[Feb 17th 2024]

The world this week

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The world this week

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The world this week

Politics
Feb 15th 2024 |

Candidates tied to Tehreek-e-Insaf (PTI), the party of Imran Khan, won the
most seats in Pakistan’s general election, despite a de facto ban on their
campaign. Mr Khan is in prison on multiple charges, which he says are
politically motivated. The Pakistan Muslim League-Nawaz (PML-N), which
was widely expected to win, came second. PML-N is the party of Nawaz
Sharif, Mr Khan’s arch-rival. It will form a coalition government with the
Pakistan Peoples Party, which came third. Mr Khan’s supporters said the
election had been rigged, which the PML-N denied. The head of the army
claimed the poll had been “free and unhindered”.

Prabowo Subianto, Indonesia’s defence minister, declared victory in the

country’s presidential election. Mr Prabowo is mired in controversy. He lost
the past two elections to Joko Widodo (or Jokowi), claiming that the vote
was stolen from him. And he has been accused of committing atrocities,
which he denies, when he was in the army, notably in East Timor, where the
independence movement had been brutally suppressed.

In India police fired tear-gas at thousands of farmers trying to reach Delhi to

stage a mass protest. Similar demonstrations were held in 2020 and 2021.
Farmers are an important voting bloc in India’s general election, due to be
held probably in April and May.

After months of negotiations with the Indian government, Qatar released

eight Indian former naval officers who had been sentenced to death for
reportedly spying for Israel.

Thaksin Shinawatra, a former prime minister, was granted parole in

Thailand, six months into serving a sentence for graft. Mr Thaksin was
ousted in a coup in 2006 and returned from exile last August. He was
originally sentenced to eight years, which was reduced to one year by the
king, and served his six months in a hospital.
A commander-in-chief?

The chairman of America’s joint chiefs of staff, General Charles Brown,

warned that America’s credibility was at stake, following Donald Trump’s
comment that he would not protect NATO countries in Europe from a
Russian attack if the countries missed NATO targets on defence spending.
Mr Trump said he would in fact encourage Russia to attack (he was recalling
a conversation with a European leader). General Brown reaffirmed
America’s commitment to the military alliance.

Lloyd Austin, America’s defence secretary, was hospitalised again for

complications related to surgery for prostate cancer, causing him to pull out
of a trip to Brussels for a meeting with NATO allies.

Mr Trump meanwhile asked the Supreme Court for a quick ruling on

whether to pause the recent decision by an appeals-court panel that he is not
immune from prosecution.
Joe Biden made a crack about his age. “I’ve been around a while,” he said,
“I do remember that.” Earlier, the special counsel investigating the
president’s misuse of classified documents concluded that no charges would
be made, because of Mr Biden’s age and mental fitness. He is a
“sympathetic, well-meaning, elderly man with a poor memory”, said the
report. Democrats rallied to Mr Biden’s defence.

Mike Johnson, the speaker of America’s House of Representatives,

suggested that the Senate’s package of military aid for Ukraine and Israel
(and humanitarian aid for Gaza) would go nowhere in his chamber. Twenty-
two Republican senators joined Democrats in voting for the bill, but Mr
Johnson wants measures on beefing up border security included in a
previous version of the legislation to be restored.

The House voted to impeach Alejandro Mayorkas, the secretary of

homeland security. An earlier vote had decided not to impeach, but the
return of one Republican from cancer treatment to vote yes helped to put the
yeas over the line. There is little chance of Mr Mayorkas being found guilty
of a “systematic refusal” to enforce border policy when he is tried in the
Senate.
Clinging on
The Democrats won the special election for the congressional seat vacated
by George Santos, a disgraced Republican, which reduces the Republicans’
already razor-thin majority in the House.

Palestinian sources said that 74 people, including civilians, were killed in an

Israeli bombardment of Rafah, the southernmost city in Gaza, as part of a
raid to rescue two hostages held by Hamas. America, Britain and France are
among the countries that have urged Israel not to mount a full-scale invasion
of Rafah because of the number of civilians who would probably be killed.
Meanwhile talks in Cairo over a temporary ceasefire and the release of
hostages in exchange for Palestinian prisoners appear to have become
deadlocked.

America urged Senegal’s president, Mack Sall, to hold the presidential

election on schedule. Mr Sall unconstitutionally cancelled the poll, citing a
dispute between some legislators and the Constitutional Council, which
determines the eligibility of candidates.

Zimbabwe plans to introduce a gold-backed currency to replace the

slumping Zimbabwean dollar, which fell by 90% last year and a further 50%
so far this year against the US dollar. This would be the second time in little
more than a decade that Zimbabwe has scrapped its currency after
mismanaging it.

The UN Security Council expressed concern about escalating violence in

eastern Congo as the Rwandan-backed M23 rebel group advanced on Goma,
the capital of North Kivu province. South Africa is to send 2,900 troops to
fight armed groups as part of a force deployed by SADC, the regional bloc.

Britain’s Labour Party, which is expected to form the next government, had
a bad week. Its leader, Sir Keir Starmer, belatedly withdrew support for the
party’s candidate in a by-election in Rochdale after he had made
controversial comments about Israel; another Labour candidate was later
suspended for similar reasons. Sir Keir was also accused of dithering before
a decision to slash the party’s flagship spending commitments on green
investment.
Azerbaijan attacked an army post in Armenia close to their border, the first
fatal skirmish between the two countries since Azeri troops recaptured the
region of Nagorno-Karabakh last September. Azerbaijan said the attack was
in retaliation for an earlier infraction. Armenia said four of its soldiers were
killed.

Volodymyr Zelensky made more changes to the top brass of Ukraine’s

armed forces following his dismissal of General Valery Zaluzhny, the
country’s most senior commanding officer. General Zaluzhny is given much
of the credit for stopping Russia’s invasion in February 2022, but has warned
that the war has settled into a stalemate. His replacement is Colonel-General
Oleksandr Syrsky, who led the reconquest of Kharkiv from Russian forces
towards the end of 2022. Meanwhile, Ukraine sank a Russian naval vessel
off the coast of Crimea.

Russia has put Estonia’s prime minister, Kaja Kallas, on a “wanted” list for
taking “hostile actions against historical memory and our country”,
according to a Kremlin spokesman. Ms Kallas responded on social media
that this is “more proof that I am doing the right thing” in supporting
Ukraine.

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week/2024/02/15/politics

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The world this week

Business
Feb 15th 2024 |

America’s annual inflation rate slowed to 3.1% in January. Although that

was down from the 3.4% recorded in December, the dip was smaller than
had been expected. Stockmarkets shuddered, as investors reduced their bets
for an early interest-rate cut by the Federal Reserve. The Dow Jones
Industrial Average had its worst day in almost a year. The next day traders in
Britain seemed to be more optimistic about a cut to interest rates there when
inflation came in at 4% for January, below forecasts.
https://t.me/+kO_MYapXtC04OTNh
Argentina’s inflation rate surged to 254% in January from 211% in
December, when it overtook Venezuela as the country with the highest price
rises in Latin America. Javier Milei, Argentina’s new president, put a rocket
under inflation when he devalued the peso and abolished price controls, part
of his “shock therapy” package of economic reforms. He has warned of
more pain ahead in his effort to stabilise the economy.

The economies of Japan and Britain fell into recession at the end of 2023.
Japan’s GDP unexpectedly shrank by 0.1% in the fourth quarter compared
with the third. In July to September it contracted by 0.8%. It has now slipped
from being the world’s third- to fourth-largest economy. British GDP was
0.3% smaller in the fourth quarter, after shrinking by 0.1% in the third.

PepsiCo acknowledged that consumers are pushing back against price rises.
The food and beverages giant jacked up the price of its products in 2022 and
2023, but it recorded a decline in the volume of snacks and soft drinks it sold
last year. Ramon Laguarta, the chief executive, said that was in part due to
pricing. Carrefour, a big supermarket chain in France, has stopped stocking
Pepsi’s goods because of its “unacceptable price increases”.
Come fly with me

Cost of living concerns are not stopping people from travelling. TUI,
Europe’s biggest tour operator, reported a big surge in quarterly revenue, and
confirmed it expects sales to rise by 10% this year. Separately, TUI’s
shareholders voted to retain a sole listing in Frankfurt and delist from the
London Stock Exchange, another blow to the City’s reputation.

The wave of consolidation in America’s Permian Basin shale oilfield

continued, when Diamondback Energy struck a $26bn deal to buy
Endeavor Energy Partners. The combined company will be the third-
largest operator in the Permian, behind ExxonMobil and Chevron.

Arjuna Capital and Follow This, two activist-shareholder groups, asked a

court to throw out Exxon’s lawsuit against them for the proxy motion they
had proposed that called on the company to slash emissions. Arjuna and
Follow This withdrew their motion when Exxon lodged the suit, but Exxon
is still pursuing it, because it wants “clarity on a process that has become
ripe for abuse”. The two investors argue that Exxon’s legal action is
unnecessary, and that Exxon instead wants to establish “the novel position”
that it can haul its shareholders into court for submitting proxy proposals.

Nvidia, which has benefited more than most chipmakers in the market for
high-end AI chips, hit a market capitalisation of $1.8trn, pushing it past
Amazon’s stockmarket value. Meanwhile Jeff Bezos, Amazon’s founder and
executive chairman, sold $4bn-worth of stock in the company recently,
according to reports. He is still Amazon’s biggest shareholder, holding about
9% of the stock.
A lawsuit was filed in a federal court seeking class-action status to sue
Amazon for misleading users when it introduced ads to its Prime video-
streaming service. The suit alleges breach of contract by making subscribers
pay an extra $2.99 a month for the ad-free service they had signed up to. The
case may sound trivial, but for Amazon it is another unwelcome focus on its
terms for Prime. The Federal Trade Commission brought a suit against it last
year for allegedly duping consumers into signing up to the service.

The Body Shop put its business in Britain into administration, just five
weeks after its new private-equity owner took over operations. The
cosmetics and beauty retailer pioneered ethical shopping when it was
founded by Anita Roddick in 1976, becoming a ubiquitous presence on
British high streets. It runs around 200 shops in Britain now (and many more
internationally).
All for nought

Lyft’s share price got an unexpected lift when the ride-hailing company
made a clerical error in its earnings. The error stated that its adjusted profit
margin was expected to rise by 500 basis points (or 5 percentage points) in
2024, rather than 50 basis points (0.5 points). Before the mistake was
realised the stock soared by 60%, which was blamed on trading bots for not
recognising an obvious typo. Still, Lyft delivered strong results otherwise. Its
stock ended the day at its highest point in a year.

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The world this week

KAL’s cartoon
Feb 15th 2024 |

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

If Israel invades, hell looms in Rafah

Only America can save Israel and Gaza from greater catastrophe
Binyamin Netanyahu is botching the war. Time to sack him

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

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week/2024/02/15/kals-cartoon
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The world this week

This week’s cover

How we saw the world

Feb 15th 2024 |

THIS WEEK, our cover focuses on the rise of national conservatism—

statist, “anti-woke” politics that puts national sovereignty before the
individual. Donald Trump, Viktor Orban and a motley crew of other Western
politicians have shattered the conservatism which Margaret Thatcher and
Ronald Reagan built during the 1980s. Rather than emphasising individual
liberty and free markets, national conservatives think ordinary people are
beset by impersonal global forces and that the state is their saviour. They
suspect free markets of being rigged by the elites, they are hostile to
migration and they despise pluralism. How, then, should old-style
conservatives and classical liberals deal with national conservatism? One
answer is to take people’s legitimate grievances seriously; sneering at them
only confirms how out of touch elites have become. Liberalism’s great
strength is that it is adaptable, and it can adapt to national conservatism.
Right now, it is falling behind.
Leader: The growing peril of national conservatism
Briefing: “National conservatives” are forging a global front against
liberalism
1843: Why right-wing Italians love hobbits, pirates and talking seagulls

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week/2024/02/15/this-weeks-cover

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Leaders
The growing peril of national conservatism
The right :: It’s dangerous and it’s spreading. Liberals need to find a way to stop it

Europe must hurry to defend itself against Russia—and

Donald Trump
Prepare for President Trump :: The ex-president’s invitation to Vladimir Putin to attack
American allies is an assault on NATO. Ultimately, that is bad for America

Pakistan is out of friends and out of money

Decline and fall :: A botched election and an economic crisis show how low it has fallen

A new answer to the biggest climate conundrum

A shock to the system :: Will electrification of industry live up to its promise?

As San Francisco builds the future of technology, can it

rebuild itself?
Silicon rally :: People feared a doom loop. Reality has been more surprising

Another bank subsidy America should kill off

America’s shadow central banks :: The Federal Home Loan Banks offer loans to Wall Street
that are too cheap

How not to do a megaproject

The ur-snafu :: The lessons of HS2 for Britain and beyond

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The right

The growing peril of national conservatism

It’s dangerous and it’s spreading. Liberals need to find a way to stop it

Feb 15th 2024 |

IN THE 1980s Ronald Reagan and Margaret Thatcher built a new

conservatism around markets and freedom. Today Donald Trump, Viktor
Orban and a motley crew of Western politicians have demolished that
orthodoxy, constructing in its place a statist, “anti-woke” conservatism that
puts national sovereignty before the individual. These national conservatives
are increasingly part of a global movement with its own networks of thinkers
and leaders bound by a common ideology. They sense that they own
conservatism now—and they may be right.

Despite its name, national conservatism could not be more different from the
ideas of Reagan and Thatcher. Rather than being sceptical of big
government, national conservatives think ordinary people are beset by
impersonal global forces and that the state is their saviour. Unlike Reagan
and Thatcher, they hate pooling sovereignty in multilateral organisations,
they suspect free markets of being rigged by the elites and they are hostile to
migration. They despise pluralism, especially the multicultural sort. National
conservatives are obsessed with dismantling institutions they think are
tainted by wokeness and globalism.

Instead of a sunny belief in progress, national conservatives are seized by

declinism. William Buckley, a thinker of the old school, once quipped that
“A conservative is someone who stands athwart history, yelling stop.” By
comparison, national conservatives are revolutionaries. They do not see the
West as the shining city on the hill, but as Rome before the fall—decadent,
depraved and about to collapse amid a barbarian invasion. Not content with
resisting progress, they also want to destroy classical liberalism.

Some people expect all this to blow over. National conservatives are too
incoherent to pose a threat, they say. Giorgia Meloni, Italy’s prime minister,
supports Ukraine; Mr Orban has a soft spot for Russia. The Polish Law and
Justice party (PiS) is anti-gay; in France Marine Le Pen is permissive.
Besides, the obsession with national sovereignty would make people worse
off, as trade collapses, economic growth stalls and civil rights are curtailed.
Voters would surely choose to restore the world liberalism made.

That view is unforgivably complacent. National conservatism is the politics

of grievance: if policies lead to bad outcomes, its leaders will shift the blame
onto globalists and immigrants and claim this only proves how much is
wrong with the world. For all their contradictions, national conservatives
have been able to unite around their hostility towards common enemies,
including migrants (especially Muslims), globalists and all their supposed
abettors. Nine months before America’s election, Mr Trump is already
undermining NATO.

National conservatives also deserve to be taken seriously because of their

electoral prospects. Mr Trump is leading the polls in America. The far right
is expected to do well in European parliamentary elections in June. In
Germany in December the hard-right Alternative for Germany hit a record
high of 23% in polls. Anticipating a lost election for Rishi Sunak, stridently
pro-Brexit and anti-migration Tories are plotting to take over the party. In
2027 Ms Le Pen could well become France’s president.

And nationalist conservatives matter because when they succeed in winning

office everything changes. By setting out to capture state institutions,
including courts, universities and the independent press, they cement their
grip on power. That is what Mr Orban’s Fidesz party has done in Hungary. In
America Mr Trump has been explicit about his autocratic designs. The
people working for him have drawn up policy documents that set out a
programme to capture the federal bureaucracy. Once institutions have been
weakened, it can be hard to restore them. In Poland PiS had the same
agenda, before it was ousted in elections last year. The centre-right coalition
that defeated it is now struggling to assert control.

How, then, should old-style conservatives and classical liberals deal with
national conservatism? One answer is to take people’s legitimate grievances
seriously. The citizens of many Western countries see illegal migration as a
source of disorder and a drain on the public purse. They worry that their
children will grow up to be poorer than they are. They are anxious about
losing their jobs to new technology. They believe that institutions such as
universities and the press have been captured by hostile, illiberal, left-
leaning elites. They see the globalists who have thrived in recent decades as
members of a self-serving, arrogant caste who like to believe that they rose
to the top in a meritocracy when, in reality, their success was inherited.

These complaints have their merits, and sneering at them only confirms how
out of touch elites have become. Instead, liberals and old-style conservatives
need policies to deal with them. Legal migration is easier if the illegal sort is
curbed. Restrictive planning rules price young people out of the housing
market. Closed shops need busting apart. To have the truly open society they
claim to want, liberals must press for elite intellectual institutions—the top
businesses, newspapers and universities—to embody principles of liberalism
instead of succumbing to censorship and groupthink. For all that the illiberal
left and the illiberal right are mortal enemies, their high-octane rows over
wokeness are mutually sustaining.

To diminish the national conservative fear that people’s way of life is under
threat, liberals also need to stake their claim to some of their opponents’
ideas. Instead of virtue signalling, they should acknowledge that the left can
be illiberal, too. If liberals are too squeamish to defend principles such as
free speech and individual rights against the excesses of the left, they will
fatally undermine their ability to defend them against the right. Instead of
ceding the power of national myths and symbols to political opportunists,
liberals need to get over their embarrassment about patriotism, the natural
love of one’s country.

Liberalism’s great strength is that it is adaptable. The abolitionist and

feminist movements broke apart the idea that some people counted more
than others. Socialist arguments about fairness and human dignity helped
create the welfare state. Libertarian arguments about liberty and efficiency
led to freer markets and a limit on state power. Liberalism can adapt to
national conservatism, too. Right now, it is falling behind. ■

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Prepare for President Trump

Europe must hurry to defend itself against Russia

—and Donald Trump
The ex-president’s invitation to Vladimir Putin to attack American allies is
an assault on NATO. Ultimately, that is bad for America

Feb 12th 2024 |

IF DONALD TRUMP returns to the White House, which version will it be?
Tough-love Trump who cajoled allies to spend more on defence, reinforced
NATO troops on the eastern flank and began to arm Ukraine; or vindictive
Trump who will act on his threats to sabotage NATO? Expect sabotage.

On February 10th the near-certain Republican presidential nominee

recounted how the leader of a “big country” once asked him whether he
would defend an ally against the Russians, even if it was “delinquent”, by
failing to spend 2% of GDP on defence. “No, I would not protect you,” Mr
Trump recalled saying. “In fact, I would encourage them to do whatever the
hell they want.”

Even if this was hyperbole, as his defenders claim, exhorting Russia to

attack any ally is an assault on the sacred promise of NATO’s Article 5: that
an attack on one is an attack on all; and that an attack on even the smallest
ally is, in effect, an attack on America. Mr Trump’s outburst is all the more
dangerous now that Russia, while rearming at a furious pace, is pushing hard
against ammunition-starved Ukrainian forces. A growing number of
European governments believe they will face the real threat of a Russian
attack in the coming years.

NATO has kept its members safe since its founding in 1949, and sustained
the spread of democracy in Europe. It keeps attracting members, most
recently Finland and, soon, Sweden. But without Article 5 the alliance is
worth little. Merely casting doubt erodes deterrence and thereby raises the
risk of war.

Mr Trump is scarcely the first president to complain of freeriding allies—

and rightly so. But he is turning a democratic alliance into a mobster’s
racket: no money, no protection. Mr Trump claims his bluntness succeeded
in getting allies to spend billions more on their defence. The bigger impulse
has been the looming threat from Russia. Defence spending started to rise
before Mr Trump’s time, and has continued after it. The number of allies
making the 2% target rose from just three in 2014 to 11 last year; 18 of the
31 allies are due to reach it this year.

Mr Trump’s baleful influence is affecting Congress. A bill to renew military

and civilian aid to Ukraine (and to help Israel and other allies) has belatedly
cleared the Senate but may be killed by Republicans in the House.
Legislation requiring the Senate to approve an actual American withdrawal
from NATO would not be much of a restraint. Congress cannot stop a
president from, say, withdrawing American troops from Europe or simply
refusing to defend allies under attack. None of this is good for America.

Europeans must act urgently. Rather than complain about Mr Trump, they
should hurry to meet the 2% target and then raise it sharply: 3% of GDP is
probably what is required to fulfil NATO’s existing defence plans; without
America, spending would have to be higher. America devoted nearly 3.5%
of GDP to defence last year. Under-prepared Europeans face a more
immediate threat.

Their agenda is daunting. They will need to invest in the many things that
America provides at scale, from ammunition to transport and refuelling
aircraft, command-and-control systems, satellites, drones and more.
Europeans must also spend better, by buying more kit jointly and integrating
their defence industries. They will have to think how to take over NATO‘s
structures if America leaves (while holding open the possibility that it might
rejoin). Germany’s finance minister, Christian Lindner, has raised the most
sensitive issue: how to preserve nuclear deterrence without America’s
umbrella. That would probably require new guarantees from Britain and
France, which hold 500 nuclear warheads between them, against nearly
6,000 for Russia.

Nothing could make up for the withdrawal of American power. But rapid
rearmament serves three vital purposes: it strengthens Europe’s ability to
help Ukraine and deter Russia; proves to Mr Trump that NATO is a good
deal for America; and creates a hedge should he turn his back on America’s
allies. ■

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Decline and fall

Pakistan is out of friends and out of money

A botched election and an economic crisis show how low it has fallen

Feb 14th 2024 |

PAKISTAN’S ELECTION on February 8th featured state-of-the-art avatars

and TikTok videos, but the question it poses evokes an old theme. How long
can the country’s relentless decline continue before it triggers a revolution,
outside intervention or—hope against hope—political renewal?

For decades the generals have ruled nuclear-armed Pakistan directly or via a
stage-managed democracy featuring a recurring cast of corrupt dynastic
parties (and the occasional political disrupter). The main political clans
agreed to back a new government on February 13th. Unfortunately, after a
rigged vote, it begins plagued by illegitimacy and a mounting financial
crisis.
The army prefers this shabby outcome. It fears that, if it cedes control of
politics, it will forfeit its own economic privileges, and trigger instability
that leaves the country vulnerable at home and abroad. Yet today’s course
involves an inexorable decline that may ultimately lead to the very same
outcome.

The election had been a fiasco before any votes were cast. Pakistan’s most
popular politician, Imran Khan, a celebrity ex-cricketer turned rabble-rouser,
was imprisoned on bogus charges at the army’s behest before the poll, even
though he had at one time worked with the generals. Independent candidates
backed by his supporters won 35% of the contested seats all the same. That
was impressive, but it was not a majority.

Instead the new, army-sponsored government will be backed by those two

political clans, the Sharifs and the Bhuttos (their parties are, respectively, the
Pakistan Muslim League-Nawaz and the Pakistan People’s Party, and
together won 49% of contested seats). The compromise prime minister,
Shehbaz Sharif, promises “to save the country from political instability”.

Is that possible? One scenario is that Mr Khan’s young, often urban and
now-enraged supporters rise up in protest at their exclusion. After his arrest
in May 2023 they stormed military buildings in Lahore. Another is that the
Pakistani Taliban, a local variant of the militant movement, takes advantage
of the political turmoil and stirs up further violence.

Yet even if Mr Sharif’s government can keep control of the streets, it faces
financial chaos. In order to fund its trade deficit and meet debt repayments to
foreigners, Pakistan needs to find $20bn-30bn of hard currency every year. It
has less than $10bn of reserves, and its dollar bonds trade at 66 cents on the
dollar, indicating a high chance of default. The best Pakistan can hope for is
yet another short-term lifeline from the IMF.

Once Pakistan could have looked to outside benefactors for cash. Its 170
nuclear warheads mean that it will never be a strategic afterthought. But
America is less interested in Pakistan than it used to be, following the wind-
down of the war on terror and its exit from neighbouring Afghanistan. China
remains Pakistan’s “eternal friend” but even its state capitalists have grown
tired of burning money on infrastructure there. Saudi Arabia, another ally, is
focused on modernising at home and strengthening ties in the Middle East
and with India. In the long run a semi-failed state in Pakistan could become
India’s problem, but for the time being the government of Narendra Modi
prefers to focus on its country’s own national renewal.

Short of a revolution, only the army and the elites can alter Pakistan’s path.
Military officers enjoy status, land grants and business opportunities, but
also see themselves as principled guardians against chaos. In fact, they are
agents of decline. Twenty years ago Pakistan’s economy was 18% the size of
India’s; now that figure is only 9%. India’s stockmarket is 137 times bigger
than Pakistan’s. Both India and Bangladesh have pulled far ahead in terms of
GDP per person.
A lot of ruin

The need for a deeper political reset is more urgent than ever. Even the army
brass should grasp that, on today’s course, they will have less money to pay
for soldiers and weapons—and less money to steal. Their immediate
withdrawal from politics might cause mayhem, because Pakistan’s
institutions and parties have been infantilised. The change is so profound
that it will require a new national consensus on creating independent
institutions that can embrace clean politics and economic reform. Pakistan’s
army and its civilian elites need to engineer such a process, not profit from
their country’s decay. ■

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A shock to the system

A new answer to the biggest climate conundrum

Will electrification of industry live up to its promise?

Feb 15th 2024 |

ONE OF THE more robust reasons for hope about the future of the climate
comes from two simple facts and a delightful kicker. The facts are that
electricity is a wonderfully versatile way of powering all sorts of things, and
that lots of technologies can now generate it without emitting greenhouse
gases. The kicker is that one of these technologies, solar power, is both very
cheap and getting cheaper.

This suggests a simple strategy. Make the grid emissions-free and do

everything you can with electricity. The obstacles to the first part of this
nostrum—which include restricted access to capital in poor countries,
constrained grid capacity and a lack of storage to offset fluctuating supply—
are no less daunting for their familiarity. But they are increasingly the target
of policy and investment. Last year, for example, the world spent more on
new stationary electricity-storage capacity than it did on constructing
nuclear-power stations.

To get the most out of all these efforts, though, electricity needs to become
even more versatile. One of the key challenges is providing heat to industry.
If you want to dry, cure, melt, smelt, set, distil, reform or otherwise change
the state of something, as industrial processing so often does, heat tends to
be involved. In 2016 providing such “process heat” produced almost seven
gigatonnes of carbon-dioxide emissions, roughly 20% of all those from
fossil fuels.

The fact that electricity does not have much of a record of providing heat has
led to the idea that these emissions are “hard to abate”. This is taken to mean
that sorting them out needs new kinds of infrastructure. Carbon dioxide
produced at the plant where the fuel is burned could be pumped into an
underground repository, a process called carbon capture and storage (CCS);
natural gas could be replaced by hydrogen. In the meantime, natural gas
would continue to be used as a “bridge fuel” to a future both greener but
also, alas, far off.

This presumption is now coming under attack. Innovative entrepreneurs and

imaginative incumbents are finding ways to turn electricity into useful forms
of heat, from scaled-up heat pumps of the sort used in some houses to space-
age containers filled with white-hot molten tin and graphite plumbing.

These technologies offer advantages in and of themselves. Heat from

renewable or nuclear sources is safe from volatile fossil-fuel prices. In
general, heat pumps are a lot more energy-efficient than combustion.
Systems that store heat for later use, sometimes called “thermal batteries”,
can be charged up when electricity is cheap, which is good both for owners
and grid operators who increasingly want demand that can be managed.

The biggest advantage, though, is that when industries use clean electricity
they slash their carbon-dioxide emissions. If the world is to keep global
warming well below 2°C, as it very much should, that sort of slashing is
mandatory.
Unfortunately, this advantage reaches a company’s balance-sheet only when
industries come under some sort of carbon-pricing scheme. Such schemes
have tended to concentrate on electricity generation. One reason for this is
that, unlike electricity-generating companies, industrial producers compete
in global markets. If their goods carry a charge for the carbon emitted in
making them, these producers will be at a disadvantage to their untaxed
competitors.

The obvious solution is a system of tariffs that level the playing-field: what
is called a carbon border-adjustment mechanism. Such measures risk being
captured by incumbents and becoming a channel for protectionism. But that
risk is worth taking. If carbon prices are to cover more of the global
economy, sorting out these trade effects well become necessary. In addition,
well-designed adjustment mechanisms provide an incentive for industries
outside the pricing system to decarbonise.

Pricing carbon emissions from industrial heat would help a phalanx of

innovative technologies whose benefits to society are currently unrewarded.
It would be bad news for the natural-gas suppliers that dominate the
provision of heat. The effect on decarbonisation by way of CCS, either at the
plants where heat is used or at the facilities which turn natural gas and steam
into hydrogen, is harder to predict.
Worth a plug

Progress on CCS has been uninspiring, to put it mildly. Widely discussed for
decades it is still, in operational terms, a rarity. It has not seen the sort of
innovative ferment that electrification is exhibiting. Many climate advocates
see it as an excuse for inaction that locks in fossil fuels as the default option.

CCS may, for all that, have a vital role to play, and sincere proponents of its
potential should welcome the spur to innovation that increased uptake of
electrical options will provide. It seems highly likely that some applications
and some forms of industrial cluster will be best served by CCS or hydrogen.
Competition is the best way to find out which. ■

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

As San Francisco builds the future of technology,

can it rebuild itself?
People feared a doom loop. Reality has been more surprising

Feb 15th 2024 |

SAN FRANCISCO has long been a byword for municipal failure. Even as
its techies minted money and transformed the world, its government was
incapable of providing residents with basic shelter and security.
Homelessness, drug overdoses and property crime were rife. Then covid-19
struck. The rise of remote work threatened to sound the city’s death knell, as
the tech industry took to its heels. As things have turned out, however, San
Francisco has become host to an artificial-intelligence boom. Having been
granted this piece of good fortune, the city must seize the opportunity to
reform. This might be the best chance it gets.
Only a few years ago social disorder, toxic politics, eye-watering housing
costs and the pandemic were driving people away. Venture capitalists (VCs)
were splashing more of their cash beyond the Bay Area. Tech workers
abandoned their offices, and sometimes the city entirely. As the downtown
streets emptied of workers, homelessness and public drug use became more
conspicuous and intrusive. “Retail for lease” signs covered the city like
wallpaper.

People keen to write San Francisco’s obituary warned of a “doom loop”.

Abandoned downtown property would lead to budget cuts and the erosion of
public services, which would in turn accelerate the exodus. Many people
worried that the city could go the way of Detroit, which suffered a painful
bust when America’s car industry started to build more plants in the suburbs
and the South.

But the power of agglomeration is such that San Francisco has been given a
fresh lease on life. As we report this week, the strides in artificial
intelligence (AI) have only strengthened its claim to be the innovation
capital of the world. Its proximity to Stanford and the University of
California, Berkeley, two AI centres of excellence, has helped infuse its
startup scene with companies that deal in the technology. No other place in
the world has as many AI firms or as much tech talent: from OpenAI and
Anthropic to Databricks and Scale AI, almost all the big startups are based in
the Bay Area. Venture funding is on the rise again, and last year the vast
majority of funding for firms in the region went to startups in the city itself.
Despite San Francisco’s problems, and there are many, it remains a magnet
for capital and talent.

All this offers the city an opportunity to fix how it is run. It helps that voters
are fed up with their city’s inane politics (owing to oppressive permit rules,
the cost of one public toilet ballooned to $1.7m). From their posh
neighbourhoods and their Silicon Valley headquarters, techies used to be
content to watch San Francisco putrefy. Today, by contrast, the wealthy who
live in the city feel a need to enter the political fray.

The first signs that San Francisco’s residents were revolting against the
status quo came in 2022 when voters ousted three members of their school
board and recalled their ultra-progressive district attorney. They are not done
yet. Local elections this year will be overshadowed by national races,
obviously, but city contests in March and November will offer voters in San
Francisco the prospect of real change.

Moderate Democrats, such as London Breed, the current mayor, are often
stymied by left-wingers who resist building houses, cutting business taxes,
shrinking the bloated budget or funding the police. Electing more moderates
to the board of supervisors, San Francisco’s name for the city council, could
make all those things easier to accomplish.

Even if sensible folk get into office, making big changes will be hard. The
local NIMBY movement is entrenched, and corruption has long been a
problem. And yet second chances are rare. Young people want to live and
work in the City by the Bay and to be part of a technological revolution that
is changing the world. San Francisco can either capitalise on their
excitement and set about fixing its problems—or sink back into
complacency and squander an unforeseen opportunity. ■

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America’s shadow central banks

Another bank subsidy America should kill off

The Federal Home Loan Banks offer loans to Wall Street that are too cheap

Feb 13th 2024 |

THE SLOW-BURNING crisis in America’s small- and medium-sized banks

has entered its next phase. Nearly a year on from the failure of Silicon Valley
Bank (SVB), New York Community Bank has lost about half of its value
since it announced on January 31st that it was setting aside $552m to cover
troubled loans secured against commercial real estate. Last spring the bank
was a saviour of sorts, buying $38bn of assets from Signature Bank, which
failed around the same time as SVB. Now it is the first example of a new set
of problems facing the industry.

The good news is that commercial real estate is a smaller problem for banks
than the losses on securities which brought down SVB and others. Lenders
are protected by low loan-to-value ratios and not all commercial buildings
are in trouble: it is rent-stabilised buildings and old, energy-inefficient office
blocks that are suffering big write-downs. Banks that struggle will be those
that are unusually exposed, or for which these losses are the last straw.

Yet the new problems cast light on a deeper, structural problem with
America’s financial sector: the role of the 11 Federal Home Loan Banks
(FHLBs), a network of privately owned but government-sponsored lenders
to banks. Many banks fund commercial real-estate investments with FHLB
loans; as interest rates have risen and the financial system has wobbled, the
FHLBs’ role has further grown in importance. New York Community Bank
has long relied on loans from FHLBs and as of December 31st they funded
nearly 20% of its $116bn balance-sheet.

The government started the FHLBs in the 1930s with the goal of promoting
homeownership by lending against housing assets. With the government’s
encouragement, the system has since turned into something resembling a
central bank, providing vast liquidity to the financial system during moments
of stress. In the spring of 2023 “advances” to its members—which include
life insurers and others as well as banks—passed $1trn for the first time
since the global financial crisis, up from just $335bn at the end of 2021.
Today advances are about $800bn, incorporating both the run-of-the-mill
lending and more recent demand for crisis liquidity.

Ample liquidity sounds like a good thing, especially in a pinch. One problem
is that it comes too cheap. The FHLBs fund their loans by selling their debt
to investors (after the Treasury, they are the world’s second-biggest issuers
of dollar-denominated bonds). They are owned by their member institutions
but their debt is presumed by investors to be all but guaranteed by the
government. They are also exempt from some taxes, among other privileges.
The result is their debt trades at a similar yield to Treasuries, allowing the
FHLBs to lend at below-market interest rates to banks, which also share in
the FHLBs’ profits. In all the FHLBs dole out an implicit subsidy that
researchers valued at around $5.5bn in 2022, when the FHLBs were smaller
than they are today.

To the system’s cheerleaders the subsidy, some of which is passed on to

everyday borrowers, looks like money for nothing. The FHLBs have never
called on the public purse directly, in part because they only make secured
loans. The trouble is that, in a crisis, the availability of FHLB funding
probably postpones the moment at which banks in trouble turn to the Federal
Reserve. Banks dislike going cap in hand to the Fed, which is regarded as a
sign of weakness, when FHLB loans, which carry no such stigma, are
available. Even rock-solid banks borrow from the FHLBs as a matter of
course, in part because doing so brings some regulatory advantages.

But keeping out the Fed has consequences. An asset pledged as security
cannot later be sold by regulators to compensate remaining depositors, so
emergency lending to a bank can raise the costs of winding it up should it
fail. As a result, central banks are supposed to lend only cautiously and at a
penalty interest rate. The FHLBs appear to lend freely. SVB, as it gradually
lost depositors in 2022, borrowed $15bn from the FHLB system. First
Republic, another bank that failed last year, had borrowed $28bn as of
March 31st. Had those banks turned to the Fed sooner, red flags might have
gone up—in time, perhaps, to forestall the crisis that later struck.

Many politicians approve of the FHLBs because they must use 10% of their
earnings to fund affordable housing initiatives (and have volunteered more).
But the government can fund worthwhile projects directly. The FHLBs’
privileged status increasingly looks like a relic and the system’s regulators
are pondering reforms to the system. They should work with Congress to
remove the various taxpayer-backed privileges FHLBs enjoy and allow
market forces to determine their role. Central banking should be left to the
central bank. ■

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The ur-snafu

How not to do a megaproject

The lessons of HS2 for Britain and beyond

Feb 15th 2024 |

THE LIST OF the world’s biggest infrastructure snafus is long. The Berlin-
Brandenburg Airport missed so many opening dates (seven) that Germans
joked it required a new tense, the impossible future. A high-speed train-line
between Los Angeles and San Francisco was first proposed in 2008; so far
$9.8bn has been spent and not a single track laid. But Britain has an entry
that will prove hard to beat.

High-Speed 2 (HS2) was supposed to be a 540-km Y-shaped railway linking

England’s biggest cities. At its inception in 2010, proponents from first
Labour- and then Conservative-led governments argued that it would cut
journey times, increase rail capacity and raise productivity in the north.
Those plans proved hopelessly optimistic. As costs soared, ministers hacked
off first one and then another branch of the Y to save money.

The surviving rump line, which will run from west London to Birmingham,
will achieve the unusual distinction of being both eye-wateringly expensive
—it is expected to cost almost £300m ($376m) for every kilometre of track
—and largely pointless. The line, which is due to be operating in the early
2030s, will slightly speed up journeys between two cities that are already
well-connected. But services north of Birmingham will actually be slower
(high-speed trains will be unsuited to the old tracks and will have to slow
down to go around corners). Capacity will be reduced, too, because the new
trains will have to be split in half to serve older stations.

Sir Keir Starmer, the Labour leader who is likely to become prime minister
following an election later this year, has promised to launch a public inquiry
into the mess. That would be another waste of time and money. What he
should do next is clear; so, too, are the lessons of HS2 for his ambitions to
upgrade Britain’s creaking infrastructure.

This newspaper has argued that the line to Manchester should be completed.
That would still be a sensible goal, given that passenger demand is only set
to rise. Sir Keir is understandably nervous about making spending
commitments ahead of the election, but he should at least promise to
complete the section of track from Birmingham to Crewe. That would ease
transport problems in the North at little extra cost.

As for the lessons to be drawn from the HS2 fiasco, three stand out. The first
is to change the way Parliament legislates for big projects. Britain’s current
approach allows local councils to hold national schemes to ransom. HS2 has
had to obtain more than 8,000 local planning consents; councils have taken it
to court more than 20 times. Most of the line has been buried in expensive
tunnels or hidden in cuttings to spare NIMBYs the horror of seeing a train.
Passengers will have “meaningful” views for less than ten minutes in a 45-
minute journey.

Sir Keir should look to France, which has built an impressive high-speed rail
network. There, national infrastructure projects are granted sweeping
planning powers; in return the government adopts an efficient, standardised
approach to compensating losers. Britain’s system costs much more, and still
leaves everyone unhappy.

The second lesson from HS2 is that Labour should raise the bar to constant
political fiddling, which drives up construction costs. Rishi Sunak, the prime
minister, took the latest decision to stop the line just north of Birmingham at
the Tory party conference last October. Overturning 15 years of cross-party
consensus on HS2 on the basis of a rushed decision in a hotel room is a
ludicrous way for an advanced economy to make long-term infrastructure
decisions. Once big projects are agreed, a vote in Parliament should be
required to make big changes.

A predictable pipeline of projects would help with the third lesson of HS2:
that the British state lacks engineering expertise. Not long ago Britain was
seen as having the competence needed to pull off big projects. But the public
body charged with building the high-speed line botched vital early contracts
and has struggled to attract and retain talent. HS2 has become a disaster. Its
legacy should be to ensure that it is a one-off. ■

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Letters
Letters to the editor
On export controls on China, charter schools, council tax, Ukraine, DEI, Peter Schickele,
common sense :: A selection of correspondence

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On export controls on China, charter schools, council tax, Ukraine, DEI,

Peter Schickele, common sense

Letters to the editor

A selection of correspondence

Feb 15th 2024 |

Letters are welcome via email to letters@economist.com

Chips and China

The Economist contends that technology controls on China are ineffective

and counter-productive (“Picking losers”, January 27th). I take a more
positive view. The purpose of export controls is to raise costs to competitors
by impeding access to better technologies. Those who impose and
implement such controls are well aware that countries subject to them try to
circumvent them through smuggling, buying substitutes from alternative
suppliers, or developing replacement products. These activities are costly.
Smuggling is a poor substitute for having an established arrangement with a
supplier. For products that need a steady source of chips, it is impossible to
guarantee a secure supply if one relies on smuggling. The current embargo
on microchips to Russia has had a notable impact on Russian arms
production even as the Russian government has sought to purchase chips
illegally.

During the cold war, export controls caused the Soviet Union to invest
heavily in inferior electronics, diverting resources that could have gone to
other uses. In the case of China, developing alternative chip-manufacturing
equipment or cutting-edge microchips will be difficult, especially when
Chinese companies and universities are hindered from participating in the
free flow of ideas and technologies. China has many capable people, but
when confined to collaborating solely with Chinese colleagues, they do not
fully share in the developments taking place elsewhere. Moreover, China
had pursued policies to develop its own technologies in these areas long
before the embargoes. Being cut off from collaboration with Western
companies is unlikely to make its efforts more successful.

The article notes that Nvidia will lose sales because of the controls. Many of
the sales of Nvidia chips to China go into products that are then exported by
China back to the rest of the world. One of the reasons the controls were
imposed was to diversify suppliers of these products to Western markets.
Many of Nvidia’s chip sales will not disappear; they will go to countries that
will pick up the assembly operations that used to take place in China.

In short, The Economist is wrong to say that controls are ineffective and
counter- productive. They are leaky and do not preclude China from
developing alternatives, but they impose costs that are much higher for
China than for America and its allies.

DR KEITH CRANE
Senior economist
RAND
Arlington, Virginia
School choice

Your leader on charter schools overlooked a big factor influencing the

educational effectiveness of public schools in America (“A charter for
change”, February 3rd). The overwhelming majority of American children
are assigned to one local neighbourhood school based on their address,
without a single tuition-free alternative. Although some K-12 students may
be able to choose a “magnet” school instead, it will still be managed (and
often mismanaged) by the same school district that operates their local
school and all of the publicly funded schools in that geographic area. Charter
schools, which are publicly funded schools authorised and regulated by state
or local authorities, do not have students assigned to them, and their students
are free to return to their traditional assigned school at any time.

Running a successful school requires persistent hard work, difficult choices

and often uncomfortable conversations. Which organisation has the greater
incentive to succeed in that difficult work? The traditional school, whose
student admissions (and the funding per-student it represents) is virtually
guaranteed, regardless of results? Or the school that must strive to meet its
students’ needs, or risk losing them and the public funding that came with
them?
JAMES MILLS
Walnut Creek, California

Is the council tax unfair?

Regarding Britain’s council tax, or property tax (“Fixing a hole”, January

27th), councils are necessarily local, and it makes sense for the cost of the
services they provide to be borne locally. So what if a dwelling of a
particular value attracts significantly less council tax in one council than
another? So what if one council’s property prices have risen four times faster
than another council’s? What is relevant is whether there have been
disproportionate price rises of the properties within each council. By all
means revalue everything every ten years, but this is not a fundamental
issue.

Moreover, a family of four in a £2m ($2.5m) “mansion” uses no more (and

probably much less) council services than a family of four in a £250,000
semi-detached. A direct correlation between property values and council tax
is both nonsensical and unreasonable.

NICK HILL
Penang, Malaysia
A future for Ukrainian art

Thank you for highlighting the extensive plunder and destruction of

Ukrainian art carried out by Russian forces (“Treasure quest”, January 13th).
Like numerous autocrats before him, Vladimir Putin understands the
significant influence that culture and language have in strengthening a
nation’s identity. This is why artists, writers, journalists and dissidents are
often the first to be targeted in times of war.

Although it is probably true that, “unless Ukraine wins the war, there is no
way to recover what Russia has looted,” please note that amid the dangers
and challenges, new Ukrainian art continues to be created. A Ukraine
National Pavilion will be at the Venice Biennale, and our organisation is
partnering with the curators. PEN America’s Artists at Risk Connection has
provided financial and other support to nearly 500 Ukrainian visual artists
whose lives and livelihoods have been impacted by the conflict.

Art has the potential to preserve memories, translate emotions and ideas and
foster open dialogue. It can ignite protests and kindle dreams. As long as art
exists, there remains hope for a brighter future.
JULIE TRÉBAULT
Director
Artists at Risk Connection (ARC)
PEN America
New York

The neuro basis of bias

As a neurobiologist, I endorse fully the letter (January 27th) from Scott

Simmons about the hopeless mismanagement of diversity, equity and
inclusion. I hope that it is read meticulously by the leaders of all institutions,
and above all the heads of human-resources departments.

The letter should be a wake-up call for bosses to take a mandatory course in
the neurobiology of behaviour, instead of aping mindlessly the unscientific
mantras of DEI. Any programme that deals with human conduct and does
not take brain realities, as expressed in human conduct, into account is
doomed to fail.

SEMIR ZEKI
Professor of neuroaesthetics
University College London
P.D.Q. Bach

As well as being a musical satirist, Peter Schickele was, perhaps

inadvertently, an effective teacher in the history of music (Obituary,
February 3rd). I first heard of him during my studies at university when I
took a course on music appreciation (known to students as “name that
tune”). The professor played for us a recording of Schickele doing colour
commentary on a performance of Beethoven’s 5th symphony. It was pointed
out to us that Schickele’s astounded remarks indicated just those aspects of
Beethoven’s music that shocked his contemporary listeners and made it
revolutionary.

JOHN FOX
Mercersburg, Pennsylvania
Start making sense

I enjoyed the article on researching common sense, but I thought the

definition was incomplete (“A slippery concept”, January 20th). For many of
us, common sense isn’t related so much to factual information (a triangle has
three sides) as it is to behaviour, specifically, our ability to understand and
employ the norms of successful life.

Common sense says don’t let your children play in traffic. Don’t laugh out
loud at your boss’s big idea. Don’t taunt a bear in the woods. Be very polite
to the proctologist. And so on. How do we measure that ability?

CARL SESSIONS STEPP

Emeritus professor at the University of Maryland
Springfield, Virginia

I am reminded of an old saying. Two of the most common things are rare:
common sense and common courtesy.

PHILIP RAKITA
Philadelphia
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By Invitation
David Owen argues that Joe Biden and Donald Trump are
both too old to be president
Politics and ageing :: Nor should anyone else over 70 be considered for the job, says the
politician and former neurologist

Two experts predict AI will transform companies’

understanding of themselves
Corporate culture :: Wave goodbye to clunky employee surveys, say Don and Charlie Sull

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Politics and ageing

David Owen argues that Joe Biden and Donald

Trump are both too old to be president
Nor should anyone else over 70 be considered for the job, says the politician
and former neurologist

Feb 12th 2024 |

SOME PARTS of most people’s brains that are involved in higher cognitive
thinking are subject to an ageing process starting from 60-70 years of age
and continuing until death. In particular, there is a shrinkage of the brain’s
frontal lobe and, deeper in, of an area called the hippocampus. The brain’s
surface areas can also thin and nerve fibres shrink, which slows the way the
brain processes information. Among the chemical changes that researchers
think occur during brain ageing are a decrease of neurotransmitters,
particularly dopamine, serotonin and acetylcholine, in parts of the brain.
I was a neurologist, a doctor of medicine who specialises in the brain, and a
research fellow at St Thomas’s hospital, across the Thames from Britain’s
House of Commons, before I became a Labour MP in 1966. I continued to
do medical research after going into politics as the Commons in those days
didn’t sit until the afternoon. I was lucky enough to have as co-researcher
David Marsden, who was by then already on the road to becoming one of the
world’s best neuroscientists specialising in dopamine. In 1968, when I
became a minister, I stopped working as a doctor.

