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10 The world this week Leaders 13 America’s mid-terms Welcome to Washington 14 Jerusalem’s holy sites Temple madness 16 Drugs policy Marijuana milestone 16 Japan’s economy Big bazookas 17 Performance indicators How to lie with indices On the cover Republicans have won a huge victory. Now they must learn to compromise: leader, page 13. Voters castigate the president, but the result may be worse gridlock, page 31. Modest budget goals are within the Republicans’ reach, page 33. Voters have chosen change, but obstacles ingrained in America’s political system will make progress di?cult, pages 25-29. Ohio’s Republican governor puts results ahead of ideological purity: Lexington, page 36 The Economist online
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The Economist November 8th 2014 7 44 East Asian ?rms in China Jobs machine 45 Kazakhstan’s spaceport Final countdown 46 Banyan Healing Myanmar China 47 Foreign policy Showing o? to the world 48 Children’s eyesight Losing focus 48 Investment ?ows Out as well as in Middle East and Africa 49 Jerusalem Eternally unhappy 51 Satire in the Middle East Laugh at the humourless 51 Syria’s war Rapidly unravelling 52 Burkina Faso Not so pretty now 53 Tanzania’s elephants Big-game poachers Europe 54 The Berlin Wall Twenty-?ve years on 55 Ukraine’s separatists Shrinking country 55 Spanish corruption A lot of bad apples 56 French eco-politics The dam bursts 57 Charlemagne Ireland’s revival Britain Decentralisation Let the cities go Immigrants What have they done for us? Tax and welfare Digging deeper Bagehot Andy Burnham’s big battle Submerging economies As emerging-market economies hit troubled times, Russia and Brazil look vulnerable, page 71. After pro-Russian rebels hold elections, the con?ict in Ukraine appears to be frozen, page 55
Letters 20 On Congress, Heathrow, Myanmar, food, IndiGo airlines, skiving Brie?ng 25 American democracy Powering down United States 31 Mid-terms: the Senate Republicans on a roll 32 Mid-terms: the House House keeping 33 States and governors Even worse for Democrats 33 Fiscal policy The governance test 34 Ballot initiatives A little liberal comfort 35 Funny campaign ads Bridal gowns and sweatshirts 35 The Supreme Court Is a ?sh a document? 36 Lexington A big win for John Kasich The Americas 38 The US-Canadian border Undefended no more 39 Colombia’s Paci?c region More than perfume, please 40 Bello Pe?a Nieto’s mettle Asia 41 Japan and Abenomics Riding to the rescue 42 Pakistan and India Nawaz Sharif weakens 44 Politics in South Korea Parked
Germany 25 years on The fall of the Berlin Wall closed the question of communism. But it reopened the question of Germany, page 54. Few big companies are based east of the old internal border, page 64. A new book on the wall’s astonishingly peaceful fall, page 83. Germany at the British Museum, page 84
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Jerusalem Israel’s prime minister must resist the dangerous campaign for Jewish prayer rights at Muslim holy sites: leader, page 14. Con?ict in Jerusalem may spark a wider con?agration, page 49
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Volume 413 Number 8912
Published since September 1843 to take part in "a severe contest between intelligence, which presses forward, and an unworthy, timid ignorance obstructing our progress." Editorial o?ces in London and also: Atlanta, Beijing, Berlin, Brussels, Cairo, Chicago, Hong Kong, Johannesburg, Lima, Los Angeles, Mexico City, Moscow, New Delhi, New York, Paris, San Francisco, S?o Paulo, Singapore, Tokyo, Washington DC
1 Contents continues overleaf
The Economist November 8th 2014
International 61 Performance indices Ranking the rankings 62 Internet use A tangled web Business 63 Twitter’s future How high can it ?y? 64 East German industry Still not over the wall 65 Spooks v tech ?rms Crypto war 2.0 65 Russian media ?rms Interesting news 66 China’s carmakers Zoom, zoom, splutter 67 Gays in business Out at the top 67 Companies and water Value diluted 68 Schumpeter The cannabis business Finance and economics 71 Emerging markets The dodgy duo 72 Buttonwood De?ation and the dollar 73 Tax reform in India The truck stops here 73 Banking in Japan Celestial Suruga 74 The World Bank Opprobrium from the atrium 76 The Federal Reserve When doves cry 76 Crackdown on tax Weil walks 78 Saving in Germany Negative rates 78 Emerging-market corporate debt Invisible bonds 79 Free exchange Forget the 1%
Science and technology 80 Virgin Galactic and Orbital Sciences It is rocket science 81 Evolution Nuclear reaction 82 GM crops Field research 82 The Human Protein Atlas Balls and brains Books and arts 83 The fall of the Berlin Wall The German open 84 Germany at the British Museum History lessons 84 Economic history The searing Twenties 85 New York property Reason not the need 86 Peter Carey Forget-me-not 86 Searching for frogs Toad haul 92 Economic and ?nancial indicators Statistics on 42 economies, plus our monthly poll of forecasters Obituary 94 Joan Quigley The president’s stargazer Next week Under American leadership the Paci?c has become the engine room of world trade. But the balance of power is shifting, says Henry Tricks
Twitter For all its success, the microblogging service may not achieve the scale many investors hope for, page 63. Who goes online, and where, page 62
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Cannabis Now that almost half of American states have begun to legalise cannabis, the federal government should follow suit: leader, page 16. The legal cannabis industry is run by minnows. Who will be the ?rst household name in pot? Schumpeter, page 68. Mexico’s president pays the price of playing down his country’s security problems: Bello, page 40
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The ivory trade Claims of links between politicians and poachers in Tanzania merit further investigation, page 53
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The world this week
the electorate’s wishes in the American capital. Proposals in Colorado and North Dakota to grant legal rights to fetuses, or “personhood”, were defeated. In California a measure passed to reduce the penalties for certain crimes, including possessing drugs. Thousands of people in jail for that o?ence are now eligible for release.
The Economist November 8th 2014
supposedly desecrating the Koran. Their bodies were then burned in a kiln. Assaults on Christians have increased in Pakistan over the past few years. Unusually, police arrested dozens of the alleged perpetrators this time. Aung San Suu Kyi, the leader of Myanmar’s opposition democratic movement, decried the slow pace of political reforms in the country, noting that America may have been “overly optimistic” about the process. Although she was allowed to stand for parliament in 2012, Myanmar’s military rulers are using constitutional tactics to block her bid to become president.
A load of ballots
The Republicans won control of America’s Senate for the ?rst time in eight years in the midterm elections. The party rode a wave of discontent to pick up eight seats, which may rise to nine after Louisiana holds a run-o? next month. They also won some states by much larger margins than the pollsters had predicted. Mitch McConnell, who will be the Senate’s new leader in the new Congress, thumped his Democratic opponent by 15 points. The Republicans also increased their majority in the House of Representatives. The day after the elections Barack Obama promised to work with the Republicans in Congress, but said he was also prepared to make more use of his executive powers. Mr McConnell warned the president not to take unilateral action on immigration reform, which would be “like waving a red ?ag in front of a bull”. It was also a bad night for Democrats in races for state governor. They had been expected to do well but in the end the Republicans held on to Florida and Wisconsin and picked up Arkansas, as well as Illinois, Maryland and Massachusetts, three heavily Democratic states. The Democrats had to console themselves with taking Pennsylvania from the Republicans and holding on, just, to Colorado. Many referendum questions also appeared on the ballot in the elections. Voters in Oregon and Alaska approved the legalisation of marijuana. So did voters in Washington, DC, though Congress can overrule
Canada seals Canada announced extra security measures for part of its border with the United States, including a new surveillance web, with radar, ground sensors and thermal radiation detectors. The American government has been pressing Canada to monitor crossborder activity since last month’s attack by a gunman on the Canadian parliament.
Mexico’s president, Enrique Pe?a Nieto, under pressure to curb drug-related violence after the disappearance of 43 students in September, promised there would be new revelations following the arrest in Mexico City of the fugitive mayor of the town where the atrocity occurred. Relatives of the students remain angry.
Bloodied but unbowed
Boiling over In Jerusalem a Palestinian driver ploughed a van into a group of pedestrians, killing one policeman and injuring at least 14 others, amid mounting tensions over demands by some Israelis for the right to pray in the area of the al-Aqsa mosque. The driver was subsequently shot by Israeli policemen. Another similar attack injured three. Clashes also took place between Israeli security forces and Arab protesters at the site of the mosque, which is known to Jews as the Temple Mount, leaving some injured.
Al-Qaeda’s Syrian a?liate, Jabhat al-Nusra, seized bases belonging to Syria’s moderate rebels in Idleb province, their last northern stronghold. The Syrian regime, meanwhile, stepped up air attacks on rebel-held areas. Australia said it would send about 200 members of its special forces to help train Iraqi forces battling Islamic State jihadists. More British troops may also return to Iraq to help train government ?ghters there. Blaise Compaoré, the president of Burkina Faso, resigned after protests broke out when he attempted to amend the constitution to run for another term in o?ce. His abrupt departure sparked a power struggle in the military, which immediately conducted a coup.
The Ukrainian president, Petro Poroshenko, threatened to tear up a cease?re deal granting special status to areas in eastern Ukraine held by pro-Russian separatists, after the separatists staged elections. America, the European Union and the UN condemned the polls; Russia praised them. Mr Poroshenko ordered reinforcements to the region, where Russia has been arming the separatists. Five ministers in Georgia’s government resigned after Irakli Garibashvili, the prime minister, sacked his defence secretary in a row over alleged misspending by o?cials. The ruling Georgian Dream coalition was left without a majority in parliament. The resignations included the foreign minister and the minister for European relations, casting doubt on the country’s foreign policy of balancing ties with Europe and Russia. The prime ministers of Finland and Sweden warned David Cameron, the British prime minister, that they would oppose any moves to limit freedom of movement in the European Union. Mr Cameron has hinted that he will propose some curbs on immigration from other EU countries to satisfy widespread anti-immigration sentiment among backers of the UK Independence Party and his own Conservative Party. Angela Merkel, Germany’s chancellor, was reported to have said she would be prepared to wave auf Wiedersehen to Britain and let it leave the EU before she would consider altering the commitment to 1 freedom of movement.
Islamic militants claimed responsibility for a suicidebomb that killed 55 people at Pakistan’s Wagah border crossing into India. The bomber targeted a daily ?ag-lowering ceremony conducted by Pakistani and Indian troops that attracts large crowds. It was the deadliest terror attack in Pakistan this year, though it didn’t stop the ceremony from taking place the next day. Two Christians were beaten to death in Pakistan by a mob numbered in the hundreds for
The Economist November 8th 2014
In?ation in the euro zone will remain below the European Central Bank’s target of almost 2% until at least 2016, according to the latest o?cial economic forecast from the European Commission, which also sharply reduced the outlook for growth next year, to 1.1%. America’s economy grew at an annualised rate of 3.5% in the third quarter, thanks in part to increased government spending and exports. But the unexpectedly large growth of the trade de?cit in September suggests that the GDP ?gure will be revised downwards. aggressive move by the Saudis to increase market share. With the Saudis trying to boost oil imports into America, BHP Billiton, meanwhile, was hoping to test a ban on oil exports from America by selling oil it has extracted but processed only very lightly in Texas. A report by the IMF’s internal auditor concluded that having ?rst advised countries to adopt ?scal stimulus during the global ?nancial crisis, the fund’s later push for austerity had “turned out to be a mistake and its timing unfortunate”, because the recovery was fragile. Christine Lagarde, who has led the IMF since 2011, said the auditor’s report bene?ted from hindsight. The trial of the most senior Swiss banker to be charged with helping Americans evade tax came to a swift end, when a jury in Florida took just over an hour to ?nd him not guilty. Raoul Weil used to run the wealth-management division at UBS. The prosecution’s case was based partly on testimony from his former subordinates, some of whom struck deals to avoid prosecution. His defence team was so con?dent about winning that it didn’t bother calling any witnesses.
The world this week 11
Alibaba issued its ?rst earnings report since making its stockmarket debut in September. The Chinese e-commerce company’s revenue in the third quarter grew by more than half, to $2.7 billion, from the same period last year, mostly because many more people in China are using mobile devices to shop. Ryanair, Europe’s biggest low-cost airline, reported solid earnings for the latest quarter and raised the outlook for its annual pro?t. The butt of many jokes about poor airline service, Ryanair has refocused on attracting business passengers and overhauled its systems, reducing its online booking process from 17 to ?ve clicks. Its boss, Michael O’Leary, who once described passengers as “idiots”, said that being nice was new to him, but was turning out to be a winning strategy.
Federal air-accident investigators began looking into what caused a spaceplane owned by Virgin Galactic to explode over the Mojave desert during a test ?ight, killing one pilot. The accident is a setback for the burgeoning private space industry. Virgin Galactic had been hoping to take rich tourists to the edge of space in the aircraft perhaps as early as next year. Sir Richard Branson, its founder, promised to keep the project going and build a second spaceplane. He had planned to be aboard the inaugural passenger ?ight.
Access to the internet Robert Hannigan, the head of Britain’s GCHQ intelligence agency, called for more support from internet giants such as Google and Apple in gathering information about suspected terrorists. He described social-media sites as “the command and control networks of choice” for terror groups, and criticised the extra security measures being added to the internet by companies in their e?orts to deter surveillance by Western spies.
Haruhiko Kuroda, the governor of the Bank of Japan, strongly defended the massive expansion of the government’s quantitativeeasing measures, announced on October 31st. Mr Kuroda said that he would do whatever it takes to cure Japan’s “chronic disease of de?ation”, though critics think the scale of the new initiative will distort markets. After the policy was revealed the Nikkei stockmarket index jumped to a sevenyear high and the yen tumbled against the dollar.
Amid the rouble rubble The announcement by Russia’s central bank that it would curb its support for the rouble pushed it to new lows against the dollar and the euro. The bank spent more than $30 billion propping up the currency in October and it raised interest rates to 9.5% just recently. Limiting its interventions will increase in?ation, but also protect foreign reserves and help avert the risk of a fullscale currency crisis.
The price of Brent crude sank to a four-month low after Saudi Arabia cut its price for oil for America while raising it elsewhere, seen by some as an
A tasty deal United Biscuits, a British baker that includes Ja?a Cakes and Twiglets among its brands, was sold by its private-equity owners to Yildiz, Turkey’s biggest food company, for a reported ?2 billion ($3.2 billion).
Other economic data and news can be found on pages 92-93
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The Economist November 8th 2014 13
Welcome back to Washington
Republicans have won a huge victory. Now they must learn to compromise PINION polls before the mid-term elections on November 4th suggested Barack Obama’s party would be beaten, but this was a thrashing. Republicans captured the Senate easily (see page 31) and their majority in the House of Representatives is now the biggest it has been in most Americans’ lifetimes (see page 32). A Republican candidate in New York was indicted for 20 counts of fraud, but won anyway. Close-up, the results are even worse for Democrats. They thought they could bin a bunch of tax-cutting, union-bashing Republican governors, but nearly all survived. Instead, Republicans captured governorships in solidly Democratic states like Maryland and Massachusetts. Mr Obama cannot escape the humiliating verdict on his presidency. He campaigned in his home state of Illinois, for a Democratic governor running against a Republican who belongs to a wine club that costs over $100,000 to join. The oenophile won by ?ve points. Yet as Republicans toast their triumph, they should be careful not to over-interpret it. Their campaign did not o?er voters much of a positive agenda; rather, it consisted largely of urging them to blame Mr Obama for all the trouble in the world. That was enough to secure victory, but does not give them a mandate to pursue a wishlist of conservative policies. Although more Americans than ever hold partisan views, a larger number are weary of gridlock and would prefer their representatives to compromise to get things done. For the voters to be satis?ed, America will need to ?nd new ways to run its politics. A mandate for moderation Many outsiders will be ba?ed by the election results. Compared with other rich nations, America is in good shape, with a growing economy, booming stockmarket, falling unemployment and robust public ?nances, at least by European standards. Why, they wonder, is Mr Obama so disliked that Democrats in swing states asked him not to campaign for them? The answer is that although the economic headlines look good, voters do not feel that way. Median incomes are in the doldrums and many households feel terribly insecure about the future. A staggering two-thirds of Americans expect their children to be worse o? than they are. And when they look at Washington, DC, to see what their political leaders are doing about it, they see a circus of name-calling and irresponsibility. Last year a stand-o? between House Republicans and Mr Obama temporarily shut the government down and nearly caused a catastrophic sovereign default. The outgoing Congress is the least productive since 1947. The proportion ofAmericans who trust it is a wretched 7% (see pages 25-29). It may be harsh, but when voters thinkthe country is on the wrong track, the president and his party get the blame. There is a Republican faction that would like nothing more than to spend the next two years indulging in futile attempts to repeal Obamacare and conducting televised investigations of
the president’s supposed abuses of power. If this faction prevails, America can expect yet more dysfunction and Republicans will deserve to lose the White House in 2016. Optimists are sure the new Congress will be better than that. Now that Republicans are in charge, voters will expect them to govern, rather than merely obstruct. Republican leaders such as Mitch McConnell and John Boehner would probably like to get things done, albeit with a bit of partisan sparring. And that means working with Mr Obama, who will remain president until January 2017 and can veto any bill the new Congress sends him. The two sides will thus have to ?nd common ground—starting with the president. Deals are possible in plenty of areas. Republicans favour free trade; Mr Obama wants the authority, which his own party has denied him, to negotiate trade deals. Both parties want to ?x the corporate-tax code, and to invest more in America’s shoddy infrastructure. Moderates on both sides also want to reform immigration law to unblock the ?ow of talent on which America depends. With power comes responsibility Yet, even if the optimists are right, America faces a host of ailments that seem beyond the reach of today’s politics. The personal tax code cannot be simpli?ed without closing middleclass loopholes. Health care and pensions for an ageing population will swallow up the budget unless costs are curbed and the retirement age is raised. In each case, lasting reform will in?ict pain on large groups of voters. Reforms are possible only if they have both parties’ ?ngerprints on them—if one side tried alone, the other would accuse it of throwing Grandma o? a cli?. Cool heads in both parties know that the big entitlement programmes, which grow automatically, need ?xing. Yet even in the most collaborative Congress, both sides would duck the issue, preferring instead to bicker over the mere 15% of the budget (excluding defence) that it re-authorises each year. America has changed since the days of Ronald Reagan and Bill Clinton. Money is splurged on elections and, many argue, this corrupts lawmaking. The parties are far more polarised and suspicious of each other. America’s political architecture is part of the problem, for two reasons. First, the electoral system rewards extremists. Many members of the House represent gerrymandered districts which their party cannot lose. Their only fear is that they might lose a party primary to a challenger who accuses them of being soft on the other side. So they pander to the zealots who vote in primaries and treat opportunities for compromise like invitations to burn Old Glory. Second, the federal government has so many checks and balances that it is all but paralysed. The Senate ?libuster gives 41 out of 100 senators the ability to block anything except a budget (they could in theory represent just 11% of the population). Attempts to limit campaign spending tend to fail—and to infringe the constitution’s free-speech guarantee. The best one can hope for is that donors will have to reveal who they are. More can be accomplished with reforms that empower the centre and remove road blocks, without requiring a federal constitutional amendment. Here are three suggestions: First, scrap the ?libuster in the Senate. Second, stop gerry- 1
2 mandering. Four states have already handed control of redis-
The Economist November 8th 2014
tricting to independent commissions. California did so in 2010. Between 2002 and 2010 the state’s House members held on to their seats 99.6% of the time; in 2012 a quarter of them retired or got the boot. The reforms also moderated California’s state legislature. Once dominated by doctrinaire Democrats, last year it rejected 39 out of the 40 bills that the Chamber of Commerce said would kill jobs. One day, with luck, computers will design voting districts without taking party preferences into account. Third, other states should copy California’s open primaries.
