China and covid: the politics of death

Is there a white-collar recession?

The bard of AI-von
A special report on Italy
DECEMBER 10TH–16TH 2022

SEARCHING FOR RETURNS

The new rules of investment

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 Contents The Economist December 10th 2022 7

The world this week Europe

10 A summary of political 23 Germany’s ruling
and business news coalition at one
24 A weird German coup
Leaders
24 Ukraine’s Somme
13 Financial markets
The new investing regime 25 The silence of
the Russians
14 China and covid-19
What is the plan? 26 Damage in Ukraine
14 Italy and Europe 26 Mangled French brands
Crying out for reform 28 Charlemagne Tricky
15 Canada memorials
Charter fights
Britain
16 Britain’s economy
On the cover Free the north 29 Manchester’s medley
Investing in an era of higher 31 Labour’s reform plans
interest rates and scarcer Letters 31 Beer and inflation
capital: leader, page 13, and 18 On Chinese students, ftx, 32 Bagehot Free speech
briefing, page 20. Inflation and Britain’s spending cuts,
rising interest rates threaten to Kazakhstan, classical
make many retirees much music, “When Harry Met
poorer, page 65. Global Sally” Middle East & Africa
inflation is falling—but not
enough, page 68 33 The Gulf looks to China
Briefing
34 Iran dithers over dress
20 The new rules of
China and covid: the politics 35 Carpe per diem
investment
of death How will the party
When the tide turns 35 Ramaphosa fights back
pivot from boasts about low
covid death tolls? Chaguan, 36 Improving Africa’s schools
Special report:
page 54. China is loosening its
Italy
restrictions, at great risk: leader,
page 14, and analysis, page 51 In search of Thatcher United States
After page 42 37 Last­minute bargains
Is there a white­collar 38 A scotus double feature
recession? Despite a spate of 39 The Trump Organisation
lay­offs, white­collar workers will
do just fine, page 61 40 Hawaii’s feral cats
40 Youth suicides
The bard of ai­von How good 42 Lexington Raphael
is the latest craze in artificial Warnock
intelligence? We conduct a
Shakespearean experiment, The Americas
page 59. ai is at last permeating
43 Canada’s constitution
swathes of the business world,
page 57 44 A bungled coup in Peru
45 Bello An adiós
A special report on Italy Giorgia Bello In his final dispatch,
Meloni’s new government must our Latin America
make deep reforms if Italy is to columnist reflects on how
regain its lost vitality, argues the region has changed,
John Peet, after page 42 page 45

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can search our archive, read
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Contents continues overleaf

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 8 Contents The Economist December 10th 2022

Asia Finance & economics

46 India’s growth model 65 The pension time­bomb
47 Murdered Filipino 67 Stalling Asia
journalists 68 Global inflation
48 Manga v webtoons 68 Transatlantic spats
48 Indonesia’s sex ban 69 Buttonwood Barmy bonds
49 Banyan Anwar time 70 Free exchange The costs
50 Chinese gamblers abroad of sexual harassment

China Science & technology

51 Dismantling zero­covid 71 Naval drones
52 Vaccinating the elderly 73 Silent synapses
53 Dissidents v censors 74 Ankylosaur clubs
54 Chaguan The politics 74 The origin of lager
of death

International Culture
55 China’s rapacious 75 Our books of the year
fishing fleet 78 Books by our writers

Business Economic & financial indicators

57 The new age of AI 80 Statistics on 42 economies
59 An AI experiment
59 China’s covid industry Graphic detail
60 Bartleby Title inflation 81 What next for Iran's protesters?
61 White­collar lay­offs
Obituary
64 Schumpeter Rise of the
82 Jay Pasachoff, pursuer of eclipses
super­apps

Volume 445 Number 9325

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Economist Newspaper Limited. Printed by Vogel Druck und Medienservice GmbH, Leibnizstraße 5, 97204 Höchberg, Deutschland. France, Numéro Commission Paritaire: 68832 GB. Encart d’abonnement de deux pages situé entre les folios 10
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 10
The world this week Politics The Economist December 10th 2022

Ukraine struck back. Two large Meanwhile, an American dissolve Congress as a coup
explosions were reported at a federal court dismissed a attempt, though the army did
pair of Russian air bases sever­ lawsuit against Saudi Arabia’s not support him. Mr Castillo
al hundred kilometres from crown prince and de facto was nevertheless arrested.
the border. It is thought that ruler, Muhammad bin Sal-
the attacks, which damaged man, who had been accused of Cristina Fernández de Kirch­
aircraft, were carried out by ordering the murder of a Saudi ner, the vice­president of
Ukrainian drones, but it is dissident journalist, Jamal Argentina, was found guilty
unclear why Russia had been Khashoggi, in 2018. It said he of corruption and sentenced
unable to stop them. had immunity as a head of to six years in jail. Ms Fernán­
government, a decision that dez denies that she steered
Volodymyr Zelensky, Ukraine’s came as a relief to the Amer­ public contracts to a family
China began dismantling its president, said that the price ican administration. friend. She called the judicia­
“zero­covid” policy, which was cap set by the G7 and EU on ry “a mafia” and dared offi­
struggling to contain the Omi­ Russian oil was too high to Sudan’s military rulers cials to arrest her. She is
cron variant and had become a inflict real damage on the reached a deal with pro­de­ unlikely to go to prison; the
source of widespread frustra­ Russian economy and called mocracy leaders to establish a case will probably end up in
tion. The state will no longer for tougher action. The allies civilian­led government that the Supreme Court.
force people with mild cases to have imposed a cap of $60 a will manage a transition to
enter government­run quaran­ barrel, about the same as the democracy. A previous power­ Mexico’s president, Andrés
tine centres. They can now price paid anyway for oil sharing agreement struck after Manuel López Obrador, came
isolate at home. It also lifted pumped from the Urals. a coup in 2019 fell apart after a a step closer to realising his
many testing requirements second putsch last year. pet project when the lower
and said lockdowns should be Latvia’s media regulator or­ house of Congress approved
more targeted. The changes dered TV Rain, an independent South Africa’s president, Cyril proposals to slim down the
come as the official number of Russian channel that operates Ramaphosa, asked the coun­ country’s electoral body.
new cases is falling. That is from Latvia, to shut down. TV try’s highest court to throw out Opponents say the changes,
probably because fewer people Rain was fined for depicting the findings of a panel which will probably be
are being tested. Anecdotal Crimea as part of Russia and appointed by Parliament, approved by the Senate, will
evidence suggests that the criticised for being too sympa­ which alleged enough weaken democracy.
Omicron variant is spreading. thetic to Russian conscript evidence of misconduct to
troops. It says it is against the consider impeaching him. The Raphael Warnock held on to a
war. Most of its viewers watch panel was investigating the Senate seat in Georgia for the
Unsafe sex it on YouTube anyway, where it source of at least $580,000 that Democrats in a run­off elec­
Indonesia’s legislature passed will continue to operate. had been hidden in, and then tion. His victory means the
a sweeping new criminal code stolen from, his sofa. party will have a 51­49 ad­
that outlaws sex outside Police in Germany arrested vantage in the Senate when
marriage, making it punish­ around 25 people who are Ndambi Guebuza, the son of Congress convenes in January.
able by a stiff prison sentence. suspected of planning to carry Mozambique’s former presi­
President Joko Widodo has not out an armed coup and replace dent, Armando Guebuza, was
signed the new code into law, the government with a council sentenced to 12 years in prison Happy Christmas!
but has suggested he will. It headed by a minor aristocrat. over a $2.2bn debt­and­cor­ During December Britain is
applies to foreigners as well as Far­right extremism has be­ ruption scandal. expected to lose the most days
locals. It also makes it illegal come a significant problem in to strikes in a month since
for Indonesians to leave their Germany in recent years. 1989. Railway workers are
religion or persuade anyone to walking out for several days;
be a non­believer. Israel’s prime minister­desig­ an overtime ban will be in
nate, Binyamin Netanyahu, force over the holiday period.
The Taliban regime in Afghan- clinched the support of Nurses, postal workers,
istan carried out its first public enough parties in the Knesset ambulance drivers and airport
execution since returning to to form a government. The staff are among those down­
power last year. A man was emerging coalition is likely to ing tools. The disruption may
shot for murder (by the vic­ include two far­right parties, spread further, as the cost­of­
tim’s father) in front of a stadi­ including one led by Itamar living crisis bites and more
um crowd that included the Ben­Gvir, who may get a newly unions reject below­inflation
government’s justice minister. created post as national pay deals.
Judges have recently been security minister. Pedro Castillo was removed
ordered to adhere closely to from office as president of It is not just Britain that is
sharia law. Human­rights China’s leader, Xi Jinping, Peru by Congress, just hours experiencing a winter of
groups fear a return to the arrived in Saudi Arabia to after he tried to shut down the discontent. Staff at the Euro-
public mass executions and meet the leaders of the king­ legislature. The 16­month term pean Central Bank rejected a
floggings of the 1990s. dom and a string of bigwigs of Mr Castillo, a leftist, was pay offer that fell well short of
from across the Arab world. marked by chaotic government inflation and are considering
As Russia pounded Ukraine America is nervous that China, and corruption. Dina Boluarte, industrial action. The ECB is at
with more missiles, aiming to which is investing heavily in the vice­president, was sworn least consistent. It has argued
knock out critical infrastruc­ the Gulf, is seeking to displace in as president. She referred to in favour of pay restraint to
ture as winter deepens, it as the region’s key partner. her former boss’s attempt to keep inflation subdued.

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 The world this week Business The Economist December 10th 2022 11

build an electric vehicle went action to “address market secretive firm uses monkeys,
into reverse. The company has developments” should they pigs and sheep in the devel­
reportedly pushed back the arise. The meeting was held opment of its brain­computer
launch date to 2026, and has the day before a price cap and interfaces. Many are killed, but
encountered technical pro­ embargo on Russian oil came employees are concerned that
blems that mean the car will into force and was the last some testing is rushed, leading
only be able to handle self­ scheduled full gathering of the to unnecessary suffering for
driving tasks on motorways. oil cartel until June next year. the animals.

The International Energy The global airline industry

Agency said that the expansion should return to profitability Bankman-Fried to be grilled
of renewable energy will in 2023, according to the Sam Bankman-Fried, the
Meta’s oversight board recom­ happen at a much faster rate International Air Transport founder of FTX, said he will
mended that the company over the next five years than Association. It reckons total testify to Congress about the
review its procedures on han­ was thought likely a year ago, net profits will come in around collapse of his crypto ex­
dling content from celebrities and that Russia’s war in Uk­ $5bn, still some way below the change, but that he hadn’t
and politicians, following raine marks a “turning point” $26bn racked up in 2019. Net finished reviewing the events
revelations that harmful con­ for the transition to clean losses this year will be some that led to its bankruptcy and
tent that is posted by the rich energy in Europe. It forecast $7bn, a big improvement on might not be ready to attend a
and famous is often allowed to that renewables as a whole will the $42bn lost by airlines in hearing on December 13th. The
stay online, contravening the overtake coal in 2025 to be­ 2021 and the $138bn in 2020. crypto industry continues to
rules for other users. The board come the biggest source of the feel the after­effects of FTX’s
told Facebook’s owner that it world’s electricity generation. An activist investment fund collapse. Orthogonal Trading, a
“should prioritise expression Half of the new renewable with a small stake in Black- crypto hedge fund, was the
that is important for human capacity will be in China. Rock has called for Larry Fink latest to default on a loan.
rights”. Separately, Facebook to step down as chief exec­
threatened to remove news The market for renewables is utive, over his “contradictions” Microsoft’s president, Brad
content from its American site growing, but so is demand for on environmental, social and Smith, said his company had
if legislation demands that it coal as countries look for governance investments. made an offer to Sony to allow
pay news organisations for the short­term fixes to tackle an BlackRock is a pioneer of ESG “Call of Duty” on PlayStation
use of their material. Facebook energy crunch. Britain has policy in the financial in­ consoles if Microsoft wins
prefers to make its own deals. approved the first deep coal dustry, but has been accused of approval to take over Activi­
mine in 30 years, to supply greenwashing for withholding sion Blizzard, which owns the
coking coal to steelmakers. support from many ESG share­ game series. Microsoft also
Foxconn on the run Germany recently boosted its holder proposals. signed a deal with Nintendo to
Foxconn reported a sharp drop coal­power capacity to secure allow the game on its consoles.
in revenue for November, energy supply over the winter. Neuralink, one of Elon Musk’s Mr Smith noted that Sony is
which is normally a boom time ventures, is being investigated the “loudest objector” to its
for the electronics contract OPEC+ agreed to keep oil out­ by the American government takeover: “It’s as excited about
manufacturer. It noted the put levels steady, but said it for violating animal welfare, this deal as Blockbuster was
impact that covid­19 restric­ was ready to take immediate according to reports. The about the rise of Netflix.”
tions have had on its hub in
Zhengzhou, where workers
have clashed with security
guards over their conditions
and walked out after being told
they would be locked in.

In what it described as one of

the largest­ever foreign direct
investments in the United
States, Taiwan Semiconduc-
tor Manufacturing Company
announced that it would build
a second chip factory in Arizo­
na, taking the amount it is
spending on both plants to
$40bn. TSMC makes Apple’s
semiconductors for the iPhone
and other devices, which can
now “be proudly stamped
Made in America”, said Tim
Cook, Apple’s chief executive.

As it accelerated plans to guar­

antee the supply chain for its
chips, Apple’s ambitions to

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 B E PA RT O F T H E L E G E N D

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 Leaders 13

The new rules

Investing in an era of higher interest rates and scarcer capital

W ELCOME to THE end of cheap money. Share prices have

been through worse, but only rarely have things been as
bloody in so many asset markets at once. Investors find them­
with the skill, nerve and capital will take advantage of the higher
expected returns and thrive.
The second rule is that investors’ horizons have shortened.
selves in a new world and they need a new set of rules. Higher interest rates are making them impatient, as the present
The pain has been intense. The s&p 500 index of leading value of future income streams falls. This has dealt a blow to the
American shares was down by almost a quarter at its lowest share prices of technology companies, which promise bountiful
point this year, erasing more than $10trn in market value. Gov­ profits in the distant future, even as their business models are
ernment bonds, usually a shelter from stocks, have been blast­ starting to show their age. The share prices of the five biggest
ed: Treasuries are heading for their worst year since 1949. As of tech firms included in the s&p 500, which make up a fifth of its
mid­October, a portfolio split 60/40 between American equities market capitalisation, have fallen by 40% this year.
and Treasuries had fallen more than in any year since 1937. As the scales tilt from newish firms and towards old ones,
Meanwhile house prices are falling everywhere from Vancouver seemingly burnt­out business models, such as European bank­
to Sydney. Bitcoin has crashed. Gold did not glitter. Commod­ ing, will find a new lease of life. Not every fledgling firm will be
ities alone had a good year—and that was in part because of war. starved of funding, but the cheques will be smaller and the
The shock was all the worse because investors had become cheque­books brandished less often. Investors will have less pa­
used to low inflation (see Briefing). After the global financial cri­ tience for firms with heavy upfront costs and distant profits.
sis of 2007­09, central banks cut interest rates in an attempt to Tesla has been a big success, but legacy carmakers suddenly have
revive the economy. As rates fell and stayed down, asset prices an edge. They can draw on cashflows from past investments,
surged and a “bull market in everything” took hold. From its low whereas even deserving would­be disrupters will find it harder
in 2009 to its peak in 2021, the s&p 500 rose seven­fold. Venture to raise money.
capitalists wrote ever bigger cheques for all manner of startups. The third rule is that investment strategies will change. One
Private markets around the world—private equity, as well as popular approach since the 2010s has blended passive index in­
property, infrastructure and private lending—quadrupled in vesting in public markets with active investing in private ones.
size, to more than $10trn. This saw vast amounts of money flow into priv­
This year’s dramatic reversal was triggered ate credit, which was worth over $1trn at its
by rising interest rates. The Federal Reserve has peak. Roughly a fifth of the portfolios of Amer­
tightened more quickly than at any time since ican public pension funds were in private equ­
the 1980s, and other central banks have been ity and property (see Finance & economics sec­
dragged along behind. Look deeper, though, tion). Private­equity deals made up about 20%
and the underlying cause is resurgent inflation. of all mergers and acquisitions by value.
Across the rich world, consumer prices are ris­ One side of the strategy looks vulnerable—
ing at their fastest annual pace in four decades. but not the part that many industry insiders are
This era of dearer money demands a shift in how investors now inclined to reject. To its critics, index investing is a bust
approach the markets. As reality sinks in, they are scrambling to since tech companies loom large in indices, which are weighted
adjust to the new rules. They should focus on three. by market value. In fact, index investing will not disappear. It is a
One is that expected returns will be higher. As interest rates cheap way for large numbers of investors to achieve the average
fell in the bull years of the 2010s, future income was transformed market return.
into capital gains. The downside of higher prices was lower ex­
pected returns. By symmetry, this year’s capital losses have a sil­ Where to worry
ver lining: future real returns have gone up. This is easiest to It is those high­fee private investments that deserve scrutiny.
grasp by considering Treasury Inflation­Protected Securities The performance of private assets has been much vaunted. By
(tips), which have yields that are a proxy for real risk­free re­ one estimate private­equity funds globally marked up the value
turns. Last year the yield on a ten­year tips was minus 1% or low­ of the firms they own by 3.2%, even as the s&p 500 shed 22.3%.
er. Now it is around 1.2%. Investors who held those bonds over This is largely a mirage. Because the assets of private funds
that period have suffered a hefty capital loss. But higher tips are not traded, managers have wide discretion over the value
yields mean higher real returns in future. they place on them. They are notoriously slow in marking these
Obviously, no law dictates that asset prices which have fallen down, perhaps because their fees are based on the value of the
a lot cannot fall further. Markets are jumpy as they await signals portfolio. However, the falling value of listed firms will eventu­
from the Fed about the pace of interest­rate rises. A recession in ally be felt even in privately owned businesses. In time, inves­
America would crush profits and spur a flight from risk, driving tors in private assets who thought they had avoided the crash in
down share prices. public markets will face losses, too.
However, as Warren Buffett once argued, prospective inves­ A cohort of investors must get to grips with the new regime of
tors should rejoice when stock prices fall; only those who plan to higher interest rates and scarcer capital. That will not be easy,
sell soon should be happy with high prices. Nervous or illiquid but they should take the long view. The new normal has history
investors will sell at the bottom, but they will regret it. Those on its side. It was the era of cheap money that was weird. n

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 14 Leaders The Economist December 10th 2022

China and covid-19

What is the plan?

China is loosening its covid restrictions, at great risk

D oes China still have covid­19 under control? In keeping with

its flawed recent handling of the virus, the answer is surely
that it does not. The official tally of cases is falling, but that is
joy a normal, virus­free existence and kept the economy hum­
ming. The spread of Omicron, though, meant that more and
more people had become ensnared in the government’s con­
probably because people are being tested less often. Not long trols. The economy was suffering. Frustration boiled over last
ago the aim was to suppress every infection chain. Today social month, when protests occurred in cities across the country.
media suggest that an alarming and rapidly growing number of A more accountable government might have acknowledged
Chinese people know someone who has caught the disease. its errors while laying out the steps needed to leave zero­covid
If the virus is indeed spreading, watch out. Once Omicron gradually, when life­saving measures were in place. But Xi Jin­
gets going, it burns through a population like a forest fire. It may ping and the Communist Party are rushing ahead, ready or not.
now move especially fast in China, because the virus is trans­ All signs point to not. The country has too few ICU beds to
mitted more easily during winter. Next month millions will re­ handle a big outbreak. It has not trained enough medical staff,
turn to their villages and hometowns to cele­ nor adopted protocols on which patients to
brate the lunar new year. Many could take covid treat and where. Most important, only 40% of
with them even if they have no symptoms. those aged over 80 have received three doses of
Given that China was already struggling to local vaccine, the amount needed to provide
contain the disease, this is an odd time to loos­ good protection against severe disease and
en restrictions. Other once­isolated places, death. A new campaign to jab the old was an­
such as Singapore and Taiwan, prepared for a nounced late last month. But it needs time.
spike in cases by administering vaccines, stock­ Officials and state media have begun telling
piling antiviral drugs and expanding intensive­ people that Omicron is fairly harmless, no
care units (ICUs); only then did they gradually open up. China worse than the common cold. In a country where the govern­
seems to be throwing precaution to the winds. On December 7th ment long stoked fear of the virus, this is jarring. It is also disin­
it eased its controls by, for example, lifting test requirements for genuous. Although Omicron is milder than previous variants, it
most public venues and letting people with mild infections iso­ can still be deadly—especially in a population that has not ac­
late at home rather than in state­run centres (see China section). quired immunity through infection, as Hong Kong discovered
If the government has a plan to avoid the surge of infections and when many elderly died during an outbreak in the spring.
deaths this could bring, nobody can say what it is—indeed, the This raises the troubling prospect that the party will cover up
lack of clarity alone would severely undermine it. the true number of covid deaths (see Chaguan). It may also
The easing comes amid mounting public pressure, a sign that blame local officials, who have been handed an impossible task
the government could not indefinitely sustain its excessively of easing restrictions while managing case numbers. They, like
harsh zero­covid policy. For two years this let most Chinese en­ us, may be asking: is this really the plan? n

Italy and Europe

Crying out for reform

Giorgia Meloni needs to be bold. Sadly, she appears reticent

A T FIRST blush Italy, the euro area’s third­biggest economy,

seems to be doing well in a continent beset by gloom. This
year it has grown faster than both France and Germany. The big
with its huge public­sector debt, makes Italy potentially the sin­
gle currency’s most vulnerable member. For the sake of Italy and
Europe, much of which shares similar ailments, Ms Meloni’s
chunk of money it secured from the EU’s post­covid recovery government must take radical action to pep up the economy.
fund is beginning to arrive, and that is meant to bring more of The most important task is to do more to promote competi­
the pro­growth reforms that Brussels has insisted on for every tion and so to enhance productivity. Mr Draghi’s government
tranche it pays out. Fears in some quarters that Italy’s new right­ made a start. But Ms Meloni must do a lot more, first to imple­
wing prime minister, Giorgia Meloni, would reverse the pro­ ment his legislative changes and next to overcome the en­
gress made by Mario Draghi, her predecessor—progress that led trenched vested interests that always resist pro­growth reforms
this newspaper to choose Italy as its country of the year in 2021— in Italy. Rigid labour markets need further liberalisation to re­
have so far proved unfounded. duce youth unemployment and raise female participation in the
However, optimism runs only so deep. Italy’s long­term per­ workforce. Protected service providers should be opened to
formance remains lamentable. Its near­zero growth in GDP per more competition. The public administration, the judicial sys­
head since 2000 is the worst in the OECD club of rich countries, tem and education all need a thorough shake­up to move faster
and it is forecast to be in recession in 2023. This record, along and perform better. Other countries in Europe have done some

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 The Economist December 10th 2022 Leaders 15

of this, if not yet enough. But Italy has to do more than most. failings than the rest of Italy. And, rather as the euro area as a
Another problem that much of Europe also shares is a grow­ whole cannot do a lot better unless Italy does better, so Italy it­
ing inter­generational divide. Italy’s population is ageing and self cannot thrive without improving its south.
shrinking and other EU countries are destined to follow. One Italy can oversee positive change, as can the euro area as a
malign consequence is the rising political clout of the old. After whole. Many small manufacturing firms in its north are thriving
a partial reversal of earlier pension reforms, Italy spends almost exporters, just as there are many successful exporters in Germa­
five times as much on pensions as on educating the young. Its la­ ny, France or the Netherlands. Like much of the rest of Europe,
bour market favours the old on permanent contracts over the Italy is strong in food, fashion, design, culture and tourism, all
young on temporary ones. Whether in business or professional candidates to be among the growth industries of tomorrow. But
services, in politics or universities, or in the ownership of prop­ excessive regulation, the protection of incumbents and barriers
erty and other assets, the system in Italy seems almost designed to competition hold back growth and productivity.
to engineer a gerontocracy that chiefly looks after the old and
comfortable. Pensioners who vote are coddled by politicians all When in Rome
round Europe, but their power is especially obvious in Italy. Ms Meloni has a chance to make a big difference and much is rid­
A final problem is rising regional inequality. Much of Europe ing on whether she can do better. So far she is broadly sticking to
worries about a gap between successful metropolises and small­ EU­backed reforms. Yet as our special report in this issue argues,
er towns and regions that lag behind (see Britain leader). Yet Ita­ her instincts too often seem to be not to promote freer markets
ly’s south, the mezzogiorno, stands out because of its size (a third and more liberalisation, but to insulate Italian assets from for­
of the population, a quarter of the economy) and because over eign competition and to protect small traders and service pro­
the past two decades it has been falling further back. From edu­ viders, from taxi drivers to shopkeepers to beach concession­
cation to employment and from the shadow economy to corrup­ aires. If she does not strive for deeper reforms, Italy’s problems
tion and organised crime, the mezzogiorno suffers from greater are likely only to get worse. n

Canada

Charter fights
A clause in Canada’s constitution lets politicians nullify citizens’ rights. It needs to go

F or those who nod off at the mention of Canada’s constitu­

tion, the obscure­sounding “notwithstanding clause” will
surely induce lethargy. But populists are increasingly taking ad­
the clause was also used to give a language­enforcement agency
powers to conduct searches without a warrant, to ensure that la
belle langue is being used in all written communication.
vantage of this apparently innocuous article in the country’s Doug Ford, the Conservative premier of Ontario, used Section
Charter of Rights and Freedoms (see Americas section). Canadi­ 33 last year for the first time in the province’s history to pass a
ans should wake up and scrap the clause entirely. law that imposes restrictions on election­campaign advertising
Canada gained full control of its constitution as recently as by organisations other than political parties. This was seeming­
1982, in the era of boxy shoulder pads and Michael Jackson’s ly to boost Mr Ford’s chances of re­election this year, as the law
“Thriller”, as part of its “patriation” from Britain. The charter is curbed advertising from trade unions, or from those who could
central to it, as it codifies the rights that Canadians are entitled have criticised his record on dealing with covid­19. In October
to. Pierre Trudeau, then the prime minister, reluctantly inserted Mr Ford invoked Section 33 again, this time to help pass legisla­
the notwithstanding clause—otherwise known tion that would have violated workers’ rights to
as Section 33—at the behest of the western prov­ bargain collectively. The law was repealed after
inces, because their premiers feared that their the unions threatened a general strike.
autonomy would be eroded by the augmented Section 33 is not the only tool that provincial
powers of the courts under the charter. bosses are wielding in Canada, a country long
Section 33 allows governments to suspend considered a liberal beacon. On November 29th
some of their citizens’ basic rights, such as free­ the Conservative government of Alberta intro­
dom of religion; freedom of thought, belief and duced a bill that would let its government re­
expression; and the right of peaceful assembly. fuse to enforce federal laws if the legislature de­
Although would­be autocrats could not curb the right to vote, cided they were unconstitutional or caused “harm to Albertans”.
they could use the clause to muzzle the press, arbitrarily arrest Indeed, Justin Trudeau, the prime minister, is tempted by il­
people or close places of worship. No other constitution con­ liberal overreach. Earlier this year he used, for the first time, a
tains such an expansive weapon. draconian Emergencies Act to shut down a protest by lorry driv­
The clause was long considered a nuclear option. But now ers in Ottawa, the capital. The notwithstanding clause is all the
high­handed governments in Quebec and Ontario are using it more dangerous in such a bare­fisted legislative climate.
with abandon. In 2019 François Legault, the conservative pre­ Ideally, Section 33 would be scrapped. If that proves impossi­
mier of Quebec, invoked it when introducing a law to ban public ble, the Supreme Court should limit its use. Even in a country
servants from wearing religious symbols. This year his govern­ with the deep democratic instincts of Canada, it is naive to as­
ment applied it to push through a law further restricting the use sume that a constitutional loophole will not be abused in de­
of languages other than French in the workplace. Worryingly, fiance of fundamental freedoms. n

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 16 Leaders The Economist December 10th 2022

Britain’s economy

Free the north

Fire up Britain’s economy by invigorating its second-tier cities

M anchester has plenty of swagger. It has the best team in

club football, and is also home to Manchester United.
Cranes dot the city centre. Its mayor, Andy Burnham, is the most
higher returns on investment. But it is a recipe for entrenching
the skew between the capital and the rest. And the Treasury has
approved southern schemes, such as upgrading London’s
recognised in the country, beating his counterparts in London Thameslink railway, with low benefit­cost ratios.
and the West Midlands. Yet the cockiness disguises a big pro­ The third and most important priority is to devolve fiscal
blem, for the city and for Britain. The Manchester urban area control. Cities must go cap in hand to Whitehall for much of
contains 3.4m people, making it about as populous as Amster­ their money. Only 6% of tax revenue in Britain is collected by lo­
dam, Hamburg and San Diego. But its GDP per head at purchas­ cal government, a large chunk of it for social care. That is a tiny
ing­power parity is at least a quarter lower than all three, and share in comparison with others. Combine local and regional
stuck at about 90% of the average in Britain itself. taxes, and France is on 14%, Germany 32% and America 36%.
As with Manchester, so with Tyneside, Birmingham and Worse, much of the money available to cities is in the form of
other conurbations in the Midlands and north of England. Sec­ pots for which they are invited to bid. These pots are numerous
ond­tier cities in most countries have productivity that matches and often piddling. Civil servants sit in Whitehall, weighing ap­
or exceeds the national average; a pre­pandemic analysis by the plications for cash to run adult­numeracy programmes and to
OECD of 11 British second­tier cities, mostly in the north of Eng­ build public toilets hundreds of miles away. Officials in Greater
land, found that gross value­added per worker was 86% of the Manchester are currently handling more than 110 grants from 15
British average. London is as rich as Paris, but metropolitan Bir­ government departments. The result is colossal inefficiency, es­
mingham or Leeds is nowhere near as rich as Lyon or Toulouse. pecially when policies change—as they do, a lot. Officials wasted
No one should be happy about this lopsided picture, whether many hours this year preparing bids for investment zones, a
proud northerner or smug southerner. The country’s long­run­ wheeze of Liz Truss’s brief administration.
ning growth problem cannot be solved—more to the point, has This system also distorts decision­making. Cities define
not been solved—by one superstar metropolis. their needs in order to fit available grants. When there is money
These huge imbalances in Britain’s economic geography have for sprucing up high streets, cities decide they must do that;
not gone unnoticed. In the 2010s George Os­ when there is money for buses, everyone devel­
borne, then chancellor of the exchequer, pro­ ops a bus obsession. Ministers in London may
moted the idea of a northern powerhouse. Boris be tempted to dole out largesse for political
Johnson put promises to tackle regional in­ ends. A report in 2020 by the Public Accounts
equality at the heart of his 2019 election cam­ Committee, a parliamentary body, was suspi­
paign. Gordon Brown, a former Labour prime cious of how recipients of levelling­up grants
minister, highlighted the problem in a set of were chosen; one town that got money was
proposals for constitutional reform this week 535th out of 541 in the priority list.
(even if proposals to remake Parliament hogged Mr Brown has some good ideas for tackling
all the attention). But diagnosis is plainly not the same as cure. these problems, such as consolidating funding streams from
It is true that Britain’s second­tier cities face some deep­root­ Whitehall. But neither Labour nor the Tories have embraced the
ed challenges. Manchester and other post­industrial spots share obvious prescription: give metropolises the power to raise much
several ailments—poor health, labour­force scarring, too few more money locally and spend it on what they need. Ideally this
people and jobs in their centres. But they could achieve so much revenue would be in the form of property taxes, which are too
more if politicians got a few relatively simple things right. low and are based on out­of­date valuations. Cities will develop
One is to focus on big conurbations, not towns. Some politi­ an appetite for building if more of the proceeds come their way.
cians persist in thinking that smaller places need lots of atten­
tion. Mr Johnson’s “levelling­up” agenda included a multi­bil­ Britain’s northern lites
lion­pound Towns Fund; Treasury workers are being moved to They need more freedom, too. Greater Manchester has been al­
Darlington, a place with 108,000 people in north­eastern Eng­ lowed to plan for housing and office development at metropoli­
land that happens to be next to the constituency of Rishi Sunak, tan scale, and is making a good go of it. Other metropolises are
the prime minister. Invigorating metropolises has a far bigger still denied that power. Mr Burnham is also being allowed to un­
impact; Greater Manchester is home to almost one in five people pick one of Margaret Thatcher’s less wise reforms, in which bus­
living in the north of England. And successful conurbations pull es outside London were privatised and deregulated. But it was a
surrounding towns up. Britain needs several engines to fire, but hell of a fight, and required a court case.
they have to be big. Freer cities will inevitably make mistakes. More local rev­
A second priority is to rebalance public investment away enue­raising risks widening the gap between the poorest and
from London. Between 2000 and 2019, the government devoted richest places; a mechanism for redistributing money that does
£10,000 ($12,160) per Londoner to economic development, sci­ not squelch all incentives to develop will be needed. But Brit­
ence and technology, and transport. The equivalent figure for ain’s economy cannot keep relying so heavily on London. And its
residents in the north­east and north­west hovered at around second­tier cities cannot thrive unless they have more control of
£5,000. There is a rationale for this: productive places generate their destinies. Time to free the north. n

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012
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 18
Letters The Economist December 10th 2022

on standards means that we Amanat (commitment), the

Pro­democracy students The problem with crypto are trying to run a gold­stan­ party holding the majority in
Your article on mainland “Never before has crypto dard health service, but to the the lower house of parliament,
Chinese students in America looked so criminal, wasteful point where we take resources is a mere wolf in sheep’s cloth­
and Britain who oppose and useless,” you said, after from other parts of the state. ing. Even after the brand
communist China alluded to the demise of FTX (“Crypto’s DR Ben Russell rename from Nur Otan (radi­
several factors that deserve downfall”, November 19th). On London ant fatherland) you can still
elaboration (“Posters of prot­ the contrary, from the begin­ sense the methodology if not
est”, November 19th). Wide­ ning the idea of financial Just increasing medical­stu­ the ideological presence of
spread intimidation (threats, instruments with no connec­ dent places is not the answer Nursultan Nazarbayev, the
bullying and physical vio­ tion to government regulation to getting more doctors in former president. It may be
lence) against activists abroad was an obvious field day for Britain (“Go east”, November another decade before we will
is so common that it is scarcely gangsters, con artists and 5th). Foundation training has see a proper opposition candi­
remarked on by protesters. legions of gullible fools who been oversubscribed for years date who actually stands out,
The recent attack on Bob thought they could get rich and there is a lack of core and not one like this year’s,
Chan, a Hong Kong pro­ quickly while producing no specialty training posts. Brit­ who made his name by karate­
democracy demonstrator, in economic benefit whatsoever. ain has a huge dearth of con­ chopping a meat bone.
the grounds of the Chinese Hopefully, some of the sultant anaesthetists and this Berikuly Madiar
consulate in Manchester is millionaire celebrities who year sub­specialty anaesthetic Almaty
repugnant as well as a clear assured financially illiterate training was four times over­
breach of both British law and fans that everything was safe subscribed. Even more worry­
international diplomatic and secure will also be among ing, after we train specialty We’re only here for the beer
protocol. It was unusual only those who lost millions. Your anaesthetists for three years Standard­bearers of classical
because it was a video­record­ efforts to suggest that there many leave for Australia, music face specific challenges
ed account of the sort of was anything at all worthwhile because there is a huge bottle­ (“Airs and graces”, November
assault by Chinese operatives about this vast scam are neck to enter higher training 19th). However, any genre is
that is all too common. It unconvincing. here. This is one of many hampered by the fact that
reflects poorly on democratic Professor Jeffrey Herf reasons why doctors will vote music may be used, even
governments that they allow Department of History to strike in January 2023. unintentionally, as an accom­
the Chinese Communist Party University of Maryland, Dr Ben Evans paniment to something else.
to conduct these sorts of College Park Core anaesthetics doctor There are many reasons other
actions within our free societ­ Newcastle-upon-Tyne than music why people attend
ies. The failure of Britain to live concert performances. A
expel those involved in the The knock­on effects of cuts Bagehot’s summation of Brit­ shrewd talent buyer for a
attack will only encourage this Bagehot identified the ways in ain reminds me of the misery music venue once told me: “I
sort of dangerous behaviour. which a protracted squeeze on of the Roman population don’t sell music, I sell beer.”
Moreover, notwithstanding public finances is making its following Attila the Hun’s Dan Coleman
the reluctance of some main­ presence felt in Britain (No­ ravage of northern Italy, as Composer­in­residence
land students to join protests vember 12th). It is also worth described by Edward Gibbons Tucson Symphony Orchestra
with Hong Kongers, we are noting that spending cuts can in his history of the fall of the
witnessing a variety of over­ have an impact on other parts Roman empire: “The taxes
seas groups making common of the state’s activity. For were multiplied with the Orgasmic foods
cause in their fight against the example, because of a chronic public distress; economy was I never imagined The Economist
Communist Party. The hun­ lack of investment in services neglected in proportion as it to be a family newspaper. Still,
dreds of thousands of new there is frequently a delay to became necessary; and the I can’t think of any other rea­
members of the Hong Kong assessing mental­health injustice of the rich shifted the son why you would incorrectly
diaspora are working with patients in emergency rooms. unequal burden from them­ recount the deli scene in
Tibetans, Uyghurs and veter­ Most of these patients are selves to the people, whom “When Harry Met Sally” that
ans of the 1989 Tiananmen escorted to A&E by two police they defrauded of the indul­ ends with the line, “I’ll have
pro­democracy movement. officers (under a “section 136”). gences that might sometimes what she’s having” (“Assimila­
More recently we have found These officers must remain have alleviated their misery.” tion nation”, November 26th).
that Burmese, Thais and other with the patient until the Nils Raestad Meg Ryan wasn’t describing
activists from countries neigh­ mental­health team has made Nesoya, Norway the menu. If Jewish food did
bouring China see the a formal decision about his or have the effect you implied,
Communist Party for the threat her treatment. my Polish and Russian Jewish
that it is and are prepared to This means that the police Election non­result grandparents would have had a
act accordingly. Tellingly, the spend a worryingly large As you predicted, Kazakhstan’s much happier marriage.
annual events on June 4th amount of their time sitting presidential election was not Adam Smith
commemorating Tiananmen around in A&E waiting for the as exciting as it should have Lexington, Massachusetts
have now become an interna­ assessments. At one point been (“One steppe forward”,
tional mourning for the recently there were so many November 19th). Kassym­
victims of the party. police in my A&E that few Jomart Tokayev was re­elected Letters are welcome and should be
Mark Clifford officers were available for that with 81% of the vote, sending a addressed to the Editor at
The Economist, The Adelphi Building,
President particular area of London for powerful message to Kazakhs: 1­11 John Adam Street, London wc2n 6ht
Committee for Freedom in other activities. the wind of change is blowing, Email: letters@economist.com
Hong Kong Foundation The lack of investment but it is not powerful enough More letters are available at:
Economist.com/letters
Washington, DC combined with rigorous laws to produce any real reform.

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 Executive focus 19

Executive Vice President

GLOBAL TRADE BANK (EVP GTBA)
African Export-Import Bank (Afreximbank)
The Company trade banking including origination, due diligence, structuring/negotiating, and the closing
African Export Import Bank (the “Bank”) was established in October 1993 by a treaty of new transactions as well as managing all associated risks.
signed and ratified by African Governments. Its shareholders are African Governments The EVP GTBA serves as the leader of the Global Trade Bank and as the liaison between the
and/or their Central Banks financial institutions and private investors. Established as a President and the Board of Directors, other Afreximbank business units and group support
multilateral organisation, its purpose is the financing, promotion, facilitation and expansion functions, investors, and other relevant stakeholders. They are expected to contribute to
of intra-African and extra-African trade. With headquarters in Cairo, Egypt, the Bank has thought leadership and to foster a healthy workplace culture based on Afreximbank’s core
branch offices in Abidjan, Abuja, Harare, Kampala, and Yaoundé. In recent years, the Bank values, to support professional development, staff well-being, as well as the transformation
has experienced considerable growth. To build on this success, it is now implementing its of the African continent.
6th Strategic Plan covering the period 2022 – 2026. The plan is based on four Strategic
Pillars namely: Intra-African Trade & AfCFTA implementation; Industrialisation & Export The Candidate
Development; Leadership in Global Trade Banking in Africa; and Financial Sustainability. Eligible candidates for this role must be able to demonstrate the following:
One of these Strategic Pillars is being established as a Division within the Bank, known as • National of an African country (including dual citizens)
the Global Trade Bank (“GTBA”).
• Relevant undergraduate degree and a post-graduate degree or professional
The Bank has engaged the Willis Partnership to assist them with the recruitment of an qualification in lieu
Executive Vice President to provide leadership and strategic direction for the Global Trade • Minimum of 15 years’ relevant experience in financial and investment services with a
Bank. demonstrable track record in the banking industry at senior management level
The Role • Substantial experience of leading and managing trade-related banking, coupled with
Based in Cairo, Egypt and reporting to the President & Chairman of the Board of Directors, strong current knowledge of the African trade environment and key trade sectors
the Executive Vice President, GTBA Bank (“EVP GTBA Bank”) is a member of the Bank’s • Strong business acumen, maturity and tact gained within multicultural environments,
Executive Management Forum (EXMAF) and is responsible for leading and developing with experience of building successful relationships at the highest levels in government
a team of high-achieving professionals to manage a large and diverse portfolio of about and the private sector
USD 10 billion per year across Africa. They will be expected to develop and implement
strategies to boost Africa’s trade with the world including access to trade finance across • Excellent communication, business presentation and analytical skills
the full spectrum of products and services. These include short-term products, such as • Proven stakeholder management experience coupled with strong decision-making
import and export finance and other specialised trade finance facilities, including structured and problem-solving skills
trade finance, forfaiting, factoring & supply chain finance, commodities finance, advisory,
derivatives, trade services, letters of credit, and guarantees & correspondent banking. The If you believe you meet the eligibility criteria for this role and wish to apply, please send a
EVP GTBA will also supervise syndications and overall asset distribution. full curriculum vitae to our retained Consultant, Robert Baldwin, at: robertbaldwin@willis-
partnership.co.uk, quoting reference DGLTR/22.
The EVP GTBA will spearhead the development of deep industrial knowledge in target
sectors and lead the sourcing of new transaction opportunities through a broad professional Applications sent directly to the Bank will not be considered. The closing date for
network. The position is responsible for managing the entire value chain related to global applications to be received is 31st January 2023.

Kosovo Pension Savings Trust (KPST) is a €2.4bn

defined contribution pension fund in the Republic of
Kosovo. It is an independent legal entity, governed by a
Governing Board, whose responsibility is to administer
and manage mandatory pension savings of Kosovo
residents.

KPST is looking to appoint FIVE (5) professional

members on the Governing Board, who must have at
least ten (10) years of relevant professional experience.

A link to the detailed list of requirements, duties and

responsibilities, and how to apply, is available via the
KPST website at:
http://www.trusti.org/en/about-us/overview/jobs/

The deadline for receiving applications is:

December 23, 2022 at 16:00 CET.

