London’s rotten police

Turkey on the brink of dictatorship

Myth-busting young consumers
How to find an alien
JANUARY 21ST–27TH 2023

DISNEY’S SECOND CENTURY

And the future of mass entertainment

012
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012
012
012
 Contents The Economist January 21st 2023 5

The world this week Britain

7 A summary of political 21 Predators in the police
and business news 22 Holyrood v Westminster
Leaders 23 Pay­review bodies
9 The business of culture 23 The housing market
Disney’s second century 24 Horse­racing’s decline
10 Turkey 25 Strictness in schools
Dictatorship looms 26 Bagehot Money in politics
11 Health care
Flashing red Europe
11 South African railways 27 A Franco­German
Grinding to a halt anniversary
12 Marketing to the young 28 A crash near Kyiv
On the cover A myth­busting memo 28 Russia’s dead conscripts
Technology is turning the
29 Ukrainian loyalties
business of culture upside Letters
down: leader, page 9. As 29 The Czech presidency
14 On free speech, Starlink
Disney reaches 100, its terminals, America’s 30 Eastern Europe’s
business is on a rollercoaster towns, future populations, infrastructure
ride: briefing, page 17 Pope Benedict’s shoes, 31 Charlemagne Neutrality
food
London’s rotten police The case
United States
of a serving officer who is a serial Briefing
rapist is the latest in a line­up of 32 American incomes
17 Disney at 100 33 Joe Biden’s filing system
horrors, page 21
Thrills and spills
34 The distracted far right
Turkey on the brink of
Special report: 35 Cash for everyone
dictatorship Recep Tayyip
Turkey 36 Whacking schoolchildren
Erdogan could turn a flawed
democracy into a full­blown Out with the old 37 Lexington George Santos
autocracy: leader, page 10. After page 42
Turkey faces an election that Middle East & Africa
could decide its future, argues 38 Syria and Turkey
Piotr Zalewski, see our special consider rapprochement
report, after page 42. Mr
Erdogan is eyeing reconciliation 39 Israel’s Supreme Court
with a Syrian regime he once 40 A contentious waterway
sought to topple, page 38 40 Sudan’s resistance
41 The other Eskom
Myth­busting young
consumers A memo on how to 42 Self­financing schools
sell to the young: leader, page 12.
They are woke, broke and The Americas
complicated. Businesses should 43 China and Latin America
take note, page 57 44 Peru’s political chaos
45 Hunger in Brazil
How to find an alien Ideas for
spotting et are getting more and
more inventive, page 72 Bartleby Pointing fingers
is unhelpful, but bosses

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do it more than anyone,
page 60

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subscription means that you
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王
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Contents continues overleaf

012
 6 Contents The Economist January 21st 2023

Asia Finance & economics

46 Japan’s military muscle 63 Health­care chaos
47 Sinking towns in India 65 China’s re­opening
48 South Korea talks nukes 66 Buttonwood Venture­
48 Chinese cyborgs capital’s $300bn question
49 Jacinda Ardern resigns 67 Japan’s monetary policy
49 A murder in Afghanistan 67 Goldman’s struggles
50 Banyan The meaning of 68 Opulent offices
“Asia” 70 Free exchange Europe’s
inflation woes
China
51 China starts to shrink Science & technology
52 China, Africa and space 71 The new Moon race
53 Has covid­19 peaked? 72 The search for et
54 Chaguan On the train 74 Dopamine and ai
with migrant workers

International
55 The promise and peril of Culture
open intelligence 75 Senegalese­French film
76 Pegasus spyware
77 Case studies in failure
78 A hymn to idiosyncrasy
78 Janet Malcolm’s memoir
79 Johnson Bible translation
Business
57 How the young shop Economic & financial indicators
59 Electric cars in Mexico 80 Statistics on 42 economies
59 China’s techlash eases
60 Bartleby Blame culture Graphic detail
61 India’s struggling startups 81 The causes of the Industrial Revolution
62 Schumpeter tsmc’s chip
diplomacy Obituary

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82 Adolfo Kaminsky, forger of identities

Volume 446 Number 9330

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012
 The world this week Politics The Economist January 21st 2023 7

ing of government buildings doms and protections. It has Iran executed Alireza Akbari,
by his supporters this month. even sought to cover the faces a British­Iranian convicted by
Luiz Inácio Lula da Silva, the of shop mannequins (which is the regime of spying. Mr
new president, dismissed 40 a compromise: it had wanted Akbari, who was arrested in
soldiers who were stationed to chop their heads off). 2019, was previously the
outside the presidential palace deputy Iranian defence
when the protests took place. A plane crash near the tourist minister. He said he had been
city of Pokhara in Nepal killed tortured and forced to confess
all 72 people on board. It was to crimes that he did
A constitutional clash the country’s worst such not commit.
The British government incident in 30 years.
blocked the Scottish Parlia­ Jihadists in Burkina Faso
Russia intensified its missile ment’s recently passed kidnapped 50 women and
attacks on cities in Ukraine, gender­recognition bill. It is girls foraging for food near a
part of its strategy to bomb the the first time a Scottish law has town that has been blockaded
population into submission. been blocked since devolution by the insurgents. Thousands
One rocket hit a residential in 1999. The Westminster of people have been killed and
block in Dnipro, killing at least government said allowing millions forced from their
40 people, the deadliest single someone in Scotland to change homes and fields since jiha­
loss of civilian lives in Russia’s their gender more easily would dists began crossing the bor­
latest campaign. It has mostly have a negative impact on der from Mali in 2015.
targeted energy infrastructure, nationwide “equalities protec­
causing widespread loss of tions”. Nicola Sturgeon, Scot­ Senior officials from America
power in the depth of winter. land’s first minister, promised and Russia will visit Africa in
to pursue the issue in the In a surprise announcement a growing struggle for influ­
Ukraine’s interior minister courts. Separately, the British Jacinda Ardern said she would ence on the continent. Janet
was killed in a helicopter crash government reversed course step down as New Zealand’s Yellen, America’s treasury
in a suburb of Kyiv. The heli­ and said that a new law to ban prime minister. Ms Ardern led secretary, is to visit Senegal,
copter came down in dense fog conversion therapy would now her country through the pan­ South Africa and Zambia in a
near a nursery, killing at least include trans people. demic—in often controversial bid to counter the economic
14 people in total. The interior ways, such as closing the and political influence of
ministry is responsible for China’s population fell for the border for two years. Her ap­ China, a big financier of infra­
domestic security and has first time since the 1960s. The proval rating has slumped structure projects. Sergei
helped gather evidence on government has long struggled lately, and she says she no Lavrov, Russia’s foreign min­
Russian war crimes. to convince people to have longer has the energy to stay in ister, will visit South Africa.
more children. A shrinking office. Ms Ardern had faced
Christine Lambrecht resigned labour force and ageing pop­ elections in October.
as Germany’s defence ulation will increase pressure The paper trail
minister. She had lost credibil­ on the economy and health In the Philippines Maria Ressa More classified documents
ity after a number of gaffes, system. It is also a blow to and her news organisation, were found at the private
such as offering to supply national pride: India is poised Rappler, were cleared of tax home of Joe Biden. The Justice
Ukraine with helmets when it to pass China as the world’s evasion by a court in Manila. Department appointed a
needs heavy weapons. The new most populous country. Ms Ressa, a joint winner of the special counsel to look into
defence minister is Boris Nobel peace prize in 2021, Mr Biden’s handling of the
Pistorius. His appointment China reported 59,938 covid­ provoked the ire of Rodrigo material. Republicans
came as Germany’s allies related deaths between Duterte, the country’s previous demanded the release of
pressed the government to December 8th and January president, when she investi­ visitor logs to the home (there
send Leopard tanks to Ukraine, 12th. It was the first time the gated his bloody war on drugs. are none), pointing out that
a move it has resisted. government had released such Democrats had lodged a simi­
detailed figures since lifting its The Supreme Court in Israel lar request when Donald
Italian police arrested Matteo “zero­covid” policy last month. blocked the appointment of Trump’s home was searched
Messina Denaro, Italy’s most­ The real toll is much higher. Aryeh Deri as interior minister by the FBI last August.
wanted Mafia figure, after 30 The official statistics refer only and vice­prime minister be­
years on the run. He was to deaths recorded at medical cause of his conviction for tax Eric Adams, the Democratic
caught in Palermo attending a facilities and doctors have fraud. The ruling sets Binya­ mayor of New York, visited
clinic under a false name. The been discouraged from citing min Netanyahu, the prime America’s border with Mexico
arrest was hailed as the culmi­ covid on death certificates. minister, who himself faces to declare that there was “no
nation of a three­decade­old charges of bribery and fraud, more room” in his city for any
strategy to weaken the grip of Mursal Nabizada, a former MP on a collision path with the more illegal migrants, and to
Cosa Nostra on Sicily. in Afghanistan, was shot dead court. His government has criticise the Biden adminis­
at her home in Kabul. Ms proposals for reforming the tration’s handling of migra­
A Brazilian Supreme Court Nabizada, a champion of wom­ court that would limit its tion. New York has received
judge approved a request from en’s rights, had decided to stay powers and, say his oppo­ tens of thousands of mi­
prosecutors to include Jair in the country after the Taliban nents, undermine Israeli grants, in part because some
Bolsonaro, Brazil’s former regained power in 2021. Step by democracy. More than 80,000 Republican states have made
right­wing president, in an step, the regime has been protesters rallied in Tel Aviv a point of busing new arrivals
investigation into the storm­ dismantling women’s free­ against the plan. to areas run by Democrats.

012
 8
The world this week Business The Economist January 21st 2023

Markets were left dumbfound­ Didi Global said that China’s The “reopening” of China’s Microsoft decided to cut
ed by the Bank of Japan’s network­security office had economy after zero­covid will 10,000 jobs, around 5% of its
decision to stick with its policy given it permission to sign up affect a number of industries workforce, the latest in a
of controlling the yield on new users to its ride­hailing this year. The International round of lay­offs by tech com­
Japanese long­term govern­ service, 18 months after people Energy Agency reckons that oil panies grappling with a post­
ment bonds. Investors were were banned from download­ demand will hit a record pandemic slowdown in sales.
expecting the central bank to ing its app amid a crackdown 101.7m barrels a day, with
at least signal that it would on China’s tech giants. Didi fell around half the gain coming
change its monetary policy, foul of the authorities when it from China, even though the Picking winners and losers
after it had raised the cap on floated shares in New York in speed of its reopening is un­ After months of trying to avoid
fluctuations (above or below a 2021. It eventually delisted its certain. The return of Chinese bankruptcy, Britishvolt called
target of zero) in ten­year bond stock. The resumption of tourists was cited as a factor in the administrators. The
yields in December. Since then normal service indicates that by the World Tourism Organi­ battery­making startup had
it has spent ¥34trn ($265bn) the government now sees tech sation when it forecast that been championed by the Brit­
purchasing bonds to keep companies as engines of international holidaymaking ish government three years
yields low. The yen fell by 2% growth again, rather than as could reach 80­95% of ago as part of its “green indus­
against the dollar after the potential political threats. pre­pandemic levels. trial revolution”. On the same
announcement. day that it collapsed the busi­
Underlining the surge in de­ ness committee in the House
Britain’s annual inflation rate China’s GDP mand for air travel after almost of Commons launched an
% increase on a year earlier
dipped only slightly in Decem­ three years of covid restric­ inquiry into the viability of
8
ber, to 10.5%. The government tions, Ryanair, Europe’s big­ making batteries in Britain for
Forecast 6
has promised to halve the rate gest airline, took 4.95m book­ electric cars, noting a “series of
this year. Food prices rose by 4 ings in a week, its most ever. setbacks” in the industry.
16.9% over 12 months, the 2
And United Airlines said its
fastest pace in decades. In profit in the fourth quarter of The trial got under way of Elon
0
America the inflation rate fell 2022 was almost a third higher Musk for securities fraud in
2018 19 20 21 22 23 24
to 6.5% in December. In the than in the same period of relation to a misleading tweet
Sources: National Bureau of
euro zone it dropped to 9.2%. Statistics; World Bank
2019, before the pandemic. It he posted in 2018 that suggest­
expects sales to be 50% higher ed he was taking Tesla private.
China’s economy grew by just this quarter than in the same A group of investors are suing
When there’s little to deal in 3% in 2022, the weakest expan­ three months last year. him, claiming they lost bil­
Goldman Sachs reported a sion since 1976 apart from lions in the market reaction to
slump in profit for the fourth 2020. Last year brought more German GDP grew by 1.9% in the tweet. Mr Musk may well
quarter, caused in part by a extensive lockdowns in China, 2022, despite the energy crisis settle before the trial reaches
slowdown in investment disrupting factories and con­ and knock­on effects of the its conclusion. Jury candidates
banking. The bank is shedding sumer spending. China’s ex­ war in Ukraine. Germany’s displaying hostility towards
6.5% of its staff, including ports in December fell by 9.9% economy ministry thinks a Mr Musk, including one who
investment bankers, as part of year­on­year in dollar terms, slowdown in the coming described him as a “delusional
a cost­cutting drive. Still, the sharpest decline since the months will be “milder and narcissist”, were weeded out
Goldman’s net profit for the start of the pandemic. shorter than expected”. from the final selection.
whole of 2022 came in at
$11.3bn. Other banks have
reported similar tales. Morgan
Stanley blamed its fall in
revenue from investment
banking on a “challenging
market environment”.

Some of Brazil’s biggest banks,

including BTG Pactual and
Santander Brasil, were left
exposed to debt from Ameri­
canas, a giant retail chain that
has reported accounting
“inconsistencies”, leading to
the resignation of its chief
executive and chief financial
officer. Facing bankruptcy,
Americanas has been given a
month’s protection from its
creditors by the courts. The
news of its potential collapse
caused its stock to plunge by
77% in a day, the biggest fall for
any company in the Ibovespa
index for at least two decades.

012
 Leaders 9

Disney’s second century

Technology is turning the business of culture upside down

“W hy do we have to grow up?” Walt Disney once won­

dered. As it launches its centenary celebrations on Janu­
ary 27th, the Walt Disney Company has sustained its appeal to
used for streaming. Silicon Valley is of a different scale from Tin­
seltown (Amazon’s growing advertising business is already
three times bigger than Disney’s) and its moguls have no need to
the young and young­at­heart. This year Hollywood’s biggest make money from streaming, which they see as an add­on to
studio will invest more in original content than any other firm. their main business. Hollywood initially wrote off the nerds. But
It dominates the global box office, with four of last year’s ten big­ the nerds have enough money to take creative risks. Last year
gest hits, and has more streaming subscriptions than anyone Apple won the best­picture Oscar with “CODA”, a comedy­drama
else. Its intellectual property (IP) is turned into merchandise partly in sign language, less than three years after it entered the
ranging from lunchboxes to lightsabers, and exploited in theme film business. The more fine content these new producers make
parks that are churning out healthy profits even as covid­19 lin­ and sell below cost, the greater the risk that older studios will fall
gers. More than just a business, Disney is perhaps the most suc­ from the top tier of media into the perilous middle.
cessful culture factory the world has ever known. At the same time, new technology is allowing those lower
So the upheaval rocking the company today has relevance far down the “long tail” a better chance of reaching the profitable
beyond its empire (see Briefing). Uncertainty about the future top. Inventions like game engines, which help with the creation
profitability of Disney’s enormous entertainment portfolio has of virtual sets, are lowering barriers to entry. Generative artifi­
caused a rollercoaster ride in its share price. It threw out its chief cial intelligence, which can already make rudimentary video,
executive in November and will soon replace its chairman. It may eventually lower them further. The first beneficiaries have
also faces a rebellion from an activist investment firm that been non­American film studios, which until recently struggled
wants a board seat in what could turn into the biggest face­off to nail first­class special effects. No longer. Two of the world’s
since Michael Eisner, a previous CEO, was forced out in 2005. highest­grossing films last year were Chinese—and when covid
Disney’s trials are not just a boardroom drama. Similar crises are ebbs in China, expect that number to rise. China has yet to con­
unfolding at other leading culture factories, from Warner Bros to vert foreign audiences to hits like “Wolf Warrior 2” (tagline:
Netflix. The reason is a technological revolution that is turning “Anyone who offends China, wherever they are, must die”). But
Hollywood upside down. don’t bet that this will always be the case. China
The continuing pre­eminence of a centenar­ already has a globally successful social­media
ian like Disney has confounded many predic­ app in TikTok and produces video games that
tions. Since the days of “Steamboat Willie”, are international hits, including Tencent’s
Mickey Mouse’s first outing in 1928, there has “Honour of Kings”, which is the world’s highest­
been an explosion in the supply of video enter­ earning mobile game.
tainment. Television, cable, home video and Perhaps the most dramatic way technology
then the internet have offered increasing could disrupt the culture business is by creat­
amounts of choice. Anyone with a phone can ing new categories of entertainment. Young
record video and make it accessible to billions of people, free of adults in rich countries already devote more time to gaming
charge. More content is uploaded to YouTube every hour than than to broadcast television. Hollywood has been slow to catch
Disney+ holds in its entire streaming catalogue. on, but its Silicon Valley rivals are snapping up gaming IP. Mi­
Many predicted that this surge of niche content would bring crosoft’s proposed acquisition of Activision­Blizzard, whose
down mainstream hit­makers. They were mostly wrong. Infinite games include “Call of Duty” and “Candy Crush”, is worth nearly
choice in entertainment has ruined the companies which pro­ ten times what Amazon paid for Metro­Goldwyn­Mayer, home
duced middling content that people watched because there was of James Bond and Rocky Balboa. Movies based on games are be­
nothing else on—witness the collapse in broadcast­television coming as popular as games based on movies. A series based on
ratings. But those at the very top of the business have thrived. “The Last of Us”, a post­apocalyptic game, seems to be a critical
When anyone can watch anything, people flock to the best. Glo­ success. Sonic the Hedgehog was among last year’s biggest films
bal streamers like Netflix and Amazon have more than 200m di­ and Mario is likely to be among this year’s. Nintendo is opening
rect subscribers, once an unimaginable number. a new Mario theme park next month—in Hollywood, no less.
Those who have fared best at a shrinking box office are the
owners of IP that is already popular. As people visit cinemas less The mouse and the long tail
often and competition intensifies, studios have pumped money The great creative factories of Hollywood will have to adapt if
into films people will turn out to see even when they go only they want to survive. Another successful era is not beyond their
three or four times a year. America’s ten biggest films last year reach. Disney’s century has been one of endless reinvention, in
were all sequels or parts of a franchise; Disney’s upcoming slate business terms as well as artistic ones, as the company has
includes an 80­year­old Harrison Ford returning for a fifth out­ moved its output from projectors to cables to cassettes and now
ing as Indiana Jones. It has not been a golden age for cinema, but bytes. It will probably continue to innovate. Still, there are alrea­
for those at the top it has been a profitable one. dy signs that much of the coming century’s popular culture will
Now technology is shaking things up again. Online distribu­ be dreamt up in places other than Hollywood. For audiences tir­
tion has enticed tech firms that make the hardware and software ing of sequels, that may be a welcome twist. n

012
 10 Leaders The Economist January 21st 2023

Politics

Turkey’s looming dictatorship

Under Recep Tayyip Erdogan, a flawed democracy could tip into full­blown autocracy

T URKEY HAS NATO’s second­biggest armed forces. It plays a

crucial role in a turbulent neighbourhood, especially in war­
scorched Syria. It exerts growing influence in the western Bal­
the presidency in four months, if the opposition unites behind
its best candidate and the election is more or less clean.
That is a big if. Mr Erdogan is determined to tilt an already­
kans, in the eastern Mediterranean and more recently in Africa. uneven field even more in his favour. The mayor of Istanbul, Ek­
Above all, it is important in the Black Sea and in Russia’s war in rem Imamoglu, perhaps Mr Erdogan’s most plausible rival, was
Ukraine; last year it helped broker a deal to let more Ukrainian recently sentenced to prison and banned from politics, for call­
grain be shipped to a hungry world. ing election officials who annulled his first mayoral victory “idi­
So outsiders should pay attention to Turkey’s presidential ots”. The government is asking the constitutional court to shut
and parliamentary elections, which Recep Tayyip Erdogan sug­ down the People’s Democratic Party (HDP), the largest Kurdish
gested this week will be held on May 14th. All the more so since, party, many of whose leaders languish in jail. The court has fro­
under its increasingly erratic president, the country is on the zen the HDP’s bank accounts. The opposition will need the sup­
brink of disaster. Mr Erdogan’s behaviour as the election ap­ port of Kurdish voters if it is to oust the president.
proaches could push what is today a deeply flawed democracy Mr Erdogan once likened democracy to a tram journey: when
over the edge into a full­blown dictatorship. you reach your destination, you get off. Under him, elections
When he first became prime minister in March 2003, Mr Er­ have seldom been completely fair, but they have been broadly
dogan held out much promise for Turkey. Secularists feared that free, with large numbers of voters taking part. The worry this
he had an excessively Islamist agenda, but he and his Justice and time is that, with Mr Erdogan fearing defeat, he alights and en­
Development (AK) party have not got far in pursuing it. In its ear­ sures that the elections are neither fair nor free.
ly years Mr Erdogan’s government gave new economic and polit­ Western leaders need to speak out. America and the EU have
ical stability to a country that had for decades lacked either. He too often held back from criticising Mr Erdogan for fear of alien­
defanged the generals who had too often meddled in politics and ating a pivotal if troublesome ally. No one wants a country as im­
mounted coups. He brought in reforms to boost the economy. portant as Turkey to go completely rogue. All are aware that a re­
He even put out peace­feelers to the Kurds, Turkey’s biggest eth­ sentful, isolated Turkish president could do great mischief. He
nic minority, who had long suffered persecu­ could foment fiercer territorial quarrels with
tion at the hands of the army. In 2005 he de­ Greece and with Cyprus. He could create further
servedly secured a prize that had eluded all his confusion and strife in Syria. He could allow
predecessors: the formal opening of talks about the 5m migrants and refugees in Turkey to set
Turkey one day joining the European Union. sail for southern Europe, something many
However, the longer Mr Erdogan has been in would try if they could. And he could go beyond
power, the more autocratic he has grown. After his current refusal to take sides in Ukraine, de­
11 years as prime minister he was elected presi­ spite being a NATO member, by continuing to
dent, and set about turning that previously block NATO accession for Finland and Sweden.
weak post into a dominant one. After an attempted coup in 2016 Yet Turkey also needs the West, not least to restore some sta­
he had tens of thousands of people purged from their jobs or ar­ bility to its battered economy. Although its membership talks
rested, often for the merest whisper of a connection to the reli­ may be stuck, it still hopes for an upgraded and expanded cus­
gious group blamed for the plot, such as having attended one of toms union with the EU that would boost growth. It needs to find
its schools as a child. a way to revive foreign direct investment, which has tumbled in
As our special report in this issue explains, he has steadily co­ response to political and economic uncertainty. Turkey relies on
opted institutions and eroded checks and balances. He has Western technology to improve its low productivity. And it
turned much of the media into a tool of state propaganda. He wants Western weapons, notably American fighter aircraft. It
has, in effect, censored the internet. He has thrown many critics, would be unable to secure any of these things if Mr Erdogan were
including opposition leaders, into jail. He has sidelined rivals to turn his back on democracy and join the dictators’ club. All
within the AK party. He has suborned the judiciary, using the this gives him a strong incentive to keep in with the West.
courts to harass opponents.
Approaching his third decade in power, he sits in a vast pal­ Time for bluntness from Biden
ace snapping orders at courtiers too frightened to tell him when And that should give Western leaders bargaining power. Mr Er­
he is wrong. His increasingly eccentric beliefs swiftly become dogan is a bully who sees timidity as a reason to press his advan­
public policy. Thus, he has imposed on a previously indepen­ tage and toughness as an incentive to mend fences—as he has
dent central bank a monetary theory that is flatly bonkers. He recently with many of his Middle Eastern neighbours (see Mid­
thinks the cure for inflation is to make money cheaper. This is dle East & Africa section). Western leaders should therefore
the main reason why Turkish inflation is 64%. Living standards show Mr Erdogan how much they care about his behaviour, by
are shrivelling; tempers are fraying. speaking out before the election, privately and publicly, against
Voters, especially in cities, are pushing back. Three years ago the prospective bans on Mr Imamoglu and the HDP. It is not too
Mr Erdogan’s party lost the mayoral elections in the three biggest late to pull Mr Erdogan back from the brink. But the West needs
cities of Ankara, Istanbul and Izmir. Polls suggest he could lose to start warning him off now. n

012
 The Economist January 21st 2023 Leaders 11

Health care

Flashing red
Deaths are soaring as health­care systems buckle across the rich world. What can be done?

I n 1516 thomas more described the ideal health­care system. held it constant, were already on a path to worse services.
“These hospitals are well supplied with all types of medical Yet squeezed budgets do not fully explain the disarray. Even
equipment and the nurses are sympathetic,” the philosopher in places with ample funding, health care is struggling with the
wrote in “Utopia”. “Though nobody’s forced to go there, practi­ unprecedented effects of the pandemic. On the demand side, co­
cally everyone would rather be ill in hospitals than at home.” vid has left behind sicker populations. After years of avoiding
Five centuries later, those who prefer to be ill in hospital flu, many people are now getting it. The world is also discover­
would struggle to make it past the lobby. People often lament the ing some of the costs of lockdowns. In 2020­21 many hospitals
shortcomings of their own country’s health system. They tend to and family doctors cancelled appointments for non­covid con­
ignore the extent to which pressure is visible across the rich ditions. People who postponed treatment for other maladies are
world (see Finance & economics section). Britain’s National presenting with later­stage illnesses that need more expensive
Health Service (nhs) is in a winter crisis like none before, with treatment; they also have poorer chances of recovery.
people who have heart attacks waiting 90 minutes for an ambu­ Covid hits the supply side, too. Many hospitals continue to
lance. In Canada things are so bad that a children’s hospital isolate covid­positive patients and maintain strict cleaning re­
called in the Red Cross. Even in Switzerland, gimes. This eats up time and resources. In addi­
whose health care is often admired, the system OECD, health-care spending tion, staff are burned out. The result seems to
is under enormous stress. Estimated, % of GDP have been a decline in productivity. Excluding
10.0
Worse care is contributing to huge numbers 9.5
primary care, the nhs has 13% more doctors and
of excess deaths. Mortality in Europe is about 9.0 10% more nurses than in 2019, yet it is treating
10% higher than expected in a normal year. In 8.5 fewer patients from its waiting list.
mid­December French and German deaths were What can be done? More money would make
a quarter higher. The chaos is also damaging in 2015 16 17 18 19 20 21 little immediate difference. It takes time to hire
ways that cannot be measured. It is distressing staff and vacancies are already high. But it may
to think that one day you will need to call 911, 112 or 999—and that be possible to boost productivity by winding down anti­covid
no one will come to help. measures that are unnecessary in mostly vaccinated popula­
Spending on health care is at an all­time high in the rich tions. Beyond this year, spare capacity is needed. Governments
world. The trouble is that “all­time high” does not necessarily that cannot find ways to boost productivity will have no choice
mean “enough”. Ageing populations increase demand. Health­ but to increase funding and therefore raise taxes. Reforms that
care systems compete for staff with other parts of the economy, were already desirable, such as streamlining processes or intro­
so doctors’ and nurses’ wages must keep pace with prevailing ducing more competition, may come to be essential.
rates of pay. Costs rise even if health­care productivity stagnates. Governments thinking about the next pandemic should also
The unforgiving logic of this “cost disease” means that in ageing note the long­term consequences of lockdowns. There is a pain­
societies health­care spending must usually grow as a share of ful trade­off between suppressing disease in the short term and
the economy just to maintain a given level of provision. Coun­ avoiding bottled­up problems in the future. As More counselled,
tries, such as Britain and Italy, that in the years before the co­ “it’s a pretty poor doctor who cannot cure one disease without
vid­19 pandemic cut health­care spending as a share of gdp, or giving you another.” n

Africa’s state­owned firms

Arresting development
South Africa’s collapsing railway firm illustrates how state overreach makes Africa poorer

T he global financial crisis of 2007­09 showed that huge

bombs had been placed in the rich world’s banking systems
and capital markets. If one blew up, as Lehman Brothers did, it
gdp growth by about 1.3 percentage points in 2019. The effect is
now surely worse: there were roughly four times as many black­
outs in the first nine months of 2022 as in all of 2019.
could send a blast wave through the rest of the economy. Another South African firm stumbling towards collapse may
The companies that run power stations, railways and ports be even more systemically important, since it affects not just its
can be every bit as systemically important as banks. Eskom, home country but the wider region. Transnet, which runs the
South Africa’s state­owned electricity firm, was once among the railways, ports and pipelines that connect sub­Saharan Africa’s
world’s largest utilities by installed capacity. In recent decades it most industrial economy with the outside world, is in deep trou­
has been hollowed out by graft, cronyism and mismanagement. ble (see Middle East & Africa section). Like Eskom, it was badly
Daily blackouts now close South African factories, offices and managed by hacks “deployed” by the ruling party and then pil­
shops. The government reckons this “load­shedding” trimmed laged through corrupt contracts, many signed during the era of

012
 12 Leaders The Economist January 21st 2023

“state capture” under Jacob Zuma, a former president. Now, rest of Africa. Many governments still have Marxist leanings or
weighed down by debt and with hundreds of broken locomo­ see in China a model of state­led development.
tives, it cannot keep all of its freight trains running. Yet often politicians want firms to be state­owned so they can
Last year, even as coal prices were booming, South Africa’s give jobs to pals or enrich themselves. These firms tend to arrest
coal exports slumped to their lowest level since 1993. This is be­ development, not accelerate it. A recent IMF study found that
cause Transnet’s main coal line, which ought to carry 81m tonnes fully 40% of state­owned firms in sub­Saharan Africa were un­
to ports, carried just 54m. This represented lost exports worth at profitable and that their losses could destabilise local banking
least 80bn rand ($4.7bn). Iron­ore exports, which also go by systems, hurting the flow of credit to the rest of the economy.
train, slumped to their lowest since 2012, while volumes of gen­ Another IMF note in 2019 found that they account for 20% of
eral freight sank to levels last seen during the second world war, public debt and their annual losses were equal to 1% of gdp.
reckons Jan Havenga of Stellenbosch University. Add to these
the extra costs from inefficiency of going by road, and the total Freight expectations
hit comes to around 400bn rand, or 6% of gdp. Given that Africa is still poor and underindustrialised, it is
The poor performance of just these two firms goes a long way tempting for governments to cook up grand strategies filled with
towards explaining why South Africa’s gdp is likely to grow by a buzzwords like “the fourth industrial revolution”. But industry
feeble 1.6% over the next three years, less than half the pace of cannot thrive if the lights are off and the trains do not run. South
sub­Saharan Africa. That ought to prompt some introspection Africa’s utilities need private investment and effective manage­
by South Africa’s government, which has long insisted it needs ment, which will not be forthcoming so long as they are the play­
to own big firms to invest, create jobs and reduce racial inequal­ things of a dysfunctional ruling party. Transnet’s woes, like Es­
ity. This idea of a “developmental state” is also popular in the kom’s, should serve as a cautionary tale. n

Consumers

Don’t try to dig what we all say

A myth-busting memo on how to sell to the young

D ear boss—You have always tried to attract young and

youngish consumers, and our consultants have always
come up with new ways to label them. I don’t need to remind you
member those online­only influencer­backed beauty brands
like Glossier, which took the world by storm during the pandem­
ic? It turns out that they struggle to get repeat business and have
that “millennials” and, increasingly, “Gen Z” are our most im­ had to pair up with physical retailers lumbered with bricks and
portant markets (see Business section). Together they make up a mortar. Remember that most Americans still buy their cosmet­
majority of the world’s population and a third of America’s. The ics at Walmart. If we want to succeed, we need to offer the best of
trouble is that coming up with rules to define a swathe of hu­ both physical and virtual worlds.
manity is more art than science. It is liable to become an exercise And don’t assume that all young customers are DiAngelo­
in applying stereotypes; not every youngster is sipping kombu­ reading social justice warriors. Four­fifths of America’s Gen Z
cha in a Brooklyn warehouse. Luckily you have me, and I’m here consider a brand’s sustainability and social impact before check­
to tell you that much of what is written about marketing to to­ out, according to one survey. But considering something is not
day’s most prized consumers is a myth. the same as surrendering to it. Gen Z cares less for consumer
Start with the idea that, glued to smart­ boycotts than its virtue­signalling parents. It is
phones, Gen Z barely notices the physical world chiefly youngsters who buy cheap “fast­fash­
and slavishly follows the latest hype from Insta­ ion” outfits to wear once and then send to land­
gram or TikTok. It’s true that the days of market­ fill. And plenty of chains do well among young
ing chiefly through television, newspapers and people without being woke. Just look at Chick­
magazines are long gone. Yet social media has fil­A, which is America’s most popular restau­
not just changed the ways in which people dis­ rant among teenagers, according to another
cover brands; it has undermined the power of survey, despite its chairman’s past opposition
marketing as a whole. Such is the ease with to gay marriage and its donations to socially
which digital natives can fact­check our dodgy marketing conservative causes.
claims and swipe left on our ads that it is getting harder to build What really matters is avoiding hypocrisy. Insincerity is easi­
brand loyalty. Online, talk is cheap and prices are readily ly exposed online, where everyone loves a takedown. Remember
Googled. Surveys suggest that young Americans are among the the backlash against Boohoo, a fast­fashion firm, when it ap­
most price­sensitive food shoppers. It doesn’t help that they pointed Kourtney Kardashian, a jet­setting socialite, as a “sus­
have accumulated less wealth than earlier generations had by tainability ambassador”? Don’t post pictures from your private
the same age. plane, obviously, but don’t pretend you’re Greta Thunberg, ei­
There is a similar temptation to think that physical shops no ther. Avoid platitudes, commit only to causes you can tangibly
longer matter. Young consumers love their Amazon deliveries. It support and be frank when you are putting profits first. Nobody
makes sense for our company to make sales via social media and is perfect. To pretend otherwise is so 2013. We are people just as
ship directly to customers’ homes. But what works best is the our customers are and people contain multitudes. Isn’t the story
seamless combination of the digital and physical worlds. Re­ of your life that yesterday’s hippies are tomorrow’s suits? n

012
012
 14
Letters The Economist January 21st 2023

majority of Starlinks (almost future, miserable overpopulat­ they are spared the hardships
Self-censoring academics 20,000 units) were sent and ed world, his “repugnant of life yet not deprived of
I was pleased to see Bagehot paid for by Polish government conclusion”. Homo sapiens potential positive experiences
mention the Free Speech institutions. We strongly formed in Africa, a continent because there is no one to
Union’s support for Joe Kelly believe that the terminals, untroubled by the advances experience the deprivation.
(December 10th), who is chal­ which cost only a fraction of a and retreats of glaciers that The possible person in ques­
lenging his criminal convic­ howitzer shell, are an extreme­ would have got in the way of tion is a purely theoretical
tion for posting a “grossly ly cost­effective way to support human evolution. Various concept. There are therefore
offensive” tweet. We agree that Ukraine in its brave fight species of Homo spread out existential as well as social and
it should not be a criminal act against the Russian invaders. across the Sahara and Middle economic benefits to reducing
to be “grossly offensive” Janusz Cieszynski East. With a different arrange­ the number of people brought
online. The law is vague, Secretary of state, government ment of continents this would into the world.
malleable and open to abuse. plenipotentiary for never have happened. Each of Chris Gilmore
A government that says it is cyber­security these waves was different Toronto
committed to free speech Warsaw culturally, and the early adapt­
should scrap this offence. ability of H. sapiens, honed in
But, I disagree with Bage­ the deserts of the Middle East, The papal shoes
hot’s analysis of the govern­ Shaping America’s towns helped their later colonisation Your recent obituary of Pope
ment’s “cartoonish” focus on Your article on city planning of the rest of Asia and Europe. Benedict XVI made a common
free speech in British universi­ referred to the land ordinance But what if the rising seas error regarding his “fashion­
ties. A recent survey by Tena of 1785 and the grid of property had flooded the Suez isthmus conscious almost to foppish­
Prelec, an academic, found lines created to promote west­ preventing migration? What if ness” choice of dress (“Joy and
that 57% of social­science ward expansion in America one of the glacial periods had severity”, January 7th). On the
faculty members think there is (“Going off grid”, December been long and cold enough to foppishness I agree, but the
a risk to freedom of expression 24th). The Rectangular Survey hold up evolution? Human and “red Gucci slippers” made
on campus. A separate study System replaced traditional geological history are full of famous by the deceased pontiff
from the University and Col­ property markers, such as “what if?” moments. It’s even were actually the product of a
lege Union found that 35% of rocks, trees and buildings, possible that we are living in pair of cobblers working in the
British academics in general which could change over time. some previous visionary’s city, Adriano Stefanelli of Italy
self­censor. These statistics are Tested in eastern Ohio, the repugnant conclusion right and Antonio Arellano of Peru.
not surprising for us. system created vertical rows of now, experiencing Parfit’s Joseph Doyle
We have come to the aid of townships, divided into fearful muzak and potatoes. Saint Paul, Minnesota
hundreds of students and “sections”. These were a mile We just don’t know it.
academics who have been square, or 640 acres, and could Professor Mike Stephenson
dragged through long and be subdivided into half­, quar­ Honorary research associate Soul food
distressing internal investiga­ ter­ and quarter­of­quarter­ British Geological Survey Reading about how food
tive and disciplinary proce­ sections, the last of which was Nottingham affects the mind was an eye­
dures, merely for having 40 acres; hence the expression opener indeed (“Use your loaf”,
expressed unorthodox but “40 acres and a mule” as the The question of the unborn is December 24th). But it
lawful opinions. Some are basis for subsistence farming. older than you may think. The wouldn’t come as news to
coerced to resign, some get Almost everything west of Talmud contains one such Jerome K. Jerome, who in 1889
sacked, others forced out on Ohio was surveyed this way discussion. In the tractate of wrote the following in “Three
sick leave. For most “heretics” and innumerable deeds today Bava Metzia rabbis debate Men in A Boat”:
the process is the punishment refer back to these original whether it would have been “How good one feels when
and, for their peers, a clear subdivisions. In a flight over better for man not to have been one is full—how satisfied with
warning not to challenge the America’s western areas the created at all. The Talmud ourselves and with the world!
orthodoxies of the day. Britain checkerboard pattern of land ultimately concludes that it is People who have tried it, tell
has a problem with free speech parcels, direct descendants of better that man was created, as me that a clear conscience
and, unfortunately, it is not the Rectangular System, is he has the ability to do good makes you very happy and
confined to section 127 of the readily apparent. deeds and improve the world, contented; but a full stomach
Communications Act. Jeffrey Darbee and the potential to achieve does the business quite as
Karolien Celie Columbus, Ohio great things. However, it also well, and is cheaper, and more
Legal officer notes that man’s capacity for easily obtained. One feels so
Free Speech Union evil and wrongdoing is also a forgiving and generous after a
London Rocks of ages result of his creation, and that substantial and well­digested
The philosophical debate this must be balanced by his meal—so noble­minded, so
about how to value lives that capacity for good. kindly hearted.”
Poland’s war contribution have not yet been born dwells David Rothenberg RON GIELGUN
You mentioned that the too much on the present and London Belchertown, Massachusetts
Starlink terminals that are so future (“All uncreated men are
important to Ukraine’s war equal”, December 24th). As a David Benatar, a philosopher,
effort were delivered by SpaceX palaeontologist, my view of argues that, because of the Letters are welcome and should be
at the request of the Ukrainian what is basically the study of asymmetry between the harms addressed to the Editor at
The Economist, The Adelphi Building,
government (“The satellites contingency (what if?) is root­ and benefits of coming into 1­11 John Adam Street, London wc2n 6ht
that saved Ukraine”, January ed in the past and the evolu­ existence, it is always better Email: letters@economist.com
7th). That was true for the first tion of humanity, rather than not to be born. When someone More letters are available at:
Economist.com/letters
batch, but at the moment the Derek Parfit’s vision of a is not brought into the world

012
 Executive focus 15

012
 16 Executive focus

012
 Briefing Disney at 100 The Economist January 21st 2023 17

Thrills and spills Chapek, and brought his predecessor, Bob

Iger, back from retirement.
Mr Iger, a corporate Jedi who led Disney
for a successful decade and a half until
2020, has been given two years to turn
things around. He must manage the de­
cline of Disney’s legacy businesses, make
its new ventures profitable and find a suc­
DISNEYLAND
cessor who can fend off the threat from Sil­
As Disney turns 100, its business is on a rollercoaster ride
icon Valley. His performance is already un­

S plash Mountain, a popular ride in Dis­

neyland, towers over attractions that
encapsulate the 100­year history of the
theme parks have bounced back from pan­
demic shutdowns to generate record pro­
fits. Its broadcast and cable­television net­
der fire from Nelson Peltz, an activist in­
vestor whose company, Trian Fund
Management, has bought a 0.5% stake
Walt Disney Company. To the south, on works continue to rake in billions of dol­ (worth $900m) and is demanding a seat on
Main Street USA, a little cinema screens lars a year. And in streaming, the medium the board. How Mr Iger navigates these
“Steam Boat Willie”, in which Mickey of the future, Disney has racked up more challenges will help shape the entertain­
Mouse made his debut in 1928. In the cen­ subscriptions than anyone, last year over­ ment business and determine whether
tre of the park the Sleeping Beauty Castle taking Netflix. During 12 thrilling months Disney survives another hundred years.
evokes the classic Disney animations of in 2020­21, investors clung on as the com­ In the 1950s Walt Disney literally
the 1940s and 1950s. On the outskirts are ar­ pany’s share price doubled. sketched out why the firm he had founded
eas themed around Star Wars and the Mar­ Then came the plunge into cold water decades before was so successful, drawing
vel universe, which Disney took over dur­ (see chart 1 on next page). In the past year doodles of Mickey Mouse and Donald Duck
ing an acquisitions spree in the 2000s. Pas­ Wall Street has realised that Hollywood’s on a flow chart showing how the different
sengers at the high point of the ride have a old formats are decaying faster than its parts of his empire mutually reinforced
few seconds to take in the view. Then, with new ones are growing. Cinema has not ful­ each other. The Disneyland park “plugs
a lurch, their car makes a near­vertical ly recovered from covid­19, and may never. movies”; television “plugs merchandise”;
plunge and everyone gets drenched. Cable is in steepening decline. Meanwhile the film studio “provides interchange of
In the run­up to its centenary, which Disney’s streaming division is still losing stars” for TV, he noted. At the centre of the
Disney will start celebrating on January more than $1bn a quarter as it competes diagram he put the studio’s creative out­
27th, the company itself has been on some­ with rivals like Apple and Amazon, who put, which generates the intellectual prop­
thing of a rollercoaster ride. The world’s use streaming as a loss­leader for their erty that powers every part of the business.
biggest entertainment firm, with a market other businesses. Disney’s market value The strategy remains unchanged. At
value of $180bn, still rules the box office, has dropped by half since its peak in 2021, Disneyland visitors can board a replica of
with four of the ten highest­grossing films back to the depths it plumbed at the out­ the Millennium Falcon to relive scenes they
of 2022 (including the sequel to the most break of the pandemic. In November the first saw in “Star Wars” at the cinema. On
lucrative ever, “Avatar”). Its American company sacked its chief executive, Bob their way out they can buy a $25 Baby Yoda

012
 18 Briefing Disney at 100 The Economist January 21st 2023

doll, a reminder to tune in for the next sea­ Disney+, while increasing the price of an
son of “The Mandalorian” on the Disney+ Nail-biting 1 ad­free subscription by 38%, to $10.99 a
streaming service. Streaming, which turns Share prices, January 1st 2020=100 month in America. Mr Iger may drop the
TV viewers into direct customers for the 160
target of adding another 50m Disney+ sub­
first time, promises yet more cross­promo­ scribers by the end of next year, a goal that
S&P 500
tion. In future Disney+ might recommend 140 could drag the unit further into the red. As
shows based on the rides a subscriber has Mr Malone recently warned, “There is a lot
taken at its theme parks, for instance. 120 of blood flowing down the gutters of peo­
But several pillars of this structure are 100 ple who are streaming. Some of them can
now wobbling at once. Take broadcast and afford it and some of them can’t.” The as­
cable television, which contribute the big­ 80 sumption is that there will be some con­
gest share of Disney’s profits (see chart 2). Disney solidation or closures among the many
60
The industry is in long­term decline, as streaming services, with Disney’s smaller
households swap pricey cable packages for 40 rivals looking most vulnerable.
cheaper streaming services, as well as free 2020 21 22 23
Adding to the pressure is the uncertain
content on YouTube and the like. The Source: Refinitiv Datastream
outlook for Disney’s other divisions. The
primetime audience of ABC, a broadcast cinema, where Disney properties from
network owned by Disney, has fallen by Mickey Mouse to “Toy Story” first entered
nearly a third in the past four years. Since vestor, has described as a “mad Oklahoma the public imagination, is losing its cultur­
July Americans have spent more time land­rush” for market share. To win sub­ al clout. Theatres around the world lo­
streaming than watching cable, according scribers, Hollywood’s biggest studios have wered their curtains at the start of the pan­
to Nielsen, which measures audiences. ramped up their combined content spend­ demic, reducing global box­office receipts
From next year only a minority of Ameri­ ing by 50% since 2019. Amazon and Apple, in 2020 to 19% of what they had been in
can households will have cable subscrip­ new to the game and eager to stock their li­ 2019. Despite the success of the “Avatar” se­
tions, forecasts eMarketer, a research firm. braries, have been writing big­tech­sized quel and a few other blockbusters, takings
Cable companies have been able to pro­ cheques that have raised costs for every­ in 2022 were only 65% of the pre­pandemic
tect profits by raising prices for their re­ one. “We sit around and go, ‘Can you be­ level. Gower Street Analytics, a research
maining customers, who are addicted to lieve what Apple’s paying?’,” Netflix’s boss, firm, forecasts that this year receipts will
sport, in particular. But this strategy has Reed Hastings, said at a recent conference. still be a quarter below the pre­covid norm.
run out of road. In November Disney re­ Despite splashing out on content, stu­ Part of the reason is China, where Dis­
ported a 5% year­on­year drop in quarterly dios have kept streaming prices low. In ney’s blockbuster of 2019, “Avengers: End­
revenue from its television businesses. A America and Canada the average Disney+ game”, made a quarter of its takings. In ad­
weak advertising market, with neither subscriber paid $6.10 per month in the lat­ dition to the lockdowns that suppressed
American elections nor mammoth sport­ est quarter, less than half the figure at Net­ ticket sales last year, the government has
ing events this year, makes matters worse. flix, which has been around for longer and become sniffier about Western films. In
MoffettNathanson, a firm of analysts that has steadily raised its prices. Disney’s February “Black Panther: Wakanda For­
had expected operating profit at Disney’s streaming customers outside America and ever” will become the first Marvel film to
cable networks to fall by 4% this financial Canada, who make up over 70% of the to­ be allowed a cinematic release in China in
year, now predicts a drop of 17%. TV (as op­ tal, generated even less. The 61m subscrib­ three­and­a­half years.
posed to streaming) “is marching to a dis­ ers in India, who tune in mainly for the In the West, too, cinema’s power is fad­
tinct precipice, and it’s going to be pushed cricket, each contributed $0.58 a month. ing. Even before the pandemic, consumers
off”, Mr Iger said in September, shortly be­ At Wall Street’s urging, Hollywood is were losing the habit of going to the mov­
fore his return. Disney’s recent results sug­ shifting its focus from growth to profits. ies for anything bar the most spectacular
gest “that cliff may be closer than any of us Some studios have announced deep cuts. releases. The average American visited the
thought”, MoffettNathanson argues. Warner Bros Discovery, for instance, can­ cinema five times in 2000 but only 3.5
As old­fashioned TV totters towards the celled an almost­finished $90m­movie, times in 2019. During the same period the
abyss, Hollywood studios are scrambling “Batgirl”, among other projects. Mr Iger has country lost 1,600 of its cinemas. Covid
for parachutes in the form of streaming promised to take a “hard look” at costs. Dis­ sharply accelerated this decline; now
services. Disney+ made a blisteringly ney is also raising prices: in December it many in Hollywood suspect the box office
strong start in 2019, signing up 10m Amer­ added advertising to the cheapest tier of will never fully recover.
ican households on its launch day. Its de­ A permanently weakened cinema mar­
but in Europe a few months later handily ket would dent Disney’s earnings: it made
coincided with the first covid lockdowns, More leak than stream 2 an operating profit of $2.7bn from its film
adding millions more. It now has 164m Disney, operating income by segment, $bn studio in 2019. But the indirect cost could
subscribers. If one includes ESPN+, Dis­ Financial years ending in October be even higher if the shift makes it harder
ney’s sports streamer, and Hulu, its 2021 2022
to popularise new stories and characters.
general­entertainment platform, Disney -5 0 5 10
There is a nagging worry in Hollywood that
has more streaming subscriptions even the small screen struggles to make the last­
than Netflix, and a lot more than everyone Cable and broadcast ing impression that the cinema once did.
channels
else (see chart 3 on next page). Many note that Netflix, despite keeping its
Yet the streaming business is losing Parks, experiences 223m subscribers perfectly content, has
money hand over fist. The trigger for Mr and products struggled to launch enduring franchises of
Chapek’s ejection was his announcement Content sales, the sort that Disney churns out.
in November that Disney’s streaming loss­ licensing and other Romantics ascribe cinema’s power to
es in the latest quarter had run to $1.5bn, the magic of a shared experience, or to the
twice the loss incurred a year earlier. The Streaming services sensory impact of a vast screen and
cause is what John Malone, the chairman Source: Company reports
thumping sound system. To watch “Dune”
of Liberty Media, a big entertainment in­ on a mere television is “to drive a speed­

012
 The Economist January 21st 2023 Briefing Disney at 100 19

boat in your bathtub”, declared its director, kind of home­entertainment, Generation