Instead of letting just registered Republicans pick a Republican candidate and Democrats pick a Democrat, the Golden State now holds primaries in which anyone can vote. The top two candidates then proceed to the general election, even if they are both of the same party. This gives candidates an incentive to pitch to the political centre from the very start. None of these reforms will happen soon, as they all need patient agitation in the states. But if Americans want to be better governed—which is what they voted for this week—they need to change the way they elect their leaders. 7
Jerusalem’s holy sites
Binyamin Netanyahu must resist the dangerous campaign for Jewish prayer-rights at Muslim holy sites HE destruction of the temple in Jerusalem by the Romans in 70AD is seared in Jewish memory and carved in marble on the Arch of Titus in Rome, which depicts legionnaires carrying o? the temple menorah. Every day since then, Jews have prayed that the temple may soon be rebuilt. For most, this has been an abstract longing for a future perfection, to be realised when the Messiah appears. Until then, they have been content to pray at their traditional holy place, the Western (formerly Wailing) Wall, at the foot of the mount where the temple once stood. For a growing band of zealots, however, this is not enough. Rabbis and activists have been preparing for the restoration of the temple and challenging the ban on Jews praying on the esplanade on top of the mount, the Haram al-Sharif, site of two venerable Muslim shrines, the golden Dome of the Rock and the al-Aqsa mosque. This would be esoteric if it were not so dangerous. A minority obsession with the temple is entering the mainstream and creating a vicious cycle. More temple activists, among them politicians and ministers, are visiting the Haram to demand the right to pray. To some, this is the ?rst step to sweeping away the mosques. In turn, Palestinian rioters vow to “defend alAqsa”, the third-holiest site in Islam. The attempted murder of a prominent temple activist, Yehuda Glick, on October 29th has redoubled calls for Jewish prayers and more restrictions on Muslims. As Palestinians adopt a new tactic of driving into Jewish pedestrians, there is talk of a new uprising, even of war. The Israeli prime minister, Binyamin Netanyahu, has restated his commitment to the status quo. But his words came late and only after intense pressure from America and Jordan. His plea for responsibility is being ignored by prominent members of his ruling Likud party. Israeli security measures, such as the routine exclusion of Muslims below the age of 50 from the Haram, are already changing the status quo. In 2000 a misguided visit by Ariel Sharon (then an opposition politician) to the Haram sparked the second Palestinian uprising. With the Middle East racked by jihadism, the world hardly needs a new con?ict over God and Jerusalem. Any responsible Israeli leadership must be resolute in halting Jewish agitation on the Haram. Previous governments have understood the need for restraint. When Israel retook the Western Wall in the war of1967
and annexed East Jerusalem, it ensured that Muslims retained the exclusive right to pray; Jews and others could visit as tourists; the Israeli police would enforce order. The then defence minister, Moshe Dayan, thought the Jews should show tolerance. The chief rabbis said ritually impure Jews should stay out for fear that they might de?le the temple’s Holy of Holies, its inner sanctum, whose precise spot was unknown. That prohibition is being eroded. Some rabbis say Jews may pray where, they reckon, the Holy of Holies could not have been. Growing numbers of Jews go up to pray covertly, pretending to talk into their mobile phones. Jewish visitors must be protected by policemen; where radical Jews go, the Israeli state usually follows (see page 49). In the ever-contested ground of the Holy Land, prayer is not just an act of personal devotion: it implies ownership. Jews were allowed to pray at the Cave of the Patriarchs in Hebron, another contested city. But when a settler massacred Palestinians in 1994, the site was divided into Jewish and Muslim areas. Palestinians fear a similar cycle of provocation, violence and concession to Jewish radicals in Jerusalem. The erosion of the status quo also looks like part of a broader policy ofencroachment. Arab areas ofJerusalem are starved of resources, surrounded by Jewish housing blocks, sliced by security walls and roads, and, increasingly, disrupted by hardline Jews settling in clusters in their midst. Building permits for Arabs are routinely denied and residence permits withdrawn. The hope for a negotiated peace and the creation of a Palestinian state with East Jerusalem as its capital is fast disappearing. Hear, O Bibi That may well be what hardliners, and Mr Netanyahu, want. They look around and see the world going their way: the Palestinians are weak and divided; Syria and Iraq are torn by civil war; jihadists are keener to kill Arabs than Israelis; Egypt is ruled by a friendly general who hates Islamists; Saudi Arabia is an ally against Iran; America’s Congress is supportive and Barack Obama will soon be a lame duck. Why compromise? Such short-sightedness is dangerous. It pushes Palestinians to radicalism, feeds calls for European sanctions and strains frayed relations with the Obama administration. An explosion in Jerusalem risks turning friends against Israel, strengthening its foes and, worst of all, spilling a lot of Arab and Jewish blood. Indulging temple messianism can only bring disaster. Jerusalem’s holy sites must not be touched. 7
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16 Leaders Drugs policy
The Economist November 8th 2014
Almost half of American states have taken steps to legalise cannabis. The federal government should follow ESIDES choosing lawmakers, on November 4th voters in three American states and the District of Columbia considered measures to liberalise the cannabis trade. Alaska and Oregon, where it is legal to provide “medical marijuana” to registered patients, voted to go further and let the drug be sold and taken for recreational purposes, as Colorado and Washington state already allow. In DC, a measure to legalise the possession of small amounts for personal use was passed. A majority of voters in Florida opted to join the lengthening list of places where people can seek a doctor’s note that lets them take the drug. However, the measure fell just short of the 60% needed to change the state constitution. Even so, that such a big state in the conservative South came so close to liberalising shows how America’s attitude to criminalising pot has changed. After this week’s votes only 27 states outlaw all sale or possession of marijuana. In the rest, a thriving “canna-business” is emerging (see page 68): trade in the drug is escaping the grasp of organised crime and becoming normal, just as alcohol did after the end of Prohibition. But even as moves to legalise and regularise the business continue at state level, the federal government and Congress remain dead set against the drug. A panoply of federal laws to curb the marijuana trade remain in place; and in recent months the Drug Enforcement Administration has raided cannabis dispensaries in California that are operating under state licences. The cannabis industry is now in a legal no-man’s-land. In some states the distinction between medical and recreational use is hazy: just fake a back problem and you can join the ranks of licensed pot-heads. Entrepreneurs are creating a range of products that is, literally, mind-blowing: not just smokes, but
cannabis cakes, chocolates and massage oils. Yet even where state governments allow people to partake of the weed for pleasure, growers and sellers face the constant threat of seizure or arrest by the Feds. National laws make it hard for them to open bank accounts or get credit, and thus to rent premises or invest in production. They cannot sell across state lines. This makes it harder for the business to distance itself from the criminal underworld, which is one of the main purposes of legalisation. It also has safety implications. Smaller states will struggle to monitor quality standards and set safe doses for the huge variety of marijuana products coming to market. The federal Food and Drug Administration—the world’s foremost regulator of drug safety—refuses to inspect the cottage industry for fear of legitimising it. (Strangely enough, such qualms do not deter the Internal Revenue Service, which readily taxes the proceeds.) Marlboro, man Opponents of legalisation are happy to see the business stay small, amateurish and nervous. They argue that if it got into the hands of giant corporations with big marketing budgets, as tobacco and alcohol have, pot use would surge. However, the weed business is already vast—worth some $40 billion by one estimate—and it is largely in the hands of gangs that, unlike big, stockmarket-listed ?rms, would not hesitate to sell dodgy stu?, to youngsters as well as adults. A legal, well-regulated pot industry would be a safer, less crime-infested one, but it would not necessarily be a bigger one: tobacco use has plunged as regulation has been tightened and public education about its health risks has improved. The federal government and Congress should face up to the reality that across swathes ofAmerica, pot is now all but legal— and voters want it that way. They should redirect their e?orts to making it as well-regulated as booze and cigarettes. 7
The central bank is right to be bold. Now the prime minister must follow suit APAN prizes caution and consensus. So it was remarkable As a % of GDP when the Bank of Japan (BoJ) 60 Bank of Japan suddenly promised to buy ?80 40 trillion ($705 billion) of governECB 20 ment bonds a year until the Federal Reserve economy is clear of de?ation— 0 2007 08 09 10 11 12 13 14 and the government’s huge pension fund joined it, saying that it would double its holdings of Japanese and foreign equities. With annual purchases equivalent to over 15% of GDP, the BoJ is venturing into new territory. Relative to the economy, its balance-sheet will dwarf those of the Fed, the Bank of England or the European Central Bank.
Central banks’ assets
The move was prompted by what the BoJ’s governor, Haruhiko Kuroda, described as a “critical” moment in Japan’s attempts to escape from de?ation. Getting in?ation up is central to the economic programme of the prime minister, Shinzo Abe. Mr Kuroda recently promised that core in?ation would never again fall below 1%. But after a rise in the consumption tax in April, the economy slowed and in September core in?ation dipped to Mr Kuroda’s threshold. The BoJ was right to move boldly. The past two decades have been a story of too little, too late, for Japan. But not everybody is comfortable with the move. Four of the bank’s board members voted against it—which was also a shock. Critics worry about the impact of an already weak yen 1
The Economist November 8th 2014
2 weakening further. Since the earthquake and tsunami of
March 2011, Japan has been virtually without nuclear power. It therefore relies on imports to satisfy almost all its energy needs. At a time when real wages are already falling, the weaker yen has pushed up household energy costs by over a quarter. Big ?rms that export are bene?ting, but the small and midsized businesses that employ most of Japan’s workers are being squeezed. A survey suggests four-?fths of such ?rms do not want the yen above ?109 to the dollar. It is now ?114. The di?cult bits But energy prices are falling, o?setting the e?ects of a weaker currency—one reason why Mr Kuroda felt able to move. A bigger concern is that Mr Abe has been relying on monetary policy to wow markets and foreign investors while failing to push ahead with the politically di?cult parts of his economic programme. These include structural reforms to boost sluggish long-term growth and a credible plan to stabilise Japan’s parlous ?nances (the government’s de?cit and public debt stand at 6% and 240% of GDP respectively). In June Mr Abe unveiled proposals to sharpen incentives in the labour market, open up restricted sectors and revamp corporate governance. Yet the blizzard of proposals—over 240 of them—showed little sense of priorities, which suggests they
were intended in part for e?ect. Some progress has been made, including on getting more women into work (see page 41), but much has languished. Mr Abe’s earlier promises to bring down steep tari?s on beef and other farm goods look thin; negotiations with America over joining the Trans-Paci?c Partnership, a free-trade grouping, are stalled. Some Americans, once fans of Mr Abe, wonder whether he is all hat and no cattle. With the de?cit running at 8%, the government will need to raise taxes to avoid losing still more ?scal credibility. By the end of this year, Mr Abe must decide whether to go ahead with an increase in consumption tax from 8% to 10%, starting next October. Eventually, the tax probably needs to go up to 20%. Mr Kuroda’s stimulus was intended to make it easier for the prime minister both to carry out structural reforms and also to raise the consumption tax. Now Mr Abe must forge ahead with the reforms. On the tax, however, he should tread cautiously. Private consumption is too weak for the economy to bear a tax rise right now. So Mr Abe should instead announce legislation for the tax to go up by one percentage point a year, for 12 years. The increases should start when the economy can bear it. That will not be next year. Boldness in monetary expansion; boldness in structural reform; caution in ?scal contraction. It will be a delicate operation: but Japan’s situation is indeed very delicate. 7
How to lie with indices
Learn the ruses of international country rankings ROOKS already know these tricks. Honest men number must learn them in self-deActive Discontinued (as of 2011) 200 fence,” wrote Darrell Hu? in 150 1954 in “How to Lie With Statis100 tics”, a guide to getting ?gures to 50 0 say whatever you want them to. Pre- 80- 90- 2000- 101974 84 94 04 14 Sadly, Hu? needs updating. The latest way to bamboozle with numbers is the “performance index”, which weaves data on lots of measures into a single easy-to-understand international ranking. From human su?ering to perceptions of corruption, from freedom to children’s happiness, nowadays no social problem or public policy lacks one (see page 61). Governments, think-tanks and campaigners love an index’s simplicity and clarity; when well done, it can illuminate failures, suggest solutions and goad the complacent into action. But there are problems. Competing indices jostle in the intellectual marketplace: the World Economic Forum’s Global Gender Gap ranking, published last week, goes head to head with the UN’s Gender Inequality Index, the Index of Women’s Power from Big Think, an internet forum—and even The Economist’s own Glass Ceiling Index. Worse, some indices are pointless or downright misleading.
Global performance indices
As easy as 1, 2, 3 Which to trust, and which to ignore? In the spirit of Hu?, here is our guide to concocting a spurious index. Use it to guard against guile—or follow it to shape public perceptions and government policies armed only with a catchy title, patchy data and an agenda.
