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China's other debt problem 

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The welcome spread of the right to die 

NOVEMBER 13TH-19TH 2021 

Putin’s new era of repression 



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The Economist November 13th 2021 

On the cover 

Vladimir Putin’s new era of 
repression will lead to 
confrontation with the West: 
leader, page 15. Russia has 
shifted from autocracy to 
dictatorship: briefing, page 28 

China's other debt problem 
Evergrande is not the only 
looming danger in the 
mainland's financial system: 
leader, page 18. The government 
sets its sights on sleazy ties 
between businesses and banks, 
page 73 

Nuclear power: safe and 
essential It makes fighting 
climate change a lot easier, 
leader, page 20. Rolls-Royce and 
the British government are 
betting that small reactors can 
fix the industry’s tricky 
economics, page 59. Will the 
climate crisis force America to 
reconsider nuclear power? 
Page 36 

Biden's inflation headache 
A broad pickup in prices puts 
pressure on the Fed to raise 
rates, page 75 

The right to die Assisted dying is 

Spreading, but too many are still 
denied this basic freedom: 
leader, page 76. Inthe West the 
right to die is rapidly becoming 
legal and accepted, page 62 

> The digital element of your 
subscription means that you 
can search our archive, read 
all of our daily journalism and 
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stories. Visit 









The world this week 

A summary of political 
and business news 


Putin’s repression 

The end of life 
Deciding on death 
Financial contagion 
China’s other problem 

War, drought, famine 

Nuclear power 
Discreet charm 


On economics, Balkan 
bridges, Shakespeare, 
mission statements, 
hydrogen, Facebook, 
French, Polexit 


Russian repression 
Manacled in Moscow 


Bartleby The demands on 
chief executives require 
them to be weird, page 67 





United States 

The southern border 
Infrastructure year 
Durham’s indictments 
Necessary nuclear power 
Lexington Hispanic 

The Americas 
Venezuela’s autocrat... 
..and Nicaragua’s 
Bello Brazil’s economy 

South Korean industry 

Education in Bangladesh... 

..and in Pakistan 
Myanmar’s collaborators 

Banyan The great board 

State-sponsored hacking 

The prison lives of Hong 
Kong’s dissidents 

Chaguan Why aim for 
ZeTO COvid? 

Middle East & Africa 
Vision 2030 at five 

Sex and hotels in Morocco 

Iran’s weapon of choice 
Rebels in Congo 
Liberia’s quest for justice 

»» Contents continues overleaf 

S B@eleie 

55 Train troubles 
56 The Belarus-Poland border 
57 Covid-19 
57 Turkey's banana spat 

58 Charlemagne A fight over 
minimum wages 

59 Small nuclear reactors 
60 Going green, at a price 

61 Bagehot Brexiteers’ 
paranoid triumphalism 


62 The rapid spread of 
assisted dying 

65 Hollywood's talent wars 
66 Hot commercial property 
67 Bartleby Weird bosses 
68 Zero covid in China 
69 General Electric breaks up 
69 Strife at Volkswagen 
70 The corporate metaverse 

72 Schumpeter The flywheel 

[ the F 

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The Economist November 13th 2021 

Finance & economics 
China’s tycoon banks 
Crypto’s funding craze 
America’s inflation shock 
Debt-for-nature swaps 

Buttonwood The appeal 
of cash 

Free exchange Lessons 
from Zillow 

Science & technology 
Diagnosing dementia 
Those climate goals 
Plastics and pathogens 
Better blackcurrants 
New covid-19 treatments 

Books & arts 

Dirty money 


The cold war on the couch 
An art collection opens up 

Economic & financial indicators 
Statistics on 42 economies 

Graphic detail 
Twitter's algorithm favours conservatives 

Aaron Beck, the man who revolutionised psychiatry 



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The world this week Politics 

As delegates haggled over the 
final drafts at the UN COP26 
climate-change summit in 
Glasgow, America and China 
issued a joint declaration to 
work together to reduce 
emissions. The two countries 
said they were committed to 
keeping the increase in Earth’s 
mean surface temperature to 
“well below” 2°C compared 
with pre-industrial levels. 
China said it would come up 
with a national plan to curb 
methane emissions. Time will 
tell whether their statement 
was diplomatic showboating 
or the start of something more 

Belarus kept dumping mi- 
grants at the border with Po- 
land and barring them at gun- 
point from retreating. It has 
been luring them onto flights 
from the Middle East with false 
promises of easy passage to the 
European Union. The migrants 
cannot enter Poland, and with 
winter coming, may soon 
freeze. The despotic regime of 
Alexander Lukashenko appar- 
ently hopes to cause another 
political crisis in the EU about 
refugees. Poland has sent 
15,000 troops to the area. 

The British government 
announced that National 
Health Service frontline staff 
in England will need to be 
vaccinated against covid-19 by 
April ist. The latest govern- 
ment data show that10% of all 
NHS employees are not fully 
jabbed. This week was the 
deadline for care staff to meet 
the requirement; arounda 
quarter of those workers have 
not received their full dose. 

The White House urged large 
companies to press ahead with 
plans to ensure their staff are 
vaccinated by early January, 

after a federal appeals court 
temporarily suspended Joe 
Biden's vaccine mandate. The 
court said it had “grave 
statutory and constitutional” 
concerns about the order. The 
government asked it to reverse 
its decision. 

Mr Biden was able to claima 
big victory when the House of 
Representatives at last passed 
his $1trn infrastructure bill. 
The bill had seemed in peril 
when left-wing Democrats 
insisted that welfare legisla- 
tion should come up fora vote 
at the same time. 

It'll still be there 

NASA pushed back its planned 
mission to land astronauts on 
the Moon, its first since 1972, 
by at least a year, to 2025. A 
lawsuit brought by Jeff Bezos’s 
Blue Origin over the contract 
awarded to SpaceX to build the 
Moon lander was one reason 
for the delay (a judge recently 
dismissed the suit). 

Daniel Ortega, the authoritar- 
ian president of Nicaragua, 
won a fourth consecutive 
term. Joe Biden called the 
election a “pantomime”. Over 
the past six months Mr Ortega 
has imprisoned some of his 
potential opponents and 
forced others to flee. Many 
hundreds of ordinary people 
who have protested against his 
regime in the past remain 
behind bars. 

Chile’s Chamber of Deputies 
approved impeachment pro- 
ceedings against Sebastian 
Pinera, after leaked documents 
raised more questions about a 
mining deal that the presi- 
dent’s family signed during his 
first term in 2010 (he denies 
wrongdoing). But the opposi- 
tion will struggle to obtain the 
two-thirds majority needed to 
impeach Mr Pifiera formally in 
the Senate. 

The Central Committee of 
China’s Communist Party held 
an annual meeting at which 
delegates discussed a resolu- 
tion on the party’s history, the 
first of its kind in 40 years. It 
appeared to be aimed at justi- 

fying an extension of X1 
Jinping’s rule beyond a party 
congress in 2022. 

America urged China to re- 
lease Zhang Zhan, a citizen 
journalist who was sentenced 
to four years in prison for her 
reporting on the early days of 
the covid-19 pandemic in 
Wuhan. The government 
continued to battle a new 
outbreak of the disease that 
began in mid-October and has 
caused hundreds of infections. 

Thailand’s constitutional 
court ruled that three activists 
who called for reforms to the 
country’s monarchy during 
protests last year were guilty of 
attempting to overthrow the 
king. The court focused on 
whether the speeches were 
constitutional, so no penalty 
was imposed, but the ruling 
will stifle debate about the 
monarchy’s role. 

The Duterte dynasty 

Sara Duterte, the daughter of 
Rodrigo Duterte, president of 
the Philippines, withdrew her 
candidacy for re-election as 
mayor of Davao City, kindling 
speculation that she intends to 
run for a national post in the 
presidential election next year. 
Her father will have served the 
full presidential term allowed. 

Mustafa al-Kadhimi, the prime 
minister of Iraq, was the target 
of an assassination attempt. 
The attack reportedly involved 
drones, one of which reached 
Mr Kadhimi’s home. He was 
unharmed, though six of his 
guards were wounded. Suspi- 
cion has fallen on Iranian- 
backed militias. 

Iran’s top nuclear negotiator, 
Ali Bagheri-Kani, visited Euro- 
pean capitals ahead of talks 
with America and European 
powers aimed at resurrecting 
the nuclear deal that Iran 
signed in 2015. Mr Bagheri- 
Kani seemed to rule out any 
discussion of Iran’s nuclear 
activity at the talks, and said 
that instead they should focus 
on lifting sanctions. America, 
which walked away from the 
deal in 2018, disagrees. 

The Economist November 13th 2021 13 

Coronavirus data 

To 6am GMT November 11th 2021 

Weekly confirmed cases by area, m 

United States | Asia 

Europe | iy ve 

190° 2021 

Estimated global excess deaths, m 
With 95% confidence interval 
17.1 ies 


—— = 5.1m official covid-19 deaths 

Vaccine doses given per 100 people 
By country-income group 

Low income 7 
Lower-middle 62 
Upper-middle 135 
High income 142 

Sources: Johns Hopkins University CSSE; 
Our World in Data; UN; World Bank; 
The Economist’s excess-deaths model 

> For our latest coverage 
please visit 

France formally handed back 
to Benin 26 precious arte- 
facts, including statues anda 
royal throne, that it had taken 
when it colonised the west 
African country in the late 
19th century. Other former 
colonial powers are also 
under pressure to return 
looted items. These include 
Britain, which holds more 
than 900 “Benin bronzes” that 
were taken from Nigeria. 

A South African court said 
that Manuel Chang, Mozam- 
bique’s former finance 
minister, could be extradited 
to America. He faces charges 
there related to kickbacks 
from loans that funded, 
among other things, a tuna- 
fishing firm. 

F.W. de Klerk, the last white 
president of apartheid South 
Africa, died at the age of 85. 
He once said that he should 
not be given the honour of 
ending apartheid, though Mr 
de Klerk was instrumental in 
laying the ground for Nelson 
Mandela's release and the 
subsequent transfer of power. 


The world this week Business 

After years of complaints from 
investors that its sprawling 
empire of businesses was 
hindering profits, General 
Electric decided to split into 
three, independently run 
companies. Its health-care 
assets will be spun off in 2023; 
energy and power will be 
rolled into one and spun off in 
2024; and aviation is to remain 
the sole focus of today’s GE. 
The conglomerate has been 
shedding businesses for over a 
decade. The decision to split 
heralds the end of arguably the 
world’s best-known conglom- 
erate, a titan of American 
business throughout the 2oth 

On the road 

Rivian, a maker of electric 
vehicles backed by Amazon, 
had a successful stockmarket 
debut on the Nasdaaq. Its stock 
rose by 30% above the offer 
price, giving ita market capi- 
talisation of over $100bn, more 
than either Ford or General 
Motors. The company raised 
around $12bn, making it the 
biggest IPO in America since 
Alibaba’s listing in 2014. 

At the opposite end of the 
motoring business, Hertz’s 
share price fell by 10% on its 
first day on the stockmarket 
since the company emerged 
from bankruptcy. 

The European Union’s General 
Court, the lower tribunal of the 
Court of Justice, dismissed 
Google’s appeal against the 
€2.4bn ($2.8bn) fine that the 
European Commission im- 
posed on the company in 2017 
for anti-competitive practices 
that favoured its own compari- 
son-shopping service. In the 
one ray of light for Google, 
which is also appealing against 
two other blockbuster anti- 
trust fines in Europe, the court 
said that general search is not 
included in its ruling. 

Rolls-Royce said it had re- 
ceived enough investment 
from private partners to start 
building small modular re- 
actors, or small nuclear power 
stations, in Britain. The gov- 
ernment is contributing to- 

wards the project as part of its 
“green industrial revolution”. 

Britain’s economic growth 
rate slowed in the third quar- 
ter, to1.3%. As in other coun- 
tries, supply-chain problems 
are hindering the recovery. 
GDP is still 2.1% smaller than in 
the final three months of 2019. 

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US petrol prices 
$ per gallon 






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Source: EIA 

Oil prices climbed higher, 
with Brent crude once again 
over $85 a barrel. In America 
the price of petrol at the pump 
hit an average seven-year high 
of $3.41a gallon. California 
remains the most expensive 
State in which to fill your car, 
with petrol averaging $4.64 a 
gallon, according to the Amer- 
ican Automobile Association. 

The price of fuel is a big factor 
behind America’s surging 
inflation. The annual rise in 
the government’s consumer- 
price index leapt to 6.2% in 
October, up from 5.4% in 

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September, the largest jump 
Since late 1990. Stubborn 
inflation is putting pressure 
on the Federal Reserve to bring 
forward an interest-rate rise. 

Government relief 
Meanwhile, the pace of hiring 
picked up in America, with 
employers creating 531,000 
jobs in October. That is closer 
to the monthly average for this 
year and comes after two 
months of lower-than-expect- 
ed jobs growth. 

The board of Sydney Airport 
agreed to a A$23.6bn ($17.5bn) 
buy-out from a consortium of 
investors. The deal comes 
amid a sense in the aviation 
industry that business is really 
taking off following 20 months 
of pandemic gloom. America 
reopened its borders to most 
travellers this week. Emirates, 
one of the world’s biggest 
airlines, reported that pas- 
senger numbers were up by 
319% from April ist to Septem- 
ber 30th, year on year, though 
it still made a net loss in the 
first six months of this year. 

Aftera little overa yearasa 
publicly listed company, 
McAfee agreed to a buy-out 
from a consortium of private- 
equity firms, ina deal worth 
$14bn. The computing-securi- 



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The Economist November 13th 2021 

ty company is to refocus en- 
tirely on the consumer market, 
having sold its enterprise 
business in July. 

Consumers’ voracious appetite 
for ordering grub from home is 
feeding a wave of consolida- 
tion in the sector. This week 
DoorDash, America’s largest 
food-delivery platform, agreed 
to buy Wolt, based in Helsinki 
and with operations in 23 
countries, for €7bn ($8bn). 

Viasat, a satellite company 
based in California, is to take 
over Inmarsat, a British rival 
that counts the American 
armed forces among its cus- 
tomers, in a $7.3bn transac- 
tion. The combined company 
will compete in the increas- 
ingly crowded space for pro- 
viding satellite broadband. 

Markets were once again left 
scratching their heads about 
the motives behind Elon 
Musk’s latest stunt, when he 
asked his Twitter followers 
whether he should sell 10% of 
his stake in Tesla to pay tax, in 
a dig ata Democratic proposal 
to tax unrealised capital gains. 
They said yes. Tesla’s share 
price swooned. Mr Musk then 
Started selling stock. He had 
planned to sell at least some of 
his shares before seeking 
advice from the Twitterati. 



Putin’s new era of repression 

It will lead to more confrontation with the West 

NDREI SAKHAROV, a Soviet dissident and physicist, used to 
Aareue that repression at home invariably becomes instabil- 
ity abroad. His own life was evidence of it. His internal exile was 
lifted in 1986 by Mikhail Gorbachev, the Soviet Union’s last lead- 
er, who as the architect of glasnost released political prisoners 
and tolerated free speech. It was no accident that Mr Gorbachev's 
rejection of repression coincided with the end of the cold war. 

Today Sakharov’s thesis is being demonstrated once again— 
in reverse. According to Memorial, a human-rights group, Rus- 
Sia has more than twice as many political prisoners than at the 
end of the Soviet era. Memorial, which Sakharov helped set up to 
document Soviet abuses, has itself been branded a “foreign 
agent” and attacked by state-sponsored thugs (see Briefing). 

At the same time, Russia's relations with the West have also 
entered a dark period. In order to justify repression at home, 
President Vladimir Putin is telling his people that Western pol- 
icy is designed to obliterate the Russian way of life. Mr Putin 
now builds in cold-war confrontation to his dealings with the 
West. Its leaders need to prepare for what comes next. 

The latest phase of repression began in 2020 with the poison- 
ing of Alexei Navalny, Russia’s most famous political prisoner, 
and winner last month of the European Parliament’s Sakharov 
prize for freedom of thought. Mr Navalny survived the attack, 
only to be incarcerated and abused in Penal Col- 
ony No 2, one of the country’s harshest jails. 

Since then, Mr Navalny’s organisation has 
been outlawed and much of his team chased 
out of the country. Those who stayed are being 
pursued. On November goth Lilia Chanysheva 
was arrested and now faces ten years in prison 
for having worked for Mr Navalny while his or- 
ganisation was Still legal. The net is spreading 
beyond politics. The same day, Sergei Zuev, the 67-year-old head 
of the top liberal university in Russia, who is recovering from 
heart treatment, was taken from house arrest to a prison cell, 
perhaps to force a false confession in a fabricated case. 

A third of the Russian government’s budget is spent on secu- 
rity and defence. Much of this is directed inwards, at the sort of 
people The Economist features this week in a documentary film 
(see people who have had enough 
of Mr Putin’s rule and the corruption of his regime. As incomes 
have fallen and discontent has grown, so Russia’s many police 
and security services have swollen. With 10% more staff than in 
2014, they now outnumber Russia's active-duty military forces. 

For Mr Putin, repression does not have a reverse gear. He will 
not be able to restore the prosperity that helped buoy his ratings 
during his first decade in power. True, the fortress economy that 
the Kremlin has developed since 2014 can withstand sanctions, 
especially when energy prices are high, as now. But Russia, 
which is more like Iran than China, does not have the dynamism 
to generate sustained, robust growth. 

Hence the logic of confrontation. Soviet rulers waged the 
cold war from atop the ideology of communism. Russia’s secu- 
rocrats assert that traditional values of family, culture and histo- 
ry are being corrupted by the liberal and licentious West and that 

only they can defend them. Fighting back against the West lets 
the Kremlin portray all those who oppose it—journalists, hu- 
man-rights lawyers and activists—as foreign agents. In this way, 
Mr Putin’s regime depends on anti-Western ideology for its poli- 
tics just as it depends on oil and gas for its prosperity. 

Dictators insist that how they treat their subjects is a ques- 
tion of sovereignty. In fact, repression is everyone's business. 
One reason is that human rights are universal. The other is that 
violence at home spreads beyond a country’s frontiers. 

Both Russia and Belarus, where the dictator Alexander Lu- 
kashenko is propped up by the Kremlin, have murdered dissi- 
dents abroad. Russia shot down a passenger plane and Belarus 
hijacked one to arrest a local dissident. Poland and Lithuania 
have sheltered the Belarusian opposition in self-exile. Backed by 
the Kremlin, Mr Lukashenko is taking revenge by flying in refu- 
gees from the Middle East and shunting them to its borders to 
engineer a humanitarian crisis (see Europe section). 

On a greater scale, Mr Putin meddles in Western elections, 
peddles anti-vaccine propaganda and fights proxy wars with 
America in Africa and the Middle East. He is using the promise 
of extra supplies of gas to weaken ties between the European Un- 
ion and countries like Ukraine and Moldova. He has once again 
massed troops on the Ukrainian border and is flying nuclear- 
capable bombers to Belarus. 

The good news is that just as most of the So- 
viet people did not believe in the advantages of 
communism over capitalism, so most Russians 
do not believe in the advantages of confronta- 
tion. For all Mr Putin’s propaganda, two-thirds 
have a positive view of the West. Nearly 80% say 
Russia should see it as a partner and a friend. 
This is most pronounced among the young, 
who reject state violence and favour human rights instead. 

Western politicians should take note of this divergence be- 
tween the Kremlin and the Russian people. One response is to 
harmonise sanctions and focus them on the powerful Russians 
who loot the state and abuse the people. That entails Western 
countries standing up to the lobbying of their own service in- 
dustries, which get rich from helping Mr Putin’s cronies launder 
their reputations, pursue their legal vendettas and shelter their 
illicit wealth (see Books & arts section). 

Think ahead 

They should also start laying the foundations for a post-Putin 
Russia. Nobody knows whether that will come in years or de- 
cades. But it is hard to see Mr Putin’s system surviving him. 

The West should therefore invest in people who share its val- 
ues. It should speak out against human-rights abuses inside 
Russia. The flood of Russian students, journalists and intellec- 
tuals seeking a better life will increase. Western governments 
should accommodate them. Latvia and Lithuania are hosting in- 
dependent media outlets and dissidents. Russian students 
should be welcomed to Western universities. By doing so the 
West would not just be helping the victims of Mr Putin’s repres- 
sion, it would also be helping itself. m 

Leaders 15 

16 Leaders 

The Economist November 13th 2021 

The end of life 

A final choice 

Assisted dying is spreading, but too many are still denied this basic freedom 

N 1995 AUSTRALIA'S Northern Territory enacted the world’s first 

law explicitly allowing assisted dying. It said that terminally 
ill, mentally competent adults who wanted to die could ask a 
doctor for help, using lethal drugs. The law sparked outrage. 
Within months the federal government had overturned it. Yet 
today five of Australia’s six states have assisted-dying laws. 

The Economist first made the case for assisted dying in 2015. 
We argued that freedom should include the right to choose the 
manner and timing of one’s own death, while also cautioning 
that the practice should be carefully monitored and regulated to 
avoid abuses. Since then, it has become more widely available. 
Assisted dying is now legal in one form or another in a dozen 
countries, and the trend seems likely to continue. Last week 
New Zealand enacted a euthanasia law for the terminally ill after 
65% of voters backed it in a referendum. The same week Portu- 
gal’s parliament passed a broader law. Assisted dying is still ille- 
galin Britain, but the House of Lords is debating a bill to allow it. 

The number of people who die this way is increasing, though 
still small. In the Netherlands it rose from roughly 1,800 in 2003 
to nearly 7,000 in 2020, or 4% of all deaths. As more countries 
liberalise, the global total will rise further. 

Many people object to assisted dying on religious grounds: 
some faiths deem suicide a sin. Others worry that safeguards 
will prove insufficient, or that legalisation is a 
slippery slope. Critics have long predicted that 
families exhausted by the demands of caring 
for sick, elderly relatives will place undue pres- 
sure on them to end their lives, or that cash- 
strapped states will encourage the most expen- 
sive terminally ill patients to hurry up and die. 

Yet such horrors do not seem to have come 
to pass (see International section). In places 
with the longest experience of assisted dying, charities that rep- 
resent the elderly or disabled have not reported any abuse. It is 
conceivable that some has taken place unobserved, but scrutiny 
has been intense and in most countries permission to help 
someone die is revoked if there is even a hint of coercion. Fears 
that the poor and marginalised might be hastened to their ends 
have also proved to be unfounded. In America, the Netherlands 
and Switzerland the overwhelming majority of those who 
choose an assisted death are educated and middle-class. 

Far from being too lax, the rules have often been too restric- 
tive. The Australian state of Victoria, for example, bars doctors 
from mentioning assisting dying to their patients. The aim is to 
avoid coercion, but the consequence is that many sufferers do 
not know that it is an option. In some jurisdictions only those 
with less than six months to live are allowed help to die. Thus, 
patients can be terminally ill and in intense pain, but unless a 
doctor estimates that the end is very near, they cannot end their 
own suffering. In some cases the diagnosis comes too late. In 
Victoria in the first six months of 2021 no cases were withdrawn 
because the patient decided not to proceed, but in 90 cases the 
patient died before receiving relief. Some countries, such as 
Spain and Colombia, have liberal laws in theory, but in practice 
health authorities are reluctant to let anyone make use of them. 

Last week in Spain a desperate 83-year-old threw herself out of a 
window after her repeated requests for euthanasia were refused. 

Canada offers a better model, because it provides more lee- 
way for individuals to make their own choices. Anyone whose 
suffering is unbearable can choose an assisted death. They do 
not have to be terminally ill. And, uniquely, the question of what 
constitutes “unbearable” suffering is for the patients them- 
selves to decide, so long as they are of sound mind. There is a 
cooling-off period of ten days, in case they have second 
thoughts. In many cases, simply having the option of an assisted 
death gives people a sense of comfort and control. In Oregon a 
third of those people who receive the prescribed lethal medica- 
tion ultimately choose not to take it. 

Even as more societies accept the principle of assisted dying, 
hard questions remain. Some people worry that its availability 
may prompt health services to skimp on palliative care. But that 
is not ordained. Canada’s assisted-dying bill was explicitly 
linked to increased funding for palliative and long-term care. 

If assisted dying becomes common, will old people who re- 
quire round-the-clock care feel more social pressure to choose 
death? Many already worry that they are a burden on their chil- 
dren or carers. Some may feel additional guilt if continuing to 
live is seen as an individual choice, rather than the blind work- 
ings of fate. This is a genuine concern. But the 
possibility that some may agonise over whether 
to die should not trump the certainty that oth- 
ers will suffer unendurable pain if their free- 
dom to choose is denied. 

The trickiest questions arise when an indi- 
vidual’s capacity to make an informed choice is 
in doubt. Some people with mental disorders 
have suicidal thoughts that come and go. For 
them, the bar should be very high. Doctors must be sure they can 
distinguish between a temporary mental-health crisis and a sus- 
tained, considered wish to die. If in doubt, they should offer 
treatment aimed at helping the patient to live. 

Free to choose, to the end 

Dementia poses the hardest problem of all (See Science & tech- 
nology section). Someone diagnosed with the condition may 
make a living will, asking for an assisted death when it becomes 
severe. But they may change their mind. Such a document 
should never be used to kill someone against their wishes, and if 
those wishes are unknowable, they should be left to live. Assist- 
ed dying should be only for those who can make an informed de- 
cision at the time they take the drugs. 

No rules in this area are perfect. All should be subject to revi- 
sion in the light of new evidence about how they work in prac- 
tice, or to take account of medical advances. But the overall prin- 
ciple—that individuals are entitled to choose how they end their 
lives—is, we believe, a sound one. The evidence from countries 
that allow assisted dying is that abuses remain largely hypo- 
thetical, whereas the benefits are real and substantial. It relieves 
suffering, and restores a measure of dignity to people at the end 
of their lives. m 



Enjoy your dream flight with the Boeing 78/-9 Dreamliner. 


TA ROXO LU [Ol cera) ALOMSI=1 AVA (@loicera] AomSLU | ©) 100 KO Mel al=) a1e(-mel>) ol>) alellalemelamnlrelalaelelaslerelam-|arem-|lcele-1am 

18 Leaders 

The Economist November 13th 2021 

Evergrande and financial contagion 

China’s other debt problem 

Evergrande is not the only looming danger in the mainland’s financial system 

CARES ABOUT toxic debt are an ever-present feature of China’s 
S economy. The latest involves Evergrande, a troubled develop- 
er that threatens to cripple the property sector. The firm also has 
tentacles that reach into the darkest corners of the Chinese fi- 
nancial system, wrapping around banks and shadow lenders. 
Yet even as Evergrande catches the eye, another risk is emerging: 
crony capitalism at smaller banks. 

A government crackdown on leverage in property has pushed 
Evergrande to the brink of collapse. Other large developers are 
weighed down by $5trn of debts. Speculation is swirling that one 
of them, Kaisa, is also struggling to make payments (it has asked 
investors for “time and patience”). The turmoil may intensify as 
more debts come due. According to Nomura, a 
Japanese bank, the property industry must re- 
pay $20bn of offshore bonds in the first quarter 
of 2022, twice the level of this quarter. 

Foreign investors have been quick to grasp 
the risks. The yield on Chinese junk dollar- 
bonds has reached a crippling 24%, shutting 
most issuers out of the market. Some home- 
buyers are holding off purchases, worried about 
handing over deposits to weak firms. Building has stalled at ma- 
ny of Evergrande’s 1,000 or more projects. 

Itis unclear who is exposed to losses, and to what extent. Ma- 
ny developers use shell companies, masking their debts, while 
stockmarket regulators have allowed them to Keep investors in 
the dark. On November 8th the Federal Reserve warned that Chi- 
na’s property troubles threaten the global economy. 

Losses on property loans will hurt the banking system, al- 
though by how much remains to be seen. But as we explain this 
week (see Finance & economics section), lenders also face an- 
other danger. Crony capitalism has flourished among the coun- 
try’s small and mid-tier banks. Because the biggest state-owned 

High-yield dollar-bond spread 

China, percentage points 

lenders prefer to make loans to other state firms, private com- 
panies and entrepreneurs have bought stakes in banks in the 
hope of getting preferential access to credit. 

Although the banks involved are often small they add up toa 
giant problem. The Economist calculates that up to 20% of the 
commercial-banking system may have close links with tycoons 
or private businesses. There have already been blow-ups. In 2019 
the collapse of a small lender caused a spike in interbank bor- 
rowing rates; several more failures have followed. Evergrande 
was until recently the owner of a captive bank in north-east Chi- 
na and is said to be under investigation for some 100bn yuan 
($15.7bn) in related-party deals. 

For Xi Jinping, China’s leader, state control is 
the answer to both the property and banking 
threats. To keep building sites ticking over, lo- 
cal governments are taking control of some un- 
finished projects. At smaller banks many cor- 
porate shareholders are being forced out and re- 
placed by local-government asset managers. 

This reveals the limitations of Mr Xi’s eco- 
nomic philosophy. The expanding reach of 
state control may prevent a full-blown panic, because it shows 
that almost all banks are underwritten by the government. But it 
fails to acknowledge an important truth about the economy. 

Many of the distortions that plague China’s markets were 
created by rigid state control. In plenty of private firms, insider 
dealing with lenders has been a way to cope with a state-domin- 
ated banking system that discriminates against them. Mr Xi may 
succeed in averting a sudden bad-debt crisis by reasserting state 
authority. But his reluctance to be bound by rules, treat state and 
private firms equally, and offer predictability to investors will 
ensure that the financial system is doomed to suffer yet more 
dangerous distortions in the future. 


War, drought, famine 

The world must act now to stop Afghans starving 

N NOVEMBER 8TH the World Food Programme (WFP), a UN 
O) seency, said that its estimate of people “teetering on the 
edge of famine” worldwide had risen from 42m earlier this year 
to 45m. Remarkably, just one country accounts for almost all 
those 3m additional people. Afghanistan is on the brink of a 
humanitarian catastrophe. 

Some 23m Afghans, ina country of 38m, face acute hunger. Of 
those, 8.7m are in a state of emergency, the second-highest cat- 
egory in the WFP’s hierarchy of calamity. The classification man- 
ual explains that by the time the agency declares a famine, the 
highest category, it will be too late to avert the worst con- 
sequences “because many will have died”. 

Many are dying already. More than 3m children are malnour- 

ished. Locals report cases of entire families starving to death in 
their homes. Hospital wards are taking in emaciated children, 
including 11-year-olds who weigh just 13kg. Poor Afghans are 
selling their remaining possessions for food. Some are selling 
their daughters. The misery is as bad in the cities as it is in the 
countryside. As the winter sets in, the agony will only deepen. 

Afghanistan’s condition was fragile even before the fall of the 
capital, Kabul, in August. Long periods of below-average rainfall 
and above-average temperatures have led to poor harvests and 
high prices. After decades of warfare, around 4m Afghans are 
refugees in their own country, with little means of support. 

The Taliban takeover has made everything worse. Foreign 
aid, which funded three-quarters of government spending, has >» 

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20 Leaders 

» dried up. The country’s foreign reserves of some $9bn have been 
frozen. Half a million soldiers and police have lost their jobs, 
and civil servants have gone unpaid for months. Half the coun- 
try was living on less than $1.90 a day before the Taliban came to 
power. By next summer, reckons the UN, all but 3% of Afghans 
will be in the same position. 

In September the UN held a “flash appeal” seeking over 
$600m from donors, and received pledges of $1bn. But just a 
third of it has arrived. The European Union promised €ibn 
($1.15bn) in October. Yet €300m of that had already been commit- 
ted, and much of the remainder will go to Afghanistan’s neigh- 
bours. The wFP reckons it may need as much as $220m a month 
to avert a crisis over the lean winter months. 

Even if the money arrives, it is at best a sticking plaster. “No 
humanitarian organisation can...replace the economy of a 
country,’ says Robert Mardini of the Red Cross. The economy is 
atrophying. The flow of dollars into Afghanistan has been 
stanched, the value of the domestic currency has plummeted 
and the banking system has ground to a halt. The IMF reckons 
formal businesses will shrink by 30% in the next few months. 

The Economist November 13th 2021 

Nonetheless, if aid were to resume and reserves were unfrozen, 
the pain would ease. 

The trouble is that this would hand billions of dollars to the 
Taliban, yet to be recognised by any country as legitimate rulers 
of Afghanistan. The cabinet includes figures such as Sirajuddin 
Haqqani, whom the West considers a terrorist. America is ada- 
mant that the group must form a government that represents all 
Afghans and guarantee rights for women, girls and minorities. 

Those are worthy aims. Yet withholding life-saving aid is rep- 
rehensible in almost any circumstances. It makes even less 
sense given that the Taliban show no signs of bowing to pres- 
sure. The West’s demands for basic freedoms for Afghans are en- 
tirely justified, but allowing many of the intended beneficiaries 
to starve to death is not a good way to fulfil them. 

There is no choice but to work with the Taliban, as distasteful 
as that is. That need not mean becoming chummy or support- 
ive—just realistic. The Taliban’s takeover is already terrible for 
Afghans. For the West to punish them further by leaving them to 
starve would be as cruel as anything the zealots with guns are 
likely todo. m 


The discreet charm of nuclear power 

It makes fighting climate change a lot easier 

N THE NEGOTIATIONS which led up to the Rio Earth Summit in 
Lioo2, Saudi Arabia spent a great deal of time attempting to in- 
sert the term “environmentally safe and sound” in front of refer- 
ences to “energy sources” and “energy supplies”. Given that the 
oil Saudi Arabia exports in greater quantities than any other 
country is now understood to be anything but environmentally 
safe, this seems bizarre. At the time, though, the aim was obvi- 
ous to all concerned: the phrase was a way to keep nuclear power 
off the Rio agenda. 

The oil shocks of the 1970s had led to many countries increas- 
ing their nuclear efforts. In the ten years to 1992 the amount of 
nuclear energy consumed worldwide had increased by 130%. 
What was more, some talked of using nuclear 
plants to produce not just electricity, but also 
hydrogen which could then form the basis of 
synthetic fuels. The Saudis may or may not have 
had real concerns about the environment. But 
they knew a competitor when they saw one. 

Their scheming proved unnecessary. In con- 
trast to the oil shocks, the threat of global 
warming has not served the nuclear cause well. 
After peaking in 2006, the amount of nuclear energy consumed 
in 2019 was just 18% higher than it had been 1n1992. Asa share of 
global primary energy, it had fallen from 6.1% to 4.3%. 

Because nuclear power is expensive in ways that show up in 
profits, whereas damage to the climate is not priced into burn- 
ing fossil fuels, this would be unsurprising even if it were popu- 
lar with environmentalists—which, by and large, it is not. But it 
is still too bad. The paradigm-shifting drop in the cost of renew- 
able electricity in the past decade is central to the decarbonisa- 
tion pathway the world is fitfully following. But a clean-energy 
system requires redundancy and reliability in its electricity 
grids that are hard to achieve with renewables alone. It will prob- 

ably also require lots of hydrogen for, say, powering aircraft and 
making steel and chemicals, which reactors could provide. 

Nuclear power has its drawbacks, as do all energy sources. 
But when well-regulated it is reliable and, despite its reputation, 
extremely safe. That is why it is foolish to close down perfectly 
good nuclear power stations such as Diablo Canyon, in Califor- 
nia, because of little more than prejudice (see United States sec- 
tion). Itis why some countries, most notably China, are building 
out their nuclear fleets. It helps explain why others—including, 
as it happens, Saudi Arabia—are getting into the game for the 
first time. And it is why approaches to reducing nuclear energy’s 
cost penalty are at last coming into their own. 

France, which has found its newest genera- 
tion of huge reactors impossible to build on 
time and within budget, and consequently also 
hard to export, has new plans for small, modu- 
lar reactors (SMRs) that might do better on both 
counts. Rolls-Royce, a British engineering com- 
pany, is touting a similar approach (see Britain 
section). On November 4th an American com- 
pany, NuScale, signed a deal to sell six such 
reactors to Romania at the CoP26 in Glasgow. Russia already has 
a floating SMR power Station. 

Such designs can in principle be produced in factories and 
shipped where they are required, keeping their costs down. 
These advantages have been extolled for decades without being 
realised, so caution is in order. But today’s efforts are broader- 
based and have real impetus. They need regulatory approaches 
which, while not lax, permit their makers to learn as they build. 
That will allow competing designs to prove themselves against 
each other, making nuclear power, once again, a source of 
innovation—and adding to the world’s capacity to ditch unsafe 
and unsound fossil energy. @ 

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Data hoarding 

You have a rosy view of the use 
of timely, high frequency data 
in economics, which you 
describe as a “third wave” in 
the discipline (“The real-time 
revolution”, October 23rd). 
However, there is a big down- 
side. Not everyone has equal 
access to these figures, espe- 
cially to data collected by the 
private sector. This unequal 
access will widen the divide 
between the “haves” and the 
“have nots”. Democracies 
cannot work properly if citi- 
zens do not have an opportuni- 
ty to access the economic 
information that is necessary 
to make good economic and 
voting decisions. Basing policy 
on summary Statistics from 
inaccessible micro data with 
many possible flaws will only 
lead to more distrust. 


Former division chief 

Price and Index Number 

Bureau of Labour Statistics 
Washington, DC 

The connection you made 
between the value of real-time 
information and Salvador 
Allende’s Project Cybersyn isa 
reminder of a lost opportunity. 
One of Allende’s principal 
advisers when he was presi- 
dent of Chile was Stafford Beer, 
a visionary cyberneticist, then 
at Manchester Business 
School, who came up with the 
pioneering viable system 
model. Some of us were not 
entirely sure about Stafford’s 
connection with reality, but 
that was our mistake. Had 
Allende lived on we might now 
be much further ahead in this 
burgeoning field of analysis 
and administration. Still, 
better late than never. 



Structural differences 

Ursula von der Leyen may have 
been a bit optimistic when she 
hailed the opening of the Svilaj 
bridge between Croatia and 
Bosnia-Herzegovina (“Bigger is 
still better’, October 9th). 
Bridges in the Balkans have 

unfortunate connotations. The | 

Peljesac bridge is lauded by its 
supporters for unifying Croa- 
tia but denigrated by its detrac- 
tors for bypassing Bosnia. The 
Mitrovica bridge in northern 
Kosovo exists either as a 
tenuous link between Serbs 
and Albanians or as an insu- 
perable barrier, depending on 
your perspective. The Mostar 
bridge was blown up in fight- 
ing between the Croats and the 
Bosniaks, who had been allies 
in the early stages of the 
Yugoslav civil war. 

Before the European Union 
can even consider enlarge- 
ment, it needs to deal with 
these and other festering 
sores, such as the disputed 
waters between Slovenia, Italy 
and Croatia. These may seem 
minor issues, but they matter 
hugely to those who live there. 


Shakespearean phraseology 
Echoing Hamlet, you said that 
vaccine mandates in poor 
countries are often “honoured 
in the breach”, suggesting that 
the edicts are not complied 
with (“Strictly come jabbing”, 
October 23rd). Shakespeare's 
phrase has a more nuanced 
meaning. In the passage where 
Hamlet says that the Danish 
custom of boozy revelry is 
“More honour’d in the breach 
than the observance’, he 
means that it is more honour- 
able to ignore the custom of 
drunken carousing than to 
follow it. So Shakespeare is 
referring to a practice that is 
best ignored than followed, 
not merely one that is often 


Dig deeper 

After eight years in the Amer- 
ican army followed by 20 years 
in business, I could not agree 
more with Bartleby's scepti- 
cism about applying military 
mission values to business 
(October 30th). Shifting un- 
certainties and testosterone- 
infused competition are com- 
mon to both worlds, but not 
much else. Over time I have 
found gardening and cooking 

metaphors to be more useful 
for business than fighting and 
sporting ones. 



Thinking of corporate mission 
statements reminded me of 
Charles Mackay’s account of 
the South Sea Bubble in 
“Extraordinary Popular Delu- 
sions and the Madness of 
Crowds”, published in 1841. At 
one point in the frenzy Mackay 
mentions a bubble company 
with the mission statement of 
“Carrying on an undertaking of 
great advantage, but nobody to 
know what it is”. 


La Paz, Mexico 

Financing for hydrogen 
Uncertainty about future 
carbon prices can slow private 
investment in hydrogen (“A 
very big balancing act”, Octo- 
ber 9th). The German govern- 
ment has proposed carbon 
contracts for difference 
(CCFDs) to mitigate the pro- 
blem. Under these contracts 
the government and acompa- 
ny seta price at which its zero 
carbon hydrogen technology 
would be competitive. Until 
the agreed carbon price is 
reached, the government pays 
the price difference to the 
company. Once the price is 
exceeded, the payment direc- 
tion is reversed. 

CCFDs have three benefits. 
Carbon prices become predict- 
able for the length of the con- 
tract. Subsidised technology 
can compete with carbon- 
emitting incumbents. And 
should carbon prices rise 
above the set price during the 
contract period, the govern- 
ment subsidies could be reco- 
vered and the necessity for the 
contract vanishes. 

Tuttlingen, Germany 

Facebook fury 

Your observations about the 
incoherence of Facebook's 
many critics were helpful as 
far as they went (“Facepalm’, 
October 9th). But the most 
vexing question is why, after 
years of frustrated policymak- 

The Economist November 13th 2021 

ers calling for more regulation, 
and as many years of Facebook 
inviting them to dish it up, 
have lawmakers and regulators 
produced so little other than 
noise? Maybe their inaction 
betrays an implicit recognition 
that the same human failings 
that are distorted and ampli- 
fied on Facebook are already 
legislated for, and that the 
social network's worst trans- 
gression is that it is as 
unflattering but depressingly 
accurate as any hi-def selfie. 

Managing director 

Access Partnership 


The true romance language 
As an adult, I tried to learn the 
French language (Johnson, 
October 16th). Our teacher, a 
native French speaker, told us 
beginners to make over-exag- 
gerated facial gestures in order 
to produce sounds common in 
the French language. Her 
reasoning was that we were 
trying to pronounce French 
with an English mouth, and we 
needed to retrain our mouth to 
move correctly to produce the 
right sound. 

If we were ever in doubt on 
how to pronounce something, 
She had a standing rule: “When 
speaking French, you must 
always position your lips, so 
that if required, they are 
always in position to givea 
kiss on a moments notice.” 


A Polish Brexit? 

Discussing Poland's latest row 
with the Eu, Charlemagne 
used the term “Polexit” to 
describe a potential outcome 
of the stand-off (October 16th). 
Polexit sounds clunky and 
doesn't roll off the tongue. 
Might I suggest “Pout” instead? 

Letters are welcome and should be 
addressed to the Editor at 

The Economist, The Adelphi Building, 
1-11 John Adam Street, London wc2N 6HT 

More letters are available at: 

Executive focus 


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Centre for the Study of 
Financial Innovation 

CEO - City think-tank 

Well-established City think-tank - with a range of public and 
private, institutional and individual supporters - seeks a new Chief 
Executive to take it to the next stage. 

The CSFI is a registered educational charity, set up in 1993. Its 
mandate is to look at issues affecting the financial services industry, 
domestic and international. Its focus covers technology, regulation, 
the environment, financial exclusion and the post-Brexit outlook — 
as well as macroeconomics and geopolitics. Its focus has primarily 
been on face-to-face meetings, but since the pandemic it has also 
built up an extensive archive of videos ( It also 
publishes a magazine and specialist reports. 

Candidates should have broad knowledge about (and interest 
in) financial and economic issues, and a vision of how the City 
should evolve. He or she should be prepared to be the public 
‘face’ of the Centre, to handle relations with supporters and to 
promote the Centre across the media and in Westminster. A strong 
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Manacled in Moscow 


Vladimir Putin has shifted from autocracy to dictatorship 

N OCTOBER 14TH Twins Garden, in 

Moscow, was among the first Russian 
restaurants ever to be recognised with Mi- 
chelin stars. In celebration it treated guests 
from the beau monde to magnums of Boll- 
inger alongside its signature “sea urchins 
with citrus and shiso leaves” and innova- 
tive “3D-printed bean ‘squid’ with aspara- 
gus and black caviar”. From its rooftop ter- 
race overlooking Pushkin Square guests 
could marvel at Moscow's beautifully lit 
Skyline. Below them pedestrians strolled 
along recently repaved streets lined with 
cafés and boutique shops, or rushed to 
catch the new production of “Tosca” at the 
Bolshoi. Delivery bikes sped back and forth 
attending to the needs of those staying at 
home—or stuck in their offices. 

The diners might also have made out, 
less than a kilometre away, the building 
housing Memorial, Russia’s oldest human- 
rights organisation, which was at the time 
being stormed by masked thugs. Dozens of 
them, accompanied by state Tv crews, 
crashed into a screening of “Mr Jones”, a 
film by Agnieszka Holland, a Polish direc- 
tor, about the famine Stalin inflicted on 

Ukraine in the early 1930s. The thugs 
jumped onto the stage and pumped their 
fists in the air, shouting “shame’, “fascists” 
and something about Goebbels. When the 
police arrived, they used a pair of hand- 
cuffs to lock the building’s doors closed, 
sealing the staff inside until the small 
hours of the morning. 