Denis Villeneuve. Pragmatists suspect that 21st-century flux 3 Z—roughly, those under 25—ranked it last.
cinema’s power has more to do with the Worldwide streaming-TV subscribers†, m Their main hobby, by some distance, was
way it is marketed. Persuading millions of 800
video gaming.
people to watch a film during a short run at Peacock Gaming is a blind spot for Mr Iger, who
the theatre requires a concentrated promo­ Apple TV+ wound up Disney’s gaming arm during his
tional blitz, in which $100m or more can be Paramount+ previous stint as chief executive. Today
blown in a few weeks. Studios are glad to Discovery+* 600 Disney licenses its brands to developers
avoid that cost in favour of a softer stream­ HBO Max* like Electronic Arts, which makes Star
Amazon
ing launch. But executives wonder if skip­ Prime Video§
Wars and Marvel games, among others.
Owned by
ping the theatre makes it harder to create Disney With Netflix, Amazon and Apple now of­
400
an enduring cultural icon. fering gaming subscriptions alongside
Similar questions are being asked at Netflix
video, Disney looks like the odd one out.
Disney’s amusement parks, where the Last year Mr Iger told the New York Times
awesome power of its creative assets is 200 about the moment he realised that, by li­
most clearly on display. As children high­ censing Disney’s video content to Netflix,
five Spider­Man, grown men wander ESPN+ he was helping a competitor: “I woke up
around in $35 mouse ears. Superfans can Hulu Disney+ one day and thought, ‘We’re basically sell­
get married outside the Sleeping Beauty 0 ing nuclear weapons technology to a third­
Castle, the holiest place in the Disney reli­ 2019 20 21 22 world country, and now they’re using it
gion, for $125,000 (Mickey Mouse can at­ †Includes estimates *Owned by Warner Bros. Discovery against us.’” Having Star Wars video games
§Active viewers only
tend, for $2,070 per half­hour). Source: Ampere Analysis
on non­Disney platforms like Amazon’s
The parks have come roaring back from Luna may soon feel like a similar mistake.
pandemic closures, as families splurge on Before launching Disney+ Mr Iger
treats deferred during lockdown. The rele­ June, leaves much unclear, including who bought a controlling stake in BAMTech, a
vant division earned an operating profit should pay off the district’s debt. Florida’s streaming­technology company. The goal
last year of $7.9bn, 16% more than before governor, Ron DeSantis, is expected to run was to get “engineering DNA” into Disney,
the pandemic, making it the company’s for president next year and seems unlikely says a former colleague, who thinks Mr Ig­
main source of growth. At its American to back down in his war on “woke CEOs”. er may make another acquisition to inject
properties Disney has harnessed pent­up The power to plant and nurture intel­ some gaming DNA. Electronic Arts, with a
demand, introducing airline­style pricing lectual property in cinemas and parks market value of $34bn, is said to be looking
to charge more in busy periods. For a fam­ gives Disney an advantage over rivals from for a buyer. Or Disney could step into the
ily of four, tickets for a day at Disneyland Silicon Valley. “If the centre of creation of metaverse by acquiring Roblox, a gaming
and the adjoining California Adventure [intellectual property] shifts from the cine­ platform worth almost $20bn, or the pri­
park in high season cost nearly $1,000, not ma…Disney would find itself as just anoth­ vately held Epic Games, which as well as
including any $14 Wakandan pork wraps or er contender, with a smaller war chest than making “Fortnite” runs the Unreal Engine,
$40 lightsabers the visitors may buy. the big tech companies that will be looking a 3D­modelling tool which Disney used to
Some at Disney worry that, by milking to invest and acquire,” notes Enders Analy­ make “The Mandalorian”.
customers so vigorously, the company sis, a media­research firm. Disney is carrying $37bn of net debt,
may weaken the parks’ role in reinforcing As storytelling moves to new formats, however, a hangover from Mr Iger’s last
brand loyalty among their 150m annual Disney may need to broaden its creative shopping spree, which culminated in the
visitors. “Why are they going in front of horizons. “Disney needs to see what a purchase of the 21st Century Fox studio for
us?” a girl asks her mother as another fam­ broad business it’s in. It builds worlds and $71bn. Mr Peltz, the activist investor, has
ily sweeps to the front of an hour­long characters, not just movies,” argues a for­ complained about the firm’s creaking bal­
queue for the Indiana Jones ride. The an­ mer executive. In 2021 Deloitte, a consul­ ance­sheet, in particular. Offloading some
swer is that since 2021 Disney has let visi­ tancy, found that whereas past generations legacy assets before they expire could pro­
tors pay $25 for a pass to skip a queue. of Americans named TV as their favourite vide some financial room for manoeuvre.
Other parks, like Universal Studios, do this People close to Mr Iger say he did not
too. Still, points out a former Disney parks plot his return and is unlikely to drag out
executive, for a visit to Disneyland to be his second act. That makes the search for a
successful, “Parents have to be the he­ successor urgent, and there is no obvious
roes”—and it is hard for them to feel heroic heir. Meanwhile, the job is getting ever
while explaining to their children that they more demanding. Streaming has turned
are in the second­class lane. Disney into a gigantic direct­to­consumer
Mr Iger is said to be more sympathetic business, as well as a far more internation­
to these concerns than Mr Chapek was, but al one. Its boss must manage political rela­
until other parts of the business pick up, tionships with everyone from Florida’s Re­
Disney will need to wring what money it publicans to the Chinese Communist Par­
can from its parks. What is more, the parks ty. And as technology puts Hollywood in
face a political distraction. Last year Mr competition with Silicon Valley, Disney
Chapek enraged Republicans in Florida by will have to find new ways of exploiting its
criticising the state’s so­called Don’t Say intellectual property, the one thing its
Gay law, which restricts discussion of LGBT richer rivals cannot yet match. The endur­
matters in classrooms. In retaliation the ing value of those creations was foreseen
state passed a law to abolish the special by Walt Disney, who declared on the eve of
business district in which Disney World Disneyland’s opening: “I only hope that we
has operated on favourable terms for over never lose sight of one thing—that it was
50 years. The law, which takes effect in all started by a mouse.” n

012
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012
 Britain The Economist January 21st 2023 21

The Met perhaps along the lines of the Macpherson

Report, which followed the murder of Ste­
Predators in the police phen Lawrence, a black teenager, in Lon­
don in 1993. Some believe the rot runs so
deep that someone from outside the insti­
tution should take charge of removing it.
For now, though, the task of reforming
the Met’s toxic culture is the responsibility
of the force’s newish commissioner, Sir
The case of David Carrick is the latest in a line-up of horrors
Mark Rowley. Since he took over in Sep­

P REDATORS THRIVE in institutions that

smooth access to victims. The Metro­
politan Police Service is no exception. Da­
“Bastard Dave”.) In October the interim
findings of a report by Dame Louise Casey,
one of a number of probes sparked by Ms
tember, the Met has embarked on a num­
ber of reforms designed to kick out degen­
erate officers. Most significantly, it has set
vid Carrick, who on January 16th (and in an Everard’s murder, showed how shockingly up a domestic­abuse and sexual­offences
earlier hearing) pleaded guilty to 24 counts badly the Met handled misconduct allega­ unit to investigate allegations against serv­
of rape and dozens more sexual offences tions. It took on average 400 days to re­ ing officers. This week, after Mr Carrick’s
over a 20­year period, used his position as solve allegations of misconduct (see chart crimes emerged, Sir Mark said it was inves­
a Met officer to prey on women, showing on next page). Less than 1% of officers in­ tigating at least 800 of its 35,000 officers;
them his warrant card to win their trust volved in two or more cases had been more than one in every 50 of the Met’s offi­
and telling them later they would not be sacked. Allegations of sexual misconduct cers has been taken off frontline duties
believed. The Met says that on nine sepa­ “and other discriminatory behaviours” while they are being probed.
rate occasions it and other police forces were especially likely to be dismissed. Many more changes will be needed. Mr
had been made aware of “off­duty inci­ The revelations about Mr Carrick are Carrick’s case illustrates the importance of
dents” involving Mr Carrick. Despite a likely to lead to calls for a wider­ranging rigorous vetting. The Met says that when
“pattern of behaviour that should have inquiry than any so far commissioned, he joined the force in 2001 there were al­
raised concerns”, the force failed to notice ready two allegations against him; today, it
it was harbouring one of Britain’s most says, owing to more “robust” vetting he
→ Also in this section
prolific rapists. would not have been offered a job. He
This tale of violent misogyny and impu­ 22 Holyrood v Westminster should have been vetted again ten years
nity in Britain’s largest police force is hor­ later but was not—something that hap­
23 Strikes and the pay review bodies
rifyingly familiar. After a serving Met offi­ pens too often but is being tackled, it says.
cer, Wayne Couzens, kidnapped, raped and 23 Prospects for the housing market Yet a former senior Met officer says it is
murdered a young woman, Sarah Everard, not clear how vetting processes have really
24 The decline of horse­racing
in 2021, it emerged that many complaints changed beyond becoming a more thor­
about “The Rapist”, as he was dubbed by 25 Strictness in schools ough version of the background and secu­
colleagues, had gone uninvestigated. (Mr rity checks it already conducts. He says the
26 Bagehot: Money in politics
Carrick was known by other officers as force should consider putting all candi­

012
 22 Britain The Economist January 21st 2023

dates through psychometric testing. It al­ was Her Majesty’s Inspector of Constabu­ prove a rape has taken place, especially
ready uses such tests to assess officers’ lary and Fire and Rescue. “One of the things when victims do not want to testify. Yet
suitability for counter­terrorism roles; that worries me is that more chief consta­ “there is still a lingering sense that some
tests designed to profile personality types bles from other forces should be standing officers are less responsive to crimes typi­
could be used to weed out bullies and nar­ up and saying this [misogyny and violence cally suffered by women, [such as] domes­
cissists, he reckons. against women] is a problem everywhere tic violence and rape,” Ms Billingham says.
The litany of horrors raises the question and we are going to tackle it,” she says. The worry is that the Met’s latest scandal
of whether the Met has more reprobate “That doesn’t seem to be happening.” will further deter women from reporting
coppers than other forces. It is impossible More concerning yet, she adds, is what such crimes. “People will be thinking what
to know. But the Met does have distinctive such scandals reveal about the way police if, God forbid, you reported a rape and
characteristics. Met police tend to live out­ deal with allegations of rape and sexual as­ someone like Carrick turns up?” she says.
side the area they serve—many come from sault. Rape has the lowest charging rate of Or, as is more likely, one of the innumera­
Kent or Essex, and Mr Carrick came from all crimes: less than 2% of reported rapes ble officers who heard dreadful things
Hertfordshire—which may mean they con­ lead to convictions. It can be difficult to about him, but did absolutely nothing. n
sider themselves separate from the people
they serve. That may foster a different cul­
ture to that of other forces. Given that Lon­ Gender policy
don has a higher proportion of ethnic mi­
norities than the counties that surround it,
Populism, Scottish-style
it could be especially relevant to attempts
to tackle racism in the force.
A constitutional row provokes an illiberal response from the SNP
It is also possible that some depart­
ments in the Met are more likely to foster
undesirable behaviour than others. Mr
Carrick, like Mr Couzens, was part of the
T he Scottish National Party’s plan
for their new nation reflects a classi­
cally liberal ideal of limited government.
referendum over 25 years ago. To argue
that Scotland’s constitutional order
should change is legitimate. To claim it is
Parliamentary and Diplomatic Protection It would feature a written constitution, an alien imposition is absurd.
Command, which provides officers to which would entrench fundamental The rhetorical shift reflects the pres­
guard the Palace of Westminster. It is con­ rights and “bind the institutions of the sure that Ms Sturgeon faces from impa­
sidered an elite unit. It is also “one of those state”, all overseen by a Scottish Supreme tient SNP members as the avenues to a
units where you put constables standing Court. For many Scots this is an attractive referendum close. She has threatened to
outside Parliament for hours on end,” says alternative to Britain, where a swagger­ turn the next general election into a “de
the former officer. There’s a lot of banter, ing government seems to do as it wants facto” vote on independence, a legally
not very much supervision and “it can at­ so long as it controls Parliament. meaningless course.
tract lazy people who want to hold a gun”. Which makes a shrill rhetorical turn Scottish nationalists regard their
The Met also has a smaller proportion of fe­ by the SNP all the more jarring. In No­ destiny as joining a family of modern
male officers than most other forces vember the Supreme Court in London European democracies. Yet Germans do
(around 30%; the average is 34%). found that the Scottish Parliament in not declare the death of democracy when
Though some of its problems may be Holyrood could not unilaterally organise their highest court strikes down the
particular to the Met, its scandals are likely a second referendum on independence. decisions of federal and state parlia­
to hold lessons for other forces. The social On January 17th Alister Jack, the Scottish ments as ultra vires. When SNP poli­
pressure among police to be a team player secretary, announced the decision of the ticians denounce procedural obstacles as
can be unhealthy. Officers should feel able British government to block a new law, thwarting the “will of the Scottish peo­
to express misgivings about a particular passed by Holyrood in December, which ple”, they resemble the English Brexiteers
colleague without fearing they will be pun­ would make it much easier for people to they hope to escape.
ished for it. “The mantra you hear all the change their gender in law. Mr Jack ar­
time in the police that ‘you’re my colleague gues that the Scottish bill would affect
so you need to have my back’ is overdone,” the operation of equalities law, a matter
says the former officer. reserved for Westminster, across Britain.
Misogyny is a problem in all police forc­ Whether he is right is also likely to end
es, notes Zoë Billingham, who for 12 years up being tested at the Supreme Court.
In response, outrage. Nicola Sturgeon,
the SNP leader, said this was a “full­
Too many, too slow frontal attack” on the Scottish Parlia­
Metropolitan Police, misconduct ment, and that democracy itself was at
allegations and investigations, 2013-19 stake. Her colleagues accuse Mr Jack of
Number of allegations
behaving like a “colonial general”. His is a
2,500 risky move, given Scotland has long
enjoyed autonomy in many areas. But for
2,000
bodies such as the Scottish Parliament to
1,500 be constrained by law, which is review­
able by the courts, is not an assault on
1,000
democracy but a precondition of it.
500 The clause that Mr Jack used to halt
0 the bill is drawn from the same Scotland
0 6 12 18 24 30 36 42 48
Act that created the Scottish Parliament,
Months taken to finalise investigation
a settlement carefully drafted by Scottish
Source: Casey Interim Review
politicians and endorsed by Scots in a Sturgeon spoils for a fight

012
 The Economist January 21st 2023 Britain 23

Industrial action mer member of several—either because, Housing

like soldiers, they are banned from striking
The going rate or because, like teachers, they have limited Pain and relief
options in the private sector.
Yet it is also true that ministers have the
upper hand in the process. Each year secre­
taries of state issue remit letters, stressing
the factors that a PRB should consider, in­
A wave of strikes reflect a loss of faith A downturn in the housing market is
cluding what funding it considers avail­
in public­sector pay bodies under way. How much will it hurt?
able. Since the 1990s governments “have

B ritish employers lost 467,000 work­

ing­days to strikes in November, the
highest in over a decade, according to fig­
put consistent pressure” on them to rein in
pay, says Mr Smith. “There is a culture of
not rocking the boat too much.” PRB mem­
T anya McWaters, a 30­year­old televi­
sion production manager, and her hus­
band may have managed to buy right at the
ures released by the Office for National Sta­ bers keep a low profile, and do not give in­ peak of the housing market. Like others
tistics (ONS) on January 17th. That mark terviews or appear before Parliament, their age the couple used their savings, as
will almost certainly be breached before which may contribute to an excessively well as a little money from her parents—
Britain’s winter of strife is over. Scottish consensual approach, he says. For chunks and, in their case, emptying his Australian
teachers, London bus drivers, nurses, of the past decade, the PRB process has pension pot—to cobble together the mon­
courtroom staff and driving instructors been bypassed altogether. ey for a deposit. They moved from a rented
were among those picketing this week. The work of PRBs can also be muddled flat in London into a house in Bicester, near
More strikes are being called by the day. by competing objectives. In its latest remit Oxford, last April. “I love it,” she says. “[The
On January 16th teachers in England and letters, British ministers stress that the mortgage bill] was the same as our rent for
Wales voted for seven days of walkouts. PRBs must be mindful of the risk of stoking the one­bed in London.”
Some 100,000 civil servants in 124 govern­ inflation through higher wages. The Scot­ Not for much longer. Having taken out a
ment departments will strike on February tish government, meanwhile, says that pay one­year fixed­rate mortgage as “the econ­
1st. The government sounds by turns emol­ policy should help the poorest workers. omy was so confusing at the time”, they
lient and aggressive: a bill that would force But there are much better tools for tackling now face a steep rise in their housing costs.
certain unions to maintain a minimum both those issues, says Ben Zaranko of the Even the best deals on offer would see the
level of service during industrial action is Institute for Fiscal Studies, a think­tank— couple’s monthly housing bill increase by
now going through Parliament. namely, monetary policy and the benefits £300 ($370), over 25% more than they pay
Grievances over pay lie at the heart of system. Instead, pay should be focused now. “It’s a bit grim,” she says.
the disputes. Private­sector pay (excluding squarely on filling the jobs the government According to data from the Office for
benefits such as pensions) increased by wants doing for a price it is willing to pay. National Statistics (ONS), over 1.4m fixed­
7.2% in the year to November, the ONS said Perhaps the biggest issue is one of tim­ rate mortgages will come to an end this
on January 17th, compared with a rise of ing. When the Treasury gave its evidence to year. Nearly all of these mortgages have an
3.3% in the public sector, and a rise in con­ last year’s pay round in December 2021, in­ interest rate of less than 2.5%; new two­
sumer prices of 10.7%. But underpinning flation was forecast to peak at 4­5%. By the year fixed­rate mortgages will typically
these grievances is a loss of faith in the pay time the NHS pay body recommended a cost more than double that, at about 6%.
review bodies (PRBs) that advise the gov­ rise of 4.8% in July 2022, an increase ac­ The average variable­rate mortgage, which
ernment on what to pay public­sector em­ cepted by the government, inflation had tracks the Bank of England’s base rate, is
ployees. The trade unions say the PRBs lack breached 10%. The structure of public­sec­ about 4.4% and will rise further as the cen­
clout and independence. On January 11th, tor budgets make things worse: although tral bank tightens monetary policy. Heftier
14 unions representing health­care work­ pay reviews are conducted annually, the mortgage bills will be painful. The big
ers said they would not submit evidence to departmental budgets from which salaries question for the economy is whether they
the NHS PRB as it starts to weigh salaries for are drawn are fixed for three years. The sol­ signal something really ominous.
the 2023­24 fiscal year. ution may be a mechanism by which PRBs As in many other countries, housing
There are eight PRBs, covering the can recommend departmental budgets are transactions surged in Britain during the
armed forces, doctors and dentists, other reopened in extreme circumstances, says covid­19 pandemic. Low interest rates, a
NHS staff, prison officers, teachers, police Mr Zaranko. Such sensible reforms are temporary pause in stamp duty on some
and the most senior public­sector manag­ needed if confidence is to be regained. n property sales and the spread of working
ers. They typically number six to eight from home combined to fuel a dash for
wonks and worthies, appointed by the gov­ space. First­time buyers were enthusiastic
ernment. The PRBs analyse evidence from Wage gauge participants in the market, accounting for
the government, employers and unions, Britain, average weekly earnings, £, 2010 prices* more than half of all new mortgages during
and commission their own research, be­ 12-month moving average the pandemic. Between March 2020 and
fore proposing pay deals. 500 November 2022, the average cost of a house
There is not much evidence that the rose by a quarter, from £233,000 to
PRBs are ministers’ cronies. In its report Public sector
£295,000, according to official statistics.
last year, the NHS PRB warned that an “ex­ 450 That surge in house prices is now firmly
hausted and demoralised” workforce was in reverse. “There is a big hit to affordabil­
leaving to take low­paid work in the private Private sector ity from higher interest rates,” points out
400
sector and putting patient safety in jeopar­ Andrew Burrell, a property economist at
dy. It rejected the argument that higher Capital Economics, a consultancy, which is
wages would mean fewer staff, arguing a 350 forecasting a peak­to­trough fall of 12% in
reliance on expensive agency workers was house prices. Savills, an estate agent, pre­
a false economy. A prb’s job is to protect 2001 05 10 15 20 22
dicts that house prices will fall by 10% this
the interests of workers whose industrial Sources: ONS; The Economist *Deflated by CPIH
year, the steepest drop in prices since the
muscle is weak, says Alasdair Smith, a for­ financial crisis in 2008.

012
 24 Britain The Economist January 21st 2023

But such a fall would take the price of an prizes of A$6m (£3.4m) and 26.5m dirhams
average house back only to the level it was (£5.8m) respectively. The disparity be­
at in the second half of 2021. For most of tween Britain and the rest of the world be­
last year, house prices continued to rise. comes even more pronounced at Group 2
That all came to an end in October. “Mort­ and Group 3 levels, which account for the
gage rates spiked during the Truss tur­ majority of races.
moil,” says Neal Hudson of Residential An­ Horses bred in Britain are increasingly
alysts, a consultancy, referring to the ef­ sent abroad to chase bigger prize pots.
fects of the disastrous mini­budget un­ Even the monarch is souring on the sport.
veiled by the government of Liz Truss. The Charles III has started winding down one
cost of government borrowing has since of the world’s oldest commercial thor­
fallen as Ms Truss’s policies were reversed, oughbred­breeding organisations: almost
but mortgage rates have stayed high. 60% of the horses that were owned by Eliz­
The wave of first­time buyers during abeth II have been sold at auction since her
the pandemic will be at the sharp end of death in September. Just Fine, the king’s
this reversal because they have bigger first winner, was among 14 of the royal
mortgages and less equity. The only mort­ horses sold at Tattersalls, a thoroughbred
gage metric “flashing red”, says Mr Hud­ auction house, in November. It left the
son, is the ratio of loans to incomes. Low sales ring bound for Australia for 300,000
interest rates allowed borrowers to spend guineas (£315,000).
the same amount of their incomes on Reversing the decline in the sport’s for­
housing while taking out larger mortgages. tunes will not be easy. Racing in Britain is
Even modest rate rises, by historic stan­ For less than it cost last year partly funded by the Betting Levy, a tax on
dards, will mean budgets taking a hefty gambling: fewer flutters mean less prize
whack. According to the Resolution Foun­ for which the Financial Conduct Authority, money and lower field sizes. As betting on
dation, a think­tank, the typical mortgage a regulator, has a full set of figures, the pro­ other sports such as football, American
holder who renews their policy in 2023 will portion was around 4%. Data from UKFi­ football and Formula 1 has increased, gam­
see a £3,000 annual increase in their bill, nance, an industry body, shows that the av­ bling on horses has fallen, by 27% in the
enough to reduce their after­housing­costs erage first­time buyer’s mortgage in 2022 ten years before the pandemic. Declining
income by a hefty 12%. had a loan­to­value ratio of around 77%, attendance at racecourses has also hit the
“We can afford it,” says Mrs McWaters, compared with over 80% in 2007. Very few coffers. The number going to the races in
of the rise in her mortgage bill. She and her are likely to fall into negative equity. the first half of 2022 was down by 9% from
husband, who also works in TV, will reduce That will not be great consolation to the same period of 2019; many things, from
the amount they usually put into savings, pandemic­era first­time buyers, who must cost­of­living pressures to animal­welfare
towards their pensions, in order to tide pay higher bills for an asset that is worth concerns, are cited as causes.
themselves over. Others, however, will less. But it offers some reassurance to regu­ In response the British Horseracing Au­
struggle. Debt­advice charities report that lators and economists. Housing will not thority (BHA), the sport’s governing body,
they are seeing a gradual increase in the help the economy this year, but it is unlike­ has grabbed the reins. Late last year its
number of homeowners asking for help; ly to drag it into a deep recession. n board replaced a triumvirate, consisting of
they usually make up only a small percent­ the board and two other BHA committees,
age of their caseloads. Morgan Wild, head which had made decisions by consensus.
of policy at the Citizens Advice Bureau, Horse-racing The BHA is currently reviewing the sport
says many people show up after they fall from top to bottom, and sweeping changes
behind on their energy bills, having tried Equine decline are planned.
to cut back elsewhere to keep their mort­ To create a more appealing product for
gages ticking over. newcomers to racing, new penalties for
Stretched borrowers do have more op­ breaking whip rules will come into force in
tions than in the past. In August the Bank February: for the first time in the sport’s
of England scrapped an affordability test, history, excessive use of the whip will re­
The sport is attracting fewer
introduced in 2014, that had restricted the sult in disqualification, rather than a fine.
participants and smaller crowds. Why?
range of mortgages that could be offered. The nuances of whip reform may not as­
The removal of this rule will allow some
banks to offer more interest­only or vari­
able­rate mortgages to those coming off
T he sport of kings is down on its luck.
The best measure of the health of
horse­racing is the average field size, the
suage public concerns about horses’ wel­
fare, but prize money is something the BHA
can affect directly. It is set to thin out the
fixed deals. “What the regulator and the number of horses competing in a race. At racing calendar, which would allow the
banks are both thinking is that if this is a 8.46 across both flat and jumps racing in proceeds of the Betting Levy to be divided
period of elevated rates, we don’t want 2022, this figure is at its lowest in Britain among a smaller number of races.
high levels of repossessions,” says Lucian since records began in 1995. The BHA is also looking afresh at the
Cook, head of residential research at Sa­ The reasons include rising costs and revenue that racecourses generate from
vills. That is a lesson learned from the climate change—the dry summer prevent­ selling media rights to broadcasters and
housing bust in the early 1990s. ed many young horses from racing on hard bookmakers. The way this money is divid­
Trouble in the property market is un­ ground. But the big problem is falling prize ed is murky, but Ralph Beckett, a horse
likely to provoke the same kind of vicious money, which declined by 11% between trainer and president of the National
cycle of bank failures as it did in 2008. 2018 and 2021. Among Group 1 flat races, the Trainers Federation, is among those call­
Banks are better capitalised and mortgage sport’s most prestigious events, the Epsom ing for more of it to be directed towards
standards have improved. In 2007 nearly Derby rewards the winner with just over prizes. The sport has been stuck in a doom
15% of mortgages had a loan­to­value ratio £900k ($1.1m); the winners of The Everest loop for years; bigger rewards are its best
of more than 90%; in 2021, the latest year in Australia and of the Dubai World Cup get hope of finding a way out. n

012
 The Economist January 21st 2023 Britain 25

money and you could continue to have

your child caned until 1999. Private schools
were seen to stand for odd uniforms, anti­
quated methods and excellent results;
state schools conjured up an image of pro­
gressive methods and poor results. The
fact that this was a gross over­simplifica­
tion was irrelevant. For a time, a sign out­
side Michaela’s premises read: “Private
School Ethos—No Fees”.
Momentum now seems to be with Mi­
chaela’s approach. Walk into other high­
achieving academies in London (King Sol­
omon Academy in Marylebone, at which
every pupil learns a musical instrument, is
one; Mossbourne Academy in Hackney,
another) and you are likely to see similar
techniques. This is the rise, says Mr Ben­
nett, of what you might call the “neo­
strict” school.
The “neo­” bit matters. This is not Grad­
grind. The old­fashioned version of disci­
pline controlled largely through punish­
Strictness in education ment. Neo­strictness does use sanctions
but chiefly it weaponises praise. Merit
The silent treatment points are handed out and children strive
for them. When a question is asked in Mi­
chaela, every arm rises in unison.
Critics of neo­strictness argue that it
leads to schools kicking out children who
can’t cope. But Michaela’s exclusion rate,
WE MBLEY, NO RTH LO NDO N
though higher than the national one, is re­
Whisper it (or you’ll get a detention) but attitudes to discipline are changing
strained: there have been seven exclusions

T o understand how discipline is

changing in British schools, go to Mi­
chaela Community School in north Lon­
rooms. The debate is bitter, has deep roots
and is itself strikingly undisciplined: Ms
Birbalsingh, an outspoken figure who
from the school over the past five years.
And, says Ian Patterson, a former head
teacher who now advises London acade­
don. Among the first things you see are stepped down as chair of the government’s mies, chaotic classrooms are “certainly not
vast bright billboards. Whereas other social­mobility commission this month, egalitarian”: kids with settled home lives
schools coax pupils, cosset them with con­ has received death threats. manage disruption better and disadvan­
gratulations and avoid marking in red pen One reason this debate is so bitter is taged ones flounder.
lest they sear young souls, Michaela has no that classroom politics in Britain are inti­ Moreover, children like discipline.
truck with such softness. “I am the MAS­ mately tied up with class politics. Once, What adults see as strictness, they often
TER of my fate”, reads one billboard, in un­ education in Britain was scrupulously perceive as safety and the promise of suc­
repentantly large capitals. “Work HARD Be egalitarian in its disciplinary methods, cess. Michaela pupils are unnervingly keen
KIND”, reads another. “Especially”, barks a with the children of princes and paupers on their school. Your correspondent was
third, “when it is DIFFICULT”. alike beaten till they bled (“the agony”, shown around by a pupil who said that she
And pupils at Michaela do work. HARD. wrote Roald Dahl, was “unbelievable”). wanted to be “a doctor or a surgeon” and
As breathless news reports relate, they lis­ Then, in the 1960s, grammar schools study at “Cambridge or Oxford”. Sociolo­
ten attentively in lessons; walk in silence closed, new comprehensive schools gists may not want to launch educational
in corridors; chant poetry in the lunch opened and the stern old ways were com­ sputniks; children often want to soar.
hall—and ace exams. Almost a quarter of prehensively rejected by many. The discipline debate is far from over
its pupils are on free school meals, yet al­ At this time a comfortable Rousseauian but it is open in a way that it hasn’t been in
most three­quarters of its A­Levels (exams consensus was growing, which held that years. Back at Michaela the bell rings for
usually taken at 18) were graded A or A*. It is children were eager sunbeams who really lunch, and the children file into the dining
rated “outstanding” by Ofsted, a state in­ wanted to learn and that teachers merely hall where the lunchtime poetry recital be­
spectorate, and its most recent Progress 8 had to assist them. Strict discipline, si­ gins. A young teacher stands at the front
score (a nerdy educational tool used to lence and chalk were out; games, group and shouts the first word of each line; the
measure the value added by a school) is not work and good vibes were in. Which, says pupils respond with the rest.
just the best in the country but, according Mr Bennett, is a pity, as the Rousseauian Today, the poem is “Invictus”. “Out—”
to Tom Bennett, a former teacher who is ideal is “rubbish. You can have dancing he shouts; “—of the night that covers me,”
the government’s behaviour tsar, “the best bears and holograms…but if kids don’t they shout back at once. On the poem goes,
that there’s ever been. It is extraordinary.” want to learn they’ll tell you to get stuffed.” call and response, louder each line, until
Michaela, which opened in 2014, is also Left­wing sociologists rejoiced at this the final couplet. This, like everything in
extraordinarily contentious—because it, turn (I have no interest, wrote one, in see­ Michaela, is done in capitals. “I—” he
its exam­acing children and its charismat­ ing “school as a launching pad for educa­ shouts; “AM THE MASTER OF MY FATE,”
ic head teacher, Katharine Birbalsingh, are tional sputniks”). Traditionalists went into shout back 170­odd children. “I—” he
at the centre of an argument over how a moral panic. But the old methods weren’t shouts and, in capitals, the children shout
strict discipline should be in British class­ rejected by private schools. Pay enough back: “AM THE CAPTAIN OF MY SOUL.” n

012
 26 Britain The Economist January 21st 2023

Bagehot Mo’ money, fewer problems

To become more professional British politics needs more money

Foundation, operate on budgets of less than £3m per year. Scrappi­
er outfits get by on barely a tenth of that, relying on mischievous
tweets by recent graduates to make a splash. Poor pay is near uni­
versal. A junior researcher can expect to earn about £26,000, an
amount not much above the London living wage. When wonks are
expected to be able to crunch numbers as well as any banker, hir­
ing becomes tricky. Those with the right skills can find a job at a
bulge­bracket bank in Canary Wharf that pays far more.
This matters. Good government requires a healthy stream of
good ideas. Milton Friedman, a free­market economist, was right
when he argued that in a crisis “the actions that are taken depend
on the ideas that are lying around”. But good ideas are harder to
generate when the pay is poor. Germany solves this problem with
generous state funding. America solves it by having plutocrats
from across the political spectrum pump cash into think­tanks.
Britain leaves the problem unfixed by not having enough of either.
The result is a surfeit of think­tanks that produce worthy but thin
work, or that chase headlines rather than solving deep problems.
A lack of money also dilutes the quality of the politicians
tasked with putting those ideas into practice. When salaries were
first introduced for MPs in 1911, they amounted to £400 per year or
roughly six times the average wage of the time. Now an MP earns

A t times it feels as if Westminster is awash with cash. Boris

Johnson, the former prime minister, recorded the biggest sin­
gle donation in British political history, when a crypto mogul
around £84,000, just over double the average full­time wage. (The
days of being able to boost pay via dodgy expense claims are long
gone, too.) Meanwhile, incomes for high­flyers in professional
handed over £1m ($1.2m). Moonlighting mps have earned a collec­ services have exploded in the past few decades. Lawyers, bankers
tive £17m from second jobs since the last election. According to a and even accountants now command large salaries, pulling well
handy new database put together by Sky News, a broadcaster, and ahead of former fiscal peers such as doctors and politicians. The
Tortoise Media, a news firm, over £180m has flowed into Westmin­ opportunity cost of a career in politics is huge for the most able.
ster since 2019, triggering a week of chatter about the unhealthy
effects of Mammon on politics. Pay the price
British politics does have a problem with money: there is not Pound­shop politics has upsides. Cheap elections are a blessing. A
enough of it. Total political donations per year add up to roughly campaign in which £500m was spent would not produce a better
the cost of a competitive Senate race in America. A benevolent government than one with a budget of £50m. People rightly fear
millionaire could fund almost all of Britain’s biggest political an American­style free­for­all, with politicians dedicated to
think­tanks and have change left from £20m. Salaries for those ceaseless fundraising in order to pay for an electoral arms race.
working in government and Parliament are skimpy. British poli­ Skimping on salaries is undoubtedly popular. Politicians fall
tics operates on a shoestring. Being cheap comes at a high cost. over themselves to forgo pay rises because voters loathe the idea.
Start at the bottom of the political food chain. There are many Higher pay for bag­carriers ranks alongside a puppy­cull for elec­
humiliations involved in being a ministerial aide, from serving as toral popularity. Yet the public expects ever more of modern poli­
a metaphorical punchbag to helping a minister hone his confer­ ticians. Their voting records are pored over; their inboxes are now
ence speech while he strides around a hotel room in his under­ stuffed with correspondence. Part­social worker, part­legislator,
pants. To cap it off, considering the importance of the job, the pay the life of an mp is an exceptionally busy one. On the one hand,
can be lousy. Only a few top aides earn six­figure salaries. For the voters demand professional lawmakers. On the other, they are not
rest, pay ranges from £40,000 to £80,000, to help run depart­ willing to pay the going rate.
ments with budgets that can stretch to over £100bn. In Britain it is Being an mp will always appeal only to a select few. After all,
quite common to find a minister trailed by a 20­something, not half the country hates you; and your colleagues are a self­selecting
because they are especially brilliant but because they are the only band of overly ambitious sociopaths. But better pay can make
one willing to put up with terrible conditions. even horrid jobs appealing. Plumbers are paid well because they
Away from the government front bench, things are even worse. wade through effluent. In their own way, so do those in politics
Although opposition parties are handed “short money” from the (indeed, one parliamentary candidate recalled being sent a photo
state to fund their day­to­day parliamentary business, the of her election leaflet covered in a large human turd). Relying on
amounts are stingy. Labour, which is odds­on to form the next public spiritedness alone to guide people into politics is as foolish
government, recently searched for a new head of economic policy. as hoping goodwill will be enough to persuade someone to spend
The salary on offer was about £50,000, for a key role shaping the a life unblocking toilets.
direction of a £2trn economy. The prospect of power may be A lack of money leaves much of politics the preserve of those
enough to tempt someone to quit a well­paid career elsewhere. who are rich, mad, thick or saintly. Sadly for Britain’s body politic,
Equally, the weight of a mortgage may keep them where they are. the saints are outnumbered by the rest. A little extra money in
Things are no better in think­tank land. Even the largest ones Westminster would go a long way toward fixing this. If voters want
have puny budgets. The most well­known, such as the Resolution a better standard of politics, someone has to pay for it. n

012
 Europe The Economist January 21st 2023 27

Franco­German relations were even more so after Germany’s unilat­

eral announcement that it would spend
Reaching over the Rhine €200bn ($216bn) to protect Germans from
high energy costs, without warning
France, as would be customary for such a
budget­busting move.
In truth, Russia’s war on Ukraine has
“laid bare Franco­German differences, and
BE RLIN AND PARIS
they are struggling to find common
France and Germany stifle their spats to celebrate a 60­year friendship
ground,” says Tara Varma of the Brookings

B eneath the crystal chandeliers of the

Elysée Palace on January 22nd 1963, the
leaders of France and Germany signed a
time for the bilateral bond. The meeting
was originally scheduled for last October,
but was cancelled by the French at short
Institution, a think­tank. Foremost among
these are defence and energy.
France is delighted that Germany is
treaty to cement their friendship. On Janu­ notice—ostensibly due to diary issues, but spending more on defence. The two coun­
ary 22nd this year, 60 years after Charles de widely interpreted as a reflection of irrita­ tries have, at last, reached an industrial
Gaulle and Konrad Adenauer met, the two tion at Germany. French officials were al­ agreement to develop a joint next­genera­
countries’ current leaders will renew their ready aghast when Mr Scholz failed in Au­ tion fighter aircraft. Yet the lesson that Ger­
predecessors’ vows. gust to mention France in a big speech on many and much of eastern Europe draw
Emmanuel Macron and Olaf Scholz, as Europe in Prague, and in another at a from the war is that the continent is right
well as scores of their ministers and parlia­ French­German business club. (German to look to America and NATO for cover. To
mentarians, will gather in Paris for a day of aides say these were not “snubs”.) They French chagrin, Germany has chosen to
festivities and meetings designed to mark equip its air force with €10bn­worth of new
the resilience and richness of this cross­ American F­35 fighter jets. For Mr Macron,
→ Also in this section
border tie, which has no real equivalent who has a French defence industry to pro­
elsewhere within the European Union. The 28 A crash near Kyiv tect and Europe in his veins, the lesson is
day will begin, symbolically, at the Sor­ rather different: that the EU should push
28 Russia’s dead conscripts
bonne, where in 2017 a freshly elected Mr even harder for “strategic autonomy”, albe­
Macron first laid out his vision for a more 29 Ukrainian loyalties it in a way that is compatible with NATO, in
sovereign Europe. Both leaders will speak, defence as well as industry.
29 The Czech presidential draw
ahead of a joint cabinet meeting, and Such differences have prompted public
doubtless find a common language to talk 30 Eastern Europe’s infrastructure irritation. Mr Scholz has paid a high dip­
about Europe over the coming decade. lomatic price for being slow to step up for
31 Charlemagne: Neutrality’s end
Yet the summit comes at a challenging Ukraine. He is under particular pressure

012
 28 Europe The Economist January 21st 2023

from European allies to send German­ find common ground, and bring others Russia’s casualties
made Leopard 2 main battle tanks, and to with them. Yet the war has dragged Ger­
enable others, notably Poland, that need many’s attention eastwards. France likes to Invisible dead
German re­export permission to do so. But think it is always at the top of Germany’s
many in his government are galled that, al­ concerns, a sensitivity German leaders tra­
though Germany has provided far more ditionally indulge. But with a wobbly
overall aid to Ukraine than France, Mr Mac­ three­way coalition government, Germany
S AMARA
ron has often got more credit. has been distracted. Gazing ever­inward,
As Russian families mourn, more
Take the president’s recent announce­ on January 17th Mr Scholz replaced one rel­
mobilisation may be coming
ment that France would deliver light tanks atively obscure loyalist from his party,
to Ukraine, just a day before Germany and
America made similar offers. Ever self­crit­
ical, German commentators were quick to
Christine Lambrecht, with another, Boris
Pistorius, as defence minister.
Nor have the two leaders found much
F IVE FRESH graves break through the
snow in Novokuybyshevsk, a village in
south­western Russia’s Samara region.
suggest that Mr Macron’s move had personal chemistry. Mr Scholz’s persona is “Denis, my son!” a woman wails. Not long
“forced” a grudging Mr Scholz into ac­ what Germans expect of a native of Ham­ ago, 27­year­old Denis was a dad and an en­
tion—something the chancellery in Berlin burg: quiet pragmatism, a dry, tight­lipped gineer at the local oil refinery. In Septem­
denies. “Macron knows we are eminently formality and a slightly acid sense of hu­ ber he was drafted. By December he was in
shame­able,” says Thorsten Benner of the mour. Useful in German politics, these Ukraine. His military career lasted six
Global Public Policy Institute, a think­tank. qualities do not inspire passion, nor suit days: he was stationed at the now infa­
On energy, too, the war has exposed old him to wartime leadership. For Mr Macron, mous Makiivka military barracks when a
disagreements. France’s preference for nu­ who brims with energy and ideas and likes salvo of HIMARS missiles struck it on New
clear power has for years rubbed up against to speak his mind, this makes for a tricky Year’s Eve. His mother feels fortunate to
Germany’s firm rejection of it. Germany’s partnership. The French, says one insider, have received his body whole. Other fam­
reliance on cheap Russian fuel for its in­ find Mr Scholz unusually difficult to read. ilies’ sons could be identified only by DNA.
dustry has forced a radical rethink of a The summit will doubtless disguise The true death toll at Makiivka remains
strategy that kept it prosperous for the past such troubles. Germany may be looking secret. Families are burying their sons in
30 years. The pair have sparred in public eastwards, and inwards. France may be unadvertised funerals across Samara,
over alternatives, notably an ill­fated plan strengthening other European ties: a new which was home to most of the soldiers.
to build a gas pipeline to France from treaty with Spain, an upcoming summit Local authorities claim implausibly that
Spain, which France squashed. “It’s not with Britain. Yet the density of the link be­ just 89 men died, but refuse to publish full
good for Europe”, declared Mr Macron, tween France and Germany is unique. Both lists. Ukraine says at least 400 perished.
“when Germany isolates itself.” countries know that they are condemned Denis’s parents agree that the numbers
France and Germany often disagree. to find a way to talk to each other, however were probably in the hundreds.
The strength of their tie is their ability to tough that may be right now. n Family members are reluctant to speak.
But “Anna”, the sister of one of the injured,
who agreed to talk on condition of ano­
nymity, confirmed that many relatives are
angry. “The commanders blamed soldiers
for giving away positions by mobile­phone
use,” she said. “In fact, it’s a story of their
criminal negligence.” Anna’s brother was
blown clear by the blast and escaped with a
shoulder injury. The soldier in the bed next
to him died immediately. Anna does not
understand what Russia is fighting for.
Many relatives feel the same, she says.
An open letter from the families, pub­
lished on a regional website on January
10th but since deleted, called on President
Vladimir Putin to scale back the use of con­
scripts in his “special military operation”.
It is unlikely to have any effect. There are
indications that a renewed wave of con­
scription is being planned. Ruslan Leviev,
an open­source investigator, says in recent
days Kremlin officials have stopped ruling
out the possibility. One independent jour­
nalist reports that authorities in Yekaterin­
burg, Russia’s fourth­biggest city, have set
up tents in anticipation.
A wartime disaster
Russia has yet to deploy all of the
A helicopter crash outside Kyiv on January 18th killed at least 14 people, including 300,000 or so soldiers it mobilised in the
Denys Monastyrsky, Ukraine’s interior minister, as well as his deputy and other senior first wave. Those who have arrived have
officials. The wreck landed on a kindergarten, killing at least one child. The head of the stabilised the front, says Mr Leviev. But it is
national police was appointed as Mr Monastyrsky’s temporary replacement, but the hard to imagine any sustained new offen­
loss may affect the country’s war effort. Mr Monastyrsky was an important member of sive without a new call­up. A source in Uk­
the national security council, and the interior ministry co­ordinates the national guard, rainian military intelligence insists that
police, emergency services and other forces. The cause of the crash remains unknown. even a new wave of conscripts would have

012
 The Economist January 21st 2023 Europe 29

little impact: Russia’s problem, he says, is 75 km Kyiv

ularly and have relatives there. But Ku­
Belgorod
with mid­level command, and cannot be piansk is an exception: in most liberated
solved by increasing the headcount. He Crimea areas, returning Ukrainian forces have
nonetheless expects Russia to try to mobil­ Kharkiv been greeted as heroes. The invasion has
ise half a million more men for a fresh of­ Kupiansk alienated even Ukrainians once friendly to
fensive in the spring. Luhansk Russia. A missile strike on January 14th
The recent appointment of Valery Gera­
U KR A I N E that killed at least 40 civilians in the city of
Severodonetsk
Ukrainian territory
simov, Russia’s hitherto sidelined chief of annexed by Russia Dnipro is just the latest atrocity.
the general staff, to head the operation in on Sep 30th 2022 RUSSIA But Ukraine ultimately hopes to recon­
D Luhansk
Ukraine may suggest an offensive in the Dnipro o n quer Crimea and Donbas, regions occupied
b a
making. It could also be an attempt to reas­ s by the Russians and their proxies since
Donetsk
sert the usual military chain of command 2014 and historically more sympathetic to
over Yegveny Prigozhin and his Wagner Donetsk Area controlled by
Russia. That would entail a battle for hearts
Russian-backed
Group of fighters. Many in Moscow are Mariupol separatists and minds. Russian propaganda “works
before Feb 24th
troubled by the influence of Mr Prigozhin’s with horrific results”, Ukraine’s president,
sadistic shadow army, which is leading the January 18th 2023 *Russia operated in Volodymyr Zelensky, told The Economist in
Assessed as Russian-controlled or attacked, but
fight in Bakhmut and Soledar, the bloodi­ does not control an interview in December. Winning over
est section of the front lines. Claimed as Russian-controlled Sources: Institute for Ukrainians who have spent nearly a decade
Assessed Russian operations* the Study of War;
If conscription resumes, thousands AEI’s Critical exposed to it will be a challenge.
more men will try to emigrate. After the Approximate Ukrainian advances Threats Project
Reconstruction is crucial. “We know
first mobilisation announcement on Sep­ that Russia is darkness, and that Ukraine
tember 21st, an estimated 700,000­ Belgorod, a city north of the border, pumps belongs to the civilised world,” says Mr Be­
800,000 fled in one month. Others hid Russian propaganda into local homes. The sedin, the Kupiansk mayor, “but people
within the country, some in radical ways. Ukrainians have been unable to block the need to see it with their own eyes.” The au­
Since September Adam Kalinin, an IT spe­ signal. “A large majority of the people here thorities have distributed humanitarian
cialist, has been living in a forest some­ were pro­Russian” before the war, says Mr aid and restored electricity and water to ov­
where in southern Russia. Speaking via an Besedin, and not much has changed. er 90% of households, but rebuilding takes
encrypted messaging app, Mr Kalinin said Russian forces entered Kupiansk with­ longer than blowing things up. Oleh Syn­
he has everything he needs: a tent, a sleep­ out resistance days after the invasion be­ ehubov, the head of the military adminis­
ing bag and a workspace for his computer, gan. The former mayor and most of the city tration in Kharkiv, the regional capital,
which he runs on solar power. He recom­ council collaborated with the invaders. Ov­ says foreign donors offered books in Ukrai­
mended it for other draft­dodgers who er 200 of the 214 city­council employees, nian for schools and libraries around Ku­
cannot get out of the country (and who along with the mayor, are believed to have piansk. “I said it’s a nice idea, but we don’t
have some camping experience). n escaped to Russia. The Russians launched have schools and libraries left.” n
a new radio station, distributed copies of
the Russian constitution and Russian tab­
Liberating Ukraine loids, and began to publish their own Czech presidential election
newspaper, Kharkov Z, packed with stories
Uncertain about Russia’s heroic campaign to save Uk­ There will be mud
raine from “Nazis”. To block news from the
allegiance rest of Ukraine, they cut off mobile, televi­
sion and internet access.
Not everyone bought into the propa­
ganda. The locals your correspondent en­
KUPIANSK A first­round draw augurs a nasty
countered mostly backed Ukraine; many of
Some liberated areas face a loyalty test second round
those who sided with Russia have fled. One

N ear Kupiansk, an hour’s drive from

the Russian border, Andrei, a Ukrai­
nian aid worker, was distributing sweets to
of them used copies of Kharkov Z to roll cig­
arettes, another as kindling for his stove.
Luda Klimovets, a housewife caring for
P rague castle, the Gothic rockpile that
looms over the Czech capital like a giant
bat, is the official residence of the coun­
children when he noticed some taking seven dogs, 25 cats and a hedgehog left be­ try’s president. In a Kafkaesque touch, no
photos of him with their phones. A soldier hind by her neighbours, says she used president has actually lived there in de­
told him they were sending them to Rus­ them as toilet paper. cades. On January 13th and 14th eight can­
sian social­media channels, and possibly Locals who opposed the occupation didates vied to become the castle’s next of­
to hit squads. On another occasion he saw were often imprisoned or tortured. Vitaliy ficial occupant, and in another Kafkaesque
villagers refusing aid from Ukrainians. Sayapin, one of the few officials who re­ touch, none of them won. Andrej Babis, an
“They still miss the Russians,” Andrei says. fused to side with the Russians, spent over oligarch who served as prime minister un­
Months since Ukraine recaptured Ku­ 100 days in a cell so crowded the inmates til the autumn of 2021, and Petr Pavel, a re­
piansk, pro­Russian sentiment in the area had to sleep standing up. Guards forced tired general, finished neck­and­neck in
remains high, says the town’s acting them to sing the Russian national anthem the first round of the election. With the
mayor, Andrii Besedin. Russian shelling and Soviet folk songs. Those who refused second round scheduled for January 27th
has destroyed about a third of the city; only were beaten. Electrocutions and mock exe­ and 28th, Mr Babis has unleashed a vi­
17,000 of its 57,000 pre­war residents re­ cutions were common. In between torture ciously negative campaign. It will be a
main. Officials think some still send infor­ sessions, the Russians would stroll the cor­ “uniquely disgusting” two weeks, predicts
mation on Ukrainian deployments to Rus­ ridor proclaiming that Ukraine’s leader­ Karel Schwarzenberg, a former Czech for­
sian troops, less than 10km (six miles) to ship had fled. On Russia’s Flag Day, Mr eign minister who ran for president in 2013
the east. Some Ukrainian troops say they Sayapin remembers, they offered each in­ and now backs Mr Pavel.
were told not to accept food from locals, for mate two cigarettes. This is the Czech Republic’s third direct
fear of poisoning. A broadcasting tower in Many residents travelled to Russia reg­ presidential election: a constitutional

012
 30 Europe The Economist January 21st 2023

change in 2012 scrapped the previous sys­ Eastern Europe’s infrastructure hal, Ukraine’s prime minister, said his
tem, a parliamentary process prone to country would begin rebuilding its rail­
back­room deals. Fully 68% of voters Between three seas ways to European gauge. There is talk of
turned out. The candidates included Da­ turning the western Ukrainian city of Lviv,
nuse Nerudova, an academic who hoped to where many of the country’s businesses
become the country’s first female presi­ have relocated, into a hub with rail links to
dent, and Jaroslav Basta, a far­right popu­ Kosice in Slovakia and Ostrava in the Czech
list. Mr Pavel got 35.4% of the vote, Mr Ba­ Republic, as well as to southern Poland’s
An east-west region discovers
bis exactly 35%. Ms Nerudova, whom polls Silesia region.
north-south links
had shown doing well, unexpectedly fin­ Weaning Europe off Russian hydrocar­
ished a distant third with 13.9%.
The president is head of state, but has
limited powers. They include appointing
W HY DO TRAVELLERS take the bus in the
Baltic countries? Their capitals—Tal­
linn, Riga and Vilnius—are only about
bons has meant new regional energy links,
too. In 2021 Croatia opened a liquefied nat­
ural gas terminal on its island of Krk. Last
judges on the constitutional court and 600km (370 miles) apart, a perfect distance year Poland inaugurated an undersea gas
board members of the central bank. Most for fast rail. But the winding train journey pipeline to Norway, as well as links to Slo­
presidents, including Vaclav Havel, a for­ takes 12 hours and includes several vakia and Lithuania. In October Greece and
mer anti­communist dissident, have been changes. This is part of a broader problem. Bulgaria opened a new gas link. Even Ser­
circumspect. But the incumbent, Milos Ze­ Look at any map of infrastructure links in bia is seeking to reduce its reliance on Rus­
man, a hard­drinking populist who weath­ eastern Europe, be they road, rail or pipe­ sia, its friend, by plugging into Europe’s
ered several impeachment attempts, line: most run east­west. A few slow or mi­ Southern Gas Corridor, says Olga Khakova
stretched the limits of his mandate. He nor routes run north­south. of the Atlantic Council, a think­tank. Plans
meddled in foreign policy and flaunted his During the cold war, central and eastern for fibre­optic and 5G connections span­
sympathies for Russia and China. (He European countries prioritised east­west ning the region may take a while. But small
changed his pro­Russian stance only after corridors—those leading to Moscow. In re­ projects are under way, says Viljar Veebel
Vladimir Putin invaded Ukraine.) cent decades their growing wealth made it of the Baltic Defence College in Estonia.
Mr Zeman backs Mr Babis. The former possible to build a more omnidirectional One vehicle for co­ordination is the
prime minister got a boost a few days be­ web of cross­border links, but national Three Seas Initiative (3Si), a forum of 12 EU
fore the election, when he was acquitted in squabbles got in the way. Now the war in countries spanning the Adriatic, Baltic and
a long­running fraud trial related to €2m Ukraine is prompting the region to push Black seas, founded in 2015. Its investment
($2.2m) in EU subsidies to one of his busi­ ahead with its neglected connections. fund, set up in 2019, says it has raised at
nesses. Piotr Fiala, the current centre­right Eastern Europe’s energy and trade flows least $1.2bn. That is pocket change in the
prime minister who beat Mr Babis in 2021, look very different today from a year ago. infrastructure world, and its flagship in­
is tacitly backing Mr Pavel, who promises In April Russia cut off gas supplies to Po­ vestments so far are small. (They include a
to back progressive social policies. land and Bulgaria, forcing them to fall back Polish locomotive­leasing company, a data
Otto Eibl, a political scientist, says Mr on connections with others in the region. centre in the Baltics and some solar farms.)
Babis plays on voters’ fears of inflation and When Ukraine’s Black Sea ports were But central and eastern Europe has to date
the war in Ukraine. As prime minister he blockaded, trains and trucks could handle mainly been a recipient of western Euro­
led the country poorly during the pandem­ only a fraction of its grain exports. The pean largesse; 3Si is the region’s first col­
ic. An admirer of Donald Trump, he handed country’s largest steelworks had to ship its lective attempt to invest its own money.
out MAGA­style red baseball caps embla­ goods by rail to ports in Poland—and re­ Despite their obvious benefits, infra­
zoned with the slogan “Strong Czechia”. He load them at the border, where the railway structure links have often been held up by
embraces anti­immigrant policies and fos­ changes from Russia’s 1.52­metre gauge to bickering. The idea for a highway from the
tered close ties with Viktor Orban, Hunga­ Europe’s 1.435­metre one. Some worried Lithuanian port city of Klaipeda to Thessa­
ry’s populist leader. that naval conflict in the Black Sea could loniki in Greece appeared in 2006. It took
Rural, less­educated and poorer Czechs shut Romania’s largest port, Constanta. nearly a decade to sign a deal to begin work
are drawn to Mr Babis’s populism. Urban, The turmoil has led to a flurry of new on Via Carpathia, slated to open in 2025.
educated, better­off and younger voters infrastructure plans. In May Denys Shmy­ The expected debut of Rail Baltica, the Bal­
backed Mr Pavel or Ms Nerudova in the first tic countries’ 870km high­speed railway,
round. Many of Ms Nerudova’s voters will “Three Seas” was pushed back from 2026 to 2030 after
FINLAND
switch to Mr Pavel. Mr Babis, who owns NORWAY members Estonia, Lithuania and Latvia squabbled
SWEDEN
two newspapers and the country’s biggest 500 km over management, leading the EU to
Tallinn
commercial­radio station, kicked off his threaten to block funding for the €6bn
mudslinging right after the first round’s re­ Balt ic ESTONIA ($6.5bn) project. “We will have flying cars
DENMARK Riga RUSSIA
sults were announced. He insinuated that S ea LATVIA before we get Rail Baltica,” says Mr Veebel.
Mr Pavel was a spy and compared him to Klaipeda LITH. For 3Si, the main roadblock is not mon­
Moscow
Mr Putin. He also claimed that he had Vilnius
ey but political solidarity. Croatia and the
hailed the Red Army’s invasion of Czecho­ POLAND Czech Republic, among others, worry that
GERMANY BELARUS
slovakia in 1968; Mr Pavel was seven years Ukrainian territory
Poland could use the forum to grind its axe
Silesia
old at the time. Mr Babis later apologised. CZECH REP. annexed by Russia with the EU. Those fears are calming as
Ostrava Lviv on Sep 30th 2022
Dirty campaigns are not new to Czech more powerful backers come on board.
politics. In the presidential campaign of Kosice SLOVAKIA UKRAINE
This summer America confirmed it will in­
AUSTRIA
2008 conservatives attacked Jan Svejnar, a SLOVENIA
HUNGARY vest $300m in the fund. Japan, Germany
liberal, for having a non­Czech­speaking CROATIA ROMANIA and the European Commission have also
wife. In the run­up to a parliamentary elec­ Krk Island shown interest in the initiative. As ships
Ad

