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Sunday August 29th 2010
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The president warned that terrorists would try to take advantage of the catastrophe. See article Gunmen from the Shabab Islamist militia stormed a hotel in Mogadishu. The UN sent two envoys to investigate a gang rape by rebel soldiers of over 150 women and boys that took place just miles from a UN camp in Congo. It was the second such trip in four months for the Dear Leader. a sacked policeman with an assault rifle took hostage a busload of tourists from Hong Kong. who had called it in hopes of cementing a brief Labor surge in the weeks after she became prime minister. with neither Julia Gillard’s incumbent Labor party nor the conservative coalition led by Tony Abbott winning the 76 seats it would take to form a new government. See article China’s state media reported that the government would reduce the number of crimes punishable by death in the country from 68 to 55. Smuggling cultural relics and forging tax invoices will no longer be capital offences. UN officials say they did not know the crime was being committed. Somalia’s capital. he commands the support of many MPs. the Philippines’ capital.Politics this week Aug 26th 2010 The floods that have ravaged Pakistan for the past month have stranded 800. See article Kim Jong Il. Although Mr Ozawa is widely disliked by voters. according to the UN. a series of bomb attacks across the country left over 50 people dead. in an internal party election next month. the election represents a failure for Ms Gillard. The southern plains of Sindh are in danger of further flooding. he tried to bargain for his job back. the country’s first in 70 years. Of the 17m across the country who are said to have been affected. See article Ichiro Ozawa shocked the Democratic Party of Japan when he said that he would run against Naoto Kan. almost 5m are now homeless. the current leader and prime minister. North Korea’s leader. Whichever way the next government goes. seven years after the invasion. In the subsequent televised standoff. Three independents from rural areas were left holding the balance of power. Pakistani officials are said to be asking the IMF for a loan of nearly $11 billion.000 people beyond the reach of ground transport. . The toll underlines fears for the stability of the country. Eight of 15 captives were killed when heavily armed police stormed the bus. travelled to China. Mission not accomplished As the last American combat troops left Iraq. possibly accompanied by Kim Jong Un. his son and chosen successor. See article Australia’s general election resulted in a hung parliament. killing 32 people. including six MPs. The attack came amid heavy fighting between the Shabab and the forces of the weak transitional federal government. who rarely ventures abroad. The city’s police chief took leave of absence. In Manila.
who is running as an independent. Mr Assange. He says he wants to appeal against the ruling. Germany’s defence minister. Marco Rubio. The electoral council in Haiti rejected a bid by Wyclef Jean. was achieved under duress. The miners had survived by eking out two days’ rations. the founder of the Wikileaks website. A report by Northern Ireland’s police ombudsman found evidence that the police. said he had been warned to expect “dirty tricks” after Wikileaks released more than 75. Mexico’s navy discovered 72 dead bodies at a ranch in the north-eastern state of Tamaulipas. and will run for a fifth term in the Senate. The National Institutes of Health said the judge’s decision would do “serious damage”. A federal judge temporarily suspended an executive order that had allowed federal funding for stem-cell research. His preferred plan would cut troop levels by a third and halt conscription. Hayworth. The election in November will be a three-way race between Mr Meek. presented parliament with five options to reform the country’s military. and Charlie Crist. was jailed for three days following his participation in an unsanctioned rally in Moscow. a hip-hop musician. a right-wing radio host and teapartier. a darling of the Republican right. but the council says its decision is final. who still faces questioning over a separate allegation of molestation. The constitution requires candidates to have lived in Haiti for five years prior to the vote. They are already receiving food.000 classified Afghan war logs in July.The Meek inherit the Earth In Florida’s primary election Kendrick Meek won the Democratic nomination for senator after a bitter fight with a billionaire rival.D. the British government and the Catholic church had colluded to conceal the suspected involvement of a Catholic priest in 1972 IRA bombings that killed nine people. Boris Nemtsov. overturning a previous ban on such funding. John McCain cruised to victory in Arizona’s Republican primary. Mr Jean lives in the United States. but freeing them may take months. Now you see it Prosecutors in Sweden withdrew an arrest warrant on rape charges for Julian Assange. Another critic. but Mr McCain beat him by 56% to 32%. a day after it was issued. . a small private mine. If Mr Meek wins. They were at first assumed to be drug traffickers. The company is now jointly held by the government and Argentina’s two biggest newspapers. a leading dissident in Russia. Barack Obama had issued the order soon after he took office. but were subsequently identified as migrants trying to reach the United States. An appeal is pending. Argentina’s government released a report claiming that the 1976 sale of Papel Prensa. A stunning survival story Rescuers in Chile made contact with 33 miners trapped since August 5th when a tunnel collapsed at San José. Earlier in the year it was thought that J. he will be the Sunshine State’s first black senator. Lev Ponomaryov. was freed after being arrested. would cause an upset. to register as a candidate in a presidential election due in November. a suggestion that makes many in his own party uneasy. Karl-Theodor zu Guttenberg. the country’s sole producer of newsprint. One former shareholder says she received a threat to her daughter’s life if she refused to sell. Florida’s governor.
The world this week
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Business this week
Aug 26th 2010
Sales of existing homes in America plunged to their lowest level in more than a decade, down 27.2% in July compared with June. Sales of new homes also plummeted, to a record low since figures were first kept in 1963. Both declines were worse than had been expected, and follow the expiry of a tax credit for homebuyers. The figures added to fears that America might suffer a double-dip recession. Similar concerns caused the dollar to fall to 83.6 against the Japanese yen, nearing its 1995 record low. But speculation that Japan will intervene to weaken the yen caused it to retreat slightly. Japan is worried that a strong currency could hurt exports and worsen deflation by pushing down the price of imports. All roads lead to Beijing A 60-mile (100km) traffic jam outside Beijing could last until mid-September, Chinese officials said. Road construction is the immediate cause for the gridlock, which stretches as far as Inner Mongolia. Enterprising locals have started selling drinks and noodles to stranded lorry drivers. Higher commodity prices helped BHP Billiton to more than double its net profits to $12.7 billion. The Anglo-Australian miner, the world’s largest, sold record amounts of iron ore and oil, but gave warning that demand from China was likely to slow in the second half of the year. McDonald’s, an American fast-food chain, became the first non-financial foreign company to issue yuan-denominated bonds in Hong Kong, raising 200m yuan ($29m). China has recently eased some currency controls as it tries to increase yuan-denominated transactions. HSBC entered into exclusive talks to buy a controlling stake in Nedbank, South Africa’s fourthlargest bank by assets. The British lender is keen to beef up its African presence, though it will have to reassure the government, which has been nervous about foreign ownership in the past. See article More money, more problems Standard & Poor’s downgraded Ireland’s public debt by one notch, citing the cost of bailing out Anglo Irish Bank. The ratings agency estimates the bail-out will cost the country up to €50 billion ($63.5 billion), though Ireland has protested at the downgrade, arguing that S&P’s analysis is “flawed”. Ireland’s downgrade contributed to fresh anxiety on Europe’s edge. Greek-German yield spreads rose to their highest level since May, just before a €750 billion ($963 billion) rescue plan was announced, and yields for the benchmark German 10-year bund hit record lows. However, Portugal, one of Europe’s troubled economies, raised €1.3 billion ($1.6 billion), with bids nearly double the amount on offer. America’s Securities and Exchange Commission passed a new rule intended to make it easier for shareholders to remove directors at companies they feel are underperforming or paying their bosses too much. Business lobby groups said they may fight the rule change in the courts.
The Financial Services Authority fined Société Générale £1.6m ($2.5m) for inaccurately reporting trades to British regulators. According to the FSA, the French lender misreported 80% of its trades over a two-year period, getting 18.8m wrong. The British financial-services watchdog, criticised for being a lapdog before the financial crisis, has since bared its teeth, this year fining JPMorgan Chase a record £33.3m. An Indian government panel advised against allowing Vedanta Resources to mine for bauxite in the eastern state of Orissa. The London-listed miner is accused of violating forest-protection laws and the rights of tribal groups, but has said it will not abandon the project, which was expected to yield 78m tonnes of the aluminium-bearing ore. 3PAR, a data-storage firm, was courted for a takeover by both Hewlett-Packard (HP) and Dell. The two computer-makers are keen to expand their business to digital information storage. HP offered $1.6 billion to buy 3PAR and Dell, having been outbid, was expected to bring a sweeter offer to the table. Securing its future Intel, the world’s largest microchip-maker, said it would buy McAfee, a maker of security software, for $7.7 billion. The deal is Intel’s largest effort yet to diversify away from making computer chips. It is also a bet that security needs to be incorporated into hardware to combat future threats. A 39% rise in half-year net profits at WPP, the world’s largest advertising company, was not quite as impressive as expected; although the firm said ad revenues were rising in all big markets, it admitted to some “uncertainty” about the prospects for Europe and America.
The world this week
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KAL's cartoon Aug 26th 2010 KAL's cartoon The world this week .
American power After Iraq Aug 26th 2010 America has had a bruising decade. Whizzbang technology enabled America to conquer Afghanistan and Iraq in the twinkle of an eye with negligible losses. Mr Obama always considered this a “dumb” war.000 killed. Nearly six out of ten Americans now say that they oppose even Mr Obama’s “good” war—the one against alQaeda and the Taliban. the misadventure in Iraq has come to symbolise a broader wrong turn America made after Osama bin Laden assaulted it on September 11th nine years ago. But if so it is an instinct he . But do not underestimate either the superpower or its president WHEN Barack Obama confirms next week that all American combat forces have left Iraq. An America that is bleeding economically at home. the sectarian bloodletting that followed the invasion has abated. The wrong turn To many Americans. to shape events in far-flung regions such as Central Asia and the Middle East. some 40. with unemployment stuck at nearly 10% and debts as tall as the eye can see. But the country’s new democracy remains chronically insecure (see article). it is a credit to Mr Obama that he has resisted the temptation to follow the popular mood and turn his focus entirely inward.000 American “support” troops are to stay behind to shore it up. Subduing them has been harder. which is one reason why some 50. as well it should given its annual defence spending of $700 billion.000 have been wounded and more than 5. but Saddam Hussein’s vaunted weapons of mass destruction turned out to be a chimera and the cost in American and especially Iraqi lives has been hideous. Iraq. you can be sure of one thing. Even in an age of austerity America still towers above all-comers in military power. In his gut Mr Obama may well care more about nationbuilding at home than he does about exercising superpower abroad. is no longer a dictatorship. almost as much as the rest of the world put together (see article). But the past decade has laid bare the limits of high-tech power. Given all this. America and its allies may have rid the Middle East of a bloodstained dictator. Thanks in part to Mr Bush’s lonely refusal in 2007 to heed the calls to cut and run. is losing confidence in its ability. it is true. and events have proved him largely right. He will not repeat the triumphalism of George Bush’s suggestion seven years ago that America’s mission there has been accomplished. Of the 2m Americans who have served in the two wars over the past decade. and perhaps in its need.
the prime minister and Labor leader. But. She chose to go to the country when Labor was ahead in the polls. just two months after fronting a coup against Kevin Rudd. Voters don’t much like assassins. seen as an autocrat and a loser after having abandoned his signature climate-change bill. and four independents. Posture and pontificate as they might. who from mid-2011 will probably hold the balance of power in the upper house and be able to block his programme. You get a sense of the many things Mr Abbott doesn’t like. but a half-baked idea for a people’s assembly on climate change and a tack to the right on immigration made Ms Gillard look shallow as well as disloyal. cynical campaigns leave Australia in a mess. Once dismissed as unelectable—and that was by his own party—he has now undone two Labor prime ministers in nine months. and Tony Abbott. counting second-preferences. Not since the Depression have Australians rejected a firstterm government. and a dangerous policy vacuum. the left had a tiny advantage in the popular vote. were both rejected for being several hat-sizes too big. But most of the swing from Labor went to the Greens. But the drama masks a desperately impoverished politics “THE bigger the hat the smaller the property. Presiding over a party at war with itself. As The Economist went to press the right and left both had 72 seats—four short of a governing majority. it is harder to know what he favours. Three of the independents came from the right and may back him rather than offend their anti-Labor constituents. she would struggle to assert power as prime minister.The Australian election When the hat doesn't fit Aug 26th 2010 Australia’s dead-heat election was exciting. And his campaign hardly inspired confidence. . who are understandably playing one side off against the other (see article). The result is a disaster for Ms Gillard. he is weak on economics and short of ideas. the vote is as close as a Queensland afternoon. the right-wing coalition leader. particularly on immigration. Relentlessly negative and populist. facing its first hung parliament since 1940. With one lower-house seat still in doubt. Their empty. politics that is poisonous even by Australian standards. Ms Gillard’s failure is necessarily Mr Abbott’s success. The balance of power in the lower house will rest with a Green. Julia Gillard.” Perhaps that piece of Aussie wisdom is what voters had in mind when they went to the polls on August 21st.
wrote that “the battle to feed all of humanity is over… In the 1970s and 1980s hundreds of millions of people will starve to death.Brazil's agricultural miracle How to feed the world Aug 26th 2010 The emerging conventional wisdom about world farming is gloomy. Canada. it decided to expand domestic production through scientific research. in “The Limits to Growth”. however. Even more striking than the fact of its success has been the manner of it. a Malthusian. and at a time when soaring oil prices seemed to confirm the Club of Rome’s worst fears. not subsidies. For them. a country which was then a large net food importer decided to change the way it farmed. sustainability is the greatest virtue and is best achieved by encouraging small farms and organic practices. A year after “The Limits to Growth” appeared. Australia. Instead of trying to protect farmers from international competition—as much of the world still does—it opened up to trade and let inefficient farms go to the wall. there is little extra farmland and renewable water is running short. Driven partly by fear that it would not be able to import enough food. Brazil has followed more or less the opposite of the agro-pessimists’ prescription. the Club of Rome (a group of business people and academics) argued that the world was running out of raw materials and that societies would probably collapse in the 21st century. There is an alternative THE world is planting a vigorous new crop: “agro-pessimism”. In 1967 Paul Ehrlich. Natural disasters—fire in Russia and flood in Pakistan. Argentina and the European Union). The world has been here before. They frown on monocultures and chemical fertilisers. which are the world’s fifth. The country was Brazil.and eighth-largest wheat producers respectively—have added a Biblical colouring to an unfolding fear of famine. The current harvest of this variety of whine will be a bumper one. They like agricultural research but loathe . By 2050 world grain output will have to rise by half and meat production must double to meet demand. In the four decades since. or fear that mankind will not be able to feed itself except by wrecking the environment. it has become the first tropical agricultural giant and the first to challenge the dominance of the “big five” food exporters (America. And that cannot easily happen because growth in grain yields is flattening out. This was all the more remarkable because most of the country was then regarded as unfit for agricultural production.” Five years later.
Stronger demand will eventually solve the problem. argue that more must be done to prop up growth (see article). The main point of contention is whether policymakers should try to speed up that process with yet more fiscal or monetary stimulus.Joblessness in America A stickier problem Aug 26th 2010 America’s jobs woes cannot be cured just by waiting for economic recovery THE economy stopped shrinking a year ago. Extensions of unemployment insurance by Congress have been necessary but have also reduced incentives to seek work quickly. the labour market has almost certainly become less efficient at matching the supply of jobseekers with the demand for workers. though they dare not use the “S” word. The IMF now reckons it may have risen from 5% before the crisis to 6-6. And judging by the recent rise in applications for unemployment benefits.and medium-skilled men in construction and manufacturing—may not be those that employers now need. America’s economy is still operating well below its potential and there is little doubt that most of the rise in unemployment is the direct result of this. This focus on stimulus is understandable. Some 45% of the unemployed have been out of a job for more than six months—the highest proportion since the 1930s. Thanks to the scale and nature of the housing and financial bust. The skills of those out of work—disproportionately low. But unemployment is high for other reasons too—ones largely neglected in the current debate. but America’s unemployment problem is as big as ever. At their annual gathering in Jackson Hole this week. where fat benefits and rigid firing rules dulled labour-market efficiency. That possibility suggests that the debate over more stimulus is important. around one-third of the rise in America’s joblessness is impervious to the business cycle and cannot be solved by boosting demand (see article). That . but insufficient.5% in July. The official jobless rate was 9. All this erodes America’s famed flexibility. America needs a more comprehensive strategy to combat joblessness. Federal Reserve officials are chewing over when and how the Fed might try to boost the feeble jobs market by printing more money to buy government bonds. while Democrats. European history lessons If America’s labour market is less efficient. People saddled with mortgages worth more than their homes are less able to move in pursuit of new jobs. the situation may soon get worse rather than better. Why is joblessness still so high? The prevailing view among policymakers is that unemployment is a painful reflection of the economy’s weakness. Americans are out of work because the slump was deep and the recovery has been lacklustre. and would be higher still had many people not given up searching for work. the country’s “structural” or “natural” rate of unemployment will be higher.75%. But what exactly should it include? Much of what economists know about structural unemployment has been gleaned from the sorry history of continental Europe. If so. And long periods of joblessness in themselves make people less employable. On the congressional campaign trail Republicans tout high unemployment as proof that stimulus has failed.
That is a decent start. but may be too indiscriminate. But cast your mind back to late 2008. Instead a way needs to be found to impose losses on their creditors without causing a wider panic—the financial equivalent of squaring a circle. From the luxury of even today’s stuttering economic recovery it is easy to vow that next time lenders’ losses will be pushed onto their creditors. somehow. as in most others. Such counterparties are likely to run from any bank facing a risk of being put in resolution—which. But that still leaves the outlier banks that in the last crisis. and boost it in the long term. Worse. the share prices of the world’s biggest banks could halve in minutes. lost two to three times more than the average firm. they have done a good job of resisting the banking lobby and demonstrating that if put in place gradually. Indeed. not onto taxpayers. Anyone exposed to them. The final rules are due in November and will probably call for banks in normal times to carry core capital of at least 10% of risk-adjusted assets. could mean most banks. causing a run that threatened another Great Depression. by boosting banks’ safety buffers. Now.Regulating finance Killing them softly Aug 26th 2010 International regulators are making progress on tackling too-big-to-fail banks TALK is cheap when it comes to solving the problem of too-big-to-fail banks. from speculators to churchgoing custodians of widows’ pensions. short-term paper sold to money-market funds and bonds held by pension funds. that choice is what the people redesigning the rules of finance must try to make possible. including overnight loans from other banks. No reasonable safety buffer is big enough for them (a core capital ratio of some 20% would be required). imagine being sat not in the observer’s armchair but in the regulator’s hot seat and faced with such a crisis again. the unsecured- . the crisis has shown that if they are not rescued they can topple the entire system. higher capital levels will only dent the economy a little now. The easier part of their job is to make the dilemma less likely. America has created a resolution authority that will take over failing banks and force losses on unsecured creditors if necessary. tried to yank their cash out. The biggest banks each have hundreds of billions of dollars of such debt. as the recent crisis showed. Can anyone honestly say that they would let a big bank go down? And yet. That is why swaggering talk of letting them burn next time is empty. Then. This would be enough to absorb the losses most banks made during 2007-09 with a decent margin for error. Here. Reasonable people thought that many firms were hiding severe losses.
but there is wide variation about the average. a private-sector scheme would relieve the government of its costs. just as companies use equity investment to finance projects with uncertain returns.” The broad distribution of outcomes makes raising tuition fees unfair and poor economics. and it would compensate universities according to the value they add to students’ careers. it would aid the international competitiveness of the education sector as foreigners could then participate. August 7th). Peter Ainsworth Managing director EM Applications London SIR – The current policy of British universities to charge higher fees to non-European Union applicants (“Will they still come”. August 7th) provides a perverse incentive for our cash-strapped universities to lower their academic entrance requirements for non-EU applicants. This should not be a graduate tax as it cannot apply to foreigners and still requires government funding. Thomas F. Maher Director British Home Tutors . or indeed whether the fruits of doing so are as profitable as the numbers suggest. In a recent survey of British university heads we found that over two-thirds cited increasing their international presence among their top priorities. It is widely believed that it is much easier to win a place at some British universities when applying from outside the EU than from within. But more importantly. It is questionable whether these ambitions can be supported. Friedman also observed that. why do universities continue to seek ways to subsidise inherently uneconomic ways of working rather than rethinking outmoded business models that have changed little in 50 years? Mike Boxall PA Consulting Group London SIR – Given your suggestion that British universities should charge “something close to the real cost of their education” you would do well to turn to Milton Friedman.. Instead. to pay “for education would be to ‘buy’ a share in an individual’s earning prospects”.Letters On British universities. This is not only resented by British and other European applicants but could undermine Britain’s universities in the longer term as they are forced to chase higher fees from overseas pupils to the exclusion of more academically able EU candidates. Japanese society. Brussels. American railroads. Proposition 8 Aug 26th 2010 University challenge SIR – You were right that too many universities see the international student market as the panacea for their domestic ills (“Hustling spires”. bubbles. Myanmar.. He agreed that “the average expected return [on higher education] may be high. students would pay what they could afford.
The governing structure they assembled remains. Andrew H. but not in real time. It is unthinkable that the existence of this dictatorial regime is a state of affairs which other nations with a liberal conscience can allow to continue. passenger and freight rail have been successfully sharing infrastructure since the beginning of railroading. Their systematic mismanagement and impoverishment of a once proud and rich independent country continues to be vilified and yet the junta has not been overthrown. Tripp Chicago Neighbour behaviour SIR – In my view Sino-Burmese relations have never been warmer (Banyan. planning and engineering. and would in my opinion be well worth the price of admission. August 7th). your assertion that freight and passenger rail cannot successfully coexist is not supported by the facts. On the contrary. such close economic ties with China are not in the best interests of the Burmese people as the only beneficiaries are a small exclusive coterie of the upper levels of the army. those who had hoped for genuine reform from the upcoming November elections are now simply grateful an election will be held. though. a large part of my desire to study at Oxford is the Bodleian Library. However. we can ensure there . I endured enough mollycoddling and hand-holding in high school and in many of the required introductory classes at university. How many healthy booms would they kill? Lubos Pastor Professor of finance University of Chicago Chicago On track? * SIR – Your article “High-speed railroading” (July 24th) articulated well the many benefits of the American freight rail system. who spoke about irrational exuberance in 1996. Meanwhile.London SIR – You mentioned that many foreign students who come to British universities struggle with the unstructured nature of courses. leaving more than 50m longsuffering Burmese citizens in poverty and isolation. China has carved out a deep relationship with Myanmar with its own economic needs in mind. which is truly the best in the world. or his predecessor. The generals should not bother hiding behind civilian attire as they have clearly won already. who missed the recent housing bubble. As an American college student this is exactly what I am looking for. Admittedly. The Obama administration has committed significant resources to maintaining and improving the system. With good modelling. Jessica Khine Singapore Don’t trust the government SIR – I am perplexed by Buttonwood’s support for the idea that governments must intervene to prick asset-price bubbles (August 14th). Probably no other country is as close to the Burmese generals and their lackeys—and it is a relationship that will continue to influence the future of Myanmar. Bubbles are easy to identify in hindsight. However. Do you really trust government-appointed wise elders to make the right calls? I don’t expect them to be smarter or better-informed than the current American Federal Reserve chairman. Magical institutions like the Bodleian are increasingly hard to find.