In 1987, when Memorial was set up to 
document Stalinist repressions, the state 
was holding about 200 prisoners of con- 
Science. Today, according to Memorial’s 
count, Russia has at least 410 political pris- 
oners. On the day the Michelin stars were 
awarded, Vyacheslav Egorov, an activist in- 
volved in protests against a landfill siteina 
historic town near Moscow, was sentenced 
to 15 months in prison. A few days earlier, 
Sergei Zuev, the rector of the Moscow 

A 15-minute film, “How Putin is silencing his 
opponents’, is available to readers at A longer 
version, Fearless: The Women Fighting 
Putin’, a co-production of The Economist 
and Hardcash Productions for ITv, is 
available to readers in Britain at 

School of Social and Economic Sciences 
(known as Shaninka), one of the country’s 
leading independent universities, was tak- 
en to a prison cell from his hospital bed; 
the university faces closure. After being re- 
leased and undergoing cardiac treatment 
he was jailed again on November oth. 

On October 27th Gleb Maryasov, a liber- 
tarian activist, was sent to a penal colony 
for ten months for blocking roads during a 
protest in January. On October 29th, the 
day on which the victims of Stalin’s repres- 
sion are commemorated, four Crimean Ta- 
tars were sentenced to 12-17 years in jail. 
Hardly a day goes by without someone be- 
ing fined, sent to jail, officially deemed 
“undesirable” or declared a “foreign agent”, 
as Memorial has been—a_ distinction 
which requires targeted organisations and 
individuals to preface every public utter- 
ance, in capital letters, with these exact 
words in Russian: 


The increasing number of political pris- 
oners—there are eight times as many as 
there were six years ago, according to Me- 
morial—is not a return to Soviet form, as 
the high life which surrounds the repres- 
sion bears witness. But the people of 
late-1930s Berlin would find the mixture of 
the two quite familiar. 

The Economist November 13th 2021 

Echoes of that era are also to be found in 
Russia's Official rhetoric of ressentiment 
and imperial nationalism. They can be re- 
cognised in media images of the male body 
beautiful, encouraging healthy living, and 
in laws against homosexual propaganda. 
They were voiced in a recent speech by 
Vladimir Putin, Russia’s president, extol- 
ling the country’s “spiritual values and his- 
torical traditions” and denouncing the de- 
cadence of Western liberalism. Mr Putin 
took the opportunity to praise Ivan Ilyin, a 
philosopher who in the 1920s embraced 
Italian fascism as a model for Russia. 

Sitting pretty 

For much of his rule, Mr Putin was more 
readily associated with kleptocracy, fakery 
and cynicism than with a coherent ideolo- 
gy which inserted the state deep into 
everyday life. During his first decade in 
power, the 2000s, economic growth— 
much of it to the benefit of his friends and 
former KGB colleagues, but significant 
amounts enjoyed more broadly—provided 
more or less all the support his regime 
needed. In his second decade, when 
growth faded and protests broke out in 
large cities, nationalist propaganda and 
anti-Americanism became more preva- 
lent. The annexation of Crimea in 2014 and 
the war in Ukraine kept people enter- 
tained, excited and on-side. There was re- 
pression, but Russia’s ruling elite was 
more interested in wealth than violence. 
Literary-minded Russians could take com- 
fort in lines from “Letters to a Roman 
Friend” a poem by Joseph Brodsky: “You 
are Saying procurators are all looters, But 
I'd rather choose a looter than a slayer.” 

Mr Putin’s regime is now rendering that 
distinction moot. As Alexei Navalny, an op- 
position leader poisoned in August 2020 
and jailed this year, recently wrote from his 
prison cell: “An official taking a bribe anda 
policeman pulling a bag over the head ofa 
prisoner tied to a chair are one and the 
Same person. His law is the superiority of 
the strong over the weak. The superiority 
of the interests of a corporation over the 
rights of an individual. The willingness to 
commit crimes as an act of loyalty.” 

Grigory Okhotin of ovp-Info, a media 
and human-rights organisation that moni- 
tors political repression and provides legal 
help to its victims, notes a shift in the gov- 
ernment’s tactics. Once it wanted to con- 
tain, and by doing so deter, political 
threats. Now it wants to eliminate them. 
Political power has shifted from civilian 
technocrats to militarised and often uni- 
formed “securocrats” happier with vio- 
lence. The regime has moved from being a 
consensual autocracy supported by co-op- 
tion and propaganda to a dictatorship rest- 
ing on repression and fear. 

This aspect of Mr Putin’s power has 
deep roots. In 2015 it claimed the life of Bo- 

ris Nemtsov, a liberal opposition politi- 
cian. Having warned of the lethal danger of 
Mr Putin’s corruption he was subjected toa 
hate campaign before being shot dead ona 
bridge next to the Kremlin. But since the 
summer of 2020 it has been applied more 
widely. According to a poll by the Levada 
Centre, also a “foreign agent”, the fear of re- 
pression, now shared by 52% of Russia’s 
population, and of state violence (58%), are 
at all-time historic peaks, trumping the 
fear of losing a job, falling into poverty or 
being struck by natural disaster. 

Politics has been banned. Mr Navalny’s 
organisation has been crushed and de- 
clared “extremist”. His entire team has 
been forced out of the country; their re- 
maining relatives are harassed and perse- 
cuted. The father of Ivan Zhdanov, one of 
Mr Navalny's right-hand men, was put on 
trial in October. On November gth Liliya 
Chanysheva, a 39-year-old politician who 
ran one of Mr Navalny’s regional offices, 
was arrested on a retroactively applied 
charge of “extremism”. She could face ten 
years in jail. 

Open Russia, a pro-democracy organi- 
sation funded by Mikhail Khodorkovsky, a 
former billionaire once jailed and since ex- 
iled, has been declared “undesirable” and 
forced to close. Its former boss, Andrei Pi- 
vovarov, is facing six years in jail for Face- 
book posts. Thousands are denied the right 
to stand for election because of real or 
imagined association with Mr Navalny—as 
are 9m people (8% of the electorate) with 
previous criminal records or dual citizen- 
ship, according to Golos, an election-mon- 
itoring outfit that is also a “foreign agent”. 

One example is Violetta Grudina, who 
once worked for Mr Navalny in Murmansk, 
an Arctic port, and who is profiled ina film 
produced by The Economist and Hardcash 
Productions (see 
film). After Mr Navalny’s organisation was 
banned, she decided to stand as an inde- 
pendent candidate in local elections. Her 
office was vandalised, she was forced intoa 
covid hospital, and then disqualified for 
being part of an “extremist organisation”. 


The grapevines 

Russia, news consumption by source 
% responding 


Newspapers, radio, = 30 
pat : Social media & Telegram, 

| 20 


Friends, family, neighbours 0 

2015 IA ise 16 I ie 19 

Sources: Levada Centre; Rogov, “The Year 
of Navalny”, Liberal Mission 

JAS) 72) 

Briefing Russian repression 

Losing that loving feeling 
Russia, trust in Vladimir Putin by age group, % 

® 2015 average ® January 2020 to May 2021, average 

0 20 40 60 80 
All ages o_# 
18-24 oe ___#4 
25-39 o—"—"_*__—_"" 8 
40-54 o—_“¢ 
Das os 

Sources: Levada Centre; Rogov, “The Year 
of Navalny”, Liberal Mission 

The crackdown has not been as harsh as 
some before it. The regime has not used le- 
thal force—at least not in its own name. 
Many have been allowed—indeed encour- 
aged—to leave the country. This is nota liqg- 
uidation, nor is ita tyranny built on a cult 
of personality. Rather it is something cob- 
bled together to retain power in the face of 
falling popularity and eroded legitimacy. It 
is Similar in kind, if not yet in resistance 
and violence, to that of Alexander Lukash- 
enko in neighbouring Belarus. It does not 
thrive on mass mobilisation and hysteria. 
Its aim is to suppress crowds not excite 
them. It neither inspires nor requires en- 
thusiasm in the masses. 

Maybe this time 

Just as well. Mr Putin’s access to the masses 
is not the easy matter it once was. He was 
brought to power by television, which then 
helped him consolidate his control. The 
public was dependent on the medium that 
he monopolised. Anything that was not 
televised did not exist, which was bad 
news for opposition figures. And that 
which did not exist could still, when nec- 
essary, be televised—as in the case of Uk- 
rainian “fascists” in Crimea. 

The rise of the smartphone changed all 
that. By 2018, 80% of the population was 
using the internet and 82% of 18- to 44- 
year-olds were watching YouTube. Accord- 
ing to a recent report by Liberal Mission, a 
think-tank, the share of Tv, radio and 
newspapers in overall media consumption 
has shrunk from 70% to 45% since the 
mid-2010s, while online sources’ share has 
grown from 18% to 45% (see chart1). 

In the same period, trust in Mr Putin 
has fallen from 60% to 30%. In the 2000s 
members of the younger generation were 
among Mr Putin’s most loyal supporters. 
That has now been reversed (see chart 2), 
and not just because of internet access. The 
young feel more disgust at corruption, 
which deprives them of prospects, and 
have a more positive view of Europe and 
America. They resent the state’s increasing 
intrusions into their lives and they value 
human rights. But the internet has un- 


doubtedly helped cement those feelings b> 

30. ~=6Briefing Russian repression 

» and bring together those who feel that way. 

One way of looking at the change is by 
comparing the three waves of protest in 
2011-12, 2017 and 2019. The protests of 2011- 
12, the largest up to that time, were a re- 
sponse to elections seen as rigged and to 
the return of Mr Putin, who had previously 
switched from president to prime minis- 
ter, to his previous office. They were politi- 
cal protests spurred by political events. 

The next protests of comparable size, in 
2017, were triggered by a YouTube video. An 
account of the corruption of Dmitry Med- 
vedev, Russia’s prime minister at the time, 
put together by Mr Navalny, was seen by 
4.5% of Russians within a couple of weeks, 
his supporters say, and its claims were 
heard by three times as many. Mr Medve- 
dev’s approval rating fell by ten percentage 
points. Encouraged, Mr Navalny called on 
people to take to the streets, and they did. 

In the Liberal Mission report, Kirill Ro- 
gov, a political analyst, argues that “The 
biggest threat to the regime is not the prot- 
est itself, but the reaction of society.’ On 
that basis the 2019 protests were the water- 
Shed. Barred from standing himself, Mr 
Navalny nominated allies to run in Mos- 
cow’s local elections. When the Kremlin 
blocked them, people took to the streets 
and violence ensued. After the 2017 prot- 
ests, 40% of the public had sided with the 
police and only 27% with the protesters. In 
2019, 41% sympathised with the protesters 
and condemned the police violence. The 
Kremlin lost nearly half of its seats on the 
city council. The protesters had, for the 
first time, garnered real support. 

That did not mean they were winning. 
Though Mr Navalny had support in Mos- 
cow and some other places, only 20% of 
Russians approved of him. But 80% now 
knew who he was. One of the key assets of 
any autocracy—the apparent absence of 
any alternative—had been lost. The Rus- 
Sian elite started to talk about succession. 
So Mr Putin changed the constitution to let 
himself stay in power indefinitely and re- 
inforced that change with repression. 

It has been largely a pre-emptive strat- 
egy. Many Russians believe Mr Navalny’s 
videos showing the extent of the regime’s 
corruption and think him brave, but few 
are committed to doing anything about the 
situation. That is how Mr Putin wants to 
keep it. The difference in the treatment of 
those arrested during the protests of 2019 
and those arrested in protests at the time of 
Mr Navalny’s return in January is revealing. 
In 2019, the vast majority were quickly re- 
leased with a fine, whereas in 2020 roughly 
half of the 1,000 arrested were held for up 
to two weeks. More than 130 criminal cases 
have been launched in the aftermath, ac- 
cording to ovD-Info. 

Facial-recognition technology also al- 
lowed the police to make arrests weeks or 
even months after the main protests—a de- 

layed response that adds to the anxieties of 
all who participated. Mr Okhotin of OvD- 
Info argues that such anxiety has become 
an important instrument of oppression in 
itself. So has the cynicism of jailing protes- 
ters during the pandemic for “violating 
epidemiological restrictions”, in a country 
where 80,000 people can be gathered into 
Moscow's Luzhniki stadium to cheer Mr 
Putin. If Mr Navalny tried to inspire a sense 
of agency, the Kremlin wanted to plunge 
them back into a state of helplessness. 

In 2019 Mr Putin signed a “sovereign in- 
ternet” law which forced internet provid- 
ers to install special equipment that allows 
the state to block, filter and slow down 
websites. Gregory Asmolov, an expert on 
the internet at King’s College London, says 
the goal is not to build a Chinese-style fire- 
wall but to influence people’s choices. If 
people don’t know what they are missing, 
they will not look for it. 

The Kremlin has cracked down on “in- 
fluencers” and independent media outlets 
that feed interest in politics, while herding 
web users towards local social-media net- 
works—which happily share information 
with the security services—and video- 
hosting platforms that are easy to control. 
International services are harried with 
fines and hobbled with slow download and 
upload speeds, making video sharing al- 
most impossible. Most Russian opposition 
figures believe that within two years You- 
Tube will not be available in Russia. 

Tomorrow belongs to me 

For now the Kremlin seems to have suc- 
ceeded in applying enough repression, and 
thus generating enough fear of worse to 
come, to accomplish its needs. But the 
screw continues to be turned. For one 
thing, the repression is not limited to 
achieving the Kremlin’s political aims; 
those close to Mr Putin are able to use this 
machinery for their own ends. Mr Zuev’s 
persecution, for example, appears to be to 
some extent collateral damage in a fight 

The Economist November 13th 2021 

between a detained former vice-president 
of Sberbank, Russia’s largest state bank, 
and Arkady Rotenberg, one of Mr Putin’s 
closest business associates. 

And Russia’s securocrats are not going 
to pack their bags and go home when they 
control a significant and growing chunk of 
public expenditure. More than 10% of the 
national budget is spent on internal secu- 
rity. There area third more police and secu- 
rity staff than active-duty soldiers. 

Mariya Omelicheva of the National War 
College in Washington, Dc, points to an- 
other self-perpetuating dynamic: she calls 
ita “repression trap”. Expanding the role of 
the security services amplifies the Krem- 
lin’s perception of threat at home and 
abroad, justifying more repression. As 
long as the regime relies on the demonisa- 
tion of foreigners—and “foreign agents’ — 
this trap looks set to keep tightening. 

So repression worsens even as resis- 
tance is held at bay. Protesters know that 
the people understand the regime's cor- 
ruption. According to a Levada survey, 55% 
found the picture of Mr Putin’s ostenta- 
tious wealth and corruption that Mr Naval- 
ny posted to YouTube on his return in Jan- 
uary convincing. But they also understand 
that this in itself will not change things, at 
least not quickly. Only 17% said that the 
video changed their opinion of Mr Putin 
for the worse. And increased comforts pro- 
vide a palliative for some. 

On the eve of the last large protest in 
April, in a candle-lit Moscow café, mem- 
bers of the liberal intelligentsia sat hud- 
dled around small tables, bracing them- 
selves for arrest at a protest the following 
day. Tatiana Gnedovskaya, an art expert, 
sang for them. Her normal repertoire is 
Russian and romantic. On that evening, 
though, she ended her set instead with 
night-club songs from 1930s Germany. No 
one needed to ask why. “We, too, have a 
sense of dark times coming” she said later, 
“but we continue to live and enjoy our lives 
while we can.” @ 

Of walls and wobbles 


Why the tumult on America’s southern border is becoming harder to handle 

TT" SITE has an air of abandonment, like 
a half-finished apartment building 
whose developer ran out of money. Thirty- 
foot (nine-metre) steel rods rise from the 
desert sand. The area has been electrified 
and prepared for floodlights, but only half 
a dozen have been installed, so most of the 
structure is bathed in darkness at night. 
Thanks to Donald Trump the border wall, 
of which this is part, has become a charged 
symbol of nativism and exclusion. But the 
design of this stretch, with slats spaced 
four inches apart to let people see through, 
is Similar to the 128 miles of wall built dur- 
ing Barack Obama's presidency, just taller. 
It was built hastily during the final months 
of Mr Trump’s term. Strewn nearby are 
steel piles of the old, shorter wall, which 
have yet to be hauled away. 

President Joe Biden, who has not visited 
the southern border since 2008, put a halt 
to all wall-construction on his first day in 
office. The wall here ends abruptly, in the 
middle of a mountain peak. Close by are 
several long gaps, where floodgates were 

planned to allow water to flow through 
during heavy rains. Time ran out, and they 
were never added. Instead, a few low boul- 
ders and a thin string of wire serve as hur- 
dles. Atone break, a dozen water bottles are 
littered on the sandy ground, a sign of mi- 
grants’ passage. “See, this is concerning for 
us,’ Says Jesus Vasavilbaso, who works for 
Customs and Border Patrol (CBP). The near- 
est city is 45 miles away, a four-day walk 
through desert and mountains, he ex- 
plains. Being out of water bodes ill for the 
migrants’ prospects of survival. 

Large construction trucks are still 
parked nearby, as if awaiting direction. 
Chris Magnus, the police chief in Tucson 

34 Infrastructure year 

| 36 John Durham's indictments 

36 Necessary nuclear power 

38 Lexington: Hispanic Republicans 

nominated by Mr Biden to run CBP, has ex- 
pressed tentative openness to completing 
“barriers, walls, other things”. Mr Vasavil- 
baso is hopeful that Mr Magnus could at 
least persuade the president to finish the 
gaps in the Tucson area. 

Today the gap-riddled wall represents 
not only Mr Biden’s predecessor but also 
Mr Biden, who seems to know what he 
does not want—any more wall—but has yet 
to come up with a plan that is both “fair 
and humane”, which is what he promised 
on the campaign trail. The result is frustra- 
tion from immigration advocates and peo- 
ple living close to the southern border, as 
well as a political headache. In the mid- 
term elections next year Republicans will 
accuse Democrats of presiding over chaos 
at the border. Democrats do not yet have an 
answer to this, in part because they do not 
realise the criticism has some truth. 

The number of illegal border-crossers is 
the highest for 21 years. The number of “en- 
counters” in the 2021 fiscal year (which 
ended in September) was the highest on re- 
cord. (“Encounters” and the number of 
border-crossers are different, since one 
person may attempt several crossings.) 
The perception that Mr Biden is less hostile 
to migrants than Mr Trump was one factor 
in the rise, but not the only one. Covid-19 
has hit economies to America’s south, add- 
ing to the poverty, violence, natural disas- 
ters and autocracy which many people are 
eager to escape. AS more migrants arrive at | 

32 United States The Economist November 13th 2021 

» the border it becomes harder to manage =z try to cross the border. In January this year 

them ina consistent way. 

Until recently it was overwhelmingly 
Mexicans and people from the Northern 
Triangle—El Salvador, Guatemala and 
Honduras—who showed up at America’s 
southern border. But in March arrivals 
from elsewhere began to spike (see chart). 
Brazilians, Ecuadoreans, Cubans, Haitians, 
Nicaraguans and Venezuelans are arriving 
in large numbers. In the 2021 fiscal year 
47,000 Haitians arrived at the southern 
border, 23 times more than in 2019. 

“The biggest story of 2021 is not the 
numbers but the diversity of origins of 
people,’ says Andrew Selee, president of 
Migration Policy Institute, a think-tank. 
Word has spread widely that people should 
try their luck. Some 4,000 Russians were 
encountered at the southern border by CBP 
this fiscal year, compared with 21 in 2019. 

The variety of nationalities makes the 
border even harder to manage, says Mr Se- 
lee. AMerica can return people to Mexico 
swiftly, but it is more complicated to re- 
turn Haitians, Cubans and Venezuelans. In 
addition, around 28% of those encoun- 
tered by cBP in fiscal 2021 were family un- 
its. AS more families with children arrive, 
operations on the border are getting harder 
to manage, at a time when tolerance for 
long holding periods and detention space 
are in short supply. Unaccompanied chil- 
dren are universally being allowed into 
America, SO some parents are making the 
difficult decision to send them ahead 
alone, stretching the ability of American 
facilities to process them. 

Mr Biden’s administration is therefore 
under renewed pressure to show it can 
control immigration. Yet like the adminis- 
tration he served in as vice-president, he 
also faces pressure from immigration ad- 
vocates, who question how different Mr Bi- 
den’s policies are from Mr Trump's. The Bi- 
den administration has continued to rely 
on a public-health rule called “Title 42”, 
which was first adopted by Mr Trump in 
March 2020. This enables America to 
quickly expel most migrants—even those 
trying to seek asylum—to Mexico or their 
home countries on public-health grounds. 
They are not formally processed or charged 
for illegal entry, which makes the process 
much faster. It also explains why border- 
crossers are making repeated attempts if 
they are apprehended the first time. 

Immigrant advocates recently staged a 
walk-out during their virtual meeting with 
White House officials on border policy, 
due to their frustration with the continued 
use of Title 42 and the reimposition of the 
“Migrant Protection Protocols” (MPP) pro- 
gramme, Says Gia Del Pino of the Kino Bor- 
der Initiative, a non-profit. Mr Biden tried 
to end MPP, which was designed by Mr 
Trump as a deterrent and keeps asylum- 
seekers in squalid refugee camps in Mexi- 

The unusual suspects 

United States, migrant apprehensions 

at the south-western border, ‘(000 

Excludes Mexico, El Salvador, Guatemala and Honduras 



Fiscal years ending September 

Source: US Customs and Border Protection 

co while their asylum claims are pro- 
cessed. However, a court order recently re- 
quired it to be reinstated. “There is very lit- 
tle practical difference between Trump and 
Biden at the border,” says Lee Gelernt of the 
American Civil Liberties Union, which is 
suing the Biden administration to end Title 
42 for asylum-seeking families. 

Lifting Title 42 would make it harder to 
deport people who cross the border illegal- 
ly. But itis hard to justify keeping it on pub- 
lic-health grounds. On November 8th 
America reopened its borders to foreign, 
vaccinated travellers. “Someone can come 
to the border and say, ‘I’m here, I’m Mexi- 
can, I’m vaccinated, and I’m here to go 
shopping at Walmart’ and they'll be able to 
come in,’ says Aaron Reichlin-Melnick of 
the American Immigration Council, a 
think-tank. “But someone can show up and 
say ‘Hi, I’m Mexican, I’m vaccinated, and I 
am here to claim asylum because I could be 
assassinated in the next 24 hours, and 
theyll be turned away.’ This different 
treatment is “nonsensical”, he says. 

Migrants are experiencing widely dif- 
fering treatment depending on where they 
come from, who they are and where they 

Freed om’s bank 

88% of border apprehensions resulted in 
expulsions, 2% in a release into America 
and 5% in detention. In August 49% result- 
ed in expulsions, 22% in release and 20% 
in detention. The main factor in the de- 
cline in the share of expulsions is the Mex- 
ican government’s decisions about who 
they will take back, says Mr Reichlin-Mel- 
nick of the Immigration Council. 

For example, Mexico said it would not 
accept Ecuadoreans who were expelled un- 
der Title 42, but single Ecuadoreans who 
pass into the El Paso sector are, in fact, be- 
ing sent to Mexico, which seems to be the 
result of decisions by local officials in the 
Mexican state of Chihuahua, says Mr Rei- 
chlin-Melnick. Tamaulipas, another Mexi- 
can state, decided not to take back families 
with children under the age of seven, 
which has resulted in America releasing 
them into the United States. As a result, 
more migrants go to South Texas near Ta- 
maulipas, anticipating easier entry. 

In fiscal 2021 284,000 people were re- 
leased from Border Patrol custody into 
America according to Henry Cuellar, a 
Democratic congressman who represents 
south-west Texas. He thinks Mr Biden is 
surrounding himself with the “wrong ad- 
visers’. “The administration is paying too 
much attention to the immigration activ- 
ists, and I don't think they're paying 
enough attention to the border communi- 
ties and Border Patrol folks, who are on the 
frontlines of all this,’ Mr Cuellar says. 

People working on the American side of 
the border, from non-profit employees to 
Border Patrol agents, struggle to explain 
why some people are being allowed in 
while others are sent away. “I wish I could 
say Isee 100% consistency, but we do not,” 
Says Teresa Cavendish of Casa Alitas, a 
non-profit organisation that runs migrant 
Shelters. “It could be a factor of volume or 
training, or just something that happened 
that day that made allowances for some- 
one to pass who would have otherwise not 
had entry. The outcome for asylum-seek- 
ers crossing the border can vary wildly and 
depends more on their nationality and 
family status than on any policies or laws 
inside of the United States,” she adds. 

Things are getting bad when Mr Biden, 
the most devout Catholic president the 
country has ever had, is being criticised by 
nuns. “The lack of clarity about what the 
United States is doing gives people the 
wrong message,’ Says Sister Norma Pimen- 
tel, who runs Catholic Charities of the Rio 
Grande Valley. “The more the us puts effort 
into clarifying what the immigration pro- 
cess is, it will help avoid great masses of 
people coming thinking they have a 
chance to enter when they don't.” She adds 
that if the Biden administration has fig- 
ured out its border policy, “they haven't 
voiced ityet”. & 

You get 
to set time limits. 


) Set time limit 


(+) Ic 

34 United States 

Infrastructure year 



Joe Biden’s infrastructure bill will boost competitiveness for decades to come 

OCK AND DAM 25 on the upper Missis- 
Lisipsi River is testament to how good 
American infrastructure can be. Stretching 
nearly 1,300 feet (400 metres) across the 
water, the concrete-and-steel structure is a 
crucial link in the system that connects 
Midwestern fields to Southern ports and 
thence to Asian markets. Roughly 60% of 
America’s corn and soy exports pass 
through it every year. But it is almost 100 
years old, and engineers wage a constant 
battle to keep it operational. It has the 
Same capacity as when it was built, while 
boats have grown bigger. “How many high- 
ways built in the 1930s still have the same 
number of lanes now?” asks Andy Schimpf, 
a manager at the lock. 

Salvation may be at hand. On November 
5th the House of Representatives passed a 
five-year, $1trn bill to repair and upgrade 
America’s ageing infrastructure. About 
$2.5bn has been allocated to inland water- 
ways, and Mr Schimpf is optimistic that 
some will go towards rebuilding Lock and 
Dam 25, doubling the size of its chamber. 
Today, workers sometimes need to break 
apart barges to get them through, and then 
reassemble them on the other side, which 
can take up to three hours. A bigger lock 
could reduce transit time to 30 minutes. 

Hundreds of similarly delayed and ne- 
glected public projects around America 
will get a big boost from the infrastructure 
bill, which President Joe Biden will soon 
sign into law (it long ago passed the Sen- 
ate). It includes $40bn of new funding for 
fixing bridges, the largest investment since 
the construction of the interstate highway 
system. There will be nearly $7o0bn for pas- 
senger rail, aimed both at clearing years- 
old maintenance backlogs and bringing 
service to new areas. Another $65bn 
should ensure that every American has ac- 
cess to high-speed internet. And the list 
goes on and on, from highways to airports 
and the electricity grid to water pipes. 

For years American infrastructure has 
suffered from under-investment. It would 
take $2.6trn over the next decade to get it 
up to scratch, according to the American 
Society of Civil Engineers (ASCE), a profes- 
sional body (albeit one with an interest in 
spending more). The bill will not fix every- 
thing. But it could be the beginning of a 
process that will make a real difference. 

How big a difference? Roughly half the 
headline amount would have been expect- 
ed as part of regularly budgeted mainte- 

A concrete achievement 

nance, meaning that about $550bn actually 
constitutes new spending, to be disbursed 
over five years. That might not sound like 
much, but it is. From 2022 to 2026 federal 
infrastructure spending will rise from 
about 0.8% of annual GDP to 1.3%, well 
above the trend of the past four decades. 
Adie Tomer of the Brookings Institution, a 
think-tank, says that is nearly the same av- 
erage level as during the New Deal, which 
helped lift America’s fortunes after the 
Great Depression. 

As arough rule of thumb, an additional 
$100bn per year spent on infrastructure 
could boost growth by about a tenth of a 
percentage point when the digging actual- 
ly begins, and potentially more if it cataly- 
ses additional private-sector investment, 
notes Ellen Zentner of Morgan Stanley, a 
bank. In the longer term, she estimates, a 
Sustained expansion of infrastructure 
Spending could support productivity and 
raise America’s potential growth by as 
much as a fifth of a percentage point, a big 
deal for a large, mature economy. “That's 
why whenever you talk to economists, in- 
frastructure is the stuff that we go to bed at 
night dreaming of,” says Ms Zentner. 

Getting a positive return will, of course, 
require the money to be allocated well. 
Considering the shortfalls in investment 
over the years, it should not be hard to find 
good projects. On average a water main 
breaks every two minutes somewhere in 
America, while nearly half of all roads are 
in bad shape, according to the ASCE. In 
some cases the investments will not gener- 

The Economist November 13th 2021 

ate new growth so much as defend Ameri- 
ca’s existing strengths. Take the locks on 
the upper Mississippi: they help American 
soyabeans compete against Brazilian ones. 
Labour is much cheaper in Brazil, but tran- 
sportation is better in America. Keeping 
the locks in good shape underpins that. “If 
you were to close any of them down fora 
few months, it would cost us billions of 
dollars,’ says Steve Censky, CEO of the 
American Soybean Association. 

Just about doubling the federal govern- 
ment’s expenditure on infrastructure over- 
night could lead to waste, however. Cost 
overruns often bedevil American infra- 
structure projects. It is more expensive to 
build rail in America than in almost any 
other country, according to Transit Costs 
Project, a research group. The price of 
building highways has also soared. That 
just about anyone can mount a legal chal- 
lenge against public works in their vicinity 
is part of the problem, leading to delays 
and missed budgets. And the current back- 
drop is hardly propitious, with supply- 
chain congestion affecting even the most 
basic home-building projects. 

On the positive side of the ledger, the 
bill creates space for private investors to 
join the government’s efforts, which could 
both enlarge total spending and impose 
more financial discipline. Any city or state 
seeking federal funding for transport pro- 
jects costing more than $750m will be re- 
quired to evaluate whether partnering 
with private-sector investors would deliv- 
er better results. Some projects, suchas the 
development of the first-ever national net- 
work of chargers for electric vehicles, nat- 
urally lend themselves to co-operation 
with the private sector, given that is where 
the technology resides. The government 
also wants companies to pitch in to make 
infrastructure more resilient to climate 
change. Grant programmes, useful in at- 
tracting private investment in water sys- 
tems, are likely to be expanded. “This bill 
can potentially create a framework for on- 
going and necessary public and private in- 
vestment in infrastructure,’ says Aaron 
Bielenberg of McKinsey, a consultancy. 

But a dose of scepticism is also useful. 
Ultimately, the amount that America 
spends on infrastructure is a direct result 
of the amount that Americans are willing 
to be taxed. And that, by the standards of 
other rich countries, is not very much. 
“Ten years from now, I think we will look 
back and say that this bill was a historic in- 
vestment, a great expansion of invest- 
ments that were neglected,’ says Austan 
Goolsbee, an economist at the University 
of Chicago and a former adviser to Presi- 
dent Barack Obama. “But people are still 
going to be saying, well, why don’t we have 
high-speed rail all over the country?” Even 
so, better to fix roads, expand ports and lay 
broadband cables than not. 

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36 United States 

The Durham investigation 

You're in trouble 

The special counsel arrests one of the 
sources of the infamous Steele dossier 

N OCTOBER 17TH Christopher Steele, a 

former British intelligence officer who 
now runs a private research consultancy, 
appeared on ABC News. Mr Steele was be- 
ing interviewed about a dossier that he had 
provided to the Democratic Party and to the 
FBI in the run-up to the 2016 presidential 
election. It reported on Donald Trump’s 
business interests in Russia and his team’s 
relationships there. But most explosively, 
it also alleged he had possibly been cap- 
tured on video indulging curious sexual 
tastes in the presidential suite of the Ritz- 
Carlton hotel in Moscow in 2013. Mr Steele, 
asked whether he believes that this video 
exists, said, “I think it probably does.” 

That seems less and less likely. On No- 
vember 4th John Durham, the special 
counsel for the Department of Justice, who 
was appointed by William Barr in 2019 to 
investigate the FBI investigation into Mr 
Trump’s supposed links with Russia, in- 
dicted Igor Danchenko, a Russian national 
and professional Russia expert based in 
America. Mr Danchenko is alleged to have 
lied about how he collected information 
for the Steele dossier (knowingly lying to 
FBI agents is a crime). According to the in- 
dictment, Mr Danchenko got some of the 
rumours he sent to Mr Steele from a Russo- 
phile American PR executive, named by the 
New York Times as Charles Dolan, who pre- 
viously worked on Clinton campaigns. Mr 
Danchenko allegedly hid this from the FBI 
when he was interviewed (he denies it). 

Right-wing media in America have 
turned this into a storm. Kimberley Stras- 
sel, a columnist for the Wall Street Journal, 
wrote that the indictments show that the 
Steele dossier ought to be called the “Clin- 
ton Dossier’, and argued in effect that Mr 
Trump was a victim of a giant orchestrated 
conspiracy to make out that he was in (a 
rather damp) bed with Russia. Others, such 
as Fox News, have made much of Mr Dan- 
chenko’s work from 2005 to 2010 for the 
Brookings Institution, a centrist think- 
tank in Washington, Dc. Many also suggest 
that the Mueller investigation, a federal 
probe which looked into Mr Trump’s 
team’s links with Russia, began with the 
Steele dossier. Mr Trump himself said ina 
TV interview that the findings are “only go- 
ing to get deeper and deeper’—and would 
implicate Democrats. 

In reality, the conspiracy is not so deep. 
An earlier investigation by Michael Horo- 
witz, the Inspector-General of the Depart- 

Less than meets the eye 

ment of Justice, revealed many of the 
shortcomings of the Steele dossier. But it 
also showed that it was not what sparked 
the FBI's investigation into the former 
president’s Russian links. A tip-off from 
the Australian government in July 2016 did 
that. The Mueller investigation, which 
emerged from the original FBI investiga- 
tion, made almost no mention of the alle- 
gations from the Steele dossier. Instead, it 
focused on the activities of various of Mr 
Trump’s associates, who certainly did meet 
Russian officials, and also communicated 
with WikiLeaks over the release of emails 
hacked from the Democratic National 
Committee by the Russian state. A biparti- 
San Senate report released last year as- 
sessed that Mr Trump was aware of this. In 

New nukes 

Energy deficient 


The Economist November 13th 2021 

April, the Treasury department sanctioned 
an associate of Paul Manafort, one of Mr 
Trump’s campaign managers, for feeding 
information to Russian intelligence. 

So Mr Durham has very much not exon- 
erated Mr Trump from having shady deal- 
ings with Russia. But he has underlined 
that the most lurid allegations were, at 
best, unsubstantiated rumour. That is em- 
barrassing to the FBI, which used the Steele 
dossier in part to justify a wiretap on one 
Trump adviser, Carter Page. 

But it is also damning of many journal- 
ists and Democrats. The Steele dossier was 
presented by many in the more left-lean- 
ing media as a highly credible investiga- 
tion by a highly respected British former 
spook, involving “deep cover sources in- 
side Russia” (in the words of one MSNBC 
anchor). In fact it was outsourced to people 
outside Russia such as Mr Danchenko, who 
seemingly gathered information by read- 
ing newspapers and drinking with pals. 

What happens next? Mr Durham’s in- 
vestigation has been going on for over two 
years and, so far, has produced only three 
indictments: as well as Mr Danchenko, 
there is Michael Sussmann, a cyber-securi- 
ty lawyer also alleged to have made false 
statements to the FBI, and ajunior FBI law- 
yer who has admitted altering a document 
to strengthen a wiretap request. There may 
well be more. Yet the main outcome of the 
investigation will be to help Mr Trump 
move the conversation about his Russian 
links on from his own actions to the ten- 
dency of liberal journalists to believe the 
absolute worst about him. For the former 
president, that is a pretty good result. 

Will the climate crisis force America to reconsider nuclear power? 

HE DIABLO CANYON nuclear power 
yore lies about 200 miles north of Los 
Angeles on California's central coast. Its 
twin reactors sit between the Pacific Ocean 
on one side and emerald hills on the other. 
The Golden State’s only remaining nuclear 
plant provides nearly 9% of its electricity 
generation, and accounts for 15% of its 
clean-electricity production. Yet despite 
California’s aggressive climate goals anda 
national push to reach net-zero emissions 
by 2050, Diablo Canyon is set to close down 
by 2025. A new report from researchers at 
Stanford University and the Massachusetts 
Institute of Technology (MIT) reveals just 
how detrimental that would be. 

Diablo Canyon came online in 1985 and 

has operated without incident. But the 
plant is controversial. Diablo sits near sev- 
eral major fault lines, and locals have long 
feared that an earthquake could trigger a 
nuclear disaster. America’s Nuclear Regu- 
latory Commission (NRC) ordered utilities 
to evaluate their plants for flooding and 
seismic risk after the meltdown at the Fu- 
kushima Dai-ichi nuclear plant in Japan in 
2011. Diablo Canyon was found to be safe. 
Even so, in 2018 the California Public 
Utilities Commission approved a proposal 
put forward by Pacific Gas & Electric, the 
State’s largest utility and the operator of Di- 
ablo Canyon, and environmental and la- 
bour groups to close the plant. PG&E ar- 

gued that there was reduced demand for >> 

The Economist November 13th 2021 

Nuclear nipples nixed 

» nuclear power because of the promise of 
renewables, such as wind and solar, and 
the growth of “community choice aggrega- 
tors’, which allow local municipalities to 
decide where they get their power from. 

Three things have changed since then. 
First, California passed SB1ioo in 2018, 
which requires the state to achieve 100% 
clean-power generation by 2045. Second, 
the south-west is suffering from what pa- 
leoclimatologists think is its second-worst 
megadrought in 1,200 years. Reservoirs 
across the region are drying up, limiting 
the supply of hydroelectric power. Just 1% 
of California’s in-state power generation 
came from hydro in 2020, a 44% drop from 
2019 (see chart). Electricity from clean-en- 
ergy sources (including nuclear) made up 
51% of California’s power generation last 
year, down from 57% in 2019. 

Third, a heatwave in August of 2020 led 
to rolling blackouts across the state as de- 
mand for electricity (to power air-condi- 
tioners) outpaced supply. California’s pub- 
lic utilities commission is scrambling to 
meet increased demand. The regulator re- 
cently ordered utility companies to buy up 
renewable energy and battery storage to try 
to offset the impending loss of Diablo. 

These three trends led researchers to 
ponder how keeping the plant running 
might change California’s energy outlook. 
They found that to Keep it going to 2035, 
ten years past its current operating licence 
issued by the NRC, would cut emissions, 
bolster the grid’s reliability and save the 
state $2.6bn. The analysis shows that Dia- 
blo’s continued operation would reduce 
the carbon emissions from power genera- 
tion by 1% each year from 2017 levels. And 
unlike wind and solar power, nuclear ener- 
gy provides a stable source of electricity 
unaffected by changes in weather. 

The researchers also suggest that Diablo 
could potentially help California make its 
power sector greener and tackle water 
Shortages by producing hydrogen or po- 

wering a Salt-water desalination plant in 
addition to generating electricity. “You 
cannot afford to take technology solutions 
off the table’ when pursuing net-zero 
goals, says Jacopo Buongiorno, one of the 
authors and a nuclear scientist at MIT. “All 
of the above is really the best strategy.” 

It is one thing to prove Diablo’s value, 
and quite another to reverse its retirement. 
A law aimed at protecting marine ecosys- 
tems would force the plant to replace its 
water-intake system, which cools its reac- 
tors, with anew system that reduces the in- 
take flow rate by 93%. It would also require 
PG&E to reopen its 2018 settlement and re- 
license the plant, which can be an onerous 
process; or sell Diablo to another utility. 

Fission impossible? 

The debate over Diablo Canyon reflects the 
recent rebranding of nuclear. Steve Nesbit, 
president of the American Nuclear Society, 
says three things happened in the 2000s to 
puta damper on nuclear power in America: 
fracking took off, the financial crisis of 
2007-08 lessened demand for electricity 
and the Fukushima accident spooked poli- 
ticians. The plants that were commis- 
sioned were delayed and over-budget. Yet 


Power hungry 

California, in-state electricity generation 
By power source, % of total 

~ Other 

™M Nuclear MHydro ~~ Wind ® Solar 


Natural gas | 
i i 0 
PAN 5S it SG, 

Source: California Energy Commission 

United States 37 

evidence shows that when nuclear reactors 
shut down, polluting fossil fuels make up 
the difference. 

Even while plants are being shut down, 
nuclear power is gaining in appeal. Envi- 
ronmental groups have long been sceptical 
of nuclear because of the toxic waste it pro- 
duces, or because they were against nuc- 
lear weapons. Jessica Lovering, the foun- 
der of Good Energy Collective, which aims 
to build the “progressive case for nuclear 
energy’, Says today’s climate activists are 
more pragmatic, and focused on nuclear’s 
lack of carbon emissions. She cites the 
Sunrise Movement as a group that is not 
necessarily pro-nuclear, but is against 
closing down existing plants. 

Nuclear is responsible for nearly 20% of 
America’s power generation and about half 
of its clean energy. A survey from ecoAmer- 
ica found that 56% of Democrats supported 
nuclear power in 2020, up from 37% in 
2018. “Young people these days maybe 
don't bring with them the baggage of their 
parents and grandparents, who were raised 
during the cold war, in their view of nuc- 
lear power,’ says Mr Nesbit. 

Policy is slowly catching up. Pro-nuc- 
lear groups point to the use of “clean elec- 
tricity” or “zero-carbon” language in state 
and federal climate targets as a way to leave 
the door open for nuclear, rather than re- 
quiring renewables. Jennifer Granholm, 
President Joe Biden’s energy secretary, told 
a crowd at COP26, the global climate con- 
ference in Glasgow, that nuclear energy is 
an “essential tool” in decarbonising the 
grid. Republicans and Democrats alike are 
excited about the potential for converting 
coal plants into nuclear power stations. 
When TerraPower, a company founded by 
Bill Gates, announced that it would builda 
nuclear reactor at the site of a closing coal 
plant in Wyoming, Ms Granholm, the 
State’s Republican governor and its senior 
senator were in attendance. The federal 
government is also subsidising the project 
to the tune of $80m. 

But nuclear power still faces several ob- 
Stacles. Experts say the biggest is the pro- 
hibitive cost of building a new plant. New 
designs, such as TerraPower’s, may help 
with this. Many states, including Califor- 
nia, also have de facto bans on building 
new reactors until radioactive waste can be 
permanently disposed of. The federal gov- 
ernment tried for decades to build a nuc- 
lear waste repository at Yucca Mountain in 
southern Nevada, but met stiff resistance 
from local politicians who didn’t want the 
stuff buried in their backyard. 

The first of Diablo’s reactors will lose its 
licence in 2024. The report’s authors hope 
the Golden State will come to its senses be- 
fore then. “The circumstances have 
changed,” says Ejeong Baik of Stanford. 
“Diablo Canyon presents an opportunity,’ 
she adds. Will California take it? @ 

38 United States 

Lexington | Latin hex 

The Economist November 13th 2021 

A large minority of Hispanic voters support Trump populism. This looks catastrophic for the left 

HEN DONALD TRUMP descended his elevator six years ago 
V / and inveighed against Mexican rapist immigrants, it was as- 
sumed that Hispanic voters would take offence. But a short hop 
across the Hudson river, in heavily Hispanic Passaic City, Angel 
Castillo loved what he heard. “Trump kept it real,” recalled the 43- 
year-old immigrant, over a cup of strong Dominican coffee in his 
one-room family restaurant, El Primito. “He didn’t say all Latinos 
are rapists. He said a lot of those coming over the border are rapists 
and drug-dealers and he’s right.” 

Though a registered Democrat, Mr Castillo resolved to vote Re- 
publican thenceforth. Many of his relatives (a few of whom are 1l- 
legal immigrants) were horrified: “People said you re crazy, you're 
voting for a racist.” Yet his wife, mother, brother, sister and teen- 
age daughter followed his lead. This puts them in the most in- 
triguing, hotly studied and potentially decisive cohort in Ameri- 
can politics: Hispanic Trump voters. 

Their emergence as a major electoral force was the big surprise 
of last year’s election. It saw a huge turnout by Hispanic voters, 
helping Joe Biden to victory in Arizona and Nevada. Yet it also fea- 
tured a pronounced Hispanic tilt to Mr Trump. Initially thought to 
have been a localised phenomenon—which cost Mr Biden Florida 
and any hope of victory in Texas—it turned out to be nationwide. 
With around 38% of the Hispanic vote, Mr Trump won a higher 
Share than any recent Republican presidential candidate apart 
from George W. Bush, a pro-immigrant Texan, in 2004. And last 
week's elections in New Jersey—including Governor Phil Mur- 
phy’s brush with political death—suggests the shift may endure. 

Passaic City, a decaying factory-town where seven in ten voters 
are Latino, helps illustrate it. In 2016 Mr Trump won 22% of the 
vote there, almost the same as Mitt Romney had. Four years of re- 
lentless immigrant-bashing and race-baiting later, he bagged 36%. 
Mr Murphy’s Republican challenger, Jack Ciattarelli, appears to 
have held on to that gain; when vote-counting finishes, a third of 
the commissioners of Passaic County could be Republican. 

