[Fri, 03 Nov 2023]

The world this week

Leaders
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Asia
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Europe
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Finance & economics
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Culture
Economic & financial indicators
Obituary
The world this week
Politics
Business
KAL’s cartoon
This week’s cover
The world this week

Politics
Nov 2nd 2023

Israeli ground forces pushed deeper into Gaza to attack Hamas militants.
The Israelis said they killed one of the leaders of the October 7th terrorist
attack and a number of other Hamas men in an air strike on Jabalia, north of
Gaza city; the Hamas-run authorities said scores of civilians had died. One
of the 240 hostages held by Hamas, a female soldier, was rescued by the
Israelis. Binyamin Netanyahu, Israel’s prime minister, rejected calls for a
ceasefire. He said people who are calling for one are asking Israel “to
surrender to barbarism”.

The humanitarian crisis continued to build in Gaza. The death toll among
Palestinians now exceeds 8,000, according to the authorities in the enclave.
Some 1.4m people have been displaced. Shelters are overflowing. More aid
lorries were allowed in, though their number still fell far short of the 500 a
day that had been entering the area before the war started. The first trickle of
civilians left Gaza through the Rafah border crossing into Egypt under a deal
negotiated by Qatar. Only foreign nationals and the severely wounded are
being allowed to leave.

Israel sent missile boats to the Red Sea to head off potential strikes from
Yemen, where the Houthi militia claimed to have launched rockets and
drones at Israel. The Israeli army said it had intercepted an “aerial threat”.
The Houthis are backed by Iran and control large parts of Yemen, including
the capital, Sana’a.

India’s government said it would explore all legal options to help secure the
release of eight Indian nationals who have been sentenced to death in Qatar
for spying for Israel. The eight men formerly served in the Indian navy.

An antisemitic mob attacked the main airport in Dagestan, a mostly Muslim

Russian republic in the North Caucasus. Hundreds of men swarmed the area
looking for Jewish passengers who had arrived on a flight from Tel Aviv.
Scores of them were arrested after they clashed with police.

The haters
Attacks on Jewish people and symbols around the world have risen
markedly. According to the Anti-Defamation League, a Jewish organisation
in New York, antisemitic incidents rose in America by 388% between
October 7th and 23rd compared with the same period last year. Britain saw
an increase of 689% over three weeks, according to the Community Security
Trust, another Jewish group. Attacks on Muslims have also increased.

Republicans in America’s House of Representatives introduced their own

bill for $14.3bn in emergency aid to Israel, setting up a clash with the White
House. The Republican bill hives off money for Israel from a wider package
put forward by Joe Biden that includes extra funding for Ukraine. It offsets
this by cutting $14.3bn that has been allocated for the Internal Revenue
Service under the Inflation Reduction Act, Mr Biden’s signature bill.

The main opposition presidential candidates standing in Congo’s general

election next month called for urgent measures to prevent manipulation of
the results. Electoral authorities have not published voters’ roles or lists of
polling stations, making it difficult to monitor voting independently.
Ziraat Katilim, a Turkish bank, has become the first foreign lender to operate
in Somalia since 1970, when a Marxist government nationalised the
financial system.

Li Keqiang, a former prime minister of China, died of a heart attack, aged

68. From 2012 to 2022 Li was the Communist Party’s second-highest-
ranking official, but he was overshadowed by Xi Jinping, who has
consolidated power. Censors have deleted many of the online tributes to Li,
fearing they might lead to dissent or demonstrations.

Officials in Pakistan said that tens of thousands of Afghans who reside in

the country illegally had obeyed an order to leave ahead of a November 1st
deadline. The Pakistani government issued an order for all illegal migrants,
meaning Afghans, to go following a wave of suicide-bombings that it blames
on Afghan terrorists. Around 1.7m of the 4m Afghans who live in Pakistan
are there illegally. The government says it will forcibly expel them if they do
not depart voluntarily.

Opposition parties in Bangladesh claimed that the police had arrested

thousands of their supporters following clashes at anti-government
demonstrations, in which two people died. The protesters are calling for
Sheikh Hasina to resign as prime minister ahead of a general election that is
due to take place in January.
Emmanuel Macron visited Kazakhstan, where he praised the country’s
leadership for not siding with Russia in its war on Ukraine. The French
president’s trip rattled the Russians, who are worried about the growing
influence of the West in the former Soviet Central Asian states. Meanwhile,
46 miners died in a fire at a coal mine in Kazakhstan. The mine’s operator,
ArcelorMittal, recently agreed to transfer ownership to the Kazakh
government.

Lest we forget
A senior official at the UN told the Security Council that 40% of Ukraine’s
population, or around 18m people, are in need of humanitarian assistance,
and that the figure is likely to rise over the coming winter. Russia is expected
once again to focus on knocking out power stations once temperatures start
to plummet. The official said that 9,900 civilians are confirmed to have been
killed in the war, but that the true figure was probably much higher.

Montenegro got a new coalition government, following an election in June.

Milojko Spajic of the centrist Europe Now Movement is the new prime
minister. Aged 36 Mr Spajic, a former banker at Goldman Sachs, is one of
the world’s youngest leaders.
Venezuela’s Supreme Court annulled the opposition’s primaries process,
nearly two weeks after an overwhelming victory for María Corina Machado.
Ms Machado is a liberal and vocal critic of Nicolás Maduro’s autocratic
regime. Mr Maduro had already barred her from holding office, but it was
hoped that the lifting of most American sanctions would lead him to
liberalise. In America Republicans called for the sanctions to be reinstated.

Saudi Arabia seemed set to host the football World Cup in 2034, after
Australia, the other potential host, decided not to bid. Questions have been
raised about how women will be treated at the tournament (public places are
segregated). Speculation is rife that the Saudis may relax a strict prohibition
on alcohol by creating “fan zones”.
This article was downloaded by zlibrary from https://www.economist.com/the-world-
this-week/2023/11/02/politics
The world this week

Business
Nov 2nd 2023

The Federal Reserve left its benchmark interest rate on hold again, at a
range of between 5.25% and 5.5%. Inflation has slowed, but uncertainty
remains over the sell-off in the bond market, the oil price and the tight
labour market. The central bank left the door open to a rate rise at its next
meeting in December.
America’s stockmarkets all lost ground in October, the third consecutive
month of declines and the longest losing streak since the start of the covid-
19 pandemic in 2020. The S&P 500 slid by 2.2% during the month, the
NASDAQ composite by 2.8% and the Dow Jones industrial average by
1.4%. Investors are adapting to a world of higher interest rates, which reduce
the present value of future earnings.

The Bank of Japan relaxed its policy of capping long-term interest rates for
the second time in three months. It will now allow the yield on ten-year
Japanese government bonds to rise above 1%, treating this level as “a
reference” rather than a strict ceiling. Ueda Kazuo, the bank’s governor,
attributed the decision to the sharp rise in American Treasury yields. The
BoJ remains the world’s only central bank to have a negative policy interest
rate, of -0.1%.

In a busy week for the big central banks, the Bank of England also left its
key rate on hold, at 5.25%. It is the second month in a row that the rate has
been held. Annual inflation in Britain is still high at 6.7%, far above the
bank’s target of 2%.

The euro area’s GDP grew by just 0.1% in the third quarter, year on year.
Over the previous three months it shrank by 0.1%, dragged down by
Germany’s economy, which also contracted by 0.1%. That was in part a
result of reduced household spending, but also of subdued global demand for
Germany’s industrial goods. There was also some good news for the
currency bloc, though. Annual inflation tumbled to 2.9% in October, from
4.3% in September.

China’s manufacturing industry contracted again in October, according to

the official purchasing-managers’ index. On that measure manufacturing has
shrunk in six of the past seven months.

The United Auto Workers union ended its six-week strike after reaching
pay deals with Ford, General Motors and Stellantis, the parent company of
Fiat-Chrysler. All three Detroit carmakers have agreed to increase workers’
pay by 25% over a four-year contract. Ford said recently that the stoppage
cost it $1.3bn in operating earnings, GM reckoned it was losing $200m a
week, and Stellantis said it lost $3.2bn in revenue.

Putting the brakes on

Meanwhile GM’s self-driving car business, Cruise, decided to halt all its
robotaxi operations after California suspended the service in the state
because of safety concerns. Cruise’s other markets include Dallas, Houston,
Miami and Phoenix.
Panasonic reduced the profit outlook for its electric-car battery business,
blaming a slowdown in demand for some Tesla models. Panasonic has made
a big bet on making batteries for EVs and operates a factory with Tesla in
Nevada. Tesla’s share price has fallen sharply in recent weeks, as investors
fret that it will sell fewer cars in the future.

WeWork is reportedly preparing to file for bankruptcy protection. The

office-sharing company is mired in debt and is now worth just tens of
millions of dollars, a far cry from its valuation of $47bn in January 2019,
when exuberance about its prospects peaked.

Big oil companies reported bumper quarterly earnings. BP’s headline profit
came in at $4.9bn for the third quarter, Chevron made $6.5bn in net income,
ExxonMobil $9.1 and Shell $5.8bn. Those were all higher than in the
previous quarter, and largely reflect rising oil prices from July to September.

Orsted, based in Denmark and the world’s largest developer of offshore

wind power, announced that it was withdrawing from two projects off the
coast of New Jersey, citing “adverse impacts” relating to supply chains and
increased interest rates. The company is writing down $4bn in impairments.
The industry has been hit by a storm of problems. General Electric said
recently it expects its wind division to lose $2bn over two years.

Thinking, fast and slow

Britain hosted the first global artificial-intelligence summit at Bletchley
Park, the base for Alan Turing’s band of codebreakers during the second
world war. Attendees included Kamala Harris, the American vice-president;
Wu Zhaohui, China’s vice-minister of science and technology; and Elon
Musk, the boss of Tesla. The conference aimed to hammer out a set of
international rules for the safe and responsible development of AI.

X, formerly Twitter, is now worth $19bn, according to internal memos

reported in the press. Elon Musk paid $44bn for the company when he
bought it last year. He has struggled to turn the platform into an “everything
app”. Ever the optimist, in March Mr Musk told staff that he saw “a clear,
but difficult, path” to achieving a valuation of at least $250bn.
This article was downloaded by zlibrary from https://www.economist.com/the-world-
this-week/2023/11/02/business
The world this week

KAL’s cartoon
Nov 2nd 2023

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

Governments must not rush into policing AI

The world wants to regulate AI, but does not quite know how
Meet Ernie, China’s answer to ChatGPT

KAL’s cartoon appears weekly in The Economist. You can see last week’s
here.
This article was downloaded by zlibrary from https://www.economist.com/the-world-
this-week/2023/11/02/kals-cartoon
The world this week

This week’s cover

How we saw the world
Nov 2nd 2023

THIS WEEK our cover looks at the threats facing the world economy, which
has confounded even the most optimistic expectations with its performance
over the past year. Only a year ago everyone agreed that high interest rates
would soon bring about a recession. But those expectations have not been
met. Around the world, inflation is falling, unemployment has mostly stayed
low and the big central banks may have stopped their monetary tightening.
Unfortunately, this success cannot last: interest rates look set to remain high,
consumers’ excess savings—accumulated during the pandemic—will
eventually run out and governments have towering debts to service. Peer
ahead, and threats abound.
Leader: The world economy is defying gravity. That cannot last
Briefing: Markets think interest rates could stay high for a decade or more
Finance and economics: How Japan poses a threat to the global financial
system
This article was downloaded by zlibrary from https://www.economist.com/the-world-
this-week/2023/11/02/this-weeks-cover
Leaders
The world economy is defying gravity. That cannot last
Why Israel must fight on
Trump’s tariff plans would be disastrous for America and the
world
How to stop turmeric from killing people
Why the rules on embryo experiments should be loosened
Britain’s prisons show up wider flaws in government
Too good to be true

The world economy is defying gravity. That cannot

last
Threats abound, including higher-for-longer interest rates
Nov 2nd 2023

EVEN AS WARS rage and the geopolitical climate darkens, the world
economy has been an irrepressible source of cheer. Only a year ago everyone
agreed that high interest rates would soon bring about a recession. Now even
the optimists have been confounded. America’s economy roared in the third
quarter, growing at a stunning annualised pace of 4.9%. Around the world,
inflation is falling, unemployment has mostly stayed low and the big central
banks may have stopped their monetary tightening. China, stricken by a
property crisis, looks likely to benefit from a modest stimulus.
Unfortunately, however, this good cheer cannot last. The foundations for
today’s growth look unstable. Peer ahead, and threats abound.

The irrepressible economy has encouraged bets that interest rates, though no
longer rising rapidly, will not fall by much. Over the past week the European
Central Bank and Federal Reserve have held rates steady; the Bank of
England was expected to follow suit shortly after we published this on
November 2nd. Long-term bond yields have accordingly risen sharply.
America’s government must now pay 5% to borrow for 30 years, up from
just 1.2% in the depths of the pandemic recession. Even economies known
for low rates have seen sharp increases. Not long ago Germany’s borrowing
costs were negative; now its ten-year bond yield is nearly 3%. The Bank of
Japan has all but given up on its promise to peg ten-year borrowing costs at
1%.

Some people, including Janet Yellen, America’s treasury secretary, say these
higher interest rates are a good thing—a reflection of a world economy in
the rudest of health. In fact, they are a source of danger. Because higher rates
are likely to persist, today’s economic policies will fail and so will the
growth they have fostered.

To see why today’s benign conditions cannot continue, consider one reason
why America’s economy in particular has fared better than expected. Its
consumers have been spending the cash they accumulated during the
pandemic from handouts and staying at home. Those excess savings were
expected to have been depleted by now. But recent data suggest households
still have $1trn left, which explains why they can get away with saving less
out of their incomes than at any point in the 2010s.

When those excess savings buffers have been run down, high interest rates
will start to bite, forcing consumers to spend less freely. And, as our Briefing
explains, trouble will start to emerge across the world economy if rates stay
higher for longer. In Europe and America business bankruptcies are already
rising; even companies that locked in low rates by issuing long-term debt
will in time have to face higher financing costs. House prices will fall, at
least in inflation-adjusted terms, as they respond to dearer mortgages. And
banks holding long-term securities—which have been supported by short-
term loans, including from the Fed—will have to raise capital or merge to
plug the holes blown in their balance-sheets by higher rates.

Fiscal largesse has added to the world economy’s sugar rush. In a higher-for-
longer world, it too looks unsustainable. According to the IMF, Britain,
France, Italy and Japan are all likely to run deficits in the region of 5% of
GDP in 2023. In the 12 months to September America’s deficit was a
staggering $2trn, or 7.5% of GDP after adjusting for accounting distortions
—about double what was expected in mid-2022. At a time of low
unemployment, such borrowing is jaw-droppingly reckless. All told,
government debt in the rich world is now higher, as a share of GDP, than at
any time since after the Napoleonic wars.

When interest rates were low, even towering debts were manageable. Now
that rates have risen, interest bills are draining budgets. Higher-for-longer
therefore threatens to pit governments against inflation-targeting central
bankers. Already, Ms Yellen has felt obliged to argue that Treasuries carry
no risk premium, and Jerome Powell, the Fed’s chairman, has insisted that
his bank would never cut rates and let inflation rip to ease pressure on the
government’s budget.

Whatever Mr Powell says, a higher-for-longer era would lead investors to

question governments’ promises both to keep inflation low and also to pay
their debts. The ECB’s bondholdings are already becoming skewed towards
the Italian government debt that it tacitly backstops—a task that has become
far harder in a high-rate world. Even when Japanese government-bond yields
were a paltry 0.8% last year, 8% of Japan’s budget went on interest
payments. Imagine the strain if yields reached even Germany’s relatively
modest levels. Some governments would go on to tighten their belts as a
result. But doing so may bring economic pain.

These strains make it hard to see how the world economy could possibly
accomplish the many things that markets currently expect of it: a dodged
recession, low inflation, mighty debts and high interest rates all at the same
time. It is more likely that the higher-for-longer era kills itself off, by
bringing about economic weakness that lets central bankers cut rates without
inflation soaring.

A more hopeful possibility is that productivity growth soars, perhaps thanks

to generative artificial intelligence (AI). The resulting boost to incomes and
revenues would make higher rates bearable. Indeed, figures published on
November 2nd are expected to show that America’s measured productivity
surged in the third quarter. The potential of AI to unleash further
productivity gains may explain why higher-for-longer has so far not
punctured stockmarkets. Were it not for the rising valuations of seven tech
firms, including Microsoft and Nvidia, the S&P 500 index of American
stocks would have fallen this year.

Don’t look down

Set against that hope, though, is a world stalked by threats to productivity
growth. Donald Trump vows swingeing new tariffs should he return to the
White House. Governments are increasingly distorting markets with
industrial policy. State spending is growing as a share of the economy as
populations age, the green-energy transition beckons and conflicts around
the world require more spending on defence. In the face of all this, anyone
betting that the world economy can just keep carrying on is taking a huge
gamble. ■

For subscribers only: to see how we design each week’s cover, sign up to our
weekly Cover Story newsletter.
This article was downloaded by zlibrary from
https://www.economist.com/leaders/2023/11/02/the-world-economy-is-defying-gravity-
that-cannot-last
The Middle East

Why Israel must fight on

Israel’s bombardment of Gaza is taking a terrible toll. But unless Hamas’s
power is broken, peace will remain out of reach
Nov 2nd 2023

ISRAELI FORCES are entering a hellscape of their own making. One in ten
buildings in Gaza has been pulverised by Israeli aircraft and artillery. Over
8,000 Palestinians have been killed, many of them children. Shortages of
fuel, clean water and food, imposed by an Israeli blockade, pose a growing
threat to the lives of many thousands more.

Around the world the cry is going up for a ceasefire or for Israel to abandon
its ground invasion. Hearing some Israeli politicians call for vengeance,
including the discredited prime minister, Binyamin Netanyahu, many people
conclude that Israel’s actions are disproportionate and immoral. Many of
those arguing this believe in the need for a Jewish state, but fear for a Jewish
state that seems to value Palestinian lives so cheaply. They worry that the
slender hopes for peace in this age-old conflict will be buried under Gaza’s
rubble.
Those are powerful arguments, but they lead to the wrong conclusion. Israel
is inflicting terrible civilian casualties. It must minimise them and be seen to
do so. Palestinians are lacking essential humanitarian supplies. Israel must
let a lot more aid pass into Gaza. However, even if Israel chooses to honour
these responsibilities, the only path to peace lies in dramatically reducing
Hamas’s capacity to use Gaza as a source of supplies and a base for its army.
Tragically, that requires war.

To grasp why, you have to understand what happened on October 7th. When
Israelis talk about Hamas’s attack as an existential threat they mean it
literally, not as a figure of speech. Because of pogroms and the Holocaust,
Israel has a unique social contract: to create a land where Jews know they
will not be killed or persecuted for being Jews. The state has long honoured
that promise with a strategic doctrine that calls for deterrence, early
warnings of an attack, protection on the home front and decisive Israeli
victories.

Over the past two decades Israel lost sight of the fact that Palestinians
deserve a state, too. Mr Netanyahu boosted Hamas to sabotage Palestinian
moderates—a cynical ploy to help him argue that Israel has no partner for
peace. Instead, Palestinian suffering became something to manage, with a
mix of financial inducements and deterrence, kept fresh by repeated short
wars.

On October 7th Hamas destroyed all this, including Mr Netanyahu’s brittle

scheme. The terrorists ripped apart Israel’s social contract by shattering the
security doctrine created to defend it. Deterrence proved empty, early
warning of an attack was absent, home-front protection failed and Hamas
murdered 1,400 people in Israeli communities. Far from enjoying victory,
Israel’s soldiers and spies were humiliated.

The collapse of Israel’s security doctrine has unleashed a ferocious

bombardment against the people of Gaza. The reason is an attempt to restore
that founding principle. Israel wants its 200,000 or so evacuees to be able to
return home. It wants to show its many enemies that it can still defend itself.
Most of all, it has come to understand that, by choosing to murder Israelis
regardless of how many Palestinians will die in Gaza, Hamas has proved that
it is undeterrable.
The only way out of the cycle of violence is to destroy Hamas’s rule—which
means killing its senior leaders and smashing its military infrastructure. The
suggestion that a war which entails the deaths of thousands of innocent
people can lead to peace will appal many. In the past one act of violence has
led to the next. That is indeed the great risk today.

However, while Hamas runs Gaza, peace is impossible. Israelis will feel
unsafe, so their government will strike Gaza pre-emptively every time
Hamas threatens. Suffocated by permanently tight Israeli security and killed
as Hamas’s human shields in pre-emptive Israeli raids, Palestinians will be
radicalised. The only way forward is to weaken its control while building the
conditions for something new to emerge.

That starts with new leadership for both sides. In Israel Mr Netanyahu will
be forced from office because he was in power on October 7th, and because
his reputation for being Israel’s staunchest defender is broken. The sooner he
goes the better. His successor will need to win a mandate for a new security
doctrine. That should involve a plan for peace and reining in Israeli settlers,
who even now are molesting and killing Palestinians on the West Bank.

The Palestinians need moderate leaders with a democratic mandate. At the

moment they have none. That is partly because Mr Netanyahu boosted
Hamas, but also because Mahmoud Abbas, the president of the Palestinian
authority, has sidelined potential rivals. The question is how to stop Hamas
or its successor from seizing back control of Gaza before fresh leaders can
emerge from fair elections.

Hence, the second condition for peace: a force to provide security in Gaza.
Israel cannot supply it as an occupying power. Instead the strip needs an
international coalition, possibly containing Arab countries that oppose
Hamas and its backer, Iran. As we have argued in previous leaders, creating
a coalition that all sides can agree on will take committed leadership from
the United States and a leap of faith from the region.

And that leads back to the condition that makes all this possible: a war to
degrade Hamas enough to enable something better to take its place. How
Israel fights this war matters. It must live up to its pledge to honour
international law. Not only is that the right thing to do, but Israel will be able
to sustain broad support over the months of fighting and find backing to
foster peace when the fighting stops only if it signals that it has changed.
Right now, this means letting in a lot more humanitarian aid and creating
real safe zones in southern Gaza, Egypt, or—as the best talisman of its
sincerity—in the Negev inside Israel.

A ceasefire is the enemy of peace, because it would allow Hamas to continue

to rule over Gaza by consent or by force with most of its weapons and
fighters intact. The case for humanitarian pauses is stronger, but even they
involve a trade-off. Repeated pauses would increase the likelihood that
Hamas survives.

Nobody can know whether peace will come to Gaza. But for the sake of
Israelis and Palestinians it deserves to have the best possible chance. A
ceasefire removes that chance entirely. ■
This article was downloaded by zlibrary from
https://www.economist.com/leaders/2023/11/02/why-israel-must-fight-on
Trade wars: episode II

Trump’s tariff plans would be disastrous for

America and the world
You may think his worst ideas won’t get far. Sadly, on trade he has been
singularly influential
Nov 2nd 2023

JOE BIDEN’S approval rating is languishing and Donald Trump is cruising

to the Republican presidential nomination, so it is wise to consider what
another Trump term might bring. Though much about Mr Trump’s policy
agenda is chaotic, in one area he is crystal clear: he wants to raise tariffs. A
lot. He has proposed slapping a 10% tariff on all imported goods, thereby
trebling the country’s average and taking American trade protectionism back
to its mid-20th-century heyday.

This is not idle talk. Mr Trump’s lieutenants want to double down on the bad
bets they placed in his presidency. Robert Lighthizer, Mr Trump’s chief trade
negotiator, has proposed a universal tariff that would be as high as is
necessary to eliminate the country’s trade deficit. Peter Navarro, a prickly
adviser in Mr Trump’s White House, has called for total reciprocity: if any
country has high tariffs on specific American products, Mr Trump should
match them. Economic populists, meanwhile, are trying to sell Americans on
the merits of all this. On October 28th the Wall Street Journal published an
essay by one arguing “Why Trump is right about tariffs”. In fact, the policy
would not only fail to achieve its goals, it would also inflict grievous harm
on America and the world economy.

Mr Trump and his fellow travellers argue that tariffs strike three targets: they
lead to a reduction in America’s gaping trade deficit, a source (in their view)
of economic weakness; they encourage businesses to manufacture at home;
and they counter the manifest injustice of a global economic system in which
other countries, especially China, exploit America’s openness.

Each of these propositions is bunk. The argument that tariffs determine the
size of the trade deficit is wrong in both theory and practice. The
fundamental driver of the trade balance is America’s low national savings
rate, which in part reflects its consumer-led economy. Rather than being a
sign of fragility, its appetite for imports is proof of its vitality. America has
run a trade deficit every year since 1975, during which time it has been the
world’s pre-eminent economic power. And Mr Trump’s own experience
shows that tariffs alone do little to change the trade deficit. It widened by
nearly 25% during his time in office.

Tariffs do help some manufacturers. Protected industries tend to expand their

domestic market share, as steelmakers have since Mr Trump coddled them
with tariffs. But at what cost? Sheltered companies can get away with being
less efficient than their global rivals. Other domestic industries suffer: one
study estimates that steel users paid an outrageous $650,000 for each
steelmaking job created by Mr Trump’s tariffs. And although Mr Trump
claims that tariffs are paid for “mostly by China”, the burden actually falls
on American consumers, via higher prices. A 10% universal levy would cost
each American household an average of $2,000 a year.

Last, tariffs will not fix the global trading system but will make things
worse. Other countries would retaliate, as they did during Mr Trump’s first
rodeo. That would amount to a global tax on trade, adding to inflation risks.
The World Trade Organisation would go to the brink, having been weakened
by American administrations over the years, including the present one. And
tariffs would tear at America’s ties with its allies, undermining attempts to
forge supply chains that do not hinge on China.

Regrettably, Mr Biden does not have much standing to criticise Mr Trump

on protectionism. His subsidies for electric vehicles, wind turbines and more
besides discriminate against foreign countries and may end up squandering
public money. He has left most of Mr Trump’s original tariffs untouched and
may reapply levies on European steel as transatlantic talks falter.

That sorry record is all the more reason to fear Mr Trump’s plans. On trade
he has been influential, turning America from a force for free trade into an
apologist for protectionism. With a 10% tariff, that ugly transformation
would be complete. ■
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https://www.economist.com/leaders/2023/11/02/donald-trumps-tariff-plans-would-
inflict-grievous-damage-on-america-and-the-world
Lead poisoning

How to stop turmeric from killing people

Developing countries—especially India—should learn from Bangladesh
Nov 2nd 2023

TURMERIC, A FLOWERING plant of the ginger family, has long been

prized in Ayurvedic medicine for its anti-inflammatory properties and in
Asian cuisines for its earthy flavour and vibrant hue. Haldi, the spice’s Hindi
name, is derived from the Sanskrit for “golden coloured”. But for the
millions of South Asians who habitually consume it, turmeric’s skin-staining
yellowness can be deceptive and deadly.

To heighten their colour, the rhizomes from which the spice is extracted are
routinely dusted with lead chromate, a neurotoxin. The practice helps
explain why South Asia has the highest rates of lead poisoning in the world.
The heart and brain diseases it causes—to which children are especially
susceptible—accounted for at least 1.4m deaths in the region in 2019. The
economic cost is crippling; that year lead poisoning is estimated to have
lowered South Asian productivity by the equivalent of 9% of GDP. Yet it
turns out that with clever policies, enlightened leadership and astute
messaging this blight can be greatly reduced. Bangladesh has shown how.

At the instigation of teams from Stanford University and the International

Centre for Diarrhoeal Disease Research, Bangladesh, a research institute, the
country launched a nationwide campaign against turmeric adulteration in
2019. Rules against adulteration were enforced and well-publicised stings
carried out against wholesalers who persisted in it. The prime minister,
Sheikh Hasina, discussed the problem on television. Bangladeshi bazaars
were plastered with warnings against it. Local media also publicised it.

According to newly published data, the country thereby reduced the

prevalence of turmeric adulteration in its spice markets to zero in just two
years. That slashed lead levels in the blood of Bangladeshi turmeric-mill
workers by about a third. Nationwide, it probably saved thousands of lives.
Early analysis suggests that each extra year of healthy life cost a mere $1 to
preserve. Achieving the same benefit through cash transfers is estimated to
cost over $800.

Other countries where lead poisoning is rife should follow Bangladesh.

Recent estimates suggest a staggering 815m children—one in three of the
global total—have been poisoned by the metal. According to the Centre for
Global Development, a think-tank in Washington, this disaster explains a
fifth of the learning gap between children in rich and poor countries.

The poisoning has many causes. Weak or absent regulators permit lead-
infused cooking utensils, cosmetics and other products. Yet adulterated
turmeric looks like a major culprit almost everywhere, chiefly owing to poor
practice in India, which produces 75% of the spice. India was the source of
much of the poisonous pigment found in Bangladesh and is estimated to
have the highest incidence of lead poisoning of any country.

Bangladesh’s response to the problem, if properly understood, could work in

many countries. Its key elements included an openness to foreign expertise;
effective NGOs; a willingness by the government to work with them; and the
formation of an even broader coalition, also including journalists and private
firms, to maximise the effort. This low-cost, co-ordinated and relentless
approach to problem-solving, familiar to admirers of Bangladesh, has
underpinned its outstanding development success over the past two decades.
And Sheikh Hasina deserves credit for it—even though her commitment to
such enlightened policymaking appears to be flagging.

Leaders and lead poisoning

With an election approaching, the world’s longest-serving woman prime
minister, Bangladesh’s ruler for two decades, is growing more authoritarian
and irascible. The importance of the turmeric campaign should help
persuade her to reverse course. As it shows, the Bangladeshi model rests on
organising, collaboration and consensus, not political fiat, and there is much
more than her legacy riding on it.

India, whose leader, Narendra Modi, is in the process of driving out foreign
donors and dismantling any NGO he considers unfriendly to him, has much
to learn from Bangladesh’s more open, pragmatic approach. The developing
world has countless health and environmental problems that it might help
solve. For these many reasons, it should be sustained and widely copied. ■
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Coming of age

Why the rules on embryo experiments should be

loosened
Lifting the 14-day rule would help researchers understand how organs
develop
Nov 2nd 2023

WHEN LOUISE BROWN, the first child created through in-vitro

fertilisation, was born in 1978, the idea of creating an embryo in a dish was
very controversial. More than 12m IVF babies later, all bar some of the
devoutly religious treat the technique as routine. Yet a rule invented in
Britain in the 1980s still determines the sorts of research that can be done in
the world’s embryology labs. The 14-day rule says that embryos must not be
grown in a dish for longer than two weeks after fertilisation.

First suggested in 1984, the rule tries to balance the benefits of research with
the disquiet about experimenting on things that could potentially develop
into human beings. It is law in several countries, including Britain and
Canada, and followed voluntarily by researchers elsewhere. By reassuring
doubters that scientists would not be allowed to act recklessly, the rule has
made human-embryo research less controversial than it might otherwise
have been.

But 1984 was a long time ago and later this month Britain’s fertility
regulator will seek more flexibility. However, it will not go so far as to scrap
the rule. We think that is a mistake, both in Britain and elsewhere. Four
decades of research have shifted the balance of benefits and drawbacks.
Regulation should change to reflect this new reality.

Part of this is that the 14-day limit creates a black box in embryonic
development into which scientists cannot peer. The box opens up again after
about 28 days, when scientists can study aborted embryos; four weeks is
roughly how long it takes most women to realise they are pregnant and seek
abortions.

It is during this unobserved two-week period that the earliest organs begin to
develop. Congenital heart disease, the most common birth defect in Britain,
affects around one in 150 babies. It is caused by abnormal development of
the heart, much of which takes place in the black box. The ability to study
embryos at this stage could lead to new treatments. It might also shed light
on what leads to recurrent miscarriages, a heartbreak facing one in 100
British couples trying for a baby.

Loosening the rules might also help the development of a technology that
could in time reduce the need to experiment on embryos at all. As we
describe in our Science & technology section, one of the biggest innovations
in embryology in recent years is the invention of “embryoids”. These are
made not from a sperm and egg but from protean stem cells, which can be
persuaded to transform into almost any type of tissue.

The technology holds great promise, especially for those who still regard
research on real embryos as wrong. Embryoids can be mass-produced in a
way that embryos cannot. They lack the ability to develop into humans,
making them more ethically straightforward. The problem is that, to check
that they are accurate stand-ins, scientists need to compare embryoids with
the real thing. The 14-day rule limits their ability to do that.
If the rule were scrapped, what might replace it? In 2021 the International
Society for Stem Cell Research recommended that, if the public agreed,
countries should switch to a case-by-case review, in which scientists seek
approval for every study they wish to run. Unlike a time-based ban, this
would be flexible. Regulators could grant permission based on the likely
benefits of each proposal, public opinion and developments in the field.

This system could be analogous to that for animal research, in which the
more human-like an animal is, the more protection it is given (mice therefore
receive less protection than monkeys). Similar distinctions could hold for
embryos and embryoids, too. Given the availability of aborted embryos,
researchers wanting to culture live embryos beyond 28 days might have to
work harder to convince regulators that their study should go ahead.

Although today it is not possible to produce embryoids that can develop into
live humans, some scientists worry that might not be the case for ever. If
they are right, then a case-by-case system could apply strict limits to
research involving such creations without the need for new laws.

One objection to such a system is that researchers may eventually capture

their regulators. But strong feelings around the ethics of embryo research
make it unlikely that an overly liberal regulator could remain out of step
with public opinion for long. Another worry is that such a system sets off a
race to the bottom, with unscrupulous researchers decamping to the country
with the most pliant approval committee. Something similar could have
happened with the 14-day rule—but it did not.

The 14-day rule is a good example of how sensible regulations can make the
world safe for valuable but controversial research. After four decades it has
reached the end of its usefulness. Just as a generation of test-tube babies now
have children of their own, so it is time to let embryo research grow up. ■
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should-be-loosened
Trials and errors

Britain’s prisons show up wider flaws in

government
The entire criminal-justice system is under strain
Nov 2nd 2023

NO LONG-TERM planning. Disjointed decision-making. Tension between

expert advice and political calculation. The covid-19 inquiry has been the
best place this week to see the flaws in Britain’s government laid bare.
Largely hidden from public view lies another: a crisis in the country’s
prisons. Those same factors have left some parts of the criminal-justice
system close to breakdown.

Start with the lack of long-term planning. In October it was revealed that the
number of inmates in English and Welsh prisons is just a few hundred short
of their maximum capacity. This should surprise no one. A long-standing
push to be tough on crime has coincided with a more recent imposition of
spending cuts. His Majesty’s Inspectorate of Prisons has repeatedly reported
that jails are overcrowded, squalid and unsafe. The number of people in jail
is nearly double what it was three decades ago; prison-building has not kept
pace.

Alarmed by suggestions that judges may have to stop sending down

dangerous criminals, the Ministry of Justice (MoJ) has announced a number
of emergency measures. Some of these are sensible. But they will not come
close to tackling the crisis. That is partly because of its scale. But it is also
because decision-making in Britain’s government is often contradictory and
incoherent. Efforts to ease one source of pressure exacerbate difficulties
elsewhere in the justice system.

Take the most sensible emergency measure—limiting the use of short prison
sentences in favour of community ones. This has myriad benefits beyond
reducing prison numbers. Community sentences result in lower re-offending
rates than the brief jail sentences given to petty offenders. They are cheaper,
too.

But more community sentences means more strain on the probation service,
which is in terrible shape. Its part-privatisation in 2014, designed to save
money, was so disastrous that it was reversed in 2021. By then, however,
many experienced probation officers had left; the service is now recruiting
hard to try to replace them. The restructuring also reduced the number of
probation trusts, each run by a chief probation officer, from 35 to 12,
accelerating a longer-term trend towards centralised control of the service. It
worked much better before; the MoJ should restore localised control.

Prison overcrowding has also been exacerbated by backlogs in the courts. In

recent years there has been a huge increase in the number of prisoners
awaiting trial on remand. This number surged during the pandemic, but the
backlogs have been worsened by problems of the government’s own making.
Between 2010 and 2019 the MoJ’s budget was reduced by 25% in real terms.
The results are fewer courts, fewer judges and longer delays.

Yet even if the probation service is restored to health and court backlogs are
unblocked, prisons will remain overcrowded. The MoJ predicts their
population will keep rising, from around 88,000 now to 98,700 by 2026.
That is in large part because of the way that Britain’s politicians choose to
treat convicted criminals. Since the mid-1990s the length of the average
prison sentence has increased. It is right to lock up those who commit
serious and especially dangerous crimes, and tough-on-crime policies are
popular with voters. But ever-longer sentences have unwelcome
consequences.

The worst of these are endured by prisoners themselves. Overcrowding and

understaffing mean that inmates are locked up in their cells for most of the
day, unable to do any of the things, such as job training and cognitive
behavioural therapy, that would help them live productive rather than
predatory lives on release. Grim conditions lead to more assaults and
suicides behind bars. And the strains in the criminal-justice system have
wider effects, too. Jam-packed jails make it even harder to recruit prison
workers, who are already in short supply. And poorly run services
compromise public safety: when assessing the risk that criminals pose,
probation officers are making domestic-abuse inquiries in less than half the
cases they should be. The criminal-justice system has been trying to spend
less and punish more for years. The circle can no longer be squared. ■
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government
Letters
Letters to the editor
On donating organs, mental health, the Sagrada Família basilica, film
lengths, James Bond, “Star Trek”

Letters to the editor

A selection of correspondence
Nov 2nd 2023

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

Organ-donation economics
More than 110,000 Americans are waiting for an organ transplant and over
5,000 died waiting for an organ in 2019. Close to 6,000 recovered organs
were discarded. “Wasted organs” (September 23rd) correctly pointed out that
the responsibility lies in part with non-profit Organ Procurement
Organisations and in part with the excessive caution exercised by transplant
centres when deciding who to conduct transplants for and which kidneys to
use.

Numerous initiatives in Congress, and more proposed by various non-

governmental agencies, such as the Federation of American Scientists and
the National Academies of Sciences, Engineering and Medicine, among
others, have been focused on tweaking how the performance of organ
procurers and transplant centres should be measured while keeping in place
the system that put us in today’s quagmire. As we indicate in our recent
paper (conditionally accepted at the Journal of Political Economy), such
approaches that keep regulations fragmented are bound to be inefficient,
given that the incentives and opportunities facing organ procurers and
transplant centres are intertwined.

We show that “holistic regulation”, which aligns the interests of organ

procurers and transplant centres by rewarding them based on the health
outcomes of the entire patient pool, can get at the root of the problem. This
approach also leads to more organ recoveries while increasing the use of
organs for sicker patients who otherwise would be left without a transplant.

In the end increasing access to kidney transplantation will require the

improvement of the entire supply chain of organs. This means boosting
donor registrations and donor recoveries from the deceased. It also means
increasing living donations, and co-ordinating donations through
mechanisms like paired kidney donations and deceased-donor-initiated
kidney- exchange chains.

ALEX CHAN
Assistant professor of business administration
Harvard University
Cambridge, Massachusetts

ALVIN E. ROTH
Professor of economics
Stanford University
Stanford, California
Hope on mental health
The history of psychiatry is a history of therapeutic enthusiasm, with all of
the tragedy and triumph, hubris and humility that such enthusiasm brings
(“From tents to hospitals”, October 21st). Many of the challenges facing
mental-heath treatment in the United States are seen elsewhere. In high-
income countries, just one-third of people with depression receive formal
care. In low-income countries, the rate of minimally adequate treatment is
3%.

Neuroscientific progress is glacial, but there are reasons for hope. Despite
our rudimentary understanding of the brain, we have treatments that work,
including psychological therapies and antidepressants. Antipsychotic
medication is associated with longer life in schizophrenia. Globally, the
suicide rate declined by a third between 1990 and 2016. This dramatic
improvement in global public health does not mean the work is done (even a
single suicide is one too many), but it shows that positive change is possible.

BRENDAN KELLY
Professor of psychiatry
Trinity College Dublin
A church becomes art
The completion of unfinished work by a dead artist raises interesting
questions about authorship and merit (“(Sort of) by Sondheim“, October
21st). In architecture, the work of Antoni Gaudí i Cornet shows how the
creativeness, vision and craft of a genius can live on and be completed
according to his original designs 100 years after his death. Gaudí was a
renowned architect in Barcelona when he was appointed as the chief
designer for the Sagrada Família basilica in 1883. He completely changed
the designs, everything from the external structure to the details of the
interior, and attracted a group of designers, architects and craftspeople to
work with him according to his designs. This continued until his death in
1926 (after being hit by a tramcar).

The construction continued, exactly according to his vision, through

extended periods of social unrest, a civil war and a world war. The final two
towers of the four evangelists were only recently completed and the
cathedral is on target to finish the tower of Jesus Christ at the centenary of
Gaudí’s death in 2026. This work is not a reconstruction, or the
redevelopment of plans or the projection of other architects onto the plans of
Gaudí. The basilica will look as it did in the original plans envisioned by
Gaudí.

J.M. INNES
Visiting fellow
Churchill College, Cambridge
About time
“Movie marathons” (October 21st) explained how films today are on
average 24% longer than in the 1930s, and pointed to competition from
streaming and the growing clout of big-name directors as possible reasons.
But there is a much more practical factor: costs have come down because of
digital capture and digital projection. Every extra foot of film in older
movies cost money. It also cost a great deal for the initial capture and
development, and editing was slow and tedious. The average reel of finished
film was around one hour and 20 minutes.

Every cinema in America needed six reels of film, all of which required
costly printing and shipping. Today, even if a film is captured on film stock,
99% of the final projection will be from a digital scan. At most, this means a
hard drive shipped to the cinema. At that point length really doesn’t matter
much, at least in terms of studio economics, even if it stretches an audience’s
patience or bladder control.

DOUGLAS BOWKER
Salem, Massachusetts
I was among the last to see “Titanic”. I was sure a bathroom break would be
needed for a movie that long and I have wondered why there was not an
intermission. Additional candy sales would surely have resulted.

CONNIE ELLIOT
Studio City, California

For your eyes only

As mentioned in your review of Nicholas Shakespeare’s biography of Ian
Fleming, John F. Kennedy listed Fleming’s “From Russia, with Love” as one
of his ten favourite books in a 1961 interview with Life magazine (“The man
with the golden pen”, October 14th). What may also be of interest to your
readers is that the Life article began with an agitated Kennedy asking his
secretary about the late delivery of the latest issue of The Economist.

A few paragraphs (and reminders) later, our hero sallies forth to his waiting
helicopter the next day, said issue of The Economist safely tucked under his
arm.

ALOK MOHAN
Dubai
Highly illogical
I think Schumpeter was a bit premature in predicting the demise of the hand-
held device (October 7th). One only needs to watch Captain Kirk flip open
his communicator in “Star Trek” to realise such devices will obviously
remain indispensable, even in the 23rd century.

GREG NOLE
Cheshire, Connecticut
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By Invitation
The commander-in-chief of Ukraine’s armed forces on how to win
the war
Steven Simon thinks that Israel may be able to avoid a regional
escalation
Marc Weller on what international law has to say about the Israel-
Hamas conflict
The war in Ukraine

The commander-in-chief of Ukraine’s armed

forces on how to win the war
Technology is the key as the war becomes “positional”, says Valery
Zaluzhny
Nov 1st 2023

RUSSIA’S INVASION of Ukraine in February 2022 provoked a global

security crisis. The assault on democracy by a morally sick imperial power
in the heart of Europe has tilted the balance of power in other parts of the
world, including the Middle East and Asia-Pacific. The failure of
multilateral bodies such as the UN and Organisation for Security and
Cooperation in Europe to maintain order means that Ukraine can only
restore its territorial integrity by military force.

Ukrainians have shown their willingness to lay down soul and body for their
freedom. Ukraine not only halted an invasion by a far stronger enemy but
liberated much of its territory. However, the war is now moving to a new
stage: what we in the military call “positional” warfare of static and
attritional fighting, as in the first world war, in contrast to the “manoeuvre”
warfare of movement and speed. This will benefit Russia, allowing it to
rebuild its military power, eventually threatening Ukraine’s armed forces and
the state itself. What is the way out?

Basic weapons, such as missiles and shells, remain essential. But Ukraine’s
armed forces need key military capabilities and technologies to break out of
this kind of war. The most important one is air power. Control of the skies is
essential to large-scale ground operations. At the start of the war we had 120
warplanes. Of these, only one-third were usable.

Russia’s air force has taken huge losses and we have destroyed over 550 of
its air-defence systems, but it maintains a significant advantage over us and
continues to build new attack squadrons. That advantage has made it harder
for us to advance. Russia’s air-defence systems increasingly prevent our
planes from flying. Our defences do the same to Russia. So Russian drones
have taken over a large part of the role of manned aviation in terms of
reconnaissance and air strikes.

Drones must be part of our answer, too. Ukraine needs to conduct massive
strikes using decoy and attack drones to overload Russia’s air-defence
systems. We need to hunt down Russian drones using our own hunter drones
equipped with nets. We must use signal-emitting decoys to attract Russian
glide bombs. And we need to blind Russian drones’ thermal cameras at night
using stroboscopes.

This points to our second priority: electronic warfare (EW), such as jamming
communication and navigation signals. EW is the key to victory in the drone
war. Russia modernised its EW forces over the past decade, creating a new
branch of its army and building 60 new types of equipment. It outdoes us in
this area: 65% of our jamming platforms at the start of the war were
produced in Soviet times.

