The Economist - 24TH - 30TH June 2023

How to build Ukraine 2.
0
Is China’s economy turning Japanese?
AI: bigger is not always better
Study-drugs don’t work
JUNE 24TH–30TH 2023
the trouble
with sticky
inflation
012
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Contents The Economist June 24th 2023 3
The world this week Asia
5 A summary of political 17 Asia’s resource contest
and business news 18 Modi the yogi
Leaders 19 Afghanistan’s drug war
7 Financial markets 19 Greenwashing
What if inflation sticks? South Korea
8 The home front 20 Banyan Showa retro
Creating Ukraine 2.0
China
9 Iran and the bomb
Buying time 21 The debate over Taiwan
9 China’s growth troubles 22 China eyes Okinawa
Confidence trap 23 Clothes and diplomacy
10 Antitrust and tech
On the cover Merger crush saga
Investors must prepare for
sustained price pressure: Letters
leader, page 7. Inflation in 12 On productivity in Latin United States
Britain is increasingly the result America, Boris Johnson, 24 The competition cops
of poor judgments. Tackling it New College of Florida, 25 The road most travelled
will hurt, page 42. Persistent Verdun, legal speak
inflation is as corrosive to 26 Pollsters’ problems
investing as it is to the real Briefing 27 Hunter Biden’s plea
economy: briefing, page 55 27 Death row in Louisiana
13 Reforming Ukraine
Worth fighting for 28 Abortion politics
How to build Ukraine 2.0
For Russia’s war to fail, Ukraine 29 Lexington Multiverse
must emerge prosperous, escapism
democratic and secure: leader,
page 8. The war is reshaping the The Americas
Ukrainian state—for the better: 30 The politics of 114%
briefing, page 13. America is not annual inflation
keen for the country to enter
32 Journalism under fire
nato—yet, page 46. Ben Wallace,
Britain’s defence secretary says 32 A lifeguard crisis
he is out of the race for running
nato, page 44. Ukraine’s
spymaster Kyrylo Budanov has
got under the Kremlin’s skin, Middle East & Africa
page 37 33 Africa and global bodies
34 Congo’s jihadists
Is China’s economy turning
Japanese? The recovery from 35 A minideal on Iran
zerocovid is already spluttering. 36 Israel’s arms boom
The prognosis is not good: leader,
page 9, and analysis, page 58
ai: bigger is not always better Europe
It will have to do more with less, 37 Ukraine’s spymaster
page 64
38 Beefing up French arms
Studydrugs don’t work Schumpeter Move over, 39 A Mediterranean tragedy
They can make people worse Bud Light. Surrender to 40 Turkey’s housing crisis
at problemsolving, not better, the power of the Hispanic 41 Charlemagne Europe’s
page 65 market, page 54 small cars
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Contents continues overleaf
012
4 Contents The Economist June 24th 2023
Britain Finance & economics
42 More inflation agony 58 China’s economy
43 Pay for bosses 59 Rebuilding Ukraine
44 Ben Wallace 60 Cheap energy
45 Bagehot Luck trumps skill 61 Buttonwood Confused
animal spirits
62 Farming in India
63 Free exchange More
International
military spending
46 Should Ukraine join
nato? Science & technology
64 Why ai must get smaller
65 Studydrugs don’t work
66 Building wooden towns
Business
49 Vetting Chinese deals
50 China needles Sweden Culture
51 Finishing school for execs 67 Taiwan's #MeToo drama
51 Dr Walmart’s clinic 68 San Francisco’s art island
52 India’s aviation boom 69 Lorrie Moore’s new novel
53 Bartleby “Scaling People” 70 North Korea’s next
54 Schumpeter Modelo v Bud dictator?
70 The world’s waste problem
Briefing 71 Johnson The ghost in the
55 Inflation and investing AI machine
Economic & financial indicators
72 Statistics on 42 economies
Graphic detail
73 Buyers of Russian crude are exporting refined oil to the West
Obituary
74 Daniel Ellsberg, leaker of the Pentagon Papers
Volume 447 Number 9352
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012
The world this week Politics The Economist June 24th 2023 5
until July 17th, but Russia the government of atrocities. It is unclear if the progressive

claims its own grain exports Since the army seized power in Move Forward party, which
are being impeded. 2020, Mali has constrained the scored a stunning upset by
operations of the blue helmets coming first in the election,
In Moldova the Constitutional and has turned instead to has enough support to form a
Court placed a ban on Sor, a Wagner Group, a Russian coalition under its leader,
proRussian political party mercenary firm, in its fight Pita Limjaroenrat.
that has led protests against against jihadists.
the Moldovan government. The age of sexual consent in
The party’s leader was Ilan Jihadists from the Allied Japan is to rise from 13 to 16
Shor, a businessman who fled Democratic Forces, a following landmark reforms
to Israel after being found Congolese group backed by passed by the country’s legis
Antony Blinken visited China, guilty of moneylaundering. Islamic State, killed 41 people, lature. The definition of rape
the first American secretary of most of them children, in a is to be broadened from
state to do so in five years. He Petteri Orpo became prime crossborder raid on a school “forced” to “nonconsensual”
met several senior officials, as minister of Finland. The coun in Uganda. It was the country’s sexual intercourse.
well as China’s president, Xi try’s parliament formally worst terrorist attack
Jinping, who said they had backed his new centreright since 2010. Police in the South Korean
made “progress” towards coalition following an election city of Daegu stepped in to
stabilising relations. Both in April, in which the ruling At least 46 women were killed allow a gay pride festival to
sides appeared open to further Social Democrats were defeat in a prison in Honduras in a proceed after local officials
talks, but no agreements were ed. The new finance minister battle between rival gangs. tried to stop the event. The
reached. Mr Blinken said there is Riikka Purra, who leads the Most of the women had been conservative local mayor said
are “many issues on which we Eurosceptic Finns Party. set on fire. President Xiomara the organisers had not sought
profoundly, even vehemently, Castro, who has been trying, permission and the festival
disagree”. Later, at an event in Estonia’s parliament legalised without much success, to would impinge on business
California, Joe Biden called Mr samesex marriage, making crack down on gang activity, es. But a court refused to
Xi a dictator and said the Chi the Baltic nation the first including within prisons, said impose an injunction, finding
nese leader had been embar country in eastern Europe to the violence had happened that freedom of expression
rassed when America shot do so. The prime minister, Kaja with the acquiescence of secu was paramount.
down an alleged Chinese spy Kallas, has formed a liberal rity officials. She sacked the
balloon in February. China said coalition following her party’s country’s security minister.
the comments were absurd. election win in March. Hunter on the defence
In a deal with the Justice
Mr Biden described Russia’s Four Israelis were killed by Department, Hunter Biden
deployment of tactical nuclear two Palestinian gunmen in an pleaded guilty to failing to pay
weapons to Belarus as “abso attack near a settlement in the income tax. He also reached
lutely irresponsible”. Vladimir occupied West Bank. Palestin an agreement on his illegal
Putin confirmed that the first ian officials said hundreds of possession of a gun that will
batch of weapons, which carry Israeli settlers assaulted a see him avoid prosecution.
small warheads for battlefield village in revenge; a Palestin Republicans accused the
use, had been sent to its ally as ian man died in the ensuing department of political bias in
a warning to countries that are mêlée. Hamas, the Islamist what they claim is its lenient
“thinking of inflicting a group that runs Gaza, said the handling of Joe Biden’s son.
strategic defeat on us”. gunmen were its members and
that the attack was retaliation Narendra Modi travelled to A submersible vessel carry
for an Israeli raid on Jenin, America for his first full state ing five passengers on a trip to
A voice in the wilderness where Israel fired from heli visit (it was his sixth trip as the wreck of the Titanic lost
The Russian authorities began copters in the West Bank for prime minister of India). Mr contact with its support ship.
a new trial of Alexei Navalny, the first time in 20 years, kill Modi is being feted by Amer An extensive search was
this time accusing Russia’s ing seven Palestinians. ica, which wants to deepen ties launched for the Titan, which
most prominent opposition with India on defence and had limited oxygen on board.
politician of rehabilitating Zied el Heni, a journalist, was technology, in large part to
Nazism while in prison. The arrested on charges of in counteract the rise of China. In Britain MPs voted on a
closeddoor trial is being held sulting Kais Saied, Tunisia’s India is not an American ally, committee report that
in the penal colony where Mr president. Tunisian judges however, and still depends on censured Boris Johnson for
Navalny is serving over 11 years have detained or opened in Russia for oil and weapons. Mr deliberately misleading
on other trumpedup charges. vestigations into more than 20 Modi also met Elon Musk to Parliament. Rishi Sunak was
The preordained guilty verdict prominent figures opposed to discuss tech investments. criticised by the opposition
in this sham case could add Mr Saied in recent months. for a lack of leadership when
another 30 years to his term. Thailand’s election commis he declined to turn up for the
Mali ordered a peacekeeping sion confirmed the results of a vote. Most other Conservative
Russian officials threatened to mission with 15,000 personnel ballot in May that was won by MPs also failed to appear. But
end the deal that ensures the to leave “without delay” and the opposition. The commis in the end only seven Tories
safe passage of Ukrainian grain said it would bring espionage sion’s confirmation of the voted against the report, a
through Black Sea ports. The charges against UN officials result paves the way for parlia crushingly low level of sup
agreement has been extended involved in a report accusing ment to choose a government. port for Mr Johnson.
012
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The world this week Business The Economist June 24th 2023
er’s boss in 2018 over allega The Italian government took ica’s enticement of chipmak

