[10月 18, 2024]

The world this week

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The world this week

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The world this week

Politics
10月 17, 2024 07:30 上午

The diplomatic row intensified between Canada and India over the murder
of a Sikh separatist near Vancouver. Canada expelled six Indian diplomats,
including the high commissioner, claiming a link to the shooting in June
2023 of Hardeep Singh Nijjar, an activist who pushed for a Sikh homeland
in India. Explaining the expulsions, Justin Trudeau, the Canadian prime
minister, said the police evidence could not be ignored and it was necessary
“to disrupt the criminal activities” that threatened public safety. Canadian
police described a broad campaign against Indian dissidents in the country
involving criminal gangs. A furious India denied the claims and expelled six
Canadian diplomats, including the acting high commissioner.

Genaro García Luna, Mexico’s federal security minister during the “war on
drugs” between 2006 and 2012, was sentenced to more than 38 years in
prison by a court in New York for taking bribes from the Sinaloa cartel and
protecting its members from arrest.

Argentina’s economic outlook continued to improve, with the country’s

risk index compiled by JPMorgan Chase, a bank, hitting its lowest level in
five years. Inflation has continued to slow, running at 3.5% month-on-
month in September. All of this is good news for Javier Milei, Argentina’s
libertarian president, who has slashed public spending in an effort to curb
rising prices. The nationwide poverty rate, however, rose to 53% in the first
six months of 2024, up from 42% over the previous six months.

America took the rare step of deploying military personnel to Israel. The
Pentagon sent a THAAD missile-battery system and its associated crew to
the country to boost Israel’s defence capabilities following Iran’s recent
missile attack. In the past America has used navy ships and fighter jets to
help defend Israel. This week the Pentagon dispatched long-range bombers
to target weapons-storage sites in Yemen belonging to the Houthis, a rebel
group backed by Iran who have fired missiles at Israel.

Carrots and sticks

As well as bolstering Israel’s security, the Biden administration also warned

the Israeli government that it must allow more humanitarian aid into
Gaza, or risk a reduction in the arms it receives from the US. Among other
things Israel must allow at least 350 lorries of aid a day into the area. The
deadline for complying comes after America’s election on November 5th.
Israel said it took the matter seriously.

The horror in Gaza continued, as at least 50 people were killed across the
strip, according to Palestinian health officials, who do not provide a
breakdown of civilian and combatant casualties. Israeli forces claimed they
were targeting Hamas in Jabalia, in north Gaza.

At least 147 people died and scores more were injured when a fuel tanker
caught fire following a crash in northern Nigeria. The victims had rushed to
the scene of the crash to collect petrol leaking from the tanker. Fuel-tanker
explosions are common in Nigeria because of bad roads and poor vehicle
maintenance.

Italy sent its first batch of illegal migrants to Albania to process their
requests for asylum, under a controversial arrangement with the Albanian
government. Italy has stressed that only men who are not considered to be
vulnerable and come from safe countries will be sent abroad for processing.
The first batch, of just 16 men, came from Bangladesh and Egypt. If their
asylum claims are rejected they will be repatriated.

Poland is also cracking down on migration. The prime minister, Donald

Tusk, announced that he intended to suspend the right of asylum to stop the
flow of illegal migrants. It was unclear if such a suspension would be
allowed under EU law.

Facing a budgetary squeeze, the French government admitted that it would

not be able to fulfil a pledge of €3bn ($3.3bn) in military aid to Ukraine
this year, and that the figure would be closer to €2bn. The news came just a
few days after Volodymyr Zelensky visited Paris, where he presented his
“victory plan” for defeating Russia to Emmanuel Macron. The French
president’s office said the meeting confirmed France’s “unwavering
support” for Ukraine.

Marine Le Pen, the parliamentary leader of the hard-right National Rally

in France, took the stand in her trial for misuse of European Parliament
funds. Ms Le Pen is accused of overseeing a system that spent money
which was earmarked strictly for European Parliament affairs on employing
party assistants. Ms Le Pen insists there were no irregularities, but if found
guilty she could be banned from running for office for five years.

The Social Democrats were on course to form a government in Lithuania,

after the party won the first round of a parliamentary election. Vilija
Blinkeviciute looks set to be prime minister and has already begun coalition
talks with other centre-left parties.

China held a series of war games around Taiwan after the Taiwanese
president, Lai Ching-te, gave a big speech on national day. The Chinese
government described the speech as a “provocation”. The Pentagon said the
war games were “irresponsible, disproportionate and destabilising”. Xi
Jinping later visited Dongshan in China’s southern Fujian province, where
Chinese nationalists were defeated in a battle in 1953.

Symbolic gestures

In its latest bout of sabre-rattling North Korea blew up two roads within its
borders that link it with South Korea. The North has said it will destroy all
existing rail and road networks connecting the two countries, which were
first severed during the Korean war.

At least 21 workers were killed in an attack on a coal mine in the Pakistani

province of Balochistan. Baloch separatists, who have carried out a number
of deadly assaults in recent months, denied any involvement. The incident
came shortly before Pakistan hosted a summit of the Shanghai Co-operation
Organisation, a security forum that counts China, India, Iran and Russia
among its members.

SpaceX’s Starship project took one giant leap forward when the rocket’s
huge first-stage booster returned directly to its launch pad, caught safely by
the gantry’s massive arms. As well as being an engineering first the latest
test suggests that SpaceX’s plans for a reusable spacecraft will work, which
would slash the cost of sending cargo, and eventually humans, into space.
“Big step towards making life multiplanetary was made today,” said Elon
Musk, SpaceX’s founder.
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The world this week

Business
10月 17, 2024 07:30 上午

Facing snarl-ups in production caused in part by the continuing strike at its

west-coast facilities, Boeing plans to raise up to $25bn in new capital and
has secured a $10bn credit line. The company revealed its plans in a
regulatory filing. It has also decided to slash 17,000 jobs, or 10% of its
workforce, and will not proceed with any more furloughs of workers that
were introduced at the start of the strike. The first deliveries of the 777X jet,
which Boeing hopes will turn its fortunes around, were delayed again, to
2026. The Biden administration held talks with both sides in the dispute to
try to broker a deal.

Meanwhile, Airbus announced the loss of 2,500 jobs in its defence and
space division, which is losing money on building satellites. It noted the
“ever-evolving” space market.
The European Central Bank cut interest rates again, reducing its deposit
facility by a quarter of a percentage point to 3.25/%. With Germany’s
economy still spluttering and inflationary pressures easing considerably in
the the euro zone, the ECB’s decision was expected.

Britain’s annual inflation rate fell to 1.7% in September, the lowest it has
been since April 2021. Markets now expect the Bank of England to cut
interest rates in November. Recent data showed America’s inflation rate
dipping to 2.4% in September.

In its annual report the International Energy Agency said that investment
flows to clean-energy projects were nearing $2trn a year, almost double
the combined amount spent on new oil, gas and coal supply, and that China
accounted for 60% of the renewable capacity added globally in 2023. Solar-
power generation in China alone will exceed today’s total electricity
demand in America a decade from now. The IEA also raised its forecast of
worldwide demand for electricity, in part because of the use of air-
conditioning to mitigate hotter temperatures.

Google signed a deal with Kairos Power, a startup, to construct small

modular nuclear reactors that will power its data centres. SMRs are much
smaller than standard nuclear plants, but can be more easily built to cut
costs. Kairos will provide Google with a capacity of 500 megawatts by
2035. With the rise of energy-intensive artificial intelligence, big tech
companies are trying to cut their emissions. In July Google admitted that its
greenhouse-gas emissions were 48% higher in 2023 than in 2019.
Nvidia’s share price hit a new high. The supplier of graphics-processing
units has seen its stock drop at times this year amid investor worries about
whether AI investment is a boom or a bust, but tech markets have rallied
since the Federal Reserve started cutting interest rates last month. The S&P
500 and Dow Jones Industrial Average reached record closes this week.

The renewed exuberance in tech stocks was slightly deflated, however, by

ASML reducing its sales forecast for next year. The supplier of the world’s
most advanced machines for chipmaking warned of “customer
cautiousness” and that “foundry dynamics” have resulted in changes to the
timings of demand for its gear. Net bookings, or orders, were far lower in
value than markets had expected. The company’s share price swooned.

Don’t hail the cab

Tesla’s stock struggled to recover from the drubbing it received following

the firm’s unveiling of its much-hyped Cybercab, a two-seater robotaxi.
Elon Musk gave little detail at the event of the roadmap the vehicle must
follow to enter service, other than it will be available “before 2027”.

The latest quarterly earnings from America’s big banks were well received
by investors. JPMorgan Chase recorded a net profit of $12.9bn. Although
that was less than in the same quarter last year, it was better than analysts
expected. It was a similar story at Bank of America, Citigroup and Wells
Fargo. But at Goldman Sachs profit jumped by 45% to $3bn and at Morgan
Stanley by 32% to $3.2bn: its stock hit a new high.

Walgreens announced the closure of 1,200 of its 8,700 stores over the next
three years. The pharmacy chain follows its rivals CVS Health and Rite Aid
in reducing its bricks-and-mortar presence in the face of growing
competition from Walmart and Amazon.

A political row brewed in France over the potential sale of Sanofi’s

consumer-drugs business to an American private-equity firm. The
pharmaceutical company’s announcement that a bid by Clayton, Dubilier &
Rice had beaten that of a local consortium has raised French hackles. The
government has suggested it could block the sale, or take a stake in the
business.

Reviving the spirits

Hong Kong slashed taxes on brandy, gin, whisky and other strong drinks as
part of an effort to boost nightlife in the city. Visitor numbers are still
around 30% lower than in 2018. Cutting alcohol taxes could be an idea for
other governments trying to tempt punters back to city centres, notably in
London, where the rate of closure of night-time businesses has been
described as a “crisis” by their trade body.
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The world this week

The weekly cartoon

10月 17, 2024 07:30 上午

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

Russia continues to advance in eastern Ukraine

Does Israel’s new plan for Gaza include withholding food?
“Hell on earth”: satellite images document the siege of a Sudanese city

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

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this-week/2024/10/17/the-weekly-cartoon
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The Economist

This week’s cover

How we saw the world
10月 17, 2024 07:30 上午

OUR GLOBAL cover this week considers the impact of America’s

poisonous politics on its mighty economy. In 1990 America accounted for
about two-fifths of the GDP of the G7. Today it makes up half. But as they
prepare to go to the polls in November, Republicans and Democrats have
never mistrusted or disagreed with each other more. With the country
becoming more partisan, both Kamala Harris and Donald Trump, the two
presidential candidates, are focusing on policies that protect their own
supporters, rather than expand the overall economic pie. America is not
about to lose its economic dominance. But, sooner or later, rotten politics
will start to exact a heavy price, and by then it will be hard to reverse
course.
Leader: America’s economy is bigger and better than ever
Special report: The American economy has left other rich countries in the
dust
Finance: Trump’s trillion-dollar tax cuts are spiralling out of control
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Leaders
America’s economy is bigger and better than ever
The envy of the world :: Will politics bring it back to Earth?

How the Biden administration botched America’s sanctions

against Iran
Financial firepower :: With the financial deterrent undermined, only military deterrence is left

Canada’s Trudeau trap

Justin’s time :: How the world’s most reasonable country grew sick of centre-left liberalism

Britain’s budget risks being a huge missed opportunity

Reeves’s first rodeo :: Rachel Reeves looks set to please no one for little return

Starship will change what is possible beyond Earth

Space travel :: The successful test-flight of SpaceX’s massive new space vehicle promises a
host of new projects, including the colonisation of Mars

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The envy of the world

America’s economy is bigger and

better than ever
Will politics bring it back to Earth?
10月 17, 2024 07:30 上午
FEW SIGHTS have better captured America’s world-beating ingenuity. On
October 13th a giant booster rocket built by SpaceX hurtled to the edge of
the atmosphere before plunging back to Earth and being neatly caught by
the gantry tower from which, only minutes earlier, it had taken off. Thanks
to this marvel of engineering, big rockets could become reusable and space
exploration cheaper and bolder. Yet, just as the launch was a testimony to
American enterprise, so Elon Musk, SpaceX’s founder, captures all that is
going wrong with its politics. In his support for Donald Trump, Mr Musk
has spread misinformation about voter fraud and hurricane relief and
derided his opponents as ill-intentioned idiots.

America, too, continues to rack up a stellar economic performance even as

its politics gets more poisonous. As they prepare to go to the polls in fewer
than 20 days’ time, Republicans and Democrats have never mistrusted or
disagreed with each other more. Against that gloomy backdrop, can
America’s breathtaking economy possibly stay aloft?

Over the past three decades America has left the rest of the rich world in the
dust. In 1990 it accounted for about two-fifths of the GDP of the G7. Today
it makes up half. Output per person is now about 30% higher than in
western Europe and Canada, and 60% higher than in Japan—gaps that have
roughly doubled since 1990. Mississippi may be America’s poorest state,
but its hard-working residents earn, on average, more than Brits, Canadians
or Germans. Lately, China too has gone backwards. Having closed in
rapidly on America in the years before the pandemic, its nominal GDP has
slipped from about three-quarters of America’s in 2021 to two-thirds today.

This record is now in jeopardy. As America has become more partisan, both
Kamala Harris and Mr Trump, the two presidential candidates, are focusing
on policies that protect their own supporters, rather than expanding the
overall economic pie. America is not about to lose its economic dominance.
But, sooner or later, rotten politics will start to exact a heavy price, and by
then it will be hard to reverse course.

To see why, consider first the factors behind America’s success. As our
special report this week sets out, innate advantages play an important role.
America is a big country blessed with vast energy resources. The shale-oil
revolution has driven perhaps a tenth of its economic growth since the early
2000s. The enormous size of its consumer and capital markets means that a
good idea dreamt up in Michigan can make it big across America’s 49 other
states.

Yet good policy has been important, too. America has long married light-
touch regulation with speedy and generous spending when a crisis hits.
Although supersized stimulus during the pandemic fuelled inflation, it has
also ensured that America has grown by 10% since 2020, three times the
pace of the rest of the G7. By contrast, stingier Germany is mired in
recession for a second consecutive year.

This combination of factors has fuelled a powerful virtuous cycle.

America’s dynamic private sector draws in immigrants, ideas and
investment, begetting more dynamism. It is home not just to the world’s
biggest rocket-launch industry, but also its internet giants and best artificial-
intelligence startups. Its seven big tech firms are together worth more than
the stockmarkets of Britain, Canada, Germany and Japan combined;
Amazon alone spends more on research and development than all of British
business. Because the dollar is the world’s reserve currency, meanwhile,
investors have a keen appetite for American debt. They flock to Treasuries
in times of crisis, letting the government dole out vast stimulus packages.

So far, America’s worsening politics have had little visible effect on the
economy. Over the past eight years Mr Trump and President Joe Biden have
reached for protectionism and interventionism, in the name of helping
factory workers, at the expense of the wider economy. Because America’s
economic strength has been so broad-based, it has not been overturned; and
for many years stimulus has provided an offsetting sugar rush. Yet the
economy is not immune from politics. And as the country grows more
divided, Ms Harris and Mr Trump are promising ever more damaging
policies—Mr Trump especially.

For a start, both candidates would tamper with the market forces that have
served America so well, by protecting some companies at the expense of
others. They could also limit the government’s scope to swoop to the rescue
next time a crisis hits. Both promise tax and spending giveaways—Ms
Harris wants to spend more on families; Mr Trump to offer tax relief on
everything from car loans to overtime work. Yet neither has a plan to rein in
the budget deficit, which is running at around 6% of GDP, a level usually
seen only during wartime or recession. Unchecked deficit spending could
crowd out private investment and erode faith in American debt as a risk-free
asset.

Mr Trump poses the bigger risk to America’s extraordinary economy. He

speaks of imposing ruinous tariffs on imports and embarking on huge
programmes to deport millions of non-citizens, many of whom have been
fully integrated into the labour market for years. He is cavalier about
institutions, including the Federal Reserve and the rule of law. Should the
independence of either be undermined, America would no longer attract the
talent and money it needs to keep pushing relentlessly ahead. Nobody
knows if Mr Trump means what he says, but the chance that he does hangs
heavily over his candidacy, like Mr Musk’s rocket over the launch pad.

Mission critical

Growth is not an inalienable right, but a gift to be cherished and nurtured. If

the virtuous cycle that propels America’s economy forward goes into
reverse, toxic politics would by that point be ingrained. There is no
knowing how bad a president’s ideas have to be before things start to fall
apart. The turning-point may not come tomorrow, or even in the next four
years. But with every mistake that politicians make, it draws another step
closer. ■

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Financial firepower

How the Biden administration

botched America’s sanctions
against Iran
With the financial deterrent undermined, only military deterrence is left
10月 17, 2024 07:30 上午

A FORTNIGHT AGO Iran aimed more than 180 ballistic missiles at Israel.
Now Israel will respond, and the world is holding its breath. What it does
next, and how Iran reacts, will determine whether the Middle East is
engulfed by all-out conflict. For America the question is how to encourage
restraint from Israel, limit escalation, curb Iran’s baleful influence and deter
it from choosing to build a nuclear weapon. Unfortunately, as our
investigation this week shows, the Biden administration has undermined
one of America’s main tools.
In 2018, under Donald Trump, America unwisely withdrew from an
agreement to stall Iran’s nuclear programme and then imposed its harshest
sanctions ever, in an attempt to punish the regime and stop it funding
proxies and terrorists abroad. America banned its citizens from trading with
Iran or handling Iranian money; it also reinstated “secondary” sanctions,
which punish entities from third countries that deal with Iran, for instance
by cutting them off from the dollar banking system.

President Joe Biden has often waived the enforcement of these sanctions.
He was keen to bring Iran back to the negotiating table, and worried that a
crackdown on Iran’s oil trade might fire up oil prices just when energy
markets were alarmed by Russia’s invasion of Ukraine. His administration
issued sanctions waivers to foreign entities, considered giving Iran access to
frozen money and often turned a blind eye to Iranian oil smuggling.

The efficacy of sanctions was always going to erode. Faced with

constraints, people will find other ways to shift money and goods around
the world. Tankers are routinely renamed. It takes much less time for an
Iranian stooge to set up a company in Hong Kong or Dubai than it does for
America’s Treasury to investigate evasions. It was inevitable that money
would flow away from the dollar banking system and into alternative
payment mechanisms.

Yet by choosing not to rigorously enforce the sanctions, America has

undermined their efficacy even in the short term, perhaps bringing China
and Iran closer together. A complex infrastructure has developed to help
Iran channel its revenues around the world. Last month it sold 1.8m barrels
per day of crude oil, mostly to China—the highest level in six years.

Our reporting shows how a web of front companies uses banks in China,
Hong Kong, the Gulf and even the West, many of which unwittingly handle
Iranian money. Last year Iran’s revenues were worth $50bn-70bn. Precisely
where the money ends up is uncertain, but oil sales are surely helping to
arm Iran and its proxies.

Now that this infrastructure exists, the financial deterrence that America has
lost is not easily regained. To throw sand in the gears of Iran’s war machine,
America would have to punish the worst-offending banks in, say, China or
the Gulf, or press their governments to insist that lenders make more efforts
to comply with America’s edicts. But that either means escalating financial
warfare with China, for which America may have little appetite, or cracking
down on allies such as the United Arab Emirates. Leaning on friends to
discipline their banks, or blacklisting some outright, would cost America
diplomatic capital.

The unfortunate consequence is that the difficult task of influencing Iran’s

behaviour has become even harder. America’s tools include threatening to
enforce sanctions (or offering to lift them) and threatening to go to war.
Those choices were fraught with risk. But their costs are higher today than
they would have been if America had enforced sanctions rigorously. This
also means that America has less to offer Israel as it tries to persuade it to
moderate its retaliation for Iran’s missile strike. As an Israeli-Iranian war
beckons, the last thing that the Middle East needs is a lack of good options.
■

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Justin’s time

Canada’s Trudeau trap

How the world’s most reasonable country grew sick of centre-left liberalism
10月 17, 2024 07:30 上午

MOST OUTSIDERS think of Canada as a freezing but pleasant place. It is

open and tolerant, and its people are famously nice. But lately the country’s
politics have become a cauldron of recrimination. The reign of Justin
Trudeau, the prime minister since 2015, is nearing what appears to be a bad
end. As its poll ratings collapse, his party may even oust him.

Mr Trudeau’s journey from a centre-left hero to a toxic liability has lessons

for mainstream politicians everywhere. His brand of sanctimonious, and
sometimes illiberal, identity politics is no substitute for effective
government. Unless leaders come up with practical answers to the problems
that the electorate cares about, including the effects of mass migration and
housing shortages, government by virtue ultimately alienates many more
people than it inspires.

For 92 of the past 128 years, Canada has been run by a party named after
liberalism. When Mr Trudeau was first elected he stood for a modern vision
for his country: multicultural, climate-conscious and keen to win influence
by behaving responsibly in an unstable world. After Donald Trump was
elected president in 2016, the contrast between Canada’s saintly
government and the nativist, jingoistic politics to its south was stark.
Initially Mr Trudeau achieved many successes, from reforming welfare to
skilfully helping negotiate a new trade deal with America and Mexico to
replace NAFTA.

Yet it has gradually become clear that Canada’s biggest challenges have
festered. Immigration is a good example. Last year the population grew at
its fastest rate since 1957; it has expanded by 16% since Mr Trudeau
entered office, owing to the arrival of people from abroad. He thought
opening the door wider made Canada virtuous. But the Liberals failed to
ensure that housing, education and health care kept pace with demography.
The result has been a sharp loss of public willingness to keep borders open:
44% of Canadians say that immigration is excessive, the highest for a
quarter of a century.

A big reason for this anger is a shortage of housing in cities, which has led
to soaring prices and a build-up of mortgage debt. The government has had
almost a decade to stimulate house-building by liberalising rules, but has so
far failed to make much difference. By one estimate, Canada will need a
third more residential properties to house its population. A new plan
launched this year has not yet boosted construction.

It is a similar story with climate change. Canada is rightly praised for its tax
on carbon emissions. But the patchy redistribution of the revenue it brings
in, and the threat it poses to towns and firms that rely on fossil fuels or their
extraction, have created a large and vocal opposition to Mr Trudeau’s
climate policy. Or consider defence, where Canada’s approach is negligent.
Disgracefully, it spends only 1.3% of GDP on its armed forces, freeloading
off other NATO members even as the world becomes more dangerous.
Any government in office for almost a decade makes mistakes and creates
enemies. But a feature of Mr Trudeau’s administration has been its illiberal
approach to dissent. It has frequently dismissed its critics as bigots, or
unreasonably used emergency legal powers against them, as it did when
truckers protested during the pandemic. It has also tried to curb free speech.
Even now, when reality and polling have forced him to admit that he has a
problem, Mr Trudeau acknowledges only that some Canadians are
“anxious” about his policies, not that they face real difficulties.

Virtue politics

A national election must be held within a year. The Liberal Party could soon
eject Mr Trudeau. After that, Canada will switch from being a failing liberal
experiment to a test of whether political systems can answer the electorate’s
concerns without veering towards populism and lasting polarisation. The
opposition Conservatives say they are focusing hard on realistic solutions to
Canada’s problems, and they have some useful ideas on speeding up
construction, but sometimes they display disappointingly Trumpian
tendencies. The Liberal Party is only just starting to wrestle with life after
Mr Trudeau. When picking his successor it should remember that
politicians need style to win office, but substance to govern. ■

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Reeves’s first rodeo

Britain’s budget risks being a huge

missed opportunity
Rachel Reeves looks set to please no one for little return
10月 17, 2024 07:30 上午

MANY POLITICIANS would kill to be in Rachel Reeves’s position. Two

weeks before her first budget, Britain’s chancellor has the benefit of an
unassailably large majority in Parliament, a leaderless opposition and
almost five years before the next election—enough time for even slow-burn
policies to start winning over voters. If there were ever a moment to reshape
how tax and spending work in Britain in support of the government’s self-
professed aim of igniting growth, this is it.

True, Ms Reeves has some firefighting to do: she needs to find £20bn-30bn
($26bn-39bn, or 0.7-1.1% of GDP) a year just to stop Britain’s feeble public
services from crumbling further, and ideally a slug more than that to start
investing in them. But that should not be impossible for a state that already
takes in over £800bn in tax annually; Ms Reeves’s French counterparts are
having to raise vastly more to resolve their own fiscal crunch. Increasing
broad-based taxes like income tax or VAT, a consumption tax, would
quickly balance the books without hurting growth much.

An ambitious budget wouldn’t stop there. Britain’s tax code is a mess, the
result of decades’ worth of fudges, special-interest carve-outs and
misguided tax raids. A brave pro-growth government would use its political
capital to take a scythe to it. One place to start would be stamp duty, a
transaction tax that jams up the property market, misallocating Britain’s
already inadequate housing supply. Stamp duty on shares distorts the
financial system. The exemptions to VAT deter small businesses from
growing and skew spending. Taxes are much higher for employees than the
self-employed, even though companies are typically more productive.

A reforming budget would also unleash investment. Britain has been bottom
of the G7 rankings for public and private investment for 24 of the past 30
years; it desperately needs better transport and power infrastructure. A
radical budget would unlock more public cash, but also take further aim at
the bureaucratic bottlenecks that hold development back. Put together a
plan to tackle all this, and the mood music around the new government
would quickly gain tempo.

To her credit, Ms Reeves has been clear about the importance of

investment: expectations are high that she will change Britain’s fiscal rules
so that she can borrow more in order to invest. Tweaks such as excluding
the Bank of England’s quantitative-easing losses from the definition of debt
used in the fiscal rules could allow another £10bn-20bn of borrowing for
investment. (Going much further—by, for example, moving to a measure
that would include the state’s assets, not just its liabilities—would risk
spooking markets.)

But in other respects, the signs are uninspiring. Instead of signalling a once-
in-a-generation tax reform, Ms Reeves has trailed a slapdash effort,
cobbling together revenue-raisers while trying to wriggle free of self-
imposed political constraints. Labour’s unwise pre-election pledge not to
increase corporation tax, or to raise taxes on “working people”—which it
defined in its manifesto as income tax, national insurance and VAT—has
left precious little room for ambitious reform.

To get itself out of this fix, the government appears to be readying itself to
increase employers’ national-insurance payments. That is at least a broad-
based tax which can raise decent revenue. The Resolution Foundation, a
think-tank, reckons that requiring employers to pay national insurance on
pension contributions could raise £9bn annually. But however much Labour
might protest to the contrary, in economic terms this would patently be a tax
rise on working people, because employers would just pass the costs on to
employees’ pay packets. Reversing the pre-election cuts to national
insurance of four percentage points by Jeremy Hunt, Ms Reeves’s
predecessor, would be simpler and raise over £20bn.

To fill up the rest of the hole, Ms Reeves looks likely to borrow more, and
to raid here and there. There is a case for changing the tax base for capital-
gains tax (CGT); and a number of exemptions to inheritance tax and CGT
could do with a chop. But such tidying up will raise only a few billion
pounds if Ms Reeves is sensible. Going too far would create growth-
destroying incentives for taxpayers to change behaviour—by, for example,
holding on to assets in the hope that a future government will reduce CGT
again—and would also jar with Sir Keir Starmer’s warm words about
wealth creation. Some measures, such as a further clampdown on non-
domiciled taxpayers, are reportedly being diluted.

A budget of this sort would be the hallmark of an unambitious government

scrambling to make the figures add up, not a radical one doing whatever
was needed to pursue growth. Nor would it make sense politically. The
choice facing Labour is between frittering away its political capital on
weaselly definitions and unpopular half-measures like cuts to the
pensioners’ winter-fuel allowance, or deliberately spending it on lasting
improvements to the public finances. Be bold, chancellor. ■

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Space travel

Starship will change what is

possible beyond Earth
The successful test-flight of SpaceX’s massive new space vehicle promises a
host of new projects, including the colonisation of Mars
10月 17, 2024 07:30 上午

IN ANY NORMAL week, the biggest-ever interplanetary probe blasting off

to look for signs of life in the depths of an occult ocean would hog the
headlines about space. But the launch of Europa Clipper on October 14th
was eclipsed, spectacularly, by the test flight the previous day of the
Starship being developed by SpaceX, a launch provider, satellite-
communications supplier and Mars-settlement enabler founded and run by
Elon Musk. Seven minutes after take-off a thin, waggling finger of rocket-
fire guided the launcher’s huge first stage back to its launchpad in Texas,
there to be grasped like the quarry of a giant praying mantis.
It is tempting to see such success as a culmination. Mr Musk sees it as a
start. The Starship system is designed to provide about eight times as much
mass to orbit per flight as a Falcon 9, the SpaceX workhorse, and to fly
even more often. The company talks about reaching a cadence of more than
one launch a day; it says its factories could eventually build 1,000 Starships
a year. Mr Musk talks of dropping the cost of shipping a tonne into orbit by
at least tenfold.

SpaceX was founded “to revolutionise space technology, with the ultimate
goal of enabling people to live on other planets”. It is undoubtedly doing
the first of those and with this week’s success it is better placed to
accomplish the second. Mr Musk says that in 2026, the next time the
planets are well-aligned for such ventures, SpaceX will send five uncrewed
Starships to Mars. Crews will follow perhaps four years later. He hopes
before too long to be sending hundreds of Starships and tens of thousands
of people at every more or less biennial opportunity. Some of the journeys
will have return legs: Starship uses fuel that is in principle fairly easily
synthesised on Mars. But his main purpose is settlement.

Mr Musk is notoriously inaccurate when it comes to predicting when his

companies will achieve his goals. Starship was meant to have been flying
years ago. Fully self-driving cars from Tesla, a car company which he runs,
have often been postponed, too. But people who set his wild ambitions at
naught have an even worse record.

Whenever the crewed missions start, potential settlers can expect a hard and
possibly horrid time. Though Mars looks a bit like the American West, it is
far less hospitable: bereft of liquid water, of a breathable atmosphere, of
native life to use for shelter or food and of resources to sell to the people
left behind on Earth. Efforts to set up isolated societies from scratch have
failed in much more clement places, sometimes very nastily; the messianic
and millenarian tendencies behind such endeavours, clearly seen in some
would-be Martians as well as Mr Musk himself, could exacerbate the risks.
But SpaceX looks set to pursue its interplanetary goal until it achieves
something like it, or tragedy strikes, or other forces intervene.

As it does so, it will open up the possibility of other previously impossible

and conceivably more fruitful enterprises. Starship should allow SpaceX to
increase the capacity of its Starlink satellite-communications system
beyond anything previously feasible. Other companies plan to use Starship
to launch space stations. One contract for a commercial Starship trip around
the Moon has been cancelled, but there will surely be others. Astronomers
dream of huge space telescopes (even as they fret about Starlink and its like
blocking the view of the cosmos from Earth’s surface). Tech visionaries
look at space’s supply of uninterrupted solar energy and wonder if they
should be harnessing it to train AIs in orbit. Generals think dark thoughts
about what might be dropped on whom, and how hard. And competitors in
America, China and perhaps elsewhere will vie to replicate and surpass
what SpaceX has done. After Starship’s success, normal weeks in space
may soon look very different. ■

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Letters
Letters to the editor
On VAT, Spain, UNRWA, electric cars, tuition fees, working lunches :: A selection of
correspondence

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On VAT, Spain, UNRWA, electric cars, tuition fees, working lunches

Letters to the editor

A selection of correspondence
10月 17, 2024 07:30 上午

Letters are welcome via email to [email protected]

The VAT trap

Raising value-added tax (VAT) can indeed be a good way to raise revenues,
but such a policy shift is not without potentially damaging side-effects that
governments should bear in mind (“The case for VAT”, September 28th).
One important side-effect is the impact that increases in the tax can have on
corporate investment if shareholders demand more dividends to fund their
now more costly consumption.
This “VAT trap” is more marked in countries with a relatively short-term
culture, such as America, Australia and Britain. When shareholders value
their current consumption more than that of future generations, investments
go down when VAT goes up. In countries with a more long-term culture,
such as Germany, Japan and South Korea, VAT does not distort investments
as much. In these places, a rise in VAT can be a good solution.

What is a good alternative for short-term oriented countries? A slight

increase in the personal-income tax on wages, especially on those earning
higher incomes, might help raise revenues without doing too much harm to
the economy. It is, however, important to raise the tax rate only moderately
to avoid giving an incentive to those worst affected by such a move to pack
their bags and leave.

MARTIN JACOB
Professor of accounting and control
IESE Business School
Barcelona

How it works in Spain

The minority coalition government led by Pedro Sánchez in Spain has
certainly required negotiation and compromise with regional parties, but to
imply that this erodes democracy is an extraordinary leap (“In office, but
not wholly in power”, October 5th). The deal with Catalan and Basque
nationalists, though contentious, is a pragmatic response to Spain’s
decentralised political landscape and a common practice since 1993, not a
Machiavellian betrayal. Even José María Aznar, a former conservative
prime minister, had to pretend in 1996 that he “spoke Catalan in intimate
groups”, just for the sake of parliamentarian arithmetic.

Yes, Mr Sánchez’s amnesty and fiscal promises have sparked debate.

However, they were passed through Spain’s democratic institutions,
following the rule of law and regular procedures. Describing these decisions
as constitutional “back-door” dealings while ignoring their legal and
parliamentary foundations is a selective reading of events. One might
wonder whether the real issue here is not the fragility of democracy but the
discomfort with regional politics that has long been part of Spain’s DNA.

You did point out the bigger picture: a recovering economy, improved
employment figures and a political opposition still mired in fragmentation.
Surely, Spain deserves a more nuanced analysis than a gothic narrative of
democratic doom, and the caricature of Mr Sánchez as a power-hungry
operator.

ALEJANDRO GUERRERO
Paris
Wither UNRWA

Phillipe Lazzarini, the head of UNRWA, the UN’s agency for Palestinians,
was appallingly selective in his empathy (By Invitation, October 2nd). Not
a word about the murdered, tortured, raped, mutilated and kidnapped Israeli
victims. Nor about the tens of thousands of Israelis who have had to
evacuate their homes under the torrents of rockets launched by Hamas and
Hizbullah. No reference to Hamas’s own indifference to the loss of
Palestinian life caused by the deliberate embedding of Hamas terrorists in
homes, schools, mosques and indeed in UNRWA facilities. The tragic loss
of Palestinian life in this war is a central and cynical tactic used by Hamas.

Selective empathy is a problem. UNRWA is part of a UN framework that

uniquely and perversely fosters the eternality of Palestinian refugee status.

JOEL EISEN
Richmond Hill, Canada
EVs will not rule the road

Global sales of hybrid cars are destined to decline, you said, because of
improvements in electric vehicles that run purely on battery, or BEVs (“On
a detour”, September 21st). However, hybrids and BEVs are competing for
the same mobility niches. Some 95% of electric-vehicle sales worldwide are
in America, China or the European Union, and concentrated in the densest
and most urbanised parts of those markets. The mobility needs and
infrastructure capacity of these areas differ dramatically from those of rural
economies and the global south. For the latter, hybrids and internal-
combustion engines are going to be essential for decades to come in order
to provide high-range transit that can maintain critical rural-urban links.

Mobility providers should not focus on a single technology or energy

solution. Rather, they need to reflect on not only what consumers need, but
on whether the local market itself has the infrastructure to support those
needs. The industry has to shift away from the idea that one size fits all. To
decarbonise a diverse world we need a mix of technologies. More efficient
hybrids will be one important decarbonising solution, along with
innovations in synthetic and alternative fuels.
There is no such thing as a global, universal mobility solution.

MATIAS GIANNINI
Chief executive officer
Horse Powertrain
London

What colleges should learn

Raising university-tuition fees in Britain (“Universities challenged”,

September 21st) would fail to tackle the need for more fundamental
changes in the higher-education sector. Universities are still largely
analogue services in a digital age, with an outmoded model of instruction
that has barely changed in decades. Individual lecturers develop and deliver
modules for small classes, a highly inefficient process.

Higher education’s Blockbuster-Netflix moment is fast-approaching; a

radical change in universities’ operating model brought about by the
economies of scale provided by digital technology. Universities should be
looking at how they can work together to build high-quality hybrid
offerings. Call this the WeLearn model; an artificial-intelligence enabled
teaching available to all students that provides a wide-range of courses,
skills training and applied learning. All this combined with the social
experience of campus life.

Britain is in a strong position to capitalise on this opportunity and shape a

better future for higher education. What the sector needs is innovation, not
fee inflation.

DR RICHARD MILBURN
War Studies
King’s College London

Don’t look so glum

“Fashion photography jolts the viewer out of the grim and the quotidian”,
you say (“Very in vogue”, October 5th.) Yet the vast majority of fashion
models themselves look grim. On the catwalk and on the page they hide any
evidence of enjoyment in the clothes they wear. They must look as though
they have just argued with the designer and lost, becoming unsmiling,
aggressive posing machines daring the viewer to look them in the eye. They
become coat hangers, their humanity lost to art.
ROBIN LAURANCE
Oxford

Bon déjeuner

Clearly Bartleby never had a working lunch in a meeting room in France

(September 28th). I have had many, and I can assure you that two things are
guaranteed: superb catered food that is devoured by everyone, and French
colleagues loudly complaining that working during lunch is barbaric.

JEM ESKENAZI
London

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By Invitation
Europe must play to win—not just play nice—in a new
space race, argues ESA’s boss
The space industry :: Josef Aschbacher, the European Space Agency’s director-general, says
keeping up is not enough

Europe should not see a potential Trump return as a

threat, says Nadia Schadlow
America’s election :: The former deputy national security adviser says there is room for mutual
benefit

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The space industry

Europe must play to win—not just

play nice—in a new space race,
argues ESA’s boss
Josef Aschbacher, the European Space Agency’s director-general, says
keeping up is not enough
10月 17, 2024 07:30 上午

SEEING SPACEX’s super-heavy-lift Starship soar into the skies on October

13th, and then its reusable booster fly back to the launch pad in a world
first, filled me with awe. NASA, America’s space agency, plans to use a
human-rated version of the rapid-launch vehicle to return astronauts to the
Moon in a couple of years. China—which has made astonishing strides—
aims to put people on the lunar surface by 2030. India hopes to do the same
by 2040. A new space race is under way.
How does Europe define itself in that race? It has great ambitions, and
much to offer. Space is not just about rockets and astronauts—although
Europe has those, too. Europe has proven itself to be world-leading in
programmes such as Copernicus, the world’s largest Earth-observation
programme, and Galileo, a satellite-navigation system more accurate than
the much-heralded American GPS. Countries worldwide rely on these
European systems, which have boosted industries from precision agriculture
to parcel delivery. And Europe’s world-class science missions seek answers
to the secrets of the universe—the Euclid telescope casts light on dark
energy and dark matter.

As the world becomes ever more complex geopolitically, space has become
crucial to the strategic prosperity of nations. Our understanding of climate
change, and how to mitigate it, is informed mostly from space. Advances in
rocketry spur advances in missiles and other industries. Space is vital to
daily life on Earth in other ways, too, from emergency services to banking.

Europe must not be drawn in by the false sense of security in isolationism.

Instead it should reinforce its heritage as a sentinel of collaboration. When
space is used to inform and implement climate, industrial, economic and
security policy, co-operation becomes a powerful tool for Europe to address
pressing global challenges.

Admittedly, Europe has lost ground in rockets. Ariane, a European family

of launch vehicles, once dominated the commercial-launch market globally.
Despite the recent success of Ariane 6, SpaceX, based in America, now has
the lion’s share of that market, offering more frequent launches than anyone
else.

Europe is responding. As head of the European Space Agency (ESA), I

have increased public and private funding for space programmes. ESA has
also incentivised commercialisation by opening a series of competitions
between space companies throughout Europe. Public organisations like
ESA will become anchor customers for new rockets to launch ESA
missions and for vehicles to ferry cargo to and from the International Space
Station and other destinations. This will boost Europe’s capabilities as new
economies emerge in low-Earth orbit and on the Moon.
But Europe cannot just play catch-up; it must leapfrog ahead. Innovative
technologies that show promise on Earth—such as quantum
communications for secure connectivity, or artificial intelligence and
machine learning for pattern recognition—show equal promise in space.
These technologies can keep governmental communications encrypted, for
example, or alert authorities to dangerous weather conditions. ESA is
helping companies based in Europe—and Canada, with which ESA has a
co-operation agreement—to build novel spacecraft. We have just seen the
launch of the second European AI-enabled Earth-observation satellite that
processes data onboard to identify wildfires, for example, and alert
firefighters more quickly.

Such innovations demand that people collaborate to generate new ideas and
technologies. This is where Europe has a unique edge. ESA’s 22 member
states work together to enable individual countries to have international
impact.

ESA collaborates with America, Japan, China and India (and had a similar
partnership with Russia until sanctions were imposed over the invasion of
Ukraine). The agency is, for example, providing life support for astronauts
in NASA’s Orion spacecraft and will help power it to and from the Moon as
part of the Artemis programme. And ESA has long collaborated with Japan
to explore the solar system and to study climate change. The agency is also
working with countries in the Middle East, East Asia, Latin America and
Africa.

But while collaboration is vital for success, it is insufficient. Europe’s space

industry lags behind America’s in both the level of government support and
speed to market, mostly owing to Europe’s risk aversion and its tedious
bureaucracy.

I have started to cut red tape in ESA, for instance by slashing the time
between companies bidding on a contract and the winners being selected.
The next step is to speed up the commercialisation of space-enabled
products and services across Europe. To do that, we must react more
quickly to the needs of the many startups that ESA supports in Europe’s
largest network of space-startup incubators. The agency has created
expertise in countries that previously lacked a competitive space industry,
such as Greece and Poland. The breadth of expertise developed through
ESA has created some of the world’s most competitive and advanced space
industries, thereby guarding against the emergence of a monopoly.

To prosper in the new space race, Europe needs not just talent and speed but
also money. In America NASA, the US Space Force and other public
institutions spent $73bn on space in 2023. In Europe the figure was less
than $12bn. Europe needs to close the gap in funding, both public and
private. As well as raising public funding for space programmes, ESA is
increasingly playing matchmaker between banks, investors, entrepreneurs
and startups to encourage more private investment.

Europe is currently reassessing the use of space for security and defence.
NATO declared in 2019 that space is an operational domain, as America,
China and several European countries set up space commands. Much of the
recent increase in public funding for space comes through defence budgets.
While ESA is committed to peaceful purposes, it has a mandate from
member states to develop security-relevant programmes and technologies in
satellite navigation, telecommunications, Earth observation and space
transportation.

A diverse, thriving space industry creates jobs and increases prosperity, as

well as helping governments to formulate climate action and to respond to
emergencies such as wildfires and flooding. Space missions inspire young
people to study science and become tomorrow’s technology leaders. To
improve life on Earth, we must work together in space.■

Josef Aschbacher is the director-general of the European Space Agency.

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America’s election

Europe should not see a potential

Trump return as a threat, says
Nadia Schadlow
The former deputy national security adviser says there is room for mutual
benefit
10月 17, 2024 07:30 上午

DONALD TRUMP has long made it clear that no one speaks for him.
Nonetheless, it is probably safe to say that if elected he would pursue a
foreign policy consistent with that of his first term. Regarding Europe, he
would be likely to highlight many of the same problems he already has:
inadequate defence spending, a lack of energy diversification and trade
protectionism. Many Europeans acknowledge these problems. They could
therefore create opportunities for America and Europe to work together—if
they resist the temptation to cast Mr Trump as the problem.

Although many NATO states have raised defence spending since he was in
office, Mr Trump would point out that they need to do more. Since 2014
non-US NATO members raised defence spending by more than $600bn.
That substantial figure is less impressive when considered as 31 countries’
spending increases, spread over ten years. Yet there is progress. Eighteen
NATO members will spend at least 2% of GDP on defence in 2024,
compared with just three countries in 2014. Mr Trump deserves some of the
credit, and the Russian invasion of Ukraine explains the rest. His typical
negotiating style of deploying threats, for example by saying that America
should not defend spending laggards, induces movement towards his
desired position.

However, NATO still has shortcomings that European leaders can see.
Germany’s Zeitenwende, a historic shift to address years of neglecting its
defence, has failed. Since Russia’s invasion of Ukraine NATO has promised
to increase its rapid-reaction forces from 40,000 troops to over 300,000.
That promise is likely to be broken, which will actually diminish
deterrence. Two years ago Kaja Kallas, then Estonia’s prime minister,
caused an uproar by revealing that NATO’s defence plan for the Baltic
states was to “allow them to be overrun before liberating them after 180
days”—spelling certain destruction for her country. (Estonia, formerly one
of those spending laggards, is predicted to spend close to 3.4% of GDP on
defence, the second-highest fraction in the alliance. Mr Trump should praise
this rise.)

On energy issues Mr Trump would probably start where he left off. During
his term he advocated “open, fair and affordable energy markets” and
pushed for a continued diversification of energy sources. He believed that
European energy supplies should come from newly energy-exporting
America, not Russia; in 2020 he cautioned Europeans at Davos about
dependence on “unfriendly energy suppliers”.

Europe could work with Mr Trump on that, and he would for example
enthusiastically supply American liquid natural gas as a lower-carbon
energy source. But he wants a robust energy system, and set of policies, that
can propel prosperity. He is not fixated on systems dominated by
intermittent renewables. Coal would also have its place in providing
baseload. And he would be interested in collaborating on nuclear energy,
recently cited as a useful adjunct to renewables by the European
Commission.

Europe, Mr Trump would point out, is now setting itself up for dependence
on China for renewable-energy systems and electric vehicles. China
accounts for 90% of the supply of rare-earth elements needed to
manufacture renewable-energy equipment. It makes 60% of wind turbines
and electric-car batteries, and controls a majority of the world’s production
of solar panels. Mr Trump wants to reduce American dependence on critical
minerals, so would be a willing partner to Europe in the effort.

Mr Trump would certainly return to his “favourite word” on transatlantic

trade: reciprocal. His campaign is already preparing a Reciprocal Trade Act,
which aims to match the tariffs imposed by trade partners in order to protect
American workers. His views on reciprocity would probably lead to a
closing of the trade gap with the EU. His separate proposals for across-the-
board tariffs, which go beyond the tit-for-tat reciprocal ones, may also be
motivated by this goal—or by his analysis that the EU is not as open as it
should be to American goods. Europe and Mr Trump should be ready to
make market access equal and reciprocal.

On trade with and business in China, America and Europe could present a
united front. China is trying to force the deindustrialisation of both through
unfair competition, and both could develop joint counter-strategies. One
promising sign of that is the reaction to Chinese overcapacity flooding the
European market with cheap electric vehicles. Citing this “injurious
subsidisation”, the EU recently voted to impose, over five years, 45%
tariffs. Together Mr Trump and European leaders could address the
difficulties of doing business in China, including preferential treatment of
domestic Chinese firms and efforts to limit market access. And as someone
minded to reduce America’s massive trade deficits, Mr Trump would surely
be sympathetic about the one Europe has with China: it has increased from
around €40bn ($44bn) 20 years ago to ten times that today.
There are many other issues that Europe should see as opportunities in the
event of a second Trump term. The EU Commission report on
competitiveness issued in September was dire in its assessments, from
overregulation to lack of innovation to slow growth. Mr Trump would
probably agree about many of these problems. He too tried to free America
from “the crushing weight of bureaucracy” during his first term, insisting
that for every new regulation adopted eight old ones were to be removed.

Where both sides see a problem in common, co-operation becomes

possible. A pro-growth, pro-freedom partnership is possible. Instead of
framing him as destroyer of an old order, Europe should consider how Mr
Trump’s disruptive nature might help to position Europe for a better future.
■

Nadia Schadlow was a deputy national security adviser for strategy in the
Trump administration and is a fellow of the Hudson Institute and Hoover
Institution.
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Briefing
The rockets are nifty, but it is satellites that make SpaceX
valuable
Filling up space :: Elon Musk’s space venture may soon be more valuable than Tesla

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Filling up space

The rockets are nifty, but it is

satellites that make SpaceX
valuable
Elon Musk’s space venture may soon be more valuable than Tesla
10月 17, 2024 07:30 上午

THERE WAS no mistaking the feat of engineering. The bottom half of the
biggest object ever flown—by itself as tall as a 747 is long—came hurtling
out of the sky so fast that it glowed from the friction. With the ground
rushing to meet it, a cluster of its engines briefly relit, slowing the rocket
and guiding it carefully back towards the same steel tower from which it
had launched just seven minutes previously. A pair of arms swang closed to
catch it, leaving it suspended and smoking in the early-morning sunshine.
Less obvious than the kinetic marvels, but even more important, are the
economics of Starship, as the giant rocket tested on October 13th is known.
The firm that built it, SpaceX, was founded in 2002 by Elon Musk, an
entrepreneur, with the goal of slashing the expense of flying things to space.
For Mr Musk, the purpose of such cost-cutting is to make possible a human
settlement on Mars. But it has also made new things possible back on Earth.
Over the past four years, SpaceX has become a globe-straddling internet
company as well as a rocket-maker. Its Starlink service uses what would, a
few years ago, have been an unthinkably large number of satellites
(presently around 6,400, and rising fast) to beam snappy internet access
nearly anywhere on the planet.