The overarching explanation for this development is suggested 
by the many alternative cuisines, Mexican, Colombian, Peruvian, 
Venezuelan, Puerto Rican, available within a few steps of El Primi- 
to. Hispanics are incomparably more diverse than the earlier 

waves of immigrants—Irish, Italian, Polish, Hungarian—who 
turned Passaic from aigth-century fur trading-post into an indus- 
trial hub. They also lack the labour unions that bound those 
hordes into the Democratic fold. The assumption that Mr Trump’s 
xenophobic rhetoric would make Hispanics recoil in unison took 
too little note of their differences. While some have done so—es- 
pecially young, college-educated Hispanics—the extreme polar- 
isation of the Trump era has pushed others to the right. 

Ronald Reagan quipped that hard-working, religious, commu- 
nism-hating Hispanics were Republican even if they didn’t know 
it. In his different way, Mr Trump has hammered those same is- 
sues. He endeared himself to Miami’s Cuban exiles by calling the 
Democrats socialists. His claim to defend Christianity wooed His- 
panic evangelicals everywhere. Hector Fernandez, a 69-year-old 
evangelical minister in Passaic, was another first-time Republican 
voter in 2016. “I don't love the Republicans but my Christian values 
compel me to vote for them,” he said—and estimated that over half 
his congregation voted for Mr Trump last year. 

The former president’s strong ratings on the economy, based 
on his wealth and claim to be a job-creating genius, also attracted 
the community. “Imagine coming to America from a poor country 
and seeing Trump’s name on a building!” says Passaic’s thoughtful 
mayor, Hector C. Lora, a son of Dominican immigrants. Mr 
Trump’s pivot to raging against economic lockdowns after co- 
vid-19 hit probably increased that advantage. Hispanics typically 
own small businesses, which were hard-hit by the lockdowns, the 
mayor noted. They also have reason to dislike government diktat. 

The excesses of Latin politics perhaps also made it easy for 
some Hispanics to shrug off Mr Trump’s bigotry. “We are used to 
vitriolic rhetoric,’ says Mr Lora. Yet others liked it—as Mr Castillo 
illustrates. “Immigrants used to come here to work,” said the res- 
taurateur. “Now they come here and jump straight into govern- 
ment assistance, just like other races in this country.” You need 
not be Anglophone or America-born to find Mr Trump’s white na- 
tionalism and nativism seductive. And Hispanic Trump fans are 
just as easily radicalised as whites. Mr Castillo is a covid anti-vaxx- 
er who suggests that Mr Biden’s election was not on the level. 

It is hard to exaggerate the importance of this development. Re- 
publican strategists had considered Mr Trump’s chauvinism in- 
compatible with the coalition-expanding embrace of diversity 
many recommended after Mr Romney’s defeat. But it appears not 
to be—and for Democrats that looks disastrous. 

The party’s decades-long decline in the white, conservative 
and electorally crucial Midwest appears irreversible. Even if it 
could excise its leftist fringe—a kiss of death in such places— 
mainstream liberal causes such as minority, immigrant and re- 
productive rights are too toxic there for Democrats to progress. To 
remain competitive, they must therefore build new strongholds 
in diverse states such as Florida and Texas. But, as Mr Biden’s fail- 
ures showed, this requires them to maintain Obama-esque levels 
of Hispanic support. 

The dwindling Democratic majority 

Harping on immigration reform, the Democrats’ default response, 
will not deliver that. Millions of Hispanics are hardly concerned 
with the issue. Yet itis hard to identify a liberal approach to the di- 
verse and fracturing Hispanic community that would be more 
popular. Democrats had hoped Hispanics would compensate for 
the illiberal drift of working-class whites. Yet a sizeable minority 
of them appear to be following the same inexorable course. 

The Americas 

How to be a dictator (1) 

By the book 


The Economist November 13th 2021 

Six ways Nicolas Maduro has subverted democracy in Venezuela 

(47 DON’T SEE how Nicolas Maduro has the 

hvaiarins to stay for an extended time 
in government,’ said Henrique Capriles, a 
former presidential candidate, in 2013. “It’s 
near the end for Maduro,” concluded Ian 
Bremmer, a political scientist, in 2017. “Ma- 
duro’s days are numbered,’ promised Mike 
Pompeo, then the United States’ secretary 
of state, in 2019. 

Venezuela's president has had the satis- 
faction of proving them all wrong. Mr Ma- 
duro’s demeanour during broadcasts on 
State Tv these days is one of avuncular 
calm. In October he took viewers on a tour 
of the presidential palace to show off gar- 
ish Christmas decorations. “How cute!” he 
exclaimed, as he pointed at a plastic deer. 

Such festive cheer is rare outside the 
palace. Mr Maduro has overseen one of the 
worst recessions in world history. Under 
his incompetent management, Venezue- 
la’s economy has shrunk by 75%. Some 6m 
people have emigrated: more than a fifth of 
the population. If fair elections for presi- 
dent were held, it is almost inconceivable 

that he would win. His support in opinion 
polls hovers near 15%. But Mr Maduro 
doesn't let the little people tell him what to 
do. Over the past five years his regime has 
turned from somewhat authoritarian to 
blatantly so. When Venezuelans go to the 
polls for municipal elections on November 
21st, it is highly unlikely that the opposi- 
tion—who, for a change, are taking part— 
will get very far. Here are six steps Mr Ma- 
duro has taken on the path to autocracy. 

Step by step 

Most importantly, he has continued and 
extended the subversion of institutions 
that began under his predecessor, Hugo 
Chavez, who was president from 1999 to 
2013. After Mr Maduro’s United Socialist 
Party lost control of parliament in 2015 (in 

> Also in this section 
40 Daniel Ortega clings on in Nicaragua 

42 Bello: Jair Bolsonaro’s fiscal mess 

what most observers rate as the last re- 
motely fair election), various measures 
were put in place to stop the opposition 
from achieving anything. The Supreme 
Court was stuffed with loyalist judges. In 
2017 the elected parliament was dissolved 
and replaced with a rubber-stamp constit- 
uent assembly. The parliament was later 
re-established, with a socialist majority, 
after an unfair election. The electoral au- 
thority which oversaw all these changes is 
flagrantly biased. 

Meanwhile, the regime has tightened 
its grip on broadcast media. Private chan- 
nels are run by people who sympathise 
with the regime or who have decided to toe 
the line. The government has closed down 
almost all newspapers. Opposition parties 
are meant to be given equal access to the 
media ahead of elections, such as those in 
November, but in practice they are almost 
completely excluded. An analysis of recent 
coverage by the main state-owned televi- 
sion channel found that the opposition 
was not mentioned at all on three of the 
nine days examined. The rest of the time it 
is referred to only briefly and disparaging- 
ly, as “radical” or “extreme”. Several web- 
sites that are critical of Mr Maduro’s re- 
gime are blocked. 

Having inherited his job from a military 
man who was both the perpetrator (1n 1992) 
and target (in 2002) of attempted coups, Mr 
Maduro is keen to avoid any similar un- 

pleasantness. Chavez, while president, >> 

40 The Americas 

> created an army loyal to himself, not Vene- 
Zuela. Mr Maduro gets help from Cuban 
spies to find and purge potentially trouble- 
some Officers. “Believe me, he can be total- 
ly ruthless if he needs to be,” says a former 
government official. 

Dozens of officers have been locked up. 
Some have allegedly been tortured. Last 
month General Raul Baduel died in a de- 
tention centre run by the security services. 
A former defence minister, who helped re- 
instate Chavez as president after the coup 
plot in 2002, he began to disagree with his 
former boss in 2007. For most of the rest of 
his life he was imprisoned on unproven 
corruption charges, despite pleas from his 
family for mercy. His daughter says he was 
murdered. (The government says he died 
of covid-19.) 

Officers who support the regime tend to 
prosper. Under Mr Maduro, the armed 
forces have informal control of gold- and 
diamond-mining, for reasons no one can 
quite explain. Venezuela's oil industry is 
not as lucrative as it used to be, thanks to 
Sanctions and mismanagement, but the re- 
gime has other ways to reward loyalty. One 
is to grant cronies permission to build 
homes in national parks. Officers and offi- 
cials are thought to be among the owners 
of lavish mansions that have sprouted in 
areas supposedly off-limits to construc- 
tion, including the Caribbean archipelago 
of Los Roques and the supposedly protect- 
ed mountain above Caracas. 

Some speculated that when Mr Maduro 
wrecked the economy, it would provoke a 
mass uprising against his regime. It did 
not. Many of the angriest and most ener- 
getic Venezuelans fled abroad, and now 
send home cash that helps their relatives 
Survive. Those who stayed have become 
increasingly dependent upon the state. If 
they were to rebel, they fear it would let 
them starve. In 2016 Mr Maduro introduced 
bi-monthly hand-outs of food. To qualify, 
recipients need to have an identity card 
which party loyalists often inspect on elec- 
tion days. The message is clear: with loyal- 
ty comes food. 

Perhaps Mr Maduro’s most surprising 
move has been his embrace of the us dol- 
lar. Having previously denounced the cur- 
rency as an imperialist tool, he now says 
“thank God” it exists. The change hap- 
pened in 2019, during a six-day power cut 
which made electronic payments impossi- 
ble. That forced people to accept the dollar, 
technically in breach of the law. Since then, 
the regime has abandoned price controls 
and a fixed exchange rate and instead em- 
braced the greenback. As of June around 
70% of transactions were carried out in 
dollars. The policy has reduced annual in- 
flation from a peak of over 2,000,000% in 
2019 to under 2,000%, which by Mr Madu- 
ro’s standards is a Success. 

The use of dollars has helped simplify 

the sending of remittances. It has also 
made life for middle-class folk slightly 
more tolerable. Across the country, casinos 
are being re-opened. In the relatively 
wealthy bubble of eastern Caracas hard- 
currency stores sell everything from de- 
signer ski-wear to organic maple syrup. 
Cynics call the process pax bodegonica, or 
peace through delicatessens. 

Unlike, say, Saudi Arabia or Afghani- 
stan, Venezuela still pretends it is ademoc- 
racy. At the start of the 24-day campaigning 
period before the elections this month Mr 
Maduro implored people to participate. 

How to be a dictator (2) 

A family affair 

The Economist November 13th 2021 

Voting was “the best demonstration of love 
for Venezuelan democracy”. But his regime 
has also shown that, when it is at risk of 
losing an election, it will cheat, ignore the 
results, or both. 

The tactic has not only enabled the re- 
gime to survive. It also appears to have con- 
vinced a lot of Venezuelans that democracy 
does not work. In a survey in October by 
the Andrés Bello Catholic University in Ca- 
racas, just half of respondents said democ- 
racy was their preferred form of govern- 
ment, a fall of 18 percentage points since 
Mr Maduro took office. @ 

Daniel Ortega steals the election in Nicaragua 

ONTHS BEFORE the polls in Nicaragua 
M on November 7th the outcome was all 
too clear. Daniel Ortega, a former guerrilla, 
won his fourth consecutive term as presi- 
dent after jailing most of his potential op- 
ponents and forcing others into exile. With 
his vice-president, Rosario Murillo, who is 
also his wife, he will rule the country of 
6.6m for an unbroken two-decade stretch. 

“The election had no legitimacy,” says 
Maria Lilly Delgado, a journalist. Hard men 
from the ruling Sandinista party, who had 
gone from house to house telling people to 
vote, hung out at polling booths, menac- 
ingly. President Joe Biden denounced the 
poll as “a pantomime”. Several countries 
have refused to recognise the result. One 
organisation reckons that 80% of Nicara- 
guans boycotted the vote. 

In the run-up to the election the regime 

acted with a brazenness not seen in Latin 
America since the 1970s and 1980s, an era of 
military dictatorships. Since May it has ar- 
rested at least seven potential presidential 
candidates and scores of other critics, in- 
cluding former Sandinista comrades, 
charging them with vague offences such as 
“undermining sovereignty”. They include 
Cristiana Chamorra, the daughter of Viole- 
ta Chamorra (to whom Mr Ortega lost in 
1990 after his first stint in power). At the 
time of her arrest she was the most popular 
opposition politician, and might have won 
the election, had it been fair. 

The regime spreads disinformation. On 
November ist Facebook said that, in the 
month before, it had shut down a “troll 
farm” of more than1,o000 fake social media 
accounts operated by state employees. 
Most media are controlled by the children 
of the Ortegas or their allies. Independent 
journalists are mostly in exile. 

All this is the culmination of years of 
creeping authoritarianism. Mr Ortega 
looks more and more like Anastasio Somo- 
Za, the widely loathed dictator the Sandi- 
nistas overthrew in 1979. In 2000 he 
changed the law so that the presidency can 
be won with as little as 35% of the vote. This 
let him return to power in 2007. He subse- 
quently increased his control over the po- 
lice, armed forces and the courts. 

Since 2018 the regime has relied more 
on brute force, says a political scientist 
(who, like many Nicaraguans, did not want 
to be named in this article). That year thou- 
sands of young people took to the streets to 
protest against proposed changes to wel- 
fare payments. Police and pro-regime 
thugs opened fire on them. More than 300 
people died. Many more were locked up. 

Political prisoners are deprived of food and b> 



Subscriber-only live digital event 

Tht WORLD Ait 

Thursday November 18th 
6pm GMT / 1pm EST / 10am PST 


Sharpen your foresight with Tom Standage, 
deputy editor of The Economist and editor of 
The World Ahead, as he explores a provocative 
vision of the future. Tom will take viewers 
through his predictions and highlight the 

big issues and trends to think about in the 
coming year. 

Please submit your questions in advance to: 

2] Reserve your space: 

. rd ai = 


42 The Americas 

» subjected to constant bright lights. 

Since the regime has shown its willing- 
ness to kill, most Nicaraguans are now too 
scared to take to the streets to protest. But 
it was an important sign that so many ab- 
stained from the vote, thinks Ms Delgado. 

The ruling couple will shrug off criti- 
cism from abroad. The United States and 
the European Union have already imposed 
Sanctions on the regime’s inner circle, in- 
cluding Ms Murillo and at least three of the 
couple’s nine children, and may add more. 
Mr Biden’s administration is considering 
expelling Nicaragua from Central Ameri- 

ca’s free-trade agreement, but rather than 
harm Mr Ortega, that would mostly affect 
the lives of ordinary folk. 

The Biden administration faces a quan- 
dary. It does not want to destabilise the 
country and send more Nicaraguans flee- 
ing. Since 2018 at least 80,000 have re- 
quested asylum in Costa Rica, the nearest 
place of refuge. Almost 50,000 were appre- 
hended at the United States border this 
yeal, up from just over 2,000 in 2020. 

Several leaders in Latin America have 
refused to condemn Mr Ortega; some be- 
cause they like his methods. Nicolas Ma- 

Following the money 

Jair Bolsonaro ts bad for Brazil’s economy 

N SEPTEMBER 2019 Paulo Guedes, Bra- 
Lis economy minister, told Congress 
that it could “make history” by keeping 
the budget under control, adding that 
“the political class shouldn't be chasing 
ministers, begging for money.’ Now Mr 
Guedes is backing an underhand govern- 
ment attempt to bypass the constitution- 
al cap on public spending set in 2016, 
which was a crucial step towards righting 
the country’s finances. He and Jair Bolso- 
naro, the president, are presiding not 
just over a return to fiscal incontinence 
but also to other economic ills that have 
dogged Brazil: rising inflation, high 
interest rates and low growth. And the 
budget shenanigans have in turn created 
uncertainty about the future of the coun- 
try’s flagship social programme. 

In the election in 2018 Mr Bolsonaro’s 
alliance with Mr Guedes, a free-market 
economist, did much to persuade busi- 
ness people to vote for a former army 
officer of the hard right who had never 
before shown any interest in liberal 
economics. Mr Guedes promised radical 
reform of Brazil's swollen and inefficient 
State. But this pledge has resulted only in 
some useful savings on pensions, legal 
independence for the central bank and 
minor regulatory simplifications. Now 
the reform drive is over, replaced by Mr 
Bolsonaro’s scramble for money to buy 
political support and popularity. 

To stave off impeachment over his 
mismanagement of the pandemic and 
his family’s misdeeds (which they deny), 
Mr Bolsonaro allied with the centrdo, a 
big coalition of conservative pork-barrel 
legislators. When covid-19 struck the 
government declared “a state of calami- 
ty’, allowing it to offer big temporary 
handouts despite the spending cap. 
Poverty fell in Brazil in 2020, bucking the 
regional trend, and Mr Bolsonaro’s pop- 

ularity rose. In March the government 
won an emergency constitutional amend- 
ment, punching a hole in the spending 
cap, to allow at least some payments to 
continue. Now the president’s plunging 
approval rating is reducing his chance ofa 
second term in next year’s election. 

A new constitutional amendment 
would punch two further holes. It would 
allow the government to delay making 
payments ordered by courts (such as 
refunding excess taxes collected). And it 
would exploit a recent leap in prices by 
indexing the budget to December's annual 
inflation figure (likely to be over 10%) 
rather than to June's (8.4%). These chang- 
es would give the government an extra 
100bn reais ($18.2bn) to play with next 
year, reckons Marcos Mendes, a former 
economic adviser to the Senate. 

Some of this money would go to Auxi- 
lio Brasil, arevamped anti-poverty pro- 
gramme. This will incorporate Bolsa Fami- 
lia, the successful anti-poverty scheme 
launched in 2003 by the president at the 
time, Luiz Inacio Lula da Silva. But it will 
add complexity and uncertainty to it, 

The Economist November 13th 2021 

duro, Venezuela's despot, congratulated 
Mr Ortega on his win. Mr Maduro’s regime 
has provided cash to help the Ortegas con- 
solidate their control of the media. Cuba’s 
communist regime, too, has sent words of 
support. Cuban police have helped train 
their Nicaraguan peers in “self-defence” 
and interrogation techniques. Farther 
afield Sergey Lavrov, Russia's foreign min- 
ister, harrumphed at Mr Biden’s criticism 
of the election. (His country supplies 90% 
of Nicaragua’s military imports.) With 
friends like these, Mr Ortega and Ms Muril- 
lo’s grip On power Seems Secure. 

notes Marcelo Neri, a poverty specialist 
at the Getulio Vargas Foundation, a 
think-tank. The government has raised 
the average permanent benefit by 18%, to 
217 reais per month. However, Mr Neri 
points out that inflation had eroded 32% 
of its real value since 2014. Mr Bolsonaro 
has also promised a temporary bonus, so 
that all17m families in the scheme will 
get at least 400 reais a month, but only 
until December 2022. Not coincidentally, 
that is just after the election. 

Another large chunk of the extra 
money would go on less worthy causes, 
including around 18bn reais to finance 
opaque budget amendments that grant 
overpriced public-procurement con- 
tracts to individual legislators in return 
for their support for Mr Bolsonaro. These 
were an innovation devised by the cen- 
trdo. This week a majority of the Supreme 
Court ruled these secret clauses illegal. 
That did not stop the lower house of 
Congress approving the constitutional 
amendment on November oth. Whether 
it will get through the Senate is unclear. 

Either way there will be costs. Defeat 
would cast doubt on the financing of 
Auxilio Brasil in the future. But victory 
would be pyrrhic. Four of Mr Guedes’s 
Senior aides resigned last month because 
they opposed the amendment (the offi- 
cial gloss was for “personal reasons’). 
Concern about fiscal policy is the “main 
fuel for inflation”, says Zeina Latif, an 
economist in Sao Paulo. The purpose of 
the spending cap was to halt the re- 
morseless rise in public spending to 
satisfy insiders, which is neither re- 
distributive nor efficient in overcoming 
the bottlenecks that hold back growth. 
Its weakening shows that Mr Bolsonaro 
is not just bad for the environment, for 
human rights and for democracy, but 
also for Brazil’s economy. 

ee ol oe 

\ ull 

Manufacturing a green revolution 


South Korea’s industrial centres will have to transform or disappear 

(4 F WE DO well, the country does well, 

Land if the country does well, that is the 
way for us to do well,” reads the inscription 
on the walls of the former Hyundai Heavy 
shipyard in Gunsan on South Korea's west 
coast. The quote from Chung Ju-yung, the 
late founder of Hyundai, one of the coun- 
try’s biggest conglomerates, is an apt sum- 
mary of South Korea’s development strat- 
egy. Equating manufacturing prowess with 
the national interest drove the massive 
State-led investment in heavy industry 
that made South Korea rich. 

Today the fading letters are an ominous 
sign of things to come. Four years ago the 
Hyundai shipyard and the GM car factory in 
Gunsan shut within ten months of each 
other, resulting in the loss of tens of thou- 
sands of jobs. There is a risk of more such 
devastation in the future. The country’s in- 
dustrial behemoths have no clear plan to 
eliminate greenhouse-gas emissions by 
2050, which the government has promised 
to do. How they do so will determine the 
future not just of South Korea’s industries 
but of its industrial cities, too. 

South Korea’s coastal cities are the most 

visible markers of the country’s rapid in- 
dustrialisation. Starting in the 1960s, slee- 
py fishing ports and trading posts turned 
into sprawling industrial centres, filled 
with shipyards, car factories, steel mills, 
oil refineries and container terminals. In- 
dustry generates 37% of GDP, compared 
with the rich-country average of 27%, and 
more than 80% of exports. GDP per person 
in Ulsan, the most important industrial ci- 
ty, is 75% higher than the national average. 
At a museum in the city you can wander 
around model versions of industrial in- 
Stallations to take in the story Ulsan wants 
to tell about itself. “We went from a GpP of 
$100 per person to this,’ beams Shin 
Hyeong-seok, the museum’s director. 

But as South Korea joins the rest of the 

44 Anewcurriculum in Bangladesh... 
45 ...andin Pakistan 
45 Theciviliansin Myanmar’'s junta 

46 Banyan: Playing Goin the Himalayas 

world in the effort to curb climate change, 
its centres of heavy industry are turning 
from drivers of growth into liabilities. 
Their reliance on fossil fuels is one reason 
why South Korea is the world’s seventh- 
biggest emitter of greenhouse gases. Presi- 
dent Moon Jae-in has promised to reduce 
emissions by 40% below 2018 levels by 
2030, and that South Korea will be carbon- 
neutral by 2050, a target that was written 
into law in August. 

Environmental groups point out that 
Mr Moon’s targets are still insufficient to 
meet South Korea’s commitments under 
the Paris agreement. The government itself 
freely admits that it is lagging behind other 
rich countries in reducing emissions. But 
the announcement has alarmed industry 
representatives. They warn of production 
cuts and large-scale job losses unless busi- 
nesses are given more time and support to 
reach the targets. 

The transition to a low-carbon econ- 
omy, if pursued seriously, will be the big- 
gest challenge for manufacturers since the 
transition from light to heavy industry in 
the 1970s, says Park Sang-in, an economist 
who focuses on South Korea’s conglomer- 
ates at Seoul National University. The fact 
that South Korea is so late to the game 
makes the task harder, because bigger re- 
ductions will now have to happen over a 
shorter period of time. 

If the government is to achieve its tar- 
gets, carbon-intensive manufacturing in- 
dustries will have to reduce their emis- 
sions by as much as 80% over the next! 

44 Asia 

» three decades (what carbon is still emitted 
will have to be captured and stored in facil- 
ities yet to be developed). De-industrialis- 
ing and shifting towards less energy-in- 
tensive services would be one way to 
achieve that. But given the importance of 
manufacturing to the economy, the conse- 
quences for workers and the industrial 
centres where they live would be devastat- 
ing. The only alternative is for industries to 
change. “We do not want to lose the role 
these industries play in the economic 
growth process, so it is critical that they be 
transformed,’ says Kang Sung-jin, who 
studies industrial development at Korea 
University in Seoul. 

What will this transformation look 
like? Factories that make petrol and diesel 
cars will have to switch to making batteries 
and electric vehicles. Shipbuilders will 
have to produce carriers that run on green- 
er fuels, and the petrochemical industry 
will have to provide those fuels. Steel fur- 
naces will have to run on something other 
than coke made from coal. Electricity for 
both industry and households, now pro- 
duced mostly by coal-fired power stations, 
will have to come from renewable sources. 

Just as during the switch from light to 
heavy industry, the change will be most 
visible in industrial cities. In the future the 
government envisions, places like Ulsan 
and Gunsan will be connected to huge off- 
shore wind farms and covered in solar pan- 
els. Green hydrogen will power next-gen- 
eration container ships and carbon-neu- 
tral steel furnaces. 

Just reinvent yourself 

The government's most recent plans have 
Spurred companies into action. Yet the 
lack of preparation means that the road to 
net zero is likely to be bumpy, with indus- 
tries vulnerable to shocks. Moreover, there 
is no guarantee that the pledges will sur- 
vive the next election. Climate change is 
not yet a big issue in the presidential-elec- 
tion campaign, and the next government 
may not feel the need to keep up pressure 
on the conglomerates. 

That means that many of South Korea's 
industrial centres could end up looking 
more like Gunsan, as investment in green 
tech yields results in other countries and 
higher emissions render some of South 
Korea's industries obsolete. Government 
efforts to get Gunsan’s laid-off workers 
into new employment have progressed on- 
ly sluggishly. Thousands have left the city. 

At the site of the old colonial port, 
where city officials have launched a series 
of urban-regeneration projects, visitors to 
a large ship-shaped museum can relive the 
experience of trading rice in a 1930s ver- 
sion of the city. Unless South Korea’s green 
economy gets whirring, the museum in UI- 
San on the opposite coast may soon ac- 
quire a similar old-timey vibe. @ 

Education in South Asia (1) 

Levelling up 

Bangladesh is making a serious 
attempt to move away from cramming 

EW IN BANGLADESH would deny that 

their country has had remarkable suc- 
cess at getting kids into classrooms. Four 
decades ago less than a third of children 
finished primary school. Today, 80% do. 
Before the pandemic, more Bangladeshi 
girls than boys attended high school. In In- 
dia and Pakistan, the reverse is true (see 
story on next page). 

Improving the quality of education has 
proved trickier. More than half of Bangla- 
deshi ten-year-olds in school are not profi- 
cient in reading, according to the World 
Bank, and more than a quarter of those 
aged between 15 to 24 are not in education, 
employment or training. A year and a half 
of pandemic-related school closures have 
made matters worse. 

In some respects, unimpressive out- 
comes have not held back Bangladesh. The 
economy has been growing at an annual 
rate of 6% for the past decade, reaching 8% 
before the pandemic. The two main drivers 
of growth, the garment industry and remit- 
tances from overseas Bangladeshi workers, 
have boomed. But that is because labour is 
plentiful and cheap, not because it is 
skilled. Bangladeshi labourers in the Gulf 
often earn less than their Indian brethren. 
Garment workers in Dhaka, the capital, toil 
for lower wages than rivals in China. 

Sustaining growth will rely on moving 
from cheap to skilled labour, says Hossain 
Zillur Rahman of the Power and Participa- 
tion Research Centre, a think-tank in Dha- 
ka. “Those skills need to be created now,’ 
he says. The government is shaking up the 

The Economist November 13th 2021 

curriculum as a way to achieve that. The 
plans, which are due to be implemented by 
2025, focus on shifting away from mind- 
lessly memorising textbooks and regurgi- 
tating them during exams and towards 
building useful skills. All exams will be 
scrapped until third grade. Year-end public 
exams, which start in secondary school, 
will wait until tenth grade. Before that, stu- 
dents will be assessed on their knowledge 
and ability throughout the year. 

The new curriculum, which comes after 
years of consultation, including with em- 
ployers and workers, is designed to ad- 
dress the mismatch between education 
and the skills required in the economy, 
says Mohibul Hasan Chowdhury, the depu- 
ty minister for education. A choice of two 
vocational subjects from such options as 
woodwork, graphic design, car mechanics, 
child care and plumbing will be mandatory 
for high-schoolers. The government also 
plans to open more technical universities. 

Though many education experts are in 
favour of the change, some worry parts of it 
amount to trying to run before learning to 
walk. How can coding be taught well when 
“we cannot ensure numeracy and literacy”, 
asks Niaz Asadullah, an economist who fo- 
cuses on education inequality at the Uni- 
versity of Malaya in Kuala Lumpur. More- 
over, he says, tens of thousands of madra- 
sas, which are unaffected by the changes, 
have no government oversight and teach 
little beyond the Koran. 

Nor does changing the curriculum 
solve many of the other problems under- 
lying Bangladesh’s poor learning out- 
comes, says Mr Asadullah. Teachers are 
poorly paid, inadequately trained and too 
few in number. Bangladesh has among the 
largest class sizes in the region, with one 
teacher to 45 pupils in secondary school. 

Worse, the system is riddled with cor- 
ruption. Many teachers bribe their way in- 
to staying in cities, ensuring that remote 
regions get fewer teachers. Appointments 
at all levels are often based on political in- 
fluence or bribery, according to Transpa- 
rency International, an advocacy group. 
Certificates are handed out ona similar ba- 
sis. The bribe needed to secure a head- 
teacher job can be1m taka ($11,660). 

Public funds flow less easily. At 2.1% of 
GDP, Bangladesh spends less on education 
than any other South Asian country, and 
falls well short of the 4-6% recommended 
by UNESCO, the UN body responsible for 
education among other things. Mr Chow- 
dhury says that a chunk of education 
spending comes from different ministries, 
and so is unaccounted for in this figure. 

As aresult of all this, many of the curri- 
culum changes introduced over the past 
decade are yet to be implemented. The re- 
cently announced reforms are “on the pos- 
itive trend”, says Mr Rahman. But only if 
they actually happen. m 

The Economist November 13th 2021 

Education in South Asia (2) 

Levelling down 

A new national curriculum sparks a 
backlash in Pakistan 

EW IN PAKISTAN would deny that some- 

thing needs to be done to improve its 
education system. The country is well be- 
hind Bangladesh, India and Iran, and just 
barely above Afghanistan, in UN education 
rankings. Less than 60% of people over 15 
can read and write, having attended school 
on average for 5.2 years. In Bangladesh, by 
contrast, the literacy rate is 74%, with 6.2 
years of education (see previous story). 

The headline figures hide as much as 
they reveal. In the country’s elite schools, 
the children of the wealthy study in Eng- 
lish for international exams and set their 
sights on the world’s best universities. At 
the other end of the spectrum, 23m chil- 
dren are not in school at all, with girls 
much less likely than boys to be enrolled. 
Government schools, where available, 
have a reputation for rote learning. Private 
schools of varying quality fill the gap. Ma- 
ny poor families send their children to ma- 
drasas, which tend to skip subjects like sci- 
ence and maths. Some are vehicles for ex- 
tremist ideologies. Imran Khan, the prime 
minister, calls this divide “educational 
apartheid” and has vowed to get rid of it. 

Such an aim is admirable, but the tool of 
choice has come in for criticism from aca- 
demics, educators and parents. Earlier this 
year the government began rolling out a 
single national curriculum (SNC) for all 
schools, including madrasas. This set of 
minimum standards is meant to improve 
the quality of teaching and boost the pros- 
pects of pupils. But its ambitions are wider 
still. Among the objectives listed by the 
education ministry is to increase “social 
cohesion and national integration”. 

The new curriculum has so far been 
rolled out only in primary schools, but al- 
ready some of its dictates are causing a 
backlash. The sNc has increased the num- 
ber of subjects, such as general knowledge, 
which must use textbooks in Urdu or other 
local languages rather than English. Mr 
Khan, himself an old boy of Aitchison Col- 
lege, the country’s most prestigious 
school, makes his case in punchy post-co- 
lonial terms. “When you acquire English- 
medium education, you adopt the entire 
culture,” he argues, adding that “you be- 
come [a] slave to that particular culture.” 

Yet the resistance to the SNC’s imposi- 
tion of local-language learning is not just 
an elite phenomenon. There have been re- 
ports of schools unwilling to implement it. 
And there is huge demand for English from 

parents who see it as a way for their chil- 
dren to stand out in the job market, accord- 
ing to teachers. Mariam Chughtai, the di- 
rector of the national council drawing up 
the curriculum, says the aim is not to drop 
English but to elevate local languages. 
“When we think ‘multilingual’, we think 
French, German and English. But when 
you say bilingual in Urdu and English, the 
elites look down upon it,” she says. Still, 
“no one is denying the importance of Eng- 
lish. It’s here to stay.” 

A bigger complaint is that conserva- 
tives are using the curriculum to increase 
religious teaching in schools. Rather than 
turning madrasas into schools, it will turn 
schools into madrasas, charge critics. In- 
deed, the education ministry’s list of “key 
considerations” in drawing up the curricu- 
lum puts the teachings of the Koran at the 
very top. Non-Muslims need not take 
classes on Islam, but religious content is 
seeping into other subjects, such as Urdu- 
language lessons that include passages on 
Muslim caliphs. The government argues 
that there is nothing wrong with teaching 
religion in a religious country. 

The third criticism may be the most 
pertinent. Pakistan’s abysmal learning 
outcomes are not so much the result of 
content as of access, says Jasir Shahbaz, an 
educationalist in Lahore. A new curricu- 
lum will do little to fix that. “The issue is 
not so much what the kids are studying, so 
much as how many kids are actually study- 
ing, or are actually understanding what 
they are studying,’ he says. 

The battles are likely to intensify as old- 
er pupils start the new curriculum next 
year. Ms Chughtai says it will take time for 
results to show. But the furore, she says, is 
because the changes affect even the elite: 
“Any time you try to bring a major policy 
change, for the small minority of people 
for whom even the broken system was 
working, they are going to get scared.” @ 

The write stuff 


Politics in Myanmar 

How to geta 

Some civilian politicians are working 
for the murderous generals 

EFORE THE Burmese army took power 
Bin a coup last February, Aung Naing Oo 
was a well-spoken civil servant widely 
praised for spearheading economic re- 
forms under the governments of Aung San 
Suu Kyi, the country’s de facto leader until 
the coup, and her predecessor. When the 
army took over, it detained senior mem- 
bers of Ms Suu Kyi’s government. Yet Mr 
Aung Naing Oo did not just remain free. He 
was promoted by the junta to the role of in- 
vestment minister. 

Once a darling of the international 
community, Mr Aung Naing Oo, an ex-mil- 
itary officer, now speaks the junta’s lan- 
guage. He recently told Reuters that for- 
eign executives of Telenor, a Norwegian te- 
lecoms firm, had been barred from leaving 
the country because of the regime’s need to 
meet them in person. Myanmar’s current 
economic crisis, he argued, was caused in 
part by “sabotage” backed by foreign states. 

After previous coups, Myanmar’s gener- 
als did notimmediately invite civilians on- 
to their ruling councils. This time is differ- 
ent. Several civilians sit on their council, 
and in their caretaker government, too. 
Nine of 28 cabinet ministers are civilians. 
Six ministers were senior civil servants in 
the ousted government, suggesting the 
junta wants to project a sense of continu- 
ity. Eight cabinet members served under 
the presidency of Thein Sein, an ex-general 
who, between 20n and 2016, created a 
“pbusiness-friendly but military-controlled 
state’, which the junta seems to want to re- 
create, write researchers at ISEAS, a think- 
tank in Singapore. 

Why the top brass has included civil- 
lans in its government seems clear. Why 
civilians would want to work for the gener- 
als is less obvious. Some may not have had 
“much of a choice when asked by the mili- 
tary’, says Ye Salween, the pseudonym ofa 
Burmese analyst based in Yangon. They 
may also not have expected the coup to 
meet with the overwhelming public oppo- 
sition that it did. 

There are more petty reasons, too. Sev- 
eral ministers hold grudges against the 
junta’s arch-rival, Ms Suu Kyi. In 2019 she 
reassigned Mr Aung Naing Oo from the 
government’s investment agency, which 
he ran, to the investment ministry, making 
him permanent secretary. This was widely 
regarded as a demotion—though appar- 
ently not by Mr Aung Naing Oo, who says 


that it was a promotion and that he bears >» 

46 Asia 

> no ill will towards Ms Suu Kyi. 

Thet Thet Khine, the welfare minister, 
is a former lawmaker from Ms Suu Kyi's 
National League for Democracy (NLD). She 
bears “hatred” for Ms Suu Kyi, a former 
friend says, because she was made to feel 
unwelcome by Ms Suu Kyi and the NLD ov- 
er her past leadership of the country’s top 
business lobby, which engaged with previ- 
ous military regimes. The party dismissed 
her in 2018, whereupon Ms Thet Thet 
Khine became one of Ms Suu Kyi’s most vo- 
cal critics, branding her a “control freak”. 
(Ms Thet Thet Khine denies that she hates 

Ms Suu Kyi but says she’s not a “huge fan”.) 

The turncoats also claim to believe that 
the junta can do some good. The army jus- 
tified the coup by claiming that the NLD 
stole the election in 2020, even though ob- 
servers found no evidence of widespread 
fraud. Ms Thet Thet Khine says that she 
“witnessed personally that NLD cheated”. 
Days after the coup she justified working 
with the generals by arguing that the oust- 
ed government “did undemocratic things”, 
whereas the army “is doing democratic 
acts” by taking charge until it can hold a 
fair election. For his part, Mr Aung Naing 

The great board game 

How the game of Go explains China’s aggression towards India 

N THE ANCIENT Chinese game of weiqi, 

better known in the West as Go, the 
objective is not to knock out your oppo- 
nent. Taking turns to add one stone ata 
time to the board’s 361 spaces, what play- 
ers firstly seek is to build the largest, 
strongest structures, and only secondly 
to weaken and stifle enemy ones. Better 
players shun contact, preferring to parry 
threats with counter-threats. Such un- 
resolved challenges multiply, the ad- 
vantage shifting to whoever poses the 
Sharpest ones. Only when more stones 
than empty spaces fill the board can 
resolution of these tactical matters no 
longer be avoided. 

The contest between China and India 
has unfolded in similar fashion. The two 
have lately engaged in sabre-rattling and 
name-calling. But such tension has been 
rare during their seven-decade rivalry as 
modern nations. As ina game of weiqi, so 
long as India and China were focused on 
building their own core structures, each 
largely ignored the other. 

Far from their crowded coasts and 
plains, the Asian giants’ 3,500km-long 
border region remained an empty sec- 
tion of the board. It contained not people 
or resources but the world’s coldest, 
driest deserts and its highest mountains. 
India and China maintained overlapping 
claims, and their forces sometimes 
clashed, as in a brief war 1n 1962. But they 
both also judged that there was not 
enough at stake to fight a big war over. So 
territorial limits continued to be defined 
in many areas by a “Line of Actual Con- 
trol” rather than an internationally re- 
cognised boundary. By mutual agree- 
ment their border patrols went lightly 
armed. They mostly avoided contact. 

As ademocracy bound by rules, India 
has repeatedly sought to end the ambigu- 
ity by negotiating a permanent border. 

But perhaps because its strategists are 
steeped in the culture of weigi, China has 
repeatedly rebuffed such efforts. Fora 
player building formidable structures 
across the rest of the board, why foreclose 
on potential pressure points? Better to 
leave them open for use in the future, 
when you have more leverage and your 
opponent has more reason to fear you. 
Under President Xi Jinping, China 
appears to have decided that this future is 
now. At several strategic spots along the 
border in the spring of 2020, Chinese 
troops marched into long-established 
patches of no-man’s-land, setting up 
permanent forward positions. When India 
sent in soldiers to challenge the intru- 
sions, fisticuffs ensued. One clash left 
some 20 Indians and at least four Chinese 
dead. China has since refused any return 
to the status quo ante. This leaves it in 
control of lands India regarded as its own 
and, more seriously, in control of vantage 
points from which to threaten crucial 
roads and other Indian infrastructure. 
From a weigi perspective China's bold- 
ness is understandable. In the 1980s its 

The Economist November 13th 2021 

Oo may have calculated that he could bring 
about more change from within govern- 
ment than outside. 

The flaw in that argument is that the re- 
gime focuses not on good government, but 
on violently quelling resistance to its rule. 
It has killed more than 1,200 civilians so 
far, according to a local watchdog. The 
names of reformers like Mr Aung Naing Oo 
are now “manure’, says Mr Ye Salween. If 
they thought siding with the army would 
ensure their safety, they may be thinking 
again. Low-level officials are assassinated 
almost every day. @ 

economy was roughly equal to India’s. It 
is now five times bigger, and churns out 
ever-more sophisticated weaponry while 
India relies on imports. China’s infra- 
structure has expanded towards its peri- 
pheries at a speed India has been unable 
to match. 

As seen from Beijing, China’s south- 
ern neighbour looks weak in other ways. 
Its democracy is messy and inefficient. 
Narendra Modi, India’s prime minister, 
looks like a puffed-up bluffer. And even 
as China extends strength by tightening 
its alliance with India’s arch-enemy 
Pakistan, Mr Modi dithers. In his dream 
of a Hindu golden age India needs no 
allies, only weaker satellites or rich 
friends. Despite fanfare over defence 
agreements with America or Japan or 
Australia, these remain largely notional. 
India’s army has little functional inter- 
operability with any other. 

In short, as the board fills up and one 
player emerges dominant, there should 
be no surprise for it to push the advan- 
tage. But China has not yet won. Even if 
his opponent is erratic, the global game- 
board may prove wider, and India may 
turn out to have better-placed assets than 
Mr Xi realises. 

Despite Mr Modi's failings India 
retains a big reserve of goodwill asa 
democracy and a decent global citizen; it 
would gain fast allies if it really tried to 
win them. India’s core strength may run 
deeper, too. Its relative smallness is 
deceptive: the eastern third of China, 
where 95% of Chinese actually live, is no 
bigger than India. As China’s economy 
matures, India’s remains packed with 
upward potential. Besides, unlike a game 
of weiqi this contest between two great 
and ancient nations will never simply 
stop. It will keep on going long after Mr 
Xi and Mr Modi finish playing. 

The spectral game 

Despite pledging not to, China still uses hackers to steal business secrets 

ARLIER THIS year Microsoft found thata 
Press of hackers, which it called Haf- 
nium, had broken into hundreds of thou- 
Sands of computer servers around the 
world that were running the firm’s mail 
and calendar software. The cyber-thieves 
were stealing emails, documents and other 
data from small businesses, NGOs and local 
governments in an enormous, seemingly 
indiscriminate, cyber-attack. In July Amer- 
ica, Britain, other members of NATO and 
the European Union all blamed China. 
America was more specific. It named Chi- 
na’s civilian intelligence agency, the Min- 
istry of State Security (MSS). 

Such co-ordinated condemnation of 
the Chinese government for allegedly 
hacking into foreign computer systems 
was unprecedented. But it was no surprise 
in the West that China appeared to be re- 
sponsible (as always in such cases, it de- 
nied involvement). 

In 2015, standing next to Xi Jinping at 
the White House, Barack Obama said the 
two presidents had agreed that neither 
country would “conduct or knowingly sup- 

port cyber-enabled theft of intellectual 
property” for commercial gain. But cyber- 
experts say China remains hard at it. In 
September attacks allegedly mounted by 
the Chinese government included ones 
against Indian media firms, Microsoft’s 
Windows operating system and Roshan, a 
telecoms network in Afghanistan. 

Spy agencies everywhere hack into oth- 
er countries’ computer systems. What irks 
Western governments is that China also 
steals commercial secrets to pass on to its 
companies, whereas there is no evidence 
that the West’s spies collude with business 
like this. Since Mr Xi took power in 2012, 
China’s hacking capabilities have grown. 

The Chinese army’s_ signals-intelli- 
gence wing, the Third Department, used to 
be in charge of such work. It attacked 
everyone from American military contrac- 

48 Hong Kong's jailed dissidents 

50 Chaguan: Why aim for zero covid? 

tors to Google. In 2014 America’s Depart- 
ment of Justice formally accused five Chi- 
nese citizens from the Third Department's 
Unit 61398 of “computer hacking, econom- 
ic espionage and other offences” against 
American companies involved in nuclear 
and solar power as well as metal produc- 
tion. (Those charged were believed to be in 
China and have not appeared in court.) By 
then, however, control over hacking activ- 
ities was being transferred to the Mss. The 
army is still hacking, but its targets are 
now mainly government ones. 

The MSs was first publicly linked to the 
hacking of foreign companies in 2017. Its 
involvement was exposed by an anony- 
mous blog called Intrusion Truth, which 
monitors such attacks. Several cyber-secu- 
rity firms endorsed its analysis. Later that 
year the American government charged 
three alleged Mss hackers in absentia for 
attacks on foreign firms. Two of the ac- 
cused had been identified by the blog. 

Attributing cyber-attacks to China, let 
alone to specific government agencies, is 
tricky. Benjamin Read of Mandiant, an 
American firm that tries to keep tabs on 
who is hacking what, explains that he and 
his colleagues gather and analyse telltale 
tracks, such as the addresses of computers 
used to launch attacks. A single hacking in- 
cident usually does not leave enough in- 
formation to identify the culprit: attackers 
can give their computers a false address. 
But that can be laborious, since, whenever 
they use a new address, the hackers must} 

48 China 

» also reinstall all of the tools they use to car- 
ry out attacks. This creates an incentive to 
use addresses repeatedly, which facilitates 
the work of cyber-detectives. 

Under military oversight, China’s cyb- 
er-attacks often seemed haphazard. Hack- 
ers were given lists of targets at the begin- 
ning of each month, but there appeared to 
be little supervision or co-ordination of 
their efforts. The Mss has integrated the 
process more closely with other intelli- 
gence-gathering operations, says Mr Read. 
One team might grab a target’s mobile- 
phone data from a telecoms firm, then 
hand the information to a different group 
that would use it to infiltrate the device. 