First, banish pedantry and make life easier for yourself by using whatever ?gures are to hand, whether they are old, drawn from small or biased samples, or mixed and matched from wildly di?ering sources. Are ?gures for a country lacking? Use a “comparator”, no matter how dubious; one index of slavery, short of numbers for Ireland and Iceland, uses British ?gures for both (aren’t all island nations alike?). If the numbers point in the wrong direction, ?nd tame academics and businessfolk to produce more convenient ones, and call their guesses “expert opinion”. If all that still fails to produce what you want, tweak the weighting of the elements to suit. Get the presentation right. Leaving your methodology unpublished looks dodgy. Instead, bury a brief but ba?ing description in an obscure corner of your website, and reserve the home page for celebrity endorsements. Get headlines by hamming up small di?erences; minor year-on-year moves in the rankings may be statistical noise, but they make great copy. Above all, remember that you can choose what to put in your index—so you de?ne the problem and dictate the solution. Rankings of business-friendliness may favour countries with strict laws; don’t worry if they are never enforced. Measures of democracy that rely on turnout ignore the ability of autocrats to get out the vote. Indices of women’s status built on education levels forget that, in Saudi Arabia, women outnumber men in universities because they are allowed to do little else but study. If you want prostitution banned, count sex workers who cross borders illegally, but willingly, as “tra?cking victims”. Criticism can always be dismissed as sour grapes and special pleading. The numbers, after all, are on your side. You’ve made sure of that. 7
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Congressmen sitting pretty SIR – Lexington bemoaned the number of races in Congress where the incumbent is running unopposed (October 25th). But he overlooked the even larger number of lopsided and inconsequential races where there are two candidates; the advantages of incumbency are so great that even serious opponents can rarely win. Political fundraising is skewed. According to OpenSecrets, incumbents out raise their challengers by six to one in the House and around ten to one in the Senate. On average it takes about $2.4m to unseat a sitting congressman. Fifteen states have imposed term limits. This has reinvigorated the electoral process in those places, introducing competitive elections and the rotation of o?ce that was intended by the constitution’s authors. Term limits also disrupt the regularity of the relationship between lobbyists and politicians. PHILIP BLUMEL President US Term Limits Palm Beach, Florida SIR – There are so few competitive races because congressional districts are stu?ed full of voters from the incumbent’s party. An unwinnable seat presents the same problems as an uncontested one. Whether a car has no driver or no fuel, it’s never going to win the race. DAVID LEBEDOFF Minneapolis SIR – I enjoyed your article on youth voting, “Let’s set the world on ?re” (October18th). But its title implied that there is something wrong with staying home on election day. I disagree. Yes, youth apathy is damaging, but low voter turnout is a symptom, not a problem in itself. I am 24, and I may not vote. I have been too busy to do the research, and an uninformed vote is more damaging than a blank ballot. If forced to vote I would be persuaded by political ads, or would simply vote along party lines. A democracy relies on universal su?rage, but frankly, any voter—young or old—who is literally unaware of an impending election is probably not in the best position to in?uence its outcome. If elections are decided by those who feel passionately about politics, is that really so bad? PAUL FORNIA Washington, DC SIR – Let the young vote from their smartphones. We have ?gured out how to complete banking and payment transactions securely and practically without risk from our mobile devices. We should improve democracy and make voting truly convenient for all. MARCELO LIMA Miami London’s infrastructure SIR – Your argument in favour of expanding Heathrow (“The freight debate”, October18th) is on uncertain ground using Hong Kong as a comparison. Many freight ?ights at that airport are during the night. It is di?cult to see Heathrow being allowed to operate the same hours. Like HS2, the question is how much we prefer developing for the long-term future, or upgrading for the present. London’s population is projected to rise by 3m during the next 30 years. London will swell, including westward towards Heathrow given the residential e?ect of the new Crossrail line. It was shortsighted of the Davies commission to reject the option of an airport to the east of London in the Thames estuary. PROFESSOR TONY ECCLES London Myanmar’s displaced people SIR – Although monasteries in Myanmar have remained untouched by industrial development (“Let a million factories rise”, October18th), other people in the Thilawa Special Economic Zone have not been so lucky. Last month I visited some of the families displaced by the project. They said that they had been threatened with arrest if they did not move. Many have fallen below the poverty line since being displaced, and the new housing does not even meet the minimum international hygiene standards for refugee camps, never mind for a longterm resettlement. The result of the ?rst phase of this project provides important lessons about how to ensure that Myanmar’s business boom does not bene?t governments and companies at the expense of its most vulnerable citizens. DEDE DUNEVANT Director of communications Physicians for Human Rights New York Ravenous Europe
The Economist November 8th 2014
trast, Air India has reduced routes, cancelled orders, and accumulated $5.9 billion in losses over the past six years. Although privatisation is an option for beleaguered Air India, providing it with a clear mandate and measurable operational targets is a better way to attract customers than just a generous 30kg baggage allowance. JONATHAN BROOKFIELD Associate professor of strategic management Tufts University VAMSI VALLURI Medford, Massachusetts The idlers SIR – Another, and possibly more signi?cant, reason for summer starvation in England and Wales during the 14th century was horticulture (“The cruellest months”, October 25th). Europeans ate cool seasonal vegetables such as carrots and cabbage, boosted in the autumn by nuts and tree fruits. July was called “the hungry gap” because starvation was common between the spring and autumn harvests. This changed with 15thcentury discoveries in the New World of foods such as tomatoes, squash, potatoes and maize corn, all summer crops. Potatoes and corn were particularly important because they grew quickly and could be used for ?our. The availability of food in the summer a?ected mortality rates as much as did disease and war. DANA DENNISTON Lexington, Kentucky The ?ight thing for India SIR – India’s government may hope to turn Air India around under state control, though the new civil-aviation minister has provided little direction (“Yes, prime minister”, October18th). He does not need to look far for a solution. IndiGo airlines has succeeded through innovative management, meticulous planning and coherent brand positioning, based around on-time performance and cleanliness, clear selling points for a low-cost carrier. In conSIR – If skiving (or shirking) at work is a form of art (Schumpeter, October 25th), Antwerp is its Mozart. In 2000 the Belgian city’s theatre sent a technician packing but failed to inform the governing body. For ?ve years the man was paid a salary. When the authorities found out in 2006 and tried to claim back lost expenses, Antwerp was ordered to re-employ him. STIJN RAMMELOO Brasschaat, Belgium SIR – You mentioned the coaton-the-back-of-the-chair trick as an aid to skiving. A variation of this is to pay a colleague to change the coat from time to time, for one of a conspicuously di?erent colour, and alter the clutter of paper on one’s desk, to give the impression of diligence and o?ce presence even during an absence of several days from the workplace. Never let it be said that skivers lack imagination. PHIL VERNON Tunbridge Wells, Kent SIR – I thoroughly enjoyed your article on skiving, which I can assure you I did not read online while at work. PETER GALLIGAN Fremont, California 7
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Voters have chosen change, but America’s political system makes that far too hard
OR anyone interested in how a free society governs itself there is nothing quite as spectacular as an American election. The country has just spent nearly $4 billion on a ?erce contest that has changed the balance of power in Congress (see page 31). Add to this the races for governors, statehouses, attorneys general, judges and so on—well over 10,000 o?ces in total— and it seems that America’s democracy is in ?ne fettle. Furthermore, optimists believe the mid-term elections will usher in a period of compromise: Republicans, having captured the Senate and increased their majority in the House, will want to prove that they can govern; Barack Obama will have little choice but to work with them. Polls show that, in general, voters increasingly favour politicians who seek consensus over those who do not. Deals on things like trade and tax reform seem possible. The next Congress could hardly accomplish less than its predecessor, which comes to a close in December and is likely to be remembered as one of the least productive in history (see chart 1). It has shut down the government once and ?irted with a sovereign default twice. But the low
standard by which progress is judged and the limited expectations of even the most cockeyed optimists are signs of deeper trouble in America’s political system. Designed to make legislating di?cult, it has recently looked dysfunctional. In a new book, “Political Order and Political Decay”, Francis Fukuyama of Stanford University argues persuasively that America “su?ers from the problem of political decay in a more acute form than other democratic political systems”, a statement that not long ago would have seemed ludicrous. Sand in the cogs There is no shortage of explanations for why this might be: the only thing generally agreed upon is that the trouble started at some point between 1787, when the Founding Fathers determined that their new creation would not be pushed around by an overmighty government, and 2010, when the Supreme Court loosened the rules on campaign spending. But two explanations for the sorry state of American politics stand out. The ?rst is that small, increasingly partisan groups wield vetoes over the federal government, blocking it from moving forward or back except in exceptional
circumstances, such as economic crisis or war. The second is that much of the federal bureaucracy was created at a point in the middle of the 20th century that was, in political terms, highly unusual. Under more normal conditions it struggles. Begin with the vetoes. For reasons that include the sorting of the electorate into like-minded folks, redistricting and the cultural divide between cities and prairies, only 5% of the House’s 435 districts were truly competitive on November 4th. There were 69 congressional districts where the candidate faced no opponent. This means that the main threat to the jobs of congressmen comes from primary elections, in which fewer than 20% of the electorate vote, about the same proportion who describe themselves as holding consistently conservative or consistently liberal views. Few congressmen lost to primary challengers in 2014, but results like the defeat of Eric Cantor, the House Majority Leader, in Virginia’s seventh district remind them that such voters are not wild about anything that smells of compromise with the other side. These voters have the ?rst veto. Getting a bill safely through the House, something that has become harder since Republicans adopted the idea that bills should have the support of a majority of their caucus to pass, is straightforward compared with getting one through the Senate, thanks to the ?libuster rule. Since a ?libuster requires a bill to gain a 60-vote majority, a group of 41 senators can halt almost any piece of legislation. Even the smallest state has two senators, so those 411
26 Brie?ng American democracy
2 sometimes represent a small chunk of the
The Economist November 8th 2014
electorate: Larry Sabato of the University of Virginia has worked out that states that are home to just 11% of Americans can elect the senators needed to block legislation. This potent weapon gives the minority party in the Senate the second veto. Other delaying tactics and procedural quirks enhance the power of small groups, and even individual politicians, to stall congressional action. These were once used sparingly, but the gulf between the parties and their policies has grown so wide that they are now wielded to block minor legislation. The founders feared such a development. “There is nothing which I dread so much as a division of the republic into two great parties,” wrote John Adams in 1780. “This, in my humble apprehension, is to be dreaded as the greatest political evil under our constitution.” In the decades since America’s two great parties were remade by the ?ght over civil rights in the 1960s, they have steadily become more ideologically consistent. Congressional Republicans and Democrats have withdrawn from each other, to the point where there is now hardly any common ground between them (see chart 2). Voting patterns in Congress suggest that the parties are even further apart now than they were in the mid-1990s, when Republicans tried to impeach Bill Clinton, or the middle of the past decade, when Democrats denounced George W. Bush as a warmonger. Over the past 20 years, the share ofAmericans who express consistently liberal or consistently conservative opinions has doubled, according to a study by the Pew Research Centre. Most of these people now believe that the other party’s policies
Laws enacted by each congress in the first 19 months of its two-year term, by type CEREMONIAL SUBSTANTIVE 150 100 50 0 50 100 150 200
104th (1995-96) 105th (1997-98) 106th (1999-2000) 107th (2001-02) 108th (2003-04) 109th (2005-06) 110th (2007-08) 111th (2009-10) 112th (2011-12) 113th (2013-14)
Source: Pew Research Centre *Up to July 29th
“are so misguided that they threaten the nation’s well-being”. The results of the mid-terms, far from repudiating this dynamic, have re?ected it. The defeat of John Barrow in Georgia leaves just one white Democratic congressman in the deep South; most of the Senate seats picked up by Republicans were at the expense of moderate Democrats in states that voted for Mitt Romney. This degree of political polarisation is often described as unprecedented, but that is mistaken. The parties were similarly divided at the end of the 19th century, following the civil war. The di?erence then was that Republicans won most federal elections, so the restraints built into the constitution did not resemble leg-irons, as they do now. When Congress is stuck, presidents often try to get their way by issuing executive orders. Earlier this year Barack Obama an-
nounced that 2014 would be “a year of action” during which he would use his pen to get things done if Congress stood in his way. Nine months later, how has this action-packed approach to bypassing Congress transformed America? Aside from the designation of a large marine reserve in the Paci?c, which costs nothing and offends no one, the president’s biggest solo accomplishment has been to issue an edict raising the pay of minimum-wage employees doing contract work for the federal government. The president can act with more freedom abroad and has done so in Libya, Iraq and Syria; by imposing sanctions on Russia and sending troops to west Africa to help contain the spread of Ebola. At home, though, his power to overcome an obstructionist Congress is limited. For those who favour more limited government, all this might sound like a good thing. But the vetoes that hamper the passage of laws make it just as hard to stop the federal government from doing anything. Birth of the kludgeocracy The growth ofentitlements is a good example. Spending on public pensions (Social Security) and federal health-care programmes (such as Medicare and Medicaid) increases automatically every year with no need for a vote. Without changes this bit of the budget will account for 14% of GDP by 2039, double the average level of the past 40 years, sending public debt to over 100% of GDP. Many countries face similar problems, but in America the preponderance of vetoes makes the mix of spending cuts and revenue increases needed to deal with it impossible. Maintaining some budgetary discipline while entitlement spend- 1
Going their separate ways
America's political polarisation, based on DW-Nominate scores* Democrat 1983-84 Republican Other 1997-98 2011-12
House of Representatives
*These capture differences in political ideology, based on votes on government intervention in the economy, and values traditionally identified as Northern and Southern, based on votes on race-related issues
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2 ing grows and revenues do not requires
Brie?ng American democracy 29
ernment’s employees are asked for their opinion on the agencies where they work. Only 56% say they are encouraged to come up with new and better ways of doing things; 36% report that creativity and innovation are rewarded where they work. The Pentagon, which has to produce more than one report a day for Congress, is frequently forced to buy kit it does not want and keep bases open that it would rather close. The urge to bind the bureaucracies, born of frustration at their ine?ciency and waste, often makes them even worse. Wasting time, too Faced with a malfunctioning government, voters have concluded that the politicians in Washington are scoundrels. Trust in Congress has tumbled to 7%. This is unfair: compared with past occupants of Capitol Hill the current lot are strikingly uncorrupt and hardworking. But much of their e?ort is aimed at raising money for their next campaign, which for House members is just two years away. A presentation to incoming freshmen in 2012 by the Democratic Congressional Campaign Committee recommended that they spend four hours each day making fundraising calls. Republicans in tight House races this year were given similar instructions. There is a lot of misplaced anxiety about the corrosive e?ect of fundraising on politics—sacks of cash are rarely traded for votes; donors and their political bene?ciaries tend already to be aligned—but what is unarguable is that the amount of time it takes up prevents congressmen from doing their jobs properly. The shortage of time further increases politicians’ reliance on lobbyists, who thrive in part because congressmen are usually too pressed to think for themselves. In a city marked by a deep partisan divide, the one place in Washington where political foes will happily work together is in the city’s lobbying ?rms, many of which employ a senior Democrat and a senior Republican to maintain ties with both sides. Even when government is stuck, lobbyists are able to prosper by heading o? threats to incumbent ?rms. Comcast, the biggest provider of cable TV and broadband internet services, which is in talks to buy another media ?rm, Time Warner, employs 126 di?erent lobbyists, according to the Centre for Responsive Politics, a watchdog. All but a handful of these people are former congressmen, congressional sta?ers or members of the executive branch. Lobbyists in turn donate to or organise donations for congressmen. Mr Fukuyama likens this reciprocal gift-giving to the kind ofpatrimonial politics seen in 18th-century France. No lobbyists are to be guillotined for their part in it, but there is something rococo about the business. A few months after the Treasury announced sanctions against Russian banks in July, Gazprombank hired two former senators, one from each party, to represent it in Washington. One of the best things about democracies is that voters in each one seem to believe that their system is uniquely ?awed. This is a helpful sort of paranoia, which usually prevents bad things from happening. America’s federal institutions have shown an ability to correct themselves before. The partisan warfare of the 1890s turned out to be a prelude to a triumphant century. This may take a long time, though, and there are no signs of it beginning yet. America has so many things working in its favour—new sources of energy, a tolerant society, the world’s most innovative companies—that progress will not be halted by the federal government. Yet no country can hand a ?fth of its economy over to an authority that works only intermittently and not expect to su?er for it. 7
hacking back everything else, from scienti?c research to road building. Discretionary spending, the kind Congress does vote on every year, has shrunk to just 15% of the budget once military expenditure is taken out. Thus neither Congress nor the White House imposes much meaningful control over most of what the federal government spends each year. The accusation, generally made by conservatives, that the federal bureaucracy is out of control is, in this sense, true. The federal government imagined by the founders was mainly responsible for running post o?ces, custom houses and giving away land, rather than the regulation of health care or the administration of the National Security Agency. One way to think about the federal bureaucracies now, and to understand their frequent failings, is as a collection of institutions put together when there was a lot of co-operation between parties, trying to function when there is very little. The New Deal and Great Society programmes of the mid-20th century were created by legislators with shared memories of two big national traumas, the Depression and the second world war, when party divisions were blurred. Lyndon Johnson may have been extremely cunning, but the kind of dealmaking he was able to practise was the product of a moment that, in political terms, was an anomaly compared with what went before or came after. These mid-century institutions have subsequently been asked to run a plethora of new programmes, each layered on top of the next because Congress ?nds it so hard to undo legislation. The House budget committee reckons there are at least 92 separate federal anti-poverty programmes, which overlap in ways that are ba?ing. This patchwork approach to problem solving leads to what Steven Teles of Johns Hopkins University calls “kludgeocracy”. Mr Teles compares the government’s veto points to toll booths, with the toll-takers extracting promises of pork-barrel spending and the protection of favoured programmes in exchange for passage. Needing the approval of so many, often ideologically opposed actors makes it almost impossible to craft coherent policy. Inaction is often the result, but also the creation over time of confusing systems for education, health care, taxes, welfare, etc. This complexity obscures the bene?ciaries of federal policies—businesses, for example, gain more from abstruse regulations that favour them than from more obvious hand-outs—and makes it di?cult for voters to pinpoint who is to blame for failures. The anger directed at the system is therefore di?use, says Mr Teles, leading to a broad loss of trust in the public sector. From inside the machine that lack of trust feels oppressive. Each year the federal gov-
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The Economist November 8th 2014 31 Also in this section 32 The mid-terms (2): the House 33 The mid-terms (3): governors 33 Fiscal policy after the mid-terms 34 Ballot initiatives 35 The funniest campaign ads 35 Are ?sh like documents? 36 Lexington: A big win for John Kasich in Ohio
For daily analysis and debate on America, visit
The mid-terms (1): the Senate
Republicans on a roll
Voters hand Republicans an unexpectedly whopping victory
HE Republican Party was disciplined and united. Voters were dismayed at the state of America, made acute by collapsing public con?dence in Barack Obama. As a result, the Republicans seized control of the Senate in mid-term elections on November 4th, taking up to eight seats from Democrats (see map). A ninth, in Louisiana, is likely to fall their way after a runo? election in December. That will leave Republicans with 54 seats and make Mitch McConnell (pictured with his wife, former labour secretary Elaine Chao) the new leader of the Senate. Republicans increased their majority in the House of Representatives (see page 32) and pulled o? stunning wins in governors’ races, even in such Democratic bastions as Maryland and Massachusetts (see page 33). It was an unhappy, angry election. Twothirds of voters told exit polls the country was on the wrong track. Hefty majorities expressed dissatisfaction or anger at the job performance not only of Mr Obama, but also of both parties and Congress. Excuses can (and have been) o?ered by Democrats for their thumping. Some of the closest Senate races involved centrist Democratic incumbents trying (and failing) to survive in deeply conservative states, such as Alaska or Arkansas. The retirement of veteran Democrats made Republican wins easy in West Virginia, Montana and South Dakota. When a president has been in the White House six years, a mid-term backlash against his party is the
norm. America is a country with two electorates. One, a national electorate which appears once every four years when a president is on the ballot, leans slightly Democratic. The other, made up of those Americans who reliably turn out in midterm and state elections, is markedly older, whiter and more conservative.