Starstruck

Excitement about Starlink’s prospects has seen SpaceX’s valuation rise to

$180bn (see chart 1). Some analysts are even beginning to wonder whether
it might one day match or exceed the value of Tesla, an electric-car firm of
which Mr Musk is also CEO. If Starship lives up to its promise, its
combination of vast size and bargain-basement price could provide a big
boost to the economics of space in general—and of Starlink in particular.
SpaceX’s Falcon rockets have already slashed the cost of space flight,
partly thanks to the fact that their lower stages, unlike those of almost any
other rocket, can be recovered and flown again. According to an estimate by
Citigroup, a bank, the Falcons can send a tonne into space at about a tenth
of the cost that prevailed a decade ago. Figures from BryceTech, a firm of
analysts, show that in the first quarter of this year the firm shot almost
seven times as much into orbit as all its rivals put together, be they private
firms or national space programmes (see chart 2).

But as disruptive as the Falcons have proved, they are relatively small and
only partly and slowly reusable. Their upper stages are discarded and their
lower stages take weeks to refurbish before they can fly again. Starship is
intended to finish the job. Both halves of the rocket are designed to be
reusable, and quickly to boot. Mr Musk hopes to drive turnaround times
down from weeks to hours. The rocket is huge, designed to carry perhaps
150 tonnes into orbit, far more than the 18 of the Falcon 9, SpaceX’s
current workhorse.

Despite Starship’s enormous size, it is intended to be cheaper than a Falcon,

too. SpaceX charges $70m to launch a Falcon 9. It hopes to drive down the
cost of a Starship launch to $10m. The eventual goal is to transform the
rocket business into something more like the aircraft one, via the mass
production of a vehicle that is designed to be refuelled quickly and flown
again and again. Mr Musk’s aspiration is that the “Starfactory” that SpaceX
is building at its headquarters in Texas will churn out a new Starship every
day, and that the firm’s fleet of them will fly hundreds or even thousands of
times a year.

Starman

Mr Musk is famous for making grand predictions, only some of which

come to pass. But when he started Starlink he said his only ambition was
not to go bankrupt, with good reason. Something similar had been tried,
albeit on a much smaller scale, by firms including Teledesic and GlobalStar
at the height of the dotcom boom. All of them went bust. But as far as
anyone can tell, Starlink is thriving.

Its distinctive white antennae have popped up everywhere from remote

schools in the Amazon to the bunkers and trenches on the front lines of the
war in Ukraine. “I’ve [even] seen a Starlink dish tied to a broom handle and
mounted on a public toilet in the Lake District,” says Simon Potter of
BryceTech. In September the firm announced it had signed up 4m
customers. Traffic through its networks has more than doubled in the past
year, as SpaceX has signed deals with cruise lines, shipping firms and
airlines.

Modelling by Quilty Space, another firm of analysts, suggests that

Starlink’s revenue will hit $6.6bn this year, up from $1.4bn in 2022. That is
already 50% more than the combined revenue of SES and IntelSat, two big
satellite-internet firms that announced a merger in April. A year ago Mr
Musk said that Starlink had achieved “break-even cashflow”. “It’s
astounding that a constellation of this size can be profitable,” says Chris
Quilty. “And it scares the shit out of everyone else in the industry.”

Using satellites to provide internet access is not a new idea. Such firms as
Hughes, SES and ViaSat already offer exactly this service, bouncing signals
from subscribers back down to ground stations and on to the wider internet.
But they rely on small numbers of satellites mostly in high orbit. That
allows a single satellite to see a large portion of Earth’s surface and thus to
serve many customers at once.

Unfortunately, flying so high also means that signals take a noticeable

amount of time to get up to the satellite and back down to Earth. That
makes remote working, video calls and online gaming a pain. And having
lots of people share one satellite risks congestion. For that reason, says Mr
Potter, satellite internet has been seen as a last-resort option, useful only
when nothing better is available.
Starlink’s satellites fly in very low orbits, around 500km up. That slashes
transmission delays, allowing Starlink to offer a connection similar to
ground-based broadband. The trade-off is that each satellite can serve only a
small area of Earth. To achieve worldwide coverage you therefore need an
awful lot of satellites. According to Jonathan McDowell of the Harvard-
Smithsonian Centre for Astrophysics, the 6,400 or so Starlink satellites
launched since 2019 account for around three-quarters of all the active
satellites in space (see chart 3). SpaceX has firm plans to deploy 12,000
satellites, and has applied to launch as many as 42,000.

The Falcon 9 launches a couple of dozen Starlink satellites at a time.

Starship should be able to carry more, bigger ones. Mr Musk says that only
Starship will be able to transport the next generation, with ten times more
bandwidth. And even when Starlink’s constellation is complete, Starship
will have plenty of work to keep it busy. One consequence of the satellites’
low orbits is that each has a lifetime of only around five years, before the
tenuous atmosphere at that altitude drags it below orbital velocity. To
maintain a constellation of 40,000-odd satellites would require replacing
about 8,000 of them a year.

Cheap launch costs are not the only secret of Starlink’s success. Vertical
integration helps, too. SpaceX makes its own satellites and the high-tech
antennas it sells to its customers. Not having to pay suppliers’ profit
margins helps keep costs down, says Mr Potter.

So does mass production: by making so many satellites and antennas, the

firm can drive unit costs down. Gwynne Shotwell, SpaceX’s chief operating
officer, has noted that each antenna cost the firm around $3,000 to make in
the early days. Since it was selling them for $499, that meant absorbing a
big loss on each new customer. Last year SpaceX said it had managed to
drive the cost of production below $599, the price at the time.

A system made of thousands of comparatively small satellites rather than a

handful of big ones can also be more easily tweaked and upgraded.
Starlink’s newer satellites, for instance, sport laser links that allow them to
talk to each other directly. That allows traffic to be routed between satellites
before it is sent back down to Earth. That should limit the number of ground
stations that Starlink needs to build—an important saving, says Mr Quilty,
who thinks that running the network’s 150-odd ground stations accounts for
more than half of Starlink’s operating costs.

In January SpaceX launched the first of a new, more powerful batch of

satellites designed to allow smartphones to connect to Starlink using the
existing 4G mobile standard, without any special antenna. The idea is to
keep phones connected even when they are beyond the reach of terrestrial
networks. The system will start with simple text messages, before
eventually moving on to voice and data services.

SpaceX announced its first “direct-to-cell” deal of this sort with T-Mobile,
a mobile network, in America in 2022, and has since signed similar
agreements with firms in various countries including Australia, Canada and
Japan. It had been due to switch on the American service next year. But
earlier this month the firm announced that it would activate a “best-effort”
version immediately in areas hit by Hurricane Helene, which would allow
T-Mobile phones to receive emergency alerts from the authorities even
when mobile-phone masts had been knocked out by the storm.

Since it has never before been possible to build something like Starlink, no
one is quite sure how big or profitable it might end up becoming. Morgan
Stanley, a bank, forecast earlier this year that Starlink might have 32m
subscribers by 2040, earning it around $100bn a year in revenue, or around
three-quarters of the bank’s prediction of SpaceX’s total revenue.

Morgan Stanley also outlined optimistic and pessimistic scenarios. In the

former, Starlink signs up 80m subscribers and brings in $250bn-300bn a
year, more than twice as much as Tesla earned last year. In the latter, in
which Starship is delayed and subscribers are scarcer than imagined,
revenues reach just $40bn a year.

In all these scenarios the bulk of Starlink’s revenue comes from households
in remote areas. Serving such customers was the firm’s original plan and,
on paper, it is a big market. The International Telecommunication Union
(ITU) reckons about 2.6bn people worldwide lack reliable internet access.
Even in America, the government says 22% of households in rural areas
cannot get a decent connection. At a broadband-industry conference on
August 6th Ms Shotwell declared that her firm could connect every one of
those under-served Americans, and much more cheaply than by laying
fibre-optic cables.

Most of the unconnected live in poor countries. SpaceX charges $120 a

month in America—a sum few in the developing world could afford. It has
experimented with lower prices in other countries; high volumes might
conceivably compensate for slimmer margins. It has also signed deals with
mobile-phone networks in Africa and in Europe to use its satellites to
connect remote masts to the internet.

Other dollops of revenue come from the airline and shipping industries.
SpaceX has already signed deals with Carnival and Royal Caribbean, the
world’s two biggest cruise lines, and with Maersk, a Danish cargo-shipping
giant. Air France, Qatar Airways and United Airlines have said they will use
Starlink antennae to provide free wifi for passengers, as have smaller
airlines such as Air New Zealand.

Morgan Stanley notes that it is not just phones that connect to the mobile
network; most modern cars (including Mr Musk’s Teslas) do so as well, as
do other devices from drones to wind turbines. It thinks this market might
in time provide a third of Starlink’s revenue. Governments may contribute
some revenue, too. Shortly after Russia’s full-scale invasion of Ukraine in
2022 SpaceX announced that it had set up a division called Starshield, to
supply Starlink-like satellites to customers in government. In 2021 the firm
reportedly signed a $1.8bn contract with the National Reconnaissance
Office, which operates America’s spy satellites.

Starlink might one day provide connectivity above Earth as well as on it.
On a recent crewed mission, astronauts tested one of its laser-
communication modules aboard its Dragon spaceship, which allowed them
to connect to the network while in space. (It is also Starlink that allows
SpaceX to broadcast footage from Starship test flights even when the rocket
is out of range of ground-based cameras.) In March Ms Shotwell announced
plans to sell the laser modules to other satellite operators, offering them
cheap and easy connectivity in orbit.

Not everyone welcomes Starlink. The service has been banned in several
African countries, including Burkina Faso, Cameroon and Senegal. Some
governments may be wary of an American-owned internet provider whose
infrastructure sits in orbit, beyond easy reach. SpaceX has already
experimented—with the encouragement of America’s government—with
providing uncensored internet access in Iran to anyone with a smuggled
antenna, despite a formal complaint from the Iranian authorities, upheld by
the ITU.
 From the jungle to the void

Space X’s politics do not seem consistent. Starlink has not tried to get
around censors in China, for instance, where Tesla makes and sells lots of
cars. Mr Musk refuses to allow Ukraine’s army to use Starlink when
attacking Russian forces in Crimea, even though the peninsula is Ukrainian
territory. And he has gone back and forth in a row over regulation of the
internet in Brazil. A judge there ordered internet providers to cut access to
X, a social network that he owns. SpaceX at first refused to comply, but
later reversed course.

SpaceX has competitors, too, though none that quite match its low costs and
enormous scale. A firm called Eutelsat OneWeb uses a fleet of more than
630 satellites to pursue a similar business model, although it deals only with
businesses, rather than selling directly to consumers as SpaceX does. On
October 15th a Chinese firm named Shanghai Spacecom Satellite
Technology launched a second batch of satellites in what it hopes will
become a 14,000-strong low-flying constellation of its own, named
Qianfan.

Then there is Amazon, whose founder, Jeff Bezos, is just as much of a space
cadet as Mr Musk. Amazon’s planned Kuiper constellation will consist of
3,200 satellites and, in theory at least, will begin signing up customers next
year (it has so far launched only two prototype satellites). Lacking in-house
access to cheap rockets, Amazon ended up placing the biggest order in the
history of the space business, buying 83 launches from assorted rocket
firms including United Launch Alliance (a joint venture of Boeing and
Lockheed Martin, two aerospace firms), Arianespace (a European outfit)
and Blue Origin, Mr Bezos’s space firm, which is due to conduct the first
test flight of its own big reusable rocket, New Glenn, in November.

The political pitfalls and unproven rivals make it even harder to judge
SpaceX’s potential. But it has a huge head start, a proven capacity to
innovate and a determined if unpredictable leader in Mr Musk. As Starlink’s
costs come down and its kit improves, its universe of potential customers
grows. In the not-too-distant future, markets may get a chance to assess its
prospects: Mr Musk has said several times that he may spin Starlink out of
SpaceX when the business is mature enough.

Stardust

That would leave SpaceX free to focus on getting cargo and people to Mars.
Starlink’s terms of service assert that Mars is “a free planet” over which no
earthly government has “authority or sovereignty”, and that any disputes
over Starlink services provided on Mars will be settled through principles
“established in good faith at the time of Martian settlement”. Those who
dismiss this as nerdy bravura should contemplate the sky above their heads.
■
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United States
Democrats struggle to limit the loss of black voters in
Georgia
Getting the drift :: Kamala Harris’s campaign has good reason to feel jittery

Republicans ramp up efforts to court Amish voters in

Pennsylvania
Barnstorming :: Where mail-in ballots could matter most

Polarisation by education is remaking American politics

Degrees of difference :: The battle for Pennsylvania is a test case for new coalitions of
Democrats and Republicans

Voters won’t thank Kamala Harris for the state of the

economy
Campaign calculus: the customer is sometimes wrong :: Why voters are down on America’s
remarkable economy

Vital election races in Wisconsin are awfully close

Crying over split milk :: America’s dairyland is giving Democrats some heartburn

Brandon Johnson is giving Chicago’s teachers’ union

everything
Payback time :: It may well cost him his political career

One big thing Donald Trump and Elon Musk have in

common
Lexington :: They both want to crush Tesla’s competition

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Getting the drift

Democrats struggle to limit the loss

of black voters in Georgia
Kamala Harris’s campaign has good reason to feel jittery
10月 17, 2024 07:30 上午 | Atlanta

THE DRIFT of black voters away from the Democratic Party has become a
touchstone of the 2024 election. In Georgia, the anxieties of the Kamala
Harris campaign are hard to miss. On one night in Atlanta it deployed music
moguls to run a “Brothas and Brews” event. Then it released an
“opportunity agenda for black men”, promising to give more business
loans, protect cryptocurrency and legalise marijuana. To press her closing
arguments Ms Harris is sitting down with Charlamagne tha God and other
influencers.
Her campaign has good reason to feel jittery. In Georgia, where 30% of
registered voters are black—more than in any other swing state—Ms Harris
is polling at 83% with the constituency, ten points behind the level of
support Joe Biden attracted when he won the state in 2020. If turnout
remains constant this year, such a gap with black voters would leave Ms
Harris with a deficit of 139,000 votes, nearly 12 times Mr Biden’s 11,779-
vote victory margin.

Donald Trump’s allies are pouring it on as early voting opens in Georgia:

“For the last three and a half years the Democrats haven’t given a damn
about black men unless they’re dead or gay,” Michaelah Montgomery, a
black Republican activist, roared onstage at a rally featuring Mr Trump on
October 15th. In the packed audience, black men in suits stood and clapped
as white women looked on, beaming. Liberals can seem befuddled about
why some black voters are turning to Mr Trump but the defectors are often
moved by the same issues as other supporters: jobs and reinvesting at home.
“You can’t fund other countries if your own backyard is on fire,” says
Kiersen Harris (pictured, right), a 22-year-old security guard who plans to
vote for Mr Trump.

Mr Biden’s narrow win in Georgia, the first by a Democrat since 1992, was
one of the most remarkable results of the 2020 election. It announced that
Democratic presidential candidates could again compete in old Dixie after
years of mostly fruitless effort. An influential prophet of the turnaround was
Stacey Abrams, a Democratic politician who had argued for years that the
state was ripe for flipping. Anything less than full investment in Georgia
“would amount to strategic malpractice”, she told national Democrats in
2019.

Why was she right? In the two decades to 2020 Georgia’s voting population
grew by 1.9m. Nearly half of that growth came from black voters—the
largest percentage-point increase in any state’s black electorate. New voters
came mostly from New York and Florida, but also the Caribbean and
Africa. They bolstered the state’s well-established black elites. Black voters
born outside Georgia are now more than twice as likely as black natives to
have a college degree. This was a double advantage for Democrats, who
increasingly rely on college-educated and minority voters.
Now Mr Biden’s achievement in 2020 lies on a knife’s edge. If Ms Harris
does not match Mr Biden’s share of the black vote, she would need to make
up votes among white voters, who skew Republican. But whereas Mr Biden
won 30% of the white vote in Georgia, polls show Ms Harris up by just one
point, at 31%. If that finding proves accurate she can afford to drop just two
percentage points with black voters, not the ten shown in current polls.

Democrats’ struggles with black voters are not new, or confined to Georgia.
The party’s presidential candidates won an average of 87.5% of the black
vote between 1984 and 2004. Barack Obama changed the equation and won
96% in 2008. “It was a lightning-in-the-bottle moment,” says Terrance
Woodbury, a Democratic strategist. Since 2012, however, Democrats have
fallen back towards their pre-Obama norm. Black support slipped to 90%
by 2020, but a surge in turnout that year—200,000 more black voters in
Georgia, in particular—masked the decline. More black votes even at a
slightly lower margin delivered Democrats a significant net gain. The alarm
for Ms Harris is that polls show her attracting the lowest share of any
Democratic nominee in decades. The national Economist/YouGov polls
have her at 83.5%, while other polls find her share as low as 78%.

Jobs on their mind

Lower turnout this year could exacerbate Ms Harris’s problem. In 2020

Georgia had two Senate races that attracted national attention and ultimately
determined control of the chamber. This time there are no statewide contests
to motivate voters disaffected by the presidential candidates. And the black
migration that helped Democrats win in 2020 seems to have slowed. Data
from L2, an analytics firm, show that of the 187,000 voters who moved to
Georgia since 2020 only 24% are black, half the share of those who came
before.
Perhaps the most striking feature of black voters’ evolving outlook is that
young black men see less salience in the civil-rights movement than did
their parents’ generation. Just 65% of black men under 30 say civil rights
are an issue that is very important to them, compared with 84% of those
over 65. Auburn Avenue, a black business district that was once the
epicentre of Atlanta’s civil-rights movement, is now hollowed out and quiet.
“Thinking about racial politics is a luxury,” says a black millennial who
works in Georgia politics. “These days young people are more concerned
about jobs.”

Ms Abrams reckons this is a messaging problem—fears about the futures of

black men and their access to jobs “are inherently civil-rights issues”, she
says. She argues that the idea that black voters are moving away from
Democrats is “an extrapolation that is not warranted yet”, especially as
polling suggests that black women are heavily motivated by Ms Harris.

Ms Abrams and her peers are confident that the Harris campaign can defy
the polls. “We saw some similar softness two years ago and we ended up
closing that gap,” says Lauren Groh-Wargo, a longtime Georgia operative.
Political scientists have shown that tight-knit black communities have
strictly enforced political norms, to include voting for Democratic
candidates, even as conservatism has become more popular. Trump-curious
black voters may yet be persuaded to back Ms Harris by pastors and women
in their extended families. If they express support for Mr Trump “out loud
in black spaces, research suggests it’s not going unchallenged,” says Andra
Gillespie, a political scientist at Emory University. Most undecideds, she
thinks, will break in the end for Ms Harris.

At Fade Away Cutz in South Atlanta Richard Wright, once a candidate for
Atlanta mayor and named for the black author, is getting a crisp shave. He
and his barber, both middle-aged, are sceptical of the left but say they are
voting for Ms Harris. They worry about the younger men who intend to
back Mr Trump—and about the fallout from the campaigns’ obsessions with
voters who look like them. “If Trump wins, me and you are going to have to
move,” Mr Wright tells his barber between treatments, “because black men
are going to get blamed.” ■

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Barnstorming

Republicans ramp up efforts to

court Amish voters in Pennsylvania
Where mail-in ballots could matter most
10月 17, 2024 07:30 上午 | PARADISE, PENNSYLVANIA

“THAT’S NOT a woman’s position,” a straw-hatted Amish man in

Lancaster County, Pennsylvania, says wistfully, referring to the presidency.
“I’ve got [voter-registration] papers in my pocket right now.” He’s been
taking part in a “mud sale”, an Amish charity auction, in a field near the
community of Paradise. While the auctioneer shows off his impressive lung
capacity, several Republican volunteers mingle among the crowd handing
out voter-registration papers and Trump-Vance flags. “I did this four years
ago,” one of them says, and “it’s even better now.”
Pennsylvania has 93,000 Amish people, double the number in 2000. Almost
half live in Lancaster County. They could in theory help swing the critical
state, which Joe Biden won by just over 80,000 votes in 2020. But the
Amish, who famously eschew electricity and cars, don’t have much time for
politics either. Typically, less than 10% vote. That said, it’s clear that the
Amish worldview aligns neatly with traditional Republican beliefs in
limited government and social conservatism, say Steve Nolt and Kyle
Kopko, academics at Elizabethtown College. Of Amish folk who do
register, more than 90% do so as Republicans.

Efforts to court them have increased. “Amish PAC”, founded in 2016, spent
more than $300,000 on advertising in the past two presidential cycles. The
scarcity of Trump billboards in the area points to a tactical shift to face-to-
face canvassing, which Mr Kopko reckons has found greater success.
Between 2016 and 2020 voter registration among the Amish in Lancaster
County doubled to over 4,000, and among those registered turnout grew
from 49% to 71%.

With Pennsylvania a toss-up, Republican operatives are busy. Scott Presler,

a conservative activist, founded “Early Vote Action” in 2023 to encourage
mail-in voting. “The Amish could very well save the United States,” he
says. Mr Presler and his ilk have been turning up at Amish sawmills and
farmers’ markets, pitching their message that Donald Trump stands for
world peace and the freedom for the Amish to live as they choose. Their U-
turn on mail-in voting, “something which the Democrats really pushed”, he
gloats, will enable the Amish to vote in private, away from the prying eyes
of any disapproving peers.

Even if the Amish taboo around voting has begun to fray, there is a snag. By
tradition, Amish weddings happen on Tuesdays in autumn and involve
hundreds of guests. Presidential elections, held on a Tuesday in November,
may well be overshadowed. So early voting may not just be a smart tactic in
turning out the Amish. It could be essential. ■

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with fast analysis of the most important electoral stories, and Checks and
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state of American democracy and the issues that matter to voters.
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Degrees of difference

Polarisation by education is
remaking American politics
The battle for Pennsylvania is a test case for new coalitions of Democrats
and Republicans
10月 17, 2024 07:30 上午 | PITTSBURGH

DEPENDING ON WHERE exactly you find yourself, western

Pennsylvania can feel Appalachian, Midwestern, booming or downtrodden.
No matter where, however, this part of the state feels like the centre of the
American political universe. Since she became the presumptive Democratic
presidential nominee, Kamala Harris has visited western Pennsylvania six
times—more often than Philadelphia, on the other side of the state. She
made her seventh trip on October 14th, to the small city of Erie, where
Donald Trump also held a rally recently. Democratic grandees flit through
Pittsburgh regularly. It is where Ms Harris chose to unveil the details of her
economic agenda, and where Barack Obama delivered encouragement and
mild chastisement on October 10th. “Do not just sit back and hope for the
best,” he admonished. “Get off your couch and vote.”

That western Pennsylvania has become such contested ground tells you a
lot about how America’s two major parties have changed. Voters are
increasingly divided by their educational degrees; the traditional working-
class base of the Democratic Party has eroded and been replaced by the
college-educated. This trend is not uniquely American—it is visible among
parties of the left across Europe. But its impact on America is strong.
Educational polarisation has remade the map of battleground states and
districts and triggered ideological changes in both parties. It has
transformed not just where candidates campaign, but what they say.

It used to be that high educational attainment was a reliable predictor of

Republican voting. George Babbitt, the eponymous main character of
Sinclair Lewis’s 1922 satire of bourgeois conformity, is a college-educated
real-estate broker for whom “the senators who controlled the Republican
Party decided in little smoky rooms in Washington what he should think
about disarmament, tariff, and Germany”. In later decades, data show the
same. From 1952 to 2000, a majority of white voters with college degrees
self-identified as Republicans.
From 2012, this affiliation began to weaken. It loosened even more once Mr
Trump became the Republican nominee in 2016. By 2020, the white
college-educated called themselves Democrats by a 2:1 margin. And there
were many more graduates. Their share of the electorate rose from 8% in
1952 to 40% in 2020. Had the party held on to the rest of its support, this
would have ensured an enduring majority.

Yet at the same time, Democrats lost support among whites without college
degrees, who now favour Republicans by their own margin of 2:1.
Polarisation along educational lines also means polarisation by geography
because Americans increasingly sort themselves based on their educational
credentials, with cities at the centre of the knowledge economy. That is why
in 2020 Mr Trump won 2,588 of America’s 3,144 counties and still lost the
popular vote by a wide margin. Educational polarisation also stoked conflict
“over the proper source of American leadership and the proper direction of
American culture”, write Matt Grossmann and David Hopkins, two political
scientists, in their incisive new book “Polarised by Degrees”. This
transformation, they observe, has led the Democrats to “adopt a reputation
for cultural progressivism, intellectual erudition, and demographic
diversity…while traditional venues for conservative discourse have lost
influence to more populist and anti-intellectual platforms”.

One goal of the Harris campaign is to change that. Of its 50 offices in

Pennsylvania, 16 are in counties that Mr Trump won by double digits in
2020. “The challenge is that if you look at the work that people are doing,
who are living paycheque to paycheque outside of the big cities, it often is
not the type of work that the Democratic Party is associating itself with,”
says Conor Lamb, a former Democratic congressman based just outside
Pittsburgh.
The fight over Mr Lamb’s old district is a microcosm of the test Democrats
face. It requires an answer for anger about deindustrialisation. “We suffered
through terrible trade deals that really hurt places like western
Pennsylvania, pushed by Wall Street and a corporate management ideology
that just chased the cheapest and weakest labour and environmental rules,”
says Chris Deluzio, the one-term Democratic incumbent. His Republican
challenger, Rob Mercuri, a state representative, agrees that outsourcing of
manufacturing jobs, especially steel, was “directly tied to policy choices
that elected leaders have made over the years”. But their prescriptions differ
immensely. The left, in Mr Mercuri’s view, offers “well-intentioned but
really wrongheaded government interventionist, big New Deal-style
policies”, the result of a “disconnect…related to this kind of highly
educated, elitist mindset”.

In 2020, Democrats promoted ideas exciting to the college-educated, such

as defeating systemic racism. Ms Harris was no exception. The national
Democratic Party has realised that promoting anti-racism is a losing
strategy. This time, Ms Harris is pitching herself as a pro-fracking, gun-
owning, common-sense Democrat who likes unions and is wary of
corporations. Her economic agenda is concerned with protecting American
jobs through industrial policy and funnelling more tax credits to workers.
Mr Trump, too, has moved the Republican Party to the left on economic
issues, courting unions and promising tax cuts on tips, social security
benefits, even car-loan payments. Whether it is working is hard to tell. The
voters both candidates are jostling over are not just unfriendly to the
country’s college-educated elites: they are reluctant to answer pollsters too.
■

Correction (October 15th 2024): An earlier version of this article misspelt

Matt Grossmann’s name. Sorry.

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Campaign calculus: the customer is sometimes wrong

Voters won’t thank Kamala Harris

for the state of the economy
Why voters are down on America’s remarkable economy
10月 17, 2024 07:30 上午

POLITICIANS RARELY tell voters they are wrong. For Democrats trying
to sell America’s economic success, the temptation must be strong. As our
special report explains, the country’s economy is one of the strongest in the
world. Americans are richer than at the start of President Joe Biden’s term.
Yet they struggle to believe it: in weekly polling conducted by YouGov
since mid-2021, almost twice as many say the economy is getting worse as
say it’s getting better.

It is hard to judge what this will mean come November 5th. Historical
examples do not shed light on the divergence between economic
perceptions and reality, nor on the unique circumstance of a former
president running for re-election while the incumbent is sidelined. Vice-
President Kamala Harris is leading in national polls despite poor ratings on
the economy. But if grumbling is the new normal, the economy could yet
cost her the election.

During the covid-19 pandemic, economic optimism came untied from the
macroeconomic indicators which reliably predicted it in preceding decades.
The University of Michigan recorded its lowest-ever index of consumer
sentiment—a long-running measure of how consumers feel about the
economy—in June 2022, despite the economy looking healthy by most
objective measures. The “vibecession” left economists and politicians
scratching their heads.

Although sentiment has improved since then, Americans still underestimate

the strength of their economy. This month, YouGov found that 39% of
respondents incorrectly believed the country was in recession (only 36%
said it was not). The media, which increasingly emphasise negative
economic news, deserve some blame for this. But although Democrats can
correctly say voters are wrong about Mr Biden’s economic record, it is cold
comfort for Ms Harris: a recent poll by Ipsos found that Donald Trump had
an eight-percentage-point lead over her on the question of whom voters
would trust more to handle the economy.
A more optimistic pointer for Democrats is the partisan divide in consumer
sentiment (see chart). While both parties’ supporters tend to feel more
positive when they control the White House, Republicans “cheer louder”
and “boo louder”, in the words of Ryan Cummings and Neale Mahoney,
two economists. They find that this asymmetry explains around 30% of the
gap between expected and observed consumer sentiment since Mr Biden
took office. If economic negativity is partly confined to Republican
partisans, the electoral cost could be smaller than it appears.

Ms Harris is also somewhat insulated by running as a non-incumbent.

Despite her role in Mr Biden’s administration, the vice-president’s
campaign has cast her as an advocate of change, not continuity. In the
fundamentals model that underpins The Economist’s presidential forecast,
we find that economic indicators predict the election chances of incumbent
presidents but not other candidates from the incumbent party. When Mr
Biden dropped out of the election, the economy also dropped out of our
forecast.

These factors could explain why Ms Harris is outperforming historical

incumbent-party candidates with similar economic conditions. Lenny
Bronner, a data scientist at the Washington Post, found that this year’s
employment growth points to a two-percentage-point popular-vote victory.
John Sides, a political scientist, found the same for GDP growth. In our
polling average, Ms Harris leads by 3.2 points. Voters march to the beat of
their own drum. And so it is that many spend more than ever—and say they
will vote for Ms Harris—while professing deep economic pessimism. ■

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Crying over split milk

Vital election races in Wisconsin

are awfully close
America’s dairyland is giving Democrats some heartburn
10月 17, 2024 07:30 上午 | SHEBOYGAN, WISCONSIN

IT WAS ONCE common for states to split their pair of senators between the
two major parties. In 2010 there were 19 such states. Today only three have
true splits. In all three of those states—Ohio, Montana and Wisconsin—the
Democrat-held seats are up for election in November. And all three could
well be lost. Jon Tester faces an uphill re-election bid in Montana. In Ohio,
Sherrod Brown, a third-term incumbent, must persuade a large share of
Donald Trump voters to split their tickets (an increasingly rare
phenomenon) if he is to remain in office. That leaves Tammy Baldwin, the
twice-elected senator from Wisconsin, who is campaigning on the least
Trumpy terrain of the three.
That does not mean it will be easy. “I live in a battleground state. I run in a
battleground state. There’s an old expression: ‘Run scared or run
unopposed.’ And I am not unopposed,” Ms Baldwin says, sitting outside a
coffee shop in Sheboygan (which the mayor informs your correspondent
should be better known as the “Malibu of the Midwest”). Ms Baldwin is a
consummately “midwestern nice” politician. She prides herself on showing
up in rural parts of the state that other Democrats neglect—and pushing for
policies that ought to endear her to them.

“I consider myself the Buy America champion of the United States Senate,”
she proclaims. Ms Baldwin says she was honoured to receive the
endorsement of the Wisconsin Farm Bureau—the first Democrat to do so in
20 years—for, among other things, picking fights with the Biden
administration over “plant-based products that pretend to be milk when
they’re not”. (Wisconsin produces a quarter of the cheese made in
America.)
In other words, Ms Baldwin is the kind of homespun midwestern Democrat
campaigners dream of—the kind with the best chance of swimming against
the tide of inhospitality towards the party in rural America. And yet she is
facing her tightest Senate race ever. After publishing a poll showing Ms
Baldwin leading by only two percentage points, the Cook Political Report
with Amy Walter, a prominent election handicapper, downgraded her race to
its “toss-up” category. (Our own forecast model gives her better odds.)
Her campaign says its internal polling showed an equally tight race (though
this is also a handy fundraising tactic). If Ms Baldwin loses her race, it does
not just guarantee that Democrats lose control of the Senate—it almost
certainly would imply that Mr Trump has swept the presidential election
away from Ms Harris. The reason for this, the same reason that split-ticket
voting has declined along senatorial split pairs, is the ever-growing
nationalisation of state and local politics.

It is not just polarisation that Ms Baldwin must reckon with. Part of her
trouble is the unexpected strength of her opponent, Eric Hovde—a lushly
moustachioed businessman who has not held public office before. “When
you’re out there and you’re talking to people every single day, you know
what the concerns are: economics, number one, and the border, number
two,” says Mr Hovde, speaking in the office of a newly opened apartment
building in Racine on the shores of Lake Michigan.

He explains voter discontent with the economy—despite aggregate

America’s outperformance of its peers—as a result of the “very bifurcated
economy” and national growth as spurred by extreme deficit spending. “If
you look at the history of societies that have gone through debt crises, we’re
already hitting all the flashing red signals,” he says. Mr Hovde is an old-
school Republican in more than just his choice of facial hair: he is wonkish,
worried about deficits, regulations and growth. He is one of a shrinking
minority of American politicians willing to come out as “largely a free-
trader”. His biggest political misstep, other than owning a bank and a
mansion in Laguna Beach, California, has been to defend the sensible
policy of raising the retirement age for Social Security for young
Americans. “We’re in a position where the day of reckoning is coming,” he
says.

All that has lent the state’s Senate race a retro feel—with the same themes
as the contest between Barack Obama and Mitt Romney in 2012. You will
see plenty of cows in Ms Baldwin’s campaign advertisements; you will see
comparatively few invocations of the attack on the Capitol on January 6th
2021. Polls show that Ms Baldwin is running roughly three points ahead of
Kamala Harris in the state. This provides a “good cushion” says Charles
Franklin, who runs the Marquette Law School Poll, even in the face of
another polling error in the state. (In both 2020 and 2016, Democratic
margins were overestimated by an astonishing seven points.) If he were the
Harris campaign, though, Mr Franklin says he would be “pretty worried”. It
is easy to underrate support for Mr Trump among the politically disengaged
voters who are hard to reach. “They certainly don’t trust pollsters. They’re
not big fans of politics generally. But they’re mobilised by Trump.”

That statement will cause painful flashbacks for Wisconsin Democrats. Talk
to any of them for long enough and you will eventually come to the subject
of Hillary Clinton’s decision to not campaign here—and the comeuppance
she received when Mr Trump won by 0.8 percentage points. When they do
not neglect the state, Democrats can win, but only barely. In 2020 Joe Biden
won it by 0.6 points. In 2024 a squeaking victory for Ms Baldwin would
probably mean a loss for Ms Harris. For her part, Ms Harris is determined
not to repeat Mrs Clinton’s mistake: she has visited the state five times
since July. ■

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Payback time

Brandon Johnson is giving

Chicago’s teachers’ union
everything
It may well cost him his political career
10月 17, 2024 07:30 上午 | CHICAGO

LAST YEAR, when he was campaigning to be mayor of Chicago, Brandon

Johnson, a former organiser for the Chicago Teachers Union, was asked
how he would handle negotiating a contract with his former employers,
especially when money is tight. He answered simply: “Who better to
deliver bad news to friends than a friend?” The teachers’ union downplayed
hopes of special favours. “Brandon is a remarkable person who has a lot of
principles,” said Jesse Sharkey, a former head of the union.
Over a year later, Mr Johnson shows little interest in delivering bad news to
the people who helped him become mayor. In fact, he is showing that there
is no greater love than to lay down your political career for your friends.
The mayor was elected in large part thanks to the heavy financial backing
of the teachers’ union, and it expects to be repaid in contract negotiations
this year. But the money to do so is lacking. Rather than admit that, Mr
Johnson has tied himself into knots and offended almost every other
constituency in the city, including his own progressive allies.

On October 7th he appointed a new school board, after all the original
members resigned. Mr Johnson had wanted them to fire the head of the
school district, Pedro Martinez, and they refused. Mr Martinez opposes the
mayor’s plan to fill a looming deficit in the schools budget by taking on a
$300m short-term loan. The resignations—and Mr Johnson’s hasty
replacements—have thrown Chicago’s local government into chaos.

On paper Chicago’s schools are generously funded. Total spending by the

school district works out at around $29,500 per pupil, compared with a
national average of $19,000. Teachers in Chicago are also already rather
well paid (the average salary is $93,000). But too much of the budget is
spent repaying historical debt, and on pensions. And Chicago has too many
schools. Over decades total enrolment has shrunk, especially in black
neighbourhoods, and three-fifths of schools are underused.

One high school on the West Side of the city, Frederick Douglass Academy,
has just 27 students, in a building meant for 900. Keeping it open costs the
equivalent of $68,000 per pupil, roughly four times what is spent directly
(after debt and other centralised costs) in the average school.

Closing schools in black neighbourhoods is unpopular. When Rahm

Emanuel, a former mayor, did it a decade ago, it may have tanked his
mayoral career. Under Mr Johnson, Mr Martinez has done the opposite,
allowing more money to flow to struggling schools. But the covid-relief
funds that have made this possible are now running out. The school district
faces a budget deficit of $500m this year. Other school districts in America
are making cuts: San Francisco recently announced it will close several
schools. In Chicago that is apparently unthinkable. Instead teachers say they
want 9% pay rises and every school to be staffed as though it is fully
occupied.

A $300m loan will only mean a bigger hole next year. Even those formerly
supportive of the mayor recognise the problem. “If you are maxing out your
credit card at home, you can barely make payments, and somebody
proposes you take out another high-interest loan, that isn’t solving your
problem,” says Andre Vasquez, a progressive alderman. He is one of 41 out
of 50 city-council members who signed a letter opposing the mayor.

Mr Johnson, who has the power to jam through the $300m loan, is defiant.
Announcing the new board appointments, he compared “so-called fiscally
responsible stewards” to supporters of slavery. He says he was elected to be
transformative, not to “nibble around the edges”. But by 2027 his appointed
school board will be replaced with a 21-member elected one. The mayor
seems to want to give his pals a big raise, and let others work out how to
pay for it. ■

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Lexington

One big thing Donald Trump and

Elon Musk have in common
They both want to crush Tesla’s competition
10月 17, 2024 07:30 上午

SUMMONING A GIANT flaming rocket safely home from the edge of

space is pretty cool, but Elon Musk’s success in yanking the infamously
inertial American car industry in a new direction still ranks among his most
impressive achievements. Believing that a transition to sustainable energy
was essential to preserving humanity, Mr Musk set out to make Tesla “a
guiding light” that would lead other automakers to electrify their cars years
before they might have otherwise. The strategy began working almost right
away. In 2009, the year after Tesla delivered its first production car, the
Roadster, Bob Lutz, a General Motors vice-chairman and a convert to
electrification, called Tesla “the crowbar that helped break up the logjam”.
Among the puzzling aspects of Mr Musk’s devotion to electing Donald
Trump is that the former president considers this achievement a historic
mistake. “The electrics are just not going to work,” Mr Trump told the
Detroit Economic Club on October 10th. “The entire industry will go to
China for the making of these all-electric cars and trucks. The auto industry
would be non-existent.”

In fairness, Mr Trump sometimes says things he does not mean. (“He’s the
world’s champion of bullshit,” Mr Musk once observed to his biographer,
Walter Isaacson.) And sometimes what Mr Trump says does not mean
much. (“He seems kind of nuts,” Mr Musk said after meeting Mr Trump in
2016.) These seeming deficiencies—which, as Mr Trump has amply proved
over the past eight years, are actually among his core strengths—tend to be
on vivid display when he talks about the car business.

“By the time I came into office after our victory in 2016, the Michigan auto
industry was on its knees begging for help, gasping,” Mr Trump told the
Economic Club. “It was all gone.” In fact, the “big three” automakers had a
banner year in 2016 amid record sales in America of 17.5m vehicles. In the
same speech, Mr Trump warned that without him in power the industry was
again “going out of business” and its workers were living in a “nightmare”.
In fact, the big three are making record profit-sharing payments to hourly
workers. (On the nonsense front, he described watching Mr Musk’s rocket
boosters land: “They’re coming down very slowly, landing on a raft in the
middle of the ocean someplace with a circle. Boom. Reminded me of the
Biden circles that he used to have, right? He’d have eight circles and he
couldn’t fill them up. But then I heard he beat us with the popular vote.”)

As Mr Trump rattled on about how his “hair would be waving” in his

Pontiac GTO during the industry’s “glory days”, he sounded a bit out of
date. Chad Livengood, the political editor of the Detroit News, has come to
think Mr Trump has a “1978 Cadillac Eldorado view of the auto industry”,
as though “everybody is still driving big bulky V8 sedans” and an American
electric-vehicle company, Tesla, is not the most valuable carmaker in the
world. And yet, Mr Livengood adds, “To give him credit, he put his thumb
on an issue, a sore really, and he kept pressing down on it.”
That sore spot is the anxiety in the industry and among consumers over the
transition to electric vehicles. The industry has weathered existential
challenges before. With varying levels of federal and foreign help, the big
three ultimately made the shifts to greater fuel efficiency in the 1970s and
1980s and to lean manufacturing in the 1990s and 2000s. But neither of
those transitions matched the complexity of the one now under way.

Despite a federal tax credit of up to $7,500 and price cuts, electric vehicles
are piling up on dealers’ lots, and the Biden administration is struggling to
build the charging network envisaged by the 2021 infrastructure law. So far,
the $7.5bn federal investment has yielded just 19 stations in nine states,
though the pace is accelerating, according to Atlas Public Policy, a
consultancy. Even Mr Musk has been cutting prices as he confronts new
competition at home and abroad. Tesla finds itself vying for global sales
leadership in EVs with BYD, a Chinese firm, and losing market share in
America as dozens of new models go on sale.

Mr Trump is gaining share in the Midwest by claiming that Vice-President

Kamala Harris, the Democratic nominee, wants to force people into electric
cars. Ms Harris insists she “will never tell you what kind of car you have to
drive”. But when she ran for president in 2019, Ms Harris supported a
mandate that all new vehicles sold be zero-emission by 2035, and the Biden
administration’s emissions standards in effect mean that, by 2032, 56% of
new vehicles sold would have to be electric—a goal that seems more
fanciful by the day. To buy the Americans time to build share in the market,
President Joe Biden raised the tariffs that Mr Trump imposed on Chinese
electric vehicles, from 25% to 100%.

The fast and the spurious

Besides ending the “insane electric-vehicle mandate”, Mr Trump has called

for doubling those tariffs and rewriting America’s trade deal with Mexico to
impose tariffs of up to 1,000% on Chinese electric vehicles made in plants
there. “They might as well stop building the damn plants,” he said in
Detroit. And yet as he seeks to protect Americans from buying Chinese
electric cars, he is claiming Americans won’t buy EVs anyway and urging
American automakers to give up making them. It’s like saying Chinese
golfers can’t play one of his courses because no one else will, then turning
the place into a launching pad for zeppelins.

Mr Musk no doubt has his reasons to support Mr Trump. Mr Biden snubbed

him because his plants are not unionised, and Mr Musk’s contempt for the
“woke mind virus” seems deeply felt. Yet it is also a happy coincidence
that, when it comes to EVs, Mr Trump’s eccentric mix of protectionism and
defeatism would stifle competition for the great insurgent American car
company that, to Mr Musk’s profound credit, has become the incumbent. ■

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which brings together the best of our leaders, columns, guest essays and
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The Americas
Justin Trudeau is killing Canada’s liberal dream
The dying of the light :: His failings hold lessons for liberals the world over

Bolivia’s slow-motion economic crisis is accelerating

Running on empty :: Dollars and petrol are scarce, and growth is weak

The Mounties take on Modi. Who will win?

India-Canada relations :: India’s government has dismissed explosive charges by Canada’s
police

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The dying of the light

Justin Trudeau is killing Canada’s

liberal dream
His failings hold lessons for liberals the world over
10月 17, 2024 07:30 上午 | Ottawa

“IT IS A time of massive anxiety.” Justin Trudeau was talking about

Canadians’ economic outlook, pitching the durability of his liberal project
to a gathering of global progressives in Montreal last month. “People notice
the hike in their mortgages much more than they notice the savings in their
child care,” he offered, perhaps implying that in doing so people failed to
appreciate all he did for them.

A diagnosis of anxiety fits his own government, too. Mr Trudeau and his
party have traversed an arc from heroic to hapless during nine years in
office, and today are despised by many in Canada. Polls suggest that less
than a quarter of the electorate plans to vote for him. With under a year to
go until a general election, Liberal Party members fear no plan exists to
increase that share. They have lost two by-elections in quick succession, as
well as the support of their governing partner, the New Democratic Party. A
letter has been circulating among Liberal MPs calling upon Mr Trudeau to
resign. Massive anxiety indeed.

Mr Trudeau became a beacon of morality after he swept to power in 2015,

welcoming refugees to Canada from war-torn Syria that Christmas. He
legalised marijuana, rewarding the record number of young people who had
voted for him. He faced down a truculent President Donald Trump to
salvage the North American trade pact that is foundational to Canadian
prosperity. His government’s annual payment to families of up to C$7,787
($5,660) per child under six is hailed for lifting 435,000 children out of
poverty. After promising child-care subsidies to help more women into
work, working-class and younger voters gave him renewed minority
mandates in 2019 and 2021.

Three years later those groups have turned on Mr Trudeau. Today both tend
to support the opposition, Pierre Poilievre’s Conservatives. What went
wrong?
The unaffordability of housing is central. The cost of owning a home in
Canada has increased by 66% since Mr Trudeau took office, with prices
rising faster in this century than in any other sizeable OECD country bar
Australia. Lack of supply is a problem in many, but is especially acute in
Canada. In 2022 the average OECD country had 468 dwellings per 1,000
inhabitants. Canada had 426, a number that has hardly moved in a decade
(see chart 1). Mike Moffatt, a housing economist, says a “wartime effort” is
needed to triple the current building rate and throw up 5.8m houses in the
next ten years. No such luck. In August Canadian housing starts dropped to
an annualised rate of 217,000.

The influx of immigrants during Mr Trudeau’s decade in power has

intensified the demand for housing. The number of temporary foreign
workers jumped from 109,000 in 2018 to just under 240,000 in 2023. The
number of non-permanent residents—including temporary foreign workers,
students and asylum-seekers—has more than doubled from 1.3m in 2021 to
over 3m on July 1st, according to Statistics Canada, representing 7.3% of
Canada’s total population of 41m.

The education and health-care systems have also felt the pinch. Universities
are bursting with foreign students, often lured by unscrupulous overseas
middlemen offering “sham” degrees, according to Mr Trudeau’s
immigration minister, Marc Miller. Some 560,000 student visas were
handed out in Canada last year. Mr Miller is cutting that number to 364,000.
“It’s a bit of a mess, and it’s time to rein it in,” he said earlier this year.
Some elementary-school teachers flounder, as they grapple with the
children of recent arrivals who often speak neither of Canada’s official
languages, English and French.

The pain of high housing costs has been compounded by a mediocre

economy. Canada suffers from laggardly productivity growth, which has
suppressed wages. Investment has been strong in oil- and gas-fields, and in
extractive industries more generally, but has been overshadowed by other
parts of the economy. The share of tech, R&D and education, taken
together, in total investment is lower in Canada than anywhere else in the
G7 club of rich countries.
Canada’s economic ties with the United States have created problems since
the end of the pandemic. American spending switched disproportionately to
domestic services after lockdowns ended. This left Canadian manufacturers
—whose goods had been flying off the shelves to online shoppers south of
the border—in the lurch. The Canadian services sector had to pick up the
slack, relying on Canadian demand to drive growth in the economy.
Higher interest rates made that a tall order. In Canada, where most
mortgages are sold with rates that are fixed for five years, rate increases hit
consumer spending power harder than they did in the United States, where
fixes usually last for 30 years. Canadian households were already dealing
with more debt, relative to income, than any other G7 country. On average
15% of disposable income is now spent on servicing debt, an increase of 1.5
percentage points since 2021. Americans spend 11%. Canada’s government
has not been splurging to try and ease the pain. It ran a budget deficit of
1.1% of GDP in 2023, the lowest of any G7 country (see chart 2).

Climate change offered Mr Trudeau perhaps his clearest opportunity to

blend moral leadership with pragmatism. But he ignored polling showing
that while Canadians were concerned about the climate crisis, they were
also loth to pay taxes equivalent to a Netflix subscription to fight it. His
carbon tax, introduced in 2019, imposed a levy on greenhouse-gas
emissions. It currently runs at C$80 per tonne, scheduled to rise by C$15
annually to reach C$170 per tonne in 2030. Canada’s parliamentary budget
watchdog said on October 10th that most households would be worse off,
when indirect costs of the tax were factored in. Mr Trudeau’s failure to find
a way to compensate groups who lost out as a result of the tax left it and
him vulnerable to criticism from Mr Poilievre; he says the tax will lead to
“nuclear winter”, trigger “mass hunger and malnutrition” and compel poor,
older people to freeze. Support for the carbon levy has crumbled.
Mr Trudeau’s standing is not helped by the waning under his Liberal
government of Canada’s influence in global affairs. When it last tried to win
a seat on the United Nations Security Council in 2020, it finished behind
Norway and Ireland. It spends just 1.3% of its GDP on defence, far below
the 2% required of NATO members, and the pace set by rearming European
members facing an expansionist Russia (see chart 3). Mr Trudeau has
promised Canada will hit the 2% level in 2032. Meanwhile, relations with
Asia’s most populous countries, China and India, remain ice-bound. On
October 14th India and Canada each expelled the other’s high
commissioner, the latest move in an ongoing spat between the countries
over the murder of a Sikh separatist in British Columbia last year. In the
Middle East, Israel’s prime minister, Binyamin Netanyahu, does not return
Mr Trudeau’s calls.

