[May 10th 2025]

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The world this week

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The weekly cartoon

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The world this week

Politics
May 08, 2025 06:49 AM

Friedrich Merz visited Paris and Warsaw, a day after the German Bundestag
officially voted to approve him as Germany’s new chancellor. It took two
rounds of votes among MPs to confirm Mr Merz in the job, a setback that
may dent his authority. He is the first person in the country’s modern era not
to attain the support needed to become chancellor in the first round,
underlining the tensions in his coalition of Christian Democrats and Social
Democrats.

Raining on his parade

Ukraine launched a big drone attack on Russia, which caused Moscow’s

four airports to close temporarily. The attack came shortly before a
smattering of world leaders arrived in Russia to attend Vladimir Putin’s
military parade to mark 80 years since the end of the second world war in
Europe. Xi Jinping was “guest of honour”. China’s leader was starting a
four-day visit to Russia, which includes talks with Mr Putin.

The European Commission laid out a road map to remove all imports of
Russian oil, gas and nuclear energy from EU markets. The plan envisages
stopping all imports of Russian gas by the end of 2027, with new contracts
halted by the end of this year. Legislation will be introduced next month.

George Simion, a hard-right Eurosceptic, took 41% of the vote in the first
round of Romania’s presidential election, well ahead of Nicusor Dan, the
liberal mayor of Bucharest. They will contest a run-off on May 18th.
Following the result Marcel Ciolacu resigned as prime minister and pulled
his Social Democrats from the coalition, saying the government was no
longer legitimate. The election is being held five months after December’s
ballot was cancelled amid claims of Russian interference.

Israel’s cabinet announced that it would expand military operations in

Gaza· (some ministers demand that the entire strip be occupied). It also said
that it would put in place a new way of distributing aid to the civilian
population. Israel has kept Gaza under a total blockade since March 2nd
and Israeli officials admit that food will run out in a matter of weeks. Israel
plans to set up aid hubs with security provided by both Israeli troops and
American mercenaries. Palestinians would travel to the hubs to collect food
and basic items.

A missile fired by the Houthis·, a rebel group in Yemen backed by Iran,

struck close to the main airport in Tel Aviv. In response, Israel hit Houthi
targets in Yemen that included the airport in Sana’a, the capital, and a port.
But soon after, Donald Trump announced a deal with the Houthis in which
America would stop bombing the group in return for a cessation of the
rebels’ attacks on shipping in the Red Sea. The rebels have said that Israel
is not covered by the ceasefire.

On a visit to France, Ahmed al-Sharaa, the president of Syria, confirmed

that the country was holding indirect talks with Israel. Intelligence sources
have said that the negotiations are focusing on security issues so far.
The government of Peru imposed a curfew in the province of Pataz
following the murder of 13 mineworkers. The authorities say the men were
killed by illegal miners and criminal gangs after they had tried to regain
control of a mine.

Members of Venezuela’s political opposition managed to leave the country

after spending more than a year holed up in the Argentine embassy in
Caracas. America’s secretary of state, Marco Rubio, said that a “precise
operation” had brought all of the five to United States’ soil. He condemned
the regime of Nicolás Maduro, saying it had “violated human rights, and
endangered our regional security”.

Fresh from his turnaround election victory, Canada’s prime minister, Mark
Carney, visited Donald Trump in the White House. The president spoke
warmly about Mr Carney in front of the press assembled in the Oval Office.
Mr Carney reiterated his well-worn campaign message, telling Mr Trump
that Canada “won’t be for sale, ever”, to which Mr Trump shrugged, “Never
say never.” No new policies or agreements were announced. The pair are
due to meet at the G7 summit in Alberta in June.

Mr Trump said that Stephen Miller, his deputy chief of staff, was a front-
runner to be national security adviser. The president has sacked Mike
Waltz, who accidentally added a journalist to a policy chat group, from the
job and nominated him as ambassador to the UN. Marco Rubio, the
secretary of state, is the national security adviser on an interim basis, the
first person to hold both positions simultaneously since Henry Kissinger.
Meanwhile, Pete Hegseth, the defence secretary, announced a streamlining
of the military’s most senior officers, which may involve the merging of
some operational commands.

Sudan’s government cut diplomatic ties with the United Arab Emirates. It
said the country was a “state of aggression” that supplied strategic weapons
to the Rapid Support Forces, the Sudanese army’s adversary in the civil
war. This followed several days of drone strikes against Port Sudan·, a city
on the Red Sea that has become Sudan’s de facto capital since the war
began.
Rwanda claimed it would sign a peace deal with the Democratic Republic
of Congo next month, following consultations over an agreement between
the two countries brokered by America. The details were yet to be worked
out. Tensions between Congo and Rwanda have been high ever since M23,
a rebel group backed by Rwanda, took control of swathes of eastern Congo
earlier this year. Previous attempts at a peace deal have gone nowhere.

India struck back at Pakistan in retaliation for a terrorist attack in Indian-

administered Kashmir that India claims had cross-border involvement from
Pakistan. India carried out air strikes in Pakistan-administered Kashmir and
deep inside Pakistan that it said targeted terrorist camps. Pakistan claimed
that civilian areas had been hit and that it shot down five Indian military
aircraft. It vowed to hit back at India. Other countries in the region appealed
for calm.

Labor was re-elected to power· with an increased majority in Australia’s

general election, a stunning comeback for a party that was trailing in the
opinion polls earlier this year. As with Canada there was a Trump effect;
voters listed the turmoil of Donald Trump’s trade policies as a big concern.
And again like Canada, the leader of the conservative opposition lost his
seat in Parliament. After his victory Anthony Albanese, the prime minister,
said he had a “warm and positive conversation” with the American
president.

Ahead of a trade agreement with America over tariffs, Britain and India
struck a trade deal that will slash export duties between the two countries.
It is Britain’s biggest such pact since leaving the European Union. Bilateral
trade with India is expected eventually to rise by £25.5bn ($34bn), or
roughly 40% from 2024, but will add just £4.8bn to British GDP, or 0.1%,
by 2040, according to the government.

End of the two-party system?

In Britain politicians from the governing Labour Party and the main
opposition Conservative Party spent the week pondering just how they
would tackle the rise of Reform UK. The populist party led by Nigel Farage
came first in local elections held in mostly non-urban areas of England,
taking control of ten councils and winning two mayoral contests. Reform
also won a by-election for Parliament in Runcorn, hitherto one of Labour’s
safest seats. It now leads national opinion polls.

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The world this week

Business
May 08, 2025 06:50 AM

The Federal Reserve kept interest rates on hold for its third consecutive
meeting, maintaining its benchmark rate at a range of between 4.25% and
4.5%. The risks from inflation and unemployment have risen, it said, amid
uncertainty about the economic effects of Donald Trump’s tariffs, even
though jobs figures for April also showed that the labour market was strong.
Mr Trump is pressing Jerome Powell, the Fed’s chairman, to cut rates.
Before the bank’s meeting the president said he would not sack Mr Powell,
but did call him a “total stiff”.

China’s central bank shaved 0.1 percentage points off its main interest rate,
taking it to 1.4%. The People’s Bank of China also reduced other loan rates
and cut the amount of money that banks need to keep in reserve, all part of
an effort to boost liquidity in the financial system. The announcements
came just ahead of the start of trade talks between America and China.
America’s trade deficit hit a record monthly high in March, of $140.5bn.
The dash to get ahead of Mr Trump’s tariffs resulted in imports from some
countries, such as France, India, Mexico and Vietnam, reaching all-time
highs. However, imports from China were the lowest since March 2020.

The Bank of England lowered its benchmark interest rate from 4.5% to
4.25%. The central bank mentioned that although increases to energy bills
are likely to push up consumer-price inflation in the third quarter, it is
expected to fall back thereafter, and progress on disinflation is “generally
continuing”.

Oil prices dropped to near four-year lows after OPEC+ said it would
increase output, which raises the prospect of an oversupply of oil amid a
slowing world economy. At one point Brent crude traded just below $60 a
barrel. In mid-January Brent was at $82 a barrel.

Lower oil prices in the first quarter of 2025 were a factor behind the
reduced profits reported by big energy companies. Chevron’s net profit of
$3.5bn was $2bn below the profit it made in the same quarter last year.
ExxonMobil’s $7.7bn was down from $8.2bn. Shell’s adjusted profit fell
by 28% to $5.6bn. Shell has dismissed rumours that it is interested in taking
over BP, which is struggling to convince investors of its turnaround plan.
BP’s headline profit fell by half in the quarter, to $1.4bn.

Overcoming the recent tensions between the two countries, including over
energy imports, Sunoco, an American oil company, struck a $9bn deal to
buy Parkland, a Canadian rival. If it survives any potential pushback from
Mr Trump, the deal will create the biggest fuel distributor in the Americas.

A Musky odour

Sales of Tesla cars again fell heavily in Europe in April. In Germany they
were down by 46%, year on year, and in France by over 50%. And in
Britain, which had hitherto resisted the continent’s rejection of Tesla and
Elon Musk, sales plunged by 62%.
Normally associated with assembling the iPhone, Foxconn made a big push
into the electric-vehicle market by striking a deal with Mitsubishi. The cars
will be developed by Foxtron, Foxconn’s EV subsidiary, and made in
Taiwan for sale in Australia and New Zealand. Foxconn is eager to co-
operate with Japanese carmakers. Earlier this year it considered buying a
stake in Nissan in return for co-operation on technology.

OpenAI abandoned its attempt to turn into a for-profit company and will
remain under the control of a non-profit board. It is instead rejigging its for-
profit subsidiary, which helps fund its R&D in artificial intelligence, to
make it more investor friendly. The startup’s ambition to become a regular
company has been criticised by Elon Musk, one of OpenAI’s founders, and
others as a betrayal of its roots. A judge had recently ruled that Mr Musk’s
attempt to block the conversion to a for-profit could proceed to court next
year.

Orsted, the world’s biggest developer of offshore-wind power, halted work

on a project in the North Sea that is meant to supply energy to 1m homes in
Britain. It blamed rising costs and the risks from delays, which means the
Hornsea 4 farm off the Yorkshire coast is not viable “in its current form”.
The news is a blow to the ambitious (some say over-ambitious) desire of the
Labour government for Britain to reach net-zero emissions by 2030.

Disney’s quarterly earnings pleased investors. Profit came in ahead of Wall

Street’s expectations, helped by a jump in revenue from the Disney+ and
Hulu streaming services. Disney’s theme parks also performed well. The
company announced that it is to build a theme park in Abu Dhabi, its first in
the Middle East.

The Sage of Omaha

Warren Buffett· announced his retirement as chief executive of Berkshire
Hathaway, a conglomerate and investment company that he has led since
the 1960s. The board approved Gregory Abel to replace Mr Buffett on
January 1st 2026. Mr Abel was chosen as the heir in 2021 and oversees
Berkshire’s businesses other than insurance. Once famous for his
blockbuster acquisitions, Mr Buffett has said there are few such takeovers
for Berkshire these days and has instead accrued a cash pile of $348bn.
Berkshire’s stock has risen by 5.5m per cent since Mr Buffett took charge in
1965, vastly outperforming the S&P 500. He will be 95 when he steps
down.

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The world this week

The weekly cartoon

May 08, 2025 06:49 AM

Dig deeper into the subject of this week’s cartoon

Mark Carney leads Canada’s Liberals to a remarkable victory

How Donald Trump caused a political earthquake in Canada
The new American imperialism

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

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this-week/2025/05/08/the-weekly-cartoon
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Leaders
Saudi Arabia is pulling off an astonishing transformation
All grown up :: Muhammad bin Salman is going from troublemaker to peacemaker

What Putin wants—and how Europe should thwart him

An existential struggle :: Many Europeans are complacent about the threat Russia poses—and
misunderstand how to deter its president

Luck stands between de-escalation and disaster for India

and Pakistan
The Himalayas of peace :: Sooner or later, the luck will run out

The war in Gaza must end

Israel’s forever conflict :: America should press Binyamin Netanyahu to accept a ceasefire,
then press Hamas to disarm

Donald Trump is right to ditch Joe Biden’s chip-export

rules
Illusion of control :: Time to get realistic

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All grown up

Saudi Arabia is pulling off an

astonishing transformation
Muhammad bin Salman is going from troublemaker to peacemaker
May 08, 2025 06:50 AM
WHEN DONALD TRUMP lands in Saudi Arabia on May 13th for the
opening state visit of his second term in office—a reprise of his very first
state visit eight years ago—you should pause for a moment to take in just
how unexpectedly the situation has changed. Mr Trump has become wilder
and more autocratic. By contrast, his host, the crown prince and de facto
Saudi ruler, Muhammad bin Salman (MBS), has transformed his country
into a force for order.
The familiar image Saudi Arabia conjures up is not just of fabulous riches
but also of political repression and the subjugation of women. The kingdom
has exported religious extremism, and thereby shares responsibility for the
terrorism and violence that this has fomented. Today the country is still an
autocracy. Its crown prince does not tolerate dissent. However, the Saudi
Arabia you used to know no longer exists.

Saudi society has changed drastically. Can the economy change,

too?·
MAGA meets MBS

The kingdom is now a stabilising influence in the Middle East. At home it

has undergone a stunning social revolution that has few parallels. The
pressing question is over the third part of Saudi Arabia’s transformation,
from a petrostate into a globalised, 21st-century economy. Here change has
begun, but it is not fast enough—with potentially grave consequences for
MBS’s entire project of reform.

The most surprising attribute of the new Saudi Arabia is its constructive
role in world politics·. The kingdom has both oil wealth and a hefty
population. That clout once made it a menace. It was a financier and
exporter of jihadism. In 2015, after his father, King Salman, ascended the
throne, MBS began a disastrous war in Yemen against the Houthis. In 2018
came the shocking murder of Jamal Khashoggi, a journalist and dissident,
on the orders of the Saudi regime.

The stain of those disgraces remains, but Saudi Arabia’s recent actions
count for something, too. It no longer sponsors terrorism. It now counsels
other countries to wind down their conflict with the Houthis. It has helped
Syria’s new government by paying some of its debts to the World Bank, and
promising to invest in the country if American sanctions are lifted.

Saudi Arabia’s influence in the region and with Mr Trump means that MBS
could yet do more. His country has already hosted talks aimed at bringing a
ceasefire to Ukraine. He advises dealmaking· with Iran and an end to the
war in Gaza. America’s president might just listen.
One reason for believing in Saudi Arabia’s foreign-policy rethink is that it
furthers MBS’s central concern, which is to bring about bold social and
economic change at home. He needs those changes because oil revenues
cannot be counted on to sustain Saudi Arabia for ever. If young Saudis, who
are two-thirds of the native population, are to thrive and, in the long run, to
sustain the House of Saud in power, they need jobs. An unstable
neighbourhood is a headache, because it inflames Saudis at home and raises
the risk premium foreign investors attach to the country. A flourishing
Middle East, by contrast, would mean more customers for the products
Saudi Arabia hopes to make, and for its glittering new tourist resorts.

Social change· is the second component of MBS’s new contract with his
people, and it has been nothing short of extraordinary. Less than a decade
ago half the country’s population—its women—were shut out of public life
and much of the labour market. Cinemas and concerts were banned. Any
fun was had indoors, in the desert or abroad, away from the eyes of the
religious police. Today women are free to travel, work and live where they
like. The vice squad has been disbanded. Like the rest of the world, Saudis
can now watch rock stars on stage and superheroes on the silver screen.
Even in conservative parts of the country crowds of young people are out
and about, revelling in their new freedoms.

The area where Saudi Arabia’s reinvention remains incomplete is the

economy. Since 2016 the government has spent heavily in order to diversify
away from oil. The main targets have been gaudy “giga-projects”—such as
the futuristic city of NEOM and a giant cube the size of 20 Empire State
buildings—which by 2030 were projected to gobble up nearly $900bn. To
cultivate new industries, the sovereign-wealth fund has backed more than
100 firms in areas from electric vehicles and e-sports to coffee-making and
chip manufacturing.

Despite this, the economy remains stubbornly oily. About 60% of the
government’s revenues still comes from selling crude. Although the
hospitality and leisure industry is thriving, the flood of money being
channelled into public spending is raising costs and crowding out private
enterprise. Foreign investors are not yet excited about Saudi Arabia.
Worse, the fiscal strain is growing. Oil prices are at $61 a barrel, well below
the $92 that the IMF reckons the kingdom needs to balance the books. The
country’s debt stock, though low, has doubled as a share of GDP since
2016. Although Saudi Arabia has got off with a so-called “reciprocal” tariff
of just 10%, Mr Trump’s trade war will only worsen the strain. If the world
economy slows, then oil prices and foreign investment could sink further.

No more white camels

To truly transform the economy, MBS must seize the chance to curb vanity
projects that offer scant hope of a return. The government could retrench
from areas such as tech, where private firms may invest. Improving areas
where they will not, such as education and enhancing the business
environment, would do more for long-term growth. A new investment law
is welcome, but businesses remain unsure that their rights will be upheld,
especially if they clash with the government.

The stakes for MBS and his country are high. Social liberalisation has
bought him time among a youthful population. However, if economic
change stalls and Saudis’ livelihoods suffer, their goodwill could easily
dissipate. Unrest at home could lead the government to crack down,
undoing the progress the kingdom has made. Saudi Arabia has come a long
way in just a few years. It still has far to go. ■

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An existential struggle

What Putin wants—and how

Europe should thwart him
Many Europeans are complacent about the threat Russia poses—and
misunderstand how to deter its president
May 08, 2025 07:41 AM
IN RED SQUARE on May 9th Vladimir Putin is due to celebrate Victory
Day, marking the defeat of Nazi Germany. The parade used to include
Russia’s second-world-war allies. Today, as Mr Putin targets what he
absurdly claims is another “Nazi” government in Ukraine, it signals how
Russia stands resolutely against the West. That should worry all of Europe.
As the death toll in Ukraine has grown, Mr Putin’s war aims have swollen
to justify Russian losses. What began as a special military operation next
door has become Russia’s existential struggle against distant enemies. This
is a profound shift. It means Ukraine’s future depends on Mr Putin’s
ambitions more than President Donald Trump’s theatrical diplomacy. It also
means that many Europeans are complacent about the threat Russia poses—
and that they misunderstand how to deter him.

Russia may not be about to invade other parts of Europe. But it will try to
gain sway by redoubling its cyber-attacks, influence operations,
assassinations and sabotage. If Mr Putin senses weakness, he could seek to
split apart NATO by seizing a small piece of territory and daring the allies
to respond. He could be ready for that in two to five years. This may sound
a long time. In military planning it is the blink of an eye.

Would Vladimir Putin attack NATO?

A glimpse inside Putin’s secret arms empire
Russia’s military parades have become a sign of weakness

Many people in America and southern Europe will find these claims
hysterical. Some, like America’s envoy Steve Witkoff, say that Mr Putin
can be trusted; or that he would not dare violate Mr Trump’s putative peace
deal. Others, though wise enough not to trust a man who has gone to war
five times in 25 years, argue that Russia is too weak to pose much threat. In
Ukraine it has suffered almost 1m dead and wounded and, since its gains in
the first weeks after the invasion, it has taken less than 1% more of
Ukraine’s territory.

Many in the Baltic states, Poland and the Nordic countries go to the other
extreme, warning that the threat is bigger than Mr Putin, because Russian
imperialism has deep roots. That fear is understandable given their history
of being mauled, but it is the wrong way to approach Russia. Not only does
it affirm Mr Putin’s message that NATO is incurably anti-Russian, but it
makes Europe more likely to miss chances for detente.

Mr Putin is indeed an aggressor· who needs to be deterred. A bad peace

imposed on Ukraine could become a springboard for his next war. At the
same time, however, even if Mr Putin is implacable, he is 72 years old.
Now is the moment to influence what comes after him.

Deterrence depends on understanding the threat Mr Putin poses. After three

years of fighting, war has become an ideology. In the past, 60% of Russians
said that the government’s priority should be to raise living standards.
Today, that share has fallen to 41%; instead, 55% now say they want Russia
to be respected as a world power. Mr Putin has put the whole of Russian
society onto a war footing. The arms industry creates employment.
Generous payments to soldiers and their families amount to 1.5% of GDP.
Mr Putin also uses war as his excuse for ever-harsher repression and
isolation from the West.

It is wrong to think that Russia’s forces are spent or incapable. The navy
and air force are largely intact. NATO’s top commander says Mr Putin is
restocking men, arms and munitions at an “unprecedented” pace. Russia
plans to have 1.5m active troops, up from 1.3m in September; eventually, it
could boost forces and kit on the western front by 30-50%. Thanks to the
war, it has deepened its ties to China, Iran and North Korea.

Russian tactics are crude and costly, but a sudden small incursion into a
NATO member would force NATO to choose whether to take back lost
ground and risk nuclear war. If it did not fight, NATO would be broken. In a
longer conflict NATO could surely repel a first Russian offensive, but
would it have the resources for a fifth or sixth? Mr Putin might count it a
strategic victory if Mr Trump declined to turn up, even if Russia were
pushed back. That is because America’s absence on the battlefield would
entrench Russia’s influence over Europe.

Defence against Russia begins in Ukraine. The more Mr Putin is denied

success there, the less likely he is to attack NATO. As The Economist has
argued, that means supplying Ukraine with arms, as well as giving it more
money to pay for those it can build cheaply itself. Ukraine could produce
$35bn-worth of kit a year, but has orders for less than half as much. Mr
Trump should see that financing Ukraine is in America’s interests, if only
because China is watching Russia’s progress.
However, backing Ukraine is not enough to make the entire continent safe
and Mr Trump is unlikely to offer much help, so Europe must do more.
That means working harder to defend itself, shoring up its unity and laying
the foundations for a post-Putin Russia.

Europe is buying more arms. New figures from SIPRI, a Swedish think-
tank, show that NATO, excluding America, increased spending by $68bn,
or 19%, in 2022-23. More is needed, but European leaders have still not
prepared voters for the sacrifices ahead. They are squabbling over arms
contracts. For example, Britain may not be allowed to join a European
Union scheme unless it lets EU boats fish in its waters.

Work is needed to enhance NATO’s unity, especially if America no longer

binds it together. It is naive to think that countries like Spain and Portugal
will ever fear Russia as Estonia and Poland do. But they face threats to their
infrastructure and politics. They also have a vital interest in the EU being
spared the dysfunction that would result from greater Russian influence
over its eastern members.

Last, Europe needs a Russia policy that looks beyond Ukraine. In the cold
war the West persuaded ordinary Russians that it was on their side, and that
what kept them from freedom and prosperity was the Soviet regime. It
cultivated dissidents and encouraged contacts. Today, too many Europeans
are hostile to all Russians, rather than just the warmongers.

Europe has the wealth and industrial power to withstand Mr Putin. It has the
potential to find an accommodation with his successor. As Russian soldiers
strut through Red Square, the question is whether Europe can overcome its
divisions in order to save Ukraine and protect itself. ■

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The Himalayas of peace

Luck stands between de-escalation

and disaster for India and Pakistan
Sooner or later, the luck will run out
May 08, 2025 07:40 AM

THE SPECTACLE of India and Pakistan teetering on the threshold of war

and then backing off is both alarming and familiar. This time the odds
remain in favour of de-escalation, as before. Yet the past two weeks show
that relations between the two nuclear powers, which have flared into open
conflict four times since partition in 1947, are increasingly unstable and
dangerous. It is more important than ever that the two sides address their
differences, including Pakistan’s reckless indulgence of militant groups,
which threatens itself and India.
On May 7th Indian missiles struck Pakistan and the Pakistani-ruled part of
Kashmir, a territory both sides claim. These were in retaliation for a
terrorist attack on April 22nd that killed 26 civilians in the part of Kashmir
that India controls. It says it has intercepts that show militants from
Pakistan were to blame. Pakistan, meanwhile, denies this and says that it
has shot down several Indian warplanes. It is threatening further counter-
strikes. Artillery duels along the de facto border in Kashmir are growing in
intensity and killing civilians. The outside world, following a well-worn
script, has urged both sides to step back.

Can India and Pakistan control a new cycle of escalation?·

Explainer: Why are India and Pakistan fighting over water?

Something like this pattern has occurred several times since 2000. Yet look
closer and this conflict is changing. Pakistan’s decay has been unstoppable.
The country endures a rolling economic crisis; its democracy is rigged by
its army, led since late 2022 by General Asim Munir, a pious hardliner.
Remarkably, the state enables or tolerates militant groups within its borders,
including Lashkar-e-Taiba (LeT), which has a history of atrocities against
Indians. Other terrorists, including those operating from Afghanistan, killed
1,612 Pakistanis last year in 444 attacks, the worst toll for a decade. As
Pakistan sinks, India is rising: its GDP is now ten times larger than its
troubled neighbour’s, having been five times larger back in 2000.

New weapons technology is changing the conflict, too. India has increased
arms spending since the last mini-war in 2019. It has acquired warplanes
from France and boosted its drone capabilities. Pakistan, for its part, has
bought new fighters and missiles from China, from which it now imports
81% of its arms, up from 38% just 15 years ago. Following the wind-down
of the war on terror and the fall of Kabul to the Taliban in 2021, America
and Europe pay less attention to Pakistan. Once Western presidents and
prime ministers had to indulge, humour, bribe and threaten Pakistan in
order to ensure its half-co-operation. Now they more often ignore it.

The combination of an unstable Pakistan, an arms race and outside

indifference is dangerous. Fortunately, the military exchanges have so far
been measured. True, India’s missiles stuck deeper into Pakistan than ever
and hit more sites. But they appear to have targeted militant camps. Its
aircraft remained in Indian airspace. During skirmishes in 2019 the
government of Prime Minister Narendra Modi foolishly stoked jingoism at
home. This time government rhetoric and the public mood have been more
restrained. Pakistan, meanwhile, may have salved its wounded pride by
shooting down Indian warplanes, possibly using Chinese air-to-air missiles.
It reserves the right to take further action; India says it has foiled one
attempt by Pakistan to hit back with drones and missiles. Still, there is an
off-ramp from Armageddon.

Unfortunately, unless the conflict’s underlying causes are tackled, it will

surely flare up again. India needs to end its self-defeating repression of the
part of Kashmir it controls. This has a Muslim majority and has been
subject to more centralised administration since 2019, resulting in
militarisation, clampdowns on free speech and abuses of human rights. But
the bigger problem is Pakistan’s tolerance of militants which it has long
viewed as a source of asymmetric leverage. Although Pakistan’s
involvement in the atrocity of April 22nd is not proven, a group linked to
LeT initially claimed responsibility. It then issued a denial, saying that its
social media had been hacked. Pakistan’s timeworn strategy is to sponsor
destabilising attacks and then call for stability.

America has some bargaining power, and the Trump administration should
urge Pakistan’s government to shut down terror camps and prosecute
militant leaders. International organisations that still have influence over
Pakistan, including the IMF and the global anti-terrorist-financing
watchdog, should demand it does more.

In the new multipolar world other countries should pull their weight, too.
China has become Pakistan’s most powerful patron but its citizens have
been victims of terrorism there. The Gulf states, including Saudi Arabia, the
United Arab Emirates and Qatar, should put pressure on Pakistan. They
have long been friendly with it, but their economic interests are now aligned
with giant India. With luck the latest outbreak of violence will fit the
familiar pattern. But sooner or later luck will run out. ■

Editor’s note (May 8th 2025): This article has been updated.
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Israel’s forever conflict

The war in Gaza must end

America should press Binyamin Netanyahu to accept a ceasefire, then press
Hamas to disarm
May 08, 2025 07:41 AM

THIS TIME, Israeli officials insist, things will be different. On May 5th the
cabinet approved a new plan for Gaza. It aims to mobilise tens of thousands
of reservists. The army will reoccupy a part of the enclave, razing some
buildings as it goes. Palestinians will be displaced to a sliver of land in
southern Gaza. In parallel, Israel will let some aid into the strip, which it
has blockaded since March 2nd. It will be stockpiled at hubs guarded by
American mercenaries. Families will come once a fortnight to collect food
and some essentials.

Supporters of this plan claim it will be decisive: destroying what remains of

Hamas by denying it space to regroup or oppress Gazans and depriving it of
food to feed its fighters. Binyamin Netanyahu, Israel’s prime minister, has
spent 18 months promising “total victory·”. The plan’s backers argue they
need just a few more months to achieve it.

Read all our coverage of the war in the Middle East

There is no reason to believe that they are right. For a start, the operation is
unlikely to free the hostages who remain imprisoned in Gaza. Israel’s army
has morale problems: in some units only 50% of reservists report for duty.
Polls show that more than 60% of Israelis oppose an offensive to reoccupy
Gaza. Israel has already smashed Hamas’s leadership, its rocket arsenal and
its ability to mount complex attacks. What remains is a ragtag guerrilla
force, which Israel will struggle to destroy because fresh recruits are
plentiful. Given that rump Hamas cannot muster much firepower, it may not
be worth destroying.

The new plan will bring further agony for Gazans. More than 2,000 have
died since Israel resumed fighting in March, bringing the cumulative toll to
a grim 52,000. Civilians are going hungry because of the blockade. Israel’s
scheme for supplying aid will offer scant relief. It makes no provision for
people who are sick or unable to trek to a distribution centre.

Israel’s radical new course in Gaza·

How many people have died in Gaza?

The only people who benefit from continuing the war are Mr Netanyahu,
who keeps his coalition intact, and his far-right allies, who dream of
emptying Gaza and rebuilding Jewish settlements there. If they were to get
their way, 2m people would be crammed into 25% of Gaza’s territory with
subsistence rations. Some ministers already gloat that such conditions
would drive Gazans into exile. That would count as ethnic cleansing.

Food should not be used as a weapon. Israel must allow aid into Gaza and
let charities distribute it. Some will be stolen by Hamas, which cares little
for the plight of Gazans. That is bad, but the alternative would be
starvation. Beyond that, it is past time for a lasting ceasefire. Donald Trump
should demand that Mr Netanyahu agrees to one, in exchange for the
release of all hostages. No other leader can compel him. The president is
eager for a foreign-policy win. When he visits the Gulf next week, Arab
leaders should urge him to pursue this one.

Then America should apply pressure to Hamas, using the strongest

remaining tool at its disposal: reconstruction. The UN estimates this will
cost $53bn over the next decade. Mr Trump should issue an ultimatum:
donors will not pledge a dollar until Hamas agrees to cede power and
disarm. America’s allies will need little convincing. Most want Hamas
gone.

The odds are that Hamas will try to cling to power. But it will have to
answer to its own people. Thousands of Gazans have already joined protests
demanding its ousting. Perhaps their ranks will swell. And if Hamas ever
posed a serious threat to Israel, then Israel would be entitled to strike again.

That outcome would be bleak, but the present course is bleaker. More
Gazans will die from shelling and starvation. Hostages will perish in
captivity. An endless war will deepen the rifts in Israel and further damage
its standing in the world. Israel has achieved a string of victories over its
foes. If it ends up depopulating and reoccupying Gaza it will commit a
strategic blunder and a moral outrage. ■

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Illusion of control

Donald Trump is right to ditch Joe

Biden’s chip-export rules
Time to get realistic
May 08, 2025 06:50 AM

FOR YEARS now America has grappled with how best to protect its lead
in the artificial-intelligence race. Its weapon of choice has been export
controls on the sale of AI chips to China. But, as we report this week·,
controls so far have been leaky. A burgeoning grey market exists for the
wares of Nvidia, America’s chip champion. Chinese firms lease access to
offshore data centres or buy chips through intermediaries. Export controls
have conspicuously failed to stop Chinese tech from surprising the world.

The Biden administration thought the answer was to cast a wider net. In its
final days it announced a sweeping plan for a licensing regime that would
have spanned much of the globe. Unfortunately, this would have been a
bureaucratic nightmare, and on May 7th the Trump administration rightly
said it would ditch the rules and replace them with something simpler. As it
rethinks its approach, it should proceed with care. Chip restrictions may
offer the illusion of control. But they bring with them a range of unwanted
consequences.

How China is still getting its hands on Nvidia’s gear·

The problem with the Biden rules was that they were unworkably
complicated. Close allies would have faced few restrictions; China and
Russia would have been barred outright. But some 120 middle countries,
such as India, Singapore and the United Arab Emirates, would have become
subject to a labyrinthine licensing regime. Tracking the use of chips around
the world would have been impossible. The Bureau of Industry and
Security (BIS), which was supposed to enforce it, is short-staffed and
poorly equipped.

As the Trump administration mulls new rules, it needs to be realistic. Chip

controls are always going to be leaky. Export controls can work if they are
narrowly applied. Banning China from importing extreme-ultraviolet
(EUV) lithography machines has successfully delayed its efforts to make
the most advanced chips, for instance. But EUV tools are easy to track: they
are made only by ASML, a Dutch firm, and only around 50 of them are sold
a year, each weighing more than 100 tonnes. Controlling the sale of AI
chips is a different story. They are smaller, more versatile and far more
numerous. Nvidia alone expects to sell more than 6m of them this year.

Moreover, chip controls on China will have a half-life. For more than a
decade China’s government has poured billions of dollars into its
semiconductor sector, in the hope of achieving self-sufficiency. But the
breakthroughs came in earnest only after America began tightening its
export controls, giving businesses a reason to look for alternatives. Huawei,
China’s tech champion, recently unveiled an AI system that is said to match
Nvidia on some measures. China still relies on foreign tools, and lags
behind on chips at the cutting edge. But it is closing the gap.
This means that widening the net to others will bring few benefits, but big
costs. A wide-ranging system of licences would do little to stymie China.
But it would push middle countries towards Chinese suppliers—not because
they prefer them, but because their chips are easier to obtain. Mr Trump’s
administration is reportedly considering using access to AI chips as a
bargaining chip in trade talks. But if a rules-based system descends into
wheeling and dealing, many countries may see American suppliers as
unreliable. This could shrink American firms’ market share and diminish
their technological leadership.

Chip controls alone cannot be America’s way of staying ahead. At best they
might buy some time; at worst they do not work at all. If America is to win
the AI race then it will need all the ingenuity, talent—and friends—it can
get. ■

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Letters
Are plastics greener than they seem?
A selection of correspondence :: Also this week, birthright citizenship, Donald Trump’s
economics, liberation theology, company lunches

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A selection of correspondence

Are plastics greener than they

seem?
Also this week, birthright citizenship, Donald Trump’s economics, liberation
theology, company lunches
May 08, 2025 06:49 AM

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

Find out more about how we process your letters

The problem with plastics

The claim that “Plastics are greener than they seem” (April 19th)
oversimplifies the reality that plastics vary widely in their composition and
impact and many are significantly more harmful than they appear. Some
plastics may be lightweight, reusable or recyclable. Many others, including
polyvinyl chloride, polystyrene and certain types of polyethylene, contain
toxic monomers and additives that leach out of products and waste, posing
serious risks to both human and environmental health. In addition, not all
plastics are created equal and a number of factors hinder their “circularity”
of use in an economy, for example.

We know a lot about plastics and their harms. Environmental pressures

from plastics are high and increasing with production. Humans are exposed
to microplastics and nanoplastics through ingestion and inhalation.
Mortality and harm to wildlife from plastics is demonstrated in the wild as
well as in the laboratory. And emerging evidence points to some specific
and severe health effects in humans from microplastic particles.

We must dramatically alter our relationship with plastic polymers and their
additives to keep them out of our environment and our bodies.
Margaret Spring
Chair of the ISC Expert Group on Plastic Pollution
Monterey Bay Aquarium
Monterey, California
Patrick Schröder
Member of the ISC group Chatham House
London

As part of an environmental company committed to advancing the circular

economy I welcomed your leader, “In praise of plastics” (April 19th). As
you noted, the low recycling rate for plastics is a question of market logic.
If the value of a material is high, demand will lead to recycling. Most
plastic waste carries a low value because of the low cost of making new
plastic from cheap Russian crude oil. This weakens incentives to invest in
recycling technologies.

Increased circularity of plastic in the economy requires policies that level

the playing field for recycled and virgin plastic. Proven market
interventions include deposit return schemes, quotas for recycled content
and material standardisation.
One approach, often overlooked or misunderstood, is strategic landfilling.
By actively storing low-grade plastic waste in safe facilities, we can keep its
carbon under lock and key while we build a bank for the material. Yet in
many regions, landfilling sorted plastic waste is illegal or heavily taxed.
Like most waste legislation, this reflects an outdated view of waste as a
problem to be minimised rather than a valuable resource. Policymakers
must rethink the role of modern landfills.
ANDERS KIHL
Chief strategy officer
Ragn-Sells
Stockholm

One of the main advantages of plastics in packaging is reusability. The main

barrier to reusable packaging is cost, driven entirely by a lack of regulation,
a gap that currently favours single use. Today, collection costs for reuse can
be up to 100 times higher than for single use, simply because the supporting
infrastructure does not yet exist. If existing waste systems were adapted for
reuse, it would already be significantly cheaper than single use.
Environmental reuse is far ahead of recycling. Currently available not-at-
scale reuse systems can reduce waste by 99% and carbon dioxide 84%
compared with world-class single-use alternatives.

The EU has demonstrated forward-thinking leadership by setting ambitious

reuse targets for 2030 in the latest Packaging and Packaging Waste
Regulation.

I’m sure Sir David Attenborough approves.

Tomaso Torriani
CEO and co-founder
Movopack
Milan

Must you be born in the USA?

You severely overstated the notion that the 14th Amendment to America’s
constitution guarantees citizenship to anyone and everyone born on
American soil (“Why make all babies citizens?”, May 3rd). No court has
ever held that it applies to those who are in the United States temporarily or
illegally. Many scholarly treatises, including an entire book on the issue by
two law professors at Yale, have concluded that it does not.

In Oforji v Ashcroft, the then 7th Circuit judge, Richard Posner, wrote in
dicta that “A constitutional amendment may be required to change the rule
whereby birth in this country automatically confers US citizenship, but I
doubt it… Congress would not be flouting the constitution if it amended the
Immigration and Nationality Act to put an end to the nonsense.”

Many European nations previously had birthright citizenship, reviewed it,

and then rescinded it. In 2004 Ireland abolished it with a constitutional
amendment passed by almost 80% of the voters.

There may have been good policy arguments for jus soli, the right of the
soil, in the 1860s when most nations were an ocean and a month’s sail
away. But these no longer apply in 2025 when an airline flight makes birth
tourism accessible and simple.
Ric Oberlink
Berkeley, California

Top of the protest pops

Your article on the connection between the Vietnam war and American
culture claimed that no protest song topped the Billboard charts in the
1960s (“The times, they did a-change”, April 26th). I protest. Barry
McGuire’s “Eve of Destruction” hit number one in September 1965.
Wout Ultee
Amsterdam

Updating economics

The column by Paul Dans arguing that there’s method in Donald Trump’s
madness raises a deeper question than is perhaps intended (By Invitation,
May 3rd). That is, does Mr Trump break economic theory, or prove it right
when systems are pushed to their limits? He is not rewriting economics but
stress testing it to its limits. The dysfunctions that Mr Dans highlighted of
persistent trade deficits, industrial erosion and fiscal imbalance have long
been visible through classical and Keynesian lenses.

Ricardo’s logic survives, but in a world of geopolitical rivalry and systemic

risk the definition of “advantage” has shifted from efficiency to control.
Keynes, similarly, saw deficits not as aberrations but as symptoms of
internal misalignments between production, spending and investment. His
insights remain essential.

Classical theories do not need demolition. They need updating to reflect

new constraints such as ecological limits, fractured labour markets, the
weaponisation of trade and the disruptive concentration of technological
power. Mr Trump’s ascent challenges economists to refine and extend the
canon, not to abandon it.
Dr Rolando Fuentes
Professor
EGADE Business School
Tecnológico de Monterrey
Monterrey, Mexico

I read Mr Dans’s column on Project 2025 and the first 100 days of Donald
Trump’s second term with a mix of concern and intellectual dismay. The
sweeping claims of a necessary “revolution” to “save America” raise
troubling questions, not only for modern governance, but for the very
foundations of democracy.

Plato, through Socrates, warned of democracy’s tendency to slip into

demagoguery, where power becomes concentrated in the hands of a single
figure who feeds popular sentiment while weakening institutions. His idea
of epistocracy, or governance by the knowledgeable, reminds us that
healthy democracies rely not just on popular will but on informed
judgment. When leaders are surrounded by loyalists rather than independent
thinkers, even clearly harmful decisions, like reckless tariff wars, go
unchallenged by advisers who know better from their days on Wall Street
but dare not speak up.
The challenge is not bureaucracy itself, but how it functions. Dismissing the
entire administrative state as an obstacle ignores the complexity of
governing a modern society. What’s needed is not destruction, but reform—
thoughtful, measured, and evidence-based. Addressing America’s debt and
deficit requires restructuring welfare systems, controlling health-care costs,
and yes, considering higher taxes on the wealthiest, rather than
indiscriminate tax cuts and rhetorical wars on civil servants, academics and
judges.

From the outside, and especially from a country like Switzerland, it is clear
that quiet co-ordination between diverse political forces tends to produce
more durable, effective governance than ideological theatrics or power
grabs disguised as reform.
Dr Henning Stein
Zurich

I’m sure you will get many letters criticising the essay by Mr Dans. I was
particularly struck by his complaints about “unelected, revolving-door
bureaucrats”. In a single breath he then heaped praise on Elon Musk, who is
both unelected and an incompetent bureaucrat. Mr Dans has a powerful
facility for hypocrisy.
Clive McCarthy
San Francisco

Liberation theology

Your obituary of Pope Francis (April 26th) stated that he was no fan of
liberation theology. Although this was true earlier in his career, he was
greatly affected by the assassination of Archbishop Oscar Romero in El
Salvador in 1980 and the murder of six Jesuits in 1989. By the time he
became pope in 2013 he was well disposed toward liberation theology
because of the priority it gave to the poor. He and Gustavo Gutiérrez, one of
liberation theology’s foundational authors, were said to be fast friends.
When Gutiérrez died in 2024 Francis broadcast a video at the funeral in
which he described him as “A man of the church who knew how to be silent
when he had to be silent, who knew how to suffer when it was his turn to
suffer, who knew how to carry forward so much apostolic fruit and so much
rich theology.”
Christine Gudorf
Professor emerita
Department of religion
Florida International University
Miami

It’s time for lunch

Bartleby extolled the virtues of office lunches (April 19th). I have often
found that working lunches, where selected staff are offered free
sandwiches (or perhaps something more substantial) are an ideal way to get
the creative juices flowing. They encourage input on projects from
employees who have no formal role in the assignment. More important,
lunch can help when making deals. In negotiations, trust is a key factor and
nothing helps foster trust more than having an opportunity to relax and get
to know each other over a quiet meal, one’s likes and dislikes, comparing
different national obsessions and so on (a glass of wine can help, too). Such
opportunities allow individuals to see each other as people rather than job
titles.
David Scott
Port St Mary, Isle of Man

The disappearance of the lunch break is mostly an Anglo phenomenon. In

most countries, the lunch break and in particular eating lunch with
colleagues, often in company cafeterias, is still the norm. By the way the
word “company” comes from the Latin companio, which is related to cum
pane or cum panibus, and means “one who eats bread with you”.
Jem Eskenazi
London

The need for tweed

I enjoyed your article on Nigel Farage, “The scarier sequel” (April 26th).
However, I also noted your theme of associating the tweed worn by Mr
Farage with less-than-favourable connotations. Historically, tweed may
have had its negative stereotypes, but this versatile fabric is now produced
in a variety of contemporary designs, weights and technical properties.
When well-cut, it can result in clothing that is both stylish and
complementary to modern tastes.