We have already built many of our own electronic protection systems, which
can prevent jamming. But we also need more access to electronic
intelligence from our allies, including data from assets that collect signals
intelligence, and expanded production lines for our anti-drone EW systems
within Ukraine and abroad. We need to get better at conducting electronic
warfare from our drones, across a wider range of the radio spectrum, while
avoiding accidental suppression of our own drones.

The third task is counter-battery fire: defeating enemy artillery. In this war,
as in most past wars, artillery, rocket and missile fire make up 60-80% of all
the military tasks. When we first received Western guns last year, we were
quite successful at locating and striking Russian artillery. But the
effectiveness of weapons such as Excalibur, a GPS-guided American shell,
has declined dramatically owing to improved Russian electronic warfare.

Meanwhile, Russia’s own counter-battery fire has improved. This is largely

thanks to its use of Lancet loitering munitions, which work alongside
reconnaissance drones, and its increasing production of precision-guided
shells that can be aimed by ground spotters. Despite the dismissive view of
some military analysts, we cannot belittle the effectiveness of Russian
weapons and intelligence in this regard.

For now, we have managed to achieve parity with Russia through a smaller
quantity of more accurate firepower. But this may not last. We need to build
up our local GPS fields—using ground-based antennas rather than just
satellites—to make our precision-guided shells more accurate in the face of
Russian jamming. We need to make greater use of kamikaze drones to strike
Russian artillery. And we need our partners to send us better artillery-
reconnaissance equipment that can locate Russian guns.

The fourth task is mine-breaching technology. We had limited and outdated

equipment for this at the start of the war. But even Western supplies, such as
Norwegian mine-clearing tanks and rocket-powered mine-clearing devices,
have proved insufficient given the scale of Russian minefields, which stretch
back 20km in places. When we do breach minefields, Russia quickly
replenishes them by firing new mines from a distance.

Technology is the answer. We need radar-like sensors that use invisible

pulses of light to detect mines in the ground and smoke-projection systems
to conceal the activities of our de-mining units. We can use jet engines from
decommissioned aircraft, water cannons or cluster munitions to breach mine
barriers without digging into the ground. New types of tunnel excavators,
such as a robot which uses plasma torches to bore tunnels, can also help.
My fifth and final priority is to build up our reserves. Russia has failed to
capitalise on its hefty manpower advantage because Vladimir Putin is
worried that a general mobilisation might spark a political crisis, and
because Russia cannot train and equip enough people. However, our
capacity to train reserves on our own territory is also limited. We cannot
easily spare soldiers who are deployed to the front. Moreover, Russia can
strike training centres. And there are gaps in our legislation that allow
citizens to evade their responsibilities.

We are trying to fix these problems. We are introducing a unified register of

draftees, and we must expand the category of citizens who can be called up
for training or mobilisation. We are also introducing a “combat internship”,
which involves placing newly mobilised and trained personnel in
experienced front-line units to prepare them.

Russia should not be underestimated. It has suffered heavy losses and

expended a lot of ammunition. But it will have superiority in weapons,
equipment, missiles and ammunition for a considerable time. Its defence
industry is increasing its output, despite unprecedented sanctions. Our
NATO partners are dramatically increasing their production capacity, too.
But it takes at least a year to do this and, in some cases, such as aircraft and
command-and-control systems, two years.

A positional war is a prolonged one that carries enormous risks to Ukraine’s

armed forces and to its state. If Ukraine is to escape from that trap, we will
need all these things: air superiority, much-improved electronic-warfare and
counter-battery capabilities, new mine-breaching technology and the ability
to mobilise and train more reserves. We also need to focus on modern
command and control—so we can visualise the battlefield more effectively
than Russia and make decisions more quickly—and on rationalising our
logistics while disrupting Russia’s with longer-range missiles. New,
innovative approaches can turn this war of position back into one of
manoeuvre.■

General Valery Zaluzhny is commander-in-chief of Ukraine’s armed forces.

He has held the position since July 2021.

Read a more detailed new essay by General Zaluzhny on this topic.

This article was downloaded by zlibrary from https://www.economist.com/by-
invitation/2023/11/01/the-commander-in-chief-of-ukraines-armed-forces-on-how-to-win-
the-war
War in the Middle East

Steven Simon thinks that Israel may be able to

avoid a regional escalation
But continued hard-right rule could foster dystopia, argues the academic
and author
Oct 31st 2023

ON OCTOBER 7TH Hamas showed that it was true to itself by abandoning

its periodic ceasefires and skirmishes with Israel and embracing
Götterdämmerung. Perhaps it expected its murderous attacks to spark a
regional conflict that would bring Israel to its knees, with Palestinians
battered but triumphant. But this motivation seems unlikely, and we may
never know. Regardless, America, Israel and key Arab states such as Egypt
and Saudi Arabia must now plan for the day after, if only to avoid the
prolonged immiseration of Gaza’s population and a resumption of regional
hostilities.

Hamas’s problem is that even a widened conflict including Iran, Hizbullah

and a motley collection of smaller Iran-backed militias would not overcome
the fundamental power disparity between Israel and its foes, let alone
Palestinians. Moreover, both Iran and Hizbullah, its most powerful proxy,
have reasons to avoid escalation.

Hizbullah has refrained from engaging in a full-blown conflict with Israel on

its northern border since the Hamas attack, though there have been
exchanges of fire. Iran’s leaders and senior commanders have reportedly
concluded that there is not much they can do, apart from tacitly permitting
their country’s proxies to act as they see fit. These prevarications have given
Israel time to mobilise an immense army, deploy a large part of it to the
Lebanese border, evacuate local towns and buttress its air defences.

True, to dismiss the risk of escalation because it would not serve the alleged
interests of Hizbullah or Iran could be just another example of the mirror-
imaging and wishful thinking that plague policymakers of all stripes—and
which contributed to the Israeli blunders that opened the door to Hamas on
October 7th. Hamas may yet find fellowship in its self-immolation.
Nonetheless, compared to Hamas, Iran and Hizbullah are conventional
creatures and can therefore be deterred by the prospect of a punitive Israeli
response. Hamas clearly can not.

Hence Israel’s conclusion that Hamas must go. This has entailed the sudden
reversal of entrenched policy. As Israel’s prime minister, Binyamin
Netanyahu, has explained, Hamas was an essential tool in Israel’s effort to
split the Palestinian national movement, weakening the more moderate, West
Bank-based Palestinian Authority (PA). Hamas functioned, perversely, as the
loyal opposition to Likud governments. Even Israel’s ultra-right was on
board; Bezalel Smotrich, the hardline finance minister, has described the PA
as a burden but Hamas as an “asset”.

The scale and sadism of Hamas’s rampage on October 7th has made a return
to the old arrangement unthinkable for now. Although Hamas is not Islamic
State, its participants in the atrocities were weaned on IS’s gruesome videos,
which had redefined the culture of jihad. Whatever the precise inspiration,
the resulting performance of Wagnerian apocalypticism has now reached its
culminating acts of fire and purification. If past were prologue, this process
would be interrupted within weeks as the marginal costs exceeded the
returns for both sides. This time, the past is merely the past.
Israel’s friends, especially America, have expressed concern about its war
aims. The Biden administration must worry about regional escalation, and
about its own reputation as Palestinian civilian casualties grow. It must also
fear an all-out push by Israel that fails to eliminate Hamas but pulverises
Gaza and ends in a comprehensive Israeli blockade, a traumatised
population, a public-health crisis, warlord rule and a lost generation of
Palestinian youth. The question of who rules Gaza if Hamas is toppled, or
even crippled, is therefore urgent.

There are good reasons to doubt Israel’s ability to dislodge Hamas as the
power in Gaza. Its army is not battle-hardened, urban combat is more
gruelling than open warfare—and Hamas will have prepared the battlefield
to compound the challenge. Toppling Hamas could require a lengthy
occupation of Gaza, raising the spectre of an insurgency amid the ruins.

On the other hand, Israel’s armed forces are powerful and highly motivated,
the war has unified a citizenry riven by political differences just weeks ago,
and there is something like a consensus over the need to remove Hamas.
Toppling the group—not as a social movement, but as a government and
army—is thus at least a plausible aim.

Victory, however, could prove pyrrhic—not least if there is no government

to replace Hamas. Israel will need to hand responsibility for Gaza to a
competent, temporary steward as soon as is practicable. Such a transitional
government will have to be formed of a coalition of states and perceived as
legitimate and effective, as well as being acceptable to Israel. It will need to
be authorised and equipped by the UN to defend itself while administering
Gaza’s urgent needs, and it must be ready to enter the territory when the
shooting stops. And as it restores order, it must also prepare the ground for
reassertion of Palestinian rule through elections in both Gaza and the West
Bank. Planning for this will require time and complex diplomacy.

The PA, however, is run by a president elected in 2005 and legislature

elected in 2006. It is corrupt and widely perceived as a tool of Israeli
occupation. It is incapable of stemming Israel’s building of settlements in the
West Bank and their occupants’ attacks on Palestinians. Any expectations of
a role for the PA in governing a post-conflict Gaza are unrealistic unless
these conditions change.
Furthermore, Arab states’ participation in a transitional administration will
hinge on the promise of Israeli concessions on the West Bank, including a
halt to the building or expansion of settlements, curbing violence by settlers
and the transfer of some land from mixed Palestinian and Israeli control to
the PA. No long-term solution to the problem of Gaza is possible without
this. It will require the application of a defibrillator to the peace process, as
well as the resumption of Israeli-Saudi normalisation talks.

Of the many obstacles to this approach, Israel’s willingness to make

concessions is the most formidable. How formidable will depend on what
kind of government emerges in Jerusalem after the war.

Bernard Avishai, the author of “The Tragedy of Zionism”, believes that “the
combination of corruption, fecklessness and extremism of the hard-right
government—and especially Netanyahu himself—will be expelled like a
hairball from the cat.” A darker view is that the terrible costs of the conflict,
global opposition to Israel’s military campaign, tinged as it is in places with
antisemitism, the awfulness of October 7th and intensified mistrust of Arabs
will push Israelis to continue backing hard-right rule. If so, the dystopia
won’t just envelop the Gaza Strip.■

Steven Simon is the professor of practice in Middle Eastern studies at the

Jackson School of International Relations, University of Washington, senior
research fellow at the Quincy Institute for Responsible Statecraft and the
author of “Grand Delusion: The Rise and Fall of American Ambition in the
Middle East” (2023).
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invitation/2023/10/31/steven-simon-thinks-that-israel-may-be-able-to-avoid-a-
regional-escalation
War and law

Marc Weller on what international law has to say

about the Israel-Hamas conflict
Military advantage must be balanced against the risk of civilian casualties,
even when vital interests are at stake, says the law professor
Oct 27th 2023

LAW ACCEPTS the reality that war is a feature of human relations. Hence,
law in war is meant to strike a balance between the need to use force in
extreme circumstances and the wish to reduce the prospect of war and keep
the associated human suffering to a minimum. This balancing act takes two
forms. The UN Charter limits the right of states to make war. Humanitarian
law limits the means of warfare.

The UN Charter permits necessary and proportionate self-defence. But it is

not always easy to determine how much force is proportionate to an armed
attack and necessary to prevent the next one.

In the wake of the terrorist attacks on September 11th 2001, for instance, it
was widely accepted that America enjoyed the right of self-defence, even
against a non-state actor like al-Qaeda. But how much force would be
proportionate to the murder of over 3,000 people in New York?

American forces were entitled to pursue and defeat al-Qaeda in Afghanistan,

where Osama Bin Laden’s group was mainly based. Arguably, this included
the right to go as far as overthrowing the Taliban government, which was so
closely intertwined with al-Qaeda that it would have been impossible to
defeat the one without at the same time taking on the other.

In response to the horrific attack of October 7th, Israel, too, is entitled to

self-defence. But what is a proportionate response to the horrendous atrocity
that cost some 1,400 mainly civilian lives and still exposes over 200
hostages to ceaseless terror?

Israel’s prime minister, Binyamin Netanyahu, asserts that it is necessary to

eradicate Hamas as a political and military force if further outrages are to be
prevented. Even if self-defence goes that far, there is still more balancing of
competing values to be done under the second branch of applicable law,
humanitarian law.

A civilian population remains protected by the fundamental principles of

humanitarian law even in a conflict triggered by an indefensible outrage of
the kind mounted by Hamas, which evidently does not play by humanity’s
rules. Israel fully accepts this fact. The difficulty arises, again, with respect
to proportionality—this time as an element of humanitarian law.

The first principle of humanitarian law is that of distinguishing between

combatants and civilians along with the obligation to ensure the protection
of civilians. Attacks must not be directed against a civilian population. This
prohibition includes indiscriminate aerial bombardments of civilian areas.

Where it is impossible to isolate civilians from an attack against a lawful,

military objective, proportionality requires a balancing of the military
advantage gained through the attack against the extent of civilian damage it
will foreseeably cause. Humanitarian law states that if “incidental loss of
civilian life would be excessive in relation to the concrete and direct military
advantage anticipated” then the operation must not take place.
Israel argues that, given the gravity of the threat to its national security and
the lives of its citizens, this provision must not place undue restrictions on its
military campaign. Sharvit Baruch, formerly a senior legal adviser to Israel’s
armed forces, argues: “Even if many civilians in Gaza are harmed during the
attacks”, when weighed against Israel’s overwhelming security interest in
defeating Hamas “this is not necessarily excessive incidental damage and
therefore [these] would not be disproportionate attacks that are illegal.”

This view would unhinge the law on the protection of civilians. The extent
of its application cannot be relative, depending on the sense of injustice and
threat felt by the state using force. Every state going to war will inevitably
feel that its vital interests are at stake. But this becomes a judgment on how
far force can be used in self-defence under the UN Charter, and not on the
extent to which civilians must be protected under humanitarian law when
that force is used.

Humanitarian law requires that the military advantage of each and every
combat operation during conflict needs to be balanced against the risk of
civilian casualties, even if vital interests of the state mounting the operation
are at stake.

Colonel Baruch adds that “Since Hamas places its military infrastructure in
the heart of the civilian population in the Gaza Strip, including in residential
houses, schools, mosques and businesses, it is permissible to direct attacks
toward these sites, as they have lost their civilian nature and have become
legitimate targets due to this use.”

Again, the fact that Hamas operates from a densely populated territory does
not strip the civilian population in that territory of legal protection. These are
not willing human shields, even if Hamas may attempt to keep them in place
through misinformation and propaganda. Attacks against Hamas can only be
undertaken if there is no foreseeable risk of causing excessive civilian
casualties when compared to the military advantage gained from the attacks
being contemplated.

Israel asserts that it is fulfilling its duty of distinguishing between civilians

and combatants by telling the population of northern Gaza to evacuate. At a
tactical level, where a specific building is to be attacked, such measures may
be legitimate or even legally required. However, even where Hamas has
networks of subterranean tunnels, clearing out a million civilians in order to
generate a clear field of fire throughout all of northern Gaza is not permitted.

Israel cannot discharge its duty of distinction between combatants and

civilians simply by wishing the entire civilian population away. This may
make it far more difficult for Israel to wage this war, but it cannot simply
transfer the risks involved in armed combat in an urban environment from its
soldiers to civilians.

The International Committee of the Red Cross has issued a declaration

confirming that this displacement is incompatible with humanitarian law,
especially as southern Gaza, the area to which the population is supposed to
move, is also subject to attack and deprived of that which will be necessary
for those living or moving to survive—unless aid arrives consistently and
reliably. The refusal to allow sufficient quantities of humanitarian supplies
into the area, delivered under international control and supervision, can also
not be justified by whatever military advantage such a strategy is meant to
yield. Even if, as Israel asserts, Hamas is secretly holding its own stocks of
fuel and supplies and reserving them for war rather than for other Gazans,
this cannot justify withholding from civilians, crowded together in a position
of extreme vulnerability, what they need to survive.■

Marc Weller is professor of international law and international

constitutional studies at the University of Cambridge. He has served as an
adviser on peace negotiations in numerous countries, including Kosovo,
Myanmar and Sudan. The views expressed are his own.
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israel-hamas-conflict
Briefing
Markets think interest rates could stay high for a decade or more
Higher for longer

Markets think interest rates could stay high for a

decade or more
The economic consequences could be grim
Nov 2nd 2023 | NEW YORK

NOT LONG ago, as interest rates in the rich world hovered near zero,
economists debated whether their downward march was the product of a
decades-, centuries- or millennia-long trend. Now the burning question is
how long they will stay high. On October 18th the ten-year Treasury yield,
which incorporates long-term expectations for interest rates and was below
1% as recently as 2021, hit 4.9%, its highest since 2007. The 30-year
Treasury yield crossed 5% the same day. Analysts at Bank of America may
have sounded a little breathless when they declared last month that rates
were “coming off 5,000-year lows”. But that is indeed how it feels to
economists, investors and anyone in the uncomfortable position of servicing
debts they incurred when almost everyone expected rates to be low for ever.
The conviction that rates will remain “higher for longer” is spreading around
the world. The euro zone saw negative interest rates in 2021; now Germany
must pay nearly 3% to borrow for a decade. Britain’s bond yields are nearly
as high as America’s. Even Japan, whose apparently permanently low rates
were seen as a harbinger for the rest of the world, has faced upward pressure
on its bond yields (see chart 1). Bets that its central bank will have to raise
interest rates in 2024 for the first time since 2007 are mounting.

If markets are right, a new era is beginning and the consequences will be far
reaching. Households and companies will have to pay much more to borrow.
The financial system will have to adjust to a painful new reality. And
governments will find they have to divert more tax revenue to pay the
interest on their accumulated debt. The higher-for-longer scenario that many
investors are now predicting is a potentially toxic mix.

Start with the real economy. One of the surprises of the past year is how
resilient the world economy—and particularly America—has been in the
face of higher rates. On October 26th it was revealed that America’s GDP
grew at an annualised pace of 4.9% in the third quarter. Consumer spending
has been supported by the excess savings households built up thanks to the
lockdowns and stimulus payments of the covid-19 pandemic. Many firms
issued long-term debt when rates were low, and so continue to enjoy low
financing costs today. Net interest payments by America’s companies have
actually fallen this year, because the interest they earn on the cash they keep
to hand has risen faster than the cost of servicing their debts.

These protective buffers will last for a while yet. In September statisticians
revised up the estimate of savings accumulated during the pandemic, which
had previously looked like they were on the verge of exhaustion. It now
appears that America’s households are still sitting on about $1trn of excess
cash, equal to nearly 5% of annual personal income in aggregate. It will also
take time for higher rates to slow companies down. Goldman Sachs, a bank,
estimates that just 16% of America’s corporate debt will mature over the
next few years. Refinancing it will lift the average interest rate on the total
stock of debt from 4.2% this year to just 4.5% in 2025.

Not all companies are resilient to higher rates, however. Smaller American
firms, whose debts typically fall due sooner than those of big ones, are under
strain even though the economy is booming. There and in Europe, where
growth is weaker, corporate bankruptcies are rising (see chart 2). In some
economies firms are much more exposed to rising rates: at the end of 2021
the median maturity of Spanish and Italian businesses’ debts was only 2.6
years and 2.1 years respectively. In Sweden, where corporate debt is an eye-
watering 155% of GDP, the average effective interest rate on outstanding
bank loans to companies rose from 1.5% to 3.9% in the year to March and
will be higher still by now. In September the number of corporate
bankruptcies was 14% higher than a year earlier.

Were rates to reach a permanently higher plateau, even long-dated debt

would eventually start to cost companies dear. That would be painful
because during the 2010s firms borrowed heavily: America’s non-financial
corporations issued a net $4.1trn in debt over that decade while retiring a net
$3.2trn of equity through dividends and buy-backs. In advanced economies
as a whole, corporate debt is around 93% of GDP, up from less than 80% in
the mid-2000s, according to data from the IMF. If rates stay higher for
longer, this borrowing binge may need to be unwound. A long period of
deleveraging could therefore inhibit investment in the 2020s, just as low
growth inhibited it in the 2010s.

Home is where the hurt is

Households, too, will eventually find that higher rates bite. In America and
some European countries interest rates on mortgages can be fixed for
decades, which protects borrowers from rate rises as long as they do not
move house. But house prices are likely to fall, because they depend mostly
on buyers who borrow afresh, and therefore face much higher costs. On
October 18th Mortgage News Daily, a data provider, reported that the
average 30-year fixed-rate mortgage in America carried an interest rate of
8% for the first time since 2000. As a result the monthly payment required to
buy the median American home with a mortgage worth 90% of the
property’s value is now nearly 60% of average earnings, up from 33% in
July 2021.

It strains credulity to think that housing markets can sustain such ratios.
According to the Bank for International Settlements, real house prices in 12
advanced economies fell by 10% between the start of 2022 and the second
quarter of 2023. Should rates follow the path implied by markets, real house
prices should fall by another 14% by the end of 2025. In a scenario in which
interest rates stabilise slightly above their current level, the peak-to-trough
fall in real house prices would reach 35%. For comparison, the fall prompted
by the global financial crisis was 13%.

Next, consider the implication of higher rates for the financial sector. Traders
often joke that interest rates go up until something breaks. In the spring of
2023 something did: banks. They own lots of government bonds, which lose
value as rates rise. The jump in the yield of ten-year Treasuries from 1.5% at
the end of 2021 to around 3.5% a year later drove down the value of a broad
index of Treasury bonds by about 10%. That inflicted over $600bn of losses
on American banks, the most vulnerable of which—Silicon Valley Bank and
First Republic—suffered runs and failed. The crisis was eventually
forestalled by the Federal Reserve offering to lend to banks against the face
value, rather than the market value, of their Treasuries, easing the pressure
on their balance sheets.

But in a higher-for-longer world, the crisis could return. The last loans under
the Fed’s new lending scheme are to be made in March. Even if it is
extended, banks may find themselves unable to afford to pay the interest on
the Fed loans (which is similar to prevailing short-term rates and so has been
rising steadily).

And it is not just Treasuries whose market value falls when rates rise. More
or less any loan paying a fixed return over a medium-to-long duration will
follow the same pattern. Erica Jiang, Gregor Matvos, Tomasz Piskorski and
Amit Seru, a group of economists, undertook an analysis that valued all the
assets of American banks at the market prices that prevailed in March and
then tested to see what would happen if half or all of their uninsured
depositors withdrew their savings. They found that, even under the less
apocalyptic scenario, some 200 or so banks, with collective assets of
$300bn, would potentially be insolvent. Another paper, by Mark Flannery
and Sorin Sorescu, two more economists, concluded, “If all unbooked losses
were fully reflected in bank balance sheets, roughly half of all banks,
holding roughly half of all bank assets, would not meet their minimum
regulatory capital requirements.”
Since March the bond index has fallen by 5% more. Ms Jiang and her co-
authors have repeated their analysis. They find that unrealised losses have
climbed modestly, but are now concentrated at bigger banks. In March only
some 30% of the $2.2trn of these losses were at banks labelled “systemically
important” by regulators. Now there are $2.5trn of unrealised losses, with
about two-thirds at such banks.

There are other sources of financial vulnerability, too. Commercial property

loans make up around a tenth of bank assets, and the value of office
buildings has collapsed owing to higher interest rates and lower occupancy.
Some owners have simply handed the keys to lenders. What is more, much
lending has migrated in recent years from banks to other sorts of financial
institutions, such as pension funds and insurance firms. They have never
gone through a cycle of rising rates as big lenders before. Although the
dispersal of risk is in principle helpful, it also means a greater number of
firms face potential losses.
Last, consider the vulnerability of governments. After the global financial
crisis, rich countries’ public debts surged to the highest level since 1946.
Since the pandemic they have been larger, relative to GDP, than at any time
since the Napoleonic wars (see chart 3). The sustainability of these massive
debts depends not just on interest rates, but on how those rates compare with
economic growth. In the low-rate era it became fashionable to note that if
GDP expands faster than interest accrues, then a government’s debt-to-GDP
ratio can shrink even as it borrows afresh to pay its interest bill. It may even
be able to borrow more still to fund extra spending while keeping its debt-to-
GDP ratio stable.

In October the IMF projected that, between 2023 and 2028, the economic
growth rate in advanced economies will continue to exceed the interest rate
their governments pay on their debts, by 1.4 percentage points on average,
despite recent rate rises. The reason is that governments, like companies,
have locked in low rates to some degree by issuing long-term debt.

Yet debt-to-GDP ratios are mostly set to rise anyway, because many
governments continue to run excessive deficits. America especially is
borrowing with abandon: strip out accounting distortions and its deficit for
the past year was 7.5% of GDP, according to the Committee for a
Responsible Federal Budget, a think-tank. Deficits that high are typically
seen only during wars or catastrophic recessions. The Economist calculated
the fiscal adjustments that advanced economies would need to make to keep
their debts stable, given the IMF’s projections. In every big advanced
economy bar Germany and Japan, belt-tightening is needed to stop the debt-
to-GDP ratio from rising further. America would have to trim its primary
budget deficit—ie, its deficit excluding interest on its debt—by an annual
2.4% of GDP. Such parsimony will be especially difficult given the extra
spending that is needed to cope with ageing populations, the climate crisis
and rising geopolitical tensions—the annual bill for all of which, the IMF
estimates, will add up to about 7.5% of GDP in rich countries.

What is more, in a higher-for-longer world governments, like companies,

must refinance eventually. Ten-year yields are now above plausible estimates
of long-run growth in most rich economies. That means much more belt-
tightening could be needed to keep debts from rising. It is hard to escape the
conclusion that, on current growth forecasts, higher-for-longer would force
governments into another round of painful budget-balancing like that
suffered by Europe in the 2010s. If upheaval in the finance industry prompts
expensive bail-outs, the fiscal outlook would become yet bleaker.

There is always cope

Can the world economy cope with corporate deleveraging, falling house
prices, turmoil at banks and fiscal frugality? Surprisingly, the answer is,
perhaps—if rates have risen for the right reason. Economists typically think
that interest rates are determined in the long term by the balance between the
world’s desire to save and to invest. All else equal, more saving pulls down
the so-called “natural” rate of interest; more investment pushes it up. The
most popular explanation for the rock-bottom rates of the 2010s was that
ageing populations were stashing away more money for retirement, while
insipid long-term growth prospects had sapped companies of the desire to
expand—a phenomenon sometimes called “secular stagnation”.

For rates to have shifted permanently, that outlook must have changed. One
possible reason it might have is the anticipation of faster economic growth,
driven, perhaps, by recent advances in artificial intelligence (AI). In the long
term, growth and interest rates are intimately linked. When people’s incomes
rise over time, they have less need to save. Companies, expecting higher
sales, become keener to invest. Central banks have to keep rates higher to
stop economies from overheating.

It might seem farfetched to say that optimism about AI is pushing up bond

yields. Yet it would explain why the prospect of higher-for-longer has not
caused stockmarkets to fall much. In theory, higher bond yields should
reduce the value of companies’ future earnings, an effect that bites hardest
for technology firms, since they tend to promise jam tomorrow. In fact, as
optimism about AI has spread, the value of big tech firms such as Microsoft
and Nvidia has soared. Their rising value has kept the cyclically adjusted
price-earnings ratio of the S&P 500 at around pre-pandemic levels, even
though bond yields—and hence the rate used to discount future profits—are
now much higher. And America’s strong growth in the third quarter was not
driven by an unusual jobs boom; in fact, the labour market is cooling. If the
growth number is accurate, productivity must have risen.
To the extent that productivity growth explains higher rates, the new era
could be a happy one. Alongside the rise in debt-service costs, households
will have higher real incomes, firms will have higher revenues, financial
institutions will enjoy low default rates and governments will collect more
tax. Healthy competition for capital might even bring benefits of its own.
Some economists long suspected that the low-rate era of the 2010s made the
economy less dynamic. “It was easy for relatively inefficient companies to
stay afloat, so there wasn’t much creative destruction,” says Kristin Forbes
of MIT. In a higher-rate world underpinned by faster growth, there would be
plenty of dynamism.

Alas, there is a more worrying explanation for higher rates: that government
debt has grown so large that it has sopped up the world’s surplus savings,
leaving the private sector to compete for the scraps. In the short term, many
traders blame the avalanche of debt issuance since the pandemic, as well as
the unwinding of big bond purchases at central banks, for rising bond yields.
Economists often pooh-pooh the significance of existing bonds changing
hands, but they do think the size of the outstanding stock of debt matters. A
rule of thumb proposed in 2019 by Larry Summers of Harvard University
and Lukasz Rachel, then at the Bank of England, is that a ten-percentage-
point increase in debt-to-GDP raises interest rates by 0.35 percentage points
in the long run, while every percentage point increase in deficits raises rates
by a similar amount. That would imply that spendthrift governments have
contributed to today’s high rates.

To the extent government debt is to blame for “higher-for-longer”, then the

world economy will have to deal with higher rates without any
accompanying fillip to growth. That would be painful. “You can’t really take
the view that deficits will continue to push interest rates up and will also
continue unchecked,” says Maurice Obstfeld of the Peterson Institute for
International Economics. “Something’s got to give, whether it’s a more
restrictive fiscal policy or some sort of debt crisis.”

Other than a fiscal crisis, how could the tension be resolved? One possibility
is that persistently high inflation could erode the real value of government
debts, as it has in the past after moments of economic crisis. In that case,
though nominal interest rates might be higher-for-longer, the real interest
rate would not have risen as much. Companies and governments would
survive high rates because their incomes would be strong in cash terms.
Relative to the high real yields they expect today, bondholders would be
squeezed.

Another possibility is that high rates push the world economy into a
recession, which in turn causes central banks to cut them. In line with this
thesis, on October 23rd Bill Ackman of Pershing Square Capital announced
that his fund was no longer betting that rates would keep rising, pushing
down the value of Treasuries. “There is too much risk in the world to remain
short bonds at current long-term rates,” he wrote. “The economy is slowing
faster than recent data suggests.” If he is right, higher may not be for that
much longer. ■
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stay-high-for-a-decade-or-more
Asia
Singapore’s biggest money-laundering case has links to Chinese
gamblers
A Tokyo district cracks down on Halloween
Bangladesh strikes a blow against lead poisoning
Politics hampers Delhi’s fight against air pollution
Narendra Modi has shifted India from the Palestinians to Israel
Asia’s dirty money

Singapore’s biggest money-laundering case has

links to Chinese gamblers
It also sheds light on how Asia’s transnational crime gangs operate
Nov 2nd 2023 | Singapore

WHEN POLICE showed up at Su Haijin’s lavish apartment in Singapore

one early morning in August, he leapt from his second-floor balcony. The
ethnic-Chinese businessman was found hiding in a drain with broken legs.
The police meanwhile arrested nine other suspects in what Singapore has
described as one of the world’s biggest money-laundering cases. It has since
seized or frozen more than $2bn in luxury properties, cars, gold bars and
cash.

The case is part of a broader campaign by Asian governments to counter a

huge surge in money-laundering linked to organised crime. This criminal
tsunami has roots in illicit online gambling by Chinese punters, much of it
organised in South-East Asia by ethnic-Chinese gangs. In recent years the
gangsters have also moved into other illegal activities, especially online
scams. Police in Australia, Hong Kong, Malaysia, the Philippines and
Thailand, as well as Singapore, have recently raided casinos and scam-shops
to arrest and grab the assets of those responsible.

In October, Australian police arrested seven people on suspicion of

laundering the proceeds of cyber-scams, smuggling and violent crime, and
seized over $30m in assets. It was the third China-related money-laundering
case they had made public this year. In June police in the Philippines raided
a giant online gambling firm, rescuing 2,700 people who claimed to have
been tricked into working in cybercrime. China’s summer blockbuster this
year was not “Barbie” or “Oppenheimer” but “No More Bets”, a propaganda
film warning of the risks of being trafficked to South-East Asia to work in
cyber-scamming.

The crime surge can be traced back to a corruption crackdown launched by

China’s leader, Xi Jinping, a decade ago. Gambling has long been illegal in
China, except in Macau, whose casinos had hitherto been exploited by high-
rollers not only for gambling, but also to evade the country’s strict capital
controls. Individuals are permitted to move no more than $50,000 out of
China each year. By arranging to gamble in Macau through middlemen,
known as junkets, cash-rich Chinese (including corrupt officials looking to
squirrel away stolen loot) could move money into international bank
accounts. Mr Xi’s crackdown put an end to that. By 2015, Macau’s gaming
revenues had slumped by 34%. This left Chinese gamblers and capital-
control cheats looking for an alternative arrangement. They found it in
online gambling.

It is also illegal in China, but permitted in several South-East Asian

countries, whose online casinos tend to be accessible through Chinese
social-media platforms. By 2017, some of the junkets that Mr Xi had driven
from Macau had relocated to the Philippines, where they were licensed as
Philippines offshore gaming operators (POGOs) to run online gambling
firms serving clients located abroad, mostly in China. Around half a million
mainland Chinese are now estimated to work in the Philippines’ online
gambling industry. That is in part because popular online games such as
blackjack and pai gow poker require the dealer to speak the same language
as the player. The size of China’s online gambling market was $9.9bn in
2022, according to IMARC, a market research firm.
Under Rodrigo Duterte, president of the Philippines from 2016 to 2022, the
country’s online casinos were encouraged. The industry generated some
$350m in taxes between 2017 and 2019, says Alvin Camba of the University
of Denver, who studies Chinese capital flows in South-East Asia. At its peak
it comprised an estimated 250-300 online gaming firms, mostly linked to the
Chinese online gambling industry and in many cases also conduits for
money laundering, according to Dr Camba. Yet even many legal POGOs,
providing tax revenues to the Duterte government, were being used as a
cover for other crimes, especially online scams.

This is because some legal online gambling firms that target Chinese
gamblers are run by criminal gangs. And as these gangs have developed
their online operations they have often discovered new avenues for
criminality. It is not uncommon, in Manila or Phnom Penh, to find a licensed
online gambling firm on one floor of an office tower, and a sister operation
running online scams on the floor below. In recent months authorities in the
Philippines have raided several POGOs accused of using “casino
infrastructure as a cover to launder, move and generate proceeds of crime,”
says Jeremy Douglas, head of the United Nations Office on Drugs and
Crime in South-East Asia. Such recent cases have suggested the region’s
illegal online gambling industry is now much bigger than the licensed
industry in terms of both platform numbers and revenues.

In the Philippines, the surge in illegal activity in and around licensed casinos
turned opposition politicians and public sentiment against them. The number
of POGOs in the Philippines began declining in 2020, says Dr Camba. Some
crime gangs shifted to Cambodia and Myanmar, where they faced fewer
strictures. Between 2014 and 2019, the number of casinos in Cambodia rose
by nearly 160%, according to the Office of the United Nations High
Commissioner for Human Rights (OHCHR) in South-East Asia. The gangs
are alleged to have trafficked thousands of people to work in their casinos
and “scam compounds” in those countries.

As in the Chinese blockbuster “No More Bets”, these victims are often lured
by the promise of a lucrative job, only to find themselves trapped and forced
to engage in cybercrimes such as investment and romance fraud. The scam
centres they work in generate billions of dollars in annual revenues,
according to the OHCHR in South-East Asia. The gangs launder their profits
through their legal or illicit casinos—then typically invest the proceeds in
property in cities such as Singapore.

Hongli International, a company implicated in the Singapore bust, illustrates

how transnational gambling firms operate. According to Chinese court
documents and Chinese-language news reports, it was founded as an online
gambling firm by a Chinese-born individual, Wang Bingang, in 2012. Within
a few years, it had become a lucrative gambling syndicate based in the
Philippines, then Cambodia, targeting Chinese punters. In 2015 Mr Wang
was arrested and repatriated to China, where he spent three years in prison
for operating illegal gambling websites. After his release he moved to
Singapore, where he continued to run Hongli, says Jason Tower of the
United States Institute of Peace, a think-tank in Washington, who studies
how Chinese gambling firms operate in South-East Asia. He estimates
Hongli has generated billions of dollars in profits. One of Mr Wang’s
relatives was arrested in Singapore’s dawn raid. According to the Straits
Times, a Singapore daily, Mr Wang is listed as a “person of interest” in the
case.

Governments have woken up to this nightmare of gambling, scams and

money laundering. In September the UN, China and the Association of
South-East Asian Nations teamed up to counter it. Italy and Spain recently
announced crackdowns on Chinese money-laundering networks. They will
all struggle. Only 2-5% of money-laundering flows are intercepted, says
John Langdale of Macquarie University in Australia. However hard
governments try to raise that figure, the crime gangs, incentivised by their
enormous profits, are likely to find new means in the depths of the internet
to stay a step ahead. ■
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has-links-to-chinese-gamblers
Save our ghouls

A Tokyo district cracks down on Halloween

Japan’s ageing society is limiting youthful pleasures
Nov 1st 2023 | Tokyo

SHIBUYA, A DISTRICT in Tokyo known for its zesty pop culture, is a

place to find strange clothes and youthful frolics most days. Yet on
Halloween the capital’s top tourist attraction traditionally takes it up a gear.
For years crowds of partygoers in fancy dress have filled Shibuya’s neon-lit
streets and celebrated Scramble Crossing. In 2019 around 40,000 flocked to
the district on Halloween. But this October 31st the mood was much less
joyous. The killjoys of Shibuya’s local government had banned Halloween
festivities in the ward.

Unwelcoming signs were plastered all over it, including a billboard reading:
“No events for Halloween on Shibuya streets”. Outside the district’s metro
station, a famous meeting-place, security guards blew whistles and hustled
away anyone tempted to linger. Most monstrous to Shibuya devotees, police
sealed off the spot’s iconic statue of Hachiko, a legendary Japanese dog
known for its loyalty. “We came here to see Hachiko. How could they do
this?” complained Olga, 31, a Russian tourist, looking disconsolately at the
boarded-up dog.

The crackdown was in response to a Halloween tragedy last year in Seoul, in

which over 150 people were crushed to death. Officials feared Shibuya’s
narrow alleys could see another disaster. According to Fukuda Mitsuru, a
crisis-management expert, the fact that Halloween festivities are a fairly
recent foreign import exacerbated such concerns.

Yet the curbs are part of a broader crackdown on fun-seeking in Shibuya.

Complaining of excessive noise and litter, the ward banned public alcohol
consumption at certain times. Such measures seem unobjectionable in
isolation. Drunken salarymen lying prostrate on pavements is a less edifying
Tokyo spectacle. But combined with the Halloween ban they look to many
like an overreaction against youthful spirits by heavy-handed and often aged
officials.

That was certainly the view of those carousers who did bravely make it to
Shibuya this week. “I come to Shibuya every year for Halloween, so I feel
betrayed,” said Takeuchi Tetsuya, wearing a Mickey Mouse costume.■
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Death by turmeric

Bangladesh strikes a blow against lead poisoning

Are India’s rulers wise enough to take a lesson from their neighbour?
Nov 2nd 2023 | DELHI

TURMERIC IS THE key to a good curry—ask any South Asian. The spice
supplies a distinctive flavour, aroma and bright yellow colour. Many believe
that consuming turmeric, or even bathing in it, also has multiple health
benefits. But in much of South Asia, and perhaps far beyond, the spice also
exacts a terrible cost.

That is because turmeric sold in these places is routinely adulterated with

lead chromate in order to brighten its golden hue. And exposure to lead, a
neurotoxin, increases the risk of heart and brain diseases. Children are
especially vulnerable, because lead poisoning stunts cognitive development.
According to a study by the Centre for Global Development, a think-tank in
Washington, lead poisoning among children in poor countries explains 20%
of the learning gap between them and their peers in rich countries.
People in South Asia have the highest levels of lead in their blood, according
to a new study published in the Lancet Planetary Health. Pinpointing the
main cause had long seemed daunting, because lead is everywhere in the
region. Traces of the metal can be found in cooking utensils, cosmetics and
other everyday products. But in 2019 a team of researchers from Stanford
University and the International Centre for Diarrhoeal Disease Research,
Bangladesh (ICDDR, B ), a health-research institute, began focusing on
turmeric adulteration. Working with the country’s food-safety authority, and
politicians right up to Sheikh Hasina, Bangladesh’s powerful prime minister,
they then launched a nationwide campaign to root out the use of lead-
chromate pigment in turmeric. It turns out to have been hugely successful,
according to a new study published in the journal Environmental Research.

In less than two years, the share of turmeric samples in Bangladeshi markets
that contained detectable lead fell from 47% to 0%. This elimination of lead
adulteration had a near-immediate public-health impact. Among workers at
turmeric mills, blood lead levels dropped by 30% on average. Across
Bangladesh the reduction in lead exposure probably saved thousands of lives
for little cost. A preliminary analysis by Pure Earth, a New York-based
environmental NGO, suggests the programme delivered an additional year of
healthy life for $1. (Generating the same effect through cash transfers is
estimated to cost $836.)

In a region where rapid policy responses, let alone effective ones, are rare,
Bangladesh’s success is all the more impressive. It was founded on
recruiting support from policymakers by explaining the problem to them in a
credible way, says Jenna Forsyth of Stanford University. Between 2014 and
2018, she and her colleagues collected data to demonstrate the link between
turmeric consumption and high lead exposure levels among pregnant women
in rural Bangladesh. Armed with these findings, the researchers were able to
convince not just Bangladesh’s food-safety officials to take urgent action,
but also the prime minister’s office.

The mass-media campaign that followed included graphic warnings about

lead-tainted turmeric. Sheikh Hasina commented on the problem on national
television. Around 50,000 public notices about it were plastered in markets
and public areas. At a big turmeric processor, researchers tested workers’
blood samples to show how lead was poisoning those responsible for
pulverising, colouring and packaging the tubers from which the spice is
produced; then publicised the results.

Turmeric adulteration was declared a crime—and this change was also

broadcast. A bust on a major turmeric producer was aired on TV. Two
wholesalers were prosecuted in a mobile court for selling contaminated
turmeric, a trial the media was again encouraged to cover. The wholesalers
were convicted, fined and had much of their stock confiscated.

The Stanford team hopes to help launch similar campaigns in India and
Pakistan, where they believe turmeric adulteration may be even more
prevalent and deep-rooted. Much of the poisonous pigment used in
Bangladesh was imported from India. The spice supply chain is also longer
and more complicated in India than in Bangladesh, where a handful of
wholesalers serve the entire turmeric market.

The broader lessons from Bangladesh are applicable to all sorts of policy
problems, suggests Mahbubur Rahman of ICDDR, B. First, identify and
cultivate the most influential champions for change, he says. The impetus
they generate can then be sustained by launching broad-based coalitions. In
Bangladesh this meant rallying researchers, government, media outlets and
private firms to collaborate against poisonous spices. It was hardly a secret
recipe for success; but, as when making curry, the challenge lay in putting
the ingredients together judiciously. ■
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poisoning
Choking a city

Politics hampers Delhi’s fight against air pollution

Narendra Modi’s central government is at war with Delhi
Nov 2nd 2023 | Delhi

DURING THE last week of October, Delhi’s air quality began its seasonal
shift from unpleasantly foul to sickeningly filthy. As temperatures dropped
and clouds heavy with brown particulate matter drifted in from neighbouring
states, the official rating of air quality in India’s capital went from “poor” to
“very poor” and then “severe” in places. This means that Delhi’s air, the
most polluted of any big city, is now hazardous to breathe even for healthy
people. It is likely to remain so for much of the next three months.

Air pollution in South Asia is estimated to claim over 2m lives a year. Partly
caused by agricultural practices, including stubble burning, it is most severe
in northern India, especially in winter, when cold air traps pollutants in the
mostly windless Indo-Gangetic Plain bordered by the Himalayas. A recent
study suggests that the average resident of Delhi loses up to 12 years of life
to air pollution. According to official figures, in 2022 Delhi’s air was
considered “good” or “satisfactory” on only 68 days. The average
concentration of particularly harmful PM 2.5 particles—which can enter the
bloodstream and cause heart disease and respiratory problems—was 98
micrograms per cubic metre. That is nearly 20 times the level considered
safe by the World Health Organisation.

As sources of air pollution are often far from the worst-affected places, it can
only be significantly mitigated by different authorities acting in concert. Yet
partisan rivalry often gets in the way—as is illustrated by the latest row
between Delhi’s government, which is run by the Aam Aadmi Party (AAP),
and the central government of Narendra Modi’s Bharatiya Janata Party
(BJP).

The argument pits Delhi’s environment ministry against the city’s pollution
control committee, which is headed by a bureaucrat on secondment from the
national home ministry. In late October the capital’s environment minister
claimed this official had unjustifiably withheld funding from a years-long
study to measure the source of pollutants in Delhi’s air. The pollution control
committee claimed to have identified methodological flaws in the study
which, it said, were designed to absolve the AAP government of blame for
the problem. The city administration, in turn, claimed the scuppering of the
study was part of a pattern of government officials loyal to the BJP
deliberately undermining the AAP’s work. Whoever is right, the study is
unlikely to be resumed—a serious setback for pollution mitigation in the
world’s filthiest city.

The row is part of a broader fight between the AAP and centre over control
of Delhi’s entire bureaucracy. In August the central government passed a law
in effect awarding control to itself. This superseded a Supreme Court verdict
on the issue in the AAP’s favour. A constitutional challenge by the AAP
government is pending.