Instead of adapting to or confronting challenges thrown up by his policies,

Mr Trudeau has preferred to attack his critics. He has seemed inert as the
erosion of his party’s support accelerated. Some Liberals privately suggest
the breakdown of his marriage last year distracted him. In a shuffle aimed at
energising his front bench in 2023 more than half his cabinet changed
portfolios, but the economic message remained the same: we will continue
to deliver “good things” to Canadians. Only recently has Mr Trudeau begun
to acknowledge that this fell short. “Doing good things isn’t enough to deal
with the kind of anxiety that is out there,” he told the Montreal conference.
He still describes his voters’ problems in psychological rather than practical
terms.

Boxed out

Mr Poilievre identified that economic anxiety early. This lent him

credibility with the sectors of the Canadian electorate who felt abandoned.
He has boiled his platform down to a series of simple three-word slogans.
He says his first piece of legislation will be to “axe the tax”, ditching the
carbon levy. He has yet to outline what actions his government would take
to fight climate change, but polls make it clear that Canadians care far less
than they used to. All too many have forsaken Mr Trudeau, and the causes
he stood for. ■
Editor’s note (October 15th 2024): This story has been updated with news
of the tit-for-tat diplomatic expulsions from India and Canada.

Correction (October 16th 2024): An earlier version of this article cited a

figure of C$50 per tonne as the current level of Canada’s carbon levy. In
fact, it is currently C$80 per tonne. Sorry.
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Running on empty

Bolivia’s slow-motion economic

crisis is accelerating
Dollars and petrol are scarce, and growth is weak
10月 17, 2024 07:30 上午 | LA PAZ

PICKUP TRUCKS hauling empty fuel drums are lined up outside a petrol
station next to a field of soyabeans in Santa Cruz, Bolivia. The attendant
says the queue hasn’t budged in days: there is no diesel. It’s been this way,
on and off, for two months. “And the summer sowing is about to start,” he
sighs.

Bolivian politics are messy—in June there was an attempted coup by a

rogue general. The economy is chaotic too. In February 2023, running low
on dollars, the central bank stopped publishing weekly reports on its
reserves. Since then, the government has scraped dollars together month by
month. Meanwhile, the gap between the official and black-market exchange
rates yawns wider. Imported goods are increasingly scarce and prices are
rising. It’s a slow-motion currency crisis. Bolivians are bracing for a
devaluation.

The Movement to Socialism (MAS) has ruled Bolivia for all but one year
since 2006. Some of that period has seen remarkable stability and growth. A
fixed exchange rate, subsidised energy and food, and hefty public
investment are the pillars of the MAS economic model. The state has paid
for all this using dollars earned by exporting natural gas to Brazil and
Argentina.

Then the model ran out of gas. Prices slumped as the commodity boom
ended. Production fell as the state-owned gas company stopped drilling
wells. International reserves, which stood at $15bn in 2014, have fallen to
around $2bn, with just $153m in dollars. The state now struggles to pay for
fuel imports.

And so an economy built on cheap dollars and fuel can no longer count on
either. The result is “prolonged agony,” says José Luis Exeni, a political
analyst. Importers are running down inventories and hiking prices.
Supermarkets have bare shelves and idle staff. Exporters, struggling to
source inputs, are producing less.

Billboards showing Luis Arce, the president, flying an aeroplane, with

taglines trumpeting macroeconomic stability, have been taken down. The
IMF predicts GDP growth of 1.6% this year, the lowest in two decades
(excluding the first year of the pandemic). Two years ago, the MAS boasted
that Bolivia’s inflation was the lowest in the region. Now it is among the
highest.

In response, the government is being pulled in two directions at once. In

meetings with the private sector it talks of liberalising agriculture exports
and changing the law to attract investment in oil and gas. Meanwhile,
unions want the government to force exporters to repatriate more of the
dollars they make. Giovanni Ortuño, president of a Bolivian business lobby,
says Mr Arce has assured them that the government will not take this path.
But in public Mr Arce will not rule it out.
Coercing exporters would do nothing to fix the fundamental economic
problems. That requires altering the exchange rate and the fuel subsidy; the
price of petrol has been fixed at around $0.50 per litre since 2004. It may
also mean a loan from the IMF, and broader economic liberalisation. But
the MAS considers such reforms to be against its principles. “They aren’t
pragmatic,” said Beatriz Muriel, an economist. “They are highly dogmatic.”

Politics were unstable before the coup in June. Evo Morales, a former
president, is fighting to be the candidate of the MAS in next year’s
presidential election. Mr Arce’s government is kneecapped because he
cannot count on legislators loyal to Mr Morales. Roughly $1bn of loans
from development banks worth around 2% of GDP are awaiting
congressional approval.

Mr Arce seems to be attempting to scrape through to next year’s election

without carrying out any painful-but-necessary changes. But the working-
class voters who are the core constituency of the MAS have started to
protest. “Shortages and price increases; falling purchasing power and rising
poverty; deterioration of the social mood,” says Gabriel Espinoza, a former
director at Bolivia’s central bank. “The question is when and how this will
morph into conflict in the streets.” ■

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India-Canada relations

The Mounties take on Modi. Who

will win?
India’s government has dismissed explosive charges by Canada’s police
10月 17, 2024 07:30 上午

CANADIAN THANKSGIVING is usually a sleepy holiday, unnoticed by

the rest of the world. Not this year. In a press conference held on October
14th Mike Duheme, the head of the Royal Canadian Mounted Police,
accused India’s top diplomat in Canada, Sanjay Kumar Verma, of
involvement with a criminal network that has coerced and killed Canadian
citizens who support Sikh separatism.

The Washington Post reports Canadian officials saying that Indian

diplomats had been collecting information on members of the diaspora, then
passing it to India’s Research and Analysis Wing, a spy service, to identify
targets. One official reportedly said the operation had been authorised by
Amit Shah, India’s home secretary. Indian officials have denied
involvement.

The Canadian government immediately ordered Mr Verma and five other

Indian diplomats to leave the country. “We cannot abide by what we are
seeing right now,” Justin Trudeau, the prime minister, said in a press
conference. Indian officials angrily denied the accusations and reciprocated
by ejecting six New Delhi-based Canadian diplomats from India. One
Indian official says Mr Trudeau’s statement was the “same old Trudeau
saying the same old things for the same old reasons”.

Mr Trudeau stunned Canadians in September 2023 when he first alleged

publicly that Indian agents had been involved in the shooting of Hardeep
Singh Nijjar outside a Sikh temple in a Vancouver suburb. India had
designated Nijjar as a terrorist and offered a reward for information leading
to his arrest. The Indian government said the accusation that they had killed
him was ludicrous, and demanded that Canada provide proof.

The Canadians had been attempting to do just that. Mr Trudeau discussed

the case with Narendra Modi, India’s prime minister, on the margins of the
ASEAN summit in Laos on October 10th. Canada then dispatched security
officials to Singapore to show evidence to their Indian counterparts. That
was an exceedingly rare step in spycraft, according to Ward Elcock, former
head of the Canadian Security Intelligence Service, as sharing evidence
reveals the capabilities of an intelligence service. The Indians were
evidently unmoved.

They were more receptive to similar accusations from the United States,
whose government alleged last year that Indian agents had tried to hire a
hit-man to kill Gurpatwant Singh Pannun in New York. Mr Pannun had
worked closely with Nijjar on the campaign for an independent Sikh state.
Mr Modi has co-operated with the American investigation (the unnamed
Indian official mentioned in the United States indictment has now been
arrested), but rebuffed Canada’s claims.

“That says that the Indians see Canada as weaklings, while they know they
have no choice but to toe the line with the Americans,” says Mr Elcock.
The Canadian authorities believe India was behind other assassinations
besides that of Nijjar. Any further revelations bearing that out will mean the
United States, Britain and other allies will have to choose between their
values and their strategic interests in Asia. ■

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Asia
New Zealand’s biggest pivot since the 1980s
The fifth Five Eye :: An interview with Christopher Luxon, the prime minister reshaping its
foreign policy

Bhutan prays it can be India’s Hong Kong

Big dreams in a small place :: The Himalayan kingdom seeks to reincarnate as a financial
centre

Pakistan rolls out the red carpet for China’s prime

minister
Stormy weather :: But the “all-weather strategic co-operative partnership” has hit a rough
patch

Myanmar’s military junta has conjured up a crazy

currency system
Banyan :: Desperate for cash, the Tatmadaw is distorting foreign-exchange markets

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The fifth Five Eye

New Zealand’s biggest pivot since

the 1980s
An interview with Christopher Luxon, the prime minister reshaping its
foreign policy
10月 17, 2024 07:30 上午 | VIENTIANE

ON SEPTEMBER 25TH the Aotearoa, one of just a handful of ships in the

Royal New Zealand Navy, sailed through the Taiwan Strait alongside an
Australian destroyer. The idea was to demonstrate to China that its claims to
sole control of the waterway are invalid under international law. America
does it several times a year, despite condemnations from China, sometimes
with allies such as Canada. Australia does, too. New Zealand has not made
such a bold move since 2017.
In an interview with The Economist, Christopher Luxon, New Zealand’s
prime minister, notes that, as a small trading nation, New Zealand depends
on freedom of navigation. All countries, he says, including China, need to
adhere to international law. He plays down the voyage itself: he argues it
was just the quickest way for the ship to sail from the East China Sea to the
South China Sea.

But the Aotearoa’s transit underscores a big shift in New Zealand’s foreign
policy under Mr Luxon, who took office at the head of a coalition
government in November last year. His “reset”, as he calls it, has two
elements. The first is a push to diversify New Zealand’s diplomatic and
trade relationships away from its reliance on China, which takes 27% of its
exports. This is mostly uncontroversial.

The second is to bring New Zealand into closer alignment with the other
four countries in the Five Eyes, an agreement between America, Australia,
Britain, Canada and New Zealand to share intelligence. As part of that, Mr
Luxon is prepared to align New Zealand more closely with America than at
any point since the two former allies went their separate ways in 1986. The
latter change has provoked one of the most spirited debates in New Zealand
on foreign policy since that time.

New Zealand is the only Five Eyes country that is not an American ally.
That is unlikely to change, at least on paper. America suspended its defence
commitments to New Zealand under the ANZUS alliance in 1986 in
response to a ban by New Zealand on nuclear weapons in its ports. Because
America’s navy doesn’t disclose which of its ships are carrying nukes, that
made an alliance impossible.

In the years that followed, New Zealand’s governments of the left and right
staked out a new foreign policy for the country. They forged deeper
diplomatic ties with New Zealand’s closest neighbours, the small island
countries of the Pacific, and traded more with a rising Asia. But it was only
“semi-aligned” with the West, according to Helen Clark, who served as
prime minister from 1999 to 2008. It avoided getting involved with the war
in Iraq, but sent special forces to help NATO fight the Taliban in
Afghanistan.
It also got rich. In 2008 Ms Clark’s government signed a free-trade
agreement with China. The pact, which removed 98% of Chinese tariffs on
New Zealand’s exports, spared it the worst effects of the global financial
crisis. But most of New Zealand’s exports to China are highly substitutable
agricultural goods, making it vulnerable to economic coercion.

And as trade with China grew, so did other links between the two, not all of
them benign. Under Labour governments from 2017 to 2023, prompted by
intelligence-agency warnings, New Zealand cracked down on Chinese
attempts to interfere in its politics. It tightened an investment screening
process and banned foreign campaign donations.

Although maligned by some critics as the weak link in the Five Eyes,
intelligence experts from the other members say that New Zealand’s
security services are solid. The agencies are small, but do good work in the
Pacific islands and in intercepting adversaries’ internet and satellite
communications. There have been no embarrassing counter-intelligence
lapses.
It is on defence that New Zealand’s long estrangement from America has
prevented it from making more of a contribution to upholding the rules-
based order in Asia (see chart). Mr Luxon seems ready to change that. The
sailing through the Taiwan Strait, which was followed by multilateral
exercises in the South China Sea, is one example. New Zealand has also
stepped up its contribution to the multinational task force working to
prevent North Korean oil-smuggling. The task force’s work has angered
China, even though it is operating under the authority of a UN Security
Council resolution, because China fears that it is also snooping on them.

And Mr Luxon has continued some of the Labour government’s earlier,

tentative moves in this direction, including a look at joining AUKUS, the
defence pact signed in 2021 between Australia, America and Britain. New
Zealand wouldn’t take part in efforts to develop nuclear-powered
submarines for Australia, but it might join the pact’s second “pillar”,
focused on advanced defence technologies.

Critics, like Ms Clark, say that none of this is in New Zealand’s interests.
Semi-alignment has served New Zealand well. “It takes longer to fly from
Auckland to Beijing than from Beijing to London. We are a long way south
and very remote,” she says. But Chinese attempts to sign Pacific island
countries up to security agreements over the past three years, and suspicions
regarding China’s expanded presence on Antarctica mean that even New
Zealand cannot stay out of the way of geopolitics.

If Mr Luxon wants to be more than a bystander, however, he will face real

constraints. New Zealand’s defence force is smaller than that of any of
America’s allies or partners in Asia. Its army can muster no more than a
brigade. Its air force gave up fighter jets decades ago. And its navy is down
to eight ships, following an accident which saw a survey vessel sink off the
coast of Samoa on October 6th.

The government plans to release a defence-capabilities plan later this

month. Mr Luxon will not be drawn on the report’s recommendations
before its release. But its choices will reveal much about how far it is
willing to go, according to David Capie at Victoria University of
Wellington. If naval plans focus on small patrol boats, for example, it would
suggest a force concerned with its neighbourhood and tied to New
Zealand’s “semi-aligned” foreign policy. If it opts to invest in higher-end
capabilities like frigates, however, that would signal a New Zealand ready
to do more with Australia and America to uphold the rules-based order.

One seemingly inexhaustible resource is Mr Luxon. Ten months into office,

the new prime minister has already visited America, Japan, South Korea
and half of the countries of South-East Asia. Each is at least a 12-hour flight
from Wellington, the capital. When your correspondent interviewed Mr
Luxon, he was in Laos. Asked about his travel schedule, Mr Luxon shrugs.
Prior to politics, he spent seven years as CEO of Air New Zealand. ■
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Big dreams in a small place

Bhutan prays it can be India’s

Hong Kong
The Himalayan kingdom seeks to reincarnate as a financial centre
10月 17, 2024 07:30 上午 | Gelephu

KING JIGME of Bhutan recalls that when he was studying in America, his
classmates would scoff in disbelief when he told them there were tigers and
elephants in his Himalayan homeland. Like many foreigners, they thought
of it as a place of snow-clad peaks and alpine meadows. Even those who
had visited were unlikely to have strayed to the subtropical lowlands that
border north-east India.

Now, 25 years later, King Jigme is on a fresh mission to enlighten the world
about this southern sliver of his realm. And this time, it is not just about the
wildlife. In December he unveiled plans for a new city there that would
ultimately cover 1,000 sq km, making it bigger than Singapore. Powered
mostly by hydro-energy, it is designed to house a million people, including
digital nomads, Buddhist pilgrims, crypto entrepreneurs and wealthy
expatriates. Bhutan’s current population is 780,000.

King Jigme is not the only world leader with the city-building bug. Think of
Saudi Arabia’s Neom development or Indonesia’s future capital, Nusantara.
But Bhutan’s project, Gelephu Mindfulness City (GMC), stands out in three
ways that could help it to avoid the Ozymandian fate of many such
grandiose schemes.

First, consider the geopolitics. Bhutan is land-locked between India and

China. The struggle for influence across South Asia between these two
countries has intensified lately with political upheavals in the Maldives,
Nepal, Bangladesh and Sri Lanka. Bhutan has long been in India’s camp.
But in the past decade, it has expanded trade, tourism and other links with
China, while edging towards resolving a border dispute. In 2023 it appeared
close to a land swap, and possibly establishing diplomatic ties, with China.

India objected. It has hundreds of troops in Bhutan and fears that

encroachment by China there could help Chinese forces, in a war, to sever
India’s access to its north-east. India has since pledged $1.2bn of
development support for Bhutan in the next five years, double that of the
previous five. Bhutan now accounts for 36% of Indian foreign aid, more
than any other nation. India has also backed GMC. It is building road and
rail links and discussing developing a new international airport there. It will
provide much of the labour. And rich Indians seeking refuge from
congested cities are among the prime targets for GMC’s promise of luxury
homes and low taxes.

Indian firms could play an important role. On October 2nd the Reliance
Group announced plans to invest $700m in two power projects, one in
GMC and one nearby. Adani Group, another Indian giant, has also
expressed interest. Because of India’s proximity and friendly ties, the
“threshold for allowing Indian contractors would be much lower,” says
Lotay Tshering, GMC’s governor. He says there have been no talks with
China about its involvement in the city, which will supposedly rely on
private investment. But, he adds, there should be no “exclusion criteria”.

The second feature of GMC is its possible draw for the artificial
intelligence and crypto industries. Bhutan has 2.5GW of installed
hydropower but potential for over 30GW. GMC’s managers say they are
talking with big data-centre investors who are scouting for sites with
renewable energy sources. One obstacle could be American export controls
on AI-related technology. Tshering Tobgay, the prime minister, is confident
he can satisfy American regulators and convince India to allow its data to be
stored in Bhutan too.

An additional lure for tech investors is progressive regulation. GMC will be

a “special administrative region”, allowing more autonomy than a typical
“special economic zone”. Laws will be based on Singapore’s and financial
regulation on Abu Dhabi’s. Investors will be able to shape regulation too,
especially in sectors such as AI, biotech and crypto. Fanciful as that might
seem, Bhutan is already a bitcoin pioneer, with six operational mines. In
September its bitcoin holdings were valued at $750m, the world’s fourth-
highest.

The secrecy of that venture worries some Bhutanese. Foreign officials also
fret that Bhutan could attract money from illicit sources or nations facing
Western sanctions. Bhutan says it will carefully screen all investors. But
how exactly is unclear, given its limited resources and ill-defined
diplomatic outlook (it has no official relations with the five permanent
members of the UN Security Council).

The project’s third unique trait is the existential crisis behind it. Bhutan has
achieved remarkable success since introducing Gross National Happiness as
a development measure in the 1970s. In December it graduated from the
UN list of “least developed countries”. Its youth literacy rate is above 97%.
Since 2015, however, more than 6% of its residents have emigrated, many
of them to Australia. King Jigme hopes that GMC will tempt them back
while teaching other Bhutanese to compete at home with foreign talent. And
if the project succeeds, he plans to introduce similar policies across the
country.

GMC’s promoters talk a lot about “mindfulness”, touting it as a place of

spiritual retreats and harmony with nature. At its core, though, the idea is
much harder-edged: it is designed to be a financial centre offering a
gateway to India, much as Singapore and Hong Kong do for China. It is a
long shot. But as King Jigme told recent visitors, it may be the only hope
for his nation’s future. ■
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Stormy weather

Pakistan rolls out the red carpet for

China’s prime minister
But the “all-weather strategic co-operative partnership” has hit a rough
patch
10月 17, 2024 07:30 上午 | Islamabad

THE SUICIDE BOMBER’S video message is chilling and direct. “China,

your interests are not welcome here. Your investments will be burned, your
investments will not be safe,” he warns. On October 6th he struck, ramming
an explosives-filled pickup truck into a convoy of Chinese workers outside
the airport in Karachi. Two Chinese nationals were killed. The attack was
claimed by the Baloch Liberation Army, a separatist group fighting the
Pakistani state—and, increasingly, Chinese interests in Pakistan.
The timing is as clear as the bomber’s message. On October 14th Li Qiang,
China’s prime minister, arrived in Islamabad, the federal capital, for a
heads-of-government summit of the Shanghai Co-operation Organisation.
Mr Li is the highest-ranking Chinese official to visit Pakistan since
President Xi Jinping in 2015. That visit formally launched the $62bn China-
Pakistan Economic Corridor (CPEC), a series of infrastructure and energy
projects.

Mr Li visits in very different circumstances. Pakistan’s government is

desperate to impress—a 21-gun salute and a red-carpet welcome met him at
the airport—and desperate to keep the peace. Islamabad went into
lockdown. A three-day local holiday was declared. Army and paramilitary
troops patrolled the streets of the capital. Because of the security risk, the
movements of Chinese citizens within Pakistan were curbed during the
summit.

China is in the crosshairs of Pakistani militants for two reasons. Baloch

separatists have been waging a low-level insurgency against the Pakistani
armed forces since 2004. They, like the Karachi bomber, believe Chinese
investments “extract wealth”. The conversion of Gwadar, a small fishing
town, into a deep-water port under CPEC attracts particular separatist ire.
On October 14th Mr Li inaugurated a $230m international airport in
Gwadar “virtually” from Islamabad, some 1,400km away. The start of
operations at the airport was delayed after militants killed 70 in attacks
across Balochistan on August 26th.

Islamist militants, angered by China’s treatment of Uyghurs, are the other

threat. In March five Chinese engineers were killed in a suicide bombing
near a hydropower project. Pakistan’s government blamed the Tehreek-e-
Taliban Pakistan, the Pakistani branch of the Taliban, and arrested 11 of its
members.

The financial side of the relationship is also under strain. Chinese power
plants have added 8GW to the electricity grid in Pakistan, but at a steep
cost. Pakistan owes China some $1.9bn in unpaid dues and $16bn in loans
that it is trying, unsuccessfully, to renegotiate. The logjam has stalled the
next phase of CPEC.
However, in September Pakistan landed a new 37-month, $7bn deal with
the IMF after China helped roll over $12bn in credit to Pakistan (Saudi
Arabia and the UAE also chipped in). “China is absolutely clear about the
strategic importance of Pakistan, to balance India,” says Asfandyar Mir, an
analyst at the United States Institute of Peace, a think-tank in Washington.

Mr Mir also senses a “shifting centre of gravity” to more military matters in

the relationship. Evidence for that abounds, from co-operation on building
submarines to tanks to fighter jets. Also in September, America announced
new sanctions against Pakistani and Chinese entities involved in ballistic-
missile technology, the sixth round of sanctions since November 2021.

“The Pak-China relationship is multi-faceted, it will survive,” says

Mushahid Hussain, chairman of the Pakistan-China Institute, an Islamabad-
based think-tank. But he notes that the Chinese are “hopping mad”, and
thinks they are pushing hard for new security measures, including
deploying Chinese security inside Pakistan. That has been resisted in the
past. It could just offer militants more targets. ■
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Banyan

Myanmar’s military junta has

conjured up a crazy currency
system
Desperate for cash, the Tatmadaw is distorting foreign-exchange markets
10月 17, 2024 07:30 上午

THE FOREIGN-EXCHANGE market is a devilishly difficult place to turn

a profit. Massive and closely watched, edges are impossible to maintain.
Most FX traders lose money. So Banyan was impressed to encounter one
Myanmar-based punter who, with just a few years’ experience, has
managed to produce 22% returns trading the volatile, illiquid kyat, the local
currency. Or, rather, he would be impressed—were this upstart trading
against counterparties who had any say in the matter.
In the 12 months ending in June, the Tatmadaw, the army that overthrew
Myanmar’s elected government in 2021, earned Ks6.4trn ($1.8bn) from the
FX market, according to a recent analysis by Jared Bissinger, a Burma-
watcher. These proceeds, bigger than the military budget, were not the fruits
of market nous. Instead, they were stolen from Myanmar’s exporters
through a system of rigged exchange rates.

The scheme works like this: Burmese exporters earn revenue abroad in
foreign currency and must book profits in kyat. Exporters would prefer to
swap to kyat at the prevailing market rate (about 4,400 kyat per US dollar),
but since 2022 have been forced to do so at two rates set by the junta. A
quarter of proceeds must be converted at the official rate, which, at 2,100
kyat per dollar, is divorced from reality. Second is the slightly less mad
“online platform rate”, around 3,500 kyat per dollar, at which the remaining
three-quarters of export earnings must be converted. The junta-controlled
central bank tightly manages trades happening through a London-based
platform.

The result is that a third of exporters’ earnings are syphoned off to the
regime, calculates Mr Bissinger. Some go towards providing subsidised FX
for favoured importers, such as those bringing in fertiliser and fuel.
Increasingly, the funds are being used for the Tatmadaw’s foundering war
effort. FX is needed to buy military equipment, much of which Myanmar
cannot make itself. Private companies help the military import arms through
a shadowy trade network that runs from Thailand to Russia. Though this
“death trade” has shrunk recently, it still amounts to $250m in the most
recent fiscal year, the UN’s special rapporteur estimated in June.

These economic tactics are brutal, just like the Tatmadaw’s conduct on the
battlefield. They suggest that the army is desperate. As a share of GDP, the
budget deficit is on track to triple in three years. American sanctions have
stranded at least $1bn in FX reserves; another $4.5bn appears to be in limbo
in banks in Singapore. Myanmar’s fossil-fuel reserves, once abundant, are
drying up. New drilling projects have ceased, oil majors such as Total and
Chevron have fled, and China and Thailand, the biggest buyers of Burmese
gas, are diversifying away. Artillery shells frequently fall near pipelines.
The junta-dominated jade trade (at one point worth $31bn annually, the
equivalent of half of Myanmar’s GDP) is under assault from China. In
nominal terms, tax revenue looks stable, but inflation has undermined
purchasing power. Prices rose by 27% in both 2022 and 2023.

Meanwhile, many Burmese are fleeing the country and trying to get their
money out, too. This applies constant downward pressure on the currency.
The Tatmadaw has tried to arrest its way to currency stability: in June it
charged dozens of FX and gold traders for “engaging in speculation to
hinder the country’s economic development”. Yet the kyat will not co-
operate: in August, it fell as low as 7,500 per dollar, more than triple the
official rate, and has remained volatile. To finance government spending at
home the junta has resorted to money-printing. The National Unity
Government, a government-in-exile made of opposition lawmakers, claims
the junta has printed 30trn kyat ($6.8bn) since it seized power in 2021. This
has stoked inflation. The price of staples has risen by 426% since the coup.
Half the country is in poverty.

All this is short-sighted. The Tatmadaw is risking economic collapse. By

rigging exchange rates and printing money, it has massively distorted price
signals. This is destroying commercial activity. Foreign sales of garments
and gas, Myanmar’s biggest exports, have fallen sharply. The junta’s FX-
meddling is cannibalising its remaining legitimate sources of foreign
exchange. And further battlefield losses to rebel groups in parts of the
country will hardly make it a wiser economic manager. A saying about
myopic traders applies: the Tatmadaw is, by all appearances, picking up
pennies in front of a steamroller. ■
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China
Does China welcome—or dread—an Iran-Israel war?
The view from Beijing :: It wants American interests to suffer, but not at any price

China makes love and war with Taiwan

Drill, baby, drill :: The government in Beijing tests the armed forces—and its own messaging

Do amateurs regret jumping into China’s frenzied

stockmarkets?
Buy, buy, buy…sell! :: Some have made small fortunes, others have lost everything

In China, fib online and find out

Evil influencers :: The police are punishing those who engage in even idle boasts

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The view from Beijing

Does China welcome—or dread—

an Iran-Israel war?
It wants American interests to suffer, but not at any price
10月 17, 2024 07:30 上午

LAST MONTH, as tensions escalated between Iran and Israel, China

helped organise a Chinese film festival in the Iranian capital, Tehran. It
opened with a blockbuster: “The Battle at Lake Changjin”. The drama
portrays the heroism of Chinese soldiers who fought against American
troops in the Korean war of 1950-53. “Strike one punch to avoid a
hundred,” Mao Zedong is shown exhorting his colleagues. Nationalist
bloggers in China crowed about the film’s showing. “Iran cannot sit idly by,
even if the United States is behind Israel!” wrote a widely read scribe.
As Chinese officials ponder the violence in the Middle East since then, they
may be less keen on escalation. Iran fired a barrage of missiles at Israel on
October 1st. Israel has relentlessly attacked Iran’s proxies in Gaza and
Lebanon. All of that unsettles China, which is by far the most powerful of
four countries—also including Iran, North Korea and Russia—that have
acquired monikers in the West such as the “axis of upheaval” and the
“quartet of chaos”. The four share a contempt for the American-led global
order and a readiness to disrupt it. Their security-related dealings with one
another are often shadowy. But, notwithstanding its own muscle-flexing
around Taiwan (see next story), there are limits to China’s appetite for
conflict.

China’s relationship with Iran illustrates its dilemma. Leaders in Beijing

have a lot of sympathy with Iran’s worldview. Last year it was given full
membership of the Shanghai Co-operation Organisation, a Eurasian security
and economic club dominated by China and Russia. In January Iran was
admitted to the BRICS, another group that China and Russia are trying to
nurture as a bastion of West-sceptics.

China also benefits from Iran’s abundant supply of oil. The volume of this
trade is hard to quantify because of the elaborate schemes that China and
Iran use to evade American sanctions. But estimates put it at 10-15% of
China’s crude imports. That is most of Iran’s exports of the fuel.

As the world’s biggest buyer of foreign oil, China worries about the
potential impact of a wider war in the Middle East on the flow and cost of
the stuff. Iran sells its oil cheap. An Israeli strike on Iranian oil facilities
could force China to depend more on other, pricier suppliers such as Saudi
Arabia. But Saudi shipments could be disrupted in the Strait of Hormuz or
the Red Sea by missile strikes from Iran or the Iranian-backed Houthis in
Yemen.

This may not be disastrous for China. It is thought to have reserves that
would cover three or four months of lost imports. And oil accounts for 18%
of China’s energy supply, compared with 34% in America. But a big war
could also threaten China’s commercial interests in the Middle East. It has
poured billions of dollars into energy and infrastructure projects, especially
in Gulf countries such as Saudi Arabia and the United Arab Emirates. Israel,
too, is a recipient of Chinese investment (despite China’s support for the
Palestinian cause).

China sees American power waning in the Middle East, and senses an
opportunity. It has forged close ties with Iran, but also with Saudi Arabia
and Iran’s other rivals. China describes its big investments in the region as
part of its Belt and Road Initiative (BRI), a global infrastructure-building
scheme aimed at boosting trade and Chinese clout. The BRI’s politics-blind
approach helps to cast China as a non-meddling power. It is eager to foster
that image in the global south, which it views as a counterweight to
America.

But as the Middle East threatens to descend into ever wider conflict, with
Iran—a prominent Chinese friend—at the centre of it, China’s diplomatic
impotence in the region risks being exposed. It has been trying to
demonstrate otherwise. In March last year it brokered the final stages of a
deal between Iran and Saudi Arabia to restore their long-severed diplomatic
relations. In July the rival Palestinian factions, Fatah and Hamas,
announced a vague agreement in Beijing to co-operate in forming a new
government for Palestinians when the war in Gaza ends.

These moves have done nothing to stop the violence, however. Israel
rejected the “Beijing Declaration”—it wants no role for Hamas in the
Palestinian territories. Iran’s dependence on China as a buyer of its oil
would appear to give China leverage over the Islamic Republic. But China
apparently sees greater dividends from America’s embroilment in Middle
Eastern conflict than from trying to keep Iran in check. An America
distracted by wars in Ukraine and the Middle East, China may reckon,
would have less appetite for confronting China over Taiwan or the South
China Sea.

That does not mean that China is eager to fan the flames. The security ties
between it and Iran are limited. A report published this month by the
Carnegie Endowment for International Peace, a think-tank in Washington,
notes “rumoured” Chinese provision of satellite technology for Iran’s
ballistic-missile programme. But an agreement signed in 2021 has produced
little in the way of military co-operation, apart from some joint drills that
Western intelligence analysts deem largely insignificant. And though the
deal reportedly dangled the possibility of $400bn in Chinese investment
over 25 years, China shows no eagerness to pour money into Iran.

To China, the two other members of the quartet are more vital concerns.
Russia and North Korea both border China and act as buffers against
encroachment by American power. But even with these countries, China
does not offer carte blanche. It gives massive technological support to
Russia’s defence industries, while appearing to stop short of providing
weapons for use against Ukraine (despite a partnership with Russia that
they both describe as having “no limits”). China has made clear its
opposition to Russia’s threatened use of nuclear weapons in that conflict.

With regard to North Korea, China did not stop it from acquiring nukes, but
it was clearly angered by the move. It may have also taken a dim view of
the agreement, which looks a lot like a defence treaty, that North Korea and
Russia signed in June. With Russia in the mix, China risks losing some of
its influence over North Korea.

China sees all of its authoritarian friends as useful for discomforting

America. But it also treats them with caution, showing a smaller appetite
for risk than other members of the quartet. In the Middle East, it does not
want to become enmeshed in a complex struggle. If things really kick off
between Israel and Iran, leaders in Beijing are likely to stand back and
watch, with fingers crossed that China’s interests survive the crossfire. ■

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Drill, baby, drill

China makes love and war with

Taiwan
The government in Beijing tests the armed forces—and its own messaging
10月 17, 2024 07:30 上午 | TAIPEI

CHINA’S WAR games around Taiwan on October 14th broke records for a
single-day drill. The People’s Liberation Army (PLA) employed 153
aircraft. Taiwan’s defence ministry also spotted 26 ships, including a
Chinese aircraft-carrier. As if that were not enough, China’s coastguard
carried out an unprecedented patrol around Taiwan’s main island, calling it
a “practical action to control Taiwan island in accordance with the law
based on the one-China principle”.
This was “punishment”, said China, “for Lai Ching-te’s continuous
fabrication of ‘Taiwan independence’ nonsense”. On October 10th Mr Lai,
Taiwan’s president, gave a speech to mark the local national day. Chinese
state media claimed that he provoked the government in Beijing by
“indulging in outright secessionist and blatantly provocative remarks”.
Xinhua, the official news service, noted that instead of referring to China as
the “the mainland”, which would suggest that China and Taiwan are one
country, he referred to it as “China”, as if they were separate.

Mr Lai seems to enjoy throwing rhetorical barbs at China. In September he

said that if the country really cared about territorial integrity, it should take
back land annexed by Russia in the 19th century. On October 5th he said it
was “impossible” for China to be Taiwan’s motherland because the modern
incarnation of Taiwan was 38 years older than Communist China. But Mr
Lai’s speech on October 10th was relatively restrained. He made no
mention of independence, though he said Taiwan would “resist annexation”
or “encroachment upon our sovereignty”.

The speech, then, was probably not the main impetus for China’s war
games. Taiwanese officials say that China was preparing for the drill before
Mr Lai spoke on October 10th. Called Joint Sword-2024B, the exercises
were a follow-up to a two-day drill in May, called Joint Sword-2024A. The
PLA said version B aimed to test the ability of its army, navy, air force and
rocket force to work together. China did not fire any missiles over Taiwan,
but it practised blockading Taiwanese ports and assaulting maritime and
ground targets.

It is also practising its messaging. China is eager to shape the narrative

around its military activity. Its claim to have been provoked by Mr Lai
appeared aimed at giving the exercises an air of legitimacy. Were China to
actually move against Taiwan, it would probably blame Taiwanese leaders
for upsetting the status quo. China is also trying to paint its dealings with
Taiwan as a domestic affair. The inclusion of China’s coastguard in the drill
seemed like an attempt to reinforce its claim that the waters around Taiwan
are actually Chinese.

The coastguard, for its part, sent its own message. It produced an image,
shared widely online, of its ships sailing around Taiwan in the shape of a
heart, accompanied by the words: “Hi, my sweetheart…Patrolling around
you in the shape of love.” That prompted some in Taiwan to compare China
to an abusive partner. It seems the coastguard’s public-relations team still
needs more practice. ■

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Buy, buy, buy…sell!

Do amateurs regret jumping into

China’s frenzied stockmarkets?
Some have made small fortunes, others have lost everything
10月 17, 2024 07:30 上午 | BEIJING

“I can’t even do the maths any more! It’s so incredible!” With those words,
uttered on September 30th, a retail trader summed up the state of China’s
stockmarkets during a surge that lasted from mid-September to early
October. Posting on social media, the man marvelled at the boom in share
prices. Others told triumphant tales of enormous returns.

Already rising, Chinese stocks took off after the government announced on
September 24th new measures to boost the economy and increase
consumption. These included a policy-rate cut and lower reserve
requirements for banks. The central bank also promised to create a 500bn-
yuan ($70bn) swap programme to fund stock purchases by institutional
investors and said it would help firms buy back their own shares by
refinancing certain loans.

That led to record-setting trading volumes and big rises in China’s main
stockmarket indices. The CSI 300, an index of the country’s biggest stocks,
shot up by as much as 35% during the buying spree (see chart). Data from
securities firms, reported in local media, suggest that young punters were
eager to get in on the action. Many of those opening new brokerage
accounts were born after 1990, according to the firms. State media reported
that traders were taking out consumer loans to buy stocks, leading to stern
warnings from officials.

One of those who opened a new account was a 26-year-old graduate student
in Beijing. She had long considered entering the market, yet resisted, she
told The Economist. The recent surge convinced her to jump in. At the end
of September she put 15,000 yuan, most of her savings, into the account.
“With the little money I have, there is absolutely no way I could consider
buying property or investing in anything else,” she said. “So I thought
maybe I could make a little money this way.”

For days she was glued to her phone, watching stock prices rise. The fun
ended on October 9th, when the indices took a downward turn. This came
on the heels of an announcement that disappointed investors. While talking
up the need for more stimulus, officials offered only vague hints about what
was to come. A detail-free press conference by the Ministry of Finance on
October 12th added to the sour mood. News that the government may raise
6trn yuan from special treasury bonds over three years has so far failed to
lift spirits.

The frenzy highlights a stubborn feature of the country’s stockmarkets, says

Michael Pettis of the Carnegie Endowment for International Peace, a think-
tank based in Washington. Most investors are responding to signals from
regulators, looking at the same information and interpreting it in the same
way. “This always leads to huge volatility as everyone rushes to buy or sell
at the same time,” he says.

The student from Beijing considers herself lucky: “I got out before I lost
everything.” She found the experience nerve-racking and is not planning to
trade more in the future. Others have fared much worse. One investor
griped on social media that he had lost 600,000 yuan in two days. “I was
told there is a bull run,” he wrote, “but where is the bull?” ■

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Evil influencers

In China, fib online and find out

The police are punishing those who engage in even idle boasts
10月 17, 2024 07:30 上午 | BEIJING

LAST MONTH a 33-year-old woman in Xi’an, in central China, posted a

video on social media that showed snowflakes falling on the ancient city. It
was early in the year for such weather, so netizens shared the video widely.
But it turned out to be fake. When China’s police found out, they detained
the woman, accusing her of being an “evil influence” on society.

That might seem a little heavy-handed, but China’s police take online
fibbing seriously. In July they detained a man in Hengyang, in southern
China, after he boasted on social media that he had been the first person
ever to ride the local Ferris wheel (he had not). In December they detained a
woman in Liaocheng, in the east, after she shared a video showing her
delivering junk food to her sick mother-in-law (it had been staged to
generate outrage).

The police justify such actions by citing a sweeping law against “spreading
rumours”. It allows them to hold someone for up to ten days without going
through China’s court system. Between January and mid-September, they
punished 31,000 people for the offence as part of a “special action to
combat rumours”. The goal, officials say, is to make sure cyberspace stays
“clear and bright”.

But another aim is to make sure cyberspace stays under the thumb of the
Communist Party. While officials clean up genuine misinformation, they
also label anything that contradicts the party line as such. China’s leaders
fear that loosening control of the internet could threaten social stability.
Crackdowns are a good way to remind the public that there are real-life
consequences to posting the wrong thing.

The case of the woman in Xi’an caused much debate. Few people on
Weibo, a social-media platform, seemed to think her punishment was
deserved. A bold commenter asked if people still remembered the case of Li
Wenliang. He was a doctor in the city of Wuhan who, in late 2019, sounded
the alarm about a coronavirus outbreak before China’s government admitted
there was a problem. Li, who eventually died of covid-19, was quickly
detained by the police—for spreading rumours. ■

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Middle East & Africa

Bad ideas are back on the menu in the Middle East
Once more, with feeling :: From a proxy force in south Lebanon to regime change, what’s old
is new again

Does Israel’s new plan for Gaza include withholding food?

Hell and horror, again :: Israel’s government says no, but America is demanding the ramping
up of supplies

Lebanon’s army is less useless than its reputation suggests

Above the fray :: It is one of the few remaining institutions holding the country together

How Wagner survived Yevgeny Prigozhin’s death

A study in resilience :: Its mercenary model is still effective in Africa’s most fragile places

Africa’s EV revolution has two wheels not four

Next-generation transportation :: E-bikes are cheaper and less likely to choke you

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Once more, with feeling

Bad ideas are back on the menu in

the Middle East
From a proxy force in south Lebanon to regime change, what’s old is new
again
10月 17, 2024 07:30 上午 | DUBAI

IN THE LATE 1990s Israel started work on a memorial to honour the South
Lebanon Army (SLA), its proxy force during its occupation of Lebanon. It
was inaugurated in May 2000, two days before Israeli troops withdrew from
the country. The SLA collapsed almost immediately; its fighters fled to
Israel or surrendered. The monument was blown up by Hizbullah.

History has a way of repeating in the Middle East. A quarter-century later,

Israeli troops are once again fighting in the same part of Lebanon.
Hizbullah has spent the past year firing rockets at northern Israel, and it has
built up a formidable network of tunnels and bunkers along the border. The
war is meant to push it back, as the Lebanese army and UN peacekeepers
have been unable to do for decades.

Yet, as they discuss how to keep the militia out of south Lebanon,
policymakers in Israel and the West have revived some old (and often
failed) ideas about how outsiders might try to change the region.

Yair Lapid, the Israeli opposition leader, thinks the way to secure the border
between Israel and Lebanon is by reviving the SLA. In a By Invitation
essay written for The Economist, Mr Lapid called on America, France and
the United Arab Emirates to train and fund a new force that would serve as
a “buffer” between Israel and Hizbullah.

With foreign funding, Mr Lapid suggested, the new SLA could pay fighters
$500 a month, five times more than the regular Lebanese army can pay.
That, plus a “patriotic call” to “seize the opportunity for a better future”,
would ensure a flood of new recruits.

History suggests otherwise. The SLA, which broke away from the Lebanese
army during the civil war in the 1970s, paid high wages yet often struggled
to find fighters. It forcibly conscripted thousands of young men, and
sometimes used child soldiers. It was a brutal militia, notorious for torturing
thousands of people at a detention centre in Khiam, but not a terribly
effective one: it could not fend off Hizbullah without constant Israeli
support.

A revived SLA would fare little better. Few Lebanese would be willing to
join a force that would be seen as an Israeli proxy. The regular army, for all
its faults, is seen as one of the few bodies that transcends Lebanon’s
endemic sectarianism. A new SLA would be mired in it, alarming
Hizbullah’s Shia constituency, which would probably see the force as a
threat. That would be true even if, as Mr Lapid suggests, the new militia
was placed under the authority of the Lebanese government.

All this is in any case impossible right now: Lebanon has no president to
oversee it. The post has been vacant since Michel Aoun ended his term in
October 2022. The consensus choice for his successor is General Joseph
Aoun, the army chief (the two are unrelated). But Hizbullah is keen to hand
the job to Suleiman Frangieh, the head of a small political party, whose
main qualification is his fondness for the Assad regime in Syria. Parliament,
which selects the president, is deadlocked. After a dozen failed votes, it
gave up trying; the last ballot was in June 2023.

Amos Hochstein, America’s special envoy to Lebanon, says his top priority
is filling the vacancy. Some lawmakers in Washington are now pushing for
sanctions on Nabih Berri, the speaker of parliament, if he fails to call for
another ballot and break the impasse. “We hope that Hizbullah is degraded
enough that they are less of a force in Lebanese politics,” says Matthew
Miller, a State Department spokesman.

For Lebanese, this is another echo of the 1980s. Back then Bachir Gemayel,
the head of Lebanon’s largest Christian militia, cemented his power through
an alliance with America and Israel. He was elected president of Lebanon in
August 1982 with the help of Philip Habib, who was Ronald Reagan’s
envoy to the region. Less than a month later Gemayel was dead,
assassinated by a member of a party aligned with Syria.

In Lebanon, it does not serve anyone’s interests to be seen as the American-

Israeli candidate. The more the two allies push for General Aoun, the less
likely he is to become an effective president.

Joe Biden is old enough to remember all this. In 1982 he was already a
second-term senator. He might also remember that Mr Reagan, despite his
sympathy for Israel, withheld delivery of F-16 fighter jets in protest over
how Israel waged war in Lebanon. A decade later George Bush senior
temporarily blocked $10bn in loan guarantees over the construction of
illegal settlements in the occupied West Bank.

Aside from holding up one shipment of 2,000-pound bombs, Mr Biden has

so far avoided such confrontations with Israel. On October 14th, though, his
administration told Israel to increase the flow of aid to northern Gaza within
30 days or risk losing American military aid. That would be an effective
idea to resurrect from the 1980s: America has leverage over Israel, if it
chooses to use it.
Critics doubt the president will follow through, however: he has spent a
year making demands of Israel only to see them ignored. After warning
Israel for months against a big escalation in Lebanon, his advisers now
support it; they seem to agree with Israeli officials that the invasion offers a
chance to transform the region.

Indeed, talk to Middle East hands in Washington over the past month, and
they often sound euphoric. Jared Kushner, Donald Trump’s son-in-law and
former adviser, captured the excitement with a tortured metaphor. “The
Middle East is too often a solid where little changes,” he mused on X last
month. “Today, it is a liquid and the ability to reshape is unlimited.”

It is not just Lebanon they hope to reshape. Perhaps regime change is back
on the menu: there are discussions about whether Israel should try to topple
the Assad regime, or if air strikes in Iran could collapse the Islamic
republic. “It’s like 2003 all over again,” grumbles one American diplomat in
the region, referring to the heady mood around the invasion of Iraq (which
ended badly for its architects).

This is a moment of change for the Middle East. But there are no easy
solutions for problems that have evolved over decades. Even if General
Aoun becomes president, he cannot push Hizbullah out of political life:
Lebanon’s sectarian system ensures it will have a role.

As for the Lebanese army, it is weak because everyone wanted it to be. Its
Western partners would not give it sophisticated weapons, while Hizbullah
and its allies refused to let it exercise sovereignty. A new, parallel force will
not change this. It will simply give Hizbullah a new target—and, perhaps,
give Israeli architects reason to build a new memorial. ■

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Hell and horror, again

Does Israel’s new plan for Gaza

include withholding food?
Israel’s government says no, but America is demanding the ramping up of
supplies
10月 17, 2024 07:30 上午 | JERUSALEM

HARROWING FOOTAGE of limbs attached to intravenous drips inside

burning hospital tents in Deir al-Balah in Gaza on October 14th was a
reminder that the war there—one of several fronts Israel has been fighting
on since Hamas massacred 1,200 people a year ago—is far from over.
Although the world’s focus is on Lebanon and a possible Israeli retaliation
against Iran, the horror in Gaza continues.

Four people were killed and dozens wounded in Gaza after Israeli air
attacks. More than 42,000 people have been killed in the strip since October
7th 2023, according to the Hamas-run authorities. The Israel Defence
Forces (IDF) claimed they had conducted a “precise strike” on a “terrorist”
headquarters adjacent to a hospital. On October 6th nearby Jabalia, a
refugee camp, was surrounded by an armoured division. The IDF says that
it is attacking some 4,000 Hamas fighters who have been regrouping in
northern Gaza. In response the IDF has told civilians in the north to
evacuate. It has halted convoys carrying food, leaving the area without
vegetables, fruit, yogurt or even rice. “For a fortnight we’ve only eaten
beans and bread,” says a former civil servant.

Israel’s own figures suggest the overall flow of aid to Gaza, measured by
weight, has dropped by more than half during October so far compared with
the rate in September. That has angered America. On October 14th Antony
Blinken, the secretary of state, and Lloyd Austin, the defence secretary,
threatened to cut military aid to Israel if it does not increase the flow of
supplies. This was the most overt warning in this war from Israel’s main
ally and it led to the IDF’s allowing the first humanitarian convoy into
northern Gaza in two weeks.

Some speculate that the IDF will implement what the Israeli media is
calling “the generals’ plan” to eliminate Hamas fighters and press their
leader, Yahya Sinwar, to release the 101 Israeli hostages still being held.
The plan—proposed by a group of retired generals—entails cutting off food
supplies to northern Gaza where roughly 400,000 civilians are present
(down from a pre-war population of about 1.1m), and demanding that they
move elsewhere in Gaza where supplies would continue. Anyone who
remains would be treated as a combatant. For now, despite going hungry,
people are not leaving. Resistance, for most, is staying put. Leaving “is
going from one hell to another”, says one resident. “We’d rather die in our
homes.”
The IDF denies it is implementing any such plan, which would probably
amount to starving out the population and be in breach of international law.
It insists its operation is aimed at preventing Hamas from regrouping.
Israel’s defence minister, Yoav Gallant, and the IDF Chief of Staff,
Lieutenant General Herzi Halevi, have tried to assure their American
counterparts of that. But further down the chain of command, the Israeli
denial is less emphatic. “The operation in Jabalia is very clearly aimed at
getting the civilians to leave north Gaza,” says one officer involved in the
fighting. “But it hasn’t worked because the Palestinians just refused to
leave.” Another officer says, “some of the senior commanders in Gaza have
been trying to achieve this outcome, but they don’t even have sufficient
forces to carry out such a major operation”.