Yet some Democratic losses are harder to explain away. In Iowa Democrats chose a ga?e-prone lawyer, Bruce Braley, to contest an open Senate seat. He was beaten by Joni Ernst, a soldier and farmer’s daughter who managed to sound both populist (hers was the famous castrating-pigs ad) and remorselessly on-message. A Democratic incumbent in Colorado, Mark Udall, lost after building his campaign around a theme that had served his party well in previous elections: accusing Republicans of being extreme on abortion. But Republicans had recruited a candidate, Cory Gardner, who eschewed harsh rhetoric on social issues, e?ectively blunting Democratic attacks about a “war on women”. Republicans at last learned how to 1
SENATE HOLD GAIN n/a Undecided Democratic No election Republican
Mid-term elections results*
Seats in Congress
Democrats 14 243
MAJORITY THRESHOLD Sources: AP; The Economist
MAJORITY THRESHOLD *As of November 5th Likely result à Includes 2 independents
32 United States
2 blend high-tech data-mining and digital
The Economist November 8th 2014
foreign trade pacts. But at Mr McConnell’s own victory party, his Kentuckian colleague in the Senate, Rand Paul, o?ered a di?erent vision, vowing: “We will send the president bill after bill until he wearies of it,” including moves to repeal every “vestige” of Obamacare, the president’s ?agship health law. Americans have sent Mr Obama a loud warning and given Republicans a governing majority in Congress. Their reward may be more gridlock. 7 tion, party leaders talked privately about the need to win ten more seats so that they would no longer have to depend on the support of a shutdown caucus to pass bills. The maths behind this theory does not quite work. Republicans increased their majority to at least 65, but 144 Republican congressmen voted to continue the government shutdown last year. Even so, there is truth to it. What Charles Krauthammer, a conservative writer, once called the House “suicide caucus” is smaller than the shutdown vote suggested. This matters because, under Republicans, the House will only vote on bills that have support from a majority of the Republican caucus. Even a tiny change in the complexion of that caucus increases the odds of the House sending the Senate bills it can work with, rather than the acts of protest it has favoured for the past four years. More important than the small changes to how Republicans will look are the di?erent ideas that some of the new members will bring with them. The next House will still be conservative: hostile to gay marriage, abortion and any checks, real or perceived, on gun rights, sceptical about climate change, determined to shrink the state and unwilling to increase taxes. There will continue to be a gulf between the ideological intensity of Republicans in the House and in the Senate (senators represent whole states, and so tend to be more moderate). But the party’s success this year has also brought in congressmen and opinions from beyond its heartlands. Robert Dold, the MBA-wielding boss of a family pest-control business from Illinois, is one such. Mr Dold will represent a district that Barack Obama won by 17 points in 2012. He is a ?scal conservative who supports gay marriage, stem-cell research, gun control and immigration reform, worries about climate change and wants to protect funding for abortion—a mixture that gives a tantalising glimpse of what politics might look like if the parties tailored their platforms to win centrist voters rather than to please their bases. While Republicans have gained some more eclectic members, this election has pushed Democrats in the opposite direction. The defeat of Nick Rahall in West Virginia’s third district, after 38 years in the House, deprives the party of one of its few remaining rural voices and con?rms that state’s steady drift away from the Democrats. The loss of John Barrow, another favourite of the National Ri?e Association, in Georgia’s 12th district leaves Democrats with no white representatives from the Deep South in the whole of Congress. If Mary Landrieu loses the run-o? for the Louisiana Senate seat, as seems likely, it will ?nally be time to send Blue Dog Democrats to join Rockefeller Republicans, Dixiecrats and Silverites in the museum of political taxonomy. 7
wizardry with old-fashioned pavementpounding to turn out voters, in ways pioneered by Team Obama. Virginia, a state which complacent Democrats had thought a safe bet thanks to demographic changes, turned out to be close. Mark Warner, the Democratic incumbent, claimed victory, but Ed Gillespie, a lobbyist and former Republican campaign chief, has demanded a recount. It was a fear-mongering, ?nger-pointing election. Democrats chose economic insecurity as a theme, hammering Republicans as shills for billionaires, heartlessly ignoring public demands for such policies as raising the minimum wage. Several Republicans—such as Thom Tillis, who ousted a Democratic Senate incumbent in North Carolina, or David Perdue, who beat o? a challenge for an open Senate seat in Georgia—played on voter fears about national security. Ads ?lled the airwaves with doomy images of Ebola victims and Islamic terrorists, and accusing Democrats of doing nothing to secure America’s borders. Only in one race did this approach conspicuously ?op: New Hampshire, where a doom-mongering Scott Brown (previously a Republican senator in Massachusetts) failed to overcome local loyalties to the incumbent, Jeanne Shaheen. Above all, the Republican establishment nationalised the election. They made every race about Mr Obama, portraying even the most conservative Democrats as his lapdogs. In several states party leaders worked to block maverick Tea Party types from running under the Republican banner and harming the party’s national brand. Party leaders staged an intervention in Kansas to save Senator Pat Roberts, an unpopular 78-year-old incumbent who was in denial about his chances of being toppled by a businessman running as an independent, Greg Orman. Yet cracks in party unity could be seen even on election night, at a jubilant victory party in Louisville, Kentucky, home to the new top dog in the Senate, Mr McConnell. The senator, a canny and ruthless 30-year veteran of Congress, o?ered a nuanced vision of the next two years. Americans were sickofbig government and bossy federal bureaucrats, Mr McConnell said. But he defended limited government as a force for good, telling supporters: “I don’t expect the president to wake up tomorrow and view the world any di?erently than he did when he woke up this morning. He knows I won’t either. But look, we do have an obligation to work together on issues where we can agree.” After his win Mr McConnell swiftly pledged that a Republican Senate will not shut down the government or default on the national debt. Mr McConnell and Mr Obama have named areas for possible agreement: from tax reform to pursuing
The mid-terms (2): the House
An increased majority will make John Boehner’s job a bit easier
HEN the new members of the House of Representatives take their seats in January, the Republican side will look a little di?erent. The current contingent has no blacks and no gay people. The election of Mia Love, a black Mormon of Haitian descent, in Utah and Carl DeMaio, a gay policy wonk, in California will change that. Once Arizona’s second district ?nishes counting its ballots, Republicans may also have an answer to the Democrats’ rhetoric about the war on women, in the form of Martha McSally, a former air force colonel who was the ?rst American woman to ?y a combat mission. For the past two years John Boehner (pictured), the Speaker of the House, has struggled to control his boisterous caucus. The arrival of these and other congressmen, who together will give Republicans their highest total in the House since 1946, will strengthen his hand. Before the elec-
A man with a bigger majority
The Economist November 8th 2014 Statehouses and governors
United States 33
As he campaigned for other Republicans in October, Chris Christie, the governor of New Jersey, told reporters that he was “convinced that the next president of the United States is going to be a governor”. That now seems a little more plausible. Mr Walker’s re-election in Wisconsin—his third victory in four years—will cheer those who believe that his brand of unionbashing conservatism could put a Republican in the White House. Mr Christie’s own presidential ambitions will be bolstered by the fact that his frenetic campaigning paid o? (though a ?nal stop in Pennsylvania did not save Mr Corbett). For Democrats, the lesson is much less optimistic. Their loss in the Senate, painful though it is, comes in a year when the election map was dominated by the South and when many senators elected in the Democratic wave of 2008 were up: losses were to be expected. Most governors, however, are elected on four-year terms; the last time these states were fought was in 2010, when Democrats lost in huge numbers. That they lost yet more states this time, even trueblue ones, suggests that Republicans may genuinely have improved their image, even in places which soundly re-elected Mr Obama in 2012. For progressives who hope the Republican tide will turn in 2016, that is a frightening thought. 7
Even worse news for Democrats
BOSTON AND LANCASTER, PENNSYLVANIA
Republicans triumph at state level, too
T A rally in Massachusetts for Martha Coakley, the Democratic candidate for governor, a supporter con?ded to The Economist that perhaps Charlie Baker, her Republican opponent, would be better for the economy. That may explain why Mr Baker (pictured), a moderate Republican, managed to win even in one of America’s most Democratic states, following in the footsteps of Mitt Romney, who was a reformist Republican governor there before running for president. It also suggests that, for the Republican Party, the results of the governors’ races may be even more cheering than retaking the Senate. Before the election, polls suggested that voters would toss out several Republican governors. Yet they sacked only one, in Pennsylvania, where a uniquely bungling incumbent, Tom Corbett, lost to Tom Wolf, a serenely smiling local businessman. (Another Republican incumbent, Sean Parnell in Alaska, seems likely to lose to an independent, Bill Walker, when the count is ?nished.) Instead, the Democrats faced a rout—losing in several reliably blue states, including Illinois and Maryland as well as Massachusetts. States that the Democrats had hoped they might take—Florida, Wisconsin, Michigan and Maine—all stayed solidly Republican.
A Republican win in Massachusetts
themselves with Republican legislative chambers. In Colorado John Hickenlooper, who has passed strong gun-control measures, held on narrowly, but his party appears to have lost the state senate. In New York too, Republicans took the state senate despite the e?orts and money of New York City’s mayor Bill de Blasio. Losing so many states could well hurt the Democrats more than losing the Senate. After seizing a series of governorships and statehouses in 2010, many Republican governors pushed through ?ercely conservative policies. In Wisconsin Scott Walker barred public-sector workers from collective bargaining about matters other than wages. He also made them contribute more to their pensions and health insurance, as private-sector workers do. (Police o?cers, who tend to vote Republican, were partly excluded from the reforms.) In Kansas Sam Brownback slashed taxes and failed to get the accompanying spending cuts through the legislature, creating a large de?cit. Democrats hoped that voters would reject such conservative policies. The election results suggest that plenty of voters rather like them. One of the biggest casualties of the election may be the implementation of Barack Obama’s health-care programme. In Florida, for example, Charlie Crist, the Democratic candidate, had suggested he would push through an expansion of Medicaid which would have given 850,000 poorer people health insurance. He lost, and the re-elected Republican, Rick Scott, is less keen. In Arkansas, where a Democratic governor has retired, his Republican successor is not a fan of the state’s version of expanded Medicaid, and may yet repeal it with the help of the Republican legislature. Only Alaska’s independent o?ers any hope for expanding health coverage.
Fiscal policy after the mid-terms
The governance test
Painting the map redder The result is that, although America remains gridlocked at the federal level, at state level Republicans are in charge, says Tim Storey, a political scientist at the National Conference of State Legislatures. Republicans now control 29 state legislatures, holding both chambers—two more than they did, and the most they have since the 1920s (see table). Several Democratic governors who were re-elected now ?nd
Modest, though not radical, budget goals are within the Republicans’ reach
The states of play
Likely results as of November 5th State Legislatures Republican Democrat Split* Governors Republican Democrat Independent 33 16 1 Control 29 11 10 Gain/Loss +2 -8 +6 Gain/Loss +4 -5 +1
*Including Nebraska, which has a unicameral legislature Sources: AP; National Conference of State Legislatures
F THE many reasons Congress is scorned, ?scal policy tops the list. Since Republicans took control of the House ofRepresentatives in 2010 bitter battles with Senate Democrats and Barack Obama produced a near-default on the national debt, a white-knuckle ?scal cli? and a 16-day government shutdown. Now that Republicans also control the Senate, they have a chance to improve on that record. Their ?rst test comes quickly. Most of the federal government is operating on a temporary “continuing resolution” until December 11th. Without an extension, the government will shut down again. Given the beating their image took last time, Republican leaders are unlikely to want a repeat. They are more likely to seek a deal with Democrats, who control the Senate until the end of the year, to extend it at least until April, when Congress is supposed to pass a budget resolution. That resolution lays out broad guidelines for how much the government may spend and tax. Congress hasn’t passed one 1
34 United States
The Economist November 8th 2014
which Republican candidates, all of them either opposed to or ambivalent about a higher minimum wage, won Senate seats. As the Democrats’ grip on Congress and statehouses has loosened, ballot initiatives are among the few things left for liberals to smile about. Of the ballot initiatives that passed, California’s prison-emptying measure may be the most signi?cant. As well as from Jay Z, support came from Newt Gingrich, a Republican who in a di?erent era advocated the death penalty for some drug smugglers. It is the second ballot initiative to pass in California intended to ease overcrowding in the state’s many prisons: in 2012, voters also chose to loosen the state’s controversial three-strikes law (which was itself approved by ballot in 1994). That Californian voters, admittedly a liberal bunch, are willing to vote to go easier on o?enders suggests that now crime has fallen, the growth of its prison population may begin to reverse too. In Washington state, campaigners chalked up a victory for gun control. A measure which requires a background check for all gun sales—including private sales and sales at gun shows—passed with 60% of the vote. A rival proposal, which would have banned many background checks and was supported by the NRA, failed—though by a smaller margin, suggesting that at least a few voters opted for both. Support from Bill Gates helped: his foundation gave $1m to the group advocating the change. Not all was great news for liberal campaigners hoping to bypass politicians. In Nevada, a proposal to tax businesses to pay for an increase in education spending—the state’s rapidly-expanding schools are badly underfunded—was soundly defeated. Unsurprisingly, businesses opposed to the measure put up more money than teachers’ unions. But social conservatives, whose in?uence dominated ballot initiatives in the 1990s and 2000s, had a harder time too. Colorado’s proposed amendment to de?ne a fetus as a person—with the aim of banning all abortions in the state—was defeated for a third time. So too was a similar amendment in North Dakota. (Had either passed, the courts would have struck them down.) Only in Tennessee did a pro-life effort succeed: there, voters amended the state constitution to give politicians more power to limit access to abortion. Initiatives are less common than they were—around 150 this year, down sharply since the 1990s. Campaigns are costly, and it costs more to put them on the ballot in the ?rst place—states have learned from California’s experience that too many ballots can lead to contradictory results, such as votes for higher spending and lower taxes. Still, if gridlock continues in Washington, DC, expect more direct democracy. 7
A must-do list
Issue Avoid government shutdown Tax breaks Budget Highway Trust Fund Debt ceiling
Sources: Goldman Sachs, press reports
Task ahead Congress must renew funding by December 11th or else Expired last January, awaiting retroactive renewal Senate, House should agree on one by April 15th 2015 Running low, must be reauthorised by May 2015 Must be lifted sometime between August and November 2015
2 since 2010, largely because the Republican
House and Democratic Senate have been ideologically too far apart. Once Republicans control both chambers, they can use the resolution to instruct key committees to rewrite the laws governing taxes and entitlements such as Obamacare and Medicare (health care for the elderly) through a process called reconciliation. Provided those changes reduce the budget de?cit, a reconciliation bill could not be ?libustered by the Democratic minority in the Senate because it only needs 51 votes, not the usual 60; though Mr Obama can still veto it. Republicans will be tempted to use reconciliation to advance long-standing goals such as tax reform, the repeal of Obamacare and an overhaul of Medicare. Yet for practical reasons, they may not try. Mr Obama would veto such sweeping changes. Many Republican senators are running for re-election in Democratic-leaning states in 2016 and don’t want to cast politically costly votes with nothing to show for it. “Nobody likes to do anything perceived as reducing Medicare spending,” says Judd Gregg, a former Republican senator who tried. As a result, Republican leaders may pursue more modest goals—such as repealing an unpopular tax on medical devices—which could attract a few Democratic votes and avoid Mr Obama’s veto. Republicans will also have to decide whether to keep in place the “sequester”, hard caps on discretionary spending such as defence, government operations and education (but excluding entitlements) that last to the end of 2021. The two parties agreed to raise the cap modestly last year, but that deal expires next September. Thereafter defence spending is projected to fall to 2.7% of GDP, the smallest since 1940, and other discretionary spending to 2.5%, the lowest since the 1950s. Republicans would like to raise the caps on defence spending, but that would need some Democratic votes in the Senate and Mr Obama’s signature. They will get neither without raising the caps on domestic spending. The more likely result, then, is no change, at least until 2016. Circumstances could push Mr Obama and the Republicans together on several fronts. Republicans could give the president “fast-track” authority to strike foreign trade deals. Highway construction and disability bene?ts are both ?nanced by trust
funds that are almost out of money; that could spur modest ?xes to both. Mr Obama and Republicans also agree on the broad goals of corporate tax reform: a lower top rate and fewer loopholes. Mr Obama and Republican leaders spoke of co-operation on trade and taxes the day after the election. But they do not trust each other. And Republicans are far from united. Mitch McConnell, the new Senate leader, could be stymied by a handful of conservatives led by Ted Cruz of Texas. They may insist that any budget bill must end Obamacare (though Mr Cruz has said he might settle for repealing bits of it), or refuse to raise the statutory debt limit, raising the spectre of arbitrary cuts to federal payments or default on the national debt. Republicans must avoid such calamities to prove they can govern. Otherwise, as their majority leader in the House, Kevin McCarthy, predicts, “There won’t be a Republican president in 2016.” 7
A little liberal comfort
LOS ANGELES AND WASHINGTON, DC
Better news for progressives on ballot initiatives
ILL rappers be the saviours of progressive politics? An unlikely idea, but whereas Democrats lost almost everywhere on November 4th, in California, the state’s voters enthusiastically passed Proposition 47, which reduces penalties for some criminal o?ences to misdemeanours. That was supported by Jay Z, who spoke out in favour of the measure on stage with his wife Beyoncé in August. In Alaska, meanwhile, fans of Snoop Dogg have a concert to lookforward to: in September he promised he would perform in the state if it voted to legalise the recreational use of cannabis. The voters duly obliged. Reassuringly, the in?uence of Mr Z and Mr Dogg may be overstated. Voters in Oregon also opted to legalise pot smoking even without the o?er of a concert. Alaskans also voted to raise the minimum wage, as did people in Arkansas, Nebraska and South Dakota. Those are all states in
The Economist November 8th 2014 The Supreme Court
United States 35
Is a ?sh like a document?