The row is threatening a rare hopeful anti-pollution effort. A regional anti-

pollution body, encompassing Delhi, its neighbouring states and several
central-government ministries, was recently launched to co-ordinate smog
mitigation policies. The fact that the AAP also governs Punjab, where much
of the stubble-burning happens, made that seem all the more promising. Yet
the body will not achieve much so long as the central and Delhi governments
prize partisan advantage over making Delhi’s air safe to breathe. ■
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pollution
Banyan

Narendra Modi has shifted India from the

Palestinians to Israel
The pivot reflects Indian domestic politics and new interests in the Middle
East
Nov 2nd 2023

FOREIGN NEWS usually gets short shrift in India. Yet for the past month
the country’s television channels have been dominated by wall-to-wall
coverage of events in Israel and Gaza, mostly from Israel’s perspective.
News anchors in bulletproof vests stand in the desert delivering breathless
reports on the aftermath of Hamas’s atrocities in Israel on October 7th. Talk-
show hosts restage the Palestinian terrorist group’s attack from Gaza with
toy soldiers and miniature bulldozers. Weeks into the war, coverage remains
intense.

The media’s fascination with Israel’s plight and retribution coincides with a
marked shift in the Indian government’s stance on the conflict between Israel
and the Palestinians. It has moved from backing the Palestinians to more or
less unqualified support for Israel. The pivot is based on a realist reappraisal
of Indian interests in the Middle East. It has also met with strong public
backing from Narendra Modi’s domestic supporters, which is gratifying for
Mr Modi’s government ahead of state elections this month and a general
election next year.

In the past, like many countries in the global south, India tempered any
expression of support for Israel with expressions of concern for the
Palestinians’ plight. No more. Mr Modi took to X (formerly Twitter) within
hours of Hamas’s assault to express his horror at the “terrorist attacks” and
declare that “we stand in solidarity with Israel”. It took five days for India’s
Ministry of External Affairs to reiterate, in response to questions from
reporters, that India continued to support a two-state solution to the conflict.
On October 27th, in a departure from its usual voting record, India abstained
as the UN General Assembly adopted a resolution calling for a humanitarian
ceasefire in Gaza; it objected that the text did not condemn Hamas’s assault.

The shift reflects India’s growing defence and commercial ties to Israel. Co-
operation between the two countries has been deepening ever since Israel
provided India with military help during the Kargil war against Pakistan in
1999. That was long before America took a serious interest in military co-
operation with India. Over the past decade India has bought missiles, drones
and border-security equipment (and probably surveillance software, though
it has not admitted this) from Israel, making it the Israeli defence industry’s
biggest foreign customer.

A bromance between Mr Modi and Binyamin Netanyahu, Israel’s prime

minister, has deepened the relationship. So has the two countries’ shared
preoccupation with fighting terrorism, especially the Islamist variant.
Explaining the abstention in the UN vote, Subrahmanyam Jaishankar, India’s
foreign minister, said in a speech on October 29th that India took a strong
position on terrorism “because we are big victims of terrorism”.

India has also been increasing its ties with Gulf Arab countries, especially
Saudi Arabia and the United Arab Emirates. And it can ill afford to alienate
them; it depends on them for much of its oil and goodwill towards an
estimated 9m expatriate Indian workers. Yet the fact that both countries have
recently moved closer to Israel has allowed Mr Modi to effect his shift with
alacrity. Even in the current crisis, the Saudis and Emiratis appear reluctant
to allow the events in Gaza to cause a rupture in their long-term
rapprochement with Israel.

Domestically, the Modi government’s pivot is essentially all upside. The

Congress-led opposition has condemned it; leaders of India’s 200m Muslims
have heavily criticised Israel’s military response. Yet the Indian middle-class
that mostly backs Mr Modi is especially concerned about Islamist terrorism.
Its members look on Hamas’s attack and recall the tragedy Mumbai suffered
in 2008, when Pakistani Islamists killed 175 people and wounded more than
300 during a four-day rampage. It included an attack on a Jewish community
centre in the city, where the terrorists murdered the rabbi and his pregnant
wife.

There is a small risk the government will overplay its hand. As the civilian
death toll in Gaza rises, India’s Arab partners might turn against the Israelis
and their backers more aggressively. Mr Modi has latterly hedged against
that possibility. He has reached out to Palestinian leaders, offering Indian
condolences and humanitarian aid. Meanwhile, his Hindu-nationalist
henchmen are unrestrained in using the conflict to stoke the Islamophobia
that has propelled their party’s rise. Even if Mr Modi’s pivot becomes
difficult abroad, it will probably help him win elections.■

Read more from Banyan, our columnist on Asia:

South Korean politics is one big row about history (Oct 26th)
India-Pakistan relations are becoming more marginal and worse (Oct 19th)
Pakistan expels undocumented Afghans. But at what price? (Oct 12th)
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https://www.economist.com/asia/2023/11/02/narendra-modi-has-shifted-india-from-the-
palestinians-to-israel
China
Xi Jinping is trying to fuse the ideologies of Marx and Confucius
China and Bhutan aim to resolve a long-running border dispute
How China’s delivery drivers quietly fight to improve their lot
Why Chinese mourn Li Keqiang, their former prime minister
One leader, two philosophies

Xi Jinping is trying to fuse the ideologies of Marx

and Confucius
A new television show places them at the centre of Chinese culture
Nov 2nd 2023

KARL MARX and Confucius may have lived 2,400 years apart, but on
Chinese state television they stroll together through an ancient Chinese
academy. In a sun-dappled bamboo grove, a group of student painters invite
the two philosophers to be their models. As the young people paint, Marx
and Confucius chat. They are impressed with China’s high-speed trains,
among other things. When the portraits are revealed, the thinkers are
surprised. Marx is depicted in a Tang-dynasty robe; Confucius is portrayed
in a Western suit and tie. But both are delighted. “I’ve been in China for
more than a hundred years,” says Marx (in Mandarin). “Actually, I have
been Chinese for a long time.” Confucius chuckles, stroking his beard. Long
hair looks a bit strange with the suit, he says, but it make sense to keep
changing.
The scene is from “When Marx Met Confucius”, a television series created
by the propaganda department in Hunan province and released in October. It
is not popular. On Douban, a film website, it has received only 100 or so
reviews, most of them negative (eg, “makes me sick”). But for those who
can stomach it, the show is a good way to understand Xi Jinping Thought on
Culture, the latest branch of the Chinese leader’s philosophy.

Other parts of Mr Xi’s thinking emphasise tighter Communist Party control

over such things as diplomacy, defence and the economy. Xi Jinping
Thought on Culture, announced in October, attempts to fuse pride in Chinese
tradition with loyalty to the party. Its most important tenet is the “two
combines”, party-speak for a decades-long process to make Marxism more
Chinese. The first combine refers to early efforts to adapt Marxism to
China’s “specific reality”. Such ideological flexibility allowed Deng
Xiaoping, China’s former leader, to pursue economic reforms in the 1980s.
The second combine is Mr Xi’s idea: to sinicise Marxism by melding it with
traditional Chinese culture.

The effort represents the culmination of a radical turnaround for the party,
which once considered tradition its enemy. During the Cultural Revolution
of 1966-76, Mao Zedong’s Red Guards destroyed Confucian temples, burnt
Confucian texts and desecrated the sage’s tomb. Young people denounced
their elders, contradicting Confucianism’s emphasis on filial piety. But after
Mao’s death in 1976 the party warmed to Confucius, or at least to a
simplified version of his teachings that emphasises deference to authority.
Deng allowed public celebrations of the philosopher’s birthday. Jiang Zemin
and Hu Jintao, Deng’s successors, appropriated Confucian ideas. In the early
2000s Chinese scholars debated whether Confucianism might even replace
Marxism as China’s guiding ideology.

Mr Xi is putting an end to that debate. Marxism is the “soul” and

Confucianism the “root” of Chinese culture, he says. Neither ideology can
be abandoned. Instead, they must be merged.

“When Marx Met Confucius” guides viewers through this new thinking. For
much of the five episodes, the philosophers sit on a stage in front of students
and a rotating cast of scholars and party officials. A young woman wearing
hanfu, traditional robes, plucks a guzheng, or ancient zither, in the
background. The philosophers converse with holograms of figures such as
Vladimir Lenin and Mao, who explain how their thinking is compatible. The
programme’s hosts then explain how it all fits into Xi Jinping Thought.

The show glosses over big differences between Confucius, who believed
hierarchies were necessary to maintain social order, and Marx, who called
for a proletarian revolution. “You were trying to maintain stability and I was
seeking the liberation of all mankind,” says Marx. “But aren’t we both
seeking the greatest good for all humans?” When Marx mentions his vision
of a classless society, Confucius says he has a comparable concept called
datong (great unity). “So we have many similarities!” says Confucius. The
students applaud.

The Cultural Revolution is mentioned—once. It did “great damage”, says a

host. But Mao doesn’t get the blame. At one point his spirit appears, assuring
Marx and Confucius that he was a faithful communist and defender of
traditional Chinese culture. Confucius nods approvingly.

The show spends more time bashing the West. A host blames foreign
bullying of China in the 19th century for a “long-term cultural inferiority
complex” (exacerbated by Chinese intellectuals, who at the time claimed
China’s traditions made it weak). The early reform era of the 1980s is
remembered as a dangerous period of “historical nihilism”, when Western
ideas misled Chinese people into criticising their society and government.
“Can a country become strong if its economy develops but its spirit is lost?”
asks the host, quoting Mr Xi.

No is the implicit answer. A good thing, then, that Mr Xi is restoring China’s

confidence, the show claims. Not only that, he and the party are pursuing the
common good worldwide, in contrast to dastardly Western countries.
America exports cluster bombs, while Japan dumps nuclear wastewater into
the ocean, says a host. China, a “responsible great power”, would never do
such things, he adds. Marx is impressed. He congratulates China for
revitalising socialism and fulfilling his vision.

“When Marx Met Confucius” is easy to ridicule, but parts of its message are
worrying. In the last episode, a student asks Confucius for advice on Taiwan,
the self-governing island that China claims. “We truly have a traditional
culture of peace, but some Western countries only believe in the law of the
jungle,” says the student. “If they bully us or obstruct our national
unification, should we still speak to them of peace?” Confucius furrows his
brow. Goodness should be met with goodness, but hatred should be met with
justice, he says. A host jumps in. China seeks peace, but if its dignity and
interests are hurt, it will use military force to pursue national unification, he
says. Images of fighter jets and warships fill the screen. ■

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ideologies-of-marx-and-confucius
Progress on one front

China and Bhutan aim to resolve a long-running

border dispute
That has caused India to worry about its own territory and a loss of
influence
Nov 2nd 2023 | DELHI

CHINESE DIPLOMATS have had a rough ride in South Asia for most of the
past four years. Relations with India took a nosedive after a deadly border
clash in 2020. Debt problems, political instability and militant attacks on
Chinese nationals have strained an “ironclad” friendship with Pakistan. Mass
unrest toppled a China-friendly president in Sri Lanka last year after it
plunged into a debt crisis linked to Chinese lending. Bangladesh also shelved
several infrastructure projects tied to China’s Belt and Road Initiative.
Lately, though, China has bounced back in some of the region—to India’s
dismay. The most recent Chinese success came with Bhutan, a Himalayan
kingdom of 770,000 people wedged between China and India. It is the only
Asian country without formal diplomatic ties to China. Along with India, it
is also one of only two countries whose land borders with China are
officially disputed. And to complicate matters further, the disagreement
covers an area, known as the Doklam plateau, where the Indian, Chinese and
Bhutanese borders meet (see map).

The breakthrough was the first ever visit to Beijing by a Bhutanese foreign
minister. Tandi Dorji met his Chinese counterpart, Wang Yi, on October 23rd
(see picture) and China’s vice-president, Han Zheng, the following day. He
also participated in the two countries’ first talks on the frontier dispute since
a stand-off between Chinese and Indian troops in Doklam in 2017.

In his meeting, Mr Wang said China was ready to complete the border talks
as soon as possible and to establish formal ties with Bhutan, describing it as
a “historic opportunity”. China’s readout quoted Mr Dorji saying he too was
keen for an early border settlement and progress towards establishing formal
ties. A joint press release was less forthright, saying just that the two sides
agreed to continue pushing forward with the border negotiations.

But Bhutan’s prime minister, Lotay Tshering, suggested to an Indian

newspaper earlier in October that the end goal was formal ties with China.
“Theoretically, how can Bhutan not have any bilateral relations with China?
The question is when, and in what manner,” he said. He also mentioned that
a possible land swap involving Doklam had been proposed.

The rapprochement is geopolitically important for several reasons. Bhutan

does not have formal diplomatic ties with any of the five permanent
members (or P5) of the UN Security Council—America, Britain, China,
France and Russia—largely owing to its history of isolationism and non-
alignment in the cold war. Opening formal ties with China could lead Bhutan
to do the same with other P5 members, drawing it into the ongoing tussle for
diplomatic influence around China’s borders.

But it is most significant for India. Under a treaty signed in 1949, India
gained a formal right to guide Bhutan’s foreign policy in exchange for free
trade and security guarantees. The foreign-policy provision was scrapped in
2007, but India has remained Bhutan’s most important diplomatic and
economic partner.

Indian officials’ chief concern is Doklam because it is near the Siliguri

corridor (also known as “the chicken’s neck”) which connects India’s north-
eastern states to the rest of the country. Indian authorities have long feared
that China, which won a brief border war with India over a nearby part of the
disputed frontier in 1962, might try to sever the Siliguri corridor.
India may now have accepted that diplomatic ties between China and Bhutan
are inevitable, given the lure of Chinese trade and investment. But it wants a
role in the border talks and is sceptical about a land swap. Progress might
still be possible, given that China and India both seem keen to stabilise their
border dispute. Since the deadly clash in 2020, they have pulled back troops
from several flashpoints, creating buffer zones where neither side patrols.

But Indian officials also have concerns about China’s renewed efforts to
enhance its clout in a region that India considers its backyard. Several South
Asian states are indebted to China. The Maldives, where India had recently
reasserted its influence, elected a new pro-China president, Mohamed
Muizzu, in September. He has since asked India to remove the roughly 70
Indian troops stationed there to maintain radar stations and other military
assets.

In Sri Lanka, too, India has pushed back against China’s influence in recent
years, but the island nation has lately indicated that it seeks strong relations
with both of Asia’s giants. On October 25th Sri Lanka’s government allowed
a Chinese scientific-research vessel to dock in Colombo, its biggest city,
despite American and Indian security concerns. Sri Lanka’s president, Ranil
Wickremesinghe, also attended the Belt and Road Forum in Beijing in
October. The geopolitical jockeying is sure to continue. But China is still
very much in the game. ■

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running-border-dispute
New tactics

How China’s delivery drivers quietly fight to

improve their lot
Sometimes there is a good reason that food ordered in Beijing doesn’t
arrive
Nov 2nd 2023 | BEIJING

CHINA’S FOOD-DELIVERY drivers have a lot to complain about. Many

work long days, earning as little as 5 yuan ($0.68) per delivery. Heavy rain
and heatwaves do not stop them—in fact, demand is highest during such
weather. Delivery apps promise fast turnarounds, so drivers, most of whom
work for contractors, are sometimes fined for arriving late (not to mention
scolded by customers). The only way to keep up, they say, is by running red
lights and speeding. Accidents are common.

Drivers and couriers have pressed for improvements, holding around 400
protests in the past five years, says China Labour Bulletin, an NGO in Hong
Kong. Perceived troublemakers can face consequences, such as being cut out
of deliveries. Nevertheless, a new study suggests that labour activism among
drivers may actually be more widespread than previously thought. Some are
using quieter tactics to get their way.

The research was carried out by Bo Zhao of Fudan University in Shanghai

and Siqi Luo of Sun Yat-sen University in Guangzhou. One of the authors
spent 18 months working as a delivery driver in southern China. During this
time they witnessed five small-scale strikes, none of which was known to the
public. Rather than taking to the streets, upset drivers simply logged out of
the app that assigns deliveries during a period when demand was high, such
as at lunchtime. That was enough to cause delays to snowball, forcing the
company to reject orders.

Even the threat of such action causes some supervisors to bend rules on
when drivers get fined, says the study. Another piece of research, from 2021,
found that small-scale strikes were sometimes effective in convincing
contractors to increase (slightly) how much they pay.

It helps when the public gets involved. In 2021 a company called Ele.me
said it could pay only 2,000 yuan ($273) in compensation to the family of a
delivery worker who died on the job. After a backlash on social media, the
company agreed to cough up 600,000 yuan. Later that year, the government
demanded that delivery companies improve working conditions for drivers
and couriers. But little has actually changed, says China Labour Bulletin.

More organised and ambitious labour activism would probably lead to more
gains for workers. But the Chinese government is unlikely to tolerate it. For
years Chen Guojiang, a food-delivery driver in Beijing, posted videos online
trying to drum up support. At one point he said he was talking to 14,000
drivers via groups on WeChat, a messaging service. He encouraged them to
work together and fight for better conditions. That was too much for the
authorities. In 2021 he was arrested for “picking quarrels and provoking
trouble”, a vague charge commonly used to punish activists. Small, quiet
victories may be the best drivers can hope for.■

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world.
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to-improve-their-lot
Chaguan

Why Chinese mourn Li Keqiang, their former

prime minister
Missing the Communist Party that sought legitimacy through technocratic
performance
Nov 2nd 2023

THE UMBRELLAS gave them away. Even from a distance, these were
unmistakably townsfolk, shielding themselves with parasols from an autumn
sun that no Chinese farmer would fear. On and on they trudged: a long
column of outsiders, following a country lane between rice paddies and
fishponds towards the village of Jiuzi, ancestral home of Li Keqiang,
China’s prime minister until his retirement earlier this year.

They were mourners, turning out in their hundreds on this warm Sunday, a
few days after Li’s sudden death at the age of 68. Most held bunches of
white and yellow chrysanthemums, a funeral flower in China. Under their
umbrellas some were formally dressed in black and white. Parents cajoled
young children to keep walking, after parking cars in fields well outside the
village.
No Communist Party diktat had summoned these grieving citizens. Nor had
convoys of buses brought them. Quite the opposite. Official media outlets
have played down Li’s death. Instead, state media have devoted their efforts
—as always—to extolling Xi Jinping. China’s leader has spent more than a
decade concentrating power in his own hands, at the expense of government
ministries and of Li Keqiang, who oversaw them as prime minister. The
diminishing of Li continues even after his demise. Though terse, his official
obituary finds room for four tributes to the leadership of the party central
committee “with Xi Jinping at the core”.

For days, censors have deleted large numbers of online tributes to Li, leaving
only the blandest untouched. Reports abound of universities banning
students from organising memorials. There is a grim logic to this caution.
More than once, a public figure’s passing has offered Chinese citizens a
chance to stage demonstrations, notably after a former party boss, Hu
Yaobang, died in 1989.

For all that discouragement, thousands of Chinese have persisted in leaving

flowers and handwritten notes for Li, from Jiuzi to cities where he lived and
worked, such as Hefei and Zhengzhou. Some observers, including Chinese
intellectuals outside the country, detect in these tributes a challenge to Mr
Xi, and a yearning for a more reformist China. One exiled writer calls this
moment a “flowers revolution”. Such intellectuals remember Li’s youth as a
brilliant law student at Peking University, with an interest in Western legal
systems (he helped to translate a book on the rule of law by Lord Denning, a
British judge). They are undaunted by Li’s actual record as prime minister
from 2013 to 2023. True, they concede, that decade saw the party
systematically dismantle checks and balances on its power, and spurn the
rule of law in favour of an iron-fisted alternative that Mr Xi calls “law-based
governance”. But in their telling, Li’s humiliations make him an icon for
others whose hopes have been crushed in Xi-era China.

Chaguan is not about to tell Chinese exiles they are mistaken about their
own country. Indeed, despite the censors’ best efforts, social-media users
have circulated images of floral tributes and graffiti that do look like anti-Xi
complaints. Many of these quote celebrated Li sayings, in particular his
pledge that China’s opening to the world is as irreversible as the flow of the
Yangzi and Yellow rivers. It is safe to assume the intention is to grumble
about the inward-looking nationalism of the Xi era.

For all that, it would be unfair to claim that every mourner for Li is a
protester. When this columnist visited Jiuzi, the crowds were on their best
behaviour, not defiant or fearful, as would be expected at an actual
demonstration in China. Local farmers sold cut-up sugar cane to visitors, as
police directed traffic. When asked why they had come, several mourners
offered apolitical answers about a local man who reached the top.

A mother who had brought her young son to lay flowers praised Li as “a
good premier who did practical things for the people”. Yet listen carefully,
and some of that cautious praise was revealing. The mother noted that Li
went to the epicentre of the covid-19 pandemic, Wuhan, “at the earliest
possible time”. She did not mention that Mr Xi took months to visit Wuhan
and never visits natural disasters while they are under way. Perhaps the
mother was not thinking of this. But it is a common gripe.

Several people in Jiuzi noted that Li, the son of a rural official, knew poverty
as a child. To them, this explained Li’s focus on concrete problems, such as
migrant workers not being paid wages they are owed. One man contrasted
Li’s humble origins with Mr Xi’s background, as the son of a party elder and
Politburo member.

Around China, sites linked to Mr Xi and his family have been lavishly
restored as “red tourism” destinations for party pilgrims. In Jiuzi, a farmer
recalled talk of beautifying the village after Li achieved high office. But
whenever their illustrious ex-neighbour heard of special treatment for Jiuzi,
he “would call and tell the local officials not to do it,” the farmer said
approvingly.

The death of accountability

Two seemingly disparate groups—angry dissenters and nominally apolitical
families laying flowers in Jiuzi—do in fact overlap. The link involves
accountability and Li’s willingness to admit that China still has serious
problems. At a press conference in 2020, Li shocked some urbanites by
reminding them that around 600m Chinese subsist on just 1,000 yuan ($137)
a month. He also admitted that covid had hit poor families hard. At other
times he called for checks on arbitrary government power and for the public
to supervise officials’ work. Many Chinese recall those Li sayings now.
They are making a political point whether they admit it or not.

As a reform-era technocrat, Li served a one-party system that sought

legitimacy through governing performance. Many Chinese miss that time.
That is surely what they mean when they call Li practical and in touch with
the masses. Today China has one-man rule and the party rejects external
supervision. To admit to problems in this China is to doubt Mr Xi: an
impossibility. China will be mourning that loss of accountability for a long
time to come. ■

Read more from Chaguan, our columnist on China:

How China sees Gaza (Oct 26th)
Xi Jinping wants to be loved by the global south (Oct 19th)
China’s ties with America are warming, a bit (Oct 12th)

Also: How the Chaguan column got its name

This article was downloaded by zlibrary from
https://www.economist.com/china/2023/11/02/why-chinese-mourn-li-keqiang
United States
A tax-cutting wave is sweeping over America’s states
Why Kentucky’s Democratic governor is heading for re-election
Can a Presley win Mississippi?
Why doctors in America earn so much
Why is America’s capital so violent?
The Gaza war could help set speech free again
Cut chemists

A tax-cutting wave is sweeping over America’s

states
Conservatives see a fiscal triumph, while critics warn of a looming disaster
Nov 2nd 2023 | DES MOINES

IOWA IS ACCUSTOMED to the national political spotlight as the first state

that Republican hopefuls vie to win when seeking their party’s nomination
for the White House. What is more unusual is that this small midwestern
state now also finds itself in the national economic spotlight. For
conservative politicians and commentators, Iowa has emerged as America’s
tax-cutting champion, a paragon of fiscal responsibility. To critics it looks
more like an example of economic recklessness.

Either way, Iowa is playing an outsized role in a bigger debate about how
American states ought to manage their revenues and spending. Until a few
years ago it had one of the highest income-tax rates in America. By 2026 it
will be down to a flat tax of 3.9%, with designs on more cuts. “Ultimately
I’d like to get as close to zero as I can,” says Kim Reynolds, Iowa’s hard-
driving governor. Iowa is far from alone. Some 25 states, from Arizona to
New Hampshire, have cut individual income taxes over the past three years.
A handful, including Georgia and Idaho, are shifting to a flat tax. And a few
others such as Arkansas and Mississippi want to eliminate their income taxes
altogether, joining the likes of Florida and Texas which have none.

It is not just a Republican trend. Virtually all states, regardless of political

make-up, have lowered their citizens’ tax bills since 2021, deploying a
mixture of one-off rebates, credits for families and outright cuts to property
and sales taxes. Overall, these have been equivalent to a roughly $30bn
decline in states’ tax revenues during this time, the steepest such reduction in
at least four decades. But the most aggressive, and potentially the most
permanent, moves have been cuts to income taxes, and Iowa has been at the
forefront of these efforts. “You have to continually be looking for
opportunities to be competitive, and our constituents are the winners in that
competitive environment,” says Mrs Reynolds.

The key factor enabling the tax-cutting zeal is that states are flush with cash
—a striking contrast with the federal government, which is saddled with
gargantuan, growing deficits. States are in a different position to begin with,
because most are required by law to balance their budgets each year. During
2020 that turned into a headwind for their budgets: they had braced for a
long, difficult stretch but instead notched up record-setting revenue growth
in 2021 and 2022, owing in large part to the economy’s rapid recovery.

Tax receipts have fared less well over the past year, but 45 states have still
managed to collect more revenues than they had budgeted for, according to
the National Association of State Budget Officers, a nonpartisan
organisation. Although a handful, including California, have swung to
deficits, most are still on track for surpluses this year. Moreover, the strong
inflows of the past three years have padded the buffers. States have amassed
rainy-day funds worth about $155bn collectively, about double their pre-
covid level.

This has set up states for what, on the surface, looks like the fiscal equivalent
of a free lunch. They are using their surpluses to pay for their tax cuts and
are still bringing in more than enough revenues to meet their budgetary
commitments. “Every single time since we’ve cut taxes, revenues have still
come in higher than estimates,” says Jack Whitver, the Republican Senate
majority leader in Iowa. Were the economy to fall into a recession, treasurers
would be able to dip into their rainy-day funds to plug any shortfalls. “These
are not states that are having difficulty in making ends meet,” says Katherine
Loughead of the Tax Foundation, a think-tank.

The first cut

Where things get more contentious is accounting for why state budgets are
so strong, and whether this strength can last after they slash taxes. Politicians
naturally love to take credit for their surpluses as evidence of their sound
fiscal management. In fact they were beneficiaries of the covid economy in
two ways. First, federal transfers soared to help states cope with the
disruption. In 2022 federal grants to state and local governments reached
$1.2trn, about 70% more than in 2019. Technically, states were barred from
using any emergency covid relief to fund tax cuts. In practice money is
fungible and state treasurers are masters of creative accounting.

Second, inflation has flattered their books, and continues to do so. Rising
prices augment governments’ nominal tax receipts and higher wages push
people into higher income-tax brackets, says Lucy Dadayan of the Tax
Policy Centre, a think-tank. At the same time, states’ nominal expenditures
are limited by their annual budgets. This year, for example, states have
budgeted for a roughly 2.5% increase in spending. Factoring in the
prevailing inflation rate, that will amount to a small cut in real spending.

Critics are quick to point to Kansas’s bruising experience with deep income-
tax cuts in 2012 and 2013. Described by the governor at the time as a “shot
of adrenalin” for the economy, the state instead ended up with slower growth
and weaker fiscal revenues, leading it to reduce funding for schools. In 2017
it reversed its tax cuts. Advocates for tax cuts counter that Kansas is an
unfair example, given that many other states have reduced taxes over the
years without such dire outcomes. In any case, most of the tax cutters this
time around are proceeding carefully. “I am not going to be the governor that
has to turn around and raise taxes, so I use very conservative projections,”
says Mrs Reynolds. Iowa’s planned expenditures are about 15% less this
year than its expected revenues.
But it will be hard for states to deliver such restrained budgets without
undermining the services that they provide, notably education and health
care (states are big funders of Medicaid, medical insurance for low-income
families). Grover Norquist, long America’s most outspoken anti-tax activist,
thinks state treasuries should cap expenditure growth at the rate of
population growth plus inflation, which would effectively peg per-person
spending at current levels in real terms. That sounds like a reasonable
formula. The trouble, however, is that education, health care and transport
tend to experience higher inflation than other parts of the economy. Capping
government spending at the general inflation pace would almost certainly
necessitate real cuts to schools, medical insurance and road works.

Even without making outright cuts, states may be forgoing opportunities to

expand their current offerings, says Wesley Tharpe of the Centre on Budget
and Policy Priorities. In Nebraska, for instance, the resulting revenue loss
from its income-tax cuts of the past three years is about the same as its
annual spending on Medicaid, he notes. Iowa’s shift to a flat tax will be
phased in over the next few years, so its impact will only be truly felt in
2028, when the state’s nonpartisan legislative agency estimates that the
various cuts will cause an estimated $1.9bn decline in fiscal revenues,
putting them roughly 20% below their prior trend. “Something has got to
give, whether it’s education or health care or something else. A crash is
coming,” says Mike Owen of Common Good Iowa, a non-profit group
opposed to the tax cuts. Mr Whitver is more sanguine: “I don’t think it has to
be one or the other. We can continue to make investments where investments
are needed, and continue to cut taxes.”
In the meantime, with so many states cutting taxes, there is also a question
about how best to structure the reductions. Most of the reductions in income
taxes have been fairly modest: the median top rate for states has gone from
5.4% in 2020 to 5% this year, according to the Tax Foundation. Iowa, on the
other hand, has been more radical. Not only has its top rate gone from 9% to
3.9%, it is shifting to a flat levy that represents a dramatic simplification of
the tax code. Iowa previously had nine separate income-tax brackets, plus a
thicket of exemptions, all of which are now being scrunched into one single
tax rate for all. The knock against flat taxes is that they aggravate inequality,
doing away with the redistribution of income that is baked into a graduated
tax system. Mr Owen estimates that about half of the direct savings from
Iowa’s shift to a flat tax will flow to the richest 5% in the state. Mrs
Reynolds is unapologetic: “We’ve got to stop punishing success, we should
reward it.”

Is the steepest
Another group may benefit from Iowa’s reforms: economists. Those wanting
to study the effects of tax cuts have a natural experiment because Iowa
happens to share a border with Minnesota, one of the few states moving
sharply in the opposite direction. Democrats in power there have pursued
one of America’s most left-wing policy agendas seen in recent years. Rather
than converting their fiscal surpluses into across-the-board tax cuts, they
have rapidly increased spending levels. In Minnesota’s latest biennial
budget, expenditures are 38% higher than in its previous one, a record
increase. The state has showered money on schools, roads, housing and
more. It has also tried to make its tax system more progressive: a new
“millionaire tax” raises rates for the wealthiest Minnesotans, while lower-
income residents will benefit from a range of tax rebates.

Beyond differences in their fiscal and economic trajectories, much attention

will focus on whether Iowa or Minnesota does better at attracting new
residents and new investment. Over the past decade, America’s low-tax
states, notably Texas and Florida, have generally been its fastest growers—in
terms of both population and economic size. That has been about much more
than taxes, with warm weather and relatively low housing costs also crucial
parts of the equation.
Iowa will be a tougher test case for the benefits of lower taxes. For years it
has had relatively little population growth. Mrs Reynolds thinks the state can
now turn its luck around. “We’re building the right kind of environment for
people and businesses,” she says. If a landlocked state known primarily for
corn and presidential races can manage to do that, all while keeping its
schools, hospitals and roads in good shape, it will be a tax-cutting triumph. If
not, it may instead end up a cautionary tale.■

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The other derby

Why Kentucky’s Democratic governor is heading

for re-election
Lessons for the party from a state Donald Trump won easily
Nov 2nd 2023 | LEXINGTON

ASKED TO DESCRIBE the politics of Kentucky, many would default to

calling it Trump country. And they would have many points in their favour.
But others object. “It’s Beshear country!” yells Steve Beshear, the state’s
Democratic governor between 2007 and 2015, unzipping his bomber jacket
to show a T-shirt emblazoned with the slogan for dramatic effect. He, too,
has a point. On a wet Saturday morning in Lexington he was the warm-up
act for his son, Andy Beshear, the sitting Democratic governor of the state,
who is running for re-election on November 7th. Incredibly for a state that
went for Mr Trump by 26 percentage points in 2020, current polls make
Beshear the Younger the favourite.

As in Appalachia and the American South, Democrats once swept Kentucky.

In recent elections, Democrats have managed to convince themselves that
one of their number has a chance of winning a prominent statewide race, and
then raise fabulous sums of money, only to face a drubbing at the ballot box.
Thus in 2020 Amy McGrath, a serially unsuccessful Democratic candidate,
raised $90m in her race to unseat the Republican senator Mitch McConnell
—only to lose by 20 points. Yet the state has spent more years this century
being governed by a Democrat than by a Republican. And it may now be in
for another four years of the same.

That should be instructive for Democrats. Both Beshear père and fils have
managed to keep an arm’s-length relationship with presidents of their own
party. They have done so by touting the economic benefits of federal
spending. Despite the unpopularity of Obamacare, the elder Beshear pushed
through an expansion to Medicaid, the health-insurance programme for the
poor, and a state-run insurance exchange (which Republicans are no longer
campaigning to undo). The younger Beshear touts private-sector investments
spurred on by the Inflation Reduction Act, a big subsidy bill, even as he
murmurs objections to some federal environmental rules. “The things that
are going on from infrastructure to public education to health care in
Kentucky to new jobs are a lot more important to a Kentuckian than
whatever they’re arguing about in Washington, DC,” says the governor.

That is why Daniel Cameron, the current state attorney-general and

Republican challenger to Mr Beshear, is trying his utmost to link the
relatively popular Democratic governor to the deeply unpopular Democratic
president. He argues that the economy is hardly as Mr Beshear presents it.
“The median household income has dropped 12%…and we have the lowest
workforce participation that’s been recorded in Kentucky’s history,” says Mr
Cameron after an event in Fort Mitchell, near the border with Ohio. “That’s
all because of the Biden administration and the enabler that he has here in
Andy Beshear.”

Mr Cameron has also sought to nationalise the race in another way. In his
stump speech, he pledges to protect law enforcement from apologists for
crime, the unborn from abortionists and women’s sports from biological
males. Some might point out that Kentucky seems an inhospitable place for
the various three-letter strains of feared progressive indoctrination—CRT,
DEI and ESG. “Some of these things haven’t made it to rural areas, but
we’re reading about them in the newspapers, and we know they’re coming,”
says Thomas Massie, a Republican congressman who carries a homemade
and self-programmed national-debt clock in his suit pocket, while at a
welding training centre in Flemingsburg.

Yet Mr Beshear has managed to parry some of these attacks. Abortion is all
but illegal in the state of the Kentucky, the result of a “trigger law” that went
into effect after the Supreme Court overturned Roe v Wade in 2022, with no
exceptions for rape and incest. As staunchly anti-abortion as Kentucky is,
Mr Beshear has spent the later part of the campaign hammering his opponent
for the stance. “My opponent lacks the basic empathy to say a nine-year-old,
raped and impregnated by a family member, should have an option,” says
the governor. “That’s too extreme for all of Kentucky.”■

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All shook up

Can a Presley win Mississippi?

Elvis’s cousin, health and tax cuts are on the ballot in America’s poorest
state
Nov 2nd 2023 | GREENWOOD

DOWNTOWN JACKSON, Mississippi’s capital, is a ghost town with

storefronts boarded up since the civil-rights era and a crime rate that scares
locals into staying in after sunset. More people in Mississippi are out of a job
and more children live in fatherless homes than anywhere else in the
country. Well over half the black residents of the Delta live below the
poverty line. Some of those in the state’s richer parts are glum. “When
you’re the poorest, sickest, fattest state in America, who wants to bring their
family here?” says a retiree in Oxford, a pretty college town.

It is perplexing then that Tate Reeves, the Republican governor, is running

for re-election on November 7th on a message of prosperity. He is
campaigning on what he calls “Mississippi momentum”, touting the state’s
schools and economy. His best selling-point is a statistic released earlier this
year: in the decade to 2022 Mississippi rose from ranking second-worst on
4th-grade reading-test scores to 21st-best nationally, a feat that the governor
deserves some credit for. He reminds voters that he reopened the state after
covid-19, pumped money into coastal industries and cut taxes. (Less is said
about the biggest corruption scandal in state history that took place while he
was lieutenant governor.)

That could be enough to get his base to the polls. After all, Republicans
usually win here. But his opponent, Brandon Presley (a second cousin of The
King) is a pro-life, pro-gun Democrat and is trailing by just one point in the
latest poll. He outraised the governor four to one in the last quarter (largely
thanks to money from out of state). “As your side mirror says in your car,
things are closer than they appear,” he told a crowd two weeks from election
day.

One of the key issues is health care—or lack thereof. One in six people in
the state do not have insurance and nearly half the rural hospitals are at risk
of closing. For every 4,000 children in the Delta there is just one
paediatrician. Five years ago the inpatient ward in Greenwood, a rural town
tucked between cotton fields, had 160 beds; today it can finance only 12.
Most of its patients can’t pay and skilled nurses have been sacked to save
money. “The bleeding is profuse,” says Harold Wheeler, a doctor who left
the hospital after working shift after shift without backup.

For every patient who shows up there are many more who stay home.
Jahcoby Edwards, a 27-year-old mechanic who lives in the projects and
sends child-support checks to seven women, craves a check-up but makes
too much to qualify for Medicaid and too little to pay his way. He has high
blood pressure and last year his father died of a stroke. He fears he is
destined for the same, but hopes he can live to see his toddlers become teens.
The oldest person he knows is 65.

Mr Reeves takes pride in Mississippi being one of ten states that still refuses
to expand Medicaid, passing up $1bn a year in federal funds so as not to
partake in Barack Obama’s signature project. But polling shows that 70% of
Republicans in the state disagree with him on it. So does Cary Stockett, the
governor’s pastor. “He and I don’t see eye-to-eye on that,” he says from his
office overlooking the state capitol. “We have the highest infant-mortality
rate in the country, I just kind of believe the Lord would like to see that
addressed.”

At the end of September the governor announced a plan to ask the feds for a
higher Medicaid-reimbursement rate. If granted, it would keep hospitals
afloat but would do little to help people like Mr Edwards afford care.
Democrats mocked the scheme, calling it “too little, too Tate”.

Mr Presley wants all the cash the state can get. The New Deal sped up
electrification in Mississippi by decades, he says. He is touring every county,
arguing that federal money could be just as transformative for health. His
unlikely path to victory runs through black voters, who make up 35% of the
electorate and most of the state’s Democrats. At a historically black college
in Jackson, Mr Presley’s words were echoed by so many “that’s right”s and
“amen”s that it sounded like a Baptist church on a Sunday morning. “Let’s
go Brandon,” one student said with a smirk. ■

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Medicine’s gilded age

Why doctors in America earn so much

A mismanaged training system has artificially depressed the supply of
medics
Oct 31st 2023 | WASHINGTON, DC

ACCORDING TO THE Association of American Medical Colleges

(AAMC), in a decade America will have a shortage of up to 124,000
doctors. This makes no sense. The profession is lavishly paid: $350,000 is
the average salary according to a recent paper by Joshua Gottlieb, an
economist at the University of Chicago, and colleagues. Lots of people want
to train as doctors: over 85,000 people take the medical-college admission
test each year, and more than half of all medical-school applicants are
rejected. And yet there is a shortage of doctors. What is going on?
For many Americans, the doctor shortage has already arrived. More than
100m people today live in an area without enough primary-care doctors (the
problem is particularly bad in rural areas). For mental health things are even
worse: half of Americans live in an area with a shortage of mental-health
professionals. With less than three physicians for every 1,000 people,
America is behind most other wealthy countries, despite spending vastly
more on health care (see chart).

The usual suspects have been blamed. As the baby-boomers age the need for
medical care rises and the doctors among them retire. According to the
AAMC, more than two out of five practising doctors will be 65 or older
within the next decade, leaving even more vacancies. Covid-19 drove
doctors away: an analysis by Peterson-KFF, a non-profit group, shows that
health-care workers are quitting their jobs at a rate 30% higher than before
covid (and about double the rate of all workers today). “A majority of
physicians would not encourage our offspring to go into health care,” says
Jesse Ehrenfeld, a physician and president of the American Medical
Association. “People have lost the joy in the profession.”

Yet there is another explanation for the doctor shortage, which has to do with
the pipeline into the profession, and which the American Medical
Association has played a part in creating. It takes longer to train a doctor in
America than in most rich countries, and many give up along the way.
Future physicians must first graduate from university, which typically takes
four years. Then they must attend medical school for another four years. (In
most other rich countries, doctors need around six years of schooling.) After
post-secondary education, American doctors must complete a residency
programme, which can last from three to seven years. Further specialist
training may follow. In all, it takes 10-15 years after arriving at university to
become a doctor in America.

If the expense and length of the training were not off-putting enough, the
number of places in the profession has also been artificially held down. In
September 1980 the Department of Health and Human Services released a
report warning of a troubling surplus of 70,000 physicians by 1990 in most
specialties. It recommended reducing the numbers entering medical school
and suggested that foreign medical-school graduates be restricted from
entering the country. Despite the shortage, doctors trained abroad must still
sit exams and complete a residency in most states regardless of their years of
experience.

Medical colleges listened, and matriculation flatlined for 25 years, despite

applications rising and the population growing by 70m over the same period
(see chart). In 1997 federal funding for residencies was capped, forcing
hospitals to either limit programmes or shoulder some of the financial
burden of training their doctors. Some spots have been added back, but not
nearly enough. Many potential doctors are being shut out of the profession.
“Not everyone who would be willing to go through that training and could
do it successfully is being allowed to,” says Professor Gottlieb, the
economist.

In reaction to this artificial doctor shortage, a new type of medical degree

gained popularity: DOs (doctors of osteopathic medicine). In 1981, there
were only 14 osteopathic medical schools. Today there are 41. In most
countries, an osteopath is someone who manipulates middle-aged spines. In
America DOs are fully-licensed doctors. They represent about 11% of the
physician workforce and 25% of medical-school students. “The American
DO looks almost nothing like their international counterparts,” says Robert
Orr, a policy wonk. “They basically mainstreamed themselves in response.”

Nurse practitioners and physician assistants have been given responsibilities

typically reserved for doctors, such as writing prescriptions. Foreign-trained
doctors have filled some of the gap too. Yet the shortage persists. This looks
a lot like a labour market that has been rigged in favour of the insiders. ■

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Crime and governance

Why is America’s capital so violent?

In most big cities violent crime is declining. In Washington the opposite is
true
Oct 30th 2023 | WASHINGTON, DC

THOUGH HE HAS a black belt in karate, when a trio of armed boys in ski
masks threatened Henry Cuellar, a congressman from Texas, outside his
Navy Yard flat on October 2nd he swiftly handed over the keys to his Toyota
Crossover. It was the 754th carjacking in America’s capital this year,
amounting to roughly three a day since January. And it was not the first
attack on a member of Congress. In February Angie Craig of Minnesota
heroically fended off a man who grabbed her by the neck in the lift of the
building where she stays near the Capitol.

Violent crime in the district is up by 40% this year. A proliferation of guns

has turned dozens of petty disputes into killings: for the first time in a
quarter of a century, more than 200 people were murdered before October
1st. That bucks the national trend. Elsewhere the crime epidemic that came
with covid-19 is ebbing. In 30 cities that make their murder counts publicly
available, the Council on Criminal Justice, a think-tank, found that by July
there had been 202 fewer homicides than in the first half of 2022, a 9.4%
drop. In Atlanta, Los Angeles, Philadelphia and Rochester the murder rate
fell by more than 20%. Why then is the capital of the free world on track to
record its worst year in decades?

Because the District of Columbia is not a state, the federal government has
an unusual amount of say in its affairs. In March Congress reversed a
revision to Washington’s criminal code passed by the district council which,
among many other changes, dropped mandatory minimum sentences for
carjacking. It was the first time Congress had nixed a local law in three
decades. Mitch McConnell, the Senate’s minority leader, warned that the
district’s “soft-on-crime” leaders needed “adult supervision”. By summer’s
end three Republican congressmen had filed a bill to dissolve the council
and mayor’s office and put federal lawmakers in charge.

Local government is certainly to blame for some of DC’s problems.

Washington’s crime lab, a district agency responsible for processing forensic
data, lost its accreditation in the spring of 2021 after it repeatedly tried to
cover up mistakes it had made. Data from the first nine months after it
closed show that just 7% of DNA samples collected at crime scenes were
analysed. That made some cases impossible to prosecute. The lab is now
seeking re-accreditation, two and a half years later. But even if it resumes
work, Matthew Graves, Washington’s chief prosecutor, expects substantial
litigation over whether courts can recognise the scientists at the lab as
forensic experts again.

Letting the House of Representatives run the District would be no magic fix,
however (especially given its own penchant for disorder). In fact, the current
degree of federal involvement seems to be hindering Washington’s ability to
ward off crime. Criminal-justice research suggests that people are not
deterred from committing crimes based on the severity of punishment, but
rather on whether it is certain and swift. The federal government’s chokehold
on the district complicates both.

Capitol offences
In Washington, unlike any other American city, the US attorney is
responsible for prosecuting both local and federal crimes (and defending the
federal government in civil cases). The office’s split personality means that
resources must be rationed. After January 6th 2021, for example, the former
US attorney pulled staff off local cases to help prosecute insurrectionists
who had stormed the Capitol.