Four divisions, the bulk of the IDF’s ground forces, are involved in a
campaign in southern Lebanon against Hizbullah, which has been shelling
Israel’s northern communities for over a year. Meanwhile, Israel’s military
planners are focused on its response to the salvo of 181 ballistic missiles
fired from Iran on October 1st. This is expected to take place within days,
most likely in the shape of long-range air strikes. The arrival in Israel on
October 15th of an American THAAD (Terminal High Altitude Area
Defence) anti-missile battery and its crew suggests that Israel has struck an
agreement with America and will probably hit military targets in Iran but
refrain from hitting oil facilities and nuclear sites. One Israeli official
admits that with the top brass preoccupied by Lebanon and Iran, the
commanders in Gaza may have taken their own initiative.

Israel’s incoherent strategy in Gaza reflects the divisions within its

government. Binyamin Netanyahu, the prime minister, has yet to present a
comprehensive “day after” plan for Gaza. His main opponent in cabinet, Mr
Gallant, is in favour of gradually handing over control to a new
administration of local Palestinian leaders who are not aligned with Hamas.
But Mr Netanyahu has refused to authorise such a plan. Meanwhile, the far-
right parties in his coalition, who say they want to build settlements in
Gaza, are demanding that the IDF take over full responsibility for supplies.

“If we take responsibility for the distribution of food in Gaza, it means we

have to establish a full administration there,” says a general opposed to the
far-right’s plans. Mr Netanyahu, whose parliamentary majority needs the
far-right parties, has not taken a clear position on the aid issue. He is in no
rush to end the war in Gaza, since it would be followed by a national
reckoning over his government’s failings in preventing the Hamas attack on
October 7th.

“A year into this war and there still isn’t any clear strategy on how to deal
with Gaza,” says an exasperated Israeli security official. “The government
is focused on the war with Hizbullah and Iran, but Gaza is where it all
started and they’re ignoring it now at Israel’s peril.” ■

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Above the fray

Lebanon’s army is less useless than

its reputation suggests
It is one of the few remaining institutions holding the country together
10月 17, 2024 07:30 上午 | Beirut

IN A COUNTRY that has just been invaded by Israel, you might expect
soldiers to be manning watchtowers. In Lebanon, they are just as likely to
be spotted driving taxis. With money tight and morale low, General Joseph
Aoun, the army chief, is letting his roughly 80,000 soldiers bunk off from
duty several days a week to supplement their meagre wages, which have
fallen to as little as $100 a month since the country’s economic meltdown in
2019. This pragmatic policy has stopped soldiers from defecting
completely, so they show up to work at least on the days they are not
officially moonlighting. That has kept Lebanon’s army functioning even as
just about everything else resembling a state has crumbled around it.
Lebanon’s army gets a bad rap, especially for its failure to expel Hizbullah,
the Iran-backed Shia militia, from southern Lebanon. Yet the leadership of
the Lebanese Armed Forces (LAF) has kept it somewhat above the fray of
Lebanon’s corrupt political system, allowing it to keep sectarian violence at
bay in the crumbling country. As the conflict between Israel and Hizbullah
intensifies, that role is growing ever more vital.

The LAF has been criticised for failing to enforce UN Security Council
Resolution 1701, which formally ended the war between Israel and
Hizbullah in 2006. Aided by UN peacekeepers, it was supposed to force
Hizbullah’s fighters to abandon their positions near the Israeli border in
south Lebanon and stay behind the Litani river, some 30km from the border.
Yet the resolution was never fully implemented. The area remained under
Hizbullah’s control until Israel’s recent invasion, which confirmed
Hizbullah maintained sophisticated military infrastructure mere metres from
the border fence.

It was hardly realistic to expect the LAF to enforce the resolution. Back
when it was given the task, it was battered from decades of Syrian
occupation. As its capabilities improved in recent years, the powerful
sectarian interest groups controlling Lebanon’s political system have
prevented a consensus that would have allowed it to carry it out. “What five
thousand LAF soldiers in the south do not want to do, fifteen thousand LAF
soldiers will not do,” says Saleh Machnouk, a political analyst.

The LAF has largely stayed out of the latest war between Hizbullah and
Israel, which has intensified following the decapitation of the Hizbullah
leadership and Israel’s invasion of southern Lebanon. It has withdrawn its
forces from bases along the border, and only patrols in certain areas with
UN escorts. It has also made it clear that it does not want to be a party to
what its leadership sees as Hizbullah’s war, even though a handful of LAF
soldiers have been killed in exchanges of fire with Israeli troops in southern
Lebanon.

Instead, the army has limited itself to tasks it can achieve. General Aoun, a
Maronite Christian, is considered incorruptible and resistant to sectarian
tendencies. Some of that reputation extends to his force. His soldiers man
checkpoints across the capital and mediate in arguments between Syrian
refugees and Christian landlords. Often operating like a police force, they
are keeping a close eye on hundreds of thousands of displaced Shias now
living in non-Shia areas. Occasionally, they fight armed sectarian groups.

Those activities have kept sectarian violence at bay as the rhetoric in the
country has hardened. As the war between Israel and Hizbullah continues,
that role in keeping the domestic peace will become ever more vital to
Lebanon’s stability. The army will only ever be as powerful as the country’s
politicians allow it to be. Yet, by the standards of the Lebanese state, it is a
more respectable institution than most. ■

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A study in resilience

How Wagner survived Yevgeny

Prigozhin’s death
Its mercenary model is still effective in Africa’s most fragile places
10月 17, 2024 07:30 上午 | Bangui

TRUE FRIENDS, says Hassan Bouba, swigging from a mug with Vladimir
Putin’s face on it, “are those who are by your side in the most difficult
moments. And Russia was with us in the most difficult of moments.” Mr
Bouba is the minister of livestock in the Central African Republic (CAR),
one of the world’s poorest and most fragile countries. He is referring to the
help the Wagner Group, a Russian mercenary outfit, gave his government in
dispatching an armed rebellion nearly four years ago. But Mr Bouba could
equally have more personal memories in mind. In 2021 the minister was
arrested by a UN-backed special court and charged with war crimes he
allegedly committed when he was a rebel fighting a previous government.
Yet after only a week in prison he was freed. Many suspected that Mr
Bouba, known for his close personal ties to Wagner, had his Russian friends
to thank.

In recent years Russia has combined official diplomacy with a mix of

gangsterism and colonial enterprise to advance its interests in Africa.
Wagner’s operations in CAR served as a blueprint for the second portion of
that enterprise, which has been most fruitful in fragile places. The way the
group has evolved in recent months illustrates how that approach has
changed since the summer of 2023, when Yevgeny Prigozhin, Wagner’s
oligarch founder, was killed weeks after he staged an abortive mutiny
against Mr Putin. Though the group’s activities have been brought under
closer control of the Russian state, it retains its presence on the continent.
Yet without big changes to its modus operandi, it is unlikely to expand
further.
Wagner first arrived in CAR in 2018. Quietly backed by the Russian state
(which publicly denied any involvement with the group), Prigozhin’s
mercenaries offered protection to the government of Faustin-Archange
Touadéra, CAR’s president. In January 2021 they helped defeat a coalition
of rebels contesting Mr Touadéra’s re-election. “They saved our
democracy,” claims Fidèle Gouandjika, an adviser to the president. In
return, Wagner was given access to the country’s most lucrative gold and
diamond mines. Russia replaced France, the former colonial power, as
CAR’s most influential foreign ally.

The approach was repeated across the continent. By 2023 Wagner was
present in about a dozen other African countries, in particular Mali, Libya
and Sudan. Reports of horrific human-rights abuses allegedly committed by
Wagner fighters across Africa did little to dent the group’s influence.

The events of last summer briefly threw the Wagner model—and, by

extension, Russia’s entire Africa strategy—into doubt. After Prigozhin’s
rebellion, Mr Putin sought more control over an operation that had
previously thrived on plausible deniability. The Russian state moved in,
breaking up the mutineer’s portfolio of security, business and media
interests. Several hundred Wagner personnel, including some leaders, were
withdrawn from CAR. By the end of 2023, Wagner’s Africa branch had
been formally replaced by the Africa Corps, a new umbrella organisation
for multiple quasi-state expeditionary forces under Russia’s ministry of
defence.

Yet the practical consequences of the restructuring have been limited. In

some ways, they appear to have elevated the group’s status more than
damaged it. That is particularly evident in CAR, where Wagner continues to
operate under its own brand name. Western efforts to dislodge the 1,500-
2,000 Wagner troops spread around the countryside have gone nowhere.
The government rebuffed an offer of alternative security assistance from an
American private-security firm. Western diplomats complain that Wagner
leaders still enjoy unrestricted access to Mr Touadéra, despite a recent
rapprochement between CAR and France. In Bangui, the capital, hotels and
shopping malls remain full of burly Russian men, their faces covered with
balaclavas. A monument dedicated to Wagner troops killed in service in the
country has been erected in the city centre.

If anything, Wagner has continued to expand its activities in CAR. Its

mercenaries are reportedly developing a base intended to host 10,000 troops
by 2030 and serve as a hub for Russian military operations in Africa. In
contrast with their previous role as shadowy forces kept at arm’s length by
the Russian state, Wagner fighters have also taken on new quasi-diplomatic
roles. They are said to have been involved in negotiations to reopen the road
to neighbouring Chad, and to have helped set up a joint force to patrol the
shared border. “It’s like a second life for this force,” says Jedrzej Czerep of
the Polish Institute of International Affairs.

Beyond CAR, the group’s record is patchier. In Mali and Libya former
Wagner men have been reinforced by fighters from other paramilitary units
under the Africa Corps, some of whom have recent battle experience in
Ukraine. Small contingents of Russian mercenaries, possibly supported by
detachments from the official Russian army, have been dispatched to
Burkina Faso and Niger, Mali’s neighbours in the chronically unstable
Sahel region.

Yet Wagner and its successors have found waging counter-insurgencies in

the Sahel much more difficult than in CAR. Last November they achieved
an important symbolic victory in helping the Malian army capture the rebel
stronghold of Kidal.

More recently they have faced setbacks, including a major defeat near the
Algerian border in July in which scores of Wagner fighters died. Efforts to
acquire stakes in Mali’s mineral sector, meanwhile, have also made less
progress than the group might have liked. According to the Sentry, an
independent investigative outfit, none of the country’s industrial or artisanal
gold mines are yet in Russian hands.

That may be one reason for the Russian state to try different approaches to
pursuing its economic interests. While Prigozhin was able to risk his own
fortune in CAR on business ventures ranging from diamond mining to beer
brewing, these days Wagner and its successors are more constrained by the
Kremlin.

Since the oligarch’s death, Russia has overall become “less transactional
and more strategic” in its investments in the region, argues Samuel Ramani,
author of “Russia in Africa”. In September Russia’s space agency signed a
deal with Mali, Burkina Faso and Niger to deploy telecommunications and
remote-sensing satellites over their territories. Last year Russia’s state
nuclear company signed a preliminary agreement to construct a power plant
in Burkina Faso. It is reportedly also building a large solar plant in Mali and
seeking the rights to a giant uranium mine in Niger.

This points to a bigger strategic dilemma. From the early days of

Prigozhin’s entry into CAR, the Wagner model offered the Kremlin a cheap,
high-impact means to propel Russian influence in Africa. But CAR was, in
some ways, exceptional. Mali’s junta has proven more reluctant than Mr
Touadéra to allow Russian mercenaries to seize mining assets. Burkina
Faso’s junta avoided welcoming Russian troops until Wagner had been
replaced by Africa Corps. Other African governments share similar
concerns. With Russia’s official army tied up in Ukraine, there are limits to
how much the Kremlin can assuage them.

Further expansion in Africa would probably require even more top-down

involvement from the Russian state. That, in the long run, might further
undermine the very arm’s-length arrangement which seemed to deliver so
many benefits to the Kremlin in the first place. ■

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Next-generation transportation

Africa’s EV revolution has two

wheels not four
E-bikes are cheaper and less likely to choke you
10月 17, 2024 07:30 上午 | Nairobi

WITH HIS electric motorcycle resting on the curbside, Stephen Omusugu

explains the economics. The two-wheel-taxi man from Nairobi, Kenya’s
capital, went electric a month ago, after watching several of his colleagues
do the same. He took out a loan for the new e-bike, which will take him two
years to repay in daily instalments. Added to that is the cost of charging the
bike’s electric battery or swapping it for a full one each day. All told, Mr
Omusugu reckons, he can make 2,500 Kenyan shillings ($19.35) every day,
two and a half times as much as when he rode a petrol-powered bike.
Mr Omusugu and his home city are part of an electric vanguard. Nairobi
these days buzzes with thousands of e-bikes and boasts dozens of electric-
vehicle (EV) startups. Last year, Uber launched its first e-bike fleet in
Africa on Nairobi’s streets. In the first six months of this year the number of
registered EVs in Kenya tripled. Similar trends are apparent in other
countries. That has raised hopes that electric motorbikes, and perhaps one
day cars, could spread rapidly across the rest of the continent. Besides
lowering climate-warming emissions and improving the air in Africa’s
choked cities, they could also save their owners some money.

Over the past year the number of electric motorcycle taxis in Kampala,
Uganda’s capital, tripled to around 3,000. Ampersand, a leading EV startup,
has sold about the same number in Kigali, Rwanda’s capital. Spiro, the
continent’s largest EV manufacturer, says it has 20,000 e-bikes on the road
across Africa. Most dramatically, Ethiopia now has more than 100,000 EVs,
according to official figures, after it became the first country in the world to
ban the import of all petrol- and diesel-powered vehicles.

Ethiopia, though, is an exception. With private cars unaffordable for most

Africans, motorbikes and buses are the main form of transport for deliveries
and taxi rides, with riders typically travelling up to 100km every day for
work. That means widespread electrification of public buses, and above all
two-wheelers, could have enormous benefits.

Chief among them are cost savings. The continent is projected to spend
$23.5bn on fuel to power some 27m motorbikes in 2024, according to
calculations by Ampersand. Much of that could be saved if they all went
electric.

As Mr Omusugu concluded, the lifetime cost of an e-bike is lower than that

of a petrol-powered equivalent, despite higher upfront costs. Charging and
maintenance are cheap and owners do not have to buy fuel. Battery
swapping, in which drivers can exchange the removable units for fully
charged ones at swap stations, can reduce costs further. “The sweet spot for
e-mobility is someone who uses the vehicle very intensively,” explains Josh
Whale, Ampersand’s CEO.
For now, the numbers are still tiny compared with other regions. In India, a
poor country with a population that is around the same size as Africa’s,
1.5m EVs, mostly two-wheelers, were sold in 2023 alone. McKinsey, a
consultancy, expects the market for electric motorbikes to grow faster in
Africa than in any other region until the end of the decade, but largely
because it is starting from the lowest base.

Plenty of factors could stall the transition to electric mobility. Pessimists

note that few companies are likely to expand much beyond Africa’s biggest
cities. Most EV startups have yet to demonstrate they can make money,
holding investors back; battery infrastructure, in particular, is capital-
intensive and tricky to make profitable. In many countries on the continent,
EVs will struggle to compete so long as governments subsidise fuel and
electricity is erratic.

Yet even if the transition remains confined to big cities, that could make a
big difference to their pollution-choked inhabitants, particularly as more
Africans move to urban areas over the coming decades. Often it is argued
that the world’s green-energy transition imposes unaffordable costs on poor
African countries. Electrifying transport is not one of them. ■

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Europe
Italy starts outsourcing its migrant crisis to Albania
Out of sight, out of mind? :: As European governments grapple with irregular migration, some
are looking outward

This tiny country is a laboratory for Russia’s dirty tricks

Maia Sandu takes a stand :: The Kremlin wants to rig Moldova’s election. The country is
fighting back

Why Russia is trying to seize a vital Ukrainian coal mine

Digging for victory :: Without it, the country’s remaining steel industry will be crippled

The limits of Turkey’s strategic autonomy

Between BRICS and a hard place :: Choosing between autocrats and democracies

Poland’s new modern-art museum wants to give the capital

a fresh look
Reclaiming the centre :: Warsaw smooths its rugged historical edges

Hopes for religious harmony come to life in the Muslim

Vatican
Charlemagne :: Albania wants to put the “state” in “Islamic state”

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Out of sight, out of mind?

Italy starts outsourcing its migrant

crisis to Albania
As European governments grapple with irregular migration, some are
looking outward
10月 17, 2024 07:30 上午 | BERLIN AND GJADER, NORTHERN ALBANIA

THE FIRST camp for asylum-seekers built by an EU country outside the

EU spreads across an area the size of ten football pitches near the village of
Gjader in northern Albania. This week 16 Bangladeshis and Egyptians, who
had been picked up in the Mediterranean, disembarked in Albania, destined
for the site. It was an important moment, and not just for Italy, which has
sponsored and built the Albanian centre. After decades of fruitless
discussion and thwarted plans, for the first time an EU country has begun to
process asylum claims in a third country.
A metal screen atop a concrete base encircles the three areas of the Gjader
facility. The first, made up of prefabricated accommodation units, is for
asylum-seekers awaiting the response to their claims. The few that receive a
positive decision will be taken to Italy. A secure zone covered with steel
mesh is for the rest, who in theory await repatriation. The camp also
includes a small jail for criminal offenders. Under the terms of an
agreement signed last year between Giorgia Meloni, Italy’s prime minister,
and Edi Rama, her Albanian counterpart, the centre will remain under
Italian control until at least 2028.

The deal applies only to migrants plucked from the high seas (ie, outside
Italian waters) by Italian vessels, and not to all of them. Women, children,
families and vulnerable men will go to Italy for processing in the normal
way. So will anyone who claims to be from a country not on Italy’s “safe”
list of 22 (which includes Bangladesh, Tunisia and Egypt, whose nationals
often attempt to reach Italy). The rest—arguably, the guileless, who either
admit to citizenship of a safe country or retain ID documents demonstrating
it—will be shipped to Albania.
In 2023 irregular migration on the central Mediterranean route reached its
highest level since Europe’s crisis of 2015-16, though numbers have since
fallen (see chart), owing in part to a deal with Tunisia, from where many
migrants depart. Italian ministers say the prospect of diversion to Albania
will dissuade those planning to sneak into the EU via the Med. “Its
strongest effect will be as a deterrent,” agrees Mr Rama, whose government
stands to be rewarded with Ms Meloni’s help in its bid to join the EU.
Yet whether migrants who have chosen to risk their lives at sea will be put
off by the prospect of a spell in the steel embrace of Gjader is questionable.
And its potential deterrent effect would seem to be its sole value. Italian
officials stress that the site is subject to Italian law, and that nothing can be
done there that cannot be done in Italy.

That includes returns to migrants’ home countries. In the first half of 2024
Italy issued 13,330 repatriation orders but sent back only 2,242 people,
despite its return agreements with most of the safe countries. Sceptics think
deportation troubles mean Gjader’s maximum capacity of 3,000 could
quickly be reached—and local officials say that in the medium term they
may be able to hold just one-third of that figure. They add that, after three
months of detention, failed asylum-seekers, if not yet repatriated, will
normally be taken to Italy, released and told to leave the country.

In short, there is plenty of reason to doubt that the centre will make a
serious dent in the number of irregular migrants reaching Italy. Yet, as EU
countries from the Netherlands to Austria to Poland turn sour on asylum,
such is the desperation to get a grip on irregular migration that the Albanian
experiment is being closely observed across the club and beyond.

As The Economist went to press, the heads of the EU‘s 27 governments

were gearing up for a lively migration discussion in Brussels. On October
14th Ursula von der Leyen, the president of the European Commission,
reiterated to them her commitment to find “innovative ways” to tackle
irregular migration, a euphemism for outsourcing deals. Notably, she also
gave her imprimatur to the old idea of “return hubs”: centres in non-EU
countries to which failed asylum-seekers may be sent as they await
deportation. The Albanian arrangement, added the president, will provide
lessons.

Earlier this year the EU passed a long-stalled “migration pact”, designed to

speed the expulsion of failed asylum-seekers and to distribute the burden of
hosting refugees among member states. But that has not dulled
governments’ interest in pursuing outsourcing deals with other countries. In
2021 Denmark passed a law enabling extraterritorial asylum processing.
This May 15 EU governments urged the commission to investigate further.
In Germany, which accounts for roughly a third of asylum applications in
the EU, the interior ministry will in December present options for external
processing. The opposition conservatives, likely to take office after next
year’s election, are already committed to third-country asylum deals. Some
even want to emulate Britain’s failed deal with Rwanda, a simpler but more
radical proposal that would have dispatched asylum-seekers who reached
British shores to Kigali to try their luck there.

Such schemes face countless financial, legal and logistical hurdles. The
principle of outsourcing asylum does not appear to violate refugee law,
especially the ban on refoulement, or returning people to places of danger.
But in practice the need to uphold and maintain standards that can pass
muster in European courts may prove insurmountable, especially if deals
are done with non-European countries. Judges thwarted Britain’s efforts;
they may yet do for Italy’s.

To ease the path, EU governments aim to make legal tweaks, including to

the “connection criteria”, which stop them sending failed asylum-seekers to
non-EU countries to which they have no formal link. Trickiest of all is
finding, and keeping, partners. Mr Rama emphasises that his offer does not
extend beyond Italy. Other countries in Europe’s neighbourhood have ruled
themselves out as outsourcing or return hubs. Winning them over will
require a deftness of diplomacy not often associated with the EU and its
disputatious members. But rarely has Europe been so determined to reduce
the number of irregular migrants reaching its shores. ■

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Maia Sandu takes a stand

This tiny country is a laboratory

for Russia’s dirty tricks
The Kremlin wants to rig Moldova’s election. The country is fighting back
10月 17, 2024 07:30 上午 | Chisinau and Comrat

SINCE THE Soviet Union collapsed, a good quarter of Moldovans—no one

knows the figure for sure—have chosen to build new lives abroad. Two
decades ago roughly half of such emigrants used to head for jobs in Russia,
which had ruled them from 1944 to 1991; the other half tried their luck in
western Europe. But now the traffic is nearly all westward. Especially since
Russia’s assault on Ukraine in 2022, the entire country of 2.5m or so
people, with a few peculiar territorial exceptions, has been pivoting towards
the EU. A presidential election and simultaneous referendum on October
20th are expected to confirm this trend—so long as Russia’s unprecedented
array of dirty tricks can be fended off.
If the opinion polls are right, the incumbent, Maia Sandu, should easily win
the first round of the contest against ten other candidates. Her chief
opponent is Alexandr Stoianoglo, a staunch pro-Russian. Even if she does
not win outright in the first round, she is expected to prevail in a run-off on
November 3rd. She is the most dedicated reformer in Moldova’s post-
Soviet history—and its most robust fighter against the pervasive blight of
corruption.

The referendum, however, matters even more. The voters are being asked to
change the constitution to endorse the government’s decision to seek
membership of the EU. Russia, determined to win back influence over its
former peripheral domains, is dead against the idea—and is using every
trick to kibosh the yes vote in a brazen campaign of hybrid warfare.

This has entailed a mix of disinformation, bribery and low-level violence,

including payments for rowdy protests. Cyber-attacks have targeted the
health ministry and postal services. In April a string of ATMs were
vandalised to spread rumours that the banks were running out of funds.
Disinformation hurts the EU cause hardest. The Kremlin has relentlessly
targeted susceptible groups, especially those who speak Russian as their
preferred language, about 15% of the total population. They predominate in
the breakaway statelet of Transnistria, sandwiched between the rest of
Moldova and Ukraine (see map).

The Gagauz, a still smaller minority (about 5%) of Turkish-descended

Christians, are as fiercely pro-Russian. The main street of their capital,
Comrat, is still named after Lenin, whose statue takes pride of place. Most
signs are in Russian, not Romanian, Moldova’s main tongue. The governor
of Gagauzia is an underling of Ilan Shor, a fugitive banker now believed to
be in Moscow, considered Russia’s key Moldovan oligarch and a big backer
of Ms Sandu’s main opponent, Mr Stoianoglo.

Fake news and conspiracy theories against the EU have swamped the
popular Telegram app, as well as TikTok, Facebook and YouTube. The EU
is said to be a proxy for NATO, seeking to drag Moldova into war. Greedy
foreigners will buy up Moldovan land. Children will be inculcated with the
EU’s supposedly “gay values”. “Unfortunately, too many people believe
this,” laments a minister.

Bribery is more straightforward. The security service reckons at least

130,000 Moldovans are on Russia’s payroll. Many travel to Russia (often
via Turkey or the Caucasus) to collect cash (up to $11,000 may be brought
into Moldova in one go) to pay for anti-government demonstrations, to
encourage people to vote for pro-Russian candidates in the presidential
election and to vote no in the referendum.

But Russia’s message may not be heeded as much as before. Some

Moldovan bigwigs known to have been pro-Russian in the past may be
hedging their bets; some, like the mayor of Chisinau, the capital, say cagily
they are now pro-EU. Others say they want Moldova to “balance relations”
between the EU and Russia.

Most strikingly, the tide is turning against Russia even in Transnistria.

Voters there will still vote en masse against Ms Sandu and the EU, but their
economy and trade have tilted sharply away from Russia towards EU
countries, especially since Ukraine closed its border after the war began. A
transit deal whereby gas from Russia has passed through Transnistria,
enabling it to curtail supplies to the rest of Moldova, will soon end as
Moldova turns to other supply lines. “Transnistria is losing its last big
card,” smiles a government adviser.

Victory for Ms Sandu on October 20th will be far from a guarantee of

Moldova’s stability. Her presidency has been buffeted by covid-19, the war
in Ukraine, an influx of refugees and a bout of soaring inflation.
Parliamentary elections next July could knock back her party, which may
then have to accept a coalition with other less reform-minded parties. Much
will depend on the outcome of the war in Ukraine. Says a pro-EU think-
tanker: “The battle between the oligarchical system and the reformers is not
over.” ■

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Digging for victory

Why Russia is trying to seize a vital

Ukrainian coal mine
Without it, the country’s remaining steel industry will be crippled
10月 17, 2024 07:30 上午 | Udachne

ON THE OUTSKIRTS of the eastern city of Pokrovsk two women stand

waiting for their lift. Like most civilians in the city they have already fled
elsewhere, but they have come back to collect some belongings. They are
standing by a boarded-up petrol station which was bustling just a few
months ago. Russian troops are creeping ever closer, and a full-scale battle
for the city is about to be joined. New defensive lines have been dug to the
west of Pokrovsk to which, if and when it falls, Ukrainian troops will hope
to fall back.
A plume of smoke can be seen rising in the distance. The Russians are now
barely 8km from Pokrovsk’s eastern outskirts. But they have more than this
strategic road and rail junction in their sights. The jewel in Pokrovsk’s
crown is a huge modern mine 15 minutes’ drive to its south-west. Just
outside the village of Udachne, it towers over the surrounding fields. Last
month it took its first war-related casualties when two women were killed in
an attack.

The Donbas region, once an area of endless steppe, was industrialised in the
late 19th century when it was part of the Russian empire and was found to
lie on rich seams of coal. These then powered its iron and steel industries.
When Ukraine lost half of Donbas in 2014 to Russian-backed separatists,
the loss of mines there meant a loss of 80% of its coal deposits. And in
2022, during the siege of Mariupol, the city’s two steel plants were
destroyed, devastating Ukraine’s steel industry. One of them, Azovstal,
became internationally famous as Ukrainian troops staged a last-ditch
defence there.

Pokrovsk’s mine is far from being a rickety old Soviet relic. It opened in
1990 and now belongs to Metinvest, a company owned by Rinat Akhmetov,
one of Ukraine’s richest men. Metinvest also owned the two Mariupol steel
plants, and one of the largest coking-coal production plants in Europe,
which was in Avdiivka and was destroyed last year. Now he faces the loss
of this mine too.
It is widely believed that for the Russian leadership, targeting Mr
Akhmetov’s assets has, apart from undermining the Ukrainian economy, the
added benefit of revenge. Until 2014 the oligarch was a key political and
economic player in Donbas and Ukraine, and the Kremlin doubtless
believed he would side with its separatists and with Russia. When he came
down on the side of Ukraine, they saw this as a betrayal and seized his
properties. Today even the gleaming stadium he had built in 2009 for the
Shakhtar Donetsk football team that he owns lies abandoned.

Along with its associated plants and administration buildings, the Pokrovsk
mine group employs 6,000 people, of whom some 1,000 are currently
serving in the armed forces. It is the largest coking-coal mine in Ukraine. Its
coal, used for smelting iron ore, is vital for the country’s remaining steel
industry. This year Metinvest hoped to mine 5.3m tonnes of coal there. In
2023 Ukraine’s steel plants produced 6.2m tonnes of crude steel. In 2021
though, before the loss of the two Mariupol plants, Ukraine had produced
21.4m tonnes. That year Ukraine was the world’s 14th-largest steel
producer but in 2023 it had tumbled to 24th.

According to Andriy Buzarov, an analyst, the Russians do not even need to

take the mine to throttle Ukraine’s remaining steel industry. As they
advance, they will try to cut its power supply and shell the road that takes
its coal west to the remaining steel plants. They will then do the same at
another smaller mine, 18km north of Udachne at Dobropillia, he thinks.

Before the full-scale invasion began in February 2022, steel accounted for a
third of Ukraine’s exports. Since then, the economy has shrunk by a third.
Oleksandr Kalenkov, the head of Ukrmetalurgprom, a metals and mining
industry lobby group, said at a conference last month that the loss of
Pokrovsk’s coking coal would lead to a further disastrous loss in steel
output. “This year, we can reach 7.5m tonnes,” he said, but “in the event of
the loss of Pokrovsk, it will be 2m-3m tonnes.” And the Russians know it. ■

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Between BRICS and a hard place

The limits of Turkey’s strategic

autonomy
Choosing between autocrats and democracies
10月 17, 2024 07:30 上午 | ISTANBUL

FOR OVER a decade, BRICS summits have featured the same cast of
characters, meaning the leaders of Brazil, Russia, India, China, and South
Africa. That will change on October 22nd, when the presidents of Egypt,
Iran, Ethiopia, and the United Arab Emirates, which joined the club earlier
this year, pose alongside Vladimir Putin and other BRICS veterans in
Kazan, in south-western Russia. But an even more unusual guest, the leader
of a NATO country no less, is expected to make an appearance. Russia has
announced that Turkey’s president, Recep Tayyip Erdogan, will be on hand
to make the case for his country’s BRICS membership.
Flanked by autocrats and populists who say they speak for the global south
and hope to shape BRICS into a viable alternative to the Western world
order, Turkey’s leader should feel right at home. Turkey has long sought to
diversify its foreign-policy portfolio, by building new bridges and repairing
old ones, with the Middle East, the Caucasus, Africa and Central Asia. But
Mr Erdogan has gone farther, especially over the past decade, and begun to
preach “strategic autonomy”. This is the idea that Turkey needs to chart its
own path, reduce its dependence on the West, especially when it comes to
the defence sector, and co-operate with allies only when this suits its own
interests. Other NATO members can settle for the fixed menu. Turkey dines
á la carte.

This has come into focus in Ukraine, where Turkey has supplied the
Ukrainians with drones and other weapons, sometimes on the sly, while
staying chummy with Russia. Turkey has refused to implement Western
sanctions, which has allowed its trade with Russia to soar, reaching $56.5bn
last year, up from $34.7bn in 2021, and continues to depend heavily on
Russian oil and gas. Russia is also building Turkey’s first nuclear-power
plant, and vying to build its second.

Mr Erdogan has been marching to the beat of his own drum elsewhere.
Turkey has clashed with Greece and France by staking a claim to swathes
of the eastern Mediterranean, challenged America by launching offensives
against US-backed Kurdish insurgents in Syria, and taken on NATO as a
whole by holding up the membership bids of Sweden and Finland. It has
refused to be drawn into America’s stand-off with China. Mr Erdogan is
also the only NATO leader to openly embrace Hamas.

But Turkey has no desire to break with the West, and its BRICS bid has
been a clear case in point. As soon as Russia leaked the news that Turkey
was keen on joining the group, officials in Ankara rushed to say this would
not come at the expense of relations with Europe and America. Turkey’s
foreign minister, Hakan Fidan, went so far as to suggest that the move was
less of a geopolitical pivot than a cry for attention. “Perhaps we would not
be on such a quest,” said Mr Fidan, had Turkey been a member of the EU.

Western capitals might take a dim view of Turkey’s BRICS gambit, but they
are not alarmed. Membership of BRICS, which remains little more than a
talking-shop, is a poor alternative to NATO or the EU, with which Turkey
has a customs union.

Still, BRICS may not be ready to roll out the welcome mat just yet. India is
rumoured to oppose Turkey’s accession, because of Mr Erdogan’s support
for Pakistan in its dispute over Kashmir. Russia, too, is of two minds. On
paper, Turkey’s BRICS membership would be a coup for Moscow, which
welcomes any chance to drive a wedge between Turkey and its Western
allies. But the Russians may be uneasy about having a NATO state in
BRICS, fearing to water the group down even further.

Turkey may be backpedalling already. At a conference in Istanbul on

October 14th, a Turkish diplomat said he was “not aware” whether his
government had lodged an application to join BRICS. The BRICS bid was
supposed to shine the spotlight on Turkey’s global ambitions. It may end up
exposing their limits. ■

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Reclaiming the centre

Poland’s new modern-art museum

wants to give the capital a fresh
look
Warsaw smooths its rugged historical edges
10月 17, 2024 07:30 上午 | WARSAW

IT HAS BEEN compared to a shoebox, a parcel locker and an unmarked

IKEA warehouse. Ahead of its opening on October 25th, Warsaw’s new
Museum of Modern Art is an emotive topic for Varsovians. Some praise the
three-storey white box for its cool minimalism. Others say it is a missed
opportunity to create a statement building, like the Guggenheim in Bilbao,
to beautify the scarred Polish capital.
Warsaw’s chaotic central square tells the city’s turbulent history. Some 90%
of its buildings were razed by German occupiers in the final year of the
second world war. It was rebuilt with soulless Soviet grandeur, with wide
thoroughfares and an ornamental skyscraper.

The chief task for the museum’s architects was “breaking the trauma” of the
barren square, says Joanna Mytkowska, the museum’s director. The winning
project, by Thomas Phifer, an American architect, did so through its
austerity. It pays tribute to Warsaw’s legacy of modernist architecture,
largely buried by the war. It subtly nods to its own archaeology: the
interior’s wonky concrete columns mimic the Soviet-era metro tunnels
below; the park outside is designed on the grid of the pre-war streets
discovered during construction.

The new gallery is part of a push by Warsaw’s mayor to revitalise the city’s
centre. A matching theatre, in black, is already being erected alongside it. It
is also part of Warsaw’s broader reinvention. In recent years Varsovians
have reclaimed redbrick industrial sites: a power station is now a trendy
mall; a defunct vodka distillery houses a Google campus. Several museums
celebrate chapters of Polish history: the science of Copernicus, the music of
Chopin and, since September, the chocolate of Wedel, the region’s Willy
Wonka. Its burgeoning skyline, including Varso Tower, the EU’s tallest
skyscraper, signals that eastern Europe’s biggest EU capital is becoming a
business destination. ■

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Charlemagne

Hopes for religious harmony come

to life in the Muslim Vatican
Albania wants to put the “state” in “Islamic state”
10月 17, 2024 07:30 上午

CHARLEMAGNE MAKES it a point to lay off heavy liquor until after

lunch. But what if the booze being proffered is a mere thimble of raki, a
fruity firewater Balkan hosts foist upon visitors in a gesture of hospitality?
What if, furthermore, the host in question is a Muslim cleric, unexpectedly
keen to lubricate your columnist as he explains the tenets of his faith while
himself puffing away at a stubby cigar? And what if, finally and yet more
improbably, the bottle-wielding holy man is soon to become the head of the
world’s newest state, a diminutive Muslim sovereign enclave carved out of
the low-rent suburbs of the capital of Albania? It was pushing noon after all.
Perhaps a small shot.
When put in proximity to each other, the words “Islamic” and “state” tend
to induce more panic than enthusiasm. To Albanians practising an easy-
going local variant of the faith—far removed from the fatwas, jihads,
caliphates and other Western bugbears—that is a perversion to be defied.
Proud of the liberal strand of Islam known as Bektashism that is prevalent
in this corner of the Balkans, the authorities have decided to grant the order
its own state, with flag, passports and all. The birth of most countries can be
traced to decades of battles, upheavals and revolutions. The new Bektashi
country, in contrast, was announced out of the blue by Edi Rama, the
Albanian prime minister, in an interview with the New York Times last
month. Once a few legal niceties are settled, the world will celebrate its
200th-or-so country perhaps as early as the end of the year—if anyone
recognises what has inevitably been termed the “Muslim Vatican”.

If Vatican this is, Baba Mondi, Charlemagne’s genial host, is the Holy
Father. Donning a 12-sided hat as he greets visitors in the compound
outside Tirana, his white beard flowing over embroidered green robes, the
grandfatherly preacher winces at the comparison with the Catholic
headquarters in Rome. But that is more an act of modesty than rebutting a
theological offence (there are pictures at hand of the head baba greeting
various popes). The pontiff tends to a billion-strong Catholic flock from the
grandeur of Rome. The Bektashi World Centre, squeezed between an
industrial estate and some fields being gnawed at by sheep, measures just
11 hectares, barely a few football pitches. A newly built auditorium and
museum offer a focal point for visitors keen to add to their country tally. It
is no Sistine Chapel, but it will do for now.

There are even more Muslims than Catholics in the world, though only a
fraction would recognise their faith in this Albanian variant. Formed in the
13th century in Turkey, the Bektashis are a Sufi mystic order, combining
learnings from the Koran with devotion to their own traditions. Once the
religion of the Ottoman military elite, the order took in teachings from far
and wide until being banned there in the 19th century. When Turkey went
secular in the 1920s, the Bektashis’ leaders moved to Albania. Through
their love of the arts, the order’s dervishes have been credited with helping
the country shake off the Ottoman yoke in 1912; some describe it as the
Albanian “national religion” though more people adhere to mainstream
Sunni Islam. The creed’s reward was to face persecution, alongside all other
faiths, at the hands of the poundshop Stalinist regime that ran Albania from
1944.

Bektashis claim 20m followers spread thinly across three dozen countries.
That may be an exaggeration. Counting its adherents is all the harder given
its easy-going ways: some describe it as more of a philosophy than a
religion. Baba Mondi, the eighth dedebaba since the move to Albania,
speaks with reverence for all faiths. “Don’t constrain yourself while God
has made you free,” just about sums it up. There is a bit of fasting (but not a
whole Ramadan’s worth), some daily praying (but no imposing mosques or
minarets), and a lot of talk of humans “sharing the same destiny”. Being a
good Bektashi is about exuding love and tolerance. Their leader calls
himself a friend to all, including Israel, whose president he met just last
month—hospitality unlikely to be extended in Tehran or Mecca, say. The
Bektashis shun politics and decry violence. They are, in other words, easily
compatible with the God-shunning ways that prevail in most of Europe
these days.

Rome Baba

If Baba Mondi is the Bektashis’ religious leader, Mr Rama serves as the

faith’s chief ambassador. In an evening chat with your columnist, the former
artist delights in his munificence towards the order, describing them as “a
national treasure you have to help survive the rest of time”. Never mind his
own (latent) Catholic faith, succouring his Muslim brethren is a roundabout
way of showing off Albania’s proud history of tolerance. It was the only
country occupied by Nazis during the second world war to end the conflict
with more Jews than it started with. A majority-Muslim country, it
celebrates Mother Teresa, a Catholic nun with local roots. Why stigmatise
do-gooders based on something as mundane as faith? The Bektashis are a
deserving lot. “It is precisely because some people in Europe have a
problem with the word “Muslim” that this is something to be done,” says
Mr Rama.

Not everyone is a fan of granting the Bektashis their own enclave, decrying
what they see as an attempt at religious engineering. Other Muslim interests
are busy trying to gain ground in the Balkans; last week Recep Tayyip
Erdogan, the Turkish president, swung by Tirana to open an 8,000-capacity
mosque. Plenty see the Bektashi move as a PR ploy by Mr Rama, a big man
—literally, as a former professional basketball player, as well as politically,
given over a decade in power with few domestic rivals—in a small country.
Perhaps. But the intention is noble, in keeping with the Bektashis’ kindly
ways. Showing off Albanian tolerance while subtly shaming that of fellow
Europeans is surely worth redrawing a few maps for, and a swig of raki. ■

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Britain
Sir Keir Starmer’s elevator pitch for investment
They will come and build it :: In an interview with The Economist, the prime minister sets out
his stall

Is Britain’s government at war with the wealthy?

The ticked-off well-off :: Speculation about the budget on October 30th has spooked some rich
people

Trade unions have their eye on Britain’s tech sector

Tech brothers :: The government’s plans to strengthen workers’ rights may help their cause

Alex Salmond went from the fringes to the mainstream and

back again
A shrunken giant :: The one-time figurehead of Scottish nationalism died on October 12th
2024

Could you pass the British citizenship test?

Testing times :: If you’re a native-born Briton, almost certainly not

An assisted-dying bill is again introduced to Westminster

The right to die :: This time there is a good chance it will pass

The war on prices: British edition

Bagehot :: Too often, politicians see prices as something to be fought

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They will come and build it

Sir Keir Starmer’s elevator pitch

for investment
In an interview with The Economist, the prime minister sets out his stall
10月 17, 2024 07:30 上午

INVESTOR SUMMITS follow a standard recipe. First come the speeches.

The 200-odd executives who made it to an international investment summit
in London on October 14th heard from Sir Keir Starmer, the prime minister,
that after almost a decade of political turmoil in Britain, stability has
returned. Labour’s landslide majority on July 4th means that the
government’s decisions can be “measured in years, not months”, Sir Keir
told The Economist in an interview. Then comes the glitz. Delegates were
whisked to St Paul’s Cathedral, to be greeted by Charles III and serenaded
by Sir Elton John, a musician.
Conferences, kings and cathedrals get you only so far, however. What is the
new government’s actual pitch to investors? The answer is a bit like Sir
Keir himself: a mixture of the sensible, the potentially radical and the
frustratingly unclear.

First, the sensible. To make life as easy as possible for investors, the
government wants to create a “concierge” service. That is in line with the
recommendations of Richard Harrington, a Conservative peer, who in a
report last year warned of deals being scotched because of a “disorganised,
risk-averse, siloed and inflexible” Whitehall. Poppy Gustafsson, a former
boss of DarkTrace, a cyber-security firm, has been belatedly appointed as
investment minister; the Office for Investment, a unit of government, will
be enlarged and plugged into Number Ten, the Treasury and other Whitehall
departments.

“I want a central place where investors can go and say, right, this is the door
through which I walk,” says Sir Keir. “Under the last government, every
time they finally got to the right door, there’d be somebody else behind it.”
To make a one-stop-shop work, Lord Harrington notes, the minister will
need the clout to extract visas, grants and other goodies from across
government. Will Ms Gustafsson have that authority? “Absolutely,” says Sir
Keir. “Not just from my office, but from me, because this is our number-one
mission.”

Stop the political somersaults, rationalise Whitehall and give investors a

number to call: all of this is conventional and reasonable. But Sir Keir is
also capable of boldness. If the new government has a guiding philosophy,
it is an idea in vogue among the centre-left known as “productivism”. It
holds that Britain’s congenitally low rate of public and private investment—
the country has been bottom of the G7 rankings for 24 of the past 30 years,
according to the Institute for Public Policy Research, a think-tank—is at the
root of its weak productivity growth. Fixing this problem implies expanding
the productive capacity of the economy, and particularly what Sir Keir
terms “the fundamentals” of housing, transport and energy.

On Britain’s planning system, Sir Keir’s rhetoric has, if anything, become

more radical since taking office. “It’s just too slow, and it’s got to be
stripped down,” he says. “[Investors] don’t have to invest in this country.
They have choices.” He urges backers of schemes mothballed under the
previous government to resubmit them for review. He wants a new planning
framework and a change of mindset. “For urban housing, we need to get to
a position where there’s a default position of ‘yes’ and we can move
forward at pace. But for all projects, I want there to be confidence that the
planning rules will be simpler, faster, and that even if it’s a ‘no’, it’s a quick
‘no’, not a slow ‘no’.”

There is more than a touch of Thatcherism to this. “There’s too much

regulation, and it’s inconsistent, different regulatory bodies pulling in
different directions,” he says. But in one area at least, Sir Keir is a fan of
making more rules. For 40 years Britain’s relatively liberal labour market
has been regarded by successive governments as a draw for investors. This
one is heading in the opposite direction. On October 10th it published an
Employment Rights bill of striking width, combining plans for new
individual rights (such as an obligation on employers to protect employees
from harassment) with lower thresholds on union recognition and industrial
action.

The risk, aired by some business lobbies, is that the bill chills hiring; many
of its provisions are subject to further consultation. But Sir Keir argues that
these reforms are in the long-term interests of investors themselves if giving
people more secure working conditions helps tame populist discontent.
“The values that we’ve had as a country as a sort of open, trading country
that the investors here know and understand…are under threat politically
with populism, which is bearing down on those values. So, yes, this is an
economic argument for the better of the country to make people better off,
but it is also a fight for the values of freedom and democracy that we
fundamentally believe in.”

That argument may not cut much ice with the moneymen. Although the
summit went well, verdicts on the party’s first 100 days in office are varied.
In opposition the party courted businesses with the promise of tight co-
operation. Many now report frustration at ministers being harder to reach
than promised, and at an undercooked policy agenda. “We expected a much
more hit-the-ground-running approach from Labour,” says one City figure.
Conclusive judgments will be reserved until after the budget that will be
unveiled by Rachel Reeves, the chancellor, on October 30th. Prior to the
election Labour promised higher levies on private schools, private equity
and non-domiciled residents. To make its sums add up, the government will
need to raise other taxes; these may include a higher rate of capital-gains
tax (which is paid on the sale of assets), employer payroll taxes or tweaks to
the inheritance-tax regime. Surveys show that business confidence has
become more fragile since the election.

“We’ve had to be clear that it’s going to be a tough budget,” says Sir Keir.
“The reason we’re doing it is to ensure that we clean the slate and there’s
economic stability. That is what investors want to hear.” At St Paul’s
attendees were cooked for by Clare Smyth, a Michelin three-star chef. The
dinner was doubtless delicious. The aftertaste will only emerge at the end of
the month. ■

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The ticked-off well-off

Is Britain’s government at war with

the wealthy?
Speculation about the budget on October 30th has spooked some rich
people
10月 17, 2024 07:30 上午

WEALTHY PEOPLE have distinctive hobbies. One of them is talking,

often noisily, about moving abroad to escape high taxes. In the run-up to the
Labour government’s first budget, due on October 30th, rich Britons have
some cause for concern. Rachel Reeves, the chancellor, has spoken of the
need for higher taxes but also pledged no further levies on “working
people”. Sir Keir Starmer, the prime minister, has said that “the broadest
shoulders should bear the heavier burden”.
A centre-left government proposing a slightly more progressive tax system
should hardly come as a surprise. But might a too-zealous programme of
soaking the rich backfire on a government that says it is committed to
boosting the economy and to wealth creation?

Labour trailed several policies aimed at squeezing more out of the better-off
in its manifesto ahead of the election: putting VAT on private-school fees,
tightening the screws on non-domiciled (non-dom) taxpayers and raising
the tax on private-equity performance fees. Potentially also on the chopping
block are inheritance-tax exemptions on pensions, farmland and shares
listed on the London Stock Exchange’s Alternative Investment Market
(AIM). Most consequentially, the government has also hinted that capital-
gains tax (CGT) may go up.

Some of these are sensible reforms. The “carried interest” provision which
lets buy-out barons pay capital-gains tax rather than (usually higher)
income tax on their firms’ investment profits is a loophole that should be
closed. The main inheritance-tax exemptions are highly distortive—among
other things they push up the price of farmland (perversely hurting farmers
who are seeking to expand) and channel money into the underperforming
AIM market. Putting VAT on private-school fees has class-war overtones
but is also a tiptoe towards a much-needed cull of Britain’s many VAT
exemptions.

The situation is messier for non-doms, people who are deemed not to be
domiciled in Britain and who are not liable to pay tax on income generated
abroad. Ms Reeves’s Tory predecessor, Jeremy Hunt, already abolished
non-dom status in his final budget in March; from April 2025, wealthy
foreigners will be taxed based on how long they have lived in Britain. The
Office for Budget Responsibility, Britain’s fiscal watchdog, estimates this
will raise around £3bn ($3.9bn) annually. Labour’s manifesto proposed to
juice that amount by opening non-doms’ trusts up to inheritance tax, but
some reports suggest the Treasury now questions whether, as now laid out,
the policy would raise money at all. Plenty of non-doms would sooner leave
Britain than face a 40% tax on estates often largely earned abroad.
CGT is the biggest potential revenue-raiser on the list. There are also solid
economic reasons to question why capital income is taxed so much more
generously than labour income (see chart 1). But simply jacking up the
headline rate would be an error. A better approach would be to reform the
tax base, marrying a higher rate with a generous allowance that excludes
gains up to (and potentially above) the risk-free return on cash, removing
exemptions for the selling of business assets and ending the regime
whereby capital-gains on assets are reset to zero for inheritors when
someone dies.