tions of financial misconduct. measures to block a Chinese ers. The Israeli government
Mr Ghosn, one of the most stateowned company from said that Intel would up its
powerful executives in the car appointing a CEO at Pirelli, a investment in a factory in the
industry at the time, filed his global maker of tyres best country to $25bn.
claim in Lebanon, where he known for its association with
fled in 2019 to avoid a trial. Formula One racing. Sinochem Alibaba announced that Eddie
Nissan declined to comment. holds a 37% stake in Pirelli. Yongming Wu would replace
Daniel Zhang as chief exec
The International Energy IndiGo, a lowcost Indian utive in September. Mr Zhang
Agency published a report on airline, placed an order for 500 will retain control of the cloud
clean energy in developing Airbus A320 passenger jets, the division. Mr Wu is one of the
Britain’s headline annual rate and emergingmarket econo biggest ever deal in commer founders of the Chinese
of inflation remained elevated mies. It said that investments cial aviation. India has be internet giant and is a close
at 8.7% in May, defying expec in those countries would have come the fastestgrowing friend of Jack Ma, another
tations that it would fall again. to rise from $770bn a year to aviation market and IndiGo is founder, as is Joe Tsai, who
Core inflation, which strips between $2.2trn and $2.8trn by the biggest domestic player. takes over Mr Zhang’s other
out food and energy prices, the early 2030s if the Paris The deal was announced at the role as chairman. In March the
rose to 7.1%, the highest it has agreement’s goals on carbon first Paris air show since 2019. company announced plans to
been since March 1992. The emissions are to be met. China At the event Air India firmed turn itself into a holding com
government has promised to accounts for twothirds of the up its order for 470 planes pany overseeing six divisions.
cut inflation by half this year current spending on clean from Airbus and Boeing.
from the 10.1% registered in energy, with Brazil and India
January, but higher prices taking a large bite of the rest. America’s Federal Trade Com A ray of Son shine
persist in food, clothing, mission sued Amazon for Son Masayoshi used his first
recreation, health, communi Denmark retained top spot in allegedly enrolling customers public appearance in seven
cations and travel. the annual World Compet into its Prime service without months to talk up SoftBank’s
itiveness ranking from the their consent and for making it investments in artificial in
International Institute for hard for them to cancel. telligence. Displaying his
Brick by brick Management Development typical exuberance, the boss of
The price of housing in Britain (IMD). The criteria behind the Intel doubled the amount it is the Japanese tech conglomer
is also soaring. The cost of a ranking include international investing in two new chip ate told shareholders that “a
twoyear fixedrate mortgage trade, government and busi making factories in Germany huge revolution is coming” in
has shot above 6% in recent ness efficiency and techno to $33bn, after the German AI and that SoftBank would
days, as lenders reevaluate logical infrastructure. Ireland government agreed to increase “rule the world” in its devel
their mortgage products and leapt from 11th place to 2nd subsidies for the project to opment. After a period of
remove cheaper deals from the while Britain tumbled from €10bn ($11bn). It is the largest reflection following heavy
market. Banks link their fixed 23rd to 29th, dragged down by ever foreign investment in losses at its flagship Vision
rate mortgages to market worsening productivity and Germany and the biggest bid Funds, Mr Son said he now
expectations for interest rates, rising bureaucracy. America by a European country to enter wants to become “an architect
which are rising as the outlook was 9th; China 21st. the chip war, following Amer for the future of humanity”.
sours on inflation. Official
statistics showed rents also
surging, by 5% in the year to
May, the fastest pace since the
data series began in 2016.
China’s central bank trimmed
its benchmark lending rates
for the first time in ten
months, in an effort to rejuve
nate growth. With Li Qiang, the
prime minister, warning that
“the external environment is
becoming more complex and
severe”, the government is
considering other measures to
get the economy moving. The
finance ministry unveiled a
520bn yuan ($72bn) extension
to tax breaks for electric
vehicles to boost car sales.
Carlos Ghosn filed a lawsuit
seeking $1bn in damages from
Nissan related to his arrest and
defenestration as the carmak
012
Leaders 7
The trouble with sticky inflation
Investors must prepare for sustained price pressure
A t first glance the world economy appears to have escaped
from a tight spot. In the United States annual inflation has
fallen to 4%, having approached double digits last year. A reces
tionlinked Treasuries, for instance, is consistent with average
inflation expectations of 2.1% over the next five years, and 2.3%
in the five years thereafter. A world of higher sustained inflation
sion is nowhere in sight and the Federal Reserve has felt able to would therefore involve an epochal shift for financial markets.
take a break from raising interest rates. After a gruesome 2022, Unfortunately, it would be volatile, wrongfoot investors and pit
stockmarkets have been celebrating: the s&p 500 index of Amer winners against losers.
ican firms has risen by 14% so far this year, propelled by a resur One source of volatility could stem from the damage to cen
gence in tech stocks. Only in Britain does inflation seem to be tral banks’ reputations. In the decades since the 1980s they have
worryingly entrenched. trumpeted their commitment to targets. Yet over the past two
The trouble is that the inflation monster has not truly been years they have failed to anticipate the persistence of inflation.
tamed. Britain’s problem is the most acute. There, wages and Should they then pay lip service to their unmet targets, they
“core” prices, which exclude energy and food, are rising by might no longer be taken at their word. In time they could lose
around 7%, year on year (see Britain section). But even as head the ability to guide the expectations of businesses and their
line rates elsewhere have dropped as the energy shock has faded, workers. Those expectations could become unmoored and
core inflation has been frustratingly stubborn. In both America cause lurches in prices, inducing inflation to spiral.
and the euro area it exceeds 5%, and has been high over the past Volatile inflation would hurt companies, and their shares, by
year. Across the rich world many governments are adding fuel to making it harder for them to manage their costs and set prices. It
the fire by running budget deficits of a scale typically seen dur would hurt virtually every asset class by raising the likelihood
ing deep economic slumps. that central banks would have to rush to adjust rates after an un
As a result, central banks face agonising choices. What they expected flareup. That could bring large swings in real yields,
do next will reverberate across financial markets, threatening prompting investors to demand a discount in compensation for
uncertainty and upheaval for workers, bosses and pensioners. the uncertainty, forcing asset prices down.
Equity investors are hoping that central banks can return in The new regime could wrongfoot investors in other ways,
flation to their 2% targets without inducing a too. Were central banks more lax, it would ini
recession. But history suggests that bringing in tially flatter the prices of shortterm bonds and
flation down will be painful. In Britain mort push down their yields. In time, as the system
gage rates are surging, causing pain to aspiring adjusted to higher inflation, nominal rates
and existing homeowners alike. Rarely has would rise to keep real interest rates constant;
America’s economy escaped unscathed as the in anticipation, the price of longterm bonds
Fed has raised rates. By one reckoning, the un would fall. Investors could rush into commod
employment rate would have to rise to 6.5% for ities, an inflation hedge. Yet a stampede into the
inflation to come down to the Fed’s target, the tiny market for futures, which are easier to
equivalent of another 5m people being out of work. Rising inter trade than physical barrels of oil, would risk a bubble.
est rates imperil financial stability in the euro area’s most in Higher inflation would also create new winners and losers.
debted member countries, notably Italy. Most obviously, inflation involves an arbitrary transfer of wealth
Moreover, the secular forces pushing up inflation are likely to from lenders to borrowers, as the real value of debt falls. Heavily
gather strength. Sabrerattling between America and China is indebted borrowers, including governments around the world,
leading companies to replace efficient multinational supply may feel like rejoicing. But as bond investors realised they were
chains with costlier local ones. The demands on the public purse being stiffed, they could punish recklessness with higher bor
to spend on everything from decarbonisation to defence will rowing costs, including in rich countries.
only intensify (see Free exchange).
Central bankers vow that they are determined to meet their Sticker shock
targets. They could, by raising rates, destroy enough demand to Other financial relationships could also become strained. If in
bring inflation down. Were they to keep their word, a recession flation was gobbling up four percentage points of returns each
would seem likelier than a painless disinflation. But the costs of year, investors might start to look askance at fund managers’
inducing a recession, together with the longer term pressures on fees. Rising yields would improve the financial health of many
inflation, suggest another scenario: that central banks seek to definedbenefit pension schemes, by reducing the present value
evade their nightmarish tradeoff, by raising rates less than is of their future liabilities. But benefits in retirement are not al
needed to hit their targets and instead living with higher infla ways fully protected from inflation, meaning that the purchas
tion of, say, 3% or 4% (see Briefing). ing power of some pensions will eventually be lower than ex
This approach would resemble the “opportunistic disinfla pected. That would fuel voters’ ire.
tion” espoused by some Fed governors in the late 1980s. Rather Such is the excruciating situation that central banks now find
than deliberately inducing recessions to bring inflation down, themselves in. They are likely to steer a course between high in
they sought to do so passively, from cycle to cycle. Yet today’s flation and recession. Investors seem to believe that this can still
markets are not prepared for such tactics. The pricing of infla end well, but the chances are that it won’t. n
012
8 Leaders The Economist June 24th 2023
The home front
Creating Ukraine 2.0
For Russia’s war to fail, Ukraine must emerge prosperous, democratic and secure
U KRAINE’S WAR is raging on two fronts. On the 1,000km bat

tlefront its armies are attacking the Russians’ deep defenc
es. At the same time, on the home front Ukraine is defining what
them now, despite the fighting. Progress will help lock in West
ern support, which may ebb—especially if Donald Trump is
elected in 2024. It will also signal to Mr Putin and his cronies
sort of country it will be when the fighting stops. Both matter, that their war is futile.
and both will pose a severe test for Ukraine and its backers. The effort starts with money for rebuilding on a vast scale.
After two weeks Ukraine’s counteroffensive is falling behind Ukraine’s economy has stabilised at about twothirds of its for
plan. Its forces have retaken some territory, but they have suf mer size. Ultimately, its future rests on private investment, but
fered losses and have yet to penetrate the kilometresdeep array government money will be needed first. The London conference
of Russian minefields, tank traps and trenches. Even if they set out to galvanise support from development banks and West
break through some lines, they risk being pinned down and de ern backers as well as tempt businesses to consider a reformed
stroyed by enemy artillery and drones. Ukraine as a place to invest (see Finance & economics section).
That is a sobering prospect. However, the vast majority of Many countries have a vital interest in Ukraine succeeding
Ukraine’s troops have yet to enter the battle and, until they do, and Russian aggression being seen to have failed, but these are
nobody—not even Ukraine’s generals—can know the two sides’ straitened times. Governments will not raise enough money, es
true strength. In the coming weeks the Ukrainian army will es pecially if they protect their aid budgets, as they should. Instead
tablish whether or not Vladimir Putin can hold his ground, and they should find a legal process that allows them to treat the
set the military terms for the rest of the conflict. $330bn or so of Russian state money they have frozen as a fund
The home front is less dramatic, but everything depends on for paying out compensation to Ukraine.
it. Russia may continue to occupy tracts of land, but if Ukraine Next comes good government. The war has shunted aside
ends up prosperous, democratic and secure, then Mr Putin’s war many of the oligarchs who held Ukraine back. Their place has
will have failed utterly. By contrast, if Ukraine takes back territ been taken by a cohort of entrepreneurs and activists, many of
ory only to sink into a morass of corruption, poverty and polit them with a background in technology (see Briefing). The gov
ical violence, it will have surrendered the ideals for which its ernment of Volodymyr Zelensky has moved against some cor
citizens have fought so bravely. A conference in ruption, including detaining the head of the Su
London this week and a NATO summit in Vilni preme Court on allegations of bribery.
us, in Lithuania, on July 11th12th are laying the However, Western officials warn that, for all
foundations for success or failure. his strengths, Mr Zelensky is bored by the detail
Ukraine’s nationbuilders face formidable that dogged reform entails. When Ukraine fi
obstacles. The greatest is that, while Mr Putin is nally holds elections it risks lapsing back into
in power, this war is unlikely to end with a solid the old, corrupt politics. That is why accession
peace treaty. The two sides may talk—if only to to the European Union is so important. It
avoid being seen as warcrazy. But Mr Putin’s creates an incentive for reform and the applica
word is not to be trusted and Ukraine will be unwilling to for tion of the law. It also submits the government to scrutiny and
mally sign away its claim to any territory that Russia still occu creates allies for those who dream of transforming their country.
pies. Instead the two armies could dig in. An informal ceasefire Finally comes security. Eventually, Ukraine needs to join
could follow, or a lowintensity conflict broken by missile NATO. That would offer permanent security at the lowest cost,
strikes, a continued blockade and fitful, probing offensives. because NATO’s Article 5 guarantee would signal to Mr Putin and
The other obstacles are almost as formidable, though at least his successors that an attack on Ukraine was an attack on the en
it is in the power of Ukraine and its allies to overcome them. tire alliance—a battle Russia could not win. By binding what will
About 6.2m Ukrainians have fled abroad: their country needs be Europe’s biggest and bestequipped army into NATO’s struc
them back. More than 1m fighters will return from battle, many tures, it would also help stabilise Ukraine and its borders.
bearing injuries and mental trauma. The World Bank has esti However, Ukraine gains little from joining while battle rag
mated that repairing the damage from the first year of war will es—because that would require suspending Article 5 and any
cost more than $400bn—and that was before the collapse of the doubt about when it applies would weaken NATO. Instead Uk
dam at Nova Kakhovka, most likely because of Russian sabotage. raine needs bilateral security guarantees and an accelerated path
Last, as Ukraine leaves behind martial law, it must overcome a to NATO membership (see International section). These guaran
history of corruption and misgovernment that Russia has long tees need to be written into law, as they are between America and
exploited to corrode Ukrainians’ faith in their leaders. Israel. They should involve money, weapons, intelligence and
To succeed, Ukraine must work on many dimensions at the investment in Ukraine’s arms industry. Western troops may
same time. To attract workers and private capital, it needs to re eventually be based in the country. The aim is to make Ukraine
build itself. To unleash the creativity and enterprise of its cit indigestible, rendering a future Russian invasion less feasible.
izens, it must live by the rule of law. To deprive Mr Putin of a veto This is a fearsome agenda. If Ukraine struggles on the battle
over its prosperity, it must ensure that its skies and cities are front, a greater burden will fall on the home front and the higher
safe enough from Russian aggression for normal life to flourish. will be the obstacles to success. All the more reason for
Each of these depends on the others, and work should start on Ukraine and its allies to press ahead. n
012
The Economist June 24th 2023 Leaders 9
The Middle East
Buying time
America wants to lower tensions with Iran. Good
I RAN CANNOT rival Ukraine and Taiwan for headlines, but it

could soon prove as dangerous as either. Its nuclearweapons
programme has put its regime in a position to dash for a bomb.
Korea honour $10bn of payments they owe Iran. Congressional
approval would not be needed.
The arrangement would reward Iran for slightly less danger
Because fullblown negotiations are impossible, the threat ous behaviour even as it flirts with becoming a nuclearweapons
could yet draw the Middle East into war—including through state. That sounds like a dreadful outcome, until you consider
American strikes on Iranian nuclear facilities. That is why it is the alternatives. Mr Trump’s policy of bringing down the regime
good that the Biden administration is seeking to lower tensions. through sanctions has failed. gdp has shrunk by 44% since 2012
Since 2018, when President Donald Trump recklessly left a in dollar terms, but the mullahs and Revolutionary Guards are
pact between Iran and a group of world powers, known as the retaining power by spilling blood: 349 people have been execut
Joint Comprehensive Plan of Action (jcpoa), Iran has faced fewer ed this year. In the past year oil exports, mostly to China, have
constraints on its nuclear programme. The original pact lifted risen from under 1m barrels a day, to over 1.5m. A Chinesebro
some sanctions; and in return, Iran agreed to abide by a set of kered deal with Saudi Arabia has left Iran less isolated.
commitments until at least 2030, including The jcpoa is dead: Iran’s breakout time is
that it would cap its uranium enrichment at measured in days, not years; the deal’s backers
3.67% and accept intrusive inspections. The in Tehran have lost sway; and the possibility of
goal was to freeze at a year the time needed to Mr Trump being reelected means America can
enrich a bomb’s worth of uranium. not make a credible longterm commitment.
Mr Trump viewed this as “the worst deal The military option is no better. Americanled
ever”, yet he also decided against a military strikes would not destroy Iran’s nuclear effort,
strike (the plans for one may be in his stash of only set it back months or years. They might
classified documents). Iran has responded by also ignite a regional war. America has other
accelerating its enrichment activity and continuing to act as a priorities: helping Ukraine and deterring China in Asia. The last
menace in other ways. It has supplied fleets of drones to Russia. thing it needs is a conflict in the Middle East.
Since September, after a young woman died in the custody of Today the conditions for a grand bargain with Iran are not in
Iran’s morality police, it has crushed antiregime protests at place. That could change. When Ayatollah Ali Khamenei, Iran’s
home. In February international inspectors found particles of 84yearold supreme leader, eventually dies it could trigger a
uranium enriched to 83.7%, just short of the 90% typically need succession struggle. A deal between Saudi Arabia and Israel
ed for a bomb, leading Israel to warn that it may attack. could shake up Middle Eastern diplomacy. With an eye on its oil
The new arrangement being discussed between America and supplies, China could press Iran to act more responsibly. Even if
Iran—no one is calling it a deal—would seek to lower the tem a grand bargain proves permanently out of reach, the intensity
perature (see Middle East & Africa section). Iran would cap en of the Ukraine war could one day fade, freeing up American mil
richment at 60% and accept more inspections. America would itary resources. Buying time while retaining the option of using
ease sanctions somewhat, for example by letting Iraq and South force against Iran is the least bad option. n
Growth in China
Confidence trap
China’s recovery from zerocovid is spluttering. The prognosis is not good
W hen the Chinese government abruptly abandoned its