As the years went by watching fellow politicians take decisions often under
great stress, not just in Britain but around the world, as foreign secretary, I
began to analyse their decision-making and wrote a book, “In Sickness and
In Power”. In that book I analysed in some depth President Franklin
Roosevelt’s decision to stand again as president of the United States in 1944
when his own health had deteriorated quickly during the previous two years.

It is sometimes suggested that Roosevelt should not have been “permitted”

to run, but who permits a president? This president was determined to run,
and on July 11th 1944 at a press conference Roosevelt read from a letter he
had written to the chairman of the Democratic National Committee: “All that
is within me cries out to go back to my home on the Hudson River, to avoid
public responsibilities…Reluctantly, but as a good soldier, I repeat that I will
accept and serve in the office, if I am so ordered by the Commander-in-Chief
of us all—the sovereign people of the United States.”

Roosevelt then travelled to Yalta in February 1945 to meet Joseph Stalin and
Winston Churchill. On February 8th, towards the end of the conference,
Roosevelt developed pulsus alternans, in which a weak and strong pulse
alternate. This is indicative of a very serious heart condition, left ventricular
heart failure. I studied carefully all the evidence of doctors and observers,
and though there are very good grounds for arguing that Roosevelt should
not have stood for re-election, Yalta is not one of them.

America now faces a situation where both presidential candidates would be

way past any normal retirement age when their term ended. Joe Biden would
be 86 and Donald Trump 82. In a poll conducted by ABC News/Ipsos last
week, almost nine out of ten Americans said they believe Mr Biden is too
old to serve a second term; 62% believe that Mr Trump is too old to serve
again. Against those facts, both the House of Representatives and the Senate
should legislate now to stop any presidential candidate standing who would
be over the age of 70 on taking office.

Business has already shown the way in establishing limits and there are
increasingly rules which restrict the age at which someone can serve on a
company’s board. According to new data compiled by a law firm, nearly
three-quarters of S&P 500 companies have instituted mandatory-retirement
age limits—typically around 70 years old—for board directors.

In Mr Biden’s case we have highly relevant information that relates to the

inquiry into his handling of classified documents when vice-president in
Barack Obama’s administration. According to a behind-closed-doors
interview by Robert Hur, a special counsel, Mr Biden twice failed to recall
the dates he served as vice-president and could not remember when his son
Beau had died. His memory was so poor, his investigators claimed, that it
was not worth bringing a prosecution against him for mishandling national
secrets because a jury would be likely to take pity on him as a “well-
meaning, elderly man with a poor memory”. There are also many instances
in media reports of Mr Trump’s mental state that call in question his fitness
for another term in office.

Of course, it can be argued that Mr Trump was a successful president but

that term of office finished five years ago and many people have had an
opportunity of seeing Mr Trump’s mind operate since then. Experience of
office is helpful, to be sure, and that can be said for Mr Biden as well as Mr
Trump. Many people believe, as I do, that as president Mr Biden has
successfully handled some very difficult issues, helped by having an
excellent secretary of state and national security adviser. But that is the past.
And already legitimate questions have been asked about Mr Biden’s
cognitive deterioration. The whole point of having fixed terms for business,
military and political leaders is to avoid deterioration in the future. It is an
extreme arrogance of political leaders that they believe they can be judged
by different criteria from those who run multinational companies.

Against this factual background all future holders of the single highest
executive office in democratic governments should ideally face a mandatory
medical examination from a reputable, independent medical practitioner
specialising in the brain before putting themselves forward as a candidate.
The result of that examination should be released well before the start of any
election period. The relevant medical tests should include, but not be limited
to, state-of-the-art brain imaging.

I can only conclude, as a politician and a doctor, that the president should
announce that he will not be running for another term and should ask that
this summer’s Democratic National Convention choose an alternative
candidate.■

Lord Owen was British foreign secretary from 1977 to 1979 and a Member
of Parliament from 1966 to 1992.

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Corporate culture

Two experts predict AI will transform companies’

understanding of themselves
Wave goodbye to clunky employee surveys, say Don and Charlie Sull

Feb 12th 2024 |

IN A RECENT survey of North American chief executives and chief

financial officers, nearly 80% listed corporate culture as one of the five most
important factors driving their company’s financial performance. A growing
body of empirical evidence supports their belief that culture matters—and
can boost profitability.

Yet, in the same survey, an even higher number of respondents—84%—said

their company’s culture is not where it needs to be. Again the data supports
their intuition. The average culture rating of large employers in America on
Glassdoor, a website that lets workers rate their employers, is 3.6 out of 5.
Few people would be excited to eat in a restaurant or ride with an Uber
driver with that kind of rating. Similarly, few employees are likely to relish
spending 40 hours each week in an average culture.

Building and maintaining a healthy corporate culture can be even more

challenging in organisations where employees work remotely. In an ongoing
study, we find that the companies where employees are most effusive about
remote work score lower than their peer groups on corporate culture,
especially on learning and development opportunities and honest
communication.

Leaders cannot improve what they cannot measure. Unfortunately, the most
common tool for gauging corporate culture—the engagement survey—
suffers from serious limitations. Faced with a long list of questions,
employees switch to auto-pilot and assign identical or similar scores to every
question. Employers that ask dozens of multiple-choice questions, as many
do, might glean only a couple of reliable insights because of respondents
zoning out. Even when employees do engage with a question, their score
offers little guidance on how to improve things. And what if the topic the
employee really wanted to weigh in on wasn’t included?

Recent advances in AI—most notably large language models (LLMs)—

allow leaders, for the first time, to glean nuanced insights into their corporate
culture from how employees talk about their company in their own words.
Rather than answering reams of questions on a five-point scale, workers can
now simply explain what is and isn’t working in their organisation and offer
suggestions for how it can improve. The AI can do the heavy lifting,
providing much more granular classification of comments and assessment of
sentiment.

Freed from the shackles of traditional surveys, organisations can use AI to

gather and process employee feedback from many sources. The volume of
available feedback is staggering. Combining free text from internal surveys,
performance feedback provided to managers, online employer reviews and
other sources equates to tens of thousands of pages of data each year for a
large company. Until recently, organisations had to rely on crude tools such
as word clouds or search keywords to gain insights from this trove of
information.
Armed with the more numerous and granular measurements that AI brings,
executives can more quickly and easily assess whether their company is
living up to the values it considers “core”, identify the most important
cultural elements driving everything from employee attrition to innovation,
diagnose toxic subcultures within the organisation, and plot progress over
time. After spotting important patterns, leaders can dive into the raw
feedback for more nuanced context and employees’ recommendations on
how to improve culture.

Take Amazon, which aspires to be the best employer in the world. We used
our AI platform to analyse tens of thousands of employee reviews of the e-
commerce giant. This showed that Amazon does well on many of its
leadership principles, such as “customer obsession” and “invent and
simplify”. But the firm’s culture also contributes to employee burnout,
especially among software engineers, who are twice as likely to complain
about burnout than warehouse workers or drivers. Raw employee feedback
points to ways Amazon could reduce stress for engineers, like fixing a
performance-review process widely viewed as brutal or minimising late-
night disruptions when technical employees are on call.

Even the largest companies will take their time adopting AI. But cultural
analysis is one of the few areas where it can be embraced right now, because
it plays to one of AI’s biggest current strengths: understanding natural
language at scale.

This does not mean that leaders should blindly trust the output of LLMs. The
tools require safeguards to protect against foibles, such as hallucinating
made-up answers. Models should measure the elements of culture based on
solid evidence, rather than the latest management fad. Leaders need to take a
broad view of culture, measuring not only the factors that influence
employee satisfaction but also topics that shape a company’s ability to adapt
to market shifts and to avoid unethical or illegal behaviour.

Leaders who do adopt AI for cultural insights can use these to make their
employees happier, lower the odds of reputational disasters and, ultimately,
boost their profits. Measurement is not the only piece of the “successful
culture” puzzle, but it is a crucial one. Culture has always been an enigma at
the heart of organisational performance: undoubtedly important, but
inscrutable. With AI, meaningful progress can be made in deciphering it. ■

Don Sull is a professor at the MIT Sloan School of Management and a co-
founder of CultureX, a research and AI firm. Charlie Sull is a co-founder of
CultureX.

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Briefing
“National conservatives” are forging a global front against
liberalism
Nationalists of the world, unite! :: The alliance may be incoherent, but that does not make it
harmless

First electric cars. Next, electric factories?

The burning question :: They could be a major new way to slow global warming

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Nationalists of the world, unite!

“National conservatives” are forging a global front

against liberalism
The alliance may be incoherent, but that does not make it harmless

Feb 15th 2024 | BUDAPEST and WASHINGTON, DC

YOU MIGHT call Budapest a Mecca, were Islam not anathema to the
pilgrims flocking there. An anti-Davos would be a better description: a place
where conservative nationalists from all over the world gather to compare
notes on how to defeat international liberalism. Either way, Hungary’s
capital is at the heart of a global movement to reinvent right-wing politics.

Viktor Orban, Hungary’s prime minister since 2010, is one of the main
proponents of the “national conservatism” that is newly ascendant in much
of the world. “Hungary is saying outspokenly and loudly some anti-
establishment things about migration, about the role of family, about gender,
about the role of national sovereignty,” says Balasz Orban, the prime
minister’s (unrelated) political director.

The Hungarian government has spent a lot of time and money trying to
propagate this ideology. State-sponsored institutes and think-tanks have
cultivated warm ties with right-wing American outfits expounding the
politics of Donald Trump. Conferences bring together national conservative
notables from around the world. At first glance, these powwows seem rather
forced: the main thing Mr Orban, Mr Trump and Giorgia Meloni, Italy’s
prime minister, have in common is a tendency to rail against wokery,
immigration and international institutions.
But just because the networking is orchestrated rather than organic does not
make it meaningless. At the level of pure political power, the movement has
been doing extraordinarily well. The Republican Party has been captured by
Donald Trump and his merry band of America Firsters. All over Europe,
national conservative parties are on the rise (see chart).

Ms Meloni, who leads the Brothers of Italy, a party descended from admirers
of Mussolini, took power in Italy in 2022. Of the European Union’s five
most populous countries (Germany, France, Italy, Spain and Poland) four
have hard-right parties in government or polling at 20% or more (Spain is
the exception). Right-wing populists that were once excluded from
governing coalitions, such as the Sweden Democrats and the Finns Party,
have become too popular to sideline. Coalition negotiations in the
Netherlands could yet install Geert Wilders, a national conservative
firebrand, as prime minister. Another, Marine Le Pen, is leading in early
polls for France’s next presidential election, to be held in 2027.

This new form of conservatism marks a radical departure from the sort that
prevailed in the era of Ronald Reagan and Margaret Thatcher. Instead of
sunny optimism and a view of America as a “shining city on a hill”, as
Reagan had it, it sees decline and “American carnage”, as Mr Trump puts it.
In place of muscular internationalism is a profound scepticism of foreign
wars and multilateral organisations. Its economic policy is much more
aligned with the left’s style of thinking: sceptical of big business, willing to
accept a large welfare state, concerned with working-class hardship and keen
to preserve domestic industry and jobs through protectionism.
The time is right

Proponents of national conservatism argue that elections this year will

cement it as the West’s dominant right-wing ideology, dispelling any notion
that it is simply a flash in the pan. “Just like in June 2016 when the Brexit
vote shadowed Trump’s November victory, I think you’re going to see the
European parliamentary elections in June of this year foreshadow a big
sweeping victory for the populist movement in the United States,” says
Steve Bannon, a former adviser to Mr Trump who has spent years trying to
light populist fires. “President Trump is our leader in this movement, but this
movement has got permanency to it. Now it’s in the process of building
institutions. It’s not going away. It’s only getting more powerful and bigger.”

Several concerns distinguish national conservatism from the “default

liberalism of neocons and libertarians”, says Yoram Hazony, an Israeli-
American who runs a series of conferences called “NatCon” that aims to
bring the movement around the world together: “immigration, hostility to
what we could call wars of expansion…and the question: has the free market
damaged the social fabric of the country?” In addition, “An awful lot of
nationalists genuinely feel there is something like a neo-Marxist takeover of
the educational institutions and the bureaucracies.”

In his book, “The Virtue of Nationalism”, Mr Hazony takes issue with

foundational tracts of liberalism by Jean-Jacques Rousseau and John Locke,
whose “political theory summoned into being a dream-world, a utopian
vision, in which the political institutions of the Jewish and Christian world—
the national state, community, family and religious tradition—appear to have
no reason to exist.”

Another influential thinker is Patrick Deneen of the University of Notre

Dame, who argues that the current elite should be replaced with “a better
aristocracy brought about by a muscular populism” who will use state power
to advance the “common good”—at least as he understands it. In a book
published in 2023, “Regime Change”, Mr Deneen decrees this common
good to be “integration”, about which he is simultaneously verbose and
vague, but which seems to mean, among other things, reuniting church and
state.
Right mind

These intellectuals and like-minded politicians are actively forging ties. Past
attendees at Mr Hazony’s “NatCon” gatherings include Mr Orban, Ms
Meloni and prominent figures from America’s new right, including Ron
DeSantis, Florida’s governor, and Josh Hawley and J.D. Vance, both
senators. In Washington, established conservative think-tanks such as the
Heritage Foundation have been overhauled in the national conservative
manner. “It is national conservatism—and not the corporatist, secular,
neoliberal establishment—that bears the standard of Thatcherism and
Reaganism in the 21st century,” declared Kevin Roberts, the president of
Heritage, at a speech at NatCon in London in May.

On February 13th one of the architects of Heritage’s Project 2025, a detailed

plan to defang the deep state in a second Trump presidency, arrived in
Budapest to present his findings at an event hosted by a state-sponsored
think-tank. CPAC, an annual meeting of the American right, invited Mr
Orban to Dallas to give a speech in 2022. (“The globalists can all go to hell;
I have come to Texas,” Mr Orban exulted.) CPAC has begun holding annual
conferences in Hungary, too, co-sponsored with the Centre for Fundamental
Rights, a think-tank which receives government funding, albeit indirectly.
Mr Wilders is expected to speak at the conference this year.

In Hungary national conservatism is a state-led project. In 2020 the

Hungarian parliament donated shares in state-owned companies worth
$1.7bn to the Mathias Corvinus Collegium (MCC), which educates talented
young Hungarians at little cost, but with a distinct nationalist slant. As a
share of Hungarian GDP, the donation was bigger than the combined
endowments of Harvard, Yale, Stanford and Princeton are, relative to the
American economy.

Kim Lane Scheppele of Princeton University considers MCC “a boot camp

for Orban” that is “expanding its training programme to include right-wing
allies from other states”. Its leadership denies that it is a tool of
indoctrination. “The main purpose is to find the most gifted, most talented
people,” says Zoltan Szalai, the director-general, who is also editor-in-chief
of a pro-government weekly magazine called Mandiner. Mr Orban, the
prime minister’s political director, is chairman of the board.

MCC has branches in Hungary, Romania and Slovakia. It has opened a

centre in Brussels that advocates a Europe of “sovereign states” and “strong
borders”. It is “against the culture war” and “unshackled from
environmentalism”. It has also set up outposts in Berlin and Vienna and
plans to do so in Britain, too.

The Hungarian government also funds conservative think-tanks. It channels

money to a foundation which in turn distributes it to think-tanks like the
Centre for Fundamental Rights, the co-sponsor of CPAC Hungary, and the
Danube Institute, which gives fellowships to foreign conservative
intellectuals. The same foundation pays for two English-language
publications, the European Conservative and Hungarian Conservative.
Istvan Kiss, the executive director of the Danube Institute, says its purpose is
to be “a kind of beltway between our region and the Anglosphere”. Its
chairman, John O’Sullivan, is a former speechwriter for Margaret Thatcher
and editor of the National Review, an American conservative journal.
He is not the only Anglophone intellectual drawn to Budapest. Gladden
Pappin, one of the first political philosophers to try to intellectualise
Trumpism, is president of the Hungarian Institute of International Affairs,
which reports to the prime minister. Mr Pappin says, “Hungary has a
national interest in fostering like-minded, nationally oriented parties in the
European level.” That is necessary, he explains, because “Conservatives felt
that liberal globalism was a kind of divide-and-conquer ideology and that
conservatives had been kept incommunicado.”

The networking has allowed national conservatives to borrow ideas from one
another. Jaroslaw Kaczynski, the leader of Poland’s former ruling party, PiS,
imported techniques of state capture from Hungary. In Florida Mr DeSantis
approved a law banning lessons on homosexuality and gender ideology
months after Mr Orban’s government did the same. Another Floridian law
banning the teaching of critical race theory in universities and the takeover
of a small college deemed too liberal also echo Mr Orban’s politics.
Human right

There are shared policies on the family, too. The phrase “family friendly
Hungary” is plastered across the airport in Budapest in multiple languages.
Women who have large numbers of children receive big tax breaks, student-
loan forgiveness and considerable aid in buying homes. In Poland one of
PiS’s most popular policies was a grant of 500 zloty ($125) a month for
every child, which helped reduce child poverty markedly. In America, too,
some on the right support payments for working parents (“workfare”) as a
way to help families, despite misgivings about the welfare state.

The desire to defend the family sometimes manifests itself as a fixation with
fertility. “Perhaps you weren’t expecting to have to think about making
babies at 9 o’clock on a Monday morning,” mused Miriam Cates, a Tory
MP, at NatCon in 2023, “but if you want to be a national conservative, you
need a nation to conserve.” At a recent conference hosted by Ms Meloni,
Elon Musk, the world’s richest man, urged those present to “make more
Italians to save Italy’s culture”.

Despite all these exchanges, however, national conservatives are a disparate

bunch with lots of disagreements. There are deep divisions on economics,
foreign policy and social affairs. America Firsters and Fidesz are
resoundingly opposed to giving Ukraine additional aid to resist Russia’s
invasion, but PiS was among Ukraine’s staunchest allies when it was in
government. In America, Hungary and Poland nationalists worry about gay
and trans indoctrination of children; the most prominent nationalist
conservatives in France and the Netherlands, Ms Le Pen and Mr Wilders, are
more supportive of gay rights (which they trumpet in part as a way to bash
Islam).

Mr Trump wants to impose big tariffs to protect domestic industry, whereas

as much as Hungary’s government rails against bureaucrats in Brussels, it
has no plans to leave the EU and its single market. “We are against
globalism as an ideology, not globalisation,” explains Mr Orban, the prime
minister’s political director.

Ms Meloni provides a good case study of the internal contradictions of the

coalition. Given her belligerent Euroscepticism before becoming prime
minister, many had feared that she would ally with Mr Orban in his constant
feuding with the EU. “While defending Italian sovereignty, we cannot forget
to defend Viktor Orban’s Hungary or Kaczynski’s Poland, once again under
attack from the European progressive mainstream,” she declared at a NatCon
conference held in Rome in 2020.

Yet in office she went along with other European leaders to suspend billions
of euros in payments to Hungary over its dubious commitment to the rule of
law. Ms Meloni has also strongly supported aid to Ukraine despite Mr
Orban’s objections, and helped twist his arm to allow a recent tranche of
€50bn ($54bn) to go through. Since 1998 Ms Meloni has organised an
annual conservative conference called Atreju (named after a character from
the fantasy series “The Neverending Story”). In 2019 her honoured guest
was Viktor Orban. Last year it was the thoroughly conventional prime
minister of Britain, Rishi Sunak.

There is little agreement among national conservatives about what a post-

liberal international order should look like. To win broader support—and
perhaps after witnessing the painful contortions of Brexit—European
national conservatives have backed away from Frexit, Huxit and Nexit.
Hungary has used its veto within the EU and NATO to win concessions from
its fellow members, but does not want either supranational organisation—
from which it draws big benefits in the forms of direct subsidies and security
guarantees—to be disbanded. For all of the complaints about globalism,
most national conservatives do not seem to want to go it alone.

Indeed, some argue that national conservatism is so inchoate and incoherent

that it is not worth taking seriously. But even movements with deep internal
inconsistencies can reshape the world. In America, the Reagan revolution
relied on “fusionism”, an awkward assemblage of anti-communist hawks,
anti-abortion social conservatives and libertarian free-marketers, in order to
rewrite the meaning of conservatism for decades. The First International and
Second International were motley 19th-century assemblies of left-wing
groups that collapsed in acrimony, but nonetheless helped propagate both
communism and social democracy.

In 1934 Italian fascists convened a conference in Montreux, Switzerland,

with the aim of sketching a universal theory of fascism. The effort was a
complete failure. Nazi Germany had been excluded due to diplomatic
conflicts with Italy. “The delegates at Montreux disagreed on almost
everything of ideological substance: the centrality of fascist corporatism;
race and the so-called ‘Jewish question’; the role of Christianity…and,
eventually, over the very balance between national independence and
international collaboration,” writes Aristotle Kallis, a historian of fascist
movements. And yet, as divided as the fascist movement was, it still proved
capable of igniting the second world war.
Right and wrongs

Modern-day national conservatives are not fascists, and are at pains to

distinguish their movement from the destruction of the 1930s. Mr Hazony,
for instance, claims that the Nazis were not true nationalists, but imperialists
who sought to conquer Europe, and that real nationalism entails opposition
to imperialism and other totalising ideologies, including liberalism.

Of course, in practice, nationalists often overlook the distinction Mr Hazony

is drawing. Vladimir Putin, Russia’s president, bases his authoritarian power
on corruption and the appropriation of nationalist causes. He embraces the
Russian Orthodox church, seethes at Western thanklessness about the Soviet
Union’s sacrifices during the second world war and telegraphs revulsion for
foreign immorality. To justify his invasion of Ukraine, he served up a
smorgasbord of nationalist propaganda, insisting that the two countries were
part of the same Slavic nation.

When George Orwell pondered the question of nationalism in the waning

days of the second world war, he wrote of its dangers this way: “Nationalism
is power hunger tempered by self-deception. Every nationalist is capable of
the most flagrant dishonesty, but he is also—since he is conscious of serving
something bigger than himself—unshakeably certain of being in the right.”

Much the same criticism could be levelled at many national conservatives.

Although some, like Ms Meloni, govern within the rules, many of the
movement’s most prominent figures, including Mr Trump, Mr Orban and Mr
Kaczynski, are so convinced of their own correctness that they do not mind
subverting the state to maintain power. Courts are not seen as an important
independent check on the executive, but as an obstruction that ought to be
made more pliant. The media are treated in much the same way. Mr Trump
even went as far as trying to overturn an election.

National conservatives insist that their movement is compatible with, not

antagonistic to, democracy, yet most of its prime exponents are intent on
retaining power. It already dominates right-wing politics across much of the
Western world. The elections of 2024 could help it to dominate politics, full
stop. ■

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The burning question

First electric cars. Next, electric factories?

They could be a major new way to slow global warming

Feb 15th 2024 | Fort Collins

BASF IS IN the business of molecules. As the world’s biggest chemicals

firm, with operations in more than 90 countries, it makes a lot of them.
When those molecules contain carbon atoms (and a great many do—they are
a wonderfully versatile resource) those carbon atoms tend to come from
fossil fuels. When their manufacture requires high temperatures, which is
also often the case, that heat comes from burning fossil fuels. Until recently
BASF’s massive plant in Ludwigshafen in Germany accounted for 4% of the
country’s entire consumption of natural gas.

Conventional wisdom has it that such a firm cannot really hope to lower
very much the number of carbon-dioxide molecules it creates in the course
of its business. The path to decarbonisation will come instead from gathering
up those molecules and disposing of them underground, a process known as
carbon capture and storage (CCS). The same conventional wisdom holds
that if BASF were to swear off burning molecules of gas to create heat, the
obvious green alternative would be to burn hydrogen molecules instead.
Those molecules would have to be manufactured, too, in an energy-intensive
process.

That is why the recent declaration by Martin Brudermüller, the boss of

BASF, that “the decarbonisation of energy-intensive industries can only be
achieved through electrification” sounds, to many ears, like heresy.
Electricity is for houses and light bulbs and maybe even for cars, but not for
heavy industries built around burning heroic quantities of fossil fuel. Yet Dr
Brudermüller is not alone.

BASF has joined a consortium including SABIC, a Saudi chemicals firm,

and Linde, a European engineering firm, to develop an electric furnace that
can generate heat intense enough for the chemical reactions that are their
bread and butter. These firms are not the only recent converts to the
electrification of industry. On February 8th Rio Tinto and BHP, both
gargantuan mining firms, announced a joint effort to build Australia’s first
electric smelter for iron ore. Fortescue, another mining giant, is introducing
all-electric excavators and mining lorries, while Spain’s Roca Group recently
unveiled the first electric industrial tunnel kiln for ceramics. Such
innovations offer a new path to slowing global warming which may in many
cases prove quicker and easier than approaches based on CCS and hydrogen.
Industrial fail

According to the International Energy Agency (IEA), a research body,

industry consumes a third of all global energy, with the generation of heat
accounting for three-quarters of that. A staggering 90% of that heat is made
by burning fossil fuels. All this makes industry a bigger source of
greenhouse-gas emissions than power generation or transport. What is more,
whereas carbon-dioxide emissions from power generation appear to have
peaked and, if electric vehicles continue to proliferate, emissions from
transport may soon stop growing, too, industrial emissions are projected to
keep growing indefinitely (see chart 1).
Aware that this is impossible to square with their commitments to slash
emissions, governments in advanced economies have showered subsidies on
hydrogen and CCS as the technologies most likely to help decarbonise
industry. Both, however, have so far disappointed. Electrification,
meanwhile, had long been dismissed for two reasons. First, it was argued,
the very high temperatures and steam required by heavy industry would be
difficult or at least uneconomic to produce with electricity. Second, the
standard ways of making cement and steel require carbon as an input, which
means emitting carbon dioxide is unavoidable even if clean electricity were
to replace the burning of fossil fuels.

Yet McKinsey, a consultancy, predicts that 44% of the decarbonisation it

foresees in Europe by 2050, should the EU stick to its net-zero targets, will
come from electrification, more than double the share of hydrogen and CCS
combined. Why is it so optimistic about an unheralded technology?

Electrification is suddenly getting a second look for several reasons, argues

Jeffrey Rissman in a new book: “Zero-Carbon Industry”. Most obviously,
green electricity has become much cheaper and more widely available
thanks to the remarkable decline in the cost of wind and solar power.
Another factor is growing wariness of reliance on natural gas, thanks to the
global price shock that followed Russia’s invasion of Ukraine. Supplies of
gas ran so low in Germany, for example, that the government considered
rationing it for industrial users like BASF.

But the best reason for reconsideration is innovation. Making things hot with
electricity is not that hard; think of an electric kettle. Such technologies can
scale: if you want ten times as much boiling water, get ten kettles or one
bigger one. But if you want to get to 1,000°C instead of 100°C, until recently
there were few electric options. That is now changing.
Electric avenue

For temperatures of up to 200°C, the technology attracting most attention is

not the electric kettle but the industrial heat pump. Heat pumps, like
refrigerators, move heat from one place to another. In a fridge the heat is
removed from the inside (keeping the contents cooler) and dumped outside
(making the kitchen a little warmer). Heat pumps, which are becoming
increasingly common for domestic heating, take heat from outside and move
it inside. Because the amount of energy needed to move heat this way is
lower than the amount needed to heat things up directly, this can lead to big
energy savings. And as the technology improves and sales increase, prices
are falling.

Some companies are betting that what works in the home can work in the
factory, too. One such is AtmosZero, a startup that aims to reduce emissions
at New Belgium Brewing, an American beermaker. AtmosZero is installing
a heat pump that will soon replace one of the gas-fired boilers at New
Belgium’s brewery in Fort Collins, Colorado. Like most industrial firms over
the past 150 years, New Belgium burns fossil fuel to produce steam, which
in its case then heats the ingredients required to make beer. AtmosZero’s
heat pump will allow it to produce that steam without any burning. Since the
electricity used to run the pump will be renewable in the future, that
eliminates most greenhouse-gas emissions from the process. It is also more
efficient, consuming less energy overall. And because the heat pump
transfers warmth to water, just as in a conventional boiler, the equipment can
be slotted into New Belgium’s existing factory, without the need for a
complete overhaul.
Such heat pumps would allow a vast array of industrial processes that
require heat of less than 200°C to be electrified, replacing fossil-fuelled
dryers, stills, ovens and boilers. Using electricity to run a heat pump can be
several times more efficient than using natural gas to heat a boiler. Using
hydrogen, in contrast, is less efficient, because making hydrogen by splitting
water molecules through hydrolysis powered by green electricity, although
emission-free, involves a loss of at least 20% of the energy you started with
(see chart 2).
Some industrial heat pumps are in use in Europe and Japan, thanks both to
subsidies and to a relatively high ratio of gas prices to electricity prices.
Kobe Steel, a big Japanese industrial firm, sells commercial heat pumps
capable of producing high-pressure steam at 165°C very efficiently. Heaten,
a Norwegian startup boasting investment from the venture arm of Shell, a
British oil giant, has developed a durable, low-maintenance heat-pump that
can harness waste industrial heat to reach temperatures of up to 200°C. That
makes it attractive for industries from pharmaceuticals to textiles that need
middling heat.

Even in developing countries in Asia, electrification of relatively low-heat

industries is making headway, despite the region’s abundance of cheap coal
and lack of subsidies, which makes it harder for heat pumps and the like to
compete. RMI, a think-tank, calculates that some four-fifths of the increase
in industrial electrification globally since 2014 has taken place in Chinese
light industries. The IEA predicts that the share of heat used in industry that
is generated with electricity will rise from 4% in 2022 to almost 11% in
2028. China will account for almost half of that growth, boosting its use of
renewable electricity to generate industrial heat more than five-fold.

In America, electrified solutions are making inroads even though natural gas
is comparatively cheap. A study published in January by the Renewable
Thermal Collaborative (RTC), an industry consortium, finds it costs no more
to run a heat pump than a gas boiler when trying to attain temperatures
below 130°C. That would make heat pumps competitive for 29% of
industrial demand for heat, without any subsidy or technological
improvements. The RTC expects heat pumps for temperatures of up to
200°C to become competitive by 2030. Harald Bauer of McKinsey expects
that, in time, heat pumps will be able to reach temperatures of 500°C.

For the time being, however, higher temperatures require different

technology. “You are looking at the future of industrial energy infrastructure
right here!” declares John O’Donnell, the head of Rondo Energy, a startup
developing “thermal storage”. At first glance, the future does not seem that
remarkable: the object of his enthusiasm is a big metal box.

It mainly contains bricks. Wires use electricity to heat the bricks, much as a
toaster does bread, to temperatures over 1,000°C. The bricks, helped by
extremely effective insulation, can then retain heat for days with only
minimal losses. When it is needed, the heat can be released in controlled
doses at variable temperatures. Air is blown through channels in the bricks,
transferring heat.

Rondo’s thermal batteries are cheaper to manufacture than electric ones that
require cobalt or lithium. The heat stored is intense enough to power a lot of
heavy industry. As with AtmosZero’s heat pumps, they can be slotted into
existing factories without a complete redesign. And since each battery is so
efficient, it can consume electricity to heat the bricks when power is
cheapest but dispense heat any time.

The box is generating lots of enthusiasm. Rondo recently raised $60m in

financing from the venture-capital arms of such corporate titans as
Microsoft, a software colossus, Aramco, the Saudi national oil company, and
Rio Tinto. It counts various luminaries of tech investing among its backers.
After a widely viewed TED talk and a recent lecture to the great and the
good at the World Economic Forum in Davos, Switzerland, Mr O’Donnell
chuckles, he is known as “the brick guy”.

Mr O’Donnell is planning a big global expansion. With the help of

Thailand’s Siam Cement Group, an investor with plenty of experience
making bricks, Rondo hopes to manufacture enough boxes each year to store
90GWh of electricity—double the capacity of Tesla’s “gigafactory” for
batteries in Nevada.

Other companies are developing variations of these “rocks in a box”.

Brenmiller, an Israeli firm funded in part by the European Investment Bank,
uses volcanic rock as a storage medium. Antora, a Californian startup, uses
big cubes of solid carbon to store heat as intense as 1,800°C. Boston’s
Fourth Power uses molten tin flowing through a system of graphite bricks
(and graphite plumbing) to provide storage at 2,400°C. Because the tin
glows white hot, specialised photovoltaic cells inside the system mean that
energy can be withdrawn in the form of electricity as well as heat. In areas
with variable power prices, it can run at a profit simply by storing heat when
power is cheap and dispensing electricity when the price rises.
The hardest industrial processes to electrify are those that require intense
heat around the clock, especially if they use fossil fuels not only to generate
heat but also to provide some sort of chemical necessity—such as the carbon
used in steelmaking. This is the most experimental end of the spectrum of
electrifying industry, but also potentially the most rewarding, since steel,
chemicals and cement together account for more than half of industrial heat
and thus for a similar proportion of industrial emissions of greenhouse gases.

Several well-funded startups are pursuing radical innovations in aspects of

steelmaking, one of the world’s most polluting industries. Electra, which is
backed by Amazon and BHP among others, has found a way to make pure
iron in a fire-free furnace. A picture of Arnold Schwarzenegger’s Terminator
—who met a molten end in a steelworks—glares down at researchers at its
laboratory in Colorado as they dissolve iron ore in a chemical cocktail and
zap it with electricity. This “electrowinning” technique produces pure sheets
of iron without using any coking coal or fossil fuels and so emitting hardly
any greenhouse gases. The firm is chasing rivals including SSAB, from
Sweden, which plans to commercialise green steel by 2026.

A more tried and tested method of reducing the carbon emissions from
steelmaking replaces blast furnaces with electric-arc furnaces. These
typically use electricity to melt and recycle scrap metal, rather than making
steel from scratch using iron ore and coking coal. That makes the most sense
in places with a carbon price, plenty of scrap and relatively stable demand
for steel—rich countries, in other words. In January Tata Steel announced it
would shut down blast furnaces and shift to electrified steelmaking in
Britain. Wood Mackenzie, a research firm, predicts investment of $130bn in
electric-arc furnaces in the coming years. That would allow low-emission
steel production, currently 28% of global output, to rise to 50% by 2050.

Cement is another tricky industry to decarbonise because, like steelmaking,

its emissions come from the chemical reactions involved, as well as from
burning fossil fuels to generate heat. Sublime Systems has found a way to
obtain the necessary chemicals without emissions at room temperature, using
electrolysis—a process in which chemical reactions are stimulated by
running an electric current through a solution. “We are basically replacing
the kiln,” explains Leah Ellis, the firm’s co-founder. Investors including
Siam Cement poured in $40m last year.

The third giant, sooty industry is chemicals. One radical form of

electrification involves feeding chemical precursors into a super-speedy
rotor, spinning at more than 20,000 revolutions a minute. Coolbrook, a
Finnish firm, is pioneering this sort of “roto-dynamic reactor”. It is backed
by Braskem, a Brazilian firm, Cemex, a Mexican one and SABIC, a Saudi
one. In December it announced it had used this technique to crack (break
down) naphtha, a common process for the industry.

Some chemicals firms are also looking at nuclear power as a source of

electricity and heat. Dow, an American one, plans to build four small
modular reactors made by X-energy, a startup, at a plant in Texas. These will
replace gas-fired boilers that currently provide electricity and steam.
Amping up

Even if such technologies work as advertised, electrifying industry will take

time. Frederic Godemel of Schneider Electric, a big French manufacturer of
industrial equipment, reckons existing technologies can in theory electrify
30% to 50% of heavy industry. In practice, however, he thinks only 10% is
electrified now. That is because, even when new electrical kit is competitive
over the long run with existing equipment, factory bosses often resist
switching because it involves high upfront costs, disruptive stoppages,
training on the new gear and so on.

Carbon pricing or other incentives to cut emissions would obviously help. So

do technologies that minimise the disruption. Addison Stark, the chief
executive of AtmosZero, has explained that his firm explicitly set out to
overcome managers’ objections by designing its electric boiler to slot into
existing factories easily and so reduce the hassles of installation. “Steam
powered the first Industrial Revolution,” he declares, “and decarbonised
steam will power the next one.”

One indication that electrification may live up to its promise is the interest
shown by oil and gas companies, whose products the technology is intended
to supplant. Equinor, Norway’s state-owned oil firm, has long been
electrifying its offshore rigs to reduce the emissions involved in pumping for
oil. Its most efficient offshore operations emit less than 1kg of carbon
dioxide for every barrel of oil produced (or for the equivalent amount of gas)
compared with a global average of 15kg a barrel. Oil firms drilling in
America’s Permian basin, under pressure from regulators to cut emissions,
are spending billions to replace conventional equipment prone to leaking
methane (a potent greenhouse gas) with electric alternatives. If even the
natural enemies of electrification can see its worth, its prospects must be
decent. ■

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Asia
India’s unprecedented love-in with the Middle East
A historic shift :: Amid a war Narendra Modi builds new Gulf ties

India’s Supreme Court delivers a rare setback for

Narendra Modi
Junked bonds :: It declared unconstitutional an opaque campaign-finance tool that chiefly
benefited the ruling party

Pakistan’s voters tell the generals where to put it

File under F for “fiasco” :: Imran Khan’s candidates won the most seats despite heavy-handed
attempts to hobble them

Prabowo Subianto will be Indonesia’s next president

General, elected :: The controversial former general is unlikely to boost the country’s
democratic credentials

Australia needs to rethink its approach to its Pacific island

neighbours
Banyan :: They care more about development than hard security

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A historic shift

India’s unprecedented love-in with the Middle

East
Amid a war Narendra Modi builds new Gulf ties

Feb 14th 2024 | ABU DHABI

AS A FLEX of India’s newfound geopolitical muscle, it was hard to top.

Visiting the Middle East this week Narendra Modi stopped first in the United
Arab Emirates (UAE), where he signed an investment treaty, headlined a
rally of 40,000 Indian expatriates and opened a vast new Hindu temple. Then
India’s prime minister headed to nearby Qatar, having just secured the
release of eight Indians jailed there for espionage. All the while, a dozen
Indian navy ships were in nearby waters, helping to protect global shipping
under threat from pirates and Houthi missiles.

The trip, which began on February 13th, thus neatly entwined some of the
key strands—business, migration and security—of a historic shift in India’s
approach to the Middle East. Mr Modi is now injecting new momentum into
arguably his most important diplomatic initiative since taking office a
decade ago: downgrading relations with Iran and aligning India with Israel
and the Gulf Arab states

The shift could pay huge dividends for all sides, boosting foreign investment
to India in particular. It could also help establish India as a competitor to
China on infrastructure and technology in the region. And it could add
ballast to efforts by America and its Gulf Arab partners to stabilise the
Middle East. But there are risks too. And those have intensified in recent
months as violence has spread from Gaza into the Red Sea and beyond,
threatening India’s investments and expatriates, as well as its ships and
cargo.

Mr Modi’s visit was, to some extent, about politics back home. With a
general election in India due by May, the rally in Abu Dhabi was part of a
global effort to mobilise overseas Indians, a big source of political funding.
Opening the temple there will further energise his Bharatiya Janata Party’s
Hindu-nationalist base, less than a month after he inaugurated one in
northern India on the site of a mosque demolished by Hindu extremists in
1992.

The visit also reinforced a campaign message that Mr Modi is bolstering

India’s global stature, including in the Islamic world. Indian expatriates say
the results are palpable in the UAE, which he has visited seven times since
2015, when he became India’s first prime minister to go there since 1981.
“Respect for Indians has really increased,” says Biswajit Ray, a 43-year-old
Indian banker at the rally. “We see it in our offices. We feel it walking on the
street.”

But electioneering is only a tactical cherry on the strategic cake. Though

India’s links to the Middle East date back centuries, its diplomatic influence
there waned for decades after independence in 1947, largely because of Arab
states’ support for Pakistan. India’s ties to Iran and solidarity with the
Palestinians also stymied relations with Israel. Mr Modi now seeks to re-
establish India as one of the region’s essential players.
Consider the economic picture first. India’s business links with the region
used to be defined by its imports of oil and exports of cheap labour. In the
past few years, however, bilateral trade has diversified, with the UAE
emerging as India’s second-biggest export market. Last year the two
countries signed a free-trade deal aimed at doubling non-oil bilateral trade to
$100bn by 2030. Indian commercial and political ties with Iran, by contrast,
have dwindled after India stopped importing all Iranian oil in 2019 because
of American sanctions.

At the same time, India has lured billions of dollars of investment from Gulf
Arab states keen for a stake in the world’s fastest-growing major economy.
Emirati investment flows into India totalled $9.8bn in the half-decade to
2023, almost triple the figure for the previous five years. The UAE’s largest
sovereign-wealth fund has committed itself to investing $75bn in Indian
infrastructure. Saudi Arabia’s has pledged $100bn.

Big Indian companies have also won infrastructure contracts in the region as
America presses Gulf Arab states to seek alternative partners to China. One
of them, Larsen & Toubro, says that some 30% of its $55bn order book
stems from the region, mainly Saudi Arabia. And Indian commerce with the
UAE is expected to grow faster with the agreements Mr Modi just signed,
including the bilateral investment treaty, a deal to link the two countries’
digital-payment systems, and a commitment to advance a plan backed by
America and the EU to establish a trade corridor linking India to Europe via
the Middle East.

As business ties have grown, so too has the Indian diaspora in the Middle
East. There are now some 9m Indian nationals in the Gulf Co-operation
Council countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the
UAE), up from 7m in 2013. The UAE has about 3.5m, representing 36% of
its population.

They are still mostly blue-collar workers. But in recent years many more
wealthy and middle-class Indians have been moving to the UAE, especially
Dubai. Some migrated because of covid-19, which hit India hard. Many used
the UAE’s “golden visas” which since 2019 have granted ten years’
residency to qualified professionals, entrepreneurs and investors.
The influx also reflects the UAE’S efforts to emphasise inclusivity. Hence
the new Hindu temple, which Mr Modi proposed in 2015. The UAE’s
president, Muhammad bin Zayed, allocated 27 acres of land for it. At the
Abu Dhabi rally, Mr Modi hailed Sheikh Muhammad as his “brother” and
thanked him for looking after Indian expatriates. “We are partners in each
other’s progress,” Mr Modi said, pledging to elevate to new heights a
relationship “based on talent, innovation and culture”.

On the security front, the landscape has changed even faster. Israel has
become one of India’s top three weapons suppliers in recent years. Along
with several Gulf Arab states, it is an important Indian partner on counter-
terrorism. And now India is making a notable contribution to maritime
security in the region, with its biggest-ever naval deployment there. India’s
navy has not joined the American and British force in the Red Sea that has
hit Houthi targets in Yemen. It is focusing instead on piracy in the wider
area, where it has investigated some 250 vessels, boarding 40. It is co-
ordinating closely with America and Britain.

Mr Modi’s pivot has suffered some setbacks. After breaking with Indian
precedent by voicing strong support for Israel following last year’s Hamas
attacks, his government had to adjust its position a few days later to reaffirm
support for a two-state solution. That followed intense criticism of Israel
among developing countries, including China, which India sees as its rival
for leadership of the “global south”. India may have to recalibrate again if
Israel’s actions prompt Gulf Arab states to harden their own positions.

India was also shocked in October when a Qatari court condemned to death
eight former Indian naval officers accused of spying for Israel. It is unclear
how India secured their release but last week it signed a $78bn deal to
extend imports of Qatari liquefied natural gas until 2048. There will no
doubt be more challenges ahead. But as India’s Middle Eastern interests
expand, so does its appetite for risk. “India is now playing a game in which
you’ll get hurt sometimes, you’ll get pushed around or you have to push
other people around,” says C. Raja Mohan of the National University of
Singapore. “It’s part of joining the big boys’ club.”■

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Junked bonds

India’s Supreme Court delivers a rare setback for

Narendra Modi
It declared unconstitutional an opaque campaign-finance tool that chiefly
benefited the ruling party

Feb 15th 2024 | DELHI

WHEN NARENDRA MODI took office in India a decade ago, he pledged

among many other things to halt the rampant use of illicit cash in politics.
His big initiative on that front was the launch in 2018 of electoral bonds,
which enabled Indian individuals and companies to donate to political
parties anonymously, but legally. His Bharatiya Janata Party (BJP) hailed it
as a roaring success.

Opposition leaders and civic activists were thus elated when India’s Supreme
Court ruled the scheme unconstitutional on Feb 15th. A five-judge bench
headed by the chief justice, Dhananjaya Chandrachud, also ordered the State
Bank of India (SBI), the only entity that sells the bonds, to stop issuing
them. The ruling was a rare setback for Mr Modi in the run-up to general
elections due by May.

It is unlikely to affect the BJP’s prospects in the election, which it is

expected to win. The Supreme Court took several years to reach its decision
on challenges brought by activists and the Communist Party of India
(Marxist). In the meantime, the BJP was by far the biggest recipient of
donations via electoral bonds, with many apparently coming from
companies, according to the Association for Democratic Reforms (ADR), a
non-profit among the Supreme Court litigants.

Parties got 92bn rupees’ worth ($1.1bn) of bond proceeds in the first five
years, of which 57% went to the BJP, according to Election Commission
data analysed by ADR. Just 10% went to the BJP’s main national rival, the
Congress. More than half the bonds bought by July 2023 were for the
maximum 10m rupees, probably purchased by companies. About a third
were used by parties just before the last general election in 2019, ADR says.

Purchases have also sped up in the past two years, reaching a total of 73bn
rupees, according to SBI data obtained through right-to-information requests
by another activist, Lokesh Batra. The bank does not give a breakdown of
recipients but the BJP is presumed to have taken the lion’s share.

The case was an important test of the Supreme Court’s independence, which
the opposition has often questioned under the BJP’s rule. It has also brought
scrutiny to the links between Indian business and the prime minister. India’s
companies have long made political donations, often funding incumbents
and opponents simultaneously to hedge their bets. But Mr Modi is especially
close to a handful of Indian tycoons who have thrived in the past decade.

The BJP says that its donations reflect its share of seats in the national
parliament and the number of state governments it controls (it governs 12
out of 28, versus three for Congress). In the BJP’s telling, Congress triggered
the influx of illicit cash into politics after its prime minister, Indira Gandhi,
banned corporate funding in 1969 (her son, Rajiv, lifted the ban when he was
in power in 1985). Indian companies also see Mr Modi as an effective,
business-friendly administrator, BJP officials say.
Hogwash, say the scheme’s critics. They argue that it did little to curb
political graft, and stopped donors from funding opposition parties for fear
that the government could gain access to donor data from state-owned SBI.
The Supreme Court ruled that the opacity of the scheme violated citizens’
right to information. The question now is: what is the alternative? ■

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File under F for “fiasco”

Pakistan’s voters tell the generals where to put it

Imran Khan’s candidates won the most seats despite heavy-handed attempts
to hobble them

Feb 12th 2024 | ISLAMABAD

NO PARTY OBTAINED a majority in Pakistan’s election on February 8th.

But the vote nonetheless produced a clear winner: Imran Khan, the
imprisoned former prime minister who was barred from standing and whose
party, Pakistan Tehreek-e-Insaf (PTI), was subject to a de facto ban.