Is it too late to reconsider this sartorial stereotype?

James Cretney
Fownhope, Herefordshire

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By Invitation
This time really is different for the dollar, writes Kenneth
Rogoff
Dollar dolour :: The greenback was already in decline. Donald Trump will accelerate the
process

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Dollar dolour

This time really is different for the

dollar, writes Kenneth Rogoff
The greenback was already in decline. Donald Trump will accelerate the
process
May 08, 2025 06:50 AM

TO PARAPHRASE A common saying: it ain’t what you don’t know that

kills you. It’s what you think you know that ain’t so. Nothing could better
describe the numb-skulled thinking behind the havoc that President Donald
Trump and his trade Rasputin, Peter Navarro, have wrought on the global
economy. Among the likely casualties will be the supreme status of the
dollar. Although the greenback will almost certainly remain the world’s
dominant currency for at least a couple more decades, it will probably fall
several notches. Expect the yuan and the euro to encroach on the dollar in
the legal economy. Cryptocurrencies will do the same in the underground
economy, which is roughly a fifth of global GDP. Reduced market share
will mean higher interest rates on long-term dollar debt, and a weakening of
the effectiveness of American financial sanctions, among other problems.

Even before Mr Trump, dollar dominance had been in slow decline. There
are many measures of the dollar’s footprint on the global economy,
including central-bank reserve holdings, the currency used in trade
invoicing and the denomination of international borrowing. A particularly
useful one is what currency central banks focus on as their exchange-rate
anchor or reference currency. Given that national central banks have
intricate knowledge of their economies’ inner workings and how exchange-
rate movements affect them, anchor or reference currency choices may be
thought of as a portmanteau measure of dominance.

By this measure, dollar dominance peaked around 2015, after which China
gradually began to make its currency more flexible. This was a change long
in the making, since a large economy like China’s can experience very
different business cycles than America’s, and there is no reason to make its
central bank dance to the Federal Reserve’s tune. American sanctions on
Russia, including the freezing of over $300bn-worth of central-bank
reserves, have also put a fire under China’s efforts to decouple, given the
likelihood of an eventual reckoning over Taiwan.

As China’s exchange-rate regime has evolved, so too have those of its

neighbours, given that China is at least as important a trading partner as
America for most. With Asia constituting roughly half of the dollar bloc—
ie, economies that focus on the dollar when managing their own currency’s
exchange rates—a gradual splintering was already under way. Europe, too,
chafes at the tentacles of control that dollar dominance gives America; the
European Central Bank’s moves to establish a central-bank digital currency
should be viewed in part as an effort to compete more effectively with the
dollar.

The biggest challenges to dollar dominance come from within, including

America’s unsustainable debt trajectory. It is already under strain from the
inevitable ending of a period of very low long-term real interest rates. If Mr
Trump’s chaos keeps undermining the dollar’s “exorbitant privilege”—the
borrowing discount America’s government enjoys thanks to the greenback’s
dominance—rates will rise even more.

A related source of concern is the increasing willingness of both Democrats

and Republicans to challenge the Fed’s independence. Mr Trump’s
extraordinary attacks on the Fed, which he wants to blame for the recession
his tariffs might cause, has taken Fed-bashing to another level. Don’t think,
though, that Fed independence would have been entirely secure under
progressives, who want the Fed to focus more on the environment,
inequality and social justice, and ultimately to create a central-bank digital
currency to suck money out of the private banking system and redirect
credit towards government-favoured sectors.

Mr Trump did not start the dollar’s decline, but he is likely to prove a
powerful accelerant. Aside from upending a global trade regime in which
America was a big winner, he is working hard to undermine almost every
other pillar of dollar dominance. He has rightly cut back illegal immigration
—but he does not seem to care much for legal immigration either. He seems
hell-bent on crushing research at the nation’s top universities, which have
long been a major source of innovation and growth.

Above all, Mr Trump’s broad challenge to the rule of law weakens the case
for dollar exceptionalism. Until now, trust in the fairness of America’s legal
system has helped convince investors that American assets are among the
safest in the world. This includes not just Treasuries, but stocks, corporate
bonds, property and more. The prices may go up and down, but at least you
own what you own. Now, if Mr Trump’s efforts to vastly extend
presidential power succeed, foreign holders of US assets will feel less
secure.

The great Danish chess player Bent Larsen, when asked if he preferred to
be lucky or good, replied “both”. Americans tend to emphasise how good
the American system has been, as the dollar has beaten back one challenger
after another, from the Soviet Union to Japan to Europe, and now perhaps
China and crypto. But they forget how many turns of luck America has had
along the way. These include, among others, the collapse of mid-1960s
Soviet economic reforms that might have turned the country into something
more like latter-day China; Japan’s mistake in allowing itself to be
browbeaten in the 1985 Plaza accord when its monetary-policy framework
and financial regulators were not yet ready for prime time; and the euro
zone’s decision to prematurely include Greece.

This time, unfortunately, is different. Unless Mr Trump reins in his chaotic

trade policy—he could start by firing his Rasputin—America’s luck looks
set to run out. ■

Kenneth Rogoff is a professor at Harvard University and the author of

“Our Dollar, Your Problem: An Insider’s View of Seven Turbulent Decades
of Global Finance and the Road Ahead”.

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Briefing
Would Vladimir Putin attack NATO?
Watching the bear :: Russia is building up its forces, causing fear in its neighbours

Saudi society has changed drastically. Can the economy

change, too?
Not your father’s kingdom :: The government’s push to reduce dependence on oil is creating
other distortions

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Watching the bear

Would Vladimir Putin attack

NATO?
Russia is building up its forces, causing fear in its neighbours
May 08, 2025 06:49 AM | NARVA

EGERT BELITSEV, the head of Estonia’s border force, calls it the edge of
the free world. A bridge stretches between the outer walls of the Hermann
Castle in Narva, on the Estonian side, and those of the Ivangorod Fortress,
in Russia. Swollen by the melting snows, the Narva river seethes
underneath. Two giant screens recently erected on the Russian side facing
Estonia were expected to stream video of the parade in Red Square on May
9th commemorating victory in the second world war. The sounds of drums
and the images of goose-stepping Russian soldiers are bound to induce
anxiety in Estonia, which was annexed in 1940 by Stalin and was occupied
by the Soviet Union from 1944 until 1991.
Provocations are routine. Russia has been jamming GPS signals throughout
the region, disrupting air traffic and search-and-rescue operations. Last year
Russian border guards removed buoys on the Narva, which mark the border.
Surveillance blimps are a regular sight in the skies. More concerning is
what can be seen on satellite images. Although Russia’s bases near the
Estonian and Finnish borders are nearly empty, with troops and equipment
sent to Ukraine, new construction is under way.

On paper, Russia has big plans. It aims to expand its armed forces to 1.5m
active troops, up from about 1.3m in September. In 2023 it announced the
creation of a new formation, the 44th Army Corps, in Karelia, along the
Finnish border. The 44th’s first units were bloodied in Ukraine last year.
Russia is also expanding several brigades into larger divisions. All this will
take years to accomplish. But if Russia succeeds, notes Lithuania’s
intelligence agency, it will increase troops, equipment and weapons on its
western front by 30-50%. “During 2024”, noted a recent Danish
intelligence assessment, Russian rearmament “changed character from
reconstruction to an intensified military build-up”. The goal is to be able “to
fight on an equal footing with NATO forces”.

Some argue that Russia is bound to attack. “It’s a question of when they
will start the next war,” argued Kaja Kallas last year, when she was
Estonia’s prime minister (she is now the EU’s foreign-policy chief).
Emmanuel Macron, France’s president, in March pointed to Russia’s
breakneck rearmament. “How believable is it, then,” he asked, “that today’s
Russia will stop at Ukraine?” Others are sceptical that Russian ambitions
range much beyond the Dnieper river. Pedro Sánchez, Spain’s prime
minister, scoffs at the notion of a big war: “Our threat is not Russia bringing
its troops across the Pyrenees.” Steve Witkoff, Donald Trump’s envoy for
peace talks with Russia, when asked whether Russia intended to “march
across Europe”, responded simply: “100% not.”

Intelligence analysts frame threats in terms of two variables: intent and

capability. There is no specific intelligence at present that suggests Russia
intends to attack NATO. But intentions are fluid. In his public speeches,
Vladimir Putin has justified his war to conquer Ukraine in several ways: the
need to defend Russian-speakers in Donbas; the imperative of
“demilitarising” and “de-Nazifying” Ukraine; and the need to keep a
supposedly hostile NATO at bay. In February 2022, on the eve of war, Mr
Putin blamed Lenin for tearing apart the Russian empire, implicitly casting
doubt on the sovereignty not only of ex-Soviet states like Ukraine, but also
of those once part of that empire, such as Finland.

Yet for Mr Putin, war may be less about external threats than about
prolonging and trying to legitimise his reign. In his 25 years in power, he
has waged five wars. Each began with his popularity sagging; each ended
with his authority enhanced. At the start of the war few Russians believed
the Kremlin’s line that Russia was threatened by the West. It has since
become more widely accepted—not least because Mr Putin’s propaganda
was reinforced by some Western rhetoric that blamed all Russians for the
war. This has alienated those who were initially sympathetic towards
Ukraine and the West.

Rallying round the flag

Though a majority of Russians would prefer the war to end, most also credit
the war with boosting the country’s international clout, according to a joint
survey conducted by the Chicago Council on Global Affairs and the Levada
Centre in Moscow. In the past, 60% of Russians prioritised high living
standards over great-power status. Today 55% of Russians favour power
projection over high living standards. They may be getting part of their
wish. After three years of war, Russia’s economy is sliding towards
stagnation. Inflation remained stubbornly above 10% in the year to March
despite the central bank holding its benchmark interest rate at 21%.

Sometimes it is capability that shapes intentions. In a recent interview, Mr

Putin said that the war in Ukraine is the culmination of a long-standing
confrontation with the West. After he grabbed Crimea from Ukraine in 2014
he stopped, not because he lacked the will to grab more, but because he
lacked the means. “In 2014 the country wasn’t prepared for a head-on
confrontation with the entire collective West, which is what we’re seeing
now.”
Yet Mr Putin’s zest for war and his ability to wage it are two different
things. In Ukraine his troops have spent nine months unsuccessfully
assaulting Pokrovsk, with a pre-war population of 70,000 people, while
suffering more than 1,000 dead and wounded every day. Russia’s army is
incapable of complex manoeuvres and a generation of officers has been
lost. Its air force rarely ventures into Ukraine, preferring to hurl glide
bombs from a safe distance. As long as the war in Ukraine grinds on,
Russia will have no spare ground forces to mount a serious threat to NATO.
But even if a ceasefire is signed, Russia might struggle to divert large
numbers of troops, notes Konrad Muzyka, an analyst, because that might
allow Ukraine to recapture territory.

Russia, therefore, would have to build new forces. Western intelligence

agencies have scrutinised how long that might take. Their conclusions vary
considerably. America talks of Russia reconstituting its army “during the
next decade”. Norwegian intelligence reckons five to ten years “at the
earliest”. Ukraine’s estimates suggest five to seven; Germany’s are five to
eight. Estonian spooks appear to be the least sanguine, offering a three-to-
five year timeline for Russia to build new formations, depending on the
course of the war, Russia’s economy and whether sanctions remain.

These timelines hinge on a variety of factors. Russia is churning out

munitions at extraordinary speed—more than 1,400 Iskander ballistic
missiles per year, as well as 500 Kh-101 cruise missiles, according to
Ukrainian estimates and a recent report by the Royal United Services
Institute (RUSI), a think-tank in London. But in other areas, current
production rates are unsustainable. Just 10-15% of the 1,500-2,000 tanks
and 3,000 other armoured fighting vehicles being produced annually are
new, notes RUSI. The rest are refurbished from old Soviet stockpiles. These
could run dry by 2026 if present loss rates continue, notes Dara Massicot of
the Carnegie Endowment. Russian armour production might have peaked
this year, says Mr Muzyka.

Manpower is also a serious constraint. In the short term, Russia is recruiting

some 30,000 men a month, but over the longer run it faces challenges from
a declining and ageing population.

More important is the quality of these forces. “Materiel recovery will be

much faster and easier than the actual ability to employ the force,” argues
Michael Kofman, also of the Carnegie Endowment. Russia’s armed forces
have improved dramatically in some areas, he says, such as finding and
striking targets using drones, but their ability to scale this up is limited by
the quality of troops, officers and staff work.

The men in the foxholes

The quality of Russia’s forces has been hurt by grievous losses. Western
officials reckon since late 2024, Russian military hospitals have been
operating at maximum capacity. General Chris Cavoli, NATO’s Supreme
Allied Commander Europe, said in April that Russia had suffered an
estimated 790,000 casualties. Many of those who have been killed or
wounded are the junior officers needed to lead units in an expanded force.
Public funeral notices suggest that between 2022 and 2024 Russia lost
about as many lieutenants as would normally be needed to staff ten
divisions or brigades, writes Ms Massicot.

A recent study by the RAND Corporation, an American think-tank,

explores the different ways Russia could rebuild its armed forces. For many
years before the invasion of Ukraine, Russian leaders sought to build a
leaner, more professional force that relied on technology and agility. That
model is now in the dustbin. Russia is reverting to an older, cruder way of
war: “The centrepiece of these reforms is not innovation and technological
adaptation. Rather, it is a return to mass and firepower.”

Russia’s ability to sustain a military build-up is also constrained by its

struggling economy. Last year it spent 6.7% of GDP on defence, according
to official figures, with spending forecast to rise this year. Yet not all of this
money will be used to buy new equipment, since the figure includes
payments to injured soldiers and the families of those who have been killed,
as well as large salaries to entice people to sign up as contract soldiers.

The slog of war

One camp therefore argues that the threat from Russia, though real, is more
manageable than commonly thought. The new formations, such as the 44th
Army Corps destined for the Finnish border, are “Potemkin units”, says
John Foreman, who served as Britain’s defence attaché in Kyiv and
Moscow. In the latter post, he recalls, Russia claimed that it had 1m men
under arms; the true figure at the time was 880,000.

Moreover, the accession of Sweden and Finland to NATO has drastically

worsened Russia’s position in NATO’s north. The idea that Russia could
extricate itself from Ukraine, reform its army and “march on Warsaw” is
“an absolute fantasy”, concludes Mr Foreman. He doubts that Russia has
any intention to attack, in any case.

Another school of thought retorts that Russia’s ability to wage war depends
very much on the sort of war being waged. “In the medium term, Russia is
unlikely to be able to build up the capabilities needed for a large-scale
conventional war against NATO,” acknowledges Lithuania’s defence
intelligence agency. “However, Russia may develop military capabilities
sufficient to launch a limited military action against one or several NATO
countries.” Danish intelligence sounds a similar warning: it would take five
years for Russia to be ready for a big war (not involving America). But it
would take only two years to prepare for a “regional war” against several
countries in the Baltic-sea area, and a paltry six months to be able to fight a
“local war” against a single neighbouring country.

Russia could shift 50,000 troops from Ukraine to its Leningrad military
district with a minimal impact on the current war, argues Hanno Pevkur,
Estonia’s defence minister. “But this would significantly change the force
posture of the Russian army close to Estonia,” he warns. “To have a
localised small conflict, they don’t need to have all the troops available
from Ukraine.”
There are big caveats to these scenarios. The Danes assume that NATO
would not rearm “at the same pace”, a premise that looks shakier today as
European NATO allies, spooked by Mr Trump’s assault on them, pour
money into their armed forces. The more important assumption is that
Russia could keep a war localised in the first place. NATO currently
deploys a string of “forward” battlegroups in eight countries, from Estonia
down to Bulgaria, involving troops from 28 separate countries. American
troops are present in at least three of them. Increasingly NATO is also
“shadowing” Russian exercises, ensuring that it monitors and matches
surges of Russian troops near the border; the “Zapad” exercise in Russia
and Belarus later this year will be watched closely.
In order to fight a limited conflict, Russia would have to assume either that
these forces would stand by or pull back—or, at least, that America would
not step in (an assumption that would be strengthened were America to be
distracted elsewhere, for instance by a Chinese attempt to invade or
blockade Taiwan). That would certainly even up the odds.

Our calculations suggest that, even after adjusting for Russia’s lower wages
and costs and its increased budgets, Mr Putin’s defence spending does not
match that of NATO’s European members. Yet fragmentation and
duplication mean that at least some of Europe’s spending is wasted. More
importantly, although European forces are well armed on paper, they would
struggle to target their long-range weapons, organise complex air
operations, command big formations and defeat Russian air defences
without American involvement. Poland, for instance, has oodles of long-
range rocket launchers. But it does not have the means to find targets for
them far behind the front lines. For now, most European countries are
operating on the assumption that America, even under Mr Trump, will keep
up that support for long enough for Europe to fill in the gaps over time—a
managed transition rather than a disorderly withdrawal.

Looking for a soft flank

If that assumption holds, and if European rearmament gains pace—both big

ifs—Russia is likely to remain deterred from taking any acts of war that
would trigger NATO’s Article 5 mutual-defence clause. But its appetite for
risk could nonetheless grow, not least if it judges that Mr Trump might
overlook smaller transgressions. “Russia will gradually become more
willing to use military force in the coming years to put pressure on or
challenge NATO as a whole or individual NATO countries,” argues Danish
intelligence.

That could involve relatively minor incidents, such as the reckless decision
to interfere with American, British and French surveillance aircraft in recent
years. But it could also entail more ambitious efforts to destabilise what
Russia views as peripheral territory, such as the Norwegian island of
Svalbard, where it might be harder to gain a consensus among NATO allies
on a timely response. Non-NATO states would also be easier prey still. “If
you saw Russian troops from Transnistria moving into some part of
Moldova,” says one intelligence insider, “I think that would be a very, very
difficult contingency to deal with, and it would split NATO.”

Predicting future wars is always fraught. During the cold war, America and
the Soviet Union habitually misunderstood both the intentions and
capability of the other. In “Watching the Bear”, a collection of essays
published by the CIA in 1991, Raymond Garthoff, a former CIA analyst,
reflected on the tendency, in the 1950s and 1960s, and again in the 1970s
and 1980s, “to impute offensive intentions to increasing Soviet strategic
offensive capabilities”. Soviet thinking, in turn, he notes, was marked by
“considerable exaggerations of Western bellicosity and capabilities,
including planning for initiation of war”.

But understating the risks is also dangerous. The chances of a big war near
Sweden remain low, says the country’s spy agency. However, a “limited
armed attack” against a Baltic state or NATO ships is entirely possible, it
warns. “Such action could seem disadvantageous from a Swedish
perspective,” explain the spies, “but it is important to emphasise that the
Russian leadership makes decisions based on its own logic and
assessment.” ■

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Not your father’s kingdom

Saudi society has changed

drastically. Can the economy
change, too?
The government’s push to reduce dependence on oil is creating other
distortions
May 08, 2025 06:50 AM | Buraidah

TWENTY YEARS ago Buraidah was a showcase of Saudi Arabia’s

problems. Religious police roamed the city’s streets, making sure that shops
stayed closed for the five daily prayers, that women only left their homes
accompanied by a male relative and that the sexes did not mingle anywhere.
There were no cinemas or concerts; most restaurants catered only to men.
Two decades of relatively low oil prices had called into question the
assumption that Saudis could simply swan into well-paid government jobs.
Dissatisfaction at the disintegrating social contract helped propel another
Saudi export: Islamic fundamentalism. In 2005 a local militant cell battled
the security forces for nearly 48 hours.

Today Buraidah is scarcely recognisable. On a warm Friday evening the

high street bustles, with women wandering as freely as men. Couples stroll
along together or sit side-by-side in restaurants. A cinema screens Arabic
and Hollywood blockbusters. A women’s driving school on the edge of
town does a brisk trade. The religious police are nowhere to be seen and
terrorism is a dim memory.

But Buraidah is still emblematic of one enduring blight: a lack of economic

diversification. It has a few new jobs in services, including the cinema and
the driving school, and still lots in the bureaucracy. Buraidah’s only other
notable industry is date-farming, which is sustained chiefly by migrant
labour.

A royal warrant

Muhammad bin Salman, the crown prince and de facto ruler, often known
as MBS, has been trying for a decade to ease Saudi Arabia’s stultifying
social strictures and to reduce the economy’s dependence on oil and the
state. The first half of this formula has proceeded with astonishing speed.
But the second is making little headway. And the pressures that made Saudi
Arabia’s old system of generous state handouts, enforced piety and
commodity dependence seem unstable and unsustainable—volatile oil
prices, lurching fiscal deficits and inadequate job creation for a youthful
population—have not gone away. MBS’s social reforms have won him lots
of goodwill, but only the economic elements of his “Vision 2030” can bring
lasting stability.

The crown prince’s plans stretch from the grandiose to the granular. Most
attention-grabbing are the “giga-projects”, into which officials planned to
plough nearly $900bn by 2030: a vast, futuristic “linear city”; a ski village
overlooking baking desert; 50 luxury hotels strung along the Red Sea; the
world’s biggest building in Riyadh. Less spectacular but perhaps more
important are the government’s efforts to foster new industries, from
tourism to carmaking. Civil servants, once dozy in their sinecures, are
hastily rewriting rules on everything from divorce to foreign investment.
All told, more than 600 packages of reforms have been initiated.

MBS’s social revolution has not only expanded personal freedoms, it has
also boosted economic activity. Since 2018 women have had far more
freedom to move around, to work and to start businesses. Discriminating
against them in hiring or pay is now illegal. Women’s participation in the
workforce has shot up from 20% to 36%. It has risen fastest among those
with only high-school diplomas, many of whom have joined the private
sector, notes Jennifer Peck of Swarthmore College. The number of dual-
income families has grown, pushing up household incomes.

Whether through luck or foresight, these changes came just as society was
ready for them. When MBS sidelined the religious police there was some
fear of a conservative backlash. In practice, as research by Leonardo
Bursztyn of the University of Chicago and colleagues has shown, married
men tended in private to support the idea of allowing women to work, but
wrongly assumed that society as a whole was too conservative to accept it.

Latifah Altamimi, an entrepreneur who went to university in America,

explains that Vision 2030 encouraged her to return to the kingdom. She was
surprised to discover that her elderly, conservative father had reconciled
himself to the social changes. “I experienced culture-shock twice: once
when I got to America and again when I returned,” she says.

The state has also played an active role in promoting the sports and
entertainment industries. A catsuit-clad Jennifer Lopez performed before
the Formula 1 Grand Prix in Jeddah earlier this year. More mundanely, at
Boulevard City, an open-air mall in Riyadh, the capital, a DJ presides over a
crowd of young dancers—a scene that was unimaginable 20 years ago. The
parts of the non-oil economy that have grown fastest in recent years include
retail and hospitality. According to the central bank, the share of household
spending devoted to eating out, recreation and culture rose from 12% in
2017 to nearly 20% in 2024.

Officials are also proud of the growth in tourism, which has risen from
around 60m overnight stays in 2016 to more than 100m in 2023. The bulk
of these are staycating Saudis. In 2017 Ms Altamimi founded Gathern,
Saudi Arabia’s version of Airbnb. The company, now one of the kingdom’s
biggest startups, helps large families find holiday
accommodation. Foreigners, meanwhile, account for only a tiny fraction of
the increase, despite heavy investment in flashy resorts and attractions.

Overall, however, the economic transformation has been slow to arrive, to

officials’ chagrin. Oil still accounts for the lion’s share of exports and
government revenue. Its share of economic activity remains high, too,
although it has fallen from 36% of GDP in 2016 to 26% last year (see chart
1). A liberalisation of mortgage-lending means that construction is
booming, alongside retailing and hospitality. But the growth of other
industries championed by the authorities has been lacklustre.

Why the slow progress? One answer is that, whereas social change can
happen overnight, economic restructuring takes longer. Some industries do
show promise. The kingdom has a competitive advantage in mining, thanks
both to geology and to the many similarities between extracting
hydrocarbons and digging up minerals. Ma’aden, a company owned by the
PIF, Saudi Arabia’s sovereign-wealth fund, hopes to start exploiting bauxite
reserves soon; it is already extracting gold. Vedanta, an Indian firm, plans to
invest $2bn in copper-processing facilities.

Renewable energy may, in time, become another industry that takes root,
given the scope for solar installation and hydrogen production. The PIF has
entered into joint ventures with Chinese firms such as LONGi to develop
solar projects. Hotels along the Red Sea could eventually attract more
foreign tourists: rumours swirl endlessly that the kingdom may try to boost
international arrivals by lifting its ban on alcohol in such places. Some basic
industries have been spurred by new local-content requirements in public
procurement. Bullets for the army are now being home-made, for example,
as they have long been in most industrialised countries.

But there are other industries in which Saudi Arabia simply lacks the know-
how to make progress. Carmaking is one. The PIF has a goal to produce
500,000 electric vehicles a year by 2030. By the end of 2023 the kingdom’s
sole car factory had reassembled just 800 vehicles in total using kits
imported from America, according to Reuters. A push into semiconductors
faces similar challenges, says Farouk Soussa of Goldman Sachs, a bank. In
some areas the kingdom is competing with other oil-rich places, such as the
United Arab Emirates, which have a head start.

Progress in advanced manufacturing requires skilled labour and corporate

expertise. Yet despite a charm offensive, foreign investors are not flooding
in. Inflows of foreign direct investment actually fell in 2024 compared with
the year before. As a share of GDP, they will need more than to double to
reach the target for 2030.
A princely ransom

Foreign investors are wary for a number of reasons. The memory lingers of
MBS holding held many rich Saudis hostage in a luxury hotel in Riyadh in
2017-18 until they handed over huge sums to the government. So too does a
worry about the reputational risk of doing business with a government that
had a prominent critic killed and dismembered in 2018. Political
connections remain vital to doing business in Saudi Arabia, say analysts at
Capital Economics, a consultancy. More prosaically, payment disputes and
delays are not uncommon with government contracts.

Donald Trump’s trade war will hamper the foreign-investment push, too.
Assuming that the overall effect of America’s new tariffs is to chill the
world economy, global trade and capital flows will fall. Mr Trump is due to
visit the kingdom on May 13th. During his stay he and MBS are expected to
announce hundreds of billions of dollars in American investments in Saudi
Arabia and Saudi investments in America. But both sides are keener for the
money to be spent in their own country: Mr Trump has talked about
attracting $1trn from Saudi friends.

The realignment of trade brought by Mr Trump’s tariffs could lead to some

benefit to Saudi Arabia. He has imposed only the minimum, 10% levy on
Saudi goods, far below the levels threatened for most countries and already
visited on China. The kingdom’s petrochemicals industry might find itself
replacing American firms as supplier of certain products to China, for
instance. Yet Saudi Arabia will not have a cost advantage in many goods,
even after accounting for tariffs. And it will not be considered as stable a
place to set up new manufacturing facilities as its neighbour the United
Arab Emirates.

Another constraint is human capital. Half of Saudi men work as

bureaucrats. Women’s participation rates remain low despite the recent
growth. Schoolchildren across the Middle East score well below the OECD
average in maths, reading and science. Saudi pupils, in turn, perform worse
than their Emirati or Qatari counterparts, despite hefty investment in
education. The heavy past emphasis on religious instruction may be partly
responsible. And the security of cushy public-sector jobs may have blunted
incentives to study hard.

To its credit, the government acknowledges that change is needed.

Education has been modernised, with the number of hours of religious
education in middle school cut by 60%. A new law on investment, which
seeks to define contractual rights, has recently come into force, although it
has not yet been put to the test.

In other ways, however, the government is becoming a bigger hindrance to

private enterprise. Businesspeople talk approvingly of the capable and
committed cadre of senior technocrats and ministers. But the sheer scope of
what they are trying to do can turn them into bottlenecks.
Micromanagement means that even simple decisions can take a long time.
The crown prince himself is rumoured to be overseeing the design of
models at a state-backed car firm. Further down the chain of command,
meanwhile, bureaucrats are too risk-averse to move things forward. The
result is stultifying sluggishness.

Still front and centre

Moreover, Saudi Arabia has become a textbook example of crowding out.

MBS’s giga-projects are sucking up capital, attention and construction
materials. These were originally expected to gobble up $879bn by 2030,
assuming they came in on budget (which is unlikely). That is impeding
other projects that will probably make more difference to the economy in
the long run. The opening of mines is being delayed not by the difficulty of
obtaining the necessary permits—the usual constraint in the rest of the
world—but by a shortage of the right digging equipment. As the economy
has overheated, prices and rents have risen across the board.

Borrowing costs have gone up, too. As oil revenues sag, the government
has turned to banks and bond markets for funding, pushing up interest rates
for everyone, says Mr Soussa of Goldman. A fifth of local banks’ loans are
now made to the public sector, up from less than a tenth in 2015. With loan-
to-deposit ratios rising, banks are having to borrow commercially
themselves in order to meet regulatory requirements, pushing up the rates at
which they can lend.

In its eagerness to find worthy domestic initiatives to bankroll, the PIF is

elbowing private investors out of the way. Its annual spending is due to rise
next year, from $40bn to $70bn (nearly 7% of GDP). So determined has it
been to push money out the door that it is funding projects that do not need
public support. That, in turn, is driving up valuations and so diminishing the
government’s returns. Financiers say they have raised the matter with
officials, to no avail.
What may force a reckoning is the rapidly deteriorating fiscal picture. As
the government has splurged, the oil price needed to balance the budget has
risen from $82 a barrel in 2021 to $96 last year. On average last year the
actual price was about $80 a barrel. The consequence has been steady
growth in public debt. In 2016 this stood at 13% of GDP. Last year it was
30% and it is projected to swell yet further this year (see chart 2). Last year
Saudi Arabia overtook China as the biggest emerging-market issuer of
dollar-denominated bonds.
The fiscal outlook is set to become bleaker still, since the oil price has been
moving in the wrong direction. The trade war has raised the prospect of a
global recession in recent months, sending it lower. It has also fallen in
recent years because some members of the OPEC cartel have produced
more than their quotas, even as Saudi Arabia has sought to raise the price
by trimming production. On May 3rd Saudi Arabia told OPEC it would no
longer underwrite such cheating, and would instead open the taps to regain
its market share. The price of Brent crude duly slumped to around $60 a
barrel.

A royal pain

Even before the latest drop in oil prices, the budget deficit in the first
quarter of 2025 was already more than half of the predicted annual shortfall.
Declining export revenues and surging construction-related imports drove
the current account into deficit last year—an unusual occurrence for a big
commodity exporter.

Naturally, spending cuts loom. Officials talk euphemistically of a

“reprioritisation”. Some of the flashiest giga-projects are quietly being
scaled back; some speculate that a few may even be put on ice. Increasingly
the idea is to focus instead on the things that are more likely to provide a
return on investment, such as tourism projects. The official line is that no
one ever really meant the linear city at NEOM to stretch across the desert
for 170km. It was always going to be a much smaller “proof of concept”.
The PIF, too, is reported to be considering spending cuts.

If the oil price forces Saudi Arabia’s rulers to scale back their vanity
projects, that may have the added benefit of easing the crowding out. But
Saudi economists and businesspeople would like to see a bolder shift: a
government withdrawal from certain industries; the faster privatisation of
the successful firms in the PIF’s portfolio; more radical changes to
education and, perhaps most important of all, a more considered,
discriminating and hard-nosed approach to economic reinvention. At the
very least, the division of labour between the private and public sectors
needs to be made clearer.
Saudi Arabia’s wholesale social transformation has bought the government
time and goodwill to reshape the economy. Its youthful population is still
revelling in newfound freedoms. But as the novelty wears off, its
expectations will grow. Through the will of one man, the kingdom has
come further than many would have predicted. A vast state-funded machine
is working hammer and tongs to re-engineer the country’s future. The
question is whether it can restrain itself. ■

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can-the-economy-change-too

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Asia
Can India and Pakistan control a new cycle of escalation?
Punishment time :: India’s missile strike was the largest aerial attack on Pakistan in 50 years

Australia is no longer lucky

The Australian Labor Party’s thumping win :: It needs to get its mojo back

Trade tensions help Singapore’s prime minister to a big

win
The devil you know :: But voters want credible opposition in parliament, too

Taiwan’s other war

A call to arms :: The island is a kill zone for green iguanas

How should India promote Hindi? By doing nothing

Banyan :: Squabbles over language are heating up

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Punishment time

Can India and Pakistan control a

new cycle of escalation?
India’s missile strike was the largest aerial attack on Pakistan in 50 years
May 08, 2025 10:44 AM | DELHI

Editor’s note (May 7th 2025): This article has been updated.

SHORTLY AFTER midnight on May 7th, two weeks after a terrorist attack
in Kashmir, Indian missiles streaked into Pakistan. India said it had hit
“terrorist infrastructure” at nine sites in Pakistani-administered Kashmir and
in Punjab. Pakistan said that India had struck six locations in those regions.
It denied the sites were used by terrorists and said it had shot down five
Indian fighter jets, a claim not confirmed by India. It was the largest aerial
attack on Pakistan in more than 50 years.
After the strikes, both sides exchanged artillery and small-arms fire across
the “line of control” dividing Kashmir, which is claimed wholly and ruled
partly by both countries. India said that killed 13 people on its side;
Pakistan said 31 of its civilians were killed in the shooting and the Indian
air strikes. But this is almost certainly just the start of the nuclear-armed
neighbours’ confrontation. Pakistan said India damaged a hydropower dam
and called the attack “an act of war”. Pakistan’s army said it would hit back
“at a time and place of its own choosing”. It also said that it shot down 12
Indian aerial drones that entered its airspace in the early hours of May 8th
and that killed one civilian. India said on May 8th that it had “neutralised”
an attempted overnight missile and drone attack by Pakistan on several
military targets and had responded “in the same domain with same
intensity” by targeting air-defence radars and systems at several locations in
Pakistan.

India’s government had hinted at military retaliation ever since accusing

Pakistan-based militants of being involved in an attack on tourists in
Kashmir on April 22nd, which killed 26 civilians. That was the bloodiest
assault there since 2019 and the deadliest on Indian civilians since one in
Mumbai in 2008.

Before its strikes, India had taken non-military action, exploring new ways
of responding to what it sees as persistent Pakistani-backed terrorism. Yet
India decided that a military response was essential. That is partly for
deterrence: the foreign secretary, Vikram Misri, said that Pakistan-based
terrorists planned more attacks. But India is also trying to satisfy a furious
public. Mr Modi has been under pressure to go beyond his responses to the
last big militant attacks in Kashmir. In 2016 he sent soldiers into the
Pakistan-ruled part of the region, and in 2019 he ordered air strikes on
Pakistan. Having claimed to have brought peace and prosperity to Kashmir
since scrapping its semi-autonomous status in 2019, his policies and
security forces are under scrutiny.

The Indian strikes on May 7th were notable for three reasons. One is that
India appears to have fired the missiles and guided bombs from its own
territory. “This cowardly and shameful attack was carried out from within
India’s airspace,” said Pakistan’s army. If that is true, India may have been
trying not to repeat its experience in 2019, when an Indian fighter was shot
down over Pakistan and its pilot captured. Several Indian news outlets
reported that India had fired SCALP cruise missiles and dropped Hammer
smart-bombs from French-made Rafale fighter jets. The relative success of
those tactics may depend on the veracity of Pakistan’s claims to have shot
down three Rafale jets, one SU-30 and one MiG-29. India has not
commented officially on the claim. But Indian and foreign media reports
suggest that three aircraft may have crashed in Indian territory. Reuters
reported that three Indian pilots involved were in hospital.

As in 2019, India attacked undisputed Pakistani territory as well as

Pakistani-held Kashmir. The distinction this time is that it targeted four sites
in Punjab: Pakistan’s most populous province, and its most politically and
economically important one. India said that its target in the city of Muridke,
which is 30km from Lahore, Punjab’s capital, was a training camp for
Lashkar-e-Taiba (LeT), an Islamist militant group that has deep ties to
Pakistan’s intelligence service and that Indian officials say was behind the
latest terrorist attack in Kashmir. India says its target in the Punjab city of
Bahawalpur was the headquarters of Jaish-e-Mohammed, another jihadi
outfit with ties to Pakistani spooks.

India’s decision to strike Punjab is escalatory. But the third feature of the
strikes is that everything else appeared designed to minimise the risk of
full-scale war. Pakistan said India’s attack had targeted civilian areas,
damaging mosques and killing innocents including women and children.
But India said that its strikes were “focused, measured, and non-escalatory”.
It said that it had not struck military, economic or civilian targets, but only
“known terror camps” from which attacks on India had been directed.
Footage played at an Indian news conference showed what appeared to be
precision strikes on individual buildings. India seems eager to provide
Pakistan with an off-ramp.

Will Pakistan take it? After India attacked in 2019 it carried out a retaliatory
air strike. Pakistan could attempt another counter-strike, if India did indeed
thwart an overnight missile and drone attack from it. But Pakistan will
probably choose its response with care, doing enough to placate its people
and to restore a modicum of deterrence. Its defence minister, Khawaja Asif,
told broadcaster Geo News that Pakistan would hit only Indian military
targets and not civilians. That might involve strikes against symbolic targets
which are unlikely to cause mass casualties.
Still, the risk of further escalation remains. India told foreign governments
that it would retaliate for any Pakistani counter-strike. India said it briefed
Marco Rubio, America’s secretary of state, after the attacks. But if
American officials might once have used their clout in both countries to
defuse the crisis, their appetite and ability to do so this time is less clear.
Donald Trump initially responded with insouciance, saying the two sides
had been fighting for “centuries”. He later urged them both to stand down:
“They’ve gone tit-for-tat, so hopefully they can stop now.” ■

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The Australian Labor Party’s thumping win

Australia is no longer lucky

It needs to get its mojo back
May 08, 2025 06:50 AM | SYDNEY

Albo the Dutton-slayer

THE LANDSLIDE win on May 3rd for the Australian Labor Party, led by
Anthony Albanese, the incumbent prime minister, was the party’s best
election performance since the second world war. It was also the worst
faring ever for the main opposition, the (conservative) Liberal-led coalition.
By May 8th, ten seats in the 150-seat House of Representatives remained
undeclared. But Labor had won at least 90 seats; the coalition had bagged
only 40 (see chart).
A few months ago the coalition was savaging Labor over the cost of living
and high immigration. But an anti-Trump bump turned Mr Albanese’s
fortunes—as it made Mark Carney’s in Canada. Both left-leaning
politicians faced candidates borrowing from Donald Trump’s populist
antics.

The Liberal leader, Peter Dutton, stoked anti-woke culture wars and
extolled the American president. It backfired. Dismay has grown among
Australians at Mr Trump’s trade wars, and they no longer trust America as a
security partner. Mr Dutton’s campaign was hobbled by unforced errors.
The Liberal Party lost votes across every demographic—women, urbanites,
migrants—except those over the age of 60. Mr Dutton even lost his own
seat.

Australians voted for stability and Mr Albanese’s dullness became an asset.

They did not vote for stasis, however. Australia’s problems are both
economic and geopolitical. China’s once-insatiable appetite for Australian
iron ore, copper, coal, meat and wine has slowed sharply. Australia’s
economy grew by just 1.3% in 2024, the slowest rate (apart from during the
pandemic) since the early 1990s. Now Mr Trump’s tariffs of 10% on
Australian steel and aluminium may prove the precursor of other trade
storms. Australia’s priority, says Jim Chalmers, the treasurer, is managing
the economic risks arising from tensions between America and China.

The task is made harder by a soggy economic performance. Across social,

economic and environmental indicators, Australia has fallen behind its
peers in the OECD, a club of mainly rich countries. Over ten years
disposable incomes per person have risen by just 1.5%, compared with 22%
on average in other wealthy countries.

Mr Chalmers is right to make boosting productivity his priority in the

second term. Productivity growth is slower than at any time in the past 60
years. Not counting Australia’s mining sector, private business investment
is at an all-time low. Meanwhile, the proportion of women who work full-
time is among the lowest in the OECD; many women are deterred by high
income taxes and the cost of child care. And thanks to onerous regulations
and too few workers, it takes twice as long to put up a house as it did three
decades ago. Australia must improve productivity, Mr Chalmers says, by
investing in people, improving competitiveness and embracing new
technologies such as AI.
One big problem stems from tax-relief policies that encourage Australians
to put too much of their money into housing. Baby-boomers have built
enormous wealth doing this, but home ownership among the young is
falling, as house prices climb to all-time highs. Labor is unlikely to abolish
tax breaks for housing (fearing baby-boomers’ wrath). So building more
houses may be Australia’s best shot at fixing the housing crisis. Labor
promises to work with state governments and private developers to ease
zoning rules and build 1.2m homes over five years.

Mr Albanese’s government also promises to move Australia’s energy mix

towards more renewables. Climate policy, especially a carbon tax, has been
the most polarising issue in Australian politics over the past two decades,
toppling three prime ministers. Had the coalition, when in office in 2015,
not scrapped a carbon price, Australia would be collecting A$70bn
($45.2bn) more each year in revenue, says Ross Garnaut, an economist. In
its first term Labor legislated to cut emissions to zero by 2050 or earlier.
But integrating solar and wind projects into Australia’s ageing electricity
grid is slow-going.

Given tensions between America, Australia’s historical supplier of security,

and China, the biggest buyer of its exports, Australia badly needs to make
itself more robust, in security as well as in economics. Mr Albanese has
promised to raise defence spending from 2.1% to 2.4% of GDP. Key
priorities include acquiring nuclear-powered submarines through AUKUS,
a defence pact with America and Britain; enhancing long-range strike
capabilities; and upgrading military bases located in northern Australia.

During Mr Albanese’s first term, Australia steadied its tumultuous relations

with China, while also deepening ties with Japan, India, South-East Asia
and Pacific islands. The country is more prepared than it was five years ago,
argues Rory Medcalf of the Australian National University, but has a long
way to go. For Mr Albanese, election-night euphoria has fast given way to
the reality of hard slog ahead. ■

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The devil you know

Trade tensions help Singapore’s

prime minister to a big win
But voters want credible opposition in parliament, too
May 08, 2025 06:50 AM | Singapore

LAWRENCE WONG was not expected to win big in his first general
election since becoming Singapore’s prime minister. Members of the
People’s Action Party, which has governed the city-state since before
independence in 1965, measure their leader by how well he preserves its
share of the popular vote. The last two men to lead Singapore presided over
dips in support of 2% and 9% in their first elections after taking over. Many
observers thought the country’s latest leader might do worse.

In fact Mr Wong bucked this trend at the election held on May 3rd,
increasing the PAP’s share of the vote from 61% to 66%. In Singapore’s
unusual electoral system, which is dominated by winner-take-all, multi-
member constituencies, that share translates into 90% of elected seats in
parliament. The party successfully defended every seat that opposition
politicians had been seeking to flip.