zerocovid policy at the end of 2022, all bets were on a rap
id economic rebound. After nearly three years of restrictions,
semiconductors and skittish foreign investors, to President Xi
Jinping’s crackdown on big tech firms. But the main culprit for
the recent weakness is property, which before the pandemic was
the world’s secondlargest economy would, the thinking went, a crucial source of growth across the economy. Activity slowed,
come roaring back. first as the government sought to rein in heavily indebted devel
In the event, China has reopened with a whimper, not a bang. opers, and then more recently as sales have stayed weak. Be
A range of economic indicators, including retail sales and in tween January and May, for instance, realestate investment fell
vestment, have risen less rapidly than expected. Some analysts by 7.2%, compared with the same period a year ago. The danger
now think the economy might not have grown at all during the is that the property bust now becomes an enduring malaise.
second quarter. At this rate, the government’s modest gdp tar The end of the long property boom has hurt the economy in
get, for growth in 2023 of 5%, will only just be met. several ways. It has dragged down construction and all the asso
There are several reasons to be gloomy about China’s eco ciated services needed for housebuilding and sales. Because
nomic prospects, from America’s export controls on advanced homeowners are less likely to spend money if they are worried
012
10 Leaders The Economist June 24th 2023
about their most valuable asset, the end of the boom has proba Unfortunately, China looks as if it may repeat the same mis
bly also depressed consumption. Many businesses in China use take. The government remains fond of directing stimulus to in
property as collateral for their borrowing, so it is likely to have vestment, rather than towards handouts (see Finance & eco
cooled private investment, too. nomics section). The central bank is cutting rates, but by a paltry
Property bubbles rarely end well. America’s last housing tenth of a percentage point at a time. China may also be in a
blowup set off a global financial crisis. But the most instructive worse position than Japan. Although Chinese leaders’ fanfare
comparison for China today is Japan in the 1980s. Although it about “common prosperity” raised hopes that a more equal dis
was much richer then than China is today, its economic growth, tribution of income could raise consumption, the share of
like China’s over the past decade and a half, was created by an in household spending in gdp is 38%, well below the global average
vestment boom, much of which flooded into property. of 55%. In the past six years it has not increased.
When Japan’s assetprice bubble burst at the end of 1989,
growth slowed dramatically. Firms and households, burdened Calling all hedonists
by debt, paid off their liabilities rather than spending on goods Even if China wanted to foster more consumptionled growth, it
and services. Together with a shrinking workforce, this meant would not easily be able to do so. Many of the government’s eco
that Japan’s gdp growth lagged behind the rest of the rich world. nomic policies are still designed to promote exports and invest
Part of the problem was that policymakers were too slow to ment, and to suppress consumption. Sustainably boosting
respond. It was not until 1999 that the Bank of Japan cut its households’ spending, such as by building up sturdier safety
benchmark rate to zero; the government directed stimulus to nets, would take years to accomplish. The propertydriven
wards investment, rather than consumption. The bust turned gloom could hover over the economy not just for the rest of the
into decades of stagnation. year, but far into the future. n
Antitrust and tech
Merger crush saga

Squashing the Microsoft-Activision deal would harm consumers, not protect them
T here are more than 14,000 levels in “Candy Crush Saga”, a

maddeningly addictive mobile puzzle game. Microsoft’s at
tempt to buy its publisher, Activision Blizzard, is encountering
Adding games like “Call of Duty” to its catalogue would make it
stronger still. Subscriptions and streaming have turned the mu
sic and television industries upside down in the past couple of
almost as many obstacles. The $69bn deal—Microsoft’s largest decades. If the same thing happened in gaming, regulators fear,
ever—sailed through the easier stages of the merger game, win Microsoft could become unassailable.
ning approval from jurisdictions like Japan and the European That is possible—but the bigger risk is that blocking the deal
Union. But in April it was blocked in Britain, with only limited would chill such innovations, and the competition they may
scope for appeal. As we published this, on June 22nd, Microsoft bring. Subscription and streaming represent alternative ways to
was preparing for a court battle with American trustbusters, bring highquality games to consumers, including those who
who are in an activist mood and seem determined to stop the would rather pay monthly for online access than shell out hun
transaction (see United States section). dreds of dollars for a console. They are not new markets, but new
The regulators have two main objections, both misguided. forms of competition in an existing one.
The most talkedabout and least concerning is What is more, these new models are unlikely
that Microsoft may remove popular Activision to become dominant overnight. Most gamers
games from rival platforms, principally Sony’s play only one or two titles at a time, making
PlayStation. True, Microsoft has form in this, subscription libraries less appealing than they
having previously bought developers such as are in music, say, where consumers tend to lis
Bethesda only to keep their games for itself. But ten to hundreds of songs. Cloud gaming, mean
the gaming market is diverse enough for such while, accounts for less than 1% of spending.
“exclusives” not to harm competition. By one That share will surely grow. But games’ interac
estimate, a combined MicrosoftActivision tivity means that streaming, with its unavoid
would account for only 14% of global gaming revenue among the able time lags, is unlikely ever to replace the console in the way
biggest listed gaming companies. In any case, Microsoft has of that it has killed the DVD player.
fered to make Activision’s titles available for at least a decade on You can see why trustbusters are triggerhappy. They took
other platforms—including Nintendo’s Switch, which currently flak for letting Facebook gobble up socialmedia competitors
lacks Activision hits such as “Call of Duty”. like Instagram and WhatsApp. Other tech markets remain con
The second, more serious worry is that the deal would allow centrated (regulators may want to look at Apple’s app store). But
Microsoft to dominate the next phase of gaming. The firm trails the pursuit of unnecessary cases threatens to chill dealmaking:
Sony and Nintendo in console sales. But it has been gaining in the value of acquisitions in America so far this year is about 40%
subscriptions (whereby consumers pay a monthly fee for access lower than the average for the previous five years. In opposing
to a library of titles) and in cloud gaming (in which the action is Microsoft’s acquisition of Activision, regulators are throttling
streamed to the screen, much as Netflix streams movies). Last an emerging business model that promises more competition,
year Microsoft had 57% of the market for subscription libraries. not less. There must be better targets to crush. n
012
Executive focus 11
DIRECTOR OF
ECONOMICS AND ENVIRONMENT
INTERNATIONAL COPPER STUDY GROUP (ICSG)
The International Copper Study Group, an inter-governmental

organization based in Lisbon, Portugal is seeking a Director of
Economics and Environment.
The position requires a good understanding of international economics

and extensive economic policy experience regarding the analysis
of economic and environmental issues relating to copper as well as
the ability to prepare and present publicly detailed reports of a high
standard. Although not a prerequisite, experience in the minerals or
metals industry would be valuable.
The successful applicant must be able to work flexibly in a small

professional team, be willing to travel, possess tertiary qualifications in
a relevant field, and be fluent in English.
The starting salary will depend on the applicant’s qualifications and

experience. Benefits include a Provident Fund, six weeks of annual
leave and a relocation allowance where applicable.
Applications with Curriculum Vitae should be forwarded by email to

mail@icsg.org by no later than 31 July 2023.
Tenders
Sale of an exceptional property
CALL FOR BIDS

For the sale by the French Government of the Château de La Garoupe, located in Antibes, France.
All interested parties must submit their application file before July 17, 2023, at 12h00, Paris local time.
Information and conditions for participation:

www.chateaudelagaroupe.com
012
12
Letters The Economist June 24th 2023
A new constitution is cur initiatives, and a one hour site where they would try to

Productivity in Latin America rently being drafted. It is our “mandatory” DEI training draw the French into a battle
I am an assiduous reader of hope that a significant update video, which 25% of employ of attrition was because even
The Economist, always of the country’s political sys ees completed in the most by 1916 it already carried so
admiring and praising your tem will serve as a catalyst for recent academic year. In the much historical baggage.
global coverage, technical a new generation of bold yet Board of Trustees meeting in MICHAEL FROST
depth and wellargued liberal sound economic reforms. which DEI was “eliminated” Lewes, East Sussex
values. However, by choosing Rodrigo Krell at New College, it was pointed
the headline “A land of useless Executive secretary out to Mr Rufo just how little
workers” (June 10th) to National Productivity and DEI the school actually had. Legalese
describe productivity in Latin Evaluation Commission New College is a remark The article trying to explain
America you fell short of those Santiago ably independentminded “Why legal writing is so awful”
standards. As a Mexican citi institution, where students (June 3rd) missed a big factor:
zen, I have met and learned can design their own major, the language used in court
from informal workers. They Cometh the hour… faculty teach what they want decisions. Complicated lan
typically work more than eight The owl of Minerva, Hegel without curricular oversight, guage may be the reason why
hours a day in rigorous, often observed, flies only at dusk. and all students are encour a contractual term ends up
unsafe conditions. Sadly, It is only at the end of Boris aged to do independent being litigated, but once the
many of these workers cannot Johnson’s political career, and research culminating in a court has made its decision its
even afford healthy and let us not doubt that it is over, yearlong required thesis meaning, no matter how
balanced diets to provide them that we get the true measure project. It would be hard to tortured the language, is set in
with the necessary energy that of the man (Bagehot, June find a college with less poten stone. No lawyer will run the
their jobs demand. They 17th). Selfobsessed, econom tial for topdown indoctrina risk of using simpler, untested
receive very low economic ical with the truth (to put it tion of students. Mr Rufo and language, especially if the
remuneration and perhaps mildly) and a coward. his fellow trustees are engaged wording touches areas of law
even less social recognition. Mr Johnson could have in disruptive political theatre, that are complicated.
Although the article was tried to persuade the House of not a measured response to The interpretation of
well researched and nuanced, Commons to reject any recom the facts on the ground at New contractual indemnities
describing all Latin American mendation from the Privileges College, a unique educational illustrates this. After the Piper
workers as “useless” was Committee. He made no such institution that in no way Alpha disaster in 1988 there
insensitive and disrespectful, effort. He could have cam exemplifies illiberal leftist were bitter legal fights as to
to say the least. paigned against any recall excess in the academy. who should carry the can,
Pablo Reynoso petition that would force a Peter Cook some of which revolved
Friendship Heights, Maryland byelection. He will lead no Associate professor of around the precise meaning of
such campaign. He could have psychology and neuroscience indemnities (promises to pay
Editor’s note: The headline stood in any byelection that New College of Florida out or not to sue) in the con
was changed to “A land of ensued. His name will not Sarasota tracts between Occidental, the
frustrated workers” online to appear on the ballot paper in operator of the oil platform,
make clear that we are analys Uxbridge and South Ruislip. and various service providers.
ing the social and economic He has chosen instead to sulk The history of Verdun The courts decided, the
costs of low productivity. off into a wellpaid sunset, Charlemagne’s column meaning was settled and the
where it is to be hoped that likening the Battle of Bakhmut exact same wording is still
I wholeheartedly agree with “commentators who cannot to that of Verdun was excellent used 35 years on.
your emphasis on the signif resist writing about one of (June 3rd). But the charac David Roper
icance of systemic conditions their own” (including The terisation of Verdun as having Solicitor
that determine the working Economist) will leave him been “a small place of little Alford, Aberdeenshire
environment as the key factor well alone. renown” before its martyrdom
in labour productivity, rather Jonathan Allum in the first world war was You let lawyers off too easily.
than the workers’ inherent Amersham, Buckinghamshire wrong. The French town al Apart from the deficiencies
qualities. In Chile productivity ready had immense symbolic mentioned, legal writing too
lags across industries, significance in FrancoGerman often has Unnecessary Defined
including copper mining, A rumpus on campus history as the namesake of the Terms (“Unnecessary Defined
where the best local operation Christopher Rufo may well Treaty of Verdun (843), which Terms”), repeats even one (1)
uses 44% more labour than have “quickly moved to elim partitioned the Frankish number as a numeral,
international peers. There are inate diversity, equity and empire and can be said to have obfuscates by not avoiding
also notable productivity inclusion initiatives” at New marked the separation of double negatives, and puts too
problems in the public sector. College of Florida when Ron France and Germany into many words in one sentence.
The reasons for this include DeSantis appointed him as a separate nations. Verdun was Jeffrey Sherman
gaps in bestpractice manage trustee (Lexington, May 27th). one of the Three Bishoprics, Toronto
ment, a lowquality education But in fact, New College had which were part of the Holy
system, an inadequate almost no administrative DEI Roman Empire throughout the
regulatory framework and infrastructure to dismantle. Middle Ages but annexed to Letters are welcome and should be
insufficient innovation rates. A signee to the Chicago Princi France in 1552. And it was the addressed to the Editor at
The Economist, The Adelphi Building,
A long and uncertain permit ples on free speech, New Col site of a major battle in the 111 John Adam Street, London wc2n 6ht
granting process also hampers lege had one employee (since FrancoPrussian war of 187071. Email: letters@economist.com
investment and can dampen terminated) who worked half Indeed, one reason why the More letters are available at:
Economist.com/letters
competition. time on statemandated DEI Germans chose Verdun as the
012
Briefing Ukraine 2.0 The Economist June 24th 2023 13
The battle within arms industry. “The fullscale Russian in