Voters disregarded the hints to shun Mr Khan (pictured), casting their ballots
for his candidates anyway. Members of the PTI, standing as independents,
bagged 92 of the 264 parliamentary seats being voted on (70 reserved seats
will be allocated proportionally). The Pakistan Muslim League-Nawaz
(PML-N) of Nawaz Sharif, Mr Khan’s chief rival and a three-time former
prime minister, was widely expected to win. It limped in second with 75
seats.

Yet the PTI will not form the government. Instead, Shehbaz Sharif, Mr
Sharif’s younger brother and the president of the PML-N, is likely to
become prime minister. On February 13th his party agreed to a coalition
with the Pakistan Peoples Party (PPP), led by Bilawal Bhutto Zardari, which
won 54 seats. Asif Ali Zardari, Mr Bhutto’s father, will be the nominee for
president. The younger Mr Sharif appears to be backed in his efforts by the
army chief, who praised the “free and unhindered” election and called for
“stable hands” to put an end to “anarchy and polarisation” in the country.
PML-N has also approached Mr Khan’s winning candidates to switch sides.
At least one has already jumped.

Mr Khan’s party claims to have evidence that it would have won a majority
of seats if the election had not been rigged. It has already begun to challenge
the results in court. Mr Sharif’s party denies the allegations. “How can they
claim rigging when they are the single largest party in the National
Assembly?” says Khawaja Asif, a PML-N leader in Sialkot.

Yet signs of tampering are plentiful. The election commission, which had
been instrumental in obstructing Mr Khan and the PTI in the run-up to the
election, blamed days of delay in releasing results on unspecified “internet
issues”. It initially barred returning officers from certifying results and
ordered a repeat of the vote in dozens of polling stations after reports of
snatched and destroyed ballot papers. But it soon reversed course and
confirmed results in disputed constituencies.

The dubious electoral process was preceded by a systematic campaign,

orchestrated by the army, against Mr Khan and the PTI. The election
commission stripped the party of its electoral symbol, a cricket bat, in effect
dissolving it. The Supreme Court sealed the deal by overturning a successful
challenge to this in a lower court. Many PTI leaders were imprisoned or
disqualified. Those who stood as independents were prevented from
campaigning openly. A week before the election Mr Khan, already in jail on
a separate charge, was sentenced to three long prison terms in quick
succession on counts of corruption, disclosing state secrets and getting
married illegally.
That the PTI succeeded despite all this is a rebuke to Pakistan’s army, which
for the past few months has ruled the country from behind the scenes
through a loyal caretaker government and tried its best to force Mr Khan and
the PTI into political irrelevance. The result may, some hope, prove a turning
point in the generals’ ability to influence Pakistan’s politics.

Yet the immediate consequence for Pakistani voters will be more of the
same. Though blatant rigging in some instances could be reversed by legal
challenges, the PTI will be confined to the opposition benches. The Sharif-
Bhutto coalition set to take power is very similar to the one that took over
after Mr Khan was forced from office in April 2022 and ruled until
parliament was dissolved last August. The only difference is that it will
enjoy even less legitimacy this time around.

That bodes ill for Pakistan, which faces an economic crisis, an escalating
threat from terrorism and an increasingly hostile neighbourhood. Pakistani
voters have made it clear that they are tired of the old way of doing things.
Their leaders, predictably, have once more dashed their hopes for something
new.■

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General, elected

Prabowo Subianto will be Indonesia’s next

president
The controversial former general is unlikely to boost the country’s
democratic credentials

Feb 14th 2024 | JAKARTA

HOW HE HAS waited. In 1998, after the fall of Suharto, the dictator who
ruled Indonesia for 32 years, Prabowo Subianto, his then son-in-law,
manoeuvred to take over—unsuccessfully. In 2014 and again in 2019, Mr
Prabowo ran to become president of what had by then become the world’s
third-largest democracy. Both times he lost to Joko Widodo, better known as
Jokowi (and both times he falsely claimed the election had been stolen). But
as voting closed on February 14th there remained no doubt that Mr Prabowo
had at last clinched his prize: with reliable pollsters showing he had won
nearly 60% of the vote in the first round, he will be Indonesia’s next leader.
Mr Prabowo is a controversial former general with a worrying history who
has rebranded himself as a cuddly grandad. His victory casts a shadow over
one of Asia’s democratic bright spots. Though Indonesia’s democracy is
flawed, many Indonesians cherish their suffrage in a neighbourhood
dominated by juntas and autocrats. But prominent Indonesian academics,
activists and journalists have labelled this election the most undemocratic
since the start of reformasi, an era of rapid democratic development after
Suharto’s fall.

Much of the blame lies with Jokowi, who remains wildly popular and
backed Mr Prabowo. In recent years he has eroded Indonesia’s democratic
institutions, including the once-independent anticorruption commission. And
throughout the campaign he faced accusations of interfering in the election.
Anies Baswedan and Ganjar Pranowo, former governors who ran against Mr
Prabowo, accused state agencies of arbitrarily cancelling their rallies and
intimidating Jokowi’s critics.

Jokowi and Mr Prabowo reconciled in 2019 when Mr Prabowo was

appointed defence minister. Jokowi’s eldest son, Gibran Rakabuming, ran as
Mr Prabowo’s vice-presidential candidate after the constitutional court
(whose chief justice at the time was Jokowi’s brother-in-law) delivered a
ruling that in effect made Mr Gibran, who is 36, an exception to a rule that
bars anyone under the age of 40 from running for president or vice-
president. As Mr Prabowo declared victory to cheering fans at a sports
stadium in Jakarta, a huge roar of support erupted when he mentioned
Jokowi. Shouts of “Get back together!” went through the crowds when his
former wife, Titiek Suharto, appeared on screen.

Mr Prabowo ran on a platform of continuity, promising to build on Jokowi’s

signature policies. These include moving the capital from Jakarta to a site in
the jungles of Borneo and a nickel-centric industrial policy that requires
foreign firms to process and manufacture raw ore in Indonesia. Mr Prabowo
is “continuity with improvement”, says Burhanuddin Abdullah, one of his
spokesmen.

A more worrying continuity may be in the form of pressure on civil society

and the press, which have suffered under Jokowi’s presidency. Now they are
nervous about their place in Indonesia under Prabowo. At an event on
February 10th, Mr Anies and Mr Ganjar both pledged to protect press
freedom. Mr Prabowo was absent. Human Rights Watch, an advocacy group,
said Mr Prabowo was the only candidate who did not respond to a
questionnaire about human-rights issues important to voters. Mr Prabowo is
accused of having kidnapped pro-democracy activists in the 1990s and of
ordering the massacre of independence fighters in East Timor in the 1980s
(he denies all wrongdoing). He has previously tried to abolish direct
elections of regional leaders. What the country needs, he said, is an
authoritarian leader.

Yet worries that Indonesia may plunge into a full autocracy are overblown,
suggests Marcus Mietzner of the Australian National University:
“Indonesian democracy is now weak enough that Prabowo doesn’t need to
completely overturn it,” he says. “After all, he just won the presidency.”
That is not much consolation. Jokowi oversaw Indonesia’s rapid economic
growth even as he weakened its democratic institutions. Mr Prabowo will
continue at least one of those trends.■

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Banyan

Australia needs to rethink its approach to its

Pacific island neighbours
They care more about development than hard security

Feb 15th 2024 |

FROM AUSTRALIA’S perspective the Pacific’s island states have sat for
decades in its backyard. Latterly a gate-crasher has stomped in. China has
shaken Australian assumptions in the Pacific.

Australia has deep ties with the Pacific islands. It was the colonial
administrator in Papua New Guinea (PNG) until independence in 1975.
During unrest in the Solomon Islands between 2003 and 2017, it provided a
policing mission. It has helped plug the budget holes of island states. They
are “family”, as an Aussie prime minister once put it—a word tinged with
paternalism. On February 8th family was celebrated in Canberra with the
first-ever address to Parliament by a Pacific leader, PNG’s James Marape.
China is one reason behind the red carpet laid out for Mr Marape. PNG,
immediately to Australia’s north, is vital to its security. But China is wooing
Mr Marape with infrastructure and investment. It can point to the gleaming
Chinese-built or -refurbished stadiums and police headquarters that adorn
towns in Fiji, the Solomon Islands and the Cook Islands. Such overtures
have helped Chinese state firms gain a hold in the Pacific. China buys or
extracts about half of the region’s minerals, timber and seafood. Now
another bonanza beckons, for seabed minerals.

China’s political gains are also striking. Since 2019 the Solomon Islands,
Kiribati and Nauru have switched diplomatic allegiance from democratic
Taiwan to China, helped by financial inducements to ruling politicians. Most
controversially, in 2022 the Solomon Islands’ Australia-resenting prime
minister, Manasseh Sogavare, signed a security pact with China. Chinese
police sit in the capital, Honiara. A potential military base in the Solomon
Islands would represent a big threat to Australia.

Concerns in Canberra are thus understandable. China is securing resources,

buying political influence and seeking military access. It hopes for regional
hegemony. That would mean imposing its will on vulnerable island states, as
well as destabilising the regional order; though China promises
infrastructure, investment and access to a huge market, its approach can
corrupt local politics.

Yet Australia’s response can be heavy-handed, notably over demands that

island states upgrade their security relationships with it. A case in point is
tiny Tuvalu. Late last year the two countries signed a ground-breaking treaty
whereby Australia promised to help the atoll nation tackle climate change
while offering rights to Tuvalu’s citizens to settle in Australia. The treaty
also included a security agreement to stop Tuvalu falling under China’s
sway. But the government that negotiated the treaty has since fallen, and
opposition to the security deal is building.

In truth, Pacific countries do not prioritise hard security. Mark Brown, prime
minister of the Cook Islands, says “development is the Pacific’s number-one
security priority,” especially in the face of a warming planet. Even Mr
Marape, a staunch friend of Australia’s, was reluctant in January to invoke
PNG’s security treaty with Australia following deadly riots in the capital,
Port Moresby, for fear of looking like Australia’s lapdog.

Mr Marape faces a vote of no confidence this month, with the riots a factor
in the political turmoil. In the Solomon Islands a general election, always a
turbulent time, is due in April. Meanwhile, Tuvalu remains without a
government. Some Australians wring their hands: China, with its back-room
blandishments, navigates such crises with ease.

Australia cannot begin to match China’s commercial clout. Still, its concerns
are overblown; its Pacific strengths remain substantial. Whereas China’s aid
to the Pacific has fallen since the pandemic, Australia’s still grows,
accounting for two-fifths of all assistance, well ahead of the Asian
Development Bank in second place and China in third. It offers education
opportunities and technical assistance. A new infrastructure-financing
facility competes with the corruption-heavy Chinese approach. It is boosting
opportunities for work and immigration—hugely popular among Pacific
islanders. And its “number-one weapon”, as Mihai Sora of the Lowy
Institute, a think-tank in Sydney, puts it, is sports diplomacy, with offers to
bring Pacific rugby teams into Australian leagues. China wields no such soft
power.

The lesson is clear. To counter China across the Pacific, Australia should
broaden its horizons from security to match those of the island states
themselves. There is no better way to trump the cynical Chinese approach. ■

Read more from Banyan, our columnist on Asia:

Singapore cracks down on Chinese influence (Feb 8th)
Asia’s commercial heft helps keep Russia’s war economy going (Feb 1st)
South Korea’s ban on praising the North is ridiculous (Jan 22nd)

Also: How the Banyan column got its name

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China
Xi Jinping’s paranoia is making China isolated and insular
China and the world :: From his personal travel plans to capital flows, cross-border exchange
is shrinking

Hong Kong is struggling to restore its image as a global city

Messy for Messi :: Efforts have been tripped up by nationalists

China is trying to boost domestic tourism

Life’s a beach :: Even “China’s Hawaii” may not tempt them

How China stifles dissent without a KGB or Stasi of its own

Chaguan :: A secret policeman on every street

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China and the world

Xi Jinping’s paranoia is making China isolated

and insular
From his personal travel plans to capital flows, cross-border exchange is
shrinking

Feb 12th 2024 |

“NIHAO, CHINA” is the name of the country’s latest effort to attract foreign
visitors. The logo accompanying the phrase (which means “Hello, China”)
features a panda—an image always handy when China wants to seem
cuddly. Chinese officials have been touring the West to promote the
campaign, helped by a video in which happy-looking foreigners intone the
Chinese greeting. Those with a deeper grasp of the language might sense a
different mood, including billboards on city streets warning people to look
out for foreign spies, and government propaganda on social media urging
vigilance against threats to national security. The Communist Party often
tells people that tourists, journalists and businesspeople could all be after
China’s secrets.

More than a year after Chinese leaders scrapped the “zero-covid” policy
which had kept the country sealed off from most foreign visitors from early
2020 to the end of 2022, they are now pushing in two contradictory
directions. Parts of the government appear eager to court foreigners. Last
month China sent a large delegation to the World Economic Forum in
Davos, Switzerland. Li Qiang, the prime minister, told the gathering that “no
matter how the world changes, China will…open its door still wider to the
world.”

In at least one key respect this is true: China’s trade in dollar terms is 31%
higher than in 2019. But The Economist has looked at a range of other
measures, from the number of flights and visits to China by foreign tourists
to levels of academic exchange, investment flows and even the personal
travel schedule of China’s leader, Xi Jinping. They suggest a country
overshadowed by a profoundly changing relationship with the West, a more
security-driven style of policymaking at home and by the parlous state of its
economy. China has become more inward-looking, as the West has become
more wary.

At the most basic level, far fewer outsiders are crossing borders into China.
Last year the country recorded about 62m fewer entries and exits by
foreigners than in 2019, before the pandemic began—a drop of more than
63%.

Behind these figures lie deeper trends. Take the geopolitical environment. In
the three years during which China shut its borders to prevent the spread of
covid, and its leaders hunkered down at home, the West, led by America,
was engaged in a wide-ranging rethink of how to cope with China’s rise as a
global power.

President Donald Trump focused on trying to cut America’s trade deficit

with China, but his administration sought to push back on other fronts, too,
including efforts to contain China’s military activity. There was no let-up
after Joe Biden became president in 2021. In the following year Russia’s
invasion of Ukraine drove the wedge between the West and China even
deeper. China had just called itself a “no-limits” partner of Russia. Mr Biden
ramped up controls on the export to China of advanced semiconductors.

The invasion threw up an unexpected obstacle to the restoration of normal

flows of people between China and America. In response to Russia’s
aggression, America and its allies barred Russian airlines from using their
airspace. Russia imposed a tit-for-tat ban. This has impeded the reopening of
aviation routes between America and China that were severed during the
pandemic: America does not want to give an advantage to Chinese airlines
by allowing routes to reopen, when those airlines could save time and fuel,
and therefore gain passengers, by flying over Russia.
At a meeting in November Mr Biden and Mr Xi agreed to “work towards a
significant further increase in scheduled passenger flights”. According to
OAG, a travel-data firm, in February 2019 there were 1,219 scheduled direct
flights from China to America. In February 2024 there are 269 (see map).
According to FlightAware, an American flight-tracking website, Chinese
airlines are avoiding Russia on newly approved routes.

In part, America is to blame for a reduction in contacts between the two

countries that were once considered routine. In 2022 it ended a Trump-era
campaign by the Department of Justice, known as the China Initiative,
whose aim was ferreting out Chinese spies in American academia and
business. The scheme had become mired in accusations of racial profiling.
But ditching it has not put scientists at ease.
Worried about being accused of helping China by sharing advanced know-
how, American researchers have become increasingly wary of collaborating
with their Chinese counterparts. In 2020 the number of science papers jointly
produced by Chinese and American researchers began to fall. “That is
certainly a consequence of the political environment” in America, says
Jonathan Adams of Clarivate, an analytics firm. Of China’s internationally
collaborative research papers, the share involving American co-authors has
fallen from a peak of 47% in 2013 to 32% in 2022, the company’s data show
(see chart 1).
Journeys to the West

At America’s borders, officers have become twitchier about Chinese

entering for study. Chinese diplomats complain that some students with valid
visas are being subjected to lengthy interrogations, often about Chinese
government backing for their projects. They say a few of them have been
sent back. Deborah Seligsohn of Villanova University in Pennsylvania, who
has been studying Sino-American exchanges in science, says she knows
Chinese academics whose research is “completely uncontroversial” who
have been subjected to such questioning.

Among foreigners mulling trips to China, memories have been slow to fade
of the sometimes brutal enforcement of its zero-covid measures. China now
all but ignores covid (it abolished the last vestige of pandemic control in
November, by ending the need to fill out a health-declaration form on
arrival). But potential visitors are “still fearful at the back of their minds
about potential lockdowns,” says John Grant of OAG. “You know, the horror
stories that we’ve all heard about…all of that impacts consumers’
perceptions of the market.”
China’s state-controlled media like to highlight examples of American
mistreatment of Chinese people. Such cases serve a propaganda campaign
that portrays the West as racist and a builder of barriers and of menacing
security networks that are aimed at keeping an innocent China in its place.
Perhaps intentionally, this depiction of the West may be deterring some
Chinese students from going to America: in the academic year of 2022-23
they numbered about 290,000, down from a peak of more than 370,000 in
2019-20.
Mr Xi likes to present his own country as a champion of global engagement
(in a world laden with doubt about globalisation, he describes it with striking
confidence as an “irreversible trend of the times”). In reality he seems less
inclined to travel abroad. In 2023, after the better part of three years without
venturing overseas, he spent only 13 days outside the country, compared
with a more typical 28 days in 2019. In September last year he shunned an
annual gathering of G20 leaders in India, despite having attended previous
such events in person or online. He did, however, travel to San Francisco in
November for a summit of the Asia-Pacific Economic Co-operation forum.
There, at his first face-to-face meeting with Mr Biden for a year, he insisted
that for America and China, “turning their backs on each other is not an
option”.

Many Chinese officials survey their struggling economy, with its collapsing
property firms and mountains of debt, and still see benefit to be gained from
the West’s markets, capital and technology. Mr Xi is maintaining military
pressure on Taiwan but does not appear ready for an all-out clash with the
West that an assault may entail. In December China resumed military-to-
military communications with America, having suspended them for more
than a year in protest against high-level contact between America and
Taiwan. The door is barely ajar: China’s armed forces share little in such
dialogue. But the message is that Mr Xi wants a stable relationship with the
West. He appears not to want Westerners to rush for the exits.

That is evident in the “Nihao, China” campaign. Since December tourists

from France, Germany, Italy, the Netherlands, Spain and Switzerland, as
well as Malaysia, have been allowed to visit China visa-free for 15 days.
Russians may be close friends, but they do not enjoy such a concession.
Many Western businesspeople, however, worry about China’s shaky
economy and the government’s heavy hand over it. Foreign direct
investment in greenfield projects in China has declined from more than
$87bn in 2013 to less than $18bn in 2022 (see chart 4). Flows of portfolio
investment into China have been negative for the past four quarters as global
funds dump Chinese equities (see chart 5). Foreign businesspeople are
anxious about the growing assertiveness of China’s secret police: raids last
year on foreign consulting firms in China rang alarm bells. On February 1st
the American Chamber of Commerce in China released its annual survey of
member companies’ mood. Nearly 40% said they believed foreign firms
were less welcome in China than they were in 2022, a year when many
businesses were battered by covid-related lockdowns. Mr Xi is “living in his
own world, surrounded by the security people”, says a prominent Western
businessman in Beijing. “And then you have these economic decision-
makers around him who find it very difficult to find time with him, to alert
him and to stop this erosion in sentiment.”
Mr Xi keeps railing against what he sees as “ideological infiltration” by the
West, and talking up the need to make China’s economy “self-reliant”. The
West’s heightened resolve to counteract harmful behaviour by China abroad
has stiffened his sinews. In response to America’s chip war, his government
is pumping money into Chinese companies to help them produce cutting-
edge technology by themselves (see Business section).
What about the big exception to the trend of isolation, China’s soaring trade
flows, which reflect its continuing role as an industrial powerhouse? Even
they tell a story. During Mr Xi’s rule, the share of China’s foreign trade with
major rich-world economies has been falling. In recent years, trade with the
ten-member Association of South-East Asian Nations and the other countries
of BRICS—namely Brazil, Russia, India and South Africa—has grown more
rapidly than its trade with Europe and America (see chart 6).
For Mr Xi, although America remains important, “south-south co-operation”
is growing fast as a strategic and economic priority. What he means by this
is the creation of an alternative centre of world power—one that pivots
around China, with the West at a safe distance. China is stepping up efforts
to woo countries of the “global south”, as Mr Xi calls it, trying to secure
them to China’s orbit with implicit promises of economic gain in return for
their acquiescence to China’s worldview. China is opening a new door. This
time it is setting the terms for those allowed to enter. ■

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Messy for Messi

Hong Kong is struggling to restore its image as a

global city
Efforts have been tripped up by nationalists

Feb 15th 2024 |

AS CHINA HAS struggled with reopening to the world, so too has Hong
Kong. The former British colony has long branded itself “Asia’s world city”,
a more international place than the mainland. But on top of the pandemic, a
sweeping national-security law enacted in 2020 has crushed dissent and
spooked foreigners. Some 34m tourists still visited last year, but that was
only 57% of pre-pandemic numbers.

Hong Kong officials had hoped that holding some big events might help. To
that end, they offered HK$16m ($2m) to help fund an exhibition football
match featuring Lionel Messi, an Argentine superstar. Promoters plastered
Mr Messi’s face on billboards across the city. On February 4th Inter Miami,
Mr Messi’s club, played a local team in Hong Kong’s biggest stadium.
Nearly 40,000 people paid up to HK$4,880 to watch.

They were disappointed. Mr Messi (pictured) spent the match on the bench,
apparently suffering from a groin strain. The crowd booed Inter Miami off
the pitch. To make things worse, three days later Mr Messi played a game in
Japan, China’s long-time rival. The injury not only soured the football game;
it also ignited a nationalist firestorm.

Regina Ip, a pro-mainland lawmaker in Hong Kong, said on social media

that Mr Messi had made a “deliberate and calculated snub” to the city. She
suggested that “black hands”—code for foreign plotters—were to blame. An
editorial in the Global Times, a state-run tabloid, speculated that foreign
powers were trying to undermine Hong Kong’s economy. Mr Messi’s
account on Weibo, a social-media platform, was swamped by angry
commenters.

Authorities in Beijing and Hangzhou then said that they would no longer
host Argentina’s national football team in two friendly matches scheduled
for March. The decision was made “for the reasons everyone knows,”
according to officials in Hangzhou. Tatler Asia, the organiser of the match in
Hong Kong, has pledged to return 50% of the price of the tickets.

All of this has made Hong Kong look worryingly like the mainland, where
brands and celebrities are wary of offending thin-skinned nationalists. As
well as the football, Hong Kongers have been talking about “Expats”, an
Amazon Prime show about wealthy foreigners living in the city. Officials
had hoped it would be good for Hong Kong’s image. In 2021 they even bent
quarantine rules to allow Nicole Kidman, an Australian actress, to film on
location. But some politicians have said the series portrays the city
negatively. When it premiered on January 26th, Amazon did not make it
available to viewers in the territory.

Undeterred, Hong Kong officials say they are planning dozens more “mega-
events” to attract tourists. A new 50,000-seat stadium is set to open later this
year. But in Hong Kong, as in mainland China, sports stars and other
celebrities will need to tread more carefully. ■
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Life’s a beach

China is trying to boost domestic tourism

Even “China’s Hawaii” may not tempt them

Feb 15th 2024 | SANYA

SURFING IS HARDER than Huang Shimin had expected. Alongside a

bunch of other wet-suited novices, she is trying it out on the golden sands of
Hainan, a tropical island roughly the size of Taiwan, off China’s
southernmost tip. The young professional from Shanghai is exactly the kind
of high-spending tourist that China’s government hopes will holiday within
China now the pandemic is over. The lunar-new-year break, which began on
February 10th, will be a test of the push to spur domestic consumption
through tourism.

Hainan should be a model for this policy. When Xi Jinping, China’s leader,
visited in 2013, he urged locals to harness the “green mountains, clear
waters, blue seas and azure skies” to build “an international tourism island”.
As in many peripheral areas where Mr Xi has bolstered the travel industry,
including Tibet and Xinjiang, he also has a political agenda. China’s vast
size means that the central government’s control is often weaker in these far-
flung provinces. Hainan is strategically important, located on the South
China Sea, where China has been militarising reclaimed islands. It is also
home to a giant naval base, as well as space and satellite launch sites, and
hosts the annual Bo’ao forum, a meeting of bigwigs often dubbed “Asia’s
Davos”.
Mr Xi’s directives have led to new airports, high-speed railways and giant
expressways on the island. Chinese tourists have long been able to purchase
items there duty-free. In 2020 their allowance was tripled to 100,000 yuan
($14,000), a direct appeal to affluent Chinese consumers accustomed to
buying designer goods abroad. At first glance, these efforts appear to have
been successful. In 2021, when domestic tourist numbers and revenues
elsewhere in China nearly halved, visits to Hainan stayed close to 2019
levels. Covid gave the island province a boost: from 2020 to 2022, GDP per
person rose faster than in the preceding ten years, when China’s economy
was growing more rapidly. Even after China lifted covid restrictions and
unsealed its borders in 2023, Hainan attracted 90m visitors, more than any
previous year.

The Chinese government is committed to serving high-spending shoppers in

fancy hotels. And in 2022 a new 3m-square-foot duty-free mall, the world’s
largest, opened in Haikou, the island’s capital. But as the domestic tourism
market matures, says Yang Yang of Temple University in Philadelphia, many
Chinese are looking for experiences beyond staying in posh hotels. The local
government is now promoting inland hiking trails through its tropical
forests. Music and film festivals are being staged to attract an artier crowd.

The most innovative new attraction is medical tourism. One 39-year-old man
standing in the lobby of a swanky hospital is in Hainan for a faecal
transplant, having heard about “experimental health vacations” on television.
“Managing my health is like maintaining a car,” he says of his choice to
spend ten days at the facility. The government wants to attract thousands of
tourists to giant new hospitals in Hope City, a purpose-built medical district
near Bo’ao, where patients are offered everything from cosmetic surgery to
stem-cell therapy. Hainan already has a large community of pensioners from
elsewhere who spend winter on the island.

Yet the uptick of visitors in 2023 may be deceptive. International-flight

volumes last year remained well below pre-pandemic levels. As a more
normal level of international travel resumes, Hainan may struggle to attract
China’s wealthy travellers. International bookings are up for the lunar new
year, particularly to Malaysia, Thailand and Singapore, where Chinese
citizens do not need visas.
Faced with strong foreign competition, the island’s current strategy risks
looking outdated. Prices on Hainan are so high that many who go there could
easily afford an international break. Other Chinese destinations now have
duty-free outlets, and more people are buying domestic brands.

What is more, there is unlikely to be an increase of international tourists.

Foreigners must use Chinese apps for payment, cope with an internet
firewall that precludes roaming and navigate gridlocked cities where most
signs are in Chinese.

The rewards of tourism are proving elusive for local people. Despite
government transfers and crowds of tourists, Hainan is still one of China’s
poorest provinces. Only Ningxia, Qinghai and Tibet, in China’s west, rank
lower. Tourism is dominated by a small number of often foreign-owned
hotels and outlets. Restaurant-owners and businesses in Sanya say they
benefit little from tourist traffic even in high season. Many of the island’s 9m
residents are still poor farmers. Even with such high traffic during the
pandemic, GDP per person fell, relative to other provinces, from 16th in
2019 to 21st in 2022. Hainan will need a lot more surfers to turn the tide. ■

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Chaguan

How China stifles dissent without a KGB or Stasi

of its own
A secret policeman on every street

Feb 15th 2024 |

MUCH THOUGHT has gone into making the Beijing Police Museum a
family-friendly attraction. Housed in a classical mansion near Tiananmen
Square, the museum is big on crime-fighting heroics. Glass cases show guns
used by Chinese police. A model of a police dog sports a bullet-proof vest,
commando-style helmet and protective boots on its paws. During the lunar-
new-year holidays, a recent weekday found parents and children admiring
displays about police helicopters, drug squads, traffic patrols and cyber-
officers keeping the internet “healthy”. Political repression earns a passing
mention—but in a historical section. An old photograph shows student
protesters being arrested by plain-clothes agents, decades before the
Communist Party took power.
Finding that museum’s opposite—a site that symbolises the dark side of the
police state—would not be a straightforward task. China has no direct
equivalent of the Soviet-era KGB, meaning a secret-police agency with
armies of officers. There is nothing in Beijing like the KGB’s Lubyanka
building, a notorious city-centre prison whose name struck fear into
Muscovite hearts. For all that, political protests against Communist Party
rule are vanishingly rare. That is because the party has built the most capable
surveillance state in history, argues “The Sentinel State: Surveillance and the
Survival of Dictatorship in China”, a new book by Minxin Pei.

China’s system of “preventive repression” is designed to deter, detect and

frustrate critics of one-party rule before they can organise or act, writes Mr
Pei, of Claremont McKenna College in California. In part, that involves
high-technology tools that have made headlines worldwide, from facial-
recognition cameras and vehicle number-plate readers to mobile-phone
tracking devices. Digital firewalls surround China’s internet, and algorithms
monitor messaging services and online comments. Cross an unseen red line,
and police will soon be pounding on the door. For good measure, the book
weighs the potential of a still unfinished “social-credit system” that assigns
citizens scores for social and anti-social behaviour in their business and
private lives.

Yet Mr Pei suggests that gadgets cannot explain China’s success in

suppressing dissent. That, he argues, is mostly explained by overlapping
networks of thoroughly analogue human beings. Most of these are not full-
time spooks. When the Berlin Wall fell in 1989, East Germany employed
one Stasi officer for every 165 citizens. China would need 8.5m secret police
to match that ratio, but actually employs a small fraction of that number. The
Ministry of State Security, China’s main civilian spy agency, handles
overseas espionage and domestic counter-intelligence. MSS branches around
the country watch foreigners, Chinese with overseas connections and ethnic
minorities with cross-border ties or an international profile, including
Tibetans and Uyghurs. State-security agents wield fearsome powers to
intimidate and detain targets without charge. But the MSS is relatively small
and has “limited purview with respect to domestic surveillance”, notes the
book.
A more significant secret-police agency lurks within the Ministry of Public
Security, China’s regular police service, Mr Pei writes. This force-within-a-
force is known as the political-security protection unit (zhengbao for short).
The total number of Chinese police officers is not made public, but is
thought to be over 2m. Drawing on provincial, municipal and county
yearbooks and publications, Mr Pei estimates that 3-5% of all police work
for the zhengbao at the national and local level. That equates to 60,000-
100,000 zhengbao officers, or one for every 14,000-23,000 citizens. They
are complemented by the wenbao, a police unit that watches cultural and
educational establishments, especially universities.

Another elite outfit is the Political and Legal Affairs Commission, a party
body. It runs surveillance operations and “stability-maintenance offices”
tasked with smothering strikes and protests before they start. A powerful
agency, it oversees security policy generally, and vets police and legal
officials for political reliability.

China does not need a secret-police agency with millions of officers, the
book suggests. That is because its surveillance state rests on other pillars that
offer part-time but invaluable help. The first is rank-and-file officers in
neighbourhood police stations. In Chinese propaganda, there is nothing
sinister about such police. They are hometown heroes who battle crime and
keep the public safe. But tracking political dissent or public discontent is
their job, too. The police oath mentions upholding “the absolute leadership
of the Communist Party” before it talks of protecting the public.
The police work that is not shown to children

Police stations are required to monitor “key personnel”, a formal term for
millions of Chinese with police files, including ex-convicts and criminal
suspects but also those deemed threats to “state security”. Police stations
also watch millions more “key individuals”, a group that includes rights
activists, religious believers and people petitioning the government for legal
redress.

All of that involves a second pillar of the surveillance state: informants. Mr

Pei quotes documents in which city governments and police districts boast of
recruiting express couriers, shopkeepers, security guards, hotel clerks and
building managers as informants. Xi’an, a western city, once reported one in
12 city taxi drivers working for police. Universities report that foreign
faculty and Uyghur students are under close watch, thanks to students
recruited to spy on teachers and classmates alike. Millions more party
members and community volunteers are asked to report suspicious acts as
well as colleagues and neighbours unhappy with the authorities. The system
fights crime and defends the party’s monopoly on power: no clear line
separates these two tasks.

This complexity suits the party. It has eyes and ears everywhere, while
avoiding a stand-alone Chinese KGB or Stasi that might alarm the public or
grow too mighty to control. China’s surveillance state, it turns out, is hiding
in plain sight.■

Read more from Chaguan, our columnist on China:

Xi Jinping’s chaos-loving friends (Feb 8th)
Hard times for China’s micro-industrialists (Feb 2nd)
Xi Jinping looks abroad for confidence (Jan 25th)

Also: How the Chaguan column got its name

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https://www.economist.com/china/2024/02/15/how-china-stifles-dissent-without-a-kgb-
or-stasi-of-its-own

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United States
Black workers are enjoying a jobs boom in America
Racial progress in America :: A tight labour market chips away at some of the most stubborn
inequalities

House Republicans fear Trump too much to aid Ukraine

House of cowards :: They include the speaker, Mike Johnson, who won’t allow a vote

Cousin marriage is probably fine in most cases

All in the family :: It is also illegal in 25 American states

The far-right’s favoured social-media platform plots a

comeback
Parler games :: What to make of Parler’s return

The search for justice in America is not a nine-to-five job

Night court :: Courts should stay open later. New York City has been doing that since before it
was cool

Donald Trump’s tremendous love

Lexington :: His politics may seem hostile, yet he talks like a Valentine’s Day card

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Racial progress in America

Black workers are enjoying a jobs boom in

America
A tight labour market chips away at some of the most stubborn inequalities

Feb 14th 2024 | WASHINGTON, DC

IT IS A grim fact of American life that black people have long lagged well
behind white folk in the world of work, with higher unemployment, lower
wages and a larger share giving up on job searches altogether. A much more
hopeful fact is that many of these inequalities now appear to be shrinking. In
the half-century before the covid-19 pandemic, the black unemployment rate
was on average twice as high as the white one. At the end of last year jobless
rates were, respectively, 5.2% for black Americans and 3.7% for white
people—equalling the narrowest gap on record.
Even more striking are shifting tides in labour-force participation. About
63% of black Americans are now deemed to be either in work or searching
for jobs, more than the 62% level for white Americans—an inversion of the
pattern seen in previous decades. In part this reflects demographic
differences, because the median white American is about a decade older than
the median black American and thus more likely to be retired. But it also
testifies to better job prospects for black Americans: their median earnings
were about 84% of those of white Americans at the end of 2023, a sharp rise
from the 79% average of the preceding two decades.

The underlying cause of all of these changes is America’s run of economic

strength. The labour market has been so tight for the past couple of years
that it has benefited all workers but especially the most marginalised,
helping to create opportunities that were once much harder to come by.
Although it is only natural to worry whether these advances will endure
when growth eventually slows, it is important to recognise that, for the
moment, they are reducing some of America’s most persistent inequalities.

The improvement for black Americans has been broad-based, with gains for
blue-collar and white-collar workers alike. Eddie Smith in Charlotte, North
Carolina was struggling to get by with occasional jobs mixing concrete until
last summer, when he took a four-week course to obtain his commercial
driver’s licence. Now he pilots an 18-wheeler and delivers crates of beer
around the city for a base salary of about $60,000. “It’s the best job I’ve ever
had. The pay is good, and I work at my own pace on my own schedule,” he
says. He is not alone. According to official data, the economy has added
about 1.6m jobs in “transportation and material moving”—a category which
includes driving delivery trucks—since the end of 2019, and about 20% of
these have gone to black Americans, above their 14% share of the
population.
At the opposite end of the labour market is Lloyd Bolodeoku, a senior in
computer science at Bowie State University, one of America’s historically
black universities. He has already accepted a job offer from Adobe, a
software company, and will start in a cyber-security role in May, mere days
after he graduates. Mr Bolodeoku recalls the words of a teacher from his
high school just outside Baltimore, where the student body was more than
90% black: “His saying was you either want the router or you want the
spatula.” That is, if you do not learn about technology, you may end up
flipping burgers. Although black Americans are still underrepresented in
high-tech work, they have gained about 130,000 jobs in computer-related
occupations in the past three years.

One reason that a strong labour market is valuable for black Americans is
that many work in highly cyclical sectors such as freight delivery. That
makes them vulnerable to recessions but also well placed during periods of
growth (a similar dynamic exists for Hispanics). A tight labour market also
blunts some of the discrimination that black applicants may face when
looking for jobs. “During cyclical downturns employers can afford to pick
and choose, but when workers are really needed, they are penalised for their
biases,” says Michelle Holder, an economist at John Jay College, City
University of New York.

The evolution of America’s economic structure is probably also playing a

role. Concentrated in lower-skill jobs, black men were hit especially hard by
the decline of factories and unions from the 1970s on. But lower-skilled
workers are once again in high demand in a range of occupations that are
increasingly central to the economy, from stocking warehouses to assisting
nurses. Real-wage growth for the bottom 10% of earners has consistently
outstripped all others since 2020—a boon for black Americans.

Another factor is a decline in incarceration. About 590,000 black adults were

in prison in 2021, down by more than a quarter from a decade earlier. Black
Americans are still nearly five times more likely than white ones to go to
jail, but a lower incarceration rate is progress nonetheless, freeing more
people for work.

Sam Schaeffer, head of the Centre for Employment Opportunities, which

helps Americans find work after leaving prison, has also seen increased
openness to “second-chance hiring” by companies. He says that stems in part
from executives making commitments to racial justice but also, crucially,
from the tight labour market. One of his organisation’s success stories is Mr
Smith, the beer-delivery man in Charlotte. He was behind bars for 34 years
before getting parole. Many firms were afraid to hire someone with his
background, but thankfully not all. “It’s just hard for them to find drivers
these days,” he says.

A strong labour market is, by itself, far from a cure-all for racial inequality.
Although the black-white wage gap has narrowed in the past two years, the
wealth gap has widened over the same period, because white Americans own
more stocks than black Americans and so have benefited more from the
market rally.

What’s more, unfairness goes well beyond hiring decisions. For decades the
received wisdom was that black Americans would pull closer to white
Americans if they had similar academic qualifications. But Valerie Wilson of
the Economic Policy Institute, a think-tank based in Washington, DC, has
shown that wages for black and white college graduates have instead drifted
further apart in recent decades. “In addition to pay discrimination, a lot has
to do with disparities in the jobs that people go into and in opportunities for
promotion,” says Ms Wilson.

One question is whether historically black colleges, which produce about

40% of America’s black engineers, can help reverse this dismal trend for
graduates. The computer-science department at Bowie State, where Mr
Bolodeoku is finishing his degree, has built up an internship-placement
programme that links students with companies and government agencies,
starting in their first year and continuing throughout their studies. “They get
to be mentored and get the confidence they need,” says Rose Shumba, chair
of Bowie’s computer-science department. Not coincidentally, its enrolment
has more than doubled from 190 in 2019 to about 500 today.

For black women more generally, investment in early education would be

even more significant. A big stumbling block for their careers is the need to
raise young children. Nearly 50% of black children live only with their
mothers, compared with less than 20% of white children. That is one of the
motivations for the Biden administration’s proposal to subsidise child care
and make pre-kindergarten free, a policy which would need a Democratic
sweep in the election later this year to get through Congress. “You would get
a return on investment both in terms of lifting kids out of poverty and freeing
up their parents to be able to pursue more opportunities,” says Lael Brainard,
director of the National Economic Council in the White House.

For now, the test of whether black Americans are truly faring better in the
workplace will arise whenever the economy next hits a soft patch.
Historically, many have fallen prey to a “last hired, first fired” mode of
employment. But William Rodgers of the Federal Reserve’s branch in St
Louis is cautiously optimistic that a future downturn may play out
differently. He has homed in on some of the workers most likely to be fired
—young black Americans with no college degrees—and found that their
unemployment rate has barely risen since 2022 even as the number of job
openings has fallen. This, he thinks, may be a sign that gains of the past few
years are sustainable. “People have come in, gotten a toehold and built up
experience,” he says. With any luck, more black Americans will go from last
hired to lastingly hired.■

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House of cowards

House Republicans fear Trump too much to aid

Ukraine
They include the speaker, Mike Johnson, who won’t allow a vote

Feb 14th 2024 | WASHINGTON, DC

AMERICA’S CONGRESS does not have a reputation for productivity, but

its failure to authorise more aid for Ukraine is unusual even for the
underachievers on Capitol Hill. And the legislation’s already grim prospects
are diminishing as the presidential election approaches.

On February 13th the Senate approved a $95bn bill. Most of that funding is
meant to assist Ukraine and replenish America’s dwindling weapons stocks.
The legislation also includes $14bn for Israel, $9.2bn for humanitarian relief
and some $8bn for the Indo-Pacific. Almost every Democrat and 22
Republicans voted in favour.
That is as far as the legislation is likely to go. A wing of isolationist
Republicans has always opposed helping Ukraine, but now some legislators
previously supportive of Ukraine argue that they shouldn’t help until
America resolves its border crisis. Donald Trump, aiming to keep America’s
immigration mess as a campaign issue, ordered Republicans to oppose a
compromise. He also has insisted any foreign assistance should come in the
form of loans to be repaid in the future.

Chuck Schumer, the Senate majority leader, called on the House to take up
the bill, as it would almost certainly pass the House if voted on. But Mike
Johnson, the Republican House speaker, listens more closely to Mr Trump
than he does to Democratic senators. “The mandate of national-security
supplemental legislation was to secure America’s own border before sending
additional foreign aid,” Mr Johnson said before the bill passed. “Now, in the
absence of having received any single border policy change from the Senate,
the House will have to continue to work its own will.”

Republicans apparently had the great misfortune of getting what they asked
for. First, they demanded that the border and Ukraine to be linked. When
Senate negotiators offered the toughest immigration law in decades, most
Republicans rejected the offer. A foreign-aid-only bill passed, and now Mr
Johnson is complaining that it does nothing to control immigration.

Republicans have such a small majority in the House that a few anti-Ukraine
congressmen could challenge Mr Johnson as speaker if he were to allow a
vote on military aid. He could theoretically offer amendments or restart the
whole process, though there is little evidence that this House is capable of
doing much. He could also split the bill into pieces and offer separate votes
for Ukraine and Israel, for example, though that too appears unlikely.

Perhaps the only hope for Ukraine funding is a parliamentary manoeuvre

known as a discharge petition. The time-consuming, multi-step process
allows a simple majority of the House to force a vote on legislation. The
mechanism could take more than a month to play out, and it hasn’t been
successfully used in nearly a decade. Both sides seem to agree the tactic is
unlikely to succeed.
Even though a majority of the House still supports Ukraine, many
Republicans don’t feel strongly enough to defy House leadership and Mr
Trump. It’s one thing to support Ukraine; it’s another to risk losing a primary
to a Trump-backed challenger. And some House Democrats plan to reject the
bill because of its support for Israel. Every Democratic defection will require
another Republican to step up.

Time is running out for Ukraine funding, but it’s not the only item on Mr
Johnson’s agenda. The House impeached Alejandro Mayorkas, the secretary
of homeland security, on the same day that the Senate passed the aid bill.
And a partial government shutdown will begin on March 1st in the absence
of legislative action. Mr Johnson says that is where he has directed his
attention now. Yet a lapse in government funding looks increasingly likely:
House Republicans have shown themselves to be as feckless on setting a
budget as they have been on helping allies. ■

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All in the family

Cousin marriage is probably fine in most cases

It is also illegal in 25 American states

Feb 15th 2024 | WASHINGTON, DC

IT JUST SEEMED so wrong. In January Nick Wilson, a Kentucky state

legislator who achieved reality-TV fame for winning “Survivor” in 2018,
created a frenzy on social media when he sponsored a bill that removed
“first cousin” from the list of incestuous family relations. Mr Wilson said
that the omission was a mistake and the bill was quickly withdrawn. The
new draft put “first cousin” back on the list of criminal sexual relations,
alongside parent, sibling, grandchild and other blood relatives.

Since much of Kentucky is covered by the Appalachian mountains, a region

stereotyped for encouraging incestuous sexual behaviour, jokes quickly
spread online. The reactions on X (formerly known as Twitter) ranged from
humour to disgust to fear for the resulting offspring. Only a few pointed out
that in many states it is legal to have sexual relations and marry one’s first
cousin. Is it really OK to kiss your cousin?

Geneticists mostly say that it is, with some caveats. In 2021 the National
Society of Genetic Counsellors (NSGC) published updated guidelines for
consanguineous couples (people descended from the same ancestor) and
their offspring. The risk to offspring is greater, but the increase is quite
small. According to the Centres for Disease Control and Prevention about
3% of all babies born in America have birth defects. The NSGC guidelines
state that for “couples with no known genetic disorders in the family, there is
an additional 1.7% to 2.8% risk for significant birth defects.”

Many other couples face far higher risks of genetic complications for their
offspring, and those unions are not banned. Classic Mendelian genetics (the
kind taught in biology class) predicts that if two people each have a
recessive gene for certain disorders, such as cystic fibrosis or sickle-cell
anaemia, there is a 25% chance their child will be born with that disorder.
Yet those marriages are allowed. “The law against first-cousin marriage is a
major form of discrimination,” says Robin Bennett of the University of
Washington’s department of medicine, who was a co-author of the NSGC
guidelines. For offspring “the risks are very low and not much different than
for any other couple,” she says.

Throughout Western history attitudes about consanguineous marriages have

varied. The Bible does not directly ban sexual relations between cousins—
how else would all of mankind have descended from Adam and Eve? The
Roman Catholic Church did later prohibit first cousins from marrying,
though exceptions were made for a fee. Martin Luther, the father of
Protestantism, objected to such payments, so many Protestant denominations
allowed these marriages free of charge. As is clear from novels such as
“Mansfield Park” and “Wuthering Heights”, the people of Georgian and
Victorian England were not too squeamish about such relations. Queen
Victoria was married to her first cousin, as were both Albert Einstein and
Edgar Allan Poe.

In some cultures, marriage between close family members is encouraged

today. It secures wealth and reinforces social connections within the family.
It might even make marriages easier, on the optimistic assumption that the
in-laws are more likely to get along. In some areas of the world (Pakistan,
the Middle East), nearly half of all marriages are between close relations. No
European countries ban marriages between first cousins (though Norwegian
policymakers recently debated doing so).

There are limits to the amount of intermarriage that is healthy. Charles

Darwin, the father of evolutionary biology, who married his first cousin in
1839, was reportedly conflicted about his own arrangement. The Darwins
had ten children, but three of them died during childhood and three of his
surviving children never had any offspring with their spouses. Some
historians surmise that the children suffered from genetic abnormalities due
to their parents being closely related—the families of Darwin and his wife
had a long history of intermarriage.

Yet despite the fairly low genetic risk for most couples, the “ick” factor
prevails in Western culture. The family dynamics can be difficult to explain
to others. Many consanguineous couples choose to keep quiet, says Ms
Bennett. For this reason it is difficult to know how many of these couples
exist in America.