The funniest campaign ads
Of bridal dresses and sweatshirts
Politicians are not comedians, but some try
.D. WINTEREGG, a primary challenger to John Boehner, the Speaker of the House, released a pastiche of an ad for erectiledysfunction pills. A narrator explains “electile dysfunction” thus: “It could be a question of blood ?ow. Sometimes, when a politician has been in DC too long, it goes to his head and he just can’t seem to get the job done.” The ad goes on to say: “If you have a Boehner lasting longer than 23 years, seek immediate medical attention.” Politicians use humour to wake voters up, and sometimes it works. No one had heard of Joni Ernst before she mentioned castrating pigs, in her youth, as proof that she would know how to cut pork in Washington. This week she was elected to the Senate. Rob Maness, an unknown conservative running for Senate in Louisiana, tussled with an alligator on ?lm, winning himself enough votes to force the other two candidates into a run-o?. Young supporters of Republican Governor Rick Scott in Florida spoofed “Say Yes to the Dress”, a reality show about picking a bridal gown, in an ad called “Say Yes to Rick Scott”. Mr Scott’s Democratic opponent, sleekly grey Charlie Crist, was the “expensive and a little outdated” frock— the one recommended by your annoying mother—while Mr Scott was the perfect dress. Some voters found this patronising, but Mr Scott won anyway. Some candidates engage in the Washington equivalent of rap wars, taking their rival’s words and ?inging them back with a beat and a curse. Supporters of Senator Mitch McConnell in Kentucky took a quote from a previous campaign by his oppo-
nent, Alison Lundergan Grimes, in which Ms Grimes’s grandmother asked: “What rhymes with Alison Lundergan Grimes?” Mr McConnell’s ad gave three musical answers: “Not ready for prime time”, “Leftwing mime” and “Sticks to the party line”. Mr McConnell won by 15 points. In Michigan, the scene of a particularly nasty Senate campaign, two humorous ads stand out. In one, Terri Lynn Land, a Republican, says of her Democratic opponent: “Congressman Peters and his buddies want you to believe I’m waging a war on women. Really? Think about that for a moment.” Then some jolly music plays as she sips co?ee and looks at her watch. After a long silence she says: “As a woman, I might know a little more about women than Gary Peters.” Not to be outdone, Mr Peters recruited his family to persuade voters that he is not a traditional tax-and-spend Democrat. In an ad called “Frugal” his wife complains: “I wouldn’t call him cheap, but our washing machine is older than the kids.” Mr Peters ends the ad wearing a ratty sweatshirt and a shoe with a hole and bragging that his family “did this ad for free”. He won. Making people giggle does not always prompt them to vote for you. A Washington State University study of political ads found that frightening negative ones work better, especially when a candidate is behind. Mr Winteregg’s ad has generated nearly 418,000 views on YouTube, but Mr Boehner still clobbered him in the primary. And the ad cost Mr Winteregg his teaching job at a Christian university. Some people have no sense of humour. 7
HEN Congress passed the Sarbanes-Oxley Act in 2002, after the Enron scandal, its target was big corporate fraud, not small ?sh. Yet in 2011 the law banning document-shredding sent John Yates, a ?sherman, to jail. On November 5th the Supreme Court considered whether Mr Yates should have been charged under this law, which carries up to a 20-year prison term, for tossing undersized grouper into the sea. The crime that spawned Yates v United States took place in 2007. A Florida o?cial found that 72 red grouper on Mr Yates’s boat were an inch or two shy of the 20-inch minimum. Mr Yates received a citation and was ordered to bring the o?ending ?sh to shore the next day. Instead, the government claims, he asked a crew member to toss them overboard and replace them with bigger ?sh. The government’s lawyer insisted that when the law condemns anyone who “knowingly...destroys...or makes a false entry in any record, document, or tangible object” to impede a federal investigation, tangible objects include ?sh. Mr Yates’s lawyer urged the justices to interpret the term in context. Mr Yates’s supporters see the case as part of an epidemic of overcriminalisation in America. Justice Antonin Scalia seemed to agree. “What kind of a mad prosecutor would try to send this guy up for 20 years?” he asked. The government hu?ed that Mr Yates had concocted a “cover-up scheme” and had lied to law-enforcement o?cers. Chief Justice John Roberts was unconvinced: “You make him sound like a mob boss or something.” The justices will hook a decision by next June.
36 United States
The Economist November 8th 2014
Lexington A big win for John Kasich
Ohio’s Republican governor puts results ahead of ideological purity Chris Christie in New Jersey and Rick Scott in Florida, he is one of a clutch of Republican governors, elected in battleground states that voted for Mr Obama in presidential elections, who then turned round, cut spending and picked ?ghts with public-sector unions. Back in 2011—when 62% of Ohio voters rejected Mr Kasich’s plan for union curbs in a crushing referendum defeat—he seemed the weakest of that pack. But Mr Kasich learned from that debacle, taking pains to build broad coalitions for subsequent reforms. This has served him well. His more purist peers, such as Mr Walker and Mr Scott, also won this week—it was that kind of an election—but by much thinner margins. As for Mr Christie, he ?nds himself struggling to defend the ropey condition of New Jersey’s ?nances. As the dust settles, Mr Kasich looks like a champion for pragmatism. Not all on the right like Ohio’s 2014 take on compassionate conservatism. Mr Kasich is under ?re for accepting federal money to expand Medicaid, a government health scheme for the poor— both because it is a form of socialised medicine and because the expansion is part of the Obamacare health law (which Mr Kasich says he opposes as a “top-down” scheme that chills business investment and fails to control costs). Conservatives were indignant when Mr Kasich defended his actions as rooted in religious duty, complaining that he was calling them un-Christian. Mr Kasich does not duck the ?ght. His critics seem to feel “guilty” about something, he ventures. He is unmoved by the charge that he cannot claim to oppose Obamacare as a whole while using one part of it. Why not, he asks? Sometimes “practicality” trumps the qualms of somebody who “lives in an ivory tower”, he says. Ronald Reagan expanded Medicaid, he notes. Theodore Roosevelt achieved great things: “Was he doctrinaire?” Looking for what works Ohio’s governor is more interested in conservative ends than means. Aides researched the idea of creating private health-insurance for the poorest, for instance, but concluded that government control (ie, Medicaid) would be cheaper. Such pragmatism chimes with voters’ preferences. Many in Ohio, as elsewhere, resent Obamacare as a form of mandatory redistribution, from the solvent and healthy to the sick and hard-up. Yet a majority backs public health cover for the very poorest. It is “cool” that the governor expanded Medicaid, enthuses Everett Woodard II, a voter at a rally near Toledo who supports both Mr Obama and Mr Kasich. Society should support those who are “in need, but who aren’t trying to milk the government”, says Mr Woodard. Mr Kasich’s cruise to re-election has involved some luck: the campaign of his Democratic opponent imploded after a series of ga?es. But political luck rarely occurs in a vacuum. Had the governor looked vulnerable, he might have drawn a stronger rival. Mr Kasich is no centrist. He opposes abortion and gay marriage and has cosied up to the National Ri?e Association. He approved a Republican-friendly gerrymandering of Ohio’s congressional districts. He can be curmudgeonly: at a Dayton rally he started fretting about young children who call parents by their ?rst names, citing this as a symptom of national decline. But Mr Kasich’s pragmatism outweighs his ?aws. He tries to do what works, not what will win him a standing ovation from conservative purists. Unlike many Republicans, he sought a positive mandate from voters this week—and he won it triumphantly in Ohio, the ultimate bellwether state. The crowded Republican ?eld for the White House in 2016 surely has room for him. 7
HAT is conservatism for? In the election campaign just past, too many Republicans ignored that question. Instead they went negative, harnessing the anger of voters who feel that America is going to ruin and have no faith in President Barack Obama. Senator Mitch McConnell ofKentucky, the canny Republican who will now lead the Senate, boiled down his pitch to a yell of revolt against Democrats as eco-warriors, liberal zealots and government bullies. Further distilled to ?t on McConnell campaign bumper-stickers, this became: “Coal. Guns. Freedom.” North of Kentucky in the swing state of Ohio, the Republican governor, John Kasich, secured re-election on November 4th with much duller bumper-stickers, bearing such slogans as “Kasich works.” No matter. He won by a staggering margin of 31 points. Mr Kasich, who is 62, is proud of his conservative achievements: balancing a budget that faced an $8 billion shortfall when he took o?ce in 2011, cutting taxes and red tape to boost job-creation. He is prouder still of what prosperity enables him to do. In the governor’s telling, conservatism must have a moral purpose. Republicans should celebrate those who are successful— Americans do not hate the rich, they want to join them, he likes to say, quoting his late father, a postman. Conservatives should encourage those already on their way (he enthuses about job-training schemes and school reforms, and notes that Ohio is trying to steer more state contracts to non-white entrepreneurs). Lastly, a prosperous state should use its resources to help the weak—those who, in a favourite Kasich phrase, “live in the shadows”, including the mentally ill or drug addicts. He has worked to keep minor o?enders out of prison and to help ex-inmates ?nd jobs. In a string of pre-election rallies he spent no time attacking Mr Obama—an extraordinary omission for a Republican. Instead he urged his fellow Republicans to canvass Democratic relatives and friends (at a rally near Lima this drew a “pshaw” of disdain from one activist). Mr Kasich can sound positively preacher-like, declaring: “When you die and go to heaven, I don’t know that St Peter is going to ask, did you balance the budget? He is probably going to ask what you did for the least of those [around you].” The governor’s instincts remain thriftily conservative. As a member of Congress in the 1990s he spent years working towards a balanced federal budget. Along with Scott Walker in Wisconsin,
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The Economist November 8th 2014
Also in this section 39 Colombia’s Paci?c coast 40 Bello: A test of Mexican mettle
For daily analysis and debate on the Americas, visit
The United States-Canadian border
Undefended no more
DERBY LINE, OTTAWA and VANCOUVER
Violence in Ottawa has thickened a once-seamless border, souring the mood on both sides
N THE Haskell Free Library and Opera House, which straddles Quebec and Vermont, you can watch a show with one foot in Canada and the other in the United States. Built at the turn of the last century, when both countries boasted about the world’s longest undefended border, the cultural centre was created for Derby Line, Vermont, and Stanstead, Quebec. Nancy Rumery, the librarian, says the towns were a “single community that just happened to have an imaginary line drawn through it.” Al-Qaeda’s September 2001 attacks on America put paid to that. You can still park in Canada and walk across the border to the front door. But now American o?cials watch to make sure you go back the same way. Elsewhere in the twin towns, movement has been curbed; gates have turned streets into dead ends. Although Derby Line and Stanstead share water and sewer-
age systems and a Rotary Club, they are no longer one community, says Brian Smith, a local politician. Many locals hesitate to cross the border to shop, worship or see friends—for fear of being detained and ?ned, as befell a local pharmacist who did not report to customs when he crossed over to get a pizza. “It’s not like it used to be,” says Mr Smith. The attack in Ottawa last month by a lone gunman, who killed a Canadian soldier and stormed parliament, seems likely to make matters worse. Although there is still uncertainty about the motives of the gunman, Michael Zehaf-Bibeau—possibly a deranged outcast, possibly a religious extremist—the United States is reviewing security along the 5,525-mile (8,890km) line which separates the two countries (including the Alaskan land border). After meeting his Canadian counter-
part in Ottawa in the wake of the attacks, John Kerry, the United States secretary of state, was euphemistic but ?rm about the need to tighten up. He voiced con?dence that the two countries could come up with “some tweaks, some changes, some additions that will promote even greater security than we have today.” It is debatable whether more security on what Senator John McCain recently called the “porous” northern border really will make Americans much safer from terrorism. But it seems hard for politicians to shake o? the habit of Canada-bashing. Both Mr McCain and Hillary Clinton (in 2004) have stated, wrongly, that the 9/11terrorists entered American territory through Canada. An article on the politico.com website last month (before the Ottawa shootings) had the headline: “Fear Canada: the real terrorist threat next door”. What is more certain is that “tweaks and changes” will impede economic exchanges between two countries who are each others’ largest trading partners; and they may further fray social relations between once-friendly neighbours. Nik Nanos, a pollster who has tracked cross-border attitudes for a decade, says Canadians and Americans still like each other but have lost enthusiasm for further co-opera- 1
BRITISH COLUMBIA Vancouver Abbotsford A L B E R TA
O N T A R I O
MANITOBA NORTH DA KOTA SOUTH DAKOTA MINNESOTA
WASHING TON M O N TA NA OREGON IDAHO
MAINE NOVA Stanstead SCOTIA Ottawa Cornwall Derby NEW Line Cornwall HAMPSHIRE Island MASSACHUSETTS VERMONT WISCONSIN NEW YORK MICHIGAN RHODE ISLAND CONNECTICUT NEW JERSEY ILLINOIS INDIANA OHIO
CALIFORNIA NEVADA UTAH
New York PENNYSLVANIA
AT L A N T I C OCEAN
The Economist November 8th 2014
The Americas 39
bear spray. Neither proved necessary. Canada has assuaged some American concerns—by arming 5,685 customs o?cers; agreeing to joint patrols on the Great Lakes; and helping to form teams that include coast guards, border agencies and police from both countries. By one estimate, Canada spent an additional C$92 billion ($77 billion) on security in the ten years after 9/11. On November 4th it announced a new surveillance web, with radar, ground sensors and thermal radiation detectors, along 700km of the border. Yet while the United States sees the border through the lens of security, Canada thinks of bilateral trade worth $2 billion a day. Businesses of all kinds moan that stringent procedures depress activity. Costs rise when lorries have to queue for hours to be inspected several times over. Although border security is not the only factor, Canada’s share of trade in the United States has stalled since 2001 (see chart). The near-quadrupling of North American trade in the ?rst 20 years of the 1994 North American Free Trade Agreement largely concerned the United States and Mexico. (The value of United States trade with Canada tripled over the period, while that with Mexico grew more than sixfold.) In the wake of the Ottawa shooting, Canadian businesses fear an overreaction, says John Manley, who heads a group representing the country’s largest ?rms. A shopping centre on Cornwall Island in the Canadian bit of Akwesasne, a piece of land set aside for the Mohawk people, shows how changing regimes harm small businesses. When the Mohawks objected to the arming of Canadian guards, Canada moved a customs post north to the mainland. This left the mall in no-man’s-land. Travellers from the United States are now told not to stop until they reach Canadian customs. The change has cost the mall’s sports store C$50,000 a year and has made some units unrentable. Canada and the United States have made periodic e?orts to ease the ?ow of goods and people: some cargo clearance has been moved away from the border, and American customs o?cers now work in some Canadian airports. Beyond the Border, a plan launched with fanfare in 2011 by President Barack Obama and Stephen Harper, Canada’s prime minister, aims to create joint perimeter security. But work on aligning standards and rules has been sporadic. Every resumption, such as a meeting last month in Washington, DC, is hailed unconvincingly as a new start. While Canada is keen, the other side lacks the will for a sustained push. Coolness between Mr Obama and Mr Harper hardly helps. Ms Rumery, the librarian at that cultural centre on the border, could see her nightmare come to pass—users having to clear customs to get through her door. 7
No longer leaping
Canada’s trade* with the United States
Goods and services, C$bn
Colombia’s Paci?c region
800 600 400 200 0 1990 95 2000 05 10 13
Source: Statistics Canada *Exports and imports
More than perfume, please
The poverty-stricken Paci?c eludes attempts to improve it
2 tion, most notably on terrorism.