Constanta
ria

SERB.
tion in 2021, Mr Babis called the rival Pirate full of grain queue up in the Black Sea, the
tic

B l a ck S ea
IT

Party a “pro­migrant neo­communist BULGARIA war is showing that better connectivity in

Se
AL

a
Y

group”. No doubt he has similar lines in Thessaloniki

TURKEY central and eastern Europe will pay off far
store for Mr Pavel. n GREECE beyond the region itself. n

012
 The Economist January 21st 2023 Europe 31

Charlemagne The Never­Never Land club

Countries that consider themselves “neutral” must adapt to a new world

As war broke out on the continent, Sweden and Finland took
the opportunity to join their non­neutral friends. Both applied to
join NATO in May after public opinion swung against military
standoffishness. The alliance wants them, but all 30 existing
members need to ratify their accession. Turkey’s autocratic presi­
dent, Recep Tayyip Erdogan, is holding Sweden to ransom, de­
manding it extradite Kurdish militants who have sought asylum
there. A deal may be near; even if not, the Finns and Swedes have
already picked their side. Finland has said it may offer advanced
Leopard 2 battle tanks to Ukraine alongside other allies. Both Fin­
land and Sweden have signed a security agreement with Britain,
and are pondering one with America. (Arguably, joining the EU
was itself a renunciation of neutrality, given that the club’s rules
include a mutual­assistance clause.)
Finland has long sought to distance itself from the idea of neu­
trality, which was a reminder of how the Kremlin once circum­
scribed its foreign­policy choices. At least its “non­alignment”
was not a way to scrimp on defence. Finland dedicates 2% of GDP
to its military budget, in line with NATO guidance that only a hand­
ful in the alliance have met of late. That is perhaps unsurprising
for a country with a 1,340km (830­mile) border with Russia. For
other neutrals, the scrimping is part of the appeal. Sweden spends

G overnment policies come and go, the victims of trends and

fickle public opinion. The Swiss attachment to neutrality has
had more staying power than most. Historians disagree whether it
1.3% of GDP, on a par with much­criticised Germany. Malta, Swit­
zerland and Austria dedicated under 1% of GDP to their armed forc­
es before the war; Ireland is the stingiest in the EU, at just 0.3%.
was formally adopted in 1515 or merely in 1648, or perhaps even as Apart from the Nordics, the neutral status quo looks set to en­
recently as 1815. Either way the idea that Switzerland should steer dure without much questioning. Ireland has gone through dip­
clear of foreign military entanglements has proved nearly as dur­ lomatic contortions to proclaim itself “not politically neutral, but
able as its Alpine backdrops and discreet banks. Other countries militarily neutral”. Instead of sending guns to Ukraine it has deli­
have copied it. Before Russia attacked Ukraine last February, half a vered first­aid kits. Austria and Switzerland have reaffirmed their
dozen European countries described themselves as neutral. Once commitment to the doctrine. Both have offered their services as
the approach had an enlightened tinge to it: the virtuous foreign conveners of peace talks between Russia and Ukraine, a much­
policy of well­run Nordic types. These days it looks hopelessly hyped traditional role for neutrals (other countries’ posh hotels
naive, if not worse. Some countries have binned the concept while are available if and when talks are afoot). “Austria was neutral,
others are sticking to their pacifist guns. Austria is neutral, Austria will also remain neutral,” said its chan­
Whether Switzerland—Europe’s 20th­most­populous country, cellor, Karl Nehammer, while pledging to boost military spending.
with just 9m people—is pitching in to a conflict may scarcely be Neutrality is popular and enshrined in its constitution.
noticeable to either belligerent. Yet the question has gained unex­ Switzerland, for its part, recently reviewed its neutrality doc­
pected importance in recent weeks. The Bern government’s at­ trine and found it to be suitable. It would aid Ukraine if the UN Se­
tachment to neutrality includes not sending arms made in Swit­ curity Council condemned Russia—not too likely, given that Rus­
zerland to war zones, nor allowing countries that had previously sia wields a veto there. Its most important contribution to the war
bought Swiss arms to re­export them without prior approval. Such effort has been largely to mirror sanctions imposed by the EU.
authorisation has been refused to Spain and Germany, which want These have hobbled the trading of Russian oil in Geneva and fro­
to forward Swiss­made kit and ammunition in their arsenals to zen piles of oligarch cash stashed in Zurich. But populists have
help Ukraine fend off Russia. Swiss obstinacy has been lambasted criticised even this as drifting away from non­alignment.
by those on the front lines. “Ukraine sees this not as neutrality but
as undermining our defence capabilities,” tweeted Anton Gerash­ No war please, we’re neutral!
chenko, a government adviser in Kyiv. Neutrality looks increasingly like a simplistic answer to complex
Reports suggest the Swiss may find a way to circumvent their geopolitical questions. The security of Europe is being fought over
principles. That would be the latest blow to a policy which has not in Ukrainian trenches. Any country on the continent declaring it­
aged well. Five other countries have adopted some variant of neu­ self neutral about the outcome is announcing that its own safety is
trality in Europe, for different reasons. Finland and Austria were of scant concern. Non­neutrals resent this. Their guns are implic­
lumped with it to shake off the Soviet yoke: proclaiming them­ itly defending the likes of Austria, which get to splurge on more
selves neutral was a condition for regaining their freedom after butter and boast of their virtue to boot.
the second world war. Sweden has claimed neutrality for over two Countries that declare themselves neutral can change their
centuries; tiny Malta adopted it in 1980 to avoid getting crushed by minds. Congress was so determined that America should remain
cold­war rivalries. Ireland, out of the way and close to both Amer­ unaligned that it proclaimed its neutrality in 1935, 1936, 1937 and
ica and Britain, has been neutral since at least the 1930s. (Cyprus is 1939. Yet by 1941 it had joined the allies. Switzerland or Ireland
an honorary member of the club: it is not in NATO, but only be­ throwing its weight behind Ukraine is unlikely to have the same
cause Turkey would block its accession.) effect. But it would be a welcome decision to join the real world. n

012
 32
United States The Economist January 21st 2023

Incomes es. An alternative, preferred by the Federal

Reserve but not by headline writers (per­
The unstuck middle haps because of its ungainly name), is the
personal­consumption­expenditure (PCE)
price index. One crucial distinction is how
often they are re­weighted to reflect chang­
ing consumption patterns: only once every
two years for the CPI; monthly for the PCE.
WASHINGTO N, DC
The latter is a more accurate snapshot of
Incomes are rising in America, especially for the poorest
how people spend their money. To expand

C ardi B, better known for her punchy

hip­hop than her economic analysis,
recently observed that the price of a lettuce
upside­down post­pandemic period. In
the longer run, the range of estimates is so
vast that some economists argue that me­
on Cardi B’s point, the CPI in effect as­
sumes that people go on buying lettuce
even after it has become a luxury item,
had soared to as much as $7. “If I think that dian incomes have stagnated for half a cen­ whereas the PCE allows them to replace it
shit is crazy, I can only imagine what mid­ tury whereas others insist that the Ameri­ with more reasonable veggies.
dle­class people or people in the hood are can dream of upward mobility is alive and Such substitution adds up. Since April
mother [bleep] thinking,” she said. Ms B is well. A closer look at the data points to­ 2020, when inflation began to perk up, CPI­
right. Paying that much for a head of let­ wards the more optimistic end of the spec­ based wages are down by over 3%, whereas
tuce is indeed crazy. Inadvertently or not, trum, albeit with some big caveats. PCE­based wages are roughly flat. Over
she also opened a window onto a more Much of the confusion stems from dif­ time the differences are even more stark.
fraught topic than the price of greens: are ferent ways of measuring prices. Media When adjusting by the CPI, people appear
incomes in America going up or down? coverage of inflation typically focuses on to make a bit less today than in 1970. Ad­
Answering this question might seem the consumer­price index (CPI), a gauge of justed by the PCE, wages are about a quarter
easy. Hourly wages today are, on average, prices for a wide array of goods and servic­ higher today (see chart 1 on next page).
about 15% higher than on the eve of the That may not seem like much to cheer
pandemic—the biggest increase over any about, given that it works out to real wage
three­year period since the early 1980s. But → Also in this section increases of less than 0.5% per year for the
soaring prices for everything from vegeta­ past half­century. Yet it is not bad. The
33 Joe Biden’s filing system
bles to vehicles has reminded consumers slowness is overstated by a dreadful
that what really matters is how much they 34 The distracted far­right stretch for workers from 1970 to the
can actually buy with their paycheques. mid­1990s, a period when unions broke
35 Cash for everyone
When looking at real earnings—that is, ac­ down and companies spent heavily on the
counting for inflation—the picture is more 36 Whacking children in school labour­saving technology of the modern
complex. If anything, low­income Ameri­ workplace. Partly thanks to that, since
37 Lexington: George Santos
cans appear to have fared the best in the 2000 income growth has consistently been

012
 The Economist January 21st 2023 United States 33

faster, working out to nearly 1.5% a year. moving not only to better­paid work but
That puts income growth in America near Before and after 2 also to more productive employers.
the top among large, wealthy countries. United States, cumulative growth There are, however, two worries. The
The more serious problem is that al­ in average income, by income quintile, % first is whether the good times can contin­
though average incomes look pretty good Lowest Middle three Highest ue. Current wage growth is predicated on
in America, many people have not done so an ultra­tight labour market, which might
well. The gains have been disproportion­ Before transfers After transfers stop if recession strikes (as many soon ex­
ately captured by the rich. In a report in and taxes and taxes pect). Second, although the poorest Amer­
November the Congressional Budget Office 120 120 icans are doing well, the middle class is
(CBO) examined changes in incomes—a 90 90 seeing less uplift. That even appears to be
metric that is broader than wages alone, in­ the case after accounting for inflation.
60 60
cluding extras such as social insurance and Normally, rising prices hit the poorest the
capital gains. From 1979 to 2019 it found 30 30 hardest. But research by Xavier Jaravel of
that real incomes for the highest quintile 0 0 the London School of Economics shows
of households rose by 114%. Income -30 -30 that over the past couple of years inflation
growth for the remaining four­fifths of 1979 2000 19 1979 2000 19
has been particularly cruel for middle­in­
households was, by contrast, a paltry 45%. Source: CBO
come tiers in America, in large part be­
Taxation and means­tested transfers cause they seem to be more reliant on cars,
mitigate some of this. The lowest quintile and hence petrol, for getting to their jobs.
of income earners see their tax bills shrink come quintiles changes when, for exam­ Unlike $7 lettuce, that is not something
while also receiving more benefits, espe­ ple, children make more (or less) than their they can quickly opt out of. It would also
cially health insurance. Medicaid, which parents. Studies show that nearly two­ imply that while income stagnation in
covers some medical costs, is the country’s thirds of children born into the lowest America is a myth, the squeezed middle is
largest and fastest­growing transfer pro­ quintile of America’s income earners— all too real. n
gramme. As a result after­tax income many of them the children of immi­
growth for the lowest quintile since 1979 grants—eventually rise to higher strata.
amounts to 94%, roughly twice their pre­ Such movement is a wonderful thing. Un­ Joe Biden’s messy filing
tax rate (see chart 2). But there are sharp fortunately, there is not more of it. Raj
limits to this redistribution. Chetty of Harvard University has found Sloppy Joe
that America’s rate of upward mobility is
A middle muddle roughly half that of Canada’s.
Shifts in taxation have failed to keep up So far, this is a mostly bleak assessment
with the explosive growth in incomes for of income trends in America. But are
WASHINGTO N, DC
America’s wealthiest. The share of post­tax things now improving? The recent CBO re­
The presidential mislaying of classified
incomes going to the top 1% of earners rose port shows that the distribution of after­
documents is infectious
from 7% in 1979 to 13% in 2019, while the tax income was more or less steady in the
share going to middle earners has fallen.
For all but the lowest quintile, taxation has
become less of an equaliser over time. Tax
decade before the pandemic. That is, al­
though America was not getting more
equal, it was, for the first time since 1979,
P RESIDENTS HAVE mishandled official
documents since long before Donald
Trump was flushing them down White
rates have declined for the wealthiest, giv­ not getting much more unequal. Even be­ House toilets and hoarding others at Mar­
ing them a bigger share of the country’s fore taxes, wage trends were a little rosier, a­Lago. Several took files (mostly non­clas­
post­tax incomes. That leaves America too. In a paper published in October, Clem sified) with them when they left the White
with the most unequal income distribu­ Aeppli of Harvard and Nathan Wilmers of House, says Jeremi Suri, at the University
tion in the G7 group of rich countries. the Massachusetts Institute of Technology of Texas at Austin, as keepsakes or for their
Believers in the promise of America will found that earnings inequality reached a memoirs. Occasionally, as with Lyndon
note one major flaw in the foregoing analy­ plateau after 2012. The gap between top and Johnson’s obfuscation of classified Viet­
sis: the rich as a group may be getting rich­ middle­income workers persisted, but nam papers, they did so to keep unflatter­
er, but the rich are not necessarily the same low­wage earners began to catch up to the ing information out of the public eye. The
people today as they were yesterday. Put middle. This, they concluded, stemmed most infamous example, at least until the
more technically, the composition of in­ from a tight labour market: unemploy­ Trump saga, was the wiping of White
ment fell steadily from nearly 10% in 2010 House recordings in 1973, during the Wa­
to 3.5% in early 2020, a five­decade low. tergate investigations into Richard Nixon.
Pick your deflator 1 These trends appear to have been am­ Although the recent discovery of classi­
United States, real hourly earnings* plified since the pandemic. Just before co­ fied papers in Joe Biden’s office and home
January 1970=100, calculated using: vid, wages for the bottom half of income probably has less sinister motives, it is em­
130 earners were growing roughly half a per­ barrassing because he had recently berated
PCE† deflator centage point faster than those for the up­ his predecessor for doing something simi­
120
per half, according to data from the Federal lar. The headlines got worse when the pres­
110 Reserve’s Atlanta branch. Over the past ident sought to reassure the public by
100 year the outperformance for the bottom mentioning that he stored his Corvette in
90 half has widened to about two percentage the same locked garage as the documents.
points. David Autor of MIT and Arindrajit It did not take long for pundits to contrast
80
CPI‡ deflator Dube and Annie McGrew, both of the Uni­ the fbi raid on Mr Trump’s home with
70 versity of Massachusetts, find that these spoof images of Mr Biden driving a sports
1970 80 90 2000 10 22 gains have been caused almost exclusively car with documents flying out of the back.
*Production and non-supervisory employees by job switchers at the low end of the in­ A week before the midterm elections,
†Personal-consumption expenditures ‡Consumer-price index
Sources: BEA; BLS
come ladder. This, they argue, could bene­ several classified documents were found
fit the economy, because Americans are by Mr Biden’s personal lawyers as they

012
 34 United States The Economist January 21st 2023

cleared out his former office at the Penn Bi­ recover the (hundreds of) documents held (DoJ) against the insurrectionists. The trial
den Centre, a think­tank in Washington, in his home and it took many months, and kicked off on January 12th and could last
dc. This was not made public until this a search by the fbi, to get hold of them. Mr for weeks. Two members of the Oath Keep­
month. Then Richard Sauber, a White Trump made a strange defence, arguing ers, another far­right group, were found
House lawyer, announced the discovery of that he had declassified all the documents guilty of the same charge in November, and
a “small” second batch, this time in the ga­ he took. Mr Biden’s team claims to have could face up to 20 years in prison.
rage and an adjacent room in the Bidens’ handed over the first batch of documents After January 6th, 2021, many far­right
family home in Wilmington, Delaware. as soon as they were discovered, and the groups were temporarily scared into si­
Two days later Mr Sauber announced that documents in the second location were lence. But a new report from the Armed
five more pages had been found. found as part of a search of Mr Biden’s Conflict Location & Event Data Project
For Democrats, who have insisted that properties instigated not by an fbi warrant (ACLED), which tracks political violence,
Mr Trump should face criminal prosecu­ but volunteered by Mr Biden himself. suggests that these groups are mobilising
tion for his mishandling of classified pa­ Uncomfortable questions remain for again in different ways. ACLED began to
pers, this is horrible news. For Republi­ Mr Biden. How did documents from the collect data on America in 2020. Its recent
cans, it is an unexpected gift—one enjoyed Obama presidency get to these places? Why report tallied events between the start of
by Mr Trump. “When is the FBI going to were they (still) there? What did they con­ that year and the end of 2022 organised by
raid the many homes of Joe Biden, perhaps tain? Why did it take until last week for all scores of far­right groups, including the
even the White House?” he asked on Truth this to be publicly revealed? The newly em­ Proud Boys and Oath Keepers. Their activi­
Social, his social­media platform. Other powered Republicans in Congress will ties include protests, recruitment, train­
Republicans have demanded that the jus­ make it their mission to pursue the an­ ing, the dissemination of propaganda and
tice department treat Mr Biden with the swers and pick at any inconsistencies. The acts of violence.
same rigour as it has Mr Trump. In Novem­ prosecution of Mr Trump for mishandling The report shows that the issues moti­
ber the attorney­general, Merrick Garland, classified documents, which Democrats vating far­right groups are shifting. Prot­
appointed a special counsel to oversee in­ have pressed for, now seems less likely. n ests against lesbian, gay, bisexual and
vestigations involving the former presi­ transgender (LGBT) Americans and their
dent. Sure enough, on January 12th Mr Gar­ rights are on the rise. The number more
land appointed a special counsel, Robert The far right than tripled in 2022—and they accounted
Hur, to review Mr Biden’s case, authorising for about two­thirds of all far­right prot­
him to prosecute any federal crimes aris­ Proud, ests in December. The geographical bound­
ing from the investigation. Mr Hur was ap­ aries of such sentiments are also expand­
pointed by Mr Trump as attorney­general distracted boys ing. Activity among far­right groups was
for Maryland, so seems fairly independent. documented in 18 states last year—up from
House Republicans have also an­ six in 2021. Last June, for example, mem­
LOS ANGE LES
nounced an investigation of their own. bers of a white­supremacist group were
How America’s far right flits from issue
James Comer, the Oversight and Account­ discovered in a lorry in Idaho. They had
to issue
ability Committee chair, has demanded planned to riot at a gay­pride parade.
the Biden administration hand over visitor
logs to the Wilmington home. The White
House denies these exist—presidents do
M ORE THAN two years after supporters
of President Donald Trump invaded
the Capitol building, several of his most ra­
An examination of the issues animat­
ing right­wing extremists doubles as a ti­
meline of the culture wars. After George
not normally keep records for private resi­ bid fans are facing punishment. The for­ Floyd was murdered in May 2020—and
dences. Asked on CNN why the committee mer leader of the Proud Boys, and four of many Americans took to the streets to
was not investigating the files found in Mr his associates, are standing trial for sedi­ protest—demonstrations staged by far­
Trump’s home, Mr Comer said that his big­ tious conspiracy, or plotting to overthrow right groups against the Black Lives Matter
gest concern was, “how there’s such a dis­ the government. It is the most serious of­ movement surged. Pro­Trump and “stop
crepancy in how former President Trump fence levied by the Department of Justice the steal” rallies proliferated before the
was treated, by raiding Mar­a­Lago, by get­
ting the security cameras, by taking pic­
tures of documents on the floor, by going
through [former first lady] Melania’s clos­
et. That’s not equal treatment.”
The appearance of hypocrisy, and the
suggestion of a double standard among in­
stitutions such as the Justice Department,
the fbi and the National Archives are at the
centre of much of the public and (right­
wing) media storm. Inevitably, baseless
claims have been made tying the papers in
the Bidens’ home to the controversy sur­
rounding their son, Hunter. An article on
Fox’s website speculated that, “Malign ac­
tors may well have gained access. The pres­
ident’s son, Hunter Biden, who is under
criminal investigation for influence ped­
dling schemes involving foreign entities,
had routine and ready access.”
Allies of Mr Biden have emphasised
that the two cases are fundamentally dif­
ferent. Mr Trump tried to block attempts to The daft knight

012
 The Economist January 21st 2023 United States 35

Universal basic incomes not qualify. Local governments generally

What’s next? do not have the data to even identify the
United States, % of far-right protests by issue Winning the people most in need.
That helps to explain why Cook Coun­
80
lottery ty—together with several other municipal­
ities—has turned to Give Directly, which
60 until recently mostly worked in poor coun­
Against BLM* Against LGBT
CHICAGO
tries using money from donors. According
What no-strings cash schemes say
40 to Sarah Moran, the charity’s American
Against about America’s safety net
abortion country director, working in America re­
20
T here were no giant cheques, but the
people who filed into a conference
room at the Cook County building in
quires making trade­offs. In its schemes in
Kenya, the charity would sign up every
family in a single village—local residents
0
downtown Chicago to fill in forms on a would help guard against fraud. Running a
2020 21 22 snowy morning late last year had nonethe­ lottery open to such a large number of peo­
Source: “From the Capitol riot
to the midterms”, ACLED, 2022 *Black Lives Matter
less won the lottery. On December 15th, ple however requires more formal checks,
3,250 people were paid $500, either on spe­ but having too many undermines the sim­
cial debit cards or by direct deposit into plicity of the system. Under the scheme,
2020 presidential election and continued their bank accounts. They were picked ran­ the winners are asked to provide bank
after Mr Trump’s defeat, culminating in the domly from over 230,000 applicants by statements or payslips to prove eligibil­
attack on the Capitol. Far­right groups then Give Directly, a charity that has been ity—but people who cannot supply them,
banded together to protest against covid­19 brought onto administer the county’s uni­ such as undocumented immigrants, can
vaccines and public­health measures to versal basic­income scheme. qualify by being interviewed. An algorithm
curb the pandemic. After a leaked opinion Applicants had to meet only three crite­ is used to try to spot fraud—such as people
suggested that the Supreme Court was ria to qualify: they needed to live in Cook applying with multiple identities.
poised to overturn Roe v Wade, rescinding County (which covers the city of Chicago The recipients filling in their forms last
the constitutional right to an abortion, an­ and a large portion of its suburbs) and have year were, unsurprisingly, delighted.
ti­abortion events briefly dominated far­ a household income of less than 250% of Among them was Jasper, a 32­year­old fa­
right activity, but subsided around the the federal poverty line—about $69,000 ther of three who, with his disabled wife
time it became clear that support for abor­ for a family of four—and not be claiming and children, has been living in various
tion bans would not benefit the Republi­ from any other similar schemes. The $500 family homeless shelters for several years,
can Party in the midterm elections. payments will continue monthly for two after losing his factory job and then, when
The far right thus fixates on whatever years. Recipients can do whatever they he failed to pay his subsidised rent, his sec­
controversy is dominating politics at the want with the money, and will continue to tion 8 housing. “When I first got the email,
time. Ever since January 6th, experts sug­ receive it as long as they stay in the county. I thought it was a scam”, he says. Without a
gest, extremists have been searching for Such universal basic­income (UBI) permanent address, he has struggled to
another cause that will unite the various schemes have been adopted by dozens of find a new job or even open a new bank ac­
strands of a historically decentralised net­ local governments across America in the count; without an income, he cannot get a
work of far­right groups. There are signs past couple of years. They are paid for by new home. Food stamps cover the family’s
that some centralisation is happening. The the flood of money made available by the basic needs, and he intends to save the pay­
data show a modest increase in far­right federal government for relief schemes dur­ ments until he has enough to put down a
activity over the past year, from roughly ing the worst of the pandemic. The Cook deposit for an apartment, and in turn start
780 events in 2021 to 800 in 2022. But the County programme is by far the largest yet. looking for jobs. The UBI will help him; but
number of groups organising these events Some revenues from the taxation of mari­ such people perhaps should not have to
is shrinking as people gravitate towards a juana have been set aside to continue the win a lottery to get assistance. n
small number of organisations such as the scheme when the federal money runs out.
Proud Boys, the Patriot Front and the anti­ Toni Preckwinkle, the county president,
Semitic Goyim Defence League. says that her aim for the scheme is to test
Overall, though, the story is one of de­ “good ideas that percolate up from the bot­
cline. The only state where more outfits tom”, with the hope that “eventually the
were active in 2022 than in 2021 was Arizo­ federal government takes them over.” Yet
na, where about 90% of all recruitment to in a way, the appeal of creating UBIs comes
far­right groups last year took place. That is not out of hope, but out of frustration: the
perhaps not shocking: Arizona’s midterm failure of the American welfare system to
elections were saturated with Republican protect the poorest people.
candidates for statewide office who ped­ Americans who fall on hard times can
dled conspiracy theories, including the access a panoply of different schemes, at
“Big Lie” that Mr Trump won the presiden­ both a local and a federal level. There are
cy in 2020. ACLED’s data suggest that the disability benefits; food stamps; section 8
far­right has largely moved on from “stop housing vouchers; Medicaid; and unem­
the steal” rallies. Hostility to gay and trans ployment insurance (which is paid for and
Americans may be a passing fad, too. administered by states, but in crises often
Americans who don’t belong to extremist expanded federally). Most of this comes
groups are moving in the other direction. with an extraordinary amount of bureauc­
Last year Congress passed the Respect for racy, however, and many people fall
Marriage Act, which recognises same­sex through the cracks—for example, because
unions. The far­right’s paroxysms may be a they do not have a permanent address, or
last stand in a losing battle. n they fail to file the right forms, or they do Started out with nothing

012
 36 United States The Economist January 21st 2023

Education, allegedly Consent from parents also perpetuates

violence in schools. Children from blue­
Batty collar families are expected to be deferen­
tial and compliant, according to research
by sociologist Annette Lareau. Discipline
is paramount in working­class homes
where parents tend to have little time. And
some spank more than others. Black par­
WASHINGTO N, DC
ents use corporal punishment more than
Corporal punishment is far too common in one state in particular
twice as much as white ones. They smack

A ccording to this year’s student hand­

book, wearing “sagging pants” or being
too touchy with a crush in the hallway is
is the second Monday of the school year
and parents have to renew the request an­
nually. The opt­out policy means some
their boys to teach them not to misbehave
on the streets, where the consequences
could be deadly, says Ellen Reddy, the head
enough to get a teenager paddled by the parents do not even realise that they have of a coalition to end corporal punishment
school principal in Union County, Missis­ agreed to let their child be spanked. in Mississippi. “The black community
sippi. A first­time dress code infraction, In 2020 Kiory Baugh, then an ace 2nd needs a narrative change around our rela­
public display of affection, repeated tardi­ grader in Grenada, Mississippi, was pad­ tionship with our children,” she says. “We
ness or failure to hand in homework three dled by her principal even though she was must undo those beliefs.”
times in nine weeks makes children eligi­ on the no­paddle list. When Kiory came For reformers like Ms Reddy there is lit­
ble for corporal punishment. Beatings in home from school she was in so much pain tle hope the law will change. Back in 1977,
the state’s schools are not uncommon. In she could not sit down. The school told Ju­ when corporal punishment was legal in all
2018, the year for which the latest numbers lia, her mother, there was no need to take but two states, the Supreme Court ruled in
are available, 69,000 American children her to the hospital. Julia took her to the Ingraham v Wright that hitting children in
were hit by public­school staff—30% of emergency room anyway, where the doctor school did not qualify as “cruel and unusu­
them in Mississippi. Though intentionally told her he would have called the police if al punishment”. Children, the opinion de­
wounding a pet cat is punishable by six she had been hit outside of school. She clared, were not protected by the 8th
months in prison, teachers in Mississippi missed seven days of classes to recover. amendment, which spared prisoners from
can legally strike kindergarteners with After Julia complained to the district, Kio­ physical abuse. Many have since chal­
wooden paddles for speaking out of turn. ry’s teacher failed her. That summer Julia lenged corporal punishment under the
Corporal punishment in public schools moved the family to Arkansas, where cor­ substantive due process clause, arguing
is legal in 19 American states; in private poral punishment is less common. that the practice violates a child’s right to
school it is permitted in all but two. For a bodily autonomy. The only judicial circuit
wealthy country that is unusual. In Britain That’s a paddlin’ in the country that has ruled against that
the practice was banned in 1986. Canada Why don’t American schools spare the rod? argument is the Fifth circuit, representing
did away with it in 2004. In all of Europe Teachers in states with greater shares of Louisiana, Mississippi and Texas. Making
and most of South America and East Asia it evangelical protestants are more prone to paddling unconstitutional would require a
is outlawed. But since there is no federal paddling. In the 1990s Irwin Hyman, a mood­change among judges in the Deep
prohibition on the books, American stu­ school psychology professor at Temple South or a reversal of precedent in the Su­
dents, mostly in the South, can still be hit. University, attributed the link to the reli­ preme Court. Neither seems imminent.
Though others disregard it, America is the gious right’s obsession with sin and pun­ Instead, advocates have turned to poli­
only country not to have ratified the United ishment. But the racial history of physical tics. In 2019 the Southern Poverty Law Cen­
Nations’ treaty to protect the rights of chil­ retribution is impossible to ignore in the tre, a civil­rights group, got the Mississippi
dren, which prohibits the practice. Deep South. A 2021 paper published in So- legislature to outlaw hitting disabled chil­
The legal parameters for corporal pun­ cial Problems found that each historical dren in public schools. In recent years Lou­
ishment in Mississippi are vague. School lynching of a black person increased the isiana, Oklahoma and Tennessee have
boards and superintendents tend to set the incidence of modern­day corporal punish­ done the same. While the unpalatable im­
guidelines. But according to Mississippi ment for black students in that county by age of smacking a child in a wheelchair res­
state law, as long as the act is not deemed 7.5%. The effect for white students was onated with state legislators, forbidding it
“malicious”, teachers and administrators smaller and statistically weaker. for all children is trickier. That is where
cannot be held liable for harm done to chil­ Congress could come in. In 2021 Democrats
dren. There are no statutes to specify in the House and Senate introduced a bill
which instruments can be used, how many States frights to eliminate corporal punishment in
times a day a child can be paddled or how United States, number of public school students schools, but the proposal had few co­sign­
old they must be. who received corporal punishment, ’000, 2017-18 ers and never got a hearing.
In Mississippi black children bear the 2.5 5 10 15 20 Though the Union County school dis­
brunt of the beatings. Though just under Nil trict superintendent claims that corporal
AK ME
half of the state’s students are black, in punishment is “seldom used”, government
WI VT NH
2018 nearly two­thirds of those hit in data show that in the 2017­2018 school year
school were. The majority were boys and WA ID MT ND MN IL MI NY MA there was a paddling nearly once a day at
one in six were disabled. Parents can put OR NV WY SD IA IN OH PA NJ CT RI the county high school. Viral videos from
their children on the “no paddle list”—a Florida and Georgia show wailing five­ and
CA UT CO NE MO KY WV VA MD DE
practice encouraged by a school in Ken­ six­year­olds begging the grown­ups not to
tucky if the child “bruises easy”, suffers AZ NM KS AR TN NC SC DC hurt them. Those who campaign against
from severe depression or has been physi­ OK LA MS AL GA
school beatings in America hope that one
cally abused—but amid the back­to­school day there will be parity. Behaviour that
chaos many forget to submit the necessary HI TX FL counts as criminal assault if done to an
form. The deadline to do so in the Coving­ Source: Office for Civil Rights, Department of Education
adult, they argue, should not be permitted
ton County, an hour southeast of Jackson, in the classroom. n

012
 The Economist January 21st 2023 United States 37

Lexington The end of trust

George Santos is the right man for a democracy in which winning matters above all
not exactly hiding his light under a bushel. “You can’t make this
stuff up!” Mr Santos declared at that rally— surely a contender for
his most shameless lie.
This is why the outrage of the press and the Democrats over Mr
Santos is so poignant. Since he ran again, and won, they have not
just torn away his veil of autobiographical humbug but turned his
deceit into a national scandal. Yet given Mr Trump’s enduring suc­
cess at warping reality, this blow for justice seems even less satis­
fying than catching Al Capone for tax evasion. It is more like
hounding one of Capone’s accountants for jaywalking.
None of this excuses Mr Santos. His lies do matter, but not real­
ly for what they reveal about him. That such a person should rep­
resent Americans in Congress is a national disgrace. But it is also
fitting, because he represents something true and awful, particu­
larly about the Republican Party, yet also about America, a nation
lousy with misinformation, also known as deceit.
“In law and in journalism, in government and in the social sci­
ences, deception is taken for granted when it is felt to be excusable
by those who tell the lies and who tend also to make the rules,” Sis­
sela Bok, a philosopher, wrote in her landmark book “Lying: Moral
Choice in Public and Private Life”. Writing in the late 1970s after
the deceptions of Watergate and the Vietnam war, Ms Bok was try­

W hy do the many lies of George Santos matter? Maybe some

of Mr Santos’s constituents, in a district stretching along the
North Shore of Long Island, voted for him in November because
ing to make sense of the collapse of trust in American institutions.
Ms Bok added a new introduction a decade later, after the Iran­
Contra affair, and another a decade after that, once President Bill
they were impressed he was a volleyball star at Baruch College and Clinton admitted he had lied about sex with an intern. Now—in
worked at Goldman Sachs, though none of that is so. Maybe they the wake of the Iraq war and Mr Trump, Bernie Madoff, Q­Anon and
voted for him because he claimed to be Jewish, though he says Sam Bankman­Fried, after social media has turned so many Amer­
now, with Seinfeldian sangfroid, that he meant only that he was icans into deceptive brand ambassadors for themselves—it may
“Jew­ish”. If such qualities did in fact seem like reasons enough to be time for a fourth introduction.
cast a ballot for someone, well, the voters deserve what they got. Without trust in veracity—“a foundation of relations among
But those qualities were probably not why most voters sup­ human beings”—institutions collapse, Ms Bok wrote. She placed
ported him. During the campaign his opponent raised doubts particular responsibility for the fraying of trust on politicians,
about his biography, as did a local newspaper, the North Shore partly because political lies, even when thought trivial by those
Leader, which noted an “inexplicable” leap in his reported assets who tell them, spread so far and are so widely imitated. “When po­
from zero to about $11m in two years. The national press exposed litical representatives or entire governments arrogate to them­
some of his shady business dealings, and Democrats branded him selves the right to lie, they take power from the public that would
a “flat­out liar”. The Leader went on to endorse the Democratic can­ not have been given up voluntarily,” she wrote.
didate, saying it wanted to support a Republican but that Mr San­
tos “is so bizarre, unprincipled and sketchy that we cannot”. Chance on fire
What seems certain is that, unlike the Leader, the majority of That is what Kevin McCarthy, the speaker of the House, is doing by
voters in New York’s third district, which includes part of Donald defending Mr Santos as innocent until proven guilty of a crime. In
Trump’s home borough of Queens, did prefer a Republican regard­ prioritising his fragile majority, Mr McCarthy is conceding that
less of how sketchy he might be. They were swept up in a wave of power matters more to him than veracity. The speaker has blown a
discontent that washed through the Democrat­dominated, trou­ chance to restore some trust, in himself and Congress.
bled state of New York. The Republican agenda appealed to them, Joe Biden has a chance of his own. He is not the résumé­embel­
and Mr Santos, in his first votes, has supported it. lisher he was when he first ran for president, in 1987, and claimed
But there is an even more troubling frame in which to view degrees and honours he had not earned. But he still tells the occa­
what Mr Santos calls his “résumé embellishment”. The voters also sional fable about himself, and he has also lied at points about the
preferred Mr Santos, by a margin of more than seven points, at economy and the pandemic. Now it appears the White House mis­
least in spite of—though probably because of—a much more de­ led Americans by withholding news for two months that classified
structive and transparent whopper that he told, that Mr Trump documents were found in Mr Biden’s private office and home, the
won the 2020 presidential election. first of them almost a week before the midterms.
After running for the same seat in 2020 and losing, Mr Santos There is no sign Mr Biden deliberately held back documents, as
appeared at a rally in Washington on January 5th 2021, the day be­ Mr Trump did. But unless the White House comes up with a better
fore the attack on the Capitol, to declare that his own election, explanation for its long silence than it has so far, Mr Biden should
along with Mr Trump’s, had been stolen. Calling Mr Trump “the own the deception, and apologise. Mr Biden is no George Santos or
best president in modern history since Abraham Lincoln and Ron­ Donald Trump, but deceiving the public to advance a political
ald Reagan”, Mr Santos asked, “Who here is ready to overturn the agenda should not be graded on the curve. It is always wrong, and
election for Donald J. Trump?” As a teller of tall tales, the man was America could do with a demonstration of virtue in leadership. n

012
 38
Middle East & Africa The Economist January 21st 2023

Syria and Turkey trols more than 5% of Syria’s territory (with

a quarter of its population). Mr Assad
The art of forgetting would like the land back. It would also be a
diplomatic coup to restore ties with a
country that supported the opposition—
and which is a NATO member, to boot.
Recep Tayyip Erdogan, Turkey’s presi­
dent, has his own reasons. The 4m Syrian
DUBAI
refugees in Turkey have become deeply
Turkey is eyeing reconciliation with a Syrian regime it once sought to topple
unpopular, a useful issue for his oppo­

T HEY WERE once friends, but even a good

therapist might call their relationship
hopeless. For years they traded insults.
Whether it happens or not, the mooted
meetings say much about the state of Syria.
Twelve years after the first protests against
nents to hammer ahead of elections in a
few months’ time (see special report). His
ruling Justice and Development party
One used terms such as terrorist, butcher, him, you can view Bashar al­Assad in two would like voters to think that normalisa­
baby­killer; the other had his own choice ways. One is as a survivor who weathered tion with Mr Assad will solve the refugee
slurs, from thief and murderer to “small­ an insurgency, kept his grip on power and problem, even if, in reality, that is unlikely.
time employee of the Americans”. Words is slowly emerging from isolation. The Other countries are urging them on.
are just words, but there were actions too: other is as a beggar with few real friends One is Russia, which played a decisive role
it is hard to forgive a friend for supporting and a shattered country. Both are true. Mr in helping Mr Assad survive the civil war
men who want you dead. But in diplomacy Assad won the war but is losing the peace. and maintains deep (if complicated) rela­
everything can be forgiven, or—at least of­ It is easy to see why the Syrian president tions with Turkey. It would relish the sight
ficially—forgotten. wants to reach out to Turkey, which con­ of a Western ally embracing a Western pa­
With Russia’s encouragement, Syria riah. Also keen to play mediator is the Un­
and Turkey are edging towards rapproche­ ited Arab Emirates (UAE), which reopened
ment. Last month their defence ministers → Also in this section its embassy in Syria in 2018 and last year
and spy chiefs held their first public tête­à­ welcomed Mr Assad on his first visit to an
39 A battle over Israel’s Supreme Court
tête in more than a decade. It was followed Arab country since the uprising began.
by rumours that their foreign ministers 40 What’s in a name in the Gulf? Abdullah bin Zayed, the UAE’s foreign min­
might do the same—and then perhaps ister, flew to Damascus on January 4th for
40 Sudan’s resistance committees
their presidents. Or perhaps not: the for­ talks with Mr Assad.
eign ministers’ meeting has been repeat­ 41 South Africa’s failing railway Even if the leaders of Turkey and Syria
edly delayed. They have reasons to seek do meet, expectations would be low. Syria
42 Zimbabwe’s self­financing schools
reconciliation, but there are also obstacles. wants Turkey to leave the territory it con­

012
 The Economist January 21st 2023 Middle East & Africa 39

trols. Mr Assad would then need to defend January 18th, blocking the appointment of
the border and rein in the People’s Protec­ The ups and downs one of the new government’s senior minis­
tion Units, or YPG, a Kurdish militia that Syria, budget ters because of his conviction for tax fraud,
controls a chunk of Syria’s north­east. He is has exacerbated matters.
probably too diminished to manage that. In Syrian pounds, trn In US dollars*, bn Israel’s lack of a formal constitution
Even if he gets a photo­op with Mr Erdo­ 18 10 and its unicameral proportional­represen­
gan, in other words, it is unlikely to lead to 15
tation election system, which usually
8
a Turkish withdrawal. leads to coalitions with a number of small
12
This is becoming a pattern. Mr Assad is 6 but politically powerful special­interest
emerging from isolation in the Middle 9 parties, mean its Supreme Court has long
4
East, if not the West, but has little to show 6 been highly interventionist. Israeli politi­
for it. He no doubt hoped that restoring ties 3 2 cians of all stripes have bridled at the
with the UAE would open a gusher of aid court’s reach. Israel’s founding prime min­
0 0
and investment. It did not. Even if Ameri­ ister, David Ben­Gurion of the centre­left
2020 21 22 23 2020 21 22 23
can sanctions were not a concern (and they Labour party, skipped the Supreme Court’s
*Based on the official exchange rate
are), Emirati firms are not queuing up to opening. The new Netanyahu government
Source: Ministry of Finance
pour money into a war­torn kleptocracy. is made up largely of politicians who ob­
Old friends of Syria are not much help ei­ ject, on principle, to the interventions of
ther. Russia never invested much. It did growing number of anti­Assad Syrians, unelected judges. They are adamant that
snap up a few key sectors, such as sweet­ who reckon that desperate people scroung­ they are upholding true democracy.
heart deals for oil­and­gas exploration off ing for firewood do not make good revolu­ Israel’s judges disagree. On January 12th
the Mediterranean coast and phosphate tionaries. At least so far, the latter camp Esther Hayut, the president of the Supreme
mining. But these are meant to turn a profit seems correct. There have been scattered Court, in a rare public criticism of govern­
for Russia, not revive the Syrian economy. protests in Sweida, a restive southern ment policy, called Mr Levin’s plan “a mor­
province, but nothing that poses a real tal wound to the independence of the judi­
Cold, hard cash threat to the regime. ciary”. Were it to pass, said Ms Hayut, it
The same is true of Iran, which has strug­ That should be small comfort for Mr As­ would “change the democratic identity of
gled to keep its economy afloat since Do­ sad. He may no longer be persona non gra­ the country beyond recognition”.
nald Trump withdrew from the nuclear ta in regional capitals, but he has yet to find The changes would mean the removal
deal of 2015 and reimposed American sanc­ anyone willing to sink billions into re­ of any checks on the government’s power,
tions in 2018. Iran has been Syria’s main oil building his ruined country. If Syria is argues Suzie Navot, a constitutional law­
supplier, but in recent months it has sent coming in from the cold this winter, it is yer and vice­president of the Israel Democ­
less. What oil Iran can export it would rath­ only as a figure of speech. n racy Institute, a think­tank. The plan has
er send to China, which buys it at closer to rejuvenated the fragmented centre­left op­
the market price—and pays upfront. position. On January 14th around 80,000
The fuel scarcity has, in effect, brought Israel’s judiciary protesters gathered in Tel Aviv and other
Syria to a halt this winter. Blackouts stretch cities to fight the government’s plans.
for up to 22 hours a day, even in Damascus. Judges’ dread Mr Netanyahu is undeterred. The fol­
Drivers queue for hours to find petrol. In lowing day he described the election in No­
December the regime announced unex­ vember as “the mother of all protests” and
pected holidays because of energy short­ claimed millions had voted to reform the
ages. Schools and government offices were legal system. “We are not even touching
JE RUS ALE M
shut and public transport halted. The price the Supreme Court’s powers of administra­
The new government has the Supreme
of firewood has soared as families burn tive review,” insists the chairman of the
Court firmly in its sights
whatever they can to keep warm. Knesset’s law committee, Simcha Roth­
With few sources of hard currency, the
regime’s finances are a mess. (Syria’s main
export is Captagon, an amphetamine.) On
B INYAMIN NETANYAHU’S latest govern­
ment has lost no time getting to work.
Much attention has been paid to the far
man, a member of Religious Zionism, a far­
right bloc. He ridicules cries that these
changes will make Israel less democrat­
January 2nd it devalued the official ex­ right and ultra­religious parties in his co­ ic. He claims that no other court in the
change rate by 33%, to 4,522 Syrian pounds alition, which have won control of big world uses a comparable “reasonableness”
to the dollar, still a good bit stronger than ministries. But the appointment of Yariv test, or vets its appointments in the man­
the black market, where the rate sits Levin, a member of Mr Netanyahu’s Likud ner of the Israeli one.
around 6,500. Last month Mr Assad ap­ party, as justice minister may have the In the past the independence of Israel’s
proved a budget worth 16.6trn pounds, most profound effect on Israeli democracy. legal system has allowed it to hold the gov­
24% up on the previous year—in local cur­ Mr Levin is determined to curb the pow­ ernment, as well as the country’s leaders,
rency. In dollar terms it is worth about one­ ers of the country’s robustly independent to account. One former prime minister was
third less (see chart). The amount ear­ Supreme Court. The new minister wants to convicted of corruption. A president was
marked for subsidies is 12% lower than last introduce an “override clause” which jailed for sexual assault. Mr Netanyahu
year. The UN’s World Food Programme says would allow a simple majority in the Knes­ himself is facing charges of bribery and
that 90% of Syrians now live in poverty, set, Israel’s parliament, to pass laws fraud. The proposed changes would not af­
and that the prices of some basic foods rose deemed unconstitutional by the court. Un­ fect his case directly, but it is hard to avoid
by 800% between 2019 and 2021. der his plans the court would no longer be the impression that he has returned to of­
For some of the regime’s foes, particu­ able to nullify government decisions on fice with a score to settle with the judges.
larly in Washington, this is a sign that iso­ the ground of “reasonableness”. Politicians Mr Netanyahu once presented himself as a
lating Mr Assad is working: if living condi­ would appoint judges. The government’s champion of the Supreme Court’s indepen­
tions get bad enough, they reckon, people legal advisers, currently an independent dence. Whether he has genuinely changed
will rise up again. That view is unpopular group, would be replaced with political ap­ his mind or done so for political expedi­
with Syria’s neighbours and even with a pointees. A ruling by the Supreme Court on ency, that position no longer suits him. n

012
 40 Middle East & Africa The Economist January 21st 2023

What’s in a name? found at every administrative rung down

to the village, each with its own rules go­
A Gulf apart verning its affairs. Over time they have be­
come more sophisticated. Many have
elected separate field, political, liaison and
media officers. Some provide first aid or
welfare, such as handing out fuel and flour.
But their core business is still organis­
Iraqis are backing their neighbours
ing demonstrations. Since the generals’
who call the waterway the Arabian Gulf
latest coup, staged in October 2021, the

I TS WATERS are beguilingly calm. But a

tempest is brewing over their name. Iran
insists that the waterway that divides the
committees have brought people onto the
streets almost every week. “It basically
takes a WhatsApp message and we can
country from its Arab neighbours should shut down all the roads in Sudan,” says Ah­
be known as the Persian Gulf. Most West­ med Ismat, a spokesman for a committee
ern cartographers agree. But across the sea, in Khartoum, the capital.
Arabs are angling for it to be called the Ara­ The committees are distinctive in sev­
bian Gulf. (Google Earth hedges its bets by eral ways compared with other youth
using both names.) A natural barrier for movements in the region such as the
centuries of Arab­Persian rivalry, the wa­ “Qeerroo”, an ethnic­nationalist organisa­
ters reflect increasingly troubled relations. tion of young men in neighbouring Ethio­
The latest catalyst is a football tourna­ Powerful wet stuff pia. For one thing, Sudan’s committees
ment. For the first time in decades Iraq has have no single figurehead. Decisions are
been hosting the Arabian Gulf Cup, which This time tens of thousands of fans taken collectively, by an elaborate if time­
involves all the states bordering the water­ jammed Basra’s corniche to cheer on their consuming process of local consultation.
way, bar Iran. It has been keen to show teams from across the so­called Arabian Members’ views from marginalised states
where its loyalties lie. “Today we’re part of Gulf. “Iran’s occupation has been a disaster such as Darfur, where a government­
the Arab system and we’re eager to main­ for Iraq’s economy and Arabic culture,” backed militia has raped and butchered for
tain our relations with the states of the Ara­ says Talib Abdulaziz, a Basra poet, referring years, have been given special weight.
bian Gulf,” said Iraq’s prime minister, Mu­ to Iran’s political influence. Three decades “They have more at stake, they matter
hammad al­Sudani, ahead of the opening after its invasion of Kuwait made Iraq a pa­ more,” says Mr Ismat.
ceremony in Basra, the host city, which is riah among Arab states, the country is, he Young women, too, are unusually
near the border with Iran. Other Iraqi poli­ says, “coming home”. n prominent. When it is time for a protest, it
ticians have chimed in. “Welcome to the is usually they who sound the zaghrou-
states of the Arabian Gulf,” tweeted Muqta­ ta—a high­pitched ululation that brings
da al­Sadr, a cleric who heads Iraq’s biggest Sudan people to the streets. Many are in positions
group in parliament. of authority. Sajida al­Mubarak, a medical
Iran is crying foul. It has shown treaties La résistance student, is just 23 years old. But as a senior
purporting to prove that the Gulf has been spokesperson for an influential committee
Persian since Darius the Great in the fifth in Khartoum, “she’d be my boss,” notes 37­
century bc. It has also summoned Iraq’s year­old Waleed Adam, an activist.
ambassador, denounced Iraq in Iran’s par­ In December the generals and leaders of
KHARTOUM
liament and projected the words “Persian the civilian opposition struck a new pact
How young activists toppled
Gulf” onto a football stadium in Tehran, that is meant to lead to elections, a fully ci­
a genocidal dictator
the capital. “It has been and always will be vilian government and the withdrawal of
Persian,” insists Alireza Salami, a tetchy
Iranian MP, who says Iraq must apologise.
Iran’s sense of grievance is all the more
C ivil-society activism in Africa can
sometimes seem like an exercise in
empty sloganeering: “mobilising the
the army from politics and the economy.
As part of it, talks are still under way on
sticky issues, such as the prosecution of
bitter because Mr Sudani’s government grassroots”, “empowering the youth”, and some generals for genocide and crimes
had been hailed as the most pro­Iranian so on. Not in Sudan, where in recent years against humanity. But the committees see
since Shah Abbas conquered Baghdad four thousands of neighbourhood “resistance the process as merely the latest stitch­up
centuries ago. One of Iran’s largest trading committees” have sprung up throughout by a coterie of ageing generals and politi­
partners, Iraq is also the only other Middle the country. Forged in 2018 in the furnace cians in Khartoum. “We are sick and tired
Eastern state ruled by Shia Muslims. And it of revolt, they began as autonomous net­ of people gathering in closed rooms and
has 120,000 fighters who profess loyalty to works of local protesters aimed at toppling giving us orders,” says Ms Mubarak. Many
Iran’s supreme leader, Ayatollah Ali Kha­ Omar al­Bashir, an Islamist despot accused suspect, for instance, that a deal granting
menei. That is even more than Hizbullah, of genocide by the International Criminal an under­the­table amnesty to the top gen­
Lebanon’s pro­Iranian Shia militia. Court, and at shepherding the country to­ erals has already been negotiated.
However, the economies of the oil­rich wards democracy. What the committees are articulating,
Gulf states offer Iraq juicier investment op­ Four years on, their revolution is unfin­ instead, is a vision of politics that over­
portunities than Iran, which is hampered ished. In 2019, after protesters had taken to turns the old model of “one person who
by Western sanctions. And though most of the streets for months, Sudan’s generals calls all the shots”, says Mr Adam. Rather
Basra’s inhabitants are Shias, like their Ira­ gave Mr Bashir a final shove and seized than wait for the old guard to hand down a
nian neighbours across the border, many power. They have clung to it ever since. new federal constitution, the committees
look to the football cup to revive the happy Nonetheless, the committees offer a have been drafting their own. This in­
memories of Kuwaitis and Saudis, who fol­ glimpse of how ordinary people were able cludes radical proposals to tackle the root
low the Sunni version of Islam but still to come together to fight for freedom. causes of Sudan’s recurrent crises. Mem­
used to come to the city for fun. In parts of Sudan, committees can be bers like Nabeel Gasim, from a Khartoum