In 2022 the office declined to prosecute 67% of local arrests, up from 31%
in 2016. That is much higher than in other cities: according to the
Washington Post, last year Philadelphia prosecutors dropped just 4% of
cases, Cook County, which includes Chicago, 14% and Detroit 33%. Such a
high dismissal rate could well be discouraging police from making arrests.
And though it could suggest triaging, where prosecutors prioritise slam-dunk
cases, the office’s win-rate did not budge as they slimmed down their docket.
That sends a message: in America’s capital, committing a crime may not
have consequences.

Because there is no state apparatus, district judges who hear local cases are
nominated by the president and approved by the Senate, just like federal
judges. Since presidents are eager to fill circuit-court posts across the
country to increase their political influence, Washington’s judges get
sidelined. As a result the district has 12 vacancies and seven judges awaiting
Senate confirmation. That is unusual: in Pennsylvania just two posts are
unfilled, in neighbouring Maryland one. With nearly one-third of the bench
empty, fewer cases go to trial. The backlog is not only an injustice; it also
pulls the punch of a quick conviction.

More independence from the feds would probably help the District get back
on track. But local leaders will be trusted only when they can reduce
violence. In July the council passed a bill that temporarily raised the charge
for firing a gun from a misdemeanour to a felony and made it easier to lock
up violent offenders before trial. After Mr Cuellar was attacked they voted to
extend that bill for another 90 days.

Last week the mayor introduced another one, to crack down on loitering,
wearing dodgy masks and scheming to steal from shops. Congress ought to
commend them for it. Instead, House Republicans’ latest appropriations bill
includes a provision to allow out-of-state gun-owners to carry concealed
weapons in the district. It is hard to imagine how that will help. ■

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Lexington

The Gaza war could help set speech free again

Campus protesters for Palestine are lowering the bar for “hate speech”
Nov 2nd 2023

IT’S ALWAYS seemed a bit self-sabotaging: The leftist ideology rippling

out from American college campuses this century has on the one hand
favoured restricting speech, yet on the other posited that the implacable
forces of capitalism and white privilege entrench right-wing power. Whose
speech did these ideologues imagine would wind up getting suppressed?

This tension has not surfaced often on college campuses, at least not at the
most exclusive schools. There, the forces of capitalism and white privilege—
if not of tolerance and curiosity—were mostly routed. A dwindling minority
of faculty members, as few as a tenth, identify as conservative.
Administrators, whose ranks have ballooned and who oversee the “bias-
response teams” that police speech, are even more likely to identify with the
left.
Yet off campus, the forces of reaction began responding with strikingly
symmetrical concerns about speech: conservative governors and legislatures
across America have embraced the theory that certain ideas are too
dangerous for all minds and certain views are too hurtful for particular ears.
Bills proposed in states such as Texas seek to protect children from material
that might cause “discomfort, guilt, anguish, or any other form of
psychological distress on account of his or her race or sex”. But rather than
aiming to safeguard the feelings of people from historically marginalised
groups, such bills are meant to protect white children from the very ideas the
left wants to promulgate.

Now a hard yet potentially constructive moment in America’s battle over

speech has arrived. On prestigious campuses, the war in Gaza has shaken the
prevailing power relationships, for the moment. Students attacking Israel for
its response to the terrorism of Hamas have come under withering criticism,
and worse: some have seen job offers rescinded or had their names and
photos flashed on billboards paraded by trucks around their campuses.

Some right-leaning advocates of free speech are relishing the spectacle. For
years, leading lights of the left insisted there was no such thing as a glibly
censorious “cancel culture”. They liked to speak instead of an
“accountability culture”, or a “culture of consequence” that justly punished
offensive speakers. Now, as the cancellers wring their hands about being
cancelled, Schadenfreude hangs heavy in the air.

Rather than try to punish or silence students, a wiser choice would be to

pocket the permissive standard they are setting, for when the bias response
team next comes knocking. A recent Harvard/Harris poll showed 51% of
Americans between 18 and 24 believed Hamas’s rampage could be
“justified” by Palestinians’ grievances. Still, some may not realise, when
they chant for a Palestine “from the river to the sea”, that they are
advocating ethnic cleansing. But that is the message received by many Jews
and others, and an argument of leftists uneasy with debate has been that the
impact on the listener, rather than the intent of the speaker, should guide
judgment of offensiveness. By that measure alone, it should be harder now
for those sympathetic to pro-Palestine students to argue that any “hate
speech” is off limits. University presidents are in effect embracing this
standard by defending the right of these protesters to speak up. (They seem
unlikely to advance the foul position that Jews are “white” and thus un-
offendable.)

Some presidents are in trouble over their own speech. Donors to Harvard
and the University of Pennsylvania have closed their chequebooks because
they thought the presidents temporised on antisemitism. Again, this could
prove constructive: after years of taking positions on matters of moment—
positions that happily aligned with those of staff and students—leaders may
acquire an appreciation for promoting debate rather than prejudging it.

“My hope is that the rediscovery of freedom of speech, and the discovery of
political neutrality or political restraint—not commenting on every event of
the day—will be something schools adopt, and they’ll stick with it,” says
Greg Lukianoff, co-author of a new book, “The Cancelling of the American
Mind”. “My fear is that this will be just like 9/11.” Mr Lukianoff, who is
president of the Foundation for Individual Rights and Expression, a non-
profit organisation, says that after the attacks by al-Qaeda universities rallied
around professors vilified for criticising America. “When the threat is
perceived as coming from off campus, they always rediscover freedom of
speech and circle the wagons,” he says. “The test is going to be if they still
feel that way when the threat comes from on campus, when it’s students
demanding a professor be fired.”

What Dartmouth can teach

Amid the uproar—because of the uproar—there are signs of hope. Despite
some vile acts, protests have generally been peaceful, even when students
with opposed positions have gathered near one another. Faculty views have
not been homogeneous. Not all speech has taken the form of shouting, and
there have even been instances reported of listening. Within hours of the
Hamas massacre, professors at Dartmouth from Israel, Lebanon and Egypt
decided to jointly host two public forums on the crisis, according to the
Forward, a Jewish publication. They expected a dozen or so but drew
hundreds; searching questions were asked.

At the second session, Susannah Heschel, a professor of Jewish Studies,

observed that scholars learn “never to be satisfied with a simple narrative”.
A fellow panellist, Ezzedine Fishere, an Egyptian novelist and former
diplomat, then suggested the members of the audience ask themselves, “Are
you trying to understand what is happening, or are you trying to find
someone to blame?” People had a right to be indignant, he continued, but
students also had a chance “to understand the complexity, which is often
unpleasant because we come across things that we don’t like”.

“You don’t have to go to an Ivy League university in order to be indignant,”

he continued in the same kindly yet firm tone. “The opportunity you have
here is to learn.” ■

Read more from Lexington, our columnist on American politics:

Mitt Romney is the fixed point revealing the Republicans’ slide (Oct 26th)
Joe Biden has shown a steady hand in the Gaza crisis (Oct 18th)
Joe Biden should admit Republicans are (partly) right about border security
(Oct 12th)
This article was downloaded by zlibrary from https://www.economist.com/united-
states/2023/11/02/the-gaza-war-could-help-set-speech-free-again
Middle East & Africa
The pace of Israel’s war in Gaza far exceeds previous conflicts
Why urban warfare in Gaza will be bloodier than in Iraq
Is a two-state solution possible after the Gaza war?
America suspends duty-free access to four African countries
How the red beret became Africa’s most political hat
Ethiopia’s prime minister wants a Red Sea harbour
Darkening days

The pace of Israel’s war in Gaza far exceeds

previous conflicts
But Israel’s generals think they could be fighting Hamas in Gaza for a
year
Nov 2nd 2023 | JERUSALEM

THE WORLD shook, and then the ground opened. On October 31st Israeli
jets carried out air strikes in Jabalia, a refugee camp in northern Gaza. A
witness reported hearing multiple explosions, which left huge craters. Videos
from the site showed apocalyptic scenes: buildings crumpled and canted at
odd angles, dead bodies being pulled from the rubble. Dozens were killed.
The Israeli army said it was targeting the underground headquarters of a
Hamas commander, Ibrahim Biari, and militants with him, and that much of
the damage was caused when tunnels collapsed.

The war between Israel and Hamas, the militant group that controls Gaza, is
nearing the end of its first month, and it is already the bloodiest conflict
between Israelis and Palestinians since 1948. Since it began on October 7th,
when Hamas murdered more than 1,400 Israelis, the Israel Defence Forces
(IDF) has struck more than 11,000 targets in Gaza, far exceeding the pace of
previous wars. The Hamas-run health ministry says that more than 8,800
Palestinians have been killed, including some 3,500 children. Large parts of
northern Gaza, normally home to more than 1m people, have been reduced
to rubble.

Much of Israel’s formidable border fence with Gaza is gone. Hamas

breached it in 29 separate locations during its attack, and Israel has
dismantled more of it to facilitate the entry of armoured battalions. Israeli
troops entered Gaza on October 27th from two places: near Beit Hanoun in
the north, and at a point just south of Gaza city in the narrow waist of the
45km-long strip. Their goal is to bisect Gaza and gradually encircle the
northern part of the enclave, which they have told civilians to evacuate.

Hamas does not want a head-on fight with an advancing IDF, which has
vastly superior firepower. Instead it will seek to harass Israeli troops with
guerrilla warfare. Israeli military sources think they have only a short
window of opportunity in which to operate with large formations inside
Gaza. They will try to destroy tunnels and command centres to disrupt
Hamas’s freedom of movement and divide its fighters. In the coming weeks,
Israeli generals expect international pressure will force them to revert to a
more limited presence inside Gaza. The war will shift to raids against
specific targets. These, they predict, will take months, perhaps even a year.

About two-thirds of northern Gaza’s population is thought to have heeded

the evacuation order. That still leaves hundreds of thousands of people.
Conditions in the south, supposedly a safe zone, are dire. More than half of
Gaza’s population—1.4m people—has been displaced. Shelters are
overflowing: one UN facility in Khan Younis, the first city south of the
evacuation line, now houses 22,100 people, more than ten times its intended
capacity.
Essential supplies are still scarce. Around 250 lorries have entered Gaza
since October 21st, when Israel lifted its veto on aid deliveries. Martin
Griffiths, the UN’s top humanitarian official, calls the deliveries thus far a
“drop in the ocean compared to the vast scale of needs”. Israel still refuses to
allow shipments of fuel to Gaza, arguing that this will eventually force
Hamas fighters, who need it to light and ventilate their tunnels, to move
above ground. The sole power plant ran out of fuel on October 11th. One-
third of Gaza’s hospitals and two-thirds of its clinics are closed, either
because they have no fuel left or because they were damaged by Israeli
bombardment.

After weeks of delay, people with foreign citizenships were allowed to leave
Gaza via Rafah on November 1st. Egypt also allowed ambulances with
injured Palestinians into its territory for treatment. But it refuses to open its
border for refugees.

As the fighting expands, so has the dysfunction in Binyamin Netanyahu’s

government. Many Israelis hold the prime minister responsible for the
failures leading up to Hamas’s attack. Though the army and intelligence
chiefs were also culpable, they are much more popular than he is. Half of
Israelis told pollsters they trust IDF commanders to lead the country in war.
Just a tiny minority trusts Mr Netanyahu more.

This has enraged the prime minister, which compounds the divisions within
Israel’s war cabinet. Officials present at its meetings have described a
“traumatic” atmosphere. The day after ground forces entered Gaza, Mr
Netanyahu took to X (formerly Twitter) and blamed intelligence and security
chiefs for their assessment, before the October 7th attacks, that “Hamas was
deterred and sought accommodation.” He deleted the post after public
criticism from members of the war cabinet.

The divisions are affecting military decision-making. They explain why IDF
soldiers sat in staging areas near the Gaza strip for two weeks until the order
to go in was given. “The army took a terrible hit but is now standing on its
two feet,” says one senior official. “The same can’t be said for the rest of the
government.”
The public is also furious with Mr Netanyahu for his handling of the hostage
crisis. At least 240 people were abducted during the Hamas raid and brought
back to Gaza. Four have been released, and on October 30th Israel said its
forces had freed a soldier, Ori Megidish, captured during the Hamas assault.
There are ongoing talks via Qatar, which has close ties with Hamas, about a
deal to free more hostages.

As the ground offensive grinds on, Israel will have to decide whether to
release more of the 360,000 reservists called up after Oct 7th. Their
mobilisation is a growing burden on the Israeli economy. Some in the war
cabinet, however, would like to take advantage of the country’s war footing
and attack Hizbullah, the Shia militant group in Lebanon that has been firing
rockets and anti-tank missiles at Israel.

Those attacks have reached steadily further into Israeli territory. On October
29th a rocket hit a house in Kiryat Shmona, the largest city on its northern
border; another barrage was aimed at Rosh Pina, 14km from the Lebanese
border. Israel’s retaliatory strikes have also moved deeper into Lebanon.
Still, the view in both Israel and Lebanon is that Hizbullah does not wish to
expand the fighting much further. Hassan Nasrallah, the group’s leader, was
due to make a speech on November 3rd, his first public appearance since the
war began. His silence is unusual. But he is under intense domestic pressure
to keep Lebanon out of the war. A survey published in al-Akhbar, a
Lebanese daily sympathetic to Hizbullah, found that 68% of Lebanese
opposed opening a full-fledged war with Israel.

On October 31st the Houthis, a Shia militant group that controls large parts
of Yemen, launched drones and ballistic missiles at Israel. One was shot
down by Israeli missile-defences. The Houthis are keen to show their
support for Hamas, but their drones are slow and their missiles inaccurate.
One explosive drone aimed at Israel hit Taba, an Egyptian resort town, and
injured six people; another landed in Jordan.

Though Iran continues to issue near-daily threats, it seems reluctant to

unleash its proxies. Raz Zimmt, an Iran-watcher at the Institute for National
Security Studies, an Israeli think-tank, notes that some Iranian media outlets
have tried to portray Israel’s ground offensive as a failure. This may make it
appear as if Hamas can continue the fight without Iranian help. “[It] provides
Iran with justification to avoid expanding the conflict,” says Mr Zimmt.

In Gaza, though, that conflict will expand. A day after the first strike on
Jabalia, Israeli jets bombed the camp again. There will be many more scenes
of devastation in what will be a long war. ■

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Civilians and the ground invasion

Why urban warfare in Gaza will be bloodier than

in Iraq
The battle against IS in Mosul offers Israel lessons—and warnings
Oct 30th 2023

THE WAR in Gaza is exacting a brutal toll on civilians. The Hamas-run

health ministry says that more than 8,000 people have died. The number of
children among them, more than 3,000, exceeds the annual death toll for
children in all wars in each of the preceding three years. The Economist
estimates, from satellite imagery, that over a tenth of Gaza’s housing stock
has been destroyed, leaving more than 280,000 people without homes to
which they can return. In many ways that fits with the norm of urban
warfare, which is unusually destructive. But Israel’s war in Gaza is also
distinctive.

War in built-up areas is always bloody. America’s first assault on Fallujah in

2004 killed as many as 600 civilians, or 0.2% of the population, compared
with 0.3% in today’s war in Gaza. A second assault later in the year killed
around 800 more and left the majority of the city’s buildings damaged. A
battle for Sadr City, a suburb of Baghdad, is thought to have killed nearly
1,000 people in March and April 2008, out of a population of around 2m, not
dissimilar to that of Gaza.

The largest urban battle in recent years was the assault on the city of Mosul,
which had been seized by the Islamic State (IS) group, by an American-led
coalition including Iraqi and Kurdish ground forces. At least 9,000 civilians
were killed in Mosul during 2016-17, according to Airwars, a non-profit
organisation that tracks civilian harm. That amounts to 0.6% of the
population at the time. Of the buildings that were damaged, more than 80%
were residential.

These cases might suggest that the war in Gaza, though destructive, is not
unusually so by historical standards—at least not yet. Yet there are also key
differences. The first and biggest is the status of civilians. In Mosul, IS
attempted to prevent civilians from fleeing, firing at them and mining
corridors out of the city. Many left nonetheless. Between October 2016 and
June 2017 nearly 900,000 departed—almost half of the pre-war population.
Even Russia, during its siege of Mariupol in Ukraine between February and
May 2022, negotiated humanitarian pauses in which some civilians were
permitted to leave. Israel has thus far rejected calls, by the European Union
and others, for such pauses.

Gaza’s geography is less permissive than any of these cases. Israel has told
around 1.1m civilians to evacuate from the north of Gaza, but around a third
of those have remained in place. Many residents are already refugees from
other places and fear that if they leave they might never be allowed to return
to their homes. Those who do want to escape cannot go south to Egypt,
which does not want to take responsibility for refugees and has so far
refused to open its border.

Israel is still striking parts of southern Gaza, albeit in more limited fashion
than the north. “Locals can’t really get away, nor can fighting really occur in
open areas away from urban centres,” says Amos Fox, an expert on urban
warfare who has written extensively about Mosul. “The urban fight [in
Gaza] is self-contained and likely far more costly than anything we’ve seen
in the past few years.” Even those civilians who have moved south face a
growing humanitarian crisis. Gaza’s health-care system has capacity for only
3,500 beds, according to Médecins Sans Frontières, a humanitarian group,
far short of what is needed.

In Mosul, by contrast, the World Health Organisation was able to establish

trauma stabilisation points to provide urgent medical attention within 10-15
minutes of the front line, with larger field hospitals another hour away. The
Israel Defence Forces (IDF) have a small number of “humanitarian affairs
officers” embedded in its fighting units whose role it is to try and address the
needs of the local population, but these are far from sufficient for dealing
with the needs and scale of misery resulting from a ground offensive. Israeli
politicians have said they will not send aid for civilians until all hostages are
released, though officials acknowledge that may change as the offensive
develops.

A second difference is the degree to which civilian and military

infrastructure is intermingled in Gaza. In Iraq, IS had held Mosul for little
over two years when the battle to remove them began. Even in that short
period, the group had established impressive multi-layered defences,
drawing on Western military doctrine, says Rupert Jones, a retired British
major-general who was deputy commander of the anti-IS coalition.

Hamas, in contrast, was founded in Gaza in 1987 and has much earlier roots
there, dating back to the foundation of the welfare organisation Mujama al-
Islamiya (‘Islamic Centre”) by Ahmed Yassin in 1973. For half a century it
has been fully integrated into Gaza’s social fabric and has run the strip for 16
years. Its defences have been built around—and under—the territory’s
civilian infrastructure. Part of the ease with which Hamas seized Gaza from
Palestinian rivals in 2007 was down to the fact that its fighters were
recruited from the streets.

A third difference is tactics. Israel’s armed forces say that they place
considerable emphasis on civilian protection. Nonetheless, Israel’s
bombardment of Gaza has been intense by historical standards. It dropped
6,000 bombs on the territory in the first six days of the war, a rate of
ordnance far exceeding American and Western counter-terrorism campaigns.
In Mosul, for instance, the American-led coalition dropped 7,000 over two
months in the most intense period of bombing. On October 30th a former
deputy commander of the IDF’s Gaza Division told the Financial Times:
“When our soldiers are manoeuvring we are doing this with massive
artillery, with 50 aeroplanes overhead destroying anything that moves.”

Tactics are shaped by how an army views the stakes of a war, the nature of
the enemy and that of the surrounding civilians. For Israel, the war in Gaza
is “existential in a way that even Mosul or Marawi weren’t”, says Anthony
King of Exeter University, referring to a battle between the Philippines army
and IS in 2017. Israeli officials increasingly describe Hamas as akin to IS—
an enemy with which compromise is no longer possible. Nor does the IDF
have the same affinity with Palestinian civilians that Iraqi forces did with the
compatriots they were liberating from IS rule.

In Mosul, Iraq’s political leadership, from the prime minister down, insisted
that great emphasis be placed on civilian protection. Lieutenant General
Basim al-Tai, a senior Iraqi officer, was in charge of the humanitarian
operation. “He was carrying the weight of the Mosul population on his
shoulders,” says General Jones. “He cared deeply about the civilians.”
Caroline Baudot, an adviser in the civilian-protection unit in the
International Committee of the Red Cross in Geneva, agrees: “The
commander’s intent in Mosul was extremely clear.”

Even then, the experience of different parts of Mosul is instructive. The east
of the city, viewed as the more intellectual and urbane part, suffered less
damage. The old city in the west, where IS made its last stand, was viewed
by Iraqi forces as more conservative and IS-friendly and emerged far worse.
“The mindset in which you fight affects your planning, your conduct, and
even the reconstruction,” says Ms Baudot. “If you operate on your own
territory [as opposed to] in another territory you might not have the same
care for civilians.”

The role of medical facilities is especially contentious. In the previous

rounds of warfare, Palestinian hospitals and other civilian relief centres were
marked on Israeli military maps as non-strike areas. Some were hit in past
wars, but none intentionally, claims Israel. In this war, Israel has ordered the
evacuation of northern Gaza, including hospitals—which it says are used as
Hamas command posts. Under the laws of war, hospitals lose their special
protection if they are used for military purposes. But, even then, armies can
only attack them “after due warning” and “a reasonable time limit”.
Mosul, again, provides a point of comparison. IS used the city’s hospital as a
stronghold. Commanders spent weeks deliberating whether it could be
attacked, says General Jones, considering other options such as the use of
snipers. “Slowly, over time, it became clear it was no longer a functional
hospital.” Ultimately it was struck only with the approval of Iraq’s then
prime minister. “I’ve never heard of any case where you have a few days to
evacuate and dismantle an entire hospital,” says one veteran expert on
wartime civilian harm, reflecting on the Gaza case. “It’s just not possible.”

A fourth and final difference is the nature of battlefield intelligence. At the

outset of this war the IDF would have had considerable intelligence on
Hamas’s infrastructure in Gaza, collected over years. But many of those
targets would have been struck in the first week of the campaign. Air forces
must then move to “dynamic” targeting—finding and striking targets that
were not known at the start of the war and have to be developed in relatively
short order. This is where most cases of civilian harm occur, says the expert.

In Mosul, local civilians, many of whom hated IS, provided a wealth of

human intelligence, or HUMINT—information passed on by sources on the
ground—to Iraqi forces, helping them to target IS fighters. In contrast,
during the battle for Raqqa, a Syrian city held by IS, in 2017, commanders,
with fewer infantry forces on the ground, were “starved of local
information” and found themselves reliant on aerial surveillance, incapable
of seeing inside buildings, according to a report by the RAND Corporation, a
think-tank.

Israeli intelligence has already suffered one serious intelligence failure in

Gaza, having missed sufficient signs of Hamas’s preparations for the attack
of October 7th. It will have good electronic intelligence on the strip, aided
by the phalanx of American aircraft patrolling in the eastern Mediterranean.
But Hamas is likely to have the intelligence advantage on the ground, argues
Mr Fox, with locals offering a steady flow of HUMINT to the group as the
IDF advances. “This flips the HUMINT situation that we saw in Mosul on
its head,” he says. “The IDF will have to methodically fight through better
planned and prepared defences…than they otherwise would.” The result will
be more civilians killed. The last three weeks have been hard on civilians in
Gaza. The coming weeks could be even harder. ■
This article was downloaded by zlibrary from https://www.economist.com/middle-east-
and-africa/2023/10/30/why-urban-warfare-in-gaza-will-be-bloodier-than-in-iraq
The day after

Is a two-state solution possible after the Gaza war?

Joe Biden is calling for a new peace process
Nov 1st 2023 | JERUSALEM

IN TRYING TO plan for the future, world leaders are looking to the past.
“When this crisis is over, there has to be a vision of what comes next, and in
our view it has to be a two-state solution,” said Joe Biden, America’s
president, in one of his many public statements about the nearly month-long
war in Gaza. Rishi Sunak, the British prime minister, has made similar
comments; so has Emmanuel Macron, the French president. An emergency
meeting of the Arab League last month ended with a call for “serious
negotiations” towards a two-state solution.

When Israel left Gaza in 2005, uprooting some 8,000 Jewish settlers from a
territory it had controlled since 1967, no one knew quite what to make of the
decision. Some hoped that Israel’s willingness to cede occupied territory
would be a trend, a step towards a final settlement with the Palestinians.
Others saw a canny ploy: relinquishing control of Gaza might help Israel
entrench its control of the West Bank. The latter view turned out to be
correct.

Similar confusion has emerged since October 7th, when Israel began
planning a ground invasion of Gaza after Hamas, the militant Islamist group
that controls the territory, massacred 1,400 Israelis. Palestinians fear the war
will lead to a second naqba (“catastrophe”), referring to the mass
displacement that accompanied Israel’s birth in 1948. Far-right Israeli
ministers hope it will offer a chance to reassert control over Gaza and
rebuild the dismantled Jewish settlements. A few hopeful sorts, among them
Mr Biden, hope it will provide a chance to revive the comatose Israeli-
Palestinian peace process.

For now, that is a far-off dream: Israeli generals expect months of fighting.
But both they and many foreign powers hope eventually to transfer control
of Gaza to the Palestinian Authority (PA), which governs parts of the West
Bank, probably with a peacekeeping force brought in to help the transition.
And they doubt that Mahmoud Abbas, the Palestinian president, would
return to Gaza without a guarantee of meaningful talks about Palestinian
statehood.

Any plan for the “day after” in Gaza, in other words, needs to consider the
possibility of a two-state solution. The broad outline has not changed much
for decades. A Palestinian state would be formed in Gaza and the West
Bank; Israel would swap chunks of its territory for portions of the West Bank
where it has built large settlements. Jerusalem would be divided, with some
sort of joint control over the old city. A small number of Palestinian refugees
could return to Israel, while the rest would settle in either Palestine or their
present homes elsewhere. Israel would expect a Palestinian state to be
demilitarised.

After two decades of serious talks—from the hopeful era of the Oslo accords
in the early 1990s, through a desultory attempt under Barack Obama—the
peace process ground to a halt in 2014. There have been no serious
negotiations since.

Negotiators cannot quite pick up where they left off. At the end of 2021
there were 465,400 Israeli settlers living in the West Bank, up from 116,300
when the Oslo accords were signed in 1993. They are a growing obstacle to
peace. Most are concentrated in areas that would probably be ceded to Israel
in an agreement, but their political clout (they would oppose surrendering
even land that they do not live on) has increased along with their population.

Context is everything
The regional picture is also more complicated. In 2002 the Arab League
endorsed a Saudi proposal that promised Israel normal relations with Arab
countries after a two-state solution: by ending its conflict with the
Palestinians, Israel could end all its regional conflicts. The Arab Peace
Initiative was meant to be a powerful inducement. Israel might be more
willing to take its boot off the Palestinians if it felt that other threats would
then dissipate.

But the region has changed since 2002. Some militias, from Hizbullah in
Lebanon to the Houthis in Yemen, are now more powerful than the states
they call home. It would not suffice for Arab governments to end their
conflicts with Israel: non-state actors would have to agree to do so as well.

Other things could be easier. A two-state solution would be costly. Even

before the war, the Palestinians would have expected help to rehabilitate
Gaza; the bill will be much higher now. At the failed Camp David summit in
2000 negotiators discussed a $30bn fund to compensate Palestinian refugees
for lost property. Gulf states such as Saudi Arabia and the United Arab
Emirates (UAE), which have boosted ties with Israel in recent years, might
be more willing to stump up the cash to show they have not abandoned the
Palestinians.

The biggest problem, however, remains not the details of a solution but the
political will to negotiate and implement one. There will be no serious peace
process with Binyamin Netanyahu’s coalition of far-right and religious
politicians. That coalition is unlikely to survive long after the Gaza war, and
Mr Netanyahu’s opponents hope that the next government will be more
amenable to talks with the Palestinians. “We learned a lesson that we need to
separate from them in a good way,” says one centrist Israeli lawmaker. “It’s
time to start that discussion.” But Israeli politicians from the centre and left
have avoided the issue in public for more than a decade.
On the Palestinian side, Hamas has always been eager to play spoiler. Its
first suicide-bombings in the 1990s helped to scuttle the Oslo process, and
the carnage it wrought during the second intifada (“uprising”) from 2000 to
2005 turned a generation of Israelis against the idea of compromise. Perhaps
Hamas will fade away after the war in Gaza—but another group could take
its place.

Ordinary people on both sides have lost faith in the two-state solution. A poll
in September 2022 by the Israel Democracy Institute, a non-partisan think-
tank, found that only 32% of Israeli Jews would support one, down from
47% five years earlier. Israeli Arabs, who make up one-fifth of the
population, still endorsed the idea, although their support has also dropped,
from 87% in 2017 to 71% in 2022. A plurality of Israeli Jews preferred the
status quo.

Support has plummeted even further among Palestinians. A survey in June

2023 by the Palestinian Centre for Policy and Survey Research found that
just 28% still support a two-state solution. Some 53% of them backed the
idea ten years ago, though just 39% thought it feasible.

Optimists hope that these results are squishy: people are unlikely to support
something they think impossible. A meaningful peace process could push
the poll numbers back up. “I don’t think our people would reject a chance to
end the occupation,” says one former Palestinian minister. But the events of
recent weeks could just as well harden both sides against the idea of
compromise.

As ever in Israel, some of the strongest supporters of ending the occupation

are the men tasked with running it. In the wake of the Hamas attack, few
Israelis are talking publicly about the two-state solution—or any other
solution for the conflict. But defence officials are discussing it in closed
rooms. That is partly because the desired end state of the war will shape the
war itself and because the Netanyahu government is incapable of holding a
serious debate on Israel’s long-term strategy.

Then there is the question of who will play mediator. Though Russia and
China both aspire to a role in Middle East peacemaking, neither has much
leverage or credibility to assume it. The European Union could position
itself as an honest broker but it is not taken seriously.

That leaves America. Mr Biden spent the first three years of his presidency
trying to ignore the conflict. He will have other things on his mind in 2024—
and neither Israelis nor Palestinians are likely to embark on a peace process
with a president who could soon be turfed out. If Mr Biden wins in 2024, he
could try to lead efforts.

Donald Trump would be another story. In January 2020, after years of

trailing a supposedly serious peace plan devised by Jared Kushner, his son-
in-law, he finally unveiled it. The plan, almost laughably biased in favour of
Israel, was dead on arrival. It would have given the Palestinians just 75% of
the occupied West Bank, in three cantons linked by highways. Israel would
have kept the Jordan valley, the breadbasket of the territory, and
compensated the Palestinians for their loss by ceding a few patches of barren
desert in the Negev. Palestine’s capital would have been limited to a few
destitute suburbs of east Jerusalem. The Palestinians, unsurprisingly, refused
even to discuss the proposal. ■
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and-africa/2023/11/01/is-a-two-state-solution-possible-after-the-gaza-war
AGOA and out

America suspends duty-free access to four African

countries
Trade officials are meeting to discuss America’s approach to the continent
Nov 2nd 2023

IN THE EYES of American officials, the African Growth and Opportunity

Act (AGOA) is about “more than just trade”. The flagship policy grants
duty-free access to America for almost 7,000 products from sub-Saharan
Africa. To qualify, countries must respect human rights, uphold labour
standards, promote a market-based economy and eliminate barriers to
American investment, among other criteria.

But can a system of trade preferences also be a tool of foreign policy,

without stifling trade’s potential for development? That question will rumble
beneath the surface as American and African officials gather in
Johannesburg between November 2nd and 4th for the annual AGOA forum.
Out of 45 countries that could benefit from the scheme, ten are already
ineligible. On October 30th President Joe Biden said four more would be
kicked out next year, while Mauritania would be reinstated after making
progress on workers’ rights.

None of the new suspensions are surprising. Niger and Gabon have recently
had coups. The Central African Republic (CAR) has become a second home
for trigger-happy Russian mercenaries. Uganda has a long record of human-
rights violations and this year passed a law that imposes strict punishments
for homosexuality, including the death penalty in some cases. Ugandan
human-rights groups says that LGBT people have been tortured, arrested and
sacked, among other abuses.

For many governments the consequences are more reputational than

economic. America buys just 6% of sub-Saharan Africa’s goods exports;
China and the EU each purchase three times as much. Even though the
Ugandan government is irked by America’s warnings to firms about the risks
of doing business in the country, it can probably live without AGOA, which
applied to just $12m of its exports last year. Niger and the CAR export next
to nothing under the scheme.

In a handful of countries AGOA really does make a difference, especially in

clothing. There, a suspension can put a brake on economic development.
Ethiopia has been ineligible for almost two years over abuses by soldiers and
rebels during a civil war. But that was hardly the fault of the young women
who stitch shirts in industrial zones, and who were laid off in their thousands
when the loss of duty-free access made Ethiopian exports uncompetitive.
Some investors have packed up and left. “Once bitten, twice shy: when will
people come back to those zones?” asks another, who is weighing up how
long to stay.

Even South Africa, the biggest exporter under AGOA, cannot take its trade
access for granted. America is alarmed by its close military ties to Russia.
Senior congressmen have questioned whether the country should remain
eligible for AGOA and pushed for this year’s forum to be moved elsewhere.
That did not happen, but only after a South African delegation flew to
Washington to patch up things.

As AGOA is an act of Congress, not a two-way trade deal, countries have

little recourse when they are booted off. Some Africans accuse America of
bullying. “We want to be supporting governments and institutions that our
values align with,” says Joy Basu, an American deputy assistant secretary of
state for African affairs, adding that human rights and democratic principles
in turn create “the right environment to deepen trade and investment”.

All that will be moot if Congress does not extend AGOA beyond its current
expiry date of 2025. The uncertainty has caused 45% of American clothing
firms to reduce their sourcing from Africa, according to an industry survey.
Some senators have called for a swift renewal to “counter the malign
influence of China, Russia, and other foreign actors”. In Washington, trade
with Africa has long been viewed as both a boost to development and a spur
to good governance. It is increasingly seen as a contest between great
powers, too. ■
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and-africa/2023/11/02/america-suspends-duty-free-access-to-four-african-countries
Firebranding

How the red beret became Africa’s most political

hat
From Uganda to South Africa, it conjures the spirit of revolution
Nov 2nd 2023

FRENCH REVOLUTIONARIES wore the bonnet rouge. Fans of Donald

Trump don MAGA baseball caps. For young activists in Africa, the red beret
is de rigueur. Julius Malema, a South African firebrand, says the hat is “a
revolutionary symbol of defiance and resistance”.

It is sported by supporters of Mr Malema and his Economic Freedom

Fighters, a populist party. It is also worn by followers of Bobi Wine, a singer
and opposition leader who is trying to unseat an autocratic president in
Uganda. Activists from Ghana to Zimbabwe pull on berets of various hues.

The head that launched a thousand hats belonged to Thomas Sankara, a

Marxist president of Burkina Faso who was assassinated in 1987. A man of
personal modesty and striking looks, he refused to let his portrait be hung in
public buildings. But in death his image is everywhere on the pan-African
left. He first wore the red beret because he was a soldier (who staged a
coup). He said he later took inspiration from Che Guevara, to whom he is
often compared.

Ibrahim Traoré, an army captain who led a coup in Burkina Faso last year,
mimics Sankara’s rhetoric and headgear. But it is generally civilian activists
who wear berets to project radical vibes.

The beret can be worn in ironic rebuke of soldiers and the police. Omoyele
Sowore, a Nigerian activist, has contrasted his orange beret with the black
ones worn by police officers, who have a reputation for brutality. Yet the cap
can also make one a target of the state. In Uganda, beret-topped followers of
Mr Wine have been convicted by army courts for wearing military uniforms,
an offence that can lead to life imprisonment.

“The beret evokes and carries a sense of liberation fighting,” says Oliver
Barker-Vormawor, a convener of a Ghanaian youth movement that hopes to
launch its own version. For many young Africans who look across the
continent and see that promises of democracy, equality and dignity are
unfulfilled, the beret is surely a symbol of a revolution that is not yet
complete. For many others, though, it may simply be that it is, as Mr Wine
has said, “more fashionable” than dowdy sun hats worn by Yoweri
Museveni, his ageing adversary—and by their parents.■
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and-africa/2023/11/02/how-the-red-beret-became-africas-most-political-hat
Ports in a storm

Ethiopia’s prime minister wants a Red Sea

harbour
Abiy Ahmed’s push for access to the sea has rattled his neighbours
Nov 2nd 2023

NERVES ARE jangling once again in the Horn of Africa, just a year after
the end of a brutal civil war in Ethiopia that led to the deaths of perhaps
385,000-600,000 people. Now foreign diplomats and analysts fear that in his
bid to get a port on the Red Sea, Abiy Ahmed, Ethiopia’s prime minister,
risks sparking another conflict, this time next to one of the world’s busiest
shipping routes (see map).
In a jingoistic documentary aired on state television on October 13th, Abiy
argued that landlocked Ethiopia must acquire a port on the Red Sea to break
its roughly 120m people out of a “geographic prison”. Turning to history, he
quoted a 19th-century Ethiopian warrior who had proclaimed that the Red
Sea was the country’s “natural boundary”.

Ethiopia, Abiy noted, had indeed been a sea power with a navy and two
ports, Massawa and Assab. It lost these along with the rest of its coastline in
1993, when Eritrea seceded to form a new country. Now, Abiy suggested,
the moment was nigh to right a historic wrong. “It’s not a matter of luxury,”
he insisted, “but an existential one.” Foreign diplomats say this reflects what
Abiy has been declaring in private for months.

Ethiopia’s neighbours are rattled, particularly because Abiy had not raised
the issue with them before making his threats. “The whole country thinks the
man is mad,” says an adviser to Somalia’s president. A fight over ports
would further destabilise a region already in turmoil. Sudan, Ethiopia’s
neighbour to the west, has been plunged into what the UN calls “one of the
worst humanitarian crises in recent history”. Fighting between two warlords
there has forced almost 7m people from their homes. And Ethiopia itself
faces simmering rebellions in Oromia, its largest and most populous region,
and Amhara.

Abiy says that Ethiopia’s demands can be met through peaceful negotiations
with its neighbours. Better to discuss the matter now, he argues, than to risk
an armed conflict in the future. But Abiy has reportedly said in private that
he is ready to use force if talks fail. “If it is not achieved by other means, war
is the way,” says an Ethiopian official. A few days after the broadcast Abiy
flexed his muscles with a military parade in the capital, Addis Ababa, in
which the army displayed its new weapons including a Russian-made
electronic-warfare system. Troop movements have been detected along both
sides of Ethiopia’s border with Eritrea in recent weeks. A well-connected
source in Addis Ababa says that the armed forces are exercising in
preparation for another conflict. On October 22nd the head of the air force
warned his troops to ready themselves for war.

Ethiopia’s Red Sea conundrum dates back to at least the start of its bloody
border war with Eritrea in 1998. Though a ceasefire was reached in 2000,
the two countries remained at loggerheads. Ethiopia could not ship goods
through Assab and Massawa. Now 90-95% of its external trade flows
through Djibouti, to which it pays some $1.5bn a year in port fees.

In 2018, soon after Abiy came to power, he ended the nearly two decades-
long stand-off with Eritrea by signing a peace deal with its dictator, Issaias
Afwerki. Though the contents of the deal were never made public, it was
generally understood that Ethiopia would regain tax-free access to Eritrea’s
ports in exchange for returning disputed territories it had occupied since the
end of the war. The following year Abiy was awarded the Nobel peace prize.

But plans for Ethiopia to use Eritrea’s ports never materialised. Instead, two
years later, a power struggle between Abiy and Tigray’s ruling party, the
Tigrayan People’s Liberation Front (TPLF), sparked civil war. Eritrean
troops joined in on Abiy’s side to fight against the TPLF, which Issaias has
long hated.

The two leaders have fallen out since then, possibly because Ethiopia signed
a peace deal with the TPLF in late 2022. Each sees the other as a threat to
their influence over the region. “Abiy and Issaias cannot co-exist in this
region,” says an Ethiopian opposition leader. “War is inevitable.”

Increased tensions with Eritrea could exacerbate Ethiopia’s existing internal

conflicts. Under the peace deal Abiy struck with the TPLF last year, it was
supposed to disarm and demobilise its fighters while Eritrea was meant to
withdraw its forces from Tigray. But Eritrea remains in control of at least 52
districts of northern Tigray, according to the region’s interim administrators.
In recent weeks, Eritrean troops have expanded their presence along the
border areas, reports a visiting foreign researcher. Tigrayan forces have
handed over most of their heavy weaponry to the Ethiopian army. But they
still have some 200,000 men and women under arms.

Another party in the multi-sided civil war in Tigray was Ethiopia’s Amhara
regional government, which sent its own militias and troops to fight
alongside Abiy’s federal forces. These troops were also supposed to have
withdrawn from disputed territories inside Tigray that they occupied at the
start of the war. But they have yet to do so. Instead, they have turned on
Abiy’s government, accusing it of betraying Amhara’s interests. In August
they fought federal forces for control of several towns.

Shifting alliances
With so much bad blood and so many armed groups jostling for influence
within Ethiopia, Abiy’s threats are extremely reckless when it comes to his
own country’s security. They are damaging to Ethiopia’s relations in the
wider region. Djibouti, which now provides Ethiopia’s main access to the
sea, has furiously responded that its “territorial integrity cannot be disputed”.
Somalia, similarly, insisted its territorial integrity and sovereignty are
“sacrosanct and not open for discussion”.

Some Ethiopian officials play down Abiy’s fighting talk. “It’s about
diverting attention from domestic issues,” says an ally of the prime minister.
Although the Eritrean port of Assab, which was once part of the former
Ethiopian Empire, has particular symbolic value for Ethiopians, Abiy has
also floated the possibility of negotiating for a strip of land around the
ancient port of Zeila in the breakaway Somali region of Somaliland. In
exchange, Ethiopia might offer to recognise Somaliland statehood. “Abiy
has no interest in being part of another conflict for the moment,” says an
analyst in Addis Ababa.

But the Ethiopian prime minister is notoriously unpredictable. “Nobody

except himself can be certain if he is serious or not,” says a TPLF official.
Little more than three years ago Abiy insisted he would not go to war in
Tigray. Many diplomats and regional leaders took him at his word, which he
soon broke. They would be wise not to make the same mistake again. ■
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and-africa/2023/11/02/ethiopias-prime-minister-wants-a-red-sea-harbour
The Americas
Gang violence is spreading across Latin America
Costa Rica no longer seems a Latin American success story
Venezuela’s Supreme Court tests President Joe Biden
Canadians are starting to sour on migration
The new narco network

Gang violence is spreading across Latin America

Previously safe countries such as Ecuador are now racked with crime
Nov 2nd 2023 | PUNTARENAS AND São Paulo

ON OCTOBER 27TH 90 police officers, 22 vehicles and a water cannon

stood ready in a field on the outskirts of Santiago, the capital of Chile. They
were not there to guard a rowdy protest. Instead, they were there to monitor
a narcofuneral: the burial of a young woman with alleged ties to drug-
traffickers. Such an event, which often ends with bullets being shot into the
air by mourners, would have once been unthinkable in Chile, long
considered one of Latin America’s safest countries. But between May 2019
and September 2023 gangs held nearly 2,000 such funerals, according to
Gabriel Boric, the president. In September Mr Boric sent a bill to Congress
intended to limit them.

Latin America’s murder map is being redrawn. The region’s homicide rate
has been falling since 2017, although countries such as Mexico and Brazil
are still home to some of the cities with the highest murder rates on Earth.
But in previously safe countries murder rates are hitting record levels,
including Ecuador, Costa Rica and Chile. Call it the new narco network: a
cocktail of drugs, guns and migration is fuelling gang violence across the
region.

Take Ecuador first. Its descent into chaos has been swift. In 2018 the country
was a sleepy Andean patch of 17m people. It exported oil and fish. It had the
fourth-lowest homicide rate in Latin America, at 5.8 per 100,000 people. But
this year that rate is expected to top 35 per 100,000 people. It is already
higher than Mexico’s and Brazil’s (see chart). Criminal groups kill with
impunity, setting off car bombs and hanging dead bodies from bridges. In
August a presidential candidate running on an anti-corruption platform was
assassinated. The six supposed Colombian hitmen were found hanged in
their prison cells in October.

Cocaine is the primary cause of Ecuador’s problems. For decades the

country was mostly ignored by international drug-traffickers. That changed
in the late 2000s, when gangs realised they could get even juicier mark-ups
by shipping blow farther afield, to Europe and Australia. Partly as a result,
gangs then changed their shipping methods: rather than pack it onto planes
or boats to the United States, coke was squirrelled away inside container
ships among legitimate goods.

After Colombian ports tightened their security, criminals looked for

alternative shipping routes. Ecuador’s poorly-monitored ports became even
more attractive after 2009, when Rafael Correa, a left-winger, then the
president, undermined the country’s defences by closing an American naval
base and, as such, ending co-operation with the US Drug Enforcement
Administration. Ecuadorean gangs such as Los Choneros signed up as
transportistas, moving coke for Mexican gangs and the Albanian mafia. By
2019 Ecuador had turned into a cocaine superhighway.

Locking up gangsters merely helped them strengthen their networks. Los

Choneros thrived in the crowded prisons, recruiting heavily and launching
attacks on their enemies. Targeted killings escalated into massacres, where
dozens of inmates were dismembered and burnt. In 2021 some 330 prisoners
were murdered in Ecuador, the highest number in the world. That same year
coke ranked as Ecuador’s sixth-biggest export, worth nearly $1bn, or 0.9%
of GDP, according to InSight Crime, an investigative outlet.