But how good is a railway that has abdicated its role in the national transportation system. Only once I had finished my job in Brussels was I asked to return to Italian politics where I won a second general election. apart from the haulage of a few profitable items? The breakdown in trust between the private rail operators of America and the public authorities. improving air quality and reducing dependence on fossil fuels. Szabo Federal railroad administrator Washington. This process will require hard work but these agreements will increase passenger. and the regain of modal share. Certainly the performance of the transcontinental freight lines in recent years. unlike Charlemagne. high-speed-rail investments will add double and triple tracks. the states and the freight railroads can finalise agreements that ensure good service and allow both types of rail to prosper. Romano Prodi Bologna The perfect society? . In many cases. You may not believe it but. the European Commission I chaired was known to be hyperactive and pro-European from the first to the last day. It is a pity that the American government’s modest initiative in favour of modern signalling and acceptable passenger service is being met by the railroads with such defensiveness and timidity. I had no time to dedicate to Italian domestic issues. DC * SIR – You only presented the point of view of the Association of American Railroads in your article. It is hard also to see “best in the world” associated with American railroading post-1940s without suspecting a self-promotion operation on the part of the railway companies. despite the laudable efforts made in recent years to rebuild at least the transcontinental trunk lines. achieve a balance between private and public interests and ensure optimal operations for both interests. The shift of many European governments from centre-left to centre-right and the open opposition of some national governments made it clear to me that a second mandate was impossible. Justin Bur Montreal Busy in Brussels SIR – In response to Charlemagne’s article on Brussels (July 31st). I did love and I still do love Brussels. are impressive.is the capacity for the operating needs of both. That is why we are working closely with states and host freight railroads to reach operating agreements that define responsibilities. already firmly entrenched a century ago. as well as new sidings and signal improvements. is only barely beginning to mend. The infrastructure and technology deficit caused by the devastating collapse of the rail system between the 1950s and 1980s is still vast. which over time will allow freight and high-speed passenger trains to coexist at the optimal speeds for each. You implied that these balanced agreements are unachievable but through open dialogue and good-faith negotiations.and freight-rail services and will bring the highest level of benefits to the nation by relieving highway congestion. You didn’t consider how and why American railways got into the predicament from which they have recently emerged. I understood this at least two years before the end of my term but I did not change my agenda in order to please the critics. nor why in a wealthy country it should be so traumatic to consider upgrading passenger rail in 2010 to approach the international standards of 40 years ago. Joseph C.
hovering almost stationary in the air. Another comes from technology: the advance of robotic warfare may. whose numbers were once supposed to reach about 750. For the moment. including the latest. At this summer’s Farnborough air show. In their place. Farewell Tom Cruise in “Top Gun”. But even more impressive is to see the Raptor at low speed. its stealth and sensors allow a lone Raptor to kill a flock of any other kind of aircraft. One threat comes from success: in Iraq and Afghanistan. outside London. a third danger is more immediate: the economic crisis. welcome the faceless drone operator sitting in a windowless container in the Nevada desert. the F22 Raptor. has ordered that production of the F-22 should end this year. DC The chronic problem of exorbitantly expensive weapons is becoming acute THERE were the starlings: aerobatic teams with mesmerising group displays. Western forces have been uncontested in the air. so sophisticated fighters seem less relevant. In mock battles. Goodbye Biggles. altitude and agility. the jet fighters. its nose pointing upwards. heavy airliners that still manage long. eventually perhaps. Well. Robert Gates. which . Germany. make the pilot in the cockpit redundant. Italy and Spain—will fall. And there were the buzzing propeller-driven military transporters. America’s most advanced fighter. The aircraft that American field commanders most clamour for is not the F-22 but helicopters and the Predator. the Airbus A400M. Many think of fighters in terms of speed. But the star turn was reserved for the birds of prey. But the fighter is an endangered species. And on both sides of the Atlantic the rising cost of the stealthy F-35 Joint Strike Fighter means its order book could shrink sharply. if not on the ground. though. eliminating the joint-forces command. In Europe orders for the Typhoon—a fighter made by Britain. like a child’s toy strung up to the sky. effortless flight.The cost of weapons Defence spending in a time of austerity Aug 26th 2010 | FARNBOROUGH AND WASHINGTON. There were the albatrosses: Boeing’s 787 Dreamliner and Airbus’s A380. America’s defence secretary. the British adventure-book hero. The extent to which unmanned aircraft could or should supplant piloted ones will be debated for decades. The fighter pilot seems to be losing his dash. which is forcing Western countries to cut expensive military equipment. an unmanned drone able to stay aloft for a day. announced its power with a thunderous roar. at some point. On August 9th Mr Gates announced a new set of money-saving measures: among them cutting at least 50 of the 900-plus generals and admirals. capping the fleet at 187—a final cull for the Raptor.
promotes integration among the services. Britain’s choice. To Americans. “Strategy is what you need when you don’t have any more money.000. But Mr Gates knows that after a decade of ever-rising defence spending. though. Italy will chop by 10% next. China is also fast building up its naval power (see chart 1).” says Mr Krepinevich.5 billion) from the defence budget by 2014. America is not giving up any of its commitments. Even Britain. is likely to cut defence spending by 10-20% over the next five years. That means finding new money within constrained budgets. say. There are sound military reasons for this internal cost-cutting. to preserve enough might to protect allies from. Spain cut defence spending by 9% this year. Such a move would shock Europeans who hope that the impact of their own defence cuts will be softened by American help in times of need. which has the largest European force in Afghanistan. and reducing staff in Mr Gates’s own office. “Britain was a declining power but it managed to hang on for quite a long time with intelligent strategy. a thinktank in Washington. which strain even America’s gargantuan $700 billion defence budget (almost as much as the defence spending of the rest of the world put together). This week Karl-Theodor zu Guttenberg. argues that America is at a crossroads of the sort that faced imperial Britain at the turn of the 20th century. “the gusher has been turned off”. His dread is already reality for many European colleagues. as it contended with a rising America. cutting funds for contractors. Just to keep up America’s existing combat units. Mr Gates is grappling with the conundrum faced by many of his predecessors: the rising costs of military manpower and equipment. Mr Gates wants his forces to become better at fighting insurgencies. costs 2-3% more each year. support Japan to check Russia in the East and make up with France so as to confront Germany. China’s economic strength should give the West cause for concern. now his greatest fear is that defence spending will be cut to curb the budget deficit. director of the Centre for Strategic and Budgetary Assessments. Germany’s defence minister. he argues. In a seminal book of 1987. was to surrender its interests in Latin America to the United States. following an overdue defence review in the autumn. and also to maintain “all options” for dealing with Iran’s nuclear programme.” The beginnings of a sound policy today. Paul Kennedy of Yale University popularised the notion that a country’s military power flows from its economic strength. The move is part of Germany’s plan to cut €8. he notes. might be for America to withdraw from a costly war in Afghanistan and pull forces out of Europe. France is freezing defence expenditure. an expansionist Russia and fast-industrialising Germany and Japan. NATO’s longstanding call for allies to spend at least 2% of GDP on defence has been lost in the clamour over wider public-spending cuts. said he favoured suspending conscription. . it all looks like a dis-arms race. Less drastically. especially the need to redirect money to the war in Afghanistan. to about 165. By this measure. For the moment. the global pecking order is determined as much by economic performance in peacetime as by martial abilities in wartime. North Korean aggression or Chinese hegemony. Is the constraint on military spending evidence of a general decline of the West? Critics of Mr Gates argue that he is hollowing out the armed forces and accepting a diminished position for America in the world. then. DC. But the annual budget is rising by only 1-2%. “The Rise and Fall of the Great Powers”. in order to create a “smaller but better and more operational” army that would shrink by a third. with the option of resuming it later. Instead of strategy Andrew Krepinevich.3 billion ($10.
A study of defence bureaucracies by McKinsey. more heavily armed and better-protected . And instead of negotiating fixed-price contracts. Since 1970 America’s fleets of combat aircraft and major warships have shrunk. So why do weapons not follow Moore’s Law. big countries develop weapons from scratch.Mr Gates wants the Pentagon to save 1-2% a year in overheads. a luminary of the aerospace industry. often faster than GDP. which drives down unit costs. Study after study shows that the price of combat aircraft has been rising substantially faster than inflation. Much of the performance of modern weapons lies in their computing power and software. the entire defence budget will purchase just one aircraft. he plotted the exponential growth of unit cost for fighter aircraft since 1910 (see chart 2). a 1986 study of shipbuilding costs since the end of the Napoleonic wars. and their families. is expensive. a global management consultancy. Unfortunately nothing has changed. Even aerospace giants such as Boeing and Europe’s EADS. and extrapolated it to its absurd conclusion: “In the year 2054. Kuwait and the Netherlands). The same is true of warships. But that does not come cheap. Yet he has a hard time restraining Congress’s generosity to soldiers and veterans. though the most potent in the world. Mr Augustine says. In a book published in 1983. compared with $50m-60m for the venerable F-16. military equipment lacks the huge scale of consumer electronics. In the long run. “we are right on target. the proportion of fighting forces to support personnel (the best were Norway. The spiral The rising cost of military equipment is an old curse.” complains Mr Gates. even as defence spending rose (see chart 3). a big burden is the cost of health-care programmes for current and former servicemen. when it will be made available to the Marines for the extra day. This aircraft will have to be shared by the Air Force and Navy 3½ days each per week except for leap year. are among the least efficient. Nevertheless. One response to high manpower costs is to rely on technology. drafted a series of lighthearted “laws”. as most Western ones are these days. governments typically bear the risk of designing advanced systems in “cost-plus” arrangements. are wary of developing a military jet on their own. In one aphorism.” These days Raptors go for $160m apiece ($350m including the cost of developing the jet). more powerful. In America. Norman Augustine. Philip Pugh. Pay has to be competitive. argues that the industrial revolution made the problem more acute: the rapid pace of technological change set off a race to build bigger. Instead of choosing products in the open market.” Nearly three decades on. so need more support than those only defending national borders. suggests that American forces. “Health-care costs are eating the defence department alive. the study suggests there is flab to be trimmed. at least in terms of the “tooth-to-tail” ratio. moreover. which predicts the rapid fall in the cost of computing power? For one thing. Military software is often bespoke. which compete to produce expensive civil airliners. author of “The Cost of Seapower”. American forces deploy and fight globally. Manpower in all-volunteer armies. The need to keep it secure makes it hard to upgrade and to develop the “plug and play” functionality of PCs. high unit costs must limit numbers.
In the end. giving the top brass a chance to tinker endlessly with requirements.” Cost was secondary. France is down to one aircraft-carrier. Some NATO allies are sharing the cost of new C-17 military transporters but such examples of pooling are few and far between. “In the cold war everything was sacrificed to performance. navies and armies. It has ordered two big new carriers. Europe needs economies of scale. Few would disagree with another of Mr Augustine’s laws. But how to achieve them. They cost $2 billion each. given that there was no shooting war.battleships. whereby bureaucrats and contractors underestimate the likely cost of weapons. delay raises costs. spend later” would save about £450m ($695m) in the first four years. as unit prices rise. Their budgets are divided among more than two dozen air forces. Jointly developing weapons carries considerable costs: decisions are arduous and work has to be . so weapons must be redesigned. Britain has two pintsized ones. The F-22 began development before the end of the cold war. but in Britain even some among the top brass think that nukes are too expensive. or seek game-changing technology. At that point. European countries in any case struggle to generate much bang for their money. that “the last 10% of performance generates one-third of the cost and two-thirds of the problems. But the bigger military powers do not want to depend too much on others. relying instead on NATO allies to police their skies. military projects are hard to kill. governments cut the size of the purchase. Plainly. The National Audit Office says this case of “save now. So the fact that the cold war never turned hot may help explain why Western ministries of defence got into the habit of developing weapons slowly and expensively. their choices are agonising. quantity takes precedence over quality. one of two things must happen: countries must either scale back their ambition. short of an implausible single European army? One option would be for Europeans to specialise. and they often sail without aircraft. the quest for the best is often allied to a “conspiracy of optimism”. as they did when the battleship gave way to the submarine and aircraft-carrier. incurring greater long-term costs. governments postpone work further to avoid busting yearly budgets. better weapons is fiercest in peacetime but tends to fall once war actually breaks out. The Baltic states have no air force to speak of. Once approved.1 billion overall. Mr Pugh also identified another intriguing trend: the race for bigger. so did the Typhoon. With time. Such are the ingredients for a spiral of cost and delay: technological stumbles hold up development. European states have more troops than America but only a fraction of America’s fighting power. At some point. but add £1. technology becomes outdated. wittingly or unwittingly. Mr Gates wonders whether America needs 11 aircraft-carrier groups. America may debate how many nuclear weapons it should have. “You cannot optimise cost. It’s even worse in Europe This is not just an American affliction. Repeated reforms have failed to break this dire cycle. According to the last full report by America’s Government Accountability Office (GAO). Denmark has abandoned submarines. so driving up unit costs further. some people in Britain and France ask whether they can buy new ones at all. performance and development-time at the same time. and many have defence industries to preserve.” says Mr Krepinevich. but no sooner had work started than the government slowed down construction. incurring an average delay of 22 months. and time was least important of all. As a result. the cost of 96 of America’s biggest weapons programmes in 2008 had risen on average by 25%.” Moreover. There were supposed to be 132 stealthy B-2 bombers but only 20 were built. he argues. The Netherlands has given up maritime reconnaissance. so they try to keep a bit of everything.
still looks less expensive than Augustine’s law would predict. Reconciling the needs of each can result in building countless variants. One might argue that the mounting price of weapons does not matter given that modern equipment is so much more effective than older kit. build quickly to minimise disruption and upgrade when technology is ready. Now Mr Blue is showing off a jet-powered. Early models were powered by snowmobile engines. The future. So is there any way of developing weapons more cheaply? More transatlantic co-operation would help. navy and marine corps. Several countries have joined the programme. which suffered a cost overrun of more than €11 billion. expendable drones that can swarm or spread out as circumstance requires. having a widespread presence is valuable. But they were looking over their shoulder at an insurgent: Neal Blue. CEO of General Atomics. As Stalin reputedly said. quality or technology? At Farnborough this year. This happened to the A400M. what’s that unmanned thingy at 12 o’clock? Getting the pilot out of the cockpit. Maybe. Perhaps Europeans should just buy American kit off the shelf. In general. One Airbus insider calls the A400M an eierlegende Wollmilchsau. It inherits technology from the F-22. protect an important export industry and maintain some independence. called the Avenger. but in a disordered world of diffuse threats. Germany wanted it to skim over treetops. lies in cheaper. countries need to take smaller technological steps. The same applies to warships fighting pirates off the cost of Somalia. is the best way to keep prices down. a ship cannot be in two places at the same time. Britain needed it to lift (now-scrapped) new armoured vehicles. General Atomics stole a march on the big firms by producing the Predator drone. The F-35 fighter. It would also help to use more off-the-shelf technology—as has been done with the mine-resistant vehicles rushed to the battlefield in recent years. Both Britain and France said it had to operate from rough airfields. then into a bigger plane. stealthier version. He claims the cost of an Avenger is about a tenth of a new “hyper-expensive” manned jet. In Iraq and Afghanistan numbers matter more than firepower. quantity has a quality all of its own. he says. But those with their own military industries want to preserve high-tech manufacturing and software skills. Algy. despite disputes over rising costs. able to carry more weapons. . and three variants are being built for the American air force. or “eggproducing wool-milk-sow”. the Reaper. or in piling multiple requirements on a single aircraft. he reckons. Better known for its work in nuclear physics. the big aerospace companies still enjoyed the best chalets. Quantity.shared out. I say. The first flying cameras evolved into armed versions that could strike targets at short notice.
in keeping with the orthodoxy of their parties. he said. bested by foreign competition or automating to keep pace with it. America simply cannot afford more pump-priming. however: for decades. eliminating 225 jobs. where polls consistently rank the state of the economy. Another local firm. Earlier this year American of Martinsville. Mr Hurt. recently laid off 530 workers.Unemployment and the mid-terms To help or not to help Aug 26th 2010 | MARTINSVILLE. At the most recent election. Stanley Furniture. and thus create jobs. There may . as the voters’ main worry (see chart). ousted the Republican incumbent by just 727 votes. Tom Perriello. have very different ideas about how to reduce it. he argues. in 2008. declared bankruptcy and closed its local factory. Both candidates agree that the biggest local concern is unemployment. sees the enthusiasm of Mr Perriello and his Democratic colleagues for this sort of spending as “fiscal recklessness”. Mr Perriello trumpeted his success in securing $15m in federal funding for improvements to the local sewage works. That legacy is grim. The expanded facility. a 100-year-old furniture manufacturer whose headquarters overlooks the giant seat.000 nationwide. The same is true of America as a whole. he claimed. local factories. VIRGINIA The parties wrestle over whether America can afford to create more jobs THE gargantuan statue of a dining-room chair that graces the centre of Martinsville is a tribute to the legacy of the local furniture-making industry. which was already 9% before the recession. textiles and tobacco. would help the county attract new businesses. a popular state senator. Unemployment in the town. He also highlighted his recent votes in favour of extending unemployment benefits and providing grants to states to avoid lay-offs of teachers. Two other big local industries. are equally sickly. in part from last year’s $814 billion stimulus package. At a recent town-hall meeting in nearby Halifax County (unemployment 12%). policemen and the like. aims to recapture the seat for the Republicans. with a deficit of 9% of GDP and government debt approaching 100% of GDP. is now 20%. and some 160. even as the district voted against Barack Obama for president. a Democrat. and unemployment in particular. Over 400 teaching jobs would be saved in the district as a result. Martinsville also happens to sit in one of the most marginal congressional districts in the country. however. have been shedding workers or shutting up shop altogether. In November Robert Hurt. But the two candidates.
Yet the city’s large black majority. The old neighbourhoods are almost intact. To take just one measure. were essentially taken over by the state. Appointment to them now requires some knowledge of engineering and hydrology. The city’s arcane political structure has .New Orleans five years after Katrina Chins up. The signs are everywhere: empty lots overgrown by weeds. and the city’s irrepressible people have mostly returned. Reforms in other areas. which set about converting most into independent. derelict public buildings still awaiting restoration. Nobody at home. even in a city that has tended to blame poverty and racism for its appalling schools. once a patronage playpen.000 more on the day disaster struck. has ensured that the extravagant culture of New Orleans has survived the flood unharmed. the most drastic and positive transformation has occurred in the public schools. and the results are broadly positive. the police are bent. Those who left were probably disproportionately black and poor. ramshackle. into the unstarred districts of the city. the vast majority. with its restaurants and night clubs. hopes high Aug 26th 2010 | NEW ORLEANS The budget’s holed. is certainly a factor. not simply a friend in politics. Nearly two-thirds of the city’s students now go to these. open-admission charter schools. have been restructured and professionalised. from 30% to 59%. would still have been unthinkable before Katrina. The storm set in motion a massive and surprisingly successful educational experiment. Some houses feature “Katrina tattoos” sprayed by rescuers as they completed house-by-house searches in 2005. Something awful happened here in the not-too-distant past. still there and mostly still poor. The regional boards overseeing the river levees. New Orleans will not always have a steady supply of such teachers. Why? Freedom from bureaucracy. And yet New Orleans has undoubtedly recovered its essence. Experts estimate that perhaps 360. Another is that the link with the teachers’ union has been severed. and idealistic. Poorly performing schools. energetic young teachers have replaced indifferent ones. which comes with chartering. leaning houses. as measured by standardised test scores. willing to work 70-hour weeks for low wages. Without a doubt. though less dramatic. But their efforts have proved that reform is possible. but good times keep rolling—somehow Heavies on the levees IT IS still obvious to any visitor—especially one who ventures out of the French Quarter. the percentage of pupils attending “satisfactory” schools. has doubled since the storm.000 people now live in a city that was home to around 100.
remains weak and undiversified. which is now involved. but cobbled back together. On the economic front. Many Louisianans fret that Gulf-based drilling rigs will decamp for West Africa or Brazil. though at last contained. meanwhile. many black Orleanians thought their neighbourhoods were being condemned. Other irrelevant offices have also been phased out. The mood recalls a letter written in 1870 by the city’s most famous chronicler. was forced out of his post as the city’s leading prosecutor. It is unclear what the long-term fallout will be. the municipal budget—dependent largely on the sales tax—reflects the city’s economic health. It can be seen in the growth of vocal neighbourhood organisations in parts of town that never had them before 2005. each overseeing his own fief. the criminal-justice system is still in disarray. Though New Orleanians narrowly re-elected their feckless mayor. The murder rate is almost flat. not two. Heavy black support sealed his victory. Mr Landrieu had to announce immediate austerity measures to plug a $67m hole in the city’s operating budget. The spill. who now fear that all Gulf fish are tainted. New Orleans relies heavily on tourism. New Orleans now has one elected tax assessor—instead of seven. As ever. To date. But BP’s disastrous oil spill in the Gulf of Mexico has cast another dark shadow over the region. William Jefferson. He has been replaced by Leon Cannizzaro. but of breathtaking cover-ups. but is easily the country’s highest. The only good news is that the federal Justice Department. Many of the state’s legendary fishing grounds have already reopened. most have stayed. than to own the whole state of Ohio. But the city’s problems are hardly over. which builds ships. The city also has a new congressman. Northrup Grumman. Lafcadio Hearn. At the time. Eddie Jordan. of “recovery projects” will not be completed because of shortfalls in federal financing. with the mayor unable to seek re-election. the city’s first white mayor in over 30 years and the brother of Louisiana’s senior senator. So far. Even with new leadership. And just last month one of the largest employers in the region. A new.” . too. Mr Nagin benefited from their fear. To some extent. Anh “Joseph” Cao. there will be one clerk of court instead of two. Yet New Orleanians are used to dire news. voters opted en masse for the man he beat last time: Mitch Landrieu. And dozens. The city’s economy. After the storm it was not reformed. the two sectors are still crucial to the region’s economy. Ray Nagin. The federal government’s moratorium on new deepwater drilling is very unpopular in the region. This year. There is now one sheriff. but fears remain about the oil spill’s effects both on species and on customers. While few people in the city itself are employed in oil or fisheries. And the picture is ugly. Officers have been accused not only of killing three innocent people. An ineffective Jefferson acolyte. who ousted the long-tenured. And a series of federal civil-rights cases have exposed a culture of violence and corruption in the city’s police department. and the fruits of that disastrous decision are now being seen. a recent survey found that nearly three-quarters of residents think the city is moving in the right direction and are optimistic about its prospects. with its low-paying jobs and vulnerability to economic downturns. to a friend in Cincinnati: “Times are not good here. Despite the latest outbreak of it. perhaps hundreds. and corrupt. soon. that election now seems an aberration. can-do spirit seems to have sprung up.also been streamlined. announced the closure of its local operations. New Orleans was largely insulated from the early months of recession by the piles of federal cash that had been funnelled into rebuilding. As the only black candidate of stature. The city is crumbling into ashes…But it is better to live here in sackcloth and ashes. The polls. may insist on reforms. in 2006. have given evidence of disgust with the old ways. a judge. has done serious damage to two linchpins of the south-eastern Louisiana economy: oil and fishing. 18 current or former cops have been charged.
When America first created forest reserves. Before the downturn. and a good example of that is Montana’s timber industry. explains that the industry’s problems predate the recession. wet south-east. In 2008. Montana’s junior Democratic senator. the state’s overall sales of wood and paper products were roughly $710m.2bn in 2005. They were doing well from commodities. too. its goal was to create a sustainable supply of timber as well as to protect the woods and the fresh water reserves within them.000 acres as new federal wilderness areas. MONTANA Doing the trees good AMERICA’S most sparsely populated states were among its more resilient during the recession. so did housing starts. In some cases assuring supply is vital to conservation.000 more acres of the state’s national forests each year. however. according to the University of Montana’s Bureau of Business and Economic Research. more than a century ago. is promoting a Forest Jobs and Recreation Act that would mandate logging on 10. The legislation represents a somewhat grudging compromise between conservationists and industry. Such coalitions are not unusual in forests. North-western lumber mills have had a hard time competing with large Canadian operations since the passage of NAFTA. At the same time.Managing the West’s forests For fun and profit Forest jobs are disappearing. Tom Power. The National Centre for Conservation Science and Policy is working on legislation that would allow logging in eastern Oregon’s forests. In 2008 Montana’s growth rate was the highest in the country. but as the markets collapsed. It would also designate some 600. had never known housing bubbles and were not especially vulnerable to the financial sector’s troubles. . where trees grow up to five times as quickly. down from about $1. Jon Tester. A furious national rate of homebuilding kept lumber prices high at the beginning of the decade. When the wheels came off the national economy. State leaders. places like Montana and North Dakota poked along with slow growth and greying populations. But no state has escaped unscathed. they began to move up the rankings. Perhaps strategic alliances with tree-huggers can help Aug 26th 2010 | KALISPELL. an economist at the University of Montana. mills in Montana and its neighbours are losing ground to suppliers in the warm. are loth to see wood-products jobs disappear.
the two sides are supposed to start talking directly again. Bill Clinton got Yitzhak Rabin and Yasser Arafat to shake hands on the White House lawn. after all. These were expected to fail. with long experience of upset tummies and smoke-filled rooms in Cairo. that it is more realistic for America to “manage” the conflict in Palestine than to seek actually to solve it. for example. Either way. are willing to argue. After the dinner he intends to host at the White House on September 1st for Israel’s prime minister. Most have a go—or at least go through the motions. you have to wonder. Jimmy Carter owes his Nobel peace prize in large part to the peace deal he brokered between Israel and Egypt in 1978 (and has never let the world forget it). and this Mr Obama has now done.Lexington The president and the peace process Aug 26th 2010 A thankless task. Soon after Mr Clinton’s failure at Camp David. of the need to shuttle between them. Since the Nobel committee saw fit to reward Barack Obama virtually the instant he was elected. the president of the Palestinian Authority. it cannot be a bad thing to get old enemies to talk. but no peace. that is. since the reaction to peacemaking that fails can be violent. and Mahmoud Abbas. . followed the unhappy Camp David summit of 2000. and no prize. George Bush took one look at the blood and muddle and decided that America had better things to do. Jerusalem and Ramallah. Doing so is not. Mr Obama’s envoy. Whether Mr Obama is trying to solve the conflict or simply to manage it is hard to say. It merely restores matters to where they stood after Mr Bush inaugurated a previous set of direct talks in Annapolis at the end of 2007. compulsory—nor always wise. it cannot be the lure of that prize that explains why he is investing in this thankless conflict so early. Some actually make progress. do they bother with it? The “peace process”. and lived up to expectations. That is progress of a sort. the Palestinians mounted their second intifada. relieving George Mitchell. Binyamin “Bibi” Netanyahu. since the secret of “managing” is to maintain the pretence that the peace process will indeed one day produce. a wave of suicide-bombings that blew away the modest store of goodwill that Rabin and Arafat had built during the 1990s. After his own election in 2000. And yet every American president is implored upon entering office to bring the quarrel swiftly to an end. Plenty of rueful diplomats in Washington. albeit not the sort that poses the slightest danger of raising high expectations. The present conflict between Arabs and Jews in Palestine has been going on for about a century. but at least Barack Obama seems to be trying WHY. sotto voce.