012
 The Economist January 21st 2023 Middle East & Africa 41

suburb, believe the committees should are widening. Some members argue that the kilometres of rail in sub­Saharan Afri­
seize back control of formal politics by try­ the deal should be given a chance. Several ca. All of it, no matter its profitability, re­
ing to win seats in a future legislature. “The committees refused to sign a draft consti­ quires upkeep.
committees are transforming from being a tutional charter published in October, When it came to power in 1994, the Afri­
mobilising force into an overtly political complaining that it had been drawn up can National Congress (ANC) took over the
organisation,” notes Kholood Khair, an an­ without enough consultation. supervision of Transnet, which four years
alyst in the capital. Even so, the movement remains a force earlier had been carved out of the Depart­
Yet some reckon that the committees to be reckoned with, so long as Sudan’s ment of Transport. Transnet veterans ad­
are a busted flush. Street protests against democratic transition seems to be stalling. vised the new government to allow the
the agreement reached in December were “We are building a state,” says Ms Mubarak. company to let rural lines rust and focus on
more muted than before. Internal fissures “We won’t stop until our goals are met.” n the profitable coal and iron­ore railways.
The ANC declined to do so. Instead Trans­
net eventually showed the typical charac­
Transnet teristics of state firms under the ruling par­
ty: neglect, patronage and corruption.
Off the rails During the era of “state capture” under
Jacob Zuma, South Africa’s president from
2009 to 2018, Transnet accounted for 72%
of all irregularly awarded contracts, foren­
sic auditors told an anti­corruption com­
PO NGO LA
mission. The largest dodgy deal involved
The disintegration of South Africa’s freight rail threatens the country’s
kickbacks tied to the purchase of more
industrial base
than 1,000 overpriced locomotives, mostly

T he roads in the north of Kwa­Zulu Na­

tal (KZN), South Africa’s second­most­
populated province, were once sedate. Lor­
the industry most dependent on Transnet,
that in December their lobby group asked
its board to sack its boss, Portia Derby,
from China. The scandal not only hurt
Transnet’s balance­sheet, but also brought
thousands of trains to a halt: the Chinese
ries carrying timber or sugar cane from warning that the firm faced bankruptcy. firms stopped supplying spare parts after
nearby plantations would trundle past, (She remains in her job.) new managers cancelled further locomo­
overtaken occasionally by tourists heading Train geeks will happily tell you all the tive deliveries. Today Transnet has just
to game reserves. But these days hundreds historical reasons why running South Afri­ 1,600 working locomotives, down from
of trucks laden with coal roar through ca’s rail network is not an easy task. In the 2,300 five years ago.
small towns on their way to the port of 19th century British colonists laid “Cape Vandalism is another scourge. In the fi­
Richards Bay. In September one lorry gauge” railways to get diamonds and gold nancial year ending last March 31st,
rammed into a pickup in the oncoming out of the country’s hinterland. This nar­ 1,500km (930 miles) of copper cable was
lane, killing 20 passengers, near the town row gauge was fine in the days when the al­ stolen, says Ms Derby. “It has to be part of
of Pongola. “Our roads aren’t meant for this ternative was an ox wagon. But today most syndicated crime,” she says.
amount of traffic,” says Mike Patterson, other countries have wider gauges and as a Short­sighted management matters,
from the local chamber of commerce. “The result their trains can carry heavier loads. too. Over the past decade Transnet has al­
coal should be taken by rail.” In the 20th century during apartheid, or most doubled its wage bill, while cutting
Indeed it should. But South Africa’s white rule, governments indulged farmers spending on maintenance, according to
freight rail network is in such bad shape by building a dense but uneconomical net­ the African Rail Industry Association
that firms are struggling to move their work that stretched to remote rural areas (ARIA), an industry body. Ms Derby con­
goods. In 2017 trains hauled 81m tonnes of with little freight traffic. Today South Afri­ cedes that the amount spent on mainte­
coal to export terminals. This year about ca has 0.6% of global GDP but 2% of the nance is “quite disastrous”—roughly 30%
54m tonnes will go that way; lorries will world’s rail network. It has about half of all of what it needs, she estimates. A strike in
carry only another 9m. The decline reflects
a missed opportunity: international coal
prices soared last year after Russia invaded
Ukraine. The gap between what coal min­
ers could dig and what they could export
last year represents a loss of at least 80bn
rand ($4.7bn), estimates Jan Havenga of
Stellenbosch University. Other miners and
manufacturers report similar deficits. The
total hit to South African firms from lost
exports and the extra costs of going by road
will amount to about 400bn rand in 2022
(6% of gdp), says Mr Havenga.
Many people, including those outside
South Africa, have heard of Eskom, the
state­owned electricity utility with a mar­
ket niche in keeping homes dark. Transnet,
a less familiar state­owned enterprise
which operates the freight rail network, as
well as ports and pipelines, is a similar
mess. And its woes are just as consequen­
tial for South Africa’s economy—and that
of the wider region. So worried are miners, The great train robbery

012
 42 Middle East & Africa The Economist January 21st 2023

Education in Zimbabwe secondary schooling, a huge amount when

Wire cutters 40% of people live on less than the equiva­
South Africa, freight-rail cable theft* Cluck-cluck lent of $2.15 a day. Though the government
is supposed to pay the fees of the poorest
Incidents, ’000 Length, ’000 km economics pupils, the payments are often late or in­
5 1.5 sufficient, or never arrive.
That is because Zanu­PF has run Zimba­
GO RO MO NZI
4 bwe’s economy into the ground through
1.0
Why Zimbabwe’s schools have taken to
venal misrule. High inflation has eroded
3 selling chickens
the value of teachers’ salaries. The rise in
2

1
0.5
T he job of a head teacher involves hiring
teachers, disciplining pupils and pla­
cating parents. It does not normally in­
local prices from 2019 to 2020 meant that
the education budget, nearly all of which
goes on salaries, fell by more than half
0 0 clude selling chickens. But that was one of when measured in American dollars, the
2016 18 20 22 2016 18 20 22
several side­hustles run by Evermore only currency trusted by Zimbabweans all
Source: Transnet *Years ending March 31st
Chakwizira, who until last year was the too familiar with hyperinflation.
head of Chinyika High School in Goromon­ A teacher at another rural school says
zi, 40km (25 miles) east of Harare, Zimba­ that her salary is worth the equivalent of
October ended with another pay bump for bwe’s capital. Since 2019 his school has $107 a month, down from $500 a few years
staff. Yet, as at Eskom, experienced engi­ sold hundreds of chicks a week at the local ago. She says that some teachers who de­
neers are in short supply. market. During the covid­19 pandemic, pend on taxis to get to school travel in the
The effects of negligence are evident. when children were at home, fluffy poults boot of the vehicle, as that costs half of a
The average distance travelled by locomo­ took up residence in the classrooms. normal fare. An education official from a
tives every month is almost a third less The school has other businesses, too. It rural district admits that teachers can no
than five years ago, reckons ARIA. Mining used the money earned from selling chicks longer afford to send their own children to
firms are scrambling for alternative out­ to buy sewing machines to make face­ school, before adding that salaries are less
lets. There is the coal cavalcade in KZN. masks and uniforms for schools across the than what it would cost to buy bread for a
Chrome miners truck the metal to the bor­ province. Its latest schemes are to manu­ family for a month.
der with Mozambique, where it is loaded facture bricks and breed tilapia fish. Desperate teachers have resorted to a
onto trains heading for Maputo. Some Zimbabwe’s education system was once practice euphemistically known as “extra
Manganese is shipped through Namibia. the envy of the continent. As a result the lessons”: they only teach children whose
Yet these workarounds are not enough. adult literacy rate (90%) is still much high­ parents pay them an extra fee. At another
er than the average in sub­Saharan Africa rural school teachers have taken a group of
Network defects (67%), according to the UN’s cultural agen­ these fee­paying children out of their
Transnet is paid to move things, so when it cy, UNESCO. But under Zanu­PF, the ruling classroom to be taught under a tree. The
carries less freight, it makes less money. In party, schools have fallen to pieces. Most poorer pupils are left unsupervised. This
the financial year ending in March 2021 it have businesses of some sort. Without neglect makes things worse for destitute
posted a loss for the first time in more than them schools would collapse entirely. kids. More than a quarter of school­age
a decade. In October the government an­ The right to a basic education is en­ children do not attend class because their
nounced it would give it 5.8bn rand—its shrined in Zimbabwe’s constitution. But parents cannot afford the official charges.
first direct bail­out in decades. government schools are not free. Parents Of those who do go to school, about 15%
To her credit, Ms Derby, appointed by cover 96% of schools’ non­salary costs. drop out before the end of their fifth year.
Cyril Ramaphosa’s government in 2020 to Overall they contribute more than the state In 2016 this figure was close to 1%.
clean up the mess of the Zuma years, recog­ does. On average families in the country­ Chinyika High School’s enterprising
nises her firm’s problems. She says miners side pay several hundred dollars a year for initiatives allowed it to build new class­
are “rightfully upset”, adding that the net­ rooms and buy textbooks. Though its ef­
work “is too big for the South African econ­ forts are laudable, they are hardly the basis
omy; it needs to be scaled back.” Ms Derby for a functioning education system. Often
says she also wants to allow more private the means to get schemes off the ground
firms to use Transnet’s network. come from politicians eager to be seen to
Over the past few years several other Af­ be doling out patronage. The first 1,000 of
rican countries, such as Mozambique, Tan­ Chinkyika’s chicks were donated by the lo­
zania and Zambia, have allowed “open ac­ cal MP. Yet “there isn’t enough patronage
cess” to their rail networks. These coun­ for everyone,” says Obert Masaraure, the
tries sell slots on the tracks to private oper­ president of the teachers’ union. Bigwigs
ators, which in turn bring fresh may pay for chicks but not the feed, mak­
investment. Last year the South African ing the project redundant. In other cases
government published a white paper pro­ projects start promisingly but fail quickly,
mising to implement the idea. Yet progress as when a bureaucrat responsible for deli­
on passing a bill has moved about as slowly vering chicks as part of a government pro­
as a coal truck through KZN. gramme gave them to a relative instead.
South Africa has world­class miners, Ahead of elections later this year Em­
manufacturers and farmers. But if export­ merson Mnangagwa, the president, has
ers cannot get their goods out of the coun­ pledged again that primary education will
try, they cannot make any money. South be free. But Zimbabweans have learned
Africa is regularly referred to as sub­Saha­ their lessons. They know that, when it
ran Africa’s most industrialised country. comes to schooling, his government has
That is still true—for the moment. n The next lesson is counting chickens only a poultry offering. n

012
 Erdogan’s
empire
SPECIAL
REPORT:
Turkey
→ January 21st 2023
3 Out with the old
5 The economy
6 A family affair
7 Syrian story
9 Political Islam
9 Foreign policy
11 Political changes
12 A crucial election
 Caution:
low-hanging fruit
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012
 Special report Turkey The Economist January 21st 2023 3

Out with the old

Approaching its centenary, Turkey faces an election that could decide its future as a democracy, argues Piotr Zalewski

T HERE IS NO getting around the Kulliye presidential palace on

the edge of Ankara, Turkey’s capital, on foot. Black minivans
pick up visitors, whisk them through a tunnel and underground
tion every November 10th, the day of his death nearly 85 years ago.
He would have been awed by its transformation from a hobbling
agrarian economy into a regional powerhouse and the most pop­
car park, and deposit them in one wing. Above ground, endless ulous country in continental Europe (Turkey’s population of 85m
carpeted corridors connect 1,100 rooms spread over 300,000 has overtaken Germany’s.)
square metres of space, four times the size of Buckingham Palace. But he would recognise little else. For almost 20 years Mr Erdo­
A mosque towers over the grounds. Security guards, sporting gan, who first became prime minister in March 2003, and then
beige fatigues and expertly trimmed moustaches, zoom around in president in August 2014, has been the country’s all­dominant fig­
armoured vehicles. Foreign dignitaries calling on President Recep ure. Initial fears of his Islamist agenda may have proved exaggerat­
Tayyip Erdogan are welcomed by 16 costumed warriors, each rep­ ed, but his autocratic bent has become ever clearer. Turkey now
resenting a Turkish empire from the Huns to the Ottomans. has an executive presidency, which Mr Erdogan has exploited to
Closer to the city centre is an unassuming pink building, the combine the roles of president, prime minister, party chairman
Cankaya mansion, which was the residence of Kemal Ataturk, and de facto central­bank governor. The army, once a big political
modern Turkey’s founder, and his successors for over 90 years. actor, has been tamed. Mr Erdogan has a new foreign policy that
With one exception. In late 2014, months after being elected presi­ prizes autonomy from the West and favours armed intervention,
dent for the first time, Mr Erdogan moved into the newly (and, says and a new economic model that treats low interest rates as the
a court ruling, illegally) built Kulliye. Cankaya then served two cure for, not a cause of, galloping inflation. Turkey even has a new
prime ministers before Mr Erdogan made the job redundant. The name. In May 2022 Mr Erdogan decreed that it should be known in
mansion has become a symbol of a bygone era. English as Türkiye, its Turkish name.
Later this year Turks will celebrate the centenary of the day The new Turkey Mr Erdogan once promised, which he plans to
when Ataturk, having fended off an invading Greek army, as well govern for the foreseeable future, is hardly a finished product. But
as the British, French and Italians, proclaimed the Turkish Repub­ many of its building blocks are in place. The Kulliye has become
lic and became its first president. What Ataturk would have made its symbol and nerve centre. Over the past ten years power has
of today’s Turkey is a fascinating question. He would surely be ebbed out of other state institutions and into the hands of the
moved to see his portrait in every office and classroom, his signa­ president and his courtiers, friends and family. Mr Erdogan has
ture emblazoned on sweatshirts and the country stand to atten­ the last word on almost all public policy. As prime minister, he re­

012
 4 Special report Turkey The Economist January 21st 2023

stored the central bank’s independence. As president, he has made Gulenist movement and a violent attempted coup. He has done so
it in effect into a government agency. The foreign ministry, once a through repression and censorship, but also through ruthless
bastion of the secular establishment, is now little more than his pragmatism, solid political instincts and his own charisma. No
foreign­policy secretariat. politician in Turkey can command a room or a crowd like Mr Erdo­
A similar fate has befallen the ruling Justice and Development gan, and none can campaign as relentlessly.
(AK) party. “The AK party was never and will never be a one­man Mr Erdogan has also ensured that elections are fought on his
party,” Mr Erdogan said in 2014. This was hardly true then and is terms. The president and the AK party commandeer state resourc­
manifestly false today. There are divisions and competing fac­ es for their campaigns and exploit the media as public propagan­
tions within AK, but no room for dissent. The party is entirely be­ da. Only about a tenth of news outlets in Turkey qualify as inde­
holden to Mr Erdogan, as is a big part of its base. “If the president pendent or opposition­leaning, and even these often steer clear of
says this is blue”, says an AK MP, holding up a white napkin, “then official red lines such as government corruption or criticism of Mr
people will say it is blue.” Erdogan. The internet, once a refuge for critical voices, is now any­
thing but. Most evidence levelled against the 200,000 people in­
Checks and imbalances vestigated on charges of “insulting the president” since 2014, an
Constraints do exist on Mr Erdogan’s power. One is the economy. offence liable to up to four years in prison, consists of social­me­
Reckless interest­rate cuts have sustained high growth, but at dia posts. A law criminalising the spread of “fake news” has given
huge cost. Inflation peaked at 85% last autumn before easing to the government new powers to police Twitter or Facebook.
64% in December, according to official measures. Unofficial ones Mr Erdogan has also learned to extract political dividends from
put it much higher. New government handouts and large increas­ the use of armed force. Turkey has launched four military opera­
es in the minimum wage, meant to offset plummeting living stan­ tions in northern Syria, mostly against Kurdish insurgents whom
dards, have put additional upward pressure on prices. New rules the government labels terrorists (but America considers allies
forcing banks to buy government bonds and companies to borrow against Islamic State). After a deadly bomb attack in Istanbul in
only in lira have also raised fears of a credit crunch. early November, which the government immediately blamed on
A second is the ballot box. Parliamentary and presidential elec­ the Kurdistan Workers’ Party (PKK), the armed Kurdish separatist
tions are due in June, though they are likely to be brought forward group, and the People’s Defence Units (YPG), the group’s Syrian
by at least a month. His latest spending spree has earned Mr Erdo­ franchise, a fifth offensive may now be in the offing.
gan and AK a reprieve, as his poll rating recovers. The share of Finally, Mr Erdogan has used the courts to stack the decks in his
Turks who disapprove of the government’s handling of the econ­ favour. Over three years ago, he tried to rob an opposition leader,
omy dipped from 75% in July to 62% in November. But polls sug­ Ekrem Imamoglu, of victory in Istanbul’s mayoral election. In De­
gest that the Turkish leader is still likely to lose to any of the oppo­ cember Mr Imamoglu, who could be the strongest candidate to op­
sition’s chief presidential contenders, while AK and its coalition pose Mr Erdogan, was given a prison sentence and a ban from poli­
partner, the Nationalist Movement Party (MHP), are on course to tics, though both may be overturned on appeal. The Kurdish Peo­
lose their parliamentary majority. By the time Turkey formally ple’s Democratic Party (HDP), many of whose leaders have been
turns 100 on October 29th, Mr Erdogan may be out of office. locked up for years, may also be closed.
Betting against Turkey’s leader is a dangerous business, how­ This special report argues that Turkey’s democracy, though
ever. Mr Erdogan has won ten parliamentary and local elections, damaged, endures, making the outcome of the election no fore­
two presidential ones and three referendums. He has survived gone conclusion. But the stakes could not be higher. Another five
mass protests, corruption scandals, a turf war with the powerful years of “Erdoganismo” would push the country more overtly to­
wards autocracy. Already, the patronage networks over which Mr
Erdogan presides are so entrenched that Turks fear the govern­
ment might go to extremes to hold on to power. They also struggle,
after two decades of Mr Erdogan’s rule, to picture what a country
without him might look like. Many of the changes Mr Erdogan has
made, especially in foreign and security policy, will stay.
What happens in Turkey matters to the world, and especially to
Europe. The war in Ukraine has highlighted Turkey’s importance
to NATO and to Black Sea security, despite the country’s ambiguous
relationship with Russia. For the European Union, Turkey is a first
line of defence, not always a dependable one, against Islamist ex­
tremism and illegal immigration. Turkey’s comatose membership
talks with the EU are encouraging European governments to play
down the country’s human­rights record and focus on issues like
border security and intelligence co­operation instead.
Turkey’s reach extends to the Caucasus and Central Asia, where
Russia’s influence has begun to wane, but also to Africa, the Mid­
dle East and the western Balkans. In the past year, Turkey has
mended fences with Israel, Saudi Arabia and the United Arab
Emirates, and it seems close to reconciling with Egypt and Syria.
Criss­crossed by pipelines bringing oil and natural gas from Rus­
sia, the Middle East and Central Asia to Europe, Turkey has aspira­
tions to be a transit country for the wealth of hydrocarbons buried
under the east Mediterranean.
In one decade Turkey has seen record numbers of refugees, ter­
ror attacks, an attempted coup, a state of emergency and covid­19.
A country in a whirl Now new problems loom. The most urgent is the economy. n

012
 The Economist January 21st 2023 Special report Turkey 5

The economy
Downs and ups

Into the unknown Consumer prices

% change on a year earlier
Currencies against the $
January 2022=100
100 120
Turkey Real
80 110
A bizarre monetary policy has left an economy Brazil
South Africa
in need of urgent repair 60 100
India
Indonesia Rupiah

A COUPLE OF years ago Mehmet Arslan, an architect in his late

30s, and his wife Mediha could afford to buy a flat in Istanbul.
No longer. Mr Arslan’s salary rose by 30% in the past year, but in­
40

20
Rupee
Rand
90

80
flation has been at least twice that. House prices have soared by Lira
even more, the result of higher construction costs, a low housing 0 70
stock, and a spike in demand, mostly from Turks hoping to protect 2020 21 22 J F M A M J J A S O N D
their savings from inflation. In the 12 months to October, property Sources: Haver Analytics; Refinitiv Datastream
prices in Istanbul shot up by 241%, according to Endeksa, a consul­
tancy. Mr Arslan’s salary now barely covers the rent and other liv­
ing expenses. “We’ve given up hope of owning a house,” he says. far below inflation. These and other directives have stopped com­
Their predicament reflects an economic experiment gone panies and ordinary Turks from dumping the lira in favour of the
wrong. Mr Erdogan believes the remedy for inflation is to make dollar. But they have also forced banks to start rationing credit.
money cheaper. Over the past year he has put his theory, which is Many exporters and small enterprises are awash in cheap loans.
about as popular among economists as alchemy among scientists, Others are frozen out.
to the test. As other central banks have sought to rein in inflation Critics say the new rules are diverting credit to those closest to
by raising interest rates, Turkey’s has done the opposite. The bank the government. Opposition parties say they are a recipe for ineffi­
has slashed its benchmark interest rate by fully ten percentage ciency and corruption. When loans are priced at 40 percentage
points since September 2021, to 9%. This has sustained growth, points below inflation, even loss­making companies can thrive so
which may have been 5% last year, after 11% in 2021. But it has also long as they have access to credit. For a select few, getting rich has
pushed inflation to the second­highest level in the G20 after Ar­ never been easier. In Ankara rumours swirl of palace officials me­
gentina, and nearly 13 times the central bank’s ostensible target. diating between favoured companies and state banks.
The government claims its policy makes Turkish goods more With credit no longer as readily available, Mr Erdogan has
competitive by cutting labour costs, and adds that boosting do­ turned to spending to pep up the economy before the election. He
mestic output will reduce inflation. Since inflation results from has some headroom: at 40% of GDP, Turkey’s public debt is lower
too much money chasing too few goods, the argument goes, prices than in most EU countries. The government has offered early re­
will come down as home production takes off. Exports have in­ tirement to 2.3m workers, pledged 600bn lira for energy subsidies,
deed risen, by 13% in 2022 to a new record level. But because the and promised to build 500,000 new homes in five years. This
economy depends heavily on raw materials from abroad, so have month it raised the minimum wage by 55% and the pay of civil ser­
imports, by 34% in 2022. The current­account deficit has balloo­ vants by 30%. Yet inflation will have wiped out most of these new
ned to $40bn (almost 5% of GDP). handouts before June, one reason why Mr Erdogan may advance
Financing such a large deficit is becoming harder. Put off by the the election.
government’s crazy monetary policy, as well as worries over cor­
ruption and the rule of law, Western investors are shunning Tur­ The earlier boom
key. Foreign direct investment has dried up, as have portfolio in­ All this makes a grim contrast to the early 2000s, when Mr Erdo­
flows. To make up for the shortfall, Turkey has turned to new gan helped set off a boom. Reforms pushed through after an eco­
friends. The central bank has concluded $28bn of currency swaps nomic crisis in 2001 that catapulted AK to power had brought in­
with China, Qatar, South Korea and the United Arab Emirates. Rus­ flation down to single digits for the first time in decades. The
sia has wired billions to Turkey to finance the construction, by a economy took off. Annual real growth averaged 6.9% between
subsidiary of Rosatom, of a nuclear power plant. And Gazprom, 2002 and 2007 and 7.4% between 2010 and 2015. About a third of
another Russian energy giant, is poised to allow Turkey to delay the population in 2002 lived below the World Bank’s poverty line
payments for natural­gas imports. for middle­income countries of $5.50 a day (in 2011 dollars). By
Some money comes in under the counter. In the first eight 2018 that share had dropped to 8.5%. Foreign investment, which
months of 2022, “errors and omissions” in the central bank’s ac­ was never above $1bn a year before 2001,
counts hit a surplus of $28bn. Much of that is believed to be gold reached $22bn in 2007. Turkish builders
and dollars from Russians who have fled to escape conscription and brands spread through Africa and the
and Western sanctions. Turkey has used foreign reserves to sup­ Mr Erdogan Middle East. The labour­force participa­
port the lira, a policy economists liken to selling the family silver. believes that tion rate for women rose to 32.5% in 2021—
The bank is thought to have sold at least $100bn of reserves last still the lowest in the OECD club of mostly
year. This has relieved some market pressure, but only a little. The
the remedy rich countries, but up from 25.3% in 2005.
lira depreciated by almost another 30% against the dollar in 2022. for inflation Today, many of those gains are being
Unable to defy Mr Erdogan, the central bank and the banking is to make lost. A decade ago, Mr Erdogan promised to
watchdog tried to stave off another run on the lira through new money cheaper make Turkey one of the world’s ten biggest
regulations. One prevents companies with foreign­currency hold­ economies by 2023, and to raise incomes
ings from taking out new loans. Another forces banks deemed to per head from $11,300 to $25,000. The
have insufficient lira deposits to buy treasury bonds yielding 10%, economy has since dropped from 17th

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 6 Special report Turkey The Economist January 21st 2023

past, allowing the central bank to raise

All in the family rates. But there is reason to suspect he
might refuse to do so. “As long as this
brother of yours [ie, him] is in power, the
interest will continue to fall,” he declared
A government over-reliant on kith and kin
last October. Months beforehand, his fi­
expertise, says one former palace official. nance minister had boasted of making the
His coalition with MHP nationalists in central bank’s policy rate irrelevant. Victo­
parliament and with supporters who ry could encourage them to do away with
favour closer co­operation with Russia conventional monetary policy altogether.
and China has sealed the fate of other Mr Erdogan has never put forth a seri­
former allies. ous economic theory to support his belief
Since 2016 Turkey’s leader has parted that high interest rates cause inflation,
ways with Ali Babacan and Mehmet possibly because one does not exist. Some
Simsek, architects of the boom of the think his motives are religious. “If Turkey
2000s, with Abdullah Gul, his predeces­ continues to go down this path, the bank­
sor as president, and with Ahmet Davu­ ing sector will become based on Islamic fi­
toglu, a former foreign and prime min­ nance,” says Arda Tunca, an economist. Mr
ister. Mr Davutoglu and Mr Babacan have Erdogan has not dispelled such suspi­
set up two separate opposition parties, cions, often invoking the Islamist injunc­
Gelecek (Future) and Deva (Democracy tion against usury as a reason to cut rates.
and Progress). Mr Davutoglu accuses Mr More than anything, though, the new
Albayrak of engineering his ousting. economy is an exercise in statism. Nearly
And he is just one of Mr Erdogan’s all the president’s economic advisers are
relatives. One of his sons, Bilal Erdogan, leftists and nationalists, says another

A SK opposition politicians and for­

mer Justice and Development (AK)
officials who is responsible for Turkey’s
commands a following among AK offi­
cials and the party’s youth wing. Last
year, the younger Mr Erdogan popped up
economist. “They love the idea of being in
control,” he says. “Bang your fist on the ta­
ble, make the decision, and the market will
new economic model, and one name, at a summit in Tehran, alongside Ebra­ go with us. This is economic illiteracy.”
Berat Albayrak, comes up a lot. Mr Albay­ him Raisi and Vladimir Putin, the Irani­ Most analysts agree that this model
rak took over the finance ministry in an and Russian presidents, and also cannot be sustained. Something will have
mid­2018 after a few years as energy accompanied his father on an official to give. Currency swaps and cash from Rus­
minister. By the time of his shock resig­ visit to Uzbekistan. The biggest star, sia may prop up the lira until the election,
nation two years later, the central bank’s however, is the president’s other son­in­ but not for much longer. Without a return
foreign reserves and its credibility were law, Selcuk Bayraktar, the chief tech­ to orthodoxy, another currency crisis and a
depleted, and the lira had lost nearly half nology officer of Baykar, a defence com­ fresh surge in inflation await. To stop the
its value. Yet his legacy lives on. Insiders pany, and the face of Turkey’s successful bleeding, the government might have to
say the finance ministry is still staffed by drone programme. Though popular, even impose capital controls.
Mr Albayrak’s allies. Nureddin Nebati, among opposition supporters, Mr Bay­ Economists still say Turkey’s long­term
now the finance minister, is a close raktar has so far steered clear of politics. prospects are bright. The search for shorter
friend. On his watch, the country has Mr Albayrak retains influence supply chains means it can compete with
resumed Mr Albayrak’s policy of cutting through his former ministry, some AK China as a supply hub for Europe. An ex­
rates to stoke growth while selling for­ MPs and his older brother, Serhat, who panded customs union with the EU, held
eign reserves to support the lira. runs Turkuvaz, a media group known for up by concerns over democracy, would
Mr Albayrak is Mr Erdogan’s son­in­ hyperventilating pro­government cover­ help. Turkey boasts better infrastructure,
law. His career is emblematic of the age. But his stock has taken a beating. including airports, bridges, hospitals and
Turkish leader’s tendency to dump tech­ Many Turks blame him for burning tunnels built during Mr Erdogan’s tenure,
nocrats and former AK heavyweights in through $165bn in foreign reserves and than many EU members. Turkish business­
favour of yes­men, opportunists and for the state of the economy. The man es and banks have weathered economic
relatives. The coup attempt in 2016 was a once touted as Mr Erdogan’s possible upheavals and barmy policy. The tech sec­
turning­point, after which Mr Erdogan successor could yet turn out to be a cause tor has great potential. Turkey boasts six
began to prize family and loyalty over of the Turkish president’s undoing. unicorns (startups valued above $1bn), up
from none three years ago. And demogra­
phy works in its favour: by 2040 the popu­
lation may by one estimate hit 100m. With
to 19th, and average incomes have shrivelled to $9,600. Over the the right policies, as well as strong institutions, the economy
past two years, skyrocketing prices and falling real wages have could break into the global top ten around the same time.
pushed millions of Turks into poverty. Growth is no longer inclu­ Yet economic mismanagement stands in the way. One effect is
sive, as Mr Erdogan’s new economy creates more losers than win­ an accelerating brain drain. Turkey’s brightest minds, unable to
ners, helping to wipe out a sizeable chunk of the middle class. afford a decent lifestyle at home, are eager to try their luck else­
A reckoning awaits whoever wins the election. The opposi­ where. At least 30,000 software developers and 1,400 doctors are
tion’s solution is to restore the central bank’s independence and said to have emigrated in 2021. A survey last summer found
raise interest rates to rein in inflation. The harder question is what that 82% of Turks between the ages of 17 and 30 would move
will happen if Mr Erdogan remains at the helm for another five abroad if they had the means. For young Turks, the long term can­
years. He could concede to the laws of economic gravity, as in the not come soon enough. n

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 The Economist January 21st 2023 Special report Turkey 7

because of the war in Syria are unprecedented. At the end of 2010,

Syria
just before the start of the war, Turkey had only 10,000 refugees
and asylum­seekers. Twelve years on, it hosts 3.6m Syrians, more
The southern spillover than the rest of Europe put together, plus over a million migrants
from Africa, Central Asia, the Middle East and Russia. Turkey is a
country transformed.
The gleaming, air­conditioned container cities that once dot­
ted the border, where most newcomers sheltered in the first years
of the war, are a thing of the past. Fewer than 50,000 refugees are
Syria’s civil war has transformed Turkey
now in the camps. The rest are scattered across cities, mostly in

A LTINDAG, A NORTHERN suburb of Ankara, still bears the scars

of summer 2021, when local mobs rampaged through the
streets, attacking Syrian businesses and homes after the killing of
the south and west. Over 98% of Syrian workers are employed in­
formally, reckons Saniye Dedeoglu, a professor at Abdullah Gul
University in Kayseri, with no social security or other benefits.
a Turkish teenager by a refugee. Police vehicles patrol the main Most are paid less than Turks. Child labour, especially in agricul­
intersections. Parts of the area feel deserted. In response to the vi­ ture, is widespread. But the refugees are better off than those else­
olence, Turkey’s interior ministry decreed that the share of for­ where in the Middle East. Syrians have access to public health care
eigners in some neighbourhoods, starting with Altindag, would and education, and a path to citizenship. Some 730,000 Syri­
be capped at 20% of the population. To drive this home, the au­ an children, about 65% of the total, are in school. Around
thorities moved out 4,000 Syrians and tore down more than 300 220,000 refugees have been naturalised.
buildings, presumably to ensure that refugees could not return. Western countries generally praise Turkey for doing a remark­
Tensions have calmed, but the Syrians who remain are uneasy. able job for its Syrian refugees. Yet Turks do not want to hear it.
What they fear most is not renewed violence, but the risk of mass Most say the country has become a safe house for foreigners
deportations. Yasin, a barber from Aleppo, says he was once ar­ whom Europe does not want to see within its own borders. And
rested for smuggling cigarettes, and this could give the police an many want the refugees to go home. Violence of the kind seen in
excuse to deport him to Syria. He would end up in prison, he says, Altindag remains rare. But as the economy sputters and the elec­
because he fought against the regime. “Turkey welcomed us when tion approaches, attitudes to the Syrians have hardened.
practically every other Arab country refused,” he says. Now it is Opinion polls find that refugees are the third­most important
showing Syrians the door. issue for voters, behind only the economy and unemployment.
Turkey is home to around 15m Kurds, a million Arabs, tens of Opposition politicians are stoking and feeding off the resentment.
thousands of Armenian descendants of those spared the genocide Kemal Kilicdaroglu, the head of the opposition Republican Peo­
of 1915, and a small, dwindling population of Greeks and Jews. But ple’s Party (CHP), has pledged that, by restoring relations with the
the social and demographic changes the country has undergone regime in Damascus, he will ensure that Syrians in Turkey return

Another desert wave

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 8 Special report Turkey The Economist January 21st 2023

home “with drums and trumpets”. The gov­ across the border. Over the next 19 months, their bombs across
ernment is not far behind. Mr Erdogan, Turkey killed hundreds of people. Most of the victims were Kurds,
whom many Syrians in Turkey consider a Mr Erdogan’s or supporters of the Kurdish cause. Many perpetrators turned out
saviour, has begun placating his base by in­ Syria policy to be homegrown Islamist radicals who had travelled to Syria to
sisting he too wants most refugees gone. A join IS and returned home. If their goal was to sow chaos in Turkey,
few years ago, he proposed resettling them
has become they succeeded. Kurdish politicians claimed that Mr Erdogan was
in areas of northern Syria formerly con­ a weakness, supporting IS against the Kurds in Syria. Some even accused his
trolled by the YPG but now occupied by exposing him government of having a hand in the bombings at home. Days after
Turkish troops and their local proxies. Hu­ to voter backlash one attack, two Turkish policemen were assassinated in a town
man­rights groups decried this as an at­ near the Syrian border. A PKK offshoot claimed responsibility for
tempt at demographic engineering. Tur­ what it called a revenge killing.
key’s offensives in Syria, plus atrocities Mr Erdogan responded to the assassination with more air
committed by its Arab proxies, have already displaced hundreds of strikes against PKK positions in northern Iraq. After years of calm,
thousands of Kurds. Turkey has also deported thousands of Syri­ war returned to Turkey’s Kurdish south­east. PKK fighters, em­
ans, mostly for alleged crimes, or for failing to register with the au­ boldened by their gains in Syria, holed up in cities across the re­
thorities. Many say they were forced or tricked into signing volun­ gion, booby­trapping homes and lobbing rockets at army vehicles.
tary return forms by Turkish police. The government responded with a ruthless crackdown, sending
Public pressure has forced Mr Erdogan into a U­turn. No for­ tanks into urban centres. When the dust settled, some 2,000 peo­
eign leader has pursued regime change in Syria more doggedly ple were dead, several districts lay in ruins, and Turkish politics
than him. But last November Mr Erdogan said he was ready to bury had lurched further to the right. Mr Erdogan, who once bravely en­
the hatchet with Bashar al­Assad, the Syrian dictator. He wants dorsed cultural rights for the Kurds and even opened negotiations
voters to believe that rapprochement with Syria will pave the way with the PKK, courting Kurdish voters, had changed course, rein­
for mass returns. Many Syrians in Turkey fear they may pay the venting himself as a Turkish nationalist.
price. They are likely to stay whoever wins the election. Deporting Today, Mr Erdogan’s Syria policy has become a weakness, ex­
them would violate Turkish and international laws. And volun­ posing him to voter backlash and to pressure from Russia, argues
tary returns, at least on a mass scale, are a pipe dream. Studies find Gonul Tol, of the Middle East Institute, in a new book, “Erdogan’s
that only one in five refugees wants to go back. War”. But the war has also allowed him to consolidate his power.
Making nice with Syria’s regime could even trigger a fresh exo­ Mr Erdogan has presided over the arrests of thousands of activists
dus. The areas of Syria now under Turkish control are home to and politicians from the Kurdish HDP party, including the jailing
some 4m people. Were Turkey to hand them back to Damascus, of its former leader, Selahattin Demirtas. His war against the PKK
something Mr Assad will insist on as part of any normalisation in Syria and northern Iraq has helped him silence dissent and bull­
agreement, many who fear his tyrannical rule might flee north. A doze his way to one­man rule.
Turkish withdrawal from Idlib province in Syria’s north­west, an Mr Erdogan’s hawkish turn and his decision to go after the HDP
opposition stronghold, would surely be followed by a renewed re­ won him new friends in the MHP. The coup attempt in 2016 sealed
gime offensive, and another refugee wave. their alliance. Having purged supporters of the Islamist Gulen
movement, whom he blamed for the coup, and other opponents
Transatlantic woes from the army and the police, Mr Erdogan then handed the MHP
The war in Syria has upended Turkey’s relations with America, as nationalist party the keys to parts of the security apparatus. The
well. Almost as soon as the fighting began, Mr Erdogan’s govern­ MHP returned him the keys to an executive presidency. A year later
ment threw its weight behind efforts to topple Mr Assad, offering the party, headed by Devlet Bahceli, a former leader of the Grey
rebels both weapons and a haven in Turkey. America initially Wolves, a right­wing group with a history of political violence,
backed this. But its appetite cooled, especially as foreign and Turk­ backed a referendum giving Turkey’s leader sweeping new pow­
ish jihadists poured into Syria through Turkey’s southern border, ers. Mr Erdogan prevailed, albeit by a slim margin. The war in Syria
swelling the ranks of Islamic State (IS), a jihadist group. had, in effect, redrawn Turkey’s political map. n
One turning­point was in 2013, when
Barack Obama, despite previous talk of red
lines, shied away from an armed response UKRAINE
MOLDOVA
after Syrian troops had killed 1,500 people Kherson
with chemical weapons. Another came a ROMANIA Odessa
Kerch
RUSSIA
year later, when Mr Erdogan twiddled his Belgrade Bucharest
thumbs as IS besieged Kobane, a Kurdish
city in Syria within sight of the border. SERBIA Sochi
C a Caspian
Only American air strikes and air drops BULGARIA Black Sea u c
a s Sea
saved the Kurds from a massacre. Turkey KOS. u s
Sofia GEORGIA
continued to call for Mr Assad to go, but Tbilisi
N. MAC. Istanbul Nagorno-
America focused more on the war against Karabakh
ARM.
IS, which it partly outsourced to the YPG. GREECE Ankara Erzurum AZER. Baku
Turkey accused the Americans of doing Aegean Bursa Yerevan
TURKEY
nothing to stop Mr Assad. America accused Sea Kurdish
Athens Konya Kayseri majority
Turkey of doing nothing to stop IS. Izmir areas Van
With America’s help, the Kurds brought Gaziantep
Kobane IRAN
the IS caliphate crashing down. But their Mersin Sources: M. Izady,
war, as well as violence unleashed by jiha­ Aleppo
Areas under Turkish Army control Columbia University;
Turkish Republic of Northern Cyprus
dists in Syria, spilled into Turkey. In 2015 IS Idlib
SYRIA
(Dec 2022) Janes, the defence
Mediterranean Sea CYPRUS IRAQ intelligence provider
fighters took their campaign of terror

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 The Economist January 21st 2023 Special report Turkey 9

Political Islam

It’s all over now

How Turkey’s promotion of political Islam abroad died

M ANGO JUICE is delicious. So AK officials had no reason to

complain when Mr Erdogan began serving it in his palace
last year. But they may have been baffled to hear that it was a pre­
sent from Egypt’s president, Abdel Fattah el­Sisi. For Mr Erdogan
and Mr Sisi had not been on speaking terms for a decade. As an
avowed Islamist, Mr Erdogan had thrown his full weight behind
the Muslim Brotherhood, which took power in Egypt in 2011 after
protests toppled Hosni Mubarak. When Mr Sisi seized power two
years later, in a coup that killed hundreds of protesters, Turkey’s
leader called him a tyrant, held rallies in support of Muhammad
Morsi, the deposed Egyptian president, and gave other Brother­
hood leaders a haven.
Political Islam has made fewer inroads in Turkey than Mr Erdo­
gan might have wished. But the Arab spring that shook the Middle
East in 2011 saw the country emerge as one of its main exporters.
Besides Egypt, Turkey backed Brotherhood parties and other Is­
lamist groups in Libya, Syria and Tunisia. Mr Erdogan and Ahmet
Davutoglu, then his foreign minister, wanted to expedite the col­
lapse of the old regional order and cement Turkey’s influence over
the new one. But that policy ran out of steam in Egypt when Mr Sisi
took over, and in Syria two years later when Russia intervened to
prop up the Assad regime. Now it has gone into reverse. In Novem­
ber Mr Erdogan met Mr Sisi for the first time, on the sidelines of
Foreign policy
the World Cup in Qatar. Months of talks between Turkish and
Egyptian spooks and diplomats paved the way for the meeting.
Mr Erdogan also mended fences with other regional powers.
He has proclaimed a “new era” in relations with Saudi Arabia,
The eastern question
whose crown prince, Muhammad bin Salman, visited Turkey last
summer. The crown prince is believed to have ordered the murder
in 2018 of Jamal Khashoggi, a dissident journalist, in the Saudi
consulate in Istanbul. Mr Erdogan has inked new trade deals with
Turkey has turned into an awkward ally for the West
the UAE, which with Egypt waged a proxy war against Turkey in
Libya, and which officials accuse of supporting the abortive Turk­
ish coup in 2016. To the chagrin of his Islamist supporters, Mr Er­
dogan has also patched up relations with Israel, which broke
“T URKEY WILL strive for peace and durable stability in the re­
gion alongside the US, her strategic partner and ally for more
than half a century,” a Turkish leader once wrote in an American
down after Israeli commandos killed ten people aboard a Turkish newspaper. “We are determined to maintain our close co­opera­
ship in 2010. He has even reached out to Bashar al­Assad in Syria. tion with the US.” Those words seem from another era. They are,
Turkey’s motives are varied. Mr Erdogan needs Gulf money to though not such a distant one. The year was 2003, Turkey’s parlia­
support the lira, at least until the election. The UAE has pledged to ment had rejected an American request to use the country as a
invest $10bn in Turkey and agreed to a $5bn currency swap, boost­ launchpad for its invasion of Iraq, and the writer, keen to reassure
ing depleted dollar reserves. Saudi Arabia is in talks to park anoth­ his NATO ally, was the new prime minister, Recep Tayyip Erdogan.
er $5bn in Turkey’s central bank. Turkey also hopes to weaken Is­ Turkey’s president strikes a different tone when he speaks of
rael’s and Egypt’s support for Greece in the east Mediterranean, America and the West today. Mr Erdogan accuses America of sup­
and to position itself as a transit route for natural­gas exports. porting terrorism by arming the PKK, which Turkey considers its
But the reset has come at a cost to Turkey’s Islamist credentials. mortal enemy. Some of his associates suspect America of having a
To clear the way for reconciliation with Saudi Arabia, Turkey has hand in the coup attempt of 2016. Similar recriminations are lev­
dropped any investigation into the Khashoggi murder, ensuring elled at the EU, which Mr Erdogan says was never sincere about
impunity for the killers. It has ordered news outlets launched by Turkey’s membership aspirations, has become a haven for terro­
Brotherhood exiles not to criticise the Sisi regime. At least one op­ rists and is envious of Turkey’s progress.
position channel has closed as a result. Damascus will also de­ Policy wonks and diplomats accuse Turkey of abandoning the
mand a price for normalisation. A deal with Mr Assad would force West. Turkish officials claim they are the ones being abandoned.
Turkey to sever its links with the armed opposition, says Dareen Turkey no longer sees itself as on Europe’s periphery, or as part of a
Khalifa, an analyst with the Crisis Group think­tank. Political Is­ single zone of influence, but as a country with its own centre of
lam looks to be a spent force in Turkish foreign policy, at least as gravity. Membership of NATO gives it the best insurance policy
far as the Arab world is concerned. n around. NATO cannot afford to lose Turkey either. But there is a

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 10 Special report Turkey The Economist January 21st 2023

sense in Ankara that the “new Turkey” is strong enough to ignore tral to Turkish security,” says Dimitar Be­
or test such old alliances, sometimes to breaking­point, to forge chev, a visiting scholar at Carnegie Europe.
new ones and to act autonomously. “Turkey is trying to conduct a Western leaders “Once Russia inserted itself there, the
360° foreign policy,” says Ibrahim Kalin, a presidential adviser. have come stakes for Turkey were much higher than
“And we don’t want to favour any particular issue or actor or region anything happening in Ukraine.”
or country over others.”
to terms with
Officials in Ankara say good relations
Mr Erdogan is even more uncompromising over national secu­ Turkey’s refusal with Russia allow Turkey to act as a media­
rity. “We do not need to ask permission from anyone,” he said in to take sides tor in Ukraine. Mr Erdogan has done a good
November, warning of a new offensive in Syria, “and we will not be in Ukraine job getting Russia to ease its naval block­
held accountable to anyone.” Foreign policy in Turkey, once the ade of Ukraine, allowing the resumption of
purview of generals and professional diplomats, has become a do­ grain exports by sea and negotiating pris­
mestic issue and part of identity politics. Bashing the West goes oner swaps. But mediation has offered Tur­
down well with religious voters, nationalists and even many left­ key a cover for business dealings and for refusing to align with
ists. So does the idea that Turkey is destined to be a world power. Western sanctions. In Ukraine Mr Erdogan takes credit for giving a
Look at the inroads Turkey has made in Africa and Central Asia ov­ besieged country the drones that helped save Kyiv and for closing
er the past decade, the popularity of its soap operas, the success of access to the Black Sea for Russian warships. In Brussels and
Turkish Airlines and the number of countries queuing up to buy Washington he expects praise for his efforts. Yet in Moscow he
Turkish drones, and you might think it is one already. reaps the rewards of acting as Vladimir Putin’s friend, and at home
Many in Mr Erdogan’s inner circle celebrate the idea that the he takes credit for Turkey’s thriving business with Russia. Exports
West is in decline and a new international order is taking shape. to Russia hit $7.6bn last year, up by 45% on 2021.
This conviction has become one of the pillars of Turkey’s new for­ Western leaders have come to terms with Turkey’s refusal to
eign policy, says Galip Dalay of Chatham House, a think­tank. A take sides over Ukraine. A wider concern is that its view of Russia
case in point is Turkey’s ongoing romance with Russia. Modern does not appear to have changed during the war. For many in
Turkey’s pursuit of good relations with Russia is nothing new. Ata­ Europe, the invasion was a wake­up call. Not in Turkey. “We do not
turk reached out to the Bolsheviks for help in his war against see Russia as a threat,” Mr Kalin says. “The fact that we are a NATO
Greece. They gave him weapons, money and military advisers. member, that we are part of the Western alliance doesn’t prevent
Even during the cold war, governments in Ankara co­operated us from having a good relationship.” Perhaps with the exception of
with the Soviet Union; Russian engineers built some of Turkey’s Viktor Orban of Hungary, nobody else in NATO agrees.
biggest industrial plants. But the relationship under AK is stronger
than at any point since the foundation of the republic. A fickle ally
Turkey depends on Russia for billions of dollars in tourism rev­ Turkey is important to NATO. Turkish soldiers have joined mis­
enue, and more than 40% of its gas imports. The two regional sions in Afghanistan, the Baltics, Bosnia, Kosovo and Macedonia.
powers have locked horns in the Caucasus and Libya. But for Tur­ In 1950, two years before it joined the alliance, Turkey sent 15,000
key, it is in Syria that relations with Russia matter most. The buffer troops to fight alongside American soldiers in Korea. But the
zones Turkey has created in Syria’s north would not have been country is often now a spoiler. It is threatening to block NATO ac­
possible without Russian approval. Although weakened by its war cession for Finland and Sweden. Mr Erdogan wants to strong­arm
in Ukraine, Russia can still cause havoc for Turkey in Syria. A re­ both countries into deporting PKK suspects and Gulenists. Turkey
gime offensive against Idlib, backed by Moscow, could send hun­ may also hope its veto threat can extract concessions from Amer­
dreds of thousands of new refugees to Turkey’s borders. ica’s Congress, whose members have threatened to block the sale
Hopes that war in Ukraine would prompt Turkey to distance it­ of new F­16 fighter jets. America has banned Turkey from buying
self from Russia have proved misplaced. The relationship has sur­ F­35 stealth bombers, after Mr Erdogan went ahead with the pur­
vived bigger tests. One was the assassination of the Russian am­ chase of an S­400 air­defence system from Russia.
bassador to Turkey in 2016, which both countries called a provoca­ Turkey also threatens to attack a fellow NATO member. A dis­
tion. Another came in early 2020, when a Russian airstrike in Idlib pute over maritime rights with Greece, more suited to lawyers and
killed 34 Turkish soldiers. Turkey struck back, but only against bureaucrats, has drawn in politicians and generals. “We may sud­
Syrian forces, and never blamed Russia. “Syria is much more cen­ denly come one night,” Mr Erdogan warned last October, suggest­
ing a Turkish operation against one of the Greek islands that hug
Turkey’s southern and western coast. He has even hinted that Tur­
key is capable of striking Athens with ballistic missiles.
Going off Europe From the war in Ukraine to those in Syria and in Nagorno­Kara­
Foreign trips by Recep Tayyip Erdogan, by region, % of total bakh, to relations with China, to sanctions against Iran, to press
100
freedoms, human rights and terrorism, the list of issues where
Turkey and its Western allies no longer see eye to eye is long. The
Other
institutional links, including membership in NATO and the Coun­
80
Middle East cil of Europe, and the customs union with the EU, are intact. But in
policies, a decoupling is under way. In 2008 Turkey aligned itself
Africa 60
with 88% of the EU’s foreign­policy decisions and declarations. By
2016 that share had fallen by half to 44%. Last year it was only 7%.
Asia* 40 Neither America nor the EU has come up with a persuasive
strategy for their engagement with Turkey. Under Joe Biden,
20 America has taken an ad hoc approach, stepping in only when Tur­
Europe† key and Greece risk coming to blows, or when Mr Erdogan pre­
0 pares a new offensive in Syria. Mr Biden has been frosty towards
2006 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 Turkey’s leader, seemingly waiting until the summer election to
Sources: Emre Akcakmak; government sources *Including Russia †Excluding the Balkans work out how best to deal with him or his successor. “The view of

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 The Economist January 21st 2023 Special report Turkey 11

the White House,” says Soner Cagaptay, of the Washington Insti­

tute for Near East Policy, “is that when you engage with Erdogan A recovery of sorts
you end up with drama.” Turkey, %
The EU’s relations with Turkey have been in limbo for several
years. Turkey’s accession talks with the EU were dying on the vine Recep Tayyip Erdogan’s 2023 general-election
almost as soon as they started in 2005. German and French lead­ approval rating voting intention
ers, who were once merely lukewarm to the idea of Turkish mem­ 60 40
bership, now seem to be openly hostile to it. The EU’s decision to Disapprove
50 AKP
admit a divided Cyprus in 2004 and the breakdown of peace talks 30
between the internationally recognised Greek­Cypriot govern­ CHP
40
ment in the south and the Turkish­occupied north have made 20
Approve
matters worse. Mr Erdogan, who once backed the island’s unifica­ 30 IYI
tion, now favours partition. Many Cypriots fear Turkey may end HDP 10
up annexing the north. 20 MHP
Talks on reform of the customs union with the EU have stalled. DEVA 0
An upgrade to extend it to agriculture, procurement and services 2020 21 22 2020 21 22
could boost Turkey’s GDP by as much as 1.8%. But Turkey’s descent Source: National polls
into autocracy and the deadlock over Cyprus make EU politicians
reluctant to agree. The relationship centres instead on a deal un­
der which the EU has paid Turkey $6bn to keep refugees and mi­ AK-MHP alliance narrow. The parties face three major hurdles.
grants on its side of the Aegean Sea. The EU and Turkey are keeping One is the media. Many of Turkey’s news channels, especially
the membership talks on life support at best. The relationship its public broadcasters, have turned into government PR agencies.
needs an alternative track. “We have no strategic vision towards The Kurdish HDP has been subjected to an informal media ban
Turkey,” despairs a European diplomat. since 2017. Through censorship, fear of criminal prosecution and
The marriage between Turkey and the West is increasingly un­ the blacklisting of certain pundits and journalists, the media have
happy. But it will surely endure. The champions of the “new Tur­ no power to hold Mr Erdogan to account.
key’s” eastern pivot might have a destination in mind, but also no The second is Turkey’s leader. Mr Erdogan has a history of us­
means to get there. Turkey’s business and trade links with China ing the central bank and the treasury to prime the economy ahead
and Russia pale in comparison with those with Europe. The EU is of elections, and the courts to harass opponents. He will not hes­
Turkey’s main trade partner and source of foreign investment, just itate to do all of this again.
as America is Turkey’s biggest supplier of weapons. The Shanghai The third obstacle is the opposition itself. With only months to
Co­operation Organisation, the loose group of Asian countries go before the election, the Nation Alliance, as the opposition calls
headed by China, India and Russia which Mr Erdogan plans to itself, has still not come up with a united candidate for the presi­
join, might be a nice venue in which to rub shoulders with Mr Pu­ dency. Mr Kilicdaroglu, the CHP chairman, seems determined to
tin and discuss Western decline. But it is a poor alternative to im­ run, but is facing pushback from Meral Aksener, the leader of IYI.
proved relations with the West. n Cracks within the opposition are starting to show.
Mr Kilicdaroglu is a capable manager, and can take much credit
for opposition success in the 2019 local elections, which saw AK
Politics mayoral candidates defeated in Turkey’s three largest cities. But
he may also be unelectable. As a public speaker, he does not hold a
candle to Mr Erdogan. The Turkish leader’s mass rallies have the
Opposition days atmosphere of a rock concert. Mr Kilicdaroglu’s can feel like a fire­
side lecture. Another concern is that the CHP leader hails from the
Alevi religious minority, which faces prejudice from Sunni con­
servatives and the far right.
Polls suggest two other CHP leaders, Mr Imamoglu, the Istan­
The opposition remains rudderless bul mayor, and Mansur Yavas, mayor of Ankara, would fare better.
But to run for president each would have to resign and hand over

A T LEAST ON paper, Turkey’s opposition has it all worked out. In

policy documents the opposition bloc, headed by the CHP and
IYI, a centre­right party founded by defectors from the MHP na­
the mayor’s office to AK, which controls the Ankara and Istanbul
city councils. Each also has a weak spot. Mr Imamoglu’s star had
already faded after his shock victory in 2019, and he has now been
tionalists, has plans for a post­Erdogan future. Constitutional handed a ban from politics (though he will appeal). Mr Yavas, a
changes will dismantle Mr Erdogan’s executive presidency, hand hardline nationalist, may be too unpalatable to Kurdish voters.
back to parliament the powers enjoyed by the palace, restore the
post of prime minister, free the courts from political influence A way with Kurds
and lower from 7% to 3% the election threshold that keeps small There is a broader problem for the opposition alliance. Although it
parties out of parliament. With the central bank in charge of mon­ needs the votes of Turkey’s Kurds to have a shot at unseating Mr
etary policy again, zombie companies and government cronies Erdogan, the opposition has given the HDP, the third­biggest
cut off from free credit and inflation under control, foreign invest­ group in parliament, the cold shoulder. The CHP continues to
ment will gush in. “Turkey is going to be a target for a once­in­a­ court the party’s support. But IYI nationalists, who see the HDP as
decade trade,” says Bilge Yilmaz, head of IYI’s economic team. merely the PKK’s political wing, refuse to sit at the same table.
Most Turks, even AK voters who may be disappointed with the The HDP and its 6m voters, who have seen dozens of Kurdish
presidential system and the economy, could get behind such a mayors and parliamentarians thrown in prison since 2016, have
programme. But the opposition is running out of momentum no love for Mr Erdogan. But they are disappointed with the Nation
ahead of the summer election and is now seeing its lead over the Alliance, which shies away from speaking about Kurdish rights.