Similarly, this year in Costa Rica homicides are predicted to hit a record of
17 per 100,000 people, compared with 11 per 100,000 people three years
ago. Cocaine is a big part of the problem there, too. Rising production in
Colombia, where record amounts of coca leaf have been harvested in recent
years, translates into larger shipments arriving in Costa Rica, says Álvaro
Ramos, a former security minister.
However, coke is not the only reason for rising violence. In recent years
many murders have been about the domestic marijuana market. Illegal
cannabis is big business in Costa Rica: 3% of residents say they use it
monthly, one of the highest consumption rates in Central America. Many
gangs prefer weed to coke. Moving the white stuff is hard: it requires
connections and corrupt officials (of whom there are relatively few in Costa
Rica). By contrast weed has few barriers to entry and it can be sold
anywhere.

The state is ill-equipped to stop these new gangs from thriving. Costa Rica
abolished its military in 1949. Rodrigo Chaves, the president, blames past
administrations and the judiciary for the situation. He says the country does
not have enough police, the laws are outdated and the judicial system is too
soft on criminals.

The third place in this new narco network, Chile, is not a murder hotspot.
Last year its homicide rate reached a record 6.7 per 100,000 people. That is
far below its neighbours, and close to the rate in the United States, of 6.3.
But as its narcofunerals attest, crime is getting much worse. More cocaine
and potent cannabis are being interdicted than ever before, with cannabis
seizures tripling between 2018 and 2021. Its ports have become targets for
gun-runners. Timber-trafficking is also a problem. The copper industry,
which accounts for nearly 11% of the country’s GDP, is blighted by armed
hijackings.

Cocaine blues
Chile is one of the region’s richest countries. It also hosts half a million
Venezuelan migrants fleeing Nicolás Maduro’s regime. That combination
has attracted mafias such as Tren de Aragua, Venezuela’s largest gang. It is
battling to control Chile’s underworld, having built a human-trafficking
empire across South America. Shoot-outs occur regularly in the port city of
Iquique, as local gangs fend off incursions by the Venezuelans. Tren de
Aragua’s cells run prostitution rings in several cities. Some 40 alleged
members were jailed in one province last year. Dozens have been detained in
police raids this year.
As a result, the share of Chileans who say immigration is bad has surged
from 31% in December 2018 to 77% in April 2023, according to Cadem, a
pollster. Another survey found that most blame illegal immigration for the
rise in crime. Facing regional elections next year, the government has
focused more on security. After three police officers were killed in March,
Mr Boric pledged a 40% annual increase in the security budget and passed
stricter penalties for crimes against police. Even so, many consider him too
soft on crime.

What does this new narco network mean for the countries that were once
among Latin America’s success stories? Many citizens will vote with their
feet. Last year, Ecuadoreans were the second-biggest nationality to cross
Panama’s treacherous Darien Gap on their way north.

Those who stay at home may turn to more extreme solutions. According to
Latinobarómetro, a regional survey, fully 48% of Ecuadoreans, 31% of
Chileans and 22% of Costa Ricans rank security as their country’s biggest
problem, well above the regional average of 13%. Plenty of Latin Americans
admire El Salvador’s authoritarian president Nayib Bukele, who over the
past year has locked up 1.6% of the population in a sweeping gang
crackdown and whose approval rating is 88%, the highest in the region.

Politicians across Latin America are taking note. On October 15th Daniel
Noboa, a 35-year-old right-winger, won the presidential elections in
Ecuador. He has promised to ape Mr Bukele’s approach, and build floating
prisons in the Pacific. Some are sceptical that will curb the gang problem
there. But such outlandish solutions are increasingly popular. Faced with
ever more powerful gangs, many Latin Americans appear to think sacrificing
civil rights is a price worth paying for security. ■
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americas/2023/11/02/gang-violence-is-spreading-across-latin-america
Paradise lost?

Costa Rica no longer seems a Latin American

success story
Its state services are crumbling, and people are angry about it
Nov 2nd 2023 | SAN JOSÉ

ON OCTOBER 25TH San José, the capital of Costa Rica, was filled with
music and placards as several thousand marched to the presidential palace to
call on President Rodrigo Chaves to provide more funding for the country’s
public services. Many shouted in favour of more money for education,
which does not receive the 8% of GDP annually that the constitution
mandates. Others called for supporting the Caja, the institution that provides
health care and pensions to Ticos, as citizens are known.

The country has long stood out among its neighbours in Latin America for
its universal health care and education, along with its democratic institutions.
Worries that they are worsening have been accelerated by the president’s
current focus on cost-cutting. It also comes at a time when the country faces
a surge in violent crime, and youngsters need opportunities so as to not get
involved with gangs.
Mr Chaves says that he agrees that public services have deteriorated. But he
pins the blame on the “bad administration” of the country for the past four
decades. Mr Chaves says he “loves” that people march to the presidential
palace to defend their rights, but his government does not have the headroom
to spend more on health or education. “You have people defending...interests
that don’t necessarily coincide with the general well-being,” he argues.

Costa Rica has long struggled with how to pay for its welfare state. The
pandemic worsened matters, causing debt-to-GDP to rise to 68% in 2021.
Mr Chaves has reduced that to 60%.

But many fret that Mr Chaves’s parsimony is an excuse for a full-scale

overhaul of the welfare state. He has raised tensions with the Caja by calling
it “bankrupt”. That is not true, says Álvaro Ramos Chaves, a former head of
the institution (no relation to the president).

Similarly, the president has also worried some by criticising other liberal
institutions, such as public universities and the independent media. Yet with
an approval rating of over 60%, he is unlikely to change course. ■
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americas/2023/11/02/costa-rica-no-longer-seems-a-latin-american-success-story
Dashed dreams of democracy

Venezuela’s Supreme Court tests President Joe

Biden
By barring the opposition primaries, the country risks an escalation of
sanctions
Nov 2nd 2023 | Caracas

FOR A FORTNIGHT in October, it did not seem delusional to feel hopeful

about Venezuela. On October 17th the autocratic regime of President Nicolás
Maduro met in Barbados with representatives of the opposition to agree on
how free and fair future elections should be held. The following day, the
United States government lifted most of the draconian sanctions it had
imposed since 2019 on Venezuela’s oil, mining and finance sectors. Five
political prisoners were then set free. On October 22nd, opposition primaries
went ahead. Turnout was high, with the organisers saying more than 2m
people voted. A thunderous 92% of those who participated backed María
Corina Machado, one of Mr Maduro’s most determined critics (pictured).

Ms Machado, a former congresswoman and an advocate of privatisation, has

already been banned from political office by Mr Maduro’s regime. But for a
few giddy hours during and after the primary election, there was a flurry of
optimism that perhaps a change was in the air. “All we Venezuelans want to
do is vote,” said Carlos Fernández, a 74-year-old, as he cheerfully queued to
cast his ballot at a polling station in Caracas, the capital. Some dared think
that Mr Maduro’s government might finally have been persuaded that the
prize of a lifting of American sanctions was a fair exchange for allowing a
real presidential election—one in which it might even be defeated—to take
place next year.

Then came the reality check. Jorge Rodríguez, president of Venezuela’s

National Assembly—a body itself born out of a rigged vote in 2020—
declared that the opposition-run primary was “a farce and a scam”. He
insinuated that the opposition stole the identities of 2m Venezuelans. His
allegations were followed up by actual legal threats, delivered by the
regime’s attorney-general, Tarek William Saab, who announced that he was
investigating those who had organised the primary vote. On October 30th the
country’s Supreme Court, yet another arm of Mr Maduro’s government,
declared that the result of the election was formally annulled.

“They basically wiped out the election. They’ve broken the deal”, said
Marco Rubio, the Republican senator for Florida, to Antony Blinken, the US
secretary of state, during a committee hearing at the Senate on October 31st.
Mr Blinken insisted that the Venezuelan government would not get “a free
pass” and that sanctions could be reimposed “if the regime has, in fact,
violated the agreement that it reached”. Mr Blinken has previously stated
that the regime has until the end of November to set a timeline “for the
expedited reinstatement of all candidates”, and to release several American
prisoners from Venezuela.

Full reimposition of sanctions seems unlikely. The United States “has

several reasons to be careful,” says Mariano de Alba, from the Crisis Group,
a think-tank in Brussels. In September 50,000 Venezuelan migrants crossed
the Mexican border to the United States, outnumbering Mexicans for the
first time. Along with ensuring its own access to Venezuelan oil at a time of
global supply concerns, Mr Biden’s government is likely to want to stop that
migration at its source by leaning on the regime. Meanwhile Mr Maduro’s
government will be reluctant to cut itself from the boom that a sanction-free
economy could offer in an election year, while retaining the option to cheat
if necessary. The end of this Venezuelan tragedy does not seem near. ■
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americas/2023/11/02/venezuelas-supreme-court-tests-president-joe-biden
Oh no, Canada

Canadians are starting to sour on migration

So far, it has not led to a populist right-wing surge
Nov 2nd 2023 | Ottawa

AN APHORISM ABOUT Canada is that it has too much geography and not
enough history. Immigration has long been seen as the solution to both
problems in the country’s century-and-a-half of existence. Canadians, who
tend to think of themselves as pro-migrant, have broadly agreed that
bringing in immigrants would improve the country’s economic growth and
help fund the country’s generous social programmes as its population ages.
Similarly, by making the country more diverse, migrants boost its culture,
too.

That consensus is now starting to fray. For the first time in decades, the
number of Canadians who want to take in fewer immigrants is increasing: it
jumped from 34% in March to 53% in September, according to one poll. In
another survey 44% of those asked either strongly or somewhat agreed with
the statement “there is too much immigration to Canada,” compared with
27% last year.
What has caused this? Partly it comes down to the fact that a post-pandemic
backlog in migration has turned into a deluge. For the year ending July 1st
2023, more than 1m newcomers arrived in Canada, edging the population
over 40m. That was the highest annual population-growth rate, at 2.9%,
since 1957. Statistics Canada, the usually sober statistical agency, announced
it was “cause for celebration”.

Not all Canadians are putting out the bunting, though. A lack of affordable
housing in the country, combined with a public health-care system that is
stretched by a shortage of family doctors, has led some to become wary of
newcomers. As people feel that their quality of life is deteriorating, they
blame immigrants, says Victoria Esses, a specialist in attitudes towards
migration at the University of Western Ontario.

The government wants to welcome nearly half a million new permanent

residents this year, going up to half a million in 2025. By contrast the annual
target in 2015 was 300,000 people.

So far no political leader in the country has called for a cut in the annual
migration target. Indeed, many Canadians still say migrants are a good thing
for the economy, even as they want fewer of them. But on November 1st
Marc Miller, Canada’s immigration minister, announced that no further
increases to the half a million number would be made. It was a concession,
albeit a small one. ■
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americas/2023/11/02/canadians-are-starting-to-sour-on-migration
Europe
Ukraine’s commander-in-chief on the breakthrough he needs to
beat Russia
Trenches and tech on Ukraine’s southern front
The Middle East crisis is splitting the French opposition
Beefing up Poland’s armed forces
War of attrition

Ukraine’s commander-in-chief on the

breakthrough he needs to beat Russia
General Valery Zaluzhny admits the war is at a stalemate
Nov 1st 2023

FIVE MONTHS into its counter-offensive, Ukraine has managed to advance

by just 17 kilometres. Russia fought for ten months around Bakhmut in the
east “to take a town six by six kilometres”. Sharing his first comprehensive
assessment of the campaign with The Economist in an interview this week,
Ukraine’s commander-in-chief, General Valery Zaluzhny, says the battlefield
reminds him of the great conflict of a century ago. “Just like in the first
world war we have reached the level of technology that puts us into a
stalemate,” he says. The general concludes that it would take a massive
technological leap to break the deadlock. “There will most likely be no deep
and beautiful breakthrough.”

The course of the counter-offensive has undermined Western hopes that

Ukraine could use it to demonstrate that the war is unwinnable, forcing
Russia’s president, Vladimir Putin, to negotiate. It has also undercut General
Zaluzhny’s assumption that he could stop Russia by bleeding its troops.
“That was my mistake. Russia has lost at least 150,000 dead. In any other
country such casualties would have stopped the war.” But not in Russia,
where life is cheap and where Mr Putin’s reference points are the first and
second world wars, in which Russia lost tens of millions.

An army of Ukraine’s standard ought to have been able to move at a speed

of 30km a day as it breached Russian lines. “If you look at NATO’s text
books and at the maths which we did, four months should have been enough
time for us to have reached Crimea, to have fought in Crimea, to return from
Crimea and to have gone back in and out again,” General Zaluzhny says
sardonically. Instead he watched his troops get stuck in minefields on the
approaches to Bakhmut in the east, his Western-supplied equipment getting
pummelled by Russian artillery and drones. The same story unfolded on the
offensive’s main thrust in the south, where inexperienced brigades
immediately ran into trouble.

“First I thought there was something wrong with our commanders, so I

changed some of them. Then I thought maybe our soldiers are not fit for
purpose, so I moved soldiers in some brigades,” says General Zaluzhny.
When those changes failed to make a difference, the general told his staff to
dig out a book he once saw as a student. Its title was “Breaching Fortified
Defence Lines”. It was published in 1941 by a Soviet major-general, P.S.
Smirnov, who analysed the battles of the first world war. “And before I got
even halfway through it, I realised that is exactly where we are because just
like then, the level of our technological development today has put both us
and our enemies in a stupor.”
That thesis, he says, was borne out as he went to the front line in Avdiivka,
also in the east, where Russia has recently advanced by a few hundred
metres over several weeks by throwing in two of its armies. “On our monitor
screens the day I was there we saw 140 Russian machines ablaze—destroyed
within four hours of coming within firing range of our artillery.” Those
fleeing were chased by “first-person-view” drones, remote-controlled and
carrying explosive charges that their operators simply crash into the enemy.
The same picture unfolds when Ukrainian troops try to advance. General
Zaluzhny describes a battlefield in which modern sensors can identify any
concentration of forces, and modern precision weapons can destroy it. “The
simple fact is that we see everything the enemy is doing and they see
everything we are doing. In order for us to break this deadlock we need
something new, like the gunpowder which the Chinese invented and which
we are still using to kill each other,” he says.

This time, however, the decisive factor will be not a single new invention,
but will come from combining all the technical solutions that already exist,
he says. In a By Invitation article written for The Economist by General
Zaluzhny, as well as in an essay shared with the newspaper, he urges
innovation in drones, electronic warfare, anti-artillery capabilities and
demining equipment, as well as in the use of robotics.

Western allies have been overly cautious in supplying Ukraine with their
latest technology and more powerful weapons. Joe Biden, America’s
president, set objectives at the start of Russia’s invasion: to ensure that
Ukraine was not defeated and that America was not dragged into
confrontation with Russia. This means that arms supplied by the West have
been sufficient in sustaining Ukraine in the war, but not enough to allow it to
win. General Zaluzhny is not complaining: “They are not obliged to give us
anything, and we are grateful for what we have got, but I am simply stating
the facts.”

Yet by holding back the supply of long-range missile systems and tanks, the
West allowed Russia to regroup and build up its defences in the aftermath of
a sudden breakthrough in Kharkiv region in the north and in Kherson in the
south late in 2022. “These systems were most relevant to us last year, but
they only arrived this year,” he says. Similarly, F-16 jets, due next year, are
now less helpful, suggests the general, in part because Russia has improved
its air defences: an experimental version of the S-400 missile system can
reach beyond the city of Dnipro, he warns.

The delay in arms deliveries, though frustrating, is not the main cause of
Ukraine’s predicament, according to General Zaluzhny. “It is important to
understand that this war cannot be won with the weapons of the past
generation and outdated methods,” he insists. “They will inevitably lead to
delay and, as a consequence, defeat.” It is, instead, technology that will be
decisive, he argues. The general is enthused by recent conversations with
Eric Schmidt, the former chief executive of Google, and stresses the decisive
role of drones, and of electronic warfare which can prevent them from
flying.

General Zaluzhny’s assessment is sobering: there is no sign that a

technological breakthrough, whether in drones or in electronic warfare, is
around the corner. And technology has its limits. Even in the first world war,
the arrival of tanks in 1917 was not sufficient to break the deadlock on the
battlefield. It took a suite of technologies, and more than a decade of tactical
innovation, to produce the German blitzkrieg in May 1940. The implication
is that Ukraine is stuck in a long war—one in which he acknowledges Russia
has the advantage. Nevertheless, he insists that Ukraine has no choice but to
keep the initiative by remaining on the offensive, even if it only moves by a
few metres a day.

Crimea, the general believes, remains Mr Putin’s greatest vulnerability. His

legitimacy rests on having brought it back to Russia in 2014. Over the past
few months, Ukraine has taken the war into the peninsula, which remains
critical to the logistics of the conflict. “It must know that it is part of Ukraine
and that this war is happening there.” On October 30th Ukraine struck
Crimea with American-supplied long-range ATACMS missiles for the first
time.

General Zaluzhny is desperately trying to prevent the war from settling into
the trenches. “The biggest risk of an attritional trench war is that it can drag
on for years and wear down the Ukrainian state,” he says. In the first world
war, politics interfered before technology could make a difference. Four
empires collapsed and a revolution broke out in Russia.
Mr Putin is counting on a collapse in Ukrainian morale and Western support.
There is no question in General Zaluzhny’s mind that a long war favours
Russia, which has a population three times and an economy ten times the
size of Ukraine. “Let’s be honest, it’s a feudal state where the cheapest
resource is human life. And for us…the most expensive thing we have is our
people,” he says. For now he has enough soldiers. But the longer the war
goes on, the harder it will be to sustain. “We need to look for this solution,
we need to find this gunpowder, quickly master it and use it for a speedy
victory. Because sooner or later we are going to find that we simply don’t
have enough people to fight.” ■

Read a more detailed new essay by General Zaluzhny on this topic.

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breakthrough-he-needs-to-beat-russia
Don’t look up

Trenches and tech on Ukraine’s southern front

Drone pilots have become valuable targets for both sides
Oct 29th 2023

THE DRONE might not spot you, but if it does, there is only one thing to
do: hide well, and hide quickly. “Major”, a 25-year-old drone pilot operating
near the hottest front lines of the south, in Zaporizhia province, says your
chances are not good if an enemy pilot has you in his sights. The drone can
come from behind your own positions, and masquerade as your own. The
cameras are not great. But running at speeds of 150-160 kph, it will always
outpace you. “If your cover is poor, then you are likely a dead man,” he says.
Major has survived a pursuit four times, the last time in mid-October. Two of
his closest comrades have been less fortunate. “God, not physics, decides if
you survive,” he says.

The hunters are rapidly becoming the hunted. The controllers for most
drones leave their own electronic trace, and if a pilot isn’t careful, the enemy
can home in on them. “Hummer,” a commander in the 47th brigade, in the
south, says the Russians fire everything they have once they identify a target.
They can use their own strike drones, but they also apply high-precision
artillery, mines, glide bombs and even, on occasion, saboteur groups. Major
says he has lost 15% of his colleagues over the last few months. Hummer
says his figures are lower, but refuses to elaborate.

Ukraine is the pioneer of the first-person-view (FPV) drones: craft that are
flown, video-game-like, by goggle-wearing pilots with real-time
manoeuvrability. The drones can cost just a few hundred dollars to build, but
can deliver explosives capable of destroying or incapacitating equipment
with a value of millions. In a day, a single operator can take out a dozen
high-value assets, with corresponding human losses. That has made the
drone pilot an even more prized kill than a sniper, one front-line commander
suggests. “A lot of people want to become drone pilots because they think
the work is further back and safer. The reality is that it’s extremely
dangerous to be flying battlefield drones.”

The first FPV drones appeared in eastern Ukraine in the spring. They were a
response to limited supplies of Western ammunition and the challenge of a
much better-equipped adversary. Drones have since played a leading role in
degrading Russian firepower as part of Ukraine’s southern counter-offensive
in the Zaporizhia region. Although Ukraine initially enjoyed total dominance
in this new class of drones, the Russians are catching up. The first Russian
FPV drones appeared by July, and are now harassing Ukrainian units along
the front. Ukraine is also hampered by the fact that its drones are still largely
assembled and paid for by volunteers. Command structures are similarly
anarchic, with freelance drone operators, brigade drones, secret services and
others operating in the same areas. Meanwhile Russia has clear superiority
when it comes to more expensive classes of drones, such as high-powered
reconnaissance machines.

But the small FPV battlefield drones have challenged many accepted rules of
war. “The future is already with us,” says “Genius”, a deputy battalion
commander in the 47th brigade. In mid-October a Ukrainian pilot set a 22km
record for the distance at which he incapacitated a Russian tank, 18km
behind the front line. His commander says the Russians have imposed a
10km no-tank zone behind the front, dramatically decreasing the value of
such weapons. Hummer says that his own forces have a 58% success rate in
hitting targets. But the traffic is not one-way, and the Ukrainians have
suffered many losses too. Russian FPV drones have destroyed several
Bradley Fighting Vehicles (each worth some $2m) and even a Leopard tank.

The Russians are learning “from their mistakes…and from ours,” says
Hummer. Earlier in the summer, some units began to equip higher-value
assets like tanks and artillery with jamming boxes, which create high-energy
fields around an object so that signals around it stop working. Attacking
such equipment, without video feedback, is a difficult if not impossible task.
Ukrainian units by and large don’t yet have the same technology. “FPV
drones have completely changed the tactics of armoured infantry battle and
we have to adapt better,” says Yuriy Momot, the deputy general director of a
company developing technology-jamming countermeasures for Ukraine.
“Before, only brigades thought about electronic warfare. Now company-
level units need equipment that can detect and defend themselves against
FPV drones.”
Major, who pilots from positions starting just a few hundred yards from
Robotyne, the centrepoint of the Ukrainian counter-offensive effort, says he
operates without any electronic protection. “Intuition is the only thing that
counts in this wild fight,” he insists. It is a fight that shows no sign of letting
up—even as Ukraine’s progress south has slowed to a snail’s pace. “Left
Handed”, an infantryman also fighting at the front, says Ukrainian losses
have increased to alarming levels, in part due to the drones. The plains of
Zaporizhia have turned their back on life, he says. “It’s hellish. Corpses, the
smell of corpses, death, blood and fear. Not a whiff of life, just the stench of
death.” Those in units such as his own have more chance of dying than
surviving. “Seventy-thirty. Some don’t even see their first battle.” ■

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front
The fracturing French left

The Middle East crisis is splitting the French

opposition
Divisions over Israel and Hamas threaten the left-wing alliance
Nov 2nd 2023 | PARIS

A DECADE AGO France’s Socialist Party controlled the presidency, both

houses of parliament, and a majority of regions and big cities. Today the
once-mighty party has been reduced to an inaudible minority partner in a
left-wing parliamentary alliance controlled by Jean-Luc Mélenchon, a
former Trotskyist firebrand. When this four-party grouping, known as
NUPES, was first launched last year ahead of legislative elections, Socialist
moderates accepted its logic through gritted teeth. Now, as differences over
the Israel-Gaza conflict surface, the alliance is tearing itself apart.

Mr Mélenchon’s failure to describe the murderous Hamas attacks on Israel

on October 7th as acts of terrorism prompted the first fracture. He
denounced the violence and called for a ceasefire, with no reference to
terrorism or Hamas. As the ambiguity persisted, Olivier Faure, the Socialist
party’s leader, ordered a “moratorium” on working with NUPES.
Since then, things have only worsened. On October 31st Mr Faure declared
that there was no reason to return to the alliance, although he stopped short
of quitting. He favoured a union of the left, he said, “but not at any price”.
The “constant conflictualisation” of all subjects, Mr Faure argued, was
“demonising” the left—precisely at a time when, on the far right, Marine Le
Pen was busy “de-demonising” her own party. The left, in effect, was
helping to make her look respectable.

The logic that turned the alliance into the biggest opposition grouping to
Emmanuel Macron’s minority centrist government always had more to do
with improvised electoral tactics than conviction or style. The constituent
parties—Mr Mélenchon’s Unsubmissive France, the Communists, Greens
and Socialists—disagree about NATO, Europe, nuclear power and more.
NUPES delights in theatrical antics, designed to go viral on social media.
One of Mr Mélenchon’s deputies brandished a vial of bedbugs in parliament.
Another posed outside a government ministry with his foot atop an effigy of
the minister’s head.

Moderate Socialists have watched in dismay as the left’s credibility has been
shredded. Divisions over the crisis in the Middle East have brought those
strains to breaking point. In a recent poll 63% of Socialist voters judged
Hamas’s attacks to be terrorist acts; among supporters of Unsubmissive
France, the figure was a mere 38%.

The troubling reality for the Socialists, however, is that they lack the weight
to go it alone. Their candidate at each of the two most recent presidential
elections secured a dismal single-digit score in first-round voting. Some
Socialists who had misgivings about the NUPES adventure hope that the
fracture might be a clarifying moment. It could be, says one ex-minister, a
“chance for a realignment” of left-wing politics, which also draws
disappointed left-wingers from Mr Macron’s centrist alliance. Bernard
Cazeneuve, a Socialist ex-prime minister who quit the party when it joined
NUPES, has called on the party to break definitively with the alliance.

Even if it does, the damage will be hard to repair. “Moderates in the party
have been trapped”, says a Socialist figure. A new poll on first-round voting
for the presidential election in 2027 gives the Socialist candidate just 4-6%.
The candidate who comes top, with 31-33%: Ms Le Pen. ■
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french-opposition
Fear spurs the Poles

Beefing up Poland’s armed forces

The incoming government is set to create the biggest army in Europe
Nov 2nd 2023

POLAND’S INCOMING coalition government will want to be seen by the

rest of Europe as marking a fresh start. But in one respect it is unlikely to
diverge far from the policies of its populist predecessor, PiS (the Law and
Justice party). In the immediate aftermath of Russia’s invasion of its
neighbour Ukraine in February last year, the then government embarked on a
mission that the defence minister, Mariusz Blaszczak, described as providing
Poland with “the most powerful land forces in Europe” by acquiring massive
firepower and more than doubling the size of its armed forces.

There is a strong Polish consensus on the need for such a plan. According to
opinion research by NATO, 80% of Poles favour maintaining or increasing
defence spending. In March 2022 parliament voted almost unanimously for
the Homeland Defence Act that raised the annual military budget to 3% of
GDP (well above NATO’S call for 2%) and set up an extra “off budget” fund
for military modernisation worth about $9.5bn this year and next.
Few demurred when the prime minister, Mateusz Morawiecki, declared in
January that the course of the war in Ukraine meant that “we must arm
ourselves even faster” and pushed the target up to 4% of GDP amid hints
that it might even have to rise to 5% over the next decade.

Given that Poland’s security, unlike Ukraine’s, is undergirded by its NATO

membership, some might question why Poland feels the need to be such an
outlier in military spending. The answer is that history and geography make
Poland hedge against the possibility of Ukraine being forced into an
unsatisfactory ceasefire and Russia quickly regenerating its combat power.
Besides, Poles fear the prospect of an isolationist Trump administration that
might weaken NATO and balk at coming to Poland’s rescue, should the
worst happen.

Poland’s first priority last year was to fill the gaps left by transferring 240
mainly Soviet-era tanks, infantry-fighting vehicles, fighter jets and artillery
(including 54 new Polish Krab howitzers) to Ukraine. America agreed to
deliver 116 M1 Abrams tanks from Pentagon stocks to add to the 250
ordered in 2021. But the list soon expanded: most of the contracts went not
just to America but, more surprisingly, South Korea. This was partly to snub
Europeans critical of the PiS government’s creeping authoritarianism.

Though not all the contracts have been finalised, the total planned spending
may be between $30bn-40bn but could rise to $135bn over the next decade.
Aside from an agreement in 2020 to buy 32 F-35 fighter jets for $4.6bn,
other big-ticket items ordered from America include 486 HIMARS rocket-
launchers for about $10bn, to add to the 20 it has already; 96 Apache attack-
helicopters for up to $15bn (in addition to an order worth $1.7bn for 32
AW149 helicopters from Leonardo, an Italian firm); 48 of the latest Patriot
air-defence launch stations with hundreds of interceptor missiles, and an air-
and-missile-defence battle command system that ties it all together, at a cost
of up to $15bn.

However, it is the size and scope of the string of deals with South Korea,
worth together at least $14.5bn, that have startled observers. They include
1,000 K2 Black Panther tanks, 180 of them to be delivered rapidly from the
Korean army’s own inventory and 820 to be made under licence in Poland
from 2026. The rest of the package includes 672 Thunder howitzers, two-
thirds of them locally produced, and 288 Chunmoo multiple-rocket
launchers to be mounted on Polish infantry-fighting vehicles. Poland intends
to field more tanks than are operated by the armies of Germany, France,
Britain and Italy put together.

K-Pop’s ARMY marches on

To replace the MiG-29s and SU-22s sent to Ukraine, Poland is also buying
from South Korea 48 Golden Eagle FA-50 fighter jets, in preference to
adding to its fleet of more expensive American F-16s, for which it would
have to wait years. Speed of delivery, quality, price and standardisation with
NATO equipment were all reasons for doing business with the Koreans. A
further strategic goal has been to turn this buying spree into an engine for
building Poland’s own arms industry as an exporter to the rest of Europe—
again, with Korean help.

What could possibly go wrong? While generally endorsing the defence

build-up, the new government will want to review some contracts that may
have been unduly rushed through. The affordability of the weapons binge
also depends on optimistic assumptions about economic growth. Ben Barry,
a land-warfare expert at the International Institute for Strategic Studies in
London, queries whether Poland can handle the scale of infrastructure
investments and institutional change needed to meet the “massive challenge”
of training a much larger army to use the new kit.

Poland’s demography—its population is falling fast—could make it hard to

meet the goal of a 300,000-strong armed forces, of whom 250,000 are to be
regulars and 50,000 part-timers. A former head of the national defence
ministry, Tomasz Siemoniak, recently poured cold water on the plan: a
professional army of 150,000, he reckoned, was the manageable limit.

If as expected the new government seeks to repair relations with the EU, it
will face pressure to comply with EU budget-deficit rules, which will bring
greater scrutiny of Poland’s vaulting military ambition. Nonetheless, Poland
seems bent on becoming NATO’s beefiest military land power in the years
ahead. Fear of Russia is a great motivator. ■
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Britain
The blight of Britain’s prisons
The covid-19 inquiry exposes chaos in Boris Johnson’s government
How the rapid growth of virtual wards is helping the NHS
The genius of Jilly Cooper, queen of British bonkbusters
Do Labour’s plans for Britain’s private schools make sense?
Labour’s screw-ups reveal how the party will govern Britain
Wasted time

The blight of Britain’s prisons

Overcrowded and understaffed, they are at crisis point
Nov 2nd 2023

JUDITH FELINE loved being a prison governor. The former boss of HMP
Maidstone in Kent relished the challenge of helping prisoners “become
better people”. Small, everyday interactions were a crucial part of that, she
reckoned. But twin challenges—a rising prison population and a shortage of
staff—meant this was becoming increasingly unachievable. “I didn’t want to
stop loving my job,” she says. So last year she took early retirement.

Ms Feline’s experiences mirror those of innumerable prison workers. In

October data from the Ministry of Justice (MoJ) revealed the prison
population of England and Wales had hit an all-time high—only a few
hundred short of official capacity. Most British prisons have long been
overcrowded. A dramatic escape from Wandsworth prison in London this
summer showed it was holding more than 1,600 men, though it was built for
1,000.
The situation has been dreadfully exacerbated by a shortage of prison
guards. In 2013 the MoJ introduced a voluntary redundancy scheme for
prison officers, the effects of which were so dire it tried the following year to
rehire many of those it had paid off. In his most recent annual report Charlie
Taylor, the chief inspector of prisons, said every inspected institution
suffered from staff shortages.

For prisoners, this has been calamitous. It may seem a simple thing, says Ms
Feline, to put another bunk in a cell that already sleeps one, or even two.
(Most of Britain’s prisons were built in the 19th century when cells were
intended for one.) But in jammed, understaffed jails, people are locked up
for far longer: 22 hours of confinement is not uncommon.

“It’s awful to hear people describe spending endless hours doing nothing
locked in their cells,” says Andrew Neilson, director of campaigns at the
Howard League for Penal Reform, “and how self-harm, drug use and
violence are all rising as the situation gets worse and worse.” In the year to
September 2023 the number of suicides in prison rose by 24%. All this
means prisons are failing in one of their chief purposes: to rehabilitate.
Prisoners cannot “do the stuff they need to do to show they are worthy of an
early release,” says Ms Feline. “It’s disheartening”.
This perfect storm of failures has been gathering since the mid-1990s, when
a more punitive sentencing policy was introduced. Since then most types of
crime have seen “sentence inflation”, says Mr Neilson. The average sentence
for murder was 20 years in 2020, up from 12.5 years in 2003. No
government has tried to reverse this trend, which is why the prison
population of England and Wales is now nearly double what it was three
decades ago.
But the situation has now become so bad that the government cannot ignore
it. In October Alex Chalk, the justice secretary, announced a series of
emergency measures to tackle overcrowding. Some are better than others.

One, limiting short prison sentences (of less than 12 months) for low-level
offenders, should have been introduced long ago. Research shows that for
such petty criminals, many of whom are drug addicts, short prison sentences
result in higher levels of reoffending than community sentences. Community
options are cheaper, too. And because chaotic, low-level criminals (who are
the main conduit for drugs into jails) make prisons more difficult to run,
reducing their number may also make it easier to recruit prison staff.

Another initiative, releasing some prisoners who are serving sentences of

less than four years 18 days early, is also sensible “and not alarming for the
public,” observes Pia Sinha, chief executive of the Prison Reform Trust and
a former prison governor. She notes, however, that it is unclear how much
difference it would make given that it seems likely to be limited to certain
prisons and prisoner-types.

These measures, like most that would reduce overcrowding, have a major
flaw: they would put more pressure on the probation service, which manages
community sentences and oversees some prisoners after they have been
released. The probation service is itself in shockingly bad shape, and badly
needs reforms of its own.

Another initiative announced by Mr Chalk, of sending prisoners overseas,

has been tried elsewhere; both Belgium and Norway have in the past rented
cells in the Netherlands. Mr Neilson says that ensuring domestic laws—on
family visits, say, or prisoners’ rights to speak to a lawyer—are followed on
foreign soil can be fraught. No more than a few hundred prisoners are likely
to be dealt with this way, he reckons.

The government is also considering two further measures. The prison

population has increased sharply since the pandemic because court backlogs
have increased the numbers on remand (ie, suspected criminals who are
locked up before they get to court). Their number has risen from 9,000 in
2019 to over 15,000 in 2023. The MoJ is considering giving them longer to
plead guilty before they get to trial; since guilty pleas result in reduced
sentences, that would help. It should also stop imprisoning so many
offenders who infringe the terms of their licence on release. Most of those
infractions, such as going abroad without permission, are not crimes in the
normal sense of the word.

Yet none of these will be enough to ease the crisis in prisons. Partly because
it is recruiting more police officers, the MoJ expects the prison population to
reach 98,700 by 2026, up from around 88,000 now. Its prison-building
programme is not keeping pace, so what is to be done?

For one thing, the MoJ must recruit more prison officers and find ways to
retain them. “It’s not just about numbers,” says Ms Feline, the former
governor. “There’s nothing like working on the landing. You can be trained,
but the real training is experience.” She says her old prison in Kent has lost a
lot of workers to the border force. The inspector of prisons says elsewhere in
south-east England prison staff are leaving for the police. Better pay may
help. But making prisons less crowded and dysfunctional would mean fewer
staff left for less stressful jobs.

Perhaps most importantly, the MoJ must push for a reduction in the length of
sentences. There is little point giving criminals more time if they spend it in
their cells, becoming more violent, hopeless and, in many cases, mentally
unwell. This, however, would be a major undertaking, not least because
politics plays such an unhelpful part in criminal-justice policy. The Labour
Party, assuming it forms Britain’s next government, will not want to be seen
single-handedly to undo the tough-on-crime policies of the Tories. A cross-
party parliamentary inquiry or even a royal commission might be one way to
defuse this problem. “A crisis of this scale calls for systematic change,” says
Ms Sinha. “It’s time to get experts round a table, look at what works, take
politics out of it.” ■

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I swear, your honour. A lot

The covid-19 inquiry exposes chaos in Boris

Johnson’s government
Wrong people, wrong place, wrong time
Nov 1st 2023

IT WAS EASY to get distracted by the foul language. Did Dominic

Cummings regret calling ministers “useless fuckpigs”, “morons” and “cunts”
in WhatsApp messages, or describing the Cabinet Office as “terrifyingly
shit”? Giving evidence to the covid-19 inquiry on October 31st, the one-time
chief aide to Boris Johnson was characteristically caustic. If anything he had
“understated” the scale of the dysfunction within the government as it
grappled with covid.

Many countries have completed short, sharp exercises to draw lessons from
the pandemic. Britain’s sprawling inquest will try to dissect the functioning
of almost every part of the state. Witnesses will be questioned until at least
2026. Lawyers will pore over a vast trove of documents and try somehow to
pin down a narrative.
In retrospect, Britain’s handling of the pandemic does not appear as bad as it
once did. On a crude measure of excess deaths, the country ranks close to the
middle of the pack, helped greatly by an impressively fast vaccine roll-out.
But the inquiry will look at why Britain did so badly before the jabs arrived,
probing government decisions over lockdowns, care homes and public-
health guidance. This autumn’s hearings, focused on 10 Downing Street and
the Cabinet Office, will be among the juiciest sessions. Hovering over them
is one question: was the British state badly prepared or were individuals in
power spectacularly unsuited to the job?

It is already known, for example, that the country’s national risk assessment
failed to anticipate and plan for a novel pathogen, and that the state was slow
to adapt the plans it did have for a flu pandemic. The Cabinet Office lacked
basic data to track what was happening. In 2021 Mr Cummings told a
parliamentary committee that departmental responsibilities for the crisis
were horribly muddled. This week he reiterated that the core part of the state
supposed to prepare for emergencies was glacially slow to respond.

Yet the big-name witnesses now appearing on the stand heighten the sense
that the chaos was driven by individuals. The portrait of Mr Johnson as a
prime minister who was unserious, indecisive and unable to grasp detail is
hardly new. Memorable colour is being added, though. In one message Mr
Johnson ponders whether older people should accept their fate (while
demonstrating a sketchy grasp of the concepts of “median age” and “life
expectancy”). As a former media adviser put it on the witness stand this
week, covid did “not suit his skill set”. (Mr Johnson himself is expected to
appear next month.)

As for Mr Cummings, he styles himself as a truth-telling maverick interested

in systems. Yet he appears to have been incapable of running a functioning
office. At one point he moans that meetings in Number 10 did not function
on a basic level, when he had been the prime minister’s chief of staff for
seven months. On November 1st Helen MacNamara, the then deputy cabinet
secretary, described an environment that was toxic, macho and sexist.

All of which raises difficult questions for Simon Case, the cabinet secretary,
who is yet to give evidence. It also bodes ill for Rishi Sunak, who will also
appear before the inquiry next month. It is not just that the prime minister
will face tough questions about his time as chancellor. It is that Mr Sunak
has spent the past year trying to banish memories of his chaotic
predecessors. Instead, the circus is back. ■

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boris-johnsons-government
Introducing the VHS

How the rapid growth of virtual wards is helping

the NHS
One way to increase capacity in hospitals as winter approaches
Nov 2nd 2023

THERE IS NEVER going to be one answer to the problems of the National

Health Service (NHS). But by preventing admissions to hospital in the first
place, or enabling an earlier discharge date, virtual hospital wards promise to
offer a practical solution to shortages of real beds.

Virtual wards is a fancy term to describe low-risk patients who are

monitored at home. Patients are given electronic doodads—blood-pressure
cuffs, thermometers, oximeters—so that hospital staff can collect data about
their health in real time. They are not new but their roll-out accelerated
during the pandemic. Given the approach of both winter and an election, the
pace is not letting up. The NHS in England reached 10,000 virtual beds this
autumn—actual beds total about 140,000—and wants to have 24,000 of
them by the end of next year. During one period this summer, 14 beds were
being added daily, says Ben Horner of Boston Consulting Group.
Hertfordshire Community NHS Trust runs its virtual ward, with help from a
tech firm called Doccla, from a nondescript office building on the edge of
Stevenage. It looks like a call centre, except that nurses, doctors and
pharmacists are the ones sitting in front of screens. These display lists of
patients alongside their vital signs, such as pulse rate, oxygen saturation,
blood pressure and temperature. The measurements taken depend on what
kind of ward it is. Virtual wards today are often for geriatric or respiratory
patients. But their use in cardiology and other areas is growing.

The benefits of virtual wards to a hospital system that is chronically short of

real beds, especially during the winter, are obvious. Virtual beds can be
created far more rapidly and cheaply. Patients seem to like them—most
people, unsurprisingly, prefer to remain at home with their families, sleep
undisturbed by nurses changing shifts and eat their own food. If patients
don’t go to hospital they will not pick up an infection nor bring one in.

Operating 10,000 virtual beds should release about 7,500 actual beds, says
Mr Horner (the disparity is because virtual patients are discharged a bit more
slowly than those in hospital). That “takes our high occupancy rate in winter
back down to the magic number of 91%”, a threshold that allows hospitals to
run better. A range of other benefits has been proposed, such as faster
recovery times.

Charles Tallack, director of data analytics at The Health Foundation, a think-

tank that is analysing virtual wards, says the challenge in assessing them is
their heterogeneity. Some are not tech-enabled at all; they just comprise
patients at home who get a daily call asking about their activity and how
they are feeling. But overall he says that virtual wards are “broadly
promising”. Everyone seems to agree that the costs per day of virtual wards
are lower; Mr Horner puts this at about a third of the cost of a real one. But
how much of this gain is lost because of longer stays in virtual beds is not
yet known.

The NHS has to get a more precise handle on these costs and benefits soon.
The central pot of money that the government has set up to establish virtual
wards is due to run out next year; trusts will then need to pay for them out of
their own budgets, and will want to know what they are getting. Virtual
wards are not without challenges—a lack of standardisation and guidance on
how they should be set up and run is already a concern. There are no rules
on what staffing ratios should look like, for example, though anecdotally a
ratio of one nurse to every 30 patients seems to be common (an equivalent
NHS ward is not meant to exceed a 1:8 ratio).

As technology progresses, some wonder if entire virtual hospitals for some

patients might be possible. The government might fulfil its pledge to have 40
new hospitals by the end of the decade, after all. ■

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is-helping-the-nhs
Sex and horses

The genius of Jilly Cooper, queen of British

bonkbusters
The magic and the meaning of an 86-year-old social pornographer
Oct 30th 2023

JILLY COOPER novels are smutty, sexist and snobbish. They have titles
such as “Mount!” and “Score!” and “The Man Who Made Husbands
Jealous” and are not easily mistaken for the collected works of Jane Austen.
Their cast lists feature characters such as Rupert Campbell-Black (“nirvana
for most women”), Bethany (a “nymphomaniac”) and Cadbury (a Labrador).
Her novels contain far too many appearances of the word “wet” and a
frankly distressing number of “thrusts”. They are reprehensible in almost
every way. They are, in other words, great fun. And they also say something
about how Britain has changed during Ms Cooper’s long career.

The release of her latest novel, on November 9th, will be a peculiar

publishing event. Everything from its nudging title (“Tackle!”) to its cover
(more tackle—perhaps even tackle!—in white shorts) suggests that this is
the sort of book that literary London will sneer at. In fact, literary London
almost certainly will not. Ms Cooper has written 18 novels and sold over
11m copies in Britain alone. She has built up not so much customers as a
congregation, less readers than religious believers. Her followers range from
the prime minister, Rishi Sunak (“You need to have escapism”), to
Cambridge dons (she is, one wrote, “precise, insightful, witty”).

Such public displays of affection surprise many who haven’t read Ms

Cooper’s novels, and can particularly surprise the young. Ms Cooper’s style
is not what you would call “woke”—and it is certainly not feminist.
Feminists do appear in her pages: they can usually be spotted by their hairy
legs and their fondness for the New Statesman. In one Cooper novel, a boy
asks his father who Florence Nightingale was. The father answers briskly:
“A lesbian.” But then if Ms Cooper is out of touch that is hardly surprising.
She is 86 and, like most who live so long, is anachronism incarnate—a
living reminder that social and sexual changes which appear prehistoric to
younger minds were in fact pretty recent.

It was only in 1975, the year in which her first novel, “Emily”, was
published, that British women finally gained the right to open bank accounts
without a male signatory. When “Riders”, the first of her novels set in the
fictional county of “Rutshire”, was published ten years later, Debrett’s guide
to “Etiquette and Modern Manners” could still be read earnestly rather than
ironically. Its 1981 edition included advice on everything from how to
address a marchioness (“Lady”) to how to deal with a butler (let him buttle).
It instructed on how to handle asparagus (demurely), corn on the cob (so
messy it is best saved for those whose love you are sure of) and even
“Sexual Relationships” (see corn on the cob).

Openly admitting to reading “Jilly” also surprises some people because it

seems akin to openly admitting to an enthusiasm for porn. It is not entirely
unreasonable to assume that her novels are all about sex. Her books were
among a group of novels that led to the introduction of the term
“bonkbuster” into the Oxford English Dictionary in 2002. There are lashings
of sex in them—at times there are even lashes. But the idea that they are
pornographic is simply wrong, says Dr Ian Patterson, a fellow in English at
Cambridge University, since in a Cooper novel sex is “just to do with fun”
and not there “to titillate”.
In fact the real pornography here is social, not sexual. Her books are filled
with sweeping lawns, puce-faced colonels and above all, handsome upper-
middle-class Englishmen. Her hero, Rupert Campbell-Black—the hyphen
gets heavy use in her stories—is said to be partly based on Andrew Parker
Bowles, the current queen’s first husband. Her books linger lovingly over
cads as they drink, smoke, swear and fondle fat Labradors and slender
women in stone-flagged Cotswold kitchens.