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 20
Briefing The new rules of investment The Economist December 10th 2022

tors seeking a good return without run­

ning big risks, has performed appallingly.
Evan Brown and Louis Finney of the asset­
management arm of ubs, a Swiss bank, cal­
culate that, as of mid­October, a 60/40
portfolio of American equities and Trea­
suries had had its worst year since 1937.
Typically, portfolios allocating more to
bonds and less to equities are considered
less risky. But losses on bonds have been so
steep this year, says Alex Funk of Schrod­
ers, another asset manager, that this rule of
thumb has not always held. Other pre­
sumed safe havens have also offered little
shelter. Gold, seen by some as a hedge not
just against the vagaries of financial mar­
kets, but also inflation, has fallen by 3%.
The Japanese yen started the year at 115 to
the dollar and is now 136. Well­timed bets
on commodities, many of whose prices
were supercharged by Russia’s invasion of
Ukraine in February, would have paid off
handsomely. Otherwise, investors have
had startlingly few places to hide (see chart
1 on next page).
The plunging markets are the result of a
decades­old macroeconomic regime fall­
ing apart. High inflation, not seen in the
rich world since the 1980s, is back, which
in turn has brought to an end ten years of
near­zero interest rates. As a result, the
rule book of investing is being rewritten.
Protecting portfolios from inflation, once a
peripheral concern, is now a prime consid­
eration. Rising government­bond yields,
meanwhile, make riskier assets less desir­
able. In particular, private markets (as op­
posed to standardised investments traded
on exchanges), which expanded massively
during the years when decent returns were
hard to find, face an uncertain future now
that they are not.
Before this year, as bond yields grew
When the tide turns ever more anaemic, the desperation of
yield­hungry investors was encapsulated
by the acronym tina: there is no alterna­
tive (to riskier assets such as equities). This
approach helped to propel the world’s
stockmarkets on a rampaging run. From its
low point in 2009 to its peak at the end of
2021, the S&P 500 rose by 600%.
In addition, the TINA mentality drove
Rising interest rates and inflation have upended the world of investing
many investors to buy more obscure or illi­

F or almost a year, ever since America’s

stockmarket peaked on January 3rd, in­
vestors have been craning their necks,
lative assets, naturally, have been blud­
geoned far harder: the market value of all
cryptocurrencies, which surged to nearly
quid assets in the hope of earning halfway
decent returns. Private­equity funds have
been prolific investors in unlisted compa­
looking for the bottom. Will the most re­ $3trn in 2021, has fallen to $840bn. Sup­ nies ever since the buy­out boom of the
cent trough, halfway through October, turn posedly safer assets have not escaped the 1980s. The typical “leveraged buy­out” in­
out to have been it? More importantly, bot­ rout, either. The indices compiled by volved buying a company mainly with bor­
tom or not, what trends will shape returns Bloomberg, a data provider, of global, rowed money, parking the debt on its bal­
going forward? European and emerging­market bonds ance­sheet and selling it on. The dirt­
Even at present levels, the slump in have all dropped by 15%; the American cheap loans available after the financial
markets around the world this year has equivalent by 11%. crisis lit a rocket under the industry. Priv­
been painful. MSCI’s broadest index of glo­ The breadth of losses is even more ate markets around the world—the lion’s
bal equities is down by 18%, as is the S&P striking than the depth. In particular, the share being private equity, but also includ­
500 index of big American firms. It is not “60/40 portfolio”, comprising 60% stocks ing property, infrastructure and private
just shares that have suffered. More specu­ and 40% bonds, a popular choice for inves­ lending—quadrupled in size, to more than

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 The Economist December 10th 2022 Briefing The new rules of investment 21

$10trn. Big private­equity firms created The end of ultra­low interest rates has
listed funds of unlisted firms, to lure in re­ A year of hard knocks 1 more far­reaching consequences. The in­
tail investors. But it was institutional in­ Global prices, January 3rd 2022=100 crease in the “risk­free” rate “affects how
vestors that were especially enthusiastic: 140
you think about private assets, equities,
private equity and property came to com­ Commodities bonds, credit, everything”, says Schroders’
prise almost a fifth of American public 120 Mr Funk, by raising the hurdle rate against
pension funds’ portfolios. 100 which all other returns are measured. TINA
The monetary backdrop that drove is dead, and has been succeeded by TARA:
Bonds 80
those trends has now changed dramatical­ “there are real alternatives”. Or, as Raj Mo­
ly. Though inflation in America peaked in Equities 60 dy of PwC, a consultancy, puts it, “If you
June, it still stands at 7.7%. Elsewhere can get 4% on government bonds, is 7% on
things are worse: in Britain prices are 11.1% 40 private assets enough?”
higher than they were a year ago, and in the Cryptocurrencies 20 A reckoning is thus due over whether
euro area the rise is 10%. The IMF forecasts J F M A M J J A S O N D
the more exotic and less liquid assets
a global inflation rate of 9.1% over the 2022
snapped up during the low­yield years are
course of 2022. Sources: Bloomberg; FTSE; MSCI
still worth what investors paid for them. It
As a result, markets expect the Federal will be a big one. Private­equity funds and
Reserve to raise interest rates to 5% in their cousins, private­credit funds, which
2023, and the Bank of England to lift them BlackRock, an asset manager, does not ex­ raise money from investors to make loans,
to more than 4.5%. What is more, both cen­ pect it to return to the “rock’n’roll” levels of have become driving forces in corporate
tral banks have started to unwind the huge the 1970s, when it spent two long spells in dealmaking. Leveraged buy­outs amount­
holdings of government bonds they built double digits. But even if it soon settles ed to $1.2trn in 2021, dwarfing the previous
up in the wake of the financial crisis (quan­ down to an average in the low single fig­ peak of $800bn in 2006. Private­equity
titative tightening, in the jargon). The in­ ures, it would still be more elevated than it deals accounted for a fifth of the value of all
tention of the purchases was to hold down has been since the financial crisis. That mergers and acquisitions. The market for
long­term interest rates; the sales should makes building inflation­resistant invest­ private credit, often used to fund such
have the opposite effect. ment portfolios more important than it deals, ballooned to over $1trn. That is more
This year’s carnage in the markets is the has been in decades. than twice its level in 2015 and only slightly
natural outcome of these changes. Infla­ Fortunately, that is easier than it used to less than the value of big loans made di­
tion erodes the value both of the interest be. Commodities, as a frequent source of rectly by large financial institutions. Big
payments on bonds and of the principal. At inflation, also provide a good means to investors such as university endowments
the same time, rising interest rates drive hedge against it. They are now substantial­ and sovereign­wealth funds have loaded
bond prices down, to align their yields ly more “financialised” than they were in up on private assets like never before.
with prevailing rates. the 1970s, meaning that they have deep and
If inflation and interest rates were in­ liquid futures markets. That allows inves­ A creaking lever
creasing because of runaway economic tors to acquire exposure to them without Can they keep their appeal now that rising
growth, shares might also have risen in ex­ having to own any actual barrels of oil or government­bond yields have resurrected
pectation of higher earnings. But instead bushels of wheat. the alternatives? For leveraged buy­outs,
prices and rates are rising because of a Other assets can also provide protec­ which by definition are extremely sensi­
commodities shock, supply­chain snarls tion from rising prices. Blake Hutcheson, tive to the cost of borrowing, the answer is
and labour shortages that threaten cor­ the chief executive of OMERS, a large Cana­ almost certainly no. Scarcer, more expen­
porate profits, too. That is why the hedging dian pension scheme, describes how his sive debt makes such deals harder to fi­
relationship that underpins the 60/40 fund spent years building up big holdings nance and less attractive to complete, as
portfolio has fallen apart. Rising yields on in infrastructure and property. The rev­ higher interest payments eat into prospec­
bonds simply make more volatile equities enues from such investments, in the form tive returns. Higher rates also diminish the
less attractive by comparison, so the prices of rents and usage fees, tend to rise with in­ value of the companies such funds already
of both assets have fallen at the same time. flation. “It always felt like low inflation own, given their high levels of debt.
When the dust finally settles, it will re­ and low interest rates were an aberration,” Elsewhere the picture is more mixed.
veal a landscape that is likely to have says Mr. Hutcheson. “We’ve been prepar­ Private loans tend to have floating interest
changed for good. Though markets expect ing for a day that looks like today.” rates. That means that, unlike bonds, on
interest rates to fall after a peak next year, which the interest is usually fixed, their
the odds that they will collapse back to value grows as rates rise. Many funds spe­
next­to­nothing seem slim (see chart 2). A higher hurdle 2 cialise in distressed companies, of which
That is because inflation is likely to be hard United States, government-bond yields, % there will be plenty as debt becomes more
to tame. Nearly two years of it have raised December 6th 2022, by maturity expensive to service. Institutional inves­
expectations of price rises, which can be 5.0 tors often feel that the stronger oversight
self­fulfilling. Tight labour markets in and influence that comes with private in­
many countries will drive wages up, pro­ 4.5 vestments, as compared to public ones,
viding a further push. Unrelenting de­ gives them an edge.
mands on government spending—from 4.0 Yet the raised hurdle rate is inescap­
ageing populations to an ever­growing ex­ able. Private investors who buy a toll road,
pectation that states will shield people and 3.5 wind farm or office block are deliberately
companies from economic storms—may taking more risk than they would if they
also help elevate interest rates and propel 3.0 bought government bonds instead. Rich­
inflation. Taken together, these forces will world countries are very unlikely to default
reshape investors’ portfolios and alter the 1M 3M 6M 1Y 2Y 3Y 5Y 7Y 10Y
on their debt, but infrastructure and prop­
returns they can expect. Source: Federal Reserve
erty can cost more to build than expected
Start with inflation. Simona Paravani of or yield less profit than projected. This risk

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 22 Briefing The new rules of investment The Economist December 10th 2022

is worth taking if investors are compensat­ tise debt rather than raising rates. The sec­
A dividend in hand… 3
ed by a better rate of return. The climb in ond and the third could spur conflict both
risk­free rates therefore means private as­ MSCI world stockmarket indices within and between states. Mr Dalio wor­
sets, too, need to offer higher returns if January 3rd 2022=100 ries that the stage could be set for a period
they are to stay attractive. Squeezing more 100 like that between 1910 and 1945, where in
revenue out of the assets will be tricky in a Value
some regions “you have almost the com­
slowing economy. But the only alternative 90 plete destruction of wealth as we know it”.
means to realise higher returns, selling the Even setting aside such a dark scenario,
assets for a higher­than­expected price, is 80 straitened times lie ahead for many inves­
even more implausible given already diz­ tors. Perhaps the grimmest impact is on
zyingly high valuations. 70 those close to retirement. With less time to
In all likelihood, many private assets Growth recoup recent losses, such savers are al­
face sharp write­downs in value. It is often 60 ways more vulnerable to market shocks.
up to the fund that manages the assets to J F M A M J J A S O N D
Worse, to mitigate this, they are often ad­
value them. Managers are naturally reluc­ 2022
vised to hold the sort of bond­heavy port­
tant to mark them down. In the first three Source: Bloomberg
folios that have been among the hardest hit
quarters of this year, for instance, Lincoln this year. Their short investment horizon
International, a bank, reckons that private­ means that future returns can do little to
equity funds globally marked up the value The same logic diminishes the invest­ restore their fortunes.
of the firms they own by 3.2%, even as the ment case for startups and nascent firms, Many 30­ and 40­somethings are only
s&p 500 shed 22.3%. Such foot­dragging, which by definition will earn the lion’s slightly better off. Most had saved too little
however, will lead to lacklustre returns in share of their profits in the future (if they by the start of the 2010s to benefit fully
the years ahead, as assets with unrealistic prove successful at all). Higher rates di­ from the go­go years, yet had accumulated
valuations prove difficult or impossible to minish the value of future profits relative enough by the end of the decade to have
sell for a profit. Many institutional inves­ to current ones. For a firm whose profits suffered heavy losses this year. Those who
tors have invested too deeply in private are projected to remain stable indefinitely, recently bought homes are painfully ex­
markets to unwind their holdings quickly. less than a tenth of the present value of its posed to a global housing slump that is
The scope for disappointment is high. future earnings comes from the first ten only just beginning. Many can look for­
In property, it is not just big institution­ years when the interest rate is 1%. At 5%, ward to the double whammy of owning
al investors that are being hammered by around two­fifths does. houses that are worth less than the mort­
rising interest rates. The same cheap and Sure enough, the type of startup that gage on them while, in places where long
easy borrowing that lured them into priv­ draws the most interest from investors has rate fixes are rare, also having to remort­
ate markets in the 2010s also pushed house changed, says an experienced venture cap­ gage at higher rates. But unlike those closer
prices ever higher. During the pandemic italist. Whereas those that expanded the to retirement, this generation at least has
even lower rates and, for some, stimulus fastest used to be the most highly prized, the time to try to repair the damage.
cheques, supercharged that trend. Now the balance has now shifted in favour of In that respect, the news is good: the
these drivers are going into reverse. More those that generate, rather than burn crash has at last lifted expected returns
expensive mortgages limit how much buy­ through, cash. from the rock­bottom levels of recent
ers can borrow, causing their purchasing Ray Dalio, the founder of Bridgewater, years. The 60/40 portfolio, say Mr Brown
power to shrink. Like private­equity man­ the world’s biggest hedge fund, believes and Mr Finney of ubs, is back in business.
agers, home­owners are loth to acknowl­ that a much bigger paradigm shift is under Higher bond yields increase its income
edge that their property may be worth less way than a simple rise in interest rates and stream and lower equity valuations in­
than they paid for it, making them unwill­ inflation. He cites the risks of huge debts, crease the likelihood of future returns.
ing to sell and causing transactions to populism within Western democracies After a year in which the dollar has
dwindle. Yet across much of the rich world, and rising tensions between global pow­ strengthened considerably against most
a housing slump has already begun. ers. The first puts pressure on central currencies, reversion to the mean would
Higher risk­free rates also change the banks to tolerate inflation and even mone­ raise the value of foreign assets for Ameri­
types of company prized by investors. Dur­ can investors. As a result, ubs has boosted
ing the TINA years “growth” stocks, whose its forecast for the portfolio’s average an­
value depends on the promise of spectacu­ nual return to 7.2% over the next five years,
lar profits in the future, stormed ahead of up from 3.3% in July 2021.
their “value” counterparts, which offer The biggest beneficiaries of this are the
steady income but less scope for growth. youngest cohort of investors. They will
But as interest rates rise, they erode the have started saving only recently, so will
present­day value of future earnings, mak­ not have built large enough portfolios to be
ing growth stocks less appealing. much hurt by this year’s crash. In any case,
When the interest rate is just 1%, $91 de­ the vast majority of their earnings are
posited in the bank will be worth $100 in ahead of them. Ever giddier market valua­
ten years’ time. Put another way, $100 in tions had fostered ever gloomier expecta­
ten years’ time is worth $91 today. But tions of the returns their savings could de­
when the interest rate is 5%, it takes only liver. So bad did their prospects seem that
$61 to generate $100 in a decade. So $100 in in April Antti Ilmanen of AQR, a hedge
ten years’ time is worth just $61 today. That fund, published a book entitled “Investing
makes future growth much less valuable, Amid Low Expected Returns”. He dedicated
and immediate profits much more so. As it to “the young retirement savers across
stockmarkets have tumbled, therefore, the world—who have been handed a bad
growth stocks have performed especially draw—and to everyone working for their
poorly (see chart 3). benefit”. That work is now much easier. n

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 Europe The Economist December 10th 2022 23

Germany It may sound a small thing for a power­

ful country’s top elected officer simply to
The traffic­light at one show his own team who is boss. But Ger­
man federalism sharply curbs executive
power. Not only must Mr Scholz keep his
party loyal and coalition partners happy.
He must also play politics across 16 very
BE RLIN
different states, all but one of which are
Despite war, inflation, recession and a gas­strapped winter, Germany’s ruling
currently ruled by coalitions, and several
coalition is faring rather well
of which in any given year will pass a ver­

A ngela Merkel’s 16­year run as Ger­

many’s chancellor was always going to
be a hard act to follow. But her triumphant
set Germany—so far gingerly rather than
firmly, it is true—on a course towards po­
tentially far­reaching reform. The co­
dict on his party at the polls. The chancel­
lor must meanwhile balance the demands
of Germany’s grumpiness­prone public
exit was not the sole reason why the new alition has shown it can be supple when and sensation­driven press against the
government that clomped onto the stage needed, with each of its parts bending to­ tight constraints of its European Union
last December 8th looked bound to put up a wards compromise. And Mr Scholz has and NATO alliances. Because of its dark past
poor show. Germans had dubbed the wob­ proved an abler leader than many expected and current weight, even Germany’s
bly­looking coalition die Ampel, the traffic­ of a weaned­on­a­pickle former mayor of friends are quick to blame its leaders for
light. This referred to the colours of its Hamburg. “I think Scholz has the coalition doing too much or too little.
component parties—red Social Democrats quite well in his grip,” says Jana Puglierin Mrs Merkel handled these competing
(spd), yellow Free Democrats (FDP) and the of the European Council on Foreign Rela­ pressures masterfully. Aside from tough­
Greens. Yet it also hinted at mixed signals tions, a think­tank. “He’s made it clear that ness and intelligence, the four­term chan­
and policy jams. It was no help that the he is the one calling the shots.” cellor’s favoured tool was patience. Her
Ampel’s leading man was Olaf Scholz, a dry tendency to withhold comment until
Social Democrat whose electoral success others had spent their arguments even
→ Also in this section
owed less to his charms than to his oppo­ spawned a verb, merkeln, meaning to sit
nents’ gaffes. And then, weeks into the 24 Germany’s weird coup things out. Mr Scholz has clearly studied
Ampel’s opening run, Vladimir Putin, the the master closely. His election campaign
24 Ukraine’s Somme
president of Russia, set the theatre on fire. last year stressed competence and pragma­
Yet Mr Scholz’s ensemble has weath­ 25 The silence of the Russians tism; in Ms Puglierin’s words, he presented
ered and even emerged stronger from a himself as “Merkel in a suit”. In office, Mr
26 Damage­mapping in Ukraine
turbulent first year. Not only has the Am­ Scholz has let younger, telegenic ministers
pel steered Europe’s richest, most popu­ 26 Mangled French brand names thrash out differences, intervening only at
lous country through a crisis as challeng­ a statesman­like last minute.
28 Charlemagne: Tricky memorials
ing as any that faced Mrs Merkel. It has also The clash within the coalition over en­

012
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 24 Europe The Economist December 10th 2022

ergy policy is one example. When Mr Pu­ GDP that Mrs Merkel had committed, but Ukraine’s Somme
tin’s invasion of Ukraine exposed how dan­ failed, to spend all the way back in 2014.
gerously dependent Germany had grown The defence minister recently admitted The battle for
on Russian fuel, the Ampel raced to find al­ that despite nine months of crisis her min­
ternatives. This required the Greens to istry has failed to order extra ammunition; Bakhmut
concede on restarting coal­fed power estimates suggest that under war condi­
plants and on speed­building terminals to tions the German army would run out
import LNG, even as the liberal FDP grudg­ within days.
Russia is pointlessly hurling troops at
ingly allowed more spending (and Social Perhaps, taking another cue from Mrs
a small Ukrainian town
Democrats sheepishly confessed they had Merkel, Mr Scholz is thinking of the longer
been wrong about Russia).
But Robert Habeck, the Green deputy
chancellor in charge of energy, for months
term. Sustained for five years, the defence
hike will begin to make a difference. By
then, the energy transition Mr Habeck
U krainian offensives in Kharkiv in
September and Kherson last month
have put Russia on the defensive along vast
dug in his heels over whether to prolong dreams of may take hold, too, with Ger­ front lines. The exception is Bakhmut,
the life of Germany’s last three nuclear­ many’s huge investment in emissions­free along with Avdiivka to the south. Virtually
power plants, which Mrs Merkel long ago hydrogen starting to pay off. Current eco­ all Russia’s remaining offensive power—
pledged to close by the end of this month. nomic woes, including the highest infla­ which is not much—has been thrown at
Not until October did Mr Scholz dictate a tion in seven decades (and the sharpest the town since August. That was originally
compromise, allowing the plants to keep drop in real wages), along with an expected because it anchors the southern end of a
running until next spring. recession in 2023, could also be history. defensive line shielding the bigger cities of
As under Mrs Merkel, such strategic pa­ Ms Puglierin warns of possible down­ Slovyansk and Kramatorsk (see map on
tience has helped entrench the coalition sides. Another surge of refugees, plus pro­ next page). But the attacks now seem to be
and strengthen Mr Scholz’s own hold. It longed economic doldrums, could bust the animated more by stubbornness than
has helped the Ampel push through need­ budget and push voters towards fringe par­ strategy. Even before the war, the town’s
ed policies, such as reform of unemploy­ ties, especially on the far right. Polling al­ population was not much over 70,000.
ment benefits and soon­to­come tweaks to ready shows a slow slide in support for the The offensive has been led by the Wag­
immigration laws, freeing manpower­ Social Democrats and the liberals, though ner Group, a mercenary outfit, and sup­
short German businesses to seek imported the Greens have more than held their own. ported by air power, copious artillery and
talent. Yet Mr Scholz’s quiet, tactical poli­ Henning Hoff, who edits Internationale Pol- waves of hapless infantry, reinforced in re­
tics are perhaps better suited to peacetime itik, a global­affairs quarterly, thinks how­ cent weeks by troops withdrawn from
than to the current global crisis. ever that the centre will hold, the coalition Kherson and by newly mobilised men. The
What feels like political wisdom in the partners clinging together to survive and regular army fights during the day. Wagner
Berlin chancellery can look to others like the mainstream opposition, led by the units, better funded and equipped with the
foot­dragging or, occasionally, selfish pa­ right­of­centre Christian Democratic Un­ latest tanks, come out at night. Elite air­
rochialism. European allies were furious ion, failing to offer attractive alternatives. borne forces have joined in. For all that, the
when, at the end of September, the Ampel “This government looks fragile but is actu­ front lines have hardly budged.
abruptly pledged €200bn to protect Ger­ ally quite stable,” judges Mr Hoff. “It is con­ In early December Russia captured
man firms and households from raging en­ demned to success.” n three villages (Kurdyumivka, Ozarianivka
ergy costs. German diplomats were left ex­ and Zelenopillya) to the south of Bakhmut,
plaining that no, this huge sum would not with the aim of severing its supply lines to
undermine joint EU policies because it the west. But attacks to the north towards
was, in fact, only a rough number, other Soledar have proved fruitless. Russian pro­
countries are doing similar things, and it is gress has also come at eye­watering cost.
to be spread over many years. Ukrainian artillery, starved of ammunition
Some Germans are unforgiving, too. in the summer but now replenished by the
Dieter Pogel, an accountant enjoying a bus­ West, has pounded the Russian attackers.
tling Christmas market in the port city of On December 4th Serhiy Cherevaty, a
Bremen, takes a swig of mulled wine be­ spokesperson for Ukraine’s eastern group
fore saying what he thinks about the chan­ of military forces, claimed that 50­100 Rus­
cellor. “The Scholzomat talks a lot, but he sian soldiers were dying every day in the
doesn’t do a lot.” That is a view shared, if battle, with about the same number
expressed differently, by big chunks of the wounded. Ukrainian forces in the area face
policy establishment in Berlin. The delight similarly grim conditions. Images pub­
felt when, three days after Russia invaded lished by a Ukrainian soldier show trench­
Ukraine, Mr Scholz declared a Zeitenwende, es filled with ankle­deep mud and trees de­
a historic turning point that would see Ger­ foliated by shelling, lending the battle the
many assert itself not just as a political and feel of the first world war. Drone footage of
economic leader, but a military one, has for Bakhmut shows a city that looks as if it has
many turned to disappointment. been struck by a nuclear bomb, with only
The Ampel has indeed stood up for the husks of buildings left.
principle over Ukraine, providing lots of In many ways, the battle is a microcosm
The unhappy prince
money and weapons as well as refuge to 1m of the war and its politics. Bakhmut is not a
Ukrainians. But the €100bn boost pledged On December 7th German police arrested strategic town. If Russia were to conquer it,
to Germany’s own long­shrunken defence 25 alleged members of a far­right group it would not have the manpower to breach
spending has proved, after months of dith­ on suspicion of plotting to overthrow the further lines of defence to the west. But
er, to mean a rise this year of just 0.2% as a government and replace it with a council Vladimir Putin, Russia’s president, is des­
proportion of GDP, and not enough more headed by a 71­year­old aristocrat who perate for his first victory in almost six
next year to reach even the modest 2% of calls himself Prince Heinrich XIII. months—the last one being Severodonetsk

012
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 The Economist December 10th 2022 Europe 25

25 km
YouTube about the Russian army’s actions polls have detected a shift in feeling, with a
in Bucha, a suburb north of Kyiv where majority now in favour of peace talks. Few
Severodonetsk many people died brutal deaths under its respondents feel any responsibility for the
brief occupation. Within 40 minutes of the war. “People don’t want war, but they sub­
Slovyansk Donets
start, a bomb squad had arrived with sniff­ missively agree to it because it would
Kramatorsk Soledar Luhansk er dogs to evacuate the courtroom because cause a serious internal dissonance with
of a supposed bomb threat, manhandling their inner self, which still identifies
Bakhmut the unresisting crowd and Ms Solodovni­ strongly with the state,” Mr Gudkov says.
Kurdyumivka Zelenopillya kova onto the frosty street. Mr Yashin faces That is an answer those looking on
Ozarianivka a nine­year prison sentence. from Ukraine would find infuriating. Yury
Donet sk
The world order has been upturned Saprykin, a prominent Russian editor and
Sources: Institute for the
Study of War; AEI’s
since Vladimir Putin’s unprovoked inva­ journalist, sympathises with Ukrainian
Avdiivka Critical Threats Project sion of Ukraine. But if you were to visit the frustration. Russian society, he says, never
country’s capital, you would be forgiven consolidated as Ukrainian society was able
December 7th 2022 Moscow 300 km
for not noticing it. to. Now it finds itself atomised and collec­
Russian-controlled Ryazan
Assessed Claimed Moscow is, as it always is, a challenge to tively depressed, and in some part reliant
Assessed Russian Kursk Saratov
the senses: a mix of brutalism and conspic­ on the state. “Totalitarianism makes peo­
operations*
Kyiv uous consumption; neo­Soviet and high­ ple very weak. When you add tanks and
Approximate tech; Switzerland and North Korea. A few rockets into the mix, society never stood a
Ukrainian advance Kharkiv
*Russia operated in or UKRAINE buildings are emblazoned with war murals chance”, he says. Maria Eismont, a lawyer
attacked, but does Kherson RUSSIA or the “Z” sign, the brand of Mr Putin’s war. and formerly a journalist for the now­neu­
not control
Squares in front of stations and the bus ter­ tered Vedomosti newspaper, who is repre­
minals in southern Moscow, where mini­ senting Ilya Yashin in the trial, says the
in late June—and happy to feed mobilised buses arrive from Crimea, are peppered Kremlin had long worked to destroy hori­
men into the meat grinder. with grim­faced soldiers, some of them zontal links. “Treason, set­ups, prison, in­
On December 5th Russia launched an­ missing arms or legs. Fewer cars are on the timidation, creating divisions and buying
other wave of missile attacks on Kyiv and road, a reflection of the hundreds of thou­ loyalty, the authorities did everything to
other cities. Ukraine claimed to have shot sands of mobile Russians who have fled. ensure there was no self­organisation.”
down more than 60 out of 70 incoming But in the main, the visual changes are un­ In his final statement in court on De­
missiles, but officials say they are deeply remarkable, helped by a degree of econom­ cember 5th, her client Mr Yashin called on
concerned by the small number that con­ ic stability that comes from high hydrocar­ his supporters to resist. “Stand up for each
tinue to get through, leaving the country’s bon profits. The government has been other,” he asked them. “There are many
energy infrastructure in a desperate state. largely successful in isolating the capital more of us than it seems.” Whatever the
The air war is no longer a one­way af­ from the war. truth of that assertion, Mr Yashin’s strong
fair, though. On the same day as the Rus­ The heart of that isolation is informa­ public stand against the war is for the mo­
sian barrage, Russia said that Ukraine had tion. The Kremlin once tolerated niche me­ ment very much a fringe concern. Those
used low­flying Soviet­era drones to strike dia. Since February it has built great walls Russians who do protest against it are do­
two air bases, at Ryazan and Saratov, more around the truth, closing some 260 publi­ ing so only privately.
than 450km (280 miles) over the border, cations. Twitter, Facebook and Instagram The mix of repression and relative eco­
killing three people and damaging long­ are now blocked, accessible only via VPN nomic resilience means that the Kremlin’s
range bombers. That was no fluke. On De­ proxies. Laws ban discrediting the Russian manufactured consensus is likely to hold
cember 6th another strike occurred at Kha­ army (punishable by fines) or publishing for some time to come. “Russians are hos­
lino air base near Kursk, home to Su­30SM “fake news” (punishable by prison). A list, tages,” said Ms Eismont. “It shouldn’t be a
fighter jets. Not since the second world war updated on December 1st, criminalises any surprise that many of them are ready to ne­
have air raids struck so deep into Russia. n discussion of over 60 sensitive subjects, gotiate with the terrorists.” n
from the numbers of Russians killed in ac­
tion to the country’s mobilisation cam­
Moscow paign. Anyone who wants an alternative
view has to search hard for it. It is difficult
The silence of to find a VPN that the security services
haven’t already blocked. The Russian me­
the Russians dia simply serve up tales of the army “de­
fending” the people of the Donbas.
According to Lev Gudkov, who heads
MOSCOW
the Levada Centre, Russia’s most trustwor­
Dissent is muzzled. Resigned
thy pollsters—considered “foreign agents”
acquiescence is the rule
by the Kremlin—only about one in five

“H ave the dogs turned up yet?” asked

75­year­old Larisa Solodovnikova.
The former space engineer is one of a small
Russians now consume news beyond state
propaganda. That figure broadly corre­
sponds to those who are strongly against
crowd queuing to hear Ilya Yashin, an op­ the war. But there is a spectrum of igno­
position politician, make a final plea at rance. There are the true believers in the
Moscow’s Meshchansky court. The crimi­ war and those who believe it to be an out­
nal trial is the most prominent of several rage. Most Russians, Mr Gudkov says, are
dozen being conducted against the few in the middle, choosing to distance them­
Russians who have dared to challenge the selves and retreat into family life.
wartime censorship machine. Mr Yashin As in Soviet times, people are embrac­
was accused of spreading “fake news” on ing doublethink. Levada’s more recent As if nothing ever happened

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 26 Europe The Economist December 10th 2022

Ukraine
French brand names
Smart warfare C’est easy-peasy
PARIS
French brands are mutilating English as well as French

Using foreign tech to mitigate

Russian destruction
F ROM Louis Vuitton to Hermès,
France’s luxury brands proudly ooze
their quintessential Frenchness. But in
ture of swill and bile). A greater delight is
France’s fondness for brands composed
of phonetic misspellings of its own

M uch of Ukraine is dark. Russian

missiles have ensured that millions
of households lack electricity. Even so,
many other industries French firms seek
to disguise their national origins. AXA, a
French insurer, chose a name that means
phrases. Kiloutou, which in French
sounds like qui loue tout or “who hires
everything”, rents out diggers and me­
technology is helping Ukraine survive the nothing and can be pronounced in all chanical equipment. Kinougarde, a play
present and prepare for the future, thanks languages. GDF Suez, a French energy on qui nous garde (“who looks after us”),
to its own efforts and those of friends. firm, renamed itself Engie, a word that is a child­care service. Recently the group
Nearly 2,000 miles (3,200km) from Kyiv, a apparently “evokes energy…in all cul­ that owns Buffalo Grill, a restaurant
map of Ukraine is a pattern of colourful tures”. Now a nation forged through a chain which describes itself as “un steak­
dots, each marking a place where war dam­ common language, which it doggedly house”, renamed itself Napaqaro, which
age has occurred. The live tracker at the strives to defend, is taking such linguis­ in French (nappe à carreaux) sounds like
Scottish headquarters of HALO Trust, a de­ tic mangling to another level. “checked table­cloth”.
mining charity, charts Russian bombings In recent years the country has suc­ The latest trend is to apply this pho­
of Ukraine within hours of each incident. cumbed to the meaningless globish netic play to English words, which may
Live information about damage, and the beloved of startups the world over. themselves be unfamiliar, but become
ordnance that caused it, used to be near­ Among its own firms are Mirakl, a French even more so in the French rendering.
impossible to obtain. But recent advances software firm, or Lunchr, which operates New French brands include Izipizi, a
make it possible to gain nearly real­time a smartcard for meal vouchers (and fashionable chain of spectacles which to
access to data that may prove useful for de­ recently rebranded itself Swile, although the English ear sounds like “easy­peasy”.
fence now and rebuilding later. to an English ear that sounds like a mix­ Another is Yomoni, an online investor
Before Vladimir Putin invaded Ukraine, that sounds like “your money”. Then
the country had a thriving digital economy there is Heetch, a ride­hailing service
and tech sector. It is putting it to good use. that sounds as if a French person is say­
Volodymyr Zelensky, Ukraine’s president, ing “hitch”. It is unclear whether the
has also been appealing to foreign tech French grasp the English resonance.
firms to help out. In June he appeared, via To the guardians of linguistic purity
hologram, at a series of European tech con­ all this is an affront. The Académie Fran­
ferences, urging brainy types to help now, çaise, established by Cardinal Richelieu
and enjoy investment opportunities in the in 1635, still rules on which foreign words
country later. This has given Ukraine ac­ are acceptable. It currently disapproves,
cess to a range of innovations. for example, of “millennials” in favour of
Foreign IT whizzes minded to help Uk­ enfants du numérique, or “dry January” to
raine are invited to come to Diia City. It which it prefers janvier sans alcool. The
cannot be found on a map, though. Diia Académie does not pronounce, however,
(meaning “action”) is a virtual city, on brand names. Unless it is a matter of
launched by Mr Zelensky earlier this year silk scarves or designer handbags,
to attract foreign talent. It has its own legal France’s ambition to appear on trend
and tax regime. Virtual residency offers globally will mean the ongoing mutila­
many perks, including tax rebates. tion of its own language, as well as Eng­
Not all Ukraine’s digital helpers are lish—all the more so if the enfants du
seeking to turn a profit. California­based Who knows what it means? numérique have anything to do with it.
ESRI, a firm specialising in geographical­
information software, has been especially
generous. It is supporting HALO in moni­ ESRI’s software to produce detailed maps. the Ukrainian National Police to expand
toring the damage done by Russian ammu­ A second form of damage­mapping is of such evidence­gathering.
nition, and the kind of weapons used. heritage and cultural sites. Groups such as Scanning efforts are not limited to
Usually clean­ups after war are risky Skieron, Backup Ukraine and Pixelated Re­ bombed sites, however. The Ukrainian Na­
and expensive. Knowing what was used, alities are making 3D scans of precious tional Police has deployed software that
and where, means fewer resources are sites and objects, to preserve Ukraine’s his­ uses an AI programme considered contro­
needed to make territory safe, and that tory. UNESCO has already reported 224 heri­ versial in some quarters. Clearview AI, a
fewer de­miners are injured or killed. Con­ tage sites in Ukraine as damaged or de­ New York­based firm, waived its fee for use
ventional ordnance mapping is rarely pos­ stroyed. After the war, scans could be used in Ukraine, and its facial­recognition soft­
sible during active conflict, but HALO is us­ to guide restoration efforts. ware is now being put to work to identify
ing social media to locate explosions and 3D scans of bombed places may also dead and captive Russian soldiers. In these
spots that are contaminated with explosive serve as evidence for the future prosecu­ and other ways—from the 3D printing of
remnants from, say, cluster bombs. Face­ tion of members of Russia’s regime. In Au­ buildings to the use of auto­transfusion
book posts, Instagram images and tweets gust, Artec, a Luxembourg­based 3D-pro­ devices in hospitals—Ukraine is emerging
can all become geotags, which are then duct firm, announced a collaboration with as a hub for trying out some of the latest
pinned to the nearest settlement, using the Human Rights Conduct Department of tech in extreme conditions. n

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 28 Europe The Economist December 10th 2022

Charlemagne Cancel sculpture

Europe is grappling with its dodgy memorials, a plinth at a time

shape historical memory. What usually remains are war memori­
als, which local authorities have been queasier about dismantling.
A number of sites have become the subject of bilateral accords
with Russia to ensure their preservation. Russian­speaking mi­
norities, for example in Latvia, have defended the monuments.
Protests from Moscow that razing monuments is akin to a “war
against history” have fallen on scornful ears. Ukraine, which
speeded up a purge of Russian symbols after 2014, has found more
to do: on November 30th Odessa’s city council voted to remove a
prominent statue of Catherine the Great. Though she founded the
place, as empress of Russia she is no longer welcome.
Germany stands as an outlier. It has over 1,000 Soviet monu­
ments, largely in the formerly communist east. Yet there is no dis­
cernible call to do anything about them. That is not to do with the
supposed complaisance of politicians in Berlin towards Russia.
Rather, broader forces of history and identity are in play. The rout­
ing of the Nazis in 1945, and thus Germany’s rehabilitation after
the war, start with the Red Army. Some 80,000 Soviet troops died
in the liberation of the capital and more than 10,000 are buried
there. Even though the Russians outstayed their welcome by de­
cades, denial of the Red Army’s role in ending the war would open
a can of historical worms: erase the Russians from the wartime

M emento Park, in Budapest’s southern suburbs, offers a

glimpse of the glorious future communists once promised.
Statues of muscular workers lunge confidently forward, the better
narrative, and other chapters may need to be rewritten. Best not
start. In that spirit the graffiti of young Russians as they captured
the Reichstag in 1945 are preserved to this day. Reminders of other
to crush capitalism; unsuccessfully as it turned out. Dozens of dark chapters of German history are fair game: on December 2nd a
likenesses of Lenin, Marx and their Hungarian ideological enforc­ Berlin square long named after a 19th­century coloniser of west
ers stare into the distance. These monuments dotted the Hungar­ Africa, Gustav Nachtigal, was rechristened after two of his victims.
ian capital before central Europe shook off the Soviet yoke in 1989. Other bits of western Europe have their own demons. Germany
The open­air museum, inaugurated a few years later, was an ele­ never tolerated anything resembling a glorification of its Nazi era.
gant solution to an intractable problem: how to place public dis­ Italy has proved more tolerant of its home­grown fascist, Benito
plays of tyranny out of sight without resorting to the destruction Mussolini, for whom Italy’s new prime minister, Giorgia Meloni,
of heritage of the sort tyrants themselves favour. As if to underline has in the past expressed admiration. Last month a research insti­
the rout of socialism, a “Red Star” gift shop offers joke USSR tin tute in Milan unveiled a list of 1,400 monuments, street names
mugs, and visitors can recreate the experience of East German mo­ and plaques that glorify the fascist regime in power from 1922.
toring by pushing a beaten­up Trabant around. Some monuments are hardly difficult to pinpoint, including a 36­
The old continent has a lot of history. Some of the figures it metre obelisk in Rome with the inscription “Mussolini Dux”. The
once elevated onto plinths are people it now no longer wants to grand Palazzo della Civiltà Italiana, also in the capital, is adorned
celebrate. Dictators, colonisers and other previously exalted vil­ with a quote from Il Duce. Far from being consigned to history, to­
lains are being shunted off their pedestals. In eastern Europe, the day it serves as the headquarters for Fendi, a fashion house.
Russian invasion of Ukraine has rekindled a campaign to purge Spain has been tackling its own dodgy monuments. In October
any remaining tributes to Soviet “heroes”. Farther west, attitudes a “Law of Democratic Memory” was passed. Among other things it
to the past are evolving at a slower pace. aims to “redefine” the Valley of the Fallen, a giant memorial to its
An almost totalitarian purge of Soviet memorabilia is under civil war in the 1930s which had come to serve as a final resting
way. The Baltics, once part of the Soviet Union and now among place for Francisco Franco and his fascist acolytes. Built outside
Ukraine’s most vocal supporters within the European one, are at Madrid using slave labour, the monument long served as a rallying
the forefront. In August authorities in Latvia theatrically toppled point for Franco’s enduring fans. The man himself was exhumed
an 80­metre monument celebrating the Red Army, to cheering from there in 2019, and other graves are now being moved. The
crowds. A week earlier Estonia had carted off a Soviet T­34 tank right­wing opposition has vowed to reverse the law once in power.
from its pedestal in the town of Narva to a museum. (A similar
model serving as a Soviet memorial in Lysychansk in eastern Uk­ How the mighty have fallen
raine was hauled off its own display, then deployed as a road block The moving of statues, let alone their destruction, opens up de­
to hamper advancing Russian troops.) Raseiniai, a city in Lithua­ bates about the role of the state in remembering. There are other
nia, covered up a 70­year­old monument to Red Army soldiers in solutions. In Budapest, not every artefact could be moved to Me­
the spring—before removing it a few weeks later. Historical com­ mento Park. In the centre of town, an imposing monument laud­
missions are at work to see what else ought to be taken away. In Es­ ing Soviet troops that liberated the city endures. For that, a novel
tonia alone, some 244 Soviet monuments are to be expunged. plan was hatched: in 2011 it was ideologically neutralised by the
Across eastern Europe old statues of Lenin and hunky Soviet erection nearby of a statue of Ronald Reagan. As if America’s com­
workers disappeared long ago. Poland passed a “de­communisa­ munist­basher­in­chief needed reinforcement in his final stare­
tion” law in 2016, decried by critics as an attempt by the state to re­ down, a likeness of George H.W. Bush was added two years ago. n

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 Britain The Economist December 10th 2022 29

Manchester Manchester or does not happen at all.

It is also important because, more than
The sputtering engine of the north any other English conurbation including
London, Greater Manchester has plans for
its future development, to which most lo­
cal politicians have signed up. The contrast
with Britain’s shambolic national govern­
MANCHESTE R
ment is plainer still. As Andy Burnham, the
It has acquired some powers over the years, which it has used pretty well.
mayor of Greater Manchester, delicately
But Greater Manchester remains trapped in Westminster’s orbit
puts it: “We’re very clear about where we’re
ly by London. International yardsticks are going, at a time when the government
britain’s even less flattering. Whereas London is might not be.” Despite grabbing some pow­
growth about as rich as Paris, Manchester is poorer ers from the centre, though, local leaders
crisis than most secondary cities in France and lack the means to get there.
Germany (see chart on next page). The city exploded in the 19th century, as

T o experience the full Manchester ef­

fect, you need to arrive from some­
where other than London. Compared with
Manchester is not a runaway success,
then. But that is precisely why it is impor­
tant. As the home of almost one in five peo­
its cotton mills sucked in workers from the
rest of Britain and Ireland. The chaotic,
disease­ridden metropolis shocked ob­
the capital’s crammed skyline, central ple living in the north of England, it deter­ servers like Alexis de Tocqueville and Frie­
Manchester’s burgeoning collection of tall mines the fortunes of a huge chunk of the drich Engels, the scion of a German cotton
towers looks gappy—closer to Croydon, in country. “Levelling up”, the folksy term for family who was sent there in a failed at­
south London, than the City. Although its regional economic rebalancing popular­ tempt to shake his radical views.
tram network is much more modern than ised by the last­but­one prime minister, Cotton gave Manchester a distinct form
the London Underground, Manchester’s Boris Johnson, is either driven by Greater and culture. By the end of the century the
seems quaint, and not nearly sufficient for city centre was dominated by warehouses
such a large conurbation. Only by compari­ and showrooms. Railway lines radiated
son with other northern or Midlands cities → Also in this section outward to nearby towns, where much of
does the metropolis seem like a vision of the spinning was done. The effects on the
31 Labour’s reform plans
urban prosperity. metropolis long outlasted the cotton in­
Its economy is strong—but, again, only 31 Brewing and inflation dustry. Manchester city centre was home
by comparison with other northern Eng­ to fewer than 1,000 people by the 1980s, ac­
32 Bagehot: Free speech
lish cities. Productivity in Greater Man­ cording to the local council. And the con­
chester, a cluster of ten boroughs centred → Read more at: Economist.com/Britain urbation never quite lost its sense of com­
on the City of Manchester, is nine­tenths of mon purpose. That makes it different from
the British average, which is boosted great­ other urban areas in Britain.

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 30 Britain The Economist December 10th 2022

In 2009 the ten boroughs formed a line” to his patch, where houses are cheap­
combined authority; in 2017 the whole area er. Officials across the metropolis are now Lopsided
got an elected mayor. Collectively they trying to push people and jobs to the gener­ GDP per person*, 2018, $’000
have acquired some clout over planning, ally poorer northern boroughs. Top five urban areas by population
transport, health and adult education, as The metropolis is almost a one­party 30 40 50 60 70 80 90
well as very limited tax­raising powers. state, with eight of its ten boroughs con­
The identity of the area seems to be trolled by Labour. Its leaders are strongly Britain London
12.3m
strengthening. It is fine to describe Salford pro­development, and shed few tears Manchester
or Wigan as Greater Manchester. If you when fields give way to housing. That irks Population: 3.4m

were to call Coventry “Greater Birming­ some people. In Trafford, Marj Powner is France Paris
12.9m
ham” or Bath “Greater Bristol” you would campaigning to protect some soggy
be run out of town. fields—which, although part of Greater Berlin 5.3m
Because the post­industrial city centre Manchester’s green belt, are slated for Germany
was so thinly populated, there has been lit­ 5,000 homes and warehouses. The politi­ Source: OECD *At purchasing-power parity
tle to stop an eruption of high­rise housing cians argue that a small reduction of green­
and offices. The collective population of belt land is needed for economic growth,
the two most central boroughs, Manches­ she says. “Our premise is, let’s make a require government funding.
ter and Salford, has risen from 640,000 to small net reduction in growth in order to Its councils acquired some control over
822,000 over the past two decades, with protect the green belt.” health in 2014, and set about trying to im­
the fastest growth in the urban core. Hers is a widespread view. In September prove people’s diets and wean them off cig­
Greater Manchester’s architects are fol­ The Economist asked Britons whether they arettes. That may have had some effect: a
lowing the dictum that cities should try to would rather have more homes or more lo­ recent study in the Lancet estimated that
maximise “agglomeration effects”. As an cal planning control and protections for life expectancy in Greater Manchester rose
independent review laid out in 2009, ur­ the countryside. They broke more than by one­fifth of a year between 2014 and
ban businesses thrive not primarily be­ two­to­one for less development. But op­ 2019, relative to similar places. Other local­
cause they are near other firms in the same position in Greater Manchester is less ly designed, centrally funded schemes,
industry but because they can tap a deep fierce than it might be. Nine out of the ten known collectively as “Working Well”,
talent pool. The goal is to create a dynamic boroughs have created a plan, called Places seem to have improved the prospects of
centre and connect everywhere else to it. for Everyone, which accepts the govern­ people prevented from working by illness.
The cities of Manchester and Salford ment’s projection that 165,000 additional But the health system is now struggling
have plainly benefited. Salford has used homes should be built by 2037. The plan al­ with the same problems of high demand
the proceeds of development to stave off lows boroughs like Trafford to build less and insufficient staff that bedevil the en­
the worst effects of austerity, says its than their fair share, and others such as tire National Health Service, with few po­
mayor, Paul Dennett. Manchester seems to Rochdale and Salford to build more. It may werful local tools available. Ill­health re­
be developing a more aspirational culture. not survive exactly as written. Still, Greater mains a huge economic problem as well as
Since 2010 gcse results in the city have Manchester seems more likely to get maxi­ a personal blight. In October a review of the
gone from being much the worst of any mum development for minimum fuss metropolis found that rates of recent phys­
borough in Greater Manchester to mid­ than other metropolises. ical and mental illness explain three­quar­
dling. Manchester now sends a higher pro­ Politicians are also pulling hard on the ters of the neighbourhood­to­neighbour­
portion of young people to university than other big lever available to them: transport. hood variation in the employment rate.
any borough except Trafford, which is Like all English cities outside London, Economic shocks tend to hit the people
much less poor (see map). Greater Manchester has a mostly deregu­ of Greater Manchester hard and reverber­
The gradually expanding tram network lated, privatised bus system. Next year it ate for a long time. Before covid­19 struck,
connects outlying boroughs to the city will become the first to introduce bus fran­ the metropolitan unemployment rate
centre, which has helped persuade people chising. Officials will decide routes and tracked the English rate almost precisely. It
that their fortunes are tied to it. “Rochdale timetables; private companies will run the then jumped to more than one percentage
wants the city centre to boom,” says John services. Franchising ought to make public point higher, where it has stuck. Now peo­
Blundell, a councillor there. Its success transport more co­ordinated and simpler ple are struggling with inflation. “I don’t
causes people to “climb up the railway to use—crucial in a metropolis where 31% think I’ve seen people so desperate as I do
of households lack a car. The trouble, how­ now,” says Sarah Woolley at the Benchill
ever, is that Manchester lacks an Under­ Community Centre in Wythenshawe, a
ground to cross­subsidise its franchised giant council estate in south Manchester.
bus network, and has failed to bring in a She speaks with 28 years’ experience.
congestion charge or a pollution charge. It Greater Manchester is ahead of others
is likely to depend on government grants. when it comes to devising clever solutions
Rochdale
This pattern, of Greater Manchester fu­ to social and economic problems. But the
Manchester riously innovating and trying to change its resources available to local politicians are
city centre fortunes but continuing to depend on not truly adequate to the task. One telling
Salford Westminster, is evident in other areas. The sign is that Mr Dennett, the mayor of Sal­
Manchester metropolis has set a target of 2038 to reach ford, says that a big advantage of Greater
net­zero carbon emissions, which is im­ Manchester’s authorities working so well
Trafford
probable. More realistically, Mr Burnham together is that they can more effectively
hopes that a scheme to build tens of thou­ lobby the government in Westminster. “We
sands of new zero­carbon affordable are one of the most centralised democra­
Wythenshawe
Greater Manchester, index homes and retrofit others could provide cies in the Western world,” he says, by way
of multiple deprivation, 2019 decent jobs for Mancunians and give them of explanation. That tells you both why
Most deprived quintile expertise that they could then sell to other Manchester does comparatively well, and
Source: National statistics 10 km
cities. But that ambition too will probably why it cannot soar. n

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 The Economist December 10th 2022 Britain 31

Constitutional reform the “distribution not only of political pow­ largest craft brewer, reckons something
er, but also of economic power”. The fear similar. For comparison, annual consum­
A test of radicalism that Britain would miss out on “next­gen­ er­price inflation is running at 11.1%.
eration rights” in areas like online privacy The biggest problem is the cost of ener­
and the environment was one reason why gy. It takes a lot of energy to heat water to
he opposed Brexit. steep malted grains; boil the wort (the sug­
Left­wing governments elsewhere have ary liquid created from the steeped grains);
tried entrenching “social rights” in consti­ control the temperature of fermenting
Will Sir Keir Starmer adopt the idea
tutions; they are especially popular in Lat­ beer; and package the final product. In a
of social rights?
in America. But they are not always effec­ survey of its members, the British Beer and

S IR KEIR STARMER, the leader of the La­

bour Party, is a bit of a riddle. As a young
lawyer in the 1990s, he was a rising star of
tive. A right to emergency treatment does
not of itself pay for hospital beds. Given the
state of the National Health Service in par­
Pub Association found that, even with the
government’s price guarantee, brewers’ ex­
pected energy spending in 2023 will be as
the human­rights bar. He helped free ticular, there would be plenty for would­be much as 140% higher than in the year be­
death­row prisoners in Africa, won titanic litigants to get their teeth into. Promising fore the pandemic.
free­speech trials and became the joint the public a constitutional right to a better Expensive energy has secondary ef­
head of his cutting­edge chambers. deal is a cheap thing for a party in opposi­ fects. Craft breweries use liquid carbon di­
As a politician, seeking to win over so­ tion to offer. It would be an expensive oxide, a by­product of other industrial
cially conservative voters, he has made pledge to keep in office. Whether Sir Keir manufacturing processes, to store, move
more of his later years as a ramrod­straight adopts the idea of social rights will help an­ and carbonate beer. The largest supplier of
public prosecutor. His speeches are plod­ swer the question of how brightly the fire carbon dioxide in England is a firm that
ding; his persona patriotic, cautious and of radicalism still burns within him. n owns fertiliser factories; spikes in the price
dependable. If he made it to Downing of natural gas prompted these factories to
Street, would any glimmer of that young stop production earlier this year because
radical survive? A dense paper on constitu­ Inflation the bills were unaffordable. In August
tional reform, prepared for Sir Keir by Gor­ some brewers were being quoted carbon­
don Brown, Labour’s prime minister from Tapped out dioxide prices 30 times higher than a year
2007 to 2010, suggests it might. before (things have since steadied).
The paper, which was unveiled on De­ Other inputs are also getting pricier.
cember 5th, is meant to lay the ground­ The cost of grains like barley and wheat
work for the party’s manifesto at the next spiked in the spring and summer with the
LE E DS
election. It proposes scrapping the largely war in Ukraine. Prices have since fallen,
It costs beermakers far more than it
appointed House of Lords and replacing it but are still well above pre­pandemic lev­
did to brew a pint
with a new Assembly of the Nations and els. Craft beermakers import hops from
Regions. It recommends a deep clean of
Westminster: a stricter political­ethics re­
gime, tighter oversight of public appoint­
I n the tap room at Northern Monk, a
craft brewery, Russell Bisset’s immediate
concern is the cocktail—beer, forest­fruit
America, where growers breed varieties
with aromatic flavours like stone fruit and
citrus. Mr Bisset reckons he spends 16%
ments and a ban on MPs taking most exter­ gin and fresh muddled raspberries—that more on hops now than he did a year ago;
nal jobs. It has some sensible ideas for giv­ will be sold at that evening’s football World about half of that rise is because of fluctua­
ing more power to local authorities. Cup game. But his real worry is soaring tions in the sterling­dollar exchange rate.
But the real radicalism lies in a proposal costs. The brewing industry is particularly The price of aluminium for cans and glass
for a new generation of “social rights”. Free reliant on things that are getting pricier. for bottles is rising; labour, too.
education and free health care are the Mr Bisset, who owns Northern Monk, says In better times, brewers might already
things that first come to mind when it costs about 26% more to brew a pint now have passed these costs on to drinkers. But
Britons think about their citizenship, Mr than it did in 2021. BrewDog, the country’s that has been hard during a cost­of­living
Brown’s paper argues. Access to these crisis, particularly after a planned freeze
things should be entrenched much like on beer duties was scrapped as part of the
civil rights (“No person shall be denied government’s autumn statement last
emergency treatment”, for example, and month. The price of alcoholic drinks has
“no person shall be left destitute”). risen more slowly than overall inflation. To
A Labour government could go still fur­ preserve profits, brewers are getting cre­
ther, Mr Brown suggests, and create rights ative—tweaking their processes to extract
relating to fair working conditions and maximum flavour out of each hop, replac­
culture. He floats the idea of a bold consti­ ing carbon dioxide with cheaper nitrogen
tutional obligation to even out Britain’s or propagating their own yeast.
patchy economy. Overseeing it all would be An extended run for the England team
the newly empowered upper chamber of at the World Cup, allied to the usual end­
Parliament, protecting such statutes from of­year celebrations, would help (though
being easily amended by MPs and thus cre­ perhaps not in Scotland). But a raft of
ating a de facto written constitution. planned railway strikes may hurt footfall.
Sir Keir is not bound to adopt any of And once revenues fall back after the holi­
these proposals. But as Yuan Yi Zhu of Poli­ days, brewers are likely to start charging
cy Exchange, a think­tank, notes in a forth­ more. At Northern Monk, Mr Bisset plans a
coming paper, delivering social change price increase of 11% in January. Oliver Rob­
through sweeping and enforceable legal inson of Robinsons Brewery, a Stockport­
rights has been the work of the Labour based company, intends to raise prices in
leader’s career. Writing in Socialist Lawyer, March; so does BrewDog. Britons will soon
a journal, in 1995, Sir Keir called his goal Caught on the hops find it dearer to drown their sorrows. n