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 12 Special report Turkey The Economist January 21st 2023

“When it comes to solving the Kurdish problem, they behave tim­ moglu to over two years in prison and banned him from politics,
idly, spinelessly,” says Pervin Buldan, the HDP’s co­chair. “If they pending an appeal. His crime was to have referred to the election
think differently from AK, they have to make it clear, otherwise officials who had briefly stripped him of victory in Istanbul as “idi­
they will be no different from the government.” The HDP has now ots”. Earlier this month the constitutional court similarly froze the
said it will nominate its own presidential candidate. bank accounts of the Kurdish HDP party; the party may yet be
Working out what the opposition stands for is also hard in for­ banned altogether.
eign policy. CHP and IYI politicians claim to want to patch up rela­ Perhaps a glut of new spending to support living standards, his
tions with America and Europe, to turn Turkey back into a depen­ enduring popularity with conservatives and nationalists, and a
dable NATO ally, to issue fewer threats and to reduce dependency successful electoral campaign, along with the usual censorship,
on Russia. But they acknowledge that Turkey is too big and too in­ would have been enough to ensure victory for Mr Erdogan, at least
dependent, and exists in too tough a neighbourhood, to stay in in the presidential election. But Turkey’s strongman seems deter­
lockstep with its Western partners. Disputes over issues like mined not to take any chances. Governments come and go; re­
America’s support for the YPG, Europe’s attitude to the PKK, or gimes hold on for dear life. The system that Mr Erdogan controls
sanctions on Russia and Iran, are bound to continue. already resembles the second.
On too many issues,the opposition has given Mr Erdogan a
blank cheque. The CHP backed the government’s gunboat diplo­ A presidential dilemma
macy in the east Mediterranean, its offensives against Kurdish A big problem with charismatic strongmen, especially those like
fighters in Syria, its intervention in Libya, its rapprochement with Mr Erdogan who inspire genuine allegiance, is that the regimes
Russia and even its calamitous purchase of Russian S­400 mis­ they build lose their purpose once their leaders leave office. Tur­
siles. As soon as Mr Erdogan invokes national security, the opposi­ key’s leader has no anointed successor, and no one within AK or
tion falls into line. “Whenever there is criticism against one policy the MHP comes close to being able to walk in his shoes. The person
or another, the government accuses the opposition of taking sides mandated to replace him as president, in case of his death or in­
with the terrorists,” says one CHP lawmaker. “You cannot express disposition, is practically unknown to the rest of the world, and
your views and opinions without being pushed into a corner.” even to many Turks. He is Fuat Oktay, the vice­president.
Given Mr Erdogan’s insistence that any dissent on matters of Mr Erdogan has persuaded himself that he is indispensable.
national security equals treason, a reluctance to criticise him is Many of his supporters reckon the economic, religious and securi­
perhaps understandable. But it does not inspire confidence. ty gains they have seen over the past two decades depend on his
“What the hell are they going to do that is very different?” asks Soli staying in power. The people who stand to lose most from the end
Ozel, an academic at Kadir Has University in Istanbul. “Either they of the Erdogan era would not be ordinary voters, but thousands of
don’t have the courage of their convictions, or they don’t have con­ senior officials, propagandists and businessmen whose careers
victions.” Rather than find a strategy to win, the opposition seems and personal fortunes depend on the patronage networks over
merely to be waiting for Mr Erdogan and the AK party to lose. That which Turkey’s leader presides. It is they who may do most to en­
may not be enough. n courage Mr Erdogan, assuming he needs encouragement, to do
whatever it takes to win.
Yet Turkey is not a dictatorship. Elections are more like a foot­
ball match in which one team has eleven players, the other eight,
The future
and the referee generally sides with the bigger team, says Berk
Esen, an academic at Sabanci University. But the smaller team, as­
Democracy, if you can keep it suming it has the better players and the right strategy, can still
play to win, he suggests.
Despite the camaraderie between Mr Erdogan and Mr Putin,
and the Turk’s tendency to borrow from the Russian’s playbook,
Turkey is not Russia. Mr Erdogan knows that his power depends
not only on his ability to lock up his critics and to control public
The election will test Turkey’s democratic credentials
bodies, but also on the idea that he can be unseated through the

I N SPRING 2019 Ekrem Imamoglu won the Istanbul mayoral elec­

tion, defeating one of AK’s main leaders, Binali Yildirim, a for­
mer prime minister. He did so not just once, but twice. On election
ballot box. He may have dismantled many of the country’s demo­
cratic institutions, but he has also upheld the belief that elections
can make a difference. The majority of Turks could not agree
night, just as Mr Imamoglu was poised to overtake his rival, the more: witness the impressive turnouts of over 80% in recent local
state news agency suddenly stopped updating the vote tally. Over­ and general elections.
night large banners proclaiming Mr Yildirim’s victory went up Elections in Turkey have often been flawed, but so far never
across Istanbul. But by the time the vote count had ended, Mr Ima­ stolen outright. They are voters’ last remaining valve for dissent
moglu was ahead by over 13,000 votes. against their president. Closing it could trigger economic chaos
His victory proved short­lived, however. AK appealed, claiming and social unrest. The next few months will be crucial for what re­
irregularities, leading Turkey’s election board to cancel the vote mains of Turkey’s democracy. n
and order a rerun. Two months later, Mr Imamoglu won again,
this time by a resounding 800,000 votes.
Optimists see this episode as evidence of the resilience of Tur­ acknowledgments A list of acknowledgments and sources is included in the online version
key’s democracy. Pessimists say that a government capable of such of this special report
shenanigans in a local contest could go to even greater extremes to
win an election in which Mr Erdogan’s career and the future of his licensing our content For information on reusing the articles featured in this special report,
or for copyright queries, contact The Economist Syndication and Licensing Team.
new Turkey may be on the line. Tel: +44 (0)20 7576 8000; email: rights@economist.com
So far, the pessimists seem to be winning the argument. On De­
cember 14th, in what many critics saw as a verdict handed directly more special reports Previous special reports can be found at
Economist.com/specialreports
from Mr Erdogan’s palace, a court in Istanbul sentenced Mr Ima­

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 The Americas The Economist January 21st 2023 43

China and Latin America American trade, up from 5% in 2005. Ex­

cluding Mexico, the share rises to 24%.
Boom or bust? Whereas China became South America’s
top trading partner, the United States re­
mains that of Mexico and Central America.
Brazil, Chile, and Peru all run trade sur­
pluses with China.
Booming trade has led to complacency
BUE NOS AIRES
among some Latin American politicians.
China’s post-covid rebound will create winners and losers in Latin America
Many expect the relationship to always

F or centuries Latin America’s econo­

mies have been characterised by short
booms and sudden busts, often on the back
China. But, like the silver and gold rushes
of the past, the good times may not last. Al­
though strong growth this year is likely, the
stay the same, says Margaret Myers of the
Inter­American Dialogue, a think­tank in
Washington, DC. But this overlooks struc­
of commodity cycles. When silver was dis­ longer­term relationship between China tural issues in China, such as a domestic
covered in the highlands of Bolivia in 1545, and the region could disappoint. property slump and the fallout from a trade
the village of Potosí briefly became one of In the decade after 2002 Latin America’s war with the United States. There are alrea­
the most densely inhabited places on Earth dollar GDP grew by more than 3% a year, dy signs that China’s engagement with
as it provided more than two­thirds of the thanks to a commodities boom triggered some parts of the region is weakening.
world’s supply. A century later, with the by Chinese industrialisation. China’s Since 2020 China’s policy banks have
mines depleted, it was a ghost town. state­directed “policy banks”, including approved no new loans to the region (see
As China reopens after almost three China Development Bank and Export­Im­ chart on next page). Although commercial
years of lockdowns, some countries in Lat­ port Bank, provided more than $138bn in banks and private­equity funds have filled
in America are preparing for another loans to Latin America between 2005 and part of the gap, they are not as generous.
boom. Morgan Stanley, a bank, thinks Chi­ 2020. Poverty fell and government coffers Venezuela, which used to get two­thirds of
na’s economy could grow by 5.7% in 2023. swelled as China bought the region’s Chinese finance in the region, today only
That would trigger rising demand for the grains, metals and hydrocarbons. receives credit to help it maintain oil ship­
region’s goods. China consumes more than Trade with China grew from $12bn in ments to China.
16% of the world’s oil, over half of its cop­ 2000, or 0.6% of Latin America’s GDP, to Chinese lending changed after several
per and more than three­fifths of its iron $445bn in 2021 (8.5% of the region’s GDP). bad experiences. China struggled to recov­
ore. When rumours circulated last year By 2021 China accounted for 18% of Latin er millions of dollars in oil­for­loans deals
that covid­19 restrictions would be lifted, with Venezuela after Nicolás Maduro, the
the price of copper jumped by 7% in a day. autocratic president, came to power in 2013
→ Also in this section
All this is good news for commodities and oil prices fell. Elsewhere, pushback
exporters such as Chile and Brazil. Fully 44 Political chaos in Peru from environmental groups also stalled in­
67% of Chile’s copper exports go to China; vestments, as did shifting policies under
45 Lula’s plans to curb hunger
Brazil sends 70% of its soyabean exports to different administrations.

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 44 The Americas The Economist January 21st 2023

According to AidData, a research insti­ Peru

tute at the College of William and Mary in Cooling off
Virginia, between 2000 and 2017 more Chinese policy-bank* lending to governments
and state-owned enterprises, $bn
Ever more
high­value transactions linked to China’s
Belt and Road Initiative were suspended or Venezuela Brazil Ecuador Argentina
polarised
cancelled in Latin America than almost Rest of Latin America and Caribbean 40
anywhere else. Similarly, work by CEPAL, a
UN­linked research organisation, shows 30 LIMA
that Chinese investment peaked between
The political chaos looks set to persist
2010 and 2014 and has fallen since then. 20
Even if engagement with the region in­
creases again as China reopens, it will not
follow the same pattern. As China’s econ­
10 P eru has had six presidents in the past
five years. Next year it may have a sev­
enth. The latest resident of the presidential
nil nil 0
omy shifts towards services and manufac­ palace, Dina Boluarte, took office last
2007 09 11 13 15 17 19 21
ture of high­tech goods, electric vehicles month after Pedro Castillo, her predeces­
*China Development Bank and China Export-Import Bank
and renewable­energy products, its im­ Source: Inter-American Dialogue
sor, bungled a coup attempt. She did so in
ports and investments abroad will change. accordance with the constitution, backed
China’s imports of crude oil will fall, while by the institutions of state. She was, after
those of critical metals will increase. From jects linked to strengthening China’s food all, Mr Castillo’s vice­president, elected to
2005 to 2009, 95% of total foreign direct in­ security. A state­owned firm is building a take his place in such circumstances. But
vestment (FDI) by China in the region went port 50km (30 miles) north of Lima in order in the eyes of many Peruvians her presi­
into raw materials. By 2015 to 2021, this to increase China’s supply of food. (So far dency is illegitimate.
share had fallen to 46%, with the balance the protests in Peru do not appear to have Since Ms Boluarte took office, the coun­
split between manufacturing and services. affected it—see next story.) try has been shaken by protesters demand­
Between 2017 and 2021 Latin American All this has ruffled feathers in Washing­ ing her resignation, fresh elections and a
exports to China of aluminium, used in so­ ton. In 2020 Donald Trump’s administra­ new constitution. Indigenous and rural
lar panels, were 28 times as large as in the tion put pressure on Brazil not to allow people, among whom Mr Castillo cam­
previous four years. China’s annual im­ Huawei, a Chinese telecoms giant, to par­ paigned with promises to upend the status
ports of balsa wood from Ecuador, used in ticipate in a 5G auction. The Brazilian gov­ quo, are particularly angry. His 16 months
wind turbines, rose by 57% over the same ernment went ahead anyway, but is creat­ in power were marked by corruption scan­
period. Lithium may be particularly ing a separate network for government dals, ineptitude and chaos. But many of
prized. The price of lithium carbonate, agencies that excludes Huawei. Similarly, those who voted for him blame the elites in
used in batteries for electric vehicles, the Trump administration extended a loan Lima, the capital. They were furious when
soared in 2021 and 2022 from a five­year av­ to Ecuador to help it pay off billions of dol­ he was ousted so swiftly.
erage of $14,000 per tonne to $72,000. lars’ worth of debt to China on the condi­ The demonstrations were at first peace­
Other commodities may have a trickier tion that it exclude Chinese telecoms firms ful but quickly turned nasty, then deadly.
future. The price of copper is expected by from its 5G network. In 2021 the G7 By January 16th, 50 people had died in the
Goldman Sachs, a bank, to rise from launched “Build Back Better World”, to unrest, most of them civilians in clashes
$9,000 per tonne today to $11,000 in the compete with Chinese infrastructure in­ with the police and army. Several of the vic­
next 12 months. But Andrés Bórquez at the vestment around the world. It was such a tims were not even taking part in protests,
University of Chile thinks that less of it flop that it had to be rebranded last year. such as Yhamileth Aroquipa, a 17­year­old
may be needed—and that if China replen­ South America has less to gain than girl killed by a stray bullet.
ishes its copper reserves, which are at their Central America from cosying up to the Ms Boluarte has described the protes­
lowest for 15 years, demand will eventually United States. Brazil’s relationship with ters as a “group of radicals making the
plateau. That could hurt certain overex­ China “just really makes sense”, says Laris­
posed countries, such as Chile: 38% of its sa Wachholz, at Brazil’s Centre for Interna­
exports go to China, over three­quarters of tional Relations. “It’s beneficial for both
which are copper. sides.” She thinks the investment that is
Chinese investments are also becoming lacking in Latin America—in roads, ports
more strategic. Electricity is a key area. Be­ and utilities—is exactly what China can of­
tween 2017 and 2021 investments in this fer. Now that the leftist Luiz Inácio Lula da
sector made up 71% of Chinese mergers Silva is in power in Brazil, its government
and acquisitions in the region, according is likely to make more overtures to China.
to Boston University’s Global Development A few countries are trying to lessen
Policy Centre. In 2021 two Chinese state­ their reliance on the Asian superpower. Al­
owned firms splurged $6bn collectively to though Ecuador’s centre­right president is
buy Chilean and Peruvian electricity com­ finalising a free­trade agreement with Chi­
panies. Both projects were among the larg­ na, his administration also wants to join
est foreign investments ever received by the Pacific Alliance, a trade bloc composed
either country. of Chile, Colombia, Mexico and Peru. Uru­
Chinese investment in other infra­ guay, which exports more than 60% of its
structure appears to be accelerating. A sur­ beef to China, is seeking a free­trade deal
vey by Mexico’s National Autonomous with China as well as trying to join other
University reckons that of 192 regional in­ free­trade agreements. Yet across the re­
frastructure projects with Chinese involve­ gion, few countries are thinking about how
ment undertaken between 2005 and 2021, to adapt if China’s comeback turns out to
57 were carried out in 2020 and 2021. The lack the potency of the past. The coming
reasons may have to do with strategic pro­ boom may not last long. n Summer of discontent?

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 The Economist January 21st 2023 The Americas 45

country bleed”. On January 14th she ex­ gressional approval. So far the idea has countries where at least 5% of the popula­
tended a state of emergency in much of the failed to appease the protesters. tion face serious food insecurity. But those
country. Extremists have no doubt been in­ One proposal, long advocated by the gains were short­lived. A commodities
volved in the riots. Mr Castillo and his left­ left, is for a new constitution. This is now boom, which boosted growth and funded
ist allies have fanned the flames by insist­ supported by 40% of Peruvians, double the Lula’s social programmes, came to a crash­
ing he is the victim of a coup. But Gonzalo number in 2021, according to a recent sur­ ing halt in 2015. Economic mismanage­
Banda, an analyst, says that Ms Boluarte is vey. But the poll also suggests that the ment by his handpicked successor, Dilma
underestimating the muscle of indigenous search for a new political system might Rousseff, did not help. GDP per person fell
and rural groups, especially in the south. merely open more arguments. Fully 72% of by 8% from 2014 to 2016, leaving millions
She has formed an alliance with cen­ those polled want to bring back the death jobless and unable to feed their families.
trist and right­wing parties that control penalty, and half of those polled want the The governments that followed over­
Congress and has vowed not to resign. If state to control strategic industries. saw a “radical dismantling” of Brazil’s pro­
she did, it would leave the speaker of the Peru is “on a dangerous path” to levels poor policies, says Renato Maluf of
chamber, a retired military man, in charge of ungovernability, says Mr Banda. PENSSAN, who also advised Lula’s cam­
of the country. Instead she has called for “There’s a very sharp cleavage between a paign. Under Jair Bolsonaro, a right­wing
new elections to be held in April 2024, two Peru that defends the current system and a populist who was elected in 2018, the hun­
years ahead of schedule. This requires con­ Peru that wants to change it.” n gry were initially a low priority. In 2011 Mr
Bolsonaro, then a congressman, called Bol­
sa Família’s beneficiaries “ignorant
Brazil wretches”. During covid­19, however, he
launched a cash­transfer programme that
Fewer bellies full helped many. But these handouts were not
enough to stave off hunger for the poorest.
Inflation is easing but the prices of food
and non­alcoholic drinks were up by more
than 11% year­on­year in December.
People from the favelas of Rio de Janeiro
RIO D E JANE IRO
are turning up at state hospitals with mi­
Luiz Inácio Lula da Silva wants to reduce the number of hungry Brazilians
nor ailments, hoping to be checked in just

D ays after winning Brazil’s presiden­

tial election in October last year, Luiz
Inácio Lula da Silva stood on a stage with
so they get a hot meal, says Rodrigo Afonso
of Ação da Cidadania, a charity. Rural
households are doing little better.
tears streaming down his face. Lula, as he For many of the poorest in Brazil, Lula’s
is known, sobbed as he talked about the victory comes as a relief. So far, it looks like
large and growing number of Brazilians the new president and his Workers’ Party
struggling with hunger. “If at the end of my will manage to keep their promise to bring
term in 2026, every Brazilian is having hunger down. In December a Supreme
breakfast, lunch and dinner once again,” Court ruling that raises government­
he said, “I will have fulfilled my life’s mis­ spending limits helped save Lula’s plans to
sion.” At his inauguration in January, he continue Bolsa Família.
broke down once again and reiterated that
his government’s “first action” will be to More on the menu
rescue millions from malnutrition. But Lula may have a harder time pushing
As Marcelo Neri, an economist, puts it, through other pro­poor policies. He won
if China is the world’s factory, Brazil is the the presidential vote with the narrowest
world’s farm. The country is the world’s margin—1.9 percentage points—since Bra­
largest exporter of beef and the second­ zil’s return to democracy in the 1980s. He
largest exporter of grain. Yet despite the faces a Congress dominated by conserva­
bounty, millions of Brazilians are not get­ tives. And the government is desperately
ting enough to eat. Partly because of the short of funds. Among G20 countries Brazil
war in Ukraine, food prices have increased had one of the most generous fiscal re­
so quickly recently that families who con­ A crying shame sponses to the pandemic. Congress de­
sidered themselves solidly middle­class a clared a “state of calamity” to bypass a con­
few years ago are now struggling to put was launched in his first 30 days in office, stitutional ceiling on spending, allowing
food on the table. became a model for other developing gross public debt to climb to a peak of 88%
The share of the population that is hun­ countries. Bolsa Família, the world’s big­ of GDP in late 2020.
gry has jumped from 9%, or about 19m peo­ gest conditional cash­transfer scheme, en­ Hunger is not the only thing Lula has to
ple, at the end of 2020 to over 15%, or 33m sured families did not starve. By 2010 47m worry about. The country has a productivi­
people, in 2022, according to the Brazilian students got healthy free school meals. ty problem, too. Even in the commodities
Research Network on Food and Nutrition The effects were obvious almost imme­ boom output per worker grew on average at
Sovereignty and Security (PENSSAN), a diately. The share of the population that just 1% each year, according to Capital Eco­
non­profit organisation. The number that was undernourished fell by half, from nomics, a consultancy. Analysts expect
face some form of food insecurity—for ex­ around 8% in 2003 to just 4% in 2010, ac­ that output will expand by less than 1% in
ample, skipping meals or opting for lower­ cording to the World Bank. A generation 2023. Since the election, the government’s
quality food—is around 125m. grew up with better prospects as fewer borrowing costs have ticked up as lenders
The last time Lula was president, from children were distracted by rumbling worry about soaring spending on social
2003 to 2010, he got some way towards his stomachs at school. In 2014 Brazil dropped protection. The president faces a tricky
goal. One campaign, “Zero Hunger”, which off the UN Hunger Map, which includes balancing act. n

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 46
Asia The Economist January 21st 2023

Security in East Asia Shifts in public opinion have allowed

the government to take steps that were ta­
Stronger, faster boo just a few years ago. Keeping defence
spending capped at around 1% of GDP has
been an informal but inviolable rule since
1976. Now Japan plans to raise spending to
2% of GDP by 2028, and cough up an addi­
tional ¥43trn ($326bn) over the next five
TO KYO AND WASHINGTO N, DC
years. Japanese leaders have long refrained
Japan is making tough choices in order to improve its defences
from acquiring long­range missiles, even

S pend enough time on Japanese mili­

tary bases and in policymakers’ offices,
and you will eventually encounter the
important defence­policy frameworks. Ja­
pan will spend vastly more on defence and
acquire powerful new weapons. China’s
though the government concluded, back in
1956, that doing so would not breach the
constitution. Now Japan plans to purchase
same unusual map. It depicts East Asia ro­ belligerence, under Xi Jinping, has helped hundreds of cruise missiles from America
tated 90 degrees anti­clockwise, as if to fuel this. But Vladimir Putin’s invasion of and develop its own long­range missiles.
show the region from Beijing’s perspective, Ukraine has played a bigger role. “The basic Whereas Abe’s reforms drew tens of thou­
looking out across the East China Sea. The assumption for years was that we won’t sands out to protest, the latest changes
Japanese archipelago, and in particular the have to fight a war,” says Sasae Kenichiro, a have attracted support from a majority of
Nansei island chain stretching from Kyu­ former diplomat who chaired a council ad­ Japanese in polls.
shu to Taiwan, seems to form a wall. Chi­ vising on the new security policies. “Now War in Ukraine has pushed Japan to
na’s ambitions for a greater global role, the for the first time, the Japanese people think more about what combat would in­
map suggests, run right through Japan. sense the possibility of armed conflict in volve. “Putin did it, why not Xi?” says one
In recent years this precarious position this region and are asking what it means senior Japanese official. “Dictators are not
has encouraged Japan to do more to ensure for Japan.” always rational.”
its security. When the late Abe Shinzo was Japan plans to spend a big chunk of its
prime minister, Japan beefed up its Self­ new defence money stocking up on parts
→ Also in this section
Defence Forces (SDF)—as its armed forces and ammunition, as well as hardening
are called, in deference to its pacifist con­ 47 Sinking towns in India military facilities against missiles. The SDF
stitution—and loosened laws that limit also hopes to catch up in cyber­warfare,
48 South Korea’s nuclear bluff
their ability to use force. Yet such steps where it is a laggard. Officials think Japan
were incremental—and also controversial. 48 Cyborgs in Japan would not withstand the kind of cyber­on­
Plenty of people in Japan worried about slaught Ukraine has faced; they reportedly
49 Jacinda Ardern resigns
backsliding towards militarism. plan to quadruple the size of Japan’s cyber­
Changes have accelerated in the past 49 A murder in Afghanistan forces by 2028, to about 4,000 people. The
year. In December the government updat­ SDF will adapt its command structure by
50 Banyan: The meaning of “Asia”
ed its National Security Strategy and two establishing a joint headquarters with a

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 The Economist January 21st 2023 Asia 47

single figure responsible for overseeing how the public would respond if Japanese of doing that in the Himalayas. The town is
ground, air and land forces. soldiers were actually sent into combat. a jumping­off point for hikers and people
All this has delighted foreign­policy Japan must also communicate clearly going to sacred sites at loftier altitudes. Its
types in America. “I have rarely had such a what it is up to, lest its changes only end up usefulness to pilgrims—and the recent col­
sense of elation about the celebration of fuelling conflict. Co­operating more close­ lapse, due to subsidence, of at least one lo­
the US­Japan relationship,” Kurt Campbell, ly on security with South Korea, another cal temple—makes its travails a particular
who oversees Indo­Pacific affairs in the American ally, would help deter China. But challenge for the ruling Bharatiya Janata
White House, gushed after Kishida Fumio, the Japanese build­up makes many in Party, which likes to show off its piety.
Japan’s prime minister, met Joe Biden on Seoul wary. China itself has been caustic: Authorities began paying attention to
January 13th. For American planners, Ja­ “This reminds us of the last time Japan people such as Mr Saklani earlier this
pan’s size, economic heft, strategic geogra­ took a wrong turn and brought a terrible di­ month, when cracks that were already vis­
phy and military potential make it the saster to Asia,” crowed the Global Times, a ible around town began to multiply. Satel­
most important Indo­Pacific ally when it Chinese tabloid. One risk is that China lite imagery suggests the area sank by more
comes to counterbalancing China. Japan does not see a wall being fortified, but a than 5cm (2 inches) in 12 days during the
has become essential, in particular, to force creeping towards it. Japan is trying to new year period, having already subsided
America’s plans for responding to crises offer some reassurance: its new security by 9cm between April and November last
around Taiwan. In the 1990s “our attitude strategy refers to China as a “challenge” but year. The district stopped all construction,
was: fine, we’ll do it ourselves,” says Mi­ does not label it a “threat”, as some hawks declared hundreds of houses unsafe and
chael Green, a former senior American of­ had sought. Japan, for better or worse, can­ moved their inhabitants, including Mr
ficial. “That’s not the attitude anymore— not change its place on the map. n Saklani and his family, to temporary ac­
we can’t do it without Japan.” commodation. The five of them are now
America has announced plans to make living in one hotel room. The government
Okinawa, in southern Japan, the base for Indian infrastructure has given them 150,000 rupees ($1,800) in
one of three new “marine littoral regi­ compensation. At least officials are taking
ments”, designed to scatter along the is­ Cracks in the notice now, says Mr Saklani.
land chain, avoid detection and seek to Joshimath’s most recent drop may have
close sea passages to Chinese ships. The façade resulted from the bursting of a groundwa­
two countries have also declared that their ter reservoir. What caused that is under in­
alliance extends into space and agreed to vestigation. But a high risk of subsidence
JOSHIMATH
expand joint training and use of military in the area was recognised in the 1970s,
A sinking mountain town sparks
facilities. Although Japan does not have a when a government commission conclud­
debate about development
combined command with America (unlike ed that Joshimath’s location—built atop
South Korea or NATO), it will need Ameri­
can help with targeting and intelligence to
use the new missiles it desires. That will
I T IS NEARLY two years since cracks ap­
peared in the walls of the house in which
Durga Prasad Saklani lived with his wife
sand and stone deposited by an old land­
slide—made it a poor venue for large­scale
development. Melting glaciers have since
require “a command­and­control system and daughters. Since then the 52­year­old left behind more loose material which has
that is more integrated than ever before,” from Sunil, a village near Joshimath in the pushed up the dangers, says Sarswati Pra­
said Oue Sadamasa, a retired Japanese air state of Uttarakhand in the Himalayas, has kash Sati, a geologist from Uttarakhand.
force general, at a recent seminar in Tokyo. filed endless petitions warning that his Nearby towns and villages are affected
For all the bonhomie, doubts about home is sliding down the mountain. For a by similar issues. Yet in recent years there
America’s staying power are also helping long time, says Mr Saklani, “nobody cared”. has been little opposition to big construc­
drive Japan’s reforms. Officials have con­ India’s government wants to develop tion projects designed to attract tourists.
cluded from watching the war in Ukraine, the country’s remotest corners. Problems “What is the use of scientific research and
and America’s withdrawal from Afghani­ around Joshimath underline the difficulty reports if they are never executed?” won­
stan, that America will only come to the aid ders Mr Sati.
of those who are ready to fight for them­ Many locals blame Joshimath’s most re­
selves. Japan is seeking to strengthen ties cent descent on a road built between Hin­
with its other partners: on his way to du pilgrimage sites and on a hydropower
America Mr Kishida stopped in London to project, both of which the central govern­
sign an agreement with Britain that makes ment supports. Atul Sati, a local activist,
it easier for soldiers to train and operate in said that for years the government has
each other’s territory. Japan is also plan­ failed to protect the town, even after a
ning to develop a next­generation fighter landslide two years ago that killed 200 peo­
jet with Britain and Italy. Japan, like others, ple. The head of a local Hindu monastery
worries about the possible return of Do­ told reporters that “the planned destruc­
nald Trump or one of his acolytes. “We tion of the Himalayan region” through de­
have to think about Plan B,” says one influ­ velopment risked Joshimath’s survival as a
ential scholar. religious and cultural centre.
Many in Japan question whether the The government denies that its devel­
new policies will work out. Mr Kishida has opment projects are to blame. But it is wor­
yet to clarify how he will finance the new ried about public opinion. In mid­January
spending; the ruling Liberal Democratic the National Disaster Management Au­
Party is split on whether to raise taxes, cut thority told officials and scientists in
spending or issue more government Uttarakhand to stop speaking to the media.
bonds. The plans will require more person­ A study detailing the extent of the subsi­
nel, but Japan’s population is shrinking dence has disappeared from the website
and the SDF already struggles to meet re­ that published it. Some fear the govern­
cruitment targets. And it is still unclear Falling apart ment plans to paper over the cracks. n

012
 48 Asia The Economist January 21st 2023

Renuclearising
Chinese cosmetics
Loose talk about Making faces
nukes TO KYO
Japanese youngsters want to look like Chinese starlets
SEOUL AND WASHINGTO N, DC
once. Chinese celebrities have beauty “on
South Korea’s leader muses about his
another level”, says Nanako (pictured), a
country getting nuclear weapons
24­year­old Japanese woman who also

R ash talk about nuclear weapons is

common from North Korea; less so
from the South. In a speech given on Janu­
has lots of followers online.
Enthusiasm for these styles is driving
up sales in Japan of Chinese brands of
ary 11th Yoon Suk­yeol, South Korea’s con­ cosmetics, such as Florasis and ZEESEA.
servative president, speculated that a day Older Japanese have long avoided Chi­
may come when the threat from North Ko­ nese products, which they consider
rea requires America to deploy nuclear inferior. But their children are less likely
weapons back to the peninsula. Failing to assume this, with some justification.
that, he said, South Korea could “acquire For years Japan had the world’s second­
our own nuke”. He said that this would not most­valuable market for cosmetics,
take long, given his country’s technologi­ after America; the Chinese market out­
cal prowess. grew it in 2019. China’s make­up firms
It is the first time in decades that a sit­ have grown more competent, and more
ting South Korean president has talked inventive, as their sales have ballooned.
about going nuclear. His remarks were ad­ Tensions over disputed islands and
mittedly casual, says Yang Uk of the Asan Taiwan have poisoned ties between
Institute for Policy Studies, a think­tank in Japan and China in recent years. But
Seoul, who was in the room. And they unlike the trade in products such as
cropped up within a somewhat meander­
ing speech that required its audience to
imagine a number of hypotheticals.
W HITE GLITTER shimmers around
Chang Chia­jung’s eyes. Her lips
are bright red; her skin glows. Ms Chang,
semiconductors, which governments
seek to control, cosmetics are “apoliti­
cal”, says Goto Yasuhiro of Asia Universi­
Yet it is not the first time Mr Yoon has who was born in Taiwan and now lives in ty in Tokyo. Behind the rows, he says,
caught America unaware by speculating Japan, is a fan of what she calls chuuka youth cultures in Japan, China and South
about a more robust nuclear policy. Nukes meiku (Chinese make­up). She learned Korea are growing increasingly alike.
are plainly on his mind. The past year has from influencers on RED, a Chinese A survey in 2021 suggested that more
brought a record number of North Korean social­media site. Now she posts tuto­ than 40% of Japanese aged 18­29 feel
missile shots, as well as preparations for a rials of her own for Japanese audiences. “affinity” towards China, compared with
long­expected seventh nuclear test. Diplo­ Her skills have earned her thousands of only 13% among those in their 60s and
macy aimed at “complete denuclearisation followers on Instagram and Twitter. 70s. Sugai Fumihito, who works for an
of the Korean Peninsula” seems hopeless. Beauty gurus across Japan are going outpost of the Beijing Language and
And the intensifying rivalry between potty for styles of make­up made famous Culture University in Tokyo, says many
America and China is worsening military by starlets from China. The boom began youngsters studying Mandarin at his
tension in Asia. four years ago with the break­out success institution cite Chinese make­up as a
Mr Yoon’s words may thus have several of a look known as Chiborg. That com­ reason for their interest. “I never imag­
intended audiences. The first is domestic. bines the words for China and cyborg; it ined a day when Japanese consider Chi­
Taking a hard line against North Korea aims to make young faces seem pre­ nese to be ‘cool’,” he says. “Lots of Japa­
pleases his conservative base. Several polls ternaturally chiselled. More trendy now nese have started to admire Chinese
show robust public support for an indige­ is chunyu (pure desire), which involves people,” echoes Ms Chang. “That’s thanks
nous nuclear deterrent. Another is North trying to look alluring and innocent all at to Chinese make­up.”
Korea. In the same speech Mr Yoon said the
most effective deterrent against aggres­
sion would be to convince the North it the fear of abandonment. that seeks the abolition of nuclear weap­
would be hit “100 or 1,000 times” more South Korea’s president may be seeking ons, thinks Mr Biden will not offer a more
strongly than any blow it could land. A stronger American assurances. In Novem­ tangible nuclear commitment. He notes
third target may be China, which is being ber the two countries agreed, among other that America’s nuclear weapons “are like
warned that it may one day have another things, to hold tabletop training exercises Domino’s Pizza: we can be there in 30 min­
nuclear state on its periphery if it does not that “include a DPRK nuclear use scenario”. utes, or your money back”. America, he
do more to rein in North Korea. But they disagree over what this means. says, would resist South Korea building its
Mr Yoon’s main audience is probably The South Koreans have repeatedly sug­ own nukes.
America. As North Korea tests missiles gested they were discussing “joint nuclear Mr Yoon is highly unlikely to go that far.
with the range to hit the American home­ weapons planning and exercises” with “He’s not saying we will go nuclear today or
land, many South Koreans are scared that America that would be tantamount to tomorrow,” says Mr Yang. After his speech,
the United States might not risk the de­ NATO­style “nuclear sharing”, in which al­ Mr Yoon’s office quickly restated South Ko­
struction of, say, Seattle, to defend Seoul. lies get a say on the use of nuclear weapons rea’s commitment to nuclear non­prolifer­
Donald Trump’s talk of leaving South Korea (and some are tasked to deliver them). Joe ation. The danger, however, is that his
to defend itself, and the possibility that he Biden, America’s president, shot down that loose talk may only create a split with
or a similarly minded candidate might suc­ suggestion with a curt “no”. America—to the delight of North Korea
ceed President Joe Biden in 2025, increase Jon Wolfsthal of Global Zero, a group and China. n

012
 The Economist January 21st 2023 Asia 49

Politics in New Zealand 14th. The most obvious replacement, Grant

Robertson, the deputy prime minister, has
The tank runs dry already ruled himself out. The “continuity
candidate” would therefore be Chris Hip­
kins, a 44­year­old who oversaw New Zea­
land’s pandemic response, argues Neale
Jones, Ms Ardern’s former chief of staff.
A choice could be made as soon as Janu­
ary 22nd, when a vote will be held among
New Zealand’s prime minister announces her resignation
the party’s caucus in Parliament. If two­
ACINDA ARDERN said tearfully that she that Labour is trailing National, the main thirds of them agree on a new leader, that
Jhad found “time for reflection”. Being opposition party. One poll conducted in person will immediately replace Ms Ar­
prime minister requires you to have “a full December found that 38% of New Zealand­ dern as prime minister. If they do not, La­
tank, plus a bit in reserve for those unex­ ers would vote for the conservatives in the bour’s members will also get a vote. Do not
pected challenges”, she declared at a meet­ coming election, compared with 33% for expect the kind of mania that accompa­
ing of her Labour Party in the city of Napier. Ms Ardern (though she was still their pre­ nied Ms Ardern’s rise. She pulled her party
After five years as New Zealand’s leader, the ferred prime minister). out of the doldrums in 2017, and catapulted
tank had run dry. Ms Ardern announced That reflects an increasingly gloomy it to victory amid a bout of “Jacinda­ma­
that she would step down as prime minis­ mood. Inflation in New Zealand is above nia”. Her successor might be lucky just to
ter no later than February 7th, and perhaps 7%. Between 2020 and 2021 house prices limp back into office. n
as soon as January 22nd. “I am human. Pol­ rocketed by 25%, leaving New Zealand with
iticians are human,” she explained. “We some of the most expensive homes in the
give all that we can, for as long as we can, English­speaking world. Many Kiwis Afghanistan
and then it’s time.” grumble that they cannot afford to buy or
Few saw that coming. Since being elect­ rent a property. Killing women
ed prime minister in 2017, at the age of 37, This is not what Ms Ardern promised.
Ms Ardern has steered her country through She came into office with lofty plans to
a mass killing, a volcanic eruption and the “build a fairer, better New Zealand” by
covid­19 pandemic. At a time of rising pop­ slashing child poverty, ending homeless­
ulism, she gained a reputation for kind­ ness and erecting 100,000 cheap houses.
A murder in Afghanistan highlights
ness. When a white­supremacist shot dead But that “idealism collided hard with reali­
the misery of women
51 mosque­goers in Christchurch in 2019 ty”, in the words of David Seymour of the
she donned a headscarf, embraced griev­
ing families and coined a national refrain
by declaring: “They are us.” In early 2020
right­wing ACT Party. Labour’s affordable­
housing targets were scrapped. A well­in­
tentioned policy to put homeless people
W HEN THE Taliban took power in Af­
ghanistan in August 2021, thousands
of Afghans who had been associated with
she was quick to close New Zealand’s bor­ into emergency accommodation is blamed the American­backed government fled.
ders in response to covid. The death toll for causing crime. Gangs are warring. Ki­ Mursal Nabizada, an activist and former
from the pandemic stayed low. wis have been getting worried about a parliamentarian, chose to stay. Afghani­
Her prowess also puffed New Zealand’s spate of ram­raids—an ostentatious kind stan, as she put it, was not like a restaurant
reputation overseas. At home, Ms Ardern of theft that involves driving cars through you can leave if you do not like the service.
won the last election in 2020 with 49% of shop windows. It was her home.
the vote—the best result for any party since Whoever succeeds Ms Ardern will have In mid­January Ms Nabizada was shot
1951. However, her pulling power has lately an awful lot to do ahead of a general elec­ dead in Kabul, the capital. It is not yet clear
weakened. Successive polls have shown tion which is due to take place on October who killed her. But her murder provides
another appalling glimpse of how life in
Afghanistan is deteriorating—for women
and girls in particular. Under the Taliban,
people who mistreat or attack women have
much less reason to fear punishment. “The
gloves have come off,” reckons Ashley Jack­
son of the Centre on Armed Groups, an
NGO based in Geneva. “Anyone can do any­
thing to a woman.”
At the Taliban’s first press conference
after seizing power a spokesman an­
nounced that women would be “very ac­
tive” in Afghan society. There was some
hope that “Taliban 2.0” would set itself
apart from the brutish regime that ran the
country from 1996 to 2001. But moderate
voices are being drowned out by diehard
mullahs in Kandahar, the group’s southern
stronghold. Steve Brooking, a former spe­
cial adviser to the UN in Afghanistan, says
it is “the ideologues, rather than the prag­
matists, who are in charge”.
In March last year girls were told they
On her way out could start returning to secondary schools,

012
 50 Asia The Economist January 21st 2023

Banyan One word to rule them all

Who gets to define what Asia means?