vasion not only brought the horrors of war
to millions of Ukrainians. February 24th
2022 was also an occasion for Ukraine to
rethink itself,” echoes Ukrainska Pravda, an
online newspaper.
Like Mr Fedorov, the Ukrainian state
was born in 1991. A vestige of the Soviet Un
KYIV
ion, it was seen by many Ukrainians as
War is reshaping the Ukrainian state—for the better
more of a nuisance than a benefit. Corrup
W HEN RUSSIAN tanks began bearing

down on Kyiv, Ukraine’s capital, in
February of last year, Mykhailo Fedorov
modernise a state that until then had been
a byword for bureaucracy and corruption.
DiIa, launched in 2020, was the centre
tion was endemic, from the bribes de
manded by traffic cops to the kickbacks
needed to secure government contracts.
was overseeing improvements to an app piece of this effort. But what began as a The public put far more faith in civil soci
that provides Ukrainians with easy access means to mollify exasperated voters quick ety than in official institutions.
to government services. At the time the app ly became part of Ukraine’s struggle for It was civil society, naturally enough,
focused on fairly conventional tasks: filing survival. To beat back the Russian on that spearheaded the campaign to change
tax returns, obtaining business permits, slaught and keep the government func all this. It led the Maidan uprising of 2013
claiming benefits and so on. But the 32 tioning, the state has had no choice but to 14 (pictured on the next page), a protest
yearold Mr Fedorov and his colleagues become vastly more nimble and effective. movement which brought about the fall of
quickly added extra features. Now DIIA Viktor Yanukovych, the grasping proRus
(the Ukrainian for “action” and also an ac Wreckage and resolve sian president of the day. The new govern
ronym for “the State and Me”) allows patri The young, techsavvy Ukrainians leading ment, with the help of Western aid agen
ots to donate to the war effort, struggling this overhaul see it not just as a necessity, cies, set up a series of institutions to battle
businesses to apply for state support and but also as an opportunity. “We call it Uk corruption, including an independent in
ordinary citizens to report Russian troop raine 2.0. We all loved Ukraine as we knew vestigation bureau, dedicated prosecutors
movements. And with the war making it it, but there were a lot of things in it which and a special court. Mr Zelensky has since
hard for people to visit government offices, we don’t want to bring into a new one. We strengthened this system by installing a
the ability to conduct official business on got a unique chance to build a new coun new council composed partly of retired
line has become a godsend for many. try,” says Oleksandr Kamyshin, a 38year American and European judges to regulate
When Volodymyr Zelensky became old former manager of a venturecapital judicial conduct. The details of most pub
Ukraine’s president in 2019, he promised to fund who is now restructuring Ukraine’s lic procurement are now made public, to
012
14 Briefing Ukraine 2.0 The Economist June 24th 2023
make crooked transactions easier to spot. minister in charge of the defence industry, government, but they are rare in postSovi

These new rules and institutions have another pit of inefficiency and graft. State et states. Their adoption by the Ukrainian
not eliminated corruption, but they have owned factories produced more shells in army helps explain why it has been able to
made it a far riskier undertaking, rather the first month after his appointment than keep Russia’s numerically superior forces
than the accepted norm. In the threeand they had done in the entire previous year. at bay. They have also been used to great ef
ahalf years that the anticorruption court Mr Fedorov, now a deputy prime minister, fect by Mr Kamyshin’s former boss, Olek
has been operating, 65 people have been has found a different way to speed up mil sandr Kubrakov, the minister of infrastruc
convicted in it, including 20 judges and itary procurement, crowdfunding the pur ture, in the mammoth task of distributing
several mps and senior officials. Such pros chase of around 4,000 drones and the all the weapons and supplies donated by
ecutions were unheardof before 2014. “In training of 10,000 people to use them. Ukraine’s allies. These have to be brought
the past few years corruption stopped be Mr Fedorov has also turned his hand to to the front lines without being stockpiled
ing a system and became an ailment that streamlining the operations of the armed in big warehouses or transported along
could be dealt with,” says Vitaly Shabunin, forces. (In his trainers, sweatshirt and predictable routes, since both would create
an anticorruption activist. jeans, wielding only a stickerspattered easy targets for Russian bombs. He has
laptop, he has probably done more damage achieved the nearimpossible by dividing
Threatened by rectitude to Mr Putin’s war machine than most men deliveries into multitudes of small con
This change seems to have infuriated Vlad in uniform.) He has helped create software signments, the vast majority of which are
imir Putin, Russia’s president. Not only to pool information from assorted drones, moved by private hauliers along a plethora
had the popular campaign for good gov sensors and cameras to provide a compre of obscure and everevolving routes.
ernment caused the downfall of a proRus hensive picture of the battlefield, which That hints at another change: treating
sian regime; it was also undermining Mr can be viewed in real time by everyone ordinary Ukrainians as allies of the state,
Putin’s favoured technique for suborning from generals to foot soldiers. rather than adversaries or subjects. Civil
Ukrainian politicians and, worse, it was Appropriately enough for a system en society has also grown stronger during the
creating an alarming example of success abling quicker, less hierarchical decision war. A survey conducted in mid2022
ful reform that might inspire his own citi making, the software in question was de found that 86% of Ukrainians had volun
zens. In a speech laying out Russia’s case veloped not at a secret military research in teered in some way to support the war ef
for war days before the invasion, Mr Putin stitute on orders from on high; instead, fort. There has been an eightfold increase
included among Ukraine’s supposed shortly before the war began, the army as in the number of registered charities since
crimes the creation of the new units to sembled a team of volunteer programmers the start of the war. At the same time, there
fight corruption. It was not just a passing and activists; they have applied them has been a blurring of the lines between ac
reference: he listed each agency individ selves to problems as they have arisen. Mr tivism and government. Mr Shabunin has
ually, and denounced them all as tools of Fedorov organises hackathons to come up enlisted in the army. Mustafa Nayyem, a
America. “Not every politician in Ukraine with solutions to specific programming journalist whose socialmedia posts were a
could name all these institutions. This was conundrums. “There is a fundamental catalyst for the Maidan uprising, served for
a real tribute to our work,” says Mr Shabu change now in how we think, how we a time as a deputy to Mr Kubrakov, oversee
nin. “Putin realised that if he does not in make decisions and what kind of a country ing the road network, and now heads the
terfere now, these reforms would lead Uk we are building,” says Mr Fedorov. agency charged with postwar reconstruc
raine into the Western world.” The distaste for rigid hierarchies and tion. His brother, a humanrights lawyer,
But far from halting the overhaul of the the devolution of decisionmaking are also enlisted, and lost an eye in combat.
Ukrainian state, Mr Putin’s invasion has among the defining features of this new The new generation of reformist ad
accelerated it. The stateowned railway approach to administration. Those may ministrators is well aware that they are not
company, Ukrzaliznytsia, is a good exam sound like boilerplate principles of good just restructuring ministries and state
ple. In August 2021, just months before the
invasion, it was put in the hands of Mr Ka
myshin, who has not only a Cossackstyle
semishaved hairdo, but also a degree from
INSEAD, a French business school. At the
time, he says, Ukrzaliznytsia was a feeding
trough for corrupt officials, politicians and
shady intermediaries, who sold it second
rate supplies at inflated prices.
Mr Kamyshin quickly cleared out the
middlemen. But to keep the trains running
throughout the war, despite relentless
shelling and blackouts, he also had to em
power not just thrusting young managers
but also the grizzled engineers who know
the tracks inside out. As a result, Ukrzaliz
nytsia has kept essential cargo moving, be
it weapons, troops, humanitarian aid or
refugees. It even ferried Joe Biden, Ameri
ca’s president, across the country on a visit
in February, earning its special service the
sobriquet “Rail Force One”. All this has
made Ukrzaliznytsia a popular brand
among young Ukrainians. In November it
opened its first merchandise shop in Kyiv.
In March Mr Kamyshin became the They are probably in government now
012
The Economist June 24th 2023 Briefing Ukraine 2.0 15
candidate last year, will require detailed re
forms to everything from energy markets
to customs procedures. The process is seen
by reformers as a critical safeguard, pre
venting the reinvention of the state from
going into reverse.
The government has set all manner of
lofty targets, such as doubling the size of
the economy in a decade, which would re
quire average annual growth of 7%. Its offi
cial “Recovery Plan Blueprint” calls for pri
vatisation, stronger laws on competition
and corporate governance and “deoligar
chisation”. Mr Fedorov expresses hope that
the war will transform Ukraine from an
economy focused on natural resources and
the associated rents to one driven by tech
nology and innovation. The authorities see
it, already 5% of gdp, as an important po
tential source of growth.
All of this is contingent not only on re
storing security, but also on attracting vast
amounts of investment. The government
estimates the bill for reconstruction at
Giving shape to a revival more than $750bn. Ukraine’s allies and do
nors have gathered in London this week for
owned enterprises, but are laying the foun Berezhna, deputy minister for economy. a big conference intended in part to work
dation of a new country. “It is essential that The exodus is currently constrained, out how to drum up such a daunting sum
everybody has a vision and understands since men of working age are not allowed (see Finance section).
what they have fought for, what we are to leave the country. But with so many Uk But Ukrainian civilsociety groups’ big
building” says Mr Fedorov. “Without that rainians now settled elsewhere in Europe, gest worry about reconstruction is not that
vision, there can be no success.” in many cases with jobs or children in there will too little money, but rather that it
Success is far from guaranteed, how school, the likelihood is that lots of Ukrai will not be well spent and much of it will be
ever, even if the war goes well. The forces nian men will go join their relatives when embezzled, according to a recent survey
arrayed against the reinvention of the Uk ever travel restrictions are lifted. Those conducted by Chatham House, a British
rainian state are many and powerful. For who stay will present problems, too: they thinktank. These sorts of concerns are
one thing, not all Ukrainians support the will be traumatised by fighting, and in widespread: according to a recent poll
idea. Many in the old elite are losing their many cases gravely injured. “The war has commissioned by Zerkalo Nedeli, another
meal tickets. The office of the president is generated a major demographic crisis in Ukrainian online newspaper, 84% of Uk
preoccupied not just with the war, but also the country,” says Ms Berezhna. rainians agree that, even during the war,
with politics; the nittygritty of adminis Although the economy is showing “The facts about corruption should be
tration is a much lower priority. And the some signs of life, it has been clobbered. It made public, because through corruption
exigencies of the invasion have put the se shrank by about 35% last year. The World we will lose unity, the support of partners,
curity services in positions of great author Bank predicts that more than half the pop and, ultimately, victory.”
ity, often with little oversight. ulation may be living in poverty by the end
Corruption remains rife, a clear sign of 2023. Some 3m people are unemployed. The war on graft
that not all bureaucrats have turned over a Roughly 5m are internally displaced. “Ukraine in this war is fighting not only for
new leaf. Last month the most senior judge The government’s priority is to try to the right to exist, but also for the opportu
on the Supreme Court was charged with stop the economy from atrophying yet nity to become a European country, intole
taking bribes. A scandal involving the pro more. It is handing out grants to small and rant to corruption…That is why scrutiny of
curement of military rations has also come mediumsized businesses and farmers on officials and government becomes even
to light since the beginning of the war, the condition that they create new jobs. more important for journalists than before
leading to the sacking of several officials Some 6,000 new businesses have sprung the war,” says Segvil Musaeva, the editor
and the resignation of the deputy minister up since the war began and some 40,000 inchief of Ukrainska Pravda. “We cannot
of defence. A reforming official gripes that jobs have been saved by relocating firms allow our society, our army to find out after
in some parts of the country businesses are from the most wartorn parts of the coun the end of this war that all this time offi
suffering extortion on a par with the depre try to safer areas in the west. The state is cials have persisted in misconduct, bad go
dations of Mr Yanukovych’s tenure. also creating programmes to reintegrate vernance or corruption.”
What is more, the war is robbing Uk veterans into civilian life and to make it Mr Fedorov agrees. In the eyes of the
raine of many of its best and brightest. In easier for the disabled to work. trailblazers of Ukraine 2.0, it is the govern
addition to those killed or disabled on the In the longer run the government also ment’s efforts to work for its citizens, rath
battlefield (Ukraine does not disclose casu wants to make Ukraine a more attractive er than exploit them, that make Ukraine
alty figures), some 6.2m people have fled place to invest and do business. It is debat worth fighting for. Everyone has been pro
the country over the past 18 months, more ing sweeping deregulation of the labour foundly affected by the war, he explains,
than 15% of the prewar population. The market—to such an extent that some ob and everyone has become an activist, in ef
workforce has shrunk by the same propor servers worry it will gravely reduce work fect. “Our society has grown tremendous
tion. And some 60% of the adults who have ers’ rights. Accession to the European Un ly,” he says, “It will not allow us to turn in
left had university degrees, says Tetyana ion, which officially accepted Ukraine as a the wrong direction.” n
012
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012
Asia The Economist June 24th 2023 17
Critical minerals rare earths—yet a processing minnow. It