Others say it was hastened by hours of intensive interrogation. can claim an unusual consequence of his friendship with Fidel Castro. But now the house lies empty. Their reaction was to launch an investigation against him. Fidel Castro stood down as Cuba’s leader in 2006 with an intestinal illness. Rio Zaza was shut down earlier this year. A guerrilla in the 1960s and then a bodyguard of Chile’s socialist president. the Chilean is said to have vented his frustration on officials at the Central Bank. the authorities imposed strict limits on the amount foreign businesses could withdraw from their Cuban bank accounts. of overcharging its stateowned joint-venture partner and bribing Cuban managers to look the other way. enjoyed a nearmonopoly on sales of packaged fruit juice and milk across the island. His fall from grace began two years ago. who denies all the allegations. The Cuban government said that his death was a coincidence. Mr Marambio was furious. was found dead in his Havana apartment. but Rio Zaza’s alleged misdeeds involved . and was still too unwell to receive calls. Mr Marambio.Business and politics in Cuba Potbelly and rumbling stomachs Aug 26th 2010 | HAVANA What the fall from grace of Fidel Castro’s Chilean business crony says about Cuba’s uncertain economic times MAX MARAMBIO. They accuse Rio Zaza of supplying food to Cuba’s large black market. But he had no one to turn to. Rio Zaza. dubbed in Cuba “the potbelly” because of his portly figure. Other foreign joint ventures in Cuba cut corners. ordered him to return to the island by August 23rd for questioning about bribery and fraud at Rio Zaza. Faced with an acute shortage of foreign currency. Cuba’s government. His body was cremated in Chile. That apparently did not offend Mr Castro. a Chilean businessman. For the past two decades this company. It made him rich. declined the invitation. its rolling lawns unkempt. possibly the result of a drug overdose. Salvador Allende. Mr Marambio. another Chilean who was the firm’s managing director. Mr Marambio is a wanted man. Rio Zaza was unable to gain access to some $30m dollars of revenue. Neighbours at the businessman’s grand 1950s home on the outskirts of Havana recall that the Cuban leader was a frequent evening guest (the home itself is believed to have been a gift from Mr Castro). In April Robert Baudrand. became a multimillionaire. Instead. led now by Fidel’s brother Raúl. Mr Marambio set up one of the earliest business joint-ventures with Cuba’s Communist regime. without a thorough post mortem.
For Raúl Castro. Cuba’s government may find it easier to charge Mr Marambio than to replace him. where the warehouses were notoriously prone to theft. Vesco was imprisoned. Vesco fled to Cuba to evade fraud charges in the United States. Yoani Sánchez. there has been speculation that the Castros were annoyed that Mr Marambio financed the presidential bid of Marco Enríquez-Ominami. the national airline. The Americas . looking for stolen goods. But the demise of Rio Zaza may say more about Cuba’s shifting. “occasionally we are all reminded who’s the boss here”. and he settled in the island to escape the dictatorship of Augusto Pinochet in Chile. reports that since the demise of Rio Zaza. then released. and checkpoints have been set up at all the main entrances to the capital. in other ways his case evokes memories of Robert Vesco. It was also linked to the illicit use of planes belonging to Cubana. But even as it loosens the iron grip of the state. Whereas Fidel saw illegal private enterprise as an evil which could be overcome by teaching Cubans to be more revolutionary. a maverick socialist. a scandal which cost several senior officials their jobs earlier this year. and was reported to have died from cancer in 2007. He is quietly legalising chunks of the informal economy: Cubans can now legally buy building materials and mobile-phone connections. in Chile’s election last year. and sell services such as hairdressing and building work. Although Mr Marambio faces no charges outside Cuba. a blogger. a conservative. times. uncertain. Whatever the reason. Cubans rely on the grey economy and some worry how far such a clampdown might go.particularly large sums of money. Raúl seems to take a more pragmatic approach. An American financier. Military police patrol the island’s main roads. tackling Cuba’s moribund economy and vast black market is a priority. end two decades of rule by a centre-left coalition. The effect of his candidacy was to help Sebastián Piñera. He lived in great style in Havana for many years until he too was accused of trying to swindle his hosts. as a foreign businessman in Havana puts it. the black-market price of milk and other staples has doubled. In addition. the government is redoubling its efforts to be seen to remain in charge of Cubans’ everyday lives by cracking down on corruption.
and Adam Bandt of Victoria. has seen his hand much strengthened: his campaign was built on simplistic slogans about paying back debt.4% swing against Labor in effect reversed the gain that had brought it to power three years ago. so each has set out to woo Mr Bandt and four independents. up from five. now courting Aug 26th 2010 | SYDNEY The Australian electorate falls out of love with the two main parties. A 5. relied on two independents to stay in power. attracting 11. The romancing may yet turn ugly. Instead.Australia's dead-heat election Hung. Mr Bandt took his seat handsomely in Melbourne. The Greens are emerging as a centrist party that appeals to young. The bigger winners were the Greens. it looks like turning into a long fortnight. city professionals on a range of issues broader than the purely environmental ones that once marked them out as mere tree-huggers. and the conservative Liberal-National opposition. wealthy. neither Ms Gillard nor Mr Abbott will command the 76 seats needed in the 150-seat House of Representatives. A similar surge in their support in a state election in Tasmania in March led to their sharing government with Labor. that arrangement collapsed a year later. On August 25th Mr Bandt cited the Greens’ federal priorities: ending a ban on gay marriage. while each tries to woo independents and form a government EVERYONE had expected a long night waiting for a result in the closely fought general election on August 21st. Australia’s political culture seems set for upheavals. more compassionate . which had been held by Labor since 1906. The Greens are also likely to scoop nine Senate seats. who hold the balance of power. led by Tony Abbott. leaving the first hung parliament in 70 years. The last time the country found itself in this state was in 1940. Mr Abbott. under Kevin Rudd (whom Ms Gillard knifed just two months ago to seize power). But it failed to yield a clear verdict. stopping boats of asylum-seekers and ending waste and he all but defeated Labor after just one term.5% of the vote for the lower house. making them the upper chamber’s power-brokers from mid-2011. Yet the opposition saw its vote rise only by 1. under Julia Gillard. who picked up most of the disaffected Laborites. drawn. Robert Menzies.9%. at 20 the youngest federal MP. which Mr Abbott now leads. produced some exotic outcomes: Wyatt Roy of Queensland. This time. Ms Gillard suffered the biggest loss. long dismissed as unelectable. the first Green elected to the lower house in a general election. who later founded the conservative Liberal Party. The contest between the ruling Labor party.
Mr Kan has tried to drive his rival into the political wilderness in recent months. Mr Ozawa may be moved by sheer bitterness. but then the prime minister badly misjudged the public mood during upper-house elections in July. Whether or not Mr Ozawa believes he can win. . Compared with his scheming mind. If he were to win on September 14th. Support from Mr Hatoyama could clinch the race because he brings a faction of about 60 MPs. in an internal election of the ruling Democratic Party of Japan (DPJ). He adds that Mr Ozawa is rumoured to have enticed the notoriously fickle Mr Hatoyama by promising to make him foreign minister. He may be fighting on behalf of the tight political entourage that surrounds him. this month indicated that four out of five people opposed Mr Ozawa having any influential role in government. Naoto Kan. It is not clear why the ruling party should want him back. Americans should take that as a compliment. he has other motives for running.Japan's dysfunctional politics Ichiro Ozawa strikes back Aug 26th 2010 | TOKYO The return of a destructive force in Japanese politics Ichiro Ozawa reluctantly returns to the limelight ICHIRO OZAWA. the editor of Tokyo Insideline. Yomiuri Shimbun. he was forced out as the DPJ secretary-general alongside the previous prime minister. Japan’s third this year alone. Japan’s most Machiavellian politician. because of poor leadership and his links to a foul-smelling campaignfunding scandal for which he may possibly still face indictment this year. That would mark a remarkable comeback. if elected. Less than three months ago. Of these at least 150 are known to be loyal to Mr Ozawa (although others loathe him). launching a leadership challenge to the prime minister. Yet the DPJ election. On August 26th Mr Ozawa dropped a bombshell that could bring down the government. with whom he has long been close. Yukio Hatoyama. Mr Ozawa. recently dismissed Americans as “monocellular”—using a Japanese term that roughly means simplistic. is mostly decided by the DPJ’s 412 MPs. in which the party rank-and-file and local politicians have a vote. whereas Mr Kan lacks a strong faction of his own. He said he was persuaded to run by Mr Hatoyama. would automatically become prime minister. on June 2nd. according to Takao Toshikawa. Mr Ozawa scented revenge. An opinion poll in a newspaper. 68. a newsletter. even though the former prime minister had said two days before that he would back Mr Kan. too.
The police in the Philippines Manila showdown Aug 26th 2010 | MANILA A bungled rescue of Hong Kong hostages sparks a diplomatic row AS A policeman ineffectually sledgehammered the windows of a hijacked bus. He may have deluded himself into thinking that by taking hostages he could force a prosecutor to review his earlier dismissal. as had the hostage-taker. equipped and paid. in a desperate effort to reach 15 hostages trapped inside. and found proof of their bungling: eight of the 15 hostages. But a broader investigation of the weakness of the force as a whole is more pressing. The ill-prepared rescue attempt was launched as Mr Mendoza began shooting hostages. a television network had broadcast footage. watching the drama unfold live on television. That was difficult. but negotiators then lost control of events. August 23rd thereby became a shameful day for the Philippine National Police. Days earlier. both criticising the botched rescue efforts and telling its citizens to stay away from the Philippines. all Hong Kong tourists. it became sickeningly clear that a rescue operation had gone dreadfully wrong. Some are bound to focus on Mr Mendoza. Survivors and relatives of the victims were more explicit in their anger. which he had lost after accusations of extortion and robbery. apparently of a senior Manila policeman torturing a bound and naked robbery suspect who has since disappeared. The pictures served as a graphic corroboration of the popular view that officers consider themselves to be above the law. The government in Manila had been hoping to tap a growing demand among Chinese for holidays abroad to increase the Philippines’ paltry share of tourism in South-East Asia. More than an hour later the police got in by opening the emergency exit. It was obvious to millions in the Philippines and beyond. because of a perception that the country is violent and chaotic.000-strong police force is expected to tackle the violence and corruption that beset Philippine society as a whole. How not to help The tour bus with 25 occupants was seized in Manila by a former senior inspector. that the rescue squad lacked training and equipment. His police career would have certainly taught him that prosecutors and judges are far from immune to bribery or intimidation. The government of Hong Kong has reacted strongly. armed with an assault rifle. Battered by criticism at home and abroad. Asia About The Economist online About The Economist Media directory Staff books Career opportunities Contact us Subscribe [+] Site feedback . Filipinos know that their police are poorly trained. Early negotiations led to a few tourists being freed. Rolando Mendoza. He wanted the return of his job. a former policeman. Various inquiries into the latest failure have begun. The task has just grown much harder. riddled with corruption and prone to unnecessary violence. As serious are chronic weaknesses in the country’s law-enforcement system. Yet the 120. had been shot dead. who was once publicly lauded for being an outstandingly good cop. the police admitted to “defects” in their handling of the hijack.
A powerful exiled leader. In the south waters continue to rise. only to reveal the many homeless and hungry. About 2. Yet a coup still looks unlikely. who were relatively slow to respond at first. which matters to the economy. Food inflation will hurt even the driest of the poor. Pakistan. down from a predicted 4. have now pledged over $815m to Pakistan. Nor would outsiders be impressed. But hunger may prove to be a bigger problem. Farther north the tide is now receding. The threat of epidemic disease lurks in unhygienic.2m homes have been damaged or destroyed. the unpopular and much-criticised president. Thoughtless (or cynical) officials are saying they will cut development spending to pay for reconstruction. the electricity grid and other infrastructure (including flood protection) will be costly. the help is patchy at best. Donors. In any case the officials will struggle to enact a complex rehabilitation programme. so blame for the inept official response will be widely shared.6m acres of cultivated land have been drowned. with many left to fend for themselves. has called for the army to “take any martial law-type action against corrupt politicians and feudal lords”. in Baluchistan province. aid is being diverted to constituencies of powerful figures. a full 100km from the Indus river. Most of Pakistan’s big political parties are part of the national or provincial governments.5%. Officials say that the rehabilitation will take three years. Much more will be needed. Some 800. economic and political misery will endure for a long time yet. Overall 1. bridges. whose Muttahida Qaumi Movement is part of the ruling coalition in Islamabad but is also known to be close to the military establishment. Now dark (and plausible) accusations are circulating: the well-connected chose which areas were purposefully flooded to relieve pressure elsewhere. woefully feeble flood-protection infrastructure was left badly maintained. says Pakistan’s National Disaster Management Authority.The floods in Pakistan Washed up The misery shows no sign of abating. negotiating new lending terms with the IMF. Even where the government or aid agencies are present. including a quarter of the cotton crop. now estimates that economic growth will fall to 2% (or worse) of GDP this year. eating up new areas and swamping districts such as Jaffarabad. but should at least boost the economy later.000 people remain cut off from all help. An estimated 23% of the year’s harvest was washed away. Everywhere it is becoming clearer how social. not least to deny the Taliban and their allies—who this week carried out three . As Asif Zardari. points out: “I don’t think anybody in their right mind” would want to take over Pakistan right now. though other bits of the bloated state apparatus should be chopped first. their stores of wheat and their crops and livestock destroyed. Altaf Hussain. Yet those made destitute need to be put back on their feet as quickly as possible. even as waters recede in some places Aug 26th 2010 | ISLAMABAD PAKISTAN’S floods are looking ever more monstrous. barring more floods. crowded camps and back in villages where putrefying animals lie under the mud and in pools of stagnant water. Repairing roads.
says the leaders will try to avoid any disruptive change in the two years remaining before Mr Wen and President Hu Jintao are likely to step down from the ruling Politburo. was published in Hong Kong on August 16th but is banned in mainland China. it is thought few are convicted of these crimes. to build a society with “fairness and justness”. in Guangdong Province where Shenzhen is located. A timid attempt at reform unveiled on August 23rd involves cutting 13 non-violent crimes from the list of 68 offences punishable by death. but Mr Wen is no Deng. Heady stuff. Yu Jie. One enthusiastic group of 15 or so intellectuals gathered outside Beijing to discuss their import. Security agents visited Mr Yu in July and warned that he could be jailed if the book appeared. Chinese leaders have spoken before about the importance of political reform (while ushering in very little). published a commentary saying a new wave of “leftist” thinking was blocking reforms in some places. “China’s Best Actor. says participants supported Mr Wen’s views. China. One official newspaper called his speech one of “extraordinary importance”. Mr Wen’s remarks on political reform were striking. Mr Yu has put Mr Wen to an unusual test by writing a book that accuses the prime minister of being far less reformist than he makes himself out to be. Their failure to arrest him so far could be a sign of progress. Mr Yu has taken on “Grandpa Wen” who is regarded by many ordinary Chinese as the party’s more human face. he said. and called for “a new generation of reformers to stand up”. In this case. but sceptics abound. Cui Weiping. who turned Shenzhen into a test bed for economic change exactly 30 years ago.Talking about reform in China Change you can believe in? Aug 26th 2010 | BEIJING The prime minister calls frankly for political reform CHINA is enjoying its new status as the world’s second-largest economy. Or. but some doubted that much would happen. An organiser. This has caused a flurry of excitement in some state-controlled newspapers. The arrival of two suspected security agents and an unexpected power cut at the venue hastened proceedings to a close. he said. Yangzi Daily added that social stability in China would be unsustainable without political change. it could be a careful . During his trip Mr Wen laid flowers before a statue of Deng. but the prime minister. One of Beijing’s most outspoken Wen-sceptics. he says. Global Times quoted a Communist Party academic as saying that the “slow pace” of political reform in China was the “root cause of growing social conflict”. Of the hundreds executed each year. Few books that are so explicitly critical of serving leaders (Mr Yu produced another last year that attacks President Hu) have ever been published by a Chinese citizen living in China. had to “resolve the issue of the excessive concentration of unrestrained power” and “create conditions for the people to criticise and supervise the government”. Most Beijing newspapers have reported Mr Wen’s remarks without comment. Wen Jiabao”. His remarks on August 20th and 21st in the city of Shenzhen have been compared by some optimists to those made by the late Deng Xiaoping during a tour of the same city in 1992. It said it was time for a “breakthrough”. Wen Jiabao. During a visit to a southern boomtown he declared that economic gains could yet be lost without reforms to the political system. Deng’s calls for market-oriented reforms sent central-planners scurrying and unleashed the entrepreneurial energy that has helped China to grow at giddy rates since. but Mr Wen’s emphasis was unusual. It was necessary. is refusing to relax. Southern Daily.
Slender and frail. an 81-yearold separatist leader. he says he is 17 but seems younger as he basks shyly in the praise of the men gathered in a garden in Srinagar. who have engaged in “dialogue” with India. But. the traffic is gridlocked. and poses for a photograph with him. More moderate separatists. Owais and those like him have presented the Indian government with a new and perhaps insoluble Kashmir crisis. On the one or two designated “shopping days” each week. summer capital of Indian-ruled Kashmir. Paramilitaries point their rifles out from bunkers or lounge on street corners. idly tapping their lathis (heavy batons) on their padded legs. On most days. They are self-proclaimed “stone-pelters”. His uncle died that day. and by government-imposed curfews. named after their weapon of choice. lucky to be alive. And many still seem to be ignoring his edict to give up throwing stones and stick to peaceful protest. But he is proud to show off the scars and stitch-marks that cover his belly. He took a bullet in an anti-Indian protest on August 2nd in Kupwara. It is in his garden that Owais waits. have had nothing to show for it.Banyan Vale of tears Aug 26th 2010 In Kashmir freedom is much farther than a stone’s-throw away OWAIS hardly looks like a serious danger to the security of India. cussed consistency has earned him a pivotal role. some 90km (56 miles) away. or strikes. Sheer. Few share his Islamist pro-Pakistan ideology. hugs him tight. called by separatist leaders. Setting the hartal “calendar” is Syed Ali Shah Geelani. In response to their protests much of the Kashmir valley that surrounds Srinagar has been shut down—both by hartals. to a large extent—the pelters emerge at short notice to throw stones at police stations and other targets. one of more than 60 people. So have India’s past tactics to divide its opponents. he kisses the boy on both cheeks and the forehead. When the old man emerges. He has just emerged from hospital. mostly young. Mr Geelani has never wavered in his refusal to compromise with Indian rule. Well-organised—on Facebook. killed in a wave of unrest that began on June 11th. Srinagar is a ghost town of shuttered shops and empty streets. unlike other political leaders. and get shot at. and ended discredited and . Mr Geelani seems a strange icon for a movement of teen-aged Facebookers.
now. live bullets. it is most likely that these protests will end as so many before them did: with India making no more than token concessions. Secondly. nor are they stooges of the militants and spy agencies that have fuelled the war. but they fear nothing. Finding India’s collective conscience So. “Infiltration” across the “line of control” dividing Indian and Pakistani bits of Kashmir. out of more than 40. search-and-cordon operations to lock up suspected stone-pelters. India may have to contemplate a political solution. however.com/blogs/banyan Asia About The Economist online About The Economist Media directory Staff books Career opportunities Contact us Subscribe [+] Site feedback . The two-decade-long insurgency. the cycle of protests will resume. They have grown up knowing nothing but insurgency. They see Indian troops in Kashmir as an often brutal occupying force. The conflict is killing far fewer. the detention of separatist leaders who might lead big processions and. and 100. Fed up with the disruption. For India. Economist. probably stay in India. its only Muslim-majority state. Owais and his classmates may be misguided. Only the Muslim-dominated Kashmir valley and adjacent parts of Jammu seem hellbent on secession. When turnout in an election for the state government in 2008 reached an unprecedented 60%. with many Buddhists. Hindu-majority parts of Jammu. Dream on. they have marred a victory of sorts. says India). Less so now that its troops are killing children armed only with stones. along with Ladakh. politicians dream of an independent country linked to old Central Asian trading routes. nursing their anger to take it out another day. In the valley. So long as it was fighting Pakistan. is integral to its national identity: “the idea of India”. Mr Geelani says protests will continue until India accepts the “disputed” status of Kashmir. and appalled at the loss of so many young lives. and “martyrdom” least of all. They may fear the insurgents and dislike their methods. even liberal Indian opinion seemed ready to tolerate a heavy hand in Kashmir.” What will it achieve? “Azaadi!” (Freedom!). One is that small cracks are already appearing in the national consensus behind its repressive policies. Now Mr Geelani ignores a call for talks from India’s prime minister. Of the five parts of the former “princely state” of Jammu & Kashmir. It will not tolerate the circulation of maps (in most cases) that show Pakistan-controlled Kashmir as. And at some point they will become so big that they can only be contained by killing more of its citizens than a democracy can stand. backed by Pakistan. though still 375 last year by one count. is almost defeated. But they sympathise with their goal. which has never renounced its claim to all of Kashmir. Why does Owais protest? “We are oppressed. Boys like Owais neither trained in camps in Pakistan. This seems less clever than it did at the time. This is the third successive summer of big anti-Indian protests. worried about keeping children out of school. Manmohan Singh. Kashmiris will sooner or later have to go back to life as usual. even if it were clear what it meant.000 killed since 1989 by the army’s reckoning.000 by the separatists’. India has responded to the unrest in time-worn fashion: with extra troops. Of the three bits in India. well. India will never do that: the official line remains that Jammu & Kashmir. many Indians misread this as belated Kashmiri acquiescence in Indian rule. Pakistan-controlled. two are in Pakistan (and a bit of one was ceded to China by Pakistan—illegitimately. looking anywhere but south over the mountains to Delhi. Eventually. without change.compromised. given a choice. divided by the first India-Pakistan war in 1947-48. for two reasons. That is not on the cards. has fallen. would.