Despite the fact that first-cousin marriages are pretty low-risk for offspring,
25 states do not allow first cousins to marry. In six states, it is legal to marry
a first cousin, but with caveats (if one person is unable to reproduce or
elderly, for example). However, if Mr Wilson’s experience in Kentucky is
indicative of the public’s reaction, it will be a long time before such laws
will be stricken from the books. ■

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Parler games

The far-right’s favoured social-media platform

plots a comeback
What to make of Parler’s return

Feb 15th 2024 | NEW YORK

AH, TWITTER IN 2020. X was just a letter in the alphabet. Elon Musk was
preoccupied with implanting computer chips into pigs. Donald Trump wasn’t
yet banned, though his tweets were loud, alarming—and getting fact-
checked by the platform itself. Tired of liberal big-tech companies telling
them what they could post, some Republicans had started to defect to a rival
platform launched two years earlier: Parler. It looked similar to Twitter, but
with less content moderation. More began to announce their migration from
the nest with the hashtag #Twexit. “Hey @twitter, your days are numbered,”
tweeted Brad Parscale, then Mr Trump’s campaign manager, with a link to
Parler.
Parler has since earned a darker reputation. Messages exchanged on Parler
have been presented in court as evidence to convict rioters who broke into
the Capitol on January 6th 2021. Misinformation and far-right conspiracy
theories shared on the platform came to the fore. The app was taken off the
Apple and Google app stores (although it was later restored). A legal battle
with Amazon Web Services, the cloud platform that hosted Parler, ensued.
For a brief moment in 2022 Kanye West, a controversial rapper, attempted to
buy it. The app eventually went down altogether.

Now it is promising a “big comeback” after being acquired by PDS Partners,

a Texas-based company. Parler rejects its association with January 6th.
Shortly after the insurrection, the platform’s previous ownership denounced
“Big Tech’s scapegoating of Parler” in a letter to the House Oversight
Committee (HOC) and said that Parler had shared concerns about violent
activity with law enforcement before January 6th.

“Many people organised to be at that event on all different platforms,” says

Elise Pierotti, the firm’s returning chief marketing officer. “Parler was the
only one that was scrutinised.” Ms Pierotti, who claims that Parler’s move to
return in an election year is coincidental and that the firm is “not thinking
about politics”, says that the platform will allow users to say that the 2020
election was stolen (“because that is a personal opinion”) and that mail-in
ballots are fraudulent. “When it comes to open discussion, or people
presenting, you know, different ideas, that’s not up to us.”

Parler is not the only fringe platform to have won favour among those on the
right, but it is the best-known. Nor was it the only social-media service to be
cited in the House’s January 6th report, though the committee notes that it
found “alarmingly violent and specific posts that in some cases advocated
for civil war” on Parler. “It’s hard to imagine that the brand itself, the name
Parler, has shed the public understanding of the app as being a place [where]
many who were part of January 6th got organised and shared resources,”
says Joan Donovan of Boston University.

Will fans of Parler return? Twitter (now known as X) looks very different
under Mr Musk’s ownership; these days it is liberal users who threaten to go
elsewhere. Mr Musk has dismantled or weakened X’s fact-checking tools as
part of his own free-speech crusade, claiming that the platform “has
interfered in elections”. He recently shared posts about America’s “insane”
voting system and why “you can’t trust the media” to his 172m followers
(by comparison, Ms Pierotti estimates that Parler had almost 20m users at its
peak).

If Parler does return, how concerning would that be? Social media’s ability
to influence extreme political acts is notoriously difficult to quantify. Several
papers published since January 6th 2021 have begun to paint a more nuanced
picture of the link between platforms of all stripes, polarisation and violence.
Parler’s unique contribution to January 6th is “very unclear”, reckons Daniel
Karell, a sociology professor at Yale University who co-authored a study on
Parler, platforms like it and civil unrest. He found that while it is unlikely
someone could have been radicalised by posts on Parler alone, the platform
did attract like-minded people with extreme views and gave them a space to
affirm each other’s ideas. In other words, a loosely moderated forum made
storming the Capitol seem almost like a normal thing to do.

As private, encrypted channels—which can offer both unfiltered

conversation and fewer prying eyes—grow in popularity, such conversations
will become harder to see. One thing supersedes the power of content
moderation altogether: the charismatic figure that rallies others to their cause
(or social platform of choice). Ms Donovan says her own research into
networked incitement has found a common thread among those who were
arrested at the Capitol: “they came because Trump asked them to, very
simple.” Whether Parler’s user base will return or grow remains to be seen.
The conversations it hosted never went away. ■

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Night court

The search for justice in America is not a nine-to-

five job
Courts should stay open later. New York City has been doing that since
before it was cool

Feb 15th 2024 | ROOM 130, MANHATTAN CRIMINAL COURT

“I APPRECIATE EVERYTHING that you’ve done,” Judge Jonathan

Svetkey told a team of defence lawyers at a recent Night Court arraignment
in Manhattan. The lawyers had asked for their client to be released under
supervision. They had been working on getting mental-health services and a
bed for the night. The judge was sceptical the defendant would accompany
them to a shelter. “What if he says, ‘I’m going the other way?’ What are you
going to do?” He set bail for $5,000. Judge Svetkey moved on; Night Court
usually must handle 70-90 cases a shift.
By day, Manhattan’s Criminal Court is a bustling building. Long queues
snake through the metal detectors at the entrance. Lawyers, jurors,
defendants and police fill the corridors. But come 5pm, the building clears
out, except for two courtrooms, which remain open until 1am to handle
arraignments.

Night Court has been around a long time, and without it, New York City’s
criminal courts would be even more badly backlogged than they already are.
These days, however, late shifts in courts also reflect a national effort to use
alternative hours to improve efficiency and engender public trust in the
justice system.

To aid rule-breaking drivers who hold down day jobs, many Californian
counties offer late hours for traffic court, from 5pm-7.30pm. Forced online
by covid, courts around the country continue to hold virtual hearings.
Getting to court might be unsafe if someone needs a protection order against
a violent partner, so Cook County, which includes Chicago, offers remote
proceedings from 9pm until 3am on weekdays, as well as on weekend
afternoons. Alternative hours can be used to increase participation, among
other benefits, says Danielle Hirsch of the National Centre for State Courts,
a non-profit group that promotes court innovations.

Swamped by criminal defendants, New York embraced alternative hours

before it was a cause of better-government types. Until 2003, Manhattan’s
arraignment court was open 24 hours a day. A third session known as the
“lobster shift” ran from 1am until 9am. But during the 1990s, Gotham
became one of the safest big cities in America. Fewer arrests meant fewer
arraignments. More recently district attorneys have stopped prosecuting
marijuana-possession cases, which used to jam up arraignment court. But the
remaining shift of Night Court remains busy most nights.

Arrests related to domestic-violence are rising. The influx of migrants has

put a strain on the city’s social and judicial services. More migrants are
appearing before a criminal-court judge, often for shoplifting necessities
such as nappies or stealing something to sell on. A few face charges for
more serious crimes such as assault.
New York City law requires, with some exceptions, that defendants appear
before a judge within 24 hours of arrest. It would be difficult to meet this
goal without Night Court. The arraignment process is no different from
during the day. The prosecutor presents the charges and requests that the
defendant post bail, be released under supervision or be remanded to jail.
Perhaps because it is night, however, some of the emotions seem heightened
and many of the defendants can look fragile. Shelter and other services are
not as readily available at a late hour, which can be especially worrying on
cold winter nights.
Late-night feelings

As in day court, many defendants have mental-health issues and some suffer
from drug addiction. Most are poor. Some do not have coats. One former
Legal Aid Society lawyer says she had to run out to a 24-hour pharmacy to
buy shoes for a client. Taramanie Sukhu, an arraignment supervisor, often
shares food.

Ed McCarthy, of Legal Aid, has been working Night Court for more than
two decades. He says there is not always a social worker available in the
evening or on weekends. (Court is in session seven days and nights each
week in New York City.) Defendants can languish at Rikers Island, the city’s
largest and most notorious jail, Mr McCarthy says, “only because there’s
nobody to offer a programme or a way of giving judges reasons to release
you.”

Aubrey Fox of New York City Criminal Justice Agency, a charity supporting
pre-trial defendants, says that an infrastructure to promote release instead of
detention does function quietly in the background. For every person held at
Rikers, nine are released into the community. Many are candidates for
treatment and other social services. About 85% make all their court dates.
“That gives judges more confidence that if they release someone they will be
taken care of,” Mr Fox says.

Night Court is one place where this triage begins. The public gallery tends to
be quiet, except for the occasional family member. One family drove from
Michigan when a close relative was arrested. The late-shift courtrooms also
attract tourists. Kathrin Kolvenbach, a trainee lawyer from Germany, said
she had heard about it from a guidebook. She was there to learn about
America’s court system. Others are there to gawk, looking for gritty
entertainment. Tourists give Night Court tips to each other on Tripadvisor, a
travel website. One defence lawyer said seeing tourists, who tend to be white
Europeans, leaves a bad taste in her mouth and unsettles her clients, who are
mostly African-American or Hispanic.

Krystal Rodriguez, policy head of the Data Collaborative for Justice at John
Jay College, says arraignments both night and day are a “snapshot of how
the criminal-justice system becomes the unfortunate repository for all these
other social issues that outside of the criminal legal system we haven’t been
able to address”. Many Americans learned about Night Court from an
eponymous sitcom that ran from 1984 until 1992. It was recently rebooted
and is not very funny. There are few laughs in the real one either. ■

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Lexington

Donald Trump’s tremendous love

His politics may seem hostile, yet he talks like a Valentine’s Day card

Feb 13th 2024 |

WHAT DOES Donald Trump talk about when he talks about love? For the
man presents himself as being full of it. He is associated with a politics of
grievance and retribution that has boiled over at times into violence, most
infamously in the attack on the Capitol on January 6th 2021. And yet no
other president, or presidential candidate, has so wreathed himself in
valentines.

In speeches and blast emails, Mr Trump romances his supporters with

constant reminders of his love. Among those for whom he has declared his
love over the years are “the Hispanics”, “the Saudis”, “the poorly educated”
and officers of the Central Intelligence Agency. His heart often has reasons
of which reason would appear to know nothing. Like Titania he has tumbled
for the most improbable of creatures (“We fell in love,” he gushed of North
Korea’s supreme leader, Kim Jong Un). Like Rihanna he has found love in
hopeless places, including the Soviet Union (“you could see it was a country
where there was a lot of love”) and even in that crowd on January 6th
(“There was a lot of love out there. There was tremendous love”).

Pretty much by definition, presidents are not normal people. But even by
their abnormal standard Mr Trump is an unusual character. His detractors
like to point out that he had a head start in life as the son of a millionaire
real-estate developer. They may not give him enough credit, though, for how
through daring, determination and a certain ethical flexibility he willed
himself into becoming a billionaire, a flamboyant celebrity, a reality-
television star and then the president—how, like F. Scott Fitzgerald’s Jay
Gatsby, Donald Trump “sprang from his Platonic conception of himself”.
His insistence on this conception overwhelmed the scoffers at his candidacy
eight years ago, bulldozed most Republicans into believing he did not lose in
2020 and may now persuade Americans to return him to the White House.

Biographers of Mr Trump have recounted how, as he discovered he could

dominate and bamboozle others, he acquired some contempt for them as
well. Once he became known for his wealth people would claw at him for
favours. He marvelled, as a candidate in 2015, how easy it was to woo voters
with the slightest gesture.

Wayne Barrett, a New York journalist who was probably the closest student
of Mr Trump’s rise, fall and fragile recovery into the early 1990s, writes in
“Trump” that people who worked for the mogul longed for him to find love
but “did not really believe he had the capacity for it.” Mr Barrett quotes one
such person as saying Mr Trump was “unaware of his own tragedy” and then
continues, “As they saw it, his deeply ingrained remoteness was so much a
part of his unexamined life that he neither understood it nor regretted it.”
When one friend, irritated by Mr Trump’s uninterest in his troubles, accused
him of being a shallow person, he replied, “That’s one of my strengths.”

The Great Gatsby was laid low by love, but that seems to have little chance
of undoing The Donald, as his first wife, Ivana Trump, called him. Outsiders
can never know what really goes on inside a marriage, but journalists,
lawyers and the participants themselves have rendered some of Mr Trump’s
marriages more transparent than most. Ideals of love have not tended to
predominate.

“If you don’t marry me you’ll ruin your life,” were the words with which Mr
Trump proposed to Ivana, according to her book “Raising Trump”.
“Continuing love and affection was not a material part” of their nuptial
agreement, read a court filing from Mr Trump as the couple split up. “I was
bored when she was walking down the aisle,” Mr Trump later recalled of
Marla Maples, the woman for whom he left Ivana. “I kept thinking, ‘What
the hell am I doing here?’” Probably no Valentine’s Day card will ever
invoke Mr Trump’s advice about how best to behave toward women: “You
have to treat ’em like shit.”

Outside his family, Mr Trump did not express much love for the people who
helped build his fortune. “Look at those losers,” he remarked to an associate
as he watched people gambling in one of his Atlantic City casinos, according
to “Confidence Man” by Maggie Haberman.

To Mr Trump, hate could be a virtue. Back in 1989, New York’s mayor, Ed

Koch, urged citizens not to have rancour toward five black youths arrested
for the rape of a white jogger in Central Park. Mr Trump, then beginning to
dabble in politics, took out full-page ads in the four daily New York papers
calling for reinstatement of the death penalty and declaring, “I want to hate
these murderers and I always will.” The youths served years in prison, but
even after they were exonerated Mr Trump would not recant, saying in 2014
that they did “not exactly have the pasts of angels”. (Hate can mean never
having to say you’re sorry.)

As president in 2020, Mr Trump attended the National Prayer Breakfast,

devoted that year to the theme of “loving your enemy”. “I don’t know if I
agree,” he mused, when he stepped behind the lectern. He had recently been
impeached for the first time and was not inclined to forgive people he
thought of as enemies. “They have done everything possible to destroy us,”
he said, “and by so doing, very badly hurt our nation.”
Say that you love me

Mr Trump’s love has limit and conditions. He seems to need to feel

appreciated and admired, to feel loved, and then he will complete the
transaction by declaring his own affection. “I’ll never stop loving you,” he
vowed in a recent mass email seeking donations. “Why? Because you’ve
always loved me!” That is a deal his supporters are eager to make. They
have their own unmet needs for recognition and affirmation. They know
their guy is not perfect; in fact, it seems probable that when their love swears
he is made of truth they believe him even though they know he lies. They
will not risk his love by doubting him. This codependence has become the
strongest force in American politics. ■

Read more from Lexington, our columnist on American politics:

This is not a story about Taylor Swift and the Super Bowl (Feb 8th)
How to overcome the biggest obstacle to electric vehicles (Feb 1st)
Why America’s political parties are so bad at winning elections (Jan 25th)

Also: How the Lexington column got its name

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states/2024/02/13/donald-trumps-tremendous-love

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Middle East & Africa

If Israel invades, hell looms in Rafah
The next phase of the Gaza war :: Binyamin Netanyahu wants to attack now. His generals
don’t

The real problem with the UN’s agency for Palestinians

The case against UNRWA :: It has perpetuated the misery of Palestinians

How Yemen’s dominant Houthis blackmail foreign aid

agencies
Helping the bad guys :: They risk causing a man-made famine with their meddling

Is Julius Malema the most dangerous man in South Africa?

South African politics :: His party wants to nationalise all. He may become kingmaker

African governments return to international bond markets

Taking credit :: Debt worries have eased a little, but borrowing is still expensive

Evidence mounts that Ukrainian forces are in Sudan

Ukrainians in Sudan :: But their presence may not alter the outcome of its civil war

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The next phase of the Gaza war

If Israel invades, hell looms in Rafah

Binyamin Netanyahu wants to attack now. His generals don’t

Feb 13th 2024 | JERUSALEM

AS CEASEFIRE TALKS bog down in the Middle East, the threat is building
of a new and devastating level of violence. On February 14th Binyamin
Netanyahu, Israel’s prime minister, said he would not send a team to
negotiate a truce in Gaza in exchange for the release of hostages by Hamas,
citing the group’s “delusional demands”. Simultaneously fears have been
rising for days of a massive Israeli army invasion of Rafah, Gaza’s
southernmost city that is hemmed along the border with Egypt, where 1m or
more Palestinians are located. Any expansion of the fighting will probably
have devastating consequences for civilians, detonate Israel’s relationship
with Egypt and exhaust American patience. Yet Mr Netanyahu is intent on
escalating, insisting that it may be necessary in order to achieve “total
victory”.
Mr Netanyahu’s emphasis on Rafah is in part an attempt to boost his
standing by promising Israelis a decisive result in the war. On February 12th
the embattled prime minister was given a fillip when commandos rescued
two hostages from the Al-Shabura neighbourhood in Rafah (diversionary
bombardments killed 74 Palestinians). “Only continued military pressure…
will bring about the relief of all our hostages,” he said afterwards. Yet the
focus on Rafah is not just about Mr Netanyahu’s self-preservation. Within
the Israeli security establishment there is an acknowledgment of the benefits
of taking on Hamas there, in its last major stronghold, and of gaining control
of the border with Egypt, the main channel for arms-smuggling.

In the assessment of security officials, Hamas is on the back foot. The

movement’s leader in Gaza, Yahya Sinwar, is the subject of a manhunt in
Khan Younis, the largest city in southern Gaza. He is understood to be
increasingly incapable of communicating with his men.

The group has been trying to re-establish its presence in Gaza city, in the
north, by putting police on the streets and paying civil servants. Yet Israeli
intelligence officials believe Hamas leaders worry they are losing control
over the population. More than 10,000 Hamas members are believed to have
been killed and thousands more wounded or captured. The Israel Defence
Forces (IDF) says around 18 of Hamas’s 24 battalions have been
“dismantled”. The remaining fighters are in “guerrilla mode” and are losing
their ability to rule Gaza.
Trapped in the crossfire

Attacking Rafah would squeeze Hamas further, yet the toll could be huge.
The generals know that there may be no effective way of moving civilians
out of harm’s way. In the previous stages of the war, Israel urged residents of
Gaza city and Khan Younis to move south, away from the war zone. Now it
would have to get those who had fled to Rafah to move again, this time to
the shrinking “safe areas”—makeshift tent-cities on the coast (see map).
Neighbouring Egypt is desperate to avoid the war spilling into its territory. It
is refusing to allow many refugees to leave Gaza and has warned Israel a war
in the border area could have “dire consequences”. Egyptian officials have
threatened to suspend a peace treaty signed with Israel in 1979 if desperate
Palestinians surge into Egypt, according to the Wall Street Journal.

The prospect of high civilian casualties has Israel’s allies anxious. On

February 12th President Joe Biden said that “a major military operation in
Rafah should not proceed without a credible plan for ensuring the safety and
support of more than 1m people sheltering there”. David Cameron, Britain’s
foreign secretary, also called for restraint. “It is impossible to see how you
can fight a war amongst these people [in Rafah],” he said. “There’s nowhere
for them to go.” In all nearly 29,000 people have been killed in the Gaza
Strip since Hamas attacked Israel on October 7th.

Whether Israel now goes ahead and attacks Rafah depends on two factors.
One is whether Mr Netanyahu can rally domestic momentum for a new front
in the war. This is by no means assured. The operation he is touting would
be large and include entire brigades that would probably remain there for
weeks. The IDF has yet to start mustering troops for a manoeuvre of this
scale. Instead the generals have been pulling troops out of Gaza and
demobilising many of the 300,000 reservists called up on October 7th.
Meanwhile the economic costs of the conflict are mounting. On February 9th
Moody’s, a credit-rating agency, downgraded Israel from A1 to A2. It
warned that a prolonged war could “weaken executive and legislative
institutions”.

Mr Netanyahu’s popularity continues to plummet in the polls, with his rival

in the war cabinet, Benny Gantz, outstripping him both in personal ratings
and in voting intentions. If elections were held now, Mr Gantz’s centrist
National Unity party would get more than twice the votes of Mr Netanyahu’s
Likud. Although Mr Netanyahu’s predicament gives him an incentive to
gamble on redemption by escalating in Rafah, the generals and the pragmatic
wing of the war cabinet, led by Mr Gantz, prefer to pursue a deal to free
more hostages. For them, Rafah can come later.

Whether such a deal might happen depends on the talks in Cairo resuming,
and on Hamas. Israel has flatly rejected its demands for a full ceasefire and
the permanent withdrawal of Israeli troops in Gaza before any exchange of
hostages for Palestinian prisoners. Despite Israel withdrawing its negotiators
from the talks, the Israeli assessment remains that Hamas’s demand is just an
opening gambit and that a deal can be reached on a temporary truce. Israeli
officials believe that Hamas’s need to regroup and provide the population
with some desperately needed respite before the holy fasting month of
Ramadan, which is expected to start on March 10th, could force it to show
more flexibility on hostage negotiations. To avoid hell in Rafah, one side
needs to blink first. ■

Correction (February 14th): An earlier version of this article had the

incorrect date for Mr Biden’s comments.

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The case against UNRWA

The real problem with the UN’s agency for

Palestinians
It has perpetuated the misery of Palestinians

Feb 15th 2024 | DUBAI

NOTHING IS PERMANENT, but in the Holy Land some things come

close. The UN Relief and Works Agency (UNRWA) was founded in 1949 to
aid 700,000 Palestinian refugees displaced by the creation of Israel. Meant
as a temporary fix, its mandate has been renewed every few years since. This
year it will turn 75—if it survives that long.

Last month Israel alleged that 12 UNRWA employees took part in the
October 7th massacre, in which Hamas militants murdered some 1,200
Israelis. It has also claimed, without publicly offering any evidence, that
10% of the agency’s 13,000 employees in Gaza are members of Hamas. In
early February the Israeli army took journalists on a tour of a tunnel beneath
UNRWA’s headquarters in Gaza, which it said housed Hamas military
infrastructure.

Philippe Lazzarini, the agency’s director, says he fired nine of the 12

employees named by Israel (two others were already dead). The agency
denies any knowledge of the tunnel. But the charges had an immediate
effect: some of UNRWA’s biggest donors, including America and Germany,
quickly suspended their funding.

Hamas has ruled Gaza as a one-party statelet since 2007. No one should be
surprised if it has stuck its members on the UNRWA payroll or stashed
weapons in UNRWA facilities. The UN acknowledges that both have
happened before. Aid workers have had death threats for looking into such
incidents. Almost by definition the job of providing aid in rough places
requires dealing with bad actors: the alternative is not to do the job at all.

That seems exactly the point of the latest allegations. Some Israeli officials
have wanted to shut down UNRWA for years, accusing the agency of
helping to prolong the conflict. They have seized the moment to press their
case. For its supporters, meanwhile, the agency is above reproach, a group of
selfless humanitarians doing vital work. As ever, life is more complicated
than a morality play. The continued existence of UNRWA is a problem—but
not for the reasons its critics think.

Around the world, displaced people are the responsibility of the UN High
Commissioner for Refugees (UNHCR). Only the 6m Palestinian refugees
scattered across the Middle East have a separate dedicated caretaker. Before
the war perhaps a few tens of thousands were refugees in the literal sense:
people forced to flee a conflict. The rest are their descendants, by now three
or four generations of them. Most Palestinian refugees, in other words, are
not displaced.

This is the core of Israel’s case against UNRWA: that its definition of
“refugee” is too expansive, without parallel, and nurtures false hope that all
Palestinians will return. Both parts of the argument are flawed. There are
other long-running crises, such as Afghanistan, where UNHCR recognises
children of refugees as refugees themselves. If the numbers are more
lopsided in the case of Palestinians, it is because their displacement has gone
on for so long. And it is ironic to hear Israelis argue that Palestinians only
hold fast to their territorial claims because of the UN—when their own
national project rests on a millennia-old attachment to the same land.

Yet it holds a grain of truth, too. The UNHCR does not only care for
refugees. It also has a mandate to seek “durable solutions”, such as
integrating them into host countries that offer refugees citizenship. Yet
UNRWA can only provide aid.

This is a problem—but not one of UNRWA’s making. Blame instead the

Arab states that have refused, for decades, to offer citizenship to the
Palestinians in their midst. The 1.7m registered refugees in Gaza (or their
ancestors) lived under Egyptian control for almost two decades until 1967.
Instead of offering them rights, Egypt left them in squalor.

Syria insists that Palestinians enjoy the same rights as Syrians, except for
citizenship and suffrage (not that the latter is very valuable). In practice,
though, they face discrimination, such as a prohibition on owning farmland.
The situation is far worse in Lebanon: Palestinians cannot own property,
hold certain jobs or have access to many government services. Jordan is the
exception, yet UNRWA continues to serve the 2m Palestinian refugees there
—even though most are also citizens of Jordan, which, in any other context,
would mean they were no longer refugees.

Whether UNRWA can continue to provide those services is now in doubt. It

relies on mostly Western donor countries. Of the $1.2bn UNRWA raised in
2022, 44% came from the EU and its members and 29% from America. The
agency says it may cease operations by the end of February if donors do not
resume their contributions.

Some diplomats think that warning is exaggerated. America, UNRWA‘s

largest funder, had already sent $121m since October, about one-third of its
usual annual contribution. It was due to send roughly $300,000 this month,
which is now suspended, but did not expect to send more until the summer.
Germany had no pending payments. The EU had planned to send €82m
($88m) by early March, which may be delayed. If donors do not relent soon,
though, the agency would undoubtedly have to start paring down its
operations. It would probably prioritise work in Gaza, where it is now
keeping 2.2m people alive.

Before the war more than half of Gazan students, almost 300,000 children,
attended UNRWA schools. Half of the population (1.2m people) relied on
UNRWA for health care. A similar share received food aid. Aside from the
Hamas government, UNRWA was the largest employer in Gaza, and its
salaries were vital to the economy.

In many ways, UNRWA was the government. Hamas officials have all but
admitted this in interviews over the past few months. They said Hamas’s role
was to build up its military capabilities, not to care for their people—they
had do-gooders for that. Israel, too, relied on UNRWA to mitigate the
consequences of the draconian blockade that it (along with Egypt) imposed
on Gaza. Even today, as Israel tries to abolish UNRWA, it still relies on the
agency to prevent mass starvation in Gaza.

On visits to the enclave over the past 15 years, your correspondent heard
periodic criticisms of the agency from the very people it served. “Imagine
that you have cancer,” said one young man, himself a graduate of an
UNRWA school, in 2022. “And your doctor has a cure, but instead he gives
you painkillers.” That was the role of UNRWA: to preserve the status quo.

Since 1949 that status quo has sometimes served the interests of regional
powers. Arab countries could avoid caring for and integrating Palestinians.
Israel could keep Gaza sealed off without worrying that it would implode.
Hamas could be an absentee ruler, fobbing off the hard work of governance
and providing services on someone else. Abolishing UNRWA would not kill
the Palestinian cause. It would merely make clear that, for nearly 80 years,
far too many governments have not cared about the well-being of
Palestinians. ■

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Helping the bad guys

How Yemen’s dominant Houthis blackmail foreign

aid agencies
They risk causing a man-made famine with their meddling

Feb 15th 2024 |

GAZA’S PALESTINIANS have had no friends as fervent as Yemen’s Houthi

rebels. While Arab leaders shed crocodile tears, one of the world’s poorest
countries fires ballistic missiles at Israel and targets vessels passing through
Bab al-Mandab, a chokepoint for international trade. The Houthis’ religious
leader, Abdel-Malik al-Houthi, vows to continue the attacks until Israel stops
bombing Gaza and lets in unfettered aid. The Houthis rejoice in
encouragement from abroad. “Yemen, Yemen make us proud! Turn another
ship around!” cry protesters in New York.

Few notice the Houthis’ disdain for humanity at home. After a decade of
war, the UN reckons that the humanitarian crisis in Yemen is one of the
world’s worst. Over half of its 33m people need aid to survive, many of them
under Houthi control in the north-west. But across their realm the Houthis
hinder aid flows. They insist that the UN uses the Houthis’ own list of
beneficiaries and lets the Houthis oversee distribution. They have barred
access to international aid workers. They tax shipments, sell aid and charge
customs fees at checkpoints. In sum, they treat the aid programme worth
billions of dollars as a cash cow. “As in Gaza, the risk of famine is man-
made,” says a former UN official. “They use aid as a weapon.”
For the past decade Yemen’s economy has survived mainly through foreign
aid. After the Houthis seized the capital, Sana’a, in 2014 and triggered a war
with Saudi Arabia, UN agencies poured billions into the country to avert
famine. Yet the Houthis, who adhere to a Shia offshoot of Islam, generally
treat foreign aid workers as if they are Western spies.

Since America and Britain began bombing military sites in Yemen in

retaliation for Houthi attacks on shipping in the Red Sea, the Houthis have
ordered American and British citizens to leave. Among those affected is the
UN’s newly appointed humanitarian co-ordinator for Yemen, Julien Harneis,
a Briton. For now, most are in Aden, Yemen’s largest southern city and the
seat of its internationally recognised government. But rumours circulate that
the Houthis will shut down any UN or aid agency that refuses to remove its
American and British employees from Yemen.

Tension has been building for years. Since 2019 the Houthis have blocked a
biometric system the UN wants to use to track where the aid has gone.
Instead the Houthis insist that the UN and other aid agencies use a ration list
that their own administration has drawn up. This list also serves as a register
for taxes and perhaps for the military draft. Families that oppose the Houthis,
refuse to pay up or do not send their children to the front have been struck
off the ration list, the UN reported last year.

The UN is also impeded by Houthi checkpoints and Houthi-nominated

contractors who oversee aid distribution. Aid workers need the Houthis’
security people to approve every trip out of Sana’a, while female staff need a
Houthi-approved male guardian to escort them. Yemen’s third-largest city,
Taiz, is under siege, its water supplies restricted. “We have simply no idea
who’s getting what in the north,” says an aid worker.

Woe betide anyone who complains. Foreign staff can lose entry or exit
permits. “Please, I’d rather not get into access issues for now,” says one,
waiting to return to Sana’a. “There could be repercussions.” Some local staff
have been detained. Three who work for the UN are in jail. An aid worker
for Save the Children, a British-based charity, died in Houthi custody in
October. “Nowhere else in the world does the UN tolerate this,” says a
former UN staffer. “But 20m could starve if we pull out.”
The UN has sometimes sought to resist the Houthis’ blackmail. In December
the World Food Programme (WFP) suspended deliveries to all 9.5m
recipients in Houthi areas. It is hard to know the impact of this, since access
is so tricky. Trouble in the Red Sea has pushed up insurance premiums on
shipping, increasing costs for the cash-strapped WFP, and may slow the
supply of basics to Houthi-controlled ports. Alas, the hungrier the population
becomes, the more it depends on the Houthis. ■

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and-africa/2024/02/15/how-yemens-dominant-houthis-blackmail-foreign-aid-agencies

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South African politics

Is Julius Malema the most dangerous man in

South Africa?
His party wants to nationalise all. He may become kingmaker

Feb 15th 2024 | JOHANNESBURG

AS CYRIL RAMAPHOSA, South Africa’s president, delivered his annual

state-of-the-nation speech on February 8th, he looked remarkably nonchalant
for the leader of a country beset by power cuts, staggering unemployment
and rising crime. He appeared to have been cheered by small pleasures. For
the first time since taking office in 2018, he was able to finish the address
without the threat of interruption, heckling or the sight of pugilistic
opposition members being removed by security.

This was because the main instigator of parliamentary disorder in recent

years was not there. Julius Malema, the populist leader of the Economic
Freedom Fighters (EFF), had been suspended from Parliament for the month
of February, along with five other party officials, after storming the stage to
demand Mr Ramaphosa’s resignation while he was delivering his state-of-
the-nation speech last year.

Mr Ramaphosa could be forgiven for thinking that South African politics is

an awful lot simpler without Mr Malema and his distinctive red overalls. As
things stand, however, the combative opposition leader may hold the key to
Mr Ramaphosa’s re-election later this year.

Post-apartheid South Africa is often lauded for its free and fair elections. But
such is the dominance of the African National Congress (ANC)—the ruling
party has never got less than 57% of the seats in the national assembly—that
the results of those elections have always been foregone conclusions. Until
now.

Polls consistently suggest that the ANC could dip below 50% of the vote in
the national and provincial elections slated to take place between May and
August. (The date will be announced before February 23rd.) The reason is
plain: citizens contend with daily electricity blackouts, some of the world’s
highest crime rates and, recently, sharp increases in living costs. The ruling
party’s appeal has also been severely dented by corruption scandals that have
implicated senior leaders, including Jacob Zuma, a former president.

The most comprehensive poll to date, released this month by Ipsos, a

research firm, showed support for the ANC dropping lower than even the
most pessimistic figure predicted by political analysts—to below 40%. In
this scenario the only way the ANC could realistically remain in power
would be by forming a coalition with one of the two main opposition parties:
the Democratic Alliance (DA), which is currently the second-largest party in
Parliament, or Mr Malema’s EFF.

Of these options, ruling-party insiders consider the EFF one far more likely.
“We are getting ready for Juju,” sighs an ANC official, referring to Mr
Malema by his nickname. He ought to know what he is in for. Mr Malema
cut his teeth in the ruling party’s youth league, where he was never far from
controversy. As the league’s president in 2010 he was charged with hate
speech for singing the song that has become his trademark at rallies: “Dubul’
ibhunu’” (“Kill the Boer”). Mr Malema argues that the lyrics, which are
from an old anthem of the struggle against apartheid, should not be taken as
a literal call to kill Afrikaners. But his increasingly radical policies, coupled
with his scathing criticism of Mr Zuma, were too much for the party’s top
brass, who suspended him in 2011.

In 2013 Mr Malema founded the EFF, which won 6% of the vote in 2014
and 11% in 2019. The recent Ipsos poll puts it at 19%, ahead of the DA‘s
17% (with 10% undecided). This is a remarkable testament to Mr Malema’s
skill as a politician, even as he has continued to be a magnet for scandal.

“Over a fairly short but nevertheless extraordinary political career he has

become the quintessential political entrepreneur,” says Micah Reddy, an
investigative journalist who has reported extensively on corruption
allegations that have dogged Mr Malema and his party. “He has artfully
blended business and politics…and built up an impressive political fiefdom.”
Mr Malema has denied wrongdoing.

The apparent surge in support for the EFF suggests that disgruntled former
ANC voters are struggling to find a home in the DA, a centre-right party that
has seen an exodus of black leaders in recent years. Instead, the EFF’s
radical messaging is striking a wider chord.

“This is the weapon that will be used against the enemy of our revolution,”
Mr Malema declared on February 10th, brandishing the party’s 265-page
manifesto. The document is a wholehearted rejection of the rainbow nation
that Nelson Mandela tried to forge. “The political changeover in 1994 did
not bring true liberation,” Mr Malema writes in the manifesto. “It was a bluff
which continues to subject black people to economic and social apartheid.”

Mr Malema proposes sweeping changes to the economy. These include land

expropriation without compensation; the nationalisation of mines and banks,
again without compensation; and the introduction of basic income grants for
the unemployed. These are curious proposals, since everything the state
already runs, such as Eskom, the power utility, is falling apart.

It is unclear how hard Mr Malema would push the ANC to adopt these ideas
in a coalition. Where the EFF has been the junior partner in coalitions
running cities, it seemed to care more about landing plum jobs than
promoting its policies.

Mr Malema would no doubt want a senior cabinet post in return for joining a
coalition. That would bring his divisive and disruptive politics into the heart
of the government. Though that could keep Mr Ramaphosa in power, it
would hardly be a recipe for economic or political stability. ■

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Taking credit

African governments return to international bond

markets
Debt worries have eased a little, but borrowing is still expensive

Feb 15th 2024 | ADDIS ABABA

WILLIAM RUTO’S first 18 months as Kenya’s president have been haunted

by a single date: June 24th this year, when a $2bn sovereign bond is due to
be repaid. His cash-strapped government has raised taxes and cut subsidies,
as protests have rocked the streets. Now it has bought some respite, at a
rather exorbitant price. On February 12th Kenya issued a new $1.5bn bond,
maturing in 2031, at a yield of 10.4%. It will use the proceeds to buy back
most of the debt owed in June, kicking the can seven years down the road.

Governments in sub-Saharan Africa are tentatively returning to international

capital markets after a 21-month hiatus. Last year was the first since 2008
when no countries in the region sold a dollar bond, as high interest rates shut
them out of the market. The freeze was broken in January when Ivory Coast
borrowed $2.6bn at 8.5% and below. Benin then raised $750m at a similar
rate. Those bond sales gave hope to other African governments; the high
yield on Kenya’s bond gives caution.

Africa’s fortunes track the mood of the Federal Reserve. When America’s
central bank pumps cheap money into markets, as it did after the 2008
financial crisis, some trickles into Africa in search of higher returns. When
the Fed has raised interest rates over the past two years, capital has flowed
back the other way. In addition, the twin shocks of covid-19 and the Ukraine
war caused investors to seek safety. China’s lending to Africa has also fallen
to its lowest level in two decades. The combined impact is clear in the flows
of Africa’s long-term external debt: by 2022 governments were paying back
about as much as they were getting in new lending (see chart).

Investors are now returning to Africa because they expect the Fed to begin
cutting rates later this year. The difference in yields between bonds issued by
the American government and by African ones—an indication of the risk
premium that investors demand—has shrunk by four percentage points from
its recent peak. But the door has only opened a chink. Of 17 countries in
sub-Saharan Africa that have outstanding foreign-currency bonds, around a
dozen are still shut out of the market by double-digit yields, reckons Stuart
Culverhouse of Tellimer, a research firm specialising in emerging markets.

For some countries it is already too late. A wall of bond repayments is

falling due this year and next. Zambia, Ghana and Ethiopia have all
defaulted and started protracted talks with their creditors. Kenya, which had
flirted with the same fate, is willing to pay generously to borrow because it
does not want to burn through its foreign-exchange reserves. The high yield
suggests investors still consider it a risky bet, says Churchill Ogutu, an
analyst in Nairobi at IC Group, an investment bank.

Until African governments find a way to generate more revenue and exports,
they will always be vulnerable to the caprice of foreign investors. “Going
back to the capital markets is just recycling the problem,” argues Jason
Braganza of the African Forum and Network on Debt and Development, an
NGO based in Zimbabwe. The interest rate that African countries typically
pay to borrow from private creditors is three times what they pay to other
governments or multilateral banks. Many currently spend more on interest
payments than on education or health.

Gregory Smith, the author of a book on African debt, compares the path of
bond yields to a hiking trail. In the years after the financial crisis, African
governments were in a green valley of low interest rates. Since the pandemic
they have been gasping in the thin air on top of Mount Kilimanjaro. Now
they find themselves on a lower plateau, where they can breathe a little
easier. But it is still a long trek down. ■

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Ukrainians in Sudan

Evidence mounts that Ukrainian forces are in

Sudan
But their presence may not alter the outcome of its civil war

Feb 15th 2024 |

THREE MEN kneel on the ground, topless and blindfolded. One of them is
light-skinned. His interrogator, who is also white, addresses him in Russian.
The group are part of “PMC Wagner”, answers the prisoner, adding that
about 100 Wagner mercenaries had entered Sudan from the Central African
Republic.

On the interrogator’s arm is an owl insignia, the mark of Ukraine’s military

intelligence, which is responsible for covert operations. According to the
Kyiv Post, which published the video on February 5th, this is evidence that
Ukrainian forces are fighting in Sudan’s civil war. If so, it suggests Ukraine
is widening the fight against Russia well beyond its own borders. It also
highlights how Sudan’s war is sucking in outsiders.

Videos purporting to show Ukrainians in Sudan have been circulating for

months. Some appear to be of kamikaze drones striking buildings in
Khartoum, the capital. Others allegedly show Ukrainian snipers or
commandos conducting raids. The accumulating evidence, open-source
investigators say, suggests that a small team of Ukrainian special forces is
fighting on the side of the national army, the Sudanese Armed Forces (SAF).
Some Western diplomats and sources close to the SAF agree. Ukraine and
America neither confirm nor deny the allegations.

Ukraine may have several goals in Sudan. First, it appears to want to disrupt
the flow of gold from facilities reportedly operated by Russia’s Wagner
mercenary group. Bullion from Sudan, Africa’s third-largest producer, is
believed to be one way Russia has mitigated Western financial sanctions.
Wagner’s local ally, a rebel paramilitary group known as the Rapid Support
Forces (RSF), is the main player in the country’s gold industry.

Second, Ukraine may have used Sudan as a transit stop to get weapons from
other countries. Sudan itself may have also supplied munitions, though it
seems unlikely to have sent much since civil war broke out last April. In
September Ukraine’s president, Volodymyr Zelensky, met Abdel Fattah al-
Burhan, the head of the SAF, to discuss armed groups funded by Russia.

Last, targeting Russian forces anywhere in the world sends a message. “It
would be the right thing to hunt down the mercenaries in Africa,” says
Alexander Khara of the Centre for Defence Strategies, a Kyiv-based think-
tank. “To make them pay for the genocidal war in Ukraine.” That may be so.
But as the RSF continues its advance across much of Sudan, and the war
threatens to spill over its borders, it is unclear whether Ukraine is achieving
this. ■

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The Americas
Why Lula keeps meddling with Latin America’s top oil
company
The perils of Petrobras :: His worst instincts are undermining the national oil company’s hard-
won gains

Chile’s crisis is not over yet

From model to muddle :: Political tumult is now the norm in the country

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The perils of Petrobras

Why Lula keeps meddling with Latin America’s

top oil company
His worst instincts are undermining the national oil company’s hard-won
gains

Feb 15th 2024 | Rio de Janeiro

ON FEBRUARY 1ST Petrobras, Brazil’s state-owned oil company, reached

a value of $551bn reais ($112bn) on the country’s stockmarket, a record in
the local currency. Its shares have outperformed those of ExxonMobil and
Chevron in the past year. Months before, it had laid out an investment
strategy costing $102bn over the next five years, the largest such plan for
nearly a decade. Most of the investment will go to the expansion of offshore
basins in the country’s south-east, known as the pre-salts, and the
development of new offshore fields in the north-east. The expansion could
help Brazil become the world’s fourth-biggest oil producer by the end of the
decade, up from seventh today, according to Rystad Energy, a consultancy.
Yet despite the glowing headlines, investors should be vigilant. Under the
administration of President Luiz Inácio Lula da Silva (or Lula), who was
previously in power from 2003 to 2010, the government is increasingly
meddling in Petobras’s decisions, after several years during which state
interference had declined. That is leading to poor business choices. It also
increases the possibility of corruption.
Petrobras’s success is all the more striking given its recent history. In 2014,
under Lula’s hand-picked successor, Dilma Rousseff, Petrobras was found to
be at the centre of a sprawling kickbacks scheme in which it doled out
contracts at inflated prices. Contractors paid bribes to certain executives at
Petrobras using this extra cash. These executives and contractors also
funnelled money to dozens of politicians.

Under pressure from Ms Rousseff, Petrobras lost $40bn between 2011 and
2014 by keeping domestic petrol prices artificially low. Partly in order to pay
for this, and partly because interest rates were low, the company took on
enormous dollar-denominated debts. When oil prices collapsed in 2014, the
corruption scandal erupted and the real depreciated, Petrobras hit a nadir. By
2015 it had debts totalling almost $130bn, making it the world’s most-
indebted oil firm. The following year it had lost 90% of its value compared
with 2011.
The company owes much of its turnaround to Pedro Parente, a far-sighted
CEO who was appointed under the centrist government of Michel Temer in
2016. When asked to take the helm, Mr Parente says he set two conditions:
“The company has to be guided by good business principles, and there must
be no political interference.” Mr Temer acquiesced for a while.

Mr Parente ran Petrobras like a private firm, despite the government having
a controlling vote on the board. The domestic price of fuel was linked to its
cost on international markets. To raise revenue and pay off debts, Mr Parente
sold billions of dollars worth of assets in fertilisers, distribution and
petrochemicals. The company also focused on the business of drilling for
deep-sea oil.
Oil be back, interfering

To prevent another corruption scandal, Mr Parente set up an independent

compliance department and a robust channel for whistleblowers. Crucially, it
has become harder for corrupt executives to make individual procurement
decisions. Now a team of managers from different departments must sign
them off. By 2021, the value of the company was around $70bn and its debts
were down to $37bn.

For a while, politics helped. In 2016 Brazil’s Congress passed the “state-
owned companies law”, which made it harder to appoint politicians to state-
owned firms. But this gentlemen’s accord began to unravel in 2018, when
Mr Parente resigned after lorry-drivers went on strike to demand lower fuel
prices. Mr Temer’s populist right-wing successor, Jair Bolsonaro, appointed
four CEOs in as many years, including a general with no previous
experience in oil. Mr Bolsonaro also appointed three political allies to
Petrobras’s 11-member board, even though many people worried they lacked
industry experience.

Lula has not only continued this political interference, but ramped it up. Like
Mr Bolsonaro, he forced two of his picks onto Petrobras’s board shortly after
taking office, despite Brazil’s securities and exchange committee deeming
them ineligible: one is a politician; the other works for the energy ministry.
More worryingly, Lula’s intervention also goes further than his predecessor.
Jean Paul Prates, the new CEO, supported a campaign promise Lula made to
“Brazilianise” fuel prices—meaning to lower them.

In May the firm announced changes to its pricing policy that lowered the
cost of diesel and fuel prices from its refineries by 12%, and cooking gas by
a fifth. Though Petrobras does have leeway to lower prices within market
parameters by using its own refineries more, the new pricing policy is
confusing. Adriano Pires, an energy analyst in Rio de Janeiro, calls it “a
black box”. Markets reacted positively to the announcement not because of
the policy’s merits, but because they had been expecting more intervention.
It is unclear how the policy will work when oil prices rise.

Yet even this was not enough. Alexandre Silveira, the energy minister, has
repeatedly criticised Mr Prates for not lowering prices more. Petrobras’s
blockbuster new business plan appears to respond to pressures from Lula to
boost local jobs, diversify into renewable energy and expand Petrobras’s
reach abroad.

The government is also trying to reverse Petrobras’s divestment policy.

Petrobras’s big new investment plan includes an 80% increase in
investments for refineries, transport and marketing. In November Petrobras
cancelled the $34m sale of a refinery it had agreed to sell in 2020, claiming
that the terms of the contract had not been fulfilled. The purchaser, Grepar, is
demanding compensation.

It is unlikely the government will stop there. Partly as a result of the

corruption investigations after 2014, Petrobras signed a deal with Brazil’s
antitrust body in which it pledged to sell eight of its 13 refineries in the
country in order to reduce its dominant market share. It had put four of these
up for sale, including the one bought by Grepar, and was preparing to let go
of the other half, too. In November the government asked the antitrust body
to review the agreements on the sale of refineries. Mr Prates says that
Petrobras’s ownership of refineries is not monopolistic and that “it’s a false
obligation to sell those refineries”. Petrobras is currently in negotiations to
take back partial control of a refinery that was sold to Abu Dhabi’s
sovereign-wealth fund in 2021, and which accounts for 10% of Brazil’s oil-
refining capacity.

Lula’s recent moves suggest he has not learned from past failures. On
January 18th he announced that Petrobras would expand a refinery in his
home state of Pernambuco that has been mired in scandal for years. Lula
suggested the reason the refinery was incomplete was because the United
States does not want Brazil to become an oil power and was in cahoots with
anti-corruption prosecutors. In fact, in 2016 a federal court determined that
the cost of building the refinery had been inflated by a fifth. It never
operated at capacity and caused Petrobras to lose over $3bn.

Other unsettling signs abound. Last March Ricardo Lewandowski, then a

judge on Brazil’s Supreme Court, suspended a section of the “state-owned
companies law”, thus allowing national firms to appoint politicians to
leadership roles if they want to. (Mr Lewandowski is now justice minister.)
Minority shareholders on Petrobras’s board resisted changing the company
bylaws, but in November the government overpowered them.

Mr Prates said the change was “innocuous” because it simply aligns

Petrobras’s bylaws with a change in federal law. But Marcelo Mesquita, the
representative of minority shareholders on the board, disagrees. “As an
isolated case, this may not be a scandal. But it is the beginning of a ‘let’s see
[how much we can get away with]’ approach. It shows the government is
worried about something.”