aims to become, by 2030, “a globally signif
Asia’s new resource competition icant” producer of processed critical min
erals. It can “play its part in making sure we
build secure supply chains”, says Ms King.
To that end Australia is committing
A$500m ($343m) to projects under its new
strategy. That is in addition to an existing
PE RTH
A$2bn fund to get earlystage critical min
Can Australia break China’s critical-minerals monopoly?
erals projects off the ground, among them
AS OIL was weaponised by its suppli battery industry) aim to profit from a min a rareearths refinery. This year Australia’s
JUST
ers in the 1970s, so China’s dominance in erals bonanza. The focus of much of the government blocked a Chinese entity from
the supply and processing of critical min strategising, according to the National Bu raising its stake in a rareearths company
erals could prove threatening. Cobalt, reau of Asian Research, a thinktank in Se on nationalsecurity grounds.
graphite, lithium, nickel, the rare earths attle, is on three things: “friendshoring”, As a freetrade partner of America’s,
and more are called critical for good rea shifting supplychain management from Australia hopes to qualify for green subsi
son. They are crucial to defence, smart “just in time” to “just in case”, and ensur dies under President Joe Biden’s Inflation
phones and other digital technologies. A ing spare capacity in minerals processing. Reduction Act. In April a delegation of Aus
handful are essential to wind turbines, bat Mineralrelated initiatives are coming tralian producers visited Tokyo, hoping
teries and electric vehicles. A cleanenergy in droves. China’s dominance, says Austra that Japanese investment and longterm
future is inconceivable without them. lia’s resources minister, Madeleine King, is purchase contracts will do for Australia’s
China has a near monopoly on many of a “strategic challenge”. On June 20th her criticalminerals industry what they did
these minerals. It supplies nearly 90% of government unveiled a criticalminerals for its now preeminent ironore and gas
processed rareearth elements. It is by far strategy to address it. Australia is the big sectors. Last year Japan made critical min
the biggest processor of lithium. In the In gest producer of lithium, the thirdbiggest erals one of 11 strategic sectors deserving of
doPacific region, this is driving Australia, producer of cobalt and fourthbiggest of government support. In March, Japan and
Japan, South Korea and others to seek to di America agreed to cooperate on minerals
versify away from China—in the process supply chains, including by countering
→ Also in this section
defining a new resourcebased geopolitics. “nonmarket” actors (ie, China).
Plans for new criticalmineral supply 18 Modi the yogi South Korea, with global ambitions for
chains are being drawn up in multilateral electric vehicles and batteries, looks espe
19 Afghanistan’s new drug war
forums such as the Quad grouping of cially vulnerable to competition between
America, Australia, India and Japan. Re 19 South Korean greenwashing America and China on this issue (and
sourcerich countries like Australia and In others). As part of President Yoon
20 Banyan: Showa retro
donesia (with lots of nickel and plans for a Sukyeol’s commitment to “comprehen
012
18 Asia The Economist June 24th 2023
sive resourcesecurity measures”, his gov
ernment earlier this year released a plan to International Yoga Day
secure criticalmineral supplies. The aim
is to cut the country’s import dependence
Narendra Modi’s yoga evangelism
on China from 80% to 50% by 2030 and to
LO NDO N
increase its use of recycled minerals, from
The Economist joins an invigorating mass contortion in Trafalgar Square
2% to 20% of the total. South Korea has
struck partnerships with countries includ
ing Australia, Indonesia and Kazakhstan,
as well as the eu. It has joined an Ameri
T rafalgar Square, like many public
places in London, is crammed with
British Indian history. On one of its giant
Hindu prayer. Yet the annual yoga day is,
like the practice itself, more obviously
inclusive. It also signifies increased
canled, multicountry Minerals Security plinths is a statue of Charles James Napi Indian confidence and visibility—and Mr
Partnership, announced last year. er, conqueror of Sindh in 1843. On anoth Modi’s genius for marketing his country
Taiwan and India are also groping their er is Henry Havelock, who beat the rebels and himself. A daily practitioner, the
ways towards adopting new criticalmin at Kanpur in 1857. On June 20th the Indian leader himself marked yoga day
erals strategies. The challenge, in nearly all square hosted a more contemporary by leading a multinational contortion at
cases, is China’s lock on processing, which display of Indian empirebuilding—in the UN headquarters in New York.
is costly, complex and potentially environ the form of 300 British Indians and For many in Trafalgar Square, yoga
mentally hazardous to develop. Dozens of assorted others (including The Econo- was a spiritual, but nonsectarian, an
metallurgical stages are required to turn a mist) practising yoga. swer to the pressures of modernity.
rare earth ore into the final product. Only It was an early celebration of in Inderpal Chandel, a 45yearold from
tiny amounts of critical minerals can be ex ternational yoga day, a UN initiative Hounslow, credited her daily practice
tracted from vast quantities of ore. Decades launched at the urging of Narendra Modi with easing a workplace injury that for 17
ago, China made processing central to its in 2015. Critics of the Indian prime min years put her on crutches: “My life was
industrial plans, using massive subsidies ister’s Hindunationalist agenda view his changed by yoga.” For many, too, it was a
and lax environmental standards. Its dom yoga evangelism with suspicion, given way to sustain an Indian identity in the
ination reflects that decadeslong strategy. the practice’s Hindu origins. The yoga West. “Yoga should not be minimised for
By and large, its customers did not chant “Om” is a sacred sound in Hindu recreation, but appreciated culturally
mind when it used its processing monopo scripture. The Sun Salutation, a common and wholly,” says Mamata Subramanian,
ly to drive down prices in order to deter set of yoga poses, is associated with a 30yearold raised in Ohio. Though
global competitors. The risks of China’s relatively few were diehard Modi fans,
dominance have grown, however. For Ja most said the prime minister had raised
pan that became apparent in 2010, when the prestige of Indian culture. “He’s not
China suspended exports of rare earths to polite but he’s pushy, and that’s a good
it in reprisal for a spat over some disputed thing,” says Mohit Singh Bharti, 31, mort
islets. Last year it threatened to withhold gage adviser and immigrant from Jaipur.
critical minerals from two American de Yogawise, this newspaper concurs.
fence contractors, Lockheed Martin and Trafalgar Square, a place of protest and
Raytheon Technologies, in protest over revelry, had never rung with more civi
America’s arms sales to Taiwan. lised instruction than that offered over
The pandemic caused others to wake up the course of the twohour session. “Feel
to the perils of a monopoly processor, by awareness in your toes intently.” “Any
underscoring the vulnerability of supply remaining thoughts and feelings, just
chains generally. Russia’s invasion of Uk relax and make a note of them.” And,
raine further highlighted the risks of doing ahead of the gutcrushing pawanmukt
business with a potential enemy. By with asana, which encourages flatulence: “If
holding supplies of gas to European cus you hear any noises, be kind to yourself
tomers, Russia sought to weaponise a cru and your neighbour.”
cial commodity. (It is also a key exporter of If this was rascality, as the imperialist
nickel and palladium.) Napier said in an altogether less benevo
Yet one case study shows how hard cre lent context, it was a “very advantageous,
ating alternative mineral supplies can be. Half butterfly and full Nelson useful, human piece of rascality”.
After Japan’s China standoff in 2010 its
government encouraged a Japanese trad
ing house, Sojitz, to sign purchase con of environmentally safe processing, any Japan on rare earths.
tracts with an Australian producer, Lynas new capacity will require longterm sup How different might criticalmineral
Rare Earths, while backing it with cheap port, Ms King argues. Tiny rareearth min supply chains eventually look? Mr Coyne
loans. China fought back by flooding the ing companies cannot afford the railways says the goal, achieved through invest
market to suppress rareearth prices. In and other supporting infrastructure that ment and cooperation, should be more re
Malaysia, political opposition grew to a Australia’s giant ironore companies run. silience and competition and less reliance
new Lynas processing plant, despite the In Lynas’s chief executive, Amanda Lacaze, on China. There is far to go before reaching
ternational Energy Agency giving it a clean calls for “straightup industry planning” to even that modest aim. China’s hold is im
bill of health. A Chinese propaganda group rival China’s 30 years of strategic thinking posing, and the costs of entry into process
backed by the Communist Party had spread on critical minerals. Cooperation among ing steep. Even the boss of Raytheon, the
disinformation about the project. Lynas likeminded countries will also be crucial, world’s biggest maker of guided missiles,
survives thanks to cheap loans from Japan, says John Coyne of the Australian Strategic this week told the Financial Times that end
which recently advanced it a further Policy Institute in Canberra. His institute’s ing its reliance on Chinese supplies of crit
A$200m (S136m) in investment. “Darwin dialogue” aims to enhance coor ical minerals looked “impossible…We can
Given such hurdles, and the high costs dination between America, Australia and derisk but not decouple.” n
012
The Economist June 24th 2023 Asia 19
Afghanistan and opium South Korea and net zero
A new drug war Greenwashing

in Seoul
NAD ALI, HE LMAND PROVINCE SEOUL
The Taliban is cracking down A country that promised to lead

impressively on poppy cultivation on climate is lagging
E arly this month, the Taliban turned up