Ian Chong of the National University of Singapore calls it a “flight to

familiarity”. Mr Wong campaigned on the need to maintain stability amid
the upheaval of Donald Trump’s trade war. The former colonial entrepôt’s
trade-to-GDP ratio, exceeding 300%, is among the highest in the world. Mr
Wong urged Singaporeans to hand him a strong mandate and “the best
possible team” to steer the country through the storm. The party sent the
head of the task force dealing with the trade war to stand in one of the
island’s most hotly contested constituencies, daring voters to oust him. The
gambit worked; the party kept the constituency’s four seats.

The PAP benefited, too, from some long-standing structural advantages. As

in past years, a short nine-day campaign limited the opportunities its
opponents had to get their message out. The PAP’s large party machinery
quickly adjusted to a redistricting of constituencies that was completed less
than two months before the polls. The new boundaries upended the ground
games of opposition parties, which make do with fewer resources.

But the election also strengthened the main opposition, the Workers’ Party
(WP). It attracts voters who think that there needs to be at least some
alternative voices in parliament, though its policies are not radically
different from those the government promotes (the party is sometimes
considered “PAP-lite”). It contested only 26 of 97 seats. But it successfully
defended the ten seats it held before the election, and will receive two more
under a scheme that rewards the best-performing losing candidates. Indeed,
the WP received more votes overall than the PAP in the constituencies in
which it stood.

One question for the Workers’ Party is whether it is ready to start going
after votes in parts of the city that smaller, chronically unsuccessful
opposition parties (derisively labelled “mosquito parties” by one observer)
have long thought of as their own. It has been cautious about growing too
fast. It fears that Singaporeans would think twice about voting for it, if it
ran enough candidates to form a majority government. It also worries about
making sure all the candidates it fields are up to scratch.

“Voters returned the government out of caution, not conviction” says

Kenneth Paul Tan, an expert on Singapore’s politics. The victory will
nonetheless enhance Mr Wong’s authority within the PAP. His predecessor
as prime minister, Lee Hsien Loong, who held office for nearly two
decades, remains in the cabinet as senior minister. So, probably, will two
former rivals for the top job. But if there were any doubts about Mr Wong’s
ability to put his own stamp on the government, they have been put to rest.
It is Mr Wong’s team now, come what may. ■

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A call to arms

Taiwan’s other war

The island is a kill zone for green iguanas
May 08, 2025 06:49 AM | Chiayi

Collared

VOYU YASIUNGU is dressed in camouflage and carries a homemade rifle

on his back. He treads quietly into undergrowth near a river in Chiayi
County in Taiwan. Suddenly, he points his rifle at a tree top. There’s a pop
like a firecracker—and then a beast that looks like a small dinosaur plops to
the ground. It is an iguana with orange spikes along its back, more than a
metre long, shot through the throat. Mr Yasiungu scans the canopy a second
time. More shots follow; more lizards plop.

Taiwan has a problem with green iguanas. The giant lizards came from
Central and South America more than 20 years ago as exotic pets. Many
escaped or were released by their owners; they then multiplied rapidly in
Taiwan’s southern and central regions, where they have no natural
predators. Some experts blame global warming for the lizards’ fecundity:
unusually warm winters may have increased hatching rates, as well as the
number of babies who survive into adulthood. Whatever the case, there are
probably now about 200,000 of them. They are causing enormous problems
for farmers by ravaging valuable crops such as maize, red beans and
gourds.

The Taiwanese government pays professionals such as Mr Yasiungu to cull

them. They get $16 for an iguana measuring at least 30 centimetres from
snout to anus, and $8 for smaller ones. But local governments in the south
have also been recruiting amateur lizard hunters. Locals have taken classes
in how to snare and kill the reptiles, for example using slingshots or long
poles with nooses. Factory workers in the city of Kaohsiung were recently
filmed using tools fashioned from fishing rods to capture an iguana
wiggling on a roof. More than 1,600 Taiwanese have had this kind of
training, says Chiu Kuo-hao, an official with Taiwan’s Forestry and Nature
Conservation Agency. These beginners are also eligible to earn bounties,
though they earn half the rate that is given to professionals.

Some 83,000 iguanas were killed last year. The goal is to cull up to 120,000
this year. But Mr Chiu worries that the work is not going fast enough. Tight
control of firearms is probably slowing the hunt (Mr Yasiungu is from one
of Taiwan’s indigenous tribes, to whom looser rules apply). Last year
officials from Taiwan’s Ministry of Agriculture suggested that wider use of
air guns might make the job more efficient. One problem is that laws
prevent Taiwanese firms from producing guns that would be powerful
enough to kill a lizard cleanly. Willi Chang, from the Taiwan Airsoft and
Airgun Association, says that if Taiwan decides it wants to go down that
route people will probably end up having to source the weapons from
Chinese manufacturers. Top marks if you predicted that an invasion of
ravenous foreign lizards might one day lead Taiwanese to seek out Chinese-
made guns. ■

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Banyan

How should India promote Hindi?

By doing nothing
Squabbles over language are heating up
May 08, 2025 06:49 AM

LAST MONTH in Bangalore, India’s tech capital, concertgoers heckled a

pop star with demands that he sing in Kannada, the local language. He told
them off; the police registered a complaint against him. In New York Diljit
Dosanjh, a Punjabi actor and singer, arrived at the Met Gala wearing a cape
embroidered with the Punjabi alphabet, seen as an assertion of linguistic
pride. In Tamil Nadu the chief minister said parents should give babies
Tamil names. Meanwhile, a central-government push to promote the use of
Hindi nationally gathers pace. Speakers of other languages are, predictably,
pushing back.
Language is a touchy subject in a country with 22 legally recognised ones
and hundreds more besides. It is also the raison d’être for most Indian
states. When internal boundaries were reshaped after independence, it was
on linguistic lines: Gujarat for Gujarati speakers, Maharashtra for Marathi.
Some activists set themselves on fire rather than be forced to speak a
strange language. Southern states, especially, have long bristled at what
they see as attempts by the north to “impose” an alien tongue. Attempts at
compulsory teaching of Hindi caused agitations in the south even before
independence.

And yet governments at both state and national levels persist with language
politics. Goings-on in Maharashtra make it clear this is a fruitless pursuit.
The state recently obliged young pupils to learn Hindi as a third language,
before quickly being forced to U-turn. Maharashtra is run by the Bharatiya
Janata Party (BJP), which rules nationally and in most northern Hindi-
speaking states. If the party cannot impose its will on a state it controls,
what hope in the south?

Nor is the government-promoted language one that many people speak.

Demotic Hindi is a varied and forgiving language, spoken differently in
different regions of the country. The Sanskritised version promoted by the
BJP would be analogous to Modern Standard Arabic if it were heavily
retrofitted with classical vocabulary: a made-up thing with little resonance.
Unsatisfied with foisting Hindi upon people, the chief minister of BJP-ruled
Delhi last week declared Sanskrit—spoken natively by roughly zero people
—as the language of the future.

If the idea is to give Indians a common tongue with which to communicate

with each other, it is counterproductive. In the south Hindi is associated
with northern dominance. The burden of language policies often falls on
schoolchildren; being forced to study something does not inculcate a love
for it. And Hindi-promotion anyway seems at odds with other stated
priorities, such as a government effort to create an AI translator that will
help “transcend language barriers”.

It is undeniable that India is divided by its languages. But it is getting less

so. A study by Leena Bhattacharya and S. Chandrasekhar of the Indira
Gandhi Institute of Development Research in Mumbai found the chance
two random Indians could speak in a common tongue, based on data from
the 2011 census, was about one in four, up from one in five in 1971. There
has been no census since, but the next one will no doubt reveal that the
probability has risen.

One reason is that Hindi has spread without—or despite—ham-fisted

government efforts. The influence of Hindi-language pop culture from
Mumbai has helped, as has the growing use of the roman alphabet for Hindi
words in advertising and online. Migration from poor, northern, Hindi-
speaking regions to the prosperous south has contributed, too. Between
2001 and 2011 native speakers of Tamil in Tamil Nadu grew 14.3%, in line
with population growth of 15.6%. Native speakers of Hindi in the state
more than doubled, mostly in cities.

The second reason is the rise of English. Parents rich and poor send their
children to English schools. Streaming services have widened access to
English-language entertainment. Social media are mostly in English. And
English is the language of economic mobility.

A sensible government would acknowledge that English is, after 200-odd

years of British rule and nearly 80 in an “associate official” role, an Indian
language, one that gives India an advantage over many other emerging
economies, and promote it accordingly. But a truly enlightened one would
heed the lyrics of a song from “Sadhu aur Shaitaan”, a Hindi comedy film
from 1968. “Stop this argument about English, Hindi or Urdu,” it goes.
“Speak Tamil, speak Bengali. Speak the languages of all nations. Learn the
knowledge of all nations.”■

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China
China’s gig economy could help it survive the trade war
Deliverance :: It is vast, and ready to absorb displaced workers

Xi Jinping glorifies hard work, but the young are not so

sure
Toil and struggle :: Cynicism at home is becoming a problem

China intensifies its campaign against exiled Hong Kong

dissidents
The very long arm :: Police in the territory are harassing the families of those who have fled

The men’s and women’s world snooker champions are now

both Chinese
Right on cue :: Another victory for a rising sports power

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Deliverance

China’s gig economy could help it

survive the trade war
It is vast, and ready to absorb displaced workers
May 08, 2025 06:50 AM | BEIJING AND QUANZHOU

AS CHINA’S EXPORT machine sputters under the weight of 145% tariffs,

jobs are at risk. Some 16m workers are involved in the production of goods
bound for America, says Goldman Sachs, a bank. Nomura, another bank,
projects a possible 5.7m job losses in the near term and 15.8m in the long
run, as the shock ripples through the economy.

The possibility of at least some easing of the tariffs came with the news that
America’s treasury secretary, Scott Bessent, will meet He Lifeng, a Chinese
vice-premier, in Geneva on May 10th. But Communist Party leaders have
already been yanking levers to soften the blow, should the trade war
continue. At a Politburo meeting on April 25th, they vowed to increase
rebates of unemployment-insurance payments for firms hit by tariffs. And
they are also looking to another labour-market saviour: China’s vast gig
economy. Indeed, Donald Trump’s trade war could complete that sector’s
metamorphosis from a freewheeling industry viewed with suspicion by the
party, into the world’s largest state-approved e-market for labour, with a
stronger safety net attached.

The party is turning to the gig economy because it is vast: the state’s trade-
union federation estimates there are 84m people relying on “new forms of
employment”, including delivery services and ride-hailing. The government
cites a broader category of 200m “flexible workers”, including the self-
employed and part-time workers. Both figures far exceed the 54m jobs at
state-owned enterprises in cities, and make up a big chunk of the 734m-
strong workforce. One delivery firm, Meituan, uses 7.5m couriers, who get
paid $11bn a year. Drivers often describe their taxing work as guodu, a
transitional job “to ferry over a stream”.

Mr Wan is typical. The 36-year-old looked for the highest paying job within
reach and saw that food-delivery drivers could make 10,000 yuan ($1,400)
a month. He criss-crosses Beijing on his scooter from 6am to 9pm each day.
“Every penny matters right now,” he says. Couriers loom large in the public
mind. “Upstream”, a recent film about a middle-aged programmer-turned-
delivery-driver, put their ranks on the big screen.
Happily for the party, this huge gig economy is growing, despite trade
clashes and years of sluggish consumer confidence. Meituan’s workforce,
typically employed via third-party contracting firms, is 41% larger than in
2021 (see chart). In March its bosses said they expected healthy growth of
both food and shopping delivery. The firm is forecast to increase its sales by
15% annually until 2027. Similarly, the number of ride-hailing licences
exploded from 2.9m in 2020 to 7.5m in 2024.

Even more helpfully for the party, an epic struggle for market share
between rival firms means a hiring war is being unleashed amid the trade
war. On April 21st JD.com, an e-commerce firm that recently entered the
food-delivery business, said it would take on 100,000 new riders by July.
The combination of price cuts for consumers and more labour costs has
spooked investors who have sent share prices tumbling. But more jobs, and
some kind of safety net, is exactly what the party wants.

All of this is leading to the political rehabilitation of the companies that

power it. In a broader crackdown that began in 2020, it was denounced as
part of a “disorderly expansion of capital”. Leaders viewed the firms as
“castles built on sand”, says Tilly Zhang of Gavekal Dragonomics, a
consultancy. But the party has realised jobs and consumption matter, too.
The pivot began in 2023, when Li Qiang, the prime minister, praised the
platform companies for their “increasingly prominent” role in demand and
employment. Now the government is openly embracing the gig economy as
a cushion for the economy.

That embrace is so fulsome that the government is even encouraging gig-

economy companies to play more of a role in providing welfare. In
February JD.com offered social-security benefits to its drivers. Meituan
says that it will “gradually provide” social security for its couriers, too,
starting with a pilot scheme this quarter. Desperate to impress, firms are
investing in rest stations, meals and subsidies for drivers, “for the
government to see”, says one economist.

What’s not to like? A huge question is who ultimately pays. Pensions and
medical insurance sound great to workers, but not if they come directly or
indirectly out of their pay cheques. JD.com insists it will pay both the
employer and employee’s premiums into a state-run scheme. Scepticism
abounds on social media. Several drivers, when asked about the scheme,
use the phrase, “the wool still comes from the sheep’s back”—nothing
comes for free.

In the southern city of Quanzhou, where Meituan last month launched a

pilot scheme to reimburse half of pension premiums for qualifying drivers,
30-year-old Mr Lai says he is not interested. Sitting on his scooter outside a
mall, he says: “When we’re old, the workforce will be even smaller, and the
pension contributions they pay will not be able to support my generation.”
If the social burden on the firms grows too great, it may be hard for them to
cope financially, hence the share-price collapse. The state should protect the
flexibility of gig workers and consider new ways to transfer income to
them, warns the economist. Otherwise platform firms could disappear with
the drivers’ jobs, just as the trade war has hit manufacturing jobs.
Technology could influence job creation, too. Meituan is pioneering the use
of delivery by autonomous vehicles and drones, which it says have
completed 4.9m and 1.5m customer orders respectively.

Nonetheless, changes in the gig economy show how the trade war is forcing
China’s rulers to adapt. They might love their vision of high-tech workers
making semiconductors for the world. What they have instead is a low-tech
army of people delivering meals on scooters. It keeps the show on the road.
That is true for the drivers, too. After a year of delivery, Mr Lai says he is
moving to work in a factory that sells goods on Amazon. He thinks the
trade war will end soon. But if he is wrong, he will be back on his bike. ■

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Toil and struggle

Xi Jinping glorifies hard work, but

the young are not so sure
Cynicism at home is becoming a problem
May 08, 2025 06:50 AM

EVERY FIVE years China names hundreds of people as “national model

workers”. The latest to receive the honour gathered on April 28th at
Beijing’s Great Hall of the People where the country’s leader, Xi Jinping,
urged them to “struggle, struggle, struggle to the end”. He avoided any
mention of tariffs brought in by America’s president, Donald Trump, but his
use of the old Communist rallying cry was clearly intended to show how
people should respond. Amid a trade war that could threaten millions of
jobs in China, the message is clear: keep your noses to the grindstone and
blame any pain on America.
Some workers may wince. An increasing number complain about how hard
they are expected to toil. The infamous “996” work ethic—9am to 9pm, six
days a week—has spawned an online drop-out counter-culture known as
tangping, or “lying flat” (though some may not practise what they preach).
Workers complain of neijuan, the idea of spinning your wheels and not
getting anywhere. If there is a struggle going on, for some it is just getting
out of bed.

Officials have tried to show sympathy with burned-out staff. In July last
year the ruling Politburo denounced business approaches which led to
neijuan and its associated stresses. This year several big companies have
introduced measures aimed at limiting time spent at work.

But Chinese media still love a good story of absurdly hard toil. The internet
has been flooded recently by one such tale concerning a bricklayer called
He Jilin, who reportedly managed to save 2m yuan ($275,000) after nine
years of work. Several tabloids described how Mr He used this money to
build a two-storey mansion for his family in a village in Sichuan province.
Since mid-April, when news of Mr He’s story broke, posts with related
hashtags on Weibo, a microblog platform, have attracted tens of millions of
views and thousands of comments.

While some netizens have attacked Mr Trump’s tariffs, others have heaped
scorn on the story of Mr He’s struggles (working 5am to 9pm, with few
days off, has left him with a chronic back injury). “Don’t romanticise
others’ pain—they suffer not to inspire you, but because they had no
choice,” said one user on Weibo, referring to Mr He’s case. “How many
future million-yuan hospital bills are waiting for him?” wrote another.
“Sounds like a made-up story designed to glorify labour until we drop
dead,” a third weighed in. Mr He has responded modestly, telling media he
regrets not having studied harder at school.

Mr Xi does not want Chinese youngsters to take up bricklaying in order to

get rich. Speaking to the model workers, he said the country needed people
who were “knowledgeable, skilled and innovative”. But he sticks to old-
style rhetoric. Among Chinese “the spirit of hard work, unity and relentless
striving will never change,” he said. While fighting America, Mr Xi may
struggle to defeat cynicism at home. ■
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The very long arm

China intensifies its campaign

against exiled Hong Kong
dissidents
Police in the territory are harassing the families of those who have fled
May 09, 2025 03:08 AM

ON APRIL 30TH Hong Kong police unleashed a new weapon in their

attempt to punish those who have fought for freedoms in the former British
territory since 2019. The father and brother of one activist who took part in
mass protests that year, Anna Kwok (who fled to America in 2020), were
detained on suspicion of assisting an “absconder” by “directly or indirectly”
handling her funds or assets.
This is an offence under the 2024 legislation known as Article 23, one of
the city’s two sweeping national-security laws. (The first was imposed by
the government in Beijing in 2020.) Ms Kwok’s brother was freed on bail
pending further investigation. But on May 2nd, Kwok Yin-sang, her 68-
year-old father, was charged. If found guilty, he faces up to seven years in
prison.

The move marks a serious escalation by the Hong Kong authorities, under
pressure from Beijing, to enforce complete political control over the
territory. Last year they jailed a group of 45 prominent activists who stayed
in the city, for between four and ten years. But this is the first time a family
member of an exiled activist has been prosecuted. In 2023 the Hong
Kong government placed a bounty on several campaigners abroad,
including Ms Kwok, who now leads the Hong Kong Democracy Council in
Washington, accusing them of colluding with foreign forces. That can carry
a sentence of life in prison. There are now 19 “wanted” activists living in
exile, who have a bounty on their head. The authorities have revoked the
passports of Ms Kwok and 12 others.

Their family members have faced increasing harassment. Since January

police have interrogated the families of at least five of the exiled activists,
says Human Rights Watch (HRW), an NGO in New York. They raided the
office of the Hong Kong Public Opinion Research Institute, an institution
associated with Chung Kim-wah, a scholar now based in Britain, and
confiscated HK$800,000 ($103,000) from the family of Ted Hui, a former
lawmaker who lives in Australia, both for allegedly contravening national
security.

Many ordinary Hong Kongers have left the city since the crackdown on
dissent began in 2020. By May 2024 more than 200,000 had arrived in
Britain under a scheme set up to allow people from the territory who met
certain conditions to emigrate to the former colonial power.

But fleeing the city does not take them beyond the reach of the Communist
Party. The new laws criminalise acts deemed a threat to China’s national
security, even if they are committed elsewhere. Some of the exiles say they
have experienced campaigns of online intimidation, and have been followed
and monitored abroad.
HRW has urged foreign governments to take concrete actions against the
intimidation campaign “by imposing targeted sanctions on government
officials implicated in these abuses”. Ms Kwok has not commented on her
relatives’ arrests, but recently pointed to the Hong Kong authorities’ claims
that the city respects human rights. “We are living examples of that not
being true,” she said. ■

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exiled-hong-kong-dissidents

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Right on cue

The men’s and women’s world

snooker champions are now both
Chinese
Another victory for a rising sports power
May 08, 2025 06:49 AM | BEIJING

Half a million, corner pocket

IT HAS BEEN a long time coming. On May 5th a soft-spoken, left-handed

28-year-old named Zhao Xintong (pictured) raised the famed trophy in the
legendary Crucible Theatre in the northern English city of Sheffield, and
was crowned men’s snooker champion of the world. He had defeated a
three-time winner, Mark Williams, by 18 frames to 12, thereby pocketing
£500,000 ($660,000) in prize money. “This is going to take snooker to
another level,” Jason Ferguson, chairman of the World Professional
Billiards and Snooker Association (WPBSA), the sport’s governing body,
told the BBC.

He could well be right. Half of those viewing the final on television are
thought to have been in China, where, some estimates suggested, 150m
people had tuned in. One Chinese media report described it as “a live
broadcast of the transition to a new dynasty in the world of snooker”.

China has been rising in the snooker world since an 18-year-old named
Ding Junhui defeated Stephen Hendry, a seven-time world champion, at the
China Open in 2005. But though Mr Ding reached the world final in 2016,
he has never won. Of the world’s 40 top ranked male players, 11 are
Chinese, according to WPBSA. (Some of them are based in Sheffield.) Last
year a 20-year-old phenomenon named Bai Yulu won the women’s world
championship, held in China for the first time.

Mr Zhao has some baggage. He was one of ten Chinese players banned for
match-fixing in 2023, in his case for 20 months. He did not fix any matches
himself, but he accepted charges of being party to another player doing so,
and of betting on matches.

With the ban served, his win could have big implications. Mr Ferguson
believes it could help snooker to be included as a new sport at the Olympics
in Brisbane, in 2032. “The size of snooker and how important China is to
the [International Olympic Committee], someone has to look at this and say
‘this is now snooker’s time’.”

In the basement of the Yundu pool hall in Beijing, most of the 26 tables
were in use on a recent afternoon (pool and snooker are often spoken of
interchangeably in China, and many casual players stick with pool). Much
of the talk was about Sheffield and Mr Zhao. A 40-year-old man named
Chen leaned on one of the tables and summed up the mood. “We’re all very
proud. How could we not be?” ■

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understand what the world makes of China—and what China makes of the
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champions-are-now-both-chinese

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United States
American cities are criminalising homelessness. Will that
help?
After Grants Pass :: How a Supreme Court decision paved the way for more punitive policies

Pete Hegseth is purging both weapons and generals

Pete’s purge :: The American army wants to get rid of obsolete kit. But there are risks

A social history of America in a warehouse

Replacement rate :: Replacements, in Greensboro, is an encyclopaedia of tableware

One of the most controversial executive orders will shortly

land at SCOTUS
Born in the USA :: What to listen for in oral arguments over birthright citizenship

Where the Trump administration has science on its side

America’s sort of Cass Review :: A government report evaluates gender therapy and medical
care for children

Trump knocks down a controversial pillar of civil-rights

law
Mr Equal Protection :: The rise and fall of the “disparate impact” doctrine

Harvard has more problems than Donald Trump

Lexington :: He is just making them harder to fix

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After Grants Pass

American cities are criminalising

homelessness. Will that help?
How a Supreme Court decision paved the way for more punitive policies
May 08, 2025 06:50 AM | Fresno

DAVINA VALENZUELA watches as sanitation workers heave most of her

belongings into a garbage truck. The 33-year-old has been homeless for
more than a year, and was sleeping in a dusty alley in central Fresno, the
biggest city in California’s Central Valley. The truck devours bags of
clothes, a pushchair (stroller), a pile of hypodermic needles and around
$120—much of it in change. Police officers arrest her and a friend and sit
them in the back of a truck. They are given tickets for camping in a public
place, which became a misdemeanour in September in an attempt to shrink
the city’s homeless encampments. “That’s all I have right there,” she says,
once her handcuffs are taken off. “I don’t know how I ended up here.”
Roughly 771,000 Americans were homeless last year, more than any other
year on record and an 18% increase from 2023. A national housing shortage
is by far the biggest culprit, but the end of pandemic rental assistance, an
increase in migration and natural disasters that displaced people also
contributed to the surge. Only about 35% of homeless people in America
sleep outdoors rather than in shelters or in temporary housing, but that is a
higher proportion than in most other places tracked by the OECD, a club of
mostly rich countries (see chart). Rough sleepers are more likely than their
sheltered peers to be homeless for long stretches of time. Many of them
struggle openly with drug addiction and mental-health problems, which can
make tent camps look and feel unsafe.
The entrenchment of homeless encampments has frustrated both voters,
who wonder where the billions of dollars poured into fixing homelessness
have gone, and politicians whose careers may ride on fixing the problem. A
backlash is well under way. Last June the Supreme Court ruled in Grants
Pass v Johnson that punishing homeless people for sleeping outside when
they have nowhere else to go was not a cruel and unusual punishment,
which is banned by the Eighth Amendment. At least 163 municipalities
have passed camping restrictions since then, according to the National
Homelessness Law Centre, an advocacy group. Almost a third of those bans
are in California, which has both more homeless people than any other state
and the highest proportion of rough sleepers (see map). The result is a
country that, city by city, is trying to end outdoor homelessness by force.

To understand how these bans are being implemented, consider Fresno,

where there are more homeless people in the region than there are beds.
Residents report encampments they want cleaned up to the city via an app.
A special team of police officers and sanitation workers investigate these
spots and make arrests. Sergeant Steven Jaquez, who runs the team, argues
that the camping ban gives his officers leverage. Violators can face up to
$1,000 in fines—an astronomical amount for someone living on the street—
or one year in jail. But in lieu of punishment they can ask police to take
them to a shelter where they can inquire about housing or treatment. If they
complete a rehab programme, their citation goes away. But if, like Ms
Valenzuela, they refuse the offer, tickets can accrue. As of April 25th the
city attorney’s office had filed charges in 266 cases. Only 33 of them were
resolved because the person charged had accepted services. How harshly
people will be punished is still unknown: the first case to make it to trial
was dismissed by the judge for taking too long.

Move on

Fresno’s leaders consider the camping ban a success, and insist that outdoor
homelessness is declining. But the most recent official statistics are two
years old. Dez Martinez was once homeless and now advocates for her
“street family” in Fresno. She reckons people are just hiding from the cops
by moving under highway overpasses and tying their belongings to trees.
Jerry Dyer, Fresno’s Republican mayor and its former police chief, doesn’t
mind if that is true. “I’m sure there are people that have now chosen places
that are less visible publicly, which is not a bad thing” for businesses, he
offers, though he would prefer people to seek help. Yet if homeless people
go into hiding it becomes hard to know how many of them there are. The
city can claim success, but the problem may persist in the shadows.

Mr Dyer contends that it is more compassionate to coerce homeless

Fresnans to accept housing or treatment than to allow them to suffer on the
streets. Despite their different political parties, he sounds remarkably like
Gavin Newsom, California’s Democratic governor, who argued that lower
court rulings previously limiting enforcement against camps had “tied the
hands” of officials. The Cicero Institute, a conservative think-tank in
Austin, Texas, started by Joe Lonsdale, a tech billionaire, pushes a similar
argument as it works to pass state camping bans. “We have a deep
discomfort with forcing people to do things,” admits Devon Kurtz, who
studies homelessness at Cicero. But, he asks fairly, “Is it OK to let them die
out there?”

The fact that so many Republicans and Democrats are on the same side
illustrates how frustration with the status quo has scrambled the politics of
homelessness. Many on the left were once wary of clearing encampments
for fear that breaking up communities and trashing people’s belongings
could be traumatic for them. That argument is little-heard these days. The
risk is that these camping bans prove to be too big a stick, and eventually
follow the same pattern as anti-vagrancy laws passed during the 19th
century, filling jails and hospitals with people whose crime is having
nowhere to live. “There’s a very sordid history of moving from
criminalising people who are destitute, to then institutionalising them,” says
Dennis Culhane of the University of Pennsylvania.

Not every city has taken a punitive approach. Los Angeles is clearing
encampments without the threat of citation or jail and the number of rough
sleepers there dropped by 10% between 2023 and 2024. But it is far too
soon to celebrate: the number of unsheltered homeless people in LA,
adjusted for the city’s population, remains among the highest in the country.

While cities experiment with camping bans, housing wonks warn that new
federal policies could worsen homelessness. In President Donald Trump’s
budget request, which is mostly a wish-list, funding for the Department of
Housing and Urban Development would be slashed by 44%, jeopardising
rental-assistance programmes that help keep poor Americans housed.
“We’ll all be at Donald Trump’s house” if big cuts are implemented, jokes
Ms Martinez, “camping on the White House lawn”.■

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Pete’s purge

Pete Hegseth is purging both

weapons and generals
The American army wants to get rid of obsolete kit. But there are risks
May 08, 2025 07:44 AM

THE PENTAGON is in chaos. Pete Hegseth, the secretary of defence, is

accused of mishandling classified information. Many of his aides have been
fired over alleged leaks (accusations they deny). Top generals have been
dismissed for no discernible reason beyond their colour or sex. The
department is in “a full-blown meltdown”, says John Ullyot, a Hegseth
loyalist who served as chief spokesman until April. Yet Mr Hegseth is
pressing ahead with reforms that will change the size, shape and purpose of
America’s armed forces.
The first step came on April 30th when Mr Hegseth issued a memo to the
army. The force had two simple priorities, he wrote: defend the homeland
and deter China in Asia. The army was told to expand its stockpiles,
deployments and exercises in the region, which tends to be dominated by
the air force and navy. No mention was made of Europe, where America
still has more than 80,000 troops, a fact that is likely to raise eyebrows
among European allies a month ahead of a NATO leaders’ summit in June.

The memo gave the army a number of new tasks. The most important was
the exhortation to “achieve electromagnetic and air-littoral dominance” by
2027, a convoluted phrase that translates into out-jamming and out-droning
the enemy. By the end of next year every division in the army has been told
to field sizeable numbers of drones (perhaps 1,000 per division); every
“manoeuvre” platoon (a unit of three dozen soldiers) should have better and
cheaper anti-drone systems. Divisions and larger formations are to have
“AI-driven command and control” to manage battles.

To free up money for all this, Mr Hegseth has also told the army to stop
doing various things. Some of this is bureaucratic tinkering. The
streamlining of five major commands into two, including the merger of the
army’s Forces Command, which produces soldiers for commands around
the world, with two others which cover North and South America, is the
biggest institutional shake-up in years. A thousand staff positions are being
cut from the army’s headquarters. But Mr Hegseth is also proposing a
bonfire of equipment. The memo orders an end to “obsolete” weapons, such
as crewed planes and outdated drones.

The army singles out the Humvee, a hulking truck that served America well
during its Middle Eastern wars but would be dangerously vulnerable in a
high-intensity conflict, and the Joint Light Tactical Vehicle, its replacement.
The M10 light tank, which has only just come into service, is also set for
the chopping block because it has been deemed too big and heavy.

The army itself has long been keen to get rid of much of this equipment,
which it says would be of minimal use in a serious scrap with China or
Russia. In a podcast with War on the Rocks, a website, Dan Driscoll, the
secretary of the army, lamented lawmakers’ “parochial” insistence that
services must keep unwanted weapons: “a welfare system for…certain
congressional districts”. The army wants to use the money and manpower
that is freed up to focus on newer programmes. Crewed attack helicopters—
which have fared badly in Ukraine—are to be supplemented with cheaper
drone swarms, for instance.

Critics retort that the reforms are knee-jerk and muddled. Patrick Donahoe,
who served as an army major-general until 2022, argues that M10s, for
example, were a crucial part of ensuring that the army’s future brigade
combat teams had enough firepower. “Killing the platforms without
replacing the capability isn’t reform,” he argues. “It’s regression.” Mr
Donahoe suggests that the Pentagon has been dazzled by a vision of war
which puts too much emphasis on technology. “We’re cutting armour and
firepower for concepts that collapse under contact.” The army denies this. It
says that adding drones and technology has made units “300% more lethal”
than their predecessors in recent exercises in Europe. “When you look at the
outcomes of going leaner and lighter,” says Mr Driscoll, “it is leading to
incredible results.”

Hardware is not the only thing becoming leaner and lighter. On May 5th Mr
Hegseth issued another memo ordering the army and other services to cut
the number of four-star generals and admirals by at least 20%, and the total
number of general officers and flag officers (GOFOs, or brigadier-generals
and higher) by 10%. It is true that America has a top-heavy military. It has
817 generals and admirals serving today, including 38 four-star officers.
The ratio of generals to troops has risen steadily.

The Trump administration is not the first to take aim at their ranks. In 2010
the secretary of defence at the time, Robert Gates, was alarmed by the post-
9/11 surge in GOFO numbers and tried something similar. Mr Hegseth’s
pruning is a continuation of that. The difference is that his cuts may be
informed as much by culture wars as real ones. In a podcast last summer, he
complained that a third of officers were “actively complicit” in allowing
diversity initiatives, such as the inclusion of women, to undermine combat
standards. Mr Hegseth will now have the opportunity to mould a top brass
more to his liking. ■

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Replacement rate

A social history of America in a

warehouse
Replacements, in Greensboro, is an encyclopaedia of tableware
May 08, 2025 06:49 AM | Greensboro, NORTH CAROLINA

It was a theme she had

REPLACEMENTS IS a one-of-a-kind business. Walk into the 500,000

square-foot tableware emporium near Greensboro, North Carolina, and you
will find a display of America’s 500 most popular dinner plates from the
past two centuries. Some are decorated with a classic lace trim; others with
garish peacocks and florals. This is just a small selection of their stock.
Smashed one of the crystal goblets your mum gave you in the 1980s? They
can sell you a replacement. Always coveted your great-grandmother’s
teacups but a greedy aunt snatched them after she died? They can probably
send you an exact set.
The store has 11m pieces of inventory—300,000 unique patterns—and
ships 2,000 packages a day. An army of 455 independent buyers scavenge
the country’s estate sales, antique stores and flea markets to find them.
Florida has the best goods. “It’s a retirement Mecca, and when people
downsize they bring their china,” says Keith Winkler, the shop’s head
marketer. Consumer taste is less regional. Replacements’ top selling line, an
English pattern with ornate animal portraits, does as well in Texas as it does
in California and New York.

The store’s inventory is more than merchandise; it traces the social history
of china in America. During the depression consumers bought basics, but
by mid-century the industry got playful. In 1946 Libbey Glass started
selling “hostess sets” that included tumblers with carnival and merry-go-
round motifs. The post-war designs “promised the good life to a population
tired of rations,” writes Regina Lee Blaszczyk, a historian. In 11 years
Libbey sold 30m. But when foreign trade deals introduced Americans to
cheap ceramics from Europe and Asia, domestic manufacturing slumped.
Between 1947 and 1961 the industry contracted by 50%. Potters begged
Congress to raise tariffs, to no avail.

During the cold war cultural conservatism caught on. Marriage rates rose
from 60% in 1940 to 68% in 1960. More weddings meant more demand for
place settings, and American firms pounced. Lenox China, a company that
devised the wedding registry in the 1930s, advertised to wannabe-brides in
Seventeen magazine with the slogan “You get the licence, I’ll get the
Lenox”. To newly-weds who moved into suburban homes with money from
the GI bill, functionality mattered too. Corning Glass started selling Pyrex
casserole dishes that could go from fridge-to-oven-to-table. By the mid-
1960s most of America’s fine china was sold on the bridal market.

Today couples marry later and often want espresso machines and
KitchenAids rather than tea sets. According to the Knot, a wedding website,
last year just 11% registered for fine china. During the pandemic Libbey
and Lenox closed their only remaining American factories.

Despite the dwindling market for new stuff, Replacements hopes for a
resurgence of the old. Their typical customer is a woman in her 60s, but
they are pitching to youngsters: use those inherited dishes and don’t fret if
you break them. They now stock Anthropologie patterns and point to a
Taylor Swift video that features 1970s Corelle “Butterfly Gold” dinner
plates to prove that vintage is in. On a thread about dusty china, one Reddit
user urged others not to drop their finest at the thrift shop. She recently
started using her grandparents’ brown Pfaltzgraff bowls, which go for
$15.99 at Replacements. “I am enjoying the hell out of them now on a daily
basis,” she wrote, “even for Fruity Pebbles.” ■

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Born in the USA

One of the most controversial

executive orders will shortly land at
SCOTUS
What to listen for in oral arguments over birthright citizenship
May 08, 2025 06:49 AM | NEW YORK

Stars and possible bars

SWIFT ACTION is not a hallmark of America’s Supreme Court. Typically,

more than a year passes before parties bringing their cases to the justices get
a decision. But the Supreme Court has an “emergency docket”, too, and
Donald Trump has it humming. Thirteen cases involving his
administration’s moves have rocketed to the justices’ inboxes so far in his
second term. By contrast, the George W. Bush and Barack Obama
administrations made a total of eight emergency pleas to the justices over a
span of 16 years.

Trump v CASA challenges Mr Trump’s executive order on January 20th

denying citizenship to babies born to undocumented migrants and
temporary visa-holders. Federal courts in Maryland, Massachusetts and
Washington quickly blocked the policy, noting the 14th Amendment’s
command that “all persons born or naturalised” in America, “and subject to
the jurisdiction thereof, are citizens”. The judge in Washington, an
appointee of Ronald Reagan, said he couldn’t remember having such an
open-and-shut case over his four decades on the bench. Mr Trump’s move,
he fumed, is “blatantly unconstitutional”. On March 13th, after striking out
in three appellate courts, the Trump administration asked the Supreme
Court to weigh in.

The court has not hastened to Mr Trump’s rescue. It set a leisurely briefing
calendar and took the unusual step (for the emergency docket) of
scheduling a special oral argument session, on May 15th. The solicitor
general did not ask the justices to reverse the lower courts’ rulings against
Mr Trump’s order outright. Instead, he asked the justices to narrow the
injunctions to cover only the litigants in the cases—not the “hundreds of
thousands” of people who may be affected by his directive. For Mila
Sohoni, of Stanford University, such lack of uniformity would undermine
justice and corrode the rule of law. It could mean that a baby born to non-
citizen parents in New Jersey would be American while one born in
Tennessee would not.

Even so, this gambit may prove shrewd. A majority of the justices are not
likely to reject a fundamental principle of America’s constitutional order.
Since 1898, when the Supreme Court confirmed in United States v Wong
Kim Ark that a child of Chinese nationals born in San Francisco was a
citizen, birthright citizenship has been understood as universal—with
exceptions only for offspring of diplomats, invading soldiers and (until
1924) Native Americans. But nationwide or universal injunctions—the
remedies put in place by the lower courts—alarm several of the justices.

Justices Neil Gorsuch and Clarence Thomas have been most vocal, calling
universal injunctions “patently unworkable” and “legally and historically
dubious”. Citing these and other justices’ comments, the Department of
Justice lawyers contend that broad injunctions “stop the executive branch
from performing its constitutional functions”. The “intolerable” situation
“tars the entire judiciary with the appearance of political activism”.

Universal injunctions have become much more common since 2015, says
Samuel Bray of Notre Dame University, when a judge stopped one of
Barack Obama’s signature immigration orders. Since then, he says, judges
have been overreaching to thwart “almost every major executive initiative”
of Democratic and Republican presidents alike. Mr Bray thinks Mr Trump’s
withdrawal of birthright citizenship is wrong and would sow “chaos and
harmful legal uncertainty”. But he argues there are better ways to address it,
including so-called “declaratory judgments” and class-action lawsuits. He
predicts the court will dial back on nationwide injunctions, even as it makes
clear its disdain for rewriting the 14th Amendment.

The justices may have another motive for curtailing judges’ power to
stymie presidential orders: reducing the flood of emergency appeals to their
tribunal. But Steve Vladeck, of Georgetown University, reckons there
would be unintended consequences from such a move. The emergencies
will only multiply, he says, when more and more plaintiffs have to bring
their own cases against the president’s policies. ■

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America’s sort of Cass Review

Where the Trump administration

has science on its side
A government report evaluates gender therapy and medical care for
children
May 08, 2025 06:50 AM

BACK IN JANUARY Donald Trump signed executive order 14187,

entitled “Protecting Children from Chemical and Surgical Mutilation”. He
instructed federally run insurance programmes to exclude coverage of
treatment related to gender transition for minors. The order aimed to stop
institutions that receive federal grants from providing such treatments as
well. Mr Trump also commissioned the Department of Health and Human
Services (HHS) to publish, within 90 days, a review of literature on best
practices regarding “identity-based confusion” among children. The ban on
federal funding was later blocked by a judge, but the review was published
on May 1st.

A controversial president commissioning a department headed by a

controversial health secretary, Robert F. Kennedy junior, amid a big
reduction in government funding for science, sounded like a recipe for more
culture warring. Yet what the commission has served up is unexpectedly
rigorous.

“It is a lot like the Cass Review,” says Julia Mason, a paediatrician in
Oregon and one of the few left-leaning physicians in America to ask
questions publicly about the nationwide embrace of puberty blockers, cross-
sex hormones and surgery for children. The Cass Review, published in
2024, is the most extensive report on the subject so far, commissioned by
England’s National Health Service and headed by the former president of
the Royal College of Paediatrics, Hilary Cass. It found that evidence for the
benefits of gender-affirming interventions on minors was “remarkably
weak”.

The HHS report is more than 400 pages long, with a 173-page appendix full
of charts. It is in five sections: the history; a review of existing evidence; a
section on “clinical realities” in American gender clinics today; a section on
ethics; and a final one on the importance of psychotherapy. Chapters were
subject to peer review, and contributors included doctors and medical
ethicists, but the HHS has not named the authors, pending a post-
publication review process. The report largely avoids culture-war battles or
terminology, though it does refer to “paediatric medical transition” (PMT)
rather than “gender-affirming care”.

The summary cuts to the chase. “The evidence for benefit of paediatric
medical transition is very uncertain, while the evidence for harm is less
uncertain.” When medical interventions pose unnecessary, disproportionate
risks of harm, “healthcare providers should refuse to offer them even when
they are preferred, requested, or demanded by patients.” Claims that
distressed children who do not transition face greater risk of suicide “are
not supported by the evidence”.
The report includes a review of 17 previous systematic reviews on the
subject, many conducted in Europe, to evaluate the evidence for benefits
and harms of PMT. It finds that the overall quality of evidence on the
effects of intervention is “very low”. What is more, the report says the risks
of PMT include sterility, sexual dysfunction, impaired bone density, adverse
cognitive impacts, psychiatric disorders, surgical complications and regret.

The ethics chapter gives perhaps the deepest bioethical analysis of the issue
yet to be published (the Cass Review had no chapter on ethics). In response,
Jonathan Moreno, a professor emeritus at the University of Pennsylvania,
who was an adviser to Barack Obama’s bioethics commission, told the
British Medical Journal that the report cited reputable bioethical texts and
presented a “plausible” analysis.

The HHS report pays particular attention to the role of the World
Professional Association of Transgender Health (WPATH), whose advice is
embedded in American health care, even though the group does not require
members to be medical professionals. In the process of developing its latest
standards of care, the report claims that “WPATH suppressed systematic
reviews its leaders believed would undermine its favoured treatment
approach”. As a result, the report says, WPATH promoted the idea that
children could consent to the treatment, and that the treatment was
beneficial, even though it knew the evidence could not support either
assertion.

WPATH says the HHS report “misrepresents existing research and

disregards the expertise of professionals who have been working with
transgender and gender-diverse youth for decades”. Trans-rights groups
have also been scathing. “It is deeply troubling to see the country’s top
authority on health publish a collection of recommendations that seemingly
have no basis in following established health care best practices, science, or
input from providers who actually administer the type of health care in
question,” said Casey Pick, director of law and policy at the Trevor Project,
a non-profit.