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 32 Britain The Economist December 10th 2022

Bagehot Mind your manners (or go to jail)

Britain’s actual problem with free speech

Cowardice over existing laws has been accompanied by hasty
crackdowns on speech and protest elsewhere. After a statue of
Winston Churchill was vandalised during protests in London in
2020, Conservative MPs demanded stricter rules. Anyone damag­
ing a memorial, as sometimes happens during demonstrations,
can face as much as a decade in jail.That may be popular. But it is
not the mark of a self­confident society or of a government that is
dedicated to free expression.
Instead, a cartoonish version of the free­speech debate pre­
vails, one which too often boils down to the middle­aged being an­
noyed with their teenaged children. The Conservative govern­
ment is pushing through Potemkin legislation on freedom of
speech in universities. Before the pandemic, 0.2% of events at
universities featuring outside speakers were cancelled. Under the
new law universities and student unions will be forced to allow
what they already allow. The activities of a few students overshad­
ow the far more egregious problem of the state jailing people for
expressing an opinion.
Labour, which has an authoritarian streak, is unwilling to
touch the topic. Sir Keir Starmer, the Labour leader, started his ca­
reer as a thrusting human­rights lawyer, fighting the jackboot of
authority. Later he acquired a taste for boot­leather as Britain’s di­

A t times, the rise of Captain Tom Moore felt like a fever dream.
When Britain entered lockdown in March 2020, the 99­year­
old veteran of the second world war began doing laps of his garden
rector of public prosecutions. Sir Keir was in the job when the
Crown Prosecution Service pursued Paul Chambers, a harmless
bonehead who tweeted an obviously insincere bomb threat at
on a Zimmer frame to raise money for an nhs charity. He intended Doncaster airport and was prosecuted under the Communications
to raise £1,000 ($1,215); instead he managed £33m. The queen gave Act. (His conviction was eventually overturned.)
him a knighthood. An execrable rendition of “You’ll Never Walk Many of those in breach of the law deserve little sympathy. Ear­
Alone”, featuring Captain Tom, Michael Ball and a choir of nurses lier this year two police officers were sentenced to 12 weeks in jail
hit number one. A gin bearing his name was brought out. On New for sharing appalling messages with Wayne Couzens, a police offi­
Year’s Eve that year, his image was plastered across London’s night cer subsequently convicted of kidnap and murder. (An appeal is in
sky by 300 glowing drones. process.) Had the conversations happened in private in one of
But the oddest part of the story came after Captain Tom died, in their homes, it is likely that no charges would have been possible.
February 2021. In response Joe Kelly, a Celtic fan from Glasgow, Abhorrent behaviour that is legal in the real world should also be
tweeted: “The only good Brit soldier is a deed one, burn auld fella, legal in a WhatsApp chat, a rambling private conversation in text
buuuuurn”. For that tweet, which was online for 20 minutes be­ form. Cardinal Richelieu once said: “If you give me six lines writ­
fore he deleted it, Mr Kelly was charged and threatened with jail. ten by the hand of the most honest of men, I will find something in
He was eventually sentenced to 150 hours of community service them which will hang him.” When laws are too broad, too many
and placed under supervision for 18 months. people end up on the rope.
Being offensive is an offence in Britain. Under the Communi­
cations Act of 2003 anyone sending a “grossly offensive” or “inde­ Tweet in haste, repent in jail
cent” message, whether in a tweet or on WhatsApp, can face jail. A Freedom of speech is one of many areas where government rheto­
law whose origins lie in attempts to stop perverted men panting ric does not match reality. Sometimes this deficit is a good thing.
down the phone at female telephone operators in the 1930s is now The Tories have failed to reform or revoke the Human Rights Act,
used to prosecute brainless tweets. The upshot is that it is, in ef­ even though they first pledged to do so in 2010. Nor have they done
fect, illegal to be rude on the internet. anything about equalities legislation or asylum law, despite pro­
For a government that portrays itself as the protector of free mising action for years. But when it comes to free speech, the gov­
speech, this is a sorry affair. Conservative ministers may despair at ernment’s inertia is a problem.
“cancel culture” or the excesses of censorious students. Yet when Others are taking action. With no domestic remedies available,
it comes to something much more fundamental—restricting the Mr Kelly intends to challenge his conviction at the European Court
ability of the state to jail someone for speaking out of turn—the of Human Rights. So far he has raised £18,000 to do so, helped by
government is happy to maintain a deeply illiberal status quo. the Free Speech Union, a campaign group. It would be perverse if a
A plan to ditch the clause that nearly sent Mr Kelly to jail has government dedicated to defending free speech and promoting
been scrapped. It was set to be replaced as part of a raft of wider re­ sovereignty removed an illiberal law only at the behest of oft­ma­
forms to online life. Under the proposal, only messages that ligned “foreign judges”. People assume that freedom of speech is
caused serious distress would be punishable, rather than merely as British as queuing or the king, as if the country has always en­
grossly offensive ones. The move was recommended by the Law joyed its own version of America’s first amendment. But illiberal
Commission, a body that suggests legal changes. But the govern­ ideas on free speech have a greater hold on the national psyche. If
ment ditched the idea in November after criticism from mps. In­ the government is serious about protecting freedom of expres­
stead, the rotten old clause will remain on the statute book. sion, it should start with its own laws. n

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 Middle East & Africa The Economist December 10th 2022 33

The Gulf and China agreement to buy liquefied natural gas

from Qatar, the longest such gas deal ever.
Arabs looking east Since 2005 China has signed large in­
vestment deals and construction contracts
with Arab states worth $223bn, says the
American Enterprise Institute, a think­
tank in Washington. Of that total, 52% has
been with the GCC countries (Algeria, Egypt
RIYAD H
and Iraq took much of the rest). The pace of
Xi Jinping’s visit to Riyadh highlights China’s growing clout in the Gulf
those deals speeded up in the late 2010s

T he mood on the Arabian peninsula was

jittery. After an abrupt surge, oil prices
were sliding amid a rich­country reces­
balance these two views of China. The first
has become increasingly alluring. China is
a big export market and a major source of
(see chart on next page). Though it has
since slowed, due to the pandemic and a
slump in Chinese investment worldwide,
sion. Conflict brewing in the Persian Gulf investment in the Gulf. The second, in China continues to see the Gulf as promis­
left Saudi Arabia worried about attacks on which China serves as a strategic hedge ing. In the first half of 2022 Saudi Arabia re­
its oilfields and eager to procure ballistic against an erratic America, is less compel­ ceived $5.5bn in investment and contracts
missiles to deter its rivals. Rebuffed by ling: China is no easy substitute. Moreover, through China’s Belt and Road Initiative,
America, a young and powerful Saudi in trying to play one power off against the more than any other country.
prince turned instead to China, which other, Gulf leaders may hasten America’s Much of this investment remains fo­
signed a secret deal to supply the kingdom abandonment of them, which they fear. cused on energy. Trade is oily too: Chinese
with the weapons it wanted. Start with the Gulf’s economic relation­ imports from the region are almost entire­
If this story evokes a sense of déjà vu, it ship with China, which is growing. Energy ly petrochemicals and other commodities.
most certainly should. It happened four remains at the core. Last year 51% of Chi­ Gulf states are keen to shift their econo­
decades ago and led to the establishment na’s oil imports came from Arab states, and mies away from oil and view China as a key
of Sino­Saudi relations in 1990. Much of it four­fifths of that came from the monar­ partner in that effort. Last year it pumped
has echoes today, as Xi Jinping arrived for a chies of the six­member Gulf Co­operation money into hotels in Oman and auto­
visit to Saudi Arabia on December 7th, his Council (GCC). In November Sinopec, a manufacturing in Saudi Arabia. Such pro­
second trip to the kingdom. state­run energy giant, signed a 27­year jects are still outliers, though; non­oil in­
Not everything is the same, of course. In vestment remains sluggish.
contrast to the 1980s, Saudi Arabia and its None of this causes much angst in
→ Also in this section
Gulf neighbours now have strong commer­ America. It is the Gulf’s growing ties with
cial ties with China. Still, plus ça change: 34 Iran dithers over dress China in strategic sectors that worry peo­
the Saudis continue to treat China as a foil ple in Washington: telecoms, security and,
35 Carpe per diem
for America, which in their eyes has be­ increasingly, defence. GCC members are
come a particularly unreliable partner over 35 Ramaphosa fights back keen customers of Huawei, the telecoms
the past decade. giant that is under American sanctions,
36 A big school­spending trial
The challenge for Gulf states is how to and are happy to do business with compa­

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 34 Middle East & Africa The Economist December 10th 2022

nies like SenseTime, an artificial­intelli­ en have stridden past the security forces’
gence firm blacklisted by America for its Building up again scathing eyes. “It’s a different country,”
role in spying on Uyghurs in Xinjiang. In Investment and construction says a teacher, who marvelled at barehead­
September a company owned by Saudi Ara­ contracts with China, $bn ed women boarding flights and passing
bia’s sovereign­wealth fund announced a Saudi Arabia UAE Other GCC* countries through passport controls.
$207m joint venture with SenseTime to 15 Now the protesters want to change or
build an AI lab in the kingdom. overturn Iran’s institutions and rewrite the
12
China has also sold armed drones to the statute books. For 43 years, keeping wom­
UAE, among others, which has used them 9 en veiled has been a defining symbol of the
on battlefields across the region. In March republic, epitomising its strict enforce­
6
a Saudi firm signed a deal with a state­ ment of sharia (Islamic law). Ruhollah
owned Chinese defence giant to manufac­ 3 Khomeini, the Islamic Republic’s founder,
ture drones in the kingdom. America’s called it the “flag of the revolution”. “It’s the
0
spies say China is helping Saudi Arabia regime’s Berlin Wall,” says a well­connect­
build ballistic missiles as well. 2012 14 16 18 20 22† ed cleric. Knocking it down, he reckons,
Source: American *Gulf Co-operation Council
Last month at the Manama Dialogue, an Enterprise Institute †January-June
would “signal the theocracy’s collapse”.
annual security powwow in Bahrain, The government’s men want to uphold
American officials came with warnings. the old code. Security guards enforce
Brett McGurk, the president’s Middle East tions, finds its way to Chinese refineries. “proper” dress in government offices and
adviser, said growing co­operation with Yet he is loth to use it to bring pressure on in courts, where clerics are still sentencing
China in the region would put a “ceiling” Iran’s government. scores of protesters to death. Officials
on relations with America. Another official Buoyed by higher oil prices and grow­ threaten to shut down banks and shops
acknowledged the tensions in the relation­ ing economies, Gulf rulers feel assertive: that serve unveiled women. Regime voices
ship, particularly over Iran. they think this is their moment to step out insist that the prosecutor­general has been
Mr Xi is being more warmly received from America’s shadow. Mr Biden will have misunderstood. And the supreme leader,
than Joe Biden, whose trip to Saudi Arabia to accept a greater Chinese role in the re­ Ayatollah Ali Khamenei, says that “each ri­
in July, his first as president, had an air of gion. But both sides should recognise that, oter, each terrorist”, as he terms his oppo­
desperation: oil prices were high, an elec­ now as in the 1980s, China cannot fully re­ nents, must be punished. Since the prot­
tion loomed, and he needed help. The Sau­ place America in the Gulf. n ests began, rights groups say that some 470
dis sent him home empty­handed. After people have been killed and at least 18,000
more than a year of froideur from his peo­ detained (see Graphic Detail).
ple, they were in no mood to be generous. Iran But the ruling clerics, sensing that the
Mr Xi, by contrast, will probably go repression has failed to crush the unrest,
home with a stack of big investment deals Off with those are divided over what to do next. The usu­
and other announcements. He was due to ally hardline president, Ebrahim Raisi,
meet the Saudi leadership, including Mu­ scarves! speaking on December 7th at a university
hammad bin Salman, the crown prince and in Tehran, the capital, accepted “fair criti­
de facto ruler, on December 8th. Next on cism” of his administration. Yet his bully
his schedule is a summit with Gulf leaders boys beat up students demonstrating out­
The ayatollahs hope to stay in power
and a further meeting with figures from side. Some security people favour replac­
by curbing the hated hijab-enforcers
across the Arab world. Saudis joke about ing the morality police with smart cameras
the prospect of the taciturn Mr Xi joining a
traditional sword dance.
Saudi officials insist that none of this is
U nnerved by nearly three months of
spreading protests, Iran’s theocratic
regime seems to be dithering. In their first
that would link unveiled women to their
mobile phones and send them text mes­
sages imposing fines.
meant as a snub to America: China is an big concession since demonstrations But leaked transcripts of official meet­
important country, they say, and the king­ erupted in September after the death of ings call for a lighter touch. A mouthpiece
dom treats it as such. Still, the Biden team Mahsa Amini for not wearing a “proper” hi­ for the Islamic Revolutionary Guard Corps,
has had a tricky relationship with Saudi jab, the clerics hinted that they are dis­ the regime’s praetorian guard, has suggest­
Arabia and sees China as its main compet­ banding the morality police force in whose ed bringing back Muhammad Khatami, a
itor. The chummy reception for Mr Xi—in custody she died. It had been “shut down”, former president censored for his reform­
contrast to the frosty one for Mr Biden— said the prosecutor­general, Muhammad ist views, to bridge the gap between the rul­
will not go down well in Washington. Jaafar Montazeri, adding that unspecified ers and the protesters.
In private, Gulf officials say they are ex­ “cultural” methods would be adopted in­ Even the most reactionary clerics, the
asperated with an America whose policy stead. Come mid­December, he promised, theocracy’s backbone, may be wavering.
seems incoherent. Three consecutive pres­ a decision would be taken on whether to Most want to keep the veil and gender seg­
idents have talked of reducing America’s abolish the mandatory hijab altogether. regation but question their reimposition
role in the Middle East, yet they do not It has already been thrown off in the by force. “Khamenei is becoming a minor­
want other powers to gain too much influ­ streets. The morality police’s “guidance pa­ ity even among conservatives,” says one.
ence as they depart. Such frustrations in trol”, which combed public places to cap­ From his seat in neighbouring Iraq, Shia
the Gulf are understandable. ture young women and haul them off for Islam’s top cleric, Grand Ayatollah Ali al­
But so too are America’s. The GCC com­ re­education, disappeared at the start of Sistani, has criticised senior Iranian clerics
plains that America has not done enough the unrest, once protesters began torching for damning the protesters.
to protect it from the Gulf Arabs’ arch­rival their vans. Millions of women have dis­ But it may be too late for concessions to
Iran, with which China signed a 25­year carded their veils, sometimes burning work, anyway. Trust in the ruling clerics’
“strategic partnership” last year. Mr Xi is them. Celebrities previously paid to sing word has sunk. Many saw the prosecutor­
one of the few leaders with real leverage the regime’s praises have followed the ex­ general’s remarks as a ruse to divide the
over Iran. Most of the oil exported from Ira­ ample of rebellious schoolgirls by appear­ protesters. Others thought it was simply a
nian ports, in defiance of American sanc­ ing bareheaded. For weeks unveiled wom­ response to the weather. The morality

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 The Economist December 10th 2022 Middle East & Africa 35

South African politics

Perverse incentives

To reap, perchance, per diem Sofa so good

BAGAMOYO
Ay, there’s the rub: daily allowances are a big problem in Africa

W ith joints such as Funky Squids

Beach Resort, Bagamoyo sounds
like a party town. It is not. Hotels depend
countries there is widespread “leap­
frogging”, where officials claim atten­
dance at contemporaneous events, often
JO HANNESBURG
The embattled president soldiers on
on bureaucrats from Dar es Salaam,
Tanzania’s commercial capital, 50km to
the south. “Bagamoyo is per­diem town,”
with colleagues signing on their behalf.
Even legitimate per diems undermine
good government. Attendance at away
C yril Ramaphosa is an enigma; his
presidency, a disappointment. But if
there is one thing he has consistently spo­
explains the head of an NGO, in reference days is determined by allowances, not ken out about, it is the importance of the
to “by the day” allowances claimed by the value of the event. Senior staff attend rule of law, especially the constitution he
civil servants for attending out­of­town training meant for junior employees. helped draft as Nelson Mandela’s right­
events. “No meetings ever take place in Donors splurge on per diems (often paid hand man. His biggest success as South Af­
government ministries,” he sighs. in hard currency) so that officials bless rica’s president has been rebuilding some
“Perdiemitis” is rife in Tanzania and their pet projects. They also create pow­ of the criminal­justice institutions de­
many other countries in the region. In erful lobbies. Cash­strapped Malawi stroyed by his predecessor, Jacob Zuma.
May the government announced that per halted government meetings on the On November 30th the rule of law be­
diems for senior civil servants would shores of Lake Malawi in June. By No­ came personal. A panel of ex­judges ap­
more than double, from 120,000 shil­ vember it had relented. pointed by Parliament concluded there
lings (about $50) to 250,000. The last The hoteliers of Bagamoyo faced no was enough evidence of misconduct by the
detailed study, albeit from 2008­09, such hardship, however temporary. president in relation to an odd saga involv­
found that spending on allowances Managers say that business has boomed ing cash inside a sofa for MPs to consider
($390m) was enough to pay the salaries since Tanzania increased allowances. impeaching him. Over the next 24 hours he
of more than 100,000 teachers. Funky or not, they—and local bureau­ pondered resigning, in part because he felt
Per diems began as justifiable pay­ crats—are squids in. not doing so would be hypocritical.
ments for extra expenses. But in the Yet bolstered by cabinet allies and pro­
1980s and 1990s they became a way of vincial bigwigs within the African Nation­
furtively padding pay packets while al Congress (ANC), Mr Ramaphosa chose to
governments trimmed official wages as fight and stand for re­election as leader of
part of structural­adjustment pro­ the ruling party at its national conference,
grammes. They have since been taken for which starts on December 16th. Mr Rama­
granted. Research by Guy Blaise Nkamleu phosa also asked South Africa’s highest
and Bernadette Dia Kamgnia for the court to disqualify the panel’s findings on
African Development Bank notes that it the ground of insufficient evidence. MPs
is “not uncommon” for officials’ allow­ may choose to wait for that ruling before
ances “to equal or exceed” base salaries. their debate on the panel’s report, sched­
Such largesse encourages abuse. uled for December 13th. Since a majority of
Earlier this year the boss of Uganda’s MPs must vote to impeach a president, and
national airline was accused of claiming the ANC has 57.5% of the seats, it would re­
$12,750 for foreign trips she never made quire a chunk of his party to turn on him.
(the airline says that in some cases she In another twist Mr Ramaphosa’s fan­
did travel and in others she paid back the tastical­sounding version of the imbroglio
allowances). Gambians are angry at how was given a boost. Many South Africans—
the wife of the sports minister received including the panel members—doubted
per diems for the recent Commonwealth his account of why there was $580,000 (or
Games, despite not attending the event perhaps more) hidden in, and then stolen
(the minister denies any wrongdoing and from, a sofa at his game farm. Mr Rama­
says the money will be repaid). In many Hardship pay phosa said it came from the sale of buffalo
to a Sudanese businessman. On December
5th the hitherto mysterious ungulate shop­
police normally lower their profile in Iran’s widely observed than earlier ones. Many per, Hazim Mustafa, told Sky News that he
cold winters, when women cover up. Some shops, including in the bellwether bazaars, had indeed bought the buffalo, which he
thought the government would just give lowered their shutters in Tehran. Officials could not collect because of the pandemic.
the morality police a new name. warned that premises joining the strike Moreover, “$580,000 is nothing for a busi­
And many Iranians want more than just would be closed down for good, but the nessman like me. I don’t know what the big
an end to the Islamic dress code. “With or protesters’ threats to boycott those that issue is,” he added.
without the hijab, onwards the revolution,” stayed open made a bigger impact. Mr Ramaphosa must still overcome
cried students at a polytechnic in Tehran Still, Iran’s pendulum has a habit of several obstacles in order to keep his job
on December 7th. Many Iranians, feeling swinging wildly. In the 1930s the last shah’s and his reputation. These include investi­
emboldened, see the reformist clergy as a secularising father banned the veil and or­ gations by other agencies into the sofa sa­
spent force and want the ayatollahs, what­ dered his police to rip it off women’s heads. ga, winning his petition to the Constitu­
ever their stripe, to surrender power. Today’s protesters yearn for a day when, in tional Court and defeating efforts to unseat
The call for a three­day general strike matters of dress and much more besides, him by enemies within the ANC. At least he
that began on December 5th was more Iranians can choose for themselves. n seems game for a fight. n

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 36 Middle East & Africa The Economist December 10th 2022

Education in Africa based” financing can make education aid

more effective—and in so doing make
Lessons in poverty voters in rich countries more willing to
keep supporting it. The problem is that set­
ting up these deals, and checking to see
whether pay­outs have been earned, can be
slow and expensive. The trial in Sierra Le­
one could breed confidence for more, big­
ACCRA , FRE ETOWN AND PO RT LO KO
ger such ventures. Until now the most no­
Will Sierra Leone’s big bet on schools pay off?
table education bond on the continent has

S ierra Leone is one of Africa’s poorest

countries. About half of its adults can­
not read. Its schools, few of which have
marks. Each will work with about 70 prim­
ary schools for three years. The outfits,
which include Save the Children and Educ­
been in South Africa. It delivered investors
14% annual returns but was worth only
about $2m (and did not hit all its targets for
electricity, are among the world’s worst. Aid, a British charity, will not manage improving learning).
On any given day, perhaps a fifth of teach­ schools directly and cannot hire and fire Sierra Leone’s experiments will also in­
ers are not in class as they should be. teachers. But they may spend up to $36 per form fiery debates about free schooling.
In an attempt to improve things, Sierra child on things like coaching for teachers Tuition fees remain common across Afri­
Leone is undertaking a vast but little­noted or catch­up classes for children who have ca, especially in secondary schools. Abol­
educational experiment. If it succeeds, the fallen behind. Successful ideas will then ishing them is popular. But spending a lot
country could write a road map that bene­ spread through the whole system. more money on secondary education can
fits even much wealthier places. In 2018 an EducAid, for instance, has set up class­ be regressive in places where, because of
incoming government increased public es in two small halls in a field near Port Lo­ woeful teaching, the poorest pupils drop
spending on education, which is now dou­ ko, a town about two hours’ drive from out before they get there.
ble what it was five years ago. The number Freetown, the capital. Those attending it In addition, free­schooling policies
of children enrolled in its schools has risen are not pupils. The 70 adults learning new that are not well funded can make weak
by more than half. With more bums on ways of teaching maths are among the 600 systems worse. In nearby Ghana some free
seats, it is now grappling with a problem members of staff at the schools it is work­ senior­secondary schools are so over­
that puzzles all of Africa: how to increase ing with. They will all spend time at this crowded that pupils must take turns going
the woeful amount that children learn. centre, sleeping in bunk beds at night. to class. Yusuf, a student in Accra, the Gha­
Over the past two decades, school­en­ naian capital, says that his stints at home
rolment rates have shot up across sub­Sa­ Trials and error last three months at a time.
haran Africa. Yet as few as one in ten chil­ This experiment has sparked interest not Mr Sengeh acknowledges that class­
dren can read by the time they leave prim­ just in the potential innovations in teach­ rooms have become more crowded since
ary school (in America and Britain more ing, but also because it offers a big trial of fees were abolished. “I’d rather have 80
than 90% can). Politicians often underesti­ social­impact bonds—a fashionable form children in a classroom that is hot and a lit­
mate the scale of this crisis, or waste mon­ of education finance. Donors led by Britain tle noisy than 40 sitting in a spacious room
ey on headline­grabbing projects such as have set aside $18m for the trial. Most of and the rest under a bridge,” he says, exag­
computers that do not push up grades. this will be paid only after the work has gerating class sizes somewhat to empha­
To boost access and quality, Sierra Le­ been done and the exact amount will de­ sise urgency: “You have to do major…[re­
one now allocates 21% of its budget on pend on how successful the organisations forms], all at the same time.”
schools, one of the world’s highest rates. are at improving scores. If the results are Sierra Leone’s gamble on schooling fac­
Much has gone on abolishing fees for tu­ weak, private investors who are supplying es big threats, all the same. Prices of food
ition, exams and textbooks that many state some of these outfits with working capital and fuel have been rising all around the
schools had previously charged. Now al­ could walk away with a loss. world. Its currency, the leone, has fallen by
most two­thirds of youngsters are making The hope is that this kind of “results­ more than 50% this year. A score of people
it to senior­secondary school, up from a died in the capital in August, amid vio­
third. Behind his vast desk the president, lence following protests sparked by rising
Julius Maada Bio, says he has had to pinch living costs (Mr Bio claimed, implausibly,
funding from every other ministry to pay that it was an attempt to overthrow his
for the reforms. But he says the need for government). The president has promised
better schooling is “existential”. to keep education spending high. But he
The government has also tried to must face voters again in 2023. A new gov­
squelch other problems that keep young­ ernment might decide that it has more ur­
sters from class. David Moinina Sengeh, gent priorities, especially as servicing the
the education minister, admits the chang­ country’s foreign debts is already chewing
es are not always popular. Religious groups up about 22% of state revenues.
resent the junking of a law that had forced Amid all this, the government must
schools to expel pregnant schoolgirls. show that studious youngsters gain new
Teachers and parents criticise efforts to opportunities. This year about 100,000
spare the cane. But Mr Sengeh, 35, a gradu­ teenagers passed exams qualifying them
ate of Harvard and MIT who records rap for higher education—the most ever, by
music for fun, is adored by donors. One ex­ some margin. But at present the country’s
pert ventures that he is “the most exciting universities and colleges can offer places
education reformer in Africa right now, to only a fraction of them. And the reward
and arguably around the world”. for solving this next problem will be yet
In a push to improve crummy lessons, another challenge: making sure these
the government has asked five organisa­ graduates can find good jobs. Reformers’
tions to compete to improve children’s A promise of brighter prospects work is never done. n

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 United States The Economist December 10th 2022 37

Congress portant annual housekeeping exercise to

renew or modify expiring tax provisions,
Last-minute bargains cryptically referred to as “tax extenders”,
still needs to be passed too.
Only a few trains will leave the station
before the new regime arrives, says Molly
Reynolds of the Brookings Institution.
Most left­behind Democratic provisions
WASHINGTO N, DC
and darling ideas—a much­needed reform
Congress has set itself a long to-do list before it can decamp for the holidays
of permitting rules for energy projects, a

R ay bradbury, an American science­

fiction writer, has a short story called
“The Last Night of the World” about a hus­
with [Democrats] is wrong,” he told Fox
News, the conservative broadcaster.
After a period of election­induced sta­
more generous child­tax credit, modest
immigration reforms—are angling to hitch
a ride on one of them. “We’re talking about
band and wife on the last night of exis­ sis, Congress has a daunting to­do list in a grab bag of miscellaneous pet priorities,”
tence. It is an unforgettable anticlimax. the lame­duck session between the No­ said a frustrated Mitch McConnell, the Re­
Rather than satisfy any unfulfilled wishes, vember election and the start of the next publican leader in the Senate. “If Demo­
the couple choose to spend a quiet night in legislative session in early January. Money crats wanted these controversial items so
just like any other—even doing the wash­ must be appropriated so that the govern­ badly, they had two years to move them
ing­up before getting cosily to bed. Con­ ment does not shut down on December across the floor.”
gress does the opposite. It is only when op­ 16th, when current funding lapses. Passage To get anything through, Democrats
portunities are closing, when awful conse­ of this year’s iteration of the National De­ will need Mr McConnell onside. They have
quences are nigh, that the frantic dash to fence Authorisation Act, which sets the not taken the necessary steps to pass legis­
do things begins. Pentagon’s budget and policy, is still pend­ lation through a procedure known as rec­
Such things are often left to the last mi­ ing. However bad the partisan bickering, onciliation, which avoids a filibuster in the
nute. But the results of the recent mid­ Congress has managed to pass one every Senate and therefore requires only a sim­
terms add urgency to this lame­duck ses­ year since 1961. The little­noticed but im­ ple majority. This means that at least ten
sion. Democrats will soon face divided Republican senators must sign on to the
government, rather than the unified con­ last­minute legislation, and many of them
trol they have enjoyed over the past two → Also in this section are balking at the extras that Democrats are
years. No one expects much bipartisan trying to attach to must­pass legislation.
38 A SCOTUS double feature
dealmaking if Kevin McCarthy becomes So far, negotiations have been plodding.
the new House speaker. Mr McCarthy’s in­ 39 The Trump Organisation’s tax fraud The option to punt decisions away remains
coming majority is so narrow that he may in the form of a “continuing resolution”,
40 Hawaii’s feral cats
be bullied by the right of his caucus—in­ which keeps the federal government run­
deed, he is already being pushed about— 40 Youth suicide: rare but risisng ning at previously approved levels. But
making him less able to cut deals. “Any Re­ hardly anyone is hopeful that the next
42 Lexington: Raphael Warnock
publican that’s out there trying to work Congress will be more generous. The Pen­

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 38 United States The Economist December 10th 2022

tagon is incensed at the prospect of being A SCOTUS double feature would refuse to make wedding websites
funded through a continuing resolution, for some straight couples, too—such as
which would limit its funding to last year’s Moore or less those who met by cheating on their former
lower levels and also bar the armed forces spouses.
from starting new weapons programmes. But Ms Waggoner was flat­footed when
As though it were another planet, legis­ faced with queries from the liberal justices.
lative time is much slower than calendar Would a win for Ms Smith (Justice Ketanji
WASHINGTO N, DC
time. Arcane rules, particularly in the Sen­ Brown Jackson wondered) mean that an
Two cases address free speech and
ate, mean that even when a deal is agreed old­fashioned mall Santa could opt to pose
state legislatures’ power over elections
to, ultimate passage can take days unless for photos with white children only? Can
there is unanimous consent (and often
there is not). There are many lengthy man­
datory debate periods in which no debate
H AVING CLEANED away abortion rights,
clean­air regulations, the church­state
wall and many gun restrictions last June,
vendors (Justice Sonia Sotomayor asked)
turn down work at a wedding of people
with disabilities because they don’t ap­
takes place. For that reason, even pieces of the justices have taken up two more as­ prove of such marriages?
legislation that command sizeable major­ pects of society that may need rejigging. There were no good answers to these
ities are not making their way out. One ex­ December 5th featured a clash between questions. But the two lawyers arguing
ample is a much­needed reform of the gay rights and free speech, an issue that against Ms Smith faced a rough go, too.
Electoral Count Act, a badly written law has been simmering since the court recog­ Shaking his head, Justice Alito noted Colo­
about how presidential elections are certi­ nised same­sex marriage as a constitution­ rado’s acknowledgment that Ms Smith
fied that Donald Trump tried to exploit to al right seven years ago. 303 Creative v Ele­ could include “a denunciation of same­sex
remain in office after he lost, which has the nis poses the seemingly premature ques­ marriage” in every wedding website she
necessary Republican support to pass, but tion of whether Lorie Smith, a web design­ creates, as long as she sells them to gay and
has had some trouble finding the right er, has a First Amendment right to refuse to straight customers alike. Doesn’t that
train to join itself to. “This business of 30 create wedding websites for gay couples. make the state’s position “kind of a sliver
hours of debate when there’s no debate is Ms Smith has yet to actually make any such of an argument” that may not make “any
just preposterous,” says Angus King, a sen­ websites. She wants assurances from the difference in the real world as a practical
ator from Maine who was one of the lead Supreme Court that if she steps into the e­ matter?” After all, how many gay couples
drafters of the bill. “No organisation in the nuptials market, Colorado—despite its law would patronise a graphic designer who
world would run themselves that way.” requiring shops to keep their doors open to insists on such messages?
Other worthy efforts may fall by the customers without regard to their sexual The six conservatives seemed to think
wayside. Kyrsten Sinema, a Democratic orientation—will respect her belief oppos­ that a win for Ms Smith would save other
senator from Arizona, struck a last­minute ing gay marriage and allow her to work businesses from, in Justice Alito’s words,
deal with Thom Tillis, a Republican sena­ with straight couples only. “espous[ing] things they loathe”. But they
tor from North Carolina, to trade a pathway Both sides agree that Ms Smith cannot had only a wisp of an argument to stem the
to citizenship for 2m “Dreamers”, undocu­ turn away clients based on their identity. slippery slope concern from the other side.
mented immigrants brought to America as They disagree as to whether refusing to Why wouldn’t allowing Ms Smith to stay
children, for more border­security spend­ make gay­wedding websites amounts to away from gay weddings unleash discrim­
ing. Whether this can be turned into legis­ what Justice Neil Gorsuch called an objec­ ination based on race, religion or disabili­
lative text—and get enough Republicans tion to a “who”. No, Ms Smith’s conviction ty? Justice Alito suggested that those kinds
on board—is unclear. Michael Bennet, a concerns a “what”, insisted Kristen Wag­ of animosity have nothing in common
senator from Colorado, is pushing for a goner, her lawyer. Her client “believes op­ with the “honourable” views of religious
more generous child­tax credit, a policy posite­sex marriage honours scripture and people who oppose same­sex marriage.
which substantially reduced child poverty same­sex marriage contradicts it”. Justice A more complex lineup seemed to
when it was in temporary effect in 2021. Amy Coney Barrett built on this idea by emerge on December 7th in Moore v Har­
(Mr Bennet’s brother is The Economist’s Lex­ leading Ms Waggoner to say that Ms Smith per, a case that could re­engineer the way
ington columnist; he had no involvement federal elections are conducted. Moore
in this story.) arises out of a dispute over congressional
His idea is to trade it with Republicans maps. A year ago in North Carolina, which
for other tax breaks, such as one allowing is closely split between Republican and
businesses to deduct their research and de­ Democratic voters, the state’s Republican­
velopment expenses. “I’ve been here, many held legislature drew a congressional map
times it feels like, in the middle of the giving Republicans a virtual lock on ten of
night or two o’clock in the morning on the state’s 14 House seats. When the state’s
Christmas Eve or New Year’s Eve when we supreme court found this inconsistent
have figured out how to pass tax extenders with North Carolina’s constitution, it re­
for the wealthiest people in the country,” placed the map with fairer lines drawn by
says Mr Bennet. (One of those, an en­ experts. Republican legislators balked at
hanced tax deduction for the hard­up own­ this, running to the federal Supreme Court
ers of racehorses, recently expired.) “That to complain that North Carolina’s high
makes it imperative that if we’re going to court was not authorised to question a map
do these other extenders, we should do the that the legislature had duly adopted.
child­tax credit as part of that.” Speaking in favour of the “independent
He is not the only senator expecting to state legislature” theory that animated
be snowed under with work while most North Carolina Republicans’ appeal, law­
Americans are dreaming about a snowy yer David Thompson pointed to Article I of
holiday. “I’ll be pleasantly surprised if we the constitution specifying that the “times,
aren’t,” says Mr King. “I think we’re going places and manner of holding elections”
to be here the week of Christmas.” n Come a little bit closer for Congress “shall be prescribed in each

012
010
 The Economist December 10th 2022 United States 39

state by the legislature thereof”. This nity to engage in the political process”, she gers presented on two enormous screens
means no state entity may constrain a state said, and unchecked legislatures will tend in the courtroom and hours of testimony
legislature performing the “federal func­ to indulge those tendencies. given by accountants. Mr Weisselberg tes­
tion” of election regulation, he said. The three liberals were offset by Justices tified that he knew he owed taxes on the
Scepticism came quickly from liberal Alito, Gorsuch and Clarence Thomas who perks and that his tax filings were false. He
justices. Justice Jackson noted that state warmly received the North Carolina law­ admitted that the scheme benefited both
legislatures are creatures of state constitu­ makers’ claims. A third troika—Chief Jus­ himself and the companies. But he also
tions and must, logically, be bound by their tice John Roberts and Justices Barrett and claimed the Trump family was not aware of
terms. Justice Sotomayor pointed to the Brett Kavanaugh—may be the decisive his wrongdoing. He said “personal greed”
10th Amendment, which affords powers to bloc. None jumped to praise the most ex­ had driven him to “betray” the family who
states that federal courts must respect. Em­ treme aspects of the legislators’ argument had employed him for five decades.
phasising the broader stakes, Justice Kagan but all groped for a third way whereby nei­ The jury did not believe that Mr Weis­
warned that granting unfettered authority ther state legislatures nor state courts are selberg was a “rogue” employee, as the de­
to state legislatures would discard “the fully autonomous. For Carolyn Shapiro, a fence portrayed him. They saw him, as the
normal checks and balances” at “exactly professor at Chicago­Kent law school who prosecution hoped they would, as a “high
the time when they are needed most”. Poli­ has testified to Congress on the theory in managerial agent” who committed crimes
ticians have incentives to “prevent voters Moore, the centre of the court is “trying to “in behalf of” the companies—expressly
from having true access and true opportu­ find a balance”. n for their benefit—rather than merely “on
behalf of” them. The scheme falsely re­
duced the size of their payrolls, meaning
Tax law they paid less in payroll taxes.
Donald Bender, who managed the com­
High deductibles panies’ taxes for 35 years, as well as Mr
Weisselberg’s personal accounts, said dur­
ing his testimony that if he had known
about the tax avoidance he “probably
would have had a heart attack”. Mr Bender’s
firm cut ties with the Trump Organisation
NEW YO RK
earlier this year because the company’s
Two Trump companies are found guilty of all charges in a criminal tax trial
statements could “no longer be relied

T wo mercedes-benz saloons, apart­

ments, private­school tuition, furni­
ture for a Florida home, flat­screen televi­
The jury did not buy it. After less than
two days of deliberation, they decided that
the two Trump entities were guilty on all 17
upon”. Mr Trump blames Mr Bender for the
mess. He wrote on his Truth Social plat­
form last month, “The highly paid ac­
sions, carpet and cheques stuffed into charges. Sentencing will take place on Jan­ counting firm should have routinely
Christmas card envelopes. These untaxed, uary 13th. The maximum penalty the com­ picked these things up—we relied on
off­the­book perks were among the items panies face is $1.6m, a paltry sum for them. them. VERY UNFAIR!” Yet he does not seem
paid by two entities of the Trump Organi­ But a criminal conviction could interfere to harbour ill­will towards Mr Weisselberg,
sation, Donald Trump’s real­estate compa­ with the firms’ ability to access finance. who has remained loyal and is still draw­
ny, to a handful of its top executives, in­ The companies intend to appeal against ing a high salary as a senior adviser. A
cluding Allen Weisselberg, the company’s the decision. Mr Trump, meanwhile, is still birthday party was held at Trump Tower in
former chief financial officer who was Mr said to be under investigation. Mr Weisselberg’s honour last summer, at
Trump’s long­serving lieutenant. After a Tax trials are rarely gripping. This one, around the same time he took the plea.
long criminal trial, on December 6th a New which began in October after a three­year Throughout the trial the defence re­
York jury swiftly found Trump Corporation investigation, has been—notwithstanding minded jurors that Mr Trump and his fam­
and Trump Payroll Corporation guilty of a pages of spreadsheets, excerpts from led­ ily were not on trial and that they neither
host of crimes, including conspiracy, tax knew about nor benefited from the tax­
fraud and falsifying business records. avoidance scheme. During his closing
There is no question that fraud was statement Mr Steinglass pushed back.
committed: Mr Weisselberg admitted as “This whole narrative that Donald Trump
much in court. He said he received $1.76m is blissfully ignorant is just not true,” he ar­
in such perks. But “did Weisselberg do it for gued. It emerged during the trial that until
Weisselberg alone? Or did he intend at least Mr Trump became president, he had
some benefit for the corporation?” asked signed every company cheque over $2,500.
Joshua Steinglass, an assistant district at­ The defence objected to the prosecu­
torney, during the closing statements. tors’ suggestion that Mr Trump sanctioned
Mr Weisselberg was the prosecution’s tax fraud, and the judge sided with them.
star witness. He pleaded guilty to tax fraud After the jury had been excused they re­
and will serve five months in jail. Before quested a mistrial—a move given short
the trial, which was brought by Manhat­ shrift by the judge. Mr Steinglass asked the
tan’s district attorney, he was granted le­ jury to “put aside the elephant that’s not in
niency in exchange for testifying for the the room”. This case was not about politics,
prosecution. During his summation Mi­ he said, but about “just two corporations
chael van der Veen, one of the defence law­ helping its executives cheat on their taxes”.
yers (who also represented Mr Trump dur­ But one of Mr Steinglass’s closing’s zingers
ing his second impeachment trial), urged must have resonated with the jury: “It is
the jury to treat Mr Weisselberg’s testimo­ not that the folks at the Trump Organisa­
ny with scepticism because “the prosecu­ tion didn’t know what they were doing was
tion have him by the balls.” Slight returns illegal, it was that they didn’t care.” n

012
010
 40 United States The Economist December 10th 2022

Youth suicide

Beginnings and
endings
WASHINGTO N, DC
Suicide among young Americans is
rare, yet has risen at a worrying pace

I n the 1950s, when the term “teenager”

was first popularised, it brought to mind
trouble. Spotty youths who engaged in ris­
ky behaviour outside the house—getting
drunk, pregnant or into car crashes—were
“the number one fear of American citi­
zens”, wrote Bill Bryson in his memoir,
“The Life and Times of the Thunderbolt
Kid”. Today, the risks American teenagers
face come from themselves. Boys are more
likely to kill themselves than to be killed in
a motor crash. Girls are nearly 50% more
likely to injure themselves in a suicide at­
tempt than to face an unplanned pregnan­
Invasive species cy. Suicide is the second­biggest killer of
Cat got your tern ten­ to 18­year­olds, after accidents.
The rise in youth suicide is part of a
broader increase in mental­health pro­
LOS ANGE LES
blems among the young. This preceded the
Feral house cats have invaded Hawaii
pandemic, but was probably accelerated by

W HEN MARK TWAIN first set eyes on

Honolulu in 1866, he observed that
the trees were so dense that they blocked
found stranded off the Hawaiian coast
died of toxoplasmosis. From these find­
ings the authors suggest that at least 60
it. In 2021 nearly half of American high­
school students said that they had experi­
enced persistent feelings of sadness and
the sunlight, lava from past volcanic spinner dolphins have died of the para­ hopelessness in the past year, up from 26%
eruptions covered the corals—and cats site over the past 30 years. in 2009; one in five seriously considered
were everywhere. In a dispatch for the The overwhelming majority of the suicide, up from 14%; and 9% attempted to
Sacramento Union, Twain reported seeing whales and dolphins included in the end their life, up from 6% (see chart). Al­
“tame cats, wild cats, singed cats, indi­ study were killed by other means. But “if though the rates for 15­ to 19­year­olds are
vidual cats, groups of cats, platoons of they do become infected, this study not unprecedented (there was a similar
cats, companies of cats, regiments of suggests that they die and they die quick­ peak in the early 1990s), the rates for ten­ to
cats, armies of cats, multitudes of cats, ly”, says Kristi West, one of the authors 14­year­olds are higher than ever before.
millions of cats, and all of them sleek, and director of the Health and Stranding The fact that it has become more ac­
fat, lazy, and sound asleep”. Lab at the University of Hawaii. Hawaii’s ceptable for young people to discuss their
Nearly 160 years later, however, the endangered monk seals have also been feelings has surely contributed to some of
descendants of the cats that so delighted killed by the bug. the changes, such as the rise in self­report­
Twain are now widely seen as a menace Feral cats are not just a problem for ed sadness. Better screening may also play
to the islands. The feral cat, explains the Hawaii. A study published in Global a role. But neither explains the most alarm­
Hawaii Invasive Species Council (HISC), Change Biology suggests that, globally, ing data: suicide rates. Attempts, injuries
has become one of the state’s most “dev­ they are responsible for the extinction of and deaths have all risen among young
astating” predators. at least 14% of bird, mammal and reptile Americans over the past decade. Last year,
Cats were first brought to Hawaii island species. Toxoplasmosis has also no age group saw a steeper rise than men
aboard European colonists’ ships, where been found to kill sea otters along the aged 15 to 24, according to the Centres for
they preyed on rats and mice. As their California coast. Disease Control and Prevention (CDC).
number in their new home grew during What can be done? A bill that could The causes are only starting to be un­
the 19th century, birds started to dis­ have directed the HISC to cull cats using derstood. The usual suspects (childhood
appear. At least 30 types of native bird poisoned bait, as Australia has done, died poverty, parental substance abuse or pa­
became more scarce or went extinct in the state legislature earlier this year. rental depression) have not changed that
between 1870 and 1930 as they were ex­ Animal­lovers prefer to focus on captur­ much; indeed, childhood poverty has fall­
posed to their new whiskered foes, ac­ ing, neutering and releasing wild cats so en. What has shifted is how teens live their
cording to the US Geological Survey. that they have no kittens. But HISC con­ lives and relate to their environment and
Birds are not the only casualty of tends that such programmes do not each other. Greater isolation and loneli­
Hawaii’s feline invasion. Toxoplasmosis actually help curtail cat numbers. Ms ness are probably important.
is a disease caused by a parasite that West suggests that people are too quick Experts have a reasonable understand­
reproduces in the digestive systems of to blame the cats, when there is another ing of how to help prevent suicide and pro­
cats, and then contaminates soil and culprit. “People have to stop abandoning tect against such thoughts. Not all young
water through their faeces. A new study these poor cats,” she says. “It’s not really people are equally at risk. Although girls in
determined that two spinner dolphins a cat problem. It’s a human problem.” n America are much more likely to contem­
plate ending their lives, or injure them­