Even then, Ms Reeves should be wary of pushing too far: pinning down
taxpayers’ likely response is tough. Many will either have already sold
assets ahead of the budget (there are rumblings in the property sector about
a glut of second homes and buy-to-let units being put on the market) or will
hold onto them in case future governments pull CGT back down.

All this raises a deeper question about what Ms Reeves’s goal for the
budget is. There is a decent case for cleaning up a few exemptions that
advantage the wealthy and for reforming CGT. But these policies simply
aren’t big enough to deliver the tens of billions that Ms Reeves needs to
stop public services from deteriorating further, let alone mend them.
Nor is it clear that, overall, Britain’s tax system is insufficiently
progressive: half of income-tax revenue comes from the highest 5% of
earners (see chart 2). Indeed, there are plenty of growth-blocking
inefficiencies that penalise the rich. A truly productivity-obsessed budget
would also eliminate stamp duty for shares (a distortive financial-
transaction tax) and tidy up the bizarrely high marginal tax rates that hit
those with children who have incomes in the low six figures.
Predicting the movements of the wealthy and footloose is difficult.
Sociologists at the London School of Economics recently interviewed
several dozen of Britain’s one-percenters to suss out how tolerant they
would be of tax rises. The bulk struggled to imagine themselves leaving. “I
can’t see myself budging. I can see myself cursing and having to pay a lot
of tax,” said one. Another despaired at the feeble cultural offerings in tax
havens: “You think, well, I’d quite like to go and watch an opera, well, you
can forget that, there’s not a theatre in the Bahamas.”

But the allure of museums and opera can go only so far. A decent offering
for the wealthy—and all Britons—has to start with a faster-growing
economy. It would be an own goal if Ms Reeves were to jeopardise that
with too punitive a tax raid. And irrespective of where the budget ends up,
plenty of the rich have been spooked. As an exercise in communications, it
has already done some damage. ■

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Tech brothers

Trade unions have their eye on

Britain’s tech sector
The government’s plans to strengthen workers’ rights may help their cause
10月 17, 2024 07:30 上午

TECH FIRMS are known for the large salaries and ostentatious perks they
bestow on workers: office slides, ball-pit meeting rooms and back
massages. These companies tend to be less keen on the idea of employees
joining a trade union. In Britain, however, they will soon have less choice in
the matter.

Cycles of mass redundancies in the industry mean that workers are warming
to membership, according to John Chadfield, one of the founding members
of United Tech and Allied Workers (UTAW), a branch of the
Communications Workers Union. “People want job security rather than
ping-pong tables.” The Labour government’s plans for beefed-up workers’
rights should make it easier for British tech employees, and their peers in
other industries, to join up.

The Employment Rights bill, which was introduced to Parliament on

October 10th, proposes a raft of potentially radical reforms, including a
wave of rights for all employees on the first day they are hired, enhanced
sick-pay entitlements and a clampdown on zero-hours contracts. Stronger
union rights are a big part of the bill. Under its provisions, employers would
be required not only to inform new recruits of their right to join a union but
to remind them of that right on a regular basis. Unions in turn would be
granted more rights to enter workplaces and recruit members.

The bill would also make it easier for unions to organise industrial action. It
would scrap the need for at least 50% of those eligible to vote to cast their
ballot, leaving only the requirement for a majority of votes cast to be in
favour of striking. Where trade unions are now required to give employers
at least 14 days’ notice of a walkout, in future they would be required to
give only seven. The bill would also repeal laws that allow employers in
health care and other selected industries to impose minimum-service levels
during strikes.

This would all be good news for the unions themselves. They have endured
a protracted decline in membership, owing to fewer jobs in heavily
unionised sectors such as manufacturing and a rise in self-employment and
casual work. Around 13m British workers were members of a trade union in
the 1970s; today there are 6.4m members, the lowest level in nearly three
decades.

It is too early to predict a new era of union militancy, not least because
much of the bill is subject to consultation. But industries like technology,
which have historically avoided unionised workforces, may have to get
used to the idea of comrade coders. ■

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A shrunken giant

Alex Salmond went from the

fringes to the mainstream and back
again
The one-time figurehead of Scottish nationalism died on October 12th 2024
10月 17, 2024 07:30 上午

“A MONUMENTAL FIGURE of UK and Scottish politics” was the tribute

paid by Sir Keir Starmer, the prime minister, to Alex Salmond, who died on
October 12th, aged 69. That is half-right.

Mr Salmond, who was suddenly taken ill after giving a speech at a

conference in North Macedonia, was instrumental in driving the Scottish
National Party (SNP) from the periphery into government in Holyrood. A
charismatic and committed campaigner, he helped embed a lasting
enthusiasm for Scottish independence among a large minority of the
population. But his failures, both personal and political, shrivelled his own
reputation and reduced that of his party. He changed Scotland, but his
impact on the union he wanted to dismember was smaller.

At his zenith, when he was Scotland’s first minister from 2007 to 2014, Mr
Salmond could claim to be the most feared politician in Britain. In his early
years in nationalist politics, he had been a left-wing firebrand; upon election
to the House of Commons in 1987, he was branded an “infant Robespierre”
by one Tory MP. But by the time he took the SNP into government in 2007,
during his second spell as party leader, he had learned to use his rhetorical
gifts in service of a cannier strategy.

He exploited the advantages of incumbency and devolution to their fullest,

spending money on popular causes such as the end of a tuition fee for
Scottish university students and criticising Westminster for anything that
constrained the Scottish government. He carefully fused left and right,
courting media barons and oil companies while spending lavishly,
championing social liberalism while espousing a “Braveheart”-style
nationalism.

In the Scottish parliamentary election in 2011 he secured a majority,

establishing the SNP as the dominant political force north of the border.
That victory paved the way for an agreement with David Cameron, the then
prime minister, to hold a referendum on Scottish independence in 2014. The
victory for the pro-union campaign, by 55-45, ended Mr Salmond’s tenure
as first minister: he resigned, to be succeeded by his protégée, Nicola
Sturgeon.

The referendum campaign also revealed holes in the nationalist argument

that have not been filled in ten years later. Mr Salmond trained as an
economist but could not satisfactorily answer questions about Scotland’s
post-independence economy, most notably what currency it would use. And
having lost the referendum, the SNP found itself unable to articulate a
plausible Plan B.

In recent years Mr Salmond’s career went full circle, moving him

inexorably back towards the fringes. He lost his seat in the Commons in
2017. He hosted a show on RT, a Russian state broadcaster, from then until
the start of full-scale war in Ukraine in 2022, dismaying his fellow-
nationalists. He was acquitted of serious sexual offences in a trial in 2020
but his name was badly tarnished as a result; his own defence counsel told
the jury that they wouldn’t have been there if Mr Salmond had been “a
better man”.

His relationship with Ms Sturgeon was irreparably damaged by the handling

of the harassment allegations against him—a breach in SNP unity that was
exceptional at the time but prefigured a period of increasing party
indiscipline and scandal. In 2021 a vengeful Mr Salmond founded a new
nationalist party, Alba, which has had a vanishingly small impact: all of its
candidates drew insufficient votes to keep their deposits in the 2024 general
election.

Mr Salmond’s untimely death has little immediate political salience, in

other words. But it does tell a wider story. His achievement was to make the
cause of Scottish nationalism a central part of the political landscape north
of the border: around 45% of Scots still support independence. But the
referendum defeat in 2014 deprived nationalists of a clear path to this goal.
Ms Sturgeon has herself been toppled; the SNP is still in power in Holyrood
but faces a difficult election in 2026; Mr Salmond ended up a marginalised,
almost trivial figure. As a political epitaph, “so close, so far” captures it. ■

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Testing times

Could you pass the British

citizenship test?
If you’re a native-born Briton, almost certainly not
10月 17, 2024 07:30 上午

THE BATTLE of Hastings is not a bother. Almost all Britons would know,
as the British citizenship test demands they should, both when it was fought
(1066) and who won (William the Conqueror). Many might also manage
Agincourt (1415, Henry V); a few could probably even get Bosworth Field
(1485, Henry VII). But then the test, and the battles, get harder (Battle of
the Boyne, anyone?). Other topics are even more of a struggle. How many
Britons could confidently plot Bradford on a map? Or know what an
“Ulster fry” is (a food? a crime?). Or be able to say who Kenneth MacAlpin
was (a building magnate?).
What makes someone British? According to the law, the answer is simple:
someone with British citizenship. But according to the “Life in the UK” test
—a 24-question, 45-minute multiple-choice test taken on computer in a test
centre—a Briton is a far more quixotic creature.
To judge by the test’s preparatory handbook, they combine a fine
knowledge of British history with an enthusiasm for Sunday roasts, Welsh
cakes and celebrating Diwali in Leicester. They like gambling and going to
pub quizzes (where they can tell you that Kenneth MacAlpin was a ninth-
century Scottish king). Britons enjoy the Boat Race and pepper their speech
with phrases such as “[he] bowled a googly!”. On April 1st they like
nothing more than to “play jokes on [people] until midday”. They sound, in
short, insufferable.

The test does capture one quintessentially English quality—irony. This is

because most native-born Britons would probably flunk it. David Cameron,
the prime minister who oversaw the addition of a history section to the test
in 2013, failed his own questions on live television when he could date but
not translate the Magna Carta (it means “Big Charter”). Others struggle,
too. The test, which has been sat over 2m times since it was introduced in
2005, costs £50 ($65) a pop to take and requires a score of at least 75% to
pass, has a failure rate of around a quarter. It is, says Thom Brooks, a
professor of law and government at Durham University, like a “bad pub
quiz” filled with “insane trivia” that “makes no sense [as] a test for British
citizenship”. The last government promised a panel to review it, but this has
not yet materialised.

Citizenship is an ancient ideal. So, too, is the granting of it to non-citizens

in ways that are odd, even whimsical. In 212AD an emperor called
Caracalla extended Roman citizenship to all free people in the Roman
empire, who had to pay him taxes and bear his name. His example later
inspired the British empire to allow citizens from all over its own territories
to settle in Britain. The right was enshrined in the 1948 “British Nationality
Act”, which, as one MP put it, allowed a man to say “Civis Britannicus
sum” and live where he liked. Where women and non-Latin-speakers might
live was left unspecified.

The test is also part of a less generous tradition. The first country to
introduce a citizenship test was America in 1887: it took the form of a
language exam aimed at keeping out illiterate eastern and southern
Europeans. Since the 1990s Canada, Denmark, Germany and the
Netherlands, as well as Britain itself, have all followed suit. Most bill them
as “integration” tests. Nonsense, say critics: they are barriers to integration,
not bridges to it.

Whatever they are for, they are telling for what they choose to include and
omit. Most countries follow a similar formula, seasoning starchier questions
on government and law with ones on history (the German test emphasises
the Holocaust, the American one slavery) and culture (the Dutch test notes
that they like to put their rubbish in the right bins). The British test is not
given to self-reflection. Beneath the title “A Long and Illustrious History”,
it describes Elizabethan colonisation as “a time of growing patriotism”
when proud explorers “sought new trade routes” in the Americas. Later, it
notes that many thought empire was “a force for good in the world”. Which
leaves a little unsaid.

The test is flawed, then. But, argues Dan Jones, a historian, not to have any
of the past would pander to a “prissy metropolitan distaste” of anything that
smacks of patriotism. Besides, he adds, anyone who studied it would do
well in a “local pub quiz”. And there are few things more British than that.
■

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The answers to the sample questions are: C; A and D; D, C, D, C and C. If

you got all of them right, you are almost certainly a British citizen who was
not born in Britain.
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The right to die

An assisted-dying bill is again

introduced to Westminster
This time there is a good chance it will pass
10月 17, 2024 07:30 上午

ON OCTOBER 16TH, on a grey morning in Westminster, a gaggle of pink-

clad campaigners with placards gathered in Parliament Square. “Kim
Leadbeater MP: Thank you for giving us hope,” read one sign. Later that
day, Ms Leadbeater, a Labour MP, introduced a bill in the House of
Commons to allow assisted dying for the terminally ill in England and
Wales.

Ms Leadbeater is not the first politician to propose changing the law. The
first was Lord Ponsonby, whose bill on voluntary euthanasia in 1936 was
supported by H.G. Wells and the Dean of St Paul’s. That bill was defeated
after his fellow peers pronounced themselves unconvinced by the promise
of safeguards and worried that the choice could be extended to those of
unsound mind (or “imbeciles and mental defectives” in the less thoughtful
language of the time). Many were bound by their religious beliefs to oppose
it. In the past two decades four attempts to introduce similar legislation
have all run into the same hurdles. Advocates, The Economist among them,
hope that this time will be different.

It helps that the affable Ms Leadbeater is an MP, not a peer. Private

members’ bills—those not introduced by government ministers—have more
chance of passing if they are tabled in the House of Commons rather than
the House of Lords. That is why Lord Falconer, a peer who proposed his
own assisted-dying bill in the Lords in July, is withdrawing it in favour of
Ms Leadbeater’s newer proposal.

Parliament also looks very different from the last time an assisted-dying bill
was debated by MPs—and defeated by 330 votes to 118—in 2015. A new
intake of (mostly Labour) MPs appear more receptive to the idea, and
crucially, the prime minister, Sir Keir Starmer, is a supporter of it. Sir Keir
has promised a free vote on the matter; his biggest contribution will be to
allow time for a proper debate.

The actual content of the legislation is still being drafted and will not be
debated by MPs until November 29th. But Ms Leadbeater has already told
The Guardian that her bill would have “strict, stringent criteria”. She has
suggested that, like Lord Falconer’s proposal, which would have limited
assisted dying to those with only six months to live, two doctors and a judge
would have to sign off on a terminally ill person’s request to die. If a bill of
this sort were to pass, it would be one of the strictest laws of its kind in the
world, surpassing in its caution the legislation that the American state of
Oregon first enacted in 1997.

Even so, it is by no means certain that MPs will vote for it. Assisted dying
remains deeply contentious; at least half of the cabinet are thought to be
undecided or opposed. That may put them out of step with the British
public: polls consistently suggest that around two-thirds of Britons support
a change in the law. Other countries and jurisdictions are moving ahead
with their own plans. On October 17th the Irish parliament’s lower house
will consider a committee report which proposes introducing an assisted-
dying law. Bills are also progressing through the parliaments of Scotland,
the Isle of Man and Jersey. There is a long way to go until England and
Wales get an assisted-dying law. But there is growing momentum. ■

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Bagehot

The war on prices: British edition

Too often, politicians see prices as something to be fought
10月 17, 2024 07:30 上午

EVERY FEW decades the American government declares war on a noun,

and the British government meekly follows along. In the 1970s it was
Richard Nixon’s war on drugs, which shaped British drug policy for a
generation. In the 2000s it was George W. Bush’s war on terror, which the
British government keenly joined. Now another war has come along: the
“war on prices”.

The term was popularised by Ryan Bourne, an economist at the Cato

Institute, a free-market think-tank. It explained how America’s politicians
had come to see prices as something to be fought rather than a vital part of a
market economy. Like its forebears, the war on prices has caught on across
the Atlantic. Like an inept general, the British state has intervened when it
should have steered clear; where action was necessary, it has often
blundered.

The British war on prices started with a skirmish. In 2013 Ed Miliband,

then the leader of the opposition Labour Party, argued for a cap on energy
bills. What was once dismissed as a hopelessly left-wing idea became
policy in 2017 under the Conservative government of Theresa May. Four
governments later, it is still in place. Each quarter Ofgem, the regulator of
Britain’s privatised energy market, decides how much a firm can charge its
customers.

New fronts in the war keep opening. If the state can set energy prices, why
not fiddle in the private rental market? A renter’s bill designed to mitigate
the casual humiliation of tenancy in England—landlords must now remove
mould quickly—has morphed into the introduction of a soft version of rent
control. The removal of no-fault evictions means tenants can be more gung-
ho about challenging rent rises. A tribunal of lawyers and experts will
decide the “market rate” (mainly by firing up Zoopla, an online portal). This
will be a one-way bet: a tenant will never have to pay more than the initial
offer. Likewise, flat-hunters will be forbidden from going above the
advertised asking-price. In the war on prices, “market prices” are too vital
to be left to the market.

At times, this is a dirty war. British politics has taken a scatological turn, in
which leaders of a G7 country spend a surprisingly large amount of time
discussing sewage. Again, inept pricing is to blame. Since privatisation in
1989, Ofwat, the water regulator, has focused on low prices rather than on
compelling higher investment from private water companies. The result is
waterways that are less clean than they might be. Worse, thanks to stricter
rules on measuring sewage spills, voters in England now know exactly how
bad things are (there were 464,056 spills in 2023). Faced with a choice of
poo in the rivers or price rises, “neither!” is the war-cry of British voters.

The water industry is not the only one to suffer from the British habit of
marketising a service that struggles to function as a market. Universities are
another victim. Tuition fees were capped at £9,000 ($11,725) in 2012, in the
expectation that some universities would charge less to attract students.
Instead, practically all universities—from Cumbria to Cambridge—charged
the highest amount possible. The government then refused to allow price
rises (other than an increase of £250 in 2017, seven years and one inflation
shock ago). Many universities are now broke. Labour is considering
allowing fees to rise to £10,500 by 2029. It is not much of a peace offering.

What happens if the price of something is prevented from rising? Look

beneath your feet. In Britain it is common to see paving slabs or intricate
brickwork spoiled by streaks of tarmac left behind by utility companies.
“Street scars”, as they have been dubbed by Create Streets, a design
consultancy, are a consequence of the war on prices. According to a law
passed in 1991, a company must pay up to £2,500 if it leaves a street in a
state. What was once a stiff price is now spare change. Every year it is a
little bit cheaper to leave Britain’s public realm resembling a battlefield.

The war on prices was, for a time, a phoney war rather than truly damaging
one. Sadiq Khan, the mayor of London, made a show of freezing bus and
Tube fares. Keeping fares flat in an era of low inflation and low wage
growth was a cheap sop to voters. But in an era of sticky inflation and
healthier wage growth, the fighting is expensive. Between 2016 and 2024
bus fares in London rose by 17% to £1.75, with any rises smuggled through
between election years. In contrast, the starting salary of a London bus
driver rose by 43% to £33,000. London’s transport network is cash-strapped
and the war on prices is, in part, to blame.

The Price Is (Not) Right!

Surrender in the war on prices is not necessary. At times the British state is
a model of Hayekian rationality when it comes to prices. It is, for instance,
happy to put a price on life. The National Institute for Health and Care
Excellence, a regulator, is admirably clear that if a treatment costs more
than £20,000-30,000 per quality-adjusted life year, it is generally not
available on the National Health Service. This is the necessary sociopathy
of the state, whose fundamental duties often boil down to who dies and
how.

Prices are sometimes deployed for cuddly but complex goals. Britain is a
pioneer when it comes to “biodiversity net gain” credits, which see
developers pay from £42,000 for disturbing heathland to £650,000 for
ruining a peat lake. For all its flaws (what is the right price for a bog?) this
is better than the previous system, which priced these habitats at either zero
or infinity, with building being simply banned. It is in less knotty areas—
such as tuition fees or bus prices—where the war does most needless
damage.

But there is hope there, too. London was the first major city to introduce a
congestion zone; it was also the first to introduce an ultra-low emissions
zone, sticking with it even when masked vigilantes started chopping down
enforcement cameras. Many battles have been lost. Peace in the war on
prices is still possible. ■

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International
Vladimir Putin’s spies are plotting global chaos
Going feral :: Russia is enacting a revolutionary plan of sabotage, arson and assassination

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Going feral

Vladimir Putin’s spies are plotting

global chaos
Russia is enacting a revolutionary plan of sabotage, arson and
assassination
10月 17, 2024 07:30 上午

“WE’VE SEEN arson, sabotage and more: dangerous actions conducted

with increasing recklessness,” warned Ken McCallum, the head of MI5,
Britain’s domestic security and counter-intelligence agency, of the threat
posed by Russia and the GRU, its military-intelligence agency. “The GRU
in particular is on a sustained mission to generate mayhem on British and
European streets,” he said on October 8th. Other European intelligence
agencies are equally concerned. On October 14th Bruno Kahl, Germany’s
spy chief, said that Russia’s covert measures had reached a “level
previously unseen”. Thomas Haldenwang, the head of Germany’s domestic
intelligence services, told lawmakers that an act of sabotage had almost
caused a plane to crash earlier this year as he warned that “aggressive
behaviour” by Russian spies was putting lives at risk.

Russia’s war in Ukraine has been accompanied by a crescendo of

aggression, subversion and meddling elsewhere. In particular, Russian
sabotage in Europe has grown dramatically. “We see acts of sabotage
happening in Europe now,” Vice-Admiral Nils Andreas Stensones, the head
of the Norwegian Intelligence Service, said in September. Sir Richard
Moore, the chief of MI6, Britain’s foreign-intelligence agency, put it more
bluntly: “Russian intelligence services have gone a bit feral, frankly.”

The Kremlin’s men have squeezed the West out of several African states. Its
hackers, Poland’s security services said, have tried to paralyse the country
in the political, military, and economic spheres. Russia’s propagandists have
pumped disinformation around the world. Its armed forces want to put a
nuclear weapon in orbit. Russian foreign policy has long dabbled in chaos.
Now it seems to aim at little else.
Start with the summer of sabotage. In April Germany arrested two German-
Russian nationals on suspicion of plotting attacks on American military
facilities and other targets on behalf of the GRU. The same month Poland
arrested a man who was preparing to pass the GRU information on
Rzeszow airport, a hub for arms to Ukraine, and Britain charged several
men over an arson attack on a Ukrainian-owned logistics firm in London.
The men were accused of aiding the Wagner Group, a mercenary outfit now
under the GRU’s control. In June France arrested a Russian-Ukrainian who
was wounded after attempting to make a bomb in his hotel room in Paris. In
July it emerged that Russia had plotted to kill Armin Papperger, the boss of
Rheinmetall, Germany’s largest arms firm. On September 9th air traffic at
Stockholm’s Arlanda airport was shut down for more than two hours after
drones were spotted over runways. “We suspect it was a deliberate act,” a
police spokesperson said. American officials warn that Russian vessels are
reconnoitring underwater cables.

Even where Russia has not resorted to violence, it has sought to stir the pot
in other ways. The Baltic states have arrested a number of people for what
they say are Russian-sponsored provocations. French intelligence officials
claim that Russia was responsible for the appearance of coffins draped with
the French flag and bearing the message “French soldiers of Ukraine” left at
the Eiffel Tower in Paris in June. Many of these actions are aimed at
fanning opposition to aid for Ukraine. But others are intended simply to
widen splits in society of all kinds, even if these have little or no link to the
war. France says that Russia was also behind the graffiti of 250 Stars of
David on walls in Paris in November, an effort to fuel antisemitism, which
has surged since the start of the Israel-Hamas conflict.

Much of Russia’s activity has been virtual. In April hackers with ties to the
GRU seem to have manipulated control systems for water plants in America
and Poland. In September America, Britain, Ukraine and several other
countries published details of cyber-attacks by the GRU’s Unit 29155, a
group that was previously known for assassinations in Europe, including a
botched effort to poison Sergei Skripal, a former Russian intelligence
officer. The GRU’s cyber efforts, which had been ongoing since at least
2020, were not just aimed at espionage, but also “reputational harm” by
stealing and leaking information and “systematic sabotage” by destroying
data, according to America and its allies.

Beyond Europe, GRU officers have been in Yemen alongside the Houthis, a
rebel group that has attacked ships in the Red Sea, ostensibly in solidarity
with Palestinians. Russia, angered by America’s provision of long-range
missiles to Ukraine, came close to providing weapons to the group in July,
CNN reported, but reversed course after strong opposition from Saudi
Arabia. The fact that Vladimir Putin, Russia’s president, was willing to
alienate Muhammad bin Salman, the kingdom’s de facto ruler whom he had
courted for years, is an indication of how Russia’s war has cannibalised its
wider foreign policy.

Everything everywhere

“What Putin is trying to do is hit us all over the place,” argues Fiona Hill,
who previously served as the top Russia official in America’s National
Security Council. She compares the strategy to the Oscar winning film:
“Everything Everywhere All at Once”. In Africa, for instance, Russia has
used mercenaries to supplant French and American influence in the
aftermath of coups in Burkina Faso, Mali and Niger.

Russia’s meddling in America takes a very different form. In May Avril

Haines, America’s director of national intelligence, called Russia “the most
active foreign threat to our elections” above China or Iran. This was not
merely about trying to shape America’s policy on Ukraine. “Moscow most
likely views such operations as a means to tear down the United States as
its perceived primary adversary,” she said, “enabling Russia to promote
itself as a great power.” In July American intelligence agencies said that
they were “beginning to see Russia target specific voter demographics,
promote divisive narratives, and denigrate specific politicians”.

These efforts are generally crude and ineffectual. But they are prolific,
intense and sometimes innovative. In September America’s Justice
Department accused two employees of RT, a Kremlin-controlled media
outlet that regularly spews out Russian talking points and lurid conspiracy
theories, of paying $10m to an unnamed media company in Tennessee. The
firm, thought to be Tenet Media, posted nearly 2,000 videos on TikTok,
Instagram, X and YouTube. (Commentators paid by the company denied
wrongdoing.) The department also seized 32 Kremlin-controlled internet
domains designed to mimic legitimate news sites.

Russian propagandists are also experimenting with technology. CopyCop, a

network of websites, took legitimate news articles and used ChatGPT, an
AI model, to rewrite them. More than 90 French articles were modified
with the prompt: “Please rewrite this article taking a conservative stance
against the liberal policies of the Macron administration in favour of
working-class French citizens.” Another rewritten piece included evidence
of its instructions, saying: “This article…highlights the cynical tone
towards the US government, NATO, and US politicians.”

Russian disinformation campaigns are hardly new, acknowledges Sergey

Radchenko, a historian of Russian foreign policy, pointing to episodes such
as the Tanaka memorandum, an alleged Soviet forgery that was used to
discredit Japan in 1927. Nor are proxy wars or assassinations a novelty.
Soviet troops were already fighting in Yemen, disguised as Egyptians, in the
early 1960s, he notes. The KGB’s predecessors and successors have killed
many people abroad, from Leon Trotsky to ex-spy Alexander Litvinenko.

The genuinely new part, says Mr Radchenko, “is that whereas previously
special operations supported foreign policy, today special operations are
foreign policy.” Ten years ago the Kremlin worked with America and
Europe to counter Iran and North Korea’s nuclear programme. Such co-
operation is now fanciful. “It is as if the Russians no longer feel they have a
stake in preserving anything of the post-war international order,” says Mr
Radchenko. This period reminds him more of Mao’s nihilistic foreign
policy during China’s Cultural Revolution than the Soviet Union’s cold-war
thinking, which included periods of pragmatism and caution. Ms Hill puts it
another way: “It’s Trotsky over Lenin.”

Mr Putin embraces these ideas. “We are in for probably the most dangerous,
unpredictable and at the same time most important decade since the end of
World War II,” he said in late 2022. “To cite a classic,” he added, invoking
an article by Vladimir Lenin in 1913, “this is a revolutionary situation.”
That belief—that the post-war order is rotten and needs rewriting, by force
if necessary—also gives Russia common cause with China. “Right now
there are changes the likes of which we haven’t seen for 100 years,” Xi
Jinping told Mr Putin last year in Moscow, “and we are the ones driving
these changes together.”

Russia’s foreign-policy strategy, published in 2023, offers the bland

reassurance that it “does not consider itself an enemy of the West…and has
no ill intentions”. A classified addendum acquired by the Washington Post
from a European intelligence service suggests otherwise. It proposes a
comprehensive containment strategy against a “coalition of unfriendly
countries” led by America. That includes an “offensive information
campaign” among other actions in the “military-political, trade-economic
and informational-psychological…spheres”. The ultimate aim, it notes, is
“to weaken Russia’s opponents”.

This does not mean Russia is unstoppable. It is increasingly a junior partner

to China. Its influence has slipped in some countries, such as Syria. It does
not always back up its own proxies—dozens of Wagner fighters were killed
in an ambush by Malian rebels, aided by Ukraine, in July. And Russian
subversion can be disrupted, says Sir Richard, by “good old-fashioned
security and intelligence work” to identify the intelligence officers and
criminal proxies behind it. The fact that Russia is increasingly reliant on
criminals to carry out these acts, in part because Russian spies have been
expelled en masse from Europe, is a sign of desperation. “Russia’s use of
proxies further reduces the professionalism of their operations, and—absent
diplomatic immunity—increases our disruptive options,” says Mr
McCallum.

Russian meddling is intended to put pressure on NATO without provoking a

war. “We also have red lines,” says Ms Hill, “and Putin is trying to feel
those out.” But if he is truly driven by a revolutionary spirit, convinced that
the West is a rotten edifice, that suggests more lines will be crossed in the
months and years ahead. ■
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Special report
The American economy has left other rich countries in the
dust
Expect that to continue

American productivity still leads the world

Economic output :: Innovation and a vibrant tech sector continue to give America a
competitive edge

Is higher inequality the price America pays for faster

growth?
For richer and poorer :: A look at the potential downsides of outperformance

The shale revolution helped make America’s economy

great
Energy :: But will the country’s oil riches discourage a similar revolution in renewables?

Why the American stockmarket reigns supreme

Stocks :: Lower returns are coming, but they should continue to be world-beating

China’s yuan is nowhere close to displacing the greenback

The dollar :: The only way the dollar will lose its supreme role is at America’s own hand

What can stop the American economy now?

Looking ahead :: Toxic politics could derail America’s economic boom. The world should
hope it does not

Sources and acknowledgments

The American economy ::

The envy of the world

The American economy :: The American economy has left other rich countries in the dust.
Expect that to continue, argue Simon Rabinovitch and Henry Curr

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Special report

The American economy has left

other rich countries in the dust
Expect that to continue
10月 17, 2024 07:30 上午

“ON PRESENT policies and performance, the United States is condemned

to slower growth than the other main industrial countries for the foreseeable
future.” So declared the Competitiveness Policy Council, a committee
advising America’s president and Congress, in 1992, a time when America
was gripped by concerns that its economy was declining and losing ground
to Japan and Europe. The opposite turned out to be true. Japan entered a
long period of stagnation, Europe’s growth fizzled and America
experienced a mini-boom, fuelled by the rise of the internet.
More than three decades later, some are again painting pictures of an
American economy heading towards decline. China is now the rising
juggernaut in the East. Donald Trump, instead of Bill Clinton, is the
candidate for president lamenting the state of the economy (Mr Trump says
it is “failing”, where Mr Clinton called it an “unpleasant economy stuck
somewhere between Germany and Sri Lanka”). Ordinary Americans are
anxious. Gallup, a polling firm, regularly asks Americans if they are
satisfied with how things are going. From 1980 until the early 2000s, a little
more than 40%, on average, said they were. Over the past two decades that
has dropped to 25%.

Are the prophets of decline onto something this time? Since the rollicking
1990s the American economy has suffered occasional upheavals, including
the dot-com bust, the global financial crisis, a spike in unemployment
during the covid-19 pandemic and, most recently, a surge in inflation. In
purchasing-power-parity (PPP) terms America’s share of the global
economy has indeed shrunk, from 21% in 1990 to 16% now.

America’s outperformance has accelerated recently

But one thing has been consistent since the early 1990s: America has grown
faster than other big rich countries, and it has rebounded more strongly
from bumps along the way. The faulty diagnosis of the competitiveness
council back in 1992 should stand as a corrective for those now peddling
gloom. America’s growth since then has been best-in-class, and its strengths
today give grounds for optimism about the country’s economic power and
potential. That America’s share of global GDP in PPP terms has decreased
is less a comment on its own trajectory than on the growth spurts of the two
most populous countries, China and India. China’s output per person
remains less than a third of America’s; India’s is smaller still.
Even more striking is how America has outperformed its peers among the
mature economies. In 1990 America accounted for about two-fifths of the
overall GDP of the G7 group of advanced countries; today it is up to about
half (see chart). On a per-person basis, American economic output is now
about 40% higher than in western Europe and Canada, and 60% higher than
in Japan—roughly twice as large as the gaps between them in 1990.
Average wages in America’s poorest state, Mississippi, are higher than the
averages in Britain, Canada and Germany.

And America’s outperformance has accelerated recently. Since the start of

2020, just before the covid-19 pandemic, America’s real growth has been
10%, three times the average for the rest of the G7 countries. Among the
G20 group, which includes large emerging markets, America is the only one
whose output and employment are above pre-pandemic expectations,
according to the International Monetary Fund.

Coupling this growth with the dollar’s strength translates into heft for
America and wealth for Americans. That can be seen in the huge numbers
of Americans travelling and spending record sums overseas. A decade ago
(as Chinese travellers too were demonstrating their wealth) many analysts
thought that China would, by now, have overtaken America as the world’s
biggest economy at current exchange rates. Instead its GDP has been
slipping of late, from about 75% of America’s in 2021 to 65% now.

Endowed with gifts

This special report will explain why American growth has been so strong
for so long, and why it can be expected to continue. Some of the reasons are
down to the good fortune bestowed by geography. As a quasi-continental
economy with a giant consumer market, American companies benefit from
scale: a good idea hatched in California or product built in Michigan can, in
short order, spread to 49 other states. America also has a big, well-
integrated labour market, allowing people to move to better-paying jobs and
drawing workers to more productive sectors. A long, porous southern
border may be politically contentious but it has been an economic tailwind,
allowing the labour force to steadily grow and helping to fill the hard, dirty
jobs that many native-born Americans have no interest in doing. And as
important as the size of the country is what lies beneath it. Over the past
two decades the improvements in techniques for extracting hydrocarbons
from once-unpliant shale rocks have turned America into the world’s
biggest producer of oil and gas.

The American economy also has particular strong points which have bred
more strength. Possessing the world’s deepest financial markets has made it
easier for startups to raise equity, a better way to get off the ground than
borrowing cash. The plethora of exciting young companies in America has,
in turn, boosted the attractiveness of its markets. Similarly, having the
world’s dominant currency has made global commerce more frictionless for
American business. And America has the world’s best universities, which
remain so in part by attracting the world’s best students.

The visible hand

Other policy choices have helped. America has a more relaxed approach to
business regulation than many other countries. That has given high-tech
companies room to play and grow. It also enabled the experimentation
which led to the shale revolution. But America’s success is not just a story
of small government. Officials have made bold, resolute interventions
during crises (including ones that, in fairness, were abetted or exacerbated
by lax regulation to begin with). After a shaky start, America delivered a
strong response to the global financial crisis of 2007-09, acting decisively
to clean up bank balance-sheets, and making aggressive use of monetary
policy to support growth. The government’s response to the covid
slowdown was yet more extraordinary, with a suite of fiscal stimulus
packages that left other countries in the dust. Indeed, officials overdid it in
their pursuit of a recovery, contributing to the global rise in inflation. But it
is impossible to explain America’s mighty economic engine without
acknowledging the government’s willingness to step on the accelerator
pedal when it has sputtered.

For all of America’s prowess, it has plenty of maladies. A fundamental test

of any country’s governance is whether its people live good, long lives. On
this count America is wanting. In 2023 the life expectancy for a newborn
American was 79, three years shorter than the average in western Europe,
according to UN projections. That startling gap was virtually nonexistent in
1980. This is largely a reflection of fewer Americans reaching their dotage
owing to obesity and to particularly acute American problems like opioids,
guns and unsafe roads. But older Americans fare badly in relative terms,
too. In 2023 in America the average 60-year-old was projected to live
another 24 years, nearly one year shorter than in Europe. In 1980 the
reverse was true; older Americans were projected to outlive their European
peers by almost a year.

Many critics of America’s economic model contend that it is intrinsically

flawed, beset by extreme inequality and ever-more dominant companies
crushing competitors. But these are exaggerations. There may be scope for
a fairer distribution of the country’s wealth without undermining America’s
growth, but the widely held belief that the top 1% are taking it all is
overdone. As for tech behemoths such as Apple and Amazon, their potential
for dominance must be watched and, if necessary, curtailed, but it is also
true that they have generated incredible value in daily life and shaken up
stodgy industries. And they face fierce competition to stay on top. They
stand as evidence more of America’s economic success than of its
problems.

In the history of modern economics America’s three-decade outperformance

is remarkable. Can it continue? Throughout this report we will consider
reasons for pessimism, from poisonous politics to fiscal frailties. Set against
these is a relentless dynamism, the essential characteristic of the American
economy and the ultimate force propelling it forward. ■
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Economic output

American productivity still leads

the world
Innovation and a vibrant tech sector continue to give America a competitive
edge
10月 17, 2024 07:30 上午

CLAD IN A white bunny suit that leaves only his eyes exposed, S.V.
Sreenivasan carefully picks up the slender object that lies at the heart of the
global economy, a silicon wafer. But this particular wafer is a little different
from most of those from which semiconductors are made: it is fused to a
glass plate. Mr Sreenivasan’s team at the Texas Institute for Electronics, a
public-private consortium, is working on a $1.4bn research project to make
chips which use materials in addition to silicon and which stack
components vertically. If successful, it could change the basic architecture
of semiconductors. “People keep asking if innovation in the industry will
slow down,” Mr Sreenivasan says. “If anything, it’s accelerating.”

What makes the work interesting is not just its ambition but also the
provenance of its funding. The biggest single infusion of capital— $840m
—comes from the Defence Advanced Research Project Agency (DARPA), a
government body that has achieved something akin to legendary status for
its roles in inventing the internet, popularising the global positioning system
and developing the mRNA vaccines that let the world move past the covid-
19 pandemic. “At any moment in time, we’re really just laying a whole
bunch of bets,” says Stefanie Tompkins, the director of DARPA.

In the world of economics DARPA is legendary for another reason. It is

seen as part of the explanation for why America is not just good at
innovation but also why it is a lot more productive than many other
countries. In September Mario Draghi, former president of the European
Central Bank (and former prime minister of Italy), argued as much in a
report for the European Commission about the continent’s slow growth.
Pointing to America’s stronger productivity, he noted that one important
axis ran from DARPA’s willingness to back risky ideas with public capital
to America’s propensity for technological breakthroughs.

In truth it is impossible to ascribe productivity to any single factor, much

less a single public agency. DARPA is one element in a heady, complex
mix. But there is no question that productivity has enabled much of
America’s economic outperformance.

This year the average American worker will generate about $171,000 in
economic output, compared with (on purchasing-parity terms) $120,000 in
the euro area, $118,000 in Britain and $96,000 in Japan. That represents a
70% increase in labour productivity in America since 1990, well ahead of
the increases elsewhere: 29% in Europe, 46% in Britain and 25% in Japan.

Working holiday hours

A common riposte is that American productivity is exaggerated since

American workers get much less holiday time than their peers abroad. But
when assessed on a per-hour basis the gap remains sizeable: 73%
productivity growth for American workers since 1990 versus 39% in the
euro area, 55% in Britain and 55% in Japan (see chart). Another criticism is
that productivity growth in America has steadily declined over the past
couple of decades. That, however, has been true elsewhere as countries
have grappled with ageing populations and what had seemed to be a
maturing tech landscape. Productivity growth in America remains stronger
than in most other economies.
To explain this productivity outperformance, it is useful to break it into a
few broad, overlapping categories. The first is investment in capital.
American workers, simply put, have more tools at their disposal, both the
physical kind such as highways and warehouses and the intangible sort in
the form of software. Non-residential investment has run at about 17% of
GDP in America since the mid-1990s, consistently higher than the share in
large European economies, according to John Fernald of INSEAD, a
business school in France. Moreover, much American business investment
is the most potent kind: spending on research and development, which sows
the seeds for future growth. With the exceptions of Israel and South Korea,
America invests more in R&D than any other country, at roughly 3.5% of
GDP. China is the one major power that has closed the gap on R&D
spending, but it still trails America by a large absolute margin.

America’s overall economic environment, often described as its business

dynamism, is a second factor. One way of showing this is the churn rate
among its companies, or the share that are created or dissolved in any given
year. This has declined somewhat in America but is still nearly 20% of
companies annually (roughly half are new businesses and the other half are
those that stop operating). In Europe it is closer to 15%, according to the
European Centre for International Political Economy, a think-tank. This
difference reflects the twin facts that it is easier both for old firms to fold in
America and for startups to obtain financing.

To everything (churn, churn) there is a season

Churn allows the American corporate landscape to keep evolving in the

direction of more profitable ventures. In 2005 America’s biggest issuers of
patents were Procter & Gamble, 3M, General Electric, DuPont and
Qualcomm, while in the euro area they were Siemens, Bosch, Ericsson,
Philips and BASF, according to Antonin Bergeaud, an economist at HEC, a
business school in Paris. In 2023 in America there were four new entrants in
its top five: Microsoft, Apple, Google and IBM joined Qualcomm. In the
euro area it was almost all the same, with only Bayer displacing Siemens.

America invests more in R&D than almost all other countries

The dynamism applies to America’s labour market, too. In any given three-
month period about 5% of its workers change jobs. In Italy it takes one year
to get the same level of labour turnover. A study in 2020 by the OECD
found that among citizens in a large sample of Western countries,
Americans were the most likely to move elsewhere for new jobs. Decisions
to move may partly stem from things that other countries want to avoid,
notably America’s weaker union laws and its more limited support for the
unemployed. But dislocation can be productive: those who switch jobs tend
to enjoy higher wages than those who stay put, an indication that they have
gone to companies and places which are making better use of their talents.
The wage premium for job-switchers is especially true for women, youth
and people with fewer skills.

Over time all this churn tends to push workers, entrepreneurs and
investment towards more productive sectors. That matters because the
productivity gap between America and Europe is almost entirely the result
of America’s outperformance in a few digital-intensive segments of the
economy—the third vital factor behind America’s productivity success. It
has done particularly well in tech, finance and professional services such as
law and consulting. In other sectors, such as retail sales, European countries
often get more out of their workers. The point is thus not that every facet of
American life is more productive, but that America is strong in the sectors
that have done the most to generate growth and wealth over the past few
decades.

The underlying cause of America’s tech superiority is the country’s vibrant

innovation lifecycle. It starts with its universities, helped by their ability to
attract many of the brightest minds from around the world. Public support
for research is robust. Financing for young companies is plentiful. And
companies face few regulatory hurdles to scale up. It is not that American
regulators are lax but that they compare favourably to many of those
elsewhere in the world. Europe still fragments along national lines. Japan
has a way to go in shaking up its stodgy corporate governance. In China the
Communist Party has set its own cause back by throttling its once-vibrant
private sector.

The very success of America’s tech giants has provoked concern that they
have become too powerful, and that their dominance is harming the
economy and stifling its dynamism. Thomas Philippon of New York
University has documented the rise in corporate concentration in America
since the 1980s: big companies have taken a larger and larger share of
corporate revenues; corporate profits in general have risen as a share of
economic output; and companies, especially in the most concentrated
sectors, have transformed less of their profits into new investments and
more into share buybacks. Added up, that threatens to be a recipe for slower
productivity, weaker growth and higher inequality. So influential is this
assessment of the economy that it is a motivating force for the Biden
administration’s aggressive application of antitrust laws, aimed at curtailing
the reach of big tech.

Yet the case that concentration has reached harmful levels is no slam dunk.
Economic theory suggests that monopolists (or oligopolists) will abuse their
clout to reduce production and raise prices. Sharat Ganapati of Georgetown
University has found pretty much the opposite relationship in four decades’
worth of American census data: industries with rising concentration have
also been the most productive, and the companies that fared best in them
did not raise prices. One interpretation is that America’s corporate
champions have excelled by being more efficient, thereby benefiting
consumers and the wider economy.

New and improved products

Data on concentration are also complicated. Studies typically focus on

entire industries—the way that, say, Procter & Gamble (P&G) is a
powerhouse in consumer goods. But looking at the economy in terms of
products, rather than industries, presents a different picture—one that is
arguably more consistent with everyday realities. Looked at on a product-
by-product basis, concentration is actually declining in America; established
brands are moving into new niches, according to research by C. Lanier
Benkard of Stanford and colleagues. P&G may be big in consumer goods
generally, but it has reduced concentration in the rubber-glove market with
a new Mr Clean product.

And corporate America is getting into areas that are more consequential
than dish-cleaning. Economists have long observed the duality between
national and local competition. Home Depot’s heft seems to reduce
competition on a national scale, but when it enters a town that previously
had just one hardware store, it represents a new competitive force. A similar
dynamic may be playing out as tech giants move into markets which are
conceptually, rather than geographically, new to them. Companies like
Amazon and Alphabet offer one of the best hopes for shaking up America’s
high-cost health-care sector as they get into primary care, diagnostic
services and more.

The rise of AI may herald a return to faster growth

If tech companies manage to achieve dominance across many markets by

being hyper-efficient competitors, then proceed to block new challengers,
the worst fears about them might prove justified. For now, though, a recent
examination of the evidence by Carl Shapiro of the University of California
at Berkeley and Ali Yurukoglu of Stanford put it well: the rise of
concentration across American industry looks more like competition in
action than competition in decline.

What is more, many excited observers think the latest wave of innovation
emanating from the tech giants—the rise of artificial intelligence (AI)—will
herald a return to faster productivity growth both in America and abroad. In
a study last year, economists at Goldman Sachs, a bank, concluded that AI
could drive a 7% increase in global GDP over a decade. And they estimated
that America would reap a bigger boost to its growth than any other country
by virtue of being at the frontier of technology, both pushing AI forward
and adopting it extensively. A healthy dose of scepticism is in order. After
reviewing literature on how AI works and how ideas spread, Daron
Acemoglu of MIT came to the more sedate conclusion that it will boost
GDP by about 1% over the next decade.

Whatever the eventual outcome, the rise of AI has served to underscore just
how formidable America remains as an engine of innovation. It accounts for
more than half of global private-sector investment in AI. And it is not just
the private sector. DARPA is all over the boom, funding dozens of projects
that use AI, from beefing up cyber-security to turning machines into more
trustworthy partners for their human operators. It is, once again, helping
write the next chapter in the story of American productivity. ■
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For richer and poorer

Is higher inequality the price

America pays for faster growth?
A look at the potential downsides of outperformance
10月 17, 2024 07:30 上午

THINK ABOUT income inequality in America and some archetypes easily

come to mind. Start with a rich corporate lawyer, earning above the roughly
$1m annual income (before taxes and transfers) that places a household in
the top 1% of earners. At the other end of the scale, in the bottom 20%, a
single mother with a fast-food job might have an income of $25,000.
Between them, a home with a mechanic and a part-time teaching assistant
might have annual earnings of $80,000, around the median.
The skew towards the top is sharp. America ranks as the most unequal big
rich-world country (see chart). Combined with lower average incomes
elsewhere, the pay of America’s top workers looks astonishing to European
eyes. For comparison, it takes the equivalent of a mere $250,000 or so to
enter the top 1% of two-person households in Britain.

It would be natural to conclude that high inequality is merely the flipside of

America’s wealth. That is probably true to an extent. Yet America has
grown more redistributive over the period examined by this special report,
expanding the earned-income tax credit, a wage top-up for low earners, in
the 1990s, and subsidies for health insurance in the 2010s. And it is not
clear that tolerance for inequality is powering its economic outperformance
over the past decade.

Take the corporate lawyer. Even after taxes and transfers, the average real
income of households like his grew by 110% from 1990 to 2019, according
to the Congressional Budget Office (CBO). But most of that growth took
place early in the time period: in 2019 he was probably doing worse than
his equivalent in 2007, before the global financial crisis.

By contrast incomes in the lowest 20% of households, in which the fast-

food worker resides, surged in the tight labour market of the late-2010s. By
2019 she was enjoying after-tax-and-transfer household income 25% higher
than those like her in 2007, in part thanks to “Obamacare”. Even over the
full period since 1990, the bottom quintile’s after-tax-and-transfer income
growth was 77%, the same as for the highest quintile—thus, excluding the
highest-earning 1% from the top 20% would show the poor enjoying faster
income growth than the upper-middle-class. In the 2020s the burger-flipper
probably had a boost from the tight post-pandemic labour market, which
lifted wage growth the most at the bottom end of the income distribution.

It is the mechanic and teaching assistant in the middle who have the best
claim to having missed the party: median real income rose by 57% from
1990 to 2019. But that is still a healthy 1.6% per year—a far cry from the
stagnation in median earnings that is sometimes alleged, based in part on an
inflation index, the CPI, which is biased upwards.
Some argue that things are different. The CBO numbers are in the middle of
the range of income-inequality estimates. Calculations by economists
Thomas Piketty, Emmanuel Saez and Gabriel Zucman show a rise in after-
tax-and-transfer inequality that is sharper, while those by Gerald Auten and
David Splinter, published in July in the Journal of Political Economy, show
a much smaller increase (see chart). Income inequality is also only one type
of inequality: nobody disputes that wealth inequality has risen this century
(even if most estimates wrongly ignore the value of the single mother’s
future entitlement to social security payments in old age). America faces
other social problems which can exacerbate a sense of inequality.