Many American medical organisations, such as the American Academy of

Paediatrics (AAP) and the American Medical Association, follow
WPATH’s “gender-affirming” approach. The HHS report traces how this
impression of medical consensus came about, through blind delegation of
authority to WPATH and its members, a chain of trust that was broken, the
report says, when WPATH chose to suppress evidence. One researcher who
follows the issue expressed a hope that the report could help provide a
“golden bridge” for the associations to retreat, admit they had been misled
by WPATH, and change course, as is starting to happen in Britain and
elsewhere.

That looks unlikely. Susan Kressly, president of the AAP, dismissed the
report, saying it “relies on a narrow set of data and perspectives”. By using
terms like “child mutilation” and campaigning hard on a painful issue for
those parents and children directly affected, the Trump administration
damaged its chance of being listened to by people on the fence. In Britain,
the left-of-centre Labour government has committed to implementing the
Cass Review in full. In America, by contrast, many well-meaning people on
the left have dug themselves into a position that is not supported by
research. Dr Mason says, “The best way to judge this document is to read
it.” ■

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Mr Equal Protection

Trump knocks down a

controversial pillar of civil-rights
law
The rise and fall of the “disparate impact” doctrine
May 09, 2025 01:43 AM | WASHINGTON, DC

IN THE DELUGE of 145 executive orders issued by President Donald

Trump (on subjects as disparate as “Restoring American Seafood
Competitiveness” and “Maintaining Acceptable Water Pressure in
Showerheads”) it can be difficult to discern which are truly consequential.
But one of them, signed on April 23rd under the bland headline “Restoring
Equality of Opportunity and Meritocracy”, aims to remake civil-rights law.
Those primed to distrust Mr Trump on such matters may be surprised to
learn that the president’s target is not just important but also well-chosen.
The White House order aims to defang the legal concept of “disparate
impact”—the idea that policies without discriminatory intent can still
violate civil rights if they produce disparate outcomes along racial and
gender lines. After landmark legislation like the Civil Rights Act of 1964
was passed, disparate-impact theory accreted steadily in American
jurisprudence. The idea received its greatest endorsement in the Supreme
Court case Griggs v Duke Power Co., decided in 1971, which ruled that a
power plant in North Carolina had violated the act by requiring job
applicants without degrees to take IQ exams—which white candidates
passed at nearly ten times the rates of black ones.

In their unanimous opinion, the justices wrote that this was directly
traceable to race, particularly the poor education given in segregated
schools, and therefore violated the Civil Rights Act which “proscribes not
only over-discrimination, but also practices that are fair in form, but
discriminatory in operation”.

This idea that discrimination could occur without deliberate intent was
revolutionary. The federal government abolished its main civil-service
exam because of discrimination lawsuits. The Equal Employment
Opportunity Commission, the agency set up to police discrimination,
promulgated a “four-fifths” rule, saying that procedures resulting in “a
selection rate for any race, sex, or ethnic group” less than the 80% of the
highest-performing group would be regarded as “adverse impact”. Because
the rules required private monitoring and enforcement, they encouraged the
rise of professional HR departments.

Don’t mind the gap

Disparate impact has constrained federal policy in several domains. Barack

Obama pushed schools to remake their discipline policies because black
pupils were suspended and expelled at greater rates than white pupils.
Providers of public housing have been discouraged from asking for criminal
records of potential tenants. Under Joe Biden, the Federal Communications
Commission defined digital discrimination to include actions “that
differentially impact consumers’ access to broadband internet access service
based on their income level, race, ethnicity, colour”.
What Mr Trump aims to do is to extirpate this kind of reasoning “in all
contexts to the maximum degree possible”. Some left-leaning
commentators have argued that this is segregationist in intent, but critics of
disparate impact do not dispute the bans on overt and direct discrimination
on the basis of race. The problem is that “virtually every practice you can
name has a disparate impact on some group or other, which means that
agencies can go after almost anything they want to,” says Alison Somin of
the Pacific Legal Foundation, a libertarian-minded law firm.

Although Mr Trump’s order could be rescinded by an incoming Democratic

president, his action—in addition to downsizing the civil-rights divisions in
the Departments of Justice and Homeland Security—may well lead to the
demise of the idea. Federal agencies will go years without bringing
disparate-impact cases. Reviving the concept may be hard because
disparate-impact lawsuits and the racial balancing they encourage are not
particularly popular with voters, says Richard Hanania, a conservative
commentator.

Although disparate impact is written into law on some statutes and the
Supreme Court opinion in Griggs remains in effect, a new Supreme Court
case might strike down the whole concept as unconstitutional. In an opinion
given in 2009 (on a case about exams administered by a fire department),
the late Supreme Court Justice Antonin Scalia wrote that their resolution,
ducking the core constitutional questions, “merely postpones the evil day on
which the court will have to confront the question: whether, or to what
extent, are the disparate-impact provisions of Title VII of the Civil Rights
Act of 1964 consistent with the constitution’s guarantee of equal
protection?” That day might come—and if it does, given the court’s
conservative supermajority, it is not expected to go the way that
progressives hope.

Disparate impact has been something of an American export. In 1985 the

Canadian Supreme Court ruled in favour of a Seventh-Day Adventist who
had been sacked from working at Sears because the company required all
its employees to work on the Sabbath, calling it a case of “adverse effect
discrimination”. European law recognises the analogous idea of “indirect
discrimination”. It was codified into British law through the Equality Act of
2010—though similar ideas of indirect discrimination existed in the Sex
Discrimination Act of 1975 and the Race Relations Act of 1976. In 2017
the British Supreme Court upheld indirect discrimination claims (one case
involved a standardised test taken by immigration officers seeking
promotion). The concept may be in its waning days in America, but it
remains safely ensconced in other legal systems. ■

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Lexington

Harvard has more problems than

Donald Trump
He is just making them harder to fix
May 09, 2025 01:29 AM

A PROGRAMME at Harvard Divinity School aspired to “deZionize Jewish

consciousness”. During “privilege trainings”, working-class Harvard
students were instructed that, by being Jewish, they were oppressing
wealthier, better prepared classmates. A course in Harvard’s graduate
school of public health, “The Settler Colonial Determinants of Health”,
sought to “interrogate the relationships between settler colonialism,
Zionism, antisemitism, and other forms of racism”: Will these findings by
Harvard’s task-force on antisemitism and anti-Israel bias, released on April
29th, shock anyone? Maybe not. Americans may be numb by now to
bulletins about the excesses, not to say inanities, of some leftist academics.
If so, one might hope that as Americans consider whether antisemitism is a
problem at Harvard, they would imagine how it might feel to be a certain
sophomore encountering this social-media post about herself, by a peer:
“She looks just as dumb as her nose is crooked.” The report, a door-
stopping 311 pages, describes a campus culture so toxic that another
undergraduate confided to members of the task-force, “I feel lucky I don’t
look Jewish.”

No doubt a task-force on racism or sexism on any Ivy League campus

would find evidence of both. And, in fact, a separate Harvard task-force
found that Muslim, Arab and Palestinian students have felt “abandoned”
and even “actively suppressed and repressed”. None of that diminishes the
seriousness of the problem of antisemitism on elite campuses as
documented by Harvard’s task-force and by one at Columbia University, or
the particular, institutionalised quality this bigotry has acquired. “We are
not aware of any other group on campus,” the Harvard report on
antisemitism reads, “that is subject to social exclusion as part of an
intentional campaign by political organisers.”

The Harvard task-force was formed following the campus convulsions after
Hamas attacked Israel in 2023 and the war in Gaza began. But it tells the
long story of Jews’ relationship with the school, from grudging admission,
constrained by quotas, to “a golden age” of inclusion from the 1960s to
about 2010. After that, according to the report, the pro-Palestine movement
hardened, increasingly regarding Israel as a pariah and at times ascribing “a
form of hereditary and collective guilt” to American Jews over its actions,
even its existence. “The slippage between ‘Israel’ and ‘Jews’ is
widespread,” the report notes. On campus and beyond, out of ignorance or
malice, a trope is catching hold on the left that equates racism with
Zionism, and thence with Judaism.

Donald Trump has cancelled billions in combined grants to Harvard,

Columbia and other universities. His pressure campaign is ostensibly rooted
in alarm about antisemitism, but other concerns keep sprouting. On May 5th
Linda McMahon, the education secretary, told Harvard it was barred from
future grants, in a letter in the signature smashmouth style of this
administration and the professional-wrestling league she ran. In more than
two pages of insults and criticism about everything from plagiarism to
hiring former New York Mayor Bill de Blasio, Ms McMahon referred only
elliptically to antisemitism. Mr Trump’s indignation about campus
antisemitism was always hard to take at face value. He has contributed to
the “slippage” by condemning Jews who vote Democratic as “very disloyal
to Israel”. He has failed to deplore antisemitism among his supporters.
Those he pardoned for attacking the Capitol on January 6th included Nazi
sympathisers, one of whom sported a “Camp Auschwitz” hoodie that day.

Mr Trump’s approach is a poor match for the schools’ troubles. Some

Jewish officials, on campus and beyond, fear that Jews will bear the brunt
of blame for Mr Trump’s campus crusade, and that faculty and
administrators will minimise the problem of antisemitism in reaction. His
pressure will probably also make it harder for universities to make even
common-sense changes. Columbia’s trustees insisted that measures put in
place after demands from Mr Trump were steps the school wanted to take,
but the appearance of capitulation intensified the backlash.

What is saddest, or maybe most laughable, is the implication that America’s

national politics (let alone the guiding light of Trump University himself)
has anything to teach its undergraduates about grappling with complexity,
nuance or the views of an adversary. Ms McMahon’s letter, a model of
hyperbole and animosity, is a masterclass in turning problems into political
opportunities rather than helping solve them. In early May, a bill to define
antisemitism for purposes of combating it on campus stalled in committee,
as senators bickered over language they feared would make it a cudgel for
one party or the other.

Muddle East

By contrast, the self-scrutiny on campus is substantive. The task-forces at

Harvard and Columbia have been thorough, and their recommendations are
specific and far-reaching. Finding a need for “profound repair”, Harvard’s
task-force made dozens of proposals, for everything from governance to
discipline, to strengthen a “culture of pluralism”. Students, it reported, “too
often feel they are carrying the weight of their identities, since they say that
is how they sold themselves to Harvard in the application process”. Instead,
applicants should be told to expect a “genuine community with people with
whom one may disagree”. When it came to the Middle East, the report
acidly noted a “shortage” of courses “meeting Harvard’s standard for
intellectual excellence”.

It is ridiculous that Harvard has to relearn lessons about the value of rigour
in the classroom and the folly of reducing individuals to group identities.
But at least the university is showing signs of buckling down. Mr Trump
would be wise to do what he does well, and claim credit for this happy
development, rather than try to teach the lessons himself. ■

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The Americas
Xi Jinping tries to press China’s advantage in South
America
The strategic south :: New polling suggests locals are warming to China

A Mexican pharmacy chain revolutionised health care at

home
Farmacias Similares :: Can it do the same abroad?

Killer gangs are inches from ruling all of Haiti

Breaking point :: They seem to be unstoppable

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The strategic south

Xi Jinping tries to press China’s

advantage in South America
New polling suggests locals are warming to China
May 08, 2025 06:49 AM | Montevideo

ON MAY 12TH Xi Jinping, China’s president, will welcome South

American bigwigs to Beijing for China’s biggest diplomatic jamboree since
Donald Trump took office. Among them will be Luiz Inácio Lula da Silva
(known as Lula), Brazil’s president, Gustavo Petro of Colombia and Gabriel
Boric of Chile. American officials disapprove. Pete Hegseth, the secretary
of defence, has said China’s activity in the Western Hemisphere is “for
military advantage and unfair economic gain”.

To date, most of the Trump administration’s attention has been focused on

what it sees as problematic Chinese ties close to home. It worries that
Mexico offers a route for Chinese products to bypass tariffs and enter the
United States, and that it allows chemicals from China to be made into
deadly fentanyl that is smuggled over the border; it fears that the Hong
Kong-based firm which runs the ports at either end of the Panama canal
influences its operation. Much less attention is paid to the dramatic
expansion of Chinese ties that has taken place over the past decade just
slightly farther away, in South America.

Opinion polling commissioned by The Economist shows that although the

United States retains an edge in popularity, public opinion of China in
South America is improving fast. China is seen as the more respectful
superpower. In most places surveyed, China is seen as the more reliable
trading partner. As Mr Trump rails against America’s trade deficits, China
happily expands deficits with South America, gobbling up copper, lithium
and soyabeans.

Trade forms China’s strongest link with the region. In 2013 the United
States was South America’s biggest trading partner, with $280bn in total
goods trade in today’s dollars. By 2023 that was down 25%, while China’s
trade jumped 43% to $304bn. Only Colombia and Ecuador, American
allies, still trade more with the United States than with China. And even
there China is drawing closer.

Chinese demand for commodities has been driving this change. Chile’s
copper-ore exports to China almost tripled over the decade. Brazil’s
soyabean exports nearly doubled. The purchases buy China political
influence while the raw materials are used to churn out exports. Most South
American countries also now import more from China than from the United
States. Increasingly, those are imports of more complex products, from
electric vehicles to solar panels.

Chinese firms also invest a vast amount of money in South America. Since
2000 they have poured more than $168bn into the region, chiefly into
Brazil. Favourites like mining and agriculture are now complemented by
deals in telecoms, renewables and electricity utilities. Though investment
has declined recently, the value of newly announced projects ticked back up
in 2023. Still, Chinese investment trails that from Europe and the United
States.
State-backed loans are another tie. Since 2005 China has lent some $111bn
to Venezuela, Brazil, Ecuador and Argentina. New loans have declined
sharply since 2017 but the debt remains. Venezuela still owes perhaps
$10bn. Brazil owes billions, too. Even Mr Trump’s allies are constrained.
Ecuador owes China $3bn, a counterweight to President Daniel Noboa’s
pro-Trump instincts. President Javier Milei of Argentina, a Trump super-
fan, recently renewed a $5bn swap line from China despite Mr Trump’s
special envoy calling it “extortionate” and saying that the United States
wants it to end.

China’s strength is also evident in our new polling in Brazil, Colombia and
Venezuela, carried out by Premise, a research firm based in Washington.
The surveys, conducted through a mobile app, use samples balanced by age
and sex to reflect national populations. Overall opinion of the United States
is only slightly more favourable than of China and nearly 70% of Brazilians
and Colombians, and 60% of Venezuelans, say China’s popularity is
growing in their country. Strikingly, in every country—as well as in a
separate survey of Argentina—respondents think China respects them more
than the United States does (see chart 1).

The fairer friend

All this influences responses to the trade war. Mr Trump seems to want to
pressure trading partners to distance themselves from China in exchange for
a reduction in tariffs with the United States. But this is going down poorly.
“I don’t want to choose between the United States and China. I want to
have a relationship with both,” said Lula, echoing Mr Boric at a joint press
conference held in April. The gathering in Beijing may even produce a joint
statement condemning high tariffs, claims Yue Yunxia of the Chinese
Academy of Social Sciences, a state think-tank. That would play fine back
home. Brazilians, Colombians and Venezuelans think China has fairer and
more transparent trade practices than the United States does (see chart 2).
The United States also sees a military threat. “China’s military has too large
of a presence in the Western Hemisphere,” Mr Hegseth has said. There are
no Chinese military bases in the hemisphere, so instead Mr Hegseth and
colleagues worry that Chinese-built commercial ports, including a new
mega-port at Chancay in Peru, could be used by the navy.

Ground stations for relaying radio signals to space are another

preoccupation. China already has one in southern Argentina. Like the rest
of China’s space programme, it is run by an arm of the army. Mr Milei, ever
softening on China, has largely ignored the issue. A proposed new space
observatory in northern Chile, a joint venture by a private Chilean
university and China’s state astronomical institute, was recently frozen for
review by the Chilean government after American complaints. Wary,
perhaps, of this sort of hectoring, and concerned about Mr Trump’s
erraticism, one South American army is considering ways to diversify its
intelligence sources and weapons systems away from the United States.

Some welcome this shift. “Trump is also seen as an opportunity,” says

Oliver Stuenkel of the Fundação Getulio Vargas, a Brazilian university,
“He’s seen as the midwife of a multipolar order.” The enthusiasm stems
partly from the fact that the era of American dominance came with plenty
of meddling from Uncle Sam.

Any efforts to persuade South Americans to push China back are hampered
by the Trump administration’s all-stick-no-carrot approach. Deportations,
tariffs and threats dominate headlines. Stronger trade and economic ties
would make it much easier for Mr Trump’s team to persuade South
Americans to distance themselves from China. Yet the administration has
shown little interest in those. Gutting USAID does not help.

Even the most pro-American of leaders, Mr Milei, knows that he needs

China. In November he told The Economist that “the well-being of
Argentines requires that I deepen my commercial ties with China”.
Premise’s data suggest Argentines agree: 56% say he should maintain
strong economic ties with China. Only 15% disagree.

Charming South America should not be so hard. While China says its firms
just want to make money in the region, their methods can leave a sour taste.
“Our relationship with China is love-hate, and it gets more hateful as time
goes by,” says Alfredo Thorne, a former Peruvian finance minister,
highlighting China’s goods-dumping. American culture and values still win
out over Chinese ones, according to Premise’s surveys. Yet South America
is often taken for granted. Evan Medeiros, an architect of the pivot to Asia
by a former president, Barack Obama, says a new pivot is now needed, to
focus American attention further south. Whatever its merits, that looks
unlikely. ■

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Farmacias Similares

A Mexican pharmacy chain

revolutionised health care at home
Can it do the same abroad?
May 08, 2025 06:49 AM | Mexico City

FARMACIAS SIMILARES can seem an unserious business. Employees

dressed as the company’s mascot, the moustachioed “Dr Simi”, dance
outside its pharmacies. Stuffed-toy Simis, costumed as Jedi knights or
musicians in traditional mariachi style, adorn its headquarters in Mexico
City. But behind the cutesy marketing is a firm that has made health care in
Mexico dramatically cheaper and more accessible over the past three
decades. It is now trying to push into the United States.

In 1997, when Farmacias Similares opened its first shop, prescription drugs
cost twice as much in Mexico as they did elsewhere in Latin America.
Generic medicines were not available. The firm’s founder, Victor González
Torres, struggled against powerful pharmaceutical companies to win the
freedom to sell generic drugs at prices up to 75% lower than his rivals’
patented products. Today his firm’s slogan—“the same but cheaper”—is
emblazoned on nearly 10,000 branches across Mexico. Farmacias Similares
does not publish financial results, but claims to sell 45% of all prescription
drugs in Mexico by volume, and that its sales are growing by more than 9%
a year. Medicines in Mexico are now among Latin America’s cheapest.

Farmacias Similares has also used its pharmacies to expand access to health
care. From the start, each one has had a doctor’s office attached. An
appointment costs 60 pesos ($3). In March alone there were more than 15m
consultations.

Demand has grown thanks to former president Andrés Manuel López

Obrador. Health care in Mexico is linked to payments for social security,
made only by workers in formal employment. The majority, who work in
the informal sector, used to rely on Seguro Popular, an insurance scheme
run by the government. Promising to give Mexico a universal, “Nordic”
health-care system, Mr López Obrador got rid of Seguro Popular in 2020.
But his creation was poorly run and underfunded. He soon scrapped it,
leaving no coverage in its place. As a result, affordable private health care
like that offered through Farmacias Similares is now essential. Other
Mexican pharmacists have copied the model.

Claudia Sheinbaum, Mexico’s president, has promised to improve health

care for Mexico’s poorest by hiring more doctors for the patchy network of
government-run clinics, and by providing medication free. But with money
tight and an economy threatened by tariffs, it is a promise she will find hard
to keep.

In any case, says Victor González Herrera, who succeeded his father as the
firm’s boss in 2022, it would be stupid for the government to compete with
providers of affordable private health care rather than working with them.
He suggests chemists could provide on-site general practitioners while the
government focuses on health-care specialists.
The United States is not Farmacias Similares’s first international foray. The
firm already runs 550 branches in Chile. Attempts to enter the Argentine
and Colombian markets have not gone so well. Mr González blames a
highly regulated and closed industry that wants to prevent newcomers and
keep its high prices.

That sounds rather like the pharmaceutical industry in the United States.
Even as he inaugurates a new headquarters in Texas and opens
“Similandia”, a shop on Hollywood Boulevard in Los Angeles, regulatory
hurdles mean that Mr González will at first sell only vitamins and non-
prescription drugs in the United States. Tariffs will make sourcing more
challenging. Still, millions of Hispanics in California and Texas recognise
Dr Simi. Perhaps Mr González will find a way to look after them, too. ■

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Breaking point

Killer gangs are inches from ruling

all of Haiti
They seem to be unstoppable
May 08, 2025 06:50 AM | MIAMI

Can’t take much more of this

THE COLLAPSE of Haiti’s government in April last year was a challenge

but also an opportunity. An interim government called the Transitional
Presidential Council was installed. A UN-brokered, Kenyan-led security
mission arrived soon after. But a year later things are worse than ever. “We
are approaching a point of no return,” María Isabel Salvador, the UN’s top
official in Haiti, told its Security Council at a meeting on April 21st.

Tasked with preparing for elections that in theory will be held in November,
the council is now mired in allegations of corruption. The security force of
around 1,000 people (less than half the number originally planned) has not
been able to stem the chaos. Its funding runs out in September. The council
is a “transitional authority that controls nothing”, says Claude Joseph, a
former prime minister. “It’s an unsustainable catastrophe. We could lose
Port-au-Prince at any time.”

Port-au-Prince, the capital, now sees daily gun battles in which police and
civilian vigilantes face off against a gang coalition called Viv Ansanm
(“Living Together”). It has seized control of much of the city. The
international airport has been all but shut down; the only way in or out is by
helicopter, or by a barge that skirts the coast to bypass gang territory to the
south. On May 2nd the United States designated Viv Ansanm and a sister
organisation as terrorist groups, opening the door to tougher criminal
penalties for those who provide them with money and weapons.

The collapse of public life is accelerating. Most schools are shut. Cholera is
spreading. The Marriott, one of the last functioning hotels, has closed its
doors. Gangs have surrounded the offices of Digicel, Haiti’s main cellular
network, through which most people connect to the internet. “If Digicel
goes down, the country goes dark,” warns a security expert.

The gangs don’t need it. Increasingly sophisticated, they use Elon Musk’s
Starlink satellite system to communicate, organising themselves to the
extent that they have been able to keep control over access to Haiti’s ports.
They also extort lorry drivers and bus operators moving along many of the
country’s main roads.

The UN reports that in February and March more than 1,000 people were
killed and 60,000 displaced, adding to the 1m, nearly 10% of the
population, who have fled their homes in the past two years. Circulating
videos show gang members playing football with severed heads, bragging:
“We got the dogs.”

Central Haiti, once relatively peaceful, is fragmenting into fiefs. Mirebalais,

a city which lies between Port-au-Prince and the border with the Dominican
Republic, is now controlled by gangs. “The country has become a criminal
enterprise. It’s the wild, wild West,” says a foreign official.
Patience is running thin at the UN Security Council. The United States has
already committed $600m to the security mission, but is unlikely to offer
more. “America cannot continue shouldering such a significant financial
burden,” said Dorothy Shea, the US ambassador to the UN. Few other
countries want to donate.

The council is so desperate that it is exploring deals with private military

contractors. It has been talking to Osprey Global Solutions, a firm based in
North Carolina. The founder of Blackwater, Erik Prince, visited Haiti in
April to negotiate contracts to provide attack drones and training for an
anti-gang task force. The council declined to comment.

The Haitian police are overwhelmed; an estimated 12,000 officers police a

population that approaches 12m, barely half the UN-recommended ratio.
Weak leadership, poor co-ordination with the Kenyan-led force, and calls
for the ousting of the police chief point to deep institutional rot.

In Canapé-Vert, one of Port-au-Prince’s last gang-free pockets, a former

policeman known as “Commander Samuel” leads a vigilante group called
Du Sang 9 (“New Blood” in Creole). Gangs have thinned its numbers. It is
all that stands between them and the prime minister’s office. ■

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Middle East & Africa

Israel’s radical new course in Gaza
Who will feed the strip? :: A deeply flawed plan to fight Hamas and feed Gazans

MAGA meets MBS

Agree to disagree :: Trump and the Saudis get along famously in person but poorly on policy

A Faustian pact with the Houthis

The Red Sea :: A new American deal strengthens their grip over Yemen

The fight for Sudan’s skies

Threat from above :: A drone attack on the coast heralds a new phase in the country’s civil war

Nigeria has more people without electricity than any other

country
A nation in the dark :: Fixing that will be fiendishly difficult

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Who will feed the strip?

Israel’s radical new course in Gaza

A deeply flawed plan to fight Hamas and feed Gazans
May 08, 2025 06:49 AM | JERUSALEM

ON MAY 5TH Israel’s cabinet changed course on Gaza in dramatic

fashion. It decided to “expand” military operations in the strip again and put
in place a new plan to distribute aid to Gaza’s population. Israel’s hard right
sees a path to a permanent reoccupation. Generals in the Israel Defence
Forces (IDF) believe the plan will allow a temporary surge to crush what
remains of Hamas. Israel’s critics think it will guarantee even more civilian
misery and death. The pivot comes at a crucial moment. President Donald
Trump will visit the Gulf states on May 13th-16th, with Gaza on the
agenda. Inside Gaza a shortage of food is at a critical point: some accuse
Israel of a policy of starvation.
For over two months Israel has enforced a total blockade of the strip. It has
stopped food or medicines from entering and cut off electricity supplies, so
that desalination plants and many pumps have been unable to function.
Israel has severed aid before, but this is the longest blockade since the war
began after the Hamas massacres of October 7th 2023. Gaza has been stuck
in a military limbo since the ceasefire collapsed in late March. The fighting
is less intense, with the weekly death toll about half what it was before. In
total 52,000 Gazans, including combatants, have probably now been killed
(see next article).

Read all our coverage of the war in the Middle East

The aid cut-off has led Palestinians and aid organisations to warn of
starvation and even famine. The charges are especially loaded because
claims of imminent famine in 2024 by international organisations, together
with the stated intention of some Israeli politicians to deny Gaza food,
bolstered the case for the International Criminal Court to issue arrest
warrants against Israel’s leaders for alleged war crimes and another case, on
genocide, in the International Court of Justice. Those predictions of famine
turned out to be badly wrong. Yet the idea that Israel is prepared to use food
for leverage is right.

Today Israel insists sufficient supplies of food and medicine surged into the
strip in the seven-week ceasefire to sustain its civilians: around 25,000
lorries’ worth in total. It claims shortages are manufactured by Hamas,
which it says has seized supplies and is manipulating food markets to fill its
coffers, pay its members and control the population. Israel accuses aid
groups of being naive or complicit.

Yet on the ground there is no doubt of severe suffering. Grocery shops stand
empty, bakeries have closed and communal kitchens are overwhelmed by
families who might receive one hot meal a day at most. “The main
warehouse we use to distribute food in Gaza City is now empty,” says Olga
Cherevko, a UN spokeswoman. “We recycle water many times,” says a
former civil servant in the city. Tents are next to piles of solid waste.
“People live like animals,” says Khaled Dawas, a doctor.
Food prices have rocketed. Some items cost 700% more than before the
war, says the UN’s World Food Programme (WFP). A sack of flour that
once cost 50 shekels ($14) goes for 1,200 ($330). The WFP delivered the
last food from its warehouses on April 25th. Akram, a teacher displaced
from north Gaza, sends his sons to queue with a pot. One day they got bean
stew, the next, soup. The family of five supplements this with pasta and
cans of tuna stockpiled in the ceasefire. They have not gone a full day
without food, one yardstick of famine. But “we go to sleep hungry every
night”. Akram’s stash will run out in two weeks. There is a glut of cooking
oil but no fuel.

Agricultural land across the south of the strip is under Israeli occupation.
Some 78% of greenhouses are damaged or destroyed, along with 72% of
the fishing fleet. Only 1% of Gaza’s pre-war chickens remain. Malnutrition,
especially among children, is rising. Gaza’s health authority, overseen by
Hamas, says 57 people have died of starvation since the start of the war.
Sources in international agencies say these deaths were probably caused by
pre-existing conditions, but malnutrition may have been a contributing
factor.

Even Israeli officials admit that food for the general population will run out
in weeks. The IDF’s new chief of staff, Lieutenant General Eyal Zamir,
appointed for his toughness, has said the army will not use starvation as a
military tactic. Officers have urged Binyamin Netanyahu, the prime
minister, to resume supplies. But the IDF also wants to disrupt what
remains of Hamas’s economic networks. One idea floated is to withdraw
from circulation the 200-shekel note, used in Gaza, in order to annul
Hamas’s reserves.

A terrible idea

For now Israel’s focus is on the new plan. With the backing of America,
Israel will establish “distribution hubs” in Gaza. A representative of each
family will be allowed to collect a package of food and hygiene products
that will last two weeks. Eventually there could be ten hubs, but initially
just one or two will be set up in the south as a pilot. The IDF will secure the
convoy routes to the hubs and their outer perimeters. Private American
“contractors”, a more respectable term for mercenaries, will provide
security inside. On May 4th a forum of UN agencies and other NGOs said
the plan was “dangerous, driving civilians into militarised zones to collect
rations, threatening lives”.

The plan has huge flaws. It leaves the Palestinians reliant on subsistence-
level rationing indefinitely. It is unclear how hospitals and refugee shelters
will be supplied. A shadowy international foundation has been set up to pay
for the contractors, but no details have been given about its donors
(America’s government is involved). Israeli officials expect aid groups will
eventually capitulate and join the hubs once they realise this is the only way
aid will get into Gaza without Hamas being in tacit control.

The aid plan is meant to complement the IDF’s military operations. The
cabinet on May 5th also authorised the “expansion” of ground operations,
though the details have yet to be specified. Some ministers want Israel to
occupy the entire strip, corralling Gazans around the aid hubs. General
Zamir opposes this, warning it would endanger the hostages and that the
IDF may not have enough troops.

Occupying most of Gaza’s territory and forcing its population away from
their homes towards the distribution hubs will take months, and require the
call-up of tens of thousands of reservists. In some reserve units, where
soldiers are exhausted and disillusioned (having already served for
hundreds of days), only half are planning to turn up.

Within the IDF some fear the operational plans are unrealistic. Israel’s
armed forces, reliant on its reservists, are overextended, they say. Some
officers also admit that Hamas will always be able to enlist thousands more
youngsters to its ranks. But General Zamir has his orders. Either way, no
major manoeuvres are expected for at least two weeks until reserve units
are called up and the results of Mr Trump’s visit to the region are clear.

Mr Trump is the only person with any clout when it comes to the Israeli
prime minister. Mr Netanyahu worries that the president will be urged by
the Arab leaders to press Israel to return to the original ceasefire deal. Israel
is unlikely to go ahead with its plans if the Americans withdraw their
support. Gaza is becoming Israel’s forever war, and Gazans’ perpetual hell.
■

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Agree to disagree

MAGA meets MBS

Trump and the Saudis get along famously in person but poorly on policy
May 08, 2025 06:50 AM | RIYADH

Eager to return

MORE THAN a few wags in Riyadh have quipped that Donald Trump is
America’s first Saudi president. He is certainly the kingdom’s most
simpatico counterpart in the Oval Office since the dawn of the century.
Barack Obama resented the Saudis as “free riders”. Joe Biden promised to
make them “pariahs”. Even George W. Bush, who strolled hand-in-hand
with Saudi princes on his ranch in Texas, was prone to giving them irksome
lectures about democracy and human rights.

They hear none of that from Mr Trump. His style of court politics, his
mixing of family and state business, even his taste in interior decor, all look
familiar to Saudi royals. They will give Mr Trump a warm welcome when
he arrives in the kingdom on May 13th, his first stop on a three-country
Gulf tour—nothing like the chilly fist-bump they offered Mr Biden in 2022.
Yet the public bonhomie is a façade. In Mr Trump’s second term, as in his
first, America and Saudi Arabia cannot agree on what they want in the
Middle East.

In 2017 that was because the kingdom was an agent of chaos. It had
invaded Yemen two years before. Muhammad bin Salman, the crown
prince, would go on to blockade neighbouring Qatar, kidnap a Lebanese
prime minister, imprison scores of princes and businessmen in a Riyadh
hotel and to approve an operation which led to a journalist being
dismembered in Istanbul. Mr Trump had to deal with the consequences. The
embargo of Qatar caused a schism between America’s closest allies in the
Middle East.

Now it is Mr Trump rattling the region (and the world). He started bombing
Yemen in March. Around the same time, he let Israel abandon a ceasefire
and resume its war in Gaza. He has kept sanctions on post-Assad Syria.
Then there are the ructions he has caused the global economy: the price of
Saudi Arabia’s main export has fallen by 22% since Mr Trump took office.

When Mr Trump visited Saudi Arabia in 2017, the kingdom wanted

American support for a forthcoming offensive to retake Hodeidah, a port
city in Yemen that had been captured by the Houthis, a Shia militia. The
president and his allies were hesitant, fearing that a fight for Yemen’s
biggest port would cause famine in a country that imports 90% of its food.
Times have changed. On May 5th, a week before Mr Trump’s second visit,
America helped Israeli jets bomb Hodeidah. The Saudis stayed silent; it was
their turn to worry about the consequences of a conflict.

Those fears have abated, at least for now. On May 6th Mr Trump paused his
seven-week bombing campaign against the Houthis. Still, the episode was
striking. The Saudis have done an about-turn since 2017: now they are the
ones focused on maintaining stability in the region.

Prince Muhammad has been the kingdom’s de facto ruler for eight years.
Perhaps with age comes wisdom, or at least caution. He is also getting
better advice. His first foreign minister, Adel al-Jubeir, was the first
commoner to hold the job since 1962. That meant he was little more than a
front man for the crown prince’s hawkish impulses. Faisal bin Farhan al-
Saud, the foreign minister since 2019, has been a moderating influence. As
a prince himself, he has more room to shape policy.

Most of all, Prince Muhammad’s priorities have changed. He needs to

safeguard Vision 2030, his ambitious plan to overhaul the Saudi economy.
That is incompatible with trying to reshape the Middle East by force: it is
hard to attract tourists while ballistic missiles whiz overhead.

Saudi foreign policy is now more velvet glove than iron fist. Along with
Qatar, it has helped pay off Syria’s $15m debt to the World Bank, a small
but symbolic step that will unlock more aid. It should soon lift a years-old
ban on its citizens travelling to Lebanon, a sign of confidence in that
country’s new government. It ended its war in Yemen and its feud with
Qatar, and initiated a rapprochement with Iran.

America is still trying to figure out its priorities, a process that begins anew
with each change of president. Does it want to end the region’s wars, as Mr
Trump has promised? Or to keep the boot on Iran and its proxies, as some
of his advisers prefer (and the strikes in Yemen were meant to do)? Mr
Trump sometimes talks about wanting to forge a prosperous Middle East.
His tariffs, aid cuts and sanctions will create the opposite.

What’s the new deal?

Since its inception in 1945, the American-Saudi relationship has been

transactional. The Saudis kept their oil flowing to America, which in turn
pledged to protect the kingdom. That bargain has run its course. This could
be a moment for reinvention. America and Saudi Arabia share common
interests in everything from stabilising Syria to promoting regional
economic integration. But the chaos of the Trump administration makes
pursuing such long-term goals impossible.

Instead, the relationship is likely to remain transactional. Mr Trump hopes

to leave Riyadh with a promise of $1trn in trade and investment, and to
conclude an arms deal worth $100bn. Both are implausible: the former is
equal to Saudi Arabia’s annual GDP, and the latter dwarfs its $72bn defence
budget. The Saudis, for their part, still hope to conclude a formal defence
pact with America. The kingdom has changed much since Mr Trump’s first
term. But its relationship with America still looks mired in the past. ■

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The Red Sea

A Faustian pact with the Houthis

A new American deal strengthens their grip over Yemen
May 08, 2025 06:50 AM

OVER THE course of seven weeks Donald Trump, America’s president,

bombed the Houthis, Yemeni rebels backed by Iran, over a thousand times.
That was twice the number of strikes his predecessor launched in over a
year. Then, unexpectedly, the bombing stopped. On May 6th, in a press
conference with Canada’s prime minister, Mr Trump casually mentioned
that he had landed a deal with the Houthis. “We will stop the bombings,” he
explained, in return for a cessation of Houthi attacks on shipping. “Freedom
of navigation for international commercial shipping in the Red Sea,”
tweeted the Omani foreign minister, Badr Albusaidi, who brokered the
agreement, soon after.
Many things explain Mr Trump’s change of course. The cost of the
campaign, estimated to be $1bn, was heavy. The attacks had failed to deter
the Houthis. And they threatened to fuel conflict just as the president was
heading to the Middle East to promote peace. The Iranians had suspended
negotiations about their nuclear programme after Pete Hegseth, the
American secretary of defence, warned Iran that it would “pay” for its
“lethal support” of the Houthis. On May 4th one of the Houthis’ missiles
pierced Israel’s defences and struck the outskirts of its main airport in Tel
Aviv. In response Israel destroyed Hodeidah, a Yemeni port, the capital’s
airport, three civilian aircraft and two big cement plants. The old Middle
East, pitting America and Israel against Iran and its proxies, seemed to be
back.
The immediate beneficiary of the apparent détente is Iran. Having parked
the Houthi problem, Mr Trump looks closer than ever to a deal with the
ayatollahs. Iran quickly declared it would resume a fourth round of talks
within days. A draft agreement is said to be circulating that could see the
Islamic Republic and America restore diplomatic relations after 45 years. If
that materialises, technical teams would finalise a deal that lets Iran enrich
uranium to low levels in perpetuity. Ahead of his trip to the Gulf on May
13th, Mr Trump has already let slip that “a very, very big announcement” is
coming. “Things are moving very fast,” says an observer in touch with both
the Iranians and the Americans.

The Houthis are also crowing. Mr Trump said they had capitulated. The
rebels insist America beat a retreat. America’s strikes have damaged but not
eliminated the Houthis’ long-range missile arsenal. They remain Yemen’s
most powerful force. The leaders of Hamas and Hizbullah, the other
members of Iran’s “axis of resistance”, have fallen; Abdel-Malik al-Houthi
is its last man standing. “We didn’t expect Trump would surrender to the
Houthis and hand them a victory for free,” says Abdul-Ghani al-Iryani, a
Yemen analyst.

Others are counting their losses. The deal leaves 25m Yemenis under the
Houthis’ yoke. A decade of air strikes that began with the Saudis has
crippled infrastructure. The Houthis tax heavily, but show scant interest in
service-delivery. Instead they focus on bolstering their forces, tightening
their grip and indoctrinating the population with religious dogma and hate
speech. “They’re worse than the Taliban,” says a Yemeni visitor to Sana’a,
the capital.

The Houthis’ Yemeni rivals are smarting, too. Some had hoped that under
American pressure the group might at last accede to a power-sharing
agreement and let the internationally recognised government return to the
capital. Others hoped to exploit American mission creep and relaunch a
ground assault. Now they fear it could be the Houthis who advance. None
of Yemen’s other forces can match the rebel group. Their force has grown
12-fold to 350,000 since 2015, according to the UN, a year after they seized
Sana’a. And unlike their Yemeni opponents, they are disciplined and battle-
ready. Prepare for Houthi attacks on the oilfields near Marib and Shabwa,
say Yemen-watchers.

Most surprising is Mr Trump’s abandonment of Israel. He launched his

campaign in March when the Houthis resumed their attacks on Israel. But
the deal does nothing to constrain Houthi strikes against America’s ally.
The Houthis say they will continue firing at Israel as long as Israel
maintains its blockade of Gaza. It might be a sign of Mr Trump’s frustration
with Israel’s prime minister, Binyamin Netanyahu or of his determination to
secure a deal with Iran. Either way, Israel seems unusually out of the loop.
■

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Threat from above

The fight for Sudan’s skies

A drone attack on the coast heralds a new phase in the country’s civil war
May 08, 2025 06:50 AM | Nairobi

FOR NEARLY two years Port Sudan on the Red Sea was a haven in
Sudan’s civil war. The city became the country’s de facto capital after the
Sudanese Armed Forces (SAF) fled to the coast. Thanks to its functioning
international airport, it was the centre of relief operations for the world’s
biggest humanitarian crisis.

Now it is a military target. Starting with a drone attack on May 4th, civilian
infrastructure (including the airport, a hotel and a power station) has come
under fire from the Rapid Support Forces (RSF), the army’s main adversary.
“No place is safe any more,” says Suliman Baldo of the Sudan
Transparency and Policy Tracker, a conflict-monitoring group. A war that
has forced 12m of Sudan’s 50m people from their homes and caused one of
the world’s worst famines has shifted to the skies.

The SAF was first to use armed drones on Sudan’s battlefields. After losing
control of Khartoum, the capital, and much else to the RSF in 2023, it
focused on acquiring advanced weapons. By 2024 it had bought drones
made in Turkey, Iran and China. They may have been decisive in dislodging
the RSF from Khartoum in March.

More recently, the RSF has also been acquiring drones with the help of the
United Arab Emirates, its key foreign backer. As it abandoned its attempt to
advance east by land, it has stepped up their use, targeting civilian
infrastructure across SAF-controlled territory from the sky.

The new phase of the war is particularly bad news for humanitarian
operations. All flights in and out of the country have been suspended,
disrupting the supply of aid and medicine. In Port Sudan fuel is scarce.
Electricity, already erratic, is down; a shortage of oxygen in hospitals is
expected. Though aid agencies are staying put for now, the UN is preparing
evacuation plans. One aid worker in the city warns of a “catastrophe” if the
country’s telecoms infrastructure is hit next.

The attacks may signal a shift towards asymmetric warfare, in which the
RSF focuses on inflicting maximum damage from afar. The SAF has
frequently used air power to target villages and marketplaces inside RSF-
held territory, killing probably hundreds of civilians. The two sides are now
stuck in “tit-for-tat logic of disrupting civilian activities”, says Mr Baldo.
As with all developments in the war so far, the latest twist spells more
misery for Sudanese. ■

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A nation in the dark

Nigeria has more people without

electricity than any other country
Fixing that will be fiendishly difficult
May 08, 2025 06:50 AM | Lagos

Noisy but necessary

BEFORE GEORGE ETOMI went to university in 1972, his home in Lagos,

Nigeria’s commercial capital, had near-constant power. When he returned
from studying abroad a few years later, power cuts had become frequent.
By 1984, Mr Etomi needed a fuel-powered generator to open his law firm.
Today roaring generators provide the soundtrack to urban Nigerian life.
They produce more than twice as much power as Nigerians get from the
grid.
Decades of underinvestment in Nigeria’s power supply mean it has not kept
pace with the country’s growth. More than 90m of its 230m people live
without access to electricity, the highest number in any country. Deep
dysfunction in the sector and a gaping lack of funds mean things are
unlikely to improve soon.

Plenty of poor countries struggle with intermittent power. Yet Nigerians are
uniquely deprived. Just under half the country has never been connected to
the national grid, which has never carried more than 6 gigawatts (GW).
South Africa, which has suffered blackouts and load-shedding, manages
48GW of grid power for its 63m people. Even Bangladesh, poorer than
Nigeria until recently and home to 170m people in an area a sixth of
Nigeria’s size, generates around 16GW. In Nigeria, when production
reached a high of more than 5GW one day in March, the surge made the
grid collapse. When the power comes back, “it’s as if a goal has been
scored in football,” says Mr Etomi.