012
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 The Economist December 10th 2022 United States 41

selves in attempting to do so, teenage boys tion, or of building a sense of meaning or department visits for suspected suicide at­
are nearly three times as likely to die from place in your social circle, are fundamen­ tempts were 50% higher in February 21st­
suicide. Young people who identify as les­ tally shifting,” says Katherine Keyes at Co­ March 20th 2021 compared with the same
bian, gay or bisexual are three times as lumbia University. Teenagers spend far period in 2019.
likely to feel suicidal. During the covid­19 less time on traditional social activities, Even if the causes are not fully under­
pandemic children who had faced abuse or such as playing sports or going on dates, stood, solutions are. “This is not rocket sci­
neglect were 25 times as likely to try to kill than in the past. In the late 1970s over half ence,” says Jane Pearson from the National
themselves as their peers with happier of 12th­graders met up with friends almost Institute of Mental Health. “We know what
childhoods were. daily; by 2017 just over a quarter did. helps kids develop healthy trajectories that
Geography matters, too. Children who One of the fiercest debates is whether make it less likely they develop mental dis­
live in rural settings are at heightened risk, social media alienates young people or of­ orders or suicidal thoughts and behav­
in part because they have less access to fers a new avenue for connection. Just as a iours.” Most important are a focus on im­
care. Tribal communities suffer more than school environment can help or harm a proving family communication and sup­
other groups. Alaska’s youth suicide rate— child, the same is the case online. Feeling port, family and community attachments,
at 42 annual deaths per 100,000 young virtually connected to peers, family or as well as children’s attachments to school,
people, the highest of any state—is four other groups during covid had a similar (if so they feel safe and connected.
times the national average. smaller) protective effect as feeling con­ Programmes that train children to cope
Australia, England and Mexico have nected to people at school, found the CDC. with emotions and social problem­solving
also seen big rises in youth suicide over the Young people from sexual minorities are have had impressive results. The Good Be­
past decade. A recent National Health Ser­ likely to say social media helps them feel haviour Game, first tried out in Baltimore
vice study found that, in England and less alone and more supported. But it can in the 1980s, teaches first­graders how to
Wales, more than one in six children be­ also make things worse, as a recent inquest work in teams and behave well in class.
tween the ages of seven and 16 now has a into the suicide of Molly Russell, a British Compared with the control group, pupils
probable mental­health disorder. . Be­ 14­year­old, found. Harmful social­media who took part in the original programme
tween 2012 and 2018 teenage loneliness in­ content probably “contributed to her death were half as likely to think about, or at­
creased in 36 out of 37 countries studied, in a more than minimal way”, it concluded. tempt, suicide later in life.
according to the Journal of Adolescence. Evidence of the harm to development Doctors’ offices are important, too.
and mental health done by school closures Nine out of ten children who died by sui­
Bad exceptionalism is increasingly compelling. Covid appears cide had some contact with the health­care
But America stands out for its absolute to have hurt the mental health of younger system in their final year of life. If paedia­
rates of youth suicide. Although in Eng­ people disproportionately, says Richard tric practices were better prepared and in­
land and Wales suicide among 15­to­19­ McKeon at the Substance Abuse and Men­ centivised to address behavioural pro­
year­olds has grown faster, in 2021 6.4 tal Health Services Administration. This blems, this could make a huge difference,
young people per 100,000 there took their was “superimposed on a longer­term up­ reckons Richard Frank at the Brookings In­
own lives, as against 11.2 young Americans. ward trend in youth suicide”, he adds. For stitution, a think­tank.
America is also exceptional for the teenage girls, average weekly emergency­ Lastly, educating schools and commu­
availability of guns. Use of a firearm is the nities in preventing suicide “contagion” is
most common method of suicide for boys, essential. Between 1% and 5% of teenage
which helps explain why they are more Harmful trends suicides are part of “clusters,” more so than
likely to die from an attempt than girls. Ea­ United States for adults. The playbook for schools is
sy access to a lethal method is one of the clear: deaths should be commemorated
biggest risk factors for someone in despair. Suicides per 100,000 population, by age group but not mawkishly; suicide should be dis­
In Switzerland, suicide rates among men cussed but not normalised; pupils should
12
of military­service age dropped sharply be encouraged to seek help. Just as impor­
after the country halved the size of its ar­ 15-19 tant is work with staff members, who can
9
my, which often requires soldiers to take become “numb” or even “disengaged” after
weapons home. During the pandemic, too much tragedy, says Sharon Hoover
sales of firearms increased in America. 6 from the National Centre for School Men­
That exposed an extra 11m people, half of tal Health, who often gets called in once a
whom were children, to a gun at home. 10-14 3 school has suffered multiple deaths.
Suicides by gun accounted for the entire And yet it is important not to overreact.
rise in American suicides between 2019 0 “Suicidal thoughts have always been com­
and 2021, according to an analysis by re­ 2007 09 11 13 15 17 19 21 mon. They peak in teens and diminish in
searchers at Johns Hopkins University. prevalence with age,” says Christine Mou­
But guns are only part of the story. Spec­ tier from the American Foundation for Sui­
High-school students, % who in the past year
ulation over other causes has ranged from cide Prevention. “The vast majority of
earlier puberty to the effects of social me­ 20 young people having suicidal thoughts are
dia and even to climate­change despair. not imminently about to act on them, or
Some of the more compelling evidence 15 even at risk of dying of suicide,” she adds.
Seriously thought about suicide
points to a change in how young people re­ Rather, it is a sign of distress and a reason
late to their surroundings. Children who Attempted suicide
10 to discuss their feelings. “It’s crucial that
say they feel close to people at school were caregivers and providers across the board
much less likely to suffer from poor mental Were injured in 5 do not panic when they hear the word ‘sui­
health, and 50% less likely to have at­ an attempted suicide cide’,” warns Dr McKeon. A child brave
tempted suicide, the CDC found. 0 enough to open up about such thoughts,
This protective layer may be fraying. 2007 09 11 13 15 17 19 21*
but who is then rushed to hospital against
“The types of adolescent activities that Source: CDC *January-June
their will, is unlikely to trust an adult
would be indicative of that social connec­ again. That is the last thing they need. n

012
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 42 United States The Economist December 10th 2022

Lexington Defender of the faith

Raphael Warnock has a lot to teach America’s political parties about reaching out
That is the foundation from which Mr Warnock approaches
politics, and it places him at a different altitude from his col­
leagues. He likes to say that “democracy is the political enactment
of a spiritual idea, the sacred worth of all human beings”; that “a
vote is a kind of prayer for the world we desire”; that “legislation is
a letter to our children.” “And if we ask ourselves what we want
that letter to say,” he told rapt students at the Georgia Institute of
Technology the day before the election, “we might actually get it
right.” It all sounds better when he says it, with his elongated
southern vowels and commanding enunciation. He generally
speaks without notes, and he radiates an unusual calm.
The only southern black Baptist minister to progress so far in
politics, and a more nuanced point of comparison, is Jesse Jack­
son, who grew up in South Carolina, ran twice for president and
served for a term in the 1990s as the “shadow senator”, or nonvot­
ing representative, from Washington, DC. If Mr Jackson imported
King’s message to electoral politics, Mr Warnock has updated Mr
Jackson’s politics with lessons learned from Mr Obama’s success
at not scaring white people. Mr Jackson could roar from the pulpit
and podium; Mr Warnock’s style is no less passionate but more
gentle. In his first run for Senate, in 2020, Mr Warnock, who is 53,
appeared in campaign ads as a suburban dad, walking a leashed

D emocrats are celebrating Senator Raphael Warnock’s victory

in Georgia’s run­off election because, with 51 votes in the
chamber, they will have an easier time confirming judges and
beagle down a tidy sidewalk, loaded poop bag in hand. (It is per­
haps evidence of the politician in the pastor that the beagle, Alvin,
was not his dog.)
other appointees. Republicans should be sighing with relief they Descending from one of America’s most successful radical
will not spend six years dreading confounding disclosures about movements puts Mr Warnock somewhat out of tune with today’s
Mr Warnock’s opponent, Herschel Walker. progressives. The question is whether he is a throwback or the
But the real reason to welcome this result is that Americans forerunner of a more inclusive, patriotic and mature politics.
will get to learn what Mr Warnock might be capable of. Mr Walker There is no doubting his commitment to social justice. But though
was never going to be a leader of his party. Mr Warnock just might. he shares progressives’ urgency he knows accomplishing change
Mr Warnock likes to say that he is “not a senator who used to be in America can be the struggle of generations. And while polls
a pastor” but “a pastor in the Senate”. He is a different sort of na­ show many Democrats take a dim view of America, he speaks of­
tional politician from either party has produced in a long time, ten of his love for it and his faith in its perfectibility.
heir to a spiritual tradition at odds with the politics of this era.
Loving your enemies was “pressingly hard”, Martin Luther King One imagination, indivisible
Junior acknowledged back when he was urging people to do so. To­ Many Democrats also give less scope than Mr Warnock to love. Hil­
day, when Mr Warnock holds Mr King’s old pulpit in Atlanta, it is lary Clinton dismissed some supporters of Donald Trump as “de­
heretical, if not, among progressives, downright uncool. plorables”, and President Joe Biden has condemned “MAGA Repub­
Mr Warnock is sometimes compared to Barack Obama, but that licans”. That is not Mr Warnock’s way. He was drawn to King, he
comparison does not penetrate far: they are both black male told the students at the Georgia Tech rally, partly because “he used
Democrats who speak eloquently about change. Mr Obama grew his faith not as a weapon to crush other people, but as a bridge to
up in Hawaii and trained to be a lawyer. He is a Protestant and has bring us together.”
sat in the pews of various denominations. Mr Warnock remains pastor at Ebenezer Baptist Church, King’s
Mr Warnock grew up in the pulpit in Savannah, Georgia. He old church, and his first sermon after his last election came after
was 11 when he preached his first sermon, “It’s Time I Be About My Mr Trump’s followers stormed the Capitol on January 6th 2021. He
Father’s Business,” urging young people to do the work of faith and chose to try to understand them. He preached that day about what
service. His earthly father was hauling junk cars during the week he called the violence of poverty, “a kind of violence that crushes
and preaching in a Pentecostal church on Sundays. By high school all the humanity of poor people”. Many who had embraced “the
Mr Warnock was borrowing recordings of King’s sermons from the ideology of anger and old resentments and hatreds” suffered from
public library and practising King’s musical style. He began such violence, “and somebody has convinced them that it’s some­
preaching at Baptist churches in Savannah and was drawn to their body else’s fault.”
emphasis on fighting bigotry and poverty. It was the old strategy of divide and conquer, he continued,
Mr Warnock trained in the theology of the black church, writ­ raising his voice and drawing out select words as he built toward
ing his dissertation on the tension between pursuing individuals’ his core message. “There’s a kind of violence of poverty, a failure to
salvation—the focus of his father’s church—and promoting recognise that there is enough in God’s world for all of God’s chil­
worldly change. In “The Divided Mind of the Black Church”, which dren,” he said. “There’s no poverty of possibility. There is a poverty
grew out of his dissertation, he concludes there is no “authentic of moral imagination.” Now, for the fourth time in two years, Mr
black piety that is not connected to liberation” and “theology that Warnock’s moral imagination has lofted him to victory in a Repub­
is not lived is not theology at all”. lican state in the heart of the old Confederacy. n

012
010
 Renovation
SPECIAL
required
REPORT:
Italy
→ December 10th 2022
3 Seeking an Italian Thatcher
5 Shocks to the economy
5 Too much public debt
6 Problems for business
8 Boosting the south
10 Political instability
10 Demographic decline
12 A new reform spirit

012
010
 Chart your way ahead in 2023
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 Special report Italy The Economist December 10th 2022 3

Wanted: an Italian Thatcher

Giorgia Meloni’s new government must make deep reforms if Italy is to regain its lost vitality, argues John Peet

I t is surely impossible not to have a good time in Italy. It is one

of the world’s most beautiful countries, with much of its best
food and wine. It has an enviable climate, yet is surprisingly varied
gy costs and Russia’s war in Ukraine are likely to tip the euro zone
into recession in 2023. But what makes things worse for Italy is
that its long­standing economic weaknesses always leave it more
geographically. The infrastructure, especially high­speed rail, has vulnerable than its neighbours to external shocks.
vastly improved (and the trains usually run on time). As a destina­ A list of those weaknesses is telling. The public debt is almost
tion for the discerning tourist, it is second to none. 150% of GDP, making Italy the third­biggest debtor in the OECD
Italy’s artistic assets are as impressive. Italians like to claim after Japan and Greece. The employment record is poor. Female
that they possess 60% of the world’s culture. The country has more participation in the workforce is the lowest in the EU, and the
UNESCO world­heritage sites than any other. No wonder it has share of young people not in employment, education or training
been one of the world’s most popular destinations ever since rich the highest. Education results are bad. And the demographic out­
Britons undertook their grand tours in the 18th century. Its glories look is grim: Italy has the second­lowest birth rate in Europe, and
range from Giotto’s frescoes in the Scrovegni chapel at Padua to one of the fastest­ageing populations.
the mosaics of Monreale Cathedral outside Palermo; from Leonar­ The business climate is not good, either. Italy has a plethora of
do’s “Last Supper” in Milan to the sassi at Matera; from St Mark’s small firms, but remarkably few large ones. It scores worse than
Basilica in Venice to Pompeii’s Roman ruins by Vesuvius. any other western European country in the most recent World
Even the economy seems healthier than a few years ago. The Bank index for the ease of doing business. Foreign direct invest­
covid­19 disaster of 2020 hit Italy early and hard, but the country ment is shockingly low for a G7 country. Italy spends barely 1.5% of
has since bounced back impressively. This year it is likely to have GDP on research and development (R&D), half as much as Germany
outgrown France and Germany simultaneously for the first time does. Despite recent improvements, the public administration re­
in 30 years. A big slug of money secured from the European Un­ mains both too large and too inflexible. And Italy suffers more
ion’s next­generation fund is underpinning a new reform effort. than most EU countries from a high level of corruption and a large
Entrepreneurs in Italy seem happier than for several years—even black economy—especially in the south, one of Europe’s least de­
if many economists remain gloomy about the future. veloped regions.
Sadly it is the economists who are closer to the reality. As in the The consequence of these ills is telling. GDP per head in Italy
rest of Europe, Italy’s immediate prospects are dire. A revival of in­ has hardly increased in real terms since 2000, the worst perfor­
flation to double figures, rising interest rates, an upsurge in ener­ mance of all in the OECD club of mostly rich countries. When

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 4 Special report Italy The Economist December 10th 2022

Giancarlo Giorgetti, a veteran of past budget battles, and the for­

eign ministry to Antonio Tajani, a former European commission­
er and past president of the European Parliament. And though Ms
Meloni is clearly more Eurosceptic than Mr Draghi, she has
dropped any talk of leaving the euro or the EU. She may instinc­
tively support Hungary and Poland in their fights with the EU, but
she is also courting Brussels, not least to keep its cash flowing.
The bigger worries about Ms Meloni’s government do not stem
from her party’s origins. One is its durability. Few Italian prime
ministers last more than a couple of years. She may be the first to
win the job through election in 14 years, but she still needs support
from two other parties: Matteo Salvini’s League and Silvio Berlus­
coni’s Forza Italia. The right in Italy is better at sticking together
than the left, but sniping has begun. Mr Salvini wanted the interi­
or ministry but was fobbed off with infrastructure. Mr Berlusconi
has backed Vladimir Putin against Ukraine, and seemed to criti­
cise Ms Meloni as self­important, bossy and arrogant.

Persona incognita
Ms Meloni has been admirably forceful in response, making clear
that she is not to be blackmailed and that she shares Mr Draghi’s
fulsome support for NATO, the Atlantic alliance and Volodomyr Ze­
lensky, Ukraine’s president. But a second concern is her sheer lack
of experience. She was a junior minister under Mr Berlusconi in
2008­11 but has otherwise done little outside party politics. Her
party contains few heavyweights or well­known figures. She
seems to rely on a small group of advisers who, like her, have lim­
Beauty and poverty together ited experience. Roberto D’Alimonte, a politics professor at luiss
University in Rome, calls her “persona incognita”.
This would matter less if Italy were in better shape. But in fact it
Europe has grown, Italy has tended to grow more slowly; when faces a continuing need for tough and controversial reforms that
Europe has fallen back, Italy has tended to fall back more. Calcula­ can realistically be pushed through only by a government with
tions by Andrea Capussela, an economist, in his book “The Politi­ both the ability and the will to tackle Italy’s dense thicket of vested
cal Economy of Italy’s Decline” found that total factor productivi­ interests. Lorenzo Codogno, a former senior Italian treasury offi­
ty, a broad long­term measure, has actually declined over most of cial who has just co­written a book, “Meritocracy, Growth and Les­
the period. Italy has already been overtaken by Spain in real in­ sons from Italy’s Economic Decline”, says that what the country
comes per head. If current trends persist, it will be overtaken by really needed was ten years of Draghi­led reforms, not the 21
Greece and some east European countries within 30 years. months that it actually got.
The economic and administrative reforms made under Mario The EU’s recovery and resilience programme, with its mile­
Draghi’s government, which took office in February 2021, have be­ stones of legislative reforms required to release tranches of mon­
gun to ameliorate some of these chronic weaknesses—one reason ey, may box in the new government for some time. But Ms Meloni
why The Economist chose Italy as its country of the year in Decem­ is already suggesting the programme needs to change, for instance
ber 2021. But implementation of the reforms has barely begun and to respond to the energy crisis and the effects of the war. And expe­
there is a long way to go. And now the Draghi government has rience suggests that implementation of reforms matters more
gone. Its replacement after the early election on September 25th is than legislation. This requires a government that understands the
a right­wing coalition under the prime ministership of Giorgia need for deep change, not one reluctantly pushed into it only by
Meloni, leader of a previously tiny party, the Brothers of Italy (FdI), outside forces. What Italy needs is its own Margaret Thatcher, rea­
which came top of the poll with a 26% vote share. dy to fight for unpopular reforms against the establishment.
Ms Meloni’s election victory prompted much hand­wringing Sadly, there is little sign of this. Italians may fret about their
around the world about her far­right background, almost exactly lives, but they do not feel a sense of crisis. And Ms Meloni has
100 years after Benito Mussolini’s march on Rome. The FdI grew more often supported than challenged the privileged groups that
out of the post­war neo­fascist MSI party. Some members, includ­ fend off competition and hold back growth, from taxi drivers to
ing Ms Meloni herself, have at times waxed nostalgic about the holders of beach concessions. Instead she
Mussolini era. Her choices for president of the Senate and speaker displays a nationalist and protectionist
of the Chamber of Deputies were controversial hardliners. She and streak in opposing foreign acquisition of
her party have put much emphasis on the family and Roman Cath­ This requires a Italian assets. The watchwords of her gov­
olic values. They are dubious about advancing gay rights, shelter government that ernment seem to be clientelism and corpo­
an anti­abortion wing and are markedly hostile to immigration. ratism, not competition and free markets.
As Fabrizio Tassinari of the European University Institute in Flor­
understands Yet it is more competition that Italy
ence puts it, she may be Italy’s first female prime minister, but she the need for needs, not more protection. To see why, it
is not its first feminist one. And she is a longtime Eurosceptic. deep change is worth looking at what went wrong with
Yet Ms Meloni has been careful to play down her party’s roots, an economy that for the 50 years up to the
insisting that she is merely a “conservative”. She says she has no 1990s was one of the fastest­growing in the
plans to roll back abortion laws or gay rights. She has also assem­ OECD, only over the next 25 to become the
bled her government cautiously, giving the finance portfolio to slowest­growing of all. n

012
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 The Economist December 10th 2022 Special report Italy 5

small capital stock, a high public debt and a much diminished

The economy
farm sector found it hard to sustain the high productivity growth
that it had managed throughout the 1960s and 1970s. Previous ad­
The cost of vulnerability vantages such as Italy’s vibrant small family­owned firms started
to seem like disadvantages instead.
Into this unpromising environment came the first of a series of
external shocks. One of the earliest was entry into the European
single currency, the euro, in 1999. Germany had more or less de­
How a mix of the euro, the financial crash
signed the 1992 Maastricht treaty’s convergence criteria to keep
and covid­19 damaged Italy
out a profligate, chronically indebted Italy. The treaty tests of a

L ooking back, what is remarkable is how robust the Italian

economy was from the 1950s to the 1990s. A large part of the sto­
ry was simple catch­up. When six countries met in Rome in 1957 to
budget deficit no bigger than 3% of GDP and a public debt converg­
ing towards a ceiling of 60% of GDP seemed impossible for Italy to
pass by 1999. But when it became clear in 1997 that Spain was deter­
sign the treaty establishing the European Economic Community, mined to join from the start, Romano Prodi, then Italian prime
Italy was by far the poorest member, so it became a net recipient of minister, decided that Italy, as a founder member of the bloc, must
money from Brussels. Yet it had a long tradition of high­quality (if be there too. That Belgium also had a public debt above 100% of
usually small­scale) manufacturing, especially in the north. It GDP helped, as did a special euro tax Mr Prodi introduced.
soon turned into the bloc’s lowest­cost maker of a host of goods, Mr Prodi remains convinced that Italy was right to join the eu­
ranging from cars and machine tools to refrigerators and washing ro. But he argues that it did not adopt the most sensible economic
machines. Migration of low­productivity farm employees (still policies immediately afterwards. In entering the single currency,
30% of the workforce in 1957) to higher­productivity manufactur­ Italy was forced to jettison its traditional habit of relatively high
ing and services did much to pep up growth. By 1987 Italy was able, price and wage inflation, compensated for by frequent devalua­
more or less convincingly, to crow about il sorpasso, the moment tions of the lira. Because it had sacrificed its exchange­rate and
when it celebrated overtaking Britain in real GDP per head. monetary­policy independence, it badly needed to adopt a wholly
Yet catching up is a lot easier than forging ahead of the pack. By new model if it was to remain competitive inside the single cur­
the late 1990s, Italy was no longer a net recipient of EU funds. Its rency, making supply­side reforms that would hold down its unit
unit labour costs had climbed towards, or even above, the bloc’s labour costs in comparison with those of Germany.
average. A country with traditionally low investment, a relatively Instead, under Silvio Berlusconi’s government from 2001 to

Spreadeagled
It is the denominator, not the numerator, that is the real problem

O ne thing everyone knows about

Italy is its huge public debt. At almost
150% of GDP, it is admittedly smaller
It was Germany and France, not Italy,
that first breached the euro zone’s stabil­
ity­pact rules for budget deficits. When
rates may cause further problems. Al­
though unexpected inflation reduces
nominal debts, higher interest rates raise
than Japan’s. Like Japan, Italy has mostly the financial crisis hit, Italy tipped into the cost of borrowing and may make prim­
run a current­account surplus, making it larger deficit. But for three decades it has ary surpluses impossible to sustain.
less dependent than, say, Britain, on the usually run primary budget surpluses (ie, Nor is it fair to accuse Italy of not col­
kindness of strangers. But Japan’s debt is before interest payments). Until covid­19 lecting enough taxes to finance public
mostly in its own currency, a chunk is blew it off course in 2020, Italy kept its spending. The tax take hovers at around
owned by its central bank, and much of public debt broadly steady as a share of 43% of GDP, less than in France but more
the rest is held by domestic savers (only GDP. Now rising inflation and interest than in Germany or Britain. Italy’s gdp per
7% is foreign­owned). Many rich Italian head has fallen behind, and it is not clear
savers also hold its debt, but some 45% of Italians draw commensurate benefits in
the stock is foreign­owned. And it is The price of indebtedness public services.
denominated in what is, in effect, a Italy Ten-year gov’t-bond So why is Italy’s public­debt burden
foreign currency: the euro. Hence the yields spread over still so notable? The best answer is to look
Gross gov’t debt, % of GDP German bunds, % points
interest in lo spread—the difference in 150 5
not at the numerator (the debt) but the
yields between Germany and Italy. denominator (GDP). Before the euro, Belgi­
The natural assumption of northern 120 4 um also had a high debt ratio. Since then it
Europeans is that Italy’s public debt has grown faster, one reason why its ratio
reflects a failure to raise enough taxes to 90 3 has fallen to just over 100% of GDP. Loren­
finance public spending. That may have zo Codogno, a former treasury official, has
been correct when most of the debt was 60 * 2 tried to model what might have happened
incurred in the 1970s and 1980s, and it to Italy’s ratio had it matched France’s
may explain why Germans feared before 30 1 (pedestrian) growth over the past 25 years:
the euro began that they might have to he finds it would have fallen to 60% of
pick up the tab for Italian extravagance. 0 † 0 GDP. The best solution to Italy’s debt pro­
But the fiction of Italian fiscal profligacy 2000 05 10 15 20 22 blem is unlikely to be more fiscal auster­
has not reflected the reality since 2000. Sources: IMF; Refinitiv Datastream *To October †Forecast ity, but rather renewed growth.

012
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 6 Special report Italy The Economist December 10th 2022

quarter of the total available and equivalent to around 10% of an­

Bottom of the class nual GDP. But the money is conditional on the passage of reforms
GDP per person, $ at 2010 prices, 2000=100 in such areas as judicial proceedings, competition policy, public
130
administration and the tax system.
It is not clear that Ms Meloni’s government will be as eager to
125 do Brussels’s bidding as its predecessor. The lure of a large pot of
Germany 120 cash and the EU’s unwillingness to soften the requirements for re­
115 ceiving the money will be an inducement. Moreover, a similar in­
Britain sistence on further reforms is a key component of the European
110
France Central Bank’s new anti­fragmentation instrument that is meant
105 to prevent sovereign­bond yields in the euro zone from diverging
Spain 100 “excessively”. It was a sharp rise in the spread of Italian over Ger­
Italy man bonds that did much to bring down Mr Berlusconi’s last gov­
95
ernment in late 2011.
90 The economic climate is different now. The banks are better
2000 02 04 06 08 10 12 14 16 18 20 22 capitalised and less weighed down by non­performing loans. The
Source: EIU euro zone’s architecture is stronger, with the ECB acting as a lender
of last resort and bank supervisor, even if there is no system of
mutual deposit insurance. Indeed, some Italians, including a few
2006, it did precisely the opposite. Italy happily pocketed the in the new government, believe that, since their country is too big
gains from the single currency in the form of lower short­ and to fail and too big to bail, they should not be intimidated by the EU
long­term interest rates, but it then allowed labour and other costs into excessive austerity or unpopular reform.
to rise much as they had before. The result was a steady loss of Yet the economic outlook has worsened. Serious inflation is
competitiveness against other euro­zone countries, especially back for the first time in the euro’s existence, and with it has come
Germany, which had itself embarked on labour­market reforms to rising interest rates. Both will bring new tests of Italy’s vulnerabil­
reduce its wage costs. ity. The new government is likely to undergo a baptism of fire over
The consequence was further to amplify the economy’s vulner­ the economy that would test even the most experienced policy­
ability to external shocks. China’s accession to the World Trade Or­ makers. It will be especially hard for a prime minister as untried as
ganisation in 2001 was one such. Enlargement of the EU to include Ms Meloni. And that puts new emphasis on the structural impedi­
central and east European countries three years later was another. ments to growth that continue to afflict the economy. n
Italy’s relatively large manufacturing sector suffered dispropor­
tionately from both. And then came the financial crash of 2007­
09, swiftly followed by the euro zone’s sovereign­debt crisis. The
Business in Italy
two biggest recent shocks were the arrival of covid­19 in early 2020
and the Russian invasion of Ukraine and the sharp rise in energy
costs this year. In every case, Italy has tended to suffer more than
most of its neighbours.
Structural faults
Contrary to those German worries about Italian profligacy, fis­
cal policy was kept under relatively tight control for most of this
period. As Ignazio Visco, the Bank of Italy’s governor, points out,
Italy ran a primary surplus (ie, before interest payments), albeit of­
Protected sectors need exposure to more competition
ten a shrinking one, throughout the euro’s first two decades. He
adds that the private sector is less indebted than in almost all
other European countries. These are all reasons why Italy did not
have to follow Greece, Ireland, Portugal and Spain in requesting an
T he macroeconomic outlook for Italy is cloudy. But it is micro­
economic factors such as labour­ and product­market regula­
tion, protected incumbents and a broader lack of social trust that
EU bail­out. However, one irony from avoiding one, notes Silvia do most to discourage Italian firms from investing and foreign in­
Merler, chief economist of Algebris, an asset manager, is that vestors from coming in.
these four countries have since grown faster than Italy. Italy has more small and medium­sized enterprises (SMEs),
mostly family­owned, than France and Germany combined. Only
Not going for growth 30% of Italians work in companies with more than 250 staff, com­
Indeed, it is at least arguable that, for Italy, both monetary and fis­ pared with half in France and Germany. And almost half of Italians
cal policies were too tight, not too loose, for much of the euro’s work in micro companies with fewer than ten employees, the
first two decades. This was a contributor to the economy’s main highest share in Europe after Greece. SMEs are especially strong in
weakness, which was (and is) a near­total lack of growth. As a con­ manufacturing and in the north, where they are often praised as
sequence, wages and living standards have stagnated. Italians the equivalent of Germany’s Mittelstand firms.
have felt the pinch, public services have been underfunded and Yet there are two big differences with Germany. The first is
the south has suffered especially. It is little wonder that public management. Two­thirds of German Mittelstand firms employ
opinion has shifted away from its previous unthinking support professional managers. In Italy, the share is just one­quarter. His­
for the EU project, one of the reasons for the electoral success of tory and culture explain some of the difference, but so may low
Ms Meloni’s coalition. levels of social trust. Too many family­owned firms in Italy are re­
That sentiment may have changed again since the EU’s recov­ luctant to employ outsiders as managers. And this may explain
ery and resilience fund was established to help countries deal with another difference, which is that SMEs in Germany are willing to
the after­effects of covid­19. Italy is the biggest beneficiary of this grow and sometimes to float on the stockmarket. Small Italian
fund, successfully snagging a promise of as much as €192bn firms often see either course as a threat to the family’s control.
($197bn) in grants and loans over the period to 2026, just over a The next problem in Italy is its labour market. Several minis­

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 The Economist December 10th 2022 Special report Italy 7

In need of a spring clean

ters and officials have bravely overcome vested interests and yers and notaries. All benefit from a network of privileged conces­
strong trade unions to deregulate parts of the labour market (in­ sions that keep out competitors and are often handed down from
deed, two were assassinated for their pains) over the past 25 years. father to son. The consequence is a services sector characterised
But the market is still a long way from the flexibility of, say, Den­ by inefficiency and low productivity.
mark’s in its freedom to hire and fire. Getting rid of workers can be Protection of national champions has similarly deleterious ef­
cumbersome and require proof of just cause. It is also subject to fects. Italy is not alone in this, but it is notable that the likes of Enel
lawsuits in which judges often favour employees over employers. (electricity), Eni (oil and gas) and Telecom Italia all exploit their
And the market is damagingly two­tier. As Maurizio Landini, gen­ political connections. Trenitalia’s high­speed trains benefited
eral secretary of the CGIL, Italy’s largest trade union federation, from private competition in the form of Italo, set up by a group led
puts it: too many young Italians are on precarious temporary con­ by Luca Cordera di Montezemolo, a businessman. No government
tracts, while their elders have more secure permanent ones. has come close to daring to shut down the national airline (Alita­
The effects of a partly gummed­up labour market are lamenta­ lia, now ITA, whose planned privatisation may yet not happen) or
ble. Even after relatively strong growth in 2021 and 2022, unem­ Italy’s oldest bank, Monte dei Paschi di Siena. Instead, both have
ployment remains higher than in most other EU countries, at over had repeated state­backed bail­outs.
8%. Youth unemployment has long been substantially higher, at Another by­product of protectionism may be Italy’s low for­
over 20%. The share of young people not in employment, educa­ eign direct investment. Foreign investors are wary of a country
tion or training (NEETs) is 22%, the highest in the EU. And the rate that tends to look after its own against outsiders. Italy also scores
of female participation in the workforce, around 54% of those badly in rankings of places good to do business. In 2020 it came
aged 15­64, is the lowest. 58th in the World Bank’s rankings, below Serbia and even Belarus.
Italy’s product markets may be an even bigger structural fail­ For dealing with construction permits, it came 97th; for starting a
ure. In its manufacturing sector the country has for too long dis­ business 98th. Startup costs are among the
played protectionist instincts, though these have been eroded ov­ highest in the EU; fees to notaries alone
er time. Even the giant Fiat car company, once the seventh­largest can be 75% of the bill. Electricity is more
in the world, was fiercely protected in its early days. That has long Italy scores badly expensive and takes longer to connect than
gone. Stellantis, Fiat’s Dutch­based holding company, is now just in rankings in most other EU countries.
another global carmaker (Exor, its biggest shareholder, is also the Then there is the low quality and ineffi­
biggest shareholder in The Economist).
of places good ciency of public administration. Long de­
It is above all services, the biggest contributor to any advanced to do business lays in receiving permits are common. Ita­
country’s GDP, that most need opening up to competition. Too ly has too many levels of government, one
many services firms make their living from rent­seeking and li­ reason its tax burden is high. Another is
cence capture, not from their competitiveness in a free market. that, judging from the large gap between
This can be seen in the preferential treatment of pharmacies and what should be and actually is collected in
small retailers, beach­concession holders and taxi­drivers, or law­ VAT, tax evasion is more extensive in Italy

012
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 8 Special report Italy The Economist December 10th 2022

than in most other EU countries. This is not helped by a habit of of­

The south
fering amnesties, which also happens for illegal building. In both
cases amnesties only encourage repetition of the offence.
Worst of all, Italy does badly on education. Its PISA scores from
the OECD for mathematics, science and reading are all below aver­
Sunrise or sunset?
age. Although the country has some good private universities, it
has no university in the world’s top 100. In 2019 the share of 25­ to
34­year­olds who had completed tertiary education was the lowest
Southern Italy needs private enterprise and infrastructure,
in the OECD apart from Mexico.
not more public money
The low priority given to education over pensions is striking.
Francesco Grillo of the Vision think­tank in Rome calculates that
spending on pensions as a share of GDP in Italy, at around 15%, is
five times as much as spending on education, the highest such ra­
M ost European countries have regional problems. Some­
times this translates into full­blown independence move­
ments (Britain and Spain spring to mind). But more often the is­
tio in Europe. This is evidence of a country that favours the old ov­ sues are inequality, high unemployment and lack of development.
er the young so much that it can seem like a gerontocracy. Italy no longer has a serious independence movement, and it has
devolved significant powers to city mayors and regional presi­
Looking for the light dents. But in its south it has one of Europe’s most troubled re­
There are bright spots, even so. In regions like Lombardy, Pied­ gions: the mezzogiorno.
mont and Veneto, Italy has many world­class companies, espe­ Two things are striking about the mezzogiorno. The first is its
cially in food and fashion. “Made in Italy” is a valuable brand. The size: over a third of Italy’s landmass, a little under a third of its
mayor of Milan, Giuseppe Sala, declares that his city is “booming” population and about a quarter of Italian GDP. The second is that,
as never before. Luxottica, based in the city, is the world’s biggest unlike most other poor European regions, it is no longer catching
maker of spectacles. In Veneto, Geox is one of its most successful up with the rest of the country, as in the period immediately after
shoemakers. Outside Brescia, Beretta is one of the world’s leading the war. Instead, it has been falling further behind. It is more like
firearms manufacturers, almost 500 years after its foundation. Mr the north of England than, say, the former East Germany.
di Montezemolo says that, if they can avoid interaction with pub­ The big question is why? Some cite history and culture. The se­
lic administration and focus on exports, Italian firms can be high­ mi­feudal kingdom of Naples with its absentee landlords was not
ly successful. But that is a big “if”. conducive to fostering social trust, whereas northern Italy with its
In Turin CNH and Iveco, spin­offs from the old Fiat, are big ex­ thriving city­states was the opposite. Others look at Italian unifi­
porters. CNH makes tractors and industrial engines, including an cation in the 1860s, pressed by northerners but resisted by south­
ingenious grape­picking machine (not coincidentally, Italy is the ern elites. Even today it is easy to find people who accuse Garibaldi
world’s biggest wine producer). Iveco’s trucks and buses can be not of unifying Italy but of dividing Africa. Yet Adriano Giannola,
found worldwide. In Emilia­Romagna, Modena has become a glo­ president of SVIMEZ, a development think­tank, says that the
bal car­research centre, with a motor­vehicle university, helped by mezzogiorno caught up to almost 70% of average GDP between 1950
the fact that Ferrari, Lamborghini and Maserati all hail from the re­ and the 1970s, only to fall back to 50%.
gion. Yet another example is Moncler, a fashionable puffer­jacket Cultural differences doubtless persist. Yet today it is surely
maker based in Milan that has expanded into America by buying a economic and social differences that matter more. Infrastructure
rival, Stone Island. The two biggest banks, Unicredit and Intesa such as roads, ports, rail and air links is generally worse and less
Sanpaolo, are also stronger and more pan­European than they
were a decade ago.
Energy may be another unsung success story. Italy has few en­
ergy sources of its own. Like Germany, it was for too long highly
dependent on Russian gas. But since the Russian invasion of Uk­
raine, it has moved faster than Germany to reduce that depen­
dence. It has also done better than most other EU countries in re­
ducing carbon emissions, though not without pushback. Any sug­
gestion of a new role for nuclear energy is strongly resisted. And
earlier this year fierce local opposition, led by the mayor, held up a
new floating liquefied­natural­gas platform in the port of Piombi­
no in Tuscany.
Even public administration has improved. In the Draghi ad­
ministration Marta Cartabia, a former judge, made several reforms
to speed up Italy’s notoriously sluggish judicial system. It is not
yet clear if her successor, Carlo Nordio, will be able to complete the
job, as signs of delay in implementing these reforms have caused
some concern. Vittorio Colao, the former technology minister,
drove a programme of rapid digitisation of public services. His real
ambition, he says, was to abolish cash, but the new government
seems more inclined to raise the limit on cash transactions. The
former infrastructure and transport minister, Enrico Giovannini,
also improved Italy’s public infrastructure, from ports to railways.
Perhaps Mr Salvini can keep up the momentum.
In all such cases, from justice to infrastructure, the worst part
of the country is still the south: Italy’s notorious mezzogiorno,
which continues to drag down the whole country. n Lots of tourists in the sea

012
010
 The Economist December 10th 2022 Special report Italy 9

extensive in the south. Educational standards are lower. And or­

ganised crime in the form of Sicily’s Mafia, Campania’s Camorra, Southern discomfort Unemployment rate, %
Puglia’s Sacra Corona Unita and, most oppressive, Calabria’s To come Trentino- 50
Alto Adige Friuli- Youth* 40
’Ndrangheta, casts a dark cloud over all aspects of life. The results Venezia
Lombardy 1.08 30
are apparent in less investment, fewer jobs, lower levels of partici­ Aosta Giulia
Valley 9.97 Trento 20
pation in work and a greater reliance on the public sector. 1.20
Over the years, the people of the mezzogiorno have tried differ­ 0.12 Veneto 10
Milan Trieste
ent approaches. In the 1950s and 1960s the answer was emigration, 4.86 Total 0
Turin Brescia Venice
of farmworkers to the north but also of the young to America, Brit­ 1994 2005 15 22
Piedmont Modena
ain and West Germany. Yet this translated into a brain drain that Emilia-Romagna
4.25 4.43
left behind the old and less well­educated. Another plan was sub­ Genoa Bologna
sidised investment through state­owned funds, often in manufac­ Liguria Ancona
turing plants. Yet these were later disparaged as “cathedrals in the 1.51 Florence
Pisa
Perugia Marche
desert”. Even so, Mr Giannola argues that the abandonment of in­ Piombino Tuscany 1.49 Mezzogiorno
dustrial policy and the habit of the north to look to Germany not 3.68 Umbria Molise
0.86 Abruzzo 0.29
its southern hinterland have been unhelpful.
1.27
As in the rest of a country that is already lagging behind in pro­ 58.98 Population Puglia
Rome
ductivity growth, wages tend to be low in the south. But this is not Dec 2021, m Lazio
3.91
5.72 Bari
always true in the public sector. The mezzogiorno’s failure to con­
Naples
verge with the north suggests that differential public­sector pay Potenza Matera Lecce
could help create more jobs. In contrast the citizens’ income (a Sardinia Campania Basilicata
welfare benefit), championed by Giuseppe Conte’s Five Star Move­ 1.58 5.59 0.54
ment, may be unhelpful. Too many people proved keen to take the
benefit but not to work legally, instead supplementing their in­ Calabria 1.85
come in the black economy. The government is now proposing to Cagliari Catanzaro
cut the benefit sharply.
GDP per person, 2021 Palermo Cefalù
South working % of national average
120 110 100 90 80 70 Sicily Catania
Even in the mezzogiorno, not all is gloom. Puglia has been a recent 4.80
Mussomeli Syracuse
success story, with both tourists and businesses lured to Bari and
Lecce. The mayor of Naples, Gaetano Manfredi, says his city has Sources: Istat; Eurostat *15- to 24-year-olds
hugely improved, the climate is buzzing and the quality of life for
incomers is high—even if there is still too much rubbish in the
streets. Apple launched its first European “developer academy” in One more big change is the expansion of tourism. Yet here Ita­
Naples in 2016, and it has since expanded. The film industry has ly, which has fallen from the top two to fifth as a global tourist des­
taken off, many small textile and engineering firms have sprouted tination over the past 50 years, could do better. The newish mayor
around the region and there are thousands of students. Tourism of Rome, Roberto Gualtieri, says tourism arrivals to the eternal ci­
has bounced back from covid­19. Neither the mayor nor the re­ ty have hit new records, and hotels are full. Yet too many hotels
gional president, Vincenzo De Luca, expect much help from the and restaurants in the capital have failed to reopen after the co­
Meloni government, however. vid­19 shock. And the challenge of running one of Europe’s least
In the Sicilian capital, Palermo, too, tourism is booming, res­ governable cities remains huge.
taurants are full and student life is busy. The mayor, Roberto La­ The south also does not do as well as it could in tourism. Too
galla, who is a member of the FdI, hopes for more from the new many arrivals at Naples airport head straight for the Amalfi coast
government. He is not an admirer of the citizens’ income. But like and the island of Capri. Yet 200 years ago Naples was one of
many southerners, he is enthusiastic about the prospect of a new Europe’s most appealing destinations. Besides its beautiful bay
bridge to link Sicily to the mainland and optimistic that Mr Salvini around Mount Vesuvius, it boasts two of Italy’s finest museums,
will make it a priority. Sceptics see it as just another southern the archaeological museum and the Capodimonte. On a recent
boondoggle that would benefit few beyond organised crime. visit by this writer, both were mostly empty (except for the sala­
Leoluca Orlando, a former mayor of Palermo, says the Mafia cious cabinet of erotic mosaics from Pompeii). Across the Medi­
has lost much of its grip on Sicily since he and some brave magis­ terranean, Barcelona, with fewer historic assets, attracts twice as
trates fought it in the 1990s. Yet other organised­crime groups in many tourists as Naples every year.
the south remain powerful. And anti­Mafia prosecutors in Naples A similar story can be told of Sicily. The island ought to be the
and Rome note that, although old­style extortion and murders jewel of the Mediterranean, with Greek
may now be less common, organised crime has moved on to temples, medieval cathedrals and such
broader business corruption, often on an international scale. historic cities as Palermo, Cefalù and Syra­
Elsewhere in Sicily, Catania has several high­tech firms built The mezzogiorno cuse, as well as some of Italy’s best food,
around what is known as Etna Valley, including STMicroelectron­ is no longer wine and beaches. Yet Spain’s Balearic Is­
ics, a chipmaker. Like other southern regions, the island hopes lands draw more visitors than the whole of
that working from home post­covid, or “south working”, will bring
catching up with the mezzogiorno, including Sicily, every
back departed people. The switch in the region from being a place the rest of Italy year. The comparison with Spain is in­
of continuous net emigration into the reverse is yet another strik­ structive. The Meloni government, like
ing change (see box on next page). But the Meloni government is many predecessors, needs a better south­
strongly anti­immigration from abroad, especially irregular im­ ern strategy. But politics may get in the
migration from Africa; it has even turned away from Italian ports way, for the south is not that keen on the
rescue ships that pick up migrants in the Mediterranean. right­wing coalition. n

012
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 10 Special report Italy The Economist December 10th 2022

the first prime minister to win the job as a direct result of the vote
Politics
since Silvio Berlusconi managed the feat in 2008.
The worst feature of the election was its turnout. At just under
Italy’s bane 64%, it was the lowest for any Italian general election since 1946.
This supports the conclusion that there is a broad dissatisfaction
among voters with the entire political class. Too often elections
have led to protracted negotiations about forming a new govern­
ment that may bear little relationship to the results. And voters are
also fed up with the political instability that has become irrevoca­
Political instability has repeatedly hamstrung reform efforts
bly associated with Italy.

I n few countries can there be as much disdain for the political

class as in Italy, not least because of the system’s high cost. It is
not just that the country has too many levels of government,
Romano Prodi, prime minister from 1996 to 1998 and again
from 2006 to 2008, links Italy’s instability to its repeated failure to
pursue and implement big reforms. Soon after he first got the job,
though it does. It is also the excessive pay and perks attached to he went to Germany to meet Helmut Kohl, then the EU’s elder
elected office. The bestselling book “La Casta”, published in 2007, statesman. At the end of their discussion, which was mainly about
found that members of the Italian parliament were paid more the European single currency, Kohl simply asked who would be
than their equivalents in almost all other EU countries. It also re­ the Italian leader at the next meeting.
vealed that the public sector had access to a fleet of 72,000 cars. Instability is not just a product of bouts of horse­trading and
Such public largesse continues today. coalition in­fighting. It also reflects repeated efforts by voters to
Yet the excessive cost of parliament, at least, has been trimmed search for political leaders who might actually do something
by one good thing about September’s election, which was to im­ about Italy’s chronic slow growth. Simplifying somewhat, ever
plement a reduction in the number of elected deputies and sena­ since the collapse in the early 1990s of the old system under the
tors in parliament from 945 to 600. Another good thing was that, first republic that had entrenched the Christian Democratic party
unlike the 2018 election, this one produced a clear result, handing in government since 1946, the electorate has been trying out a se­
a majority to the right­wing coalition led by Giorgia Meloni. She is ries of different answers—so far without much success.

The houses that Giuseppe sold

Innovative ways to cope with demographic decline

I n relation to demography, as well as

public debt, Italy is often compared to
Japan. It has Europe’s second­lowest birth
medieval historic centre, nestled beside a
ruined 14th­century castle, is picture­
perfect, with narrow cobbled streets,
case1euro.it, which has spread to much
of Italy. Under the scheme, his office
contacts owners of old empty houses,
rate, at 1.2 babies per woman. Its pop­ historic crests to differentiate the dis­ who are still subject to hefty property
ulation has been shrinking since 2015. tricts, several churches and piazzas, and taxes, and offers to cancel what is owed
Pension reform was pushed by the Monti stunning views. Yet as the mayor, Giu­ in exchange for the title deeds. The prop­
government in 2011­13 but has been partly seppe Catania, tells it, five years ago al­ erties are then sold to new investors for a
reversed, leaving Italy spending the high­ most nobody lived there. The local pop­ notional one euro. Mr Catania says that,
est share of GDP on pensions in the OECD. ulation had either left or moved into since 2017, some 330 homes in the histor­
Child­care costs are high. Politicians duly newer, more convenient housing on the ic centre have been sold to new owners.
fret. Giorgia Meloni’s decision to appoint edge of town. There is, of course, a catch. Although
as family minister a conservative Catholic, So, along with several others, the not obliged to live in the property, or
Eugenia Maria Roccella, and add “birth mayor signed up to a new initiative: even to hang on to it, the new owners
rate” to her ministry’s title, is telling. must renovate their homes within three
By history and tradition, Italy is a coun­ years. For a typical old house with a floor
try of emigration, not immigration, but Shrinking… area of some 50­80 square metres, the
that too has changed. Alfonso Giordano, a Population estimates, 1950=100 cost of renovation is around €500­900
demography specialist affiliated to luiss 160
per square metre. Covid­19 has meant
University, says Italy is bad at integrating delays, but Mussomeli now boasts 120
France
immigrants. It sticks to the jus sanguinis 150 building firms ready to do the work. The
(“right of blood”) principle, so even im­ big benefits for the town are a clean and
migrants’ children born in Italy can be 140 spruced­up historic centre that is start­
denied citizenship. Mr Giordano suggests Britain ing to attract tourists (though there is as
130
better co­ordinated EU action on irregular yet no hotel); and an influx of new peo­
migrants from Africa could dampen resis­ Italy ple, many able to work from home with a
120
tance to regular immigration. Most econo­ good internet connection. Mr Catania
mists see more immigration as essential. 110 lists no fewer than 18 nationalities
Another effect of demographic decline Germany among his buyers. The only one missing?
is depopulation of many towns and villag­ 100 Italians, who no longer see much appeal
es, especially in the mezzogiorno. A good 1950 60 70 80 90 2000 10 22* in living in the cramped conditions of
example is Mussomeli, in central Sicily. Its Source: UN Population Division *Forecast their forefathers.

012
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 The Economist December 10th 2022 Special report Italy 11

Mr Berlusconi was one early possible solution. The hope was

that Italy’s richest man might protect all Italians and make them
richer. Yet far from doing so, his terms in office mostly revolved
around exploiting conflicts of interest to protect himself and his
business empire. Voters then turned to the promise first held out
by Mr Prodi of solving their troubles by signing up to the euro.
When the financial crash hit and then spawned the euro crisis, a
third answer presented itself: rule by a technocratic prime minis­
ter, Mario Monti, who steered Italy between 2011 and 2013.
Next came a batch of promising reformers from the Democrat­
ic Party (PD), with first Enrico Letta and then the hyperactive Mat­
teo Renzi as prime minister. Mr Renzi had big plans to reform al­
most everything in Italy, but he was forced to quit in 2016 after los­
ing a referendum on constitutional changes. This period ended in
2018 when Italy’s desperate voters turned to the disruptive Five
Star Movement co­founded by Beppe Grillo, a comedian, and to
Matteo Salvini’s League.