The striking thing is how little these problems seem to have exacted an
economic toll. Once inequality reaches very high levels, rent-seeking by
elites imperils economic growth. America’s experience suggests that it
remains on the right side of this threshold. ■
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Energy

The shale revolution helped make

America’s economy great
But will the country’s oil riches discourage a similar revolution in
renewables?
10月 17, 2024 07:30 上午

IN THE DENSE hilly forests of northern Pennsylvania, Trapper Wyman

steers his pick-up truck down a gravel path until he reaches a small clearing
at the end. It is a modest industrial site, with a lattice of pipes and valves, a
few engine-like units no bigger than SUVs and one worker who is
monitoring it all. The operation runs in almost total silence. Unseen are the
wells that plunge some 10,000 feet below the ground, then turn a corner to
run another 10,000 feet horizontally, or the gas that flows back up and into
a pipeline that traverses the country. This is the Marcellus shale, a family of
rocks rich in fossil fuels. For Mr Wyman, owner of a local crane company,
it is a site of deep reverence. “You only ever see bits and pieces of the
Marcellus above ground, but it is like a giant factory producing energy for
America and the world,” he says.

The Marcellus is just one of several such rock formations around America,
from the oil-rich Bakken shale in Montana and North Dakota to the
Permian basin, endowed with both oil and gas, in Texas and New Mexico.
The revolution in tapping their hard-to-reach hydrocarbons got under way
in the latter half of the 20th century as companies and government
researchers worked to combine hydraulic fracturing, or fracking (the
injection of specialised liquids to open cracks in rocks), and horizontal
drilling. As they honed these techniques in the early 2000s, production
surged. Now, America produces some 13m barrels per day of crude oil and
3bn cubic metres per day of natural gas, making it the world’s biggest
producer of both.

The economic effects have been far-reaching. Most obviously it has

changed America’s trading relationship with the world. Long a major
importer of oil, America’s need for foreign crude started to decline in 2008
—just when its oil-shale fields really took off. By 2019 it was, for the first
time in more than half a century, exporting more energy than it imported
(although it produces more than it consumes domestically, it still imports
vast quantities of oil because it needs some varieties only produced
overseas). Last year America recorded a net energy surplus of about $65bn.

Where the boom has occurred, the impact has been profound

Shale has boosted American growth in several ways. Narrowly, the decline
in imports and increase in exports has improved America’s balance of trade:
in most other sectors America buys more from the world than it sells to it.
Plentiful shale gas, which is harder to export, reduced domestic energy
prices, freeing up cash for more consumption and investment. Although
many lost money on shale investments last decade because they took on
excessive risk at high costs, the survivors have become more disciplined
and efficient, with drilling rigs declining but production increasing. In a
paper for the Federal Reserve’s Dallas branch, Mine Yücel and Michael D.
Plante estimated that the energy boom added about 1% to American GDP
from 2010 to 2015, or about a tenth of the economy’s growth during that
period—a boost that may be continuing.

Where the boom has occurred, the impact has been even more profound.
The timing was also remarkable. In much of America, as in much of the
world, the 2007-09 period is remembered for the global financial crisis and
a steep rise in unemployment. In places like Williamsport, a town in
northern Pennsylvania that serves as a hub for drilling in the Marcellus
shale, it is remembered as the beginning of the boom. “There were new
companies coming to town, and they were coming in at a time when
everything else was really slowing down,” says Jason Fink of
Williamsport’s chamber of commerce. Nationally employment in oil and
gas extraction increased by 60% to 200,000 between 2005 and 2015. It
subsequently declined as production techniques improved. Yet the knock-on
consequences have been more significant still, from growth in support
services for fracking to a small recovery in manufacturing, fuelled in part
by cheaper energy.

A well-insulated house

But the biggest economic effect of all is that shale has helped to shield the
American economy from the volatility of the global oil market. In the past,
oil shocks were a source of economic instability in America, just as in other
countries: price surges drove up inflation and depressed growth, a
combination experienced most brutally in the stagflation of the 1970s. In
recent years, the drags have been far milder. Higher prices have led to
ramp-ups in domestic oil and gas production, thereby supporting economic
activity in the energy sector even as higher prices hurt downstream users. In
2022, soon after Russia invaded Ukraine, natural-gas prices in Europe
soared as Russia cut off its westbound pipeline shipments. In America,
awash in gas as never before, prices climbed a little, but never much above
a quarter of the European level.

Shale also highlights some of the roots of America’s economic strength.

There is the country’s sheer size and particular geology, which bestowed it
with extraordinary energy deposits, both more plentiful and more amenable
to drilling than shale formations in other countries. The drive of American
capitalism is also on display in its oil and gas wells. Unlike many other
countries America allows private individuals to own the minerals under
their land. That encouraged hundreds of companies, big and small, to get
into the shale business, and as they drilled more wells, they developed a
better picture of where the richest reserves lay. This was an important
differentiator between America and countries where big, lumbering national
oil companies moved more tepidly. “The more you drilled, the more likely
you were to hit the sweet spots,” says Xizhou Zhou of Wood Mackenzie, an
energy consultancy. Now, with extensive geological surveys already on the
books, energy producers know where to turn for their next wells.

Fracking has a bad name due to its environmental downsides: leaks of

methane, a highly potent greenhouse gas, from wells and pipes; the creation
of waste fluid; and, especially where that waste is reinjected in the ground,
a risk of earthquakes. But the critiques undersell the upsides. It actually
requires little energy to generate oil through fracking in America, meaning
that direct emissions from extraction are relatively low. And the gas
produced is much cleaner than the coal that had previously been one of the
country’s major energy sources. Much of the reduction in carbon emissions
in American power generation over the past two decades has come from
shifting to gas.

That raises the question of whether America’s shale riches may turn into a
liability, landing the country in a “fossil-fuel trap” by discouraging both
innovation and investment in clean energy. As evidence that this may
already be happening, Daron Acemoglu of MIT and colleagues have
pointed to a decline in renewable-energy patents in America, from 1.9% of
total patents in 2009 to 0.8% in 2016. “Gas has been good for addressing
the problem to date, but at some point, if you want to get to zero emissions,
it’s not good enough,” says Samantha Gross of Brookings, a think-tank.

In economic terms, a fossil-fuel trap would pose two risks for America. The
first is that its existing energy investments go stale. However much crude
American producers extract, Gulf producers can always get more at lower
costs. As the world weans itself off oil, shale fields will probably generate
diminishing returns. The second risk is that America fails to make the right
kind of new investments. It is a distant second behind China in producing
electric vehicles, solar panels, wind turbines and batteries—the essential
parts of clean-energy systems. Many of these are already cheaper sources of
power over their lifespans than fossil fuels are, and their cost advantage will
only grow.

The Innovation Production Act

The Biden administration has thrown money at the problem. Its signature
piece of legislation, the misleadingly titled “Inflation Reduction Act”,
lavishes tax credits and subsidies on both the companies that make
renewable technologies and the consumers who buy them. Goldman Sachs,
a bank, calculates that this may catalyse nearly $300bn per year in
investment in renewables in America through 2032, resulting in double the
energy produced from shale. James Stock, a Harvard economist and an
energy adviser in President Barack Obama’s White House, says that the
clean-energy revolution should, in theory, play to the innovative strengths
of American firms, since so much advanced technology underpins it, from
battery storage to hydrogen power. But for now renewables in America
remain in the shadow of shale. ■
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Stocks

Why the American stockmarket

reigns supreme
Lower returns are coming, but they should continue to be world-beating
10月 17, 2024 07:30 上午

IF YOU had invested $10,000 in the American stockmarket at the end of

the year 2000 you would have had about $27,000, after adjusting for
inflation, by the end of 2023. If you had invested in global equities
excluding America, you would have had only about $16,000. Wall Street’s
outperformance this century has propelled America’s stockmarket to a 61%
share of global market capitalisation. That has not surpassed the all-time
high reached during the 1960s, but it is close (see chart). And it is close
even though America dominates the real economy far less than it did half a
century ago, before the rise of Asian emerging-market giants and the fall of
the Soviet Union. America’s share of the global stockmarket is 2.3 times its
share of GDP—a ratio that has never been higher.
What accounts for the boom? In part it continues a long-running
phenomenon. In the 20th century American equities produced a real dollar
return of 7% per year, versus 4.9% in the rest of the world, according to
Elroy Dimson of Cambridge University and Paul Marsh and Mike Staunton
of London Business School. That gap may sound small, but such is the
power of compound interest that an investor in only American stocks would
have ended the century more than seven times richer than an investor only
in stocks elsewhere.

High returns are not unique to America: over the very long run Australian
stocks rival American ones. Some small countries with a few very big
companies—such as Denmark, home of the drugmaker Novo Nordisk—can
boast a higher ratio of stockmarket capitalisation to GDP. What makes
America’s stockmarket unique is its combination of enormous size and high
returns. Still more striking, its return advantage over the rest of the world
has grown over time.

There are two ways for a stockmarket to outperform its rivals, setting aside
ephemeral ups and downs (and America’s stockmarket is no more volatile
than those of other major economies). One source of high returns is if the
companies comprising the market make more profits. The other is for
investors to value those profits more highly. America’s recent stellar record
reflects primarily the latter effect. In a paper last year Cliff Asness, Antti
Ilmanen and Dan Villalon of AQR Capital Management compared the
American market with a currency-hedged index of large- and mid-cap
stocks in other developed countries. They found that once the effect of
rising valuation multiples was stripped out America’s outperformance fell
by nearly three-quarters and became statistically insignificant. Today
America’s valuations are unmatched: the US market trades at 24 times
forward earnings, compared with 14 in Europe and 22 in Japan.

Europeans are so granola

There are logical reasons for America’s high multiples. It is home to the
world’s “magnificent seven” technology titans including Apple, Amazon,
Meta and Nvidia, making the market overall much more weighted towards
growth stocks—shares in firms that are expected to be more profitable
tomorrow than today, and so naturally are valued at higher multiples.
Europe does have its own group of stockmarket giants—the so-called
“GRANOLA” group, which includes GSK, Roche, Nestle and Louis
Vuitton—but they are mostly consumer-focused companies. Their growth
prospects are not as good as those of the tech giants, at least if optimists
about AI are to be believed. The same goes for Japan’s dominant
companies.

The next tech titan is likely to be in America because of its capital

markets

Since the global financial crisis, investors everywhere have bet heavily on
growth stocks, while many old-economy sectors, like banks, have faced
headwinds, note strategists at Goldman Sachs. This has contributed to
America’s valuation advantage. Investors are also drawn to American firms
because they tend to reinvest more of their profits, increasing expectations
of future growth. Last, American stocks are more valuable to investors
because people know they can sell them in large quantities without moving
the price much, as there are always lots of people who want to trade them at
any given moment. The result is that global stockmarkets have become
concentrated on three levels: geographically in America, sectorally in
technology stocks, and at the company level in the magnificent seven (as
well as at the top of European and Japanese industries). Just Apple,
Microsoft and Nvidia together make up an astonishing 12% of the MSCI
All Country World Index of stocks.

The dominance is to a degree self-reinforcing. The next tech titan is much

more likely to be located in America (perhaps having been relocated there)
in part because of its capital markets. America’s high valuations make it an
attractive place for firms to raise capital. And America dominates private
markets as well as public ones—its share of venture-capital investments is
at around 45%—making it the best place both to raise early cash and in
which to go public. Europeans regularly bemoan the loss of their most
promising companies to the clutches of Wall Street.

One threat for the American market is that investors’ confidence in AI-
related stocks dissipates. But technology firms, though pricey, are not yet
valued at the truly eye-watering levels seen when the dotcom boom of the
late 1990s was about to turn into a bust. Then, Cisco Systems, a networking
firm, traded at over 125 times its expected earnings. And even excluding
technology stocks, America’s share of global equities is still 55%, up 20
percentage points since 2008.

Even if today’s divergence in multiples is justified, it will not in itself

maintain America’s strong outperformance indefinitely. High valuations
predict lower long-term returns—and America’s have only ever been higher
in two previous economic cycles. According to Mr Asness and his
colleagues, “international diversification “is still worth it, even if it hasn’t
delivered for US-based investors in 30 years”.

That is especially so if emerging-market stocks grow in anything like

proportion to their forecast share of global GDP. Today China’s share is so
small in comparisons like ours in part because they only count “free float”,
excluding shares that international investors cannot buy because of legal
restrictions. Count everything—which you might if China liberalised those
restrictions—and China’s share more than trebles to almost 10%. Goldman
Sachs’s researchers predict that emerging markets’ share of global market
capitalisation will rise to 55% by 2075.

That does not mean America’s equity market is going to lose its status as
the world’s biggest, however. Since overtaking Britain’s in 1902 it has been
displaced only once: when Japan briefly occupied the top spot in 1989-90,
before its markets crashed. Today Japan is still in second spot but its market
is only about a tenth of the size of Uncle Sam’s; Goldman predicts that even
in 2075 America’s market will be almost as big as China’s and India’s
combined. It is a measure of the success of America’s stockmarket that
precisely because it has achieved such extraordinary dominance, its global
share may be near its peak. ■
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The dollar

China’s yuan is nowhere close to

displacing the greenback
The only way the dollar will lose its supreme role is at America’s own hand
10月 17, 2024 07:30 上午

AFTER THE collapse of the Bretton Woods system of fixed exchange rates
in 1973 the prestige of the dollar looked gutted. America had devalued its
currency twice in scarcely a year. “The dollar is regarded all over the world
as a sick currency,” said a writer in the New York Times; predictions of
falling use of the greenback were rife. Those views, notes Barry
Eichengreen of the University of California, Berkeley, in his book
“Exorbitant Privilege”, could not have been more wrong. America’s share
of the global economy, measured at PPP, did fall from 27% to 23% by
2000. But as the rest of the world parked its growing wealth in New York
and governments built up reserves with which to defend their currencies,
demand for dollars grew.

In the 21st century the pattern has been repeated. Amid predictions of a loss
of its status—and despite a further fall in America’s share of world output to
16%—”king dollar” has kept his throne. For trade, cross-border investment
and foreign-exchange transactions, the dollar remains by far the currency of
choice (see chart). Its appeal gives America a seemingly endless supply of
credit and the power to cripple foreign financial entities with sanctions. Its
strength means that at market exchange-rates America counts for over a
quarter of the world economy, the same as in 1990.

It is not that there has been no change at all. Dollar dominance has declined
in reserve holdings and trade-invoicing. The fraction of reserves central
banks keep in dollars peaked in 2001 at 73% and has since fallen to 59%,
according to IMF data. Strip out distortions such as the effect of dollar-
appreciation and the greenback’s share has in fact fallen to 56%, according
to research by Serkan Arslanalp of the IMF and two co-authors, including
Mr Eichengreen.

China is responsible for the dollar’s decline in invoicing for trade. As it has
attempted to internationalise the yuan and escape the grip America has on
the financial system—demonstrated by sanctions against Russia after its
invasion of Ukraine—the Chinese government has spent the past decade
trying to do more business in yuan. It has got its trading partners
comfortable with using the currency by, for instance, opening swap lines
with them to provide a line of yuan credit and launching a cross-border
payments system. About 25-30% of China’s goods-and-services trade is
now settled in its own currency.

Taken together, these declines for the dollar as a reserve currency and as a
basis for trade-invoicing could be seen as a harbinger of a spiral. It is most
useful to hold a currency as a reserve today if it brings lots of options for
trade tomorrow. So a high share of reserves and trade-invoicing should, in
theory, reinforce one another, according to research by Gita Gopinath of the
IMF and Jeremy Stein of Harvard University. Reverse that idea and in
theory the dollar is in trouble.

But the twin declines are not interlinked enough to dent the dollar’s
standing. On the IMF data, the dollar’s share of reserves has fallen back
only roughly to where it was in 1995. And it has not been China absorbing
its share, or even the euro, which Europe uses for most of its own trade and
is the dominant currency in parts of Africa. Rather, it is, as one joke goes,
other currencies called “dollar” or “krone”: those in Australia, Canada, New
Zealand, Singapore, Denmark, Sweden and Norway. “They are the
currencies of small, open, well managed, in the main inflation-targeting
economies,” says Mr Eichengreen.

It’s good to be the king

They are also mostly America’s allies, making it hard to sustain an

argument that the fall in reserve share says much about lost Western
hegemony. And among remaining official holdings of dollars, three-quarters
are owned by governments with a military tie to America, says Colin Weiss
of the Federal Reserve. Strikingly, note Mr Arslanalp and his colleagues,
the yuan’s share of international reserves has shrunk since 2022, when
Russia invaded Ukraine, sparking American sanctions and much
speculation that countries would jettison the dollar for fear of similar
treatment.

As for trade, flows involving at least one advanced economy but not China
account for two-thirds of the global total, calculate Gerard DiPippo, now of
Bloomberg, and Andrea Palazzi of the Centre for Strategic & International
Studies. It is hard to see why they would ever switch to yuan, because rich
countries are mostly America’s allies. Exclude them altogether and only
25% of global trade would be left on the table, three-quarters of which is
between emerging markets other than China. Changing these flows to yuan
is a tall order given the risks in holding the currency.

Looking in the round, researchers at the Federal Reserve concluded in 2023

that dollar dominance “has remained stable over the past 20 years”. Why is
it so tough to displace? One reason is network effects: the more people use
dollars, the greater the incentives to use them. This is visible in currency-
trading, where the dollar’s liquidity means that for some currency pairs it is
cheaper to trade through the dollar—ie, to sell a holding for dollars, then
buy the desired currency—than to trade two non-dollar currencies directly.

The dollar’s status is often said to confer an “exorbitant privilege”

Network effects do not guarantee the status quo for ever, as shown by the
fall of past reserve currencies such as the British pound and the Dutch
guilder. The problem faced by rivals now is that they simply cannot offer as
safe and liquid a store of value, and in such quantities. China’s authoritarian
system and controlled capital account, which restricts how much money can
be taken out of the country, make investors skittish. Europe lacks safe,
jointly issued assets on the scale of the Treasury market. Nowhere offers
America’s combination of the rule of law, deeply liquid markets and an
open capital account, meaning that investors know they can get their money
out easily.

Stop making cents

More likely than another country gaining these traits is America giving
them up, by design or by accident. There are plenty of American critics of
dollar dominance. In the influential book “Trade Wars are Class Wars”,
Michael Pettis of Peking University and Matthew Klein, a financial writer,
argue that the dollar’s status as the default location for the world’s savings
means that mercantilist countries like China, whose policies lead to
consistent trade surpluses, accumulate vast quantities of American assets.

Because these global capital flows, it has long been thought, both reduce
America’s interest rates and, by making the currency strong, increase the
purchasing power of its people and companies, the dollar’s status is often
said to confer an “exorbitant privilege”—that is, an unfair and extreme
advantage. But Messrs Pettis and Klein say it raises the cost of America’s
exports and hurts its manufacturing workers. J.D. Vance, Donald Trump’s
running-mate, has made a similar argument. Robert Lighthizer, the US
Trade Representative during Mr Trump’s presidency, has floated bringing
the dollar down by levying a “market access charge” on foreigners holding
American assets.

It is not an illogical argument. But it is hard for researchers to identify how

much the foreign buying of dollars makes the greenback stronger versus
how much that same foreign demand pushes down interest rates (which
weakens rather than strengthens the greenback). Simple comparisons of
bond yields show little exorbitant privilege. In fact, American interest rates
tend to be higher than those elsewhere in the world, in part owing to its
strong economy.
 American firms can simply borrow more cheaply

It is easier to see the advantage the dollar confers not in interest rates but in
quantities of debt issued. America has run up net public debts worth 99% of
its GDP and continues to runs an enormous deficit worth 7% of GDP.
Britain faced a bond-market crisis in 2022 at lower levels of debt and
borrowing.

The private sector benefits too. American assets make up over a quarter of
the stock of global investment in financial instruments, up from less than a
fifth in the mid-2000s, says Goldman Sachs. A paper by William Diamond
of the University of Pennsylvania and Peter Van Tassel of Caption Partners,
an investment firm, finds that demand for dollar assets reduces all American
interest rates versus a counterfactual, not just those of the government.
American firms, then, can simply borrow more cheaply.

An American administration that meddled with the dollar’s reserve-

currency role would risk giving up these benefits—which is why it has
generally been the policy of the Treasury to support the status quo. Despite
Mr Vance’s worries, and Mr Trump’s laments of a strong dollar, the
Republican Party’s platform promises to keep the dollar as the world’s
reserve currency.

That leaves an accidental loss of status. The Bretton Woods agreement

collapsed because America could not satisfy the world’s demand for its
assets, given the dollar’s peg to gold, without compromising their safety.
The problem was known as the “Triffin dilemma” after Robert Triffin, the
economist who identified it. Now economists talk of a “new Triffin
dilemma” whereby the appetite for dollars encourages American
indebtedness, threatening the very conditions that make greenbacks so
appealing.

The new Triffin dilemma is unlikely to bring about a dramatic crisis so long
as there is no suitable alternative into which investors could flee suddenly at
scale. But it is conceivable that American indebtedness could gradually
make dollar debts look less safe. That would not mean the triumph of
another currency. It is more likely the world would have to live without a
liquid, safe and plentiful asset at all. Seen this way the real exorbitant
privilege is more broadly conferred than critics claim. Americans get cheap
debt, foreigners get a safe store of value. Were that service ever to
disappear, the whole world would pay the price. ■
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Looking ahead

What can stop the American

economy now?
Toxic politics could derail America’s economic boom. The world should
hope it does not
10月 17, 2024 07:30 上午

IT MAY NOT be the finest work of American literature but “The President
is Missing”, a 2018 thriller by Bill Clinton (yes, him) and James Patterson,
does get at an essential truth. A cyber-attack threatens to cripple the country
and crash its economy. Knowing how utterly dysfunctional the political
system is, the president goes rogue to save the day. Triumphant, he
addresses Congress and calls for a healing of bitter partisan divides, noting
that most of America’s wounds are self-inflicted. “Our ability to solve
problems and seize opportunities is shrinking,” he intones.
When trying to grasp what the future may hold for America’s economy, this
is as good a place as any to start. The story of the past few decades is that
despite nearly constant political rancour and division, the country’s growth
trajectory has remained impressive. America has expanded its economic
lead over the rich world and kept China’s challenge at bay. But the biggest
thing standing in the way of sustained outperformance is homemade: the
self-inflicted wounds lamented by Mr Clinton’s fictional alter-ego.

The world has seen how political brinkmanship can bring on economic
headaches. In 2011 and again in 2023, America ran smack into its “debt
ceiling”—a limit imposed by Congress on how much the Treasury can
borrow. Without last-minute agreements to lift the debt ceiling, the
American government might have defaulted on some of its obligations, a
potentially cataclysmic event for global markets and for the dollar’s
standing as the world’s pre-eminent safe haven. That danger still lurks in
the country’s toxic politics.

Always a borrower be

The simplest measure of a country’s fiscal health is its debt-to-GDP ratio.

America’s has nearly tripled since the outbreak of the global financial crisis
in 2007 to about 99%. The Congressional Budget Office, a nonpartisan
scorekeeper, forecasts that it will soar to more than 160% over the next
three decades. Alarming as that seems, it is impossible to know how much
is too much. Japan’s net debt ratio is about 157%, and investors still lap up
its sovereign bonds. Given the dollar’s centrality to global markets, America
probably has even more room to run. But this also lets its political leaders
off the hook from having to make unpopular decisions—namely, raising
taxes and cutting spending—to rein in deficits. This makes America’s fiscal
woes a festering problem, not an imminent hazard.

America’s drift towards more extreme politics, as exemplified by Donald

Trump, poses other dangers to its economy. The ugliest is a surge of anti-
immigrant rhetoric fanned by the former president, who has vowed mass
deportations if elected again. Foreigners attracted to the promise of America
have helped make the country what it is, and not just in Silicon Valley or on
Wall Street. The return of migrants in large numbers after the covid
pandemic, many with limited education, replenished an ultra-tight labour
market—a major reason that growth has remained robust at the same time
as inflation has receded.

Mr Trump has, for the first time in nearly a century, also made tariffs an
integral part of America’s economic statecraft. If he returns to the White
House, he is determined to slap a 10% tariff on all imports, a decisive turn
away from the free trade that, though unpopular today, has helped the
economy flourish. It is true that America is not the manufacturing power it
once was, but manufacturing is not as significant as politicians make it out
to be. An economy with an unemployment rate of 4% and a per-person
GDP of $85,000 does not have to be made great again; it is great.

As for Vice-President Kamala Harris, she seems intent to continue the

Biden administration’s posture of high vigilance towards America’s tech
giants, which some fear is a strategy to cut them down to size. Her
opponents are obviously being absurd when they label her a communist.
But her regulatory instincts look decidedly European, which is not an
optimal recipe for economic growth or high-tech breakthroughs.

Optimism should be the default assumption about America’s economy

America faces other concerns, too, as laid out in this special report. Its shale
boom has helped to fuel its growth over the past two decades. But the rise
of renewables means that plentiful oil and gas may no longer confer the
same advantages, and America lags behind other countries in the transition
to cleaner power. American financial markets may be near a high-water
mark of outperformance, if mainly because its equities now trade at very
rich multiples compared with those in other countries. Some reversion to
the mean appears inevitable. And America’s leadership in technology—with
it again at the fore of what may be the next big thing, the AI revolution—
will eventually lift other countries as its ideas and tools spread more widely.
In this sense America’s innovation contains the seeds of other countries’
catch-up growth.

Yet despite America’s challenges, there is cause to be cheery about its

economic future. Indeed, one conclusion from its successes thus far is that
optimism should be the default assumption. Politically, America’s tendency
towards self-harm has been matched by a capacity for self-correction. At its
moments of greatest economic need—the global financial crisis and the
covid pandemic—leaders have been able to work together across the aisle.
America’s governance has also proved resilient: just look at the wheels of
justice slowly grinding down the insurrectionists who stormed Capitol Hill
on January 6th, 2021. And America’s heft gives it extra insulation. If a
global trade war does erupt, it would probably come off better than others in
a more autarkic world owing to its size and heterogeneity. Small, open
economies would suffer the most.

The two essential ingredients in determining a country’s ultimate economic

potential are its productivity and its population. The foundations of
American productivity—a giant, competitive domestic market, many of the
world’s best universities and the sanctity of the rule of law—are firmly
entrenched. They will endure if Mr Trump retakes the White House. That is
not an argument for complacency but a recognition that the checks and
balances built into the political system are more powerful than any
president.

Another American century

America’s demographics are also healthier than often appreciated. Like

most other countries, it is getting older. But unlike most, it maintains a
slightly higher fertility rate and a better ability to absorb immigrants,
despite the rising xenophobia in its politics. Even Mr Trump, when not
promising expulsions, says the country needs to bring in more skilled
workers; he has mused about giving green cards to foreign-born graduates
of American universities. Today, America accounts for 4% of the world’s
population, and by 2100 it will still be about the same, according to
projections by the UN. During that same time, China’s share is expected to
fall from 18% to 6%, while the European Union will go from 6% to 3.5%.
And America will, in relative terms, be a younger country (see chart).
These are the roots of sustained economic outperformance. They look as
strong today as at any time over the past three decades, which is good news
not only for America, but also for the rest of the world. That America, a
liberal democracy, remains a bigger economic power than its authoritarian
challengers is an unalloyed positive for a global order under intense strain.
For other countries to truly benefit, though, America will need to overcome
its protectionist impulses, to return to a position where its wealth helps to
lift others and it can lead through inspiring example. Our view is that it has
ample economic capacity to do just that, as long as its politics allow. There
will, of course, be downturns, doubts and drama along the way. But if you
want to bet against America, The Economist will gladly take the other side
of the wager. ■
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The American economy

Sources and acknowledgments

10月 17, 2024 07:30 上午

This report relied on the assistance, advice and published work of many
people. In addition to those mentioned and quoted in the text, the authors
would like to thank, in particular, Nigel Chalk, Jason Furman, Douglas
Holtz-Eakin, Timothy Haynes, Glenn Hubbard, Arvind Krishnamurthy,
Rohit Kumar, John Schreck, Chima Simpson-Bell, Michelle Smith, Chad
Syverson, Eric Van Nostrand, Paul Winfree and Felicia Wong.

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The American economy

The envy of the world

The American economy has left other rich countries in the dust. Expect that
to continue, argue Simon Rabinovitch and Henry Curr
10月 17, 2024 07:30 上午
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report/2024-10-19
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Called out :: The adoption of AI is surging in call centres

The horrors of the reply-all email thread

Bartleby :: Easy to start, impossible to stop

What if carmaking went the way of consumer electronics?

Schumpeter :: The Foxconnification of electric vehicles

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Autonomous cars

The trouble with Elon Musk’s

robotaxi dream
Scaling up self-driving taxis will be hard, and competition will be fierce
10月 17, 2024 07:30 上午

ELON MUSK’S choice of Warner Bros Studios for the long-anticipated

launch of his robotaxi on October 10th was entirely appropriate.
Hollywood’s film studios are as much a dream factory as Tesla, his electric-
car company. The vision he served up, accompanied by whoops of delight
from the superfans in the audience, is an autonomous Cybercab so cheap
that it will serve as “individualised mass transit”. But Mr Musk’s promises
were, like many Hollywood movies, long on bombast and short on reality.
The road to self-driving taxis will be long, and Tesla will face intense
competition along the way.
The Cybercab, a two-seater car without a steering wheel or pedals, will be
on sale “before 2027”, according to Mr Musk, though his timelines often
slip—he once promised a fleet of 1m robotaxis by 2020. He also showed off
a Robovan, which will carry 20 passengers, and modestly predicted that his
humanoid robot will be the “biggest product ever of any kind”. Yet the
event, which was light on details, disappointed investors; Tesla’s share price
fell by 9% the following day.

In recent years robotaxi services have popped up in a growing number of

cities. Waymo, a division of Alphabet, has raced ahead in America. After 15
years and perhaps $30bn of investment it now has a fleet of 700 self-driving
cabs operating in Los Angeles, San Francisco and Phoenix, and will soon
launch in Atlanta and Austin. Farther back is Cruise, whose biggest investor
is General Motors. It also operates in Phoenix and is resuming tests in San
Francisco after regulators slammed on the brakes following an accident last
year. Zoox, Amazon’s contribution to driverless travel, is testing vehicles in
five locations including Las Vegas and Miami.

China has also become a hotspot for autonomy. Apollo Go, the robotaxi unit
of Baidu, a Chinese tech giant, launched its service in Wuhan in 2022 and
has since expanded to ten other Chinese cities. It aims to double its Wuhan
fleet to 1,000 robotaxis by the end of the year. Other Chinese firms
including Pony.ai, WeRide and Didi, the country’s biggest ride-hailing firm,
are also experimenting with robotaxis in a number of big cities.

But a series of pilots in a handful of cities is far from the go-anywhere

vision that Elon Musk has espoused, and there is still no guarantee of
meaningful profits in the foreseeable future. Waymo and its competitors so
far mostly operate in places where the weather is fine and the roads are
straight and wide. Expanding to trickier cityscapes will take time and
money. To deploy its service in a new city, Waymo has to invest significant
sums upfront to compile detailed 3D maps and build other necessary
infrastructure.

The cost of the self-driving vehicles themselves—around $150,000 apiece

for Waymo—also remains a problem. Around two-thirds of that is estimated
to come from hardware. To operate their vehicles autonomously, Waymo
and others are relying on a battery of expensive sensors including cameras,
radars and lidars, which use lasers to create a 3D image of the vehicle’s
surroundings, as well as oodles of in-car computing power to make sense of
all the data.

Roadblocks

Human drivers account for well over half the fare of ride-hailing services
such as Uber and Lyft, which might suggest a big opportunity for self-
driving cabs. Yet Waymo still employs remote “safety drivers” to keep an
eye on its vehicles. Significant amounts of real estate are also needed close
to city centres in order to charge, clean and maintain robotaxis. Bernstein, a
broker, calculates that once all costs are considered, fares for self-driving
taxis will remain higher than for human ones for some time. What is more,
replacing the fleet of Uber and Lyft cars in America with robotaxis would
require up to 400,000 vehicles, Bernstein reckons. At the current cost of a
Waymo, that would mean an investment of around $60bn.

Tesla is betting it can make a cheaper option work. Its “full-self driving”
system, which will be the underlying tech for its robotaxis, relies only on
cameras to collect information. Data from these will go into an “end-to-end
neural network”—an algorithmic black box trained on 9bn miles of driving
data from the 6m Teslas already on the road—to produce driving
commands. As a result, Tesla says its robotaxis will cost under $30,000 and
will be easier to transfer from one city to another.

Even if Tesla can make the technology work, it will still need to convince
regulators of its approach. Its neural network will be far less transparent
than the modular systems used by Waymo and others. And regulators may
not trust that relying solely on cameras will be sufficient to deal with rare
and unusual “edge cases”. Officials are already wary of safety after Cruise’s
accident last year, in which one of its vehicles dragged along a pedestrian
thrown into its path by a human hit-and-run driver.

Mr Musk believes his approach will gain regulatory approval once it proves
it is safer than human drivers. But any incidents that do occur could still
turn off would-be passengers. And some cities may also resist robotaxis if
they are perceived as a threat to public transport and local jobs or a source
of traffic congestion.

Also unresolved is the question of who will own and operate all these
robotaxis. Ride-hailing firms are one possibility. Uber has signed deals with
Waymo and Cruise to make their vehicles available on its platform in some
locations. It has also invested in Wayve, a British autonomy startup. But the
company, which has only just begun to turn a profit after years of torching
cash, may be reluctant to pour vast sums of money into acquiring a self-
driving fleet.

During his presentation, Mr Musk speculated that “an Uber or Lyft driver
today” could one day operate a fleet of self-driving cabs “like a shepherd
tends their flock”. That kind of wishful thinking is part of the reason why
JPMorgan Chase, a bank, does not expect “material revenue generation...for
years to come” from Tesla’s robotaxis. Standing expectantly by the roadside
for a driverless lift will, for most people, involve a long wait. ■

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On the rack

Pity the superstar fashion designer

Creative directors are coming and going faster than the latest trends
10月 17, 2024 07:30 上午

A GIANT BIRDCAGE held models wearing Chanel’s latest clothes at its

show for Paris fashion week on October 1st. The exhibit in the Grand Palais
had all the hallmarks of the 114-year-old fashion house: sophistication, skirt
suits and even a little black dress. Yet at the end there was no designer to
take the applause. In June Virginie Viard, Chanel’s creative director since
2019, stepped down. Ms Viard was only the third person to hold the role.
She took over from Karl Lagerfeld, a sharp-tongued German who held the
role for 36 years and once called sweatpants “a sign of defeat”. Mr
Lagerfeld’s predecessor was Coco Chanel. The front rows of runway shows
are now rife with gossip about who will bag fashion’s most prestigious job.
An announcement is expected this month.
Ms Viard is but one among many superstar designers to have left their jobs
recently. In July Peter Hawkings, creative director at Tom Ford, left after
less than a year in the role. On October 2nd Hedi Slimane quit the top
design job at Celine, owned by LVMH, a French luxury conglomerate; on
October 11th Kim Jones left the same post at Fendi, another LVMH maison.
Fashion designers are coming and going faster than the latest trends.

The turmoil can be attributed in part to a slowdown in sales of luxury

goods. Softening demand, notably in China, has hurt fashion houses. On
October 15th LVMH reported that revenue for its fashion and leather-goods
division for the quarter from July to September fell by 5%, year on year.
The slump is making investors and bosses jittery, in turn giving established
designers less freedom to experiment and newly appointed ones less time to
find their feet.

At the same time, designers are increasingly being asked to do more than
just fashion clothes. Karen Harvey, a consultant who helped appoint Calvin
Klein’s lead designer this year, says there is a growing expectation in the
industry that creative directors will be able to “rescue a brand”. Virgil
Abloh, a streetwear entrepreneur and creative collaborator of Kanye West,
transformed the staid image of Louis Vuitton’s menswear by working with
younger talent. He once told an interviewer, “I am not a designer.” After he
died in 2021, aged just 41, the company replaced him with Pharrell
Williams, a singer who had also branched out into streetwear. According to
Ms Harvey, customers now expect a mix of “fashion, zeitgeist and culture”
from luxury brands—all of which creative directors are meant to supply.

Whoever replaces Ms Viard at Chanel will at least have one advantage: the
world’s second-biggest luxury-fashion brand by sales (behind Louis
Vuitton) is privately owned by two French brothers, Alain and Gérard
Wertheimer. That should mean there will be less focus on short-term
financial results. Yet Chanel is not entirely shielded from the forces
buffeting the industry. It has been aggressively chasing growth in recent
years; between 2020 and 2023 its sales nearly doubled, to around $20bn.
Much of that is a result of hefty price increases. Bernstein, a broker,
estimates that from 2020 to 2023 like-for-like prices at Chanel increased by
almost 60% on average. Among other luxury brands it examined, only Dior
put its prices up by more. Amid weakening demand, further big increases
may be difficult to pull off.

That will make the job of Chanel’s fourth-ever creative director trickier. In
the running are said to be Mr Slimane, recently of Celine; Pierpaolo
Piccioli, who left Valentino in March; and Marc Jacobs, who was the
creative director at Louis Vuitton for 16 years and now has his own label.
Whoever gets the job will hope to make a strong impression quickly—lest
they be pushed aside for Chanel number five. ■

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Little frog, bigger pond

Poland’s stockmarket has a hot

new entrant
The IPO of Zabka could help revive Warsaw’s beleaguered bourse
10月 17, 2024 07:30 上午 | Warsaw

IF A POLE runs out of milk on a Sunday morning, they will probably head
to Zabka, a convenience store. It is rarely a long walk. Roughly 17m
people, nearly half of Poland’s population, live within 500 metres of one of
its more than 10,500 outlets. Some may now buy a slice of the retailer
itself: on October 17th its owner, CVC, a European private-equity firm,
listed a third of Zabka’s shares on the Warsaw Stock Exchange (WSE) at a
valuation of 21.5bn zlotys ($5.5bn). The deal has brought a boost to
Poland’s beleaguered bourse.
Zabka, whose name means “little frog” in Polish, has grown rapidly in
recent years. Between 2021 and 2023 its revenue rose from $3.2bn to $5bn.
It plans to open 4,500 more shops by 2028, moving beyond cities and into
smaller Polish towns, as well as abroad—in May it entered Romania under
the name Froo.

Already Europe’s largest convenience-store chain by number of outlets,

Zabka has earned its popularity. Its small shops are cleverly designed:
customers are in and out in 106 seconds on average. Each store’s inventory
is optimised for the appetites of local customers. A snazzy mobile app holds
vouchers and receipts and gives customers access to its cashierless “Nano”
stores, which are open 24/7. It helps that Zabka is now one of the few
places you can get groceries on a Sunday in Poland: it is exempt from
trading restrictions introduced in 2019 owing to its franchise model.

Zabka’s choice to debut on the WSE was a rare coup for the struggling
stockmarket. Valuations of Poland’s listed firms have not kept pace with the
country’s economic growth of late. Its stockmarket took a hit in 2013 when
the first government of Donald Tusk, who returned as prime minister last
year, overhauled the country’s pensions system. Private pension funds were
absorbed into a government system in an effort to reduce the state’s debts,
leading to a reduction in investment in the WSE.
Warsaw’s exchange has been in a doom loop ever since. The market
capitalisation of companies listed on the WSE fell from 40% of Poland’s
GDP in 2013 to 26% in 2023, putting it well behind other European
countries (see chart). Domestic investors have been put off by poor past
performance. That, in turn, has sidelined Poland’s stockmarket as a source
of funding; in 2021 InPost, a Polish parcel-locker company, chose
Amsterdam instead to raise €2.8bn ($3.4bn) in equity. The number of
companies listed on the WSE reached a peak of 482 in 2017, but has since
steadily fallen to 410.

The WSE is now dominated by state-controlled banks and energy firms.

These have often pursued the government’s aims by pouring profits into
state-backed projects, rather than dividends, and hiring and firing
executives on political whims, says Andrzej Stec, editor-in-chief of
Bankier.pl, a Polish financial-news outlet.

Yet there are still good reasons for Zabka to debut in Poland. As the fourth-
largest IPO ever on the WSE, it has gained plenty of attention in the
country; orders for its shares, priced at the top of their proposed range, were
heavily oversubscribed. Jon Eastick, the chief financial officer of Allegro,
an online marketplace that listed on the WSE in 2020 in the exchange’s
biggest-ever IPO, explains that his firm chose the local bourse to attract
retail investors who use its service. Listing in Poland might also be a way
for companies to stay in the government’s good books. Changes to the
Sunday trading laws are listed first among the risks to Zabka in its
prospectus.

More headline-grabbing IPOs like Zabka’s could inject much-needed

sparkle into Warsaw’s dull stockmarket, drawing in first-time investors and
perhaps charting the way for smaller companies seeking funds. Zabka’s
pond may soon grow. ■

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Mine your own business

BHP and Rio Tinto are heading in

different directions
The strategies of the world’s two most valuable miners are diverging
10月 17, 2024 07:30 上午

FOR YEARS BHP and Rio Tinto, the world’s two most valuable miners,
moved in lockstep. During the 2000s the twin Anglo-Australian giants rose
on the back of China’s demand for commodities, particularly iron ore. In
2007 they even explored a merger (regulators rebuffed the idea). Then,
when the commodity supercycle crashed in 2015, both landed in investors’
bad books, and were forced to shed assets and pay down their debts. Now,
as the pair look to make the most of the energy transition, they are placing
diverging bets on the future.
On October 9th Rio, the smaller of the two by market value, announced it
was buying Arcadium Lithium for $6.7bn in one of the largest mining deals
of the past decade. The purchase will make Rio the world’s second-biggest
producer of lithium, a critical element in batteries, with mines from
Argentina and Australia to Canada and China. It follows various other
lithium investments by the company in recent years, including the
acquisition of a site in Argentina for $825m in 2022 (expected to begin
production before Christmas) and a project in Serbia that has been delayed
by a backlash over its potential environmental impact.

Rio’s bet on lithium is bold. Prices of the metal have plunged by more than
80% over the past two years as the market for electric vehicles has
decelerated and concerns around oversupply have spooked traders. Yet
Jakob Stausholm, Rio’s boss, is confident that demand for lithium will
outpace supply over the course of the decade, leading prices to rise again.
He adds that Rio’s mines will be better quality and lower cost—and
therefore more profitable—than those of its competitors. The acquisition of
Arcadium should help with that: the miner is a pioneer in so-called direct
lithium extraction, a group of technologies that draw lithium from brine
without relying on evaporation, which is less efficient.

“Lithium is a differentiator between Rio and all the other big miners,” says
Mr Stausholm. That includes BHP. Mike Henry, the bigger miner’s boss,
has said in the past that he doesn’t “see the opportunity” in lithium. He is
more interested in copper, a metal that is also critical to the energy
transition as well as to the data centres powering the artificial-intelligence
revolution. Earlier this year BHP tried to buy Anglo American, another big
miner, for $39bn, primarily for its copper assets. After that fell through, it
announced it would buy Filo Corp, an exploration company with copper
assets, for about $3bn, in partnership with Lundin Mining, a Canadian
miner. Although Rio has also invested in copper, it produces far less of it
than BHP.

Aluminium is another area in which the two have diverged: BHP divested
its aluminium business a decade ago; since then Rio has continued to
expand its role in the West’s supply chain for the metal. It is now one of the
world’s biggest miners of bauxite, the ore that is refined into aluminium. On
October 16th Rio reported it produced 15m tonnes of the stuff in the quarter
from July to September, up about 8%, year on year. Last year the company
said it would invest $1.1bn to expand its aluminium smelting operations in
Quebec. And earlier this year it acquired a 50% stake in a producer of
recycled aluminium for $700m.

On the whole, Rio has been far more aggressive in its pursuit of growth
than its rival. Besides BHP’s investments in copper and, to a lesser extent,
nickel and potash, it has kept its purse-strings tight. The book value of its
operating assets is roughly what it was in 2019; Rio’s, by contrast, has
surged by a fifth over that period. As BHP has concentrated more on mines
in Australia, Rio has made investments in far-flung places from Guinea to
Mongolia. The pair’s preferred commodities are also telling. Lithium’s
price may be more volatile than copper’s, and its market currently smaller,
but demand could rocket: the International Energy Agency, an official
forecaster, predicts that in a net-zero scenario demand for lithium in 2040
will be about 8.7 times its level today, compared with 1.5 times for copper.

Rio’s focus on expansion, however, has come at a cost. In 2019 the return
on capital for the two miners was almost identical, at roughly 15%; Rio’s
has since fallen to below 14% while BHP’s has risen to 21% (see chart). To
surpass its long-standing rival, Rio will need to find ways to turn more of its
earth into profit. ■

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Reign of the spreadsheet

Why Microsoft Excel won’t die

The business world’s favourite software program enters its 40th year
10月 17, 2024 07:30 上午

FOR MANY, Microsoft Excel is the epitome of corporate drudgery. Its

dreaded #VALUE! error has driven an incalculable number of users to
despair. Yet among financial analysts, management consultants and even the
odd business journalist, the spreadsheet program, which this month entered
its 40th year, is a handy tool for everything from interrogating company
financials to pricing assets. Satya Nadella, the boss of Microsoft, has called
it the “best consumer product” the tech giant ever made. The program even
has its own world championship in Las Vegas, where spreadsheet wizards
pivot, concatenate and VLOOKUP their way to victory.

Excel was not the first spreadsheet for PCs. That honour belongs to
VisiCalc (short for visible calculator), built in 1979 by Dan Bricklin, then a
student at Harvard Business School. By 1983 a rival program, Lotus 1-2-3,
had taken the lead. When Microsoft released Excel in 1985, it brought a few
clever twists. Instead of recalculating every cell when one changed, it
updated only the affected cells. This made it much faster, especially on
early PCs. Microsoft also ditched the clunky command-line interface for an
easier-to-use graphical one.

Excel quickly became one of the most popular business tools. Exact figures
are hard to pin down because the software is bundled with other Microsoft
products, but last year the company reported that its cloud version had
nearly 400m paid users. Mastery of Excel is prized: more than 100m
LinkedIn users list it as a skill, compared with 61m for Google Sheets, a
rival program, according to Senacea, a spreadsheet consultancy.

Excel has featured in plenty of workplace blunders—though its defenders

will be quick to blame human error. The financial world is littered with tales
of costly spreadsheet errors. Excel has also been blamed for botching gene
names in over a third of genomics papers (because it labelled them as
dates); underreporting covid-19 cases in England (because it only had a
limited number of rows in which to record the results); and disrupting the
trial of January 6th rioters in America (because sensitive information was
left in hidden cells).

Such snafus have not dented Excel’s dominance. Might artificial

intelligence (AI) steal its crown? With whizzy new tools powered by the
technology promising to make data analysis easier, the familiar grid of
numbers and calculations could soon feel outdated. Rather than replacing
spreadsheets, though, AI might make them even better. Last month
Microsoft introduced an AI assistant for Excel which lets users crunch data
using natural-language prompts. Excel, and its faithful, aren’t ready to be
filtered out just yet. ■

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Called out

Can artificial intelligence rescue

customer service?
The adoption of AI is surging in call centres
10月 17, 2024 07:30 上午 | San Francisco

IT’S NOT easy being a customer-service agent—particularly when those

customers are so angry with a product that they want to yell at you down
the phone. That’s the sort of rage that Sonos, a maker of home-audio
systems, encountered in May when it released an app update so full of
glitches it caused its share price to plunge.

One of the agents dealing with the ensuing customer tirades was a rookie.
But not a human one. Prior to the debacle, Sonos had hired Sierra, a startup
co-founded by Bret Taylor, the chairman of OpenAI, to provide it with a
customer-service bot powered by generative artificial intelligence (AI). It
could have been a disaster; the only thing worse than a malfunctioning
product is being trapped in an automation prison by a robot giving you the
runaround. Yet the bot beat expectations. After digesting Sonos’s technical
materials, it came up with its own workaround for one of the problems with
the Sonos app.

Customer service is one of the few industries where the use of generative
AI is already taking root. In a survey of customer-service executives
published earlier this year by Gartner, a research firm, almost half said that
AI customer assistants would have a significant impact on their
organisations in the next 12-18 months. Startups and established tech firms
alike have launched a volley of new products at the industry that promise to
transform customer service—and millions of jobs.

Customer service is a big industry. Most companies have some sort of

customer support, whether in-house or outsourced to call centres. In
America alone there are almost 3m customer-service workers, according to
the Bureau of Labour Statistics. At a median salary of around $40,000 a
year, that works out at roughly $120bn in wage costs. Many more work in
call centres in places like India and the Philippines, where these jobs are
seen as ladders to the middle class.