Computer experts at Chinese universi- 
ties have long co-operated with cyber-theft 
operations conducted by the army and the 
Mss. Such people have been obvious tar- 
gets for recruitment by China’s intelli- 
gence agencies as in-house talent. Now the 
government is expanding the potential 
supply of hackers by creating a vast new 
teaching and research facility in the cen- 
tral city of Wuhan, says Dakota Cary of the 
Centre for Security and Emerging Technol- 
ogies at Georgetown University in Wash- 
ington. The 40-square-kilometre campus, 
called the National Cybersecurity Centre, 
is under the direction of the Communist 
Party Cyberspace Affairs Commission, 
led by Mr Xi. The centre will produce its 
first graduates—1,300 of them—next year. 

Growing numbers of people are needed 
to sift through the huge volumes of data 
that are stolen by the hackers. Mr Brazil of 
BluePath Labs reckons there are probably 
several hundred thousand analysts work- 
ing on this already. “The economy and mil- 
itary have greatly benefited from technolo- 
ey theft,” he says. “Why stop just because 
those foreigners are feeling aggrieved?” 

America’s Federal Bureau of Investiga- 
tion has been stepping up its efforts to curb 
the espionage. On November 5th an Mss of- 
ficer was convicted in Ohio of conspiring 
to steal jet-engine technology from Gener- 
al Electric, an American conglomerate. In 
July two Mss spies living in China were for- 
mally accused of hacking into high-tech 
businesses around the world over the 
course of many years, most recently to 
steal pharmaceutical data related to co- 
vid-19 vaccines and treatments. 

Companies that worry about China’s 
hacking often use a private cyber-security 
firm to monitor their networks for subtle 
patterns indicating an attack, and try to cut 
it off before it goes too far. Encrypting as 
much data as possible helps them to min- 
imise their losses. But it is extremely hard 
to fend off all cyber-spying. If China’s hack- 
ers really want to break into a network, are 
willing to work slowly and are able to oper- 
ate stealthily, they will often succeed. The 
entreaties of Western governments will 
not deter them. mf 

Dissent in Hong Kong 
New kids on the 
cell block 

The city’s jails are filling up with 
political prisoners 

OME NEW inmates in Hong Kong’s pri- 
S sons have reading wishlists that reflect 
interests beyond such common behind- 
bars topics as self-improvement and how 
to exercise in small spaces. Their requests 
include dystopian novels about totalitar- 
lanism, such as George Orwell's “1984” and 
“Brave New World” by Aldous Huxley, or 
books about struggles against authoritar- 
ian rule, including Vaclav Havel’s “The 
Power of the Powerless” and “How To Feed 
A Dictator” by Witold Szablowski. 

Such bookworms belong to a new breed 
of prisoner: the dissident. Before the pro- 
democracy demonstrations that roiled 
Hong Kong for much of 2019, few people 
were incarcerated for taking part in politi- 
cal protests. But the authorities have got 
tougher. More than 10,000 people have 
been arrested in connection with the un- 
rest. Court proceedings have begun against 
a quarter of them. The government is 
building a megacourt to process a backlog 
of cases, including some involving a na- 
tional-security law that was imposed in 
Hong Kong last year. Hundreds of people 
are now Serving prison sentences or being 
held on remand for alleged offences relat- 
ed to the protests. Many Hong Kongers 
know someone in jail who has been ac- 
cused of such crimes. 

Conditions are better than in the main- 
land’s jails, where political prisoners are 
allowed little, if any, contact with the out- 

The Economist November 13th 2021 

side world and are often treated brutally. In 
Hong Kong, volunteers collect books and 
organise letter-writing campaigns for de- 
tainees. Online guides provide advice to 
correspondents about what not to write: 
avoid slogans from the protests and any 
references to violence or sexually explicit 
material. Instead, write about trivial news, 
tell jokes, describe movie plots and draw 
sketches, suggests one manual. A book- 
seller recently ran an eight-part workshop. 
Participants wrote letters to inmates and 
read prison literature by Nelson Mandela, 
Havel and activists from Hong Kong. Josh- 
ua Wong (pictured, entering prison), one 
of the best-known faces of the pro-democ- 
racy movement, has written that he is 
grateful for “every word and every sen- 
tence” mailed to him. 

Sympathy for political detainees is 
widespread in Hong Kong. During a heat- 
wave in May, a petition for the provision of 
cold water and more showers to those in- 
carcerated garnered over 140,000 signa- 
tures. A cottage industry has emerged to 
help them in other ways. Some Hong Kong- 
ers transcribe popular YouTube videos for 
inmates, who cannot access the internet. 
Other pen-pals copy and paste posts from 
LIHKG, an online forum that attracts de- 
mocracy enthusiasts, in order to create a 
physical newspaper for inmates. “As an 
avid user of LIHKG, these forum-post print- 
outs are my Bible,” says a detainee quoted 
by a prisoner-rights group. 

Well-known pro-democracy inmates 
pass the time by exercising, writing letters, 
helping fellow inmates with their appeals 
and publishing articles in local newspa- 
pers. Chow Hang Tung, a jailed barrister 
and human-rights activist, accepted her 
boyfriend’s proposal of marriage, which 
was sent to her by letter. It was later pub- 
lished in Ming Pao, one of Hong Kong’s 
leading newspapers. These young Hong 
Kongers are “learning to seek freedom in 
an environment where they have lost their 
freedom”, writes Chan Kin-man, an aca- 
demic who served 16 months in jail for his 
role in the Umbrella Movement of 2014. 

Imprisoned activists are scattered 
throughout the city’s jails to prevent them 
from communicating with each other. But 
officials still worry about their influence. 
In September an elite squad was used to 
quell a protest by 18 prisoners angered at 
the treatment of other inmates, including 
Tiffany Yuen, a district councillor who is 
on remand under the national-security 
law. They had been accused of acquiring a 
prohibited number of chocolates and hair 
clips. Bizarrely, officials feared they might 
give them to other inmates to win support 
for Ms Yuen. “This is how groups begin, 
like terrorist groups recruiting followers,” 
Said Woo Ying-ming, the head of Hong 
Kong’s prisons. Even behind bars, officials 
keep Ms Yuen’s type under close watch. @ 

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50 China 

The Economist November 13th 2021 

Chaguan | Why China has a zero-covid policy 

Harsh rules enjoy support, as long as a majority feels safe 

- — > at 

EARLY TWO years into the covid-19 pandemic, China’s propa- 
N ganda machine is locked in a futile argument with the outside 
world. The row is about whether this giant country is paying too 
high a price for its “zero-covid” policy. China’s attempts to elimi- 
nate the virus, rather than merely manage it, are certainly costly. 
They have largely closed China’s borders for19 months. Dozens of 
city districts, towns and counties are enduring lockdowns as the 
highly contagious Delta variant and an early cold snap cause a 
flare-up of infections. There are several hundred cases of the dis- 
ease nationwide. Many of them are local transmissions rather 
than imports from abroad, underscoring Delta’s perils. Controls 
include roadblocks manned by police in protective suits, closed 
schools, cancelled trains and testing of millions of residents. 

With officials facing punishment for cases on their watch, 
grassroots harshness abounds. The northern city of Heihe has de- 
clared a “people’s war’, with rewards of up to 100,000 yuan 
($15,600) for residents who report such pandemic crimes as illegal 
hunting. A county in Inner Mongolia locked nearly 10,000 tourists 
in hotels for two weeks to smother an outbreak. Two pharmacies 
in suburban Beijing lost their licences for selling fever-reducing 
medicines to a couple without logging their names in a virus- 
tracking database. The customers, who had earlier visited areas 
with covid cases and later tested positive, are being prosecuted for 
failing to report to a fever clinic. Citing possible transmission 
risks, officials in cities including Chengdu, Harbin and Wuxi en- 
tered the homes of quarantined locals and killed their pet cats. 

Officials reject foreign reports that call such measures unsus- 
tainable. “It’s simply not right to question China’s efforts to elim- 
inate the virus,’ complained Xinhua, a state news agency, citing 
the country’s “robust” economy and calling travel curbs a “minor 
inconvenience’. Hu Xijin, the editor of a tabloid newspaper, says 
foreigners are jealous of China's virus-fighting record, and char- 
ges that America has eased pandemic controls because it values 
“money over life”. In fact, the two sides are talking past one anoth- 
er if they focus on how strict zero-covid policies are. It is more rel- 
evant to ask who feels the pain from those controls. They are best 
understood as a giant utilitarian experiment. To help the majority 
enjoy an orderly, covid-free existence, a hapless minority—nota- 

bly those who catch the virus or are suspected of contact with car- 
riers—must sacrifice individual liberties, privacy and dignity. 

A focus on the interests of the majority resonates with many 
Chinese. They remember images of chaos in Wuhan last year, as 
the virus overwhelmed hospitals in that city of 1om. They know 
that the health system is weaker outside big urban centres. Many 
doctors in rural clinics lack university degrees. Intensive-care 
beds are rare. AMerican-style pandemic policies could have led to 
millions of deaths. As for closed borders, which cause anguish to 
expatriates and Chinese with family overseas, they do not greatly 
pain the 87% of the population without passports. 

Many citizens of democratic countries would not tolerate half 
the rules imposed on China in this pandemic. But the collective 
sacrifices of the Chinese have produced something remarkable. In 
a country of1.4bn people, the official total death toll from the pan- 
demic is under 6,000, compared with almost 808,000 excess 
deaths in America, which has less than one-quarter of China’s 
population. Some scepticism of China's statistics is reasonable, 
given that officials in Wuhan, where the outbreak was first detect- 
ed, concealed the virus for weeks in late 2019 and early 2020. Yet if 
large outbreaks were still being concealed today, control systems 
would start breaking down, for they rely on tracking and tracing 
fresh cases. Instead, life in much of China is relatively normal. 

Strictness for the greater good continues to enjoy unmistak- 
able public support. But Chinese leaders do face a risk whenever 
public opinion suspects that overly harsh lockdowns actually 
serve the interests of a minority, ie, officials eager to cover their 
backs. There are signs of disquiet. Chengdu, for instance, recently 
broadened its pandemic controls, testing 82,000 people whose 
mobile telephones had spent ten minutes within 800 metres of a 
suspected case. Other cities have started copying this approach. 
But on November 8th two leading epidemiologists and a doctor in 
Chengdu wrote an open letter warning pandemic officials that 
such mass testing must be guided by science, and risks causing 
panic. That officials keep talking about punishing rule-breakers is 
a sign of at least some public fatigue. It also risks driving the weary 
to hide from the authorities. 

The party calls pandemic control proof that it loves the people 
To maintain support, strict controls must be seen to benefit every- 
one, though a minority will feel the most hardship. Foreigners in 
China, yearning for borders to open, often suggest that the sight of 
normality in the rest of the world will soon make Chinese citizens 
restless. For now, state media keep such envy at bay by presenting 
the West as a death-stalked hellhole. An online video promoted 
this week by state media is filled with images of Donald Trump 
when he was America’s president, and the chaos abroad of those 
days. It calls American travellers “walking vectors of contagion”. 
To date, zero-covid’s worst effects have been felt by luckless 
minorities, from locked-down residents to those whose liveli- 
hoods depend on free movement within and outside China. Fear, 
and the stigma endured by those who catch the virus, have en- 
sured compliance with orders. Harsh policies have bought China’s 
leaders time, as they wait for potent vaccines and antiviral drugs 
that might let them open up Safely. Officials have arguably slowed 
an exit by refusing to approve foreign vaccines that are more effec- 
tive than China’s, in their eagerness to prove the superiority of 
one-party rule over Western democracy. Further mutations of the 
virus may one day challenge China’s strategy. If they make lock- 
downs more frequent, the ranks of the unlucky will grow. @ 

witelel (om eae Viale 

Saudi Arabia 

No tourist Mecca 


The reinvention of the Saudi economy is going slower than planned 

ERE IT NOT for the ubiquitous photos 
WV of the royal family, visitors to Abha 
might forget they were in Saudi Arabia. 
Gnarled juniper trees dot green moun- 
tains; mist clings to valleys where farmers 
grow crops and raise honeybees on ter- 
raced fields. Troops of baboons line the 
roads, foraging for food and occasionally 
Stealing bags from unsuspecting visitors. 
Saudis have long flocked to this city, 
870km (541 miles) south-west of Riyadh, 
the capital, to escape the summer heat. 
Foreigners will soon discover it, too. The 
Public Investment Fund (PIF), the main 
Saudi sovereign-wealth fund, has pledged 
ubn rials ($2.9bn) to build 2,700 hotel 
rooms and dozens of tourist attractions in 
the region (pictured). By 2030 developers 
hope to draw 2m visitors annually. 
Tourism is a key element of Vision 
2030, an economic-reform plan meant to 
wean the kingdom off oil that was unveiled 
five years ago by Muhammad bin Salman, 
the crown prince. The government expects 
tourism to be the largest source of new jobs 
in the private sector, accounting for 10% of 
both GpP and employment within a de- 

cade. “The industry is at the top of our 2030 
agenda,’ says Ahmed al-Khateeb, the tou- 
rism minister, who hopes to see1oom local 
and foreign tourists in ten years’ time. 

Saudi Arabia has lots of untapped po- 
tential. It did not even offer tourist visas 
until 2019. But officials struggle to explain 
why a hoped-for 50m foreign visitors will 
choose the kingdom over other destina- 
tions each year. That points to a bigger 
question looming over the economic-re- 
form effort. To achieve its goals, Saudi Ara- 
bia must attract foreign firms and inves- 
tors. Yet officials struggle to make a com- 
pelling case for why they, too, should 
choose the kingdom. 

Prince Muhammad will be judged large- 
ly on whether he can create decent jobs for 

> Also in this section 

52 Premarital sex in Morocco 

53 Iran's weapon of choice 

53 Reintegrating rebels in Congo 

54 Liberia's quest for justice 

The Economist November 13th 2021 

Saudi Arabia’s 21m citizens, two-thirds of 
whom are under 35. The pandemic pushed 
the jobless rate up to 15.4% in the second 
quarter of 2020. Since then it has fallen 
(see chart on next page), dropping to 11.3% 
in the second quarter of 2021, the lowest 
level in a decade. That is in part because lo- 
cals are taking low-skilled jobs that used to 
be the preserve of migrants. Saudis now 
work tills and brew coffee, sights unimag- 
inable a decade ago. Women, too, are piling 
into jobs: they are now 28% of working 
Saudis, up from 16% five years ago. 

Falling unemployment, however, 
comes partly from a lower participation 
rate, which dropped by 1.8 percentage 
points during the first half of 2021. At the 
high end of the labour market, there are 
not enough jobs for educated Saudis. Half 
of unemployed citizens hold at least a 
bachelor’s degree. At the other end, grunt 
work is mostly done by foreigners, who are 
cheaper. Citizens are still just 24% of the 
workforce in sales and 20% in hospitality. 
Over 85% of the jobs in construction, the 
industry that employs the most people, are 
done by foreigners. 

As the economy grows, the labour mar- 
ket will grow with it. But the foreign direct 
investment (FDI) needed for growth re- 
mains sluggish. By 2020 the kingdom had 
hoped to attract $1obn in annual inflows. It 
fell far short, bringing in $5.5bn last year. 
No matter: last month Prince Muhammad 
announced a new investment strategy that 
promised $100bn in annual FDI by 2030 

(more than the total for the past decade). >> 

Middle East & Africa 

» This is a problem across the government. 
Officials set ambitious targets, miss them, 
then simply aim higher. “The crown prince 
doesn't have enough feedback,’ says a con- 
sultant to multinational firms. “There are 
too many yes-men.” 

In private, would-be investors fret 
about the business climate in a country 
dominated by one man. They were un- 
nerved in 2017 when Prince Muhammad 
detained dozens of businessmen and roy- 
als for alleged corruption (many traded as- 
sets for freedom). Tax was a big concern at 
this year’s Future Investment Initiative, a 
glitzy annual conference in Riyadh. The 
government has served several firms, in- 
cluding Uber (and Careem, its subsidiary 
in the Middle East), with hefty bills for un- 
paid taxes. Some executives wonder if this 
portends a private-sector shakedown. 

Multinationals have already been told 
to move their regional headquarters to the 
kingdom by 2024 or risk losing juicy state 
contracts. Last month the Saudi govern- 
ment said that 44 such firms, including 
Siemens and Unilever, would open offices 
in Riyadh. The pressure has prompted 
grumbling from executives based in places 
like Dubai, which are less conservative and 
offer better amenities. 

To Saudi Arabia’s credit, it continues to 
ease once-draconian social restrictions. 
The weekend before Halloween, young 
Saudis crowded a party-supply store, its 
shelves stocked with monster masks, devil 
tridents and sexy-nurse outfits. Not long 
ago such merchandise would have 
prompted a visit from the religious police. 
“They have no control over us now,’ beams 
the store’s owner (whose only concern was 
that his “very, very conservative’ relatives 
might discover what he does fora living). 

Partitions that separated single men 
from families have come down in smart 
restaurants. Young Saudis crowd cinemas, 
banned for decades, to watch films like 
“Dune”, about a prince tapped to rule a re- 
source-rich desert. On October 2oth hun- 
dreds of thousands of people in Riyadh at- 
tended a concert by Pitbull, an American 
singer who is not for the prudish. 

The government hopes fun will be lu- 
crative. With few diversions at home, Sau- 
di holidaymakers do most of their spend- 
ing abroad. The pandemic offered hints of 
how much business escapes to London and 
Dubai. In the second quarter of this year, 
Saudi hotels logged 2.2bn rials ($590m) in 
point-of-sale transactions, a 7% increase 
over the same period in 2019—even though 
the kingdom was largely shut to visitors. 
“It was pure Saudi spend,’ says Princess 
Haifa Al Saud, who oversees the national 
tourism strategy. Yet there will be less 
money for them to spend as Saudis take 
lower-paid jobs and the government cuts 
once-generous benefits. Petrol prices have 
more than doubled since 2015. The govern- 

Jobs for some 
Saudi citizens, % 

Labour-force Unemployment 
participation rate rate 
80 40 

Male Female 

ee 20 
Female af 200 ne 10 

| 0 Male 0 

2017 19 21 2017 US 21 

Source: General Authority for Statistics 

ment introduced a 5% value-added tax in 
2018 and raised it to 15% last year. 

The tourism industry needs foreign vis- 
itors. Apart from Abha, they may come to 
enjoy long stretches of unspoilt Red Sea 
coast and historic sites like the Nabataean 
ruins at Al Ula. No one can accuse tourism 
bosses of lacking creativity. In October the 
PIF announced “The Rig”, a plan to repur- 
pose an offshore oil platform into a resort 
and theme park. 

But officials seem blithe about how all 

The Economist November 13th 2021 

of this will compete with other destina- 
tions. The first hotels to open on the Red 
Sea will be luxury brands, pricing out many 
prospective visitors. Officials are coy about 
whether they will legalise alcohol. “We 
know we have to be competitive in every 
aspect,’ says one. Even if they do, some 
tourists may be put off by a sun-and-sand 
holiday in a country with such a conserva- 
tive image. In the “halal tourism” market, 
meanwhile, Saudi Arabia faces stiff compe- 
tition from cheaper, more established 
places like Turkey and Malaysia. 

The same goes for the broader econ- 
omy. Lower subsidies, higher taxes and 
pricier labour have eroded some of Saudi 
Arabia's traditional selling points for 
firms. It is unclear what will replace them. 

Until the government banned the prac- 
tice, residents of Abha would chop down 
juniper trees for firewood, to stave off the 
winter chill. As part of the regional tourism 
project, developers plan to plant 1m trees 
to reforest the mountains. It will be a long 
time before visitors can appreciate them: 
they grow just 5cm a year in the region's dry 
climate, says Turki al-Bishri, a local guide. 
For all the talk of rapid change, the slow- 
erowing juniper may offer a better glimpse 
of Saudi Arabia’s economic future. 

Get two rooms 

Hoteliers are backing Moroccans who want to legalise sex before marriage 

T IS BAD enough that the pandemic cut 

the number of foreign tourists by 80%; 
to make matters even worse, Morocco’s 
ban on extramarital sex is stifling the 
domestic market in hotel beds. Un- 
married couples caught in the same 
room are liable to jail terms of uptoa 
year under Article 490 of the penal code. 
Each week the police check hotel records 
to uphold the law. Receptionists-turned- 
private detectives require verification of 
marriage certificates before handing over 
the Keys. “I get more calls from unmar- 
ried couples wanting to stay than anyone 
else,’ says Meryem Zniber, who runs a 
resort in the Rif mountains. “I could fill 
my hotel100% if only they’d lift the law.” 

Hopes of change rose after the Islam- 

ist party heading the government 
crashed in elections in September, losing 
90% of its seats. For a decade its leaders 
had squelched any policy deemed haram, 
or contrary to Islamic law. Aziz Akhan- 
nouch, the new prime minister, sounds 
more liberal. His government recently 
Said it would review the entire penal 
code. But he has left out of his coalition 
the only party that publicly calls for 
Article 490 to be repealed. 

The interior ministry is a big obstacle. 
“They fear turning hotels into brothels,” 
says a former minister. Others say the 
main concern is pecuniary: Officials do 
not want to lose the bribes they extort 
from hotels and unmarried couples who 
canoodle in them. 

Travel websites suggest workarounds. 
One proposes donning a wedding ring. 
“The offer of an additional payment may 
carry some weight,’ it adds. Another 
suggests “the two-room method: rent 
single rooms, then scurry across the 
corridor after dark”. But others have tired 
of the expense and the hypocrisy. Hash- 
tag campaigns—“Love is not a Crime” 
and “Stop490”—proliferate online. 

Conservatives urge young Moroccans 
to respect tradition. Youngsters retort 
that the precursor to Article 490 was 
introduced by France in 1953, near the 
end of the colonial era. And they point to 
other Muslim countries that are shaking 
off old mores. The United Arab Emirates 
decriminalised extramarital sex a year 
ago. Saudis say their hotels have stopped 
asking couples to show marriage certif- 
icates. Morocco’s latest hashtag cam- 
paign implores “Vote4Love’”. 

The Economist November 13th 2021 

Iran's military tactics 

The new predators 

Why drones are becoming Iran’s 
weapon of choice 

SING DRONES to assassinate people has 

long been the preserve of the most ad- 
vanced armed forces, such as America’s 
and Israel’s. But an attempt on November 
7th to kill Iraq’s prime minister, Mustafa al- 
Kadhimi, was a dramatic demonstration of 
how such “precision-strike” capabilities 
are spreading to less advanced countries 
and even to shadowy militias. 

Several of Mr Kadhimi'’s bodyguards 
were hurt when at least one drone hit his 
home in the protected “Green Zone” of 
Baghdad. Other drones may have been shot 
down. The prime minister survived, ap- 
pearing soon afterwards on television to 
denounce the “cowardly” attack. 

The hit was so rudimentary, apparently 
involving quadcopters (of the sort that can 
be bought by hobbyists) rigged with small 
bombs, that it could have been staged by 
any one of Iraq’s many armed groups. “If 
you can deliver pizza with a drone, you can 
drop a grenade,’ says James Lewis of the 
Centre for Strategic and International 
Studies, an American think-tank. 

Yet suspicion immediately fell on Iran 
and its proxies, for two reasons. The first is 
that Fatah, the political arm of Shia mili- 
tias aligned with Iran, is furious at losing 
most of its seats in Iraq’s election last 
month. Loyalists have staged protests and 
on November 5th attempted to burst into 
the Green Zone. The following day, at the 
funeral of a protester killed by security 
forces, militia leaders vowed revenge 
against Mr Kadhimi. 

The second reason is that Iran has be- 
come the most assiduous provider of 
drone technology to its proxies and 
friends, not only in Iraq but also in Leba- 
non, Yemen, Syria and the Gaza Strip. 
These are not the sophisticated machines 
operated by America, such as the Predator 
and the Reaper. Instead, they are often 
“craptastic” knock-offs, made with com- 
mercially available components, explains 
Aaron Stein of the Foreign Policy Research 
Institute, another American think-tank. 
But Iran is also making improvements, not 
least by reverse-engineering captured 
drones, such as America’s stealthy RQ-170. 

Like unmanned aerial vehicles (UAVs) 
from advanced countries, Iranian ones are 
used for both surveillance and strikes. Un- 
like them, Iranian UAvs do not usually car- 
ry precision-guided munitions. Instead 
the drone itself is the guided bomb, flying 
into the target and detonating like a robot- 

ic kamikaze. Iran dispenses with the satel- 
lite links that allow Western forces to con- 
trol drones from the other side of the 
world. Its UAvs are typically operated by 
line-of-sight radio control, or can guide 
themselves with Gps technology used in 
smartphones and automotive satnavs. 

Iran achieves great range by distribut- 
ing UAVs (or the techniques to make them) 
to its allies across the Middle East, thereby 
threatening targets from the Mediterra- 
nean to the Persian Gulf. The drones are of- 
ten delivered in kits and assembled locally 
with little help from Iran, notes Mr Stein. 
“These drones allow Iran to orchestrate at- 
tacks while maintaining deniability and 
ambiguity,’ says an Israeli military official. 

The simplicity belies the threat that the 
drones pose. Last month an American out- 
post in Tanf in Syria was hit by five Gps- 
guided drones. Nobody was hurt, but 
American Officials later blamed Iran and 
the Biden administration imposed sanc- 
tions on people and firms associated with 
the drone programme. In 2019 several 
drones struck Saudi Arabia’s oil facilities at 
Abqaiq and Khurais, interrupting about 
half of the country’s oil output for a while. 
The Houthi militia in Yemen, which 1s al- 
lied to Iran and has been fighting againsta 
Saudi-led coalition since 2015, claimed re- 
sponsibility. But Western military sources 
believe the drones were dispatched from 
Iraq, or perhaps even from Iran. 

Israel pioneered the use of disposable, 
self-destructing drones to destroy Arab air 
defences in the 1970s and 1980s. Now, 
though, it must ward off the drones of its 
enemies. It has resorted to everything from 
F-16 fighters to the Iron Dome anti-rocket 
system, but is looking for a better defence. 
So is America. “We no longer have air supe- 
riority,’ laments an American military 

source, referring to the Middle East. “Amer- 
icans got used to owning the skies.” @ 

Middle East & Africa 

Congo's militias 

No farewell 
to arms 

The president does not know what to 
do with rebels who surrender 

T THE ENTRANCE tO a base for ex-rebels 
Ain Mubambiro, a town in the east of the 
Democratic Republic of Congo, a young 
man paces to and fro, clasping a wooden 
replica of an AK-47, the rifle of choice for 
guerrillas everywhere. “I am the guard 
here,” he explains, “And I am used to hav- 
ing a gun, it makes me feel comfortable.” 

Shukuru Bijadunia, aged 23, handed his 
real rifle to the Congolese authorities in 
2018 and has languished in a dismal camp 
ever since. He sleeps without a mattress in 
a Shabby tent with other former rebels. Last 
year no food was provided at the camp for 
nine months. “I sleep badly, I barely eat 
and there is no medicine when we get 
sick,’ says Mr Bijadunia. “Life in the bush 
was better.” Hundreds of other former re- 
bels agree. At its peak, the camp hosted 
more than 1,700 fighters, from 30 different 
militias, who had surrendered. Today, few- 
er than 400 of them remain. Some have 
gone back into the bush to rejoin their old 
armed groups. Others have been recruited 
into new ones. 

Conflict has ravaged eastern Congo for 
over 25 years. More than 120 armed groups 
hide in the forests. Many are reportedly 
backed by Uganda and Rwanda, though 
both countries deny this. Militias that had 
surrendered or disbanded are regrouping, 
and new ones are forming. Some groups 
say they want to overthrow the president, 
Félix Tshisekedi, though he is usually more 
than 1,000km (621 miles) away in the capi- 
tal, Kinshasa. In the meantime, many prey 
on local civilians or smuggle minerals. 

On November 7th gunmen attacked two 
villages near the Ugandan border, killing 
Congolese soldiers. The attackers are be- 
lieved to be members of the M23, a militia 
backed by Rwanda that in 2012 captured 
Goma, acity of 2m people, before being de- 
feated and forced to surrender a year later 
by UN forces and the Congolese army. Now 
it seems to have reassembled. The Ameri- 
can embassy recently warned its citizens 
in Goma to stay at home, fearing another 
attack on the city. 

Also this month, members of a new 
group calling for Mr Tshisekedi to step 
down stormed the city of Bukavu. The at- 
tacks highlight the president's failure to 
make good on one of his main campaign 
promises before he came to power in 
2019—to pacify the eastern parts of Congo. 
On his first presidential visit to the embat- 


tled province of North Kivu, Mr Tshisekedi >> 

54 Middle East & Africa 

a ge Victoria 
Mubambiro ——4te Goma 
7 » |)RWANDA 
>, Bukavuse! 
env ‘4 BURUNDI 
200 km o & 
Violent events involving rebel groups = Number of 
January 1st-November 10th 2021 civilian deaths 
Gio € 325 

Source: ACLED 

>» encouraged rebels to come out of the bush 
and start new, peaceable lives. “To all my 
brothers in armed groups, this is the hour 
for change,’ he said. “The government is 
reaching out its hands to you.” But those 
who disarmed were left to rotin camps like 
the one in Mubambiro, which hardly en- 
courages others to do the same. 

Foreign donors have pumped millions 
into dysfunctional disarmament schemes. 
The World Bank alone has contributed 
$171m to three programmes. Some have 
been laughable. The UN once offered rebels 
$100 for each of their guns. But, as Séveri- 
ne Autesserre points out in her book, “The 
Frontlines of Peace”, a Kalashnikov Sells for 
$40 on the black market. So a militiaman 
could hand in his rustiest gun, buy two 
more, and still have money left over for 
beer. Other programmes have been horrif- 
ic. In 2014 over a hundred rebels and their 
family members died from starvation and 
disease at a government camp. 

Mr Tshisekedi has recently launched 
yet another disarmament programme 
which, this time, is meant to reintegrate re- 
bels back into the villages they came from. 
Yet the scheme lacks funds. Chastened by 
the failures of past projects, Western do- 
nors are reluctant to pay for it. What is 
more, the president has chosen a former 
Rwandan-backed rebel, Tommy Tambwe, 
to run it. Considering Rwanda’s continued 
interference in Congo’s conflict, this has 
been unpopular. Politicians and rebels 
alike have called on Mr Tshisekedi to 
change his mind. 

When Mr Tshisekedi travelled to the 
east in June, he did not pay a visit to Mu- 
bambiro. However, emaciated former re- 
bels from the camp tried to get his atten- 
tion by blocking a main road nearby with 
flaming logs and branches. “We regret 
coming here, we don't understand why the 
president called us here,” says Héritier Ba- 
hati, a former fighter, standing in front of 
the smoking barricade. “It’s as though he 
called us here to die.” @ 

Time and 

Would a war-crimes court allow Liberia 
to move on? 

(4FHERE WAS a lot of blood all over the 

T piace’ remembers Patricia, her voice 
cracking. She survived the night in 1990 
When government soldiers shot and 
chopped to death about 600 civilians who 
had been sheltering from Liberia's civil war 
in the Lutheran Church in Monrovia, the 
capital. “We saw the pregnant women, 
their stomachs open, the children on their 
mother, sucking, crying.” 

Today, not far from the bullet-scarred 
church, gold letters on the Temple of Jus- 
tice declare: “Let Justice Be Done To All”. Yet 
not a single person has been convicted in 
Liberia for the massacre—or for any war 
crimes committed during the back-to-back 
civil wars between 1989 and 2003, in which 
about 250,000 people were killed. 

Much has changed since the conflict 
ended. Clinics and schools have sprung up, 
tarred roads hum with traffic and, above 
all, peace has endured. Yet Afrobarometer, 
a pollster, found that in 2018 half the popu- 
lation had paid a bribe in the previous year. 
Rapes of women and children are all too 
common. So are murders. Two sons of for- 
mer presidents have been killed since Sep- 
tember. Some human-rights activists 
blame a culture of impunity that dates 
back to the wars. 

Impunity is not hard to spot. Prince 
Johnson, an influential senator, is a former 
watlord who, in a video available on You- 
Tube, can be seen drinking a Budweiser 
beer and barking instructions as his men 
cut off the ear of a former president, Samu- 
el Doe, in 1990. Mr Johnson, who has ad- 
mitted that his men killed Doe, has de- 
clined to comment beyond saying, “There 
is no need to dwell in the past.” 

George Boley, a congressman, is anoth- 
er former rebel leader who was deported 
from America because of allegations that 
his men had burned captives alive and 
raped villagers before slitting their throats. 
Charles Taylor, a warlord and former presi- 
dent, was convicted of war crimes at the In- 
ternational Criminal Court in The Hague 
for atrocities in neighbouring Sierra Le- 
one’s civil war. He is now in prison in Brit- 
ain. But he has never faced justice for his 
alleged crimes in Liberia itself. 

In 2009 the country’s Truth and Recon- 
ciliation Commission (TRC) recommended 
that some of the most violent warlords face 
trial. But that recommendation was not 
acted upon by the government of Ellen 
Johnson Sirleaf, who was then president. 

The Economist November 13th 2021 

Activists and politicians, including Rus- 
tonlyn Dennis, a congresswoman, are try- 
ing to revive the idea, through protest and 
by proposing draft legislation. “This coun- 
try will never go forward if people don't 
take responsibility,” says Ms Dennis. Oth- 
ers say a court is needed to deter people 
from taking up arms again. “In absence of 
punishment there will not be peace,” says 
Dempster Brown of Liberia’s Independent 
National Human Rights Commission. 

Yet not everyone favours trials. Sam 
Walker of Liberia Peace and Reconciliation 
Forum, a group opposing the tribunal, says 
it would be a “witch hunt” and even claims 
it could renew conflict. He prefers alterna- 
tives, such as getting victims and perpetra- 
tors to talk. Others worry about the price 
tag, given that Sierra Leone's special court 
cost about $300m. “What do we priori- 
tise?” asks Meo Beyan, the assistant minis- 
ter of justice, listing pressing needs suchas 
jobs, education and health care. 

Still, many suspect President George 
Weah’s own wotries are the real barrier. His 
run for president in 2017 was backed by Mr 
Johnson, whose support Mr Weah is 
thought to want in the next election, in 
2023. In 2019 he tried to kick the question 
of a tribunal to the Senate, which advised 
against “reopening old wounds”. 

Though the government drags its feet, a 
tribunal has some odd supporters. Joshua 
Blahyi (pictured), known as General Butt 
Naked, led a group of drugged child sol- 
diers who often fought wearing nothing 
but sneakers and charms. He told the TRC 
he was responsible for the deaths of 
20,000 people. Today he claims to be a re- 
pentant Christian and, despite his docu- 
mented history of almost incomprehensi- 
ble violence, is entirely at liberty. Is he in 
favour of a war-crimes court, even if it 
might jail him for the rest of his life? “Defi- 
nitely,” he says. “It’s Liberia’s only hope.” @ 

General Butt Naked’s new mission 

The Economist November 13th 2021 

EU railways 

Disoriented express 


Trains could help Europe reach its climate targets. But daft rules block the tracks 

HE CENTREPIECE of this year’s Euro- 
Tpean Year of Rail was the “Connecting 
Europe Express’. Between September and 
October its cars whisked EU officials across 
the continent on a whistle-stop tour pro- 
moting the future of railways. But the train 
itself was a nostalgia trip: most of its wag- 
ons were built in the 1980s, since more re- 
cent models were less likely to be certified 
by the rail-safety boards of all 26 countries 
it visited. Without arm-twisting by the 
European Commission, said Alberto Maz- 
zOola of the CER, a rail-industry group, the 
trip would have been impossible. 

It was a classic European story. The EU 
has grand ambitions for trains as a way of 
cutting carbon emissions, and its national 
railway networks are strong. But rail is the 
form of transport that requires the most 
co-ordination, and ona continent split in- 
to dozens of countries that is a problem. 
Governments pour money into domestic 
high-speed lines, but often leave just a 
winding bit of track linking to the neigh- 
bours. For the national carriers that domi- 
nate the sector, such as Germany's Deut- 
sche Bahn and France’s SNCF, cross-border 

trips are a side business and competitors a 
nuisance. “The single European railway 
area exists in terms of a market opening,” 
says Kristian Schmidt, the European Com- 
mission’s director of land transport. "But 
we have a long way to go.” 

The EU's mobility strategy calls for mak- 
ing all scheduled travel of 500km (310 
mikes) or less carbon-neutral by 2030. The 
most obvious way to do that is with electric 
passenger trains. Even accounting for use 
of fossil fuels in power generation, trains 
average about one-fifth the greenhouse- 
gas emissions per passenger-kilometre of 
aeroplanes and less than half that of buses, 
says the European Environment Agency. 

Gimme a ticket for an aeroplane 

Yet only 8% of the distance travelled by 
land in the Eu is by rail. Even in the most 
train-happy countries, Austria and the 
Netherlands, the figures are13% and 11%. In 
those countries, more than 75% of land tra- 
vel is done by car. Statistics on cross-bor- 
der rail are patchy, but EU figures show that 
people made only 6.5m international trips 
by train from Germany in 2019. They made 

> Also in this section 

56 Belarus's border theatrics 

57 Covid surges in eastern Europe 
57 Banana protests in Turkey 

58 Charlemagne: The EU versus 
Scandinavia on minimum wages 

10m by air, just to other countries in the 
EU. Shifting a significant share to rail will 
require huge investments. 

More fast trains would help. The Eu 
wants to double high-speed rail traffic by 
2030. Because they deliver passengers to 
city centres rather than airports, trains can 
out-compete flights on routes of up to 
800km, provided they run at 200kph or 
more. Flights between Milan and Rome fell 
by more than half after a high-speed rail 
line opened in 2007. The Eurostar carried 
nearly 80% of traffic from London to Brus- 
sels and Paris in 2019, and a big share of 
those travelling between Paris and Frank- 
furt go on French TGv or German ICE trains. 

But such international high-speed 
routes are few. Spain and France each have 
extensive high-speed networks, but to get 
from one to the other trains must creep 
along old-fashioned tracks. France and Ita- 
ly have scarcely begun tunnelling under 
the Alps to link their networks. High-speed 
routes between Berlin and central-Euro- 
pean cities such as Prague and Vienna are 
still in the planning stage. 

These tracks are part of a web of high- 
priority transport corridors known as 
TEN-T first sketched by the Eu in the 1990s. 
But national governments, which bear 
most of the costs, have been slow to pony 
up the money. The EU’s own Connecting 
Europe Facility and other programmes 
budget €86bn ($100bn) for rail from 2021- 
27. But high-speed track can cost more 
than €40m per kilometre. On most routes 
countries would be better off improving b> 

56 Europe 

European core passenger 
railway network, 2021 
---- To be upgraded 

~~ Planned 

Source: European Commission 


— Completed 
--=- To be upgraded 
a ~ Planned 

—— Completed 

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Brennertunnel, = ">, = 4 
: : i : 1 i fr 
~~ HSR route, ay a 
~2035 a ee L yall 
f i f T= Sn tin 
i Tae 7 al Ta kk: 
France/Spain a oN 
HSR link, tls Lo Sager? 
est. ~2040 ea es ae 
oe ai 
aay j 
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Mediterranean Sea a en 

» their conventional networks, according to 
the European Court of Auditors. 

A less costly approach is to bring back 
the original long-distance rail technology: 
the night train. Sleeper cars were disap- 
pearing in Europe by the mid-2010s, but 
were revived between Brussels and Vienna 
in 2016 by OBB, Austria’s national carrier. 
They have become a romantic fad, popping 
up again in France, Germany and Sweden. 
But their carrying capacity is small. 

Berth of a nation 

National divisions have always been a pro- 
blem for rail. Sleeper trains were brought 
to Europe by Georges Nagelmackers, a Bel- 
gian banking heir who fell for the Pullman 
car while travelling in America in the 
1860s. It took him years of negotiations 
with various governments to set up the 
Compagnie Internationale des Wagons- 
Lit, which ran sleeper coaches that 
switched between national operators’ lo- 
comotives when they crossed borders. 

In some respects European cross-bor- 
der rail has gone backwards. The trip from 
Brussels to Luxembourg can take an hour 
longer than it did in 1980. Along the Ger- 
man-Czech border some timetables are not 
much better than those in Hendschel’s Tele- 
graph of 1914. When Germany's transport 
minister last year announced “Trans Europ 
Express 2.0’, it raised the question of why 
the original Trans Europ Express trains im- 
mortalised by Kraftwerk 1n 1977 were aban- 
doned by the early 1990s. 

One difficulty in reviving them is com- 
patibility. Europe’s electric railways use 
four different voltage levels. Signalling and 
Safety systems are even worse: almost ev- 
ery country initially had its own. The Euro- 

pean Rail Agency is gradually enforcing 
common specifications, but that effort has 
been under way since 1996. At Europe's 
edges, even the width of the track varies: 
the Baltic countries use the Russian Em- 
pire’s wider gauge, and Spain and Portugal 
have one of their own. 

Private rail entrepreneurs say that traf- 
fic would rise if countries actually lived up 
to their obligations to allow competition. 
Under EU law all member states have un- 
bundled their rail infrastructure from their 
train operators, and must let outside play- 
ers run on their tracks. But some countries 
are in practice more open than others. Ger- 
many’s track owner is an arm of Deutsche 
Bahn and charges high service fees, which 
tends to deter competitors. Sweden char- 
ges only for the added maintenance that 
new users require, fostering competition 
from newcomers such as FlixTrain and 
MTR that has cut prices. 

Then there is ticketing. Because sys- 
tems are incompatible, only a few agencies 
sell rail tickets across the entire continent. 
As for refunds, operators are responsible 
only for the portion of the trip on their own 
trains. High-speed rail tickets typically 
cost far more than a budget airfare on the 
Same route. That is unlikely to change 
while jet fuel and most airline emissions 
are tax-free. 

If Europe wants passengers to shift to 
rail, it will need to tax airlines’ carbon 
emissions properly. Until then, many pas- 
sengers will think of trains nostalgically. At 
a Connecting Europe Express event in Ber- 
lin, Christopher Irwin of the European rail 
passengers’ union reflected that he first 
travelled to the city by rail from Britain in 
the 1960s. “It was easier back then.” @ 

The Economist November 13th 2021 

The Belarus-Poland border 

Caught at the wire 

A scheme to use migrants to split the 
EU Is likely to backfire 

A cian? The president of Belarus has 
brought thousands of migrants from the 
Middle East to the EU's doorstep on the eve 
of winter, daring the bloc to abandon its 
humanitarian instincts as the world looks 
on. Mr Lukashenko seems to have intend- 
ed to reignite the internal division and po- 
litical upheaval that followed the influx of 
migrants to Europe in 2015. He has instead 
forged a consensus in favour of the swift 
punishment of his regime. 

The scenes that have unfolded at the 
Polish-Belarusian border since November 
8th were his concoction. Belarusian travel 
agents in Iraq offer flights, a visa and the 
sham promise of an easy path to a new life 
in Europe in exchange for thousands of 
dollars. Arrivals in Minsk are whisked 
through the woods to a spot on the border 
where, far from swiftly crossing into Po- 
land and embarking on the supposed op- 
portunity to move around the Schengen 
free-travel zone, migrants end up squeezed 
between the EU's razor-wire fences and 
Belarusian men with guns, unable to go 
forward or back. As The Economist went to 
press on November 11th, some 2,000 were 
trapped near the current main point of 
concern, the Kuznica crossing (See map). 
There have been a number of attempts to 
breach the border there. An estimated 
20,000 migrants are thought to be else- 
where in Belarus, with more still continu- 
ing to fly in via Istanbul and other Middle 
Eastern cities on Belavia, the Belarusian 
State carrier. 

Mr Lukashenko’s foreign policy has 
increasingly resembled that of a mafia 
boss since his theft of elections last year. 
He has sent goons after dissidents who fled b> 





(Russia) Vilnius © 


The Economist November 13th 2021 

» abroad. He is angry at the countries shel- 
tering them, chiefly Poland and Lithuania, 
and at the entire EU for the sanctions it has 
imposed on his regime. The ambition of 
those sanctions was scaled back thanks to 
lobbying by affected industries, from Aus- 
trian banks to Lithuanian railways. Now 
the political will to deter Mr Lukashenko 
has hardened. The Eu is hinting at fresh 
Sanctions, including on Belavia, possibly 
as soon as next week. The hitherto hesitant 
Irish government, whose firms lease 
planes to the airline, has come on board. 

That does not mean that keeping mi- 
grants off the route to Belarus will be easy. 
The Eu wants to install officials at airports 
across the Middle East to prod Iraqi pas- 
sengers with awkward questions before 
they embark. But that will take time. Ange- 
la Merkel, Germany’s outgoing chancellor, 
has asked Russia’s president, Vladimir Pu- 
tin, to talk Mr Lukashenko out of his plot- 
ting. Her chances of success seem slim. 

Poland sees deterrence as the best way 
to stem the influx, and so is determined 
not to admit any of the migrants gathering 
at its gates. Its populist government has 
waved away offers of help from Frontex, 
the EU's border agency. A camp has sprung 
up on the Belarusian side, and a lengthy 
battle of wills is likely. Meanwhile, the mi- 
grants are in danger. A freezing winter ap- 
proaches. And Mr Lukashenko is willing to 
make people suffer, if the television foot- 
age causes problems in Europe. & 

Coronavirus in eastern Europe 

The arc of 

Countries with poor vaccination rates 
are suffering dreadfully 

N NOVEMBER 6TH teams of medics 

dressed in full protective gear packed 
equipment into a Romanian military 
transport plane before pushing beds with 
two severely ill covid-19 patients up the 
ramp and inside. As the propellers began to 
whirr, the back door slowly closed and the 
plane lumbered up the runway heading for 
Denmark. “There is no secret,’ says Raed 
Arafat, who is co-ordinating Romania's 
fight against covid: the country’s hospitals 
are “overflowing”. About 90 patients have 
been evacuated to Denmark, Germany, 
Hungary and elsewhere. Teams of doctors 
are also flying in from all over Europe to 
help their beleaguered colleagues. 