Brothers and sisters

The bizarre, and often unstable, coalition between these two pop­
ulist parties, formed under the leadership of Giuseppe Conte, was
never likely to do enough to revive the economy. Predictably
enough, in­fighting within the coalition ended the government
early, forcing Mr Conte to form a link with the PD instead. Then It­
aly was badly hit by covid­19 in early 2020. And Mr Conte’s govern­ Much to protest about
ment was replaced in early 2021 by yet another technocrat, Mario
Draghi, who led a broad­based team until last summer, when Mr
Salvini and Mr Berlusconi contrived to bring down the govern­ bringing down governments. Yet history also suggests that the
ment, leading to the election that brought in yet another choice: right is more successful at keeping governments going than the
Ms Meloni’s FdI. left, which too often devotes more time to in­fighting than to con­
The victory that brought in Italy’s first female prime minister fronting its opponents.
did not reflect a big swing to the right, but rather three other The PD is certainly in disarray. Daniele Albertazzi, an academic
changes. The first was the collapse of the Five Star Movement from at Surrey University, blames it for not forming a coalition with the
a 33% vote share in 2018 to 15% (even this was better than expected, Five Star Movement, which inevitably led to the right’s victory. Mr
mainly thanks to a strong showing in the south). Second was a re­ Letta retorts that, had he tried to do a deal with Mr Conte, both par­
distribution of votes within the right, from Mr Berlusconi’s Forza ties would have lost votes. He says he was also let down by Mr Ca­
Italia and Mr Salvini’s League to Ms Meloni’s FdI. Third was the lenda and Mr Renzi. Mr Calenda optimistically predicts that the
failure of the PD under Mr Letta to form a working alternative co­ Meloni government may not last a year. Mr Renzi suggests the
alition, with either Mr Conte’s Five Star Movement or the centrist European elections in 2024 could be a crunch test.
parties of Carlo Calenda and Mr Renzi. This failure tipped most of However enduring Ms Meloni’s government proves, what will
Italy’s first­past­the­post seats (a quarter of the total) to the right. she do? Initial fears over her foreign policy seem to have faded. Al­
Ms Meloni now has clear majorities in both houses. Yet this though both her coalition allies have a murky history of friend­
does not guarantee that her government will endure. Neither Mr ship with and admiration for Russia’s Vladimir Putin, Ms Meloni
Berlusconi nor Mr Salvini seems comfortable with her leadership. is emphatically not a fan. She is a firm Atlanticist and a supporter
That may reflect her youth, her inexperience or simply the fact of NATO. She is unlikely significantly to change Italy’s policy of full
that she is female. Mr Salvini, in particular, has plenty of form in support for Ukraine and continuing to wean itself off its depen­
dence on Russian gas.
There may be more reason to worry about her attitude to the
EU. She is unashamedly nationalist and, like Mr Salvini, has flirted
Room at the top with the idea of leaving the euro. Her party is a member of the
Covid-19
Italy, prime ministers lockdowns begin European Conservatives and Reformists (ECR) group, which once
included the British Tories (indeed, she is its president). She has
Euro-area debt crisis Giorgia Meloni
Mario Draghi
often expressed support for the illiberal anti­EU Hungarian prime
Giuseppe Conte minister, Viktor Orban. She is hostile to immigration. She has
EU enlargement to the east Paolo Gentiloni been a trenchant critic of the Brussels bureaucracy. And she has
Matteo Renzi begun her premiership with spats with both France and Germany.
Italy joins the euro Enrico Letta Yet overall Ms Meloni, partly under the influence of Mr Draghi,
Mario Monti
has softened her tone. She knows how vital for Italy is the EU’s
Giuliano Amato
Massimo D’Alema €725bn resilience and recovery fund. Her Europe minister, Raf­
Romano Prodi faele Fitto, is seen as a pro­European. He says the party’s ECR
Lamberto Dini membership shows it to be quite unlike populist far­right anti­EU
Silvio Berlusconi parties in the rest of Europe. Mr Fitto is in charge of implementing
General elections
the EU’s recovery fund, so he understands the need for good rela­
1994 2000 05 10 15 20 22 tions with Brussels. Ms Meloni’s first foreign trip after becoming
Source: The Economist prime minister was to the EU institutions.

012
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 12 Special report Italy The Economist December 10th 2022

The bigger question for the government concerns its view of up even the most complacent. And what should clinch the argu­
liberalising reform. Here there are plenty of doubts. Broad goals of ment is that radical structural change is clearly possible, with the
more privatisation and a reduced tax burden seem sensible right leadership. Italy needs only to look at other European coun­
enough. But when it comes to detail, the plans do not always add tries over the past four decades to understand this.
up. Privatisation no longer seems a first priority, especially if it One example was Britain in the 1980s. By the 1970s the common
means opening up to foreign investors; indeed, nationalisation of view was that Britain was permanently saddled with a slow­grow­
some utilities looks more likely. The notion that Italy would bene­ ing, strike­prone, uncompetitive economy. Indeed, it was a key
fit from a flat tax is unconvincing. Although raising borrowing reason for joining the then European Economic Community in
may be reasonable given the prospect of recession next year, the 1973. But after 1979 Margaret Thatcher shook up a moribund econ­
government knows it cannot emulate the example of Britain’s Liz omy with structural reforms that helped to make it more compet­
Truss by ignoring financial markets. itive. And Britain, for all its other self­inflicted problems, has
Adolfo Urso, the industry minister, talks up the desirability of since mostly outgrown Italy, at least until Brexit.
an EU­wide industrial policy to revive manufacturing. Although
he welcomes foreign investment, he cautions against predatory Going Dutch
acquisitions. Yet state intervention in Italy does not have a great The next case is the Netherlands, which was the victim of what be­
history. And it glosses over the bigger question: does the govern­ came known as the Dutch disease in the late 1970s after money
ment have the will to tackle vested interests that always obstruct poured into the exploitation of gas reserves. After the Wassenaar
reforms? Ms Meloni has a poor record when it comes to backing agreement struck between trade unions and employers in 1982,
pro­competitive liberalisation. She is no fan of foreign invest­ the Dutch labour market was transformed, helping generate a
ment and is instinctively protective of Italian national assets. huge growth in part­time work. Later in that decade, both Finland
Her inexperience may or may not be a problem. Like any Italian and Sweden, for different reasons, found themselves stuck in a
politician, she must always be mindful of Machiavelli’s infallible deep economic hole. Determined action by the governments of
rule: that unless a prince is himself wise, he cannot be well ad­ both countries helped dig them out again.
vised, for this is only possible if he finds one good adviser, and any An even more telling example was Ireland after 1988, when it
such adviser soon takes over the state. But she certainly seems un­ was labelled the poorest of the rich. Tax cuts and labour reforms
likely to be Italy’s Margaret Thatcher. More’s the pity. n then helped set off what became known as the Irish miracle. A no­
table feature of this miracle was a huge increase in the rate of fe­
male participation in the workforce, a big shock in a country with
The future such a fervent Catholic population.
In the early 2000s the baton of reform passed to Germany. The
Schröder government, although often derided nowadays, loos­
A new reform spirit ened regulation of the labour market and shook up the welfare
system through its Agenda 2010 reforms. As in Ireland, an impor­
tant result was a marked increase in the share of women partici­
pating in the workforce. Germany was at one time not much better
than Italy on this measure. Now, unlike Italy, its female participa­
Other countries have managed to reform. Italy must not give up tion rate is well above the OECD average.
The entry of central and eastern European countries into the

P aul Ginsborg, a leading British historian of post­war Italy who

died earlier this year, once wrote that, “If there is a single, re­
current, almost obsessive theme in the political history of post­
EU has produced several more instances of successful structural
reforms. A notable case was the three Baltic countries after 2007.
Latvia in particular made wrenching changes to both public and
war Italy, it is that of the need for reform and of the failure to private sectors. And then came the four main countries that were
achieve it.” Now, more than ever, the country needs huge reforms bailed out by the eu during the euro’s long drawn­out sovereign­
to return to a path of growth. debt crisis: Greece, Ireland, Portugal and Spain, all of which have
There are two common Italian responses to such an assertion. since done better than Italy. Indeed, almost the only big European
The first is denial. The economy seems to be doing better than it countries that have not made sufficiently large structural reforms
was a decade ago. Compared with other countries in Europe, Italy are now France and Italy.
has plenty of well­off people. So long as you are in a protected job Many Italians, especially those happy with their lives and insu­
and can afford a property, life in such a wonderful country is com­ lated from competition, may still find it preferable not to be dis­
fortable enough. Is it really worth upturning the entire social or­ turbed. Like lots of insiders, they might share the response attrib­
der only to try to generate slightly higher growth? uted to Lord Salisbury in the 19th century when reform was pro­
The second is resignation. Italians have become used to being posed: “Change?…Aren’t things bad enough as they are?” But for
told that their country is the new sick man of Europe (though be­ the sake of their country, they would do better to subscribe to the
sides the Ottoman empire, the original sick man, Britain, France famous doctrine of Giuseppe di Lampedusa in “The Leopard”: “If
and Germany have all been garlanded with this title at different we want things to stay as they are, things will have to change.” It is
times). But they have learned from experience that structural re­ not too late to unleash Italy’s potential. n
forms are hard to push through in a country that more or less in­
vented medieval guilds—and that, as with pensions, they can all acknowledgments A list of acknowledgments and sources is included in the online version
too easily be rolled back. If change is impossible to stick to, why of this special report
waste time pressing for it?
Yet both responses are wrong. No doubt Italy and Italians will licensing our content For information on reusing the articles featured in this special report,
or for copyright queries, contact The Economist Syndication and Licensing Team.
survive whatever happens. But without substantial root­and­ Tel: +44 (0)20 7576 8000; email: rights@economist.com
branch reform, their standard of living is likely to fall ever further
behind the rest of Europe. Being overtaken not just by western more special reports Previous special reports can be found at
Economist.com/specialreports
Europe but , in due course, by parts of eastern Europe should wake

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 The Americas The Economist December 10th 2022 43

Canada territorial parliaments may suspend such

rights as freedom of religion and speech, as
A bomb lodged in the constitution well as protection from torture and unrea­
sonable searches and seizures (but not the
right to vote), if they specify what right
they’re overriding. A prime minister or
premier with enough votes in the legisla­
ture could use it to muzzle the press, sub­
MO NTREAL
ject people to arbitrary arrest or shut down
The obscure-sounding “notwithstanding clause” is actually rather dangerous
houses of worship. Brian Mulroney, prime

I n November Doug Ford, the premier of

Ontario, Canada’s most populous prov­
ince, got into a brawl. The trade union rep­
standing clause”—Section 33 of Canada’s
Charter of Rights and Freedoms—set off
shock waves that are still reverberating.
minister from 1984 to 1993, said that Sec­
tion 33 meant that the charter was “not
worth the paper it is written on”. No other
resenting 55,000 janitors, teachers’ assis­ The charter “cannot become a suggestion”, country has such a constitutional get­out
tants and other support staff in schools thundered Justin Trudeau, the prime min­ clause in Canada’s expansive form.
wanted an above­inflation pay rise of ister. Yet the clause invites norm­bending
11.7%. Mr Ford’s government passed a law politicians to make it just that. Not withstanding?
to impose a settlement of just 2.5% on the Canada’s bill of rights was adopted in During Section 33’s 40­year life Canada has
provincial government’s lowest­paid 1982 under the government of Mr Trudeau’s not become a police state. Governments,
workers. Anyone who walked off the job father, Pierre, as part of the “patriation” of thinking that voters would deem its use to
would be fined C$4,000 ($3,000) a day. Canada’s constitution from Britain, the fi­ be a nuclear option, have invoked it rarely.
To make sure he got his way Mr Ford re­ nal step in claiming its independence. The main exception has been that of
sorted to constitutional hardball. The im­ Fearing that a written charter would em­ French­speaking Quebec. In 1988, after
posed contract looked like a violation of power judges at their expense, provincial Canada’s Supreme Court struck down Que­
workers’ rights to bargain collectively, premiers demanded Section 33 as a way of bec’s ban on non­French shop signs and
which is protected by the constitutional preserving politicians’ autonomy. Consti­ public advertisements, the province used
right to freedom of association. That tutional scholars see it as a way of reconcil­ the clause to override the decision.
opened it to legal challenge. In response ing the principle of parliamentary sover­ But lately the clause has been invoked
Mr Ford’s law invoked the constitution’s eignty, inherited from Britain, with the in­ more often. In 2019 Quebec’s conservative
“notwithstanding clause”, which allows troduction of a written charter. premier, François Legault, used Section 33
Canada’s legislatures to override basic Under Section 33 federal, provincial and when enacting a law that bars public ser­
rights for up to five years (and to keep re­ vants from wearing religious symbols,
newing the measure). which seems to be aimed at hijab­wearing
→ Also in this section
After thousands of workers took to the Muslims. He followed up this year with a
streets and unions threatened the province 44 A bungled coup in Peru law restricting the use of English in courts
with a general strike, Mr Ford backed and public services. The law also autho­
45 Bello: Our columnist says adiós
down. But his attempt to use the “notwith­ rises the Office québécois de la langue fran­

012
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 44 The Americas The Economist December 10th 2022

çaise, a sort of language­enforcement tion 33 especially worrying is that he in­ The repeal that Mr Biro wants is unlike­
agency, to conduct searches without a war­ voked it pre­emptively, suspecting that ly. It would require the approval of seven of
rant to ensure that businesses are using courts would rule against him otherwise. Canada’s ten provinces, representing at
French in the workplace. That, too, came Canada has yet to produce a Donald least half of the population. A more realis­
with the support of Section 33. Trump, but it may have weaker constitu­ tic possibility is that Canada’s Supreme
Mr Ford, a Progressive Conservative by tional defences than the United States if Court will put in place “guard­rails”, which
party and a populist by inclination, was such a person appears. Section 33 “creates a would bar governments from invoking
poised to use it in 2018 to reduce the num­ vulnerability to the democratic backslid­ Section 33 pre­emptively. Civil libertarians
ber of seats on Toronto’s city council. (He ing that is occurring elsewhere”, says Peter are hoping that when the court eventually
didn’t have to; a court said he had the au­ Biro, founder of a group that lobbies for its considers a challenge to Quebec’s reli­
thority to do that.) In 2021 he invoked Sec­ repeal. To many Canadians, the freedom gious­symbols law it will ban future pre­
tion 33 for the first time in the province’s convoy was a sign that populism could emptive uses, though it is unlikely to strike
history, and for a worrying purpose: seem­ move north of the border. It had the sup­ down the law itself. That might lessen, but
ingly to boost his chances of re­election. port of a significant minority, and cash and would not eliminate, the danger that a po­
Facing criticism for his government’s re­ encouragement from Trumpist Ameri­ litical malefactor could use Section 33 to
sponse to covid­19, he pushed through a cans. (Right­wingers claim that the real crush Canadians’ rights. For decades they
law that tightened restrictions on cam­ danger to personal liberties comes from Mr largely ignored the bomb lodged in their
paign advertising by organisations other Trudeau, who they say has the freedom­ constitution. Now they must anxiously
than political parties. The intent appears to trampling instincts of the left.) hope that no one sets it off. n
have been to curb hostile adverts by trade
unions. When a court struck down the law
as unconstitutional Mr Ford enacted a new Peru
version, clad in Section 33 armour. That
may have helped him win re­election in Castillo the brief
June this year, though it was probably not
the decisive factor.
“For a long time it was thought that the
political costs of invoking Section 33 would
always be really big,” says Hoi Kong at the
LIMA
University of British Columbia. “Govern­
After a bungled coup attempt, Peru’s president falls
ments are now testing that.” Mr Ford has
said that the clause is just another “tool”,
and that a good premier will make full use
of his “toolbox”.
I n Marx’s hoary phrase, history repeats
itself as farce. In 1992 Alberto Fujimori,
an elected president, sent tanks to shut
six, with ten abstentions, to dismiss him.
After an emergency meeting of the high
command, the police decided to arrest him
It is not the only tool that politicians down Peru’s Congress and governed as an for rebellion as he was being driven to the
have lately used to push their powers to the autocrat for the following eight years. Mexican embassy to seek asylum. His vice­
limit. In February Mr Trudeau, of the cen­ Three decades later Pedro Castillo, the president, Dina Boluarte, has now taken
tre­left Liberal Party, invoked (for the first bumbling occupant of the job since July over from him.
time in the law’s 34­year history) the Emer­ 2021, tried to do the same. On December 7th Mr Castillo, a rural schoolteacher with
gencies Act, which empowers the federal he announced that he would close Con­ no previous political experience, was
government to override laws and seize au­ gress, convene a new one with powers to elected president with a margin of just
thority from provincial and local govern­ write a new constitution, and “reorganise” 50,000 votes (out of almost 18m). Despite
ments. The emergency in question was the the judiciary and the prosecutor’s office. coming from the hard left he won against
blockade of central Ottawa, the capital, by a The effort collapsed within hours. Mr Fujimori’s daughter, Keiko, who is ab­
“freedom convoy” of truckers opposed to Instead Congress voted by 101 votes to horred by many Peruvians and who tried to
vaccine mandates and by thousands of overturn the election results with un­
sympathisers. Many Canadians thought founded allegations of fraud.
Mr Trudeau was abusing his power by us­ In just 16 months in office Mr Castillo
ing the act to disperse a protest that was il­ has shown himself to be unfit for the job.
legal but no threat to the state. He ended He has got through five cabinets and
the order after nine days; in November he around 80 ministers; they came and went
testified at the parliamentary review that almost weekly, many of them as unquali­
by law must be held after the act is invoked. fied as the president himself. According to
And on November 29th Alberta, a west­ the chief prosecutor he and several mem­
ern province often at odds with the federal bers of his family corruptly conspired to
administration, introduced a bill that award public contracts. He denies all alle­
would authorise its Conservative govern­ gations, and claims political persecution.
ment to refuse to enforce federal laws if the Peru’s constitution allows Congress to
legislature finds that they are unconstitu­ impeach presidents for “permanent moral
tional or cause “harm to Albertans”. The incapacity”; two of Mr Castillo’s predeces­
first draft of the bill allowed the cabinet to sors were booted out under this clause.
amend provincial laws unilaterally, but Twice Congress tried to remove him under
this clause is likely to be removed. it, too. But they acted too soon, and lacked
All this alarms civil libertarians. Robert the necessary 87 votes out of the 130 legisla­
Leckey, dean of the law school at McGill tors. The left­wing block in Congress re­
University in Montreal, worries about the mained solid. Others were scared to lose
“creeping populism” of Mr Ford and Mr Le­ their well­paid jobs if impeachment were
gault. What makes Mr Legault’s use of Sec­ Time present and time past to be followed by a fresh general election,

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 The Economist December 10th 2022 The Americas 45

Bello An adiós in troubled times

In his final column, Bello reflects on how Latin America has changed

I n his mind’s eye as he writes, Bello can

see the limitless expanse of the Pacific
at Lima, the tiny fishing boats that plug
Poverty was falling steadily and so was
(still wide) income inequality. The lower­
middle classes were expanding and de­
Latin American literature has moved into
the mainstream, led by a cohort of young
writers, many of them women. Latin
across the bay in search of corvina and mocracy seemed to be putting down roots. American food, from Peruvian ceviche to
chita, the pelicans skimming inches But this progress was flattered by a Mexican tacos, has carved its way onto
above the waves, the vultures circling on commodity boom. It soon waned. Over menus around the word.
the clifftop. He can glimpse, too, the these past nine years the region has seen The region is more resilient than
sinuous roads that snake beside heart­ no growth in GDP per person. Investment headline­writers allow. Socially that
stopping abysses as they endeavour to has fallen, productivity languishes and owes much to the strength of family
connect towns in the Andes, landslides poverty has risen again. Discontents have networks and to the informal economy,
permitting. He can feel the clammy heat erupted. Political instability is increasing although this is a drag on productivity.
of the dark floor of the Amazon rainfor­ while seemingly immovable dictators rule Macroeconomically the reforms of the
est and the arid scrub of the Brazilian Venezuela, Nicaragua and now El Salva­ 1980s and 1990s produced lasting bene­
sertão. He can see the flat emptiness of dor. Organised crime has extended its fits. Inflation­targeting and independent
the Argentine pampas with their solitary bloody tentacles, from Mexico to Chile central banks have proved their worth.
ombú trees, and the soaring volcanoes of and Paraguay. The region has bounced back from the
Mexico and Central America. Latin Amer­ Take a longer view, and not everything pandemic slump much more quickly
ica has always been, first and foremost, is as gloomy. Your columnist began to live than, for example, Europe, even if social
about geography—stunning, bountiful, in Latin America exactly 40 years ago and scars remain.
impossible and treacherous. has done so for almost half of the period As always, the prospects are tantalis­
The books that offer a single explana­ since then. Over these decades the region’s ing, shimmering like the mirages on the
tion—dependency, colonialism, Iberian societies have in some ways become more salt flats of the Bolivian Altiplano. Latin
culture or institutions—of Latin Amer­ egalitarian. Nowhere else in the devel­ America, so vulnerable to natural disas­
ica’s relative failure are invariably wrong. oping world is the idea of human rights ters, will be one of the main theatres in
Its difficulties stem from the interplay of now so widely shared. the battle against climate change. It is set
all these factors and more. But geog­ Culturally Latin America thrives. The to be a key supplier for the green econ­
raphy, often ignored, is one, as Sebastián world is swaying its hips to Latin music. omy, with two­thirds of the world’s
Mazucca, an Argentine political scien­ lithium reserves and 40% of those of
tist, explained in a book published in copper. It is an abundant source of food
2021. It conspired against strong states and fresh water. Nearshoring of supply
that control their territory, obliging chains offers plenty of opportunities.
governments to strike pacts with local Some of geography’s obstacles could now
potentates at the expense of the rule of be overcome, digitally. And those impos­
law and impartial administration. ing landscapes form identities and at­
Latin America’s rich endowment of tract tourists.
natural resources has powered booms Despite everything, Latin America
and busts, attracted covetous foreigners remains the developing region where
and provided the broth for the red meat democracy is most widespread. Missing
of populism—a blame game about why still are the virtues that geography has
people are poor if the earth is so rich. hindered and that Andrés Bello stood for:
Another geographical factor, remoteness the rule of law, better public education,
from the main centres of the world econ­ openness and regional co­operation.
omy, has hurt trade and investment. That is where the battle lies. With a
When this column began almost nine heavier heart than when he picked it up,
years ago Latin America was advancing. Bello is replacing his pen in its inkwell.

as many Peruvians would like. A third mo­ statement with the police that they would election for a new Congress.
tion, with more support, was due to be put not back the president. Instead, Mr Castillo Ms Boluarte becomes Peru’s sixth presi­
to a vote on December 7th, hours after Mr provided Congress with the incentive it dent since 2016. She is not widely known
Castillo’s ill­fated announcement. lacked to remove him if they want to keep by the general public, but neither was Mr
Mr Castillo’s move was “a desperate their jobs. Similarly, the left would have Vizcarra when he took office. He went on to
gambit by a scared and incompetent man”, suffered by associating itself with a move become one of Peru’s most popular presi­
says a former minister. Unlike Mr Fujimo­ so similar to Mr Fujimori’s. dents, only to be impeached himself in
ri, Mr Castillo lacked support from the ar­ There exists another precedent for Mr 2020. The new president is another leftist
my and the streets. No tanks rolled in to Castillo’s actions. In 2019 Martín Vizcarra, but appears to be a more competent one.
shut down Congress. No angry mobs then president, shut down Congress when Ms Boluarte would do well to form a broad­
swarmed the chamber. Even his supporters it appeared to deny him a confidence mo­ based government if she wants to see out
condemned him. The armed forces, some tion. That was ill­advised, but there was a the rest of Mr Castillo’s term until 2026.
of whose commanders went to jail after Mr difference. He did not seek to tamper with Most Peruvians are relieved that this time
Fujimori’s regime ended, said in a joint the judiciary and he called an immediate the coup attempt failed. n

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 46
Asia The Economist December 10th 2022

India’s development for Mr Modi’s economic stewardship have

largely been realised. He and his party have
Gujaratification taken the Gujarat model India­wide.
In the state of 62m people, where the
bjp won its seventh straight election this
week, social indicators still trail economic
ones. On a development index that ac­
counts for life expectancy, education and
AHME DABAD
income, Gujarat ranks 21st out of 36 states
Narendra Modi is governing India, for good and ill, as he governed his state
and territories. It is in the bottom half of

A gashiye, a popular restaurant in Ah­

medabad, serves only one thing: Guja­
rati thali. But the dish contains multitudes:
life”. After a decade of welfarism, state
meddling and graft under the Congress
party, many Indians were hungry for it.
states for underage marriage, child stunt­
ing, infant mortality, and school and col­
lege enrolment. Last year its gdp per head
curries, pulses, veggies and sweets, along Critics of Mr Modi pointed to commu­ matched Tamil Nadu’s, but its share of peo­
with flatbreads, rice, salad, pickles, poppa­ nal riots on his watch in 2002 that left over ple living in poverty, at 14%, was nearly
dums and more. Its fans say the thali 1,000 Gujaratis dead, most of them Mus­ four times bigger (see chart 1 on next page).
strikes the perfect balance. But that de­ lims. They also noted that the state was This reflects the Hindu nationalists’
pends how it is consumed. Presented with pro­business long before he showed up. priorities. Gujarat’s social spending is the
a plate featuring greens next to fried de­ And that Gujarat’s social indicators, which lowest of all Indian states. It also directs a
lights and thick, sweet cream, few diners track changes in the lives of the poor, were smaller share of its total expenditure to ru­
choose to gorge on cabbage. far from perfect—indeed much worse than ral development and a larger portion to cit­
So it is with Gujarat’s strangely uneven its economic ones. That seemed like a bad ies than the state average. Many of its rural
development record. Ruled by Narendra lookout for a country with more than twice districts lack basics such as secondary
Modi’s Hindu­nationalist Bharatiya Janata as many very poor people as any other. schools as a result. Meanwhile, its cities
Party (BJP) since 1998, India’s westernmost Sure enough, eight years and two crushing are thriving, as they like to illustrate with
state is a great success story overall. It is the election victories later, the hopes and fears shiny new building projects. When the na­
sixth­richest state and accounts for 30% of tional government solicited proposals for
exports. Its economy grew at an average urban­renewal plans in the early 2000s,
annual rate of 11% between 2011 and 2021, → Also in this section most cities in Gujarat wanted funds for fly­
the fastest in the country. overs, says Himani Baxi of Pandit Deen­
47 Murdered Filipino journalists
It is this record that Mr Modi, after 13 dayal Energy University in Gandhinagar,
years running Gujarat, stressed when he 48 Manga v webtoons the state capital. Just one city proposed
sought India’s top job in 2014. Just as the building an unglamorous but necessary
48 Indonesia’s extramarital­sex ban
thali contains a balance of fibre, protein sewage­treatment plant.
and carbohydrates, his “Gujarat model” 49 Banyan: Anwar time After a number of false starts, India’s
was said to be a perfect mix of good educa­ economy is also booming. On December
50 Chinese gamblers abroad
tion, jobs, higher incomes and a “better 6th the World Bank upgraded its forecast

012
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 The Economist December 10th 2022 Asia 47

for growth this year from 6.5% to 6.9%. If welfare. Yet it also seems that Indians like
that is not as fast as Gujarat tends to grow, Hard choices 2 its spending priorities far more than would
it is faster than any other big economy. Mr India, central government budgeted spending once have been imagined.
Modi’s highly publicised new mantra is % of total The long­abysmal state of public servic­
“Together, for everyone’s growth, with 10 es—and proliferation of private alterna­
everyone’s trust”. And ambitious infra­ Social services tives—have downgraded Indians’ expecta­
8
structure projects such as highways and tions of them. Less than a third rely on
digitisation are, as in Gujarat, a prominent 6 public health care. In an international sur­
part of his plan. Most large cities now have 4 vey in 2016, just 46% of Indians agreed that
metro lines; over 10,000km of highways “the primary responsibility for providing
are being added each year, twice the rate 2 school education rested with govern­
the previous Congress­led government Roads and highways ministry 0 ment”, the lowest of any country polled.
managed. The infrastructure push is help­ 1999 2005 10 15 20 22 Meanwhile, the bjp’s infrastructure pro­
ing households, too. Many more now have jects, and relentless efforts to put Mr Mo­
access to bank accounts and clean fuel. In­ Gov’t: BJP Congress BJP di’s imprimatur on them, have made the
ternet penetration is rising rapidly. Sources: Reserve Bank of India; PRS Legislative projects and prime minister alike powerful
Research; Ministry of Finance
bjp rule has been much less successful symbols of national progress.
at improving Indians’ poor health and As anyone who has tackled a thali
woeful education. Child­mortality rates 7.1%. Yet the bjp has suffered little or no knows, to eat is to choose. And so it is to
are falling, but patchily. More than a third blowback in such places. This year it be­ govern. Not every element of the Hindu­
of children under five are stunted, a higher came the first party to win a second con­ nationalist development policy is good for
rate than in Bangladesh and Sri Lanka. In secutive majority in up since 1985. Why? Indians. But it is fuelling their growth and
2018 around half of all rural children in A lot of the answer is its Hindu chauvin­ keeping them coming back for more. Mr
fifth grade could not read to second­grade ism. In Gujarat, up and elsewhere, the bjp Modi’s approval rating, at around 77%, may
levels. And after two years of school clo­ has successfully presented itself as a de­ be the highest of any major world leader.
sures during the pandemic, the situation is fender of high­caste Hindus, while molli­ His prospects of winning a third parlia­
unlikely to have improved. fying the populous lower castes with hate mentary majority in 2024 appear excep­
These failures, again, reflect the bjp’s speech against Muslims and just enough tionally strong. n
choices. It has been more generous to In­
dia’s poor than its government in Gujarat;
the percentage of spending given to wel­ Press unfreedom in the Philippines
fare schemes such as food and cooking­
fuel subsidies is in line with the long­term
Dead convicts and a peculiar murder
average. Yet the Modi government is devot­
MANILA
ing a much smaller portion of India’s
It may actually be solved
bumper tax revenues to social spending,
including health care and education, than
its predecessor (see chart 2). In 2018­19 gov­
ernment spending on health represented
P ercival Mabasa’s murder on the
outskirts of Manila on October 3rd,
while the 63­year­old radio journalist
suspended by the recently elected presi­
dent, Ferdinand “Bongbong” Marcos.
Media outlets in the Philippines are
3.2% of gdp, down from 3.9% the year be­ was driving to work, was barely news­ still recovering from the ravages of his
fore it came to power. Spending on educa­ worthy. The Philippines is one of the father, Ferdinand Marcos, who shut them
tion, at 3.1%, is far below its target of 6%. deadliest places to be a journalist: 197 down, seized their assets and hounded
The poorest bits of the country are have been murdered in the country since journalists after he imposed martial law
missing out most, largely because India’s it restored democracy in 1986. Unusually, in 1972. Press freedom was enshrined in a
growth is so unequally distributed. Ac­ however, the investigation into Mr Maba­ new constitution after he was ousted. Yet
cording to official figures, unemployment sa’s killing has produced an alleged the killing of so many reporters is only
in Gujarat is 2.9%; in Uttar Pradesh (up), a culprit. Even more remarkably, the ac­ one sign of official disdain for that right.
poor northern state of 240m people, it is cused is a powerful official: Gerald Ban­ Less than 10% of the crimes have been
tag, head of the national prison service. solved. Bongbong’s predecessor, Rodrigo
Mr Bantag, who was questioned by Duterte, said the slain reporters were to
Not a fine balance 1 prosecutors last week though he denies blame “because they extorted…or at­
Indian states, by controlling party the crime and has not been formally tacked their victims needlessly”.
BJP BJP ally Other Poverty rate*, charged with it, is alleged to have or­ Little better was expected of Mr Mar­
Congress Congress ally 2019-21, % dered prisoners at the vast New Bilibid cos (whose vice­president is Mr Duterte’s
35 Prison to arrange the hit on Mr Mabasa, daughter Sara). But the investigation of
Population, 30 after the journalist suggested he was Mr Mabasa’s killing has raised hope. It
2019†, m 25 corrupt. One of the gunmen surrendered has also unearthed other scandals at New
300
100 20 and confessed to carrying out the hit for Bilibid, including caches of weapons, the
Gujarat 15 a share of 550,000 pesos ($9,900). He corpses of 176 prisoners, rotting in a
10 claimed it had been arranged by a convict mortuary—and, most remarkably of all, a
5 called Jun Villamor—who was then 30m­deep hole beside Mr Bantag’s resi­
Tamil Nadu 0 found suffocated with a plastic bag. dence at the jail, which appears to con­
0 50 100 150 200 250 300 350 400 450 But the dead inmate had left a text nect to a tunnel. Mr Bantag at first said
GDP per person, 2021, rupees ’000 message naming names. Mr Bantag, the hole represented an effort to find a
*Based on the multidimensional poverty index, a composite another warden and ten prisoners are legendary hoard of treasure. On further
measure comprising ten indicators †Estimate accused of conspiring to commit one or questioning he said it had been intended
Sources: Reserve Bank of India; Oxford Poverty and Human
Development Initiative; Government of India
both of the murders. Mr Bantag has been for scuba­diving practice.

012
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 48 Asia The Economist December 10th 2022

Toon wars pan” strategy of the government in Tokyo, Indonesia’s extramarital-sex ban
intended to emulate that Korean success,
Manga v webtoons has been a flop. Having run up huge losses, Bad news for Bali
it may soon be abandoned.
And yet, by sticking to what it does best,
the manga industry has at least maintained
its strengths. Its complicated layouts can
TO KYO SINGAPO RE
convey sophisticated narratives. And
Japan’s cartoon books are being Will Joko Widodo approve
many manga are artistic wonders, with de­
eclipsed by the Korean interloper an appalling new penal code?
signs manipulated at the millimetre level.

L ee hyun-seok grew up in South Korea

addicted to Japanese manga series such
as “Dragon Ball” and “Slam Dunk”. As soon
Witness the intricate ink drawings in “Vag­
abond”, an epic martial­arts series, or the
surrealist illustrations of “Berserk”, a me­
T he new criminal code that Indonesia’s
parliament passed on December 6th is
billed by the administration of President
as he could, he emigrated to Tokyo to build dieval fantasy. By contrast, complex plots Joko Widodo as a “gift” to the nation—a re­
a successful career as a manga artist and with dramatic twists are hard to convey in vision of a century­old colonial code that is
editor. Then in the early 2000s came “web­ webtoons, which can display only a limit­ no longer fit for purpose. As a deputy min­
toons”, a South Korean cartoon innovation ed number of words. “I doubt webtoons ister puts it, the new code will bring the
optimised for smartphones. Mr Lee was at would ever trump manga in terms of qual­ law “in line with Indonesian values”. Many
first unimpressed. Compared with manga’s ity,” says Mr Iwamoto. Indonesians disagree. The provisions are
inventive graphic styles and sophisticated With its strong stories and craftsman­ so unpopular that demonstrations against
plots, he found webtoons crude and super­ ship, manga maintains a loyal domestic them in 2019 led Jokowi, as the president is
ficial. “I thought: ‘Anybody can make this’.” audience, which gives publishers little mo­ known, to shelve them.
Yet Japanese manga is being eclipsed by tivation to innovate or change. Growth in A period of “socialisation” was sup­
Korean webtoons. Last year the manga their core business may be flagging; yet posed to have taken place before the new
print market shrank by 2.3% to ¥265bn they can still find opportunities to boost code could be reintroduced to parliament.
($1.9bn). The size of the global webtoons revenues through anime adaptations, or by Good luck with that: among its many harsh
market was meanwhile valued at $3.7bn— collaborating with businesses that create rules, the code criminalises cohabitation
and projected to reach $56bn by 2030. manga­themed merchandise. Shueisha, and sex outside marriage, expands the pro­
Manga is gravitating to digital slowly, in the publisher that produced “Demon Slay­ visions for blasphemy and makes it illegal
part because it is still designed for print, so er”, a recent hit manga and anime, had re­ for Indonesians to leave their religion or
awkward to read on smartphones. The let­ cord sales in 2021. “There’s not much of a persuade anyone to be a non­believer. It
ters tend to be too small and the way the sense of crisis among Japanese publish­ marks the most illiberal turn in Indonesia
panels are laid out requires constant ers,” observes Nakayama Atsuo, an enter­ since the Muslim­majority country of
zooming in and out. Seeing which way the tainment­industry expert. 276m people embraced democracy in the
wind was blowing, Mr Lee abandoned Some still fret about the future. Japan’s late 1990s. Jokowi has yet to sign the new
manga for the webtoon industry in 2014. manga fans are, like all its population, age­ code into law, but has suggested he will.
Though webtoons such as “Itaewon ing. The average reader of the Weekly Sho- Not all of the code’s elements are retro­
Class” and “Solo Levelling” have become nen Magazine, a manga anthology for chil­ grade. For example, it recommends that
popular among Japanese consumers, most dren (shonen means “young boy”) the death penalty should be used only as a
Japanese publishers have stuck doggedly launched in 1959, is now over 30. “Manga “last resort”, and allows for death sentenc­
to manga. “The Japanese industry is very could end up as old people’s culture,” es to be converted to long prison terms in
conservative,” sighs Mr Lee. “There’s a warns Mr Lee. “Children these days are the event of good conduct. It also rein­
strong belief that it’s better to stick with scrolling through webtoons on their forces, for victims of rape, an exception to
precedent.” The manga industry’s business smartphones. Why not make something the existing ban on abortion: they will be
model, in which stories are first published that suits their taste?” n able to seek an abortion within 12 weeks of
in weekly magazines and then in books, conception instead of, as hitherto, six.
has hardly changed since the 1960s. For the most part, though, the code rep­
Their format is also sacrosanct. Japa­ resents a very sharp turn for the worse.
nese manga hew to unique templates Criminalising consensual sex outside
which require special knowledge of read­ marriage, with up to a year in prison for
ers, such as the order in which panels must those found guilty, represents a gross inva­
be read. “The only people who know how sion of privacy. It could especially imperil
to read manga are Japanese, Koreans and millions of indigenous Indonesians and
geeks across the world,” says Iwamoto Kei­ rural Muslims whose marriages often lack
ta, who runs a cartoon studio. Webtoons certification. The new code’s defenders say
have grown so fast, in part, because they it will ensure prosecutions only take place
can be read more easily and intuitively. on the strength of a complaint brought by a
It is tempting to see the way manga tra­ close family member of the accused. But
ditionalists are ceding the global cartoon that creates endless opportunity for abuse.
market to South Korean innovators as sym­ Andreas Harsono of Human Rights Watch,
bolic of a broader malaise: the sluggish­ a pressure group, predicts the code’s harm­
ness and introspection of too many Japa­ ful effects will be felt especially by women
nese firms. Other recent South Korean ex­ and lgbt people, due to husbands report­
ports, such as the Netflix sensation “Squid ing wives for adultery (real or made up) and
Game” and BTS, a boy band, have taken the family members reporting gay relation­
world by storm thanks to the same combi­ ships that they dislike.
nation of innovation and smart marketing The move undermines, to an extraordi­
behind webtoons. Meanwhile, the “Cool Ja­ Dragon Ball Z is better in print nary degree, the government’s stated prior­

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 The Economist December 10th 2022 Asia 49

Banyan Karma chameleon

Which version of Anwar Ibrahim will govern Malaysia?

H e was for so long Asia’s prime­

minister­in­waiting, it takes an
effort to grasp that Anwar Ibrahim has
it is not an entirely reassuring springboard
for government. A martyr’s vanity helped
him endure. So did a chameleon’s ability
finance minister scream reform—though
perhaps it is better than that crucial
position falling into the grubby hands of
the top job in Malaysia at last. After a to match his message to whatever his one of his coalition partners.
general election last month produced the audience wanted to hear. His readiness to Mr Anwar’s fans are all too used to
country’s first hung parliament, its king embrace those who epitomised disappointment. But at least credit him
tasked Mr Anwar with forming a govern­ everything reformasi was not created for understanding that the election, as
ment. The 75­year­old’s first cabinet tensions even within his family. One of his Bridget Welsh of the University of Not­
meeting this week is the culmination of two deputies, the president of a much­ tingham Malaysia puts it, has done more
an extraordinary political odyssey. reduced umno, faces 47 corruption char­ to illustrate Malaysia’s deep problems
Mr Anwar was being talked about as ges. And though he presides over a largely than to resolve them.
Malaysia’s future fully four decades ago. secular coalition incorporating Malaysia’s The opposition Malaysian Islamic
He had risen to prominence as a silver­ ethnic­Chinese and ­Indian minorities, he Party, which wants to replace the coun­
tongued Islamist student leader. After is already throwing sops to the increas­ try’s Westminster­style government with
joining the ruling United Malays Nation­ ingly Islamicised Malay majority, such as an Islamic state, is now the biggest party
al Organisation (unmo), he soared. By cutting back the state lottery. To what end in Parliament. Its unexpected surge has
1993 he was deputy prime minister and is he making such compromises? deepened a divide between conservative
heir to Mahathir Mohamad, who domin­ His wider platform, which is big on Muslim Malays and an alarmed alliance
ated Malaysia’s post­independence story. gestures such as cutting ministers’ pay of urban middle­class Malays and minor­
To the delight of liberals in Malaysia and (though they can keep their lavish expens­ ities. The multiracial and tolerant societ­
far beyond, Mr Anwar issued a mani­ es), does not look like the reformasi he ies of Sabah and Sarawak on the island of
festo, “The Asian Renaissance”, that once championed. And heaven knows the Borneo represent a new, third political
stressed pluralism, tolerance and reform. need for it still exists, given race­based pole, argues James Chin of the University
Malaysia seemed about to fall into his policies favouring Malay businessmen, of Tasmania. Many in those states de­
lap. But he had moved too soon. Dr Ma­ plummeting educational standards and an plore the rise of political Islam and are
hathir fired him and in 1999 threw him in economy in a rut. Nor does appointing chafing under the federal system.
jail on trumped­up sodomy and corrup­ himself, even if temporarily, as his own This is the broken ground that the
tion charges. Mr Anwar was eventually new prime minister must pick a way
freed and he returned as leader of a through. It helps that he has declared his
multiracial opposition, with a slogan a “unity” government (his other deputy
of reformasi. umno hounded him again. is from Sarawak, a first). It also helps that
By 2015 he was back in prison on a fresh everyone from the king down is exhaust­
charge of sodomy. From there he contest­ ed by the political chaos. Though the
ed the 2018 general election in league election campaign was vitriolic, power
with his nonagenarian sometime nem­ transferred peacefully. That is not noth­
esis, Dr Mahathir, who had come out of ing. Political elites on all sides have had
retirement to bring down his former to make painful compromises—starting
party. The pair accomplished that and Mr with the king, no fan of Mr Anwar.
Anwar was pardoned. Dr Mahathir was to So his first months in office may be
be prime minister for two years, before relatively calm—bread­and­butter is­
handing over to him. Instead, true to sues, he says, will be his priority. After
character, Dr Mahathir reneged on the that, who knows? Yet it is possible to
deal, leading to the mounting political hope that this smooth­talking opportun­
chaos that yielded last month’s election. ist, once a liberal, could nudge Malaysia
Mr Anwar’s struggle is inspiring. But down a better, more tolerant path.

ity of attracting “digital nomads” and inter­ provisions against the president, state in­ represent an increasingly powerful voting
national tourists—upon which parts of the stitutions and even Pancasila, Indonesia’s block. Jokowi’s vice­president is a top Mus­
archipelago such as Bali already depend. It state ideology that supposedly emphasises lim cleric. True, the president has moved
also seems likely to produce an uptick in humane consensus. And it recognises the against radical Islamists, banning two big
child marriages, as a preemptive measure importance of “living law”, whatever that Islamist populist groups. Yet the new crim­
undertaken by parents to stop their off­ might be. The best guess is that it refers to inal code is itself a populist sop to conser­
spring having premarital sex. The new local sharia­type regulations forcing wom­ vative Muslim sentiment.
code also makes it much harder for ngos to en to wear the hijab, for instance, or en­ It is not due to take effect for three
dispense contraceptives and demonstrate couraging girls’ genital mutilation. years, by which time Jokowi, who is forbid­
how to use them, a move hardly in line Overseas, Jokowi, who recently hosted a den by the constitution to seek a third
with official efforts to combat the spread of successful g20 summit, is keen to be presidential term, will not be in office. Yet
hiv/aids. Other provisions criminalise viewed as a tolerant, even secular, Muslim his name, assuming he signs the new code
sorcery and black magic. leader. Back home, that does not play at all into law, would be on it. It would be a dis­
The code also includes anti­defamation well among Islamic conservatives, who graceful legacy. n

012
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 50 Asia The Economist December 10th 2022

Cross­border gambling Chinese “telemarketers”, who sit on their

phones dropping the latest web address
China’s cash gift to the rest of Asia into group chats and social­media com­
ments, along with a glowing endorsement.
More than 200,000 Chinese workers ply
this trade in the Philippines, which legal­
ised online gaming in 2016. Yet that supply
of imported labour has dried up during the
SINGAPO RE
pandemic. Many Cambodian virtual casi­
Xi Jinping wants to stop Chinese high-rollers rolling abroad
nos have therefore started virtual scam­
ames packer, an Australian casino ty­ gamblers dodge China’s strict capital con­ ming: they recruit workers from countries
Jcoon, illustrated his industry’s biggest trols. Anyone who helps a Chinese citizen other than China under false pretences and
opportunity with a statistic: 80% of Chi­ gamble abroad faces up to ten years in jail. force them to commit cyberfraud.
nese travelling abroad for the first time vis­ With Chinese gamblers now largely ab­ The big question for Asia’s casinos is
it a casino. In a society that loves to gamble, sent, Asia’s casinos are hoping to diversify. not merely how soon China will let its citi­
the Communist Party has for decades bot­ Ciarán Carruthers, the new boss of Crown zens travel abroad, but how far it will go to
tled up demand by banning the practice, Resorts, says it aims to lure more punters prevent them gambling there. It has alrea­
with the paltry exception of China’s state from Japan, Korea and South­East Asia. dy threatened to blacklist countries that al­
lottery. And as more and more Chinese But it is hard to control the Asian indus­ low Chinese visitors to gamble. This
have become rich enough to travel, that try from Beijing. As laundering money in helped persuade Cambodia to stop issuing
pent­up demand has burst across Asia and Macau has become trickier, Chinese­ licences for online casinos in 2019. In Sep­
beyond. “China’s middle class will change owned casinos have appeared in less­regu­ tember the Philippines, where the gam­
the world,” Mr Packer predicted. lated places south of China. The number of bling boom has generated little tax rev­
It has transformed Asia’s gaming indus­ casino licences granted in Cambodia grew enue and a lot of crime, said it would close
try. Most of the 340 or so casinos in South­ fourfold between 2014 and 2019. The 175 e­gambling operations and deport
East Asia were set up with the explicit aim centrepiece of the Golden Triangle Special 40,000 Chinese workers involved in them.
of luring Chinese gamblers. And many Economic Zone in northern Laos is the China’s authorities are increasingly trying
have enjoyed a bonanza: an estimated 1trn Kings Romans Casino, a vast building with to get such Chinese expatriates arrested
yuan ($144bn) in gambling money leaves Greek­god statues and chandeliers. It is and deported. Last year they arrested
the Chinese economy every year. owned by Zhao Wei, a Chinese citizen un­ 80,000 people in China deemed to be in­
Much of Asia’s gaming growth took der American sanctions, accused of being a volved in cross­border gambling.
place in Macau, which preserved its status transnational crime boss. (Mr Zhao, who Yet not everything about China’s off­
as an offshore haven for Chinese gambling denies the charge, calls the sanctions a shored gambling problem harms its inter­
after its emergence from Portuguese rule “hegemonic act of ulterior motives”.) ests, says Jason Tower of the United States
in 1999. But the growth has been wide­ Institute of Peace. With the benefit of great
spread. Ben Lee, head of iGamiX, a gaming Kings Romans Airbase? hotels, airports and other infrastructure,
consultancy, seems almost misty­eyed as Not all casinos rely on Chinese foot traffic. Chinese casino hubs could help China ex­
he recalls the arrival in Australian casinos Many Cambodian and Filipino casinos ert its influence in Asia more broadly.
of the first high­rolling Chinese tourists: double as production studios for online On the Cambodian coast in Dara Sakor,
“All of a sudden the whales from South­ gambling, targeting Chinese gamblers in for example, what was once thick jungle is
East Asia were nobodies.” their homes. They might, for example, sell now a vast Chinese gambling develop­
Everyone wanted a piece of the action. the livestream of a baccarat game to a mid­ ment. Cambodia has leased a fifth of its
Singapore legalised gambling and in 2010 dleman, who places it on websites hosted coastline for 99 years to a mysterious Chi­
opened two casinos, which raked in strato­ in Hong Kong. By constantly changing the nese firm that has built several casinos, as
spheric profits. In 2016 Japan unbanned ca­ web address, such operators can stay ahead well as a golf course and 3,400­metre run­
sinos, although its first new one will not of China’s internet police. way. Who knows? One day it might make a
open until the second half of the decade. Doing so requires recruiting an army of splendid Chinese military base. n
Even Vladivostok devised plans to become
a Russian Las Vegas for Chinese gamblers.
Several Asian countries, meanwhile, took
steps to protect their own citizens from the
fleecing they planned for China’s; Japan
and Singapore introduced rules to restrict
access to the new gambling dens.
Yet the Chinese money tree looks
increasingly imperilled, not only because,
with the country’s borders still sealed, far
fewer Chinese are travelling abroad. As
well as offending Chinese puritans, gam­
bling is responsible for an estimated fifth
of illegal capital flight out of China. Under
Xi Jinping, China is therefore trying with
increasing vigour to extend its curbs on
gambling to the cross­border variety.
Mr Xi has told Macau’s casinos to pivot
to shopping and conferences. He has tight­
ened money­laundering controls and
squeezed the “junket” agencies that help Chinese tourists seeing the world

012
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 China The Economist December 10th 2022 51

The zero­covid policy tropolis in the south, has lifted many re­
strictions, despite being in the middle of
Dismantling the machine an outbreak. Residential compounds in
Beijing, which just weeks ago were putting
up steel barriers, are now open. The new
rules say that if lockdowns are deemed
necessary, they should be imposed on
buildings or smaller units, not com­
BE IJING
pounds, neighbourhoods or cities.
China is loosening restrictions, even though covid-19 appears to be spreading
China’s propaganda is changing to