Unlike the turbulent border with Mexico, the northern frontier usually gets little attention in the United States. It “just doesn’t squeakas loud as the southern border,” says Paul Frazer, a consultant on diplomatic a?airs. Jeh Johnson, homeland-security secretary in the United States, gave a speech on “Border Security in the 21st Century” last month in which the only allusions to Canada were about the 1920s. Illegal immigration, which haunts American relations with Mexico, is less of a concern in Canada’s case. Of the 420,789 people apprehended by America’s border patrol in 2013, 98% were caught on the country’s south-western edge. On the northern side, guns and drugs are the big worry, says Jose Acosta, an American patrol o?cer who knows both frontiers and now works near Abbotsford, British Columbia. “We have Ecstasy, meth and marijuana coming south,” he says. “Canada gets illegal aliens and guns going north.” Mr Acosta often sees guns and drugs hidden in vehicles or on persons heading into Canada. But for anyone who knows the southern border, “it’s pretty quiet here.” Still, comparisons with Mexico can understate the di?culty of policing a line which runs through remote spots like the hills of Montana and Alberta (pictured) and four Great Lakes. There has been a rise in security measures since 2001. The number of American border agents looking atCanada seems paltry, at about 2,200, compared with 18,600 dealing with Mexico; but the former ?gure was only 340 in 2001. Since that time the United States has also added aircraft with sensor arrays, thermal cameras, video surveillance and unmanned aircraft to watch remoter areas. Aaron Heitke, deputy chief patrol agent in Montana, says that when he started 13 years ago his main item of equipment was binoculars. Now, in addition to his weapon, he has a radiation detector, night goggles and thermal imaging. Perfect security is impossible. Ross Finlayson, a member of a globe-trotting club, trekked through wild terrain from Montana to Canada last summer, bringing a passport and some anti-
OR decades, Colombia’s masters have told the world, and their own citizens, that they cherish being a Paci?c power— and they truly want their poor Paci?c region to catch up with more vibrant places, for example on the Caribbean coast. Getting anyone to believe that is harder. The latest rallying cry was sounded in the port of Buenaventura by President Juan Manuel Santos on October 25th. He unveiled new details of a $400m development strategy for the Paci?c coast, including a pledge of $12m to provide drinking water for every resident of the city. Admitting that people had heard all this before, he vowed: “This time...it is not a strategy that comes from the capital...it will be implemented and supervised from here.” Yet as Colombia booms—the central bank forecasts growth at 5% for 2014—the Paci?c part lags. In Buenaventura, the country’s second biggest container port, huge ships sail past wood-slat houses where taps ?ow for three hours a day at most, children are ill-fed and violence is rife. Unemployment in the port exceeds 40%, and elsewhere in the forested, mountainous region things are worse. Governments have tried to help. Over the past 40 years there have been master plans, policy papers and road maps. Some focus on infrastructure, some on ecology, others on poverty. But they tend to peter out. That is despite the fact that in foreign policy, Colombia holds dear its status as a Paci?c nation. It has dreamed for two decades of joining the Asia-Paci?c Economic 1
A grim view of the ocean
40 The Americas
2 Co-operation forum, whose members ac-
The Economist November 8th 2014
the area’s biodiversity, says Luis Gilberto Murillo, a man from Chocó whom Mr Santos has asked to head the latest initiative. But there is mistrust between Paci?c residents and the capital. National powerbrokers balk at letting light-?ngered local authorities handle funds. A provincial assembly member from the country’s north was banned from politics by Colombia’s inspector-general for 13 years after voicing these suspicions in a way deemed racist; he said, in 2012, that “investing money in Chocó is like putting perfume on a turd.” Meanwhile Paci?c locals resent plans made in Bogotá. “The plans aren’t for us, they are for big businessmen,” says Mario Riascos, a community leader in Buenaventura. Acceptance by residents is crucial, as 84% of land in the Paci?c region is subject to collective-title rights granted to black and indigenous groups. The introduction of such rights in 1993 were seen as a triumph for the poor, but business leaders say it hurt growth. A port manager in Buenaventura says it makes life much harder for ?rms needing access to land. Already the grand plan sounds hollow to some. On November 4th Buenaventura residents protested because some districts have had no water for ten days. 7
count for 63% of its trade and 50% of foreign investment. And Colombia founded— along with Mexico, Peru and Chile—the Paci?c Alliance trade group which has slashed tari?s. As part of the latest Paci?c plan, authorities have dusted o? old projects, including one for a pipeline and a railway to stretch from oil?elds in the east to Buenaventura. Another calls for a “corridor” to link the Caribbean and Paci?c by river and road through Chocó province. Such plans need to o?er economic gains for ordinary folk and protection for
Bello A test of Pe?a Nieto’s mettle
The president pays the price of downplaying Mexico’s security problems
T LUNCHTIME on Sunday November 2nd a group of students, some of them masked, “liberated” the toll booths on the motorway connecting Mexico City and the nearby city of Toluca. Your columnist, along with other queuing motorists, was peremptorily ordered to make a “voluntary contribution in solidarity with Ayotzinapa”. Neither motorway sta?nor police were anywhere to be seen. Daily protests, some as anarchic as that one and some massive, continue six weeks after Mexico was horri?ed by the disappearance of 43 trainee teachers from a college in Ayotzinapa, in the southern Mexican state of Guerrero, and the killing of six other people. The hijacked buses in which the students were travelling were intercepted by local police in Iguala, a nearby town, on the orders of its mayor, José Luis Abarca, and his wife, who are alleged to be leaders of a drug ma?a and were arrested this week. Mexico has grown used to violence since the ex-president, Felipe Calderón, declared war on drug gangs in 2006. In the maelstrom Mr Calderón unleashed, some 22,000 people have disappeared, many of them o?cially said to be criminals. But the fate of the Ayotzinapa students caused outrage on a scale not seen for decades, for three reasons. First, the missing students are not anonymous victims. As Héctor Aguilar Camín, a writer and sociologist, points out, “22,000 disappeared is a statistic; 43 with names and families is a humanrights crisis.” Second, although the Ayotzinapa students had a history of lawless protests and possible links with a criminal gang, this was no settling of scores among drug tra?ckers. Rather, their apparent executioner (assuming they are dead) was the local state. The third reason for outrage is that this
human-rights crisis has left the government of Enrique Pe?a Nieto, Mr Calderón’s successor, seemingly paralysed—as absent as those toll-booth sta?. Mr Pe?a dispatched federal police to Iguala; they have disarmed the local police in 17 nearby towns. But extraordinarily, he has yet to go there himself; a month passed before he met the grieving families. In almost two years in o?ce Mr Pe?a, of the centrist Institutional Revolutionary Party (PRI), has pushed through a radical programme of structural reform of Mexico’s hidebound economy. With economic growth starting to tick up after a weak spell, o?cials were in bullish mood. In securing a pact with the opposition to enact his economic reforms, Mr Pe?a showed himself to be a skilled political tactician. In several meetings with him, Bello has been impressed by the president’s political discipline—he and his senior o?cials always stick rigorously to the script. Events have suddenly torn up that script, and the government ?nds itself facing a radically di?erent political agenda. This starts with security, justice and the rule of law—issues that Mr Pe?a had
sought to play down. His security policy stressed the role of state police forces. Yet Mexico’s 32 states include several failed ones, such as Guerrero. The overlap between politics and organised crime in many parts of the country is an open secret. Guerrero’s governor, ?ngel Aguirre, a PRI stalwart before he switched to the leftof-centre opposition, has resigned over Iguala. He is alleged to have received money from the Abarcas, though he denies this. If he is to regain the initiative, Mr Pe?a will have to bring to justice political bosses known to be corrupt. “We have to rethink, about the police and about access to justice,” says a senior o?cial. “Structural changes” are needed, he adds, but they should not be rushed in response to media or social pressure. The government seems to think that if it resolves the Iguala case, pressure will ease. It may be underestimating the depth of public concern over security. This week, in a belated reaction to Iguala, the president urged the opposition to join him in a pact for the rule of law. To critics, this seems an evasion of responsibility. Mr Pe?a governs through a small group of bright young technocrats, with old-time PRI stalwarts in security jobs. Though it is not in the president’s nature to go outside his coterie, his government would be boosted by a more substantial ?gure as interior minister, with the freedom to act. The obvious candidate is Manlio Fabio Beltrones, a leader of the PRI in Congress. If he can react to events, change strategy and command the new political agenda, Mr Pe?a will have shown himself a far more substantial politician than he now looks. Respond too slowly, and he may lose the initiative for his remaining four years in o?ce—and the credibility he needs to pursue his economic reforms. 7
The Economist November 8th 2014 41 Also in this section 42 Pakistan and India 44 Domestic politics in South Korea 44 East Asian ?rms in China 45 Kazakhstan’s spaceport 46 Banyan: Healing a wounded country
For daily analysis and debate on Asia, visit
Japan and Abenomics
Riding to the rescue
The prime minister has been given an opening. Will he take it?
HEN the Bank of Japan (BoJ) moved unexpectedly on October 31st, the effect was to galvanise the world’s ?nancial markets and, at home, to breathe new life into Shinzo Abe’s programme to pull the country out of de?ation. The scale of the central bank’s action—it will print money to buy ?80 trillion ($698 billion) of government bonds a year, equivalent to 16% of GDP—directed politics away from a string of distracting cabinet scandals. Mr Abe’s plans for the economy had been ?agging. A rise in the consumption (value-added) tax in April had prompted an alarming drop in spending by consumers. The ?rst shoots of in?ation started to retreat. Having climbed to 1.5% in April, core in?ation fell to 1% in September—far o? the 2% target that the central bank had said it would achieve by the spring of 2015. Meanwhile, some spread rumours that a conservative old guard at the central bank was regaining sway and could block Haruhiko Kuroda, its governor, from ful?lling his promise to do “whatever it takes” to rid Japan of de?ation. As it was, Mr Kuroda only narrowly won consent for the bank’s move. On October 31st four of the board’s nine members voted against expanding quantitative easing. That lack of consensus caused almost as much of a stir as the easing itself. Yet the BoJ’s move strengthens another consensus among Japan’s policymakers,
which is that Mr Abe will soon be obliged to press ahead with a second rise in the consumption tax, next October, from 8% to 10%. Mr Abe has to decide by the end of this year if he is not going to, in order to introduce legislation to stop the hike. After a dreadful second quarter, when GDP shrank by an annualised 7.1%, many of Mr Abe’s economic advisers are convinced that the initial rise was a mistake. A battle is on between the ?nance ministry, which is pushing for the increase to deal with Japan’s ballooning public debt, and the prime minister’s o?ce, which leans towards altering the timetable. Akira Amari, the key minister for economic reforms, seems to favour sticking to the timetable. In reality, argues Gerald Curtis of Columbia University, the radical action taken by Mr Kuroda, a staunch advocate of a hike in the consumption tax in order to maintain the country’s ?scal credibility, may have removed most ofthe prime minister’s political leeway for postponing one. Mr Abe is likely to make his decision after ?nal GDP ?gures for the third quarter are released in early December; a closely watched preliminary estimate comes out on November17th. The problem with an increase in the consumption tax is that it hits the very people who need to spend more. In similar fashion to America or Europe, quantitative easing has bene?ted big businesses and
wealthy individuals owning shares or property in Tokyo and a few other big cities. But ordinary Japanese, notably in the regions that are emptying of people, feel left behind. Support for Abenomics is slipping as more people feel there is little in it for them. As well as the rise in the consumption tax, households have had to contend with higher prices from a weaker yen, notably higher energy and fuel costs. At least these have fallen in recent weeks as global demand for oil has weakened. It is one reason Mr Kuroda felt able to act by loosening policy further. The yen weakened immediately. The news that the government pension fund will double its holdings of equities, including foreign ones, has also helped drive down the yen even as it has boosted stockmarkets. In all the excitement over monetary easing, the part of Mr Abe’s programme to do with structural reform has gone mostly unmentioned. The government has at times dangled the prospect of impressively bold reforms, such as allowing ?rms to ?re permanent workers in return for severance pay while also making the employment of Japan’s millions ofworkers on non-permanent contracts more secure. In some areas, good progress on such reforms is being made, in particular over the participation of women at work. Some 820,000 women have joined the workforce since Mr Abe came to o?ce in 2012. The government will oblige large companies to publish ?gures on the number of women on boards. Two-?fths of career civil servants hired this year were female, a sizeable jump. The hope is that the scandals around the resignations last month of two women cabinet ministers, following minor ?nancial misdeeds, will not prove too severe a setback to the government’s campaign to better the lot of working 1
The Economist November 8th 2014
leader for decades. Now he is diminished. Even close supporters fret that his main achievement will be the modest one of keeping himself in the job. Three problems weigh him down. First, failure on economic and social matters. In?ation, electricity brownouts and the absence of free-market reforms mean incomes are hardly rising and growth is elusive. A wealthy ex-backer says he is disillusioned by Mr Sharif’s incompetence as a manager. The prime minister is prone to wasteful populism: the dishing out of laptops and a part-built “metro bus” project linking Islamabad and Rawalpindi. Polio experts condemn his government’s feeble e?orts against the disease given that Pakistan is home to four-?fths of all polio cases. A second di?culty is India. Mr Sharif made better relations a priority, hoping that trade and co-operation would boost the economy. Polls show three-quarters of voters agree. Better ties would weaken the army’s claim that India is an existential threat, an argument long misused to justify excessive military spending and army control of foreign and security policies. ? Mr Sharif’s bad luck is that his Indian counterpart will not co-operate. Narendra Modi, India’s nationalist prime minister, judges that his own public wants a muscular policy towards Pakistan. He scrapped peace talks in August and gave the Indian army a freer hand on the disputed border in Jammu and Kashmir. That led to the worst violence in a decade. Matters might ease after Mr Modi’s Bharatiya Janata Party has contested assembly elections in Jammu and Kashmir in December. Otherwise Mr Sharif’s olive branch will remain spurned. Third, Mr Sharif has been hurt by months of protests led by Imran Khan, a demagogic ex-cricketer. These had fallen quiet, but Mr Khan pledges a big march on November 30th in Islamabad. He wants to force Mr Sharif out in favour of new elections or rule either by army-backed technocrats, or himself. Though Mr Sharif should hang on—most in parliament support him and the army looks unready to suspend democracy—Mr Khan is a distraction. It is not that Mr Khan is widely popular. Polls suggest that 18% of voters back him— the same share as he got in the 2013 election. He excites young supporters. But his national appeal is waning. A year ago many who backed Mr Sharif would have picked Mr Khan as a second choice, but no longer. He is charismatic, but shows little capacity for compromise, essential for in?uence in a parliamentary system. Nonetheless Mr Khan weakens his rival, especially in dealing with the army. Early in o?ce, says one person close to the prime minister, Mr Sharif would not consult the army on any policy. As recently as May, say foreign-policy advisers, Mr Sharif decided alone that he would attend Mr Modi’s inauguration. And Mr Sharif insisted on prosecuting Pervez Musharraf, a former dictator on trial for treason. Such dominance is gone. “The army has gained as Nawaz is weaker” sums up Hasan Askari-Rizvi, a security analyst in Lahore. And he may get weaker still when the special court trying Mr Musharraf rules, on November 21st, whether other defendants—senior army men—should also be tried. If it does, the “army will hit the roof”, says a political commentator. Can Mr Sharif avoid an open rift with the army? He insists the trial will go ahead and resists giving up on running foreign and security policies—though he must now negotiate on these with the army’s leaders. Yet with both the court hearing and Mr Khan’s new protests due within weeks, November will be a trying month. Mere survival will be an achievement. 7
Elsewhere, in a series of special economic zones, experiments are taking place to free up strict regulations over farming and other sectors. Yet overall, says Heizo Takenaka, an adviser to Mr Abe, the government’s attempts are falling short. Mr Takenaka was once enthusiastic about the prospects for stronger leadership. As barons in the ruling Liberal Democratic Party last month sought the means to silence the opposition on the subject of political-funding scandals, speculation grew that Mr Abe might call a snap election by the end of this year, discom?ting an opposition in general disarray. Similar rumours swirled following the central bank’s action. Yet with a majority in both houses of the Diet guaranteed until 2016, Mr Abe already has the muscle to make real reforms. He just needs to use it. 7
Pakistan and India
DELHI AND ISLAMABAD
Nawaz Sharif is weakening, and looks unable to improve relations with India
T IS a measure of how inured Pakistanis have become to violence that it takes an especially cruel attackto provoke much debate. This week saw two. In the ?rst, on November 2nd, a suicide bomber killed at least 60 people, mostly Pakistani tourists leaving a ceremony performed by soldiers on the border with India. He struck in a car park near the main arena. Given the location, Indians asked if his intention had been a cross-border attack. More likely the militants—three rival groups claimed responsibility—wanted a target in Punjab, home to much of Pakistan’s political and military elites. It was the ?rst big terrorist strike since the army began operations against militants in North Waziristan in June. Many are braced for more attacks. Elsewhere in Punjab came a smaller, but also horri?c, assault. A mob in Kot Radha Kishan, a town south ofLahore, lynched an indebted Christian couple on November 4th, then burned their bodies, having accused them of blasphemy. Claiming outrage can be a pretext by Sunni extremists to grab property or settle other scores with members of minority religious groups. Lawlessness and religious bigotry are becoming frighteningly common. Both attacks raise doubts about the ability of the prime minister, Nawaz Sharif, to rule a stable Pakistan. He swept to o?ce with a big mandate, winning 126 of 272 contested seats in parliament in May 2013, making him the most powerful civilian
The Wagah border on a more normal day
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44 Asia East Asian ?rms in China
The Economist November 8th 2014
A bridge over troubled waters
Taiwan, Japan and South Korea employ huge numbers of mainland Chinese
Domestic politics in South Korea
Park Geun-hye’s administration is fragile but the opposition is in shambles
ORE than six months after a ferry sank with the death of 304 South Koreans, mostly pupils from one high school, the furore has barely subsided. But whereas anger had once united people, now frustration divides them. Victims’ families and their sympathisers still occupy makeshift tents on the main square of the capital, Seoul. But government supporters have set up nearby, challenging them to leave. Last month prosecutors demanded the death penalty for the ferry’s captain. He was charged with murder for abandoning ship after telling passengers to stay in their cabins. Though that bitter sentence is unlikely to be handed down at the end of the trial, on November 11th, it indicates how the accident continues to weigh on the government of President Park Geun-hye (above). Ms Park herself has been hit by rumours that she was out of reach on the day of the accident (her o?ce refutes this). The disaster has also divided the National Assembly. For months the country’s main rival parties—the ruling Saenuri party and the opposition New Politics Alliance for Democracy (NPAD)—have wrangled over the scope of a bill, called the Sewol bill, for an independent investigation into the cause of the sinking, and creates a new disaster-response unit under the prime minister. Last week the two sides at last reached a deal. But the stando? held up hundreds of other bills: none was voted on from May to September. Legislative gridlock has plagued Ms Park since she began her term in February 2013. Part of the problem is that three-?fths
HINA is a country that ?nds it strangely hard to get along with its East Asian neighbours, rubbing many of them up the wrong way with assertive territorial claims and other high-handedness. Yet political tensions obscure the region’s intense economic links, particularly the fact that an astonishing number of Chinese are employed on the mainland by East Asian ?rms. At the latest count 88,000 ?rms from Taiwan employ 15.6m Chinese workers. About 11m are employed at 23,000 Japanese ?rms or their suppliers. Throw in 2m more workers for South Korean enterprises, and companies from around the troubled East China Sea have approaching 30m Chinese on their payrolls. Most of these Chinese, of course, have factory jobs. The working conditions at some ?rms have come in for criticism. Foxconn from Taiwan, which makes things for Apple and other high-tech ?rms, is the best-known example, and also the largest foreign employer, with a staggering1m Chinese workers. Chinese authorities, never friendly to independent organised labour, have at times tolerated strikes and other labour disputes at foreign-owned factories, including Japanese carmakers. At times, it makes being in business in China look a touch risky. When anti-Japanese tension ?ares in China, intricate regional supply chains suddenly look fragile. But China knows it needs these jobs at foreign ?rms. A large number of the jobs are ?lled by migrant workers from the Chinese countryside. About 163m people were working outside their home area in 2012. The government often worries about what would happen were this restless population to be unemployed. In truth, many Chinese like working for foreign ?rms. They follow China’s labour rules as well as, and often better
than, local ?rms; they also pay fairly well. And, by and large, they continue to hire. A survey of Taiwan’s top 1,000 companies by China Credit Information Service, a Taiwanese consulting ?rm, found they employed on average 8% more workers than ?ve years ago. Until recently, Japanese ?rms also steadily increased employment, despite popular calls for boycotts of Japanese products in 2005 during a time of violent street protests against Japan in cities across China. Yet recently Japanese investment in China has begun to fall—by nearly two-?fths last year—as Japanese companies have invested elsewhere in Asia; their employees in China are likely to decline too. That is reason enough for China’s president, Xi Jinping, to make up with Shinzo Abe, the Japanese prime minister—they have not spoken for a year or more—at an Asia-Paci?c trade meeting in Beijing next week (see page 47).