It is not all light; there are villains in Rutshire. They are called “socialists”
and can be recognised because they wear sandals, drink your champagne and
complain about things. But true darkness rarely breaks into Ms Cooper’s
writing. Evelyn Waugh once said of P.G. Wodehouse, a comic novelist, that
his was a world in which there “has been no Fall”—no evil had broken into
his Eden. And, despite the sex and the smut, so it is with Ms Cooper’s
books. Her novels have “a relentless faith in human good nature, of a quite
old-fashioned sort”, says Dr Patterson.

And when things do go wrong, her characters don’t talk about it. Because
perhaps the most archaic thing of all about her novels is that the good never
complain. One of the most striking entries in that updated Debrett’s edition
appears in the section on “Royal, Diplomatic and Formal Occasions”.
Beneath the advice on what to wear (hats) and how to behave (toadyingly)
comes the heading “Choking” (on food, that is). “If it happens it happens,”
Debrett’s advises, but you should “do it as discreetly as possible”. Ms
Cooper comes from this school of stoicism. When she was involved in a
terrible train crash in 1999, she simply said: “I know how lucky I am.” She
has expressed bafflement at modern men who have beards and “cry all the
time”.

There are plots in her books—stuff about football and horse-jumping. There
are flaws, too. The recent novels in particular are more sprawling and less
sharp. But that barely matters. Ms Cooper has created not merely stories but
a world. Like Dickens’s London or the Brontës’ Yorkshire or Austen’s “—
shire”, “Rutshire” is a place you know the moment you open the page, where
people have clipped accents, rambling houses and, most important, fun. ■

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british-bonkbusters
Classroom war

Do Labour’s plans for Britain’s private schools

make sense?
A proposal to charge VAT on fees arouses passion on all sides
Oct 31st 2023

FOR DECADES, on and off, the Labour Party has been promising to take a
harder line on private, fee-paying schools. Before the general election in
2019 it pledged to explore ways of “integrating” them into the public sector.
That idea has been dropped, along with one to strip private schools of their
charitable status.

But the policies spelled out to enthusiastic applause at Labour’s conference

in October—to make private-school fees subject to value-added tax (VAT),
at the standard rate of 20%, and to remove a discount these schools receive
on business rates—are still controversial. Given the party’s yawning lead in
the polls, they are also likely to become reality. As claims and counterclaims
fly, three questions dominate. What is the case for making the tax changes?
Would they materially affect private schools? And would they improve
education in Britain?
On the rationale for the policy, Sir Keir Starmer, Labour’s leader, has batted
away claims that his party is contemptuous of aspirational parents; he has
said he sees “no case” for trying to abolish fee-paying schools. Instead
Labour’s argument is that it is unjust to continue exempting from tax a
service bought mostly by the rich.

Research suggests that pupils in private schools learn more than they would
if they studied in the state sector. Indeed, the fact that they get more and
better qualifications is the biggest single reason they earn more than others
in adulthood, according to academics at University College London (UCL)
and Cambridge. (Chummy networks probably also help.) By the time they
turn 25, privately educated Britons earn 17% more than workers from
similar homes, according to research published in 2020. The pay premium
widens by the age of 42, according to earlier research, to around 21% for
women and 35% for men.
About three-quarters of children in Britain’s private schools come from the
richest 30% of families, according to another study by academics at UCL. In
contrast, only 2% of pupils come from the poorest third of families (see
chart). Although private schools sometimes offer means-tested discounts
aimed at drawing in poorer children, last year only about 7% of private-
school pupils benefited. Of this small group, only about half received help
amounting to 50% or more of total costs; only about one-quarter attended
free.

Critics say that the “partnerships” private schools boast of forming with state
schools are underwhelming, sometimes involving little more than matches
between their sports teams. It is also occasionally argued that private schools
deprive government ones of wealthy and engaged parents. And according to
Francis Green at UCL, private schools educate less than 7% of pupils in
England but employ around 14% of teachers.

Private schools push back. They object in particular to Labour’s claims that
they are benefiting from “tax breaks”. Most education spending is exempted
from consumption taxes, on the principle that encouraging adults to invest in
youngsters’ brains will benefit the country in the long run. Parents do not
pay VAT when they send toddlers to playgroups; undergraduates never pay
VAT on their tuition fees (even though degrees can greatly boost their
incomes). Julie Robinson of the Independent Schools Council (ISC), a group
representing more than half of Britain’s 2,400 or so private schools, says it is
rare for countries to tax school fees, and that if Britain were still in the EU it
would not be allowed.

Fee or free
Private schools also complain that debates about the sector focus on a
handful of very toffee-nosed institutions, such as Eton, and on a subset of
parents seeking a shortcut to Oxbridge. In fact, plenty of parents have turned
to private schools in the hope that extra help might turn a struggling
schoolchild into an average one. And lots of private schools offer specific
educational or religious environments that are not available in the state
sector. Lizzy Nesbitt, the principal of Emmanuel Christian School, a private
primary with 60 pupils in Oxford that charges annual fees of about £6,500
($7,900), thinks her school’s families—about one-third of whom earn
£40,000 or less—are probably not the kind that Labour is imagining it is
targeting.

The second debate is what the effects of changing the tax rules would be.
The ISC insists the impact of adding VAT to school fees would be huge. A
report it commissioned in 2018, when such a policy was last widely
discussed, claimed that private-school enrolment could fall by 17-25% in the
five years following; some 90,000-135,000 additional pupils would enter
state schools. Competition for spots in the best government schools would
inflate house prices in their catchment areas; adding lots of spots to the state
system would cost money. Labour says it will raise £1.7bn from its plan; the
ISC’s study warned that the reform might raise little extra cash.

There is good reason to think the consequences would be much less

dramatic. The Institute for Fiscal Studies (IFS), a think-tank, argues that
there is only a very weak relationship between the cost of private schooling
and the number of parents who pay for it. Average private-school fees, now
£15,200 a year, have jumped by 20% in real terms since 2010 and by 55%
since 2003, for reasons unrelated to the government. Over that time the share
of all children who are educated privately has barely budged. Private-school
parents are increasingly concentrated in very high-earning professions such
as finance, goes one explanation; fees are also more likely to be paid in part
or in full by rich grandparents.

The IFS’s best guess is that adding VAT to fees would cause private-school
enrolment to fall by 3-7% (up to 40,000 kids) over several years. It thinks
the policy would raise about £1.3bn-1.5bn for the government—equal to
about 2% of the state-school budget. Unlike other analysts, it argues that
parents who stop paying school fees will probably end up spending the
money they save on other things, most of which would be taxed. So even if
as many as 15% of pupils shifted, the change would still raise about £1bn.

Again, however, the impact is likely to be unevenly distributed. About half

of private schools have fewer than 290 pupils; a quarter have fewer than 155.
Even modest swings in enrolment could hit these fairly hard. The largest and
most elite schools may be less affected. Businesses that charge VAT are
exempt from paying the tax on their own “inputs”; the greatest beneficiaries
would be schools that spend the most on things other than teachers’ pay,
including luxuries such as golf courses.

The final question is what scale of improvements Labour can drive in the
state sector with the extra tax receipts. So far it has promised to spend
£350m hiring 6,500 more teachers, which would swell the state-school
workforce by around 1%. It talks of spending a similar amount providing
breakfast clubs in primary schools, which some evidence suggests can boost
how much the littlest pupils learn.

A vaguer list of uncosted aspirations contains nothing anyone could find

offensive but may not drive big improvements. Labour has rejected the
government’s proposal that all pupils study maths until 18; its alternative
idea, to keep improving maths teaching in the early primary years, seems
both less ambitious and less responsive to what international data suggest are
currently schools’ biggest flaws.

During the years of Conservative rule England’s schools have drifted up

international league tables. That has probably had less to do with funding—
which has too often been miserly—than with unpopular reforms to
curriculums and tests. Pushing up standards in the state sector has made it
gradually harder for private-school pupils to win places on the most
prestigious degree courses. That, as well as efforts by elite universities to
increase their state-school intake, may be a bigger threat to fee-paying
schools than any change in tax rules.

Arguments, in other words, are being over-egged on all sides. Private

schools will lose some pupils but fewer than they claim, especially among
their core constituency of rich parents. Labour will draw a bit of cash from
rich parents and please a lot of its voters, but the most-affected private
schools and parents are likely to be smaller and less wealthy, respectively.
The money raised will be useful at the margins but it will not fix the biggest
issues in schools. The signals sent by this issue arouse passions; its actual
importance is less great. ■

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schools-make-sense
Bagehot

Labour’s screw-ups reveal how the party will

govern Britain
Palestine, plagiarism and power
Nov 2nd 2023

FOR A BARRISTER, Sir Keir Starmer is surprisingly slow on his feet. The
Labour leader had an illustrious career at the Bar but can struggle under light
interrogation. When Israel launched its assault on Gaza in response to
Hamas’s attack on October 7th, Sir Keir was asked a seemingly simple
question during a radio interview: “A siege is appropriate? Cutting off
power, cutting off water, Sir Keir?” Sir Keir replied: “I think Israel does
have that right.”

The trap was sprung. Clips of the former human-rights lawyer appearing to
endorse what many regard as war crimes went viral in Labourland, where
Israel and Palestine is a poisonous issue. Panicky aides clarified that Sir Keir
had said that Israel had to stay within international law, but the damage was
done. Dozens of councillors resigned; MPs were inundated with emails from
pro-Palestinian members and voters. Threats of shadow-minister
resignations unless Sir Keir endorsed a ceasefire followed; the Labour leader
refused, largely to stop Britain becoming an outlier among its allies. He was
stuck, kippered by a breakfast-show radio DJ.

Sir Keir has triggered a month-long internal row. Slapdash behaviour from
Rachel Reeves, the shadow chancellor, caused a more amusing episode. Ms
Reeves had found time in her schedule to bash out a book titled “The
Women Who Made Economics”. A reviewer at the Financial Times noticed
that phrases had been lifted from Wikipedia, the Guardian and even one of
Ms Reeves’s own colleagues. In one case, four paragraphs from Wikipedia
on the concept of rent-seeking were copied in almost word-for-word.

Both of these errors tell a story. One is serious, one is silly. Neither will
determine whether Labour ends up in power. But each demonstrates how
Labour will govern when it does.

A bitter row over Gaza is a reminder that with Labour in power, its neuroses
will replace Conservatives ones. Britain has spent a decade wrestling with its
position in Europe not because voters demanded it, but because
Conservative MPs were obsessed by it. With Labour in office, topics such as
Israel and Palestine will become matters of internal political psychodrama
rather than cold debate about policy. Backbench Tory bores waving copies of
the Treaty of Rome will be replaced by Labour counterparts quoting the
Balfour Declaration. It was, after all, a row over Israel that led Tony Blair to
realise his time was almost up in 2006.

Party unity is a fragile thing. Sir Keir has tight control of the party, but it has
been achieved with sticks rather than carrots. Dissent has not been tolerated;
fringe elements within Labour have been cowed. People within the party
have put up with this due to the prospect of power. Painful decisions have
passed with little protest as a result. This summer, Labour confirmed that it
will not remove a two-child limit on child benefit. Doing so would lift
250,000 children, which is the population of Stoke-on-Trent, out of poverty
at a cost of about £1bn ($1.2bn; 0.05% of GDP), but fiscal credibility came
first. Gaza has shown the limits to discipline.

Control was one part of the Labour leadership’s pitch. The other was
competence. Ms Reeves’s literary endeavours have damaged that bit of the
pitch. The shadow chancellor mentions her brief stint as a Bank of England
economist in her 20s with the swagger of a former West Ham youth player
turning up to play five-a-side football on a Monday night. Being caught
lifting an explanation of rent-seeking from Wikipedia straight into a book is
not career-ending. But it is mortifying.

Labour’s reputation for economic competence is relative: it relies on Tory

ineptitude. Labour has failed to explain how it would differ in government
from a Conservative one on fiscal matters. Ms Reeves has ruled out any tax
rises beyond tinkering with things like VAT on private school fees, while
also keeping roughly to Tory spending plans. But Conservative polling is
only four points above where it was at the nadir of the Liz Truss era, when
her chancellor was appearing on television with a graphic of sterling
plunging next to his head. Voters would choose anyone else; Labour are
anyone else.

Sheer luck is the most overlooked part of Labour’s rise. Sir Keir’s tenure as
leader could easily have ended in 2021 after a humiliating by-election defeat
in north-east England and a narrow victory in another. The Conservatives
rode to his rescue in 2022, switching prime ministers twice in two months
and triggering a financial crisis. Even the row about Gaza could be worse.
Few voters are paying attention to it. Helpful distractions have emerged,
such as an inquiry into Boris Johnson’s inept handling of the pandemic
(complete with foul-mouthed WhatsApp transcripts). Luck, however, cannot
be relied on. It was bad luck that a reviewer spotted borrowing in Ms
Reeves’s tome. It was bad practice that put it there.

Step by step
Labour have reached the edge of power by making few mistakes. This is
fortunate, since error correction happens slowly. A quicker leader would not
have made his error on Gaza in the first place; a more flexible one would
have corrected it faster. The response to Ms Reeves’s borrowed paragraphs
was a delicious cocktail of denial and confession, noted one wag. Labour’s
slow-and-steady approach can be an asset in opposition but will be a liability
in office.
Now that a Labour government is seen as an inevitability, Westminster
journalists have begun inflating the feats and skills of Sir Keir and Ms
Reeves to fit their poll lead. Boot-licking season has begun. Yet what is now
considered masterful inactivity can as easily be labelled timidity. Under Sir
Keir, Labour has let others make major policies on his behalf. When it
comes to foreign policy, Labour has been happy to follow allies. When it
comes to fiscal policy, the party has moved in lockstep with the
Conservatives, creating a new economic consensus. In government,
however, Labour will occasionally have to stride out alone. Sir Keir will
have to learn to be quick on his feet. ■

Read more from Bagehot, our columnist on British politics:

The rise and fall of class dysphoria in Britain (Oct 26th)
How rationing became the fashion under the Tories (Oct 19th)
The rise of Britain’s new nanny state (Oct 10th)

Also: How the Bagehot column got its name

This article was downloaded by zlibrary from
https://www.economist.com/britain/2023/11/02/labours-screw-ups-reveal-how-the-party-
will-govern-britain
International
The culture war over the Gaza war
Views of Israel are misleadingly negative online
Views of the Middle East

The culture war over the Gaza war

The conflict is raging on streets and screens in the West
Oct 28th 2023

THE IMAGERY is enticing, the rhythm and rhyme are propulsive. “From
the river to the sea,” runs the popular slogan, “Palestine will be free!” In
recent days that couplet has resounded in squares from Toronto to Berlin.
Wearing chequered keffiyeh scarves, Californian pupils declaimed it as they
swept down school corridors. Activists projected the words onto a wall of a
university in Washington, DC.

What do they mean? Superficially an idealistic vow of liberation, the

decades-old expression also contains a threat: the river is the River Jordan,
the sea is the Mediterranean and freedom, in this case, implies the
destruction of the state of Israel. That is certainly the sense in which Hamas
uses the phrase. The children chanting it at the base of Nelson’s column in
London on October 21st, during a big pro-Palestinian march, may not have
grasped the menace. But several marchers who were yelling the words, or
bearing them on placards, seemed aware of it, clamming up defensively
when asked to explain them.

“Anyone who’s paying attention knows exactly what that means,” says
Jonathan Greenblatt of the Anti-Defamation League, an American anti-hate
group which, like watchdogs in Britain and elsewhere, has documented a
steep rise in antisemitic incidents since Hamas’s bloody raid on Israel on
October 7th. (Islamophobic incidents have multiplied in several countries,
too.) The ubiquity of this deceptively hardline mantra points up an important
shift in Western attitudes to the Israeli-Palestinian conflict. Three related
forces are driving it: technology, demography and ideology.

The Western left once sympathised with Zionism. That changed markedly
after the six-day war of 1967 and the Israeli occupation of the West Bank
and Gaza. Especially since the end of apartheid in South Africa, the
Palestinian cause has been a talismanic issue for left-leaning Westerners.
Why it acquired this status is a matter of debate. In some analyses, Israel
serves as an avatar for American power, or for bygone colonial struggles.
Jewish groups and others have wondered why the casualties in, say, Syria or
Afghanistan—where the perpetrators as well as the victims are Muslim—stir
less bien-pensant concern.

After a period in which the issue receded in prominence in Western

diplomacy and headlines, Gaza’s plight is now inspiring protests and
disputes as never before. A glut of open letters by artists and other
luminaries have decried Israel’s bombardment and Western leaders’
acquiescence to it. (Counter-petitions mourn the atrocities of October 7th
and affirm Israel’s right to self-defence.) Pro-Palestinian rallies have been
held in many cities, including some where they were notionally banned.

The recriminations flow both ways. In Britain the BBC’s reluctance to refer
to Hamas as “terrorists” led to an outcry and a partial climbdown. Dave
Chappelle, an American comedian, reportedly had a spat with punters at a
gig in Boston after he lamented the crisis in Gaza. Some American students
have been hounded for their stridently anti-Israel views; talks by Palestinian
authors have been cancelled. Palestine Legal, which supports pro-Palestinian
activists in America, says they are “facing a wave of McCarthyite backlash
targeting their livelihoods and careers”.
“Silence is violence”, runs another popular protest slogan, a position taken
by some on all sides. A range of institutions, from universities to unions,
have been berated for the wording of their public statements, or for failing to
issue one. Calls for peace have been likened to appeasement. And supporters
of both Israel and the Palestinians make analogies with Ukraine to show the
supposed hypocrisy of the opposing camp. Backers of the Palestinians see
Gaza as the victim (like Ukraine) of invasion by a bullying neighbour. Pro-
Israelis point to Hamas’s incursion and liken its barbarity to Russian war
crimes.

The polarised passions and viral slogans are in part a sharp manifestation of
the echo-chamber effect of social media. Millions of people have watched
footage of Hamas’s depredations in horror. Many others are transfixed
instead by images of Gaza’s agony. In Germany, for instance, where a
synagogue has been firebombed and Stars of David daubed on Jewish
homes, some Islamists exist in “parallel societies”, relying on digital and
overseas news, says Felix Klein, the federal commissioner for antisemitism.
So, he adds, do many on the far right, which commits most of the country’s
antisemitic crimes. (There, as in America, the two groups have made
common cause online.)

Worse, the heart-rending clips and pictures sometimes come from the wrong
country or the wrong war, or even from video games. Like the echo-chamber
effect, online disinformation is a familiar problem that has seemed as acute
as ever in the ongoing crisis.

The blast at the Ahli Arab hospital on October 17th was a supreme example
of the reach and clout of falsehoods. Swiftly picked up by major news
outfits, misleading reports contributed, in short order, to the cancelling of a
summit between Arab leaders and President Joe Biden. Demand for
disinformation, reckons Peter Pomerantsev of Johns Hopkins University in
Baltimore, is an even bigger problem than supply. In wartime, “people are
looking for reasons to confirm their biases,” he says glumly. “It isn’t about
the facts.”

Screen habits encourage another striking feature of reactions to the war: the
“gamification” of news, whereby irony and taboo-busting are prized, even
amid the gravest calamities. The paragliders on which some Hamas
murderers flew to Israel were, for a few onlookers, irresistibly meme-
worthy. Black Lives Matter Chicago briefly posted an image of a paraglider
with the words, “I stand with Palestine.” “From Chicago to Gaza,” runs
another of its messages, “from the river to the sea.”

As for demography: immigration is one factor skewing the culture war in the
West over the tragic one in the Middle East. Muslim populations in Western
countries are both growing and changing in composition. In the past, notes
Yunus Ulusoy of the Centre for Turkish Studies and Integration Research in
Essen, the Muslim population in Germany was of predominantly Turkish
origin. Now, he says, around 2.1m Muslims in the country have roots in
Syria, Iraq and other places that are hostile to Israel. They brought their
views of the conflict with them—shaped, says Mr Ulusoy, by a sense of
solidarity with the ummah, or global Muslim community.

Awareness of Nazism and the Holocaust, which for decades coloured

German attitudes to Israel and antisemitism, is waning. Some Muslims, says
Professor Julia Bernstein of the Frankfurt University of Applied Sciences,
think this awful past “is not our history”, and that they are now the real
victims of prejudice in Germany.

France, notes Dominique Moïsi, an eminent French commentator, is home to

both the largest Muslim population in western Europe and the biggest Jewish
one. It has a traumatic recent history of Islamist terrorism, and a more distant
one of collaboration with the Nazis, both of which tend to bolster support for
Israel. But it also harbours contrary strains of anti-Americanism and guilt
over French colonialism in the Arab world. The result, says Mr Moïsi, is a
“conflict of memories” that plays out in politics and on the streets.

In America, the most influential depiction of Israel in popular culture is

probably “Exodus”. A novel by Leon Uris published in 1958, it dramatises
the birth of the state and became a film starring Paul Newman. (“As a piece
of propaganda,” said David Ben-Gurion, Israel’s first prime minister,
“Exodus” was “the greatest thing ever written” about the country.) Overall,
Americans remain much more supportive of Israel than are Europeans. Polls
conducted since October 7th show a hardening of support for it among
Democrats in particular.
But there is an important demographic wrinkle. As Tim Malloy, a polling
analyst at Quinnipiac University in Connecticut, says, younger Americans
are much less inclined to back Israel than are their elders. They also think
more favourably of the Palestinian people. According to surveys by Pew,
this gap in sympathy between American generations is widening (see chart).

Many young voters do not have direct memories of the attacks of September
11th 2001, a calamity which shaped older Americans’ views of Islamist
terrorists such as Hamas. Their diverging outlook also reflects the third force
swaying Western attitudes: a binary ideology that emerged from American
universities to win converts far and wide.

Beyond good and evil

Seeing the world in Manichean terms can be comforting. It turns
confounding issues into simple clashes of good and evil, conferring a halo of
virtue on those who pick the right side. As Yascha Mounk, author of “The
Identity Trap”, argues, the emerging ideology offers just this form of
comfort, sorting the world into opposing categories—coloniser and
colonised, oppressors and oppressed—often along racial lines. In essence it
transposes the terms of American debates over race onto other places and
problems. “The American brand of anti-colonialism”, quips Mr Mounk, “is
astonishingly colonialist.”

In a polarised age, lots of people infer their opinions from their political
allegiance rather than the other way round. This, thinks Mr Mounk, is part of
the new ideology’s appeal: it furnishes an all-purpose vocabulary to apply to
any conflict. In this schema, the powerless can do no wrong, least of all to
the powerful—and nobody can be both. Liberation movements of all kinds
are linked, as communist insurgencies purported to be during the cold war.
As flares in the colours of the Palestinian flag were set off at Piccadilly
Circus, a protester in London holding a “Queers for Palestine” sign
explained that “All the struggles are connected.”

This philosophy is tailor-made for the posturing and character-limits of

social-media posts, perhaps one reason it is gaining adherents. But it
prohibits the balance and nuanced judgments that intractable real-world
hostilities demand. In particular, because the Palestinians are cast as
powerless, and Israel is classed as powerful, it follows that Israelis cannot
qualify as victims. Never mind the exile of Mizrahi Jews from Arab
countries to Israel. The Holocaust is ancient history.

The schema shows up glaringly in references to Hamas’s crimes as a form of

“resistance” or “decolonisation”, and in the statement by some Harvard
students that held Israel “entirely responsible” for the slaughter of its own
citizens. Many Jews, in Israel and the diaspora, perceive a wider disregard
for Israel’s suffering—not just less sympathy than it received during, say, the
Entebbe hostage crisis of 1976, but a void. If the issue is morally simple,
meanwhile, for many Western activists the remedy is blunt and drastic: not
the two-state solution of yore, but a Palestine that stretches “from the river to
the sea”.

In the left-leaning political elite, the picture is starkly different. Both Mr

Biden and Sir Keir Starmer, leader of Britain’s opposition Labour Party,
have offered Israel staunch support. All the same, the escalation in some
rank-and-file attitudes to the war may have a lasting fallout—both in the
Middle East and in the West. Mr Biden, Sir Keir and other leaders have been
lambasted by some in their parties for declining to call for a ceasefire. This
disapproval—often motivated by natural compassion for Palestinian
civilians rather than ideology—may cost them votes, Muslim and otherwise,
in what may be tight elections next year. (Mr Biden may have weighed that
risk against the potentially higher cost of supporting a ceasefire.)

That may not be the only form of political blowback. Plenty of liberal voters
are dismayed by the responses of people with whom, in the past, they felt
broadly aligned. Their coalition with more radical voters was already under
pressure; for some liberals, the bedrock of common values that they thought
underpinned it seems to have crumbled. If the debate over Gaza has been a
symptom of polarisation in the West, it may yet prove to be a cause of
realignment, too.

The consequences for Israel and the Middle East are unpredictable. At least
in the short term, revulsion for Hamas seems to outweigh any qualms
Americans might have had before the war over Israel’s rightward lurch
under Binyamin Netanyahu. Most Americans, including most Democrats,
tell pollsters that supporting Israel is in American interests. How far and how
long that remains the case depends on a series of unknowns—starting with
the conduct and outcome of the ground invasion of Gaza, and the new
dispensation that may follow. Developments in domestic politics will matter,
including the fervour of the Republican embrace of isolationism.

From an Israeli point of view, though, the long-term trajectory of opinion in

America is worrying. And in Europe, as the second world war recedes from
living memory and the clout of Muslim voters grows, support for Israel may
continue to soften, especially on the left.

Even as the disaster in Israel and Gaza unfolds, one of its morals is already
clear. Amid the unchecked flow of images and ideas, Western public opinion
and geopolitical conflicts are entangled in new and explosive ways. Culture
wars and real wars are no longer separate struggles. ■
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Social media are not real life

Views of Israel are misleadingly negative online

Support for the Palestinians is far greater on social media than in
properly weighted polls
Nov 2nd 2023
IF YOU SCROLL through a typical x (formerly Twitter) feed, it looks like
sympathy for Israel following last month’s attacks has dried up. Supporters
of the Palestinians have taken not just to the streets but also to their
keyboards. “At first I was angry at Hamas and Palestine for the attacks”
wrote one user, “but now after seeing more of what’s going on I cannot
support such a regime in Israel. #FreePalestine”.

Do such views reflect overall opinion? At our request DMR, an AI-

technology firm, collected 1m posts from Instagram, Twitter and YouTube
from October 7th to 23rd. All contained hashtags from a list with similar
numbers of pro-Israeli and pro-Palestinian terms in English, or replied to
such posts. DMR then built a machine-learning model to classify posts as
backing one side, the other or neither. It was trained on content in English,
but also processed posts in any language that included English hashtags.
DMR found a sharp shift against Israel over time. On October 7th the two
sides had roughly equal shares of support. By October 19th pro-Palestinian
posts were 3.9 times more common than pro-Israeli ones.

Israel has fared far worse online than in surveys of overall public opinion.
A poll of Americans by YouGov found three backers of Israel for every
Palestinian supporter on October 20th—a day with twice as many pro-
Palestinian posts on American social media as pro-Israeli ones. In Britain,
another YouGov survey found equal support for each side that day, when
the Palestinians won the British social-media battle by a six-to-one margin.
One cause of this gap is age. Social-media users skew young, and such
people are unusually pro-Palestinian in their views. Moreover, DMR’s
sample did not include Facebook, which may be the most pro-Israel
platform owing to its older users. In polls of people in Denmark, France,
Spain and Sweden, Israel drew more total sympathy, but young
participants’ opinions matched social-media ratios. Yet in America and
Britain, social-media views are even more pro-Palestinian than those of
young poll respondents. Israel’s backers show rather less zeal for online
combat. ■

Chart sources: DMR; YouGov; The Economist

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negative-online
Business
America’s economy is booming. Why aren’t its bosses happier?
OMV, Austria’s energy major, reimagines its future
How to get the lying out of hiring
Can America’s weapons-makers adapt to 21st-century warfare?
Can Israeli-Emirati business ties survive the Gaza war?
Chinese apps are a mixed blessing for American big tech
Heady, with headaches

America’s economy is booming. Why aren’t its

bosses happier?
Companies’ earnings calls have hardly been celebratory
Oct 29th 2023

GOOD NEWS about America’s economy seems to keep rolling in. In the
third quarter GDP expanded by a barnstorming 4.9% in annualised terms.
Heading into earnings season, the month or so each quarter when most firms
report their latest results, a stream of upbeat economic figures led
stockmarket analysts to hold their profit expectations for the quarter steady,
rather than trim them as they normally do. Many called the end of America’s
corporate-earnings recession.
Such optimism now looks justified. Following a hat-trick of consecutive
year-on-year quarterly profit declines, America Inc’s bottom line is growing
again. According to FactSet, a data provider, of the roughly half of big
companies in the S&P 500 index that have reported their latest results, 78%
have beaten profit expectations (see chart 1).

Yet the mood during the quarterly carnival of conference calls has hardly
been celebratory. Plenty of bosses failed to excite investors despite bringing
them sound results. The reaction to the performance of big tech was
particularly discordant. Alphabet, Google’s parent company, heartily beat
profit forecasts but saw its share price sink by 10% after investors were
underwhelmed by how its cloud-computing division was doing. Meta’s
warning on macroeconomic uncertainty meant that the social-media empire’s
biggest-ever quarterly revenue figure went unrewarded by markets. The
lingering possibility of a recession and anaemic levels of corporate
dealmaking overshadowed banks’ profits from lending at higher rates of
interest.

Why the gloom? A boom in the third quarter notwithstanding, the future
health of America’s consumers remains bosses’ principal worry. Small
wonder. American businesses draw more than a third of their revenues
directly from domestic consumers’ pockets, according to Morgan Stanley, a
bank. Shoppers have seemed indefatigable lately; retail sales grew by 0.7%
in September, compared with August. Coca-Cola and PepsiCo both raised
their profit guidance for the rest of the year. But recently their growth has
been the consequence of price rises rather than selling more fizzy drinks and
snacks.
Other cracks are beginning to appear. According to Bank of America, credit-
and debit-card data show a downturn in spending in October, compared with
a year ago. Last month Americans with student loans had to resume debt
payments after a three-year reprieve. In aggregate, spending is now growing
faster than real disposable income, eating into savings. At the same time,
credit-card and car-loan delinquencies have been ticking up (see chart 3).
Consumers tell surveys that they are gloomier about their financial situation
—and who can blame them?
That is worrying chief executives. UPS, a delivery firm, said Americans
were spending less on goods and more on services, dampening its outlook
for profits. Mattel, a toymaker which owns the Barbie brand, among other
things, delivered a blockbuster quarter but its outlook for Christmas was a
flop with investors. Bosses at Alphabet say that the technology titan’s data
showed customers hunting harder for deals and offers of free shipping for
goods. On Tesla’s investor call Elon Musk bemoaned the effect of rising
interest rates on consumers’ ability to afford the company’s electric cars.
(Though, as Mr Musk also admitted, some of the carmaker’s problems were
home-made: “We dug our own grave with the Cybertruck.”) Since the call,
Tesla’s share price has fallen by 15%, wiping more than $100bn off its
market value.

Companies are also closely watching their costs, especially for labour.
Margins were boosted by cooling wage inflation across the economy and the
summer of strikes is at last winding down. In September Hollywood writers
agreed to up pens. In the past week the United Auto Workers (UAW) union
struck deals with Ford, General Motors (GM) and Stellantis (whose biggest
shareholder also part-owns The Economist’s parent company); its members
are returning to the factory floor.

But workers, especially in Detroit, have extracted higher wages and other
concessions. And the weeks-long stoppages have already cost the carmakers
dearly. Stellantis, whose marques include Chrysler and Jeep, said that they
shaved $3bn from its sales. GM, which held out the longest of Detroit’s “big
three”, withdrew its profit guidance for the year. So did Illinois Tool Works,
which makes car parts. Even Bosses at Delta Air Lines complained that
fewer passengers were landing in Motor City, possibly as a result of the
labour unrest.

Happenings farther afield were also weighing on bosses’ minds. A refrain in

many earnings calls was sadness at the loss of life in Israel and Gaza. Yet for
now at least, conflict in the Middle East is not having large financial effects
on American companies. A few firms signalled caution—Snap, a social-
media firm, said some advertisers in the region paused spending as a result
of the hostilities. But corporate America as a whole earns a vanishingly
small part of its profits in the volatile region. American bosses who examine
the direct risks posed to their business by the war in Gaza are likely to
conclude that they are much smaller than the costs of, say, unwinding
operations in Russia, let alone the existential worries about America’s
relationship with China.

Bosses were silent on a bigger long-term threat to earnings: higher interest

rates. During the past year the fortunes of big business have diverged from
those of smaller firms, especially ones owned by private-equity funds, as
they have been largely immune to the soaring cost of capital. Bank of
America reckons that more than three-quarters of debt borrowed by S&P
500 firms is both long-term and fixed-rate, compared with less than half in
2007, when ten-year Treasury bond yields last exceeded 5%. Eventually,
however, big businesses’ debt piles will need to be refinanced at a higher
rate of interest, which will squeeze profits. The earnings recession might
have ended in the third quarter. But plenty of threats still lie ahead. ■

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its-bosses-happier
Plastic surgery

OMV, Austria’s energy major, reimagines its

future
Less carbon, more plastic
Nov 2nd 2023 | VIENNA

WHEN HE became chief executive of OMV in September 2021, Alfred

Stern had one word for Austria’s oil-and-gas major: plastic. Having
previously run the concern’s chemicals division, Borealis, he saw that
business, not fossil fuels, as OMV’s future. Global demand for carbon-
emitting products will sooner or later peak. That for virgin plastics used in
packaging is forecast to increase on average by 4.7% a year until 2030,
faster than world GDP; for recycled plastics it will expand by as much as
12% annually.

Mr Stern must have seemed prescient to his underlings in February 2022,

when Russia, from which OMV was buying most of its natural gas, invaded
Ukraine. A month later he publicly unveiled his new strategy. From now on
the company would focus on producing and selling sustainable fuels,
chemicals and materials—with an emphasis on “sustainable”. It would
gradually wind down its production of oil and gas. OMV’s boss wants the
oil-and-gas division to account for 30% of the group’ operating profit by the
end of the decade, compared with an average of 44% between 2019 and
2021. Chemicals would make up half, up from 29%.

Such a transformation would be ambitious at the best of times. With global

markets for energy, chemicals and materials all being buffeted by
geopolitical and economic forces, it seems almost brazen—especially when
other oil-and-gas companies are revising their green plans and doubling
down on crude.

On October 31st OMV said that sales slumped by nearly half in the third
quarter, compared with a year earlier, to €9.5bn ($10bn). Net profit
plummeted by almost two-thirds, to €431m. Both the energy business (the
exploration and production of oil and gas) and the fuel and feedstock unit
(which supplies the chemicals industry) did worse than forecast. Borealis
beat expectations, but still reported a loss of €11m.

Investors nevertheless seem happy with the thrust of Mr Stern’s plan. Some
of the earnings slide was merely a return to earth from a period of sky-high
prices for oil and gas that had boosted profits a year ago. Many applauded
his announcement in the earnings call of a joint venture with Interzero, a
German firm, to build Europe’s largest sorting plant for chemical recycling
in southern Germany. Oleg Galbur of Raiffeisen International, an Austrian
bank, thinks that the chemicals unit in particular has plenty of room for
improvement once the cyclical industry recovers from the current economic
slowdown in large markets such as China and parts of Europe.

The division’s prospects could brighten further if talks between OMV and
Abu Dhabi National Oil Company (ADNOC) aimed at uniting Borealis and
Borouge, the Emirati giant’s chemicals unit, succeed. That would create one
of the world’s biggest makers of polyolefin plastics, which would be listed
and owned in equal parts by OMV and ADNOC. (Borealis already owns
36% of Borouge and ADNOC 25% of Borealis.)

Mr Stern’s biggest challenge will continue to be dealing with the fallout of

his company’s close business ties with Russia. In 2018 his predecessor,
Rainer Seele, signed a deal with Gazprom for gas deliveries until 2040. Mr
Stern has made clear he is not planning to renege on that contract. But he
had to write off €2.5bn in Russian assets, including a €1bn investment in
Nord Stream 2, the defunct gas pipeline from Russia to Germany.

During the latest earnings call Mr Stern was at pains to reassure investors
that OMV could honour its gas-delivery contracts even if Ukraine’s
government lived up to its intention of stopping the transit of Russian gas
through pipelines on its territory by the end of 2024. He has made a big
effort to find alternative gas suppliers, such as Norway. OMV has also
signed a deal with BP, a British energy giant, to get liquefied natural gas via
a terminal in Rotterdam. In July Mr Stern signed off on Neptun Deep, a joint
project with Romgaz, a Romanian gas firm, to explore for gas in the Black
Sea. Plastic may be the future. But OMV’s present will involve energy for a
while yet. ■

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its-future
Bartleby

How to get the lying out of hiring

A process that rewards exaggeration would benefit from greater realism
Oct 30th 2023

HIRING PROCESSES can be thought of as a battle between candour and

dishonesty. You might imagine this is a simple fight between truth-seeking
firms and self-promoting candidates, and to a certain extent it is. But
companies themselves are prone to bend reality out of shape in ways that are
self-defeating.

Start with the obvious culprits: job applicants. The point of a CV or a

LinkedIn profile is to massage reality into the most appealing shape possible.
Everyone beyond a certain level of experience is a transformational leader
personally responsible for generating millions in revenue; the world
economy would be about 15 times bigger than it actually is if all such claims
were true. The average Briton spends four and a half hours a day watching
TV and online videos. But the average job candidate uses their spare time
only for worthy purposes, like volunteering in soup kitchens or teaching
orphans to code.
The cover letter is so open in its insincerity (“When I saw the advertisement
for this job, I almost fainted with excitement”) that people are starting not to
bother with it. At the interview stage one task facing the firm’s recruiters is
to winkle out the truth of what a person actually contributed to a project.
Those hoary questions about a candidate’s weaknesses and failures are there
for a reason; no one will bring them up unprompted. Cognitive and
behavioural tests are useful in part because they are harder for applicants to
game.

But a tendency to stretch the truth infects companies as well as applicants.

The typical firm will write a job description that invariably describes the
work environment as fast-paced and innovative, and then lays out a set of
improbable requirements for the “ideal candidate”, someone who almost by
definition does not exist. Sometimes—as when ads demand more years of
experience in a programming language than that language has existed for—
these requirements include an ability to go back and alter the course of
history.

Industrialised hiring processes can often reward mindless exaggeration.

Services that scan your résumé when you are making an application mark
you down if your CV does not match the keywords that appear in the
original job advertisement. The message is clear: to get through to the next
stage, you have to contort yourself to meet corporate expectations.

Substance can matter less to recruiters than form. One software engineer
says she got a 90%-plus response rate with a spoof CV showing apparent
spells at Microsoft and Instagram but also boasting, among other things, that
she had increased team-bonding by organising the company potato-sack race
and “spread Herpes STD to 60% of intern team”. References are so prone to
inaccuracy that many firms have a policy of not giving them, fearing legal
action from defamed candidates or deceived employers.

Too few firms offer an accurate account of what a position actually involves.
Tracey Franklin, the chief HR officer for Moderna, a fast-growing
drugmaker—and an interviewee in this week’s episode of Boss Class, our
new podcast—is a fan of “realistic job previews” (RJPs). These are meant to
give prospective recruits a genuine sense of the negatives and positives of
the job, as well as a clear idea of the company’s corporate culture. One
effective tactic is to lay out, in text or video, what a typical day in the role
would look like.

Such honesty can be its own reward. Research has long suggested that RJPs
lead to lower turnover and higher employee satisfaction. A paper in 2011 by
David Earnest of Towson University and his co-authors concluded that
favourable perceptions of the organisation’s honesty are the best explanation
for why.

The incentives on both sides of the hiring process lean naturally towards
glossing reality. If candidates were to give genuinely truthful answers (“I
have a habit of making basic but calamitous errors”), many would rule
themselves out of jobs. And if firms were to give a warts-and-all description
of themselves, many would end up deterring good applicants. But a process
designed to uncover the truth about job applicants would run a lot more
smoothly if firms were also honest about themselves. ■

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

Would you rather be a manager or a leader? (Oct 26th)
How big is the role of luck in career success? (Oct 19th)
Trialling the two-day workweek (Oct 12th)

Also: How the Bartleby column got its name

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https://www.economist.com/business/2023/10/30/how-to-get-the-lying-out-of-hiring
Bangs for bucks

Can America’s weapons-makers adapt to 21st-

century warfare?
Arming Uncle Sam isn’t what it used to be
Nov 1st 2023

ARMING UNCLE SAM is a great business. America’s latest defence budget

earmarks $170bn for procurement and $145bn for research and development
(R&D), most of which ends up with the handful of “prime” contractors,
which deal directly with the Department of Defence (DoD). So will some of
the $44bn in American military aid to Ukraine and a chunk of the extra
defence spending by America’s European allies, which account for 5-10% of
the primes’ sales. Although those sums do not increase at the same rate as,
say, corporate IT expenditure, leaving less room for spectacular gains, arms
manufacturers are also shielded from eye-watering losses by huge, decades-
long contracts.
Thanks to a big shake-up at the end of the cold war, the industry is also
highly concentrated. At a meeting in 1993, dubbed the “last supper”,
William Perry, then President Bill Clinton’s deputy defence secretary, told
industry bosses that excess capacity was no longer appropriate and that
consolidation was in order. As a result, the ranks of the primes have thinned
from more than 50 in 1950s America to six. The number of suppliers of
satellites has declined from eight to four, of fixed-wing aircraft from eight to
three and of tactical missiles from 13 to three.

Guaranteed custom and weak competition have helped American

armsmakers’ shares comfortably outperform the broader stockmarket over
the past 50 years. A paper published by the DoD in April found that between
2000 and 2019 defence contractors did better than civilian ones in terms of
shareholder returns, return on assets and return on equity, among other
financial measures. An increasingly unstable world means more money
going to the armed forces—and to their suppliers. Total shareholder returns,
including dividends, at primes such as General Dynamics, Lockheed Martin
and Northrop Grumman rose when Russia invaded Ukraine in February
2022 and when Hamas attacked Israel on October 7th (see chart 1).

This cosy oligopoly is now being challenged on two fronts. One is

technological. As the tank battles on Ukrainian plains and in Gazan streets
show, “metal on the ground” remains important. So do missiles, artillery
shells and fighter jets. But both conflicts also illustrate that modern combat
relies increasingly on smaller and simpler tactical kit, as well as
communications, sensors, software and data. The second challenge is the
Pentagon’s efforts to extract greater value for money from the military-
industrial complex.

Both developments undercut the primes’ big competitive advantages: their

ability to build bulky kit and to navigate the mind-boggling procurement
process. Cost-effective innovations, such as the Pentagon’s recently
announced project “Replicator”, which aims to get swarms of small drones
in the air, ASAP, require agile engineering for which the defence giants “are
not innately organised”, as Kearney, a consultancy, delicately puts it. If they
are to thrive in the new era, they will have to rediscover some of the
innovative ways that helped them shape Silicon Valley in the decades after
the second world war. So far, though, they are finding this difficult.
It is easy to see why the primes (and their investors) like the current setup.
The DoD reimburses the primes’ R&D expenses, and adds 10-15% on top of
that. This “cost plus” approach spares the companies from funnelling lots of
their own capital into risky projects, which offers security but reduces the
incentive to deliver things on time and on budget. The project to build the F-
35 fighter jet, which has accounted for more than a quarter of Lockheed’s
revenues in the past three years, started life in the 1990s. It is running around
a decade late and will cost American taxpayers up to $2trn over the lifetime
of the aircraft.

Once in production, newly developed large kit is sold at a fixed price, often
for decades. The B-21 stealth bomber currently in development by Northrop
Grumman will cost the Pentagon more than $200bn for 100 planes delivered
over 30 years. The Columbia Class nuclear-submarine programme made by
a subsidiary of General Dynamics will sail from the early 2030s until at least
2085.

Past their prime

The Pentagon’s patience with this time-honoured business model is wearing
thin. Last year’s national-defence strategy summed it up succinctly: “too
slow and too focused on acquiring systems not designed to address the most
critical challenges we now face”. Instead, it wants to “reward rapid
experimentation, acquisition and fielding”. This is forcing the primes to
think about how they could build fresh functionality atop their existing
platforms, by adding new software, modules, payloads and the like, and to
create production processes which can be modified to accommodate
innovations.

As Lockheed Martin’s chief executive, Jim Taiclet, recently acknowledged,

soldiers expect seamless integration of sensors, weapons and systems for
battle management such as joint all-domain command and control (JADC2),
a new concept for sharing data between platforms, services and theatres.
Contracting, building and continuously updating such systems will be a
struggle for firms that have hitherto produced huge bits of hardware slowly
and which, in the words of Steve Grundman of the Atlantic Council, a think-
tank, are not “digital natives”.
The primes face another problem. The technology the Pentagon has in mind
is not inherently military, observes Mikhail Grinberg of Renaissance
Strategic Advisors, a consultancy. Most of the defence giants do have
civilian divisions—large ones in the case of Boeing, General Dynamics and
Raytheon. But the Pentagon’s growing appetite for dual-use technologies
means more competition from civilian industry, which is constantly devising
new equipment, materials, manufacturing processes and software that could
be used for military as well as peaceful ends.