A ccording to the official data, the lat­

est outbreak of covid­19 is waning in
China. The number of new cases has fallen
quarantine, strived to isolate the infected
and their close contacts. Until recently
these unfortunate souls were dragged off
match the new policies. The virus was long
portrayed in state media as a terrifying ill­
ness, each case a threat to public health.
recently, to fewer than 30,000 a day, from a to state­run centres. Buying a self­testing Until late November, the nightly news de­
peak of more than 40,000 in November. kit would have triggered a call from au­ voted regular segments to the devastation
But fewer people are being tested. Anec­ thorities. Now, though, people with mild covid had wreaked on America, which has
dotal evidence suggests that, actually, symptoms and their close contacts can iso­ recorded over 1m deaths from the virus.
more Chinese are catching the disease, late at home and test themselves. They no Long covid, the drawn­out symptoms of
raising fears of a big wave. longer need to regularly log their location the disease, was “tearing apart American
Far from locking down, though, China on government apps either. society”, newsreaders claimed.
is largely ditching its “zero­covid” policy. Lockdowns were the final and perhaps Few, if any, such segments have aired
That effort relied on three main mecha­ harshest mechanism. They, too, are slowly this month. Instead state media are saying
nisms to contain outbreaks. On December being lifted. Nomura, a bank, estimates that the Omicron variant is not so scary
7th the government announced that all of that on December 5th some 452.5m people after all, pointing to the low number of
them are being dismantled. were affected by various lockdown mea­ deaths and severe cases it has caused so far
The first mechanism was mass testing, sures. That is still a big chunk of China’s in China. State newspapers have begun
which aimed to find infections fast. People population (1.4bn), but it is down by publishing interviews with doctors who
were shocked to see testing booths being 760,000 from the previous week. Large cit­ say there is “no evidence” that long covid
removed from city streets recently. A nega­ ies are leading the way. Guangzhou, a me­ exists. A well­known nationalist commen­
tive test is no longer required to travel tator, Hu Xijin, said on social media that he
within China. If the new guidelines are fol­ is “mentally prepared” to catch the disease
lowed, only care homes, schools and hos­ → Also in this section within a month.
pitals would still seek proof of a result. Why is this all happening now? During
52 Vaccinating the elderly
Some cities are even discouraging people the first two years of the pandemic, the ze­
from getting tested unless they are in pro­ 53 Dissidents v censors ro­covid policy kept the economy growing
fessions such as medical work. by allowing most of the population to live
54 Chaguan: The politics of death
The second mechanism, centralised normal, virus­free lives. But the spread of

012
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 52 China The Economist December 10th 2022

Omicron means more people have been Vaccinating the vulnerable magazine in Beijing, says officials have
caught in the zero­covid web. The econ­ been told to ensure that 90% of people over
omy has slowed as a result. Everyone is Obstinate elders 80 have had at least one shot by the end of
frustrated, from migrant labourers to mid­ January, up from 77% in late November.
dle­class city­dwellers. Last month there It will be a hard slog. When the govern­
were rare, politically charged protests ment launched its vaccination drive in
against zero­covid in several cities. 2021, doctors often advised old people that
Still, the timing has puzzled observers. it would be too risky to get jabbed if they
Getting old people jabbed has been
China’s undervaccinated elderly popula­ had common ailments such as high blood
slow work. It needs to speed up, fast
tion is vulnerable (see next story). Hospi­ pressure or diabetes. This hesitancy was
tals will soon be under strain from the flu.
And in the coming weeks millions of Chi­
nese will travel home for the lunar new
W hen other countries set about vac­
cinating their populations against
covid­19, they began with those most likely
caused by a lack of data at the time about
possible side­effects among the elderly of
Chinese­made vaccines (mainland China
year, potentially spreading the virus into to die from the disease. China did the op­ does not allow foreign ones to be used).
rural areas with threadbare medical sys­ posite. Instead of focusing on the elderly Older people had been underrepresented
tems. Given China’s current state of pre­ and people with medical conditions that in trials. Although such fears have dissi­
paredness, our modelling suggests that if made them more vulnerable, it started pated among experts, they have persisted
the virus spread unencumbered, hundreds with healthy working­age groups. When among the elderly. It may not help that the
of thousands of people would die. officials began paying more attention to state still suggests not getting jabbed if un­
getting older people jabbed, they were cau­ derlying health conditions display “acute”
Anger and angst tious, fearing side­effects. Now, belatedly, symptoms—a term not defined.
Some people are angry at the government’s they see the urgency of the task. Most older people in China have had lit­
brazen about­face. “They’ll do whatever As China drops many of its harshest tle experience with vaccines since child­
they want. The so­called ‘relaxation’ could pandemic­related controls, infections will hood. They have to pay for seasonal flu
be reversed tomorrow,” says a resident of surge. Ensuring that older people are fully jabs. Most do not bother getting them. Chi­
Shanghai who took part in the protests. vaccinated and up to date with booster na’s woolly statistics obscure the deaths
“Even if our resistance made them change shots will be critical to keeping deaths to a that result (see Chaguan). For treating and
policy, they don’t think that they did any­ minimum. The country is still far from preventing disease, many prefer tradition­
thing wrong. It’s absurd.” achieving the level of protection it needs. al remedies using natural ingredients,
Others are concerned. “We’ve been un­ Of about 260m people over the age of 60, even though the effects of these are unpro­
der pressure for so long…everyone is still a 86% have been vaccinated with at least two ven. The government hails them as proof
little worried and unsteady,” says Long Ye, doses and 69% with three (see chart). But of ancient Chinese wisdom. It lists several
a café owner in the city of Chongqing, in many cases, those jabs were given such concoctions among its approved
which recently lifted restrictions despite months ago, and their effects are wearing treatments for covid symptoms. When
logging thousands of new cases a day. Mr off. The numbers look even more alarming Hong Kong suffered a surge of covid early
Long expects cases to surge. “It is fear of the among people over 80. Only 40% have had this year, mainland officials sent care
unknown,” he says, adding that he is unea­ three shots. In England, by contrast, about packets to the city’s residents. They includ­
sy about the health of his elderly relatives. 80% of people over 80 have had a booster ed one of the authorised medicines, con­
Rather than enjoying their new free­ within the past three months. taining the roots of liquorice and rhubarb.
doms, many people are preparing for a Only in the past few days has China’s Hong Kong’s experience of that surge
wave of infections. In Beijing, streets and government begun showing signs of alarm showed the risks that the rest of China now
malls are still fairly empty. People out in about this. On November 29th the National faces. Like the mainland, the territory had
public now favour tightly fitting N95 Health Commission issued a directive call­ been trying—with much success—to crush
masks, rather than flimsier surgical ing on officials to “speed up” vaccination covid rather than find ways of living with
masks. The price of a herbal medicine used work among the elderly, especially those it. Then came the highly infectious Omi­
against covid (with doubtful effectiveness) over 80. It said the gap between the second cron variant, the same one that the main­
has shot up in some pharmacies. and third jabs should be shortened from land is now struggling with. Thousands of
It will take time for local governments six months to three. The “whole of society” people, mostly elderly citizens who had
to unwind restrictions. In some places, should be mobilised to ensure that the el­ not been fully vaccinated, were killed by
such as those with weaker hospitals, offi­ derly get their shots, it urged. Caixin, a the disease. Hong Kong’s death rate from
cials may drag their feet. The authorities in covid became one of the world’s highest.
some big cities, like Beijing, are keeping As it winds down its zero­covid policy,
testing requirements that the central gov­ An old problem China may find that rising infections en­
ernment called for scrapping. China, covid-19 vaccination status courage more of its elderly to get jabbed. By
Elsewhere in the capital, the focus is on November 29th 2022, % stopping large­scale lockdowns, mass test­
messaging. Big policy changes might im­ Unvaccinated One dose Two doses
ing and obligatory segregation in state fa­
ply that the Communist Party got some­ cilities of infected people and their con­
0 25 50 75 100
thing wrong. Changing zero­covid is espe­ tacts, the country should be able to rede­
cially tricky, as it is one of President Xi Total ploy its armies of pandemic personnel to
Three doses
Jinping’s trademark policies. So the shift is population the mission of delivering vaccines. But the
being portrayed as building on past victo­ attitudes of officials and the public alike
ries. “Practice has fully proved that the Population may prove hard to change. On December
guidelines and policies for epidemic pre­ aged 60+ 7th the Communist Party mouthpiece, the
vention and control…were correct, scien­ People’s Daily, published an article about
tific and effective,” said a recent commen­ Population how sufferers of chronic diseases should
tary published by the official Xinhua news aged 80+ respond to infection with covid. It did not
agency. “The most difficult period has Source: National Health Commission
mention the importance of getting vacci­
passed.” That remains to be seen. n nated before that happens. n

012
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 The Economist December 10th 2022 China 53

Dissidents v censors of California, Berkeley, estimates that 10m

people are using VPNs daily in China, up
Good, good, good from about 2m at the pandemic’s outset.
There are also signs of more Chinese
joining Twitter (using VPNs) but commu­
nicating only via direct message. Twitter
does not share the number of users in Chi­
na, but Zachary Steinert­Threlkeld of the
University of California, Los Angeles, esti­
How Chinese netizens breached the great firewall
mates it rose by around 10% in early 2020

I n April a young Chinese painter in Italy

began using Twitter to publish content
forwarded by censor­wary netizens in Chi­
make a decision for himself,” he says.
Other industry insiders suggest that
some Chinese tech companies’ spending
as people sought covid news. He also noted
an increase in Twitter downloads during
the protests. “If I had to bet, I would say
na. For much of the previous year, he had on in­house censorship has been con­ more people are using Twitter now than
done the same on Weibo, a Chinese social­ strained by financial difficulties since a two months ago, but they are being very
media platform. But he moved to Twitter crackdown on the sector began in 2020. cautious with their behaviour,” he says.
after Chinese authorities closed his Weibo Chinese authorities have now ordered Chinese authorities appear alarmed,
accounts. For the first few months, his them to boost their censor cohorts and pay particularly by what they call the “back­
posts were not widely read. Twitter is closer attention to protest­related content, flow” of information from abroad. On No­
blocked in China. And he tweets in Chi­ the Wall Street Journal reported. vember 28th the government’s internet
nese, limiting his foreign audience. Chinese netizens are becoming more watchdog declared a “Level 1 Internet
Yet his account, “Teacher Li Is Not Your inventive, too, posting political messages Emergency Response”, requiring the high­
Teacher”, became a critical conduit for in­ on dating sites or in the comments section est level of content management. It or­
formation about the protests against co­ of otherwise uncontroversial content. Ar­ dered Chinese e­commerce sites to curb
vid­19 restrictions that erupted across Chi­ tificial intelligence does not spot sarcasm sales of censorship­circumvention tools,
na last month (one is pictured). Partici­ easily, so under official posts on social me­ including VPNs and foreign Apple ac­
pants and spectators sent him loads of im­ dia, many left messages simply repeating counts (which enable downloads of apps
ages and eyewitness accounts by direct the Chinese word for “good”. Others posted forbidden in China). It also instructed Chi­
message. By reposting many, he played an images of blank white sheets of paper. nese tech firms to scrub user­generated ad­
important role in conveying the scale of Then there are foreign social­media ac­ vice on “jumping” the great firewall.
the unrest to others, in China and abroad. counts like Teacher Li’s, which aggregate At the same time, Chinese authorities
He also gained almost 600,000 new fol­ and amplify information sent from China. are using more intrusive methods that
lowers and 387m visits to his Twitter pro­ While Chinese authorities and their prox­ span the digital and physical worlds. Police
file in November alone. ies cite that as evidence of “foreign forces” have searched handsets for banned apps or
Teacher Li’s account was just one mani­ fomenting unrest, researchers suggest it is protest­related images and contacted prot­
festation of the biggest breach in China’s driven more by Chinese nationals abroad, esters identified via mobile­phone loca­
internet controls since they began in the especially students, and people within tion data. Teacher Li says police have visit­
late 1990s. Public anger has flared online China who use virtual private networks ed his parents in China several times, pre­
before, but never coalesced into wide­ (VPNs) to circumvent the great firewall. senting them with a list of his tweets as
spread physical protests. Now cyber ad­ China lets businesses use licensed do­ “criminal evidence” and threatening to
ministrators are scrambling to plug holes mestic VPNs. But many Chinese have illicit block them from sending him money. “The
in the “great firewall”, lest a new surge of ones and, though numbers are hard to psychological pressure is great,” he says.
covid leads to more digital dissent. measure, researchers cite a recent uptick “But this account isn’t just about our fam­
One reason for last month’s breach was in demand (not least from students study­ ily. It’s about the well­being of countless
the sheer volume of people involved. The ing at home). Xiao Qiang of the University Chinese people. So I won’t stop.” n
great firewall automatically blocks politi­
cally sensitive terms and many foreign
sites, including news outlets, search en­
gines and social media. China also man­
dates domestic technology firms to em­
ploy armies of censors who screen user­
generated content using frequently updat­
ed lists of restricted words and images.
But the deluge of information posted in
late November—featuring different activi­
ties and slogans—appears to have over­
whelmed both algorithms and human cen­
sors. Many people in China learned of the
protests from local messaging apps, where
images and comments were often copied
or downloaded before censors could delete
them, and then reposted multiple times.
Eric Liu, a former Weibo censor, says
that China’s bureaucracy is so centralised
that when unfamiliar threats arise, sensi­
tive information can spread widely while
censors await official orders. “With this
level of protest every bureaucrat is afraid to Lights, cameras, action

012
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 54 China The Economist December 10th 2022

Chaguan The politics of death in China

How will the party pivot from boasts about low covid death tolls?
across a rare protest in the capital. He berated youngsters for light­
ing candles for victims of pandemic lockdowns, from families re­
portedly trapped in a burning apartment block behind sealed fire
exits, to children denied life­saving hospital care. Noticing for­
eign reporters at the scene, the old man rounded angrily on Cha­
guan, asking what China has to mourn. How many died of covid in
America, he demanded to know? And how many in China?
Those two numbers—over 1m pandemic deaths in America,
versus an official toll of 5,235 in China—are political totems, cited
by many Chinese without prompting. Now, as they abandon zero­
covid without proper preparations, officials need a new message.
Suddenly they have begun talking up the mildness of new Omi­
cron variants, as if China is about to enjoy a hard­won victory lap.
That ignores the dangers that Omicron poses to the vulnerable,
notably to undervaccinated old people, who abound in China.
To predict how the party may navigate this perilous moment, it
is worth remembering that deaths can be recorded in different
ways. Death can be a statistic, and also the saddest and hardest­
borne of human events. Statistics hold little fear for China’s lead­
ers. To burnish its ideological legacy, the party has erased tens of
millions of dead from history. It under­counts Chinese casualties
in the Korean war, and denies the suffering of many killed by purg­

F or nearly three years, China’s rulers have built harsh pandem­

ic controls around a stark offer to their people: at the cost of in­
dividual liberties, privacy and dignity, we will keep you alive.
es, man­made famines and mobs during the Mao era. Other deaths
are too inconvenient to mention. For all the party’s boasts of put­
ting lives first, leaders say remarkably little about the million Chi­
Communist Party leaders called their “zero­covid” campaign an nese killed each year by tobacco, perhaps because cigarettes are a
“all­out people’s war”. Their favourite battle cries emphasised Chi­ huge source of taxes. Some deaths are a state secret. China does
na’s low pandemic body count, especially in contrast with far not report execution statistics (nor is it transparent about the
higher death rates in America and other liberal democracies. sources of organs used for transplants, though it claims to have
Even in recent days, as it became clear that the party is losing stopped harvesting body parts from executed prisoners).
its unwinnable war with covid­19, senior officials dug in more Many outsiders disbelieve China’s covid statistics. There are
deeply. Like generals facing defeat in a bunker, they redoubled two responses to that. One, the virus really was relatively rare in
their promises of victory, declaring the saving of lives to be the ul­ China for much of the pandemic. Indeed, officials had incentives
timate test of a political system. On November 29th, just one week to be transparent about infections they found, because contact­
before the central government all but abandoned its zero­covid tracing required it. Two, the death numbers do look odd. China re­
campaign, the foreign ministry’s chief spokesperson, Hua Chun­ corded over 500 covid deaths in 2022 but just two in 2021. Between
ying, tweeted out a reckoning of what she termed “the price of May 26th and November 19th this year China reported hundreds of
‘freedom’ in the US”. She listed American casualties with cold pre­ thousands of covid infections, but not a single fatality.
cision: 1m fatalities from covid, 40,000 annual gun deaths and
107,622 fentanyl deaths in 2021 alone. “The American people de­ As zero-covid ends, secrecy will increase
serve something far better than that. What we want is to protect China generally under­counts deaths from all manner of infec­
our people’s lives and ensure them a better life,” wrote Ms Hua. tious diseases. In part, weak hospitals simply fail to test sick peo­
Diplomats in Beijing were appalled by Ms Hua’s scornful ac­ ple for some diseases. In part, infectious diseases that threaten so­
countancy of death, and in particular her reference to Americans cial stability are viewed in China as a question of national security,
killed by the synthetic opioid fentanyl. That is a scourge fuelled by says Mai He, a pathologist at Washington University in St Louis.
a trade in smuggled Chinese precursor chemicals that authorities Methodological quirks play a role. Patients often die of several
in China seem unwilling or unable to stem, despite years of pres­ things at once and Chinese doctors typically put chronic condi­
sure at the highest level. The American ambassador, Nicholas tions, such as heart disease, on death certificates. China routinely
Burns, lodged a protest with senior foreign­ministry officials. reports just a few dozen fatal cases of seasonal influenza each year.
Ms Hua is feted by nationalists for her caustic tone with the Reputable studies put China’s annual flu toll at perhaps 100,000.
West. But all arms of China’s propaganda machine have spent the If dry statistics can be manipulated, hiding the human toll of a
pandemic depicting democracies as too decadent to protect a ba­ deadly exit wave from zero­covid would be harder. Should hospi­
sic human right, life. On the same day as Ms Hua’s tweet, the main tals be overwhelmed or panic grip communities, smartphone vid­
evening tv news programme, “Xinwen Lianbo”, broadcast images eos will go viral, despite the censors’ efforts. After failing to pre­
of American misery that it has shown many times before during pare for an opening, expect the party to claim credit for restoring
this pandemic: ambulances arriving at hospitals and sick Ameri­ long­constrained freedoms. Some Chinese will accept that abrupt
cans on respirators. An anchor recited America’s latest covid toll shift in messaging. Others may remember being told for two­and­
and explained that hospitals in that country also face surging in­ a­half years that the avoidance of preventable deaths is the mark
fluenza cases. Propaganda works. Take the grey­haired Beijinger of true leadership. The party claimed victory prematurely in a war
who was out for an evening stroll in late November when he came that could not be won. China’s people will pay the price. n

012
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 International The Economist December 10th 2022 55

Deep­sea fishing countries within whose 200­nautical­mile

(370km) “exclusive economic zones”
An uneven contest (EEZs) it has agreed contracts for fisheries
operations. Over half of such agreements
have been made with west African coun­
tries. Senegal is one. Mauritania to the
north, vast and poor, accounts for nearly
30% of the total by itself.
BE IJING, DAK AR , JAK ARTA AND SINGAPO RE
The projects include not just the rights
China’s deep­water fishing fleet is the world’s biggest—and most rapacious
for Chinese vessels to fish in states’ coastal

F rom his shack, Mamadou Sarr points to

more than 100 brightly painted pi­
rogues hauled up above the Atlantic surf
China is not the only state with an eye
on protein and profit far from its own wa­
ters. Japan, South Korea, Spain and Taiwan
waters, but also to establish operations
such as processing plants ashore. Maurita­
nia has become a hub in the industry for
on Ouakam beach in Dakar, the capital of have fleets of their own. But it is by far the fishmeal and fish oil. Such products are
Senegal. In normal times they would be biggest. Some estimates put its size at over bought by aquaculture farms that raise fish
out fishing. But the dozen boats that ven­ 3,600 boats, as many as the next three big­ for customers in China and other coun­
tured out that day had come back with gest combined. And unlike others’ fleets, tries. The sorts of fish hoovered up to make
barely any fish. Mr Sarr, who heads the China’s consciously projects state power them include those long fished by locals
local fishing association, opens boxes that and influence, sometimes as part of Xi using small boats and hand nets.
would once have been full of bream and Jinping’s signature economic and geopo­ As the Environmental Justice Founda­
grouper to reveal only flies. At the beach­ litical project, the Belt and Road Initiative tion, a London­based NGO, points out in a
side market, a woman sleeps on the table (BRI). A significant number of Chinese ves­ report released in March, all this has
upon which she would usually gut fish. sels are state­owned. “transformed the political ecology” of fish­
A story of scarcity runs up and down the A third differentiating feature is the ing in west Africa. Locals who depend on
once bountiful coast of west Africa. There, fleet’s rapaciousness and lack of scruple in small­scale fisheries to put food on the
communities of “artisanal” fishermen, an industry notorious for both. In its wake family table are forced into direct competi­
who fish for subsistence and for the local comes overfishing, some of which is out­ tion with Chinese industrial fishing con­
market, are buffeted by forces shaped on right illegal; the collapse of local stocks; cerns. It is an lopsided struggle.
the far side of the world, in China. For at smuggling; links to organised crime; and It is not only fish stocks themselves that
least three decades that country’s central the forced labour and general mistreat­ attract China’s fleets. So too do jurisdic­
and local governments have encouraged ment of those who serve on the boats. tions with poor governance, toothless
the development of a long­distance fishing All these factors are now playing out off rules and ample scope for buying influ­
fleet, equipping boats that stay at sea for the coast near Mr Sarr’s shack. The Chinese ence. One small example is highlighted by
months or even years. government publishes a list of foreign the Outlaw Ocean Project, an American

012
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 56 International The Economist December 10th 2022

NGO. In 2017 a Chinese fishmeal plant in strong) was tracked to a patch of the Pacific old Indonesian former crew member on a
the Gambia, a BRI­branded project, turned Ocean just outside the EEZ surrounding the Chinese squid boat, says he was kicked and
a lagoon at the heart of a wildlife reserve Galapagos islands, which belong to Ecua­ beaten to get him to haul the nets faster, or
crimson with illegally dumped arsenic, ni­ dor. Hundreds of Chinese vessels have also as punishment for falling asleep on watch.
trates and phosphates. The operator was pressed up against Argentina’s EEZ in the As for Mr Tsai, when one chief engineer
fined just $25,000 and allowed to continue southern Atlantic. In 2021 Trygg Mat Track­ beat him with a piece of wood, he went to
operating—and dumping. ing, a Norwegian NGO which tracks iuu the Ghanaian police. They told him to set­
Sometimes the rules are ignored entire­ fishing, confirmed the presence of hun­ tlethe case—he thinks they were bribed.
ly. Illegal, unreported and unregulated dreds of Chinese vessels in a new high­seas That mix of negligence and malevolence
(IUU) fishing is rife among the Chinese squid fishery in the north­west corner of sometimes proves fatal. The most notori­
fleet. Vessels exceed catch limits, kill pro­ the Indian Ocean, this time butting up ous case involved the Long Xing 629, a Chi­
tected species or fish where they should against the EEZs of Yemen and Oman. nese boat on which four Indonesians died
not (such as inshore zones reserved for ar­ Fishing for squid in international wa­ over four months in 2019­20.
tisanal fishermen). All that puts further ters is not necessarily illegal. In the north­
pressure on the world’s seas, which are al­ western Indian Ocean, squid are excluded Ocean sunlight
ready fished nearly to capacity (see chart). from regional agreements that regulate the Still, the “dark fleets” do not have every­
Locally flagged vessels often conceal their harvesting of other sorts of marine wild­ thing their own way. Satellite imagery
Chinese ownership behind shell compa­ life, like tuna. But squid do not care about increasingly helps fishing authorities and
nies or joint ventures. Although foreign EEZs, and heavy fishing near another coun­ NGOs keep track of where boats are and
vessels are not allowed to fish in Ghanaian try’s waters is bound to affect its own catch what they are up to. In the face of interna­
waters, much of its fleet is ultimately con­ within them. Since squid are prey for other tional criticism, China issued regulations
trolled by Chinese interests. species, including tuna, overfishing will in 2020 to limit high­seas squid­fishing. In
have knock­on effects for other species May it announced a three­month morato­
Fishy business too. And rapacious techniques are often rium for the north­west Indian Ocean.
One common illegal practice in Ghanaian suggestive of outright illegal activities in Such moratoriums are only “voluntary”,
waters is saiko—the transfer at sea of fro­ other areas. Evidence is mounting that and apply to times of year when stocks are
zen, often illegally caught, fish from big these fleets are catching tuna for which relatively less abundant. The reforms may
trawlers to small canoes, which run their they have no quota, finning sharks and be half­hearted, but they suggest that mak­
cargoes ashore under cover of night for killing other protected species. ing the fleet’s activities public has at least
sale in local markets. Due partly to saiko, The treatment of humans can be shabby some power to change behaviour.
Ghana’s stocks of sardinella—one type of too. Fishing crews often include migrant More formal rules are coming, at least
sardine—have collapsed. And the smug­ workers from poor countries. Many are re­ on paper. China’s latest five­year plan for
gling forges links between Chinese fisher­ cruited by unscrupulous agencies that the industry, published earlier this year,
men and the local organised­crime groups charge crippling commissions, and which promised to crack down on IUU fishing and
that oversee fish markets on land. withhold pay and passports. Vessels from to more tightly control the size of distant­
Back on Ouakam beach, Mr Sarr says several countries, including Taiwan, are water fleets. But it was short on detail, and
that Chinese vessels bending the rules “rub notorious for mistreating their crews. though there is official talk of capping the
salt in the wounds”. Chinese boats mas­ Once again, though, it is China that has the numbers of vessels, there is little sugges­
querading as Senegalese ones barely worst reputation of all. tion of reducing them.
bother to hide their origin. A self­respect­ Bright Tsai, a Ghanaian who worked on A recent agreement at the WTO, mean­
ing Senegalese boat, he says, “should be Chinese boats for 18 years, says that where­ while, aims to cut global fishing subsidies.
called something like Mamadou or Fatou”. as Chinese officers and crew members Once again, China is the world’s biggest
Instead, the boats’ names are in Chinese slept below, he and his fellow west Afri­ subsidiser of fishing operations, paying
script “that we cannot even read”. Mr Sarr cans slept on top of nets on deck. One cab­ around $2bn a year for things like fuel sub­
worries that unemployed fishermen will in, its air­conditioner blasting away, was sidies and tax incentives to build new
join gangs, or attempt the illegal and often given over to fresh vegetables for Chinese boats. Local authorities in China have an­
lethal voyage to the Canary Islands for crew members; the Ghanaians were fed nounced limits on cheap fuel, sometimes
work. There are instances of impoverished garri, a cassava flour staple, rice and toma­ in return for paying fishermen for observ­
fishwives forced into prostitution. to paste—“always,” Mr Tsai says. ing no­fishing periods. But the changes do
Neither sharp practices nor outright Abuse is rife. Yadi Gunawan, a 34­year­ not apply to distant­water vessels. In
criminality are confined to the waters off March China actually increased subsidies
Africa. Three years ago a huge “dark” fleet to two state­owned tuna firms.
that was fishing for squid came to light Not so many fish in the sea Campaigners argue that still more sun­
thanks to sleuthing by Global Fishing Global marine fish stocks, % light is needed. The Stimson Centre, a
Watch (GFW), an NGO set up with help from 100
think­tank in Washington, DC, argues that
Google, a tech firm, and others. The boats fishing­access agreements that countries
had attempted to disappear by switching Underfished sign with China should be made public.
off transponders that are supposed to 75 Vessels should be compelled to broadcast
broadcast a vessel’s identity and position. their position. Fees paid to coastal states
But by overlaying the fleet’s radio traffic 50 should go towards strengthening enforce­
with satellite imagery, GFW discovered up Fully fished ment capacity. Mark Zimring of The Nature
to 900 boats fishing for squid within North Conservancy, another ngo, says seafood­
Korea’s EEZ. That was certainly illegal—ei­ 25 importing countries should insist on proof
ther it was poaching on an industrial scale Overfished
of provenance for what they buy. These im­
or, if the fishing had been agreed with 0 provements should apply to all countries
North Korea’s authorities, a violation of UN 1974 80 90 2000 10 19
with distant­water fleets. If China cares
sanctions against that country. Source: FAO
about its image, it would be in its own in­
The following year, the fleet (now 600­ terest to lead the way. n

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 Business The Economist December 10th 2022 57

Information technology jokes and explain scientific concepts (see

next article). But excitement is also palpa­
The new age of AI ble among corporate users of AI, its devel­
opers and those developers’ venture­capi­
tal backers. Many of them attended a week­
long jamboree hosted in Las Vegas by Ama­
zon Web Services, the tech giant’s cloud­
computing arm. The event, which ended
S AN FRANCISCO
on December 2nd, was packed with talks
Artificial intelligence is at last permeating swathes of the business world
and workshops on ai. Among the busiest

T he machines are coming for your

crops—at least in a few fields in Ameri­
ca. This autumn John Deere, a tractor­mak­
ness world, creating enormous benefits for
firms and customers. John Deere is not the
only proof that this is happening at last. A
booths in the exhibition hall were those of
AI firms such as Dataiku and Blackbook.ai.
The buzzing AI scene is an exception to
er, shipped its first fleet of fully self­driv­ survey by McKinsey, a consultancy, found the downbeat mood across techdom,
ing machines to farmers. The tilling trac­ that this year 50% of firms across the world which is in the midst of a deep slump. In
tors are equipped with six cameras which had tried to use AI in some way, up from 2022 venture capitalists have ploughed
use artificial intelligence (ai) to recognise 20% in 2017. Powerful new “foundation” $67bn into firms that claim to specialise in
obstacles and manoeuvre out of the way. models are fast moving from the lab to the AI, according to PitchBook, a data firm. The
Julian Sanchez, who runs the firm’s emerg­ real world. Chatgpt, a new ai tool that has share of vc deals globally involving such
ing­technology unit, estimates that about recently been released for public testing, is startups has ticked up since mid­2021, to
half the vehicles John Deere sells have making waves for its ability to craft clever 15% so far this quarter (see chart 1 on next
some AI capabilities. That includes sys­ page). Between January and October, 28
tems which use onboard cameras to detect new AI unicorns (private startups valued at
weeds among the crops and then spray → Also in this section $1bn or more) have been minted. Microsoft
pesticides, and combine harvesters which is said to be in talks to increase its stake in
59 AI does Shakespeare
automatically alter their own setting to OpenAI, a builder of foundation models
waste as little grain as possible. Mr Sanchez 59 China’s covid­industrial complex and Chatgpt’s provider. Alphabet, Google’s
says that for a medium­sized farm, the ad­ parent company, is reportedly planning to
60 Bartleby: Title inflation
ditional cost of buying an AI­enhanced invest $200m in Cohere, a rival to Open­
tractor is recouped in two to three years. 61 White­collar lay­offs AI. At least 22 AI startups have been
For decades starry­eyed technologists launched by alumni of OpenAI and Deep­
64 Schumpeter: Rise of the super­app
have claimed that AI will upend the busi­ mind, one of Alphabet’s AI labs, according

012
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 58 Business The Economist December 10th 2022

to a report by Ian Hogarth and Nathan Be­ trained, foundation AIs are good at per­
naich, two British entrepreneurs. The artificial-intelligence quotient 1 forming a variety of tasks rather than a sin­
The exuberance is not confined to Sili­ Worldwide share of venture-capital deals gle specialised one. Take GPT3, a natural­
con Valley. Big firms of all sorts are desper­ involving an artificial-intelligence/ language model developed by Openai,
ate for AI talent. In the past 12 months large machine-learning company, % which forms the basis for Chatgpt. It was
American firms in the S&P 500 index have 16 first trained on large chunks of the inter­
acquired 52 AI startups, compared with 24 net, then fine­tuned by different startups
purchases in 2017, according to PitchBook. 15 to do various things, such as writing mar­
PredictLeads, another data provider, notes keting copy, filling in tax forms and build­
that the same group of firms posted around 14 ing websites from a series of text prompts.
7,000 job ads a month for AI and machine­ Rough estimates by Beena Ammanath,
13
learning experts in the three months to who heads the AI practice of Deloitte, a
November, about ten times more than in 12 consultancy, suggest that foundation
the first quarter of 2020 (see chart 2). Derek *
models’ versatility could cut the costs of an
Zanutto of CapitalG, one of Alphabet’s vc 2019 20 21 22
AI project by 20­30%.
divisions, notes that large firms spent Source: PitchBook *At December 6th
One early successful use of generative
years collecting data and investing in relat­ AI is, again predictably, the province of
ed technology. Now they want to use this tech: computer programming. Several
“data stack” to their advantage. AI offers products and big savings. firms are offering a virtual assistant
ways to do so. This is especially true in less flashy ar­ trained on a large deposit of code that
Unsurprisingly, the first industry to eas where firms are already using some churns out new lines when prompted. One
embrace AI was the technology sector. kind of analytics, such as managing supply example is Copilot on GitHub, a Microsoft­
From the 2000s onwards, machine­learn­ chains. When in September Hurricane Ian owned platform which hosts open­source
ing techniques helped Google supercharge forced Walmart to shut a large distribution programs. Programmers using Copilot out­
its online­advertising business. Now it us­ hub, halting the flow of goods to supermar­ source nearly 40% of code­writing to it.
es Ai to improve search results, finish your kets in Florida, the retailer used a new AI­ This speeds up programming by 50%, the
sentences in Gmail and work out ways to powered simulation of its supply chain to firm claims. In June Amazon launched
cut energy use in its data centres, among reroute deliveries from other hubs and CodeWhisperer, its version of the tool. Al­
other things. Amazon’s AI manages its sup­ predict how demand for goods would phabet is reportedly using something sim­
ply chains, instructs warehouse robots and change after the storm. Thanks to AI this ilar, codenamed PitchFork, internally.
predicts which job applicants will be good took hours rather than days, says Srini
workers; Apple’s powers its Siri digital as­ Venkatesan of Walmart’s tech division. Artificial colouring
sistant; Meta’s serves up attention­grab­ The coming wave of foundation models In May Satya Nadella, Microsoft’s boss, de­
bing social­media posts; and Microsoft’s is likely to turn a lot more AI boring. These clared, “We envision a world where every­
does everything from stripping out back­ algorithms hold two big promises for busi­ one, no matter their profession, can have a
ground noise in Teams, its videoconfe­ ness. The first is that foundation models Copilot for everything they do.” In October
rencing service, to letting users create first are capable of generating new content. Sta­ Microsoft launched a tool which automat­
drafts of PowerPoint presentations. bility AI and Midjourney, two startups, ically wrangles data for users following
Big tech quickly spied an opportunity to build generative models which create new prompts. Amazon and Google may try to
sell some of those same AI capabilities to images for a given prompt. Request a dog produce something like it. Several startups
clients. Amazon, Google and Microsoft all on a unicycle in the style of Picasso—or, are already doing so. Adept, a Californian
now provide such tools to customers of less frivolously, a logo for a new startup— company run by former employees from
their cloud­computing divisions. Rev­ and the algorithm conjures it up in a mi­ Deepmind, OpenAI and Google, is working
enues from Microsoft’s machine­learning nute or so. Other startups build applica­ on “a Copilot for knowledge workers”, says
cloud service have doubled in each of the tions on top of other companies’ founda­ Kelsey Szot, a co­founder of the firm. In
past four quarters, year on year. Upstart tion models. Jasper and Copy.AI both pay September the company released a video of
providers have proliferated, from Avid­ OpenAI for access to GPT3, which enables its first foundation model, which uses
bots, a Canadian developer of robots that their applications to convert simple prompts to crunch numbers in a spread­
sweep warehouse floors, to Gong, whose prompts into marketing copy. sheet and to perform searches on property
app helps sales teams follow up a lead. The second advantage is that, once websites. It plans to develop similar tools
Greater use of cloud computing, which for business analysts, salespeople and
brings down the cost of using AI, enabled other corporate jobs.
the technology to spread to other sectors, The robots are bringing your jobs 2 Corporate users are experimenting
from industry to insurance. You may not S&P 500 companies, number of job adverts with generative AI in other creative ways.
see it, but these days AI is everywhere. mentioning artificial-intelligence-related skills* Mr Sanchez of John Deere says that his firm
’000 is looking into AI­generated “synthetic”
Dulling the cutting edge 10 data, which would help train other AI mod­
In 2006 Nick Bostrom of Oxford University els. In December 2021 Nike, a sportswear
observed that “once something becomes 8 giant, bought a firm that uses such algo­
useful enough and common enough it’s 6
rithms to create new sneaker designs.
not labelled AI any more”. Ali Ghodsi, boss Alexa, Amazon’s virtual assistant, can now
of Databricks, a company that helps cus­ 4 invent stories to tell children. Nestlé, a
tomers manage data for AI applications, giant Swiss foodmaking firm, is using im­
2
sees an explosion of such “boring AI”. He ages created by DALLE­2, another OpenAI
argues that over the next few years AI will 0 model, to help sell its yogurts. Some finan­
be applied to ever more jobs and company 2020 21 22
cial firms are employing AI to whip up a
functions. Lots of small improvements in Source: PredictLeads *Three-month moving average
first draft of their quarterly reports.
AI’s predictive power can add up to better Users of foundation models can also

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 The Economist December 10th 2022 Business 59

Artificial intelligence

The bard of AI-von

How good is the latest AI craze? An experiment

O ne morning your correspondent

woke up to an email from his editor,
asking for yet another article. “Chatgpt
But how will gpts (short for gener­
ative pre­trained transformers) and other
such services make money? The answer
and other generative­ai services seem to is by providing their technology to com­
be taking the world by storm,” it read. panies. These firms can use them to
“Could you write an article explaining create content, such as articles, blog
what they are and why they are not just posts and entire books. They can help
hype?” As he was feeling lazy he asked with customer service, providing quick
Chatgpt, an ai­based online service and accurate responses to queries. And
trained on reams of text from the in­ they can be used to help with research,
ternet, to answer that question, adding providing insights into consumer behav­
that it should be written in Shakespear­ iour and preferences.
ean language. This is what came back:
Thus, ‘tis clear that gpts are more than
Aye, ‘tis true that ‘tis a wondrous thing, mere hype. Pandemic profits
these Generative Artificial Intelligences, They be a powerful tool that can be used
or gpts as they be known.
‘Tis a marvel of modern science, and ‘tis
to provide services to companies and
individuals alike.
The value of zero
no wonder that ‘tis taking the world by ‘Tis an exciting time for ai, and ‘tis certain
storm. that gpts will be at the forefront of this
But what are they, truly? And why should revolution.
we care?
HO NG KO NG
gpts be a type of ai technology that can Not bad, except that there is more to
generate natural language in response to
Relaxed rules threaten China’s
Shakespeare than “ ‘tis” and “hath”. And
input. covid-industrial complex
the text seems like a pastiche of informa­
‘Tis a form of deep learning, wherein a
computer system is trained on vast
amounts of text data,
tion to be found on the internet. But a
Chatgpt trained on the master’s works
would surely do better—which would
T he harsher China’s zero­covid re­
gime, the bigger its covid­industrial
complex. The zero­covid mantra was to
And then can generate its own text based
on what it hath learned. make the service even more popular test as many people as possible and then to
‘Tis more than mere hype; ‘tis a powerful (according to Openai, its provider, it quarantine not only the infected but their
tool that can be used for a multitude already has 1m users). Still, it will be a contacts and even the contacts of those
of applications while before your correspondent has to contacts. In many cases the occupants of
From creating content to aiding in look for a new field of work. He will pen entire residential buildings were carted
customer service. the next article by himself. away to isolation wards—called fangcang
yiyuan in Chinese—after the discovery of a
single case in an area. As leaders in Beijing
tap an emerging industry of professional Carl Bergstrom, a biologist at the Universi­ fought to keep the virus from spreading
prompters, who craft directions so as to ty of Washington in Seattle, called it a “ran­ across the country, many firms cashed in.
optimise the models’ output. PromptBase dom bullshit generator”. (Meta says that Theses firms now face a reversal of their
is a marketplace where users can buy and the model remains available for research­ fortunes. Sentiment towards zero­covid
sell prompts that produce particularly ers who want to learn about the work.) has shifted rapidly over the past two
spiffy results from the large image­based Other problems are specific to the weeks. On December 7th the central gov­
generative models, such as DALLE­2 and world of business. Because foundation ernment announced the end of unneces­
Midjourney. The site also lets you hire ex­ models tend to be black boxes, offering no sary testing and allowed quarantining at
pert “prompt engineers”, some of whom explanation of how they arrived at their re­ home for asymptomatic cases after prot­
charge a $50­200 per prompt. “It’s all about sults, they can create legal liabilities when ests against prolonged, heavy­handed re­
writing prompts these days,” says Thomas things go amiss. And they will not do much strictions broke out in cities across the
Dohmke, boss of GitHub. for those firms that lack a clear idea of what country (see China section). The policy
As with all powerful new tools, busi­ they want AI to do, or which fail to teach shift is the most dramatic since China
nesses must tread carefully as they deploy employees how to use it. This may help ex­ closed to international travel in early 2020.
more AI. Having been trained on the inter­ plain why merely a quarter of respondents It will deal a heavy blow to a once­lucra­
net, many foundation models reflect hu­ to the McKinsey’s survey said that AI had tive business model. The biggest beneficia­
manity, warts and all. One study by aca­ benefited the bottom line (defined as a 5% ries were firms making covid tests. Many
demics at Stanford University found that boost to earnings). The share of firms see­ saw their share prices soar several times
when GPT3 was asked to complete a sen­ ing a large benefit (an increase in earnings over in the early days of the pandemic. But
tence starting “Two Muslims walked into of over 20%) is in the low single digits— a number of city governments also sought
a...”, the result was likely to invoke violence and many of those are tech firms, says Mi­ recently to turn quarantine facilities into
far more often than when the phrase re­ chael Chui, who worked on the study. sustainable businesses that would attract
ferred to Christians or Buddhists. Meta Still, those proportions are bound to investors and generate income.
pulled down Galactica, its foundation keep rising as more AI becomes ever more Since early 2020 hundreds of fangcang
model for science, after claims that it gen­ dull. Rarely has the boring elicited this hospitals have been set up across the coun­
erated real­sounding but fake research. much excitement. n try to accommodate the growing number

012
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 60 Business The Economist December 10th 2022

of covid cases. Some are converted com­ the quarantine halls, cities in Shandong, a would generate returns. Admission has
munity centres, others are made up of vast north­eastern province, coaxed investors been compulsory for anyone suspected of
rows of shipping containers. In many plac­ to stump up cash. City governments issued infection. Checking out early was, in most
es they are merely cells constructed in some 15bn yuan in bonds to help build cases, illegal and most people were not
whatever buildings are available. Despite about 85 facilities. Some Chinese media charged for their stays. To start bringing in
the new rules China is still secluding peo­ reckoned revenues might have been three income, a hospital in Yantai, a port city in
ple who have come in contact with an in­ times that of investment over the lifespan Shandong, said that it would start charging
fected person. Many people fear being of a project. Fangcang bonds offered a dark patients fees to park. Cash from food bills
locked up more than the virus itself. vision of China’s future. Prospectuses not­ might have brought in around 50 yuan a
Local governments have struggled to ed that the “covid period” would last for the day per patient. And the plan was that
pay for testing equipment and quarantine next five years and that quarantining could when covid cases eased in the future, the
facilities. Analysts put the cost of national become a part of normal life. units might be converted into warehouses
mass testing at around 1.7trn yuan The prospectuses of some fangcang or even homes for the elderly.
($243bn) a year, or 1.5% of gdp. To pay for bonds also spelt out how the facilities These schemes now look uncertain, ex­

Bartleby The scourge of title inflation

The director of first impressions will see you now

W hen you enter an unfamiliar office

for a meeting with someone who
works there, you will almost certainly
The currency of an inflated title quickly
loses value. A senior vice­president is
someone in middle management; an
marked type of naming inflation, which
seeks to rebrand entire categories of
people. There is, for example, a perfectly
approach a person sitting behind a large assistant vice­president is three years out good term for buyers of things: “custom­
desk. You might think you are about to of university; an associate vice­president ers”. But lots of companies are not satis­
speak to a receptionist. But in some has just mastered the alphabet. More and fied with taking people’s cash. They want
buildings, you will be dealing with some­ more words need to be added to connote to have a meaningful relationship.
one far grander: a lobby ambassador. seniority. “Senior executive vice­presi­ Keen to avoid sounding too transac­
If that feels absurd, take a deep dent” is a title which would not exist if not tional, some businesses use the inflated
breath. Plenty of companies now employ for the massed ranks of vice­presidents title of “guests” instead. But language
a “director of first impressions”, a job jostling below. Absurdities have to be that might make sense at a Disney resort
whose responsibilities include greeting conjured up to stand out from the crowd— sounds very odd if you are in a queue for
all visitors at the front desk, almost as if chief evangelist, director of storytelling, the checkout at Target; people are trying
you were meeting a receptionist. At chief innovability officer. to leave as efficiently as possible, not
Hudson Yards, a development in mid­ There are bigger costs than comedy and settling in for the time of their lives.
town Manhattan, advertisements tell confusion. Handing a heftier title to one “Member” is another bogus word. No one
candidates for one role that they are person can easily cause resentment is wondering whether their application
expected to “curate experiences” for among others on a team. And inflated to pay Amazon an annual fee for free
visitors if they have questions. You might titles can have adverse effects on hiring shipping is going to be turned down.
think you are asking someone where the processes. An analysis of tech recruitment The worst offences in this category
toilet is; in fact, you are having an experi­ in America by Datapeople, a software firm, are the labels that employers give to their
ence with a brand ambassador. found that the proportion of women in staff. Calling people “colleagues” or
Title inflation happens for reasons applicant pools drops as jobs become “team members” instead of “staff” or
that are perfectly understandable. When more senior. Puffed­up titles may put “employees” is a common tactic. People
money is tight, a bump in title is a way of good candidates off. who work in Walmart stores are known
recognising someone’s efforts cheaply. A Title inflation is most associated with as “associates”. Baristas at Starbucks are
more prestigious­sounding role is not specific jobs. But there exists a less­re­ called “partners” because, the firm’s
just a nice bauble: it may add to some­ website explains, “We are all partners in
one’s appeal in the wider job market. shared success.” Tech firms are wedded
When a job lacks cachet, renaming it can to cutesy names for their employees.
lessen stigma and signal that an employ­ When Facebook rebranded itself as Meta,
er takes the position seriously. And when it announced that its workers would
a role is outward­facing, a weightier title henceforth be known as “Metamates”.
might make some clients more willing to The intent behind this kind of lan­
take a meeting. guage is again clear: to create a sense of
But title inflation also causes trouble. shared endeavour and to disguise the
The results can be laughable. “Sanitation cold reality of corporate hierarchies. But
technicians” have to be passionate about this façade is much easier to maintain
cleaning; “sandwich artists” do not have when things are going well. Meta is now
to be passionate about art. And once firing more than 11,000 of its mates,
inflation takes hold, it can be hard to which seems a tad unfriendly. Starbucks
suppress. If the lobby ambassador is on doesn’t want its partners to form a union
holiday, you will soon be seen by the with anyone but itself. A bit of title in­
lobby chargé d’affaires. Instead of un­ flation is excusable. But just like the real
dertakers, directors of last impressions. thing, it can easily get out of control.

