5

Asi'a
..

leader'S :13 "u5:sias,juture

Cracks a ppear :1,4 rrhe rise of moUtic,al IsLaml And the winner ]'S~~lI' :10 iren, yea,rs of' China, in

,45, China"s eco'no'my and -'be van ,AU cha n 9,e

,46 Chinese polttics and

tbewrO INlo ch a. n 'g,e ,4 7 ~a gtt n' s e'n ergy eli s1:s INIu dea r wi nter

tile ~D

Shades of gre'y

:16 li'"notlher lEU summli1J Bewa re ttl'e M le~ "l,Y' reel p e rko
:18id,eo>ames

O'nthe cover Tile crae ks ,ap IIIe',ar in Vladi mir Puli"n's IRu5si,a:' leader, ,age :13. Routi' ne elLection fra ud turns i' nto futt ...sca1le pretest, , pag,e 55. The upheavals in Russia show how' hard. ttfs, :20Iy'ear-s i,ft,e'rthe systeml coIUa'plsed" 'fo'r"lhe (OUh'try to p,ut a,way 'itJ; So'vhat past,
page,s 2'7'-],0
1

Th e seri to U,S bus; n ess of fu n

Letters
,20

~,etrefnrm in India Off th ,ei r tro LI~ey:s ,48 [an~'an H 0 r nets' nest in 1Pa.ld sta n
M'fddle East and Afri,['a ,49'oJitical.Isia r Everywh,ere on the rise
5,0 Israel and the Islamtsts

,47-8.'

'he ,Ar'i"b ,spring Political Islam is on the march+and the 'West must keep its nerve: leader, page 14..The Middle, Eastvotes for Islarnists, page 49" Israel's fears, P(iu:i!'t@ ,(J n d its own SOt fU!nd~lml~mtaUsts, pa'ge 51m Wh:Y'
,Al!1e'rl'ca can never escape the ,Middle East: l'e xi' n gton " page 40

On 'the London Stock

Ex(lhange,~ rounda bouts, bond markets rh,omlas, Co 0 k d; a.5go,lra,.5

Briefi'ng
:27 Rus,sf a

The, lo ng' life of Ho mo

The Economist online

Dai ly anldysi sand. opinion from our 19 bloqs, plus audio. and vide-o content debates and a dBil~ychart
1

SO"'! ieticus

U 111te dl State 31 rhe ,el,ectiOh'

Oh no! But let's talk ,5,1le"e'li'gious Israelis Th ey' re -0 n th e r]1se too :5,:2 Uncert:ainb' in Ira n D1d they rea Uy mea n th~s'?' :54, Con e's e:lero,on It could ,get worse ,54 South Afri'ca's, courts Pres~de nt 'V j' ud 9 If'S Sped'aL r'eport: V;'deo
g'ame,s

E,onomjs,t.~com/bwgs,

E...'ma,il;: n ewsletters and

mobile editlon
Economis,t.com/ e'mai ~ Pri nt e di'tt 0 n:: avai La b le CHl Lin e by 7 pm lo'~ do n ti m eeac h Th u rsd;a,,y Emnonns:tllmml pd'liiIt

Barack Obarna chooses his grou,nd 3:2 :-,timuln,lIS and thel &,!:'onomy Lookinq up
3:2 [rans

A~t the world's a game After page 54

Euro'pe

sort in Gleoli~ 1a
5-:5

B,arack 0 bama The presid ent offe rs ,A m ie ri ca anew's Irq u a re deal for his re-election campaiqn, paqe 31...A new round ofstimulus miqht help
him, page 32
-

Spare a pe'n nyf'

3,4 Tecl~ul0l'ogy and a'vil

IPOti ti ca l eri si sin

Ru55i a.

Audio ed,iti'on: avai lahle oHI~ine to down loa d each Fr id "IJ'Jl

E[onomi:!i,t"rom/ a ud~'oleudiid,(J.I1~

ltbedie,s
Don't

shoot

Voti ng'~,Russian-style 5,6 Germa,ny's de,bt b'r,a1ke

36 De'iro,;'t mears ba n kra Rt~ NIoOwhie're'toO run

Economist

Th,e

36

Insid,er 'trading and

Cong'ress

Ite your hands, please :5,6 ~an(e and Gelrma,n INlo thanks for the
memo des

Capitol~ crim es
fi' 1i,R; P IlIlbli'.s;liUi!tll in S:e;pte'l1I_belT tB43

to tnlriBpart in i'l'as~rE!' ~D!rtest be.t~en

"'oUr p'i(UJfe:SS.

intf;ll'ig~nC~1 wh ich lJr€S$~ J-orwlJW,.. i)mj an unworthy., thrdd ~g,"Q~ln'ce'obstructlng

IT -

38 [o,rt reform Closin g the Lottery ,40 le,:dngto!j Th e' wretc hied M~ddie East
The Amle'ri'cis
,41

:57 Italy_"s, bud _- e Savin 9 Italy :58 ,Rom,ani.a',s ,ecomo,m~8;1[j, ckle ILl P :5,8 Macedonia Call itwhatvou want
5,9' [ha'r~emag'ne

['it~lii~a,l iOlffi,ce"5 'in IL~,md!(ilj1i11ilJli1d , alsro: AUa,i1rtel. IB€iji til'g; IB~-rlitil; IBn!issets, ,(~iio;,
oCihlic,agQ, ,!HI oliJ9 IKoTII'g,,] oha If! rlle<s~:mr!il', Los,Ange~esr

Those obstru ctive IB,dits,

Me).(loo {\ty" M,o's~~!', INlew [)~~hi ,@w York. Peai s, ~ r Sa n W~a,tJldsco, Sao Pa ulo, S"iJ"ruga.PQre" '10 k~rD
I'

canada and the U'nited

-··tates

WaShl1l11Q1001il DC

_j

The be rder two-step ,4:2 Co to m bia' s flo,o('i"S That damned Ninla

,4,2 M'inn111 in IPerll.l Doing' the Conga
44 PubLishiulg in Latin

because [hina was. Let 'lnto the 'World Trade, Organi'S,at~on!l No.w th e world's biqqest trader needsto grow up: leader, pa.ge 16. The impact an China of '" ~ J01 rn In 9 the ten ye.a rs ago"
l

China The world ~s richer

~"

are a 19,Qten yea rs old: Econ o mics focus

)l'ag'e 86

pag'€ 45 .Th e B RIC.s

wro

,A l~tera ry deft ci t

unerlca

~., [on ten ts conti nues overl@,af

I Contents

The Economist December loth 2011

,8:2 Fin an d a,I acco IJI, nti n g

Britain
6:1t Reform;ng weLfa'r N~c:ework ~fY'ou,can find it
If;':2: Shri'nki'ng d'gar-

Tax:cuts that hurt 8:2 'riv~te eqldti] One careful owner?

U Pi 'ii 11 s.. 0 Ike m

6], Bagehot IG ad ina uster U:y B. ritai n I:lntern

,84 H@lpfng the poor 'to, sa{@_] SmaLI~wonder 86 -c_onQmi CS, (it(u:SJ Th e B.IRICs,at ten

an on aiL
iii
,II;

Euro crisis The fLaw's in the M erkozy plan: leader, ]J.age is,
Thescvereiqn bond markets

hope for a solution, page 7q,~

6,51 (i'W builldillg Hon 9 Kong in IHond uras l!: E:' y,7 lI'fee Cl'ti es Ilion d uras sh rug"ged
Business

Science ,and technolog,Y 87 I3D prin'ting

Next week

The shape of thinqs to

come

IlaLy"s budget" page 517~,Ihe Brjtish proh lern: Charle'm,a,'gn e, p do 9"~' 59 ~l.esso In s fro 1001 th 'e Great Depression, p'dg-es76~1'8

88 ,'A,- , h'ritiS:

6,9 Ma,ca,u's ga,mbUn91 imdustl!l{ __j A, window on China

70 Am'encan

Botox as pain relief go uman evolutio'n Tih e fi rst mattresses

90 ~Dotller' E,arth' Home awayfrorn horne B,oaks and arts
9:1 ["ooks, of' ttl e 'ye',arl, 201 I, Pa 'Q,e-tu rn e rs 96 Books, by Ecomo'm~s,

'telecom~s A, b rea t h of fres h a ir wave's

We' pu b~li:sheur (,bristma s doublei',ssu:e'" m'tb artldes om DOre 1:"5 busi ness mod e'." 'f'li'og'-lh unting tn India, the m,an Who m,ad,e adv,ettisi'ng ,sexy r cafe 'cu tture in _ ... II 'r'f!VO' l tuttona ry (,allO, soo a", tn,s di a,'i n 'It he 16-1h centu'ry" a'nd much mote
Ii ,Ii

711 irho mso n R,euters

Pli nopa lcom m,erd an offic,es:: rel: '02'0 7,8]0 7'000

:2'5 St. Jla,1lilI e-5,1 s Street Lon d Or! SW-JJA 1111G

" ," ~Ig Spe"M':ll

report Vl'"d1e'. g:!mes i .__ .I~: "0

: ,',

",110 __ .,:. ":.

will be the fastest-qrowinq a rid most exciti n ~ form of mass media over the coming decade: read our special
reportafter page 54,.,A bit of

Screen test 72 Advertising Publicis's du ra b lie boss 72: liotech 'patents Ta ki In Ig 'lit p erso n aUy 7,3, (a,rmakeli] Revenge of the petrolh eads 74 ·-chumR,eter
University,cha,Uen·ge BriefinQ' 7,6 L-esson,5 of the 1930,s r ...... _ ,n I r,nll ~ 'T~'Q'r,~ 'Il,;.V!i,;lIiIIILd b t,I Il.!!-_b l I I
'I;;;;; 'I!;;.

Bouleva IIdJ des lila n chees :1l6

112.0 5 Ge:n eva~, ,Switzeilta nd

Wcnte'[5_

Pens and ffinl~

1'04

l~L!:1l2 2: '5,(i6 2470 4 750 3 rd A'v€.nu e, ,tJh F[,oorl' Nlew' YQwlk_, NY 10017 reh :11212 5·41 0500 50! FCentra l Pliiz~ 18 IHla.rbo!JI r IRoa,d ~Wa nchei, IHlol'1-91 ong' K Tel: 8~2 2tlg~3888

~' ndicators

Economic' and ftnanctal

Statistics on 42 eco nom ies, p I~IJ. 0 u r S monthly poll nfforecasters

Obi'tu,ary
1,06 ····:ocrate,s Footha U":s philosop her

Oth,@r'[,o mmeKi',iill, .offi'.ces;:

Chlicalg 0 ~ubai; Fra n kfurt, los AI!1ge>i.es. P,aris ~Sa in Fran cisco ,a nd 5.i iillg,j3,pore
I l

the entertainment business that man:~lotherfirms can

<i>":' • Sb uescnpnen service

'-',to!
c

'I!;;.

,-

II,)

,iEIi _,'I!;;.

learn from: leader, patJ,e 18

ahea.d

and ecenomics 79 E.urogle's, debt crisi!J

Ifinance

.sca~ffingthe summit 80 rrh@IMIF and th e @lIrOj Ca s hi fo r credi hi lity 80 Mexico" s pbl.l n'gin'! '~esOJ 'i.A,tr~baf a rribal

For our lawt subs criptie 111 offers, visit [co[I@lmi:5ti'~'O'Iil1/offe:rs Fa r S l.!I bscription s€'tJ'\400 'j) lease (:;0 mud ,bll ~ terrepholl1~~fax, web 011 mail dJt 1t~,edeta~ls p~'OVid.e~ be!l4fw: Til!!e[l] h one:, :it 800 4~~H) l 60Sli (inn nTI mittsl de th @ US and Canada, 1, 3,:!4 44'1 8109t} lFa'b~fmi le,: '1 861i :8!fH;80'1~ (froml outside
th e US and Canada t 1. ~,:l4 44'7 ~06:!ii.)

We.b:

E'b:OIi1!aa<mi~bulbs ..C'Dfin
'CUS~'Qf;d@;rlh,~~p'@@(Dmomist.C'Dml

IE-mar~~:
IPO:$,t:

T1he'ikonQmj':st Subscrlptierru
$@MlCe:s\l' ~;,O"DO); 4691,8\r 51. 'bUiWS, I~UJ 6]146-6"78, USA LIS$13fJ,
(fIIJ $ 189

,Sgb~(ri'p!thln "for :1ye~1i(Sl'i'sslaes.)

U nmt@Q Stclt'e!S

8ll Buttonwood
T~e' ef~UTIity g-C1 P

Ca tJ'l,~da

lao n Amen

ca

US$ 210

ye,ar The, best reads of 20~1"in ourview, paqe

9t" What w,e wrote, when w!e weren't in the office, page 96,
PIEFC ,~ert1i',ed
T~i'~ 'CO~'~ ef rh,'!' E"OiI'J'C~l'st iis prilnte~ on pallP er SOU!IfOed fmrn sustai !1~bly~~UH!gee! '~mre:t;t:)oe<mn'ed by PIEIFt w~v~+pm.,ofg]

Books of the

r
© :201!1 Th~ IEOO{fJ{llR1n:stNI~WBP:liIP~F IL1I11rit~,!, ALL r~gnt.$ ~'!;~FlJe.::!l_ Me.ith'l!!r"~m$ plli!blJi(';aiIi~IilIIilH)r a~ p..9!rit ofiit n1.!!~ b~ 1i'~r»Ii'{JdI1lC'~~, :!ioor,e~ In ,2i re'b'l'iieva& ~,y~iI:e<ilIl,,f!rtli'alfl$ri~iil:it~ in a Fiy f'@li'li'fi>l:ll" by aJliliji n1lMn$. e,'I.@.rtFol)nie.[m,eehalflit'aL,. ph(ll1:'~ p~I1I9I; li'"~rdlli1lg or Othl~Fl!rlS.@, w'ithcl'uttntll' prier permission tlIrUh~ IE'(1t) emist NI@WSpmlP~r Umrihdi. rh8 .€mnam~5t (ISSt\l (i01!J~06l~} is pulbllsh@d ~@lI'jf !Nook,. xeeptfo Fa ~ r-end dOI!llD~'is.'SI!J~I by Th@ EC'{t,n{liRlll.st it4e'11lSpalP@F Ll'rillOOcl, '7S0 31rd1 n e Al;@nl!l~, 5,th Hoor, N~lvYm~ MY 100:17. nte, !ScQ\I1!l7rn~t~$~ ii'e~stei',e~ tUr.l~e!itiaIFk .of The E~OrH)'iiIl~s;t ~~'I'Sil);;1peii L~rml~" PerioO"iica~5 pos't"l,ge pa,rd~t New Yor~" W( ~,mid ;;id.ditio:na,l ii~i:!llj['1'9 offims" ~1S,'~m'I!l:S,toei[',: d ~,dd[es$ dh~!iI;9,e5 The IEooWlfJl1rii:St [1;0. IFtc»::409,,;8, St LlJ~5 ~ MO. t53146""c'!n,8,. USA. Se~i to (2il1la!CIaJ ~:;;~ pl1lbl]c2iitiiol1l$ [fIl2li l ((alFlaJd,i'21n diistriblllrtfon) ,~B.Le$aJ91r1l;!e!iR1iel1lllill~_40CK12'331L. R'e~uJlilIlulfldel:£vE!i'a,bl£! (a,Fi.9!dr'i2l1f'ia.ddl~5$E!$ ((I ThlE!' ['C.(!I1IO~l:st. P[li iSox Jl!:!8 STIlI!Ai Tor''OIilI1[,O,(Itt\! MSW lX.g. GST R1l2:3 2'36267- F"i'i'Fited by IRlRnOFi Fie~, :9~1i',2isbu F9.. VA ,2:265,7

lnvestrnan s

Trust Services

Credit & Ban ing Solutions

Asset Mana,geme

RBe Wea~tlhMa,na,ge'm'ent 'is 'the global wealth business of R,o'ya~Bank of Canada and, affiliates. *:SI[orpio Partnership Glob,at Prlvate Banking KPI'Be.nchm'aJk 2011,. The v,alue of lnvestments m,ayfall as well as rlse. Vou m,ayriot get back the fuU,amount that you orig'inaUy "nvested. ® I ™ Trademarkts) of Royal Bank of Canada ..Used under llcence ..Abov't'! mentioned services are offered
th rou gil Roya I Ban k of Can ada 0 r its
~lffi late s. l

Now B/ackBerry® moves at the speed of

wfth 2·ye.ar wir~less svc agrleement 00 voice & minimum S1S/mo. data p ~n requ ired,

BLACKBERRY@ w TORCH 4G

kP "e R athm« 'OSSI_/, '"'bI . -.:-

, , " -. i",',- .'~ "

',""

-,
-

, ," -

, 'I

,":-

'~-

.-

• -I.

.-

'

',
.".-

FR'EE SH~PP~NG ~ 1.866.MO'BILITY

- ATT~COMlTOIR'CH -

vrs

T A STORE

4'G speeds d,elh/',ered by IHSPA,+ wit:~ eIm~a meed baekhau l Not ava~table eve,ryw here, D'eIP'~oymemll,on !goIngl,. learn more at aH.,colml/nietw'ork~
CmJerag@ and sees not: a.vaiil ,everyw1n.ejre_Credit: a,pproval req'~d. Attn",_ 'fIe'e'$,36.11 ine. Geoglra p hie, LUlsage,a.n 01 o~h,ejrt,erms, o]lno IrIJ~ons~nd restrh:,tHions aplpl~,y a.md mla.y re.s1uU in SV( terlliTh~in~dllio~, s s@@ ,0'MIIB\1' plan lWeqUl~n~d.Ii yo~ exceed y,our ilnitial~ 200MIS ,tlUOVI$an(e~, yo~ -W~IU,(]'utorlThaticaUy' be chalrged :s~or,~'of V~51~t lttCQ,m for complete d~t~li~$ and co,veralge m,2IIP~,Data:::Min .sIS/mo. 20 a datta I i[i n oven1ge o~ $15 'for EI,alclh,add iti onal 20~M B pn)lvided, All daJ~a a Ucw,a nCies (1111101 velm gle.s. mlws,t Ib'e' us.ed in th e bI~lUl1ligl p e,mlod provid e d Olr ~h,ey wm Ibe. fQrilleitled - dletaJi1$ at aH_com/datapla.rn.s, o Reg ullator,' Co,t Recov,er" Charge u Pi to .$1...2'5/m0. is (br'g 'd '~C' h,elp' com p,!,y' with govt obUgaUons and [In wgl5; if is not a ta:~or Ig ov~t reqid (hrgl. [Ea~lyIe II"D1inaii,on Fee (ETF'),:, ftftt-~H 310 '0 aysj' E.lf up to $.325 bas!ed on de'vi,eS' {d eta i ls att(orn/'eqw ipnmenttElF)_ Res,tocki n,g fe1e up to 535,. Ial,es and ott he r clharg es a.plpl,y'. 8la c~8eny~" I~ I Research I~nM 01:IC n0 and! re ~aJtedttradema.rks~ R M® ~almes~ .allilid I~CigO\5 '~h,e,property of Resean:hl hl M'DtJion Limitedl i),nd aJre' r,egistEred ,anf%r usedl iin '~he iUI.S" and (,oJiLmltJmies around the 'wol~~d, sed unde-r Uicense' 'from Research In M'DtJo:n ,are U Urllited. Screen I~mages ,silmulated. © 20:11 AT8J Irni~e.I~iectualProper~. Se'rJice provided by AT&T 1M lity. AU ri'gbts resereed ,AJ&I & the AJ&T log 0 ,3 re tr.ademarks of AlaJ InteUedua l Property; obi
1

L'irnUed ..tim,e ,of-fe fl' BiacklBie rry Iorch with new :2~yr 'W ir,eles5, a'g rm~ of $39 .. !9'or h~glher and ml':n S15/lm'll da,'tfJ plain ~s $14'9.99. Wirel(ess, Service: Sulo]ect to Wilr,eless ClllJs,t(imel~ Agrmt 9

. The worLd this week

Polltics
The Muslim Brotherhood won "f an even b" igger proportion OJ the vote than pre d icte din, the firs t .of thre e sets of vo tes for E:gypt's parliament, getting .3 7% 'in party lists but raising its seattally to 46'%, after a series of run-offs in single-member constituencies, The Salafists, a more extreme group of Islamists, surprised pollsters even more, getting 241% of the vote on party lists and ,2:1% overall afterthe run-offs, The Brothers said if they won they would not team 'UPI with the Sa afists
. . '. .".... . J"

The' Econo,mist D,e'cember loth 2:0.11 9

'Fundame'ntaUst, concerns
'I -. ~. '. . -,,'. '.' .

'I - .. '

I' -.

.". "'1'

". .'.

of Mazar-i -Sharif as wors hi uppers gatherecdl an dl ,were a. rare form of sectarian violence in the: country The next day; 19
':.' .. ' "1'"' "," . '"... (. ,.' _',' .' •. ,".
I ti .' • i .' '. .... _'."' '.

The ~'eadersof 3'3 countries met

in Caracas to foun d the

I '..
(

Communityof Latin Ame:riC3'R and Caribbean States

"CELAC:~
" ,

people travel ingin a minibus were killed 'by a roadside

bomb in Helmand province, India's communications

- - --.--.--- .-d .-. ey . cone d-emnea th e American economic embargo against Cuba and. supported Argentina's claim to the Falk:
..

j.

..

: 'J"

-Th-ii!-

.•

....

I'"

·'1

['

,"

""1

ministe r asked Googl e, Face-

d A-h .::. .' aEi- '- ,- ,'U' ,.ea·I.OI, uropeanumon

'If--- ':
+

II::

as. Sarkozy, th e French president, caned for changes to the

Europ ean U nion treaties to

~:U'm mit JII." - -- -,-.G_erman-,j;, ," ... ,.

.i . .

An gela . M- .erkel tho. ,. _ ,I{;.w. lL.\.~.w.l!! . -'h - - -,ill - -- - -·-'1 cnan-- c e I1-or"ancd N" .1:"-C 0. .1
'0' ~

14'1(;,

,"

,"

["-i

','

••••

'.

',

.ll'

'-1"

but would form, a,coahtion with se cularists, The voting is

due to end in, mid-Ianuary Kuwalt's emir di ssolve d parliament amid a crisis over allegations of corruption, Ele,ct:io'ns will be held wrthin ,6"0 days,

enforce tighter fiscal rule s" 'Ihe pair said they' wanted aillieurozone countries t'o introduce laws limiting government n defi ~cits a nd_ for snendth rifts t-,u ""-;. Il.U1".. . ... L' ..,~, WI.Ift" 'be punished, David Cameron, '. ". t h e British prim e minister, -,n tIS, came under pressure from Euroscep t" mem fIS a f 'h., ic is Conservative Party to hold ,a referendum on any new treaty
II,;;;

book, Yah,o!o~ and Microsoft' to screen user-generated content fo ,rl: offen .~,~-:-~,c'm'. ater ia ~I b.'~ fo..--a ttJIl!.. u.U~. v~, ., a.!~II;';.~.w. llIO;; 'm" ~ goes online. Thlte move is aimed at protecting the sensibilities of Indians from blasphemous materia "though. the v olume of content posted online by India's loom in= tern et users makes any such re gu illa tion im p ossi ble.
jjiJi.

110j[! ..

lands '(Ma~.vinas)~ Butthey did not support: a plan. 'by the host, Venezuela's Hugo Chavez, to give CEIA'C a permanent secretariat or budget,

Canada's prime minlster,

signed, an agreement called Beyond the Border under which Canada will share inform .I.uh. I,., lIl'I... ation abou -·t- Jt"''''''' people . entering and, leaving the country while the United States will ease some security checks on cross-border trade,
.!II. ,

Stephen Harper, and America 's president, Barack 0bama,

Ja.pan

plant, wh-ich was seriously'

'5 Fukushima

nuclear

.,...1..';:].

I -.

. 'I'_-

I .- ,~-

-I

-I .' -, - - _.-'-'~ ',- - ~

7'

- , ~.

. - ".

•.

,..:,,_'

l - " ..

- _. (-

b- . (-

.'.

.".",

'

]n Russia's pa'rHamentary' ele,ctfon the ruling Un~ted

Russia party of Vla,di:mir Putin 'wonjust und,er h,alf th,e 'votes, less tha.'n ~tha.d expe ,ct,ed~Afte'ltl

The Uni.t:ed State'S opened a "virtual" embassy' for Iranians that offers them services such as.'visa Information, Th e real American embassy in 'Iehran has been closedformore 'than 32: ye-31rs~ M,eanwhfullie",[ran ,cmaimed to have sho,t do,wn an American dro,n,e a-verlts. ,€;,astern bord.e:r~

damaged, after Marich;s earthquake, was found to have sp I' - inig a 'ke- 0' .m AIS' tonn es _',,'U ':': of contaminated water spilled nut of' the plaint: into. a nearby wastewater area,
I

'''!il 'IJ!::iI'~1 ~'Q

I

~"iI!

·s· .....

I"

,I

0 ,!!fj;~ ~_

.' .....

:,

,I~."-:,

Progre:s,si've 'value s

~d 'Wl~es.:pr,ea.';d f,eports 0:f'

'votlll'ng ir.regular.itie;s, Moscow' saw its 'bmggest :pioliti-cal protests:in 'y'ea[s~S'eve'ra,ill promin,ent opposition, figures were arrested and j .ajmle,d~
+

Laurent IG'b,agbot. the for,m,e,f' p,rle.sid'E'nt of 'Cote' d~lvo,ire", appeare,d at th.e I:n,tern,atfuonal
Criminaill

upio,a.d,ed at billo,g- post ab"out the king wrrutten fro,m Colorado, but.'w,as arresled.'w'h,enhe ,entered,'Thlailand.1I
'he new battle of' Caja;m,a rc,a Peru"s new pr!esident~, iOllillianm'a Humala, de clare d a. sta me .a f ,em,er,g.ency in the· northern

mo'

ThaUand jailed a ITh,atID:-b,o,r.n. "" t: A"' ~_merh:an citizen lll'ortwo-an d a -half'-ye'ars to r eli mm,cisingt:h,e
".~.

'0" 1.~1iI. ~. I~f' }IO' "'l'r~h' j., ....

I~

'G'

' -0' ._.",

":r-d'In'n'. ·u

Barack Ohama went to Kansa s deep in th R',iiiJiP-:'UI- blican 11;;;1. .. heartland, to give at big speech on the economy in which he attacked Republican economic policy and said America was a.t a. ~"m,a,ke-'or-brieak :moment co' r t-'h· 'm' d elll c·l -. M' t· .Ill! Ob,ama la~d oU~'hisc,a,se'in th,e same t'Own w'he-re Ied,dy Roo= sev'elt caUe,d ~or a pl[ogr.essmve UneTT'l' na~l" o·nall"sm ~...1n 1-91'1i10 '" "JiL ''"vv ~
"'" ,., .. ''!;;;'!;;;.'';'' . ,;i;;'I; '!;;;

!b'1;.Ll1.

.11

..

0. .'~,.

II"

'.1

00 ~

I ..

"ll "" e"; ~, .. '.. : ,n,;::jl;j;

1-

:1,_IIi,..i

I-I ."_

:1-

I'

El,e,ctions w'elle held mn 'Cro,atia. and smovenia,~B;oth w'iere won 'by ce'n~r,e-lliefl pl,artie s; as pre'dieted in C,roa.Ha's !case, but surprilsi ngly in 8m oV'lenia 's"
Italy"s new p,rime minister~
~ .' ,o.ntm~. nn.OlIn.ce, d a M ,armo M·' a __ ~nl'. ..d'i ." 's-'p.o nl :
1Ik;;.

Tlhe :first fb.r.m,er h,e'a,d of state mo g() be·fore th,e c)Qur1:, he wa.s "th' '. ,C h ,a;rged 'W11- crJmes ,a.galns:t humanity m,n the ,aft.ermath of a disp,uted p,.reside:ntilai ei'ectio:n at ye,ar ago~
'1.

C,o:urt funThe H:ague'~

d,e:par~me'nt .of Caj,amarca and. s,!enmtroops to qu,ash p,rotests. - -'.-- -t . ..]lna.s ·c·" - - - - - . , agruns. M'~- - - '_.ong:a,~a $',4..8 "·~~1"1 iildl d '. b_lJILdon, gOlll- an:. copper mInIng
. :' " • .' '.. :..;. [' 1'.,'
"'I I ". -. ._..

c·

projei(~t Day ,of mourning

:n,ew aust,erffi:ty bud,get.of €30 'bUli.on ,(,$4'0bUlionJ funtax rises

a
d". _

sign.ed und.er an eth~,ca,lli,cllio'u d~, th!e sixth ministe:r to depaIt this ye,ar o've'r co!rrup,tion
,clliaims;;

Bra'zU's ].ab!'our minist,er re=

H.,erman Cain uSUSI}en,dedj'~

I'1 "g' c'· '· . .,j;", 'Thll" :!n' '_ " te' _. U

.0 110;;

-~,O~&~rl'it=il· W II;;;OJILllla . 'b

m-inis.ter 'brol{e dow,n i.n te,ars as. 'e h ,.-~ anna un,ce,:d- b~ s. e ",-_'-".,-_.-. a_lg sh,a:ke-upi of It,aly;s g,e:nerous 'p~en.sion syst.em~ .
.-;-;:c
-I .

1-- . -'1'-"-1

'-:-

,-_.- -.--, :.-

,g,o.v-ernm en't, un.del press-ure from th,e markets. Th,e 'new prim,e' mmnism,er is E]io, d.i Ru.po, a Socia.list from the Wal 000 (F:rench'-sp e a.lli.{i n,g) ,eomm uni ty;

After a 'wo:rld -rec.ord 5,41,days; Belgium, 'finaUy' form!e:d at

most rumporma.'nt d,ay of Mliha.r"S·_·h"'·.c -1If~-'-'II , _,s r,a.m, 8., , ma.,l.eSdv.a. ",Th"·e b'-,om"b-:"-" ,eJ<p],ode,d n'ear I,eUgi.o,us smtes.in I(abul and th,e n.orthern to'w:n
1-'

Two bomb blasts in Af:ghani," s,ia-n ltrulled S9 people o:n th,e

Bra.zn~s S,en,at,e ,appr,oved ,tl r,efor,m of the country"s 'Forest 'Cod,e~ re,d'u1cing the am,ount of fon!st ,coveI' farm!e:rs are, ob,= iiI~ d- . ~t ~.' 1IlIllg,e~, t 0 mamn'·. a.m'nt. bU,I., requllrlng .. t ~ th!em over 2,0 y'ears to' riepilant ar!eas ml~-eg,aUy' ide fo:reste,d~ This came as the governm,en.t an.-' nounere,d that defor,esta,t~,on in thie; y,ear to July ,had fBJm,en to. t:h!e lliow,est·level sin,ce s,a.t·,eUi te m ODm~ ~ b.eg,an 23 yie~a.rsago., hJIl'ng .~ •
+

his cam,p aign for th,e Re-:p!u'bU.can pr,e:s.idential :n(lminat~,on,~, +0 effect ,en,dling h"s ca.ndmd,aticy~ Newm Gingri,c:h, is mkeID,y to. be *h- ,.-',maIn b····-.,,-I··-·fi·-·'i-:--- 0 ..h--_'.15 e -,~.,,- _e.n e C.]l,ary If:' -·'·'~' with,drawal fro:m th'e r.ace~
I~.

'_I" ,,-.

Rod Blagoj.evic'h was :se',n=

[fneed to 14, ye',ars fun:prison. for at ran,g,e of !cri.me s,~ ru.ncl ud~n,g trymng to sell Mr '0 bama~s old Se·nate seat 'He: :is m:h,e s,eeon,d ,conse,cumill've fo,rme-r'governor

.of DHnois. mobe jailed for corrupti,on~

••

The world this we',ek

The Economist Decle'mber 10t~ 2011

Busine,5s
Standard & Poor's put isof the euro zone'aazmembers on w rus .w.,w.~c,(;iIl!~l!L v~ ere d. ~it are h- ',,' '~.~p: W!~., is already on the list and Greece ID,S at ill: risk .0'(' a de fa ult)~
in,;O;a~I~~'~:~'~
-

.JIl~

.. JIJ, .

(ICY,'_

','-'.-:l

Along with Italy and Sp'8J1tn:"

,s,,&'p threatened to downgrade

Haliburt,o:n,; one of ~t'smain. contracto rs in th e stri cken De epwa ter Horizon prole ct, of destroying test: results from the cement that Halliburton used on the rig' before it exploded. A court in, ' 0-1 ~ near ctarms m New '_[ eans is to h for damages related to the
r

D,P accused

A panet mvesnganng an ac-

'~I~

~.

which rcachcdis billion app

ruts ratings for AAA countries such, as France and even Ge:[many and gave warning that :it

might also cut the credit rating of th e Buropean F~ nanci aJ.

Stability Facility Us decision ca used t 'g': in '8:··I' '-.c., ,-' ,. ~, '.'

[!fsul ting oil -spill disaster in, the IGulf of Mexico. Halliburton SOlid that 'B,P had. chosen to mischaracteri sle~"h,€! tests, t which have "little or no releva.. ee to the case" ~ n
~'i

counting scandal at O'lymp,us produced a damning report on the japanese company's management, which it de scribed as. "rotten", Headed by a former judge on lapan's Supreme Court, the panel d etailed ~he scheme that executives allegedly used. to hide investment losses by parking them in offshore funds, Olympus, h .. ~ W h Ie:,. co'mmru,SSJ1on,€,d. mhe ." report, IDS being investigated in Iapan, America and Britain~

downloads inJum~

'-0'',' ',U· " ..1 G,~ "Q i"~ !;;;.

-,

U'

if':Q, I if': ..i:lI'Wi'!l;;;; Wi,,.

with some poli tician s accusing s&p of retaliating against European proposals t,ocurtai] the, influence: of ratings agencie s~S&f' cite d the in crea se d systemic risk 0 f a failure of the euro zone,
The unem'ployed count

I Brazil's GOP Itn

~~nRlarats l
%

'boo (i':: ard step down soon,

, ,~ ~'

The

JOn~l"iIAO , ~. JL~"

1"'S '~.:xp!,~-.. .. , t-o ; 0---- ected ~ ..•.

Research In M.o-mion said it was writing downi ts inventory of' :B,maclkBerry rmayBololks by $48s:m because ofthe steep price discounts b eing offered by' retailers for the ta bl et. It is another 'blow for the maker of the HI I1ckB erry;. w hich ~s struggling in the market for smart devices, The PlliayBook hit the stories ,at $50,0 'but: can now be 'bought for $2'O~)", ltIM~S h ice .. S,· ,a.r,e p"n,l;)€! h ,as f- 1'1 b y 7'0 % ,a. . ,en _ • SO far this ye,tlf.
-. "".. - , - - .., --. '1, ,-- . . " - .. .=. ,'

aTII'5!j,en previo us ,q usrter at o

12 8 4 .-.....- 0 4 8
-+

I,!

Ameri ca' s unemployment

rr

rate, fell sharply to. ,8,.6'%, in, of the decline is due-to more people simply giving UPI 1001\ing for work and leaving the, labour market, but revised ata ~ J' I... d a ~Ie0 sh o' ' W' ' '-- d th .al~.i ob gllowth was stronger thro'ugho'ut the autumn tha.n :had
I .... .1" ~".

November, th,f lowest it has been since March 20'09~Much

B,razillts e,conomy was all but

~I.I

..I

~.

1 1. .,

••••••

0
~

,"

..

*1

_I

I_.,

n'r~-v-_--NiOI JIF" ~ . JIL u- ~

's;;'!l-y··~ iOQ'n··~h' ,0-' ,u-g':'ht·b·· lIL··." . :

, _.' _-. ~~,
"!Il

A study prel)ared, tor ,an .Ameri-, ican niatura~,~,gasI.ad,e 'body b,y t

IHS,
. --',-,',-'

flat: in the third quarter cornpared with the: previous three months (b'ut grew 'by 2..1% compared with the same quarter run 20101., The- global el.-o· d own has h· urtll- cap. ~t-~I]I w ~. ~ai s:pe'n,ding ,an,d the i'nd,usmrial selctoI :in BrazU, ~lut mo,s~: .n= a aly··-sts 'were surp- rise d lJy'~thiS '. q,uarter's p,1'Wl,g'lf In co.nsum'er s:pen.ding, w'hilch ,ie,counts for 6.,0%, of th,e ec.on,omy~
!UI\ . .. .' . .."
·;.1

Two big online g,aming firms set mh,e price range for their respective initia] public offermgs ~ thi s m on th, ater Nexon, which, attracts 77:m th , . =- ,,-· p 1ayers ,at montn, h .opes to IBIS- e' d'I.. To' ,'k-:- " , to ""11' ~ ..,i. b'~lli ,.1 ' ',,:, n' th 1.1 on 0' J)'I" yl 0 S: Ex-change in what will be japan's biggest IP 0 of the year, . _Zynga, w h 1.-. b nch boasts 26-0:m g,ame:rs" hopes to raise a, similar
'. ': . , 'I' --I .... '. , -, -.. .. ,...'-, .. ,.... . .
"11 10 ,'I!b~

A dosed shop India's government back-

tracked o:nits recent decision to open up the country's retail

industryto foreign super-

I.' •. 'il!... \..

i'

...

'markets i'nthe face of protests whippe d up, by politi clans .. Indian shoppers would have benefited from lower prices and investors had celebrated

amount as :it floats '14,~3 of th e % company giving it a, market value of around $7' btllion. Both are- expected to be heavi~,y oversubscribed.

the proposed reforms, But .= middlemen, who would have, suffered 0bjeeted .. In China competitton regulators approved Nestle's acqui.-:
--:-,0 ..'!I!;;;;.-::iJ,j!;

.[JL .

".

tI

A'pp,
I_

1_'

I:

of the lo-bUl~,o:nth,app from its ~t .- I.e ,And ml,"'d8t.ore.~]lso Id th. 9~binion.th,just a 'month ,agu,.,It' is eatc'hin,g up fast with Aplple,
1-'

G····· ~. m:atfl{'E:'"d- t'h' e':·d-·.. , .. ~II ,. '-d-' oo,glll'e . . l, _ I.· ownJlloa.':

'-'1'-:-"'-'1-' ..~-- i··-'·-··<·'
:.~ 1--:'
,.. . ,.-:' -:,

i,P P i,nd. liiI w'ay'!

s:it~ of Hs:u Fu Chi, which on ~n d·b:~ C'Ul· :' S .. .. , mak' e ifi'-W-' ·t,(, a ..•. _};;:), ..I~;,.n'.. o:n.e of the bilggestfofleil.gn ~akeovers of a, Chfun,ese firm~
....•.. '0,0 oj, '!b:'I(;;' ,Il:'!

'If!

:1'

Othie'l" ,econom~'cdata and news· cain be fournd on Rages '204-;:105

·~lli hal sL__ e,pswL",a,CCQll,n. tID 6 0'0 ~or .. ~.' · !of ,aUnatural-gas ]p1[oducUon fun A,'m,erica. by 2,0'3-5 ,and s'upp,ort
,", . . - ',-''. ',' .' ,-' ',- -I - .. ' -. - -', ,,'," -.'.:_

Gl 0 b!al Insight forecast that

1~6:m obs ~Th,€! stud.y' :proJe cte d j ~hat c.api tal sp ,e~n,din,gin Am,eric-an shal ,€ gas 'woullid
,amo'u'nt to $:L9 trUUon betwle:e,n
""!i1'OlO' ~ _.I -",._".
''3I1Yl ~m.l

d -,;"3' 5 0

,":: ~/. "_". :: _~. .

'II

MildAm-er~,c.an,En.er,gy~at hollid= fungco:m,p1an:y (:on~rolled 'by Warren Buffettts BeJl~shire Ha!thaway~, saj,d it: was lbuyi'n"g m'h,e 'Yo'paz Soruar 'Farm :in '" i '. ~'h'~' : a mlorn ~- W Ie '.' ' ~ i'C-' sou.~ ,em a '. ·'h"~',-.'h , wUl be one of the larg,est pho'!ti,o"~~O,]I,t p- ,0'W'iOf' lin ~I,a·- nlt'~, th,o. ~,~~ ~n· VJII worillid'wh,en futis c.omplel,ed,. Mi.{llAm,erilcan"'s. b OS-S", Greg Ab'elli, said Topaz. shows that solar ,en,er.gy is ,eom.men:iaillly viable~ lS,ut following t'he Somyn,dra s(~.andaJ.) wb'irn C,Q-Sm. m·a.xp,ayers a iortu'nie!', sp,ats ov,e'r gr,e,en subsidies s:how 'no sfgn. of !coolitng~
'C, ". '

I~,

.!tAlJ!i,~,

~.,

'

.~

~~,.

. .JWI Jl

'I!;;i

, ,GOOD"1

IL,UC~i~'

sow
'Whs'n you look at the Chevlr,o,let Vo~itare' vou looklnc at steet end plasfic, or are you lookinq at software? The 'Volt~ an electric car with 'Q,as-,po,were,d extended rang,a, contains over '10 million lines of code, more software than you:'d fli'nd in the avionics and navigation systems of a modern fighter jist. Chevrolet turned to, 118M help them design the control to systems andl software: for the Volt, ,allllllowln'Q them to dB~ilverths rovolofionary car in 'far less time, than development typi,cal~ytakes, US~lng the R,atiionalll®platform to d,esi'gn the car allowed ~'nginee:rs around tbe world to collaborate in real trne, 'which helped the Vo~itbecome the 2:011Motor Trend Car of' the 'Year?A smarter business is buiillitor smarter software. systems and services

l.et's build a smarter pianist ibm.com/ccllaborate

IBM, ~'lfeIBM Iog;J. :i~m.rom, ~ati0rn3l Smartel Plane~ and Ihe pla,net iron ~~e'~ademarks of IntetnatiOO?l1 Business MocJ1ines CCJfp~egistet"€d in many jurisdictions 'M:lfkMlide. Other product and seruioo remes might be r tratk.~Jn8!rks Of (BM or mll~rmmpan~;S.A Gurfijt11 list of IBM trademarks ~s.a~ilablt: an tltf:l"l W8D;3rwWIJ~.lblitGGI11iIegal~~adMhrtml © lntr~wnattronal BllSi~~ Machines CQrpomtlorl2Dl1.

I\

'\

13

The cracks appear

USSIA"S e ections are not in,tended to produce surprises, just as its streets are not meant to heave with protesters and its political leaders are n ot supp 0 sed to be publicly booed, The coun"''t'- -:lis "m a ,.'_.~"I_, d d e mo eraci ~ llly' '.' "r an ase ne nocracy with the media muzz ed" on y tame opposition candidates a llowed and widespread vote-rigging, is designed to hand big victories tOI Vladimir Putin and his. United Russia party Yet the Duma election on December 4th produced an upset: United Russta's share of the vote fell from .' ," yen 6,-''01: it -'['urn er- .50,-%_:","gmv~ ng - "'",I~,,'on -1" a ,-:ll'i - maj onit y:, E,--·· - more re 4 10 I~.O md -, -:::- [':~",'" -- -' , - ,- y sum r I~' markably; demonstrators took to the streets in the biggest pro°arC" - ha -- - - _~"~:Uua ith - - if]P' - ----" es 'R- sra xus ~'U t~sts _:' C"S" has seen In yes rs C~I. n timg '~R ssia 'WI. ,_,O[U'~'tj"m b efore troops poured funto stop them (see -,age sSJ" Smaller p-rotests took place in other cities, Now some 17~OOOpeople have signed 'up for a protest ion December loth ~nRevoluti onary Square, Moscow's main public space ..The government has asked them to find a. different location, These events constitute the biggest crack in Russia's regime since M'r Putin first came tOI power in late 1999i Th.at they are happeningjust as he prepares to return next March for at least another six years as president is no coincidence. Mr Putin's power has rested on two foundations, One 'is that, despite his government's contempt for human rights and his tolerance of the kleptocracy around him, Mr Putin had le.. gitimacy because he was personally extremely popular, The other ts that, thanks largely to ever' higher oil prices, he w-as able tOI ensure steadily rising living standards for Russians .. , Both foundations now look fragile" That does not portend an imminent end fen" Putinism; but for the first time the prospect of a p,os:t-Putin Russ.ia n~)longer seems fa.nt.asti,cal, That sh,o'ul,d b'e- ,a, walte-n'))' call for Russia's me,ader to, ,embr.ace -riefo,rm~
-I

-t,t

'I

'I

'I -II'

I'

-~

o:iIl

==,

~',

£"00

- .' --

jI'!i

The :pop'ularity :stal{es, Mr Pu,tin s'tarts w,i'th certain, str-engths~ His :p,eo[ple ,af'e·h,a:rdmy 'y,e',a.r.nin,g: for H.beralism: in ,areC 8'nt p 0]1 'b,y th'e p,€!'w F:oun,d,.ati ~)n,[ Russians, by a. mar.gin, ,of 57%,to J2%,~ p,referne',d to, rely o'n stro!ng "lIn Ie "ll,d; ,e' [- s',hi-~'p' 1- a- "'ho'IV t- -h ·a·· do;°m- '0--"I:"'r-'a-' ("y' tOi d:e-' l~'v'el-''.g-o- o,d-: oo[v':' 'e'r--nIl . . It.... . llJ.,.·.· ..... .... 0'" .", -ment And. by the stand . ar,ds ,of lea,dels else:wh,ele, Mr Putin stiI'I s.eems :p,r,etty ,popular, with ,a:p:pr-ov,al '[,atings of around 40%~ N()iliin,gis likel'Y to, stop him winn'ing the p,r-esidentC:y in M.a:r!ch,~ B,ut op-in.'io[n is cl.earlliy mo[vi'n.,g ag,ainst him.~Mr P'u,tin" who! is. :now pr"m:f- minist,e:r; s,aw his p!'opularity start ,to fall th,e m,o~ men.t in Septem'ber when. 'he announ,ced his 'plan tiD swap jobs with D:mitry' ,Miedv,e[de'v, the p,up'plet h,e installed as, p:reside:nt afi'er 'his first tw,o t'er,ms ,ended in .2008~Soo[n afte-rwards Mr ,Putin was 1bollo'e!d 8lt' a :martialli~,arts (::on.test~,a sta.,gg'eltn,g idea 'onlli'Y a :few :m.o,nths agol~He cance le,d. fu.rt:her pu.'b i,c appearances" b,ut t'he su'bstitutes he s,e:nt wer'e booed in 'his :ste,ad~ This ma:y :not be ,a ~'Ceausescumomenf;~,'w'hen a c,od,dled dictato'r 'w,a'kes. up to p'op'uia.r fur~ But mt'is stili a big shocl~~, A bigger p,r-o'blem for Mr Putin :is that the, ,d,eman,ds of the econom,y' a'D,d of his po,litic,al op,eration are .~cre,atsingIy m, con~ n flict In or,der to, ho,l,d o'n.~o p'oiw'er, 'h,e :has kep.t a ti,g'h.t ,glrip O'D, ,th,e'
i
'~'" " I , ••

eco .·,om~,As a result both Russia and the regime's patronage system remain heavily dependent o!n oil and gas'!Corruption and inefficiency mean that the budget wil not ba ance unless oil prices stay around $110 ,3, barrel-which, given the grim globel outlook, they are not likely to, Capital and talent are fle eing an economy that offers few opportunities. Growth rates are likely to come down, Without rising living standards, resentment against the government is likelyto swell, Twenty years ago, ,8 similar contradiction between politics and economics brought down the Soviet 'Union (see J2,ages.27_'~ 110'}" 'Weird'Iy~ Mr Putm seems to welcome comparison with this period, He,touts as his new foreign-policy priority a "Eurasian Union't of form 'ter mon or rormer·--'S-·'".:,~, t repun 1CS, an ,he . ets his supporters sovie n ublics and ae IS 'I' ,',' praise the Brezhnev years+another period in which stability ' ~-n h Ii h .' turne d to stagnation, Ye:'t' e must rear tne pOSSE_ ·"b"'.. that r.e-S,ES'= n mty h tance to 'hilsregime, too, will grow Can he avoid i,t?' Mr Putm presents himself, first and foremost, as ,a, strongminded patriot, If he has his country's interests at heart, he will respond tal rising discontent by opening up the economy and curbing corruption, The criminal-justice system has become a tool of the Kremlin and its commercial allies" Russians of all sorts loathe such cronyism, Both ,Mr' Putin and Mr M.ed:'" vedev have talked about tackling graft, but done- nothing, ]f they took action, they would lose some power, but win kudos, The altemative is more repression, The decision tOI cam in the troops suggests this is Mr Putin's chosen route, He may entrench his hOi d in other ways+perhaps by distancing himself from United Russia" widely derided as "the party of crooks and thieves", or by dumping MI' Medve-,de-v as prime minister, Seasoned. observers also expect imagined threats to the state, to which the; government reacts 'by' cracking down, For a mod, ;_ r-- I tin .-- eds onh to ~,--l nexxt door t,'---:I'---,e~arus, wnere eMP runn n,ee .S oruy 0 roos -.. oor 0 8: I· .-',- '. wh "'--,A yaksandr Lukashenka clings on as Europe's last dictator .. , SU.ch an ,ap:p'f'o,a. c_h. m,ay 'worle,. fo-r a. while ..His regime has a tight' e -,lough grip on the security services tOI sU.ppress d'issent fOI so,m'e tim[e~ Yet as the: o:I,d,SOivi,et Un'Io,n found (a.n,d tod:a.y's
1

~&

."

'Ib-" ,.

..\....

i!

:.'

B,eIarns is finding);, economi,c: pr,oblem-s m,ake repressio:n har,d',. eJ t,o sust.ain,~ With th.e :i.nt,er.net w,atching,[ it is als'o ,diffi..cu'It to keep e--ngin'eerin,g mar,ge-s'ca]levotin"g fraud~, :her,e ms .a. gr,owing T ,_-;'_-k·' 0 ,'f asoCla,an,po, '" 1"'b,~ca ex,p,oS10n,IDUSSla"evenE ;>, -I 'if-- 11S00 'I '-, ' ~,-1 'I - do; +-" ---II ' "- 'l-~--,' _,"'- - - '- R' 1"-," -I "t ..,:'tlIS early an,d the op'pos,itm[on is too ,disjoint-e"d for t'her'e' to 'b,e' 'mu.ch :h,op e ,of a Russi,a.n spr.in,g~
I ~",

Do,n'lt be·t ,on a fallin:g tsar'

Th.e i.de,a has tak,en, 'ho1d. abilrOad tha'l' Mr Put~n"s regJme, th'ough mild'Iy dlis.tas:te-ful, p-r,ovides smbiUt¥ That h,as prove1d, wrOlng~ ,As m,any Wes;t'ern ,c:omp,anies ha.ve found, Mr P'utin has, failed to b,uild the rules-based system th,at provi!d:es t'he economic s'ecurity forei,gn m'nvesto[:rs 'ne!ed" N',o:r~ r-e,cenl e-v,e'nts :sugg:,est, has as he ,de ivere,d. a p oliti.ca.1 e quilib [mum .. [t is :n'ol'just' this w"eel{"s , p:riotests that: ,are a rea.s 0 n fo,r co,nce-r,n: rising lliawle-ssn.fss :1nth'e '",- ~ ' uc~-[u,~ -:,- ~I :-'Oil ,- --,[-,,-- -'-IS' nO~JU- lIl'O=. u,. I,U!~, !ll'or b:,I,.:-, 'b:,,-,:-t no" r-~'hlCI'a'l" ''OIIS''- ,p m'QlLYCuus - e"p=o_, =em- ,- --,;~,..- '-s,t...~-r- R'-' 's'S:'''~I-_ u,. ~- -th,e e'n.tmre' region~, Ru.ss,ia is nOll stab! e~]t is 'rigidi U'nless 'i'tsts,a:r m'oves to r,efo:rm his r'ea'Im, it wil] D!eco,me m'ore dange:rolls:~Dloth fO'l ~tsneig'hb,o!ur.s an,d fo'r Mr Put-in 'himself~ _
l

:14 le,ade'rs

'The Economist, December iotr ,20Jl!1

Islamtsts, elections. and the Arab spring'

And the winner is...

Political Islam is on (he march", The West should keep its nerve,
S, THE Arab spring tum ing into

couragingly modern, and secular, Indeed the young Facebookers and 'lwitterers 'braving: the bullets in Cairo and Tunis seemed to give the lie to the dictators claims that the only alternative to,the thuggery of a strongman was mullah-led theocracy, But:look across th'e Arab, wOIJ.d -oday' and political 15lam hasjumped to the fore (se'epa.ge __g)~ Egypt offers the most dramatic example, The relatively mild-mannered Muslim Brotherhood, 'he best-organised of the Arab movements espousing an ideo ,ogy that bases its message on the texts (If 1:51am,is winning the three-stage election to Egypt's parliament 'by' a wider margin. than pundits predieted, with 461'% of the seats SOl far, Far more fr~ ghtenmg ~sthe party comin .. second, with. 21% of the seats, The Salafists, g whose name denotes a, desire to emulate the "predecessors" who were early followers of the Prophet Muhammad, decry alcohol, pop music and other aspects ,of 'Western lifestyle, They want to ban. interest' in banks, think women should cover themselves and stay' at horne, would segregate the sexes in public, might turn Christians, around ,(1 tenth of Egypt's B5m people, into second-class citizens and, denigrate Jews" not to mention the people of Israel, Assuming that the two Islamist parties do, no worse in the next two rounds th ~smonth and next, generally in more conservative areas, they will control ,a clear majority of seats; the only question ~swhether the Brothers will keep their promise not to team up and rule together,

b ~ '11 idwi hi .nreax midwmten '7' E I"mertrus Ear year the revolutions sweeping through the region seemed en-

Under a C,rescent M,oon, In Tunisia and Morocco Isla-mists of a. similar' stripe to the Brotherhood have handsomely won elections. In Libya, with Muammar Qaddafi gone" they may yet do so too, In Syria they ,a.r-e' prominent 'in, an opposition front that may eventually displace Bashar Assad. Mid, fun Palestine the Islamists of Hamas a branch of the M.uslim Broth.ers th:at still Oln pap,e:r reje,c~tsthe t r-' 'Ji1·S-:,' s-'e-"ii""'U[-O a-S Dve- 'r-,,in con- 'trol o·'f-- G- '!JI"'J'iIJIlE'v'e- n 1i'n ~ll~ a-' D u·... ... >. S-~lte of ]s-'[-'a-,ol cha'otic Yem,en" ,an ]slamist part.y might w'ell'emerge as the biggest p,arty if electlo;ns, are :held .as p,rom'is,e,d. In Iraq Mu'q.t.a.da al-Sadr, ,at fiery :mullath., has th,e p ow,e'I t(J v,eto! ,d,ec:ilsio:nshe dislikies~and has suc,oeed!e,d in, le'nfor'cin.g the re-mo val of a] Arn,e-rican troo:ps b,y' th.e en.d of the 'yeaI~ 'T'hl()u,gh 'Risl{y and, messy unchalill'en.,ge,d at any b,a.l1ot b,ox" the ro,yaI ruJ.e-rs of Saudi Af,a'~' None of this 'wiII be ,easy fOf' olutsi.ders~ The fOIe:ign 'policy of ilia. rem,a.in in hoc k to a deepIy into erant c ,eric,al estabIish,,., E,gyp:l, ,the: Ar,a'bs" Ieading co'-un,try;, is likeIy to, I)e Ies:s ,am.enable to the West ..Even miill,d,-mann,e'r-e',d, Isla-mists may still pJo;ve na.rmen't~ Mor'eov'er" the two 'oth,er great. pe'op'Ies 'of th'e re,gmon" the r,ow=:mind,e',d ,on s.o:m,e scores" .Bu.,t ,th,at is :no foe'a.s-on for th,e We·st TIlrIc$. and P,e:rsian:s~ ,are b,oth u~nd,ert~he sway of .governments with an. [slaemist .Ia'b!,eI, albeit of wildly different hue:s~]ndee,d, to d.esert: them" let .alone hark nO,Stal,g~ calI-y' ba.ck to t~heel,a of po,mitic-al [s]am ·n.OW'has m.ore ,clo'ut in. the r,e·gion. than. al any s,e-culli,arstro:n.gm,e-n~ .Dem.o"cracy· ,e'ntaiLls risks ..]t 'is often m.ess~ time since the Ottoman em.p,ir-e colIapse,d ,a most a ioen,tury :like :p'eo'p' 'e everywhere" A'rabs m,ay m.a'ke b,ad ichoi.ces,~F11o= ~ ~, ago",a.n d- h _,pe.r .lapSSInce NIb eon _.roug ht a mo._d erntSIngmes . ,a.po Utic,allslam c:,omes :in m,any shapes an!d, guis'es ..SOl far~the ver-' si,on e:m,erging ,as p:redo1minanl se,ems, r-elativ,emy be'n,e;v,olent s,ag,e to the Arab w',orld 'w'h,en h,e inv,ade!d 'Egypt i'n,17"98~ AJll this~s w()[Iying" not just for se cula.[ 1ib era] Ara.b,'S lJiu. Grity,o'ul te'eth.and c.au.tio'us ,. welco:me it~in the h,ope fhat fhe Arab,s turn aw.a'y fr,om. the :more m,ali,gn,81n·t: variety: _ also :£or th,e 'West O'n th,e' 'electi~):n'tr.ail, B,araclc Obama is 'b,eing
_iDol.
=
1.9 _'\.r_.;;)

J~

•••

',

.'

',

••

[ ...

.~

'\.,

'!~

..

~,

.,',

!~'

..

'r.'

:I ',11"'1

,I,

','

.......

•••

"IIGt~~i11

1.·.·.·.'

"

,Jl.:

attacked fair his naive trust in the Arab, spring and for not doing Th "llj] 11' more '(0 protect Israe 1-~'T at 'WIJlJl sure 1- oruy mcrease as th-I. e y' scale of political Islam's success becomes evident, Are the sceptics who said that Arabs could not handle democracy-: and 'W'OUIid, inevitably elect nasty people 'who would never surrender power-being proved horribly right? 'T'h.e answer is no, Until the Brothers actually take power, fut ls hard to say with certainty where the dominant rna instream (If political Islam stands ..But mos: of the signs are that it is. ,8 , long way from both its intolerant caricature and the tenets prometed by some o,fthe, Brothers' predecessors ,a_ generation ago, Indeed the most striking feature of the Arab spring remains the comp ete failure of violently radical Islam, A -Qaeda the murderous perversion of Islam responsible £01 felling the Twin Towers and for countless other atroctties against MusUrns as well as Christians and.I ews, has entirely failed tomake Its presence felt As peaceful political Islam advances, alQaeda and ~ violent jihadi friends have retreated to the rers motest patches of Yemen, Somalia and the Sahara desert, 'That would be small comfort for liberal Egypfians if tbe Brotherhood teamed UP' with the Salafists and then claimed a democratic right to, expunge secularists from government= and from most of Egypt's institutions. ..But that does. not seem , likely The Brothers have repeetedlv insisted that they will uphold the rights of women and religious minorities and respect the verdict of the polls, €!,ve·n if mt. goes. against them, They say they will not enforce the veil Oil' immediately ban, alcohol. As in lunisia. and MOI'O'CCO, they will seek to rule in coalition with secularists. As in 'Iurkey; the-y' want the generals who used to rule and persecute them to go back to their barracks, They 'will be keener to support the Palestinians .han Hosni Mubarak was; but do 'not wantto tear up the peace treaty with Israel. 'The main reason for Is amists' popularity is their hatred of corruption the scourge of secular dictatorships throughout the region, and their promotion 0,( justice and dig ,~ity~ words that have resonatedin the Arab spring even more than democracv ThI'C- l~la- ists a·1.ppea to th e·1·,P:·'O-iOI:r often by iroviding a -rU-I'-'" m J" -, dimentary welfare system via the mosque when state provision has be en lacking, Their 'P'olitica] appeal lies In their ability to get ,'hings ,d,one~'their TurI{~sh cOlu.nt,erparts offer a. m(tstly hO'.lp'eful 'e'x.ample ,of vig',oro'us d,emocracy:, fr,e"e me,dia .and ,e,cionomi.c miberalisati,on~, ev'en if ,th.e Turkish :p,ri'm,e mmis.ter h,as s,om.etimes betrayed ·an un.ple,a_sant'~y an,thO'Ittari,an. stre,atk~
.

\..a

=-

-~.

p.

-"

---='__:

-,.

.:'

I' '.'

-':'.

~l

'-.

.:",

'~

" -.1 -

.'

,"I,

~'!

-'j'

",

'I:

1-

-:

'

"

t p'

"-.

I'

I•.

I~

By 20,50, ".9 of the 30 lamest economies wi I be in countries we now callemerqinq'" HSBC:'s lnternational n,stwor-k can help Y'DU discover new rna ets wherev8'r they ernerqe next. There's a 'new wo Id lout there.
1 1

d Th era s more on trac e 18t' WWW ~ be. co rn/i nthefutu re hs

....... ',"

.',

..

'

"11.

'The Economist, December iotr

,20Jl!1

Ten year:s of China. in the \NlO

Shades of g.·rey··'. , " •• ,. .• .. I', _")~ '~ . I

'>

It was riS'h,t to, EelChina in" 'Now the, world's big,ges,t trader 'Reeds to grow up

'Wo'rlli,d Trade Organisation SincE!'WfO accession, $2010 trn ( '-) d d c. WTO,'; raggec on for 15 years, '1...6 long enough to "turn black hair 1..2 white" as Zhu Rongji, Chma's O.B, former' prime minister, put it (His own hair remained Politbuzoci 03 05 07 09 1,Q ro-black throughout.) Even. after membership was granted" ten years ago this. week, Mr Zhu lexpected many "headaches" including the loss of customs duties and the distress of farmers exposed to foreign competition, Yet the bet paid off for Chma. ]t has blossomed into the world's greatest exporter and second-biggest importer, The marriage of foreign know-how Chinese labour and the open, global market has succeeded beyond anyone's predictions. It is instead China's trading partners who now contemplate its W'T'O membership 'with furrowed brows (see u,a~,e5)~ They 'have a variety of complaints: that China exports too much, swamping their markets with cheap manufactured goods, subsidised by' an undervalued currency: that it hoards essential inputs, such as rare earths, for its own firms; and that it still skews its own market against foreign companies, 'in some cases by being slow to imp, cmcnt W· .0 ru es (notably on piracy), in, others by suddenly imposing unwritten rules that are unfavourable or unknowable to forei gners ..The med .. ' dlmg state lets mulnnationals in, only to sq'ueez,€ them dry of their valuable technologies and then plush them out, Much ,of this criticism is right, China made heroic reforms mn the' years around its 'W'TO entry 'Ihat raised expectations that it has conspicuously fa "led, to 'meet. t signed up for mu tilateral rules, 'but neglected the rule. of law at home, Free trade did not bring wider freedoms, and even the traid,e was not 'ex=
(hiina's foreign trade
1

HINA'S efforts. to, join the

actly free, It is in, China's interest to liberalise ,its exchange rate further, to, prevent local officials from discriminating against &-. h 11 b foreigners ancd a b aove au11 to d £ more to support the giooai1 do tar trading system, The W'T10, IS undermined when any member flouts the rnles, never mind one ,a.sbig as China .. Too bigto be a bystander-or t,obe kept out: But China's sins should be put into perspective ..In terms of glo. hal trade consumers everywhere have gained from cheap Chinese goods, Chinese growth has created a. huge market for oth ... er countries' exports, And China's remaining barriers are 'often exaggerated, It is more open to imports than japan 'was at the -I'~' ,·· C sts.ame s~age ofd evel 0, .. eve.opmen~,m.ore.. open !LO .. ,'j. :.. ..rec~InVes.. JLOreIgn 1 m.ent tb an S-· outh 'K·'.· ,0''_'r-'@"dI]IW'''Ji 's''n,n·'I·t "ILlth··,Q1·'99''Os·]t·,s··' t":l riffs u ~ -· ~,~ are ~, l!.!~ '_.'\). ,_:' .. capped . at ,-l'O~ on_ average: Brazi 's at over 3"OI'~- And in China, .. ._.. . _.0 . ,. ._ ":_., unlike India, you, can shop at Walmar , most of the time, As for the hurdles foreign, firms face in China, they' ,are disgracefu +but sad y no worse than in other developing CIG;J;un .. tries, The grumbles are louder in China chiefly because the stakes ar;e higher ..Foreigners may have won a smaller slice of ' ,... .__:__ Chn '."'.'marxet th"an the r had hc ed bnn Ch-'·ma....is aI·''b·"·'- , " pie '" rey ,3,: iopen, it ._: " . ngger,. .,. '.'_ una s narket than, anyone dared tOI expect, Had China been kept out of tbe WTO'; there wou d have been Iess growth, for everybody And the 'WTO still provides the best means to discipline and cajole, Rather than delivering congressional 'ultimatums, America r-e 1'"'0··'ul d 'm·· ke m· ..0-·· 'U'e" ·0·.f thI w"'" - T O· :!i'e rumJ1.~'.~'S' ~.n, if"U' rb... a ,a.n·d 0'·' th '1.'._', . I'::', I· I· . __ IL'y I· China's worst infractions .. , '1 nate t ,'~ .. .~ ten ne [ICSo cere b t Ch Ina, ,s ~ years In th WT'O: 'w,e are a11 '. h er because of ~,t ut, when it comes 1.0 trade, China's rulers now B badly need to grow up, Their cheating is harming their own consumers and stoking up protectionism abroad. That could pro,v;e to, b,e econ,omic s.e~f=h,arm 'o:n an ,epic s.cale~ ,:.-, 1'-"";'-1' 'II· ....,'
···1·'

',I'···

.. ~,:

,die ,",,-.,.:

~ ",

- ",.,-

'!OIJ.'

.:

11

!Ii;

,.' .' .. ". _'~'

_'

~_.lJ..w.

._I

'!I'

=.

_ _

,:..

((i ~ -

--

=- -

-=- - -

l"

l"

-'

'..

l"

-'

.,

c_,

I':

c_, .

,,'.

'.',

,.

I' I, -

.I

II

.. .

iEIi I~

'1;..,.'. .._

.'.__

,',.-,-

:\.'~

'lV'0 JII.'~

~~_ 0

..

0, '!(;

.. .e-

......::.'

Il.,;,

The lEUsumm~t

· ........ e ·ier Beware t'hM'1 cozy reClp',e

th.'e' histo;ry' books are written", wiI~ D,€cem'b,er 8th.-9th b'e s,e'e'n a.s at lurning'~' p,oint :in thie 'eu,ro, crisis? Th,at is 'when Europe'~:s le'aders wer'e Idue to me et fo r th;e late s.t :in a. ,string~. of m,u!ch-ba'1l1yhooed summits at. whmich th!ey repe.a.tedIy promise ]b" re £.,orms- t.0 t"h e .. III I.es t.0 save t"h e ,smng J.e curre.ncy., 1,g .... I ... ~ ·-:·'·_'t ',-,_.:.,', .... ~'" ·I'~· .• 1 _ : sum.m1~ A'··TiA,.: E·-'·-conOmts,. wen:·t·-' t·--,···I press". th· Ie lOCUS a ·f·· th-I,.':1:S ',:'1 ... ', '~, S rtf J cO -.,. '_ :.::"~ was aIr,eady' ,clear, th,ank's 'to .a deam o:n D'ecem.ber 5th, b,etwe;e:n the tw,o p"e'ople who m"a.tter mOist:' th'e' G,s:rm,a.n ,ch,an,c:'e,ll,or, Ange ill.a Merk,el~,and the 'Fren,c:h presi dent, Nicolla.s S,arko'Zj4 ]:t' wi'U be ,all about tight'ening the euroi's. fisc,atllu].e'S~ The u'M,erko'zy'" ,duo hav'!e d'ecr,e'ed th:at th,e' 'pri'ority' sh,ould, be ,a. march towar,ds
'HlEN'
'. ·1

,··t __ ,-C·'<-,_· -, gre.et ,er"6-' sea 1 d"'· -,~·-1"- ,,- t- b.f ' enLorce .... ,1SClP Ine;.,. ,() _
.'. ~. 1 • '• , •

t' ,'.

."

".-'.

'.

....

,.

'.

-,'

.. ','

'.

.._.,'

y;e.:.__>.". hI •a pnon - t'I", IS d angerous 1y I,OpSl- '-'Id ,~]f t'h'-, euro mst'I'··· .. --' '.. ,y ,. ,.". ,__ '·1 '.,:, ., € . d I ,I.e .. ,0 ': t sue survive~, Europe needs a m,o;r!eb'alanced plan t:,o'b:uild th,e' 'fisc,al ,a:nd. fina'nc~a ,integratio:n that matches tod.ay's monetary un,~ ion,~ Finding ways to p,olice ,go,ve:rn'ments an,d :p,reve:nt fis.c,al pro'Riga,cy is p,art' of that B,u t it is o,nly part;: it 'is,'n,o t th e m,ost im" porta.nt ,C'om.pon:ent; and, ,on its own,. it is un'IU.{ely to, worlc"
'I I-, , !.:.__" -', ':

d-I b _y
..

s,t--'- _ re_erees,;; rong ,~'-'- ,.,- ,

.
I' "', : 1 ' • • • " • • _'. '

, I. l

..

J'

'''.'

..'

".-,

I: ..
j

~,

'j

'J

I:"

.. I. I

I[

'.

I: ..
j

~,

.'! .'

"'r '.' :' "

r ,-' ," .', .. '

.~

I: {

..." ,

.,

I,

-i '. '" :'

-'11·-'

I'

··:'"d·-,: '···:·'t ·' a. : '., . .• '. '::.,' '--:, ,-" .. , ,onsn_er~ '_ '..'6 " .rs_""wh-' ·--·tl- M---;-' r .. ·S····,· ,"·k·,··I"" ,an_-·-I M--:'-'Irs:,M···: ,'er'-1-cell 'h-I,"aV'f"., ,agree_·d'·· .. ar ozy '::. -,.. d,' to". :B,y the en,d of MiClllrch :2012 t'hey wan,'t' the Euro;p;ean, U'~nion,'s m'e'mber ,g'ov'ernments (i,d,ealIy all 27~ if ne'f',d b"e o,n'Iy' th,e' 17 'but that are in,the ,euro) to, sign 'up to, a:n ov'erha-ul of the fiscal [n, es;; Eu,rio m,embers 'w'o,uId enshrine bo;t'h, d,eb,t and deficit ce~l~ng;s ~. ,Ielf .,'-, ·.-··,···t·'~I·t·· ~ Th-,-·,····E-I 'I .. ~ .. mn ~h-'·'··"··-cons 11lU 10ns.~ ,I,e ..uropean . ,c·,,··· ·,·-:·t--,· O_USlilce .--~,ld··'·-,·d-·.,~ ··.,our ··f·~J-I'I-"f·· WOUll_, e "..
,c·" .,' ... , . I'

A set ,of ~n.complete 'mgred '" nts e

Ii

Iil..IiI..

· U'

'I"

there Will ··d

I .. ,

We are gOing tal need multiple alternatives

Iossi fuels. ~S,i'z~nlg Climate Economv' the is IHSBC~,sunique perspective on tomorrow's most promising innovatiorrs in he' energy sector. Once vou've read it, please recycle. The future starts, here.
1'10

There's more on sustainable investments at www.nsbc.ccm/inthefuture

:18

le',aders

'The Economist, D'ecember iotr 20Jll.'!

..termme whether this national legislation 'was sufficiently binding, Sanctions on countries that broke the cei ings W'OIU d be more automatic than they are now, Whether or not aI'Ithis requires a full-blown+and disruprive-change to. the .JEU treaties is a matter of anxious debate, Th'8 president of the European Council, Herman Van Rompuy; thi I ks-- m,llC_,, C-a- be d Q,n- sin ,-I", by- C,' ,ngIn,g, p,-" 0 t 0 co , Mrs hai --'~,- a "1' .ok ', ..m {- - ---' h _ n, _e _ ,- e Emp=y ,Merkel thin, that is not enough Th British prim minister ,. lli\ ~l , "nk ll'l(;; David Cameron, is already being' awkward (see Charlemagne), But in any case such reforms, for a~IIhe POI itical brou .. t ~' haha surrounding them, 'will not be, enougb tOI solve the 'problem, The odds of deterring ,a malfeasant country 'with fines, however semi-autornatic they' may appear, are slim", And the flouting ,offiscal rules was not the only, ,or ,even,the main, cause of the problem in the: first place, Today's crisis is less about fiscal profligacy than, about investors' fears for the euro's sustainability and their t1igh't' from periphera assets, In the: short run an obsession with austerity' could make matters 'WO'Ise by deepening recession ..And without ,8l framework for co,mm,on , financing, investors' confidence 'will not return", On this score the Merkozy vision offers nothing, Mrs Merkel persuaded ,M.r Sarkozy 'to rule out jointly issued Eurobonds,
I'

,"

,"

, -,

_' -

II

"

'

,- ':

',-

"

"

'I

iI

'-

' --,

'"

IL;; JL

'e" ,i;,l

,,""

,JL _

'_

~"

__

,-'

,,"'

, "~ 'IQ

"ll,

JL,

_.JL

I~

!Ii;.

!_

He got her tOI water down the idea that: private bondholders must take a. hit whenever countries get into trouble, 'Ihe hope seems to be that tough ta ill< on fiscal discipline will be enough to persuade the European Central Bank that it should step, in mo roe boldly M- ario Drag hi- ," th e "IP'·C--B pre sid en t h 'as, in d'ee -d-" inth ed that a "fiscal compact" coul d elicit such help, But there 'IS no strategy' 'On the bigger question of how and how far euro-zone countries should go towards joint mia bility for some debts, 'This is crucial, The past ten years provide ample evidence that fiscal ru es alone are not enough (and if you want to be really scared, look at Europe's experience in the 193,'O'S of monetary rigidity' without a lende r of lastre sort--see ;Q ages 16'=78' ~[f, however, new stricter rules 'were combined with some form of joint liability then there 'would be a reward fOJ good behaviour and also a credib e sanction: any country that overstepped 'its fiscalhmits could not benefit from Euro bonds, That would still reave a Iot of other things to do" including structural reforms to boost competitiveness and the, creation of ,atrulliy European banking system ..But the CO'f'e of th,e sol, ution has to 'Diethe Iink 'between good behaviour andjoint liability Otherwise this will be just another much-ballyhooed summit that fa,i s to, save the euro, •
" .., _ .,. , . _.)[IIl -,.' _,

, ~ . ,. _ ~

.,

-'

.:lUI. _

"

,! -.

,.

_ _.. '_ -.

.,

I~,

Vi'd,eo games

Th serious b· smess · _ ie _u
,A bit of the, entertainment

ff un 0__
music" have dissipated, Meanwhi e rapid improvements in computing power have allowed game designers tOI offer expe-

business that 'many other' firms can learn from

'D ,-,- ..Ie atl"·" . ... s ere.ot ypes die hard Picture, a video-game player and you will likely imagine a teenage boy, by himself, compulsively hammering aw-ay at ,a game involving rayguns and aliens that splatter when blasted, Ten years ago+an aeon in gaming time-that might have borne some relation tOI reality But today a. gamer is as likely to be a. middle-aged commuter playing Angry Birds' on her smartphone, In America, the biggest m,arI{e:t~ the ,a:ver,ag!e game=player is 37 years ,old~Tw!o=fifth:s ,are' fe'm,a e,~Even tee'nagers with ima.ginary rayguns a:r'e mo:re milc e]y t.o'bie'p]aying "HaIo'~"wmth, t'h,e,if frien!ds than so:I()~ Over the past t,en ye,ars the vid,eo,=game inidustty h,as gro!w:n from, a sm,alI nh:h,e bus~ness tOi a hu,ge, m,ainstre,am, Qlne (see ,our s:peciaill replort)~ 'With. glo,'b'aill sames. ,of $s:6 billtoln in :2'0['OI~i.t is more than twic,e fhe size of the riecoId,ed-m'u:sic indl~stry~ De~ spite the, downturn" it is. growing 'b,y' .alm()st 9% a 'y,e'ar" Is. this S"U(:"cess !du,e to lu!ck or sl<HI'?''Ihe ,answer m,atte:[s" be ... Ic.ause the rest of the entertain~ment :in,dustry has tend,ed, to 'tre,at gamin,g ,as being a ~uc'I{y' b'en,e'ficilary' ,of 'b''f'08 der t,e-chnlolo,gilcaJ ,ch,an,ges4' Video gaming, un'Hl~e music" 'film or t:e.e-vision" ha,d 'he: lucIe to! b!e born di,gimi:: mt never fa1c€,d,th'8 stru"ggle to con'v'e-:rt ..· Jil'or,o_· me,< Ia 0 lle,arn .. f--,:-, ,-,,_rom -,', ,--'1'--'-"':, [-:-C:,1l;aC!l.~,,=ere 'IS pll'en. y'.f:- ..- -ld~I.--.--"d·~I·',-t·-l.-,-'--,-:,a.na_ogue,,. _D ... ifi- ,*,'h-,'-- ~,_",lll,--'--t ~ Vid,e'o, ,gam'es have certamnIy' 'b'e'en swept alo:n,g b'y tw',,) fo::rces:,,d,emo,gr,atp'hy an,d technoiogy., The :first ,g,a"min,g ge'nef..a'~' tiion=th,e ch ~ Idren of th,e 1970S ,and ear y 19.80';S='ES nOlw' olvler J,IOI~ Many stilm love gaming, .and Ica:n afford, t.O sp"e'nd far m'Ole on ,it nlow~As gamin,g estabmishe's i'tse~f as ,a p,astime f,or adu~ts,;the social stigma and the wo,[ri,es about moraI !clorl'upti.on that hav'!e h'istorillcammy greet:e,d ,all fl:e'w 'media" ~fr,omno;v,eis to po;p
' ,"I

OL

11-"'-'

"

"

:'

'

-,'

riences that are now often more cinematic than, the cinema, 'But. even, granted this good fortune', the game-makers 'have been clever, They have reached out to! new customers with

new gadgets; Nintendo's W'~iconsole showed that games with cross-generational appeal can, make money faster than ,at virtu,811 Rafael Nadal returns your puny serve, They have branched out into education, corporate training and even warfare and have embraced digital downloads an,d mobile de-vices. with enthusiasm, Big-budget shoot-rem-up franchises such as "Call of Duty" and, "Halo" are still popular, 'but much of the growth no;w' co,mes fro,m, ~"'c,as,u,al'" games that a:r'e simple;, che,ap ,an,d playabl!e in s:hort 'D'Ur.sts ,on m,o b,i~e p,holnles o,r in web b-rlowSlers.~ UA'ngry BUlds'"ha.s. been dOlwn ,o,clded, so"orn times~

O'n to the D.,ex,t :Iev:el The indu,stry has e'xce led "n tw,o P,8I'ticu'Ea.r a.re.as:: pr"icing and piracy~]n an ,era wh,e',n p e',ople' ,are ,rusin.clm,ed to pay for ((Intent 'On th,e web, ga'mes :plublishers were quick to ,dev,elliop ~~free;" mium" m,o,!d"eds"w,here you rely on n,on~pay·'ng' customers to build ,an a'udie'n:ce anid, th·en e'xtract cash olnly from a fanatic,al few~ ]n ,China" where ,pliracy' is ram,plant, m,atny' gam"es c,an be pla.yeld, olnline fr011 nothing:~ Firms inste'a!d, m,ake money b,y selling in=game p,er:ks and "~virtual ,goo"ds" to dedicate,d piay,e,rs. .. ,China, is nOlw th'e slecond-'biggest ,gaming m.arlc:,e:t,b'ut ,d'oes n,ot even r,ank, in the to:p 20 m,arkets fo;r the 'm'usie 'busin,ess", As gaming ,comes ,"0 be g'ee:n as jllSt. ,a:n'oth,er 'mediu'n1" its tech-savvy ,ap,p'r'o,am,,could provid!s a w'elc!om'e' sh!{)t in th'e' arm fo'£ exlstLng m,e,di,a g:r~JUpS,~Time' Warnef' an,d DiEsney' have bo'u,gh.t ga:m,es firms:; b,ig'-bu,dg'let games, ,meanwhile,. no,w have HolIywolold~s:tyill,e lau'nc'h,es~ HomJo lud.ens'is herle to pla~, -

IPod not in.::1uded.

The Wave®muslc system

with Connect, Klt "or ·Pod~

You really love your iPod. Now there's a reason to llove it even more, Take every song

on your playlist and bring it to life out loud with the award-winning sound of the' Wave® music
system. The optional pick it up and go, The Wave® music Connect KIt for iP,o'dl makes it easy, even clhiarg'iilng your iPod or ilPhone® so you can

system can bring new life to all your music, including [:ID5
system that includes a clock,

and radio. Thls Is a complete, high-pcr'ormancc an alarm and a handy navigation. astonished at

Save ,$50

when you order

remote that also controls key' ~P'odfeatures like playlist

the W,ave® 'music

system

Murray HiH of the Pcstmedla News Service says that "Everyone is

by January ,2, 2012. To order or learn more:

the sound ...You can near every nuance.' Take advantage' of our
nOI

30~day~risk-free trial. Ask about making 12 e'8s'y' payments~ with

interest.

Bose.com /connect
1-800 -411-80'72. ext. TX358
1

charges from !Bose: Order tl1E W,rJVf?JiIDmusic system now and you'll even save $50. Hear you r p laylist like never before. W~th the performance of Blose', the

most respected name in sound.

Th e Connect Kit p lays Iill~Jsicfro m and ch arges. most iPad cllnd i~ho.ne models, In the' event of audio i nterferen te, set iPhorlle to airpl ane me de'. 'Bose p.3ymentplanavailab eon orders ofS299~S~500paJioby majorcred,t ::.31'"0. Sep1arate 'lnancitlJg otters may be Elvailablcefor sele1:t products, See website' 'Fe d eta -Is, Devm p.aym ent is J/12 the procuc t pri'Ceplu 5 appl i::able tax arm sh ippi ng cha rg'i:'s. charge d whebll your oroer is sh ipped, Then your ere dit r card w II ae billed 'for ll equa monthly installm~nrts b~ginning alplPfoxlrnal~elyone month from the date your order 1'5 5rupp~d, with 0% APR dina 110 interest rnsrges from Bose. CmDitcaro rules and interest may apply, u.s. res~dl~ntsorlly.limi'lon[' actlw::d1r1ancilngpmgram percustomer, ©\201~~cs~ Corpo rat IG F)., The oi st inc tiv~ dl2sig'n of the Wa\ffl~ musi c system is a iI"@gist@red trad@ma~ of II3r.)s~ Cm!]orat iGn, IFInanKlng an d sav lrigs offers not t 0 bl~ (;c:mbine.d with IJth~l'offen.i or ~pphed 00 prevlouspvrchases, Jind sub,ect to ~hl'iln~e'with(lutnGtke" Offeif.s are Ilmiited to purchases made frOm Bose an d paC" tldpat rt~ i:;I uthnnzed dealers. Offers v~1id 11 20lTH12112- ~ rsk flf'ee rer ers to. 8 [)-d~y trl ~I only, req U Ire.:; prcdoc t ~u rthase and dees net i ri(1ude t retu rn sh pp I"lg.[] elIvery is subjec t w p rodoc t ~va Ilaoi lit~. iPhone' ~nd i Pod are re~ I:stereo tradernar ks of Apple Inc., 0.1)0tes repri n;ted wi ttl pe~mi $$iOR

,20

,M,easurin,1 stock exchanges

sra -You asserted that the merger of the: financial exchanges in Tokyo and Osaka won d create the world's thirdlargest market, overtakingthe London Stock Exchange I(Hlist-, ing, not keeling", November 26th}~ 'The statistics used to cal culate this ranking measure only domestic and not international market capitalisation of the world's exchanges ..London remains significan ly larger than the soon-to-merg'€ japanese en timy., 'The omission of international market capitalisation barely shiftsjapan's combined standing, as the Tokyo Stock Exchange has only ']12 internationa listings and 1015a11(a, fewer than that London ID,S home to 326, intema ti cnal listings, which, when added to London's dome snc m.. arket capitalisation, gives at tota] value: of $5 ~7'5trillion, approximately $2 ~IHH.o:n more than the: future Tokyo-Osaka exchange. One of London's abiding strengths is its openness to overseas companies, intemational investors, entrepreneurs and id eas, To. ignore that is to sell .ondon short
XAVIIE:R RO l ET

"I'In... .... .:....-.:':': \.;.,. J£~; ~,' vv I,Jall :

t+,'s auce for tbe Greeks ~ s ~_ . A,'~" =~cii~,~

l

S:11{ -

notice the contradictory arguments put forth in separate

leaders in your November 26th issue on t-he euro and the failure of the "supercommittee' in 'Washington to reach agreement on reducing Ameri-

One could not help but

question of any tour operat or's failure ca us I" ng' th e C.A. Ato ICOUa1PSe..,
I _ .
• ...,

1-

_,

~','

.. 1,

~~

•.