In 2020 General Motors won a contract to supply infantry vehicles. The

carmaker has now teamed up with the American arm of Rheinmetall, a
German weapons firm, in a deal to furnish military trucks. Other challengers
are trying to muscle their way into the military-industrial complex, drawn by
the DoD’s appetite for more diverse systems. Palantir, founded in 2003 to
help avert more attacks like that of September 11th 2001, makes civilian and
military software that processes the vast amounts of data that modern life
and warfare throw up. Elon Musk’s SpaceX sends payloads, including
military ones, into orbit and is being paid by the DoD to provide internet
access to Ukrainian forces in their fight against Russian invaders.
Big tech is getting in on the action, too. Amazon, Google and Microsoft have
targeted defence and security as promising markets, says Mr Grundman.
Military procurement is a rare business large enough to make a difference to
the tech titans’ top lines, which are counted in the hundreds of billions of
dollars. The trio, along with Oracle, a smaller maker of business software,
are already sharing a $9bn cloud-computing contract with the Pentagon.
Microsoft also supplies the army with augmented-reality goggles in a deal
that could eventually be worth $22bn.

The Pentagon’s new approach is also attracting upstart rivals. Anduril, a firm
founded in 2017 solely to serve military needs, has developed Lattice, a
general-purpose software platform that can be swiftly updated and adapted
to solve new problems. The company also makes a short-range drone called
the Ghost, which can be operated by a couple of soldiers. Recognising that
to win business quickly it needs to be vertically integrated, it has acquired a
manufacturer of rocket engines and is developing an underwater autonomous
vessel for the Australian navy.

The wannabe primes and their financial backers still bemoan the barriers to
new entrants. Brian Schimpf, Anduril’s boss, says that when working with
the DoD you get “punched in the face every day”. SpaceX and Palantir both
had to fight court battles just to be able to contest military contracts. In June
Palantir signed an open letter with 11 other companies, including Anduril,
and investors, imploring the Pentagon to remove obstacles to smaller
contractors. The letter, which drew on proposals from the Atlantic Council,
condemned “antiquated methods” that “drastically limited” access to
commercial innovation.

As the national-security strategy shows, the DoD seems keen to move away
from procurement antiquity, for example by shifting more risk onto
contractors through fixed-price, rather than cost-plus, development contracts.
Such developments are causing palpitations among the primes. Boeing’s
recent financial travails are partly a result of catastrophically underbidding in
fixed-price contracts for the KC-46 tanker and Air Force One, which ferries
around American presidents.

In contrast, Anduril has dispensed with the crutch of cost-plus of its own
accord, and is investing its own capital to make what it thinks the DoD will
need. By clinging on to the old model, the primes may be depriving America
of the 21st-century defence industry it needs. ■

The Economist‘sA to Z of military terms explains modern warfare in plain

English
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21st-century-warfare
Holding pattern

Can Israeli-Emirati business ties survive the Gaza

war?
The commercial logic of the rapprochement is sound. The politics is
trickier
Nov 2nd 2023 | Dubai

IN 2020 MIDDLE EASTERN commerce was transformed. The United Arab

Emirates (UAE) and a few other countries signed the Abraham Accords with
Israel, normalising relations between the Jewish state and some of its Arab
neighbours. Israeli tourists flooded into Dubai on the first ever direct flights.
In the first eight months of 2023 Dubai welcomed almost 230,000 travellers
from Israel, 73% more than in the same period last year. Nowadays travel
agencies in Tel Aviv even offer bar-mitzvah tours in the emirate, with pit
stops at kosher restaurants.

Business dealings have blossomed, too. The UAE-Israel Comprehensive

Economic Partnership Agreement came into force in April. Official trade
between the two countries is expected to surpass $3bn this year, from
nothing in 2019. Last year Abu Dhabi’s sovereign wealth fund, Mubadala,
reportedly invested $100m in six venture-capital (VC) funds based in Israel
or focused on Israeli startups. It also bought a $1bn stake in an offshore
natural-gas field from NewMed Energy of Israel. Israeli technology
companies such as Liquidity Group, a fintech darling, have opened research-
and-development centres in the UAE. Israeli and Emirati universities have
forged research partnerships on things like artificial intelligence.

All of this progress is now at risk as a result of the war raging between Israel
and Hamas. Since the conflict erupted, reports one Israeli entrepreneur,
many Emirati contacts have gone silent. An Israeli-American investor who
splits his time between Dubai and Tel Aviv worries that even after the
conflict abates, Arab firms will think twice about transacting with Israeli
ones.

That would be unwelcome for Israel and the UAE alike. Israeli business
confidence was slumping even before the hostilities in Gaza. Proposed
reforms to weaken the supreme court worried corporate bosses. Amid a
worldwide VC winter, Israeli startups raised less than $4bn in the first half
of 2023, the lowest since the same period in 2018. More than two-fifths of
Israeli companies surveyed in late October reported that their prospective
backers had cancelled or delayed investment agreements. Israel’s businesses
could therefore use the UAE’s deep pools of capital and access to its
domestic market, especially as their country recovers from hostilities that
are, according to surveys, already affecting four in five of its tech firms.

The UAE, for its part, covets Israeli know-how, which could accelerate the
country’s economic diversification away from oil and help it keep up with
competition from its bigger neighbour, Saudi Arabia, itself in the throes of a
modernisation drive (and, until the Gaza war, on course to forge diplomatic
ties with Israel). In the past decade private investment in the UAE has
declined as a share of GDP. Although the government has put in place
various incentives for entrepreneurs, from accelerator programmes to credit
guarantees, the IMF has recently pointed to the “weak technology content”
of the Emirati economy. Most new tech ventures end up looking like
copycats of stale e-commerce businesses. Israel, with its keen technological
acumen in areas from digital technology to water desalination and a culture
of free enterprise, has a lot to teach the Emiratis.
The commercial logic of continued rapprochement, then, remains sound.
Many businesspeople in Israel and the UAE know it—and are hoping that
the current pause is just that, rather than a collapse. ■

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survive-the-gaza-war
Schumpeter

Chinese apps are a mixed blessing for American

big tech
How long will the advertising blitzes of Shein and Temu last?
Nov 2nd 2023

DURING THE past year Shein and Temu, two ultra-fast-fashion upstarts
famous both for $5 frocks and for playing down their Chinese heritage, have
waged an internecine legal battle in America. Singapore-based Shein, the
better-known of the two, threw down the frilly gauntlet, accusing Temu,
which has invaded its territory in America, of stealing its trademarks and
using social-media influencers to disparage it. Temu, which is based in
Boston but owned by PDD, a Chinese e-commerce giant, struck back. It
accused Shein of monopolistic practices like using its market power to force
a network of 8,000-plus suppliers in China to refuse to do business with
Temu. Then, on October 27th, Reuters reported that the firms had suspended
hostilities.

To observers in the West these goings-on might once have seemed like an
entertaining sideshow. But they illustrate that the cut-throat drama of
Chinese e-commerce has now arrived in America. The fortunes of Shein and
Temu are intricately bound up with those of some of America’s biggest
technology firms, such as Meta, with its social-media empire, Alphabet,
owner of Google, and Amazon, America’s e-commerce behemoth—not to
mention physical retailers like Walmart and the dollar stores ubiquitous
across American strip malls. No one likes to say this out loud, but for all the
talk of Sino-American decoupling, China-linked e-commerce platforms are
muscling into American business with the same shock-and-awe tactics that
TikTok, a video app, used to besiege social media. For digital advertisers it
is a mixed blessing. For discount retailers it is a curse. For everyone it may
change the warp and weft of cross-border commerce.

Take advertising for starters. In its third-quarter results announced in late

October, Meta revealed that advertisers from China, including e-commerce
and gaming firms, had an “outsized” impact on revenue growth. Meta did
not name the firms or quantify their impact, but supersleuths went to work.
One was Brian Wieser, a former adman turned analyst, who five years ago
first drew attention to the importance of Chinese advertisers on Facebook
after spotting differences in company data between the geographic location
of those who sell ads on its platforms and those who see them. Only this year
did Meta start acknowledging China’s importance, vindicating his work.
Using similar location data, MoffettNathanson, a research firm, estimates
that Shein and Temu provided nearly a third of Meta’s revenue growth in the
nine months to September, or almost $3bn (a figure well short of Mr
Wieser’s estimates). Alphabet, too, is reaping the bonanza. Tinuiti, a
marketing firm, says that in the third quarter Temu was as big a competitor
in auctions for ads on Google Shopping as Walmart. A year ago the fledgling
firm was nowhere.

Then there is e-commerce. Amazon’s platform has long hosted sellers of

cheap goods from China. They seldom advertise their provenance.
Nonetheless, Juozas Kaziukenas, founder of Marketplace Pulse, an e-
commerce research firm, has combed through physical addresses to estimate
that many merchants selling on Amazon are based in China. As Shein and
Temu surge in popularity, some of those vendors may switch to their
platforms. For now, Mr Kaziukenas does not expect the cut-price duo to
materially challenge Amazon’s business, which is much bigger, has a
broader range of goods for sale and vastly outpaces them on speed of
delivery. That said, if e-commerce in China is any guide, the upstarts will not
rest until they have taken market share from American competitors,
undaunted by their rivals’ heft. TikTok, too, is becoming a force to be
reckoned with in online shopping, using live jamborees to attract shoppers, a
common practice in China. MoffettNathanson calls the triple-barrelled
onslaught the “biggest disruptive threat” to e-commerce in years.

If the Asian trio loom so large, why are America’s tech giants so hush-hush
about them? For those enjoying the ad windfall, one reason may be
questions about the longevity of Shein’s and Temu’s marketing sprees. In
mass-market retail, with wafer-thin margins, pouring billions of dollars into
digital ads is a road to ruin if it goes on too long. Meta and Alphabet may not
want to draw attention to the potential volatility of the revenue streams.

Political headwinds in America may be mounting, too. Sinosceptics in

Congress, in a similar tizzy about Shein and Temu as they are about TikTok,
accuse the fast-fashion duo of exploiting an exception in American law that
allows packages under $800 in value to enter the country duty-free and with
scant inspection. It reckons the two firms are responsible for 30% of
packages entering America under this rule. Closing the loophole could
significantly cut the discounts the two platforms offer in America. Moreover,
their algorithms draw on oceans of data about shoppers. That opens them up
to the same attacks as TikTok.

One risk that the retail firms are apparently spared is a crackdown in China.
With headquarters outside the country, they are less likely to suffer the fates
of successful Chinese tech firms that have fallen foul of President Xi Jinping
in recent years. Sky Canaves of Insider Intelligence, a data-gatherer, says
their success may in fact be helping their Chinese suppliers offset the
economic slowdown at home. She thinks that will boost their standing with
the government.

The cat is out of the bag

It is not clear why Shein and Temu settled their legal grievances, but it will
surely be a relief to the powers that be in Beijing. After all, a common front
is better for the country’s image abroad than a catfight on the digital catwalk.
Whether the truce means they will spend less to out-market each other
remains to be seen. But American tech giants are in a new world order. They
are still largely shut out of China. China, by proxy, is all over their home
turf. The new competition no doubt frustrates big tech. To its customers, it is
a neatly wrapped gift. ■

Read more from Schumpeter, our columnist on global business:

Lessons from frugal businesses minting money in India (Oct 26th)
Are America’s CEOs overpaid? (Oct 17th)
Weight-loss drugs are no match for the might of big food (Oct 12th)

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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american-big-tech
Finance & economics
Donald Trump’s second term would be a protectionist nightmare
American banks now offer customers a better deal
What a third world war would mean for investors
Investors are paying close attention to the world’s safest assets
China’s economy is a mess. Why aren’t firms going under?
How Japan poses a threat to the global financial system
The Middle East’s economy is caught in the crossfire
Tariff Man Part Two

Donald Trump’s second term would be a

protectionist nightmare
His first term was bad enough
Oct 31st 2023 | Washington, DC

SEQUELS ARE never as good as the original. And when the original was
terrible, there is even more reason to dread the next episode. So it is with
“Tariff Man Part Two”. In the White House, Donald Trump put more new
tariffs on American imports than any president in nearly a century. His
philosophy was simple: “I am a Tariff Man. When people or countries come
in to raid the great wealth of our Nation, I want them to pay for the privilege
of doing so.”

Mr Trump’s protectionism made America poorer, did little to help exporters

and annoyed its friends. If he wins the Republican presidential nomination (a
likely outcome) and goes on to win the election (too close to call), he has
vowed to ramp up things. He is mulling an across-the-board levy of perhaps
10% on all products entering America. In one fell swoop, his plans would
more than triple the average American tariff. The direct costs would be bad
enough, with the tariffs functioning as a tax on consumers and hurting most
producers. Yet they would also tear at America’s ties with its allies and
threaten to wreck the global trade system.

To get a sense of the impact, look back. On January 23rd 2018, a year after
Mr Trump was sworn in, he got started with tariffs, hitting washing
machines and solar panels. A couple of months later he went after
aluminium and steel. A few months after that, it was Chinese goods. By
2021 American duties were worth 3% of the country’s total import value,
double the level when Mr Trump took office. Tariffs on Chinese imports rose
from 3% to 19%, calculates Chad Bown of the Peterson Institute for
International Economics, a think-tank.
Mr Trump’s first aim was to slim the trade deficit. He thought tariffs would
bludgeon other countries into submission, leading them to rejig policies to
America’s advantage. Memorably, he declared that “trade wars are good, and
easy to win.” But instead of shrinking, the deficit widened. Instead of
buckling, China tripled its tariffs on America. Many allies retaliated, too.

The consequences were dismal. Industries that were protected by tariffs

reaped benefits, enjoying greater market share and fatter profits. Most others
suffered. America’s International Trade Commission (USITC), a bipartisan
agency, found that industries downstream from tariff-coddled producers
faced higher input prices and lower profitability. The Peterson Institute
estimated that steel users in effect paid an extra $650,000 per job created in
the steel industry. Studies have calculated that almost all the costs have been
borne by Americans, rather than foreign producers. The USITC found a near
one-to-one increase in the price of American imports in the wake of tariffs
on China.
Mr Trump did unquestionably succeed in one respect. He helped remake
politics. According to a recent survey from the Chicago Council on Global
Affairs, a think-tank, 66% of Americans think the government should place
restrictions on imported foreign goods to protect jobs at home, up from 60%
in 2018. On the campaign trail in 2019 Joe Biden criticised tariffs as a costly
policy. In power he has rolled them back only a little. The array of levies on
China remains intact. Whatever the merits of lifting tariffs, the White House
appears fearful of blowback from looking soft on China.

At the same time, Mr Biden has concocted an enormous industrial policy,

fuelled by more than $1trn in subsidies for electric vehicles, offshore wind,
semiconductors and the like. It is a more thoughtful and deliberate approach
than Mr Trump’s, but it still looks likely to fail to bring about a
manufacturing renaissance, is very expensive and, in lavishing subsidies on
American factories, discriminates against other countries. It is, in short,
rather Trumpist.
How much worse could things get? If Mr Trump wins the presidential
election in 2024, the world may discover that the answer is: “Rather a lot.”
In August Mr Trump was interviewed on Fox Business, a television channel,
by Larry Kudlow, his former economic adviser and a long-time media
personality. Mr Trump put forward two ideas. First, all foreign firms selling
to America would face a 10% levy. Second, if any country placed a high
tariff on anything American, he would hit back with exactly the same tariff.
“Call it retribution,” said Mr Trump. “Reciprocity,” interjected Mr Kudlow,
using the politer label.

The lineage of these ideas can be traced back to thinkers who crafted policy
during Mr Trump’s presidency, and who are working on new, more detailed
plans. Robert Lighthizer, United States trade representative under Mr Trump,
recently laid out his vision in a book, “No Trade is Free”. One of his ideas is
the universal tariff on all imports, to be used as a lever to bring America’s
trade flows into balance, so that the country no longer runs a big deficit. Mr
Lighthizer would not limit the tariff to 10%. Rather, he writes, America
should impose the levy “at a progressively higher rate year after year until
we achieve balance”.

Project 2025, a coalition of conservative groups, published a book earlier

this year with blueprints for almost every facet of government during a
second Trump administration. In the trade chapter Peter Navarro, another
economic adviser to Mr Trump, bemoaned the fact that countries like China
and India have higher levies on America’s goods than America does on
theirs, arguing that this has led to “systematic exploitation of American
farmers, ranchers, manufacturers, and workers”. In principle, reciprocity
could be achieved in two ways—either by persuading other countries to
lower tariffs or by America raising its own. Mr Navarro leaves no doubt as
to his preference.

Action, reaction
If Mr Trump has his way, other countries will probably respond by slapping
their own tariffs on America. The spread of universal tariffs would be akin to
a giant tax on cross-border transactions, making international commerce less
attractive. Meanwhile, Mr Trump’s hopes of shrinking the trade deficit
would run headlong into the economic forces that actually determine the
balance of exchanges between countries. In America’s case the crucial factor
is the country’s low saving rate, which is almost certain to continue as a
result of persistently high consumer spending and widening government
deficits.

Mr Trump has pointed to one ostensible virtue of his tariffs: they generate
income. The Committee for a Responsible Federal Budget, an advocacy
group, estimates that a 10% tariff may bring in up to $2.5trn in extra revenue
during its first decade of implementation, which could be used to reduce
America’s budget deficit. But this money could also be brought in by other
methods. Raising tariffs simply means picking them as a tax over others
such as, say, a higher income or inheritance tax.

Every tax has pros (eg, generating public revenue or discouraging bad
behaviour) and cons (eg, hurting growth or imposing costs on individuals).
The cons of tariffs are big. Ahmad Lashkaripour of Indiana University
estimates that a global tariff war would shrink American GDP by about 1%.
Most countries would suffer falls closer to 3%. The drag on smaller, trade-
reliant economies would be greater still. Tariffs are also regressive since they
hurt those on lower incomes twice. They tax more of their spending, by
raising the price of consumer goods, and more of their earnings, since many
work in industries, such as construction, that face higher material costs. If
the bulk of the tariff bill is passed on to American consumers, as occurred
with the first round of Mr Trump’s tariffs, a 10% duty would cost each
American household about $2,000 per year.
The toll from universal tariffs would go beyond their economic impact.
International commerce, and the system that enables it, built after the second
world war, allows countries to challenge each other’s policies at the World
Trade Organisation (WTO). But the WTO’s role in dispute settlement has
been disabled since 2019, when the Trump administration blocked
appointments to its appellate body, preventing the institution from making
binding rulings. The result is that countries which object to Mr Trump’s
tariffs would lack a suitable way to confront them. “The system would fall
apart in a much greater way than it did even during his first term,” says
Douglas Irwin of Dartmouth College.

Mr Biden has not been a model free-trader. His industrial policy is built on
lavish subsidies that, by incentivising investment in America, are unfair to
other countries. Yet even if somewhat hamfisted, he has worked to cobble
together supply chains and trade networks that bring America and its allies
closer together. This is part of an attempt, still in its infancy, to lessen
dependence on China. Mr Trump’s tariffs would reverse Mr Biden’s
progress. It would no longer be America and (occasionally reluctant) friends
versus China—it would be America versus the world. “Trump would view it
as a badge of honour if other countries were upset. He’d say, ‘See, I’m
fighting for you and we’re sticking it to them’,” predicts Mr Irwin.

Mr Trump would lack outright authority to implement a universal tariff. The

constitution gives Congress the power to regulate commerce; the president
can intervene only by using special justifications. Mr Trump previously drew
on two statutes: section 232 of trade law allows the president to restrict
imports in order to protect national security (the dubious basis for tariffs on
steel and aluminium); section 301 allows a president to impose tariffs
against a country with discriminatory trade behaviour (the more reasonable
basis for actions against China). But both require time-consuming
investigations, which would cut against the desire of Mr Trump and his
advisers for rapid executive actions.

Another option would be to invoke the International Emergency Economic

Powers Act, which Mr Trump used in 2020 to order the removal of TikTok
and WeChat, Chinese social-media goliaths, from American app stores. In
this scenario Mr Trump would declare a national emergency and then
announce a universal tariff as the response. “It is less clear exactly what
national emergency would be declared,” says Jennifer Hillman, a former
general counsel with the US trade representative. “Perhaps that the trade
deficit is threatening American competitiveness? Or that the size of the trade
deficit is unsustainable?”

Few economists would endorse such thinking. Far from being a weakness,
appetite for imports comes from strength. America has run deficits for the
past half-century, a period of economic dominance. More crucially, legal
experts would also take a dim view. “Trump would be bending the law in a
direction that it was never intended to apply,” says Alan Wolff, a veteran of
trade law. “There would be court challenges, and they might well be
successful.”

Reciprocal tariffs might seem tidier, but any attempt to impose them would
get messy. Mr Navarro loves to point out that American tariffs on cars are
just 2.5%, whereas the European Union charges 10%. What he omits is that
America has long placed a 25% tariff on imports of pick-up trucks, not to
mention hefty duties on some imports of lumber and foods. A line-by-line
look at tariffs would turn up scores of examples where American levies are
higher than those of other countries.

Indeed, a guiding principle of the WTO is that countries can negotiate across
different product categories to set tariffs that protect politically sensitive
sectors, so long as they keep tariffs down overall. Letting countries hammer
out unique tariff regimes is a core part of diplomacy. Pure reciprocity would
descend into absurdity.

Politically, Mr Trump would also face opposition. Despite his embrace of

protectionism, many in the Republican Party are less committed. Consider
Project 2025, the coalition drawing up policy plans for Mr Trump’s second
term. It is quite clear in all of its positions—except for that on trade. Its
chapter on trade is split in two: Mr Navarro’s plea for tariffs is set against a
free-trade argument by Kent Lassman of the Competitive Enterprise
Institute, a think-tank. Mr Lassman lays out what he dubs a “conservative
vision for trade”, calling for tariff cuts to reduce consumer prices, as well as
more ambitious trade deals.

Mr Trump’s domestic opponents would receive support from abroad. A trade

official with an American ally says that his government is braced for tariffs
at the start of a new Trump administration, and that he and his colleagues
have a damage-limitation playbook, honed during Mr Trump’s four years in
office. They would work with firms and politicians in Republican districts
that enjoy the benefits of trade—from Iowa’s corn-growers to Tennessee’s
car industry—and try to persuade Mr Trump to carve out exceptions.

Charging farmers
Yet both legal challenges and lobbying would take months, if not longer, to
play out. In the meantime, the global trade system would be plunged into
uncertainty. Other governments would slap retaliatory tariffs on America. Mr
Biden’s work to repair ties with America’s allies would be torn apart. As
firms try to assess the risks, they could well turn more cautious in their
investment, which would weigh on economic growth. Companies with
border-straddling operations would face pressure to retrench. Smaller
countries that are dependent on trade would be vulnerable.

One of the lessons of Mr Trump’s first stint in the White House is that he can
cause great damage with the stroke of a pen, and that the damage is not
easily reversed. Most of his tariffs are still on the books. The WTO remains
neutered. The America-first ethos that he preached, once a fringe preference,
is now a force in the political mainstream. The consequences of a second
Trump presidency for global trade would be grave and enduring. ■

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The joy of competition

American banks now offer customers a better deal

How much higher will interest payments go?
Nov 2nd 2023

WHEN THE Federal Reserve began to raise interest rates more than a year
ago, American banks enjoyed a nice little boost. They increased the interest
they charged on loans, while keeping the rates they offered on deposits
steady. In other countries this move attracted public opprobrium and
politicians floated measures to ensure that customers were not swindled.
Americans were happy to rely on a more American solution: competition.

It has done its job. Average yields on interest-bearing bank deposits have
soared to more than 2.9%, up from 0.1% when the Fed began to raise
interest rates. The extent to which higher rates have been passed on to
customers—known as the “deposit beta”—has been a popular subject on
recent quarterly earnings calls. Despite assurances by bank bosses that they
have peaked, betas are likely to keep rising in the coming months, pinching
profits.
The process is being driven by customers shifting their money from low-
yielding products to higher-yielding ones. Data from quarterly filings show
that the share of bank deposits held in interest-free accounts has fallen from
29% at the end of 2021 to 20%. Had this figure remained constant, bank
interest costs would be roughly 10% lower than they are now. Quarterly
filings also show that banks which have lost more than 5% of their deposits
since the start of the year have increased the average rate on interest-bearing
deposits by 2.7 percentage points, compared with a more miserly 2.1
percentage points at those institutions with more secure deposits.

This much is familiar from past Fed tightening cycles. Historically, however,
big banks have enjoyed an advantage over smaller peers, owing to their
pricing power—something that now appears to be dwindling. America’s “big
four” banks (JPMorgan Chase, Bank of America, Wells Fargo and Citigroup)
reported average deposit costs of 2.5% in the third quarter of the year,
identical to the median rate across all the country’s banks. And the funding
gap between the biggest and smallest institutions has flipped since the last
tightening cycle. In 2015-19 banks with assets of at least $250bn paid 0.3
percentage points less on their deposits than banks with less than $100m in
assets; today they are paying 0.8 points more.

Brian Foran of Autonomous Research, an advisory firm, suggests that this

may reflect greater competition among big banks for corporate and high-net-
worth clients, who are most likely to be aware of other, higher-yielding
places to stash their cash. When rates were at zero, competition for such
deposits was non-existent, notes Mr Foran. Now, with money-market funds
offering 5%, the competition is much fiercer.

How much longer will the squeeze continue? Chris McGratty of KBW, an
investment bank, says that banks have felt most of the pain, but that costs
have a bit further to rise and are likely to stay elevated, given that the Fed
has signalled it will keep rates higher for longer than previously expected.
Even if the Fed’s policymakers are done raising rates and banks keep yields
steady, customers will continue to shift deposits from lower-earning to high-
earning products, pushing up costs for banks. This will put pressure on
deposits, forcing banks to slow their lending. While savers will benefit from
higher rates of return, borrowers are another story altogether. ■

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Buttonwood

What a third world war would mean for investors

Global conflicts have a habit of sneaking up on money-managers
Oct 30th 2023

EUROPE HAD been moving towards the slaughterhouse for years, and by
1914 a conflict was all but inevitable—that, at least, is the argument often
made in hindsight. Yet at the time, as Niall Ferguson, a historian, noted in a
paper published in 2008, it did not feel that way to investors. For them, the
first world war came as a shock. Until the week before it erupted, prices in
the bond, currency and money markets barely budged. Then all hell broke
loose. “The City has seen in a flash the meaning of war,” wrote this
newspaper on August 1st 1914.

Could financial markets once again be underpricing the risk of a global

conflict? In the nightmare scenario, the descent into a third world war began
two years ago, as Russian troops massed on the Ukrainian border. Today
Israel’s battle against Hamas has the frightening potential to spill across its
borders. American military support is crucial to both Ukraine and Israel, and
in Iraq and Syria the superpower’s bases have come under fire, probably
from proxies of Iran. Should China decide it is time to take advantage of a
distracted superpower and invade Taiwan, America could all too easily end
up being drawn into three wars at once. The rest of the world risks those
wars interlocking and turning into something even more devastating.

This scenario would of course place financial damage a long way down the
list of horrors. Even so, it is part of an investor’s job to consider exactly
what it would mean for their portfolio. So far the possibility of a world war
has barely caused a tremor in the markets. True, they have for some time
now been more seized by fear than greed. Bond prices have been turbulent,
even for supposedly risk-free American Treasuries, and yields have been
climbing for most of this year. Stock indices in America, China and Europe
have fallen for three consecutive months. Yet this choppiness can all be
plausibly explained by peacetime factors, including outsized government
borrowing, interest-rate expectations and shareholders whose previous
optimism had got the better of them.

In short, it does not look anything like the panic you might expect if the odds
of the world entering into war were edging higher. The brightest conclusion
is that such odds really are close to zero. A darker one is that, like the
investors of 1914, today’s may soon be blindsided. History points to a third
possibility: that even if investors expect a major war, there is little they can
do to reliably profit from it.

The easiest way to understand this is to imagine yourself in 1914, knowing

that the first world war was about to arrive. You would need to place your
bets quickly—within weeks, the main exchanges in London, New York and
continental Europe would be closed. They would stay that way for months.
Would you be able to guess how many, and which way the war might have
turned by then? If you wisely judged American stocks to be a good bet,
would you have managed to trade with a broker who avoided bankruptcy
amid a liquidity crisis? You might have decided, again wisely, to trim
positions in soon-to-be war-strained government debt. Would you have
guessed that Russian bonds, which would experience a communist
revolution and Bolshevik-driven default, were the ones to dump completely?

War, in other words, involves a level of radical uncertainty far beyond the
calculable risks to which most investors have become accustomed. This
means that even previous world wars have limited lessons for later ones,
since no two are alike. Mr Ferguson’s paper shows that the optimal playbook
for 1914 (buy commodities and American stocks; sell European bonds,
stocks and currencies) was of little use in the late 1930s. Investors in that
decade did try to learn from history. Anticipating another world war, they
sold continental European stocks and currencies. But this different war had
different winning investments. British stocks beat American ones, and so did
British government bonds.

Today there is a greater and more terrible source of uncertainty, since many
of the potential belligerent powers wield nuclear weapons. Yet in a sense,
this has little financial relevance. After all, in a nuclear conflagration your
portfolio would be unlikely to rank highly among your priorities. The upshot
of it all? That the fog of war is even thicker for investors than it is for
military generals, who at least have sight of the action. If the worst happens,
future historians might wonder about the seeming insouciance of today’s
investors. They will only be able to do so because, for them, the fog will
have cleared.■

Read more from Buttonwood, our columnist on financial markets:

Investors are returning to hedge funds. That may be unwise (Oct 26th)
Why it is time to retire Dr Copper (Oct 19th)
Investors should treat analysis of bond yields with caution (Oct 12th)

Also: How the Buttonwood column got its name

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economics/2023/10/30/what-a-third-world-war-would-mean-for-investors
The tail that wags

Investors are paying close attention to the world’s

safest assets
Forget the Federal Reserve. There is a new show in town
Nov 2nd 2023 | WASHINGTON, DC

REGULAR AND predictable. That has been the golden rule of Treasury
issuance for 40 years. America’s fiscal branch once funded itself with
“tactical” bond sales. Officials would survey market participants and issue
debt in response. But this process proved highly disruptive to financial
activity. So in 1982 they adopted a new approach: a regular schedule of
issuance would be followed, communicated long in advance. Treasury
officials now think that, by reducing overall borrowing costs, this strategy
has saved taxpayers a fortune.

As a part of this regularly scheduled programme the Treasury has, for

decades, released a “quarterly refunding announcement” in which it lays out
its plans for the next three months. This is not generally a hotly anticipated
event, being precisely the kind of wonkish release that seldom attracts wider
interest. But on November 1st the announcement was pretty much all that
Wall Street cared about. Ian Lyngen of BMO Capital Markets, an investment
bank, declared this a “unique moment in market history”, because the
refunding announcement was more important than the meeting of the
Federal Reserve, which took place later the same day. “All that matters at
this moment is supply.”

Investors’ interest has been piqued for several reasons. America’s fiscal
deficit is large. It will clock in at almost 6% of GDP for the fiscal year of
2022-23. It has been pushed upwards by high interest rates, which have
increased the cost of servicing America’s national debt. This has put pressure
on bond markets. In August, at the last refunding announcement, the market
appeared surprised by both the increase in total issuance and just how much
of it was long-dated. In the weeks that followed several auctions “tailed”—
trader-speak for the auction resulting in debt being issued at a higher yield
than expected.
Some traders think this exacerbated the almighty sell-off in long-dated bonds
that has occurred since the summer. Since August 1st the yield on T-bills,
the name given to short-dated Treasuries which mature within a year, has not
budged at all. Yields have spiked, however, for long-dated bonds that mature
in ten or 30 years. The difference between what it costs to borrow in the
short term and the long term is called the “term premium”—and it has
returned with a vengeance (see chart).
In the event, markets were relieved by the Treasury’s announcement.
Planned issuance was increased, but will be concentrated at the short end.
Exactly the same value of 20-year Treasuries will be issued in the three
months from November as in the three that preceded it, but almost 20%
more two-year Treasuries will be sold. Currently, short-dated T-bill issuance
is more than one-fifth of total debt issuance. Although that is slightly above
historical levels, the issuance committee indicated that it might be willing to
go higher still. As noted in the minutes of their meeting, committee members
“supported meaningful deviation” from the range. Markets embraced all of
this news. The yield on the ten-year Treasury fell about ten basis points after
the release.

That the Treasury managed to reassure investors this time round is a pleasing
outcome for all involved. Its officials are sticking to their procedure as far as
regular programming is concerned—they will, in three months’ time, publish
their next set of issuance plans. But with markets so volatile it is becoming
ever harder for the Treasury to remain predictable.■

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Indestructible

China’s economy is a mess. Why aren’t firms going

under?
The government’s desire to avoid bankruptcies is another drag on growth
Nov 2nd 2023

EVERGRANDE IS FIGHTING for its life. On October 30th the property

developer was granted its fifth, and probably final, stay of liquidation by a
court in Hong Kong. Yet the situation on the mainland is a little more
comfortable: the firm’s representatives have not even had to visit a
courtroom. This is not unusual. Despite the many horrors visited upon
China’s property sector, an industry publication reports that just 308 of the
country’s 124,665 developers declared bankruptcy last year.

China’s ultra-low corporate bankruptcy rate—about a fifth of that found in

America—might seem like unalloyed good news for officials in Beijing.
That is until you consider the fact the country is experiencing a wave of
corporate defaults, which includes half of the 50 largest property developers
in 2020. With many unable to shed their bad debts through restructuring,
businesses are struggling to reduce new borrowing and pay back outstanding
loans. Policymakers, banks and firms all want to stave off formal
bankruptcies in order to avoid a “Lehman moment”, or crisis-triggering
event. The result is stifled productivity and deeper economic malaise.

Creative destruction, the process by which market economies replace failing

firms with more efficient ones, has few fans in China. Local officials press
lenders to prolong the lives of even the most unproductive businesses.
Lending rules restrict debt forgiveness, an important tool in restructurings,
because banks are state-owned, ultimately putting the government on the
hook for losses. A corporate bankruptcy requires the consent of courts,
creditors, local government and often a regulator, which all have a strong
interest in keeping firms alive. As a deterrent for other company bosses, the
threat of prison is never far away. In September Hui Ka Yan, Evergrande’s
chairman, was detained. The next month a former chairman of Bank of
China was arrested for a bevy of misdeeds, including the creation of
financial risk.

Barriers to bankruptcy mean that struggling firms have little choice but to
refinance, replacing existing debts with new ones. China’s approach of
keeping bad companies on life-support weighs on its economy, according to
research by Li Bo of Tsinghua University and co-authors. Ms Li has found
that provinces which have introduced special courts to arbitrate bankruptcies
at arm’s length from local authorities have seen more firms created and
improved productivity. Corporate borrowing becomes cheaper, too. In the
rest of the country creditors demand a premium, since recovering debts is so
hard.

Rules that seek to keep sick companies alive also push up the number of
liquidations when cases do reach court, because those that make it so far
tend to be in a terrible way. Indeed, 83% of companies that arrive in court
end up liquidated, compared with a mere 5% in America. Bankruptcy courts
themselves drag out proceedings in attempts to avoid liquidation: cases
average 539 days in court, around 50% longer than American ones. For its
part, Evergrande has been in default for two years, during which it has been
unable to propose a restructuring plan that is acceptable to its offshore
creditors. The value of its assets has been driven lower still by the lengthy
default. Deloitte, a consultancy, reckons that in a worst-case scenario
offshore creditors will recover a miserable $0.02-0.04 per dollar owed.
China’s bankruptcy rules also have international ramifications. The country
has become the world’s largest sovereign creditor, having lent $1.5trn to
governments around the globe. Yet its refusal to accept write-downs has
slowed multilateral debt negotiations—as was evident in October, when an
IMF deal on Sri Lanka’s debt was scuttled. The failure was partly a result of
rules restricting China’s bankers from recognising and forgiving bad debts,
says a mainland lawyer involved in overseas lending. Writing down the debt
would have left Chinese firms that built Sri Lanka’s infrastructure out of
pocket, triggering the same political concerns that exist in cases of domestic
debt distress. A Lehman moment would have ramifications abroad. So, too,
does China’s desire to avoid one. ■

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Frightening

How Japan poses a threat to the global financial

system
Huge, reliable buyers of overseas bonds may be about to close their wallets
Nov 2nd 2023

THE BANK OF JAPAN (BoJ) failed to deliver a Halloween thriller. Even as

central banks elsewhere have raised interest rates in recent years, the BoJ has
stuck with its ultra-loose policy, designed to stimulate growth. Japan’s
benchmark interest rate sits at -0.1%, where it has been for seven years. And
on October 31st, despite building pressure, the bank decided merely to tweak
its cap on ten-year government-bond yields. The 1% ceiling on yields, which
the bank makes enormous bond purchases in order to defend, is now a
reference rather than a rule. Indeed, yields on the benchmark bond are at
0.95%, their highest for over a decade (see chart).
After the BoJ’s announcement, the yen fell to ¥151 to the dollar, its lowest in
decades. Inflation, long quiescent, is no longer so low—the BoJ raised its
forecasts for underlying “core” inflation over the next three years. Many
analysts expect the central bank to end its yield-curve-control policy once
and for all early next year, and to have raised interest rates by April. But
even when the BoJ does finally raise interest rates, it is likely to be by just a
fraction of a percentage point, meaning the gulf between Japanese bond
yields and those in the rest of the world will remain large, with major
consequences for global financial markets. A fright is still in the offing.

To understand why, consider the impact Japan’s rock-bottom interest rates

and continued intervention to suppress bond yields have had. Low rates at
home have generated demand for foreign assets, as investors seek better
returns. Last year the income from Japan’s overseas investments ran to
$269bn more than was made by overseas investors in Japan, the world’s
largest surplus, equivalent to 6% of Japanese GDP. The huge gap between
bond yields in Japan and those in the rest of the world now presents dangers
to both the Japanese investors that have bought foreign bonds and the global
issuers that have benefited from Japanese custom.

Jeopardy is particularly apparent at Japan’s largest financial firms, which

make big investments abroad. The cost of hedging overseas investments
depends on the difference between the short-term interest rates of the two
currencies at play. America’s short-term interest rates are more than five
percentage points above Japan’s equivalent, and the gap exceeds the 4.8%
yield on ten-year American government bonds. This means Japanese buyers
now make a guaranteed loss when buying long-term bonds in dollars and
hedging their exposure. Hence why the country’s life insurers, which are
among the institutions keenest to hedge their currency risk, dumped ¥11.4trn
($87bn) in foreign bonds last year.

The huge gap between short-term interest rates means that Japanese
investors now have more limited options. One is to continue buying
overseas, but at greater risk. Meiji Yasuda Life Insurance and Sumitomo
Life, each of which held more than ¥40trn in assets last year, say they will
increase their overseas bond purchases without hedging against sudden
currency shifts, in effect betting against a sudden rise in the yen. Life-
insurance firms are usually conservative, but the longer the enormous gap in
interest rates persists, the more they will be encouraged to take risks.

Meanwhile, rising yields on long-term Japanese bonds, which will surely

rise further still if the BoJ does abandon yield-curve control, may tempt local
investors to bring home their money. Japan’s 40-year bonds offer yields of
2.1%—enough to preserve the capital of investors even if the BoJ hits its
target of 2% inflation. Martin Whetton of Westpac, a bank, says that this
prospect ought to worry firms and governments in America and Europe used
to a voracious Japanese appetite for their bonds.

In such a scenario, a source of demand would turn into a source of pressure

on the funding of Western firms and governments. The yen might then surge,
as Japanese investors sell foreign-currency debt and make new investments
at home. Bob Michele of JPMorgan Asset Management warns of a decade of
capital repatriation.

The flow of Japanese capital to the rest of the world, which emerged during
a decade of easy monetary policy around the world, looks likely to be
diminished. Whether the resulting pain will be felt by local financial
institutions, or foreign bond issuers, or both, will become clearer over the
months to come. What is already clear is that it will be felt by someone. ■

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Free exchange

The Middle East’s economy is caught in the

crossfire
Before the war in Gaza, it had been poised to boom
Nov 2nd 2023

A MONTH AGO, on the eve of Hamas’s attack on Israel, there were reasons
to be hopeful about the Middle East. Gulf states were ploughing billions of
dollars of oil profits into flashy investments, building everything from sports
teams and desert cities to entire manufacturing sectors. Perhaps, optimists
thought, the wealth would even trickle down to the region’s poorer countries.

What prompted such hope was the longest period of calm since the Arab
spring in 2011. Gnarly conflicts, such as civil wars in Libya and Yemen, as
well as organised Palestinian resistance to Israel, appeared to have frozen.
Violent clashes were rare, which some believed a precursor to them
disappearing altogether. The region’s great rivals were inching towards
warmer relations. International investors flocked to the Gulf to get in on the
action.
Hamas’s attack and Israel’s response suggest that the region will now be
laden with a bloody, destructive conflict for months to come, if not longer.
Under pressure from their populations, Arab leaders have blamed Israel for
the situation, even if they have been careful in their language. Overnight,
their focus has shifted from economic growth to containing and shortening
the war. Countries across the region, including Egypt and Qatar, are pulling
out all the diplomatic stops to stop the spread of fighting.

Even if the conflict remains between just Hamas and Israel, there will be
costs. Analysts had been upbeat about the prospects for economic
integration. In 2020 the United Arab Emirates (UAE) and Bahrain
normalised relations with Israel, opening the door to deeper commercial ties.
Although many other Arab countries refused to recognise Israel, many were
increasingly willing to do business with it on the quiet. Even Saudi Arabian
firms surreptitiously traded with and invested in their Israeli counterparts,
whose workers are among the region’s most productive; the two countries
were working on a deal to formalise relations.

How long the pause in such negotiations lasts remains to be seen, but the
greater the destruction in Gaza, the harder it will be for Arab leaders to cosy
up to Israel in future, given their pro-Palestinian populations and pressure
from neighbours. Although Thani al-Zeyoudi, the UAE’s trade minister, has
promised to keep business and politics separate, others are unsure that will
be possible. A Turkish investment banker, who draws up contracts for firms
in the Gulf, reports that most of his clients considering Israel as an
investment destination are waiting to see what happens next.

For the Middle East’s poorer countries, the consequences will be worse—
and nowhere more so than in Egypt. The country was already struggling,
with annual inflation at 38% and the government living between payments
on its mountain of dollar debts by borrowing deposits from Gulf central
banks. Now it has lost out on the gas that flowed from Israel. On November
1st officials in Cairo allowed across the border a handful of injured Gazans,
as well as those with dual nationalities. Some diplomats hope that a larger
influx might follow, perhaps even on the scale seen by Jordan when it
welcomed Palestinians in the 1940s and Syrians in the 2010s, if Egypt were
given the right financial incentives. In 2016 looking after 650,000 Syrian
refugees cost Jordan’s state $2.6bn, much more than the $1.3bn it received in
foreign aid. There are twice as many internally displaced people in Gaza.

What if the conflict escalates? In the worst case, the region descends into
war—perhaps including direct confrontation between Iran and Israel—and
economies are turned upside down. Any such war is likely to see a sharp rise
in oil prices. Arab oil producers might even restrict supplies to the West, as
they did during the Yom Kippur war in 1973, which the World Bank reckons
could push up prices by 70%, to $157 per barrel. Even though the world
economy is less energy-intensive today, the Gulf’s oil producers would
benefit. All-out war, however, would hinder efforts to diversify their
economies. Migrant workers would leave. Manufacturing industries would
be hard to get off the ground without secure transport. Futuristic malls and
hotels would lack the tourists to fill them. And for the region’s energy
importers, which include Egypt and Jordan, a spike in oil prices would be a
disaster.

There is another, more plausible escalation scenario. So far Iran has declined
to turn threats and errant missiles into a direct attack. Israel’s ground
invasion—smaller and slower than expected—is helping keep a lid on
things. Nevertheless, conflict could still spill across Gaza’s borders. Imagine,
say, fighting in the West Bank or greater involvement from Hizbullah. In this
scenario, investing in the Middle East would look much riskier. If fighting
flashed in neighbouring countries, leaders in the Gulf would find themselves
working harder to convince investors that a return to calm and closer ties
with Israel might happen soon.