The Japan factor
minister—who would be voted in (and out) by parliament. The move has rare bipartisan backing (and had been mooted under previous governments). Kim Moo-sung, who became chairman of the Saenuri party in July, has suggested a debate on constitutional reform should restart. Ms Park, who once promised reform, is now squarely against it, calling it a “black hole”. Such debate would be a distraction from Ms Park’s economic agenda. Constitutional revision is unlikely to happen in her term, but would still pit her against her party. The revived discussion suggests 1
of MPs must consent to bills before voting— and the ruling party holds only a slim majority. That makes walkouts attractive for the NPAD. Since its election in 2012, the assembly has passed little more than a tenth of all bills. It has hampered the president’s ambitious three-year plan to revive the country’s unusually sluggish economy. In August the ?nance minister pleaded with MPs to pass bills swiftly. The brouhaha has triggered fresh talk of constitutional reform that would transfer some of the administrative powers of the president to the cabinet and the prime
The Economist November 8th 2014
2 some MPs are already distancing them-
ability in Ms Park’s choices, says Tobin Im, a public-policy expert at Seoul National University. He says she is surrounded by yes-men who were also trusted allies of her father: her chief of sta?, Kim Ki-choon (aged 74), helped to draft the martial law that kept Park in power. Ms Park has three four-star generals in her cabinet and four former public-security prosecutors in top posts. Mr Im doubts she hears “any good advice”. But if she is in some trouble, the opposition is in worse. It has no clear unifying vision, preferring merely to rile the Saenuri party. After wearily reaching a compromise on the Sewol bill, the ?oor leader of the NPAD resigned last month. In July the party won only four of15 contested seats in by-elections. Its approval rating has more than halved in six months. But as the two main parties fracture, Ms Park will ?nd it tougher to push through reform. South Korean presidents tend to become lame ducks halfway through their terms. Ms Park will need to stretch her wings if the ferry disaster is not to become the event that de?nes hers. 7 ploded after lift-o?—the fourth Proton disaster at Baikonur in 14 years, say Kazcosmos o?cials. Kazakhstan tried to limit Proton launches because the rocket uses an especially toxic fuel. But Russia needs its workhorse. Thanks to the Proton, which launches only from Baikonur, Russia has held a third of the commercial spacelaunch market over the past decade, says Rachel Villain of Euroconsult, a space-industry consultancy. Russia is speeding up construction of its Vostochny (“Eastern”) Cosmodrome near the Chinese border. In September Vladimir Putin, Russia’s president, said the project would guarantee that Russia remains an “independent” space power. He promised the ?rst launch by 2015. If Russia were to leave, Kazcosmos hopes to use Baikonur to develop its own space industry. Russia is supposed to train Kazakh scientists, says the agency’s deputy head, Erkin Shaimagambetov. But joint undertakings have failed before. In 2004 the two sides announced plans for a new generation of cleaner rockets, the Angara. Mr Shaimagambetov says arguments over money have derailed the project. Russia is scheduled to test its ?rst Angara in December—but from a facility near the Arctic. Back at the cosmodrome, Russia’s secret police control access to the nearby town of Baikonur, where the engineers live. The population shrank by a third after the Soviets left. Faded murals celebrate Soviet triumphs. Residents fear a Russian departure. “It will be a mess,” says a resident. “We won’t even have water.” The Russians are unlikely to disappear overnight. An American engineer thinks Soyuz manned missions will not work at Vostochny because the capsules will not be able to make emergency landings there. Meanwhile, Baikonur and Vostochny have a competitor: the European Space Agency’s spaceport in French Guiana, where Russia began launching Soyuzes three years ago. Because Guiana is close to the equator, rockets can blast o? from there with twice the payload. Russia’s Baikonur lease runs until 2050. But it can be broken with a year’s notice—a blink in space-industry time. 7
selves from a government that is losing popularity, says Choi Young-jin, a professor of politics at Chung-Ang University, in Seoul. He thinks Ms Park is a spent force with three years still left of her term. The president continues to enjoy rocksolid backing from over-60s nostalgic for her late father and former president, Park Chung-hee. Support in her regional stronghold in the south-east is unwavering. Yet her approval ratings have slipped from highs of 61% in early April to 46% last month, according to Gallup Korea, a pollster (others put it as low as 38%). Ms Park’s travails over personnel do most to undermine her authority. It took her a month to form her ?rst cabinet. She dismissed her prime minister over a botched response to the ferry accident, only to recall him after two failed attempts to replace him. In May she ?red her spokesman for groping an intern. She has hired a celebrity ?tness coach as her secretary. It is prime fodder for a press that relishes scrutinising nominees. But the string of reshu?es suggests that loyalty trumps
Russia is thinking of moving its space operations out of Kazakhstan
HE manned Soyuz mission thundering into space sends tremors through the observers, except for the impassive camels munching in the surrounding grasslands. Almost as stirring is the history of Russia’s main spaceport. From Baikonur—now in central Kazakhstan, then in the Soviet Union—Sputnik and Laika the dog blasted o? in the 1950s, and Yuri Gagarin shot into orbit and fame in 1961. These days the land is littered with rusty metal. Russia pays about $115m a year to lease the remote chunk of steppe. Roscosmos, Russia’s space agency, launches
most of its rockets from Baikonur: between 22 and 25 each year. Until America develops a new space taxi, the Soyuz is the only way to get people to the 15-nation International Space Station. But Kazakhstan and its tenant are bickering. The chief of the Kazakh space agency, Kazcosmos, has threatened to tear up the lease. And Russia is building a new spaceport on its own territory, threatening to make the cosmodrome redundant. Some Kazakhs would be happy to see the Russians leave. In July 2013 a Proton rocket carrying navigation satellites ex-
Soyuz: will it stay or will it go?
The Economist November 8th 2014
Healing a wounded country
Myanmar is looking less and less like a foreign-policy triumph for Barack Obama stitutional change to have the support of at least 75%. It also bars Miss Suu Kyi from the presidency, because her sons are British. Moreover, Parliament, dominated by the government’s party after the NLD boycotted the election in 2010, has been talking about tinkering with the voting system. The NLD’s landslide win in by-elections held in 2012 may have left the ruling party afraid of being wiped out in the present ?rst-past-the-post system. So it is looking at some formula with elements of proportional representation, involving boundary changes. With very little experience of voting at all, many Burmese would be ba?ed by this and it would be a recipe for a chaotic election. The chairman of the Election Commission, Tin Aye, had argued that the end of 2013 was the latest possible deadline for changing the voting system. But he now says there is still time. Postponement to give time to implement a new system would be unpalatable since the election has become the main symbol of the reforms. When he called Mr Thein Sein late last month to talk about his impending visit, Mr Obama, said the White House, “underscored the need for an inclusive and credible process”. Inclusive and credible may, however, exclude Miss Suu Kyi. Quoting anonymous American o?cials, Reuters this week reported that Mr Obama was no longer insisting that Miss Suu Kyi be allowed to run for president. America seems to have concluded that the army’s antipathy to her personally may be impeding reform. Miss Suu Kyi is criticised for her tactics and occasionally high-handed style. But it is hard to champion dignity and democracy in Myanmar while endorsing reform that bars the country’s most popular politician from o?ce. Mr Thein Sein seems to realise the reforms have an image problem. On October 31st he convened a meeting of 14 senior ?gures, including Miss Suu Kyi, to discuss the way ahead. Tellingly, ten of the others were former or serving generals. After the meeting it was announced that constitutional change will be discussed in Parliament. That, too, seemed aimed at foreign ears. Change remains unlikely. Oh, for a smoke-?lled room Miss Suu Kyi has long been calling for talks, but had wanted them limited to four people: herself and the president, along with Shwe Mann, the speaker of Parliament, and General Min Aung Hlaing, the armed-forces chief. The format Mr Thein Sein chose, she complained afterwards, left no time for real discussion. Each participant made a short statement and that was it—no way to build trust. Miss Suu Kyi may have been thinking back to the private meetings she had with Mr Thein Sein over three years ago. It is not known what was discussed, but they persuaded her to join the political process. She must have believed in his sincerity; he must have trusted her not to use her enormous popularity to exact revenge on the army that had detained her over two decades. Now she needs to do what politicians do, and ?nd a way of reassuring her opponents, the army and its civilian proxies that a fair election and an NLD victory will not be the end of the world for them. That is hard if they barely talk to her, and when they do it is in a formal setting allowing no give and take. When Miss Suu Kyi was honoured in America’s Congress in 2012, Mrs Clinton made a speech, likening her to Nelson Mandela and in which she praised both for having realised that “overcoming the past, healing a wounded country, building a democracy, would require moving from icon to politician.” The trouble is that too many others, including, it seems, the American government, prefer the icon and will not let her be a politician. 7
MERICA at our best” is how Hillary Clinton’s memoir “Hard Choices” sums up her country’s role (and especially her own) “as a champion of dignity and democracy” in supporting Myanmar since Thein Sein, a member of the former long-ruling military junta, took o?ce as a civilian president in 2011. The chapter of her book devoted to the country is not entirely starryeyed; she admits it is hard not to get “breathless” about it and that there is “a long way to go”. But she breathes fairly heavily herself about her friendship with Myanmar’s opposition leader, Aung San Suu Kyi. And she quotes an academic who called the Myanmar e?orts of the administration, in which she was secretary of state, “as decisive a diplomatic victory as anyone is likely to see”. So as Mrs Clinton mulls a tilt at the presidency in 2016, Myanmar is likely to become a political issue in America. Her opponents may relish arguing that she got Myanmar wrong in prematurely celebrating a successful transition and rewarding it with high-level visits and an easing of sanctions. Barack Obama, who just after his re-election in 2012 became the ?rst sitting American president to visit Myanmar, is due back there for a regional summit on November 12th and 13th. He will ?nd that the bubble of euphoria about the country’s reforms has burst. Replacing it is a sombre new realism. Myanmar remains a far freer place than it was. But e?orts to reach a national cease?re and start a formal peace process with the many ethnic insurgencies that ring Myanmar have so far not borne fruit. Fighting continues, as does communal violence and tension involving Muslim minorities, especially the stateless Rohingyas. Now Miss Suu Kyi herself has said that the reforms have “stalled”. At a press conference this week she questioned whether any positive changes have taken place in the past 24 months and accused America of at times being over-optimistic about the reform process. Her critics accuse her of the same mistake, arguing the army never really intended to give up power. In theory, the de?nitive transition from military rule should come at an election to be held in a year’s time, when Miss Suu Kyi’s National League for Democracy (NLD) is expected to emerge as the largest single party. But so far no progress has been made on amending the constitution adopted by the former junta. It guarantees the army 25% of the seats in parliament and requires con-
The Economist November 8th 2014 47 Also in this section 48 Short-sightedness among children 48 Investment ?ows
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Showing o? to the world
The capital is about to host President Xi Jinping’s diplomatic coming-out party
HE factories have closed down for a few days, and millions of cars have been ordered o? the roads. Clear blue skies appearing over a usually smog-choked Beijing always mean one thing: a big event is about to get under way. From November 10th President Xi Jinping will welcome world leaders to this year’s Asia-Paci?c Economic Co-operation (APEC) summit. Not since the Olympics in 2008 have so many leaders gathered in the capital, and they will include the heads of the United States, Russia and Japan. It is a de?ning moment for Mr Xi’s foreign policy. Having established himself at home as China’s most powerful leader since Deng Xiaoping, he now seems to want to demand a bigger, more dominant and more respected role for China than his predecessors, Deng included, ever dared ask for. Respect begins by putting on a good face to guests. Chinese bullying over disputed maritime claims has done much to raise tensions in the region. But now Mr Xi appears to be lowering them. In particular, China’s relations with Japan have been abysmal. The government has treated Japan’s prime minister, Shinzo Abe, with both venom and pettiness, implying he is a closet militarist. The relationship had sunk to such a low that it will count as notable progress if Mr Xi shakes Mr Abe’s hand— even if he does little more—at the summit. On November 11th and 12th, Mr Xi will host a state visit in Beijing for Barack
Obama. It is the second summit with the American president, following one at Sunnylands in California in 2013. It will be a good show, with a scenic walk and all that. But the substance appears less clear. At the time of Sunnylands, there was much Chinese talk of a “new type of great-power relationship” with America. Yet since it implies a diminished role for America, at least in Asia, Mr Obama does not seem inclined to go along. The two men appear likely to co-operate in a few areas, including climate change, trade and investment. They will agree to a bit more communication over respective military movements in and over the seas near China. But hopes that cordiality at Sunnylands might lead the relationship to blossom may come to little. In truth, Mr Xi does not have much respect left for Mr Obama; the Chinese dismiss him as weak-willed in foreign policy. And so much of Mr Xi’s ambition lies elsewhere. Above all, the dream is to return China to its rightful place in a world in which, according to Bonnie Glaser of the Centre for Strategic and International Studies, a Washington think-tank, “China will be at the centre, and every other nation will have to consider China’s interests.” This attitude is most familiar to China’s neighbours in the South China Sea and East China Sea. China has upset the Philippines by grabbing a disputed reef; Vietnam, by moving an oil rig into contested waters; Japan, by challenging its control
over uninhabited islets; and even South Korea which, though on good terms, was concerned along with others when China declared an “Air Defence Identi?cation Zone” over the East China Sea, demanding that planes inform it when entering it. Yet Mr Xi has also courted friends under the catchphrase of “peaceful development”. He has pushed multilateral initiatives, including a new Asian Infrastructure Investment Bank, which many of China’s neighbours, including India, have signed up to. A New Development Bank has also been set up with fellow “BRICs”—Brazil, Russia, India and South Africa. One of Mr Xi’s playmates is President Vladimir Putin. China and Russia have a history of mutual distrust, but Mr Xi’s ?rst trip abroad as president, in March 2013, was to Moscow. Since then the two countries have struck a long-stalled gas deal and, according to Kommersant, a Russian newspaper, a pact on cyber-security. China backs Russia’s pro-Syrian stand in the UN Security Council and has refused to condemn Russia’s territorial incursions in Crimea and eastern Ukraine—though it loves to preach non-interference. A strong thread that binds the two countries is American dominance in international a?airs. “No country”, said Mr Xi at a security summit earlier this year to which Mr Putin was invited, “should attempt to dominate regional security a?airs or infringe upon the legitimate rights…of other countries.” Mr Xi did not name America, but a month earlier Mr Obama had in Tokyo emphasised that America’s security pact with Japan extended to the Japan-controlled Senkaku islands, which China claims and calls the Diaoyu. Is Mr Xi’s foreign policy succeeding? Only in parts. China’s maritime assertiveness has pushed some neighbours closer to Japan and America. But for long China 1
2 will remain Asian nations’ biggest trading
The Economist November 8th 2014 Investment ?ows
partner. It is busy pursuing regional and bilateral trade agreements while an American-led trade initiative, the Trans-Paci?c Partnership, is bogged down. At APEC Mr Xi will seek to build on those economic relationships. And, given China’s heft, by and large he will succeed. And what of global ambitions? If Mr Xi wants a bigger role in the world, then China will have to engage better with the big issues, including the environment, terrorism and health. Here the picture is mixed. This week China and Russia together blocked an international plan for an ocean sanctuary in Antarctica. On counter-terrorism, China puts more e?ort into getting everyone to acknowledge it faces an alQaeda-type threat in Xinjiang than it helps in much worse terrorist hotspots. Yet global health is an example of how Chinese policy can change. Only a few weeks ago, during preparations for Mr Xi’s summit with Mr Obama, o?cials appeared to see their American counterparts’ obsession with Ebola as proof of Americans always coming to them only with the latest irritating pebble in their shoe, as Douglas Paal of the Carnegie Endowment for International Peace, a think-tank, puts it. But since then China has announced a trebling of its commitment to ?ghting Ebola, to $120m, making it the second-most generous of any country. One way or another, China’s rise continues. 7
More out?ows than in
Read that outside
East Asia, a?icting 80-90% of urban 18year-olds in Singapore, South Korea and Taiwan. The problem is social rather than genetic. A 2012 study of 15,000 children in the Beijing area found that poor sight was signi?cantly associated with more time spent studying, reading or using electronic devices—along with less time spent outdoors. These habits were more frequently found in higher-income families, says Guo Yin of Beijing Tongren Hospital, that is, those more likely to make their children study intensively. Across East Asia worsening eyesight has taken place alongside a rise in incomes and educational standards. The biggest factor in short-sightedness is a lack of time spent outdoors. Exposure to daylight helps the retina to release a chemical that slows down an increase in the eye’s axial length, which is what most often causes myopia. A combination of not being outdoors and doing lots of work focusing up close (like writing characters or reading) worsens the problem. But if a child has enough time in the open, they can study all they like and their eyesight should not su?er, says Ian Morgan of Australian National University. Yet China and many other East Asian countries do not prize time outdoors. At the age of six, children in China and Australia have similar rates of myopia. Once they start school, Chinese children spend about an hour a day outside, compared with three or four hours for Australian ones. Schoolchildren in China are often made to take a nap after lunch rather than play outside; they then go home to do far more homework than anywhere outside East Asia. The older children in China are, the more they stay indoors—and not because of the country’s notorious pollution. Since poor sight is associated with higher incomes and more schooling, it is less prevalent in rural areas of China. In the countryside a third of primary-school students are myopic, compared with nearly half of urban children, according to the health ministry. But eyesight problems there are somewhat di?erent. Stanford
big reason for its fast economic growth is that China has been a magnet for the world’s investment capital. Over the past two decades, China attracted more foreign direct investment (FDI) than any country save America. So the recent prediction made by the Centre for China and Globalisation, a Beijing think-tank, that this year China’s outbound investments would exceed its inbound ones, is noteworthy (see chart). This is not—yet—because China is becoming less attractive to multinationals, which are squeezed by local rivals and targeted by overzealous regulators and the state media. Inward investment has topped $100 billion a year in the past ?ve years. Rather, Chinese ?rms are increasingly venturing abroad. Earlier waves of investors were led by stateowned enterprises in search of resources in Africa and Latin America. Today’s pioneers are often private ?rms. They seek brands, talent and technology to bring back to the Chinese market.