Across Europe the numbers of people 
infected with the highly contagious Delta 
variant are rising, and many governments 
are contemplating or imposing new re- 
Strictions. But this wave is affecting some 

countries far more than others. From the 
Balkans to the Baltics an arc of susceptibil- 
ity has emerged, encompassing a swathe of 
countries with low vaccination rates. 

In the past few weeks the death rate 
from covid-19 has hit record highs in Bul- 
garia, Latvia and Romania. In the week to 
November 8th there were 22.8 confirmed 
deaths in Bulgaria for every million people. 
In Romania the figure was 21.8 and in Lat- 
via18.8. Yet for the EU as a whole it was only 
3.0. The number of cases is at last dropping 
in those three badly-hit countries, but it is 
now Soaring in Croatia, Estonia, Lithuania, 
Slovenia and Ukraine. 

All of the countries being clobbered are 
at the low end of the scale when it comes to 
vaccination. Only 23% of Bulgarians and 
34% of Romanians have been double- 
jabbed. In Latvia the proportion is 57%, but 
it was much lower a month ago, when the 
current wave took hold. In the EU as a 
whole, 66% are double-vaccinated. 

Low vaccination rates are not the result 
of a lack of vaccines. The countries of the 
arc have ample supply, but also loud anti- 
vaxxers. Distrust of government and medi- 
cal staff is high. A Eurobarometer survey 
conducted earlier this year found that only 
22% of Bulgarians and Croats, 26% of Latvi- 
ans and 31% of Romanians tend to trust 
their governments. When asked if they 
trusted medical staff, 34% of Bulgarians 
Said they did not, along with 32% of Croats, 
31% of Latvians and 40% of Romanians. 

It is ironic that relatively low levels of 
infection in the summer seem to have con- 
tributed to the scale of current outbreaks. 
Those with doubts about the vaccine saw 
little urgency in getting it, which left them 
vulnerable when the Delta variant hit. Of 
those now in hospital, says Dr Arafat, 92% 
are unvaccinated. The true share could be 
higher, as unknown numbers have bought 
fake vaccination certificates. He angrily 
denounces anti-vax disinformation, 
which is often propagated by rogue doc- 
tors, Orthodox priests and far-right nation- 
alists, with the help of “Dr Facebook’. 

Inga Springe, a journalist with Re:Balti- 
ca, a news website, says that in Latvia 
prominent doctors have given ambiguous 
signals about vaccinations and some poli- 
ticlans are promoting themselves via anti- 
vax Sites. Bulgaria goes to the polls on No- 
vember 14th for the third time this year, 
and politicians there may fear alienating 
anti-vax voters. 

According to Oana Popescu, director of 
GlobalFocus, a Romanian think-tank, Ro- 
manians’ lack of enthusiasm for getting 
vaccinated is a direct result of what they 
perceive to be decades of neglect by the au- 
thorities. “When the government suddenly 
seems to care for you for the first time in 30 
years, of course you become suspicious!” 
she explains. Alas, itis not just Romanians 
who feel that way. @ 


Going bananas 


A fruity joke offends officials 

URKEY HAS deported Syrian refugees 

before. Some were sent back to their 
war-scorched homeland for failing to 
register with the authorities or for 
minor crimes. Some say they were 
tricked or forced into signing voluntary 
return forms. But none thought they 
would be thrown out for eating ba- 
nanas. Until now. 

In October the government said it 
would deport seven Syrians for sharing 
“provocative” videos on social media, 
which showed the young refugees 
Staring into their phones and munch- 
ing yellow fruit. This was in response to 
an interview with a Turkish man who 
had blamed Syrians for driving up rents 
and complained that they could afford 
bananas, which he could not. 

The banana-eaters seemed to be 
mocking prejudice against refugees. 
But officials accused them of mocking 
the needy. And that was not the end of 
it. Turkish police arrested a Syrian 
journalist who had made light of the 
uproar in a video that showed him 
nervously buying bananas from a groc- 
er, then hiding them under his sweater. 
(He was released on November 8th.) 

Some 3.7m Syrians have made Tur- 
key their home over the past decade. 
The Turkish welcome, once generous, 
has become grudging. As the lira plum- 
mets and inflation tests 20%, the refu- 
gees are becoming a target of frustra- 
tion. With its poll numbers shrinking 
President Recep Tayyip Erdogan’s gov- 
ernment appears keen to prove that it 
can act tough. Even over soft fruit. 

Don't tell the president 


58 Europe 

The Economist November 13th 2021 

Charlemagne | Minimum wage, maximum rage 

A fight about worker pay pits a Scandinavian duo against the rest of the European Union 

VERYONE WANTS to be a little bit Danish. Hygge, a sense of Nor- 

dic contentment attained via baking, candles and good compa- 
ny, became the philosophy du jour during lockdown. Danish dra- 
mas win garlands, while its comedies contain jokes so enjoyably 
dark that viewers may worry about finding themselves on a Euro- 
pol watch list. Even Danish semen has become a booming export, 
thanks to the country’s combination of liberal rules for donors 
and reputation as asmall nation of tall hunks. 

But it is the Danish labour system that attracts the most plau- 
dits. Leftists drool over a model that sees burger flippers in Mc- 
Donald’s paid the equivalent of $22 per hour. Those on the right 
marvel that the country has no statutory minimum wage. Instead, 
employers and stakeholders sit down together and hammer out 
collective agreements that cover most workers. It is the same in 
neighbouring Sweden. Employees benefit from wages and bene- 
fits that are among the most generous on the continent; employ- 
ers can hire or fire with ease during boom or bust. Denmark and its 
Scandi neighbours manage to be both a worker's paradise and a 
capitalist’s dream. 

Telling Scandinavians how to run a labour market is akin to 
teaching the French how to bake baguettes. Yet this is the position 
in which the Nordic countries have found themselves. Ursula von 
der Leyen, the president of the European Commission, wants all 
workers to be covered by a minimum wage, whether through na- 
tional law (as in most of the club) or through collective agree- 
ments (as in Scandinavia). Proposals that will see the topic of 
minimum wages dragged into EU law are being negotiated among 
MEPS and national governments. 

At first glance, Denmark and Sweden have little to worry about. 
Acommon minimum wage is not on the table. Indeed, that would 
be impossible for a club that includes Luxembourg, whose mini- 
mum wage is €2,202 per month ($2,550) and Bulgaria, where it is 
€332. According to the Eu’s own treaties, only national govern- 
ments can set a minimum wage. Indeed, the commission came to 
praise the Scandinavian system, not to bury it. It would rather 
everyone looked a bit more like Sweden or Denmark, with collec- 
tive agreements galore. 

Instead, the commission wants to shape how national govern- 

ments guarantee decent wages, rather than to set their level. Un- 
der its proposals, countries would still be in charge of the details. 
Those with statutory minimum wages would be forced to ensure 
these are adequate when measured against average incomes. For 
those without a minimum wage, a group which includes Italy, 
Austria, Cyprus and Finland as well as the Scandinavian duo, the 
commission wants at least 70% of workers to be covered by collec- 
tive agreements—a hurdle that the Scandinavians already meet. 

Yet the Scandinavian duo are still fretting, and with some 
cause. All legislation comes with unintended consequences, par- 
ticularly at the European level, where the European Court of Jus- 
tice is a player as much as a referee. In Sweden about 60% of col- 
lective agreements do not include a minimum wage, points out 
German Bender, an analyst from Arena Idé, a Swedish think-tank. 
With EU law now encompassing minimum-wage rules, legal chal- 
lenges would become possible. And peculiar things can happen. A 
case in the 1960s involving an unpaid electricity bill worth a few li- 
ra ended up establishing the primacy of EU law, which means EU 
rules trump national ones if the two clash. The so-called “no bai- 
lout” clause in the EU’s treaties did little to stop a series of bail- 
outs. A single judgment might upend the Nordic labour model. 

When proposals start rolling, they are tricky to stop. Employ- 
ment legislation gets agreed by a qualified majority of govern- 
ments, so vetoes do not apply. Usually, though, the EU avoids top- 
ics that are sacred to national governments. Pleas that legislat- 
ing—rather than issuing suggestions—on minimum wages vio- 
lates the Scandinavian principle of no government interference in 
wage-setting fell on deaf ears. Denmark and Sweden “yellow-card- 
ed” the proposal fora directive on minimum wages, a formal prot- 
est, but to no avail. In the EU’s ministerial council, where national 
governments haggle over a position, the lawyers say it is perfectly 
legal. The French government, which will shepherd negotiations 
on the topic from January, is keen to get it done sharpish. 

Beyond the bare minimum 

New rules on minimum wages are only the beginning of a wider 
push on workers’ rights at the EU level. Laws to make pay transpar- 
ent have been put forward by the commission. Proposals on how 
countries must treat “platform workers’—such as Deliveroo riders 
and Uber drivers—are in the works. For some it is a welcome shift 
in EU policy. During the austerity years governments were to be 
lean and mean. Angela Merkel was fond of noting that the EU was 
7% of the world’s population, a quarter of its economy, but about 
half of all its welfare spending. Today, the tune has changed. Gene- 
rous welfare states and high worker protections were once held to 
be the cause of the EU’s woes; now they are the solution. 

For the Scandinavians, this shift is cause for concern. Their 
system is not broken, yet the EU insists on fixing it. There is little 
scope for dodging the legislation. Denmark has an opt-out on the 
euro, aS well as on European laws on justice and home affairs. 
Sweden is in theory obliged to join the euro eventually, but uses a 
loophole to cling on to its krona. Such derogations are a thing of 
the past, however, and of no help in the present case. Europe is no 
longer ala carte. Systems that work well, such as those of Denmark 
and Sweden, may have to change in order to help systems that 
work less well, such as those of Cyprus or Italy. “United in diversi- 
ty” is the EU's slogan. But unity increasingly trumps diversity as 
the EU delves ever further into the lives of its citizens. Everyone 
wants to be a bit like Denmark. But Denmark may soon start to re- 
semble everywhere else. @ 



This time, it’s different 

Rolls-Royce and the government are betting that small reactors can fix 

nuclear power’s tricky economics 

RITAIN IS keen on nuclear power—in 

theory, at least. In 2010 the government 
gave permission for eight new reactors to 
be built in England and Wales, as part of its 
efforts to decarbonise electricity genera- 
tion. Things have proved harder in prac- 
tice. A decade later only one—at Hinkley 
Point on the Somerset coast (pictured)—is 
being built. It is late and over budget. Con- 
struction only began at all because in 2013 
ministers committed consumers to paying 
EDF, the French firm building the plant, a 
fixed price far above the going rate for its 
electricity for the first 35 years. 

Rolls-Royce, a big engineering firm, 
thinks it can do better. On November 8th it 
said it had raised £195m ($263m) from priv- 
ate investors including Exelon Energy, an 
American firm, and BNF Resources UK, a 
company backed by the Perrodo family, a 
French oil dynasty. The money will be used 
to develop and design a new generation of 
up to16 smaller nuclear reactors that Rolls- 
Royce says will be both cheaper and quick- 
er to build than existing ones, and which it 
hopes may evolve into a new business line. 
That will be particularly welcome because 

its aerospace business suffered badly dur- 
ing the covid-19 pandemic, leading it to cut 
up to 9,000 jobs. 

The private investment was enough to 
persuade the government to chip in anoth- 
er £210m. Ministers hope that a new round 
of nuclear power plants will help Britain 
meet its carbon-cutting goals by providing 
a Steady source of low-carbon power to go 

Small change 
Britain, emissions from electricity generation 
Gigatonnes of CO, equivalent per kWh 


2030 target 

202 iS Dae 30 
Source: MyGridGB *12 months to November 10th 


60 Going green, ata price 

61 Bagehot: Brexiteers paranoid 

— Read moreat: /Britain 

with the intermittent electricity generated 
by wind-farms and solar panels. Rolls- 
Royce reckons that the first ones could 
come online by the early 2030s. 

Such “small modular reactors” (SMRs) 
are not a new idea. Countries from China 
and Russia to America, Canada and France 
are pursuing the concept. As the name sug- 
gests, they are designed to be smaller than 
most modern nuclear stations. The two re- 
actors at Hinkley Point C, when they are 
finished, will supply 3.2 gigawatts (GW) of 
electricity. In summer that would be 
enough to cover around a tenth of Britain’s 
electricity demand. Rolls-Royce’s reactors, 
which are large by SMR Standards, will sup- 
ply 0.47GW each. 

Smaller means cheaper. The latest esti- 
mate for Hinkley Point C is £23bn. Sucha 
hefty price tag ensures that only the big- 
gest, best-capitalised firms can build nuc- 
lear plants. Even then governments must 
often sweeten the deal. In 2017 the Nation- 
al Audit Office, a spending watchdog, said 
that EDF’s fixed-price contract might 
amount to a subsidy of £30bn over the 35 
years of the contract. By contrast Rolls- 
Royce reckons its first few sMRs might cost 
around £2.2bn apiece. That would put 
them within reach of smaller firms. 

The “modular” part, in turn, refers to 
how the reactors are constructed. Rather 
than building a reactor on-site, says An- 
drew Storer, who runs the Nuclear Ad- 
vanced Manufacturing Research Centre at 
the universities of Sheffield and Manches- 
ter, the idea is to make as much of the reac- | 

60. _—sC#Brritain 

» tor as possible off-site, in factories, before 
shipping the parts for final assembly. 

Rolls-Royce thinks that should make 
construction faster. It reckons the build 
time for an SMR could be shaved to three or 
four years, shortening the time between 
forking out capital and beginning toearna 
return. It also hopes that a combination of 
factory manufacture and a large produc- 
tion run will allow its engineers to take ad- 
vantage of economies of scale and learn 
how to streamline production, just as mak- 
ers of standardised goods from aircraft to 
fridges do. It reckons that the cost of later 
SMRS could fall to around £1.8bn. 

It all looks good on paper. Rolls-Royce 
says there is interest from Poland, the 
Czech Republic and Turkey. Privately, 
though, even some of those associated 
with the project concede that history coun- 
sels caution. The nuclear industry has 
promised cheap reactors many times be- 
fore; so far it has failed to provide them. 

Environmental attitudes 

Mustn’'t grumble 

The price of wind and solar energy, mean- 
while, continues to fall. 

Ministers, however, may feel they have 
little choice but to hope that this time real- 
ly will be different. Britain’s nuclear plants 
produced 16.5% of its electricity last year. 
Yet they are mostly old and decrepit: all but 
one is due to shut by 2030. The country has 
installed fleets of wind turbines, but 
unusually calm weather this year has cut 
output and forced it to rely more heavily on 
polluting coal and gas-fired power sta- 
tions, even as the price of natural gas has 
soared. Electricity bills are rising; carbon 
emissions from electricity generation, 
which had been falling for years, have 
crept back up (see chart on previous page). 

Nuclear energy, despite its drawbacks, 
is low-carbon and more dependable than 
the wind. Its price is little affected by fluc- 
tuations in the cost of uranium. Ministers, 
Rolls-Royce and consumers will hope that 
a new twist on the idea takes off. @ 

Britons are keen on greenery—especially the wasteful kind 

NE SIDE-EFFECT Of hosting an interna- 

tional climate conference is an out- 
break of navel-gazing. As the UN extrava- 
ganza in Glasgow nears its end, many opin- 
ion polls and studies have appeared, which 
provide a superbly detailed view of how 
Britons think about climate change. They 
reveal acountry committed to tackling glo- 
bal warming, but unfortunately drawn to 
the priciest ways of doing it. 

Perhaps sensing that they ought to seta 
good example for their international 
guests, Britons have swung firmly behind 
the view that anthropogenic climate 
change is both real and alarming. One poll- 
ster, Ipsos MORI, finds that 81% believe that 
an environmental disaster looms unless 
habits change quickly. Old people’s opin- 
ions have changed most dramatically. A se- 
ries of polls for the Department for Busi- 
ness, Energy and Industrial Strategy reveal 
that 80% of over-64S are now concerned 
about climate change, up from 56% in 2012. 

Britons have a lot on their minds these 
days, what with Brexit, covid-19 and infla- 
tion. That does not seem to matter. Where- 
as the financial crisis of 2007-08 was fol- 
lowed by a years-long recession in concern 
about climate change, the coronavirus 
pandemic suppressed interest only briefly 
(see chart). Lorraine Whitmarsh of the Uni- 
versity of Bath suggested a decade ago that 
people have a “finite pool of worry” and 

that economic concerns had displaced en- 
vironmental ones. She now thinks that cli- 
mate change has become a core concern 
that cannot be pushed out of the pool. 
What to do about it, though? Unsurpris- 
ingly, Britons are keen on climate mitiga- 
tion policies in the abstract and less keen 
when they are presented with the probable 
costs of such policies. But if they must pay, 
they would rather do so, bya slight margin, 
through general taxation. Onward, a think- 
tank, reported on November 8th that 50% 
of people were prepared to pay higher taxes 
in order to reduce carbon emissions, 
whereas 46% would pay higher prices for 


Financial slump, pandemic pause 
Britain, % citing pollution, the environment or 
climate change as a top issue facing the country 

First daily covid-19 briefing 30 

from Boris Johnson 

_-+ Beginning of Northern - 
Rock's bank run : 

Ags tye Veer Se ee “as Sy 

Source: Ipsos MORI 

The Economist November 13th 2021 

goods. Low-earners were especially op- 
posed to higher prices. 

Politicians amplify this view. Robert 
Halfon, the Conservative MP for Harlow, 
has for a decade campaigned successfully 
against any rise in fuel duty. That probably 
contributed to the fact that greenhouse- 
gas emissions from transport fell by just 
2% between 2010 and 2019, even as emis- 
sions from all sources dropped by 26%. Mr 
Halfon is not a climate-change denier (“I 
believe in all of it,” he says). And he sup- 
ports subsidies for electric vehicles. He 
merely opposes attempts to reduce de- 
mand by raising prices. 

Britons are keener still on banning 
things. Another poll, in August, found that 
people would prefer policies that restrict 
the number of flights they can take and the 
quantity of meat they can eat to policies 
that increase the price of flying and the 
price of meat. Sir John Curtice, a psepholo- 
gist at the University of Strathclyde, and 
others found that 44% support a ban on 
powerful vacuum cleaners. The proportion 
rose to 64% following an online discus- 
sion of the issue. 

Economists usually favour market- 
based interventions such as carbon taxes, 
and disdain measures such as electric-car 
subsidies because of their inefficiency 
(some of the money goes to people who 
would have bought electric cars anyway). 
But ordinary Britons plainly disagree. Will 
Tanner of Onward suggests that is because 
they believe the cost of tackling global 
warming should be borne by society as a 
whole, and general taxation strikes them 
as a good way of achieving that. Blanket 
bans probably strike a nation inordinately 
fond of queuing as equitable, too. 

This enthusiasm for inefficient ways of 
reducing greenhouse-gas emissions im- 
plies that Britain will end up spending far 
more than it needs to. That is frustrating. 
But the polls also suggest that Britons are 
in one sense ahead of their leaders. Adap- 
tation to climate change has for years been 
the poor relation of mitigation. It is dis- 
cussed less and often thought of as some- 
thing that poorer countries need to do. 
Speaking at a session on adaptation in 
Glasgow on November 8th, Anne-Marie 
Trevelyan, Britain’s trade secretary, touted 
a fund to assist Asian countries but said 
nothing about her own. 

People seem to have noticed this, and 
are not happy. In late 2020 Ipsos MORI 
polled 30 rich and middle-income coun- 
tries for the energy firm EDF. It found that 
just 30% of Britons believe that their gov- 
ernment has taken measures to reduce the 
effects of climate change at home, such as 
building dams—the second-lowest pro- 
portion of any country after Italy. Politi- 
cians might call that judgment unfair. It 
would be better if they tried to change peo- 
ple’s minds through their actions. @ 

The Economist November 13th 2021 


Bagehot | Learning from Paterson 

Boris Johnson needs to shake off the Brexit elite’s tri'umphalist, paranoid mindset 

OME POLITICAL dramas flare up briefly; others redraw the politi- 
Sal landscape. The debacle in the House of Commons on No- 
vember 3rd and ath, when Boris Johnson tried to tear up the sys- 
tem of parliamentary oversight to prevent the suspension of Owen 
Paterson, a friend and MP, only to reverse course, looks like the 
second type. As furious Conservative MPs complained about being 
treated as cannon fodder, it strained their faith in the prime min- 
ister’s judgment and undermined the whips’ authority. It also gave 
fresh juice to other inquiries into Tory conduct, including Mr 
Johnson’s recent holiday at a Spanish villa, payment for seats in 
the House of Lords and the extra-parliamentary legal career of Sir 
Geoffrey Cox, a former attorney-general who earned £900,000 
($1.2m) in the past year. A YouGov poll after the fateful vote on No- 
vember 3rd found that a Tory lead of 6% had narrowed to1%. 

Marxist theoreticians argue that, as Hegel put it, beyond a cer- 
tain point “merely quantitative differences...pass into qualitative 
changes”. Mr Paterson has stepped down, but for the prime minis- 
ter the affair may mark the moment when his accumulating errors 
and u-turns, from getting friends to pay for expensive wallpaper 
in his residence to changing tack repeatedly on lockdowns, be- 
comes a qualitative shift in public opinion. 

Explanations for such a catastrophic misstep range from gen- 
erous (the prime minister merely wanted to protect a friend and 
ally) to cynical (he sought to neuter the standards commission be- 
fore it pronounced on his own actions). But one is particularly 
compelling: that he was unduly influenced by a clique of ageing 
Brexiteers. Behind the Paterson debacle stands a group of broth- 
ers-in-arms who served shoulder to shoulder in the anti-Euro- 
pean trenches for decades. The hard core, Sir Iain Duncan Smith, 
Sir Bill Cash, David Davis and Sir Bernard Jenkin, were critics ofthe 
Maastricht Treaty in the 1990s, “Vote No” warriors under David 
Cameron, stalwarts of the pro-Brexit European Research Group, 
self-styled “Spartans” under Theresa May—and champions of Mr 
Johnson as prime minister. 

Dame Andrea Leadsom, who put forward the Paterson amend- 
ment, and Jacob Rees-Mogg, who did most to push it through, 
were too young for the Maastricht wars. But they were there in 
Spirit (the infant Rees-Mogg was educated in Euroscepticism by 

Sir Bill). Lord (Charles) Moore, a former editor of the Daily Tele- 
graph, also played a pivotal role. He wrote columns in support of 
Mr Paterson, his friend for 45 years, and organised a dinner at the 
Garrick Club on November 2nd, at which Mr Johnson was fed 
pheasant and claret, and brought round to their point of view. 

The clique’s victory in the Brexit vote of 2016 has injected a tox- 
ic mix of triumphalism and paranoia into the heart of Conserva- 
tism. Its members see themselves as possessing a unique connec- 
tion with the British people, anda rare strategic genius. They think 
they can achieve anything, as long as they exert sufficient pressure 
and plot sufficiently thickly. But they also regard themselves as 
beset by a hostile establishment that seeks to frustrate their will. 
Lord Moore's articles are textbook examples of the style. He has ar- 
gued that the two-year investigation into Mr Paterson “smacks of 
political revenge’, and that the parliamentary standards commit- 
tee selectively targeted pro-Brexit MPs while going easy on Re- 
mainers. He urged MPs to reject the committee’s sentence as a way 
of “reasserting the right of voters, not bureaucrats, to decide who 
should make [the] law and ensure that it works”. 

Successful political parties rely on their elders’ accumulated 
wisdom to stop them making unforced errors. Even Margaret 
Thatcher, a radical to her fingertips, paid close attention to Wil- 
liam Whitelaw, a moderate grandee—thus her immortal dictum 
that “every prime minister needs a Willie”. But the Brexit wars 
have removed a generation of “Willies” from the parliamentary 
party, notably Sir Nicholas Soames, Sir Alan Duncan, Kenneth 
Clarke, Patrick McLoughlin and Dominic Grieve. Politics has been 
left in the hands of ageing zealots in the Commons and light- 
weight technocrats in Downing Street, such as Dan Rosenfield, Mr 
Johnson’s chief of staff. The zealots appeal to Mr Johnson’s worst 
trait, a tendency to believe that he is above accountability; the 
technocrats lack the strength to rein their master in. 

Younger MPs were particularly furious about the Paterson 
mess, not because they are anti-Brexit saboteurs (most were fer- 
vently in favour of leaving the EU) but because they resent being 
treated so cavalierly by people who wouldn't recognise them in 
the corridors of Westminster, let alone say hello. The brewing row 
over extra-parliamentary income sharpens their resentment. To 
the ageing baby-boomers within the Brexit clique, £100,000 a year 
may sound like a reasonable second income; to the 2019 intake 
representing working-class “red wall” constituencies in the Mid- 
lands and north of England, it is serious money. 

Mr Johnson now needs to break with the Brexit clique. He 
should stop listening to the likes of Sir lain and Mr Davis, who are 
neither wise nor even particularly intelligent. Gargoyles like Mr 
Rees-Mogg should be cleared out of front-line politics. In their 
place, the prime minister should assemble a government of all the 
Tory talents. The brightest and best of the rising generation should 
be put on the fast track to high office. 

They’re not out to get you 

Above all, he needs to break decisively with the triumphalist-para- 
noid mindset. Neither he nor anyone else has the right to force 
through controversial legislation in the name of some mystical 
connection with “the people”. Not everyone who resists his ac- 
tions is plotting to bring Britain back into the Eu. The British es- 
tablishment, by and large, recognises that Brexit is a fait accompli 
and the great task of the coming decades is to make the best of it. 
Mr Johnson can still repair the damage of the past week, but only if 
he takes itas a spur to party renewal. @ 


Death on demand 


In the West, assisted dying is rapidly becoming legal and accepted 

HORTLY BEFORE Angel Hernandez hand- 

ed his wife the glass of barbiturates that 
would kill her, he asked her once again if 
she wanted to die. “The sooner the better,” 
she replied. Ravaged as Maria José Carras- 
co’s body was by multiple sclerosis, she 
struggled to swallow the poison. In the end 
she forced it down through a straw. 

Ms Carrasco’s death in 2019 provoked a 
media storm in Spain. In Madrid the inves- 
tigating judge initially referred the case to 
a court that specialises in violence against 
women. The prosecutor pushed for Mr 
Hernandez, then 70, to serve six months in 
prison. But on June 25th Spain enacted a 
law allowing those with a “serious or in- 
curable illness” or a “chronic or incapaci- 
tating” condition to seek help to end their 
own lives. Twelve days later, Mr Hernan- 
dez was acquitted. 

In much of the West public opinion has 
long favoured assisted dying. In 2002 60% 
of Spaniards supported voluntary eutha- 
nasia, a Share which had risen to 71% by 
2019. Writ large, secularisation and 
increasingly liberal values have solidified 

support. But so has personal experience, 
particularly that of baby-boomers who, 
having witnessed their parents’ suffering, 
are fighting for the right to deaths of their 
own choosing. 

Change has been rapid. Assisted dying 
is now legal or decriminalised in at leasta 
dozen countries, with legislation or court 
challenges pending in many others (see 
map on next page). On November 5th Por- 
tugal’s parliament approved a revised bill 
which would allow those with “grave, in- 
curable and irreversible” conditions to re- 
ceive help to end their lives (the constitu- 
tional court had in March blocked an earli- 
er version as being too imprecise). Other 
largely Catholic countries such as Chile, 
Ireland, Italy and Uruguay are also moving 
towards enshrining a right to die. In Belgi- 
um, Colombia and the Netherlands gov- 
ernments have broadened assisted-dying 
laws to include terminally ill children. 

After years of struggle, activists and 
politicians have found ways through or 
around reluctant legislators. The right to 
die has been ticked through American bal- 

lot boxes, squeezed through Australian leg- 
islatures, and gavelled through Canadian 
and European courts. Proponents are us- 
ing public consultations and petitions to 
demonstrate public support. And growing 
evidence from countries with assisted-dy- 
ing laws has assuaged fears it will become 
easy to “kill granny”. The changes are 
snowballing as advocates in one country 
learn from their counterparts elsewhere. 

Assisted dying is still rare. Most cases 
are cancer-related, and the number of 
deaths is tiny. But they are nonetheless 
changing how people think about dying. In 
some countries assisted dying has been ex- 
tended to those with mental disorders and 
dementia, and even to old people who feel 
tired of life. A clandestine network of baby- 
boomers who share methods to kill them- 
selves has sprung up on the internet. Even 
some proponents are beginning to worry 
about a slippery slope. 

Thirty years ago assisted dying was ille- 
gal everywhere bar Switzerland. But in 1997 
the American state of Oregon approved the 
Death with Dignity Act, initiating a spate of 
liberalisation. In Oregon two doctors must 
agree that a patient is of sound mind and 
has less than six months to live before he 
or she can receive the lethal drugs. These 
must be administered by the patient 
(known as physician-assisted dying) rath- 
er than injected by a doctor (voluntary eu- 
thanasia). Around 2,000 people have died 
under the law (roughly 250 of them last 
year, see chart 1), with no wrongful deaths | 

The Economist November 13th 2021 

» reported. Versions of the law are now on 
the books of ten states, home to a fifth of 
Americans, as well as in Washington, Dc. 

Oregon’s rules are being copied interna- 
tionally, with some modifications. New 
Zealand’s Oregon-style law came into ef- 
fect on November 7th. In Australia, the 
State of Victoria passed a similar law in 
2017, and since then all but one of Austra- 
lia’s six states have followed suit. In Brit- 
ain, an Oregon-style bill passed its second 
reading in the House of Lords in October. 
But to become law it would also need the 
support of the House of Commons and the 
government, which looks unlikely. Three- 
quarters of Britons support a right to die, 
but only 35% of MPs do. 

Some campaigners are circumventing 
cautious representatives by going through 
the courts. In February Peru's constitution- 
al court ruled that the Ministry of Health’s 
refusal to help a woman with degenerative 
polio end her life violated her rights to 
“dignity” and “autonomy”. Several coun- 
tries, such as Austria, are beginning to 
flesh out a ruling by the European Court of 
Human Rights in 2011 that people have the 
right to decide the time and manner of 
their deaths. After Germany’s highest court 
declared in 2020 that a ban on repeatedly 
helping others die was unconstitutional, 
Dignitas Germany, a non-profit organisa- 
tion, began to help people kill themselves. 

Even after a legislature or court opens 
the door to assisted dying, those pursuing 
the option can face high hurdles. With 68 
safeguards, Victoria’s law excludes some of 
the people it was intended to help. Doctors 
are forbidden to bring up assisted dying 
with their patients, so many do not knowit 
is an option. Colombia decriminalised vo- 
luntary euthanasia in 1997, but is only now 
regulating the practice. As a result, many 
Colombian doctors refuse to get involved 
for fear of prosecution. Approval is rare 
and can be withdrawn. 

Despite such strictures, the expansion 

Live and help die 
Assisted dying 
Bel., Neth. & Lux. 

Canada. . 

Oregon = ne re France # 
Colorado . Maine “i 
vee US Bee eieey Portugal ¥ 
California C 
New Mexico Spa n 
€ Hawaii 
Colombia i 
Peru — 

| Uruguay 

Source: The Economist 


Final choices 

Oregon, United States, patients who have died 
from ingesting a lethal dose of medication 

By illness 

™ Cancer Mi Neurological disease \ Respiratory disease 

® Heart/circulatory disease Other 

0 50 100 150 200 a\0) 

By insurance type 

™ Private MH Government* &! None Unknown 

0 50 100 150 200 250 


Source: Oregon Health Authority *Medicare, Medicaid or other 

of the right to die is not without controver- 
sy. In Canada, the Supreme Court ruled in 
2015 that a ban on medical assistance in dy- 
ing (MAID) violated the national Charter of 
Rights. Now MAID is available to all Cana- 
dians who suffer from chronic physical ill- 
ness or disability. Uniquely, the law allows 
patients to determine what constitutes 
“unbearable” suffering. In 2020 only 6% of 
written requests for MAID were refused. 

Some advocates for the disabled argue 
that the amended law devalues the lives of 
those with disabilities. It’s “literally un- 
thinkable” that MAID would be doled out 
instead on the basis of race, sex or any oth- 
er protected characteristic, says David 
Shannon, a quadriplegic lawyer who cam- 
paigns against assisted dying. But others 
argue that the foundations of the disability 
movement lie in creating the freedom to 
make one’s own choices. 

Opponents also fear that Canada may 
end up helping people die before it has 
helped them live. Disabled people who do 

@ Legal during or before 2015 

® Legalised after 2015 

~ Bills in progress/significant 
public debate in 2021 

_ Switzerland 

Australia » v7 ib 
Wa __ Queensland 
“Nictoria | 
Tasmania © J 

New Zealand 

International 63 

not get enough support may choose to die 
because society has failed them, critics ar- 
gue. They worry this may prove particular- 
ly true for people whose lives have been 
filled with abuse, racism and poverty, 
though data from America show that those 
who choose assisted death are overwhelm- 
ingly middle-class, white and educated. 

From 2023, Canada will extend MAID to 
those who suffer solely from mental ill- 
ness, on the ground that to do otherwise 
would discriminate. Many Canadians find 
this troubling (see chart 2). They worry that 
doctors may indulge the suicidal urges that 
are a symptom of many psychiatric disor- 
ders: one in ten schizophrenics kill them- 
selves, some studies reckon. Others ques- 
tion whether a patient could have tried ev- 
ery possible treatment when the medical 
and social understanding of mental illness 
is sO rudimentary and mental-health ser- 
vices are so often inadequate. Most people 
underestimate how serious an intractable 
psychiatric condition can be, says Mona 
Gupta, a Queéebécoise psychiatrist and 
bioethicist. They see depictions of mental 
illness in popular culture but have never 
met anyone severely affected. 

The only way out 

John Scully, who has lived with severe de- 
pression and PTSD for decades, agrees. At 
home at night in Toronto, Mr Scully, who is 
80, is haunted by the horrors he witnessed 
aS a Wal correspondent: the dead torn apart 
by vultures, the AK47 scoped to shoot him. 
He also experiences physical pain. “There 
is no cure,’ he says. Nineteen shock thera- 
pies, countless medications and six stints 
as a psychiatric patient have failed to bring 
him relief. The “only help available’, he be- 
lieves, is assisted dying. He sees it as a far 
more dignified choice than suicide, which 
he has attempted twice, and he thinks it 
would be less painful for his family. 

Like other bioethicists, Dr Gupta thinks 
mental disorders should be seen in the 
same light as other conditions that create 
chronic pain. For doctors, she says, the as- 
sessment process would be much the 
same: distinguishing between an impul- 
Sive death-wish and a considered one, and 
determining if a patient is mentally com- 
petent. Such cases are rare. In 2020 in the 
Netherlands, only 88 people with mental 
illnesses—12% of all those who made re- 
quests—had their requests for help ap- 
proved by a euthanasia clinic. Many are 
heartened by simply having the option. 

Canada is making the same mistakes as 
the Netherlands, reckons Theo Boer, a 
Dutch ethicist who once supported his 
country’s euthanasia laws. Since Dutch 
doctors pushed to legalise assisted dying 
20 years ago, he believes that voluntary eu- 
thanasia has gone from being a “last resort 
to prevent a terrible death to a last resort to 
prevent a terrible life”. Voluntary euthana- >> 


» Siais a Shortcut to death, like a c-section 1s 
a Shortcut to birth, he argues. In the Neth- 
erlands as a whole, one death in 25 is as- 
sisted, he notes, but in some cities that fig- 
ure can be as high as one in seven. 

The choice to die is often murkiest for 
those with dementia. In 2016 a Dutch wom- 
an with severe Alzheimer’s awoke during 
her euthanasia and, as she struggled, her 
family had to hold her down. Before de- 
mentia overcame her, she had made a writ- 
ten request for euthanasia, and the doctor 
prioritised that choice. In 2020, after the 
doctor was cleared of wrongdoing, the Su- 
preme Court clarified that doctors cannot 
be prosecuted for carrying out euthanasia 
on patients with advanced dementia, even 
if they no longer express an explicit wish to 
die. The Netherlands averages around two 
Such cases a year. 

Bert Keizer, a geriatrician who has car- 
ried out some of the Netherlands’ most 
controversial euthanasia cases, is deeply 
uneasy about the new guidelines. Eutha- 
nasia usually happens with the agreement 
of the patient, doctors and the family. But 
in cases of dementia, he muses, “the one 
who it’s all about” is “removed from the 
event”. Implicit in the court’s ruling is a 
judgment that the person one was has 
more value than the person one has be- 
come. A patient who wanted to live could 
be denied that choice. 

What lies ahead 

Swiss law, by contrast, mandates that those 
seeking to kill themselves be mentally 
competent. This can create a different fear. 
Alex Pandolfo has early-onset dementia. 
He has decided to die in Switzerland, yet he 
has postponed the day of his death once. If 
he waits too long, he will doom himself to 
the future he does not want. 

Some proponents of assisted dying are 
pressing to expand eligibility, to include 
those who feel they have lived a “complet- 
ed life”. In 2020 the liberal D66 party in the 
Netherlands proposed a law to make sui- 
cide pills available to people over 75 who 
felt they were done living. Critics point to 
research from the University of Humanis- 
tic Studies in Utrecht, which shows that 
death wishes in older people are subject to 
change, and in some cases are caused by 
loneliness and isolation. Few truly want to 
die, and those who do often meet other cri- 
teria for euthanasia, a commission found 
in 2016. Supporters say it is important to 
offer the choice, even though few will take 
it in the end. Just 3% of the members of 
Dignitas, which campaigns for assisted dy- 
ing, end up getting help to end their lives. 

Some who are tired of life, or unwilling 
to endure its decay, do choose to press 
ahead. At 76, Dawn Voice-Cooper, who suf- 
fered from debilitating but not life-threat- 
ening ailments, saw her future and did not 
want to live it: the pain of having her ears 

Mindful of the difficulties 

Canada, access to MAID* for those with a mental 
illness, % responding by age group, February 2021 

®@ Strongly support 
Somewhat oppose 

Somewhat support 
® Strongly oppose 

0 25 50 15 
Gen Z (18-23) 

Millennial (24-39) 

Gen X (40-55) 

Boomer (56+) : 

Source: Ipsos *Medical assistance in dying 

syringed; the indignity of swimming with 
a colostomy bag; the diminishing freedom 
to move as her arthritic joints stiffened. 
Life was exhausting and would only be- 
come more so. “I don’t want to die but I 
can’t live like this,’ she said. In October she 
travelled from her home in Britain to an in- 
dustrial estate on the edge of a Swiss forest. 
After listening to Nick Drake’s “Day is 
Done’, she died, with her friend Mr Pandol- 
fo (and a tabloid reporter) by her side. 

“Many people are not waiting for laws 
to pass,’ warns Katie Engelhart, author of 
“The Inevitable”, a book about the right-to- 
die movement. It reveals a secret world 
where people, fed up with restraints im- 
posed by laws or doctors, order lethal sub- 
stances over the internet. Their reasons are 
often existential rather than physical: a 
loss of purpose, fear of being a burden or of 
losing their dignity. People who seek death 
through legal channels have similar rea- 
sons. In Oregon the most common con- 
cerns among people who qualify to die ow- 
ing to terminal illness include loss of en- 
joyment (94%), loss of autonomy (93%) 
and loss of dignity (72%). 

Some shrug this off, arguing that “as- 
sisted dying is not suicide.” But Ms Engel- 

The Economist November 13th 2021 

hart believes that such deaths are inevita- 
bly linked to the strictures around assisted 
dying. In New South Wales, Australia, for 
example, one in five people over the age of 
4o who kill themselves have a terminal or 
debilitating illness. Yet many lonely sui- 
cides are not planned and considered, soa 
black market in suicide can bring terrible 
risks. Earlier this year a 28-year-old Dutch 
woman died after taking a substance from 
an affiliate of Last Will Cooperative, a right- 
to-die organisation, it seems impulsively. 
Several members of the group, including 
its leader, have since been arrested. Prose- 
cutors suspect the group is involved in 
dozens of deaths. 

In the West, assisted dying is helping to 
change the culture of death. People are 
talking about it more, and even Scripting it, 
says Naomi Richards, a British anthropolo- 
gist. Death is becoming an event to be 
scheduled, controlled, reached via a byway 
past ageing or suffering. In an Instagram 
age, itis possible to imagine a “good death” 
being idealised and curated. Ellen Wiebe, a 
Canadian doctor, says she has helped peo- 
ple die “on a beach, in a forest and in the 
middle of a party”. Such deaths may seem 
particularly appealing when, for genera- 
tions, dying has been medicalised and hid- 
den, and during a pandemic in which so 
many have died alone in hospital. 

For those left behind, an assisted death 
can feel like a blessing or a curse. Some, 
such as Tom Mortier, who has taken his 
mother’s case to the European Court of Hu- 
man Rights, feel angry and resentful thata 
relative was taken too soon. But most find 
solace. Heather Cooke’s son, Aaron Ball, 
chose to die last year, at 42, while suffering 
from metastatic colon cancer. Ms Cooke 
suffers the agony of a mother who has lost 
her only child, but she is also comforted 
that he died in peace, at home, surrounded 
by his family. Medically assisted dying was 
a “gift” for us, she says. “But I understand 
why people fear it.” @ 

Fading stars 

Money is streaming into the movie business—but the biggest stars are losing out 

OLLYWOOD LABOUR disputes have a 
H certain theatrical flair. When Scarlett 
Johansson sued Disney in July, claiming 
She had been underpaid for her role in 
“Black Widow”, the studio launched an 
Oscar-worthy broadside against the ac- 
tress’s “callous disregard for the horrific 
and prolonged global effects of the covid-19 
pandemic”. In September film crews 
marched to demand better conditions, 
brandishing placards designed by Ameri- 
ca’s finest propmakers. And when Warner- 
Media decided to release “Dune” on its 
streaming service on the same day it hit 
cinemas on October 21st, the movie's direc- 
tor, Denis Villeneuve, huffed magnificent- 
ly that “to watch ‘Dune’ on a 
to drive a speedboat in your bathtub.” 

The streaming revolution has sent 
money gushing into Hollywood as studios 
vie to attract subscribers. Netflix boasts 
that its content slate in the fourth quarter 
will be its strongest yet, with new titles 
such as “Don't Look Up”, starring Leonardo 
DiCaprio, and the final season of “Money 
Heist”, a Spanish bank-robbing saga. On 

November 12th Disney will announce its 
latest commissioning blitz, with new 
shows expected to include “Star Wars” and 
Marvel spin-offs. In total, streaming firms’ 
content spending could reach $50bn this 
year, according to Bloomberg. 

Yet despite the largesse it is a turbulent 
time in Tinseltown, as everyone from A- 
list stars to the crews who style their hair 
goes to war with the film studios. Some of 
the disputes have arisen from the pandem- 
ic, which has upended production and re- 

66 Hidden property gems 

; 67 Bartleby: why bosses are weird 
68 China's hermit economy 
69 General Electric does the splits 
69 Volkswagen's labour woes 
70 The metaverse of things 

72 Schumpeter: The flywheel delusion 

lease schedules. But the tension has a 
deeper cause. As streaming disrupts the Tv 
and movie business, the way talent is com- 
pensated is changing. Most workers are 
better off, but megastars’ power is fading. 

Start with the pandemic. As cinemas 
closed, studios scrambled to find screens 
for their movies. Some, like MGM’s latest 
James Bond flick, were delayed by more 
than a year. Others were sent to streaming 
platforms—sometimes without the agree- 
ment of actors or directors. Those whose 
pay was linked to box-office revenues were 
compensated, either behind the scenes (as 
WarnerMedia did in the case of “Dune’”) or 
after very public spats (as with Disney and 
Ms Johansson). 

Even before covid, streaming was 
changing the balance of power between 
Studios and creatives. First, there is more 
work to be done. “There's an overwhelming 
demand and need for talent, driven by the 
streaming platforms and the amount of 
money that they're spending,’ says Patrick 
Whitesell, boss of Endeavour, whose WME 
talent agency counted Charlie Chaplin 
among its clients. Three years ago there 
were Six main bidders for new movie pro- 
jects, as Netflix vied with five major Holly- 
wood studios. Now, with the arrival of Am- 
azon, Apple and others, there are nearer a 
dozen. Streamers pay 10-50% more than 
the rest, estimates another agent. 

Below-the-line workers, such as cam- 
eramen and sound engineers, are also 
busier. Competition among studios has| 

66 Business 

>» created a “sellers’ market’, says Spencer 
MacDonald of Bectu, a union in Britain, 
where Netflix makes more shows than 
anywhere outside North America. In the 
United States the number of jobs in acting, 
filming and editing will grow by a third in 
the ten years to 2030, four times America’s 
total job-growth rate, estimates the Bureau 
of Labour Statistics. 