1'-'

11-'

'.

.,,-

~ .•

"

",

--

,-

C h'j ef executive [ivi ~,Aviation Auth ority Landon'

ANDRIEW HAlrNlES

become a. responsible land successful Individual who ,adh_ d to tne 1 ,_ ere., th ,_.awsa.n,d, customs of the adoptive coun-

~ry~'would never have l

thought of imposing customs from the society] left behind,

Over the hills and far away

pressure off indebted coun~I~iQS"'-y,.' backing Eurobonds b ,t:"K.lIl ,= - I,Uv, ' One page later, in ~"A,downgrade for Congress", you came to the conclusion that it win take a "terrifying b ond crisis" to. force American politicians to act en the deficit, So in Europe, Germany is. to remove all market pre ssure from debt-laden countries as soon as :Possihle, 'but in AmenIll..
.IIi,~ . -, " - '''II

headline to your leader on the euro asked "ls this really the en d?"; an d cri ncise d G,ermany for refusing to take the
J ie

fl-" ca :IIs.der cr"

,j>

sra - -T-l."'D El"'o- 'no- -ml~'·s",t'' ,s·· continr~~. ued defence of the valueof migration 'in human
, I,,~ '_'

Unfortunately this notion seems to have become at thing' of the past,

I lO N.A 0 Ui INJ'CANI

_Ii. ,_',: _', .

~-_ -

~'

•• -

·I,,~. JI._,=

Heathsville, Virginia Yt)ur account of the politics 'Of illegal immigration in the United States was woefully naive (,~'~Crying olf", w '- - -- _fr19 thl "Y;-'- I de Novem b ou- e scribed ill ega] immigration as a "disappearing problem" that Republicans needlessly worry about, As a. Hispanic-AmenSIR .. ',"'-' ' ",(,'

eamore bond market pressure

itsneeded to enforce reform?
M AIRlill N STO E g, E

your briefing could have gone beyond economics. Many of th e most vibrant diasporas are those whose members have Ieft coonfli ct and, crisis b ehind Somalis; Afghans and Iraqis for instance, There is increaslng evidence that these transna tional diaspora s remittances, as well as, the social ca.pi tal an d skills th f!Y accumulate through migraH on, p lay at vital role in,preventing further disp Iacements,
KA,TY LONG

development is impressive '("'Weaving the world together", November :m:9Ith)~However,

I,~

''',

-I

'-

can who leans Democratic, ill

agree that most illegal immigrants have something to contribute ..And yes, illegal b rmmigranon h over-a.II,',_.een •las" fundechne, But you went fUI~ ther and seemed to be 'wholly
.. .' +

Hambur_g
1lU.", ",' ,',' atio ,1Il"-, Dr-I'"tain's avi a "-0,11--regulator
,I I'

D €!'IP'C! rtm

ent of Intern atio Inal

against any' attempt even to patrol or guard our borders,

De'veLop ment

(hi,ef e'xecutive office'r

london Stock E'xc:haI1Ig,e IGro UPI

:Driven :ron_nd th,e ben,d a,f[n.diana may m:h'in,k a.tra.ffic ID'un,daboutto be a nov,elmy e'wh,at go,es ,i;lround'~';" 'Nov',emb 'er 19thl, 'bu~' m,D N~'wJersey' traffic eirel res hav,e b"e,en in U5H~ d'ming the 60. y'e,aIs that [,have Uv',e:d.lilere,. D -e sp:i te t'hru,s history; :1 o,cals a:n,d VfuSrutOIS h.alve n,ev'er qurute got: mhe hang of th,em., A,'n afm:erno on"s n'*0rt' amnmen'*' (";;II'nbtt:i had by s,etti:n,g'u"p a chair and watching :pe,ople att,em.pting'to nav-ig.at!e ,one~Som,!e speed, 'up anid ho:p,e :for the, b'E:st So'me' stop an.(llget r!ear-€rndled,~ A few' motor strai:ght across the ce:n= ~reisla-n,d~ Som.e: fuldl it ,difficult m',o r'e:ad -signs while drivin,g in a ic::irc~,e'~ his is always ac.-compia-=' T nm,edl b,y horns; rude gesture,s an!d the so,un,d of m,emal.and pllia-sti.cbeing de'~orm,ed,.,
SIR '-'Resru,d;ents
I . ~ d '.
. , I:_' ~~!!!~I'~ ,.0

'You suggested that if Thomas Cook, a struggling travel agency' with a big: presence on the IBrU~sh high street, were to c'eaSif: tr,ading" the ICi'v~U Aviation Authority would U.proba:bly ,goO' unlde'f,. too"~ ("'~A, to,ur op'era to.r~ mr,avatills"', N 0s. ve:m,b,er 26th).,' I, js, is nom th,e
So li]l -

london School of Economics The age of jet travel" transcontinental commuting and internet connectivity has no. ,do'uht enabled th,e spr,ead, of :mass migratia.n with,out migrants in,curring th,e' ru.solaHon ,a~nd,de'mo.ralliising' home siclli{ness ,o.f the, patst The almnsm :insta.n ma-n,e()us lOP P ort-unity to. interact wmth fa'mUy ,and b'usm'niess lP,armners in ,d]s:ta.nm icountries, confers m,utua suppo11" But' "wonder w:h,eth,er this ea.s.e of a,(;ce 50S to th e cOUO= try of 'Origin als 0 r'edu,!ces th,e in,centniv,e to sociabs'f: an,d mix:
SIR -

Additlonally 'y.oucompleteIy ignored the surging problem of the d-rug wars that have already scarred MexIco and are slowly seeping into. the: American south-west, Every ,day; drugs and weapons are smuggled. into the country ~hrough v,ehi,cles" tunnels~ 'o.r blatantly' in 'plain sight
JOS.IEPH CARIZ

5t,Pe'tersburgl florida

,r-a-s-'!o,- The'
~I. J ~''''

='

,e·A·A" runi'S
-,~. ~ "~

-_

the• .....J
••

,.

A:· oe" T
t=

- ...•

~~Jllrl ~-

.' _

,._ -:. _' . I

~,I~J

I,

__

~ ~ \...'

~O!GEIR n:MPSON

Short Hills" New,J,ers,ey

SChe,mle~wh'ich :pr,ot!e',cts, package ,holiday~mBlkersif their tour op1erator stop,s tf<ldhl"g, r.epatrID.,-, a.ting them if th,ey ar'€ 'overs.e,as and refunding them nthey' are y'E:t to travel.. Th,e schem,e i,s bac~{-ed by mh,e Air Travel Trust Fund~ whi,ch :is '11n,an,ced by' a (1.. 0 ($].. 5 90) ill-evy on every A TOL -pro te-ct-e d h,a.~ida:y;b,a:n~k 1borrowru ng fa,e iU.t~,e andl a, s bacltu'p ]'flSUranc,e p.o, icy., A TOL m,s a statutory s ch,€me,~ cr,ealed a.ndl b,a.cl~ed 'by the, govern'm1e:nt As su!ch an'yon1e: booking R'n AT o L'-':piiotect!ed holiday' ca.n b,e co,nfid.'ent th ey will be IOOokedl ,aft,e:r s:houlli,dl t:h,e:i:r Oopf'ra tor fait 'The 'CAA ms fin,an,ce-,d enmiJe:ID,y sep 2J1ra,eiy to ,A'l"0 L; w'i m t h ,charges ~evied on industry for ID 're gulatory serv~h:e ~'Con,ts s tr,a-ry to your !claimt. ther,f' ~s no
1

r-em,ocate ,d i,lo.., 'lEffici'ent'transport and real-

w~th illoc,a,~,comm'u~nities~.n the ,co'untries th,at mjgrants h!av',e

[found 'ya.ur brm,efing on, ,diasp"o:ras to 'be v',ery mnte'restmng ([ hav'l~ rece:ntly:retu-rne,dl to. In,do'nesi.a afte'r gra d'uating Ho'm the U niv'e,rsity of B;it~ ,nt" - B' '~' ' - ,- ~~I mJlln&Lam.~u _-. t,W'h- a.~,I r,e.au,y' e:nj' oye d, w'erlE: t'he ,captioO,ns that pe'p:pe.red, 'yOlH artfudle: U!Th.,e
SIR +-

I -),!

Um,e c,a.mmunmcatio:ns 'wim'h, th,e folks b,81,ckhome ,COll d unint:.entJonal~y m,ake migrant com'm,unUi,es more mnsuillar"
JOSIEPH TINIG

Z,eppelllin,.,

-h e out,·.d 00[" n UR bl" on ·_~a.m'_lng a_n,d, 5oC) on,. Iassum'e t_ha., , you .. f'L too are at b:mg f-an 012 d.
m
'!'
- -, I -,' _ ", ,-, _-, -'" -I ,-,:

ilmmmgrant so ng~'t !;"In, th:rou,gh

H

'VOOPI ABIMAN'VU

J'akarta _

B'ris ba ne,,!'Au stra lia

,s,IR
=

[arri:v',e,d ~,nAm,er~,ca 'with,

.ago~ that time one ne,e,d,edl,a, At s:ponsor or firm Ism]pllio'ym,ent ~,no.rd,er not to beco,me ,tt ~J.ubli,c - ---,'" -- - _I~ b 'I-- -d- ,-- - -T:h-, ,- Iec d fe,am was,"- t 0II _Ufo en;>
1

a s:uim'ca.se ,and, a dream 45 years

'he Economis,ttt 2S StJ~lmes'sStreett

E,~mla]' l: lloette rs@econom1st" c~)onni iFax,: 0 2~O78.39 4,0 9 2' M 'On? Lette rs a're ,elVa i~ab te at:,
1L,o rnd on .sWIA 1 HG
"1""

lL'ette r:s a re 'we'10~Jme and s~ au lei be, addressed to 'the EdTIOOrat

Ec:onO!11iI1 stttom.lletters

Fe,el, in control, Start Vanquardinq" now,

shouldn't mak.e 'your heart race. You can't control the market, but vou can control your costs. 'Vanguard offers our funds at-cost, so you keep more of' your returns. Over time, those savings can grow pretty biq, while your pulse stays pretty steady'.
lnvestinq

800-251-8344 vanguard.com/economist

Van,guard provides Its services to the Vanguard funds at-cost. For more iniormetion about Van'guard turds, including atcost services, visit venquerd.com/economiet, O{ cen 8'OO-2,51,.s344,~ 'to obtein a prosoectus. Investment objectives, risks, disrqes, expenses, and other important in formation ebout ,8 iund are conteinedin the prOSptBC'lUS/' reed end consider it carefully before iiwestlra. All lnvestments are subject to risk. Vanlguard funds are not lnsured or guarante,ed.
© 2011 The Vanguard Group, Inc. All rights reserved. Vangluardi M,arketing Corporation D lstributor
l

women's participatton in the workforce? Expert guests co n ve n e' at our 0 n I~ii dI ebati ng site' ne to discuss the' 'motion "This house, believes, that a. wO'ma f11I'S PLace is at wo rk", Jh e floor is open fory(;,ur comments. and the result depends upon your votes. E:(yo;nomi st~c'o'rnlde'bates
lE u ro pe: fhi s ti me it's; serie llJIS OUmcorrespo n dent repo rts from

Wom,en and wo'rk Should 1m be done to increase ore

'Festi'va~voices Geoffre'y HI;U, co nsf d ered 011 e of the' best poets writi ng'in IEnglj sh ~i's. appea rii Illigat The;Economist's inauqu ra ~Boo ks ofth e Yearfestivalalong wiith Si man Sehaq M,onteflore" Jani ne de Giovan In~ and I . ,", :-, _" ::[' -,' k:1' -, . us - b.. ut ., .' L!ti~ [" -, . o th e rs • H'~ spoke t 0I ...anou pou IC5,ar··t I Ie a n dthe impact of rel~fgljon on his 'work
I
i."..:.

Ba,roque ain't everything Who would swap Vie'nna for boring G.eneva or grey Pra.gue? Alas, companies locating a

reqional headquarters. for central and

eastern Europe' are.putting good

internationa Uy rni n ded labo ur force of grand opera a nd Sachertorte

Econ'o'.i5t.,COI1il/ node/215 4::ll2 8J

communications"

jnfrastructure and an
GJ head

,Economi st",(O'nl/1111J ttl m,edi'a/ culture

the, latest 'euro s u. m mit, a s ,Armqela Me rke l an d Nieo Las Sa rkozy present thei r plan to fellow leaders
Eel
1110 m~.s.tt,coml nod e/2 :1\:5,':13.];1

Syrians durinq the uprising'

Ec'onomist.c,cnn/lod.e/2:1,S4,13;

M'ddl. e '-, E as·t •...P ., rt_raJ.l_S 0 f' a r@vo, ~ I' till~on" " ,"" [ ,'", -'0 ,. lt',:'""'" U ,,"" A IG,erman-,Brrutjishartist has been painting 30

Doing [good does not have to hurt the bottom Une, say the, a utho rs of a new boo k about coorp 0 rate Pi hi' La In t hi ro py
IE,conolmi st~c:o.gll ode/215,413 34 n

BlIsi'ness: Talking wit:h R,i'chard IBralso:n

Un; te d State s': A miGnt~10" surprises Avideoqraphic breakinq down the 1~lovle'mber data 0 III America's presidentia! electio n Eco'no'm~,5,t~c-omlnod,e/2 :~:5!42,3,21, U'nitad Stat,es: Jon Hili tsman (c'.'as to town A photoqraphic ~ook at a Republlcan ca nd']date's tou r of New Ha m pshi Fe
ECOjUU'ii~s,t~(omlnod'e/2

,A SUr] day after no on spe nt by t.h e iG.atl~lwa:y of

Asia:

B'olmba,Y nav,a~,'gaz,ing ...

In dia, watchi ng the '9 un boats, ca rnera ... phones and 'flying colours 9101 by
E:conom1 st~(OmlriiU)d e/2: :1,54,12 5.1
18usin
II ~

Ta ch no. 10 gy: Reg u lati'o'nVllle

',',: 1 -'," . c

South IKor,eans are' among the world's bi'9g-est . . .. f' . . -' co nsurn ers 011 srnar 'tr hione apps, b utt' rna h'·'I~ _p -'l_~ games have not reaUy ta ken ,off=untiL. now
I -', -'," ~ ,-' -, 1-' ~I ' I" II

11- -

",-

II'

e 5,S e d ueatl 0 n: INare:seaifJ':ch req uired Shoul~dit matterto students whether a II!... si nee's if'c'"h iyU'. h O~ a:~ r'o n l ._ iiI1I r'eif' e" " rch JUg S e7 " WJllu~ ." '. .. st ":
_"~l·:.1 ,~": .,_

IE,conOIRli t",c:o'lilnode/215,41:2 '75 s

ii"'I;

''=!I,;r:'

I...

_:.'

.:

lin ::~II~~I

. i :~,,:

_I'Q. _ ',I -~

':lI

~::Ii

I.,':

ill

Th e cen tre-Ieft wi 115 e lectio ns ~In S love n ia

and Croatia: Maoedoniia wins an internati 0 nal-cou rt ru ti n91;and Serb "i,a anxio lisl~~l awaitsa verdict on its EUbid IE,conololi st.(O'./ nodie/215,412 '7 4:

Eu TO pe:: 'The bu S'J' I,a II,JQ'ns

::ll:5i4:ll2 3;3;

Our diarist th~n ks mot

Africa: Untild.eat~ldo IUS part A, billcrimtnalistnq same-sex marriaqe 'TIin Nffig,erfa, could hinder the efforts of'qroups helping those most at risk of AIBS
E'c'o'no;m~,sti>comlnod,e /2 ll:$IQ'j[,3, 28,

E:c:onomi st.e'OII1/11 00 e/2 :1,54.13: 2 2

Com p'a rri es so'm ef m €!'$, ch O() se rath Imlus ffi c to ~9 (O m pa fly th eiir adverts ..C
E:c:onomi st~c'Ollil1lrilod,e/2:':I 54,12 5 7

Cu lt u re: Loony

tunes
€t
'0

dd L;'llIikste all these stories cam be "'olund at

Ec,ornomist~(om/nod,el2:i54:1,3,51

23

_ tn h Dep,m,
'_ i'_I -

"I' o'f' ie~d1.urt ,"'_11"0

~

0 ice

18mml~'

1']On'-1

'I " 'f I

'Ii nlnin'
, I ..

e
I 'I
!I!

lUI

iI;

I,

in.-

j,

onomie " business a

'0
,
. ".

.
_I_

urn

lie

'inance

r
'Th,e' IEco'nomist I~)eoember10th '2:0]1

0-

24,

"I.. .!"DiN·T._ ....-..... eTA T1l6S' .' , •, _:I, ' . HEAD-' ,,_--J...J.h..liV..l,'. DE''P'I~ A 10 T l.VLo _

(Vacancy N'o2011=06)
The International Oil Pollution Compensation Funds (IOIPiC Punds) are three intergovernmental organisations (1992 Fundi) Supplementary Fund and I 971 Fund) which provide compensation for pollution damage resulting from oil spills from tankers, Compensation is governed by an. international regime elaborated under the auspices of the International Maritime Organization (IMOI),,, At present, 105 countries belong to this reginl,e., The IOP'C Funds are administered by a joint Secretariat, based in London, with 32 staffmembers. Detailed information on. the role of Head, Claims Department, including the main duties and responsibilities, as well as qualifications and experience required; call be found on the Funds' website www.iopcfimd.org. Applicants should have an advanced university degree or equivalent qualifications in an appropriate field (la\v·/laivv· of torts; finance; accounting; science) and significant relevant professional experience at a managerial level. Experience of working in. an international environment; a. solid foundation ill the Civil Li,~b~~ity 'Convention and. the Fund Conventiens; experience in handling C~.arnnlS for compensation and technical ,k]].ovv~;edg,e and experience of the effects of oU spills on fisheries and aquaculture and coast' related commercial activities are all essential requirements. There are various attractive benefits, including six weeks annual leave and a provident fund, O'11iy' candidates from 1992 Pnnd Member States will be considered, The working languages of the Tope Funds arc 'English, French. and Spanish, Fluency in 'English is required. Fluency in. French and/or Spanish. would be an. asset. The post is.to be :6~~ed soon as possible. SaJury is in accordance with IGt'"a.de D ..l of the United 'Na.t~,{).ns as scale and .ws free of 'United. Kingdom income tax, Ihe dependency rate (D ~ Step I) therefore starts at US$103;070 plus post adjustment of $76; 168-J i.e. a total. of 1; US$179,2,38 per annum whereas the single rare starts at' US$95}2'70 plus post adjustment ofUS.$7U,404 i.c, 3. '[nita!ofUS$ 6-5,674 per annum. Applications must be accompanied 'bya COPY' of the .lope Funds' Personal Hiseory Form. Please 'visit our website htrp.y' I~.iopcfun.ds. • n. 'II ...'m '11.. .. '~db '-' fund .,org: O,f' 01'g/- vacanCleS.,[ltm. T!IL co,m..pJl,ete-.d IO"PC•... ,F lUt- dS 10 JJ.!i.e .. .~ y'ersn,oJi:JJl.' H' '.' ~;S,torylCl' .ro:rm. SJJ_!i.oUUL- e s,ent - b Iy e-m.a n- toO 'V'atcan(:y 1111 • ·0·£· , ..l'-~iOpC. I -I. . lII.. o. Hn~ alter,nati.vdy posted to.: Hrun3.11.Itesources ,Mama.,ge:r',Fin.a.ll..cean.d Adnfliu.istrn.tio.n D,ept .. In:1ttt.ll.l3ltlona], on Polhrtion Conll'pen.sa.tio.u Punds, , Porrland House, Bressenden Place, London ,S'.WIE ,S,P'No; he deadline for the receipt of appllcations T is '9' Jrul!U31''Y'2012.~
'-'-_I,'

Tile E(on 0 mist Deeem ber 'loth

201'1

25

... IfUm

10

,.

niDI m

1'11-

~G . d u_·

II
Iii

·iilln

ry n

"91 ng

nJf

_nl.

arm

1181

ul_m,-

'Th,e' IEco'nomist I~)eoember10th ·2:0]1

Unit

P rmers
n

• IU iN~
DIP'
1-

--

.:.

-- - - -

- ..

T OJ

W0

'a e

e m

------------_

.. _---------_.

For .mor@ informd tio« ~nd ro sLlbrfld an appJi,(:jJ tion go fa

Ihttp,:Jljobs, .. 'nd.p,..'Q:r'gJ.cj V i1e'W' _jIQ.b ..cfm "?Je,b id:~:2:'G5rI12 u ,

.. -

EcD.no,·miis,t Inte~Ug'e nee Unit

- . -- _ .. -

_..

..- - -

-_

---

- - _.

. _ ..

_. -

._

In

rp

27 'h .,- . nope ~.'.., corrupt . an d, aut" ontanan reJSU.C; , j.." - Ihs.e... pa .. t- i··: ._"_ g]m'e ~,S~~ ·If··~ ·-.. ·····11·· 0,ifa ·s··: .. tle ..il"ovle!~,e,g,tlC~ ~ ].5d' II ven by the lac t of alternative s rather than
.. . - ., • ., -, , . I .' 1 .~-,

'1 -

_...

I'

'.

1'·','

.'.

•.

r,

~c:'~

...

,c,· .. -_

'1If

The long life of Homo, sovieticus

MOSCOW

·· Union fell apart;month since the ·W.ENTY· years to the TSovtet ._ crowds of anU

This week's elections and upheavals In lrussia, show how bard, it Is, 20 years after the system collapsed, for the!countryto put away its Soviet past

gress at the end of November, where Mr Putin was nominated for the presidency "w·..... ne e!d . 81sIo,ng, b·-r.ave. an··..·a.. 'e ill·'e al' e.r r . tro -.- and -b'm ad .. gry young people heve taken to the streets e J. td w········,~ ,~v:,o, . ~ - ~In'" lt 'l'~,.....~ r .A-n·. --_. hav ""ll'-c·'h a, ·m··'.. 11 i V1" . dh'm" ~.·r-· of Moscow, protesting against: the ruling -d h Putin," h VIadimirovich P ., tn enthuserd a fi~ ,::nt=· tm di U'nfuted Russia Party' ('~'th,eparty of crooks and thieves") and chan ting Russia. with- rector, A steelworker told the congress how Mr Putin. had 'tbfte,d o'ur factory from ]its out Putin!" Hundreds have been. detained, lor· . .,.~ .. d_ .t' ,,' 'h·', ..... d'. S an.d the a:r:my' h.as been b·rough.t ilnto th,f: .k.ne·lfS an~d-_.." ll,PP.O.rt·e.••IW]._ ·'t· h' .-1. IlLS Wlse ,at.•.. 'vjce"\ A single mothe[ with 19 ,children c.entre of Moscow ",'t.o ·Plo;vID.de seeu:rity"';; .A~thou.ghth1e n:urn:b,ers al,e 3l far cry from tha.n.k!edl Mr Put~n for a ""bright futureSUlch p,arallels with. t:h.e' no,w' idealised th'e h.alf-'milb.o'n wh.o thnJ:n.ge:d the streets 'to';-, bUI·ry·· t' h·' 'e" -U-S·· s·n· ,tho "IO'S'I(;j, w· ··'Ie-ra. ,tho bJg' a,e's* ·l!kb late Sovi!et ,era.·we-re· SUP'p05H~~dto. be on,e .of prot1ests in -recent y1ears,. Th.e ~mm·ed~.a.mle Mr :JP'utin's selH.ng p'oints,. No tfures,ome .PIQtri.gge:r for this erm sm.s was, m:h e ri g'g;in.g of th.l~ l:itllca.l !de·b.i!te·.~ fairly bro"ad p,ersona.ill fre·e-' .'-: ,~ II ~ _oms, .'h·o u, .100 wa.sn . '>: ~. "-'''-h'--' pa.r1··- . >". 1-". ~.~'_ eecttons on 'D' Hlmentary I'· '1--' ',' .ecem. b er 4t.h !d' i", .,~i ps f.'I'1'1 '0 ·f '&:'1 . ,d.;..;~'-:,.,I··.· . ;'·t t'h' .th. W al~ , I·i- f;., : peopIe wan.te,d? lnstea.d,. unthinkably,. Mr (see Rage ~S)"BulII" t h e causes, be. ",'a.r d eep e[" T:h,e ruUn:g' .re'gime' s:tarte',d to lo.se its le~ P!utin h,as b,een booed::: first 'by ·an audience gitimacy Just· as Vladlimir P'ulllin~ Russia"'s a~'a. ma:rbal-·ar1s ev·ent on Novemb"e:r 2oth~, :prime m]lnru.steI~idecla:red. at fina~ vic.tory for the:n. at :m.any poU.in.g stattilo:ns, and now on. th,e smreet:s..I.he Sovm,et' rhet('ir.i,c c,onju'I,ed an "":s~albiHty"') prom ised t,D retur.n to. the .Krem:··s .. :Un as pres;idenm ,a-n.dp].e,dged to rebuild a antl-: .OVlem,respo:n.s,e;; Eurasian Union 'with form,er Sov}.em rep,ub,-, ,Accor,ding to. Lev G·udkov o.f th;e Levada 'Ce:ntf,€, an ffi.n,de·pe·n,!de·nt p,ollmng-;research lies;; The- Sovi,et ,f} avour of aJ 1t'hms had been ,. dl ;o.-:""c· ',..;;;' ~Itiif' l.~'.,,· ...;:)" ~ ., p .. Ill, un· . .,II,;;;I,;:),.v'InIP d'·. n- U'n' ,~·t,o,d·· R''U""'S'l" ~I ~'5 n a'I'~Y'" ,c·· !i;'n'orga.n s a.I't'" ... , 'jth~ re·a.Ct" n a._g"Rlfl St th e ma lon.~ ... . ~s .10 ...
.. .. .. . ',' . . I' '. I' _······1···· .
~ '.' !f
I' '. . . • ~

still a h:ybrid state, It ~s smaller, more consumerist and lliess collective than the Soviet Union .... while the ideology has gone, But the mechanism for sustaining political p 'Ower rem ains ~I{,e'Y' institu tio ns, incl u ding ...' . d COUIt~h po '1· Ice an .. Sf cunty services, te levi_1 ·· evi sion and education, are used by bureaucrats to, maintain their own power and wealth, The· presidenttal admtnistration, an unelected b,od.y~still occupies the build~.ng(and place) of the Central Committee .]61., -u. of 1I!h·;O. Communist Party More important, the Soviet mental software has proved much more durable than the ideology ru.tsie~f;; When, .in 1989~.a group ifso .·)1 . iI1, d O. SOCIO.w.ogmSldS ill ,d,b.v ,].:'.,-. L lIle._ y 1. un .·eva.·_a IUegan. * .. I~.O studywhar they' called Soviet Man, an. artificial construct of doublethink, paternallem '.-1-: ism, ..-... ,.-.,1.·····,-· an.·d·1 isa anon ~,-.. thev SUSlP~,Cl an _, isolatior sm, Il· ,ey thought he was. vanishing, O!V€'r the next 20' years they realised. that: Homo sovieticus had mutated and reproduced." a. quirc= ,. hi mg, a Iong tr e way~ new characteri ~ taracteristics such as cynicism and aggression. This is no t some genetic legacv, but the result of institutional restrictions and the skewed economic and moral stimuli propagated by the Kremlin, 'This mental software 'was not a generanon I'~ ~ 1~,Dl.-Jl. ~, '~"'" *h· Leva '.d a eroun ·a··t- I"""~'*' C~~I'tU·1AO· F v '.!O ' lILll suspected, The elections were rtgged m Moscow not only by middle-aged people with Soviet memories, but 'by thousands o f pro-Kremli n ·youn.gier folk gath'ere d from . .~. ..,.... -,..,. ry ,-.'.".-.~ .. d at -"d- ~, across. the, coun tr an d.. mspatc .h E': t a casr multiple ballots around the CID.ty~ Symbolil= cally; they made their camp in an empty pavilion of the Stalinist Exhibdtion of' People's Achievements, Most of them had no memories .of the Soviet Union; they were born after It had ceased to exist, 'Yet the election re sults also revealed the reluctance of alarge p art of Russi an society
I '1-'

e('di·~ l~ VI Jl!l. 1! ..: •,it:, :-.:11,;;;;.. rl ..I;':'.;j;JII,a. :~'IE" : a com' rm on visionI '. forI: change Por 'R"u'
, !.:,
,I..

I"

1..

'

~-

"',

'-",

'I

'",

I.

I..

'

",

I···J

••

'!'

.'.

I.::'

" ....

:.

r•

.i -

_.

r..

I,.'

-.

Iy'

I{ ;,~

....

·... 11

,il

-I~_ .•

i'

i'::"'

ILl

~.

':.'

,.

-.

lIlu

. uJlJ.

(;;1[;:"

l~.

.0 ,~.

II;;;;

1 .. ~

. .I!J..

;:,·ll

e-...

~ '.. -

,i' :--'.

c .•

,-:-.t&-

'1
.•

•.

~.

~."

II

fl'

.,

1!iJI

~a;11J I "",

.I

".

'..

I ..

_,...

.__ '.

,":;.1'1;",

_ ..(II;...,c.lI;..

_'!i;"

,0. _._'!i;"

.,c';!~

c .. ,

".

'. ' . ._.- ..

'

,-: ..

I . '1' ..... '.

young and old, tried. to stop the fraud. and protect their rights, One election monitor, who was thrown ()<ut f th·e polling st.at~.on; o wrote .i:n. .his 'blog tha.t ""I th,oughm ] woumd ,..l~Q s u.JIl~ o·,·f"· '".:':ha-·m····~· I d~id' n-: o·,··t ·rna·n·· ~Ig:.:~,ot·o·· ':5',a-·V,·:-:-Q YO'urvo~,es~'.'~ forgiv,e m'e" Su.cl1, voi!ce s may s.tUI b"e .at minority" b'ut the (ma.sh b,etween thes,e two grou'pS was lessen.tialiy·.at clash ..of cilviUsations=an d a sign t'h:at th.e' pro.cess, .of ·disman.tlliing' th!f: Sovtet systlem, 'which started 20, y·ears agot. is far from. ov'er;;
I

to carryon. with the present system, Thoud san d s 0-f~· di muignamt men ann women,

,.~~!!!~

','

JJ..

'.".,

(jL._~

,"

..

:~

;'j'

'. ~,--

. -.

'~:I

".

1'.1 .

I --.~

...•.. ~"'-'

1-,-'1'1-".

A m,o'f,al'v's,cu,lIm

''!U',

' , . .•

,'-'

. c-

i'I' :c.

C.

1-.-:: .-_.. . II' . (I

.':

.:-: •.,..

I'

-' - . - . ,~

'.

1'-

Wh.e'n the Commun~.st regi'me ,co:Uap,sed i~n 1991 there W,ilS "tn lex:pectati.on" 'both ~.nth,e res In .·USS.1a ,,a. . € counry wau.w.. W:_:·,'t.an .. ':!I Rc .. ,.j. ·t-·hl,··t,th,_:·" ,·-·I··t ··'"I·ld· , !emb'race Weste·r.n va]u,es ll~).djotn the ,civi-' ~.ffise,d orId,. It took no aecOU'nt ,of' at ruined w leiconom~. depileted. an,d ,exha.ustedl h'u m an. (:apitaJ and th,e m,t;:ntaill an.d mora~, d,en.t ••
c·-.

Id·

,28 Briefing Russia

The Economist, D'ecember 10th 20Jll.'!

..made by 70 years of Soviet rule. Nobody

knew what kind of country would sueceed the, Soviet Union, or what being Russian really meant, 'The removal of ideological and geographical constraints did not addmoral clarity In particular, the intelligentsta-the en-;,- - _ o ;, - - ,_ _- - - gh --glllne,olf S·_'- vre- t.co-II apse- was cauz -t unpre pared", When their "hopeless cause' becarne reality, it quickly transp ired that the country lacked a responsible elite able and willing to create new institutions, The So.-' viet past and its ins itutions were: never properly examined: instead", everything Soviet became a. subject of ridicule," ie very word "Soviet" was shortened to so1Jok"which in Russian mean s "dustpan", In fact, says Mr Gudkov of Levada, this selfmockery was not a, reasoned rejection of the Soviet system; it: was, playful and flippant, Sidelined by years of state paternalism and excluded from politics, most people did not want to take responsibility for the f"O"U' ntry a. afflairs, The flippancy ended when the government abohshed pri-ce regulation, revealing the worthlessness of Soviet savings, and Boris Yeltsin, faced with an armed rebellion, fired on the Soviet parliament in 19'93~ Soon the hope of a miracle was replaced by di sillusion and nostalgia, As Mr Le'=' vada 's polling showed, it, did. not: mean that most people wished to return to the Soviet past, But they longed for order and stat biUty~ which th ey associate d with the, army an,d security services rather than ith n cians, wns ~p 0 r u,"'"
[ " 'J!
,'I' ',,_. " , ["1 .'

f.,

' _:

..

_',I

"

1",

.',..

"1

..

j-

:It was better before

.0 10 20 30 40 50. 60 10

Ar~.you satisfied with thf1" waf thing~ .q_~

{Jomg
UJ RU5SJU.?

IW~uldyou describe the

current: e.crmomrc

situatiCJfl as good?

Is it

great m~i5forttJne that the Soviet lktkm

{I

no longer exis.ts?'

[~

..

~" -

_'I_~'_'

:!i'e" ~

_C'i~_I-

I!I

Have t/"l'€' changes :since 1991 helped ardilrwlY pe,vJpte ?

t

Have they 'improve.d the standard ofNvirrg?

_pride in

Have' they enhanced

oUt country?

~aw they had -0, g~od

mnrality?

mfluence

on publlC

IWhat sJmuld we m~y to so[ve ,Russia 5 prob~ems? ,on

I

channel in, Russia" says he thought thaw "there would be enough youngjoumalists who would nor want to go back to the stables.t was wrong," Russia was much freer in the 19'9"OSthan it b ecam-~ un d Q,[-- Mr' ", P'UI fin ,',But th ch anse Il :' was gradual rather than sudden, and was based on a relationship between money and powe-r mherised from 11 previous era, 'The privatisations of the 1990S put property in the hands of the Soviet officialdom an d. a. smal group of Russian oligarchs. A,s -K-:-'l"[I ,~'l'] ogov R his tori an and analy ,""t h observed the, rea] problem was 'not that th,e accumulation of capital was, unfair-It usually is+but that clear rul es of eomp etition and a mechanism for transferring property from less to more efficient ownt, ers were never esta blf1Sheo. 'd Under Yelt'Sin.~, the, oligarchs were shiel d ed from com petition by their .p olitiCBl~, clout, M-r Putin simply flippe d. the formula, turning owners 'into, vassals who were allowed to keep their property at his discretion, From now on im 'was. the power of the bureaucrat, not: the wealth of the owner, that guaranteed th'E: own ershi P' of anasset. Thenexus between political POW= er and property was never broken -as it must be in, a functioning democracy
Ill. _ ..... 'itJI! I
'!;,or

brought television under his control, then and gas, Igor Malashenko, who helped to establish NTV:! the first private television

on

1_:

"'"', . ' " '

,iii3 ,!!;;.-

c'

"

,~,!!;;.-

"

.II! "

",.

,Y,!!,

''!ll U.

"i!I -

"ill

J1!,!I;i,

1!;iI",,'

!I;i,!!!"!!I,Uo!",,w.I

.~, "

"]IS ~-

'\ ..'

"','

I'"

',",'

','

'.

I.

Democ ratic

'10. 2,0 30 40 500 6,0 70

'govenn m ent

A. strong lea de'ti'

What is'mote imp-Drtont in society?'

sober, blue-eyed and calm=was ,at perfect 'match for people's expectations, Although picked by Yeltsin, he, made a striking contrast with, the ailing leader, Though he owed his career to the, 1°9:- '" she S<fIl"1e- sse"d t"h "l,t' =1L' ' ,0',' wn ,t' imes 'wer'e --·7- 0~l'-,IL'·'-,' ,_do hms .. L_ _~-'.~'" ... :'II:' ~ very diffe:re'nt. Two factors mad,e h]'m papin ar::: a growing econo:m~ w'hich ,aUow'ed hllim to pay .off saIary' and p'ens.ion ,arI-ears, ,a:nd the Inusecution of a war in 'Ch,e'chnya~ lB,oth sym b,oliseid t~he-return of thlE: state", in thle absence of ,any ne'w' vi,sion or ru,de'ntID.ty~, thlf: ,contrast with t'h,e 19'9'OS 'couldl onru,y be- achieved b,y app,ealing toO' a pe:riodl mhat pn~'ceded it-th,e illa.te Soviet Union~ Yet ,although Mr Putin ,explo:ited t'h,e' ·n!()stalgia fo,r a:n i.d.e,aJised S,Q.viet past and, restore:d m'h,eSovtet an.th,e'm" h,e~h,atd, no. inm,enmion of rebufl dltng th!e' Soviet Union €dt ,el 'f!'COno,m~,cammy or :g'e'o:gra:phically" As he s,add r,e:~ peatedmy" IUO'ne w'ho does not :regret the passing of the Sov~,et Uni.on ·has, n.a heart'; on,e 'w'ho wants to bring it b'a.ck has n.o'
Mr Putin+young,
:!!,
I: J ..

:E,n~'e'r hero the

o
Freed o m rro~ sratre lin te'if~re nee ' Start€! en sun ng no one '

'10 20 30 40 50. 6),0 70

in need

Sou r~e ~Pew Glob~l

A1tiI:i"lrudJ es ~U!rrvev

*$ urvey conducted in sp,lriinlgl ~:O11

a.d,op,t:ed by'the West 'What mattered, i:n,the 'wo:rld,-E,a.sm .or West-'were mon,e~i' and, t' ' 'h.cli, P Q,w'" ' 'e r', '''llnid ,t' !e"C',e'W' !er\JE!l,h,e· ~h'l"n ,o,oi:!!·~ s,et' ,0' ,ut'· to con,sO, 'l'"date" I Th,e co.untry' was, tired of ideoiogy, Blnd h,e did not :forc'f it AU h,e pro:mis"e:d (an,d largeMy deliv'e,re,d) was to ra.is,e in{:om es;, to restote Sov'iet,- era sta'bUity ,and a, s,ense of ·w'O:rth; to provide, more ,consum,e'lh" g,oods; an,d to let pleopme tr.avet Sin,c.e thesle thitn"gs sa tisfie d most .of th,e' d,e:m,and,$ for ""FIe edom'" tha.t :ha.di b!een, he,Gllrd f}lorn, mh,e late 19'8.0'S on'w,ards, th,e m)elop:~e happHy ,agf1eed 'to hm,s req'uest that the:y s~h,ould sta.y o'ut of 'p' Oll"'~ Ih!ou' 'gh' 'Mr' iIlUI ~l+'n'-w~'a~ au -1ff:h QI[1;_ '''lIn' ta.ri,an,~·he seem,ed u'd,e'mOCI,at'ic~' to. ~'hem~ ·'th w,e ,_ : ..- Lr'~';nno Im]lna,1 Th- e eas.e 'Wli - 'W h~h- Mr P'Ut"ln, e I~ ~ t lI!J, ~ln' ,A~s. I{'GE mant Mr Puti,n kn,ew pe:rfecd,y at ed, 8111 a]tl~rnativ'e sour!ces of p o,wer was, a. well that th e state-,co'n.troU,e'd, Sov:i.et e(~Qin- teshmo.ny not toO ,hms stre,ngth but tOo :R'us= SID,a_"'S mnstitut],onaJ wea~kness~ Yeltsin; w:h,o o my' dl,d n,ot worl~ a.nd th,at th,e id,eoTh,ogy was hollo'w" But aIso, ,as ,a 1<>G8, man", he bie- :h,a.med ,com:m,'unis,m; h,ld refused to censo:r the :m.e,dia or mnterfe-re mn th,e (,ourt syst.em~ liev,ed that d,emoc:rf.u:y· and, civffi1 socmety 'I '". rutIn, '. 'hd no. su I ch' ,qua ~ IF'" .lrst h a, ms~ ' - : ,e were simp1y an ftd,eo],ogical cover-'u'p .MP
'. . -, ,~~, .',

'h,

1 ~,

~..-

""",

"

!!J.

(J\C",

,'!!;..,

."

.\

..

. .~[

I'

~I"

I . ~,. ,. ,It.!. ,iI"";r;' "'" ,;)",

I '.,

','

.l("' ,...

ill.

·,oUI'

,(I. ,.

,,"

,I~

. ,.

.III,

'

' -,

',

','

I"',

'

'"

M,onetisin:g privilege Under communism, the lack of private property was compensated for by power an,d. status, A party boss did not own a factory personally-he could not even buy a flat-but his Piosition in the party gave him access to the collective property of the state ~including elite housing and, special food parcels, The, word "special" was a favourite one tn the Soviet system.as in "speci a. me eti ng", "sp e c~a.:m d,e:partmen ts" an,d speiclB regIme' ~ The Soviet system, co. lal'pse,d w'he'n top offic~,als dlecild,edl tOo '~'mone:tru.se'~ t'heir 'privileg,es an,d turn thie~m into :proplerty~ 'Th,e word '"specilaJ''' was ,also commercialise'd; to b"e'com,e ,ensklusim,y (exc],·usItv,e) and ,eUtnU (leliteJ" M:t was 'used to marIDcet almost[ anythin"g;~from a hou8,e 11[0, a 'hamr,cut., U'nde,:r MI Puti.n~ usp!eciar~ re'gainedl its Soviet me'a.ning without losing ruts c.om'm,er-ci.a] v"due., A, bl,u;k ,Meroe,des. with ,3., blue flash,ing light" ploughing its W,aty ~~hrough, p,edes;-jfm' tr.I'"B'n· IS- bloQc~~'m·'1 ~.'h' U d , ' 8'toQm· ,~Inl~.c.t;:'!i~,t-!llt!io, ]'.'.wool of p,ow,er and m,one}t It was ,a;lso on,e.af the sym'boMs .af'inj'usti(e whitch 'hem'ped, to tri.g'=' gel'"th,e lliatestp,rotests;o S~o:l].es. 0 f b'u'[e,a-uc:r.ats~ a.n d lesp e ci a.ny the: sec.urity siervices, putting' p:ressurle: on b'usi:n,esses are now c.ommon~ The moOst famous ,exam,pille~sthat of M:ikha'il m(hodo:rl{,ovs\ky ,an!d th,e disme:m'bering of the Yuko5. oU comp,anyt ]But th,s're ar'e thousatn,ds of otheJs~ Th,e' sma~jstics are' st'aggeI~,ng: on'e in si x b'usines sm,en in, Russia. h,ats jb"e,en ...
U ." ,~

,'!Jill

',.

,'"

.'.

II,;;

~,!;;;;

,g I~

,II,;;;;

Q I"

11,;;,

(I.,

dh!;;;;oUI

~(I.

ilo"'ii

30
.

Briefing Russia
I' 'I . - ,':"'I ..
I" I .' - '.~ ,."

The Economist, D'ecember 10th 20Jll.'!

_I { :...
I

I' : ted f .. p.rosecuJ~, "_,or an a ~]- d e.ge"~eeonorruc ""'cnme over the: past decade, Most of th,e cases g(. _ have no nlai n .tl"ff-. ~ ,L th numb er of ae an d q uittals is close to zero)! a ccordmg to studies by' Russia's Centre of legal and Economic Reseercb Th,~(;': eans that the v,3"S-'t num "or m of Russm.an businessmen in jail arevictims cutors - I-,U'IO',-,,-, anc : ",I s,~ o'f' '~,-:, 'runt prosecutors, ponce :!!JI<--,d- courrts.. corrupt -:-"-'-"~",which can expropriate ,at business with impunity As Yegor Gaidar, a prominent liberal economist, wa me d in'19'9'4,"The carcas s of a bureaucra tic system can b eco me the carcass of a mafia system, depending on its goals," :By' m'h,e' time his book appeared ID'n 20,,09 his warning hadbecome reaJity~ In the!I(;': C;.o-- vears 't~,;:w 'y' ,.d_' _, -- this urn-onstrous ; hvbri d'ili' i .' y _ has starte d to, exten d 'its ten tacle s in to every sphere of public life where money can be: made, Examples of violence against businessmen aboend, 'This adds 'U·PI to a S'oviet-style policy of negative selection where the best, and most active are suppries-sed or eliminated while parasitic bureaucrats and law enforcers are rewarded, Wh.att: Stalin wrought 'by repression and, e-xm erminati on" today's ·RuSs-I.81 at chi eves by corruptlon and state violence,
"I . .'
I," -

I"

.."

I,

.~:..

"~

i_

GII .'1;;..

. .1

'_ ~

I,..

_.

'!I;". -

J~LJ~a

\r.

JIL.:t!

~,.-:l

Il_

!~

_)

-b' _
_

I~'.

P''''!iIC-ta~,I~.

I~

~,

--'

-, I,,I

I, ,--

,I .

,1-

oil and g.as and, fans p,ateln,aJism~ Mr P'utru:n m,., ~ h" ~Jiaswor ..it.e.d h d' t,o 'bUIL,u, 'up t~ 1m,age o·r.. L,a,.[l. ., ~~.JI e m'he sta f.e ,atSth,€!,some 'b e ne factor" taking ,ere dit fo,r rising in;com es g',e:ne;rat.ed. by high, oi pri ces.~As :hie stresse d at m:he, United Russia ,congress" only th,e smate and, its ruUng: :pa.rty ,are c:apaible .of sortin,g o'ut p"eople"'s, p:ro~ blliems" ~~No on'f eillse is r,esplons:ib~e for .af=' fairs in a viJ.la.g:e; m.own~,Icity 0'1 :regio'n or the, w:hoh:~: Olm.try~ r:h'e:re' ~.sno s u(:'h fo.rc,e,.,'''' Q 'Th:is ideal 'WalS SlI)r!ead 'by local g,Q.vernO'fS, 'who told. th,eir citizlens b"efo;re "he, e'l ie:.(;tio'ns mham'-region,al fundin:g ,d:epe'n,de,d on v'Otffing ft]! U'nmt,ed Ru-ss~a.. ~']f e ar'e rew sponsible" 'Wl~ .hav'e no. choJlc:e/' the, g,overnO'l of :impoveI~sh.'ed Udmu·rti.a told, 'his pe:opile., UWe 'must go. ,an,d vo.te ft)Jr the [Un= ile,d Russia:~party c,an,dida.tes '99,"'99%~ This ru.s :h.ow'im was itn S ovi em: times", and :if we h,a,dl not broken this order, we 'w'OuId stiU bileIiv~ fung in the Soviet Union .. .m'u,eh better thaLn n,ow~t" :_:n pr,a"ctice~,c,r~tics s.a,y~t'he, state has (aillied 'to p"er~oIm :many' of :~tsfun,ctions, sU.ch as .provid1n,g ,ade qu,ate h,e,a.lth care, edu,cation~ se CUI]:ty' an,d justice,. But mn Russia 'wor,ds and sym'bo],s ofte'n c.ou'nt for more than experienl)f: ..
~I
i,

ticip ati on in the rent-distribution chain, Whi I.e thfus aU,O'ws. ~.tto' chan~nel .mo:n.e-y· to=' wards s ensi.tilve re gi,ons and fa.ctor.i,e s~ rut .also ~n,crease s mh,e ,country'~s ,a"ddru,ct!on. to.

'The bureaucracy's main reso urce is par-

him 'by America), Nh Putin has employed one of Stalinism's favourite formulas; 'Russi a as an isolate d an d be sitege d fortres $;, Although Russia has no Iron curtain and the Internet is free, ".it is as though an Invisible wall still counterpoises every. ng I~' . d~ ,.s I. ." ~"61 thiI~'=, th ~I* .I"S 'ours' to ever-Y'llit •. ~ 'forei gn' , ,~" rthing " .. ~l_: Mr Levada has written, Indeed hi s polling showed that, by :2,0;04", the number of Russians who considered themselves no different from people in other countries 'had fallen, while the opinion that Russia is surrounded, bY'enemies had grown stronger, 'Ihe recent parliamentary ie, ections were accompanied by at heavy-handed propaganda campaign that portrayed America's anti-missile system as an existential threat to. Russia, Dmitry Mie,dved.'e~ Russi a' s president, ma de bel lige re nt s ta tements and state television showed lengthy footage of Russian missiles, radars andothe:r threatening stuff, accompanied by at tense soundtrack. ]t was as though Russia was about to 'be attacked, The target of this campaign was not the West~ where the Russian elite spends much of its time and, money, butthe domestic audience. nm A-nyon wh 0 criticises the ,g' O·-v,-Q'..... --.enI't from within Russia gives aid to the enemy ·with.'out. ]n his speech to th,e p"arty con=
I.'· .. , '_:.' -:'

the Soviet Union, Leaders then had values, not Just interests, The Communist, Party mi ght have b een sd eroti C. and repressive, but im, was not call ed at party of thieve s and crooks" ~Soviet leaders did not encourage cynicism; they took the mselves and, their words. seriously It would have been impossible, for. example, for a chief Soviet
'i,~

ideologist to write an anonymous novel exposing the: vices of the system he himself had ere ate d, as Vladislav Surkov; th e
chief Kremlin strategist, has just done. Many I(remUn poltticians in faJ:t per-

ceive themselves as progressive West€rmis.-

boiled over,
After a

e.rsstruggling with a backward inertpopulation which has neither the tast,€ nor the skill for democracy They assume people will swa low' anything as long as their incomes keep rising, But when Mr Putin said that his job, swap with Mr Medvedev had been planned long ago, people felt duped, These blatant machinations, where everything was imita.tion and nothing was real, leached away support for United Russia even before the elections, wh!s'n the Kremlm decided to r.ig the ballot openly, fu-ry

,g ~

".

..",

, jl,

·JIL '"'

,~~ri:ll

I~.

I:.

,"

~.ti

.~"

Sov~et Union was at the end. of its. dla.ys~

Th,e 'big dmffe']f!enlce~ however, is that t,he' 5-0= viet 'Unmo:n had a c~,Ie:ar structure cn'][,d~ .in M:lkh,aiill !Gorb,achev,-. a.lead,er w'ho was nom

decade of "stability", Russia now looks as vulnerable to shock as the

.gress .l\tr Putin ,p.artic.uhrrly· attacke,d N (i~'O S 'w'hi,ch reiceivif: money' from th,e West' "to :in= tluf'n,ce fhe 'COUJs'e of the; election campaign i'n o'u-rco,untry~~T'h!e "'so-called gr.ant ~ :rece.i.v,ers" were Uke- Jud,as", h,e s,aid", e:n.ding' his spee,ch wimh at quome fro:m Stal mist times: UTtuth ~s.on, ,our sid:e~ 'Vmctory win ble: P' '-, ',-" 'I ','1"" y ]J.e. ours,., He conspICUOUSI ~II,'f~' ou. "-'t t'h" , ,thO, 'd ,e. 'bim:"'The ,en,em:y will be d,estlhloy'edI But no sooner had he spoken th,a'n Russia.'~s slav'= ish 'h:!:me,visio:n, (w'hich has shown non'e of the, Icurre:nt protests) a~.reda prop'agandj.ist film ab"out G'ollios, ,a, lea,din,g' in,depende,.nt election monitor) trym.ng to. fra'me i'ts ,staff ,as 'Western agents.~ Su,c~h l(lct[CS,~ in 'WhECh, ,en,emies af!e ev'eryw'h,elle and n.o nne is aUow'e,d a, nobl!e '. '. .m.otive, b .fee., ,a gen,e.r.am· cynu:asm .. In, th'· _ d],S~ :post~Soviet Russiat fe e.1s very' differe,nt f:rom
11'" 1'\ I I"

I~,

I~_r _ '

pr-ep"ar,ed to ,defendl hfu,mself with for-oe~ 'Tal'" dlayts ,cir,cu:msta.n,ces ,are ve,ry differ,ent Mr'Putmisunlike'lyto foUo'w the atdv~c,e of Mr ,G'o:rb,(1l;ch,ev a.nd ca-n!cel th'e: results of th'e rig,g'E:,d 'eIIe:(tion .. He: may' in,st!E:a.'d n~:soI~ to :more active rep,r'e:ssion" *'h,e.reby' m,81kin.g the country look at lliot m,ore :Soviet This w'Ould only 'make the cri.sis wo.rse~Ho.w Mr Putin,'s highly' pe,rso:n.-aiise,d p'ower ,might be ch,allen.gedl~ ,a~nd, 'hat, m'he ,co:nSle,que:n;c:es w
ere,ate ,a_ sys:te.m mh,tlt lprom,ot,es :ho,nes,ty; o:penness.~ tollieratnce an,d infmiativ'€!, n,o rn.. of ~e:a.der win, fte:'e tba~ir c01ll1try ange f:romthe S,ovilet:grip~ •
W(luld be~ rema.in un,answe'rable que:st~,ons~ B'ut m.'tt .i s obvious that unl,ess Russians

" -,- ,-

-, I

',' - ' ,-

( " - -, - - -

"

,- "

-, --, '-,

,-",

- ,- '-"" ,,-_ : ,--

,-

Co

,~.

enemies~ :Hav:i:ng promote,d. a v'!ersion of hmstory in whi,ch Smalin rep,rns,ents Russia;,s gIn~atness(h,Esr,epressions just an unfortun,ate side·='effec:t .of ,a co,~d, ar forced 'u:plon w

A for-tress men,t'ality Amon.,g Mr lP'ubn~s .redlisc,Q-vfI'ed Sovi,et symbols,~ no:n,e is more Etmp,ortant than that !of :Russfua. as a gr,eat ,pow'e-r surroun.d.ed 'by

31 Also 'in thts secti'on

For daffi~~1' B'ltHilys]is and debate on Am erica, Visit

Econ omi st. c'D,mll u li'teds.tates

It ne president - cnooses h·' grourud Th id h ms

WAS,HiLfI.:I'G'lONI1 IO(

rect the widespread sen;S,I€ that America has lost its way-something that would normally count against him-Into exasp eration with the Republicans ~ But lVIT Obama.must walk a. fine line ..As
'Chuck Schumer, a Democratic senator, noted earlier this month, Americans are put off by' anything that smacks of soaking

Baraek Obama offers America. a new square d,eiul

much the same, Getting into the middle cessors' campaigns he will take as at ternclass and staying' there has been growing: plate ... ill Barack Obama attempt to. per- ever- harder in recent years, he lamented, W suade voters, ,asRonald Reagan did :in19 84, a- n d yet th ""'" ri ch h-a'~V" "e' O"o~.I~. 1~·v·Ig,·r'·'·'.r'~ch- ,g·r" 'ThfIL """.. "'" ····,.,11._1_ .•,,; .1 ' .• "".1' _,~A.!.,.r:'. solution he m aintained is hisher ·'t~IVIl2ioS on that the darkness of recession was giving 'W·' 'QIiy. ·t·,o·· om ing in Am ·er~IC·'QlI"'''? : "m .. ·' The n d urthe wealthy to fund more investment in , ist essness 0 f tne economy mazes thrat education and infrastructure while keepth ~k mg. 'I" 1 ,s Th alt e r n I, n .g' A·:m eric a" d e b t' 'I' n 1{'O'h' eck a tricky sell. Could he perhaps emulate Harry 'lruman's successful mira-deof 1948 tive, he said, was a "you're on. your own ;;. against ' the "do-nothing Congress"? M-: economy, marked 'by fa ling wages, rising ... ' .,... ..... ......1 . '". ." ." '.,'.. '. ~ '.' r b etter u ~I -w~::C'~r' In go 'co',"c.'~1Il ~~ th '~'n' pollution and emasculated unions, ml ilL",ll a'b:'~ml I '", ~[~, thumping tubs, and in, any ease control of .Mr O'b.81mB.was at pains to 'make clear Congress is divided, making Democrats as that he had no wish to punish success or resp onsib le for its ineffe etiveness a.s R.e·=· suggest that go,vernment had the solution " .. ib .' ,·t·- ~I . '. ,0 '.. " .., .... ,,' '",,-Th,i..., publicans are",This week M~r bama put an t·_'· every pro ' b '1em.vrr IS isn t at ·O'U_ crass O end to the debate by' publicly invoking OJ, warfare, ,,~he said at one point, "This is about the nation's welfare," The word different role' model: Te ddy Roosevelt, D'I ..'.,'..... er 0, M-;"-" ..... ,ama ",-11, ,1QL ·"IIi.l! ..n " .. :. iii'.', '.. 0, n.>'ecem -··b1t::.t"·h __"r O:·::·I·b,··,:··: ,t' rave_ 'f 'd-' ~",("lll'rH rf"ro"p"p,o d un.IF' a'g' ~1111 a''n d ~Iga,;il o' ,,', t' h·. e r--l'ph· to Os.a:w.atto,mie-.~ a sm,alill town ~n I<a,nsas sh'Q.u~.d pay th.eir "fa!i-r shaJ.e~~ of taxes; poo,re:r Am,ericans sho:uld ,get ,8.. Ufair shof;' 'where· :Roose'velt gave .at celebrate·,d sple!ech in :t910, lay"ing out th,e 'platfor,m the. t he am su.cc,ess:; rut was Uth,e; h,eight of ·u.nfafrness.;t 'would ,eventually ado,p't' .as, .at thilld.-parmy that 'bUUon,aire-s should. :p.ay a lowe·,[,,effe c·=· ca:ndidate for p-res].d.e·nt two y,ears la.ter~ ·Be- tive tax: -rate th,Wl. 'mid.'d~.ie·=clatss,JoIl{~ : ... 1·.AU this is ,quit,e clevler~'By inv,oking a Re·-· £ole a. crow df o· 30~Oooeh 1···-·1ib ora.te- on d ,I e a.l_ his lliongstan,ding th erne .of a, '~''Sq.·ua.r,ed·eal'" pub,Ucan presm.d,ent, Mr 0b·ama, can and, .," ,.,'" 1.__!CJlclJJ.m .~o .' TIlfor worl{mng Am.ericans-a c,on·cept that. d"d' III ,. t b' e IUlSllng a b- .,ov·e p,aros an po 1'" ha"d .ma,de him 'wil,dly Il"Op'ular ,during 'his t~.ICS~ He also shifts atte:ntion frOomhis p"erso'=' naill stewardship !of the· e·co,no·:m.y, w:hich :n.e·arlliytw'o merms in office;; A'm.er:m!ca's econA:mericans ·co:nsi,de-r :in,ep,t) mo the b:roat,de-r omy and, po]:it.i c,a1 syst1em were b~ased, toe'~I':a·,. ' 'll·t~··~ 'wa.-rds mhe ·rich. th,e form,er p:re·side·nt icom- an'.'d:' m-' ·:r ,~'b' c·'t·, q. ,oe't'~o.·n--·· ,f f nl ,oq' ua···,y" .tIl plain,e d:;he promis.ed to gjve· th,e Ii t~le ,g'uy a w·h,er.e D!emo,crats shouilldl be on firm.€·,[ ... .• d" fai r sh,a'k_e., groun d- ...Mn essence" 'h-- e:ms ,at~e.m,pting to .::m
'"'j< •...•

ti..;:) " un.gton 0,1i;:L.JI.{ ." ill . W~,e'h'JIl';:: ......•,. , ..•... c 'to'asl w.h ~~'L.. ofhisprede
I.IIlYl. . I.,j;
,.'11,;;:

I~yE~Ytime ~~resmdellt se..eks 'e-eill!ecmio~; It mssomething of a parlour game- m

r. .. 11,;;1

the local hig_h school, Mr Obama

In a. speech to a more modest crowd in

said

_ lll ..l:

!!;,..IIJ_

,g

JIlL

_,

_'

~,c

iff·

JIl"",,,

"",.

I~

Q
"""

I;

I"

,_,

_",

"",'-t.

'.',

.!I!.~

.1

'

I'

e-:

I!;)!I,

'.

I,

...

I.

:.-litl

....

II .• I.!I! ..
'-;"

...

lee 1 ...
:'

,'

.....

'

,',.'

,':"

' ....•

',,'

',',.,:

I"

'.

',,"

':

'.,

"1'

-','.

(:.--

(:.

':'1

'.' "

:c·

_.

'"

=.__ I.",

=".

,_'.

I.

,,,I

!!o,..

_ '!/;,;. .... __

.'

_ j'!;j; '"

Ui.

....

~'IUi.

;!'l . Q . , 0,

~ of'! JlLUi

.- ~

.I~ " ,~1fi'. ~

D, ' ,

,Jj,

'.

a- '.

!o.;('

,(;i

,"If.,

I.

':'.<

I!I;,;.!__ ..•..

. ''!/;,;.'' ' ..

'

i!LI,.,

..1

I .•.

__I_

....

-:-"--1

..

-1

1-::"--1--:

.' ... '...•... -

[.,-:.:

"

"1

il'>l'

"1

....

-.

'-.q .. .. -

-~.~ , ...

i--

..

'0, .

cO.

[;t,

ij;1~:r . ".

UI

.1;;,;:)

J!J. ".

• ,0..

.1;;;;

....

.~

"-',~,"

'

'C

'C

'....

;-:

','

".C·

-.

,-

-'.

.~"'

.:.

'1'1 ,'.~ ... -

: I·

,.~.

-; ,..-

.=,

the rich, but are attracted to the notion of fairness. (Roos evelt, ~tshoul d be noted, lost th e eiecnon t".. '11 owing 'h+ osawaso rm e . 11 tic JiO. - - ~ I~'•.. : is 0'-"" - _. spee ch, dividing his party and lea vin g it in the political wlldemess.) The Democrats in the Senate have formonths suggested paying for a series of worthy-sounding schemes=most recently' an extension and expansion of a soon-to-expire re duction in payroll taxes=by raising tax rates for millionaires, Thes e propo sals, all so far stymied by Republican opposition, are intended to. show that Republicans, when forced to choose between the lnterests .of the middle class and those of the rich",will abandon the struggling mass of Americans without a second thought, Most polls suggest that voters agree with Mr Obama and the Democrats in principle. Our own .EconOHl'istJ¥ouGov· pol] finds that a majority' of Americans would like to s!ee the payroll-tax c.ut e-xmend ed,;, fOJ exa.m p 1e-.~, .and, tw'o-thirds .of those th~nit a. surta.x on mUlion.adres is th e blest way to play for it., Yet Mr O'bi31m.a has been harping on ab'out ra.isirng taxes on the ric'h sinc:,e hits first e~echo:n campaign.~ 'nu~:Republicans do not Slf:e'm to h·arve p,ai d a~n ele dorial pri c.e for ,dismru.ssin .. the idea ,as iclass warfar,e anld g· prev,entin .. its imple,mentation g in C·on~ gre-ss;, I'ndee d; D1emo crats in .swru.ng :stattles have· often 'V(lted, with th.e·:m. w.hen fhe irl.ea ha.s 'b,e,enput to the te'st, for fear of b,ei'ng mad-e'p. _. ~1Il ,~. b,o.~ll;Od·· , .-t'~IX""-~ln·· ,o·n:d" 11"b ~·s··Mr Ob·ama. s'eems t,o. be h,oping that his ••
1ff' ~.
f~'

,OJ"

,.. _

Wi.~

" .. _..

'

DiI('~ .,II~J1al.

'11

32: United States

'The Economist, December iotr ,20Jl!1

~Republican opponents, many of whom have put forward proposals for regressive,

flam taxes, for example, win, take their coddling of the rich too far for most voters' tastes, That case will be harder to make If Mitt Romney; the former governor of MJilSsachusetts, wins the nomination, 'He, has the least doctrinaire tax plan in the Repub" ill·'I - ': - -- 'fi eiu, comp- m ere wn -"ax b -- -'1 - exc ,U ican -I d ,,-- - ,- -,-' - t - ith t - rrea rs - -~ sively for middle-income groups, In our latest poll, however, Mr Romney has seen hts support among hkely primary voters de dine 'to 'l5%,~, ess than half the Ievl el of Newt Gingrich, a. former Speaker of the House of Representatives who appears mo be benefiting from the "suspension" of the campaign of Herman Cain, a. candidate dogged 'by multiple accusations of sexual 'impropriety Mr Gingri ch supports a nat: tax and has denounced Mr Romney's plan as Obama-style class warfare, That presents Mr Obama with a bigger target. - ~o l .. " e -,---,,:, , --.s,aw,a H e told t-'h,- crow ,dl_,.at' 0·-' '-' .'-_' , t- omle t-'h"a,l~",th e" deb a.teat bout ineq uality "is th e defining issue, of our time", meaning that he would like it 'to be th e defining issue of the presidential campaign, _
-I' """ I' ,-' I"

'-I'

",

,',,'

I'

---1"-

.:',

-,

o!'

The economy and stimutus

ooking up
WAS If N G,fON ~ IDe: U

'111,6 eeonomy makes h"eadway,,:So do efforts to renewstlmulus

H"REE months ago Barack Obama was firmly in the dock over news thatno net jobs were created in,August. Some gloomy people even saw a double-dip recession on the way, America, :it turns ou t~,'WB1S not on the verge of' recession, and rut still isn't, Subse-

quent revisions show that 1,04;0'0,,0 jobs we-re in fact create d ~n A'U,gllst Later --h ,. Y"": '. mOin· It s·· hI a' v'e' ~I~C"!O b e,eii·n re·V':ls,e" d Un,w,,: oar, d ,an!d in Nov€!'mbe'I p,aYlloil s gr;ew 'by 0'-.,. 1'%,:· '0- -n-· D,o,"i"',Orn'b Orr' 2·"n' d' th~ 1 ""Ii_,O-, 0-' ,0,'0· gov'ern'men~ ,also reporte'dl that th,e 'u'nle'm~
, , ", - _ ~,,"'" ',_ '_ ~ ,;;:I! -'

_,""'

I,.

'

',_

-_ '

._

C ,;JI,

-,

.. --",

_"'¥ UJIi.

,,'~

..

- ,-

~,._,~,

..

~JIL

!II;;;;

J-I-b'5,-- r -fijjA' ~'aL o I@"IIV -,

Utu!mp_ioy.men t

rate %
l

Change in rwn-!rum

payroU~, 1000 500

10.0

250

9.0

II

:2010

201'1

ployment rate had declined sharply to '" 8''-16,~ the low'-:,es'figure fo r w.-',0· -and-a-half 'yea-rs, down from 9%" November; it seems, was a, very good month, Retailers reported solid sales on and after "black Friday", the day after Thanksgiclng on November zath that marks the traditional start of the Christmas shopping season, Car sales were ,at:their strongest since the days of the cash-forchmkers subsidy programme, back in August 200'9~ Mortgage applic ations also ti eked sharply higher. 'Ihe American economy is looking up, in large part be'c.ause ~,t as been down for h S'O long, The recent run of good economic data suggests m-hatt he economy' is. growing t artaround a '2'15:% rate, roughly Its long-term trend, That is fast enough to create jobs for a growing population, but 'not fast enough to reduce, unemployment, Instead, the unemployment rate feU in November thanks to two unusual factors. First, the, househ o~1dl S''U1?'v':·,o,u UC" e:d t- 0, "~II ate th e unem ,cul .n' . ployment rate, has lately been recording strong Ol"O'W-: ...., :h than the separa re better·--:t' c~ in. ~,;:]~ known payroll survey; 'why~, unclear, Secis ond, and more, gloomy a lot of people have left the labour force, reducing the number 'who are counted as unemployed, The share of working-age people in the labour market has fallen since the recession ended, holding the unemployment rate down for the wrong reasons", A stronger recovery would probably have begun this. year 'but, for a run of bad :1uclc a rise in om 1price s foll owing the Arab, spring, dlsruptions to globa] supply chains caused by japan's earthquake and the deepening debt crisis in Europe", But part of the: problem was self-induced, Anxiety among investors rose in August when a stand-offbetween Mr Obama and, the Republicans in, Congress almost forced the government to stop paying some of its bills and prompted the first-ever downgrade of the nation's credit rating, In the afterma.th, the p,resident saw his ap'proval .ratings siu'mp': but ,arpprovam of C,ongre-ss fell 'l~V'(~ more,,; att:o:ne' 'p o:int :go:ing' n :l~ tl _. Tbll a~ ~"Qi;'m- ~'O h '9'V"Ie t . n' ,,',0, s-·l~'n·g'~ filtJ"ur- 'eolll.~, sicared both sid es :into av'oi d]~n,g:furthe:r c.o:nfrontatUlon", F,ears ~h,at thle governme'nt :mi:ght sh,ut down on December. l,6th ov,er furnding disa.greeme'nts ar.e fading:;: 'Co:ngJ",ess :h as patsse d thr,e,e ,app!lropri31tmons bH.l s a.nd is ,c~,os:in,g ~n on th,e le':maining nine" ,More bn,portant', RepubUican le,a_,de:rs. hav-,e :indi,cat.ed that t'h,ey' w,o:u~,d:lilt,e to ext,end bloth a 2% :p,ayron~taxcut and th,e avajllia,blilli= ity' of 'up! to 9'9 w'eeks of un-e:m.pllioym,e,nt b!ene:fits" Both w·er.e p'art' of ,a ,compr.ommsle~ a,g,reement a y,ea:r a,go, a:nd an! sup,posed to expire ,at th!e ,end ,of this year. Th,e' dmsagreem,ent is O'v',er:how to pa.y for the extiens:ions~, whi-ch J1PMorgan reckons arie wor~h $160 b:iUion n,eJ{t ye,r:lr~ Mr O'ba.ma. ,a.n,d S;i€'n.a.te D,em,ocra.ts 'would lil~,e to ,expl,anid t'h e p,ayrol1~~ax ,an.id finatn oe it 'cut
'. '.. Q"
I~,_ .'
'.C ,. ••

lU.

!!!!'!.J

'.

,,'_

JIlII_.

'to

...

~~,_

~.

'

with. a surtax on milhonaires over the next ten, years, The Republicans are 'using their filibuste r power to blo ck that but getting no f,Uuther with their alterna tiv -w hich .. .... . ,~. WJ!l . I would cut theranks and pay of civi servants, Some :Repu·bU-c.anlegislators oppose any extension because of th,€; lmpact on the deficit. The posturing will inevitably continue for a few more days; but, compromise seems likelliy., Wru.t.h the euro zone probe b ly already in recession, America 'wUI struggle to maintain even its current modest, place of growth next year, 'With another self-induced wound, mast August's forecasts of at seasonal recession would turn out to have been early rather than wrong
I

,11,;;,

ul!J.t;,JIl"

_,

,:,,0, .~,

..

,~,

.,!!!,!!!;..

.;:11

..

Co,

~-'\"'

..

'.

"'-'

-'=.

. -'='--

. .IILV·

19,1Y' _!!;;;,w,

I~ .

,'-,!II;;;;)

..

~,

Trans port tn Gecorgia,

Spare a penny?
ATILA.fllJTA

Taxes, fOf' mEras,true,ture

I~

~J

_:

iii:" I .:-~\.,

,_.

'iI='

I~~~'

C' ,!ill

It.. _ ,

)tL : , ..:-,

have, ~h,e nmongest a.ver.age,rush-:h,ourco:mmuh~':in Am,erica,: 127' m'inutes", Th,e city's transpor~ infrast.ro,cture h,as n,ot keplt 'pac,e with its rapid growth ,and. sprawL According to Gleo'rgia"s ,goV',eI,nment, the sta,b~; sp!en,dls less 'pe:r h,ead, on tr,anSJ:HJI1 thian an.y o~he-r e-xt(~e'pt 1!enness,ee~ 'But: fixing the mfrastructure means. ratms~"ng taxe:s-p,olit~caUy unpa]atable, ,even 'in fa.t y,ears" ,a.ndl this is not ,o:n,e~ So. inJune' :2 01'0 'G eo,rgia "s 1e,gislatu-re ,de',eide,d, t.o. let cimiz,ens vote o'n whe,th,er to raise thleir own tax,es." The Tr,ans.p"ort,attion Investment A(:t (TI A) dire c.ted, ele ete d, offici at~,Sin ,each of IGleo'rgia",s 12: regmo:n,s to come 'up 'with . .a U,sm of proj ects,., T~h,emast of those lists was 6na~,= is!e,d in O'ct:ober., ,A~:th,e tim,e of next ye,ar'~s state prilimary !eme-ctio:ns; citizens in eac'h region wIl vote ,on wh,ether to finan,c.€; mhos,e ...

ATLANTANS" it ms ,estimat,ed"

34 United States ~projects 'by imposing a one-cent sales tax within that region, 'This is a variation on a" taxation, model called, rather pi easingly, a SPLO ST: a special purp ose ],0 ca 1.- option sales tax p assed by' a regional body and approved by referendum, Din November 8th voters in metro Atlanta approved a total .of ;$3,~2billion in

'The Economist, December iotr ,20Jl!1

funds for t'h,e region's schools, Proponents sold that tax as a way to raise money for school construction without raising property taxes, Should the transport bill meet, with similar approval, aU, money collected within each region 'wHXstay there. Should voters turn it down, the regional round-table can come up 'with another list and submit 'it for a. 'vote in no less than, 241 'months" In all, '''rIA -backed p raj ects would cost Georgia's voters over $:12 'hinton in 20n dolS,Pl.O ST

lars, 'with, nearly half of that coming from

th,e ten-coun t~,rAtlanta region.

What is surprising is not the size of Atlanta's list-in, addition to having some of America's worst traffic, the ,At"1 anta metropolitan area also accounts for more than half the state's population and roughly 75'0/0 of its economic activity-but that 'it was agreed on at all, Animosity simmers lb,e~ tween Atlanta and, the rest of the state', especially among elected officials, Atlanta proper is heavily Democratic; the sur-

Te(h'nology and ,ci'vi~Iliberties

Don't shoot
AliLANliA

Po lice may not Hke being fdmed, butthey had better get used to it
'w·· .. ··

rounding counttes lean Republican, with a strong "tea-party" influence ..And tea-party groups have come out strongly against the, .ist, clai ming it lacks oversight, is poorly p .anned violates county sovereignty and invite s terrori st atta cks by' creating a raj I network. Fortunately, the plan 'has the' support of Atlanta's mayor, Kasim Reed, its business community the heads of all ten, counties run the region and Nathan Deal, Georgia's R!epublican, governor, The round-table approved it unanimously: no small feat, ,CQnsidering the disparate constituencies its members represent, 'Th,e list covers at range IQf p roj ects+building railway and tram lines, expanding highways, surfacing streets and improving bill'S services+ around the region" But ele cte d officials.making dealsis one thing; convincing a farmer in a rural part of fayette County; on the very edge of metro Atlan ta, to tax himself to 10 for trams. a.y downtown is something else: e:ntjreru~ :Et wi!1 'b,e ;s,ol,d ,as a c.o:ntest b etw',e,€;n,statgnamion ,and l~]~ epin.g G,e orgi.a com,petitiv'e, andl ~.twin 'not be an, ,es;sy s.ell:: ,81'ccording to Mr Reed, 'paning- data sho·w' th,le ble st: re su '1 for. s'upporteIs would b"e a narrow victo.ry, A poll in S,epte:m'ber fou'nd a sUm, 51% support 1Ithe ta~x~ Still~, o,dels run in August by the m Atllianta Re',g:ion.aJ Comm~,ss~,onsho,w that m'he completedl :proje-ct 'wiU, alillow ,aroundl 84l'o,~Ooo more peo:p~,ieto commute to wo:rk 5· m"~' IOnl. ·t,cs' In -: '~,o,e,e A: nl ,d· ~:h· l"m, p'fi·O""·-:::'!QvI I: V ments win, also sav'e' $8o,!om. in w,ast.ed fu,ei ,anid Hm,e~a, 'pretty pe'nny Jin,dee-d~ _
~ir-'ill ~"I!LlIl.

....................... from this autumn's Occupy emerge protestsi Was it the campus police officer in :Davi S~, C am~ fomia, casually pep p erspraying a line of se ate d proteste r:s.? Or the white-shirted cop in New yo.:rlt, doing the same to a pair of unarmed, penned-in women? Perhaps it was a street in Oakland, deserted except for protesters an1d at line of black-helmeted riot police, the si1ence broken when one of the cops fires a :rub b er bullet at a protester filming h im, Protesters have complained, as ever" about :p 01ice mfiltra non b,um as the s e vi deo S make clear, protesters and other cttizens are keeping their eyes on po lice, too, More than two-thirds of Americans own digital cameras, Around. one-third of adults own at smartphone. Most of these devices can record and easily transmit: audio and video ..Recording police has never been easier, and thanks to social-media and activist netwo rks such, as Copwatch,

··'HAT is the most striking image, to

Adding audio, however; raises a new set of legal issues ..Most states have singleparty consent laws concerning audio recording; meaning thad as long as one party cons ents to being recorde d:" the taping is. I egal, In.most .of the 12 states in which all par.lIl.!I/;;'~' ,'.'~, .eu, ~ viola ties m ust con sent to boO recorded tt 'VI'-·, a'lion occurs only if the, subjects being
.I"~

~I,

'~...... ,-

11/;;'

'I/;;">'!

privacy Arguing that police officers carrying out their duties in public have such, a right is a. challenge, Th e a.ttomey-general in Ma ryland, an all-party-consent state; wrote in. 20.10. that few interactions with police could 'be considered private" And challenges are mounting in two of the states-Illinois an d Massachusetts-: ':,rth t ~AlrW..........O·~"U' exnectati on -of -privacy clau lIPig.;t'I In ,I~,
r ¥!!.,rlll,l~,. '_ ,I .,
c····

recorded have a reasonable expectation of

'i;Al.,.

""" 'Ui. c. ~~:~.~

.w. ,

.4·,.. ,.'

..

·UI . .,~,

.lll~LlIW!'~

I!J.

II,;;;

..

!I,;;;

·vide'os to m'hewe:b, neither h,as p,ub Ifci~;.ing these re'cord'in;gs;; ~IW' .,a'-y'-e -_" _ ..... E!~ "-:' l'h ,al~ ·d'o·. A,S 'n· uJ', ·<:_" 00· , '0: ~v~Dr~-w~'o.'~l'IDI,60':p~e pe'aceably filming 'poH.ce h,ave be'e'n :han.'dcuffied~ be,at,e:n ha,d the-n cam'eras slefuz,ed~"Bind b,e,e:n a-rr,este',d for obsttu(:tlng ,gov,ernm:en.tal adminis:tr.at1ltfuon,~ O'bs1ltrU cting an investigatti.on,~ int,er~erien,ce disturbing the pie.ac·e;, .or io:r i]}egam w:lreta,pping~ ILn m,ak:ing sUlch action the po:mic,e .are on shaky legal ground~ th.e' ri,ght, ~'O, :photogra.ph peo:ple, inclu,dm,ng polic~' offic,ers" in pubUlc Pi ace~i~~s relativ,€ y ,cllie'a.r,.
I . '~I ~ 1~1·.1 .. .i"'!i/t . '~' U '1:"!WI' 10·.".
! ..:' ..... [~

·whi,(h, monito,rs poH.ce ac:tiv].ty and

Pt1StS

= ,

,' ....

!!b;,jli

!I!

Massachusetts last August, a. federal appeals court upheld a lower court's ruling that a citizen's right to film police in public is protected by the first and fourth, amendmems, During oral arguments, one ,0.(' the Judges h,e,arling th!€ c'hallenges mo th·e Illinois 'Eav,esdropping Act worried th.at ,allowing r,ec1or.dmng might hin,de'r ~'he abUity of th,e 'poUce to do their Jobs". He gav,e th,€'! exampllie .of a poli1cem,an ta~~king' a. c.o,nfito de'ntiai il'nlorm,ant., lPoH.lce have' also 'ex'= pIe ss,ed c.oncern ab'O'ut record.ing~, .and hen1ce exposing~, un d,ercov,er offi Clers..Jl3.uof t course poU,c!e can st~n spe'alli{~n pr.iva,te~ Given, thle act],ons of some, poID.i 'offi"cers (Ie w'h,en c~onfronte,d, with a. C'atm,era, filming cops may' not be ,prude'fit, But :nei~:he'r sho:uld it b'e llIieg,at

'The Economist, D'ecember iotr 20Jll.'!

Detro,it nears bankruptcy

Nowhere to,run.
DIEiRO]l

Insi der trading and (ong'ress

Cap ltol crimes

[]be motor city' fllrts with fisca I disaster

'_,' F',
,OD·····_,·.,

Congress, eonstders iegisla,tion, to Iimitjts own msider trading

R

-_·,'. "~,."eo·,-, "[,eh' __ ',c"'l'-'dt,'."el,'s'_',,.dm', a,~,.,

,_.0:_, "':"JIJ,ffi:-~ln". '_"

Cy.~,_,~",i,~ l,d',s.·~,'.'I'Ti.I";r,,ia.· ..

_£,'

n'~'_.,tl~:-,_,.' _'"W,,'e:"_,
U, _

,g' :·s',', n,',Q,-_,',·,gll~lts_.on, __',so ••

,',a.,_, ,·,',_,hi",,'-n,_··'

congressmen

'"

Ul

lAL

v!

~.

'"'"

_~

'N[THE1960's\~ first hit~song' fro:~'"Berry the: .Gordy's Motown empire was "Money (That's What I:Wa.nt)"'~ It might well be an anthem for modern-day Detroit On December sth M:h;hi,gan took the first legal steps towards a state, takeover of Detroit If rut happens, it wiU be the largest Americ an city to b ,e taken over by a sta te,

'The problem has been building for d,e= cades; declining property values and the flight: of better-off people to the suburbs
have hit revenues, while the Clost 'Of servicing a still-sprawling cit~l has not shrunk proporti onately The effe cts of the rece s_:I cu SI' 0- n' patti_'JIJ", lII arly severe _I__, M" '1"'!!;,;,.L,[!!,,: ~_, _.t" ave,' I' n chiga n h .. provided the trigger for the cnsis, Detroit's mayor, D,81v'e Bing, now says th,€!; city' wi ~
," I.L~,',
'_i

having a network of friends and ,3.So5o.eiates who keep 'you wen informed, But allegati ons have surfaced that p oUti cians sometimes make use ofthis privileged access for personal profit Last month CBS television aired an episode of ",60 Minutes" that accused several mem bers of Congress of financia opportunism usually associated

,:,i',_,'__:'.

run out of cash in Aprilzoia, Failing to fix: the problem, he adds,

means losing "the ability to. control our 'Own destiny", This is a. referen ce 111'0 legisla tion known as Public Act 4 (p A4l; which allows the state, to .a.PP"OID'nt an, emergen cy manager for failing local governments and school districts, When ,an, emergency manager is appointed, the authority of elected officials is suspended and the manager assumes centro of publk contracts, city asse-ts, staff pay and 'benefits" On December 1St the governor appointed an emergency manager to the city of Flin t In Detroit resentment is growing over the start, on December 61th" of a 3'o-d,ay pr1elirninary financial review which may lead to a takeover that: the ci t,y says :it does not need OJ want Yet while Mr Bing has ,deD()UD'Ced, the state's actions, they may help him swing the dea he needs to save his !city.If the unions refuse, they know the al=

more 'with Wall Street than Washington, The reason they' can get away with it is that insider tradingis perfectly legal for members of Congress, atleasr according to Peter Schweizer, the author of the' book "Throw Them All Out", on, which the CB,S episode drew Thms has sell off a. fuss on Capitol. HiU"; as congressmen try to decide what the law actually allows, Some authorities doubt that the Securities and Exchange Commission (sac) could successfully charge a member of Congress with insider trading, because it is unclear to 'whom

ternative win, be, worse, As well as, 'wa.ge ,cu,ts and,l,'ono, laty=o:ffs,~ mhe mayo:r needs bfu,gicon,cessi,ons. fro.m fhe unions~, rangilng froOmp',e:nsi'ons an,d, 'heatllith= {;are :re£orm to changes in, restrictive wo,rl~ ru~,es,.,San,dy Baruah, h,ead of th,e D,etroffit jR,e'gion,al C'ham'ber (If Comm,erce') relcko:ns Mr 'Bin,l~fs.prop oS,Eds, while :p,rd'nfui, a.re viable,..Th,€: unio,ns m,ay rear se that the, game, m,s; u:p" One, 're'pr.€s!enmati've-a.mong th,e 45 with w:h,om the city :must negotru,a.te-s,ay:s hfus'me'mbe'rs. ~e,emu,p agains,t ,at wall 'To atidd, to the ,difficumtjies~, the fight has, be:,come racially charged., IOlne D,etrom.t icounci1woman invoked, the 'fight a,g,a.inst 1 A· '1 1 .•• . :. "'b d· h s=avery~',~, ,_olca_pu hI"mcall!on d·1,es,crte··· t_Jf" go'Vernot, Rm.cW{ SnydeI~ a slave-:m,aster us,as m.ng a.lega ~~lash'~; ,against M],lchigan;s. b'l ackm,ajeudty' cild,es~John !Conyers,~ blaH:k ,con,ii grlessman fro:m Michigan,~ h,as writte'n t.a.

owe a "fiduciary duty" and what qualifies as "material, non-public information' in at p olitical context, These elements. are clearer at companies, where insider-tradi ng leases usually <0 ccur, :Itis remarkable; though, that conBI1essmen 's investmen ts have been so laxly supervised, Members 'Of Congress are not barred, for exampl e, from owning shares in.companies that are'regulated 'by committees on which they sit, They are able to trade freely; even if they find out before anyone else about regulations or events that could affect specific industries or the stockmarket asa whole, such as a war.an executive orde-r or a new law Their unharnessed access to political intelligence may be part of the, reason why a 2004 study that measured the performance of senators' stock investments in,the 'mi,d,""1990S found that they outperformed the market bY'12%.a year, A 20,06 hill, the Stop Trading On Congressional Knowledge (S.T'Q ex) Act, aimed to hold politicians to the same standards as corp ora te insi d ers, =t got,Iittle supp ort, ]n the current political climate, members of Congress are under more 'pressure to distinguish themselves from greedy' bankers, More thanrro congressmen from both parti es have rushed to sign the S"l'O ex Act, or introduce their own version U[*, i .3.' bs o 11'u'te1iy':···essen *~.... th.u ..we do ~ at .' .at _ '. - ",Il., L·a ~.1li1J.. re store the pu hl ic's trust,' says Sp en cer Bachus the House Financial Service Committee chairman, who was among many accused 'by "'60' Minutes" of benefiring from inside information. He deni .. es wrongdoing.and has introduced his. own, bin, which would require members of Congress to put their assets into blind trusts, But' even if a. bill of some sort is passed, no one is expectingmany showcas e trials: after all, the flE C gets its funding from, Congr,ess ..
.:IiJl., . . iii

1IJ...::l

£I

...