Brazil is unlikely to experience the kind of gigantic corruption scandal it did

in 2014. The firm’s compliance mechanisms are stronger. The scandal
traumatised Petrobras employees, making them more vigilant to graft among
higher-ups. In addition, the government has less power over Petrobras than
other Latin American governments do over their national oil firms. Despite it
having the controlling vote on the board, the vast majority of capital in
Petrobras comes from private stakeholders. Mr Pires thinks the problem with
Lula’s Workers’ Party is that it “treats Petrobras as if it were 100% state-
owned.”

Though it is unlikely that Petrobras will plummet to the depths it did a

decade ago, the government’s recent moves could undermine the company’s
hard-won success. Mr Mesquita says minority shareholders “made a lot of
noise” when it changed its bylaws. “If you are not constantly vigilant, things
can go back to the way they were.” That would be bad news for Petrobras,
and worse news for Brazil. ■

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From model to muddle

Chile’s crisis is not over yet

Political tumult is now the norm in the country

Feb 15th 2024 | Santiago

A SENSE OF fatigue hangs over Santiago, the capital of Chile. Since 2019
the place once considered the poster child of Latin America has instead been
the site of tumult. This has included the election of Gabriel Boric, the
country’s most left-wing president in half a century, along with the growth of
a powerful party of the hard-right. There have been two failed attempts to
write a new constitution. To top it all, this month deadly forest fires have
raged. Can Chile get back on track?

For a quarter of a century after the end of the dictatorship of General

Augusto Pinochet in 1990, the country had moderate, consensual politics and
faster economic growth than much of Latin America. Those living below the
official poverty line fell from 45% of the population in the mid-1980s to 9%
in 2017. By that year two-thirds of Chileans were middle class, up from 24%
two decades before, according to the World Bank. With its vigorous market
economy and a commitment to the rule of law, Chile was one of the few
countries in the region that looked likely to reach developed status within a
generation.

Stability was shattered in 2019 by what Chileans call el estallido social (the
social explosion). This involved two months of massive protests and
vandalism, in which metro stations and several churches were destroyed by
arson and supermarkets looted. The conservative government of Sebastián
Piñera, who died this month in a helicopter crash, came close to falling. The
demands of the protesters were for better pensions and health care, free
education and an end to “the neoliberal model” originally installed by the
dictatorship. What they got was an agreement from the politicians to set up a
constitutional convention to replace Chile’s charter of 1980.
The convention that was voted in was dominated by the far left. It wrote a
utopian text that was plainly unworkable. In a plebiscite in 2022 this was
rejected by nearly 62% of voters. That was a crushing defeat for Mr Boric,
who was elected on the back of the estallido and whose Broad Front
coalition had supported the revised text.

There followed a second convention in which the right won a big majority,
led by the Republican Party, a newish hard-right outfit. It made the same
mistake: the draft was filled with conservative moralism and was rejected by
56% of voters in a plebiscite in December last year. That in turn was a
rebuke for José Antonio Kast, the founder of the Republicans who lost a
presidential run-off to Mr Boric in 2021.
Constitutional cracks

“Chile shows that it’s very difficult in a democracy to start from a blank
sheet of paper,” says Sergio Bitar, a former minister of the centre-left. For
some Chileans this outcome suggests a rejection of the political class as a
whole. Did the first convention misrepresent public opinion? Or have
priorities changed? It is a bit of both.

For a start, conservative concerns have become more prominent because of a

crime wave. By regional standards, Chile remains a safe country. But the
murder rate has risen from 4.6 per 100,000 people in 2021 to 6.5. Extortion
and the use of firearms, previously rare, have spread, especially in poorer
urban neighbourhoods. This has coincided with, and is partly linked to, the
arrival of some 1m immigrants since 2015, many from Venezuela. Most are
hard-working; some are part of criminal gangs. As a result, the demands of
the protesters in 2019 have seemed far less pressing than dealing with crime.

A second problem is that Mr Boric overestimated his ability to implement

change. Both he and the Broad Front came to office scorning the timidity of
the centre-left Concertación alliance which governed Chile for 20 years until
2010, mixing respect for the market economy with gradual social reform.
However, Mr Boric’s party lacks a majority in Congress. His ambitious plans
to raise taxes and reform pensions and health care have foundered in the face
of a conservative opposition.

Mr Boric also inherited an overheated economy from Mr Piñera. Lavish

pandemic aid combined with legislators’ reckless approvals of early
withdrawals from pension funds injected an astonishing 35% of GDP into
the economy, according to Mario Marcel, the finance minister. Mr Marcel’s
first task was to apply a fiscal squeeze that cut the deficit by 10% of GDP in
2022. The independent central bank also raised interest rates. The result was
a mild recession.
All this meant that Mr Boric had to move to the centre. He sacrificed his
initial team of fellow former student leaders, and called on experienced
cadres from the centre-left, including Carolina Tohá, the interior minister, as
well as Mr Marcel. The government is now implementing several policies
associated with the right.

Instead of its plan to increase the tax take by 4% of GDP, it now hopes for
only half of that, mainly by cracking down on evasion, as part of a “fiscal
pact” which also involves a promise to cut wasteful spending. It is pushing
through a law aimed at cutting red tape. Instead of the promised abolition of
private pension funds, the government is arguing with the right over the fine
detail of how to assign a new employers’ contribution to pensions.

A crackdown on crime includes laws to increase sentences and set up a

national organised-crime unit at the public prosecutor’s office. The
government has given extra money and equipment to the police, vilified by
the left for their sometimes brutal handling of the protests but now once
again among the country’s most trusted institutions. “Progressive politics
can’t flourish without security,” says Ms Tohá.

Mr Boric has managed this shift with surprisingly little dissent. Achieving
change “will be a long road”, recognises Giorgio Jackson, Mr Boric’s
campaign chief in 2021. “The left understands that and so has given its
consent to pragmatism.” The president’s approval rating quickly fell to 30%
but has not sunk any further.

The assumption in Santiago is that the next government is likely to be of the

right. Mr Kast remains influential, but his moral conservatism is rejected by
many in an increasingly socially liberal country. He says he has his sights set
on Congress. Moderation may prevail on the left too: the three parties in the
Broad Front are poised to merge later this year. The new party will be “much
more measured and less antagonistic but still critical,” says Mr Jackson.

Nobody has any appetite for more constitution writing. But there is a need
for reform. Congress has made that easier: it approved changes that have
reduced the majority needed for constitutional amendments in the legislature
from two-thirds to four-sevenths. Three big things need fixing: politics,
education and the economy.
Take politics first. An electoral reform in 2015 scrapped rules that favoured
a two-party system and introduced proportional representation. The result
has been extreme fragmentation: the 155-seat lower house of Congress has
22 parties and 40 independents, making negotiation tricky.

In terms of education, between 1995 and 2020 public spending on it

increased from 2.3% of GDP to 5.6%. Yet outcomes as measured in
international tests have barely improved. Meanwhile an economic slowdown
was a big—though not the sole—cause of the estallido. Mr Kast insists that
the solution is to shrink the state and cut taxes. The left counters that while
that formula produced growth under Pinochet, Chile’s economy is now more
sophisticated. Officials have high hopes for lithium and copper. Chile has
ample reserves of both. They will help, but not enough. Growth now
requires reforms to promote innovation and incentives for businesses to take
risks, says Eduardo Engel at the University of Chile.

The estallido saw “a sense of guilt among the political class and business”,
according to Eugenio Tironi, a political consultant. But in many cases that
was short-lived. To move on, the country needs broad agreements on
questions of politics and growth. “If there’s no flexibility and pragmatism to
reach solutions, Chile could remain stuck in a cycle of frustration,” warns
Ms Tohá. ■

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Europe
The EU’s covid-19 recovery fund has worked, but not as
intended
How to spend it :: The fund should pave the way for more collective European spending

After Russia’s invasion the people of Bessarabia switched

sides
A new role :: A traditionally pro-Russian part of Ukraine now feels very differently

As Donald Trump threatens NATO, the Baltic states stiffen

their defences
A concrete wall :: Russia’s formidable installations in Ukraine are reviving interest in
fortification

As German industry declines, the Ruhr gives hope

Back from the slagheap :: The resilience of the old steelmaking heartland is a model for the
future

Europe decides it doesn’t like lab-grown meat before it’s

tried it
Overcooked controversy :: An Italian ban is red meat for cattle farmers

How not to botch the upcoming EU leadership reshuffle

Charlemagne :: The great scramble for top Euro-jobs is upon us, alas

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How to spend it

The EU’s covid-19 recovery fund has worked, but

not as intended
The fund should pave the way for more collective European spending

Feb 15th 2024 |

FEBRUARY 19TH will mark three years since the European Union’s
recovery fund came into force. Known in Brussels jargon as
NextGenerationEU (NGEU), this multi-year budget worth €832bn ($897bn,
or 5.2% of the bloc’s GDP in 2022) is funded by EU debt, previously a rare
commodity. It is the main political innovation to emerge from the pandemic
in Europe. Some called it Europe’s Hamiltonian moment, invoking
Alexander Hamilton, America’s first treasury secretary, who masterminded
the fiscal federalisation of the United States. But the EU is some way from a
fiscal federation. Northern finance ministers insist that the recovery fund
was a one-off. And the extent of its success is still unclear.
Next week the European Commission will present its first external review.
The funds are still being spent, so the economic effect is hard to measure.
More curiously, experts cannot agree on what the fund’s purpose was. But
that is not surprising. Just as national fiscal policy does not serve a single
purpose, neither does its equivalent at the EU level.

Start with its short-term purpose: to prevent a re-run of the euro crisis of
2010-12. In early 2020 the European Central Bank (ECB) had to intervene
forcefully to stop interest rates on the enormous debt of Italy, which was hit
hard by the pandemic, from spiralling out of control. To complement the
ECB’s actions, the EU agreed to pool fiscal means to help poorer countries
and those hit hard by the pandemic. The amount of aid ranged from 10.8%
of GDP for Italy to 0.6% for the Netherlands (see chart). The markets
learned that the ECB does “whatever it takes” to preserve the euro (as it
promised during the euro crisis), and that in a crisis the EU’s richer countries
will help its poorer ones. On this count, the fund has been a success.

The fund’s second purpose was to aid the recovery from the depths of the
covid recession. That was never going to work. Fiscal stimulus should focus
on consumption, not investment—think American-style stimulus checks, or
tax cuts. EU spending, which happens only via national governments and
focuses on investment, could not possibly come fast enough to help. It might
have had a signalling effect that money would flow and that governments
and investors could start planning, argues Zsolt Darvas of Bruegel, a
Brussels-based think-tank. In the end economists were glad the money was
spent slowly: otherwise it might have fuelled inflation last year. But as a
recovery tool, the fund made little difference.

What about the green and digital transformation of the European economy?
The biggest recipients got huge sums. (Richer countries got little, and will
end up disproportionately paying off the debt.) Greece’s reform-minded
government had already set up a commission headed by Sir Christopher
Pissarides, a Nobel economics laureate, to use the money to make big
changes. Some of that is working. Plans to digitise public administration and
deploy solar panels grew more ambitious. Oversight by the commission
prevented the most egregious white elephants, such as Italy’s proposal to
build a football stadium. This performance-based approach may well be
applied to most EU spending from now on.

Still, there are problems. The EU sponsored some waste: Italy’s ludicrously
generous subsidies for green renovation of houses was co-funded by €14bn
of EU money. Investments such as child-care facilities need permanent
staffing; the NGEU is a one-off, so that funding is unsure. Since most of the
money has yet to be spent, the final verdict will have to wait. But so far the
results have been mixed. “It was too much money for Italy, and there was
too little time to make sure it is spent well,” argues Tito Boeri of Bocconi
University.

The cash was also meant to help countries implement politically difficult
reforms to boost growth. This shows more promise. Greece’s government
intends to reorder responsibilities of various levels of government, the health
system and spatial planning. In Italy the government started reforming its
byzantine judicial system. The money is an incentive to stick to agreed
reforms, especially important in a country that changes governments
frequently. But Italy has struggled to boost the level of competition in its
economy. Other efforts, such as Spain’s labour-law reforms, have been less
ambitious. The real test will be whether the EU insists that countries stick to
their promises.

The final purpose of the NGEU was to bribe the EU’s outcasts, countries run
by the populist hard right. The smell of billions in fresh cash from Brussels
led Poland and Hungary to agree reluctantly to new powers for the European
Commission, to monitor whether breaches of the rule of law threaten the
union’s financial interests. Both countries must pass certain “super
milestones” to get any funds. (The EU’s decision in December to unfreeze
€10bn for Hungary was unrelated to these new monitoring mechanisms.)

Critics argue that the milestones are superficial: in Hungary they cannot
repair the damage to democracy; in Poland a new government is taking on
that job itself. But for the first time, the EU has financial leverage to
discourage countries from violating the rule of law. At the least, it can stop
its funds from adding to autocratic governments’ power.

The overall verdict, then, is cautiously positive. Some want more such
schemes. “Whatever the issue in the EU these days, NGEU is the answer,”
quips Mujtaba Rahman of Eurasia Group, a consultancy. European
federalists hope collective debt, in the words of Hamilton, “will be to us a
national blessing; it will be powerful cement of our union.” But another
Hamilton provides better guidance. A Hamiltonian cycle in mathematics is a
line that, after visiting all nodes once, returns to its origin. This is where the
recovery fund will end up, too. Having spent €832bn in 27 member states,
the EU will have to make the case for a larger budget and more authority
anew. ■
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A new role

After Russia’s invasion the people of Bessarabia

switched sides
A traditionally pro-Russian part of Ukraine now feels very differently

Feb 11th 2024 | Izmail

WHEN RUSSIA first attacked Ukraine in 2014 Bessarabia was a place to

worry about. Less than half of its people identified as Ukrainian. The region
was poor and, for historical and economic reasons, many people thought that
Vladimir Putin might be their saviour. But Russia’s endeavours to stir up
trouble in this strategic Ukrainian borderland have failed. Ukrainian forces
beat back Russian attempts to land commandos at the beginning of the full-
scale invasion in 2022, and the security services arrested dozens of agents.
Although the Russians damaged and closed one of the two bridges linking
Bessarabia to the rest of the country, they have failed to shut down the other.
In just over 200 years the ownership of what is now Ukrainian Bessarabia
has changed nine times. It is bounded by the Danube and Dniester rivers, the
Black Sea to the south and Moldova to the north. Seized from the Ottomans
by Russia in the early 19th century, it became Romanian between the world
wars and part of Soviet Ukraine after that. Apart from Ukrainians its people
include Russians, Moldovans, Gagauz, Bulgarians and Albanians who speak
Russian rather than Ukrainian as a lingua franca and for whom Russia was
their historical patron.
Oleh Kiper, the governor of the Odessa region, which includes Bessarabia,
says that pro-Russian sentiment there dwindled after 2014 and “crashed” in
the wake of the Russian invasion in February 2022. One reason why, he
says, is that, thanks to help from France, “Russian satellite TV propaganda”
has been blocked there since 2015. Since then Bessarabia has been not only
peaceful, but a crucial lifeline for Ukraine. Hundreds of lorries thunder
through daily, loaded with grain and other goods. They carry vital currency-
earning exports to the Danube-river ports of Izmail and Reni, or into
Romania and onwards.

A decade ago the main road across Bessarabia from Odessa was awful, and
Izmail felt like the dingy end of the world. No longer. The road has been
improved and a ferry service opened in 2020, linking the region to Romania
and the rest of Europe. Russian attacks have failed to put it out of service.
On the Danube in Izmail a Togolese-flagged grain ship rests at anchor; hardy
old men do squats on the riverbank nearby before defying a ban on
swimming in the river. Others prefer a dip in Izmail’s smart new municipal
sport centre.

In the past few years wineries and tourism have flourished in Bessarabia,
though the post-Soviet recovery has been patchy. In Izmail money has
poured in from up to 8,000 sailors who call this port home. Those who were
here when the invasion happened two years ago were caught by the ban on
men aged 18-60 leaving the country, but most of those who were at sea have
stayed abroad. Although it has been hit by Russian rockets, Izmail has had a
good war. Businesses and refugees from now-closed Black Sea ports like
Kherson and Mykolaiv have moved here. “People got a sense of pride in
being Ukrainian,” says Andriy Abramchenko, the mayor, who made clear in
2014 and in 2022 that his city would have no truck with Russia.

In the predominantly Moldovan village of Hlyboke, history comes alive at

the cemetery. The village lies on the banks of Sasyk, a lagoon that suffers
from a disastrous Soviet-era attempt to turn it into a freshwater lake. The
water is rising and the shoreline is eroding. The bones of Cossacks buried
here in the 18th century, and of their descendants, jut out of the graveyard’s
sandy cliff edge, eventually tumbling onto the beach below. At the other end
of the cemetery lies Sasha Gorun, the school’s history teacher, who died
fighting the Russians last May.
Maria Chekir, aged 80, who taught Mr Gorun when she was the
headmistress of the school, says she knows no one in the village who
supports Russia. Outsiders often assume older people harbour pro-Russian
sentiments and nostalgia for Soviet times. In fact, when Russia attacked in
2022, locals were terrified that their troops would land here. Now, says Mrs
Chekir, “when I hear people speaking Russian I tell them off. Our guys are
fighting Russians and I don’t want to speak Russian any more.”

Hanna Shelest, an analyst in Odessa, says that she is not surprised that the
Russians have failed to stir anti-Ukrainian unrest in Bessarabia. The war in
Donbas, in the east, destroyed any local faith in the Kremlin’s propaganda
about a peaceful “Russian World”. Meanwhile, the government in Kyiv
belatedly began paying attention to the region. Ten years ago farmers from
villages like Utkonosivka sold their cabbages to Russia, and blamed
Ukraine’s government when war killed that business. Now they have found
other markets, and resentment of the government has dissipated.

Although the fear of separatism has evaporated, the threat from corruption
has not. Ivan Rusev, an environmental researcher and activist, says that the
army has sealed off parts of Bessarabia’s national parks. Park guards now
have no power there. Inside the closed zones, he says, people with
connections are grabbing land for farming or hunting. Letting corruption
flourish under cover of fighting Russia does not bode well. Asked about Mr
Rusev’s allegations, Mr Kiper, the governor, said simply: “Thank you for
informing me.” ■

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A concrete wall

As Donald Trump threatens NATO, the Baltic

states stiffen their defences
Russia’s formidable installations in Ukraine are reviving interest in
fortification

Feb 10th 2024 |

THE SPECTRE of Donald Trump returned rudely to Europe on February

10th, when the former president told a campaign rally that he would
encourage Russia to attack NATO allies who did not meet the alliance’s
target of spending 2% of GDP on defence. Mr Trump’s message jangled
already frayed nerves: in recent weeks, a succession of European defence
ministers and spy chiefs have warned that war with Russia is more likely and
closer than assumed in the past. “It cannot be ruled out that within a three- to
five-year period, Russia will test Article 5 and NATO’s solidarity,” warned
Troels Lund Poulsen, Denmark’s defence minister, on February 9th. “That
was not NATO‘s assessment in 2023. This is new information that is coming
to the fore now,” he explained.

Some countries are acting accordingly. In January the defence ministers of

Estonia, Latvia and Lithuania announced that they would build a string of
“anti-mobility defensive installations” along their border with Russia and
Belarus, collectively known as the Baltic Defence Line. “We have…studied
the Russian war in Ukraine,” adds Lieutenant Colonel Kaido Tiitus, a
commander in the volunteer Estonian Defence League. “Our main lesson is
that we need to find a way to stop the advance of Russian armoured units.”
Ukraine’s counter-offensive last year was stymied by the so-called Surovikin
line: a sprawling array of Russian minefields, trenches, anti-tank obstacles
and old-fashioned barbed wire, among other impediments. As Ukrainian
forces slowed down to clear mines, bridge ditches and bulldoze obstacles,
they were observed by drones and hit with a hail of anti-tank missiles and
suicide drones. So uncharted was this territory that Valery Zaluzhny, then
Ukraine’s top general, asked his staff to dig out “Breaching Fortified
Defence Lines”, a book by a Soviet major-general. It was published in 1941.

Estonian officials estimate their stretch of the border will need some 600
concrete bunkers, each capable of holding around ten soldiers and taking a
hit from a large shell. Prototype bunkers are being developed and
construction is expected to start next year, at a cost of around €60m ($65m).
The aim is not to create an impregnable fortress but to slow invaders, wear
them down and buy time to bring up reinforcements. If Latvia and Lithuania
were to build bunkers at a similar density, they would need 1,116 and 2,758
bunkers respectively, calculates Lukas Milevski of Leiden University in the
Netherlands.

The catch is not military engineering but democratic consent. “The most
important part is agreement with landowners,” says Susan Lillevali, an
Estonian defence official, noting that most of the borderlands are privately
owned. She says there has been little sign of pushback from Russian-
speaking minorities in the area. Locals may be reassured by the fact that the
armed forces do not plan to store explosives near the strongholds in
peacetime, nor install anti-personnel landmines, which are illegal under the
Ottawa Treaty.

The Baltic bunker-building spree is part of a wider revival of interest in

fortification. In November Volodymyr Zelensky, Ukraine’s president, urged
his commanders to accelerate the construction of defences in the east.
Poland, too, is building up fortifications and shelters along its borders with
Russia and Belarus, an ally of the Kremlin. This throws up a dilemma.

NATO armies have long preferred a more elastic defence in depth, in which
forces retreat as needed and destroy the enemy on more favourable terrain.
That is incompatible with defending every inch of NATO soil. But with an
“operationally static defence”, observes Mr Milevski, “it’s much more of an
imperative to ensure that the blow, when it comes, is as weak as possible.”
That puts a greater emphasis on using heavy firepower to strike deep behind
Russian lines to break up the attacking force. In short: heavy bombardment
of Russian soil. “Western political leaders,” he warns, “may be squeamish
about such attacks.” ■

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Back from the slagheap

As German industry declines, the Ruhr gives hope

The resilience of the old steelmaking heartland is a model for the future

Feb 15th 2024 | Dortmund

GERMANY IS wilting. Last year its economy shrank by 0.3%, the worst
result in the G7 group of rich countries. Deutsche Bank, the country’s
biggest, reckons industrial output has sunk by 9% since 2018 and will fall
another 2.5% this year. The talk in boardrooms is of creeping de-
industrialisation as high domestic costs—especially for energy—push firms
to relocate.

For a vision of the future look to Germany’s former industrial heartland, the
Ruhrgebiet, or more simply the Ruhr. Once home to Europe’s biggest coal
mine, its biggest steel mill and munitions plants that supplied two world
wars, the English-county-sized region has been hollowed out. Two-thirds of
its workers toiled in industry in the 1960s. Under one in five now do, as in
the rest of Germany. On maps that show where factories cluster in Europe,
the region pales against booming locales such as western Romania and
southern Poland.

Focus more closely, however, and this vision of Germany’s future looks a lot
less dim. American rust-belt cities such as Pittsburgh shrank by half or more
after the 1960s; the Ruhr’s population fell by barely 10%. Its workforce has
actually grown. With 5.1m people in a cluster of some 50 towns, it contains
Germany’s biggest conurbation. The Ruhr has long since scrubbed its air and
rivers, tidied slag heaps into forested hills and converted hulking factories
into quirky museums. Huge investments in higher education (the region
hosts 260,000 university students) have made it a centre for R&D. A prime
location and dense transport infrastructure have lured logistics firms, now
the region’s top private employer. The Ruhr is, in short, a much nicer place
to live than the chimney-studded powerhouse of old.

There are outliers, of course. The region’s southern half, with the big cities
of Dortmund, Duisburg and Essen, has prospered while the more coal-
dependent north has stalled. “There is huge segregation,” says Thomas
Bauer of RWI-Essen, an economic research institute. “Everything north of
the A40 autobahn is still problematic.” The mid-sized town of
Gelsenkirchen, for instance, has suffered chronic unemployment since the
last mines shut in 2018. The jobless rate in 2023 was 14.6%, nearly three
times the rest of Germany’s.

Mostly, though, the Ruhr has rebounded strongly. In its biggest city,
Dortmund, the jobless rate touched 20% in 2005 after the closure of the
Hoesch steelworks that once employed one in five of the town’s workers.
More people now work on its abandoned factory sites than before they
closed. A mill for specialised steels occupies just a corner of one vast
suburban site, dwarfed by a giant logistics park next door, which is linked to
rail, canal and road junctions. Another site has become a sparkling campus
for corporate offices, with a derelict turbine hall converted into a venue for
high-tech light spectacles. Once a slurry pit, a huge artificial lake is now
ringed with fancy apartments and offices.

Arturo de la Vega of the city’s planning department is ebullient. ”Our plan is

for growth,” he enthuses. With its population projected to reach 625,000 in
2035 (up from 601,000 now), Dortmund is building new schools and a
children’s museum. Having learned from the Hoesch collapse, it has focused
not on winning big-name firms but on diversifying its economy and
nurturing innovation. “Most companies here are less than 20 years old, and
most you’ve never heard of,” says Mr de la Vega. This “centipede strategy”
has paid off. Not only has the local economy weathered recent shocks, the
city’s coffers are full. Its latest project is a new startup campus to revive a
canalside district.
The funding is key, because sustaining the Ruhr has required lots of public
money over a long period of time. Perhaps too much, thinks Christoph
Schmidt, the president of RWI-Essen. A bit more “creative destruction”
might have made the Ruhr adapt faster, he suggests. Some interventions
have flopped. Gelsenkirchen’s prospects as a hub for solar power ended
when subsidies dried up, and cheaper Chinese panels flooded in.

A new push envisages the Ruhr as a testing ground for Germany’s ambitious
plans to replace hydrocarbons with clean hydrogen. Christoph Noeres of
Thyssenkrupp Nucera, a recent spin-off of the Duisburg-based steel giant
that designs electrolysers to produce hydrogen, is optimistic. Typical of
today’s Ruhr, his firm no longer makes things; the 500 workers at its
Dortmund headquarters design and market complex processes that rely on
equally complex supply chains. “Of course some operations may transfer
outside of Germany,” he says. “But here we are used to transformations and
innovation. It is in our DNA.” ■

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Overcooked controversy

Europe decides it doesn’t like lab-grown meat

before it’s tried it
An Italian ban is red meat for cattle farmers

Feb 15th 2024 | Rome

FOR ITS detractors, it is an abomination—“Franken-meat”. For its

advocates, meat grown from animal cells (known as lab-grown, cultured or
cultivated) promises to help save the planet. It could slash the water
consumption and greenhouse-gas emissions of the livestock industry (around
12% of the global total). Even if lab-grown meat merely replaced the stuff
currently fed to pets, it would reduce the need to kill other animals. But it
might pose an existential risk to livestock farmers, who are already
protesting vigorously in Europe at rising costs, environmental restrictions
and mounting paperwork.
In the EU, the controversy over cultured meat is searing. The European
Commission is considering whether a ban introduced by Italy’s conservative
government breaches the rules of the internal market. Since the ban was
imposed last November, 11 other countries have lined up to defend “real”
meat. A note from the Italian, French and Austrian delegations to the
agriculture and fisheries council on January 23rd claimed the lab-grown
variety threatens the “very heart of the European farming model”. They
managed to corral eight other delegations in support.

Italy’s initiative was sponsored by the agriculture minister in Giorgia

Meloni’s government, Francesco Lollobrigida. The bill imposing the ban
includes beefy fines of up to €150,000 ($161,000) for defying it. It states that
its aim is “safeguarding human health” and “preserving [Italy’s] food and
agricultural heritage”. Yet no food-safety concerns have so far been raised
concerning cultured meat. Any commercial product would need clearance
from the European Food Safety Authority before it could be marketed.

More to the point, the fledgling lab-grown meat industry is still a very long
way from producing wholly cultured products in commercial quantities at
competitive prices. The first lab-grown hamburger, sampled in 2013, cost
more than $300,000 to create. Companies working in the area have since
faced immense problems in scaling up production and scaling down costs.
Of late, many have switched to creating hybrid foodstuffs in which small
amounts of cultivated meat have been added to plant-based protein. Already,
hybrid products are available in small quantities in Singapore, Israel and
America.

Josh Tetrick, the CEO of Eat Just, one of the leading American startups, said
this month he was taking a 50-year view of the industry’s prospects. New
discoveries might change that. But until they do, the only effect of Italy’s
ban will be to enable Mr Lollobrigida to bellow that he has defended his
country’s livestock farmers. And the controversy in the EU will remain a
storm in a Petri dish. ■

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Charlemagne

How not to botch the upcoming EU leadership

reshuffle
The great scramble for top Euro-jobs is upon us, alas

Feb 15th 2024 |

FEATURING ON A criminal “wanted” list usually crimps one’s options for

future employment. But when the country issuing the notice is Russia and
the alleged outlaw is the prime minister of neighbouring Estonia, it can be a
useful CV-enhancer. Reports that Kaja Kallas is one of a slew of Baltic
politicians the Kremlin wants arrested—something to do with removing
Soviet war memorials—may help her candidacy in the upcoming scramble
for top EU jobs. The hawkish prime minister is among those who fancy their
chances of trading up from a national post to a continental one, after the
European Parliament elections from June 6th-9th. The process of replacing
the bloc’s top officials usually entails a lot of undignified squabbling. A bit
of planning would reduce the angst and avoid divisions, at a time when
Europe can ill afford them.

Who gets which top Euro-job is traditionally decided by the EU’s 27

national leaders, who huddle in what might once have been a smoke-filled
room a few weeks after votes are cast. In 2019 the process took two summits
over five days. This time the jockeying for position is already under way. On
February 19th Ursula von der Leyen, president of the European
Commission, is expected to gain the formal endorsement of the Christian
Democratic Union (CDU), the centre-right party of her native Germany, to
serve a second five-year term atop the EU’s powerful executive arm. Having
made a decent fist of running the bloc’s most important institution through
covid-19 and the war in Ukraine, she is positioning herself as a safe pair of
hands in a potentially unsafe Trumpian world. Assuming the centre-right
comes top in European elections, as expected, few will dare challenge her.
Once nominated by leaders she must be approved by a new set of European
parliamentarians. A surge of support for the hard right means the centrist
majority available to her is narrow. But it should be manageable.

The presidency of the European Council will prove harder to fill. Luckily it
is less important. In theory the position entails chairing meetings of EU
leaders, where the biggest decisions are made (as long as Viktor Orban,
Hungary’s cantankerous prime minister, does not hijack proceedings). But
the incumbent, Charles Michel, has embraced the job’s sideline as a
ceremonial representative of the union, schmoozing the Xi Jinpings and
Narendra Modis of the world. That has led to pointless turf battles between
Mr Michel and Mrs von der Leyen, which have at times made the EU look
as disorganised as a student society. Mercifully, term limits prohibit Mr
Michel from staying on.

Convention dictates the council job be bestowed on a sitting EU leader, or a

recently retired one. The need for political balance suggests it must go to the
centre-left, which will probably come second at the polls. A southern
European would be ideal to achieve geographic balance. António Costa, who
as Portugal’s Socialist prime minister fits the bill, was considered a shoo-in
until he was forced to resign in a corruption scandal last November (he will
be replaced after elections next month). Should the current judicial probe
comprehensively clear him, he might still have a shot, if only because there
are few other qualified lefties now running EU countries. One is Mette
Frederiksen of Denmark, but her migrant-bashing stance has alienated
political allies. The council’s presidency is too small for the German
chancellor, Olaf Scholz. It could suit the Spanish prime minister, Pedro
Sánchez, who narrowly won re-election last year. But his leaving for
Brussels might leave Spain mired in political chaos, undermining him in his
new role. If none of those options appeals, lots of retired Italian prime
ministers might be willing to do the job. The most talented, Mario Draghi, is
probably a non-starter, given his insufficient leftiness and his age—at 76 he
would be young only by American standards.

The third weighty EU job is the high representative, in effect the bloc’s
foreign minister. It is currently held by Josep Borrell, an affable Spaniard
who candidly admits that concocting a joint foreign policy at EU level is all
but impossible. Nonetheless many are keen to try. Central and eastern
Europeans will fume if they are not given the post, having warned of
Russia’s warmongering intent long before it was fashionable (and not having
held a top EU post since 2019). They might be assuaged if a Balt or a Pole
were to be appointed as secretary-general of NATO. The military alliance’s
head is usually drawn from Europe and its current leader, Jens Stoltenberg, is
on his fourth extension. But Mark Rutte, the outgoing Dutch prime minister,
seems to be heavily favoured for NATO. Ms Kallas, as an easterner from a
liberal party (the third big political family whose support Mrs von der Leyen
will need) ticks many boxes. But others may yet emerge.
Holding the Leyen

Europe must avoid three pitfalls to ensure things go smoothly. First, it should
rally around Mrs von der Leyen quickly, to remove any doubt she will
continue to head the commission. Whatever errors she has made—some say
her current support for Israel’s ferocious assault on Gaza is excessively keen
—are largely overshadowed by her record. Second, Brussels must avoid
being drawn into the pointless constitutional bickering that recurs each time
the top jobs are refreshed, as Euro-federalist types see an opportunity for the
European Parliament to leach more power away from member states.
Finally, Europe would do well to pick a self-effacing president for the
council, one eager to broker compromises and work smoothly with the
commission.
Even if the top-jobs process goes smoothly, there will be opportunity for
strife later on. A new team of commissioners will have to be appointed once
their boss is in place. It is not just personnel that must be selected: their roles
often change too. (Is it time for a European defence commissioner, for
example?) Key issues such as the level of the EU’s green ambitions or its
approach to free trade will be decided in part by who gets what position.
That makes it all the more important to start by getting the biggest ones
right.■

Read more from Charlemagne, our columnist on European politics:

Europe is importing a solar boom. Good news for (nearly) everyone (Feb
8th)
Europe’s grumpy farmers are a symptom of wider malaise (Feb 1st)
The EU’s €50bn package to Ukraine is a far cry from its rhetoric (Jan 25th)

Also: How the Charlemagne column got its name

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Britain
The horror story of HS2
Getting nowhere fast :: How a flagship project became a parable of Britain’s problems

Why British police should focus on victims

Crime prevention :: A small number of people suffer a disproportionate amount of crime

Climate will be a battleground in Britain’s next election

Hotting up :: The Conservatives and Labour both have weaknesses

How to live to one hundred

Britain’s silver zones :: Have good genes and move to East Devon

British lives are getting duller

A life more ordinary :: Good news for Britons, bad news for obituarists

Ban it harder! An unwelcome new trend in British politics

Bagehot :: Do not abduct that cat

Love, frugality and home-grown flowers are in the air

Roses are perishable :: Valentine’s Day in post-pandemic Britain

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Getting nowhere fast

The horror story of HS2

How a flagship project became a parable of Britain’s problems

Feb 15th 2024 | The route of HS2

“IT’S NOT ideal,” says James Richardson, a tunnelling engineer at Old Oak
Common station in west London. He is standing in a vast hole: almost a
kilometre long, 70 metres wide, 20 metres deep. Some 2,000 people are
working at the site: by the early 2030s Old Oak Common should be one of
the largest stations in Europe, with six underground platforms for high-speed
trains whizzing in and out of London. But Mr Richardson isn’t sure where to
dig next.

Last October the prime minister, Rishi Sunak, decided to amputate High
Speed 2 (HS2), a railway project turned national trauma. He announced that
the northern leg of the line would not extend beyond Birmingham to
Manchester. Mr Sunak said that the London terminus for HS2 would still be
Euston, some 10km east of Old Oak Common, but that private investors
would have to pay for the tunnel connecting the two. That money is far from
certain to materialise, which is why Mr Richardson’s team is soon to bury
two giant tunnel-boring machines (TBMs) at Old Oak Common. They will
be entombed there, pointing eastward, until things become clear.

Proponents of HS2 dreamed of a railway to rival those in Japan and France,

linking Britain’s big cities in a feat of engineering worthy of the country’s
Victorian pioneers. Instead the project has shown that Britain cannot build.
The rump line from London to Birmingham will be one of the most
expensive in the world, costing up to £67bn ($84bn) or £300m per km of
track. It will also be one of the most pointless. A totemic project to boost the
north will end up mostly benefiting London. A huge investment to increase
capacity and cut journey times will, for some routes, do the reverse.
What went wrong? It is tempting to say everything. But several problems
stand out. The initial plan was far too optimistic, not least because ministers
kept changing it; legislation ensured that costs ratcheted up; and the
company in charge botched important decisions. To see how the project went
awry, step aboard for a journey along the line (see map).

Begin in London, where in March 2010 the then Labour government

announced plans for a 540km (335-mile) Y-shaped railway linking Euston to
Birmingham, with an eastern branch to Nottingham, Leeds and Yorkshire
and a western branch to Manchester and the north-west. The trains zipping
along the route would be among the fastest in the world.

Even at the outset, the economics were debatable. Passenger demand was
growing and the existing lines were creaking. But Britain is smaller than
France or Japan. Its large cities are closer together; they were already
connected by rail. The initial budget was also hopelessly optimistic.

At Euston, for example, the idea was to squeeze 11 platforms into a small
triangular plot between the existing station and a warren of residential
streets. Immediately there were problems. When archeologists began to
exhume 45,000 skeletons from a graveyard next to the station, they
discovered an infestation of Japanese knotweed. Experts had to be drafted in
to separate old bones from invasive perennial.

That was just the start. The work at Euston was supposed to cost just £3.2bn
(all figures are in today’s prices). The budget almost doubled even as the
number of platforms was cut to ten and then six. Euston was a portent of
wider issues. In 2010 the government had said that the whole line could be
completed for £57.2bn. The Conservatives were happy to go along with that,
but the numbers were flimsy.

Budgets are much harder to stick to when politicians fiddle. “If there is one
thing with megaprojects, it’s don’t make changes after you’ve started,” says
Professor Bent Flyvbjerg of the Saïd Business School at Oxford University.
Yet that is exactly what successive prime ministers and transport secretaries
have done.

Tunnelling between Euston and Old Oak Common has started and stopped
before now; plans changed so often that in 2020 £120m of design work for
Euston had to be scrapped. The eastern arm of the Y to Leeds was severed in
2021. Another spur went in 2022. In early 2023 the Euston site was
mothballed. Then came Mr Sunak’s decision. Contractors call this “political
risk”, and Britain pays a premium.

Changes did not just come from ministers. Continue 50km along the line, a
journey of around ten minutes when trains finally start running, and stop at
South Heath, a village in the Chilterns in Buckinghamshire. These are the
hills the project died on. For almost three years two TBMs, Florence and
Cecilia, have been chomping through the chalky earth beneath the Chilterns,
lining parallel 16km-long tunnels as they go with precast concrete segments.
They have cost around £750m to dig before a track has been laid.

As well as those in the Chilterns, five “green tunnels”, some almost 3km
long, will protect residents’ views and “connect wildlife habitats”. Almost a
quarter of the journey from London to Birmingham will happen
underground. Another third of the journey will be through cuttings, where
high banks line the tracks. In a 45-minute journey passengers will have
“meaningful” views for less than ten minutes.

Ensuring hedgehogs can get around is a fine goal. The tunnels through the
Chilterns were extended after a vociferous local campaign. But tunnels cost
about ten times as much as normal tracks; cuttings five times. A big part of
HS2’s budget has gone on making sure a small group of people in the south
of England will never have to see or hear it. As a result many more in the
north won’t either.

That points to another problem with the project: the way Parliament
legislated for it. The bill in 2017 which gave HS2 Ltd, a public body, the
power to acquire land detailed so many specifications that it ran to 50,000
pages. Critically, it gave councils the power to petition for design changes
and to hold up work if they were unhappy. Having asked for tunnels, for
example, councils then tried to stop them by denying access routes for
lorries.

One case brought by Buckinghamshire council ran for nine months before
the High Court threw it out. The council could be litigious partly because it
had 15 dedicated planning officers paid for by HS2. Keep on for another
170km and, just before Lichfield, look out of the window to admire the
Whittington Heath Golf Club. HS2 Ltd needed £400,000-worth of land from
the club; to smooth things over it bankrolled a £7m development, including a
new clubhouse (the chairman was “delighted”).

Since 2017 HS2 has had to obtain more than 8,000 planning and
environmental consents. It has gone to court more than 20 times. Such hold-
ups are the biggest cause of uncertainty and higher costs in Britain, says
Ricardo Ferreras of Ferrovial, which has built high-speed lines around the
world. Other countries, notably France, grant sweeping planning powers and
take a standardised approach to compensation.

Another big issue was the failure of HS2 Ltd to control costs. Effective
project management and accounting should have led to tough questions.
Instead, one civil servant complained that HS2 acted “like kids with the
golden credit card”.

The company asked firms to take on construction work without basic

information about ground conditions. That led to rampant over-engineering,
according to Andrew McNaughton, one of the scheme’s architects, such as
contractors insisting on installing concrete pile foundations where they were
not needed. HS2 also signed huge contracts on a “cost-plus” basis, where
firms are paid a percentage of the total value of the work. Sir Jon Thompson,
who became executive chair last year, calls that “extraordinary”: it gave
contractors an incentive to go over-budget and the company no “levers” to
stop them.
As costs spiralled, the route was pruned and the project’s benefit-cost ratio
sagged (see chart). In October Mr Sunak decided to cut his losses. In fact, he
has made a bad situation worse. To see the problems HS2 now faces,
continue another 55km along the original route to make a final stop at
Whitmore, a village in Staffordshire.

Edward Cavenagh-Mainwaring, a dairy farmer in Whitmore, has been

getting letters from HS2 for a decade. In early 2023 it finally acquired part
of his farm, including one of his wildflower meadows. More of his fields
were bought days before Mr Sunak announced that the Manchester leg
would be scrapped. HS2 has spent over £600m ($755m) on land and
property like this that it apparently no longer needs. Before it can be sold off
again, there are miles of fences to take down and 1,800 boreholes to fill.
Compulsory purchase is a slow and painful process. Undoing it will be, too.

Yet returning Mr Cavenagh-Mainwaring’s farm would not solve the real

problem, which is that the rump line makes no sense. According to Mr
Sunak, HS2 trains will run at up to 360kph (225mph) to Birmingham before
switching to old tracks to trundle up to Manchester. But high-speed trains
were not designed to run on the old track; they cannot tilt as they go round
corners, meaning they would take longer than the current Pendolino trains.

The original plan was for 400-metre-long HS2 trains, capable of carrying
1,100 passengers, to run from London to an upgraded station at Manchester
Piccadilly. With that station no longer being built, trains will need to be split,
leaving them with less capacity than current trains. It is already too late to
make changes to the rolling stock HS2 has ordered, Sir Jon has told MPs. As
a result services from Birmingham northward are likely to be worse once
HS2 has been completed.

The only way to rescue any value from the project would be to complete the
section between Birmingham and Crewe, says Jim Steer, a civil engineer.
This bit is critical because it would relieve pressure on the most congested
section of the existing line. Sir Keir Starmer, the leader of the opposition,
says Labour won’t complete the whole project but will look at options if it
enters government after an election later this year. But whatever it decides,
Britain’s grand projet has turned into a nightmare. ■

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Crime prevention

Why British police should focus on victims

A small number of people suffer a disproportionate amount of crime

Feb 15th 2024 |

FOR MOST Britons who worry about crime, two facts should provide some
reassurance. First, it has fallen over the past three decades. The latest Crime
Survey for England and Wales shows that most crimes, including violent
ones and burglary, continue to fall from a peak in the mid-1990s. Second, a
relatively small number of people are disproportionately likely to be victims.
Previous research has suggested that 5% of people (in Britain and in
America) experience 60% of all crimes in which there are victims.

If that means most Britons are less likely to experience crime than they
might deduce from media headlines, it also means that life is much grimmer
and more dangerous for a smaller number of people than most care to think
about. Sometimes repeat victimisation occurs because the target is
personally vulnerable: a woman living with a violent man, say. In other cases
it is because one crime invites a repeat: a shoplifting episode in which a thief
clocks that the cashier does not have a clear view of the exit, for example.
Often, it is both. Perpetrators of anti-social behaviour, which is not a crime
but definitely has victims, also often pick on the same people.

As with crime generally, repeat victimisation tends to be concentrated where

there is poverty. “High crime areas are ‘high’ primarily because of the
numbers of repeat victims,” says Ken Pease, a visiting professor of
criminology at University College London. The Crime Survey contains no
areas in which more than half the residents are victimised, he says, but it
does have areas in which those who are victims of crime suffer many times
over. As crime falls it appears that repeat victims account for an increasing
proportion of it.

Focusing on repeat victims to prevent lawbreaking is “low-hanging fruit”,

says Professor Pease. Yet in recent years it has largely disappeared as a focus
of police policymaking. That means the data upon which such policing
depends are often absent. Collecting a lot of detailed information on suspects
is core police work; making careful notes on victims, beyond what is needed
to bring a prosecution, is not.

The Metropolitan Police believes the best way to help repeat victims is to
look at the harm done to them (rather than simply counting the number of
crimes they have suffered). It uses a “harm index” to home in on the 100
offenders in London who pose the most risk to women and girls. Developed
by Cambridge University’s Institute of Criminology, it measures how much
damage is inflicted on victims by reflecting the sentences that different
crimes carry.

Working with other agencies is vital in such efforts, says Professor Lawrence
Sherman, the Met’s chief scientific officer (who helped devise the harm
index). He cites the case of a woman who had not been known to the police
before she was charged with the attempted murder of her husband. Analysis
of Met data revealed that the woman (“the offender”) had been admitted to
accident-and-emergency 19 times in the year before her crime. A child had
been admitted twice.
If data are vital for this sort of crime prevention, “sensible policing” is as
important, says Professor Pease. That includes targeted patrols, when
officers walk past buildings that have been burgled repeatedly. But this
requires community police officers and experienced ones. Since austerity,
both have been in short supply. ■

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Hotting up

Climate will be a battleground in Britain’s next

election
The Conservatives and Labour both have weaknesses

Feb 15th 2024 |

CLIMATE CHANGE has never been a core issue at a British general

election. At the next one it will be. That partly reflects rising salience: since
the last ballot in 2019, the environment has risen to become one of voters’
bigger concerns, alongside the economy, the National Health Service and
immigration. But there is also an increasingly acrimonious divide between
the two big parties over green policy.

Take the Conservatives first. Earlier this month, the government announced
that Britain had become the first big economy to cut its territorial
greenhouse-gas emissions by half since 1990. That sounds impressive, and it
is. But celebrating past success masks the fact that Britain has done well on
the easier bits of decarbonisation, such as closing down coal-fired power
plants, while failing to develop plans for tackling emissions in tougher areas,
like home heating and agriculture.

Last June the Climate Change Committee, a watchdog, said that, for the
government to meet its emissions target for 2030, it would need to quadruple
the rate of emissions reduction outside the power sector. In fact Britain has
gone backwards in some areas. In September Rishi Sunak, the prime
minister, criticised his predecessors for imposing unnecessary costs and
delayed a target for banning new gas boilers. Electric-vehicle sales have
slowed, in part because a ban on the sales of new petrol and diesel cars has
been deferred.

Plans to generate clean energy took a knock when the government’s most
recent auction round failed to secure any new offshore wind projects. A new
nuclear strategy contained a lot of pleasing promises but was overshadowed
by news of yet another delay at Hinkley Point C, a nuclear-power station
being built in Somerset. (Ministers did manage to approve a new round of
North Sea oil and gas licences.)

Mr Sunak is currently mulling what would be his biggest bit of climate

backsliding to date: scrapping a regulation, due to come into force in April,
that would require boiler manufacturers to produce a rising proportion of
heat pumps over time. The move would please some manufacturers as well
as some Tory MPs who consider heat pumps bothersome and un-British. But
it would leave the government’s targets looking even less credible and open
it up to legal challenges (because of legislation requiring net-zero emissions
by 2050).