The out and in club
China’s direct investment flows, $bn Outward Inward 140 120 100 80 60 40 20 0 2000 02 04 06 08 10 12 14*
*Forecast Sources: Centre for China & Globalisation; National Bureau of Statistics
Why so many Chinese children wear glasses
PARKLY, spotted or Hello Kitty: every colour, theme, shape and size of frame is available at Eyeglass City in Beijing, a fourstorey mall crammed only with spectacle shops. Within half an hour a pair of prescription eyeglasses is ready. That is impressive, but then the number of Chinese wearing glasses is rising. Most new adoptees are children. In 1970 fewer than a third of 16- to 18year-olds were deemed to be short-sighted (meaning that distant objects are blurred). Now nearly four-?fths are, and even more in some urban areas. A ?fth of these have “high” myopia, that is, anything beyond 16 centimetres (just over six inches) is unclear. The fastest increase is among primary schoolchildren, over 40% of whom are short-sighted, double the rate in 2000. That compares with less than 10% of this age group in America or Germany. The incidence of myopia is high across
University’s Rural Education Action Programme found that one in six rural children with poor sight do not wear glasses— thanks to a combination of cost, poor eye care in schools and a mistaken belief that wearing glasses weakens eyes further. When Stanford gave thousands of students free glasses, it found being able to see clearly had a higher impact on educational attainment than improving nutrition or the quality of teaching, says the programme’s co-director, Scott Rozelle. Another study reported that giving students free glasses improved test scores by the equivalent of nearly a year’s extra education. Daylight and free glasses are both cheap remedies for a growing national problem. All that is required now is a bit of vision. 7
Middle East and Africa
The Economist November 8th 2014 49 Also in this section 51 Satire in the Middle East 51 Syria’s war 52 Burkina Faso’s coup 53 Tanzania’s dwindling elephants
For daily analysis and debate on the Middle East and Africa, visit
The city of pieces
Undivided and eternal unhappiness
Con?ict over Jerusalem’s holy sites may spark a wider con?agration
HERE was no warning before the knock came at dawn on November 4th. When Mrs Abu Rajab, a grandmother, opened the door to her house she found a crowd of armed police outside. They ordered the 18 Abu Rajabs, among them a ?ve-month-old baby, to evacuate. Hours later in the same Jerusalem suburb of Silwan, whose breeze-block dwellings cling to steep hillsides just beneath the Old City, the Abu Subeih and Burqan families were also brusquely evicted. All three families are now homeless, their possessions buried under rubble: the city’s wreckers gave them no time to retrieve furnishings. Housing demolitions are nothing new to Jerusalem’s Palestinian residents. Israel says it is simply enforcing building regulations. But the reality is that the rules and their enforcement are stacked in favour of Jews and against Palestinians. Often without warning, municipal authorities have demolished hundreds of homes in the city’s eastern half since Israel captured it from Jordan in the six-day war of 1967 and annexed it as part of its united and eternal capital. Some 298 Palestinian Jerusalemites were evicted in 2013 alone, and well over a hundred more have been made homeless this year, reckons the UN. What is new is that the demolitions are taking place at a time of acute tension, especially the increasingly violent contest over the city’s holy places. On the morning after the evictions, fresh riots erupted in
the Old City, with televised exchanges of rocks and ?recrackers (from Palestinians) and stun-grenades (from the Israel riot police) in the doorway of the al-Aqsa mosque; there are con?icting accounts of how far the police went in. At midday a Palestinian drove into a tram-stop crowded with Jews, killing a policeman and injuring 14 bystanders, before he was shot dead (a near-identical attack had taken place on October 22nd). Relatives of the driver said he had been pushed to violence by the desecration of al-Aqsa. After the years of suicide bombings, largely halted by the security wall, Jerusalem is now confronted with attacks by, in e?ect, suicide-drivers. All this re?ects Jerusalem’s underlying re-
ality: although supposedly uni?ed, its 815,000 people live in resentful segregation from each other. Palestinians (who make up 37% of the population) and Jews not only speak di?erent languages but adhere to starkly opposed narratives, each fervidly convinced its grievances are greater. Still, until recently East Jerusalem has been calm compared with the two other Palestinian territories occupied by Israel in 1967: the Gaza Strip and the West Bank. Enjoying higher wages and greater privileges, including the right to travel in Israel, Jerusalem’s Palestinians had counted themselves luckier than their cousins behind the wall in the West Bank. Deepening despair Over the past year, however, a toxic mix of developments has created explosive conditions. They include deepening Palestinian despair that erupts violently; harsh and tightening Israeli strictures; and growing pressure from right-wing Jewish groups to assert Israeli control. This summer’s war in Gaza raised antagonism, particularly over its grisly prelude: the killing of a Palestinian teenager burnt alive in Jerusalem after the kidnap and murder of three Israeli students in the West Bank. After the war, trouble continued amid sporadic stonethrowing clashes. A surge in building for Jews in East Jerusalem has not helped. The biggest irritant has been the escalating campaign by messianic activists and other Jewish hardliners to change the religious status quo on the Temple Mount, site of the destroyed Jewish temple. Jews pray at the foot, by the Western Wall. The esplanade above is the Haram al-Sharif (“Noble Sanctuary”), the third-holiest site in Islam, with the al-Aqsa mosque and the goldcapped Dome of the Rock. Jews demanding the right to pray on top of the Temple Mount are met with riots by Palestinians 1
Population of Jerusalem, ’000 Jews and others* Arabs 800 600 400 200 0 1967 72 83 90 95 2000 05 08 10 12
Source: Jerusalem Institute for Israel Studies *Includes non-Jews in Jewish households
50 Middle East and Africa
2 claiming to “defend al-Aqsa”, which in
The Economist November 8th 2014
turn are ?rmly put down by riot police. The gathering crisis came to a head on October 29th, when a prominent temple activist, Yehuda Glick, was shot and gravely wounded by a presumed Palestinian assailant, who was later killed. As Muslim access was restricted the Palestinian leader, Mahmoud Abbas, denounced Israel’s “declaration of war”. The Israeli prime minister, Binyamin Netanyahu, blamed the growing unrest on incitement by Mr Abbas. “We will respond to any attempt to undermine the order and stability of Israel’s capital with an iron ?st,” he said on November 5th. There is much talk of a third Intifada, or Palestinian uprising. There appears little appetite among ordinary Palestinians in Jerusalem for prolonged strife. But such is the importance of the city to both peoples that a religious con?ict over Jerusalem could develop a momentum of its own. It may ignite unrest among another group of hitherto-quiescent Palestinians—the 1.7m “Israeli Arabs” who live within Israel’s pre-1967 borders and who enjoy Israeli citizenship. Temple Mount is not quite in our hands By long tradition Muslims have enjoyed the exclusive right to pray on the Haram, from where they believe the Prophet Muhammad made his night journey to heaven. Even when Israeli military commanders in 1967 announced the seemingly miraculous news, “Har ha-bayt be-yadeinu, “The Temple Mount is in our hands”, the Jordanian-appointed Muslim religious authorities were left in charge of the Haram. Others could visit, but not pray. Mainstream rabbis concurred, repeatedly banning Jewish “ascension” to the mount. To some on the national-religious fringe of Israeli politics Muslim autonomy is a symbol of incomplete sovereignty. In recent years a growing number of Israelis have gone up to demand a stronger Jewish presence on the Temple Mount. They represent a spectrum. Some may still share the views of Shlomo Goren who, as the army’s chief rabbi in 1967, urged commanders to blow up the mosques in the heat of battle, lest the opportunity to rebuild the Jewish temple be lost. Others, such as the wounded Mr Glick, are gradualist, demanding initially that Jews and Muslims have equal prayer rights. Nevertheless, a senior Israeli police o?cer once described him as “the most dangerous man in Israel”, and banned him from the Haram. Religious nationalists make up a significant chunk of the Israeli parliament, including members of prime minister Binyamin Netanyahu’s Likud party. The Temple Mount is central to the discourse of the hardline Jewish Home party, which has two cabinet ministers. Left-wing Israeli commentators, moreover, bemoan grow-
Pre-1 bord 967 er
Old City JERUSALEM
ISRAEL WEST BANK
West Bank barrier (planned or completed) Jerusalem municipal boundary Palestinian population Jewish population
Jerusalem 75 km
MUSLIM QUARTER CHRISTIAN QUARTER
Holy Sepulchre Jaffa gate
TEMPLE MOUNT/ HARAM AL-SHARIF
Dome of the Rock al-Aqsa Mosque
Western (Wailing) Wall David’s Citadel JEWISH QUARTER 200 m ARMENIAN QUARTER Western Wall Tunnel
Government or Jewish controlled buildings
Source: The Israeli Committee Against House Demolitions
ing domination of the army and security services by the religious right. “The real story is of a fringe party going mainstream,” says Daniel Seidemann, an Israeli lawyer and peace activist. The number of visits to the Haram by religious Jews has climbed from mere hundreds a decade ago to some 8,500 last year. In recent weeks several politicians have marched onto the mount, including such prominent members of Mr Netanyahu’s Likud party and Jerusalem’s mayor, Nir Barkat. In response to the attack on Mr Glick, the pace of such visits has increased, along with demands to change its status. Jordan’s King Abdullah II, whose Hashemite dynasty o?cially oversees the Haram, has made it known that any unilateral Israeli move on the sanctuary would force a review of its 1994 peace treaty. On November 5th it withdrew its ambassador. In deference to such warnings, Mr Netanyahu has made a stronger show of reaf?rming the status quo. On November1st he pleaded for ministers to refrain from escalation. But he has also played to right-wing demands, for instance by making it easier to sentence young stone-throwers to prison terms of up to 20 years. An intensi?ed campaign of arrests for juveniles has seen some 800 young Palestinians locked up in the past two months alone. Mr Netanyahu has also promoted new
construction for Jews in Jerusalem. On November 3rd his government approved the building of some 500 units to expand an existing Jewish enclave north of the city, Ramat Shlomo. This followed approval to start construction of 2,600 units at Givat Hamatos, a hill in southern Jerusalem that links two other neighbourhoods lying outside Israel’s pre-1967 borders. Its construction will in e?ect encircle the pre-existing Palestinian village of Beit Safafa with Jewish enclaves. The village is also being bisected by a highway linking Jewish neighbourhoods to the city centre. The government has facilitated settlement within populated Palestinian areas by private Jewish groups; one speaks of “re-jew-venating” the city. The big Israeli ?ags, security cameras and police protection that surround such implants suggest that their new inhabitants hardly expect cosy intimacy. The government says that Jews have the right to live anywhere in their own capital. Moreover, new settlements in occupied territories are being built in areas that would anyhow be part of Israel in any future peace deal. The rest of the world, though, sees it all as illegal. Recent announcements have been accompanied by a war of insults between Mr Netanyahu and the Obama administration. Palestinians undeniably fare worse than Jews in the city. While some 21% of Jewish families in Jerusalem live below the poverty line, the ?gure for Palestinians is 77%. Density for Jews is 0.9 people per room; for Palestinians two per room. Palestinian areas of the city need an additional 1,000 classrooms. Because little Palestinian property was registered before Israel’s conquest, few can secure building permits. Permits are also routinely denied because of a lack of infrastructure, which the Jewish-controlled municipality itself fails to provide. So more than nine out of ten Palestinian homes built since 1967 are technically unauthorised. Some 20,000 of them could theoretically and quite legally be demolished at any time. Palestinians, but not Jews, who leave face another risk. Israel can revoke residency rights for any Palestinian absent from the city for more than ?ve years. At least 14,000 Palestinians have in e?ect been banished from their birthplace. The security walls divides East Jerusalem from its hinterland in the West Bank; it zigzags to take in Jewish settlements, while cutting o? Arab areas that are part of the Jerusalem municipality. If all this was intended to strengthen the majority of Jews, it has been a failure. The proportion of Palestinians in Jerusalem has risen steadily because of higher birth rates. The ones who are leaving are Jews; there was a net exodus of 8,700 last year (though this was o?set by population growth). The prospect of another Intifada will not reverse this trend. 7
The Economist November 8th 2014 Satire in the Middle East Syria’s war
Middle East and Africa 51
Laughing at the humourless
The region’s artists are mocking the jihadists
F I were a cow, I would be wearing a bra,” goes a lyric in a popular song about Abu Bakr al-Baghdadi, the leader of Islamic State (IS). This reference to bovine lingerie—a poke at Mr Baghdadi’s supposed umbrage at the sight of naked udders—gets cheers from the audience in Metro al-Madina, a theatre in Beirut. The tune about Mr Baghdadi leading Islam into the abyss has proven such a hit that the Lebanese band performing it, The Great Departed, has extended its show. As America and allied forces carry out air strikes against IS in Syria and Iraq, artists from Beirut to Baghdad are combating the group in their own way. A popular target is the incompatibility between the group’s claim to adhere to strict teachings of the time of the Prophet Muhammad and its savvy use of modern technology such as Twitter. “Ktir Salbe” (“Very Bad”), a weekly sketch show on LBC International, a private television station in Lebanon, recently featured a scene in which a jihadist hails a taxi but objects to modern inventions such as the radio. Exasperated, the taxi driver kicks the jihadist out and tells him to wait for the next passing camel. Meanwhile Al Iraqiya, a state television channel in Iraq, has devoted $600,000—a record amount for the broadcaster—to produce “Dawlat alKhurafa” (“The Mythical State”), which mockingly recreates the IS takeover and rule of a ?ctional village in Iraq. In it the militant group puts the village drunk in charge of enforcing an alcohol ban, despite him sneaking drinks on the sly. The
show’s o?ensive opening, in which Mr Baghdadi hatches as the o?spring of the devil and his bride Israel, has had more than 750,000 hits on YouTube. Inside parts of Syria and Iraq where none can mock the group openly without punishment, cartoons have proliferated. In the Syrian village of Kafr Nabl, which has gained a reputation for its satirical signs, activists portrayed IS members as aliens. Its cartoons have also made fun of the West’s military response to IS while Assad and his allies go unpunished. An animated series “Dashawi” (“A member of IS”), also by Al Iraqiya, mocks the fundamentalist interpretation of Islam (pictured below). The region’s comics have long used subtle satire to criticise their authoritarian regimes, yet with little success in e?ecting change. Some artists reckon their satire could have more e?ect with IS, providing a counter to its propaganda including its slick recruitment videos, Tweets about life in the “caliphate” and articles detailing its interpretation of Islam. “We have to show them [IS] that we are not afraid,” says Ali al-Qassem, the director of “Dawlat al-Khurafa”. But Khaled Sobeih, who wrote and sings The Great Departed’s Baghdadi song, says satire needs to address more than just IS’s excesses. “People should evoke the real problems such as why [the Arab world] is a fertile environment for this movement,” he says, pointing to dictatorship and injustice as two such features of the region. That may yield less to laugh about.
Bashar Assad’s impunity is undermining the ?ght against IS
No laughing matter
HEN the jihadists calling themselves Islamic State (IS) executed the ?rst of four Western hostages in Syria in August, they lit a fuse ofoutrage that led America to expand its existing air war against the group in Iraq to include strikes against it in Syria. There was less fuss when on October 27th a jury in London found that the regime of Bashar Assad, Syria’s president, had last year “deliberately and intentionally killed” Abbas Khan, a British doctor. Mr Khan had been jailed in Syria after travelling to Aleppo to treat injured people. His mother, allowed a visit during his detention in Damascus, described signs of torture familiar to Syrians: a skeletal physique, a missing ?ngernail and burned feet. As the world’s attention stays focused on IS, Mr Assad has increased his attacks. Between October 20th and 31st his regime carried out 850 aerial attacks—including the dropping of indiscriminate barrel bombs—on rebel-held areas, according to the Syrian Observatory for Human Rights (SOHR), a Britain-based monitoring group. On October 29th the regime bombed a camp for displaced people in Idleb province. Last month it killed six local citizen journalists (compared to one killed by Islamic State), including one who died under torture after two years of detention. Although less attention is now being paid to the regime’s atrocities than those of its foes, human rights groups say Mr Assad’s forces are responsible for more deaths than IS. Torture in jail contin