the State Department will now assume some of the responsibilities that were previously undertaken by the Pentagon. the Americans. Backed by contractors who erected blast walls around a green zone. it is hiring private gunmen. the penny has suddenly dropped. escaped capture and punishment in a war-crimes trial. Sadr City. They will fly armed helicopters and drive armoured personnel carriers on the orders of the secretary of state long after the last American soldier has gone home. the combat mission that began with the invasion in March 2003. They really are on their way out. the names of places that were little known before the war have acquired the resonance of history: Najaf. Chief among them is the training of Iraqi policemen. let alone like. charting their fortunes with language that has become common currency on television back home. a junior army officer. all met with stubborn Iraqi insistence that the “occupiers” would never leave. On the positive side. Since the State Department does not have its own forces. Only his deputy. For their part.” says Wesam. to “advise and assist” the Iraqi forces that are now supposed to be in charge of the country’s security. As a sign of America’s changing role in the country. like many others.000 American troops will stay on in a support role.Iraq's uncertain future The reckoning Aug 26th 2010 | BAGHDAD American troops are leaving a country that is still perilously weak. He. Some 50. Consular offices will be opened across the country to replace military bases. In the soldiers’ telling. a key to keeping the peace. Yet public opinion has shifted remarkably in recent weeks. “We’re not ready to go it alone. fears a return of sectarian war. Nonetheless. The shock and awe of the invasion was eclipsed by insurgents using IEDs. But instead of feeling joy. American soldiers were flexible enough to change tactics in order to defeat an insurgency that threatened to . Little wonder that some Iraqis now don’t want them to go THE last American combat soldiers in Iraq shuffle through a half-empty base as they prepare for the one-way journey to the Kuwaiti border. aided by a surge of extra troops. Izzat al-Douri. in time brought something like order. Iraqis have begun to worry. divided and violent. Some recall their exploits during many tours of duty over the past seven years. August 31st marks the official end of Operation Iraqi Freedom. they conclusively ended the tyrannical rule of Saddam Hussein. That points to the fragility of much of what the American army can claim to have achieved since 2003. the people of Iraq never learned to trust. the soldiers eventually inspired an awakening among Iraqi tribes that. After countless American warnings of their imminent departure. Abu Ghraib.
a former prime minister who is mainly supported by Sunnis and controls 91 seats. a mix of mostly Shia religious parties dominated by the followers of Muqtada al-Sadr. Iraq still has no new government. though highly partisan and often harassed by officials. Yet the two men dislike and distrust each other so much that they rarely speak. Furthermore. They despaired of a country in which many residents still don’t have access to basic services. This lack of services has crippled the economy. a member of parliament. health care and education are inadequate. Iraq is also much more open to the world thanks to America’s intervention. a hardline cleric. who was hunted down and killed. They also gave seed money to entrepreneurs. internet connections have gone up from 4. a cacophony of shouted curses now assaults political leaders. The watchdog Transparency International reckons that corruption is endemic. Justice is no longer arbitrary. But Mr Sadr too . drinking water is scarce. Parties are deadlocked in negotiations.500 to 1. Although American taxpayers have spent more than $700 billion. in deference to Islamic hardliners. even if some minorities still complain of discrimination. Manufacturers cannot survive without power. Travel is unrestricted. More than anywhere else in the world. Iraqis are no longer afraid to say what they think. They avoided all-out civil war and cut short the brutal reign of Abu Musab al-Zarqawi. even among strangers. Trust even between moderates is minimal. Building a state with a democratic government and institutions that work was central to President George W. politics is discussed openly.000 American and allied soldiers lost their lives. But about half the Iraqi workforce is still without a full-time job. The Iraqi government is barely able to collect taxes and spending is financed almost entirely from oil money. Many say life is harder than ever. Yet freedom is still not universal in Iraq. About 150. and there is little they can do about it. On the streets too. Positions in the bureaucracy are awarded on the basis of family or sectarian allegiance rather than merit. but judges can still be bought and the pace of trials is often glacial. but is available nevertheless.overwhelm them.6m and the number of mobile phones has risen from 80. Women and gays suffer discrimination.000 to 20m. a more open society has taken shape in urban Iraq. The Americans have tried to boost business by financing the construction of markets across the country. Alcohol cannot be sold at certain times. Where once there were only whispers. Partisan interference so mars elections that no Western diplomat will call them “free and fair”. Across Iraq the rule of law is usually a distant aspiration rather than a solid achievement. The country has ended up with a travesty of good governance. Bush’s vision of the new Iraq. this condemns the non-oil private sector to irrelevance. imports are plentiful. and Ayad Allawi. These gains have come at a terrible cost. their emphasis on recruiting local allies proved superior to the unadulterated fire power they had used at first. Leave us to bicker The biggest failure of all is political. The prime minister could instead strike a deal with the next smaller block. Five months after inconclusive elections. Sunnis and Shias still fear each other in Iraq. The most obvious coalition partners are the prime minister. many of them desperately needed professionals who are building new lives elsewhere. Religious freedom is generally accepted. electricity is available only for a few hours a day and petrol often runs out. holds regular salons where discourse is free and often contrarian.000 Iraqis as well as almost 5. a Jordanian-born jihadist. and national reconciliation non-existent. The press is nominally free. a moderate Shia whose block won 89 seats in the 325-member parliament. Safia Souhail. More than 2m Iraqis fled the country. Nuri al-Maliki.
the fuelling this week by Russia of the Bushehr nuclear reactor. even though it has no nuclear reactors that need the stuff. developed its own new attack drone and supplied advanced radar to Syria. has talked of being wiped off the map. For the next ten years. however. But it has dodged proper talks with the six for two years now. in addition to one already up and running at Natanz and another recently discovered nearing completion on a military compound near the city of Qom. Russia. will get under way within months. Siemens. Such an attitude augurs ill for new talks about talks that Iran hints might resume in September with the six countries (America. It comes alongside recent reports that Iran has acquired a clutch of advanced air-defence missiles on the black market. Iran’s first power-generating nuclear plant that is due to start supplying electricity to the national grid by year’s end. Britain. after a German firm. Bushehr is a source of great national pride: the culmination of 36 years’ determination to get the reactor completed. a neighbour of Israel. Mahmoud Ahmadinejad. And rather than suspend its own suspect uranium-enrichment efforts (the stuff can be used for power generation or. development . about documents. with more to follow. could help persuade the regime to return to the negotiating table over United Nations demands that it suspend more troubling nuclear work.Iran's nuclear programme Game resumed Aug 26th 2010 Iran pockets Bushehr and plays on A new drone poses with the president IT WAS meant as a marker for the world’s readiness to accept Iran’s right to benefit from the peaceful uses of nuclear power. Iran insists that its nuclear programme is peaceful. Bushehr was built by Russia. Iran insists it will press ahead at all speed. says the country’s atomic chief. with further enrichment. But for Iran. abused for bomb-making). France. It also refuses to answer questions from inspectors at the International Atomic Energy Agency (IAEA). Germany and China) that have been trying to negotiate it round. For Iran. experiments. the UN’s nuclear guardian. abandoned the project years ago. its uranium fuel (enriched to under 5%) will come from Russia too and the spent fuel will go back there. a country that Iran’s fiery president. By this reasoning. Bushehr symbolises something altogether different: the fruits of defiance. despite its provocative behaviour. Work on a third enrichment plant. come what may.
The government says it cannot afford more than its final offer of a 7% rise plus a 700 rand allowance along with a previously agreed on 1. Unemployment now stands at 25%. Figures out this week show that the recovery is slowing. is now threatening to shut down the entire economy by calling all its members out in a sympathy strike next week unless the government gives in to the public-sector unions’ demands for an 8. For years. Although Cosatu represents only 2m of the 17m in the labour force. Although some 15m South Africans—nearly one in three of the total population—now get some form of welfare benefits. The consensus forecast is now for growth of around 3% this year—well below the 7% Mr Gordhan says is needed for the next 20-30 years to dent South Africa’s towering unemployment and poverty. The Congress of South African Trade Unions (Cosatu).6% wage rise—more than double the inflation rate—plus a housing allowance of 1. Police have been using water cannon and rubber bullets to break up the most violent protests. As a strike by more than 1m public-sector workers enters its second week. it continues to wield enormous influence.South Africa's strikes After the party… Aug 26th 2010 | JOHANNESBURG …comes an almighty hangover THE warm. it remains fragile. the sick and the dying left unattended and pupils trying to get into school beaten up by their own teachers. hospitals. If the government can afford to lavish millions on ministerial .5% performance bonus.000 rand ($135) a month. the finance minister. But the unions remain defiant. The army has been called in to help. prison and other essential public-service employees back to work. the biggest union federation and a supposed ally of the ruling African National Congress.6% in the first quarter. While the economy was growing at around 5% a year. this was just about manageable. The dispute has turned into a trial of strength between the government and the unions. almost a third continue to live on less than the equivalent of $2 a day. Despite the economic boost provided by the World Cup. rising to 36% if those too discouraged to seek work are included. Although the economy has picked up after last year’s recession. Partly as a consequence. Dozens have been arrested. particularly in the public sector. the ranks of the jobless continue to grow. fuzzy feeling of national pride and unity engendered by South Africa’s hosting of the football World Cup did not last long.2% at an annual rate in the second quarter. it has managed to win wage rises well above inflation for its members. The government has told the unions that it cannot simply favour the employed at the expense of the jobless and poor. following 4. In his budget speech in February Pravin Gordhan. schools and other services across the country remain closed. with growth of just 3. now. no longer. the public-sector wage bill has almost doubled over the past five years and now gobbles up about a third of the national budget. Women in labour are being turned away from hospitals. said that last year’s 13% public-sector pay rise had placed “enormous pressure” on the budget and that it would be necessary to “moderate” future increases. The High Court has ordered police.
nationality law and the expulsion of Roma (gypsies). French plans look timid. and plan a series of strikes starting on the same date. Deeply unpopular—a poll this week found that 62% of the French do not want him to seek re-election in 2012—the president faces four sources of trouble in the coming weeks: pension reform. a town in the French Alps.7 billion) will still draw strong opposition. But the government’s promises to prune spending and end tax exemptions worth €10 billion ($12. a figure many analysts still find optimistic. Mr Sarkozy’s response was to blame “insufficiently controlled immigration” and to declare that anyone “of foreign origin” who deliberately endangered the life . teaching and hospital budgets are cut. Mr Sarkozy needs to stand firm on both fronts if he is to restore his credibility. Witness the way he has flirted with far-right politics on immigration and nationality this summer. For the same reason.5% to 2%. Mr Sarkozy cannot afford to give ground. President Nicolas Sarkozy returned to work this week for what could be the most testing autumn of his presidency. This theme first surfaced in July. Next to Britain’s drastic austerity budget. The first two will test Mr Sarkozy’s reformist resolve. the heiress to the L’Oréal cosmetics empire. and an ongoing political scandal linked to Liliane Bettencourt. Mr Sarkozy’s management of them will set the tone for the remainder of his presidency. as policing. Yet he has a tendency to cede to populism. after riots in a banlieue of Grenoble. the budget. which want to see proof of France’s will to control its public finances. during which youths shot at police. the president needs his 2011 budget. On September 7th parliament will start to debate his proposal to raise France’s legal retirement age from 60 to 62. due in late September. But it breaks a cherished French pattern of progressively shortening the amount of time people spend at work. The opposition Socialist Party is also against. He has pledged to curb France’s budget deficit from 8% of GDP this year to 6% next. Trade unions are furious. But many doubt the government’s ability to see this through. the French president lashes out at some easy targets AFTER a three-week holiday at his wife’s family villa on France’s Mediterranean coast.French politics resumes Tough-guy Sarko Aug 26th 2010 | PARIS Drowning in unpopularity and beset by scandal. But under the close watch of creditrating agencies. to look credible. Last week it cut its growth forecast for 2011 from 2. The plan may not look revolutionary. and not just in economic matters.
She is opposed by Tomás Gómez. Esperanza Aguirre. All this would seem no more than a silly-season spat were a larger You’re the one that I want question not hanging in the air: will Mr Zapatero stand at the next general election? That is due no later than 2012. Spaniards appear to have tired of their prime minister. there is no public jostling for position. And don’t count the prime minister out just yet. they trail the PP by ten points in polls. For the moment. although the fragility of the prime minister’s minority government may force him to bring the date forward. one of Spain’s 17 powerful regional premierships. Rather than bow to his boss’s demands. so the Socialist dust-up comes as a bonus. the defence minister. Among the members of the government that Spaniards say they find more enticing than the prime minister are Alfredo Pérez Rubalcaba. . leader of the PP. the pugnacious leader of the Socialists’ Madrid branch. Sonsoles Espinosa. A row has erupted over Mr Zapatero’s attempt to impose a candidate to lead the party into elections for the Madrid region’s parliament next May. The PP’s candidate. including austerity measures to reduce Spain’s budget deficit. as expected. fares even worse by some counts. It is also a sign that José Luis Rodríguez Zapatero. is a rising star but may take the rap if Ms Jiménez goes down in flames. Party squabbling ahead of the vote has already begun. One view gaining ground is that victory at the next election will go to whichever party is brave enough to ditch its leader. much to the glee of the opposition People’s Party (PP). not least because the Socialists’ standing is so low. Rumours abound. A recent poll found that only a third of Socialist voters want him to run again. is losing the iron grip he once held on his Socialist Party. however. Mr Zapatero’s only consolation at the bottom of the polls is the company he keeps: Mariano Rajoy. Others say his wife. Few politicians seek to lead their party to defeat. José Blanco. Spain’s prime minister. one Zapatero ally describes the prime minister as “a top-class political athlete. a party favourite who has run Madrid since 2003. Spain’s health minister. have made him a toxic figure. Mr Zapatero’s candidate for the post. who has the transport portfolio and is Mr Zapatero’s number two in the party hierarchy. Whatever the truth. which will be held in October. who wants to stand himself. Some say Mr Zapatero knows that his unpopular economic reforms. Mr Zapatero chose Ms Jiménez over Mr Gómez because she does much better in personal polling—but that might lead some to ask why similar logic should not apply on the national stage.Spanish politics Losing his grip Aug 26th 2010 | MADRID Spain’s prime minister faces a minor insurrection within his own party IT IS a brave act of defiance. and Carme Chacón. is tired of life in the official Moncloa Palace residence. Mr Gómez has forced a party vote. would probably have stormed to victory anyway. where the first couple have lived since Mr Zapatero took office in 2004. and that he will be obliged to fall on his sword before the election.” ready for anything. the interior minister. is Trinidad Jiménez (pictured).
The government hotly contests Greenpeace’s claim that. greeted the news with their customary equanimity. Data from the United States Geological Survey suggest the seabed between Greenland and Canada holds a total of 17 billion barrels. Overall. Greenland has been searching for the black stuff for decades. This area will be opened for exploration in 2012. Australian and American accents are commonplace in .Oil in Greenland Black stuff in a green land Aug 26th 2010 | NUUK After decades of searching. gold and rubies and possibly more exotic treasures. a British petrochemicals company. “Our safety standards are the highest in the world. the island’s gritty capital. indicating the presence of oil. Most of Greenland’s 56. Despite the vulnerability of the country’s ice sheet to global warming. even before the oil starts flowing and the rubies glisten. a recent Greenpeace meeting in Nuuk drew a paltry 45 people. Greenpeace ecowarriors seeking to halt offshore oil exploration in the Arctic faced down a Danish warship. According to some estimates the bedrock beneath the Greenland Sea could hold more oil than the North Sea. evidence of oil is found off the coast of Greenland WHEN Cairn Energy. Five wells drilled in the 1970s turned out to be dry.” said a housewife less interested in the implications of a possible oil bonanza than in negotiating her country’s sole pedestrian crossing in the sleeting rain. Cairn says it has found natural gas in thin sandlayers in one of its test wells.000 inhabitants seem persuaded. Dozens of mining companies are trawling the narrow strip of land abutting its 44. because oil degrades far more slowly in freezing waters. as was a sixth in 2000. In recent months the bureau has run an extensive public-information programme in Greenland. A plethora of newly enacted legislation is designed to avert offshore accidents and to prevent a small spill becoming a big catastrophe should something go wrong. it estimates that the acreage it is licensed to drill in holds 4 billion barrels of oil. a Mexican Gulf-style oil spill would mean calamity for the fragile environment. drawing full houses at meetings throughout the sprawling country.087-kilometre coastline for diamonds. inhabitants of Nuuk. Even this minimal interest in the environmentalists’ message could fall further as the implications of this week’s news start to sink in. There may be further riches off the vast island’s eastern coast.” says Henrik Stendal. which has partially powered the British. Several hundred miles north in Baffin Bay. this week announced the first firm indication of worthwhile oil deposits off Greenland’s coast. chief geologist at the Government Bureau of Minerals and Petroleum. the world has started to arrive in Greenland. Sniffing opportunity. Greenland’s exploration adventure does not stop there. “That’s nice. But this one looks like the game-changer. Dutch and Norwegian economies for decades.
Drugs in the Czech Republic and Slovakia
Aug 26th 2010
Why are the Czechs more lenient on narcotic use than the Slovaks?
FOR many Czechs, CzechTek, an outdoor rave where revellers danced for days, often on a cocktail of speed, ecstasy and methamphetamine, was once a highlight of the summer. Authorities concerned about drug use found it less attractive. Five years ago 80 people were hurt when police used water cannon and tear gas on a crowd of 5,000 ravers. Jiri Paroubek, the prime minister, described them as “obsessed people with anarchist proclivities…who provoke massive violent demonstrations, fuelled by alcohol and drugs, against peaceful society”. So it came as a surprise when Czech politicians liberalised the country’s drug laws. Since January 1st techno fans (and other users) have faced nothing worse than a fine if caught with an amount the law considers intended for personal use. Across the border in Slovakia, the prospect of decriminalisation was briefly raised when a political newcomer, SaS (Freedom and Solidarity), which had campaigned to decriminalise cannabis, joined a centre-right coalition that took power in June. But SaS’s partners demurred, insisting that Slovaks were unprepared for such a radical move. Slovakia’s harsh drug laws, under which possession of even small amounts of cannabis can result in up to three years’ imprisonment, look set to stay. For most drugs, usage is higher in the Czech Republic than in Slovakia (see chart). Among the young the difference is particularly marked. Some 45% of Czech 15- and 16-year-olds say they have smoked cannabis in the previous year, against 29% of young Slovaks (although the figure is rising in both countries). Recreational use in the Czech Republic probably accounts for much of the difference. According to a Slovakian agency, drug use in that country is mainly associated with illness and crime. In part, the contrasting approaches to drug legislation in the two countries, which parted ways in 1989, reflect long-standing cultural differences. Notwithstanding the odd prime-ministerial outburst, Czechs are a secular, tolerant lot, with liberal attitudes. Slovakia, a more conservative place, tends to adopt a more sceptical approach to liberal innovations like relaxing drug laws. But the Czech move is motivated not only by mores. The government aims to emphasise a legal distinction between users and producers, as part of a plan to clamp down on the country’s growing reputation as a narcotics factory. In recent years the Czech Republic has become Europe’s chief methamphetamine producer. Mass-production of cannabis is another problem. The government is setting its sights higher than a few sweaty dancers.
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A Macedonian makeover
Aug 26th 2010 | SKOPJE
The capital city gets a controversial facelift
ITS charms are many, but architecture is not usually seen as one of them. Rebuilt after an earthquake in 1963 wiped out most of the city, Skopje, the capital of the ex-Yugoslav republic of Macedonia, was for years characterised by ugly concrete blocks and strange empty spaces. But earlier this year Nikola Gruevski's conservative government produced a video that revealed the full ambition of “Skopje 2014”, its plan for a radical reinvention of the city centre. It was hard to take the scheme seriously. Fifteen grand buildings, including a new foreign ministry and a constitutional court, were to be built from scratch. Older structures, such as the parliament, were to be tarted up with domes and other accoutrements. In the city's main square, the government would erect a giant statue of Alexander the Great. Supporters of the plans said that, after decades of stagnation, Here comes the equestrian statue Skopje would at last get the regeneration it deserves, its heroes commemorated in marble and bronze. Sceptical critics, used to a city where nothing much happens, sarcastically asked which triumph the proposed triumphal arch would be celebrating. Yet it is happening. New buildings are sprouting up along the banks of the Vardar river and a fresh statue is unveiled every few weeks. Workmen have begun preparing the ground for the Alexander sculpture, which should be completed some time next year. For the moment, at least, the naysayers are in retreat. But that is not the end of the controversy. For one thing, the proposed Alexander statue has enraged Greece, which says that its northern neighbour is appropriating symbols of Greek identity, evidence of Macedonia's designs over a northern Greek region of the same name. (The two countries have been rowing over Macedonia's name for 19 years.) Macedonia's Muslim Albanians, a quarter of the population, are also griping. If there is to be a new city church, they argue, then why not a mosque? And if Macedonian heroes are to be celebrated in statue form, surely space can be found for a few more Albanians (Skopje-born Mother Teresa and Skanderbeg, a medieval hero, are already represented). For Saso Ordanoski, a local commentator, Skopje 2014 is an “ugly, money-wasting, architecturally failed and politically lunatic project.” Be that as it may, says Radmila Sekerinska, an opposition deputy, Mr Gruevski has laid a clever trap. Politicians will struggle to contest plans that underscore nationalist and religious values and poke fun at Greece. But a source close to the government who asks for anonymity says that the building projects are not just a way of giving a tired-looking city a facelift; they also keep people in work. As for the Greeks, he says, it is time they accepted that Macedonia is “an independent country which can at least decide on its own interior decoration.”
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First minister of devolved Scotland since 2007 in a minority government. Unlike Britain. It has also enabled the government to hang on to industries that were privatised long ago south of the border.7 billion ($2. Changes will be passed on to the Scottish budget according to a formula based on Scotland’s share of the total population. spending per head in Scotland is higher than in England—nowadays almost 20% higher. That he has done so owes more to his own political deftness than to any sweeping appeal of his independence-minded Scottish National Party (SNP). But reading the runes in Mr Osborne’s “emergency budget” in June. when George Osborne.2 billion. but in Scotland it matters .Scotland's budget Dismantling the welfare state Aug 26th 2010 | EDINBURGH Thanks to the new austerity.9%. This extra cash has been used to fuel a supercharged welfare state. For historical reasons. however. and Mr Salmond must hope he does not go with it. Just what Scotland’s lot is to be will not be known until October 20th. All politicians in all parts of Britain risk unpopularity as cuts hit home. is to announce detailed spending plans for the next three years. the complexion of Scottish politics is changing ALEX SALMOND’S has always been a high-wire act. he has had to woo. and even more to the pots of money he has thrown at public services. Austerity is fast altering that. Elections to that parliament at Holyrood are due in May. Mr Salmond’s economic advisers reckon that in 2011-12 his government could have to lop as much as 5. government expenditure in Scotland increased by an average 5% a year. Britain’s chancellor of the exchequer. During the days of solid economic growth. or £1.6 billion). cajole and jolly along rival parties. There would then be further real cuts averaging £600m a year in each of the next four years. local governments and voters in order to exercise power. shortly after the budget cuts take effect. off this year’s budget of £29. Now. Britain faces cuts of 25-40% in most government departments. spending is set to nosedive (see chart). Just how Mr Salmond manages this when he presents his spending plans to the Scottish Parliament in November will be his biggest test yet. Scotland will not be making cuts in the current financial year.
free personal and nursing care at home for the elderly £312m. . First. points out that home care is a much cheaper way of looking after old people than putting them in hospitals or care homes. Mr Beveridge maintained. and it needs capital the government can ill afford.000 workers could have to go. Generous benefits for both rich and poor are in similar need of trimming. This refusal may not be as bone-headed as it seems. Some have been delivered. probably in the shape of a graduate tax. Scotland cannot ring-fence spending on the National Health Service as its ministers. remain unfulfilled. long a political symbol of Scotland’s more compassionate welfare state. To prepare voters for the pain ahead. set up to squeeze value from public investment.700 to 1.700. David Bell.5 percentage points in Scotland while it fell by 6. The civil-service wage bill needs to lose some £500m too. for example.500 of the Scottish government’s 506. such as cancelling outstanding student debts. which represents. Abdelbaset al-Megrahi. If pay is frozen for everyone earning £21. the NHS looms about twice as large as it does in Britain as a whole. he said. But a lot of the early shine has come off. (Some pledges. have promised to do. he says. At almost two-fifths of Scottish government spending. the country’s main economic-development agency. Scotland boasts Britain’s last state-owned water utility. abolishing post-graduation university-tuition charges. a former chief executive of Scottish Enterprise. Two recent polls of voting intentions in the coming Holyrood elections found Labour ahead of the SNP: Ipsos MORI showed Labour leading by 37% to 34%. The Scottish Futures Trust.3 points in Britain as a whole.more. around 17. making eye tests free and cancelling bridge tolls. like getting rid of prescription charges and reducing class sizes in primary school. In his report on July 29th. For the SNP came to power promising a big set of giveaways. Privatising it is anathema to a public that remains well to the left of the British centre. of Stirling University.000 a year or more. and it is clear that Mr Salmond is struggling to hold on to the public’s affection. a bigger saving to the NHS than the extra cost of personal care. Labour’s vote went up by 2. has another idea that ministers are looking at. such as freezing council-tax bills. who are also up for election in May. But he has balked at ending free care for the elderly. and YouGov by 36% to 35%. happy about devolution and glad to be Scottish rather than English. Mr Salmond has let it seep out that he might consider a student contribution. Since free personal care was introduced in 2002-03. Mr Beveridge did not pull his punches. Selling the silver Austerity is prompting a re-think in other areas too. like their counterparts in London. the number of long-stay geriatric beds in Scottish hospitals has fallen from about 2. like the Labour giveaways before them (free personal care for the elderly with washing and dressing. Others.) All these things. Cheap prescriptions (less than half as dear as in England) cost the Scottish government £32m a year. are part way to being achieved. Add in the fact that in the general election in May. That is partly because Scottish public opinion is less inclined than before to support its government’s decision to release from prison the terminally ill Lockerbie bomber. he said. to suggest where cuts might be made. Mr Salmond appointed in February a commission headed by Crawford Beveridge. He thought some form of upfront tuition fees should be reintroduced for university education. free eye tests £67m. and free meals for young primary-school children an uncalculated amount. for example). made Scots proud of their public services. Mr Beveridge said. His point has been anxiously echoed by local-council leaders. Protecting health spending means that the rest of the budget would have to be cut by 10% next year.