In recent years, however, the industry has become notorious for driving
customers mad with its use of technology. Its poor reputation is deserved,
reckons Andy Lee, co-founder of Alorica, an American contact-centre
business with 100,000 employees. It is expensive for firms to use humans to
solve their customers’ problems, so they make the process as cumbersome
as possible by forcing them to press a bewildering combination of numbers
or chat with a bot that regurgitates generic responses—a strategy known as
“deflection”. Once human agents are involved, it is in the financial interests
of outsourcing firms to make the process as labour intensive as possible,
raising costs and frustrating everybody.
Now entrepreneurs and investors are betting that generative AI can make
things less awful. Funding for startups developing customer-service tools
that use generative AI reached $171m globally in the third quarter, up from
$45m in the same period last year, according to PitchBook, a data gatherer
(see chart). This month Crescendo, co-founded by Alorica’s Mr Lee, raised
money at a valuation of $500m. Sierra, which raised funds at a valuation of
about $1bn in January, is now said to be seeking more at a valuation of
$4bn, raising eyebrows even among some AI-crazed venture capitalists.
It is not just startups entering the field. Tech titans like Alphabet, Amazon
and Microsoft are bringing generative AI to their customer-service
offerings. Software firms like Salesforce are, too. Some companies are also
using large language models like those produced by OpenAI to create their
own customer-service bots.

Unlike their rote-learning predecessors, generative-AI bots do not

regurgitate canned answers to narrow questions. Instead, they create their
own responses informed by the firms’ training materials and previous
customer-service interactions.

We apologise for any inconvenience

Providers are divided on the role these bots should play. One approach,
advocated by Crescendo, is for humans to continue managing conversations
with customers with an AI buddy in the background giving tips. But plenty
of others think that generative-AI bots are now clever enough to handle
most conversations themselves. This month Twilio, another software firm,
announced it would launch a tool to enable clients to build a customer-
service bot that can listen and talk, rather than merely read and type. A
number of generative AI startups in the industry have adopted “outcome-
based pricing”, charging for their technology when a customer query is
resolved, rather than per agent or minute of interaction, as is standard.

That raises two questions. One is how customers feel about all this.
Advocates for the technology say that customers will no longer have to wait
endlessly for a person to pick up the phone, and point out that bots will be
fluent in many languages and have easier-to-understand accents than
foreign call-centre agents. Customers, though, are yet to be convinced: 64%
of those surveyed by Gartner said they would prefer companies not to use
AI for customer service, mostly because they worry it will make it even
more difficult to reach a person. People still value human-to-human contact,
insists Rob Goeller, co-founder of Clearsource, a customer-service firm
based in Utah with employees in America, Costa Rica, India and the
Philippines.
What is more, generative-AI bots have a tendency to project utter
confidence in their responses even when they are wrong, which could
wreak havoc. Earlier this year Air Canada was forced to compensate a
customer who was incorrectly promised a discount by the airline’s AI
chatbot.

A second question is what all this means for the jobs of call-centre agents.
Last year Gartner predicted that generative AI would lead to a 20-30%
reduction in customer-service jobs by 2026. For now, Mr Goeller says
Clearsource is focused on using generative AI to help train its human agents
and assist them with summarising calls. But he adds, “I would be putting
my head in the sand if I said [generative AI] wouldn’t replace people.”

Previous waves of customer-service technology, including email and those

pesky voice menus, stoked concerns about job losses, only for them to fail
to materialise. AI could yet prove different. And if it does, its effects may
be salutary. Human agents could be freed up to spend more time on creative
and rewarding tasks, like using feedback to make products better—and less
time listening to irate customers. ■

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Bartleby

The horrors of the reply-all email

thread
Easy to start, impossible to stop
10月 17, 2024 07:30 上午

DEREK SMITH to AllStaff: Someone has taken my mug again. This is

the third time this month. Please return it immediately. Derek

Natalie Flank to AllStaff: What does it look like? Natalie

Mark van Deen to AllStaff: Round with a small curved handle?! Mark

Tim Tandy to AllStaff: Sounds like someone I know! T

Tim Tandy to AllStaff: Tim Tandy would like to recall this message
Tim Tandy to AllStaff: Sorry about that everyone. Was meant to be a
private message. Tim

Derek Smith to AllStaff: It’s red and has my name on it. I know you all
think this is funny but it’s my property and I’d like it back. Derek

Natalie Flank to AllStaff: Where did you last see it? Natalie

Derek Smith to AllStaff: It was in the cupboard in the kitchen.

Megan Gutfreund to AllStaff: Why don’t you keep it on your desk,

Derek? It’s much less likely to be taken from there. Megan.

Derek Smith to AllStaff: Because I don’t expect to have to keep

everything by me at all times in case it gets stolen. This isn’t Tegucigalpa.
It’s Bracknell. D

Sam Kernel to AllStaff: Where is Tepucigalga?

Will Adams to AllStaff: Tegucigalpa. It’s in Honduras.

Mark van Deen to AllStaff: It’s the capital of Honduras. Tegucigalpa.

Iris Lee to AllStaff: I don’t know why you are accusing your colleagues of
stealing. Someone has picked it up by accident. It’s in a cupboard full of
mugs.

Alex Arkle to AllStaff: If anyone would like to opt out of this fascinating
conversation in order to do some work, there is an option to mute it. Just go
to the “More” symbol at the top of the page, click on it and you should see
it. Alex

Ava Mayer to AllStaff: Honduras.

Derek Smith to AllStaff: It literally has my name on it, Iris. It’s the third
time this has happened. It’s not an accident. And Alex, implying that I
should be muted is appalling. This is not Pyongyang. Derek

Tim Tandy to AllStaff: I stand with Derek. Liberate the M4 corridor one!
Tim Tandy to AllStaff: Tim Tandy would like to recall this message

Alex Arkle to AllStaff: If anyone would like to know how to reply to only
one person on an email thread, please do get in touch. Alex

Varun Rama to AllStaff: I actually sympathise with Derek on this. The

mug was a gift, and it presumably has sentimental value. I am still waiting
to get my charger back, by the way. Varun

Derek Smith to AllStaff: It wasn’t a gift.

Megan Gutfreund to AllStaff: You bought a mug with your own name on
it?

Derek Smith to AllStaff: Yes. Why?

Tim Tandy to AllStaff: That would be helpful, Alex. I keep replying to

everyone! Christ alive, what a bunch of dreadful whingers our colleagues
are! Tim

Tim Tandy to AllStaff: Tim Tandy would like to recall this message

Flora Hawn to AllStaff: Varun, you’re not alone. I have lost about a
million chargers, too. F

Ren Moult to AllStaff: Coming to this late: it’s in Honduras.

Sumayah Habib to AllStaff: I bring soya milk into work for health reasons
and people keep using it. And before you ask, Megan, I have no choice but
to keep it in the fridge. Sumayah

Gabriel Palpate to AllStaff: My bicycle was stolen from outside the office
the other day. I know this isn’t relevant but it is something to be aware of.
Gabe

Sally Williams to AllStaff: I’m so sorry to hear that, Gabriel. I doubt the
police took much notice!
Megan Gutfreund to AllStaff: I do understand the difference between a
mug and milk, Sumayah. But thanks so much for making it clear.

Gabriel Palpate to AllStaff: I didn’t even bother telling them! G

Sally Williams to AllStaff: Good call!!

Tim Tandy to AllStaff: Someone’s going to get palpated!

Tim Tandy to AllStaff: Tim Tandy would like to recall this message

Sumayah Habib to AllStaff: I’m glad you know the difference between a
mug and milk, Megan. What about your arse and your elbow?

Derek Smith to AllStaff: Panic over. I found it. Sorry, everyone! D

Megan Gutfreund to AllStaff: Idiot.

Derek Smith to AllStaff: Megan, I have no idea what I have done to

deserve that. The level of rudeness you have just shown is completely
inappropriate. This is not New York. It’s Berkshire.

Continues for rest of eternity■

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Schumpeter

What if carmaking went the way of

consumer electronics?
The Foxconnification of electric vehicles
10月 17, 2024 07:30 上午

CARS AREN’T what they used to be. This is not a petrolhead’s lament. It is
a statement of technological fact. These days even automobiles powered by
a growling V8 engine contain a few kilometres of electrical wires, up from
a few hundred metres in the 1990s, plus a thousand semiconductor chips
and millions of lines of computer code to control everything from locks and
antilock brakes to infotainment. And that is before you get to the electric
vehicles (EVs) that are set to one day hog the world’s roads, a recent
slowdown in sales notwithstanding, let alone to Elon Musk’s self-driving
Cybercabs. The battery and other electronics make up more than half the
value of components in an EV, compared with a tenth in that V8. Now, 17
years after Apple gave the world the iPhone and 13 since Toyota somewhat
prematurely coined the phrase “smartphone on wheels”, modern cars have a
lot in common with consumer gadgets.

One Taiwanese company would like them to share another commonality—

namely itself. Foxconn wants to be to carmakers what it already is to Apple
and other consumer-electronics brands, which is to say their contract
manufacturer of choice. On October 8th the firm unveiled two new EV
“reference” models, an unexpectedly handsome people-carrier and an
ungainlier small bus. They join a line-up of six earlier designs for car
companies to pick from, fine-tune to their liking and slap their badge on.
One of these, an SUV, has become a domestic EV bestseller for Luxgen, a
15-year-old Taiwanese carmaker. Next year Foxconn aims to be mass-
producing a version of it with an American partner. One day it would love
to be churning out Teslas.

If an EV is a smartphone on wheels, why not build it like a smartphone?

And who better to do this than the world’s leading assembler of electronics?
For Foxconn, the $4trn global car market is a big prize as smartphone sales
tail off. For EV newcomers with no manufacturing chops and legacy car
giants with the wrong sort, farming out assembly could be a way out of
“production hell”, as Mr Musk once memorably described Tesla’s efforts to
expand capacity. And what automotive CEO would pass up an opportunity
to be more like Tim Cook at Apple, overseeing a revered brand, ungodly
profits and a $3.5trn market capitalisation?

This should not be a huge leap for carmakers. Their suppliers nowadays
contribute two-thirds of the value of a vehicle, estimates Matteo Fini of
S&P Global Mobility, a research group, leaving them to do the design, final
assembly, marketing and distribution. Moreover, integrating all the
disparate subsystems is a growing headache. Already some BMWs, Jaguars
and Toyotas, notably low-volume, high-margin coupés and convertibles, are
put together by contractors such as Magna Styer. In 1999 Ford toyed with
getting out of metal-bending entirely in order to focus on the immaterial
bits of the business. As a Ford executive summed it up to The Economist at
the time, “Auto companies are seen as firms which invest a lot and get little
return. Consumer companies are seen as investing little and earning a lot.”
That idea proved too futuristic for turn-of-the-century Detroit and was
ditched. But the executive’s words rang true then and ring truer today. Ford
and Apple each maintain $40bn or so in fixed assets and spend $8bn-10bn a
year on capital investments. Yet in 2023 the iPhone-maker raked in more
than twice Ford’s revenue and 23 times its net profit. Even if you add its
$30bn in research and development (R&D) costs to its capital expenditure,
Apple is matched by Volkswagen and Toyota, the world’s two biggest
carmakers, neither of which sells as much. As a share of revenue, Apple’s
combined R&D and capital spending, at 10%, is dwarfed by that of BYD,
China’s EV champion, which last year spent 27%.

There are two problems with the Apple comparison. First, the challenge of
replicating one of the best businesses ever may intimidate even car bosses
known for their lorry-sized egos. Second, Apple relied on contract
manufacturers for its iPhone from the beginning, making it impossible to
tell how much of its outperformance is down to this strategy rather than
some other commercial je ne sais quoi.

An earlier consumer-electronics pioneer offers a more instructive analogy.

In 1993 Hewlett-Packard, then one of the world’s biggest makers of
computer hardware, began outsourcing the production of its PCs, printers
and servers. By 2000 virtually all its computers were made by third parties.
In that period HP increased its revenues from $20bn to $49bn. It pulled this
off while barely growing its fixed-asset base and nearly halving the share of
sales going on R&D and capital expenditure, from 16-18% in 1988-92 to
9% by the end of the decade. Its global workforce shrank from 96,000 to
88,500. Net profit more than trebled. Return on equity improved from 12%
in the early 1990s to an average of 19% between 1994 and 2000.

HP sauce

Now imagine that Toyota or Volkswagen trimmed their outlays along

similar lines. Cutting their R&D and capital spending by half would free up
$19bn apiece in each firm’s cashflow after capital expenses. Assuming their
shares kept trading at a typical recent multiple of this free cashflow,
Volkswagen would stand to gain $170bn in market value and Toyota some
$270bn, more than doubling and quadrupling their market values,
respectively.

This presupposes other things being equal (they aren’t), powerful labour
unions giving the nod (they wouldn’t) and Foxconn remaining content with
margins that make gaps in a Rolls-Royce’s bodywork look gaping (fat
chance). And it still leaves the car firms a country mile behind Apple. But
as they struggle to reinvent themselves for the electric-vehicle age,
understanding what made consumer electronics so successful is a good
place to start. ■

If you want to write directly to Schumpeter, email him at

[email protected]

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Finance & economics

Inside the secret oil trade that funds Iran’s wars
Dark commerce :: An investigation by The Economist uncovers a multi-billion-dollar,
America-defying network

Why investors should still avoid Chinese stocks

Buttonwood :: The debate about “uninvestability” obscures something important

Germany’s economy goes from bad to worse

Mein Gott :: Things may look brighter next year, but the relief will be short-lived

Trump’s trillion-dollar tax cuts are spiralling out of control

Everyone wins :: His zany promises would blow up the deficit

An economics Nobel for work on why nations succeed and

fail
Free exchange :: Daron Acemoglu, Simon Johnson and James Robinson tackled the most
important question of all

| Next section | Main menu | Previous section |

 | Next | Section menu | Main menu |

Dark commerce

Inside the secret oil trade that

funds Iran’s wars
An investigation by The Economist uncovers a multi-billion-dollar,
America-defying network
10月 17, 2024 08:43 上午

IN A WAR with Israel, Iran would need money. Not just to buy weapons
and keep its economy afloat, but to re-arm militias such as Hamas and
Hizbullah. Many assume that, after years of sanctions, it would struggle.
They are wrong. Every year Iran funnels tens of billions of dollars from
illicit oil sales to bank accounts all over the world. This huge, secret
treasure was used to fund Hamas’s attack on Israel a year ago, swarms of
Russian drones in Ukraine and Iran’s own nuclear programme. It has
already seeded many crises—and could soon fuel the mother of them all.
To understand how Iran can amass so much cash, zoom in on its petro-
economy. Six years ago, when the Trump administration reimposed a
blockade, Iran’s exports of crude oil collapsed. Since then, however, they
have grown twelve-fold, to 1.8m barrels a day in September. Last year these
sales generated $35bn-50bn; petrochemical exports added another $15bn-
20bn. Smuggling oil on hundreds of tankers is hard. Covertly laundering
billions of dollars via the global banking system is even harder. America
keeps a watch on any bank, even foreign, that processes transactions in
greenbacks. So how is Iran getting paid? And how does it move, store and
spend such large amounts of money?
The Economist has spoken to a range of people with first-hand knowledge
of Iran’s oil system. To check and verify what they told us, and flesh out the
detail, we then sought information from other sources, including former
sanctions officials, Iranian insiders, intelligence professionals and WikiIran,
a third-party website soliciting leaks. Our investigation shows that the
country has built sprawling shadow financial channels, which run from its
oil rigs to the virtual vaults of its central bank. China, Iran’s main buyer, is
an architect of this system, and its chief beneficiary. Global banks and
financial hubs, often unknowingly, are used as vital cogs. A source familiar
with Iran’s books says that, as of July, it had $53bn, €17bn ($19bn) and
smaller pots of other currencies lying abroad.

Although enforcement has weakened in recent years, Iran is subject to the

broadest sanctions America has imposed on any country. Aimed at forcing
Iran to curb its nuclear enrichment and funding of terrorism, they target
swathes of its economy, as well as the government. No other country
imposes such stringent sanctions, so, in theory, most can deal with Iran. In
practice, few do so openly, as America bans its firms not just from trading
with Iran, but also with foreigners that knowingly do so. It is especially
tough for Iran to receive and move dollars, as every such transaction,
almost anywhere in the world, must eventually be cleared by an American
bank.

But our report shows that, with patchy enforcement, determination and help
from a greedy partner, a country under a de facto global embargo can end
up flouting it on a cosmic scale. Many of Iran’s tactics are reminiscent of
those a drug cartel would use to market products and recycle proceeds into
other dark enterprises, often via seemingly legitimate businesses. Iran’s
subterranean oil system is governed by rules as much as by threats. The task
is to construct an elaborate charade that will dupe sanctions-enforcers.

Barrelling about

Most petrostates export oil via a state-owned giant, but Iran is different. The
National Iranian Oil Company (NIOC), its state oil firm, has a monopoly
over production. NIOC’s Swiss-based subsidiary, Naftiran Intertrade
Company (NICO), helps market oil abroad. A growing portion, though, is
allocated to Iranian ministries, religious outfits and even pension funds to
sell for themselves. “It’s almost medieval,” says a former American official.
“The lords are being given pieces of the kingdom.”

In a country that lacks hard currency, crude is an alternative form of

liquidity. Iran’s budget last year allowed the armed forces to sell $4.9bn-
worth of oil. Allocations also reward loyalists: in 2022 individuals vetted by
the regime were offered a combined $3.6bn of petroleum. The Islamic
Revolutionary Guard Corps (IRGC), the regime’s praetorian guard, also
receives a great deal of oil, often off-book. A former Iranian official says
that the Quds Force, the IRGC’s foreign wing, earned $12bn from such
sales in 2022.

All these entities have distinct sales channels, though NICO and the IRGC
often lend their services to others. Sometimes a front company orchestrates
the whole thing. According to the American Treasury, Sahara Thunder, in
Iran, runs sales for the armed forces while posing as a private trading firm.
Iran regularly outsources sales to a third party abroad, such as ASB, a
Turkish firm, according to America’s Department of Justice. But Iran insists
on guarantees. Baslam, an ASB subsidiary, transferred 51% of its shares to
the Quds Force when it started working for them, according to a leaked
contract between ASB and an IRGC commander.

The salesmen’s first task is to find a buyer. Even though China absorbs 95%
of Iran’s crude exports, its sanctions-wary state firms do not want to touch
the oil. So three or four Iranian front companies must scout the market.
Documents shared by a source show that Litamos International Limited and
Haosi Trade Limited did this until 2021, when both were dissolved. China
has its own brokers, whose clients supply plants the state has authorised to
process Iranian oil. Most are small, independent refineries, dubbed
“teapots”.

Once a buyer is found, a formal agreement is signed, usually between two

front companies. Given the sums—a shipment of Iranian crude can easily
cost $50m-100m—business cannot work on trust. Papers specify every
detail, from trial runs and inspection schedules to the size of future
shipments. The price usually tracks Brent, the global oil benchmark, minus
a discount of $10-30 a barrel. Accepted currencies include the dollar and,
more rarely, euros, Emirati dirhams or yen.

What many contracts do not mention is the oil’s provenance, which is

usually stated, falsely, to be Iraqi, Malaysian or Omani. The actual origin is
often confirmed in a confidential letter, with the true nature of the export
spelt in caps: IRANIAN oil.
More than 100 front companies exist to procure tankers, says a source.
Many are decades-old ships flagged in Panama, a permissive harbour, and
renamed to confuse trackers. The vessels start by picking up oil at one of
Iran’s export terminals. To avoid attention, they often lend transponders to
other ships circling the area, or use software to make it look like they are
elsewhere. The ships then sail to Iraq or Oman, where their cargo may be
transferred to a new vessel. Another transshipment may occur off Malaysia
or Singapore, after which the cargo heads to China.
Iranian agents receive reports at every stage. Decisions are referred to
senior officials, who may hide behind nicknames (“Roger”, in a recent
example of an IRGC commander) in WhatsApp messages and voice notes.
False certificates of origin and papers are provided throughout. Even the
most secretive parts of the trips are closely managed. One checklist, shared
by a source, comprised 24 questions for a transshipment off Malaysia
involving Remy, now known as Wilma II, a tanker that tracking information
from Kpler, a data firm, suggests has carried Iranian crude.

Sometimes things go wrong. A sale may fall through once a tanker is en

route. The cargo sometimes vanishes, triggering threats of violence from
IRGC commanders. Some ships are simply abandoned. Usually, though,
goods are delivered without a hiccup, and within 45 days payment comes
due. This is where Iran’s shadow banking system, the most impressive part
of the scheme, comes into play.

Special FX

The story so far shows the extent to which Iran’s economic survival relies
on China. The coming chapter underlines this dependence. Iran believes it
has found a friend—its most powerful ally in an anti-Western axis. Yet
China is mostly interested in a good deal. Taking advantage of Iran’s weak
position, it will offer assistance so as long as it does not risk burning
important bridges with America, its geopolitical rival but also its biggest
trading partner. Thus it creates the perfect conditions for Iran’s smuggling to
thrive, without ever appearing, officially, to be involved.

Iran’s shadow-banking system is a feat of bureaucratic brilliance. The

country’s largest oil companies, including NIOC and PCC, a major
petrochemical exporter controlled by the defence ministry, have big
financial departments which act as banks, says a source familiar with them.
These units have incorporated firms in Iran, dubbed “money exchanges”,
that handle illicit foreign payments not just for oil exporters, but for large
parts of Iran’s economy.

Each local exchange has created front companies (known as “trusts”), with
the sole purpose of collecting and transferring money. These are based
around the world. Most have monikers straight out of random-name
generators: “Rainbow International Commercial Company”, say, or
“Glorious Global Limited”, both of which are based in Hong Kong. The
listed owner’s role is limited to liaising with local authorities and providing
powers of attorney to Iranians, or Iranian agents. One former high-ranking
Iranian official says around 200 Iranian nationals with dual passports
oversee such companies in Europe.

When an oil exporter wants to be paid, it sends an email to its preferred

exchange, stating the amount it needs to receive and from whom. The
exchange then checks balances across its network to determine where it
would rather have the money arrive. Next it will tell the oil firm to inform
its client that they should expect an invoice from a named trust. Some
payments are made in yuan that Iran recycles within China. But yuan are
not convertible, and there is only so much Iran can buy from China. So
Iranian firms often ask for hard currency. The same mechanism works in
the other direction, too, allowing Iranian firms to pay covertly for imports.

Banks where the front companies have accounts, and which process
transfers, provide Iran with access to the international financial system.
Many Western experts insist that Iranian fronts are almost entirely banked
by provincial Chinese lenders that do no business in the West and are
therefore immune to American retribution. Bank of Kunlun, the only
Chinese bank placed under Iran-linked sanctions, is registered in Xinjiang,
a far-flung province. Off the record, however, some banking-compliance
veterans report that big institutions are also used in this way. “There’s a lot
of dollars to move,” says one.

Drawing on leaks from an Iranian oil firm, in April last year WikiIran listed
the details of 218 bank accounts linked to 71 trusts it found to be managed
by Amin, one of Iran’s largest money exchanges. A look at the associated
database indicates that just 67 of these accounts were hosted by a small
Chinese bank. Of the rest, 99 were at one of China’s top 20 banks. We ran
the other account numbers through IBAN Checker, a website that verifies
bank details. This indicated that 30 accounts were held in the UAE,
including at the country’s two largest lenders; ten were at European banks
(CBC, ING, OTP, Commerzbank and three Sparkassen, as Germany’s
savings banks are known); and another five were at Turkish banks. Two
were at European fintechs—Paysera and Wise—that process cross-border
payments.

There is no suggestion any of the banks or fintechs knew that they were
dealing with front companies acting on behalf of Iran, and nothing in the
documents indicates that they did know. In response to emails from The
Economist, CBC and Wise said they could not comment on individual
accounts. ING said it launched an internal investigation last year that
revealed transactions with entities mentioned on WikiIran and resulted in
the closure of accounts at its Belgian unit. OTP said the relevant accounts
were closed in August 2019.

Documents we obtained show that, at least at one point since 2021, front
companies facilitating or soliciting payments linked to Iran’s oil trade have
had accounts at Citibank in Hong Kong, HSBC in Hong Kong and China’s
top four banks. Again there is no suggestion that the banks knew they were
dealing with front companies acting on behalf of Iran, and nothing in the
documents indicates that they did know. (Citi said it found no record of the
alleged transaction. HSBC did not reply in time for publication.)

Our investigation nevertheless suggests that a number of front companies

are successfully evading screening methods used by banks. Most such
accounts, and many of those previously mentioned, are denominated in
dollars; others are in euros. Transaction receipts show Iranian fronts use
some global lenders as “correspondents”—international banks that clear
smaller banks’ foreign-currency transactions through big financial centres.

Chinese banks are often used at the start of a petrodollar’s odyssey. This is
where the buyers of oil have their money and arranging a domestic transfer
is more discreet than sending the money abroad. The opacity of China’s
banking system then allows Iran’s exchanges to shuffle money around on
the mainland with less scrutiny. For local bankers, it is akin to “any other
type of commodity business”, says Justine Walker of the Association of
Certified Anti-Money Laundering Specialists.

Big Chinese banks have another attraction: subsidiaries in Hong Kong,

where China’s closed money loop meets global finance. The territory is
home to the only sizeable dollar-clearing system outside America. USD
CHATS, powered by accounts that banks fund with dollars, allows
members to transact with each other in greenbacks without involving
institutions in America. All international banks with decent business in
Asia, including nine of China’s ten largest, use it. Neither they nor HSBC,
which runs the system, are required to report transactions to Uncle Sam.
Under a deal with America, Hong Kong banks must still check that
payments they route through CHATS comply with American sanctions,
even though Hong Kong does not enforce them. But the fact that America
cannot monitor transactions gives room for manoeuvre, says David Asher of
the Hudson Institute, a think-tank. Last year the system processed an
average of $60bn in payments a day, a volume that makes dubious
transactions hard to spot.

Later in their journey Iran’s funds may move via other financial hubs.
Documents leaked to WikiIran suggest that, prior to May, the Dubai branch
of Banque Misr, an Egyptian bank, hosted as many as 38 front companies
used by the finance arm of PCC, the petrochemicals exporter. (Once again,
the documents do not indicate it did so knowingly. Bank Misr did not reply
to our queries in time for publication.) Exchanges use the UAE to shift
money between trusts in order to keep accounts balanced, often after
converting dollars into dirhams, a source explains. Wads of banknotes
shuttle between banks. Some exchanges maintain “cash lockers” to top up
accounts.

Phantom finance

At many banks hosting front companies, signs that should raise red flags are
not picked up, say sources. The registered owners may be Filipino or Indian
nationals with unsuitable qualifications. On inspection, the accounts’
behaviour may look strange, with the company receiving money from oil
trades and making payments for unconnected things. A source familiar with
NIOC says that banks which knowingly work with Iran can earn
commission of up to 15% of the value of transfers.

Where does the money end up? Some funds stay in or flow back to Asia,
the source of many Iranian imports, including weapon parts. Others are
hidden in the Levant, where they pay wages for Hamas, Houthi and
Hizbullah fighters. Sometimes the money is stored in less obvious places—
such as bank branches in Budapest or Aachen, a spa city bordering
Germany’s Eifel mountains. London is the world’s sixth-biggest base by
number of Iranian-linked entities blacklisted by America.
Iran’s money exchanges keep track by maintaining internal ledgers: huge
spreadsheets netting out debits and credits across hundreds of trusts. Their
clients—the Iranian companies—settle positions by buying or selling
virtual dollars via an online platform, called NIMA, usually at subsidised
exchange rates. Although the hard currency stays offshore, it is ultimately
the property of Iran’s central bank, which runs NIMA. The bank has its own
meta-spreadsheet to record the virtual reserves it is holding abroad, says
someone familiar with how the country runs its books.

The system is costly. Inclusive of discounts, rewards for intermediaries and

financial fees, Iran receives 30-50% less currency than it would in an open
market, estimates a source. Trustees of front companies sometimes
disappear with the till.

This wasteful complexity, however, also makes the network resilient.

Although American enforcers have unmasked hundreds of Iran-linked
firms, new ones quickly crop up. Emails between bosses at PCC show that
in 2022, when hundreds of trust accounts were exposed, it took just a few
months for the firm to exfiltrate the money and replace most of them.
Forcing banks to screen Iranian fronts more diligently, perhaps by
punishing egregious cases, could have more impact. Despite warnings that
it might do so, the Biden administration is yet to blacklist a single bank.

Proponents of such half-baked enforcement say it does not matter.

Sanctions, they argue, are achieving their goal: reducing the revenue Iran
earns from sales without hurting global oil supply. The problem is that costs
are largely borne by Iranian households, which face double-digit inflation,
and independent merchants, who lack the connections to secure imports.
Meanwhile, regime loyalists profit and amass missiles, as the country grows
closer to building nuclear weapons. Iran’s laundromat is an affront to the
West, a boon to China—and a menace to the world. ■

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Buttonwood

Why investors should still avoid

Chinese stocks
The debate about “uninvestability” obscures something important
10月 17, 2024 07:30 上午

NOTHING CHANGES sentiment like price, according to one investing

maxim. The world-weary saying reflects the fact that after a stockmarket
surge speculators usually scramble for reasons to believe further price rises
are on the way. A recent surge in the Chinese market is one such example.

On September 13th the CSI 300 index, made up of the largest stocks listed
in Shanghai and Shenzhen, was at its lowest in five years. Since then it has
gyrated wildly, rising by as much as 35% and then falling by 11%. Stocks
are being buffeted by waxing and waning expectations for stimulus from
the central bank and the government. On October 12th China’s finance
ministry pledged that it would boost consumption and shore up support for
struggling local governments, although it fell short of putting a precise
figure on such spending.

So has a new dawn broken over Shanghai and Shenzhen? Investors would
desperately like an end to three years of misery, during which time Chinese
stocks have been battered by a property crisis, the government’s turn
against parts of the private sector and an increasingly fraught relationship
between Beijing and Washington. A debate about whether Chinese stocks
are in reality “uninvestable” has roiled since 2022, when JPMorgan Chase,
a bank, published (and subsequently withdrew) a briefing note suggesting
as much.

What it means for a stockmarket to be uninvestable has always been a little

uncertain. JPMorgan did not intend for its provocative turn of phrase to
refer to the Chinese market in perpetuity. Alex Yao, the analyst responsible,
was referring to a particular moment of political uncertainty, which he and
his colleagues expected to last for 6-12 months. This year he has been much
more optimistic about the country’s tech firms.

Some investors are undoubtedly finding the market investable. Chinese

equity funds saw their largest recorded inflows in the week ending October
9th, according to EPFR, a data provider, with almost $40bn flooding in
from investors at home and abroad. Moreover, there is plenty of room for
foreign allocations to grow. Goldman Sachs, another bank, believes that
were allocations to return to levels proportional to the size of the Chinese
stockmarket, it would mean another $48bn flowing into the country.

New arrivals will also find Chinese stocks to be far more investable, in the
technical sense, than they have been previously. In July 85 exchange-traded
funds that are listed on the mainland were made available through the Stock
Connect system, which links mainland exchanges with Hong Kong. The
quotas and limits on purchases of stocks by so-called qualified investors
were removed four years ago, and recent rule changes have made hedging
currency risk easier, too.

But the question for most investors is simpler: is buying Chinese stocks a
good idea? Even as speculators reap quick returns, for those who wish to
buy and hold the answer is clearly still “no”.

Whatever the deeper problems with Chinese markets, a lack of economic

growth is not among them. In fact, mainland stocks have been an abysmal
way to benefit from the astonishing growth of the world’s second-largest
economy. The CSI 300 index has risen by less than a quarter in the past 15
years, while China’s nominal GDP has quadrupled.

The deeper problems include poor corporate governance, a high share of

state-owned firms and the government’s habit of blindsiding investors with
policy shifts. A campaign in 2021 against firms in education and technology
was one such shift. Officials have made encouraging noises about the
private sector recently, but it is hard to be confident there are no more
value-destroying campaigns in the offing—a situation that cannot be
resolved by stimulus and a burst of consumption growth.

Even recent improvements in market conditions demonstrate this point.

Reading the runes for changes in policy is an all-important skill when
investing in a country with a closed-off political system. For investors who
get such Kremlinology correct, the rewards can be enormous. Yet most will
never manage to do so, and will lose money trying.

Perhaps it would be better if the debate about the uninvestibility of Chinese

stocks was retired. Its terms are unclear and, in some ways, China is
becoming more accessible. Still, that does not change the most simple—and
most important—analysis. For most potential buyers, Chinese stocks are
simply not a worthwhile investment. ■

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Mein Gott

Germany’s economy goes from bad

to worse
Things may look brighter next year, but the relief will be short-lived
10月 17, 2024 07:30 上午 | Berlin

IT WAS WITH Teutonic understatement that Robert Habeck noted

economic conditions were “not satisfactory”. Germany’s economy minister
was speaking on October 9th, just after official forecasts for the year had
been revised from growth of 0.3% to a contraction of 0.2%. This would
follow a 0.3% decline in output last year, meaning that Germany faces its
first two-year recession in more than two decades.
Europe’s largest economy has barely advanced since covid-19 struck,
lagging behind the rest of the rich world (see chart 1). Isabel Schnabel of
the European Central Bank has noted that euro-zone growth excluding
Germany has been “remarkably resilient” since 2021 and faster than that of
many other big economies. But talking about the euro-zone economy
without Germany is like talking about the American economy without
California and Texas. The country, once a motor of European growth, has
become a drag.
It is difficult to imagine a worse confluence of circumstances for the export-
dependent and manufacturing-heavy German economy than those it has
faced since 2021. Soaring energy prices followed Russia’s invasion of
Ukraine; now China’s industrial overcapacity is causing havoc abroad.
Comforting as it might be to blame economic weakness on external factors,
however, Germany’s problems run deeper, with many of them homegrown.
On top of this, a fractious three-way coalition is hampering the political
response.
Industrial production has struggled in recent years. Energy-intensive
industries, such as chemicals, metal-work and paper manufacturing, have
been hit particularly hard (see chart 2). These sectors account for just 16%
of German industrial output, but consume almost 80% of industrial energy.
Many firms responded to higher energy costs by pausing production.

Shifting patterns in global demand are a bigger problem for most firms. As
Pictet Wealth Management has noted, Germany’s economic relationship
with China has shifted. In the 2010s the two countries’ growth was
complementary: Germany sold cars, chemicals and machinery to China, and
in turn bought consumer goods and intermediate inputs, such as batteries
and electronic components. Now China is able to produce for itself much of
what it once imported and, in some cases, has become a serious rival for
export markets, not least in the old German staple of cars.

Yet the gloom about German industry can be overdone. Although

manufacturing production has fallen since 2020, its gross value added has
been remarkably stable. Manufacturing firms, in many cases, have been
able to shift into producing higher-value items even as they have lost
market share. And last year, as the overall economy contracted, trade
continued to make a contribution to growth, something that looks set to
repeat this year.

Higher real household incomes, as inflation comes down, have been slow to
lead to greater demand, but they should eventually show up in consumer
spending. The worst of industry’s energy squeeze is in the past, too. Most
observers expect a pickup in growth next year. The government has
pencilled in growth of 1.1% in 2025 and 1.6% in 2026, based on the
assumption that private consumption will begin to rebound. To some
scepticism, ministers assume this will happen in part owing to their own
growth-inducing policies.

But an overdue upswing would not mean an escape from longer-running

structural problems. In reality, Germany’s economic weakness predates
recent geopolitical and economic shocks. As Ms Schnabel noted this month,
German GDP at the end of 2021 was only 1% higher than its level of four
years earlier, compared with 5% growth in the rest of the euro zone and
more than 10% in America.
German success in the 2010s reflected the country’s competitive advantage
against the rest of Europe. At the start of the century, Germany was
struggling with reunification. Its price level was higher than others in the
common-currency area (see chart 3). Then, in the early 2000s the Hartz
reforms, which included labour-market liberalisation, put a lid on costs by
weakening labour’s bargaining power. At the same time, debt-fuelled
growth in southern Europe drove the price level higher in the euro area as a
whole.
Over time, though, this competitive edge eroded. After the debt crisis of the
early 2010s, peripheral European economies embarked on their own
structural reforms. From 2015, after a decade of moderation, German wage
costs began to grow faster. By 2019 the price-level gap between Germany
and the rest of the euro area had narrowed. The impact of the energy
squeeze, with Germany especially reliant on Russian gas, pushed the
country’s price level higher. For the first time in more than two decades,
Germany does not have a cost advantage over its euro-zone peers.

As Germany deals with this loss of competitiveness, it must also contend

with demographic shifts. In recent years the country’s ageing population has
been balanced by high immigration. But fewer migrants are now arriving,
leaving firms short of workers. All told, the IMF expects the German
working-age population to shrink by 0.5% a year for the coming five years,
the steepest decline of any big economy.

IMF officials say that, unless productivity improves, German economic

growth will settle at 0.7% a year, half its pre-pandemic level. More
government spending could provide a boost, but ministers are constrained
by self-imposed fiscal rules. Annual net public investment has fallen from
1% of GDP in the early 1990s to zero. Although criticism of the “debt
brake”, which limits the federal structural deficit to 0.35% of GDP a year,
has become more common, few observers expect any change before next
year’s federal election.

Germany’s recession is painful both for Germans themselves and for the
broader euro zone. An economic recovery next year, produced by lower
inflation and lower energy costs, will not alleviate structural problems.
Germany’s economy was showing signs of strain long before the pandemic
struck, Russia invaded Ukraine and China began to throw money at
struggling industries. It will continue to show signs of strain for some time
to come. ■

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Everyone wins

Trump’s trillion-dollar tax cuts are

spiralling out of control
His zany promises would blow up the deficit
10月 17, 2024 07:30 上午 | Washington, DC

FOR AMERICAN policy wonks, the final stretch of the presidential

election has given rise to a new parlour game. What is the next tax that
Donald Trump will promise to cut? The Republican candidate has trotted
out a range of pledges, from no taxes on overtime work to no taxes on
retirement benefits. Last week alone he proposed three new exemptions,
including making interest on car loans tax-deductible. It is easy to figure out
what Mr Trump hopes to gain. Yet the economic implications are
dispiriting: not just a bigger fiscal deficit but a much messier tax code.
Set against the federal government’s $4trn in annual tax revenue, some of
Mr Trump’s most attention-grabbing ideas are inexpensive. For instance,
exempting tips from taxes would cost about $118bn over the next decade,
according to the Tax Foundation, a think-tank. Others would be much
bigger. He has proposed reinstating a rule to let Americans fully deduct
taxes paid to state and local governments from their federal tax bills. That
could cost $1trn over the next decade, the Tax Foundation says. And these
all come on top of Mr Trump’s baseline pledge to extend the income-tax
cuts that he made in 2017, which are due to expire at the end of next year.
One obvious concern is that these various cuts would push up an already
bloated federal deficit. In an estimate published on October 7th, the
Committee for a Responsible Federal Budget, a non-partisan group,
projected that the deficit would climb to as much as 12% of GDP by 2035
under Mr Trump, up from about 7% last year. As a result, the national debt
would soar to vertiginous heights (see chart).
Taken together, the proposals also represent a shift from Mr Trump’s
approach to taxes during his first term. The Tax Cuts and Jobs Act of 2017
—his biggest legislative accomplishment—simplified the tax system and
broadened the base of taxpayers in order to clear the way for cuts. What he
is proposing now, however, is the creation of a dizzying array of loopholes.
Philosophically, it is hard to defend many: why, for instance, should wage
workers pay taxes on their entire income, whereas workers who receive tips
avoid taxes on some of their income? Moreover, practically it will be a
mess: individuals will have to spend more time itemising their tax returns,
and the Internal Revenue Service, already overwhelmed, will struggle to
monitor all the claimed exemptions.

The saving grace is that many of Mr Trump’s proposed tax cuts are
probably empty promises. Fiscal legislation must make it through Congress
to become law. Even if Republicans end up controlling both the Senate and
the House, moderates in the party would surely push back against Mr
Trump’s zanier proposals. Douglas Holtz-Eakin, a long-time Republican
economic adviser, argues they are mostly transactional—cheap pledges
made to win an election that are easily discarded afterwards. “They don’t
come from a place of deep, personal belief,” he says.

But Erica York of the Tax Foundation says Mr Trump could still complicate
the debate about how to handle the expiration of the tax cuts of 2017 by
throwing unhelpful ideas into the mix. “That’s just going to add to the
pressures that Congress faces next year,” she says. And there is one type of
tax Mr Trump really does care about: tariffs. Here, too, his promises are
inflationary. At the start of his campaign he vowed to place levies of 60%
on Chinese products; on October 15th he upped his threat to 2,000% tariffs
on Chinese cars. ■

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Free exchange

An economics Nobel for work on

why nations succeed and fail
Daron Acemoglu, Simon Johnson and James Robinson tackled the most
important question of all
10月 17, 2024 07:30 上午

WHY ARE some countries rich and others poor? The question, full of
childlike curiosity, is the most important in economics. A person’s living
standards are mostly determined not by talent or hard work, but by when
and where they were born. Historically, models of economic growth
focused on the accumulation of factors of production, labour, capital and,
more recently, technology or ideas. The greater the capital stock per worker
and the more productive its use, then the richer a country would be.
Yet that still left a gap. Why did some countries manage to accumulate
more of these factors than others? This year’s winners of the Nobel prize in
economics argue that the answer depends on the quality of government. In
2001 the three men—Daron Acemoglu and Simon Johnson, both of the
Massachusetts Institute of Technology, and James Robinson of the
University of Chicago—published what has become one of the most cited
papers in economics, “The Colonial Origins of Comparative Development:
An Empirical Investigation”. In the paper they developed a schema for
institutions, dividing them into “inclusive” (those which shared prosperity)
and “extractive” (those where a small group took from the rest). Inclusive
institutions encourage investment in human and physical capital. Extractive
ones discourage it.

The idea that institutions are central to economic growth was not new. It
had been the contention of Douglass North, who won the Nobel prize in
1993, along with Robert Fogel, a historian. The problem investigated by
this year’s laureates was whether development encourages liberalism, rather
than the other way round. Richer societies could, for instance, lead to
democratic reforms.

Messrs Acemoglu, Johnson and Robinson used an “instrumental variables

approach” to solve the riddle. This exploited variations in the mortality rate
among settlers to identify which European colonies developed inclusive
institutions and which developed extractive ones. In colonies with a high
rate of mortality, owing, say, to tropical diseases, colonial powers exploited
native labour. That could be in the form of the encomienda system in South
America, which enslaved locals, or the rubber plantations of the Belgian
Congo. Meanwhile, low death rates in English-speaking offshoots—
America, Australia and Canada—attracted European settlers by offering
them a chance to share in the wealth they produced via private property and
free markets.

As such, there was a “reversal of fortune” among colonies. The richest in

1500, as measured by urbanisation, became the poorest in modern times.
Messrs Acemoglu, Johnson and Robinson hypothesised that this was
because the greater wealth of the once-rich colonies encouraged the
development of methods of extraction, while the higher population
provided a labour force that could be coerced to work in mines and
plantations. A later paper augmented the research with the “quasi-
experiment” of North and South Korea, where half of the peninsula became
a rich, liberal democracy and the other half authoritarian and destitute.

Messrs Acemoglu and Robinson theorised that states could become stuck
with poor institutions. In a highly unequal society the poor could threaten
revolution. Any commitment by the elites to redistribute wealth in response
was not credible; they could always change their mind when the threat
disappeared. As a result, unequal states were prone to instability. Checks
and balances represented a response to this commitment problem: if elites
were restrained then their promises to redistribute would be taken seriously
and any revolutionary threat would be forestalled. This was, the authors
suggested, why European states had expanded the democratic franchise in
the early 19th century.

Few economists will doubt the influence of this year’s prizewinners. Mr

Acemoglu, in particular, has long been regarded as a future Nobel laureate
for his work on technological growth and labour economics, as well as
development. Research on the persistence of institutions, using quasi-
experimental techniques such as instrumental variables, has grown vastly
more popular in recent years. But as often happens with empirical work, the
prizewinners’ methods have been questioned. David Albouy of the
University of Illinois has suggested that their estimates of settler mortality
are incorrect and selectively cited. Edward Glaeser of Harvard University
pointed out that there were ways settler mortality could affect growth other
than through institutions. Europeans brought over education and trade links
with them as well, for instance.

Historians, too, have questioned the neat division of extractive and

inclusive institutions. South Korea developed under a military dictatorship.
England’s Glorious Revolution in 1688, which Messrs Acemoglu and
Robinson have identified as the point at which the country’s rise began,
allowed Parliament to dispossess peasants as well as constrain the king.
America’s development combined individual rights and democracy for
white men with slavery and later disenfranchisement for their black peers.
For all the debate over methods, the prizewinners’ research undeniably
demonstrated the importance of historical specificity, moving development
economics away from abstract growth models. Their work was a break from
theories assuming an inevitable, deterministic path to modernisation based
on the unusual experiences of western Europe. Although Messrs Acemoglu,
Johnson and Robinson may not have been able to provide a complete
account of why some countries are rich and others poor, new generations of
economists have a firm foundation on which to build. ■

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Science & technology

SpaceX is NASA’s biggest lunar rival
The new Moon race :: The company’s successes are also showing up the agency’s failings

Tubeworms live beneath the planetary crust around deep-

sea vents
Life finds a way :: The conditions are hot, sulphurous and low in oxygen

Could life exist on one of Jupiter’s moons?

Forget about Mars :: A spacecraft heading to Europa is designed to find out

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The new Moon race

SpaceX is NASA’s biggest lunar

rival
The company’s successes are also showing up the agency’s failings
10月 17, 2024 07:30 上午

IT WAS SOMETHING amazing—an expensive, delicate ship falling out of

the sky with such precision that it could be caught in a waiting pair of giant,
gentle arms. If you wanted an illustration of the fact that Americans can do
things in space beyond the reach of other earthlings the return of the booster
stage of SpaceX’s fifth Starship test flight on October 13th could hardly be
bettered.

It is a far cry from the days when America first kindled spacefaring fire in
its belly. When, in May 1961, John F. Kennedy presented Congress with the
goal of putting “a man on the Moon by the end of the decade” America
seemed to be clearly lagging behind the Soviet Union; it would not put its
first astronaut into orbit until the following year. But Kennedy’s advisers
had chosen their target in the knowledge that the technology needed to go to
the Moon was of a different order from that needed just to get into orbit.
The USSR’s prowess in the latter was little help to it in the former. America
consequently beat them to it, developing the mighty Saturn V rocket and the
Apollo spacecraft which sat on top of it remarkably quickly.

Today America has not one, but two rockets which have more power at lift
off than the Saturn V: SpaceX’s Starship and the Space Launch System
(SLS) developed by the National Aeronautics and Space Administration
(NASA). Thus equipped, it might seem that getting Americans back to the
Moon, as the agency was told to do by then-vice-president Mike Pence five
years ago, should be a doddle.

Yet the Artemis programme, named after Apollo’s sister, has yet to see a
crewed flight (the picture, above, is from its first and only uncrewed flight).
NASA’s claim that its third flight, Artemis III, could see an American
woman set foot somewhere near the Moon’s south pole, its primary target,
in 2026 sits in the area where optimism is increasingly blurring into deceit.
Some internal NASA documents make 2028 look more likely; outside
observers, including some former insiders, talk of later still.

NASA programmes have a costly habit of being long drawn out; without
competition, there is little to focus the mind. On the lunar front, though,
there is clear competition. China has plans to fly its own astronauts to the
Moon by 2030, and many Americans have a neuralgic reaction to the idea
that America’s current geopolitical rival might put people on the Moon
before America manages to return them there. Some fear it would look like
a re-run of the space race of the 1960s, but one in which America loses,
thereby demonstrating some terrible decline.

That would be the wrong conclusion to draw; America’s technological lead

in space is broad enough that to be pipped to the post in one symbolically
loaded (though scientifically unimportant) venture would not demonstrate
all that much. But symbolism matters. NASA officials play down the very
idea that they are in a race with China. ”We’ve already been to the Moon,
[so] we already beat China to the Moon,” says Cathy Koerner, associate
administrator in the agency’s Exploration Systems Development Mission
Directorate. But if a day comes when a five-starred red flag hangs at the
south pole of the Moon with no stars and stripes nearby, it will be a bad day
to be NASA administrator, and a tense one on which to be president.

In a way, though, the more fundamental rival is SpaceX. Over the past ten
years NASA has started to move away from the time-honoured model
which sees it tell private industry exactly what it wants built and then pay
the price, with a handsome guaranteed profit added on. Instead NASA tells
companies what it wants done; lets them say how they would do it, how
much new stuff they will have to develop and what that will all cost; and
then offers fixed-price contracts to the best bids. The enlightened goal is to
build up a thriving competitive market in such services.

A starship is born

The result has been the building up of SpaceX. The contracts the company
won for delivering cargo and crews to the International Space Station (ISS)
were fundamental to the development of its Falcon 9 rocket (which among
many other things currently launches all the cargo destined for the ISS) and
its Dragon space capsule.

In some ways this worked well for NASA; one internal study found that
developing the space-station resupply capability in-house would have cost
NASA $4bn, rather than the $300m SpaceX has charged. But the
competitive market hardly appeared. The rockets which were used by the
only alternative cargo supplier have been discontinued. Boeing’s attempt to
build a capsule to compete with Dragon has been a costly and embarrassing
flop.