The lack of grid power is a massive drag on the economy and Nigerians’
quality of life. Frequent power cuts in hospitals cost lives. Air-conditioning
is a luxury. Tech entrepreneurs are forced to build their own power plants to
run their data centres. More than half the country’s manufacturers no longer
even bother to try to connect to the grid, according to the power minister. In
2023 Nigerians spent 16.5trn naira ($10.3bn) on generating off-grid power,
equivalent to 60% of the entire government budget for the following year.
That brings total supply to some 20GW, a quarter of the country’s estimated
power needs.

Decades of underinvestment have kiboshed the system in so many different

places that it is fiendishly hard to fix. The grid, still run by the government,
is dilapidated and prone to collapse. That limits the amount of power it will
agree to buy from generator companies. These, in turn, have problems
beyond the lack of demand from the grid. Gas plants, which produce most
grid power, are badly maintained and often fail to pay their suppliers.
What’s more, gas prices are capped, which means it can be cheaper for
suppliers to burn off gas rather than ship it to plants that may pay them very
little or nothing. On average, plants run at less than half their capacity.
Distribution companies, 60% of which are privatised, struggle to cover their
costs as people often fail to settle their bills. The government is the worst
offender. Last year the distribution company in Abuja, the capital,
threatened to disconnect the presidential villa and 86 government agencies
over 47.2bn naira ($29m) of unpaid bills. When one company in Lagos
asked the air force to pay for a nine-year backlog, soldiers stormed its
headquarters and beat up the staff.

Powering up

Government initiatives have not got off the ground. A partnership between
Nigeria, Germany and Siemens, a German firm, is supposed to add 12GW
to the grid’s ability to handle throughput. But the project has completed
only a pilot phase since it was signed in 2019. Privatisation, which helped
improve telecoms and banking in the 1990s, has failed to revamp the power
sector. More than half the distribution companies that were privatised in
2011 have gone bust, dampening investor appetite. “Why would anyone put
a dime in the sector?” asks Noelle Okwedy, an energy analyst.

It is politically hard to persuade more people to pay for electricity, given the
service’s shoddy quality, but the government has been trying. Still, even
after prices quadrupled for the richest households last year, today payments
cover only around 65% of the cost of providing power.

Most progress is being made off the grid. A consortium involving the World
Bank and the African Development Bank wants to spend up to $55bn to
provide electricity to 300m Africans, including many Nigerians, by the
decade’s end. Concessional financing has helped build off-grid solar
projects, such as a 12MW solar hybrid plant powering a university that was
recently completed in the northern city of Maiduguri. In March, a group of
organisations including Nigeria’s sovereign-wealth fund launched a $500m
fund for bigger renewable-energy projects.

Such projects alone will not cover Nigeria’s massive electricity shortfall, so
fixing the grid is still vital. Yet successful off-grid options may make it
harder. As reliable solar alternatives or private power plants become more
widespread, as in South Africa and Pakistan, the cost of maintaining and
upgrading the grid will be shouldered by fewer people. As costs go up and
service fails to improve or deteriorates, opting out entirely becomes ever
more attractive. The government’s response looks muddled: it wants to
integrate more solar power into the grid, but is also mulling banning the
import of solar panels.

If the electricity problem is not fixed, the economy will also continue to
operate below capacity. Nigeria cannot be Africa’s economic powerhouse
until it can power its houses. ■

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Europe
Trouble at home threatens Friedrich Merz’s global
ambitions
The ides of Merz :: The new German chancellor may fall short of his partners’ expectations

Berlin’s culture bosses must become more commercial

Frugal times ahead :: However distasteful this might seem to them

Romania’s next president may be George Simion, a Trump

ally
MAGA man :: His opponent, Nicosur Dan, is backed by anti-corruption urbanites

Portugal heads to the polls for the third time in barely

three years
When enough is not enough :: Can a political culture of compromise survive the turbulence?

How new drones are sneaking past jammers on Ukraine’s

front lines
The tethered threat :: A low-tech fix is delivering high-impact results

To grasp Europe’s fragmentations, look to a 31-year

treasure hunt
Charlemagne :: The Golden Owl is a parable for a changing continent

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The ides of Merz

Trouble at home threatens

Friedrich Merz’s global ambitions
The new German chancellor may fall short of his partners’ expectations
May 08, 2025 10:13 AM | Berlin

“SO HELP ME God,” said Friedrich Merz, Germany’s new chancellor, his
right hand aloft as he solemnly recited the oath of office in the Bundestag
on May 6th. Earlier in the day Mr Merz, leader of the Christian Democrats
(CDU), might well have hoped for a spot of divine intervention, after the
Bundestag delivered him an unprecedented rebuke. In what was expected to
have been a routine step enabling his ascent to the chancellery, MPs instead
left him six votes short of the absolute majority he needed. At least 18 of
the 328 lawmakers in Mr Merz’s conservative bloc and their junior coalition
partner, the Social Democrats (SPD), had balked at backing the man who
won Germany’s election in February. The ballot was secret; the culprits
may never be known. But whoever was to blame, it was a devilish start for
a man who had pledged to bring an end to the “chaos” he said marked the
tenure of the SPD-led government he was replacing.

A second vote that day, organised after a hasty change to parliamentary

procedures, got Mr Merz over the line. The new chancellor now hopes that
a flurry of activity will erase the Bundestag bungle from memory. On his
first full day in office he embarked on a whistle-stop tour of France and
Poland, in a display of comity with Germany’s most important neighbours.
Trips to Brussels, Kyiv and doubtless other places will follow fast. Mr
Merz’s commitment to restoring a long-absent German voice to European
and international debates is not in doubt, and he has structured his
government to centralise foreign policy in the chancellery (Johann
Wadephul, the new foreign minister, is a close party ally). The question is
whether his international ambitions may run aground on the shores of
domestic politics.

At least initially, the focus will be on Europe. “Merz is convinced that the
only guarantee for a free, wealthy and peaceful Europe is for it to build
significantly more unity,” says Roland Koch, a CDU grandee and longtime
ally. Even before taking office Mr Merz organised a constitutional change
to boost defence and infrastructure spending. Hopes run accordingly high in
many EU capitals. Emmanuel Macron in particular longs to find the partner
in Berlin he missed under Olaf Scholz, the outgoing chancellor; the French
president has asked his ministers to study the German coalition agreement
to find areas of potential co-operation. When Mr Merz dropped in to the
Elysée on May 7th—his first visit as chancellor, but far from his first
meeting with Mr Macron—the pair hugged like old pals. They promised
joint endeavours on defence, energy and innovation.

As for Poland, Mr Merz hopes to restore a relationship that also atrophied

under Mr Scholz. He vests his hopes in the fact that the CDU and Civic
Platform, the party of Donald Tusk, the Polish prime minister, both sit in the
European People’s Party, the centre-right grouping that Mr Merz regards as
a crucial vector of power in Europe. There are also ambitions with Britain:
the chancellor plans to tap into the Labour government’s hope for a post-
Brexit reset in relations with Europe. Mr Merz has said that Germany,
France, Poland and Britain should form a European “contact group” to back
Ukraine—though in Paris he added pointedly that “we still need the
Americans”. (He is expected to speak to Donald Trump soon.)

None of these relationships is friction-free. For example, France and Poland

have been sceptical about an EU trade deal with Mercosur, the Latin
American trade bloc, which Germany backs. Nor do old pathologies
disappear with a new government: concerns in Germany over France’s
excessive public debt run as deep as ever. In Poland, there are huge worries
over Mr Merz’s pledges to turn back irregular migrants at the countries’
shared border. Hours before Mr Merz touched down in Warsaw Alexander
Dobrindt, his new interior minister, announced yet-tougher border
controls. Standing next to Mr Merz later, Mr Tusk wasted no time in
making his displeasure clear. (So, separately, did the Swiss.)

Still, these look like the usual spats that pockmark bilateral relations in the
EU. It is not news that France and Germany, with its export-dependent
economy, have different instincts on trade, and on irregular migration Mr
Merz is swimming with the European tide. For most of Germany’s EU
partners, the simple fact that Mr Merz is not Mr Scholz is cause for cheer.

It is at home that dangers skulk. One early test will be budgets for both this
year (belatedly) and next, on which deliberations will start immediately.
Tight revenues will limit the fiscal room for manoeuvre. More broadly the
government must find ways to revive the long-dormant economy, especially
with American tariffs looming. That the coalition agreement is long on
aspiration but often short on detail is potentially a worrying omen, says
Ursula Münch at the Tutzing Academy for Political Education. The early
agreement on big spending packages means some potential battles have
been avoided. But there have already been intra-coalition skirmishes on tax
and the minimum wage.

Politically, the leaders of the governing parties must manage MPs among
whose ranks evidently lurk troublemakers; a potential headache for a
coalition with a majority of just 12. Another imminent challenge might be
managing calls to ban the hard-right Alternative for Germany (AfD) party,
which domestic spooks on May 2nd labelled a “confirmed” case of right-
wing extremism. Mr Merz is known to be sceptical of a ban. But many
MPs, including some of his own, want to clamp down hard.

Much will rest on the abilities of those at the top. The cabinet assembled by
Mr Merz and Lars Klingbeil, the SPD co-leader and new vice-chancellor, is
notably thin on experience (bar Boris Pistorius, whose term as defence
minister has been renewed). Their challenge will be to ensure that the
compromises needed to oil the wheels of the coalition do not turn to
inaction. “He may need to travel more than many chancellors before him,”
says Jens Spahn, the new leader of Mr Merz’s parliamentary group. “But
we all need to ensure that everything goes well at home.” Worryingly, a
large majority of Germans say that they do not trust Mr Merz.

If the Bundestag vote offered a silver lining, it might be to temper the

expectations heaped on Mr Merz’s shoulders abroad. Hopes that his
vigorous pro-EU rhetoric might be parlayed into signing on to a jumbo
package of joint debt to fund common defence schemes, for example, may
be reined in after this week’s demonstration that his power sits on rocky
foundations. However global his ambitions, Mr Merz cannot neglect the
home front. ■

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Frugal times ahead

Berlin’s culture bosses must

become more commercial
However distasteful this might seem to them
May 08, 2025 06:50 AM | BERLIN

Not just a public good

“I DON’T REALLY know that much about art,” joked Philipp Demandt,
director of the Städel Museum, the top fine-arts museum in Frankfurt. “In
Frankfurt it’s all about money.” Mr Demandt was speaking on April 11th at
the inauguration of “Dioscuri—the Given Day”, a special exhibition of a
monumental painting, 65 metres long and consisting of 24 panels, one for
each hour of the day. The work, based on the Greek myth of the unequal
twins Castor and Pollux and created by Michael Müller, a German-British
artist, is now being shown in the vast staircase of the Neues Museum in
Berlin.
Mr Müller, who had exhibited “The Given Day” at the Städel in 2022,
managed to get the funding for the entire cost of €250,000 ($283,000) for
the seven-month exhibition of his magnum opus in Berlin from corporate
and private sources. That is highly unusual in the capital, which is used to
munificent state funding of its three opera houses, 175 museums, around
150 theatres and two major concert houses. Without a more commercial
approach a lot of art may not happen in Berlin any more.

Berlin’s government is cutting its budget by €3bn, or 7.5%, this year.

Nearly all departments need to tighten their belts, including culture, which
is slashing around €130m, almost 12%, from its plan. Berlin’s cultural
leaders are up in arms, warning that the city’s reputation as a hip and
welcoming cultural capital is at stake. On May 2nd Joe Chialo, Berlin’s
culture minister, resigned after drawing fire for handling the whole affair,
especially the communications around it, badly. But his boss, the mayor of
Berlin, has had little choice: the city is in debt to the tune of €67bn
according to Destatis, the federal statistics agency, thanks to the covid-19
pandemic, poor financial management and the soaring costs of labour,
energy and nearly everything else.

Many other German cities are cutting their culture budgets, though
Hamburg and Frankfurt are not among them. Those two are both richer than
Berlin, and more commercial in their approach to funding. Hamburg is
increasing its culture budget by 11% this year, and is even getting a new
opera house financed by Klaus-Michael Kühne, the second-richest German
(who was born in Hamburg), to the tune of €330m. Berlin should take
note.■

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MAGA man

Romania’s next president may be

George Simion, a Trump ally
His opponent, Nicosur Dan, is backed by anti-corruption urbanites
May 08, 2025 06:49 AM | Bucharest

NICOLAE CEAUSESCU, Romania’s last communist dictator, was deluded

and power-mad, but he left his country’s politicians an impressive stage for
speeches. On May 4th George Simion, leader of the hard-right Alliance for
the Union of Romanians (AUR), stood before the giant parliament Mr
Ceausescu built, reputedly the world’s heaviest building, and presented
himself as Romania’s Donald Trump. His party “totally agree[s] with
MAGA ideology”, Mr Simion said. By midnight it was clear Mr Simion
had won the first round of the presidential election, with 41% of the vote.
The European Union’s club of populist leaders may soon get another
member.
It was Romania’s second try at electing a new president. The first was
annulled by the constitutional court back in December, after it was
unexpectedly won by Calin Georgescu, another hard-right populist,
allegedly with Russian interference: bot networks had inflated Mr
Georgescu’s reach on TikTok. Mr Simion denounced this as a “coup” and
promised Mr Georgescu a role in government, winning over most of his
voters. The runner-up was Nicusor Dan, the corruption-fighting mayor of
Bucharest, the capital, who got 21%. The two will face off in a second
round on May 18th.

Both Mr Simion and Mr Dan are seen as “anti-system” candidates. The

government-backed candidate, Crin Antonescu of the National Liberals
(PNL), finished just behind Mr Dan. That threw Romanian politics into
greater-than-usual chaos. Since 2021 the country has been run by grand
coalitions between the main parties of power, the centre-left Social
Democrats (PSD) and the centre-right PNL. Many voters saw the tie-up as
denying them a choice, while the government rolled back the anti-
corruption campaign Romania had pursued in the 2010s. Mr Antonescu’s
loss showed the coalition had forfeited its mandate, and on May 5th Marcel
Ciolacu, the PSD prime minister, resigned. The country now has an interim
prime minister appointed by an interim president.

Mr Simion is tipped to win the second round, which worries the EU. Along
with his routine culture-war positions against climate policies and LGBT
rights, there are geopolitical concerns. The AUR leader got his start in
politics campaigning for Romania to absorb neighbouring Moldova, where
most citizens speak Romanian. He is banned from Moldova—and from
Ukraine, which he attacks for alleged mistreatment of ethnic Romanians.
He has called for Romania to cease aid to Ukraine, and says Ursula von der
Leyen, the president of the European Commission, is only marginally better
than Vladimir Putin.

Yet in office he might prove less disruptive than this suggests. Mr Simion
“is a pragmatic guy”, says Radu Magdin, a Romanian political consultant.
The candidate likens himself to Giorgia Meloni, the Italian prime minister, a
hard-right leader who has played a constructive role in the EU. AUR
belongs to Ms Meloni’s group in the European Parliament. Mr Simion is not
pro-Russian: if Mr Putin refuses to end the war, he tells The Economist, the
EU should confiscate frozen Russian assets; Romania might seize Russian-
owned businesses. He says his economic model is Javier Milei, Argentina’s
libertarian president.

Mr Dan’s chances hinge on winning over those who opposed Mr Simion.

That may be difficult. The Bucharest mayor is backed by the Union to Save
Romania (USR), a pro-European anti-corruption party. It can co-operate
with the PNL, which is endorsing Mr Dan for president. But it has a bad
relationship with the PSD, the heirs to the country’s communists, whose
power is based on distributing patronage to local officials throughout the
country in exchange for turning out the vote. That is a big force in
Romanian politics, though a declining one. According to Cristian Ghinea, a
USR senator, mayors nowadays say “we can’t control our people: they vote
according to what they see on TikTok”.

If Mr Dan wins, he can probably appoint a USR prime minister to form a

minority government backed by the PNL. Mr Simion would appear to have
a harder job: the PSD, PNL and USR have all ruled out a coalition with
AUR. But the hard-right leader may have more power than it seems. If
parliament rejects two nominees for prime minister, the president can call
new parliamentary elections. That could be disastrous for the PSD and
PNL, which might prefer to accept a minority government led by an AUR
prime minister. Mr Simion could nominate Mr Georgescu, though their
personal relations are frosty.

Whoever wins will face a grim fiscal situation. Romania’s budget deficit in
2024 topped 9% of GDP, the highest in the EU, as the government fished
for support by raising pensions. Its credit rating is hovering above junk
status. After the government fell, the Romanian lei dropped to more than
five to the euro; the central bank has intervened to stabilise it. To calm the
markets, the new president will have to “reassure everybody that Romania
will be a stable, loyal EU member state”, says Sebastian Burduja, the
energy minister and a member of the PNL. Mr Simion is “an unpredictable
political actor”. ■

Editor’s note: This story has been updated.

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When enough is not enough

Portugal heads to the polls for the

third time in barely three years
Can a political culture of compromise survive the turbulence?
May 08, 2025 06:49 AM | LISBON

IT IS AN election that almost nobody except the main party leaders wanted.
But when the Portuguese vote on May 18th, for the third time in a little over
three years, they face some important issues. One is whether they can
engineer stable and decisive leadership to deal with the social dislocations
accompanying a vigorous economic recovery from the grim years of
austerity that followed the financial crisis of 2008. Another, common to
many European countries, is whether they can preserve a habit of pragmatic
consensus that in Portugal is under threat from Chega (”Enough!”), a fast-
growing hard-right party. They will also decide how much importance they
give to ethics in public life.
Next week’s election came about when Luis Montenegro, the centre-right
prime minister for the past year, called and lost a confidence motion in
parliament following revelations that Spinumviva, his family’s consulting
firm, had received a monthly fee from a company seeking to renew a
government concession to run some casinos. It has since transpired that the
consultancy had six more clients who do business with the government.
“I didn’t receive a single euro from a private entity since I became prime
minister,” Mr Montenegro insisted in a television debate with his Socialist
opponent, Pedro Nuno Santos. When he became the leader of the
(misleadingly named) Social Democratic Party (PSD) in 2022, he
transferred his shares in the firm to his wife and children. He was certainly
imprudent in not getting rid of Spinumviva altogether. But the affair “looks
worse than it was”, concludes a prominent economist.

Mr Montenegro, a lawyer from a small town near Porto, came to power as a

result of another scandal. Antonio Costa, the Socialist prime minister,
resigned less than two years after winning an election when prosecutors
raided his official residence. They found €76,000 in the office of his chief
of staff and arrested five people in what they said was an influence-peddling
scandal. But no charges have been brought and there is no evidence of
wrongdoing by Mr Costa, who was chosen as president of the European
Council last year.

These events, and the decision by the president, Marcelo Rebelo de Sousa,
to call a snap election in March last year, deprived Portugal of a strong and
stable government. The chief beneficiary was Chega, which won 18% of
the vote and 50 seats, up from just 1.4% and one seat in 2019. Its leader,
André Ventura, a clever, demagogic lawyer and former football pundit,
exploited discontent over a swift rise in immigration and the holes that
years of austerity had burrowed into the welfare state. Mr Montenegro
scraped into office, his coalition winning just 55,000 more votes and two
more seats than the Socialist Party (PS). Rather than form a coalition with
Mr Ventura, he obtained the abstention of the Socialists to approve a
budget.

Mr Montenegro’s pitch now is for more time to complete what he started in

a country where the main issues are health care, a housing shortage and
taxes. He has used growing tax revenues to pay for higher pensions and pay
rises for civil servants and the police. But his promise to hire more doctors
and cut hospital waiting lists has yet to bear much fruit. He wants to cut
corporate and income taxes to boost growth, which dipped in the first
quarter of this year. Opinion polls suggest that his coalition will do better in
the forthcoming election than it did last year and could even eke out a
majority with Liberal Initiative, a small classically liberal party. But few
analysts are prepared to say that Chega has peaked, and Mr Montenegro has
ruled out any deal with them.

For all its political volatility, Portugal has enjoyed underlying stability.
Since 2016, its economy has grown by an annual average of 2.2% per year,
thanks to booming exports and a newfound commitment to fiscal
responsibility shared by both the PSD and the PS. Its revolution of 1974
overthrew dictatorship and opened the path to integration with Europe.
“We’ve built in all this period a democracy based on compromise, on
finding common ground,” says Antonio Vitorino, a former European
commissioner. “I think we are losing this political culture.” For a relatively
small and poor country on Europe’s periphery that would indeed be a big
setback. ■

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The tethered threat

How new drones are sneaking past

jammers on Ukraine’s front lines
A low-tech fix is delivering high-impact results
May 08, 2025 06:49 AM | Kyiv

No jam today

DRONES HAVE transformed the war in Ukraine. Commanders sit in

bunkers scanning banks of screens, as surveillance drones hunt for targets
on the ground. Once they are spotted, artillery or mortars may blast them.
Or bomb-dropping or kamikaze drones zoom in for the kill. The problem is
that well over half the drones in the air are downed by jamming and
accidents. But a new addition to the arsenal of both sides is proving more
effective. They are fibre-optic drones. With no radio signal to detect or jam,
they are proving much harder to stop.
In a factory in Kyiv production of the new drones is being increased from
600 a month to an expected 10,000 by the end of the summer. 3DTech is
one of 11 Ukrainian companies in the fibre-optic drone business. It also
makes some 3,000 kits to upgrade existing drones each month. Mihailo,
commander of the Typhoon drone unit fighting in Ukraine’s east, is
enthusiastic. Today 20% of his drones are the new variety, but he reckons
that by the summer they will be the majority.

Read more of our recent coverage of the Ukraine war

Unlike mainstream drones, of which Ukraine produced 2.2m last year,

fibre-optic ones are controlled by a fishing-line-style filament redolent of
the wire-guided missile systems first deployed in 1945. Not only are they
hard to down (at least for now), but the fibre-optic cable means the picture
relayed back to the pilot is crystal clear. It is the difference between
upgrading from a 1970s fuzzy TV picture to HD quality, says Yuriy
Ganusyak, whose company supplies batteries for drone-makers.

The first fibre-optic drones appeared on the front a year ago. Russia began
deploying them in large numbers by the end of last year, Ukraine a couple
of months later. They played a big part in Russia’s successful
counteroffensive in its Kursk region in March. Now they are being
employed in Russia’s assaults in the east. They are particularly suitable for
hilly terrain, where radio signals are often lost.

Both sides are racing to source fibre-optic cable. On April 5th Ukraine was
reported to have bombed a factory making the stuff in Saransk in Russia.
Until now, no suitable fibre had been produced in Ukraine. Oleksiy
Zhulinskiy, the chief technical officer of 3DTech, says the Chinese
dominate the fibre market and that Ukrainian buyers have bumped into
Russian ones in Chinese factories where both are vying to buy; Russia
sometimes gazumps them. This month 3DTech is going to begin testing its
own cable.

Unlike with a kite, the fibre-optic drone’s spool flies too, unwinding as it
goes. In Mr Zhulinskiy’s factory, banks of 3D printers whirr as they make
them. Chinese ones were unreliable, and a reason why many of Ukraine’s
first-generation fibre-optic drones failed to reach their targets. Now, claims
Mr Zhulinskiy, 80% do.

Still, not everyone is convinced by the merits of the new drones. Olha
Bihar, who commands an artillery and drone unit on the Orikhiv front in
southern Ukraine, says they are heavy and it takes months to train a pilot to
fly them. Their cable can get tangled in trees and it glints in sunlight, which
can give away the location of the drone and its pilot. The drones also have a
relatively short range of 10-15km. This means that the pilot needs to be
right at the front in order to hit well inside enemy territory.

New ideas are being tested to counter fibre-optic drones. Both sides are
constructing nets over key roads and positions, but these are not proving
much of a defence. If the drones are heard above, troops use shotguns to
pepper them. 3DTech is testing a drone with a sawn-off shotgun for
attacking other drones.

Fibre-optic drones may be the new big thing, but they are a stopgap solution
developed to circumvent jamming. In the Ukrainian arms race, the holy
grail is a laser weapon capable of blinding or frying the electronic heart of
any incoming drone, missile, warplane or helicopter. At a tech fair on April
13th Vadym Sukharevsky, head of Ukraine’s Unmanned Systems Forces,
showed how Ukraine is testing its own Tryzub laser system to do just this.
The effective lifespan of any new military technology seems to be getting
ever shorter as the war drags on. ■

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Charlemagne

To grasp Europe’s fragmentations,

look to a 31-year treasure hunt
The Golden Owl is a parable for a changing continent
May 08, 2025 06:49 AM

IN THE SPRING of 1993 an obscure French publisher proposed a novel

form of entertainment to people as yet unable to squander hours watching
TikTok videos. “In Search of the Golden Owl”, a slender illustrated volume,
referred to a life-size statue of the nocturnal bird designed by one of the
authors, cast using three kilograms of gold, even more silver and encrusted
with diamonds. The tome’s other author had devised 11 riddles that would
lead successful sleuths to the precise spot where he had buried a bronze
replica of the owl. The clues were fiendishly cryptic, requiring knowledge
of history, science and other dark arts to unlock. The organisers thought it
would take amateur investigators up to two years to crack the code;
whoever unearthed the replica prize could exchange it for the real owl, said
to be worth 1m francs (over €250,000 in today’s money, or nearly
$300,000), as well as a cellar of fine wine. Not quite, as it turned out. On
May 2nd 2025, after armchair adventurers had spent three decades looking
for the wretched talisman, the organisers revealed the solution. The
continent in which the game had started in 1993 had morphed into
something different altogether. The “owlers”—an early manifestation of
how shared obsessions can give rise to niche communities—had something
to do with it.

The fact that the denouement was revealed in the form of a documentary
shown in 400 cinemas shows how the chouette d’or had captured the
popular imagination. An estimated 200,000 people are said to have tried
their luck at unearthing the bird over the years. Many Poirot pretenders
were lured into a false sense of confidence by one riddle, which spelled out
B-O-U-R-G-E-S, a city in central France. Through further deduction and
triangulation, everyone crafted their own pet theory as to where the prize
was hidden. Many were after an inside tip, which had helped bring
Masquerade, a similar treasure hunt launched in 1979 in Britain, to a close
after just three years. Failing that, you had to dig. Plenty did, in forests and
grasslands, often at night lest a rival chouetteur might be on the same track;
one had even rooted in the grounds of the Palace of Versailles. Many
divined that Dabo, a village near the German border, marked the spot. Since
1993 it has been so continuously burrowed by shovel-wielding visitors that
parts of it were left looking like a first-world-war battlefield.

Some “owlers” were in it for the money—gold is worth its weight in gold,
after all—others for the thrill of the chase. Among owlers, schisms worthy
of minor academic departments soon formed. For each Daboïste digging
near Strasbourg you could find an equally fervent anti-Daboïste; this being
France, one fellow even described himself as a méta-Daboïste. Many felt
the death in 2009 of the original riddler-in-chief, a marketing consultant
whose identity had been a secret while he lived, would mark the end of the
game. His erstwhile partner, the maker of the owl, had not been privy to the
game’s solution. The new fellow had even put the statue—the sacred prize!
—up for auction in 2014, until owlers hooted in collective protest loud
enough to stop the sale. In 2021 the late riddler’s wife passed the solution to
his co-author. The new gamemaster, in his 70s by then, tweaked the
workings of the game in ways that made it easier for the chouette to be
found. Could it be because he had planned to launch a second treasure hunt,
bringing a new generation of players to the game?

And then—finally—someone found the damn thing. In October 2024 it was

announced that a duo of diggers had come forward with the magic bird’s
replica, and a credible solution to the enigmas. The identity of the winners
remains unknown; they were given the golden owl and disappeared
overseas. But it was only last week in the documentary that the location of
their successful dig was revealed: it had indeed been in Dabo after all.
Veteran owlers, some of whom suffered divorce and depression in pursuit of
the prize, griped that the super-solution tying together the answers to the 11
riddles lacked the elegance they had chased for so long. Some think they
have been strung along. Others believe another replica chouette is still out
there, waiting to be found.

Wild goose chase, more like

It is easy to dismiss hordes of wannabe Indiana Joneses turning France into

Swiss cheese as a sign of frivolity. Is this something their parents, a
generation that had endured war and reconstruction, would have indulged
in? Probably not. But the game’s fans in 1993 offered a foretaste of society
in 2025. The owlers were among the first online communities anywhere in
the world, connected by Minitel, a French precursor of the internet that ran
online discussions on the chouette from 1993. Using pseudonymous
handles—there were Gandalf and Argos, Météor and Neo49—the sleuths
queried the gamemaster online (for a fee) years before others had ever
heard of such forums. Later, internet groups emerged and rival owlers’
associations met in person to share their theories.

Once Europeans lived in cohesive societies, with institutions such as

churches, trade unions or political parties structuring public life. Owlers
were in the vanguard of a trend towards something different: people
disappearing into their own little clans, with their own rituals and networks.
Jérôme Fourquet, a French political analyst, describes the
“archipelagisation” of society, a shift in recent decades from a unified
national identity bound together by common experience to a collection of
distinct and often disconnected groups with their own interests. We live side
by side, but not entirely together. From watching the same evening news,
we are all consuming our own corner of the web. From all voting for one of
two or three political parties, more niche outfits have emerged—including,
across Europe, populist ones that have benefited from the fraying of our
bonds. We all dwell in bubbles of our own making these days, a wise old
owl might conclude. ■

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Britain
The Church of England is dying out and selling up
Churchgoing, going…gone? :: Even if you don’t go to church, this matters

Young British men are turning to Catholicism in surprising

numbers
Time to transubstantiate :: It offers bells, smells—and certainty

Nigel Farage’s economic plans are a disaster

Double-Trussed :: Three choices: fiscal implosion, deep austerity or a hasty U-turn

The Britain-India trade deal is a sign of things to come

The start of the deals :: American tariffs are likely to accelerate bilateral trade deals

Britain’s second-world-war veterans are dying out

The very few :: The country celebrates the last big anniversary with the generation that beat
Hitler

Aberdeen shows why the UK’s clean-energy transition will

be messy
The green stuff :: The jobs in renewables can’t come fast enough to replace those related to oil
and gas

Kemi Badenoch is simply too interesting for Downing

Street
Bagehot :: The Tory leader is fascinating but irrelevant

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Churchgoing, going…gone?

The Church of England is dying

out and selling up
Even if you don’t go to church, this matters
May 09, 2025 09:47 AM | North Hill, Cornwall

PUSH OPEN the heavy door and step inside. The sound as it slams behind
you will feel loud, almost rude, in the old, cold silence. For St Torney’s
Church in Cornwall is very old indeed. The Normans built it. The Tudors
enlarged it. The Victorians meddled with it. Daphne du Maurier
immortalised it in “Jamaica Inn”. It has outlasted the Reformation and the
civil war.

It could not outlast apathy. In the 20th century, people stopped coming. By
the start of covid-19 it had four worshippers. It closed as the pandemic
began and never reopened. Its organ was taken out, its hymn books were
removed, its Bible was taken from its lectern and a more silent silence fell.
An 800-year history was over.

The Church of England (C of E) is in trouble. This is an odd ecclesiastical

moment. The pope is dead, the Archbishop of Canterbury has gone. Not
since 1691 have both seats been empty. But those seats will be filled. A far
more anxious emptiness is in the C of E’s pews. Adult church attendance in
England has fallen by over a third in 15 years; just a little over 1% go to
services weekly, according to the C of E’s own numbers. A rise in
churchgoing among the young· is mainly a Catholic phenomenon. The C of
E closes 20-odd churches each year.

Critics sense a spiritual vacuum too: in its failure to resolve international

squabbles over its stance on gay marriage and in its cover-up of appalling
child abuse. On January 6th, the former archbishop Justin Welby, who many
felt failed in his handling of that scandal, laid his curving staff on the altar
at Lambeth Palace. The process of selecting a replacement has begun.

Whether or not you believe in God, this matters, to bureaucracy and to

Britain. Britons might be a Godless lot—in the 2021 census less than half
called themselves Christian, down from almost 60% in 2011—but Britain
itself is not. The C of E is not merely a church but an established church.
England is one of around 20% of countries (from Tuvalu to Denmark) with
a state religion. It is institutionally ecclesiastical.

The C of E has soft power (bishops lead Remembrance Day celebrations)

and actual power (26 bishops in black-and-white robes sit in the House of
Lords, where they can help shape laws). It has educational power (through
4,600 C of E schools) and sacred ceremonial power (England’s king is
crowned by England’s senior archbishop). And it has money: the C of E has
an endowment of £10.4bn ($13.9bn).

Now it is choosing a new leader. The process is as eccentric as one might

expect of an institution that dates back half a millennium and which has
had, in its time, not merely bishops but also kings, queens and castles—less
a church than a chess set. The election and enthronement of an archbishop
lasts for months and involves a king (Charles), a “Clerk of the Closet” (it’s
complicated) and laws that date to 1533.
These tend to show scant regard for modern spelling (they refer to the
“Archebishope” and “the Kynges Majestie”) or for modern morals (one law
rules that if the prime minister is Jewish or Catholic they cannot take part
since this would be a “high misdemeanour”). This process will not, then,
involve much DEI. It will involve a special 13th-century stone throne.

The new recruit will have a daunting job. England is not always kind to its
archbishops, as Thomas Cranmer found out when he was burnt at the stake.
Although the new one will not face that, a full in-tray awaits. He (probably,
though unlike the next pope it could be a woman) will have to deal with
those who query the C of E’s political power: for a church in which so few
regularly worship to have a say over the laws of the land is “ludicrous”,
says Andrew Copson, the head of Humanists UK.

The primate will have to deal with the weakening link between church and
crown. England’s heir, Prince William, does not go to church every Sunday
and was said by a palace insider to feel “not instinctively comfortable” in a
“faith environment”—ominously weasel words for someone who will bear
the title of “Defender of the Faith”.

Managing the church’s present while preserving its past is a core part of the
new archbishop’s job. Christianity changed the shape of England—a spire
or tower is the first thing you see when approaching an English village—
and the English language itself. Despite the C of E’s fall from grace, the
words of the King James Bible of 1611 infused English, putting words in
our mouths like “fallen from grace” (Galatians 5:4) and “words in [our]
mouth” (Isaiah 51:16). It is “very difficult to understand English history”,
says Tom Holland, a historian, unless you understand Christianity, since it is
“suffused” by it. The very BC/AD dating system was popularised by a 7th-
century English churchman, the Venerable Bede. Time turns on his
ecclesiastical axis.

Perhaps the C of E’s most obvious vestiges are architectural: its churches.
Some 16,000 remain open; 197 have closed in the past decade alone. It is,
says Sir Simon Jenkins, an historian, “impossible to overstate” their
importance; England is unimaginable without its dreaming spires.
If the churches’ importance is clear, their modern role is not. In the 1950s
the poet Philip Larkin walked into a church and wondered “When churches
will fall completely out of use/ What we shall turn them into”? Real estate
is the short answer. The C of E sells off old churches, surprisingly cheaply.
One church “benefits from” mains water and electricity, not to mention a
“nave, aisle, organ chamber and tower”; another from a “spacious” interior.
Both are going for under £300,000.

Some, like St Torney’s, are saved by charities such as the Churches

Conservation Trust. Others are turned into cafés, offering scones and a little
spirituality—a kind of numinous National Trust. Some are too hard to
convert into anything, since they also “benefit from” graveyards and quite a
lot of dead bodies. Many fall further into ruin. Almost 1,000 are on Historic
England’s “at risk” register.

The new archbishop then, will be busy. The C of E has faced crises before.
In the Victorian era, the theory of evolution and the new science of geology
shook the stony certainties of faith. The critic John Ruskin heard the “clink”
of geologists’ hammers in “every cadence of the Bible verses”. The poet
Matthew Arnold stood on Dover Beach and heard the “melancholy, long,
withdrawing roar” of the sea of faith.

What is different now is that the retreat is so quiet. Faith is not roaring; it is
ebbing, all but unnoticed by most. The C of E should perhaps expect this:
there is, as the King James has it, a time for everything: a time to speak and
a time to keep silence. In St Torney’s, there is no sound but the birds. A
time to be born; and a time to die.■

Correction (May 9th 2025): The figure given in this article for the number
of C of E churches that have closed in the past decade has been corrected,
in line with C of E data.

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Time to transubstantiate

Young British men are turning to

Catholicism in surprising numbers
It offers bells, smells—and certainty
May 08, 2025 06:49 AM | Kensington

BROMPTON ORATORY is a peculiar place to find people in their 20s.

This grand old church in west London smells of old things and incense. At
the altar a priest clad in lace delivers mass in a droning tone. But in their
Sunday best, the young are there, sitting in the stiff pews, kneeling on
hassocks, their chinos scuffed by the cushions.

In November and December last year YouGov, a pollster—commissioned

by Bible Society, a non-profit organisation that invites people “to see the
Bible through fresh eyes”—asked some 13,000 adults in England and Wales
about their religious views and habits. The findings are striking: a 56% rise
since 2018 in those claiming to attend church at least once a month. Young
people, in particular young men, are leading the charge. In 2018 just 4% of
18- to 24-year-olds claimed they went to church regularly; by 2024 some
16% did so.

But the newly pious aren’t flocking to the Church of England. They’re
showing up at Catholic mass. So much so that, for the first time in five
centuries, Catholic worshippers in England and Wales may soon outnumber
Protestants. Among the young they already do. Six years ago a third of
young churchgoers were in the Anglican pews. Now only a fifth are, and
41% are at Catholic mass (see chart).
The pandemic may have been a godsend for the Catholic Church. Aidan
Geboers, a 29-year-old banker living in Lewisham, in south London, says
lockdown prompted his search for a community. He found it in Farm Street
Church, a Jesuit temple in Mayfair. Farm Street’s young-adult service
regularly attracts around 180 people. “Ten years ago numbers might have
been half that,” says Father Kensy Joseph, a leader in its young-adult
ministry.

To young people in Britain (and elsewhere), Catholicism seems to appeal

for two, opposing, reasons. Partly the practice of contemplation and
dedication to ritual appear to be a potent antidote to the online world. But
the internet is also a major route to evangelism. Bishop Robert Barron, an
American founder of a Catholic media organisation, and Father Mike
Schmitz, a podcaster and campus minister, have amassed hundreds of
thousands of followers on social media. Bishop Barron celebrates a new
“macho Christianity”, where men can be “heroes”.

Graham Greene, a novelist, described his Catholic faith in a way that may
reflect its attraction to young churchgoers today. It was “something fine and
hard and certain, however uncomfortable, to catch hold of in the general
flux”.■

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Double-Trussed

Nigel Farage’s economic plans are

a disaster
Three choices: fiscal implosion, deep austerity or a hasty U-turn
May 08, 2025 06:49 AM

WHEN REFORM UK sent five members to Parliament last July, Nigel

Farage, the populist party’s leader, called it a “bridgehead”. Thumping wins
across England’s local elections on May 1st marked the next stage of the
assault. Now, Reform is neck and neck with Labour in the polls.

Success means scrutiny. As a protest party, Reform, like earlier Farage

ventures, was distinguished mainly by a penchant for scandal and an
uncanny ability to nudge the Tories into unforced errors. Now, the notion
that Reform could be a party of government no longer seems fanciful. Its
ideas should be taken seriously.
Unfortunately, the mishmash on offer so far is highly alarming. Reform’s
policies add up to an agenda of fiscal recklessness that rivals, and may well
exceed, the disastrous 49-day, hair-raising, market-tanking premiership of
Liz Truss in 2022.
Reform’s manifesto from the 2024 election is a starting-point. The party has
since crab-walked away from the document, but it remains the only entry
under “Policies” on its website. More tellingly, Mr Farage has specifically
reaffirmed, or expanded on, nearly half the tax cuts listed in recent months.
The manifesto puts Reform’s giveaways at £140bn ($190bn, 5% of GDP)
per year, but claims to offset them with savings worth £160bn. Even on a
generous-but-realistic accounting, The Economist estimates that the annual
costs are in the region of £200bn and savings around £100bn (see chart).
The gap between the two would amount to a colossal fiscal shock, blowing
up the deficit and straining the gilt market to its limits.

Why the mismatch? Take taxes first. The changes are so vast that precise
costings are futile. But Reform has made serially generous guesses. The
party claims its personal-tax cuts cost £70bn a year. But the proposed lift to
income-tax thresholds alone would cost at least that much, probably more,
based on rules-of-thumb from HMRC, the tax agency. Adding cuts to fuel
duty, stamp duty, VAT, inheritance tax and more adds tens of billions.

Recently, Mr Farage has doubled down on his single costliest pledge, to lift
the personal allowance for income tax from £12,570 to £20,000. And he
now wants to fully abolish inheritance tax. The manifesto promises
businesses £18bn of giveaways too. But the promise to cut corporation tax
by ten percentage points alone is worth double that. And the realistic take
from one of Reform’s main revenue-raisers, dropping some interest
payments on Bank of England reserves, is a mere fraction of the £35bn
stated.

Then comes spending. Reform wants £30bn-40bn more for health, defence
and fighting crime. To pay, and cover tax cuts, the party relies on hand-
waving and austerity. Questionably, it asserts that its policies will add one
percentage point to growth (a near-doubling) and take 1m Britons off
benefits. In addition, it suggests a 5% cut across government (austerity not
far off the 2010s), plus unfathomably vast savings from ending net zero.

Delivering even the viable cuts would be hard. Reform’s leaders act
Thatcherite, but many of their voters are big-staters. An early test was
Labour’s cuts to winter-fuel payments—an unnecessary subsidy to richer
pensioners. Reform has loudly campaigned to restore them. Outside of tax-
and-spend, its wider agenda of (net) zero migration and expensively
burying electricity pylons is hardly more promising. The general election is
still years away, but at some point sooner the infrastructure investors
Labour hopes to woo will start pricing in the risk that Reform could be
serious about implementing these ideas.

Britain has to keep bond vigilantes onside to fund its borrowing habit. Ms
Truss’s recklessness and the Brexit saga have already strained patience.
More such episodes would start to look not like aberrations, but parts of a
pattern. Even the man Mr Farage calls his “friend” in Washington lost a
staring match with the bond market over tariffs. Reform now has four years
to choose between a serious rethink or the risk of a fiscal calamity if it wins.
Maybe being no-hopers wasn’t so bad after all.■

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The start of the deals

The Britain-India trade deal is a

sign of things to come
American tariffs are likely to accelerate bilateral trade deals
May 08, 2025 06:49 AM

SIR KEIR STARMER hailed it as Britain’s “biggest trade deal” since

Brexit, and the “most ambitious” agreement in India’s history. Neither, it
must be said, are especially high bars. Despite Brexiteers’ dreams, Britain
has chalked up only a handful of modest deals since leaving the EU in
2020. India, meanwhile, has long been one of the world’s least-open
markets. For Britain this follows a long and painful history: Mahatma
Gandhi spent hundreds of hours spinning yarn to promote his boycott of the
colonisers’ cloth.
That alone makes the trade deal agreed between India and Britain on May
6th significant—perhaps even a “landmark”, as Britain’s prime minister and
his opposite number, Narendra Modi, claimed. The deal will add a useful
boost to trade between the world’s fifth- and sixth-largest economies.
Beyond that, as the first major agreement since Donald Trump’s tariffs
came into effect in April, it points to how America’s disruption of global
trade could accelerate bilateral negotiations around the world. What was—
and wasn’t—included here will be studied closely elsewhere.