The streamers’ hunger for variety 
means their seasons have half as many epi- 
sodes as broadcast shows, and are less fre- 
quently renewed. That means “people are 
having to hustle for work more often,” says 
one script supervisor. A fatal accident on 
the set of “Rust”, a movie starring Alec 
Baldwin, has stirred a debate about the 
frantic pace of production. But the stream- 
ers’ short, well-paid seasons allow more 
time for cv-burnishing side-projects, and 
the work is more creatively rewarding. 
IATSE, a union which represents 60,000 
below-the-line workers in America, has 
reached an agreement with studios for bet- 
ter pay and conditions; its members will 
begin voting on the deal on November 12th. 

More controversial is the streamers’ 
payment model, which is creating new 
winners and losers. Creative stars used to 
get an upfront fee and a “back-end” deal 
that promised a share of the project’s fu- 
ture earnings. For streamers, a show’s val- 
ue is harder to calculate, lying in its ability 
to recruit and retain subscribers rather 
than draw punters to the box office. Stu- 
dios also want the freedom to send their 
content straight to streaming without 
wrangling with a star like Ms Johansson, 
whose pay is linked to box-office takings. 
The upshot is that studios are following 
Netflix’s lead in “buying out” talent with 
big upfront fees, followed by minimal if 
any bonuses if a project does well. 

That suits most creatives just fine. 
“Buy-outs have been very good for talent,” 
says Mr Whitesell. “You're negotiating 
what success would be...for that piece of 
content, and then you're getting it guaran- 
teed to you.” Plus, instead of waiting up to 
ten years for your money, “you're getting it 
the day the show drops”. America’s 50,000 
actors made an average of just $22 per hour 
last year, when they weren't parking cars 
and pumping gas, so most are happy to 
take the money up front and let the studio 
bear the risk. Another agent confides that 
some famous clients prefer the streamers’ 
secrecy around ratings to the public dis- 
section of box-office flops. 

For the top actors and writers, however, 
the new system is proving costly. “People 
are being underpaid for success and over- 
paid for failure,’ says John Berlinski, alaw- 
yer at Kasowitz Benson Torres who repre- 
sents A-listers. The old contracts were like 
a “lottery ticket”, he says. Create a hit show 
that ran for six or seven seasons and you 
might earn $100m on the back end; makea 

phenomenon like “Seinfeld” and you could 
clear $1bn. 

A few star showrunners such as Shonda 
Rhimes, a producer of repeat Tv hits cur- 
rently at Netflix, can still swing nine-figure 
deals. But creators of successful shows are 
more likely to end up with bonuses of a 
couple of million dollars a year. And 
though actors are receiving what sound 
like huge payments for streamers’ mov- 
ies—Dwayne Johnson is reportedly getting 
$50m from Amazon for “Red One”, for ex- 
ample—in the past they could make dou- 
ble that from a back-end deal. 

Some creative types grouse that the 
newcomers simply don’t understand 
showbusiness. With its “phone-company 
mentality”, AT&T, a cable giant that ac- 
quired WarnerMedia in 2018, turned Holly- 
wood’s most storied studio into “one of the 
last stops youd make’, complains one 
agent. Disney’s new boss, Bob Chapek, 
came up through the company’s theme- 
park division. The Silicon Valley streamers 
are more comfortable with spreadsheets 
than stardust. 

But their unwillingness to venerate A- 
listers also has an economic rationale. The 
star system, in which actors like Archibald 
Leach were transformed into idols like Ca- 
ry Grant, was created by studios to de-risk 
the financially perilous business of movie- 
making. A blockbuster, which today might 
cost $200m to shoot plus the same in mar- 
keting, has one fleeting chance to break 
even at the box office. The gamble is less 
risky if a star guarantees an audience. 

Today, studios are de-risking their mov- 
ies not with stars but with intellectual 
property. Disney, which dominates the box 
office, relies on franchises such as Marvel, 
whose success does not turn on which ac- 
tors are squeezed into the spandex leo- 
tards. Amazon’s priciest project so far is a 
$465m “Lord of the Rings” spin-off with no 
megastar attached. Netflix’s biggest acqui- 
sition is the back-catalogue of Roald Dahl, 
a children’s author, which it bought in Sep- 
tember for around $700m. 

What’s more, streaming’s approach to 
generating hits is different. Whereas win- 
ning at the box office required betting big 
on a few mammoth projects, Netflix’s 
method is “more like a random walk where 
‘hits’ are first discovered by their users, 
then amplified by...algorithms,” notes Mof- 
fettNathanson, a firm of analysts. Netflix 
served up 824 new episodes in the third 
quarter of this year, more than four times 
aS many as Amazon Prime or Disney+. Its 
biggest success, “Squid Game’, has a cast 
that is largely unknown outside South Ko- 
rea. “Competition is not limited to who has 
the best content; it is also framed around 
who has the best tech” for discovering it, 
says MoffettNathanson. In the new Holly- 
wood, stars are neither made nor born: 
they are algorithmically generated. @ 

The Economist November 13th 2021 

Commercial property 

Lab rats 

Science and technology lifts the gloom 
for property investors 


but powerful device. When a hotel 
worker in Sydney tested positive for co- 
vid-19 in March last year, the portable DNA 
sequencer traced the infection to a flight 
attendant for an American airline, avoid- 
ing a general lockdown. The success of bio- 
tech firms—another celebrity is BioNTech, 
of Covid-19 vaccine fame—is sucking cap1- 
tal into life sciences. When such compa- 
nies expand, they do so not with offices or 
shops but by means of white-walled, shi- 
ny-surfaced scientific laboratories. 

Commercial-property investors have 
long banked on offices, retail and industri- 
al buildings. Less conventional assets like 
mobile-phone towers were the preserve of 
Specialists. Now the big guns of real estate 
are competing over them too. Thus labora- 
tory space has become commercial real-es- 
tate’s hottest property, along with other fa- 
cilities that power the digital economy. Da- 
ta centres and infrastructure that connect 
smartphones are booming. 

The investors’ motivation is clear. The 
pandemic convulsed commercial-proper- 
ty prices globally. American retailers 
closed nearly 15,000 shops in 2020. By 
mid-October, with people attached to re- 
mote work, offices were only a third full. 
The risk profile of some conventional 
property assets has deteriorated sharply. 

In contrast, demand for assets like labs 

and data centres has never been stron- >> 


Laboratory conditions 

US, investor-owned laboratories, total inventory 
Q3 2021, million square feet 

Vacancy rate, % 

0 5 10 lps JAY) 25 30 

Boston 4./ 
San Francisco Bay Area 7.4 
Raleigh-Durham : 7.7 
| a 

Greater Washington, DC 3.4 

Greater New York pow 

Denver-Boulder* 198 
Philadelphia 7.1 

Seattle 8.0 

Los Angeles* 11.9 
Pittsburgh* 20.1 
Houston* 1.8 

Source: JLL 7077707 

The Economist November 13th 2021 

» ger—a trend visible before the coronavirus 
began to spread. As rent collections for 
shops and restaurants plummeted last 
year, data traffic from virtual meetings and 
online shopping exploded. Companies 
that use the underlying data centres and 
mobile towers are demanding more of 
them. These digital-economy winners 
look as safe as houses. 

The shift is reflected in the changing 
make-up of America’s ten largest real-es- 
tate investment trusts (REITS). A decade 
ago the most valuable such vehicle was Si- 
mon Property Group, the country’s biggest 

mall owner. Today it is American Tower, a 
fast-expanding owner of tens of thousands 
of phone masts around the world. Five of 
the top ten REITS currently manage either 
data centres or mobile towers. 

The loudest buzz currently surrounds 
life-sciences and lab space. Investors are 
flooding the health-care sector with capi- 
tal. Drug makers, medical-equipment 
manufacturers and other life-sciences 
firms have raised a record $103bn in ven- 
ture capital so far this year, up from $63bn 
in 2019, according to JLL, a property consul- 
tancy. A generous slice of capital is going 

The impossible job 

The demands on chief executives require them to be weird 

ELEBRITY BOSSES used to have nick- 
C names that made a virtue of short 
fuses and brutality. “Chainsaw Al” and 
“Neutron Jack” sounded more like wres- 
tlers than men in suits. That kind of 
moniker would jar today. Inclusivity and 
empathy are what matter: think “Listen- 
ing Tim” and “Simpatico Satya”. But just 
because chief executives seem more 
normal does not mean that they actually 
are. The demands of the job require an 
ever-stranger Set of characteristics. 

In some ways the path to the top of 
the corporate pyramid is unchanged. It 
requires people to compete with each 
other over an extended period. It de- 
mands evidence of financial and oper- 
ational success. It uses the prospect of 
money—lots of it—as a lever to incentiv- 
ise ambitious people. And it selects for 
familiar traits: hard work, impatience, 
self-confidence and extroversion. If you 
would rather stay in and watch “The 
Great British Bake Off” than wine and 
dine clients, the role is not for you. 

A recent study by Steve Kaplan of the 
University of Chicago and Morten Soren- 
sen of the Tuck School of Business looks 
at assessments conducted by ghSMART, a 
consulting firm, of more than 2,600 
candidates for different leadership posi- 
tions. Candidates for CEO jobs emerge as 
a recognisable type. Across a range of 
characteristics they have more extreme 
ratings on average: they shine in what 
the academics term “general ability”. 

They also differ from other executives 
in the particulars. Where aspiring chief 
financial officers are more analytical and 
focus on the detail, would-be CEOs score 
higher on charisma, on getting things 
done and on strategic thinking. These 
traits also seem to be predictive. By track- 
ing the subsequent careers of candidates, 
the academics find that people who were 

applying for a different position but had 
“CEO-like” characteristics were more likely 
eventually to wind up in the top job. 

Yet firms today are after more thana 
type-A personality. Mr Kaplan and Mr 
Sorensen note that CEO candidates with 
better interpersonal skills are more likely 
to be hired. Another new piece of research, 
from academics at Imperial College Lon- 
don, Cornell University and Harvard Uni- 
versity, analyses the lengthy job descrip- 
tions that companies draw up when they 
work with headhunters to recruit a new 
leader. Cognitive skills, operational nous 
and financial knowledge are prerequisites 
for success. But over the past two decades 
these descriptions have placed more and 
more emphasis on social skills—the abil- 
ity of bosses to co-ordinate and communi- 
cate with multiple people. 

Why are these softer skills prized? The 
answer, according to Stephen Hansen of 
Imperial College, lies partly in the rise of 
knowledge workers. Firms increasingly 
depend on developers, data scientists and 
IT managers who are used to operating 
independently. Chief executives are not 


into property. JLL estimates that up to 
$87bn is now being directed towards life- 
Sciences real estate worldwide. That is 
equivalent to a third of all global spending 
on commercial property in the second 
quarter of this year. 

Landmark deals are cropping up fre- 
quently. In October GIc, Singapore's sover- 
eign-wealth fund, purchased a 40% stake 
in Oxford Science Park from Magdalen Col- 
lege, part of Oxford University; the deal val- 
ued the park at ten times its worth just five 
years ago. Blackstone, a private-equity 


firm, recently doubled its ownership of >> 

going to tell these kinds of workers what 
to do; their job is to make sure that peo- 
ple understand the firm’s goals and toil 
together effectively. Sure enough, the 
paper shows that demand for these skills 
goes up in larger and more information- 
intensive firms. Social skills matter more 
when bosses need to persuade as much 
as instruct. 

The wider environment also rewards 
softer skills. Polling by Edelman, a pub- 
lic-relations firm, suggests that major- 
ities of customers and employees make 
choices on what to buy and where to 
work based on their beliefs. Chief exec- 
utives must mollify politicians, respond 
to activists and dampen social-media 
firestorms. It helps if the boss comes 
across aS arelatable member of society, 
not a volcano-dwelling villain. 

It is not yet time to call time on old- 
fashioned narcissism. Another study, by 
a quartet of researchers at Stanford Grad- 
uate School of Business, surveyed 182 
directors about the personalities of their 
chief executives. The answers suggest as 
many as 18% of bosses are considered 
narcissists by their own board members, 
a prevalence rate perhaps three times 
that of the general American population. 
The researchers also find that firms with 
narcissistic CEOs tend to have higher 
scores for their environmental, social 
and governance policies. What better 
way for an egomaniac to come across as 
empathetic than to save the planet? 

The demands on chief executives 
make for an increasingly strange mix- 
ture. Be more talented than others in the 
firm, but don't tell them what to do. 
Crush the competition while exuding 
empathy. Listen charismatically. Be 
likeably aggressive. CEOs have always 
been abnormal. The trick now is not to 
show it. 

68 Business 

» life-sciences floorspace in Britain, invest- 
ing over $1bn in two new sites. Shares of 
life-science REITS are booming. 

By now, lab space is growing hard to 
come by. In Boston, where much of it in 
America is held, less than 5% of labs were 
available in the third quarter. In the Golden 
Triangle, as the area between London, Ox- 
ford and Cambridge is known, premises 
have run out. The Harwell life-sciences 
campus near Oxford will add 1.5m square 
feet over the next seven years to meet de- 
mand—equivalent to three-quarters of all 
the office space London’s financial district 
will add this year. Chris Walters, director at 
JLL, estimates unmet demand for lab space 
in and around Cambridge at 1m square 
feet—equivalent to nearly a quarter of re- 
tail space on London’s Oxford Street. 

Where markets are tight, participants 
will seek to expand supply. In the case of 
sci-tech property that is harder than it 
sounds. Constructing new phone towers 
means navigating strict planning laws and 
NIMBYS. New data centres need land with 
access to cheap electricity and high-speed 
internet. Life-sciences firms like to cluster 
around top universities and academic 
medical centres that provide the chemists, 
microbiologists and other experts that 
populate their labs. One fix is finding sec- 
ondary locations. Cities like Los Angeles, 
which is fairly near the San Francisco Bay 
Area, and Pittsburgh, home to Carnegie 
Mellon, a university known for prowess in 
artificial intelligence, are attracting start- 
ups awash with capital. In Britain, life-sci- 
ences hubs are springing up in the north, 
where pharmaceutical giants like AstraZe- 
neca and GSK have manufacturing sites. 

Another remedy is converting existing 
offices and industrial space. Boston Prop- 
erties, one of America’s largest office 
REITS, Says it can convert 5m square feet of 
conventional sites and buildings into lab- 
oratories. It is no easy process, for labs are 
complex spaces governed by biosafety 
rules. They need four times the amount of 
air that offices do. Waiting lists in London 
for “wet” labs, facilities in which danger- 
ous chemicals and other hazardous sub- 
stances can be handled, are lengthening- 
. But property investors are game to try. In 
New York conversions could almost dou- 
ble the city’s lab space for rent, according 
to Newmark, a real-estate advisory firm. 

Even empty shops are being repur- 
posed. Savills, a British property firm, reck- 
ons London has at least 1.8m square feet of 
retail property that could be refashioned 
into laboratories. Shops’ high ceilings 
mean plenty of room for high-perfor- 
mance ventilation, and service lifts for 
moving dangerous materials. It will doubt- 
less take years for supply to catch up with 
demand. But as the locus of work and com- 
merce moves, real-estate investors are 
shifting with it. m 

China and the pandemic 

Seal of the realm 

The non-zero costs of China’s 
zero-covid policy 

HE TRADE war between America and 

China paradoxically brought some of 
the countries’ citizens closer together. Ben 
Kostrzewa, a trade lawyer for Hogan Lov- 
ells, moved from Washington, Dc, to Hong 
Kong to help his corporate clients navigate 
duties, sanctions and export controls. He 
used to travel two or three times a month to 
the mainland. If he timed it right, he could 
pass through the border checks in 20 min- 
utes. “I got to know those border agents ve- 
ry well”, he says. 

The pandemic has changed all that. In 
the first half of 2019, China’s busy agents 
recorded over 344m border crossings be- 
tween the mainland and the rest of the 
world (including Hong Kong). In the first 
half of this year, that number was down by 
over 80%, according to official statistics. 
Mr Kostrzewa has not visited in almost 22 
months. “It’s funny to be talking about this 
in the past tense,” he says. 

Talks, in a future conditional tense, be- 
tween Hong Kong and the mainland have 
so far failed to ease travel between the city 
and the rest of China. But officials now say 
a pilot scheme might soon allow small 
numbers of vaccinated people to travel to 
the mainland without quarantine. If the 
scheme works, some of Mr Kostrzewa’s fa- 
vourite checkpoints in Shenzhen could 
reopen by June, according to the South Chi- 
na Morning Post, although travel would be 
subject to quotas. 

For the rest of the world, visiting China 
will remain an ordeal. It is like arranging a 
“state visit’, says one banker who used to 


Diffusion class 

China, impact on GDP if business travel 
were to cease’, by place of origin, % 

South Korea 
United States 

Hong Kong 
Rest of world 

Harvard's Growth Lab 

*Based on 2011-16 aggregated and 
anonymised Mastercard data 

The Economist November 13th 2021 

make the trip 30 times a year. The docu- 
mentary requirements can be onerous and 
inconsistent. One delegation of senior 
businesspeople, hoping to visit Shanghai, 
were aSked for their primary-school tran- 
scripts. After the bureaucratic bother, the 
boredom of quarantine awaits: a mini- 
mum of 14 days, typically in a hotel not of 
one’s choosing. One well-connected mar- 
ried couple were at least given the option 
of separate rooms. They took them without 
any hesitation. 

The benefits of China’s zero-covid strat- 
egy can be measured in lives saved and in- 
fections averted. The economic cost of the 
country’s self-isolation is harder to quanti- 
fy. The travel restrictions are making life 
harder for the international “facilitators” 
that make cross-border business tick, ar- 
gues one investor in Shanghai. Remote 
communication can maintain existing re- 
lationships, but some things are better 
done face-to-face. The investor used to get 
to know his managers over dinners, drinks 
and cigars. “If you spend three hours a 
night together, by the end of that week, you 
know the guy.” No one has the stamina to 
replicate that on Zoom. 

Some know-how is also tacit, embodied 
in people or teams. To transmit this know- 
how it is necessary to move the minds that 
carry it. Increasing spending on business 
travel by 10% raises productivity by 0.2- 
0.5% in the visited sector, according toa 
study of American travellers by Mariacris- 
tina Piva of the Universita Cattolica del Sa- 
cro Cuore and her co-authors. Another stu- 
dy by Michele Coscia of the IT university of 
Copenhagen, as well as Frank Neffke and 
Ricardo Hausmann of Harvard’s Growth 
Lab, made use of aggregated, anonymised 
Mastercard data to map this movement of 
minds. They estimate that China’s econ- 
omy would be13% smaller if it had not ben- 
efited from the know-how diffused by in- 
ternational business travel. The biggest 
contributions were made by visitors from 
Germany and South Korea (See chart). 

Foreign direct investment in China has 
so far remained strong, thanks to the econ- 
omy’s early recovery from the pandemic. 
And few multinationals are leaving. Some 
foreign firms may even localise activities 
done outside China to keep doing business 
there. Companies are “battening down the 
hatches”, according to the European Union 
Chamber of Commerce in Shanghai, bring- 
ing more of their supply chain onshore, be- 
cause of geopolitical tensions, covid re- 
Strictions and new laws that limit data- 
sharing across borders. “Companies might 
be forced to have two different systems 
running: one for China, and one for the 
rest of the world,” says Bettina Schon, the 
chamber’s vice-president. “This will be 
horribly expensive.” It is not that the world 
is leaving China; more that China is be- 
coming a world unto itself. m 

The Economist November 13th 2021 


. aes 
i p 

General Electric 

Not so general 

An iconic conglomerate breaks up 

ERHAPS THE most remarkable charac- 

teristic of General Electric (GE) over its 
129-year history has been how thoroughly 
it reflected the dominant characteristics of 
big American business. Most of its history 
was a chronicle of boisterous expansion, 
then globalisation—followed by painful 
restructuring away from the now-unloved 
conglomerate model. On November 9th 
Lawrence Culp, its chief executive, an- 
nounced that GE would split its remaining 
operations into three public companies. 

Each of these entities will be large, es- 
sential and very modern. One will make jet 
engines, which GE reckons already power 
two-thirds of all commercial flights. Its 
power business will provide the systems 
and turbines generating one-third of the 
world’s electricity. The health-care divi- 
sion will continue to be the backbone of 
modern hospitals. Yet it speaks to GE's re- 
markable role that this is a modest reach 
given its past sprawl. From the late-19th to 
the late-20th century its products lit dark 
streets; provided the toasters, fans, refrig- 
erators, and televisions (along with the sta- 
tions beamed to them), which transformed 
homes; delivered the locomotives that 
hauled trains; and then built a huge busi- 
ness financing all that and more. 

The ambition to be everything was en- 
abled by the perception that it could man- 
age anything. The 21st century punctured 
that perception. Jack Welch, an acquisitive 
chief executive reputed to be a managerial 
genius, retired in 2001 after receiving a 
mind-boggling $417m severance package. 

Ever-better results during his tenure be- 
guiled investors and sent the share price 
soaring. But problems soon arose. The 
structure Welch left behind was in effect 
bailed out during the financial crisis. Loss- 
es at GE Capital, the sprawling financial 
unit he fostered, were blamed, though the 
company’s industrial core turned out to 
have plenty of problems, too. 

Recent years have been spent spitting 
out one notable business after another. 
The timing of the break-up announcement 
was determined by the sale of a large air- 
craft-financing unit. The transaction re- 
duced debt by enough to provide the three 
soon-to-be independent companies with 
an investment-grade credit rating. Mr 
Culp, the firm’s boss since 2018, speaks of 
the “illusory benefits of synergy” to be 
traded for the certain benefits of focus. “A 
Sharper purpose attracts and motivates 
people,’ he says. 

Having boasted of its management 
nous, it now seems that poor management 
is what did it for a unified GE. The contest 
to replace Welch was widely seen as pitting 
the best global executives against one an- 
other, with the losers hired to run other big 
firms. But his successors struggled. Jeffrey 
Immelt, Welch’s hand-picked replace- 
ment, retired under a cloud in 2017. John 
Flannery, once seen as a wizard behind the 
rise of the health-care division, took over 
but was fired after little more than a year. 
Mr Culp was brought in from outside, a 
step last taken in the 19th century. 

During much of Welch’s tenure and its 
immediate aftermath GE was the most 
valuable company in the world, reaching a 
peak market value nearly five times its cur- 
rent $121bn. It is tempting to conclude that 
GE's failure illustrates the demise of the 
conglomerate. That is refuted by the diver- 
sification of today’s most valuable compa- 
nies: tech firms that have branched out in- 
to driverless cars, cloud computing and so 
on. Rather, GE's story reflects how even the 
most valuable American companies may 
be flawed—and if flaws emerge, may be 
thoroughly transformed. 

And then there were three 
Share prices, January 1973=100 


Jack Welch 
CEO of GE 



1973 80 90 

Source: Refinitiv Datastream 

2000 +10 ~»#©21 


Golf's course 

Unions and the boss are at it again 


mighty boss of Volkwagen’s coun- 
cil that represents workers, announced 
his resignation in April many investors 
breathed a sigh of relief. Frequent, 
acrimonious clashes between him and 
Herbert Diess, the group’s no-less- 
mighty chief executive, had become a 
distraction from the big changes re- 
quired to push vw into the electric age. 
The culmination was Mr Osterloh’s 
attempt to topple Mr Diess. 

Yet only six months after the depar- 
ture of his near nemesis Mr Diess is 
again locking horns with labour repre- 
sentatives. This time observers say the 
brash Bavarian may have gone too far. 
After all, Volkswagen’s workers have 
enormous clout. Their representatives 
occupy half the seats on the group's 
20-member supervisory board. They 
can count on the loyalty of the two 
board representatives of Lower Saxony, 
the western German state that owns a 
fifth of vw. The Volkswagen law from 
1960 that limits voting rights of any 
shareholder to 20% gives Lower Saxony 
a de facto veto on any big decision. 

How did the relationship hit bottom 
so quickly? The biggest bone of conten- 
tion is the extent of changes required to 
enable vw to rival Tesla as a leading 
maker of electric cars. In an email that 
was leaked to the works council, Mr 
Diess suggested cutting 30,000 jobs, 
which would mostly affect the bloated 
bureaucracy at vw’s headquarters in 
Wolfsburg. Yet job losses are likely to be 
an unavoidable part of the electric- 
vehicle age, because EVS take less time 
to assemble than cars with internal 
combustion engines. Amid the ensuing 
outcry, Mr Diess toned down his plans 
for job cuts. 

But the damage is done. A four- 
member mediation committee is dis- 
cussing Mr Diess’s future even though 
his contract was extended to 2025 only 
in July. Most agree he is the right man to 
steer change at vw, but say he lacks 
diplomacy. Various names of possible 
successors are circulating. Tesla, of 
course, faces no such headwinds. Its 
boss, Elon Musk, has used social media 
to warn workers against unionisation. 
The American firm, which is buildinga 
gigafactory not far from vw's head- 
quarters, presumably views Germany’s 
system of powerful worker representa- 
tion on boards as acautionary tale. 


70 Business 

The corporate metaverse 

Virtual world, Inc 


Companies want to build a virtual realm to copy the real world—and reshape it 

ALL IT THE multiplication of the meta- 
C verses. Ever since Mark Zuckerberg, the 
boss of Facebook—sorry, Meta—laid out 
his vision in late October for immersive 
virtual worlds he thinks people will want 
to spend lots of time in, new ones are pop- 
ping up all over. An entertainment meta- 
verse will delight music fans, influencers 
will flock to a fashion metaverse to flaunt 
digital clothes, and there is even a shark 
metaverse (it has something to do with 
cryptocurrencies). Mostly these are the 
brainchildren of marketeers slapping a 
new label on tech’s latest craze. 

One new virtual world deserves real at- 
tention: the “enterprise metaverse”. Forget 
rock stars and fancy frocks, this is essen- 
tially a digital carbon copy of the physical 
economy. Building living, interactive blue- 
prints that replicate the physical world 
might, in time, come to shape it. The vision 
of what this might mean has become clear- 
er in recent days. Microsoft, the world’s 
largest software firm, earlier this month 
put it at the centre of its annual customer 
Shindig, as did Nvidia, a big maker of 
graphics processors, on November 9th. 

Corporate virtual worlds are already 
more of areality than Meta’s consumer ver- 
sion, where people will get to hang out 
with their friends at imaginary coastal 
mansions. Unlike that metaverse, which is 
populated mostly by human avatars, the 
corporate version is largely a collection of 
objects. These are “digital twins”, virtual 3D 
replicas of all sorts of physical assets, from 
single screws to entire factories. 

Crucially, they are connected to their 
real selves—a change on the shop floor, for 
instance, will trigger the equivalent 
change in its digital twin—and collect data 
about them. This set-up enables produc- 
tivity-enhancing operations that are hard 
today, for example optimising how groups 
of machines work together. Simulating 
changes virtually can then be replicated in 
the real world. And, its boosters hope, a 
path would be laid to automate even more 
of a firm’s inner workings. 

Whether the enterprise metaverse be- 
comes a reality is not simply of interest to 
aficionados of corporate information tech- 
nology (IT). Innovations unlocked through 
insights gleaned from digital mirror- 
worlds can help firms become more adapt- 
able and efficient—helping them reduce 
carbon emissions, for example. Promoters 
of the concept even argue that it will put to 

rest the old adage, coined by Robert Solow, 
a Nobel-prizewinning economist, that you 
can “see the computer age everywhere but 
in the productivity statistics”. 

The concept of this “twinworld”, as the 
enterprise metaverse might be called (a 
spiffy moniker will surely be found), is not 
new. Some of the necessary technologies 
have been around for years, including de- 
vices with sensors to capture data, known 
as the “internet of things” (loT)—another 
field still waiting for a moniker upgrade. 
Software to design detailed virtual replicas 
originated in computer games, the current 
benchmark for immersive worlds. 

But other bits have only recently be- 
come good enough, including superfast 
wireless links to connect sensors, cloud 
computing, and artificial intelligence, 
which can predict how a system is likely to 
behave. “Digital twins aggregate all of these 
things,’ explains Sam George, who runs the 
enterprise-metaverse effort at Microsoft. 

As is its wont as a maker of corporate 
software, Microsoft has developed an en- 
tire platform on top of which other firms 
can develop applications. This includes 
tools to build digital twins and analyse the 
data they collect. But this “stack”, as such 
collections of code are known, also pro- 
vides technology which allows people to 
collaborate, including Mesh, a service that 
hosts shared virtual spaces, and HoloLens, 

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The Economist November 13th 2021 

a mixed-reality headset, with which users 
can jointly inspect a digital twin. 

Nvidia’s roots in computer graphics 
mean it focuses more on collaboration and 
creating demand for its chips. Its Omni- 
verse is also a platform for shared virtual 
Spaces, but one that allows groups of users 
to bring along elements they have built 
elsewhere and combine these into a digital 
twin they can then work on as a team. The 
common technical format needed for such 
collaboration will come to underpin digi- 
tal twins in the same way HTML, a Standard 
formatting language, already underpins 
web pages, predicts Richard Kerris, who is 
in charge of Omniverse. 

Both platforms have already attracted a 
Slew of startups and other firms that base 
some of their business on this technology. 
Cosmo Tech, for instance, takes Micro- 
soft’s tools to do complex simulations of 
digital twins to predict how they might 
evolve. And Bentley Systems, which sells 
engineering software, uses Omniverse to 
optimise energy infrastructure. Both Mi- 
crosoft and Nvidia have also teamed up 
with big firms to show off their wares. AB 
InBev, a beer giant, collaborates with Mi- 
crosoft to create digital twins of some of its 
more than 200 breweries to better control 
the fermentation process. In the case of 
Nvidia, the top partner is BMW, which uses 
Omniverse to make it easier to reconfigure 
its 30 factories for new cars. 

Despite all this activity, it is not a given 
that the enterprise metaverse will take off 
as fast as its champions expect, if ever. 
Similar efforts have failed or disappointed, 
including many IoT projects. “Smart cit- 
ies’, essentially attempts to build urban 
metaverses, turned out to use technology 
that was just not up to snuff and relied too 
much on proprietary standards. 

If the enterprise metaverse does indeed 
take shape, though, it will be an intriguing 
process. Will it be based on proprietary 
technology or on open standards (there is 
already a Digital Twin Consortium)? And, 
asks George Gilbert, a veteran observer of 
the IT industry, how will software-makers 
such as Microsoft be paid for their wares? 
Since their code will be more embedded 
than ever in firms’ products and services, 
some may ask fora slice of revenue instead 
of licensing or subscription fees. 

And then there is the question of how 
the overall metaverse economy will func- 
tion. Since most business activity will be 
digitally replicated, economists may have 
unprecedented insight into what is going 
on. Digital twins could exchange services 
between themselves and perhaps replace 
firms as the main unit of analysis. If digital 
twins live on a blockchain, the sort of plat- 
form that underpins most cryptocurren- 
cies, they could even become independent 
and own themselves. Expect at least as ma- 
ny possibilities as metaverses to unfold. @ 

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mi=)] om ele))\.-1an'Lelel mm elelaarellomi ulin 
the innovators of the Nasdaq-100. 


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The Economist November 13th 2021 

Schumpeter | The flywheel delusion 

Uber, DoorDash and similar firms can't defy the laws of capitalism after all 

N THE REAL world a flywheel is a mechanical contraption that 
| eee rotational energy. In Silicon Valley it has come to mean 
something else: a perpetual-motion business that not only runs 
forever but is self-reinforcing. Thanks to powerful network ef- 
fects, the theory goes, a digital platform becomes more attractive 
as it draws in more users, which makes it even more attractive and 
so on. The end state is a venture that has gathered enough energy 
to self-levitate and throw off tons of cash. 

The payout on one of the most richly funded bets of the past de- 
cade or so revolves around whether ride-sharing and delivery 
firms—which once were part of something known as the “sharing 
economy’ but are better described as the “flywheel economy’— 
can actually ever live up to their heady promise. The outcome will 
matter to more than just venture capitalists who backed their 
growth. Whether these flywheels do gather unstoppable momen- 
tum is also of interest to regulators worried about technology’s 
propensity for winner-takes-all business models, not to mention 
paid-by-the-gig workers caught in its cogs. 

Consider the results of Uber and DoorDash, the largest Western 
ride-sharing and delivery apps respectively. Optimists will have 
seen plenty to cheer them. On November ath Uber proclaimed it 
was at last profitable, albeit only on the flattering metric of “ad- 
justed EBITDA”. Strong third-quarter figures from DoorDash, 
which were released on November oth, fuelled an already heady 
rally in its shares (the firm also announced the acquisition of 
Wolt, a Finnish food-delivery company, for $8bn). 

But look deeper and evidence is mounting that business fly- 
wheels are not defying the laws of capitalism. The money that 
went into building them recalls the railway mania among other 
past speculative investment crazes. The nine firms that have gone 
public so far—Uber and its American rival Lyft; Didi, a Chinese 
ride-sharing app; and six delivery firms, from DoorDash and De- 
livery Hero, which is based in Berlin, to China’s Meituan and In- 
dia’s Zomato—collectively raised more than $100bn. In most cas- 
es, the capital was intended to jumpstart those network effects 
and make market dominance a self-fulfilling prophecy. Seemingly 
bottomless pits of investors’ cash went to subsidising rides and 
deliveries to juice demand. This reached absurd points: a pizzeria 

could make money by ordering its own food for a discounted price 
on DoorDash (which then paid back the regular amount). To justi- 
fy such profligacy, interested parties pointed to the huge “total ad- 
dressable market”, another popular term in Silicon Valley. Bill Gur- 
ley of Benchmark, an early investor in Uber, argued in in 2014 that 
the firm could vie for as much as $1.3trn in consumer spending if 
one saw it as an alternative to car ownership. 

Measured against such visions, the flywheel economy has pro- 
ven a dud. To be sure, the nine listed flywheel firms are still grow- 
ing nicely—at 103% on average in their latest reporting period 
compared to the same period the previous year. This explains why 
they are collectively worth nearly $50o0bn. But self-levitating they 
are not. Nor are they profitable. Sales for the group amounted to 
$75bn over the past year and the operating loss to nearly $11.5bn. 

As the firms have discovered, their businesses are less perpetu- 
al motion machines than real-world flywheels that inevitably lose 
energy to friction, says Jonathan Knee of Columbia Business 
School and the author of a book entitled “The Platform Delusion”. 
The network effects in fact have proved much weaker than expect- 
ed. Many users switch between Uber and Lyft. Drivers also flit be- 
tween them, or to delivery apps, depending on which model offers 
the best pay. This bargaining power from both sides means the 
system does not become self-reinforcing after all. 

Technology, too, has turned out to be less beneficial than ex- 
pected. Data collected by the firms help optimise their operations, 
but are not the decisive factor some had hoped for. Regulators 
keep pushing back. In London they have forced Uber to pay drivers 
minimum wages and pensions. In San Francisco they capped the 
fees DoorDash can charge restaurants for delivering their meals. 

Uber’s tortuous path to stemming losses should temper inves- 
tor optimism. It eked out a profit of $8m on revenues of $4.85bn. 
That excludes expenses that are unlikely to disappear, such as 
stock-based compensation. The company has crawled out of its 
sea of red ink mostly by slashing costs, shedding technology as- 
sets such as its autonomous-car unit, charging higher prices and 
increasing its “take rate”, the share of the fares it keeps. As a result, 
an Uber is now no cheaper—and often more expensive—than con- 
ventional cabs, plenty of which can be hailed via apps these days. 

What is more, the company, which has a market capitalisation 
of $85bn, is now more of a delivery service than a ride-hailing app: 
Uber Eats generates more than half of sales. DoorDash’s own pun- 
chy valuation, of $65bn, rests on revenue that has grown more 
than fourfold since the last quarter of 2019, albeit during a time 
when people dined at home more often. But it also bakes in suc- 
cess in new markets that it has recently entered, including grocer- 
ies and pet food. 

Circular economy 

Real business flywheels do exist. Software makers have managed 
to lock users in and thus generate gross margins typically above 
70%. Venture capitalists are hoping against all hope to find new 
ones. They are already pouring money into the next generation of 
flywheel contenders: instant-delivery startups, which offer grati- 
fication in 30 minutes or less. Coupon-collecting consumers in 
cities such as New York now get at least a week’s worth of groceries 
for nothing from such services as Buyk, Fridge No More and Go- 
puff. Eventually, these firms’ champions promise, their econom- 
ics will be far better than those of an Uber or a DoorDasnh. In the fly- 
wheel economy hope and hype spring eternal, at least as long as 
interest rates remain low and capital is essentially free. m 

Finance & economics 

Chinese banks 

Attack on the tycoons 


The government sets its sights on sleazy ties between businesses and banks 

T’S BEEN A bad year to be a big cheese in 

China. Billionaire entrepreneurs have 
been hounded. Over-extravagant enter- 
tainers have disappeared from the inter- 
net. Nowa new type of tycoon is feeling the 
heat. The latest regulatory crackdown on 
what the government considers private- 
sector misbehaviour extends to business- 
men with excessively cosy ties to banks. 
The fear is that insider dealing, preferen- 
tial access to credit and lax corporate go- 
vernance pose threats to stability, particu- 
larly in the regional and local underbelly of 
China's financial system. 

The most prominent red flag is Ever- 
grande, a debt-ridden property firm close 
to collapse that until recently had a 36% 
Stake in Shengjing Bank, a local lender 
based in the north-eastern province of 
Liaoning. The authorities are said to be in- 
vestigating whether Evergrande, which is 
run by a billionaire, Hui Ka Yan, took con- 
trol of Shengjing, with about itrn yuan 
($156bn) in assets, using illicit means, as 
well as conducting some 10obn yuan in re- 
lated-party transactions. 

Another notorious case involves HNA 
Group, an acquisitive conglomerate which 
took over Yingkou Coastal Bank in Liao- 

ning in 2014 (see chart1on next page). HNA 
put new leaders into the bank and trans- 
formed it into a mill for shadow-banking 
products that provided it and related 
groups with copious amounts of credit. Its 
assets tripled in 2016, making it the fastest- 
growing bank in China that year—before it 
almost collapsed. Since February HNA has 
been in bankruptcy administration. Chen 
Feng, its co-founder and chairman, was ar- 
rested in September, as was its CEO. 

The malaise goes far deeper, posing a 
potential threat to economic stability in 
some Chinese provinces, particularly rust- 
belt ones like Liaoning. The 134 metropoli- 
tan and1,400-odd rural commercial banks 
in China make up about 32% of its com- 
mercial-banking sector, with some 9otrn 

> Also in this section 

75 Venture capital's crypto craze 
75 America’s inflation shock 
76 Debt-for-nature swaps 

77 Buttonwood: The appeal of cash 

78 Free exchange: Lessons from Zillow 

The Economist November 13th 2021 

yuan, or $14trn, in total assets. That is al- 
most the size of Britain’s entire banking 
system. They exist in the shadow of Chi- 
na’s six big national-level banks and 12 
joint-stock banks, which are predomi- 
nantly state-owned and have the most vis- 
ibility. Unlike the bigger banks, during 
most of the past decade many of those in 
the lower tiers have sold ownership stakes 
to large private investors, to the point of 
being under the influence of them. In re- 
cent years some have become cesspools of 
bad debts, insider dealing and failures of 
risk management, which are often attrib- 
uted to misaligned ownership incentives. 

This has aroused the concern of regula- 
tors. The central government is expediting 
a reform to push out what it calls “problem 
shareholders” from banks. On October 15th 
the China Banking and Insurance Regula- 
tory Commission introduced rules that ex- 
tended supervision of those that it consi- 
dered to be banks’ controlling share- 
holders. According to China Daily, a gov- 
ernment mouthpiece, that extended to 
anyone holding a10% stake or more ina Ci- 
ty or local bank, or those holding the larg- 
est equity stake in a bank or insurance 
company, with ownership of no less than 
5%. The aim is to weed out over-cosy cor- 
porate interests. 

If corporate shareholders are indeed 
the problem, the authorities will have their 
hands full. The Economist calculates that of 
107 city commercial banks that disclosed 
financial information for 2020, 72 with 
about 20.2trn yuan in total assets had large 
corporate shareholders, many of which 

were property developers and manufactur- >> 

Finance & economics 

> ers. Twenty-two of this group were con- 
trolled outright by corporations and ty- 
coons, or had been until they were recently 
forced to restructure. But even those with 
more than one large shareholder have at- 
tracted the attention of regulators. The au- 
thorities are likely to be scrutinising the 
way investors compete with each other for 
preferential treatment. 

The level of corporate ownership at ru- 
ral commercial banks extends even fur- 
ther—to the point that it has shocked some 
researchers. Wang Chunyang of Peking 
University surveyed 1,295 rural banks and 
found that 1,122, or about 87% of them, had 
private companies as their largest share- 
holders. By our calculations, that level of 
private ownership implies that up to 
39.4trn yuan in rural-banking assets could 
be controlled or influenced by private in- 
terests. For these banks, identifying pro- 
blems early is a challenge. Smaller lenders 
are more likely to hide their bad debts, says 
Ruan Tianyue of National University of 
Singapore, creating a regulatory blind spot. 

Private ownership of banks, by itself, is 
not the cause of the problem. Some pri- 
vately held banks, such as the newly creat- 
ed Zhongbang Bank, have performed well. 
For their part, many small, government- 
controlled lenders have demonstrated 
abysmal risk controls. But in banks lacking 
in corporate governance, the risk is that the 
owners use their clout to extract loans on 
preferential terms, undermining prudent 
risk management and increasing the level 
of bad debts. 

That could have economic consequenc- 
es. Some experts liken the state of China’s 
Small banks to that of the more than 1,000 
Savings-and-loan institutions that col- 
lapsed in America in the mid-1980s due to 
deregulation and lax lending controls. 
They say bad-debt problems among city 
and rural banks could hurt regional eco- 
nomic growth. 

Another problem is more political in 
nature. As evidence grows of tycoons’ mur- 

Rot in the rust belt 
Chinese banks* 

Non-performing and special-mention loans, 
as % of total loans, end-2020 

@ Non-performing ™@ Special-mentiont 
0 2 4 6 8 

Joint-stock banks 

Piggy banks 

China, ownership structure of tycoon banks 
October 2021, % of total 

®@ Private conglomerates 
® Local government 

~ Property developers 
Other private groups 

O 20 40 60 80 100 


Shengjing Bank* 

Yingkou Coastal Bank 

Chengdu Rural 

Commercial Bankt  (QSUeIcCaaa 

Langfang Bank China Fortune Land 
Fuxin Bank 
Source: QCC *Listed in Hong Kong 12019 

ky relationships with banks, the more it 
plays into the narrative of President Xi 
Jinping that socialist command-and-con- 
trol policies do a better job than private 
capital in allocating economic resources. 

Signs of misbehaviour appear to be 
mushrooming. Besides Evergrande, which 
has been forced to sell some of its shares in 
Shengjing, Hong Kong-listed Bank of Gan- 
Su required a bail-out last year after it lent 
to and invested heavily in the debt securi- 
ties of one of its shareholders, which even- 
tually defaulted. Bank of Jinzhou, a north- 
eastern lender, required an emergency re- 
structuring after its largest shareholder, to 
which it had extended many loans, could 
no longer pay back creditors. Anbang In- 
Surance, the unwieldy conglomerate best 
known outside China for buying the Wal- 
dorf Hotel in 2014, controlled Chengdu Ru- 
tal Commercial Bank until 2020. Xiao Jian- 
hua, a tycoon who was kidnapped by Chi- 
nese agents from a Hong Kong hotel in 
2017, controlled two lenders, Baoshang 
Bank and Bank of Harbin, both of which re- 
quired expensive state bail-outs. 

These problems are unlikely to abate as 
China’s economy decelerates and more 
companies default. In September shares in 

Loan-loss reserves, as % of total 
non-performing and special-mention loans 
@2019 2020 

0 50 100 150 
Joint-stock banks 

*Includes top 30 unlisted and 28 listed rural and city banks across all regions 

Source: S&P Global Ratings 

tLoans flagged for potential repayment problems 

The Economist November 13th 2021 

Fuxin Bank were put up for sale in an on- 
line auction meant to help raise capital for 
the struggling lender after a property de- 
veloper with shares in the company could 
no longer repay its debts. Bank of Langfang 
faces a potential increase in bad debts after 
its second-largest shareholder, China For- 
tune Land, a developer, defaulted on a 
5.3bn yuan bond earlier this year. 

Regulators take several approaches to- 
wards weeding out miscreant owners—of 
varying severity. One is to push out proble- 
matic shareholders. In mid-2020 the bank- 
ing regulator published a list of 38 “illegal 
shareholders” that it had forced to divest. 
Another is detention. Mr Xiao, for in- 
Stance, is thought to be currently held in 
Shanghai, where he is assisting in the un- 
winding of his business operations. A third 
is the death sentence. Cai Guohua, former 
chairman of Hengfeng Bank, which re- 
quired a bail-out in 2020, was handed a 
suspended death sentence for, among oth- 
er things, taking illegal loans. 

Authorities have no intention of forc- 
ing all private shareholders out of the 
banks, but they are moving to ensure that 
the largest shareholders come from the 
State, says Lian Ping of Bank of Communi- 
cations, a large Chinese bank. This will 
mean an upheaval across the industry, giv- 
en how prevalent large, private share- 
holders have become in recent years. Such 
regulatory actions will take time and will 
need to avoid undermining depositor con- 
fidence at banks. 