"

L:)I~\

!lor._

. '__'

the: fe d er.a] amloIneY'~,g·e:n,er.al as:kru,ng fo:r ,a re= :"'f~ 4' ~ "/ ,""",: ,"' ."" co.n.c'e,rn *rh',·, ll~~.s ,', Vle,w 0 ,rA-.~, ,expre,,sSlLng ".'{"""""~" ,at"t 'bein:g a.p p lie d :in a. dis,clfu~m:ina.tory fashi on,~ Juris,dru,cUons with h.igh pJoportio,ns of 'b~acl~s~ suc'h ,as ]8dento n Ha.rb 0 UI; Ecorse;. :Flint:, In:kster ,an,d Pontiac~ :h,a.ve all b,een hit ·byit D1etroit can expect ,a,lo~'more of this in
,.,_"C"" "Ii'Ii,' I[ ,",j."',

... '.. -' 1Il1 2012 ~f.'"'~

'.

•...,:_ '.:'

w~.th th,e powe:r to fir,e the ,elect= ed; blatck~Democr,ats of D1etroit. H:ow'e,ver, a.tt,e'm,p!ts alr1e 'b,eing ma.d,e' toO ,ch.all!enge P,A4 an,d ~fe'n,IQugh sig,n,atures are gath,ered th1e law' can be held in abe~,.a.n,ce'u,ntU a r.eferen.'-

I .. Wh~' ]lte R b- ~-" )lea.n govle.rnor'"'-. ..epu,

' .. ;." . I' '.: I" , ,1'1'1', :','
'l' .:

'-'d[-'-'u' .._ r'l'"n..

- ~IF u· '1I;;;j[!~I"'lIl.liL'~.' ''!JIl'n"C iiJi~ g'ii">~~o-"n"C'

..~

y,ga-~ r- , Mi'· c'h,e ,:1·~'u. ., 'S a'~"n"C 'IG: ,..

'. ~. '. a,pp. olnts
I' ,.; ". ," ".~

som,eone

1(J'um.in Nove:mb,er lOU., 'Were fhat to :h,appe n; oo:mplex ~egfa.]battles 'w'Ouilld bie Icertai:n,~ For busines:s~, tham sort of eXh!ndled. crisis WQulli,dl be ,atn lmw'e~= cO'm'e outcome; t'he unlcert31~~nt~l te:n,threa ing to, ,crush som,e of the green, shooms th,at h,ave sp,roum'ed in Det~oim's. d,owntown an,d mldtown ,ar'eas'l The, gov',er,noI 'r+sks a gream de'a.l by wa.di,ng i,nlllo the fig'ht to s,ave ,Detroit; ~)ut th!e albeJnativ'es 'may be worse ..A . -·'·1·1' .', an t,.,, ·t " " .' . e.1~ro,ml~; r lor ,m~.,g b· -'k,..u.pl_Cy In .... "'*- .&:;' .. ,_, ex,amp, ,e" "."', lh* a~so aHe:,ct other p,a,:rts of the staN;:.. The wealm'hy Icounty of ,Olakilland 'wo,u~d, ose ruts l trip,ID,e-A, ratffing simply 'be,cause ims n,eigh,'~rl'c' b 0,['U,-r·~: ~n '-'0' "UI ':- b.·l
L'

Dl,c,f.

...

l[

.'

U! U

~,

',.

tti

Q ,'.. "-.' ~,.,

,I

RoI~5",Rgyce·
Molal
C2:f'~ Ulii1r!.@t!Ii

·V\l:a~kin.g through ftjJ.t€ assembly S110P', Lisa Pirwstz is P liea se d with little, Every empty bin of' non-recycla ble waste it 5 a success for her, Togeth.ier with her G reenTeam, she set a. goal to recycle all ass embly production WHJ.S'b~~ at the BM.~Vplant fun. Spartanburg by 2012,. Lisa
..,J 1•C!

c O]1V~lllI'1C: d th ~ pro] ct ~ "~.."

.·:.II!..!1I. '_ Q !!O::,c,
~

llll..iII.;;'t!,

. " .II!.~..':

iI'JI "i;;_

I_,,'

WI'}] ••.

be

~. 'i;:'

;[!'U{"'I C'''~~~ sful .;. _I ..... , Q.!l:' .. , ."

~II QV' QJy' ' .IIi,I. ~"I~I

employee recognizes

its value, She also 'km10WSthat a

small creative idea can make at big difference. 1:0 pique p!eopme"sinterest in her project, Lisa recently enlisted the help of' two unusual spokespeople: a pair of hand pU.P'" pe ts made of pro duction wa ste. They were a big hit and 11e 1ped raise awareness et the same tinrne"
The 'BM'W Group is, tile world's most sustainable car com ..

pany for t me seventh consecutive year. Find out more about the 'Dow JOllies Sustainabi ili,ty Index sector eader at
W\YltV~bmwgrouplleolm/wha·tslnext

'The Economist, December iotr 20Jll.'!

Tort reform

Closing the lottery

rHJ

insurance policies rarely 'pay more than $m1", and often less, Patients must either accept: the insurance company's quick and guaranteed payment, or fight on through debtor-protecti on Iaws to get OJ. t the dottor's personal assets ... ost take the insurM ance money Thru.s has not stopped, states from capping damages, Some ]0 have now done SO~ 'Texas politicians, including Mr Perry credit thiS' state's 2~)03 cap of $250,,0.00 for most cases for bringing a flood of doctors to the state, though the extent of that is disputed. They often cite a. sustainedjump inmedical lice nee s granted (which 'began in at bout 2~O,o6l,Our chart, based on research, by three unive rsity e conomists took a. different metric, using stat e health department's figures for doctors. who work directly with

lap ru.n1994 ended up at $4S;,O,~O'oo~ Big damage awards are es p eci aJ.IDy' assoelate d with medical awsuits, But doctors'

punitive damages for a 'woman who spilled scalding M,cDon,ald"'s coffee on her

'T~, '._ db' ate. h' _ e .,'" > I e_1

I
, ....,

,-. E" I '"' f ld over tort rerorm generates, exaggerate" d eiauns.: bu 8_S0 a, rew goo d 1 eas ut I .... ' H' .IS' '.' fl"o'- n deri n- 0" cam _,_a.lll.1e'zn .l!., 'P..r"~'1:i'1 'N U·' I-P'I::' i a for ' I ·!!jJ11IiOUa~·i3' that loser-pay s eo 'U' m tries n IQ,IQ.d-: leza I. . I~ ~ptlll. I ' ,dent, Rick Perry has. at least brought one in surance, which, can be bough t (~orexamplelin England for Just £100-2.00' (,$1l50=)-00)1 topic into prornine nee: tort refo rm, In June thee'gove rnor 0._ ,lI,f"xasslgne 'd'i,a. "lose ·,H '..... ··f'lP ~ ....'.' '.' ' _.0 ser pays after an alleged loss; but before a suit, :i s a' ad ~ __ 'L a re __ . tort law, intended to discourage slight or f le d 1 'wye' rs can ti' .,van <rt,'h p" ''!i;"',,,:-,miums and add them to their bills.In other counfrivolous lawsuits by making losers pay the winners' legal costs, Conservatives are tries; such as Germany, many households .r ea ge r "0 s upport it Thee ri 'g' 'h as m ainl.,,_- carry standing legal insurance with a smal] h* .... ~alne ed . r ..,d'~":,'.d ~h""It A'·· merlCa..:'. ;,.S 11 esal ,Cw,'1_ monthly premium, Ms Gryphon argues lor .. ·ecae.s ~. ,at. .'--' .:" .w,ega. '._, that in such ,at mature lose-r-pays, market ture smothers small businesses, doctors and innovators, more small-value but high-merit cases 'Ioo bad, then, that: the, 'Iexas law is tim- would be brought, while both small "nulid, "Loser pays" is the norm, in many counsance" suits and b1ig "lottery" suits would tries, including England, Canada and Ge:r- b e less attractive to lawyers, manv,1.1" BiU* there "loser pays' is th'a, IU· '1,0. in 1.=1 Q[ .... 1~._J!!i;;. , .1.. Loser-pays has 'yet so 'be properly tried most torts, The Texas b ill awards legatill c.'osts :in,America.;; Anoth,er idea; :how,eve[" is in o nlli~,.~or Su'its "'th a.t :h,atve :n,Qbas.is in :~aw or pi~aCiein many' s.tates::' cap'ping d,a.mages ~In ' ru.n :fa.cf and atre' di.smmssle(i 'b,eto,re ,any evithe popuma-r imag:in,ation runaway juries ,dence is. gathered,., Most c.om.pe:tent ],aw- rout~ne Y' impose huge non-e,(onomm,c d.a.mages (to punish, a. d,efend,ant or m,lll\c.i@ y,ers ,can 'w'rite a clOm'plaint that clears this 111.. E ·'~I~ , .• 'up lor a, plamtiff's sufferID.ng)'~ In p,ra,etice', WJa:ro;~~V'e,n t i,e 'if'! JLieXa.s trla.Jlnlawyers aSSO"CJIla,= he',at,dline=:gra.b,bing' .awards are oft:en Ie= tio:n ev'en~u"aUyendo.rse'd Mr P'erry"s law~ $:2~7m,in iQI:nly' on'e othe:r sta.te~,Alaska~ has mOs.er= du,lced 'by j'udg}es: th,e notorious pays:; an,d o,nID,y :for a portio n of fees .. Mo,re mnmriguing~~ Fllioridat impose'd uloser=pays~'~ Distotted dia g11'05i 5, ~.n198;,0 for m,ed~cal-malp IcH:tice- cas,es~ l'he' Teocas dj;rect -ca re p hys~ n s da number .of ,cillaims dJ()p,pe,d~ trut the aver,ag'if;:award, 'Ios.e.~suggestm,ng that mo,re highper lOG, 000 peo.p~e Total. 'GOO merit ,eases got their Iday in ,co'urt whillic' i~5 110 ,I d . ell ow'-m,eTll~' 11- ~I" 'Ijjmg:s wen:: 'd' I,eterf,e··I. or se,tt ,e!. TORT REFORM fo.r less ..'B'ut m,any ~.osln,gplaintmffs 'we're too, , 40 160 poor to 'p,ay the, winn'ers'" ,co:sts,~ w,hile in 35 l'S0 on,e ,case a. iosin,g d,efen,d,al'nt had to. :p1,flY'm,U= 1.40 30 llimonsfOir the pmain tiff"s 1e.g:aill :fe!es ~,Ev'len dOlc"'., S.UPP'OII e;·_.,' ,e.'1aw s repeat. In "'11;9105' '. i~'ors'.' , ·,·t "'d" ,·t·h· ·"',.·· 25 1.30 Marte !Gryp,h!on, (if m:h,e MJa.nhattan Instimu.te.~ a c.e:n.tre-rfu,gh t t.h.~,n,k-t'a;nk~'who S au'I~'.h or . ,:0 f ,cii JIl!o· di~ ;a;y=s p' ,':~I p' O~'~~ sa'-... t·'h' _ itf' ,1" c, o.r-p ~- '.: fO £it ~ GlIl.,',:Y,,·.· s . 'I,ei 10 1990 95 200.0 05 Texa.s got "~mu,ch m.e-55 than 'haJf a loa:f'~~:, ,31n,dl ~:h' ·~It· Flo' 'Ifl!'d' W,~.-:J IC'p";"o' " '0·. JL~~ ~'iOO' qUI-..r{ y~'.'.h·.~ -:C-:C'~~I~ li"Q,d iC':l-:-l'~'-: S:,
" ,", .", . ," " ',,' .. ' .. ' : , .', ' .. ' ,' ,,' ,., " I' "
c.' '.. ',' .

EW YO ~J(

I'

..

',..

'.,

','.

. I •. .,'

>

',·cc.·,

'!;;;.

Jl

,.I ~

,,-,nl,
, .. '.

'l/;;;Ll!!J. =

u..!.

g.,c:"

GIll. JIj, ... ~ lib,

,_ iQl .... _ '!b. ..,

I .II!.- .'.

rc;: Ib:-

,-'

111

patients, 'Th,es € we-re' on a gradual upward trend well before 2.00']", and show no.acce eration after that, Per-capita numbers be= gin, in fact, to flatten out around 200]" The: caps did achieve their direct aim: medical-malpractice claims fell sharply in
l

:',"

I"'..

. , .. "

"

'.

'.

..•..

."

1_,"

.'.

. ....

...

"

"

...

"'"'

.. ,_'

,>~:

\",~

1,,_

1'"0. \.o)1I;..

1111;,..

~~j.

number, and awards dropped Just as sharply in, value, Insurance premiums for doctors have fallen, too, 'Bu~'these have failed to bring down overall Medicare
m

I,"

Ii."

....

I.:.!

I~

.!!l...

.',.1

~,i';dI

.~

'.,

~,.'

.:" i .

!~

..

costs; a ~{ey':indica tor of me dica 1c.ost s ge n e,:ratillly~ Insurers are' happier and ;5.0 are doctors" but health care isno cheaper, So the two sid es are locked in a standoff 'Trial lawyers and their Democratic am= lies call for health reform along European lines to reduce costs, making morts less expensive .. Republicans call for tort-reform first, saying it is the best way to. keep costs
down,
But

II!.

I~

,"'-'

.!I;,...:!!,

.,,::>Il;..,=

..

'

.'

.h!, ..

1I;,..'.!Ii.

h-I

""'ill

~ .'

_L'-O'-'~

ID

IF'

"

~I

111

,.

I.

"

I~. iI:iIl.

,~.,

;:]I ,~.

i:li-

'.".

.I

IL.

..

Itt;:!i,

he'a]th-car,e law' has, not (yet) b e'nt t'he costcurve", ,and Texa.s-s,myl e' d,amage c.aps :h,a.v,e not i,'n fact ~,n,cre,a.sed d,Qctorn,u'm'bers,., In f!eamity~itnce,ntives :must ch,ange :in Am,er~.ca.n hieamth ,car'e ·tu::ross the board, an.d, t,ort re= form is o:nl:y'part of that Non:etheless, goo,d i,deas des,elh'"v',es,erm= ous debate~ "'Loser pays;' sh,ou~,d not, shie],d wlongd,oers. I{.eith Hy~ton of Boston, Un'ivl~rsJty';s.lilW sch Dol es:tima m',es, at t'h,e 'we,l t fare-e'D,hanc.i:n.,g e.f£ect of m,akm'ng n,egH.genc,e more expe'nsiv'e 'w(luld be- th,e biggest e'co:nomic be'n,efit of lose:r-pays~ And, hi gh,-merit b,ut ~,ow'-;stBlltle:s, cas.es sh,o:uld ble more e co,nomfuc,a~.to file4 Herb ert I(ritzer~.of the Univ'lersity of Mi.nnesotat~, an op:pion,ent of illos'er='p,ays who is sicepmical about t'h,e utJi~ity' ca.ps on of a'w.ards; s:uggests an,othe-r reform: gj'vmn,gjurie:s ,gufu,d,eUn,es for dtamages in sim.ilar cases, w'hmch wo:ul d ttim exp,ecttltions. of l'-.I~"Y' w~ .'6;:, ~_~"" I.~li." b'!g p' a--on*c Moro. ---';idlosproad adop*iion oi"!;,f"'sUich sensible rules would, not mra.nsfo:rm th!e; tort. system: 'bu~ it' coum,d ce-rtarinly improveit _
I. I~S,~'II.II~.

Massachusetts's

universal

',':I!

I~.,

exington

he wretched Middle East

tartan war" As for the Arab, awakening, it is. true that Mr Obama did a, fair job, in February of using America's influence over Egypt's army' to prevent a. bloodbath, But n,QW' that the army that defended the revolution looks tempted to steal it, and, radical Is= lamists of an stripes have prospere d at the p -0 1180, th e trick of align-

ing America's interests with its 'values looks a bit harder to pun off American energy in dependence? That is still an aspiration, '1"'(", O']I,n'ba' '~~'".. traded :C' 0'-·mmo d ~t"tl W'" :h· ~C" hI m ean ,~ ']~Iy " Dint" a re a'1~'IIt'u, O~i~1 a ,~)Uv.. J~ that if the supply from the Gulf ID,S pinched the price will rise in America, even though America buys most of its oil elsewhere,
~ =V '. ,,' ,,: lIl'~.J"'!!1
lJj,~,

'I~.

'IJ.,lIl.l~

"

...

,'

~~

'.

.tIl..

"=~"

, ..

,0"

I~

lnto, Iran:?'
. ~'

h '. '. Apart trom 0111l",t h ie other issue th.at an ch- I ors Ame-ll '..ca m t h")e region I.~ is its bIpartlsan commitment to the safety of' Israel. An d Israel
"-rn

right now beli eves that it is facing an extra ordinary threat, in the' shape ofIran's nuclear programme, Mr Obama has worked harder on :Irat:n than he gets credits for, Tom, Donilon, his n anonal s'ecunty adv iser, 'noted las t month that Mr Obama had persuaded allles to impose "unprecedented' sanctions that have, left Iran boxed-in and isolated, ]f sanctions fail ,rM·····"~D·. onuon~ added , 11-:' sh,0uldrer ,_:"ber that Ai ..,,"-"~".",,"-: [ 'I "~ rar a. e ran s ua _,remem . ier at menca had at otic 'bll residei axen no er wor d AT !'HE ~~~~,~"~ this"~onth t?e"~l~~,t' Am,~ricBlnt~oo~,S ~I],l]le'a~,e tak " ,~ . 'op ions . 0ffL "th e rame ~n otther ,--,~~ s, the presmen t fiira.q,~ marking the conclusion of an,eight-year misadventure who sent SEAE.S and drones into Pakistan to kill Osama bin Laden mn which some 4~50'OAmerican soldiers and, many; many 'mo!"€ and, decimate al-Qaeda might in the end use force in Iran too .. Iraqis lost their lives, On Decernber 1St Vice-President Joe l~iden It is a good story The trouble is that nothing America has done told American and Iraqi troops in Baghdad that eve:n after its sol- or may halve done-mot the sanctions, not the threats; not a mystediers had, left, Am .. erica would be a loyal partner of the new Iraq rious campaign of assassination and sabotage-has yet stopped and stay "deeply engaged" throughout the region, Back horne, Iran from, continuing defiantly to enrich uranium, And :it is not however, a subversive new idea has taken hold among the mak- only Iran that seems to doubt whether Mr Obama will lever take military action against it Plenty of Americans, some glum, some ers of foreign policy Isn't it time for America to turn away from relieved, have, reached the same cone usion, In the Weekly Stanthe scorpions' nest of the Mi,ddle :East and pivot towards Asia? Since th e wish is farther to the deed, the, sup p osed "pi vat ~" as h dard, the parish magazine of the Repub mean fa'rty; Thom,a.s Donnelly of the American Enterprise Institure argued recently that, started already Barack Obama declared last month that America had made "a deli berate a-nd strate gic die cision ",to b e "all in' in the contra Mr Donilon, iran is probably pretty satisfied with the' course .0,(' events, America was leaving Iraq and about to "bug Asia-Pacific arena in the 21St century Nobody funthe administraout" of' Afghanistan, too. han, has silenced its internal opposition tion thinks that the superpower can turn away from the wretched Mi ddle East imme diately; DUt a,certain the ory of the case itsdo- and the Arab spring has plunged its Sunni foes into disarray, ing the rounds, Not right now, 'but: soon, it is argued, America "Faj udge 'by its publfc agitati on, Israel too ms losing faj th in Mr might at least be able to lower its profile there .. Obama ..Yes, the president has shown that he Is not afraid, of mil'T'h - tluIn,~'~lng.runs some- "th~ zlike thu _ m.rs; thee ~,_I,ab ,awau'\'en- itary acti on, But he also wan ts to be re-elected, and pushing Iran P'" '" ~~,_eI __ ki ,,' nmg "LJ~: ~J.~S", , t ,~ A too hard c\ould hoist the, price' a.n,d :hU'lt the, r,e;,cov1ery' .on which ~,ngg~,v,esA:m,eri-cata. chatn,ce to atlign its:int:erests with :its vam'ues::: i'n,ste't). d of' 'Su pp orting the, Iulli,€'rs,against th,e' str€,et it can Bl m ,atst,go hits re=eIection !depends" A meetin,g last w'lele:ken,d of th!e S,aban Fowith t 'e gt.aln, of history: S,econd,~M.r O,b,ama has ]ran, w,e 1. and rum, ,an an.'n'uaill eoillllioqufu-um in 'W81s.hingto,n .of hi:g'h='ups fro,m [sra=
I"
U I~_ . 11+

;11'

],~

I~

'm ..

on

I: .

~IulyHcontained," b,y S8n,ctions., T'hird, th,e d:i,ct;atorshfp of B,ashar Assa.d Jisa,b"out to ,com~a,p,se~ th,(lt wnm ,pull down the evH ,axis of an,d [tan" Syria, and, H]Yibuillmah,., Fourth as Am,eric:a'~s inftue'n(:e w,an,es~ Tur'key~s is growin,g'~a<nd. Turk,ey' is a N,A'TO m,em,'b,er ,andl Am,erID.~ ,can ailli1tLast, America no ~ong,et :im,p1o,rts. mo,re' th,an 10,% of its .a,ill fr'om th,e Middle, East~ it ,can aff;o,rd to tatke a more re Maxe dl vmew so than, :it o:n(Je did, .of the :re,gi'D n' s ,co:m,'b'ustib,ru,e dy,nami,c:s,., AU 't'hese, p,otnts :have some m,erit 'But: to. slee i:n the.m ,a ease ior Ameri-c31 tlo ie'an, ba,ck ,as it turns to ,Asia you have first to' pla:nt a pair .of rOsie-tmn~'ied spe'ittacie's n'n, y.oU'I" n.oS'Et A,s Brmtamn, disCJover,ed
t
In, "I". ~.La '. '1,_1"£:00· '. ,~o.,U! " , , ~I I_".,

em a.n,d Ame:rlh:a, saw' sun{ing',~ s,eomding' ,mo,d m:ix:ed, m,essages from bot:h sides,..Whillie ,exh,orting lsraiem ~o Ujust get to the d,amn talble'~' wit:h th,e P,ale'StID,nians~ and, m:end rle~a~io:ns wilt:h 'Tud(ey~ le,on :Panletta Americ.a's d,efe:nc'e ,se,cretar}r; sa:i d at mmlita:ry atta.ck might delay an rranman, bomb! fOol' 'D,nilly a year or tw'o, at m'lhepriCie of a r'e= g~,on,al 'w,ar:.,Th,at statem,ent hardly' ma'kes ~ts();un,d ,as if the mU.italY' option is ge-n'ui:nelYl s~fU 'o,n the p'res:id,ent~s table ..litt~e' 'won,de:r tham Is:r.a,el~ u'nSUl'€ whethe,'f Mr Ob,ama would in fact. ev'er strillc,e Iran" is dle,'bating w'h,eth,er ,a_ Ught !e~e,cno'n ye'ar~one in w'hich lh,e Reip'u'blicans are 'in fun cry' aga.inst Mr O'b.a.ma's al~eged, '~'ble~ "'l'f1lt',Qr"'~ -w·:~';ithl!d'~'-W·"'l"ngJ I,m· ~~e't- '"o,f"SUIQ-Z' nQ~lrl!\l' 'h'~lc' a, 'cl~ni~url -Y'- ,"'l,g'o tr,ayal'; of t.he'J ewish state, might b,e fh,e very time to do so its,el[ -!t~ ~,a JIlJ' ,a Jl ~ ~.. III , . ,u.. gr,ea,t p,owe.rs that thinI{ th,ey c.a.n Iieave the' ,Midd~,e :Eas,t behin,d A, PIJiVOt: to Asia?' ,Of c.o,urs.e'" T'hat~ s,ays. M,artm :indly:k: of the lBrookings. ]ns.t.itution,~,at :fo:rm'er am.bassa,dol to [sra.elli, is where the' ~he':m so'one r or illa..t'er su(:ite,d baclt in~ are Even, S'D',;this is (h~:(;id,e!dly ,not t'h.e:mome nt Start w:ith, :Ira'q~D1espite Mr Bid,en's 'bIee~'lYopt~mru,sm~,h!E: poillm= gre at _gam:e h,as ,move d~ t Jor Amer~,c.ato relax its vigiMa:n.ce: in the Mfud,d~,eEast, _ ttcs of ,iraq :re:mBl~,n atS volatile as gelilg~nite,.,Many analysts fear that the departure of A~me:rican troops mla,k,es it far likeillru.er that an 'raq w'hich has fai~.ed to r~S'D~,v,e ~n,b~Jn,a~ its ri.fts 'w:ilill fan b,a'ck into sec.'-,
t

Also 'in thts secti'on

,~

A,&IB

,_. ,,_..

For daily

,~IIIi~ lys is a

a I~d. d ebate

0 nth

e' Arme ricas, visi t

Economi Camadaand the United Sta.. tes

st.eem

Ia 1111 erieas

Th b.orr er two-step der .. , re

{]TTAWA

ation will erode our standards, which are generally considered to' be higher than, those of the United States.vthe Conference Board", a business lobbv, reported recently (~,y ·;,~r ll - :,,~ ag None of this is ikelv *"0 dera 1. the til' ment in Canada, Mr Harper enj oys at parliamentary majorjty Several prominent
!..... .~, •. ' ...

I ... '.~ . JIi.

Il,'.·'

=:l!J.!II;;'I~iif\O 0.

Liberals are 'now' among the business cheerleaders ~OI' the deal, And anti-Amencan fe eling north of the border has rece ntly ;sub..,.:' - , 'c·' ~., -".. - ~: -, ~11·::1~- ~~ .... 0'1 bar -- a. 1Il0 S U ,''51.d e d,,,'_· ana,) do, :rn.an.s.lIltKe .1\Ill .'_._ _ ama. -; more than they did his Republican predetrying hard to find, other markets, coneludcesser, George Bush, They pity rather than the war of' 1812, Canadians have worried ing a host, of free-trade agreements with envy Americans because of the higher unthat Americans harbour ambfnons to conemployment rate and more depressed Lattin American countries and negotiating trol, if not to own, their territory Thfs " I,:'i 1,-' et sou,~ . .h ousmng mar.rk..e -':,;"--uh,0,'f: ,th:'. 'b-.o"r·d·:'.eI~ .e ',',· ·'~:'.: means that b ilateral accords, of whi ch broader economic pacts with, the EuroThe b,m,gg,er question Is whether Mr there are some 6'9'8 on file; are Jealous-illy ex- pean Union and India, the United Stales reamined for their lmpact on, Canadian Obama can implement his. end of the deal, mains by far Canada's biggest trading partner, buying 73%, of goods. exported last' given the other demands on his time and sovereign ty~The latest deal, called Beyond the B'p ,"'-,:,er and_ a.nna-1-1un ce d h'-',:' te -I'h-,-'en e 'or d,,-- .an " ' -". ' . .- ': _y_ S I~,ep .,-- year and supplying 163%, of imports. Bilat- political capita] during an election year, AI= Harper, Canada's prime minister, and Pres- eral trade in goods and services totalled though at large majorlty of Americans con= idenr Barack Obama in Washi,ngton on De= 'C,$646 billion ($;6271bilillio:n)in zoio. 'Yet' this sider Canada to 'be a fair trader (at recent cember 7th, will attract particular scrutiny, relationship has suffered recent billows" in- p on found 81% felt like this compare dl with because it involve s not just tra de, but the; eluding the Buy American provisions :in 410/0 in relation to Mexico and 29% for Chithe jobs. bill, a new fee for CTOSS- border tra- na), they are generally unsympatheti c. to sensitive issue of shared security tod Mr Harper's aim mn seeking th,e deal rra aea s Y '.' € vel and the administration's stal ing on ap- trad·.8 d ""'1·:,U10, ays econormca 11,:-:-: depressed climate, The nativist wing of the 'was to dismantl e at least some of the re- proval for th,e Keystone oil pipeline from Republican Party opposes Beyond the Borstrictions that have piled 'up at the border Al berta to Texas, in th,€; name .of security since the terrorist denjust as i~:did an earlier failed attempt to But some' aspects of Beyond the Border d '. attacksof Septembernth 20"01., [The United _eepen, NA,FTA, WhiIt h- Invo mves M··' ,. exlCO are controversial :i'n Canada That' is. espeState's has agreed to do so if Canada meets cially true of passing on information about too, Despite being America's largest trade its. security' concerns by' providing more in= travellers, Even before the deal was an- partner and energy' supplier, Canada has a nounc-ed,~ th!t New De.mocratic. and Liberal formation on. traveU,ers, adopting us m.eth= low profile in Washin,gtQ1n,,-, eXlce:pt w:hen it parUes p,ointed to con1ce:rn,g :f1agge"d 'by the o,ds of' bagg'age s.c.reenffi~n"g a:n,d, ,exit: controls, fin.ds itself in the spotlight for the wron.g' and ,harmo,n~.sing ,at ,host ()!f ot:he-m: security reasons) su,ch a.s 'being ,a, s'o-urce of so-caUe,d .privacy co mm~.sston,e'~~an, officer of Parha-' m,e-asures~ ,A slepar.a:te ,de,a~, n regu~,ations ment~, and .accllsed th,e Cons,ervative; gov- ,dfurty' on, rro,m th,e Alb,erma tar sa.n,ds", o Mr Harp"er is do:in,g:,his 'b,est tn, hedg!e his. e:rnme:nt of s,el mg o'ut to th,€ Amerilcans .. co:mmits th1e two co:u'ntri.es to wOldt toward bems,~ He, h,a.s begu,'n t:o CUi f·vate vllr.ious. commo'n stand,ams o'n, @,verything' from 'The two ,governments say th,ey 'willil stay' ~ '. iII~! c·-·h~ £0,0: 'e sa.fety to JIloc,omotlve d e sp eCla.JIlJlY '_ - ma.~ within th,e mega] a.n,d p,riv3'CY regimes .of ,emlS SID,OnS,. A sma.n ,onW1.trn~s, :·,t,-····d ·_,I~a.' _.nu_ -"( ',-d-- y . . '~~r'he-s,egree:ments nepr1esent the most si.g= both c.,O'untr.i.es an.d, wouilld dev'eillop' jo:in~: S~··' b-·'bI_e:-, 'bi' ,th,-'"e:_ U· file_ S-;lt, fr,·u..es over tlh-I' e. a "fi d '. d III cant ~rlrl:~:p lIl.'o.rwar~:In. an a,~a_=us C.O=O'PI= p:rivaey p"rin c:ip,Mes to guide m:h,e:i:r~:n.tel]m= Keystone pipeb:n,e.~ he m,ade a, p"oint of tel~= .. .. er.atmon SffiC'f t'h' Norteh- Ameru::an, Fy,ee= g,enc,e sh,armng~ "e ~.ng China'~s p,resid'ent that 'Canjada ru,s kee:n, Trade Agr'e,eme.nt (NA.FT'A)t~~ says ,Mr Har= Th,ere is ,dso oppiosition, to harmonisin"g to supply :m,ore ,en:ergy to Asma~.Bu,t: g.eo'gra:pe:r~ whose goalli was to prot.'ect 'Can,atlda"s prod uc:t an,d s atfely rltlli'es~'~TI1:ep:revailliin"g p hy is smUI a b i,g p!a:rm,of Can.ad,a~'s desm:in~ Bey,on,d the Border is mmporta'nt. G'cc:'ess to th,e Amermcan :m,arket vi ew in 'Ca:n.ada ~s. that Ie,gu~ .a:tory co-op1er-

that attempts t:oassuage American fears about security and Canadian worrtes about obstacles to trade ::E:-:'R c."'. -, atterr 'be , . v·",'--: Slln,ce an unsuccess,ssf Uill-I ,at l~,emp'l~cy Doing s.o is of great concern to Canadi. " the United States to. conquer Canada in an business, Although the government is

A deal

"

,'!"

--

: 'c. -,

.- .... -

a,

.-

:~-'

'.-

-.,;If

iI1-tFr

I~,

I"

,-

!'

,.

a. ..

_-."c:-!i!,.--:

.....

_',,,.::.

1,"-:'-,

'.~:-'-':

.'_

1'-']1"-'

-(-::-'(-'1-

'

:."

..

_.

-: .-(-:.

, .. -.-:- _.. 1-:-['

'_', ,-:,.~)

.-1

- ..•..

'-1'-

[ ..-.

iI1l

"

...

1""-

;£:

C· i_

'The Economist, D'ecember iotr 20Jll.'!

That damned. Nina

BOG'~'TA

En"dless rain exacts

,8 heavy

1011

I Years of Hundred

'N THE fictional Colombian town of Ma.= ,condo, in Gabriel Garcia ,Marqu,ez,'s. "One
Solitude", it rains cease-

lessly for four. years; n months and two days, Sa,d].y~ Colombia life has recently tn been hnitating ar ~'Iorrential rains have batte-red the country ~OI much of the past two years, destroying roads, unl eashi ng mudslides, fton,ding houses and farmland and leaving millions homeless, 'The rains have been bolstered by what Juan Manuel Santos, Colombia's president called "that damned Nifia" (referring to a disruption in weather' patterns as soci ated with unusually low surface temperatures ru,nthe eastern Pacttic), They have caused 1'14 deaths m'n the three months to December znd, according to the Red CilO:SS,. Another 21 people arle missing", Seven women died when a mudslide buried a. house inTolima
on December 5th,. Rather than guerrillas,

gold project, would be- the largest single mining investment lin Peru's history It is an €!'xpans:io'n .of Minera Yanacocha, Latin America 's biggest gold producer, 'W hich is mainly owned by America's Newmont and Peru's Buenaventura. Conga would open by 2015 and pay $3 billion in taxes over the next 19 years, half .0,( which would stay' in Cajamarca, But the project would turn several small And ean lake s into reservoirs or tailing ponds. Some locals support Conga, Others worry that it could threaten water supplies for farming Yanacocha's own. environmenta record has not been spotless", Nevertheless Ca] amarca's re gion,al pre sident, are near completion), Cecilia Alvarez, who manages the government's reconstruction fun d., blame s 10 cal offi cials for the delays, Local elections in October distracted 'many' mayors ~She says the fun d will set to work
Gregorio Santos, waited, a year after the proj ect's at pproval before calling for a. new environmental-impact study He then

Minas Conga, a. $,4.,8billion copper and

repainng roads, school s and health centre s "but to start, we need the rains to st!OPI;~; Yet

after a bnef respite over Christmas, the m eteorelogists say the, first three months of next year-normally the dry season-may well 'be wet And then the next rainy season will start, •

violent crime or the economy" it is the floods that are "the worst pro blem" be has had to face since taking power in, August 20 1,0; M:r Santos 'has said, M,any rivers have burst their banks, In Cordoba cattle aile stranded on high ground, surrounded by pastures flooded by' th e San J orge river, Th,e Bogota river, which, has. reache d its highest level ever recorded, has inundated the main road north from the capital with. several fee,tof water, On November zist a mountainous stretch of the highway to Buenaventura, the country's busiest port, collapsed at Alto, de La Li. '. 1 .' nea, causing a mas srve queue o f ',0 rnes. The road was opened to some traffic: a few days later, only to 'be blocked again by another mudslide, 'Tb,e road between Barran'q'uUla and C,arta.g,ena has tdso, be'en sliced in two~AIm told, som'e 4ID :people have b!een .affe ct,e,d by' floo!ding in th,e past tw'O 'y.e.ars~ across :23 of Colom'bia~s ],2 de,partm,en,ts .. 'The :rain,s this seas'on, have not been as h,e.a.vy nor as ,consta.nt as lliast y·ea.I~w:hen m'h,e'y 'were se've·n times :h,ea:vier than. ave:r,ag,e, aJJ;cord ing to, m,et e,oroiogists .. 'B'ut with ma.ny are.as stUI wa terlo:ggeid, fto 0 d]:n,ghas be,en 'wors'e this tfme'~Last y,e,ar;s floo,dmng ,causA~d ,econ.omi,c d,til'mage' worth $5,,1 billlifuon, or '2% of G'D:'),. 'Officmals say' the ,cost ( wUl be lower this y,e,ar:; analysts say the le,con,amy 'will stiU, grow' ,at .aroun"d 5%~ 'The aum'h'orities w,ere hardly' cau,ght off gu:ard", Afm,er t~h,e 2010. fl,IQQ,ds th,e ,g'overnment set a.sid.e 16,5 tJiU~,o'n,pesos ($S50,m) .. fbr 4~'ZS:O'pu.bUc\ooworks prcde'cts ~o mim~gate' ~h.e, ,eff€H:ts of th;e n,ext ra.iny se'ason", 'But on I.y'4,0.0 h.av,e 'been. finishe"d '(anoth,@r ,680,
1

Doing the Conga

LIMA

S,~~!~e ha:Sp~:~C::e~~t ~~~~~ce Jt!

The president takes on the protesters

'words to Peruvians, giving only one press conference and few' interviews. He was charactenstically laconic on December 4th when he declared a. state of emergency in the northern department of Cajamarca, dispatching the ,army' to qu,ash w,eeks of p!r~tesmsag,arinsm Mi'nas Con,g,a" a g~.an~ mining' project, His television a.ddre'ss an= noun,cin,g th,e m,e,fJ[sur.e masted less ~'h,a.n three 'minutes" Bu.t it (:ould c:ome' '1.0 d.'efin1e his fiv',e~yle:(.~rp re'sit,dentfuaJ te.rm~ As al ill,eftist c.andlru,d alme in. th,e plasm mwo piJe:sjd.enm~al ,ele,cmi.o,ns~, Mr B'urn, a.illa r.ail,ed a.gainst fQrelgn m~ning ,comp!.an.ies and oO'u.'lted the s,o.cia mov,em,e':nts that o:ppos1e them", ,But h,e :knows that as presi.d,ent his standing win de'p,en,d m,amnly.on 'wh,eth,er he' can m,aintain Peru;s, r.ec,ent ra,pffi.d,'e'co= :nomiiC ,growth~ G:rowth i,snow slow.in,g,~ as :in t.he re st of' the wo:rhll, amtho'u,g'h it will sti lill 'b e over 6'%, m.his year~ Ma.m·ichi.ng ,or b,ea.ting· tha.t r.a'h~~ fut,u.re wi~,~'urn o,n how mUich i,n m of the ,$5'0' 'bUllon in :mi:ning a.nd hydrocar'bans mnv',estm1ent:plarnn,e,d for t'h,e next B,v!e ·y.ea'IS ,actuallliy go,e s ,ahea.d~ Hand,soff our Lake

went furth en in alliance with extreme- left groups Iast month he called an indefinite "strike" to' stop C on ga, 'The dem onstrators blocked roads and shut the airport; public offices and private businesses closed and losses 'mounted to :$lOm a ,day"according to the Iocal chamber of commerce, As the protests grew violent, Newmont agreed to a. government request to suspend the :PIO~ ject, pending a review. But the government ha s refused to bow to th e protesters" demands to scrap it, Most Peruvians will support the stateof emergency The conservanve opposition had earlier berated Mr Humala for weakness in his hand ~I'l"'n' g~'"cf the dispute 'S-,Q-V:"cII-rubig mining and electricity projects have been, cancelled this 'year because of local protests The task for Mr Humala is to PIU,~ in place procedures for evaluating mining and other big projects that: most Peruvians see as fair, But one thing now seems clear: those pundits who predicted that an, economic slowdown would prompt Mr Humala to move funber to the left were wrong, Th,€; president is a man of as few .. ~ es pnncip 1 as 'WOI d • IS,.
~ ~~ tWo
l .'

ILl

(IL.

JIL

'.

',.

!iJI .'

I~.~,.,

~,

"

Summary orosoectuee« or txosoectuees tor the' funds containin,g mote intotmstion ,may be Q,btained from yo,ur fln'ancia'/ advisor. Pteese comuter a tuna's obiectives, tist«, cnsrqe: and expenses, an,d rea'd the summ'a'fY' pro,spectus 8'nd th'e orosoectue carefully betote investing. The summary' pro,sp,e,ctu'S and' the plIJ,Spectus conteiu th is a'n,d,other information ,about th,e funds. gsam. com GoMman Sachs & Go.,~sthe distributor of ~he Goldman Sachs f'unds" e 2011 Goidm an Sachs, All rights reserved.
I

'The Economist, December iotr 20Jll.'!

iterary defl'.~ • c " cit A IIB,ra'zHapart, publishers are struggling to,persuade

,

P u, b Lis hi n.g in Lati 11 ,Amer ica

GUADALAJARA
10_-0"1r-a .- '
' ,~,

boo ks~
.~
..

the, growing 'middle class to read

,~.,,'"

d.own 'by 12'% fr,om :2i005~M,any.of thes,e aIle textboo,ks, for which d'emanid :is p,retty stea"d~ Blut :in th,e four y'ears to 20,,09 g,ale s of novels felm 'by 39'%, I(to 8m)' and of 'chfum= dIen'~s bo'oks., 'by 42%; to l],m~That 'was th1e year that reclessio!n w:ha,lckedl M,exiclQ,., ith W economic recO'v'e-ry; many ,pub,~i-sh,e'rs,at this y,ear';'s Gua.dalajara fat~r~'whmc'h cl,os,ed, ID on D ecem, 1b 4tl .~ ·.er -h report b etter s.cL,es~ .. -". • , - ,eatl'h ,e'stagn,a.u,on h as d e'e'pe-r roots" H' d lo'-v~.or" Y"','"Q",unl r.t;:!!"~I,dAiIf':~ '~a- 'y"'c' M····. l' 'K-: '1"'lm: ,:'''In' A","r"0" 'Un!e st'aJ:is.tics -flatm,er t~he,rea.,d~ng jp,row!e-ssof ge ntina,'s Clarmn grou,p ~ lor ilnsta'nce,~mar--' Latin A'mericans.~ ]nllerna.tional tests sh.o,w it,ets dliffer,ent titles t,o. ,different age groups~ tha.t aimost ,half the' rlegm,on's se,eond;ary'Re'gion,al tilt~es in M,exico's idrug-war h,om- s(:hooru. P'll,P'US fail to nre·ach the ""minimum '"k " " a,!ccep ta.b,~e' level"" of lilt!eIEu:y, a-ocordting' to sp 0 ~ 'h ,ave seen spm .·e.s In, c~,rcu~ m" _S ,a, .:mon" h ,Ie .adds (th!ou,gh, they ha:ve- atIsa suffered vi,o- the OEC::D; a ma'inly rich,-,country t'h:in'k0' 'm 'm·~ a :::,j; t- u,' po.. ',_'r 0' menice, from, th,e' mobls they exp,os,e);~ a._ t~'n~lJ' S"'-'_~J e' =_L:&!:_ddll e 11""1 .'''s a.! ·dlu 1*";[" - 'b "k' ' ,~ --, i in," .OOS" ·th" plcure ,'~IS more",_:_ m~xe d.~ example: book ],ov',ers cri'nged, w:hen :En,e ," t '" iii Iota" -W,",: ' ' w. ,:ds---- .,.~.' iIfl;I"'ru·· Publishe:rs a.rle: churnin.g out more n!ew ti'- rlnu-' p,. 'o:n~'~N·.· ~~'_'".' ho',,_.;IQi;'a,,__ -t-h~, 0, ~ :"0'.'',n, u ~I ~les ~h,atn 'eve'f., Sa~e's. in, (P'or~ug,-~u,ese'-sp-'!eak- P 0, '11,e ,co',' r- 'M····,QVl',-10 ;,e p- .. W':g.'5-'1"' ,d·,;Q;n I" ,u., ,c ~I,or*~·o',n:
'Ul_ ,"
1 '

[NY fingers wiggle through the holes in the pages of ''''A,Moverse" ("IA~t~sGet Moving"), a children's picture-book that lets read e rs preten d the-ir digit is CJl eat's. tail or penguin's beak ..WhUe managers in suits. talk print-runs and profits in one hal, of the Guadalajara International Book Fair, the world's biggest Spanish-language literary get-together, shrieks of excitement can be heard from, young' customers in the children's area next, door, Illiteracy and poverty once denied the pleasure of reading to. many Latin Amencans ._:.!_[." sh 0' d no ~0 nger _ e _:L~' t"'a se I~' 'J-"~'I! Th at- _: .r.. ulJll.'.;· .' .Ul ,!.U:I_"'~_'I/':'~' b.i:~-. the I~''''''r:_-:';~'; - a quarter of Mexicans born before ,19'5,0 are officially d assed i literate but only 2% of mhose' 'und.er 3-0,., And less. th,an a, third of Latin, Am,eric,ans 'now Uv'e beJow' the pOV'=' lerrmy ill~.ne,com,pared 'w'ruth half .in "199"0 .. The newspa.ple:l" b'US~.ness has ta'ken no,te~ Paidl'~for daHy n,ewspapleI circu~aU,on ~,n l atm.n Am,eri COlIns e by 5'% (210/0 i:n,18 ra.zil ~n' 'Iidl 16-1''.70 :l"n' M==lov.'I"!II""Iif'JI;)· 't.'etw·:··e""e-'n·..-.'_-',~ ~~ .. W ., 'lO"','O:-,e' ~i'n·ldl ,,~~, U.·, ~ 20;,09; a,ccording to I,arry Kilman of th,e Wo-r.ld Assoc~,a.tio,n nf N'ewsp,apers andl N,ews :p'ubUshers .. Ne'wspapers h~ve, w'O'n
I

:_:1 ..

!.'.

ing) Brazil, the biggest' market, are: rising. 0'0 December S:thBritain's Pearson (which owns 50% of 'ThJf :Bconomist) announced the- purchase 'by its Penguin subsidiary of 45'% of Companhia das Letras, Brazil's most inn ovative Uterary publisher, Things atre~less bright in the- Spanishspeaking world, In Mexico and Argentina, Latin, America's second and third, markets, b ook sale s h ave been falling, Thanks to the "Iwilight" vampire saga and a self-help series, Spain's G'JUp!Q Santillana, theregion's biggest publlsher, re-ports that its sales of tities a imed am teenagers have, held up, But Mexico's pub ishers' association says that
to "t,~l
...... ,·co.,·, .U

S··' '~l.t;:!!,s:·' '1"'1 e1ff' '-y,,::'.t;:!!':~I'r '~, "~ 13- '.,"1m" ..... -w~' ,Cir- . ",9: I'e' 10'P;1",Q'S- , ~a ..
~ ",
I IU1.-:lffJ.

,_",

,Q

'~I.tji

~V·.:

", "j'

j·'.-·'I-·

1,'"

."1'"

... -

'.

",,'

-.".

"

".-.[

'I(

!...

::'

"

",:',

I __

...... '.

~"

...

'~i

~U.

~JU[L)I,

ILli

. _' ~

_' '. .

.'

.I

[lUi.

seemed stumped when asked at Guadalaj ara to name three books that had made a mark 0,0, him (hie eventually came 'up with thl€ Bible the novels of J effrey Archer and uTh Ie E···agie.', S Th-" ....;; b ' C- ,-, 'ill . .: F'-uen",' t " . ,1! .. " iron e .xy anos - - ~ '. I.'€S, whose aufhorship he misattributed). One answer is to make books more ld y '" bli WL_e ~-avar "M- at bl e. M' eXiCO has '" , 7~O'OO'P'UI', 1iC d -0" '0··. I-,~L\' "," an-, .. ,~,,l...... [!ea' diID,n,g I urarl es .. .roo,ms .In which volunteers are given a set 'of '10;;0 books. to lend at churches or workplaces, The government has mstalled mini-lfbraries in bus stops and even has a fleet of emergency "book bikes" which dispatch novels m,o. places where Mexica.ns aloeat risk of boredom, including in long queues to cross the United States border, 'UWe have to tell peopieth a. pumnga b'" on th etat e ,]11-, at ',- 'ttl'. .-'e bh t e. uOOlL.\' is. as important as putting bread on the table," says Sore-oro Venegas of' 'Con aculta, the state cultural agency Colombia, too; ha s a large n.. twork of public libranes. e The sma. 1'1·)'·-:-::> 0" th __:_ "k:'"~t·1 ,---" that '-, e size of Hem,a.r, ..e .means ,a~ books. have traditionally been sold like IUX~UIY goods in Latin America ..Spain has for .0;---,0----10 .. DOp'~O By on' bookshop ,11". I ~'V~Ty ,:0'00 jp"6": .w.!~..< -.-.-~---st eontras ." Argennna has one for every las ,'-,,--,'.-' ,'_-"','-,or 20'~O;O'O,~ Brazil one for every :50"OOO,~ and .. " ' .~O'I eve:ry 70,;0 0,0 ~ M0.··._e:rn ..•.. d M:exlCO o:n,e' f' book: superstores, with cafes and comfortable chairs, are marching across the region's bigger cities, especially In B-ratzit But they co-exist with old-fashi oned shops, where 'books must be, re-quested by name from counter staff or are wrapped in browser-proof cellophane to prevent damage ~ Oth er place s are book deserts, That helps to explain the popularity of fairs, such as Guadalajara's, A fifth of Mexicans (but only a tenth of Brazilians) say' these are where they get most of their books, li sh ers .' ~ -'._ ,tt.a _"_ P, ub J. ~ ,~ - ex,Pl'~ nl ,th' e "hi ~ig-h" price of ' books ,as a consequence of short printruns and the, high cost of imported paper .. AbSU1'! JIly~~.n,_exu:o th e 1[;".- lish VetSlOn 0 fl' ," '-dl'1I1:"I'· M~-,- 'i,.,·., - ~n,g,~.s=,_ _ =_ uThe Girl wtt'h the, Dragon Tattoo", a. popular thriller, can be bought more cheaply than its Spanish translation. Shopkeepers complain of piracy, which stalks the book maIl~et ,as it Ido!e:s t'hat: for DVD:S~ The ;sh~fm from p!ayin,g in cash to ere dilt cal,ds has sq,ue,eze d. margins further" ,a,cCloIdm.ng to -H-I i',·-t" ,OI<_I '-h"",'f.""'I-" 'h:'" 'd'i _. "f Ed·!,uca. I ; a. Sl~,a'-',run .,,. t"e -', ',' __eel 'C' _avez, _,.I ea 0. books,hop ,ch,a.in in Mexi,lco,., J:echnology :has lbe,en. slow to. disru,:p~ th~s. low-volum,e', hlgh-m,atrgin 'busin!ess .. intern,et booksellmng ha,s 'b,e,en :ham,per,ed by relatively ~,OW'l,e'vels of bro,adban,d pen,-,t --,-~,:',-- -, - -, - , , ,ill - -- '- - ,- .~mazon era. 1108-- a.n)d'- ,,poor -, pos- t"1(1 s,e' rVIc.eS,. A -, ,- - --I' --d· 't - .... . ... ..- .' - - I 'd" .--,),, -, . up -• ..,'- - ' -(.atn': 1. S, K'"",-. dl-. -e, ;f:=.re'3l': e- r' se'-t. ','.- -- S,h 'Opi ,.In IDn: Sp,ain, ,o.nly this year:; it h.als pillans to ente:r
I.

~I

1_

,1.11

H -....

-""1

'

,'_','

-'

,'"

',-,

-:::1"·

',C_.'

,':'

:c~ ... ;

" ..

'I·:>

I>: I

·1-:

!~.

I .. 0 ._.1,,11,':' ~

.. ..,:~

:.

,;!\,,,,,,c,,-,,,,-~

.. --

c'

I ...

1'"

_'1_

,~.~JIl.:. ',-"

. _. ~

JI.L '.

V~

L_

-',~!'

"~I -

"

."

I'

• '1'

"

....,.

"'1'

.'"

...

"'

••

,,'

'.

'.;

• ' ••

'.

~.

",'

'I

1Gb: .1 'e; A··· .... -- 't", -" ..: ,.- '"ill~ ,rgen, _lna

," '-"d' I B' , -,"1- 'S':': an!_ ,raZID..~ome

'''.'1

-",

'4l.. ~"", ·0" '00'" e"-

,':'

.....

.""

.~.-

....

'"

",

(-,

'- ..

("

"1'

[.

:.,_.

, ...

_;

1JJ:li;,~'

'-I!o.._'~

C'

~,

I,

_I!J.~

~',ei; ~'!/;.,'

'iI]il

"

,,'

'I'

':,

'I

_:".

i'~,'

':

I,

'1 I !

',"-

':'

Jl ~

.[J~

.'

"

...• ;>

11.. I

..

..-

,W!,~,~,

..

I.~,

4f .~.

,..;;J!l'!0-""I~I...

b oo.k tith::s Olrle ,alread'Y ,avatil3lble in Po,rtuguese in B:razi.l; acoo:r,di'ng to. OI'~,eUly Medi.a~ consul~'a:ncy~ob,ermn Feith ,of' :EdU:ora a R !Q!bJetiv.a" at plubUs,he'l~ :has for,e,cast that 18""illl" k,-, f" - "1- ~ b 'I" W~, mae up 7'0/0 ate h Brazl ma.n _00 ai, book ma.rket: by 2015~'Tmm,efor Sp,a'nis;h,-language :pu.b,Ush,eJs to wake u:p~•
I~I'I
~'I _. ':.~ '.'~"_ .~ .,.,-. - •• _ ~. ' . ..._

-j'"

1";-'

:;.~

"... '

:.}.:

4,5-;:-'

I[ _ ~ I

Also 'in thts secti'on

For daffiL~l a.Ly.sffis and debate on Asia, visffit an Economi st.ccm Iasi'.a

E,conomi st, e,o,mtlblDgslba myan

C.hintr"·s elon-amy and the WTO

AI'l -I ". - . . c.h ange

'by" Its entry Into the W-..· .s TO' ", ten years ago, First the econ.omy~Overthe po:ge·.,.the p,olitilcaffi impact
'!I!;i' " __ !I;;i

·· W:: ,q~~d, ·hl.~'n·~-J·s···~.~.I.lI!. altered h '8 ...b'a.a.'HI Int___'-':0- " •. IP_ _·@s······w····'·;o exann ine bo 'IW- '.:.' C···· II. ~u
I . I 'I!;i ...
__ '.' _ lUi,
f)I!,

HONG K'[]lfI.:I~

~'!I!;il.ll..'~-_

..

"

Ie

'!I!;i.

I.

_"

Ie'

1.",",,_

'.'

THllE
I --

"'1 Of.--:, vvQJrlll_,

--ld:·· Trad -. '0"'1'--'-"'" ·'.:-·~t·~·--:·-- l:· .... o) t. Ia _e·_rganmsa.d,on ,WYO,

long" China 'had to relax overark ~ S···'0' [u.·· m u. . et Th liQI,Y"· ulll.... ~~ ce 'C'I'O'm' - ipetiti o"In from 7,0,,00 tariffs, quotas and other trade barrilocal upstarts in markets where no such rieIS~Some feared that foreign competition vals previously existed, would uproot farmers and upend rusty stat e-owne d enterp rises (s O':ES).~,as to some . - 1ft ... ~1ft. ."'. extent1ft, n did "U~-I]na,. .~-.-overai'1'1 hsas- en.:.~.B -1ft. 'c'-"h'~' .• No headroem joyed one of the·best decades in global ecoA ver.ag·e ta riffs a n d ta rijff eef [i ng$, 2'010, 0/0 nomic history Its dollar GD,f' has quadrupled.its exports almosr quintupled. M.a:d m urn penni's sihle tartff a/which.: .i]c[uall ta Iiff Many foreigners also prospered, Am.e·rican foreign dir,ect' inv'e stment rea.p's .re'-' o 10 20. 30 ,40 5D turns of 13·.,5'% in. C.h~.na, (:om:par-ed. with (ill tel m b~·a 9~7% worllidw·ru.de~,,at(:co:rdilng to I{"C. Fung of [ndJo n E!S1.13J th,f Un:iv'ersity of' ICaU~£ornia, Santa, Cruz;; E'gypt ChIna :implosles ~ower tariffs on avera.ge; Mexiico 'th,ctn. 'Brazil .o,r Inidia~ The gap 'betw'lee-n wh.atm I····· '., ." _. 'h' . .. d' . -. . ,es, .- d ~~-'h .,. BrazU l~ ,can carg,e, . un,€!·r WT,O' rw·· an.·. W.•.am Peru "* d"I'_:": ·,·;\-"'-'1' ~""":'-"l' ·I-,'I····'I~I.--: ·S··:: ll~ '.. oes. (:,u,a.rge IS " ;tt so unusua ~ysmaJU." ,.,0 " - -I"k - ., - - - -- .'. -- - - . -- - -- ..-ih.ai[and un. :m .' 'e II.t S P !e'f:fSj! 'C'. ihi" n.8l ,C01U-md'-l 0,0'.t ralse - ta-: riffs :murn 'e:v'(~'n it wanted to (s'ee cha.rt) ~ fuf M.alays'~a Vg,t O J..i~. in--'- A"" m-~-...::.'r-~Iiil""a~ ·C··'h~il'·n-':'.:iIi·'!s--' S~)~I"n- TIle-· b-i'I··'gc.O'.~·(:i*I' ~)Il-.~. _~ ...... [ndJia tra-din.g p,atrtner,. s,entim.e·nt t'owa~rds. th,f Soutth 1(,0 refIJ co Wltry' hats turne d. star~{lY' n e ga.ti ve ~ In a Chl'na reoentpon~, 61'%· of Americ.atns saidth,at Chi= :5cmrce: WfO :n,a'~s'lee-en.l: e1conomic expansion had De,en
W·81S
!,;;•• I~.~ ..
1

like many' clubs, denies patrons the right of automatic. readmissio n, Having qui m the organ isa tio n' S predece ssor shortly after the 'Communist revolution of 1949; China had. to wait 15 long years to gain entry after reapplying in the 1:980$", The doors finally opened on December nth 2.o01 ten years ago this week, The price of re- entry' 'was as steep as the
J,

it had been good, This partly reflects China's C·O.ntroversial currency regime, By keepin .. th e g exchange rate down; China's critics allege, it h as gad ned a. sub sti tu te for the mere-an nlisr measures it gave 'up to join, the W'T'O~ Forelgn frustration is partly a sign of and matured, the stakes have risen, Foreigne 'firms Iament Iosing trade battles they might not bother to wage in a less lucrative
11,... _ 11I ,11,... .•.•. . .'. 'Ii;;.. Llll _ ' ..
1 . '.• I

bad for America; Just' 15% thought

China's success, As its economy has grown

wait

>

I"

- ."

'

'.'

.,'

:--'i:"'~~1 '.' ".

..

'-.'

.. "

--

i''''

,.

'-.'.

'"

_.

'.'~

i'

JII.

.•

'

.......

.II!.-'" _" ",_

.ill

iI;.i

_.II!.

~I~.

cal-currency payments between. merchants and banks, This setback mighthave b_e·en eaSIer t·0 tia re- £. -. -- £.oreUlgn. cornpa.nllie.$.-.-.-- -.-.-.' .-.-- - I >',' .Of . - --.- " - .--. -.- ,--.- -- - -- "'.-·1 had. the market not since .gJown tenfold, m.O $1~6 trillion, according to The Nils on Re= p on, an in d ustry newsletter .. China's economy 'has evolved faster th an a'mvo ne 'h"0: "cd,' 'B:U~"l"tS' eco n I '0' m '1" hic losophy has not' ,ong Yb,ngtu,~who helped 'China, win admission to the WTO recently sBlffi.ldl that 'China is now moving further aWBJlYfrom the: organisation's principles. To moderni se its. economy, it has remai ned wedded to industrial policies, state-owned en terprise S; and a. "techno-na tionali sm" that protects and promotes home-grown technologies, Many foreign companies feel they must compete not with Chinese firms but with th e·_ h In.e-.~.".' -I't.Ie" lB' ,e-t.W'E:·en- th 'e.m, 'C-'_' - ]Ina :iI:-.,C"- .-.', ~.s'e S.·at '-'. . - .'...--. . .' . st 'h "',.. .s central and local governments own over - - r···· - - .' -- --I'" -..tl a.vour . -' ," ," - -, .-,,,,,,, -- -- - -- ~100,~O '"00," ". co.mp.anmes - ancd lm P ]l C]I·Y £'- - - -many' more;; Th,anl~s to the W'TIO',~ foreig:n, firms are no longer Iequin~:d m,o han.d. oY,er technolliogy in e-xcha;nge: ~or entry to China's mark.et B,ut. .m,any stID.U an info.rm,al feel pressure to d,c. so~Chtna. is a~so keen. to. promote its own firms by enforcing m.ms ow,n techno,~og],ca~ standa.rds" suc'h as for 3'G mobi~.e' phones~ Many of theSle interve'ntio:ns vioia.te th.e s.:pfurit~f not alwa.ys t'h'e l,etter of WT'O rules~ i In 'Iesponse~, .Am,erica. o:ft,en push.es ba,Gk 'bi= ~.ater,allliy rat'her mhan :in iGeneva, ac-co:rdin.g to a. forme;( Am,eric,an tra.,de· ne.gotia.tor~ I.his ,is p,a[tmy beca.use c,.ompanm.e-s 'worry' t'h,ey' w~ face re-tributi.on fr.-o,m,Gb in a~'sgo v- •• n
~. j .

troni " .EI' .eCTOllJiCpayments t are one examp '1e. China's first. ever payment card was issue d in 19,8; 6 by Mastercard, Poreign brands remained dominant ,at the tlme of China's W'TO entry But shortly afterwards, Chitra ,a _.~ :. .n·m·.o n a s c.;3·n·.,I,tli b ~'n' IT establi sh d tiL d ,!u . I, sti c. .-..... etin .'. mau . nd -.. . II. .> comp e 1 or,«, hin U"m on P"ay, anc gave it a de facto monopoly' over the handling oflo1

~ :., jI ;.:

I., ~
. j!"

.I

111

._.lt1_:
.

.. "

~~,

JlLL)"
-.

0 I~ ..
"

~I

~'~li'J..
•

,'-

I'

"_

I..

I'"

I,

·c··

.,:.

,.""

...

- ...

:.

"

:'.

:-

,.:":'

"-.. '.',.-.

I"

I '1'

'1'"

I '1.'

..

I :.

.'

•"

",'.

1--' l ." ~

i . ,',

I~ . :~

"

'..

lJ'

.:

..

• ,'. --:

p- ~.

~.

'11

..'

I~,.',

~~"

,: . '..."..

II PI- :.

.JJt

Il·

,C -,-.

c·

'1

I'!

.':'

.-'

'... '

,-"

,,,,,

'. -'

. "'~ . '_'.

','"

'The Economist, D'ecember

iotr

20Jll.'!

..emment if they provide evidence against it ~,n a trade case", I:m is also because much of what China does falls into at grey area that is not easy for the: WT!O' to police, China, on the other hand, is growing

more' comfortab e' with, the WTO machmb tt s' 'd' !ery~ if'" 1 s eany - ..' _,',as a memner, n shi me, in its ',,',,-",1-years '.. away from confrontation, points out Henry Gao of Singapore Management University~ In, zooe, for example, America threat" "--c'

'I

',",

',',

I"

ened to file a complaint over China's duties on kraft linerboard. China lifted thedunes the next working da]l But now the Chinese have learned the ropes, they have, also become 'more proactive .. "Now they defen d the m selves," says Nicholas Lardy of the Peterson Institute, a 'Watshlingm.on thiIn k ta k urh'ey Inl,Ble '"cases..nAnd W, en s., lti -t -'h ,. .·an", -, they lose, they comply;" In some cases the discrimination is, no
I' ',1, , ,'c.:_""

',I

1-·

'.

',,- '-"'.,

·'·1

I ',','.

=:

h ~ ,; "1 ,,"' 'WOIse than bef ierore, it mssnnp y more VID,SlIl= A I_e~ ,In,aJ, b~ ,_s. part . 0 f'" Its WTO agreement, . C'h" now circulates draft maws and regulations for 30' days to collect comments, That has made rut ea sier for foreigners tOI spot foul play, America recently complained that China had failed to noufy the 'WTO of nearly 20.0 subsidy programmes, such a.s those supporting green-energy technolog~ It knew this in,part becaus e China, following its. newly transparent practice, 'had disclosed many such programmes online, the former negotiator said: jl"'SmmUcrr policy - - -',: , " ,-, " 'I' . ,-, -'~: ' announcemen. , 'mrs were net'~b" (~' 1 I' 'm' d. u:-orlmle distribution) in the past," China's trade po licies may look a little ug ier than 'Wl"OI members had hoped when they opened the, club's doors ten 'years ago, But that its partly be cause the ~ ent ,1- h- ,1[;5 hi" b een .urnecd on, • lIlg . ave .~
I' ~

I_:'

I'

"'-'

_::' =:

',", . '

Iii

.'!

'! II_:

-"tfr-

-,

' ·ange Noc h

'",

(liline'se politics and the WJO

.

.-

-.

.-.

.-.

the then prim e'm tniste r Zh u Rongj ru, had no truck 'with such views, A recent four-velume set 0=f MI Z~LU S sp eec b es,~:t. clud h In Iudmg many not previously pub hshed, shows him to have, shared hardliners' concerns about perceived Western efforts to undermine Communist Party rule in China, 'f'Wesh;:rn hostile forces. are: continuing to trat f'W" t promo t_ t neir strategy o':'~es)ern.lS ""Ing e thei and breaking up our country" he told provmcial officials. in one now-declassified speech, four months afte-r 'China had joined the W''!04 H,e accused such people of iconducting "infiltration and sabotage" in an effort to foment instability, pointing to large-scale prote sts early in 2.002 by workers to. state-owned enterprises (independent observers detected little :if any sign of foreign involvement) ~ Mr Zhu's reformist zeal in, the economic realm, helped to foster the impression of a country willing to take considera ble P olitical risks, in order ro create at more marketdriven economy T:he, then party chief Jiang Zemin, was also pushing through a. controversial revision, to the party's constitution to allow owners of private businesses to become members, But high hopes among some Chinese liberals faded as the decad e zore on Cao Siyuan, who heads an mdependent think-tank inBeijing S31ys he and liked d ~ 'Ull 'I ., " rm"nc ec mt enectuals were "over-opnmts- " tic" about the ability of the W'TO to promote furt er change, such as. the development of a robust and independent I legal- system, Th.east d'i de h·E.lS seen hurge . ec.a.'c , - - -,~"iiI ..... ,1",." b--IU t th e.-s't! h- aver e e n a ie ga """,- b. ~II S ociar cnanges, .., 1[, Il (Y' 'mainly of pre-w'ro membership reforms'~1 such as t'h,e ,privatfus,a,tion, of h,QUS in,g, and. the loose,nmng of contro.Js o:n internal
•• "-J

Bum even the man seen 'by 'many in the il1-·. t WeSI~,as .. ·hl'"lna s a_ c 'h t,-:"- ", ", "I':' .: )'1 reo_,m,er; , _, ·,,'~>r _ \e()OnOmlC efc ,r
C'

I..

··,

,1-

'1;

- .... -~

~.,

"".'

.:

"j"-"'-

".-.'

...

- ....

'1'1

('

·······.1

'"' '!l;.rU,

'_w··· , " '. I'\,., " '. , ~

I.

.a

:--'I'~

-',.:-

"

.-.-

-_

....•

'.'

-:-'

!.-..

- ,.-,

~ _,-

,.-:- ~ .-. ..

~_I

-",-.

_._

.-

I _';

c,~-

,-

C.-.'-

"

c'

,,~.=

' ru,."l"g'- r,":lt~io,n"·

~--'~~'.'. ,~I ~'.'~~'I!II

,And with, th,e Comm'un~st Part~l agatn fa,cing a. 'big ~"ea.ders:h;lp shuffle next year~ few beli,ev,e that Iong-ne'glectedl p,olimic,a] BIEI,]lI ~G reforms w:Ul be .rev],v,ed any tim,.e; soon", Mr ::'op,e.s 'of sparkin,g pollitical ,c'h,3'nge have ,come to :nothin,g SOl fa'f - ,- __ ,-, ,-"tl '-, ..,~,S - ' - - . ,or.at - -." , r',",' C_ao- h as re cen,. y pu,"b-'-}" -h- e'dl a, Cat n ,£:- - - "'d-I'-" I ~ H'EN tryi,n,g to ,pe'rs.u,a,d€, Congress ~n fights i'n !Con,,gr,es,s o,v,er whether to It€lsp' visio"n of pow'iers"" wit'h:in the p'art,y as a 2,000 that C:hin.. :shOll I d b,e m!e~ into, a gl',31ntmngC,hina most-favo'ured-n,atruon mr,ad- step tow,81rds m!aldn,g Chin,a mo,re ,de:mo t'h,e World n,ade Organ~,s,at~.on(WT'O')~ ing'status I(as enjoye,d by 'most: of Am,er.ic:a's cr.atilic~ claim s m,an'y' i.n th,e party suplpor.m Hie ,," dl d'i sue h' a .n.omlon; b'.ut_Q ,n.ot_are, say so o.p e.n A'm,eri ca.~s the'n president~ Bill c,mfunton~ oth er t.r,adling' p,artne r5o)." Mt CUnto n '5 re~ ~I{" 'n-- ,;Q;W·~··" h- "O-"W,·_', , , 'to'-' ·:I"n' 0"-' v·,: e-·r' thiQi, coc- g,'p"'tl' Jf<C" ie; h---filI:. J!!;,..... 1\ih :marl{s p..re'ced.'ed,bittlermy conteste,d 'votes in Iy~ ICao says p10lice smOop'p,ed him, from n,ats admission" he said~,was lilru{eilly to' havle Co.ngress in 2000 that: len,d'e:d th,e a:n:n'uaJ. :re~ leavIng :his hom,e duri~n,g:th,e visit' t:o Beijing dd' A· ~ newa, 'I· p.r{H:e-SS an,·.,_ ,ens:u.re·.c_, .,·.··m,erm,c,a, in A'ug·u.st by A'mer~.ca'~s'vice'-pir.esid,enm,. J 0.""a p.rofOlund ilmpa,ct on h'uman rru"ghts ,andl , ."""' "''iii"' '" 'l ',e.r. y '" 'd'·'_'." ,,' d,.-' ,',' _. ," d-'~, ,',,", , m, ,e',n~ po I' IdJI:a.l"'b'.l .•.. t·,..,., A"·· ·_eca_,e I" on,.· C'; hi',Ina ,,' SI_ms= 'wo'uld sh,ar,e any b,e:n,e,fit's from thie marlcet= sep 'h"B:'''"d·I··'ope'ning ,mieas:ures pl~eldged by 'China on apPoID.nted li'bera~,s .no ion,g:,er sugg:est that ]'n his sp"e,ech 'in 200'0" M'[' ,cmfnton s,aid " 'h WTD ~ "II'" f', t, dl,e Wl_ spee 'd' , p(,L~ ·~,ca rei~" , _reer l.ra .. · ... I,"t'·' 1 o.rm~ that 'WTO membershfu:p woum,d[ ,ace:ei,era.te entering t~_e' ICih' .Ina"''"':s me 'd~·· ~,_atve b··,.: . lit··I'····· "" ";·· ,.. ...__ ! ma hi·'·· - .een, ~Iumpe- t',~ng Ch~,nese offic:m,aJ.s did, ·not sh,are Mr Cbn- th,e shri.ni<ag,e .of th,e st,81te~owned, s!e(:tn'I ~:he, enth annive'rsary on Decem,b"er 11th of ton '5 belief in wh,a.t he, icaU!e,d the, '~q'ufute''ex- w·hich had lbeen, "a, big sour(:e of th'e 'Com,= t cha.ng!~ ~h,attmhe W''['O' w'o'uld m'he' (iOU'ntlY's W'f.'O, acc@'s.sion",]n 'Chin,a as tra.'nrdinaIY~~ m'unist P,arty's pow'eJ"'~ This,~ hie' said; .- c' - - .- -'1'.~''. - aIm ..Ifln.,g - mu,ch as in A~merica,~ eVlent was, se'len as 'b -" - - a b-_oul't"..In .. ,h"Ina~ p'o ] 1{:,:.. y as- we-1''1--as wo'uld ~,ead to '''profound ichan,ge"';~ Many the 'Of fa.r greater im,:p'o,rtan,ee th,.aln a 'me-re ec.o'nomicaUy; Such view's were 'bomste:red, Iib eraru.s Icompru,ain~, however; that remai:n,= pled,g,e 'by Chjna to reduce barrru,ers to its. in, the West by supporUv'e' comments ing staLte firms :n,ot: onlliy smiU ,cio:ntroru, the (I'o.m som,e 'Chines e dissil,den ts~ (H,B efo:re~,the sky' comma__n,ding :h,e:ights of th'f: ,eco:n,om'Y 'bum maI'~o~ts I(moves towards wh:iiCh :ha,d long 'w,as b,~,acl~;no,w it IDS light "This ,can be ,a new' are mn some case,s step,pin,g UPI their r,esisbeen 'u'n,der Waty),~For both Ico'untries it was '. ta.n,cie mn, en,CllOl;lC·'h'men t 'b t hIe' p-rlva.te, s.ec·IY .a cr uc i.al piaIt 0'1' :r~ stormng' Icalm tOo a r'e:lla - 'beg:inntng/~ Mr CH'nton quoted one of i ,', "',,, ,' ,'", , ,,em~~,e,n, \iva.n' tio,nship that h,a"d been marre,dl by a:n~n,'uat: ,th -". R' -, 1:1,1··.· d"lng, ,assay.lng~)" t or~In, r,e c:e'nt' ye,ars, oflicmaThs :ha.v'e incr-e,as,e d ...
I ' , .. ", ' ' '.,-'
'1"-"" ',.' ,-" ,

'i

"",

'. "

,"

.'

::".,',"

,-,'

"

__

.'",.

'('

"~"~I

"""",,,,,,·_,,,,·

.. ,,,,,':',::':"··,,"·1"'-'=

1_,

...._,

w·

..

,"C'

. ,,',

. ,I~,

.:::Ii,_'"""",

. ,'!i.;r.;l!~_

.JIl

m··

,I

.- .... '

.-.'

"-",

:_:

..

,.'

',', "

! ,"

I-·J.'

"

I"",

"'I

, ..

'"

•I

I'"

'.

·'··1··

....

'I'

..

...

'.

...

.,

I.· their [efforts to e nSUI!e that p arty cells are set up in private firms" Several local govemments have- started requiring pn vate companies to. contribute about ,o.. 'o of S their pavrolls to sponsor party activities on their 'premise s.. , Such was the seeming status symbol of 'W: "'Y[""I m'l- ;Q;m-- b ',~r' h ~IP'', s d ad e'') 0"0-1 th at few, ," in China openly criticised the decision ..A , Beijing academic, Han Deqiang, was a rare exception. His book, "Collision: the Globalisation Trap and China's Real Choice",
" II;.",} J!I;.,. _ !I;.,. I.;) J!.,~
1

to investigate, It concluded that the attempted manipulan on had ind eed taken place, It also s ai d th at an i ntern aJ. !{yus·h.·u Electric memo indicated that Yasu shi Furukawa, governor of one of the local prefectures o,f Saga, en couraged the sending of supportive e-mails .. ,
BU.t

Market reform in India

Off their trolleys

M,U M B;AJ:

India shelves. a ki!'Yretail reform

'~

-:lI!

,,"""'L'~

,Q,r-

_ ,c'

,~~,

!l..'I;.4l.,

c'"

his job, Even MET] was unimpressed, Its head said last month that he wou d not allow Kyushu Electric to. re start reactors in Kyush.u because of the poor governance, indicating that he wanted heads to roll, Mr Gohara, the prosecutor, believes the more Japan"s e"ne.rgy crisis Kyushu Electric sticks to its guns." the harder tt win 'be to rebuild trust "All they are doing is giving more ammunition to the an ti-n ucl ear p eople, ;;.he says .. I<a.nsai Electric (K:EPCO.) 'is. in a different pickle.The utility that covers the cities of TCH::VO Osaka and I{yoto will have only' one of its Tim.es·are gening tougher' for some ,of 'n reactors working by the end of DecemJapan's regional powermonopolies ber, To restart them, prefectures like Ky'oto TTYUSHU and Kansai, Iapan's two 'most: (with. a. population of' 2;;6m);whose nuc~"n.'u'cillear-·de-pe.nd·ent regions, are brae- Iear-power plants lie in .an adjoining preing for a bitter winter, Citizens 00'(' both. ar- fecturc, have demanded for the first time to eas, many of them elderly have been ad- have a say over whether the plants are safe, What is. more, Osaka's anti-nuclear vised that they may have to turn down the heating because 0'( shortages of 'nuclear mayor.Toru Hashimoto, has threatened to pewee 1m wtll be another hardship in an al- end KEPC·O"'S monopoly on power genera= ready trying 'year; after the M.arch nth nuc- tion and dismbunon ..His is not just the lear disaster they had to swelter through loudest voice :in regional politics, His cffi.t~ ~ t air dl~- Osaka, is KEP'CIO"s biggest shareholder, th eu,-m" 1m" :r'with riO"·s..rictions on' !a lIi"Q!n tioning, But this. time it is not Just TEPCD, Therewill bile: plentyfor concerned citizens operator of the stricken nuclear ~}ower to mut.ter ablout this winter as t·h.ey huddle pill,ant in Fukushima~ tha.t Jis getting thle: tog!e:th,er to, ke,ep w,ar.m.;; bill,arne ~lPeop[Ie ·ar1ep'utU.ng thle:i.I'~.O p'oO,wer cal suppUers in. th.e ,do·cl~ too~ Take Kyushu ,Electri.c", Thle monopoly ·,t~·---" "-Irt', ,..a., e ,'": -'th-~-""I~' th". t cove.rs 'th:- sou', weser,n p.ll' ,0.'f J',a'pan wi'lI o:n. D,e,cembl,er 25th susp"end th!€ last of ~.ts six n;uc],ear re.acto:rs for Io,u~in,e med.nt,enance,. as. i~h:8ls its oth.18-rfiv,e..ln ~€SS , th,Bfi a. Y'ear n.u.clear 'po'we-r win h.av,e dr,a.pp"ed from ptovildin.g .4,,0'% of the re= gion'; s ,ellect.ri.lcity to ze.ro,~This is. a. gen eric :pIob[ru.em~ N o:rmaJly rea c.tors [!estart onoe :m.a~.ntlenanc,e ru.s complete~.1but across-Japan 'bI" ,C ' pu. _:u: sau:e.t' y Iconcern.s mean 'th t no sus_.La.!, pended rea.ctor has 'be,en ,auth!orised to re, ., 'h I sume operatIOns. SInce Ma.rc nt"h On,'1Y eigh t ,out of 54 are· stilm mn servi,ce'" In I{yush'u E.ie-!ctlilc·~s case~ howev'e:r~ s'om!e; p'roblems ·are· self-lnf]j.cmed ...[n Junie thlf: pow'ler co,mpany sO'ught to infl'ue'fl(:e a :pu.blh::lliy broat,dca.st he-arin.g by asking ,em.= :pilloY'ees cov·e.rtly to sen.d :i:n. e=:m.ajUs sup·=· :porting thle: rest~art oO·f a nuclear lieactor .. 'When ~'he·sca.nda.m brok.e;. the compl,a.ny recruited. a.n ind·ep!end·ent' planel :heade[d 'by a former Tokyo plios,e,cu~o'I, N,obuo, Go:hara,~
e. ..

gave 'warning: of an American plot to use; ' .. .- -'h" t h,e WTO to ~"Wesm'ern~s,e"" [e' ina. He remains a. fierce critic, 'Karl Marx, he says, 'would have agreed with th,€; viewthat eco.. .mera rsanon ~I d S to po'1"" '1 nomic lib sea mea change .."It's a matter of time, he says," Per, haps Mr Clinton can draw' comfort, _
j"

when I{yush'u Electric sent at separate report: ,on the matter to the Economy and Trade Ministry (METI) in October, it: played down the independent committee's findings and, denied Mr Furukawa's
mvolvement+as did the governor himself Although Kyushu Elliecmri,c;s boss has tendered his resignation, the company's 13-' man. board has rejected it; so he remains in

T:~~~:~t,::~~~~nfi~:~
ister, Pranab Mukherjee, had been expected, A decision two weeks earlier to allow foreign supermarkets into Jndia

was to lbe"suspended", he said. Th.e

suspension could be indefinite, although the rules for "single brand" shops may

yet be relaxed, The embarrassing result

may be an influx of smart handbag

Nuclear winter

. ,Ii:i!, w.;:)
o

.,

J~"

"

~I.

'.

~.

."

.;:)I

I'

\z,.

.',

.JIll

'1"'

~~:_:_'-\.-.

I,

'I

1'-

I,'

'-':'i-'

"I'

.,-

.. ,.

','-'

.["

'I

111-'

"-:-

stores from Paris and Milan, while foreign supermarkets remain banned from trying to, sen food mote cheaply' and efficiently than. theirIn dian rivals, The ruling Congress party faced at mutiny in its own ranks; anger from smaller coalition partners and ferocio us resistance from the opposition party, the BJP", Parltament had been shouted to. a standstill for days, As he announced his 'u-turn.MrMukherjee expressed the hope that MPS 'would start passing laws again, "Only ten days are left,' he stud of the present winter session during which, so far, nothing has been achieved, Other bills awatrin .. attention concern more g controversialissues, suchas land reform, corruption and mining. The hkelier outcome, though, 'is,more sound and fury and little action, The humiliating defeatmay come to define the present government's weakness and India's fear of reform. even as its eeonomic outlook dims .. he debacle also T highlights the isola ti on within Congress of reformers such as Mr Mukherjee and the prime mmniste:r Manm,o'h,an Singh;; The n there is ,:he' ele etoral cycle., th.e·re could now b,e two. years of lP[ar~is.an and populist :poli.titcs.~with ,aflu.rry· of state el,ections in 20121e.ading·u:p to a g'en,eral ele·cti.on by 2014~Th,e time to. pass hard :refor.ms may have p.assed~Unless~ that' is~ ,eco:no my tanlk:s~.Alrea.dy the gro,wth. :has slowed fro:m. oV'er '9'% to 6~9'%~ Part of that reflects the ma~.aise in the gllobai e·con.om:y~ it is also down to an But investme:nt slump as Indian firms .los,e co nfi den,ce i'hat 'bo:ttlene cks.:i'n th eir o,wn ,economy 'will be a.d.dress,e,d ..[f in'vestmenl do,es not perk up,. and espelciaiiy if it d.ecli.ne-s~growth. could slow to just 5=6% 'next year~reckon e·cono.mists at: CiHgroup,~ at bank,. Nobodly exp'e·cts that y·et An 'unsp ok-en 'rul e h,as it th·at In dia"s ]ll'0 Ii ti·cal cIass passe s diffi eul t re forms o.nIy wh.en the economy slows down ,enough. to give :it a fright That ru~.e prolba'bly still holds true., But fhe even~s of th,e past few w,e,eks r.ati.se ,at scary que·s.tion: just.how· ~ow d.o,es growth have to go:?
1

48 Asia

sanyan
,
.'