The core of the deal was a big reduction in tariffs. The negotiating teams
will be toasted, above all, by Scottish distillers and Indian drinkers, thanks
to the halving of tariffs on whisky and gin, from 150% to 75%. Indian
tariffs on cars will fall from 100% to 10%, subject to a quota that is yet to
be specified. In total India agreed to reduce tariffs on 90% of products—the
most open agreement on goods it has struck. Britain, meanwhile, will
reduce tariffs on Indian clothes, shoes and food.

According to the British government, the deal will boost annual trade
between the two countries by £25.5bn ($34bn) over 15 years. That is a rise
of more than a third, with the larger part coming from British exports (at the
moment India accounts for around 2% of Britain’s trade in goods).
Compared with other deals that Britain has struck since Brexit, notably with
Australia and New Zealand, Indian tariffs started at a far higher level, and
British businesses will benefit from selling into a much larger market.
Britain also won greater access to India’s government procurement
contracts, though experts think that will help mostly with the sale of goods.

That points to the lack of progress in the area that could have been most
beneficial: services. The British government had wanted easier access to the
Indian market for legal and accountancy firms, and stronger protections for
British companies selling products in India. Its refusal to budge on India’s
biggest ask—more visas for Indian workers, particularly in IT—put that
beyond reach. The government is due to publish an immigration white
paper next week. Hardening attitudes to immigrants are probably the
biggest constraint on rich countries lowering barriers.

One part of the deal has already sparked controversy. Indian workers on
inter-company transfers in Britain will not have to pay national insurance
for three years, to avoid being double taxed, given they already make
social-security contributions at home. Such deals, which apply reciprocally,
are common. India already has them with many countries including France,
Germany and the Netherlands; Britain does, too. Yet politicians on the right,
including Nigel Farage, attacked the proposal, arguing it will undercut
British workers. It is true that Indian companies employ more workers in
Britain than elsewhere, though still only around 110,000 in all. But the
number of Indian workers who can enter via this route will not rise—indeed
it may well fall.

Social security and Britain’s apparent refusal to agree to India’s request for
an exemption from carbon border taxes will be among the aspects of the
deal studied closely in Brussels. Progress on a potentially much larger trade
deal between India and the EU has stalled on several issues, including
agriculture and electric vehicles, but some parts of the one with Britain
could offer a template. “This deal will definitely set a precedent,” says Sam
Lowe of Flint Global, a consultancy.

Until now, India had struck serious trade deals with relatively few countries.
But since Mr Modi won re-election last year his appetite for trade
agreements has grown. India is set to be among the biggest beneficiaries of
the trade war between America and China. Signing deals with countries like
Britain signals to investors that it is a stable place to grow a business, says
Abhijit Das, a trade expert based in New Delhi. Britain, meanwhile, is
hoping to finalise deals this year with the UAE and Switzerland, as well as
with the EU. Both Britain and India are said to be close to making deals
with America.

Mr Trump’s impact on negotiations between other countries can be

overstated. Domestic factors will still matter most. But having appeared
stuck only months ago, Britain and India have concluded this deal at a clip.
Mr Das reckons that America’s upending of the global order could spur
negotiators to act more quickly and pragmatically, taking more risks and
prioritising finalising deals over agreeing every point. It has certainly
“focused minds”, says Vikram Doraiswami, India’s high commissioner in
London. “The attitude is let’s bag what we can get.” Call it the start of the
deals. ■
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The very few

Britain’s second-world-war
veterans are dying out
The country celebrates the last big anniversary with the generation that
beat Hitler
May 08, 2025 07:57 AM

“And what did you do in the war?”

WINSTON CHURCHILL was clear. “My dear friends,” he said on May 8th
1945, standing on a balcony in Whitehall to address the cheering crowds
below. “This is your hour.” Victory, he said, did not belong to one group. It
was not one party or class that had led Britain “from the jaws of death, out
of the mouth of hell”. All Britons had. This was a “victory of the great
British nation as a whole”.
In one sense, it still is. This week, Britain celebrated Victory in Europe
(VE) day again. It was a well-rehearsed mix of fly-bys and bunting and
cream teas, and all the things that Britain does so well. Across the country
pomp and ceremony were on display, as were poppies: almost 30,000 at the
Tower of London alone. Soldiers marched, the king and queen waved from
their balcony, crowds waved flags below. In some ways it was better than
the original: in 1945, in joyful, drunken, ration-stricken London, the beer
ran out in many pubs.

Beer was not in short supply this time. But veterans were. Some still, just,
made it: silver-medalled and silver-haired. They were watched by the world
as they shuffled by with sticks, or were pushed in wheelchairs. Many of
those who enabled Britain to “stand alone” now cannot stand. “The few”
are now vanishingly few. At this 80th anniversary there were not many
veterans. But it is probably the last big anniversary at which there will be
any.

Churchill told Britain the VE-day celebrations were for “the great British
nation as a whole”. But that nation has almost all gone. Not culturally—the
second world war infuses Britain still. It exists in films and plays and
books; in “Keep Calm and Carry On” posters and in the politics of Brexit.
Its sheer familiarity makes it feel almost fresh. But in that sense films and
photographs mislead. The start of the second world war is closer to the
Charge of the Light Brigade, in the mid-19th century, than to today. The
first world war is closer to the Battle of Waterloo.

Those who saved Britain from the “jaws of death” have themselves, now,
mostly perished. At the very least, their absence will change the
remembrance celebrations at which they—frail, fragile, revered as religious
relics—have been at the heart. “When that direct, human, living link with
the past is broken,” says Sir Max Hastings, a historian, “something will
have gone.” What Britain has long called “our” finest hour is becoming
“their” finest hour.

Like religious relics, veterans and other witnesses seemed to bring

something more than merely mortal to the events. Though—then and now
—it is their mortality that is so affecting. Churchill described Britons as
fighting “undaunted by odds”. But the odds were so very daunting. Of those
who flew in Bomber Command—most of whom were only in their teens or
just out of them—one in two were killed.

Now they are almost all gone. This does not just affect Britain. Around the
world, the heroes of the last world war are dying out. In France, the last
decorated hero of the resistance died in 2021. In Norway, the last member
of Telemark—a sabotage mission—died a few years before that. There are
still some survivors of Auschwitz. But across Europe, countries are having
to rethink how to commemorate the dead when no witnesses remain.

And, indirectly, to rethink how they live as well. Modern Europe was built
not just in the ashes of the second world war but also in response to it. It
was a different, more moralising time. Churchill began his history of the
war with “The Moral Of the Work”, spelling out, in capital letters: “IN
WAR: RESOLUTION. IN DEFEAT: DEFIANCE. IN VICTORY:
MAGNANIMITY. IN PEACE: GOODWILL.”

On the 80th VE day, the European project feels fragile. Brexit has split it,
anti-semitism once again mars it and war has returned to it. But things were
not easy in 1945 either. And as Churchill said in another VE-Day speech,
that should not “prevent us from celebrating”. Not then, not now. And this
time, with ample beer. ■

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The green stuff

Aberdeen shows why the UK’s

clean-energy transition will be
messy
The jobs in renewables can’t come fast enough to replace those related to
oil and gas
May 08, 2025 06:49 AM | Aberdeen

Dreich outlook

ALONG UNION STREET in Aberdeen, boarded-up shops offer little hint

of the Scottish city’s past prosperity. At its peak, fuelled by the discovery in
1969 of oil and gas in the North Sea, Aberdeen boasted Britain’s highest
concentration of millionaires, surpassing London. Now, the diminishing
role of oil and gas has left its mark. Aberdeen’s housing market has crashed
and young people have left in droves. As the world transitions to a low-
carbon future, the city is repositioning itself as a renewables powerhouse.
But can it shed its reliance on fossil fuels?

Scotland’s abundant natural resources give Aberdeen a unique edge. Thanks

to its wind capacity, most of the 17GW of floating wind projects in Scottish
waters are within 100 nautical miles of Aberdeen’s coast. Mountainous
terrain and ample rainfall make it well-suited for hydropower. Strong tides
and a long coastline are ideal for wave and tidal energy.

Aberdeen’s oil-and-gas heritage has advantages, too. Decades of

underground expertise bring transferable skills and proximity to key
infrastructure. The city’s deepwater berths can help in building and towing
large turbines. The local St Fergus gas terminal will house the Acorn carbon
capture and storage (CCS) project, aimed at cutting industrial carbon
emissions.

Investment is flowing to Aberdeen as a result. As much as £30bn ($40bn)

could be spent on clean energy and infrastructure projects over the coming
decade, according to Aberdeen & Grampian Chamber of Commerce
(AGCC), a trade body. A dozen offshore wind turbines and a new £420m
harbour have emerged along the coastline. Plans are under way for an
Energy Transition Zone, a net-zero research hub more than 15 times the size
of the local football stadium. A few miles away, Shell’s former headquarters
has been razed to the ground to make way for an electric-car charging
station and other green developments.

The rewards for getting the transition right are vast. But as the rapid decline
of coal mining, shipbuilding and other heavy industry in the 1970s and
1980s illustrates, the timing of the switch is fraught with risk. Aberdeen’s
dependence on the fossil-fuel industry leaves it exposed. The oil-and-gas
sector employs one in three working adults in the region, compared with
one in 220 across Britain. A third of industry jobs have been lost since the
oil-price downturn of 2015. Grangemouth, Scotland’s only oil refinery, and
Harbour Energy, Britain’s largest oil and gas producer, are the latest
casualties. More than 650 workers will be laid off.

Green jobs have not yet filled the gap. Oil rigs require hundreds of people
to maintain. Wind farms can be maintained remotely, and many are built
abroad. Much of Kincardine Offshore Wind Farm, one of the world’s
largest grid-connected floating wind projects, off Aberdeen’s coast, was
made in Spain and assembled in Rotterdam before being shipped out.

GB Energy, Britain’s new state-owned energy firm, is unlikely to offset the

shortfall in jobs. Eight months after the decision to locate the firm in
Aberdeen was announced to great fanfare, it has no office or chief
executive. With only £100m of funding for two years (compared with the
promised £8.3bn over five years), pledges to employ 1,000 people are now
expected to take two decades to materialise.

To protect jobs, the renewables sector must scale up quickly. Maintaining

the offshore-energy workforce levels of 2023 would require more than
doubling Britain’s offshore-wind capacity to an estimated 40GW at a cost
of £10bn over the next five years, according to researchers at Robert
Gordon University. On a visit to Aberdeen’s new harbour, a cruise ship and
an oil rig are moored in otherwise empty docks. The renewables sector
accounts for 10% of all vessel traffic coming in. But this generates just 1%
of the harbour’s income.

Britain’s transition will be chaotic. Oil and gas still account for three-
quarters of energy use, according to Offshore Energies UK, a trade group.
But the government’s proposed policies—extending an effective 78% tax
rate on North Sea profits and ending new licences—have frozen oil-and-gas
investment. The rapid phasing-out of fossil fuels may reduce carbon
emissions at home. But it risks jobs and increases reliance on imports from
countries with less rigorous climate targets, says John Underhill, at
Aberdeen University.

Blairing out

Sir Tony Blair is the latest to call for rethinking net-zero. The former
Labour prime minister last month argued that plans to limit fossil-fuel
production were “doomed to fail”. His institute later issued a statement
saying that Britain’s approach is “the right one”, but the damage was done.
Criticism of Labour’s plans is likely to intensify in the wake of losses in
local elections on May 1st.
The dangers of a hasty approach are visible in Aberdeen today. While the
oil boom brought wealth to the city, industries like fishing and shipbuilding
concentrated in Torry, a working-class area, were left behind. Torry is now
the site of less-appealing infrastructure projects, including a sewage-
treatment plant. It is a world apart from Aberdeen’s leafy West End, where
an influx of oil wealth gave rise to large homes, an international school and
Woodbank, a private members’ club for Shell employees. Politicians should
take heed. Aberdeen may be well-placed to reap the rewards of the energy
transition—but it is dangerously exposed to its hazards, too.■

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Bagehot

Kemi Badenoch is simply too

interesting for Downing Street
The Tory leader is fascinating but irrelevant
May 08, 2025 06:49 AM

AMONG THE identikit CVs of MPs, Kemi Badenoch’s stands out. She
grew up under military rule in Nigeria, and at 16 left alone for England.
Such a childhood left her with unusually interesting insights. Some are
profound. Liberal societies are fragile, she says; you too would hate social-
media pile-ons if you’d seen a mob lynch a person in the street. In London
the doctor’s daughter took a job at McDonald’s; every migrant knows, she
says, that social mobility goes down as well as up. And some of her
observations, to British ears, are just odd: she has “nothing in common”
with northern Nigerians, who “were our ethnic enemies”. Bracingly right-
wing and rarely dull, Ms Badenoch captivated the Conservative
membership, who elected her their leader last November.

Fascination has turned to horror. Local elections on May 1st brought heavy
losses for the Labour Party but catastrophe for the Tories. The party lost all
16 councils it was defending, caught in a pincer of Reform UK in poorer
regions and the Liberal Democrats in wealthier ones. A party that had faced
a struggle to regain office now faces a struggle to survive. Ms Badenoch is
part of the problem. She is, if anything, simply too interesting for
government.

For a public tired of Westminster, her idiosyncrasies might have been a

tonic. Viewers hate a television format which pits obtuse interviewers
against robotic politicians. Ms Badenoch shares their contempt. “It is a
fictional series. It is not a documentary,” she deadpanned when interrogated
on a breakfast show as to why she had not watched “Adolescence”, an
anxiety-stirring Netflix drama about knife crime. Downing Street still
obsesses about daily newspapers with dwindling circulations; Ms Badenoch
prefers to wax lyrical for hours on podcasts with global audiences, such as
Jordan Peterson’s show and “Triggernometry” (whose premise of goading
liberals is in the name). For a British politician it is an unconventional
approach. It is also the future.

And Ms Badenoch is a dream of a guest. On the topics in which she is

interested, she is unusually interesting. She recites her favourite thinkers:
Daron Acemoglu, Roger Scruton and Thomas Sowell. She was
unfashionably early to the transgender debate, and unfashionably hostile to
Black Lives Matter. (If you think British police are unfair, she says, meet
Nigerian ones.) Her habits are unorthodox: “Kemi arrived late, sat down
noisily, asked a none-too-bright question and left early,” recalled Peter
Mandelson, Britain’s ambassador to America, of one dinner party. A
graduate of the Spectator, a magazine that has produced a generation of
Tories better at describing the country’s problems than fixing them, she
would make a fine columnist.

Unfortunately, that is not the job she was hired to do. “She’s simply not
very interested in the electorate,” shrugs one Tory. “She skims across her
briefings,” says another. To would-be intellectuals, the stuff that wins
elections can seem pedestrian: pay, GP waiting lists and anti-social
behaviour. Her rhetoric has been more interesting than the substance of her
policy: in the leadership contest she spoke of redrawing the British state and
economy on a scale “not attempted since the days of Keith Joseph”. A
second Thatcher revolution would be fascinating indeed, but so far she has
had little to say on productivity and public services other than when they
fortuitously intersect with the culture wars. Perhaps that is no surprise, since
in the leadership campaign she hinted at a boredom with policy wonks.
“‘Oooh, let’s talk about AI, and let’s talk about NHS reform,’” she sighed.
“I want to talk about freedom.” For voters, it is possible to be interesting
but irrelevant.

The previous time the Tories were kicked out of office, they adopted a
mantra: “Concede and move on.” Yet Ms Badenoch has an intriguing
appetite to refight the last election. A more ruthless new leader might use
their first interview to apologise for Partygate, a pandemic-era scandal.
Instead, Ms Badenoch offered a curious defence: lockdown laws introduced
by Boris Johnson “ended up creating a trap for Boris Johnson”. It was an
imaginative argument; as a day-one pitch to lost voters, it was crackers.

Ms Badenoch enjoys politics more in theory than practice. She may riff on
conference panels about the battle for the soul of conservatism, but she was
oddly absent from the very real battle for conservatism unfolding to
devastating effect in the humdrum towns of Lincolnshire and Shropshire. A
hungrier Tory leader would tear into Nigel Farage’s prospectus of
protectionism and fiscal populism as anathema to traditional Conservatives.
Yet asked to name a point of difference with Reform on ideology or policy,
Ms Badenoch would say only that the Tories had a plan. A woman
described by colleagues as happy to cross the road to start a fight is oddly
reluctant to have one with Mr Farage.

Scrolling while Rome burns

British politics has big prizes for those clever enough to be dull. Even the
loquacious Mr Johnson could stick to a three-word script at an election. Or
take Sir Keir Starmer, a deeply intelligent man who took over a Labour
Party regarded as too eccentric for power and promptly underwent a form
of voluntary lobotomy. The sparkling thoughts on the Geneva Convention
that once enlivened Kentish Town dinner parties were parked for four
monotone years of touring supermarkets, tutting at the price of butter and
saying things like: “Our nation’s defence must always come first.” Try if
you can to recall a single Starmer bon mot from that era; Sir Keir bit his
tongue and reaped the rewards.

Yet Ms Badenoch says there is nothing to learn in Sir Keir’s rise to

Downing Street. More fascinating still, she has hinted that she isn’t sure if
she wants to be prime minister. Perhaps Kemi Badenoch is more interested
in being Kemi Badenoch. Her colleagues have started the clock on her
leadership, for the electorate is not much interested in her. ■

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Business
How China is still getting its hands on Nvidia’s gear
Nvidious :: Inside the shadowy business of smuggling AI chips

Huawei and other Chinese chip firms are catching up fast

Silicon surprise :: But they still depend on America and its allies in a few vital areas

OpenAI’s flip-flop will not get Elon Musk off its back
Board games :: Sam Altman is in a bind over his company’s non-profit status

Eli Lilly looks set to steal Novo Nordisk’s weight-loss crown

Battle of the bulge :: Despite a late start, the American firm is bearing down on its Danish rival

What is behind the staggering ascent of Palantir?

Us against the world :: The unorthodox firm is profiting from the AI and Trumpian revolutions

Why so many IT projects go so horribly wrong

Bartleby :: And how to do them better

Bosses beware: the tariff shock is not like covid-19

Schumpeter :: If only American businesses were so lucky

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Nvidious

How China is still getting its hands

on Nvidia’s gear
Inside the shadowy business of smuggling AI chips
May 08, 2025 06:50 AM

LAST MONTH Jensen Huang, the boss of Nvidia, landed in Beijing with a
clear message: the maker of the world’s leading artificial-intelligence (AI)
chips planned to “unswervingly serve the Chinese market”. America would
rather it didn’t. Just a few days before Mr Huang’s trip the Trump
administration introduced new controls that, in effect, banned the company
from selling its H20 processor to China. More rules are coming. Although
on May 7th the administration said it would rescind tighter export controls
proposed by the Biden administration, it plans to replace them with ones of
its own.
Over the past few years America has sought to hobble its main rival in the
AI race by restricting its access to advanced semiconductors. The
performance of an AI processor depends mostly on two factors: computing
power (how fast a chip processes data) and memory bandwidth (how
quickly it moves data between processing and memory). In October 2022
the Biden administration barred sales to China of American chips that
exceed a threshold on both fronts. Nvidia responded with the H800, a
made-for-China model engineered to stay just under the limits. A year later,
America tightened the regulations again, banning any chip with too much
computing power, regardless of memory bandwidth. Nvidia’s answer was
the H20.

The trouble for America is that restricted Nvidia chips continue to make
their way into the hands of Chinese AI developers. A shadowy supply chain
has emerged, designed to work around sanctions. Some customers lease
access to offshore data centres; others buy chips through murky
intermediaries. Further attempts to curb the flow of chips are likely to suffer
from many of the same problems.

To see why it is so difficult to restrict access to AI chips, consider Johor, a

part of southern Malaysia once better known for its palm-oil plantations.
Located just across the border from Singapore, the region has become a hub
for data centres. Land and electricity are cheap, and permits easier to obtain
than in the city-state. All the big American cloud providers—Amazon,
Google, Microsoft and Oracle—have set up shop. According to Knight
Frank, a property consultancy, Johor’s total data-centre capacity (built,
under construction or planned) grew from 10 megawatts in early 2021 to
more than 1,500 megawatts by 2024.

Johor also provides a convenient back door into China. Big Chinese firms
such as ByteDance, the owner of TikTok, have rented capacity
there. Leasing cloud capacity in Malaysia allows companies like it to gain
access to chips that cannot be imported into China. SemiAnalysis, a
consultancy, estimates that nearly half of Johor’s projected data-centre
capacity in 2027 will incorporate AI processors such as Nvidia’s. Malaysian
data-centre operators insist that they comply with American export
regulations and do not provide capacity to blacklisted entities. Yet finding
workarounds is straightforward. A lawyer advising firms in the region says
that it is relatively easy for Chinese companies to get hold of restricted AI
chips by setting up local subsidiaries.

Figures on trade flows support this. Nvidia’s high-end chips are produced
by TSMC, the world’s biggest chipmaker, in its Taiwanese factories. In the
first quarter of this year Taiwan exported $3.6bn-worth of graphics-
processing units—the kind used to train AI models—to Malaysia, nearly
matching the total for all of 2024 (see chart 1). In March alone shipments
more than tripled from the previous month to reach almost $2bn.
Then there are the smugglers who traffic chips directly into China. These
are typically diverted through third countries not covered by American
restrictions. A source familiar with the practice says goods often pass
through several jurisdictions and front companies to obscure their origin.
Export papers are doctored; restricted products are mislabelled to slip past
customs. Erich Grunewald of the Institute for AI Policy and Strategy, a
think-tank based in San Francisco, estimates that last year smuggled
American chips made up between a tenth and a half of China’s AI-model-
training capacity.

Before the first round of export controls in 2022, China accounted for about
22% of Nvidia’s revenue. That share has since fallen to 13%. At the same
time, sales to Singapore—a city with few end-users—have more than
doubled, and now make up nearly 18% of the total, making it Nvidia’s
second-largest market after America (see chart 2). The company says the
shift is routine: many clients invoice through Singapore but ship to
permitted destinations. Fewer than 2% of chips sold there are delivered
locally.
In February, however, Singaporean police arrested three men over the sale
of $390m-worth of servers that incorporated Nvidia chips. Prosecutors
allege these were first sent to Singaporean firms, then re-exported to
Malaysia. Whether that was their final stop remains unknown. What is
clearer is the incentive: demand has turned the grey market into a gold
mine. According to one industry executive, banned Nvidia chips now sell at
a 30-50% mark-up through intermediaries.

China is not the only destination. In October America placed several Indian
firms under sanctions for re-exporting restricted chips to Russia. Among
them was Shreya Life Sciences, a pharmaceutical firm based in Mumbai.
According to figures from The Trade Vision, a data provider, it exported
$322m-worth of tech goods to Russia in 2024, much of it Dell servers
containing Nvidia chips.

All this puts Nvidia in a tricky position. The firm insists it complies with
American export rules. But its operations are vast: it expects to sell more
than 6m AI chips this year and it sits several steps removed from the end
user. Nvidia supplies processors to cloud giants such as Google and
Microsoft, and to equipment-makers like Dell and Supermicro, which
integrate them into servers. From there, responsibility for compliance is
diffuse. Cloud providers and hardware firms are expected to vet their
customers. Nvidia itself conducts periodic audits. But oversight is uneven,
and servers often change hands quietly after passing initial checks. One
executive at a server manufacturer says properly verifying all end users is
“practically impossible”.

The Biden administration had drawn up an elaborate plan that would have
restricted access to AI chips for 120-odd countries in a bid to choke off
China. Mr Trump’s commerce department now promises to introduce “a
much simpler rule”. That is a relief for Nvidia: the countries that would
have faced curbs accounted for about a quarter of its sales. Some now
expect the administration to use access to American chips as leverage in
trade talks. It is also said to be considering beefing up restrictions on the
flow of AI processors to countries through which China has tended to gain
access, such as Malaysia.

The chip has sailed

Any new controls will encounter familiar problems. The Bureau of Industry
and Security (BIS), the agency tasked with enforcing controls on tech
exports, is severely understaffed. It has just one export-control officer
responsible for all of South-East Asia and Australasia—a region central to
the shadow trade in AI chips.

Some pundits have proposed technical solutions, such as disabling chips

used in prohibited locations. Nvidia argues that such hardware-level
controls would introduce dangerous vulnerabilities and are not workable.
Instead, it suggests that software tools could transmit limited telemetry—
including information on location and system configuration—back to the
company to confirm that the chips are where they are supposed to be.

Even better enforcement has its limits, however. Nvidia cannot trace every
chip. BIS cannot inspect every server. Smugglers will continue to find
loopholes. If America wants to keep ahead of China in the AI race, it will
need to innovate faster, rather than clamp down harder. ■

Editor’s note (May 8th 2025): This article has been updated.

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Silicon surprise

Huawei and other Chinese chip

firms are catching up fast
But they still depend on America and its allies in a few vital areas
May 08, 2025 06:49 AM | Shanghai

Processing time

A WAVE OF optimism has lately swept through China’s chip industry.

Share traders in Shanghai joke that Cambricon, a local firm, not only offers
a substitute for Nvidia’s processors, but for its stock, too. Although the
Chinese semiconductor firm is worth but a fraction of its giant American
rival, its share price has rocketed by 350% over the past year, around 15
times as much as Nvidia’s.

In recent years America has tried to halt the flow of advanced chips and
chipmaking tools to China in the hope of stymieing its progress in artificial
intelligence (AI). Last month Nvidia was, in effect, barred from selling its
H20 chip there, which it had developed in response to previous rules. The
Trump administration plans to rescind a complicated export-licensing
regime that was due to come into force on May 15th. But whatever replaces
it—most likely a patchwork of bilateral deals and other measures—will not
help China.

Despite America’s efforts to hold it back, however, Chinese AI continues to

power ahead. At least for the time being, the country’s AI labs do not
appear to be suffering from a shortage of chips. Internet giants such as
Alibaba and Tencent are building vast numbers of AI data centres,
apparently unimpeded.

This seemingly ample supply is partly the result of breakthroughs earlier

this year at DeepSeek, an AI startup, that significantly lowered the
computing power needed for the technology, thus allowing firms to get by
with fewer advanced chips. And it is partly the result of a shadowy supply
chain· that allows Chinese customers to continue getting their hands on
Nvidia’s gear despite American sanctions.

Yet China’s own chipmakers are also accomplishing feats that seemed out
of reach just a few years ago. Huawei, a Chinese tech giant, has impressed
analysts with the new CloudMatrix chip cluster it began delivering last
month. By stitching together 384 of its Ascend AI chips using advanced
networking technology, it is reportedly able to outperform Nvidia’s popular
NVL72 cluster, though it consumes more power, too. Could China in time
shake off its dependence on foreign semiconductor technology altogether?

Huawei is not the only Chinese chip firm turning heads. A handful of other
local companies that design semiconductors have emerged over the past
year with chips meant to replace Nvidia’s A100, the AI workhorse that
America barred sales of to China in late 2022. Cambricon is said to be
delivering one of these substitutes to customers already. Hygon, another
local chipmaker, has just finished testing an Nvidia alternative and is
expected to start delivery in the next few months.

China is also making progress in the high-bandwidth memory (HBM) units

that are incorporated into AI processors like Nvidia’s. At present that
market is dominated by SK Hynix of South Korea; other big producers
include Samsung, another South Korean firm, and Micron, an American
one. In December America began restricting HBM sales to China. But
CXMT, a company based in the city of Hefei, is thought to be quickly
catching up in the technology.

Firms that produce chipmaking equipment are achieving breakthroughs,

too. AMEC, one such company, recently unveiled an etching tool for
NAND memory chips. Lam Research, an American firm, had previously
held a monopoly for that kit, notes Lin Qingyuan of Bernstein, a broker.
Naura, another Chinese firm, has developed a technique for layering
silicon-germanium onto chip wafers—a business long dominated by
Applied Materials, an American competitor. “These types of developments
may come faster than most imagined,” says Mr Lin.

Semi-independent

China’s chip industry still has some way to go. Most of the companies
buying locally made chips are believed to be state-owned enterprises.
Huawei’s latest AI processor, called the Ascend 910C, still contains many
components supplied by foreign firms, according to SemiAnalysis, a
consultancy. China lacks a domestic alternative to the cutting-edge
lithography tools produced by ASML, a Dutch company. And it is still
unable to manufacture the most advanced chips. TSMC, a Taiwanese firm
miles ahead in that business, has been banned by America from making
these for China. That leaves the country’s chip designers reliant on SMIC, a
state-owned foundry—though SemiAnalysis has reported that Huawei
continues to dodge sanctions by purchasing wafers made by TSMC via a
third company. (Huawei and TSMC deny the claim.)

Another problem for China is the software used by coders to program chips.
Nvidia’s platform, called CUDA, is still by far the best in the world. Nearly
all AI developers learn how to use it. And it works only with Nvidia’s
chips. Switching to an alternative is costly, because it pulls developers out
of an enormous network of fellow users that can help solve problems.
Huawei has created a substitute for CUDA, called CANN, which coders can
use for its Ascend chips. But the software is years behind Nvidia’s, and it is
riddled with bugs. It has reportedly been met with apathy by local techies.

Huawei has beaten the odds before, and it may well do the same again with
CANN. Before American sanctions, the Chinese government’s efforts to
compel local companies to use homegrown semiconductor technology were
met with grumbling, owing to the higher costs and lower reliability of
domestic alternatives. Now, however, a growing number of Chinese firms
see the local chip industry as crucial to their own survival. That is making
them all the more willing to take a chance on their countrymen. ■

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Board games

OpenAI’s flip-flop will not get Elon

Musk off its back
Sam Altman is in a bind over his company’s non-profit status
May 08, 2025 06:50 AM | LOS ANGELES

IT WAS A timely win for Elon Musk. The world’s richest man, whose
business empire has recently been dragged down by his penchant for far-
right politics, has long pursued a vendetta against Sam Altman, boss of
OpenAI. In recent months Mr Musk, who helped establish the artificial-
intelligence (AI) lab but left in 2018, has sought to block its proposed
conversion into a for-profit company, deploying various methods including
an unsolicited (and unsuccessful) $97bn bid for the assets of the non-profit
entity that controls it.
Mr Musk was thus surely grinning when, on May 5th, Mr Altman
announced that OpenAI had abandoned the planned conversion. The U-turn
means a company valued at $300bn in its latest funding round will stay
controlled by a non-profit board with a fuzzy mission to help “benefit all of
humanity”. That could present big problems for Mr Altman.

OpenAI’s structure will remain baffling. The company is made up of a for-

profit entity—in which outside parties can invest, entitling them to a return
up to a maximum value—nestled inside a non-profit entity. As previously
planned, the for-profit entity will become a public-benefit corporation that
seeks to serve both its shareholders and society at large; outside investors
will receive stakes in the new company. But plans to unshackle it from the
control of the non-profit and its board have been dropped.

Of most concern for OpenAI is how this affects its ability to raise money. It
is burning through significant amounts of cash as it invests to develop ever
smarter models, and seems unlikely to turn a profit in the near future. When
the company announced its previous plan to restructure in December, it
cited its vast funding needs. “Investors want to back us but, at this scale of
capital, need conventional equity and less structural bespokeness,” it said at
the time.

OpenAI’s non-profit board, which temporarily ousted Mr Altman in

November 2023, is a particular concern for some investors. It has since
been expanded and packed with people sympathetic to Mr Altman’s
ambitions. But it remains unclear how the board will balance his desire to
rapidly develop AI models as clever as humans with concerns over the
safety of the technology.

Mr Altman has argued that, despite the U-turn, OpenAI will still be able to
secure the funding it needs. In particular, he has said that the $30bn
promised by Softbank, a Japanese tech conglomerate, is still on the table.
Microsoft, the biggest investor in OpenAI’s for-profit entity, remains
sanguine. But new investors may balk at pouring money into a company
whose controlling board does not need to take their interests into account.

Meanwhile, ditching its previous plan will not spare OpenAI from prying
regulators. The company said that its about-face followed talks with civic
leaders and the attorneys-general of Delaware, where OpenAI is
incorporated, and California, where it is based. The California Department
of Justice said it was reviewing the new plan. Delaware found it
encouraging. But as a non-profit entity, OpenAI will continue to fall under
their regulatory aegis. It can expect ongoing scrutiny.

Nor has Mr Altman succeeded in getting Mr Musk off his back. Shortly
after the announcement of OpenAI’s reversal, Marc Toberoff, Mr Musk’s
lawyer, declared that it “changes nothing”, as the company’s founding
mission to develop AI that benefits all of humanity “remains betrayed”. Mr
Musk, who runs a rival lab, xAI, intends to proceed with a lawsuit to block
OpenAI’s restructuring. He will continue to be a thorn in Mr Altman’s side.
■

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Battle of the bulge

Eli Lilly looks set to steal Novo

Nordisk’s weight-loss crown
Despite a late start, the American firm is bearing down on its Danish rival
May 08, 2025 06:49 AM

BEING FIRST to market with a drug can be crucial. Eli Lilly is proving
that being second but better can also pay. Zepbound, the American firm’s
weight-loss jab, was approved in its home country in November 2023, more
than two years after Wegovy, made by Novo Nordisk, a Danish rival. Over
the following year it yielded $4.9bn in revenue, more than half Wegovy’s
$8.2bn. On May 7th Novo cut its sales forecast for 2025, citing “lower-
than-planned” growth in weight-loss drugs. Its share price has fallen by a
third since the start of 2024; Lilly’s has risen by about as much (see chart
1).
The momentum is now with Lilly. Visible Alpha, a data firm, expects its
sales of obesity drugs to overtake Novo’s by 2027 (see chart 2). Lilly’s edge
rests on a more effective drug, better execution, keener pricing and a
stronger pipeline.

Zepbound and Wegovy belong to a class of treatments known as GLP-1

agonists. First developed for diabetes, they suppress appetite by slowing
digestion. Wegovy mimics the GLP-1 hormone; Zepbound targets an
additional hormone, GIP, thought to enhance weight loss.
That dual action matters. In a head-to-head trial conducted by Lilly, patients
on Wegovy lost 14% of their body weight; those on Zepbound, 20%. A
third of Zepbound users shed at least 25%, twice the share for Wegovy.
Prescribing has shifted: in the first quarter of 2025 Zepbound made up 60%
of total weight-loss prescriptions in America, and 75% of new ones.

Lilly has also been quicker to expand production in response to soaring

demand. Wegovy was on America’s official shortage list until February;
Lilly had sorted out its supply issues by last October. That left Novo more
exposed to “compounding” pharmacies, which may copy branded drugs
during shortages—at much lower prices. Novo expects revenue to rise now
that the Wegovy shortage is resolved and sales of copycats must stop.

Lilly has been faster to find new sales channels, too. In August it began
selling low-dose Zepbound vials directly to patients online for $399 (users
supply their own syringes). In April it partnered with Hims & Hers, an
online pharmacy, to expand sales. Novo followed after.

Price has mattered as well. Many insurers, including Medicare, America’s

public-health scheme for the old, do not cover obesity drugs unless tied to
another condition. IQVIA, a health-data firm, says that more than half of
obesity prescriptions in America are paid for out of pocket. Wegovy is
listed at around $1,350 a month, Zepbound at about $1,000.

And the pipelines? CagriSema, Novo’s prospective Zepbound rival, tied

with it in recent trials; few doctors will bother encouraging patients on
Lilly’s drug to make the switch. The results wiped 20% off Novo’s share
price in a day.

On the next front, oral drugs, Novo has a pill awaiting approval in America.
But it is costly to make, with the same active ingredient as Wegovy. Patients
must also take it first thing in the morning with minimal water and wait 30
minutes before eating. David Risinger of Leerink Partners, an investment
bank, doubts Novo will launch it globally. Lilly’s pill, orforglipron, is
cheaper to make and can be taken without fasting. Patrik Jonsson, head of
Lilly’s weight-loss division, says it has “millions of tablets” available,
ahead of its approval, which is expected next year. Analysts reckon
orforglipron will provide $16bn in annual sales by 2030.

Both firms face trouble ahead. Donald Trump’s tariffs, though on hold for
now, could hurt. Neither makes its entire American supply locally. Last year
Novo’s parent agreed to pay $16.5bn for Catalent, an American
manufacturer, to boost its output in the country. In February Lilly pledged
to invest $27bn in production at home. Still, Mr Jonsson points out that
“reshoring takes time”. A factory takes at least three to four years to build.

Battles over price regulation in America, the largest market, are another
concern. Mr Trump wants to match prices abroad, which are typically
lower. Medicare, which covers 66m Americans, has also dropped a plan to
reimburse obesity drugs.

Even so, both firms can look forward to fat profits. More than 100
companies are developing weight-loss drugs, but for now it is a duopoly.
Analysts expect that by 2030 Lilly will have 47% of a $90bn-plus market,
to Novo’s 40%. And Denmark’s former star still has time to shape up. ■

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Us against the world

What is behind the staggering

ascent of Palantir?
The unorthodox firm is profiting from the AI and Trumpian revolutions
May 08, 2025 06:50 AM | PALO ALTO

To the moon

ALEX KARP acts like everyone hates him. As the boss of Palantir strutted
the stage at a recent gathering of clients, he got a kick out of sounding
perverse, in his tousle-haired, punk-professor way. He used words like
“masturbation” and “self-pleasuring”. He berated Silicon Valley, though he
was speaking in Palo Alto, its heartland. At the last minute, he cancelled an
interview with The Economist, though he used to sit on its parent
company’s board; he did not like our review of a book he co-authored. The
man we named the best CEO of 2024 can be thin-skinned.
And yet the software company he heads, worth $250bn and imbued with his
us-against-the-world bolshiness, is going from strength to strength. On May
5th it reported that its revenue in the first three months of 2025 increased by
39% year on year, the seventh quarter in a row of blistering growth. Besides
some weakness in Europe, the only dark cloud was a 12% slump in the
share price the following day—perhaps reflecting concern that Palantir’s
growth, however fast, might not justify the quintupling of its market value
over the past year (see chart). Even so, as Mr Karp put it, “Palantir is on
fire.”
Its success is emblematic of two trends. The first is generative artificial
intelligence (AI); Palantir helps firms adopt it. Second is the growing
demand for intelligence and defence technology in a world of border
closures and superpower rivalry, where Palantir (more controversially)
excels. In both fields, its edge comes from a unique approach to profits,
growth and culture.

For about 20 years after it was founded in 2003, Palantir did not make a
profit. It had the strange business model of embedding lots of highly paid
engineers with its customers, hand-crafting software to solve bespoke
problems. Mr Karp conceived of these so-called forward deployed
engineers (FDEs) as being like bossy French waiters in high-class
restaurants who know what customers want better than they do. They had to
be pushy and persuasive.

But as their on-the-ground knowledge was incorporated into software

products, the number of FDEs per customer shrank and the business began
to scale profitably. In the past two years, Palantir’s revenues have surged
while its employees, who number 4,000, have barely increased. That has
enabled the firm to maintain gross margins of 80%-plus. Its new AI
platform, AIP, which maps and organises its customers’ data to help them
run large language models, is following a similar path.

The company’s approach to growth is just as unorthodox. A former

employee describes Mr Karp as Palantir’s salesman-in-chief, but the firm
spurns traditional marketing efforts, such as steak dinners and golf. Instead
it invites customers to “boot camps”, where they experiment with its
products.

Palantir starts off with small projects for its customers and, if they are
successful, expands across the organisation. Pete Seurken, who runs supply
chains for Wendy’s, a fast-food chain, says Palantir’s AIP software enables
his team to do in five minutes what used to take 15 people a day. The rest of
Wendy’s is interested. “That’s [Palantir’s] mechanism. They come in and
generate such value…the rest of the organisation takes notice,” he says.

Palantir needs relentless growth to justify a valuation that makes some on

Wall Street queasy. Before its latest sell-off, Palantir’s valuation multiple of
56 times next year’s forecast revenue implied that its annual sales growth
would have to rise to 50% for the next four years to be realistic, says Brent
Thill of Jefferies, an investment bank. The hype is partly the result of
meme-stock investors. These days, people can buy “Palantir to the moon”
T-shirts at Walmart, notes Mr Thill.

That loyalty is fuelled by Palantir’s provocative culture, its most

idiosyncratic trait. Employees describe it as a firm with few job titles and an
embrace of “constant disagreement”. The defiance partly stems from its
work on Western military and spy contracts, which used to make it a leper
within Silicon Valley. Even today, with more venture capitalists adopting a
pro-American approach to defence technology, Mr Karp suggests they are
fair-weather friends, uncommitted to arming America.

The company vocally supports Elon Musk’s work under President Donald
Trump at the Department of Government Efficiency (DOGE). Shyam
Sankar, its chief technology officer, told Wall Street analysts this week that
overspending had started to make the American government look like
“finely marbled Wagyu.” Employees hope that as the government shrinks,
Palantir will pick up DOGE-related work from the Trump administration.

Mr Karp said it also expects to do lucrative work providing the software for
military gear. It is leading a partnership with Anduril, an upstart maker of
drones, to help the army improve battlefield targeting. And it is reportedly
part of a consortium, alongside Anduril and SpaceX, Mr Musk’s rocketry
firm, that is bidding for a contract to help build Mr Trump’s “Golden
Dome” missile-defence shield.

Palantir’s government work is contentious. Paul Graham, a venture

capitalist, recently described the company as building “the infrastructure of
the police state” after it emerged that the firm had won a $30m contract to
support the federal government’s immigration crackdown.

Palantir was unapologetic; it sought to use Mr Graham’s post as a recruiting

tool. Mr Seuken of Wendy’s says such contrarianism makes Palantir tick.
Mr Karp’s “us-against-the-world mentality…feeds the culture of the
organisation.” He adds: “Silently, from behind, we may be cheering him on,
because quite frankly we enjoy the fact that someone is standing up and
saying ‘this is what we believe’.” ■

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Bartleby

Why so many IT projects go so

horribly wrong
And how to do them better
May 08, 2025 06:50 AM

LET’S PLAY a word-association game. Champions (Liverpool). Cyclists

(smug). IT project (failure). Ask people what they know about tech
projects, and they will probably say that they take longer than expected,
cost more than budgeted and deliver less than they are meant to. Is that
perception accurate? And if so, what can be done about it? A forthcoming
paper, by Bent Flyvbjerg of Oxford University and his co-authors, sheds
light on these questions.

Mr Flyvbjerg has made a career out of studying the ways in which

megaprojects go wrong. These disappoint with amazing regularity
(Tottenham Hotspur). Less than 10% of them meet their initial estimates for
both cost and time.

Many of the projects he studies are grand infrastructure schemes: dams,

railways, nuclear-storage facilities and the like. If you don’t work in one of
the relevant industries, your experience of such projects is likely to be
limited to complaining about traffic jams and wasted money (Chelsea). But
tech projects are ubiquitous. They affect every industry: Gartner, a research
firm, estimates that $5.6trn will be spent on IT in 2025. And they can affect
every part of an organisation.