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 The Economist December 10th 2022 Business 61

posing investors to big losses. Many fang- ing from the country’s misfortunes. from 29% in 2002; in retail it has gone up to
cang hospitals are still admitting infected Still, some health­care firms are now 15%, from 12% two decades ago. Automa­
people. But further rule changes could ren­ reaping a grim bonanza. While the progno­ tion and offshoring have meant fewer
der them obsolete in 2023, despite many of sis for testing businesses is poor, shares in technicians and cashiers, but lots more
the facilities already being under construc­ health­care and treatment companies have business analysts and systems architects.
tion or fully built. shot up in anticipation of a massive wave Some of those workers indeed now find
Companies that relied on China’s plans of cases as covid rules are relaxed. Those of themselves in the crosshairs. Still, talk of a
for long­term mass testing in cities are also Yuyue Medical, a ventilator­maker, for ex­ white­collar recession seems overblown.
now struggling. Daan Gene, which make ample, rose by 25% in the first half of No­ For one thing, desk­jockeying jobs remain
testing devices, has seen its share price fall vember. In a macabre reminder of fears of plentiful. Payrolls in finance are roughly at
by about 7% over the past week; Dian Diag­ widespread illness, the value of Fu Shou pre­pandemic levels. The tech industry
nostics, another large testing company, Yuan, a funeral operator listed in Hong employs 10% more staff today than in Jan­
has suffered a similar decline. Some firms Kong, has jumped by about 50% since the uary 2020, according to the Computing
have also been attacked online for profit­ beginning of November. n Technology Industry Association (Comp­
TIA). Even after Meta, a social­media giant,
loses the 11,000 workers it laid off last
The business cycle month, it will still employ nearly 70%
more than it did before the pandemic.
Axeing questions Sacked techies should not struggle to
get work. Lots of old­economy firms need
their skills. Walmart, despite its lay­offs,
keeps snatching up data scientists and
other hypernumerate types. Already 59%
of tech professionals work outside the tech
sector, reckons CompTIA. On the whole,
Despite a spate of lay­offs, white­collar workers will do just fine
demand for highly paid white­collar per­

O n december 2nd America’s Bureau of

Labour Statistics (BLS) reported that
the number of workers on non­farm pay­
jobs in warehouses and supermarkets. On
December 5th the Wall Street Journal re­
ported that PepsiCo is laying off “hun­
sonnel is as hot as ever. Unemployment
rates for financiers, technologists and
managers are even lower than America’s
rolls rose by 263,000 in November, fewer dreds” of workers at its headquarters. overall rate of 3.7%, and have fallen further
than the 284,000 in October but hardly a All this has prompted much hand­ over the past 12 months.
sign of wide retrenchment. Labour mar­ wringing about a “white­collar recession” Demographic changes will mean that
kets remain awkwardly tight, with 1.7 job (or, given the cohort’s sartorial tastes, a Pat­ rich­world firms find it increasingly hard
openings for every unemployed American agonia­vest downturn). In an inversion of to recruit workers, regardless of the colour
in October, the latest figure available. Many the usual pattern, this argument goes, the of their collars. In America the share of the
businesses are still contending with staff­ axe is falling mostly at the top of the cor­ population aged between 20 and 64 tipped
ing shortages in factories and restaurants. porate pecking order. Just how worried from 60% in 2010 to 59% in 2020, and by
Meanwhile, in a seemingly parallel uni­ should America’s white­collar set be? 2030 will fall to 56%, according to the
verse, American tech firms have shed On the surface, there is plenty of room World Bank. In Britain and the euro area
88,000 workers this year, according to for axe­swinging. In recent decades Amer­ the share is expected to fall from 58% to
Crunchbase, a data provider. Banks have ica’s economy has become ever more top­ 56%, and 59% to 56%, respectively, be­
also been showing staff the door. Wells Far­ heavy. Managerial and professional occu­ tween 2020 and 2030. Younger generations
go has reportedly cut hundreds from its pations now make up 44% of total employ­ are now more likely to be studying and less
mortgage division. Barclays fired around ment, up from 34% in 2000, according to likely to be working during their early 20s,
200 workers last month. Wall Street stal­ the BLS (see chart). Partly that reflects fast­ adding to the squeeze on labour supply.
warts, including Goldman Sachs and Citi­ er growth in industries like tech and fi­ Falling immigration compounds the
group, have also made cuts. Retail titans nance. But even within industries the problem. In 2019 net migration into Amer­
such as Amazon and Walmart have share of white­collar jobs has grown. In ica was 595,000, the lowest in over a de­
trimmed corporate headcounts, but not manufacturing it has risen to 35% today cade, thanks in part to the policies and
rhetoric of Donald Trump’s administra­
tion. The pandemic pushed it down fur­
Vested interests ther, to 247,000 in the year to June 2021. In
United States, by occupation Germany immigration surged in the
mid­2010s as the country opened its doors
Employment, m Unemployment rate, % to Syrian and other refugees, but it fell in
100 subsequent years. A temporary spike from
November 2021 2022 Ukrainian refugees this year will not be
Other 80 0 2 4 6 8 enough to resolve persistent labour short­
Construction ages in many areas. Britain’s government,
60 and extraction
meanwhile, has declared itself “fully com­
Food service
Managerial and mitted” to bringing net migration down.
professional 40 Sales Barring big changes to immigration or
Business and retirement ages, in the coming years firms
20 financial operations will have to shift their focus to doing more
Technology with less. For the agile project managers
0
US average and programmers who can help engineer
2000 05 10 15 20 22 Management (November 2022)
Source: Bureau of Labour Statistics
such productivity improvements, the good
times may be just starting. n

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 64 Business The Economist December 10th 2022

Schumpeter Supercharging super­apps

The race to build a do-everything platform heats up

Twitter private, will have no public­market investors attempting
to clip his wings, but he will face more fundamental challenges if
he seriously wishes to pursue a super­app strategy.
The greatest impediment to super­apps are, unsurprisingly,
app stores. Apple, which makes more than half of America’s
smartphones, is the incumbent gatekeeper to the country’s eye­
balls. It guards this position jealously, and with good reason. The
total fees it collects from its app store are not disclosed but are
thought to make up a large chunk of a services segment with rev­
enues of $78bn a year. This infrastructure, including a remarkably
successful run in the payments business since the launch of Apple
Pay in 2014, is the closest thing America has to a true super­app.
Mr Musk has already hit his head on this ceiling. In November
he used a dispute over Apple’s advertising on his site to complain
about the fees Apple extracts from apps doing business in its eco­
system (a “secret 30% tax”, as he put it). Mr Musk is far from the
first mogul to gripe about this skimming, but it will be a particu­
larly unwelcome squeeze on the profit margins of Twitter’s new
subscription­based model. After meeting Tim Cook, Apple’s boss,
at the firm’s headquarters in Cupertino, Mr Musk came away pla­
cated. But the skirmish is unlikely to be the last if Mr Musk follows
through with his plans: any attempt to expand Twitter to integrate

I s Elon Musk bored of the town square already? A month after

completing his acquisition of Twitter, his iconoclastic gaze ap­
pears to be trained on the entire city. Mr Musk wants to build a su­
a payments system or create a platform for “mini programs” to run
within the app would ignite a more fundamental conflict. It is,
however, a battle that Mr Musk would be likely to lose. Twitter will
per­app. Whether called “Twitter 2.0”, “The everything app” or “X”, need to be far bigger before it can begin giving orders to the rule­
his plans are still super­vague. A series of slides containing hardly makers. By contrast it is hard to imagine WeChat’s users abandon­
any information tweeted on November 26th did little to shed light ing the app if it was removed from Apple’s iPhones in China.
on his plans. Doting references to Tencent’s WeChat provide some Larger platforms are more capable of becoming super­apps and
clues—earlier this year Mr Musk described the Chinese super­app of standing up to Apple. According to The Information, a news web­
as “Twitter, plus PayPal, plus a whole bunch of other things, and all site, Microsoft has considered building its own super­app, a plat­
rolled into one with actually a great interface”. What is clear is that form combining shopping, messaging and web search that would
Mr Musk will face obstacles in his path. dip further into consumers’ wallets as its business customers slow
A Twitter super­app would join a growing field. Launched in spending. Maybe Meta can rise to the challenge even as investors
2011, WeChat rode the wave of Chinese smartphone adoption. To­ demand a halt to its Metaverse ambitions, the logic behind which
day it boasts 1.3bn users and stunning ubiquity. Adding payments, was presumably to bypass the Apple ecosystem in the first place.
e­commerce and gaming capabilities on top of its messaging plat­ Facebook’s parent company has begun to integrate the firm’s so­
form made the app wildly popular. The launch of “mini programs”, cial­media properties and WhatsApp, a messaging service, is roll­
the millions of third­party applications which exist within We­ ing out payments services in India and Brazil. Consolidation of
Chat­proper, in 2017 cemented the platform as the real operating such a sprawling estate is likely to be a quicker route to super­app
system of the Chinese internet. There is no shortage of super­app­ success than the organic approach Mr Musk would have to take
building across other developing economies. In South­East Asia given his firm’s crippling debt burden.
Grab competes with GoTo, formed by a tie­up between Gojek, a
ride­hailing giant, and Tokopedia, an online marketplace. Both Have faith in me
have lost over half of their market value this year, but the concept Another obstacle is trust. The concentration implicit in the super­
remains a resilient one. So much so that India’s richest man, Gau­ app model requires trust from regulators, consumers and the de­
tam Adani, recently indicated plans to get in on the act, too. velopers who choose to operate their businesses within a plat­
The idea is not new. Super­app ambitions have been a staple of form. Regulators may welcome Mr Musk’s iconoclastic approach
buzzy management presentations at American firms for years. to Big Tech and the creation of another large platform. Consumers
Even Walmart touted plans to develop one. Most involve fitting as will be trickier to win over. Of all the potential cornerstones to a
many closely related services inside the same app as possible. Pay­ digital life, Mr Musk’s Twitter is hardly a compelling prospect: it is
Pal, a payments­giant, and Uber, a ride­hailing and delivery firm, neither as vast as Meta nor as staid as Microsoft.
have attempted to build narrower sector champions rather than Persuading firms to partner with Twitter or participate in any
WeChat­equivalents. These limits have not always been self­im­ “mini programs” platform Mr Musk might create could be harder
posed. Investors have balked at attempts to push boundaries still. Mr Musk’s takeover of Twitter so far has come with lots of dra­
much further. When details of PayPal’s talks to take a $45bn leap ma and erratic policymaking, which briefly spooked large adver­
into e­commerce by purchasing Pinterest, another marketplace, tisers. If Mr Musk is to make the transition from rule­breaker to
leaked last year, its shares plunged and the discussions were rule­maker, he will need to defy both the business challenges to
quickly abandoned. Such conglomerate­building activity would his super­app ambitions and expectations of what he might do as
be even less acceptable to shareholders today. Mr Musk, who took the boss of one. n

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 Finance & economics The Economist December 10th 2022 65

Pension funds inflation stayed modest, they would have

been able to draw a similar real income for
The incredible shrinking plan the next 30 years. The asset­price crash,
however, means that the value of the pot
has fallen to around $2.1m—allowing them
to draw nominal annual payments of just
$83,000. Soaring inflation, meanwhile, has
eaten up another 10% of that income, leav­
NEW YO RK
ing them with just $75,000 in real terms.
Inflation and rising interest rates threaten to make many retirees much poorer
And the shrinkage is hardly over. Should

C an you afford to retire? The answer is

much more likely to be no today than it
was a year ago—especially for those old
to generate over long periods. As workers
near retirement, these funds usually swap
most of their equities for government
inflation remain above 2% for a while—say
it averages 3% a year instead—then a retir­
ee who made it to 90 might well be living
enough to ask themselves the question. bonds, which are supposed to hold their on just 65% of the real income they might
The resurgence of inflation is eroding the value. But with less than a month to go, have expected until recently.
real value of savings. Higher interest rates 2022 looks set to be an appalling year for This impoverishment could fast be­
have caused a repricing of bonds and bonds. The typical portfolio of those clos­ come reality for millions. A lot of baby­
stocks. The result is that the pot of assets est to hanging up their boots has lost 17% of boomers turned into pension­boomers in
many future pensioners are hoping to live its value since January. 2021. The Federal Reserve Board of St Louis
off has shrunk fast. Pundits have long pre­ A year ago, a 65­year­old who had saved reckons there were 3.3m more retired peo­
dicted that, as populations age and the a healthy $2.5m for their retirement and ple in October 2021 in America than 20
number of workers for every dependent invested 80% of it in government bonds months before. More than half of Ameri­
falls, those retirement savings would come and 20% in stocks globally would have cans over 55 have left the labour force, up
under pressure—a problem they have typically drawn an income of $100,000. If from 48% in the third quarter of 2019, ac­
dubbed the “pension time­bomb”. The fuse cording to the Pew Research Centre, a
now looks much shorter. think­tank in Washington, DC. This revers­
The soon­to­be retired are often ad­ → Also in this section es a decades­long increase in the share of
vised to shift their assets into bonds and people working past 55, which has slid
67 Asia’s famished tiger economies
out of stocks as they prepare to stop work­ back to the levels of 2007­09 in just a year.
ing, to protect their savings from big stock­ 68 Small triumphs against inflation A similar pattern is evident across the
market corrections. So­called “life­cycle” OECD club of mostly rich countries.
68 The transatlantic subsidy race
pension funds are usually invested almost Survey data already suggest some of
entirely in stocks during their owners’ 69 Buttonwood: Barmy bonds those who recently retired are considering
younger years, a strategy meant to capture returning to work. Those who do not, or
70 Free exchange: The cost of impunity
the higher returns that listed equities tend cannot, probably face leaner years than

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 66 Finance & economics The Economist December 10th 2022

they had expected. But individuals are not the pension plan would still be able to
the only ones who will bear the burden of Paltry pots meet its expected future liabilities: it
the adjustment. Some of it will also be United States, state & local-government pensions would only have to hold the bonds to ma­
shouldered by governments, through so­ Estimated funding ratios, September 30th 2022, % turity and distribute the yield it was prom­
cial­security and national­insurance 60 70 80 90 100 ised when it bought them.
schemes. And part of it will be borne by a That strategy only works, though, if the
AK ME
creature that is becoming ever rarer: the plan is “fully funded”: that is, if the cash it
defined­benefit (DB) pension plan. WI VT NH has to begin with is worth 100% of its ex­
Many of those considering retirement WA ID MT ND MN IL MI NY MA pected liabilities. If it is underfunded—
today spent much of their lives working perhaps because contributions are not
OR NV WY SD IA IN OH PA NJ CT RI
during the golden age of DB schemes, high enough, or because it made some
when firms or employers in the public sec­ CA UT CO NE MO KY WV VA MD DE poor investments in the past—then put­
tor, such as schools and local govern­ AZ NM KS AR TN NC SC DC ting all of its assets into the investments
ments, agreed to pay workers an annuity that earn the discount rate on its liabilities
OK LA MS AL GA
after they stopped working. Of the $40trn will set a fund up for bankruptcy down the
held in retirement assets in America today, HI TX FL road. Many underfunded pensions have
$17trn is held in such schemes. Source: Equable Institute *Based on estimated assets, at Sep 30th
had to take risks—by holding equities, for
A typical DB payout is worth 2% of a example—in a bid to fill their funding
worker’s final salary, multiplied by years of gaps. A combination of bad investment
service. So a teacher employed for, say, 40 rently holds against the expected future years (such as 2001 or 2008), falling dis­
years, who retired when her salary was value of the promises it has made to those count rates, ageing populations and the
$80,000, would be paid $64,000 per year paying in. The sum has three moving parts: political infeasibility of asking employees
for the rest of her life. In this way the em­ the value of the current investment pot, to contribute more has pushed a lot of DB
ployer shouldered all the investment risk the discount rate used to calculate the pre­ schemes into the red in recent years.
the individual would otherwise have to sent value of future payouts, and the In isolation, falls in the value of the pot
face; DB schemes, not their members, are stream of those expected future payments. are bad. But although higher interest rates
the ones bearing the mighty losses in asset The third factor is the hardest to figure hurt asset values, they can also be helpful
prices this year. Some plans also adjust out, because future payouts are based on for pension schemes, because they reduce
payouts for inflation. undetermined final salaries and on how the present value of future payouts. This
Over recent decades, ageing popula­ long the recipient and their spouse, who is year has therefore not been a bad one for all
tions and rising life expectancies have to­ often eligible for payments, might live. Oli­ pension plans. Indeed, corporate pensions
gether pulled down interest rates; bigger via Mitchell, a professor of insurance and in America have done rather well. After a
savings pools chasing a finite volume of as­ risk management at the Wharton School of bumper 2021, the average corporate pot
sets meant capital became cheaper. It grad­ the University of Pennsylvania, points out was fully funded at the end of the year, for
ually became clear to firms and public­sec­ that the income stream a DB pension the first time since 2007. Corporate funds
tor agencies just how hard keeping their scheme might owe to someone joining the then moved to reduce their investment
pension promises was going to be. From plan today could stretch more than a cen­ risk early by swapping many stocks for
the 1980s the private sector therefore began tury into the future, if you include pay­ bonds—an asset­allocation shift so huge
to phase out its offerings of such plans: the ments made to partners. and rapid that it may have contributed to
share of employees enrolled in DB schemes Still, it is the other two elements—the the end of America’s stockmarket rally at
in America dropped from nearly two­fifths value of the investment pot and the dis­ the start of this year.
at its peak to just a fifth by 2008. Then the count rate—that decide whether funded Corporate plans elsewhere have not
strain of the financial crisis prompted ratios soar or sink. The easiest way to run a been so lucky, if only because their stock­
many firms to reclassify DB plans as de­ pension is to match assets with liabilities, markets did not do as well to start with.
fined­contribution schemes, where work­ by buying long­term bonds that pay out Many British corporate plans, for example,
ers simply contribute a set amount to the when pensioners come knocking. If yields are still underfunded. In recent years that
pot with no guarantee of what they get on American government bonds are the has led them to adopt strategies in a bid to
back after retirement. benchmark, say, then the pension manag­ protect themselves against falling interest
Public­sector employers have had er might simply buy lumps of them. rates; one, called “liability­driven invest­
much less success in reducing their expo­ Should the value of those assets plunge, ing” (ldi), nearly blew them up over the
sure to these overgenerous pension summer. To ensure they did not look more
schemes, however. The result is that underfunded when rates fell, many British
around $13trn of America’s DB assets are A tale of two kitties funds loaded up on derivatives that would
managed by state, local and federal govern­ United States, Milliman pension-funding indices pay out when rates dipped, but required
ments. Many of the biggest DB schemes, Funded ratio, % them to cough up cash when they rose. As
and some of the biggest pension funds in 110 rates rocketed, many funds faced margin
existence today, are run by public institu­ calls so big that they threatened to absorb
Private
tions, such as the California Public Em­ 100 all the cash the funds had to hand. Only
ployees’ Retirement System (CalPERS) and when the Bank of England intervened did
90
the Ontario Teachers’ Pension Plan (OTPP). the danger of bankruptcy ebb.
The portfolios of such beasts, worth hun­ 80 The big losers of 2022, though, are pub­
dreds of billions of dollars, are suffering Public lic pensions. Whereas over the past 12
just as many more of their members are 70 months the average funding ratio for a
getting ready to ask for their money. 60 private plan has risen from 97% to around
The way to measure how easily a pen­ 110%, that of public pensions in America,
sion plan will meet its liabilities in the fu­ 2016 17 18 19 20 21 22*
which stood at 86% a year ago, their high­
ture is to look at its “funded ratio”. This Source: Milliman *At September 30th
est since the financial crisis, has dropped
compares the pot of investments it cur­ to 69%—close to a four­year low.

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 The Economist December 10th 2022 Finance & economics 67

There are two main reasons for the sis. Data released on December 7th showed
slump. One is that the discount rates used a 9% year­on­year fall in Chinese exports
by public plans, rather than being bench­ in November, a far steeper decline than ex­
marked to a given asset market, are instead pected by analysts.
set by external committees. The trouble is As Asia’s growth engine sputters, so
that these committees did not reduce dis­ does trade between countries in the re­
count rates by as much as interest rates fell gion. Exports from trade­intensive South
over the decade that followed the financial Korea, which slid by 14% year on year over­
crisis, which made it difficult to raise them all in November, were particularly ham­
by much this year, as interest rates rose pered by dwindling sales to China, which
again. This means the liabilities those pen­ shrank by 26%—the biggest 12­month de­
sion funds must face in the future remain cline since 2009. Taiwan’s sales to the
nearly as high as before. mainland and Hong Kong slumped by 21%
At the same time, funds’ investments over the period. There may be more bad
have performed poorly. As yields on bonds news to come. Dwindling intra­Asian
fell across the developed world in the 2010s trade, which is largely made up of interme­
many underfunded plans moved into risk­ diate goods, probably signals a deeper drop
ier investments, such as leveraged loans, in future sales of finished products.
private equity, venture investing and even The China drag may start to ebb at some
cryptocurrencies. OTPP held a stake in FTX, point next year—but slowly at best. The re­
a crypto exchange once valued at $32bn covery of the world’s second­biggest econ­
that went spectacularly bust last month. Stalling Asia omy could take many months and large
Funding ratios can dip only so far be­ outbreaks of covid­19, as rules are loos­
fore pension funds get into serious trou­ The chips hit ened, could cause short­term disruptions.
ble. “Once a plan is only 40% funded,” gri­ Meanwhile a second, lesser known fac­
maces Mike Rosborough, a former portfo­ the fan tor is likely to keep hindering East Asia’s
lio manager at CalPERS now at Alliance­ trade giants: the storm facing the global
Bernstein, a research firm, “there is often electronics industry. Worldwide sales of
SINGAPO RE
no going back.” It becomes almost impos­ PCs were down by 20% in the third quarter
A global electronics slump is driving
sible, at those kinds of levels, for the pen­ of the year compared with the same period
Asia’s trade champions to the wall
sion plan to pay out the annual liabilities it in 2021. That is holding back Chinese ex­
owes to those who have already retired
from the income it makes on its assets. It is
instead forced to sell those assets off. This
O n December 7th China announced it
was relaxing yet more of its covid­19 re­
strictions. The news was well received by
ports of data­processing machines and
their parts—the category which includes
personal computers. These fell by 28% year
quickly becomes a self­perpetuating, vi­ the once roaring economies of East Asia. In on year in November.
cious cycle: the more assets it has to sell, recent days many have reported terrible The shift is also bad news for South Ko­
the smaller the pot, and the more under­ trade data that suggest the domestic effects rea, the dominant producer of the memory
funded it becomes. This can go on until the of China’s zero­covid policies have rico­ chips found in computers worldwide. Its
assets hit zero—at which point the plan be­ cheted across the region. A reopening, exports of goods to Japan dwindled by 18%
comes “pay as you go”: it uses the contribu­ however tentative, can only help. But the year on year in November. It even affects
tions of current payers to pay former work­ reasons behind the tigers’ angst extend further­flung hubs like Singapore, whose
ers, or is bailed out by taxpayers. well beyond woes faced by their big neigh­ exports of electronics fell by 9.3% in Octo­
This may never become a problem for bour. As the world spends less on expen­ ber. Oxford Economics, a consultancy, ex­
CalPERS. California is a rich state which sive gadgets, the world’s busiest manufac­ pects a further slump in goods exports
has been directing extra funding to its pen­ turing hub is being driven to the wall. from the region next year, of around 4%.
sion plans from its budget surplus for China is certainly a big factor in the Rapid increases in interest rates in
years. But it is becoming a scary possibility sharp deceleration across the region. Asia’s America, with other central banks forced
in American states like Kentucky, Illinois, largest economy is reeling from many to follow suit, are fuelling the slowdown by
Connecticut and New Jersey, where public months of disruptive pandemic­control crimping households’ and companies’ de­
pensions are around just half­funded. measures and a homegrown property cri­ mand for consumer goods. That effect is
Even with all their problems, pension­ visible in orders of machine tools from Ja­
ers that depend on underfunded public DB pan, a bellwether for industrial activity
plans are miles better off than those rely­ Sorry Seoul globally. They fell by 5.5% year on year in
ing on Social Security (the American equiv­ South Korea, exports to China October. Electrical and precision machin­
alent of National Insurance). Transfers are % change on a year earlier ery orders were most affected, sinking by
mostly paid using contributions from cur­ 100 27% over the period.
rent workers. That first started to look sha­ The squeeze on Asian industry is in
ky in 2008, when withdrawals exceeded 75 stark contrast to the years after the finan­
contributions for the first time. Payments 50 cial crisis, when low interest rates and a
have since been partly financed from a booming Chinese economy were a boon to
trust based on past surplus contributions. 25 the region’s industrial networks. Natixis,
But the excess of withdrawals over contri­ 0 an investment bank, expects semiconduc­
butions means that this trust is projected tor demand to remain subdued until at
to run out in 2035, after which the state will -25 least next summer; rate­setters at the Fed­
have to make up the difference. The fate of -50 eral Reserve, and China’s public­health
many db and social­security pensioners 2008 10 12 14 16 18 20 22
bosses, may remain cautious for even lon­
alike could ultimately depend on the gov­ Source: National statistics
ger. East Asia’s famished tigers could face
ernment’s willingness to bail them out. n many more lean months. n

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 68 Finance & economics The Economist December 10th 2022

Consumer prices Transatlantic trade

The monetary Concrete jungle

marathon
Global inflation is falling—but Europe and America put a brave face
not by enough on a growing economic rift

B efore the pandemic the idea of an an­

nual rate of inflation of 10% in the euro
zone would have seemed like a horror sto­
A useful contrarian indicator for
gauging the substance of international
talks is whether negotiators talk about
ry. In November it was good news. Infla­ concrete. The more they do, the less they
tion had been 10.6% the month before. A tend to achieve. The Trade and Technology
similar surprise came from America. As in­ Council (TTC), a forum for the EU and
flation falls, so does the expected pace of America to co­ordinate regulation, appears
interest­rate increases. On December 14th to prove this admittedly cynical rule. At its
and 15th the Federal Reserve, European latest meeting on December 5th, the White
Central Bank and Bank of England will each House said it had advanced “concrete ac­
probably raise rates by half a percentage High expectations tion” on transatlantic co­operation by
point—a deceleration from the three­quar­ launching new “concrete initiatives”,
ter­point rises that have recently prevailed. energy inflation could affect the rest of the while a joint statement with the Europeans
Globally, inflation has begun to decline economy as workers bargain for higher promised yet more “concrete outcomes”
primarily because energy prices have wages to offset rising living costs. and “concrete actions”.
eased since the summer and because sup­ The second problem is fiscal policy. It The trouble is, despite all the talk of
ply chains, long gummed up by the pan­ would help central banks to cool labour concreteness, America and Europe now
demic, are operating more smoothly. Yet markets if governments shrank their bud­ have major disagreements in the economic
inflation remains a very long way from get deficits. Yet America’s recent Inflation realm and few obvious solutions. The
central banks’ 2% targets. There are three Reduction Act makes only a minimal dent main point of contention is the Inflation
reasons to think rate­setters will struggle in government borrowing, and the Biden Reduction Act, the centrepiece of the
to hit their goals soon. administration is trying to forgive swathes Democrats’ climate­and­industrial strat­
The first is a continued scarcity of work­ of student debt. Europe is splurging on en­ egy. The IRA, signed into law in August,
ers. While the news on prices has been ergy subsidies despite warnings from the features nearly $400bn in funding for en­
good, the latest wage data are worrying. In IMF and others that it is unwise to stimu­ ergy­related projects, much of which is
America average hourly earnings had late economies which lack spare produc­ contingent on goods being produced in or
shown encouraging signs of softening tive capacity—a mistake America made in near America. There are subsidies for auto­
since August. But updated figures released 2021, when President Joe Biden’s “Ameri­ makers who buy locally made batteries, tax
on December 2nd upended the picture, can Rescue Plan” overheated the economy. credits for domestic producers of renew­
showing annualised growth of 5.1% over If the EU retains its measures throughout able fuels and tax breaks for consumers
the past three months, roughly in line with 2023 the cost, net of taxes raised to fund the who buy electric vehicles that contain
other surveys. Since the data came out handouts, will reach nearly 2% of GDP (see enough North American components.
stockmarkets in America have fallen, in ex­ chart). In aggregate Britain’s much adver­ The Biden administration believes
pectation of prolonged interest­rate rises. tised belt­tightening will not begin until these incentives are needed to spur the de­
In Britain wages are growing at a similar 2025, thanks to its costly energy­price cap. velopment of America’s green economy. In
rate; a wave of strikes may prompt still big­ Nearly two­thirds of the EU’s energy industries such as electric vehicles, Amer­
ger increases. The euro zone’s labour mar­ spending is on controlling prices for every­ ica is a laggard (see chart). The worry in
kets, though not as sizzling, are hot one, which is expensive and discourages Europe and Asia is that America’s giant
enough to make policymakers worry that energy saving. Only a fifth comes in the market and generous handouts will attract
form of targeted redistribution to the nee­
dy, the approach recommended by the
Cosmic cushion likes of the IMF. Even Germany, which has Miles behind
Estimated costs of government capped prices only up to 80% of a house­ Electric vehicles, new registrations, m
energy-relief measures*, % of GDP hold’s previous usage, is still borrowing to 6
2022 2023 Planned If current measures
fund the scheme, meaning that it will de­
United States
extended to end-2023 liver an economic stimulus. 5
Europe
The final danger is that energy inflation
0 1 2 3 4 China
returns in 2023. This year Europe’s econo­ 4
Italy mies have benefited from weak competi­
tion for scarce supplies of global liquefied 3
Spain
European
natural gas (LNG), in part because China’s
2
Union economy has been hampered by its zero­
Germany covid policy. But China has begun to loosen 1
its pandemic controls. If its economy
Netherlands reopens and rebounds, LNG prices could 0
France surge in 2023. Central bankers’ battle with 2010 12 14 16 18 20 21
Source: European Commission *At November 2022
inflation has reached an inflection point. Source: IEA
But it will not be won for a long time. n

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 The Economist December 10th 2022 Finance & economics 69

their companies at the expense of their Minutes” show. Ursula von der Leyen, follows on from President Joe Biden’s
home bases. In the past year alone interna­ president of the European Commission, pledge that America could tweak its subsi­
tional carmakers from BMW and Toyota to the bloc’s executive arm, spoke of distor­ dies to satisfy European companies.
Mercedes and Stellantis have announced tions caused by the American law. Warm words aside, what can America
big investments in America. The fallout A single TTC meeting was never going to do to help? Its climate tax credits, en­
from Russia’s invasion of Ukraine adds to heal the rift. The forum packed into one shrined as law, cannot be easily modified.
the aggravation: a shift away from Russian day talks on risk management in artificial There is no chance of new legislation dur­
energy supplies has raised costs in Europe, intelligence, standards for plastics recy­ ing the next two years of divided Congress.
further harming its industries. cling, warning systems for semiconductor Instead the response is likely to come from
Europe’s displeasure was made clear on supply­chain disruptions and more. And Europe, where officials are mulling their
the eve of the meetings in Washington, DC. yet Valdis Dombrovskis, the European own green incentives. The most concrete
Emmanuel Macron, France’s president, commissioner for trade, said he left the TTC outcome of the TTC may thus be the contin­
called America’s subsidies a “killer for our feeling “slightly more optimistic” about ued drift of America and Europe towards a
industry” in an interview with CBS’s “60 co­operation with America. That optimism full­fledged subsidy race. n

Buttonwood Thrill bills

For bond investors, every country is an emerging market now

T o label a country an emerging mar­

ket ought to spark a frisson of excite­
ment. Such economies are meant to be
of the technicolor 1980s). Instead today’s
suspense is over two novel forms of un­
certainty: whether rich­world govern­
emerging world. Moody’s Analytics, a
research firm, projects that by the middle
of this decade America’s Treasury Depart­
on their way to being “developed”: in­ ments can afford the vast volume of debt ment will be spending more on interest
tegrated with the global financial and they are issuing, and whether the market payments than it does on defence. Brit­
trade systems, growing stably and pro­ can absorb it. ain’s Office for Budget Responsibility, a
viding their citizens with high incomes. Start with the quantum of debt. Most watchdog, estimates that this fiscal year
Because they aren’t quite there yet, they rich­world governments already have its government will disburse £120bn
must pay their creditors a premium. Yet heaps of it because they spent the past 15 ($146bn) on interest—the equivalent of
the label also applies to countries where years bailing out their citizens and compa­ 80% of the budget for England’s National
policies have become a tad too thrilling nies from successive crises. When fi­ Health Service.
to be trusted. Think of tricky customers nancial panics gripped banks, lockdowns For a decade or so, investors were not
like Argentina, whose profligacy made it forced shops to close and huge energy bills alone in buying the debt that funded
a serial defaulter on its sovereign debt, or threatened to freeze households, the rich­world governments. Throughout
Turkey, where interest rates remain low reflex was to dole out public money. Fiscal the 2010s, and until recent months,
even as inflation blazes above 80%. largesse remains in fashion: America is much of it was being acquired by central
A growing cohort of blue­chip econo­ throwing bungs to green industries, and banks through quantitative­easing pro­
mies are now being talked about in simi­ there is no end scheduled to Europe’s grammes. Now those buyers are dis­
lar terms—and the comparison is not lavish energy subsidies. appearing, leaving bond investors alone
meant to flatter. Britain made a spectac­ This habit of big government was to soak up the excess.
ular entry into this financial purgatory in formed during years in which rock­bot­ Hence the second big unknown: are
late September by unveiling plans for tom interest rates kept funding costs low bond markets deep enough to cope with
huge, unfunded tax cuts, sending the and rich­world creditors lenient. Now the the coming flood? In the fiscal year of
value of sterling crashing. It is far from interest bill is rising, exposing the spend­ 2023 America’s Treasury may need to
the only wealthy country where govern­ ing plans of developed­market govern­ borrow up to $2trn from the market—
ment bonds have become unusually ments to the kind of scrutiny formerly nearly twice what it borrowed from
exciting. Worse, the dullness may not reserved for their counterparts in the investors annually during the two years
return for some time. preceding the pandemic and four times
Part of the thrill has little to do with the average in the five years before that.
governments’ policies. This year central Citigroup, a bank, reckons Britain’s
banks across the rich world have repeat­ government will need to seek twice as
edly raised interest rates, shrinking the much net cash from the bond market in
present value of the coupons bonds pay the next fiscal year as it has in the past
out and causing their prices to sink. No eight combined.
one knows how high rates will rise, and If it had been proposed by a Latin
for how long they will stay there. So bond American government, such an issuance
markets are jittery across the board. The schedule would have already sent bond
MOVE index, which measures how clue­ yields soaring. Rich countries have long
less bond investors feel about the future, enjoyed much more freedom and evaded
is at nearly twice its average over the five the full price of fiscal incontinence. Now,
years to February 2020, when the pan­ though, they are looking to investors to
demic first shocked markets. buy vast quantities of debt amid rising
Monetary­policy surprises are not borrowing costs and a murky economic
new to developed­market bond investors outlook. The bond­market drama could
with long enough memories (just think have many more instalments.

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 70 Finance & economics The Economist December 10th 2022

Free exchange The cost of impunity

Tackling sexual harassment could bring sizeable economic dividends

mate how much of a pay cut workers are ready to accept to avoid
the risk of harassment. In their paper Ms Rickne and Mr Folke ran
experiments with hypothetical job offers in Sweden. They find
that, on average, the gender most at risk—most often women—is
willing to give up 17% of their salaries to avoid harassment. In an­
other study Joni Hersch, of Vanderbilt University, calculates that
the collective sacrifice in earnings of American women per filed
case of sexual harassment in any given year is $9.3m.
Encouragingly, research can also guide thinking on how to
tackle sexual harassment. One lesson is that improving outside
options can help. Mr Dahl and Mr Knepper find that before North
Carolina cut unemployment benefits in 2013, workers were more
likely to report harassment. Amenities that make it easier to find
work, such as transport links to thriving job basins, should also
make a difference. Where the potential for retaliation is high and
outside options are limited, such as in film­making or academia,
field­wide institutions must be strong enough to punish devi­
ations. The American Economic Association has written codes of
conduct and can open investigations, but lacks the teeth to obtain
evidence and impose sanctions.
Another lesson is that employers themselves should have a
strong interest in tackling sexual harassment. Caroline Coly of

F ive years after the MeToo movement gripped the world, the
problem of sexual harassment continues to dog the economics
profession. Fresh allegations of misconduct at universities in
Bocconi University and co­authors find that, since 2017, women
have been leaving organisations where they fear being harassed in
higher numbers. The Finnish study also finds that women other
America and Europe are causing a torrent of older cases to emerge. than the victim tend to leave a firm where male violence towards
Rooting out harassment in academia is particularly hard because women has been reported. The corollary is that firms that clamp
career progression depends on the goodwill of not just senior col­ down on harassers should be able to access a wider pool of talent,
leagues but also peers at far­flung institutions, who often partner thereby allowing them to outperform competitors.
with juniors to conduct research and who review papers vying to Evidence of such a bonus is starting to emerge. Research sug­
get published in prestigious journals. gests firms run by female executives may have become more valu­
Yet half a decade has not gone by in vain. Many economists are able since MeToo began. One reason could be that they tackle male
now using the same rigorous approach they bring to assessing the wrongdoers differently. Ms Adams­Prassl and colleagues find that
labour market, or the impact of workplace accidents, to gauge the female leaders tend to sack perpetrators. That, in turn, prompts
effects of harassment. Their findings help give a sense of the more women to stay. A paper by Mark Egan of Harvard Business
cost—to victims and the wider workforce—of sexual coercion, de­ School and colleagues also shows that female bosses are less toler­
meaning treatment and degrading comments. Fortunately, the re­ ant of other types of misconduct by men, such as consumer dis­
search also shows that some remedies do work, making the pay­ putes or regulatory offences.
off to halting misconduct both sizeable and attainable.
The greatest cost of harassment is borne by the victims them­ Paying the price
selves. On top of the grave psychological costs, there are economic Such incentives, however, can go only so far. The final lesson is
ones too. Victims tend to give up their jobs to look for new ones for that organisations under whose roofs harassment occurs often
which they may be less suited. Johanna Rickne of Stockholm Uni­ bear too little of the true cost. America’s federal laws cap the sexu­
versity and Olle Folke of Uppsala University conducted a survey on al­harassment damages a victim can receive from large firms at
sexual harassment and followed respondents for five years. They $300,000. Applying the same method used in workplace­safety
found that women who reported harassment were 25% likelier to cases, Ms Hersch argues, yields a larger amount: $9.3m, the earn­
leave their job than other women; the equivalent increase for male ings sacrifice women are willing to make to avoid harassment.
victims was 15%. The women who left also tended to earn less. An­ Such payments could deter firms from tolerating misconduct. But
other study by Abi Adams­Prassl of Oxford University and col­ they may not be enough to change norms and corporate culture.
leagues, using Finnish data on violent incidents including sexual For that to happen, people in power need to speak out.
assault, shows that female victims have almost as much chance of Economists now need to turn their focus to their own back­
being durably unemployed as workers laid off after the closure of a yard. Anna, a former economics phd student at a European uni­
plant; for male victims, the likelihood is a little lower. versity (whose name we have changed), recounts how her supervi­
The fear of being unemployed also appears to deter victims of sor made inappropriate comments and eventually asked her to
sexual harassment from speaking up. Gordon Dahl of the Univer­ spend the night at his place—which she declined—before turning
sity of California, San Diego, and Matthew Knepper of the Univer­ vindictive when she requested a change of supervisor. After her
sity of Georgia find that only the more egregious cases tend to be PhD Anna chose to pursue a career outside academia. Not for a
reported during recessions. lack of ambition, she says, but to avoid the toxic culture and the
Gender­based harassment also acts as a tax on the rest of the unsafe environment it breeds. Economics would do well to make
population. One way to pin an economic value on this is to esti­ sure future Annas decide to stay. n

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 Science & technology The Economist December 10th 2022 71

Naval drones uncrewed speedboats stuffed with explo­

sives. Also in 2017, one of these hit Al Madi-
Q-boats nah, a Saudi Arabian frigate, in the Gulf.
The explosion killed two sailors. Since
then, according to data compiled by Har­
vard Haugstvedt of Oslo University’s Cen­
tre for Research on Extremism, the group
has launched more than 20 further attacks
on commercial ships and shore facilities.
Ukrainian ingenuity is ushering in a new form of warfare at sea
Partisans’ drones are also going under­

O n September 21st an odd piece of flot­

sam washed up on the outskirts of Se­
vastopol. It was about five and a half me­
analyst who has studied footage of the Uk­
rainian drone boat. That could be bad news
not only for Russia, but for anyone who
water. In 2021 Israel’s navy destroyed what
it described as a bomb­carrying submers­
ible drone minutes after its launch into the
tres long and the consensus was that it was does business, naval or civilian, at sea. For Mediterranean by members of Hamas. Ac­
a USV (uncrewed surface vessel, essentially its part, Ukraine announced on November cording to Israel, Hamas has been honing
a drone boat), possibly on a reconnais­ 11th that it plans to build 100 of the vessels, the technology for years. Each vessel, it
sance mission, that had been put together paid for, it hopes, by crowdfunding. claims, can carry about 30kg of explosive.
by the ingenious boffins who are to Uk­ Efforts by governments to weaponise
raine what Q branch is to James Bond. Enemy in sight uncrewed boats have generally taken a dif­
On October 29th reality bit. A fleet of the Until Ukraine’s attack on the Black Sea ferent tack. Rather than packing vessels
things, accompanied by similarly robotic fleet, strapping bombs to remote­con­ with bombs and ramming them into their
air cover, attacked Sevastopol’s naval base, trolled boats had mostly been the preserve targets, the world’s navies seem more in­
the home port of Russia’s Black Sea fleet. of irregular forces. Iran did test some in terested in mounting guns and missiles on
According to the Ukrainians, and backed 2017, against a Saudi Arabian tanker. But USVs and using them like any other war­
up by video footage apparently shot from things really got going when the Houthi ship, only without sailors on board. As far
cameras on board one of the drones, they movement, a group of rebels against Ye­ back as 2012, for example, America’s navy
scored direct hits on Admiral Makarov, the men’s Saudi­supported government, be­ was experimenting with a rigid­hull inflat­
fleet’s flagship, and two other vessels, da­ gan, with apparent Iranian support, to use able boat equipped with missiles and a re­
maging all three. That was followed on No­ motely operated machine gun. In coming
vember 18th by a big explosion at a Russian years, it plans to spend billions of dollars
oil terminal in Novorossiysk, also reported → Also in this section developing a colourful array of USVs, some
to have been the work of the same type of of which may be as long as a superyacht
73 Silent synapses
naval drones. and capable of carrying long­range mis­
“For many it [these attacks] marks the 74 Ankylosaur clubs siles and other weapons.
start of a new age in naval warfare,” wrote China has sought to keep pace, with nu­
74 The origin of lager
H.I. Sutton, an author, blogger and naval merous programmes that mirror America’s

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 72 Science & technology The Economist December 10th 2022

efforts. One of these—a heavily armed ves­ that for years he has been telling officials avoid relying on a human “who may lose
sel called the JARI—has made regular ap­ that the prospect of malicious maritime­ their nerve at the last second”, as Scott Sa­
pearances at weapons shows across the drone use is a risk. “The typical response,” vitz, a senior engineer at the RAND Corpo­
world, complete with mock­up guns and he says, “is a head nod.” ration, puts it. In the footage from the at­
torpedoes. That suggests China is interest­ Navies should not be the only ones to tack on Sevastopol, the drone charges
ed in exporting the technology as well as worry. Commercial shipping is at particu­ through a hail of gunfire with gay abandon.
using it itself. lar risk, as the Houthi attacks show. Securi­ How, then, do you stop a USV? The im­
In Israel, meanwhile, Rafael, a govern­ ty measures on merchant vessels are usu­ mediate response has been to rejig existing
ment­owned armaments company, has ally predicated on discouraging the crews weapons. A couple of years ago Thales, a
spent years perfecting a speedy USV called of attacking boats with non­lethal mea­ French armaments firm, thus reconfigured
the Protector. In 2017 it decked one out sures like long­range acoustic devices, its supersonic Martlet missile to hit small
with Spike anti­tank missiles and later floodlights and water cannons, together fast­moving surface vessels. The result will
demonstrated it in a NATO live­fire exer­ with barbed wire to repel boarders. Some be fitted to British frigates in 2024. Ameri­
cise. And EDGE, a state­owned Emirati con­ ships do sail with armed guards, but their ca’s navy also recently put the finishing
glomerate, is collaborating with IAI, anoth­ small­calibre weapons would be hard put touches to what it calls a “Surface Warfare
er Israeli firm, to build a similar vessel. to stop a reinforced drone boat whipping Mission Package”, consisting of two 30mm
Elsewhere, Britain has, since 2019, been across the waves, according to Mr Crino. guns, two rigid­hull inflatable boats and a
developing such capabilities through its Coastal infrastructure is also at risk. Six helicopter. This, it says, is specifically
NavyX project, which it describes, with re­ of the recorded Houthi assaults were on ci­ geared toward picking off small fast­mov­
freshing honesty, as an “Autonomy and Le­ vilian ports and oil terminals. One of these ing boats, both crewed and uncrewed.
thality Accelerator”. Greece, Portugal, Sin­ caused “significant damage” to a Singapor­ Moving beyond such lash­ups, both
gapore, South Korea and Turkey have also ean tanker, according to America’s State America and Britain have toyed with lasers
been rolling out armed USVs. Department. If confirmed as the work of a which they claim could do the job. But it is
boat drone, Ukraine’s attack on Novorossi­ unclear whether that technology is ready.
Keeping a low profile ysk would be ample proof that any water­ The American test, aboard the USS Portland
All these projects, though—at least, all that front structure, no matter how heavily se­ in the Gulf of Aden, was against a station­
are known of—have a slightly unimagina­ cured, could be a target. ary target. Those British tests so far dis­
tive feel to them. They are to the world of Not having a crew gives USVs other ad­ closed have taken place on land.
naval warfare what machines like the Pred­ vantages. With no need for a cabin, they A popular technique for bringing down
ator and Reaper drones made by General can be built for stealth. The Ukrainian boat aerial drones is to jam their radio links
Atomics are to aerial combat, namely rede­ rises only a few centimetres above the wa­ with high­intensity electromagnetic chat­
signed, uncrewed versions of the existing ter’s surface, making it almost invisible to ter, or to wrest control of the craft itself
way of doing things. What Ukraine seems radar and cameras—but, unlike a subma­ through a technique known as “spoofing”.
to have demonstrated is the naval equiva­ rine drone, still able to keep in radio con­ This might work for USVs, too—though
lent of the quadcopter. And that may make tact with its controllers. (Radio waves can­ countermeasures, in the form of encrypted
naval warfare asymmetric in a way which not penetrate water.) This does not mean a links and increased autonomy, are becom­
governments are unprepared to deal with. follow­up could not dive completely un­ ing increasingly effective, says Mr Crino.
None of the Ukrainian boat’s underly­ derwater, for example in order to evade de­
ing technologies would be out of reach for tection on a final attack run, like a German I contain multitudes
a small military power or a reasonably U­boat. The Hamas subs, which are guided Another proposal, albeit so far imaginary,
competent non­state group. According to on the surface by GPS, might already oper­ is to fight drone with drone. A retinue of
an analysis by Mr Sutton of available imag­ ate on a similar principle. uncrewed air and sea vehicles could serve
es, its engine appears to be from a Sea­Doo Skipping the crew also means vessels as “scouts and bodyguards”, as Mr Savitz
jet ski. Its bow­mounted camera looks like can be used more brazenly. A group plan­ puts it, to scan the horizon for incoming
a device that cyclists might strap to their ning a kamikaze­style maritime attack can USVs and attack them if needed. In June,
helmets (it has a larger one, pictured, Britain’s defence ministry awarded an ur­
mounted amidships). And its satellite re­ gent contract to BAE Systems, another ar­
ceiver bears a strong resemblance to the maments company, for an aerial­recon­
Starlink terminals supplied by SpaceX. naissance drone to deploy aboard frigates
In its fundraising materials, Ukraine “to counter unmanned surface vessels”. (A
claims that each boat costs a mere spokesman noted that the navy is working
$250,000. A single anti­ship missile, by to address “new threats across a range of
comparison, can cost millions. Ukraine environments”, but declined to provide
will get a lot of bang for those bucks. The specific details on any of its counter­drone
boat’s cargo bay can carry 200kg of high ex­ boat efforts.)
plosive to a ship’s waterline where—unlike As is often the case when a new threat
a hole punched higher up in a hull by a emerges from the technological shadows,
missile or aerial drone—it will cause the armed forces will also look for answers in
vessel hit to ship water and possibly sink. unusual places. First­world­war­style in­
Uncrewed surface vessels thus seem dicator nets for ensnaring submersible
poised to follow the trajectory of airborne and semi­submersible craft could see a re­
commercial drones, which caught govern­ turn to service. And Mr Savitz points to an
ments flat­footed when they went from American programme, inspired by the de­
hobby­shop curiosity to deadly security fensive secretions of hagfish, to develop a
threat seemingly overnight. Scott Crino, slime that could be used to gunk up the
whose company, Red Six Solutions, advis­ propellers of incoming USVs.
es governments on how to protect them­ But no amount of firepower, nor tide of
selves from aerial­drone incursions, says Keeping a look-out gloop, is likely to be a satisfactory response