The current Northern Ireland secretary. The representatives of church and state had their reasons for this approach. But this was only the start. with a papal visit to Britain next month overshadowed by paedophile scandals. The church has offered lengthy commentaries and expressions of regret but no apology. some six months after the Bloody Sunday shooting by British soldiers of 13 unarmed people in Londonderry had set off a wave of violence. Chesney died 30 years ago. Perhaps. as the almost universal welcome for the report in June into Bloody Sunday showed. the most murderous month of Northern Ireland’s “Troubles”. He showed him a police file containing compelling evidence that Chesney had participated in the plot to bomb Claudy. then secretary of state for Northern Ireland and later Margaret Thatcher’s deputy prime minister. No one was ever charged with the Claudy attack. took aside Cardinal William Conway. it is wary of drawing attention to the similarity in how both situations were handled: perpetrators were bundled away rather than confronted. Both were desperate not to increase the overall level of violence. Relatives of those killed in Claudy say they are still dissatisfied: all these years of inquiry have produced new information but no accountability. Almost a hundred people died in July alone. In this case . The emergence of an IRA bomber-priest at that point might well have led to a further surge in deaths. and the minister feared the affair might derail his efforts to put together a government of Catholics and Protestants. head of the Catholic The turbulent Father Chesney church in Ireland. Middle-ranking police officers wanted to question Chesney but the chief constable was content to let him leave the jurisdiction. Sometimes inquiries can achieve their aims. The eight-year investigation laid bare a high-level conspiracy to hush up his involvement and whisk him out of Northern Ireland. The cardinal wished to avoid public scandal. Together they decided that the way to rid themselves of this turbulent priest was not to have him pursued by the law. but the saga of his IRA involvement has refused to do likewise. Owen Paterson. in County Londonderry. said on behalf of the government this week that he was profoundly sorry for what happened. Al Hutchinson. There are no heroes in this tale. Years of rumours that Father James Chesney had taken part in the attack were formally confirmed in a report on August 24th by Northern Ireland’s police ombudsman. but to transfer him across the border to Donegal in the Irish Republic.The Claudy killings Not peace but a sword Aug 26th 2010 | BELFAST A long-awaited report into a shocking incident has failed to assuage grievances ANOTHER troubled piece of Northern Ireland’s violent past caught up with it this week with the publication of a report on the disturbing case of a Catholic priest involved in an IRA bombing in 1972. In a single incident in the religiously mixed village of Claudy. After the bombing William Whitelaw. three car bombs killed nine innocent bystanders ranging from an eight-year-old girl to a 65year-old man. The Claudy attack took place in July 1972.
Micro-distillers Brimming over Aug 26th 2010 Start-ups are shaking up an old and staid industry Prudence in all her glory BEHIND a homely blue garage door in a genteel corner of Hammersmith sits Prudence. a bottle of which retails at something between £22 and £26. London-based brewer. That in turn allowed start-ups such as Anchor Distilling (whisky and gin) and Hangar One (vodka). For Sipsmith’s founders. and the focal point of an ancient British industry that is undergoing a remarkable and timely revival. Mr Galsworthy spent most of the last decade there working as chief sales representative for Fuller’s. as state after state cut taxes and eased permits. Once upon a time. Sipsmith. to take on the big boys. . micro-distillers have made a comeback. a big. mostly through national chains such as Waitrose and Majestic Wine. a complicated and expensive young lady. both based in San Francisco. with its ubiquitous brands and obsession with bulk sales. Financing came from within—both founders sold their houses to finance the venture—and Mr Galsworthy expects the firm to break even by 2012. micro-distilling was as common in Britain as fog or mud. In the 1700s one in four London houses boasted a still. Named after a certain former chancellor of the exchequer who gained an ultimately unwarranted reputation for fiscal austerity. “artisanal” comestibles. Prudence is the brainchild of Sam Galsworthy and Fairfax Hall. most of them producing some sort of hygienically challenged moonshine. the urge to do something different was born in America. Sipsmith has sold 5.000 half-cases of its signature dry gin. In the year since its launch. A sizeable annual tax raised standards but eradicated competition. But Sipsmith is just one of an array of start-ups injecting spirit and panache into Britain’s often bland distilling industry. Yet in recent years. a childhood friend then employed in London by Diageo.000 copper still—the first of its kind to be launched in the capital for nearly 200 years—turning out small batches of exquisitely palatable London dry gin. and set out to create a new spirit. Prudence is a £200. and by the late 20th century just one London dry gin—Beefeater—was distilled in the capital. driven partly by an international movement that favours high-quality. the world ’s largest spirits producer. He saw that micro-distilling was gaining momentum. They are the entrepreneurs behind one of Britain’s fastest-growing young micro-distilleries. On his return to Britain Mr Galsworthy teamed up with Mr Hall.
In the longer term.7 billion this year. another of Lord Turner’s proposals will add to spending. shook the status quo. Official estimates of life expectancy for 65-year-olds have already increased by over a year for both men and women since Lord Turner’s report. At present they are linked to the women’s state-pension age. if not 70. In any case the rise from 60 to 65 for women is already under way. It was lowered to 60 for women in 1940. costing £2. Both are currently available to everyone over 60. namely from 2016 for men and 2020 for women.Raising the state-pension age When I'm 66 Aug 26th 2010 And the reforms won’t stop there NOT SO long ago the right to receive a state pension from the age of 65 seemed inalienable. Two obvious ones are winter-fuel payments. and to 68 by 2046.5%. The government is promising a “triple guarantee” that the pension will rise each year by the highest of earnings. The coalition agreement says that these benefits will be protected. remarkably. the government will have to restrict other benefits they receive. The latest projection shows that a 65-year-old woman in 2030 can expect to live until she is almost 91. the earlier one used by the commission envisaged this happening in 2050. A weightier decision will be when the pensionable age should rise from 66. That threshold had. Some benefits are already paid at older ages: pensioners who are 75 or over get free television licences. first been set in 1925. for example. after all. a troubleshooter who now chairs the Financial Services Authority. swallowing up £1 billion. which will boost tax revenues as well as restraining benefit payments. and free bus travel. the government will announce its decision this autumn on just when to push up the age to 66. which discourages private retirement saving. The Treasury reckons it will cost an extra £450m in 2014-15. His solution was to bolster the basic state pension by uprating it in line with earnings rather than prices. rose during the recession (see . but that does not rule out raising the age at which older people become eligible for them. The coalition of Conservatives and Liberal Democrats now running Britain wants to move faster. That age could be jacked up to at least 65. the gains to the exchequer from raising the state-pension age will come mainly from people working longer. He was anxious to arrest the spread of means-tested top-up help for pensioners. so that by the end of the decade 65 would apply to all workers. Moving too quickly is undesirable because people need time to plan for the later payment of the benefit. If pensioners are to contribute to welfare savings. and at 80 they are entitled to higher fuel payments. That makes a compelling case for raising the state-pension age to 68 by 2030 or even earlier. Indeed. Under Tony Blair Labour decided to raise it to 66 between 2024 and 2026. But in 2005 a pensions commission headed by Adair Turner. so they are only just (since April) starting to rise from 60. prices or 2. Even if the timetable is accelerated. it will make no contribution to the harsh budget-cutting over the five years of this parliament. Following consultation. There are some encouraging signs. It recommended that the state-pension age should go higher than 65 to make pensions in an ageing society more affordable. The employment rate of people over the statepension age has been rising for several years and. which usually rise more slowly. but was due to be equalised between 2010 and 2020. As a result the earliest possible dates are likely to remain those set out in the coalition agreement.
David Cameron. The charity.) Another.Hearty holidays The call of the wild Aug 26th 2010 | BUNGAY. on statistics from VisitBritain.9m in 2008. say some. some argue. known mainly for stately homes. A survey released by the National Trust this year found that they are spending 60% less time in the wild than their parents at the same age. Why this revival of interest in outdoor pursuits? One reason is the recession. a much-loved nature writer. “Waterlog”. to counteract what it sees as the increase in “nature-deficit disorder” in children. a naturalist. including an activity appallingly called “coasteering”: cliff-diving. His bestselling book published 11 years ago. Children are at the heart of it all. and his newly expanded family—have chosen to stay put and take advantage of Britain’s own attractions. He embarked on a watery journey across Britain from his home near the river Waveney. may be that people’s senses are starved as they become ever more glued to screens. gridreferencing and photographing 150 of its “hidden dips”. and more have been flocking in since then. is working harder to promote the wide open spaces that are also in its care. suggests Robert Macfarlane. for example. SUFFOLK How Britain fell in love again with nature ROGER DEAKIN. have transformed the nylon tents and grubby communal showers of yesteryear. A third. an official tourism outfit.” burbles the blurb) was followed by “The Daring Book for Girls” (with crucial instructions on administering a Chinese burn) and others. swimming or just walking along a remote coastline. and set up camp are bestsellers. His publisher. which forms the border between Suffolk and Norfolk. Interest in the outdoors generally is more apparent. spent five years swimming Britain. “The Dangerous Book for Boys” in 2006 (“If ever there were a book to make you turn off your television. Many Britons—not least the prime minister. inspired what has become known as the “wild-swimming movement”—and. Daniel Start.6m in 2006 to 1. the renaissance of camping. a mountaineer and academic. Enthusiasts have set out to popularise what Mr Deakin sketched. The Royal Society for the Protection of Birds. Books teaching young people how to play conkers. says that visitors to its reserves rose from 1. Punk. is that overzealous health and safety rules have deprived children of important ways of learning about the world. Wild in the Waveney Camping holidays in England increased by 29% in 2009 from a year earlier. build dens and fires. thanks mainly to stricter pollution controls on farmers. was in at the beginning of another key trend. But not all the writers who helped launch this return to nature are wholly keen on where it is . rekindled Britain’s love affair with nature and hearty outdoor pursuits. including tips on glamorous camping (now known as “glamping”). and parents are beginning to want to correct that. creating a longing for what Henry Thoreau called “Contact! Contact!” with the natural world. Its glossy books. This summer the BBC has broadcast a season of programmes to celebrate what it calls the “great British love affair with the countryside”. (Most rivers and coasts are the cleanest they have been since the second world war. called swimming a “subversive activity”.
most can swiftly return). Disgruntled Lib Dem voters would love to hear their leader. Each party in Britain’s ruling coalition is more than capable of thinking up red-meat policies to throw to its core supporters. suggests an ally of Mr Clegg’s. Britain is that happy outlier. Present such a tax as rewarding hard graft and entrepreneurship rather than “idle privilege”. gave the world the phrase “dog-whistle politics” to describe a certain sort of suggestive populism. David Cameron could easily cheer core supporters by picking a fight with the European Union. and the party base would swoon. but lies in a peculiar consequence of government by a Conservative-Liberal Democrat coalition. In Australia the opposition leader. Nick Clegg. It is not inherently racist to call for tighter border controls. saw his party’s vote surge at general elections in June. The explanation is not some special British virtue.Bagehot Britain's high-minded government Aug 26th 2010 David Cameron’s coalition will struggle to agree on crudely populist policies. Yet one prominent democracy seems to be escaping the trend toward base-rousing populism.tumble democracy. Australia. In country after country. Mr Cameron’s party has form. In France an unpopular government has spent the summer clearing camps of foreign-born gypsies with the maximum fuss (never mind that. in part by talking up the problem posed by asylum seekers who arrive by sea and vowing at every turn to “stop the boats”. But deftly done. announce a wealth tax on the property or assets of the rich. For instance. perhaps paired with incometax breaks for the less well-off. political leaders seem intent on singling out scapegoats. a place of rough-and. Tony Abbott. fought the incumbent Labor Party to a draw in elections on August 21st. he is currently haggling over his price for supporting a centre-right coalition government. Similarly. American politics too look like a walk in a thunderstorm: stray too close to almost any prominent issue and you risk a zapping by lightning bolts of anger. Geert Wilders. In the Netherlands an anti-Islamic populist. such moves send a discreet signal to voters with a taste for a stronger . as European Union citizens. it breaks no law to clear French gypsy camps. Seen from afar. who called last year for Muslim headscarves to be licensed and taxed. That is both welcome and perilous LOOK around the democratic world. or by using ferocious language on immigration. and it would be easy to conclude that voters are very angry indeed. and stoking the fires of resentment against them.
Yet the dangers must be bigger for the Lib Dems than the Tories. and those who don’t. the Tory party spent more than a decade testing to destruction the idea that it could win by rallying its core vote. By happy accident. Yes.political message. Lib Dems anything that smacks of xenophobia. The whole coalition can be divided into “those who have jobs. says one. how much they have in common. with each passing day. are cherished by the other side. Lynton Crosby). As long as the coalition leadership at Westminster is tightly united around high-minded high liberalism. as well as its liberal bent. who have seen their salaries splashed all over the press by government spin-doctors seeking to justify belt-tightening. Economist. where the liberal Conservatives around Mr Cameron meet the conservative.” says a minister. there are few obvious places for ambitious Tories to go. The Lib Dems— especially those defending council or parliamentary seats in gritty northern cities—risk attack on their left flank from the Labour opposition. it would be an ironic way for the Lib Dems to meet their doom: smothered by consensus. Europe). and least populist. That does not mean that Cameron allies see no risks in the closeness of the leadership inner circle. And—in a second happy accident—those areas of overlap occupy an unusually high-minded spot on the political map.com/blogs/bagehot Britain About The Economist online About The Economist Media directory Staff books Career opportunities Contact us Subscribe [+] Site feedback . Mr Cameron. For all the grumbling on the Conservative right. the very things that Lib Dems might enjoy humbling (eg. and discover. is acutely conscious of the need to manage bigwigs outside this charmed circle. this coalition is structurally incapable of throwing around partisan red meat. For sure. The area of closest agreement within the coalition is at its pinnacle. he adds: after all. Britain’s Conservative Party rallied the faithful with slogans that were not so much tweeting on a dog whistle as tooting on a foghorn. Tories hate higher taxes. free-market Liberals around Mr Clegg. Given all the dire predictions of the coalition’s demise amid angry disagreements. “It’s time to put a limit on immigration. and has invited MPs. the two parties agree most on issues where they are at their most coolly rational. Their respective bases cancel each other out.” declared one Tory poster. Cui bono? Modernisers around Mr Cameron welcome this. or that make Tories fume (eg. disappointed parliamentary candidates and local-government types to a string of Downing Street receptions. those embattled Lib Dems will struggle to respond with full-throated populism. the coalition is not immune to populism: just ask public-sector bosses with the temerity to earn more than the prime minister. he says. The last German federal elections. Put another way. when it comes to the temptations of dog-whistle politics. During its 2005 election campaign (masterminded by a political consultant shipped in from Australia. over the nudge-nudge slogan: “Are you thinking what we’re thinking?” But neither Mr Cameron nor Mr Clegg can easily announce policies that drip with the red blood of partisan conflict. sprinkling them with the stardust of high office. saw both parties of government blame wicked “Anglo-Saxon bankers” for almost all economic ills. That is a very good thing. people who live in big houses). There is another reason why Britain’s current ruling coalition is hobbled. for instance. Coalitions in other countries are also perfectly capable of scapegoating unpopular groups.
The government of Ecuador is proud of the site’s inclusion and sensitive to any suggestion of poor stewardship. Ecuador felt that to stay on the list was a slight and lobbied to get the islands removed. tortoises and exotic birds are under threat from a noxious species known as homo sapiens. which later that year put the archipelago on its danger list—one of the strongest signals it can send that the integrity of a place which matters to the world either has been. Mr Correa’s move failed to pre-empt action by the Paris-based UN agency. The decision to remove the islands from the list of “world heritage sites in danger”—taken at a meeting in Brasília that concluded on August 3rd—was only one of several signs that the UN agency is bending its own rules under pressure from member states. and therefore placed on UNESCO’s list of world heritage sites. It was. compromised.000 to more than 30. when ministers (from a rotating group of 21 member states) convened for a world heritage meeting. such slipping standards are not merely of concern in remote Pacific islands.UNESCO's world heritage sites A danger list in danger Aug 26th 2010 In its care for precious places. or else as a scolding. from rodents to flies. which now number 911. UNESCO expressed concern about the islands. the principles are losing ground WHEN an archipelago famed for its flora and fauna is deemed to have escaped from environmental peril. by this year. And since UNESCO is supposed to be an unprejudiced protector of the whole world’s built and natural environment. President Rafael Correa declared a state of environmental emergency and said he was ready to curb tourism. many of them illegal squatters. that might sound like good news for anyone with an interest in the fate of life on Earth. Apart from an ever-rising influx of tourists. in 2007. Depending on the circumstances. contested vote. But take the Galapagos case first. which follow in its wake. When. Since 1978. as well as creatures. it was clear that the Brazilian hosts had been won over. and remains. or could soon be. the 19 islands (each with its own idiosyncratic ecosystem) have been recognised as a place of “outstanding universal value” to humanity. But UNESCO’s recent clean bill of health for the Galapagos islands was greeted with dismay by many of the people who care passionately about the place. the UN cultural agency is torn between its own principles and its members’ wishes. the islands’ resident population has grown in the past half-century from about 2. putting a site on that list can be seen as an act of solidarity with a country. . clear why action was needed: the islands’ iguanas (see picture). After a secret.000.
graver matters are at stake. some 21 new sites were added to the heritage list— even though the expert advice suggested only ten were eligible. Its head. “It’s a pity so many countries see the danger list as a slap in the face. a forest in Madagascar. Some countries. the federal government was giving itself an extra card in its dealings with other parties. a danger-listing attracted support for repair and conservation. But as Tim Badman of the IUCN points out. in a widely praised move. NGOs devoted to the Galapagos conveyed a similar message: yes. The New York-based World Monuments Fund has a “watch list”. And America. say people who went to the Brasília meeting. By declaring the alligator-infested wetlands in peril once again (because less water and more pollutants were flowing in). says a spokesman. which takes a century to grow. But given that China had invested funds and prestige in the bid. Not all the decisions taken at UNESCO’s meeting in Brasília disappointed environmentalists. will not take no for an answer. it seems.” says Kishore Rao. Gustavo Araoz. UNESCO relies on advice from the International Council on Monuments and Sites (ICOMOS).” But as far as it can. And Jeff Morgan. At the Brasília shindig. of the Californiabased Global Heritage Fund—which provides intensive.” said Toni Darton of the London-based Galapagos Conservation Trust. but it would be a disaster if UNESCO’s move suggested all was well. was declared in danger—despite the awkward fact that China is a big market for the timber. At least two other proposals for world heritage sites were so tied up with national pride that it would have been hard to turn them down: a village north of Riyadh where the Saudi royals originated. After another secret vote. a conscientious fraternity of conservation professionals. from the local authorities to companies. are getting infected by politics.” But the hard fact is that danger listings. The Swiss-based International Union for Conservation of Nature (IUCN)—on which UNESCO relies for advice on natural sites—had opined that the bid was premature: not enough had been done to define the area and plan for its protection. Other cases where countries declared their own sites in danger have included war-ravaged lands like Croatia and Cambodia: in the port of Dubrovnik and the palaces of Angkor. Why would it matter if UNESCO’s currency were debased? Well. If the gold standard of a UNESCO listing is adulterated. UNESCO’s private competitors see the travails of the heritage list as symptomatic of wider problems. so the process is not seen as a beauty contest. All over the world. involving governments. and for worthy Japanese who try to visit as many as possible. China. successfully nominated some wilderness in the south of the country. with subtropical forests and spectacular cliffs. it would be tough for countries who take the care of sites seriously. his institution tells the UN body to ponder not just whether a site is nice or interesting. says that “we respect the UNESCO committee’s right to reject our views. a rejection would have been awkward. “We urge a renewed emphasis on conservation. and a programme of practical help with conservation. especially if they are vast bits of wilderness. the government in Quito had done some helpful things. or a dunces’ parade. say) . and an imperial palace in Vietnam where a millennium celebration is being held this year. “I am concerned that [UNESCO’s] announcement is premature and may give the impression that the natural wonders of the Galapagos are no longer threatened. acting head of UNESCO’s world heritage centre. and will be in future. long-term help at a limited number of sites—says UNESCO lacks the resources to monitor its ever-growing list of places. that carries no stigma. for example. His agency talks a lot to mining firms who are keen to avoid sullying their name by harming places of cultural or ecological value.” he sighs. where rosewood is being felled illegally. as well as inscribing sites in the first place. Any individual in the world can propose a place for the watch list. “It can also mobilise help. Satellite technology has made monitoring (of forests. Meanwhile. but whether it has been cared for. For man-made sites. it had been removed in 2007. such discussions lose their edge. got the Everglades Forest in Florida reinserted on the danger list.the islands were deemed out of danger.