at Akhtar Mohammad’s farm in Hel
mand province, in southern Afghanistan,
A ddressing the UN‘s annual climate
summit in 2009, South Korea’s then
president promised his country would be
wielding sticks. In half an hour they de “an early mover when it comes to tackling
stroyed a field of poppies that had taken climate change”. Lee Myungbak pledged
the farmer a year to cultivate—leaving Mr that South Korea would allocate the equiv
Mohammad close to despair. “Now the Ta alent of 2% of GDP per year to the fight over
liban have destroyed my opium I demand the next five years and host an intergov
they feed my children,” he says. “Or I will ernmental initiative, the Global Green
have to sell one of them to feed the others.” Growth Institute, outside Seoul. “Instead
Before the Taliban seized power in Au Taliban governance of saying you first’,” said Mr Lee, the former
gust 2021, the illicit trade in opium, a gum head of Hyundai Construction, South Ko
produced from poppies, helped pay for vasion by America and its allies. For the rea would henceforth act “me first”.
their insurgency. The mullahs encouraged next 20 years, despite promises of govern Considering the shape of the country’s
farmers to plant poppies and taxed the ment enforcement and millions of dollars economy, this was ambitious. South Ko
trade. But drugs are deemed haram (pro spent by Western donors and UN agencies rea’s rise from postwar destitution, to be
hibited) under Islamic law. Shortly after on “alternative livelihoods”, Afghanistan come the world’s 12thlargest economy,
taking power the Taliban’s supreme leader, saw an opiumproducing bonanza. This was driven by polluting heavy industry and
Hibatullah Akhundzada, banned narcot was a totemic failure for the Western fossil fuels. Perhaps predictably, then, nei
ics. And stunning recent evidence from backed development effort. Nothing was ther Mr Lee nor his successors have done
across the country’s opium belt in the more indicative of the weakness of the much to help the country meaningfully
south and east suggests he meant it. country’s elected governments, and the curb its emissions. A decarbonisation
According to satellite imagery from Al impotence of their Western allies. “blueprint” recently released by the cur
cis, a British firm, poppy cultivation in the Some doubt the Taliban can sustain the rent government of Yoon Sukyeol pro
southern province of Helmand, where ban. Afghanistan’s economy is in crisis. It vides further reason to doubt that it will.
most of the crop is grown, fell from over shrank by 35% between 2021 and 2022. South Korea’s emissions did not peak
120,000 hectares in April 2022 to less than Twothirds of the population needs urgent until 2018, almost a decade after Mr Lee
1,000 hectares a year later. Antipoppy un humanitarian assistance. This is not, to made his commitment and much later
its are patrolling the province, meting out put it mildly, a good time for thousands of than in most other industrialised coun
the treatment Mr Mohammad received. itinerant harvesters to lose their jobs. tries. The country subsequently adopt a le
The results in Nangarhar province, anoth Poppy farmers are increasingly ag gally binding commitment to reduce its
er big producer, are similar. Only 865 hect grieved, as the opium price climbs. In the emissions by 40% relative to their 2018 lev
ares are under poppies now, compared south and southwest of Afghanistan the el by 2030, and to achieve netzero emis
with over 7,000 hectares in 2022. price of a kilogram of opium reached al sions by 2050. But this would be hard even
It will be harder to eliminate poppies in most $360 in November 2022, three times with massive government intervention. To
remoter regions, such as Badakhshan in the price a year earlier. In the bazaars of achieve its netzero target South Korea
the northeast. Still, the results thus far Helmand and neighbouring Kandahar would have to reduce emissions by an av
point to a dramatic success. David Mans province, rumours are rife that the Taliban erage of 5.4% a year. By comparison, the EU
field, a researcher who has studied Afghan are slyly profiting from the ban. “I respect must reduce its emissions by an average of
istan’s illicit economy for over 25 years, the decree of the Taliban’s supreme leader, 2% between its baseline year and 2030,
reckons Afghanistan’s poppy production but the decree should apply to all farmers,” while America and Britain must achieve
will drop by 80% between 2022 and 2023. says Haji Mohammad Jan, a farmer in Kan annual cuts of 2.8%.
It is hard to exaggerate how bold this is. dahar, whose twohectare poppy planta Far from broaching the necessary seri
When the Taliban took over, Afghanistan tion was razed last month. ous measures, South Korea seems content
produced 85% of the world’s opium. Ac Even if sustained, the ban may have less to pay lipservice to the issue. In effect, Mr
cording to UN estimates, the crop and re impact on the global drug trade than some Yoon’s proposals take aim at the toomod
lated drug trade provided a total income of hope. As Vanda FelbabBrown at the Brook est measures promised by his predecessor,
$1.8bn2.7bn in 2021, equivalent to 914% of ings Institution, a thinktank in Washing Moon Jaein. Besides instituting South Ko
GDP. That was more than official exports of ton, points out, cheap synthetic opioids rea’s netzero commitments, Mr Moon
goods and services. Around 450,000 Af abound. If Afghan production dries up for aimed to cut reliance on coalfired electric
ghans were employed in the opium trade. long, fentanyl producers from China and ity generation, from 42% of total genera
The Taliban have form. They banned India could take over the profitable Euro tion to 22%. His government issued fairly
poppy cultivation during their previous pean market. For now, however, it is worth modest subsidies to renewables. It also
spell in power, in 2000, with similar re marvelling at the spectacle of an Afghan “instructed” South Korean industry to curb
sults. It duly dropped from around 82,000 government enforcing its writ. Under 20 its emissions, from 261m tonnes a year in
hectares in 2000 to less than 8,000 in 2001. years of Westernbacked government, the 2018 to 223m by 2030, without providing
The ban was rolled back only later that country’s opium producers were largely many regulatory or fiscal measures to help
year, amid the looming prospect of an in unpoliced. That is no longer the case. n it do so. Mr Yoon, while reaffirming South
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20 Asia The Economist June 24th 2023
Korea’s headline targets, has backpedalled manded of businesses would “weaken in realised, would the government’s talk of

on much of that. dustrial competitiveness”, destroy jobs increasing use of hydrogen as an industrial
He has cut his predecessor’s renewables and be a “burden” on the economy. Mr fuel, as well as carboncapture technology.
subsidies, and also his targeted increase in Yoon has both reduced and deferred them. Mr Yoon has gone so far as to promise pub
renewables. Mr Yoon has at least proposed Around 75% of the wishedfor industrial lic investment, subsidies and loans for
a welcome boost to South Korea’s nuclear emissions cuts are now supposed to hap such clean technologies. But those mea
power generation, which Mr Moon dis pen after 2027, which is when Mr Yoon is sures are yet to materialise, and unless that
liked on the basis of his supporters’ exag due to leave office. changes it will be hard to accept the presi
gerated safety concerns. But Mr Yoon has His government claims South Korea dent’s claims at face value.
not yet revealed plans for new nuclear will still meet its commitments for 2030. The main outcome of his blueprint is a
power stations. Bowing to corporate pres Its promise to bring some nuclear power signal to industry that there is no hurry,
sure, he has also watered down his prede plants already under construction online says Youn Sejong of Plan 1.5, an NGO work
cessor’s demands of industry. Its lobbyists and increase renewables, somehow or ing on climate policy. “It’s only going to
complained that the pollution curbs de other, would at least help with that. So, if postpone the necessary transition.” n
Banyan Showa retro
Japan is nostalgic for a past that was in some ways worse than its present
T HE YEARS slip away as one walks
through the gates of Daiba Itchome
Shotengai, a 1960sthemed shopping
Japanese was then twice as high as it is
today. “It was a time when people strongly
believed: all your dreams can come true,”
of how many of those who experienced
the period firsthand are participating in
it. Some nursing homes and sports gyms
district in Tokyo’s bay area. Children says Kubo Hiroshi, 64, who founded Daiba aimed at older users have been redec
munch on dagashi, cheap and oldfash Itchome Shotengai. orated in 1960s colours and style.
ioned Japanese snacks. A couple of 20 That social and economic dynamism is There is a downside to Japan’s nostal
somethings take turns at dialling a rotary reflected in Showa’s adventurous aesthet gic obsession. Young Japanese use the
telephone. A newspaper headline on the ics. Bright colours and exuberant de term “Showa” to denote outdated, yet
1964 Tokyo Olympics reads dreamily: signs—such as the glitzy chandeliers and irksomely persistent, views—similar to
“Clear blue sky—opening ceremony of plush velvet seats in many kissaten—are the way that young Americans use the
the century”. A model of an undercon common features. An exciting inrush of phrase “OK Boomer” to express indigna
struction Tokyo Tower, the building that Western influence on music and fashion tion at pampered and entitled baby
would come to symbolise Japan’s post added to the feeling of postwar trans boomers. Outworn Showa attitudes
war recovery and economic boom, formation; discolike city pop often fea include sexism, wage slavery and an
stands in one of the hallways. tures English lyrics. The atmosphere of adherence to senioritybased hierar
The mall is one of many odes to Ja the subsequent Heisei imperial era (1989 chies. When Banyan asked a group of
pan’s Showa era, which corresponds to 2019) can feel cold and sterile by compari 20something Japanese, including afi
the reign of Emperor Hirohito (192689) son. (Otaku culture, which involves geeks cionados of Showa chic, if they would
but which has become synonymous with obsessing over manga and video games, actually like to have lived in that bygone
the boomtime 1950s80s. Seibuen, an emerged during Heisei.) time, almost all shook their heads. “May
amusement park in Saitama, near Tokyo, Showa retro has a demographic signif be I’d like to experience Showa just for a
rebranded itself as a 1960sthemed town icance, too. It reflects the country’s bulge day to see the architecture and culture,”
scape in 2021. Rural areas have started in pensioners, who naturally hanker for says Shichijo Miu, 20, who runs a Showa
promoting Showa architecture to attract the time of their lost youth. Inamasu retro student club at Musashi University
tourists. For some young Japanese, the Tatsuo of Hosei University suggests that in Tokyo. “But when it comes to social
epitome of cool involves visiting 1960s Showa nostalgia is distinct from the retro attitudes, there’s a lot I don’t support.”
style cafés known as kissaten; pictures of fashions of America and Europe because The endurance of Showa’s stultifying
their archetypal fare, such as emerald side also has to do with demography.
green melon soda floats, flood social Men who came of age in the postwar era
media. Kayokyoku, tunes from the Sho still dominate Japanese politics and the
wa era, and city pop, an upbeat, Western upper echelons of many institutions.
fused music genre that peaked in the The average age of Cabinet members is
1970s, are back in vogue. over 60, and only two out of 24 are wom
The fascination with Showa reflects a en. Japan’s genderpay gap is the worst in
longing for Japan’s more dynamic past. the G7. In the hands of its fuddyduddy
The country has never been richer or leaders, Japan has been slow to embrace
safer at home than it is today. Yet to digital technology (sending faxes is still
many Japanese it feels stagnant, mired in routine in offices). The government
political apathy, slow economic growth opposes legalising samesex marriage,
and a pervasive sense of relative decline. even though a majority of the public
A recent survey showed that only 14% of supports it. The Showa aesthetic can
young Japanese believe their country’s enrich contemporary Japan, and a mem
future will “get better”. Showa Japan, a ory of Showa dynamism inspire it. Still,
place of remarkable growth, was a differ in some ways the Showa mindset is
ent case. Voter turnout among young holding it back.
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China The Economist June 24th 2023 21
China and Taiwan For now, Mr Xi may well prefer caution.
War with Taiwan, after all, could mean tak
Conflicting thoughts ing on a nucleararmed superpower, too.
He may also wonder how much his own
public would support it. The internet of
fers a crude guide. Lacking helpful clues
that might be provided by a free press and
open political debate, Chinese officials pay
When it comes to a war with Taiwan, many Chinese urge caution—even some
much attention to online opinion. They
ardent nationalists
must sense that amid the clamour on so
I T TAKES LITTLE to spark fury among