Hornets' nest

'~dmffe·.ren I

T.H~EIR. m. ways ..b oth p~~~sm-an.'s. ~, sob e'~'-suited dip 1~~~ts .and ns turbaned, bearded terrorists have this week reminded the world that their country remains in dispensa b ~ to a sett e-' e ment in Afghanistan. In protest a1 the killing in November of 24Pakistani soldiers by N.A TO and Af:g"han forces, the diplomats

hoycotteda conference in Bonn atwhich 90 countries gathered to ,d~.sICUSS AfghJan.istan'~s future, The next ,day, on the: festival of Ashura, esp ecially holy for Shia Mu slims; some 6 a died, in apparently co-ordinated terrorist attacks in, three- Afghan cities, A Pakistanbased extremism 0 rganisation claimed responsi biUtlt Pakisman;s. absence meant that the Bonn conference offered Umtle reassurance about Afghanisran's stability after 2014~the year when America and its NAT'O! allies intend, to complete handing over security to. Afghan, forces", The Ashura attacks raised the nightmarish prospect that the country might fall prey to one of the' few' curses, it has b een largely spare din, the past decade: sectari a:n, bloodletting between the Sunni majority and the Shias, Many in, Afghanistan and, in NATO win, see the two events as related: terrorist attacks as both payback for the; Pakistani soldiers deaths and a reinforcement of the- dip lom atic message, Senior American officials have 'been ever more vocal in denouncing the links between Pakistan's spies, the, Inter-Services Intelligence agency '(Ism) an d the terrorists, In September the previous chairman of the Joint Chiefsof Staff Admiral Mike Mullen, I"'a~ ll,~d: ,o~'n-~ g- r--,o-'-u-'p-= th,,Q Hoq·1 n"!l'n--I~iI1iti'l1IQl;*W" :0- rook, '~;!:v·.::!;'I--ni,t''.3ib-~l~ '.3ir-·'m- ~';io---'f th,g 't I sm~ P,a~kist.an.of course d1eni!e::salny s:u,ch links American ,di:plo:ma ts" ,amthou,g'h convin(;e,d that the lSI dab,b 1es ru,n terro,:rism.,thinlk Admilra.lli Mlulien overstated th,e case~ The ID,ates1lt attacill<s have ,not been cMaimed by' eith!er the H,Cl;qqani netwo:rk o:r m'hf' Afghan 'Thliban,,-, 'whose me:adlershi:p is be11e,ved to be 'basf"d in m:h,e' ,Pam{~statni city' of Qru,etta.~ In,de'e,d; the ,A'ghan Talib,a!n~,most]y Sunnis from Afgh,a.nmstan;s lar,ge'st ethnic gr-ou,p, the P'ush~u.ns., h,atv,e co:nd,emn!edl the'm-un d,erstan,d ably, si:nce not m.o, do, so wou~,d alienah~: ,minoritiie's ,a-ndl und:ermilne th,eir poUtic.atlli am1bi'=' ~ions ~'~nstetl.'d, the att(u;ks. h.a.ve been iclatIDmle,d by an offsh oot of lashkar=e=Jhan,gvi (teJ).; at banneid group with lmnks to al='Q'ae,da ,and of late, a tacticat~, ally of t.h,e "',PaJei,st"a:n.i Laliba,n~~;w:ho 'unlH~-e mhe:ir Afgha.n ,name-sakes ,are at wax with, t'h:e Pa~{ID.sma,ni smale", LeJ was ]imp Iicate d in an atta,lcID{On army' he.adquarters :in Rawalpfund:i '
t.
!i;;., ,",'C ,,1\,.,__ c _" _ 'II;..,
I

be m-,"'l'riI'-Y'-'_ bad things burtt i'~, n- lot ,"l'n·I ,~Ir-m-- oft I. ,Ii:i;; So" if elements of the lSI had a hand in this, week's atrocities, the Pakistani government ,can plausibly deny it, But its message of Pakistan's centrality to an Afghan settlement is strengthened, whether OJ' not at gruesome act of revenge 'was intended. And revenge is ,31 popular demand in Pakistan after the killing of those 24 soldiers, N A"rOI~s presence in Afghanistan was alread Y' deeply resented in Pakistan ,as an American war tha t co sts Pakistani lives, Pakistan's support. for it now has even fewer advocates am home, Commentators have seen the deaths as just the latest and most senou in series '0'(-' Am' - erican stabs ~nl· 'boa' ck the Jnl~ One came in January when a ,CIA. contractor killed two peeple in, murky circumstance s in a. Lahore street, Next the-re' was the id i bi secret rat]l' in M.ay b American navy SEALS to 1- .'1I1i11 ',:sama~J.n ny ll,.......... Ch.JIl 0' [aden on Pakistani soil, America 'was outraged that bin, Laden was there, Pakistan was 0 u trage d its au thoriti e s were not warne d f __ k 'Id 0,_t h ,e .r,u" .iet a 1one askeod:5or permission ..Now Its soi iers, po ~ 1 dI ticians and pundits alike are saying. enougb is enough, Pakistan has also tried to demonstrate how fmportant 'it is to. America in more practical ways, than just its diplomatic sulk, It has closed two. border posts through which large quantities of supplies ·h"V!Ii;; P ave oassed "iIt has cu t off .1 .1I,,;;.w.JII.= ~ -C',O co-o nera- . lntelhgen N'A1~,:) '"_ . a,s' Jt...~. ' tion, which, for.all its shortcomings, had 1ed to a steady stream of arrests and killings of American targets, And it has ordered America to quit a base from which it is believed to have launched drone raids on terroristsin Pakistan+another cause of deep local resentment, The govemmentis clearly exasperated that its anger seems almost to have gone unnoticed in Washmngton,. It took Barack Obama a week to, caillihis Pakistani counterpart, Astf Ali Zardari, to offer "condolences" fOJ the soldiers' ldl lng, Pak ~stants cam ng chi the talk shows on, American news channels mightthink Americans believe it is their soldiers who were killed by Pakistanis, so. sour is,the attitude toward Pakistan, This week two senior Republican senators.] ohn ,McC,aru~n and lindsey Graham, issued a. statement calling fO-Ia review of American aid, to Pakistan" arguing that "the Unite d States has been incredibly patient with, Pakistan, And we have been so despite certain undeniable and deeply disturbing facts .. n
1"n-4j',O'O;9' .' Itfi- mli ~'-Y',~ .. [~,G.,_
. I!r;; ,lI.I.l,: .-_ (1,.
~

,w,,,

_.jJI,~

..

J!l.,jJI

.!l;I.

,.

., ~

111"~:11" .J!I.!U!.,J!I.~

.3 ~

.II

-'!i;", . L)

''']I; U.j:J

( ~Ii:)

l'~

,'J'

U.

I~

UL -

I~

.lIL"

..

-.

i'

,-"

,"-I"i;.

,.

'1"'·:

'.'!'

·:I"·I';·I~:·-/·'I-'-·-I'.,':·I'-:!I·'·'

1-'

,,_.,._

, '''If''IO''--''. ,. JJ".

-~

,(I_,:),jJI'iI;;;;

i'i;."

....

"~i'i;.,

..

...

It must still be likely that, after a decent interval, the allies will patch it up..After all, both have an interest ina stable Afghanistan, and Pakistan needs American aid, But in both [countries long elec-

A 1.1es Uke these i

1I!;oI.",

"1,'UI.

JIl JIllJl.",",I~,

_-

. -_ -

,iI;,iIL

".3i

.....

JIliI;,iIL

!I;.,.

iI;,iIL I

._

J !!;,...

i,

j,

tion seasons have alrea.dy be gun,~m al~dingt h,ard,er f'or p,oIiti!cilans i to offer con,oess~.onsto an un:popular partneI~ Pakilstan's govern= me:nt is b',eset by le.g2d thre'ats and, bleholdlen to its oVlerweening aImy~ Wh!en i1lt,'was n~:,po:rt:,edhis w'leelc tham ,Mr ZardaIi was funD'ut bail for med~,cai tr1eatment lor a h[ea-rt ,compillaint~.m,a.:ny spe,tulate:d that this w,as a ,pre!udle to lh:isresi,gnat~,on~ ,His g-!Qv-ernm,ent 'may be unab~e,to .accept a.r,enewEd oftfes un~e,ss,Amelica :g'uarante,esth,tlt its stram'e,gic c'once'rns will 'be met in an A(gh.an, s.ett~!e:m,ent 'Those eo'nc'erns die:ma:n,d, th,e installatmon, in Afghanistan of ,at govetnm,e:nt with, w'hich it feels eo:mforta.b,llie", ;and s.t.ri!ct~imit:s o'n In,dia-n influence there.; B'ut,. to p,ursue the:se goals" Pakistatn~ n.ot for t.he first trume, is nndin.g itself playing a v'lery' danger'ous g'am,e", mf it is no. ],on_ger ofie:r.in,g th!E:bor!de,r 'cross\in,,gs~ dron e blase aTI.'din = tlelligence help; Pa.kistan"s ,roille:in Am,erh:a~s war e:ffor1lt' becomles m,ore that of a spoUe-r., A,nd, if you~re not with US; as the; prevmous Am,e-rican preside:nt put it sUlcc:inctlliy •'.'~ •

49'"
"

Also 'in thts secti'on

and Africa ..visit

For dai~~l 111 alysw.s a

and debate

on the Middl[e East

Economi st.,cD,ml/wQ'rlld I mi didLe--ealst'-amcal

Political Islam

Everywhere on the rise

F,AYOIUlM

before the next two rounds of elections conclude in mid-Iamiary Why' dld the scale, of the Islamists' triumph so surprise Egy~p!fs mainly secular pundits? Mostly this reflects the, success of Egyptian governments, begmnmg long be-,,' ".-. .-.-."]" 1 . ",') , .... ,"' I

The success of Egypt,'s Islamists marks a trend throughout the region ~VOI.UIION

s.weeps. away ~ hated ty........ unleashing a J'OYO'US Jumble of rant, hopes, Amid. the, cacophony at faint but
steady drumbeat grows louder, Soon the; 'W nole country marches to this rhythm, Those who fall out of step find themselves

shunted aside or trampled un derfoot, sacrificed to the triumph of an idea that 'many exalt as noble but no one can define, It happened fun[ran when Ayatollah Ruhollah Khomeini steered a 'broad uprising against the shah into a grimly Islamist culde-sac, Might the, same fate await Egypt, where elections seem set to produce a. solid majority ofIslamists in parliament? And might the example of lEgypll~the, most :P"OP u1ous and cu turally radiant of Arab coun tries, spread aero SS a region primed for revolutionary ch,ange?' The bold early' advance of EgY,pt's 18'=' lamists, in an electoral process that still has several rounds morun, has come as a shock to many, including the country's own largely secular elite, It' had ·been. widely assumed that the Muslim Brotherhood w'Ould Ca.p,tulle ,a p!m'u'ra.Uty' rather than an oumrfught m:aj orfuty of v'O,tes, m uich as Us c:o'usilns~ Nahda ito 100isi81 ,and the )usti.of atn.d D'fvelliop,m1enl Party in Morocco, h,81V f reoen,tly done"Fou'nded in'l928 and ho'und= ed by' aU. governm,ents d,espdte~e'spleci ally reoently-proftessin,g al fa~Tly mo"de;rate v'erl

sion of Islam, the Brotherhood Is known for its political savvy as well as its resilience and discip Ine..The dozens of' other 'parties competing m,nBgypt's elections are inexperienced, narrowly based. or tainted 'by association with the fallen regime .. In the first round of 'voting' for the lower

house of parliament, covering at third of Egypt's 27' governorates, the Brotherhood's Freedom and Justice Party won a startling 46%, of seats with 37%, of the party-list vote .. More striking still was the performance of NO'UI, the party of Light, a rival representing th,€ puritanical Salafist strain of Islam .. Partly inspired by Saudi Arabia's strict Wahhabism, Egypt's Salafists seek to purge the faith of modern accretions an d Impos e literal interpretation's of dogma, Though only a,few months old, and, despite doubts that it. could unite an array of

1-"

often squabbling Selefist factions; Nour won 24'%, of the party-lis vote and ,21%, of the seats, The biggest secular party trailed with 1'0%. of the seats, In so'm!€districts the neophyte Salafists beat th,€ Brotherhood's slli.ick 'poU.tic811 ma.ch:in,e by wi de' m,argins~ Aldld in smaller p,.arties tha.t are offshoots of the :Bro:th,erhood" an.ld the Islamitsts appe,atl'" to :have se,cur,ed. two,=th~rds of the~ first=, round se.ats., ,M.u:ch of th.e vutrun.,g to icome is i.n rural dru.stricts that are ,Mslami;s,t strong~ hom ds,~so i'his taJly is unbkely t,o d~.m~.n~.sh

Youssef Ziedan, an Alexandrian novel~i tp '1 ' .. ~. . '-: n'il+ co lu m n that h,o Jll.6!~" ~x _ aine dl n a "d.' 'I~ came t.o understand the Salafists' attraction after taking a wrong turn and getting lost in a maze-like ghetto whose exiS'h:~:n,ce h'e ha.,d b,een ,compilleteID.y· unialWare of. 'This was just .c'ne of bundre,ds (if such, plac:,es across the countr~ with u'n,told tho'u.sa'o,ds Jilmmf~~d m,nto d:tlrk s~r,e,ets'und.er n.o' guida'nlce or rule::: u'P,eop'l Ie the:tN~ :ha.v,€ no fl€-' ,course ,except to ]slamists;, there :is no on e ••
",,'!If
.01"

..M ll ~I . ' ., JL( ore H ' f-' ~,~,osnm__ 'b,araJ_., cam,e to ,power,., ~,nd. e ny~'ng that the bulk of Egyptia.n society' has always been deeply conservative and fervi dlly.: r''.~ .. '10 ..: us·'"~ . ba ..~:~. - l' nl'-r "," ...d""'5 0.C· U' Ja... ~ ~I' ",. . .. ~:.· ,0.11'01:'10: ..... ,,,.' tever . .;:] [.. '~", 1·-- ..···,' ~ ~ .. ism macd e m th e 20, th cen t.ury; a. genera ti . 1.'00 long, 'worldwide, Islamist revival has washe d much of itt away The reality is that most Egyptians. remain grindingly poor, in educated and alienated from a. ruling class seen as more attuned to Western fashions than 1.0,(:211 custo m, In a survey of attitudes in seven Musb un-majonty countnes In D·• oe:m.- eI 2(tlO . .e bv Pew an American research oreanisa-. ~y w~ ... ., .'. 5' tion, Egyptian.s proved the most likely to prefer "fundam entalists' over "mod ernis~_1':...~.~. ers --as [.-_-..~.,.-:-.- champions 0,f Isl Islam, More t h an hal-If of Egypltians favoured separating the sexes at work, compared with Just 13% among Turks. Only' Pakistan matched Egypt's en= thusiasm for such traditionally Islamic penalties as stoning for adultery amputation for theft, and death for apostasy, despite the fact that Egypmla.n courts have shunned such punishments for a. century
I :"",' ,",1-:" .
t ", • ,', .". •••• I'

I '-

W· '-' ..

,'0' -"a'"
i<".'

",-

.e

".'

'.,

,'".,

..

.a :

·-1'

-,

I' .: -

s-

'.

,'.

".

'...

'.

...

- ..

-·~'·~'I·-··l--··.~

I'-:';'-~

= ..

~,

..:-:.--:-. .

,':'

--:('-:-1"

~.

",-:-'

,.I

'-'~I

,.-~

ilt'\A t"'o lu.~I~~:

'.1'

,I.

I.

' .. Icl~.

. ~.

:5,0 Mi'dd.le East and Africa

'The Economist, December iotr ,20Jl!1

~ else to impose any sort of order, 'The Mub= arak regim e ere ated such realities by negMecting E,gypmmans whose only sin, was that God created them in the age of Mubarak,' Villagers in the rural province of fa.youm, south-west of Cairo, who were for decades corralled to vote for Mr M'u'bar.atk;s party in fraudulent polls, got little in return except for brutal p olice, vena] officials and rutted roads, But for many years Muslim Brothers 'have paid small stipends toO' 'wid= ows and supplie d water buffaloe s on easy repayment plans to landless peasants, Satlafists, 'whose, fie-ry sermons thrill mosquegoers and have propelled a fashion for fullface veils, now also do their bit, distributing cut-price food for religious feasts and o fferi ng clas ses in I(oran reci ta.non, Perhaps more importantly they have gained a bully pulpit on numerous Saudi-funded satellite television channels that beam round-the-clock religi ous fare, 'The recent elections brought out. colOUIfu~, banners and blaring tannoys ID'n Fayoum's remotest ham ets but almost D'OD'e advemsed secular parti es. RaJUes graced by telegenic Salafist preachers attracted tens of thousands while a curious few' listened politely to 'youthful leftists talking u,p revolution. Small wonder that the province gave 14 of its 16 seats to Islamists, Four went to the Salafi sts, wh ose n umbers were, ~ronmlcall~, boosted by voters once be-holden to Mr Mubarak's now-disbanded party, who are' still Instinctively mistrustful of the Brotherhood

ty over promoting Islamic mores", 'The Brotherhood 'would probably prefer a. centrist alliance that would not frighten fore-ign powers or alienate Egypt's army which remains an arbitero f last resort ]n any case, a lB'rothe:rho.o,d-led govern-

ment is not in the immediate offing, Egyp,~:"s eneral s, dis comfite d as anyone by g the Islamdsts' advance, seem determined to find. ways to delay it They insist on retaini n,g the .rilgp t to a p:p!oint a cabinet and are seeking to dilutethe new' parliament's role in writing at constinnion. Egypt"s fractious, liberals are deeply sceptical of the milirarv b ut m revert to ~IIj""C· epting'<u fur.,' ther dose of military dictatorship to stave off th e Islamist tide" at least for a. while.just a .;:], -111,.1" ,I~ P oss iblv they rn '~Iy~s,0, em'bra 'C~' the ']B, roth ,,Ji,""'~'l!--' "'[1,,,'

I~I-y'-;

'I,;;;

Il0:.0.1[

',',

a,\"'~~,lt

''']i

,,!I;;

c"

G.,

',,'b-

,JlbU!II;;

I~ ,~

ers as the best guarantee of getting the soldiers back to the barracks,
'Whatever the outcome, 'E,g~yptlooks set to join a. broader regional trend that has

seen. ,31 more pragmatic, tolerant form of lslamism rise to. dominate the political Alia hi be IIraised scene, by wayof the ballot box rather than the gun, barrel. As Is amistp arti es c.o'm,€ to cially Coptic Christians; who make up an increastngly be eagueredrox minority s!e·e; the fore, from, Iraq to Morocco, it is. worth bearing in mind the words of Safwat Abdlittle difference b etween ri.vEdlslamists .. Yet within the broad spectrum ofpolitiel-Ghani, the' leader of an Egyptian Salafist cal Islam, the dis~inction.sbetween two are group that once preached terrorism in the telling", M,uslim Brothers tend to be upname of jihad, on the death of Osama bin wardly mobile professionals, whereas the Laden: "Al-Qaeda has not been destroyed Salafists derive th eir stre ngth from th e by the 'war on terror' but by popular revopoor, The Brothers speak of pragmatic plans and wear suits and ties~The Salafists prefer traditional robes and clothe their
_,L, J~ lutions t' har made it unne cessarv"
~-_ I: _
I~, _,_I

_._

I 'Il;"".

. _J~.l'!i...'I"",,",'.;)!,,,,

language in scripture, The Brothers see 'What do they want to do'? themselves as part of a. wide, diverse Islamis t trend, The Sa .afists fierce r.y' shun Surrounded by well-wishers at his horne Shia Muslims, Asked. what hie thinks of on a, narrow dirt stre'et in the village of Nazla, Wa,gih al-Shim] insists his Nour party Turkey 's mild Islamist rule, a Nour spokeswould have done even better )if t~hleBroth- man, snaps that his party had nothing to lers had not cheated, Blind from 'birth. ,and, take from Turkey bar its economic model, Nour says it rejects Iranian-style the oclushly bearded, Fayoum's new MP is a doctor of =s,l m'ie jurisprude nee." pre,a,c'hes fu,n :racy~b,ut equalilly rejects ,Un a'ke d'" Weste.rn= a llioca~mosqu,€S,~ and h,as a. [!ep,utatio'n for l,e- smyme: democra,c~ Instea,d, mnwh,a.t some Sasolving dispum,es, ,a_,c,cor,din,gto :sl81mic maw" lafists see as a. ,da:r~.ng departure from pIevi,ous cond,e'mnation of ,d'nything t~h,atmight U.We' ow'e our. s:uC!cess t:,o the 'people's ~Iust~ to th,e:i'['lliov,efor us. be,causie 'we, worlt dH,ute God-gi.v',en ~,aws" :U 'wants ,a. '~'restrictf()r ~he com~mon ,goo"d" :not personal gain,'" ed;' ,d,emoc:raey' c:onfine"d 'by [slli,ami,c :says NIT ShimL As :for ,a p,arty' programme, b'Q'un,ds", Yasir B;urh,ami., a top Salafist h,e says :his ]lot will impro'v'le schoolli,s~,:Py.o~' pre:a.'cher, says t'h,at his. m.issio:n, is to '-"'UPI= vfuldej o'bs an,d reform, loca.l g,overnm,e nt, .in= h,o],d, the Icallillito ]slam~ not to 'im,po'se ru.t on mI,oducitn,_g e~ectID.ons ,at ,every' llievelli tOo rle= :peo:ple",'; StUl, 'he b,elieves th,e party c,an c.onvinoe: E,gyp,mians to ac,ce,pt sUlch thitn"gs pI2u:e, M,ubarak-era cent-redly' ap'po"inted ;Qffi,C'ials~As ~or the, wid:er w'o,rld Mr Shi"mi as banni,ng alco'hol~, adop,ting th,e 'v'eil an,d, segr1eg.aUng th,e sex,es in p,ublic 'becat'u,se: m,s vatgu;e,. ,exc,ept to say ~h,att Eg:yp,t shouldl ~ ·t,eep' pe,tlce with any n,e,fghbou.f that lie- 'i'we want them to go toO, h e,a,ve,n"~ B;roth!eIh,oo,d ],i8',a,de''fs say :inst,ead mIh,at f:r.ains from attacking it. 'Th,e 'Brotherhood effio,es, this :p1,arodbiaI= they 'must r,espe'ct th,e pe'ople'~'s c:h,of,ce~ .,.., '.c: ~,sm::mts party s 8o'-p,age :ma~rulH~s:to men~ Th,emt party inc]uldes ,a few' 'Cluitstians", [t ~io:ns neithe:r ]sra.el nor famestine~ Th e tw,o 'wolke d,h,ard, to b'uild a ,oo.alitio:n with s'e c.u,gro'ups :have m,on;' in common. Th,e Broth- laril$ts~, m,o0, tho'ugh ,mosm, of its partn,ers soon, withdrew" Where,as N'OUI :p,atrty leatd,,eIS ,Pro{,ess to share th,e Salliafists' end g'Oal; ers ,openly caU, for an, aUi.ance wi~h th1e namlem~ to rega.in the I)re-e:mi:ne:n.t role for [sla.m in, e,very ,aspect of Hfe that they bie- Brothers to p'ursue a deteJm.in,ed ,Islamist mmev,e it .o'n,ce h,e~,ld~ S,om!e; h~;a.ding B;rothe,rs ag,e,nd.a,; m'heo~,d,e:r group; w~.th'its ~ong 1eJ(,peiev'len ,describ e' th,emse~.ves ,a.sSalafist .in id!e- :d.e,n,ce of perse'cut~,on,~is w,ary. It says fix.ing olog~ Many s,ecular E:gyptia:ns~ to.o" esp'e~= ]Egypes aJUng ,~conomy' sho'uld take prlorm-

Is ra I:!l and the Islam ists

-B l et ,;S' Oh ,nOi lut ' talk.maybe

- ,-- - 'I
L-, -, ,- '. .-'I
I

J IEIRilrs,AILE M

lsrael 'is appalled 'by th,e,surg,e ,o,f JIslami.sts bu~:may want to talk t:ot'hem,

HE ele,cmio,n, resul~:s ru,n Egypt .are ,an, 'ills~,amist "~'hu'rr~can,e';,~'dl.e'~u:gle;;' o:r Utsunau mi acc.ording 1.'0 Isra..eU, n,ewsp,aper 'heatldHnes~ The d,e'fe~}ce' min~st',er, Ehu,d B,arak, ca.n,ed the'm uv',€ry worris.om,e Q!ffici.a.I,s, sou'n,ding Icool~note,d that there were pre= cions fe'w' relations left t.o b"re,al since Egypl h,a,d ~,ong''be,en sev,eri~ng ti,es t'O ptm= ish ls:raellifor r~ fusin:g to 'yie~,dto th,e Pale:s'~ tin~.a.ns in t'h,e pie-ace p:ro,eess. Egyptian-, sraerui agricultura~, sche'mes :illongago grou'n,d to a :haJ.'t :Factori es 'with EsraeU lliinlrs m hOlm had :pr,onled fro:m t,a;riff-fre'e' exports, to th,e U~'litl€dl Sta.~!esh,av!e shut. Sin,('"eEg:ypfs revoilluUon be'gan in, Janua.ry, Israeli tourists ha've vmItu,a1ly s.t~o:ppe,dIcoming~ This 'ye,i;ll'l' Egyp,tian militants harv,e billown u,P' a pipe= line :pump,]i'ng Egyptian g,a:sto ]sra.el nin'e times., And [sra"ers ,emb,assy in 'Cairo .ret~',~ U " t

mains closed", ]t ,could glem W'OIse~Befor1e th,e ICamp Da-

vid pe'ailce accords were signed 33 years .ago; ltsrael's front 'wmth Egypt 'W.ilS Us most men,- ...

Middle East: and ,Africa

i~'acing-sand it

5 '1

could become so again, The

Muslim Brotherhood's Palestinian branch, Harnas, which to Israel's chagrin, stnm rule s the Gaza Strip between Israel and. Egypt, hopes that better relations with a. new Islamist-onented Egyptian government will b ster ~,t ..0 Farther south, Egypt'S, Sinai peninsula is becominga lawless no-man's-land, WIDth Bedouin and Islamist militants at large. Yet Israel is loth toO a ttack them, le sm: t igni te a i broader war, When Israeli troops shot 'back a.t milttants dre ssed in Egyptian army 'uniforms who killed eight Israelis near a Red Sea. resort on th,€ "STile, i side of the border :inAugust, .' yptian protesters stormed the Israeli embassy in Cairo, Another such attack might rupture, Egyp tian- Israeli dipIomatic relations altogether, Even if Egypt's Islarrdsts refrain from scrapping llt.he peace treaty, Israel fears they win seek to amend the clauses that provide for Sinai's demilitarisation. They might even put the treaty to a referendum, The Salafists, though declaring themselves non-vtolent ar present, could yet-Israe is fear=turn jihadist, Israe s gen erals are already b,a.ttening down the hatches, They have speeded the CoO nstru ction of a vast concrete wall along Israel's :24o,='km, (~5or='mi~e:) border WIDth Egypt and deployed another brigade to patrol ~t rones peer over the border at Sinai, D Some, Israeli generals hope that old ties with their Egyp,tia;n, counterparts will survive. They may be to,o optimistic", If the Islamists €'nd 'u'p ruling Egypt, might they seek to engage with Israel? Precedent is not encouraging, When. Hamas won the Palestinian elections in '20.06 and then asserted sole control over Gaza the following year, Israel opted for boycott and siege unless Hamas recognised Israel, among other things," After President Hosni Mubarak's taU, 'in February Israeli diplomats in C,aJrD suggested making overture's to the M'usUm Brorhorhood, only to be told from on high to desist Israelis 0fte,n re"ckon t'h,81tord:eI~ 'EV'IE:D if PO·ls·',ed' b- a 'h-,o, t~;'l-e *rl'"tv ii·s··'b-· s ,jf'h'Pllnl l J"~ ch:ao's~(This mary' ap'ply to Syria un,der th,e Assad, family too~l Moreo,ve:r, thanks to 18= I,U~rS indirec1t' and informal contacts w~th Hamas a modicum of pie-ace 'has I'emurned to Garza...~'W:ith Ham.2J1s,~ "e Ican do, w'hate'vw er 'w'e wish,~,t's.a.ys .an. [srae:b who talks to it C,aIming p'l.agmatic state'm,ents. by Mus-' lim B,lotherhood ie'ade'fS in IC:airo hint am, an llcco,mmoda,Hon~ Mu:h,amm,a·d Sa]em Awa, a leading B:rot'her"condemned the atta.ck on ]srael"s em'bassy" The B.rothers' election :m,a,nifesto says that' Egypt"s in tl~:rnatio,nal agree:ments :m,ust, be up,h,e~d~, p.res·umalbly including' those- with rsr.aet T:he:Broth,ers' desire for good reiatiQins 'w:ith th,e West a'D,d for tour~,sm to revive 'wiH, 'make.a c.. onfro:nt81tm,on less likely" In ,a sign .of thin,gs to co,m!€, Ra.chid Gh,annouchi, heRd, of N,ahdla. the TUl'nisian
_-_' _. ,,:)I~!~
1

,ill "

'.-

policy with Egypt, 'But as generals lose ,Power aero ss the region, Israel "5 politiThe' r-eligi ous right tn 'Israel
-

Islamists who. are close to the Brotherho 0 d, rece n t1~lmet Isra elis di screetly In Was:hington" He said t:h a,t' Junisi a'S constitution would not ban further contact, "The new political Islam is more realistic,' says illSf2U:J.'S outgoing' ambassador to Egypt" Yitzhak Levanon, who wants to engage, For decades Israel's security people ran

cians, including religious ones; may try' their hand, "Men of religion understand each other b etten says the religious- affairs minister, Yaakov Margov of Shas one .of two Orthodox partie s in Israel's ruling coalition, ~"Iam ready to 'meet the' Brotherho 0 d any time, any place,' he says, His party leader, Eli Yishai, once even offered to meet Hamas, until others in Israel's then governmentreined him, in,
t~,

It's o the rise too

I • ,I .•... ",'

.JI:RU$AILE~

As if to match, the Islamist surge, reHMiousJews, ,are gaining in politics too

Wtended
HEN

revolutionary Zionist: pio. _ neers first pitch ed 'up in, Pale stine,

'j

they to' look askance ,at the existing Orthodox] ews as dusty museum pieces.A century or so on, Orthodox Jews often have a similar attitude to secular jews, Once a small minontyin Israel's state-buildtng proj ect, Orthodox Jews. are nowat its forefront They comprise'4,o% of theruling coaliuon's memhers, and over 40%, of new army officers and combat soldiers, As their birth rate is more th an double ilia t of secular J ews, their power is set: to mount The spectrum of polmcaljudaism ms as 'wide as political Islam's. A bit like the split between Muslim Brothers and
Salafists, religio us Jews 100 Sely divide into religious Zi 0 n ists, wh 0 want Jew's to

"m' ,

_'

_yo i .

~,

.'

'.

ill. ,

IGl.nl , I[ ~:

.II!. .

. 'Ii;,.

.l9t--;li.'!GI,'!I."" I~, I[,~.II!

,~"

dox, who, seek to €'nforce litera rabbinical dictate s",The former pride themselves on leading Israelis into battle, The latter staunchly defend their exemption from the mili tary draft, Though intense ideol ogical rivals, they have forged working relations under Binyamin Netanyahu's coalmon. Both defen d thei r assets, bile:im settleme nts tn the 'West :Bank" where they form ,at least 70%.of the Jewish pop,ulation, ,or th,e sep.arat:e Torah ,ed'ucatio'n :systlems they ha:v'e cr,eated,~both with stah~b'adcing~ B,oth argue that Isra,ePs Jewish, character ]ismore viltaJ th,a,n its demotr.at~,c a ne:~ Se,cular Jews~ 'wlho found.ed, the state ,andl ar.e stHI a n,arrow maj ority, used, to fret that the reliigious w'ere c.arving (Jut no-go ,ar,easfor the authorities with th,emr' own legaJ and:moratlity po]ice: and using their pO'wer as p,Bl'rli.al'm,ent'ary kin,gmakers ..'Now the'y fear rellgiousJews ,ate the state~Se(:umar Jew:s continu,e to leave J ernsale,m for th,e c:,oastal c.ities~ceding it t,o,a, volatile cocktail of religious Jews an.d resentfu~, Arabs in the: east of t~heICit~ Und,er preSSU'Ie fro,m, rabbi'ni!cal aut'horiti-es and, m:heird~scip~es,~the h,otte,rh,ead,ed reU,giolls soldiers boyeott military p,a.geants at which wo:men p,erform~

control biblical land, and rhe ultra-Ortho-

cover their bodies, and remove advertismg of even modestly-clad women from streets and buses, In ultra-Orthodox suburbs of Tel ,Avi~ women, like their Saudi counterparts ~do not, drive ..The American secretary of state, 'HUlary Cl~ unton, recent lv sal shie was wome" d ,y said that women's rights in Israel w'er'e being' ,eroded" In the u]tra-Ortho,dox press. her p'hotogta.p,h 'was .adirbrush.ed o'ut
,- I' -I ,-, ,I -, -,,. 1 '." '. . I' '.-'. '.
-"-I I •I "

'. h M '.. j""..ties canceJ11. concerts 'WIt·. .<unlclpa .. female artists or insist that they fully'

'R·eiJ.ll"'gl~'OUC' }1g"w'--'··s.· 't,g,n"dl tio- 'b-, ~ ,_-11.:_ .:;:! I'b, .".., '._: lib
c

mo' 'O''<'iI''Q ,d· ~i·s-m~!C'"~ I

_J1.11b - .II! _ ' J!,~

J).romo,tle laws aU,owing' Jews to 'ban Arabs from living ,amo:n,g;:hem~ Polls t sug,gest that a high peIc:e:nta_g'!f: oO,f .religious Jews wou~,d, e:n,y n,on-Jews the' vo,te~ d 'The lea.ders of Israel's la.rg.est o,p:posih ~10,np'aru.es al'e secu 1 aTwo'men~ 'w-'o warn ,against risingJewlsh, chau·vinis.:m, as d.oes the h,e,ad of the' Supreme Court~ a ~as:t'secularist bastion." B;ut' a. secumar Icomeback m,ary de:plend o,n Mr N!e~any;a~' hu~Secular .himse~f,'he has ridden a religiolls tide to two election 'victories .. Some say he regrletsthe religilo'us righ't"s rise. But can h,e re'sist t:h,e te'mp ta.ti on, ~o' us·ethis win'n.in,g formu~a for a third Um,e?
,. +

siv'e of Ala'bs than thei,[ secular compatri-= '10 1- "t" .' +th th o t s are ..:co, lIlC~,ans.a'1+ d Wi' ,",- em , :mgn1e:

,5,2: Mid.dle East

and Africa

'The Economist, D'ecember iotr 20Jll.'!

U neertai nty in I'ran

.•. they really mean to do it? id

I
,--- I

.. " ' '. Iranian capital'I Wiele overrun m simr"'I ar fashion, this time for only a few hours, As fun:t979t the assault may' have strengthened
--, '--, '-' - ' '" "I

'I b ,291'· '; W,:, ,e':n h h ,ong b f ,:eJor'e ,, ovem,er N '... h ]"P '".l" two Brlnsh di 1omatic ,compoun'l.w.s -n t hIe' ,
i- -' 1 , ' C" "

'd~ d ,if;!

'T fELT at first like a, throwback to 19'7!9', .when Iranian revolutionaries seized the American embassy in,Tehran ~or15months and at bilateral friendship soured, ]n truth, relations between Ira-n,and Britain had cur-

'- -r

1-

the hand, of hardliners at horne, but to= day' s Islamic Repu blic can ill afford such show's 'Of defiance, Within a week of the assault, 'whit ch led to the closure of Ihe 'em= bassy and the- expulsion of the entire Iranian mission in londo,n" the Iranian action ·····-1.... - Y ...j. '~ te, negantot 'L IE.. HI-:··· a iCOSnlv mista tke !Jl'OOK n ee At the beginning of the diplomatic crisis, the speaker of the parliament in Tehran railed against Britain 's "hegemonic" policies. Iranian, dip 10mats returning from London were greeted with bouquets ..But Iranian braggadocio soon turned to queasy contrition. By December 4th at senior ib'. .. I' ..',,': '. ['. aya t 0.Ila h . was d ._eSCI]... g tthIe seizures as m ("j IIegal t"; the Iranian courts, it seems, may ,even mry some of the intrud,e'rs.~ Tlh'f cou:n- d' -, ,-* 1·1 .. "]7h' - - "~Iy S suprem!S' ·1,e',a.. ,e-r, A- ya ~o,a 'hA--' I,m . ,a.mie:m).(d" 'who se'e'ffiS ~:O'hav,e ord,ered th,e b 'e a.m,ed exp'ulsion of th:e bas:e,ej~ thle -reglme)s - ~ h i·ilI" i· h d-hmh 'ug'gms mldt18, 'W'-'O carr]l'e.: ,o.ut t~e' as,I s O!u].t, has m,amnta,in!ed a t1elHng si~ence., [ran's moy.alist m1edia w,er.e SODn tryin,g t.D' fix peop!~e"'s ,a.ttenUo,n up1on, oeremo:nies toO, m.a,rl~th,e' Sh.ia mourning m(lnth of Muharra:m" The imp,resstOon WalS of a regi'm,e' which; :h,av~:ng e:ngin,e,ered a ,cris].s.~m:h,e'n
11)... .. ,'" , ,'"' -," ,L.:' -_,
I': ,'" I"
.. ,'.... ," [" .. -'

f'"

.....

t,.

wanted itt to go quickly' awa~ This will 'be hard to arrange, The embassy assault has hardened hearts that 'were, ',I' n any ~~- ~'Se'", U' mine agamst Jran W····' ==~ amillia._ ~ l._, I, • ' j_,_ 'b. I,." _.I -' Hagu e, the affronted British foreign secretary, may 'be more hawkish than his predecesser in Britain's previous. (l.abcur) governrnent, Hie is pressing, wit ,- his. French counterpart, Alain JU·PP,e", for the European Union t.o. impose an embargo on Iranian oft Greece, ]t,aIy and Splain, the E,U~Sbiggest purchasers of the stuff want time to' line 'up new suppliers, The United States is deciding on, new financial restrictions of its own, And some American forces now being withdrawn from Iraq are-likely to 'be re~ ~In·, ~ ,'~lIi') ""~!d· d Qp' .Iy=y.:'.~",.in - K'u-' -w:·: ~t-j~'I'UI·~ a---"cr-'-o's··e th· Gulf from Iran ~The pressure on Iran IDS, 'continning to mount, The embassy attack may d it ev'en, ,h a.ve lncre,a5H~:' ]l ..•, The main, reason is, as ever, Iran's contentious nuclear plans ..Most experts think the country is still several years away from being able to 'build a bomb, 'but the dispute is now being driven b,y a deep mutual distrust; recently increased by an ominous Ie,t.I,,_ .if"
t'

,.!!I,I,.

..

. .....

bassador to Washington, Iran has been accused of plotting to :kffi 1" Thcugh Mr Kha1 menei claims the Arab spring was mspired by 'Iran's revolution, the only Arab government Iran is close to IDS Syria's, which has been ostracised 'by the Arab League, Mr Assad's opponents say that tran's support for Bashar Ass 8.. wi illI DOl b e forgotten .. d , Ordinary Iranians fret that the events of November 29th. have indeed brought pariah, status closer--with the possibility of W(lISe to come, Though Iranians resent Britain's record, of mterference in their affairs, 'which began. in the isth century and continued until the revolution of 19'7'9', the pre sence of British d ploma ts In 'Iehran has been widely seen as at guarantee that the ultnna te sancti on against 'ran" an IsraeIi or American attack, was some, way off As a European diplomat puts it, "the Irani+

~""=

,~..

-.-

f:\, ..

ans had their hostages funthe event of mil itary a ction right there, in the British ernbassy No. longer,' The, sight of a darkened and shuttered em bassy j angles the nerves of people already worrying about th ell future, A :recent 'blast am'a. missile factory near Tehmn, which ldlledzo and rocked mh,e capital, 'was one of several explosions at 'military and economic installations over the past two years. Locals assumed they' were under at= tack, American surveillance drones dr~fm over the, border from Afghanistan; the ranians were pleased when one recently fell in to their :h.a.nd s..The assasst nation of' nuelear scientists (two to date) and moral e'S,Bl'pp1i'ng in-su-rg,en,c ies am,on,g- 'min,ormties :port by th,e Intern,a,tmo:na~, Ato:mi.c E.nergy Ag,ency, the ·UN'S nncle,aI watchdog~ Wmth among :mr.,an's bordiers contrihut:ie to, th'e this re'p"ort the age·ncy carn'e clos!er th,an 'b,e- sens,!{!.of a icountty under slege'~ fore to cu::.cus.in.:g Ira'n of tryID.'ng t',o 'b'uU d a :n,'u= Eu,t this is 'notl97'9'~l£r.an is riv'eo" not s.im= cm!earwe,a'pon~ ]r,anian officials insist the'y' ply betw,een supporter's. of the Ismami,c Republic .anld oOf the p,ro~ldemocralcy' 'Gr-e'e:n still want: only toO g,enle:rat-e elec.tric:ity~ On D'ec,emb,er 5th an ,Am,er]'lcan. ,dru,Pimovle:men,t" w'hoO tOoOlc to the streets af~t',er a lo:m,a.t ~' Rob,ert Hin'h .. _=, ,- -, IIatH 'was j;~b,e- dlisp'ute d preside-:ntrua:~ ele ct~,on m,n 2:0·'0'9 ,and Oor,n-sadd _. _= , -, _, ,,, co'm'i:n,g a p ariah state'~'..I,h,e icoun try :is. ,ce-r- were, e,\;renmually ,crush,e,d; but als.o betwe,en mhe two :men, at th,€, mop., Mr Khameta.inly d~,s,ttustle,d ~y the Gulf s,heikh,dom.s and ~,oathed by' S.all.dj. Arabia., w,h,o,se- .am,-' ne'fus.81v',edPr,esidenm Mahmo'ud Ahm.adUnejad, after th,elath~f~s.e=emecHo:n in, 20'09~b,U,~ r today' the~two baremy c,o:niceal their p"erso~ naJ ,an,d ide'oio:gi(:al ritvalry. ,Met[nwhHe', .al leg:ations of corrupti.on erode ~}op'ularfaith in, th,e regime as .a. whole .. Mr A·hmadinejadl is d,ue to smn,d down in less m,an t\vo ye.ars" b'ut :h,e' shoOws -every 5i,gn of wan Ung to p.romon:g his i,nflu,encle ..'Mn falct~ he may mUIn out '~O be the Islamic Republic;s mast p,re'side'nt, for i'h,e supr,€m,e le.a.d,er,ha.s let j,t be, known that h,e faVO'illS a constitutio:n,w c:h,ange to. r.eplaee ,an ei e,cted pr,esid,en.t wit.h a. prim,e 'minister a,ppointed by' p,arliam,ent rn theory; this 'wu:uld :pum Mr 'Kham.enei w'ho, eXlerlcises mu,ch co,nltro] ove:r th,e m,embers..af parHam:ent, in ·an un,e'J'~d'"~ _illQ. assal'~~blll£l po" C'l't-'l·o'n- But- 'M' 'r A-·h-t"m-' '':!ildl'-'-'l''nsup,porters ,sh,o·w' every sign, of v~,g,oro'usly contiesti'n_g' p,arli am,entary 'ele-1cmio:n.s 'in Ma.-rch~Sin,ce ·bo~h mien ,control instimuti,ons th,a.t SUPI e:rVIDse th e e ~e dora] ptO,ce ss., i~ pro:mm,SlfS to b,e ,a lively p!oll.
JI . ,",.
'!

'~I

UJIJ.,

L)II~

"'.

,,',

.!WI

Jl~'

,Q, j[ r~lj1j.I' "1E)1,QilFS-

1" ,QL

.:1"

_=T

:I.IIJ.~

,I,"

. ,',!JIl

I."

",I J

I!i

..,,"

__

",:

,.

,""

1.1 i'"

,'~::_"_

I" I

:,",~,":",I_

flii&'fIBlct"" Ci io~~i I_lilly"" Mo~iLi!'io!C~t!91~QIt

BiHkI rrrf' BjQ'tdrwi

199~O

IS, "Maio olll!l

D"oLd flfol

~;J.M_ri~d~

I,rg[d.!

,5,4 Mid.dle East

and Africa
-I _ _

'The Economist, December

iotr

20Jll.'!

government policy" 'Yetthere were clearly some "who wish to co-govern the country through the' courts." The Constitutional Court's rulings are now to be "assesse d'' by !KIN SHiASA an ind .. epend .. research institute to enent ,josep,h Kablla is re-elected, 'but his sure that the court "conforms to the transopponents cry foul formation. :man date n'.. In South Africa transformation is shortH:E wareh .. ouse where poll workers are ad dlin,g- 'up the vote s is fun ch ao s. Ballot hand for promoting the rights of racial groups oppressed under apartheid, When'papers are strewn across the building and ever th,€!;courts hand down a ruling not to ~,n the mud outside, Bags with senstnve the AN'C;S Iiking, one of its leaders tends to material spill onto thefloor, The people doru,n:g th,e counting ask visitors for food ,3l11:d complain of "untransformed" 0'1 "counterdrink because they have 'barely had €ru.th,er revolutionary' judges, When the ANile sin ce they began totting up the results a came to power in 1994" nearly aU judges were white, But 'now most are not, includweek ago..The sceneis at symbol of Congo. ing those on the Constitutional Court, The decision to hold an election without The: challenge to ,MI Simelane's apdelay was bound to. create a mess ..The icon= pointment 'was first: brought b,y the Demoselque:n,ces may prove disastrous .. Only nine years ago Congo was still at cratic Alliance (DAl" the main, opposition IUD da declares Mr Kabila the winner, war, in 2006." with massive support from party, on the ground that he was not, as the and uprisings may' break out in, parts of Congo .. constitution requires, a ~~fit proper peroutsiders, especially the 'U:N.", the country' held its first election since 'before' the dicta- 'i'~IfKa.bila returns to power he'll have- to son;' mo hea d the, N P A ~ As director- general walk over our dead bodies," said Palm .. er of the Justice- ministry in 20"08, he had givtorship of Mob'utu Sese Seko, who ran Kabeya, one of Mr 'Ishlsekedi's backers Congo from 19,6'5 to. 19'97~The current presien "mislea .. ding and untruthful evidence' to a commissi on of inquiry headed b,y Paroutside the 78='year-'oId. candidate's party dent, J oseph Kabila, has spent five years al'\.,I-,I:!i' TII,~I D A' I, ~ am- -c.." nt's s p e .0[ cer Frene G" I" n'w''!:!II lit, , 1Q!I,1Il~.~ th struggling to hold together the country's n headquarters in Kinshasa, The dozens of said, The commission had found his conprovinces and several hundred ethnic youngmen around him agreed", Most were duct as at witness "lhighlli,y irregular" ~ groups while fending off rebellions in the unemployed: mess than '10'% of Congo's The ,PubU,c Service Commission recomworking-age people in a, populatiorr of east and trying to pass a budget fin,an,cedl mainlyby unpredictable mining revenues .. 66m (the U,N guesses) have formed jobs, All mended dlsciplinary action against Mr Si~II "h ," 1 Yet the -4.o'~'y:e.aI'~·old. er re bel insisted form said they were ready to die if they' fe llit their meiane, 1IJ... ut tne charges were quieny u ,.I dropped on his appolntment as. the NPA"'S 'votes 'were ,not allowed to count, that the poll should go ahead on Novemboss, in November 2'O~)i9'~ When recomIn vain, 'Without clear evidence of sysb er zsth, wi th scan t foreign h elp, In ternatern atic £-:-r' d the OIU~'S-1' d W orld '" '1"s loth ",' 't·O, mending him.Ieff Radebe, the justice min'~'Utiona] bodies, tired of holding Congo's. Jl ' play arbiter. ~'Mt didn't h,atV'I€ to be, like this," hand for more than a decade and, uninister, argued that the Ginwala r-eport's critian International monitor says. ruefully spired by any' candidate, were relieved, cism was irrelevant, But the Supreme Court of Appeal disagreed, In making the "These were technical mistakes, and they But a little bit of democracy done badly appointment, Mr Zuma had not "applied can be a dange rous thing, At least 18 p eople could have 'been largely avoided," Al as, his min .. properly", as the constitution ded were killed in violence over the weekend man ded, 'it ruled. It' was therefore invalid .. before election day" 'Voter rolls were not au]t was M:r Simelane who; as dire ctorSo IDI t:h Af'ri ttl's co 1lI rts dited because the electoral commission ra:n, out of ti:m,e~O'n. the day l:tself, 'ballots ID'n general of' the just~c.e mi'nmsmr~. dr,a.fted ,a. letso'm,e ,places never ,arrm,v,ed~ In, others votter or,dering Vusi PikoU, the the'n :NPA boss, n'.: m- -w-::n,Q,t on' . th' 'I" ·s, ami p' !o'I'mto drop, his p,rosie!cu~ion ofJa,cld.e Selebi~th,e m,ng stations we:r'e' 'burnl~,dd,Qwn, a.nd pol i poUce chileft. ,on ·cor.ru'ption ch!arges~ Mr. Pik= work,ers ,artt;ack,ed.~In mo,re tha.n on,e tow'n oH re:fuse,d an,d. was susp"en,de,d~ Th,e prosie:-' in North ]{ivu, provfun,cie, sol diets in, uni= cutmon n.e:'verth!eles s contin'ueid: MI S,ele bi JIOHANI ftIJ ESIBU R,G fa,rm o:r ,plai:n, clomh,es 'b'ulill~,eldvoters int,o wa,s fo·un.d guilmy' ~,a.styear;, 'The form,er [nThe rulina: ,party 'w,()uld :prefer' more h"' " "m terpOm'~I1ll..· uO:SS 'b ,!egan ~_I],S 15:-year JaL term on voting £01 Mr I{a.'billia. filled out the baJlots or maDea,blejudg,es mhem,selves, som,etim,es 'voting' d,Qz·en,s of Decem'be:r 5th after losing his ap'peat H!e],e-n zn~,e, th.e DA '5 llie-a.d,f'r; says Mr tim,e s..In 1EJq ua. t,eur lJ.lrovin CIf!; i'n. th e we st~ at , O! the t~ird time~his South Afri~ Zum,a appointed M,l'Sim,elane 'becaus.e h,e mocaJ. ele cti on 0 fficiaJ w,e:n.t in to hru.ding ,after , , ca s courms ,have overruled gove.rnrn,e,nt th,e'governor pr,e ssed h~m to. c:hange the re:- d.ecisions oveI mh,e jiustice system~ Frurstth,e wanm,ed som,eb"ody' m,or,e !iiplian_f; to he,a,d ng rule-,d thaJ the .albo~fu'=' th!e p,r-os,€u:uti aut o:r:ity., She calls. it parm suIts; 'which put the 'rna-in oppositIon ca.n- C,onstitutio,nal'Court ,di!datie Etie:nne Tshise'kedli in the Ie,ad ,,. of a UZ',um,a. cation'';' .of state institu,tio:ns fi tion of the Slcorp:ions,~ .an ,elite ·co:rruptmon.' .. busti'n,g t,eam" W3,S 'un consti.tutio n,al, Ifh!en Mr- Tshisekedi an,d m'he rest of the, op:pou'd.. esii,gned to shieMd. th,e :pr.esident: an,dl his i~: a.id, Presid,en.t Jacob Zum,a_ coullid no,~ 'exs netwo·r]{ from 'be-in,g :h,e:~d accolmtabh~:"~~ sHion h:8lv'le: crie,d fr..:l!.'ud .., D,anilel 'Ngo~l'Mulliun,da,~ h.e·a,dof the ele,ctoral (:ommjissiion,~ ·81 te:n,d th,e ,chie,f Justi ce's. te':rm of offiice", as h,e Sh,e is fa:r w.rn, aJ.on.e in her v:iew., Business :pia~nnedL Now the .mp'pe,alli CO'Utt has d.e= D,a~,~, c,ountry's lea.drung da-H~, ,c~,a!ffims pastor 'Who. is a f:fiend of .Mr ,Kabi~,a'~s,) anthe cmare d invalid Mr ,Zurna's eon.f.este,d .a:P'= noun,ce-id partm,alliresults m~hat ut the: in,cnm= p that the po ss.:i l e r,es.us(::itatio:n. of charges b b,ent wen run. the Ie-aidwith .a]m.ost nio d·ema~n .poi.ntmen~' of ,Menz,m Simelliane to h,ead th1e against M-r Zuma over .at m'ultm-'bUlinn-do~,Natmo,n;;d Prose,cuting Authorit,y (NP'A)~ ,a'bout w:h,er!e hls numbers came fro:m~ lar gov'ernmen,t ,arms d e311"'ru,s at the centre of everyi'hing he, do,€'s"",., He:nce his 'ne,ed to 'Th,e African, Unio,n ,andl Soum:h Africa;s I.h,f' pIes~,dent andl his ,AfJ~,can Namionaill a ~J'resid,e:nt" Ja.cob, Zum.a" said th,entJe'was al- Congress (A.NIC) are- n.o'~: .mused,., MJ Z'u:m,at surroun d hims.elf 'with, ~~,a;n.i'ron ring of ijQ;,S~' ~\r' most n,o~'hing w.rong~ If, as is likem'y~Mr Mum'- ,g'D' h- r',~,'-I:I~ '0- 'n- ~',o-, e- '~P'C,h-}'· m--,' S.'':lrt;g,'''' • .l,,_.'~ _ :had. aJrea.dy wilrne"d the Ju,dge's a.gainst

t coutd get worse

-

,"

'"

'1

""

","-

j u dges, he said, had no right to interfere :in

"encroaching" two branches

O'D

the territory ofthe other of the state. Unelected

;19

-:'

",

,jf"....

~'"

Q I~ , ,~ ,

",

II!;;;;

"

.,

,{IIl.,,'

w;;;",'

',.

ill. ,

,0 ,!O;

','

President v ju,dg'e;s

I~-r;("~

~ JLL.:t!

rtI1 lU .' ,O~' ~~

::-,0[-~ " . ~ :,0

',..

. ..

j ••

,Q \;..""l

;("~,c ,~~t'uh~

'.'

,0 , ,~

..... JIJ.

'F.'

rear

I:

""-"_."",

".,

,'-

'~.

.,

,,',

~.

Q
~

~,~,_I._

.•

,111.._

,,_ULlf~'iI!

VInEO

G"AMES

-l
Video, games 'wi·t. be the fastest-'gro;win'g and mostexdtinqferm o,f mass medla over the ,c'oming' decade, sa,:ys Iim Cross
]N NiQIV'EMBER 2010 'i'CaJI of Duty: Black Ops' was released, Fans in many countries queued round the block to get their hands on at coveted early copy A lucky few had won ncke 'S 'to mvitation-only release parties wh ]l, were broad castlive viewer '.' mternet . .,d. w. lch '. ~ v~ V ~w~ S' across the I .~ .. ~.~ 'th.o even t hi a,' 'been advertised on billboards, buses and television for weeks, Chrysler even produced a commemorative version of its Ieep. In the event the reviews were mixed" but no, matter: the publishers, Activision, notched 'up worl dwide sal es of'$,65 in the first five days", That made it. the most sUC= om cessful launch of a.n entertainment product ever, and people kept buying A. month later the rotal stood a.t: over $1 billion, hBJI'1 . 'I'{ ,.....PI,S, ;;, ,", nor '~" a ~11I ,,W,aie 0'---:' IS rum or a b· ':'. k .. it m.s. ,~'OO .. 1, °i' a video game .. For comparison, "Harry Potter and the Deathly Ha lows F,a112 the current I,€cord holder $0' r t-h' lIli' stest sellinz film at tho $.a·'; .lJi..'... ilL JIl": . ".~ '~,W.. :':EJ! ... :'.!I(;: t, OV 0-: ..""""'L.., {fi" ii""'lla-eked 'U_'I"p-'J,~I'U' rst IQ:"1t::'9"'m' - - 0-: 'J!.'ll\. eke '::..._S-,·,to, ;~ f ti t ....Ie s I[JI_ A 1'~I:\..'L,o ' .• J.n:r' on it ts first weeken d, "Black Ops ,', stole the crown from its predecessor in 2009~ "Call of Duty: Modern Warf~rI-e .2"~~ The latest instalment, uMod'ern Wa:rfaxe 3,", released on November sth, set a record of' its own with $7'50'm run its first five days .. Over the past two decades the videogames business hElLS gone from. a cottage industry selling to a,few niche customers to a fully c .., .t ,;:)I~ry~ gro""..~···~'n·-.. .. , h . n..1 the enter ta in ml' .on'-: in d"lu-' (:"~' ::-::-:-." _ w b rla~n"·· voW,c' According to. Pricewaterhousefloopers (lPW'IC), at consulting 'firm" the globa] video-game market was worth around $,:56 billion last year~That is more than twice the size of the recorded-music industry nearly' a, quarter more than the, magazine 'business and about three-fifths the size of th,e film industry counting D'VID sales as well as box-office receipts (see chart below). pW'C predicts that video games will b e the fastest-growing form. of' 'me dia over the next few years, with sale s rising to $8'2 billion by 2. 01S:~ SOo who platys? The stereotypical image of the gamer+teenaged, male and probablyrather nerdy+ has hardly changed in.zoyears, Butit is no longer accurate, if it ever was, Today the average age of players in America, the biggest market, is 37'J and 42% of them are female, according to the Entertainment Software Association (lESA)~ an American trade group, Some 72% of households in America play games of some sort, says the E-SA", Even among the over-sos the share is one in three, One explanation for this corning of ...
~JII..'
il:I..Dl,;:)1!J. ~'!n I~U Dl,1!.,. ..
,;;)0;:)

CO NTE,INlS

5 As, ou Like i',

Ii;;

'I,;;;; 11,;;;.

..•

..

There is a video qarne for eve ry taste

Consoles are no lonqer the on ~yg',a.m'e in town
g'

5 [bin,ki'ng out of the boXl

.I

7 Pa.:yjiii-::fOf' 'p1xeils 'Virtua~. !L, ,I ood_ are worth re.·,a:11 __ , .. u s ,,. _ '_' _l mo n €!Y"~,a. n d ca u se rea l

dilemmas

"

il!.,.' .

'1(;;'

.0

!~~I.-:

'1.

,'..

' ..

I.

Jl"l-g

'~j[c

>_~,

iIip-

.'_lI.

9 No killer ap'-,.
The

panic about video qam es is subsidinq

W'hat video-game

1M oral

10 ifhe pla~#,sthe thing

tech no logy can do in the real wo rld

12 Homo ludens

I ,-

l~.

.~

Il;;'. ..,..;;,

".a.J

. '1;;;;...

A(IK

rNJ

OW' lED G M E.NTS

enduring success

W'lhyvideo games will be an

IBesides th ose quoted iinl th e te.xtl' !lIi! a fily others co fllbi buted ideas, in.s.ig hts, contacts, an d sug gestiofls, to thli$ ,spedii;lllLrepo rt, iIfIldlud~ilil9 J IlIJstlrnB~own, JOI~nte B ry.~ nt, IEdwa rd Castren OVaJ .. Sa Ii',g de IFrre.11taJS~, KaIti ~ GoOLd b~['g~, Vlilka s (i ~ptaI .• AJUbr~y HeSSie&9ireIll1 Tim l.JU.~t1P,~t~r.MOG)'n'te'.r M,i ke Mo rhai mf]1i@.; R© bert Pi ke, Nichola,s P[ott;r J. P~ R~1iIgaswa mi .. Il)alrlll~l te m~oslkii' Joh n Wa l~El'~a nd S Nick Y~e.,Otrmlets SplQke ~lnl ondition c

of a ~onJlmUYm lfih!! a !lJiiI:Jhor WQ~ Ild li k~

to
thi;llill

k 'them all,

a. ·et~' ~,(' 0",0

.lUll ,d' "

'~,. .'. om"

in,g gen!e'ratio:n, whh:h grew 'up 'wi~'h

o "g' r ,~p,h-y.·~ 'Tbll "=<

•••••

.0., -.

', .. II

.~

,Q

fi-= ilf\S'
I •.

JJ.I

't- -v"·I"d,o,'o· -g' .'·8-- 'm".'_

~ . . '~"" ,-I'"

A. liist ,of ,S(UJ! iF'ces ] $ .at IE:(iQmmom~st.lcc!ml s'rn~~dBllvep ons,

A'1Il1

aJiudio iIiIt.ervllew with

autlh()r 1:5. at

U11€!'

II!(iO~oli11ffist!:comlail!lld~ovidleo:l

sp'@da Imp oll1s·

games ar-c.adles and. :ho:me 'consoill,es~is :now entering' middle age",]t see,me,d likely that som.e of those who whHe-d. away the~J 'youth playing uSpa.'ce Invaders'" and, "Gamaxtan"" wouilld. stick tOo ~he:ir hobby :into aduill'thood~ :But giarn.eE~ c:om.patnie's~ readi,er than ot'h,e-r m,edi,a, to ch,ase t:he "':n.ext b~.g thin,g"', h av,e ,also started, '10' ·o.-'k· ~nl 'g J.'...". . n" ~Iu-dir.~on' c,·o,c I'n' I ·ro. =:. &o·r-··' a", ._ _ .. . cent ye'ars th,e;y hav,e ,d'rBlwn :in ...
( [", I _,I.~ • .'_

JI"

I~

i~i,''i'i'7 \fY

O"I~

L)!~.

~ groups such as women, the elderly and middle-aged commuters who 'would never describe themselves as garners but are more than, happy to play "Farmville" on Facebook .or"~Angry Birds" on

their
"J.

a',·r-'tp··h··Q,n- .' .. , The biggest market is America, whose consumers this year are expected to spend $14..1 billion on games, mostly on, the: con' sole variety written for Microsoft's Xbox ].60, Sorry's PlaySmati,on ""']l~~1 oles in Britain the fifthv I. Illl[. 3 or Nintendo's W,," Cons ·_:'v .....~. also domin largestgaming market In other parts of Europ e, and particularly Germany, ,,"C games are more popular, says Peter Moore" chief operating officer of Electronic Arts, a big games publisher, '~'German parents mend to see console games as childish, 'but they think pes have some education value," he notes. China is already the second-biggest market and one of the fastest-growing, 'with sal e:s rising by' 20'% last: yea r, The: high price of consoles and rampant piracy have encouraged. the developmentof online games, mostly played on PICS", which are easier to protect from pirates,
~JIl,.~.

em" [ .. . "

a.",

-"

,"

,C'i.' ~ri:).!Il

,_

JIl,

.c

,_

-:

',"',

I Jl ..

:,_

U ~":

!I.",Ul.IU

'!JI1't.g, '1;Al"-,

..

"

.ill

(,A..IIl':Ii

c'

Japan is a, law unto itself It was the second-biggest market untilChina overtook itt earli er this 'y'e ar, 'but fhe Ja p anese idea of fun is different from other people's, 'Wesh~:rngames that sell well elsewhere tend to struggle there, says Mr Moore; and the same is true of Japanese- games in the West 'Nobody really knows w:hy. In high-tech South Korea, rhe fourth-largest market, '1pi!CS and on'l~ n 'g- I tam jII',o. ,a, 'so p-I.nP-· ','IU-' ~ ar , not .~I,;:) "")1 , I : 'ik ec ,a" u o"f JIl . geringre I sen ·t·lirr .!a " .... I~ ~ ment of Iapanese products,
, .J!j, ,

,0, I!i;;_,g.

"

JOI,,('! '~,L)

''''!!if a.JIl, ~

'~I ~'~I' JIj,II;;;-(I.':' I!J.

l-

..,L)~

,jC,o

....

o!;;;OJIl. J!j

'_

I!i;;':'~

"

'Th,s P La,'yStati o,nl 9 if3'Hi'@!'l'atf.oln ]f' you had to pinpoint the moment when gaming started to move from niche toO mainstream, December 3rd, 19'94, would 'be a. good date to pick, That 'was when. Sony; a japanese consumerele ctronics gian t; launche d its PlayStatioin console. Until then games-console companies, led by Sega and Nintendo, had con-

hearted games based on, 'fitness" sports and the sorts of puzzles found on the back pages of newspapers helped i,m sell 89:m, units, half as many again as P'layStatio:n, 3 or Xbox 3,60'~ Now' the ever-increasing computing plower of mobile phones has put the means of playing games into the pockets of people 'who would never think of spending hundreds of dollars on a. dedicated cons e l e or a r c, 'The simple games that came pre= loaded onto the mobile handsets of ,a decade ago have evolved into a subset of the industryin its own right, appealing to a more casual crowd 'who play them on trains; in airport departure lounges or while waiting for the washing to finish. 'Today~s smartphones pack far more computing powe-r than the original Playstation, and games are a big Piart 'Of their appeal: the two most popular kinds of software on Apple's App Store are games and entertain men t 'Th'e internet has played a crucial part in the rise of video O';'.:lIlm--11;".."'-', en ahlin g-:-_.. "develop ers t get th e'l"r-- 'p"'- 00' - d'U' . ets in t th eir c us~~ . tomers' hands without the need for traditional shops or publishers, That has allowed, small, Independent developers to compete with the big firms who might spend tens of millions of dollars on developing a single title and as much again on marketing :im., As a. result the industry IDS becoming increasingly fragmented as it's market s b ecome more differen nated, ~.
.. '. .' !!d. . .l~1~
. l~aJJL··

centrated largely on children and teenagers.' ieir best-known products featured the adventures of pixellated Italian plumbers and cute cartoon hedgehogs, But the P'la.yS~'ation~s eat design, n slick marketing and line-up of big-budget games appea ed to yo'ung men in their 20,S ,and 3'0:5, says Piers Harding-Rolls of Screen Digest, a firm of media analysts, Another big event was the: launch of Nintendo's Wii console in :2006~This 'was specifically aimed at women, families and those who had never played video games befor-e", Its user-friendIYtsimple design, intuitive motion-sensitive controller and light-

~.

If!

,g,!P

II;,...

'I;,.IIL

_"

I.

'C

11.,.,,,,"

_'_

,1ILo·

.:;;III

..

0-:-1 " _._

-.,.,.

I~

.-

I,

_"

'_

"IIj,....~

.....

0-:-1 '. ,.

'.....

c-,~,

VInEO

G,AMES

..

The internet has also become a games platform in its own right, making the hobby truly sociable by' electronically I inking garnets the world over, Minions of people spend many 'hours each week playing and. working (sometimes the distinction is not clear) in 'virtual places such as "World of War'cr.aft~" and ~~EV'E Online", Hundreds of milllons more play free, simple, sociable games on Pacebook, such a s "Lexulous", which is a bit IH{eSera b= bl e, and "Farm Ville", a game with an agricul tura] setting, IncreasI, _.1 n. are fre.\r." but- 't- h virtu Ul.i go,-0- ds avail,~, ~~~gly'. the gam e''5, themselves .1,. i able, fun. these online worlds-a stable for one's electronic horses, s,ay~, or a :particularly pretty shirt for on e's digital alter ego to wear-cost real money the vi deo-gamesindustry has,long been dogged by accusations, that violent games breed violent behaviour and that its -- -- -- - - - - - - - __ - .' - -- - - - _ence - -- - - - --- - '. protd ucts- can- cause- a.ddl 1ction, Th- e evi.'d - -- - - was- never -- strong- In the first place, lbut'the shady reputation has proved hard, to shake off In fact many games do, not feature any violence. With, the new emphasis on more casual games, some of the, most popular titles involve inoffensive pastimes. such as constructing electronic: cities, completing abstract logic puzzles or managing a. virtual football team, Like all media businesses, the games industry is changing I' .. th t "t {@SL, 'f erent .,e we East.v "''-h t ma 1- lt d 1fi-' --- - t fI-' om th res,t ms. ann h as - - ill come d tW a .. .. .. ch ange ancd mnova tiion an,d th rivetd on tt, ]*..ts 'now' growm.g m at~I'l ~ 1.- '. i~, sorts ofunexpected.ways. FOI example.the best players can earn money (sometimes a lot of it) from, "e-sports'<-that ],S~, video games played professionally, runfront of a crowd, And after years of talk about an imminent "virtual reality" revolution, it is the games industry that has perfected cheap, convincing simulations of the real world ..Technology piune ere d by games is now being put to use in fields from military training programmes to molecular biology and virtual showrooms for cars, The: industry --:V ft'" w ~ '~I h a·~ ~-,---.Q'n· ena.,_--:-:--:-n- ed n ml '~g",om·· '. l.o'n· It tee hin' :qu,o. "ga mif I('<at-I"0' nl ';" that applies the psychological principlesof game design to moti_,\r.
I:
"~~'L__"

The business of gaming

_I

inking out of

ebox

l~

,.

__

'L..!.-.'

\r.~

Ul'!!!!

'__ '

~L"'"

111!5i:

I_

I'

"JI'~

I,

..

"',-

II;iIi. '.,

_-

Console,s are no long'erthe' olnlly'g'ame in tOW'1i1

THE ID'E,A BEHIND video games used to be simple, Nintendo, Micros.oft, :S on y, Sega and others. sold consoles at a loss and made mh,eir money from the boxed games. they produced for them, 'The punters, mostly' 'Young technophile men, bought the games from a shop, played them for a few weeks and then put them awaJ: 'Those customers are stili around, but they have been j oined 'by' a p leth ora of others. New, more casual sorts of games are being picked up by' a mass audience that wonld previously not have, played ,at all, "In the past few years two, things have changed," says Mr Mo,or.e of Electronic Arts, "The first is the proliferation ofplatforms [on which to play games], and the second is that it's become so much easier tn,call yourself a gamer," So the industry 'has branched out into a bewildering variety of sub-sectors and niches, At one extreme, companies in the traditional sector are still charging ,$5,0, or $60,£0:[ high-end console games with ultra-realistic graphi cs and cinematic gam e play" At the other" a shoal of smaller firms is developing simpler, more casual games aimed at a, much larger and more diverse group of customers, In between, t11 mix of established firms and start-ups are testing new' 'ways to develop games and new business models for sellmg them, One of the biggest changes has 'be,en, the rise of the, mobile phone as a. gaming device" Garnes specifically designed to. be played on mobile phones already account for $,8 billion of the $.56 billion global games market, even though they typica.mmy sell at less than, a tenth the price of a traditional console game, Such mobile games are simpler to play an,d r,eq'uir,e less time, .and d,edi= catinn than the: consome: titles." Th,eru[ rle~atilv-ely' low dev.elliop,men,t co'sts an,d th.e fa;ct mhatt t:h,ey' 'ca.:n be downilloaded. ove'r :m,obile; networks. b:rffi,ngs t':h,e:m,in to ID,mp,uls.eb'uy' territory~ s,a:ys Mr H,a.rdffi,ng-RoHs at Screen, D'Ig,est

''',

',

,,'

'_.

,-c

1"'-

,-

-_-

'_, _,

'.

II

",

:'

,-

'_'

'_

: "- - ,:- _

I",

',' -' ,

',_

1-

'.-

:,",

-'-,1,'<

.. ,-

..

.'---:'

I,

,--Iii

.-

I'·.~

'---:·',1

. '-'

.1

. I"

... " -

1'1 .

"1If

i .,oil'

II!;;

IIW

,;:]

"l'n "aJ l,U,

_!O;;

..

11,;;, ,

I~~

,.

". 1"

'G)

_)- , , ,

.Lo. "

.. ."

vating workers and engaging customers, Yet vide 0 gam es are still widely' regarde d. as trivial, This. sp e,cial report will argue that as the, newest and fastest-growing form ofmassmedia they deserveto betaken seriously •

As you Ie It
'VIDEO GA,MIES (;OMEin m,a,IIlYgui'ses~ There
are :strategy'..adventure ..puzzte sports and , bus; ness ga m es,~fi 'fS t--pefso n a In d t hii rd-· pe r:so n s hoote rs, 'f'anta. s:Yand sci en ce= fictt;o n ro le= p layi n 9 g'a. mes, fl 9 hti 11191 g'aml es, (thi n k of a vi rtua l b o,xiIn g m,a.tch) Hi 9' ht si m u 1mto rs ,a_ n d m a fly t 'm,a_ny iml0 n~~,~ e lh s.a_m~people \Vi II pr(j,babl~y pla,Y- lots of
l j

o In lffi ,e,~ 0 n a IIId stra tegnl n Acti

titles a,re av,aj; l-

Play; ng: ,on 'the m'Q,ve

of mo'bile='pho.ne- s'u'bscri,ptilons w,ormdw~d,e IDS ov'e-r 5 tdn~ .last. y,ear L6 on.~
n'umb'ler

di'fF~rent kinds ofg,a,mes" T1~~ a rc.hetypal plaiylers-yo u ng rna les with Ipllenty of free time and di'sposab~e'in,come-are known a.s ha rd co re ga m ers,~ They te nd to. u'S'ededicat _, ed co ns o!~es0 r powe rfu I~pes" a WId th ei r games a Fe li kelyto involve vioLent action, co m p lli.cated fO L.e p La,y1lf1 g Q r strat1egy ~ ... :In n~cent. years th~y'have bee-n j ai'n 'ed by so ... aU~d ca s.ual pLayers whn sp'end I~~ss c tim e,r 'man ey and a,tt,entio n Of~s..i mpler g'am~,5" (j,ft,en pLayed on mobi ~€!,ph on~s (j,r
l

abtefor'such lIser51tt.oo" bu.tthe'y'tend to be Less cOlmlpLex,..The clmss.i'ca l ca.slI,at g'en re iis puzzle 'ga mes-ab stra.d b ra.iin=tea s,ers. su.ch as the venerable letris'-" .or modern titles li ke ~ Dr lKa was hi m a;'s B,ra,'i; III 'Trai ni ng-" ;; Th e inte rn et offers, 'm 0 re po s.:Si~il~ties,,., M,a,ss,iv€,~y mu I~ti player'I' g'am~'s, ,a,re' p myed by hundr@d.sorthousanlrns nf p'eo'pte simulta,ll1eously" aU~'inhabiting' the same virtual.
.N

T'he' 'p!'oh~:ntiaJ ,market is :huge~ T'he

world, hosted on a remote, s'erve'r;;ll~,eiconic ex,a mpll~eis. th e fantasy-th e'm ed uWorld of W'a rera ft'j'~Life ins u ch wo rl~ds go es. 0 n regardLe.s:s ofwiheth,er an individual gameris p iffiyi n g' 0 r rIot~ 0 rI a dfffe'rent nate" sod a l 'g,C1 mes [mix th{~ r.omlm untty feel of soci'al~;.111 etwo rki n g :siite:s 'w1th 'ga 'm e..-pLay rn,echa n~ ics efll(O u ra'gi n '9 fd ends and ~1C:'[~ ua; rmta 111ce,s lIt,op lay tog eth e rib
t

lestalblmshed firms such, as "I'HQ',~,an A:mer~Ican p,ubUsher ,a~nd, dev,e~,()p,er of vid,eo g.£lm,es, and Squar,s lEnix, a JalpanesH:: ,pu'bUsher ,a.n,d d.ev,eiop,er that has a d,edicat,ed, m,obU,e ,dilvmsion,., But m,any :g,ames, for mobile p,ho,n,es are m.ad'e by' :smaU, start=ups, at1ra;cmed by lliow entry' Irosts,., The' b"est,=knO'wn ex,amp],e ~s "'Angry .B~.rds"~;lleie-a.se,d i:n 20,0,'9' by Ro-' via. Mobile, ~ :Fin'nish firm. w'IDthj'ust 55 ,em,ph)y,e,es~ ]t is at Ughm-h,earted a.ffair in, whtch ve,ng,eful p!mayer-contr,olled b,rurds hur~,t'he:ms,el ves ,at fortifications, built 'by ,R goo'upl of ,egg-sn.a.t.'chmg gt,ele~n p'i g:s~ In ...,
:5

billlifuon h,ands'ets were so d, a 31% :r:is,e on 2~)O'9'~ at msa t.tractmng a.1ltte'n 'Th tion, from b il.g;

~ tQI'. m ~l

loads of more than s,o,o:m. (the game is available in a fre e but limited edition as we 11 as in. a. standard, paid-for version), By' contrast, at console game is reckoned to have done well if it sells a couple of million copies,

it· i'S R" m 10, 'g-~the m. 0' _. t. p' onu,S' -'. - JI-I.! '. w", lar games ever made, with total downI'f'! Ull'
J

,'o',f- ale s
,aL

~ e I .',. .:t!,1

I. _._

.. ilf'li _ JJL 1

Is timated del/e~Dp.me.nt Lost~ .$m

Unit sales since launch, ,m :112

10

80

60 ---......~.----

...-

..-.--

.. .. .--

.. .--

..----- ... --.-.-

..--.

20 ~.~._L ..~ __ Games are proving a popular appli'0 _____""IL_JZlj cation for mobile phones; and especially Red for the latest generation of sm.artphones Steel such as Apple's iphone" iPW',C expects the Seu ce: Di g i-(:.m ita I market for such apps to grow from around $.7 billion last year to. $35: billion in 2015" and much of that growth is likely to 'be driven 'by games" They aecounted for more: than half of the 100 mcst popular apps for the: iPho,ne in. zoio and make up a. large chunk of the software market for other brands of smartphone t:DO (s,ee charta).
I

MSaJssiinl's, Strangle= Creed hold Planet tnst

Hale .3

Fantas.y

Fiilil'a.ll

IX

OnLine, orcs Thanks to the spread of high-speed fnternet connections, the web h'''111C'' ersed as- a gam es pl 1Ilal~.III. rm In its IO-W-'O' righ t D. zatfo Dlffi,·aU! ami - ~rd Bnt erta-'~L'nm,o~ nt ~e' 11 l..n. - -~ d ./ 1'1J<']lr~r~lft·, g'.. .. tr .. ~u; 0I':·.nline 1". . of' vv,d; ~ u ~n n ~lu c at 'ZW· .w.:.. 'VVv[Jl' k fantasy' world filled with orcs and dragons, attracts around '9m regular users, each of whom pays a monthly subscription fee of around $.]10' to p]_a,~ As with mobile games, much of' the interest :inonline gaming revolves around attracting a new, more casual kind of player .. Again, the potential market is vast, Companies such as Pop,Cap,~a, Seattle-based g,almes studio, specialise in easy-going games that run in ordinary web, browsers, PopCap's most successful game to date is "Bejeweled", an. abstract puzzle game in, which users have to create patterns 'in a grid of coloured gems, It is easy to pick up but difficult tc master, and. can. be p ayed fOI a few mi.. utes at n a time. In 20'10 sales of the full version, which sells for about $:lO~ pass ed 5-0m, Even more dramatic has been the rise: of social-networking sites as venues fOI video gaming. As wfuth mobile p'ho.n.es~, o:n.e ilt= traction for ,de:velopers is the I}ote'nti,d size, of the audie'nee,., Fa,ice=' 'b'ool~,~ bfu,g,gest; claims ,So,om users each m.onili; most of the, 'who'm, are fairly' ,new to ga:ming. Ga.. .es m,a:ke- up :h"df o.f mhe 40 most popular ,appUca.Uo.ns m o.n lFt1lce'bo,o:k~ Some '(lll1e; simply' ei,e,cttonm,( takes on ex-istm.ng re,a.l'_W~~'lii:r'~,d a. P!}'s"'i,t-:nim,o,e, eUI ,Ph··· iIi"T,b-X::-'~i'l['! H- ,o~dj!,om'.. "" " a. ," Ol'~l{=,or'= ~, p: .l ~ . ,~a 'g~m-.... w_·-:-~,th JL~, .lIl .. ~, 30 m users a month, ;(J,ruSIo.~:o,ma.nia;"" ,a dligil.ta.M , version of siot :ma= chin,e s (th!at can. be- p~ .. aY'E:,d wIDth or with,out re'am money) with s:m d,evoteies. 'The m:ost P",o.pular ,games cJQ'mm,and enc)rm'o:u.s ,atUGS.m'@5' s na r~' o.f top U10 a p p 5 die:n,c)es. ""'CityVHle-~t; an urbanby platform,I' :2:010, 'IDk :pla:rrn.in.,g ,g:a:me an.d the most Free ' Paid. pOlp'ular Fa,cebQI!ok gam,e at the o 10 20 30 ,40 50. 60 :m,ome:nt <though tastes alie fi.ck• ,~ • ',~_. I

I~,

,1~.iIjj,O~·

"~J'

"~'

['

(;oil.

I~I

••

1,1

'I

'

Jil,

','

.':','

J.''I!

ti

I ~,

,i IlL .,'

'iii

'~'!lI

!I(;;

I~

]n U.C~'!·tyV!l··~.o.nn-- instance th ovo are incenttves :1 p' avers to J. .' . ···1 JI1'b' ~ C !,Iul V'l!;;'~ cor ~y'o,;;. ~~ help with th e running of other cities managed by their friends, Unlike traditional console g,ame::sand even many mobile ones, these games do not demand the players full attention but are de= signed to be dipped into in short bursts, And mh.ey are free to plli.ay; at least for users 'who are' prep are d. to do. without frHIs and extras, which are often bought for reed money (see box", next page)" Moreover, the designers are able to collect lots of information on exactly how users are playing the games online and can tweak them to suit' the playe rs' latest whims, ~'¥O'Uspend single. I· . I '.
111j;,.";", ~.
~',L'~ .' .\;;'.
"1(;"

I~

11,,'

1.1

digit millions, WOldt lor six' months, put your game out there, study the telemetry to learn very quickly what people mike and what they don't, and refine the product from there," says, Frank Gib eau, a senior manager at t Ble ctronic Arts, By contrast, a typical console game may cost:$2o:m:~30mto make and take several hundred people and two 'years or more to develop (see chart 2)~ Po,r'all 'hi e promi s e 'of th e new m._y,_ . S' ua ~ga m e s th C-'IO' nore adl., sole-based ones still account for $,2:8 billion of I he industry's glo'hal sales of $58 billion. But the balance is changing, Sa esof console games wUI be flat at best for the foreseeable future, reckons Tim Merel of Digi-bank, an, investment bank that specialises in the games business, whereas mobile and online games will continue to. grow rapidly; keeping the industry's overall growth rate above 8'%, at year, By 2014" reckons Mr Merel, mobile and online ,gaming win Q,ccount-£or h,aID.fthe .in.dustry's revenue;;
_-' '.

'to _"_'_

__'.=J!!, -

,_.

I!J,,=_

,gj,,!!l,

...

_j

.f.'" ~ '11,..I0Il.'-"

"Ci

. '~'

,Di, .'1/;.. .

'..

..

"UF.lI!,w,
1

,I1i.·· ,'!(;'.LJ,

,;:]

. I!...,

U!Wi

~,I['!

(ill;:]

,0 11,;;;;.

JIl - ,

~;I~·--~·"
-....;....;._

~":1j _._

Je)". aUr,acts 51tl1 us'ers ,a. m,onm:h~

_.

-- --- ----

Microsoft iPad

Its San F!ran,cis.co -,'based d,e"veloper, Zyng,a" spe cm..atMises. in SO~

c.ial='fl etworlcing gam.es", Set u,p

20"07,,

in

it now h.as l~,OIOO em= :ploY'ees and rleVlf:nues of anJund

~8·~"o-:,m , ~'" . ;Jl .. '
='= -

~~okia Palm
Sou rce: Di 9 -Ca pital

, ,.

O ne rea so:n, W _:.1 y tL_ese h -'h ,ga:mes are so suec€' ssfum. :is m:h,at the:y help pe'ople do something th,€'y ar,e alr-eady l{e,€n on: keepI! - '. '1 ~ne ~ngup e 1 -' I . , . W··, ~"ththe'I"r fr:!: nds on~Il'I' ,--,.~ •:' . .. ,.

"Ji

~7\O·"3L~ ,J' \r. OIl.~!'

-111 i

JIl, .. ,

','.-' •

.."",w,'.