On a shoestring budget. but that was a rebuke to the city. which adopted Christianity 17 centuries ago. Dresden was delisted as a site in 2009. and Patriarch Ilia II. and then turned into a firing range by the Soviet army. and are hence on a collision course with UNESCO. In some Georgian holy sites the choice is made easier by the devastation that has occurred over the centuries. But there is one ultra-sensitive spot where Georgia’s masters—political and religious—are defying art-historical fashion. have other ideas. And perhaps inevitably. the 77-year-old head of the Georgian church. uniting the country’s west and east. and in theory. for example—fair compromises have been made between the needs of modern congregations and the desire of art historians to coax faded frescoes gently back to life. mostly on churches. they found little but damp. Reconstruction is visibly in progress. The sixth-century monastic complex of David Gareja was sacked by the Mongols in 1265. but it may be the boldest defiance of the world heritage regime that UNESCO has ever faced. faces almost the opposite problem: such is the strength of a religious revival that began after the fall of communism that a hectic programme of building and restoring churches—from tiny chapels to Tbilisi’s vast new Holy Trinity cathedral—can hardly keep up with demand. a plan IN MANY European countries. the Persians in 1615. set out to create a great empire. The president has promised the patriarch that the cathedral will be rebuilt: walls. not Germany’s government. a patriarch. But President Mikheil Saakashvili. Georgia’s cultural monuments agency says it has carried out 400 conservation projects. There a new dynasty. leaving little to conserve. pockmarked caves. dome and all. Georgia. a game park in Oman had the same fate in 2007 after the government . including the latest international thinking about archaeology and conservation which holds that intervention should be kept to a minimum. when modern monks reoccupied the place. Elsewhere—in several medieval churches. Such a gesture plays well in a country where a towering expression of past and present glory has more appeal than fragile ruins. True. The edifice belongs to one of three world heritage sites in Georgia. the rush to refit ancient places of worship can easily run up against other priorities.UNESCO and Georgia Rising defiantly from the ruins Aug 26th 2010 Georgia’s mercurial leader cocks a snook at art-historical convention A president. That is the Bagrati cathedral. a ruined structure dating from the 11th century. is subject to UNESCO’s rules. dwindling Christian flocks can barely cope with the patrimony they have inherited. from steeples to statues. since 2004.
all European rail firms have had the right to cross each other’s borders with international services. and advised the French that “in a war. like Lufthansa and Air France. a subsidiary of SNCF. potentially putting rivals at a disadvantage. Deutsche Bahn. SNCF and Deutsche Bahn are for the first time competing directly for mastery of European highspeed rail. which is already open to foreign firms. refused to let their head conductors serve meals to first-class passengers. asked for rights to run long-distance routes between big German cities. With government backing. But old national rivalries are resurfacing. On August 31st France’s and Germany’s transport ministers will hold an emergency meeting with the two firms’ chief executives. Deutsche Bahn intercity express (ICE) trains glide in from Frankfurt and SNCF sends trains deep into Germany. was launched in 2007 amid high hopes. Another tussle looms in October. predicted “a bloody battle”. Since January. thanks to a joint venture between the two firms. In addition. The joint venture between Deutsche Bahn and SNCF.” says Marine Dubois. French trains are pushing swiftly into Germany’s domestic market. the French controlleur on the 13. Despite wrangling over details—French unions. we’re a team. Last year. for instance. which is closed to foreign trains. shocked. the German and French rail giants. But ministers are also fighting over rail. there is no winner”. Deutsche Bahn accuses France of unfairly protecting its domestic rail market. The firm wants to send them to London in time for the 2012 Olympics. Keolis. Relations at the top have turned nasty. Deutsche Bahn and SNCF need to have normal commercial relations. Franco-German co-operation seems on track. complains that Germany has not fully separated Deutsche Bahn’s train operations from its rail-infrastructure firm. when Deutsche Bahn will test an ICE-3 high-speed train through the Channel Tunnel. “When we’re on the same train.09 ICE to Frankfurt. Boosters predicted an open European market where trains and passengers would cross borders without fuss. on the other hand. The European Commission is taking legal action over the issue. Every train has a French and a German controller on board. Deutsche . says France’s transport minister. The joint venture could even be at risk. SNCF. so the Germans have to do it all— they get along well. This would break SNCF’s Eurostar monopoly on the tunnel.High-speed rail in Europe Trouble ahead Aug 26th 2010 | PARIS The train giants of France and Germany are at war over European high-speed rail AT THE Gare de l’Est in Paris.
The main constraint is not customers—the older schools already have waiting lists—but training and staff. and it plops out of the sky on the other. Each lesson is assisted by virtual mermaids. the classroom seems to move. five in Beijing and plans to double that number in the next year. children begin arriving at a bland commercial building just as the office workers are leaving. The initial development costs. Each classroom has a local and a Western instructor. mice and other Disney icons. A small storefront leads to an English-language school run by Disney. More than 300 songs. slowly extending from China’s two largest cities to surrounding areas. Yet the potential rewards are huge. for example. complex and in an area China considers sensitive: education.800 a year: a big sum in China. . ducks. Most students seem happy and engaged. New schools must therefore be in places where they can easily be supervised. must have been huge. many passers-by assume it is a fake. Images have been Sinified: rice. But Disney claims that its results are impressive. future mouseketeer ON A Tuesday at 6pm. Children as young as two toddle in and climb the stairs. This being China. Everything has been checked with China’s wary censors. Some 60 books augment the course materials. It is not much of an entrance. which Disney has not disclosed. At first glance. Disney hopes to keep doubling the number of Chinese students it teaches every year for a while. But word is spreading through the pushy-parent network: this is the real thing. As they ask each other questions. Tuition is $1. Touch the answer to a question (a fried egg. not heaped on a plate. While teachers instruct. predicts Andrew Sugerman. It has ten schools in Shanghai. who runs it. This is a risky venture—long-term. squashed between a dusty drugstore and a fast-food joint.Disney's schools in China Middle Kingdom meets Magic Kingdom Aug 26th 2010 | SHANGHAI A Western media company offers a product the Chinese can’t resist: education Welcome. provide mnemonic help. all tied to animations. Thousands of Chinese children have signed up for Disney’s schools since the first one was opened in October 2008. their English sounds no less articulate than that of similarly-aged Americans. but two of the four walls are interactive video monitors. comes in a bowl. for example) on one screen. their classrooms look like dreary boxes. Within a decade the programme will have a material impact on Disney’s results.
the coincidence of several deals happening at once may make other bosses pluck up the courage to make a move. Not everyone thinks such deals are wise. Many would like to raise new funds. private-equity firms are under huge pressure to return some money to their investors. the bosses of weaker firms have typically resisted takeovers by telling their shareholders that the market is undervaluing their shares and that they will soon perk up. Yet. finally breaking? M&A is a confidence game. “It’s the front-page effect. Vedanta. since business confidence has been weak. found they had not got . Nor is the fun confined to high-tech. For a start.68 billion to buy McAfee. even allowing for macroeconomic uncertainty. The trend of emerging-market multinationals buying firms in rich countries faltered after the market crash. an Indian mining and energy firm. splashed out $7.Mergers and acquisitions Waiting for a wave Aug 26th 2010 | NEW YORK A flurry of deals makes bankers salivate FIRMS with interim bosses usually opt for the quiet life. for $1. A growing share of new deals will be in emerging markets and involve raw materials. a longtime rival of HP. Having raised a stack of cash and often paid over the odds during the bubble years. However. The tough economy has helped the top firms in many industries to strengthen their position. reckons Carsten Stendevad of Citigroup’s corporate-finance advisory arm. a firm that mines potash. out of fear.” says Mr Stendevad. from which fertiliser is made. Firms in America and Europe built up record reserves during the crisis. received and promptly rejected a $38.5 billion. but the lack of a permanent boss did not stop Hewlett-Packard (HP) from launching a bidding war on August 23rd. in terms both of market share and of stockmarket valuation. which is easier if you can show that the previous one wasn’t a complete disaster. investors will demand bigger dividends or share buy-backs. widely predicted in the past year. a mining giant. These shareholders may now be losing patience. This quarter will probably see more mergers and acquisitions (M&A) than any since the crash (see chart). That makes the recent increase in activity surprising. a data-storage firm. topping the $1. a chipmaker. recently announced it was buying a majority stake in Cairn Energy’s Indian oilfields for $8. Acquirers such as Lenovo. At the same time. For example. Investment bankers are delighted. the biggest private-equity deal since 2007. So far. an antivirus-software firm.7 billion purchase of Dynegy this month. he says.5 billion. potential buyers are brimming with cash. some private-equity firms have regained their taste for acquisitions: witness Blackstone’s $4. Is a new merger wave. BHP is now pursuing a hostile bid. These firms are now well-placed to do the sort of consolidating deals that tend to deliver better results to investors than the supposedly “visionary” strategic mergers that are more common when the economy is booming.15 billion offered a week earlier by Dell. but there are many willing corporate brides in the portfolios of private-equity firms. On August 17th PotashCorp. conditions are ripe for a surge in them. a Chinese firm that bought IBM’s personal-computer business.6 billion offer from BHP Billiton. If they don’t spend them. Publicly traded firms are reluctant targets. The computer giant offered to buy 3Par. On August 19th Intel.
Another challenge facing location-based networks is to prevent tech-savvy individuals from gaming their systems. such as SMS-based promotions and mobile-search ads. which it can use to tailor promotions. Bonin Bough. There are. One is that even the largest mobile social networks have just a few million members. a food and drinks giant. Fans of such services gush that they will mint money by allowing ads to be targeted at folk who are about to make a purchase. More bargains to the left? Roger that Several advertisers have already run modest trials on location-based social networks. Other forms of mobile marketing. Its initiative taps into the competitive spirit engendered by the fledgling service. PepsiCo’s global director of digital and social media. the experiment with Foursquare has also given the firm useful data about. Ford and Starbucks have used location-based networks in a bid to lure in more customers. According to a report published last month by Forrester. Hence the growing interest in marketing circles for mobile-phonebased social networks such as Foursquare and Gowalla that let users “check in” to shops or restaurants and instantly tell their friends where they are. But the networks must negotiate some important hurdles first if such lofty predictions are to come true. The blogosphere is littered with stories of “fake mayors” and other folk who have come up with ways of checking in to places they haven’t visited. PepsiCo. For some time. already reach far larger audiences. several reasons why many marketers are still wary of committing big money to Foursquare and its like. Location-based networking won an important convert recently in the shape of Facebook. the 800-pound gorilla of social networking had tracked the progress of firms such as Foursquare. As well as persuading people to visit sites carrying PepsiCo products. dubbed “Places”. mobile social networks will have to work overtime to convince potential users that sensitive information about their movements is . Places lets them signal where they are to their friends on the network. which bestows the preposterous title of “mayor” on people who show up most often at a location. for example. Foursquare and other networks have been working hard to stamp out such shenanigans. however. but this is tricky.Location-based social networks Where are you? Aug 26th 2010 | SAN FRANCISCO A tale of fake mayors and real deals MARKETING. only 4% of American adults have ever used such networks and far fewer do so more than once a week. which is currently available only to American users of its mobile application. If they are to grow significantly. which boasts some 3m members. says the company’s initial experience has been encouraging. Then there is the thorny issue of privacy. foot traffic to stores. which limits their appeal. is delivering electronic badges to the mobile phones of people who repeatedly visit locations on Foursquare where its products are sold. its veterans like to say. a research firm. Now it has entered the market with its own service. is all about the “three Rs”: reaching the right person in the right place at the right time. in much the same way that they can “tag” themselves in photos.
he says. Israel’s technology exports grew by more than 5% last year. In the IDF. a venture capitalist in Tel Aviv. Like Americans. Mr Maital says. a vice-president (who commanded 34 soldiers in an air-force intelligence agency when he was 20). which he served as a reservist for nearly a quarter of a century. It is based on IDF cyberwarfare technologies that developers first used as soldiers. sells video technology. Despite the recession. he says. co-founder and chief executive of Tufin Technologies. Israel’s encourages creativity. Mr Cukierman thinks military service deserves some of the credit. Teenagers conscripted into high-tech units gain experience “akin to a bachelor’s degree in computer science”. He points to Check Point. a company based in Herzliya in greater Tel Aviv. He is only half joking. Optibase. president of the Israel-Canada Chamber of Commerce in Tel Aviv. Ironically. the author of “Global Risk/Global Opportunity”. That is why veterans are snapped up by start-ups. Israelis are quick to challenge authority. most job applicants have tackled real obstacle courses. An IDF spokesman says it is “highly acceptable” for soldiers to point out problems and pitch ideas to superiors. Its founders used to build firewalls to protect systems run by Israeli intelligence. thanks to conscription.Israeli entrepreneurs MBAs are for wusses Aug 26th 2010 Military service makes Israeli techies tougher Meet the new sales team MANY Israeli start-ups should pay royalties to the army. says Ruvi Kitov. They also do well raising money. like Mr Kitov himself. a new management book. One of the firm’s cash cows is software that finds spam servers and blocks their transmissions. Traditional armies drill unquestioning obedience into their grunts. The firm might not exist without the IDF. veterans of the Israel Defence Forces (IDF). an Israeli software firm. says Edouard Cukierman. In other countries. because investors assume the IDF has already weeded out the dishonest and irresponsible. employers rely on the college-entry obstacle course to select the brightest and best. says Shlomo Maital. soldiers are encouraged to improvise. In Israel. tech . This culture helps ex-army entrepreneurs solve civilian problems. says Alan Baker. it nurtures entrepreneurs. lest they lose the initiative in the fog of battle. Israel’s army does not just train soldiers. Its founders cut their teeth tinkering with video technologies used in the IDF’s intelligence and weapons systems. says Eli Garten. Almost all of Tufin’s employees in the country are. a large developer of internet-security software.
when it produced 213. In December he ordered a review of Alfa’s operations. Far from it. covets it. The theory is that Mr Piëch would like to substitute Alfa for VW’s less charismatic Seat brand. Although Mr Marchionne did not reveal the full extent of his plans for Alfa (and the rest of the Fiat Group) until April. Next year. Last year even Sergio Marchionne. VW’s chairman.The revival of Alfa Romeo Another chance for Alfa Aug 26th 2010 Alfa Romeo’s cars have not always lived up to its stellar brand. a German engineer. but none of its current offerings. Mr Wester was not being given the job to slim Alfa down or to flog it to VW. Mr Marchionne insists that he has “a strong and unequivocal commitment to the development of Alfa Romeo” and that he is “determined to transform it into a full premium brand”.000 a year are expected to be in America.000. One of Mr Marchionne’s best managers. seemed to be running out of patience. was the star of the annual Pebble Beach Concours d’Elegance in California. The choice was to stem the losses by freezing new product investment after the launch this summer of the Giulietta hatchback. but in 2009 it sold barely 100. For his part. which according to Max Warburton of Bernstein Research were losing up to $575m a year. a show for classic and concept cars.000 cars. a replacement for the handsome but not quite good enough 159 saloon. where Alfa will return by 2012.000 cars a year by 2010. It is testimony to the enduring power of a brand that has a wonderful history but which for many years has overpromised and under-delivered. or to make a final attempt to restore Alfa’s fortunes. that this may be changing. There were even rumours that Mr Marchionne might sell Alfa to Volkswagen. Mr Wester says that there are now “the right conditions. Abarth and Maserati. but the ambitious target set for Mr Wester is to sell half a million Alfas a year by 2014. the right products and the right synergies to get there”. Alfa will launch the Giulia. Yet this month the sporting Italian marque. Of these. which owns Alfa. however. having managed to sell only 400 cars there that year. to run the unit. a straw in the wind was the appointment in January of Harald Wester. which is celebrating its centenary. There is little doubt that Ferdinand Piëch. and was the group’s chief technical officer. Chrysler will provide both a manufacturing base in America and a powerful distribution network. Alfa brought over seven cars from its museum in Milan. the industry’s most insatiable collector of brands. that will lead the charge in America. Mr Marchionne had set Alfa a target to reach sales of 300. the boss of Fiat. Alfa’s previous record year was in 2001. That is changing IN 1995 Alfa Romeo ignominiously pulled out of America. 85. in part by taking advantage of Fiat’s control of Chrysler to re-establish Alfa in America. Romeo’s beloved Giulietta . This month Car magazine revealed that a small project team at VW’s design studio in Potsdam had been ordered to create a phantom Alfa line-up. Mr Wester was already the boss of two other zippy Fiat brands. There are signs. It will quickly follow it with a small crossover and a larger SUV.
gives its workers bonuses if they can produce steel more efficiently. In their new book they address two subjects that are usually given short shrift: established companies rather than start-ups and the implementation of new ideas rather than their generation. but suggest that it has little chance of producing a big breakthrough. expects its workers to spend 15% of their time on their own projects. the maker of Post-it notes. Warren Bennis. tells a story about Sigmund Freud’s flight from Vienna to London in 1938. G&T are ready with the cold water. a steelmaker. Google expects them to spend 20%. A second approach focuses on closing the loop between ideas and results. Deere & Company. “London? How can you even mention London and Vienna in the same breath?” Zweig thundered. Most are rubbish. G&T concede that this approach is an excellent way of making incremental improvements to existing products and processes. . Its authors are Vijay Govindarajan and Chris Trimble. Companies dissolve into a thousand small initiatives rather than focusing on a few big problems. On arriving in his new home Freud asked Stefan Zweig. It also produces far too many ideas: managers have to spend weeks sorting through the chaff to find a few grains of wheat. The let-them-loose approach spreads resources thinly and indiscriminately. on frugal innovation. How do companies generate new ideas? And how do they turn those ideas into products? Hardly a week passes without someone publishing a book on the subject. a maker of farm machinery. the head of General Electric. what it was like. “Still Surprised: A Memoir of a Life in Leadership”. with Jeff Immelt. two professors at the Tuck School of Business at Dartmouth College. This approach is attractively democratic: by giving everyone a chance to innovate. But “The Other Side of Innovation: Solving the Execution Challenge” is rather good. a management theorist. by encouraging everyone to think big thoughts. Nucor Corporation.Schumpeter The innovation machine Aug 26th 2010 Two gurus look at the perspiration side of innovation IN HIS new book. has produced a detailed playbook on how to design new tractors. The fashion these days is to focus on the supply side of innovation: for example. “In Vienna there was sperm in the air!” Today there is no hotter topic in management theory than “sperm in the air”. Last year Mr Govindarajan and Mr Trimble (hereafter: G&T) published a seminal article. 3M. a fellow Viennese intellectual. it makes everyone feel special. Or so the theory goes.
day and night. Australia. a remote. runs SAP software. Can it do the same for others? IN A remote corner of Bahia state. It will transform a poverty-stricken part of Brazil’s backlands. on others. Argentina and the European Union). at harvest time. charcoalmakers have moved in to reduce the rootballs to fuel. like Jatobá. a vast new farm is springing out of the dry bush. Next season this farm at Jatobá will plant and harvest cotton. employs 300 people under a gaúcho from southern Brazil. Now the farm—which. and some have already been turned into white oceans of cotton. PIAUÍ Brazil has revolutionised its own farms. In less than 30 years Brazil has turned itself from a food importer into one of the world’s great breadbaskets (see chart 1). Between 1996 and 2006 the total value of the country’s crops rose . soyabeans and maize on 24. Native shrubs later reclaimed some of it. the transformation is already complete. These two farms on the frontier of Brazilian farming are microcosms of a national change with global implications. next. 200 times the size of an average farm in Iowa. Three years ago the Cremaq farm was a failed experiment in growing cashews. That all this is happening in Piauí—the Timbuktu of Brazil. Thirty years ago eucalyptus and pine were planted in this part of the cerrado (Brazil’s savannah).Brazilian agriculture The miracle of the cerrado Aug 26th 2010 | CREMAQ. Three hundred miles north. resounds to the thunder of lorries which. somewhat lawless area where the nearest health clinic is half a day’s journey away and most people live off state welfare payments—is nothing short of miraculous. in north-eastern Brazil. a company that buys and modernises neglected fields—uses radio transmitters to keep track of the weather. other fields have been levelled and prepared with lime and fertiliser. It is the first country to have caught up with the traditional “big five” grain exporters (America. Now every field tells the story of a transformation. The increase in Brazil’s farm production has been stunning. the big five are all temperate producers. Its barns were falling down and the scrub was reasserting its grip. and. carry maize and soya to distant ports. is owned by BrasilAgro. It is also the first tropical food-giant. Some have been cut to a litter of tree stumps and scrub. in the state of Piauí. Canada.000 hectares. has 200km (124 miles) of new roads criss-crossing the fields.
from 23 billion reais ($23 billion) to 108 billion reais, or 365%. Brazil increased its beef exports tenfold in a decade, overtaking Australia as the world’s largest exporter. It has the world’s largest cattle herd after India’s. It is also the world’s largest exporter of poultry, sugar cane and ethanol (see chart 2). Since 1990 its soyabean output has risen from barely 15m tonnes to over 60m. Brazil accounts for about a third of world soyabean exports, second only to America. In 1994 Brazil’s soyabean exports were oneseventh of America’s; now they are six-sevenths. Moreover, Brazil supplies a quarter of the world’s soyabean trade on just 6% of the country’s arable land. No less astonishingly, Brazil has done all this without much government subsidy. According to the Organisation for Economic Co-operation and Development (OECD), state support accounted for 5.7% of total farm income in Brazil during 2005-07. That compares with 12% in America, 26% for the OECD average and 29% in the European Union. And Brazil has done it without deforesting the Amazon (though that has happened for other reasons). The great expansion of farmland has taken place 1,000km from the jungle. How did the country manage this astonishing transformation? The answer to that matters not only to Brazil but also to the rest of the world. An attractive Brazilian model Between now and 2050 the world’s population will rise from 7 billion to 9 billion. Its income is likely to rise by more than that and the total urban population will roughly double, changing diets as well as overall demand because city dwellers tend to eat more meat. The UN’s Food and Agriculture Organisation (FAO) reckons grain output will have to rise by around half but meat output will have to double by 2050. This will be hard to achieve because, in the past decade, the growth in agricultural yields has stalled and water has become a greater constraint. By one estimate, only 40% of the increase in world grain output now comes from rises in yields and 60% comes from taking more land under cultivation. In the 1960s just a quarter came from more land and three-quarters came from higher yields. So if you were asked to describe the sort of food producer that will matter most in the next 40 years, you would probably say something like this: one that has boosted output a lot and looks capable of continuing to do so; one with land and water in reserve; one able to sustain a large cattle herd (it does not necessarily have to be efficient, but capable of improvement); one that is productive without massive state subsidies; and maybe one with lots of savannah, since the biggest single agricultural failure in the world during past decades has been tropical Africa, and anything that might help Africans grow more food would be especially valuable. In other words, you would describe Brazil. Brazil has more spare farmland than any other country (see chart 3). The FAO puts its total potential arable land at over 400m hectares; only 50m is being used. Brazilian official figures put the available land somewhat lower, at 300m hectares. Either way, it is a vast amount. On the FAO’s figures, Brazil has as much spare farmland as the next two countries together (Russia and America). It is often accused of levelling the rainforest to create its farms, but hardly any of this new land lies in Amazonia; most is cerrado. Brazil also has more water. According to the UN’s World Water Assessment Report of 2009, Brazil has more than 8,000 billion cubic kilometres of renewable water each year, easily more than any
other country. Brazil alone (population: 190m) has as much renewable water as the whole of Asia (population: 4 billion). And again, this is not mainly because of the Amazon. Piauí is one of the country’s driest areas but still gets a third more water than America’s corn belt. Of course, having spare water and spare land is not much good if they are in different places (a problem in much of Africa). But according to BrasilAgro, Brazil has almost as much farmland with more than 975 millimetres of rain each year as the whole of Africa and more than a quarter of all such land in the world. Since 1996 Brazilian farmers have increased the amount of land under cultivation by a third, mostly in the cerrado. That is quite different from other big farm producers, whose amount of land under the plough has either been flat or (in Europe) falling. And it has increased production by ten times that amount. But the availability of farmland is in fact only a secondary reason for the extraordinary growth in Brazilian agriculture. If you want the primary reason in three words, they are Embrapa, Embrapa, Embrapa. More food without deforestation Embrapa is short for Empresa Brasileira de Pesquisa Agropecuária, or the Brazilian Agricultural Research Corporation. It is a public company set up in 1973, in an unusual fit of farsightedness by the country’s then ruling generals. At the time the quadrupling of oil prices was making Brazil’s high levels of agricultural subsidy unaffordable. Mauro Lopes, who supervised the subsidy regime, says he urged the government to give $20 to Embrapa for every $50 it saved by cutting subsidies. It didn’t, but Embrapa did receive enough money to turn itself into the world’s leading tropical-research institution. It does everything from breeding new seeds and cattle, to creating ultra-thin edible wrapping paper for foodstuffs that changes colour when the food goes off, to running a nanotechnology laboratory creating biodegradable ultra-strong fabrics and wound dressings. Its main achievement, however, has been to turn the cerrado green. When Embrapa started, the cerrado was regarded as unfit for farming. Norman Borlaug, an American plant scientist often called the father of the Green Revolution, told the New York Times that “nobody thought these soils were ever going to be productive.” They seemed too acidic and too poor in nutrients. Embrapa did four things to change that. First, it poured industrial quantities of lime (pulverised limestone or chalk) onto the soil to reduce levels of acidity. In the late 1990s, 14m-16m tonnes of lime were being spread on Brazilian fields each year, rising to 25m tonnes in 2003 and 2004. This amounts to roughly five tonnes of lime a hectare, sometimes more. At the 20,000-hectare Cremaq farm, 5,000 hulking 30-tonne lorries have disgorged their contents on the fields in the past three years. Embrapa scientists also bred varieties of rhizobium, a bacterium that helps fix nitrogen in legumes and which works especially well in the soil of the cerrado, reducing the need for fertilisers.