W HEN RISHI SUNAK became Britain’s

first non­white prime minister last
October, Ronny Chieng, a Chinese­Ma­
up the ports of the Indo­Pacific to traders,
missionaries and intellectuals, or, more
notably, through European languages that
Asian Muslims attempted to reconcile
the new (to them) religions of Buddhism,
Confucianism, Daoism and Shinto with
laysian comedian, was charged by “The served as a bridge between the vast num­ their own faith, casting the Buddha as an
Daily Show”, an American satirical cur­ ber of Asian tongues. Islamic prophet or Confucius as a philos­
rent­affairs television programme, with As late as the 20th century there were opher. Japan’s Asianists saw their own
commenting on the news. “I know every­ few dictionaries between major Asian country as a natural leader, notably
one is really excited that this is the first languages such as Japanese, Urdu, Chi­ through the imperialist project of a
Asian prime minister. But let’s be clear: nese and Persian, let alone between minor continental “co­prosperity sphere”.
Indians are not Asians,” he declared. ones. Sometimes this led to comic out­ Acceptance of the idea of Asia did not
The segment provoked a minor back­ comes. When Baha’i missionaries sought automatically lead to a sense of brother­
lash in America. But some viewers in to convert Japanese in 1914, they resorted hood or respect. As Mr Green writes, “the
Asia nodded along, for Mr Chieng’s ton­ to the use of Esperanto, a language in­ search for solidarity always raised the
gue­in­cheek rant struck at something vented in Poland in 1887. Similarly, indige­ question: unity on whose terms?”
they recognised. For centuries the people nous literature on other Asian cultures In the 1930s an Indian freedom fight­
of the region’s western and southern was scant, requiring scholars to look to er, Rash Behari Bose (who married a
parts and those of the east and south­east English, French or Russian sources. Japanese woman and would die a Japa­
have struggled to make sense of each When intellectuals from across the nese citizen), proposed to the proto­
other. That struggle is at the heart of continent chose to engage with the idea of Hindu­nationalist Veer Savarkar that
“How Asia Found Herself”, a new book by Asia as something that united them, it was “every attempt should be made to create
a historian, Nile Green, who teaches at often as a form of self­projection. Chinese a Hindu bloc extending from the Indian
the University of California, Los Angeles. intellectuals looked upon India, whose Ocean up to the Pacific Ocean.” Some 70
The term Asia was coined by Greek people had been unable to fight off coloni­ years later Abe Shinzo, then prime min­
geographers some two millennia ago and sation, as a lesson in how not to fail. Indi­ ister of Japan, extolled to India’s parlia­
did not appear on the continent it de­ ans speculated on the influence of ancient ment the idea of a “broader Asia” taking
scribed until the 1600s, at the dawn of the Hindu scriptures on Daoism, or of India’s shape “at the confluence of the two seas
age of European empire. The foreign warrior caste on Japan’s samurai. of the Indian and Pacific Oceans”. What
roots of the word—and the concept—are geopolitical analysts have more recently
visible in the transliterations that Asians come to call the “free and open Indo­
made as they grappled with the idea: Pacific” now takes in America and Aus­
Asiya in Arabic, Persian and Urdu; Esiya tralia as partners in the grouping known
in Bengali and Gujarati; Ajia in Japanese; as the Quad, which seeks to counterbal­
Yaxiya in Chinese. ance the rise of China.
It took until the 19th century for the Not for the first time, the idea of
term to catch on, and even then its most inter­Asian co­operation includes—and
salient use was oppositional: Asia as an indeed relies upon—the technology and
anti­colonial device, as “not Europe”. infrastructure of the West. And once
Even the “Asian values” promoted by Lee again, as one Asian country seeks to draw
Kuan Yew, Singapore’s founder, are best smaller states into its own sphere, other
understood in opposition to Western powers find themselves asking: “Asia on
ones. The irony, as Mr Green notes, is whose terms?” The concept of Asia has
that it was European colonial infrastruc­ for centuries and despite many efforts
ture that in many cases made inter­Asian defied definition. And so once again, in
cultural exchange possible, whether the guise of the Indo­Pacific, it is at its
through steamship routes that opened most useful when defined in opposition.

but were then sent back home as soon as holds for whom humanitarian assistance known men into their homes, or to discuss
they turned up. Bosses in Kandahar appar­ is the main source of income has increased topics such as their health. On January 16th
ently ordered that reversal at the last mi­ six­fold since 2021. Across the country Amina Mohammed, the UN’s deputy secre­
nute. Since then, new rules have forced some 20m people are at risk of severe hun­ tary­general, arrived in Afghanistan to dis­
women to cover their faces in public, ger. An unusually cold winter has wors­ cuss this crisis, and all the others.
sought to ban them from going out without ened the situation. Last year only 12% of Afghan women
a male escort, and barred them from parks Afghanistan received more than $3bn told Gallup, a pollster, that females are
and gyms (how strictly these rules are en­ in humanitarian aid last year, delivered treated “with respect and dignity”, down
forced varies around the country). In the mainly by the UN and NGOs. But confusion from 26% in 2021. Marzia Babakarkhail, a
past month alone, the Taliban has ruled over whether and how women are permit­ former judge in the country’s Supreme
that women may not attend university and ted to work for such organisations is stop­ Court, says the Taliban’s rules are pushing
may not work for NGOs. ping assistance getting to people who need millions into poverty and are greatly harm­
These edicts are impoverishing the it. Female aid workers are indispensable in ing mental health. “They are killing wom­
country. The UN thinks the share of house­ places where women are loth to let un­ en in a thousand different ways.” n

012
 China The Economist January 21st 2023 51

Demography Only a few years ago, however, many

Chinese scholars and the UN were expect­
Struggling to stay on top ing that China’s population would peak
around 2030. That it has reached the turn­
ing­point much sooner will be sobering for
the country’s leaders. It is yet another re­
minder that China no longer enjoys the de­
mographic dividend of a huge supply of
For the first time since the 1960s, China’s population is shrinking. Its long reign
cheap labour to boost its growth (which the
as the world’s most populous country is probably at an end
statistics bureau said was 3% last year, one

“W e are the last generation.” As

news, released on January 17th,
that the country’s population had fallen
This time the main cause is not an un­
natural number of deaths. On December
7th China scrapped its nearly three­year­
of the lowest rates since the end of the Mao
era). Now China is ageing rapidly. Its work­
ing­age population began shrinking in
last year for the first time in decades swept long “zero­covid” policy, causing a surge of 2012. It is following the path of countries
Chinese social media, some commenters infections and many fatalities. On January such as Japan and South Korea, without
used these doom­laden words. They have a 14th officials said there had been nearly having first grown rich, and without hav­
special resonance in China. During a 60,000 covid­related deaths since then. ing spent enough money on medical and
weeks­long lockdown in Shanghai last The actual number is much higher (the of­ other forms of care that the ballooning co­
year to prevent the spread of covid­19, an ficial number includes only deaths in hos­ hort of elderly people will need.
angry resident spat them at a hazmat­suit­ pital and covid deaths are often not record­ The government has tried desperately
ed policeman who had warned him that ed as such). But officials say December’s to remedy this, though far too late. It was
punishment for violating pandemic­con­ toll from covid is not reflected in the popu­ not until 2016 that it gave up its decades­
trol rules would affect the young man’s lation figure. The reason for the decline is old policy of forcing many people to have
family for three generations. The retort, clear: a plummeting desire to reproduce. no more than one child. In 2021 it switched
captured on a mobile phone, quickly went For many Chinese, even married ones, to a three­children­per­couple policy,
viral. Now, as its meaning truly sinks in, there will be no next generation. which is more an aspiration than a restric­
some are recalling it. tion. Having more is not punishable. This
According to the National Bureau of relaxation—accompanied by a slew of in­
Statistics, China had 1.412bn people at the → Also in this section centives to have children, ranging from
end of last year, 850,000 fewer than at the cash handouts to tax breaks and longer
52 China, Africa and space
start. Not since 1962, after millions died in maternity leave—has had little impact.
a man­made famine triggered by Mao Ze­ 53 Has covid peaked? According to the latest figures, 9.56m
dong’s “Great Leap Forward”, had the coun­ babies were born in 2022, nearly 10% fewer
54 Chaguan: A trip with migrant workers
try recorded a shrinking of its population. than in 2021. The rate was the lowest since

012
 52 China The Economist January 21st 2023

the Communist takeover in 1949. A decade how traditional values are changing. Wom­ the fall in population.
ago the total fertility rate (the average num­ en are pushing back against the gender in­ There is soon likely to be another surge
ber of children a woman is expected to equality of wedlock. The internet seethes of interest in the topic among Chinese
have over her lifetime at current birth with resentment of the idea, implied by the netizens. The UN predicts that India’s pop­
rates) was 1.7. In 2021 it fell below 1.2, UN government’s efforts to encourage bigger ulation will surpass China’s in April. Some
figures show (see chart). For a population families, that they become baby­making believe this has already happened. The end
to remain stable, the rate should be about machines. Some young people, men as of China’s reign as the world’s most popu­
2.1, assuming no net migration and that well as women, call themselves “chives”, lous country, a position it has held for hun­
mortality rates remain unchanged. suggesting their resentment of how they dreds of years, will not please Chinese na­
There are several reasons why baby­ are cynically seen as something to be har­ tionalists. Is it possible, they will wonder,
making is becoming less popular. The vested (ie, exploited) in pursuit of national that India, long left in the dust by China’s
main one is the cost of rearing children. or corporate goals. “Getting married and rapid rise, will be able to take advantage of
Last year the YuWa Population Research In­ having little chives can only harm my per­ its still­growing working­age cohort to
stitute, a think­tank in Beijing, reported sonal development and lower my quality catch up with China, and eventually to ri­
that such expenses, as a ratio of GDP per of life,” wrote one commenter on Weibo, val its power? It will be a year of much de­
person, were higher in China than in sever­ China’s version of Twitter, about news of mographic head­scratching. n
al advanced economies, including Ameri­
ca. It identified only South Korea as a more
expensive place to have kids. (That country China, Africa and space
has the world’s lowest fertility rate.) YuWa
warned that China’s declining birth rate Preparing for launch
could have a “serious negative impact” on
the country’s ability to innovate and its
“overall national strength”.
Government handouts have done little
to ease the burden on parents. On January
10th the city of Shenzhen proposed that
A planned spaceport in Djibouti may give China a boost
couples having a third child (or additional
ones) be given subsidies totalling 19,000
yuan ($2,800) during the first three years
of the child’s life. But that would amount to
W hen China began building its first
overseas military outpost—a naval
base in Djibouti—America and its allies
cently been at high risk of debt distress.
If completed, the spaceport offers Dji­
bouti a chance to claim a piece of the mul­
only about 8% of the total costs, according were alarmed. The facility, which opened ti­billion­dollar global space industry.
to an official estimate published by state in 2017, sits just 13km (eight miles) from There are about two dozen active space­
media. Despite a recent slump in China’s America’s largest base in Africa. France, Ja­ ports worldwide. Africa has none: the
property market, prices are still high. Cou­ pan and Italy have bases there, too. Before French abandoned theirs in Algeria after it
ples often put off getting married until long the Americans accused China’s forces won independence in 1962, and Italy has
they have bought a home. The numbers ty­ of shining lasers at their pilots. China com­ stopped using one in Kenya since joining
ing the knot have been falling since 2014. plained that Western aircraft were overfly­ the European Space Agency.
Another economic barrier to childbirth ing its outpost to photograph it. Djibouti has much to offer. It is not far
is the cost of looking after the elderly. That friction has since lapsed into from the equator, where the Earth rotates
About 35m Chinese are aged 80 or over. By grudging coexistence in the former French fastest, giving rockets a boost. Access to the
2050 the number is expected to more than colony, which is not much bigger than New sea would enable clients to import rockets
quadruple. Unless the government mas­ Jersey. But a new threat to this uneasy bal­ and other bulky equipment by ship. They
sively steps up its spending on care, fam­ ance has emerged with the announcement could also launch eastwards over the
ilies will pick up much of the tab. on January 9th that a Hong Kong­based
The reluctance of some young Chinese company with links to Huawei, a Chinese
to marry and reproduce is also a sign of telecoms giant, will build and operate a
spaceport covering at least ten square kilo­
metres (four square miles) in Djibouti.
Baby bust The facility will include seven launch­
Fertility rate, births per woman pads and three rocket­testing pads, says
Hong Kong Aerospace Technology Group
Replacement rate*
6 Ltd (HKATG), which signed a memorandum
China’s Three-child policy
one-child
of understanding on the project with Dji­
policy Two-child policy 5 bouti’s government and a Chinese compa­
ny that operates a special economic zone
Indonesia 4 there. In March they will sign a contract for
India the deal, which allows construction of
3
power stations, water plants, roads and
2.1 seaports, said HKATG.
Ismail Omar Guelleh, Djibouti’s presi­
United States
China 1 dent, said on Twitter that the $1bn space­
port will take five years to build and be
0 transferred to the government after 30
1970 80 90 2000 10 21 years. He has long sought to boost the
*The rate needed to keep a population broadly stable, economy through Chinese­funded infra­
assuming no net migration and unchanged mortality rates
Sources: UN Population Division; news reports
structure projects. But the pay­off has been
less than anticipated and Djibouti has re­ A red rocket

012
 The Economist January 21st 2023 China 53

ocean, minimising risks for people in sur­ Covid­19

rounding areas while taking advantage of Searching the wave
the Earth’s rotation. Has it peaked? China, search frequency on Baidu
Dec 1st 2022=100, by search term
There are drawbacks, too. Shipping
rockets and satellites across the world is Fever Positive
costly and can face regulatory obstacles. Coughing Shortness of breath
America, in particular, makes it difficult to Heart palpitations Lianhua qingwen*
export space­related equipment. Djibouti’s 2,000
The virus has already torn through
geopolitical environment is complex, giv­
large swathes of the country
en its military bases and civil conflicts
1,500
nearby. Several other countries are plan­
ning new spaceports in the coming years.
But for China, which hopes to develop a
T here were many predictions about
the rate at which covid­19 would spread
in China. The Institute of Health Metrics 1,000
private space industry to rival America’s, and Evaluation in America thought cases
Djibouti could provide an alternative to the would peak on April 1st. By that time, it said 500
four launch sites on its own soil (one of in December, a third of the country’s 1.4bn
which is pictured on the previous page). people would have been infected. Airfinity, 0
These are operating at capacity, says a London­based data firm, said the peak Dec 2022 Jan 2023
Thomas Roberts, author of a report on would come on January 13th, with a second Source: Baidu Index *A herbal medicine
spaceports for the Centre for Strategic and occurring on March 3rd. It predicted there
International Studies in Washington. A would be 223m infections by May. The
Djibouti spaceport could lower congestion Economist’s own model suggested that, if Many observers had worried that the
but would more likely be a backup to Chi­ the virus spread unchecked, the outbreak travel rush surrounding the Spring Festi­
na’s Wenchang launch site, its closest to would be at its worst in early January, hav­ val, which begins on January 22nd, would
the equator, he says. China has not shipped ing infected 75% of the population. bring covid from cities to remote areas. But
rockets abroad before, he notes, but it A lack of good data makes it hard to as­ the virus appears to have reached many of
would not be the first space power to do so. sess these projections. But statistics, anec­ these places already. Earlier this month,
HKATG, which says its main business dotal evidence and unconventional indi­ when our Chaguan columnist visited Wei­
includes designing, building, launching cators suggest that covid may already have ji, a village in Henan province, a doctor told
and controlling satellites, cited bottle­ swept through large swathes of China. him that 90% of locals had caught covid.
necks at China’s spaceports as the main The authorities are pushing the idea of An article dated January 9th in Farmers’
reason for building the one in Djibouti. an outbreak on the wane. On January 14th Daily, a state­run newspaper, noted fever­
The company has previously relied on Chi­ the National Health Commission said the ish people working in rural Shandong
nese rockets; it did not say if it planned to number of visits to fever clinics peaked on province. The virus had been there, too.
use them in Djibouti. It declined to elabo­ December 23rd at roughly 2.9m, and that it In America, a good predictor of case
rate on its announcement. has since declined by over 80%. The num­ counts early in the pandemic was Google
Either way, the deal is likely to be scruti­ ber of patients with severe symptoms of searches for the loss of taste or smell (a
nised by American and allied officials. covid peaked two weeks later. A study by symptom of early variants). So The Econo-
They have long fretted over the role of the Peking University estimated that, by Janu­ mist scraped data from Baidu, China’s
People’s Liberation Army (PLA) in China’s ary 11th, 900m people in China had already search giant, to see if they offered clues
space industry and, in recent years, they caught covid. The government, perhaps about the country’s outbreak. Searches for
have tracked its efforts to establish space­ wary of losing control of the narrative, “lianhua qingwen”, a herbal medicine used
related facilities in countries involved in quickly deleted reports and social­media against covid (with doubtful effective­
its Belt and Road infrastructure scheme. posts about the study from the internet. ness), peaked on December 12th (see chart).
Hong Kong­listed HKATG is a private Searches for “fever” reached a high five
company but has worked closely with the days later. Searches for “shortness of
state­run China Great Wall Industry Corpo­ breath”, a lingering symptom of severe co­
ration, which handles the mainland’ s in­ vid, peaked on December 27th.
ternational space business. HKATG’s execu­ It is a fuzzy picture, to be sure. Least
tives include former Hong Kong officials. clear of all is the covid death toll. China
One was a founding chief executive of the claims that from December 8th (a day after
China­United States Exchange Founda­ it lifted most covid controls) to January
tion, which American officials consider a 12th some 60,000 people died from the vi­
vehicle for Chinese political influence. rus. The real number is far higher, as the of­
HKATG also works with Huawei, whose ficial toll refers only to those who died at
products America has banned at home and medical facilities—and doctors have been
pressed allies to ditch from mobile net­ discouraged from citing covid on death
works, claiming it has ties to the PLA and certificates. Our model suggests the num­
could be involved in spying (Huawei de­ ber of covid deaths may top 1m.
nies the claims). One HKATG project is a Even if infections have peaked in Chi­
constellation of some 100 remote­sensing na, things may still get worse. Subsequent
satellites, ten of which it says are in orbit. waves of the virus killed more than the first
With Huawei, that will provide “smart city” in countries such as America and Britain.
and other services in southern China. The Chinese government may be hoping
HKATG also talks of building a similar glo­ that most people develop some level of
bal service. What role Djibouti might play natural immunity, lessening the impact of
is unclear, but some of its foreign residents a second wave. Another way to do that is by
will be keen to learn more. n A calm countryside manner vaccinating more people. n

012
 54 China The Economist January 21st 2023

Chaguan Riding the slow train in China

Talking to migrant workers heading home for lunar new year

Guangzhou­Urumqi run, there are no signs of graft. Seatless pas­
sengers queue at the on­board conductors’ office, identity cards in
hand, to be allocated places that open up between certain stops, as
passengers get off. A primly cheerful holiday atmosphere prevails,
like an orderly school trip. Passengers joke that food vendors
should give away free holiday meals. A young woman attendant,
trim in a brass­buttoned jacket, tells a colleague struggling down a
packed aisle that he is to blame for being fat.
Yet amidst all this efficient service, old divisions of class,
wealth, ethnicity and gender can be heard, too. For green trains are
rolling cross­sections of life in China, a still cruelly unequal place.
Some discrimination is blithely unconscious. A passenger teas­
ingly asks the Urumqi­based crew whether they are Xinjiang na­
tives, meaning Uyghurs. “Do I look like an ethnic minority?” the
Han Chinese woman attendant laughs.
Decades of economic growth created winners and losers. Both
are found on the train. Mr Zhuang, a lorry driver for Jingdong, an
e­commerce and logistics giant, is travelling with his wife to the
north­western province of Shaanxi to see their university­lecturer
son, about to start a PhD overseas. Mr Zhuang calls his family’s
own experience of China’s national rise “life­changing”. Asked
about prospects for the post­pandemic economy, he praises Chi­

F or officials in Xi Jinping’s China, making trains run on time

is more than a figure of speech. As Mr Xi enters his second de­
cade as supreme leader, his sternly paternalist version of Commu­
nese leaders for treating the people “like a father would his child,
they want everyone to be well­off.”
Nearby, Mr Xing, a grey­haired man from the central province
nist Party rule seeks to draw ever more legitimacy from the provi­ of Henan, dozes. He is a security guard in Guangzhou, after grow­
sion of customer­friendly public services, supplied via modern ing too old for building work. Overall, China’s rural­to­urban mi­
infrastructure. In the case of China’s railways, at least, that pro­ grants are ageing. In 2021 the average age of migrant workers in
mise of order and efficiency has been kept. China hit 41.7 years, up from 34 in 2008. Increasingly, youngsters
From January 7th to February 15th the transport ministry pre­ shun factory jobs far from home. Many old workers without ade­
dicts that 2.1bn journeys will be made by Chinese heading home quate pensions toil past the legal retirement age. Mr Xing shares a
for the Spring Festival, or lunar new year. Some will be urban pro­ prefabricated dormitory room in Guangzhou with his son and
fessionals, gliding between cities on high­speed trains. Many will son­in­law. The son, a burly 40­year­old supervisor on a produc­
ride slower lü pi huoche or “green­skin trains”, squeezed into tion line, had not planned new­year travel, but his children, 10 and
crowded carriages or sitting on corridor floors as they trundle 16, “kept calling and saying we haven’t been home for a year.” The
across China on journeys that may last 40 hours or more. Many eldest attended primary school in Guangzhou, but like many mi­
millions of them have not seen home towns or villages—and in grant children lacked the residency papers to attend a city high­
many cases their own children and the ageing parents who care school, so returned to Henan. The younger Mr Xing hopes to catch
for them—for two years, because of pandemic travel curbs. up with his daughter over the holiday, maybe taking her to an
On January 16th alone China’s rail network carried 8.3m travel­ amusement park. But she wants to be a teacher and has a lot of
lers. Chaguan was one of them, buying a standing­room ticket for schoolwork. Pondering so many years away from his children, he
the first day of a two­day train journey from Guangzhou, in the sighs: “I don’t know how to describe that feeling.”
south, to Urumqi in the far western region of Xinjiang. Chatting in
Guangzhou station before dawn, or during long hours rolling Collective progress, individual angst
through southern China, older passengers remembered the chaos Mrs Li, a street sweeper in Guangzhou, sits on a bucket by a train
of Spring Festival migration 30 years ago. Back then passengers door. A widow aged 56, she is six years past the retirement age for
would climb through windows into trains so full that people female blue­collar workers, but falls foul of China’s stingy, fiddly
would sleep on luggage racks or stand in lavatories. Even 20 years welfare rules. Years of factory jobs did not generate a big­city pen­
ago new­year trains were cluttered with boxes of fruit, cooking oil, sion. Her bare­bones health insurance can only be accessed in her
clothes and bedding that workers felt obliged to carry home. rural home. She makes 4,000 yuan ($590) after a month of 12­hour
Today the crush is less intense. Many employers allow more days, with no days off. When covid quarantines halted work, she
flexible departure and return dates, as China’s labour force should by law have been paid, but her employer, a subcontractor,
shrinks and workers become harder to find and keep. Goods or­ refused. Without money, “you’re nobody,” she says. Her son, a fac­
dered online can be delivered to villages year­round, so there is tory worker, lacks funds to buy the home and car needed to marry.
less demand for physical new­year gifts (red packets of cash for With so much pressure, young people “don’t want kids, they don’t
children remain obligatory). More migrants drive home in shared want marriages,” she sighs. Her parents and in­laws have just had
private cars. The train networks have grown hugely. Stations are covid, so she hopes her arrival will not endanger them. She longs
busy but not overwhelmed. Passengers queue to board trains, with to visit because, at their age, “every new year counts.” Other pas­
priority lines for children and the frail. There are countries where sengers echo her talk of life’s harsh pressures. Gleaming infra­
Chaguan had to pay bribes to board a train or plane. On the structure is impressive. Building a fair, happy society is harder. n

012
 International The Economist January 21st 2023 55

Open-source intelligence over buildings. A network of amateur an­

alysts on Twitter tracked the Ukrainian ad­
An open book vance, almost in real time, by “geo­locat­
ing” the images—comparing trees, build­
ings and other features to satellite imagery
on Google Maps and similar services.
The rise of open­source intelligence—
osint to insiders—has transformed the
Social­media posts and satellite imagery provide a torrent of data from Ukraine.
way people receive news. In the run­up to
But they can also overwhelm and confuse
war, commercial satellite imagery and vid­

O n May 29th 1982 Robert Fox had just

witnessed 36 hours of warfare at Goose
Green, a remote spot on the Falkland Is­
broadcast for 24 hours. Television journal­
ists had it worse, says Mr Fox. Their shots
took ten days to reach home.
eo footage of Russian convoys on TikTok, a
social­media site, corroborated Western
claims that Russia was preparing an inva­
lands, which was being fought over by Brit­ When the Ukrainian city of Kherson sion. Jeffrey Lewis of the Middlebury Insti­
ain and Argentina. It was the decisive bat­ was liberated in November, it took just tute in California used Google Maps’ road­
tle of the war and it had gone Britain’s way. hours, if not minutes, for the news to flood traffic reports to identify a tell­tale jam on
It took Mr Fox, then a BBC radio correspon­ out. Images on Telegram, a messaging ser­ the Russian side of the border at 3.15am on
dent, ten hours to get to a satellite phone, vice popular in Russia and Ukraine, February 24th. “Someone’s on the move”,
he recalls. It took another eight to decrypt showed Ukrainian soldiers strolling into he tweeted. Less than three hours later
his text in London. The story was not the city centre, and Ukrainian flags lofted Vladimir Putin launched his war.
Satellite imagery is still useful. During
the Kherson offensive, synthetic­aperture
Dyagilevo air base radar (sar) satellites, which can see at
night and through clouds, showed Russia
December 1st December 7th building pontoon bridges over the Dnieper
river before its retreat from Kherson. Boats
appeared and disappeared as troops es­
caped east. Later, new defensive positions
appeared along the river’s left bank. And
Tu-95 bomber
when Ukrainian drones struck two air bas­
es inside Russia on December 5th, high­
resolution satellite images showed the ex­
tent of the damage (see pictures).
Satellites were well­suited to catalogu­
ing Russian battalions laid out neatly in
open fields in January. But it is harder to
capture images of small companies of men
dispersed over a wide area and often en­
sconced in trenches or bunkers. The single
Il-76 transport plane most important repository of osint data
during the war has instead been Telegram.
osint analysts scour Telegram chan­
nels such as Rybar, which has over 1m fol­
lowers, to harvest images of battle and tes­
timony from the front lines. Rybar is not
neutral. Its founder once worked for Rus­
sia’s defence ministry, and reportedly had
links to Yevgeny Prigozhin, the head of the
mercenary Wagner Group. But it offers rel­
atively accurate and timely accounts of
battlefield movements, including Uk­
Tu-22M bombers
raine’s blitz through Kharkiv in September,
and is often critical of Russian policy.
Telegram has become a platform for
Russian ultra­nationalists, supportive of
the war but dissatisfied with its conduct, to
air their grievances. Popular accounts have
circulated images of troops without basic
Scorch marks
equipment. During the Kherson offensive
in early October, one panicked Russian ac­
Fire suppressant count even used it to make a plea for air
support. The first ten years of the Syrian
civil war produced about 40 years’ worth of
footage, notes Matthew Ford of the Swed­
ish Defence University. In the first 80 days
of the Ukraine war, there were ten years of
Source: Planet Labs PBC
footage—an order of magnitude more.

012
 56 International The Economist January 21st 2023

For armies seeking to maintain opera­ Open sources also entail a form of sur­
tional security, this profusion of data is a Explore further vivorship bias, akin to the problem, in the
nightmare. In 2019 Russia passed a law second world war, of drawing the wrong
banning soldiers from uploading sensitive A version of this story with video and lessons by analysing only those planes
photos or videos. It began shutting down more examples of OSINT can be found which returned from missions rather than
railway­tracking websites shortly before at economist.com/UkraineIntel also those which were shot down. “The
the war began, removing a valuable source footage we see of this war is not necessarily
of data. It has also attempted to obscure sands of recruits, most with little experi­ representative of how it is being fought,”
patches on soldiers’ uniforms and vehicle ence, this vulnerability is likely to grow. “A says Mr Lee. Tanks hit by anti­tank missiles
markings, to avoid giving away the posi­ lot of them see posting on social media as are more likely to be caught on video than
tion of whole units. part of their tour of duty,” says Mr Bullock. those struck by mines, he notes. Yet a big
In October the Kremlin began cracking He recalls tracking a Russian volunteer chunk of Ukrainian tank losses are from
down on prominent critics on Telegram, who was sent to Kherson province in June. mines, according to informed sources.
such as Igor Girkin, an ex­spook who led The soldier obligingly posted a photograph In a recent talk, General Sir Jim Hocken­
Russia’s proxy war in Donbas in 2014. But of every village he drove through, revealing hull, who ran British defence intelligence
they remain as garrulous as ever. After at the precise route of Russian supply lines. until 2022, compared old­fashioned intel­
least 89 Russian servicemen—possibly “There have been efforts to close or lim­ ligence to assembling a jigsaw puzzle with­
hundreds—were killed by a Ukrainian at­ it OSINT collection,” says H.I. Sutton, a na­ out the lid, showing the complete picture,
tack on New Year’s Day in Makiivka, a Rus­ val analyst who uses SAR imagery to track or all the pieces. “What’s happening with
sian­occupied town in Donbas, Mr Girkin ships. “But OSINT evolves and people find open source is that we still don’t have the
lambasted the incompetence of Russian new ways to figure stuff out.” He gives the lid…but what we have is an almost infinite
generals, describing them as “untrainable”. example of NASA‘s Fire Information for Re­ number of jigsaw pieces.” The result, he
Nor has Russia stanched the flow of in­ source Management System (FIRMS), said, was that one could assemble “an al­
formation. “There’s a lot of lessons being which uses infra­red sensors on satellites most infinite number of pictures”.
learnt very slowly,” says Tom Bullock, an to detect active fires. It was originally de­
osint analyst at Atreides, an intelligence veloped to track things like forest fires. Putting the jigsaw together
company, “but I think that’s on Telegram, Now it is used to identify missile launches, That creates “splintered realities”, says Mr
where they know people are looking.” On shellfire and explosions, allowing re­ Ford. He is working on an open­source his­
VKontakte (vk), the Russian equivalent of searchers to track the shifting positions of tory of the war, and reckons it can be done
Facebook, says Mr Bullock, “it’s basically the front line (see map). “at what might be considered US intelli­
just as bad as it always has been. There’s so Open sources have their limitations. gence standards”—a remarkable accelera­
many geo­tagged pictures of their bases The torrent of images from Kherson tion of military history. But he says the in­
just floating around at all times.” emerged with unusual speed, in part be­ finite jigsaw poses serious challenges. One
This sloppiness can have lethal conse­ cause euphoric residents were keen to take is self­deception: seeing the war “as we
quences. In December a Russian volunteer and upload the footage. On one occasion, want to see it, rather than as it is”. Images
posted photos on vk of forces encamped in Ukrainian forces managed to target a Che­ of hungry Russian recruits huddled in
a country club in Sahy, an occupied part of chen unit near Kyiv within 40 minutes of trenches paint a picture of shambolic mo­
Kherson province. His post included a geo­ videos being uploaded to TikTok, accord­ bilisation. In practice, Western and Ukrai­
tag of the exact location. Ukrainian mis­ ing to the New York Times. But on average it nian officials say they are worried about
siles later struck it, after which the volun­ takes one to three days for an image to cir­ the units being formed out of sight.
teer posted yet again. This time he upload­ culate widely and be geo­located, says An­ The other problem is seeing what bel­
ed a video showing the extent of the de­ dro Mathewson, an OSINT analyst for the ligerents want you to see. Early in the war,
struction, in effect giving Ukraine a dam­ HALO Trust, a landmine­clearance charity. videos showed strike after strike by Ukrai­
age assessment from on the ground, noted Images often arrive in bursts when a unit is nian drones, many set to catchy music.
Rob Lee of King’s College London. rotated off the front lines and has time and “Ukraine recognised very quickly…that this
As Russia mobilises hundreds of thou­ connectivity to upload footage. was some of the best footage they had,”
noted Justin Bronk of the Royal United Ser­
vices Institute, a think­tank, on a recent
Active fires detected by NASA satellites podcast. “And so the Ukrainians stored up a
lot of that footage and kept drip­feeding it,
June 1st-7th 2021 June 1st-7th 2022 having got rid of date, time and location
stamps to give the impression this was still
a major thing a couple of months in.”
RUSSIA RUSSIA
Despite those limitations, Western in­
telligence agencies are taking a keen inter­
Kyiv Kyiv
Kharkiv Kharkiv est in OSINT. Satellite imagery is old hat.
Severo- Severo- America has had it for more than 60 years,
U K R A I N E donetsk U K R A I N E donetsk
Dniep Izyum Dniep Izyum though never quite so much. But a world in
er Dnipro D er Dnipro D which Telegram channels convey battle­
o n o n
b a Line of b a
s s field imagery is new and unsettling. “Open
Makiivka contact at Makiivka
Jun 5th 2022
source contributes somewhere in the re­
gion of 20% of our current processes,” says
Mykolaiv Mariupol Mykolaiv Mariupol General Hockenhull, “but the availability
Kherson Sea of Kherson Sea of and opportunity means that we’ve got to
Azov Azov
Black Black invert this metric.” In other words, rather
Sea Ukrainian territory Sea Sources: Institute for the than sprinkling OSINT over existing secret
annexed by Russia Study of War; AEI’s Critical intelligence, the secrets should be the icing
150 km
in 2014 Threats Project; NASA Earthdata
on an open­source cake. n

012
 Business The Economist January 21st 2023 57

Young consumers able to afford to retire. Less than half be­

lieved they would ever own a home.
Buying time Uncertainty about the future may be
encouraging impulsive spending of limit­
ed resources in the present. The young
were disrupted more by covid than other
generations and are now enjoying the re­
bound. According to McKinsey, American
millennials (born between 1980 and the
They are woke, broke and complicated. Businesses should take note
late 1990s) spent 17% more in the year to

Y oung people have always perplexed

their elders. Today’s youngsters are no
different; indeed, they are baffling. They
economy that has moulded them. At one
end of the scale, today’s 30­somethings
came of age in the midst of the global fi­
March 2022 than they did in the year be­
fore. Despite this short­term recovery from
the dark days of the pandemic, their long­
have thin wallets and expensive tastes. nancial crisis of 2007­09 and the ensuing term prospects are much less good. Amer­
They prize convenience and a social con­ recession. Their younger peers had a bit ican millennials and Gen Zs have accumu­
science. They want shopping to be at once more luck, beginning their careers in years lated less wealth than Gen X or Boomers at
seamless and personal. They crave authen­ when tightening labour markets had push­ the same age.
ticity while being constantly immersed in ed up wages. Until, that is, the covid­19 Easy access to means of spreading pay­
an ersatz digital world. As they start spend­ pandemic upended many of their lives. ments may encourage splashing out (see
ing in earnest, brands are trying to under­ These two big shocks have fostered pes­ chart 1 on next page). According to another
stand what these walking paradoxes want simism among the young people who ex­ survey by McKinsey in October, 45% of
and how they shop. The answers will de­ perienced them. A study by McKinsey, a Europeans in their teens and early 20s
fine the next era of consumerism. consultancy, published in 2022, found that planned some kind of splurge in the next
Their absolute numbers are formidable. a quarter of Gen Zs doubted they would be three months whereas 83% of Boomers,
The European Union is home to nearly born before 1964, said “No” to such profli­
125m people between the ages of ten (the gacy. Forrester, a market­research firm,
youngest will become consumers in the → Also in this section found that most users of “buy now, pay lat­
next few years) and 34. America has anoth­ er” apps are around 20. Megan Scott, a 20­
59 Mexico’s electric­car ambitions
er 110m of these Gen Zs and millennials, a year­old student from London, speaks for
third of the population. The annual spend­ 59 China’s easing techlash many of her peers by admitting that, when
ing of households headed by American shopping, she has no restraint—until, she
60 Bartleby: Pointing the finger of blame
Gen Zs and millennials hit $2.7trn in 2021, chuckles, the bill arrives.
around 30% of the total. 61 India’s struggling startups In many ways youngsters’ shopping
A good place to start dissecting the psy­ habits, like their lives, are defined by the
62 Schumpeter: TSMC’s chip diplomacy
che of young consumer is to consider the “attention economy”—buying stuff online

012
 58 Business The Economist January 21st 2023

is far quicker and easier than a trip to the cans under the age of 25 had completed a
shops. The proliferation of social media purchase on a social­media site. Some are Marketing by post 2
means there are many new ways of attract­ following the Chinese model of “social United States, share of respondents* who
ing consumers’ eyeballs. Young shoppers commerce” by mixing live­streamed en­ have purchased from a brand they recently
never knew a world without smartphones. tertainment with the chance shop. discovered on social media, %
More than two­thirds of 18­ to 34­year­old For the time being, though, young 60
Americans spend four hours or more on Western consumers prefer to make pur­ Instagram TikTok
their devices each day. A heightened expec­ chases outside social media, and often 50
tation of convenience comes with being scour sites like Amazon for bargains. Ac­
raised in the age of Airbnb, Amazon and cording to Cowen, an investment bank, 40
Uber. Young people want their shopping to spending on subscriptions to Prime, Ama­ Facebook
be totally hiccup­free. zon’s home­delivery and entertainment 30
Snapchat
The light­speed online world also ap­ service, trails only phone bills, food and Pinterest
pears to have lowered tolerances for long travel in young people’s shopping baskets. 20
Twitter
delivery times. A study by Salesforce, a Physical shops are not entirely
business­software giant, found that Gen­z shunned, as long as the experience feels 2019 20 21 22
Americans are the likeliest of all age personal and, ideally, integrates virtual Source: Cowen *Aged 18-24
groups to want their groceries delivered and physical worlds. Nike, for example, is
within an hour. They are more likely than successfully targeting young buyers by al­
the rest of the population to use their lowing them to design their own trainers ous generations. Research by Forrester
phones to pay for shopping, says Forrester. on its website, to pick up in person after at­ shows that this attitude is even more com­
These “always­on purchasers”, as tending an in­store dance class, and then mon among teenagers and 20­somethings
McKinsey has christened them, often shun encouraging them to tag the brand in a re­ than among slightly older counterparts.
a weekly shop for quicker fixes of every­ view on TikTok or Instagram. Some of these values are centred around
thing from fashion to furniture. They like The new world of shopping has also al­ identity (race, gender and so on). Others
subscriptions, often favouring shared ac­ lowed the young to take a more informed stem from things the young care about,
cess to products rather than outright own­ view of the companies that they buy from. such as climate change. kpmg, an account­
ership. This has buoyed online­rental sites The attention economy’s information ing firm, found that the Gen Z crowd across
(like Rent the Runway for fashion) and overload has not dulled youngsters’ senses 16 countries worries more about climate
streaming services. Investors may have but appears to have made them hypersen­ change and natural disasters than any
fallen out of love with Netflix but Gen Z has sitive, especially to any brand that pre­ other generation. According to a survey by
not; the company remains one of the most tends to be something it isn’t. Edelman, a Credit Suisse, a bank, youngsters in emerg­
popular brands among that age group in public­relations firm, found that seven in ing markets are more fretful still.
America. ten Gen Zs across six countries fact­ Revealed preferences paint a more nu­
The internet has also changed how the check claims made in adverts. Citing sur­ anced picture. On the one hand, Forrester
young discover brands (see chart 2). Print, vey data that show some teens have has identified Patagonia, a premium out­
billboard or tv advertising has given way shunned certain brands because of their door­clothing brand with a record of green
to social media. Instagram, part of Meta’s shady ethics, Forrester has taken to calling do­goodery, as a Gen Z favourite in the rich
empire, and TikTok, a Chinese­owned vid­ young consumers “truth barometers”. world. The young are the most likely of all
eo­sharing app, are where the young look Brands that do not match up to the long age groups to try—and stick with—alterna­
for inspiration, particularly for goods wh­ list of requirements had better watch out. tive proteins such as oat milk and plant­
ere looks matter such as fashion, beauty If they do not get what they want and how based meat alternatives. But not at any
and sportswear. TikTok’s user­generated they want it, youngsters are happy to try price. Credit Suisse found that on average,
videos can propel even tiny brands to spee­ something new. According to the survey by consumers globally will pay an average
dy viral fame. Such apps are increasingly McKinsey from October 2022, nine in ten premium of 9% for more environmentally
adding features that allow users to shop Gen Z and millennial Europeans had friendly grub. Young consumers in the rich
without ever leaving the platform. Accord­ changed how they shopped, where they world are less willing to pay premiums for
ing to McKinsey, by 2021 six in ten Ameri­ shopped or the brands they bought in the these alternatives than their counterparts
previous three months. in emerging markets.
How the young shop is clearly in flux. Youngsters’ appetite for instant gratifi­
Spreading the load 1 What they buy, too, is changing. What old­ cation is also fuelling some distinctly un­
United States, share of respondents* who er generations consider discretionary, green consumer habits. The young have
have used “buy now, pay later”† in the such as wellness and luxury, have become virtually invented quick commerce, ob­
past three months, by generation, 2021, % essentials. Self­care is all the rage. On the serves Isabelle Allen of kpmg. And that
0 5 10 15 20 hunt for clothing that will set them apart, convenience is affordable because it fails
Generation Z
the young are turning to posh brands at an to price in all its externalities. The environ­
Born in 1997 or after ever more tender age. According to Bain, a mental benefits of eating plants rather
Millennials consultancy, the average Gen Z shopper than meat can be quickly undone if meals
1981-96 makes their first luxury purchase when are delivered in small batches by a courier
Generation X they are 15, compared with 19 for their 30­ on a petrol­powered motorbike. Shein, a
1965-80 something counterparts. Some buy posh Chinese clothes retailer that is the fastest
Baby boomers items as a hedge, believing that they can in fast fashion, tops surveys as a Gen Z fa­
1946-64 hold value even during tough times. Help­ vourite in the West, despite being criti­
Silent generation fully, such items can now be traded easily cised for waste; its fashionable garments
Before 1946 on second­hand sales platforms such as are cheap enough to throw on once and
*Between 2,767 and 23,003 online adults Vinted and Vestiaire Collective. then throw away. Like everyone else the
†Affirm, Afterpay, Klarna or Pay in 4
Source: Forrester Research
More broadly, young consumers pro­ young are, then, contradictory—because,
fess to be more values­driven than previ­ like everyone else, they are only human. n

012
 The Economist January 21st 2023 Business 59

Carmaking in Mexico chain snarl­ups during the pandemic, and China’s tech crackdown
geopolitical tensions between China and
Going electric America, have made companies think Foot off the throat
twice about relying on China for parts and
production. And carmakers have always
liked the flexibility and efficiency that
come with sourcing parts and making ve­
MEXICO CITY SHANGHAI
hicles close to their final destination.
Can the country make the most of the Big tech can start to breathe more
Mexico also has huge deposits of the
industry’s switch to battery power? easily at last
lithium required to make ev batteries.
ob adverts hint at its imminent arrival
Jbut Tesla is yet to confirm recent reports
that it will set up a new electric vehicle (ev)
President Joe Biden’s Inflation Reduction
Act (ira) specifies that eventually only bat­
tery­powered vehicles made with raw ma­
C hina’s clampdown on its best and
brightest tech companies came quickly
in late 2020. Two years later authorities in
“gigafactory” in Monterrey, a Mexican city terials sourced and processed in America Beijing are swerving rapidly back towards
close to the American frontier. The ru­ or countries with which it has a free­trade more predictable policymaking. On Janu­
mours have nonetheless set wheels in mo­ agreement, such as Mexico, will be eligible ary 16th DiDi Global, a ride­hailing firm,
tion. Noah Itech, a Chinese supplier of for subsidies. But new mines take years to said it would soon be allowed to resume
automation equipment to the American come on stream, and nationalisation could taking on new customers after an 18­
car company, is building a $100m plant in add further delays. month pause during which regulators
the city. If Elon Musk’s firm sets up in Mex­ Car firms would probably invest even banned it from growing. A week earlier Ant
ico it will be the latest in a long list of com­ more were it not for bumps in the road. Group, China’s payments and fintech
panies that have chosen to build vehicles Mexico’s goal is to have evs make up half of giant, revealed that Jack Ma, the country’s
in a country that borders the world’s sec­ all vehicles produced by 2030. gm’s boss in most prominent entrepreneur, no longer
ond­largest car market. Mexico has said that 15% is more realistic. held controlling rights in the company
General Motors (gm) and Ford, along That is because incentives are lacking. which he co­founded. Mr Ma’s ceding of
with Japan’s Toyota and Nissan, have long When Tesla set up a “gigafactory” in Neva­ control was rumoured to be one of the final
made cars for export in the country, and da in 2014 it came with a $1.3bn sweetener steps toward political approval of the com­
more so since Mexico signed a free­trade from the state in the form of tax credits. pany. Shortly afterwards a senior Chinese
deal with America and Canada in 1993. By The ira also sets aside $2bn to help con­ technocrat said the tech crackdown was
2021 that had made Mexico the world’s sev­ vert American factories to ev production. drawing to a close.
enth­largest carmaker. But as the industry The whimsical approach to policymak­ DiDi and Ant have been bellwethers for
shifts from combustion engines to battery ing of Andrés Manuel López Obrador, Mex­ big tech in China. DiDi’s trouncing of Uber,
power, will Mexico maintain its allure? ico’s president, is another red traffic­light. which ended in the Chinese firm buying its
America has been tardy in its take­up of Executives fret about the government prio­ rival’s operations in the country in 2016,
electric motoring compared with China ritising power generation by national com­ showed that local groups could compete
and Europe, but demand for evs is now panies, which mostly use oil and gas and with global ones. Ant’s eye­watering valua­
growing fast, providing a ready market for are more expensive than private­sector tion of $300bn in 2020 suggested that Chi­
Mexican­made cars. Many of Mexico’s ad­ producers. If energy costs rise and supplies na would produce the world’s next genera­
vantages hold for evs as much as for inter­ become uncertain, manufacturers say they tion of dazzling consumer­internet cham­
nal combustion, such as a skilled labour may no longer find Mexico a competitive pions. But the state’s suspension of Ant’s
force that is far cheaper than across the place to make things. Several months after record­breaking initial public offering lat­
border. “Mexico was the first plant outside gm announced the factory conversion in er that year, followed by a damaging probe
Japan for us; there is an extraordinary qual­ April 2021, it said it would not invest fur­ into DiDi just days after its flotation in New
ity of factories,” says Claudia Rodríguez of ther in Mexico if its laws do not encourage York in June 2021, made it clear that all was
Nissan Mexico. clean energy. n not well in the world of Chinese tech.
Some firms are converting factories and The “rectification”, as the authorities
at least eight plants are already assembling dubbed it, demonstrated the extent to
evs in Mexico. One in the State of Mexico, which regulators were willing to exert con­
where Ford makes its Mustang Mach­e (see trol over large technology platforms. DiDi
picture), will triple its production of evs to was eventually forced by Chinese regula­
210,000 units. gm is spending $1bn to re­ tors to delist in New York—an unprece­
configure a plant in Coahuila, close to the dented move by authorities in Beijing. A
border with Texas, where it will make the relisting in Hong Kong was also blocked.
new model of Chevrolet Blazer from 2024. Jack Ma, once an outspoken critic of bad
It plans to convert its other two plants to ev regulation, has kept out of the public eye.
production by 2035. Bombardier Recre­ Investors reacted to the tech purge with
ational Products announced in October panic. Over the past two years, Beijing’s
last year that it would build a new factory heavy hand wiped out at least $2trn from
in Querétaro to manufacture electric mo­ global markets.
torcycles and batteries for evs. Nidec, a The end of the techlash is part of a con­
Japanese company, plans to invest around certed effort to revive confidence in Chi­
$715m in a factory to make motors for bat­
tery­powered vehicles. Job vacancy The Economist is looking to hire a
Other factors may push carmakers to global business writer, ideally based at first in
make even more vehicles and components London. Journalistic experience is not necessary.
The ability to write clearly and entertainingly is
in Mexico than they do now, says José Zo­ crucial, as are analytical skills and financial
zaya, who heads the Mexican Automotive numeracy. For more details, visit
Industry Association, a trade body. Supply­ Made in USMCA economist.com/businesswriter.

012
 60 Business The Economist January 21st 2023

na’s leadership, including that of Xi Jinp­ age pushed the industry towards collapse. confer the right to appoint board members
ing. Securities regulators have made con­ But the new era for tech will be vastly and veto important decisions. Shares in
cessions in recent months by allowing different from the previous one, which was important subsidiaries of ByteDance, the
America’s accounting watchdog to review defined by rapid growth and unbridled ex­ owner of TikTok, and Weibo, a Twitter­like
the internal books of American­listed Chi­ pansion. Many companies have been sell­ platform, are already held by a state inves­
nese firms, avoiding the delisting of some ing businesses they bought in recent years. tor linked to China’s cyberspace regulator.
$900bn­worth of shares traded in New Entire internet­enabled industries, such as A similar arrangement has recently been
York. Since November China has rapidly online education, have been destroyed and made with Alibaba, an e­commerce giant,
shifted away from its zero­covid policy, a will not be coming back. and there are rumours that the same fate
costly but failed effort to suppress the pan­ State control is set to increase in the might befall Tencent. Investors can expect
demic within its borders. In the past two coming years. Many firms have already DiDi to take on government­linked inves­
weeks leaders have also drastically loos­ sold small stakes to government investors. tors before it is fully rehabilitated, says
ened restrictions on financing for property These “golden shares” often require the Cherry Leung of Bernstein, a broker. The
developers after an attempt to rein in lever­ state to buy only 1% of a company and yet new normal will be a strange new place. n

Bartleby Faulty reasoning

Why pointing fingers is unhelpful, and why bosses do it more than anyone

C asting blame is natural: it is tempt­

ing to fault someone else for a snafu
rather than taking responsibility your­
Nigel” takes one second to say and has
the ring of truth. Documenting mistakes
and making sure processes change as a
self. But blame is also corrosive. Pointing result require much more structure.
fingers saps team cohesion. It makes it Blameless postmortems have long been
less likely that people will own up to part of the culture at Google, for instance,
mistakes, and thus less likely that orga­ which has templates, reviews and dis­
nisations can learn from them. Research cussion groups for them.
published in 2015 suggests that a Shaggy The second problem is the boss.
culture (“It wasn’t me”) shows up in People with power are particularly prone
share prices. Firms whose managers to point fingers. A recent paper by aca­
pointed to external factors to explain demics at the University of California,
their failings underperformed compa­ San Diego, and Nanyang Technological
nies that blamed themselves. University in Singapore found that peo­
Some industries have long recognised ple who are in positions of authority are
the drawbacks of fault­finding. The more likely to assume that others have
proud record of aviation in reducing choices and to blame them for failures.
accidents partly reflects no­blame pro­ In one experiment, for example,
cesses for investigating crashes and close when the stakes are lower. That is why people were randomly assigned the roles
calls. The National Transportation Safety software engineers and developers rou­ of supervisor and worker, and shown a
Board, which investigates accidents in tinely conduct “blameless postmortems” transcript of an audio recording that
America, is explicit that its role is not to to investigate, say, what went wrong if a contained errors; they were also shown
assign blame or liability but to find out website crashes or a server goes down. an apology from the transcriber, saying
what went wrong and to issue recom­ There is an obvious worry about em­ that an unstable internet connection had
mendations to avoid a repeat. bracing blamelessness. What if the meant they could not complete the task
There are similar lessons from health wretched website keeps crashing and the properly. The person in the supervisor
care. When things go wrong in medical same person is at fault? Sometimes, after role was much more likely to agree that
settings, the systems by which patients all, blame is deserved. The idea of the “just the transcriber was to blame for the
are compensated vary between coun­ culture”, a framework developed in the errors and to want to withhold payment.
tries. Some, like Britain, depend on a 1990s by James Reason, a psychologist, Power and punitiveness went together.
process of litigation in which fault must addresses the concern that the incompe­ Blame also seems to be contagious. In
be found. Others, like Sweden, do not tent and the malevolent will be let off the a paper from 2009, researchers asked
require blame to be allocated and com­ hook. The line that Britain’s aviation volunteers to read news articles about a
pensate patients if the harm suffered is regulator draws between honest errors political failure and then to write about a
deemed “avoidable”. A report published and the other sort is a good starting­point. failure of their own. Participants who
by a British parliamentary committee It promises a culture in which people “are read that the politician blamed special
last year strongly recommended moving not punished for actions, omissions or interests for the screw­up were more
away from a system based on proving decisions taken by them that are commen­ likely to pin their own failures on others;
clinical negligence: “It is grossly expen­ surate with their experience and training”. those who read that the politician accept­
sive, adversarial and promotes individ­ That narrows room for blame but does not ed responsibility were more likely to
ual blame instead of collective learning.” remove it entirely. shoulder the blame for their shortfall.
The incentives to learn from errors There are two bigger problems with Bosses are the most visible people in a
are particularly strong in aviation and trying to move away from the tendency to firm; when they point fingers, others
health care, where safety is paramount blame. The first is that it requires a lot of will, too. If your company has a blame
and lives are at risk. But they also exist effort. Blame is cheap and fast: “It was culture, the fault lies there.

012
 The Economist January 21st 2023 Business 61

Indian startups Amit Bhasin, a co­founder of GoMechanic,

a car­repair firm, admitted to “errors in
judgment as we followed growth at all
Growing pains costs, particularly in regard to financial re­
porting, which we deeply regret” after it
cut 70% of its workers.
These tribulations have brought the
role of backers into question. Were firms
BANGALO RE
sufficiently monitored? Were valuations
Investors lose faith in India’s unicorns credible? Sequoia Capital, a prominent Sil­
icon Valley firm, has invested in GoMe­

“H ow long is your runway before

takeoff?” That is how venture capi­
talists (vcs) begin meetings in India these
and far lower, benchmark for what a pay­
ments company is worth.
Re­evaluating what startups might be
chanic, BahratPe, Trell, Zilingo and several
edtech companies. It acknowledged in
April the governance issues in various
days, says Ananth Narayanan, founder of worth is now the foremost concern of all holdings and vowed to provide stricter
Mensa, one of the country’s newest uni­ India’s vc firms. Funding hinges on assess­ oversight but has declined to comment
corns (companies worth in excess of $1bn). ing reserves, costs and the time needed to further. Other foreign vc firms are rethink­
Until recently the main question that mat­ become profitable. In theory, this sort of ing how they approach India, too. A more
tered for India’s startup scene was valua­ information is available for all Indian diligent approach may be required.
tion. But the mood has changed. Plunging firms because they are required to file pub­ How companies come to market is also
share prices at companies that have gone lic financial statements. But the system set to change in response to the losses from
public have made vc firms much warier operates poorly. Of the 40 startups that public offerings. India’s stockmarket regu­
about investing. Prizing unrealistic valua­ have filed results for 2022 only three are lator made changes in September that will
tions has given way to worrying about how profitable, according to Tracxn, a statistical enable far greater scrutiny. It will force
quickly startups might begin to make service, and based on their annual spend­ firms to provide information on the prices
money. So far Mensa, which buys stakes in ing, only five have enough cash to survive of private transactions that occurred be­
digital brands, is one of a handful of such for over six months (see charts). fore listings, as well as the key data used to
firms that makes a profit. In response to the tougher environ­ derive valuations. Large investors will also
That leaves plenty that do not. Since the ment, costs are being cut. Inc42, an online be required to hold at least half of their
beginning of 2021, the number of unicorns publication tracking startups, counts shares through at least one accounting per­
created in India has risen from 40 to 108. 20,500 layoffs over the past year, probably iod to stop them selling shares during a
Only America and China have produced foreshadowing a much bigger wave. Ed­ spell of hype after an offering.
more. In 2021 promising startups had no tech has been especially hard hit, with 16 These changes may not head off the car­
trouble finding investors eager to fund companies axing over 8,000 employees, nage to come. Anand Lunia of India Quo­
fast­growing firms with big ideas. That the most coming at Byju, India’s most valu­ tient, a vc firm in Bangalore, believes a
year investment in startups tripled to able startup, which is sacking 2,500 em­ quarter to half of the current unicorns will
$35bn. The momentum continued in 2022, ployees. A post­lockdown return to class­ become zombie firms that will exist in
with $3.7bn invested in March alone. Such rooms and low barriers to creating educa­ name but cease to be funded or operate.
was the clamour that startups had their tional material online has raised doubts His willingness to speak openly is unusu­
pick of “founder friendly” investors who about the entire sector’s prospects. al; his views are not. Yet for all the con­
were not too bothered about supervision, Byju has other problems. It was accused cerns about the immediate future, neither
the drudgery of background checks and in July of inappropriately aggressive ac­ Mr Lunia nor many others who think sharp
other intrusive oversight. counting and sales policies, which it de­ devaluations are coming are pessimistic
The environment has since cooled. In­ nies. Other startups have also come under about the long­term for startups. The econ­
vestment in December was only $900m. fire. BharatPe (payments), Trell (social me­ omy is growing strongly and India is good
One reason is the woeful performance of dia) and Zilingo (supply­chain manage­ at nurturing entrepreneurial software en­
firms that went public in 2021: Zomato ment) saw founders quit last year after gineers whose skills increasingly apply in
(food delivery), Freshworks (enterprise fraud accusations. BharatPe’s founder de­ every industry. All of this suggests that the
software), Paytm (payments), Policy Bazaar nies the allegations as does Trell; Zilingo is storm ahead will be followed by a resump­
(insurance) and Nykaa (fashion). The share investigating the claims. On January 18th tion of growth, eventually. n
prices of each has tumbled in excess of
59%. And while a global rout in tech valua­
tions has coincided with a broader sell­off, Spots of bother
that is not true of India. The Sensex, an in­ India, unicorns*
dex of the country’s biggest 30 firms, is
close to an all­time high and the economy Net profit, financial year ending March 2022, $m
is growing at a decent clip.
-500 -400 -300 -200 -100 0 100 200 300
The poor performance means that other
Flipkart VerSe OYO Zomato Zerodha
planned listings, such as that of Pharm­
Easy, an online pharmacy, will not now go PharmEasy Delhivery Mamaearth
ahead. Acquisitions have been similarly
hit. In October the $4.7bn purchase of Bill­
Months left before needing new funding†, April 2022
Desk by PayU, both profitable payments
companies, was cancelled. PayU’s owner 0 Delhivery 2 4 6 8 10 12
Prosus, a local vc firm affiliated to Naspers, Zomato OYO Zerodha VerSe
a Dutch­South African company, is widely Flipkart Mamaearth
believed to have walked away because the *Startups valued over $1bn, with data available
Source: Tracxn †Calculated for loss-making unicorns by extrapolating previous year’s expenses and existing cash holdings
fall in Paytm’s share price created a new,

012
 62 Business The Economist January 21st 2023

Schumpeter Speak softly, and carry a big chip

tsmc, Taiwan’s semiconductor superstar, is making the best of a bad geopolitical situation
The fab in Phoenix is exhibit A for those who fear “de­Taiwan­
isation”. Spread out over miles of desert, it is pharaonic in size. It is
due to start making four­nanometre chips next year, which, pro­
vided it beats Intel to the punch, will be the most advanced ever
made in America. A big part of the $40bn investment, TSMC says,
will be a second fab that will start to make even more sophisticat­
ed chips in 2026. Its biggest customer in Phoenix will be Apple. Be­
yond America, it plans to build its first fab in Japan for Sony, an­
other gadget­maker. This looks like a strategy to move closer to its
customers, which if you are sitting in Taiwan might look suspi­
ciously like abandonment.
“Complete nonsense,” retorts Pierre Ferragu of New Street Re­
search, a financial firm. TSMC has almost simultaneously
launched a new fab in Taiwan, with four times the wafer capaci­
ty—and more advanced technology—than the two proposed Ari­
zona foundries. Its bet on America is more of a long­term insur­
ance policy than an immediate game­changer. It enables TSMC to
start the tough job of recruiting a workforce and amassing suppli­
ers in America, providing a baseline for expansion “if the Chinese
are crazy enough to bomb Taiwan”. For the foreseeable future,
though, most R&D is likely to remain in Taiwan. So will at least
four­fifths of TMSC’s capacity.