In their new paper Mr Flyvbjerg and his colleagues claim to have confirmed
for the first time that IT does have a particular problem. They compare
actual and budgeted costs for IT projects with 22 other categories, and find
good news and bad. The good news is that lots of IT projects stick to their
budgets (Brighton & Hove Albion): only 40% of them overrun on costs,
compared with 100% of Olympic games, 97% of nuclear-power plants and
75% of hydroelectric dams.

The bad news is that when bills do start to mount up, they can go
completely bananas. Just under a fifth of IT projects have a cost overrun of
more than 50% of their budget, which again isn’t too bad. But among these
budget-busting projects, the mean cost overrun is above 450%, the worst of
all the project types that the researchers looked at. The only thing that
comes close is nuclear-waste storage. In the jargon of risk, something about
IT projects means they have very fat tails.

Theories abound as to what that something is. One explanation is that IT is

a relatively young discipline. If people have been building roads for
millennia and still regularly screw up new projects, it should not be a
surprise when software does worse. Another relates to standards. You
wouldn’t be let loose on a new bridge unless you had formal training as an
engineer; the barriers for IT are not as high.

Intangibility provides a third explanation for why things might spiral out of
control. You can set milestones for a high-speed rail line and physically
inspect a building site; it’s much harder to visit, or even visualise, a
software development. Abstraction exacerbates the risk that managers will
start adding in new requests rather than sticking to limited goals
(Southampton).

That touches on another point: IT projects reach deep inside organisations,

which means tech neophytes often call the shots. It also means these
projects bring lots of change. A new road does not require motorists to
drive differently, but digitisation usually requires employees to alter how
they work, increasing the likelihood of office politics and internal
resistance.

Mitigating these risks isn’t easy, but Mr Flyvbjerg and his co-authors have
some useful ideas. The first, familiar bit of advice is to avoid making
software projects too bespoke; the paper lauds Apple’s app store for
imposing clear constraints on app designers and developers. Their second
(Arsenal) suggestion is to take more time in the planning phase of a project.
Big IT initiatives have a mean duration of 3.2 years in the sample used by
the researchers, compared with 6.9 years for the other project categories.
The researchers speculate that the preparatory work for many IT projects
gets rushed, leading to trouble later on.

That worry is especially resonant given excitement among businesses over

artificial intelligence. Efforts to deploy AI are likely to face all the same
problems that beset conventional IT projects, with bells on. AI is novel. It
could change the jobs of everyone in the organisation. And belief in its
potential is sky-high: bosses who do not understand the technology are
demanding that it be rolled out quickly. AI may well be game-changing
(Manchester City). But being thoughtful about its deployment will reduce
the chances of miserable failure (Manchester United). ■

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Schumpeter

Bosses beware: the tariff shock is

not like covid-19
If only American businesses were so lucky
May 08, 2025 06:49 AM

PEER INTO a Bloomberg screen and the parallels between the past month
and the spring of 2020 draw themselves. Then as now the VIX index, which
tracks share-price volatility, spiked above 40, a level reached only a handful
of times in American stockmarket history. Uncannily, both in 2020 and
2025 the S&P 500 index of America’s biggest companies peaked on the
same day, February 19th, before declining and then collapsing by more than
10% in a matter of days. The oil price plunged. Sentiment among American
consumers was and is down the tubes.
Five years ago the cause of the commotion was covid-19, which infected
vast numbers of people and put the world economy in intensive care. Today
it is another force of nature, Donald Trump. Unlike the virus, the president’s
trade policy is non-lethal to humans. But it might be to American firms,
especially those which rely on China. The world’s two biggest economies
have quarantined each other with tariffs in excess of 100% on most goods.

Worse, companies contend with pandemic-like uncertainty as tariffs are

raised and lowered, imposed and removed—all in ways no less stochastic
than the evolution of covid variants. On May 4th Mr Trump suggested that
he would charge levies on films made abroad. The next day the share prices
of Disney and Netflix slid, before rebounding when the White House
altered its script. The tariff shock is “covid plus plus”, sums up a Wall
Street banker.

No wonder bosses are tempted to view it as akin to the pandemic. If only. In

fact, the consequences for American big business of Mr Trump’s trade-
warmongering are likely to be far more profound—and enduring.

In 2020 and now the tumult hit just as CEOs were preparing to report first-
quarter results. Those were and are mostly healthy, in stark contrast to
updated forecasts for revenues and profits. As in the pandemic’s early
weeks, analysts are revising down their projections for the sales, capital
expenditures and profits of many S&P 500 companies. Since January the
consensus for the index’s combined earnings per share in the second, third
and fourth quarter of this year have declined by 5%, 4% and 2%,
respectively.

More worrying still, many bosses are once again pulling guidance
altogether. On April 29th UPS, a parcel-delivery giant, withdrew its full-
year forecasts, just as it had five years earlier almost to the day. So have
carmakers (Ford, General Motors) and airlines (American, Delta,
Southwest). On May 5th Mattel paused its annual forecast for toy sales,
days after Mr Trump mused that no American girl needs more than two
Barbies, really.

Only 17% of big businesses have opted to give investors a sense of what
profits to expect in the second quarter, compared with 20% or so typically.
That is the lowest share since, you guessed it, 2020. It does not include cop-
outs like AbbVie, a drugmaker, and 3M, a glues-to-gaskets conglomerate,
which noted that their guidance does not reflect the impact from tariffs. One
in four S&P 500 companies have mentioned “recession” in their latest
earnings calls, reckons Goldman Sachs (the bank being among them). This
is not a world away from the one in three that first pandemic spring. The
previous quarter’s figure was one in 50.

Bankers and advisers report that businesses worried about supply-chain

disruption are beginning to stockpile products, increase working capital and
defer payments to suppliers. Executives echo pandemic-era watchwords
like “resilience”. Some companies are talking up investments in domestic
supply chains. On April 30th Pratt Industries, a privately held packaging
giant, answered Mr Trump’s call to reindustrialise America by pledging to
spend $5bn in the country. A day later Kimberly-Clark announced it would
spend $2bn over five years to avert any future shortages of Kleenex tissues
and Huggies nappies.

For all this hand-wringing, deep down many American bosses cling to the
hope that the tariff turmoil will also end just as the covid chaos did—which
is to say, with a swift return to business as usual, barring a few more empty
desks. The second quarter of 2020 was painful, to be sure. More than 300
companies in the S&P 500 reported a year-on-year fall in sales; over 100
suffered a net loss. Some 260 collectively booked nearly $90bn in one-off
charges such as asset write-downs.

By the autumn of 2020 CEOs still preached the virtues of resilience. But
they were privately conceding that those much-maligned “just-in-time”
supply chains held up fine, all things considered. Just as well, for
reconfiguring them would cost billions. Demand for many things ballooned
as Uncle Sam posted covid cheques to citizens. In the second quarter of
2021 some three-quarters of firms in the S&P 500 saw their profits rise year
on year. The typical bottom line swelled by 44%. By late summer 2020 the
index had recouped all its losses. It then went on an epic tear.

No-plan-demic
Investors have concluded that America Inc is reliving the covid shock on
fast-forward. Within a month of Mr Trump’s surprise announcement of
“reciprocal” tariffs on most countries, the index was back where it had been
beforehand. A 90-day pause on those levies and news of upcoming trade
talks between America and China have calmed equity markets.

Yet business is not back to usual. Even if the tariffs stay paused and
prohibitive ones on China come down, trade barriers and uncertainty will
remain. Those risk being to America Inc what Brexit was to UK plc—a
persistent drag on growth. In a new working paper Nicholas Bloom of
Stanford University and colleagues find that by 2024 Britain’s exit from the
EU had cut productivity by 3%, business investment by 12-20% and GDP
by 6-9%. American CEOs should put away their pandemic diaries and chat
to their British counterparts instead. They won’t like what they hear. ■

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Finance & economics

Why Gen X is the real loser generation
Poor slackers :: Don’t cry for millennials or Gen Z. Save your pity for those in their 50s

How Saudi Arabia is cranking up the pressure on its OPEC

allies
Over a barrel :: Will oil prices fall much further?

Trump is a threat to Asia’s giant insurers

Taiwan straits :: Not just its exporters

Global turmoil has at least one beneficiary: currency

traders
Dollar drama :: The foreign-exchange market has been reinvigorated by recent events

Buy the dip: the trend that keeps stocks from crashing
Cheap thrills :: Retail investors now play a useful role at times of panic

Warren Buffett has created a $348bn question for his

successor
The oracle plans to step down :: Berkshire Hathaway’s next CEO has huge shoes to fill—and a
mountain of cash to invest

What happens when a hegemon falls?

Free exchange :: Why economists are turning to a 50-year-old book on the Depression

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Poor slackers

Why Gen X is the real loser

generation
Don’t cry for millennials or Gen Z. Save your pity for those in their 50s
May 08, 2025 06:49 AM | San Francisco

“WE SUFFER”, SAID Seneca, “more often in imagination than in reality.”

The Stoic philosopher could have been talking about the generations.
Members of Gen Z, born between 1997 and 2012, say that social media
ruined their childhood. Millennials, between 1981 and 1996, complain that
they cannot buy a house. Baby-boomers, between 1946 and 1964, grouse
that they face an uncertain retirement.

Many forget about Generation X, which is made up of those born between

1965 and 1980. Proxied by Google searches the world is less than half as
interested in Gen X as it is in millennials, Gen Zers or baby-boomers. There
are few podcasts or memes about Gen X. Aside from Douglas Coupland’s
“Generation X: Tales for an Accelerated Culture”, a novel published in
1991 which popularised the moniker, there are few books discussing the
cohort. In Britain Gen Xers are less likely than members of any other age
group to know the generation to which they belong.

Gen Xers may have no place in the popular imagination but, contrary to
Seneca, they really do suffer. This is true both because Gen Xers are at a
tricky age, and also because the cohort itself is cursed.

A recent 30-country poll by Ipsos finds that 31% of Gen Xers say they are
“not very happy” or “not happy at all”, the most of any generation. David
Blanchflower of Dartmouth College finds all sorts of nasty things, from
unhappiness to anxiety to despair, top out around the age of 50. This is
consistent with the “U-bend of life” theory, which suggests that people are
happy when young and old, but miserable in middle age. Baby-boomers
went through it; before long millennials will, too.

The U-bend exists in part because chronic health issues start to emerge in
middle age. People also come to realise they will not achieve everything
they had hoped in their careers. On top of this, Gen Xers often have to look
after both their children and their parents. In America they devote 5% of
their spending to caring for people under 18 or over 65, against just 2% for
boomers. In Italy the share of 18-to-34-year-olds living with their parents
has increased from 61% to 68% over the past two decades. In Spain the rise
is even more dramatic. To which generation do many of these parents
belong? Gen X.

Nowhere is life more U-shaped than in San Francisco. The city’s idealistic
youngsters believe that they will start the next big artificial-intelligence
company, and are willing to put up with high costs and crime. Successful
boomers live in enormous houses in Pacific Heights and sit on company
boards. Gen Xers, in the middle, have neither the idealism nor the
sinecures. Only 37% are happy with life in San Francisco, compared with
63% of Gen Zers, according to a poll in 2022 by the San Francisco
Standard, a local paper. Many have little option but to live in Oakland—the
horror!—if they want a big house.
Although Gen Xers will in time escape the U-bend, they will remain losers
in other ways. Consider their incomes. Gen Xers do earn more after
inflation than earlier generations—the continuation of a long historical
trend, and one from which both millennials and Gen Zers also benefit. But
their progress has been slow. A recent paper by Kevin Corinth of the
American Enterprise Institute, a think-tank, and Jeff Larrimore of the
Federal Reserve assesses American household incomes by generation, after
accounting for taxes, government transfers and inflation. From the ages of
36 to 40 Gen Xers’ real household incomes were only 16% higher than the
previous generation at the same age, the smallest improvement of any
cohort (see chart 1).

Perhaps this poor income growth is a consequence of a stereotype that a

range of psychological studies have confirmed: Gen Xers are reluctant to be
corporate drones, placing more emphasis on work-life balance and
autonomy. It is no coincidence that in 1999, when Gen Xers were in the
prime of their lives, there were two hugely successful films in which people
broke free of life’s shackles. In “The Matrix” Thomas Anderson, a
computer programmer, discovers the world is an illusion simulated by
intelligent machines. In “Fight Club” an office worker joins a secret society
whose members kick lumps out of each other. All very exciting, of course
—but hardly conducive to a solid career.
Gen Xers have, to be fair, faced difficult circumstances. People’s earnings
typically rise fast in their 30s and 40s, as they move into managerial roles.
Unfortunately for Gen Xers, when they were in that age range labour
markets were weak, following the global financial crisis of 2007-09. In
2011, for instance, the median nominal earnings of British people in their
30s rose by just 1.1%. Earnings growth in Italy, which was hit hard by the
euro crisis, was just as poor. And in Canada from 2011 to 2017 the real
median earnings of people aged 35 to 44 years did not grow at all.

Gen Xers have also done a poor job accumulating wealth. During the
1980s, when many boomers were in their 30s, global stockmarkets
quadrupled. Millennials, now in their 30s, have so far enjoyed strong
market returns. But during the 2000s, when Gen Xers were hoping to make
hay, markets fell slightly. That period was a lost decade for American stocks
in particular, coming after the dotcom bubble and ending with the financial
crisis.

What about home-ownership, the ultimate symbol of intergenerational

unfairness? The conventional narrative contrasts perma-renting millennials
with boomers who enjoy six spare bedrooms. Yet data on American home-
ownership, provided by Victoria Gregory of the St Louis branch of the Fed,
overturns this received wisdom. In fact, the big decline in home-ownership
rates happened from boomers to Gen Xers. Starting in their late 30s and
early 40s, Gen Xers of a given age had a similar chance of owning as
millennials do (see chart 2).

Aversion to home-ownership is in some cases a choice. Gen Xers may have

imbibed a passage from Mr Coupland’s novel: “When someone tells you
they’ve just bought a house, they might as well tell you they no longer have
a personality.” But, again, circumstances are probably a bigger factor. From
their late 30s to their early 40s, the time when many people first get on the
housing ladder, Gen Xers suffered from the effects of the financial crisis. It
became hard to get a mortgage. Some of those who already had one
foreclosed on their house and went back to renting.

Aggregate statistics capture all these trends. Jeremy Horpedahl of the

University of Central Arkansas tracks average wealth by generation, using
data produced by the Fed. He finds that, at 31, the millennial/Gen Z cohort
has about double the wealth that the average Gen Xer had at the same age.
Using survey data from the European Central Bank we find suggestive
evidence of similar trends in Europe. From 2010 to 2021, millennials in the
euro area tripled their nominal net worth, versus less than a doubling for
Gen Xers.

The position of Gen Xers may not improve much in the years ahead. They
could be the first to suffer owing to broken pension systems. America’s
social-security fund is projected to be depleted by 2033—just as Gen Xers
start to retire—meaning benefits will be cut by 20-25% unless Congress
acts. Next time you see a quinquagenarian, at least give them a smile. ■

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Over a barrel

How Saudi Arabia is cranking up

the pressure on its OPEC allies
Will oil prices fall much further?
May 08, 2025 06:49 AM

YOU CANNOT fault the Organisation of the Petroleum Exporting

Countries for its communication. On May 3rd it and its allies (OPEC+),
which supply 40% of the world’s crude oil, announced that they would
crank up output by 411,000 barrels a day (b/d) in June—triple what analysts
had expected, and equivalent to 0.4% of global demand. Global prices
briefly sank below $60 a barrel, nearing four-year lows; they remain 6%
below their level of April 28th, when rumours of a supply boost first
emerged. In a statement, the group gave a straightforward reason for its
decision: “healthy market fundamentals”.
The problem is that nobody believes it. Recent trade tensions have
prompted the International Energy Agency (IEA) to reduce its global
demand forecast for the rest of 2025 by 400,000 b/d. What growth in
appetite survives is expected to be met through higher output by exporters
outside the cartel, such as America and Guyana. Even before May 3rd,
prices had slid by a quarter since mid-January. What really explains the
cartel’s kamikaze decision?

Until recently OPEC+ was showing restraint. Strict quotas, cutting the
group’s production by nearly 6m b/d, were introduced in an attempt to keep
prices high. Then, in December, OPEC+ confirmed its intention to undo
some of the cuts by a modest 122,000 b/d each month, starting in April.
Last month, however, the cartel snapped, declaring it would instead raise
output in May by a huge 411,000 b/d—a decision it repeated this month.

The cartel can tolerate low volumes if prices are high, or high volumes if
prices are low. But low volumes at low prices cannot be seen as a success.
At the same time, the group believes demand is less elastic to price:
although a 1m b/d cut in OPEC+ supply triggered global price jumps of $20
a barrel in 2022 and $10 in 2023, JPMorgan Chase, a bank, estimates such a
reduction would lift prices by just $4 today. As such, the cartel thinks it can
raise production without whacking prices.
The less obvious reason for the switch is that Saudi Arabia, the group’s
leader, wants to punish other members. Iraq, Kazakhstan and the United
Arab Emirates, in particular, have overshot their production quotas for
months (see chart). They have promised additional cuts in future but Saudi
Arabia is tired of waiting. It is betting it can cope better with price slumps;
unlike Iraq and Kazakhstan, it has a huge sovereign fund and easy access to
bond markets.

Jorge León, a former OPEC analyst, reckons that the pain will continue
until the troublemakers reform their ways. It is a risky gamble for Saudi
Arabia, which is part-way through an expensive reform plan. So far prices
have not fallen too far, in part because the market expects a summer rise in
demand. But it will droop in autumn as refineries enter maintenance season.
Another few supply increases, together with a signal that more will follow,
and global prices could sink below $50. That might jeopardise shale-oil
production in America, a powerful ally run by a bad-tempered president. It
would also worsen fiscal headaches in Russia, making it harder for the
OPEC+ member to fund its war.

Will the cheaters yield before then? They are not in a rush. On April 23rd
Erlan Akkenzhenov, Kazakhstan’s energy minister, announced the country
would prioritise its interests over those of the cartel when deciding on
production levels. Even if its priorities change, how much Kazakhstan
produces is not entirely up to the government, since the country is one of
the few OPEC+ members where international oil companies, rather than a
state monopoly, dominate production. Saudi Arabia’s game of chicken is
just getting started. ■

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Taiwan straits

Trump is a threat to Asia’s giant

insurers
Not just its exporters
May 08, 2025 06:49 AM | Hong Kong and Singapore

SOME COUNTRIES are rich. Others are cheap. And then there is Taiwan.
The miracle economy, home to the world’s most advanced chipmaker, has a
respectable GDP per person of over $33,000. Yet the prices of its goods and
services are only 42% of America’s, when converted into dollars. Its
McDonald’s burgers, to take one example, are the cheapest of all the
countries tracked by our Big Mac Index.

That is one sign the island’s currency, the Taiwanese dollar, is out of whack.
If its exchange rate were stronger, burgers and everything else would be
more expensive in dollar terms. Another sign Taiwan’s currency is cheap is
the country’s current-account surplus, which is equivalent to more than 14%
of GDP, or “ungodly big” in the words of Brad Setser of the Council on
Foreign Relations, a think-tank. Taiwan’s exports of integrated circuits have
more than doubled over the past decade. Yet the exchange rate of the
Taiwanese dollar has remained remarkably stable. It was around NT$31 to
the American dollar at the end of April 2015. And it was around NT$32 at
the end of last month.

Then, at the start of May, something unusual happened. Taiwan’s currency

became abruptly less cheap. It strengthened by as much as 5% during
trading on May 5th, adding to a big gain on the previous trading day (see
chart). These were the largest moves in the sleepy currency since the 1980s.

Anyone who had earlier this year predicted a big lurch in the Taiwanese
dollar would probably have expected it to weaken. America’s new president
was threatening a trade war against China and other commercial partners
that would lift the dollar and harm Asia’s exporters, contributing to falls in
their currencies. Instead, it is America’s currency that has dropped.

For Asia, that has created a dilemma of a different kind. Taiwan’s exporters
have accumulated a large stash of dollar earnings. About 16% of deposits
held in the country’s onshore banks are in foreign currency, one of the
highest shares on the continent. As America’s dollar has declined, some of
these exporters may have decided that now would be a sensible time to
convert their earnings into local currency, before they lose any more of their
value, which might have triggered the upward movement in Taiwan’s
currency.

What then amplified it was probably the anxieties of Taiwan’s life insurers.
Their purchases have helped offset the inflow of dollars from the country’s
exporters, keeping the currency competitive. But their holdings
have created a currency mismatch: the lifers pay out policies in Taiwanese
dollars, and own assets denominated primarily in American dollars.

Recent currency moves may have prompted them to rush to hedge their
exposure. They might have agreed to sell American dollars for Taiwanese
dollars on a future date, at a rate decided today. This sudden demand for
Taiwanese currency in the future would also have raised its value today, as
the institutions on the other side of the trade buy Taiwanese dollars now for
delivery when the transaction matures.

Taiwan’s central bank does not usually allow large daily moves in the
exchange rate without stepping in. The fact that it did not intervene on May
2nd no doubt contributed to the large moves on May 5th. Many investors
began to wonder if the central bank was trying to keep a low profile as the
country conducts trade talks with America. Taiwan is one of the countries
America’s Treasury department is monitoring for currency manipulation.
But the big moves on May 5th forced the central bank’s hand. At an
emergency press conference, Yang Chin-long, the governor, said the bank
had intervened in response to an “abnormal situation”. Since then, the
currency has weakened a little.

In principle, the central bank can create as many Taiwanese dollars as

people want to buy. But by always stabilising the currency, it gives the
country’s life insurers less incentive to hedge their exposures, ensuring that
the mismatch on their balance-sheets persists. And although Mr Yang
insisted that Taiwan’s currency was not a part of the country’s trade talks,
he will not want to take chances. The central bank is “well aware that there
are people in this administration who are very focused on the currency
issue”, points out Mr Setser.

Mr Setser himself co-authored a study in 2019 looking into the ways the
central bank has guided the currency indirectly, making it easier for life
insurers to buy dollar assets so it would not have to. It “did not exactly
appreciate the scrutiny”, he says.

Nor is the bank a fan of our Big Mac index: in 2016 it felt obliged to issue a
press release pointing out that the burger measurement was “lighthearted”.
Yet its policymakers have a problem. Although they can stop the Taiwanese
dollar from becoming more expensive, they cannot stop it becoming more
conspicuous—especially if the American dollar keeps falling. ■

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Dollar drama

Global turmoil has at least one

beneficiary: currency traders
The foreign-exchange market has been reinvigorated by recent events
May 08, 2025 06:49 AM

TRADERS OFTEN joke that FX stands for “forgotten exchange”. After the
global financial crisis of 2007-09, near-zero interest rates in rich economies
and tighter currency management in emerging ones kept volatility low—
and with it, profits.

Now Donald Trump’s return to the White House has jolted currency
markets back to life. In April a measure of the volatility of the DXY index,
which compares the dollar with a basket of peer currencies, was almost
twice as high as a year earlier.
CME Group, the world’s largest derivatives exchange, says that in the first
quarter of 2025—before Mr Trump’s “Liberation Day” tariff shock—
foreign-exchange trading volumes on its platforms were up by 25% year on
year, with a record daily average of 1.1m futures and options contracts
traded. On April 3rd, the day after Mr Trump’s announcement, trading on
EBS, a CME spot foreign-exchange platform, reached $147bn, the most
since 2020.

Other policy surprises have had similar consequences. On March 5th

trading between the euro and the dollar hit $137bn, more than double this
year’s daily average, after Germany announced more defence spending. On
May 2nd trading in one-month forward contracts on the dollar-Taiwan
dollar exchange rate reached over $6bn on EBS, a record for a single day,
after China signalled openness to trade talks with America. Stockmarket
jitters have added to the turbulence, with the dollar weakening since mid-
January as investors pulled money from American shares.

Currencies are quick to respond to unexpected developments, says Paul

Lambert of NCFX, a data provider. The $7.5trn-a-day market is highly
liquid, runs around the clock and settles fast, allowing investors to respond
at once to news outside normal trading hours. They then shift exposures in
stocks or bonds once markets open. Mr Trump’s announcements late in the
American day often land during Asia’s morning, triggering a rush of trading
in the region, notes John Rothstein of Optiver. To keep up, his trading firm
has had to expand its operations in Singapore.

Much of the pickup in activity comes from companies and investors trying
to limit currency risk, says Mr Lambert. Multinationals hedge foreign
revenues and costs; investors want to protect overseas holdings. Lauren van
Biljon of Allspring Global Investments, an asset manager, says that her
clients increasingly view currency moves as a source of returns, too.

Recent results issued by big banks on both sides of the Atlantic suggest that
they are also benefiting from the turbulence. UBS announced that revenue
from its foreign-exchange, rates and credit division had jumped by 27%
year-on year, driven largely by strong performance in currencies. Goldman
Sachs reported a more modest rise of 2% in fixed-income, currency and
commodity trading, but also credited higher revenues from currencies.
Strong results are prompting some to rebuild currency desks that were
emptied first by the financial crisis and then by algorithms. “When markets
turn volatile, clients want to speak to a real person,” says Stephen Jefferies
of JPMorgan Chase (even if his firm is keeping headcount steady for now).
A return to foreign-exchange trading’s heyday is still a little while off, but
in a more fractured world, he predicts, currency volatility is likely to last. ■

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Cheap thrills

Buy the dip: the trend that keeps

stocks from crashing
Retail investors now play a useful role at times of panic
May 08, 2025 06:49 AM

STOCKMARKETS APPEAR to have recovered their poise. By May 2nd

America’s S&P 500 index had climbed back to its level of a month earlier,
just before President Donald Trump’s “Liberation Day” tariff salvo. If the
S&P’s plunge was shocking—a fall of 12% in just four trading days—the
rebound was, too. Mr Trump’s decision to pause many of his duties
certainly helped. So, it seems, did retail investors.

Even as markets dropped by 5% on the day after Mr Trump’s

announcement, retail investors refused to pull out their money. Instead, they
poured in a net $5bn. Over the next week, as prices slid still further, they
deployed additional billions, snapping up everything from tech giants such
as Amazon and Nvidia to exchange-traded funds tracking the whole market.
If retail investors were fazed by Mr Trump’s tariffs, they had a funny way
of showing it.

In decades gone by, such investors were often derided as bandwagon-

jumpers who extrapolated future trends from past performance. Today they
are contrarians. Amateur investors regularly pile into the market on its most
difficult days. Investing forums, notably Reddit’s r/WallStreetBets, throb to
a drumbeat of encouragement for participants to “buy the dip”. Whereas
institutional investors may be forced by risk managers to unwind trades
when prices slide, retail investors provide welcome liquidity during sell-offs
—a pattern that is changing modern stockmarkets.

The “momentum” stereotype was not without foundation. In 2014 Robin

Greenwood and Andrei Shleifer, both of Harvard University, found that
falling stock prices did not prompt investors to expect higher returns—as
theory would suggest they should—but lower ones. Indeed, flows into
mutual funds still track broader market sentiment, and money heads to the
best-performing managers. The logic that what rose yesterday will surely
rise tomorrow remains powerful: witness appetite in recent years for
bitcoin, GameStop and Cathie Wood’s tech-heavy ARK fund.
At the same time, there have long been forces pulling in the opposite
direction. First among them is rebalancing. Many savers aim for a 60-40
mixture of, for example, $600 in equities, $400 in Treasuries. A slide of
20% in stocks and a bond gain of 2% leaves equities at $480 and bonds at
$408, a 54-46 split. Restoring the 60-40 divide means buying the asset that
has just fallen. Psychology plays a similar balancing role: one of the most
widely documented biases is the “disposition effect”, whereby investors sell
winners and hold losers. A reluctance to realise losses may appear as
contrarian behaviour.
These effects are not sufficient to explain recent rallies, however. The
disposition effect concerns selling, not scooping up bargains, and
rebalancing is usually a quarterly or annual ritual. Neither much reflects
sentiment, let alone the Reddit drumbeat. Instead, retail investors appear to
have developed a self-fulfilling belief that there will almost always be a
snap-back. This is not entirely unwise. According to theory, when prices
plunge, either fundamentals have worsened or investors have become more
skittish; in the latter case, those with cash to spare should pocket a premium
for providing liquidity and shouldering the risk. Moreover, empirical
evidence suggests the theory does hold over long investment horizons.

Main Street bets

Timing may offer a clue as to how to reconcile the data of Messrs

Greenwood and Shleifer with investor behaviour during the stockmarket
plunge that followed Mr Trump’s tariffs. A “buy the dip” approach is
frequently invoked to justify splurging on assets that have fallen in price in
recent days or weeks, whereas evidence on surveys and mutual-fund flows
tends to capture behaviour in response to performance over months or
years. And there may now be more short-term traders than in the past,
owing to the explosion of app-based, instant-trading platforms, including
EToro and Robinhood. In 2019 the latter had $14bn of assets under custody;
that figure has since climbed to $180bn. Robinhood’s average client is
around 15 years younger than that of Vanguard, which provides staid index
investing.

Growing numbers of ultra-rich investors may also play a role. Although

there are still relatively few in total, they account for a larger share of
“household” flows—and are eager to provide liquidity when the market
drops. According to Xavier Gabaix of Harvard and co-authors, affluent
investors with less than $30m typically take money out of stocks when
markets fall. Those with over $30m step in.

Paradoxically, therefore, the ultimate consequence of concentrated wealth,

internet mania and contrarian, app-based trading may be a calmer day-to-
day market. Bullish retail sentiment may inflate valuations over the long
haul, but without billions of dollars of inflows to stabilise the market in
April, stocks would surely have fallen further amid even greater volatility.
Dip-buyers were stabilisers. With stocks having recovered they also look—
for the moment, at least—like sages. ■

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The oracle plans to step down

Warren Buffett has created a

$348bn question for his successor
Berkshire Hathaway’s next CEO has huge shoes to fill—and a mountain of
cash to invest
May 08, 2025 11:53 PM | NEW YORK

SURPRISING PEOPLE at the age of 94 is no mean feat. But that is what

Warren Buffett did at the end of Berkshire Hathaway’s annual shareholder
meeting on May 3rd, when he announced that he would be stepping down
as the company’s chief executive at the end of the year. Mr Buffett gave
most of Berkshire’s directors no advance notice of his decision. Nor did he
tell Greg Abel, his presumptive successor.

Berkshire Hathaway was a textile-maker when Mr Buffett bought it in

1965. In the years that followed he turned it into an immense insurance firm
and a sprawling conglomerate with interests in everything from energy to
sweets. He employed a value-investing strategy, seeking out companies that
appeared cheap relative to their intrinsic value. From 1965 to the end of last
year, Berkshire’s market value had increased by more than 5,500,000%,
with a compounded annual return of almost 20%. The total return of the
S&P 500 index over the same period was 39,000%.

Today Berkshire has a market capitalisation of $1.1trn, having dropped a bit

on Mr Buffett’s announcement. Mr Abel has been with the company for a
quarter of a century. He has run its non-insurance operations—such as its
energy, railway and retail businesses—since 2018. His next challenge goes
beyond filling Mr Buffett’s shoes as an “oracle”. Berkshire’s strategy is
becoming more difficult to pull off.

Over the past year, Mr Buffett has aggressively sold stocks, including a
large chunk of its stake in Apple. Now, for the first time in two decades,
Berkshire owns more cash than listed equities. At the end of March it held
$348bn in cash and short-term American government debt, more than twice
the amount it held at the close of 2023. The firm’s Treasuries account for
5% of the outstanding market. If Berkshire was a country, it would be the
tenth-largest holder of American government debt, above India, Switzerland
and Taiwan.

Mr Buffett’s decision to withdraw from the stockmarket has so far benefited

the company. Its stock is up by 14% this year, while the S&P 500 is down
by 4%. The problem, for Messrs Buffett and Abel, is working out what to
do with the enormous pile of cash. Lately Mr Buffett has griped that there is
not much out there to buy at a reasonable price. Even after the recent
market tumult, valuations of listed companies are high relative to their
historical levels.

One option would be to expand more aggressively overseas. In recent years

Mr Buffett has made successful bets abroad. For example, he has poured
billions of dollars into several of Japan’s trading conglomerates, such as
Mitsubishi and Sumitomo. Mr Abel might note that among companies
worth over $5bn and with price-to-earnings ratios below ten—suggesting
they are cheaply valued—80% by value are domiciled outside America.

Another option would be to stray from value investing in the hope of

finding firms worthy of capital allocation. That seems unlikely, at least for
now. Such a move would transform Berkshire’s culture and risk the ire of
Mr Buffett’s admirers. After 25 years at the firm, Mr Abel is unlikely to pull
an immediate handbrake turn.

Absent a change of strategy, Berkshire will have to wait for a market

downturn. Mr Buffett has a history of spotting such opportunities. He
snapped up a large stake in Wells Fargo, an American bank, during a slump
in 1990. He invested in companies including Johnson & Johnson and Kraft
Foods (and Wells Fargo again) following the global financial crisis of 2007-
09. The list goes on. Berkshire’s shareholders must hope that Mr Abel has
the same vision. ■

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Free exchange

What happens when a hegemon

falls?
Why economists are turning to a 50-year-old book on the Depression
May 08, 2025 06:49 AM

THE “KINDLEBERGER SPIRAL”, a graph of world trade between 1929

and 1933, looks like water circling a drain, or a small animal curling up into
a ball. It was produced by Charles Kindleberger, an economic historian, in
“The World in Depression”, a book published in 1973, and has recently
enjoyed a new lease of life as a demonstration of the self-harm that
protectionism inflicts. From month to month, Kindleberger charted how the
global economy turned in on itself throughout the late-1920s and 1930s,
spiralling towards disaster. Another idea from his work—the “Kindleberger
gap”, referring to a leadership void—is also proving helpful.
Kindleberger had a front-row seat for the Depression. As a graduate student
completing his thesis in the 1930s, he worked at the US Treasury for Harry
Dexter White, chief architect of the post-first-world-war system of fixed
exchange rates. Graduation led to a job at New York Federal Reserve. After
the second world war, during which he worked at the Office of Strategic
Services, a precursor to the CIA, he moved to the State Department, where
he helped shape the Marshall Plan, America’s programme for the
reconstruction of Europe. In time he found his way to academia—he had
probably had enough excitement, his biographer speculates—becoming one
of the first members of the economics department at the Massachusetts
Institute of Technology.

At MIT, Kindleberger was something of a pre-war figure in a post-war

world. He was not a mathematical-model builder in the mould of Paul
Samuelson and Robert Solow, two supremely talented colleagues. Instead,
he followed a methodology he called historical economics, not economic
history. “It is better, I believe, to err on the side of an artistic feel for the
relationships and the data,” he wrote. Despite this, in 2009, it was his work
to which Larry Summers turned as he co-ordinated America’s response to
the financial crisis while director of the National Economic Council.

“The World in Depression” answers fundamental questions: “How and

where the Depression originated, why it spread so widely and why it went
so deep and lasted so long.” The book starts with the venomous diplomacy
of first-world-war debts and reparations, travels through the stockmarket
crash of 1929, the turn to protectionism, subsequent bank failures and the
seemingly never-ending economic slump, until it concludes with German
rearmament—stopping short of the second world war.

Kindleberger’s conclusion is that the Depression was such a disaster

because the global economy lacked a leading nation to stabilise it. “Britain
could not and America would not,” he wrote. Britain, which under the gold
standard was the dominant economic as well as military power, was
exhausted by the first world war. America was isolationist, protectionist and
overrun by hard-money thinking, which insisted on balanced budgets and a
gold peg. France was too small to stabilise the world but big enough to
destabilise it, he wrote, as when the country attached conditions to bail-outs
or dug in its heels over German reparations. The Kindleberger gap refers to
this void of economic leadership.

Stability, Kindleberger argued, is a global public good that must be

provided. It is not a naturally occurring equilibrium. The leading economy
—a “hegemon”, as later thinkers would term it—can capture some of the
benefits of this stability for itself, and push the system in a direction
favourable to its interests. However, it needs to take on the burden of
providing, among other things, an open market for goods, countercyclical
finance and the role of lender of last resort. President Donald Trump now
appears to reject this thinking altogether. He demands that allies pay for
military protection and views a trade deficit as straightforward evidence of
being ripped off. Members of his administration have mooted charging
countries for the privilege of lending to the American government. All told,
he simply does not see the gains that emerge from global stability as being
worth their cost.

Hélène Rey of the London Business School identifies a “New Kindleberger

Gap”. This time a “self-destructing hegemon” is, she says, uninterested in
providing global public goods, while an ascendent one (Ms Rey refers to
the European Union, but China is another candidate) lacks the ability. The
Fed’s swap lines lie at the heart of her concerns. These offer central banks
in allied countries, including the European Central Bank, the Bank of
England and the Bank of Japan, access to dollars in exchange for their own
currency. They should help forestall any crisis that bids up the price of
dollar borrowing, but are just the sort of burden-sharing to which Mr Trump
normally objects. In an attempt to bolster their position, sophisticated
policymakers are talking in Trumpian terms. “The reason we do it is it’s
really good for US consumers,” Jerome Powell, chairman of the Fed, has
said.

Greenbacked

What are the contingency options? Despite Mr Powell’s assurance that

America will continue to offer swap lines, Ms Rey suggests that European
central banks should encourage commercial lenders to reduce exposure to
dollar assets, build up precautionary dollar reserves and play a part in
turning the euro into an international currency. Robert McCauley of Boston
University advocates the creation of a “dollar coalition of the willing”,
pointing out that the central banks which would normally receive swap lines
from America already have $1.9trn-worth of dollar-reserve assets, which
they could agree to pool in advance of a crisis. That amount is far more than
they borrowed from the Fed during either the global financial crisis of
2007-09 or the early stages of the covid-19 pandemic. In the short term,
such actions may help cement the role of the dollar, as central banks build
up reserves. In the longer term, however, it may mean that American
monetary hegemony becomes a subject fit only for historical economics. ■

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Science & technology

How to build strong magnets without rare-earth metals
State of flux :: China’s export restrictions may boost scientific innovation

Compressed music might be harmful to the ears

Uneasy listening :: In guinea pigs it can weaken muscles important for hearing

Companies have plans to build robotic horses

Dog and pony show :: One diminutive design is aimed at children

Dogs really do look and act just like their owners

Friends like these :: The resemblance increases over time

Is your hay fever getting worse?

Well informed :: Climate change could be to blame

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State of flux

How to build strong magnets

without rare-earth metals
China’s export restrictions may boost scientific innovation
May 08, 2025 06:49 AM

THE HUMBLE magnet may not seem to belong alongside steel,

microchips and oil as a chess piece in the great diplomatic game. But on
April 4th, as part of its retaliation against America’s tariffs, China
announced export restrictions on a particularly useful kind of magnet—the
powerful permanent sort that can be made with “rare-earth” metals.

Assuming the restrictions stay in force, they are likely to have a big impact.
Strong and compact, rare-earth magnets have found their way into
everything from electric cars and wind turbines to MRI machines and
missile-guidance systems. And as with the rare-earth industry in general,
Chinese firms dominate the market. America’s Department of Energy
estimated in 2022 that China produced 92% of the 100,000-odd tonnes of
rare-earth magnets made each year.

That China is exploiting its dominance of rare earths and the things made
from them is hardly new: in 2010 it halted exports of rare-earth metals to
Japan for months over a fishing dispute. It imposed further restrictions in
February, before Donald Trump, America’s president, kicked off the latest
round of the trade war. But restrictions on magnets themselves came as a
surprise, says Jack Howley, an analyst at IDTechEx, a market-analysis firm.
“Many firms were focused on the tariffs,” says one industry observer. “But
these export restrictions could end up hurting them more.” And the defence
implications, says Dr Howley, are likely to “really scare” governments
around the world.

China’s restrictions, therefore, seem likely to boost efforts to find new sorts
of magnets that do not rely on rare-earth elements. Interest in this subject
has increased hugely in recent years, says Nicola Morley, a physicist at the
University of Sheffield. Last year, she says, Masato Sagawa, a Japanese
scientist who helped commercialise rare-earth magnets in the 1980s, did a
lecture tour around Europe. “It was 40 years since he’d created the best
magnet going, and he wanted to know why we hadn’t done better since
then.”

Rare-earth magnets are prized because they pack a lot of magnetic punch
into a small space. One commonly used figure of merit is a magnet’s
“maximum energy product”, known in the literature as its (BH)max. An
easy way to think of this, says Laura Lewis, an engineer at Northeastern
University in Massachusetts, is as a measure of the effort needed to prise a
magnet off a steel filing cabinet. A high-quality rare-earth magnet made of
an alloy of iron, neodymium and boron might have a (BH)max of more than
400 kilojoules (kJ) per cubic metre; ten times more than cheap ferrite fridge
magnets, or even more.

Rare-earth magnets will also retain their own magnetism even in the
presence of strong external magnetic fields—important in motors and
generators, which rely on the interaction between two or more magnetic
fields to work. With the addition of other rare-earth elements such as
dysprosium, they can be made to function at temperatures of more than
200°C.

This combination of properties makes rare-earth magnets hard to beat. One

alternative, says Dr Lewis, is to switch rare-earth elements for others that
are chemically at least somewhat similar. Platinum is one, she says,
although it is rare and expensive. Magnets made from aluminium, nickel
and cobalt, meanwhile, use relatively cheap materials and work well at high
temperatures, but offer only a fraction of the strength of rare-earth magnets.

Better options are on the horizon. Dr Lewis is working on an exotic rare-

earth substitute that is not found naturally on Earth, but which does
occasionally fall from the sky. Tetrataenite is a mineral found in some
meteorites, composed of atomically thin layers of iron and nickel stacked
on top of each other. With a theoretical (BH)max of around 335kJ/m3,
magnets made from the stuff would be nearly as strong as the best
neodymium ones, while being even more heat-resistant. And its ingredients
are common.

The difficulty lies in actually making it. Natural tetrataenite is formed as the
nickel and iron inside meteorites cool slowly over millions of years.
Scientists have been able to make tetrataenite in the lab since the 1960s, but
the process—which involves bombarding iron and nickel with beams of
neutrons—is too slow for mass production.

Dr Lewis and her colleagues are looking for a better way. Their method
involves heating iron and nickel in a vacuum, in the presence of a magnetic
field, while also subjecting the alloy to mechanical strain. The result,
according to a paper published in 2024, is that small batches of lab-grown
tetrataenite can be produced in about six weeks. That may sound like a long
time to an industrialist, but is millions of times faster than natural methods
can achieve.

Other researchers claim to have brought a different chemistry to the cusp of

commercialisation. Niron Magnetics, a firm based in Minnesota, was
founded on the back of work carried out on iron and nitrogen by Jian-Ping
Wang, a physicist at the University of Minnesota. In theory, the (BH)max of
iron nitrides could reach more than 1,000kJ/m3, far higher than even the
best rare-earth magnets, though they are more susceptible to being
scrambled by other magnetic fields. And nitrogen is common as muck: it
can be sieved or distilled straight out of the air with relatively simple
equipment. But until recently no one could produce iron nitride at scale.