In need of a parachute
In such a world, Egypt would not be the only country exposed. Lebanon’s
economic free fall—now in its third year, as inflation rages above 100%—
would accelerate with clashes between Israel and Hizbullah, which is based
in the country. Fighting in the West Bank, where tensions are high, would
spell trouble for Jordan, which sits next door. Like Egypt, the country is
almost broke. It took out a $1.2bn loan from the IMF last year, and was
recently told by the fund that its annual growth of 2.6% was insufficient to
fix its problems. Refugees could leave the state unable to repay debts. Unrest
along its borders could deter creditors.
If either Egypt or Jordan were to run out of cash the results would be
destabilising for the region. Both countries border a Palestinian territory,
feeding it with supplies and providing allies with information. Both have the
ear of the Palestinian Authority. And both have a young, unhappy
population. The Arab spring showed how easily unrest in one Arab country
can spread to another. Even Gulf officials, relatively insulated though they
may be, would rather avoid such instability. ■

Read more from Free exchange, our column on economics:

Israel’s war economy is working—for the time being (Oct 26th)
Do Amazon and Google lock out competition? (Oct 19th)
To beat populists, sensible policymakers must up their game (Oct 12th)

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economics/2023/11/02/the-middle-easts-economy-is-caught-in-the-crossfire
Science & technology
Lab-grown models of embryos increasingly resemble the real thing
Could AI help find valuable mineral deposits?
A new gonorrhoea drug was developed by a non-profit foundation
When the map becomes the territory

Lab-grown models of embryos increasingly

resemble the real thing
Embryoids promise many benefits, but pose tricky ethical questions
Nov 1st 2023

THE TRADITIONAL way to make an embryo is to combine a sperm cell

with an egg, often after dinner and a bottle of wine. But a new way may be
around the corner. In recent years scientists have discovered that they can
persuade stem cells—those with the ability to transform into many other
sorts of cells—to form structures that look and behave very much like
embryos.

“Embryoids”, as such creations are called, can help with the study of
embryology and pregnancy, and how they can go wrong. Some of the
facsimiles look strikingly real. In 2022 two teams, one led by Magdalena
Zernicka-Goetz, who works at the California Institute of Technology and the
University of Cambridge, and another by Jacob Hanna at the Weizmann
Institute of Science, in Israel, published papers describing mouse embryoids
with rudimentary guts, brains and beating hearts. In June Dr Zernicka-Goetz
published a paper describing a human embryoid designed to mimic the
earliest stages of development, shortly after a real embryo would have
implanted into its mother’s womb.

That second study was controversial, with some other scientists dubious that
it represented as much of an advance as its authors claimed. But the state of
the art is moving fast enough that some think embryoids may soon become
hard to distinguish from the embryos they are meant to model. In many
ways, that would be a good thing: the more accurate a model, the more
useful it is. Human embryoids could shed light on developmental heart
defects or diseases like spina bifida, and boost the success rates of in-vitro
fertilisation (IVF).

But research on embryos—which, after all, have the potential to develop into
human beings—is strictly regulated. Many countries ban the use in research
of human embryos that are more than 14 days old, and researchers in
countries without such laws usually adhere to the same standard voluntarily.
The more similar embryoids become to the real thing, the harder it becomes
to avoid the question of whether they should be subject to similar rules.

A natural embryo begins with a single fertilised egg. To make an embryoid

scientists grow a mix of different stem cells derived from embryos or,
sometimes, from adult organisms. They may tweak the molecular signals
between the cells and which of their genes are active. Within days, embryo-
like structures appear.

Embryoids are desirable partly because real embryos are scarce: the main
source is leftovers from IVF treatment. They are also hard to grow. That
makes it tricky to run large-scale experiments. Embryoids offer a less
ethically fraught alternative.

A rose by any other name

One example of their benefits is the study of implantation, the process by
which an embryo implants into the womb. It is here that most pregnancy
losses happen. But the reasons were almost impossible to study in detail
before the advent of embryoids. “You cannot go through the body of the
mother to see the development of this embryo,” says Dr Zernicka-Goetz.
Embryoids—specifically, a type called a blastoid—offer the next-best thing.
First created by Nicolas Rivron at the Austrian Academy of Sciences, they
resemble an embryo at the blastocyst stage, just before implantation. In
humans implantation happens around day seven and in mice, around day
four. Each blastoid consists of a hollow ball of cells that would, in a real
embryo, go on to become part of the placenta. Attached to the inner wall is a
smaller ball that would, in other circumstances, develop into the fetus. By
rolling blastoids across uterine tissue in a dish, Dr Rivron’s team found that
they only stick when they are oriented so that this inner mass is closest to the
womb tissue.

That implies the inner mass sends signals to the outer cells, instructing them
to stick to the womb. Dr Rivron thinks he has identified those signals, and
plans to publish his results soon. He hopes to help explain why so many
embryos fail to attach. That might, in turn, improve the success rates of IVF,
which in America is only about 35%. Blastoids have made such discoveries
much easier, says Dr Rivron. He has started a company, Dawn Bio, which
uses blastoids to screen drug candidates that might be useful in fertility
treatment.

Other embryoids try to capture what embryos look like after implantation.
The most advanced are made with mouse stem cells, such as the brain-and-
heart models described above, which represent day eight in mouse
development. Dr Hanna holds the record for human embryoids. In a paper
published in September he and his colleagues described embryoids that
mimic the development of human embryos between days eight and 14. He is
keen to try to push things further, perhaps to day 35. At that point, his
embryoids, like the mouse ones, would be starting to develop organs.

Dr Hanna believes that could make them a source of medically useful cells.
They might, for instance, provide stem cells that could in turn be turned into
bone marrow for transplant in leukaemia patients. If the stem cells used to
create the embryoid were taken from the patient, then the marrow would be
genetically identical to the patient’s own. That would remove the risk of
immune rejection, and the need for immune-suppressing drugs.

Convincing the embryoids to develop still further might open up truly mind-
bending possibilities. From day 50 or so, the embryoids would have gonads.
That might mean, one day, that women struggling to get pregnant could be
given a brand new, freshly baked set of their own eggs. (Dr Hanna’s
company, Renewal Bio, is pursuing such goals.)

No one knows when—or even if—these goals might be achieved. Naomi

Moris, a developmental biologist at the Francis Crick Institute in London,
agrees that Dr Hanna’s 14-day-old embryoids look the part. But she does not
think they yet qualify as full replacements. For one thing, Dr Hanna’s
embryoids never go through a blastocyst-like stage. That missing link
prevents them from attaching to a natural womb, and might impose limits on
how long they can carry on developing in a dish.

Still, the fact that such goals are being pursued at all has convinced some
scientists that the time to think about regulation is now. Dr Moris has
proposed a new legal definition for embryos that would be based on their
potential to develop into a fetus, a developmental stage that begins eight
weeks after fertilisation and lasts until birth. In many countries human
embryos are legally ill-defined. Dr Moris hopes her proposal would make
clear that an embryoid could qualify as an embryo—if it had the same
developmental potential.

Working out if they do, though, might be tricky. The only way to know for
certain whether an embryoid could develop into a fetus would be to try it and
see—though such an experiment might risk violating the law if it were
successful. Instead Dr Moris and her colleagues, including Dr Rivron, have
suggested a two-part test that would make at least a compelling argument
that embryoids had closed the gap.

The first step would be to check just how closely human embryoids track the
developmental trajectory of real embryos. The second would be to push
animal embryoids as far as possible, ideally to the point of producing live,
fertile offspring. Such a process might start with mice before moving on to
pigs or monkeys. If such long-developing embryoids look biochemically
similar to the human state-of-the-art, caution would be warranted.

Dr Moris reckons that, within two to five years, someone will have produced
animal embryoids that can reach the fetal stage. In April, Chinese
researchers transplanted monkey blastoids into surrogate animals, producing
pregnancies that lasted for up to 20 days. And there is always the chance that
someone goes rogue. In 2018 He Jiankui, a Chinese researcher, announced
that he had created gene-edited human babies. He was jailed, and widely
condemned. But it is not inconceivable that someone might try to push the
boundaries in a similar way with embryoids.

Pushing the limits

Amander Clark, the president of the International Society for Stem Cell
Research, highlights another irony that could make regulation difficult.
Since human embryos cannot be cultured for longer than 14 days, scientists
do not have a detailed picture of how they develop afterwards. That would
make it very difficult to tell if embryoids older than 14 days were behaving
as they are supposed to. The only comparators are animal embryos and
dissections of wombs surgically removed from pregnant women. In other
words, the very rule meant to protect embryos means researchers could
struggle to tell whether their alternatives were good enough—or so good
they should be given legal protection in turn. ■

Clarification (November 1st 2023): An earlier version of this piece gave the
impression that Dr Zernicka-Goetz was the first to publish work on
advanced mouse embryoids. In fact Dr Hanna’s team got there first. We
regret the error.

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thing
Ground truths

Could AI help find valuable mineral deposits?

Computers have keener eyes than geologists
Nov 1st 2023 | Berkeley, California and Boston, Massachusetts

THE FUTURE is electric. That means it will need a lot of batteries, motors
and wires. That, in turn, means a lot of cobalt, copper, lithium and nickel
with which to build them. Great times, then, for prospectors, and particularly
for any who think they can increase the efficiency of their profession.
Several firms are applying artificial intelligence (AI) to the process, both to
improve the odds of surface strikes and to detect underground ore bodies that
are invisible to current techniques.

KoBold Metals in Berkeley, California, Earth AI in San Francisco and VerAI

in Boston are tiddlers at the moment, as are SensOre, in Melbourne and
OreFox, in Brisbane. But at least one bigger fish—Rio Tinto, an Australian-
British firm—is also keen. They are garnering reams of geological,
geochemical and geophysical data to feed to software models. These, they
hope, will spot patterns and draw inferences about where to sink new mines.
Some of the data are new. But a lot once mouldered in the archives of
national geological surveys, journals of geology and other historical
repositories—or, in the case of Rio Tinto, which has been operating for 150
years, sat in the form of rock cores in various sheds around the world.

Kobolds were mythical underground sprites that bedevilled miners in

medieval Germany. (They also gave their name to cobalt.) Kurt House,
KoBold’s boss, hopes some of their magic will rub off. His firm has
reformatted archive data from around the world, many of which are on paper
and some of which go back to the 19th century, into machine-useable form.
That has permitted it to build maps of areas of interest all over Earth’s
surface.

Some of those maps are used to train the company’s AI models. Others are
used to test that software’s effectiveness by checking how good it is at
predicting known ore deposits on maps it has not previously seen. If it
passes, it can be let loose on under-explored places of interest, generating
leads for KoBold’s geologists.

Earth AI, led by Roman Teslyuk, SensOre, led by Richard Taylor, and
OreFox, led by Warwick Anderson, have taken similar approaches, but have
concentrated on Australia, which has particularly rich public geological
records. VerAI, led by Yair Frastai, focuses on the western bits of North and
South America, home to eight of the world’s ten biggest copper mines.

Dr House is especially proud of his AI’s ability to predict the shapes and
distributions of subterranean plutonic intrusions. These are bodies of igneous
rock, often ore-bearing, that have risen as liquid magma from Earth’s interior
but solidified before they reached the surface. They can be detected from the
surface via magnetic anomalies which suggest that a particular group of
rocks formed at a different time from its surroundings, a standard practice in
the industry. But KoBold’s AI is able to make more accurate predictions of
the shapes of these intrusions, and so suggest the most effective places to
drill.

And with success. Last year, KoBold announced its discovery of a rich
deposit of chalcocite, a sulphide of copper, in Zambia. Earth AI, meanwhile,
has to its credit a big find of molybdenum (an important component of
specialist steels) in New South Wales. VerAI has found ore containing
copper, gold and silver in Chile and Peru. SensOre has found a large source
of lithium in Western Australia. And OreFox’s technology has turned up a
potential gold mine in Victoria, plus several promising copper prospects.

Rio Tinto is building what Russell Eley, its head of exploration data science,
calls a “virtual core shed”. This will bring together details of the many rock-
core samples the firm has collected over the years. Software will then search
these for patterns that will assist the interpretation of new cores, and tell
geologists the best places to drill next.

Dr House observes that 99% of exploration projects fail to turn into actual
mines. AI therefore has plenty of room to improve things. It may also help
with a more subtle problem. By greatly expanding the volume of rock which
can be searched, it will enable new strikes in familiar, well-governed
countries, lessening the need to rely on what Mr Taylor diplomatically calls
“exotic jurisdictions” for future supplies. ■

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Be rich in good deeds

A new gonorrhoea drug was developed by a non-

profit foundation
Antibiotics are not commercially attractive to pharmaceutical firms
Nov 1st 2023

GONORRHOEA IS AN old affliction. The book of Leviticus mentions a

contagious condition involving the continuous emission of semen and a
painful erection. Only 2,500 years later, in the mid-20th century, did the
discovery of antibiotics bring relief.

But not, perhaps, for long. Decades of exposure to antibiotics have led N.
gonorrhoeae, the bacterium that causes the disease, to develop resistance.
With few new antibiotics coming onto the market, the bug is once again
gaining the upper hand. Failures of treatment are being reported in many
countries. It is now designated a “priority” pathogen by the World Health
Organisation.

The news on November 1st that zoliflodacin, a new antibiotic, had been
successful in a clinical trial was thus welcome. The drug inhibits an enzyme
called type II topoisomerase, which, among other things, is vital to bacterial
reproduction. More interesting than how zoliflodacin works, though, is how
it came into being. Most drugs are developed by private companies.
Zoliflodacin was created with the assistance of the American government
and the Global Antibiotic Research and Development Partnership (GARDP),
a non-profit outfit funded by a mix of organisations including the Wellcome
Trust, a big charity, and the Swiss canton of Geneva.

GARDP worked with Innoviva Speciality Therapeutics, an American

pharmaceutical firm. The company handled early development, and is
shepherding the drug through registration with the Food and Drug
Administration. The National Institute of Allergy and Infectious Diseases
guided it through its phase 2 trials, which check whether a new drug works.
GARDP supported the drug through subsequent, much bigger phase 3 trials,
the final stage before a drug is approved for use. Its support allowed those
trials to be tailored to public health goals—such as including in the trials
higher-risk patients such as women, adolescents and people with HIV.
GARDP is also handling the licensing, which it hopes will make zoliflodacin
cheap and widely available.

Duncan Graham-Rowe, a spokesman for GARDP, says such partnerships

could boost the supply of new antibiotics. (Another non-profit, CARB-X, is
doing similar work.) The dearth of new drugs in recent decades mainly
reflects poor incentives. To delay the development of resistance, new
antibiotics need to be kept in reserve until they are really needed. But a drug
that spends years on the shelf is not commercially attractive.

Governments have tried to fix that problem with ideas such as guaranteed
prices and annual payments that are made even if the drugs are not used.
State-run drug firms have been mooted too. It will take more than
zoliflodacin to show that GARDP has found a winning formula. But the
signs are good: it is developing four other antibiotics, including one for
complicated urinary tract infections, and more are on the way.■

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Culture
A golden age of TV is losing its shine
A show on Manet and Degas examines creative rivalry
Inside the secretive startup selling facial-recognition software
“King Lear” and the purpose of tragedy in dark times
Hong Kong’s year of protest now feels like a mirage
A new Beatles track is surprisingly soulful
Television

A golden age of TV is losing its shine

How Ted Lasso killed Tony Soprano
Oct 27th 2023

Pandora’s Box. By Peter Biskind. William Morrow; 400 pages; $32.50.

Allen Lane; £25

You Are What You Watch. By Walt Hickey. Workman; 240 pages; $30 and
£25

“SHH, IT’S OK,” whispers Frank Underwood (played by Kevin Spacey), as

he strokes an injured dog just hit by a car. As the dog whimpers, he soothes
it—then, after looking the viewer directly in the eye, wrings its neck.

Not so long ago this scene, which launched Netflix’s “House of Cards” in
2013, would have been unshowable on American television. Broadcasters
were bound by federal rules against rude or racy content and cowed by
advertisers who demanded wholesome heroes and happy endings. But in the
21st century bad guys have had a good run. The amoral Congressman (later
President) Underwood, the violent mobster Tony Soprano, the cocaine-
smuggling Pablo Escobar of “Narcos” and the megalomaniacal media baron
Logan Roy have lit up the small screen in what critics have hailed as a
golden era for TV. As viewers migrated from broadcast channels to cable,
and then to streaming, shows became darker and more daring.

Yet today, the TV business is in flux once more—and so is the nature of its
output. Insurgent streamers have settled in as cosy incumbents. Big tech
firms are using streaming to promote their other products. The upshot,
argues Peter Biskind in “Pandora’s Box”, a binge-worthy book about TV, is
that the risky, rule-breaking shows that defined television in the early 21st
century are giving way to less original fare.

Mr Biskind, a cultural critic, traces TV’s recent golden era to the launch in
1972 of Home Box Office (HBO), a cable network. With its “G-String
Divas”, “Taxicab Confessions” and so on, HBO was initially known for
“fighting and fondling”. But then it began to commission original drama
series and ventured where broadcast television did not. HBO and other cable
networks could ignore the nannying rules that constrained broadcasters. And
their subscription fees meant no ads, and therefore no jittery advertisers
demanding bland, brand-safe content.

Writers relished this freedom. “The things I’m getting away with, I should
be arrested for,” said a writer on “Oz”, a boundary-pushing HBO prison
drama whose plotlines include an inmate having a swastika burnt onto his
bottom with a cigarette. Bossy advertisers got short shrift. When executives
at AMC, another cable network, tried to arrange a product placement for
Jack Daniel’s whisky in “Mad Men”, a writer responded: “If you want me to
work this thing into the show, I’m going to have it sterilising equipment in
the back alley of an abortionist clinic.”

New television was not just about shock. Cable allowed writers to make
shows more sophisticated. As David Chase, the creator of “The Sopranos”,
put it: “On network, everybody says exactly what they’re thinking at all
times. I wanted my characters to be telling lies.” Since cable aired episodes
repeatedly, writers could assume that viewers were up to date, meaning that
story arcs could last whole seasons rather than being crammed into self-
contained episodes. This attracted star directors and actors to try out the
small screen, including Steven Spielberg and Tom Hanks, who made “Band
of Brothers” for HBO in 2001. In drama, “The beginning is inevitable, the
end is inevitable, but the middle is not so inevitable, and television is about
the middle,” says Brian Cox, who played Logan Roy in HBO’s
“Succession”.

Streaming took what cable started and pushed it further. Making whole
seasons available on demand has allowed viewers to binge, reviving the
importance of plot, which had been subordinated to character in shows like
“The Sopranos”. With past episodes fresh in the viewer’s mind, less
plodding exposition is needed. Streamers’ offering of thousands of shows at
once has also enabled niches to thrive. Streaming has found a home for ideas
that were too daring, weird or obscure even for cable, from Korean horror to
Swedish romance. As Reed Hastings, Netflix’s co-founder, put it, “We are to
cable networks as cable networks were to broadcast networks.”

Today Hollywood’s output is changing. Six months of strikes by writers and

actors have halted production this year. (Writers have gone back to work, but
actors have not.) Even before that, studios were preparing to cut back, as
investors began to demand evidence of profits rather than just subscriber
growth. In America more than 2,000 original series were released last year
(see chart). This will probably be the high-water mark, believes John
Landgraf, chairman of FX, a cable network.

The upcoming season

As the quantity of new shows falls, some believe the quality is diminishing,
too. Several studios have been plagued by real-life drama: from 2018, HBO
endured four unhappy years of ownership by AT&T, a phone company that
knew little about TV. (Its boss suggested producing “Game of Thrones” in
20-minute episodes to be mobile-friendly.) Across the industry, a shift is
under way. Mr Biskind quotes writers and actors who complain that
streamers are returning to the safe centre ground that broadcast networks
used to occupy. “I want to do in-your-face shit,” says Kenya Barris, the
creator of inventive shows such as “Black-ish”. But “Netflix wants down-
the-middle…Netflix became CBS.”

Advertising has made a comeback, as streamers try to squeeze more dollars

out of subscribers. And bingeing is being reined in. Most streamers now
release new shows weekly to keep subscribers on board for longer. Even
Netflix, the pioneer of bingeing, is moving this way, dripping out episodes of
some new shows one by one.

With hundreds of millions of subscribers, the likes of Netflix and Amazon

Prime Video have bigger audiences than any broadcaster. As they grow,
streamers seem to be edging away from niches and towards the mainstream.
One example is sport. Amazon has shelled out for the rights to American
football, and Netflix will air its first live sporting event (a celebrity golf
tournament) in November. Streamers and cable firms are also becoming like
film studios by developing a dependence on franchises and sequels. HBO,
which long resisted spin-offs and prequels, has embraced a “Sex and the
City” reboot and multiple “Game of Thrones” spin-offs, including
animations and a stage play.

It is hardly surprising that studios are leaning on franchises during hard

times: they are safe bets, argues Walt Hickey in “You Are What You Watch”,
a chart-filled tour through the entertainment business. Mr Hickey, a data
journalist at Insider, a news site, calculates that since 1980 the average
movie sequel has made 4.2 times its budget at the box office, while the
equivalent figure for original works is 2.8 times.

Perhaps the biggest driver of the move to the mainstream is the tech titans’
push into streaming. Both Amazon and Apple TV+ will survive the
financially ruinous streaming wars. (They will “hold everybody’s head under
water until they drown,” Steven Soderbergh, a film director, tells Mr
Biskind.) But Amazon and Apple see streaming as a way to bolster
audiences’ interest in their other businesses. As Jeff Bezos, Amazon’s
founder, once said to groans in Hollywood: “When we win a Golden Globe,
it helps us sell more shoes.”

The result is resolutely brand-safe output. Rather than the “nudity, raw
language and violence” on other streamers, Apple wants to make shows with
“broad appeal”, Tim Cook, the company’s boss, has said. This leads to
shows like “Ted Lasso”—a “sunshine enema”, in the words of one of its
producers—and “The Morning Show”, which debuted as a hard-hitting
drama about a broadcast-news network’s toxic culture but has degenerated
into a mindless soap opera. Amazon, whose early TV commissioning was
more daring, now also focuses on the middle ground, with series such as
“Citadel”, a big-budget, low-imagination thriller with plenty of explosions
and no surprises.

There are some subjects where the globe-spanning tech titans are even
touchier than the old broadcast networks. Apple recently cancelled “The
Problem with Jon Stewart”, a satirical current-affairs show, reportedly
because of concerns about Mr Stewart’s critical stances on China and AI.

Some of the people who helped to create TV’s golden age are downbeat
about its future. HBO “died at 50”, Michael Fuchs, who ran the network in
the 1980s, tells Mr Biskind. “There’s no longer an HBO.” A producer of
“The Wire”, one of HBO’s grittiest and most celebrated shows, says the
company would never make it today. For creatives, television’s golden age is
turning into a gilded cage. ■

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Artistic frenemies

A show on Manet and Degas examines creative

rivalry
Artists are often in dialogue—and competition—with each other
Nov 2nd 2023 | New York

THE PAINTING seems innocent enough. Edouard Manet slumps on a sofa,

lost in thought or perhaps bored; his wife, Suzanne, plays the piano. This
scene of cosy bourgeois domesticity was captured in the late 1860s by
Manet’s friend, Edgar Degas, who gave the painting as a gift to the couple.
However, something about the double portrait did not sit well with Manet.
He took a knife to it, cropping off Suzanne’s face. Outraged by this
unexpected act of violence, Degas took back his painting and, for good
measure, returned a still life of nuts Manet had given him. (It does not take
an art historian to interpret that.)

The knifing is a high point of drama in “Manet/Degas”, a show at the

Metropolitan Museum of Art in New York on view until January 7th, which
examines how these two artists were in dialogue—and sometimes duelled—
with each other.
Manet may have disliked Degas’s painting, but it spurred him to create his
own version of Madame Manet at the piano. Degas, meanwhile, went on to
paint increasingly cropped images that cut figures out of the frame. He
probably took a “moment of delight” in the painting’s defacement,
recognising that “Manet had made a really modern painting out of his
canvas,” says Stephan Wolohojian, the show’s co-curator. Like many
frenemies, the painters reconciled and played off each other’s work. By
putting their paintings side by side, the show invites visitors to consider how
these artists influenced each other.

The Manet-Degas rivalry began in the galleries of the Louvre, where Degas
was copying a painting by Diego Velázquez. Manet was the hot-shot. At the
Salon of 1865, his scandalous “Olympia”, depicting a naked courtesan, a
black maid and an alert cat, provoked outrage, while Degas’s conventional
painting, “Scene of War in the Middle Ages”, went unnoticed. Degas
responded by producing more radical compositions and joined forces with a
group of artists who became known as “Impressionists”. Manet refused to
take part. He was “more vain than intelligent”, Degas quipped. Still, Degas
created a series of drawings—Manet standing, Manet seated and holding his
hat—that documented their friendship, while Manet never bothered to draw
Degas.

“Influence is influenza—an astral disease,” wrote Harold Bloom, a literary

critic. Bloom was referring specifically to writers, but this “anxiety of
influence”, as he termed it, also applies to painters. The young Michelangelo
Buonarroti struggled in the shadow of Leonardo da Vinci, who was famous
and adored. In the early 1500s, Florentine officials commissioned both
artists to paint battle scenes in the Palazzo Vecchio—a showdown between
master and prodigy that was further heightened by their personalities. (Da
Vinci was sociable and well-dressed, whereas Michelangelo was rude,
disagreeable and rarely bathed.)

Three centuries later, J.M.W. Turner and John Constable battled for
recognition as Britain’s greatest painter at the annual exhibition of the Royal
Academy. Constable anxiously dismissed Turner as “just steam and light”.
Turner boastfully proclaimed himself the “great lion of the day”. In the 20th
century, Henri Matisse and Pablo Picasso vied to be the most avant-garde,
pushing each other to greater experimentation. It is hard to imagine artistic
revolutions like Cubism without that burning competition. In New York,
Jackson Pollock and Willem de Kooning borrowed inspiration from each
other to create their abstract masterpieces. When Pollock suddenly died in a
booze-fuelled car crash, de Kooning borrowed his girlfriend, too.

The Manet-Degas rivalry often manifested in their choice of subject matter,

says Ashley Dunn, the show’s other co-curator. When Manet painted a dead
toreador, Degas painted a fallen jockey in a similar pose. When Degas
painted a woman drinking in a café, Manet painted the same image of
modern urban alienation. After Manet’s early death in 1883 of complications
from syphilis, Degas began collecting his friend’s paintings. (“He was
greater than we thought,” he reportedly admitted at Manet’s funeral.) One
was a still life of a sliced ham with a gleaming knife. Degas hung it in his
home next to the slashed portrait of Madame Manet, with the knife pointing
slyly towards the defaced painting. ■

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creative-rivalry
Surveillance, Inc.

Inside the secretive startup selling facial-

recognition software
In “Your Face Belongs to Us” Kashmir Hill profiles Clearview AI
Nov 2nd 2023

Your Face Belongs to Us. By Kashmir Hill. Random House; 352 pages;
$28.99. Simon & Schuster; £20

MOST PEOPLE expect to walk down a street anonymously. Passersby do

not know fellow pedestrians’ names, jobs or what they just posted online.
But owing to the growth of facial-recognition technology, norms around
privacy are being eroded, Kashmir Hill, a journalist for the New York Times,
argues in a new book. Software enables people’s photos to be instantly
matched to online images and digital profiles. This type of technology is
now popular among law-enforcement agencies.

The technology began in the 1960s. With funding from the CIA, researchers
built a system to match faces photographed at different angles. By the 1980s,
experts could configure a face as a mathematical calculation based on how it
differed from the average face. As computers became more powerful, the
technology grew more useful. In 2001 police scanned Super Bowl attendees’
faces in Tampa and compared them to a database of known criminals. (The
event was nicknamed “Snooper Bowl”.) Big tech firms, including Google
and Facebook, developed face-scanning systems but stopped short of
releasing tools to others for fear of abuse.

Hoan Ton-That, co-founder of Clearview AI, a secretive startup, had no such

qualms. At the age of 19 the Australian university drop-out moved to Silicon
Valley. He built a video-streaming site, which automatically emailed
marketing material to users’ contacts. He then moved to New York, where
he met Richard Schwartz, who had worked as an adviser to Rudy Giuliani,
the former mayor of New York. The pair hit it off and founded Clearview
AI. Along the way they were helped by a cast of right-wing characters, such
as Peter Thiel, who put money in Clearview.

While Mr Schwartz provided connections, Mr Ton-That built the app. With

the help of a friend, he designed an advanced face-matching algorithm.
Relying on a database of harvested images of people’s faces from popular
websites, such as Facebook, the app managed to link people’s photos to their
personal details. Much of the web scraping was done by contractors, some of
whom used fake names and were paid in cryptocurrency. Eventually
Clearview’s database grew to 30bn photos.

Venture capitalists were given free trials, as Clearview wooed them. (Some
used it as a party trick, others to recognise acquaintances at conferences.)
But Clearview found most success with law enforcement. Police teams often
had databases of mugshots, which only contained people who had been
arrested. The app helped investigators match faces from surveillance footage
with online profiles. By mid-2019, more than 200 law-enforcement agencies
had used the tool, including the FBI and counterparts abroad. Among police,
the app became a verb. “We Clearviewed the guy and then passed the
information along to the right unit,” one officer told Ms Hill.

Mostly the app is highly accurate. But misidentification has also led to
wrongful arrests. This problem is most prevalent among minorities, who are
underrepresented in the databases used to teach the algorithm how to match
faces.
Much of Clearview’s rise went on in secret. That changed when Ms Hill
received a tip-off and doggedly investigated the company, publishing a front-
page story in 2020. The press coverage triggered lawsuits and regulatory
probes, which concluded that the firm must obtain consent from people
whose images it uses. Clearview’s app was banned in at least six countries.
As part of one legal settlement, the firm agreed not to sell its software to
individuals and private companies in America, though it still sells to law
enforcement.

One shortcoming of this gripping book is that it only lightly touches on

China and Russia, where the abuses of facial-recognition technology are
most abhorrent. Another is that the author makes little effort to try to weigh
the benefits of facial recognition (catching more criminals) against the
disadvantages (an erosion of privacy).

Nevertheless, the book is illuminating. The scope and sophistication of the

technology is striking. So, too, is the way in which the building blocks
needed to make it are so readily available, from open-source code to public
databases of faces. A walk down the street will not feel quite the same again.
■

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facial-recognition-software
Back Story

“King Lear” and the purpose of tragedy in dark

times
Sir Kenneth Branagh’s bold new production asks you to laugh, cry—and
act
Nov 1st 2023

MURDER ON THE television, agony on the radio; lies and hatred on the
internet, plus snuff videos that you click on before realising your mistake.
The planet is a boiling cauldron in which you are the complacent frog. When
the real world feels like a charnel house, why spend an evening and a chunk
of cash watching bodies pile up on stage?

And in “King Lear”, Shakespeare piles them high. “That’s but a trifle here,”
a character says of another’s demise during the final die-in. But the play—
and Sir Kenneth Branagh’s ingenious new production in London—make a
powerful case for subjecting yourself to tragic art, even at a time of
surround-sound horror.
These days “King Lear” is performed less often than “Hamlet”, with its
startlingly acute psychology, or “Othello” and “Macbeth”, with their overtly
modern themes of race, misogyny and the corrupting effects of power.
Critics have frequently regarded “Lear” as a triumph of philosophical poetry
but impractical as a play. There is just too much of it, and too much in it: too
many ideas and emotions, too many stories and, above all, too much
desolation and despair.

The evil characters destroy one another, but they take the good down with
them. Love kills; man is nothing but a “poor, bare, forked animal”.
Throughout the 18th century this bleakness seemed so shocking, even
immoral, that “Lear” was staged with a revised happy ending. Audiences
still struggle with emotional overload. A decade ago, at another vaunted
production in London, people sniggered when they were meant to weep.

Sir Kenneth, a British actor and director, stars in and directs the version that
opened at the Wyndham’s Theatre on October 31st. (It goes to the Shed in
New York in 2024.) Part of his response to the play’s scale is to cut lots of it.
Running with no interval for ice-cream and gossip, this is two hours of neat
tragedy—set, boldly, in Neolithic Britain. Wearing animal skins and
wielding spears, the cast hulks around a stark set that recalls Stonehenge,
their faces intermittently looming on the stones in un-Neolithic projections.
Above them hangs an orb resembling both a planet and an eyeball, which
sometimes seems to bleed.

Here the power struggle that follows Lear’s division of his kingdom is less a
clash of armies than a scrap for a bauble in the mud. Yet the absence of
pomp also makes the family drama at the story’s heart seem movingly
intimate and familiar. Captured by his foes, arms bound behind his back, Sir
Kenneth’s Lear uses his beard to dry the tears of his beloved daughter
Cordelia (Jessica Revell). Soon he heaves her corpse onto the stage, howling
in grief; this time, nobody laughed.

They chuckled at other moments though, as Sir Kenneth judiciously keeps

and hones the funny bits to help the philosophy go down. It is not just the
humour of absurdist madness and slapstick torment that hovers between
pathos and ridicule, often called the “comedy of the grotesque”. There is also
the comedy of charismatic devilment and gullibility, of champion wordplay
and some of Shakespeare’s most colourful insults.

As for the purpose of tragedy: Edgar (Doug Colling) implies one as he drags
his blind and suicidal father Gloucester (Joseph Kloska) across ancient
Britain. “Men must endure/Their going hence, even as their coming hither,”
he preaches. “Ripeness is all.” Life, in other words, is an endurance test. It
follows that, for viewers, tragic art is a kind of practice in grinning and
bearing it.

We have had quite enough practice in that, today’s punters may think; and a
homily on stoicism makes a priggish sort of moral. Edgar’s conclusion,
however, is not the play’s. The rationale it offers for its spectacle of pain is
more than a lesson in patience, more even than the sense of solidarity in
suffering that acting as fine as Sir Kenneth’s can provide.

“King Lear” is full of audiences: characters who witness folly, misery or

cruelty and must choose what to do about them. Some weigh their interests
and join in. Some wring their hands. A few resist, such as the heroic servant
who objects as Cornwall (a sinister Hughie O’Donnell) rips out Gloucester’s
eyes in a spasm of bloodlust and impunity.

It is hard to imagine yourself as Lear, even one as denuded as Sir Kenneth’s.

But maybe you could, just about, be like the unheralded minor figures who
opt to act instead of merely watching. “O, you are men of stones,” the king
cries at the close, demanding greater compassion for injustice from the
surviving characters—and from the audience, too. Don’t just sit there, the
play urges. Do something. ■

Read more from Back Story, our column on culture:

David Beckham’s guide to celebrity (Oct 12th)
“Cat Person”, an internet-breaking short story, is back as a film (Oct 5th)
Donald Trump and the dramatic power of not turning up (Sep 21st)

Also: How the Back Story column got its name.

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dark-times
The defeated

Hong Kong’s year of protest now feels like a

mirage
A new book follows four pro-democracy activists, none of whom find a
happy ending
Nov 2nd 2023

Among the Braves. By Shibani Mahtani and Timothy McLaughlin.

Hachette Books; 336 pages; $30 and £25

ON JULY 21ST 2019 Hong Kongers witnessed an attack so notorious that,

like the felling of the twin towers or the Tiananmen Square massacre, they
came to refer to it by numerical shorthand: 721. On that evening scores of
gang members, known as triads, stormed Yuen Long, a rural metro station.
There, in train carriages and on concourses, they set upon anyone they
suspected of returning from that day’s pro-democracy protests.

Gwyneth Ho, then a 28-year-old journalist for Stand News, an online-news

site, rushed to the station to livestream the violence. Even as triads beat her
to the ground with bamboo sticks, she managed to keep filming. That
bravery made Ms Ho’s name and eventually propelled her into politics.
However, the authorities were no longer willing to tolerate opposition: they
locked her up and shut down Stand News. The trial of Ms Ho, who stands
accused of endangering “national security”, is ongoing. The verdicts for her
and 46 other activists being tried on similar charges alongside her are
expected later this year.

Ms Ho is one of four pro-democracy activists followed in “Among the

Braves”, a book by Shibani Mahtani, a Washington Post journalist, and
Timothy McLaughlin, who writes on Hong Kong for the Atlantic. (The
authors are married.) Through this quartet the book traces the arc of a protest
movement that had begun with optimism and enjoyed mostly unswerving
support among the territory’s 7.5m people, but which ended in recrimination
and defeat.

The week before the Yuen Long attack, over 1m Hong Kongers had taken to
the streets to try to defend their freedom. The movement was cleaved
between those advocating wo, lei, fei (peaceful, rational, non-violent)
protests and the front-line “Braves”, who favoured more confrontation.
Among those who crossed the divide was Tommy. The mild-mannered
teenager turned up to his first protest armed with nothing but two cartons of
eggs, with which he planned to pelt government buildings. Within weeks he
had stormed and occupied Hong Kong’s parliament. Within a year, by then a
fugitive, he was planning a daring escape from Hong Kong aboard a
speedboat bound for Taiwan.

Hong Kongers’ dreams of democracy were snuffed out in 2020, as China’s

Communist Party took advantage of the pandemic, which put an end to street
protests, to foist a draconian national-security law on its troublesome
territory. But the movement had already begun to collapse.

The demonstrators’ defining principle had been to remain leaderless—to “be

water”—striking with tidal force before receding untraceably into the city’s
crevices. Abandoning this strategy proved disastrous. In November 2019
hardcore protesters holed up in Polytechnic University following a riot.
When police laid siege to the campus for days and rounded them up, the
movement had been stripped of its most determined warriors.
“Among the Braves” entwines the activists’ stories with a chronicle of Hong
Kong’s decades-old protest movement, stretching from the Tiananmen
Square massacre in 1989, through the “Umbrella” protests of 2014, to the
unrest in 2019. It lays bare the incompetence of politicians in dealing with
each unfolding crisis. Carrie Lam, the authors argue, will be judged as “the
leader who killed her city without needing any soldiers or tanks”.

The result is a book that is both a page-turner and a succinct history. But it is
also a tale with an unsatisfying ending. With the most vocal activists having
fled or been locked up, today all that remains are trampled hopes and
suppressed memories. When the now-exiled Tommy calls his former
brothers-in-arms, he finds they have returned to lives of “shopping trips,
hotpot and gossiping about Cantopop stars”. It is, he says, “as if they had all
imagined the demonstrations”. ■

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like-a-mirage
Come together

A new Beatles track is surprisingly soulful

“Now and Then” will satisfy old fans and introduce the band to new ones
Nov 2nd 2023 | New York

THE LONG and winding road of the Beatles officially ended in 1970.
Rumours swirled of a possible reunion—until December 8th 1980, when
John Lennon was assassinated in New York. Since then, the Beatles’ archive
has yielded a few posthumous gifts. In 1995 “Free as a Bird”, based on one
of Lennon’s last demos, was released; another, “Real Love”, came the next
year.

On November 2nd “Now and Then”, touted as the last new Beatles song,
hits the airwaves and the internet. Like its 1990s predecessors, it derives
from a demo long judged unmixable. Sir Paul McCartney hinted in June that
a “kind of scary” AI would help produce a “final Beatles record”, seeding
fears of some deep-faked pastiche. In reality far more basic software allowed
Lennon’s voice as recorded to sing on this new track, over accompaniment
by Sir Paul and Sir Ringo Starr. (Guitar from George Harrison, who died in
2001, is also mixed in.)
The release of this audio archaeology comes soon after AI allowed
researchers to discern a single Greek word (“purple”) from a carbonised
scroll excavated at Herculaneum. The Beatles are not such ancient history,
but in both cases, technology has let a lost world speak.

“Now and Then” is like a technicolour version of what Lennon left in spare
black and white; Sir Paul and Sir Ringo have turned Lennon’s private,
prayer-like track into a big-production song fit for a film soundtrack. But
even if it would be just a middling Beatles song—if indeed it should be
called that, and not the last work of Lennon’s fruitful solo career—its vitality
is evidence of the Beatles’ enduring appeal. Younger listeners will be drawn
in with this release.

The Beatles broke up at the peak of their fame, rather than carrying on and
on, like the Rolling Stones. Despite their last song’s age, “Now and Then”
has the gift of freshness and the poignancy of a tribute by two elder musical
statesman, well beyond 64, to the man who embodied the unrealised
ambitions of his era. “Now and then/I miss you,” goes the chorus. “Oh, now
and then/I want you to be there for me.” The lyrics almost sound directed at
Lennon himself, at the Beatles, at the golden age of rock, which beckons
once again. ■

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soulful
Economic & financial indicators
Economic data, commodities and markets
Indicators

Economic data, commodities and markets

Nov 2nd 2023
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financial-indicators/2023/11/02/economic-data-commodities-and-markets
Obituary
Matthew Perry changed the way America spoke
When the laughter stops

Matthew Perry changed the way America spoke

The star of the sitcom “Friends” died on October 28th, aged 54
Nov 1st 2023

IT IS IMPOSSIBLE, now, to watch it in the same way. The emphasis has

changed—and emphasis is what matters in comedy. He’d always known
that. The words, the sentence, the scene can be the same but alter the
emphasis—lean a little harder on this word, push a little on that one—and
the joke is transformed. He and his friends had played with this when they
were at school. They’d developed their own way of speaking. “Could it be
any hotter?” they’d ask. “Could the teacher be any meaner?” It changed
everything.

Emphasis was always his thing—it had got him the part in the first place.
Everyone had wanted to be in “Friends Like Us” but in the audition it was he
who had nailed it, reading the words in that unexpected way, “hitting
emphases that no one else had hit”; making everyone laugh. It was less that
he, Matthew Perry, could play Chandler than that he was Chandler. He
changed the part—and then the part changed him. Fame, fortune, money
followed. And above all, The Big Terrible Thing. The thing so big, so
terrible that it would demand emphatic capitals; cause him to return to rehab
14 times—and change the emphasis of those jokes for ever.

Watch “Friends” after everything that happened and suddenly it seemed

different: not simply a sitcom but a chronicle of his decline. Take that
episode in season three, the one titled “The One With The Hypnosis Tape”.
Later people saw it instead as The One Where You Could See How Thin He
Was. By then, he was addicted to opioids which had left him vomiting and
all but unable to eat. Anyone watching that season should, he thought, be
“horrified” by his thinness. Everywhere, hindsight makes the lines land
differently. Take that episode in season one, where a shrink turns up and
starts to analyse him. “You’re so funny,” the shrink says to Chandler. “I
wouldn’t want to be there when the laughter stops.”

“Friends” was not how he wanted to be remembered. Though he did

definitely want to be remembered—on that he was clear. Before that first
audition he’d fallen to his knees, eyes closed. “God, you can do whatever
you want to me,” he had prayed. “Just please make me famous.” God seems
to have listened, as success on a different scale followed. Ever after he
would be a man to be measured in millions: 22m watched the pilot episode.
More than 50m watched a single, star-studded episode in series two. By
series eight, he was making $1m an episode. “But the Almighty, being the
Almighty, had not forgotten the first part of that prayer as well.” He would
later spend over $7m in rehab.

But before that there was the success. Which was staggering. “Friends Like
Us” became first “Friends” then, for its fans, almost “friends”. Television
was still consumed en masse then and for a time a whole generation seemed
to know which Friend they “were”: the nerdy one (Ross); the pretty one
(Rachel)—or the funny one: him. It was less a programme than a paradigm;
people started copying everything about them: their hair (“The Rachel cut”
was particularly popular); their syntax (the definite article gained a
newfound celebrity—“The This”; “The That”). Even English intonation
itself bent before the show. It was, he thought, surely not an exaggeration to
say that Chandler had changed how America spoke. Could its influence be
any more clear?
And each week, tens of millions of Americans sat on couches to watch the
Friends sit on their couches. Which was ironic, in a way, as he had always
loathed sitting at home on couches. Performing in front of thousands—that
he could do. But put him alone “on my couch in front of a TV for the night
and I get scared.” Being on his own had always frightened him. His parents
had split up when he was small. When he was five, his mother had put him
on a plane, alone, to go and see his father in Los Angeles. He had snacks,
and priority boarding, and fancy lounges. He had perks; but no parents. He’d
been terrified. Later, as a famous actor, he’d get some of the same airport
perks again. He hated them then, too.

In the end, it was alcohol that comforted him. When he was 14, he and some
friends had got a six-pack of Budweiser and a bottle of white wine. His
friends had just got drunk—but he had got a sudden, overwhelming sense of
well-being. At last, he knew that he was taken care of; at last he knew it was
all fine. It was bliss. After that, there were more drugs, more bliss and, after
a neck injury, there were opioids. They were better yet: “like replacing your
blood with warm honey”.

Then the bliss faded. Watch “Friends” now and you can tell the state of his
addictions by his appearance: chunky—that’s the alcohol. Skinny—that’s
pills. The goatee? That was lots of pills. Eventually the opioids would give
him such severe constipation that his colon exploded and he passed out. “I
was so full of shit it almost killed me.” There was still humour, of a sort. He
would later learn that while he was unconscious there had been a debate
about whether he should be taken to a different clinic. The different clinic
thought not: it apparently took one look at his chart and said: “Matthew
Perry is not dying in our hospital.”

It is odd, he later wrote, “to live in a world where if you died, it would shock
people but surprise no one.” He was right about the shock. People were often
shocked by him. They were shocked when they saw him in life: he looked so
old. Those who had watched “Friends” the first time around were shocked
afresh when it was re-aired on Netflix in 2015; though this time the shock
was not at his age but their own. It all looked so dated: the hair; the ties; the
staginess; the whiteness. How had we not realised that we had been living in
the past? That time had been passing so quickly? For millions, he became
less a man than a memento mori.
Mr Perry himself needed no reminders about death. He had been to death’s
door, and back. Although that wasn’t quite the emphasis he gave it—and for
him emphasis, as always, mattered. He had started writing his memoir on his
phone; it finally came out last year. And from its first pages it was clear
where he wanted to lay the stress. Not on death, after all; but life. “I am
alive,” he wrote. “Those three words are more miraculous than you might
imagine…I am alive.” ■
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