F or a company worth $430bn that straddles one of the world’s

most dangerous geopolitical flashpoints, there is something
endearingly unflustered about Taiwan Semiconductor Manufac­
Next comes profitability. The fears are two­fold. First, for all
the subsidies offered by America, manufacturing there is crip­
plingly expensive, and the concern has been that TSMC will bear
turing Company (TSMC). Both America and China covet its un­ the losses as a gesture of goodwill to the country. Second, the sub­
matched ability to make advanced chips. It’s a far bigger supplier sidies could support the revival of Intel, which long ago lost its
to the former than the latter, but if either superpower, through lead in chipmaking to TSMC but has since banged the drum for
economic pressure or brute force, fully stifled its independence, chip nationalism. In fourth­quarter results on January 12th, TSMC
the fallout would be immense. Many of its fabrication plants are laid some of those fears to rest. Though construction costs in the
on the west coast of Taiwan and perilously exposed to a Chinese United States are, officials said, up to five times higher than in Tai­
invasion across the Taiwan Strait. Yet it refuses to be panicked. “If wan, they indicated that customers who wanted their chips to be
there is a war then, my goodness, we all have a lot more than just made in America would pay a higher price, protecting profits.
chips to worry about,” its 91­year­old founder, Morris Chang, said Moreover, despite a cyclical downswing in the global chip market,
in a podcast last year. His successor as chairman, Mark Liu, insists TSMC is boosting market share vis­à­vis rivals such as Intel. As
that peace is in everyone’s interest. Malcolm Penn, an industry consultant, puts it, it is so far out on
Such insouciance runs the risk of sounding naive. Like it or the leading edge of chip manufacture that its most advanced pro­
not, the big­power rivalry over semiconductors—what some call ducts will always be in short supply.
the Silicon Curtain—has solidified in recent months. China has In some ways, TSMC is deftly cosying up to the Biden adminis­
long sought, to little avail, to build a chip industry from scratch. tration. The Arizona fabs may not solve America’s chip­security
Last year America strengthened its stranglehold on certain problem. But at the very least they will provide some of the good
“choke­point” technologies, such as artificial­intelligence chip (ie, unionised) manufacturing jobs so beloved of the president. In
design, chip software and semiconductor­manufacturing equip­ other ways, the company is building a long­term hedge into its
ment, in order to stymie China’s ambitions. Moreover, America’s own future. It believes high­end chips will become increasingly
CHIPS Act, enacted last year, has used subsidies to entice about complex and costly to manufacture, and the digitisation of the
$200bn in investment commitments. One of the biggest benefi­ world economy will increase the intensity of their use. In that
ciaries has been Intel, a rival as well as client of TSMC. case, eventually TSMC may outgrow Taiwan, whose population is
In response, TSMC appears as if it has joined Uncle Sam. Last shrinking. Accessing more global brainpower, in America or else­
month President Joe Biden stood in front of the firm’s vast new where, will become an imperative.
American fab under construction in Phoenix, Arizona, and cele­
brated a proposed $40bn investment. Yet look closer and TSMC of­ Silicon Curtain call
fers lessons on how to handle the dirty business of geopolitics. Will its offshore investments contribute to the oversupply that is
Contrary to what some people think, the new cold war is not forc­ currently weighing on the global chip market? No, says Mr Penn.
ing it to break away from Taiwan, where it has foundry capacity for Chip demand increases by 8% a year on average. Provided invest­
making more than three­quarters of the world’s high­end chips. It ments can be adjusted for the state of the market, it makes sense to
is unlikely to jeopardise its profitability, which generates the plan for the future. What matters more is the extent to which
cashflows necessary to retain its edge. Yet it is thinking about a America and its allies blacklist China, where TSMC has a fab in
long­term future in which one day there may be a premium on Nanjing making mainstream chips for domestic use. The compa­
geographical flexibility. In short, it is playing a subtle game of di­ ny may be right to believe that cool heads will prevail. But if it is
plomacy in which its business interests come first. wrong, at least it has started the long process of hedging its bets. n

012
 Finance & economics The Economist January 21st 2023 63

Post­covid problems vice (nhs), the country’s state­run provid­

er, is in dire straits. Just before the pan­
The health-care collapse demic struck, someone with a medical is­
sue requiring urgent but not immediate at­
tention, a category that includes those
suffering strokes and heart attacks, waited
on average 20 minutes for an ambulance.
Now they wait longer than an hour and a
half (see chart on next page). The number
Across the rich world, now is an especially bad time to suffer a heart attack
of lengthy “trolley waits”—the time be­

T he imposition of lockdowns during

the covid­19 pandemic had one over­
arching aim: to prevent hospitals from be­
the disease started to spread. Unlike for
unemployment or gdp, there are few com­
parable, up­to­date figures on health­care
tween a decision to admit a patient and ar­
riving at a hospital ward—has jumped.
Other countries have less comprehen­
ing overwhelmed. Governments hoped to performance across countries. So The sive statistics, but equally miserable popu­
space out infections, buying time to build Economist has trawled statistics produced lations. In September Ipsos, a pollster, re­
capacity. In the end, however, much of this by countries, regions and even individual leased a global survey that included a ques­
extra capacity went unused. England’s sev­ hospitals to paint a picture of what is going tion on the quality of local health care. In
en “Nightingale” hospitals closed having on. The results suggest patients, doctors almost all of the 20­odd rich countries sur­
received only a few patients, as did many of and nurses are experiencing the brutal veyed, people were less likely than in 2021
America’s field hospitals. A study of after­effects of the pandemic. to say that the service on offer to them was
Europe’s experience in Health Policy, a Start with Britain, which produces “good” or “very good”. In Britain the share
journal, found only one example where high­quality data. The National Health Ser­ saying so fell by five percentage points. In
there were more covid patients than inten­ Canada it fell by ten, in Italy by 12.
sive­care beds: in the Italian region of Italian hospitals inundated by covid pa­
→ Also in this section
Lombardy on April 3rd 2020. Although tients in early 2020 are struggling once
there are now stories of overwhelmed Chi­ 65 China’s re­globalisation paradox again. We analysed data from the Pope
nese hospitals, as the country confronts a John XXIII hospital in Bergamo, site of
66 Buttonwood: The $300bn question
great exit wave, it is too soon to know some of the harrowing images of people on
whether these are isolated examples or 67 Japan’s monetary­policy gamble ventilators nearly three years ago. In the
represent broader, systematic failure. year covid hit Italy, the hospital’s waiting
67 Struggling investment banks
Outside China, covid weighs less heavi­ lists rose slightly on some measures. They
ly on people’s minds these days. Yet health­ 68 Why offices are becoming opulent then fell slightly the next year. But in 2022
care systems in much of the rich world are they jumped. Someone in the city looking
70 Free exchange: Europe’s inflation woes
closer to collapse than at any point since for a non­urgent breast ultrasound may

012
 64 Finance & economics The Economist January 21st 2023

have to wait as long as two years. Officials What is going on? Politicians, at both a Although falling productivity growth is
in Emilia­Romagna, another region hit national and regional level, are taking the an economywide phenomenon, health
hard in 2020, have launched a plan to re­ blame—and occasionally deserve it. But care currently suffers from additional
turn waiting lists to pre­pandemic levels. the forces creating the chaos are common pressures. A recent paper by Diane Coyle of
Newspapers across the Anglosphere are across countries, and are linked to a shared Cambridge University and colleagues,
filled with horror stories. In New South experience of the pandemic. They may looking at Britain, considers the effects of
Wales, Australia, a quarter of patients had also, in the short term at least, be almost dealing with covid. “Donning and doffing”
to wait more than half an hour to be trans­ impossible for governments to overcome. protocols to replace protective kit, and
ferred from paramedics to emergency­ In the oecd club of mostly rich coun­ cleaning requirements after dealing with
room staff in the third quarter of 2022, up tries, health expenditure is now not far covid patients, both of which are still in
from a tenth two years before. In Canada short of 10% of gdp, having been below 9% force in many countries today, slow every­
waiting times have reached an all­time before the pandemic (see chart). Of the 20 thing down. The segregation of covid from
high, with a median delay of half a year be­ countries for which there are data for 2021, non­covid patients limits bed allocation.
tween referral and treatment. 18 spent more per person than ever before. Meanwhile, staff feel wretched after
Even the richest, most competent sys­ Almost all spent more as a share of gdp three gruelling years. A report in Mayo
tems are feeling the strain. In Switzerland than in 2019. Even adjusting the figures for Clinic Proceedings, a journal, finds that
there are fewer free intensive­care beds ageing populations does not meaningfully quantitative measures of “burnout” among
than at most points in the pandemic. Ger­ change these findings. American physicians have shot up (see
many is seeing similar problems, with a Thus the immediate problems facing chart on next page). If health­care workers
surge in patients reducing intensive­care health­care systems are not caused by a are exhausted, they may do fewer of the
capacity (see chart). In Singapore patients lack of cash. Much of the increased spend­ things that kept the show on the road, such
waited for about nine hours to be seen in ing has gone on programmes to combat co­ as staying late to make sure the patients’
the average polyclinic at the end of 2021. By vid, including testing and tracing, and vac­ register is in order or helping with the
October 2022 they were waiting for 13. cines. But funding is now rising across sys­ treatment of another medic’s patient.
America is doing better than most tems more broadly. In almost every rich
countries, thanks to the vast amount of country more people are working in health Many among you are weak
money it spends on health care and the ex­ care than ever before. Total employment in Productivity has fallen—but it has not
cess capacity this funds. But it is not doing hospitals in 2021 was 9% higher than in the plummeted in the manner that would be
well. Average hospital­occupancy rates re­ year before the pandemic in the six oecd needed to explain the chaos. This suggests
cently exceeded 80% for the first time. countries we surveyed. The latest data sug­ the true explanation for the breakdown
Even in the darkest days of the pandemic gest that in Canada 1.6m people now work lies elsewhere: in exploding demand.
few states reported paediatric wards under in health care, the most ever. In the eu Coming out of lockdowns, people seem
stress (which we define as 90% or more more than 12m people work in “human­ to require more help than ever before.
beds being occupied). In early November health activities”, a record. American hos­ Some of this is to do with immunity. Peo­
fully 17 states were in this position, the re­ pitals employ 5.3m people, another record. ple went two years without being exposed
sult of a rise in all sorts of bugs in kids. Perhaps the real problem is not staff to bugs. Since then, endemic pathogens
numbers, but how efficiently they are such as respiratory syncytial virus have
Every kind of sickness and disaster working. Real output in America’s hospital bloomed. Everyone you know has the flu.
The collapse in the quality of health care is and ambulatory­health­care sector, which But the pandemic also bottled up other
contributing to an astonishing rise in “ex­ in effect measures the quantity of care pro­ conditions, which are only now being di­
cess deaths”—those above what would be vided, is only 3.9% above its pre­pandemic agnosed. In 2020­21 many people delayed
expected in a normal year. In many rich­ level, whereas output across the economy seeking treatment for fear of catching co­
world countries 2022 proved deadlier even as a whole is 6.4% higher. In England elec­ vid, or because their local hospital was
than 2021, a year of several big waves of co­ tive­care activity (ie, surgery planned in shut to non­covid conditions. In Italy can­
vid. Monthly deaths across Europe are cur­ advance) is slightly lower than it was be­ cer diagnoses fell by about 40% in 2020
rently about 10% higher than expected. fore the pandemic struck. In Western Aus­ compared with 2018­19. A study of Ameri­
Germany is in the middle of a vast mortal­ tralia the share of delayed elective surger­ can patients noted a particular reduction
ity wave: weekly deaths have been more ies jumped from 11% to 24% in the two in diagnoses was recorded, over a similar
than 10% above normal since September. years to November. Put simply, hospitals period, in cancers normally found during a
In early December they were 23% higher. are doing less with more. screening or routine examination.

Is there no physician there?

England, average ambulance response time Intensive-care-unit occupancy†, % of total OECD, health-care spending‡, % of GDP
for a “category two” incident*, minutes
90 Germany Switzerland 100 10.0
75 Free
75 9.5
60
9.0
45 50
30 Occupied 8.5
25
15
8.0
0 0
2017 18 19 20 21 22 2020 21 22 23 2020 21 22 23 2015 16 17 18 19 20 21
Sources: NHS; Federal Office of Public Health; Robert Koch Institute; DIVI; OECD *A serious condition such as stroke or chest pain †Seven-day moving average ‡Estimated

012
 The Economist January 21st 2023 Finance & economics 65

The re-globalisation paradox China’s fraught battles with Omicron last

All who are weary year. The index’s decline since then was in­
United States, survey of doctors Return to sender terrupted by the Shanghai lockdown and
Russia’s invasion of Ukraine, but not for
% increase in feeling, 2020-21 long. Prices tell a similar story. In June,
when the headline inflation rate in the Un­
0 10 20 30 40 50 60 ited States peaked at 9.1%, the average price
HO NG KO NG
Depersonalisation of Chinese imports into America rose by
In 2023 the world will visit China more
only 3.3%, compared with a year earlier.
often and buy less from it
Emotional exhaustion With the abrupt removal of China’s ze­
Depression A t the annual World Economic Forum
meeting this week in Davos, Switzer­
land, China’s economic tsar, Liu He, met a
ro­covid policy, the flow of people, like Mr
Liu, across the mainland’s borders has re­
sumed. The number of passengers on Air
Percentage-point change, 2020-21
number of “old friends” he had not seen China’s international routes rose by a third
during his country’s long battle with co­ in December compared with the previous
-20 -10 0 10 20 30 vid­19. In a solicitous speech, he acknowl­ month. Other parts of the economy will
Has at least one edged the importance of in­person meet­ also improve as the year unfolds. A recov­
symptom of burnout ings, lamented the fragmentation of the ery is expected in retail spending, which
Would choose to become world and called for economic “re­globali­ fell last year and would have been even
a doctor again
sation”. In a philosophical aside, he also weaker had it not been for the anxious
Work leaves enough
time for personal life emphasised the “duality” of things. stockpiling of food and medicines. The
Source: “Changes in burnout and satisfaction with China’s recently abandoned “zero­co­ outlook should also improve for home
work-life integration in physicians during the first two vid” policy cut the country off from the rest sales, which shrank by more than a quarter
years of the covid-19 pandemic”, by T. D. Shanafelt et al.,
Mayo Clinic Proceedings, Sep 2022
of the world, contributing to the fragmen­ in 2022, the sharpest decline on record.
tation Mr Liu bemoaned. But China’s per­ The government has given property devel­
iod of isolation had a notable duality of its opers a “blood transfusion”, Mr Liu report­
In England the nhs waiting list has own. Although the movement of people ed in Davos, helping them raise finance. It
grown by more than 60% since the pan­ across China’s borders was sharply cur­ has also taken steps to quicken the pulse of
demic was declared. Many of the people on tailed, the movement of goods from China the market, which he hopes will help de­
the list, and on similar ones in other coun­ to the rest of the world was spectacular. De­ velopers raise much­needed revenue.
tries, are likely to be sicker, and thus to take spite all the disruptions, China’s exports But the glaring exception to this bright­
up more resources than if they had re­ grew by almost 30% in dollar terms in 2021 er outlook is exports. They are likely to fare
ceived care in 2020. A recent paper pub­ and by another 7% in 2022, according to worse in China’s year of reopening than in
lished in Lancet Public Health, another figures released on January 13th. Perhaps its last year of lockdowns. Indeed, the
journal, estimates that over the next two in­person meetings are overrated. monthly figures have been negative in the
decades deaths from colorectal cancer China’s episodic lockdowns proved less past three releases. According to ubs, a
could be nearly 10% higher in Australia damaging to trade than feared at the time. bank, merchandise exports will shrink by
than pre­pandemic trends suggested, in When Shanghai was brought to a standstill 4% in dollar terms in 2023 as a whole. This
part because of delays in treatment. in April and May, many worried it would would be only their fifth such fall since
Covid continues to add to demand as clog international supply chains and push 1980. The re­globalisation of China’s peo­
well. The Institute for Fiscal Studies, a up global inflation. But a lot of trade passed ple will coincide with a deglobalisation of
think­tank, estimates that the disease is through nearby Ningbo instead. An index its goods. China will attract many more
cutting the number of available beds in the of global supply­chain pressure, created by foreign visitors and fewer foreign sales.
nhs by 2­7%. As covid­positive patients economists at the Federal Reserve Bank of In one important respect, China’s re­
draw resources, providers offer everyone New York, peaked at the end of 2021, before opening has made life harder for its ex­
worse care. Research by Thiemo Fetzer of
Warwick University and Christopher Rauh
of Cambridge University suggests that for
every 30 or so extra covid deaths, one non­
covid patient dies, “caused by the disrup­
tion to the quality of care”.
The effects of malfunctioning health­
care systems go beyond unnecessary
deaths. People come to feel that their coun­
try is falling apart. If you live in a rich
country and fall ill, you expect someone to
help. And someone is definitely supposed
to help when the tax burden is at or close to
an all­time high, as it is in many places. In
time, the backlog created by the pandemic
will disappear. The surge in respiratory vi­
ruses in adults and children has probably
peaked. Administrators have made pro­
gress in tackling enormous waiting lists.
But with an ageing population, and covid
now an ever­present threat, pre­pandemic
health care may come to seem like it was
from a lost golden age. n Losing bounce

012
 66 Finance & economics The Economist January 21st 2023

porters. The turnaround in China’s zero­ in the world economy will cut demand for favourable to China. In America and other
covid policy has contributed to a revival of its wares. And the landing will not neces­ rich countries consumption has shifted
the yuan, which has risen by 8% against sarily be soft. In December, for example, from the sorts of electronic goods that are
the dollar since the start of November, China’s sales to America, the eu and Japan prized by people working from home to the
making Chinese exports less competitive. fell by 17% compared with a year earlier. services people enjoy when they are able to
Mr Liu invited his audience in Davos to vis­ Ting Lu of Nomura, another bank, worries move and mingle. China’s global ship­
it China again. But even before the global that China will suffer from the so­called ments of computers and their parts shrank
capitalists arrive, global capital has rushed bullwhip effect. A small dip in demand by 35% in the latest trade figures. When the
to reacquaint itself with Chinese assets, from consumers can lead to pronounced threat of lockdowns dangled over global
bidding up the price of its currency. Ex­ drops in orders for upstream suppliers, supply chains, people worried that China’s
porters have also converted more of their just as a small flick of the wrist can lead to a exporters were a source of vulnerability for
dollar earnings into yuan. vicious crack of the whip. the world economy. Instead, the world
The main reason for the export bust, Even if the level of global spending economy is proving a source of vulnerabil­
though, lies outside China. The slowdown proves resilient, the mix is becoming less ity for China’s exporters. n

Buttonwood The $300bn question

Why aren’t venture capitalists spending their enormous pile of cash?

C onsider the following puzzle. In

2021 venture capitalists raised $150bn
in fresh cash, a record amount. Despite a
They can no longer count on another
backer following them into a deal and
helping make it a success either with
Venture capitalists are listening.
Harry Nelis, a partner at Accel, a venture­
capital firm, speculates that cash which
market slowdown, they broke the record expertise or raw cash. might have taken a year to spend during
once again in 2022, raising more than The second part of the answer is more the market boom will now be made to
$160bn. Chunks of this have already been subtle. In theory, venture capitalists could last around three times as long. And
spent, but close to $300bn of “dry pow­ spend the money they have in hand. It is, spending could get even slower. The
der” sits waiting to be put to use. Indeed, after all, already committed to their funds. money raised by venture­capital funds
spending fell throughout 2022. Fledgling For some firms, doing so would mean they does not actually sit in their bank ac­
firms appear cheap. Why, then, are ven­ would also avoid losing out on manage­ counts. Instead, funds must make “cap­
ture capitalists sitting on the cash? ment fees which only apply to invested ital calls” to their limited partners when
As with many other puzzles in fi­ capital, not that merely promised to their they want to finance an investment. This
nance, the answer starts with the rapid funds, after a certain period of time. forces the limited partner to free up cash
rise in global interest rates since the start But spending at a breakneck pace from elsewhere in their portfolio, which
of last year. Higher rates have caused the would almost certainly prove to be self­ they are loth to do at a time of stress.
value of stocks to plummet, as investors defeating in the long run. Venture capital­ Funds are well aware that they will want
have moved capital into safer assets such ists periodically raise money from limited to come back to their partners for more
as cash and government bonds. The partners, such as endowments and pen­ money in the future, so seek to avoid
tech­heavy nasdaq index has lost more sion funds. Many of these now want to irritating them by placing calls at awk­
than a fifth of its value over the past year. reduce their exposure to venture capital, ward times. Indeed, in 2001, during a
In 2022 the amount of capital raised in since public markets have taken a hit and slowdown which followed the dotcom
stockmarket listings dropped to a 32­year they seek to keep allocations to different bubble, some investors even “returned”
low. Public­market slowdowns such as asset classes in rough proportion. As a committed funds to limited partners, so
the one currently in progress reduce result, a handful are calling up venture­ that their partners could reallocate the
expected returns for investors in private capital funds to say things to the effect of money as they wished.
markets by lowering the valuation at “don’t rush back” for more money, says an Venture capitalists have other reasons
which startups “exit” into public mar­ investor in several venture­capital funds. to be concerned about relations with
kets. Venture capitalists therefore de­ limited partners. During the recent
mand lower prices in order to invest in boom, funds started to poke their noses
the first place. far beyond their usual concerns. Sequoia
This especially hurts funding for Capital, a famous outfit in Silicon Valley,
late­stage startups that in normal times launched a “superfund” which includes
might be close to a public listing. Some investments ranging from traditional
firms, flush with cash from fundraising venture­capital interests to public­mar­
in 2021, are choosing to wait things out, ket shares. Some limited partners
reducing the pace of new deals. The thought these sorts of funds were ab­
smaller number continuing with plans surdly broad, but opted to buy in anyway
must hope to avoid a dreaded “down­ in order to gain access to specialist
round”, in which a startup raises cash at a funds. Little wonder that venture capital­
lower valuation than in a previous ists are now slamming on the brakes and
round—a let­down for employees and seeking to repair relations with their
early investors who are forced to con­ limited partners. At least as long as mar­
front losses on their shares. Meanwhile, ket conditions remain miserable, the
investors have become less willing to industry’s world­conquering ambition
take a punt on riskier opportunities. will remain on hold.

012
 The Economist January 21st 2023 Finance & economics 67

Japan’s economy The central bank’s decision to lift the Wells Fargo took it in turns to report fourth
cap on bond yields in December was an at­ quarter and full­year earnings.
Speculators tempt to improve liquidity and facilitate Altogether profits at the six banks fell
more trading. It seems to have backfired. by 20% from $34bn in the fourth quarter of
swatted The boj owns around half of the country’s 2021 to around $27bn in the same period of
bond market, and more than 95% of some 2022—but the pain was not evenly spread.
bond issuances, after a decade of hefty pur­ Earnings at JPMorgan and Bank of America
TO KYO
chases. Extra purchases to defend the cap were up a little. Meanwhile, at Goldman
An extraordinarily expensive defence
have worsened market shortages. Sachs they were down by two­thirds. Some
of an extraordinary monetary policy
The boj’s decision to hold fast could ex­ of this gap can be explained by their differ­

I n december the Bank of Japan (boj)

gave speculators an opening. By lifting
its cap on ten­year government bond
acerbate the situation. The central bank is
building vast potential losses on its bond
portfolio. If Japanese bond yields were to
ent strengths. Firms with big consumer
banks, such as Bank of America and JPMor­
gan, typically do well when interest rates
yields from 0.25% to 0.5%, the central bank rise by just 0.25 percentage points, the jump. Rising rates tend to increase the dif­
raised the prospect that it would abandon bank’s total holdings as of January 10th ference between what banks pay out on de­
its “yield­curve­control” policy entirely. would slump in value by around ¥7.5trn, or posits and earn on loans. Net interest in­
Since then, officials have been put to the 1.4% of gdp, according to our calculations. come, as this gap is called, zoomed higher
test by increasingly unco­operative bond Every extra bond bought to maintain the in 2022. It climbed by $17bn between the
markets. The boj has been forced to make yield cap increases the potential loss. end of 2021 and 2022 across the big six
enormous bond purchases in an attempt to Higher yields also alter Japan’s fiscal banks, reaching $66bn.
drive down the yield, buying ¥9.5trn arithmetic. Government net debt ran to This increase is partly offset by the fact
($72bn) on January 12th and 13th alone. about 173% of gdp in the third quarter of that higher interest rates will make it hard­
Speculators excitedly awaited the boj’s last year, the highest of any rich country. er for consumers and companies to pay
next meeting. Would it be the moment the Some 8% of the national budget is spent on back debts. Banks also set aside some
central bank gave up the fight? On January interest payments. If payments on the $7.2bn for loan losses in the fourth quarter
18th the boj announced it would in fact stock of government debt rose by the same of 2022. Jamie Dimon, boss of JPMorgan,
keep going. The bank even promised to buy amount—0.25 percentage points—the to­ and Brian Moynihan, boss of Bank of
more bonds if necessary. The yen slumped tal bill would run to ¥11trn, or 10% of this America, have both predicted a mild reces­
on the news; short­sellers licked their year’s government budget. In the year sion in America this year. Yet for the mo­
wounds. Yet defending the policy is be­ ahead, the boj has no good options. n ment the net effect of higher interest rates
coming astonishingly costly. The boj’s dif­ on profits remains positive.
ficult decisions are not going away. Investment­bank revenues, which fall
Yield­curve control was introduced by Results season when stockmarkets do badly, dropped by
the bank in 2016 as part of an aggressive around 50% at Goldman and Morgan Stan­
programme of monetary easing, which of­ Marginal profits ley. But the divergence in profits between
ficials hoped would lift Japan’s dormant the six banks cannot simply be explained
inflation and economic growth. The boj is by the differing performance of investme­
one of the few central banks to have stuck nt and consumer banks. For one thing, pro­
to its guns in 2022—neither raising inter­ fits at Morgan Stanley, where non­invest­
WASHINGTO N, DC
est rates nor halting big asset purchases— ment­bank businesses did well, dropped
Investment banks are struggling
as inflation has risen around the world. far less sharply than at Goldman. For an­
in a high-interest-rate world
Japanese inflation has increased, too, other, Wells Fargo offered up another bleak
but only to 3.8% year­on­year in December.
This is less than half the peaks in America
and the euro zone. And much of the surge
S hareholders like profits: a steady
stream of income they can count on,
quarter after quarter. The earnings Ameri­
quarter, despite its big consumer bank,
with profits half their level a year ago.
The pain at Wells can be explained by
is the result of high energy prices and the ca’s biggest banks make, however, are often regulatory troubles. In December the bank
weak yen, which hit a 32­year low against pushed around by the volatility of the agreed to pay an enormous fine of $1.7bn to
the dollar in October. Thus the boj argues economy they serve. If the economy accel­ the Consumer Financial Protection Bu­
underlying inflation is yet to rise to its tar­ erates, demand for loans takes off; if it reau, for improperly managing millions of
get level of 2% in a sustainable manner. slows, bankers must set aside provisions consumer accounts. It is harder to explain
for bad loans. Investment banks’ trading the situation at Goldman. The firm sought
businesses tend to do well in times of vola­ to build a consumer bank, in part to diver­
Tokyo towers tility and uncertainty, but their advisory sify its business. But it has had to set aside
Bank of Japan, government-bond purchases* services sell best when markets are healthy unusually high provisions for loan losses
Yen trn and stable. Bank bosses must try to balance in that department, and is now scaling
15 their exposure to these forces. back its efforts. “What went wrong?” asked
The past three years, during which the one analyst on the Goldman earnings call
12 American economy has experienced a pan­ on January 17th. David Solomon, the bank’s
demic­induced shutdown, a financial boss, argued the firm had tried to do too
9
boom and a rate shock, have been unusu­ much, too fast and had lacked the talent to
6 ally volatile. As a result, the period has pull off some of its wide­ranging ambi­
been an interesting test of just how suc­ tions. Six days earlier the company had
3 cessful bank bosses have been in their ef­ sacked 6.5% of its workforce.
0 forts to balance the performance of their The enormous economic shocks in re­
J F M A M J J A S O N D J
businesses. The results were on show be­ cent years have revealed just how different
2022 2023
tween January 13th and 17th as Bank of the six banks have become. In some cases,
Source: Haver Analytics *Five-day moving sum
America, Citigroup, Goldman Sachs, the shocks have also revealed just how
JPMorgan Chase, Morgan Stanley and poorly they have been managed. n

012
 68 Finance & economics The Economist January 21st 2023

Property having poached hospitality teams from

places such as the Four Seasons hotel
The view from the top chain—and rooftop bars serving high­
quality booze. They typically boast eye­
catching entrances. The lobby in 425 Park
Avenue, an office block round the corner
from One Vanderbilt, is three storeys tall.
At Spiral, a new tower with tree­lined ter­
NEW YO RK
races on every floor, the lobby is infused
Absurdly opulent offices defy the market’s gloom
with a signature scent and soothing music.

I t is lunchtime at One Vanderbilt, a new

office tower which juts out of midtown
Manhattan. The building’s vast basement
square metres) of high­end office space,
double the amount the year before, accord­
ing to jll, a property firm. The luxurious
The ambition is to make life as cushy as
possible for workers—not just to get peo­
ple back into the office, but also to aid re­
kitchen hums, as harried staff in chef’s turn was under way before the pandemic, cruitment in a tight labour market. Ten­
whites leap in and out of swing doors. Up­ but accelerated as companies found them­ ants at 50 Hudson Yards, home to Black­
stairs, gourmet salads and soup are served selves in competition with home offices. If Rock, an investment firm, and Meta, a so­
in a lounge overlooking Grand Central Sta­ a firm needs space for only half its workers cial­media giant, have access to a helipad,
tion; a sit­down restaurant offers foie gras, each day, it can pay more per square foot. which offers five­minute transfers to John
grilled scallops and other dishes from Dan­ The picture at the top of the commercial F. Kennedy International Airport for
iel Boulud, a celebrity chef. There is not a property market is therefore very different roughly the price of an Uber suv. Other of­
soggy, al­desko sandwich in sight. to the misery in the lower echelons. Al­ fices provide services such as pet care,
Across the rich world, the commercial­ though New York is home to the most opu­ baby­sitting and dry cleaning. Landlords
property industry is in a grim state. Ten­ lent new­builds, extravagant offices are ap­ are rushing to spruce up older offices as
ants have come to terms with the fact that pearing in other global cities, too. In Lon­ well. The gm Building, a 55­year­old tower
working from home is here to stay, and are don 105 Victoria Street’s owners are adding overlooking Central Park and once owned
downsizing appropriately. In cities such as 30,000 square feet of green space—the by the Trump Organisation, was recently
Hong Kong, London and Paris vacancy equivalent of 14 tennis courts—including refurbished to include a bar, lounge and
rates have hit record highs. Another indi­ an urban farm and a “walk­and­talk” track. fitness centre with spin and yoga studios.
cator of the darkening mood is that global Merdeka 118, a skyscraper under construc­ Modern workers do not just seek luxu­
investment in offices last year fell by 42%, tion in Kuala Lumpur, will boast one of the ry, however. They also want to salve their
compared with a 28% drop for property as a world’s loftiest observation decks. consciences. As a result, green buildings
whole. A recent paper by Arpit Gupta of Before the pandemic, desks accounted are increasingly popular. For landlords,
New York University and Vrinda Mittal and for around 60% of office space, according these have the twin advantages of attract­
Stijn Van Nieuwerburgh of Columbia Uni­ to Cushman and Wakefield, a property ing higher rents and hedging against obso­
versity forecasts that offices in New York consultancy. Things have changed consid­ lescence, as countries look to meet their
could lose almost 40% of their value be­ erably. New and refurbished offices are us­ net­zero carbon goals. New energy­effi­
tween 2019 and 2029, equivalent to $453bn. ing half that space for workstations, and ciency requirements for buildings in Eng­
Yet One Vanderbilt, a 93­storey sky­ raising the share dedicated to amenities land and Wales mean that more than half
scraper with a sparkling “hall of light” ob­ from 5% to 20%. Meditation rooms, bike of London’s office stock could be unusable
servatory at its top (pictured), is among a storage, showers, outdoor spaces and other by 2027. In Europe buildings will be re­
spate of new trophy properties and reno­ treats are now de rigueur. quired to source roughly half their energy
vated buildings offering interiors and ser­ The result is an arms­race at the very from renewable sources by 2030. Among
vices akin to those at elite private­mem­ top of the market, particularly in the most the newer breed of offices, clean air, mini­
bers clubs. Last year tenants in Manhattan competitive cities. Many of the new breed mal carbon emissions and better insula­
signed deals for 6.1m square feet (566,709 of luxury offices offer concierges—some tion are commonplace. One Manhattan
West, another tower in the Hudson Yards
development, is powered entirely by re­
newable energy. Like many developers, the
tower’s owner, Brookfield, is aiming to
achieve net­zero emissions by 2050.
Yet one question hovers over the luxury
boom, and it is a big one. What happens to
the market if economic conditions deteri­
orate? After the global financial crisis of
2007­09, premium buildings were hit less
hard than their more humble rivals, but
the whole industry suffered. In London,
prime­office rents in the third quarter of
2009 were 35% below their peak in 2007.
The owners of today’s luxury towers must
hope that foie gras and high­tech gyms will
protect them next time around. n

We’re hiring: The Economist is looking for a writer

to cover international economics. Journalistic
experience is not necessary. The ability to write
clearly and entertainingly is crucial, as is a thorough
understanding of economics. For more details visit
Height of luxury economist.com/economics­job

012
012
 70 Finance & economics The Economist January 21st 2023

Free exchange Race to the bottom

Europe may end up with a worse inflation problem than America

Government policies in America and Europe have affected the
pace of adjustment to these changes. Europe’s approach was gen­
erally to try to freeze things in place during the pandemic. The
continent’s governments created generous furlough schemes,
which kept workers in their existing jobs. Unlike America, there
was no boom in durable­goods consumption, financed by stimu­
lus cheques, that required expanded production. Nor did Europe
run its economy hot to aid a reallocation of workers and capital. If
inflation in America is the result of an economic reshuffle, it may
come down faster than Europe’s once that process is complete.
Europe also had to cope with a different economic hit. Julian di
Giovanni of the Federal Reserve and colleagues show that, com­
pared with America, supply crunches accounted for a greater
share of inflation in 2020­21. Wholesale gas and electricity prices
began to rise in autumn 2021, and soared after Russia invaded Uk­
raine, with oil and coal prices following. This added much more to
inflation in energy­importing Europe than it did in America.
The consensus in economics is that central banks should not
tighten policy too much in response to a temporary supply or en­
ergy shock. Coping with such a shock is hard enough—no need to
give the screw another turn. The effects should subside over time
so long as inflation expectations stay stable. Now that supply

I nflation is coming down. On both sides of the Atlantic, falling

energy costs are provoking sighs of relief. Price­watchers are
now focused on core inflation, a measure that strips out volatile
crunches in everything from lumber to chips are easing and ener­
gy prices are coming down, Europe should benefit more than
America. That is if inflation has not become entrenched.
food and energy prices, and is usually much slower to rise—and Inflation gets baked into economies when workers and firms
more difficult to bring down. Since October, core inflation in the come to believe that prices will keep rising. In the worst­case sce­
euro zone has been higher than in America. Could Europeans end nario, this creates a wage­price spiral, with workers and firms un­
up with a worse inflation problem than their transatlantic peers? able to agree on a division of the economic pie. In a tight, flexible
Every economist knows Milton Friedman’s dictum that “infla­ labour market like America’s, which has little collective bargain­
tion is always and everywhere a monetary phenomenon.” But the ing, wage growth should quickly track inflation. And that is what
Nobel­prizewinner’s words do not seem to capture the current happened: wage growth accelerated when inflation began to rise.
bout of inflation, where post­pandemic supply disruptions, fiscal As a new paper by Guido Lorenzoni of Northwestern University
splurges, an energy shock and labour shortages have created a and Ivan Werning of the Massachusetts Institute of Technology ar­
near­perfect storm causing prices to soar. How fast inflation gues, this theoretically increases the risk of a wage­price spiral.
comes down may therefore depend not only on what central But America seems to have made it past the point of greatest dan­
banks do but on how these factors—the disruptions, energy shock ger. According to Indeed, a hiring website, the country’s wage
and wage rises—affect economies on either side of the Atlantic. growth, though high, has been coming down for a while.
Alongside these surprises, there has been extraordinary tu­
mult in the basic operations of rich­world economies. Covid­19 al­ Blessed unions
tered how people work, what they consume and where they live, In Europe, wages are often decided in collective­bargaining agree­
and did so in short order. Removing pandemic restrictions then ments. Across the eu around six in ten workers are covered by
led to a surge in demand for travel, nights out and treats. On top of such arrangements. Deals typically last a year or more, meaning
this, governments in America and Europe have decided to subsi­ that wages take time to adjust to economic conditions. That was
dise green technologies on an unprecedented scale. Capital, pro­ great when inflation got going. Wage pressures did not immedi­
duction inputs and workers need to move to parts of the economy ately add to inflation. Unions and firms could negotiate about
that are growing and away from those that are shrinking. Until how to divide the blow to incomes and profits. After all, the two
they do, the economy cannot produce enough to meet demand. sides meet at the same table every year, to take stock and adjust.
Yet moving jobs or investing in new plants or software takes Since they cover large chunks of the economy, they have reason to
time. A boom accelerates the process. Recent work by Rüdiger take the macroeconomic effects of any deal into account.
Bachmann of the University of Notre Dame and colleagues shows But relations are feeling the strain. With inflation in Europe
that workers in Germany are more likely to change jobs when de­ stubbornly high, unions are demanding extra compensation for
mand is high than during recessions. Another study, using Amer­ their members. Germany’s public­sector outfits are seeking a
ican data, suggests that moving to a growing firm increases pay for 10.5% increase in the latest round of bargaining. Such delayed in­
the job­switching worker substantially. The current shifts in the creases in pay are a normal feature of an economy where wages
economy are therefore likely to produce some inflation—and that take time to adjust and which has been hit by a supply shock. As
may be desirable. A recent paper by Veronica Guerrieri of the Uni­ Messrs Lorenzoni and Werning demonstrate, real wages typically
versity of Chicago and colleagues argues that monetary policy take a hit before recovering to their old level. But whereas America
should tolerate somewhat higher inflation if doing so allows appears to be making progress, the old continent remains some
workers to find a new job during periods of economic change. way behind. Europe’s inflation race has longer to run. n

012
 Science & technology The Economist January 21st 2023 71

The new Moon race two small rovers (one very small; the size
of a baseball) and several cameras. But its
This time it’s private slower voyage also means that it could be
overtaken by two other landers intended to
arrive on the lunar surface before its
planned touchdown at the end of April.
The first of these is Nova­C, created by
Intuitive Machines, a startup in Houston,
Three rival firms each hope to land the first private­sector probe
Texas. Nova­C should launch in March—
on the Moon in the next few weeks
the announcement of an exact date is ex­

I N recent years launching things into

orbit has become the province of private
enterprise. Of 178 successful missions in
could still get there first. There is, in other
words, a new Moon race.
HAKUTO-R Mission 1 was launched on
pected shortly—on a Falcon 9, and will take
about six days to travel to the Moon and
touch down. The company’s boss, Steve Al­
2022, 90 were by companies (in many cas­ December 11th on a SpaceX Falcon 9 rocket. temus, says a direct trajectory minimises
es subcontracted by governments), and of Having climbed beyond the Moon’s orbit, it the radiation risk to the craft. Nova­C’s de­
those 61 were by one firm, SpaceX. When it reaches its apogee of 1.4m kilometres on sign uses technology from Project Mor­
comes to sending things to the Moon, how­ January 20th and will then fall back to­ pheus, a programme operated by NASA,
ever, governments retain a monopoly of wards the Earth­Moon system. Its trajecto­ America’s space agency. This includes haz­
success. Beresheet, a privately paid for Is­ ry has been artfully designed so that it will ard­detection systems for landing, a novel
raeli probe, ended up crashing into it in pass close to the Moon and go into orbit engine design and the option for future
2019. From the Apollo programme of the around it. This “low energy” approach to landers to deploy a smaller vehicle that can
1960s and 1970s to recent endeavours, such arriving at the Moon takes longer, but uses “hop” by taking off and landing again.
as China’s robotic rover, Chang’e 5, all suc­ less fuel, than a direct trajectory. As the Nova­C will carry a selection of cameras
cessful lunar landers, orbiters and rovers Apollo missions showed, it is possible to and other instruments, including several
have been launched at taxpayers’ expense. get to the Moon in a few days, but it is then from NASA, which has paid some of the
That seems likely to change in the next necessary to burn a lot of fuel to slow down mission’s cost as part of its “commercial
few weeks, when an uncrewed lander be­ and enter lunar orbit. lunar payload services” (CLPS) programme.
comes the first commercial vehicle to HAKUTO-R’s frugality saves weight, al­ This involves the agency acting as an “an­
touch down on the Moon. But which land­ lowing for a larger payload. It is carrying chor tenant” on a commercial lander and
er—and which company—will claim that buying several payload slots, rather than
accolade remains unclear. One vehicle, HA- building and operating the vehicle itself.
→ Also in this section
KUTO-R Mission 1, operated by ispace, a Jap­ Intuitive Machines is contracted under
anese firm, is already on its way and is 72 The search for ET CLPS to send three Nova­C landers to the
scheduled to land in late April. But two Moon by the end of 2024. This is the first.
74 Dopamine, learning and AI
others are preparing to launch shortly and The third contender, the Peregrine

012
 72 Science & technology The Economist January 21st 2023

lander built by Astrobotic Technology, in being opened up? Being able to put things source extraction have run into the lunar
Pittsburgh, Pennsylvania, also operates into orbit around Earth has made all sorts regolith. America has refused to sign the
under the CLPS programme. Like the HAKU- of things possible, from GPS navigation Moon Agreement, adopted by 18 countries
TO-R vehicle, it has its origins in the Google and satellite TV to better internet access in 1984, whereas China and Russia have re­
Lunar X Prize, a contest that offered $20m and weather monitoring, as well as mili­ jected America’s latest proposal, the Arte­
to the first team to land a small rover on the tary uses. Access to the Moon has little ob­ mis accords of 2020.
Moon. (The contest was shut down in 2018 vious benefit beyond pure scientific re­ The debate over who owns the Moon
and the prize went unclaimed.) Peregrine search. Many of NASA’s CLPS payloads are has been the subject of speculation since
is to be launched by the end of March on intended to pave the way for the return of long before the space age. Lucian, a Greek
the inaugural flight of the Vulcan Centaur, people to the Moon, for example by scout­ satirist of the 2nd century AD, described a
a new rocket being developed by United ing possible landing sites or searching for lunar voyage in which he claimed to meet
Launch Alliance, an American launch pro­ resources (such as ice) for possible exploi­ Endymion, the king of the Moon. As the
vider. That adds an element of risk, and the tation, notably as a source of fuel. But such trio of landers now hoping to reach the lu­
launch of the Centaur has been repeatedly “in situ resource extraction”, as it is known, nar surface illustrate, cheap rockets and
delayed. But Astrobotic is still in with a opens a new can of worms, because there is new technology mean that the previously
shot of getting to the Moon first. no international agreement on the legal fantastical question of the Moon’s owner­
status of the Moon. ship is about to get very real. These craft are
Competition policy The Outer Space Treaty of 1967, space the first representatives of a planned flotil­
Like its rivals, Peregrine will carry a small law’s foundational text, is showing its age. la of lunar vehicles, both crewed and un­
rover and a suite of instruments, several of It dates back to the era when only govern­ crewed, publicly and privately funded, that
them from NASA. Astrobotic has also devel­ ments had access to space. And it states herald a new Moon rush. That brings pos­
oped a larger lander, Griffin, which will that no claims of sovereignty can be made, sibilities, but it also raises tricky questions
provide NASA with a resource­prospecting on the Moon or elsewhere. Efforts to up­ about the trajectory of humanity’s explora­
rover at a location near the lunar south date the treaty to establish rules around re­ tion and exploitation of space. n
pole, in another CLPS mission intended to
take place in late 2024.
Who will win this new Moon race, and The search for ET
does it matter? “We do not believe this is a
race to be first,” declares Hakamada Ta­ You can’t hide out there for ever
keshi, founder and boss of ispace, who says
he is “proud” that his craft is part of this
group of “trailblazing” landers. Mr Alte­
mus, of Intuitive Machines, says his firm’s
missions “will have many firsts associated
SEATTLE
with them,” regardless of who wins this
Ideas for finding ET are getting more and more inventive
particular race. Both he and Mr Hakamada
emphasise that their focus is to lay the
groundwork for regular service to the
Moon, opening up new opportunities for
T his month the VLA (Very Large Array)
radio­astronomy observatory in New
Mexico will begin sending every bit of data
a long time. This is done by the Green Bank
Telescope, a large radio dish in West Vir­
ginia, for which the Berkeley SETI Research
both governments and private companies. it harvests for astronomers’ research pro­ Centre has contracted 20% of the observ­
“The friendly competition only encourag­ jects to COSMIC, a computer cluster dedi­ ing time, with Dr Croft as project scientist.
es more interest,” Mr Hakamada says. cated to the search for extraterrestrial in­ Dr Davenport and Dr Croft were both
But what exactly are the opportunities telligence (SETI). A similar system has been addressing a session on detecting extrater­
piggybacking on the MeerKAT observatory restrial intelligences at a meeting of the
in South Africa (pictured on next page) American Astronomical Society, held in
since December. Seattle from January 8th­12th. This is a field
Over the next two years, the VLA alone that goes in and out of fashion, but at the
will cast an eye over 40m stars. Computers moment fortune is smiling on it in the
will also be mining data from past surveys, form of the Breakthrough Listen project,
in radio frequencies and in visible light, for paid for by Yuri Milner, a Silicon Valley
anything that seems both unnatural and venture capitalist.
not from Earth, says James Davenport, an Breakthrough Listen, which began in
astronomer at the University of Washing­ 2016, is scheduled to last for ten years, and
ton who works with such surveys. will disburse $100m over that period. The
If there are many technologically ad­ money is paying for observations by the
vanced civilisations in the galaxy, emitting Green Bank Telescope, MeerKAT, the Parkes
powerful signals, this might well be the radio observatory in Australia and the
right approach, according to Steve Croft of Automated Planet Finder telescope at the
the University of California, Berkeley. Lick Observatory in California.
Some of them will then be where users of A question preoccupying Dr Croft is
the VLA happen to be looking. Either that, how to select Green Bank’s targets. One an­
or they will be close enough to be detect­ swer is to try to get inside ET’s head (or
able from existing survey data. equivalent brain­containing part of the
But if extraterrestrial civilisations are anatomy). Starting from the assumption
rare, and thus mostly far away, or if they (admittedly generous) that there are be­
rarely broadcast with a lot of power, they ings out there who actively wish to talk to
will be found only by selecting promising their galactic neighbours, how would they
HAKUTO-R reaches for the Moon sources in advance and staring at them for go about it?