'"

Un'pa,cked A, :new generl1t~,on .of conso].es~" offering better graphfu,cs atnd n· ~,-- - W JIl~; go ]1.0 . ,,,'~t Y!IG'lJ, ., -- ~htO'nl ~Ir W· ~, m 0 r 'I'n' 'to'..... cJo'nl'nl r ~~JIJ,~y" ,-- 1:'1IIlli .'.o' 'n'l ~u~~ 'f't"loml n' , Nint.endo r,el!eases ~~h,e ii U', th.e sUicces,so.r to mts popular wn W m(;u::'h~.ne..Microsoft and, Sony are expec~l~:dt,o. '£oliow suitt in 2.01), or '2014 with sequels i,O the:ir m,8l,ch'ines", :8'ut g,o:mIf: an,aID.ysts now w'Onde.r wheth,er ,de:,dica~'e,d ,games ,con801es lh,av'e m.u,ch, of at lo:ng-term future4 Micha,eI Pachter of 'Wedblu:~ihSecurities reckons tha.t:th,e coming g,ener.aHon of ,consoI,es c.o·uld 'be, th.e la.st Fot aU. b,utthe most,dlf'voted,users paying·S.JOO for a ,d'e:dicat,!e:d ma.chine th,at taJees 'up spa c.e ]tn. th'e living roo,:m. m.aIDlJeslittle: sens'e w'hen~ for at little more; you, ,can.'b'uy ,at sm,artph.on,e or a ta.blet :p c tha.t has plenty of om'h,eruses as welL 'Th,fJindustry rk,es to boast that ~t:h,as b"ecome a bit liltle Hollywood,~ s.a.ys Rod 'Cous.eins,~th,e 'boss of 'Cod,em,as.ters,~ a. 'mid-'sized. Britis.h ,gam,es d,ev,elop"er ..But ,at least: th,e:big Hollywood. studios spr,e.ad, th.e~r risle cU;fO,SS, at: ill,east t,e:n fil:m.s .a 'y'e,ar" 'w"hereas. games d:e-ve~opiler.s te:n,d to w,onrkon. D,nle at a, ti.me~ T'hffi.s is now an. lexp,en'~' sive" rislry' a.n,d 'hit=drive:n 'business, so th:e devemop,ers hav'e 'be'= co:m.e d,ee:p,~y {:onservatfuve~preferr~.ng to bumId on :past sUiccesses rathe:l" th.an try som.e-·fhilng n:e-w~Everyone of the 'h!D 'bestselli1ing' cons,ole garn.es in, America last year w,as ~ se'quel or a d,e,vel0,pment of a:n. ex.is~ing franchise" 'Th,e co:nsole-makers ar,e well a.ware of this" Nint€rndo :h.elp,ed to piOll€N::r the idea that ,games oould appetd to. a 'muCh ••'
.. ' -OI '~' -~J., . ;O~ ~l~,
.'., ..

to ,Ii"'~ ~''IboI~]V

,I['!~,

,L'.

,.

at_'

-::-:',0

VInEO

G,AMES

./. widaer auruence. ],t,S' W,-,,-":"i consoie •,as sold "."9m nnm. s over, 't-h" h"llif-' udi -,' -', WI '''.',1 \ ,"'---,' 1"h SO!Jl '8-"''-'-' I' "",tie •a decade since its launch, outdoing both Sony's Pla.yStatio:n 3 (S,6m) and Microsoft's Xbox 3,60' (:58m)~largely thanks to a games catalogue ,aimed at casual fans, It feature s title s like ,~.~ Fi t" (8, fit= W:iil ness game) and uWii Sports", a version of sports like golf, tennis and ten-pin bowling, 'The Xbox, P'lliaySt.atilon3, an,d wn all have their own online shops that allow consumers to download games directlytotheir consoles, and an three are encouraging developers to make casual games for them, M-r Merel thinks the console business win remain a smaller though mostly profitab 1e niche within a. games indusuy that wHI range over a wide vari1:'-,
-'--c' ,-

ety of platforms and attract a much 'more mainstream audience, Categor ~ S such as ,~" e casual" or "online ;,'games erie not ,81- - --t -- d 11 -'11-- --'1- - - -, - - --- - '.- -d - - - -'1·· al -I· -. '.ways- nea ann t d ~ N' 0- t a on me- games- are aimec a tI .casua U;S:=' e,rs,~ "Minecraft", developed by Mojang, a, tiny Swedish 'firm" is an online adventure gume that mixes the building qualitie s of Lego 'with the social appeal of ~'wolrmd, of War,craft);~Despite its baste graphics and intrica te garneplay it has s 0ld over 4m copie s~Conversely some recent smartphone games have, almost ecnsolequality graphics and involving storylines, Development costs axe a.Ire a.dy tickin g up",The only safe bet about the future 'is that it will be more fragmented and more diverse than the past
.. ',' . ··1 " ... .., ..... . ...' ..... .. .... . . . . ... . 'I I' ...

, n - AV I, I!...L . IU'::;::I' .' Il.IIi Ul CA"'S":UIAlI.. G,-A",M,'-,:. ES"", M··,A, m "attract huoe.al'III,41~'~
e ..

en ees, but it 1i:5 harder to eo nvert tbose hand s reachi ng fa r wa llets, Pi'ers. Ha rdi n gR,olls at Sere en Diges,t rec ko rm that. t h 'e 57 m s II" ~A .. or so game consotes tn use m , .menca qenerate about $ 7..5 billion of rever!ue , each year~but the 109m pl~yers. otcasual online 'ga'mes producejust $2-50m ..
C:asu.a.l-g,ame' firms aretestinq a varii!eW'o.-fwaysto make more rnoneyfrorn th ei r users, fro m strai g' htforwa rd di g~ta.l mi U~i n s of ey-eba Us sta ri n9 at screen s 'i1 nto 0

promising model.comes from East.Asia, g-aITr~ s's spi ritua I~he m e ~w h ere ii nter net In .' 11' II d" ijC'C€SS liS \VI"'d €!lY' dival ~ ~- ~b le' a nl!~_, p~racy '1.' ~. I, 1:5 fa m pa rrt. :It invo Lves 'giVii n 19 use rs f'n~!e'
a,(c€!ss to
(J,1n

s.ales to s ubscri pti a ns and a dve rtisi n g'..0 n e

minority of dedicated p Layers wan ts to show off to others on line, s,ays.INlffick lovell of bs' ne'l -" Ga'me$,~bri ~.-a ga'me.5--' b usiaesswebsite. "You, rn a Ike 800/0, of yo,ur rev€! n u e fro m 2 ~/cn, of I,,,,,, -n.. _your - p'ldyer - b ,a se .,/'119'€ao~_.s~ A-' '-EW 0.-f-t~iiI::!m . ! ..J d .',' f vii Ll s h e U .-0 ut €!y~,wat.erirm'garne u n ts of rneney, In Dark Orbit! a browser-based 5 pace adventure fro m IB,i ' poi nt, a German g online-qame studio, customers can buy a 10th d ro n en· to beef u IPth ei r s pa.ces hi p fo r a ro und €l..,OOO .., BigPo'llnt hi as sold mo re than 2,000 ofthem this year, This, sort of tra de aHows pl~ye rs to
I

compensation for loss ofvaluable properw'? A'fter a ll, som e p layers h ave a ccu m u lated wealth worth thousands ofdollars in these
U

ga mes, says E~a lfur Gu dm'u ndsson chl' ef

I{f.

I.' -

II,.

economist at Iceland's
In 2010 Sou th

['ep Garnes, which L .' ma kes t i III~S(]-'fi' tra·di n g' ga 1m' e EVE 0- num," me,", I - ...1 ••
KjQ rea's

,!~

theml foraUsorts of extras;,. One 'W,estern !exam ple ~si1he' Lord of th e Ri Il 9 sOn I~ien W h~ch a L~ows p laylers to III live 1i n a ITII onli n 'e 'Versi 0 n of J ,~ R.. 10 lkffie n "s R.~ fantas,y'worl~d~ When the ga'me was,re~ Leased in 2007', pllayers had to buyth,e g'amefor $40 arid tl~en pay a .subscription for e,ac:h month ffi:he·y p,laye d,.,La.st :ye,a r -b"' - - . III~ _. -' - _ - ~-' -' J- r" 1me'" tll..-€ 9'a Iml"'~s. d €!V@l,O per.s~, m tOve ..!II t,0, lill l!Il a 1n(d:W ch dJ rgffiIn 9 ItillO del iI'm 'which th e 'g,a, e m
l-'
c' ---" _.

line g-anles but then char'ging

wo rk 0 ut a rea l-wor ld va lue fo r th ei r in game items (and makes it possible for eco 111 0 misits to c:alc u. Late th e G D·P of vi rtu.a l. d · .'~lt€.ms Ld ~.ome iP In...y€!r.s S€III_'~eSlra_b L ,wor_" ...5 )..'.' S' ·· t.-o oth e r p Lay'ers fo r r-ea I~ s.h~,~J.Pra co I('e lea chrorli',cled by Ju lia n I!Jtibbell in his 200,6
=

be converted freel~yinto real-world money, provided lit was gene rated 'j'ma ga me of ski U rather thaa won in a qarne of chance" It ~s only a mlatte r of tii me, says Roxa nne Chri st, a -'. ... ...rns, .• e I . ,--- I I la vvyer a t· L a't-h"ams &' W atkir ,b f-'ore.W'es ,toern - - I . .,.."... courts wiLL,be faced mth the, same questions,
1., ..•. ,

ru ted. th at, a 9~dIn s 11 the wis hes of th € ga mes corn pa nies, players' virtua ~cash could 'i n deed

h ffig hest. co u rt

., ,

,"-I

-'1

' •. "

,-

-'.',

'.

,-

'

,.',

,"-

._ ['

,'.

.',

-,

-_ . '.

b 0, k
..• 0' '_

-'1 j;

1[!I'la\J M· Iu ~II -) r _ . .no in el!lf j

, ____ _ _ __ __. ' •.. __~

1"n wh1" rh he'" ea'rln ed_J.i ~ IIII n

from, the g'am.-etrip,~~d. :In "~FarmViUe", Z:!lng(j,"s. w1Ld~ pop= u. La r Fa ce.bo 0 Ik=ba:s,ed 'fa rm'~n 9 5~m u lata Fr 'P laY'~rs ca n I~ar n vow ns to sp emd () In '(TO P Sj li'vesto,dk 0 r fa rm eqlui p ml€nt b.Y'P ~,yilr19 th,e g'amie" orthey can hu.ythem with r1eal ca,sh .., L ',' 'k' SUC~IIt"Ja.nsa, ' oms mace up til... '.' ,IUUK111. He b ~.., ·'f 0
cti' .' , ',' . -

wa.s made ava,i'la b ~e'for n otlhin '91 but playe'rs could spend r sal-wor[d mloney on ~urfui ne Points" ~a sort of.electronic clI,rrency with which to buy ite'msthat mak,ethe player 'mon'~'powerru,t Turbine .says its revenue
i

lito $3,00.0 a 'month tradin'Q in virtual·goods .. Such reseUjn'g1 is g'e'neraUy forbidden by the 'ga mes co-mp'alfIie's~,hough there, a re e.xt,ep'~ t tiions~ ffincLudi ng' J'j'Second l~feij',a vi rtua.l w'o rLd nJ 111 by th 'e Am e'ri'ca 111 fl rml Li nd e n La b,~ e, ut th e p La.yers the m se Lves treat th e'l'r virtua I~ d s. as if t,h ey wen~~ I~ ca n 9'00 rea and b €co m ,€! extn~m'ely possessivE!' .-a,bou.t tj~elml~, In 2.0.05 a Chi' n ese'IP,laye rr aiu Ch ien Igwei kiUed a feU~ow-p[ayerofJrrhe Leg'end of,Mir 3 fo r s.elL~n 91(0 rI e Bay) a ra r,e 'vi rtua l 'S'W'O rd that M.rQ~u had ~ent h1Iml .., Heis now serving a lffife,sen ten ce" ,AUthi s. rai ses s.om ,e 'jintrji g u.i ng q u,es.~, t1io IIIs fo r gave rm ents,~, 0 U I~ll'vi rtua L1l1ieoml e Sh be reported to th,e reaL..-,world tax:man?'
If flf

I' .'.

g' Z\,~na
~ .: ."::.:..-

'1n""g'ame adva ntalge,,, '~Vanity items"~ :slj],cih as a ne;w des.ig n fo r the el,ectro ni c ho ml,este'ad arejust niceto h~;lve. Spending real money 0'11 vi rtua ~Luxu r~es may see m od Ii b 1Jt. a
f

lli"e'lt·oiIe es Nat a U~i rtua lgoods offer p,laIye'rs a III v

i'if: III", . 'V"I.' AInU .... : :~ I I,ll
'I:

Chin,a thin ks so, in IPrindp ~eat lea.:St:: lit ha.s :S,C),; d it. 'W'g In is to tax its vi rtu a l~goods m a rke-t, thought to be worth around $1..5 billion a , year" although howt~,e tax would work is not ,cleaf4 Tlh,e So~th Korea.n authoriti,es halve rul~edthattradimg' in virtualg'Oods s h 0 u ld be slu.bject to a,10'%) sa Les tax.~ Am e ri ~ ca is 1111 ter na lReve n u e Servfce ffi s. 'wre.stLi n ,g with the .same. problem ..And if a !games com p a ny goes blus t", ,[a 11 its p L.ay,et'S cLalm

E",'spo'rts

·····..··'··~· .. co
I, .1 ... _ .'

..en... l

for more than a decade, Good players there can make a. reasonable living from salaries, sponsorship and prizl€ money, and the ~- ~es - - -- - --d --d - . - - - - rs -t very b -ill can earn- h unc re S o f thI ousan--d - 0-f"I, d o ars a year, 'y;"-el., although MI.G and similar organisations have been hosting tour= naments for 'years, professional gaming has been slower- to catch on in the We st. After the release of' '''StarCraJt 2',\ that seems to be changing Each of ,Mol,'G~S events this year has set new viewing records, Be= sides the 15:;00,,0 who attended in person, the online live-audi" : :"" '.,' -: '.' -" ":' ,. .r '.' . --.. ,-

I .'

"I'

'

,.',

II . - '.:.- ..

I'

r'

.'

.I

I"

'1- ill- '-:. '.-- - . -:. --

'.'

.-'"

--

'-",-"

'

__ ·-\-·,·-,' '--'-,-. ~ eJll - 8Hen, e:'-_ young ~,a.yer people int63 countries .. ,., ]N"--'O-I'-N-"E- C'"-Q""-R"'-N'--E-R" was G'.'.- '[e'g Pields .·.$~a tal .. ted vc ,- p ~II'-' .... " ....-""'Ii" ... -::;.... ': -1'1"1' ~," ..... ;'c_:_"MLG '.IS on Iy one , 0.;f a numt ber 0 ffiirms 0,ffen -, enng sue h con 'whose psychological demons had so far stopped him from " . ~I·'-'·,-. - .-- --~-,-: ., .mm ];0- - ,--,-: -- . ,- . 'ld rea.d:Sln.:g h-" ,~U. p,o~,e'nda,.,1 I' n theo .-t-b''er w,a.s L' .. - '\7'. H' ,w,a.n" an 0,'. .'IS .r., 1'1-. *, .. - ~;' tests, They range from week y on me-only events that payout' $1L0'0 aillill the way 'up to glitzy affairs mikethe Global StarCraft master with a string of titles and, championship S", still a ferocious com p-~etitor but on whose glory days w· -'. ere probab ~'y:. over 1'VU, ~~,... league", a South Kor-ean tournament that 'pays out 145m won .1_"'11;,. 'f'"re1d s h .at dl a Irea.': y ra C CE-'_ up a 3 0 Ieac i th rerr h estt o· seven s'e dId dm ir t f ($,127~O;OI'O) every couple of' months, I:G'N; at gaming website , , _ --. ' -t - . - -.. - - t - " --"..'n '. nes"- b. UI over - th e ,nex t. .30 mIn,U,I.,es M r-L' -- PU,I~on at. d az,zl]lng.-d IlS 1m - - - 0-W,,·.- ~d-- b':Y' 'N" ew,co ·C···· orporati on runs thllg, G" N'. Pro L' easu -lof.JI w"" h ich I play of cal culated ri sk-taking and exquisite control and won the next game, then another an d aneth er, 1evellmg th e series sponsorship Q,nd'prize money, Q'nd the can earn at three games apiece. The game being played was "StarQ year Craft 2'; ~astra tegy game designe d 'by BUzzard Entertainment, an Ameri can develoffers $30,00iiO toOits champion, Sweden plays host: t,o Dreamoper, featuring three clashing science-fiction armies, The hack, a twice-yearly games 'party with at prize pool of 40;'Oj'O';O;O matches were part of a three-day tournament run ID.n Orlando, Florida, by Major League Gaming (MLG)t an American firm that kroner ($,5'7,10'00)" The: best players can make serious money (see table 3,; next page), but Shawn Simo n, an American ("St,a,rCraft 2" organises "e-sports" events around the country Be-sidles "Starprofessional, reckons that, even outside that. elite, "StarCraft 2" 'Craft 2"~,players can compete for thousands of dollars of prize money in, "Halo; Reach", a, sci-fi shooter, or "Cal] of Duty: Modalone probably provides a H,ving for about 1,00 players world'. ... 1.lJ&· ,,~ , ., ... wide. "I've been continually shocked by how' fast it"s grown;" ern wanare 2 ; a war game. says Dustin Browder, th e game 's chief des igner, The idea of staging video-game tournaments for money Sundance ,diGiovannm" M]LG~Sfounder and chief executive, has been around for a whi 'e"]n 1997 Dennis Pong, an American gamier" won, ,3. F,errari with 'his brilliant playing of "Quake", an concedes that many people still think playing video games for early first-person shooter, Since then professional players have moneyis a. strange idea, Like any' sport" video games have a. culture th,at can b ,e h afflin:g'to v'utsi ders,., R.ath,er Uk,e p rofe ss:ion,at~, also done well 'with other games+such as "Counterstrike", anothe'f sh,ootier~, or "Warcraft 3"\' a stra.tegy ,game" The, p,rle,d,ece'ssor Wl1e:stmeIS, garners h~:n,dto pl~ay'un,d'e:r ,psleu!donyms, so Messrs Fie~,ds~ an,d Simon ,are ,known, to their f~rns,as "'IdrA"', "'B,ox:,er'" ~., [m,m gam,le of "'Sta.['Cra.ft 2'" has been, on !cable t,elevision in S-Ollth,I{ore,at
,'. ._ '-,__ .. ' -' t, _'.-._'~

ence

fOI

the, Orlando tournament p eake d a,t more than

~~-I.'

181;0,0,0
'-,':--

I·..

'.,

~'I':(~I"I

11_ .'

",,"c

"

1_

1!.;.,I~lII.IL_
._c· ,-;

,~

c'

I~,_,

,g, 'lI.;,.,

"

~,'C'

.: _.,

'/'

'.!I;;..

_',

_c

'iI;iIl

_.!II.c

"",",JI!..,

-,

-I :--

--

,-;

.--

',-;-

-.-

.',

'.

'-;-,","

'1'-''-'-

'1"

,-

,-;

:.~

-.

-' .. ,-:

'-1

. --....

.._.

", -- -:-' ~"-" .. ' ,I

_---:--

,.'.

'.-.C·

-:"'.

1'-

-:"

'

"':

,_

-,

.I

.,

',,'

--,

.'

'.

I'

__ ':c,-

,-

-'

." -

- -'I!

: I "1.--

s:

+-

':'.:

I.~

.......,

. 'C;-,

.' _

"

!!;;;,.::Ii

'.'

..

ill

". ,.

'_'"

ILAJ..

,',.

Ib: '1If .lit· -, '

J[ ,

',.

~ -'!G'

~-

,..;'"

,'

Good players can make a reasonable living from salaries, very best hundreds of thousands of dollars

VInEO

G,AMES

IPla'y and be paid.

Top
£1.

and "Sheth", Some critics are bothered 'by the absence of

, 10 1; V• Lence amd a ddl'd 10n

i '

Sta,rCradft 2H players

Wirmliings,

:.:,
:.':

waxing as a big new game is re'~ ,".' 'd ,,-, tnen :,' " " "-' - "i ' ,~ease"-,, anrd' the . wanmg.', agam; and ~.t:IDS defm ite 1y for th e- (0,gnoscenti, Yet the overall trend ".'" Choi rO,lttl is strongly upwards, One reaSecmg Hun son, says Sean P'I ott', a Star: -;. Lee ltMarineK~n,g~ 1.05, Craft" player turned commenJlung IHOCHfi tator, is, gene rational: vi deo :.: K.im Fr!lJln:= 1.02 games are 'becoming more Dealer" Won ,GI]' mainstream as the: people who :.:' Mun ~MMA~ Seo og-Won grew up playing' them for fun ·1.,' Ll'GiE IJ.I'M-iii 16 turn into adults with the dis= Ho ,JOOIll posable Income h) spend on Hyes "Step hano" 73, watching 'the pros, Satouri Technology' has made ir easier to build tightly knit fan communities ..Web,~gaming se:f"=' vices such as Microsoft's Xbox Live or Blizzard's Battle.net offer skilled amateurs a chance to play' against professionals, which would be, unthinkable in, sa~, professional football or basketball. Thanks to video-streaming sites like justin.rv, players can broadcast their practice sessions online and chat with fans in real time, and enthusiastic amateurs "I'! tournaments -',-'-1;' rgamse-, d In tnen '1" Ing rooms .. . ~ hei'I'" ,_IV;1 ". -""'1'" ,- " can, t-e 1evise - ',I- 11'1 0 Game de signers can h elp, too" "StarCf,aft '2;; was con ceived from the smart to offer a good experience for spectators, says. M'r Browder, It may be hard for new viewers to appreciate the players.' skin, at least 'until they try' it themselves, but the game is meantto be appealingto 'eve ryon e. So.for newcomers who have 'Y'let to master the finer points "we can offer the 'visual spe ctacle of alien races battling toO' the death for your own amusement,"
-I' .~-

JlaJ~ ['J'ulk

Urn nlNesTea

fJ

~-

$!~OOO

physical exertion, 'but: that never held back chess. E'sports can be a boom-

and-bust business, says

Mr dru.,=,

221
227
'11'-,

Giovanni, with fans' interest

J1eong j~Mvp'!f Jiang lFI.yeo n 1·_··

•• '.'_.

I'"

'I-U'"

'The moral panic about video la.mes is s,ub',sidi'ng

IN THE lATE moming of Apnlzoth 199'9 it Pair of tee nage rs, Dylan KI eb 01d and Ed c Harris, walked into the cafe re ria at Columbine High School ID'n olorado and began gunning down C their classmates, The two, senior-year students killedtj people in a 4,5-minute rampage before turning their weapons on. themselves ,;'Tilemass acre remains the deadlie st high-s choo] shooting in American history, In. the days after the killings it emerged that, besides enjoying violent movies, the two liked playing "Doorn", a gory video game from the mid-issos in which the heavily armed players 'use shotguns and rocket launchers to dispose of legions of zombi es an d demons, Pare nts, politicians and psychia msts fretted. that exposure to virtual violence had prepared the ground for the real-world killings, 'Two,years mater the parents of some of the victims sued dozens of gaming companies, including id Software, the d evel opers of U':DooO m", alleging that their products had contributed to the murders, The massacre fed long-standing worries about video games, particularly in America, the industry's biggest national market, Governments from California to Switzerland have trilled to b,a:nthe sale of violent games to children, and most countries have an age-rating system similar to that for fiJm.s., However) since gaming has become more mainstream, the proporti on. of violent games. 'has fallen ..According ~o vgchartz, a website that tracks games sales, the. ten bestselling console gamesof 2QlQ, includedjust three violent shooters. The rest were inoffensive sports an d fitness titles, a Super Mario pl atformjumping game and a Pokernon product, a cartoony franchise of games based on a Iapanese TV' senes for children, Many games that do feature violence se-rve up a slapstick version, The sort of gruesomely realistic killings found in, serious war films are rare, Still, many games require the player to dispose of great numbers of Nazis, gangsters, aliens and other bald guys, A few games serve up styl lsed violence for i.tsown sake, And mhe critics say' there is. a. crucial difference between films, plays or books,~ ,th p-,ll 0Y' '0 ''F,g il'U-" - S-'~'PI'.Jii~ S-J~iV': ,g In'nl-I - 0-- 0- 'ke '@'n--:d:-v:l" d:',g,o-", O'a~ m,e W'h' wher,e: they are .active ,parti,eipa:n.ts in the sim.'ulated slaymngs", That; the argum:en.t go'es; m.akes it moOre li[{e~.y t'hat t'h.ey 'willli re:= s,ort t:.o, vioille'n,ce fun(h,e-r,eaill wor],d,; too",
'",,","11..-

'Ii _.,j

'11101 ,1110.
.. ... __ _ _ ..

_-I_

.. ~-

... ._.. _ __ .. _..... _ ._ .. ._._ _ __

'U

II

III

II

I"

I'

'I,

t,

I ....£~~. Ii

iI

__'_'11_.~._._

............ _'_Ia.-c.

... _'I~ __ ..•. I'__'"

_.

,-'

'I

",

I-I'

WiUlni'ng st:realk Other developers are piling in., R:iot Garnes is pushing "League of Legends", a free-to-play fantasy team gam,€!; played online: by around am people every day that often, attracts more viewers than StarCraft :2 to its professional matches, .. For the game's, seco'nd, s.e,ason of ,competitiv'e: 'play' the co:mp,any is o ffe:r'=' i.n,g a ,$s,m p,rize pool. Valve" B,n.other b'mg pc d1evelope,:r; is :hop,],n.,g to DIe,ati( in 'with ""D',efe:nce of the A<n'ci.,e:nts :2", a direct :riv,a,J to i'League: of lje:gends~t,;:in Au,g:ust' this ye.ar it 'hosted a to,ur.na.ment rOT an early v'ersion of' ~:h.e game 'with a first prize of $,ll11_,., Th:e buzz aroun,d, th.ese games is h'elp~n"gto attra.ct intere'st from spo.nsors~ Big: 'brands sUtch as 'C,oca-'Coilla; 'Red B:un, Sa,ms;un,g and ]ntel have ,all s.po:nslored. tourna:m,ents :recently ..T,h,e'y see thIs as. a go,o,d way of' ,getming exp1os.ure' to a so'ugh~-,afler but h,ard-t.o-· re,a_,ch group, of p,!€o,ple:::m.aJes mn thl~ir late te'lens a.n,d ea.r].y 2'OS" w'ho, make up, t'h,e b:ulk.of th'E: au,dien,ce~And, m:any of the fans are 'U--I'n---'U--IS-JUa]- 'Jy' 'd- e- d- iC'-a- tg,-d- ,-0'" -no-",£" tho-" w' -, 'ho- gl't*",Q'n-'- ,dlgd-' M· L'~"L' 0·'..:.II!. 1,Ul,doevent h.a;d c.'om.le allilli w,ay from 'Cali~ornia,~ Another h,ad. thebet a tatt.oo o:n th.e o'u.tcome oOf one m.atch., A.n,d when it f,merged, that the K(lrea,n, smcu'"'Craft ,pIa. Lee: Jung-Ho on (a~k.a.~ "~Ma.rin.eK.ing~~)~ favo,urime:wUh th,e :fRns~w'o'uld noOm b"e a.ble to ,g:,em to Or-a 1l1D,do; ,at don,a.tion driv,e raise·dl th,e $,3·;500 :needed tal fly him m'he:re for the, weeke'n.d;; And, Mr Lim? Alas~ his com,eb,a.,ck was not to 'be~Mr Fields h!€~.d n:erv,e and" ~o~h,ecrowd;s, iche,e:rs~too.}{ mhe 'fin,a~. hIs gam,e'~ .'
-_ -_: ,., ,-. ,.--, JII.'.-,., 1Ib·.iI .. '

ICor-lei, '

.,

IIi3i
.....

I_J!.<I!;<I.,_',

,gr-s-I;,.-

c_

1tLl.I;,.-Jl".

,I~

,_iI;,il':;"~.II!'

.....

IV,

1 ,',

.',:-

r'.p

.;Ii",

iI;,iII.:

"

,:,I;,.-,~:

iIj:Ji S-J
"'"'~'"

Q 1Ib·.II1

I .. ,c-Ig, .g~,

,I

...

'Dl.

IlL!;;;

'1;;;-

..

-''-,;l!i'

03'

'Iii"=

Ill'" .Ie .. dIt . s ali 10 th- 'mllll'n'. But th,e ,ev:tden,ce is haI,d to pin dow:n~ V~,oi,enm ,cr~me: ID'n, ,Amerlca.~ B;ri tarun, ,an d J a.p,an~ the thre,e bigge·st vru.deo ..game m,ar-' kets, :h.as dro'Pl}ed 'ov'€r the past ,decatde at th!€ sa.m'e time ,atS sales of vicleo ga.'mes have :so,ared. I(s,e,e c.harm 4~n,e.xt lP,age)"That dOt~S, not~ b,y its,e~f~·exoflJerate the industrY'~ilfter allli"'witho'ut gam,es violent (:rim,e might h,B[v'efallen sHU further., And, slev'era~. studies purpo:rt to show th.att playin,g: vjolen.t 'vid'E:ogam.es Iatis1es aggres= silon illevels~, 'Chris Ferg'uson, a psycholo,gist ,at Texas A,&'M ]n= ,But tern.atio:n.aJ. Un:ive'fsity" :poin.ts out th,at much. of t'h:is 'wor:k is .of poor q'u.aht~ 'n a. ,meta=analli.ysis published. in. 20.0.7; he· found no evmde~n,c,et'ham galm,es :m,a. ie th eir pia yers v~,oill,en ~[nde,ed,~, after ,ded t ca.dle s (rf re sle.arCh,; he h.as c,onclu;ded that: vi ole:nlce ~n a.ny me,dlia. h.as littl!e or :no effeict o:n t:helr co,nsumers~ A, -review c,ommissio:ne d. by th e ,Australi.afl attorn,ey-gen,era~, p,u,blis;hed last y,ear~ .,.,
L'

It1i,! Econoni1i:st [h!ce mber loth ,2.011

'backed this up,

Violent crimes,

Toy' soldiers Warfare seems an obvi .ous application for games technology., "Steel Beasts", a tan r-warfare simu ation game deve oped by Cahfomia-based ,eSim. Games, is reportedly being used b,~r several Western armies, The Canadian, British .an.d Australian armed forces have experimented 'with training their soldiers on "Virtual Battle Spa ce 2" " tweaked version of UA:__ rm '2;",. m-ili. .I~t iI;,iIl.i1 tary wargame develop ed by Bohemia Interactive, a Czech games firm ..Players make on the role of an individual soldier al ongsi de Alterna,tive uses dozens of other human allies or opponents ..They can issue com= mands to computer-controlled squadmates, fire virtualversions of a variety' of weapons used by armies aroun.d, the ·w'orTh.d ~nd. Idrive tanks and .arm,oured veWcille~s,..all :in .an ,en.viJttlo:n·mlent .of hundJeds of squ.81re ki ,om,etres ~'h,att ,aJt',ernates betw',e,en day andl 'nigbt an,d .of£e:'fsweath!er ef£ecms. sU.ch as fog Blnd rain,.. A'rmles ha.v·e·mO'ng: 'used ma.chin,es to. simu]at.e exp,e'nsi've bits . .of kit s:ucl1 ·a,s.let fighters . .o'r tatnlts" says Pete:r M.o;rIlson" who, Whit video-,gam,e t,echno,1lo'gy' ca.n do, in the' ream; w'orld 'runs t'h,f:part of Bohemia In.ter·ac~iv·ehaJ fo,cus.es on th.e .mUitary· t A DEC·.AD!E AGO' thle c.'omp·ute:r in.d.u:stry·was abuzz wi~h market B'ut simulating' th'e ex.perienc'ie: of individual s,o~die:ts :is somem'h:ing nlew~ ICost apart~. hms produ1cms of£e:r other a.dvanta,ges talk ab ou t "'virtual n~:ality""tham woumd. allow the Iconstrucover fhe rea] worllid.,,]f a (:omm,and.e-r wa:n.ts his troops to p,ra'ctise' t~.on of convinlcitng digita.l fa·esimile s of th e re aJ.wormdL As it turns infantry oo:m:b,a:t in th,e fog" he does not :h.ave to. wa.it f()lI' m:he· out~ th.e gam.es industry ha.s ·come .quite cmo.se to deHv,ermng this,., ,Mode:rn gam,es us'e ,chea,p h~rdwa-re a!nd $,ofmware- to ·cr,eate ~'hre-e-' w,ea.t·her to oblige; :he ,can, co:njure it 'u,p o'n,his comput,er. dim,ensJonal w'orlds with ,con'vin,cin:g textur,es .and 'ighting~ obS a.~·i€illli.mej,m,ag:es. an d :ge o:graphtcal d.a.ta. can be fe d into the soft w.are to ge:n,e'rat,e virtu:aJ rep:resent.ati ons..of [,eal places, ..al1.o,wjelcms that obley reBlm-'wor~,d maws of p'hysics a.n,d Ih4eaHst~lcso;u·ndls .. in.g soldilE:ts to reh.e.arse sp"e,e:ific mfussions~ H'Mt':s 'quit,e milteilly that Such. wo:rlds ·are c.onsttu:cte d. mostly to' amlliow' playe:rs to' -r.ace fandle ~Amer.iciln s.pl,eci.a~.forces] te.a.m m'h.at killed Os,ama b:in Lad.e:n tasy' cats ·across th.em ,or d.efend. ~he:mfrom inva.ding am~e'n~~s... But w'ould hav'tl~:ehea.rsed lh.e :r.aid lin s.ome sort of virtua.ill e'nvuo,n= r they ,Bt~.sohav·e m ate pr.ac~fu;(:a]'uses" . B~ t · ~Il;: • rw.v- 'mle~nt:~;;'s,ays som,eo,:ne famUiat with the mUilary·-trafu·ning busi'. C d e'mas,e:ts IlS·a-rliS.: h d .ev·lf 1t.. _·o,~ ope:f' th-Ia- t sp'e{aatllSes, In.:d" ing'games~ in·c~udjn.ga, Fo:rmula One· racitng sim·ulatoI ..Its fans ·d!e~' ness ..And, sin:ce: eV',e:Iything thle soldiers do is Ie·co:rdled b!y th'eir computeIs, ,data u,om the mission ·c,anb,e .analysed afterw,ards~ :man,d a. faithful recreati.o,n.of the experienoe says Rod Cousens,. :its. ,chi.e f e-:xec:utive. 'The :firm'~s sofmwa,re can smmulliate :r,eal-w,o rllid There ,~re loms of (lther possibHitiles~ In 2002: th.e- Un~.ted. States ,ar.m'.y re 1e.a.s·e.d Ame:ri-c.a "s Ar.my';' , ,a,ga.m,e b,ased Ion a c,om- ... cars m.n a~·mo:s.t,ev'eIY detaU.", ,and, mh e circuru.ts 'wm.mh'in th,e ga.·m.e are
.. . . .'. .. I

ogist, wrote a bestselling 8 - -.- ..~.- ..-...~.- ..--.- ..-.-" 2'4book, "~fjlgrim :in. the Micro7· 21 world", in which he de= 6 18 scribed his obsession with a, .. "15 5 game caned, "Breakout" ~ It 4 12 consists .of the player bounc3 9 2"6 :ing at ball off a paddle to de1 stroy a col ecnon of bricks on -0 0----the ~~rb6 :. "'lIi"'h+r1ff-- 0116" .',.'._- . _ ~e' of '.'~ screen .IlL .. 1'-I~y second .1,1 09 199.5 05 play . an I I'm on a whole new plane of being, ..all synapses wailing," he wrote, That sensation of losing track of time will be familiar to. most garners, Again, critics point to the interactive nature of video games, which allows their designers to tweak. risks and rewards to :make them irresi_'~; _'.!A:,~~,_J. 'SO om e countri es in d"udmg Ch ma tll~. ,u...:_,. 1~"':~IIl..:=J I~': stible "-: .. ' li~='~ I!!~'.' =. and South Korea, are attempting: to. hmit the number of hOUIS that 'youngsters can play online games, Even games developers themselves have ~,A __.~' expressed r'O"n' (\O'm" '~Ib' o··u· onlm. 0 ~.=<ru,'.JJ.~;·· ..that JIl~, ~..'.' .) n'. ~ ·g-"'1In1iI.oS rely '0' : keeping players hooked, ..But there illsno suggestion that: games are ' - ~ I .1 - h -~-_ ..a. dd ~ ..1ve in thIe s e.nse ~'h t' . th ey creal t.e. pysu;a ill d e p. e.n.dl en.ce In _,Ie ti . a.1 their players, That.makes them akin to other compelling but legal pastimes, such as gambling, following a football club or collecting stamps, There is a long tra dition of dire 'warnings a bout new forms of media, from. translations of the Bible into vernacular Ian. uages to cinema and rock music, But as time passes such novelg ties become uncontroversial, and eventually some of them are -'l' -- ·,t-. d .. . . ---~,- pr.o,cess -"-' - a]' - - .IY J e 'ev.a. e',.In,~ t O.a. - - '6;. ---'. - l'h a."m me,. Ii,.ow]ng ,- -- .-'.' m,a.y '.' rea . d- b"e -DImS,,. . under way as the aver.ag'€ game-player gems older, Mr Ferguson - -t -n.O. es wry Iy th 8.1.1.1th e 1- t·e.s. tI.arge.t S a-f att~'- --- are SOCla.~-lmerna sue -h. .. - t - a - t - -- - ac k' - - - - - - • - -- - - d- ~ - as. Facebook and Twitter, which are said to expose children to paedophiles, invade their users' privacy and facilitate riots, Perhaps video games are:not so bad. •
per 1 ,OO(} pop.ulation
'I --

'Vide:D~g(J.me5' soies, $bn

1983, David. Sudnow; a. sociol-

get

But might players not addicted to gaming? In

'-'1·'

'-'1
_'

,~~

"_'

_'.

.,.

~.'

d··:
-

..

".
.

-.-

'...

' . ,',
•

'
'

.... __

. _.'

..

-.

'.

_.

__

.I!!,

.I~I

_"-"!i;

.I!!'I~

~I~

..... ~.::)

.:,'. ,,::~:

>~I~

.. :.'

,,":~,.1

d ..~.

.,!~ ... ~ ..

I~

Jl

-"

..

:"

·1··.·1

'.. -.'

+ --

'.-

"

'.-,",

..

J'

I'

'.-' I' I

,'"

....

-',,'.

'.:.

1-"

.--.- ·····.: ... .·.-··1··"'-.-

1'-'

.'

I',

'.

,,,.,

- . ". . f ra - .... . rue --t· JILlH~ t---. .-:0- ~I~r re.crea t mons .0:, ra.ce courses

as S 1-- - tone ancell' .··.·.··l vers Monza ..Wh.en 'f'ormula Dine; went to India for the first time this year, the virtual version of th.e track was ready before the real one; several drivers took advantage of his company's software to practise, "We can reere ate every asp!ect of the track from data given m 0 us by' the .Ft au thoritie s", explai ns .Mr Cousens ..
+

,.- . SU.C..h

1ff

_..

. ..

-'1 "11" - -

I"

. '.'

. '-

.'

'.'

'..

-".

.'

.'

,.

I _ ..

'1-"'-'

.'.

'.

I"

.. ..

-.. '

.. ,.' .....

- , '.'

'.'

.--' '.'

I'

,....

.'

I",'·

......:'

.,"-

I.

'-':"

..

I"·,

'.

.' :., .

. .',"'-

e-

.. '

.-....

,.....

..

"-

:iI;Al

_·ut··

"'" :_. " _

'li.,.c·

-Ifill ~.,tAl.

'.'

IJi..r

11.,. ..

'..

, . .1[.,

_·JIlc_·

. 'JIl

d U.·

,.

:'111 iI;.iIl

J JIl

'i,~

10

VIOtEO

G,AMES

'they' released a program called, "Foldit" that turned prorein-folding Into a free online puzzle game, Players are presen m ed with a protein and given the task of finding its most energy-efficient sha p e by fiddling wirth its structure, A better shape means a. higher score; dramatic progre ss is rewarded with lots of extra points, pleasing sound effects and a, Utt~e shower of virtual streamers, Th e controls atre simple an d intuitive, and there are friendly tutorials to tell novices whatto do, Online leaderboards let players compare solutions to foster competltion .. By turning their problem into a game, the sci-entists have harnessed thousands of human brains without specialist know' edge to wor t on protein-folding, says Adrian TreufUe, a.
umbia who helped to. develop the program, '~IOWewanted a t.oy/"he says, "something so beautiful and such fun that 'you,could pick lit up and start playing with it without any forma ID, training," Vital lessons were learned from, professional games developers. "We needed to have a very vivid representation of what was going on, We needed an intu:itive interface, and something called 'juicin fSS' ='a, game-d esigner's term for lots ofmstam positive feedback." "Foldit'' and its 4l6,;Ooo-plus users have already made serious contributions to biology ,A paper pub Ished in the Septemb er issue of N,ature' Structural and Mole.cular Biology shows that "Foldit" players were better than any computer algorithm at modelling the structure of a protein used by' retroviruses such as HlV'~,which causes AIDS,. Andin the best video-game tradition a sequ el, calle d 'UEte'R.NA"~is already in the works, It, will all ow' us= ~ ers to investigate RN'A synthesis, In business, gamificati on has 'become increasingly fashionable over the pastyear or two, The point aboutgames is that they make players want to perform difficult tasks and pay for the priviCOl
~,'I/;"", ",

computer scientist ,atthe University of

• mercia software package used ln dozens of straightforward consumer games, as at recruitment moot Ithas been downloaded mi lions of times and is still played online .. Companies are getting interested too. Business-simulation

games are available for everyone from managers to call-centre workers and have been used by' companies from Coca-Cola to Shell, "Doingthis sort ofbusmess education ,as a game: can make :it more compelling than a tradinonal chalk-and-blackboard appreach," says Tim tuft; of the Serious Garnes Jnstitute, a research
~"&;U,J,,., , 11,;;,;)"" ' ,II,;;,.-:Ji G...LII,;;

outfit ' ill" ',",', V!I;; ,_tr- ,y" Bngland H'~s-'rQ~'IO"a-: rchers ~T"Q W" ~nCoven ~_ , workin I'g 0,0- virtu"JILl, 1"" "v" !~u, aJ stores for a retail firm an d a three-dimensional computer version of the city of Coventry for use by architects C11nd, planners in, local government. 'i.~B!igcompanies cou d build this kind of soft,JI. _ '

lege - ays Bna n -H' urke 0" fl" ·G.'a rtne 'r' I"'" 'fiio ns ultan c'-"y.- am Il"fi--I.;EiI,IS: try 'to-"i "G· capture that sense .of engagement by providing rapid, continuous feedback, a clear SH~nS€of progression and goals that are challengmng enougzh to mamram interest st but no .so-:'Ih'-":d: as 1.,0pUI~, p, ayers ,0 out --,-::t ;M_ off 'One example is Fourxquare, a social network (and rival to
S" g
.-_ ,_.,' _ _ _.
,"=_' , , ., , _' '_,'

'iIJi, ~

!!o.."UI'~,_"

, ~,

u,_=

',:~

"

_ '_~ '!i..

~ ,_'

'-

~'-I~'

",-,-

1-"

-,.",~,-,-tFr,

':'1--:-

:'--~'-

--,

'-I-:'t-I

--,,-1F;

-II,,-:-,,:;---,~J

ware In-house,' Mr Cousens concedes, "But why would they'? We'v,e spent years and. millions of do Bars getring it Just right It's easierto just buy it off the shelf" Even as software written for the games industry is being pu t to serious uses, the ele ment of fun in games is bei ng exploit-

Facebookl that lets users post their present location for their friends to see. 'ThOSIE: who visit a. particular place (such as a restaurant or a pub) are given badges, The most dedicated are awarded Utles su ch as "Adventurer" (for ticking ten s eparate lo cations) and may be crowned "mayor" of the place, A, text-based scoring system ~skeeping p' eople engage d, Since its launch in 2,009 the- service has picked up more than 10m users,
u -_ . J Eas,:11 peasu

ed, through the la est management tool, "gamifieation", This relies on working out 'what makes video games enjoyable and applying the same techniques to other kinds of activities, from running a business to tackling tricky scientific pro blems, It may' seem a strange notf.on, but t ,ereis some~hing in it A :goo,dex:amI:

pme c.o'mes. from 'molecumar biology-more

spe~ciflCatlly,th.'e q,ues~ to u:nd,erstan,d the way in which :proteins foMd,., P'.roh~insare complicateld c'he:micals madl'E: of long chains of amin 0 ,u:ffi,ds~the tiny chemical buU,dtn,g blo-cks of ill~fe~ 'Th,os e ch,ai:n,s can ,£old 'Up in bilH,ons of different w,ayst. and thlf: 'process by w:hi-ch they ,a,rr~,v-eat t'h,e ,cor.rect -D'ne'IDS stfull ]p,ooriy un d,erst()od,. It is vitally important." b,ec,a:use, :misfolli,de,d proteins ,eith,er d,o :no~' 'work ,at all .or do thm'ngs th;att th,ey sh,ouldn't.., 'Bad~~l ,de,d :pr.o,fOI teins Br,e ~mplicateld in varflou,s forms. of canc.er as w'iell ,as n.'eUIO'lo,gical dislea.se s suc'h ,as A~zh'eim,er~'s lPa:rkinson's" ,and Co,mputers can re'cognise a 'w'eU=fold,e,d pr.otein 'wh,en pre'= Slente d with ,onie~ lbut ,actually finding it: 'c.alls for th e 8.o,:rt.of pat= tern re"cognition, ,and later.al t:hinking that th ey' struggle with,., SiCi-~ e:ntists h,ave tri!ed to de'alli'wit'h th:e ,p:ro'blem by using lenormous oom,'p'uting powe:r to sift system,atmcaJ.ID.yhro'ugh biUions of post sible configuratmo:n'S~ ,Bu~:n 2'008 at te,crm fro:m th,e Unmve:rsmty of i 'Washin"g,ton, trield a d,ifferent apprQ;ach~

Another example comes from Brittain's Department for Work and Pensions, which itsoffering a gamified version of'a suggestio,n lbox,., Staff who ,come- up with ide:as to ilmp:rove th,-e 'b'usi~' n'ess ,are a.w,ard,ed points c:aJled ""D,wP'e,as'" th,at can be, i:nv!ested in promising suggesmions ma,de' bY' other peopme~ ]f the boss gives th,e go=ah.ead, th,e in:v!estors get m~h,e:ir oints b a,ck with in t:1E:Ilest; p mh'us i:nc:re.asrng t'h,eir totaL~,;; ~,ea,derboard,and ,a ",i;'b'uz:z ~n,dex~'~:roA p vide the element 'Of comp,etm,U,o:n,,, But not €'v'er-yone is co'nvinced~ A lot .o,f ga,m~,fica.t],on ,ef-' '!"}nl,y,~thl :~n'g"~~Qry'fo' ' fl-'ilfS,' Id' 0 nl" Olt ,e,QQ'm'-' 'tin o,ff-I·~I'a",' 'l, .1 , v.,.;;, , d"'~'tf',gilo'\o'n't 'fr:o:m ~'h~ o,ld ,I~, ',' ,.',' ,In \;;; rul,es of goo,d m,anagem,ent., 'Th,emotivaH,ng power of !co:mp,eti=' ti0n atnd, 1e,a,d,erbo,ar,ds a.:re familiar to, s,ale s man,a.g'lers, who ha',vif: had s,a~,esm.an=of=t:h,e:=monthcontests fo:r m,any' years~ Gam'es des~.gners. the'mSlei'v'les say that th.e 'emp:h,a'si,s on rewards and fee'dback syst1e:ms m,ay be: m,issi:n,g the p!otnt: if the ]Io'b :itself :is t,ed~,ous a.n,d repetitive, s'uch beU.s an,d whistilles can ,co:m,e ,a.'cross ,a,s p atro ni,sin"g~Mr Burl~!f;:,a,cc.epts. this ..~'~Ga Ul cat~,o:n ca.,n,'be p owm e:rfu~;'but you h ave: to 'lls'e it Icatrefun,y~ h e Satys~"",A.1 ot: of w':h,a.tts ~'~ going on a.m m-h,emo,ment Dis drru:v!en by little mor,e th,a'n nove Ity . ,y, and'h='po, ;;' •
,I~ ,~, ~.,.;;

,u"",.,.;;,

J!L'~

"

"

I~,

II!;;;

,,',

"

_i~~

1'1

VIDEO

GAMES

Theimportance of 'fun

'W'h id eo gaml'es·W1 lb .e an enuU.rllng success '.' A· .... I':I'VI·_'

WHICH WAS IHE very first video game? One plausible candldateis=Nim", amathematical gam,€;with roots. in China It WPI.,;:) pl.~r~ on' 'NIM, _ --8'0" ·D·· 'a:com pute11/;;['. cI~Q. red ,..... reated bv Perranti an . ,- Pl.y'{;, y .~ electronics firm, for the 1951 Festival of Britain. In is 52 Alexander Do"0'1 gl ''!lISC" '0 British comp uter 'S-'('!'I",Q'n-:-tl",C'~ ·WI·'O-::t,;Q. a-v ersion of n ouah '' ,... t I" .. an d _crosses for th e pioneermg EDSAC cornpu t er a. th e U" nrversrty of Cambridge, Shooting games made their debut with "Spacewar!", written in 1961 'by' students at the: Massachusetts Institute of' 'Iechnology for. a basic computer called the PIDP·=1.. In the postwar years computing was a brand new technology, 'but games seem to. have 'been. among the first applications that the creators .'. - gh~ o f·th ose '-"11 '1- compuers th,OU.,' .. 0 f;.' .' ear, y- - - - t Half a century later they 'have become the most exciting bran ch of the entertainment industry They are a "killer app" that is helping to drive mobile-phone sales, and a. key' ingredient in the popularity 0 f social-networking sites.. Should othermedia firms 'worry' that games will take over? The numbers can look ominous.In revenue terms; video gam,es already dwarf radio, They are, twice: the size of the music business and by' 20,15 will be, worth more than, the newspaper industry.lust before the recession the games industry was growing by' ~ . 2'0-2,5'% a. yea r, Thimgs h T.,,; nave s '1 ower d d own since t,h . sen, but gammg ut is still expected to grow' by an average of OV€'f S% a yearbetween - .'. -,d - '. I' -I d ixe y ~O remain . th e.,C. I 'f t -growIng ':- ·:111' 0-f' ..-'-'.:' u la.SI~,'es .=-'\ now- an 20i5·" anc ~,S ikelv ~..'-_ lP,ar~ the media.ind.ustry ov'e:rth,at perio,d~ f ". ,-]lstory 10', me, d" te:ch no, '1 ~ sugg,ests t'hIa.t It lS ra.r'E: c: ].a - og][ies hlor Th-'e h+ any of th.em to b'e enti.reilly 'Supe-r.se,de,!d by' otheFS~ lo:n,g·-playin.g
G...

'~-:--.~I(;"

iI,\.,

,!I..o""

1-

'c

!Ih;; ....

.Jll.G

ILl,

'1;iIl~,~

iIi;>I..

'

;:;:!,

",.

I[ ",",.II!

~!Ii.-.\;,. -: "

",IlL,.

.' .

._

"'", __ --:-.

"',lII."~\c

__

::'~'

~IL" 1Il..:JI'

.-;-.

.- -. - -

-I

I - . --.

-- . -

'.

-'

'-

-I

- ,'

-I'

,-

"',

,,

':

I.

1'"

r--«

'.',"

I -,'

'I

.'~'

I,

I.

'!'.-

r'

The main reason' why games are different is that marry the power of mo"dern technology to the 'insQ'oable hum'on desire for play
re,cords did, n.ot make liv'e c.oncerts o'bsoiete, ..Television did not kin ra:d~,o"Books stUm sell in th,f 8:ge of the internel., This is known a,s u:Rfueprs law" ~.aft.er a Germa.n, ,n,ewsM=haper e,dfutoI w:h,Q first no,=' d- *:h-· tt;l9C*I· ill. -;ru'3 The ch' - "llnC£ilS d ~ ·t-h'l- ; e'v n ~If~ d' 0.0 '~lr\O . "a't -,.~'\,;.; 'VI" 1l,~~ II! mn tl· overtall,e bo()ks ,and, t'eJ,e-v~,sion. (andl they a.Jriestilill a ~ong way from doin,g so); t"h!e:·eaIH'er forms wru~lll survjv'e ,alongside 1Ithem~ That ],8 nom.to say t.hat: they wiU :remain 'untouc'he,d~ V:ide·o ,games wful1 :~nflue:n.c·enth,er patrts of th,e ,ente-r1:ai:n'm,e:nt mn,dusmry . . ,=uence . ...... ilI "'-h a.n d In turn b e.In fl'l I· '.. d,by t_h em,. - exa,m,p_e, "h"1 T~._e,MJatrlx ,a For fiJm ~hat -first 8lp,pear,e,d in 19'9'9·~h,ad mWQ se,qu,els that ,cou~d 'be fully unde'rstoo,dl on,illy by p,laying a vide'o game caBied ~~En.teIhe t Matrix" ..The game con,tin,oed .after th,e thir,d film a.s nThe Matrix a'.nUne"', an ilnt'ler,net~batSl~d m'u~.tipta·.y·erv',e:rsion, that -ran 'u'ntill 2,00'9·, Vid,eo games based. on. popular .films o:r nov'e[s h,av!e b,een around. for .a long tim,e~but no'w the ~,ide,ats lrle beginning to flow O the other way~B,ooi{s 'ba.sed, on the i"Hai·o;' :slf:rtes of sc.i.-fish,ooti:n,.g: .games~ ~or instan,lce." h,ave sold, over 1m cop:ies~ I'.UP~,' .> "cor .'. m' S'o'm' 0t' ffim' a,s 'gam,o,·s ha·v.o· o·a:ere· d·" new w'· a'Y 11 L' o·'ld ,L,~_.ed"ffia *0':m,atlt,e :money~ Musjcal ga:m.es su·ch as "'R().ck B,and,t" ;and ("'Guitar Her-o m,arry ~h,evid.,e'ot-games i'n,dustty with, the music 'bus~ness" The'se games use Icontrollers sh,rfped, Uke gumtals" drums a'n,d,mi("10 __ ~:,
Q iGlI· !j, . \:. .....

I ..L:7 ..... '~

,I".

J 'U"

II ~ ..

J9

ill

·.·I_'~,'

.•.

(J":l'YV1,;I9!i.:" ~ia,J..lJ!,~·~

II'

II"

'I'

.,'

..

1'1:

'II

·1

...•

',

I'

1'-

="I

- I' •

..' "..,. ..

I'.'

_,1,1"""

,l!L_,~,_,I""""

__ ~'\.o.,

,~,~'!;;,.

"JI ,JI;i!L!___'._'

'.~....•.

,l!J"

!!J.!

"

crophones to let players step into the shoe s of their favourite bands, The first licensed. 'US'f: of the Beatles' music outside the ir own albums, in 2()09, came ID~n IR@p ri nts of this s pecial repu rt a,re avai La b ~e the shape of '~~Thle,eatle $::: Ro cit B at [JIS$]J)O each, with a minimum of 5 copies, Band", a gam If: rumoured to p[us :tO% postaqe in t ~H3'Ul11, ted States" l5'o/G p os 'til ge 'i III Mex,ico and Ca nada ~Add tax have earned the Fab Four tens of ill CA, Df, IlL, NY~VA; CDT,' n La n ada, S millions of dollars in,royalties, For orders 'to, Nfl', 'lP~ease,add tsxbased on cost. But there, is something funof reprints plus postage. damentally different about Ifa r das 5 roo IiIi1 use or qua n tin f!S, ove r 50 P lease te leph OR e fo r disco IJnt lnro rmati 0'[1. games that sets them apart from IPteas e send yo ill r o rder with pay ment by traditional media such as 'books cheq ue 0 V ITHJIil ey 0 rde r to: and films, Games developers J il[ K.ateth a of Foste r Pri no ng Servi ce say that technology is pushing 1elep h 0 n e 8.66 87 9 9144l' extensio n 168 or em,8Jl"iljU[ k@Toste'rprinting . co m 'back the frontiers of their busi(A meri can Exp ress, Visa M.a:st-e·uCa rd €Ul d ness in a. way' that: is simply not l!DiscQver a ccep ted) op len to; s·at~, b 0 oks 01 radi 0., IFor more information and to order s,peda l They point to improving graphrepo rtsa nd rep rints 0 n [i ne! plea se vi sit iCS~, better arnfictal Intelllgen ce our website and bigger wo-rlds featured fun 'W'WW ~!@COnom ist. co mid 9 hts t eir products, The 'more busiFutu re sped a lr~'pD rts ness-minded may argue that S,tat.e ('apttali's:m J,anuar,Y 21-st 2012 games offer better 'value for Pa I!c.;' sta n feb r us ry 11.th 2002 Pi na nd(i i~ nnovation 'money' than films do, Some will Feb rua ~y:2 5th 2'012 say' that i1It is a gen era tiona] thing, 'h,e nuelear wDdd March 'i1l0t~'2012 and that people who use comPreV"iOIU S, s peci a [ nrp'o rts ,an de,6 list of fo rt h puters tn every area of' life wil comi~g ones can be found on[ine: eco'mo lirds.t~comls ped a lreperts naturally expect to use them for entertainment as well, Al] these things are true, But the main reason why games are different is that, rathe-r than being consumed passively like al tbe other media theyare interactive, marrying the plowe-r of modern technology' to the human Idesire :~orp~,a.y. h,e compulsion to play ~,shaul-wired fito the huT 'man race. It is thie' way ,people llie.ilrn~Org.aniLsed p~,ay,of£e.:[s, ·at (fair-ly)- safe' (Jutiem io.:r Icom~p!etitiv'e' im,p'uillses 1Ithiatm~g;hm:oth,erWIDse get out of han,d~ Gam,es~.sports a.nd oo:ntests feature in .eve'ry doc:ume-nt,ed human c.ulthey tu~re," P'e-opru,e fin th,eir ill'eisur'e tim'e with at ,dizzyffi,ng valiety of' ga.m,es; both. sporty' and 'brainy,-, and as 'participants aLS w,eH, as sp ecta tors., Th!f 'finaJ m.atc'h :in the :liOlOS. so,ocer World C.up WaS watched by hun,,'d~,d ofi 'm- 1"1-~ia-n'!!='oif "pe- o', P'I-'le- m-' '";lIlT1~"'n- ~'h~ a 1",~ lllJIL i one' of ~he, most wi.dely ;sh.a.r,e,d cultur.a~, ,e·ve.nts i:n,hfu,sto ry~ What th'e video-gam"es irn,dustry h.as ,done is to maI<e·mu,ch of m:his acd,vity better atnd mo're I(onveni,ent ~orth,e play,e'Is,., Vid,eo games Ican offer anymh:ing from ,eie,cmron~,c versfuo:ns of 't-r,ad'inona,~, p,astimes~, suc:h.as poL{,er or ru,gby; mo·totally new experiences, such ,a,s abstract b:fajn-tea.sers.~ sim u]ations .of w,arfare ,a.nd,intricate ,alt'ernati.v,e r,ealitie s~ 'Co'nso]es p..rovid,e ,a cilne:= m,atic treat in the iivtng i000m;, mo'billie p'hon,es a ,quick fix on {h,e move~ 'Th_,anlcs to th,e ilntern,et; opp'onenms and team :m,ates ar'e nev'er more than a few ·cUcks away~A,nyo:n,e· eq'uipP,e,d wfu,th the 2llPPIopriate :h.a.rd,'ware-'wh~,th,n, rich cO'u'ntrtes IDS i beC!(lm.in,.g ever more arffor,da.b~e" as w',e ~ as I€ve'r m.o're va.ri.ed-,ean now .play' an'y .gam,e th,€!;y . ike,~ w'h,enever and! wh·ere-ver th,e~r want.~,with anyo'ne theYl c'hoose., 'Ultim,ately the m8lrl~et for electroni,c gam,es is Umited only by th,€!: wO'rld~s appetite iorfu·ll.and !enjioy'm,en,t. •
f
I

I.

, . JI!.'II..",

.:l!<.

._~"

_'

-'",

,.

I:.iI!. '\._ _

~,

I~

. ro:;:!'

Also 'in thts secti'on

For daUiLy' a'Fl.a,Ly:s-]s and debate on Eurape. visit Econlonli Sit r:..rj,ml/ eu ropl! Politica~ crisis in Russia

Voting, Russian-style
MOSCOW
I

.i ~ounne t'..
'.'

. -,'

. - t' '1- ti.on f ~ eoec_ ~, rrauI d-__ urns I.nt'_,0 fa:

r-r . . _l

I'"

I"

._.

. ....

.'

I' ," -.

I '_

n-I' -I

liii

sea )- e pr-o t' ,est ~"IThI

. I' _ ,-' ,~ . ., . -.

r-r

.".

..••.

~~ ,Il regime IS
• -, ," -: I' .

.i -

. -'

1 '..

worrre,~ d-_,
".; .-.' I ".-.•. '.," .. -

AR::;.~~a~~~!~~·~~~J!~da~j~~~~~~~~; the the, the

]0

television: in past week Kremlin ha s us d all ',f; th ;e;:,o. to' " ~r''g: .=, ,~, Rus sia "e ~ g." er .. ' ... deepest political crisis in years, This may '. iii··' b '" not b thb _,e ,e"iegln'nln_g- 0:f" ' a, revolutton.but illt: is the end of Vladimir Putin's e-raof alleged 'j'~ . ci!. stabilitv 'W'_:hich started O·V.t2ilI·'!Ji d ecade azo Only a few weeks ago, Russia's Duma election looked Hlk:eJy to be a non-event 'with a predetermined outcome, Genuine O·'P" "p'" '0'sition ~W::-::~Ieb arred state 'rv 1i\'I'O"P" a 'g~ an': .. y"'," d,81 was ,at ful] throttle and ,Mr Putin, Russia's prime minister, and Dmitry ,M:edvedell, the outgoing president, were competing to make pledges of handouts, Governors were set specific targets for how many' 'votes their region should delive:r to United Russia, the ruling party Yet the -' ~' tic -' . --''D"'~' rst f. I-e-c_lon~, on,-E!-cem nber sth , ]h- as b. urs_ ope,n .er 4 ~ .'--. M:rPunn's political monopoly United Russia's official result was less than s:o%"down from 6,4% at the est elecibiIL ,I ~ . .:Ii Q '. ~ lllil. .", ,0' .. , . ,0 ~.!{; ~
I~. ..' ~", J1.1,=<

!UI'..-:IiJJ. ' " ~

II).~

I . .!Ii•

.!J!.

.!J!.'

,I ',I~ci!.I,:

'\;0,'_

":!!;.r

.1_'.

,.:

_,I!.,;r

¢t.~ .•..i ..

',-

,:

. .-:11.J.

."

... ,[;t.-:l _-

(;ilL,

. II!;;

t!i

,i:)' . [;t'!!;;.

lL

·-c

"1

'-'c,--

co,' I ~IgcIII""iI. - ,~." .. t~o· lin ,11., u. ...r' y,o.'a-: r''s: ,"'"v,. 'Thl',~tt·-· UQ 'fig-:, UI r~' Jl.IIL.I.,,. ~.'
'!i;;, , ,', 'I,;;:; .. ,~ ... ~)

of': -f.ily·,··
,;]i,",~,

-iin-' jJ ,

',1O"~-:::r '.,. ,e iIj'iL'm~' '.W~~ In'"

,i:)''!U'

d,e:pend.ent 'monilo-tS~ wa~s 15 to

,. I,Q ,'I,;;:;
.,;:]1 .... ~ -

co:nttol -G,ver iocaM ,councils~ In th'e :poUing station w'he-re Mr 'P'utin hitmself voted i(and W'hmch was probably' not: tam,pered. with) U,n]ih~:dRus sila got onilly :23~7i%~, losing to tlhe s-eem,ed, furiousi Mr Medve,dev d,ented ele,etoral viollia.mio,ns b'ut caU,e!d V1a-d~mir ChUllOV" t"he' 'h,e.a.d of th!e electoral com:mission~~ -alm,ost a,'magi cian ",i" U
Q1: P-'u' 1··nl C,o'mm" un I 1is"ts:· W,- ,-'h' '0.1 tF'iiilo·-l!J' "'16':, 3~If)..- M~<l~r- , *l!J._== ,_
- __ ' _" . ,,_,!!!, , -' ~ .. ' __ -. I~,V "~\,_. ,~. - "_.

f'ii:!'!! g-' ,I'. '~:o',nl,fio 'p" '",JIlY t-hl~' ~, iIf'··t--:"" ~.

20' points co' ,'.'.~,d,' .'10 $.'10" U~I ",~

feet referendums on government, this, result suggested crumbling legitimacy It' also showed that discontent with the .K·IemUn, was spreading ,Bi'CIOSS all social spheres, Unable to channel their protest into genuine opposition", people showed their frustration with United RUSSID.a.1by voting for the Communists, Just Russia, the misnamed Liberal Democratic Party or the old liberal party Yabloko, which was not' allowed mto parliament. None of these threaten, United Russia, but in, a sclerotic system they serve as a "bypass", says Lev IG'-" n,. _.ov OJ! th eL .evaa· -' C-:..:___ , It lie, ,il po,·'1~~h,eI~ st . dk 'I-::-::~'1£' I~, ~' '.. -::-'-;-'-: d ..en . >--II! "~'-t .n was nOI these SIgns 0 I d: - - - -t' - nt - - -- -~ I.· - - -"---- -f" : iscontem 'IE: ~t that tri ggered the crisis, b ut the Kremlin's. response 'EI- ecnon d starteddwi th a mas. .. day WIt·. sive cyber-attack that brought down the websites of Ekho Mosm:cv}f; a, popular radio station, and of Golos, an, mdependerit election monitor that' Mr Putm had likened to Judas. a lew' days earlier, The attacks stirred anger but..ID. d~ .. n , ot stop , m .0,81 m,to__~ a·, ,d'__ ] ~'~U'r-' d .. 1 '. ". I"-C: ·n-· . naJists from p'osting' vi d1eos of b,aUot--'b"ox do, ~''0'-'o -,S_- tu-'ffi~""n--'g o-'n- ¥I--'o'-'uT-u' b-' e-' a- n'-~' Fa'- c-'e-'b1'1' -lli~' ,~'. ,I .Most: of the' Kr,e:mlin's ,efforts were fo'-' cused o,n M,osco~ w,here a:n exit poU, sugges1lt!ed that Unmte,d Russia :h.adl 'W'on less than ]iO'% S-UP'POIt But afte:r a illo:n.,g delay ,if'· O _:=,e - '" 'It - ., . - ., . t-h' - .reSU_I, -c,a_m,!e In, a~ 4u,.5~I-O;s-ulPpor'~]ng 'S···.··I~a,lin,~sfamo'us ma,xmm that it is the Ico'unti:ng ·r.ath,er th,an th!e voming that m,a.mters,.,'Th,e m'nte'rne-t boile,d ov'ef with stories of ,eleictill,on,-' ·rigging,., In som'e re.gions. turnO'ut a'pp,ear-ed,
-.= I" ' . I" ,',',. . '1"····'· -,. .. '. . '., "
I ',. . ... , J' . • ' •• '. .'. -' .', I '. '., - [' . -, ',... ',~, . -' .' ".-' I

a country where elections are' in ef-

J..I._

'I;;

,,_-

IIl.

....:

.,..,

'!U'

...

_I

" ," !_., "'_"

'

I '._

_ '_'

'I ~-~

'c-

.-'. '~'"

-"

..-': _". c",_,'

_.' .. _,'~

...

'IIi"

- .£. - 0./·,

.. '

'flo .

to exceed 140%,,, In Chechnya United Russia scored '9!9'·.-5%,~A, simtl ar result was. rep orted in aMoscow psychiatric hospital, 'The 'Russian authorities have "'COI= reese d'' election res ults be fore, but never so blatantly' and so cynically But never before have elections been so closely monitored by volunteers inspired by the reputation of United Russia as "a party of crooks and thieves", a title promoted by Alexei Nava 1ny,-, a blogger, and widely endorsed across the countrv, The night after the election some 5,OO'i~)Muscovites came out on to the streets, The' atmosphere was a.n,gry but also Jubilant Th,e election was never going to turn Russia into a democracy, but this. was a slap :in the face for the' Kremlin, Hours later protesters clashed with armoured police and 3,0.0 activists were detained" including M:r Navalny who was handed a is-day prison sentence, On December sth another' 2,0'00 protesters were brutally disperse d by' the riot p olice ~A few' hundred, including several journalists, were arrested and some were beaten up, Spooked by' the decision of over 30'~,OiOO people to sign up online for street protests on December roth, the FSB (suecesser to the K O:B) is: trying to censor soci al networks. In the non-virtual 'world the Kremlin.has deployed tts youth movement to occ upy large public space S; bra ughr troops into the, centre of Mo:sco;w and ,(0[doned off the main squares, [10 avoid further lesc,a~atjon~on D,ece,mbe,t ,8th Mr P'utin SaIDt:J[ that~ aitho,ugh, the oPP'osition is driven by sellif=~n.teIest~the ,go,ve:rnm.e:n.t sh,o'u~,d taJktomt Mr jp'ut in sturu seems del :ermine d to r'e-' t.urn to th'e 'lK.remlin, for anoth'er 12 ·ye.ars .afm,ernlex~ March,'s presmd .. en.tiam electmon~, but hie faces. a to'ugh ch,O'ioe. He ,cou],d, atUOW s,ome :poUtica.l compe-tmtion,~ w'hi1ch risks. unravelling the system, or :he ,could try m-o s.up'p,ress dis.c.ont e:nt .and, ris:k b"eilng ostra~ ••

'The Economist, D'ecember iotr 20Jll.'!

..cised in the West and hated at horne, M-r Purin, who dislikes making radical decisions, seems to want to sit it: out ,an(11 leave it to his aide s to defuse the tension .. Dmitry Peskov his spokesman, has tried draw a distmcnon between Mr Putin and
I!O

f'rance and Germ,any

No thanks for the memories

pA.lns

United Russia." 'Vla,dislav Su'['kov~the I<remlin . r ~d" ','~, lII. J"til ,:~ 'm" ,~'ai n'-, 'P'0- 'JIll!.it,I"'b,ii;,.illl.lIl , ","',o· '10- eru" e" s- aid tha t t he' protests showed a,need for "a 'mass liberal pa:rmy~ or, more precise ly~ a party for annoyed urban communities", But as Ve'do= .. ,,),n~, ~ " ',,' • 's ..,·l!L.:JI~" '. u,_ J"t.L !,,-,__ mo sn R-'"UI ssia ,,' business d ailv wrote such moves aee too httle and too late, ,Mr Putin's next step could 'be to dump United Russia; leaving it in the hands of 'his. faithful (and disp lens able) lieutenant, Mr Me dvedev It was never more than a pedesta for the, prime minister, But although such a move cou~,dbuy time, it cann ot provide legitimacy for an other presidential term, There is a risk, say some observers, that ,Mr Putin win look for enemies outside the country or launch a war agai nst Iib eral-minde d civil society, He has a' ways preferred money to repression as a, way of staying run,power, But he may have pushed himself into a. corner, As h,e once told journalists, pushing a rat Into ,. •,a '. ~~II' '-,. a corner ts a b d id ea, t, necause It WlIlJL Ijump and chase you, •
iE' ItoII.. ,
,I

'When the going gets t,ou,gh"the French get Germanophobic

I

fI1

'1'jJj]1

,g

'c ,', ;~'~"c

'

'

I ~.• "

I '_.'

S
"

,l' '.",-','~.' ' ""'.' .,,' ,"/'''' .'" ... ~', Palace, Angela': Merkel, the, German

'HO'ULDER to shoulder at the 'Elysee

'!i;,,',

" ....

chancellor, and Nicolas Sarkozy, the French president; put. on a show of studied 'unity' ahead of this week's European Union S'UID,mit Yet despite concessions

on both sides there is a growing sense in France-that 'it has given more ground, Just ~dl"' h IO ,four mo n t. S f·' m at pre sm..... I'a 'Ie- I e en"0 n, enti such perceptions have begun to stir up ~..... l~ some nasty gennanop.!'loVae~
'-1'1

1·1

I I .,

'I

',-,

..

'1",'1','

-1'1,

' ][,

6e'rmanyr-s debt brake

· d" r Tieyour h anus,

please
B,EIR:ll
f!IJ

"G "Ii I' ,ms, ... ,-ermanY's_i SC8_ stranjac k' 3'D ret
I', I

.,'. .. ' w,
lILl1..
_'I!

example _ .. ~. _w __ -I ~~ for

0',

·t· __ ~gili r;c,?

he

La' p·.S' O'D' ~D ,i"e-·m· ·b·e"I IJI~~ 't'h'lle-, 'G'-",erm"'an c'~,~lnl.'.e. eth", . ,_= .. m:l~_, IceUor~ ,An;g-et:i M!e:rkle~" ,an,d the ,f:ren,ch presilde'nt~ Nic,olas Sarkozy~, ,~gr,e,edthat th,e 17 e:uro-zonle c.'ountries should :insert a Ger~ ... ~ _

ILL Schuld,enbremse e:nte'r the, 'f.re:n1m ........ or Italian. illan"gua.ges tb.e way' u'kin,d,er= ,' garten"~ has beco,m.e part of :E.n,gUsh?'Per='
'='_..

"_

'~' __

m,an-style '~'d,€b bra~ke,; 'into the-ir constitut ~l:'0',11' IS'" Th· 18:·t S a·'y'," ''E· uro;'I, I: ~ 'ft-' f'if!:t C-',"O' ",UI P 1,0 '.. < ii'l'l '.. hemp preve,:nt at t'f,curren'ce .of the crisis. th,at ~hr-e,ate,ns the euro;s surviwt The Euro= pean 'Court ofJusti!ce s,houm,d ve'rllify that aim mh.e ,natio.nal SlcnliUi:lfnblfnlseH pass ,mllst1e:I'" Germany is ]uot the ft.rst E,urop'e:an cO"unmry to :h,ave o:ne~Switzerla:nd, m.trodu,ce:d, a ,de:bt bralo~ in 2.001. P,oland ca.ps ~ts:p·u'bUc. ,debt at 6.0'% of GD"'; the Hmit mt wHI have to Ob,Se-IV-f' if itjo~,ns the euro., lB'u:t IGerma,ny's. . to't" ~.on,ac S"-'- hulen:remse .. '0.f" 2009. IS ill -Id' . b ,. . " rConsmu t-···· ~Jkely'to be, th,e mo,diel for the 15 'euro..!zone' icountri,f:S that do not y,et h,atv'e o:n,e~ 'Und,er .'t· ~,,. d' ~,'.,S prOV]lSJIlon,s, ;lfh e f'"I'e', ,e:ra·J' ,gove:rnm,e:n. t I{ ." mus t iCU t: ilts stru,cmuralli ,d,efi,ci t (ie~,a,dJustedl for th'e busin,ess cylc~e) to O~315'% O'f 'GD'" b1y 2 :I .' in .', .'. ::__OW; +'h - 16· L ''',.' ers~al~,e:s,' mUSI~, e-Ii' JL.I·e ~: ·an d' . . " '('" __m-_l___Q,t e' m'heirs e:ntirely 'by 20'2Ch Th.f' id e,a, ~.sto sla s:h ]public debt f(lom, ,8.. d,ecade'nt ,8Jo/Q of GDP
I~·. . '" . '",

p' "O/I'~ ,;]i

Wi',

"

~'!!,.

w·

JIL

primary compared Mrs Merkel's policies to those of Bismarck, who he said also sought "to dominate other European. . '.'". .t.nes, par t.leu'I',·] ,y Fr'" ance~" ~.. an-".. J" .,'. coun '.".'... " "., ar e Marie Le-Guen, another Soeialist, likened Mr Sarkozy to Bdouard Daladier; the French prime minister who signed the Munichagreement in 19'38 that allowed Nazi Germany to annex the Sudetenland, In an attem pt to, calm matters, Francois Ho llande the Socialist presidential candid ate, 'W'h.I- 0 vrsne d_'B er I·'" trh"'][swele t isit '-- .-_ m 1'. t '.. whrle Mrs Merkel wasin Paris; lnsisted that itt was "not Germanophobic" to guard against German, dominance: ~'We cannot let the Germans alon .. appoint e themselves expert s and j udges ." Fuelling fears of aloss of sovereignty goes down well in a crisis and ahead, of a close election", France, after all, voted against the :BU' constitution in a 2-,00,5 Ieferend'um,~ has aJ.ways feare d t.he conse'~ qu,enc,es 'Of G'erm,a,n I,eun.ificati.on a~nd re'm,ains ,di,vi,ded over the 'benefits of the' s]"'n-.4b c-'U'[f: _',e'nc- y': The"re- iiS' ]plle'n't' y:' 0-',f fvus' ,.r·'a' -' ' 'ole -, I.,_ .. 'G' tmon over excessav,ed~r,man r gour~ 'U'We all h,ave to b"e G'erm,an ,now/ '. ~"' 11 M ~~ ... h ,u.ff: on'e se,Dl+o'l' ~JIUC~at!~:'_o~Kmg I .• ,os _ Germ,aTI, domlD,a.-nce 1S In vogu~ .. ,A cult teJ e'visi on a.'dvertise:ment for. Rena.ult sends 'up 'G,erman S,U,= pe-riority'by' p,railsm,g Pre n,ch e.ngineer= ing in a ,man.g],ed, mix of fren,c:h an,d
-I
t·

Arnaud Montebourg, a defeated candida t'e at the So cialist 'pre sid entia]

<subtitled) German, Still, thereis a big step betwe en grum bling mockery and dragging up Ge:rmany's darker past. The trouble with c. "" h" ~ rearmongermg IS tnat It comes at a time when ordinary people across the Rhi-n,e know less and less about each other, There isa web of ties between elite ministries and governments" 'but Prench citizens now have: fewer links. to G,erman'y~The share of secondary-school pupils picking German as a first foreign · ','-", :.'" " , .- fall t JUS ~ . I'.anguage. ' h-- as Jla·JIj,en 0.',i st 'f-%~.' 1···.....,th' .an ess' ", ,~'" half the, level 20 years ago, Some 93%, now go for English, with Spanish the favourite second language, A Senate report calls the trend "preoccupying", France may 'not ha-ve, British-style populist tabloids to fan anti-German jingoism", But it does have the far-right National Pront, which wants Prance to quit: the euro. Marine Le 'Pen, the party's me dia-friendly lead er.I ast week accuse d
;-1
I[]' ..t.

Mr Sarkozy of selling France out to a

"German diktat" ..She is running a strong

third place in 'presidential- electi on poll" tng+a score t h ' -f' anyt 'h" rat.r nng, may understate her support,

I '.

'_ ,"
'"

,'. _ -'

,!j.I'. -

' •• 1-"

.. -

•• '

,a!, ,

I!O _'

'I'·

'~.:::'

,"',

~ 'C'

'.

=. .•.

I'

','

"-1'" +

,'.

I, ,-

iJI (J::lII.O

~I,- tl"" F"~'···--,"~' s ra..,e) ,an ' , n,ever agaIn t'~r se . 0 ranc.e '~t'-)I ..~ ··~·d" '--',', ,'i"·' '~.,.,.~"""~' I a
I~
·1

'.

,.'

"

,.'

·'1

'"

"

,",

"."

. ,". "",.,

"-',

,endme·- 'nt'"):" Th,e Ge'rm,an, measure ha.s 'broa.d :P'O:PIU,ti:..-!, 1Il......... , 1~'r' eu, 'Jn,p" 0', rl ~' BilliIi't '1"''111'..... ·~;i"O' ", 'h ~t'C" ~r' ~1ffic':"SS' 'o"m' ~ ~t b'· ' ~ '. ,e,~'.~",.-:-'.'." .' '. -:: econ,omllS.s OJE:C t' In pI1.nClp"r' ~I'. an"dl warn'.-.__ I' . ~'t .(1'.' ~ _',_ _ . ~ _ ~~. _ _ ',_"~. ._ ',.

stray' from 1ItIhepath of virtue., Spain adopt= 'd' " 111'" .'.,'" ."," .. "' - A" e;~_,,(1 s,ill",19h*,'l Y Ilooser verSion'.. m,n.'. u_gus",., th'"liS ,.I " ..;' ·t. I, ' 'wf'ek ,Austr~,apa.ssed a. simffilar ~aw I(tho'ugh
i",o'ns'· fi~·ution,a·l '~im'
ai._. iIl",!!l.JIl I~ dJIlrUi' _ _ . _ '_'_. . ~. .."

'nO
'!l;i,

.;::Ji ..

~i'{'!, ,(;iIlrUi JL 1"-,"-"

Wi \"

,Co.

"".',

.. ",~. ~

~i'-'-'

~'I ,:--' ,"-", -..,,(.(.,

"".,~.

'1-:-""·'

sh:ould be atbh! to borro'w' to :mad{e inv'e'st= menms that pay long-m'er,m dmvid,ends~ s'u,ch as ~,'neduca.ti,on,., Se'cond; it cou~d choke o:ff re'COVl~r~.res,.,'The struictu,I,a.l uug!em: ,a.llows de.fici.ts to rms,e whe':n ou,t,put fal s 'b,elow its p,o!"" te:ntilat Th,ese shoumd, th,en b'ie offset: with
surpluses ,durin,g' up,swings~ But t.his as sumes textboollic'=]]]ce econo:mic. cY'lJes/' s atys l\b B"ofingeI'~In :realli~e; icy,cl e S ,are e r= ratic.~, A .reoe:.ssi,on followed by' a, 'w'leal< .re= (overy can, sh.Iin~{ potenticd glowth~ which in turn could restr~ct the defi1cH spe·n,ding ...
H
'=

bralu~~'h,as ~:wo fl,a:ws,; hie ,argu1es" Fi.rst, i~ b:rea.ks t'h,e "'tgo~de.nru~.e~" th,at go,vernme.nts

"Ii ,,l ~

,'IIi' .