In some regions, such as the north-east, 
the government has sought to restructure 
handfuls of banks at a time, possibly wor- 
ried about a regional concentration of debt 
woes. S&P Global, a ratings agency, says 
that nearly 8% of the loan books of the 
most prominent city and rural lenders in 
the north-east were non-performing or of 
questionable status in 2020. The figure 
was just 3% for the loan books of similar 
banks in eastern China (see chart 2). 

The north-east has one of the highest 
rates of private ownership in the country. 
In Liaoning province, for example, eight of 
its 15 city commercial banks are privately 
controlled. That produced a drive for con- 
solidation. After the HNA debacle, Yingkou 
Coastal Bank became the central pillar of 
an effort to merge banks in Liaoning. At 
first regulators went so far as to attempt to 
bring together 12 of Liaoning’s banks. But 
later this ambition was downsized to two, 
including Yingkou. 

For all the regulatory overdrive, the 
neatest solution continues to evade Chi- 
nese regulators: allowing banks to fail and 
exit the market. Not since the collapse of 
Hainan Development Bank in 1998 has a 
lender been allowed to fail. And that was a 
convoluted bankruptcy that still drags on 
to this day. Rural banks would be fertile 
ground for such tests. @ 

The Economist November 13th 2021 

Funding crypto ventures 

The bitcom boom 

A venture-capital craze feels like the 
glory days of the dotcom era 

HE HONG KONG Office of FTX, a crypto- 
j poe exchange, is a place where ba- 
sic needs come second to business. Food 
and booze lie around desks fitted with six 
screens each. Sam Bankman-Fried, its 
boss, says he sleeps four hours anightona 
bean bag next to his desk—if he’s lucky. He 
sees little difference between breakfast 
and dinner, apart from “which restaurants 
are open for delivery”. 

His restlessness mirrors that of crypto 
markets, which never sleep. But it also re- 
flects the speed at which the two-year-old 
firm is growing. Last month FTx an- 
nounced a $420m funding round that val- 
ued it at $25bn, just three months after in- 
vestors gave it a price tag of $18bn. The deal 
featured the creme de la creme of the invest- 
ment universe, including BlackRock, the 
world’s largest money manager, OTPP, a 
$170bn Canadian pension fund, and Tema- 
sek, asovereign fund from Singapore. 

FTX’s funding feast is symptomatic of 
investors’ growing appetite for crypto 
Startups, especially those that are creating 
the tools to build a blockchain-based fu- 
ture. In the first nine months of 2021 they 
raised $15bn in venture capital (vc), five 
times their tally for the whole of 2020. In 
the third quarter 12 crypto unicorns—start- 
ups valued at $1ibn or more—were born, a 
record. The heady times remind some ven- 
ture capitalists of the dotcom era. But 
they’re not sure whether they are partying 
like it’s 1994— oF 1999. 

One trigger for the capital flows is the 
rising demand for digital monies from re- 
tail speculators. That is influencing vcs to 
back crypto wallets and exchanges. Inves- 
tors are also betting that, as regulation be- 
comes clearer, institutions will take it 
more seriously, stirring demand for crypto 
tax advisers, analytics firms and asset cus- 
todians, says Matt Burton of QED, a Vc firm. 
Red-hot indicators such as the bitcoin 
price, which flirted with a record $69,000 
this week, are turbocharging excitement. 

The industry’s boundaries are expand- 
ing, too. Blockchain startups are promot- 
ing new forms of financial services (decen- 
tralised finance), digital ownership (non- 
fungible tokens, or NFTS) or incentive 
models (as in gaming, where users can 
earn crypto as they play). NFT ventures 
have raised $2bn so far this year, up from 
$31m in 2020. Four-fifths of vc deals have 
been early-stage rounds. 

Most intriguing is the entry of new in- 

Blockchain reaction 
Venture-capital investments in crypto startups 

Number of deals Funding, $bn 
300 6 
250 5 
200 ie f 4 
150 3 
100 2 
50 1 
0 0 

2015 16 17 18 19 20 21 
Source: CB Insights 

vestors. Successful crypto firms are rein- 
vesting cash into younger ones. The most 
prolific is Coinbase Ventures, the invest- 
ment arm of America’s largest crypto ex- 
change, which sealed 24 deals in the past 
quarter. On November 5th FTx and other 
firms launched a $100m gaming fund. 

Deep-pocketed investors from main- 
stream finance are also pitching in. They 
include well-known venture funds, such 
as Andreessen Horowitz, an early backer of 
Facebook and Skype. SoftBank, a trigger- 
happy Japanese group, made six crypto 
deals in the past quarter. They also feature 
some hedge funds and asset managers. 
Such investors helped complete 15 rounds 
of more than $100m in the last three 
months. Together these accounted for two- 
thirds of total vc money spent. 

Shan Aggarwal, who runs Coinbase 
Ventures, says the craze recalls the dotcom 
boom of the 1990s, when investors rushed 
to back the firms that would form the foun- 
dations of the web economy. In one respect 
the current era is even more impressive: 
while the internet bubble was mostly nur- 
tured in Silicon Valley, the “bitcom” boom 
spans Asia ($1.4bn raised this quarter) and 
Europe ($1.1bn) in addition to America 
($3bn). Crypto unicorns are cantering 
ahead in Africa and Latin America, too. 

Whether it will produce successes like 
today’s tech giants is still an open ques- 
tion, though. It’s early days. The bounty 
garnered by crypto firms in 2021 amounts 
to 16% of the sum raised by fintech firms 
and 3% of that raised by startups at large. 
Big deals have buoyed the average size of 
investment rounds to $21m, triple the level 
of 2020, but the median, at $4m, is small. 

Some valuations look silly: in Septem- 
ber Sorare, a fantasy-football game played 
on the blockchain, closed a $680m round 
that valued it at $4.2bn, or 22 times sales— 
more than Facebook’s multiple when it did 
its initial public offering. All of which sug- 
gests that some investors will make out 
like bandits, while others will get their fin- 
gers burned. For good or ill, more sleepless 
nights beckon. @ 

Finance & economics 

Inflation in America 
The wrong kind 
of hot 

A broad pickup in prices puts pressure 
on the Fed to raise rates 

F AN AVERAGE American decided that last 

month was high time to buy a new sofa 
and then spent his evenings drinking beer 
on it, he would have been lucky. Both the 
furniture and the brew cost a little less 
than a few weeks earlier. Unfortunately, 
that same American may have been pain- 
fully aware that just about everything 
else—his rent, the petrol for his car, his 
food and even that new leafy plant next to 
the sofa—costa fair bit more. The best level 
for inflation, economists joke, is when 
people do not notice it. In America it is be- 
coming very noticeable. In October the 
consumer-price index rose by 6.2% com- 
pared with a year earlier, the highest rate in 
more than three decades (see chart1). 

As inflation has accelerated economists 
and officials have debated whether it is a 
transitory phenomenon—reflecting over- 
stretched supply chains—or a more persis- 
tent problem. It is far more than an aca- 
demic debate. If inflation is short-lived, 
the right move for the Federal Reserve 
would be to look through it, aware that 
jacking up interest rates may do more 
harm than good. If, however, inflation is 
stubbornly high, the central bank is duty- 
bound to tame it. The big jump in prices in 
October tilts the debate in favour of “Team 
Persistent’, as some have taken to calling 
it, and puts pressure on the Fed. 

To be sure, a big chunk of America’s 
headline inflation is still attributable to 
the lumpy post-pandemic recovery (see 
chart 2 on next page). Gasoline costs, for 
instance, are 50% higher than a year ago, 
tracking the surge in oil prices. Used cars 
are 26% dearer than a year ago, with a 


semiconductor shortage leading to slower b> 


Mercury rising 

United States, consumer prices 
% change on a year earlier 



Headline 5 

| 0 


70 80 90 2000 10 21 

Source: Bureau of Labour Statistics *Excl. food and energy 


Finance & economics 


Fuelling the fire 

United States, consumer-price components 
October 2021, % change on previous month 

-] 0 1 Z 3 4 5 6 

Used cars and trucks 

WH Rent 
© Sofas* 

Beer at home 

*Living room, kitchen, and dining room furniture 
Source: Bureau of Labour Statistics 

> production of new cars and more demand 

for second-hand vehicles. And prices are 
rising globally, from Australia to Britain. 

Nevertheless, optimism that supply 
kinks would be ironed out by now has van- 
ished. Inflation is even hotter in America 
than in other countries because of the 
strength of the rebound there, with stimu- 
lus payments fuelling demand. Price pres- 
Sures are getting broader. A gauge of core 
inflation, stripping out volatile food and 
energy prices, rose by 4.6% year-on-year in 
October, more than twice its trend rate of 
the previous quarter-century. Increasing 
rents suggest that elevated inflation will 
continue well into 2022. With wages also 
rising at their fastest in years, concerns are 
mounting about a feedback loop, in which 
higher salaries beget higher inflation. 

In truth there ought to be little chance 
of a wage-price spiral in America. A sharp 
narrowing in the fiscal deficit will con- 
Strain growth in the coming quarters. And, 
crucially, investors still expect the Fed to 
take decisive tightening action if neces- 
sary, which is why longer-term bond yields 
have not moved much. Last week the Fed 
announced that it would start reducing its 
monthly asset purchases, the first step to 
unwinding its ultra-loose policies imple- 
mented at the height of the pandemic. Sev- 
eral prominent banks have moved forward 
their forecasts for rate increases. Goldman 
Sachs, for example, had previously expect- 
ed the Fed to wait until 2023; now it expects 
two increases next year, starting in July. 
But the uncertainty around all these expec- 
tations is much greater than in normal 
times. The Fed itself has consistently un- 
derestimated inflationary trends over the 
past year, so its shift to tightening may end 
up being uncomfortably abrupt. 

Politically, this is treacherous territory 
for President Joe Biden. His week had got 
off to a great start with the passage of 
America’s biggest infrastructure-invest- 
ment bill in decades, giving him some- 
thing to crow about. On November 1oth, 
Shortly after the inflation data were pub- 
lished, he instead chose to adopt a defen- 

sive posture. “Inflation hurts Americans’ 
pocketbooks, and reversing this trend isa 
top priority for me,’ he said. His adminis- 
tration is trying to clear some of the back- 
logs at ports, which would help retailers 
stock their shelves more quickly, perhaps 
easing some of the pressures. Mr Biden al- 
so noted that the price of natural gas, a big 
contributor to inflation in October, has 
dipped in recent days. 

Yet inflation is, ultimately, out of Mr Bi- 
den’s hands. The government can only do 
so much to paper over global shortages. 
Knowledge that the Fed may feel com- 
pelled to raise rates before too long will of- 
fer Mr Biden little consolation. Historical- 
ly, growth cycles tend to come to an end 
when the central bank tightens policy, so 
today’s price pressures may augur eco- 
nomic disappointment a little farther 
down the road. Mr Biden, a teetotaller, can- 
not even soothe his sorrows with a mod- 
estly cheaper bottle of lager. @ 

Debt-for-nature swaps 

Reef relief 

Belize trades one sort of riches 
for another 

F ECONOMIES WERE measured by their 
[ natural capital, as well as the physical 
and human sort, Belize would be a richer 
country than it is. What the tiny Caribbean 
state lacks in cold, hard cash, it makes up 
for in warm, tropical biodiversity. The Be- 
lize Barrier Reef, the second largest ex- 
panse of coral in the world, is packed with 
turtles, manatees and other threatened 
species. Holidaymakers flock to its coast to 
dive, snorkel or simply gaze at its waters 
from the comfort of ahammock. Or at least 



Lawsuits off, wetsuits on 

The Economist November 13th 2021 

they did before the pandemic. Last year 
tourism dried up, growth contracted 
Sharply and public debt jumped from just 
under 100% of GDP in 2019 to Over 125%. 

That forced Belize, not for the first time, 
into a debt restructuring—one in which it 
is seeking to exchange one sort of riches 
for another. As part of the deal, concluded 
on November 5th, Belize bought back its 
only international bond, a $553m liability 
misnamed the “superbond”, at 55 cents on 
the dollar. It funded that with $364m of 
fresh money, arranged by The Nature Con- 
servancy (TNC), an NGO, which is insured 
by the International Development Finance 
Corp, an American agency. The transaction 
is backed by the proceeds of a “blue bond” 
arranged by Credit Suisse, a bank. The pay- 
back is due over1g9 years with a coupon that 
begins below that of the superbond but ris- 
es above it over time. 

It is called a blue bond because Belize 
has pledged to invest a large chunk of the 
Savings into looking after the ocean. That 
includes funding a $23m endowment to 
support future marine-conservation pro- 
jects and promising to protect 30% of its 
waters by 2026. 

It might be argued that Belize should do 
this anyway to support tourism, which ac- 
counts for 40% of economic activity. But at 
a time when governments and investors 
are looking at novel ways of funding envi- 
ronmental clean-ups, Belize was able to 
use its natural patrimony to gain leverage 
over bondholders. Whether it will be 
enough to stop it defaulting again in the 
future is another matter. 

Debt-for-nature swaps are nothing 
new. Lenders have been offering highly in- 
debted countries concessions in return for 
environmental commitments for decades. 
But these transactions have historically in- 
volved debt owed to rich countries, not 
commercial bondholders. As Lee Buchheit, 
a lawyer who specialises in sovereign-debt 
restructurings, points out, they were “neg- b> 

The Economist November 13th 2021 

» ligible in size”. In total, the value of debt- 
for-climate and nature-swap agreements 
between 1985 and 2015 came to just $2.6bn, 
according to the United Nations Develop- 
ment Programme. Of the 39 debtor nations 
that benefited from the swaps, only 12 ne- 
gotiated debts of over $30m. “It was really 
an exercise in public relations,’ Mr Buch- 
heit says. 

A lot has changed since then. Govern- 
ments are now under immense pressure to 
make ambitious commitments on climate 
change and biodiversity. And investors are 
eager to show they can make money as well 

as being committed to environmental, so- 
cial and governance goals. 

Other poor countries are trying to move 
in the same direction. At the cop26 climate 
Summit in Glasgow Ecuador’s president 
Guillermo Lasso proposed enlarging the 
country’s Galapagos nature reserve 
through a debt-for-nature swap. And TNC 
is in talks with other poor countries inter- 
ested in doing something similar. Once a 
blueprint is in place, agreement gets sim- 
pler. The last restructuring of the same sort 
that it took part in, which involved $21.6m 
of debt owed by the Seychelles to the Paris 

For the duration 

Why cash is now more appealing as a portfolio asset 

VER HAD the feeling that thereisa 
E party somewhere that you re not 
invited to? It is the same feeling investors 
have when they have capital sitting in 
three-month bills or on deposit ata 
bank. Cash is a safe asset, but a wasting 
one. The real returns on risky assets have 
been much greater. True, cash affords 
options—to buy cheaply when others are 
Selling. But episodes of distressed selling 
have been fleeting, largely thanks to 
central banks, which have been liberal in 
Supplying cash in emergencies. Why 
then should investors incur the opportu- 
nity cost of holding it? 

In its favour, cash is at least now 
offering asmall return, or the prospect of 
one. Overnight interest rates have risen, 
notably in Latin America and Eastern 
Europe. The Bank of England may raise 
its benchmark interest rate before the 
year is out. The Federal Reserve may 
follow at some time next year. But the 
rate of return in short-term money mar- 
kets is still below the rate of inflation and 
is forecast to stay that way. For those 
seeking returns, holding cash remainsa 
loss-making prospect in real terms. 

The true appeal of cash as a portfolio 
asset lies somewhere else. More and 
more capital is tied up in investments 
where much of the payoff lies in the 
distant future. You see this in the huge 
market capitalisations of a handful of 
tech companies in America and in the 
money flooding into private-equity and 
venture-capital funds. Investors have to 
wait ever longer to get their money back. 
In the meantime their portfolios are 
vulnerable to a sharp rise in interest 
rates. A simple way to mitigate this risk 
is to hold more cash. 

The concept of “duration” is a useful 
one in this regard. Duration is a measure 
of a bond’s lifespan. It is related to, but 

subtly different from, the maturity ofa 
bond. Duration takes into account that 
some of what is due to bondholders—the 
annual interest, or “coupon’”—is paid out 
sooner than the principal, which is hand- 
ed over when the bond matures. The lon- 
ger you have to wait for coupon and prin- 
cipal payments, the longer the duration. It 
is also a gauge of how much the price ofa 
bond changes as interest rates shift. The 
greater a bond’s duration, the more sensi- 
tive itis to a rise in interest rates. 

You can also think of equity invest- 
ment in duration terms. Take the familiar 
price-earnings ratio, or PE, the price paid 
by investors for a given level of stockmark- 
et earnings. The idea is that ifastockhasa 
PE of ten, based on recent earnings, it 
would take ten years to earn back the 
outlay of an investor who buys the stock 
today, assuming earnings stay constant. If 
the PE is 20, it would take 20 years. The PE 
is thus a crude measure of the stock’s 
duration. On this basis, American stocks 
in aggregate have rarely had a longer dura- 
tion. The cyclically adjusted price-earn- 
ings ratio, a valuation measure popular- 

Finance & economics 

Club of creditors, took four years to thrash 
out. Negotiations in Belize lasted a year 
and a half. 

Yet no amount of creative dealmaking 
can distract from the grim truth: many 
emerging markets still suffer from crush- 
ing debts. The pandemic has pushed half 
of the world’s poorest countries into debt 
distress or heightened the vulnerability to 
it. And debt-for-nature swaps only help at 
the margin. Last week's restructuring re- 
duced Belize’s external debt by $250m, or 
12% of GDP. The success is for coral reefs 
more than debt relief. m 

ised by Robert Shiller of Yale University, 
is now close to 40. It was higher only at 
the giddy height of the dotcom boom in 

The rationale for longer-duration 
assets is a familiar one. Real long-term 
interest rates are about as low as they 
have ever been. As a consequence in- 
vestment returns even in the distant 
future, once discounted, havea high 
value today. It is not just stocks. Property 
is valued at a steep price relative to the 
stream of future rents. Investors are 
piling into private-equity and venture- 
capital funds that won't pay out fora 
decade or more. Everyone, it seems, is 
long duration. But with longer duration 
comes a greater risk that unexpectedly 
aggressive interest-rate rises will lead to 
a collapse in asset values. 

A typical investment portfolio of 
stocks, bonds and property is vulnerable 
to this risk. There are not too many good 
ways to hedge it. Buying insurance in the 
options market against a stockmarket 
crash is expensive and fiddly. 

This is where cash comes in. Cash is 
by definition a short-duration asset. 
Were interest rates to go up sharply, cash 
holders would get the benefit quickly 
even as other assets suffer. So as the 
duration of your portfolio rises, it makes 
sense to raise your cash holdings too. By 
precisely how much will depend, as ever, 
on your risk appetite. Just as you are 
advised to sell down your stocks to the 
level where a night’s rest is assured, you 
might also build up your cash holdings 
to the sleeping point. 

Of course, sucha strategy comes with 
an opportunity cost. As long as asset 
markets continue to boom, cash will bea 
drag on your portfolio. So be it. Missing 
out on some returns is the price you pay 
for mitigating duration risk. 


78 Finance & economics 

Free exchange | Home-icide 

A Zillow whodunnit 

HE TIMING was apt. On November 2nd, just two days after 

Americans celebrated their scariest annual holiday, news ofa 
Suspicious death shocked the stockmarket. Zillow, a giant proper- 
ty and technology firm, said it would shut down its huge instant- 
buying, or i-buying, business, which uses big data and algorithms 
to make offers on homes in dozens of cities in America and then 
swiftly sells them on. The firm expects to lose in excess of $500m 
in the second half of 2021 after it overpaid for thousands of homes. 
It will lay off a quarter of its 8,o00 employees. It seemed like a 
business that should be in rude health. By and large it has been a 
fantastic time to buy a home almost anywhere in America—if you 
can only snag one: house prices have climbed between 16% and 
25% during the past 18 months. So why is Zillow’s i-buying busi- 
ness in the morgue? And whodunnit? 

Finding the right suspect matters for reasons bigger than the 
fate of Zillow itself. The i-buying business is one of many exam- 
ples of firms using a platform to collect big data, analyse it using 
advanced techniques and empower their algorithms to enable a 
market to work more smoothly. This trend has pushed down tran- 
saction costs in many asset markets, from stocks and bonds to 
camera equipment and clothing. The fate of Zillow’s i-buying 
business might indicate that using technology to buy and sell 
something as idiosyncratic as a house is a flip too far. 

Consider the most serious suspect first: the housing market. It 
has been in an unusual state of flux. At first the covid-19 pandemic 
caused a freeze in all property transactions. Then prices went ber- 
serk, rising at record levels year on year in April. Undoubtedly, vo- 
latile prices do no favours to algorithms trained on historical data. 
Still, in theory rising prices should help i-buyers by making it 
harder to sell a house for less than was paid for it. The reverse, fall- 
ing prices, could be a more likely culprit but as yet the data are 
mixed. A house-price index compiled by the National Association 
of Realtors (NAR) finds that values peaked in June 2021, at 19% 
above pre-pandemic levels, and have since dropped by 2.8 per- 
centage points. Another by S&P CoreLogic Case-Shiller suggests 
prices are still galloping ahead. Both are published with a lag (the 
NAR runs to the end of September, Case-Shiller to the end of Au- 
gust), which means the evidence is inconclusive. 

The Economist November 13th 2021 

The next suspect is the mathematical models. A handful of 
firms offer i-buying services, the first and biggest of which is 
Opendoor, founded in 2014. They charge a fee for the services they 
provide: buying and selling homes immediately, with zero fuss. 
The quick in-and-out makes them more like marketmakers than 
property investors, who buy to hold. To succeed, i-buying firms 
need two critical pieces of information: the current value of a 
home and a forecast of the price at sale time, typically two to three 
months in the future. To figure these out they need troves of data, 
ranging from the precise location of a home, to how many rooms it 
has, to whether it has a pool or not. They compare these with the 
closest comparable homes that have sold recently and look at re- 
cent trends to make a forecast. That enables them to make an “in- 
stant” offer to a homeowner. In the past the algorithms appear to 
have worked pretty well. Mike DelPrete, of the University of Colo- 
rado, found they offered homeowners about 1.4% below market 
value—not a bad outcome for a quick, hassle-free sale. 

Zillow’s boss, Rich Barton, said the big problem was with the 
firm’s forecasts. He claimed it had found itself unable to predict 
prices three-to-six months into the future. In particular Zillow 
seems to have projected much rosier conditions than material- 
ised. In Phoenix, where house-price appreciation has been partic- 
ularly rapid but seems to be slowing, Zillow is listing homes for an 
average of 6.2% less than it paid for them. 

This problem is exacerbated by the fickle economics of adverse 
selection. Even if the algorithms of i-buying firms are excellent at 
pricing homes at a fair value on average, they only need to be a lit- 
tle off for the risk to skew to the downside. Homeowners will prob- 
ably not sell their home for much less than they think it is worth, 
but they will happily settle for a higher-than-expected price. Mr 
Barton revealed in a shareholder letter on November 3rd that 
“higher-than anticipated conversion rates” were part of the pro- 
blem. One former Zillow employee has claimed that the company 
wanted around 50% of homeowners who sought an offer to take it, 
but as many as 74% of offers made in recent months were taken 
up. Zillow bought almost10,o00 homes in the third quarter, more 
than double the amount from the prior three-month period, 
which itself was more than double the amount in the first quarter. 
The suspicion is that Zillow's algorithm was making overly gener- 
ous offers, and homeowners were rushing to take advantage. 

This may have been a Zillow problem, not an 1-buyer one, how- 
ever. Some of Zillow’s competitors seemed to realise before Zillow 
that the market was losing steam. OpenDoor and Offerpad, an 1- 
buyer founded in 2015, both began making more conservative of- 
fers relative to their models’ valuation around July as price appre- 
ciation began to cool. When they reported their earnings on No- 
vember ioth neither Opendoor nor Offerpad exhibited anything 
like the problems suffered by Zillow. 

Inside job 

Perhaps the fatal blow was, in fact, self-inflicted. Zillow expanded 
its i-buying business aggressively. Opendoor expanded gradually. 
It offered i-buying services in only six markets after three years, 
taking its time to refine its algorithms. It is now operational in 44 
markets. Zillow added almost as many markets in half as much 
time. A former Zillow employee told Business Insider that manage- 
ment had been hellbent on catching up with Opendoor, the front- 
runner. In order to compete, the employee alleged, the company 
pushed to offer generous deals to potential clients. It called this 
“Project Ketchup”. Now it has its own fake blood on its hands. @ 

Knowing the worst 

It is becoming easier, cheaper and quicker to diagnose dementia 

F THE ESTIMATED 55m people living 

with dementia around the world, only 
one-quarter have been formally diagnosed 
with the condition. There are many rea- 
sons for this. Two are enduring: many pa- 
tients and clinicians alike wrongly believe 
that dementia is an inevitable part of the 
ageing-human condition and, being incur- 
able, is hardly worth diagnosing; and some 
people experiencing cognitive impairment 
fear hearing what sounds like a sentence of 
brain-death, and so do not seek help. 

Some of the reasons for non-diagnosis, 
however, may be about to change. During 
the covid-i9 pandemic many people have 
delayed consulting their doctors about 
non-urgent conditions, and as lockdowns 
ease, they may begin to ask for profession- 
al guidance (moreover, evidence suggests 
that covid itself heightens the risk of de- 
mentia). In addition, diagnostic tech- 
niques, hitherto unreliable, time-consum- 
ing and costly, are becoming available, and 
for some forms of dementia hopes are 

emerging of more effective treatments. 

Dementia is normally diagnosed by 
testing cognitive functions such as memo- 
ry. If mild cognitive impairment (MCI), of- 
ten a precursor to dementia, is detected, a 
patient may then be referred for tests to 
identify which of the dozens of causes of 
dementia are to blame. By far the most 
common is Alzheimer’s disease, account- 
ing for 60-80% of cases. 

Fear of the needle 

Identifying Alzheimer’s normally requires 
a brain scan, and perhaps a lumbar punc- 
ture (the insertion of a needle into the low- 
er spine), to extract cerebrospinal fluid, so 
as to measure its levels of two proteins that 
build up in the brains of people with Alz- 
heimer’s, known as beta-amyloid and tau. 
Some patients are reluctant to undergo the 
intrusive procedure. The scans are usually 
by magnetic-resonance imaging (MRI), to 
look at the size of the brain, along witha 
positron-emission tomography (PET) scan 


80 What the climate goals mean 
82 Plastics and antibiotic resistance 

82 Growing better blackcurrants 

83 New covid-19 treatments 

to measure the build-up of beta-amyloid. 
PET and MRI scanners are expensive pieces 
of kit, running into the hundreds of thou- 
sands of dollars. For most people in the 
world, they are unobtainable. 

That explains the excitement at the de- 
velopment of simple blood tests to distin- 
guish Alzheimer’s from other neurodegen- 
erative conditions. One, announced last 
year and likely to be validated for routine 
use within 12 months, according to Serge 
Gauthier, professor of neurology and neu- 
rosurgery at McGill University in Montreal, 
measures a form of tau called p-tau217. It 
has been found to predict Alzheimer’s with 
96% accuracy. 

It is already possible using mass spec- 
trometry, which detects how atoms and 
molecules are deflected by magnetic fields, 
to measure the level of beta-amyloid in the 
blood. But it is not certain how this relates 
to levels in the brain. The accuracy of the 
procedure rises to 94% if two other risk 
factors are considered: age and the pres- 
ence of a form of the APOE gene, Known as 
APOE4A, which heightens the risk of devel- 
oping Alzheimer’s (and also appears to in- 
crease vulnerability to heart disease and 
covid). This can also be detected by a blood 
test, so Dr Gauthier envisages symptomat- 
ic patients giving blood samples for simul- 
taneous tests for both tau and APOE4. 

Other approaches aim to detect asymp- 
tomatic people years or even decades be- | 

80 Science & technology 

» fore they begin to show obvious symp- 
toms. George Stothart at the University of 
Bath in Britain leads a team that has devel- 
oped very quick passive tests that hold 
great promise for detecting cognitive im- 
pairment early. These tests use electroen- 
cephalographic caps which are worn on 
the head to compare brainwave responses 
to aseries of images. The caps are relatively 
cheap and the test can be conducted using 
a tablet computer. 

Taking the exam 

Meanwhile, machine-learning and AI are 
enabling big improvements in cognitive 
testing, which, like other sorts of pencil- 
and-paper exams, has been prone to cul- 
tural and educational bias, and to a “learn- 
ing bias” (lessened accuracy as practice im- 
proves the participants’ results). Cognetiv- 
ity Neurosciences, for example, a firm 
launched by two academics at the Univer- 
sity of Cambridge, produces an “integrated 
cognitive assessment” that has already 
been deployed by some regions of Britain’s 
National Health Service. It has also been 
approved by America’s Food and Drug Ad- 
ministration (FDA) and by regulators in the 
European Union. 

The Cognetivity test relies on a series of 
flashing images, among which some ani- 
mals have been embedded for the person 
being tested to identify—rather like the 
CAPTCHA tests used by some websites to 
weed out robots trying to log on, only these 
are conducted at rapid speeds. So rapid, in- 
deed, that the tests cannot be conducted 
remotely, but are done on tablets in memo- 
ry clinics or at doctors’ surgeries. Already, 
however, a variety of do-it-yourself cogni- 
tive tests of various standards are available 
online, and some of these could become 
important diagnostic tools. 

Even before the explosion in the use of 
AI, scientists could detect evidence of de- 
mentia from how people use words. A stu- 
dy in 20u1, for example, found clear retro- 
Spective evidence in the writings in her 
Aos and 50s of Iris Murdoch, a novelist, of 
the Alzheimer’s she was to die with in 1999, 
aged 79. The research arm of IBM, a com- 
puting giant, has used data from the Fra- 
mingham heart study, which has tracked 
three generations of people in a town in 
Massachusetts since 1948 to improve 
knowledge of cardiovascular health. Ajay 
Royyuru, who heads IBM's health-care and 
life-sciences research, says that studying 
the use of language by participants in the 
study suggests that changes over time can 
be used to predict which of them will ac- 
quire dementia, seven and a half years be- 
fore they are diagnosed even with MCI. 

Such data—and the massive amounts 
people compile every day on their smart- 
phones, using various services such as 
messaging or navigation—could help en- 
able much earlier detection of dementia. 

This might be possible with apps, although 
the ethics of any non-consensual diagno- 
sis and the willingness of people to use 
such services are another matter. One way 
or another, though, Paola Barbarino, chief 
executive of Alzheimer’s Disease Interna- 
tional, an advocacy group, expects a “tsu- 
nami’ of demand for treatment. 

For health-care systems around the 
world all this may pose more problems 
than it solves. The main one is the lack of 
proven treatments. In June the FDA ap- 
proved Aduhelm, the first drug to treat Alz- 
heimer’s. Amonoclonal antibody shown to 
reduce accumulations of beta-amyloid, 
it has so far been little used, because it is 
expensive and insurers are reluctant to ap- 
prove reimbursement when there are 


The Economist November 13th 2021 

doubts as to whether it actually slows cog- 
nitive degeneration. But it is the firstina 
queue of drugs, for which Alzheimer’s spe- 
cialists hold out great hopes. 

The second difficulty is in assessing 
when MCI requires medical intervention. 
As Dr Gauthier points out, some mental de- 
cline is indeed part of ageing. People find 
ways of coping. Telling the difference is 
hard to do through blood tests or the use of 
AI. It still requires time and human inter- 
vention. This is part of the third and big- 
gest difficulty: that, as the world ages, the 
number of people with dementia is going 
to rise rapidly, to more than 80m by 2030 
and more than 140m by 2050. Even today 
health services are buckling. Who knows 
how they will cope in the decades ahead. @ 

Are the climate goals dead or alive? 


The lofty goals made in Paris seem like being left behind 

(€ (4 TTHEEND of the CoP we need to be in 

A; position to say ‘We are still on track 
to be well below 2 degrees, we still have a 
shot at the 1.5 degrees.’ All our efforts this 
week should be directed at that.” Thus 
spoke Frans Timmermans, an EU commis- 
sioner, as the cop26 climate summit in 
Glasgow rolled into its final week. Unfor- 
tunately for Mr Timmermans, political re- 
solve and climate plans do not currently 
add up to the demanding goals set out by 
the Paris agreement of limiting global 
warming to “well below 2°C” above prein- 
dustrial averages, let alone to keeping it as 
low as 1.5°C. Instead, the latest number- 
crunching suggests that the plans of the 193 
parties to the agreement collectively carve 
a path to approximately 2.4°C of warming 
by the end of the century. 

Uncertain heat 
Global emissions, gigatonnes of CO, equivalent 


Current policies 
25-2 9 C* 

DNDN ka vxnte 

LU5 U tal Sets 20 

> OTe Ki 


Optimistic scenario, 
‘ including net-zero 
targets 1.8°C*7 

To stay below 1.5°C 



2000 20 40 60 80 2100 

*Projected warming by 2100 

Source: Climate Action Tracker tMedian value 

That is only a modest improvement on 
where things stood when the Paris agree- 
ment was being negotiated in 2015. Under 
the deal that was struck at the time, gov- 
ernments offered up pledges to reduce 
their national emissions. Toiling away in 
the background, climate modellers esti- 
mated that the cumulative consequence of 
these pledges would be to bring about 
roughly 2.7°C of warming by 2100. Aware of 
the disconnect between this figure and the 
agreement's overall goals, negotiators said 
they would present new, hopefully im- 
proved decarbonisation plans every five 
years, in the hopes that this “ratchet mech- 
anism” would bring the overall 1.5-2°C Par- 
is goals closer. 

Hence the flurry of climate pledges that 
were made over the past year. They focus 
on what will be done by the end of the de- 
cade, by which time global greenhouse gas 
emissions must be roughly half what they 
were in 2010 in order to have a good chance 
of limiting warming to 1.5°C. So far, no 
country is on track to do this, says Niklas 
Hohne of NewClimate Institute, a think- 
tank. Dr Hohne is part of a consortium of 
researchers called Climate Action Tracker, 
which plugs national climate policies and 
pledges into models in order to give an idea 
of how they translate into temperatures. 
The group's latest results (see chart), pub- 
lished on November oth, say that if all 2030 
decarbonisation plans were to be carried 
out as advertised but no further efforts 
were made, there would be a 68% chance 
that global average temperatures in 2100 

would be between 1.9°C and 3.0°C warmer > 

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82 Science & technology 

» than pre-industrial times, with a median 
estimate of 2.4°C. 

At first glance this seems considerably 
more pessimistic than what the Interna- 
tional Energy Agency (IEA), a think-tank 
that works for governments, said earlier: 
“Cop26 climate pledges could help limit 
global warming to 1.8°C”. “BIG NEWS,” 
tweeted the agency’s director, Fatih Birol, 
“#COP26 climate pledges mean Glasgow is 
getting closer to Paris!”. In fact, the two 
numbers are entirely consistent with each 
other. It is just that the IEA’s modellers as- 
sumed not only that countries would de- 
liver on their 2030 promises but also that 
those who said they would reach net-zero 
emissions by mid-century or soon after 
would actually do so. 

Yet for now, talk of net-zero is mostly 
just that: talk. China, for instance, has said 
it would ensure its emissions hit a peak be- 
fore 2030 and reach net-zero by 2060 in 
spite of the fact that it still generates more 
than 60% of its electricity from coal. Many 
other countries have made similar net-ze- 
ro promises with very little if any detail of 
how they plan to get there. 

COP26 has also seen plenty of multilat- 
eral deals and agreements announced on 
the sidelines of the UN talks. These dealt 
with some headline issues, like curbing 
methane emissions, deforestation and 
phasing out coal use, but none were 
reached unanimously. More than 100 
countries have so far signed up to cut their 
collective methane emissions by 30% by 
2030. Another group agreed to quit using 
coal in two decades. Last week, a team of 
independent climate researchers found 
that pledges to cut methane could shave 
0.12°C off temperature projections for the 
second half of the century compared with 
cuts embedded in nationally determined 
contributions—but only if every country 
signed up. China, India and Russia, the 
three largest emitters of methane, have yet 
to do so. Phasing out coal by 2040 would 
further reduce temperature projections by 
0.28°C, but again only if it were a global ef- 
fort. Yet China and India, the two most 
coal-hungry nations, have not joined the 
“powering past coal alliance”. 

COP26 was never meant to deliver the 
whole package—pledges sufficient to keep 
global warming to well below 2°C and na- 
tional strategies to back up those prom- 
ises—in one fell swoop. It was always go- 
ing to be one in a Series of stepping stones. 
Nevertheless, the slow pace of global cli- 
mate ambition has left a huge gap between 
where the world needs to be in order to 
keep the hope of a 1.5°C world alive and 
where it is. If the gap is not rapidly re- 
duced, which would require all large emit- 
ters around the globe to drastically acceler- 
ate decarbonisation, then all hopes will 
rest on wholly infeasible options to draw 
carbon dioxide out of the atmosphere. @ 


Perilous plastic 

Microplastics in household dust could 
promote antibiotic resistance 

LASTICS ARE man-made materials that 
Pie unnatural to this world, but that 
does not stop the natural world from inter- 
acting with them. Indeed, dozens of stud- 
ies show that when plastics get into the sea 
many ocean-dwelling microorganisms ag- 
gressively colonise them. This might help 
break plastics down, but these oceanic col- 
onies are also hotbeds of antibiotic-resis- 
tant genes. Now, it seems, something simi- 
lar might be going on in the dark recesses 
of your home. 

Lei Wang suspected as much, and along 
with his colleagues at Nankai University in 
Tianjin, China, set out to gather the neces- 
Sary evidence. Their search began at an 
apartment building in Tianjin. The plastics 
Dr Wang was concerned about are the tiny 
bits that break away from synthetic fibres, 
like polyester and nylon, commonly found 
in clothing and other textiles. The micro- 
plastics then accumulate around the home 
as dust. He reasoned that if these particles 
were being colonised by bacteria then they 
too might be harbouring antibiotic-resis- 
tant genes. 

The researchers chose ten homes in the 
apartment block, each with just one male 
tenant. Each apartment had hard flooring, 
rather than any carpets, and a similar gen- 
eral layout. A team used sterilised brooms 
to sweep the bedrooms and to collect dust 
Samples as they went. These samples were 
then brought back to the lab and analysed 
for microplastics, bacteria and antibiotic- 
resistant genes. 

As they report in Environmental Science 
and Technology, 21 types of microplastics 

The Economist November 13th 2021 

were found, the most common from poly- 
ester and nylon. Using DNA extracted from 
microbes, they identified 1,385 genera of 
bacteria along with 18 genes associated 
with antibiotic resistance. 

The analysis also revealed that the 
apartments with dust that were rich in mi- 
croplastics had bacterial communities that 
were different from those apartments with 
dust that did not contain as many micro- 
plastics. Crucially, the work also showed 
that the relative abundance of antibiotic- 
resistant genes was higher in the presence 
of microplastics than it was when these 
were less common. 

Precisely why microbes dwelling with 
plastics are more likely to carry antibiotic- 
resistant genes is not clear. It is possible 
that plastics themselves are driving bacte- 
tia to develop this trait. The researchers 
suggest, however, that itis more likely that 
specific groups of bacteria are capable of 
eking out a living on plastics, and these 
bacteria also happen to be of a type that 
more readily develop antibiotic resistance. 

To support this argument, Dr Wang 
points out that Proteobacteria is both high- 
ly antibiotic-resistant and also commonly 
found encrusting oceanic plastics. Mem- 
bers of this same phylum were the most 
common type found among the polyester 
and nylon fibres swept up in the apart- 
ments, too. This suggests that, just as plas- 
tics are changing the nature of bacterial 
communities out at sea, they are also 
changing them within homes. How much 
of a threat this will ultimately be to human 
health is not known, but it cannot be doing 
people much good. @ 


Probiotic berries 

Growing better blackcurrants with the 
help of bacteria 

EW FRUITS carry more health-promot- 
Fine antioxidants than blackcurrants. 
Widely grown in cooler parts of Europe, 
they are in high demand from consumers 
seeking pesticide-free juices made from 
the berries. Farmers, though, can struggle 
to boost yields without relying on chemi- 
cals. That could change, not just for black- 
currants but other fruit too, with the judi- 
cious use of probiotics. 

Probiotics is mostly known for its use of 
microorganisms, including certain bacte- 
ria, to restore or improve the gut flora in 
people and animals. But plants can benefit 
from a collaborative arrangement with 
bacteria too. Among other things, bacteria 

help plants produce antibiotics that keep >> 

The Economist November 13th 2021 

» disease-causing microbes off their leaves, 
Support them in collecting nitrogen from 
the environment and help them dissolve 
minerals found in the soil. 

Knowing all this, Virgilija Gaveliene 
and Sigita Jurkoniene, of the Institute of 
Botany Nature Research Centre in Lithua- 
nia, set out to find a way to use probiotics 
to boost the yield of blackcurrant bushes, 
which are grown in that country. The re- 
searchers also knew from other work that 
the production of strawberries and rasp- 
berries could be increased by exposing 
plants to a carefully selected mix of bacte- 
tia from families like Bacillus, Acinetobac- 
ter and Pseduomona. And they were aware 
of preliminary evidence that probiotics 
had the potential to enhance production of 
certain antioxidants, like anthocyanins 
and flavonoids. 

Working with colleagues, they set up an 
experiment. Four blackcurrant fields, each 
one hectare in size, were exposed to differ- 
ent probiotic treatments. These were ap- 
plied first when shoots were just starting 
to grow and then again as buds were begin- 
ning to flower. One field was sprayed witha 
mix of bacteria that the team suspected 
would improve growth and yield. Another 
field was sprayed with a mix of organic fer- 
tilisers and bacteria that the researchers 
expected would enhance the chemical 
composition of the berries and improve 
their nutrient content. The third field was 
sprayed with both mixtures while the 
fourth was left as a control and sprayed on- 
ly with water. After the harvest, the team 
measured the biomass of the freshly 
picked berries and studied their chemistry. 

As they report in Agricultural Science 
and Technology, the results were impres- 
sive. While a thousand blackcurrants col- 
lected at random from the control plot 
weighed just over 538 grams, the same 
number from the field exposed to both 
treatments weighed nearly 783 grams. A 
similar increase was also true for the field 
sprayed with the yield-enhancing bacteria. 

The team were, however, concerned 
that enhanced berry growth might be com- 
ing atacost of less antioxidant. To this end, 
their analysis showed that exposure to ei- 
ther of the probiotic mixtures on their own 
did significantly lower blackcurrant anti- 
oxidant activity from the control level of 
73% to 65% and 60%. Only exposure to 
both probiotic mixtures allowed blackcur- 
rant growth to be enhanced while main- 
taining a statistically identical level of 
antioxidant activity of 72.7% 

All told, Drs Jurkoniene and Gaveliene 
are convinced that the right mix of bacteria 
can help blackcurrant farmers meet de- 
mand without using chemicals. And it 
could help other growers. What works for 
berries should, in theory, work for other 
fruit, like apples, pears and oranges. More 
experiments are needed to be sure. @ 


Pills with promise 

New antiviral drugs appear highly 
effective at fighting the disease 

HE LATEST news in the fight against co- 
Thies is encouraging. Two new antivi- 
ral drugs have been deemed so effective 
that clinical trials ended early. Data from 
these trials have not yet been published. 
However, regulators are moving swiftly to 
consider general use of the drugs. They will 
fill a large gap in the toolkit doctors are us- 
ing to fight the virus, and could well help 
end the global pandemic. 

The new drugs are molnupiravir (Lagev- 
110), developed by Merck, a pharmaceutical 
company, working with Ridgeback Biothe- 
rapeutics, a biotech firm, and Paxlovid, 
which was developed by Pfizer. All three 
are American companies. Those most at 
risk from the serious effects of covid are far 
less likely to be hospitalised, or die, if they 
take a course of either of these pills in the 
five days after symptoms first appear. 

Merck said in October that molnupira- 
vir reduced the risk of hospitalisation or 
death by about half, when given to patients 
with one risk factor for covid, such as obe- 
sity or heart disease. Regulators in Ameri- 
ca, Europe and at the World Health Organi- 
Sation are assessing the drug. Britain has 
approved it and will start using the treat- 
ment next month. On November 5th Pfizer 
Said its pill reduced the risk of hospitalisa- 
tion or death by 89% if taken within three 
days. (In fact, during its trial no patient 
died at all when taking Paxlovid within five 
days of symptoms.) 

Molnupiravir is what is known as a pro- 
drug, which means that it is converted into 

A pill is coming to help 

Science & technology 83 

its active form when it arrives inside cells. 
Once there, it is incorporated into the ge- 
netic material of the virus whereby it dis- 
rupts its ability to replicate. Errors accu- 
mulate in the virus’s genetic material, a 
process known as “error catastrophe”. 
Trials in animals have raised concerns that 
the drug might pose risks to unborn chil- 
dren, hence the British government has ad- 
vised against its use during pregnancy, or 
while breastfeeding. Other regulators may 
issue Similar warnings. 

Paxlovid is in fact a combination of two 
drugs: an existing one called ritonavir, 
which is given alongside a novel protease 
inhibitor known as PF-07321332. The prote- 
ase inhibitor was designed to bind and 
block the protease enzymes that sars-cov-2 
uses to replicate. Ritonavir prevents the 
protease inhibitor from being broken 
down too quickly in the body. 