So although it is true Brazil has a lot of spare farmland, it did not just have it hanging around, waiting to be ploughed. Embrapa had to create the land, in a sense, or make it fit for farming. Today the cerrado accounts for 70% of Brazil’s farm output and has become the new Midwest. “We changed the paradigm,” says Silvio Crestana, a former head of Embrapa, proudly. Second, Embrapa went to Africa and brought back a grass called brachiaria. Patient crossbreeding created a variety, called braquiarinha in Brazil, which produced 20-25 tonnes of grass feed per hectare, many times what the native cerrado grass produces and three times the yield in Africa. That meant parts of the cerrado could be turned into pasture, making possible the enormous expansion of Brazil’s beef herd. Thirty years ago it took Brazil four years to raise a bull for slaughter. Now the average time is 18-20 months. That is not the end of the story. Embrapa has recently begun experiments with genetically modifying brachiaria to produce a larger-leafed variety called braquiarão which promises even bigger increases in forage. This alone will not transform the livestock sector, which remains rather inefficient. Around one-third of improvement to livestock production comes from better breeding of the animals; one-third comes from improved resistance to disease; and only onethird from better feed. But it will clearly help. Third, and most important, Embrapa turned soyabeans into a tropical crop. Soyabeans are native to north-east Asia (Japan, the Korean peninsular and north-east China). They are a temperateclimate crop, sensitive to temperature changes and requiring four distinct seasons. All other big soyabean producers (notably America and Argentina) have temperate climates. Brazil itself still grows soya in its temperate southern states. But by old-fashioned crossbreeding, Embrapa worked out how to make it also grow in a tropical climate, on the rolling plains of Mato Grosso state and in Goiás on the baking cerrado. More recently, Brazil has also been importing genetically modified soya seeds and is now the world’s second-largest user of GM after the United States. This year Embrapa won approval for its first GM seed. Embrapa also created varieties of soya that are more tolerant than usual of acid soils (even after the vast application of lime, the cerrado is still somewhat acidic). And it speeded up the plants’ growing period, cutting between eight and 12 weeks off the usual life cycle. These “short cycle” plants have made it possible to grow two crops a year, revolutionising the operation of farms. Farmers used to plant their main crop in September and reap in May or June. Now they can harvest in February instead, leaving enough time for a full second crop before the September planting. This means the “second” crop (once small) has become as large as the first, accounting for a lot of the increases in yields. Such improvements are continuing. The Cremaq farm could hardly have existed until recently because soya would not grow on this hottest, most acidic of Brazilian backlands. The variety of soya now being planted there did not exist five years ago. Dr Crestana calls this “the genetic transformation of soya”. Lastly, Embrapa has pioneered and encouraged new operational farm techniques. Brazilian farmers pioneered “no-till” agriculture, in which the soil is not ploughed nor the crop harvested at ground level. Rather, it is cut high on the stalk and the remains of the plant are left to rot into a mat of organic material. Next year’s crop is then planted directly into the mat, retaining more nutrients in the soil. In 1990 Brazilian farmers used no-till farming for 2.6% of their grains; today it is over 50%. Embrapa’s latest trick is something called forest, agriculture and livestock integration: the fields are used alternately for crops and livestock but threads of trees are also planted in between the fields, where cattle can forage. This, it turns out, is the best means yet devised for rescuing degraded pasture lands. Having spent years increasing production and acreage, Embrapa is now turning to ways of increasing the intensity of land use and of rotating crops and livestock so as to feed more people without cutting down the forest.
Not all family farms are a drain on the economy: much of the poultry production is concentrated among them and they mop up a lot of rural underemployment. Partly for that reason. in jungles and in the vast wetlands on the border with Paraguay and Bolivia. Systems are much harder to export than a simple fix. Expanding production in Argentina or America takes you into drier marginal lands which are much more expensive to farm. where the good intentions of outsiders have so often shrivelled and died? There are several reasons to think it can.000km from the main soyabean port at Paranaguá.000 reais a year and produce just 7% of total farm output. And the technology transfer is happening at a time when African economies are starting to grow and massive Chinese aid is starting to improve the continent’s famously dire transport system. which are African staples. the two together also made possible the changes in farm techniques which have boosted yields further. Africa also needs to make better use of similar lands. 1. Embrapa’s was a “system approach”. It also has experience not just in the cerrado but in more arid regions (called the sertão). Brazilian land is like Africa’s: tropical and nutrient-poor. Perhaps Africans will come to Brazil and take back the package from us. as its scientists call it: all the interventions worked together. Still. are no exception. The zebu that formed the basis of Brazil’s nelore cattle herd came from India. Brazil is divided between productive giant operations and inefficient hobby farms. We’ll see. which are then forced to wait for ages because the docks are clogged. Expanding in Brazil. which comes closest. “Scientifically. these faults in Brazilian agriculture do not matter much. though it is early days and so far it is unclear whether the technology retransfer will work. So Brazil transports a relatively low-value commodity using the most expensive means. Rather. a university in Rio de Janeiro. needless to say.” If we see anything like what happened in Brazil itself.Farmers everywhere gripe all the time and Brazilians. however. “We went to the US and brought back the whole package [of cutting-edge agriculture in the 1970s]. lorries. “That didn’t work and it took us 30 years to create our own. The big difference is that the cerrado gets a decent amount of rain and most of Africa’s savannah does not (the exception is the swathe of southern Africa between Angola and Mozambique). Could they be taken back and improved again? Embrapa has started to do that. The bigger question for them is: can the miracle of the cerrado be exported. But the large farms are vastly more productive. a word of caution is in order. It has research stations for cassava and sorghum. Brazil imported some of its raw material from other tropical countries in the first place. Brazil’s agricultural miracle did not happen through a simple technological fix.6m are large commercial operations which produce 76% of output. Improving the soil and the new tropical soyabeans were both needed for farming the cerrado. Brachiaria grass came from Africa. most modern ships. Brazil is not the cheapest place in the world to grow soyabeans (Argentina is. No magic bullet accounts for it—not even the tropical soyabean. in contrast. it is not difficult to transfer the technology. In both cases Embrapa’s know-how improved them dramatically. feeding the world in 2050 will not look like the uphill . The fields of Mato Grosso are 2. which cannot take the largest. Big is beautiful Like almost every large farming country. From the point of view of the rest of the world. But it is the cheapest place to plant the next acre. half the country’s 5m farms earn less than 10. especially to Africa.” says Dr Crestana. Their biggest complaint concerns transport. A third reason for hope is that Embrapa has expertise which others in Africa simply do not have.” reckons Dr Crestana. According to Mauro and Ignez Lopes of the Fundacão Getulio Vargas. Perhaps it won’t take them so long. followed by the American Midwest). Africa is changing. takes you onto lands pretty much like the ones you just left.
according to data from Hedge Fund Research. which came to light in 2008. Capital losses and withdrawals by investors have left hedge-fund assets at around $1.” It is not only poor performance that has given investors whiplash. Now it seems that some of the industry’s biggest names have given up on themselves. Two days later it emerged that another wellknown manager. leverage and liquidity. says one executive at a fund of hedge funds. made clear the risks of handing over capital without close oversight. down from a 2007 peak of almost $1. to up-to-date information about returns.Hedge funds Bigger. That illusion was shattered in 2008 when the funds’ average returns were 19%. because he was “dissatisfied” with its performance. Paolo Pellegrini. Duquesne Capital Management. Some managers have started to meet their investors regularly and provide them with more frequent reports about performance. after making losses. safer but duller Aug 26th 2010 | NEW YORK A secretive industry opens up to meet the demands of investors and regulators FOR much of the past two years hedge-fund managers have tried to convince queasy investors not to give up on them.9 trillion (see chart). announced on August 18th that he would close his fund. Stanley Druckenmiller.2% in the first half of 2010 (although stockmarkets fell by much more). plans to hand back investors their remaining money by the end of September. “It’s almost as if you’re a car dealer and there was a devastating crash”. Messrs Druckenmiller and Pellegrini are not the only hedge-fund managers to have been humbled. a celebrated hedge-fund manager and protégé of George Soros. via their websites. which tracks the industry. Returns were -0. “We are so much more transparent than we . “Now people for the first time want to know what’s under the hood. To retain investors. Funds clawed back some of the losses last year but have struggled to build on that recovery.6 trillion. Other firms give investors greater access. Hedge funds used to boast of their ability to deliver “absolute returns”—to make money regardless of the ups and downs in financial markets. An industry that had run almost unchecked because of the returns it once produced and the mystique of its billionaire managers may never again get the same latitude from investors. hedge funds have had to shed their cloak of secrecy. Bernie Madoff’s Ponzi scheme.
JPMorganChase. In March 2009 ShoreBank was a backer of a new Global Alliance for Banking on Values. BRAC of Bangladesh and others. This group aimed to “lead the debate on the banking models we think could inspire profound changes in the mainstream financial industry. however. the bank’s regulator. These banks are now part of a consortium that is investing in the ShoreBank operations taken over by the FDIC. a founder of the bank. ShoreBank was hit hard by America’s housing bust. was able to contrast the low default rates on ShoreBank’s mortgages with the higher ones of less responsible subprime lenders. criticism from some . Within months. Bank of America and Goldman Sachs.” said Mary Houghton. such as Countrywide. and that would be enough to keep ShoreBank alive. the government had indicated that if $125m of private money were raised. following a rule change in May designed to let some well-run smaller banks receive the same sort of help that had rescued many of their bigger brethren. which have been renamed the Urban Partnership Bank. On August 20th the Federal Deposit Insurance Corporation (FDIC). as it was. he argued. Some of the biggest names in mainstream finance rallied round to try to save it. Ron Grzywinski. Founded in 1973. including Citigroup. Yet in the first few months after the house-price bubble burst. ShoreBank found itself in deep trouble as a sharp rise in job losses hit its borrowers. According to someone close to the fund-raising operation. For 35 years it thrived but the financial storm that hit in 2008. called time on its experiment in what became known as community-development finance.ShoreBank Small enough to fail Aug 26th 2010 | NEW YORK The sorry end to a bold banking experiment “LET’S change the world”: ShoreBank’s slogan shouted that the Chicago-based lender saw itself as not just a bank but the leader of a movement. he says. ShoreBank’s other founder. The difference. was that ShoreBank did it the “old-fashioned way”—getting to know the borrower and securing a significant down payment against a realistically-valued property. proved its undoing. They had earlier tried to rescue ShoreBank by putting up enough private capital for it to qualify for government support under the Troubled Asset Relief Programme (TARP). Like many financial institutions. it set out to prove that money could be lent profitably to poor people in poor neighbourhoods. $75m of TARP money would be forthcoming. along with Triodos Bank of the Netherlands. However. and the economic downturn that followed.
Republican politicians and like-minded media pundits seems to have “made the Obama administration afraid that it would be accused of favouring a Chicago institution; had it been from New York or Houston, it would have been saved.” That ShoreBank had become such a political lightning-rod makes it harder to judge precisely where it went wrong, and the implications for the model of banking in poor areas that it pioneered. Mr Grzywinski was the only banker to testify in 1977 in favour of the Community Reinvestment Act (CRA), which required banks to increase their lending in poorer neighbourhoods. Some now blame the CRA for the financial crisis, on the grounds that it was the start of a government-mandated relaxation of lending standards that led ultimately to the subprime-mortgage mess. Although ShoreBank’s management can be criticised for straying too far into riskier parts of the property business—for instance, by lending too much to developers—its demise was primarily because it stuck too closely to its original mission. Given the severity of the downturn in the areas in which it lent most of its money, it would have needed far greater reserves of capital to survive without outside help. As a ShoreBank executive puts it, “the rest of the country experienced the equivalent of a one-in-100-year flood; in the neighbourhoods we are in, it was a one-in-500-year flood.” Greater geographical diversification would have helped a lot. So would a different mix of lending: less to finance home ownership, and more for small businesses. Different approaches to lending in poor neighbourhoods have meant that community-development finance institutions (CDFIs) have performed fairly well in the past three years. That is especially true of “CDFI loan funds”, which lend to small businesses. Mark Pinsky, the boss of the Opportunity Finance Network, a group of CDFIs, says that losses rose only modestly in 2008 and 2009, and that “2010 will probably be the largest lending year yet for this sector.” Mainstream banks are now in partnership with these community-based institutions so as to tap their expertise at lending to businesses in difficult environments. ShoreBank may have failed, but the movement it once led is stronger than ever.
Finance and Economics
Copyright © The Economist Newspaper Limited 2010. All rights reserved.
HSBC and Nedbank
Aug 26th 2010
HSBC learns to play the vuvuzela
THE closest HSBC traditionally got to sub-Saharan Africa was sending its Hong Kong-bound staff round the Cape of Good Hope before the Suez Canal opened in 1869. It is a sign of the region’s vastly improved prospects and the bank’s evolving strategy that HSBC is now in talks to buy a controlling stake in Nedbank, one of South Africa’s big four banks, with a market value of $9 billion. As Africa gets richer and does more trade with Asia, foreign banks are becoming more interested. That was the logic cited in 2007 when China Development Bank bought a stake in Barclays, which owns a big African business, and a few months later when ICBC, China’s biggest bank, bought a 20% stake in Standard Bank, South Africa’s largest, which has operations in some neighbouring countries. Citigroup and Standard Chartered, which along with Barclays have the biggest panAfrican networks, now talk more about their prospects there. Portugal’s banks, which dominate in Angola and Mozambique, view their operations there as jewels. For all the talk, this grand strategic stuff makes hardly any money yet. As it stands Nedbank is simply a diversified play on South Africa’s economy, with a biggish mortgage business and a skew towards public-sector lending. It does, however, have one characteristic that HSBC tends go for: it is underperforming. Its retail division is losing money. The hope must be that fixing this would make the deal’s short-term return on investment respectable, while in the longer term the strategic elements can be put in place, possibly through bolt-on acquisitions of other banks, for example in Nigeria. That assumes the deal happens. The 52% stake is owned by Old Mutual, an insurance firm with South African roots but which is listed in London. That could mean less local fuss about a foreign takeover. Even so, HSBC would be expected to keep a chunk of Nedbank’s shares listed in Johannesburg, as was the case when Barclays bought ABSA in 2005 and when Vodafone took control of its South African unit in 2009. Unlike those firms, which have not integrated the rest of their African activities with these more recent acquisitions, HSBC should be able to make a plausible case to the politicians that over time Nedbank would become not a backwater but its African centre of gravity.
Finance and Economics
Copyright © The Economist Newspaper Limited 2010. All rights reserved.
Foundations of jelly
Aug 26th 2010 | BERLIN
A lawsuit in Germany highlights the flaws of hybrid securities
“MORE capital, better capital” has been the chant of central bankers and regulators, as they strive to rebuild the banking system on more solid foundations. The debate about how much capital banks should hold against unexpected losses has captured much attention. But a lawsuit in Germany raises equally pressing questions about the sorts of capital banks hold. The thinking behind the regulatory push for simplicity and solidity is that over the past few decades banks have been allowed to build complex capital structures made from inferior materials. The best sort of capital to ensure a stable banking system is equity, because it directly absorbs losses and can thus cushion against systemic shocks. It is, however, expensive, so banks have sought to dilute it with cheap fillers, such as the delightfully-named “hybrid capital” and other fancy instruments. One reason for their popularity with the banks that issued them was that they paid fixed interest, which was tax-deductible. Regulators, for their part, Caught between investors and took comfort from the fact that hybrids were a bit like equity in regulators that payments could be stopped to preserve capital should a bank run into trouble. Sadly, hybrids have not behaved quite as expected. Where banks have been compelled to halt interest payments as a condition of receiving state bail-outs (which is the case across the European Union), they have sometimes been unable to do so. For instance, KBC, a Belgian bank, insisted that payments on its hybrid securities were “mandatory”. In contrast, Royal Bank of Scotland, rescued by the British taxpayer, was able to suspend interest payments on only some of its hybrids. In Germany the confused status of hybrid instruments is epitomised by a peculiar set of notes issued by banks, known as “profit-participation certificates”. These pay a fixed rate of interest but only if the bank is profitable. The trouble is, German banks do not quite seem to know the precise rules that govern these payments. Last year Commerzbank paid interest on notes issued by Eurohypo, its property-lending subsidiary, even though it suffered losses. Commerzbank suspended the payments this year, following a stern talking-to by Germany’s bank regulator and its bank bail-out fund. In principle, this response is hard to fault, but irate holders of the notes point to quirks in German law that they say compel Commerzbank to pay up. They have filed a lawsuit to that effect. Similar grumbles are also heard from annoyed debt-holders in America. The picture is further complicated by Germany’s takeover laws, which give minority shareholders the right to earn a fixed dividend on their shares even if the company makes a loss. This has led to a bizarre situation in which minority shareholders in Eurohypo are receiving dividends from Commerzbank, even though they should normally expect to be first in line to share in the firm’s losses.
A recent round of bank stress tests in the European Union and Switzerland suggested that almost all banks have enough capital to absorb quite severe shocks. With the worst of the banking crisis now receding in most rich countries.” There are few easy choices when it comes to damping the burning Explore our interactive guide to world debt fuse on eastern Europe’s bad debts. or that souring loans in Hungary might cripple Austrian lenders. The main reason for the sharp rise in bad debts is that borrowers had became unhealthily addicted to loans in foreign currencies. though in both countries it is still rising and.” says Piroska Nagy. though devaluation is a two-edged sword for corporate borrowers. “The risk is of a Japanese-type frozen situation. because that would . which offered lower interest rates than local-currency debt. “We don’t worry about a banking crisis but a very stalled recovery. because their economies are bigger. Non-performing loans in Ukraine are officially below 10% of the total. such as the Swiss franc. In Hungary and Poland the proportion of debt that is souring is below 8%. In Kazakhstan more than a third of outstanding debt is non-performing. In early August a number of banks operating in the region reported sometimes startling rises in loan losses. the dangers that loan losses in the region pose to Europe’s staggering banking system can be overstated. Many are exporters and so also benefit from a weaker currency. The strains have been made worse by collapsing housing markets and the general economic slowdown. In Latvia about 90% of all private borrowing is. seem rather low. The IMF reckons the true figure is closer to 30%. That said. A bigger threat is that European banking will be paralysed if lenders are weighed down with bad debts that steadily erode their capital buffers. Among them were UniCredit. In Hungary almost two-thirds of household debt is in foreign currencies (see chart). but quirks in the tax law punish banks for writing off loans. But wafts of smoke from eastern Europe suggest the job of stabilising Europe’s banking system is not yet done. The chances that Latvia’s bad debts could overwhelm Sweden’s banks. Governments are unwilling to force an immediate conversion of foreign-currency loans into local currencies. their bad debts can cause more havoc.European banks A glow from the east Aug 26th 2010 | BERLIN A slow fuse still burns on eastern Europe’s foreign-currency debts AFTER firefighters extinguish a blaze they usually look carefully for glowing embers before rolling up their hoses and heading off. It had been hoped that loan losses would start falling. A steep rise in the value of the Swiss franc against local currencies has increased the burden of debt and interest payments on the region’s borrowers. A big share of loans to companies in some countries is in foreign currencies. almost a fifth of debt is going bad. of the European Bank for Reconstruction and Development. Erste Group and OTP. including big loan losses in eastern Europe. too. In Latvia. it is tempting to send the financial firefighters home. Instead they have continued to climb—alarmingly in some cases. say.
But then in 2009 the Swiss bank. for $3. which should support growth.Finance after the crisis: Pactual The origins of a new species Aug 26th 2010 The latest of our profiles of financial firms after the crisis looks at BTG Pactual. including a succession battle in 1999 and the departure of some senior figures in 2009. like them. with perhaps $750m of net income this year and capital of about $2 billion. a partner at Leblon Equities. A hungry culture survived contact with UBS—both sides say Pactual was run at arms’ length. making its partners some of Brazil’s richest men. for $2. Marcelo Mesquita. a partner at BTG Pactual and a former governor of Brazil’s Central Bank.1 billion. Although profits have yet to return to the bumper levels of 2007. In 2006 it sold out to a big foreign firm. A steady shift of local investment funds out of money markets into corporate bonds and equities seems likely. Recently it has risen to the top of the league tables for advising on mergers and it also has a chunky (although not top-ranked) asset-management unit. says Persio Arida. a local investment fund co-founded by André A Brazilian rainmaker Esteves. That makes it probably the largest independent investment bank in emerging markets. have been nudged down the rankings. with a leading position in capital-raising and dealing in shares and bonds. Wall Street firms. an ebullient character described by one admirer as “the world’s best salesman and an extremely hard worker”. which often retrench in downturns. It pays well and has a “fast.5 billion. one of the bank’s former top brass. the former boss of its investment bank (and of Mr Esteves during his brief stint at the Swiss firm). There have been bouts of bloodletting. Some of the building blocks are in place. with some of the world’s largest equity offerings taking place there. reeling from losses. including Huw Jenkins. the firm has also attracted talent from UBS since the split. lean management structure”. Even so. a Brazilian outfit. Today the talk is not of selling out but of whether BTG Pactual might eventually make it to the bulge bracket on its own. Brazil’s investment-banking powerhouse IN RECENT years investment banks were supposedly hijacked by boffins who used their nuclear-physics doctorates to devastating effect. “Clients look at us as businessmen. Today the renamed BTG Pactual is owned again by its partners and led by Mr Esteves who has a 25-30% stake. had conformed to their doctrine. it has financial clout. The firm is less a boutique and more a pocket battleship. Pactual. Mr Esteves says. They reckon only giant global firms can survive. . Until last year. Being a partnership again helps. UBS.” The case for independence has improved now that Brazil’s capital markets have reached critical mass. says Mr Esteves. unexpectedly sold Pactual back to BTG. Yet the industry has long been slave to a different tribe of scientists: the bulge-bracket Darwinists.
Workers routinely shuttle between industries and cities to wherever jobs are abundant. Some economists now fret that other barriers besides weak demand stand between workers and jobs. Unemployment has failed to fall in a way consistent with the increase in job openings. William Beveridge) which relates job vacancies and the jobless rate.6 weeks longer . It is easy to overstate the effects of this. The figures have also departed from the Beveridge curve (named for a British economist. The fall in GDP during the last recession was easily the largest of the post-war period. For instance. The slow rehabilitation is in part because the economy suffered a trauma. Rising GDP has not led to the fall in unemployment predicted by Okun’s Law.Economics focus Bad circulation Aug 26th 2010 There is more to America’s stubbornly high unemployment rate than just weak demand AMERICANS are used to thinking of their job market as lithe and supple. Each new injury is more painful and takes longer to heal. Such payments provide crucial support to the long-term jobless and help to prop up aggregate demand. Employment snaps back quickly after recessions. but even modest expectations for jobs growth have not been met. the labour market has resembled an ageing athlete. compared with the usual limit of 26 weeks. not a scrape. Employment has actually fallen since the end of the recession. But they jar because there are other reasons to believe that structural obstacles to jobs growth have risen. Such deviations are perhaps too short-lived to be conclusive. and output remains well below its potential. and unemployment would be even higher than it is were it not for discouraged would-be jobseekers quitting the workforce. But they also push up the unemployment rate by discouraging workers from looking for jobs as assiduously as they might otherwise do. But in the past decade. Few had expected a rapid return to full employment. and that high unemployment is partly “structural” in nature. raising concerns about the kind of sclerosis that continental Europe suffered in the 1980s. jobless benefits have been extended to 99 weeks in some states with high unemployment. an economist. The case begins with some kinks in recent data. More than a year into the current economic recovery the unemployment rate remains stuck close to 10%. A study from the Federal Reserve Bank of San Francisco* found that those eligible for extended benefits were unemployed for 1. established in the 1960s by Arthur Okun.