'11"

. )'"

,'.

of disash~:r if Europe foUows, suitt A 'bigger ,gr,oup ],$ in :favo'ur lbut sees ,roo,m for mm= .proveme:nt Peter Bofingelt on'e of five eiconomm(: "wfuse men"" wh,o advise th,e G!erman ,gov=

e:rn'm,e:n.t; ~s in the, :fir:st caml).. I,h,e debt

Europe
IH ow' t.hey sp,em til it
Govern ment structu ra [ de,ft cit, '% of GOP

57

ItaL~(,sbudget

Saving Italy
ifierlnn a ny
£'0
ROME

Spain

France

ItaLy

Gove m me:il'ilt 'Ql'r'O~debt

% ;QJrf {ilrLlf I' 2,01111

The new prime ministerpleases markets but spooks the people

.s: -' 'HOWIN,G
'PR

sanna Camusso, leader of the 'C!GII,; the biggest trade-union federation retorted that it rtsked "saving the country and finishing off' the population ,,~ ~ '. needed to revive demand. "!ll Mosm €iCOnom.ists think the 'brake, needs 0'0'-1 Decemb :er izth :1"'n'rare show ofun ki dit hi' G'" al d' t weakmg, nott el cnmg i,.ermany ,~reac- Y it~ the 'C'G,MIL willjoin two other labour alli-d _. . _.- -'Id - .- ._. - U I t I hac a cans-titI Utirona- I go ": en YU ~-Ie~ b-' t th at ances in, a strike against the decree, But it' did not stop public debt from. climbing' (M.r will last only three hours, and essenti al services will be exempt, Italians may not: Bofinger blames shocks ~il~a!: financial the: like Mr ,Mo,nti"s emergency budget, which crisis). The SChl!~deH,bre»iS'e b uttress es markets confidence in Germany I,h,e threat on came into force on December sth and is exDecember 5th 'by Standard & Poor's, at rat- pected to win parliamentary approval i"·~:.' d G-' ermany (which it needs to remain in force) by mgs agency, to d nowngrane .... (along with other euro-zone countries) Christmas. Indeed, it has lopped nine p oints off hils approval rating, according to was triggers d by the: crisis, not by' 'fiscal a poll in iCorrier€ deUa Sera." at daily news pamisbehaviour in. Germany (see ![1'age 1'~.·;>If nat tural or econ omi c.disaster strike s, defici t p er, whose cartoo nist depicted the mildlimits can be suspende d. Th e extra debt mannered professor as at bloodsucking vampire, 'Yethardly anybody is prepared to can be paid off when conditions improve, block a measure which the prime minister But' the Sc:huld,enlrn~n1Seis complicated and tricky' to enforce, and will become no said was. ,dl that stood between Italy and "the Greek rfuslcnot being ,able to pay sal atsimpler :if it spire ads across Europe ..Deter'. mmmg potentia 'I output IS an OCCU 1 d]SCI.' ries and. p ensions' ~ m.. ro' °t~, ~ c iO"Ci.r Th :~ 1. "'l'1 dl.~:.n.JIi~'1'1E' '.' 'd~ '6 d t-'hD M '~an p mne~'The fed:€ral gove:rn'm.e'nt thmnl~s the ou~put :g.ap is neg'ative thils 'ye',ar (ie, th,e bourslE: and se':nt yield:s .on ItaUan bl,on,ds" ec:onomy' is 'below' p,olentia])~ 'The Bund,es,- 'w'hiH::h 'ha,d re.a!che',d 'worrying lev,ems\~pm'un,g'-' 'bank re,cko:ns, i~is p'o smtiv'e!, p en,dthrift :pol~' in"g,.,· h.e :pa"ck.age willli un,q.u,estiiona b,iy M)'ut S ,.~,...- - - ..-uld' ~p -1- 't Sll,C h unce,rainy"t . - 011., .~ . - ~- --t·- ... 11]lClla.ns c.o ItaJy in ,a. sttrongle:r position to fac:e th1e (:a.:pm= Germ any ha.s yet to put ruts deb t brake to ted markets next ye'a[~, w:hen . .it has to refl-' th1e: test Th,e feder-aJ. governm1e:nt: ,madle nance more than, €30,Q bUUon. of ruts €19 t·r]"I~;io-' on· ·d' ,eii,b: t A·::'nl 'd': ~~ 1"~· ,ea' rn"l"·n·,.g·' M~'r M··-'o' ·.'n't·l" 'things easier tor :imself'by a ,g,enero'us ,calclllation of last year's stru,ctura~. ,defic:~.t; frie:nds a:m.ong hrus Europea.n Unjon p,e,ers~ 'whi.c'h ].s to 'be cut in equ,aM an'n'ua] s:te,ps to w·h 0. h.a.v,e b€'e n lke,en m'O show th a.i, '~ta.ID.y· is ... once a.gain a. v,alu,ed, 'p,alrtnler~ 0,~ . I ~h' 'thA '...,o·· :J.Mi"J 't-~liiFao't F' 'lu' 's··h· -w·~l·'·th·I >Ij"'~eh' Thie bud.get in.clu,die:s mOore' d,efi!cit=re'=' th,ariks t,o .at :s,tron,g' economy, ~.thas :found room fot' giv1eaw,ays.. t,o voters without faU= d'uc1i.on measures. to' ad.d to th'os,e p revfu·=' ing foWl of t'hif: lbrake ..Civil servants wi illill g!et' o u:sl:y' :imp ose d. 'by s~.lvi.o .Berlus coni' s gov'= a bigger Christm,as 'bonus n.ext year, for ex= ernme,nt B:u,t: Mr Mon.ti also b1egan to do amp,ru.e~ Fo:r m.e Lander~ th.e 20,.2,0 d,eadlJin.,e somet'hing hi.s ,p:redeoe:sso.r had, lliam,entat= s,eems a ~on,g'way off: 13 of th,em lbud"geted bly faned ,at: prom,ate: ,gJ,owth, in sluggi.sh, [~. for in.cTeaS1f:S in structural ,d'efi.cits this y,e.ar; a'm,u'P} ,F.u'lly"" .: "'1ni b: 'l"'~llll"'O".. ,'n 0,.- t·"'h·, ,e,a::··V·1inl g".C" ,a' re···.t,o", be···· ,l.Il.J"' 'E' ': v.,·, JIl.ill , .. ' . ,r 1 h ,_,a__m,ents.a. stu,'dyy'b RWI Esse-n~,at r-es.ea.r'c=L rein'vest,ed with this ann,,; I,here is ,a talN institute .. A UstabUimy Icoun,ci~n; Icomplosed b:re.a'k to e'ncoura:ge firms to hire 'woimen. of federal an.d state minist,ers" ha.s ill~ttl!e and youn:8,er 'wor:k.ers" a. fun-sca~e· libe:ralli-' m "1t+ powe:r ~I~Osa.n,ct -Ion, P'(\O d"19a 1S'I A' '·pp,atre'n't'-!Jl~ II~ isation of shop'ping hours andl €]".8 bil mon, ' .... is ,as. toothless as the e,nforc,ers of'European :fo:r 'morilbu:n.d, btfrastru.ctufie prole'cts", N'ot ·--,'--"-ill ~-. '.- lne., that resu]ts are ,exp,e,eted,so,on ..Mr Mon,ti's fin.ancuw,~d']isCIP ~"I:"'-'¥et the 'd'ebt brake :is clli!ea~1y b ,etter"" dep'uty finan.ce mrunish~:["\littorio Grillili I(Mnr e.g~m~It-I"liQ,P ~IIa·'·e.g"d·1 ''lJily''~ H" n"7 th.1'_an",-' ·th···,g 'I' 'c.6.!1l . .. M.ontm is his own fina.nce ,minj[sb~:I)~ ple'~' Geb:ha.rdt lof R.WM~ B,etter stiU if gove-rn'- diets ,at fa.U in GD:" of up to 0..,5'% next 'year" m.ents b,eat the d,eficit targems; gffi.ving th'em 'W ith the outlook flat ~or 2,01],., Tllere 'we,re, tw'O m,alin,!criticisms of the s,oop!e for sti'm'ulus. during slumpls~ O,m'her b'ud.,get Econo:mists ,de'crie,d :its reHance on co-un tries may soon disco've-r 'h,o'w G'erman tax in,clr,eases- a,ronn,d €lS, b iillli on of th,e ~'O'- Monti w,on't Let it go, to hi,s,ihea,d engineerfng w'orks in th,e;],r @'con,ommes"
.. . ... . I· .. I···J·

,200B

10

11*

1.2t

rio Monti, caned it his "Save Italy" decree: a package of fiscal adjustments worth :€30 billion (.$41,0 billion) over three years, Su-

that he is not averse to a. bit of spin, Italy's new prime minister, Ma-

tal, according to Mr Grilli, A property tax on, firs t houses, abolish ed by Mr Berhisconi, was reintroduced, higher excise 'was slapped on petrol and rhe governmem tucked away a possible ::2'% rise, ~n valueadded tax next September, Thie immediate ld spen dlmg cuts were more t1lmm.' ., an d. most~y foisted on the regions, The big savings will come more slowly from a radical ,. .,'. .. ',.... ~. I ", ". shake _ upo " f' '.the generouspensionssystem.
+ t_ ...
c . ,
c. • .~ , •

'1'

'

.'.

...

'.

,.,'

"

...

...'.,

.,.:

..' c,

- "."

Italy's unique years-in-work

If"'U.' ~IIa'. .I~.n.,t: 'g "p 'frl" I!o.. __
JJJ.

en s ~ '0' "n' abJe ' 'Ji''g'I.e' _.L

'"'
,!!!,, __ ,~ _

u"

1il' J!! 5-'"

system of calt""IO" b... nh a ,dl III e ~= _.~,;;).... ,

.' .. '
'ilJl':;;

. 11.,.'1;,.""'"

..

c'oL

~Ill

, ~.,

. ,tAl

IbLL

c'

.::I",

"

.....

_..

,~',=,

:','.

.'.:.'

.,."

'.·1'

1.

','. ",

..:.'

" }" .. ,

.'

'.

"

,'1"""

:'

'

.-,'

,"

-;i'_

". [,-

'",

. ~~'

'-."

,',

','

.... 7"""':,.-

·'1"

..

I!

- ... - _-. .

,-,

out) and the, statutory retirement age win b ie pushed back, ..- vio rs 'T.ne .';i •.06: n an err icis ....'of Mr M'onti's h';O; oth or m-ain criticism pac cage was that too much was being ex1:. : .:...:... ··1·- . pecte d 0 f h e poor, , Th ere -::were measures aim ed at the rich: a levy on investments and taxes on private boats, aircraft and luxury curs" But the government: also scrapped. full inflation-proofing next year for all but the smallest pensions, The effect that could have on more vulnerable Italians was acknowledged 'by the welfare minister, EI sa Fomero, 'who was overcome by emotion as she announced the decision, Unwittingmy~ perhaps, that too was an effective piece of P1t.:: it told ]tal~,a.ns that at least the government shared their pain, _
1 ~I,
. L, . .... .:

I· ...

:7.:-'1··'··

_.

"....

..'-.-.

.-

........ -

:""'1'

-,

":~.'

"

,'.

'

..~.

'--1 + c·

,:.-

.. ~.".~"

:"

c'i"

.'.

',! ''''1''-'

'1'

..

- :C" ' ' -

0.

'!

!1If~ I~.w.'a.

I.

1 OI

- .. ,~

.... .IJI!+

.1 . ,

'

1 ,"-

........ '.'

'.

I"

",

,'.

, .. ,

':':"'1

"'1'

,'I : ... c

0'-

,.1

..

",.'

I'

c.

",",

=_~.lILJIl,

.'_'_

....

J~

.•.

'iii!

.~

,_.

JlIIJ.

'~I~

!.

_,

"Lo'

=-r ..... _.,

._

••

"_='

°;!'} ~!a!';ll1 .

. II .I~

~" ...

;t;

,aJlJ.

'13

I·

".

• :.,

..,

~aUl'

'I

:€""

eii \r.-~

,.. _lIJ",

:.: ... ~.

_.

,_ ...

.:-

...

. 1•

... ~

I·

...

..

..

IU

_.'Ii;..

.I 1iQ. 11,..,

1I!._

,1I,...I.m,_,'Ii;..

__ ;

<' ,;)O!!,.,~

.Q '!i;".

I"

I.L..

'The Economist, December iotr ,20Jl!1

Buckl eup --U':{,

!!i'iII'} A ,'ag~~t u d get an,d 8" ere,d'""squeeze wiu __ '"' htbn It 3012 ,8 tough
1",<' :

B uc IH,A,RES 'Ii'

make
I

year'
,'IPI,.,-_

ession and F,'TE':R" tw 0' , y'Q ~~c,;;;I' of rec\',;;;I'lII.""';", v,,"

",,,,,.Ill

'!:!II c.1,,' _.=

us'

news ..So this week's announcement that the economy grew by 4.. '0 year-on-year ru:n 4 thethird 'quarte-r of 2011 wasgreeted warmru.~ But the cheer is unlikely to last; th anks to knock-on effects from the, euro-zone crisis, a banking squeeze and loan repayments to, the MMF due next year, Gheorghe, Ialomitianu, the finance minister, describe s as "prudent" a lOU budget that itsworking its way' through parliament, Its measures in=

m.er.ity; Romanians could do 'with. good

M,aced.oni'a"s name dispute

elude a. freeze o:n,public-sector wages and pensions, a levy' on health carle: and privatisation of some stat e assets, U':~, ~, .. government _l _L,,4.1. ":.,i Such m oves 'the,v~', hopes will trim its budget deficit to just 1,9% of GlOP next ye',a.r, from 4~4% this year .. lIB'ut this : depends on some rosy assumptions, in= eluding growth of around 2% and more
,.1'
",,'=.i '__

Call it what zou wan,t

y· ..
I ,'

I."

···, B
. .

A I,ela) victory :for ,Macedonia looks hollow

, .'.
.

cash from the EU~ The European Bank for

to me et E,U cap italre quirem en t:s~ 'This has not gone down well run Buchsrest 'Iraian Basescu, the, president, thundered against banks that had made "huge' profits'; in Romania getting co dfeet during -_,~u__, a' ~,_1\'-" ,,_!: a 1("'['1' ,("','1' S' A"-' us' tt·ffi n b~(. nI11, .. s 'hi a' v' '$"1' n 'C' giv e"n re assurances that their Romanian operations are SOl id and will not be affected, But, jiust in case, Romania'S ce':ntral hiank i,s :pre= paring a. nbrild,ge 'bank'" thaJ would take' over any bi.g llio,cam institution threatene dl by
I ~

Reconstruction and Development recently cum its growth forecast for Romania tn '10,12 from 3~8'Qto 'Ll%,., '¥et the banks may present the greatest difficultie s, S orne 16'%, of Romania's banking sector is in the hands of Greek institutions Most of the r,est.~,ni c uding S ome of rhe largest banks, are owned 'by Austrian banks, which have been advised. by regulators in Vienna to. limit lending to their subsidiaries in order

I,

[~~I:"','~

~ ..'

...

":l

I,~.·\r'

.0

:'-··'~_,=I

..

,0 \r': .... Jjl,.·.1

,,=_,

L"'-

" ',' " ,'" ",', , '," "" d' I' an'," aOCOl"1uno'"d ('er whiic h' unntil th e .Issue ,' was resolved Greece 'would not prevent Macedonia from, joining international organisations so long as it 'went under the clunky la belof the Fo:rm,erYugos~av 'Republic of Macedonia, or FYRO M,. In :2 0 os, however, Gree ce'stepped N A '1"0 extending Macedonia an invitation to join~ TheMJace,doniarns argue·d that-this re:pr'ese nte d ,at b,re.ac'h of th e 19'95 agre e= mle;nt It is. this claim .'h"at the Ie] h,atsnow'
10;'
1'1'" I '" , ' ,', '",,' ,

Ih,e Hague at last gave, the M d let o 'E ..'Hc:e'.onUlns a ViC I..-, ry., In1995 the United Nations brokered
",-, I ' ,'-',',' -, '," ',,, --;, ,-

ith G'" ~t wu ..• reece over lJS name, KG reece lk \. nelieves it: ~m p Hiesa claim to a northern Greek region of the same name.) But on December sth judges ,at the Internauona]

'UlLD'ERS are putting the finishing .. touches to a triumphal arch In Skopje, - do ,- s ,,-, Maceuorna , cap]its 1 (abave v', ,t~:., .'-- ,t a ar ",'e).. re ..ror mos. ' f this small, poor country s 20 year o history there have been few triumphs", ~ ' Smcem,. d epers d ence In 1991M _..:aced oma .. ' has been locked ma debilitating dispute
.... .
-

'.

- ~,

I'

--

. '-

"-

I•

....

_'1

..

~_

.- ,

' ..

II-

"i'

"

'~'_.,"

C,'

II-:~

'I

"

"

",

"

--',

'

"

"","

",

..

"

""'"

':''',

'"

'

',=: " " " "

"

was no reason to suppose .U' would behave this wayagain And after the luling Anders Fogh Rasmussen, N'A TO"'S secretary-ge n eral, said that in 20 08 th e alliance, ha dldec~_e_ ,no t to inV.l._e M' lace_o __ "d d [0 i 't .. d nia until the name issue was. resolved;
i " "''', ',(' ','" I'" \" "'11"""-' ,'" "'" ._' , """, ',..

,'=

Court ofjusncein
I
i

this, he made clear; had nor changed. What about the European U'nion?' ., Smce 2~009·· reec€; 'has blc ck- d' t from ,. o·e· .11 offering Macedonia a date' for accession talks, luca.s 'Pap a demos, the new Greek prime minister, is preoccupied 'with the fin ancial crisis and uncomfortah le dealing with the 'name row With Greece now surviving on European loans, some: spy'
+
. ,", ",. -j"'

'"

II"'!

",

'G"

'.

[' '_ .._

'"

1'-

.'

-.

:;.

I'

I'-

,"':_:_.

.'.

ru,ns lliven,c,y;, 0

'Th,e health'='care system, is another h ead= ,a,che-;;Oive:rworked and und,elpa.~,d,,do,ctors h.~v,e threattene,d to, emulate, t'h,eir counteIu P,~ri'
'~,e . 1!J..j]I,. I:!n"
110;; .. .

'upheld~ ¥et Maoedoniats

S'...,'110::, -vc::·~kl::';i~ '-w:~'~'h0" r··~'£"~'gn· I !o. dl . °n'-' , ml...'~IS:IW!'II/;; -I . u.w.u, ,".,II/;;"JIJIl_: ~ a· ,e~,

!earli;er this. monmh~Th,e 'Ro:man'i.an gov,ernment's propose,d levy~ 'w,hfuc:h wjllli o'b,U,ge, patients to pay ~or ,tt 'portion of th,emr tre'a.tmen.t~ h,as b,een w',emlcom'ed by finan,c:ie:rs" !Part .oJ' ,at drfuv'e to p1rilva,tis.e' th,e straine d, po st= 'Com.munmst, h,ealt'h-C8rre system; th,e fee
aim,s to 'bring in J78m lei ($u/j.m}; mo,n,ey

vilcto:ry illooks honow~ at least for now~ T,h,e'Icourt refused to :i.nstrulct Greeoe to r,efrain fro,m, simH,aI C'o,nd,uct in the fu.tu're,~ arguing that: thlere

the long-runnlng di spute, Bum thatlooks naive, Spyros Economides, an, academic at the London 5C'hi' '0"'0"'1 of E· con 0' m, 1"cs says that n 0" p-. sure hats bee:n p'ut on Gr1eece to let Mac= e-don.ia. begin lEU acc'ession talks" and he dlo,es not expect any now" Th.e leuro c.risi,s means t~hatt nlargement i.sh,ardly' a :prr.ior= e ity·fol Europe~ ]nlde'ed~, an:y' c.O'u'ntries m are quite happy to ~find any 'exc,use: not to p'ursu,e :it Gr1eek. ;0 bjections o'ver Mace"do--1' CA 1! ,g_' • 6t nl" Sn'~m· W "11 do n1,' ~ Jly~
... , .. ..... , ..... \;" .. / " ..... ., .. ,.;:J", OJI'U _' .. II, ,QIU .. ..

an opportunity for its ,EU' creditors, many' of whom find Greek intransigence tiresome, to demand more fl,exi,bffilit~l' over

·,,4C,,1,~,jJI'

'!:il ~

i'~ OJ -

,I.·

'!

m'ha.t hnspitals can then spend, on better lequru,p:me'n.t or saJ,aries,. But :m,e,dtccd, pifofession,a]s don,'m ~ike, it ~'i'This fee will hit the, most vu]n er,a,'bl!e a.nd. in cre,a.s'€ in!equalm,~~es/' says 'VasUe ,A,starast'o'ae:t. h:ead .of the'

co'untry"s m,edfucaJ. ,counciL "snCl+~l co'ntt·~bu !!J). ~htO a ]0' ~dd 'dIo I'I!;;O:.! squo. 'tl' on·",,';' =w,"~rl "'·ontl'!nuo *'0' 'bo m,ov"".od on "'1]'1'r,o-,I.'\;; .>~ J!J,~' '/ '{;;,'v-, ',C'," ,,~. .. u-Ing '.,C" {',-""C'I i'-"·'C"'~' .' ts ennes" m,e,- 'I, ,-d"",-,:- pensJIlons a.n,d Irenl.,~" a.n-da.n. increase in vaJ,ue-,aJ.'d,de'd, tax: pa.ssleid mast 'year 'wiU stay dlespite caUs from foreign. :in= vestors to To'wer it again,., Red tape an,d cor= :ruption are stiU, a plat,gue.~ an,d Clourt pr.oc,e= dUlles ,are lengthy ,anid itn,cons.istent Q,ne of the Icounmryts m,ost senior ju,ldges~ Gabriela
..... ,(;\·.·.1. I~
A-O 1·.'!I;;~Zi~' I~!

; :Y'

,!

.• 1· 1.~.w.J.··'-

,IIOJI'

..... '. I JII

1110.,.,,1·

1,,1

11/;;"

.•

il·

,0,
',,:

':1 ,.

'C'

--I-,'e·

:'

'e-

B:irsan; is. und.er investig,n"ion for ,alillegedl:y acce,pting bribes in ,excha.ng:ie; for issuing fa.v'ourablill,e ve'rdicts~ 'fl' arn·'C"'· ,t.ili:iiiill-I 1.IUllI..IIl: ~ AUllm"'" C"O'-"li't h'C"a.' ~f"0- 'IU R:,n'm'-, , ~ ... ';:]1'n"'C'ls- pC'n~~IS-Jt, ,~r'-s:-,.. th'E:Y' believe: th'e e cono':mic, ,crisis will last for ,mo:n:~ m.h.a.nth.ree ye.ars.. Two,=thirds. say they ~larv'eb1e,en ,affected by' r,ed,undla~nc~es or wa_gle cuts .. Only 7'% ,atppllove of the gov'= ernme'nfs handlm,g of th,e cris:is~ Bracing 'h "bl or nsru,.. ' ~' storm,y tl.m,es 3l "ea d s.eems se ··1··1·· ' ,e~ I
~." II,~, .....

lU.

..

'ni.

...

·'1

·'1··

'··1···

'. "····1,'

...

.,'

'I····

'...'

Euro,p@ 59'

Charlemagne

Those obstructive

rits

T
,II,;;

What price ,B,ritain"'s interest? French president and German chancellor, h,atd all but given Brit- Britain should worry Mr Cameron's price for his assent to,treaty ain an ultimatum: accept their plan to rewrite the laws of the EU'" change is unclear, Officials speak of changes to, EU employment or promptthe 17 members of the euro zone to, seek a separate deal laws; guarantees that EU regulation will not harm Britain's finanand risk British isolation, Mr Cameron said he would veto any cial-services industry; mechanisms to ensure that the euro "ins" !dom'io,ate' th,e "o,uts~"; nd preservi:n,g th,e s~'ngle m,arket a treaty that dtd not contain "safeguards" to protect British inter- do,:n,tm, -:--::--:-1"' , _ -:-~~111 ~~ ~ ests; if :h,e !euro z!Q,ne w.ante,d a mre,aty change,~ so did B,r.itain" y.., -_ ,~ -, __a .Y No!n' ,of-~'hl';e;,W 11 b,~,~',~\S:-::~ F'ran' c"Qand_ Q,thoOlI'-'S- WllLw,r--,~if["I"'s~'~n- h~nA whiff of Margaret Thatch,e-:r a.nd he'r b'attles for a 'budget re- .of usQ'cia] dump,ing';' ~y 'Brittd,n~ Sp"e,cfal pleading fDr the IC1ty of 'bate? Th,e zealots on, th,e Tory b,atckbien,ches, w[sh mtw,€n~~s.o"Just as Lon,don gets short shrift' fto:m tho;sie w'ho thinlk '~'A'nglo=S;,ax:on : th,e; illon ma.d'y want',ed he'r 'm.o,ne'y 'ba.ck" mh,ey' want Mr Cameron to sp,ecul,ators: cause'd, th!€ crisls, and 'may' be, plotting to. desmro,y th,e ,g,et some (o.rall) EU pow'ers back", For them, the pr~m,e:mjnister is 'enro"" B;ritain has m,O[le su,p:por~' when it seelk:s to de-fe~n,dth,e sm,gle But fat too fllexibme~ He has resisted caUs. fo:r a British r,eferend,um., He, m,atket and, t'h,e ilnteriests of t'he 'euro, ~~,outs'~~", its friends are has, said his priority is to fin,d a solutjon to th,e le:urocrisis~ ,And hie wary: if Britain gets s:pecilal :prote'ction JOt th,e C~ly~ w'hy 'not exhas given hjmse~f illots of' room to ,d[e:cmde whjch, interests to' de~ ten,d, favours for mh,e car ~n,d'ust][y in, IG'ermany' or agrmculture :in fe'nd,~'The Eu'~slawyer,s.tmoreov'er"hav,e ,come'u,p with a 'p,8lrtia~,fix Pran,c:e1' And most ';'o:uts~' d,o not want mo be mo,oclosle~y ass,Q,cmated ,ann, is to 'b e eo:m,e' ~'in s'~' ~ 80 t'hat chang,es to g'ov'erna"nc,e ru~es will :require only' a 'vote by' wruth H:rmtadn; thej r 'ul ~:mma h:~ the 27 le.atlders\~ r.ather tha,n a full revision p,ro,cedure ~,nvolvin.,g a Mr Cameron has to b,ala.n,ee' ati'ms that may b"e trre,con,cHab],e'~ conV',entio'n; an runter-governme:ntal oonferen,ce ,31n,d rammfiea.mion, in In, the, short te'rm h,e m'ust ,tJ[v,ert th,e [coUa.ps,e .of th!€ euro zon,e Blnd llJ.re'v,ent a d!€biUttltm.ng 'mutin,y' 'within his ,own part)& This could ami27 countrmes (includi'n,g some referendums)~ British, officials lik,e t'his idle-a i(though ~heir ,p,tlrrU.a.m,er.u: woullid p,ush h]i'm into letting the e'uro zone ,go,its ow·n w,ay in ordier to stUI have to rat~fy the, ,chan,g,es), b,ut the G'@'Im.ans think It does not ,avoid ,Q diffii(:uru.t Britfush ra.tifi(:a tion,. B'ut' his lliong'e-r=term funt,erests :pr,ov~,d'eienough, 'poW'iers, to impose fi,slcal dtiscirplin[e,. Yet eV'ien if a s,ugg[est he sho'uId m,ode'I.ate his, bid.'ding to, ,aUow treaty' chang',e ,at t_t 'r'" ", '[ , ",', .,' b_us.t, up- cmn b aver--if d ,]l~ WOU md on 1_e ." ypos t pone , th- e,'' [' ree {Q,nIn,g" :2'7' and rema.in at the ta.ble", 'Why'? 10. pre serve the sin,g'llie :m,aIket, p'oomot,.e BriUsh ~n.tlu[en,ce an,d Q,ctas a p'rom,ot,er of economic. ill~,bS~,ow~,y c!'uickly; :Briltain a:n,d,the euro zone are mov:ing ap'art 'o.:r eraHsm=~or th,e: sake ofBrita~:n and :Europe,., • EU 'Vl~:tera:ns might see this as just. another British Sp,att lnit],aUy fJn:lu,ded from the !c~'ub,'by Charles die GauUe~, B:rita,in hats b"een fCllliv'Ocal albout EUlope:an integration !eve'rsin,ce itjo]ned in 1913'ji
Days earlier lin,Paris, Nicolas Sarkozy an,d Angela Merkel, the
1

HER'E was a,time.just a few' months ago when 'David Camer, on was the toast of Brussels, Those who fretted about Britain's new Con servan ive prim minist ~'I' d eclared Burosceptic were I, " ' ~,',JIl surprised b~l ow accommodating he could be, He, did not stand, h in the way' of the euro zone's new treaty to create a permanent rescue fund," He even helped to bai] out Ireland, But, now that yet another treaty change looms, the old resentment of the perfidious Brits is returning. For many European leaders, itts Britain that stands in the way of their attempt to save their currency from catastrophe ..1m not the only problem facing is them, of COUtS,€, but as this, column. went tc press Mr Cameron was set for a hard negotiation at a summit on December sth-sth ..
,H, "

;:"11,;;;

.'

',_"

II/;;

I~' 11/;;,

JI,

.lII.;:"

,II/;; '[!i

'~i U

'

'.I.,

II,;;

",

;:],11,;;;

')

"

II,;;

,and again Mrs Me.i'kelli has yielded to lvIT Sarkozy on the form of' "economic government" to try' to win tougher controls on national debt and de fi cits, Wb .. atever' the process, the euro zone will be tempted to tamper with the single market, Take the latest Germen-French missive; on Decemberrth.It speaks of euro-zone action on financial regulation, labour markets, at financial-transac1'~o'n' of th oOl IrQ[iIf'n o!rl u ~ -tax--: '5,:',0. Th' ,fO,D l ate ba t'l~'o'n 't8-: x and the h '~r=m' ' 0' 'n~ i ' .. ,- ,-, - , , b h ," :Sh .ou 'ld a 1'1 matters f.or t e'EU at 27"not at 17" o .be
• I •

It' got its. budget reba tie, stayed OU~ of the Schengen free-trave area, opted out of the euro, stayed half-out of co-operation on judicial and police affairs and is blocki ng attempts to create' stronger com mon defence an d foreign policies, Its 'big reason for sticking with the EU' is the single market, This is one area where Britain seeks deeper integration, particularl Y' in freeing up services, But th is cri sls really is different. Like the churning of milk to. make butter, the financiat turmoil IDSseparating :Brit,ai:n, from th,e euro zone ~.As it forces e'uoo-zon[€ countries to bind closer, th!€ cri'S, SIS convmces H,' '~t'! " ': 0,f th" wis ,'-',:' !0_, seepmg the poun d,'."orne =I ons ,-; ne zisd om 'f ne , say Britain woul d grow faster if:it could shed more lEU rules EUllOfederalists and EUlosoe'pmi cs alike feel vindic,att€ d: monetary 'union cannot W,-'_''ork vith O-'-iU'I't' ..... n 0-m 'I''''' o nd 'P'::-'O-~~ltI"C-'~~ u nity Und QI"llV [.Il~ , ' " __ gr10pressure from the markets ~leade rs are having to address wh at the French caJlli fhe,fi,nalit,€, p[ol'itiq'ue" the end point; United Nations, or United States of Europe? Nobody' win say., Either 'w'a~,the euro Ion e is heading for more ~ederalism, an d lBrltain ma~{'ry to regain t more sovereignty M'l' S.ilrlto'zy~in,particular, sees an opportunity to turn the euro zone into. an €xclusiv'e, (and perhaps more protectionistl hard core, dominated 'by France and Germany There wou d be ever more summits of the euro members during the crisis, he wants the:m monthly, Germany is more careful about ensuring the in= -lli~ - -- -f' vo vemen-t 0, EU b 00 resan.', eten non- euro mem b -,-- B I 'tt, ..,--- . _ -d'" - - rdth - te ,- -- - - '--- --, ,- rers, IUlllme "
= ,." "I' ~

[',

]1",'

,",-

'I'

'I

·,'1"'"

,'Il;;rbU..Ll.L,I,

','c

w'

'!L.,,_

,_,

!bo

_'

_,_IJIlJl!,

,~,(,.ilJll

111.,

.'"

'

,_'

.....

',.:

'.

',_ "

...

,'

,.'

j'

'I

""1

"11"

••

"

I"

'"

•,

"

"

,-,

.,=\

.. "

'C",

".'

','

- ••••

""

lIE" .;]1"
-

'~'."".

(;-,

,U

r,

.,_,'

'f' '~' llLJ'CiLL 1

",'".

....

"~.~'"

.(lL.

-."_

..

!C;., .•..

Q ~.-:J~

'

"

,~

,-

"

'

,-

.-- "

_- IQ ,.;;

,_

I~,- ,,;)

'I!,;; ".;;"'

I~,

~.

!b"~

. _It

"J[,

I~

','

I'~'

'--I

',,'

--,['

'-':,'i"

'

",,-'

"

"

",

1[',,'

ru-

~-

,
yet

b rill iant.

Vlsua Ily stu n n i ng and in [red i blly tough! Corn lng®'Gori 1111;a®'G lass will change the way you think about glass, Its exceptional damage resistance helps protect today's most sophisticated mobile device's;from the scratches, drops, and bumps of everyday use. C'OfTi ~rig Gori lla Gilass r s cu rrently featu red on millions of the world's [0011 est srnartphones, slates, and tablets, lis ~t n yours?' o Learn more at CorningGorilllaGlas'S.com

D,l

Also 'in thts secti'on

For daily l3'maly:s,ffis and debate on Britain, visit

Economi st.,c'D,ml.l bri1l:ain

Ref'orm;'n g' welfar'@

Nice work if you can find it

· i~~i~~Lei!nt~f~!~t::;~~;:.t~~~,~~ I
I~,. ~~ _.. .. '!i;" ...

centre run 'by' a private contractor +part of a bold government-funded project to gem the
unemployed into work, The backdrop is forbidding.Iob growth in the private sector is weak, and publicsector jobs are disappearing, Fully 2~,6:2m pe onle represe ntin 'g. 8"-' 3'01 0- f Britain,~",~opv !""c-, tentia workforce, are unemployed A growing number of people have Ianzuished on benefits £0' ~Ir--'m any m onths and I. '. even years (s e e chart), Ministers desp erately' want toO avoid a return, to "hysteresis", an ugly word for the u,gly phenomenon of systemic unemployment that pe-rsists even"l_>~,I'Il;,..-L t- he' e- onomy '=~~ ._L1.:,j;~ when j, c ,.-~J-L~_, I' mproves .' Other countries have successfully ImI~ml"!~nl welfa - -~ Ill., ,Jl.{ ·p1ro· P .!!;; ,.~ ted W!!;;i ne-ro-weW ·,r·~l,=, :' g,c'r-~m'~"" 1m" Few have done so in such daunting circumstances, Ameri ca' s Clinton-era re,c :-c

like at typical factory floor, Security guards pace the 'premises as workers go about their tasks ..So me- sit at terminals completing forms on computers, In the canteen staff prepare for the lunchtime rush", The difference is that most of the people here are 'not :in aj ob at alill~ at an employment but

Sweden delivered changes in a, harsher elirna . te,-soon after the 20.'-".'o.,:- recession, but ..8:~·· ... =~ ~ many of the resultmgjobs were sponso-red, by . O'I'C" a1 ~'U'thoriti es--n 10' ,"t'- vhat B···n"~'~fnl(" ..'r u.w.mConservative-ledcoal ttion has in mi nd. The government has s,et about: a, thorough reform of benefits, lam Duncan Smith, th e work an d p ensions secretary wants to replace six housing and work benefits 'with a single universal credit. He also 'wants a cap of.' £a6;()O'iO ($40,747)1 on, the amount that can be, paid to a single household, to ensure- that th ose Ie ID:ng on welfare do not make more than average working folk, Some Church of' England
,;,1= . ~_, . . .. , Q,. '1,;;;;... . -w'

b ishops have declared this cap "profoundly unjust" (see Bagehot). But the Work Programme, launched in June",is the 'big idea for getti ng more people off handouts. it has ccmmissionedrs main id provic ers to d enver 40' contracts across r 1-" Britain at a cost of up to £,5 billion. Sevenyear contracts to remove the uncertainty of changeable government schemes are couple d with incentive s to get p eople into long-term jobs and keep them there, EO S:; the contractor which runs the SoH,hun centre, has attempted to replicate workplaces, Local firms can set up shop in its employment centres to try' out employ-

..,

.1IJ.u,

.-:l

ees, Fro:m a gallery above the shop floor, prospective bosses can moot down on those ,g'oin"g' b out their tasks and sele ct the a
-'-' .. '*' •... igem -t-' mOSI~, dili 11.

I;,..,_:,

':_"~

_:

,I, _:'_"',_

. .fO'

,_I

,'1;.1.

..

,;;;:I!

,__

~ ' A mountain 'to c[I b d awn trnn

IJ nem ploym,elflt _,

plumbing and baste construction are taught" while in classrooms, jobseekersknown as "clients't+learn how to use the internet and personal networks to sniff out ~ ocal j ob S4 Steven Bell, an :B'O!S manager, brus es s at I~, -- are few.'io ,"" I~,,_ a- ido, th 'W··.'·'O'~Ir-ry- ',,-,' th 'n th eo're u \..- ""'"- JI'.'_.' bs to . , be had, In a tight labour market, he says,
I[ '~.' ,iCii ,I;,.. . ' ;Q; fI;,.. '".
c' .' "

.. 11,·. worzers,

''liiil' .

d"rraae ..

,,111,.,'ru-}SKll S 111ik e lll.·· "

,~,

c ..

.:;Ii

.:

.. ,._

'Ii.r

""',

._

,I ,_.,

!U....:::Ii

~"

dai mant count, m Lip to 3 months Between 3 and 6mnonths.

Betw'e€ n 6 and 12 m onths Ove'r 12 months 1.6
11:.. ,.•
c":j,

people have to adjust their expectations; there are always unfilled vacancies. Twob '.'.. ,11 ,.111'1' ' - - ..' ,-",' gramme are. O.nJ'O.'.se.e.lce.rs auowanee ~ +b'.a . .'sic unemployment benefit, Placing one of them in sustamed 'work earns the, eontrac.... '.' . ,.' ,···c ',' -'(" , I' " '. ',' 'Ie 1 ' "

thirds of those on lithe company's

pro-

••. ,.

I~_~

··,.0·
I:

··~riJI,. 'Q€',

forms we're enacted at a,time of falling unemployment, Australia, which mfunist.t;~rs visited wh,en_ drawrun,g up the British platn elisa fatced a mess dire e,conOom~c o'u~lli,ook ,W~" n'.' 1 'bl,egan serlOUS ,,- ...- ..,~ .. ,-'. ': h· e 't . ,,:'.-:' ,,' .:.... '1':' relorms mn ,~004;; . .-,-~-,
t
'I',., ",
--'-I :-", :-",,',-

2006

.07

10

11

,cafe a.nd free Icomp,uteJ,~ :fat,cfulimies lurks the th-reat of b ene,fits forfeite d ~ EO'S ,q'uj,cl~lliy' se':nds oum reminde-rs t.o those :re,ferred D~7' • •

tor between £3;80.0 and £4;40,,0;; The remaining third suffer from a. variety .of health problems, from physical disability ..- :.. -,----:'.-. . t .0 ch ronlC det -- --"- -- R-'.,ea .'Y:'---- -, -.--.nb_er ..epreSSlon", --' ad ln.g.atmem r"', -.-of this group for a. job, and sustaining him orher in one is worth a, total of £13",'7,00". :B eside s de lightful things ID,ID,ke at gym~ a
J"

.OJ

,...

" ..

'I

I"

J'

.'

.•.•.

-',

:1"

.:.

:'

.,,_.'

I'

["1"

.,"

62: lri'tai n

'The Economist, December iotr ,20Jl!1

~jobcentres who fail to turn. up, After that', they are notified that welfare payments can be withdrawn, No figures are yet available for how often this 'has happ en ed, though Chns Grayling, the minister responsible for the measures, insists that the, threat is ,~~ already chan gi ng behaviour".

hard - move people off incapacity b eneto fit. The number of appeals against decisions by independent assessors that people are fit for worm, has quadrupled in two ' -, '. i· ... '" years" fr om 68,000 In, 2009 to a, projecte d 2~4 .oo 0 'by the end 0 f this. financial o Cigars year--at a cost to the taxpayer of £.so,m~ Some believe that' the payment-by-tesults system itself ~ failing, ian Mulh,eirn s ,- .' - so, - - ,. '.' - e - ,-,_a. ion a. pro ,-,--, of th e socia,-1 M-' arrket f oun-de ti --,,---- -,-, re form think-tank, SH)lYS the- scheme is in danWhy size matters more than ever ger of financial collapse because many contractors aIle missing th eir targets: "The A GOOD cigar should be sm.eked slowfily and relished, reckoned Zino Davionlyquestion is when ministers will face up, to i,."~ He estimates that even the: most doff, a Swiss tobacco merchant; a puff a minute ~sabout right, according to his. efficient schemes can move' only 10'% more peop Ieto jobs who would not have found 1961 "Guide to. Cigar Btiquette". But fewer people are sparing the time, C,i gar sales work by themse vest have declined 'by at fifth ln I'he past five ,An,d you can :6nd it if 'you, ~ry years+part of a. general decline in smoking, 'Yetmmia ture cigars are hoI ding Hard dam are frustratingly lacking, Mr steady, They now make 'Up 60,% of the Grayling said recently that the Binningkdi ~ Brrtis h cigar market, accore ling to-N'ielsen, I '. ham programme had placed its i.oooth a research, firm .. , person in at job, without revealing how Fat. cigars are handmade--each dried many U had tried to help, And, there is antobacco leaf is visible--and m'ust b,e~ other gripe ~Besides cutting worklessn ess, carefully stored to keep them moist, Like the programme was intended to involve wine, they have- vintage years ..Aficionasmall charitable and voluntary providers docSrelish the girth, firmness. and fraas part of the 'Iories' inclusive "Big Society" ..]n practice, these sm,8111 outfits have grance of their cigars, They sport special u ~~I' off e q- ip m-- Qi,n.- - (mi'n- ~_'g'c-- J[Ji._ I0- ti n -e'-- s-' -:tak-" e u ' I.. ended 'up as subcontractors; they receive the cap) and foimow' clear-Iul,es, (ai"w,ays onIDy'a, small share of the funding' pot, :5' 0" m- a r s- :1·St 1·'nvo",lv'£ii'm ,;c, n'I,:W';il"t-h- ,jf'h- £ii'W'" :0' ~k- , 1Il ,. \... " , 'tlight yo:ur own cigar)" Th,ey atmSO' h.av'e famo-us patrons: Wmston Ch'ur-(:hil1 Programm'eii Amb"er~ a ch,arim'y' supporte:d, smoke,d six to ten. a day, usuaUy Cuban, by' a ,mmxt,u:r,e of' private' fund-rais.:ing ,andl grants,~ foc,n,ses o'n re-adyfun,g y,ou·n.g people, and ,gave h~,sname to ,at b,ran,d" L,o',m' " p'---' ,a'.'0' 'f': 'b.'!n. . o" !u-nl s'" 11.... I': -W~~O'' k:: M'" ~Inly'-::lc-~k-:-g::r' COl' 'r Mi,ni,at ure c.i:gars; by contrast,~ are ,a-re' ex-offen,ders with drug aMld a'i ,coho~ ll:niform" ,m a.s s-pro,duced a.n d d-ri,e-r, fiU,e d 'wit'h a blen,d of chopp"e,d tob,a.,eco rathe:r problems., Its chief ex"ecu,tiv'e-,~ Charles th,arl roIle,d ie'av,es from a. sing. e croO'p~ Drlew~ argu1es. that: the amo,unts ,e,arm,ar:ked Th,ere arle ,Even flav'O'ur,ed varietie's, 'such, {()or:moving such ha.rd ,ca.se's 'Ooff sickness as, vaniIma,~esp'fesso rUITltwist ,and c,ara'=' benefits are too low to coveI' th,e kind of mo:n,g=term ,re'haJb]ll:it:ation req,uir,e:d", ,uT'h,e:y mle.} cr~am cigars .. liQl1y ' l ~ Th'- h ,(.II[J'v_- ' b- e'el'o"m-, , \". m-" 0' r.19 po'" pu' III'!Jill' ,. need th'eir lives rebuilt b"efore m'h,ey can stay fun'work r-eillilably~ h e says~ ,,~ th,an marg-e.r v'ersions for two reas,ons,., Firstl~ th,e ban ,o.n smoking in w'Or:kp,ma,ces\~ As. t'h.e- jiob.].ess figures ,co,nti:n'u,e toO rise; :intro,dut(;ed in Sootland in 2,0'06 and thie som'e unflls.hi!ona'b],!e ],de.as are' returning., IGra.e:me' C,ook,~a.n an.a.],yst w"it'h thl€ Institute, rest of Bri tain in, 2007~A tY,pical ciga.r ~,asts '£0'. ., ._- ·lffi y-:: R·· ,Q'C,i~~r' -.-ch· "i"',o,n: t.....I,Qf,-t Q,-,' lIl'.. ',r' p--ub. .. ,c P".-o. -,1'1"'-c' think=tank~ belm ev'e 50 that t:h,e ,coal:i~ion should p;ro-vid1e s~at,e=spo:nsoreid job,s, to en= Thle pllo.gramme: c:annom~fbI' i:nsmanre; :hand s'ure that yo'un,gr an,d lli,on,_g'~'term jo,b:see:llicers out lavish Chil ,d-ca.re Ic~€,dmtsto ent~,cemor € 'wo:men b,ack to. wo.rl~,.Spe:nding cuts me,aD ,do:n't -stay in,the cold :for ~oo mong'~Althou,gh tha.t measur,es like state=-sponsor'ed Job,1IthecoaH.tru,on for.m,ally r'esists fhfusN'ew 1abour=,era iide.a~, th,e chan,ce llor r,e:,ee,ntlliy sU'p,port sche'moes. w:U! not lbe ,as g'ienero'us as they'w"ere un,d!er. Labou~r.. agx,eed to prov,id,e some 'wa,g:,e sub sru,d,ies for The c,oabtion's i.mpatt~,enlce with w:h,att ,co:mp,a:nies emp!~O'yi,ng jp"eopille who have Dav~,d ICameron,; the p!ri.m1e minister; cans strug,gllie"d to. 'fin,d 'work-and to ch,ann!el usicm{~note cu~tur!e:"~its laudable" So)is its de-~' i30 om into ,a.PP'lentic€ship' 5iCht~m,es,., B'ut th e ftsc:am SIq_ue eze lliimits op tions ~ terminaU,on to m,aJk'f state h.ctn,do,uts a. mast
-' I_, '-", _,' ""~ _,' ,'__ , ,,_._., __ -'_ " , '.
~'-:-I .___:._ . '-.: ,~. I . "I'

-- - - '-- men -t - .sources -d --- ' 'I'" -t '- -- -- ..-1-" ,',-,', pari-~'", - ii',' a 'I .-, - ----- - a'e nu~tth all, tI'" 1SprovmgI "", " ' .' .',
it.i -, :,' " ,

'But perhaps not quickly enough, D'le+.

"J '

-t '-,

,','

',:

'I I

'1

i ."

I' ," .

:",

:",

-:

-:

,"

11

",

1,":'.

. -,:

-::

i·-·

·1·:·

-,

_:

I.·

Up i' '.,smoke

"

'

;'

"i"-

-'

,-.'

:,'

",--

:' ", '

,'- - --,

Ii'"

--

",- i'

=' ',-- =

..

- I I;,LI..~.

I" 1

_I

'II;...

iIi-' 111...

j!,

___:

It.

lILIl'.-

iIf 0---: 111. ..

'

hA. .. -

',I

'.II

''I;,;r IIGi :' :', .....

'_

',,'!

i19

JIi.:

I , I~'

"'_

_'.II!

"',,

ji,I-.

...

..'

'.....

-..

I."j

....

J..

,d.

..

..•

'.~

IAL·

'.

,c

'a.

, .. ' \".

..

._J!.!A,I

at least ·45 minutes, but minis, take be= tween three and five minutes to smoke--a better choice for those forced out into the cold from formerly ashfriendly venues suchas pubs and gentlea '. L!~IL.I!J. rn en 's clu b (", Man ufa-I ctur ;O;1i"5 h'"ave tal n note: s,YG, a tobacco. company, launched "Moments" in April, named to reflect the appeal of a shorter smoke, The second reason is that 'people have --' ',. I ess money" .,- ib - Th· e ,t' hi ton_.ttor to ·UIn~ , .. las handmade, smokes inthe 1990'S pushed up their prices: a single cigar costs upwardsof £10 ($16)~But a ten-pack of c,ate C·- ,' ..reme, t- he most~.,-,' 11,'ar,- '. -rant d 0'f- 'mass',--, e .., p opu " b -,' -, " ,. -" 'produced cigars, retails for a little over £4 and is,sold in superrnarkers and corner shops" Mo ments lem gars and Cahstos, another new brand launched this year; are even cheaper, Since cigars are tax:edl by weig'ht~,th,e dutY' on a fat c:igar :is.far hig'h·er m'h,anth,e 43 % on a stand,ard pa,ek, a-cco[!ding to, the To b a.'ceo Ma.nufacture.rs' As.so ciation~ Even fIrms that h an,d--ron ci,gars a.reresponding t:o ~h,ese shi.t~s~ SaJes are :rismng of u's,hor~ro'bustos'; , stub by fa.t ,cigars ar-o'u'nd ,four in,ches lo'ng ma.de from 'h-,"'-'h-,--' "-~l':'t",t,~"r'" -, Wh-,,·"--h--- ,al{'e aou{ 19 , qua 11. .oWJaCCQ~'· .Ie 't-,l·-'b:'- ~" y 20 'mIn'utes to smQ'ke~ Smoldn.g- a. m:ass=' produced mini is a completely different eX,perience to at hJandl'~rolled variety~says Ryan Curtis of JJ Fox~,a. cigar m,erchant, . sI'n,ce '1787 tha.t is lo,cated 'faun d the corner from The E,cotl.omisfs oftices~ Connoisseurs mig'h.t sa.y :it was clos,e; 'but no ciga.r ..
!I/;;;' ...•.... ...

Wi..

".

.,'~.II>

,'U,''b,

'.0 U,j,'~' ,I

',-iii-

JIL

..

...

~,.,

ibU

...

"''"

'~i U

!li..1!I;;;

.. "J-I!I;;;

.~

..

resort ramh-er m'han ,a. way of mife,-'CJl goal th,at 'h" .... e'1 die\dl t·· lie p,re'VJlOu.s govern'm,ent" W,.· le h U,··I h·' , ,"",,·i8.w,@'SS. ", ,..=-" ··tl-".' .".-:-'.--I't --t-', ' none. th' 11 ,- -- ·th r'ew a. I,0., rn,Olr'€money ,(1. .... h,.'e. p:ro,bI'em,., Opinion 'po~]g sh,ow strong su,p,= port for an ov-e:rh,aw of welfare ..B,ut over= hyping t~h!eimp a.ct .of a. single programme when ~he stub'born oentral problem, is slow' f:'COnOmID'C ,gI,owt:h, ,does nOot se'em wise~ It is not just the 'unemploy,e:,d who have the:ir warl, !cut out

The, Economi,st December roth 201'1

Bagebot

God in austerity

ritaii

responding high point for the Church of England; says Lord Harries, ,at former bishop of Oxford and long-standing B,:S c broadcaster, The beginnings of a similar seriousness can be fellit tod.my~ The

ed when, church leaders question government policies, If bishops can make the front page; is the country as secular as all that, he asks? Actually, yes, The latest :B:ritish. Social Attitudes Survey shows just 20%, of the British public caning themselves members .0.1 the Church of England", down from 40'% in 198)"" Roman Catholicism (about one in. mien.of the population) is more stable, Half of the population say they have "no religion", MOlie than half "never" attend a religious service, Non-Christian faiths are growing but small (6% of the population).
The evi den ce that the Church 0 f Englan dis returning to the cen tre of public life ms ambiguous, 'Irue, religious music is popular, In some pI!aces that shows a yearning for faith" But mf cathedrals ar-e increa singly lti:" .... 'law it I' e' tn Pl· art because they are anIon' '-'.::' 'IQIU-;{'!, popu a -,~ a· '. y-:·m· admits a priest th ere is no danger o fb eing asked to visit a sick Piarishioner afterw ards Business is dJ;;],I, b o.nm·ing lIlJ"JIl commo'~I'1c...... lso ._" for , :', '.. .. d.J'l [' , l!J.1 s. 1.11/;;',;:)' .... 1',~', " ..... ..... 1"... h '. caror~I concerts In non-en1". urcn settmgs, wne re a. mince P'JIle- ancd.nostalgia are as much the lure' as harking the singing of herald angels, Across the country; Raymond Gubbag an impresario behind sevth e n'oya~ ill Alb ett H· ,O!J!,JI!,~ ~S' putting on "00 s 'U chi Chi'rist 111 111 ,K'<;, ... Jll~, eral" sh ows mas concerts, Nor ]s the St Paul's Cathedral camp as flattering as it seems, The,protesters wanted to surround the London Stock Exchange, Thwarted, they ended 'up at St Paul's largely by' accident, Head~ !jg.

Bishop 'Of Leicester; Tim Stevens, points to the headlines generat-

Corne all ye fairthful, and not

.!i:J

".

_<Jl.]

·jL"1

t~,

,.:l

\zig

~~

tU ' ~.::'

"L

j.'

.LJ,t

~h,at B,:r~ ain, is ~ ,d~e,~p s,e,cu]~r,;c,?~,~ry, ~ 1Y' t~l~I~ is a lot of God, about this Christmas ..Austerity IS a part of the explanation ... 'ith the core cultural activity of modern B:rit,ainW shopping for stuff- osing its lustre, there are hints of a, nation groping for something 'more profound, FOI millions, austerity Christmas will include a dose of carols.
O'NS]D ER IN'G

I. ~

- ,.

I.'~

.•. 01-

-,',w.

;:!;

'!II;)

11__

1"':'

'~liIt' ~l~,

1•

.1

"

,1_

I!JIi

1Jl'

.,. _1_,elIL

I,'

.. .',. I

,L;. .. i'

'

:,'

.,.

1Jli;;J!I_=

11..1 ~. ..

ab oun d. A l!ondon church, St ,Martin'-:in-th,e-Flelds; is offering "carols for shoppers", while across tOW'D the grand organ of the Royal Albert Hall, a '9',~997'-pipe monster, will pound through some two dozen carol concerts in December, Anglican voices are prominent Ern less cosy contexts, too", On December 6th the Archbishop of Canterbury, Rowan Williams" made front-p age news with a commentary on the riots that gripped English towns last August, Too many y'Dung people feel they have nothing to lose, the archbishop argued, decrying Icon= .', '1'1'1,-'1"', 'I ", d.govemmen t' cu,t·..: tc you n_" services :" S ,0 " ''',' h ',':" "", ',"'" ,~~fortnieht " A' ror rugn sumensm an", ",- "1 II!'I earlier.is Angli cern bishops woo te a joint letter condemning p lans cor a· p,.o r-hl o'ue oh' 'O~I I b ,o'n .0,6't's C'R''p: 'I"nt.on" d' d to .on: 'su'r'.o ~'h ~It· -w- .ol~"::.'Ii d' .1IlaI~ Iecip~,ients do n.o 'better than. mh,e aVl~;rage worlkJng fal'm'ily)~ This risk,ed b"eing "~p'rofo'un,dly''u'njust" toO p,oo:r families with c'hlldren, said. the b,~shop,s,~ ",,' T"h A ng ~-I' curl.. cl1- h 'becom,e r.at h er. pro.prIletO[Hl m a out ,e Itan 'h ·a.s, , antj~,fin,a.n{:eprotest,e:rs campedl in th,e Cmty of' .Lo:nJjon outsid,e St P,Hl'uI's Ca,thedr.al, after at n1u,d,dlliedl ini ti am resp' ons,e that s.aw' twn, senio:r ,elergyme:n :resign", Yes~ tt.~.'eprotest.ers' de'man,ds lare vatlue~, bu,t that just shows thatt. the 'Ch,urch. of Engilland is used, ,as. ,at phl:ce to ,air soc:ie,-y"s ('unspol~e'n an'xietmes'~\ suggested, Arch'his-ho,p W:Lliams ~,ast:month~ Tfhe Bishop of Londo'n, ha.s o,rganise-d me'e,t~.ngs 'betwleen. O!C(UP'Y 'London p,rotesm,ers and th,e chief fin.anci.alre'gur ,th l~lt!OI H~,c'ta!r- 's' '~Int~' 10'-::,I'n 'hOIm· Ii:!!It~ 'n'I0t~, ~I p''rlo,,~,t [I Apor' t·,~ ~It· t-w'=::,o', u. . ., protest,ers h,a.ve started a.ttending cath,edral sle:rvj.oes,~ It is possible tOosee w"hy' :so:me An,g'],ican clergym'en .are buUish ab'out mh,eir chul",c:h"g reill'f:Van'C'f in, auste:r~.ty iBritain, d'E:S.pite· ,de= c.ades of' faUin,g' ,alttie n dance ,atMld gib"es a.bo'ut wo,oU.y" w,afi1y' p,riests ". ' " '-I '.• ',,~ '. - d,' , t "ow d"l''"f:'." -, 'd: ' ., d·" , f~·t W.I~.ngrun"g_t'-h-I elr h, a.n.·_S a_ h·, "" ", c.omp, ,'l~ u:a.I~e·_,iJll-e IS~ T·h·, 1e._.fCa:._,e a.er th1e s-ec,on,d, wor~d, wax w"it:nessed a unew s,ermousn.ess'" an,d a Icor.' _ _.~, I
J

The trend has been noticeable 'for a. couple of years, The great cathedrals expect m,oQ packed on 'Christmas Eve, Charity 'be services, family services) carols 'by candlelight and sing-along concerts

h:il1~

j'

.:),',

_ ••

J~'

I~.....

.' ' __ ~ \

I~J!Ik;,

1 I .0 ~.,

',..

'1;;,

.,'".

.~'!t

. aL

'~': .. ~

-.:.0

-i'-

,',""-",'",.'''''1-

-1'-'

--,-"""''''-_,,

,-",~,

:-I,'-',-_'-"'-,'

,,-,,-,

'-1-

'-1"'--;:':-'"

"

-c ,"'" i

,-:,--;

b-

1-

'I

,~

"

. ,II,;;.

....

·U

I~ .:J,., .

..,

"'l

.1I,;;;,1!!,:;;

~''''~

- . .w.~;JI

'"

"i:)

,~.

,.'

ines about bishops chiding the government are also doubleedged, Too often, 'what is, striking 'is not the daring .0.(' Anglican prelates but their ack of self-confidence, Time and again, 'bishops sound like shop stewards for the welfare state, biking to the airwaves to demand the preservation of specific benefits 'without mentioning the church, the role of faith 'Dr Christianity, Wellifare utopianism is an Anglican tradition, In the 19,4.08 the church embraced the welfare state as a. modern" professlonal aJ.temative to. chanty willingly dismantlmg voluntary relief net",:"~.-:-, ..~l,-, ,'i _:, ",' ·'h'-,",,-, ' , 1", " - Ita " wO!'1.{S an, d . ssgnmg over 'd!:h, -.", '-, ds So 0 f', c. urc ·:h sc h' ,OO,S, 'h-','ospt ,at s ~ ousan and other bodies to the s tate notes Linrda Woodh ead of"Lances\1"\1' [ .. ~a,. ter University, In a 19B5 report the, church, attacked Margaret T'hatcher for :p'ut~ing' e'c.'Oonornic. !efficienc,y mh,ea.d. of w'e~fare Sh,e ~ t'ft-orted, that church'='going- is ,not ,about wanting bs,ocial reform.s ,and be·nefits"" b'ut abo'ut spiritulal red.em'ption and" :in.d,e'ed,~ 'God~ Jhe ch,urch has a 'perfect right to ,comment o'n politics~ says Lord Harrie:s~ if' you lDv'e 'your. neigh,bo'Ur~ you must :have a view 'Dn polli],cile's tha1lt aftIDect hjg w"elfare;; At mhe sa:m.e tim'e:; h,e aIgue's~,the Engli sh h.a.v'e' a.lliways belen reti cen t ,a'bout reUgi()us languag'e ~'The ,c~,eIg~,. :m,'u,st us,e [!e1igmo'u,s m.ma.g.ery "ve-ry shyly'~)otherwise, the EngUsh immediam.e]y ba.ck ,aw-a~ Eait ,en,ough~ En,g'land. :is,an o,d!dp ltu:e: a se'c ular co:un~f'Y'where ,arn estabHshed (:h'urch stiU, has a. role in public life (an,d~o'n th,e \,• .,. ,~I-y- ,.~' gr'O','und', dl ,O",Qe 'm'luc:h ~I""uno ;g-,!o,od' B'ul't l':h~' ~con' aim" ,y~ 'm·.,a _:. b,~ .0 '.... } ,atbout to fa.mI off a, cliff" Th,at :po,ses at h,'u,g'e test' :for the Church of E,nglliand an,d its .claims. to be a SOU]h"'ce of' nationa.I 'stren,gth ..lf th,e; ,ehun:h c.annDt' offer. ,a message more spiky a:n.d !disttn,ctive mhan so c:ial,de'mo crOley in a clerilcad col~a,[;it will fail tha.t test _
I
'-':1
{I' ~'-:', _:, I, I

~,

~ lIL ..

,_

~ i:J'!UI'

,!!;;

I~,UIl.~,

..

~;JI,

.0.·

'LU;JI

_.

~.;Ji

..

U.I

JIL~.;Ji.

I~:

".j

.I

"I"

,-'

I'

1fi.,

The captain and his crew wish 'you a delicious, journey with top-notch chefs' menus and grands crus wines, in La Premiere First Class" gour'met meals and fine wines in Affaires Business Class" varied menus in Voyageur Economy Class, and complimentary Champagne served in all classes on long-haul fl'ig,hts,~
*0 n a.11u.s. ro utes exce pt. 0 rl a n do- P,a ri s

,A.RF,RA " CE KLM

airfrance.us

making the sky the best place on earth

'H' ong .~.ongm.'H'-on .uras ,.-. '17...-- ,~. ' ndi ..

-1-

City building

67 Rea,li ,S1ng a milbe rtarla n dr'ea'l11

~ t ~.A n.am,b,~- d-I 1.1110U5·_,eveopmentprojectatms ~ Its .v mlse'. ";:7', C.".~ j_1''!iI.: w ·rlk· ',7' ..r Jil ' _, - ~. econemlc ~ ~_, . .. _
, ."', " --,' I .. ,._ . _". '_'.' __: . -. . .- ", -, . -. -' . __:__.'.
1 . -' ,

. ...

t_Op-,l..,aC'" tr;,,11 merlcan,COWl-,rYOll I 't ..-'.'f. 01-1- ·.·.e,n_1 m-I A ~ t .... 0,

1 r. -" .' . -' ,-, " -•. ~ . • -'. .... ::..:: -. '_' .. ". " .. '.-'.' -, '.:.' .' -

surrounded by lagoons and mountains on the northern coast of Honduras was where Christopher Columbus set foot: on the American continent during his fourth
voyage in
15{)2~~ ut B

I'with a lotisa sleepy backwater, but one ,. of history th,e' beautiful bay
_Q!.
<Ii

,gin

·:0· ..

RUj1LI0

in a few decades, it might be known for something entirely different being the Hong I(o:ng of the, We·st Scores of skvsc rap ers an d.,llll ton of I-'~' mf ...... '°'0'-' {Y ple could one day surround thi€ natural harbour, The, new city could dominate Honduras, today' one of the poorest and most crime-ridden countries in Central America, becoming a magnet for most of the region's migrants, The prospect may' SOlU1,d fantastic, but
'!!u.o.
f'!;;;§)1 ,

.:l

Ui'

'a;;\., - !J(;;;)I'

Iof" .-:l.....

p-

am amendment malting them possible and. i 'r·o· . ~I '. .... ~ ap'p--v!!;:;... ,1'7"-::,o.-dl d,' "constituti 'liOn"·a'-: sta ·tul~ *h· I'~*' creates their autonomous legal framework, Mauritius has just announced that it will allow its supreme court to hear cases from the new entities (beyond that" in OJ, relit: ofcolonialism.is Britain's Privy Council, to which the decisions of' the island state's supreme CO'Uft can. be, appealed), And on 'D!-..:,·· ~:-.. ber sth p''-lOr flO 0 0" tho e·,'Honuran , .. . ece,m.- .,:,-.: '" ·61:""1'- ",·,L'I·'b" ....., . id -1presid appointed the fl'" rst m emi ~!~lf~ of I . _. U the "transparency commission", the, body that will oversee the new' entitie s' int,e,grffi.t~
111,·· _.. Y ", .~ .:ll~,

t-Q:i!; ... " -II,;;;

I~.

IGU

:-.:-"j '-".,c,:::' * h y 'p..,au 1 R'ome,r~ ,a.n econommcs prOle ssor .a..I~ ~- . . New York University The, principle russimple: take ,a piece of uninhabited land b1ig enough for a cityof several million, govern it b,y well-tried rules and let those who like the ide at move there, The aim TItS 11'0' rep licate
i' . ",'

--1-'

r..

II'-c.:__'~-·

-1'1

;1·,

iI

,--

It
.

'1-

!I;;;..'"

,Q1V'ltfi. _ .!I;;;..Jl.lI~,!!,

~,'

'Lr

. ,,"'",

..:;l!

"'",

",",Jlo;l1_

this is the goal of an amb ~.ti us developo ment project that Honduras is about to embark upon ..In a nutshell, the Honduran government wants to create wh a.m, amounts to internal start-up s- quasi-independent city-states that begin with a clean s1a.h~and, ,are then o,verse,en b,y o:uts.itde' experts,~ J'hey wiU hav'e' their own. go,yern= m.ent; write their own laws~,man,at,g'e: their own, icurre:ncy' .and; e've:n.tuaID1:y;h.oilld their own e].ectID,on.s.~ T!hffi.s 'year the H,on,iduran legislature, has taken ~'he first big ste·ps tow,ards, the 'Cle'~I*'~on of" w= h,~t ~t c'''JIi lod .- ,u'enoC'~~lldo.--olop '.(ita lal. 'alt ~: .3,~"~:J."' ..•!~v~ " me:nt regilon's.""~It has 'p,asse d a ,co:nstitution:-'
l' .' I
.1-

Rn.d'in,g new worlds The road to a Honduran Hong Kong will 'be long and rough, Forming the transparency commission proved more difficult than ex... QU;;';,w.
'11;;;" .

JII'

'.

11l

pe-cte-d .. ]t has taken longer to find candidates with., the right s-,'k.·l:"1 ~I~, Then Hondur a .. an Wll~ . t" .U ,"'!f;; officials seem ed to have second tho ·u·"ghts about the commission, But for enthusiasts, the progress S'D far 'is stil] thrilling, Th,e development regions, they -SEi)r,. wiU ,aUow poU,ci,e's t,o 'be- tested, on a sm,ali sc.allie~If th,e:ir ~aws and mnstit.u,tions make them an amtra.ctiv·e p~ac.e to ill~.ve and do busID.n!ess; peopillie 'wilill mn'v,e therle~ They co'uJ[,dl also prov~d,e' :heaJ.thy c:,ompeUtfuon for th,e gove:rnme:nt and spur r,eform,~ TIle Hon,d'ura.n regions ,a-rem.od,eH,e·d. on a,(:on.,ce'pt can,ed, ~'charter (:ittiles" de,y,elo:ped,
~.:l..
.,!;;;" , . ..

Y.

\",,w,{IIl

'!I;;, ~

I 11,;;;.

". ....

,g_ v!;;;

bY

, .. . !~,

'.,.,

Ui

theory" that he helped develop in. the 19'9"OS~ T,hils adds ideas--p artieularly technological know-how -to the inputs of' land, labour and capital that in traditional economic theory are needed for growth, More recently he h as focused on. the- rules of open science and governance systems, which help people to deal with each other and think up ideas ~ 'Joidlay 'his main interest is ~ eta -rule s": 'm how to m.ov'e from bad rU].es; w:hich. k.ee,p -- - - --ill - ~ -- - - - t - --- e,ISI - peop,e]lnp'OveI,y~ t o.th- esor,.t th- ,at ~-t' - fhl- e.m thrive" Th,ese', :he' reckons; m.aJter just as much as the b,emter=studied qu!estions aroun d t!e,chn,olo!gi calID, c:hange'~ ""What myp"es of :me-chan'is:ms WID,n at~low dev,elliopmg' Icounttie·s, to cOPY' the· rules. that 'work Wl~n m n t:he, re'st of the worl d'?";hie ,asl{s.. Ch.angitng su(:'h 'bad, ruMes s:in:gly is har,d ••
Iii"
'1 .....

the success of such places as Hong Kong not as colonial outposts but as models of developm ent, Mr Romer is best known for his insights ab - ec -- -1--- I" '. -- -t .:-.--'..":. - .,... ; . ':_._.' rona xmstin (L-,OU·t t'- -h- no. og~_' not,. as a, COInS,l . U tional theorist 'But the project stems, naturally fro ,.-his research .1 :~ C ,Ie fly·:'·e ,~- -.'': ,~OWI~ .. rom .. IS rEsea.rc zh:',- ' the new rwth I
...:-. "1 .

II'

"

'I"C

,-.. , .

I'

:r--,

'·1"

. 1-'

"I'

.....

., 1 .

I'

..

6'0 Internationat

'The Economist, D'ecember iotr 20Jll.'!

i,

t msiuer t .. enougr h .. Bsur i td mteres t_s an d i tit I __msututional inertta make reforming an entire co W1 try at best, excruciatingly slow Coercio n offers a tempting shortc ut, but it usually backfires, Outside help; whether in the form of cash, advice or Un,Bltio,n-'bul' ding" efforts, has ,a general my poor re cord to o. The idea of setting up at charter city echoes the way that big companies adapt to change, They often ser 'up new divisions unencumbered by old rules ..These can, be dram " t-'11("' succe sse s T~I rge t- , A m~ri ca' sse' c ~;a._ '...... . end-largest discount retailer, 'began hfe as an internal start-up but eventually took over its parent co mp any" Dayton Hudson. e a .~.' n A d-, an ,r[JI~~iiO. llows govern 'me- t auu~~.,v thorities to experiment with maws and governance or copy those that have worked elsewhere, says Mr Romer, A further spinoff potentially of great interest to rich (~O tries such .as America un struggli n,g 'with illegal migratio n, is that the new entity's open door gives the huddled masses an. a,ltemati ve: instead of risking their lives on perilous Journeys to cross. borders lillie aIly, g they can move legally to a charter city.,
I

_l.g

"UJ..ilJil JLl,!~

~I.

'.

\r.'~ _.\.i.'·_'~ I

,~~_!,

~'I

,_' ..

I,

I.~

-_._

.',

,-

'=

g ..~ I~JlU,~!~~.

I~j

".'

'-_

'.

'-l

'-,.

1B·oots not' ball ots

More fundamentally Mr Romer argues, when people vote with their feet to come and live in a charter ,city; they' opt in to its rules, in, a way that makes possible a new form, of governance: neither authontarian nor (at least i,nmtiaU,y) fully democratic, Migra ion to 'Br.itain gives the legal system there ~ egitimacy in mh,€! eyes of those who move there, even if they cannot vote, 'If the English legal system were enforced on the same person in his home country Mr Romernotes, thatwould be colonialrule, For this reason he 'wants. rich countries to overs ee the adminis trati on 0 f charter lei tie s,. funparticul ar the judicial system .alndl the p olice, This would not. only protect them from interference 'by the host nan on 'but avoid, a common problem in poor countries: that elected leaders, once in office" abuse their power to entrench their ru I,e,a:nd. e nnch thems.el V'~S~ Hon,d-ur.as ha.s not a.dopted Mr Ro,m,er':!; ide,as who~"esale, a]th,ough the: :projiect as plann,e d :st~Jlen ji oys his stro:n..g sU,pport Do= ru,ng aw,ay wit'h, new autonomous entities or ·even ,changi.ng their. f.rame'work win Ile= ,qum.re a. two-thmr1ds maj o:rity ~~n e cou:nth mIy~'sc.ongress an d th,e pas sage of ~ fJI;:ferenbrtl '-t-h;Or !'t-.w,~' s'" Inl" ,ab l{·i ,:,' B' ut- th,o; nh *ant-s ,dum.1.·, --eJ ,'6 ~m 1i.o H'ondu'ran charm,er cities wtU -remaj.fi legalilly :intertwine d, with th e la,c:al jU,ldici.am sys= tern" Allth,o'ugh nomin.att:ed 'by th,e (i~it,es'go,= veIning ,authorities, ju,dg'es must be .appr.ov,ed b,y a. two~thir.ds majorm,ty' in the Honduran h~:g~s~atUI,eLa,wmakers win .. , .also nele d to rat~fy the re g~on's iaws; aillbe:ID.t !onilly'by a s~mple majorUy tn, say yes .or no .. lPerhat,ps th,e most im,portant feature- of m,'h,e new 'ventur!s' is t:he '''~tr.anSm]ar,ency commission~' ~,a,kin d of b oa,rd of trusmEH~ s th,a.t .aPP'oirnts the g'ove,rnors", sU.pl,ervm,s es. their
! !
_,I ',~

actions an d iismeant to make sure tha t the entities are beyond reproach, not least when :it comes to the corruption (often fu,ell e,d by the drugs tradel that P' agues the region. "It is easier to create a board of trustees than to, give control 'Of part of your territory to a,foreign nation,' says Octavio Sarich ez Barrientos, the presidential chief of staff A role for foreign government is still an, option, but only Mau'rimius 'has so far signed on+as part of its push to become a global provider 0 f illegal service s, In other areas, Mr Romer's 0 rigina] :ideas have prevailed ..At .1east OD,e new region will b"e blg+about the slze of Hong I(ong (somea.ooo square kilometres) ..Most revenues will 'not come from, taxes (which ~ di ., u,a are cappe d[- at 12%,£. or llin_IV]._dual s an d u _ _ 16% for corporations) 'but from leasing land. to investors, And democracy will be introduced gradually Only when the transparency commission deems that the time is ripe will citizens 'be able to elect the memb ers of the "normative councils't--in effect, 1oca I parl f am ents, This. aspect of the plan is just one of th 0 se a.~tra,cting hlE:ate d critjcism,~ Somis: fin,d t'he explicit (fuf temporary) "ejecH,on of demo·crac.y re-.pe,IDl,ent 'Oth,erg d,etect til whiff of .nlf:oc.olonmaH,sm::: _gimmidks ,dreamed, 'U,P' in ri.ch ,countries 'bein,g foisme·d on :poo:r on,les~ Th_,ey lb,el]ieve that th,e 'proj'e,ct :is esp,e= cially' misp,ru,a"c,edl run .Ho,nidUIas~, a ,co'untIy cri,ppi!ed by wea.k state machinery atnd (IOllIts that filo·u'n,der tn, mh e fa,c,e of o-rganised cIim,e" Th,€; n!ew entity 'may su,ck ta.x rev,enu!es and m'a'IIe!'ntaway f~om. th,e rest of th e country" critics fe,at..An nt-h,eI worry is tha.t the new entities, m,ay' pro,v,e m,ore lil\cif: .Ma,calu tha:n. Hon,g' Kon,g~:: e.as~r pr1ey fo:r
" --,, ',-I·· -_., ',--i
_.-, -',. ,-,.-

-'-1.'-

.'-',

',-

--

..

'--

--,-

,',

reate: Nancy Birdsall, formerly at the InterAmerican Development Bank, who now runs the Centre for Global D eve 1opment, a think-tank; Ong Boon Hwee, a former- senior executive ,at 'Iemasek Ho dings and Singapore Power; and Harry' Strachan, an investor who used to,run 'llNCAE" a leading Latin American business sch ool, with Mr Romer himself in the: chair .. The: commission's first] ob is to fi~lliall of' its nine seats, Thien the hard work will start, first on investigating whether any foul play has already taken place: rumo UIS are circulating that in siders have bought land in or near 1tujUlo and other potential sites. Next comes helping pick the regions' locations and choosing developers in a way that inspires conf dence 'not suspicion, The Honduran agency for public= private partnerships has already signed several memoranda of understanding with firms including South Korea's Posco and two start-ups wi th hbertan an, leanings (8 ee next articl e),

' I,. 1.anV\fi·

sha dy ·chara"ct,ers,. M'uch 'wU.l d,ep!end on the tlansp'arency com,'mission~ The first b,atch, (If m,em.b,ers a.p,poinmed m'his we"el~ comprise Georg:e .Ak,s:ltt' of" ,anoth,er ec,onomist and N obe~ ma,u-

,gan,gsters", :m,on-ey-],a_'un,d,erers

and

ot'he:r

oed ~p-- - npille ,ev ,lI' Then ~here· is the gle:nie:ral pop'um,ation~The regJons ar'e sU:pp1os'ed, to b,·e 'ope'n to any= body~'b'ut th,e inflow of p"eo.ph~~ ;ay'have to m be c'ontroll,ed,., What itsmore ~SU'(ice ss or. fa:H= ure wiilllli !depend, not, just on, good .rules; as in laiws~lbut o'n th,e so!c]_a~ orm.s t.ha t: arle es~ n tablishe d by' ruts :firsminhabitants" explains M.f R.omer ..Th,,:; l~e;y, e: s.atys,) is to- begin, with h a COile, of people w'h,o, share c,eItain ne:'w norms:-rath,er atS 'w,h,en WflH,am Pen'n attracted people to P.ennsylv.ania 'w'boO' w'ere commitm-ed, to his c'ha:rt,er.'s lleg.alli p,romise of fre,e,dom, .of religjlon~ 'Once the 'norms ar'e wleU establish,e!d in a comm,unilll,y, s'ub,se'i(Juen t i.mmmg;ran ts 'wilill ad.a, p,t to them,., las t~b'ut :not llie-ast; co me-s s e c:u:r.ity~P:rmvate securlty firms wiU h.av·e mOo p'rotf'ct th,e po]prulatmo:n, ~:n t:he new' !ciUesj Ho:n,duras is on e ,of the- 'wo:rld"s more 'corru'pt c:()'u'ntri es; in 129th place (l'ut of 183 in a. surv!€y of out- ...
t' ,.
,II< l

Tile' Econ omtst Decem b er 10th 201 '1

I. siders'

perceptions by Transparency International, a Berlin-based lobby group, mt also has the region's highest murder rate, The local police have a poor reputation, Last month 176 police officers were arre sted 'in a corruption crackdown .. Many uncertainties remain about both the theory and the practice of charter cit''. ,-,~, '~'I' - ~._ 1'.,', I I ,. , ies, ancd a b out w h ether a sma II .'~ d trou1'-' an: bled country like Honduras is the right, place to start Mr Romer's response is that if his idle-a,scan work there, they can work fh anyw 'h re, Ev,en mno cnarter cmty ever nse s ne
I -,'
i.. ,~ " .,

'1-

"-,

- ,-

'I'

- '-"

•-

-,"

- 1-'

1.Il'

-"

,',

' I' I'

, I'

"

.1

""

,',

'I'

"" -1- ,

-,

th-I"" coun t ry' th proj t h'!JIS h-''if.ned,- to re e~ '_ _' tine and promote his ideas, Other countries have already shown some interest in, the concept (among the locations talked, about are north Afnca and Asia. Minor). It is not just m:h,e connection with Columbus that makes nujnlo a suitable site for the first charter city. It was there fun1896 that the pseudonymous American writer 10 Henry wrote, "Cabbages and Kings", a. derisive tale of tOIpOI, in which he coined the term "banana republic", Skyscrapers would 'be a suitable riposte. •
.· 1n
D
',I, ,'_ ,'_;_

iGI ,II~:

,', :,'

Ci {"' \.r~,

,c.i"

1,1,

'"

'='

,.,

...onuras 'H d
I --

free cities

S.... ugge d ·1 'hr

-

D~~~~sr~~~a~~ :~~a~a~6Ii~V:~::~
libertar" ,,--, - ----,-,- me ,--- -f'A"'-ian commune. That was- th th erne 0 yo at "D' ". d' " - .-.,-,-', .' I -l",a.n·1 s m,a.g!n,um. op,us., - u'A' -'1_as " , rugge! d;; ... t'l Sh',- ". _,"a sacred, text for lib ertarians ever since it was publtshed in :1957-'" Actually creating such an enclave 'has been the: dream of many fans of small government (or of none at all), Several have had a try' at it, but their efforts have always ended, in disaster (see table), N OW; for the first time, U,b,ertarma:n,s h,alve a r,eal ch,an,ce' to impleme'nt the-ir. id!eas .. ]n a,d,di.ti,on to, a big slJ..e,cia.l d,€v',elli op,ment -reglont. the Hon,duran go-v'ern'ment inte'nds to a.Plp.rov,e mWQ s.ma11er zonJ~'S~n!d two ii'b'A ertarian:-leaning' start~'up s h.av'e- laIrrea,dy si.gne,d, a. 'pr,eHminary m,e:m,orand,um of un'-' derstanding' with, t'h,e H,onduran glove-rn= m,ent to deveru,op them~ On.e-~firm goes by th,e n.am,e of Future CHies De-velop:m.ent Co:rp{lIatio:n,;; [i was co-fonnde"d 'b,y Patri Fried'man,~ a gra.ndson of M~iton Frie,dman." ,at Nob,eJ la,ur,e.ate' ~n ec:o"nomics", and 'until re,oentIy exe (:utive di= rector of the Sea:steu,dm,g ]nsti.tute-,~a group, prod,ucin,g l",esear'ch on how' to buffild ooean= based eommu~nes", 'The .o,t-h,er is ,calI,ed Grupo 'Ciudades Libres (Fre,e C.iti,es GiiOU'p) and is th,e brainchildl of Michael Strong and I(,evin, lyons~,two e:ntrepre,n!eurs and libertaria.n a,ctivm.sts.~ Both share a p'llIp'os,e: to b'uil,d ("fre'f: cities .t,ast' A:prm 1 all thre'e sp oke at a. ,(onf€'renc'e organis!ed. 'by Unjv'!ers'id,81,d Fra~ncfusoo M,arroqll]'n,,! a, libert.arian outfit in IGuate-' mallia" in, Se'pte:mber they' and Giian,c.81r~,o ]b,argtie'n~ th,e un i:v'ersity"s presid ent; la-unche!d the: Frle,e Cities Institut,e~ a. th.in~k= tank to foster the causle~ As so ofte n with 'e.nth'us~,asts;divis:io ns w:Uh'in th,e cat'use Iu'n ,deep~ 'The two firm,s :h,ail fFom ,dffiffe-rentjl:harmS '0f the ]fb,erta.rian sp;~'cttum", Mr Frm,@,d'm!aJ1~s tIn outspoken
.l.i.,''';;,''';;.,,;:)
I I

Two start-ups want t:o ~ry out tib ertari an, id,eas in ~'he eountry's new special development regions,

PrOD' our' e retreat too' G--alt's Gulch

'I,;;;;·iJi;;;U· ,·, ... I,lIL.';:)
',';, ,: ... ",.
" ' , '

""till .I
I'

'~i

ill-iJi;;;,g
I

I"

",'

':,

1 ,"

_:_',J

-u

critic of democracy 1m is "ill-surted for a libertarian state", he WIntle in an essay in 1,0 09 b °cau e' 1" ;"! "I'r'~ ell' a.=:UI.'" 161{lib ertar S .l1~:_:~I.. ~ ga ~nst l_~ ago arians" (they would always Iose) and inefficie nt, Rather than givingits citizens a voice, he argues, they should, be' free to exit; cities should compete for them by offe-ring the best s ervices, The second firm's backers appear to be less radical .. A, founder of several charter schools, Mr Strong is now the force behind F:LOW', it movement that clamms. to co,mbin e lib1e-rt,arian, thi'nling: '~'~'with lov',e" compa.ssloin~ social. a.n,d envir,onm!ental co'ns,cio'usness'~!' says its! w,eb,si t,e", Hie too t. pr,efers ,exit oV'ler voice' (meaning' ~h,at he thinks '-fha 1e,avin,g and ]'oinin,g an;: better t co,nstr.aints on ex'ecu,Hve p,o,wer thatn the baUot box),., But he alliso,belfue:ves mh,at demo'=' crati,c co,ns ent i,g ne ed,ed in ,ce.rtain a:reas~, su,ch, ,as ,cI]:m,~:na.ID,'u stice. H~,sgoal ~n Hondu'-' j ras :is. less to imple:m,ent illfu'bert.arian :id·eals tha'n to :redu'Ci€ pove,-rty llnd. to spe'!edl up e'cono,m'ic de'velopm,ent. So:me' in the Ho,nld"ur.an gov-,er.n'm,ent:
~' ...': ....I!" 1-.
',I~ .. _""~' ' ••

0. ,~'!b~

'!If '1' ~.

,I~.

leanings, which is one rea= son why' the authorities have moved so quickly B:'ut when the master developers e ror tl. e new zones are se ~ cte d next year, h strong politica credentials will not be enough-and may even prove to be a drawb a. ck, M-r Frie,dm an is stressing a. difference between his politica] beliefs ,an,d his firm, u·[d·- -~ - - :ma,es - b- a: b --~- - -- ,';1 hIe ;j,ay~,~ -d _I'us~ness~- - c' - " e'oJIL'o,gy' -- -k adding that Future Cities Development wants to focus on the needs of the people wh 0 live in tb e city~ Yet the biggest hurdle ~OIthe libertanan start-up's may be that the transparency commission, which will oversee the development regions, is unlikely to give, them fre e rein, The ~~onstituti onal statute ", for c the development zones, which th,e Honduran nattonal congress passed in August, does not leave much wiggle room in key areas, not. least when it comes to democracy:: ultimately their citizens will vote, Both firms, however, have links to prominent libertarians with deep, pockets, Mr Strong ~,sclose to John, Mcu:l(ey;, the cofounder and chief executive of who,me Foods, a high-enr] supermarket irnainthough Mr Strong says that Mr Mackey already has too many other things on his plate, Mr Friedman's contacts seem more premising: th,e Seasteading Institute recei Vied lots of cash from Peter Thiel; a SiliIcon VaU,ley billionaire who founded the internet payment service JPayPal and was an early Investortn Pacebook, the, world's biggest social network" ,Mr rhferSBlmbitions. go fall' b!eyo,n,d Soc,outing ou,t the- 'next big thing:in techIl1loi~ ogy~'~~[ monger bleUeve that fr-e,edom atn,d nn ,d'emocracy are c.ompatible/' 'hie 'wro,tl~: in, ,an ,ess,ay in '2009~'Tbfus is. why Ub.. rtarians e sh,ould fin,d. an, escape IT'om politics~ :he addled,., ",Because ther'e arle no tTuiy free p maces left in our worId, ] susp!,e,ct that the mode- of escape must invo!'ve' ,s,om,esort ,of n'€w' a.nd h~th,erto untrme"d pflocess that ~I.Q:~I,de u's- *0 "SO',m···· u-n:dffie',c' o-v,':"a~lg.d :cO 'untl-"nr;' ~"'a.' J'.' l8a,dk then he, ha,d th'e ocean or sp,a_.ce' in mindL Hon,duras w'ould icertainly' b',e moOre ,convenie:nt •
halve:libertarian
. ']-_ ,'_ . - .. ~.:.-:~ . I -: _".
-j . ,-,.;.,'-.
I" ','

'-=-,-:--

-:-:.-.