SpaceX is not a contractor like others NASA is used to. It does not know its
place. It did not just develop the Falcon 9: it made it reusable, which NASA
would never have dreamed of doing. And it has real plans to do things once
reserved for national programmes. Elon Musk, SpaceX’s founder and CEO,
says he wants to send uncrewed Starships to Mars within a few years, and
crewed ones soon after. Those plans far outstrip NASA’s.
The supporting-player-turned-star dynamic is clearly visible in the needless
complexity of the Artemis programme. Moon programmes, be they
American or Chinese, named after male gods or female ones, all have two
things in common: a crew capsule for getting people from the Earth to the
vicinity of the Moon and back; and a lunar lander that takes people from
that capsule down to the surface and back.
The genius of the Saturn V was that it was sized to carry a smallish capsule
and lander all in one flight. A model unveiled in February 2024 suggests
that China is planning two launches. One Long March 10 rocket (a souped-
up version of the already operational Long March 5) puts a single astronaut
into orbit around the Moon in a capsule called Mengzhou, (“Boat of
dreams”). A second Long March 10 then sends the lander Lanyue
(“Embracing the Moon”), to the surface of the Moon with two more people
on board. They spend six hours doing science, taking selfies and raising
flags before a part of the lander takes them up to dock with Mengzhou.
Then all three astronauts head back to Earth (see graphic).

With Artemis things are more complex, because NASA is using hardware
not specifically designed for the task: a capsule, Orion, which Lockheed has
been working on since the 2000s, and the rocket meant to launch it, the SLS
which Boeing and others have been working on since the 2010s. Both
programmes have gone well over schedule, and cost more than $20bn each,
though, thanks to a mixture of politics (big space programmes have strong
support from politicians from states where the money is spent) and the
sunk-cost fallacy, they are what Artemis must use.

Unfortunately, Orion is quite a large capsule, and though SLS can produce
tremendous power at launch, it is less effective thereafter. This means that
the SLS as currently configured cannot put Orion into the sort of low orbit
around the Moon that Apollo used and China is planning. Instead, Artemis
mission plans have Orion loitering in the Moon’s vicinity in a highly
elongated “near-rectilinear halo orbit” (NRHO). The good thing about an
NRHO is that you can get an Orion into one using an SLS. The bad thing is
that getting down to the Moon from one requires considerably more oomph
than getting down from a low orbit. So does getting back up.

The SLS cannot deliver a lander capable of such things to the halo orbit
chosen for Orion. So NASA put the problem of making up for the
deficiencies of its plan out to tender. It asked industry for a “Human
Landing System” (HLS) which could get from Earth to the halo orbit, down
to the Moon and back up again. The winning bid was SpaceX’s offer of a
modified Starship.
Long and winding road

The HLS starship will take the same approach to the Moon as Mr Musk
wants to take to Mars. First, SpaceX launches a Starship modified to serve
as a propellant depot. This will sit in low-Earth orbit where yet more
Starship launches, perhaps a dozen or so, will fill it up. Then another
Starship will take off and fill up its tanks. Fully fuelled, Starship has enough
oomph for a one-way mission to Mars—or, alternatively, for a trip to a lunar
NRHO, then on to the surface of the Moon and back up to the waiting
Orion (see graphic).
The only reason anyone has for thinking such a scheme might work is that
SpaceX has a truly remarkable record in terms of engineering. It is not hard
to believe that the company will, in time, build a fleet of Starships which
are fully reusable. Transferring large amounts of propellant between craft in
orbit is a new challenge, but surely not an unmeetable one. And the
company has already developed one life-support system, for Dragon: there
is no reason it should not, in time, develop a second capable of keeping the
Moon walkers on the Starship HLS alive for the duration of their flight and
lunar sojourn.

The idea that this will all be done in the next couple of years, though,
stretches credulity. In “Reentry”, his recent book about SpaceX, Eric
Berger, a journalist, talks about what the engineers there call Mr Musk’s
“green lights to Malibu” approach to timelines. In principle, if every light is
green and if you drive at 15 miles per hour over the speed limit, you could
get from the company’s former headquarters in Hawthorne to Malibu in
under half an hour. But because that never happens, you cannot. The first
flights of the crewed version of the Dragon, of the Falcon Heavy and of the
Starship all took place years after Mr Musk had said they would. Having
the Starship HLS ready to take part in Artemis III in 2026, as NASA claims
may happen, is green lights to Malibu and back over and over again.

Makes or Mars

When it finally happens, though, SpaceX will have versions of Starship

tailored for Mars ready, too; the Mars-bound version just has to combine the
landing-vertically-on-its-own legs capability needed for the HLS with the
thermal protection already needed by the everyday version of Starship (to
shield it from the heat generated by passage through a planetary
atmosphere). Once Mr Musk has a Mars-capable Starship he will use it at
the first opportunity. So by the time SpaceX has completed an uncrewed dry
run of an Artemis landing there is every chance that it will also have sent a
number of uncrewed Starships off to Mars. The odds are even better that
this will impress people more. With good reason: SpaceX will be showing it
can do things NASA pretty much can’t.
For America and for Mr Musk, to the extent that their interests align, that
looks great. For NASA it does not. In the 1960s landing on the Moon was
not an end in itself. It was the means to something else: a challenge, in
Kennedy’s words, “to organise and measure the best of our energies and
skills”. The engineers at SpaceX demonstrate America still has remarkable
energies and skills; NASA’s Artemis programme is neither organising them
well nor discovering the best they can offer. ■

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Life finds a way

Tubeworms live beneath the

planetary crust around deep-sea
vents
The conditions are hot, sulphurous and low in oxygen
10月 17, 2024 07:30 上午

HYDROTHERMAL VENTS are the planet’s exhaust pipes. Kilometres

below the ocean surface, they relentlessly belch out searing hot water rife
with harsh chemicals from beneath Earth’s crust. When they were first
discovered in 1977, nobody expected these inhospitable sites to bear signs
of life. And yet, thriving alongside these vents were colonies of tubeworms,
mussels and clams entirely new to science. It is hard to think of an
environment that could be more hostile. Now, however, new work is
revealing evidence that these animals are raising their young in just such a
place: the fractured rocks underneath the vents themselves.

The tubeworms found at hydrothermal sites are unlike almost all other
animals on Earth, in that they do not consume other organisms for food.
Instead, they get essential nutrients from bacteria that live within them.
These bacteria, in turn, live off the chemicals released by the vents. This
unorthodox lifestyle (known as chemoautotrophy) results in tubeworms
having neither mouths nor guts.

Tubeworms have an additional idiosyncrasy. For years it was assumed that

they were distributing themselves to new vents by releasing their larvae into
ocean currents that would sweep them away to locations new. The problem
with this theory, however, is that tubeworm larvae have never been detected
in open water. Aware of this, Sabine Gollner at the Royal Netherlands
Institute for Sea Research and Monika Bright at the University of Vienna
wondered if the larvae might, instead, be going underground. It was a
radical notion which required a radical test: breaking open the crust beneath
a hydrothermal vent.

Working with a team of marine biologists and deep-sea technical experts,

Drs Gollner and Bright headed out to the volcanically active East Pacific
Rise, far to the west of South America. Working from the research vessel
Falkor Too, the team sent a remotely operated vehicle (ROV) down 2,500
metres to a hydrothermal site known as Fava Flow Suburbs, where
chemoautotrophic worms abound, to investigate the crust.

Drs Gollner and Bright report in Nature Communications this week that the
area below the vent crust was teeming with a variety of complex animals,
not only the hardy bacteria and viruses they had expected to find. They
found carnivorous polychaete worms and heat-tolerant limpets that seem to
have slipped between the cracks in the seafloor to colonise the cavities
underneath. There were also tubeworms.

Although the team did not find tubeworm larvae, the adult worms they
found beneath the crust were living in clusters of individuals of the same
size, and therefore age. This suggests they were drawn into the cavities by
cool water currents as groups of larvae before settling down when the
temperature and chemical conditions are right. Precisely what those
conditions might be remains unclear, but measurements collected by the
ROV indicated that the cavities boast sulphide concentrations that are much
higher (and more toxic) than those above the crust, oxygen levels that are
much lower than those above and temperatures of around 25°C (well above
the 2°C of the ocean floor).

The discovery reveals that the strange ecosystems documented around vents
are by no means limited to the surface of the ocean crust. As Dr Gollner
aptly puts it, “The study of subseafloor animal life has only just begun.” ■

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Forget about Mars

Could life exist on one of Jupiter’s

moons?
A spacecraft heading to Europa is designed to find out
10月 17, 2024 07:30 上午

BESIDES EARTH itself, Mars is the most-studied planet in the solar

system. One reason for the abundance of probes and landers, of course, is
that Mars is relatively close. Another is that Mars appears to have once had
plenty of liquid water on its surface. And where there is water,
astrobiologists whisper about the possibility of life.

But Mars and Earth are not the only places in the solar system that either
have, or have had, water. On October 14th a NASA probe called Europa
Clipper blasted off from Florida. As its name suggests, the mission’s target
is Europa, one of the biggest of Jupiter’s 95 known moons.
Europa is a snowball slightly smaller than Earth’s moon. It has an
atmosphere that is thin to the point of non-existence, a crust of water ice
and a surface temperature of around -180°C. But scientists think a vast
ocean exists beneath the ice, kept liquid by friction produced as Europa is
kneaded by Jupiter’s powerful gravity. Over the past few decades scientists
have become steadily more excited about the life-bearing potential of such
“icy moons”. Besides Europa, these include Ganymede and Callisto, two
other Jovian moons; Enceladus, which orbits Saturn; and Triton, the biggest
satellite of Neptune.

Europa’s icy crust is thought to be tens of kilometres thick. Europa Clipper

will, therefore, not be able to tell whether there actually are any aliens
swimming around in the depths. Instead, its job is to assess whether the
moon is the sort of place where life might plausibly arise. One of the
probe’s tasks will be to characterise the size and saltiness of the ocean.
NASA’s present best guess is that it varies from 60km to 150km deep. If
that is right, then, despite its small size, Europa would have about twice as
much liquid water as Earth does.

But although water is thought to be extremely useful (and possibly even

vital) to the development of life, it is not enough on its own. To qualify as
habitable, a world needs enough other elements to allow complex
chemistry. Besides the hydrogen and oxygen in water, a common shortlist
adds carbon, nitrogen, phosphorus and sulphur. All of these have already
been found on a different icy moon—Enceladus.

On Enceladus, plumes of ocean water jet out into space through cracks in
the crust. In 2008 Cassini, another American spacecraft, flew straight
through one of those plumes, discovering six of the elements on the
astrobiological list.

Whether such plumes exist on Europa is an open question, says Robert

Pappalardo, Europa Clipper’s chief scientist. Europa’s ice shell is much
thicker than Enceladus’s, he says, which makes it less likely that surface
cracks or fissures would reach all the way to the ocean. Some tantalising—
but uncertain—images from telescopes nevertheless show things that look
plume-like. But follow-up observations with the space-based James Webb
Space Telescope have so far failed to spot any.
If plumes do not exist, then Europa Clipper will have to content itself with
examining the moon’s surface. That surface is notably smooth and
relatively free from impact craters, which suggests it is regularly renewed
by processes a bit like plate tectonics on Earth. That, in turn, suggests that
chemicals that form on Europa’s surface might have a way down to the
ocean, and vice versa. Studying Europa’s surface may, therefore, give
valuable clues as to what lies beneath.

The final ingredient for a habitable world is a source of energy for life to
exploit. Whatever that might be on Europa—far from the Sun, and beneath
kilometres of ice—it will not be sunlight. That is a bit of a problem. On
Earth almost every living thing ultimately depends on photosynthesis for its
energy, including the rich ecosystems in the ocean depths, discovered in the
1980s and which helped the idea of life on Europa gain a foothold. Their
inhabitants do not benefit from sunlight directly, but their metabolisms are
powered by chemicals created in the photosynthesising, oxygen-rich surface
oceans far above.

There’s none of that on Europa. But there does not have to be. Some of the
microbes living in fissures in the earth’s sea bed make use of chemicals that
come entirely from below, rather than above. It is a scant source of energy,
but a real one. And Europa might offer much the same. Analysing Europa’s
surface chemistry may give clues as to whether something similar could, at
least in principle, be happening on its ocean floor.

Two come along at once

And Europa Clipper will not be the only probe hanging out at Jupiter. Last
year saw the launch of a European probe called the Jupiter Icy Moons
Explorer (JUICE). It will likewise examine Europa, as well as Callisto and
Ganymede, two other moons that are also thought to have oceans. The
vagaries of orbital mechanics mean that, despite its later departure, Europa
Clipper will arrive in 2030, a year before JUICE.

If the findings from the two missions are sufficiently exciting, then the next
step could be to send a lander. Scouting for landing sites on Europa is
another of Europa Clipper’s goals. But the probe will not be able to build a
perfect map of the moon’s surface. Jupiter’s powerful magnetic field
produces areas of intense radiation near the planet, enough to fry any
spacecraft that lingers too long. Europa Clipper will, instead, make 49
looping flybys, gathering as much data as possible each time before
retreating to a safe distance. The world’s alien-hunters will be hoping it
survives. ■

Correction (October 17th 2024): An earlier version of this piece gave the
wrong space agency credit for the Cassini mission. It also incorrectly
underplayed deep-sea life’s dependence on photosynthesis. We regret the
errors.
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Culture
Why the world is so animated about anime
Who are you calling cute? :: Japan’s cartoons have conquered its screens, and more

Is the deep ocean more magnificent than outer space?

The aquatic underworld :: Some writers who have ventured into the unknown claim so

Food lovers the world over are tickled by pickles

World in a dish :: On social media, preserved cucumbers are freshly trendy

In the second world war, some diplomacy was done

between the sheets
Sexual politics :: Pamela Churchill, daughter-in-law of the prime minister, ran an effective
charm offensive

How to analyse chance, ignorance and risk

Known unknowns :: An invaluable guide to thinking about uncertainty, from a master of the
craft

What don’t you know about your partner?

Wall of worry :: A German novelist, Bernhard Schlink, imagines a marriage’s, and his
country’s, secrets

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Who are you calling cute?

Why the world is so animated

about anime
Japan’s cartoons have conquered its screens, and more
10月 17, 2024 07:30 上午 | Tokyo

MOST ATHLETES raise their fists in triumph after a win. When Noah
Lyles, an American sprinter, won gold in the Olympics 100-metre race in
August, he held his hands out in front of him, wrists together and fingers
extended, as though getting ready to catch a large ball. The gesture may
have seemed odd, but fans of Japanese animation knew immediately that
Mr Lyles, an avowed fan of the genre, was making a reference to a popular
franchise, “Dragon Ball”.

Mr Lyles had more cause to celebrate on October 11th, with the release of a
new “Dragon Ball” series and video game (more than 70m people play a
mobile game from the franchise). So will Ishiba Shigeru, Japan’s new prime
minister, another fan. Once a domestically consumed niche product
“watched by people with no friends at school”, as one veteran producer
ruefully recalls, anime has become a global sensation. These days its export
value in Japan, alongside other content such as video games, is approaching
that of semiconductors or steel; it now claims more fans outside the country
than within it. Some estimate that around 800m people globally are
animated about anime.

Those unfamiliar with the genre often wonder what anime is. “Animation
created in Japan” is the simple definition offered by Rahul Purini, the head
of Crunchyroll, an anime-streaming service with around 130m users across
200 countries. But there is also an aesthetic connotation: anime is usually
hand-drawn and two-dimensional, unlike the photorealistic 3D animation
that has grown more common outside Japan. The characters often resemble
hyper-caffeinated Tintins, with unusually large, expressive eyes, small
noses, strange hair and easily decipherable emotions.

Anime tends to be set in non-specific places, such as vaguely European-

looking cities for some films by Miyazaki Hayao, Japan’s most acclaimed
creator. The setting makes it easy for non-Japanese audiences to relate; the
only barrier is language, and animation is more easily dubbed than live-
action films.

Recently anime has raced into people’s homes with Lyles-like speed. In
2023 Japan’s anime industry hit a record high, with revenues of ¥339bn
($2.3bn), up by nearly a quarter from a year earlier, according to Teikoku
Databank, a research firm. Anime now makes almost half its profits abroad.
Netflix’s anime titles had more than 1bn views across 190 countries last
year; the most popular included “Demon Slayer”, about an orphaned boy
who battles demons to avenge his family, and “My Happy Marriage”, about
a girl with magic powers who is underestimated by her in-laws.

Two factors help explain anime’s surging global popularity. The first is
streaming, which made anime easier to find and watch. Fans no longer have
to depend on the decisions of network programmers or wait a week for
another episode. They can binge, explore and discover on their own. Anime
viewership boomed during the pandemic, as the world sat at home in front
of screens for months. (The year 2020 was the first time anime made more
money outside Japan than within.) Since then viewership numbers have
continued rising in Japan and around the world. Increased demand is
producing increased supply. In 2023 anime studios licensed some 300
works in regions such as North America, South-East Asia and western
Europe.

Second, audiences have grown tired and suspicious of Hollywood’s neat

resolutions. As Susan Napier, a professor at Tufts University and expert on
anime, explains, “Technology hasn’t brought us the utopia we thought it
would, and the post-cold-war world has become more dangerous than we
imagined,” which makes happily-ever-after endings implausible. Anime is
willing to have heroes killed off and characters suffer huge loss. At the
same time, the protagonists are often cute and relatable. “It’s a dark world
out there,” Ms Napier says, so audiences “want that fluffy cuteness”.

Anime’s global growth has been made possible by its own evolution.
Japanese comic books and graphic novels, collectively known as “manga”,
have long provided the source material for anime. Unlike comic books in
Britain and America, manga are not primarily or even mostly for children.
Thousands of new manga are published every year, on virtually every
subject imaginable, from pornography to reflections on war, which gives
anime an inexhaustible range of sources.

About 30 years ago, studios started producing more anime aimed at girls,
such as “Sailor Moon”, which was less focused on fighting and robots and
more on storylines and magic. And as the fan base got older, creators began
making more sophisticated works, often with more adult themes. Mr
Miyazaki won an Oscar in 2003 for “Spirited Away”, a baroque, fantastical
story about a girl who rescues her parents.

Around that time “Dragon Ball” and “Pokémon” were engaging a new
generation of fans. Japan’s government noticed and eventually took action:
in 2013 it launched an initiative called “Cool Japan”, in which it invested
some ¥90bn to propel Japan’s creative industries abroad. It was a flop,
because of poorly chosen investments, but that has not stopped the
government from trying again: it wants to quadruple the value of Japan’s
content industry overseas by 2033.
The painstaking nature of hand-drawn, two-dimensional animation is
providing inspiration for creators outside Japan. Earlier this year, Usman
Riaz, a Pakistani director, released a 2D feature film with an anime-inspired
aesthetic called “The Glassworker”, animated entirely in Pakistan and
originally voiced in Urdu. And the forthcoming “Lord of the Rings” film,
“The War of the Rohirrim”, to be released in December, is in that same
style. It is directed by Kamiyama Kenji, who has spent his career working
on anime.

Other creators are taking that aesthetic in new directions. Netflix’s superb
“Blue Eye Samurai”, about a revenge-seeking young woman in Edo-period
Japan, won an Emmy for animation and was among the service’s ten most
popular shows in 50 countries following its premiere last year. Created by a
Japanese-American woman and her white American husband, its lavish
aesthetic and gore pay homage to directors such as Quentin Tarantino.

Yet appealing to anime fans need not entail animation: last year Netflix
launched a live-action show, “One Piece”, based on the popular manga of
the same name (the original show, launched in 1999, was one of anime’s
most popular brands ever, with over 1,100 episodes and 500m copies of the
manga books sold).

But for all the experimentation, traditional anime shows no signs of

flagging. “People are aware of a world that’s more amorphous and more
dangerous, [and have] less ability to believe in the happily ever after,” Ms
Napier of Tufts suggests. Bad news for the world, but good for Japanese
animators. ■

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The aquatic underworld

Is the deep ocean more magnificent

than outer space?
Some writers who have ventured into the unknown claim so
10月 17, 2024 07:30 上午

The Underworld. By Susan Casey. Doubleday; 352 pages; $32. Penguin;

£10.99

Sing Like Fish. By Amorina Kingdon. Crown; 336 pages; $30. Scribe;
£16.99

Playground. By Richard Powers. W.W. Norton; 400 pages; $29.99.

Hutchinson Heinemann; £20
MORE IS KNOWN about the surface of Mars than the floor of the ocean.
By one count America spends 150 times more on space exploration than
ocean research. Scientists have mapped almost every Martian crater but
only about 20% of the seabed. Yet interest in the ocean is growing. A trio of
new books plunges into the deep. They journey through the bioluminescent
realm of the twilight zone (between 200-1,000 metres) and into the murky
depths of the midnight zone (1,000-4,000 metres).

Susan Casey, a Canadian writer, ventures even further into the abyss. In
“The Underworld” she describes her trip to an underwater volcano off the
coast of Hawaii in 2021, alongside Victor Vescovo, an explorer. When the
deep-sea submersible parked 5,017 metres down, she found a world of
“languid beauty”. On the “pale gold” seabed were obsidian rocks with
“patches of neon-orange” and sea cucumbers grazing “like tiny translucent-
purple cows”. Mr Vescovo has previously explored the deepest part of the
Mariana Trench (nearly 11,000 metres down), where the water pressure is
so high it feels like 50 jumbo jets stacked on top of you.

Ms Casey’s book flows between descriptions of the deep and the history of
ocean exploration. In the 19th century scientists believed the abyss was
“azoic”, or lifeless. Then the HMS Challenger dredged up all manner of
exotic creatures on its trip around the world in the 1870s. Around 60 years
later William Beebe, an American naturalist, explored the Atlantic ocean in
a submersible and saw such strange beasts for himself.

For much of the 20th century oceanography flourished, popularised by

explorers such as Jacques Cousteau, who wrote that the deep was a “silent
world”. In truth it is remarkably noisy. “Sing Like Fish”, by Amorina
Kingdon, a science writer, is not as engrossing as Ms Casey’s book, but it
compiles remarkable facts about ocean noise. Readers learn that sound
travels four and a half times faster underwater than on land, and that fish
have the greatest variety of sound-producing organs of any vertebrate
group.

Sometimes fish are so noisy that they are heard above water. In the 1980s
houseboat owners in Sausalito, California, thought a loud hum was being
produced by a secret military experiment. In reality the sound was the
mating call of a male toadfish. Marine animals can be heard droning, but
humans also make plenty of noise in the ocean with industrial shipping and
other pursuits.

Though these books are awash with facts, both authors agree that humans
have barely skimmed the surface of sea exploration. To conjure the untold
magnificence of the underworld, Ms Casey uses imaginative, even literary,
language. She describes the ocean as a “haunted basement” filled with
“pulsing lights and phantasmagoric shapes”. This is similar to how Richard
Powers, a celebrated American novelist, evokes the deep in “Playground”,
his new novel. The abyss brims with “primordial life”, he writes; creatures
look as if they were “left behind from evolution’s oldest back alleys”.

“Playground” tells the story of a seasteading mission off the coast of

Makatea in French Polynesia. Mr Powers uses the atoll to anchor four
separate narratives in a style reminiscent of “The Overstory”, his Pulitzer-
prizewinning epic about trees. Although the book gets lost in a whirlpool of
big ideas, from immortality to artificial intelligence, it captures the majesty
of the deep. The most interesting character, Evelyne Beaulieu, based on
Sylvia Earle, one of the first female aquanauts, embarks on mesmerising
dives. Waves of lyrical description spill over lines as she is “swarmed by
the wildest assortment” of sea creatures. The novel transports readers to a
world as fascinating as it is forbidding. ■

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World in a dish

Food lovers the world over are

tickled by pickles
On social media, preserved cucumbers are freshly trendy
10月 17, 2024 07:30 上午

IN DAYS GONE by, the pickled cucumber—or gherkin, in British parlance

—had a humble role in food. It showed up ornamentally or in tiny, grease-
cutting portions on burgers and charcuterie boards. So limited were its uses
that jars would languish at the back of refrigerators for years.

Today, however, pickles are having a moment, as a new generation of

foodies has discovered their crunchy, tangy charms. On TikTok there are
some 315,000 posts with the tag #pickles—more than with #cucumber and
even #potatoes. Users film themselves trying dill, garlic, hot and sour
varieties. (The flavour changes depending on what herbs and spices are
used and whether the cucumber is soaked in vinegar or fermented in brine.)
A video showing the assembly of an assorted “pickle platter” has more than
50m views.

Some pair pickles with confectionery for a sweet-savoury morsel. The

chamoy pickle—a bright red, piquant iteration—has gone viral. Eaters
unconcerned about heartburn or tooth decay eat it with sour candy, fruit
strips, Cheetos and hot sauce. And recently Dua Lipa, a pop star, caused a
stir by stirring pickle and jalapeño juice into her Diet Coke.

Van Holten’s, an American firm, is Gen Z’s preferred pickle purveyor. Its
individually wrapped cucumbers are fun to tear open on camera. Last year
the company sold some 85m units, up from 70m in 2022. “Laid end-to-end
that would stretch from Miami to Seattle” four times over, says Eric Girard,
the head of sales and marketing.

Enthusiasts are producing pickles at home, too. During the pandemic more
people found time to experiment with pickling and fermenting. They found
cucumber pickles an easy thing to make and a versatile ingredient to cook
with. So strong is the interest that Grillo’s, another American brand,
recently released a recipe book dedicated to the pickle, spanning
condiments, cocktails and cakes.

The obsession is new, but the pickle’s history is long. Around 4,000 years
ago ancient Mesopotamians pickled vegetables; over the centuries pickle
fans have reportedly included Cleopatra, Christopher Columbus and
Napoleon Bonaparte.

Health concerns may be partly behind the current boom. George Rice of
Serious Pig, a British snack-maker, says people buy pickles because they
are low in calories. There is also “a lot of chat about gut health”, and
evidence suggests that fermented foods can strengthen the gastrointestinal
microbiome. Pickles made with a salt brine fit the wellness bill; those made
with vinegar do not, as vinegar is too acidic for the necessary bacteria.

Alan Kaufman says his shop in New York, The Pickle Guys, uses more than
1,000kg of cucumbers a week. Yet runners come for the flavoured, salty
liquid, as it replaces the electrolytes lost during exercise. Tempted to dust
off that jar in your fridge, chomp the contents—and pour yourself a cold
glass of pickle juice? ■

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Sexual politics

In the second world war, some

diplomacy was done between the
sheets
Pamela Churchill, daughter-in-law of the prime minister, ran an effective
charm offensive
10月 17, 2024 07:30 上午

Kingmaker. By Sonia Purnell. Viking; 528 pages; $35. Virago; £25

PERHAPS IT WAS the red hair, alabaster skin and the figure-hugging
couture, or her way of stroking an interlocutor’s forearm, just so, as he
talked. Or maybe it was her name. As the daughter-in-law of the prime
minister, Pamela Churchill enjoyed the mystique that comes with being
close to power. Flattered by her attention, powerful men became pliable.
That turned out to be a useful weapon during the second world war. The
minds and hearts of Americans needed to be won if the country was to offer
aid or join the fight. So while her oafish husband, Randolph, was posted far
away, Pamela was deployed by Winston and Clementine Churchill to do a
different kind of war work. She wined, dined and seduced in the name of
Britain’s battle against tyranny.

Sonia Purnell, a writer (who once contributed to The Economist), describes

Churchill’s unusual advocacy efforts in “Kingmaker”, an alluring new
biography. Churchill set to work in 1941, aged 20. Her first task was to
persuade Harry Hopkins, a grumpy, isolationist envoy, that Britain was
worth fighting for. His qualms were no match for Churchill’s wiles:
Hopkins soon convinced Franklin Roosevelt to help.

Next she romanced Averell Harriman, the man charged with overseeing the
Lend-Lease military-aid programme, which was distributing $42bn of food
and army supplies (around $900bn today). His friends were bemused by his
“unduly pro-British” turn. Then she courted Ed Murrow, a journalist whose
nightly dispatches about the “Nazi menace” were listened to by millions of
Americans. (He toyed with leaving his wife for the British beauty.)

Churchill “developed an astonishing collection of bedfellows”, Ms Purnell

writes, and “each one was a man with clout in the war effort.” She
approached her sexual liaisons like diplomatic negotiation. She knew, for
instance, how to identify a man’s ambitions and tailor her advance
accordingly. She intuited when to withhold information and when to give it,
but fostered an atmosphere where lovers felt they could speak freely. She
would relay the intelligence she collected to the prime minister over late-
night card games.

As a result, Pamela’s “pillow talk was reaching the ears of leaders and
influencing high-level policy on both sides of the Atlantic,” Ms Purnell
writes, winkingly suggesting that the idea of the “special relationship”
between America and Britain began “between the sheets of the Dorchester
Hotel”. After reading this book, few will disagree with her assessment that
Churchill should be regarded as “the most powerful courtesan in history”.
These sexual capers, taking place as bombs rained down on London, are a
romp to read. Churchill was only 25 when the war—and her disastrous
marriage to Randolph—ended. She made the most of her war stories when
gallivanting around New York or the Mediterranean. Subsequent lovers
included Gianni Agnelli (heir to the Fiat fortune), Élie de Rothschild (a
financier) and, it is implied, John F. Kennedy. (The Agnelli and Rothschild
families own stakes in The Economist.)

Yet the aim of “Kingmaker” is to portray Churchill as more than a

honeypot. The book is of two halves: one dedicated to her magnetism and
the other about how she used it to become a canny political operator. After
reuniting with and marrying Harriman in 1971, she set her sights on
Washington. She hosted donors and rising stars of the Democratic Party for
sumptuous events at home in Georgetown and raised six figures on average
each night.

At the same time, sensing that the Democrats needed new blood and ideas
in the wake of Ronald Reagan’s election in 1980, Churchill Harriman set up
a political-action committee (ostensibly run by husband and wife, but soon
christened “PamPAC”). She personally vetted candidates, assessed their
prospects and ruled on which should receive financial support. Among her
favourites were Joe Biden, Al Gore and John Kerry.

Perhaps the biggest beneficiary of her benevolence was Bill Clinton, who
had lost his seat as governor of Arkansas in 1980. He credited his ability to
win the presidency a little over a decade later “in no small measure” to her
support. He repaid her by making her ambassador to France, offering her
another act as a go-between with him and Jacques Chirac during the
Bosnian war. By then she had perfected the deft touch of a diplomat. ■

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Known unknowns

How to analyse chance, ignorance

and risk
An invaluable guide to thinking about uncertainty, from a master of the
craft
10月 17, 2024 07:30 上午

The Art of Uncertainty. By David Spiegelhalter. Pelican; 512 pages; £22.

To be published in America by W.W. Norton in March; $32.99

A HAZARD OF teaching mathematics rather than, say, history is that the

homework is a lot harder to come up with. After all, “was Henry VIII a
good king?” is a reasonable question to ask either a classroom of nine-year-
olds or a lecture theatre of postgraduates. But “solve this quadratic
equation” would leave the classroom nonplussed and the lecture theatre
unimpressed. Maths is learned by doing, and devising a problem that is easy
enough to be accessible, yet hard enough to be satisfying, is a devilish
problem itself.

Partly for this reason, books that successfully communicate how

mathematicians think, but are aimed at those not already in the tribe, are
both valuable and rare. Over the decades many eager students have
devoured Thomas Körner’s “The Pleasures of Counting” (1996) and Sir
Timothy Gowers’s “Mathematics: A Very Short Introduction” (2002). Now
Sir David Spiegelhalter, emeritus professor of statistics at the University of
Cambridge, has added to the genre with “The Art of Uncertainty”. His new
book will appeal to many more than just aspiring mathematicians, for its
topic is universal: how to analyse chance, ignorance and risk.

With the covid-19 pandemic so recently in the past, few will need
reminding of how vital such analysis can be. If a new virus is running
rampant and the majority of deaths are among those who have received an
even newer vaccine, is that evidence that the vaccination scheme is
harmful? (No. Those at highest risk were vaccinated first; with an imperfect
vaccine this group was always likely to have the most deaths.)

Yet the book finds space for lighter fare, too. How did Giacomo Casanova,
a notorious adventurer and lover in the 18th century, manage to design a
lottery that was guaranteed to make the French government money? How
much of top football teams’ performance comes down to luck rather than
skill? How certain are scientists about the value of physical constants like
the speed of light?

Professor Spiegelhalter’s exploration of such questions is delightful for

three reasons. First, he uses them to illuminate broader ideas about how
probability and statistics work. So a discussion of vaccine safety proceeds
to Bayes’s theorem, a procedure for refining one’s judgment of probabilities
as new evidence comes to light. Bayes’s theorem is crucial for everything
from the scientific method to evaluating legal evidence and progress in
artificial intelligence. The joy of Professor Spiegelhalter’s approach is that
he reaches this deep truth via nothing more than some intuitive assumptions
and (very) simple algebra. It is this sort of elegance that makes
mathematicians enjoy maths.
The second reason to read this book is the author’s fascinating
philosophical questioning. What, after all, does “probability” actually
mean? Is it a basic property of the world, or a mere expression of our
ignorance? When we talk about the probability of rolling a six on a dice, is
that the same concept as the probability of there being life on Mars? The
author’s personal view—that uncertainty is a subjective relationship
between observer and observed rather than a fundamental quantity—is a
welcome corrective for those who think of maths as a black-and-white
subject.

Most important, though, is Professor Spiegelhalter’s skill at communicating

these ideas. Much of probability and statistics can be highly
counterintuitive, and the maths underlying it is often fearsome. But this is
not a difficult book to read or understand. For that reason alone, it is a coup
—and, no doubt, a beacon for the author’s successors. ■

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Wall of worry

What don’t you know about your

partner?
A German novelist, Bernhard Schlink, imagines a marriage’s, and his
country’s, secrets
10月 17, 2024 07:30 上午

The Grand-daughter. By Bernhard Schlink. Translated by Charlotte

Collins. Weidenfeld & Nicolson; 336 pages; £20. To be published in
America by HarperVia in January; $28.99

BERNHARD SCHLINK is probably the world’s most famous living

German novelist. His book “The Reader” (1995), a harrowing tale of a
teenage boy’s affair with an older woman he later learns had been a
concentration-camp guard, sold millions of copies and spawned a
Hollywood adaptation with an Academy Award-winning performance from
Kate Winslet. Now Mr Schlink has turned his attention to a different
German catastrophe in the 20th century: its post-war cleavage and the
shadow it continues to cast over the country, 34 years after its halves were
reunified.

Like “The Reader”, which many felt was a literary expression of the
German process of Vergangenheitsbewältigung (coming to terms with the
past), “The Grand-daughter” serves as a parable of sorts. Kaspar, a cultured,
kindly bookseller, learns soon after Birgit, his alcoholic wife, dies, that he
understood far less about her than he had thought. His investigation into her
life in communist East Berlin reveals long-concealed secrets, including an
abandoned baby daughter. Like so many of her East German compatriots,
Birgit was never able to reconcile her past and present; she did not act on
her longing to find her daughter. Kaspar, grief-stricken but less burdened by
history, hopes for better luck.

The gulf of misunderstanding between this Ossi and Wessi couple will
resonate with Germans worried about their country’s enduring east-west
divide, as demonstrated in recent state elections. Yet Mr Schlink’s deft
touch—a zippy plot, richly painted characters—keeps his tale from being
overwhelmed by history.

He skilfully renders long-forgotten events like the Germany Youth Meeting

in East Berlin in 1964, an optimistic attempt to help students from West and
East Berlin find common ideological ground. (Much of this material is
based on Mr Schlink’s own experiences as a West German student.) As in
“The Reader”, few characters escape the burden of secrets and lies: theirs
and others’.

Kaspar eventually finds Birgit’s daughter, Svenja, living in a forgotten part

of East Germany and married to a thuggish adherent of a far-right völkisch
ideology. The couple is interested only in Kaspar’s money, but he is able to
form a bond with their adolescent daughter, Sigrun, who begins to spend
time with him in Berlin. Kaspar’s quiet attempts to wean Sigrun (who keeps
a photo of Rudolf Hess, a Nazi politician, in her bedroom) from the toxic
worldview of her parents form the crux of the book. The novel’s description
of the peculiar rural milieu in which Sigrun has been raised is convincing;
Kaspar’s half-successful attempts to soothe her soul with Mozart, poetry
and chess perhaps less so.

If Kaspar’s well-meaning hopes for his grand-daughter never quite work

out, they do not leave her untouched. “It’s nice here with you. Even if it
always has to be your truth, and it’s never allowed to be mine,” Sigrun tells
Kaspar. She voices the ambiguous sentiment of countless East Germans left
disillusioned by a reunification they came to see as less a merger of equals
than a friendly takeover of East by West. ■

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The Economist reads

What to read about grief and bereavement
Six books about feelings that are both universal and unique to the person experiencing them

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The Economist reads

What to read about grief and

bereavement
Six books about feelings that are both universal and unique to the person
experiencing them
10月 17, 2024 07:30 上午

FEW EXPERIENCES are more solitary than grief. Each mourner knows
the loved one in a different way. No one feels the same pain or can predict
when they will feel it. Yet grief is also universal. As time goes by, more and
more absences populate everyone’s lives. Though inevitable, death—and
the emotions it elicits—typically comes as a shock to family and friends. In
different ways the writers of these six books, which include memoir, fiction
and reportage, evoke the experience of loss, from the earthquake of death to
the longer process of learning to live amid the rubble of memories.
Notes on Grief. By Chimamanda Ngozi Adichie. Knopf; 80 pages; $16.
HarperCollins; £10

Life in the 21st century is so far removed from the reality of death that
Chimamanda Ngozi Adichie finds herself full of rage at those who try to
sidestep its force. Writing in the days after her father’s unexpected collapse
in 2020, the novelist lashes out at the euphemisms people use, at those who
talk of his “demise” or refer to her father as “resting”. Mourners who
comment on his age—he was 88—provoke further ire: “At issue is not how
old he was but how loved.” Ms Adichie describes grief as a weight that the
living carry around; it causes her “to sink and sink”. She fears that, with her
father gone, knowledge of her family’s past, and her ancestry, will fade.
Only the longing will remain. “For the rest of my life,” she says, “I will live
with my hands outstretched for things that are no longer there.”

The Phone Box at the Edge of the World. By Laura Imai Messina.
Translated by Lucy Rand. The Overlook Press; 416 pages; $25. Bonnier
Books; £12.99

A giant earthquake and tsunami struck Japan in 2011, killing more than
18,000 people and leaving tens of thousands bereaved. Yet displays of
emotion are often frowned upon there. Some people in the hardest-hit
region, north-eastern Honshu, Japan’s main island, found an unusual outlet:
speaking to a loved one from a telephone box in a garden, the cable leading
nowhere. Laura Imai Messina’s novel is based on the real phenomenon of
the “wind telephone”. When so many people die at the same time, writes
Ms Messina, “everybody’s grief looked the same at first but was, ultimately,
unique.” At the centre of her large cast are a child who has been mute since
the waves swept her mother away, the child’s father and a bereaved woman
he meets at the telephone box. Separately, then together, they confront their
sorrow. Finally, the young girl picks up the receiver: “Mummy, it’s Hana.
Do you still remember me?” When she starts talking again she says “normal
things. Childish things, things that were just right for a girl her age”. The
message is clear: to live on is still to honour the dead.

Levels of Life. By Julian Barnes. Vintage; 144 pages; $18 and £9.99
Few contemporary authors chronicle love so beautifully as does Julian
Barnes, so it is little surprise that he writes masterfully about grief, love’s
dark companion. The novelist says that he used to imagine, and even
welcome, the idea of growing old with his wife, Pat Kavanagh, a literary
agent. The discovery that she had a brain tumour destroyed the anticipated
slowing and calming of their life. From “a summer to an autumn, there was
anxiety, alarm, fear, terror”. After nearly 30 years of marriage, diagnosis to
death took 37 days. No one can prepare for such a blow, writes Mr Barnes,
nor for the world’s indifference to it. Yet suffering is also a comfort. “Pain
is a proof of love,” he says. Several times he quotes a letter from a friend:
“It hurts exactly as much as it is worth.” Even after considerable time has
passed, everything he does or might achieve is thinner, weaker and matters
less. “The fact that someone is dead may mean that they are not alive, but
doesn’t mean that they do not exist.”

Utopia and Other Places. By Richard Eyre. Bloomsbury; 210 pages;

£12.99

Not everyone has the blessing of feeling untainted sadness after a death.
“Our parents cast long shadows over our lives,” reads the opening line of
Richard Eyre’s memoir. Many people would pick up this book to read about
his long career as a theatre director, yet the heart of this story is an almost
universal reckoning. “We try all our lives to separate ourselves from [our
parents],” Mr Eyre writes, “and only when they are dead do we find we are
indivisible.” Unlike fiction, which has shape and coherence, “life is all
loose ends.” His mother’s dementia brought that home to him. His grief
began even as she lived: “Little by little she was slipping away, and we
never knew when to say goodbye.” Mr Eyre is honest about the layers of
guilt, anger and regret that overlay his relationship with his parents. What
he did not expect was for those feelings to outlive them. “I had my freedom
now,” he writes after his father’s death. “All I wanted was his love.”

Where Reasons End. By Yiyun Li. Random House; 192 pages; $17.
Penguin; £9.99

“Where Reasons End” is a series of conversations between a mother and

her dead son. Behind the fictional dialogue is real-world horror: Yiyun Li
wrote the book soon after her teenager committed suicide in 2017. “How
have I lived so blindly and deafly?” the fictional mother asks at one point.
She is referring to how she apprehended the clamour of a busy New York,
but her implication is clear. The arguments she has with her imagined son—
about adverbs, about friends, about baking—are a quest to understand why
he ended his life. As is true for any bereaved person, the only thing worse
than hearing the voice of her deceased loved one is when he falls silent: “Is
that how any person loses any person,” she asks. The two often talk about
writing, both his and hers. “I will be sad forever,” she says. He replies, “I
thought you said you took forever out of your dictionary.” Her response is a
dagger: “You put it back for me.” Yet, even though she is an author,
language can let her down. “What do you call a parent who’s lost a child, a
sibling who’s lost a sibling, a friend who’s lost a friend?” Ms Li asks.
Sometimes there are no words.

Immortality: The Quest to Live Forever and How it Drives Civilisation.

By Stephen Cave. Crown; 336 pages; $25. Biteback; £20

Even though they know that the body fails, most people find it “literally
inconceivable” that they or their loved ones will one day cease to live,
writes Stephen Cave in “Immortality”. Every society conjures stories and
belief systems to distance itself from that reality. Part history, part
philosophical text, this book uses four broad themes to show how the quest
for immortality has succoured civilisation: resurrection of the body, the
immortal soul, living forever and establishing a legacy. As religion has
receded from the forefront of many people’s lives, that final coping
mechanism—the search for lasting fame through celebrity, feats of
discovery or heroic deeds—now dominates the drive for immortality, Mr
Cave argues. (He also notes the persistence of niche, but powerful, projects
to prolong life indefinitely.) Even the wish to have children comes in part
from a desire to cheat death. The book concludes with a plea to consider
how endless, exhausting and dull eternity might really be. Mr Cave calls on
readers to revel instead in the fragility and finitude of life and love.
Everyone, he says, needs a deadline.

Also try
What does a person leave behind when they die? Some bequeath a lot of
junk, as one Economist correspondent discovers in this podcast. Some
grievers find solace not in material goods but in syncopated pop music.
Though it is always hard to say goodbye, the way people do it around the
world says as much about those left behind as about those who have died.
In Britain funerals have changed in line with social mores, particularly
when it comes to burying a public figure like the queen. Yet it can be hard
to grieve when many others are doing so, as one reporter found after the
tsunami in Japan. Even ten years on, the pain persists. Small wonder that
some people want to live forever.■
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Economic & financial indicators

Economic data, commodities and markets
Indicators ::

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Indicators

Economic data, commodities and

markets
10月 17, 2024 07:30 上午
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financial-indicators/2024/10/17/economic-data-commodities-and-markets

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Obituary
Sammy Basso led research into his own rare disease
The boy who aged too fast :: The Italian biologist and longest-lived progeria patient died on
October 5th, aged 28

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The boy who aged too fast

Sammy Basso led research into his

own rare disease
The Italian biologist and longest-lived progeria patient died on October
5th, aged 28
10月 17, 2024 07:30 上午

LIKE ANY 18-year-old, Sammy Basso had grand ideas for the summer he
left high school. They involved friends, beer, beaches, good books, and
definitely no work. Just one great big relax. His parents, however, seemed
to have other plans. Maybe, knowing his horror of needles and puncturing,
they had enrolled him in a sewing course? Or did they mean to put him on a
strict vegetarian diet, a centrifuge of aubergines? The truth astonished him.
They were all going to America, and on the ultimate road trip, east-west
along Route 66 from Chicago to Los Angeles.
America had been his dream since childhood, when he drifted asleep to his
father’s reading of Jack London’s “White Fang”. His mind was filled with
primal forests and frozen streams in the hard, sad landscape of the
Klondike: wild, unexplored horizons, in contrast to the relatively tame
Veneto where he lived. Now he was actually going there. His don’t-forget
list for the trip, as he retailed it afterwards in “Sammy’s Journey”, was
underpants, a Yoda mask, an inflatable mattress for stone-hard motel beds, a
Hawaiian shirt for Los Angeles. Oh, and farmaci—his medications. Sadly.

He never made much of those. His life, he insisted, was normal, and most
of the time he went through it with the broadest smile and a high, sweet
laugh. True, he had puzzled doctors since birth as to why, at six months, he
had more or less stopped growing. The diagnosis of progeria, premature
ageing, came when he was two. The cause was a mutation in a single gene,
which led to a build-up of a toxic protein in the nucleii of cells. There was
nothing to be done about it, no cure. He had an ordinary boy’s football-mad
brain, but the body of a wizened old man. He never grew taller than 1.4
metres or heavier than 20 kilograms (though that was an ideal mascot size).
Twice a week from childhood he went to Mauro, his physiotherapist, to
have his joints manipulated to stop them stiffening, and Mauro devised a
sort of orthopedic heel so that he could walk, if still not far. Mauro called
him his terracotta vase, because his bones were so fragile. He also once hid
him in his gym bag to give Sammy’s mother a shock.

The American trip was a wonder. Sammy sang in a gospel choir, floating
afterwards on a cloud of beatitude. He threw out the first ball at a baseball
game and dined in St Louis on the tastiest ribs in the entire solar system.
The mayor of Pontiac, Michigan, laid on a show for him. He toured
Monument Valley in a minivan and on his father’s shoulders. The best
moment came in Roswell, New Mexico, where a UFO was said to have
crashed in 1947. There he bought a pair of slanty-eyed, green-rimmed alien
sunglasses, went to the museum, and stood with the mannequin aliens in
front of a smoke-wreathed mock-up of their craft. As a woman visitor
passed he asked her, in broad Venetian, “Have you by any chance seen my
spaceship? I swear I parked it round here somewhere...”
He made a perfect alien. That was fun at Halloween too, when he lurked by
friends’ houses to hand out sweets. Little children loved his huge cranial
cap and his hooked nose, like a beak. But it was difficult to be so noticed
and be normal, let alone happy. The unstinting love of family, friends and
neighbours could not entirely suppress the battle inside himself. Sad
Sammy said, “Why did God make me this way? Why am I suffering like
this?” Glad Sammy said, “There must be a reason. Maybe it’s a gift. Maybe
I should thank both God and progeria.” He wore the tau of St Francis round
his neck to remind himself of the saint’s simplicity, humility and fever to be
useful.

The gift he could offer was his mind, which was unaffected by progeria.
Indeed, it did him proud. At five, when he first noticed the passion of
medical researchers, he decided that would be his career. In 2005, when he
was nine, he and his parents founded the Italian Progeria Association
Sammy Basso, to make the disease better known and to raise money for
research. He followed his love of science as far as a degree in natural
sciences (the crimson envelope almost as big as himself) and a second
degree in molecular biology, with both his theses focused on progeria. A
doctorate was looming too, but by then he was so busy campaigning about
his disease that he did not have the time.

From the age of 12 he also volunteered as a guinea pig for new treatments.
He did it gladly, though also stricken by the knowledge that he was useful
only because he would soon die. On average, progeria patients died at 14.
The first drug to be approved, which slowed the build-up of the toxic
protein, probably doubled his lifespan. Unfortunately, it meant more
needles. The research that most excited him was base-editing, replacing the
faulty gene with the correct one, and here he led the debate, conferring each
Monday at 10pm with scientists in America.

Around that central focus his life was a whirl of activity. Despite the
laborious planning and preparation, he always preferred to hit the party
scene with friends rather than stay at home. (Besides, a doctor once told
him that red wine would strengthen his heart.) Whenever his Sammy
Runners took to the road, raising funds for his association, he went with
them, pushed in a little cart. He travelled as far as China to meet other
victims of progeria. There were lectures, videos and interviews. One day
Pope Francis called him, a huge moment. He liked to imagine the pontiff,
cornetta in one hand and pen in the other, jotting a note to “call Sammy
Basso before dinner.” Fame was great; it helped keep progeria in the
spotlight, in the quirky person of himself.

His dreams never stopped, either. His favourite science subject at school
was physics, rather than biology, because it got to the very heart of matter.
Perhaps one day, he thought, he would work at CERN in Geneva. In his
20s, too, he still hoped to be a particle physicist. Somewhere in that
extraordinary quantum world a clue to a cure might be flickering, waiting.
■
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