nationalist netizens in China, especially
when the topic is Taiwan. Any action that
warned him. Qin Gang, the foreign minis
ter, declared that Taiwan was “the most
prominent risk” in bilateral relations.
cial media for military action, some influ
ential netizens oppose the idea. Even
among ardent nationalists there are fis
could be viewed as a challenge to China’s Many online commentators in China sures. Some urge caution about going to
claim to the island arouses a chorus of calls argue that it is no longer worth trying kid war, or even argue that fighting may never
for war. Their voices alarm Western offi glove tactics with Taiwan. “Separatists”, be necessary: Taiwan will naturally capitu
cials, who fret that Chinese policymakers they say, have become too entrenched late when it becomes evident that China’s
may make concessions to their public’s there; only war can secure it for China. If power has eclipsed America’s.
swelling nationalism and the bellicosity it Mr Xi agrees, he does not say so openly. At a In a recent paper, Adam Liu of the Na
has spawned. Last year China’s leader, Xi Communist Party congress last October, he tional University of Singapore and Xiaojun
Jinping, hinted that the West may be right said China would “continue to strive for Li of New York University Shanghai argued
to worry. He warned President Joe Biden peaceful reunification with the greatest that support for a nearterm war, to the ex
that, concerning Taiwan, the views of Chi sincerity and the utmost effort” while re clusion of all other options, was tiny. Their
nese citizens “cannot be defied”. serving “the option of taking all measures conclusions were based on a survey they
During a recent trip to Beijing, Antony necessary”. Despite his stated respect for conducted in China between late 2020 and
Blinken, the first American secretary of public opinion, he does not want his hands early 2021. Of more than 2,000 respon
state to visit China in five years, met Mr Xi, to be tied by it. dents, a mere 1% wanted their country to
who made conciliatory comments about mount a military assault on Taiwan (not
“stabilising ChinaUS relations”. But for the just on its outlying islands) before the is
rest of Mr Blinken’s visit the message was land’s presidential election in January
clear. “There is no room for compromise or 22 China eyes Okinawa 2024. The ballot will see a new leader elect
concessions on Taiwan,” China’s most se ed to replace Tsai Ingwen, who is retiring
23 Clothes and diplomacy
nior foreignaffairs official, Wang Yi, and whose centreleft Democratic Progres
012
22 China The Economist June 24th 2023
sive Party angers China by stressing Tai by America during the wars in Iraq and China in the region
wan’s separate identity. Kosovo in the 1990s and 2000s. Implicit in
Even if China were to decide to go to war his message: much more time is needed. Eyes on Okinawa
by next January, only 55% said that would Like several other prominent national
be acceptable. Onethird said it would not ists (as opposed to the many who flood so
be. The authors said their data did not sup cial media with short messages like “When
port the idea that demand for the swift are we going to attack? It needs to be
BE IJING
mounting of a fullblown attack had grown quick!”), Mr Wu and Mr Hu do not appear to
As if China isn’t involved in enough
sharply since Ms Tsai became president in be braying for war as soon as some in
territorial disputes
2016. On the contrary, their survey, taken America fear. In a memo in January Gener
together with other academics’ findings,
suggested that “public support for armed
unification has remained relatively stable,
al Michael Minihan, the head of America’s
Air Mobility Command, wrote: “My gut
tells me we will fight in 2025.” In 2021 Ad
W hen Xi Jinping strolled around the
national archives in Beijing earlier
this month, it seemed like a routine tour.
despite the rapid deterioration in Beijing’s miral Philip Davidson, then chief of the US China’s supreme leader commented on va
relations with both Washington and Tai IndoPacific Command, said: “I think the rious items that piqued his interest, such
pei,” the scholars wrote. threat is manifest during this decade, in as ancient scripts engraved on animal bone
Their research was conducted before fact in the next six years.” and an astronomical map from the Song
Vladimir Putin launched an allout inva Some of China’s most radical national dynasty (960–1279). But his remarks about
sion of Ukraine in February 2022. Russia’s ists (the “parasoltree faction”, as netizens a manuscript from the Ming dynasty (1368
unexpected setbacks in that war, and the often call them) have faced fierce criticism 1644) received the most attention. It de
West’s solidarity in response to it, must online. One of them is Li Yi, a commentator scribed old ties between the Chinese prov
have been sobering for some supporters of with more than 16,000 followers on Weibo, ince of Fujian and the independent Ryukyu
rapid steps towards wutong, the common a Twitterlike service. Last month, in an kingdom, a collection of islands that was
shorthand in Chinese for reunification by online video, he said that even if China later annexed by Japan and turned into
force (online, to confuse censors, they of were to lose 140m people (onetenth of its Okinawa prefecture. The book, said a staff
ten use the characters for “parasol tree”, population) in a war over Taiwan “it er, “plays an important political role”. Mr
which are also pronounced wutong— wouldn’t be much at all” and that “with a Xi responded that, having served as a se
though censors usually do not mind calls bit of education” young Chinese would all nior official in Fujian, he was aware of the
for war as long as the party and its leaders agree that, for the sake of unification, casu “deep” history of the exchanges.
are not being criticised for failing to act). alties on such a scale would be fine. That may not seem like much of a state
The backlash against Mr Li has come ment. The Chinese government has never
Wait, wait from within the nationalist camp as well as asserted a claim to the Ryukyu Islands. But
Calls abound for caution about the scale of from more liberal types. “Which stupid for years a collection of Chinese scholars,
the task of conquering Taiwan militarily. people have given him the cloak of ‘patri analysts and military officials have ques
One such has come from Wu Haipeng, the ot’?” said one nationalist blogger with tioned Japanese rule there, with some ar
editorinchief of the government’s main 335,000 followers. Another, with 798,000 guing that the islands’ inhabitants paid tri
portal, China.com. Last month Mr Wu followers, asked: “How should we deal bute to Chinese emperors long before they
wrote on his blog that China had to resolve with such inhuman, Nazi language?” On recognised Japan’s authority. So it is curi
various “problems” before it could use mil June 3rd Huang Jisu—coauthor of a book, ous that Mr Xi’s comments were reported
itary means. His proposals for doing so “Unhappy China”, that became a huge hit on the front page of the People’s Daily, the
sounded like distant goals. One problem, among China’s nationalists in 2009—gave official newspaper of the Communist Par
said Mr Wu, was America’s arms supplies an online lecture to a neoMaoist group (a ty. Some observers think it was meant to
to Taiwan and its strengthening of its mil flagwaving lot). Referring to Mr Li’s re send a message to Japan.
itary posture around the island. To counter marks without naming him, he described That was the idea a decade ago, during
this, he suggested, China should beef up its people who held such views as “fascists”.
air and rocket forces, as well as its navy— Some netizens have even been airing
implying that China’s military buildup in misgivings about going to fight. In April a
recent decades has yet to give it the muscle screenshot of such a post, with its origin
required. He also said China needed to en unspecified, circulated on Weibo. “If
able its economy to resist sweeping Amer there’s a war, I wouldn’t go and I wouldn’t
ican sanctions that a war would entail. let my child go,” it said, a few days after
That will not be easy for a country so de China’s armed forces staged threatening
pendent on global trade. exercises around Taiwan in response to a
In January Hu Xijin, a former editorin meeting in America between Ms Tsai and
chief of Global Times, a nationalist tabloid, the speaker of America’s House of Repre
set out three conditions for launching a sentatives, Kevin McCarthy. “I live at the
war. First, China should have at least 1,000 bottom rung of society. No one pays atten
nuclear warheads (the Pentagon believes tion to us in peacetime. They only think of
that it currently has more than 400 and us at a time of difficulty,” the message said.
will not achieve Mr Hu’s goal until 2030). Nationalists responded with outrage. “This
Second, it should have more missiles and kind of person will always be at the bot
bombs ready for use than do the combined tom, their thinking is at the bottom…”
arsenals of America, Japan and Taiwan. Fi wrote one to his nearly 4.2m followers. But
nally, it should be able to launch a rapid, among hundreds who responded to his in
crippling strike against all of Taiwan’s mil vective, some took issue. “I won’t go. Let
itary facilities. He said this task would re the children of leading cadres go first, they
quire “far more” munitions per day than have good red genes,” said one. Officials
the most intense periods of bombardment may be weighing up such words. n On the lookout
012
The Economist June 24th 2023 China 23
Clothes and diplomacy
CHINA
East China
Sea
J A PA N
Dress to impress
Senkaku/
Diaoyu Okinawa
Islands Island
Why foreign dignitaries wear red when meeting Xi Jinping
X iomara Castro, the president of perity and good fortune. In the 14th
ds
n
Fujian Honduras, had laid the groundwork century Zhu Yuanzhang, the first emper
sl
a
I for a successful visit to Beijing this or of the Ming dynasty (and leader of the
u
u ky month. In March her country ditched ties Red Turban rebellion), declared it “the
TAIWAN Ry
with Taiwan in favour of China. Hondu most distinguished colour”. Over time
Okinawa ras is also in the process of joining the red became associated with popular
300 km
Prefecture
Shanghaibased New Development Bank, customs. Chinese people give red enve
a World Bank knockoff cofounded by lopes stuffed with cash as holiday gifts.
the first “Ryukyu boom”, as some scholars China. But perhaps Ms Castro felt some New parents often receive red eggs to
now call it. Back then, China and Japan thing extra was needed. When she met celebrate the birth of a child.
were sparring over five East China Sea is her counterpart, Xi Jinping, she wore a Chinese mythology tells of a beast
lets, which Japan controls and calls the red trouser suit and shirt with a flowing called Nian who terrorised children at
Senkakus, but which China claims and red neck tie (pictured). the start of the lunar new year, until
calls the Diaoyus. As tensions rose, Chi The Honduran president is hardly the villagers discovered that the monster
nese commentators also began pressing first foreign dignitary to pay sartorial was scared off by a small child wearing
the Ryukyu issue in staterun media. An homage to China by wearing the national red. That, according to the tale, is why
alysts believe they were allowed—and per colour. Past and present leaders, from Chinese began hanging red lanterns to
haps encouraged—to mouth off in order to Robert Mugabe to Vladimir Putin, have mark the new year and other holidays.
strengthen China’s bargaining position donned red ties for talks with Mr Xi. On Crimsonclad foreign officials are
and to make clear to Japan that nationalist at least two occasions Narendra Modi, probably hoping to be favoured by, rather
sentiment was strong in China. India’s prime minister, has slotted a red than shielded from, Mr Xi. Red has been
Today there are signs of a new Ryukyu handkerchief in the pocket of his Nehru a symbol of leftwing politics since the
boom. Days after Mr Xi made his com jacket when greeting China’s president. French revolution and was adopted by
ments, a statetelevision report in the First ladies have often gone further. the Communist Party. Chinese children
southern city of Shenzhen raised many of Richard Nixon’s wife, Pat, set the tone by were long taught that their national
the same questions about the islands and wearing a red overcoat when she and the flag—five golden stars on a red field—
quoted Chinese specialists who stopped president made their historic trip to represented the “fresh blood of martyrs”.
just short of denying Japanese sovereignty China in 1972. Michelle Obama (along For some foreign dignitaries, red has
over Okinawa prefecture. They spoke of with her daughter) wore a crimson dress indeed brought luck. Nixon’s visit was a
China’s benevolent role in the early history to a meeting with Mr Xi in Beijing in success, marking a new era in Sino
of the Ryukyus, contrasting it with descrip 2014. Melania Trump did the same when American relations. Ms Castro left Bei
tions of Japanese bullying. he visited Florida in 2017. On a trip to jing with agreements that, she hopes,
June Teufel Dreyer, a specialist on both China in 2018, Brigitte Macron, France’s will bring Chinese investment to Hondu
China and Japan at the University of Mi first lady, wore a bold red coat during one ras. But just as often foreign leaders
ami, sees a familiar pattern. When China outing, and a long red dress for an art sporting a little red look go home dis
wants to make a controversial claim, it gallery tour in Beijing. appointed. Ties with China tend to turn
may first get mentioned at a lowkey con To the Chinese red represents pros on more than just ties.
ference, she explains, then cited in a gov
ernment document or media report, fol
lowed by a reference from a senior official.
“It’s a way to create a fait accompli by inch
es,” says Ms Dreyer.
In the case of the Ryukyu Islands, the
inferences made by Chinese commenta
tors extend to other territorial disputes. Ja
pan’s claim to the Senkakus is based in part
on its assertion that they had long ago been
administered from the Ryukyus. But some
observers think all the bluster is actually
related to Taiwan.
Last year Japan, citing concerns about a
conflict over Taiwan, announced that it
would boost its military capabilities in the
Ryukyu Islands, expanding bases and add
ing troops. The island of Okinawa (which is
part of the Ryukyu chain) is already home
to several American military facilities. Chi
na may see its Ryukyu boom as a way of sig
nalling its displeasure. But it is unlikely to
dissuade Japan from beefing up the Ryu The colour of money, she hopes
kyus’ defences. Quite the opposite. n
012
24
United States The Economist June 24th 2023
Tackling corporate concentration er. (She rose to prominence as a law stu
dent in 2017 thanks to an article arguing
The competition cops that Amazon was a monopolist, and later
worked for Congress, as a law professor
and at a thinktank.) Mr Biden also ap
pointed Jonathan Kanter, a lawyer who had
worked against Google, to lead the anti
trust division at the Department of Justice
DALLAS
(DoJ). The two have spearheaded a cam
Why Joe Biden’s trustbusters have fallen short of their ambitions
paign to reboot trustbusting. They are
A MERICA’S TOP trustbusters mean to