All of which offers plenty of ammunition for other parties to target the
Conservatives on the environment. Tory MPs in some southern seats already
fret about the threat from the Liberal Democrats, who are stirring up anger
about sewage in rivers. But the climate is also an issue where Mr Sunak
spies an opportunity to take the fight to Labour, which remains far ahead in
the polls. He would like to paint the opposition as green radicals who want
to kill the oil-and-gas industry, jack up the cost of driving and rip out your
boiler.
A decision on February 8th by Sir Keir Starmer, the Labour leader, to slash
the party’s decarbonisation plans does not close down this line of attack.
Worried by charges of fiscal irresponsibility, Sir Keir ditched a pledge to
spend £28bn ($35bn, or 1.2% of GDP) per year by the end of the parliament
on cutting emissions and building up green industries. Labour now plans to
spend less than a fifth as much, £23.7bn ($30bn) over five years, with half of
the money coming from borrowing and half from a windfall tax on oil-and-
gas firms.

Labour still has big ambitions. It aims to decarbonise Britain’s electricity

supply by 2030. GB Energy, a new publicly owned clean-energy company,
would be given an initial capitalisation of £8.3bn ($10.4bn); it is meant to be
a “national champion” in the mould of Orsted or Vattenfall, state-owned
renewable-energy firms in Denmark and Sweden. A separate “national
wealth fund” would invest in industrial projects, though even enthusiasts
struggle to articulate the exact purpose of the two new bodies. Labour says it
will look more to private finance to achieve its green aims, including ways to
encourage people to pay for home upgrades. The Tories will doubtless argue
that if Labour is not going to borrow its way to net zero, it will tax or
regulate its way there. (Ministers have already instructed officials to cost
Labour’s plans.)

Optimists might hope that the ground is being laid for an invigorating debate
about the next wave of climate policies and the relative merits of taxes,
regulations, subsidies and industrial strategy. The reality will almost
certainly be dirtier and more depressing. Everyone will attack the Tories as
wanton polluters. The Tories will say that Labour cares more about the
environment than the struggles of the average voter. And the political
consensus that once prevailed over the climate will continue to fracture. ■

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Britain’s silver zones

How to live to one hundred

Have good genes and move to East Devon

Feb 12th 2024 | SIDMOUTH

“EASY TO FIND and hard to leave.” That is how Sidmouth’s tourism

website describes the small seaside town in East Devon, where the red cliffs
turn the ocean water pink. The tagline could apply to lives as well as
holidays. Almost a third of residents are over 75; locals refer to Sidmouth as
“God’s Waiting Room”. “We get a lot of people well into their 90s, 100s,”
says a woman in a funeral parlour as an undertaker in a top hat tiptoes past.
A card shop has sold “three or four” 100th-birthday cards since it opened in
November.

Life expectancy in Britain has been stagnating for a decade but the country
still produces a lot of very old folk. Britain ranks 29th in the world for life
expectancy (at 81 years) but seventh for centenarians per 100,000 people.
That puts it ahead of Italy and Greece, both of which are known for their
“blue zones”, a term used to describe areas where people claim to live
exceptionally long lives.
The secret to Sidmouth’s long-lived population is not the food. Islands like
Sardinia and Icaria have the Mediterranean diet—heavy in olive oil, seafood
and fresh vegetables. East Devon, which is home to the highest
concentration of centenarians in England, has the pensioner’s special: a
small fish and chips and a large pot of tea.

The sea air must help, says Graham Brooks, a 76-year-old who helps look
after Sidmouth’s antiques shop and whose mother, Audrey, turned 100 last
November. (Mrs Brooks probably owes more to genes, luck and the fact that
she never smoked and does not drink, with the exception of half a glass of
wine at Christmas.)

There are lots of opportunities in Sidmouth for old people to stay active and
socially connected, both good ways to delay the grim reaper. At Fields, the
local department store, the café is music-free, the better to hear elderly
friends. There are brass-rubbing classes, a ukulele club and jazz evenings. In
the window of Toto’s, a dog-toy shop “for dapper dogs”, is a poster for a
film screening of “A Matter of Life and Death”, a classic released in 1946.

But places like Sidmouth are the silver lining to a darker story. Although
some of its citizens enjoy very long lives, Britain excels at producing much
shorter ones, too. Britain’s middling life-expectancy figures disguise
extremes. Centenarians tend to cluster more on the south coast, in areas like
Bournemouth and Bognor Regis as well as in East Devon. But in many other
coastal towns, such as Blackpool, life expectancy is much lower than the
national average. London is also not a place for the very old: of the eight
local authorities in England and Wales with fewer than ten centenarians per
100,000 population, six are in the capital.

Rather than blue zones, where a specific environment is associated with

greater longevity, it seems more likely that Britain has silver zones, places
which attract longer-lived people in middle age or upon retirement. Marjorie
Hodnett, who grew up in London, will be 110 in April. Her biggest health
complaint relates to a prescription toothpaste sent to the wrong pharmacy (at
105 she still had 26 of her own teeth; now she is down to 21). She left
Sidmouth for Merseyside in 2020, but only to be nearer relatives after six
decades in the area. “It’s a lovely place,” she says wistfully. The first thing
she asks your correspondent is whether the daffodils are out. ■
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A life more ordinary

British lives are getting duller

Good news for Britons, bad news for obituarists

Feb 15th 2024 |

THEY ARE dying out. Last month the final surviving member of the
original SASdied. A year or so ago the last “Dambuster” pilot died. A few
years before that, the last Battle of Britain Spitfire ace did. Britain’s finest
hour has long since passed; now those who fought in it are passing, too.
Those who never surrendered are now surrendering. And as they go, Britain
must face the loss not only of a generation and of a direct connection to
history but also, somewhat less seriously, of a niche literary genre: the late-
20th-century obituary.

The genre emerged in the 1980s. Before then obituaries tended to serve
readers a diet of fresh corpses and stale prose—respectable judges,
unimpeachable wives and phrases in the “she passed away peacefully” and
“tributes poured in” vein. Then things changed. Led by Hugh Massingberd,
an obituaries editor at the Daily Telegraph, the in-house journal of the upper
classes from which almost all of the excerpts below are drawn, the British
press saw the possibility in chronicling colourful lives in colourful ways.
Suddenly obituaries started to offer characters such as “Brigadier ‘Slasher’
Somerset” and “the last Wali of Swat” and phrases such as “he tried
slithering along a sewer” or “cowering in the back of a hayloft in…Lower
Silesia”.

The history of the 20th century offered ample material. Wars and revolutions
may offer death on an unprecedented scale but they also offer life on it, too.
No previous century could have offered the undertaker one Lady Paget, who
“spent much of her life rescuing English governesses stranded in Soviet
Russia”; Field Marshal Sir Gerald Templer, who was “injured by a looted
grand piano, which had fallen from a passing truck on to his car”; or the
redoubtable Major-General Eric Harrison, who, having given “distinguished
service” in both world wars, also found time to be a “representative rugby
player, an Olympic athlete, a legendary rider to hounds [and] pig-sticker”.
Today LinkedIn is lamentably low on pig-stickers.

Empires and changing borders also provided a distinctive canvas. Countries

were still being administered, and even created, by mere handfuls of people
in much of the 20th century. Their obituaries are duly filled with sentences
of the “her mother [helped] to found Czechoslovakia” sort.

Class helped shape the genre, too. It is studded with aristocrats as well as
autocrats. There is much to criticise about outmoded, unjust, elitist English
aristocrats. Dullness is not high on the list. Their obituaries are filled with
the sort of names—not just “Slasher” but also “Tishy”, “Cockie”, “Loppy”
and “Pudding”—that signify only the properly posh (or possibly Labradors).
They chronicle the sort of lives that wouldn’t disgrace the pages of Evelyn
Waugh or P.G. Wodehouse: Lord de Clifford, a colonel and door-to-door
dogfood salesman; Baroness de Koenigswarter, an aviatrix who painted
portraits in “milk, Scotch whisky, and scent”; and Dame Violet Dickson,
who was “mountainously large” and “spoke Arabic in a Bedouin dialect”.
All the best people do.
Such idiosyncratic characters now had their own idiosyncratic chroniclers.
All historians would have recorded the death of Hitler. It required an
obituarist to see the pleasure of Jeanette Schmid, a “professional whistler”
who performed with Marlene Dietrich and Edith Piaf but who “had been
born a man and had fought in Hitler’s Wehrmacht before undergoing a sex
change in a Cairo clinic”.

Lives of this vintage are now almost all over. To read about them is to be
confronted by a species of human that already feels as exotic and outmoded
as a Regency rake. In an era in which people now begin to climb the career
ladder at school, it is fascinating to encounter the third Lord Moynihan
(“bongo-drummer, confidence trickster, brothel-keeper”) for whom the word
“career” was more verb than noun. In an age that frets over
microaggressions, it is sobering to read of those who coped stoically with the
macro-kind: phrases such as the “bullet passed through his chest and killed
the man behind” pepper these reviews like shot. (Though even this
generation had its qualms: when asked to land in a pineapple plantation
during the second world war, General Sir Nigel Poett, who had earlier
commanded a brigade in the D-Day landings, suggested that “a rubber estate
might be less prickly”.)

Such characters are not entirely extinct; opportunities for adventure still
exist. When confronted with the option of derring-do, however, most Britons
derring-don’t. According to Rory Stewart, a former MP whose life would
not shame the better British obituary (he was a deputy governor in Iraq
before walking across Afghanistan, Pakistan and Iran), “the interesting
question is why other people don’t do it, not really why I did.”

And if the fading of a particular type of life is a matter of regret to

obituarists, there are reasons for almost everyone else to be grateful. Most
obviously, war is not “a sort of glorious romp”, says Max Hastings, a
historian. Although the general tone of these obituaries is droll, they are
pierced with lines—“his two other sons were killed, one at Monte
Cassino”—that hint at the kind of pain no pen can capture.

Which is perhaps why, confronted with the unbearable tragedy of the 20th
century, its obituarists often turn instead to comedy. One cannot be sure of
happiness in life but one can at least be entertained. Or, as the 98-year-old
Dowager Countess of Elgin and Kincardine put it when she entered her final
year, she was looking forward to her 99th birthday as “that will be
interesting”. She then planned “to look forward to my 100th”. But “I may
die before that, and that will be very interesting too.” ■

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Bagehot

Ban it harder! An unwelcome new trend in British

politics
Do not abduct that cat

Feb 14th 2024 |

CATS ARE not like diamond necklaces or Rolex watches. For one thing,
they have minds and legs of their own. “They are known to occasionally
make themselves at home on other people’s sofas,” acknowledged Mark
Spencer, a government minister, to a committee of MPs on January 31st. The
facts of feline behaviour have not deterred the government from backing a
new bill that will make the “abduction” of a pet cat or dog punishable by up
to five years in prison. The act of “inducing” a cat (perhaps with a tin of
sardines) will also be caught by the new offence.

The problem with the bill, which is sponsored by Anna Firth, a Conservative
backbencher, is not only, as a government “pet-theft taskforce” found, that
public fears of this dastardly act far outweigh its actual incidence. It is that
stealing is already punishable under the Theft Act of 1968 by up to seven
years in prison, and that the stiffest sentences are already handed out for
crimes that cause emotional distress. Ministers used to argue as much
themselves until they yielded to a campaign by pet lobbyists. For when it
comes to tackling an injustice that is already against the law, the answer can
be simple: ban it harder.

What is true for cats and dogs is also true for war memorials. Vandalism has
long been a crime. But in 2022, amid concern that activists might topple
monuments to contentious historical figures, Parliament created a new
provision of “criminal damage to memorials”, punishable by up to ten years
in prison. More is to come. Cops already have broad powers to tackle
“disorderly conduct” and people “causing public nuisance”. Still, the
Metropolitan Police’s hands-off approach to recent pro-Palestinian protests
in London led the government to announce on February 8th that it would
seek to make “climbing on war memorials a specific public order offence”,
punishable by three months in prison.

Britain is in the grip of a bad bout of statutory inflation, in which public

demand for tough new laws outstrips the supply of social ills that have not
yet been legislated upon. The result is lawmaking that renders the already
illegal even more illegal.

This sort of legislative micromanagement would have appalled the version

of the Conservative Party that David Cameron led in opposition during the
2000s. The defence of liberties against the authoritarian culture of New
Labour was a big theme of the party’s 2010 manifesto. “Labour continues to
use ever more new legislation as a kind of rhetorical tool, a parliamentary
squawk to indicate its attitudes, while totally neglecting to use and enforce
the existing law,” wrote one Boris Johnson, then a Tory backbencher and star
columnist, in 2006 of the proposed offence of “glorifying terrorism”. A
noble sentiment and one Mr Johnson had completely forgotten by 2019,
when he put forward a law that states, with epic redundancy: “It is
recognised that the Parliament of the United Kingdom is sovereign.”

Banning it harder is eye-catching, free and reassuringly tough, which is why

Labour is still keen on the tactic. Questionable procurement during the
covid-19 pandemic has become a running sore for the government, so
Labour is considering a new offence of “fraud against the public purse”. Yet
fraud is already a crime. So is assault, but that has not deterred Labour from
proposing a “new specific offence of assault against retail workers” in
response to a wave of increasingly violent shoplifting.

Such measures can have unanticipated consequences. The problem with

offering certain occupations a special legal protection from violent crime
was apparent after a similar law was introduced in Scotland in 2021; soon
groups representing cabbies and bus drivers lobbied for provisions of their
own. New offences are also a clumsy tool for serious problems. Spiking, in
which a victim’s drink is drugged in order to rob or assault them, is a
terrifying crime. It was already prosecutable under seven separate offences
before the Home Office proposed legal amendments in December 2023 to
show “without any doubt, spiking is illegal”. But the reason why
prosecutions are rare, and the true scale of spiking hard to define, is because
hospitals do not routinely test for drugs in emergency wards. A new offence
is unlikely to change that.
Syntax error

Ban-it-harderism may nonetheless seem harmless. Britons like their pets;

they do not, as a rule, like their politicians. Reasserting existing laws in a
loud voice is a more benign way to bridge the gap between governing and
governed than, say, stirring a trade war with China. Yet it is a symptom of
two malaises in British politics.

The first concerns the role of MPs. Ms Firth told the Commons that, for one
constituent, the loss of her dogs (Mandy, Micky, Ruby and Chara) had been
“as if her babies had been taken”. Parliament, too, has been infantilised.
MPs’ time is misallocated. They are increasingly incentivised to think of
themselves as super-councillors, tasked with sorting out constituency
casework and championing local causes, rather than as national legislators. It
is a brave MP who tells constituents that their idea for a bill, prompted by a
local tragedy, would be an unhelpful complication to existing law.

The second malaise concerns law enforcement. The police response to pet
theft is “virtually non-existent”, said Ms Firth. If incidents of kittynapping
were logged under a separate law, she argues, officers would take it more
seriously. That logic is a common thread through bills to ban it harder. MPs
have little visibility or control over the police, who are operationally
independent. Restating the law in increasingly specific terms is a blunt
attempt to jolt the police into affording certain offences a higher priority. It is
akin to pounding the keyboard of a frozen computer in the hope of stirring it
to life. The problem is that the list of crimes which overstretched and
undermanaged police forces struggle to solve—rape, burglary, online fraud
—is long. Cat theft is a low priority because much graver crimes are
competing for attention. It is possible to ban things harder. They cannot all
come first. ■

Read more from Bagehot, our columnist on British politics:

The former prime minister who fascinates the Labour Party (Feb 8th)
The search for Conservative Party unity (Feb 1st)
Britain’s Labour Party is backed by a pro-growth coalition (Jan 25th)

Also: How the Bagehot column got its name

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Roses are perishable

Love, frugality and home-grown flowers are in the

air
Valentine’s Day in post-pandemic Britain

Feb 9th 2024 |

LOVE CONQUERS all. But it also makes allowances for changing

consumer behaviour. The covid-19 pandemic, the cost-of-living squeeze and
even Brexit have changed the way that Britons approach Valentine’s Day, the
annual celebration of romance/opportunity to have a blazing row with your
partner.

Loved-up Britons are more likely to stay in on February 14th than they were
a few years ago because of tighter budgets and hybrid lifestyles. On average
consumers now spend 66 more minutes at home every day compared with
the pre-lockdown era. On Valentine’s Day last year just over 8m people used
London’s buses and tube network, around 22% fewer than did so on the
same day in 2020. Spending at restaurants fell by 11.6% in January year on
year.

Those couples who decide to eat in on Valentine’s Day this year have more
options than they did before covid. Some restaurants now offer their own
DIY meal kits, delivering the ingredients and recipes for chef-crafted meals
directly to diners’ homes. A wealth of pandemic-born businesses have
ditched bricks and mortar altogether. YHangry, an online platform, allows
users to hire private chefs to provide a restaurant-style meal at home.

Singletons can be homebodies, too. The period between Christmas and

Valentine’s Day is peak season for dating apps: matches between Tinder
users globally were 10% higher than normal in the run-up to February 14th
last year. But some of these matches opt for virtual dates. Around 6% of
those polled in Britain will meet with a romantic prospect online this
Valentine’s Day, slightly more than in Europe, a survey by GWI, a research
firm, shows.

Frugality will affect gift choices. Around 43% of Britons are currently
tightening their belts, according to a survey by Barclays, a British bank. Half
of those planning to buy flowers on February 14th are intending to skip the
florist and pick them up at the supermarket instead.

The blooms they buy are changing. Brexit-related border checks that kicked
in on January 31st make importing flowers a more arduous process this year,
and when demand is so time-sensitive, any delay can be disastrous. Some
florists were already turning away from red roses and opting for homegrown
flowers such as snowdrops or tulips instead. “Valentine’s Day creates a huge
and unnecessary spike in demand for red roses which rapidly unwinds the
following day, risking high levels of waste,” says Aron Gelbard, CEO and
founder of Bloom and Wild, an online flower-delivery service. “We stopped
selling them in 2021.” ■

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International
2024 is a giant test of nerves for democracy
Counting the votes :: A warning from election results so far—and what follows in America,
Europe and India

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Counting the votes

2024 is a giant test of nerves for democracy

A warning from election results so far—and what follows in America,
Europe and India

Feb 11th 2024 |

AROUND HALF the world’s population, or some 4bn people, live in places
that are holding elections this year. These polls will decide who governs over
70 countries. But together they also represent a big test for the health of
democratic systems; for over a decade there have been fears that democracy
as a political ideal is ailing. By February 14th, when Indonesia went to the
polls, we estimate that countries with 770m people had cast ballots (or
prevented their citizens from doing so): or roughly 18.5% of the year’s total.
That makes it possible to take an initial look at how the 2024 democracy test
is going. The short answer is: not particularly well.
In one respect democracy is being modernised: a technological revolution is
taking place as short-form videos and group messaging transform political
campaigning around the world (artificial intelligence, including “deepfakes”,
is visible everywhere but is so far not decisive). Yet in another respect
democratic processes are reversing, from Pakistan, where squabbling is
under way after a recent dubious poll, to tiny El Salvador. An alarming
number of elections are being interfered with.

What do we know so far? Ten countries have held, or suspended, elections.

Earlier this month minnows Azerbaijan and El Savador held polls, as did
weighty Pakistan. March will feature Russia’s presidential poll (Vladimir
Putin will romp to victory in an oh-so-surprising outcome). After that there
will probably be votes in vast India in April and then for the European
Parliament in June, among others.

The example America sets in November matters more than ever. The
presidential contest is of supreme importance: whether this is a year of
democratic backsliding depends disproportionately on this vote and the
events surrounding it. All eyes will fix on a probable Biden-Trump rematch.

The election results fall into three camps so far: free-and-fair; fiascos-and-
farces and indeterminate. Start with the first category. On January 13th
William Lai Ching-te of Taiwan’s Democratic Progressive Party (DPP) was
triumphant. China dislikes the DPP because it rejects China’s claims to
sovereignty over Taiwan, but despite Chinese threats the electorate was not
intimidated. The other squeaky-clean election has been in Finland.

The second category involves fiascoes and farces. Top of it is Pakistan, with
its population of over 230m and history of political meddling by the armed
forces. The election on February 8th was probably the country’s least clean
since the 1980s. The most popular politician, Imran Khan, whose own
democratic credentials are questionable, was given three prison sentences in
quick succession in January on bogus charges. Polling day was marred by
violence and no party secured a majority in the election (see Asia section). In
Bangladesh a poll on January 7th saw Sheikh Hasina’s party scoop up 222 of
the 299 seats up for grabs; the main opposition boycotted the election. The
country is now in effect a one-party state.
In several smaller countries a similar erosion of democracy has taken place.
On February 5th Senegal suspended its election, with its president, Macky
Sall, once viewed as a defender of liberal values, sliding towards
dictatorship. The country has company in the Sahel. Mali was originally due
to hold an election on February 4th, which was then suspended last year; the
date has passed without the poll being rescheduled. Burkina Faso, Chad and
Niger have all recently had coups. On the other side of the Atlantic, on
February 4th the “world’s coolest dictator”, El Salvador’s Nayib Bukele,
won a second term. And Azerbaijan’s rigged election on February 7th saw
its long-time dictator Ilham Aliyev win over 90% of the votes. He received
congratulations from both Mr Putin and China’s leader, Xi Jinping.

The third category involves indeterminate polls. We put Indonesia in this

bucket: the vote appeared clean but the circumstances around the election
suggest the country’s democratic character is strained. The outgoing
president, Joko Widodo, is attempting to exert dynastic control after bending
the constitution to make his son the running-mate of the victor, Prabowo
Subianto. There were complaints of state intimidation and other forms of
interference during the campaign. Had Mr Prabowo failed to win the first
round outright on February 14th, it would actually have been a sign of
democratic health.
The idea that democracy is under pressure around the world is hardly new.
Our sister organisation, EIU, pulls together a detailed annual democracy
index, which has slipped over the past decade. Its 2023 index was released
this week and shows autocracies becoming more entrenched (see chart).
Using a longer-term index by V-Dem, a research body, the share of countries
judged to be electoral democracies soared in the 1990s but has declined
slightly in recent years to stand at about 50%. Certain opinion polls show a
cohort globally who are sceptical about democracy, especially among the
young.

What might explain the further slippage seen so far in 2024? One possibility
is technology. A striking feature of most campaigns has been the role of
newer tech platforms: TikTok, the Chinese-controlled short-form video app,
has about a billion users world-wide and is crucial. In India, where TikTok is
banned, YouTube has been displacing Facebook as the platform of choice,
while WhatsApp’s voice-note feature allows illiterate people to receive
propaganda. Everywhere political discussion has moved onto private
messaging groups where the degree of misinformation and orchestration is
difficult to ascertain.

It is possible that these shifts favour strongmen and authoritarians, by

allowing them to communicate without scrutiny. They also have the
resources to manipulate private messaging groups by using armies of proxies
and bots to spread fake information. Not all the signals so far in 2024 point
that way, however. In both Senegal and Pakistan the authorities suspended
the internet and telecoms services before scheduled polls. This suggests that
they were actually concerned about losing control of online speech.

Meanwhile a lot of the coercion involves more prosaic tactics. In the past
authoritarians eschewed elections, or stuffed ballot boxes. Today they
maintain a charade of constitutional democracy and use “lawfare” instead,
for example through courts disqualifying opposition candidates. In
Bangladesh, Pakistan, Senegal and elsewhere rival politicians have been
disbarred by courts in the name of the rule of law. After squashing Senegal’s
election plans, Mr Sall spoke of the need for a “national dialogue” to create
“conditions for a free, transparent and inclusive election”.
Alongside technology and the rise of lawfare, a final possible explanation for
democratic slippage is a more permissive global environment for autocrats
as the post-1989 world order comes under strain. With wars raging, the
United Nations rendered ineffective by superpower splits and the West
focused on trying to restrain China, Iran and Russia, upholding democracy
has taken a back seat. In 2021 President Joe Biden held a global democracy
summit calling the defence of democracy “the defining challenge of our
times”. But America’s officials are stretched. Fresh from his fifth tour of the
Middle East in four months Antony Blinken, America’s secretary of state,
managed to call Senegal’s president on February 13th. He urged Mr Sall to
“restore Senegal’s electoral calendar” and expressed America’s “serious
concerns” over events in the country.

Another 60-odd elections are still in the offing, in countries with 3.4bn
people. Some of these will be charades, such as those in Belarus and Russia
in the coming weeks. Iran’s poll in March will hardly be democratic:
prominent reformist candidates have been banned. But the vote to select the
88-strong Assembly of Experts will be crucial because that body will
appoint the successor to Ali Khamenei, the ailing 84-year-old supreme
leader.

Nobody doubts that elections to the European Parliament in June will be free
and fair. The main concern there is that hard-right parties, which are already
in government or polling above 20% in several European countries, may
have a breakthrough success. But even in free and fair elections, incumbents
can make the path to victory easier for their chosen successors. Mexico
holds polls in June. Andrés Manuel López Obrador, the outgoing president,
is intent on helping his preferred successor, Claudia Sheinbaum, with
unaffordable pre-election handouts to voters. She is likely to win. But so far
Mexico’s constitution is holding up against the populist threat Mr López
Obrador has posed.
The bumpy road ahead

Two huge elections will be acid tests of the state of democracy. In India, the
most populous democracy of all, Narendra Modi is on track for a third term
as prime minister. He is a popular politician who oversees a fast-growing
economy. But the campaign has seen the rule of law stretched: journalists
have been hounded, Muslims harassed and opposition politicians subject to
corruption probes and arrest. After the result in May, the world may discover
how much further he plans to erode India’s democratic norms and
institutions.

The other country to watch, inevitably, is America. Although Mr Biden has

repaired some of the damage done to the country’s reputation in recent years,
it is no longer the beacon of liberty and bastion of democracy it once was.
Donald Trump’s attacks on the rule of law and the judiciary come as a
multitude of cases against him are litigated. If he wins in November,
questions will grow concerning the ability of America’s institutions to
withstand a second term under him. And if Mr Trump is prepared to mount
sustained campaigns against democratic checks and balances at home, he
would almost certainly abandon criticism of autocrats abroad. Whether or
not he triumphs, democracy’s defenders face a tough task ahead. This year is
critical for democracy, and so far developments are concerning. That means
that next year could be an even greater ordeal. ■

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Business
China is quietly reducing its reliance on foreign chip
technology
Chipping in :: Firms such as Huawei are cultivating local suppliers

Japan’s semiconductor toolmakers are booming

Tokyo Electrified :: How long will it last?

Would-be suitors are wooing Paramount

Paramount’s paramours :: The drama highlights the parlous state of the entertainment industry

Why Costco is so loved

The super store :: Keeping customers, employees and investors happy is no mean feat

How to benefit from the conversations you have at work

Bartleby :: Stop thinking about your next point and listen to the one being made

How worried should Amazon be about Shein and Temu?

Boxing match :: Dirt-cheap products and marketing splurges are catching clicks

The row over US Steel shows the new meaning of national

security
Schumpeter :: Should a Japanese buyer really be blocked from acquiring the American firm?

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Chipping in

China is quietly reducing its reliance on foreign

chip technology
Firms such as Huawei are cultivating local suppliers

Feb 13th 2024 | Shanghai

FROM CONSUMER gadgets to cars, China has shown a knack for

producing cutting-edge technology. Yet the semiconductors that power the
digital economy have proved trickier to master. That has been the source of
much anxiety among its political and business elites in recent years.
America’s decision in 2022 to halt exports to the country of its whizziest
chips and chipmaking tools brought into stark relief the chokehold of
China’s geopolitical rivals over the industry. In December last year China’s
imports of the lithography machines used to imprint circuits onto silicon
wafers surged by 450%, year on year, as local chipmakers raced to buy
advanced kit from ASML, the Dutch market leader, before export
restrictions by the Netherlands came into effect in January. It has also been
hoovering up semiconductor equipment from Japan (see next article).

Although the Chinese government has been splashing subsidies on its

domestic chip industry for many years, mounting concern over the trade
restrictions being imposed by America and its allies have led it to double
down on the effort. In 2022 China’s government ramped up a national drive
often referred to as the “Information Innovation” project, or xinchuang, that
aims to replace foreign suppliers of, among other things, semiconductor
technology. What’s more, whereas the state once pushed reluctant
chipmakers to co-operate with local suppliers, their investors and boards
now demand it as a form of insurance against trade wars. As a result, China’s
semiconductor supply chain is steadily deepening. But can it ever match that
of its rivals?

China’s chip industry operates under a shroud of secrecy. Breakthroughs and

setbacks are often deemed to be state secrets, the divulgence of which can
result in arrest. In August Huawei, a Chinese tech champion, shocked the
world by producing a smartphone that contained a seven-nanometre (nm)
chip, making it capable of 5G internet speeds. The company is now
rumoured to be on the cusp of creating chips as small as 5nm, in partnership
with SMIC, China’s largest foundry. Huawei’s Ascend chips, which the firm
has designed for AI applications, are reportedly now being used by the likes
of Baidu, a local search-engine giant and creator of Ernie, China’s answer to
ChatGPT. Like Nvidia, America’s AI-chip champion, Huawei has developed
a proprietary software platform, called CANN, that helps developers use its
chips to build AI models.

All that still places China’s chip industry far from the technological frontier.
Even if Huawei and SMIC eventually succeed at producing 5nm chips, they
will remain well behind Samsung, a South Korean tech giant, and TSMC, a
Taiwanese foundry, both of which began mass-producing 3nm chips as far
back as 2022. China’s lack of advanced lithography equipment will be a big
barrier to further progress. In December a top shareholder in SMEE, China’s
main hope in lithography, said on social media that the company’s machines
had succeeded at producing 28nm chips—though it then quickly deleted the
details, causing plenty of confusion. If true, that would still leave the
company trailing ASML, whose top-of-the-line machines can produce 3nm
chips.

Look away from the bleeding edge, however, and China is steadily chipping
away at its reliance on foreign semiconductor technology. Huawei, which
was burned in 2019 by sanctions that cut off its access to American
technology, has been cultivating China’s wider chipmaking ecosystem. It is
reportedly co-operating closely with a number of chip foundries, either by
co-investing in projects or exchanging staff. In March last year it declared it
had made a number of breakthroughs in the development of electronic-
design-automation (EDA) software, used to generate blueprints for chips,
which it said would free China’s industry from the need to rely on foreign
suppliers of those tools when producing semiconductors of 14nm or more.
Though unconfirmed, its collaborator on this is widely believed to be
Empyrean, a Chinese maker of EDA tools whose sales have rocketed in
recent years.

Such collaborations are happening more often. China’s foundries historically

relied on importing tried and tested machinery from abroad. Now some of
the largest, including SMIC, have become more open to trialling local
alternatives. That gives the suppliers a chance to receive feedback and
improve their designs. Although this comes with costs—and risks—for the
chipmakers, China’s government is thought to be easing the way by
providing subsidies to those of them that purchase local equipment.
The upshot has been a big boost to Chinese manufacturers of chipmaking
equipment. The domestic market share of Chinese producers of wafer-
fabrication tools has risen from 4% in 2019 to an estimated 14% last year,
according to Bernstein, a broker (see chart). AMEC, a Chinese firm whose
machines are used to strip away residual material from a chip, controlled
10% of the Chinese market in 2021. Since then the company has been
rapidly gaining share from foreign rivals such as America’s Lam Research
(where its founder, Gerald Yin, used to work). Bernstein reckons AMEC’s
market share reached 16% last year and will rise to around 30% by 2025.
Naura, a peer of AMEC, estimates its sales grew by 50% last year. Wazam, a
Chinese supplier of the film used to insulate semiconductors, is beginning to
make inroads, too, with a trial under way at a local chipmaker.

Plenty more support will be needed before China can rely entirely on local
suppliers for the many stages of chip production. It has already pumped
some $150bn of subsidies into its chip industry over the past decade,
according to an estimate by America’s Department of Commerce. The
government, through its investments, is now present throughout the
country’s semiconductor supply chain. SMIC is partially state-owned, as is
AMEC. Empyrean is majority-owned by a state enterprise. The government
of Shenzhen, the southern city where Huawei is based, holds stakes in many
of the chipmakers the company is working with. None of this is as efficient
as relying on global supply chains. But China’s officials have security rather
than efficiency in mind. And they have decided that the price is worth
paying. ■

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Tokyo Electrified

Japan’s semiconductor toolmakers are booming

How long will it last?

Feb 15th 2024 |

CORPORATE JAPAN, long snubbed by investors, has been the source of

much attention lately. That is especially so for the country’s manufacturers
of chipmaking tools. On February 13th Tokyo Electron’s share price jumped
by 13% after it reported higher profits than expected for the final quarter of
last year, pushing its market value above $100bn, roughly ten times what it
was worth a decade ago. It is now Japan’s fourth-most-valuable company,
trouncing better-known peers such as Mitsubishi, Nintendo and SoftBank
Group.
Tokyo Electron is the largest among a crowd of Japanese purveyors of
chipmaking tools for which business has been booming. The combined
market capitalisation of the five most valuable—Tokyo Electron, Advantest,
DISCO, Lasertec and SCREEN Holdings—has doubled, in dollar terms,
over the past year (see chart). These companies, which suffered from a post-
pandemic slump in sales of electronics that caused chipmakers to slash
investments, are now on the up. The Semiconductor Equipment Association
of Japan, an industry body, expects a 27% increase in sales of machinery this
year and a further 10% rise in 2025, more than reversing the fall of 19% in
2023.

The latest rally is about more than the ups and downs of a notoriously
cyclical industry. Demand for increasingly complex chips capable of
handling artificial-intelligence functions means demand for more equipment
to make them. One estimate from McKinsey, a consultancy, puts the cost to
build and equip a factory that produces five-nanometre (nm) chips at around
six times the cost of one that produces 28nm chips, which were cutting-edge
a decade ago.

Japanese toolmakers have long played dominant roles in niche areas of the
semiconductor supply chain. Tokyo Electron controls roughly 90% of the
market for tools which apply photoresist coating—a light-sensitive chemical
applied to a semiconductor wafer in the manufacturing process. DISCO
holds a similarly dominant share of the precise cutting and grinding tools
needed for chipmaking.

The revenues of these firms have thus far not been crimped by new export
controls introduced by America on the sale of certain types of advanced
chipmaking machinery to China. In fact, as China has raced to develop its
own chipmaking capacity, sales of equipment to its neighbour to the east
have surged. Almost half of Tokyo Electron’s sales in the final quarter of last
year came from China.

Yet that also points to risks ahead. If relations between Beijing and
Washington worsen, the Japanese government could be prodded into
implementing broader restrictions on the sale of its chipmaking tools to
China. Meanwhile, China is expanding its effort not only to make its own
chips, but also the machinery that produces them, which could squeeze out
Japanese firms (see previous article). For Tokyo Electron and its peers, the
deteriorating relationship between America and China is a boon for business
today. In the future, though, it may become a strain. ■

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Paramount’s paramours

Would-be suitors are wooing Paramount

The drama highlights the parlous state of the entertainment industry

Feb 15th 2024 |

FROM “GREASE” to “Breakfast at Tiffany’s”, Paramount Pictures has

produced plenty of good romances during its 112-year history. Now the
Hollywood studio is itself the subject of a courtship drama involving
streaming rivals, private-equity buccaneers, a billionaire’s son and the owner
of the Weather Channel. The wooing of Paramount Global, the studio’s
parent company, has begun because Shari Redstone, president of National
Amusements, which has a controlling stake in the firm, appears ready to sell.
The battle to buy Paramount from the Redstones marks the fading of a
Hollywood dynasty—and shows the sorry state of the entertainment
industry.
Paramount, the last big studio still based in Hollywood, has seen lots of
action in recent years. Ms Redstone had to wrestle control of the firm from
the former girlfriends of her father, Sumner, who died in 2020 after building
an empire from a chain of cinemas he had inherited from his own father.
Paramount Global today comprises the film studio, the Paramount+
streaming service and old-school “linear” TV networks from CBS to MTV.

It is in trouble. Linear TV, which makes up nearly 80% of Paramount’s

revenue, is sinking as cable subscribers cancel their contracts. Streaming is
supposed to provide the company with a lifeboat. Paramount+ has more than
60m subscribers and plenty of hits, including a series of “Yellowstone” spin-
offs. But it lost $1.2bn in the first nine months of 2023 and appears to be
years away from breaking even. Paramount’s market value has fallen by half
in the past two years, to under $9bn.

In recent weeks Ms Redstone has been mulling various proposals. David

Zaslav, head of Warner Bros Discovery (WBD), went to Paramount just
before Christmas to sound out a possible takeover. In January Apollo, a
private-equity firm, was reported to be circling. David Ellison, head of
Skydance, a production company, made an offer later that month. Then
Byron Allen, who owns the Weather Channel and other media assets, said he
too had made a bid.

Mr Ellison’s deal is said to have progressed farthest. His partners include

KKR and RedBird Capital, a pair of private-equity firms; his father, Larry,
who co-founded Oracle, also has a fortune of $130bn handy. The main
attraction for Skydance seems to be Paramount’s film studio. The linear-
television assets, meanwhile, might be sold on—perhaps to Mr Byron, who
says he is more interested in the waning TV networks, which at least still
make money, than the studio or streamer.

The possible carve-up points to wider disruption in Hollywood. All of the

“legacy” studios—that is, ones that began in the era of celluloid rather than
streaming—share at least some of Paramount’s problems. As linear TV
declines, they have spent a fortune on trying to make streaming work,
collectively losing $25bn on the enterprise between 2020 and 2023,
according to Bernstein, a broker. WBD’s streaming business broke even last
year, after ruthless cost-cutting. Disney says it will get there this year. But
for smaller streamers like Paramount+, NBCUniversal’s Peacock and Fox’s
Tubi, there is “no clear sight of profitability”, Bernstein believes. Even those
no longer losing money are nowhere close to the profit margins of the linear
era.

The best hope of competing with the bigger streamers, like Netflix, may be
to partner up. There are already signs that is happening. On February 6th
Disney, Fox and WBD unveiled a plan to bring their most valuable sports
content together onto a new streaming platform. Bigger tie-ups may still be
to come.

Yet by pooling their resources the media giants would also be pooling their
problems. A marriage between WBD and NBCUniversal, perhaps the most
likely new combination, would result in a company that made nearly half its
revenue and nearly two-thirds of its profit from linear TV, points out
MoffettNathanson, a firm of analysts. “The situation in US media has
increasingly progressed from challenged to desperate,” MoffettNathanson
argues. Time for Ms Redstone to make a match. ■

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The super store

Why Costco is so loved

Keeping customers, employees and investors happy is no mean feat

Feb 15th 2024 |

IN THE NEARLY 40 years that The Economist has served up its Big Mac
index, the price of the McDonald’s burger in America has more than tripled.
In that same period the cost of another meaty treat—a hot-dog-and-drink
combo at Costco—has remained steady at $1.50. Last year customers of the
American big-box retailer devoured 200m of them. Richard Galanti,
Costco’s longtime finance boss, once promised to keep the price frozen “for
ever”.

Customers are not the only fans of Costco, as the outpouring of affection
from Wall Street analysts after Mr Galanti announced his retirement on
February 6th made clear. The firm’s share price is 430 times what it was
when he took the job nearly four decades ago, compared with 25 times for
the S&P 500 index of large companies. It has continued to outperform the
market in recent years. What lies behind its enduring success?

Costco is the world’s third-biggest retailer, behind Walmart and Amazon.

Though its sales are less than half of Walmart’s, its return on capital, at
nearly 20%, is more than twice as high. Charlie Munger, a famed investor
who served on Costco’s board from 1997 until his death last year, called it a
“perfect damn company”. Mr Galanti, who describes Costco’s business
model as “arrogantly simple”, says the company is guided by a simple idea
—hook shoppers by offering high-quality products at the lowest prices. It
does this by keeping markups low while charging a fixed membership fee
and stocking fewer distinct products, all while treating its employees
generously.

Start with margins. Most retailers boost profits by marking up prices. Not
Costco. Its gross margins hover around 12%, compared with Walmart’s 24%.
The company makes up the shortfall through its membership fees: customers
pay $60 or more a year to shop at its stores. In 2023 fees from its 129m
members netted $4.6bn, more than half of Costco’s operating profits.

Joe Feldman, an analyst at Telsey Advisory Group, a research firm, argues

that the membership model creates a virtuous circle. The more members the
company has, the greater its buying power, leading to better deals with
suppliers, most of which are then passed on to its members. The fee also
encourages customers to focus their spending at Costco, rather than
shopping around. That seems to work; membership-renewal rates are
upwards of 90%.

Next, consider the way the company manages its product lineup. Costco
stores stock a limited selection of about 3,800 distinct items. Sam’s Club,
Walmart’s Costco-like competitor, carries about 7,000. A Walmart superstore
has around 120,000. Buying more from fewer suppliers gives the company
even greater bargaining heft, lowering prices further. By limiting its range,
Costco can better focus on maintaining quality. Less variety in stores helps it
use space more efficiently: its sales per square foot are three times that of
Walmart. And with fewer products, Costco turns over its wares almost twice
as fast as usual for retailers, meaning less capital gets tied up in inventory. It
has also expanded its own brand, Kirkland Signature, which now accounts
for over a quarter of its sales, well above average for a retailer. Its margins
on its own-brand products are about six percentage points higher than for
brands such as Hershey or Kellogg’s.

Last, Costco stands out among retailers for how it treats its employees. Some
60% of retail employees leave their jobs each year. Staff turnover at Costco
is just 8%; over a third of workers have been there for more than ten years.
One reason for low attrition is pay. Its wages are higher than the industry
average and it offers generous medical and retirement benefits. Another is
career prospects. The company prefers to promote leaders from within.
Although Mr Galanti’s successor has come from outside, the rest of Costco’s
executive team has been with the company for more than 20 years. The late
Mr Munger was confident that Costco had “a marvellous future”. Its
customers could be enjoying $1.50 hot dogs for many years to come. ■

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Bartleby

How to benefit from the conversations you have at

work
Stop thinking about your next point and listen to the one being made

Feb 15th 2024 |

SUCCESSFUL WORKPLACES are usually characterised by good

communication. Bosses provide a clear sense of where they want the firm to
go; employees feel able to voice disagreements; colleagues share
information rather than hoarding it. But being a good communicator is too
often conflated with one particular skill: speaking persuasively.

In a paper published in 2015, Kyle Brink of Western Michigan University

and Robert Costigan of St John Fisher College found that 76% of
undergraduate business degrees in America had a learning goal for
presentation skills, but only 11% had a goal related to listening. Business
students were being schooled to give TED talks rather than have
conversations. That may have costs. Another study, conducted by Dotan
Castro of the Hebrew University of Jerusalem and his co-authors, found that
when people felt listened to by those in supervisory roles their creativity and
sense of psychological safety improved.

A focus on talking is understandable. The set-piece moments of careers, like

job interviews and big presentations, are about transmitting information. The
boss gets to be at the podium, the minions get to be in the audience. Videos
of someone giving a speech are much more shareable than someone silently
nodding. But interest in what makes everyday communication tick has also
risen, as the importance of teams grows and as conceptions of leadership
increasingly emphasise softer skills.

Recent research by Beau Sievers of Stanford University and his co-authors

asked groups of MBA students to discuss the meaning of ambiguous film
clips. The presence of people perceived to be of high status seemed to
impede consensus: these folk spoke more and were readier to reject the
explanations of others. Groups that reached consensus were more likely to
have a different character in them: people who were well-connected but not
dominant, who asked lots of questions and who encouraged interaction.
They made everything align—even the neural activity of their groups.

Mr Sievers’s research features in “Supercommunicators”, a new book by

Charles Duhigg, a journalist at the New Yorker. Mr Duhigg looks at how
some people forge stronger connections with others and at the techniques for
having better conversations. His canvas ranges more widely than the
workplace but some of its lessons are applicable there.

One chapter tells the story of the Fast Friends Procedure, a set of 36
increasingly intimate questions that are particularly effective at turning
strangers into friends. The questions were first put together in the 1990s by
Elaine and Arthur Aron, two psychologists at the State University of New
York at Stony Brook. Their survey was designed for the lab, not the
workplace. You should not suddenly start asking new colleagues what their
most terrible memory is or how they feel about their mother. But if it is
important to build team connections fast, then—Britain, look away now—
reciprocal moments of vulnerability do seem to help.
Another chapter looks at ways to bring together people with diametrically
opposed views, in this case Americans on either side of the debate over gun
control. The difficulty here was in persuading people that they were
genuinely being listened to, not dismissed as gun-toting loons or lily-livered
liberals. Mr Duhigg describes an approach called “looping for
understanding”, in which people ask questions and then repeatedly distil
their understanding of what they have heard back to their interlocutor.

Polarised beliefs of this sort are rare inside firms. But looping techniques
still have their place: when there are long-running conflicts between
individual employees, say, or in negotiations and mediation processes.

Mr Duhigg’s advice can seem obvious at times. And his examples do not
always translate to the workplace. Sometimes it is more important to make a
decision than to excavate everyone’s point of view. Reaching consensus is
vital on a jury but less necessary in a corporate hierarchy. There really is a
limit to how much vulnerability you want from a leader.

But his book is a useful reminder that demonstrable curiosity about other
people’s experiences and ideas can benefit everyone. Asking questions, not
cutting people off, pausing to digest what someone has said rather than
pouncing on breaks in a discussion to make your own point: these are not
enough to qualify someone as a supercommunicator. But in plenty of
organisations they would still represent good progress. ■

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

Fairness: the hidden currency of the workplace (Feb 8th)
Jürgen Klopp and the importance of energy (Jan 29th)
Why you should never retire (Jan 25th)

Also: How the Bartleby column got its name

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Boxing match

How worried should Amazon be about Shein and

Temu?
Dirt-cheap products and marketing splurges are catching clicks

Feb 15th 2024 | SAN FRANCISCO

“SHOP LIKE a billionaire.” With that enticing slogan Temu touted itself to
Americans watching the Super Bowl on February 11th. Football fans had
been treated to a similar advert from the e-commerce company at last year’s
event. But this time the message was hammered home. In all, Temu’s ad
played five times. That won’t have been cheap. A 30-second slot during this
year’s Super Bowl cost around $7m. JPMorgan Chase, a bank, reckons the
company will spend $3bn on marketing this year, up from $1.7bn in 2023.

Temu, based in Boston, is an offshoot of Pinduoduo, a Chinese e-commerce

firm. It is attempting to replicate the success of Shein, a Chinese fast-fashion
seller, which shot to success in America in 2021 helped by clever marketing
and ultra-low prices. In their bid to win over American shoppers the duo are
spending so lavishly on digital ads that their footprints show up in big tech
companies’ earnings. On February 1st Susan Li, the chief financial officer of
Meta, a social-media giant, said that Chinese advertisers contributed 10% of
her firm’s revenue last year and five percentage points to its worldwide
revenue growth. In November Josh Silverman, the boss of Etsy, an online
marketplace for artisan knick-knacks, blamed Temu and Shein for pushing
up the price of digital advertising.

All that spending has bought some brand recognition. Last year Temu was
the most downloaded app in America, Britain, France and Germany,
according to Business of Apps, a research firm. Shein is already a shopping
sensation among American teenagers. But can the firms win over American
shoppers en masse?

Although Temu stocks a broader range of items, from children’s toys to

industrial tools, than Shein, which mostly sells clothing, they have similar
business models. For both, the main advantage is price. Michael Morton of
MoffettNathanson, a research firm, estimates that the same items of
women’s clothing on Temu are two to four times dearer on American
websites. Temu offers electric toothbrushes, sunglasses and backpacks for
about $1 each.