012
 The Economist January 21st 2023 Science & technology 73

As luck would have it, one obvious ap­ versity are now doing the calculations for
proach does ET­seekers’ work for them. A 60 promising systems where transits hap­
good way to discover planets orbiting pen, to work out a calendar for observing
other stars is by looking for transits—brief them. So far, they have looked at seven.
diminutions in the light from a star caused Mr Tusay also told the conference about
by a planet passing in front of it, as seen his search for extraterrestrial probes in the
from Earth. So far 3,941 planets orbiting solar system. That such things exist is an
other stars have been discovered that way. even longer shot than looking for radio sig­
This method would also be obvious to ex­ nals from afar. But that, in the view of SETI
traterrestrial intelligences, and it would enthusiasts, is not a reason not to try.
make sense for them to concentrate their The question is, where to scout around?
broadcasts on planets they have disco­ In principle, such probes could be any­
vered. For Earthbound seekers after aliens, where. But there are places where they
this means they have to orient their anten­ might be especially useful to their owners.
nas towards the Earth Transit Zone, a band These are where the sun’s gravity would
across the sky from which Earth could be concentrate light or radio waves from par­
seen to transit the sun. Directing his tele­ ticular nearby star systems. It is easy to cal­
scope at planets known of in that zone culate that any signal from, say, Alpha Cen­
would be a good gambit for Dr Croft. tauri, would be enhanced along a line
Another suggestion is that garrulous pointing away from the sun in opposition
ETs might use supernovae to flag transmis­ to that star system, starting 550 times as far
sions. That, Dr Davenport explained, might from the sun as Earth is.
work like this. An extraterrestrial intelli­ That Alpha Centauri or any other near­
gence which wanted to make itself known MeerKAT’s eyes are searching for aliens by star system is home to an ET is the lon­
would broadcast high­power signals of its gest of long shots. But, doubling down on
existence every time its astronomers ob­ recently by Seto Naoki of Kyoto University, what such civilisations might be capable
served a supernova—and then wait. overcomes that by looking not at stars a of, Mr Tusay suggests probes like this
What happens next is a complicated certain distance from a supernova, but in a might be relay stations, passing signals on
geometrical dance. Two wavefronts of certain direction relative to it. to others in communication with other
electromagnetic radiation—one from the This would, Dr Seto outlined in a paper systems. This would make the solar system
supernova and one from the ET—are now he published in 2021, work somewhat like a a node in a galactic internet of sorts.
spreading through space at the speed of rugby player passing the ball to another Such probes might also exchange sig­
light. For most potential listeners, they who is running at full tilt. At any given nals with counterparts in the centre of the
would arrive at different times, depending time, there is a special direction to throw solar system, closer to Earth, keeping an
on their location with respect to both. the ball, so that it will arrive while moving eye on what was happening there. That
at right angles to the direction of the re­ means those signals might be detectable.
Galactic semaphore ceiving player. In a similar way, you can at Mr Tusay looked for such signals with
It would make no sense for those seeking any particular moment find a special di­ the Green Bank Telescope, but found none.
their galactic neighbours to start listening rection for two planets and a supernova. However, in the grand tradition of SETI re­
precisely when they saw a supernova, for With luck, both parties will know to look in search, the motto of which seems to be
they would not know where to look for any that direction to make contact. Mr Nilipour “never give up”, this has not made him dis­
signal that might have been sent in re­ has also found 403 stars for which this ap­ card the idea just yet. Probes like this
sponse to it. But what such listeners, in­ proach would work, for a total of 868 be­ might communicate in ways no one has
cluding those on Earth, could do, is go back tween the two methods. looked at or even thought of, or maybe they
to their archives and choose a supernova These approaches do, though, depend happened to be silent when the observa­
they saw in the past, say 1,000 years ago. on ET wishing to be found. Other civilisa­ tions were done.
The next step would be to see if there are tions may be shy, or simply not care. It may
any stars for which the time the supernova nevertheless be possible to discover where Spiders, but not from Mars
signal would take to travel there, plus the they are hiding. Carmen Choza of the Berkeley SETI Re­
time for the broadcast it may have trig­ In 2013, Andrew Siemion, who now search Centre, meanwhile, presented the
gered to travel to Earth, would add up to works at the SETI Institute, a non­profit or­ results of a so­far fruitless search for bea­
1,000 years as well. Those would be the ganisation that has been active in the cons not in nearby star systems in the Mil­
stars from which signals could potentially alien­searching business since 1984, pro­ ky Way, Earth’s home galaxy, but in 97
be arriving at that moment. posed looking for systems where planets others. To be detectable from such distanc­
As he told the meeting, Andy Nilipour not only transit their star as viewed from es any radio broadcasts would have had to
of Yale University has been doing just this Earth, but also regularly occult each other, be unbelievably powerful—and so pre­
for supernovae described in 1054 by Chi­ which means two of them line up precisely sumably produced by civilisations that can
nese astronomers, in 1572 by Tycho Brahe, in the direction of Earth. If both were in­ harness the power of whole stars.
in 1604 by Johannes Kepler and in 1987 by habited by members of the same intelli­ An intelligent species with such energy
many, many astronomers. Using data from gent species, one having been settled from requirements would have a hard time hid­
Gaia, an orbiting observatory belonging to the other, they would presumably be in ing, if it even cared to. It might even be­
the European Space Agency, he is able to communication. That would require fairly come what Clément Vidal, a philosopher,
measure the locations of many stars with a powerful signals—and in this case they calls a stellivore civilisation. Tapping the
precision of a few light­years. He has found would be aimed in exactly the right direc­ power of entire stars would require engi­
465 that fit the bill. tion to travel onward to Earth. neering on a grand scale. Dr Nilipour plans
Such a level of precision is available, Evan Sneed of the University of Califor­ to look in this context at a special kind of
though, only for stars that are fairly close nia, Riverside, Sofia Sheikh of the SETI In­ star system called a spider pulsar.
by. A complementary approach, proposed stitute, and Nick Tusay of Penn State Uni­ Spider pulsars are thought to be neu­

012
 74 Science & technology The Economist January 21st 2023

tron stars with a low­mass ordinary star or­ promising candidates—in particular, They think that when an animal receives a
biting so close that it is being destroyed by some stars that may fall victim to such at­ reward (or punishment), it looks back
the neutron star’s emissions. Mr Nilipour tention in 10,000 years or so. through its memory to work out what
wants to see if there is anything going on There is no spider pulsar near Earth, might have prompted this event. Dopa­
here that might not be quite natural. fortunately. But such ideas, wild as they mine’s role in the model is to flag events
His first step will be to spot stars in the are, do raise the question of whether hu­ meaningful enough to act as causes for
growing Gaia catalogue which are on their man beings should do more than just lis­ possible future rewards or punishments.
way to having a close encounter with a spi­ ten for signs of ET. Talking, albeit with a Looking at things this way deals with
der pulsar. Anything about their relative time delay of decades or even centuries, two things that have always bugged the old
motion that would require the influence of with other intelligent species would be ex­ model. One is sensitivity to timescale. The
more than regular gravity would suggest a hilarating. But if it involved organisms other is computational tractability.
stellivore preparing to tuck into its next with that sort of power, it might also be The timescale problem is that cause
meal. He has already found some semi­ pretty dangerous. n and effect may be separated by millisec­
onds (switching on a light bulb and experi­
encing illumination), minutes (having a
Neuroscience drink and feeling tipsy) or even hours (eat­
ing something bad and getting food poi­
Dopamine. Dogma. Doubt soning). Looking backward, Dr Namboodi­
ri explains, permits investigation of an ar­
bitrarily long list of possible causes. Look­
ing forward, without always knowing in
advance how far to look, is much trickier.
This leads to the second problem. Sen­
sory experience is rich, and everything
A model of learning that is decades old is under fire—with implications for AI
therein could potentially predict an out­

T he buzz of a notification or the ding of

an email might inspire excitement—or
dread. In a famous experiment, Ivan Pavlov
Researchers have known for a while
that some aspects of dopamine activity are
inconsistent with the prediction­error
come. Making predictions based on every
single possible cue would be somewhere
between difficult and impossible. It is far
(pictured) showed that dogs can be taught model. But, in part because it works so well simpler, when a meaningful event hap­
to salivate at the tick of a metronome or the for training artificial agents, these pro­ pens, to look backwards through other po­
sound of a harmonium. This connection of blems have been swept under the carpet. tentially meaningful events for a cause.
cause to effect—known as associative, or Until now. The new study, by Huijeong Je­ In practice, however, it is hard to distin­
reinforcement learning—is central to how ong and Vijay Namboodiri of the Universi­ guish experimentally between the two
most animals deal with the world. ty of California, San Francisco, and a team models. And that is especially true if you
Since the early 1970s the dominant the­ of collaborators, has turned the world of do not even bother to look—which, until
ory of what is going on has been that ani­ neuroscience on its head. It proposes a now, people have not. Dr Jeong and Dr
mals learn by trial and error. Associating a model of associative learning which sug­ Namboodiri have done so. They devised
cue (a metronome) with a reward (food) gests that researchers have got things back­ and conducted 11 experiments involving
happens as follows. When a cue comes, the wards. Their suggestion, moreover, is sup­ mice, buzzers and drops of sugar solution
animal predicts when the reward will oc­ ported by an array of experiments. that were designed specifically for the pur­
cur. Then, it waits to see what arrives. After The old model looks forward, associat­ pose. During these they measured, in real
that, it computes the difference between ing cause with effect. The new one does the time, the amount of dopamine being re­
prediction and result—the error. Finally, it opposite. It associates effect with cause. leased by the nucleus accumbens, a region
uses that error estimate to update things to of the brain in which dopamine is impli­
make better predictions in future. cated in learning and addiction. All of the
Belief in this approach was itself rein­ experiments came down in favour of the
forced in the late 20th century by two new model.
things. One of these was the discovery that The 180° turnabout in thinking—from
it is also good at solving engineering pro­ prospective to retrospective—that is im­
blems related to artificial intelligence (AI). plied by these experiments is causing quite
Deep neural networks learn by minimising a stir in the world of neuroscience. It is
the error in their predictions. “thought­provoking and represents a stim­
The other reinforcing observation was a ulating new direction,” says Ilana Witten, a
paper published in Science in 1997. It noted neuroscientist at Princeton University un­
that fluctuations in levels in the brain of involved with the paper.
dopamine, a chemical which carries sig­ More experiments will be needed to
nals between some nerve cells and was confirm the new findings. But if confirma­
known to be associated with the experi­ tion comes, it will have ramifications be­
ence of reward, looked like prediction­er­ yond neuroscience. It will suggest that the
ror signals. Dopamine­generating cells are way AI works does not, as currently argued,
more active when the reward comes soon­ have even a tenuous link with how brains
er than expected or is not expected at all, operate, but was actually a lucky guess.
and are inhibited when the reward comes But it might also suggest better ways of
later or not at all—precisely what would doing AI. Dr Namboodiri thinks so, and is
happen if they were indeed such signals. exploring the possibilities. Evolution has
A nice story, then, of how science had hundreds of millions of years to opti­
works. But if a new paper, also published in mise the process of learning. So learning
Science, turns out to be correct, it is wrong. One man and his dog from nature is rarely a bad idea. n

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 Culture The Economist January 21st 2023 75

“Saint Omer” and “Tirailleurs” both in Dakar (where she grew up) or later
in Paris (where she moved), the more the
Unheard voices parallels with Rama’s own life emerge.
With what amounts to a physical ache, Ra­
ma grasps their shared hurt: a troubled ma­
ternal tie, the pressure of parental aspira­
tion and the unresolved anxiety of a life
PARIS
divided between two cultures.
Two new films examine parenthood, and the complex link between Senegal
Ms Diop’s camera is unflinching: her
and France
close­up shots leave nowhere else for the

L aurence Coly (Guslagie Malanda, pic­

tured) is a young Senegalese woman
studying philosophy in Paris. One winter
black directors making films that chal­
lenge the way France sees itself.
The story is seen through the eyes of Ra­
viewer to look. As the lawyers attempt to
pierce the appalling mystery of infanti­
cide, the movie peels back layers of racial
evening, she takes a train to the cold north­ ma (Kayije Kagame), a French novelist and and cultural prejudice. A white university
ern French coast, checks in to a hotel for university lecturer whose parents also em­ professor called as a witness expresses sur­
the night, walks to the beach on a rising igrated from Senegal. Rama is writing a prise that Laurence chose to study Witt­
tide and leaves her baby to drown. The tiny book inspired by this case of infanticide genstein rather than a figure closer “to her
corpse is found by a fisherman, who at first and travels to northern France to sit in the own culture”. Ms Diop films the scenes of
mistakes the child for a seal. courtroom. Under cross­examination, Laurence in a wood­panelled dock, washed
Based on a true story that shook France Laurence acknowledges what she did, but through with a glorious golden light: an ar­
several years ago, “Saint Omer”, which was is unable to explain it, muttering at one resting decision, given the grimness of the
released in America on January 13th, fol­ point about “sorcery”. The more that she subject matter, which seems to call into
lows Laurence’s trial for murder. To de­ evokes her childhood struggle to fit in, question the viewer’s perceptions and to
scribe it as a courtroom drama would be to hint at the ambiguity of colour.
underplay the subtle, tightly controlled “Saint Omer” is at once a film about the
study of motherhood, race, belonging and → Also in this section African immigrant experience in France,
separation that lies at the centre of this and about motherhood everywhere. In this
76 The story of Pegasus spyware
darkly mesmerising film. Selected as respect it belongs to a wave of compelling
France’s entry for this year’s Academy 77 Case studies in failure films made by black French directors in re­
Awards, “Saint Omer” has already picked cent years. These include Ladj Ly’s “Les
78 A hymn to idiosyncrasy
up prizes at the Venice Film Festival and in Misérables”, which came out in 2019 and
Paris. It confirms the place of Alice Diop, its 78 Janet Malcolm’s memoir examines the casual violence shattering
French director, whose parents came from childhood innocence in the French ban-
79 Johnson: Bible translation
Senegal, as one of a new generation of lieues (high­rise suburbs). Another is Maï­

012
 76 Culture The Economist January 21st 2023

mouna Doucouré’s “Mignonnes” (“Cu­ as enriching as it is bold. their consent. NSO Group, an Israeli firm, is
ties”), released in 2020, which explores During the first world war nearly probably the best known. It sells Pegasus, a
girlhood, giggly friendship and the dis­ 200,000 soldiers, known as the “Senega­ piece of spyware that allows the program’s
turbing hyper­sexualisation of pre­teens. lese riflemen”, were enlisted from coun­ operators—typically spies and secret po­
Mr Ly was born in Mali and grew up outside tries across west Africa to fight for France. lice—to see everything a mobile phone’s
Paris; Ms Doucouré was born in Paris to If the film itself struggles, disappointingly, owner does. By reading messages directly
Senegalese parents. Like Ms Diop, these to engage the viewer, it has the merit of off the phone’s screen, it can bypass the en­
film­makers use their multilayered under­ highlighting their sacrifice. In this sense it cryption built into apps such as WhatsApp
standing of contemporary France to tease achieves for west Africans what Rachid or Signal. Pegasus can even surreptitiously
out the contradictions and complexities of Bouchareb’s “Indigènes” (“Days of Glory”), activate a phone’s camera and micro­
modern lives. did in 2006 for the north African soldiers phone, uploading whatever it hears or sees
In doing so, each film looks beyond the who fought for France in the second world to its controllers.
leafy cobbled boulevards of Paris. Each, in war. When “Tirailleurs” came out, the NSO made headlines in 2021 when Am­
its own way, gives a voice to the unheard. French government agreed to change a rule nesty International and a group of media
When that voice happens to be elegant that obliged surviving veterans to spend organisations, led by Forbidden Stories, a
spoken French, it disconcerts the viewer half the year in France in order to receive a Paris­based non­profit venture, reported
and challenges attitudes—exactly as Ms state pension. The film not only made sure on a leaked list of 50,000 phone numbers
Diop intends it to in “Saint Omer”. Lau­ that African­French voices were heard, but that appeared to be possible targets select­
rence explains in the courtroom that, back also that they were taken seriously. n ed by Pegasus’s various operators around
in Dakar, her parents refused to allow her the world. NSO insists that governments
to speak Wolof, her maternal Senegalese purchase its tools to catch “terrorists,
tongue, at home; having done as instruct­ Hacking software criminals and paedophiles”. Yet the leaked
ed, she was mocked by her peers for sound­ list included phones belonging to activists,
ing like a Parisienne. The eloquence with The spy in journalists, lawyers and politicians.
which Laurence recounts killing her child, Among those appearing were Emmanuel
Ms Diop has said, constitutes a form of “re­ your pocket Macron, France’s president; Rahul Gandhi,
sistance”, a way “not to be assigned to a an opposition politician in India; Roula
place she doesn’t want to be”. “Why did you Khalaf, the editor of the Financial Times;
kill your daughter?” asks the judge in the and, according to his wife, the family of
film. “I don’t know,” Laurence replies po­ Jamal Khashoggi, a Saudi journalist mur­
litely, as if in a philosophy tutorial; “but I Pegasus. By Laurent Richard and Sandrine dered and dismembered by his own gov­
hope the trial will help me understand.” Rigaud. Henry Holt; 336 pages; $28.99. Pan ernment in its consulate in Istanbul in
When collecting two prizes at the Ven­ Macmillan; £20 2018. (NSO has denied that Pegasus was
ice Film Festival last year, Ms Diop nodded used to target Khashoggi or his family.)
to Audre Lorde, a black American feminist:
“Our silence will not protect us.” The film­
maker has said she hopes her work, which
F ifteen years after the launch of the
iPhone, most people understand the
bargain with smartphones. You get naviga­
In “Pegasus” Laurent Richard and San­
drine Rigaud of Forbidden Stories tell of
how they turned the leak into an exposé.
includes several documentaries, will “offer tion anywhere in the world, the web and The book offers a history of NSO which, like
to the world all these missing stories…all email on the go and as much music as you so many Israeli startups, is stuffed with
these black women who haven’t been can stream—but first you must sacrifice a geeks who honed their skills in the army. It
heard, for whom we speak in their place.” bit of privacy. Your location, preferences explains the technical basics and Pegasus’s
The impulse to tell untold stories also and habits will be transmitted to some growing sophistication. Early versions of
drives a new Franco­Senegalese film, “Ti­ faceless corporation to be parsed for in­ the malware relied on users clicking on
railleurs” (“Father and Soldier”), which sights and sold on to advertisers keen to links in text messages, a hit­and miss strat­
was released in France on January 4th. Di­ sell you shampoo or car insurance. egy; subsequent versions were able to in­
rected by Mathieu Vadepied, it was co­pro­ Some companies profit from tools that fect phones without any user interaction.
duced by Omar Sy, one of France’s best­ allow people to be snooped on without But the book is more a journalistic
loved actors, who leapt to international
fame for his role in “Lupin”, a thriller series
on Netflix. “Tirailleurs” is set in 1917, when
Senegal was under French colonial rule,
and tells the story of Bakary Diallo (Mr Sy),
a cattle herder, whose teenaged son, Thier­
no (Alassane Diong), is forcibly enlisted
into the French army. To try to save him,
Bakary volunteers to join his son, leaving
the arid scrub of Senegal for the mud and
blood of the trenches.
Shot mostly in Peul (Fulani), a west Af­
rican language, and screened with French
subtitles, “Tirailleurs” touches on exile, fa­
therhood and colonial brutality. Mr Sy has
never spoken Peul on screen before, even
though he grew up outside Paris with it as
his mother tongue; his father came from
Senegal and his mother from Mauritania.
The decision to use this language, with
which many viewers will be unfamiliar, is NSO, under fire

012
 The Economist January 21st 2023 Culture 77

memoir than a technical analysis of Pega­ nukes, gettable for the right amount of al and independence from British rule. Mr
sus, or a profile of its creators. The authors money”.) And although it mentions several Bradatan takes issue with Gandhi’s “alarm­
describe a mix of excitement and paranoia of NSO’s less well­known—and less public­ ingly imperfect behaviour” (mainly ego­
after obtaining the list. They draw atten­ ity­hungry—competitors, readers may feel tism and undue fixation with chastity).
tion to a growing trend in journalism: that more pages could have been spent out­ The author suggests he might be compared
leaks so enormous that several outlets lining the size and rapid growth of the to the likes of Vladimir Lenin and Maximi­
have to work together to check and make hacking­for­hire business. lien Robespierre, whose utopian dreams
sense of them. The story is told mostly NSO’s story is not over. The firm has were realised as nightmares.
through pen portraits of those affected by been hit by lawsuits from WhatsApp and Third comes Emil Cioran, a misan­
the spying that Pegasus enabled, including Apple. Hanan Elatr, Khashoggi’s widow, is thropic writer with a seductive pen and
Azeri and Moroccan journalists with a pen­ reportedly planning to sue. Last year Amer­ taste for pessimistic aphorisms. (“Any suc­
chant for reporting on official misdeeds, to ica slapped it with the same sorts of export cess, in any realm, involves an inner im­
the displeasure of their autocratic rulers. restrictions it has applied to Huawei, cut­ poverishment.”) A Romanian fascist in the
The book is not perfect. The character ting it off from American microchips and 1930s—a “folly” he later denounced—he
sketches can feel a bit repetitive. Some­ software. For those wanting to catch up on became a recluse in Paris before a spell of
times the authors go too far down rabbit the drama so far—or for politicians, jour­ acclaim in the last decades of his life.
holes or stray into airport­thriller­style hy­ nalists or ceos wondering how best to cali­ Last is Mishima Yukio, perhaps the fin­
perbole. (At one point Pegasus is described, brate their paranoia—the book is a good est Japanese writer of the 20th century.
rather ludicrously, as being like “loose place to start. n Disgusted by the country’s pacifist consti­
tution as well as its decadent and material­
ist society, in 1970 he called on troops in
Life lessons Tokyo to rebel. Mishima probably knew the
protest would be futile. He committed sep-
Swing and a miss puku, or ritual disembowelment, before
being beheaded by an accomplice.
The schema is unconvincing, as physi­
cal and biological failure seem to be the
same, and each kind of failure involves
some aspect of the others. The framework
offers little more than signposting. How
A philosopher offers four counterintuitive case studies in failure
they failed, exactly, is not clear. Weil and
the lives of four individuals, which he says Cioran left their writings. Mishima
In Praise of Failure. By Costica Bradatan. offer “lessons in humility”. Each, he writes, achieved not only literary greatness but
Harvard University Press; 288 pages; $29.95 involves a distinctive kind of life failure: also the spectacular, violent death that had
and £26.95 physical, political, social or biological. been his erotic obsession throughout his
First up is Simone Weil, a radical French adult life. Gandhi liberated India.

F ailure conceals success, or so argues

Costica Bradatan, a philosopher, in this
imaginative but puzzling book. Though di­
philosopher and social missionary. She
took human suffering to be pervasive but
refused to treat it as “natural” (ie, inevita­
The territory of human failure is famil­
iar: whether life is a blessing or a curse has
been disputed since ancient times. In his
verting to read, it is not easy to review. Its ble and ethically neutral). Suffering was book “Better Never to Have Been”, David
main claim has an air of defensive para­ unequally shared, she thought, and much Benatar, a South African philosopher, re­
dox: if failure really is success, listing the of it due to the power of the strong to abuse vived an old tradition of pessimism and ar­
book’s flaws may be mistaken for praise. the weak. In 1943 she died of malnourish­ gued that, as life was on balance bad, it was
Failure may be “brutal and nasty and ment, in self­imposed poverty in England, wrong to have children. To defend a coun­
devastating”, Mr Bradatan writes, but it is at the age of 34. terintuitive proposition takes logical per­
also “essential to what we are as human be­ Next is Mahatma Gandhi, the charis­ sistence or wit—preferably both. Unfortu­
ings”. A wry reflection on failure’s neglect­ matic campaigner for India’s ethical reviv­ nately “In Praise of Failure” falls short. n
ed appeal may be a promising idea in a
market where “worshipping of success”, in
the author’s words, has had a good run. Yet
the literature of failure, whether comic or
consoling, is long established, too. It is al­
most as old as writing itself.
Trouble starts early with the use of “fail­
ure” as a generic term, rather like “butter”.
Organs, crops, machines, banks, students,
concerts, dinner parties and scientific ex­
periments are alike in that all can fail. Each
has a standard of success that may or may
not be met. That likeness, though, is mini­
mal. Some failures are serious and some
are trivial. It depends what is at stake—an
unsuccessful vaccination campaign mat­
ters more than a lost football match, a
failed kidney more than a flat soufflé.
As the stake here is success or failure in
life, Mr Bradatan wisely approaches this
topic from an oblique angle. He analyses

012
 78 Culture The Economist January 21st 2023

Janet Malcolm’s memoir

On reflection

Still Pictures. By Janet Malcolm.

Farrar, Straus and Giroux; 176 pages; $26.
Granta; £14.99

anet Malcolm was a journalist who

Jfamously compared journalists to con
men, “preying on people’s vanity, igno­
rance or loneliness…and betraying them
without remorse.” She was a biographer
who skewered the “voyeurism and busy­
bodyism” of biographies. In her books and
ern languages at Oxford—though she articles, mostly for the New Yorker, Mal­
home
failed her final exam, as she slept through colm used her pen like a knife, trimming
entertainment
it. Aged 22, she fell in love with George fat and gutting pieties. She died in 2021, but
Barker, a 50­year­old poet and father to ten her distinctive voice lives on in the sylla­
children from three relationships. (They buses of writing classes around the world.
had a further five children.) She kept a With “Still Pictures”, Malcolm has pub­
pot­bellied pig called Portia in the kitchen, lished a kind of posthumous memoir
wrote for literary reviews and taught Latin (though she never would have called it
at girls’ schools. She encouraged her char­ that). Given her critique of the biases in­
“O Caledonia” ges to be maverick young ladies, not sim­ herent in storytelling, and her insights
pering little girls. into the ways individuals use stories to ob­
One of a kind “O Caledonia” is a lyrical evocation of scure what is unknown and unknowable
that sensibility. For Janet, conventional about the self, however could she indulge
girlhood is a half­existence of dolls, rib­ in that most warped and self­serving genre
bons and submission. If to be feminine is of them all?
to be pretty and motherly, she is not only The essays that make up this book all
unfeminine, but half­feral. A haircut start with the kind of old and unremark­
Elspeth Barker’s only novel is a
makes her look like a “menacing Haus­ able personal photos that occupy dusty
celebration of obstinate individuality
frau”. She reads books as though “rending shoe boxes. In an afterword, Anne Mal­

S he lies in a heap on the staircase of

Auchnasaugh Castle, “twisted and
slumped in bloody, murderous death”.
the limbs of some slaughtered beast”. At a
loss as to how to handle her priggish
younger siblings, she nearly maims one,
colm reminds readers that her mother was
once the New Yorker’s photography critic,
but Malcolm’s observations are not really
Above her, a stained­glass window bears shoves another out of a moving car and about the images. Rather, she uses the pho­
her family motto: Moriens sed Invictus, attempts to bury a third. “A nasty rat has tos to consider the porousness of memory,
“dying but unconquered”. buried your baby,” she tells her horrified the way the mind often seizes and distorts
It is an odd beginning for a novel that parents. “She’s gone now.” some details while misplacing others.
teaches girls how to grow up. “O Caledo­ Frequently hapless and profoundly “Most of what happens to us goes unre­
nia”, however, delights in defying conven­ misunderstood, Janet suffers from the membered,” she writes. This makes auto­
tion. It is a brooding, scintillating coming­ careless cruelties of adolescence. Girls are biography a kind of “novelistic enterprise”.
of­age tale, full of delicate fashionings of cliquey and snide, boys are predatory, Given Malcolm’s preoccupation with
the macabre. It suggests that it is better to adults are rarely better. But Janet stays psychoanalysis, it is fitting that she spends
be strange than to conform. Janet, the passionate and maintains a love of lan­ much of the book revisiting the haze of
heroine, is ungainly and unusual. All the guage. Beth is “a beautiful name, a velvet childhood. She recounts how her Jewish
same, her obstinate individuality is thrill­ name, brownish mauve”. Poisonous hog­ family fled the Nazis in Prague in 1939 and
ing today, when teenagers’ need to fit in weed is rechristened “Lord of Luna”. A made a home among fellow Czech émigrés
seems ever more acute and their foibles darkening Scottish sky in winter “sheds an in New York. Malcolm’s father worked as a
are constantly displayed on social media. unearthly glory”. Janet perceives strange doctor, changed their surname from Wie­
Elspeth Barker wrote “O Caledonia”, her beauty in the world around her, even if she ner to Winn and helped them become the
only novel, in 1991. Critically lauded, it is derided for it. kind of “ordinary middle class, middle­
nevertheless fell out of print after 2001. In Her short life is a hymn to originality. brow family” that subscribed to the Book­
2017 Ali Smith called it the “one of the best How much better, Barker implies, to be of­the­Month Club and cooked casseroles
least­known novels of the 20th century”. clever and odd than gormless or dull. with Campbell’s cream­of­mushroom
In 2021, a year before Barker’s death, it was Friends are few, yet beloved: Janet’s jack­ soup. (“Does anyone say ‘casserole’ any­
reissued by Weidenfeld & Nicholson in daw, her sole mourner, searches for her more?”) Malcolm internalised the city’s an­
Britain. Last year it was released in Amer­ “unceasingly” after her death. Refusing to ti­Semitism before her parents told her she
ica and Spain; more editions are coming. adopt a lesser companion in her stead, in was Jewish, so she “resented and hid” this
The author was eccentric. She grew up despair he flies into the castle walls. Dy­ detail about herself for much of her youth.
in a Scottish castle before studying mod­ ing, but unconquered. n As a memoirist, Malcolm comes clean

012
 The Economist January 21st 2023 Culture 79

about her gaps in memory and her lapses ters whenever they fell ill. But her mother brought by one of her subjects. She la­
in judgment, and she has characteristically could also be needy and volatile—she “al­ ments her initial reaction to the lawsuit,
strong feelings about what is moral and ap­ lowed herself her histrionics”—with a vi­ which was to say nothing in her defence
propriate. In writing about her father, for vacity that perhaps masked “an inner dead­ “in dogged accord with the magazine’s
example, Malcolm explains that she is ness of spirit”. It is a compelling portrait, stance of unrelenting hauteur”.
sticking to “lovely plotless memories” even if it doesn’t quite cohere. As Malcom The book’s most charming moments
about him, as the memories with a plot are writes: “Do we ever write about our parents are when the incisive, unsparing adult can
invariably those of “conflict, resentment, without perpetrating a fraud?” be found in the child. About a kindly Czech
blame, self­justification—and it is wrong, Malcolm overlooks her first marriage couple who were friends with her parents,
unfair, inexcusable to publish them.” and touches only briefly on her second. Malcolm writes that their dullness
Her take on her mother is more compli­ She worked at the New Yorker for almost 60 “brought out an obnoxiousness in my sis­
cated. Malcolm writes that she was “warm years, yet her account of her career is ter and me for which I would blush today if
and loving and unselfish”, roasting squab dominated by the decade she spent de­ I were a better person. But a child’s cruelty
and baking profiteroles for her two daugh­ fending herself from accusations of libel is never completely outgrown.” n

Johnson In the beginning was the Word

Translating the Bible is a vexed task, as a new book shows

D ODGY TRANSLATION is not always of

great import. You may be able to
work out a new gadget’s instructions
matter and English style would be enough,
but those are just bare prerequisites for a
translator, and will not spare them endless
accessible to 21st­century readers. That
demands certain decisions. There is no
such single thing as “modern English”:
even if they are garbled. If the joke you hard choices. Mr Barton distinguishes there are many styles and registers. Some
have translated with your smartphone between “formal” and “functional” equiv­ translations, intended to reach young or
leaves your audience baffled, you risk alence. Should a translator try to carry less literate populations, err on the side
nothing more than embarrassment. across the language of the original (its of slang and read as uninspired. Even
Sacred texts are another matter. Some form) or its purpose (function)? when attempting to be neutral—when
religions eschew translations: faithful Some translators have produced a text telling the story of Noah’s ark, for ex­
Muslims are meant to read the Koran in of such quality that its readers simply ample—should the translator look to the
Arabic. Jews similarly revere their origi­ consider it “the Bible”. Martin Luther set style of a legend, a novel, an eyewitness
nal texts. Reading them in Hebrew (some the standard for modern High German account, a history or a news report? Each
passages are in Aramaic, a related Semit­ with his translation; every subsequent has its particular vocabulary and turns of
ic language) is the mark of a scholar. German version has been compared with phrase. (Mr Barton suggests that the
By contrast, the two faiths’ cousin— his text as much as with the originals. The Hebrew style of this story is best consi­
Christianity—has a long tradition of same goes for the King James Bible. Ex­ dered that of a legend.)
translation. The Bible not only includes pressions such as “long­suffering” passed Then there is the question of the
Jewish texts as the Old Testament, but into standard English from its pages. Few variety within the Bible itself. Some
also a New Testament written in Greek. readers today know that they were once translators strive to create a unified style
Nearly every quoted word in the gospels strikingly earthy literal translations from for the whole book. The word biblia was
is a translation, as Jesus and his follow­ Hebrew. (They were also the work of Wil­ originally a plural, and with reason: the
ers spoke Aramaic. For centuries the liam Tyndale, on whose translation the composition of the Old Testament
Western church’s Bible was a translation: later King James scholars drew. Tyndale spanned most of a millennium, a fact
St Jerome’s Vulgate, the predominant had courted controversy for translating reflected in its language. The New Testa­
edition until the Reformation, rendered the Bible and was executed for heresy.) ment books may vary less, but vary they
the original Hebrew and Greek into Latin. Most translations aim for a text that do. How might a translator approach the
Translation is a vexed undertaking as belongs to its distant time and place yet is first two chapters of Luke’s gospel, which
it has theological consequences. In the are so distinct they are thought by some
Old Testament, Isaiah said an almah to belong to a different author?
would give birth. Today most scholars Vladimir Nabokov said that every
agree that it probably just meant “young translator’s job was to “reproduce with
girl”. The translation of Isaiah’s Hebrew absolute exactitude” and that anything
into pre­Christian Greek (in the Jewish else is either “an imitation, an adapta­
text known as the Septuagint) rendered it tion or a parody”. Yet when it comes to
as parthenos, or “virgin”. For Christians, the Bible, translators must consider
this bolsters the idea that Jesus’s birth whether they regard the text as a “sacred
fulfilled a prophecy. script” or a “sacred story”, Mr Barton
Now most people read the Bible in says. Hew to the script, and you create a
their own language. A new book, “The difficult text that risks excluding readers
Word” by John Barton, an Anglican priest from salvation. Rework the language and
and former scholar at Oxford University, you risk presuming to improve on the
explores the complexities in converting word of God. Even staunch atheists will
millennia­old texts into modern English. learn a great deal from Mr Barton about
You might think that an excellent knowl­ the horns of a dilemma that could belong
edge of the source language, the subject to the devil himself.

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 80
Economic & financial indicators The Economist January 21st 2023

Economic data

Gross domestic product Consumer prices Unemployment Current-account Budget Interest rates Currency units
% change on year ago % change on year ago rate balance balance 10-yr gov't bonds change on per $ % change
latest quarter* 2022† latest 2022† % % of GDP, 2022† % of GDP, 2022† latest,% year ago, bp Jan 18th on year ago
United States 1.9 Q3 3.2 2.1 6.5 Dec 8.0 3.5 Dec -3.7 -5.5 3.4 150 -
China 2.9 Q4 nil 3.1 1.8 Dec 1.9 5.5 Dec‡§ 2.4 -5.6 2.7 §§ 24.0 6.76 -6.1
Japan 1.5 Q3 -0.8 1.4 3.8 Nov 2.5 2.5 Nov 1.6 -6.3 nil -8.0 128 -10.8
Britain 1.9 Q3 -1.2 4.0 10.5 Dec 7.9 3.7 Oct†† -5.9 -6.8 3.5 230 0.81 -8.6
Canada 3.9 Q3 2.9 3.4 6.3 Dec 6.7 5.0 Dec -0.6 -2.2 2.7 83.0 1.34 -6.7
Euro area 2.3 Q3 1.3 3.1 9.2 Dec 8.4 6.5 Nov 1.3 -4.2 2.0 200 0.92 -4.3
Austria 1.7 Q3 0.9‡ 4.9 10.2 Dec 8.6 5.6 Nov -0.5 -3.6 2.6 233 0.92 -4.3
Belgium 1.9 Q3 0.8 2.7 10.4 Dec 10.2 5.5 Nov -2.4 -4.8 2.6 230 0.92 -4.3
France 1.0 Q3 0.7 2.5 5.9 Dec 6.0 7.0 Nov -1.9 -5.3 2.6 231 0.92 -4.3
Germany 1.3 Q3 1.6 1.7 8.6 Dec 8.7 3.0 Nov 4.2 -3.5 2.0 200 0.92 -4.3
Greece 2.1 Q3 -2.1 5.0 7.2 Dec 9.6 11.4 Nov -5.9 -4.5 4.0 234 0.92 -4.3
Italy 2.6 Q3 1.9 3.7 11.6 Dec 8.6 7.8 Nov -0.8 -5.7 3.7 234 0.92 -4.3
Netherlands 3.1 Q3 -0.9 4.3 9.6 Dec 11.6 3.5 Dec 6.4 -1.4 2.3 220 0.92 -4.3
Spain 4.4 Q3 0.2 4.5 5.7 Dec 8.5 12.4 Nov 0.2 -4.7 3.1 245 0.92 -4.3
Czech Republic 1.6 Q3 -1.0 2.5 15.8 Dec 15.1 2.7 Nov‡ -2.4 -5.1 4.2 103 22.1 -2.6
Denmark 3.2 Q3 1.1 2.8 8.7 Dec 7.9 2.6 Nov 9.0 0.9 2.2 206 6.87 -4.5
Norway 2.5 Q3 6.3 3.5 5.9 Dec 6.4 3.2 Oct‡‡ 18.8 12.2 1.4 76.0 9.84 -10.6
Poland 4.5 Q3 4.1 4.5 16.6 Dec 14.4 5.2 Dec§ -3.7 -3.7 5.8 169 4.35 -8.1
Russia -3.7 Q3 na -2.3 11.9 Dec 13.2 3.7 Nov§ 12.3 -1.1 10.4 100 68.9 11.5
Sweden 2.6 Q3 2.4 3.0 12.3 Dec 7.9 6.4 Nov§ 3.7 -0.5 1.9 153 10.2 -11.1
Switzerland 0.5 Q3 1.0 2.0 2.8 Dec 3.0 1.9 Dec 5.2 -1.0 1.1 102 0.91 1.1
Turkey 3.9 Q3 -0.5 5.1 64.3 Dec 73.5 9.9 Nov§ -8.1 -3.4 9.8 -1202 18.8 -27.4
Australia 5.9 Q3 2.6 3.7 7.3 Q3 6.4 3.5 Dec 2.0 -1.9 3.5 162 1.43 -2.8
Hong Kong -4.5 Q3 -10.0 -2.7 1.8 Nov 1.9 3.7 Nov‡‡ 4.2 -3.4 3.1 145 7.82 -0.4
India 6.3 Q3 19.3 6.9 5.7 Dec 6.5 8.3 Dec -2.7 -6.4 7.3 70.0 81.3 -8.2
Indonesia 5.7 Q3 na 5.1 5.5 Dec 4.2 5.9 Q3§ 1.1 -3.8 6.7 28.0 15,088 -5.0
Malaysia 14.2 Q3 na 7.3 4.0 Nov 3.4 3.6 Nov§ 2.4 -5.3 3.9 26.0 4.31 -3.0
Pakistan 6.2 2022** na 6.2 24.5 Dec 19.9 6.3 2021 -3.9 -7.8 14.1 ††† 255 229 -23.1
Philippines 7.6 Q3 12.1 7.7 8.1 Dec 5.6 4.5 Q4§ -4.0 -7.7 6.3 150 54.6 -5.7
Singapore 2.2 Q4 0.8 3.5 6.7 Nov 6.1 2.1 Q3 18.7 -1.0 2.9 105 1.32 2.3
South Korea 3.1 Q3 1.3 2.6 5.0 Dec 5.1 3.0 Dec§ 1.2 -3.1 3.3 79.0 1,238 -3.8
Taiwan -0.9 Q4 -4.3 3.0 2.7 Dec 2.9 3.6 Dec 13.0 -0.3 1.2 49.0 30.3 -9.0
Thailand 4.5 Q3 5.0 3.2 5.9 Dec 6.1 1.4 Oct§ -1.8 -5.0 2.5 44.0 32.8 0.9
Argentina 5.9 Q3 7.0 5.7 94.8 Dec 72.5 7.1 Q3§ -1.0 -4.2 na na 183 -43.0
Brazil 3.6 Q3 1.6 2.8 5.8 Dec 9.3 8.3 Oct§‡‡ -3.0 -4.7 12.7 107 5.10 8.2
Chile 0.3 Q3 -4.6 2.3 12.8 Dec 11.6 7.9 Nov§‡‡ -8.1 -0.3 5.3 -78.0 818 0.1
Colombia 7.1 Q3 6.4 6.2 13.1 Dec 10.1 9.5 Nov§ -8.0 -4.7 12.4 331 4,688 -14.0
Mexico 4.3 Q3 3.6 2.8 7.8 Dec 7.9 3.0 Nov -1.0 -2.5 8.6 81.0 18.7 9.0
Peru 1.7 Q3 1.8 2.6 8.5 Dec 7.8 6.2 Dec§ -3.4 -1.5 7.9 187 3.83 0.5
Egypt 4.4 Q3 na 6.6 21.3 Dec 13.6 7.4 Q3§ -4.6 -7.4 na na 29.6 -46.9
Israel 7.5 Q3 1.9 6.1 5.3 Dec 4.5 3.9 Nov 3.4 0.2 3.1 184 3.38 -7.4
Saudi Arabia 3.9 2021 na 8.9 3.3 Dec 2.5 5.8 Q3 13.1 3.4 na na 3.76 -0.3
South Africa 4.1 Q3 6.6 1.9 7.5 Dec 6.9 32.9 Q3§ -1.3 -5.5 9.7 20.0 17.0 -8.7
Source: Haver Analytics. *% change on previous quarter, annual rate. †The Economist Intelligence Unit estimate/forecast. §Not seasonally adjusted. ‡New series. **Year ending June. ††Latest 3 months. ‡‡3-month moving
average. §§5-year yield. †††Dollar-denominated bonds.

Markets Commodities
% change on: % change on:
Index one Dec 31st index one Dec 31st
The Economist commodity-price index % change on
In local currency Jan 18th week 2021 Jan 18th week 2021 2015=100 Jan 10th Jan 17th* month year
United States S&P 500 3,928.9 -1.0 -17.6 Pakistan KSE 38,791.1 -4.8 -13.0 Dollar Index
United States NAScomp 10,957.0 0.2 -30.0 Singapore STI 3,289.6 0.6 5.3 All Items 155.4 157.7 4.6 -5.4
China Shanghai Comp 3,224.4 2.0 -11.4 South Korea KOSPI 2,368.3 0.4 -20.5 Food 139.8 139.5 1.7 0.3
China Shenzhen Comp 2,098.0 2.5 -17.1 Taiwan TWI 14,932.9 1.2 -18.0 Industrials
Japan Nikkei 225 26,791.1 1.3 -6.9 Thailand SET 1,685.4 nil 1.7 All 170.0 174.7 6.9 -9.3
Japan Topix 1,934.9 1.8 -2.9 Argentina MERV 235,372.4 4.8 181.9 Non-food agriculturals 127.8 130.9 -0.4 -24.0
Britain FTSE 100 7,830.7 1.4 6.0 Brazil BVSP 112,228.4 -0.3 7.1 Metals 182.6 187.7 8.5 -5.5
Canada S&P TSX 20,376.2 1.8 -4.0 Mexico IPC 53,218.8 nil -0.1
Sterling Index
Euro area EURO STOXX 50 4,174.3 1.8 -2.9 Egypt EGX 30 15,987.2 3.0 34.2
All items 195.3 196.0 3.4 4.6
France CAC 40 7,083.4 2.3 -1.0 Israel TA-125 1,889.1 2.3 -8.9
Germany DAX* 15,181.8 1.6 -4.4 Saudi Arabia Tadawul 10,664.0 0.4 -5.9 Euro Index
Italy FTSE/MIB 26,052.4 2.0 -4.7 South Africa JSE AS 79,865.5 1.7 8.4 All items 160.7 161.9 3.1 -0.7
Netherlands AEX 749.1 1.4 -6.1 World, dev'd MSCI 2,713.5 0.5 -16.0 Gold
Spain IBEX 35 8,933.3 2.4 2.5 Emerging markets MSCI 1,030.1 1.3 -16.4 $ per oz 1,875.3 1,910.6 5.1 5.2
Poland WIG 61,177.0 -0.2 -11.7
Brent
Russia RTS, $ terms 1,006.4 0.4 -36.9
$ per barrel 80.2 86.1 7.4 -1.7
Switzerland SMI 11,366.6 1.1 -11.7 US corporate bonds, spread over Treasuries
Turkey BIST 5,384.2 13.9 189.8 Sources: Bloomberg; CME Group; Cotlook; Refinitiv Datastream;
Dec 31st
Fastmarkets; FT; ICCO; ICO; ISO; Live Rice Index; LME; NZ Wool
Australia All Ord. 7,609.5 2.7 -2.2 Basis points latest 2021
Services; Thompson Lloyd & Ewart; Urner Barry; WSJ. *Provisional.
Hong Kong Hang Seng 21,678.0 1.1 -7.3 Investment grade 145 120
India BSE 61,045.7 1.6 4.8 High-yield 465 332
Indonesia IDX 6,765.8 2.8 2.8 Sources: Refinitiv Datastream; Standard & Poor's Global Fixed Income For more countries and additional data, visit
Malaysia KLSE 1,495.5 0.5 -4.6 Research. *Total return index. economist.com/economic­and­financial­indicators

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 Graphic detail Economic history The Economist January 21st 2023 81

→ Britain began industrialisation long before other European countries did

Workers employed Agricultural output per GDP per person, 1650=100 Share of workers employed
in agriculture, % worker, 1650=100 Modern borders, log scale in manufacturing, 1831
70 160 500
Germany Britain 80%
140 60
France 400
50 40 Liverpool
120
20

Britain 30 100
300 W ALES
WALES E NGLAN D
ENGLAND
1650 1800 1650 1800

Germany
First steam-
France
powered
railroad 200
Threshing
machine
invented Spain
Flying Shuttle Shortages of workers in wartime spurred the
weaving machine adoption of labour-saving machines
invented
French revolution, Labour-saving machines per 100 square km, 1800-30
Napoleonic wars
2.0
Netherlands

1.5
100
Areas with
Occupied mechanics
by France 1.0
80

0.5

Areas without
60 0
1650 1700 1750 1800 1850 1900 Lowest Army/navy recruitment Highest
rate, England, 1790-1815*
*Areas ranked in 20 equal-sized groups Sources: Maddison Project; “Agricultural productivity in Europe, 1300-1800”, by R.C. Allen, 2000; “Slavery
and the Industrial Revolution”, by S. Heblich, S.J. Redding and H. Voth, 2022; “Fighting for Growth”, by H. Voth, B. Caprettini and A. Trew, 2022

Mother of ship of plantations. The riches Britons ex­

tracted from slaves in the Americas flowed
A study by Leander Heldring, James
Robinson and Sebastian Vollmer shows
invention mainly to a few cities, such as Liverpool. By
the 1830s these regions had large numbers
that areas once held by monasteries were
at the vanguard of industrialisation. By the
of cotton mills and shares of workers em­ 1830s they had unusually large numbers of
ployed in manufacturing. workers in trades and crafts, agricultural­
Other factors could have made these ar­ machine patents, textile mills and grain
A flurry of new studies identifies
eas both amass wealth from slavery and in­ separators. The authors say that market­
causes of the Industrial Revolution
dustrialise quickly. But the paper tries to based farms, common on ex­monastic

T he industrial revolution was the

biggest transformation in economic
history. For centuries scholars have sought
isolate slavery’s impact using slave ships’
voyages. Long journeys, caused mainly by
bad weather, reduced the share of captives
land, created an entrepreneurial class and
incentives for technological advances.
Another factor that has gained support
to understand why this process occurred who survived and thus traders’ profits. And is labour shortages. Mr Voth, Bruno Capret­
in Britain around 1750. But without the among similar areas, those where the trips tini and Alex Trew studied Britain’s wars
ability to run counter­factual experiments, of the slave­trading ancestors of residents with France in 1793­1815, when conscrip­
it is hard to prove any single explanation. in the 1830s were unusually short industri­ tion shrank the workforce abruptly. They
Researchers are now testing theories by alised faster than did those where resi­ found that adoption of devices replacing
studying why similar parts of Britain in­ dents’ ancestors’ trips were atypically long. manual labour was greatest in areas that
dustrialised at different rates. New papers Investors still needed financial incen­ provided the most servicemen—so long as
have yielded evidence for a few key factors: tives to buy machines. In early modern those regions also had mechanics. The ef­
slave­owners’ capital, entrepreneurs who Britain, most tenant farmers paid fixed fect was weaker without such skilled work­
stood to benefit from investing, and short­ rents, stopping both workers who moved ers, and on non­labour­saving machines.
ages of lower­skilled workers. elsewhere and landlords from profiting The strength of evidence for each of
Industrialisation requires investment, from investment. An exception was mon­ these causes implies that industrialisation
which requires capital. To measure the im­ asteries’ land, where such contracts were probably required a complex mix of condi­
pact of available wealth, Stephan Heblich, rarer. In 1536­40 Henry VIII dissolved these tions. Many important variables are hard
Stephen Redding and Hans­Joachim Voth monasteries and sold their land. The buy­ to test statistically. But measuring even a
analysed geographic variation in owner­ ers could farm or rent it on market terms. few is a promising advance. n

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 82
Obituary Adolfo Kaminsky The Economist January 21st 2023

list and offer to make them new documents on the spot. Hence his
presence, carrying the tools of his trade, on the Metro that day.
Sheer chance had pushed him into forgery. He had been be­
witched by colours, and the chemicals that made them, when he
went to work for a dyer after dropping out of school. He taught
himself the science and did experiments on the stove at home, one
of which turned the washing­up every colour of the rainbow. Ink­
bleaching became a passion, and a part­time job at a dairy revealed
that the secret was lactic acid. This could dissolve even Water­
man’s blue “indelible” ink, the sort used on ID cards. His skill at
erasing got him, at 17, into a resistance group called “La Sixième”,
which specialised in removing and replacing personal details on
papers. It was extremely hard, though, to remove the huge red
“Jew” stamped diagonally across them. He gradually persuaded
his comrades that it was easier not to tamper, but to start from
scratch. Admiringly, they called him “the Technician”.
Yet he was not a natural forger. He obeyed the law absolutely.
Before the Metro incident, his tensest moment had been when La
Sixième, as an initiation, made him create a new ID card for him­
self. This illegal act so disturbed him that he never forgot the smell
of the wooden table where he sat, or the gape of the inkwell. When
the law itself was inhuman, however, it had to be fought.
Faith did not motivate him, for he was a non­believer. Nor did
money, though he was usually broke; he never charged for his ser­
vices either during the war, or in the decades afterwards when he
continued his work elsewhere. In 1962 in Algeria, where he was
helping the FLN against their French colonial rulers, he forged a
The good forger cubic metre of 100­franc notes in the hope of destabilising the
French economy. When a peace accord intervened he burned
them, every one, in a great “fire of joy”.
His motivation was simply this: to avoid deaths and save lives.
Nothing else. There had been too many corpses. He had been trau­
matised by the death of his mother, pushed off a train when he was
Adolfo Kaminsky, forger and photographer, died on
15, and by a spell in 1943 in Drancy, the holding camp for Ausch­
January 9th, aged 97
witz, where the outcome for most was death but he, with his real

T he policemAn was getting closer. As he shoved through the

car in the Paris Metro he was shouting: “Identity check! Gener­
al search!” The slight, bespectacled teenager shrank back in his
Argentine passport, had escaped. Papers could release human be­
ings or doom them; tie them to an identity, or set them free. That
responsibility was now his. The hardest job his group was given
seat and clasped his satchel tighter. Let me not give myself away, was to produce 900 documents, for 300 children, in three days.
Adolfo Kaminsky was thinking. Not now, not today. For two of those, he forced himself to stay awake. In one hour, he
Word had got round that police were looking for a forger. An ex­ knew, he could produce 30 forged papers; if he slept for an hour,
pert one, who in Vichy France in 1944 was creating identity papers therefore, 30 people would die. He could not bear that burden. He
that looked impeccable. They would never suspect him. He was worked until he passed out, then woke and worked again.
merely a child. When the officer asked what he had in his satchel In wartime France the moral case for forgery was clear. It be­
he said “Sandwiches!” and offered to show him. The man waved came less so after the war, where he helped violent groups such as
him aside and moved on. the FLN, and Irgun in British­run Palestine, as well as those who
But Adolfo was the forger. In the satchel was his whole trea­ resisted right­wing regimes in Spain, Chile, Nicaragua and South
sure: 50 blank identity cards, rubber stamps, his dip pen and a sta­ Africa. He also provided false papers for young Americans hoping
pler. With these tools and a few more he could reproduce perfectly to avoid the Vietnam draft. Wherever he was offended by the ac­
any official document you wanted. He could replicate names and tions of rulers against ruled (all humans being equal), he stepped
addresses in the authentic loopy script of a municipal clerk; he in with his pens and his rubber stamps. The work so consumed
could press paper in layers, engrave it and watermark it, until the him that his family in those decades rarely saw him and had no
page was perfect. To reproduce official perforations in passports, idea, until he was almost 80, what he had been doing.
he used a sewing machine. At the end, to give an impression of While he did his forging his cover was never blown. To outside
long use and wear in a pocket, he aged his masterpieces with fret­ appearances, and to earn at least some money, he worked as a
ting from the base of a tobacco pipe and his own special dust, spin­ commercial photographer. He was free then to seek out humanity
ning them in a centrifuge made from a bicycle wheel. and beauty in a world filled with their opposites. At night he would
Then, with these documents, he saved lives. Each one replaced climb out on rooftops to photograph Paris asleep. By day he prow­
a Jewish name with a Gentile one, and a far­off birthplace with led the streets of Pigalle, the flea markets and second­hand shops,
somewhere close. His own false ID card (not made by him) gave his looking for subjects. He snapped an old shopkeeper with his cats
name as Julien Adolphe Keller and his birthplace not as Buenos and books, a busker in the park, a tramp knitting, a woman waiting
Aires, as was the case, but Alsace. With such cards, backed up by by a wall. These lives, too, he rescued from oblivion.
forged passports, baptism certificates and birth certificates, One of the strangest photographs he took was of himself in a
around 10,000 Jews were able to escape arrest, which would have forest in 1948. He was sitting on a railway track, his gaze steady
meant death in the camps, and find safety. Most were children, through his spectacles and the wind lifting his hair. He sat there as
many from institutions. As soon as a German round­up was an­ if he was the sole obstruction to the relentless train of fate. Toiling
nounced, he and others from his group would visit those on the with his lactic acid and his dip pen, he had felt just the same. n

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