-';-'

\L':"

lIL

h:J

'_

[!In..1

. '.. "

Q .~

.. , .. ','

.~ . .:ti'"

.. ~~.~.

',',I

. )~.~

I Libertarians
of Se:.fJ.lland
.i •••••
11 ••

of the woril.d. unite!

When
l'

Atte'rfil p1ted ne.w micros1tattes and. Q1ther Ilibe,rtarila,n eff.o,rt'~, sel~H:ted

Who PM111ci Jla ~j-[y P,addy Rojl" Bates

H'DW

fi s h,€rrma.r1
I'

'1961
•••

I .....

II

.i •••

.i ••

II.

:;'~I~

AtJLanth:;
-I.'"
"'11"

Operatio n
IF ......
-II.'"

d.erma tology tycoo fi1 ,and Ayn Rami fan

III""~ .

Werner St~'@<fe.t
11.
""11-"

i •••••••

i ....

i.IL

111•••

,d,@cleJred ste.t,@ h,o C:Ht ']s-sm~d PI]JSSPO Its r touted 1r1r[.e et sewi-(:~s rn -" .11.'. ~.'!II'."" i.... 19'10 BUJl ,a huge f-erro cement hoat whi chi U
10

Sel'z,ed 'g un tower off' B ri ti sh ,coast,

-11-!l.1I .. Jl!iIIi ••• IIJI •••••• 1
I

11.11

11.l'

J~.il'

••

I •••

"

ma d.e'it to the
I ... ' ill! III
!II ........

Sa h a ma s
11'1
'I .IF I

ea rly 197 Os
-11111
III.

iI1Itern €t €ffmits fIlopp€'d, ,il ut. G nline (a,S] non [a til ned .Y-'.II. Sa r1 kin (ii, I'D u nka n e in the
.1-11 ••••• IL ...... 11. I. '!IIL.il' 1"-1111'11 111110
F

Di sa bled by ~ re i111 2006;

i .....

-,111'11

.....

11-1.1

~I''''

,I

...

·1

1111

111I1,1t-

"1'11

!!

1r.1

11-11.·

11

II

,M~ wa n,e
_~ "-l. -

Re'pu.b~ic of
• __ .... ,.. 1_.

MichaelOIJl'v€'ri' [\!!a [-estate

__ =- __ ~ _. . 110 •
_I ....

19'11
; _". ... , ...

The Atlantis
_.

Project
_ ., .:_,.

mi LLioliI,a1re Eric lK~ieni' l-rivesbJf

~' __ ., ., .. 1. __ ~.
_n.

'the South Pa,c;i'fic

,. _. ~ __ ~_ .... 1_. • • __
I

Dumpe.d. 'sand on tIN", cora[, ree,fs, ]'n

oj_"_. __
1 __ 1 __ • " .. .. _. ~ _~ ~ ...........

OI.. _.

To iii ga, in J[ 9 1",2:,; disso [ved ,back into ,()c-ea n --ii>-~. .. "_n.
• _. • _,. _ ...
I, .... __ ... _ •• _ .. _ ., ., __ •• n ~ ~. .,_,. ,. __ :.

Seh~:edby ne~'ghbouring

__

'1993
,. __ • ,__ ., ,.

P[.aTmed to set up lfloati ng sea [tty

~ __ ~ __

FundraTIs,il11g faUed in 1.994,

_ •• , •• ,_ n __

• __

••

• _ .,:.

.r_ .,

:._:

__ ~

.. __ •• _,

,•• ,_:

,{ __ •

,. ~

.;t.._

.~~?J~.~:t , _~.,~
Ship
Freedo m

Free Stat~'

PoLiti c.aL (I,ctirvists

Pete'r IB OJ n.il'S" mnm e r FBI 'flJQ!ent

"~

20ClL

~~~~ ~~~ ~.~. ~~~,:~.!~.~~~. .. ~.~.~~~.~;~ p~.~.~!,,_~~~i~u~~·~.!.~QQ ~ ..~.~~~~~!9.~!~~' .. p' ~

P[.a111111ed to e's.tablnsh tax iii aven

P['fUlIU!d to re.crU]E

,8Jt Il€i~s.t,20.,.000
'~'Ill

(rnim:s.l~,OiQO havE'mov@d

,2009

biB' s,hip

,a

Look, n g' vor fi na n d 1119

COMMOiD'IITI ES , CUIRREINC~ES EQUIIT~ES .. FIIX,IED IIN!COM,E,

iPath"

An lnvestmem in iPath ETNs involves rlsks, inc~udi'ng possible loss of prlnclpal. ro',f a descrlptlon a p p I lc a IbIe prosp ect us,

of the maln risks, see "Rlsk Factors" in the,

B,arcllays Bank PlC has filed a regis.tration statement (including' a prospectus) wlth the SEC for 'the offering to which this communication relates, BefoH~ you lnvest. you. should read the prospectus and other documents Barc:~ays,Bank PLC has filed with the SE'( for more. complete lnformatlon about the lssuer and this offertnq, 'You.may get. these, documents for free by visi,ting 'ww'wJf\atnETN, .. om or EDGA!R on the SEC website at c www ..sec~glo·v.A~·t:ernath/e·IYJBarc:~aysBankP·ILCw·il~ ,arr,ange for Barclays Capltal Inc. to send you the' prospectus mfyou request it by c:alUing tun ... free

"-8'7'7-76,4-7,284-i or yo u may request a copy from any othe r dealer partklpatl ng in the offerlnq ..
BIa:ckRock F'und D~strjbutiol1 Company assists in the promotion of the iPatlh ETNs.
IPath ET~s (the "securtttes") arl€' unsecured oblig~Uons of 8,ardays Bank pte and are not secured debt. nor 3f1i1 bUgatj,oln ef or guaranteed by ,any third p,u'Ey. The Securtties are riskler than o ordinary unsecured ,debt securities and have no prlnclpal protectlon, ''l]ihe'Securities are specu~at~v,e and may exhibit hi'gh volatility, The. Securities are also :suble-ct te i[,elll'ta<Ii,1l1 investor fe,es., wh lc h 'wTIi ha'v'E!' a n eg ~t iv\E!onect ,~Inthe va IDJI e of t m@ Sec u r it las. e

©2(H] Barclays Bank: PlC. All ri'g,hts reserved, iP,ath iPath E,fNs and the iP,ath logo are registered trademarks
j

the

propertv, and used with the perrmsslon. of their respective owners. iP·03J.8-0611
MAY LOSE VALUE.

of Barclays Bank PlC. AU other trademarks, servlcernarks or reqlstered trademarks are'

NOT FDIC INSURED· NO !BANK GUARANTEE·

A lso 'f n t his s e etie n 70 7:1 iG,Locer gO@'5 from 'Thomson Ri!,ut@i!] 7:1

f1h e doy_en of Fre.n eh advertising]

For d,au ,J U ", . -;llLu

....... '11" U U.~_,ll

'diil"i 111,13,

-(\Ids '. Q, n_'d, :.1,.l,l M' ~

.,,~ ·~11 ~'C;"Kt.;. ,u

;Ej;~~"lilu

y!

Il ~u ta i iii",f' ~3 ._Q I
~~~l

'lUI' , ..(;I.
T,~

deb - t eo'" n ,uU.;!;. ess 'ndl e..- isin ,',a _'

III

rii

I~I:_.' . ..1

od-I~Q~ ,t '~jl rE"ilt --,r.' .~

j"'~ ('

~~il

_-

MACAIllI

What an oif:sh,ore gambling mecca reveals about business in China

taca or Hong I<:ong dollars- ess, of ()OUISe, a,generous cut for the shopkeeper, No, one can quantify how much money m,s laund '-',,'. 'd-.'"- •.acau, b.:U,t it'So suer an, 0." scene ': erec m M' I n - I- ..h ',",,- obs amount of money you, would die", one resident avows", Mainland China offers scan t 1egal pro=
C "

stores, where they 'b~IYan item with yuan and promptly sell it back fCH~Ma,can,es,e pa-

';I;, -,

,c

,",C'

O'T'fa,r from ,Ch~'na's ,co,asm,!~'Macau's ca,", " " ," h th '- "", - ", ibar smos .b ruzz wnn tne- energy an dl a. "an don of the wildly wealthy Marble columns, gold deco rand mon ey 2il[ie everywhere .. Bu,m' behind the glittering facades there are siens of somethine l~ darker, Ie Macau's success is not built purely on the Chinese love' of gambling, It is also fuelled by a stampede of nervous money fleeing the mainland, A look behind the scenes at Macau, reveals a lot about 'Chi.', ", " ,,~, , b " lILW' nese corrup t' ion, anceli aiso" ,a, OU t" L_ . , _"LOW scared many Chtnese businessfolk Brie about the political climate back home, Since :2,0,04 when American casino operators first opened there, Macau has grown faster than a dealer sorts chip s.. Gaming revenues in the first 'no 'months of the yeatr were 44% higher than in 2010,; Macau is now four times bigger than Las Vegas, The former Portuguese colony, at "sped al administrative re gion' of China sin ce 1999; is n(lW t'he wo,rld~s gam,bH,ng Icapital, ~gh fl-I--or· ---ho ;=.0.' '.11I1~:mw-~t1lJ..., 'bar 'g'~m-' b"~A H1,.=: 1",'y~6 c WII jim .:1,': ro'we'd mone'y in priva.te rooms, .kn,own ,as 'I' d VIPS" c.ontrl b ,'I ',', ",- ,aIoun,- 72% a f ,Macau ",s _utecd $23.. 1billion ~n reve'n'ue's last 'ye,8l'1 (s,e,e' S ch,arrtt ]8 ecause gambling is Uleg,alli in m,ain~ land, Chm.'na,~ M,acau :is th,e:ir d'estination of choice" Th:e islan,d,~s idiosync:ratic IUjunke:t~' system hel:ps m'o 'bring rich ChinlEs,e to Ma= cau~ Junkets .are ml1ddlem,en, who len,d :hi:gh-ro~lers m,one~ arrange ac:com'm,od,a~n: d" I- .,'~" ~I t~o' a ,'" a· 'p'lal:· 'd '~ro un-'d' AI 0',,' '0' 'fl" ~'h,o, 'ca-'e'I"'nos' m,ake' in return~ (I"n L.a.s Ve,gas ca.sinos k- -'r~II'- .''blcarry out b- .ac" grOUDc d- ch" ec'1- on game, ers {s
", I
I,". .......,. I ", , ,I'. • .

'f

I'

,',,','

.:'

.a

.. i

," .- -

:'

",

.'

I"

I',

....

and lend to them directly) B'ut it is not just a passion for cards that brought mOI'€ m'h.. n 13~2m mainlanders to a Macau in the first ten months of this year, ~a" a..: tr'~ ,~ M'~ln Y' co me 0 elu db Ch l'na 's ~.', -},ct ,limits on the, amount of yuan people can take out of the country, A government official who has embezzled state funds, for example, may arrange to' gamble in Ma.cau, through a. junket When he arrives, his chips are waiting for him, When. he cash es out, his winnings are paid in H,ong]{ong dollars, which hiecan stash in a bank in. Hong .lKongor take
r

~".1

'II;;

~I 4f

!I!;;'

'~'

I.,,:

,If'!

I,

JII. . ,.,

tection fbI private property The rich; many of whom cut corners to get that way~know they could lose mt al] suddenly Many also fear losing thei r political patrons next autumn" when China's. Communist Party will anoint a new' generation of leaders. Small wonder they are seeking havens for their money and their families.

According
....:' ',..' .....:

to the Hurun
~ ~ ""'" --'. ".

Report, a
. .. I '.

wealth researcher, some 14% of rich Chine se say th ey have already ru'_eft" th '.e country , "",: ,1,1: "" "_',. '",~ II""
I •
.L

I"

" ..

l"

"

:..

_.

.'.

.'.

or are filling out paperwork to! obtain a for'n e~il0']1 pa s s 'p' 0'·r+ A'~',J. ,;0"t' h' 'l.. r 4'- 6",@l_'ilJIl'!I("-,D'C'OI-i'ns'1iill'dle'·r~'b_:, .l 'e' ',' to '
l!;i_". •. ~" " OJ,,!!!,'!I;,, '~=,',!!.I,~,

farth er.afield .. "There are many' ways to launder mone'~, 'mOI"B than we can think OfJ~~1says Davis

Fong, an asso ciate business 'professor at the University of Macau, Some bypass junkets and instead 'use pawnshops and other

Trea,SlIre island
Ma ca LJj Ica Sol"lilO Sf. 'reve'n ue'ro $ bn

" .. ,.'" 'I.',::'

"

" ",

-I" ,,"

'>,

~;

, ", ,- -

.,' ,', ',: ..' " ,~,

,,',:- ' i

-,'

~J

£I,ud 5 [ot 'ma,chi 111 es VIIP tables

Ma,ss~ma rket tab

~@S

30.

li

10

Jl. ,,' "fl' .' .

iIf',D, , " ,JIl'~

,'

ILJI[,

I .', ,,'

'/0.1

Ill,

,!I!;;;i

..',Ll,

2004 05
S:olUrce~

06

0.7

08

09

10

1 Jl * 12:*'
'"

""~I---·"',

,~"

I.:'

"',-

-I ,-,'

Gold fI1i!~rv S~(h $,

Forece st

I-"~,

-,'-

"

",~-

-::

,'.

',~.'

wa.tching" A me:mo sentin'De,cembe-r 2,,00.9 fr,om th,e Am,e'rica;n co;ns.u'ate lin Ho,n,g Kon,g' 'loth e s,ec.retary of sta t'e said that H[Macau's1 phenom,ena~, SUC'l)fSS is base,d, on, a fo,r.mulat that facibtates itf ,not e'n,cour~ a.g'es.m,oney' lliaun,de'rin,g/" In a ca,ble in 200,8 Jos,eph DonOiVant the:n the Am:erJican, consld=gen,e'Ialli, in H,on,g ,Kong~, wrote that ''''S,ome of '~:hese m.ai:nl.a.nders are 'bettmn.g w~th,emb,ezzled , state mon,ey' or proceeds fro,m officia."l ;corrup,tion, ,arndl su,b stan.ti a] portiOons of the's,e funds a.r,sflowing on to o:r:ga:rti.s.ed c'ri'm,e groups in m,ainlan,d, Chit- .~

~ng one of these steps, ,A recent report by Bank, of America Merrill Ivnch warned ~J' ab out th,€;de sta bilising effects of "hot money" speeding out: of China. this year, 'Th,e flow of money through Macau has - lr , --' ,CRU,g, t h Ie eyee of tie government ,~,- B- et It 0 'h-m' ~ jing and may explain a temporary crackdown ~"n :2008 on the number of Macau visas given to mainland Chinese. Accord., . bli ,.Y:L_cl 1 mgto caibl esma d e P'U"ILIC b Wikil, e.a_(s;.an ••. (lnlin,e troub,ru,ema'ke:r; others a.re a~so
I' C :,' , " '

I' ': ,', ", "

I'

'

",.":,

j"',

, .. ,",',

,,'"

I'

",'

"-

70 lusines,s;

'The Economist, December iotr ,20Jl!1

~na, if not Macau itself," _"any nave , aiso s, ar eo t" 0 worry a bo ,t .ou M·:-,',' h ,.'.... .'1 ·t"' rte d '". ',',' the j unkets ~he alth, ,Par tlli,y out 'Of concern about the stabihty of China's "shadow ~I " 'd·' ."". "'t"· , ... . "·''''h C' "d nes .' ' , ,.. "". ~,en,"lng sys e'm~ ['f" l"~.c· "', hine e..sa.w th_elf busin o.e;r;'o.e- IV .lIla ":",~' "r pr" o ,_.p' erty lIL.t·. ", ollap s.o invest ." ..3&. !_:' ' I~I " 1,1' ," r ,unge~a.ssome fore t,con md..,.a.ppenm.~f men '_.' sp", ~ 'c, '-'..."' '" '.. h '": " '
·.C.·

c.,,

he did, about the implication of a Ma(;a= nese 0 fficial in a corruptio n scandal or OJ. . A bie cri ld :m,'UI' d er at a casmo.Any mg cnme WO'UI probably encourage China so intervene more heavily bl Macau's affairs and specifically in the gaming industry

to part 'with some 'Of their airwaves, . ", Id' "'" SCL.·,In an ,,' 1'1 ~ .. T_ Ie revenue auction -h
::,;';
""'1." ," ':,'

It

would solicit spectrum from broadcasters and then repackage it into larger lots 1110 be
,,"',

raisec

., d
"',

,1~:;jj,.j!I~:LlI

I.,

'C"

'0'

.:

I.

~'Jl t ~:':'

I~.j!

.-

II'·

','

I'~'

.. ~:"!'

'I'

,-.:'

'

from gamblers, At 'best there would bileless money to lend, Bum junkets that could not collect debts might implode, leaving the casinos that had extended credit to them ithbi ·~..g:_ ., ~ .",.0' with .. 1osses~ M ,any casrun() executrves dl _.:' not seem to. know how much money they have lent to junkets which makes it hard to assess the 'possible extent of defaults, Casino operators, like their customers, " ,. · '" remain sangume a brout fu ture winnings, Accordingto analysts, no bigjunket has reported any issues 'wit-h, bad loans so far, A casino executive said recently that he worried less about a, junket going under than
1'"1"'

the mainland's economy slows, the 20,0 or so junkets that operate in, Macau could have trouble getting their money back

"mass-market' cusfomers, who actually

;' "l ... . I
.. :' _ •

Yo'u,can b,et that the casinos want to avoid that, 'They' are, trying toOattract more

would be shared between the government and. the broadcasters, Th,e· FC'C thinks this could release UPI to UO'MHZ of T'V broad-

cast spectrum, 'TV companies could instead sell their

'want to gam ble for fun, Such people do not need loans to play and offer 'better mar"1 ' - .... _" .
I . ,~::

~ ., gms, b ec aus e casinos d0 not ne e.d to p a.y .

I.. " .. ' :.
I' -. •

f -.'

!.... "

.I

'.'

I"

..,..,

... ,

I - .',

-','

, : .. '•.

junkets at ICUm" ,A lugh-sp eed railway b eing built from Guangzhou province to Maca.u will make it easier h) lure them ..Some casi'~i ~. ~h nos are a~ b:ill1IId mg venues witt less so 1: floor space for blackjack and more for ShOPIS, theatres and re sta urants .
111

holdings to telecoms companies directly But this 'would probably mean lots of tfuny; fragmented packets of airwaves changing hands, Wir,elliess operators will pay more
for large, contiguous parcels of spectrum, which is why the sec wants h) orchestrate the process, Legislation to give rut permism ,1Qllt.\..w,,", I g'.' 1"rs. =w·· a-:::-: th .. ·.")U akin .';UI S~ ~n' ~'O" d 10'" e~ . " ~' y . r,'o' g. ,:m... I -' .. " ' , . ,", '1mI . . ,.... ,,," ',. ,'" I_!epasse" _" I " '. - II C ongress ..' " may .,. 'b '.". sed 'by. th,e' en d. 0f'"
.IU I~·. '... ,WI'Y '1" if" ,oJ.;
'"

This may' help placate the government :in Beijing, which would rather see' its eitizens shop ~OI jewellery than fo:r a. different currency But as long as money feels ner.....•.... >""', ...•.. ' . Ch· vous" In 11'·1' ina, '.I' WLI seek aI' way ".11·'1·t. and It, 'ill 'sees out, an".
Macau is awfully convenient,

the year,

A'merican tetecom's

-h h a,lrwave:s, A "-rea,t:-I 0:£.1 -,resll,~ '.

f"

tion ""1'1 ,., ...con cerneod· thiis WI,·l"lh"'·,.,. ,un,= " . ,. '. iOJLS~ . we Ie ',~ ave ,. in tended consequences," says Alan Frank; th e Chi le, 'f- eXt;:ICUIIl:rn.ve 0,'f~"iii, t 'N"· "leW8w.,ee k,.• ,"a= . '..'., '., .'. " 'S,,,,,t"" .". .'. JIGS tions, which h'a 'O,""."p••~r'a.'~lio,:,,'ns·: D-1e"tro:,jt"·" S··.·.··a.,.,'n,' in A'n.tonio an.d other cJtmes,. 'TV' :foUe. fret that th,e; I'CC wants moO,be, ,a,'b],le t,o fore,€,; stations to swap Ichannels if necess.a.r~, !even jf th,~y - -··t a re pa :'"'- I·e - "t~- ,-. so .. a. ,~,t" d_0 nOI,.t·"·1,,"., . "rt·1.,lntho ,aue ]lon~, .-.th·-·t',ill. ca.n ere,ate a.ttra.c:tiv·'e p a.r!cels" This 'will r.a~s,e their Icosts and could lead to the dis,atp'pear~' a.n.ee of' SoQ,m'f: sta.m.ioQ·ns run ,cities n ear the
,I
,,:I ,;If'". '"
I· ." .'.

But some broadcasters have given waming that the plan could hurt some sta-

= _,

__

__ _

I , ,e' k)

..

'II;..

IlL

__

___

..

_,

._

,I .:

II"

.'

"

.,..

'

,.

..

!'

I I" '.

,".

, I'"

•~

'1b,escramble for spectrum cOiuld ,resha:p,e America's 'ie-Iee,oms m,dustry· ULMUS 'GE.NAC,HOWSK[~ the head of in 1It~h:e wireless market='w'hich is why b'oth Am,er~,cat~'S Fe·dlera], ICom:m.'u'nj.cat~.o:ns. the D·epartm,ent of Justtce' a.nd the 'F'c,e opCoO·mmru.sslon. (p,o,e); hats ,caJled wire]ess p'ose rut ATi8tr a'n,d D',eutsche: Te,ru,ekom~ T specmrum '~mhe oxy];,e:n that sustains our .MobUe;s 'German p,ar,ent, h.av'e, ple!dg ed to mob:illi!e,de:vmces~~~ unU~ke, oxyg,en.~th,e air~et fight on" bu,t the, 'merger';'s ,cha.n!ces ,are sUm~ waves ov·'er which, t,elecoms coO,mpanies VerizQin"S deal~ by' ,contr.ast~ win :pr.ob,ab~y ~r.a'nsmit th.eir wwre]ess sign,allis are in, ev·er be ,cllie,are"dby the FleiC, 'w·hich 'must ,arp=
I ,.

W'A.s.~ IN GTON, IDe

shorter S'upip,l~ A(:c.ording t.o th,e P'C'C'S icaill= !cuillati ons,~ America n,e e,ds to make 300, megah,ermz '(MHZ) of tldditi,onal splectru.'m a.vail~a'b},e 2014 to avoid. a HiClunc"h"~ that 'by

.a.nidhoI ds batlck in'nova.mmo'n;; Som,e cri~lcs r,eckon, t:h,e' riegumato.r's proje'cti,ons a.rie too. p,essim~sti,c~ ,But m'e-'I,e-coms firms sayan ;fx,:plliosJ.onof wfreless data mrigg,ered by sm,artp'hones .Rnid[ tab I,et com= pult'erS is ru:nd,eed, soaking u.p ,cR:p,ac:ity' fast Henlce the Sicram bllie f.or more airwav'es;; On D,ec.ember :2n,d Verizon Win~:les.s,th,e co'unmry~'s ~ar:gest:m,o bile .a p era.to:r, .anno'un.c:,e d ia $3~6bilU.on dlecd to buy' spectrum from sev'=' !eral cab:~,e-te]evm.s~,on ,companie·s" A.T&T~,anoth,er teIle,coms b,eh,emomh;. has been t:elUng ,anyo,ne' who, wil~ list!en tha.~'its. $39 'bHBo'n bid, iOI 'T,·,MobU,e 'USA, a s:m,aJler lival, shouill d lbe a,p'p,rov·;e,d in pa.rt be'cans e it wou~.d, ea.se' .a ca.pa.city, he a.da'ch e: AT&T has p,ru.enty .of capital 'but, needs mo're spe,c= m:rum~while TI=M.obfule :h.as the a~.rwaV'ies but lliacks th!f capital to exploit th,e:m fu~my~ 'The snag ,is m:h,alt allowing A"f'&T ,an,d TIMobile to merg'€ wou' d stifle, ;comp,enmio'n
I

driv,es 'up Ico:ns'u'me:rs; mob,ile-p,hone bHIs

p,rove transfers of licensed s.pectrum" Co'uld more 'w"ire~es s ,ca.p'a.c.fut~y 'be li'ber= a.med fnJm oth.eI busm,n,esses mhat do no.m :need ~.t?The FCC thID'nks so ..:Ithas 'c!ome up, 'w:ith ,a, proposatlli to p!e:rsua,d,e TV !companies

. I d mmID.te' •.;; sp,!ecttum lS a_rea;· y l~ .," d Such conoernscan b'le: de;alt wi't:h. Legis· "f" " 1" ~ators are ill·'k e,1" to c.reate a un, d to campen l y :'.. : 't"·· ." '".. o,a,· casl,ers." W:'h10,,'h··ave t" 0 move c_lan,'h·" sa e b ['""". d" ""',.'.'. t'"··, " ' ', " ..,.'","' n!eJ.s.. And, th1ey 'wm,n :pr.oba.'bly req'umle th'IE: ' FC'""C-: t"O,' ·tt··c-:·~·h·, f"'dl ~ln.p. ..'f·~,,"',;Oor··-v·Q ,O"'~1"S···t"1n· 10' TV ..· ,C·:'O·"-:'' 'y·,·." ... I ~X .... 10 "...v "" emg,e W'hen It: re:p,a ck··Iages a.mrwav,es~ ':. C·ongress~s, e:nthusiasm to get so'm,e~ thing d,on,e' is unde:rstan,dable~ FOI OD'e thing, an .auction 'wi illill raise: b fuUil o:ns of dol= lars [tor m:he p'ubUc: ,purs.e·~ anol 'heIt it wHI For cre.ate ]Io'bs by e·n,couragmng firms to invesm in their 'networks,.. FaHure to. ,a.ct wou]d send the, wTong signal to o'ne of Amf~~ricat';'s faste st-growin gin d ustrjJ!s~
.' . -. I' -I," :"

Mavl·C···."llnJ
_ _!J,...,A

tiII._

tiII._ _

"JJnd,c' 'C.·._·'''lln.a' :" _ d r T'V-~ tiII._ _ '. i,a:n. b. .. o.•• "d"e'Te<: w'"h·'e.··:r.e'.
= ,;;,~,". , _ _

o[

,'j

",

",

..••

'"_",

._'_

".

".

",'

"

1-.1

"'.

..

.'

-",

,. ",.,

,",.".

,'.'."

,"

"<

B"'

!~u

~';:)'II,;;;

'I;;;;;

,w.

lfi'gltrti'ng o,ver :spe(trum, not tile so,fa,

B usine

5,5,

7 '1

Th emson Reuters

B,looming close
B IlJS,] ness- ii nfo rmsti on co mpanies' mar kelt sha res
% of 'g ~lbalLtota

3·5
L,ONIIOON AN 0 N lEW Y(U~:I<'

The Infermatlon c,o,mpany" in danger of

'3'0·,
.
I ".'

oslng its top spot, gets a 'new boss

NSEVEN years as head of Reuters, Tom Glocer brought the: British-based news agency from the verge of bankruptcy to a state of rude health, But he, has done less well .as chief executive of Thomson Reu-

Btoamberg

25

+--

2'0

zoos

06

01'

.08

09

10.

11 t

next year, But these are still stormy seas~ According to. Claudio Aspesi, an anal yst at ill!_ .1.. .. 11U.. S·····'' JjD·&'0· ndC ]Qo,r·nC"·'e·- :I··D· "JI'ninv -estm ent bank.. it to ok most y nrofession at -oublishine films y three to four years to recover from the 20'01 rece ssi on, This 'U e·",Bernstein predicts, m revenue growth at Thoms,o:n Reuters 'win not reach pre-crash levels un Hill at least 201S~ One area of potentia] growth, though, is trading' services, 'Changes in financial regulation in America and Europe 'win force al ot of trading in denva m iVies from t,h e murky world of private' "over-th e-eounter" deals onto exchanges, where contracts
- I!;'II. '..I .,I!!,... ,_ .' J[J '!ir. I, ,,;::II I~.
,

,I ,', g 1

,;::11 I

I.

I.

. ~'

l~

ters, the company created when Thomson, a Canadian purveyor of professional information tor lawyers, accountants and others, bought Reuters in 2 oos. Bloomberg, the firm's American rival, has almost wiped out its once-clear lead. (see chart) ..

said he' would step down at the end of the 'y'ear., His reQI,n Decemberist Mr Glocer

placement, James. Smith, the chief operating officer, is a former Thoms-on man, I,he revenues of the professional drvision of Thomso,n Reuters grew by 10.% ~n the year to the, third quarter, bur those of the markets division-which provides fi.~
Tl. !GIll --: - '.al 'JIlnc"}'"'.

will be standardised . and prices quoted .. . ':.:;, ~.·'~dX;1 .. I~;;j J-" ·.11· 1..' .,~il~'~1 This ,presents both.r Thomson1' Reuters d d." and Bloomberg with an opportunity to gather and sell data on these, markets end perhaps to capture ,81 share of the tra de' 'by' linking banks and their clients through their own electronic trading platforms, The market f o:rthese derivatives is gigantic.A competitive edge there could make a. big difference
I _

:;j

I!'

to 'both companies'

fortunes,

Advertisi

IIg

," M.··....•... AUR.MCE is immortal," says the _' ~ _, chief executive of a! French multi..•.. , nanonal, Whe'n told of his fnend's cornment, MauricJe LevYJ boss of Publicis one nearest competitor, Bloomberg, besides ex- of the world's biggest advertising firms, is visibly flattered, But he demurs, "When pandfng its terminals business, which has over J.iO'O~,OIO'O customers (at:about szo.ooo you, think you are: immortal, you win make the: 'biggest errors of your Iife," hie: says, HI a. pop); is pushing into government-related news an d data, In 2010 it' laun cbe d Bloomknow' that if M fail to find the right success or:" berg Governmerr ~which competes with my entire career will be' a failure." Mr Levy's longevity at the top is unusuCongressionalQuarterly a sister company of Th,e Economist In. September it made its am in a 'business known for short attennon ···~ga,o.,s-- Pi'U'.' r-"lIi"' , ..1= ling bi _.6I1;;;;,!Ii .nurch· C,o. ,a-v''7,o:r'ep-'Ion-' di '.$.''" 9' 90·; 'm'" on spans, But Publicis is unusual, too, Smce _ \.;;. the Paris-based. firm was founded by MarB,N A:" a .1egal~,andltax-information firm ~ eel Bleustein-B,I.an,ch,et in 192 6" it has had So what happened to Mr Glocer's winonly two bosses: the founder and Mr Lev~, ning stre ak?' His allies say his dep arture was always just a matter of time: once at who took over in 19'8.7., Mt Le'v~, who turns firm buys another, it completes the take= 7 0 in February; had planned to retire at the end of this year, but the board recently over lby putting its own people in charge, raised the age limit for its members ~o 75.. The Thomson family still owns 5'5:% of the On November 29th P'u'bU,c~,s th,at a]l of said company, and some think the generous pr~.ceMr 'Glolcer s,ecnf,ed from T~ho:mso:n.~or the.m ,had b,.e.en re,atPPo],nmed fOorfour years~ Reu,~,ers:m:tlde him ,all th,e m,Of,e vul'n!era.b~.€L, Th,e board wanms h.im. mo,sma.y~, Mr says :JIl_'1 ,U,V d~'" ~~ . .ill Levy, 'because the economic ,crisis (~ould Bu' ho 'm~igb' ~ h~-·~ l@1ffa·y,o.d'mo·nao'r,=w,,o.·r,o."1I+ not for a mix of b,,a,d lliuck ,and, ,overco'nfi.~ 1a.st, so' th,ey want ,at safe p,aJr of h.tilfi,ds ,a.t m-h:e d,ence,., Eikon,~m.nte:nde',d toO' r,eplace' Re'ute-rs' top,~H!e s'e'€s, 10ts of un,ce:rtai nty n ext 'ye.tlr~ though, hie d.oes 'not think th,at ,eom'pa'nfues ,gI,a'b bag .of servID.c,eswith. a single o:ffering; w"i Iill ,cut: lback aJ.'dv'ertismng :S'pendin.g' .as was idesigned to be :m.OIle uSle:r=frien.dly th,a'n. Bloom'berg·"s d-evi,ces~ 'but im. was sharpilly as they did aft,e:r the coIDlapse of [!ehm,an 'B:r.athers in :2008..T'he~I resp"onse launched, :hastny and wim:h t1aws~ Wmth hin,dsight, a. mOire· gradu,al upgradie mi,gh~, to the dire· Sl-,ate of the e,con.omy win v1ary from o:n,e'fundustry an,d Icountry to the n,ext. :ha.ve 'b€H~n m.or,e lllrud,ent This summ.e'I, under jp,re's.su're ft-om the, 'Thoms.on fat'mIDly~ In Europ,e', 'not surprm,singly, th,€; ,outllioo,:k is
.l.i. 11+
'~I

d -t"'!lI1''3ln''d iJCIerv1ll· ...es ''3ln''d aC"'O"'un'". -t,,_.S" £.u'I'- -- - - -" .',1 I - more than half of total sales+managed only 1'.%;; Last ylear that division launche d. a new informanon platform, lEikoD" to 'compete with the: terminals offered by' Bloomberg, but just s.ooo customers have taken :im up~The company has 400~:OO'O financialdata subscribers in all. Thomson Reuters and Bloomberg are the lbig fish in the profession al-publishing pond, at least eight times larger than their
'!ll Q"DIi. G[_I
0:3,,,-"
JIl'Ilr --',,!GIl
+" --

Four more years

,
'

."

iI1'l,,,,!1l;,r

'In

IPAfU$,

The, d,oyen.of 'French advertising shows no sign of slowin.g down, stiUless of .standing down

U,wl'1IW ",",".".;;;

t!i,wl'

: '11;;;.,

e- ....'

..

!"

hleaker th e farther south 'you, go, Yet the, forecast for g]o·bal ad spending
in the next few years released on December ,5th by' Ze:n.ith'Optimedia" an. agenlry own,e,d by PubUc~.s~,s fair~.y rosy~ It says i sp·,e:nd:ing,·· wimm rise 'by:.' AI7~'% ru.n 2 012 to $'4"86 bnUon~ havin.g ,Bon.e' ·up'b~l3~S'% y,ear~A this
.. ~ ~. -- ." ._. . .. ,_.' t.lifil!!, -_.. J I ...

.I~11+

. I ii;;,

..

-df

I . ,~'~-

_~

II~

good ,chu'nk of ne'xt 'ye,ar;s. +nc[,ease' is d.u,e toO eVlents that c:om1e: aroO·u·nd ev·e'ry four years::, a ptesi d.enti.aLl eh~:'ctionin Am erica, the s'um~m.er 'Omympfucs and, the :Europ'ean. -. -" . I" - --"- -. ..",' f'- _.I"a.~I c"h am,pio.n.S-.'h Illp.. '_Th' .e· £orecast ~- -oot'I b... '.-}- . " ,', -.- ..',', ,," ,',- . ",', ,.-or *h;Gil iOIxt- *WO' y.o a'Ie" t- h-.'o'uuh- ..~,,'1'' ,\.,._I~:I b" eiltteI~ iOIVGI n- ,. . L< ~ I~ .\..lll.l,\.._ II!.:_'I .:....:.:,_ I....' ,~ ' ,5~2%growth in 2013 and 5,~8% :20'14 (see in ,chart on nlext pa,g,e).. .t,
" ", I ' 'I "." I'" .:.' , -' I'

1Y'II

;j,~ " .I

'S'

'The Economist, D'ecember iotr 20Jll.'!

..

'The internet and emerging economies are' th e two fastest-growing areas in the ,31d world ..Mr Levy is betting big on both, Five years ago he bought Digitas, an, internet-ad agency for $1,,3 billion, Some thought that pricey Undeterred, Mr Le'vy' bought Razorwish"an American digital agency, for $SJo'm fun200'91~and Rosetta, another, for :$57sm run May this year, 'Ioday internet advertising accounts for more' than 30% of the revenue of Publicis, against around 20% for W,"'lP',~ its lBritish rival ~ In China, by far the biggest advertising market among emerging economies; Publicis is pushing hard, taking over local agencies, Mr Levy' admits that W,P'P' entered sooner and is bigger, (wpp;s appreach in emerging economies is different too, with more weight on public relations and market research.) Success in China may determine who takes over from, Mr Levy~ The company bas put Jean~Yv,es Naouri, the chief operating officer, fun charge there, insiders s,a,y that :if Mr N aouri doubles the size of Pu blicis m China, as planned, from '€200:m. ($26sm) ~,n:10],'0 to €4,oom, by' 2012, he will make it to the, top, Whoever succeeds Mr Levy' will have big shoes to fiU~ Levy transformed Pub,~ Mr Iicis from at French also-ran at the en d of the 19!9'OiS into mhe world's number three, behind 'W'if?P and Omnicom, an, American firm, He did this through the conquest of other agencies on a Napoleonic scalemost notably the takeover of Brttain's Saatchl & Saatchl and America's Bcomj, which came with a coveted collection of clients, "They bought quality companies fO'1 a. full price," says, Christophe Cherbl an c, a me dia analyst at So c:i IG enerale ~

Ta k cmg It persona )-1)y .

'iI!.

8iotech paten ts

NEWYORK

· D
~,II...'II!.~
I!;;i!I.

A legal fight over a 'new generation of medlclne

R'U'G research is in dark times, as pipe..... _

a French bank, :rvrr Lev'y' is not planning anothe r transformative takeover in the near future, Pubm"i cis is re gular} Y' rumou re d. to be sniffing around Interpublic, a b:ig American ad firm, Aegis, a B,ri tish group, and even Ipso s) a Fren hi m arl ret researc her But th would .,,~~ u . , mean taking on mote de bt, and Mr. Levy says that this. m,snot a. good time to borrow money And he, will not want to hand over a highly indebted company to his successon-whenever that happens .•
'.' ~.
,C" " ", ..

ete

.,'

.'

(;~

. .IIl '!!;;,W! ~

,'!I;;;:;.lIl,o;.

,"

IGH

"

'rhe{)Lympic',s" and beyo,nd!:

WO'Il"~d m,ediia a,dNerUslliJg $,pendii III g,~,$,Itb III

[20,,91
Inte l1iI,e-t
,iI:§;

'S'5.o ·5,25

~@

orf w.t~l

,5001
4.7'S 450

FORECAST 2008 09 10

-42~5

sona] characteristics. However, American law' bars patents of 'natu-re and abstract ideas, The question is which discoveries in 'p erso nalise d me dicine may b e patented, Prome'th,eus is p atrt oOf a s ermes of suits over biot,ech patents;; 'Courts :h,alv',ebeen a,cti.v'e 'b,ecaLuse C,ongress has :not A r'fce'nt pate,nt refo'rm pro,vided l1~tleclarity. 'Co'ngl',ess m,eriemy or,d,e:re,d a smudy of ge'netiic tesUng., Ju.d.ges h,a.v,e 1b,e,en bold,er: in July a. feder.al court IW,ed t.hat genes cou~d.be, p,a.tente,d,~'On De'c,em,b"er 7th. th,e s;uit's los,ers a.p'pea.llie,d tOo the Supre'm'e C,ou.rt B,ut Prometheus maly' :have ,greater :pra:c= tica~ imp,ort~, says H:ans Sauer ,of the B;ru,o~
trad,f' group,., Firms a.r,f:stu dying gene'ti e correlations, th,at might pirle,diet a drug~s efIDH:a.tech no:hJ gy Indlustty IOlrg2Jln~,s,am~,on (BIO); at

. .' lines dry up and development budgets a r'·,!iGI,·.'. .. , But..one s··,·,h· of ligh ,fl,.r' cu u pierce s v the gloom, "Personal ised medicine" promises to craft drugs for individuals, Genetic tests will identify those who will benefit from specific medicmes, "fie;atment will be: more effective; waste win drop, Person at 1ised medicine has sparked excitement among drugmakers, doctors, hospitals and patients, It has also sparked a le gal brawl, On December 7th America's Supreme Court heard arguments in M,a'!jo v Prometheus,., Ih,e suit, despite a name, that suggests an, ancient liver sandwich, may be crucial for biotechnology firms" America. is the world's hub for drug research, By definition, personalised medicine includes the study of genetic mutations and other perIl~ __
'!i..

:'l;!il£.jj, ILI!!.1Il1[

\,;II

II!.

.IIi.,",

""'"

m,ethti~USmay determine whether methods USl"n·0' such correlations ~ m.,_:.!"" be patented ~,_I.J , ay .. 1,,",,' The fight: has attra cted the heavy.

CY' or determine the cause of a, disease'! Pro=

I~ ;;;"1.· •.~ "I~.' .•.. ,.' 1,1 .....:,,_'"

11

12

13

14

nal disorders such as Crohn's disease, Their effect depends on lhow they' are meta boHs,ed. N'eit'he:r thio~)urin,e,s.nor tests f():r metabolliit!es (s:u'bstan,ce s p.roduce1d by' me= tabohsm) 'were ne:w when, Pr,omet'heus'~s p.ate'nts. were filed :in 1998,., lBut t'he p!.a:tents cover the proCj€;SS for determmtng w'h,eth,e"f a. g,iv,en,,dos.e produces co,nce:ntra~ions of metatboiites with:in a,rec.om·mlen,de,drang'le~ Th,e dos'e of th:iopurin,es c,o:u~d,b"e ,Bl,djusted a,cco[,ding ~ Prometheus seils at test ·b,ats,ed on its 'patents to. ho'spi~a!s, and ,cUrries. :mn 2.0,0,4" .Mayo d,eve],op!ed a complE:1Itilng test, with differ,ent. recom.m.ende,d lev'e~sof me= ta boH.tes~ Pro.methieus su,ed. May,o "s lawy,ers. s.ay p'rom e~h,eus ,h,a.s p,at@'Dte,d a. :meJ!€obs,erva.~ion o,('the body';'s ...

weights of health care. On one side is Prometheus Laboratories, at Calffomian ,COID'pany that has patented a. way to. optimise certain drug treatments for individuals, On the other is the Ma.yo Clinic, a health and research centre, Prometheus's supporters include B]10, ,atn,dseveral te ch firms, Roche and. Abbott, two b'ig' drugmakers, gave warning against invalidating patents on diagnostic tests, Mayo; s allies include th e American, Medical Assoctation. The patents in, question do not concern genetic tests, though the suit's outcome win affect them. They concern tests for the effectiveness of thiopurines, drugs that have long been used to treat gastrointesti-

B usine

5,5,

73

I. natural

workings, Let th,e claim stand, Mavoargues, andfirmswfll winbroadpatents over basic biol ogi cal relati onships, stifling innovation, Prometheus and its. allies warn of an alternative apocalypse, Ajudg"C:-:' m~'n" (t- 1i'nM": a-' O';'~~ fa-:, Uf-,,~ 'b.y C:o'.' '~" d, will ' ,.y , , ,v-O,"' ~:h'" ," nten W.lll undermine existing: patents and shrtvel investment in piers onalis ed medicine, The Supreme CO'UIt may not make such a broad, judgment, It may instead hand
,~, .w_, " I~ , Q~''''
1

nornenon may not be patented, but which, applications of that phenomenon might be? -w'--:>-h'-' s"t- UIdvi " gene t-,'!', correia ions, , -:e-~ ,_"'"nen IYln,g ',,',", lie ,,-' ""I-,t-" which so-cal ed discoveries are trw y novel? Eventuallypersonallsed m,edilcmn € may transform patients' care and firms' busines s mod els. In the' n ear future", the greate Sf bene ficiari may ue patent 'I- awyers, cranes
i
'.:._: I • (:..' ..• ~.

down, a narrower ruling that leaves many questions unanswered. A natural phe-

I -' .

» ", ~ '~ ,'.' '!

b-

•. (.

'I -,'

'1

-,'

-.-

....."

•.

:.

"'."

:~'"

Revenge of the petrolheads

mostly seen on pricey high-performance cars: turbochargers and superchargers (w,hich mean the engine can be smaller and more fuel-efficient), fancy fuel-injecnon systems and valve trains; gIi les with variable ae rodyn am ics, and so on, Next year Ford will offer a n:EW' Focus compact car in Europe, with OJ, one-litre, three-cylinder engine that performs as wel] as the' 'LI6, litre, four-cylinder engine it a 'iOO{ ill"" f-UI vi_Ill ... re P 1-"(I y'-:;-e uses about ,~ . Iess. ,,_,,",jl!.~11 Ice Baka], an engineer a,t ford, says that even American buyers of the company's .JF'-15'O .Ift". . ..... Jt-'" w, .. ........ . ... ,-... .. at nickuos who.. would normallvy scoff ., h '. anyt h~ 'wit h iess than a vs engine, are .mg ,. -- 1 switching ~o' a. new v6 version that perfo ,- ,,'~-'--. st as we'-11-b U,I~unnxs,-·1-,,--, -, fuer, ormsa reas .... '~' ...::II,,,,,';' -- ~l, ess: . III The analysis by Ricardo and Bernstein s.h,QWS the carmakers are in OJ, might spot giv'c

, •.

,_

';GiI~. \.r;;;l!~

,;I; I[

....

' .,'

..

,Ii!)

.19

1_

'j'

':It· ~ - ,-

':1-"

en motorists' aversion to the' cost of elec-

Fossil, fue] cars are g,e'Hing much, cleaner, making 6fe hard, for green ones
~'~',:I:le-,E,,_,,_~,."t'C_~:'r,hl·e,·,,·.e,""'h~,',,'o.'._·u',ID,,_.tn·I-'_;'C_,a,_·.,'hcl'~'_·~'Mt,,",;"'_'i~_,.,_I"r=. the 'v.:y'_',r"-',,lbO,II"~I'dt,,:-.-_. .'_"._'~y,_P.,."·~".,aln,.'~' ,e,l,r,',-,od·.' Pa,,· •.,_ey:,t,:,,-,r.,le-'O on '. T,- _ illu, WJ!;.lf utional
""' ~ ill

emerged last month that its batteries had caught tire, ~,ncrash tests, OM, is likely' ~,o fall several thousand short of its target of selling 10'~OOO' Volts this year, Despite subsidies, electric cars and, hybrids (which can
Iuno,ffbatt!friesola,gl~:n,eratorpow'!ere',dby

and gre-1e:n vehicles, They conclude ago, was already sen ing poorly b efore im that ,Pet ro ill and, diesel cars will ke ep closing

technology

race

between conven-

an engine) are shifting sluggishly

m'u.ch mo're fu:el-Iefficient 'That means 'm,otor.ists 'willil rem,ain :relu ctant to. p,ay' at fa.t, :pr.emmum for a gre'e'n ear", B,etv~l'e'e'n:now and, 202S reguThators in Europ"e Amlt;:rica and ,elsew:he:re p1la,n to impos,e e'ver greater curbs on, cars'" emis'-' sions of c:arbon dio,x~,de higher fuel effi(or c:ie:ncy, 'whru,ch has :m,uch th,e sam,e- ,effect);; Th~s fusforc~ng carma:kers to i.nvest 'both in dev,e~op·i~n,g,ele,ctrrn,ICS and 'hybridls ,and in m,alting the conventional e'ngine Icle,a~n!€-r~ Ricardo" an e'ngin,e'ering ,cons:ult.a;ncy, and S,an:for,d 'e~Be'rnst.e:in ~an :in'v'estme',nt: banl{t ha.ve crunched, ,a b'un,ch .of nlllTl b,ers
t

The Vblt's battery problem should be fairly easy' to fix, But the profusion of hybrid and all-electric cars now hitting the roads faces a far bigger challenge. Petroland diesel-en:gined veh~.cles are becoming

the emissions gap tsee chart), while hy'brids and, especially eleetrics, will 'be 'more expensive to own for years to come, 'The internal-combustion engine will still 'be, king of the, road. in the early 2.02'OS~, 'when only a nfmh of cars sold in Europe will be hybrid or ele ctric, America's regulators are only now getring tough on fuel efficiency, so its cars are guzzling as much, petrol as they' did 1'0 ye'ars ago~ However, in Europe,~; 'w'hi,th got strm,ct sooner and wh.ere fuel is. heavily' tax;e,d, petrol and, dmesel v',ehicmes hav',f; beco'm,€ much clean,e':r" The a ve'l.31g:,e n'€w ,car so,Mdin B,ri~ain now do,es :52.~5 iles :pe.r g,alli=' m lon~, 'u'p f:r,om 4io~6mpg t!en years a.go" Even s,o~says N,eviU,e Jac:kson of Ricardo~, there remains mu,ch Si(~ope for im,prove:m.ent: petroill and ,d~,esel cars stiU, myp~,c:aUY"us,eless than .a fifth of m'h,e' ienergy stored in th,e~.r fueill to tum, mhe' w:heels.4 ,P'lenty mo:re m~ne,s can 'be squleezed out .of e'cu:h gan,on~ U is smmp~~la matte-r of ,cost To :m"ee-t ,at se:rie-s .of ,de,adlin,es t,o ,cut e':milssions" carmakers .ar'e 'putting into th,eir cheap1er m,o,dels a.im :sorts of gear 'hitherto

tries and hybrids, the quickest route to= wards meeting the deadlines for cutting emissions is to invest heavily in cleanin g: up their petrol and diesel cars, But to squeak past the finishing line they will still need a small proportion of hybrids and, electries C:'O~" t h e-"y', will . have~ t.. 0-_. l"'-..:.,~,~ snen ..':: keen ._~ ~ d-;-= ~,lIJ.~ ~ ... IiJI '_." :.':.. .. ,. ~', . ing on designing these, without their
~.;Iiili
1

rea-ching OJ, level of them profitable,

sallies

that 'win

make

on, both lele'ictld,c b,a.tte-ries. and dies,@,lli en-' g]'nes.1I C,arm.a,kerrs are ,als.o d,ab bH'ng in battery i'easing' (Re:na.uru:t) ,an,d car=sharm,g !(D!aimler) as, th1e:y s,eek. ways toO pers'uadle motorisms th,at 1It' 'e'ctric cars are ,afford a, b le" -el Hybrids ,atnd -el,e,ctrics win, be a drag o:n, 'C3orm,ak.e-rs ]profits ~o:r years. B,ut they are a uSleful marketing toot G,M has found that ad ding mh e :hyb.rid, Va It '(pictulle d) to! .~ ts model ra:n,ge is e'ntID,lc~ng:inmo its sh,o,wrooms ·1'h e , ,': 1' I ... m.._:_ .sort 0 f young,- UT'b b 'I . -an, I_-u.yers w,h ,o nor .. mall y ignor,e:Demroit-m,ade cars,~Ma.ny ba.'1Ie at lhe' Volt's $32,~O'OO'p:ri(:e (after a ge'ne-.rous go-v'errunent: subsidY)t biu,t s,omie end, 'u'p ,driving away in. .at petrol'e'n,gined car like 1It'heCruze., !costing HJoun,d half as muc'h~ •
t
1"-'-1' .,' ,--:,-'-:

Stefanic Lang of Be-rnstein says this will force carmakers to work together on developing new' technology: Toyota; for examI -', Las -- -d -- WOJ, zith F' '''d ,', nypre, h-" agreec 't-0 "'" - k...WII ,~_,.or on, h brid sport-utility vehicles and with BMW

I":'

c --(_."

,",'c,-~

_C'.,'

-::~""',

.,

I'

-c_

'CLos.i'n9 the ga'l]

IExhaust-pipe [02 e'm~ssiO'lfl~/If.I/lkm, ro1f,ecast ! Petito ~ Hybrid Di esell

~,

P[ug ~,i hybrid n

(p~tr:a-V@l€cmc)

(p~tr()V~l€dric)

150
1.20

60

___,.;a..

"""_'

_'__

.L...--{)

2.010

15

.20

2:5

*(l~ss C G~ rs

74 Bustn@:s:s

U iversity c allenge

Richard Arum and losipa Roksa argue that over a third of America's students show 'no improvement in critical thinking or analytical reasoning after four years in college. Popular anger about universi ties' costs is risingjust as technol ogy is shaking colleges to' their foundations. The internet is changing th:e rules, Star academics can lecture to millions online rather than the- chosen fewin person, Testing and marking can beautomated, And for-profit companies such as the University of Phoenix are stripping out costs by concentrating on at handful of popular OO'UIses as wen as making fun use of the internet, TheSloan Foundatton reports that online enrolments grew 'by 10'0 in 20jLO', against 2% for the sectoras a whole, Marry universities' first instinct will be to batten down the hatches and wait for this storm to pass, But the storm is not going to pass" 'The higher-education industry faces a stark choice: either adapt to a rapidly changing world or face a future of cheeseparing, Itis surely 'better to. rethmk the career structure of' Y01II employees than to. see it wither I(the propornon of professors at fouryear universities 'who are on track to win tenure fell from ,50'%, in '19"97 to 39'% ten years later), And lr is surely better to refo rm yourself than to have ho stile politicians take you. :i:ntoreceivership, ,A, growing number of urriversities are beginning to recognise AR~CI(' 018~M.A in~ited a pu~~Ung +gro~,pof ~~'I?P~,f~nto,t_~'~ ~ this ~They understand tha t the heginning of wisdom in acadeWhite House on December stlh: umversity presidents What should one m,alt!€ of these strange creatures? Are they chief exec- mia",as, in business IDn general, is choosing what 'not to do, They utives or labour leaders'? Heads of pre-industrial guilds or chamare in recovery from their Ivy League envy., They are also striking up relations with private-sector organisations, And a growing pions of one of America's m ost successful industri es? Defenders number of foundations such as the Kauffman. Foundation, are: of civflisationor merciless rack-renters? Whatever they might be, they are at the heart O'f a political fire- doing their 'best to sprea d the, gospel of reform an d renewal, storm. Anger about the cost of college extends from the preppiest of parents to, the grungiest of Occupiers, Mr Obama is trying to. Seats of learning channel the anger, to avoid being sideswiped 'by it.: re Wb'im,e We's,tern Governors University (W'IG'U) in Sa t l,811te' City was House Invitation complained that costs have, trebled ~nthe past founded i'n 19'9'6 by 19' state governors 'who, saw' the ens ~scoming, th ree decad ~'S-', A- e Dun can tho secretarv Y of ed ucation hi ,~~ 'Tosqueeze costs, it does all of its teaching online, It also separates m lots of things that are bundled together funtraditional universities urge dluniversities to address costs with "much greater urgency", A sense of urgency' is justified; ex-students have debts .81p'= Professors decide what they want students to know' and desig:n preaching $1 trillion. But calm reflectio n is nee ded too",America 's tests to see whether they have learned it But they buy teaching universities sutler from, many maladies besides cost, And rising- materials from independent publishers and employ "mentors" costs are often symptoms of much deeper problems: problems to guide students, It is notable that the head of W'GU was one of that were irritating during the years of affluence' but which are the nine unlversity bosses invited to. the .. aite House .. • f' ~, avo-Idaho 'has decided that focusing on teaching undergradcancerous I . In. an, age CL austenty uates . is jff'h"-i!! way forward 't hi as. gotrid ofexpen iC'l"-V'~'Q encru stations 'The first problem is the inability to say "no" ~ Por decades all!.~ .1l'u, .' u_ a _..... American universities have been offering more' of everything+ such as the athletics and, :p'hn programmes and introduced year= more' courses for undergraduates, more research students for pro- round courses. Cornell teaches 10,.00'0 students online every fessors and more rock walls for everybody+on the merry as- year, most of them working adults. Southern New Hampshire sumption that the-re would always be mote money to pay for it University has five satellite colleges that make it easier for students to live, at home while studying, The University of Southern .all The second is, Ivy League envy. The vast majority of American unive rsities are 0 bsesse d by' rising up th,€!a cad ernie hierarchy, be- California's Rossler School of Education has formed a partnercorning a. bit less like Yokel-tr and a bit: more like Yale", ship, with a private company ztor, to dlesmgn. courses for students Ivy League envy leads to an obsession with research, 'This can in, 45 states and 13 countries, be a problem even, in the best universities: students feel shortNearly 10,,0 years ago American universities faced similar W(lI'changed 'by professors fixated on crawling along the fro'ntiers of rm,es, ,about ris.ing: costs a.n,d d:€taci1:me'nt fro'm the 'rest of so{iem'y~ arg'u,ed mh:att ~'mnstimul<nowle dge' with a. matgnifying gillass",At iower-l evem un~,veIsiti!e:s ~.t Lawr'e:nce' LoweU th,e :pr,esid,en~: of H!~trv,a,'rd,~ ·r"!lllr",Ci,~!y. 'm-- ur-'d- _ ,,,,,",I· .... :' ~'hP"\l m'-'- ~1I!J!'t *h- ;QI"r- lii:ii'n'd- 'yo ,pu~'{"lIl",d-I.t;:l! T"h,gy-' t.::Ii' ~d-'-'" , ,cau,'S·esdysfunction" Am,eric.an professors of Hte:rature ,crank, OU~: t~illn'n-'S u. !G,lt... : _ "'""'J 'p:a-' 'r.t;:!!,d W::C"ffit-h· 7, 5"7 l"n die beca,use' the'y hav'le ootlliilv,ed their use:fu~ness, or fai~to d,o, the70"" '000·'· "'",c-"ho' ,~I -=l'~- 'p- -'b,'ll' 1Ii"~I~i!li"iIin~'., ~I '::-,~~r, .1Il,ulY - u - . \r.~1Jl. v y~u w',o:r:k th,at th,e 'world w,ants don,e~" Am,e ri;(:a.'s, unmversitie's, iq'uf.ckly 195-9", Most of th,ese simply mouldie:r: Mark Bauerllie:fn of Emory a a. U'ni:vlE'fsffi.ty points ou,t that, of th,e 16, f'es e'a.r,eh p,(tpers p'[o,d,'uced in began "~th,ework thatt the' world w,ants d.'o:ne~·"nd :sta.rh~~d c:en= tury of A.merican, dom:inance of higher ,educamj.on~ 'Th,ey n,e,e,d to 20,04 by·th'f: U:ni'v'lersity' of Vermont's bter.a.ture d,e'partment~ a :£air= . ru,y representative inst~.tution; nha:v'e sin'Of: re:'cei'\red 'b-et\veen zero repe,at the «flick if that ce.ntury is notto end in. failu~re. an,d two ,citations~ 'The mi,m,ewCllste,d wr.~.ti:n"g ,articles that 'will n'ev= !el 'be read cannot 'be, spent: t,eachin.g'~In, UAc.adlemmcaU,y Adrfuf1lt:~'
=

I~

. ..:;; IJ,;;;;

"'"

'!G,!O

,.

\",0",.

Q ~.

~ Ibo . 'I/,;

,(JL

'!U'

II!;;

...

.IlL·.'

,.Q.O]I

..

1"'"

',-

"'I"

..

..' I'

, ,-

'I'

'.

.w: . II

'~"

~_: .

'fl.

I~"

JI

..

~-;,A,,'

.~

~l

]\ri.

!WI

QIL

1,·.·.

.II!,V

._

'lAl.ll!'Io;.

"!l1V'Q

'!I<

Ill.

I""",\,.;.

1~,'Io;.

"",

b-l

_' ...

.;;!!I

lIl'~

,IJO,.;

iii ",,.

\,.;

•.

.,

....

IiJI. -

.,

"l

'Ol.

t"'11i"iIi'm-· "LV,··

-,

..

l!J..

'~""."1'2

,.,

30000
..... , \i

·' ant a b
. .

_ N,EW Fi',d,elity' F'ix.,d Ilnlcom. C.• nter, he Tap th'l ~~ power," of our -I~':' search,,",,tools to ' b "·"'Imd" and refine '~fixed income,:..:._ s·tra'teg·yfor".:todey's market . gl a ';6 .~ now' ~,i~b." __ ,'.,,: .. .'luUW "i.. I,"'-,...'_ . ' .•-:" •.'~J .• ;' . ":", ...• , .. -.. K9
I~i

•••....

g,"-,"

.-~.

~" .;~'

'~I

.1\.:

Go from 30,000 choices to the one ·y·ou want,

'"Compare bonds, bond funds,

OF

ICDs~
1 1

~.Sea re n by' tYlpe. iss Ulielr, rat ~ s n:g and mo Ire",~ _Use .analyt,rncsi and hypothetlcals to hellp g.auge the eft,aell:: of cha.ln'9Ie.slto 'Y'O u r portfo llo, -I :it II _,5e t' y' '. '0' dU r' ~.'r'~t 'e,'g\1.11' thJ. ,nul C'l I~k .' ' .. e'. m . ~IC··" to, _ . -y- .: ilk·. '-_.' _.
".' .. ' •......... b-: .•. I ..,. ,.I,~ .•. -";. !L'"
U-· !!

~":u1l'l It' pm'

C:~rpi:Ii'raw
~qiVfjSitmfHlil Glff:'l!i:ilC

,CC!! rpQ'r.aia Higl;, y~ ~d

'.69 I

lrnaqes are for illustrative purposes. only

and are subject to chanqe,

One, more reason serious ~n've,.st,ors.

are ehoosinq Fiidelll~ty

. t~y'· Q.~.r~"'~NYt;i~:~~g'Q"r;:~"fi.~:·.6"~~.E.;:~'p.r;~IO.I(d.~y,$~
'» :. ';""

'j

•. '

el-e(!)

This effect is ususlly more pronounced for lonqer-term secl~rfti',es,"} Fixed income securitles also calrry inflat~on r'~s,k nd a issuers and counterperties, Unll'~lk,e individual bonds, most bond funds do not have a Imlaltur~~ date, so avo'~din9 losses them unti II matu rity is ItJ1 ot possible, ~Searchcriteri 81 Imlayvary based on investment types. '*'N0 pu rchase necessa ry. Vi sit Fidel ity~ com/ researchtria I to len roll ~ 81com p II m nta ry' Fidel 'itY' mem bershi p today n ~e

risks, char'ge!h andl expenlses,,. Co'nta'ct' F-j,delity· fer 81 prOrS:fil,e,ctUis lor, if a'vaillable", a sUlmmary prospectus contali'ningl thi'si inf:olrmati'on~ R'e,ald i't, cali"efUlllly~ ~nvestin invoh/es risk, 'i nclud ingl risk of' loss, 9 ln g·el~erall the bond market is,volatile, and flxed I~·comlesecurlties carry interest rate rlsk. (As interest rates rtse, bond prices usuailly fall II, ,and vlce versa

Betore inve:stilli'l"g., censlder the fUllrlds' i'nv'estment lobjective's,

credh ,arnd default risks for both caused by price volatillit~{ by holdinq

and 9 a in fu II 8 ccess for 30 dalY'S' to the corn pre hens ilve resea rch an d tool s au r broke ",age custom e rs receive fre e ev,ery ,day..Access to th eSls se rvices may be term ~1tJ1ated at ,any ti me and th is offer is subject to rnoditication by Fidelity without prior notice . .Sys,tem ava'illl.abilli'ty' ,alndresponse times ma:y be subJett: to market ,co,ndli't:'io'n's,~
FidleHty Broke r.agle' Se rvices lLC,; Member INYSE.. Sill PC~ e 2 011 FM R lLIC,. AI l rl9 hts reserved, 59-4519 ,4.0
j.

M~bi1e

There could be trouble ahead

, n 2008 the world dodged a second Depression 'by avo,:iding the mistakes that led, to the first, But there, are further lessons to 'be Iearned for both EUfop,e' and America
," VO'U'R'E right, we did it," Ben Ber,.1nanke told Milton Friedman in a

in 20,08 ,an,d 200,9',., Sir Mervyn has a point

i
'1 ,_':

'9'ot'h,birthday in 2'0,0,2.. He 'was referring 1,0' Mr Friedman's conclusion that central bankers were responsible for much of the, suffering run the Depression. "But thanks to you,' the future, chairman of the Federel Reserve continue d. "we won't do it again ." Nine years later Mr Bernanke's peers are congratulating themselves for delivering on that promise, U:We prevented a Great Depressiolit .. ··n·)', th e D, an k '0"1 f' Eng land "S'" 0",0" ,v·9'[= 1 nor, Mervyn King, told the ,Daity Telegraph, in March this year,
.. 1,
1

speech celebrating the Nobel laureate's

11,..,

'

I,

,..:.

J ...~I

,','

1Jii.,l~lII.~I_

.. ,~,"

. '""', ,

'The shock that hit t'h,e world economy .' . lID --.- ..... with, tha ~ whi h mn '2·000 was o:n.at p,ar wr .. '.·.Ia~''WI:U:.·

dustrial production fell by ,asmuch as it did fun the first year of the' Depression, Equity prices a'nd globa] trade fell more .. Yet this mime no depression followed. Although world industrial output dropped by lJ% from peak to trough in what was definitely a deep recession, fut: fell 'by nearly 40 % in the 1930S~American and European unemployment rates 'rose to 'barely more than 10'%, in the' rece nt crisis; they are estimate d to have
1

launched the Depression, In the ]L2 months )I],,<- .' ~<". ~l,~, " " ....., ,"D' ,.~ f,:: ow .i'ng thI.eeconomic peaa In, 2000." In OJJJ
1~ .' i . I' . '. '. . "",: '-.'
1 .

topped 25%, in the' 1930$,. This remarkable difference in outcomes owes a lot to lessons learned from the Depression, Debate continues as '1:0 what made the Depression s,c- ong and deep, Some econol mists emphasise structural factors such as labour cos rs,. Am,ity Shlaes, an €iconomi.'c historian" argues that "government Intervention he ped make the Depression Great," She notes that President Franklin Roosevelt eriminalised farmers who sold chickens to 0 cheaply and ""gen,e,rat!f,d more paper than the entire Iegislative output of the federal government: since 1189"',., Her book, "The Forgotten Man", is hugely mfluentia] among America's Republicans, Newt Gingrich loves 'it A more common view among economists, however, 'is that the simultaneous tightenlng of fiscal and monetary policy turned a,tough situation into an awful one, Governments made no such mistake this time round, Wh!e:re' leaders slashed budgets anid cen tral banks rais e d rate s in the 19'JOS,~ policy was almost uniformly expansionary after the crash of ,10"0,8. Where international co-operation fell apart during the Depression, leading to currency wars and protectionism, leaders hung t:og,ether

less comforting, :For in two important-and related-arcas, the rich worl d coul d still make mistakes that were also ma,d!€in the 19'30iS~It risks repeating the fiscal tightening that produced America's "recession within a,depression' of !9 3-7'=38,., And the crisis in Europe looks eerily similar to the financial turmoil of the late 192'OS and early 191].OS~in which economies feIill like dominoes under pressure from austerity, tight money and the lack of a. lender 0 f Iast resort There are; in short; further lessons to be learned,
1

" . '1 . . , L·ook c'm oser, 'h' . ,.' . an d t' h e .:" 'tu " z. iowever, ", =1 PIC ure is
I .. ' ' " .," .. __
I' :' . . I' , -'.

Ridlng' for ,8. fall It was. far easier to stimulate the economy in the 20nOOS than in the 1930S~ Social safety nets=introduced i.n the aftermath of the Depression+mean that today's unernployed 'have money to spend, providing a cushion against recession without any' active intervention. States are more relaxed about running' deficits, and control much larger shares of national economies, The package of pub Ie works" spending and tax Jl""UI rs that Pr esid .. ~:n··H"'1!~r·bQr'I·..t- H' uV!I!;;JI[.. :ill" tr : 0·, ro,' ~,;:]i]l duced after the' crash of 1929 amounted to less than 0',.:5% of GDiF., President Barack Obama's stimulus plan, by contrast, was equivalent to 2'~3% of 'GD'f' in both :2009 .' td an,,> "";0',10", H""'I""""",:, ""~' s ..... ···t,·' ':' b dzet ,:",,,,,,.,."', (lOVer en mreu ge c.overe'd:" only about 2~5%of iGDP; Mr Obama's takes ·~,~Oj' "if' ' .' 2'5.(0 OL- ,DJ? a!n,,d" runs>, a. d'" """'1]':"1 Cl ,'"f' 10 '%"~' :. e= ~t'0 ',.-:.' '~ Roosevelt raised, spending to 10',,7'%, of output in 1934" 'by which point the Amencan economy was growing strongly By 1936 inflation-adjusted GD'P was back to ...
\.,.··til I~.

....

1I!;;

I't .'

. 11;;.

_-

'I!<;

...

111"'\

~,¥

-"0' ',-

L,I

."~ ,

'G'"

-',

"'f:, , ..',"

lriefiio'g Lessons of the 19305 77

1.'19'2'9 levels", Just how much the New Deal sp lend in.. helpe d the re-covery is still d ebatg: CO'fiI'tram'on has
AJillJ1!l1a ~ ;~r'~,elFa:91e

ed, Some economists, such as John Coch.. -· raneof the University of Chicago and Roben Barre of Harvard, say not a.m all, Piscal measures never work, they S,Bl~ Thos,e who think that fiscal measures

C'011l seq

o,en ce s

eh a n ge' in budget hala nee' as ·a o/~of f.i D P 2.0 Dr9--13 forecast (IJrjl~ss oth~mi$--e irld.'ir:l]:~d)

C 0.5 1.0 -.L5 2,.0

z.s

3.0

do work nonetheless tend to believe that, in the 'Ji93,OS~ spending was less important than monetary policy, which they s·ee as the prime cause of suffering, In a paper in
19'89 Mr Bemanke and Martin Parkinson,

United :St{lie.s
(19'36-38)

Greec.e

Spain
U nited

States

now the 'top civil servant in Austraha's fi.nance ministry wrote that rather than pro·vm,din.g recovery itself "the New' n eal is better chara cteris e d as havi ng 'cleare d the: way' for a. natural recovery" Others, such

Britain
[ta.Ly

t ~t21

[],.2]
1

Germ 8 r1r:y
So!Urc~s~BEll: IM F; White HOLUs·e

, 2~3

as. Paul Krugman, would ascribe positive rome to. stimulus spending, Whatever relative importance

at

more

is as-

need for budget-cutting ..If the current payroll-tax cut and emergency unemployment benefits were to' lapse, growth over the next year would b,ereduced by around one percentage point of 'GD"'" America is not alone .. Under David Cam eron, :Britain's hugely mdebte d government introduced a harsh 'programme of fiscal consolidation in 210ID to avert a loss .0'(' confidence i.n its. creditworthiness, 'The rationale was similar to. that for chancellor Phillip! Snowden's emergency austerity- budget of 1931; with its. tax rises and spending cuts. On that occasion confidence was not restored, and Britain was forced to devalue the pound and abandon th ego, __Slwn.d_ar_ ... 10" n thh occasion,- the ·d:._.,",., _" sold sta ~, .IS -_.:_,' measures have indeed boosted investor confidence, and thus bond yields; that the coun mry' still fa ces a se eond rece ssion .~ in s large part du!s mo the !S'U'l'O zone'~swo'es" That· s,aid.~ 'poss~biUty of s'uch shock's sh.oumd the a~w.ays b"e a ca.u·nsel f·or ,c.aution 'w'hen a go,ve:rnm.ent ·embarks o:n fiscal tig·hte·nmng." So:me say Hgh.tenin .. ne·e·,d not hurt, .In g: 2,00"9' .Alb"erto .Ales.in}a. and Silvia. Ar1dagna.
-I
l~

signed to monetary and fiscal policy, th ough, the reo is little dou bt that th eir si~ . ultaneous tightening five years Into the m Depression led to a. vi-cious relapse, Spurred by' his treasury secretary, Henry Morgenthau-who worried in. 1935 that "we cannot help but ile 'riding for a fall unless we continu!€ to decrease our deficit. each 'year and the budget is balanced'"Roosevelt urge d. fiscal restraint on. 'Con .. -·

in 193,'.. By' that point the national debt had reached a.n unheard of 40,%, of GOP (huge 'by the standards of the day, but half what Germany's debt is now), Con .. gress cum sp ending, increased taxes and wiped out a deficit of .5~5% of GD']?' between 19'36 and 19'38.. That was at larger consolidation than Greece now faces o,vertwo y'e·at tS, !(seechart· t)~ b,ut is mu,ch s.maller th.an wh,at is :plann.ed fOor it in the monger term,., At thie: same' time th·e Federal RIt;SeIve d.()'ub!~ed re~ s'erv'e .re,CJluire:m·e:nts bietw"elen mid.=19316 and :mid-1937l' e:ncouragfu·n .. b,a.riks to :p'ullli mong ey' o'u,m of the if'con,omy., LIh e 'llie:a.sury b,ega.n to restrict mh,emoney sup'ply :in sm',ep wIDth th,e; ~,e·v,el.of ,g.old m'm'porms,~ In 1937 and 1938,. th,e: rec.e:ssion. 'within,a d,e:p,.ression b,rought: a. d.rop in rea !G'DPOfll% and atn add.itf.onal four ·perc,entage· p"oints of une:mpmoym.ent, w'hilch pealked. at 13%· or 19%, de·pe·ndlin.g on how' 'you count:it
.gJ.fSS

Th.e Sn.o·w;d~:nsof y·~s.t:e:ryear· Toda.yts monetary' polilcy h.asn" t.urn,ed c:.ontra.·ction,ary; as Am,eric:a"s ,dfu.d ]fl thle 19'30S~ As 'I'he ,Eco'nomist w!e·n.t to pless.~ the Europ"ean Centrall~.Blnk (ECB) was ,e:x.p"ect:ed. to ,annO'\ll1ce ·at furth,er 'red.u.ct.ion iln in.. =· terest ra.tes~B'ut:in many :p,illa:c'esiscalli poUc.y f '. •. ,. IS ·movln.g Iapl~'. dlli-I y ln t.hat_ d' c:t1.on,. 1\ AI·,.,. lr'e .. !Ivif O'barna's stimulus is windin.g d.o,wn;;;sta.te~ an.d lQocal=.go·ve:rnm.e.nt !cut·s continu,e .. Re--' :pub,illic an can ditldates for t:he p:n:~ sidlency ec:ho the a.rgum,ents of Mr MOIgenmha,u, claiming th,at d.eficit-nnan,cle·d sUmuJ.us sIH~ndin.ghats don,e Utd.e 'but ad,d tothe o'bU.,gadons futur!e ~a.xp:a.yer.s~M'r 0 b.a.ma, Hl~;e Roos ev,eillt, ·has. started to str,ess th;e

0,"

of H'arvard p,'ublished. a :pa:per ,claiming that auste·rimy ,co'uld be· exp'~rl'nsion,ary, par-' UcumarIy :if :focusedl o'n sp"endin.g c.uts, :n.o,t' tax :in,cr,e,as,es,,, ,u,dget cuts that red.uee int,€rB "'t-., .a -. -~- ~ ~ *'.0 ~.;:) r~t,o,~ ·c t~m'-w·_· t,o plfr"V uJllI,;; 'b a'rr- o-w':'" . 'g an ,d ]l n· =' inv'lestment, an,d by ch.ang~~ngexp';f:lcta.tions a.bo·ut futuI,e tax b,ur;den.s :gov"frnm,ents can amso 'boost: gro,wth ...,others. doubt itt. An In= tern.amion.aill Monetary 'F'und '(]MF) study in Ju~y'this ·y·e·ar found that Mr Ales~n.a an.d Ms Ard,at~na mitsid,entifi·ed ,ep,~.sodles of aus= te·rity· and. thus O'verstate,d th.e b"ene:fits 'Of b'udget cuts; whi1ch typi,caHy 'bri'n.g ,conir.a.cUon n!ot !fxpla·nsion., Ro'bermn, :Perotti of 'Bocconl University' has smu.dm.e,dexamp~.es .of expansio'n a.m tmmles of ausJe:rity a.n,dls'how',e,d that it is aJ-· ,most alliways attrib'utabl1e to :rising exports as.so'c~.a~ed with ·currenlCy dlep,recilatilon~ .in the 1930,S the- contractilonary :impact of A'm.erl!ca's fisc-am cut S w,as mi ti:ga.t:ed to so'me lexte·nt by' a,n ffi.mproive.m'ent. itn n·et. ex= porms; Americ,at,s trad,e 'balance swun.g: from a. ·deflcit:.of 0 ",2'%, of G:D P to ,a surpllli'us of "'9'36 a-- l-d "o,],.() N·I~-w~:· n, Ll%:-o!f-- ·o·-·v-··m, ·b,Q'Iff-w-:-~.t;::!i.t;::!in ~Il . ~~. v· "'I
,0 "!;;,;:),

could offset the effe cts of fiscal cuts, In 2'010 the IMfl wrote that Br.it81mn~s expansionary monetary policy should mitigate the contractionary impact .0'(' big budget cuts and "establish the basis for sustain OJ, ble recovery", Yet Britain is now c10se to rece ssion and unemployment Is rising, suggesting limns to. what a central bank can do. 'th,e move to austerity' is most dramatic within the €uro zone-which ca.. least afn ford it, 'Operating without floating currencies or a lender 0, f last resort its present. jll.~ .. ~.. I ~ !I0.::II';;' pre dicament carne S painful ech oes of the gold-s tandard world of the: earl y '19l0S~ In the :mid~192,O'S\~ after an initially' untenable schedule of war reparations pay= ments w,as revised, French and American . creditors struck by the pas sibility of rapid growth in the battered German economy began to pile in ..'The massive How of capi'Iff....'~ helt ad fund.I.. Germanv's s sovereign oi11..·1·! ~:wn I erma :, ' Y ,1) 1gations and med.to soaring wages, Germany underwent a credlt-driven 'boom Uke those seen on the European periphery in the mid'=200'O'S~ 'in 19'28 and 19.2'9' the parfy ended and Ihe flow' of capital revers ed. First, investo rs sent 'their money to America to. bet on ims soaring market, Then. they yanked m.m outof Germany in re sponse to. financial panic ,."Fo defend its go d reserves, Germany's Reichsbank was forced to raise interest rates ...Suddenly deprived of foreign mon!ey~ and un.8tbl,e to. rely on ,eJ<poJts for growth as the earU.er bo,om ,g·en,erated. an unsustam.able rise ~n w·age:S 'G·erm.any turn,ed to ClusteIity to mele:t its o'bligations,~ as lrlelan.d., Portugalli, Gre·e·c,e ,an,d Spain 'have ,don.e..,A. country wID,th. a floating ,curre'n(~y ,could ex:pe·ct a silver llifu.ning t:.o, c:a.pttal ou t- ••
Ib.o
!G,;:) ... '

most of the world is cutting budgets and not every economy can reduce the pain by' boosting exports .. The importance of monetary policy ]'n the 19~ 'might suggest that central banks os

G,

,iII.~,wI.

"

I~.,

It

~.w.P'I~'

,;:),IV~J!J.ii;;]'~'I·

..

D'I,bto liS ,throttled

M:1l m one:y
(ik, [na-nl'9 €!, Dill two ye.;3Jrs a £1'0 OctoliJ@<r ,2011 or lat@'st (unteS$ o:t1l1envise i'~dicatEd)
S UJ ppLy,.

,iJI'

Ji

.,

a-' .

.~

..1,"

'. ..

-:-!

20 115 10 5 Cred.ito r COlLI IfItries

(1'929-31)
\lC

0 '"'"5 10 15

Debtor

(1fJ.29~ 1) j

COli Irlt,riie~*

EUJUJ!=afea ![~ret

Ge'nnany

Fn1.llce
Ne,theMlarn ds
EUJroarea

Italy
SpaJin
Gr€!€NJfl'

:Somces'; B.[lJ1lil k o.f Greeee; J1"G olden I~etters~rtrJ8aJIFIllJ I [1dhern gre-€'n; H~\Jer AmJal~ c-s; Th~Eco~om.pst

;;;\tlittlllill til e go~dl5tandlflnjj t,A.!1Jsm,fljl Belw urn ~ Fi nla Ii1Id .. Fr,ar!C€", Gerrf11l~W1(Y. &. Netfh~rland$

h:;re:e<ce Irre-laWlld ~ ItalYI

l

Portug:[lJl,&· Spann

['

.'

J.

Jr

-.

I'

.J..L·

.'

','

~17 ..,.ID!!!

78 Briefing lessons of the 193as

The Economist. D'ecember 10th 20Jll.'!

..flows; the exchange rate would fall, boost= Ing exports", But Germany's exchange rate was :fixe·dby the gold standard, Competitiveness could. only be restored through a slow decline in wages, which occurred even as unemployment rose. As the screws tightened, banks came lInr-'-e-£Iu-r'Ibl - A~ustri ,g,;I!"'I'o~'in- ,o~-·--'m un---d l"": -5-' faced troubles Uke those in. Germany and fun1931 the failure of Austria's largest bank, Credit Anstalt, triggered a loss of confidence in the banks that quickly spread, As pressure buth in Germany the leaders of the largest economies repeatedly met to discuss the possibility of assistance for the flailing economy, But the French, in partieu ar, would brook no reduction m:n Germany's debt and reparations payments, Re eognising that the absence of at lender of mast resort was fuelling- panic, the governor of the Bank of England, Montagu Norman, proposed the creation of an internationallender, He recommended at fund! be' set up' and cap italis ed 'with $':i5o·m;to be leveraged up by an additional $750m and empowered to lend to governments and banks, in. need of capital, The plan, proba'illy too, modest, went nowhere because France and America" owners of the gold neededfor the leveraging, didn't mike it. So the dominoes fell, Iust two months after the Credit Anstalt bankruptcy a big German bank, Danatb a nk, failed, Tihe govd introd ~!ernmient' wa.s t lor-ce:,._ to ~·ntro.·u'ce ,ca,jp,mt(1lL~ ,con.trom.s and s.u'spe:n,d gold paym,ents" in. ef-' feet unp,e,gging it:s ,curr-en,cy; 'Germany;s ,o',con' . _ "'-',a,II,:a.·p'·s:,o,d. 'Iif'h~·h·Q,rro'r'·s, o·,r- ·tho ~'nd' , ~, .' .olm·· 'Y~\.. -.,-., """ a., 193;OS ·began~ It· is at 1 dre',adfuJly famU~a.lf.Ohough n.o' Europ,ea.n C:OWltry is. ab"o:ut to, eJ.ect a'nother Hitler)~ Memb"ershfup ji'n the eu'IO zone~ like· .ad:h.e-re.nce to th'e: go,md stan,dard, m'e.an.s that uncompetiti:v'le (~O'W1tries !can't d.eva~ue' m:heir curlien,cies t() re',d'uc:,e tra de defi.c~.ts;; A'.ust:er~ty brings with it a 'vm.cio'us circllie·of ,de',c]i:n.e) ,S,qu.eez~ng do,m,estjc d!em"'ln,d andl raising une'mploym!snt" ~here'by' hurtm.ng re:·v'e.nues,~ s:u~~aainingig dleficits and drainb i,ng aw-a.y con'fid,ence in b,a.nits andl sov'erieign de,bt ,As. r-esi.dents. .of thie p'eriph,ery move t~heir money to safer banlts in the icore"th,e m.oney sU,pply de,clin,e S~,just as rut
_ ,:!l.J!.

to overcome, As in 1931.and 2008~, a grave 6= nancial crists m a.y ca use a, .1 arge drop in output, That, in turn, would place more pressure on cure-zone €!:con omies struggling to, avoid default, As panic built in 19314 country after country faced capital flight, The effort to defend against bank and currency runs prompte d rounds of austerity and, plummeting money supplies in pres sure d. economies, helping generate the colla p se :in output andemployment that turned a nasty downturn into a Depression. [:m took the enid of the gold standard, which freed central banks to expand the money supply an drefla te their economie s, to spark recovery" Today the sea has the tools needed to salvage the situation without breaking up the euro But the fact that the E'CE and, enrozone governments have options does not mean. that they will take them, The collapse of the, gold standard led to recovery but caused terrible economic damage as coun tri e s erecte d trad e b am ers to stern the flood of imports from those that had devalue d thetr curren cie s.. 'G overnments elected to 'fight unemployment experimented with. wage and. price controls, carte Usa tion of industry and other in- - - "1 -- - ' -_ '. -t erven -t"orrs th -t 0·'ft en im p'- - d - d th iIIJi ''t"',g,·C-OIV·:·= ery enabled by expansionary monetary and fiscal policies, In the worst-hit countries long-suffenng cmzens turned to fascism in the: false hope of relief The w'o-r],d 'to dlay is 'b eti-er plaoe: d to ,cop,e Wh,ere: this path me·a,ds with dis.aste:r th,an i~'was, m thif! 193;OS~Then, O'n the p-res;€nt c:,onr:se', ,con,dm t~ ons in ,d!evel- most I,a.'rg,eecono'mies 'w!ere on th,e go]d opeld 'e'conomi'es. moolk mike g'etting worSIE: standard", Jo(llay,. the ,e:uro zone I'ep,resents less than 15'%, of ·world o'utp'ut ]n d,evem= 'before: they ge~t' ,elter~Gr'owth in A'm,eric:a b op'E,d c.olmtries lm.em'ploymien~~, scourg,e an,d B:ritain win p:rob,ably be less than 2% in though it' is" dloies. :not lead to u,tter d'f.stitu'2 012 on Icurre'nt p"olic~ an.d in both r'e'C'fSsID.onis quite possfub,ie~A le:uro~zone re(Jes'~' tion as .it: dlid in th!e: 193,0 s~Th!e:n~, the· w,or].d sion is mi.kem~ Tile EIC.B could im.pnJ'v·!e th1e la.c'ke,d ,a. g'ru.ob,a,] lead,er;, 1Ito!da~, Am.le-rica lis e'UIO zone"s eco.nom],c o'utlook 'by lo,osenp:roba'bmy stilill U,P to the, ji ob of (~o-o.rdm.nating ,disaster r.espo:nse in troub],e d Ume:s~ er]nt :ing its :monet.ary poU.cy" lbut widesplie:ad a.uste:ri.my and un,certa.inty 'w* '1. 'be ,difficult national :institu.tmo.ns are 'much, stron:ger~ an.d d,emo,eracy is .more firm y ,enmren.ched", Ev'e.n :SO,~p..rolliong·lE:d eco,:nom:ic: w,eakness is contributing to a b:road :rethinldn,g of 1Ithe value: of ~ib"era] Icap!itali sm~ Coun'-' tries sCI,ap'ping ~or sca.rce d,e'IDand a:n! n.O'w intervenin.g in !curre'ncy' maikets-th,e Swjss ,are,~ed up' with. th,eir fran.c. appir1elciat= ,dfuldin the 193'OS (slee' ,chart 2) ~ High=levlel in,g ag.amst th.e ,euro,.,Americ.a"s Sen,ate has meetings with ,Cle,diltor nations b:ring no s'urce.as,e~ T~he-Ie ills,no illende-r of lliast r,eso:rt. sought to pun.ish 'China for CllIren,cy m.aI,h,o'ugh t:h,e :EurOI),ean. 'Fl'n,tllncial Sta.hil futy nipu:~ation wm.th tariffs,~ Wi.t'hin. Europe th,e turmo:il of th,e 1e!:UliO ,cr.ists, is en.co:uragin g Fa,c'·1ity (EF 8;'1'') "as gol further ,off the if"om,o of' - ·th '~J .• , '.Lril: CiS t ;a.m;~ _ !- .. 0 gJttloli'nd. t an No'tm,an'j's s,ch,em,€~ 'wh~ch it ugI~'Y' nat1'! ,.'.,' na]~'l,j;'~;:]" .,. ' .. Thefur ,extremism is mimd w·h,en. ,compar,ed ,ehiIHnglliy' res,embles, e:uro=zon'f llieade·r:s. with. the (:,ontinent=wr,e,cl~ing horro-rs of have yet to. find, at 'w,ay to. llie:ver.age its €440' Nazism b,ut that har.dly ,makes it weru.com,e .. billion 'u'p to €2 trillfuon.~ ,Even if th1e:y s.u:c(~eeid~th,at ma.y 'b e too. lit= The situation is no,~ y!et b,eyoind replail~ mle to e:n!d t.he p,anic ~ ]nv,esto:rs dlriv'e'n 'by B'utthe 1t'ask, f re,pairi.ng it g:rows hard,er th,e o murmoil in. Ita:lian markets are p.re=emp!= longe-:r it ~.s d:ela.yed~ The: lessons of the 1930,S sp a.r!f:,d m:he worllid, a mot of ,eco:n,om'i(~ mi'vely redu,cing th,eir .exp OSUf,e '~'O 'ba-nlt~, pam, ,after th,e shoc.k of the 200,8 fin,an'cia] an!d soveremgn bonds else·wher,e in the euro, crisis,,·it ms.:nottoolate to recall ot'her crit'ical zon'e ..Even. co'untries 'with relativ{~;!y ro'bust e,conom~es. such. as F!mn,ce ,a.'ndlth,e N€th,erlessons. of' th,e D',epr,e·ss~,on4 ]gno're the'm, and. history may w',e~mre,pe at itself" • lliands :have not b,een sp,atred~ No. matter 'Then and now
,~1it _.::J_ g . ""-'''' ,g
!I;.,.'