The pair keep costs low in many ways. One is to cut out middlemen and deal
directly with Chinese factories. Another is to charge merchants lower fees
than American rivals do. They also eschew enormous logistics operations in
America like Amazon’s. Instead they ship products from warehouses in
China and have them delivered to shoppers in America by UPS, FedEx or
the post. Customers thus get low prices, but not speedy delivery. Packages
can take weeks to arrive.

For now, Temu is focused on market share rather than profit. Bernstein, a
broker, reckons that it loses around $10 per item sold in America. It may be
able to keep this up for a while, bankrolled by Pinduoduo’s domestic
success. Last year the parent firm generated $12bn in cash from operations.
Shein, by contrast, is looking to raise more funds. In November it filed for
an initial public offering in America. If the listing happens, it will be huge: at
its most recent funding round in May 2022 the company was valued at
$66bn.

So far the pair have made only small inroads into America’s e-commerce
market. Temu and Shein both have shares of about 1%, according to
Bernstein. Amazon has 38%. Even so, the local giant is taking them
seriously. In December Amazon said it would cut merchants’ fees for
clothing priced under $15, probably in response to the twin threat. In
September it rolled out an end-to-end supply-chain service in which it picks
up goods from merchants’ factories and ships them to customers, mirroring
what its Chinese rivals do.

But Amazon is unlikely to be hurt first, or most. Clothing and accessories

account for only 16% of its sales, according to eMarketer, a research firm, so
Shein is probably a bigger threat to fast-fashion labels such as Forever 21.
And for Temu, the absence of a local logistics network will make it difficult
to compete with Amazon when it comes to goods customers want quickly,
such as dishwasher tablets. It is probably a bigger threat to eBay or Etsy.

That may eventually change. Both firms have bought warehouse space in
America and struck partnerships with local logistics firms. Shein is
reportedly poaching supply-chain specialists from Amazon. Temu may also
start to sell dearer goods, such as smartphones, a shift its parent pulled off in
China. That would put it into more direct competition with Amazon and the
similarly mighty Walmart.
Cheap shots

Plenty could still go wrong for the two. Each must compete both with
American incumbents and with each other. TikTok Shop, a marketplace run
by the social-media firm that launched in America in September last year,
may also get in their way. Geopolitics may hurt them, too. A committee of
American senators is probing their alleged links to forced labour. (Both firms
deny any such connections.) Analysis by Morgan Stanley, another bank,
suggests that Americans’ willingness to shop at Temu may already be
waning, perhaps as the novelty has worn off.

That said, Mark Shmulik of Bernstein argues that increasing market share
from zero to 1% is more difficult for new e-commerce firms than raising it
from 1% to 5%. Getting consumers to first take notice is tricky. Once a
brand is familiar, it is easier to sell customers more things—and more
expensive ones, too. Temu and Shein may have already done the hardest part
of making it in America. ■

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Schumpeter

The row over US Steel shows the new meaning of

national security
Should a Japanese buyer really be blocked from acquiring the American
firm?

Feb 15th 2024 |

LAST SUMMER US Steel was considering taking the capitalists’ way out—
by selling itself. American steelmaking has suffered decades of decline,
ostensibly as a result of foreign competition. At home traditional integrated
producers like US Steel have been overtaken by “mini-mills” powered by
electricity and non-union workers. In August Cleveland-Cliffs, a rustbelt
rival, announced that it had made an offer to buy US Steel and had been
rebuffed. Dozens of suitors emerged. In December Cleveland-Cliffs made a
final bid of $54 per share, to be paid in cash and stock.
It was bested by, of all things, foreign competition. On December 18th US
Steel said it had agreed to be bought by Nippon Steel, Japan’s biggest
steelmaker, for $15bn (or $55 per share) in cash. The offers from Cleveland-
Cliffs and Nippon promised shareholders almost identical financial value,
but came with very different risks. Combining with Cleveland-Cliffs would
attract antitrust scrutiny; a fleet of carmakers complained that the merged
company would dominate the automotive steel market. Selling to Nippon
would rile politicians and require the blessing of the Committee on Foreign
Investment in the United States (CFIUS), America’s increasingly strident
inbound-investment watchdog. US Steel’s lawyers were sanguine about the
risks of selling a corporate icon to a Japanese firm. Nippon won.

The ensuing pile-on has been a case study in America’s protectionist creep.
Lael Brainard, one of President Joe Biden’s economic advisers, said the deal
merited “serious scrutiny” from CFIUS. The union representing steelworkers
called it “greedy”. Lourenco Goncalves, the boss of Cleveland-Cliffs,
chastised US Steel’s board for ignoring national security. He told investors
that US Steel had been “hell-bent” on selling to a foreign firm. “I would
block it instantaneously,” said Donald Trump, the runaway favourite to be
the Republican nominee for the presidential election.

Despite the furore, US Steel expects to complete the deal during the second
or third quarter of this year. Investors are less confident—shares in the
company change hands at $46 apiece, nearly a fifth below Nippon’s offer
price. Once the deal lands on CFIUS’s desk, the body has 90 days to
investigate; if the president wishes to block the takeover, he then has 15 days
to say so. (In practice, the process can be extended if a firm withdraws its
formal notice to CFIUS and then resubmits it.)

Nippon’s bosses face an emboldened committee whose brief has expanded

along with American politicians’ definition of national security. In
September 2022 Mr Biden directed CFIUS to focus its attention on the
security of supply chains and technological leadership. Such changes have
made CFIUS busier and tougher. In 2022 it reviewed a record number of
notices despite foreign direct investment in America falling by half.
Transactions that were approved increasingly came with strings attached.
Yet the handwringing over Nippon’s acquisition of US Steel is misguided.
The national-security risks posed by a deal can be seen as a combination of
the intentions of the buyer and importance of the seller. A Chinese company
shopping for American firms producing cutting-edge technology that could
help its country’s armed forces should, and does, set off warning sirens.
Nippon’s acquisition should not.

Look, first, at the buyer. Competition with Japan during the 1980s
empowered CFIUS by codifying the presidential power to block deals.
Today, though, Japan is a crucial ally in America’s higher-stakes competition
with China. That has not eased the scrutiny of would-be Japanese buyers:
between 2020 and 2022 only Chinese firms filed more notices with CFIUS.
Some of America’s politicians see the folly in that. In December a bipartisan
committee of lawmakers tasked with examining US-China relations
published a shopping list of nearly 150 policy recommendations, among
them to add Japan to the “whitelist” of countries whose firms are exempted
from some onerous CFIUS rules.

Consider also the seller. The importance of America’s third-largest producer

of steel to national security has probably been overstated. Tariffs on steel
imports, such as those imposed by Mr Trump in 2018, have been justified on
the grounds of maintaining domestic capacity should a war break out. But
Nippon could be compelled to keep US Steel’s operations running as part of
a deal. And in the case of a war US Steel’s operations could be requisitioned
from a disobliging foreign owner.

So what really lies behind politicians’ opposition to the deal? A closer look
reveals that their main motivation is preserving jobs. And whereas workers’
rights are probably not yet at issue in the White House situation room, the
notion of “foreign policy for the middle class” is stretching the definition of
national security beyond recognition. One group of rustbelt lawmakers wrote
to Janet Yellen, America’s treasury secretary, to argue that CFIUS should
consider the effects of the deal on stakeholders including workers in its
assessment. Four signatories to a letter demanding similarly broad scrutiny
were members of the same committee that less than a month earlier had
advocated adding Japan to CFIUS’s whitelist. Mr Trump’s comments were
made at a meeting with the boss of a union. Given the industry has seen its
workforce decline by more than a third since the turn of the century, largely
under domestic ownership, even this anxiety looks misplaced.
Two roads diverged

It is only natural that bosses at US Steel ponder the deal not taken. Although
America’s trustbusters have been unpredictable under the stewardship of
Lina Khan, a number of her crusades have struggled in court, and anti-
competitive behaviour is still an issue that can be argued with numbers. The
decisions of CFIUS, by contrast, are almost entirely beyond the reach of
judges. And arguments around national security are increasingly swallowing
the light around them. ■

Read more from Schumpeter, our columnist on global business:

Musk v Zuckerberg: who’s winning? (Feb 6th)
How much should TikTok fear a resurgent Donald Trump? (Feb 1st)
Can MSCI drag private markets out of the shadows? (Jan 25th)

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

schumpeter@economist.com. And here is an explanation of how the
Schumpeter column got its name.

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Finance & economics

How San Francisco staged a surprising comeback
Artificial intelligence :: Forget the controversy. America’s tech capital is building the future

Investing in commodities has become nightmarishly

difficult
Buttonwood :: What happened to that “supercycle”?

How the world economy learned to love chaos

Putting out fires :: War, high interest rates and financial strife are yet to bring down growth

The Ukraine war offers energy arbitrage opportunities

Conflict trading :: It also provides a glimpse at the future of European gas supplies

Is working from home about to spark a financial crisis?

American banks :: That is the worry. But it is overblown

In defence of a financial instrument that fails to do its job

Free exchange :: Inflation-linked bonds are a poor inflation hedge, but that’s not the point

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Artificial intelligence

How San Francisco staged a surprising comeback

Forget the controversy. America’s tech capital is building the future

Feb 12th 2024 | San Francisco

WHENEVER A GLOBAL economic transformation takes place, a single

city usually drives it forward. Ghent, in modern-day Belgium, was at the
core of the burgeoning global wool trade in the 13th century. The first initial
public offering took place in Amsterdam in 1602. London was the financial
centre of the first wave of globalisation during the 19th century. And today
that city is San Francisco.

California’s commercial capital has no serious rival in generative artificial

intelligence (AI), a breakthrough technology that has caused a bull market in
American stocks, and which many hope will power a global productivity
surge. Almost all big AI startups have their headquarters in the Bay Area,
which includes San Francisco and Silicon Valley (largely based in Santa
Clara County, to the south). OpenAI is there, of course; so are Anthropic,
Databricks and Scale AI. Tech giants, including Meta and Microsoft, are also
spending heavily on AI in the city. According to Brookings Metro, a think-
tank, last year San Francisco accounted for close to a tenth of generative-AI
job postings in America, more than anywhere else. New York, with four
times as many residents, was second.

This has changed the mood of San Francisco. When you live in the city, you
can feel AI in the air. Drive to the airport and every second billboard tells
you the various ways in which your business can improve by adopting AI.
Go to a party and every second guest says that they are working on the tech
or in an industry being transformed by it. Barely a day goes by without some
nerdy event to satisfy your curiosity about the world’s liveliest intellectual
field, from talks about the philosophy of artificial general intelligence to
MLHops, a meet-up for AI folk who like beer.

How is this happening somewhere supposedly falling apart? Even before the
covid-19 pandemic there was a sense that the best days of San Francisco and
the wider Bay Area had passed. In the late 2010s worries about crime and
rising taxes saw other cities, including Austin, Los Angeles and Miami,
hyped as the “next Silicon Valley”. According to data compiled by
PitchBook, a financial database, at the start of 2014 firms in the Bay Area
attracted four times more venture funding than New York, the next-biggest
metro area. By the end of 2020 they attracted only 2.5 times as much.

Covid made the situation considerably worse. San Francisco locked down
early, hard and for a long time, crushing employment in service industries.
The city’s tech elite realised that they could work from home, emptying
downtown. After the murder of George Floyd in 2020, many in city
government turned against the police. Officers felt the city no longer had
their back. From 2019 to 2022 their numbers fell by 14%. In 2021 Elon
Musk left for Texas, the richest of the many thousands who vacated San
Francisco that year.

Action in startup-land moved elsewhere, too. The hottest companies were

foreign, such as Ant Group, a Chinese fintech firm, at least until it was
forced to abandon plans to go public, and Grab, a Singapore-based ride-
hailer, which listed at a valuation of $50bn. Venture dealmaking in San
Francisco inflated along with a wider market bubble. But when interest rates
rose in 2022, the industry shut down. Valuations of venture-backed firms
halved from the end of 2021 to the end of 2022.

Across the world “San Francisco” is now shorthand for a failed city. Drug
overdoses and homelessness have soared; the city’s population fell by 8%
from April 2020 to July 2022. Just 52% of Americans polled by Gallup last
year viewed San Francisco as a safe place to live, down by 18 percentage
points from 2006. Conservatives, in particular, see the city as an example of
what happens when you let social-justice warriors run amok. Today, if you
so choose, you can drive through red lights at high speed with impunity—
police have almost completely stopped issuing traffic citations as they
prioritise other crimes. More than 30% of offices are vacant. Market Street,
the city’s main drag, has an astonishing number of empty shops.

There are now signs that the local quality of life is starting to improve:
overdoses have begun to fall; in the final months of 2023 car break-ins
halved. Yet the start of the AI boom predated these changes. Despite
headlines about an exodus of the rich, San Francisco’s tech elites mostly
weathered the storm—its population decline was, in fact, mostly driven by
the exit of poorer folk. As a result, inhabitants are now better paid and more
educated than before covid. According to official data, San Franciscans’
average personal income per year is more than twice the American average.
Even as poor residents have left, income inequality has soared.
Many of the people with the skills to ride the AI wave were already in San
Francisco or nearby. Most of today’s tech giants were founded in the
suburban neighbourhoods that make up the Valley. Today they, and other big
tech firms, have huge campuses 20 or 30 miles south of San Francisco, but
their young employees rent cupboard-sized flats in the city. Much of the
funding for the AI boom is coming from these tech behemoths. In 2022 and
2023 firms such as Meta completed more Bay Area-based venture-capital
investments than ever before, largely focused on AI.
Owing to a mixture of government support and creative counterculture,
Stanford University and the University of California, Berkeley have long
been centres of AI excellence. In 2017 eight people published a paper,
“Attention is all you need”, while working in the Bay Area at Google. It has
become known even outside AI circles as the groundbreaking contribution to
the current wave of technological progress. By 2021 San Francisco and
nearby San Jose accounted for a quarter of all conference papers on the
topic, according to the analysis by Brookings Metro.

Academic excellence has fed private-sector innovation, with many

researchers moving between the two spheres. Nine were hired to build
OpenAI. At first, they laboured in the apartment of Greg Brockman, one of
its co-founders, in the Mission District. Data from LinkedIn, a job-search
platform, suggest that one in five of OpenAI’s engineering staff in America
attended Berkeley or Stanford. Now San Francisco’s AI concentration has
reached a critical mass, with success begetting further success. London and
Paris may be AI rivals, but they are a long way behind.
Thus investors are again spending big in the Bay Area. Venture funding to
San Francisco-based startups halved between 2021 and 2022, but recovered
to two-thirds of its peak in 2023. By contrast, in Miami just a quarter as
much funding went to startups in 2023 as in 2021. Finance types who once
worked in Silicon Valley are moving into the city to be closer to the action.
Y Combinator, which helps startups get off the ground, recently set up shop.
Venture-capital firms from General Catalyst to Pear VC have opened new
offices.
In desirable neighbourhoods competition for rental properties is fierce, as the
city’s population once again grows. The arrival of lots of well-paid tech
types has boosted house prices. Although they fell by more than 12% from
their pandemic highs, they have risen since the start of 2023. The city has
fewer restaurants than in 2019, but about the same number with two or three
Michelin stars. North of the city, in wine country, there is no shortage of
new, expensive hotels at which venture capitalists and founders can relax.

Some elites see San Francisco’s AI success as a precursor to a broader

transformation of the city. Locals are fed up with having to call 911 because
someone is overdosing in front of their children. In 2022 they ousted Chesa
Boudin, a progressive district attorney, and three members of the school
board who were more concerned with renaming schools than reopening
them. On March 5th they will vote on measures championed by moderate
Democrats, including one that will try to get homeless people suffering from
mental illness off the streets. In November they will choose a raft of local
officials and perhaps whether to give the mayor more power.

London Breed, the current office-holder, sounds genuine when she talks of
the need to improve public safety and cut red tape: “Rather than being a city
that says ‘no’ all the time,” she explains, we need “to get to ‘yes’ by getting
rid of bureaucracy.” She is being pushed by political groups that have
formed as tech types take a keener interest in local politics, including
GrowSF and TogetherSF, the latter co-founded by Michael Moritz, a famed
venture capitalist.
Defending the indefensible

These efforts face stern resistance. Aaron Peskin, president of the Board of
Supervisors, the city council, is the de facto leader of San Francisco’s
progressives. He argues that Mr Moritz and his fellow campaigners are
“amateurs” who are dressing up their own elite interests in the language of
reform. “I generally think that people believe their own bullshit,” he says.
(Unsurprisingly Mr Moritz disagrees: “It’d be easy for us to pick up roots
and…go to a low-tax state or go to Europe.”) Even today plenty of the city
government’s time is wasted on pointless projects such as deciding whether
or not to call for a ceasefire in Gaza. The local NIMBY movement is
extremely powerful. And cartoonish corruption remains a problem: in 2022
the former director of public works was sentenced to seven years in prison
for taking huge bribes.

Yet it may not matter much to the AI boom if San Francisco remains chaotic.
If you want good public schools, public transport or public safety, San
Francisco is not for you. If you do not need these things, or you can buy your
way around them, then the city remains a great place in which to innovate.
Covid tested the “network effects” that people in Silicon Valley believed
were crucial to its success. It turned out they were as powerful as ever. That
founders, firms, money and workers are returning to San Francisco suggests
that remote work has not killed their importance. The city is still the place to
be if you want to meet a co-founder by chance at a party.

Can the AI-driven excitement last? For now it is attracting people to the city;
in time, it could cut the workforce needed for startups. “With AI you might
not need 50 developers to start a firm—maybe you just need five,”
speculates Auren Hoffman, a founder who moved from San Francisco to
Washington, DC a few years ago. Another risk is that the AI boom will
amount to less than the bulls hope, perhaps because fewer-than-expected
businesses adopt AI tools. Yet as real as these concerns are, they are also
ones that just about every other city would love to face. When it comes to
governance, San Francisco breaks all the rules. At the same time, it is the
richest place on Earth, and getting ever richer. ■

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Buttonwood

Investing in commodities has become

nightmarishly difficult
What happened to that “supercycle”?

Feb 15th 2024 |

ONLY A FEW years ago, analysts and investors were aflutter with talk of a
new “supercycle” in commodities. Some believed the world was about to
repeat a surge in raw-material prices that began in the early 2000s, and lasted
until the global financial crisis of 2007-09. This time the prompt was meant
to be a mixture of a fast economic recovery, as the West emerged from
covid-19 lockdowns, combined with a shift to green energy.

Today the thesis looks far less certain. Prices of lithium and nickel, which
are vital for electric-vehicle (EV) batteries, exploded in 2021 and 2022, but
have since collapsed. Nickel is almost 50% cheaper than at the start of 2023.
Lithium’s fall has been even steeper: its price is down by more than 80%
over the same period. The Bloomberg Commodity Index, made up of a
basket of foodstuffs, fuels and metals, has declined by 29% since its peak in
mid-2022.

Forecasts for oil demand now vary wildly, too, depending on assumptions
about governments’ plans to wean consumers off the stuff. The International
Energy Agency expects demand for oil to increase to 106m barrels per day
(bpd) by 2028, up from 102bpd last year, and global demand to peak not far
above that level. The Organisation of the Petroleum Exporting Countries, a
cartel of oil producers, expects demand to rise more than twice as fast in the
next five years, to 110m bpd, and then to keep rising for at least the next two
decades.

Commodity trading has never been simple: prices depend on unpredictable

economic cycles, as well as the production capacity of drillers, growers and
miners. But it is now nightmarish. On top of such concerns, investors have to
contend with a barrage of political and technological uncertainties, which
range from developments in battery tech to government appetite for
subsidies. And it is these questions that will govern the pace of the green
transition.

Start with the EV market. It is clearly still growing: 14m EVs were sold
worldwide in 2023, a 35% increase on the previous year. But how fast will it
continue to grow? Both new and used EVs are sitting in American
dealerships for longer than their petrol-powered rivals. Volkswagen, a
German automaker, reports that EVs made up 8-10% of sales in 2023, down
from 11% the year before. Ford and GM are among the carmakers to have
delayed EV- and battery-plant construction over the past year. Wariness
about the sector is dragging on the share price of Tesla, the market leader,
which is down by 26% this year. And will EVs still need the same battery
materials? New sodium-ion batteries require neither nickel nor lithium. If
they begin to supersede existing types, demand for the metals will plummet.

Political considerations are also increasingly difficult to track, since the

direction of travel is no longer one-way. Politicians across the rich world
have started to worry about the costs involved in the energy transition. In
September Britain delayed a ban on internal-combustion engines. Ahead of
elections to the European Parliament in June, the draft manifesto of the
centre-right European People’s Party now opposes an outright ban on such
engines. Are these just cosmetic changes or the start of a deeper shift in
green policies? Commodity investors need an answer.

Nor is it only Western policies and demand that matter. During the last
commodity supercycle, China’s construction of millions of flats, hundreds of
thousands of miles of roads and all manner of other physical infrastructure
kept demand for hard commodities growing fast. Now demand from the
world’s second-largest economy is much less certain. Chinese economic
growth has slowed considerably, and investment in property has slumped as
the government attempts to steadily deflate a bubble of its own creation. At
the same time, copper prices have proved to be astoundingly resilient,
dipping just 9% during the past 12 months. This reflects China’s push for
self-sufficiency in energy, including in solar and hydro power.

Pity anyone whose job it is to forecast how these factors will play out over
the next 12 months: if getting an accurate sense of the trade-offs in Western
politics is tough, divining the approach of an increasingly cloistered Chinese
government is close to impossible. It is clear that old methods of reading
commodity markets are no longer sufficient. Without an understanding of
the demand for new vehicles, the technology inside them and the politics of
net-zero, any bets on the future of commodity markets will be little more
than guesswork. ■

Read more from Buttonwood, our columnist on financial markets:

The dividend is back. Are investors right to be pleased? (Feb 8th)
Bitcoin ETFs are off to a bad start. Will things improve? (Feb 1st)
Investors may be getting the Federal Reserve wrong, again (Jan 24th)

Also: How the Buttonwood column got its name

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Putting out fires

How the world economy learned to love chaos

War, high interest rates and financial strife are yet to bring down growth

Feb 11th 2024 |

CENTRAL BANKS have embarked on austere monetary policy to crush

inflation. Worries about the financial system, from bond markets to
commercial property to the health of the banks, are ever-present. Some 4bn
people will head to the polls this year, with unpredictable consequences.
Most concerning of all, the world is on fire, with conflicts from Ukraine to
Israel and the Red Sea. Other wars, not least in Taiwan, do not feel all that
far away. Little wonder that analysts speak of “polycrisis”, “hellscapes” and
a “new world disorder”.

And yet, for the moment at least, the world economy is laughing in the face
of these fears. At the start of 2023 almost all economists reckoned that a
global recession was due that year. Instead, global GDP grew by about 3%.
The early signs suggest progress is continuing at the same rate this year.
Data from Goldman Sachs, a bank, indicate that global economic activity is
about as lively as it was in 2019. A measure of weekly GDP produced by the
OECD, a club of mostly rich countries, finds similar results. And a measure
of global activity produced from surveys of purchasing managers (so-called
PMI data) points to strongish growth across the world.

Labour markets are even stronger. The unemployment rate across the OECD
remains comfortably below 5%. The share of working-age folk actually in a
job, a better measure of labour-market strength, is at an all-time high.
Healthy job markets are boosting family finances, which have been hit by
inflation. Real household disposable incomes across the G7 shrank by 4% in
2022, but are now growing once again.

True, some countries are doing less well. Chinese growth figures continue to
disappoint. Some of those coming out of Europe are concerning. Germany,
facing fallout from recent high energy prices and competition in its car
industry from Chinese electric-vehicle exports, may be in recession. But
there are also stronger showings. In January total nonfarm payroll
employment in America rose by 353,000—a blowout figure, surpassing
almost all expectations. In Brazil, a country that has faced a number of years
of weak growth, the latest PMI data are encouraging.

So far there does not seem to be much evidence that attacks on shipping in
the Red Sea are capsizing the economy. PMI data suggest that manufacturers
face longer delivery times. This is consistent with ships rerouting around the
Cape of Good Hope, which increases the length of a trip between Shanghai
and Rotterdam to 23,000km, from 18,000km. However in almost all
economies shipping costs are just a tiny fraction of the overall price of a
good. Even the most pessimistic wonks are pencilling in a rise in inflation,
because of the Red Sea disruption, that amounts to little more than a
rounding error.

Why is the global economy so oblivious to the new world disorder? High
interest rates have managed to bring down inflation from a peak of more
than 10% across the rich world to about 6%. This not only raises
households’ purchasing power; it also raises their spirits. Indeed, having hit
an all-time low in 2022, rich-world consumer confidence has risen sharply.
Higher borrowing costs have been muted by the fact that a lot of household
and corporate debt is on fixed interest rates.

There is also a more intriguing possibility: after so many shocking global

developments, the world no longer minds chaos as much as it once did. This
is consistent with academic evidence, including a recent paper by two
researchers at the Federal Reserve, which suggests that the hit to output from
a spike in economic uncertainty fades after a few months.

Good economists remain vigilant. Higher interest rates may have a delayed
impact on growth. Escalation in the Russia-Ukraine war or the Red Sea
could provoke another round of shocks to energy supply, feeding into
inflation. All bets are off if Xi Jinping decides to move on Taiwan. Yet on
the flipside, falling inflation and a potential boost to productivity from
generative artificial intelligence could prompt GDP to accelerate. Moreover,
the global economy has already demonstrated its resilience. Polycrisis, what
polycrisis? ■

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Conflict trading

The Ukraine war offers energy arbitrage

opportunities
It also provides a glimpse at the future of European gas supplies

Feb 15th 2024 |

EUROPE HAD weathered one winter since Russia’s invasion of Ukraine in

2022. But although gas prices had returned to Earth, they were sure to rise in
the colder months to come. Thus if commodity merchants bought at rock-
bottom rates in the summer, they could offer future delivery at much higher
prices on the forward market. To make the deal work, all they needed was
somewhere to store the product. The EU’s underground capacity was almost
full; parking the gas in tankers offshore would have been expensive. Their
solution was unorthodox: pumping 3bn cubic metres (bcm) of natural gas
eastward to Ukraine.
Stashing hydrocarbons in a war zone might seem ill-advised. Indeed, last
spring analysts assumed that companies would require publicly guaranteed
war insurance in order to risk such a trade. But by June the spread between
summer and winter prices had widened enough that the gamble seemed
worthwhile. Ukraine’s generous customs regime for short-term storage,
combined with promises that gas would not be requisitioned under martial
law, provided traders with extra incentive. The resulting trade helped keep
the EU’s reserves stocked throughout this winter, suppressing gas prices
across the continent. It also provided healthy profits for the firms involved.
Akos Losz of Columbia University estimates that merchants made up to
€300m ($320m) from the play.

Now the trade is looking like a test run for Europe’s future energy strategy.
Ukraine is home to the continent’s second-largest gas-storage capacity, after
Russia, totalling nearly 33bcm. It has more storage space than big economies
like Germany, which boasts around 24bcm, and dwarfs that of next-door
Poland by a factor of ten. Having mostly been developed as part of the
Soviet Union’s energy infrastructure, the facilities massively exceed
Ukraine’s domestic needs. Both the EU and the Ukrainian government are
keen to put them to work. Denys Shmyhal, Ukraine’s prime minister, has
said that he wants to turn his country into Europe’s “gas safe”. Naftogaz, a
state-owned energy company, has offered up to half its storage space to
European energy firms. Traders are now poised to repeat last year’s trade at
bigger volumes this spring, starting from an earlier date.

The firms involved in the trade have kept quiet, partly for security reasons.
Trafigura, a commodities giant, is the only one whose involvement has been
confirmed, but Naftogaz reports that more than 100 European companies
have made use of its storage sites. According to Natasha Fielding of Argus
Media, an energy-information firm, these include “large energy companies
with trading desks and smaller, local utility firms in eastern Europe”. The
latter, she says, could have the most to gain from the arrangement. Countries
including Moldova and Slovakia not only lack significant storage capacity of
their own, but also remain heavily dependent on Russian gas, which is still
delivered through Ukraine under a long-term transit agreement due to expire
in December.
Although Europe’s energy problems have become less acute, storage
provides a hedge against future disruption. Ukraine is eyeing the future, too.
The country still receives up to $1.5bn a year from Russian companies,
which use its pipelines to deliver gas under the existing transit deal. Once
that agreement lapses, the government intends to make up some of the
shortfall using storage fees paid by Western firms. There is also another
consideration for Ukraine’s leaders. The more they can integrate their
country’s energy industry with European markets, the more invested the EU
will be in their defence. At a time when support from their allies appears
shaky, that is worth quite a lot. ■

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American banks

Is working from home about to spark a financial

crisis?
That is the worry. But it is overblown

Feb 14th 2024 | New York

IN MIDTOWN MANHATTAN reminders of commercial property’s

difficulties are everywhere. On the west side, near Carnegie Hall, stands
1740 Broadway, a 26-storey building that Blackstone, an investment firm,
bought for $605m in 2014—only to default on its mortgage in 2022. Soaring
above Grand Central station is the iconic Helmsley building. Its mortgage
was recently sent to “special servicing” (it may be restructured or its owner
may simply default). As the sun sets, the underlying problem becomes clear:
working from home means fewer tenants. Floors bright with lights, where
workers potter about, sit sandwiched between swathes of black.
This is not a new development. Many buildings have stood empty since
covid-19 struck. At first, owners hoped to wait out the pandemic, but
workers were slow to return, so employers ended up downsizing. Vacancy
rates, especially in shabbier buildings, rocketed. Then interest rates rose.
Most commercial buildings are financed via five- or ten-year loans. And
many of these loans will be refinanced shortly, while rates remain painfully
high. Some $1trn in American commercial-property loans will roll over in
the next two years, an amount that represents a fifth of the total debt owed
on commercial buildings.

Recently a number of office buildings in big cities have traded at less than
half their pre-pandemic prices. These sorts of losses will wipe out many
owners’ equity, leaving banks to swallow hefty losses of their own. Indeed,
three institutions have already been hit hard. In recent weeks New York
Community Bank (NYCB), a midsized lender; Aozora Bank, a Japanese
institution that hoovered up American commercial-property loans; and
Deutsche Pfandbrief, a German outfit with exposure to offices, all reported
bad news about their loan books and saw their shares plummet.

Meanwhile, China’s property crisis is becoming more acute. With domestic

portfolios struggling, some Chinese investors, who have bought property all
over the globe, may need to raise cash—and could start dumping overseas
assets, depressing property values. If consumers start to seriously struggle
with rising interest rates on auto loans or credit cards, it is possible more
institutions will end up in a similar situation to that of NYCB. Little surprise,
then, that people are starting to fret that the move to working from home
could end up causing a financial disaster.

It is worth putting these problems into context, however. For a start, the
troubles at NYCB really do seem specific to the institution. Although the
bank has exposure to New York offices, it in fact wrote down the value of its
portfolio of loans on rent-stabilised “multi-family” apartment blocks in the
city. These plunged in value after legislation in 2019 restricted the ability of
owners to raise rents if an apartment was vacated, or if the landlord made
capital improvements. The other lender that specialised in these sorts of
loans was Signature Bank, which failed last year (after which some of its
assets were bought by NYCB).
Moreover, there is a limit to how big a problem offices can pose, even if the
damage to them is severe. The total value of American property (not
including farmland) was $66trn at the end of 2022, according to data from
Savills, an estate agency. Most of that is residential. Only a quarter is
commercial. And commercial property is much more than just offices. It
includes retail spaces, which are struggling, but also warehouses, which are
in demand as data-centres and distribution points, and multi-family
buildings. Offices are therefore worth perhaps $4trn, or about 6% of the total
value of property in America.

Between 2007 and 2009 residential real estate in America lost a third of its
value. A similar shock today would wipe $16trn from property values. Even
if every office building in America somehow lost its entire value, the losses
would still be just a quarter of that size. On top of this, lenders are better
protected against losses in commercial property than they were against those
in the residential sort. Whereas loans for the latter were often close to 100%
of a home’s value, even the most ambitious commercial-property loans tend
to cover just 75% of a building’s value.
Bloodshed

The wound inflicted on the financial system by commercial property is best

likened to that caused by a slip of a kitchen knife—it is nasty, obvious and
painful. Stitches might be required. But it is unlikely to grievously injure the
victim.

Nor will the wound fester unnoticed. Because property problems are so
visible, regulators are all over them. About half of commercial-property debt
is loans from banks (and mainly from smaller ones, since rules discourage
large institutions from such lending). The rest is securities or loans from
insurers. The Office of the Comptroller of the Currency, a regulator,
reportedly advised NYCB to write down the value of some of its loans more
aggressively, making them obvious when it reported earnings on January
31st. Across the pond, the European Central Bank has asked banks to set
aside extra reserves to cover loan losses in commercial property.

America’s strong economy offers extra protection. Look up at New York’s

skyscrapers and it is easy to feel alarmed. But cast your gaze back to street
level and you can calm yourself. The streets are bustling. Shops are packed.
Restaurants are full. America is on the move, even if it could do with a
bandage for that nasty cut. ■

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Free exchange

In defence of a financial instrument that fails to do

its job
Inflation-linked bonds are a poor inflation hedge, but that’s not the point

Feb 15th 2024 |

ALTHOUGH BUYING inflation-protected bonds to protect against inflation

does not seem unreasonable, it would have been a spectacularly unprofitable
move during the latest bout of inflation. One hundred dollars put into
inflation-protected Treasuries in December 2021, when investors first saw
American core inflation reach 5%, would have been worth just $88 a year
later. Even cash under the mattress would have done better.

Safe to say, inflation-linked bonds are in trouble. Investors pulled $17bn

from exchange-traded funds tied to them last year. Canada announced plans
to cease issuing them in 2022; Germany did the same in November. Sweden
is considering its options. Yet these countries are making a mistake. So long
as their purpose is not misconstrued, inflation-linked bonds serve a vital
function for markets and the governments that issue them.

Why, then, do the bonds not always offer protection against inflation? Start
by breaking down the sources of return for a bondholder. First comes
coupons, payments received before a bond matures. The difference between
inflation-linked bonds and their conventional counterparts is that these are
not fixed in dollars, euros or pounds; instead, they rise with inflation, as does
the bond’s principal. Their real value is preserved if inflation is unexpectedly
high. So far, so inflation-protective.

Yet for many investors a second mechanism will matter: changes in a bond’s
price. Such changes reflect shifts in the market value of the future payments
to which a bondholder is entitled. Here, a snag emerges. Real interest rates
determine the present value of that future money: when rates rise, bond
prices fall. And as was made painfully clear during 2022 and 2023, few
forces raise long-term real rates as sharply as a central bank ferociously
tightening monetary policy. Most of the time, this second mechanism matters
more for inflation-linked-bond returns than the first. Indeed, it is what
caused the $12 loss an investor would have made between December 2021
and December 2022.

Although they do not always protect against inflation, the bonds do serve a
wider purpose. For markets, their main value is isolating (and pricing)
beliefs about economic concepts. Conventional bond yields package together
two distinct forces: inflation expectations and real interest rates. Inflation-
linked bonds disentangle them: their yield more cleanly expresses the
market’s pricing of real interest rates. Likewise, the gap in yields between a
nominal bond and an inflation-linked one gives the market’s pricing of
expected inflation, known as “breakeven inflation”.

Separating these concepts matters. For speculators, doing so means a more

straightforward way to trade on macroeconomic pressures. For market
observers, making real interest rates visible and tradable helps explain the
pricing of almost any other financial asset. One way to view stocks, bonds
and property is as a way to buy future payouts (dividends, coupons and rent,
respectively). Each has real interest rates embedded in its price. And for
central bankers, breakeven inflation offers a constantly traded measure of
whether markets find their inflation targets credible.

In fact, with appropriate caveats, inflation-linked bonds do even offer some

inflation protection. They can outperform if inflation rises and central banks
fail to raise rates in response, as in 2021 when most central bankers valiantly
insisted that inflation was transitory. Shorter-duration inflation-linked bonds
can provide payouts with lower exposure to rising interest rates, a bet that
can be magnified with leverage if a speculator wishes. And long-term
investors, such as pension funds, that hold the bonds to maturity are not
much affected by fluctuations in a bond’s market price. Locking in inflation-
linked cashflows helps them offset liabilities that are often also indexed to
inflation.

For bond issuers, this poses a trade-off. Pension funds and other risk-averse
investors’ appetite for inflation-linked bonds means they may pay a premium
for them. But other buyers may demand a discount because, with pension
funds uninterested in selling, inflation-linked-bond markets are relatively
illiquid. The empirical evidence on which effect dominates is spotty at best.
Policymakers have reached varying conclusions. In 2012 analysis by New
Zealand’s Debt Management Office prompted a ten-fold increase in the
country’s inflation-linked bond issuance as a share of total issuance over the
next decade. A study in 2017 for the Dutch government concluded the
opposite: that limited liquidity made inflation-linked bonds more
troublesome than helpful.

Certainly there have been instances where governments have saved a great
deal of money by issuing inflation-linked bonds. Britain’s first such bond
issue in 1981 coincided with an 800-year high in British inflation. Whereas
its price reflected expected annual inflation of 11.5%, it eventually paid out a
realised inflation rate of just 5.9%. Recently, however, luck has run in the
opposite direction for Britain and most other rich-world bond issuers.
Spiking inflation has pushed up the coupon payments governments owe and
prompted concern about rising debt bills.

Sometimes, therefore, the bond issuer will win and sometimes it will lose.
But in the long run the odds are in its favour. That is because inflation-linked
bonds shift inflation exposure from bondholders to issuers, and markets offer
compensation for those willing to take on risk. Moreover, it is risk that
governments are well-placed to assume: high inflation tends to mean a
higher nominal tax take, and more money to pay down debt.
Forget bitcoin and gold

One question remains. If not inflation-linked bonds, what should an investor

who was worried about rising prices have held in late 2021? Stocks
performed worse, even if they bounced back, as did bitcoin. Gold and oil,
however, held their value. A better trade still might have been to bet on the
price of bonds falling—including those that are inflation-linked. ■

Read more from Free exchange, our column on economics:

Universities are failing to boost economic growth (Feb 5th)
Biden’s chances of re-election are better than they appear (Feb 1st)
The false promise of friendshoring (Jan 25th)

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Science & technology

A private Moon mission hopes to succeed where others
have failed
Lunar odyssey :: The odds are stacked against it

For the perfect cup of tea, start with the right bacteria
Milk and two microbes :: The organisms near a tea plant’s roots can influence the depth of
flavour in its leaves

What tennis reveals about AI’s impact on human

behaviour
Shame, set and match :: Since the introduction of Hawk-Eye, umpires have been biting their
tongues

A 40-year-old nuclear-fusion experiment bows out in style

JET off :: Its final run set a record for how much energy such reactions can produce

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Lunar odyssey

A private Moon mission hopes to succeed where

others have failed
The odds are stacked against it

Feb 15th 2024 |

Editor’s note (February 15th 2024): This article has been updated.

LANDING ON THE Moon is difficult. Of the five robotic landers that have
made the attempt in the past year, only two succeeded. Both successful
landers were sent by national space agencies—those of India and Japan—
though the Japanese probe, called SLIM, suffered an engine failure and
landed upside down. Luna 25, a lander sent by Roscosmos, Russia’s space
agency, collided with the lunar surface after going into the wrong orbit. Two
landers from private companies also failed: HAKUTO-R, sent by a Japanese
firm, crashed during landing, and Peregrine, made by Astrobotic, an
American company, suffered a propellant leak and never made it to the
Moon.

As a result, all eyes are now on Odysseus, another private lander which set
off for the Moon on a SpaceX Falcon 9 shortly after 6am GMT on February
15th. All being well it should land within eight days.

Built by Intuitive Machines, another American firm, Odysseus is, like

Astrobotic’s ill-fated Peregrine, part-funded by America’s space agency,
NASA, as part of its “commercial lunar payload services” (CLPS)
programme. This involves NASA acting as an “anchor tenant” on
commercial landers and buying several payload slots, rather than building
and operating such vehicles itself. Intuitive Machines is contracted under
CLPS to send three landers to the Moon, of which this is the first.

Intuitive Machines is aiming to land Odysseus near the Moon’s south pole,
an area never visited before and deemed rich with promise because of the
presence of frozen liquids and gases in some of its craters. Those deposits
are of great interest to scientists and may also be of practical use, providing
water or rocket fuel to future lunar bases and the rockets launching from
them. The planned landing site is near a crater called Malapert A, close to
many of the candidate landing sites for NASA’s proposed Artemis III
mission, which is intended to take humans back to the Moon later this
decade.
But if all goes well, a successful lunar landing by Odysseus would not just
be the first by a private company. It would also be the first soft landing on
the Moon by an American-made spacecraft since the Apollo 17 mission of
1972, the last time astronauts visited.

So there is a lot riding on Odysseus—both figuratively and practically. The

two-tonne lander, roughly the size of a telephone box, is carrying six NASA
payloads that are intended to pave the way for future human visits and a
potential long-term presence. Five of NASA’s instruments will test various
navigation and landing technologies. The sixth will assess the Moon’s
potential as a site for radio astronomy, as well as the challenges of radio
communication from a location where Earth is always low on the lunar
horizon.

The probe is also carrying six commercial payloads, including ILO-X, which
will test astronomical imaging equipment for a future lunar observatory;
EagleCam, a “selfie” camera intended to detach from the probe just before it
touches down, letting it snap its own landing; and a set of tiny sculptures by
Jeff Koons, an American artist, called “Moon Phases”.

A large number of things have to go right for the landing to succeed—and

the failures of other recent lunar missions demonstrate the sheer variety of
ways in which things can go wrong. Sometimes the problem is software-
related: HAKUTO-R failed last April because its navigation software was
confused by the unexpectedly high rim of a crater near the landing site.
Assuming that the probe was close to the surface, the software initiated a
low-speed powered descent. In fact the probe was 5km above the lunar soil,
and soon depleted its fuel supply, after which it fell to the surface and was
destroyed.

In other cases, hardware is at fault. Luna 25 crashed in August because its

engine failed to shut down correctly while it was manoeuvring into a pre-
landing orbit, putting it instead on a collision course with the Moon.
Peregrine’s propellant leak last month seems to have occurred after a valve
failed to close properly, causing a build-up of pressure and a rupture in its
oxidiser tank. As a result, it had insufficient fuel to complete its mission, and
burned up in Earth’s atmosphere on January 18th.

The following day, the SLIM probe lost one of its two engine nozzles in the
final seconds of its descent to the lunar surface, but its software was smart
enough to compensate, bringing it to a soft landing within 55 metres of its
target—astonishingly close for a mission to a different world. However,
instead of landing on its side as intended, SLIM tipped over onto its nose,
ending up with its engines pointing upward and leaving its solar panels in
shadow. SLIM’s controllers shut the probe down to conserve power, but
were able to power it up again nine days later, when the Sun was at a more
suitable angle.

The fate of SLIM shows that mishaps need not always lead to mission
failure. Its troubled landing was nevertheless the most precise in spacefaring
history, demonstrating the potential of its novel vision-based navigation
system. And, scientific achievements aside, the mission also made Japan the
fifth country to have soft-landed a craft on the Moon.

Whether Odysseus succeeds or fails in the coming days, many other private
landing attempts are planned for later in 2024. NASA has several CLPS
missions lined up: at least one (and possibly two) by Intuitive Machines,
using the same type of lander as Odysseus; another mission by Astrobotic,
using a larger lander called Griffin, carrying a NASA-built robotic rover
called VIPER; and a lander called Blue Ghost, built by Firefly Aerospace,
yet another American company which, like Intuitive Machines and
Astrobotic, has no track record in the landing game. Ispace, the Japanese
firm behind last year’s failed HAKUTO-R mission, also hopes to have
another try this year. And those are just the private missions slated for 2024;
China’s space agency also intends to launch Chang’e 6, the latest in its
successful series of Moon landers, in the next few months.

But for now the immediate question is whether Odysseus can succeed where
all previous private landers have failed. The companies involved in this
private Moon race insist that it does not really matter which of them comes
first—their shared aim is to provide regular service to the Moon’s surface,
for both public and private entities. “We are all standing on the shoulders of
those that attempted, failed and succeeded,” says Steve Altemus, the boss of
Intuitive Machines, whose fingers are no doubt firmly crossed. The return to
the Moon is proving difficult. But the direction of travel is clear. ■

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Milk and two microbes

For the perfect cup of tea, start with the right

bacteria
The organisms near a tea plant’s roots can influence the depth of flavour in
its leaves

Feb 15th 2024 |

FOR THE perfect cup of tea, does one add milk to boiling water, or the
reverse? Neither, if new research in the journal Current Biology is to be
believed. What must be prepared first, instead, are the microbes.

Scientists are increasingly aware that the fungi and bacteria living around a
plant’s roots can significantly affect its growth. Previous studies on
Arabidopsis, a species of cress that is the lab rat of the botanical world, have
shown that the presence of the right microbes can enhance the absorption of
critical nutrients like iron, phosphorus and nitrogen.
The possibility of enhanced nitrogen absorption was particularly intriguing
to tea experts Wei Xin and Wenxin Tang at Fujian Agriculture and Forestry
University in China because tea plants rely upon nitrogen-rich ammonium in
the soil around their roots to produce theanine, an amino acid that generates
their distinctive savoury flavours. Collecting the roots and leaves of 17
different tea varietals at different times of year, Dr Xin and Dr Tang found
that theanine production varied widely, even among similar teas. Some
highly valued oolong teas (the term refers to those whose leaves are partially
oxidised after harvesting), such as Rougui, produced a lot of the compound,
whereas others, such as Maoxie, produced less.

After growing these two varietals under identical conditions, the researchers
collected soil samples and used genetic analysis to identify which microbes
were present around the roots. The microbiomes of the two were very
different. Crucially, Rougui had more microbes associated with the
metabolising of nitrogen than did Maoxie. Consequently, Rougui also
showed a greater ability to absorb nitrogen from ammonium in the soil.
These differences were particularly stark in the autumn, when the roots were
accumulating theanine.

This provoked a natural question. If the microbial community found around

Rougui were transplanted to other tea plants, might this increase their
theanine production and, in turn, improve their flavour? To explore this, the
researchers created a community of microbes made up of 21 bacterial strains
that resembled the community found around autumnal Rougui roots and
applied them to the roots of Maoxie plants. They report this week that this
not only enhanced root growth in Maoxie seedlings by giving them a
nitrogen boost, but also nearly tripled the theanine accumulation in the
leaves. While the time-consuming process of transforming leaves into
drinkable tea has yet to be completed, the researchers have little doubt that
there will be big differences.

Flavours aside, the Rougui microbe sample that Dr Xin and Dr Tang worked
with has the potential to make a wider environmental impact. Most farmers,
not just tea growers, add some form of nitrogen to their soil to enhance
growth. While some of this is absorbed by plants, most runs off during
heavy rains and ends up polluting natural water bodies. When the
researchers applied their microbial cocktail to soil around the roots of
Arabidopsis plants, they found that, just as with Maoxie, the newcomers
enhanced nitrogen uptake. This hints that these microbes have the potential
to create new flavours while also reducing agricultural pollution. That
should be everyone’s cup of tea. ■

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Shame, set and match

What tennis reveals about AI’s impact on human

behaviour
Since the introduction of Hawk-Eye, umpires have been biting their tongues

Feb 15th 2024 |

WIMBLEDON’S CENTRE court has seen its share of rivalries; think of

McEnroe v Borg, or Williams v Williams. But for David Almog, a
behavioural economist at Northwestern University, the match worth tuning
in for is umpire v machine.