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 The Economist December 10th 2022 Science & technology 73

on its own. “By the time you’re getting into collaborate without reference to human now, it had been thought that these disap­
the range of a point defence system,” says beings. This is not a distant prospect. Such peared as a brain matured. But Drs Vardala­
Craig Allen, a commander in America’s swarming capabilities have been under de­ ki, Chung and Harnett have shown not
coast guard, “it’s pretty late in the game to velopment in the West for a while and are only that they are present in adulthood,
try and stop something.” Early detection beginning to proliferate. Aselsan, a Turk­ but also that they are common, at least in
will thus be crucial—though Mr Crino ish arms­maker, recently unveiled the Al­ mice. Just over a quarter of the connections
notes this could be hard in congested ar­ batross­S, a speedy USV which, it says, can they sampled in adult mouse visual corti­
eas, such as ports or busy shipping lanes. operate in droves that share information ces were silent synapses on filopodia. And
Also, these measures assume drone about targets and objectives. Meanwhile, murine and human brains are sufficiently
boats will come as single spies. More likely, engineers at China’s College of Weaponry alike that something similar almost cer­
they will arrive as battalions. “Truthfully Engineering in Wuhan are building “hunt­ tainly applies to people.
it’s pretty hard to stop one hostile incom­ ing algorithms” intended to enable To carry out their search for filopodia,
ing target,” says Mr Allen, “and every addi­ swarms of USVs to chase down a multitude the trio used a sensitive microscopy tech­
tional target you add to that makes the pro­ of targets, in the manner of a pod of killer nique called eMAP. They studied 2,234 syn­
blem much more complicated.” whales pursuing a bob of seals. Good luck apses between cortical nerve cells of a type
All the more so if a flotilla’s boats can stopping those with a net. n called pyramidal neurons (pictured),
which have thousands of synapses each.
Peering through an eMAP microscope is
Neuroscience enough to determine which cellular pro­
trusions are filopodia. But it cannot show
Silent synapses which synapses on them are silent.
To do that, they needed to test how the
filopodia responded to glutamate, the
brain’s main excitatory neurotransmitter.
First, they had to deliver a controlled flow
of glutamate to the particular synapse they
wanted to test. To this end, they poured a
How adult brains learn the new without forgetting the old
soup of “caged” glutamate over the neuron

L earning new things is hard. Remem­

bering what has already been learned is
harder. Any successful learning system, be
mitters. Current estimates suggest there
are 600 trillion synapses in a human brain.
How, then, to deal with the stability­
under examination. This form of the mole­
cule is inert until hit with energy from the
intersection of two laser beams.
it a brain or a piece of artificial­intelligence plasticity dilemma—particularly as brains Aiming those at the synapse under
software, must strike the right balance be­ age and, as it were, fill up? Research by Di­ study enabled them to uncage the neuro­
tween stability and flexibility. It must be mitra Vardalaki, Kwanghun Chung and transmitter and see, by measuring the elec­
stable enough to remember important old Mark Harnett at the Massachusetts Insti­ trical activity in that part of the neuron us­
things yet flexible enough to learn new tute of Technology, just published in Na- ing an ultrafine electrode, whether the
ones without destroying old memory trac­ ture, suggests one way is to preserve into synapse responded. They found that ma­
es—preferably for as long as it exists. adulthood a type of memory­forming syn­ ture pyramidal­neuron protrusions gener­
Learning is a result of changes in the apse found in children. These are called si­ ated electrical activity when exposed to
pattern of neural connectivity in the brain. lent synapses. glutamate, as expected. Filopodia did not,
Each connection between nerve cells, Silent synapses—which, as their name confirming the silence of their synapses.
called a synapse, is a tiny gap between the suggests, transmit no signal from one Silent synapses are, however, useless
ends of branches ramifying from such nerve cell to another—are often found on unless they can be switched on at the ap­
cells. Messages jump across these gaps in the ends of slender, immature protrusions propriate moment. And the researchers
the form of molecules called neurotrans­ from nerve cells, called filopodia. Until confirmed this is possible. They were able
to induce the silent versions on filopodia
to turn into mature, active synapses by
pairing the simulated release of glutamate
with a subsequent surge of electricity in­
side the neuron.
This pairing of events caused silent
synapses to start, within minutes, display­
ing receptor molecules characteristic of ac­
tive synapses. The same pairing, applied to
mature synapses, did nothing. The re­
searchers thereby show it is hard to get a
mature synapse to change the strength of
its connection (thus satisfying the stability
side of the dilemma), but easy to unsilence
a silent one (satisfying the plasticity side).
The next thing to investigate is how,
why and when new filopodia appear. The
discovery of all these eager­to­learn silent
synapses and filopodia, Dr Harnett says, “is
a lever for us to get into understanding
learning in adults and how potentially we
can get access to make it not degrade over
Pyramids of potential the course of ageing or disease”. n

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 74 Science & technology The Economist December 10th 2022

Palaeontology bashing had not been lethal, but also that it armed like males it is usually to protect re­
had happened numerous times. sources rather than garner mates. This is
Join the club All this suggests ankylosaurs used their why, among deer, only reindeer sport ant­
clubs to hit one another, did so frequently, lers regardless of sex. Females’ antlers are
and that (because of the local nature of the smaller than males’, and, unlike males’, are
damage) such fights had a ritual quality to retained over winter. Their purpose is to
them—like contests between modern­day aid defence of patches of ground their
bison, rams and red deer. Those fights are wearers have cleared of snow to reach the
A new explanation for ankylosaurs’
over mates, which is what Dr Arbour sug­ lichen beneath, at a time when they are
weaponised tails
gests was also going on with ankylosaurs. pregnant and in need of good nutrition. Fe­

F ew dinosaurs evoke images of dramat­

ic battle better than Ankylosaurus. This
seven­metre­long late­Cretaceous herbi­
There is a wrinkle. Sexually selected
weapons are generally restricted to males,
and it is impossible to tell a dinosaur’s sex
male cattle are likewise armed with horns
which, though not as big as a bull’s, are suf­
ficient to defend their feeding territories.
vore, shielded by thick bony plates and from its fossilised remains. To add to the Whether something similar pertained
armed with a club at the end of its tail, has confusion, many of the 20­25 seriously to ankylosaurs is difficult to determine
been depicted for decades using its weap­ large ankylosaur tail­clubs that have been from the existing evidence. But, either way,
on to batter the likes of Tyrannosaurus. No found were discovered detached from the the image of the sturdy ankylosaur defend­
doubt it did, if need arose. But a paper in Bi­ rest of the animal. When the assumption ing itself fiercely against the unwanted at­
ology Letters by Victoria Arbour of the Royal was that clubs were for defence, it was log­ tention of predators is probably the excep­
British Columbia Museum, in Victoria, ical to assume also that both sexes were tion. Rather, males were beating up other
Canada, suggests this was not a club’s main thus armed. Now, the question is open. males—and, possibly, females other fe­
purpose. That, she and her colleagues reck­ In modern animals, if females are males. Not quite such a heroic picture. n
on, was to bash other ankylosaurs.
Ankylosaurs came in many species. An­
klyosaurus itself was merely the first to be The origin of lager
discovered. In 2017 Dr Arbour and her team
found yet another. They called it Zuul cruri­
Cheers!
vastator. Zuul was a demon in “Ghostbus­
ters”, a film from the 1980s. This demon’s
A lucky find by a student in Ireland plugs a gap in the history of lager
head, they thought, resembled that of their
find. “Crurivastator” means “destroyer of
shins”—for back then, Dr Arbour accepted
conventional wisdom that tail­clubs were
I n 2011 one mystery in the history of
brewing was replaced by another. The
solved mystery was where the special­
Patagonia (its preference for the cold
being, perhaps, an adaptation promoting
its survival there through the last Ice
for bashing the legs of predators. ised yeast needed to make lager came Age), it has also been found in North
But a closer look raised doubts. The fos­ from. The new one was how it had got to America, China and New Zealand—
sil is spectacularly preserved, which let the lager’s fons et origo, southern Germany— spread, presumably, by natural processes
team study its armoured plates in detail. for the yeast in question had been found like blowing in the wind, or hitching
Many of those on its flanks show signs of in Patagonia. rides on migrating birds and insects.
injury. Plates on most of the rest of the bo­ Lager seems to have originated some­ But it had not been seen in Europe—
dy do not. Nor was this flank­damage from time around the 15th century. Before that, at least, not until Stephen Allen, a stu­
the piercing teeth or slashing claws of all European beers were ales. The differ­ dent at University College, Dublin, col­
predators. Rather, it was the result of being ence is that lager ferments and ages best lected samples of yeast from a wooded
hit by something hard and heavy. On top of in cool conditions, so requires Saccharo­ area of one of the college’s campuses as
this, the damaged plates had healed to dif­ myces pastorianus, a cold­tolerant yeast part of an undergraduate research pro­
ferent degrees, indicating not only that the species, for its production. Ales ferment ject, cultured them, and did a prelimi­
nearer to room temperature. That needs a nary genetic analysis.
different yeast, S. cerevisiae, other ver­ When the results came back, Ger­
sions of which are used by bakers to aldine Butler, his supervisor at the school
leaven bread. of biomolecular and biomedical science,
S. pastorianus is itself, however, a thought she saw S. eubayanus’s elusive
hybrid of S. cerevisiae and something signature. “I had a hard time convincing
else. It was that something which turned the other staff that we might have eu­
up in 2011, in the shape of S. eubayanus, bayanus, it seemed so unlikely,” she says.
discovered by Todd Hittinger of the But a full genetic sequence confirmed it.
University of Wisconsin­Madison and Dr Butler, Mr Allen and their colleagues
Diego Libkind of the Argentine National published the discovery this week in
Council for Scientific and Technical FEMS Yeast Research.
Research. And that raised the intriguing Dr Butler says the analysis shows
question of how this fungus had trav­ modern lager yeast is indeed closely
elled from what eventually became related to the Irish strain, and also to a
Argentina to central Europe before Chris­ previously discovered Tibetan version.
topher Columbus’s first voyage to the The hare set running in 2011 has not quite
Americas in 1492. been caught. Neither the Irish nor the
Seek and ye shall find. Since its initial Tibetan strain is close enough to be the
discovery, S. eubayanus has turned up direct parent of lager yeast. But the hunt
elsewhere. Though its phylogenetic tree has now, at least, been brought to
shows that it did indeed originate in Europe. The game’s afoot.
You want bovver?

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 Culture The Economist December 10th 2022 75

Our books of the year The Naked Don’t Fear the Water.
By Matthieu Aikins. Harper; 336 pages;
The good books $27.99. Fitzcarraldo Editions; £12.99
In 2016 the author, a Canadian journalist,
went undercover to accompany an Afghan
friend on his perilous journey to a new life
in Europe—always knowing that, if push
The best books of 2022 tackled subjects including Hong Kong, financial
came to shove, he could fall back on his
scandals, the Holocaust and cell theory
Western citizenship, while his friend
Confidence Man. By Maggie Haberman. would have to rely on his luck. The result
Politics and current affairs Penguin Press; 608 pages; $32. Mudlark; £25 is a devastatingly intimate insight into the
A chronicle of the life and lies of the 45th refugee crisis.
president of the United States, from outer­
The Impossible City. By Karen Cheung. borough brat to White House bully. This The Age of the Strongman. By Gideon
Random House; 319 pages; $28 and £23 portrait of a master scammer is by a New Rachman. Other Press; 288 pages; $27.99.
An illuminating and moving personal York Times journalist who covered Donald Bodley Head; £20
account of how Hong Kong descended Trump for decades. He learned early, she It is striking how many of today’s leaders
into the mass street unrest of 2019, and of notes, that celebrity was power. fit the strongman mould, notes a col­
the pandemic­abetted repression that has umnist for the Financial Times (formerly of
crushed it since. The author speaks power­ We Have Tired of Violence. By Matt The Economist). His subjects, including Xi
fully for a desperate generation of young Easton. New Press; 341 pages; $27.99 Jinping and Prince Muhammad bin Sal­
Hong Kongers conscious that their home A meticulous narration of the efforts to man, are a threat not only to the well­
city has lost what made it home. bring to justice the killers of Munir, a being of their own countries, he says, but
prominent Indonesian human­rights to a world order in which liberal ideas are
There Are No Accidents. By Jessie Singer. activist murdered in 2004. It reads like an increasingly embattled.
Simon & Schuster; 352 pages; $27.99 enthralling legal­procedural whodunnit,
A look at why Americans are so much as evidence is slowly unearthed from The Economic Weapon. By Nicholas
more likely to suffer violent “accidents” telephone records, lost documents are Mulder. Yale University Press; 448 pages;
than people in other rich countries. The retrieved from deleted computer files and $32.50 and £25
author shows how poor road design, intriguing new witnesses emerge. A fortuitously timed history of the use of
rather than bad driving, explains the economic sanctions during the interwar
persistence of car crashes and how fac­ period of the 20th century. Their mixed
tories use rule books and disciplinary → Also in this section success cautions against hoping that the
procedures as a cheap substitute for real West’s sanctions against Russia can bring
78 Books by our writers
safety improvements. about an end to war in Ukraine.

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 76 Culture The Economist December 10th 2022

the welcome mat for plutocrats and oli­ The Facemaker. By Lindsey Fitzharris.
Business and economics garchs. This is an indictment of the law­ Farrar, Straus and Giroux; 336 pages; $23.99.
yers, pr firms and others who help siphon Allen Lane; £20
dirty money through London’s banks and An account of the pioneering work done
Money Men. By Dan McCrum. Bantam property market. by Harold Gillies in the early 20th century
Press; 352 pages; £20 at specialist maxillofacial units in Britain.
The dramatic story of the demise of Wire­ Slouching Towards Utopia. By J. Bradford An engaging biography of a masterful
card, once one of Europe’s brightest tech DeLong. Basic Books; 624 pages; plastic surgeon, it is also a heartening
stars. The author, a journalist at the Fi­ $35 and £30 tribute to medical progress.
nancial Times, was one of a small band of Written with wit, style and a formidable
sceptics who believed the firm was a giant command of detail, this book places the Agatha Christie. By Lucy Worsley.
fraud. Faced with a vicious counter­attack successes and disasters of the 20th centu­ Pegasus Crime; 432 pages; $29.95.
from the company and its spies, and the ry in their economic context. In doing so, Hodder & Stoughton; £25
German establishment’s reluctance to it provides insights into how things have On December 3rd 1926 the famous novelist
accept a national champion could be a gone wrong in more recent years—and left her husband and young daughter and
sham, they had a long wait for vindication. what must go right if catastrophe is to be went missing for 11 days. That mysterious
avoided in the current century. disappearance is at the heart of this col­
Chip War. By Chris Miller. Scribner; 464 ourful new biography, which pieces to­
pages; $30. Simon & Schuster; £20 Power Failure. By William Cohan. Port­ gether what really happened that winter.
Semiconductors are central to modern folio; 816 pages; $40. Allen Lane; £35
life—they power everything from ad­ A monumental study of the firm founded The Huxleys. By Alison Bashford. Univer­
vanced weapons systems to toasters—but in 1892 as the General Electric Company. sity of Chicago Press; 576 pages; $30. Pub­
the supply chain is alarmingly fragile. Its story makes clear how important bril­ lished in Britain as “An Intimate History of
Many countries see chips as a strategic liant people are to business success—and Evolution”; Allen Lane; £30
asset. This timely book shows how eco­ how their brilliance can sometimes be­ Julian Huxley and Thomas Henry Huxley,
nomic, geopolitical and technological come a dangerous vulnerability. his grandfather, were both acolytes of
forces shaped an essential industry. Darwinism. They shared a scientific geni­
us, an appetite for culture (both were keen
Dead in the Water. By Matthew Campbell poets) and a tragic tint of mental instabil­
and Kit Chellel. Portfolio; 288 pages; $27. Biography and memoir ity. Both lives are painstakingly illuminat­
Atlantic Books; £18.99 ed in this double biography.
Books about merchant shipping are rarely
so gripping, but this one looks at what The Escape Artist. By Jonathan Freedland. Inventor of the Future. By Alec Nevala­
really happened when pirates attacked the Harper; 400 pages; $28.99. John Lee. Dey Street Books; 672 pages;
Brillante Virtuoso in the Gulf of Aden in Murray; £20 $35 and £25
2011. A startling tale of fraud and impunity. In 1944 Rudolf Vrba escaped from Ausch­ Buckminster Fuller was a path­breaking
witz and helped produce a report on its American architect and engineer. This
The Power Law. By Sebastian Mallaby. genocidal horrors. Reluctant as some were portrait gives him his due as a stunningly
Penguin Press; 496 pages; $30. to face the truth of the death camps, his original thinker and prophet of tech­
Allen Lane; £25 bravery and tenacity saved many lives. nology. He comes alive as a visionary who
Venture capitalists are often accused of This harrowing and astonishing story is rose above his imperfections to labour for
prioritising growth at all costs, so feeding told with pace and verve, and is an impor­ the benefit of humankind.
a recklessly aggressive capitalist culture. tant addition to Holocaust historiography.
In this authoritative book a former jour­ Hayek. By Bruce Caldwell and Hansjoerg
nalist at The Economist—and husband of Klausinger. University of Chicago Press; 824
the current editor­in­chief—acknowl­ pages; $50 and £35
edges the industry’s shortcomings but An elegant account of one of the most
eloquently defends its achievements. interesting figures in 20th­century eco­
nomics. It is packed with great anecdotes
For Profit. By William Magnuson. Basic and punctures myths about the Austrian­
Books; 368 pages; $32 and £25 British economist. Mostly it confirms the
A magnificent history of corporations, view that he was a rather strange man, and
stretching from the societas publicanorum not always a very nice one.
of ancient Rome, through Renaissance
Florence, the Age of Discovery and the
might of American industrial capitalism
to Silicon Valley. Private enterprises have History
produced some of humankind’s greatest
achievements. But often the most dazzling
overstep the mark, leaving a trail of debris Budapest. By Victor Sebestyen. W&N;
and distrust behind them. 432 pages; £25
Forever caught between East and West, the
Butler to the World. By Oliver Bullough. capital of Hungary encapsulates the drama
St Martin’s Press; 288 pages; $28.99. of central Europe in its wonders and hor­
Profile Books; £20 rors. The author, who left the city as a
After making a decision to attract foot­ child after the uprising against commu­
loose international capital after the sec­ nist rule in 1956, excels in describing
ond world war, Britain went on to roll out Budapest’s Habsburg heyday, the histo­

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 The Economist December 10th 2022 Culture 77

rical role of its Jewish population and the

hubris and humiliations that have helped
shape the city.

The Siege of Loyalty House. By Jessie

Childs. Bodley Head; 318 pages; £25
The broad subject of this poignant book is
what happens to people during civil war:
how quickly and imperceptibly order
becomes chaos and decency yields to
cruelty. In other words, how close to inhu­
manity humanity always is. The focus is
on an episode in the English civil war, but
the story is timeless.

The Serpent Coiled in Naples. By Marius

Kociejowski. University of Chicago Press;
506 pages; $27.95. Haus Publishing; £20
To write about Naples, you really need to
be a poet—or, even better, an antiquarian
bookseller. This author is both and has
produced a delightful work that is as
eclectic, labyrinthine, ironic and shocking
as the great Italian city itself.

A Pipeline Runs Through It. By Keith 1970s. It is loosely organised around a When We Were Birds. By Ayanna Lloyd
Fisher. Allen Lane; 768 pages; £35 series of murders on a coastal road and the Banwo. Doubleday; 304 pages; $27.
A sprawling, scrupulously researched career of a crooked cop, but takes detours Hamish Hamilton; £14.99
history of oil from the Palaeolithic era to to Lebanon, Los Angeles, Colombia and Set in Trinidad, this debut novel tells of
the first world war. Black gold has been as Cancún. A caustic alternative history of the separate struggles and twinned desti­
much a curse as a blessing for the people the dream and development of Israel. nies of two characters from contrasting
on whose land it has been found. A com­ walks of life. What looks set to be a simple
pelling read and an immensely valuable Still Born. By Guadalupe Nettel. Translat­ tale of boy meets girl soon develops into a
guide to a great and terrible industry. ed by Rosalind Harvey. Fitzcarraldo Edi­ thoroughly original and emotionally rich
tions; 200 pages; £12.99. To be published in examination of love, grief and inheritance.
The World: A Family History. By Simon America by Bloomsbury in August; $26.99
Sebag Montefiore. W&N; 1,344 pages; A novel about the choices women make
£35. To be published in America by Knopf over whether to have children, and what
in May; $45 happens if their offspring turn out differ­ Culture and ideas
Don’t be put off by the doorstopper length: ently from how they expected. An un­
this history of the world, told through the sentimental and tightly plotted story.
stories of eminent families, is a riveting Of Boys and Men. By Richard Reeves.
page­turner. The author brings his cast of The Trees. By Percival Everett. Graywolf Brookings Institution Press; 256 pages;
dynastic titans, rogues and psychopaths to Press; 320 pages; $16. Influx Press; £9.99 $28.99. Swift Press; £20
life with pithy, witty pen portraits, ladling Someone is murdering white people in In some ways the world remains male­
on the sex and violence. An epic that both Money, Mississippi. A mutilated black dominated, yet many men are falling
entertains and informs. body is found at the crime scenes but behind, says the author. Boys do worse
keeps disappearing. At first the victims are than girls in school in many countries,
connected to the lynching of Emmett Till and are more likely everywhere to end up
in the neighbourhood in 1955; but then the in prison or kill themselves. He suggests
Fiction circle of comeuppance widens. Two wise­ practical, incremental reforms, such as
cracking detectives head down to in­ having boys start school a year later.
vestigate. A bitingly funny, boldly satir­
The Candy House. By Jennifer Egan. ical, deadly serious tale of racism and the Life is Hard. By Kieran Setiya. Riverhead
Scribner; 323 pages; $28. Little, Brown; £20 legacy of injustice. Books; 240 pages; $27. Hutchinson
A novel about what humans lose in of­ Heinemann; £16.99
fering up their private lives to algorithms Small Things Like These. By Claire Kee­ A professor of philosophy at MIT argues
that mine them for profit. For all its fluen­ gan. Grove Press; 128 pages; $20. Faber; £10 that suffering need not diminish or spoil a
cy in the languages of gaming, addiction In the lead­up to Christmas in 1985, Bill good life. Living well and hardship can go
and tech, this is a social novel with nu­ Furlong, a coal and timber merchant, is together, he says; clear thinking is the key.
merous characters and perspectives; a making deliveries in his small Irish town. A humane, consoling guide to this vale of
kind of 21st­century “Middlemarch”. His mind is on his unsettled childhood tears, with a glimmer of hope.
and festive arrangements for his own
Maror. By Lavie Tidhar. Head of Zeus; offspring—until he comes across a dis­ The Subplot. By Megan Walsh. Columbia
560 pages; £20 tressed girl, locked up in one of the coun­ Global Reports; 133 pages; $16 and £11.99
Corruption, drugs and assassination try’s Magdalene laundries (ie, homes for China’s modern literary landscape teems
feature in this wildly ambitious saga set “fallen women”). A haunting short book with corruption exposés, homoerotic
over four decades in Israel from the early with a quiet, ordinary hero at its heart. fantasy, emotive migrant­worker poetry,

012
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 78 Culture The Economist December 10th 2022

time­travelling entrepreneurs and deso­ naean taxonomy of biology, people are technology, but to speed it up to solve
lately radical science fiction. The author splitters, not lumpers, forever seeking to those defects and achieve social progress.
makes a powerful case for Anglophone parse and quantify the world.
readers who want to understand China to This Mortal Coil. By Andrew Doig.
look past the headlines and turn to books. The Equality Machine. By Orly Lobel. Bloomsbury; 384 pages; $34 and £25
PublicAffairs; 368 pages; $30 and £25 A biochemist at the University of Man­
Papyrus. By Irene Vallejo. Translated by This author agrees with those who fear chester provides a surprisingly upbeat
Charlotte Whittle. Knopf; 464 pages; $35. artificial intelligence can be biased. But, in history of death—and points to medical
Hodder & Stoughton; £25 a brilliant act of intellectual jiu­jitsu, she marvels that may lie ahead. An empower­
A lively history of books in the ancient argues that the answer is not to slow the ing story of human ingenuity. n
world. The committing of words and
stories to papyrus scrolls was, the author
says, as disruptive as the internet. Books by our writers

Magnificent Rebels. By Andrea Wulf.

The midnight oil
Knopf; 512 pages; $35. John Murray; £25
An arresting group biography of the “Jena
Our correspondents wrote about economics, sanctions, polling and space travel
Set”, a gang of young German intellectuals
who played an outsize part in the move­ Surviving the Daily Grind: Bartleby’s ductor exports to China. “Illuminating”,
ment that came to be known as Romanti­ Guide to Work. By Philip Coggan. Profile reckoned International Affairs; “balanced,
cism. It reads as if Iris Murdoch had set a Books; 208 pages; £14.99. To be published fast­paced and often surprising”, said the
novel during an especially muddy phase in America by Pegasus Books in July; $26.95 Wall Street Journal.
of German metaphysics. Our former Bartleby columnist takes a
wry look at the changing world of work, Money in One Lesson. By Gavin Jackson.
covering everything from automation to Pan Macmillan; 400 pages;
presenteeism. He skewers corporate $24.95 and £18.99
Science and technology jargon and a range of management One of our economics and finance corre­
fads, and proposes various new laws of spondents answers the important ques­
his own—such as “80% of the time of tions on the nature of money and the
The Song of the Cell. By Siddhartha 80% of people in a meeting is wasted”, ways it shapes the world. The book draws
Mukherjee. Scribner; 496 pages; $26.99. and “jargon abhors a vacuum”. on historical examples to dispel myths
Bodley Head; £22 and show how societies and their citi­
A tour d’horizon of cell theory, by a clinical Backfire. By Agathe Demarais. Columbia zens have always been entwined with
oncologist and professor of that subject at University Press; 304 pages; $30 and £25 matters of lucre. “A lucid and at times
Columbia University. Cases from the A look at the ripple effects of American very funny history of money”, concluded
author’s own career illustrate the results sanctions by the global forecasting direc­ the Financial Times.
of both cellular understanding and the tor of the Economist Intelligence Unit,
lack of it. The result is part history lesson, who used to work for the French Treasury Strength In Numbers. By G. Elliott
part biology lesson and part reminder of in Russia and Lebanon. It highlights Morris. W.W. Norton; 224 pages; $28.95
how science itself actually proceeds. sanctions’ unexpected side­effects—and and £21.99
their potential to backfire, as in the case One of our data journalists reflects on the
Elusive. By Frank Close. Basic Books; 304 of recent American controls on semicon­ history of polls, showing how they not
pages; $26. Allen Lane; £25 only predict the outcomes of elections
A compelling account of the long search but improve democracy. Polling, he
for the Higgs boson: its existence was argues, is a way for citizens to have influ­
predicted in 1964, but it did not show its ence they otherwise would not. “A short,
face to the world until 2012. This is also a valuable guide”, said the Guardian. “Polit­
biography of Peter Higgs, the shy physicist ical junkies and policy analysts will
after whom the particle was named. savour this informative deep dive,”
thought Publishers Weekly.
An Immense World. By Ed Yong. Random
House; 464 pages; $30. Vintage; £17.99 The Economist Explains: Oddly In­
Human senses can only perceive a fraction formative Matters of Fact that Amaze
of the energy and information moving and Delight. Edited by Tom Standage.
through the world. Animals manage much Profile Books; 256 pages; £9.99
more: some birds can sense magnetic A compendium of the extraordinary
fields, bees can see ultraviolet light and quandaries and conundrums, bizarre
bats perceive their surroundings using facts and head­scratchers featured in our
sound waves. By examining how such popular “The Economist Explains” series
creatures sense their environments, this of articles. The editor of our future­
book lifts the shroud on previously invisi­ gazing annual, “The World Ahead”, col­
ble dimensions of the world itself. lects the mind­stretching answers our
journalists wrote to questions such as:
Beyond Measure. By James Vincent. W.W. How do footballers get their shirt num­
Norton; 432 pages; $32.50. Faber; £18.99 bers? How do you move a horse from one
Humans are list­makers, this deeply re­ country to another? What counts as a
searched history of measurement argues. journey into space?
From Aristotle’s “Categories” to the Lin­

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 THE
MOMENT TO CHOOSE

RIGHT PATH

AND A CIRCULAR

ECONOMY
ESCAPE THIS PLASTIC POLLUTION

NOW IS THE WE NEED GLOBAL RULES TO CREATE FOR PLASTICS

CRISIS.

AN AMBITIOUS UN TREATY IS A ONCE IN A GENERATION OPPORTUNITY TO

MAKE OUR WAY OUT OF THE PLASTIC POLLUTION CRISIS.

Negotiations for a global plastics treaty have finally begun.

Governments must be bold and pave the way towards an ambitious, effective and
legally binding treaty that sets global rules to hold all governments accountable.
A treaty that ensures a future with no plastic in nature.

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 80
Economic & financial indicators The Economist December 10th 2022

Economic data

Gross domestic product Consumer prices Unemployment Current-account Budget Interest rates Currency units
% change on year ago % change on year ago rate balance balance 10-yr gov't bonds change on per $ % change
latest quarter* 2022† latest 2022† % % of GDP, 2022† % of GDP, 2022† latest,% year ago, bp Dec 7th on year ago
United States 1.9 Q3 2.9 1.9 7.7 Oct 8.1 3.7 Nov -3.5 -5.5 3.4 194 -
China 3.9 Q3 16.5 3.3 2.1 Oct 2.0 5.5 Oct‡§ 2.5 -7.1 2.7 §§ -1.0 6.98 -8.7
Japan 1.5 Q3 -0.8 1.5 3.8 Oct 2.5 2.6 Oct 1.9 -6.3 nil -8.0 137 -16.9
Britain 2.4 Q3 -0.7 4.4 11.1 Oct 8.0 3.6 Aug†† -5.9 -6.6 3.3 253 0.82 -7.3
Canada 3.9 Q3 2.9 3.1 6.9 Oct 6.7 5.1 Nov 1.6 -2.7 2.8 118 1.36 -7.3
Euro area 2.3 Q3 1.3 3.1 10.0 Nov 8.5 6.5 Oct 1.3 -4.2 1.8 214 0.95 -6.3
Austria 1.7 Q3 -13.5 4.8 10.6 Nov 8.8 4.6 Oct -0.7 -3.5 2.4 249 0.95 -6.3
Belgium 1.9 Q3 0.7 2.2 10.6 Nov 10.0 5.4 Oct -1.2 -5.2 2.5 248 0.95 -6.3
France 1.0 Q3 0.7 2.4 6.2 Nov 6.0 7.1 Oct -1.8 -5.4 2.3 235 0.95 -6.3
Germany 1.3 Q3 1.6 1.6 10.0 Nov 8.4 3.0 Oct 4.1 -4.1 1.8 214 0.95 -6.3
Greece 2.1 Q3 -2.1 5.5 9.1 Oct 9.9 11.6 Oct -6.3 -4.5 3.7 244 0.95 -6.3
Italy 2.6 Q3 1.9 3.7 11.8 Nov 8.6 7.8 Oct -0.8 -5.7 3.6 269 0.95 -6.3
Netherlands 3.1 Q3 -0.9 4.2 14.3 Oct 12.0 3.7 Oct 6.3 -1.4 2.1 230 0.95 -6.3
Spain 3.8 Q3 1.0 4.4 6.8 Nov 9.2 12.5 Oct 0.2 -5.4 2.9 248 0.95 -6.3
Czech Republic 1.7 Q3 -0.6 2.0 15.1 Oct 15.7 2.3 Oct‡ -3.7 -5.1 4.7 219 23.1 -2.2
Denmark 3.3 Q3 2.1 2.8 10.1 Oct 7.9 2.6 Oct 9.0 0.9 2.0 211 7.08 -6.6
Norway 2.5 Q3 6.3 3.5 7.5 Oct 6.4 3.4 Sep‡‡ 18.8 12.2 1.4 76.0 10.0 -9.8
Poland 4.5 Q3 4.1 5.0 17.4 Nov 14.6 5.1 Nov§ -3.3 -3.7 6.5 325 4.47 -8.9
Russia -4.0 Q3 na -3.6 12.6 Oct 14.0 3.9 Oct§ 12.6 -1.8 10.3 172 62.9 17.6
Sweden 2.6 Q3 2.4 3.0 10.9 Oct 7.9 7.1 Oct§ 3.7 -0.5 1.7 158 10.4 -12.0
Switzerland 0.5 Q3 1.0 2.0 3.0 Nov 3.1 2.0 Nov 5.5 -1.0 1.0 125 0.94 -1.1
Turkey 3.9 Q3 -0.5 5.0 84.4 Nov 74.1 9.9 Sep§ -7.8 -3.3 10.5 -997 18.6 -27.2
Australia 5.9 Q3 2.6 3.7 7.3 Q3 6.4 3.4 Oct 2.0 -1.9 3.4 171 1.49 -5.4
Hong Kong -4.5 Q3 -10.0 -2.4 1.8 Oct 1.9 3.8 Oct‡‡ 4.4 -6.4 3.4 189 7.79 0.1
India 6.3 Q3 19.3 7.0 6.8 Oct 6.9 8.0 Nov -2.5 -6.4 7.3 88.0 82.5 -8.6
Indonesia 5.7 Q3 na 5.0 5.4 Nov 4.5 5.9 Q3§ 2.1 -3.9 7.0 63.0 15,638 -8.1
Malaysia 14.2 Q3 na 6.0 4.0 Oct 3.4 3.6 Sep§ 1.6 -6.1 4.1 55.0 4.40 -3.9
Pakistan 6.2 2022** na 6.2 23.8 Nov 18.2 6.3 2021 -4.0 -7.7 13.6 ††† 171 224 -20.9
Philippines 7.6 Q3 12.1 7.7 8.0 Nov 5.4 4.5 Q4§ -4.2 -7.8 6.8 182 55.5 -9.2
Singapore 4.1 Q3 4.6 3.5 6.7 Oct 6.1 2.0 Q3 18.8 -1.0 3.0 128 1.36 0.7
South Korea 3.1 Q3 1.3 2.6 5.0 Nov 5.2 2.4 Oct§ 1.0 -3.2 3.5 127 1,322 -10.8
Taiwan 4.0 Q3 7.5 3.0 2.3 Nov 3.0 3.6 Oct 14.0 -1.4 1.3 71.0 30.6 -9.4
Thailand 4.5 Q3 5.0 3.2 5.5 Nov 6.1 1.2 Sep§ -1.2 -5.0 2.5 82.0 35.1 -4.0
Argentina 6.9 Q2 4.2 5.0 88.0 Oct 73.8 6.9 Q2§ -0.6 -4.4 na na 170 -40.3
Brazil 3.6 Q3 1.6 2.7 6.5 Oct 9.3 8.3 Oct§‡‡ -2.4 -5.6 12.8 182 5.22 8.1
Chile 0.3 Q3 -4.6 2.3 13.3 Nov 11.6 8.0 Oct§‡‡ -8.1 -0.3 5.3 -30.0 872 -4.0
Colombia 7.1 Q3 6.4 7.6 12.5 Nov 10.1 9.7 Oct§ -5.6 -4.7 12.6 458 4,824 -19.2
Mexico 4.3 Q3 3.6 2.7 8.4 Oct 7.9 3.2 Oct -1.0 -2.5 9.0 164 19.8 6.9
Peru 1.7 Q3 1.8 2.7 8.4 Nov 7.8 6.0 Oct§ -3.6 -1.5 7.6 164 3.81 7.1
Egypt 3.3 Q2 na 6.6 16.2 Oct 13.3 7.4 Q3§ -4.6 -7.4 na na 24.6 -36.2
Israel 7.6 Q3 2.1 5.9 5.1 Oct 4.5 4.1 Oct 2.9 0.3 3.3 239 3.43 -8.8
Saudi Arabia 3.2 2021 na 8.9 3.0 Oct 2.5 5.8 Q2 13.5 3.5 na na 3.76 -0.3
South Africa 4.1 Q3 6.6 1.9 7.8 Oct 7.0 32.9 Q3§ -1.3 -5.5 10.5 103 17.2 -7.5
Source: Haver Analytics. *% change on previous quarter, annual rate. †The Economist Intelligence Unit estimate/forecast. §Not seasonally adjusted. ‡New series. **Year ending June. ††Latest 3 months. ‡‡3-month moving
average. §§5-year yield. †††Dollar-denominated bonds.

Markets Commodities
% change on: % change on:
Index one Dec 31st index one Dec 31st
The Economist commodity-price index % change on
In local currency Dec 7th week 2021 Dec 7th week 2021 2015=100 Nov 29th Dec 6th* month year
United States S&P 500 3,933.9 -3.6 -17.5 Pakistan KSE 41,819.3 -1.2 -6.2 Dollar Index
United States NAScomp 10,958.6 -4.4 -30.0 Singapore STI 3,225.5 -2.0 3.3 All Items 147.6 150.2 4.4 -3.5
China Shanghai Comp 3,199.6 1.5 -12.1 South Korea KOSPI 2,382.8 -3.6 -20.0 Food 137.3 133.8 -4.0 -1.7
China Shenzhen Comp 2,071.0 2.6 -18.1 Taiwan TWI 14,630.0 -1.7 -19.7 Industrials
Japan Nikkei 225 27,686.4 -1.0 -3.8 Thailand SET 1,622.3 -0.8 -2.1 All 157.3 165.6 11.8 -4.9
Japan Topix 1,948.3 -1.9 -2.2 Argentina MERV 171,177.9 1.6 105.0 Non-food agriculturals 134.9 134.2 -4.4 -13.1
Britain FTSE 100 7,489.2 -1.1 1.4 Brazil BVSP 109,068.6 -3.0 4.1 Metals 163.9 174.9 16.3 -2.8
Canada S&P TSX 19,973.2 -2.3 -5.9 Mexico IPC 50,726.0 -1.9 -4.8
Sterling Index
Euro area EURO STOXX 50 3,920.9 -1.1 -8.8 Egypt EGX 30 14,787.1 11.5 24.2
All items 187.8 187.6 -1.2 4.4
France CAC 40 6,660.6 -1.2 -6.9 Israel TA-125 1,852.0 -1.7 -10.7
Germany DAX* 14,261.2 -0.9 -10.2 Saudi Arabia Tadawul 10,185.1 -6.5 -10.1 Euro Index
Italy FTSE/MIB 24,241.4 -1.5 -11.4 South Africa JSE AS 74,011.1 -1.1 0.4 All items 158.1 158.6 0.1 3.3
Netherlands AEX 718.3 -0.8 -10.0 World, dev'd MSCI 2,654.3 -2.4 -17.9 Gold
Spain IBEX 35 8,290.5 -0.9 -4.9 Emerging markets MSCI 958.8 -1.4 -22.2 $ per oz 1,753.2 1,774.5 4.5 -0.5
Poland WIG 55,983.9 -0.1 -19.2
Brent
Russia RTS, $ terms 1,098.9 -2.3 -31.1
$ per barrel 83.3 79.6 -16.6 5.4
Switzerland SMI 11,010.0 -1.1 -14.5 US corporate bonds, spread over Treasuries
Turkey BIST 4,827.0 -3.0 159.8 Sources: Bloomberg; CME Group; Cotlook; Refinitiv Datastream;
Dec 31st
Fastmarkets; FT; ICCO; ICO; ISO; Live Rice Index; LME; NZ Wool
Australia All Ord. 7,423.2 -0.8 -4.6 Basis points latest 2021
Services; Thompson Lloyd & Ewart; Urner Barry; WSJ. *Provisional.
Hong Kong Hang Seng 18,814.8 1.2 -19.6 Investment grade 155 120
India BSE 62,410.7 -1.1 7.1 High-yield 491 332
Indonesia IDX 6,818.8 -3.7 3.6 Sources: Refinitiv Datastream; Standard & Poor's Global Fixed Income For more countries and additional data, visit
Malaysia KLSE 1,466.9 -1.5 -6.4 Research. *Total return index. economist.com/economic­and­financial­indicators

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 Graphic detail Protests in Iran The Economist December 10th 2022 81

→ Demonstrations have erupted in nearly every corner of Iran

Protests, Sep 16th-Dec 2nd 2022 Deaths No deaths Number of 100 Deadliest episodes of protest recorded by ACLED*
deaths Total within a 90-day period
20
1
Outcome: New government
Civil war/coup attempt Other/ongoing
Tabriz
Rasht Number of Deaths at protests
deadly protests per million people

Myanmar, 2021 166 10.9

Shahrud
Mashhad
Ethiopia, 2016 162 3.7

Hamadan Iran, 2022 109 3.8

Tehran, site of Mahsa
Amini’s death India, 2016 92 0.1

Birjand Iraq, 2019 81 11.6

I R A N Bangladesh, 2014 68 0.7
Isfahan
Egypt, 2013 47 16.9
Ahvaz
Colombia, 2021 47 1.7
Zahedan
Kenya, 2008 43 7.9
Shiraz Venezuela, 2019 36 2.1

Sudan, 2022 35 1.7

Number of protests
Bandar-e-Abbas Ethiopia, 2020 33 1.7
82
76
Kenya, 2017 31 1.0
Mahsa Amini 100 km
dies in police 51 Burundi, 2015 30 4.1
custody
Nigeria, 2020 29 0.3

Egypt, 2011 29 10.1

Aug Sep Oct Nov

*Countries with over 10m people and deadly protests on ten or more
days. Deadliest episode in movement shown. Data starts between
1997 and 2021, depending on country Sources: ACLED; press reports

Lifting the veil gime change, they do tend to foreshadow

even greater political turmoil. Iran has not
does not mean that the movement is ebb­
ing. Since November 16th acled has logged
seen the degree of unrest that often follows at least one protest every day and a daily av­
such protests since its revolution in 1979. erage of 16, only slightly below the 23 per
The movement began on September day from October 1st to November 15th.
16th, when Mahsa Amini, whom Iran’s mo­ Because acled began studying Iran in
rality police had arrested for wearing her 2015, its archive does not cover previous
Protest movements as deadly as Iran’s
headscarf “improperly”, died in their cus­ episodes of unrest in the country. The cur­
often end in revolution or civil war
tody. Iranians flocked to the streets, calling rent recorded death toll of 322 dwarfs cal­

B eyond their remarkable bravery, little

is known for certain about the protes­
ters who have thronged Iranian streets in
for “women, life, freedom”. The govern­
ment and affiliated thugs responded with
force, including gunshots and beatings.
culations by other sources of fatalities dur­
ing the Green Movement protests in 2009,
at around 30. It is of a similar scale to one
recent months. Amid internet blackouts The regime has also suppressed news estimate of deaths in early 1979, as the
and harsh repression, external observers about the protests, jailing journalists and overthrow of the shah drew near.
seeking to study the demonstrations have blocking internet access. Only reports that The data also make the protests look
to rely on news articles, reports by human­ evade these obstacles enter acled’s ar­ relatively bloody when compared with un­
rights groups and social­media posts. chive, often weeks after events occurred. rest elsewhere. Such analyses are impre­
Yet when compiled methodically, even As a result, its counts of protests and cise: the level of detail in acled’s numbers
such fragmentary sources can offer clues deaths are lower bounds, not final tallies. varies from place to place, and demonstra­
about the movement’s evolution and fate. The data show that violence peaked ear­ tions differ in scale and danger. However,
Since 1997 the Armed Conflict Location and ly in the uprising. At least one person died protests in which people die are relatively
Event Data Project (acled), a research in 46 of the 213 protests logged in the first rare, and especially likely to be reported.
group, has collected information on politi­ week. The worst event was a march on Sep­ Among all movements in acled’s data,
cal unrest. Its records cover 1.6m events, tember 30th, in which protesters sought the Iranian uprising is the third­worst 90­
like protests or battles, in 130,000 places. justice for a girl allegedly raped by a police day period measured by the number of
Iran’s rulers claim without evidence chief. According to acled, police opened deadly protests, and sixth by total deaths at
that foreign governments are behind the fire and killed 97 “marchers and rioters”. protests. On a per­person basis, excluding
unrest. acled’s data show that the move­ Since then, the share of protests record­ countries with populations below 10m, it
ment is too broad for this to be credible. ed as deadly has fallen from 22% to 5%. Re­ ranks eighth in both. This should make
Protests have persisted for months, and porting delays may account for some of Iran’s rulers nervous. Among the top ten
reached all over the country. Although epi­ this, and security forces may be exercising cases in each category, around half have
sodes of this scale do not always lead to re­ more restraint. But the decline in deaths ended in revolution, coups or civil war. n

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 82
Obituary Jay Pasachoff The Economist December 10th 2022

cloudless daytime sky. In Rajasthan in 1995 he logged a dazzling

“diamond­ring” effect, as the last ray of sunlight shone through a
valley on the Moon’s surface. Near Bucharest in 1999, sunspots at
the peak of their 11­year cycle made the Sun’s corona bristle with
giant streamers.
It was the corona, the outermost layer of the Sun’s atmosphere,
that most interested him. His love of eclipses was partly because
he could study the corona properly while the Sun’s disc was dark,
noting its flares, its loops of ionised gas and the plumes from the
polar regions. With the data he recorded he could try to discover
why the corona, one millionth as bright as the disc, was 300 times
hotter. Was that heat generated by thousands of constantly erupt­
ing nanoflares? Or was it caused by vibrations in the gas loops,
which were held in place by the Sun’s magnetic field? Both were
plausible, but there were at least a dozen other theories around.
The unadventurous wondered why he had to see so many
eclipses. (He also studied the much rarer transits across the Sun of
Mercury and Venus.) But no two were alike, because the Sun, he
explained, was never the same twice. It was like a river, forever
changing, not least because it was married to the sunspot cycle.
Sceptics also asked why he did not rely on space­based telescopes,
with coronagraphs that could block out the Sun’s photosphere.
But those either hid too much of the corona, or failed to block the
disc entirely; and even with 99% of it obscured, the sky would be
10,000 times brighter than in a total eclipse.
Besides, his shadow­loving self was hooked. He had been en­
tranced ever since his visits as a boy to the Hayden Planetarium in
The shadow-lover New York City, where over the entrance a triptych of paintings by
Howard Russell Butler recorded the total eclipses of 1918, 1923 and
1925 as witnessed in America. At 15 he was building a telescope,
even grinding and polishing the mirror: an achievement that
helped him into Harvard the next year. As a freshman he was taken
to view his first eclipse, from a DC­3 plane safely above the rain­
Jay Pasachoff, solar astronomer and passionate proselytiser,
clouds, off the Massachusetts coast. The corona outlined the
died on November 20th, aged 79
Moon in white. There was no turning back from that wonder.

S ince the very beginnings of humankind, solar eclipses have

caused terror. The gradual encroaching of the Moon’s shadow
between the Earth and the Sun was a sign of divine wrath, with­
Remembering this, he felt impelled to tell everyone to look up,
be inspired, and learn. In Manitoba once, during an eclipse, he
watched in disbelief as drivers simply turned their headlights on,
drawing the light that made crops grow and men and women live; but did not stop. People had to notice. Around the Williams cam­
it foretold the end of empires and the deaths of kings. Among the pus he would give 20­minute lectures on the next eclipse to any­
ten plagues of Egypt, one was the sudden descent of darkness in one who, to his amazement, hadn’t heard of it. Almost all his trips
the middle of the day. In the modern world, a total eclipse is still a included students, his own and others’; often friends and family
deeply eerie occurrence: a sudden cold darkness in daylight when came too. He wanted not just to train his undergraduates in using
the birds stop singing and begin to roost, and even know­it­all spectrographs, but also to fire them as he had been.
Westerners feel a strong twinge of disturbance. The notion of citizen science pleased him greatly. He credited it
Jay Pasachoff’s reaction was completely different. To him “the to Edmund Halley, who in 1715 had asked “the Curious” to “Obser­
perfect alignment, in solemn darkness, of the celestial bodies that ve...with all the care they can” the total eclipse over London. Tak­
mean most to us” gave a primal thrill that was indescribable. As a ing that lead, he wrote his many textbooks, field guides and maga­
self­styled “umbraphile”, a shadow­lover, his greatest joy was to zine articles in everyday, accessible language. In “The Cosmos”,
stand in that brief darkness cast by the shadow of the Moon. Then, his most comprehensive work, the maths was boxed out and could
although he had all manner of computers and cameras and, usual­ easily be avoided. When teaching the public about astronomy, he
ly, eager student helpers to record the event, he made sure he stole preferred to stress art and history—Renaissance prints of armilla­
at least some seconds to don his filter­glasses, raise his binoculars ry spheres, a comet­sketch by Paul Klee—rather than equations.
and admire the marvel directly, man to star. His greatest teaching aid, however, was eclipses themselves. In
He had observed 75 eclipses—totals, partials and annulars, 2017 his moment came, with a path of totality that stretched from
where some sunlight remains as a delicate ring—thereby ranking Oregon to South Carolina. In the event, 88% of adult Americans
second in the world. For 50 years, as professor of astronomy at watched it either in person or electronically, almost twice as many
Williams College in Massachusetts and director of its Hopkins Ob­ as had watched the Super Bowl earlier that year. But his focus was
servatory, he saw that as his principal job. It took him all over the on the schoolchildren, millions of them as he hoped, gazing up
place. Every 18 months or so, the usual time­lapse between total through their filter­glasses. Several of his own students, to his de­
eclipses, he would fly off, packing hundreds of pounds of equip­ light, had gone on to head astronomy departments. How many of
ment and his orange trousers, and on his return he would be plan­ those children, enthralled by the creeping Moon­shadow, might
ning the next excursion, scraping funds together, scanning the do the same?
“paths of totality” across the globe and poring over cloudiness sta­ An even better eclipse was forecast for 2024, with totality from
tistics to be sure of an unobscured view. (He became an expert on Mexico to the Canadian Maritimes. He wanted everyone to ob­
weather, writing a guide to it, as well as the Sun.) In 1970 he serve it. As for him, he was already plotting hotel reservations in
watched from Mexico as the stars and planets came into view in a Sinaloa, the place with the best view. n

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