-1._ ~..

<;J'n ,tLl.L

1I.;.·"'c

._

y. '.. _

how secure an economy's fiscal position, a, short-term liquidity crunch driven 'by panic can drive it into in solvency History need not repeat itself Norman's Bank of England was created in the rrth century to lend to the government when necessary; centra] 'banks have aways been obliged to Iend to governments - -- 11[' --- '·~~I - t Th~ e ECB C'OUl·.'.,al(i~: -W h ,en '0- th.e:rs W]U. no'.~, --..• - - ]Id t ~l on. thi s r01e. It ]ispro hibite d by itSI charter from buying debt directly from governments, but :it: can purchase debt securitie s on the secondary market, n has been doing til· !.~ ld -WI.,' lJiCi!~ so niecemeal and co..... declar '1"'tS tn ten tion to. do so systematically Its power to. create an unlimited amount of money 'would allow it credibly to announce its willingness to buy any bonds, 'markets want to. sell, thus removing the main Cl:1US'f: of panic and contagion. This week France and Germany proposed the adoptionof legaJly blinding budgetary "golden rules"!' by euro-zone members, ahead of at summit of European leaders in. Brussels on December sth-sth. Mario Draghi, the ECB,~S new president, has hinted that were a fiscal pact to be ag,reed,~ the ECB might buy bonds on a larger scale, What scale 'he: lh,as in mind, though, is unclear, jens We~ffi.d:mann1' president of Germany's Bundesbank and an influential member of the E·CB'·S governing council, has clearl Y sta te d that the B 'CD "must not b e" the: euro zone' s Iender of last resort
1-

:1_,

i_:,

.•

I~

I'

~'-"

I, _~ IL.

,I~I.

Ii:!

I~;"

,~

J~

~,

ll!..

,<:II,' UL

.1[;,

.1 .

,ii::!; I[;

'~I ,!!;;:

.•

,J.~.

l.

IIJ.

.11,;;"

-.

.,

,.'

!Ii;;

I:

if','lifo('

!Ii;;.!

:.1

i""'lii

j(-

....

79
_-:-

~'1

Also 'in thts secti'on

Fo r d affiL~la na Ly:s.i s and de bate

Econonlli st •.CD

0 naco

n 0 rni CS~· t visi

mil eC1Il1iiI !!J.li11ics

Euro'pe's s,Qvere'g'n,·debt crisis

Scaling the summit

to control deficits over the past decade, Countries wi U apparently be re quired to ~1:,QI,g.p to'! a, deficit tareet 0' 'f,'-' 3··0.1 of '-G," 0- 'D on JL-{~!(; , . u, pain of automatic san ctions umder the pact, penalties were 'usually waived), "The EU has Iearned nothing about the shortcomings of th,e previous. Stability and Growth Pact," says Simon, Smith, chief economist at Fxl'ro, a foreign-exchange
!II;;; .

I~

.aLl!l.oo,iii;;;

.-. /0

..

.,~.~

I_

represent the triumph of hope over expertence, Simi~a.rilly~ the: lead-up to every EU in, summit, investors become optimisti c that
ECIONDI
=: 111, 'I ", I =

marriages supposedly

this time-finally-leaders wUI manufacture a solution to the debt crisis, So. 'it was with , th.18 l[a.es,t summLIt "", D",:, "'~I'~' "~I sth "t··, ',',:,' 'I ~ W]l~ ," Q,n ,ecem.IUer
O!~

and sth, due to take 'place after The 8C011.o= ..· {""t' vent n m_1Ii"_ ..,' .... ' '_ to p~ I, ress Befo irehan d A'~' a~,l".],
w'

IIOor';'.:;lI'4",",ill"_,

""",

:':'!I<

"

,~,\;,.JI!,iI;,iIl.

restrictions on the ability of' euro-zone coun trie s to run I arge fiscal deficits .. !o. W uld Tho hi. "p.' ~:--::~a-:e tha t th ie, -'~:~'O_- ... b·I.~ enough to persuade the European Central Bank to. open its wallet: and buy more government bonds, 'Th,e leaders also agreed to b -~ £'orwared to n ext year the c - ,"- 0 f. -' _[~ng ·e crea.tlllO.n
.~ .'0, .,0 ~ W.LII .. .. -,. LII
• ,':.:" ...• , ..... ','. [.. ,'. I'" '.', "

Merkel, Germany's chancellor, and Nicol", -lar.Ozy, " ide as S"'" 'k-" ",' th e Frer 'hOt presu ern, "L, d -rencr nan '=:, -,_' re thrashed u a ue, whichprom ises funne nut deal
"I

_;to

_:.!__,

:,j;._.!!i;.,'I_

.<=_

'

,.1

,!!!,_.,-:

"I~I.·

cal convergence among' euro-zone mem- ity to ereate at much large r rescue fund, Inb e:rs.~.~I.t ,at~SO rrie dl a b,o ut th e rising ris'k_ ,de e-d~,s&p wa:rn e-d mh.at the :JEF~lF"S icrle!dit ra t= , 'wn the E'ufopean Stability Mech,atnism (ESM), a flUld. desig.n.ed, to bailli out ailing ,c~)'un.'-' of a recession in the euro zon,e i:n.2012~ ffi.ng wou~d be down,graded along with. the •• Europ"e'~s lea,d,ers face an agonising ,dil'=' lemma~ They needed h) MJ.rodu,ceanplan to Hope ,s,prings ,e't,ern.a l Shalld'n'g t,he banks limit the regio:ntg d,ebt ,aocumulli.ation over ·t-h,·· II on.g 'run" 'iII),··t't-," gllea.,t.an emp ···haSIS on, ..'- """,",:': . lh ree- mo,nth Euri bar sp'rea dover th ree'= Ii1i1 O'll1t h Ten-·yea r g,overn m emt bo n d yield:s" o/@ ", e ." .... '1:- vU .00 . eun, ,~}vem]'91ht-]'n,dex,ed swa'Pc~ba,s;is 'poilnts '. "n h h "1 a.ust;f~r.n:y .. tie s: o-rt: run liS {S sen,'d" t.'he 'lng 8 co,ntlinent's, economy into .at ,delep reces= ]20 sio:n; t.he latest data. o,n :Mtal ian ID:nidl'us~rial 7 j[OO prod'uc:tion sho,wed an a:nn'u,amfan. of 4,."1% 80 .in O'cto,be'l, 'ev'le;n be'lore budg,et cuts were 60 introduced by t"h'e: n,ew' gO'vern~ment ,n 40. protest ,atgainst th'e reforms" Italian, trad.e 20 unions caJle,d prru,va'te- and p'u'bli-c-sec.t,or ~ .___-"----'-----'----..___------'--"--"---, 0 + natio,nal strike s,. J Aug Se!'~ !lJct IN J J lIll A!J'9 S,ep Oct; N Dec Some, fe·a.re,dtha t th!e; o'utlin,e .of th,e Me:r2011 2011. ke,m-Sarkoz"y d,eal look!ed remarka.billy like $,o,u if(e'~ 'lilholi!ls,o'ii! Re.ute'rs th,e Stability and G·rowth f.act~,'w'hitchfailed,
'I' ',: . ., .... ', , :
I'

tri e a-red u cing the: risk tha t the 1ike S (If ]ta -, ly and Splain would struggle- to refinance maturing debts, The markets were also b On ste d by a P' 'r''0' mise th, at un ilike the ,I~ ~ Greek deal, future: bail-outs 'would not require a write-off fOI private-sector creditors .. ttahan ar ....'Spanish bond, 'Y 1 die. JIl'I(;:;,UJ., an'd pa . €6JII IU~,;:) lit .dld'·· I!. sharply (see' charta), Standard ,&, Poor's,a rating' agency added to the pr-essure on the leaders to come up 'with a convincing deal by placing all euro-zone countries on, negative "credit wa teh,,~ with a view to re d ucing thei r ra tings, The· agency cited "continuing disagreements among- European policymak- , ...........' , ' , u.... :., ,y .. ers on how to tackle the immediate market confidence crisis and, longer term, how to ensure greater economic" financial and fis.11 !v,j

broker
_ K!!;.rl
II ,:'

,iii;;;.,-_

",

~-..

••

ll,j;'II;;,

..,.,

•.

'!;;;,

l;,j,'

,~IIU:"

~-.!o. i._ ,:) ill;;,

Andrew Benito of Goldman Sachs lameats that "two options that would have res ~ I ve d the p' a st 1:"m p ,B·' ss ° m .0·· ;e;'~ ,""'1a:'" ..... ° nly I~,. ,·.1: dI . {e, h ave b een ru Iec out, Ch ance]'ill or Mer 1 1 has ruled out the Eurobond that would have directly 'mutualised' excessive debt in the peripheral economies, President Sar~{OZ~, meanwhile, h as ruled out th!f fiscal intrusion that would have given a formal veto against national bu dgets ..,' ,
'l(;;,o:lI,y. •,' :.',',
r

be c"o" rrect irr .~:L.. : IL'-_.Jl'vL ~~ anv L. lI. *0 do UU ting th e su' ab ~ill'~*Y enforce ,u,__s debt or deficit rules,"
.. " ._." : .!.E.,-_
I ... W'" ,_',

"lnv e 's:,t-O""I"~S':'
'~i

I_ll!. '-"'0".. uld_

.. ....

",'

..

' :",111,.

1I!.

I"I_:·

c;;

gl,gj_~l~

11,;;;.

II,;;;
"

'~'.,
'i

,.-:Ii

II,;;;

.,

..:l!IJ.

Ii.... ·IIW. . . ..
.

.c

" " ",'"

"I

,.

.1':'

'I

I'

"

','

',,'"

'

_,

'I'

,.-",'

"

,,'I

'i

Ba:ck to the pact ~'r"llil;-"o~ 'p !~l. ternrpered .~little on . 11~.. ~ ... M~ {~It.. 0' ...- ..nmism :,'-W~'~"~, December 7th, when hopes were dashed that th e 1l',("IM:':: W,,,-::O-i'U- ld b,~com1_bine_ dI with the_Il,t.'Il.il aL.. .. III i~ ..
JII..;],. .. (;iIlLII !lJ.1l;;=..
. ~JIl

(;iI[

,-L~'

··.·_c

...

_",""Il;,r

..

existing Europ ean Financial Stability Facil-

I"'C"

1'1'

I'··

',! " ,-- '"I'

"'--:

"I',·"

'1' .'

.J.:

,JIlIIJ1

y[

9'i,!"

[)e!IC'

IJI'iI

CJIV

80 Finance and economtcs

'The Economist, D'ecember

iotr

20Jll.'!

..countries that backstop the faciHty., Even at package that successfully bails out European ,COuntrie s in, the' ShOIt term would not deal with the long-term problem that has afflicted the region-that some countries

have become less and, less competitive, relative to Germany" Another worry for the markets is. the' contin ued pressure on, banks, The co-ordinated action of central banks on November 30th gave European banks cheaper access to much-needed dollars; they borrowed, $5'O~7btllion from the :R'CH, under the latest three-month deal, compared withjust $39s:m 'under the pre-vious facility; whi ch Iev ie d an inte foe t rate t wice as h'igh~ s Neverthe less, banks remain 'wary of lending to each other, es is. shown by the, ga p betwe en the-if borrowing costs and officia] inte rest rates (see chart 2 on previous page), Banks :may respond by cutting credit to firms and households, worsening the pressure, on the economy 'The danger is that the markets will repea t the pattern the. t followe d previous summits-a rally on news of a. ideal that peters out once Investors examine the fine, print Only a 'move to full fiscal union, with the northern countries subsidising the periphery or. unlimtted bond purchases by the E,CB~,seem s lliike~y to satisfy moves tors .. Before the summit, Jon,athan Loynes of Capita Bcono mics said tha t "we remain to. be convinced that the proposals win, bring the debt crisis to an. end and ensure that the, euro survives ~ its 'present form," n

P,Ot.. Those are the kind of sums that would 'hi'e neeue.,d, . Tlh· '1M.'·.. F 'curren It··lj·· hi' ..',." '., .',' 1;11" . ., e F. I' ", .. , JJy ,as some $390 billion of lendable cash 'in its, kitty (see chart). The. t's enough to de a with
"I

funds from others. America won't contribute anything more to the IMF'~, but big emerging markets seem willing to' mop' up' the fund's resources, provided the Europeans do so t.Q'IO~WUh Europe's own rescue fund-the Buropean F:in,ancial Stability Facllity-floundering, the IMf' may be the b -t .rou·te t ,0 raismg- rea 1money,F _es ..- . - - .. '.-...- ..- - ..How' much could 'be raised fusstill 'up for grabs ..Eswar Prasad, an economist at' Cornell University who follows the lM,P closely, reckons that if EUJ('ip,eans come UPI with $:lSO billion-zoo bilhon, then, emerging economies might add a similar sum to the
,, I' ,-,"
I'·

I"

','

..'

'.'

','

I'..

,.. ,

".,.

some ,€].20 billion ($430 billion) and. €t41 billie n re spe ctively in zoiz,

smaller. economies, but not to back stop Italy and Spain", which need to refinance
Unfortunately like many clever wheez-

The IMf and the euro

Cash for ere d 1 I1ty _Ib ili

,-.aundering European 'rescue funds through the IMf
WA:SlrHN G,TUN I
11)[

fi

' __ JI!,'

tatt,es sh a.p ,e (s,ee p're'v],ou:s Storyl~ the-re' is grow ~ ng speculaHon that Europe,'s ,ce:ntral 'b,anlte'rs Ico'uld :help in, another waY'=by' ch,'annem~ llimg resc'ue :fun,ds thro'ug'h th,e ]MJf'~ 'The :E'CB, is not allowed to fun,d m'emb"er gov·er,n'm,ents." but it or national central ba,nks. cou~,d,lend to th,e IMP ~T:hose' natru.on= ,al centralli 'banks have provi,dledl resources. m:o. t'h,e'fund 'before~ 'w'hmch is 'why th,e ullitraorthodox :Bull,d,esbatnk does :n,cn:object 1,.0 filling ~he I'MF'S c.offers-,ev'len if ~h,a.tmonf;'y 'we're th,@'D used to :pro:v+d,e' res'cu:€ funds fo,r coun trie s su(:h ,atS ]tal:y' .or Sp ain~ ~n many ways this m'on,ey,=laund,erfung wou~,d,'be at Iclli,ever wh,e'e:ze~It ,gets ar'oundl m'he centratl 'bankers' hang'=:ups .. It: p,rovides '!JIjlll';i ty dollS C1" P n;Gil 'I(";n ce th,t9 ·f-un· d' '~'s r'o n IIdll" *r I" on II!ii!!!,1h,._:.· I,']]' ,!;.,.,~ ~'liL II _I ..J woullid, h,elp to ID{eep' Europe's 'perilph,eraJ !e,conomm,es. on track" ,An d rut c:o,u~,d,,eU,cru.t
111]'·
,.I 'e
-, _ ,'Ii;". ,1_ .... ~," l~, '.'"

AS A n'ew' ga.me pla.n ~or savi:n,g the

by e':n~O'rclng fislcal d.tsclpHn,e

eUIO,

es, this one is full of' pitfal ls, b oth for the Europeans and. for the IMF.. Th,e fund, which already has over half of its outstanding loans in the euro zone, wou dlbecome even more heavily exposed mo one region, For Italy or Spain, borrowing (loom '. h h '. t h e ]M'lf' is not t-Ile same as the ]E,C:B,b "Iu:yln:g' th eir bonds ..The IM'F' is a.preferre d ere ditor, which means it always gets paid back first Thus the more the, fund lends to a country the bigger the write-down for private creditors if there were ever a default, An 'IMF res'cu'€ 'plan cou d spook investors rather than reassure th ern, particularly if paralle s were drawn with IGr;eelce',~ ortuP gal and Ireland, which have already had rescue packages from, the ]Ml~" and the h .. '. '. Europeans, an;d g,-IOW no sign of' regammg access to financial markets ~The experience of those countries does not 'bode well for the: IMF.'S credibility either, in each case the Fund's technocrats are net in, sole charge, Against their better judgment, they have often compromised IOn reform plans, with European rescuers, who usually push for ,ha.rshe'r at us.te:r:i t y. The sam,e da'ng,er ,exis.ts for ]ta.lliy or Spain~ Even if ~'he E,uropeans, la:und,er tes~ cue funds th:r,ou,gh m,e IMP ~they .are 'unl:ike= ly to o'utSOl[rC'f fiscatID, oVl~:rsigh.t lentireID,~T'hle .in,evita.bme co,mp:romises Ico'u~ld easily l!ead to resc.ue p,lli.ansthat faU,,, If th!e euro then fa lIs ,a..p,art, th,e IMF; the ODie ins titu t~.o:n. at ~:h c!Quld'picl~'up the 'pi!e,ces,~'win lack both th,e cash and ,cr,ed~biUty' to d,Qthe'job" _
:In meed of a,top UIP
December :It s~ 2:0 11~,$ b I'l

,Mex,;co's pLunging p~50

..... .. .' .. '. I _ . .

·A"·· r,rib..' ,',.. ,..'. • a- arrib a-I I,

II I . ,.
:0

M EXI((~ (lTY

A wobbly currency has not hurt

growth-for now

o
1M F 'Cl!l rr-e!flt.
,,-. ,mmitml ..e. *"" Clil ~ CD...

200

400

600

I rM F i'en dl' n ~J pa cirty ca

ro [[overs due

Sovere,j.g ifI-C ebt

2()12 S au reels: I'M F; BL-o0 Ii1iI b ~:rg

SP,MN

OL~RS and pe.~os cm~s the~~rd~I between America and Mexico in greater numbers. tban ever ..The $40,0 billion-worth of trade in zoio made Mexico America's b iggest tra ding partner after China and Canada, Greenbacks are so common southof the frontier that in some neighbourhoods peso coins are known BlS 'CUO'I~S", a mispron uncia ti on 00 f U'q uart ers" ~ lately the relationship between the currencies has been rocky ..Between July and November the peso. fell 'by 1;9'% against ,:~, dollar '~Vl!/,;' tho. ·.1 ,tt h ittlne ~te owest level sin co. th 2:009 financ:i.aJ, crisis~ It' has since 'bo!bbed, b,BlICk ,ii Utt~e' ,as prospe.r:ts. ,a_,cross the 'borde'r have ~mproved ,tl ta.d" N'on,em·he.Jess", ~ts pe-rform.ance so far in the sf,tondl half of this ye,81M' has be e:n the w'e81kest of an'y La.tin Ameri.can ,curren,cy" M,lexico is 'n ot t'h,e only e:me.r.ging :m,arID{e~ with wob'bly mo,ne~ N'ervousn,ess abo'um the ,global e,conomy) tha.nI{s to t'h,e' euro z,one~'sdebt' ,crists.; has s,ent ~'nv',estors runntn.,g from ,exoti c 'CUl]"lench~'s ~nmo,s,afe', fa.mil tar ones,., lBig 'man,ufacturi:ng co,untri,es e,v,eryw'her.e" frOom Soumh I{or,ea to PoOla.nd, have :suffe-re d frn m 'w'OIrie s a.'bo'ut th,€; irn,'p,et,ct of ,another r,eoession on, manufa,c:tur~ in,g'"say'sJose Wynn,e ofB;arclay;s, 'Ca-pitat Thrlee m,ore ~orc:esh,ave pulliled, t'he p"e$.o down" Mexico :h,as strongertmes to America than any' other big lammo Amerfucaln ()ountry,:: nearly 80,% of its exports go.the-rf";;(B,'ra'zil, by' contrast" sH~nds ess than :half its 'ex- ...
1

I,~

llu

,~JIII.,;:]

.1·.:!b;~I~

..

;;j,

.. ' lib,

''':;; ;0;

'I

Finance and econemtcs

,8:1

Buttonwood
:HE world has, accumulated too much debt, Issuing more equity would reduce ri sk, patti cularly i.n. th e b anking se ctor; and create the seed. capita] for new indusmes to emerge, But global investors may be losing their appetite for shares" That is the conclusion of a. new report' by the M·cKinsey Global Jnstitute, which argues that by 2020 a $12.. trillion gap will ] have emerged between the amount of equity that needs to. be supplied and th,€ likely leve] of demand, Tb,eproblem is,that investors in the developed world are shifting from. equities n ot er s a' .I,I. to. ". .hI ..... asset.. th I .'; nks t n d' ern 0"g' raph l'{'" changes, regulatory pressures and the disappointing returns suffered over the past ten years, Pension funds. are maturing; with more of their members in retirement and fewer ln work, so' bonds are ,a more appropriate mvestment than equities" Insurance companies have shed equities in
I

The coming shortage of equity investors

Despite the subdued level of demand, companies will still need to issue equity) either to strengthen their balance sheets or 'j. t" SUPP'Oll~. th .e·~rexpanSlon.. Th··, b an· k s Wllm~ o " . ""'1' .._e . .'. ..'."111 need to raise equity to meet the Basel rules .. Meanwhile, the fastergrowth rate of devel, " oping countnes means tlh more comparat ni es are hke 1y to floa t o n thei r domestic markets; more than half of all new issues in -'1'0"10 by'.' volu me and 'Iby"'" valu were fn emerging markets, Indeed, McKinsey reckons, the n.et excess of supply over demand for equities in. emerging markets will be some $7 trillion, Now; of course, this gap is entirely notional. The actual level of equity supply I1 wi . -. dd anem,a.n_, d WLm~ exactly 'ba_.anc.e out But . '1
I"

as they are in Europe and America,

'1'" ··bll .t liS a I' so :pO,S;Sl.·...IJ.e thtat governments

"1'

'-

" .• '&",.

I ..

, ..

_.'

' .. 1..

Ilk;;;

I'

•.

'.

1_ ..':

.:

....

A ~,.

'.'

NO:."

II(;

...

!!!;iI. ...."

.'

.".

")'4..1

..'11 '!;,.r

..

...

1_

.'

• I...,

....

'.

....

.'

.....•

..•

,-

.'.1

.. '

'-','

."

if d,es'ired supply exceeds desired demand

can encourage greater demand for equities, In the developing world, that would re quire better protectio n for the small in. I he . ld.t d vestor, _n t__ d eve ~ ,d war._,; tax cO.e _.ope reform :is the big issue, Corp orate interest payments are tax-deductible in most " h~l' '.~vr· countnes wnue d" ld en ds are not ~ But . ~db f ff-:' tthat wouktbea diff.. cuurerormto pu ~I0." 1. Given the state of public finances, governments are unlikely to be handing out new tax breaks ... And removing the tax-de du ctibility of interest, EV'en if it was accompanie d by a lowering of the overall iCO[-=' porate-tax rate, 'would endanger th.e health of highly indebted companies, The alterna tive 1)0ssibility is tha t firms will eschew issuing equity and raise capital in the form of debt Instead. 'Th,ere may
~ , ", '1-" . . ,'.-' ,',
I - ..... ', '-.",. '"

I.

..

- ,:'

."

',".~

.i _'[

.'

,'.-

,'.

...

....,

Iii' ,J

. '.' .''. -'1

..•....

.....

the face of re gulations such a.s th e :EUIO'-' pean Union's Solvency :11 regime; they could sell as much as ,$1l5'O billion. of shares over the next five years, Mean'w·h~.le~ financiaJ assets of ·dethe·v,eJ.opin.g~worid. investors are .gxowjng .fast) but: such investors tend toO' :ha,v,e ,ave ry small exposure to s.tockmarkets. rndi.ans 'have only 8% of their w'ealth in eq.uities .. .As th ey g,et rich,er~investors in the dA~'veloping 'w'Or~d'wum div',ersify t.h,eir- portfoU= os ..B'ut .McKinsey· estim.a.tes they' wO'uld :have t,o raise their ,e:quity' anocations to the 42% owne,d by American. households to clo se th e gap, c.o.m,pleteiy., De,veloping-w'orld inv,estors :h.a.v,e'understan.d.able ;re·a-sons for caution~Com.pani.es ~.n.emerging .ma.rkets are ofte:n. no,t , as transpar.ent as those· in the d.ev·eiop,edl ·w·o·rId,. n.or d,o they h,dve ·a recor,d of treatin.g minority sh·arehoi,ders well. ]nstitu·_· ti.onaM in'vest:ors-- mutua]. funds,~,msuran.ce companies, p ensi.on schemes=are not .atS wen es.talblilsh,ed in ,developing countries

one oftwo things can happen ..Share prices wil fall, so that expected returns rise and. investors become willing to buy' shares again, This might happen if dividend. 'yields on shares exceed government-bond 'yields for an. extended. period, as was the cas e- in the iirst half .0f the 2; 0 t:h century

~,-1 _- an a.ppe~h,e lor . - ch we JIl11 b e~- - '.-' -,_:_f~_:_ c ,= 's.ue pa.per, SlLnce gove~', rn.m n~' 1J.;. on " yi el d ril. ,~ar ~. so·· 10' 'w' . (. at .!...... . Uv d ". least, in the like s of Ameri c·a, Britain and. Germany) that investors will be attracted to the higher income offered by corporate b onus, . u __ .e risks aug htt t oeb OVIOUSI' ":: d But th isk bvi after the: past few years. A highly geare·d economy is lil{ely to snfter from bigger . " '.. .... dlb .lgger I I' '. · b.ooms '. ,an,.. ' ','. \ ... - b.'.usts:. .. .Eq·uity is a ve:ry usefu~, fQ.[m of longmerm ,ea.pital for th,e corp o:rate' sec:tor~ and als.o ,offe:rs a wa;y fOor p·riv.ate inv'estors to parti,c~pate in the 'long-term growth.of th.e n- a~1m' - y.:. ·B·,.u·, t ·li·n··· E- ur' -0'"'Pl e-'!3in- d' A~'·'·m" - er"'li' 'ccomp'a:nies have belen retiring equities through. s:hare buy·-·b·acks~ w'h~]e the 'vol~ UID'e 'Of initial public offerings. h;as. dropped co-nsideratd.y from. th,e lP,eak years ,of 2 000 and 20,07" If the developed wor~d is to reca-veT' its m.oJo, €,quity' is;suanlce has to, com'€; ba.ck into fashion"
i
I .. -",.~ "..~,~"., .:.~
l~'

,0

tt

~,'W,

. ,iE'

\0

:'<1.,

I,

1.... ·.

..... ,

',.

" .. , "'1.

'..

'.

'.

":'.

,'''.'

.' '.'

""".

''''

'.:.

····1

1jQ;,,,"O-'
b,.

L·

.'

.1......

__ '.

.'

. -. I

...

.' .

(.til.':

'.

...'..

.. LCl,.

;tli

ilhe eme·r·gin,g eq tJit~ ga p.; Growth and 'sta b~~it~1 iIII the new ]'If1Vestor ILands.atpeo't·" MCIKililsey Glloball Institute" Decemb~'r 2011
*.

I. ports

market:s, leve·n bU'ying donar'S now a.-n.d b·' fn,*"Ai·gc·n,·, America. hits. mh,e pe·s.o, h,ar,d~ Se·c,on,d,.. mr3.d- ·t-h,on:· ·t·-o··w'- :':lIId···Ulp·:. '!'·t-e lU.Jl~. , . ~.c ..o.I-,::-:-oe' ThI.~I·t- ~c 'a C'- --:" '10' ".: ·v"·o.mi ·b··.o.r ;9t-·h·· ,;:3V~·""·o· ts' ·"..U M· ers US,€ mhe pe so as a pfiOXy hf~ dge· for mhe-re- i('>·h-·-'n'.' 'g,-Hin' 'b~on: . N''..... .gio,n, as, it is the only Latin American CUt= re.nICy· (:ommis;s;ion (ma,de u.p' of c'entral re:ncy' to b,e t.rade·idl aro,u'nid th:e clode Som,e b anlt,ers land. fin.a:n.()e=·mru.n~.s~ryffici81ms)' lan·=· o of th,e 'peso,~'sbiggest dips h.av,e happ,ened '110'Wlc,ed thal th,e ,domlliar-'buyilng woullid. . - - - ,.B!. .- - " .. . - b-'-- oV'ernig'ht, ,d'uring tra,din.g in E.urop"e and en. d'l t. ,an.d' th'- - t' . U.p t·0 'S:.·41·00m wOUo 1d'" ·.·eso-llid_. · 'l ,iQ,d'- ._ '.: '.' 10.. 'er' _ Asia noQ,mes· Ser.gio Marti:n,~Ichief elconO.mmst. O'n' ,d- ~y' . 'W':' h·'_lI2Io'n- ;If'h P·IGI·;("O·· i i·d· l'p,yi'1......b:·y····o"·v·· ..,.;0'1 at: HS:B C in M!exico,. Th:e m e,chani.sm~ ]last 'us·ed, ru~n .2'OO"9~. wHl FinallYl' M:exl co's. c:,ent'ral bank is ~!ess templer 'volatfulity ra:the-r than dle-ien!d the peso's value·, th,e batn'k says. Jihe p1eso red:-· w:Uli'ng tha.n o,th,ers to. :int:erve~n.e-,. Whereas . Br,azil, Colombi.a and P,eru hav,e ,a~n sold lied a.ffi.t~l!e a.fter th!e; .8rnno:un ce·m,e·nt. I .. ' "~-.::--Thh c eap peso h'h'ld'" p e Mexu:an ex e as ..,e. dolla.·rs to s'up:port m'b,eir currencies" th!e B·an,co de Mexi(:o :has ~eft tlhe peso to th,e 'portlers throu.g·h a time: of wea~{ d.emand in
to rich c()untriesJ Bad, ne·ws from
". t;;;... . -. ..~. . ~.,;]i

th.eir :mad.n market an.d rising co mpetitio·n.

JIl

J1~.-::II1I;;;

VII;;;.:l .. -

..

(I..]l,;]i

~n·

A'- e~ "'lI M···' iio" M··· . ~Irt-~n' ,'..:iiJILU!ll .-.:.~., '.: JJ. ...
,(lL ...

'...

·c!d1J.c·u'~a" t· -~., t-h· ,",.. ",.'1 I·'. .a·s· -... a' t

I

jfi<:h' .0. ih'"l!Ii.'~' ~I I~ ... ~ JIJ.~aJ

'tz-,..

'.

l::~

.111.

I~

_.'~

"'II
~

~,.. ..

I ... ·

~AJJJ}L-

"

iiF :::' 'b- .... JL-.

,d;eprectation of th.e· W;H~~SO -si:n,oo the· 20'0,8 cr.isis, is. ,about I3%~ "'We are prob.ably· 'v·ery·
1i!">~llo-;·iC'e "".D!..~ ,L;!I'-

·n··-llnw·
V"-

to-:, ~·h"··-:tt::::IiC·h····-l··n-- ·e·· U'I n'- -milf'l-. ll,iA..:_ :U' ,~·l' ab-c,:o-:' I~._ I~.. "" ._. J '!;,...IL;!I' ',.1 .Il1[
c

c-

Ir" .('>,o-:·s-:·t " ;" I..

'li.;.._..:

. ...

I .....

'.

."

." .'

1'1'

':.'

"

"

"

. ..'

'.

I" I'

'.

~ .

_ ~':

it" o;J.'

I.J!I.,;r

I~

- 1191 '1;,..

...... ,.;;1.....

. '1

.L

he says~ Nissan and HoQ.n,d[a, aJ''tl~~ among the (:axmiak:ers. pers:u.adled to buillid. n.ew plan~s ~.n Mexru.icOm Th.e counmry's sh.are of Am.eriIca~s imp"ort~s last 'Y'ear was 12%.; t'h:f highest e'ver:. P'a.rtlliy for this reason,~.M,ex.ico's e·cono:m.y has beJ.d. 'up 'better than. its cUIre·ney (see· ,chart on, next p,age)" Thi.s ye·ar it win

.' ..

li-e:

I!

:;

11.<l

.. ~

.,":",~

j.

;__.-

grow' faster than :Br.azil, w·hiich this w'e'e t f,e-· porte d ftlat GD' P in tlh,e 1a.t-est q'uarter" .t·

'The Economist, December

iotr

,20Jl!1

'PH'vate eq uity
GDP,
% r:hurr:g.e em a year earUer

pesos per.J (Inv,e.rted scale)

One careful owner?

What, the secondary market says about the state of private equity

10

D
2006 01 08 09 10 11

ened bythe country's weak currency, It has

But growth

COU'I

d. eventually be threat-

meant pricier imports, which have put pressure o:n inflation, currently only ],.4,% but creeping 'U:PI~ The sickly state of the' American economy means that ,M,exilco's central bank is hop ing to cut interest rates. to keep growth on track, But as long as inflation rem ains a risk, mh a,t de ci sion w~ I be, ~ postponed, Most analysts forecast that the, Peso will a.PI p" reciate next rear, Frustrating..," ... - " id A" ".- - ".' ,,- tha -. h hs ,"", m E'urope... an .Arnenca : an wna-'t , a.'p pens at horne.
-I ,'.

my for Mexico, that hinges more on events

I .,' ",' .. ' ,. ,.,' . ", ," :,
I '1=

-y.

t .•

finan,c'aL accounting

Double-edged deferral
rHJ

EW YORK

How Iower taxes could hurt America's

'.. '· W

bigbanks

ing exp e cte d tax payments, this is recorded as an asseton the balance-sheet, JP'Morg.an Chase held DIT.AS of $16, billion at the end of last year, while Bank of America had $27 billion-worth, Th,e' undispute"d d,efe'rred-tax :king" ·howe,vet, is 'Citigl.1ou'p with sUg'htiy mOJr.'e tha'n $5!0 bimIion= worth" the large s~: ,dils,cr1etionary ,at;cc.o,unt= ~,ng ih~m in th'e com,pl,any's history~ 'To so,me ~ this mooits hil,ghly op,~itmilsUic~ Mike Mayo; an anaJys~' wmth ,eLS;A; OJ, bro= ke:r~h:as [Ie],entru,essly (~Iuestione:d 'CitPs abib= my to plod'uce eno'ugh max,a'b~e- in,co'me' to, ji us t:i fy 'the- ,ass,et an d h ~s sugg,es tied th,a.t it ;(ould b!eov,erva]ue"d by' $10 'bill ion-,a view

HEN is a corporate-tax cut bad 'for a ... >'/ corporationr When it would trigger hefty write-downs of peculiar but crincal assets, as is the case at some of America's largest banks, The accounting hem in question +sthe deferred-tax asset (DT'A)~This is a legacy of the financial crisis, America's tax code ,81UOWS losses amassed during the meltdown (with some restrictionsl to be, us ed to offset future tax bills, Since a bank is increasing its future cashflows by reduc-

used-car dealership, 'The same: is true for the second-hand market for privateequity stakes, What used, to be a tiny part of the industry has flourished (see chart), "Secondary" stakes change hands when investors, who typically agree' to lock up their money for a decade, decide to sell early 'Iriago, a firm that arranges secondary transactions, reckons that deals worth $,251biillio:n, ill take place in w zon, up by 25% from, last year's record, Banks and insurers are largely respon sible, since they nee d to sell their investments in private- equity and free capital to comply with an onslaught of new regulations, such as lHase'l 3 and Solvency II in 'Eur-o:pe" and the Volcker Ca sh1-:t"u._'~"L-·, do, Eur '0'-" P ea 'ns trappe "_ ruc le n Am'·.c eri banks are, also eager to. peddle their private-equity investments ..In August HSH, Nordbank, a. German bank, sold a €62om ($1 bilhon) portfolio that included stakes :inwell-known firms such as Carlyle and ,KKR~ A flurry of secondary activity has 'been predi cted for 'years ..But 'until recentIYl only the most desperate investors wanted to offload their stakes at rock'bottom prices ..'Iransactions have picked 'up because sellers can now get better prices, Neil Campbell of 'Iullett Prebon, an interdealer broker, says that investors today can expect around, 95- cents on, the dollar for many of their stakes, compared with only 60 cents ,in 20.09' ..Some assets have doubled i:n price in the past year, Prices have risen because, of a glut of eelpita. 1that firms sp ecialising in th e secondary market" such as 'Coller Capital and Harbourvest, have raised to. take advantage of the opportunity to buy, These firms aren't the o:nly ones shop= ping, Some pensions and funds of funds have begun to. use the secondarymarket to invest in, promising funds or foegions, Some, say that the secondary market's
~ "",,:.

[S'CQUNTED' prices, outdated models and a glut of inventory Customers can, tell plenty about the state of the auto industry while kicking tyres at a

:1'

)-

'!;,..

,j"'"'''3 •. ~!i;.t,

_~ ... c~.

Ic._,''6~'

growth shows that institutional investors are becoming more familiar 'with private equity as.an asset class-and axe becoming more aware of its attractions, It helps that secondaries can 'be 'bought and sold more easily than ever before. But transactions in them are' still more' arduous to complete, not to mention more opaque, than other investments, Unlike face-toface'bargaining over a dodgy motor, deals are negotiated through an Intermediary. Attempts to Iaunch exchanges and derivative products, which would make for more transparent pricing, have not taken off.. Mathieu Drean of Triage predicts that by 2'015 the annual ta lIy will be $75 'btllion-worth of secondary transactions annually The struggles of the privateequity industry will partly fuel this growth, Buy-out firms bonghttoo many com a n e at ~'O" ··',P. ce S,'~, Th ie y". . UI st 0.0.',':,' W' ':, ' -; '.'pri .•.. m wait until the economy improves to sell or float them and return money to impatient investors ..Private-equity firms are now holding on to companies for five years on average, compared with, threeand-a-half years i,n 20,07., Some investors don't 'want to wait that: long to pocket returns ..They are turning' to th,€; secon dary market to hand in the keys for their old model and grab what cash they lean"
""""
P-("C:, !IA

I+' "oJ! ,;P".",

~ "_

llL

".:J!

Gto ba [ p rivate-eq uity secon da ry ma rkst, $ bn

FlLIl1i ds

raised

20

15 10

199~ 97 99 200t 03 05 07

09

11\!?

for which he was,!, ior a Um,e~'b~ack'b.all,ed a.n,d b,adm,o:uth!ed by th,e' firm;s top br,ass.~ Cltm, -re}e,cts ~h,e sugge:stion ~h,tlm is counting' it '"".' 1"':,' ." .~" ::1("" "rd"" .:. 1 ,0 "'~" ':'. '.,' .lm,ag)nary 'b eans,., It.S D T A LS~a,ceo',' •.. Jog t-. '. d iik. ~ lls iii 1atest' fil' ling, bre-c'Oogn~se;; SU,uJle ct to :mllll=' a.ge.ment"s jiud,gm,ent th,at re'alisa.tion is :m,Of1e lliikelli,y m'hainnot"~ (t'hough it acknowl= edges that some ,hellipfro'm ,,'t~x,-p~anning ;;, lIl.~1 ,- b~' :,jI" ~'t'?"JiteOt1e~"jl'm'~Y'be o'eeded" t. ' :,1 B:a:n,ks. 'with DT AS h,av!e to worry ,a'bo;ut
'I ':" ,',' "" i-' '. "', I
I :

"+

..

..

,:.1:.1 g,

'.-

I',

.."

I',

electoral polliitic:s as we:n as fumure pro,fits. Wmth Bara.clt IObam,a and aim th,@,Rellublica.n llre'sid,e'nUa~ can,dm,d,att:es. ,edthe'l' ke,en .o,:r a.t lea.st p,re:p,are ,d to Io,weI th e t:o':p ra.t1e of ·C:ed:, Ie' 'li!':oJI,m C"',o-:':rp"L-,,' ,"o-:',r""'oJIl'iIf',iQ; 't:oJIIX"'" f":r-"o-: Im-" - *'10'-' glly::"'~ 3'5' G/ .. "'!ll . -: d,~' 11 "'I · ' ,,' , ,m,,. u. r""'e~ dluc.t~,onO'v'er the next year or two looks reasona.bly Hlk:e:lli~ wmmh a.n ~)'utsid,e chance ··;f·' . "'hl" ", cu~., A····· '., ..... sue,,;h' ' .move wou.w,· . ·,",1 ]Id: 0, a" s ,~,aIP !'I'~ ~ny make :DTAS less v,alua,bme s~,nclefulure tax de',du,ctions. w.o,uld b,e w'o;rth '11€ss .. 'With tBlX ...
".ill (,;Il.JIi",,,, (,;lll,,,",,,
.!I;.i.. .... '~',

III.."

:Ul, ." ,.:;iI""

'

'1

'I'-;"'!'

·.HE

GREA:-,"
Ie' •••0. .

••...•

'.'

.~
.,

R: ~: •.

".

IS::.
,"

E'

....

"S·:·...·... ..
.

Enrich Your Music L·steningSkillsand Learn the Language of Music

Beneath the joy of music ~~esthe' often mysterious realm of music theory; But what if 'you, could Iearn to understand the ,ofte.n, intimidating language of 11r.ey si,gnatures, pitch, mode, ,m,elndy~and more? What if you could. recognize these oomp;on,enrs at work while listening to YOU,I favorite' music? ~a.[ if you could "speak" the language

of music?
In Understanding the Fundamentals ofM',usilc~ award-winning com,p,os,er and Professor Robert Greenberg offers yo,u a. spirited introduction to this magnificent language, nimb y avoiding what for many of us has long been the principal roadblock. the need to read music. With these 16, fascinating Iectures, discover what parts of rnusica] spe,ech sound' 1ike, rather '[han what they ill 0ok like on paper .. You)~mquickly find yourselflistening to music with newlevels of understanding and appreciation whether at a. concert" at home, or in your car.

-... .. 1 1" 1-8...'0:0,:..-,8: 3~<,2/'_2··/··4······· 2/'

1

Offer expires 12/,27/11

'.' . . -. '. - .. ' '.' ...." I

·WWW·MITHEGIRE .. TC.O·UIIRSE.SliiC:OM./·7EC·O NI A

84 Finance and economtcs

'The Economist, D'ecember iotr 20Jll.'!

..at 35%~,a dollar of such deductions saves a company 3.5 cents, A cut to 208' would reduce the benefit 1It0 20 cents,
A decline of that order 'would hit the three big banks' combined book value 'by ,if'" .. d'. ~41 b'.'111 ~. ouuon, accommg. 4! E'eowaro K'" '. ·t-- 0' ~'O d--- d uen "f

Please don't

[lUlt,
I'

my'taxe,s,
Writed own a t 40
50

December 31 sit 20'10 $ bn

Dererred=ta.x assets at current :3 5,'0/0 rate

20% rate

'1 ", .. d' Pennsylvania.. State University anc Antlh ,0.... fly Catanach of Villanova University and ~he American College Centre for Ethics in Financial Services (se e chartl ~ This loss would feed, straight through to profits andl shareholders' equity re impact on "core' tier-one caprtal the measure of equity that

o
Bank of Ame'r]'ca

10

20

30

60.

access to formal banks, Over the past :2iO years, legi ODS of mi crolend ers have tried to extend financial services to them, Bum some communities-fhe poorest, the least densely populated and the most remoteare not attractive to tradmonal microlenders, And the poorest of the poor are often

wary of racking 'up any land of' debt, even a small one, Some economists argue that what the poor really need, if they are to man age their cash, better, is savmgs,
C,AR,E

financial markets care' most' about; would

be more muted (since only part of a DTA can be counted when determining regulatory-capital ratios) but still "potentially pa,1 . il" "LJU¥'o:J' M,":'_ tr Cata m ach infu ,'.
C~''"'·'f'!,

-- --- _e tti -wou- ~-Id a-f COUIse"- b - 0- I sel,:mog _" benefits, Less tax means, more net prefit, But the boost, to income would be spread 'Over years (assuming profits rebound), whereas the write-downs would have to be taken straight away And any deal on max cuts 'is likely m 0 mel u,die the closing of loop'Ib-I -. ere-"'"
'. ":' ',' ",'1 :. ,: '
'-I" ',', ",.-,..... r"'I' . ' .ff'"

,.·U.·'·

UII..,."

. '-,", "-

r•

~,

holes that have long allowed banks and oth er big companies to cut their effecti ve : m S,Q u eo .. cma.l[ t t a.X bi ~II'·t··· we',11 ru..! e. ow 1I!:h'" ffic 'i'-: 11 ra,-e,. No doubt the banks.' lobbying agenda includes a plea for special provisions that would soften, the blow, should corporate
:.-1 c.
-:.! ,-::~,,-

'I

I ,-::-:'-'

I~ .

I'

I ".

taxes come down, But some in, Washi.n.g'=

ton might reasonably wonder why' they should help to protect assets that: probably should have been valued more conservatively m'n the first: p lace ~,.

Helping the poor

t'IO

sav'€!

Small wonder
ACl: IRA

,""_./_ ..'~hildrenfro:;:~~~y.~~;:~a7::-"M" . "'¥"::"G"R"'O'Up."]h_·"·,,

'" "·d·I-"·-·
"-"dl--',

A, n,ew m,od,em of 'micro finance fo:rthe very poo,r is sp're,a,d'ing

'

tina! ]Kwei, rearra:n,ging 'baskets pUed h:igh wmth ca,ss,a.vas and pllian~ains around ht~:r m a.. t!et' stallil i'n ,a_ :Ploor s'ub urb of At,cIa" IGh,a.r
na::iLs~ c-':'!JII'p..... -'.·I"tl.·a-l- '.'. 'S;'h"-,IIJi' 'U-'_ls~J,Qi;d-: - ,,' .II!,lII. .. ,. . -'ut, ~
~c_,

a £".o"'l·m-- I - ~'li'n--iOII.l~ n'-· .. U, ., :'.3I~lIl"o·-:-·'

,,"" ...

.,'c

0"':[

S Bt'vmngs" ,dm,v'ld:en,ds

~,ngs gJOUp' to r,ent h,er staU and 'buy' st,ock:" Fof' thie first time'", she 'c.an feed, her two {:hil= ,drien well and siend, them to s.ch,ooL Ms Kw'ei (pictured) is onle of :m.iibons of poor p1eople to h,ave b'en,eh.ted fro:m th,e'

.andl moans from

,at

sa .. v

h,ottest. trend ],n micloiin,an oe:: village sav= :ings an,d loan,s asso,ci.ati ons~ MUmionsof pie.o:ple bk,e h,er survive on me."g:r.e and err.atic earnings,., A'CCl~SSto the simpliest finan,cIal ;SA~;rvj.ces 'ca,n help, stat bili s,e th e ~r inco:m,e's:,1 'w"h~,ch in tU'In m,allces th,em illiE:SS 'vumne:rab,ie to ,dis'earses and, natural idisas'=' ters" An un,explectedl tlOood, or ~e:'v'e..rc.an :push ,a P 00.1 fHtmUy' into 'utte'r destitutilon~ or. the m'us,culal aI,ms of ~,oansharks., Most of th,e: estjmah;:d :2 b,rullio:n, :p,eopie who u've on ill,es'S than $,:1 3l day do 'no~h.a.v'e

village savings an d loans associar ion", This is based on savings rather than debt and managed by members of the community ra ther than professionals .. Since then, C:AltE and other 'NGOS, in= eluding plan International, Oxfarn us, 'Catholic. Relief Services and the Aga Khan Foundation, have promoted village savings, I'he schemes are so. successful that they are now sprea ding across Africa, Asia and. Latin America-savings groups now have 4.. :m members in 54 countries. 6 People like these schemes be'cans,€ they are A8,··>C',Y···-:- to und erstan d savs john S'".c·hi:·~ll~:r"'. u' lJjl~'" a microfinance exp ert wi th Plan Intern ationa], A.n,dreturns on savings are extreme= ly' high+generally 20=3,0'% a year, Borrowe:rs typically pay intere st. late s of 5-10'% a month on loans. that usually have to. be reld ~hi 'h h pate wnmn u ree montrh s, rne rates may seem US:U-rj,O'llS but they are set b,y people who. are in effect lending to themselves and. saving' the interest that they charge .. A village savings. schem e typically 'in,volves a small group (perhaps 15:-3.'0 people) 'who pool their savings, Each buys a share in a fund from which they can all borrow AU must also contribute a small sum to a social fund, which ,atICIS as miCIOinsurance .. If a member suffers at sudden misfortune, she will receive a payout, Members select leaders and dratft:at constitution ..The, ru es spell out how often the group will meet, what interest: rates it will charge and what loans may hie: used for, A~ the endof ,8. cycle (usually about O,D,e year), al] the money accumulated through savin,gs and interest is sh,ared out acc:ording to members" contrfubutio,ns,,; .and a ,new icycle sta:rt,s. Once m1em.b'lers have m,atstered the syste'm,; the gro'u,ps they have form,ed can tal~,eon ,addfutio:n.al tasks such ,as pI'Q.vidli:ng training i'n a,grfuculture" hea' ~h, me'ad,e'rs.:h'ip
. ,~~ ·UI_' '. ~JIJ. i:I! G·" ',. ",
'IJ".;:] ."" . ..,"',"

Intemauenal, a charity, began a novel scheme in Niger in 1991 to. help the poor save--a basi c form ,o.f' banking called a

and. 'bus.in,ess,.,
th
O -

M,emb,ers m,ay go on to spreaid wha,~

h- - '(JIL . "!lIV·

,~,

ig;y,. :

.,iii::Ii I Q."l 'Fn- ~ . b,~

,Q. d-:b ,':

*0-:._. ,0-: ·;th,iii::Iir-tIL _," I!b,..

I

v-.. 1ill'-1 "l ,p'~

Ji _
1~1~~~jI,

('I,

M····: ·s'
._

Heaillmh lnsuranCf' S,cheme and p,ay' rent O,fl her m,arket staU ..Now Ms Kwei pllia.ns to .0.['ga,nis,e' oth,er wom'en in her ho,m;f town of A'boko'bi" n'ear ,A,c era." Sa.vingiS could improve th,eilr liv',es~too~ sh,e reck,ons.,

mo,nths ..Wit'h 'her pOItion she was a'bh;: to re,gister her family for Gbjana"s. N'ational

Kw'ei's 'viIllia,ge schie:me shar,ed ilits ,at!cc.umulat,ed satvID.n,giS ,and. dividen,ds ,afi,er nine

you want to know you're still on track

Wells Farqo Advisors offers the Envision process, ,aunique planning tool that helps, us g,et to know yo,ur specific needs and goals in order to create yOlur tailored investment plan, Monitoring your progress is easy, YOlu~tl lwa.ys know a you're on course to reach your £in,ancial goals~'Now that Wachovia is part of Wells Farqo, you'll have even more tools and resources available to help you plan your retirement. Find out what havinq an Envision plan, can do for 'you, ~ iti b Y VlSI; Lng enVl.~Slonyourgo als.eom. ,
Ii<

e Ig

INVESTMENTS

• PLANNING

• RETIREMJENT

©2011 W€I!I~,S Fawgo Advisors, LLC. Member SiPC. W€~ls:Fargo Advisors: is the trade' name' used by two separate regiiste'red broker-dee ers: We~ls,Fargo Advi sors, llC and Weilis Fargo ,Advi Sors Financi aI Network, lLC, Me m bers SIpel' non-ba nk affi! iates of Well s Farg 0 &, Co mp a ny~A II fig hits r,es€'rv€d. Envision~ is ,a ,r-egli'stered service mark ofWe'Us, Fargo & Company and used under lkense. 09111~5398A [872.51-v1] RESULTS ARE BASED ON'A SURVEY CON'DUaED BY H'ARRJ5i.NTf.RACTJVf ,FRO'M.JU.·NE~JU.LY011 AMQN,G 1,004 J,NVESTORS WITH FINANCIAL A DVIS O,R; R'ELATIQ'NSHIPS.. NOT IN'DICAnVE Of FUTUl~E PERFORMANCE OR 2 $iUCCESS, NOT REP:RfSENTAr~VE OF THE EXPERIENCE OF OTHER CLIENTS. Envision® rns a brokerage service provided by We~ Fa,rgo Advisors, ur, ls

'The Economist, December iotr ,20Jl!1

Economics focus

uns and pu ditry

ar's S~~~',~_o!_~~rg:e~l~ ~~_e'cts: !e~~e'~~i.~l~y countries (like Ind +8., where a. do ~ worth of rupees stretches much further than at dollar fun America), until things cost as much _ those commg towards them, That IS one reason w'hy 50' many as they' do in more expensive locations, Indians die crossing Mumbai's railway tracks, Wha t is true of loThanks to both kinds of convergence, the: combined GDP of comotives is also true of the world's large, fast-moving countries, People struggle to wrap their heads around the size and speed of the ,B,BJ!CS might exceed $95 trillion by 2050 That is more than six times the size of America's economy b'ut $3,5trillion less than the POPUlliO'llS emerging economies so are taken aback by the- impact as those countries come thundering on, bank calculated in its previous projection ..This is not because it Among economists alert to, the arriva] of the emerging marexpects the .lB.:RillICS to' grow less quickly but because the bank now expects :BR.IC currencies t:o, rise much less against the dollar, Brakets, none has. tooted the horn louder than Iim O'N'eUI of IGoMdI! ~]:II ~" -I h a I' ~ ill) man Sachs, In l'001 hie comed the "']8,R],0;' aero nym to describe z~_,s reaL, In d ee d '~' "1m ev en f m'l a ill~tt._'1e (' Sf e C_,=rt, rue f-'I,t p "a.n; ,e= '. Wl_= ,~at_. ,- -,., " ,- '. ,m,a.n M'n ,p,a.mnt"" mng the - pmc t,Ufes,~e "eS18 -," -" the economlSS -t 'fr-'-'am G-'- 0 ld - four countries (Brazil" Russia, India and Chine) that would soon shake up the world economy Ien yea rs down th!€ line, "'Th,e Sachs. draw most directly on the work of Roben Barre of Harvard, He found that a poor country could expect to grow' faster than a Growth Map' reflects on the Idea's successful career, now inseparable from his own, rich one, 'but only ~f rule of law' prevailed, lhe terms of trade' the were favourable, inflation and govemment )Jtl"oflfu.ga.cy remained 'The acronym provoked much excitement, some reflection in che ck and families were sufficiently small, healthy and e duca 1.= and countless 'puns (see chart title and article rubric), The name ed, That list of factors has carried on growing, According to Stewas adopted by a. 'bevy of investment funds, a. leaders' summit '(w:hic:h,did not invi te M:r O'Neill) an d even an, art exhibmon ven Durlauf of the University of Wisoonsin and his co-authors, (which did), Th,e' investmenr mania was interrupted 'by the finaneconomists have found almost as many "determinants of growth" (from coups to Confucianism) as there- are countries cial crisis; the paronomasia seems unstoppable, hi ,;:],_ I~..... FlO'I-- -thl~,~, d QC-'~"d~, M," 'r' a-'I!I'N' IA~'l'~ ,a s:' ""U' ggested another term- - with data, ll. ~ ~'" Goldman Sachs takes the :lR]CS; income pier person, relative "growth markets", defined as an emerging economy that ,8[(counts for more than rx 'Of global GIDP .. the BRM,CS qualify along- to that of America" as a. proxy for their economic backwardness, 'TIle bigger the gap, the greater the potenti al for catch-up growth, sidle Indonesia, Mexico, South Korea and 'Iurkey, Wha.t sets them apart is not their size or their growth 'but the eombinanon of the The bank also assumes that countries differ in how well they ex"' ~ 1d • two, That means the ,B.:I~:MICS will make an, outsize contribution to p,'1-OIDt- thuspotentia" ~ S" orne aosor bucnow how f'rom at b roan qUIC rer increases in. globed GDP~Between 20n and 2,0,20 their contributhan others, Their "convergence speeds" would var~ even if the distance they had to cover were the same, tion will be twice that of the 'G 7~, r O'Neill predi cts~ M These convergence spe eds are the most important variable S in Such numbers are arresting, Indeed, what "really put BRi'CS to n the 'rnaPi';,~ accordi ng to MI IOI'i'N eill, were the a ud acious pro] ec- the whole nxrcs endeavour, and the hardest to pin down, Small tions, fi-rstmade b,y two of his colleagues, Dominic 'Wffilson and tweaks produce vastly differlent outcomes. To make the choice Roopa Purushcthaman, in '2'003 and updated again this week, less, arbitrary; Goldman Sachs has, drawn on 13, of the innumerawth . t -- '~ ,t - '~d - ~fi(' ~y .....l,arllO *'h -showlngjust how 'big th,€ four economies could become 'by' mid- hi ,IE; --gJO'W~, d ,e'l,e'rmln.a.n s. ;;, 1 ;enlu. e'ldl b-'- M'-r B' ,-- an'd . o!~ erst. !r-e--n-I ~llIV Th--'-- e--y"_' d'-,~c-"{'>r--l"b-I----'Ig,d-g, ro.., ',p--,'r_-,o'J'~'-,e-(--11,_'0-'n-1 ,co 'n-'- O-~' ·a~s~· .IF _ """, thl a-: ~o'--r--Qc--,gl'~'tf.b-'IU'~'·")5-' a-' 'TIle 'b,atnl~n,ow djUg,enti"y'r,ates and ranks lemerging ,e,co:nomies o:n _, __ u,dre,atm'~) tha.~:th'e :B:I:] C:'S might fulfil., sll"ch, attributes ,as ope'nness to tr.a.d,e", ,orru,ptio:n, the Idiffusion c of 'But h,o'w ,cre:,dfublmleis such fOltune=tellin,g?' Th,e sc,enttrios may mo'bmle :p:h,ones and so on", be: bomd b'ut t:h,ey-'rely' on, ideas that: axe reassuri.ngly' old~ They as'~' Ira,cb:in,g elT'or s:ume- f'h,at the B"Ri'CS wHl e:nj'oy two kmnds of economic Iconve':rgence: of p,roductivity ,and p'urtha.sing po,wer~ Poor co'u_ntries But apl'll-zzle :remains.1\vo of the BRIes; Chfuna. a.nd Russia,!, m:!endto -'' m'-urh, IraW! ..,~" ·th'B'n·· ~hQl"r-= m-. Qd' If,o,iI"'r~ 'S,rOIir'~!IE', -w~---:,o,u-~Id' e.uo'go,e't f"lct,or-grow fa.s~er than, rffi,ch ,ones, becalusH~:it is. ,e,a.sier for th,em, mo,mitaml~ gr=o--w----:'::· i .' '[0 be~ter tecnniq,u!€s th,81n it is to :inv@'nt i:h,em~ ,At, thl~ satme tim,e) 'Th,€y- 'ben e"fit fr,om a 'Us,@'lcre-tsa'uc,e';'_"as. Gold,'man S,a.chs :put 'it Were, p'rices and ie-x,ch,a,'ng,e r,ates t,end mo, rms,e mO,Jrie "~lUj,cl~]y' ,ulch,ea.pl'; i:n, it not for this ingrledientt. their 20:$,0 G'DPS 'wo'uld b"f $10,.2 trUlio'n and $,L'9' trUlmo'n low'er~Tham's. a 10m ofsa.u,ce~ I'n M'urn'bai." s, ,consult.ancy can,ed, Fi.n,aIMime 'has :painted, y,el= BRIC buildi'ng low' U~nles,at regu~ar :intervals (lcross the' tracks to 'he.!p tresp,ass,ers ~' " do:,'C,.-, ,- ~ --" -- - 0 I-I , JU,- ,ge ~'h-- 'e spee,'do: ,--:,f'I '-I.at ~f,wns approac~ -h-- ." ,G· 10.lll, m,an oS:: -1(Ch- s a· so 111~ :',d _ - iIi,d ,-- ~-- _ae ~ ~~1::, ~, lila] _~I IBIRJC GIl[;! P, $trn, ,co n'tn b utiio n firo,m: '2010 'GD P', P ro]ierti 0 n v actiu.al~StTn
E!~!~L~~_~~~~~dtj~~~n~_t:~e ~
1 "

,,1-,

I -,

[ - ' 1'1,

'

-1'-"1

II

'1-

1"1-

I,

i-

1-

-,

I '--~'

'I

- :___,

' I~

~:__,-",

I, ' I

"-.

1-'- -, - ,-

!''-

I-I

'."

"

.II!,;:)

,II,;;

g,

'I!;;;',"'

"

~ ..I!J

.w,

"l

_!II;;;

u;

!l;:L ..

t!i

I"

•.

F"

.'

-'

-.-

I"

.'

.'

[:...

,m

h-

.,,',

'j

-.

','

,-'

"

'I

'.

'=

"

1 ."

r. :'

..

I'

-'

.'

.'

'I

"-'I

I'"

m- ' ". -'

"

,',II:

II;;r _

'

I~, ~

;;'"

"',..

"'" ~\,r

_ 11.;.".

".:;!I

,_

1Il., '_-

__

'

,1;Al..::;p

I~,!!,

_ I~ 'I;A. __

'

,r

'."

"

,I',

•.

'i..~ , ,

I~

~""

l'

.,

1Jb.. "~~~

'.'

..'.

~l'

'.

:~Ui

,',11

I~.

~I--~

'~,-

,,~

,-~--

rn

rea ~ €XC h!3J ng,@-rra.te ,aJ p pr€'ci'ati'iD I'iI

growth

f€a.l

2003,

p ret] €'[ti on
3

Aetu2IJ[ 4
5 6

down maIke:rs to hel:p tralck t'h,e

fORECAST

100
Bra,ziL 60
40
2:0

012

lRussiia

India

:2010

20

30

40

50

g,esb~:d tlh,d iBrazirs GD,P' n,a'~. wo,uld O'v'f-rt,d{e lap,an"s :in 2,015.. [n fa,ct,., both eoo:nomi,es s pa.ss!f,d their marl{e'fs last year~ By 2:cu)8, the BR.ICS'~ com,b'IDn,e-d ,GOP' was ab"out 7S% 'bi,g,g'ierthan Goldman Sachs had sugg,e-ste,d - years !... .c' . IU;M ---"t +-- 'y ..... ,.. ' em u" fi,V€ -- . 'RU;ell1!ore~' < yon 1--· r,egre~' ,~w'rl i€S M'r 0' '~CN "11,','ms +-hlalt 'we, Wl~rlen'Jtb,0~d,eI~"" IOf cou'rs,!€ no ,one Ican hope to ~,ool{so' filr ,ah,ead with gre,at a.ccu'ra,c~ B'ut, ~:ntlerest.ingly~ th,e b,ank's s,cena-rio for 201,0 'w,atS ,at H.tt~e' clo:sa~Ito' th'e m,ark" ][n, o~h,erwort(lls, they did. ,at better job of project= i:n"g s!f:ve,n y:ears. ,ahead than five ..:mf' the: goal :is. to tra,.oe out ru,ong'= h~:rm,r'en,ds\~ fo,rec.asts :m,ay d,o blette:r over the long run m,an the t short Pl'ed:ilcting th1e ,dru,stant future is ,forbfu,dding'lliy diffi,cumt Pred.ic.ti'ng th,e ne'ar fumUle :is D!O easier. 'df';'; Il,·

.l003t it s:u,g= 'wo:uld 'ov,ert-ake ltaly~s in 2'025 and. Chj-

B]~JI!cs'" ,pro'gre SS~ In

. Science and technology

3D printing

The, Economfst December loth

A lso 'f n t his s e etie n

20.11

87

'The s ·.ape of things to come .

FIR,AN KIFU IRT

Wh,en products are printed, they ofte'o Iook like nature Intended

'be:rznd, was-as might be expected-full of machines and, robots th ,. bil d emonstratmg u ierr am Ity to cut, bend, weld and bash all sorts 0- f,".' 10'-' b-1ilects in to sh ape B'U'~"I"n'-o n~ of the halls the scene was v'e-ry different, It 'was helle that :lO'O 'DJ di so ex hfb ~."ltors WOIkins in.th mg HI tl rree-mmensional printing (or "additive manufacturing" as they prefer to can rut) were gathered, Some of ,t' herr 3-,D '1,= p.' rinters W·,':'-'-' e- e t' h, ,e'. -ize:'0·,. f r ---= s cars; others were desktop mod.o1'1E! ~111 worke ...l tho .'.''Ugh ,',wJy bu ]ll A' w, ' 'l~tJll" .' -_ '- : -' lld ing products up layer by layer f rom powere d meta ,-d rop,1 0f, metal ets plastic or whatever 'was the appropria tie mate rial ~ The range of 'those; produc ts was as unusual ,as the' way they' "' were rna d e: an ex hiaust m amI· fold;, ,a.n a.rm .CIa lez an alrcra, J,OJIL, -,',,'',' tifi ial e,g,~ '.' aircraft nmge; d ozens 0f srh oes; d oor hi even entire dr-esses can 'be fash~ '!l;i.,J.' M· do I > '...,., 1"'0' ned t-h· ""wav '..',' tany of th ~e,o 1.;:].' printed items look strikingly dif= ferent from their conventional co unterp arts, They are more elegant, less clunky and have' flowing lines ..The result, shown off on plinths and in, display cases, was more like an art gal eJY than an industrial exhibition,
-e

from November 29mh to Decem-

11:~~~~~~~~i:h~l~T:~=~:~~;
_ I_c)
,-'!i.;r.;;l!

Similarly, researchers at the Massal,ch'u,setts Institute 0.1' 'Iech. Oi,E)'J)I~,:. ". ~,' ... ~, • .i\., ". an r ·'16 nt"!i.1 oev 'lad' 'by.. NI eri '0- xm La have found that you cannot beat the basic design of at plant stem+a bundle of vertical filaments .of different densities-when 'it
.III. ...... :1 ~ I.e .'.

"IIL_

_ 'il;,ill.I_l;".iO

'c

Il, '

'_'

,I

I;".

comes to making a,structure that is, both light and able to support a

__

Il;..~

_-

'!i._,

_,-

'1;;;, ~''''

.w,.w,

1I.L..

That an artificial hip, looks ike a natural on e, an d that a. concrete "tree ;" b, ehaves like at real one, lis, of course the whole point . of the exercise ~ Othe r additive m anuthat they' are copying nature by' accident=natural sele ction having amved at a similar w,a,y of

heavy load, 'They have used that insight to' print .at loa d- bearing column constructed from filaments of concrete,

' "I'

-',,-,

'''.'

",-, , '. """,_-

,-:,_-",'

'-,

-,'

",'

",-

",-, I"

-.~,

_I

,'I

~,

1'1''-

facturers, though, have found

'I

-!~

'-'I

.'

-:

"

"-,

-, '.,

,'.',

'

'I

',,'

"I

,,'

; I','

,,'.

i.

'. jIL~'I;;..

I,

I~.,~,;:)

then ,,1 .~s. chang ina- 'not only how ..,.. .-. , ~", ":W things are, made, but what is ,icul,- , ,macd e~[n partie ar, many 0 f' t h e objects on display 'had an organic look to them, Thatis no accident, In some cases, designers have' de= liberately copi ed nature, In others, they have sta rte d from first pili nciples, dI,B[Wn, onclusions (usually aided 'by' clevc '-':f:--c:" ) rd er so ftware). an d,oun ,I'· m'hat n,aiure go~ A:. 'n·" 'S'" hth-I,g,r-'A fl' "r~Lt't' n'-d;-1"0'- s-.',o~":m" ,~' ,~ h-' ,d' 'b,een ,aesthietiic-:pr,eS'uma'b~y r,eflectm'ng an evolved preference in the h'uman psy,chie for objects, th,at mooik: n!atural.
'>"1
I [., . .

Additive

manufacturing,
.:-"." ":',. ,,:,: •

I :-'"

I'

','.

j'

e-c-

,I

,", .

are also slightly different from one individduC'ts", Ea1ch hip can be, crafted pre,c],seI'y for the :in,ten,ded p,.atie:nt AU, I b,at is req'uire,d is a. sligh.t twe,ak of th,e softWllf,e that controls th,€; p,rinter" Ev@'n better" the t,echniqu@, can do so,methi,ng that :not 'ev'le:n a. h'uman cra.ftsman eo'uld m;atnage': iill: can 'cop'y in th,e tfuta.nmumof w'hich the im plant ru,s m;ade,,. th,e n.ne.;; lattj cle=like intern at], structure 'Df ,natu'~' Ia~ bo:ne;; Tillis m.ak,es the imp!illant' hghter:" without illossof stre'n,gJh.,]t ,atllis,o lets it ~:nte-' grat',e e,ilsUy with, th,e p,a.tffi,en fs ,at'cmu,al1bone ~
ual to another, Addi ive manufacturing has no difficulty 'with such bespoke PI(O-

"'_-·:·:,:','·-'-''''_:-I',

'1'1··

'I

..

II.".,!!!.,.;,

"l' '"

,:.,

__

,I,!!.,.~,

t,

.IIi.r

··c

Ig,!i!"'';C~o'!l..r.ll;,.lII..;Iilll..'_',

-'

,'I;AI.

".]IV·

..

·i~

""',

,An ex(~eUenm exatmple of d,e]lbe:ra.tely c)op'y:in,g nature ~,s,it'n,artrufici.al hip ,m,atide' by ,M,il,_ a. .. -c~",:"-, rmll.' 0 . yo I'~'t ella ']i",'"se,~,--:' B','" e':l',g an fi:':I:-· N< ···,t on 1,: d'i ... rea ,]
~,',·:!,
I':'

Growing goods,

'b.o,nes. :have C:U'Ives t~hat m,a.ss p,roduction w'Ouldfind itfumpossible~:o rep,rodu,ce,~ they

th e prob lem first. A British, firm, called Within 'Iechnol ogles, for example, m I.aK'6: • heat exchangers These res ',~Q .r ,~'rnl" :need toO' pack a large surface area into a small space+an ideal task for additive manufacturing, Freed from the need to worry' abouthow to make whatthey design" the company's engineers have found that the optimum shape resembles a fish gill, :JExchanging heat is. a similar place ss to exchanging oxygen and car'bon dioxide, The nervous. systems of ani= mals, toot. turn, out to 'be simJUalr to things made possible by additive manufacturing, Lionel Dean the head of a firm called Futurefactories, has designe d at car mirror thatincludes channels which carry th e e:lli ectri cal signals tha t operate its adjustment and folding mechanisms, The resultresembles thenerves in an arm, 'which, are a]s,o e:arril'f,d fun chiann ellis (th e j ofunts in, ~h,e mir.ror be,'have Hlte the ,arm. itselD~ At' th,e mo:me,nt~Mr Dlean c.annot finid s:uitabille ,con,ductiv'e mate.rilads with w'hi ch, to I)rint his ,n!e:w mrurroI'. T:he .rate 00 f p rogrless in, th.e field suggests; t'hough., that h,e 'wilill not :have moO 'w'am.t long~ 'Th,e flow of hydrauli,c fluid, in a ,g:,eaIbox also turns OU~. to be, s.urlP:risln:g~y 'bioi ogi.ical Ia.n HaU m day, th,e b os s of 3'1" It JP D,~,tll British en,gilne,e:rin:g firm, says that 'by' making a •.,
I,
~,l'i;,}\.o' I Q " ,- '!~,
:~ .j.. ~;~ ~

S olving

88 Science and 'technology' ~gearbox's hydraulics using additive manufacturing, its weight can be, reduced 'by 30'%'" These days, tha m. is par for the additive-manufacturing course, What is novel IDS that the box wUI also change gear faster, because the pathways through which the fluid flows, can be made smoother, Like blood, hydraulic fluid flows better through smooth arteries than ones filled with obstructions and, sharp corners, Some designs even resemble sub-cellumar stmctures. At Southampton University ~,nBritatn, researchers have pnnted an unmanned aircraft from, laser-sintered nylon (slntering is a way .of making objects 'by heating powd ers), This drone, which has a

'The Economist, December iotr ,20Jl!1

Arthritts and botuli'num t:o,xin

Something to celebrate
Botulinum toxin 'ma.y' help relieve .. .. c hromcpam
is the bane of millions of rtHv'es~ Though it comes in many forms,
A,RTHRITMS

Which is where D.r Chapman comes in, Inflammation is also caused by chemi.; Calm, stgna 'I'm·, ,',' Cells called macroprh: -. .," dn,g:,,- e. ~S ca e. ages summon all sorts of others to an injurg to try to repair rut ]f repair cannot: bee ffected,
1_,]1 .,~,. I.· 'I' . ,..... :.'

of. 1 .,~m tres 'I' n'corp orate e ,~ge "i"'fi... ~u detic structure+a latttce-like frame developed in the 1930'S by Barflies. Wallis" a British aeronautical engineer, Though WaU,8.'ce could not have known this at the time, his ge 0 d etic approach is sirmlar in concept to the "cyto skeleton" of fibrous protei ns that holds. a cell in shape ..'Whi~e'notably strong and light, geodetic structures are slow and costlyto make by tradittonal methods-but DOl by 3 D printing, an W..·':-~i Ig'c S:.'PIa lILn
I_~.J" 1-'

'"1,

J~

,0.

~I~~,

L-

...

.J1CiIJ. "~"-:'

Cit

1'_

The hole is greater than the parts That ability to. create light, strong structures which have complex internal shapes may well turn lout to be additive manufacturing's killer app, 'The layering of powders or ,drop lets that' are then sin tere d Into soli di my, or cure-d with heat or u]traviolet light, almows spaces to be left insi de the product, A'nd 'if su,ch ,at s.pl,ac,e 'would o.th,erwise' ,col,a.p,se,~ Ica:n 'b e llI'I d- Wll"th' a pow d'IeI'll'h-',at t·ne~ l"t l, ., lee _ t' ~= m,ains in t,:lct d uri'ng ,cu'l'ing; ,an,d ms m'he'n washe,d o'ut or blliown a.w,ay: Ev'e'n m.'ovilng parts,~ lliike clo,ck m,echanisms~ hav',e th'us be,en m.!~l'ch;: on'e ,go in a 3D printe:r;; in
J

Icou.ld n,ot b,e comp,ound,ed w~th mr.ad~mmo:n,al met'hQds.~ A:c,cordtn.g to D',a.vid Le:igh; t:he' presid,e'nt of Harv,est Tech:no1ogj.es, ,tt'TeX,tln firm. that 'us!es additive, .manufacturmn.g, it 'is D.'OW p,ossib~e to produ.'ce things th,a,t a.re' ru·bb,erillllke at: one en.d and stiff at th,e ot.h,e,r~ A !cam,e·ra bo,d~, :fOI instanlce~ ,coul,d be m,ad,e in OD,e ]pie'ce bu,t: bl,e soft where- it is grm:pp!ed and halrd wh,ere the le:ns an,d the op'eratm.,g me:,c'hanism are ID:n.sta.H,ed~ AIlliof' which, is very use,fu! an.d pr oH:ti ,cal"But addiU.ve m.an'ufacturing can also be, f·.' . ~p~. p., t"hi'" 'bi"oss 0, G" e o,m,agl c., an lLn,,, lng U,,. "e .... C"·', ','f ' . ',. ,_. , ." -,. 'fi "I .' IS Amer1.ca.nrm th ,B,t specm.a. '(" es in J.D d e -. sign S oftw,81fe',pr~'nts hf~r ,own sh.,oes."'The:ir ieieg,arnt, tw]i.stin:g' sh,apes 'make them ~,ook ~,ntri.guingmy :plillantHl{e~ A, BIa.cl~lHerry ;(:a:s.e' w'hich Mr Dean has ,ma.dle ~.ool{:sas if' it has be,en c.onsttu:cted. from Unguini., His .lamps~ !chairs an.d, jiew,eill~ery bo:rnrow :h,eavily' fr'Om na.turaill :history" And Iris 'v.an .H,e:rpen; a Dum,ch fa.shmo:n, d,eslgn,er,. has (se'e pi,cture on pre'vIDolls page) talren 3DI prm,n t ing 'to th,e cartwalks,~ wmth striking c~othing ,[oU.ections ~:hat retlect, n,a.tural sha.p"es ,B,nd y'et ;5,e'e:mto, An int~ammat:ory p'robtem !come &om a fu,tur.e ag,e,., =

3D prin ming' ca.n lev'e'n mmx m.am'eria~s th,at

their common theme is inflammation of the tissues around a, j oint in the skeleton, Thea.tment is merely p alliattve: anti -inflamrna tory drugs, ,Pam n k illers 0 r b 0th, But a piece of research published this WEH~:k,in !U.ochemtsrry~ by 'lEdwin C apman of the University of Wisconsin and his colleagtr es, offe-rs arthritis sufferers hop e from at strange quarter: botulinum toxin, This toxin is one of the most dangerous substances on earth.It is made by a bacteriurn called 'Clostridium botu1in,um~ Even a small amount (less than at microgram) is enough to kill a healthy adult, The toxin molecules attach themselves to a protein called synaptotagmln, which is found on the surface membranes of nerve cells ,at th eir junctions with muscle cells, Thence they are ingested, into the cell, where they disable another protein SN AP=25~, the role ofwhich rus 'to help release a chemical messenger called, acetylcho lin e, Thi s me ssenger's job is to ten muscle cells to contract, Without that signal, muscles stops working, If thishappens amm O'ver the 'bo!d~ death is '[a p,~d,., InJe,ct th,r:: toxm'n ~ocally) thou,,gh,. and 'you, c.an ,do :some' good,., 1t wipes away frow'D H.n,es an,d other wrmkles, which are, ·c.aL'us,ed 'by {l'vler.stii'mulated mus,eI!ts" thus .allowing' a,g,eing celelbs to alp,pear on ~he covers of gossip ma,gazines 'without em'batrrass:ment. More seri ously;, it: :is'us,ed mOo trea.t disord,e'Is ra:n.,gjng from h,ea.daches to musej,e spasms;; It onlliy 'works; ho'w'e'ver; in cens that have syn.a. pro ta.gmin on,th,eir s.urfaces-.,
I: .

phage signalling also involves SN'AP~25~ so Dr Chapman thinks hie: can use botulinum toxin to' shut the cells up, The-problemis that macrophages have no synaptotagmin on their surfaces .. J iey do, though, have other proteins, called 'f"IC receptors. What is. needed is a way to get toxin molecules to attach themselves to Fie receptors, And. this. 'is what Dr Chapman thinks he has managed, His trick is to, link
An antibody is. a protein that binds to a, hostile invading organism, If this does notkill the in= vader outright, then it acts as a flag' :fOI the bug ,in question to 'be eaten 'by a macro-

'is the case ]n arthritis), the signalling 'never stops, 'Th,e swelling causes P·ain and the p atien suff Q[-'!C" But m a C-'I'-'O-:'~
i(a.S.
': '1;.4L
',-C'

though
.~!LIII.

II;.,.

~ 'iI;A!..II!,~.

I *11' Il._

1_

II;.,. ,"",.'

._

Ill.

_ ,:_

each molecule to, an antibo dy.,

phage, That happens when the antibody that ls,attached to the invader also attaches it self to an rc-receptor molecule, Th~s - .,'i ,-,' _~ "t d one, the: Inva. d er. msIn.,ges,e d.~ e Dr Chapman's plan was to use this mechanism to get macrophages to eat toxin molecules. Once inside", they would disable SN'AP=25· and thus stop the release of signalling molecules in the ·way they' do :in nerve cells, Th e re sult, the theory go es; would be an end to the chronic mflammation that arthrms causes, and thus to the I.c - .~" . '. Ctt ron .. pam, JLU.:Iifll J':.. .. ~ ". Tb ~ fie1f! .fE!t~lg'o w:-'or I{=S Thl',o;, t-ovin· lIB' 'n't·.ni'ld'.,' 'r]1 ', .cf·~,.;H: .',. b_a y compJleJ[ ... succ,es.s wlIly g.]1-oms ,:·,,-,·t o. ,e on ·"th, macro:phages .. 'Jhie ~ox:in, d,o,e's get fn.s~d,e them ..,And t'h'e ,c ells, dlo sto:p signaUilng" 'Mt 'is a long way £ro,m the're- to at tre,atmenl" b'ut Dr IChapman has made· the· tljclli{ work in mic,e as 'w'!eU as Petri ,dilsh,es unjelcting mlhe 'com" 'I ,' '1' ,,' , ... .:__ I·' " -', -','-",1 '_:_ ,
•1•

·.1-

~,.'aL.~·II~

,"

'I

AJIL

"".

..wl

.~"-'A ' , ,'-', . ,._"-", .I!J..: _ ,a." -r P']I;EiI;V dlo"e"'s"· 'l··nde"I;EiI',d· ·s"o"p·'.. ml,"]j;,c·'ro'p!·h'~lg,e"s·,-',afi,I!;t, ,_.' , _'II;"

cruiting).~ Many m!ore an]~m,al tri.allis'w:um be ne,e,de"d b,e:fof;e 'it ct:ln 'be tes~:ed on, p,eo,p~.e. . But for those, wh,o suffe:r the ,chronic pain of arthritis,. it: is a hop,eful start

I'

1'-1'"

I':'

'-',.

:.. ,

'.

'---1

,-

"

'

-1'

".,-.-.,

I'

'.',

",'!

":'"

1 + -'1

':, -

..

,.-