Molnupiravir and Paxlovid are also 
known as “small molecule” drugs. These 
are molecules that are easy to make. Both 
firms say the price of the drugs will vary ac- 
cording to the wealth of the nation buying 
them. That will likely mean that rich coun- 
tries will pay $700 for a five-day course of 
pills, while poorer ones might pay around 
$20, and maybe less as the cost of manu- 
facturing comes down. 

Although both firms have said they in- 
tend to make these drugs widely accessible 
around the world, Merck already has an 
edge. It has signed a number of licences 
which allow other manufacturers to pro- 
duce the drug, and it has reserved 3m doses 
for low- and middle-income countries. 
This is to ensure that rich countries do not 
monopolise the supply of the new medi- 
cines as they have done for vaccines. Merck 
expects to make 10m doses this year, and 
20m next year. Generic manufacturers will 
make many more. Pfizer, which has not yet 
received any regulatory authorisations, ex- 
pects 180,000 packs of pills to be produced 
by the end of this year, and 21m in the first 
half of 2022. 

These drugs herald a second big turning 
point in the pandemic (the first being vac- 
cines). Rising case numbers across Europe 
suggest there will be a strong demand for 
such medicines to keep people out of hos- 
pital. While patients wait for them to ar- 
rive, it is also possible that doctors might 
consider the use of fluvoxamine, an anti- 
depressant medicine which also appears to 
lower the risks from covid. 

As the new treatments roll out for use, 
there will be concern among some scien- 
tists and doctors about the virus develop- 
ing resistance, particularly if patients do 
not complete their course. Keeping one 
step ahead of sars-cov-2 will require plan- 
ning for such an eventuality. That means 
deducing which antiviral drugs can be giv- 
en in combinations to create a therapy that 
the virus will struggle to defeat. @ 

23 Books & arts 

Dealing with dirty money 

Hear no lies 

Kleptocracy will flourish as long as Western countries welcome the loot—and 
Western professionals help to move and hide it 

EXT MONTH Joe Biden will host a virtu- 
N al “Summit for Democracy”. The aim of 
the pow-wow is to galvanise like-minded 
leaders to counter the global growth of au- 
thoritarianism. One of its themes will be 
combating kleptocracy: the plunder and 
laundering of national wealth, typically 
using international banks as conduits for 
the ill-gotten gains and Western property 
markets as a destination. Campaigners 
hope the meeting will renew momentum 
in the fight against such looting—a fight 
Donald Trump did not exactly lead from 
the front. Leaked documents that highlight 
the use of offshore financial networks to 
move money in secret, from the Panama 
Papers in 2016 to the Pandora Papers this 
October, underline the urgency of the task. 

Measuring the private wealth parked in 
“secrecy jurisdictions” is, by definition, 
impossible. Estimates range from a few 
trillion dollars to $32trn. The proportion 
that is dodgy is also hard to estimate. At 
one extreme is perfectly legitimate mon- 
ey—personal funds seeking privacy, or 
cross-border joint-ventures using offshore 
structures for the purposes of neutrality. At 

American Kleptocracy. By Casey Michel. 
St Martin's Press; 368 pages; $29.99. 
Scribe; £18.99 

The Enablers. By Frank Vogl. Rowman & 
Littlefield; 216 pages; $32 and £25 

the other is black cash, stashed in shell 
companies or trusts to mask corruption or 
launder drug money. In between is a large 
grey area that includes legal but ethically 
dubious tax avoidance. 

And where exactly is “offshore”? The 
stereotypical haven is a palm-fringed is- 
land with biddable politicians. Yet bigger 
States that harrumph at such places have 
questions to answer, too. The most com- 
prehensive study of shell companies 
found that providers in members of the 
OECD, a club of mostly well-off countries, 
were more likely to offer true anonymity 
than those in classic offshore financial 
centres. British shell companies and part- 
nerships feature prominently in giant 
“laundromat” schemes emanating from 
Russia and Azerbaijan. Several EU coun- 
tries are conduits for tax trickery. And 

The Economist November 13th 2021 

> Also in this section 

85 Witchcraft in the 17th century 
86 Thecold war onthe couch 
86 Anart collection opens up 

87 Johnson: Double trouble 

much of the world’s dirty money ends up 
invested in luxury pads in places like Lon- 
don, Paris and Miam1. 

Casey Michel’s title leaves no doubt 
where the journalist and fellow of the Hud- 
son Institute, an American think-tank, be- 
lieves much of the blame lies. For all its 
claims to moral leadership in finance, he 
argues, America has become “the world’s 
greatest offshore haven” and the largest 
provider of the “financial-secrecy services” 
that facilitate money-laundering. This has 
let it pull in unrivalled amounts of tainted 
cash from “the world’s worst”, from cor- 
rupt regimes to extremist networks. 

America was one of the first countries 
to criminalise money-laundering and 
since the 1980s has been the most aggres- 
Sive in trying to curb it. It drove efforts to 
create the Financial Action Task Force 
(FATF), a global anti-money-laundering 
standards-setter that was founded in 1989. 
Since the 9/n attacks of 2001 it has taken 
the lead in disrupting terrorist-finance 
networks. It was an American law that in- 
Sstigated the global exchange of tax data to 
curb cross-border tax evasion. 

Yet at home America tolerated many of 
the bad practices for which it hammered 
other countries. As American states com- 
peted against each other for corporate reg- 
istrations, shell companies proliferated in 
Delaware, Wyoming and Nevada—the last 
being a crucial bridgehead for Mossack 
Fonseca, the law firm at the centre of the 
Panama Papers (and forced to close by 

those revelations). South Dakota devel- >> 

The Economist November 13th 2021 

» oped a line in super-secretive trusts. 

Mr Michel builds his book around two 
characters, both prolific users of America’s 
financial-secrecy infrastructure, deftly 
weaving together their stories and his 
analysis. The first is Teodoro “Teodorin” 
Nguema Obiang Mangue, the free-spend- 
ing son of the president of Equatorial 
Guinea, a small, klepto-blighted state in 
central Africa. The other is Ihor Kolomois- 
ky, a Ukrainian oligarch accused by Ameri- 
ca of stealing billions of dollars from a 
bank he owned and rinsing them in Amer- 
ican property (accusations he denies). 

The gloves are on 

Mr Obiang’s story is the more lurid, and its 
outline is more widely known. He made 
headlines in 2011 when prosecutors moved 
to seize various assets he had acquired in 
America with allegedly corrupt money, in- 
cluding a mega-mansion, a fleet of super- 
cars so extensive that he would try to 
match his ride with his shoes, and a trove 
of Michael Jackson memorabilia (includ- 
ing the star’s famous white glove). He 
spent much of his money in and around 
Malibu, aswanky beach city in California. 

Mr Kolomoisky did his alleged launder- 
ing in less salubrious places. His represen- 
tatives swept into Cleveland, Ohio, wow- 
ing local officials with talk of regeneration. 
But much of the city-centre property, once 
purchased, was left to fall into disrepair. 
Why let your assets rot? “Think of Ameri- 
can real estate as a kleptocratic rainy-day 
fund,” explains Mr Michel. If money is sto- 
len or illicitly earned, return on invest- 
ment is secondary. The land beneath a 
crumbling building retains its value. As 
Cleveland discovered, this sort of calculus 
can devastate communities. 

The co-founder of Transparency Inter- 
national, an anti-corruption NGO, Frank 
Vogl distributes blame more broadly in his 
book. The “enablers” of his title are the 
banks that move launderers’ money; the 
lawyers who set up their brass-plate com- 
panies or, alongside public-relations 
firms, fend off prosecutors and the media 
on the kleptocrats’ behalf; and the estate 
agents and yacht-dealers who help them 
procure trophy assets. Much of all this is 
legal, but, says Mr Vogl, it does not “serve 
the public interests of citizens in demo- 
cratic nations, and indeed well beyond”. 

Few would argue with that. But Mr 
Vogl’s book is a mess. Turgid lists of exam- 
ples seem put together by an overexcited 
intern, not one of the anti-kleptocracy 
movement's wisest coves. It repeatedly 
veers off-topic, such as in an account of a 
banking scandal in Italy caused by a deriv- 
atives blow-up, not dirty money. It gets 
some things badly wrong: it is a mystery 
why Mr Vogl singles out the UAE as one of 
the countries prioritising the fight against 
illicit finance, when in reality it remains a 

foot-dragger. He drops the names of alot of 
people in finance, but doesn’t reveal any- 
thing very interesting about them. Did you 
know that the daughter of John Bond, 
HSBC's former boss, set mountain-climb- 
ing records? 

Mr Michel’s book is more fluid, coher- 
ent and entertaining. It also has more to 
Say on what is supposed to be Mr Vogl’s big 
theme. American regulators have long 
worried about the enablers, but thanks to 
effective lobbying they have managed to 
crawl through loophole after loophole. Es- 
tate agents, luxury-goods vendors and oth- 
ers, for instance, won “temporary” exemp- 
tions from the Patriot Act (a post-9/1 law 
with strong anti-money-laundering provi- 
sions), which then became permanent. 
American lawyers are pretty much free to 
work with whomever they want—in many 
ways ‘the perfect friend to have if you're a 
kleptocrat”, says Mr Michel. 

His book has flaws, too. He sometimes 
gets carried away: the racy details of the 
Obiang story border on titillation. He de- 
votes only half a dozen pages to Delaware, 
for so long America’s leading shell-compa- 
ny jurisdiction. He barely scratches the 
surface of the many ways in which Ameri- 
can double standards shape the geopolitics 
of dirty money, at the FATF and beyond. 

Neither book gets to the heart of what is 
needed to clean up global finance. The nub 
of the problem is that though money-laun- 
dering networks are increasingly sophisti- 
cated and transnational, regulation and 
law enforcement remain balkanised. Mr 
Biden's priority at that summit should be 
to push for more co-operation. @ 


Toil and trouble 

The Ruin of All Witches. By Malcolm 
Gaskill. Allen Lane; 336 pages; £20 

Y THE SPRING Of 1651 the residents of 

Springfield, Massachusetts, were con- 
vinced Hugh Parsons was a witch. He and 
his wife, Mary, were a troublesome pair. 
Hugh, a brickmaker, was given to sleeping 
in the fields and quarrelling with neigh- 
bours. Mary was a highly strung gossip. 
Two years earlier she had been convicted 
of slandering Mercy Marshfield, a widow, 
by accusing her of cavorting with the devil. 

More opaque happenings clung to the 
couple, too. A young man was thrown from 
his horse after arguing with Hugh; flicker- 
ing lights were seen at night in the marsh- 
land south of the town where he was 

Books & arts 

The mum ofall fears 

known to lurk. Worse, when Hugh was in- 
formed of the death of his infant son, he 
kept calmly puffing his pipe. Oppressed by 
the pair’s own vicious arguments, Mary 
whispered that her husband had murdered 
their child with magic so that she would be 
free to work and relieve his debts. 

Malcolm Gaskill, a historian of witch- 
craft, traces the fortunes of this unhappy 
couple. Drawing on an extraordinary col- 
lection of testimonies against them, he re- 
constructs everyday life in their “precari- 
ous frontier town” with novelistic texture. 
The result is a portrait of acommunity dur- 
ing one of the first Puritan witch panics in 
the New World—and a timeless study of 
how paranoia, superstition and social un- 
rest fuel fantasies. 

The arduousness of Puritan life is ar- 
restingly drawn. The winter of 1649 was so 
harsh that beer froze solid in barrels and 
catriages could be driven across Boston 
harbour. Torrid summers brought disease 
and Indian raids; sodden harvests pres- 
aged starvation. One in six pilgrims braved 
a second Atlantic crossing to return home. 

God demanded spiritual as well as 
physical stamina from his new Israelites. 
The Puritan self was its own battleground, 
caught between salvation and sin, flesh 
and spirit, and forever under siege. Like 
their rude civilisation hacked from the 
wilderness, the elect had to be eternally 
vigilant against outside threats—and in- 
ternal division. Fear of witchcraft, writes 
Mr Gaskill, “settled along boundaries, in- 
cluding the line separating body and soul”. 

This fear did not arrive from nowhere. 
Instead, Mr Gaskill sees it as “a serious ex- 
pression of disorder embedded in politics, 
religion and law”. The previous decade had 
involved civil war in England and the exe- 
cution of its king; conflict, disease and 
famine rattled the transatlantic world. 


Other forms of heresy and blasphemy were >> 

86 Books & arts 

» flourishing in the cracks of the shattered 
civil realm. “The pillars of the land seem to 
tremble,” a writer of the time lamented. 

Mr Gaskill’s immersive approach brings 
the fate of his subjects movingly to life. 
Neither was convicted of witchcraft. Not 
that it did them much good: in different 
ways their lives were destroyed by the ac- 
cusations of “fearful men and women”. By 
comparison, his final chapter feels breath- 
less, dashing from the trial to the post- 
Enlightenment sense of witchcraft as a fig- 
ment of mental illness and superstition. 

More successful is an uncanny epilogue 
in which the author revisits Springfield, 
dowsing the ghosts of its past in its run- 
down present. He finds that fear of witch- 
craft never truly fades. “Iam counted but as 
a dreamer,’ said another of Springfield’s 
supposed witches. “But when this dream is 
hanged, then remember what I said to you: 
this town will not be free yet.” @ 

The cold war 

Method in the 

The War of Nerves. By Martin Sixsmith. 
Wellcome Collection; 592 pages; £25. 

To be published in America in July by 
Pegasus Books; $35 

N APRIL25TH 1945 American and Soviet 

troops, who had swept through Nazi 
Germany from west and east, met at the 
Elbe river. A photograph that shows an em- 
brace between two lieutenants was staged, 
but the sense of comradeship was sincere. 
“A new atmosphere of friendship and co- 
operation”, says Martin Sixsmith, “seemed 
the inevitable outcome of years of toil and 
shared effort.” It did not last. 

Josef Stalin’s cynicism and paranoia, 
and the tougher line taken by Franklin 
Roosevelt's successor, Harry Truman, en- 
sured that the (relatively) good relations at 
the Yalta conference of February 1945 had 
soured five months later at Potsdam. 
There, mutual suspicion and facts on the 
ground paved the way for the carving up of 
Europe. The immediate flashpoint was 
Berlin, which both sides saw as a proving 
ground for their ideologies and a cockpit 
for testing the other’s resolve with psycho- 
logical warfare and dirty tricks. The Soviets 
could deploy superior conventional forces, 
but it would be four years before they 
would have an atom bomb to match Amer- 
ica’s. The “war of nerves” became the mo- 
dus operandi of the cold war. 

The term “cold war” was already in 
use—to describe a new kind of conflict, 

involving every instrument short of direct 
military confrontation—when, in April 
1950, Truman received a document that be- 
came known as NSC-68. Eight months after 
the Soviet nuclear detonation, it called for 
a big boost in military spending and the de- 
velopment of the hydrogen bomb. It also 
framed the contest with the Soviets in 
Manichean terms: a global trial of strength 
between slavery and freedom that could be 
won only by appealing to hearts and 
minds. It became the template for Ameri- 
ca’s Strategy for the next 40 years. 

There have been many histories of the 
cold war, but the virtue and originality of 
Mr Sixsmith’s is to see almost every aspect 
of the stand-off in psychological terms. De- 
ranged Stalin, volatile, bombastic Nikita 
Khrushchev, plodding, insecure Leonid 
Brezhnev, Mikhail Gorbachev's desperate 
optimism—he sketches the leaders’ states 
of mind, and the means used to stimulate 
fear of “the other”. He chronicles the brink- 
manship over Berlin and Cuba; the repres- 
sion of the Hungarian and Czech upris- 
ings; the propaganda and spying; the ab- 
surdities of the nuclear arms race and the 
effect on populations of living with the 
permanent threat of mutual extinction. 

At every point the two sides were intent 
on demonstrating the superiority of their 
systems. The Soviet launch of the Sputnik 
Satellite sent shockwaves through Wash- 
ington; an agreement in 1959 to put on ex- 
hibitions in each other’s countries, show- 
casing economic and social achievements, 
backfired on Khrushchev when Musco- 
vites were stunned by a gadget-laden 
American kitchen. Art, film and music 
were enlisted and exploited. The author, a 
Russian scholar and journalist who, as the 
BBC’S Moscow correspondent, covered Mr 
Gorbachev's presidency and Boris Yelt- 
sin’s, uses the tools of psychoanalysis to 
illuminate events and motivations. 

He laments the swift dashing of hopes 
that liberal democracy would take root in 
post-Soviet Russia. In large part he blames 
the West (and the elder George Bush in par- 
ticular) for triumphalism. Trampling over 
Russian sensibilities and pride, he thinks, 
helped ensure that the chaotic Yeltsin era 
gave way to the revanchism of Vladimir Pu- 
tin and his gang of kleptocratic siloviki. In 
Mr Sixsmith’s view, such psychological 
factors have once again contributed to a 
tragic outcome. 

Could the aftermath of the “war of 
nerves” have been happier? Mr Sixsmith 
also says that contrasting histories and na- 
tional psyches would anyway have 
inclined America and Russia to divergent 
paths—one animated by the ideas of sturdy 
individualism and the rule of law, the oth- 
er defined by autocracy and the collective 
efforts it demands. For all the differences 
in the two rivalries, something similar may 
now be true of Americaand China. @ 

The Economist November 13th 2021 

Access to art 

The mixing pot 

A museum opens up its collection 

HE NEW home for the collection of the 

Museum Boijmans van Beuningen, a 
gorgeous 40-metre-tall mirrored flower- 
pot that is set to become Rotterdam’s sig- 
nature building, had its origins in an ex- 
tremely Dutch emergency. The basement 
that held the museum’s_ undisplayed 
art—151,000 objects, among the Nether- 
lands’ most important collections—was 
six metres below sea level, and kept flood- 
ing. The city had constructed a garage un- 
der an adjacent park which interfered with 
drainage. Sjarel Ex, the museum’s director, 
could have built a storage facility in a sub- 
urb, but wanted a way to keep the trove on 
site, and to open it to the public. 

Mr Ex asked for ideas from Winy Maas 
of MvDRV, a leading Dutch architecture 
firm. The first concept was a gigantic table 
perched above the park, from which art- 
works could be lowered for spectators. 
This proved impractical, but during a 
brainstorming session Mr Maas plopped a 
tea cup onto a model of the park, then no- 
ticed a mirrored kettle nearby. The cup’s 
curve gave it a narrow base, which would 
leave more room for pedestrians; the re- 
flective surface of the kettle melded with 
the surroundings. 

More than a decade after that epiphany, 
the building known simply as “Depot” 
opened to visitors on November 6th. In 
Dutch “de pot” means “the pot” (as in the 
flowery kind), a lexical pun reinforced by 

the rooftop garden covered in birch trees. >> 

The cup runs over 

The Economist November 13th 2021 

» The mirrored exterior creates a fish-eye ef- 
fect that reflects the city’s skyline, curving 
down to show the park and viewers them- 
selves. Mr Maas compares it to the draw- 
ings of Giovanni Piranesi. Rotterdam was 
bombed flat during the second world war, 
and has since prided itself on its geometric 
modernity. Depot fits right in, but also pro- 
vides the city with a focal point. 

Yet it is the inside that is most impor- 
tant. The six-floor-deep atrium is criss- 
crossed by suspended staircases reminis- 
cent of M.C. Escher prints. Glass etalages 
showcase eye-catching pieces: fluorescent 

dresses, inlaid furniture, abstract paint- 
ings by R.B. Kitaj. Along the sides are the 
Storage halls. Canvases hang on rolling 
metal lattices in rows that can be pulled 
out for inspection. Sculptures and furni- 
ture are stacked on rolling motorised 
Shelves. Organisation is alphabetical, 
chronological or by size and material. 
There are no labels; even with QR codes and 
the museum’s smartphone app, identifica- 
tion is rarely forthcoming. 

It is all a bit dazzling. A lattice-wall 
Slides out: there is Breugel’s “Tower of Ba- 
bel”. Another emerges with what looks like 

Double trouble 

Green-lit or greenlighted? Gaslighted or gaslit? Here’s how to tell 

RECENT ARTICLE in The Economist on 
Germany's coalition talks was given 

the headline “Green-lit”. Elsewhere, 
though, we have reported that ventures 
were “greenlighted”. Another new verb is 
subject to the same confusion: to “gas- 
light’”—to try to make someone think 
they are losing their mind and should 
not believe their own eyes—has two 
past-tense forms. A search of the web 
turns up hundreds of thousands of re- 
sults for both “gaslighted” and “gaslit”. 

One reason verbs have two past-tense 
forms (or two past participles) is dia- 
lectal variation: in Britain words are 
“spelt”, in America they are “spelled”. 
Another is ordinary language change. 
Words have a tendency to become reg- 
ular over time. “Help” once had the past 
tense “holp” and the past participle 
“holpen’”, as in the prologue of “The 
Canterbury Tales”: “that hem hath hol- 
pen, whan that they were seeke’ (“that 
helped them when they were sick’). Now 
“help” is regular, though the Oxford 
English Dictionary says that “holpen” is 
“still employed by poets and archaists”. 

In rarer cases, verbs become irregular 
over time. The most famous may be 
“snuck”, which was unknown before the 
20th century. The past tense was 
“sneaked”. But some clearly felt that 
“sneaked” sounded wrong and adopted 
“snuck”. That was long disparaged until it 
suddenly began gaining respectability— 
data from Google Books show it rocket- 
ing in frequency in the 1980s and over- 
taking “sneaked” in about 2009. 

Sticklers may stick with “sneaked”, 
but they are probably stuck with hearing 
“snuck”. “Pled”, too, has crept into the 
language as an alternative to “pleaded”. 
(“Pled” is probably modelled on “led”, the 
past tense of “lead”.) Here traditionalists 
have managed to keep “pleaded” as the 


RS + 


most common form in writing, but “pled” 
is in circulation as well. 

Rarely, a verb will have two past forms 
with different meanings. To “hang” has 
the past tense “hung” when it refers toa 
painting, and “hanged” when it involves 
an execution. This rule is subtle enough 
that many people do not know it, meaning 
both pictures and the condemned (though 
hopefully only in historical writing) may 
both one day be “hung”. 

For one particularly common verb, 
American English has two past participles 
with distinct meanings. “I’ve gotacar” 
means I own one; “I've gotten a car’ means 
I have acquired one. (“Gotten” is the older 
form.) In yet another variation on the 
theme, two versions of a past participle 
can survive with different grammatical 
uses. “Thou hast cleft my heart in twain,” 
Gertrude tells Hamlet. Today she would 
say “You have cleaved my heart in two.” In 
its past-participle form, “cleft” is now 
primarily an adjective, as in “cleft palate”. 

None of these, however, is a precedent 
for “gaslighting” versus “gaslit”. This is an 
unusual case in which speakers (usually 

Books & arts 

a Jan Toorop, but who knows? On other 
floors photographers and restorers workin 
open labs. Visitors are led through by 
guides, not left alone to sample at random. 
But Depot still has an immediacy different 
from acurated museum. 

Other institutions are also planning to 
open their collections: the Victoria and Al- 
bert Museum’s new facility is scheduled to 
open in London in 2024. Meanwhile, fora 
few years Depot will be the only place to 
see the Boijmans van Beuningen’s trea- 
sures, as the main museum is closed. They 
have to fixthe basement. @ 

unwittingly) have in mind two different 
ideas of the origin of a word. The “gaslit” 
crowd work on the premise that “to 
gaslight” comes from the verb “to light”. 
When you make a compound verb out of 
an irregular base verb, the compound 
inherits the irregularity: “override” 
becomes “overrode” just as “ride” be- 
comes “rode”. Hence the instinct for 
“gaslight” to become “gaslit” in the way 
that “light” becomes “lit”. True com- 
pounds of the verb “to light” work this 
way: you can talk about a “floodlit” stage, 
because it is lit with floodlights. 

But “gaslight” does not come from the 
verb “to light”, meaning “to illuminate’. 
It comes from the name ofa play, “Gas 
Light”, which had its premiere in 1938, 
and its two film adaptations (both called 
“Gaslight”). According to an unwritten 
rule, when a new verb is coined froma 
noun, it is always regular. The name 
Google becomes the verb “to google’, 
which conjugates as “googled”, not “gog- 
gled” or something else exotic. The “gas- 
lighted” lot have the (correct) intuition 
that “gaslight” is a verb of this type, nota 
compound of “to light”. 

The same applies in the case of “to 
greenlight”. It does not mean to bathe in 
green light. Itis a verb formed from the 
noun phrase “the green light”, a meta- 
phorical approval given to something. 
Under the logic described above, “green- 
lit” should never have been greenlighted. 

In language, norma loquendi—what is 
actually said or written—is the highest 
authority. Here, though, the greenlit- 
gaslit people are trying to follow the 
logic. In fact they are committing a kind 
of snuck-pled error, inventing an irreg- 
ular form. Like “snuck” and “pled” these 
alternatives may live on, but they violate 
the rules rather than obeying them. And 
that is not Johnson gaslighting you. 


8 Economic & financial indicators 

Economic data 

Gross domestic product 
% change on year ago 

latest quarter* 20217 
UnitedStates 49 Q3 20 oye 
China 49 Q3 0.8 79 
Japan momo2 19 IES: 
Britain memQ2 23.9 6.4 
Canada ie?  =-1.1 5.4 
Euro area fee Q3 9.1 49 
Austria 128 Q2 246 41 
Belgium 47 3 7A 5.0 
France omQ3) «12.6 6.1 
Germany m3 = = /3 3.1 
Greece 164 Q2 145 6.5 
Italy omo3 «108 6.0 
Netherlands 10.4 Q2 159 oe. 
Spain m3 = 83 ae 
Czech Republic 88 Q2 5,7 3.4 
Denmark 10.0 Q2 11.7 3.2 
Norway 6.1 Qz2 44 3.0 
Poland 10.8 Q2 6.6 sd 
Russia 10.5 Q2 na 42 
Sweden oe Q3 74 40 
Switzerland ee Q2 74 3.5 
Turkey ee Q2 na 8.0 
Australia 96 Q2 oe, 42 
Hong Kong 54.3 £4204 6.2 
India 20.1 Q2 -41.2 8.2 
Indonesia oe Q3 na 3.0 
Malaysia ion Q2 na 3.8 
Pakistan 47 2021** na 3.8 
Philippines m3 «16.1 42 
Singapore mos «203.4 6.1 
South Korea 40 Q3 |Z 4 
Taiwan oom Q3 25 5 
Thailand _ Moe i514 
Argentina feemoQ2 = -9.5 8./ 
Brazil 124 Q2. -02 50 
Chile 18.1 Q2 42 11.0 
Colombia 170 Q2 -92 9.8 
Mexico 46 @ #-08 6.4 
Peru | 419 Q2. 35 eon 
Egypt ee 02 na Ss. 
Israel emQ2 166 6.1 
Saudi Arabia -4.1 2020 na pip) 
SouthAfrica 193 Q2 47 49 

Source: Haver Analytics. *% change on previous quarter, annual rate. The Economist Intelligence Unit estimate/forecast. SNot seasonally adjusted 

average. §§5-year yield. TDollar-denominated bonds. 


In local currency 

United States S&P 500 

United States NAScomp 

China Shanghai Comp 
China Shenzhen Comp 
Japan Nikkei 225 

Japan Topix 

Britain FTSE 100 
Canada S&P TSX 

Euro area EURO STOXX 50 

France CAC 40 

Germany DAX* 


Netherlands AEX 

Spain IBEX 35 
Poland WIG 

Russia RTS, $ terms 
Switzerland SMI 

Turkey BIST 1,624.1 So) 10.0 
Australia All Ord. 

Hong Kong Hang Seng 

India BSE 
Indonesia |DX 
Malaysia KLSE 

Consumer prices 


% change on yearago |rate 

latest 2021T | % 

6.2 Oct 44" 46 oct 
ome Oct 0.8 49 Sept 
0.2 Sep -0.2 2.8 Sep 
3.1 Sep 2.8 45 jultt 
4A Sep 3.1 6./ Oct 
eaiee Oct 2.2 7A = Sep 
Brom Oct Negi 5.2 Sep 
42 Oct 2.3 6.3 Sep 
mom Oct 1.9 J Sep 
A5 Oct 2.9 3.4 Sep 
3.4 Oct 0.1 IS 3a Sep 
ee Oct 1.6 9.2 Sep 
3.4 Oct 5 3.1 Sep 
Boome Oct 25 14.6 Sep 
fem Oct 3.6 2./ Sept 
Seems Oct ]./ 3.3 Sep 
Seo Oct 3.0 40 Augt# 
rene Oct 47] 5.5 Oct8 
alee Oct 6.6 4.3 Sep 
2.5 Sep 22 8.2 Sep 
ee Oct 0.5 ZOE 
19:95 Oct 17.1 11.1 Sep 
Br Q3 2.4 SO 
1.4 Sep 1.6 4.5 Sep*# 
43 Sep 5.0 Tis a: 
ae Oct hes 6.5 Q38 
me Sep 2.4 4.5 Sep8 
Bees Oct U2 6.9 2019 
46 Oct 45 Oh) ORS 
2.5 Sep 1.9 2.6 Q3 
Bee Oct De. Is Olas 
eee Oct 2.0 3.9 Sep 
24 Oct Om 1.5  Dec8 
eee Sep 48.3 9.6 Qs 
Poe Oct 8.0 13.2 Augs# 
6.0 Oct 43 8.4 Seps# 
46 Oct 3.4 12.1 Sep 
eee Oct 5.3 3.9 Sep 
emo 4.2 10.1 Sep 
foes Oct 5.4 7.3. Qa 
7am Sep 1.7 5.2 Sep 
0.6 Sep 3.1 6.6 Q2 
5.1 Sep 44 34.4 Qa 

% change on: 

Index one Dec31st 

Nov 10th week 2020 
4646.7 -0.3 231. 
15,622.7 -1.2 JAD 
eS -0.2 0.6 
2,430.1 1.5 43 
29,106.8 -1.4 6.1 
2,008.0 -1.2 iis: 
7,340.2 1.3 13.6 

21,461.9 ROIS S78 e 
4348.8 0.9 22.4 
7,045.2 1.4 26.9 
16,067.8 0.7 17.1 
27,561.0 0.7 24.0 
814.6 -0.2 30.4 
9,141.8 il v2 ise 
72,1949 -0.2 ALTE 
1,853.6 ie) 33.6 
12,401.4 0.1 15.9 
7,137A4 Os 12.9 
24,996.1 -0.1 -8.2 
60,352.8 1.0 26.4 
6,683.1 2.0 11.8 
1,520.7 -0.7 -6.5 

index one Dec 31st 
Nov 10th week 2020 
Pakistan KSE 46,629.9 -0.9 6.6 
Singapore ST| 323103 0.4 lier 
South Korea KOSPI De) -1.5 230 
Taiwan TWI 179091 2.6 (eZ 
Thailand SET pes a 2 (eS. J) 
Argentina MERV 95,130.6 oye) 85.7 
Brazil BVSP 105;,967.5 0.3 -11.0 
Mexico IPC 51,/04.4 7 [em 
Egypt EGX 30 11,480.5 -1.8 58 
Israel TA-125 1,966.2 nil 25.4 
Saudi Arabia Tadawul (peeves ES 360 
South Africa JSE AS 68,279.4 -0.4 14.9 
World, dev'd MSC 3, 10) E -0.3 19.0 
Emerging markets MSCI 12744 09 eeieon 
US corporate bonds, spread over Treasuries 
Dec 31st 
Basis points latest 2020 
Investment grade 111 eal 
High-yield 330 429 

The Economist November 13th 2021 

Current-account | Budget Interest rates 

balance balance 10-yr gov't bonds change on 
% of GDP, 2021T % of GDP, 2021T | latest,% year ago, bp 
-3.4 “124 1.6 58.0 
2.8 -4.9 27. 38 -36.0 
3.0 -8.8 nil -8.0 
-3.9 -10.9 0.8 50.0 
-2.3 -9.5 lee 93.0 
Sol -7.2 -0.2 25.0 
a -7.4 nil 33.0 
1.1 -7.1 nil a0 
-1.5 -8.5 0.1 440 
6.9 -5.7 -0.2 25.0 
-4.4 -9.6 (el 20.0 
sie) -9.6 0.9 21.0 
8.5 -5.2 -0.1 49.0 
0.9 -8.9 0.4 320) 
a -8.3 2.8 161 
75 -0.3 nil 40.0 
6.9 -3.0 1.4 76.0 
24 -6.7 29 165 
Sy)! -0.7 8.0 186 
Se -1.9 0.2 20.0 
oe -3.8 -0.2 24.0 
-3.0 -3.2 18.5 556 
(le3 -5.9 ei! 81.0 
a0 -4.5 1.4 83.0 
-0.9 -7.0 6.3 42.0 
-0.2 -6.0 6.1 -4.0 
2.6 -6.0 5 86.0 
-4.4 -6.9 10.6 tT 79.0 
-1.4 -7.5 5.0 200 
18.1 -4.2 leh 86.0 
46 -4.4 23 69.0 
[52 -1.2 0.6 25.0 
7: - os | x 49.0 
1.7 -4.0 na na 
05 -5.4 LS 429 
-1.8 -7.1 6.0 344 
-4.1 -8.5 des 269 
1.8 -3.3 13 152 

_ eee) AA Sei 180 
-4.4 -8.0 na na 
43 -6.1 ED 36.0 
46 -2.0 na na 
Ei _ 85 94 56.0 

% change on: 

Sources: Refinitiv Datastream; Standard & Poor's Global Fixed Income 

Research. *Total return index. 

Currency units 

per $ 

% change 

Nov 10th on year ago 


SV: many G 





. ¥New series. **Year ending June. TLatest 3 months. ##3-month moving 

The Economist commodity-price index % change on 
2015=100 Nov 2nd Nov9th* month year 
Dollar Index 
All Items 149.4 145.9 -7.] 109 
Food lee Lene 2.6 20.4 
All 1646 1598 -14.2 4.6 
Non-food agriculturals 146.8 144.0 -3.8 34.1 
Metals 169.9 1646 -16.6 -1.1 
Sterling Index 
All items 167.5 164.4 -7.3 8.4 
Euro Index 
All items 143.1 139.7 -7.9 13.1 
$ per oz 1,789.1 1,824.0 3.4 -3.2 
$ per barrel 84.6 84.9 1.6 94.2 

Sources: Bloomberg; CME Group; Cotlook; Refinitiv Datastream; 
Fastmarkets; FT; |CCO; ICO; ISO; Live Rice Index; LME; NZ Wool 
Services; Thompson Lloyd & Ewart; Urner Barry; WSJ. *Provisional. 

For more countries and additional data, visit 

Graphic detail Social media 

The Economist November 13th 2021 89 

+> Twitter gives its biggest boosts to right-wing legislators, and to less-reliable news sources regardless of ideology 

Audience reached on algorithmic timeline compared with chronological timeline, Apr to Aug 2020 

Tweets linking to news sites 

Political slant 
Ad Fontes score @ Daily Mail 
Zz 8=6heéu 
< Left Right > ® 
a S 
@® Daily Wire The Hill wmanopes 
me Vanity Fair 
— The Verge & 
@" Gateway Pundit New York Post O ee 12x 
& mS oe Newsweek 
@ One America News o—. 
eee vx@ OTime 
Breitbart Fox Nene “@ Forbes 
RT The Federalist e | iy 11x 
Oo 6 
6 MSNBC Washington Post 
. * © Review | 
Algorithm gives tweets 
, . @ ®Daily Kos © The Guardian o 
4 bigger audience The Economist @ 1x 
i i n" 
smaller audience 0 % % © 
eUaetee Mother @ 
AlJazeera Talking Points ProPublica 
Oo @ Memo © 0.9x 
Average American users per More accurate 
day whose feeds linked to site Mashable 
| | | | | | 
0 20 40 60 80 100 

Accuracy index* 

Coming clean 

According to Twitter, Twitter’s 
algorithm favours conservatives 

MONG THE most hotly debated ques- 
tions on social media is how algorith- 
mic bias affects social media. In America 
conservatives claim that Facebook and 
Twitter bury or outright censor their views. 
The left retorts that right-wing conspiracy 
theories like QAnon flourish on these sites. 
An unlikely arbiter recently emerged in 
this debate: Twitter itself. In October it re- 
leased a paper showing that its algorithm, 
which picks which tweets users see in 
which order, favoured right-leaning Amer- 
ican news sites. In six of the seven coun- 
tries studied, the algorithm also gave a dis- 
proportionate boost to lawmakers from 
conservative political parties. Twitter 
Shared its data with The Economist this 
month, letting us test the authors’ claims. 
The study relied on a large experiment. 

Until 2016 users saw tweets only from ac- 
counts they followed, shown in reverse 
chronological order. After launching its al- 
gorithm, Twitter kept 1% of users in the old 
system. This let it measure how often its al- 
gorithm served up certain tweets, com- 
pared with the “reverse-chron” method. 

In April-August 2020 the authors used 
this approach on 3,634 accounts belonging 
to legislators from 32 political parties. Al- 
though they did not detect political bias in 
the treatment of individual lawmakers, 
they did find a slant when grouping ac- 
counts by party. In all countries but Germa- 
ny, the algorithm’s “amplification ratio” 
was lower for members of leftist parties 
than for members of right-wing ones. 

This discrepancy could arise for rea- 
sons besides ideology. To test alternatives, 
we fed Twitter’s data into a model that ac- 
counted for the amount of amplification in 
each country, political parties’ vote shares 
in the most recent elections and whether 
they were in government. Yet even after 
making these adjustments, the algorithm 
still favoured conservative parties. 

In contrast, the evidence for bias aiding 
right-wing American media seemed less 

Tweets from legislators @ In government 

Grouped by party and ordered from left- to right-wing 

United States 1.1x 1.5x 2x 
Democratic im 
Republican Confidence interval — =@ 

log scale 

Britain 1.1x 1.5x 2x 3x 4x 
Labour ie 

SNP & 

Lib Dem & 

Conservative oe 

Canada 1.1x 1.5x 2x 3x 4x 
NDP a 

Bloc Québécois i 
Conservative we 

Germany 1.1x 15x 2x 3x 4x 
The Left @ 

Greens na 

Sa. oe 
CDU/CSU ma 0 
AfD a 

Japan 1.1x 1.5x 2x 3x 4x 
Communist ® 

CDP aly 

DPFP ay 

LDP a} 
*Combination of Ad Fontes Media, Media Bias/Fact Check 
and NewsGuard scores (first principal component) 

Sources: “Algorithmic Amplification of Politics on Twitter”, by Ferenc 
Huszar et al.; Ad Fontes Media; Media Bias/Fact Check; NewsGuard 

robust. The algorithm did give extra am- 
plification to news sources that indepen- 
dent groups like Ad Fontes Media classify 
as conservative. However, ideology and ac- 
curacy (which Ad Fontes, among others, al- 
SO scores) are correlated to each other. And 
among the sites studied, those with the 
strictest sourcing and fact-checking also 
tended to have left-of-centre politics. 

In 2019 we studied how Google ranks 
news stories, and found that accuracy, not 
ideology, explained its rankings. This is al- 
so true of Twitter. However, whereas Goo- 
gle gave higher rankings to more reliable 
sites, we found that Twitter boosted the 
least reliable sources, regardless of their 
politics. Left-wing sites with poor accuracy 
scores, like TMZ, were amplified more than 
credible, conservative ones like the Wall 
Street Journal. ProPublica, a non-profit fo- 
cused on public-interest investigations, 
had one of the lowest amplification ratios. 

Because Twitter did not share the 
tweets it studied, we could not identify the 
type of content that its algorithm rewards. 
But if the company wants to reduce misin- 
formation on its site, making tweaks to fa- 
vour rigorous reporting might help. m 

° Obituary Aaron Beck 

Up off the couch 

Aaron Beck, the psychiatrist who developed Cognitive 
Behavioural Therapy, died on November 1st, aged 100 

Y FAR THE youngest of Aaron Beck's subjects, in the very partial 

list of patients he had treated for anxiety and phobias in his 
book, “Cognitive Therapy and the Emotional Disorders” (1976), 
was an eight-year-old boy. This boy, after weeks in hospital with 
near-fatal septicaemia, became horribly squeamish about blood, 
and the smell of ether would make him faint. How was he treated? 
By learning, whenever he felt faint, to focus on other things, even 
just naming all America’s presidents in the right order. The feel- 
ings still followed him into adulthood, but he then confronted 
them head-on: by going to Yale Medical School, where the smell of 
ether was more or less infused in the walls. 

The eight-year-old boy was himself, and that childhood experi- 
ence was his first brush with the idea that human thinking moved 
on two parallel tracks. Not conscious and deep subconscious, as 
Freud had taught, which was the accepted wisdom in the 1950s 
when he entered the field, but rational thoughts and “automatic” 
ones, both on the surface. Automatic thoughts were sometimes 
useful, as when he was driving the car and simultaneously com- 
posing the next lecture for his students at Penn University, where 
he was a professor for half a century. They told him to swerve ata 
bump, or slow down, without interrupting his flow of ideas. But 
such thoughts were often distorted, blocking out more rational 
explanations for the problems that inevitably cropped up in life. 

Aman might fret, for example, that his wife had not said good- 
bye to him as he left for work. Did it mean she no longer loved him? 
Was he actually unlovable? The rational explanation might be that 
She had left milk boiling on the stove. But the negative thoughts 
crowded in first, and could lead to full-blown depression. Just one 
misinterpretation could convince a beautiful woman that she was 
ugly and a teenager that she was fat, and the damage was done. 
Anxiety attacks and phobias were usually triggered not by the 
thing itself, such as a high balcony, but by a lively negative (and 

The Economist November 13th 2021 

Statistically very unlikely) thought of tumbling over the rail. 

He concluded that distorted surface thoughts, rather than 
Freud’s long-buried childhood traumas and Oedipal desires, ex- 
plained almost all emotional disorders. To each condition he ap- 
plied scientific rigour and plain New England common sense, be- 
sides writing clear, simple manuals for therapists. As the years 
passed, his Cognitive Behavioural Therapy (CBT) was found to be 
widely effective—needing far fewer sessions than Freudian analy- 
sis, and lasting longer. It became, and remains, the most popular 
treatment for depression and anxiety in the Western world. 

His method was gentle and collaborative. He dressed nattily, 
with colourful bow ties, and his bright blue eyes were kind. Rather 
than making his patients lie on a couch and free-associate, as 
Freudian analysts did, he invited them to sit at a small table just 
across from him, an intimate space that just had room for a large 
box of tissues. He was less a clinician than a friend who would 
help them sort things out together. Then, rather than staying si- 
lent, he asked constant questions, gently unpicking their 
thoughts to expose the distorted ones, and plumbing his patients 
for evidence. The basis of CBT was empirical, and it was Socratic: 
“you say you've lost everything, but what have you really lost?” 
“How likely is it that you would die if you went outside?” “When 
you told me that story, what was really going through your mind?” 
That was his keystone question, finding the parallel tracks. 

Once the fallacies were exposed, patients could begin to help 
themselves. They were told to note their feelings day by day, and to 
gather countervailing evidence to their negative thoughts. Severe 
depressives were trained in “mastery” by being given tasks which, 
though easy for most people, had become impossible for them: 
getting out of bed, making a phone call. In1952 he even successful- 
ly treated a young schizophrenic who was convinced he was being 
followed by government agents. “How would I know what they 
look like, to help you?” he asked the patient. The patient could not 
exactly say. But as he was asked each week to describe the agents 
they became fewer and fewer, until they disappeared. 

Hard though it was to credit, this revolutioniser of psychiatry 
had once been a fervent Freudian. But he became increasingly 
bothered by the lack of hard science in it, its mantras and ritual- 
ism and its cult of celebrity practitioners. Depressives, for exam- 
ple, were said to have turned their hostility towards a parent in- 
ward on themselves, but his study of their dreams showed no 
more hostility there than in anyone else. Depressives and non-de- 
pressives alike might dream that they found only an empty Coke 
machine as they wandered in the desert. 

He wandered in the desert for a while himself, retreating into 
private practice, mocked by Freudians and attacked by pharma- 
ceutical firms whose profits from pills he threatened. In a trial in 
1977 CBT showed better results than imipramine, the best anti-de- 
pressant of the time. So he Kept going, busily recording patient da- 
tain his own journal, Cognitive Therapy and Research, when no one 
else would publish him. He was quite certain he was right. 

But he was not immediately happy. For 40 years he too checked 
his mood twice a day in the Beck Depression Inventory, and 
stowed the results in his cellar. The fact was that, though he hada 
great job, a loving wife and four beautiful children (one of whom, 
Judith, became a CBT clinician and co-founded his Beck Institute), 
he still suffered from acute self-criticism. He cared too much for 
approval, and felt bound not to get it. The cure? Even more deter- 
mined rationality. 

By the end of his life, nothing daunted his positive outlook. As 
a boy, his distorted thoughts about blood and ether had been cor- 
rected by the actual fact that he had not died, and could busy him- 
self with the future. As an old man, with his horizons narrowing, 
he had learned to see every mishap not asa loss or as confirmation 
of some defect, but as an opportunity. If it started to rain just when 
he was going out, great! All the more time to get that next paper 
written, and to spread the word still wider. @ 


Content Supply Chains must be forensic in their detail. 

Television broadcasters have long relied on instinct, 
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its own detective work. 

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