Niron, though, thinks it has cracked that problem. It plans to break ground
on a pilot plant later this year with a capacity of around 1,500 tonnes a year,
and aspires to build a bigger, 10,000-tonne commercial factory in 2027. For
now, the firm’s magnets still fall some way short of their theoretical
performance. A document published by Niron in 2023 mentions a (BH)max
of around 286kJ/m3, around half that of a good neodymium magnet. But
improvements in manufacturing will raise that further. Niron has managed
to attract around $140m in funding, says Jonathan Rowntree, its boss, with
around a third coming from America’s government and two-thirds from
private investors, including General Motors and Stellantis, a carmaker
whose largest shareholder, Exor, part-owns The Economist’s parent
company.

Even if everything goes swimmingly, none of the new magnets will arrive
in time to fix the present shortage. Many industrial firms, says Dr Howley,
will simply be hoping that diplomacy will prevail; on May 6th America and
China said they would begin formal trade talks. Having been repeatedly
burned, though, he thinks some governments may take a different tack.
“They are probably going to have to make more of a concerted effort to
support approaches that don’t rely on China,” he says. The best time to start
looking seriously into alternatives was 20 years ago. But the second-best
time is probably today. ■

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Uneasy listening

Compressed music might be

harmful to the ears
In guinea pigs it can weaken muscles important for hearing
May 08, 2025 06:49 AM

THE FICTIONAL band Spinal Tap could make their instruments louder
with the help of amplifiers that went up to 11. Lesser musicians must find
other ways to pump up the volume. One well-established trick is
compression, which makes music sound fuller by hushing the loudest parts
of a track and making quiet parts noisier.

Used since the 1930s, compression is now common in the music industry,
streaming, radio and television. Long suspected to have links with hearing
damage, there has been little experimental evidence to support concerns.
Now research in guinea pigs shows that compressed music can damage the
ears in ways that regular music does not. The research, though preliminary,
suggests that there may be cause to worry about the harmful effects of
compression.

The composer Claude Debussy called music the space between the notes.
As well as offering structure and distinctive phrasing, these pauses give the
listener’s brain vital rests that help auditory neurons recover. Compressed
music interferes with this recovery because making the quiet parts louder
can fill many millisecond-long gaps in the signal with noise. As a result
many music aficionados find listening to compressed tunes exhausting.

To test whether compression can negatively affect hearing, scientists turned

to Adele’s 2015 single “I Miss You”, a song whose distinctive frequency
spectrum results in all restorative pauses being eliminated after
compression. They also turned to guinea pigs, animals that can hear similar
sound frequencies to people while also being content to sit placidly for four
hours while played the same song on a loop.

The guinea pigs were split into two groups. One group listened to the
regular track, while the others were played a compressed version.
Importantly, the music was played to both groups at an average volume of
102 decibels—uncomfortably loud but just below Britain’s Health and
Safety Executive’s recommended maximum average for live music.

Tests of the cochlea, damage to which is the leading cause of hearing loss,
showed some mild temporary impairment in both groups immediately after
the tests, as would be expected. But compression caused more lasting
damage to the middle ear’s stapedius muscle, which contracts to protect the
inner ear from loud noises. At just 1mm long, it is the smallest skeletal
muscle in the body.

Both normal and compressed music reduced the strength with which this
muscle reflexively contracts to 40% of its pre-Adele state. Though the
animals who heard the standard track recovered fully within a day or so,
those that endured the compressed version did not. Their stapedius muscle
reflexes were still at less than half their strength by the time the experiment
ended a week later.
Writing in the journal Hearing Research the scientists, led by Paul Avan, an
audiologist at the Pasteur Institute in Paris, suggest the constant stimulus of
the compressed music overwhelmed nerve cells in the animals’ auditory
processing pathways, affecting their ability to use the muscle.

Although the study does not address the level at which compression starts
to be harmful, nor how long the effects could last (nor, for that matter,
whether humans react as guinea pigs do), the results do suggest that average
decibel level might not be the only harmful property of music. ■

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Dog and pony show

Companies have plans to build

robotic horses
One diminutive design is aimed at children
May 08, 2025 06:49 AM

You can lead a bot through water

IN A BREAK from tradition, Kawasaki, a Japanese motorcycle maker, has

announced plans to build a new breed of off-road machine shaped like a
robotic horse. Corleo, as the machine is called, has a body like a headless
steed, complete with four multi-jointed legs powered by electric motors. A
pair of handlebars serves as reins and adjustable leg supports, of the kind
found on motorbikes, pass for stirrups. Corleo will also not require a farrier:
instead of being shod with steel horseshoes, its hooves are clad in rubber.
This will help it absorb shocks and improve its grip.
Like a real horse, the rider will control it by moving their hands, arms and
legs as well as by shifting their weight about. These movements, which can
be very subtle in real equestrians, are detected by a combination of sensors,
with the data passed on to an artificial-intelligence system that instructs the
motors to respond accordingly and to maintain the robot’s balance. Once
development is completed, Corleo could carry two people and be able to
break into a swift canter.

Helpfully, Corleo is fitted with a GPS navigation system and a projector

capable of displaying directions after dark on the ground ahead. Under
present plans the robot’s electrical power would come from a small internal-
combustion engine working as a generator. This uses clean-burning
hydrogen as its fuel, thus cutting emissions. The hydrogen would be stored
in the robot’s hindquarters.

Even though Kawasaki admits that it could be a couple of decades before a

robotic horse as agile as Corleo could enter mass production, the company
is not alone in developing robotic animals. The robotics division of Xpeng,
a Chinese electric-vehicle manufacturer, is working on a small robotic pony
that can be ridden by children. This, reckons Xpeng, will become a child’s
“first smart vehicle”.

Meanwhile, Boston Dynamics, an American robot maker owned by

Hyundai, a South Korean carmaker, has already sold more than 1,500
versions of Spot, its four-legged doglike robot. Although not big enough to
ride on, Spots are used in factories, typically for jobs like inspecting
hazardous areas. As even a basic Spot costs some $75,000, robot horses
such as Kawasaki’s are likely to be a pricey addition to any stable, even
though they don’t require feeding and mucking out. ■

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Friends like these

Dogs really do look and act just like

their owners
The resemblance increases over time
May 08, 2025 06:49 AM

FOR ALL the talk of dogs and humans being best friends, sometimes
representatives of the two species just don’t click. Giving up an unsuitable
family pet can be heartbreaking, but, if the animal is an expensive working
dog, it can also be financially ruinous. Guide dogs, for example, can cost up
to $50,000 to train, but about a third are returned because they don’t bond
with their allocated owner.

To cut down on the number of mismatches, researchers in Germany are

trying to develop more harmonious pooch-person relationships. Their work
towards that goal has now confirmed what many dog-owners already
suspect, and what some may be reluctant to admit: dogs really do look like
their humans. More relevant to the quest for lasting friendships, they have
similar personalities too.

“We are interested in understanding what makes a good dog-owner match

and to find out how we can find the right dog for a person,” says Yana
Bender, a PhD student at the Max Planck Institute of Geoanthropology in
Jena. “To do that, we first need to establish the status quo: are dogs and
their owners generally more similar or more different?”

Writing in the journal Personality and Individual Differences, Ms Bender

and her colleagues have reviewed the available evidence to show how the
similarities show through. One domain concerns physical appearance.
Though it might sound barking, numerous studies in recent decades have
shown that people really can match pictures of dogs to their owners more
often and more reliably than would be possible with guesswork alone.

Some sources of similarity are clear: women with short hair tend to own
dogs with short ears, for example, and those with long hair tend to favour
long-eared breeds. People with higher body-mass-indices also tend to have
more overweight dogs. Other connections are less obvious, as shown by
research revealing dogs and owners can be correctly paired from pictures in
which only their eyes are visible.
A similar affinity bias may be at play for invisible characteristics as well,
with owners’ personality traits mirrored in the way their dogs behave.
Introverted owners have dogs that are more nervous around strangers,
neurotics are more likely to pair with aggressive pets and conscientious
people own dogs that are more motivated and easier to train. Owners of
breeds classed as dangerous, such as the notorious XL Bully, rate
themselves higher on traits like sensation-seeking and psychopathy.

What is going on? Psychologists have known for decades that humans place
more value on relationships with people who look and behave like them,
and the same seems to apply to dogs. Women with short hair rate short-
eared breeds such as the Siberian Husky and Basenji as friendlier and more
intelligent. Long-haired women think the same about Beagles and Springer
Spaniels. (What the dogs think is a question for another day.)

The phenomenon of matching personalities appears to be more complex

than that of matching looks. Rather than people simply selecting a dog they
believe matches their personality, the moods and behaviour of the owner
could influence and shape the dog over time—and to a lesser extent, vice
versa. Being around less confident people, for example, could make a dog
more nervous, while having an anxious dog can exacerbate an owner’s
worries.
Similar influences have been found in human-human relationships.
“Married couples tend to resemble each other more over time,” Ms Bender
says.

There are other parallels to human relationships, too. In related research,

Ms Bender has interviewed guide-dog owners about what works and what
doesn’t. Among those who felt incompatible with their dog were owners
who said they had a better relationship with a former dog. Another said
their pooch didn’t enjoy the same music as them. One said their dog was
too meticulous. For best results, find a dog that looks and thinks like you
do. Alternatively, consider a cat. ■

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Well informed

Is your hay fever getting worse?

Climate change could be to blame
May 08, 2025 06:49 AM

APRIL WAS the cruellest month. Just as the blossoms arrived, John
Bostock found himself struck by “an unusual train of symptoms”. First
came an “acute itching and smarting” around the eyes. Then came the
sneezing.

The “periodical affection” that he described to the London Medico-

Chirurgical Society in 1819 is now known as allergic rhinitis or, more
commonly, hay fever. It is a condition in which the immune system reacts to
airborne allergens, like pollen, by releasing histamine, an inflammatory
chemical.
Considered rare a few centuries ago, it is now extremely common—
estimated to affect one in five people in most industrialised countries, and
up to two in five in some sensitive places, including Japan. Although rates
are no longer increasing as fast as they once were, says Adam Fox of King’s
College London, sufferers now seem to be sneezing for an increasingly long
time each year.

Urbanisation may play a role: a study published in 2023 by Ann Gledson of

the University of Manchester and colleagues found that seasonal allergy
symptoms are significantly worse for city-dwellers. The exact cause is
unclear, but poor air quality might either increase the protein content of
grains or else heighten people’s immune response.

Climate change could also be to blame. Research conducted by Beverley

Adams-Groom of the University of Worcester, who produces pollen
forecasts for Britain’s national weather service, and others, has shown that
warmer springs in Britain prompt the main grass-pollen season (which
normally runs from May to July) to begin earlier. Indeed, some tree species
are now releasing pollen as early as January.

These trends are expected to continue in the coming decade, even if the
extent to which they do will depend on the level of warming, and will vary
by species and region. Warmer climates in central Europe and North
America, for instance, will contribute to the spread of ragweed, a highly
allergenic species that can require just one pollen grain per cubic metre of
air to cause a reaction. Most species need more than ten. Extreme weather
such as heatwaves and heavy rain can also decrease pollen production and
dispersal.

Pity hay-fever sufferers, for it will be difficult to do much about their

sneezing. One approach is to remove concentrations of allergenic species in
cities, as Japan is doing. Its government plans to replace 20% of the
country’s human-planted cedars with less allergenic trees over the next
decade, roughly equivalent to cutting down 70,000 hectares a year—a
drastic solution that has not been adopted elsewhere.

At least antihistamines and nasal sprays are generally able to counter

symptoms. A study conducted by HAL Allergy, a Dutch pharmaceutical
company, showed that new desensitisation treatments, which require a dose
of the allergen to be placed under the tongue each day, can reduce
symptoms by 32% relative to a placebo. Any such advance is welcome: a
study led by Simon Sobstad Bensnes of the Norwegian University of
Science and Technology suggests that the marks of one in ten pupils with
hay fever drop by a grade in exams conducted on days with high pollen
counts.

Alternatively, consider the original remedy trialled by Dr Bostock. After

years of sniffling, the good doctor resorted to relocating periodically to the
blustery seaside town of Ramsgate, where he “nearly” managed to escape
his affliction. Bless him.■

Correction (May 8th 2025): This article has been updated with the correct
duration of the grass-pollen season.

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Culture
Hollywood is in trouble. Politicians should not try to save it
Lights, camera, tariffs? :: Tariffs will not help, and taxpayers have no good reason to

The language that changed the world

Proto type :: Around half of the world’s population speaks a descendant of Proto-Indo-
European. Most know little about it

The friendship of a Chilean dictator and a Nazi war

criminal
Forged in blood :: Philippe Sands traces the connections between Augusto Pinochet and Walter
Rauff in his new book

How to write, according to the bestselling novelist of all

time
Bringing back the Queen of Crime :: Agatha Christie teaches a new writing course—with help
from AI

The morals of “Sinners”, a fantasia of vampires and the

blues
Back Story :: Ryan Coogler’s hit film is a riff on the uses and abuses of genre

If you haven’t heard of webtoons, you will soon

Making a splash :: South Korean digital comics are a multi-billion-dollar industry. Hollywood
wants a share of the profits

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Lights, camera, tariffs?

Hollywood is in trouble. Politicians

should not try to save it
Tariffs will not help, and taxpayers have no good reason to
May 08, 2025 06:49 AM | LOS ANGELES

IN “HOME ALONE 2” he made do with a cameo. Now Donald Trump has

cast himself in the role of Hollywood’s saviour. “The Movie Industry in
America is DYING”, America’s president posted on May 4th on Truth
Social, his social-media site. Other countries’ “concerted effort” to lure film
production away not only hurts the economy, but also poses a “National
Security threat”, he claimed, since foreign films are used as propaganda. To
redress these ills, Mr Trump proposed a 100% tariff on films produced
abroad.
In Hollywood the presidential post provoked a cacophony of R-rated
swearing. The film and television industry is remarkably globalised: a
movie might be written in Los Angeles, co-financed by Wall Street and
international investors and filmed in several countries. America’s
entertainment industry generated $22.6bn in exports in 2023, according to
the Motion Picture Association. If America slapped tariffs on foreign films,
other countries might retaliate. It is not clear how such tariffs would work,
nor whether Mr Trump’s off-the-cuff proposal will ever amount to a real
policy, but they could hugely disrupt an industry already reeling from the
decline of cinema-going and a rocky transition to streaming.

Cash-strapped studios would have to pass some of the extra costs on to

viewers—who have so far benefited most from the internationalisation of
film-making. American studios like to shoot abroad because it is cheaper. It
also means they can choose from a wider range of striking scenery and
work with local experts, which makes for better films. (Britain, for instance,
specialises in visual effects.) Most movie fans won’t care whether the next
“Avengers” film or Disney remake is shot in Los Angeles, Vancouver or
Budapest, so long as the end product is entertaining.

And, thanks to streamers, viewers now have access to a vast array of

storytelling from anywhere in the world: the most popular show on Netflix
is “Squid Game”, a South Korean dystopian drama that has accrued more
than 3.5bn viewing hours since 2021. In this global marketplace of ideas,
American producers can find new collaborators and pick up inspiration.

Hollywood may not have liked Mr Trump’s proposal, but many writers,
directors and lawmakers agree that he has identified a real problem. Film
and TV production fell globally following the writers’ and actors’ strikes of
2023; production in southern California, however, has fallen off a cliff. (The
wildfires earlier this year brought another shock.) According to FilmLA,
which tracks filming in Greater Los Angeles, the region hosted fewer days
of shooting in 2024 than any year except 2020, when most filming was
stopped in the pandemic. California is still home to more film and TV jobs
than any other American state, but its share is declining.
Hollywood is a catch-all term for the movie industry but it is also a district,
where workers at studios can gaze up at the white-lettered sign in the hills.
Angelenos have long worried that they are losing their grip on the city’s
best-known industry. Production first fled from LA to Canada in the 1990s
when the US dollar was very strong, says Kevin Klowden of the Milken
Institute, a think-tank in Santa Monica. In the 1990s and early 2000s states
such as Louisiana and New Mexico began offering tax incentives to lure
production. Mr Klowden notes that “Breaking Bad”, which was set and
primarily filmed in Albuquerque, New Mexico, was originally meant to
take place in Riverside, California. Eventually, in 2009, California began
offering tax incentives of its own.

They are less generous, however, than those on offer elsewhere. Britain
offers a tax credit on films and high-end TV at a rate of 34%. This is one
reason why blockbusters such as “Barbie”, “Deadpool & Wolverine” and
“Wicked” were filmed there. Last year spending on production in Britain
reached £5.6bn ($7.5bn), an increase of 31% from 2023; much of it came
from American companies.

All the while, California has been getting more expensive. Film industry
workers make roughly 20% more in the Golden State than the national
average. The workforce is heavily unionised and studios have to pay
workers enough to live in one of the least-affordable housing markets in
America. Rob Lowe, an actor, has explained why his game show shoots
overseas: “It’s cheaper to bring 100 American people to Ireland than to
walk across the lot at Fox.”

Some industry workers are leaving LA, slowly eroding the network effects
that have helped the city keep other wannabe film capitals at bay. The
production decline means spots in writing rooms are scarce. Sean Collins-
Smith, a TV writer, lives off his residual payments for his work on episodes
of “Chicago PD”, a police procedural. As a writer, he says, “If you don’t
work for two or three years, you got no choice” but to leave.

Mr Trump already seems to have backed away from his tariff pledge, but it
is unclear what might replace it. Jon Voight, an actor and one of the
president’s “special ambassadors” to Hollywood, wants federal tax
incentives. The shock that hit Hollywood when Mr Trump’s Truth Social
post landed has turned to cautious optimism. Movie moguls would love to
receive federal handouts, and California’s Democratic governor, Gavin
Newsom, has their backs. Responding to Mr Trump’s tariff proposal, he
suggested that Uncle Sam should give the industry $7.5bn a year instead.
“Obviously, the president got excited about tariffs,” says Ben Allen, a
California state senator who represents much of LA’s west side, “but there
are other ways to help.”

Why is Mr Trump interested in helping Hollywood at all? Foreign films are

hardly a security threat; as propaganda tools, they are far less potent than
social media. Lifting Hollywood over its foreign rivals could be seen as an
“America First” policy, and movie bigwigs are pressing this button by
likening their woes to those of the rust belt. Russell Hollander, the head of
the Directors Guild of America, suggests that if enough film production
leaves LA, “Hollywood can become the next Detroit.”

However, creating a federal handout for moviemakers would require

congressional approval. Since the industry is concentrated in liberal states
such as California and New York, that may not sit well with Republican
lawmakers.

Even if Congress did act, California would still have to contend with other
states’ incentive schemes. New York is mulling expanding its film tax
credit; the Golden State may follow suit. Yet California’s Legislative
Analyst’s Office has found “no compelling evidence” that such incentives
boost the state’s economy, or eventually pay for themselves. Squeezing
taxpayers to cosset the world’s most glamorous industry may prove hard to
justify, come election time. In politics, as in the movies, there may be tears
when the credits roll. ■

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Proto type

The language that changed the

world
Around half of the world’s population speaks a descendant of Proto-Indo-
European. Most know little about it
May 08, 2025 09:03 AM

Proto: How One Ancient Language Went Global. By Laura Spinney.

Bloomsbury; 352 pages; $29.99. William Collins; £22

DANTE DID like a category. Famously, he split sinners into different

circles in Hell. Those who committed milder misdemeanours (the violent;
tyrants) went in the outer realms; more serious sinners (bankers, naturally)
he tortured farther in.
But he also categorised other things. Because Dante—a linguistic Darwin—
held a heretical theory. Europe’s languages, he thought, had not been made
in a single moment, in a biblical Babel, but had evolved. With the care of a
Victorian naturalist, he thus split Europe’s languages into families by their
words for yes: thus those who lived in southern France and said “Oc” spoke
a “Langue d’oc”.

The truth of Dante’s Hell is debatable, but, linguistically, he was spot-on.

Four centuries later, a British judge and polyglot called Sir William Jones
arrived in Calcutta and was struck by the similarities between Latin and
Sanskrit words for terms such as house (domus, dam) and god (deus, deva).
Clearly they had “sprung from some common source, which, perhaps, no
longer exists”. The world’s languages were not a babel but a brotherhood.

“Proto”, a new book by Laura Spinney, a journalist who has written for this
newspaper, offers a biography of that brotherhood—or rather its parent. For
Jones’s “common source” now has a name: “Proto-Indo-European” (PIE). It
was first spoken by as little as a few dozen people around the Black Sea
then, roughly 5,000 years ago, spread with rapidity “from Ireland to India”.
Today, its offshoots include Irish and Hindi—and more or less everything in
between. Almost half of the world’s population speaks a descendant of it.

PIE is long dead, but traces of it remain caught, like insects in amber, in
modern languages, allowing academics to bring it back to life. Scholars
know its speakers (perhaps) had the wheel (*kwekwlos, in PIE’s odd
transcription, seen in English “circle” and “wheel” itself); and fields
(*h2egros—“agriculture”) and drank mead (*medhu). They know speakers
found visitors irritating: the PIE word “*ghostis” gives English not just
“guest” but “ghost”, and Latin its word for “host” but also “enemy”.
(Everyone has had a guest like that.) Its ancient wordscapes are
enlightening, if at times puzzling. A hero was “one who urinated standing
up”—which feels like a low bar.

This book is at its best on the language: to learn that English “mother”,
Latin mater and Sanskrit mata share a root provokes a pleasing
etymological “Ah!” Its (lengthy) agricultural sections are drier and contain
too many mentions of the word “goat”. Topics, like guests, can outstay their
welcome. But logophiles will enjoy getting to know a little more about their
*meh2ter (mother) tongue. ■

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Forged in blood

The friendship of a Chilean

dictator and a Nazi war criminal
Philippe Sands traces the connections between Augusto Pinochet and
Walter Rauff in his new book
May 08, 2025 09:01 AM

Sitting, not in the dock

38 Londres Street: On Impunity, Pinochet in England and a Nazi in

Patagonia. By Philippe Sands. Knopf; 480 pages; $35. W&N; £25

THE TWO men had a lot in common. They shared an affinity for German
culture and a disdain for communism; they also both committed mass
murder, only on different continents, decades apart. One was Augusto
Pinochet (pictured), a Chilean dictator from 1973-90 who murdered
thousands of people. The other was Walter Rauff, an SS officer who
developed the mobile gas chambers that killed some 100,000 people in the
second world war.

In “38 Londres Street”, a gripping new book, Philippe Sands shows that the
long-rumoured connection between the men was real. After fleeing an
Italian prison camp at the end of the war, Rauff ended up in South America.
In Quito, Ecuador, in the 1950s, he befriended Pinochet, who encouraged
Rauff to move to Chile.

Rauff settled in Punta Arenas, a city in the country’s south, where he carved
out a new life as the manager of a king-crab cannery. Years later, when Mr
Sands visits, many residents recall fond memories of Rauff (and of
Pinochet’s dictatorship). A woman who worked at the factory says Rauff
“seemed like a good person”. A magazine feature from the time includes a
glowing endorsement from the mayor: Rauff “creates no problems for
anyone”.

Was that really true? Mr Sands sets out to verify another rumour: that the
former Nazi helped Pinochet’s secret police torture and disappear people.
(The book’s title refers to a building in Santiago that became a detention
centre.) Mr Sands’s investigative work leads him to survivors and
perpetrators, many of whom claim to remember Rauff. The author leaves it
up to the reader to decide whether their testimonies are reliable.

“38 Londres Street” is the third book in Mr Sands’s loose trilogy about
Nazis, justice and impunity. “East West Street” (2016) chronicled the work
of two Jewish lawyers from Lviv, in Ukraine, in defining the legal concepts
of crimes against humanity and genocide which were used at the
Nuremberg trials. “The Ratline” (2020) retraced the steps of a Nazi fugitive
as he tried to flee to South America. As in those books, Mr Sands weaves
together travelogue, detective story and legal drama.
The author finds he has a personal connection to the events and characters.
Some of his Jewish relatives probably died in Rauff’s gas vans; during his
research he learns that he is related by marriage to one of Pinochet’s
victims, a United Nations diplomat tortured and killed in 1976. Yet his
response to the material he uncovers is often fascination rather than horror.
He is a curious scholar, not a justice warrior.

In 1998 Mr Sands, who is a practising barrister, played a minor role in the

efforts to extradite Pinochet from London, where he had been arrested while
seeking medical treatment, to Spain, where he had been indicted. Pinochet’s
arrest was the first time a former head of state was apprehended abroad
under the doctrine of “universal jurisdiction” for large-scale human-rights
abuses. A legal battle ensued: the prosecution wanted Pinochet extradited
and the defence argued that he had immunity as a former head of state. Mr
Sands interviews nearly every lawyer, judge and diplomat involved in the
17-month saga.

In the end, Rauff and Pinochet shared another experience: they never faced
justice. Pinochet was spared from extradition on flimsy medical grounds.
He returned to Chile in a wheelchair, then abandoned it on the tarmac once
he reached home soil. He faced prosecution in Chile in his final years, but
died in 2006 without standing trial. Rauff also survived extradition attempts
and died in Santiago in 1984.

Mr Sands concedes that “justice has been limited”, but shows that the law
works in indirect ways. Pinochet’s case helped persuade Chile’s Supreme
Court to exclude human-rights abuses from a sweeping amnesty law that
Pinochet himself signed in 1978, allowing hundreds of cases to be brought
against officials in the army or secret police. Rauff and Pinochet may have
enjoyed impunity, but some of those complicit in their crimes have died, or
will die, behind bars. ■

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Bringing back the Queen of Crime

How to write, according to the

bestselling novelist of all time
Agatha Christie teaches a new writing course—with help from AI
May 08, 2025 06:49 AM

EVERYONE HAS a book inside them, or so the saying goes. In this day
and age, those who want help coaxing the story out can receive instruction
online from some of the world’s most popular authors. Lee Child and
Harlan Coben, who have sold hundreds of millions of books between them,
teach thriller writing; Jojo Moyes offers tips on romance yarns. And now
Agatha Christie, the world’s bestselling writer of fiction, with more than
2bn copies sold, is instructing viewers in the art of the whodunnit—even
though she died in 1976.
Christie’s course is the result not of recently unearthed archival footage, but
artificial intelligence. BBC Maestro, an online education platform, brought
the idea to the Christie family, which still controls 36% of Agatha Christie
Ltd (AMC Networks, an entertainment giant, owns the rest). They
consented to bring the “Queen of Crime” back to life, to teach the
mysterious flair of her style.

A team of almost 100—including Christie scholars as well as AI specialists

—worked on the project. Vivien Keene, an actor, provided a stand-in for the
author; Christie’s face was mapped on top. Crucially, Ms Keene’s eerily
credible performance employs only Christie’s words: a tapestry of extracts
from her own writings, notebooks and interviews.

In this way, the creator of Hercule Poirot and Miss Marple shares handy
writing tips, such as the neatest ways to dispatch fictional victims. Firearms
bring ballistic complications. Be wary of poisons, as each works in a unique
way. Novice authors can “always rely on a dull blow to the head”.

Many of Christie’s writing rules concern playing fair. She practised

misdirection and laid “false clues” alongside true ones, but insisted that her
plots do not cheat or hide key evidence: “I never deceive my readers.” In
sections devoted to plot and setting, she explains how to plant key clues “in
plain sight” and plan events with detailed “maps and diagrams”. She
advises viewers to watch and listen to strangers on buses or in shops and to
spice up motives for murder with a love triangle.

Some of the most engaging sections come from “An Autobiography”,

published posthumously in 1977: Poirot’s origins among the Belgian
refugees who reached Devon during the first world war, or fond memories
of her charismatic, feckless brother Monty, who had “broken the laws of a
lot of countries” and provided the inspiration for many of Christie’s
“wayward young male figures”.

By relying on Christie’s own words, BBC Maestro hopes to avoid charges

of creepy pedagogical deepfakery. At the same time, it is that focus on
quotation which limits the course’s value as a creative-writing toolbox. The
woman born Agatha Miller in 1890 speaks from her own time and place.
She tells wannabe writers to use snowstorms to isolate murder scenes (as
they bring down telephone wires) and cites the clue-generating value of
railway timetables, ink stains and cut-up newspapers. These charming
details are irrelevant to modern scribblers.

Yet anachronism is not the course’s biggest flaw: it is that it lacks vitality.
Christie enjoyed a richer life than learners will glean from this prim
phantom: she was a wartime nurse (hence her deep knowledge of toxins),
thwarted opera singer, keen surfer and archaeological expert who joined her
second husband on digs in Iraq. Furthermore, her juiciest mysteries smash
crime-writing rules. The narrator does it; the detective does it; all the
suspects do it. Sometimes there’s no detective: in “The Hollow” (1946)
Christie regretted that Poirot appeared at all. With its working-class antihero
and gothic darkness, “Endless Night” (1967) shatters every Christie cliché.
This high-tech, retrofitted version of the author feels smaller and flatter than
the ingenious original. ■

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Back Story

The morals of “Sinners”, a fantasia

of vampires and the blues
Ryan Coogler’s hit film is a riff on the uses and abuses of genre
May 08, 2025 06:50 AM

A GENRE IS a shorthand way to describe a story or a song. But as well as a

category, it can be a judgment: a tool to elevate some kinds of art and
denigrate others. Often the judgment extends beyond the work to the people
who make or appreciate it, typecasting or marginalising them by disposition
(science fiction is for nerds) or by sex (romance novels are girly). Or by
race.

“Sinners”, a box-office smash that has conquered the internet, is a work of

multiplicity. Written and directed by Ryan Coogler, it has several endings—
sit through the credits if you want to catch them all—and two lead
characters, identical twins known as Smoke and Stack. Both are played by
Michael B. Jordan (pictured), who lights his double’s cigarette, fights him
and cradles him in his arms. Meanwhile the rollicking film slides between
numerous screen genres. Indeed the idea of genre, its uses and abuses, may
be its deepest theme.

Mr Coogler’s previous titles include “Creed”, a well-received “Rocky”

spin-off, and the hit “Black Panther” films. His latest unfolds over 24 hours
in 1932. Having fought in the first world war and hustled for Al Capone in
Chicago, Smoke and Stack come home to Clarksdale, in the Mississippi
Delta. The pair of dandyish toughs buy an old sawmill and hastily convert it
into a juke joint. The headline act on opening night is their cousin Sammie
(Miles Caton), an aspiring bluesman nicknamed Preacher Boy on account
of his godly father.

So far, so historical drama-ish. The story alludes to the toils and traumas of
the segregated South, such as sharecropping, chain gangs and lynching. The
landscape is bloodstained, figuratively and, on the barn’s floorboards,
literally. (The Ku Klux Klan features as well, in a sequence in which
“Sinners” morphs briefly into an action flick.)

Genre-wise, however, it is only warming up. The setting is a clue to a zany

swerve: Clarksdale is where, meeting the devil at a crossroads, the
bluesman Robert Johnson is said to have traded his soul for his talent. Here
the fiends are vampires, who besiege the juke joint and chomp the necks of
its patrons. “Sinners” thus joins recent books and productions—such as
“The Trees” by Percival Everett and the TV series “Lovecraft Country”—
that use the supernatural to suggest the grotesqueries of America’s racial
past. This is a strand of history that some politicians want to scrub from
curriculums, museums and ultimately memory. They are failing.

So “Sinners” is part gangsterish period drama, part vampire horror, with a

grenade’s-worth of action movie thrown in. But it is a musical too. A
bravura medley of cinema genres that are typically kept apart, it is also a
riff on the musical sort.

The film is a homage to the Delta blues, a monumental art form forged in
grinding adversity. In a bold fantasia in its middle stretch, Sammie’s
performance at the juke joint conjures up the spirits of the antecedents of
the blues, and of its progeny, among them west African dancers and a DJ.
Sammie’s music is a triumph, yet it is imperilled. His preacher father
disapproves of it. Then there are the vampires.

They are musicians themselves; their taste is Irish folk. But they covet the
blues. “I want your stories and I want your songs,” their leader growls. The
vampires are predatory and appropriative, just as other, predominantly
white styles of music, from rock’n’roll to country, preyed on the blues,
profiting from its rhythms and chords. “White folks, they like the blues just
fine,” a character says. “They just don’t like the people who make it.”
Succumbing to the bloodsuckers means compromise and loss.

Still, a bite from the vampires has an upside—a nuance that helps make Mr
Coogler’s wild movie a profound one. It isn’t just that you might live for
ever. In a film with a keen interest in who pays whom and how much, the
vampires have gold. Above all, they offer a seductive musical camaraderie;
join their coven, and you slip off the constraints of genre.

Genres are a way to see the world and respond to it. Each has a canon,
conventions and dignity—in “Sinners”, especially the blues. But genres are
also simplifications. After all, it may take more than one screen formula and
mood to evoke a person’s story, let alone a country’s. And they can be
divisive, splitting up art forms that are as much alike as distinct, and
splitting up people with them.

Stack’s old flame (Hailee Steinfeld) is a mixed-race woman named Mary

who passes as white. “What are you?” asks Sammie, trying to pin her down.
“I’m a human being,” Mary tells him. ■

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Making a splash

If you haven’t heard of webtoons,

you will soon
South Korean digital comics are a multi-billion-dollar industry. Hollywood
wants a share of the profits
May 09, 2025 03:33 AM

If looks could thrill

IT TAKES ONLY a few minutes and a few swipes. After reading the first
episode of “Solo Levelling”, a webtoon (ie, digital comic), you can be
confident of where the story is heading: Sung Jinwoo will not remain the
lowliest, most pathetic monster-hunter of all time. He will learn to vanquish
fearsome beasts. He will earn his peers’ respect. He will make enough to
pay for his mother’s medical care.
Readers do not seem to care that “Solo Levelling” offers a predictable
hero’s journey. The webtoon—with its dynamic fight scenes and
meticulously rendered landscapes—has become an internet sensation,
accruing more than 14bn views since its release in 2018. Last year it was
adapted into an animated series (pictured) which rocketed to the top of the
charts on Crunchyroll, a streaming platform. (A second season was released
earlier this year.) A mobile game based on the story, also released in 2024,
has made $150m. That is more than Oscar-winning films such as
“Conclave” have taken at the global box office.

Much like “The Masked Singer”, a reality TV show, webtoons originated in

South Korea and have gone global. What distinguishes webtoons from other
comics is that they are designed for a small screen. (You read one by
scrolling down, one frame at a time, rather than scanning multiple frames
across a page or spread.) The format dates back to the early 2000s, but has
exploded in popularity of late.

In 2024 the webtoons market was worth $9bn; it is projected to reach nearly
$100bn by 2033, according to IMARC, a consultancy. That figure is higher
than the projected market size of manga, Japan’s celebrated comic books.
Indeed, even Japanese readers are ditching their homegrown comics for the
digital alternative. The highest-grossing app in Japan in the first quarter of
this year was Line Manga, a confusingly named webtoon app.

The craze marries two phenomena: the popularity of comics as a genre and
people’s dependence on their smartphones for diversion. Webtoon, one
platform, releases more than 120,000 new episodes every day, meaning
even the most phone-addicted youngsters can find something to enjoy when
they pick up a device.

Webtoons are written to be enjoyed in short bursts—an episode can take as

little as five minutes to read—which suits anyone with a short attention
span. They are a product of Korean “snack culture”, which promotes the
consumption of media in morsels of 15 minutes or less, says Dal Yong Jin
of Simon Fraser University. Readers say that the single-panel format makes
for an “immersive” reading experience when compared with a traditional
comic book, as your eye is not being prematurely drawn to other frames on
the page.
Another reason for webtoons’ popularity is their paciness. Readers do not
have to worry about a slow-burning plot. Characters generally face one
moment of crisis after another: no sooner has Jinwoo survived one monster
raid than he is off on the next. And, much as soap operas use cliffhangers to
encourage viewers to tune in the next week, webtoon episodes rely on
suspense to prod readers to tap through to the next instalment.

This holds true for all genres, not just action and fantasy. Romance is
among the most popular webtoon categories. Users have been seduced by
such titles as “I’ve Fallen For The Empire’s Greatest Villainess”, a
smouldering yarn about a noble bachelor who is forced to marry. Despite its
obvious tropes, it has a 9.5-star rating and almost 3.5m views on Webtoon.

Even if many webtoons do not offer original conceits, lots offer sumptuous
imagery. Artists from across the world upload their work directly to
platforms, meaning no one has to hew to a particular aesthetic style. Some
webtoons evoke brooding American comics, but others are more
experimental. “Lore Olympus”, a retelling of the Greek myth of Hades and
Persephone, uses vivid colours and an airbrush effect. It has had 1.4bn
views.
Webtoons’ large, global followings have made them a valuable source of
intellectual property. Since 2020 more than ten stories have been adapted
into films and television shows. “Sweet Home” and “Itaewon Class” are
available to stream on Netflix, as is “Heartstopper”, a popular LGBT
romance based on Alice Oseman’s webtoon of the same name.

The truncated nature of webtoon episodes does not make them easy source
material, however, for there is often not enough story to fill a script. And
relentless twists make for hammy, monotonous viewing; people expect to
see introspection as well as action. Asa Suehira, head of content at
Crunchyroll, says that the producers of the “Solo Levelling” adaptation had
to add material about the characters’ psychology to make the story work as
TV.

The short supply

Nevertheless, more adaptations are on the way. Hollywood is snapping up

the rights to hit webtoons; 20 shows are in development. LuckyChap, one
of the production companies behind “Barbie”, the biggest movie of 2023, is
working on a live-action film of “Stagtown”, a webtoon about a town with a
dark secret. “Lore Olympus” is being turned into an animated series by the
Jim Henson Company (best known for “The Muppets”). Skybound, which
made “The Walking Dead”, a zombie franchise, has picked up “Freaking
Romance”, a supernatural love story. Having conquered smartphones,
webtoons are coming soon to another screen near you. ■

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Economic & financial indicators

Economic data, commodities and markets
Indicators ::

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Indicators

Economic data, commodities and

markets
May 08, 2025 06:50 AM
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Obituary
Alice Tan Ridley knew how to make New York’s subways
ring
Notes from underground :: The busker-turned-star died on March 25th, aged 72

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Notes from underground

Alice Tan Ridley knew how to

make New York’s subways ring
The busker-turned-star died on March 25th, aged 72
May 08, 2025 06:49 AM

ORPHEUS WAS surely the first of the underground buskers. Carrying only
his lyre he walked through Hades, soothing the lost souls, charming
Sisyphus in his rock-shoving and Tantalus in his food-cravings, until even
Pluto granted his requests. The acoustic may have been dodgy and the
listeners preoccupied, but the sheer power of music worked its wonders all
the same.

So it did in the New York City subway system, where for 30 years Alice
Tan Ridley sang gospel, R&B and Motown to the lost souls and tormented
beings emerging from or racing for the cars at Times Square, Grand Central
Station, Herald Square, 34th Street/Sixth Avenue, etc, etc, etc. Seeing their
glum, frowning faces, worrying about their jobs or their mortgages or just
the day ahead, she wanted to replace them with smiles. She did so well at it
that travellers sometimes seemed to forget their destination and stayed
listening to her, sweltering in the heat or as cold as the dickens, for hours on
end.

She took rather more than a lyre, though. Into the A Train south from
Harlem she heaved a blue valise containing a microphone, an amplifier, a
set-list of 100 songs, a folding chair, her flyers and a cushion. When
emptied out, the valise gratefully accepted quarters and dollar bills. Her
Metro card was lodged in her bra, to save fumbling for it in a bag. For most
of her career she didn’t care about her look too much; she wore her hair in
tiny braids that hung down if it rained, no make-up, simple black leggings,
light top or jacket. Since she was heavily proportioned, hot weather made
her shine with sweat. It all added to the drama of “I Will Survive” or “Proud
Mary” as she filled the halls and passageways with song.

Her usual time-slot, arranged through the Transportation Authority with

Music Under New York (MUNY) was 4.30pm, and she usually played a
three-hour set. That gave her a decent living. She worked most days, and on
a good one she could get $300: enough to pay the bills and feed her two
children, which was the main reason she was there. At first she busked for
an hour or so after making dinner, to supplement a teaching job. It brought
in so much more that she quit the school, for music’s sake. People thought
that if she was “down there”, she must be a beggar; but no, this was
absolutely a proper job. She was definitely not begging. Nor was she
homeless. She might be divorced and a single mother, but she kept a roof
over them all, for sure. Her husband Ibnou Sidibe might have taken another
woman as his wife for six years without her knowing, but she could move
up and on from that, even to the point of still considering him a friend.

The simple fact was that she loved both the subway and New York. On her
first visit, when she was 12, she was delighted to find it was not a bit like
Charles City, Georgia, let alone Lumpkin, Georgia, where she grew up, but
full of lights, cars and people. In music terms, it was like a cathedral. By
contrast Lumpkin then was a country place, once all cotton, now mostly
pine trees. Her father was a lumberjack, and the Ku Klux Klan stalked the
woods. But they were a notable family in spite of segregation, all eight
trained by their mother to be skilled at music and singing. They were
something in the world. Her brother Roger, who played guitar with her
early on, started a political party in New York; her sister Dorothy, who also
lived there, co-founded Ms magazine. And she, little Tan, seventh of the
eight, sang Aretha Franklin numbers at the top of her voice. Her mother
would tell her to go sing outside, but there she just amped up her voice
higher and louder still.

At the back of her mind the dream hovered: could she be a star? She was
earning her living by covering “I Will Always Love You” and “Billie Jean”
among the screeching trains, but with all those hundreds of people passing
by, wasn’t there one who might want to be her agent? She had proved
herself in 2002, when she won the pilot of “30 Seconds to Fame”, earning
$25,000. Yet nothing much changed until in 2009 Dvir Assouline, a young
Israeli, heard her and was astounded. He pushed her to do “America’s Got
Talent”; in 2010 she made the semifinals in Las Vegas. Her rendition of “At
Last” floored the jury, drove the audience wild and introduced her to the
nation. Sharon Osbourne asked her what everyone was thinking: what on
earth was she doing, hiding underground?

Sadly, she didn’t win. But fame had arrived, with tours, trips abroad and
shows in more than 20 states. Dressers squeezed her into wonderfully vivid
robes and draped her with jewellery, in full bloom to face the TV world.
Best of all, she had her own seven-piece band to sing with. She headlined at
B.B. King’s. All this attention was coming just after her daughter Gabourey
Sidibe had won an Oscar nomination for her performance in “Precious”.
They had always been close; now photo after photo showed them together,
thrilled to pieces for each other.

Yet after a while fame palled. She had come to it in her late 50s, so travel
wore her out. The band needed paying and the tour bus guzzled gas. As
time passed, she had fewer engagements, save her regular slots at Harlem’s
Cotton Club. She went on a crash diet, but it put her in hospital. In 2016 she
released a CD of her subway standards; it sold fairly well, though she
admitted she couldn’t push her sexuality in the modern way. It wasn’t her.
Besides, by then she was back to busking.

The subway had always been her saving grace. It still was. What she missed
up above was the closeness to her audience. She would hug them and sing
duets, encouraging the shy ones; she must have hugged hundreds of those
weary souls. Having them distant, somewhere beyond the lights, did not
feel right. No need for lights in the subway, nor any of that slick packaging
(except the great auburn wigs and a touch of that gold eye-shadow). She
just opened up her mouth and sang the emotion and meaning of the songs.
And to Herald Square, Times Square, 86th Street, 14th Street and New York
generally, she brought a loud peal of joy. ■

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