It used local mortgage-default and foreclosure figures to estimate geographical immobility. jobless benefits in America are quite mean relative to wages. because of these rigidities. A weak jobs recovery might push such estimates up further. One of the few concrete estimates comes from the IMF.org/publications/economics/letter/2010/el2010-12. Most American policymakers believe that structural joblessness has risen little. and hence not easily alleviated with looser monetary policy.75% by 2009. New technology has caused a hollowing-out and polarisation of the workforce. says Narayana Kocherlakota. The absence of price and wage pressures points to plenty of slack in the labour market. The rise of the two-income household has also made workers less mobile than they were: it is harder to move in search of jobs if there are two careers to consider. By the standards of continental Europe.html Finance and Economics About The Economist online About The Economist Media directory Staff books Career opportunities Contact us Subscribe [+] Site feedback . if at all. president of the Federal Reserve Bank of Minneapolis. and those departing these industries may struggle to adapt to jobs in more vibrant areas such as education and health services. A recent report compared the skill levels of the unemployed with indicators of the skills required by employers. The authors conclude that. The results suggest that each of these factors acts to magnify the impact of the other. The authors of the IMF study note that the structural barriers to employment growth may be transitory and could fade as the economy recovers. This effect is equivalent to a rise of just 0. Cutting out the middle men The downturn may have accelerated a secular jobs trend that had been masked by the low. A bigger worry is that jobseekers no longer have the skills demanded by employers. A worry is that this cohort may become unemployable as their skills atrophy and they become increasingly detached from the informal networks that would lead them to new jobs.than those who could not claim support. Yet it would be unwise for policymakers to hope that stronger demand will mop up all the jobless. but the productivity of high-skilled workers has boomed. and excessively gloomy conclusions can be drawn in the midst of a downturn. The long-term unemployed—those who have been out of work for more than 26 weeks—now account for almost half of the jobless. to create state-level indices of mismatches. How important are these factors? Very. The cost of this skills mismatch is compounded by America’s housing bust. America’s jobs market is not quite as flexible as it once was.4 percentage points in the unemployment rate (though other studies suggest the effect may be somewhat larger). Half of the 8m jobs lost went in construction and manufacturing. leaving them trapped in places with high unemployment and unable to move to where jobs are plentiful. the structural rate—rose from around 5% in 2007 to between 6% and 6. Sorting the cyclical from the structural is tricky. Households often opt to stay put rather than default. Employment growth for middle-skilled workers has steadily declined because of automation. He recently caused a stir by arguing that “most” of America’s unemployment is thanks to such mismatches. the unemployment rate consistent with stable inflation—roughly speaking. *http://frbsf.to middle-skilled work that the housing boom created. suggesting that skills mismatch is not yet as important as weak demand in delaying hiring. The rate at which workers leave unemployment is uniformly weak across sectors. Many owe more on mortgages than their homes are worth.
Scientific misconduct Monkey business? Aug 26th 2010 Allegations of scientific misconduct at Harvard have academics up in arms RARELY does it get much more ironic. An article in the Chronicle of Higher Education on August 19th added further spice. This investigation has resulted in the retraction of an oft-cited study published in 2002 in Cognition. But the present furore. On the same day. The story broke on August 10th when the Boston Globe revealed that Dr Hauser had been under investigation since 2007 for alleged misconduct at Harvard’s Cognitive Evolution Laboratory. who is on leave and refusing to be interviewed. is suspected of having committed the closest thing academia has to a deadly sin: cheating. involving the three published papers and five other pieces of research. the agency responsible for overseeing research practice. the hitherto taciturn dean of Harvard’s Faculty of Arts and Sciences. the matter has been referred to the Office of Research Integrity. also in 2007. to react. In an open letter to the faculty on August 20th. and doubts about the validity of findings published in Science. It offered unsettling accounts by (anonymous) graduate students and research assistants depicting Dr Hauser as brusquely dismissive of their attempts to discuss possible improprieties in data collection and interpretation. which he heads. involving as it does a prestigious university and one of its star professors. It is not the first time the scientific world has been rocked by scandal. issued a single contrite statement apologising for having made some “significant mistakes”. a professor of psychology at Harvard who made his name probing the evolutionary origins of morality. Dr Hauser was the only author common to all three papers. Trials and errors . he confirmed that an internal investigation had found Dr Hauser “solely responsible” for eight instances of scientific misconduct. Since some of the dubious work had been funded by the federal government. the publication last month of a correction to a paper from 2007 in the Proceedings of the Royal Society. All three studies purported to show that the cognitive abilities of some monkeys are closer to those of people than had previously been assumed. will echo through common rooms and quadrangles far and wide. Marc Hauser. This prompted Michael Smith. Dr Hauser.
he uses about 46 megalumen-hours— almost 100. the price of energy. burning electric lights. according to their model. Well. from 20 to 202. That. is the conclusion of a study published in the Journal of Physics D: Applied Physics by Jeff Tsao of Sandia National Laboratories in New Mexico and his colleagues. by 2030. resulting in more energy being purchased for conversion into light. which use souped-up versions of the light-emitting diodes that shine from the faces of digital clocks and flash irritatingly on the front panels of audio and video equipment. at least. Better technology has stimulated demand. the interiors of homes and workplaces are typically lit at only a tenth of the brightness of the outdoors on an overcast day. The consequence may not be just more light for the same amount of energy. solid-state lights will be about three times more efficient than fluorescent ones and that the price of electricity stays the same in real terms. To work out what solid-state lighting would do to the use of light by 2030. Dr Tsao and his colleagues see no immediate end to this process by which improvements in the supply of light stimulate the desire for more—rather as the construction of that other environmental bête noire. some parts of the outdoors might be illuminated at night to be as bright as day. In 1700 a typical Briton consumed 580 lumen-hours in the course of a year. The amount of electricity needed to generate that light would more than double. the number of megalumen-hours consumed by the average person will. The light perceived by the human eye is measured in units called Less is more lumen-hours. .Energy conservation Not such a bright idea Aug 26th 2010 Making lighting more efficient could increase energy use. Today. then: lower electricity bills and (since lighting consumes 6. A win all round. from candles. rise tenfold. This is about the amount produced by burning a candle for an hour. Only if the price of electricity were to triple would the amount of electricity used to generate light start to fall by 2030. Assuming that. If money were no object. the efficiency of the new technology and its cost. so there is plenty of room for improvement. Not if history is any guide. will indeed make lighting better. They predict that the introduction of solid-state lighting could increase the consumption of light by a factor of ten within two decades. wood and oil. promises illumination for a fraction of the energy used by incandescent or fluorescent bulbs. And many outdoor areas that people would prefer to be bright at night remain dark because of the expense.5% of the world’s energy supply) less climate-changing carbon dioxide belching from power stations. Dr Tsao and his colleagues made some assumptions about global economic output. the latest idea to brighten up the world while saving the planet. rather than the decrease hoped for by those promoting new forms of lighting. no. Solid-state lamps. But precedent suggests that this will serve merely to increase the demand for light. stimulates the growth of traffic.000 times as much. not decrease it SOLID-STATE lighting. roads. Even now. but an actual increase in energy consumption.
decided to pray for their romantic partners on a daily basis. Participants were given a survey that is used by psychologists to measure levels of infidelity on a nine-point scale (with nine being highly unfaithful). and a new study suggests that prayer can indeed guide people away from adulterous behaviour. things were more complicated than that. engaging in undirected prayer.9—significantly higher. The survey instructed them to think of the person that they were most attracted to besides their partner and then asked questions like how aroused they felt in that person’s presence. The disapproval of God. the team set up an experiment to explore prayer and fidelity. Dr Fincham and his colleagues report in the Journal of Personality and Social Psychology that although all participants had similar infidelity ratings. mammals. Frank Fincham at Florida State University and his colleagues knew from looking at past studies that couples who attend religious services are more likely to be satisfied with their marriages and less likely to be unfaithful than those who do not. is a different matter. Birds.Psychology Faith and faithfulness Aug 26th 2010 Praying for your partner stops you straying INFIDELITY is rampant in nature. This hinted to them that the mere act of praying increased fidelity. In fact. Following the survey. The researchers recruited 83 undergraduates who reported both being in a romantic relationship and praying at least occasionally. In a second survey. participants were asked to state how strongly they agreed with statements like “my relationship with my partner is holy and sacred”. by rating levels of agreement on a nine-point scale (with nine indicating very strong agreement). Speculating that the act of praying might itself cause romantic relationships to become more resilient. forcing mates to remain perpetually vigilant. Participants did as they were asked for four weeks. At the end of this period. but they did not understand why. to start with. a value much lower than they were seeing for the other two control conditions. without prompting.4. the team again measured infidelity and how sacred the participants felt their romantic relationships were. People who had prayed for their partners averaged 2. When Dr Fincham and his colleagues took this into account. significantly lower than their initial scores.5. the participants were randomly assigned to one of four daily activities: praying for the well-being of their partner. infidelity is common and public disapproval does little to dissuade the sinner. amphibians and even fish all cheat if the conditions are right. and how physically intimate they had been. at the end those ratings varied considerably between the four groups. how emotionally intimate they had been with him or her. Four participants in the “undirected prayer” group had. whereas those who thought positively about their partners or considered their day both showed ratings of 3. thinking about positive aspects of their partner or reflecting upon their day. Although cheats are publicly condemned. and shifted the scores of these specific participants to . Be careful what you pray for What struck the team as particularly intriguing was that participants asked to engage in general prayer showed an average rating of 3. or in some cases impeached. however. averaging 3.2. and kept written logs of what they were praying (or thinking). People are no different.
D. Though largely plotless. his new book will be a huge draw. DeForest was arguing over the relative merits of Nathaniel Hawthorne and Harriet Beecher Stowe. including J. “The Corrections”. should bring alive fully imagined characters in a powerful narrative with a social context. uneven in structure and weighed down with sarcastic observation. “The Corrections” went on to spend 29 weeks on the New York Times bestseller list and win the 2001 National Book Award. This was when his third novel. This year. the award may enjoy almost universal acclaim. Fourth Estate. Mr Franzen rose to fame a decade ago. was first selected as a candidate for Oprah Winfrey’s book club and then very publicly dismissed by the television star.New fiction The stuff of life Aug 26th 2010 Jonathan Franzen’s brilliant new novel studies the planet. a multigenerational family saga about American yuppies and their square parents. Farrar.uk IT WAS John DeForest. The novel that America will be talking about in the coming weeks will be “Freedom” by Jonathan Franzen.com. Mr Franzen’s work will not appeal to those seeking sharp-edged experimentalism in their fiction. (Ms Winfrey did not care for Mr Franzen’s complaint that her book club appealed only to women readers. happiness and marriage Freedom. A mop-haired Midwesterner who looks far younger than 51. Tom Wolfe and John Updike. Indeed. £20. 576 pages. Don DeLillo. who defined the Great American Novel in an 1868 essay for the Nation as “painting the American soul within the framework of a novel”. Walter and Patty Berglund are middle-class university graduates living in Minnesota (a step away from the Missouri of “The Corrections”). though. at its best. Buy from Amazon. By Jonathan Franzen. and disagreements over who should wear the laurels are as long as the continent is wide. Straus & Giroux.) The brouhaha did his book no harm.co. Others have laid claim to the title (or had claim laid to it by their hopeful publishers). two writers who definitely fit the bill. The author has spent the past ten years doing what he does well and making it better. a writer of the civil-war period. $28. Salinger. “Freedom” has all its predecessor’s power and none of its faults. Amazon. But for readers who believe the novel to be an old-fashioned thing that. Young marrieds. he working for 3M (a mining and . there has never been a shortage of candidates for this peculiarly American compulsion.
But it also served in his pursuit of justice. made him a magnet for countless scraps of information about suspected war criminals which he passed on to the authorities. By Tom Segev. $35. Mr Segev concludes. In the bitterly contested matter of the capture of Adolf Eichmann. His reputation.A biography of Simon Wiesenthal The pursuit of evil Aug 26th 2010 A complicated man. anti-Semitic attacks and. The ultimate judgment is a compassionate one. and Driven by memory instead devote his life in Vienna to amassing and immersing himself in memories that most survivors spent the rest of their days trying to forget? The famed “Nazi hunter” tended to guard his emotions by wrapping them in anecdotes for public consumption: he would talk of a girl he had seen being marched towards a mass grave whose desperate look seemed to say “Don’t forget us”. is as careful a biographer as he is an historian. who took years to act—though he also describes Wiesenthal’s subtle manoeuvres to increase his share of the glory afterwards. as well as a superb memory and a knack for networking. including Israel’s Mossad.uk AMONG the 300. When it was a torn lump of flesh they tossed it to their dogs. obsessed by his search for justice Simon Wiesenthal: The Life and Legends. Buy from Amazon. if not excusable. such anecdotes spun out of control. 482 pages. obsessed with titles and recognition. . squabbling with rivals. “Contrary to the myth he spun around himself”. Doubleday. The picture that emerges is often unflattering.000 pieces of paper in Simon Wiesenthal’s private archive is a letter from a Holocaust survivor explaining why he had ceased to believe in God. Yet Mr Segev also comes to his subject’s defence when warranted. “he never operated a worldwide dragnet” but ran a virtually one-man show out of a cramped office. As to Wiesenthal’s defence of Kurt Waldheim. German and American authorities. In his need to protect sources and conceal his work with government agencies.” What made a man who survived three concentration camps cancel plans after the war to move first to America. a chronic lack of funds.co. but having had an easier time than most European Jews during much of the war. Jonathan Cape. multiplying into many different versions in his books and interviews. he finds that Wiesenthal does deserve much credit for bringing the Nazi war criminal’s hideout in Argentina to the attention of the Israeli. then Israel. Mr Segev writes. Then they ripped off her blouse and made her use it to clean the blood off their boots. His mythomania may have been a way to burnish his image. by guilt at not only having survived. £25. for many years. He battled official indifference. and he excels at teasing apart these conflicting tales. Mr Segev. Wiesenthal comes across as a self-important busybody. In Tom Segev’s description: “God had allowed SS troops to snatch a baby from his mother and then use it as a football.com. badgering them relentlessly to make arrests. Wiesenthal was driven. The mother was forced to watch. justly celebrated for his histories of formative moments of the state of Israel. for instance. Amazon. the Austrian president who turned out to have lied about his war record—a controversy that cost Wiesenthal the Nobel peace prize—Mr Segev dissects his behaviour and finds it explicable.
often through intimidation. Black women had a much harder time finding work than foreign immigrants. some of them crossed picket lines and braved being abused as “scabs” to take jobs as strike-breakers. she is a loyal. By Isabel Wilkerson. Another to less-discussed New York. Housing covenants specifically excluded “Negroes” from many suburbs. Polish and Serbian in Chicago. all suffer disappointments. her international perspective myopic. Black men did the dirty work. The third to comparatively neglected California. It revolves around three families who leave the South. One family goes to Chicago. . Italian and Jewish in New York or Mexican and Chinese in California. hardly more than field hands. Buy from Amazon. white residents made it perfectly plain that non-whites were not welcome. $30. So did the job-destroying mechanised cotton pickers in the southern states and the demand for strong-back labour in northern ones. All the families struggle to succeed. Her account of their experiences lacks the objectivity and historical depth of Nicholas Lemann’s classic: “The Promised Land” (1991). Negro and black in line with the practice of the day. Just as the German Jews of New York feared the influx of their co-religionists from eastern Europe. But. ministers.com THE words ring out on Sundays from pulpits in America’s inner cities as well as its Deep South: “We ain’t what we oughta be. so established blacks felt their status was threatened by the arrival of unsophisticated rural folk with slow syrupy accents. transport. who uses the words coloured. the kind of jobs “that even the Poles didn’t want”. In Mississippi in the 1930s white teachers earned $630 a year but coloured teachers were paid only $215. Segregation caused millions to flee. When these covenants were ruled illegal. postal workers. Well within living memory racial segregation was a brutal fact of life in the South. we ain’t what we was. But thank the Lord God Almighty. In a North Carolina courthouse there was a white Bible and a coloured Bible. recalls. In desperation. businesses and hospitals were segregated. says Ms Wilkerson. Whites were downright hostile. kind friend. As well as schools. As Ms Wilkerson. 622 pages. Random House. coloured people in Miami Beach had to be off the streets and out of the city limits by 8pm. It was against the law in Birmingham.” Read Isabel Wilkerson’s account of the 20th-century exodus of millions of her fellow African-Americans from the states of the old Confederacy and the only possible response is “Amen!” A country that elected Barack Obama president two years ago once made people then called coloureds feel foreigners in their own land. by 1980 half of America’s blacks lived outside the southern states. We ain’t what we gonna be. In 1900 only 10% did. Hers instead is an oral history that lifts the spirits and warms the heart. Ms Wilkerson’s intimacy with members of these families is as close as Truman Capote’s with his characters in “In Cold Blood”. Alabama. In consequence. a city whose black migrants have been much studied. for whites and coloureds to play checkers together. unlike Capote. a journalist. Her understanding of economics is shaky. businessmen and the like.Black migration in America From hominy grits to cold shoulder Aug 26th 2010 An account of the 20th-century exodus of millions of African-Americans The Warmth of Other Suns: The Epic Story of America’s Great Migration. As newcomers they are not welcomed by northern-born coloureds who belong to “a solid though tenuous middle class”: Pullman porters.
Henry. Lion Hudson. Amazon.Philanthropy Do-gooders in 1790s London A bid to end slavery Aug 26th 2010 The Clapham Sect: How Wilberforce’s Circle Transformed Britain. solidly respectable. Readers will probably turn first to the sections on slavery and Sierra Leone. By Stephen Tomkins. Thornton’s debtors were given tracts on their duty to be thankful. by the second generation.000 annually (£200. was a mild dig at their religious clannishness. they saw themselves as the nation’s conscience. carrying their Clapham light across the empire. Even Sunday schools were feared as “cradles of anarchy and murder” for teaching the poor their letters. ultimately. where released slaves were taken. Thomas Paine’s “Rights of Man” (1791) and the French revolution had caused general hysteria. They were a holy lot. The one regret is its somewhat short-breathed. For some 50 years John Thornton. under William Wilberforce’s leadership. It was the brainchild of the Clapham Sect and it failed miserably—a complicated fiasco which ended in ex-slaves becoming re-enslaved as indentured labourers. firebrands breaking the doze of the established church. In fact they needed to be rich themselves. Like all evangelicals. 272 pages. A contemporary. in order to gain influence in Parliament for the abolitionist cause. and respectable. secular music. philanthropic families. calling them the “Clapham Church”. the Rev Sydney Smith. Charles Dickens would have enjoyed their priggishness: they supported the “Society for the Suppression of Vice” that snooped on the pleasures of the poor. as they all did.95 and £10. $16. He rescued small debtors from prison. supposedly to enjoy parliamentary freedom under the benign governorship of the Sierra Leone Company. particularly to the lives and characters of its cast. Stephen Tomkins relishes the ironies though he clearly admires the Clapham families. The name itself. had been sharper. prostitutes from the streets. continued the work. given later.com. to the campaigns for the abolition of the British slave trade and. But the book packs in a huge range of information on every aspect of their work. One of them enjoyed his first cigar so much he never smoked again.000 today). of slavery itself.uk THE group called the “Clapham Sect” is best known now for its contribution. They frowned on pleasure: the theatre.co. soberly As this suggests. Buy from Amazon. His banker son. spread across three generations. The Clapham Sect were always comfortable and. Members took their pleasures At the same time. many of whom settled during the 1790s in Clapham. with the emphasis on hellfire and damnation. the evangelical message encouraged sobriety and industry. encapsulating approach. gave away £3. It was a collection of evangelical. he distributed food. a wealthy businessman and a forefather of the group. Books and Arts . For all its thunder. blankets and Bibles. then a prosperous village just outside London. it was their religious brand as much as their cause that marked them out at the time. novels. It sometimes feels as though a larger book were bursting to get out. they wooed the rich.99.
one of Japan’s most notable manga artists. readers of Big Comic. cape and cane. Egyptian pyramids. the professor is Japan’s anti-Indiana Jones. He uncovers a French plot to infiltrate the museum and snatch the Rosetta Stone (the ancient artefact that provides the key to Egyptian hieroglyphs) in order to return it not to Egypt but to France. which first discovered and translated it. Though many are juvenile. They are increasingly popular abroad and starting to make their way into museum exhibitions—though in Japan itself they are still given short shrift as an art form. Like his medium.” explains Mr Hoshino. . with sales of magazines and books amounting to around $5 billion a year. In Japan manga is a mainstream medium. In previous escapades the professor barely survived after uncovering an ancient burial ground in Japan’s hinterland. Mr Hoshino trained in classical Japanese painting. violent or pornographic. bald and impeccably dressed with cap. “I engage with historical themes or folklore with a totally open mind and try to invent new theories. which reached its tumultuous conclusion on August 25th. Eventually. He does not invite danger but bumbles into it. The immaculately drawn images and historical accuracy permit the artist to move into the realm of the improbable. The current saga. How the latest strip came to be produced is almost as unlikely as the good professor’s exploits. ancient Assyria and the Kingdom of Benin in the 13th century. it is Professor Munakata’s “reverse pyramid” strategy that prevents the megaliths from being dumped atop the dome of St Paul’s Cathedral from a blimp. in the form of a manga. The strip. marks the first time that the brave hero (and his 56-yearold creator too) has paid a visit to the West. was introduced 15 years ago by Yukinobu Hoshino. Portly. have followed the exploits of the fictitious ethnographer as he gets embroiled in a bizarre plot to force the repatriation of the museum’s prized objects. he exposes readers to early British civilisation. such as the Elgin marbles which Greece has long been demanding. In the current adventure Professor Munakata is the first to realise that the stolen megaliths are pawns for the return of the British Museum’s controversial treasures. but adds occasional colour on a Mac. his method combines the old and the new: he draws with a traditional Japanese brush dipped in ink. The strip does not follow any set formula but takes on serious issues. a Japanese fortnightly magazine. others are intricate narratives skilfully illustrated and meant to educate as much as to entertain. or Japanese cartoon.Japanese cartoons The professor to the rescue Aug 26th 2010 | TOKYO A cartoon strip takes on the repatriation of treasures from the British Museum “THE Stonehenge megaliths have been stolen!?” So exclaims Professor Munakata at the outset of a rollicking adventure set at the British Museum. called “The Case Records of Professor Munakata”. He also risked his life leading an archaeological survey of an island between Japan and Korea that both countries claim. He has produced works on history and folklore as well as science fiction. Along the way. Over the past five months. but abandoned it for his love of manga (which means “pictures run amok”).
far from it. He had asked Mr Millin to be his personal piper: not a feudal but a military arrangement. his little dirk. aged 88 ANY reasonable observer might have thought Bill Millin was unarmed as he jumped off the landing ramp at Sword Beach. And it raised the hearts and minds of the home side. His playing had been planned as part of the operation. He held his pipes. tucked in his right sock. in Normandy. on June 6th 1944. The whining skirl of the pipes had struck dread into the Germans on the Somme. Unlike his colleagues. sleeping on deck. salt water wasn’t). the son of a Glasgow policeman. on the family’s return in 1925 from Canada to Scotland. on the point of jumping . Not that they had much in common. On commando training near Fort William he had struck up a friendship with Lord Lovat. The War Office in London now forbade pipers to play in battle. Mr Millin was short. a weary soldier still smelling his own vomit from a night in a close boat on a choppy sea. who had called the kilted pipers “Ladies from Hell”. as the troops left for France past the Isle of Wight and he was standing on the bowsprit just about keeping his balance above the waves getting rougher. but Mr Millin and Lord Lovat. then cradled in his arms to play.” Mr Millin thought him a mad bastard. a piper was a fighter like the rest. the wild cheers of the crowd drowned out the sound of his pipes even to himself. And bagpipes. Lovat was tall. with a broad cheeky face. and his music was his weapon. and whose kilt in the freezing water was floating prettily round him like a ballerina’s skirt. by long tradition. near Inverness. with a castle towering above the river at Beauly. piper at the D-Day landings. the pale 21-year-old held no rifle in his hands. Lovat wanted pipes to lead the way. high over his head at first to keep them from the wet (for while whisky was said to be good for the bag. lanky. Of course. piper. But Mr Millin was not unarmed. plotted rebellion. his sharpest childhood memory was of being one of the “poor”. counted as instruments of war. died on August 17th. the officer in charge of the 1st Special Service Brigade. outrageously handsome and romantic.Bill Millin Piping in D-Day Aug 26th 2010 Bill Millin. in that drawly voice of his: “Give us a tune. He was ordering now. he had his trusty skean dhu. In this “greatest invasion in history”. The man beside him. An English judge had said so after the Scots’ great defeat at Culloden in 1746. But that was soon under three feet of water as he waded ashore. so much so that when Mr Millin played on June 5th. as Scots. as they waded up Sword Beach. in full Highland rig as he was.
budget balances and interest rates Aug 26th 2010 Economic and Financial Indicators . exchange rates.Trade.
Markets Aug 26th 2010 Economic and Financial Indicators .
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