How AI oversight affects human decision-making is an important question

in a world where algorithms play an ever-larger role in everyday life. Car
drivers, financial traders and air-traffic controllers already routinely see their
decisions overruled by AI systems put in place to rapidly correct poor
judgment. Doctors, judges and even soldiers could be next.
Much of this correction happens out of the public eye, thwarting would-be
analysts. But, says Mr Almog, “tennis is one of the most visible settings
where final decision rights are granted to AI.” That is why, together with
colleagues in America and Australia, he has looked at whether tennis
umpires and line judges correctly called balls in or out during nearly 100,000
points played in some 700 matches across the world, both before and after
the introduction of the Hawk-Eye ball-tracking system in 2006.

The Hawk-Eye system, now used at most elite tournaments, uses between
six and ten cameras positioned around the court to create a three-
dimensional representation of the ball’s trajectory. This can then be
presented on a screen visible to players, spectators and officials—as well as
TV viewers. Players can use it to appeal human decisions, with the AI’s
verdict considered final. Bad calls from line judges and umpires are now
often overturned.

The latest analysis from Mr Almog and his colleagues, published as a

preprint last month, showed that Hawk-Eye oversight has prompted human
officials to up their game and make 8% less mistakes than before it was
introduced. (That comparison can be made thanks to a 2005 trial period in
which Hawk-Eye was used without the ability to influence calls.) Such an
improvement in performance is to be expected, the researchers say, given the
heightened watchfulness that accompanies the threat of public shaming.

Most of the improvement came during the multi-shot rallies that follow a
successful serve and return. But when the researchers looked at serves in
particular, and especially in cases where the served ball landed within 20mm
either side of a line, they were surprised to see the error rate soar. The
umpires and line judges, it turned out, had switched strategy. Before Hawk-
Eye, they were more likely to call a serve out when it was in. But afterwards,
they were even more likely to wave through balls that were actually out. For
every 100 mis-hit serves, post-Hawk-Eye umpires left 39 unchallenged. The
comparable figure in the earlier era was 26.

Such a shift is easily understood. Overlooked faults are less disruptive in

tennis than incorrect cries of “out” because these end the point prematurely.
They can also trigger dissent from both the player and crowd when the error
is identified on the big screen. It seems that human officials take the less
reputationally risky option, even if it leads to more incorrect calls.

Tennis, with its binary outcomes and clear evidence of whether a decision
was right or wrong, offers a highly simplified model for AI oversight. But
many of the same tendencies will be at play in fields like medicine and law,
says Mr Almog, and should be considered before algorithms are allowed to
trump human decisions. Most important, perhaps, is the social cost of getting
an important call wrong, which will vary between disciplines, and could
distort decision-making in different ways. Judges, for example, may prefer
to under-convict. Doctors, on the other hand, might over-diagnose. Stay
tuned. ■

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JET off

A 40-year-old nuclear-fusion experiment bows out

in style
Its final run set a record for how much energy such reactions can produce

Feb 9th 2024 |

THE HORSE archers of ancient Iran had a trick known as the Parthian shot.
When retreating after a charge they were able to twist their bodies around in
the saddle and loose a final salvo. That is not a bad description of the
announcement made on February 8th by the controllers of the Joint
European Torus (JET), a fusion experiment at Culham, England. After 40
years of operation, JET shut up shop in December. But the result of one of
its final runs, conducted on October 3rd of last year, makes an excellent
Parthian shot.

Fusion reactors are sometimes said to mimic the process that keeps the sun
shining. That is not quite accurate. The raw materials of solar fusion are
protons, the nuclei of the lightest and most abundant form of hydrogen. The
process that turns them into a helium nucleus (two protons and two neutrons)
has several steps. The approach used in JET, a type of reactor called a
tokamak, creates helium in a single step by reacting together the nuclei of
two heavier types of hydrogen: deuterium, with a proton and a neutron, and
tritium, with a proton and two neutrons. Both the solar and the terrestrial
transmutations release lots of energy, but they have different subatomic by-
products—two positrons and two neutrinos in the case of the former, and a
neutron in the latter.

JET’s reaction vessel was, as the name suggests, toroidal. Magnetic fields
confined and heated the deuterium and tritium within this doughnut-shaped
void to create a plasma (a gas-like form of matter in which atomic nuclei and
electrons are separate) with a volume of 90 cubic metres. At temperatures of
150m kelvin, nuclei colliding in such a plasma will fuse.

JET never pretended to be a prototype for commercial-power production. It

was there to study the physics of fusable plasmas, not to put out more energy
than it consumed. But when its operators cranked the dial up to 11 in
October last year, they managed on one occasion to achieve 5.2 seconds of
continuous fusion, yielding 69 megajoules of energy, for an average power
output of 13 megawatts. Though tiny by the gigawatt standards of modern
power stations, that is a record for a tokamak and so a good step in the right
direction. What comes next, though, is much debated.

Some look to ITER, an experimental tokamak under construction in France

by a consortium of governments. This, when it opens on a date as yet to be
determined, will have nine times the plasma volume of JET. Meanwhile, on
the other side of the Atlantic, in Massachusetts, private enterprise in the form
of Commonwealth Fusion Systems is constructing SPARC, a tokamak it
hopes to switch on next year. SPARC will have a smaller plasma volume
than JET but should, because of design advances using superconducting
magnets, put out twice as much energy as is put into it. It will, the firm
hopes, be the last step before a fully commercial machine.

Besides these projects, a second private reactor is planned in Culham itself

by a firm called Tokamak Energy. Other firms in both North America and
Britain, using approaches different from tokamaks, are also joining the fray.
And Britain’s government hopes to join in, too, with a tokamak called STEP.
All of these enterprises, though, have been helped by JET’s results over the
decades. Hail and farewell, then, to one of fusion-research’s workhorses. ■

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Culture
The third-largest exporter of television is not who you
might expect
Turkish delight :: After America and Britain, Turkey is the biggest seller of scripted shows

A secret room in Florence boasts drawings by

Michelangelo
Indecipherable fingerprints :: The artist’s fingerprints are all over the walls—or are they?

On “A Wonderful Country”, Israelis joke their way

through trauma
Laughing to tears :: Nothing appears off limits on the incisive comedy show, except for
Gazans’ pain

The Wa: the world’s biggest drug-dealers, with a tiny

profile
Drugs, terms and steel :: A new book looks at how the narco-state has flourished

From Napoleon to Vladimir Putin, disease has shaped

history
Pen v plague :: A sacked New York Times reporter takes a global view of disease

The real message of Vladimir Putin’s chat with Tucker

Carlson
Back Story :: Russia’s president is not a man to be trusted, still less to emulate or admire

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Turkish delight

The third-largest exporter of television is not who

you might expect
After America and Britain, Turkey is the biggest seller of scripted shows

Feb 15th 2024 |

MUCH OF OTTOMAN history reads like a soap opera. In the 16th century
Sultan Suleiman the Magnificent killed anyone whom he suspected of trying
to rival him, including two brothers-in-law, two sons and a handful of
grandsons. (And you thought your family had problems.) A show about
Suleiman, “Muhtesem Yuzyil” (“Magnificent Century”), first aired in 2011
and was part of the first wave of Turkish dramas to go global. Fans of the
show include Cardi B, an American rapper.

Today, as popular Turkish shows proliferate, Suleiman has to share the

throne with other reigning series. The latest is “Gaddar” (“No Mercy”),
about a soldier who returns from war and is forced to become a hitman to
protect his family. Turkey is now the third-biggest exporter of scripted series
in the world—behind only America and Britain. Between 2020 and 2023
global demand for Turkish shows grew by 184%, compared with 73% for
Korean dramas, according to Parrot Analytics, a data firm.

Turkish shows are popular not just in the Middle East but also in Europe and
Latin America. Last year the three biggest importers of new Turkish shows
were Spain, Saudi Arabia and Egypt. The Istanbul Chamber of Commerce
estimates that Turkey’s television exports earned $600m in 2022; some
analysts predict their sales will soon total billions.

What makes the shows so binge-worthy? For one, they are easy on the eyes.
They boast glamorous landscapes, luxurious costumes and handsome actors.
Most are love stories; science-fiction series are rarely made, says Ozlem
Ozsumbul, head of sales at Madd Entertainment, a distributor. Shows,
including legal and period dramas, mix romance and revenge. In 2023
“Yargi” (“Family Secrets”), which follows rival lawyers who fall in love,
won an international Emmy award for best telenovela.

Arab audiences appreciate that Turkish shows depict Muslims as heroes, not
as terrorists or cab drivers, as Hollywood often does. The shows also bow to
expectations of modesty. Turkish media watchdogs blur alcohol bottles,
forbid sex scenes and issue fines for characters kissing.

Censorship has forced directors to get creative and can even heighten sexual
tension for viewers. Longing looks and lingering fingers replace gratuitous
shots of romping. For example, in “Erkenci Kus” (“Early Bird”) the love
interests almost brush lips as the heroine rubs her perfume on her boss’s
neck. He later goes to jail for beating a man who tries to buy the rights to the
scent.

American romance novelists are taking a page out of the Turkish playbook.
Abby Jimenez, who wrote “Yours Truly”, a New York Times bestselling
novel, based her male protagonist on the one from “Sen Cal Kapimi” (“Love
is in the Air”), an enemies-to-lovers tale in which a couple falls in love after
pretending to be engaged.
In the first half of 2023, the three most popular scripted shows in Spain were
Turkish, according to Glance, a TV-data firm. Spaniards and Latin
Americans have a history of watching telenovelas, so they are used to the
schmaltz and time commitment of Turkish programmes. And some viewers
seem to welcome a break from the sex and gore of Western television.

Spanish-speaking audiences are drawn to the high production value of

Turkish dramas. Latin American telenovelas “look cheap” in comparison,
says one purveyor of shows. People in Turkey and Latin America “express
feelings unabashedly”, says Carolina Acosta-Alzuru of the University of
Georgia: “That’s why melodrama works in both cultures.”

Broadcasters are fans of the shows, too. In Turkey, programmes are aired
once a week and can last up to three hours, but when sold to foreign
countries they are chopped up and run more often, sometimes daily. TV
channels can stretch out the series over hundreds of episodes. Korean dramas
are good, says Izzet Pinto, a television distributor, but they last only 13
commercial hours. Turkish ones can extend to around 200.

Some fans complain that they cannot get enough content in their own
language. It’s a no-brainer to dub shows in Spanish because one version can
be distributed throughout Spain and much of Latin America. For languages
with fewer speakers, such as Polish or Greek, TV channels resort to cheaper
solutions, including subtitles. Some viewers even try to learn a bit of Turkish
so they can watch dramas without having to wait for the dubbed versions to
come out, says Yasemin Celikkol of Northwestern University in Qatar.
Devoted super-fans dub shows for one another on social media.

Dramas have helped boost Turkey’s image, especially in former Ottoman

lands. Ms Celikkol grew up in Bulgaria hearing that Turks were “evil,
barbaric and terrible” but thinks Turkish dramas have helped change that
perception. Bulgarians used to holiday in Greece, she says, but now they go
to Turkey more often than before.

The state has also got involved. In 2012 Turkey’s president, Recep Tayyip
Erdogan, slammed “Magnificent Century” for devoting too much time to
palace intrigues and not enough to Suleiman’s conquests. In response, a
Turkish state broadcaster made its own historical drama, “Dirilis: Ertugrul”
(“Resurrection: Ertugrul”), about a Turkic warrior in the 13th century. In
May 2020, when much of the world’s population was in lockdown for covid-
19, the show was the fourth-most in-demand TV series globally, according
to Parrot Analytics. That year Pakistan’s then prime minister, Imran Khan,
praised the programme for its “Islamic values”, and a statue of Ertugrul was
erected in Lahore. An Urdu dubbing of the pilot episode has racked up 153m
views on YouTube.

Streaming services are creating more daring programmes. Fans are taken
aback by what streamers can get away with. Netflix’s “Kulup” (“The Club”)
follows an ex-convict who reconnects with her daughter after years in
prison. The show depicts pogroms against minorities in Istanbul in the 1950s
—a politically sensitive topic, to say the least. Streamers’ dramas tend to be
shorter: so far “Kulup” has 20 episodes compared with 139 for “Magnificent
Century”. Those who tune in to Amazon’s “Bihter”, a movie about a woman
who cheats on her abusive elderly husband, can even watch sex scenes that
brazenly feature bare buttocks.

Relaxing what can appear on screens may improve Turkey’s chances of

reaching English-speaking audiences, who have been more resistant to
dubbed or subtitled series than people in many other countries. Unlike Spain
(with “Money Heist”) or South Korea (“Squid Game”), Turkey has not had a
huge hit in either America or Britain. For example, “Kara Para Ask” (“Black
Money Love”) was never much loved in America, even though it counts
Lionel Messi, an Argentine footballer who plays in Miami, and Barbra
Streisand, an American singer, as fans.

But the world is big, and Turkey’s shows do not need to conquer Britain and
America to be worth watching. Even Sultan Suleiman, who added parts of
north Africa and Europe to the Ottoman Empire, did not make it that far. ■

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Indecipherable fingerprints

A secret room in Florence boasts drawings by

Michelangelo
The artist’s fingerprints are all over the walls—or are they?

Feb 15th 2024 | FLORENCE

STANDING IN THE mausoleum of the Medici Chapel in Florence, among

tombs and elegant sculptures designed by Michelangelo, you could be
excused for failing to notice the doorway to the left. It leads to a cloakroom,
where a trap door opens to a flight of narrow steps. At the bottom is a small
vaulted room. The eggshell-white walls are covered with graceful nude
figures, a falling Phaethon (son of the sun god), a looming horse’s head and
several shapely legs drawn in shadowy charcoal—sketches, the museum
claims, by the great Renaissance artist himself.

This stanza segreta (secret room) had long been closed. Only scholars and
bigwigs like King Charles III and Leonardo DiCaprio were allowed entry by
the National Museum of the Bargello, of which the chapel is a part. But in
November the basement room was opened for a trial period of four months
to 100 pre-booked visitors a week; they are allowed in for 15 minutes in
groups of four. Tickets sold out. Officials recently extended the experiment
until July.

Entering the room, which is bare except for ankle-level strips of LED
lighting, is like stepping back in time—not just into the Renaissance, but
also into an earlier era of tourism, when attractions lacked explanatory
placards and were free from madding crowds. Most of all, it feels like
entering someone’s head, or their notebook, filled with drafts and doodles,
some finely wrought, some cartoonish. You can imagine the middle-aged
master in here, perhaps drawing by night. In several places, the walls appear
to be scorched with black soot from a burning torch. Near a rendering of a
muscular figure, there is even a smudged handprint.

Legend has it that Michelangelo holed up in this stanza segreta for a few
months in 1530. Following a popular uprising three years before, the artist
sided with those who preferred a republic to rule by the Medicis, Italy’s
wealthiest family, even though he had designed the mausoleum that bears
their name. When the Medicis returned, the artist was in danger. This small
room, conveniently furnished with a well, might have seemed like a safe
haven.

The drawings were rediscovered in 1975 by the Medici Chapel’s then

director, who suspected that what was then a coal-storage room might be
hiding something. Paola D’Agostino, director of the Bargello until mid-
January, felt it was important to finally make the room accessible to the
public. It shows “Michelangelo’s human aspect”, she says, though she
admits that it is impossible to attribute the drawings securely to the master
and concedes that some of the doodles are probably not his work.

Other experts doubt it was Michelangelo’s hand who drew them. Antonio
Forcellino, who has written two biographies of the artist, believes that none
of the drawings is of high enough quality to merit firm attribution. William
Wallace, a professor at Washington University in St Louis and a leading
expert on Michelangelo, thinks that only a couple may be by the artist—a
head that resembles the famous Laocoon statue Michelangelo had seen in
Rome, as well as a standing male figure gracing a whole wall near the stairs
—and that most were made by some of the 50 or so workmen employed to
build the chapel above.

As for Michelangelo hiding in the room? “That’s totally bogus,” according

to Mr Wallace. The already-famous artist is more likely to have been
protected by a friend. Yet Mr Wallace argues that the room is a landmark
finding nonetheless, because Michelangelo’s workmen “are in some ways
equal in importance to Michelangelo” himself. Greatness does not exist in
isolation.

Just as the little guys are often overshadowed by the old masters they
worked for, drawing often loses out to flashier forms like painting and
sculpture. But the humble medium communicates the presence of hands, and
minds, in motion.

Looking at these walls, you feel as if the artists who adorned them nearly
five centuries ago—perhaps hiding from the summer heat, or taking a drink
from the well—have just left. Even if this is not the work of Michelangelo, it
evokes his world. ■

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Laughing to tears

On “A Wonderful Country”, Israelis joke their

way through trauma
Nothing appears off limits on the incisive comedy show, except for Gazans’
pain

Feb 15th 2024 |

THE COMEDY sketch opens at “Columbia Untisemity News, where

everyone is welcome—LGBTQH,” says a university student with pink hair
and face piercings. She explains that the “H” stands for “Hamas”. Another
student, who wears a chequered keffiyeh scarf and studies “queer post-
colonial astrology”, chimes in enthusiastically. “Yeah, I totally simp Hamas,
it’s so trending right now.” They decide to video chat with a Hamas militant,
expressing concern for his well-being while he berates them: “We will throw
you from the roof, you homosexual dirt.” The students are delighted. “Did
you hear? They want to throw me a rooftop party!”
The satire recently aired on Israel’s irreverent television show, “Eretz
Nehederet” (“A Wonderful Country”). Though sometimes compared to
America’s “Saturday Night Live”, the humour in “A Wonderful Country” is
more biting. “Life in Israel is much more extreme,” Muli Segev, the
producer, says. “It’s actually life or death. The satire must be sharp, even
brutal.”

Now in its 21st season—it had its premiere in 2003—“A Wonderful

Country” is one of the most influential shows in Israel, watched by around
30% of Israelis who own television sets. The sketches often skewer Israeli
politicians and public figures. But since the outbreak of war the show has
also looked outward, lampooning a supposed pro-Palestinian bias among
liberals in the West.

One recent sketch lambasts the BBC’s coverage of the war. Announcing
Israel’s bombing of a hospital in Gaza, a news anchor urges her producer to
increase the number of casualties displayed on screen (“More, more!”). She
turns to correspondent “Harry Whiteguilt”, who says he is reporting from the
“illegal colony of Tel Aviv” and describes Hamas as “the most credible not-
terrorist organisation in the world”, a swipe at the BBC’s reluctance to refer
to Hamas as “terrorists”. It turns out Hamas is to blame for the hospital
strike. “But it’s still Israel’s fault,” Mr Whiteguilt insists.

The show posts sketches in both Hebrew and English on its social-media
platforms, where they can reach viewers outside Israel. Lately, the English-
language sketches have gone viral. The clips reflect “how a lot of Israelis
feel” and are “a way for them to explain their side” to a global audience,
says Shayna Weiss, senior associate director of the Schusterman Centre for
Israel Studies at Brandeis University.

The comedy show is especially popular among American Jews. A few

Jewish-American celebrities, including Brett Gelman, an actor on the show
“Stranger Things”, have made guest appearances. According to Ms Weiss,
“This war is obviously not being fought just on the battlefield. It’s also being
fought on social media.” But the show has a blind spot. Mocking college
students is easy; acknowledging the suffering of Palestinians is proving
rather harder. “A Wonderful Country” has not touched on the death and
destruction Israel has caused in Gaza, which is no laughing matter.
After October 7th, the day 1,200 people in Israel were tortured and murdered
by Hamas militants, the show temporarily changed its name to “Eretz
Nilhemet” (“A Fighting Country”). But despite the nationalist bent, the
Hebrew sketches often lampoon Binyamin Netanyahu, the prime minister,
and the Israeli government. (They are far more critical of Israeli leadership
than those aired in English.)

One sketch urged female soldiers in the Israel Defence Force to wear fake
moustaches to be taken seriously—playing with the idea that a refusal to
heed warnings from some of them contributed to Israel’s intelligence
oversights.In another sketch Mr Netanyahu is visited by the ghost of Golda
Meir, a former Israeli prime minister, who thanks him for making her look
better. “Finally, after 50 years, my failures aren’t the biggest in history,” she
says, puffing a cigarette. (Meir’s government was blamed for not being
prepared for the Yom Kippur war in 1973.) “Most of us don’t like the
government at all,” explains Mr Segev. But still, everyone on the show
believes Hamas has to be defeated to keep Israelis safe: “We’re on Israel’s
side.” ■

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Drugs, terms and steel

The Wa: the world’s biggest drug-dealers, with a

tiny profile
A new book looks at how the narco-state has flourished

Feb 9th 2024 |

Narcotopia. By Patrick Winn. PublicAffairs; 384 pages; $32 and £20

MANY DRUG cartels share similar starts. Hard-up farmers in remote

villages grow illicit cash crops (coca plants and opium poppies can be
cultivated even in poor soil). Local criminals muscle in. Trafficking
syndicates spring up to ship the processed narcotics to the rich world. As
profits rise, the cartel has to fight off competition. It bribes and threatens
officials to ignore its activities.

The pattern has been repeated from Afghanistan to Mexico, but only one
place has become a fully fledged narco-state. Wa State, a mountainous
region within Myanmar, near China, is home to the Wa, an ethnic group
comprising around 1m people. It spans roughly the same amount of land as
the Netherlands. It declared de facto independence from Myanmar in 1989;
today it is governed by the United Wa State Army (UWSA) under one-party
socialist rule. (It is not recognised internationally.)

Since the late 1980s the UWSA has dominated the business of peddling
methamphetamine in South-East Asia. (The UN estimates that trade of the
drug in East and South-East Asia is worth $80bn a year.) It started out
cultivating opium, graduated to making heroin and now cooks some of the
world’s best meth. This pays for an army larger than Sweden’s, which is well
stocked with high-tech weaponry.

“Just as Haiti was built on sugar and Saudi Arabia on oil, Wa State was built
on heroin and methamphetamine,” Patrick Winn writes in “Narcotopia”. Yet
the “UWSA isn’t some jungle-dwelling mafia. It’s running an honest-to-God
nation.” The rogue ethnostate collects taxes. It has its own hospitals, schools
and electricity grid, and its roads are better paved than many in Myanmar.
Members of the Politburo are chummy with the Chinese government, and
the Wa maintain an informal embassy in Myanmar. Wa citizens sing their
own anthem and live under their own flag.

Mr Winn, a correspondent for “The World”, a show on America’s National

Public Radio, has covered Asia’s fluid borders for years. His previous book,
“Hello, Shadowlands” (2018), peeked at the UWSA as part of a broader look
at rebel fiefs. “Narcotopia” is a more detailed examination. Though Mr
Winn’s attempts to smuggle himself into Wa State were thwarted by the
pandemic, he manages to interview leaders including Saw Lu, an anti-drug
evangelical who became the UWSA’s first foreign minister. The elderly
official recounts how he tried and failed to wean his government off narco-
dollars.

America bears much of the blame, Mr Winn argues. Dredging up little-

known research, he sets out how the CIA sponsored various opium-
smugglers in Myanmar in the 1950s-70s. In exchange for guns and legal
immunity, these warlords doubled as anti-communist militia bosses,
gathering intelligence and launching raids into Maoist China. The CIA
thwarted attempts to arrest top capos and even lent them spy planes to move
dope. The agency would repeat these deals with Nicaraguan rebels in the
1980s, igniting the Iran-Contra scandal.

In portraying Washington’s grimy role in the Wa saga, Mr Winn sometimes

skims over the actions of others. China acts as the UWSA’s protector, giving
it arms in exchange for not smuggling drugs into the country. Myanmar’s
generals have granted Wa State carte blanche so long as it does not seek
recognition from the UN.

Even so, the book offers a rich analysis of narco-states. The UWSA
produces bright pink, sweet-smelling meth pills that are triumphs of
branding: the “WY” logo is “as recognisable…as Nike’s swoosh”, Mr Winn
claims. Asia’s partying youngsters and exhausted workers consume billions
every year. Wa State is not so much a den of vice, the author argues, as a
nest of realpolitik and innovation. ■

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Pen v plague

From Napoleon to Vladimir Putin, disease has

shaped history
A sacked New York Times reporter takes a global view of disease

Feb 15th 2024 |

The Wisdom of Plagues. By Donald McNeill. Simon & Schuster; 384

pages; $28.99 and £20

EARLY ONE morning a New York Times reporter was shaken roughly
awake. He was sleeping in a tiny hut, deep in the Cameroonian rainforest.
Some local criminals were coming to kidnap him, his guide warned. Both
men fled, just in time.

The reporter was Donald McNeill, who started at the New York Times as a
copy boy in 1976 and later spent decades covering global health, especially
the diseases that afflict the poor. He did so with courage, compassion and an
eye for unexpectedly important details. The story he was pursuing in
Cameroon was about hunting great apes and how their extinction might
harm understanding of diseases that have crossed from other primates to
humans. As a scientist told him, killing chimpanzees “is like burning a
library full of books you haven’t read yet”.

Mr McNeill’s reportorial adventures prepared him for the biggest story of his
career: he and colleagues won a Pulitzer prize for their coverage of covid-19.
Times readers no longer have the benefit of his insights, however. He was
pushed out in 2021 because of complaints that he had uttered a racial slur
when referring to a conversation about someone else using it. On the plus
side, Mr McNeill then had time to write a cracking book on pandemics.

“The Wisdom of Plagues” puts the struggle against pestilence in historical

context, noting how the shift from hunter-gathering to farming made it easier
for bugs to jump from livestock to people. Mr McNeill explains how plagues
have shaped history, from the typhus that crippled Napoleon’s invasion of
Russia to the covid-induced isolation that, he speculates, might have
aggravated Vladimir Putin’s paranoia.

Fear of disease has long led to scapegoating. Syphilis was “the French pox”
to the English, “the Turkish disease” to Poles and “the Christian disease” to
Turks. Mr McNeill recounts how a chest of gold and silver coins was
recently found in the old Jewish quarter of Erfurt, Germany. The last king
depicted on the coins had ruled in 1349, the year the Black Death struck the
city. Locals blamed the Jews, as they did all over western Europe. The owner
of the chest never got to dig it up.

With fear comes falsehood. If it is not ethnic minorities supposedly

spreading plagues, it is evil tycoons profiting from them in convoluted ways.
A century before Bill Gates was accused of using covid jabs to plant chips in
people, John D. Rockefeller funded a campaign to urge Americans to wear
shoes to stop hookworm burrowing into their bare feet. Rumours spread that
“the oil magnate had secretly bought up shoe companies”.

Misinformation is a huge obstacle to fighting disease. Mr McNeill saw

close-up some of the estimated 300,000 extra deaths caused by a South
African president, Thabo Mbeki, who concluded after surfing the internet
that HIV did not cause AIDS. He watched the global campaign to eradicate
polio stumble because so many Muslims believe the vaccine is a Western
plot to sterilise them. Convincing them otherwise grew harder, Mr McNeill
fumes, when the CIA used a fake vaccination campaign to try to trace
Osama bin Laden in 2011. In one month the next year, Pakistani jihadists
shot dead nine polio vaccinators.

To fight pandemics, accurate information must be rapidly disseminated. That

means bureaucracies need to move faster. “I can’t think of a single serious
outbreak I learned of first” from the World Health Organisation (WHO),
complains Mr McNeill. It is part of the UN, and like “a London gentleman’s
club”, defers to its members. ProMED, an unofficial disease-alert network,
sounded the alarm about covid-19 four days before the much better-
resourced WHO.

Accurate information must also be believed. Too often, it is not, because of a

breakdown of public trust in authorities. When experts make mistakes,
which is inevitable when grappling with a new disease, many people
conclude that the professionals are useless or self-serving.

In this, they are encouraged by reckless pundits and politicians. “The storm
of rumours surrounding covid was by far the most intense I ever covered—
for an obvious reason: many of them were spread by the president of the
United States,” Mr McNeill writes. He deplores the way masks became
political badges in America, with Republicans shunning them and
Democrats sporting them even when cycling outdoors without helmets.
Tribalism makes for poor risk assessment.

Mr McNeill brims with ideas for curbing the next pandemic, including
sampling sewage for viruses. He would, controversially, end religious
exemptions to public-health rules. He omits some important things, such as
the mystery of why Sweden coped reasonably well with covid despite very
loose lockdown rules. But overall, this is a fascinating, ferocious fusillade
against humanity’s two deadliest enemies: disease and itself. ■

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Back Story

The real message of Vladimir Putin’s chat with

Tucker Carlson
Russia’s president is not a man to be trusted, still less to emulate or admire

Feb 9th 2024 |

IT CANNOT HAVE taken long for Tucker Carlson to grasp that his
interview with Vladimir Putin might not go to plan. His first question was
about the threat posed to Russia by NATO and America; President Putin’s
response was a disquisition on Rurik, a Varangian chieftain of the ninth
century, and the medieval reign of Yaroslav the Wise. To some on America’s
right, he is an enviably ruthless pragmatist, a warrior-prince of white
Christian nationalism. He came across as one of those cranks who fixate on
an arcane bit of history, except that his obsession—Russia’s historical claim
to Ukraine—is backed by a nuclear arsenal.
The interview, taped in the Kremlin on February 6th and released online two
days later, was the first Mr Putin has given to a Westerner since the invasion
of 2022. It came at a pivotal moment in more than one way. A shortage of kit
and munitions is hobbling Ukraine’s resistance. In America congressional
Republicans have held up further support for Kyiv, mindful of the
presidential election this November and Donald Trump’s candidacy in it.

A Trumpist provocateur and former host on Fox News, Mr Carlson gave Mr

Putin lots of chances to stir up American politics. For a supposed sorcerer of
electoral meddling, the president did a poor job. Might a new administration
in Washington help mend relations with Russia? “It is not about the leader,”
he said disobligingly. Invited, more than once, to blame NATO for the war—
a bogus explanation favoured by American isolationists—he repeatedly
blathered about history. Mr Carlson looked, now and then, like a man who
has drifted into a reverie over whether he left the oven on.

The president told flagrant lies. He said he launched the invasion of 2022 to
stop a war that Ukraine had started in 2014 after a CIA-backed coup.
Russian forces withdrew from Kyiv as a gesture of goodwill, he fibbed. He
alleged, as usual, that the Ukrainian government and its Jewish president
promote Nazi ideology.

Mr Carlson, who mixed up Ukraine’s revolution of 2014 with an earlier one,

was unwilling or unable to challenge such falsehoods. Nor did he raise
Russian war crimes, including those of which Mr Putin personally stands
accused, or the repression of domestic critics such as Alexei Navalny. (He
did press for the release of Evan Gershkovich, an American journalist
imprisoned in Russia.) Still, Mr Carlson came away with more than the file
of letters by a 17th-century Cossack which, bizarrely, Mr Putin presented to
him.

For Mr Putin made several remarks which, out of their rambling context,
will hearten those who say aiding Ukraine is not in America’s interests. In
the past he hinted, darkly, that Russia might use nukes, yet he told Mr
Carlson this idea was just a way for Western politicians to extort more tax.
He denied any interest in invading Poland or Latvia (though he once said the
same about Ukraine). Asked about the hypothetical deployment of American
troops to the conflict, he gave an answer that may be clipped and replayed.
“Don’t you have anything better to do?” Mr Putin scoffed, mentioning
America’s border and national debt.

After this docile questioning Mr Carlson was disparaged in the West as a

“useful idiot”. He may feel the boost to his profile—and his new streaming
website—is worth the disdain. Russian state media, meanwhile, trumpeted
Mr Putin’s performance. Watched closely, though, their exchange offered
insights of a kind that neither may have intended.

One is about the risks of rulers staying in power for decades. As his
comments revealed, even now Mr Putin resents the West’s role in the wars in
Yugoslavia of the 1990s and other long-ago crises. In democracies,
transitions of power are an amnesiac balm for such grievances, allowing
relations with other countries to heal and move on. In office for almost a
quarter of a century, Mr Putin is still avenging old grudges.

Another lesson lay in his sneering hauteur. He faced a hand-picked

interviewer who lobbed softball questions. Even so, Mr Putin’s answers
showed no regard for the patience or interests of viewers. But why would
they? He is not accustomed to explaining himself. He does not rule through
persuasion or charm but by violence and fear.

Power in Russia is opaque. It often seems that only one man is in the know,
and even he seems frequently to be flailing. Mr Carlson was granted rare
access to him and fluffed it. All the same, a vital message was broadcast
clearly: Mr Putin is not a leader to be trusted, much less to emulate or
admire. ■

Read more from Back Story, our column on culture:

A new “Mr & Mrs Smith” is about more than action, money and sex (Feb
1st)
How should cinema tackle the horror of the Holocaust? (Jan 16th)
A cultural guide to new year’s resolutions (Dec 30th)

Also: How the Back Story column got its name.

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The Economist reads

What to read about Indonesia
There’s much more to the country than Bali’s beaches, as these six books demonstrate

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The Economist reads

What to read about Indonesia

There’s much more to the country than Bali’s beaches, as these six books
demonstrate

Feb 13th 2024 |

Editor’s note: This article has been updated to take in the result of
Indonesia’s election.

INDONESIA HAS been called the biggest invisible country. It is the world’s
fourth most populous. With more than 13,000 islands, it is the biggest
archipelago. Yet few outsiders know much about it except that one of its
islands, Bali, has nice beaches. Indonesia has the world’s largest Muslim
population, but it is almost bewilderingly diverse. Islam is just one of six
officially recognised religions. The country’s 280m people belong to around
1,300 ethnic groups and speak more than 700 languages. The Indonesian
language itself uses words from English, Arabic, Dutch, Portuguese, Malay
and several Chinese dialects.

Indonesia declared independence from the Netherlands in 1945 (but the

Dutch waited until 1949 to recognise its sovereignty). Sukarno, the first
president, initially led a fissiparous parliamentary democracy but declared
martial law in 1957. Thereafter he presided over an authoritarian “guided
democracy”, backed by the army. In 1965 a failed coup, which the army
blamed on the Communist Party, gave it an excuse to take power directly.
Suharto, a general, ousted Sukarno and ruled as a dictator for the next 32
years, a period of both political repression and rapid economic development.
The CIA has described the massacres of communists that took place under
Suharto as “one of the worst mass murders of the 20th century”. They
continue to haunt the country. Unrest brought his rule to an end, leading to
the restoration of democracy and the beginning of a more hopeful period of
“reformasi”. But Indonesia’s democracy is an imperfect one, in which
politicians exchange favours for political support. On February 14th
Indonesia, the world’s third-largest democracy, elected a new president,
Prabowo Subianto. He will succeed the popular Joki Widodo, known as
Jokowi. The six books we’ve chosen illuminate the invisible country.

Indonesia, Etc. By Elizabeth Pisani. W. W. Norton; 416 pages; $17.95.

Granta; £9.99

If you read only one book about Indonesia, let it be this one. Elizabeth
Pisani, who worked there as an epidemiologist for many years, took a year
off to travel across the archipelago by boat, bus and bike. “Indonesia, Etc.”
is her account of that journey. Ms Pisani sleeps under a tree with a family of
nomads who wear little more than loincloths, rubs shoulders with the
bohemian glitterati of Jakarta, the capital, and has tea with a young man and
the body of his deceased grandmother, who were receiving visitors before
her funeral. Ms Pisani paints a portrait of a country that is democratic and
diverse. Different “groups are essentially living at different points in human
history, all at the same time”, she writes. She also shows that Indonesia is
prey to corruption and to the malign influence of patronage networks. Like
any traveller in Indonesia Ms Pisani experienced the unstinting generosity of
its people. She describes them vividly and with affection.
Liem Sioe Liong’s Salim Group. By Richard Borsuk and Nancy Chng.
Institute for Southeast Asian Studies; 610 pages; $79.35 and £53

The “nine dragons” are business empires controlled by Indonesians of

Chinese heritage who have outsize influence on the economy and politics.
These have become bigger and more complicated over time. Many are run
by the third or fourth generation of their founding families. To understand
how business and politics intersect, read “Liem Sioe Liong’s Salim Group”.
The book relates the history of Indonesia under Suharto using as its frame
the commercial conglomerate that was then the country’s most powerful. It
traces the life of Liem Sioe Liong, who was born poor in China and escaped
conscription by fleeing to Indonesia on a cargo ship. He built the Salim
Group, which has interests in many industries, including construction, coal
and forestry. It owns Indomie, one of the world’s biggest makers of instant
noodles. Enriched by interviews with Liem and his son Anthony, who
inherited the business, this is the best history yet of the sort of Indonesian
conglomerate that remains a central player in the country.

This Earth of Mankind. By Pramoedya Ananta Toer. Translated by Max

Lane. Penguin; 367 pages; $17.00

“This Earth of Mankind”, Indonesia’s most famous historical novel, is the

first book in the Buru Quartet, a series written during the 1970s in a
detention camp for suspected communists on Buru island. Pramoedya
Ananta Toer first told the novel’s story, set in Java in the final years of Dutch
colonial rule, to his cellmates. Eventually, after he was allowed to write,
Catholic priests and other visitors smuggled his papers out of the penal
colony. The quartet’s protagonist is Minke, a journalist and revolutionary
who comes of age as Indonesian nationalism begins to spread. An everyman
of sorts, Minke befriends characters who exemplify the kaleidoscope of
Indonesia, from the formidable concubine of a crazed Dutch man to a
working-class soldier turned servant. The Buru Quartet was published after
Pramoedya’s release in 1979 but Suharto’s government banned its sale. Even
though the ban was lifted in 2010, high schools do not include Pramoedya’s
works in their curriculums. That omission shows how nervous the
government remains about his Marxist ideology. The author was widely
thought to be South-East Asia’s leading candidate to win the Nobel prize for
literature, though he did not receive it before his death in 2006.
Race, Islam and Power: Ethnic and Religious Violence in Post-Suharto
Indonesia. By Andreas Harsono. Monash University Publishing; 256 pages;
$34.95 and £23.99

The collapse of Suharto’s dictatorship in 1998 was hailed by many as the

rebirth of Indonesian democracy. The country did become more liberal:
Indonesians were freer to practise their religions and speak their languages.
At the same time, politicians increasingly used Islam to accumulate power,
argues Andreas Harsono in this travelogue. “Race, Islam and Power”
examines religious and ethnic tensions since the fall of Suharto, which
sometimes led to violence across the archipelago, from Aceh, the only
province with sharia law, to West Papua, where conflict continues between
Papuan separatists and the government. A culture of impunity “expresses
itself in a systematic failure to hold accountable members of the security
forces and Islamist militants who commit abuses against religious and
gender minorities across Indonesia”, Mr Harsono writes. He takes readers
back to the Indonesian revolution, introduces them to Nahdlatul Ulama, the
world’s largest Muslim organisation, and interviews pilgrims at Sukarno’s
grave. Although Mr Harsono’s prose is occasionally wooden, the book is a
readable account of the ways that Islam has shaped Indonesia and been
shaped by it.

The Jakarta Method. By Vincent Bevins. PublicAffairs; 352 pages; $19.99

and £14.99

Bali is a surfer’s paradise. But in 1966 Indonesia’s armed forces killed at

least 80,000 Balinese, 5% of the island’s population, many of them on the
beaches. They were among 500,000-1m suspected communists slaughtered
by the army between 1965 and 1968. Many were not in fact communists.
“The Jakarta Method” tells this history in the context of the cold war.
America viewed Indonesia, which had the largest Communist Party outside
China and the Soviet Union, as the biggest of the South-East Asian
“dominoes” that could fall to a communist revolution, Vincent Bevins
writes. The American government gave the army lists of supposed
communists to be murdered. Mr Bevins uses interviews with survivors and
declassified documents to trace the history of America’s interference not just
in Indonesia but across South-East Asia and in Latin America. The offensive
against the Indonesian communists succeeded. The party’s liquidation by
government decree in 1966 “greatly reduced America’s stakes in Vietnam”,
where America was fighting a war to prevent a communist takeover, Mr
Bevins writes. Indonesia is still feeling the consequences of America’s cold-
war machinations. Although communists have little political influence, anti-
communism helps justify the power exercised by a few rich families.

The Question of Red. By Laksmi Pamuntjak. Amazon Crossing; 478 pages;

$14.95. Amazon Publishing; £8.99

“The Question of Red” is the tragic story of Amba and Bhisma, lovers
separated during the massacres of the 1960s. The novel also takes inspiration
from the “Mahabharata”, an ancient Indian epic about a warring family, and
extols the role of Buddhism, Hinduism and animism in shaping Indonesia.
The colour in question refers to communism and the blood spilt in
expunging it, among other things. The novel challenges the state’s version of
the communist purges, humanising the thousands of prisoners held on Buru
island. (Pramoedya makes a brief appearance.) Laksmi Pamuntjak weaves
together Hindu epics and cold-war history with an account of a grim period
in the late 1990s when Christians and Muslims massacred one another in the
province of Maluku, 2,400km east of Jakarta. Ms Pamuntjak wrote the novel
in English, then translated it into Indonesian, in which language it became a
bestseller. “Cigarette Girl”, a popular Indonesian television show now
streaming on Netflix, is a gripping love story that, like “The Question of
Red”, challenges the official narrative of Indonesia’s dark history during the
1960s.

Also try

Mr Prabowo, Indonesia’s new president, has a sordid past. One big reason
for his victory is that he had the support of Jokowi, one of the most popular
world leaders. Jokowi seems to be building a dynasty. A controversial court
decision allowed his son to become Mr Prabowo’s running-mate. Our pre-
election leader lays out what Jokowi’s exit means for Indonesia. During his
time in office Jokowi focused on promoting economic growth, mostly by
championing resource nationalism. New technology could secure
Indonesia’s role as the biggest producer of nickel, a component of batteries
for electric vehicles. We followed a pair of sandals across the country to
show how Indonesia is changing. Here is the story of a Chinese ice-cream
vendor that is the world’s fifth-largest fast-food chain; it is ubiquitous in
Indonesia yet almost unknown in the rich world. The country’s largest
Muslim group is spreading its moderate views across the Muslim world.

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Economic & financial indicators

Economic data, commodities and markets
Indicators ::

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Indicators

Economic data, commodities and markets

Feb 15th 2024 |
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Obituary
Jack Jennings was one of the Allied POWs who built the
Burma Railway
A line through the jungle :: The slave labourer for the Japanese died on January 19th, aged 104

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A line through the jungle

Jack Jennings was one of the Allied POWs who

built the Burma Railway
The slave labourer for the Japanese died on January 19th, aged 104

Feb 14th 2024 |

EVEN AS A young man, Jack Jennings was something of an expert on

wood. He knew his oak from his ash, and his elm from his beech. Since
leaving school at 14 he had worked with wood, first on the four-cutter
moulding machine and then by hand as a joiner. Over five years of classes at
Dudley Art College, in the Midlands, he made a work shed and workbench,
a succession of stools and a complete bedroom suite, all French polished, in
oak. He had just finished the wardrobe when in 1939, aged 20, he was called
up.

He also knew his tools: the different saws, hammers, chisels and blades, and
the long-handled adze which smoothed rough trunks into planks. What he
did not expect was that, with hand-held implements like these, he would
have to build a railway.

The railway in question was to run from Ban Pong in Thailand to

Thanbyuzayat in Burma (now Myanmar), for roughly 250 miles. Much of its
route lay through dense, sticky jungle. It was a project of the occupying
Japanese army, which used as slave labour around 200,000 Asian civilians
and 60,000 Allied prisoners-of-war. Mr Jennings found himself in that
category in February 1942, after his battalion in the 1st Cambridgeshire
regiment was forced to surrender to the Japanese during the fall of
Singapore. With that defeat, he began a forced trail from railway camp to
railway camp that lasted for three and a half years.

To build the embankments he and the others were given shovels, small picks
and wicker baskets for the earth. To make sure the bank was firm he would
have to tread it in, up and down, for hours. As the days passed, the earth-
loads had to be carried ever farther and higher. In the scalding heat, sweat
poured off him; he worked near-naked, and on his tired, bony body
mosquitoes feasted.

Most of the time, though, he worked as a carpenter. The railway, save the
narrow-gauge track, was built almost entirely of hardwoods and bamboo.
Trees had to be felled, debarked, cut into baulks and stacked by the line, or
tapered with an axe to make piles. Some had to be bodily lifted by teams of
men and cantilevered into place as bridges over dips and streams.
Hardwoods, he soon found, were as tough as they sounded, and felling them
could disturb a swarm of big red ants that bit like hell. Bamboo, used also
for fuel, sent splinters into flesh that could infect it. He protected his feet by
making wooden shoes fitted with a cross-strap, but a bamboo shaft still
caught his left leg and caused an ulcer as big as a pear.

Illness and accidents were legion. In all, the railway cost the lives of perhaps
90,000 Asian civilians and 16,000 prisoners-of-war. He himself got malaria,
dysentery and renal colic that put him in a hospital camp for nine months. Of
course, he was weak to start with: sleeping, as they all were, on filthy
bamboo slats in muddy shelters, subsisting on rice, vegetable water and a
teaspoon of sugar, and working 11-hour shifts. But at least he didn’t get the
cholera which at one point was claiming 15 victims a day. And at least he
didn’t fall into the depression that made a friend die one night from, as it
seemed to him, simply giving up.

Giving up didn’t run in his family. He had grown up poor, with nine people
sharing three bedrooms in a barely heated house. As a child he would
scrounge coal from the railway line that ran nearby, gathering whatever fell
from the steam trains. His father had died when he was eight; he therefore
had to leave school early, while his mother took in washing. His joinery he
learned at evening classes after work, rather wearily, struggling to transport
the lengths of timber on his bike. But he was proud of what he made.

His attitude, in fact, was almost chirpy. As chirpy as the harmonica he had
played since he was six, even joining a band in his teens to give concerts in
smart grey flannel trousers and a blue-and-white striped tie. In his first
wartime billets in England he would play at the drop of a hat; so much so,
that on the long voyage to Singapore he found that his harmonica had no
voice left, and threw it overboard. He felt sorry, in the railway years, that he
had done that. But he put away thoughts of home in England, even of his
fiancée Mary waiting patiently in Staffordshire, and pretended instead that
home was where he was, croaking bullfrogs, gruel and all. He would put up
with it and get on with it. Oddly enough, things seemed better then.

His various illnesses also had a positive side. They allowed him spells of rest
to get over them, and carpentry duties, in any case, were less strenuous than
bank-building. He was lucky that way. In the spare time he could find he
carved a chess set and made an octagonal table to play on, which got good
use. The pieces began as off-cuts from bed boards, half of them carefully
blackened with permanganate of potash. To bring back something beautiful
from his prison was deeply satisfying.

What he could not improve or change was the behaviour of the Japanese
guards. Prisoners who broke the rules might be clapped in bamboo cages.
Those who tried to escape were beheaded. If his pace of work slackened, he
got jabbed with a rifle butt. “Dame! Dame!” was the usual shout from the
guards: “Useless, no good!” Once, when he saluted a Japanese guard (as was
required), he got slapped in the face for it. He could not guess why. His
happy-go-lucky attitude never applied as far as his captors were concerned.
When the war at last ended, he quickly resumed the life he had intended to
have in 1939. He married Mary, had two daughters, went back to joinery and
bought a new harmonica, which he played into his 100s, leading singalongs
at his favourite local café in Devon. “Onward Christian Soldiers” was a
favourite party piece, and “Name that Tune” another.

As for the Burma Railway, he buried it deep. Only in the 1990s did he start
to write and talk about it. Four times after that he went back to Thailand, and
was surprised to find how cared-for and lovely the camp sites and
graveyards were. Even the sight of the railway he had built, though almost
all of it had gone, raised a smile from him. The ghosts of the past were laid;
he could again be happy wherever he was. ■

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https://www.economist.com/obituary/2024/02/14/jack-jennings-was-one-of-the-allied-
pows-who-built-the-burma-railway

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