make their policing presence felt. Law
yers, bankers and financiers now “recog
proach to “going into a neighbourhood and
saying you have a crime problem, so you’re
going to stopandfrisk everybody”.
pushing beyond the “consumerwelfare”
standard (examining consumer prices) to
encourage a broader look at other harms,
nise that there are cops on the beat…that Joe Biden’s appointment of Ms Khan including to labour and small businesses.
we’re vigorously looking to protect the was a signal of seriousness about fighting How successful have they been? They
American public from illegal mergers,” corporate concentration. In 2021 the White have certainly reframed public thinking
says Lina Khan, chair of the Federal Trade House issued an executive order calling on about trustbusting. “Six years ago, if you
Commission (FTC), which enforces con agencies across government to focus on didn’t buy into the consumerwelfare stan
sumerprotection and competition laws. competition. It reckoned the dominance of dard, you weren’t a serious person. Now
Whether Ms Khan, who became the a small number of firms in many markets that’s completely gone,” says Luigi Zin
youngestever chair of the FTC two years meant higher prices and lower wages. gales, a finance professor at the University
ago this month (she is 34), is a good or bad Ms Khan was a surprising pick, given of Chicago Booth School of Business.
cop is a matter of fierce debate. Progres her lack of experience as a legal practition Through the threat of lawsuits and re
sives applaud the greater scrutiny she has quests for information, which boost legal
brought to companies’ conduct—includ bills and the uncertainty of closing merg
ing her latest lawsuit, announced on June ers, the trustbusters have also deterred
21st, against Amazon, for alleged deception 25 The road most travelled some splashy dealmaking. So far this year
involving its Prime subscription service. there have been 4,955 deals in America, ac
26 Pollsters’ problems
Corporate America loathes her more parti cording to Dealogic, a data firm, only 3%
san, boisterous approach to merger en 27 Hunter Biden’s plea bargain fewer than the average for the same period
forcement. Others accuse her of treating all over the five years before. But the total val
27 Death row in Louisiana
big firms as criminals and most mergers as ue is down some 40% on the previous aver
offences. David Gelfand, a lawyer at Cleary 28 Abortion politics age, suggesting firms are avoiding larger
Gottlieb who worked on antitrust in the acquisitions (see chart on next page).
29 Lexington: Multiverse escapism
Obama administration, compares the ap Target companies are insisting on big
012
The Economist June 24th 2023 United States 25
ger breakup fees should an acquisition pushing instead to diversify the bench by two,” says Tim Wu of Columbia Law
not fly. For example, Figma, a software race and background. “It mystifies me that School, who worked in the White House on
company, will get $1bn in cash from Adobe, there hasn’t been more effort to go to competition policy. Technology, including
its potential acquirer, if the $20bn deal is school on a strategy that [President Ron the rise of AI, will surely affect competi
scuttled. (The DoJ is said to be considering ald] Reagan used very successfully,” which tion, but it is too early to say how, says
suing to block it.) But on the legal front the was nominating likeminded judges on Mark Warner, a Democratic senator.
trustbusters, especially at the FTC, have antitrust, says Bill Kovacic of George Wash Some wonder how much of Mr Biden’s
notched up plenty of losses. The most sig ington University Law School, a former FTC policy will outlast him if he does not win a
nificant court victory has been the Justice chair. To shore up the stability of the finan second term, given his limited victories so
Department’s challenge to Penguin Ran cial system, meanwhile, big banks have far in court and the threat that some of the
dom House’s proposed $2.1bn takeover of a been allowed to merge with smaller, failed signature policies will be challenged there,
rival publisher, Simon & Schuster. In Octo ones: an administration that has tried to including the ban on noncompetes.
ber a judge concurred that the deal would fight consolidation has thus enabled it. Others are more optimistic. Bashing big
hand the publisher more pricing control business has become more common
over authors’ earnings, and blocked it. Busting trust among populist Republicans, including a
Highprofile lawsuits are still winding The second problem is that the person with prominent presidential aspirant, Ron De
their way through the courts, including vision for a movement may not be the best Santis, the governor of Florida. “The poli
two against Google (one initiated during person to lead it. “The arguments they tics of this have changed, and no one wants
the Trump administration, one by Mr Kan used to achieve power have gotten in the to be on the other side of it,” insists Mr Wu.
ter’s office, which is seeking to break up way of exercising it,” says Mr Kovacic. Ms Look out for Republican presidential hope
Google’s advertising business). That one Khan took command after saying that the fuls competing on competition policy. n
will be heard by a jury, instead of a judge, agencies had been failing for decades to do
next year, in an effort to bring antitrust proper policing. That has dented morale,
back to the people. “It’s been at least 50 especially at the FTC. A poll last year of em Interstate 95
years, if not longer, since we’ve done a case ployees found that 49% said they trusted
like this in front of a jury,” says Mr Kanter. senior leadership, down from 80% in 2019. The road most
Another big lawsuit against Amazon, pos (Some observe that Mr Kanter has been
sibly over giving preferential treatment to more diplomatic in his criticism of staff’s travelled
its own goods and services, is in the offing past work than Ms Khan, and also more
this year, predicts Konstantin Medvedov strategic in the cases he has brought.)
sky, an antitrustwatcher who works for a The administration has also underesti
PHILAD E LPHIA
fund betting on merger outcomes. mated unintended consequences. Ms
Pain and pride around a vital highway
Ms Khan has taken a more speculative Khan has pushed the FTC to try to accom
approach. Having argued that enforcers of
yore were too timid to fight tech deals that
snuffed out competition, such as past ac
plish a lot through new rules, including
banning “noncompetes” (which bar em
ployees from working for a competitor)
O n June 11th a petrol tanker tipped over
and burst into flames underneath an
elevated section of Interstate 95 in Phil
quisitions of WhatsApp and Instagram by and asserting its authority to pursue priva adelphia. The heat caused the northbound
Facebook (now Meta), she challenged Me cy violations. “In many ways, I view my lanes to collapse and compromised the
ta’s deal for Within, a fledgling maker of tenure as a conservative one,” says Ms southbound lanes, shutting down traffic in
virtualreality fitness apps. But a judge re Khan. “We’re really going back to the origi both directions. Experts initially said re
jected the FTC’s request for an injunction. nal vision of the FTC as Congress envi pairs would take months. The disruption
More recently the FTC sued a second time sioned it.” But the courts and Congress may throws a spotlight on the I95, which
to block Microsoft’s $69bn acquisition of not see it that way. The Supreme Court stretches for over 1,900 miles (3,100km)
Activision, a gaming firm, arguing it could could ultimately take up the question of from Maine to Miami in Florida.
suppress competition in the videogame the FTC’s authority and circumscribe it. It is not America’s longest highway—
market. A hearing was set to begin on June Still, antitrust is a long game. “It took 12 that is the I90 from Seattle to Boston—but
22nd—a very public test of whether Ms years for the Reagan administration”— it is the busiest in terms of miles travelled.
Khan is choosing the right deals to contest. eight under Reagan, four under his succes (Along certain stretches, users complain, it
Lacking a federal privacy law or new sor, George H.W. Bush—“to get where they also stands out for truly dreadful driving.)
antitrust legislation, which Congress has wanted on antitrust doctrine. We’re in year It runs through or near many of America’s
not approved, Ms Khan has persevered big urban areas (see map on next page). The
alone. But in some instances she has “sued portion that collapsed was in a particularly
on the grounds not of what’s currently ille The real deal? dense stretch that carried 160,000 vehicles
gal but what’s undesirable”, says Matt Pe United States, mergers and acquisitions a day, including 14,000 lorries.
rault, a professor at the University of North Years to June 19th Pete Buttigieg, the transport secretary,
Carolina at Chapel Hill. That could back Value, $trn Number of deals, ’000
said when he visited the site that the dis
fire. “When you start losing cases, you set 2.0 8 ruption to trucking will put “upward pres
back the cause,” says Larry Summers, a for sure” on shipping costs on the east coast,
mer treasury secretary. 1.5 6 which may raise the cost of consumer
The administration’s mixed record re goods. Mark Zandi, chief economist at
veals three things it missed as it set out to 1.0 4 Moody’s Analytics, a research outfit, says
attack corporate concentration. First, there the highway collapse will not have a mate
is a problem of competing goals. The court 0.5 2 rial impact on the macroeconomy, but “it
is “extraordinarily friendly to large cor has been a pain in the neck.”
porate interest”, points out Nancy Rose of 0 0 Many lorries have been stuck in snarl
the Massachusetts Institute of Technology, 2010 12 14 16 18 20 23
ing congestion in places not designed for
yet Mr Biden has not made it a priority to Source: Dealogic
big rigs. Rebecca Oyler, head of the Penn
appoint judges with expertise in antitrust, sylvania Motor Truck Association, an in
012
26 United States The Economist June 24th 2023
Misleading polls other ways. Studying the differences in

populations from telephone and online
Telling it how surveys—which industry insiders call
“mode” effects—the Pew Research Centre
it isn’t in 2019 pointed out that its own online
panellists may have been more honest
about key metrics than its telephone re
WASHINGTO N, DC
spondents and less subject to “social desir
As response rates decline, the risk of
ability bias”, a phenomenon where people
polling errors rises
are more honest about things like their fi
K NOWLEDGE of many facets of American

life comes from surveys. Every ten
years the Census Bureau asks adults to tally
nancial situation and height when asked
anonymously than they are over the
phone. Pew found that on the same ques
themselves and their demographic infor tion, among the same respondents, it got
mation in an online or mailin form: a sur different responses by mode.
vey. The Bureau of Labour Statistics (BLS) That means the decline of American
produces monthly estimates of the unem society is a mirage—a statistical quirk rath
ployment rate and other economic num er than the fall of Western civilisation.
bers that are derived from interviews with Such quirks affect other numbers. Accord
tens of thousands of households: another ing to the BLS’s Office of Survey Methods
America’s severed artery survey. And knowledge of political issues Research, the percentage of people com
from opinion polls, of course, comes from pleting interviews for the monthly Current
dustry group, says one lorry driver taking a surveys. That would not be a problem if Population Survey (CPS) has fallen from
detour pulled down power lines, knocking everyone answered the pollsters. But not 90% in 2013 to 71% today. The CPS is the
out electricity in the vicinity. “I’ve heard everyone does, and the people who don’t source of key economic indicators such as
from some trucking companies that sim can be very different from those who do. the unemployment rate and labourforce
ply have given up their routes,” she says. Take a recent survey conducted by the participation. A decline in response rate
“It’s just simply not feasible for them to get Wall Street Journal and the National Opin means there is a higher chance of distor
in and out…with all the congestion and ion Research Centre (NORC) at the Univer tion if “nonresponders” are different from
come out on top.” sity of Chicago. The poll, published in the people researchers actually hear from.
President Joe Biden, a big proponent of March, purportedly showed that the popu Analysts at the US Census Bureau found
infrastructure investment, flew over the larity of many American values had fallen that plunging CPS response rates during
site of the collapse and pledged federal dol precipitously over the past few decades. In the covid19 pandemic made the survey
lars to help repair it quickly (Pennsylvania 1998 a poll by the Journal and NBC News much less representative of poor Ameri
also happens to be a vital swing state). The found that 70% of adults said “patriotism” cans. Their best guess is that the estimate
bill for the rebuild is put at $25m30m. was “very important” to them; now just of median household income in 2020 is in
Workers are on site round the clock. A live 38% do. Similarly, religion’s score had de flated by $2,000 purely because of a chang
webcam of their progress is compulsive clined from 62% to 39%; bringing up a fam ing population of surveytakers. Another
viewing. Josh Shapiro, Pennsylvania’s new ily from 59% to 30%; and community in paper, from the Global Labour Organisa
Democratic governor, said that it is being volvement, which rose from 47% to 62% by tion, an international nonprofit group,
shown in Philly sports bars. During press 2019, had crashed to 27%. Only money had found that CPS response rates are lower in
briefings at the site, he stressed Philadel become more important to the average cities and hubs for manufacturing jobs.
phia’s grit and determination. More than adult since 1998: 31% then, 43% now. Government researchers are hopeful
one observer called him presidential. The Journal wrote that “America pulls they can fix problems of nonresponse by
Mr Shapiro announced on June 20th back from the values that once defined it.” spending more money to interview more
that traffic will flow on the I95 this week A headline on Axios, an online news out people, or by developing new statistical
end. A temporary road was built at remark let, declared: “Rot of nation’s core values techniques for analysing samples. But
able speed. Mr Shapiro was not surprised. quantified by single poll”. On Twitter com other issues will persist undetected until a
“We can get big things done,” he said. “We mentators agonised over the trends, blam researcher asks the right questions. Often,
see a crisis and manage it effectively.” n ing progressivism and secularism. as with the values survey, that is too late. n
Yet the trends may not be real. Instead,
according to Patrick Ruffini, a pollster at
CANADA
Augusta the Republicanaligned firm Echelon In BLS hit
Boston
sights, they mainly reflect a change in how United States, household-survey response rates
Providence the Journal conducts its polling. In the past % of sample group that responds
Philadelphia New York it had joined forces with NBC News to field 100

a nationally representative poll by tele CPS* (employment)
Baltimore I-95 overpass
Washington, DC collapses phone, a practice that grew expensive and CPI Housing† (rents) 75
June 11th 2023 prone to error as response rates plunged.
UNITED Richmond
STAT E S Raleigh
So the newspaper recently turned to NORC, 50
which over the past decade has developed ATUS‡ (time use)
Columbia Interstate 95 polls that collect responses over the inter 25
Savannah net from a representative sample of Amer
icans recruited by mail. 0
ATLANTIC
Jacksonville
OCEAN The problem arises when the types of 2013 15 17 19 21 23
Orlando people contacted by phone and the inter *Current Population Survey
†Consumer price index ‡American Time Use Survey
500 km net can be representative of Americans de Source: Bureau of Labour Statistics
Miami
mographically, but statistical weirdos in
012
Hunter Biden’s plea bargain spite newfound support from the outgoing

governor, a bill to ban the practice died in
Crack case committee in May. Abolishing it, Republi
cans and prosecutors argued, would incen
tivise murderers to go rogue.
Mr Edwards’s political bravery is now
being put to the test. On June 13th, 51 of the
state’s 57 deathrow inmates filed for clem
CHICAGO
ency (the other six chose not to do so). A
Joe Biden’s wayward son pleads guilty
governorappointed parole board will hear
I f there ever was a chance that Joe Bi
den was going to distance himself from
his wayward son, Hunter, it was squashed
their cases one by one—the defence has
just 15 minutes to argue for the life of each
inmate—and could recommend that the
in midApril, when the president paid an governor swap out capital punishment for
official visit to Ireland. As Mr Biden criss life imprisonment without parole.
crossed the Emerald Isle Hunter was con Lawyers at Capital Appeals Project, the
stantly by his side, wearing matching avia nonprofit behind the mass filing, think
tor sunglasses. According to the Washing- their best bet is to argue for a systemic in
ton Free Beacon, a rightwing news website, dictment of the state’s protocols. That is
Mr Biden’s lawyers, who are representing why they chose to go all in instead of test
him in a case concerning childsupport Staying in step ing the most sympathetic cases first.
payments in Arkansas, claim that their cli Of the people sentenced to death in
ent even shared a hotel bedroom with his of details about Mr Biden’s financial deal Louisiana, 67% are black and most killed a
father in Dublin. Mr Biden repeatedly told ings when his father was vicepresident. white person. Ronald Dominique, a white
crowds how proud he was of Hunter. Over a period of several years the younger man known as “the Bayou strangler” who
Mr Biden’s loyalty is genuine. But his Mr Biden was paid large sums of money by raped and murdered 23 (mostly black) boys
advisers will be hoping it is also politically a wide range of foreigners, who seemingly and men in the decade to 2006, did not get
savvy. After five years, the criminal investi thought that by paying Hunter they could the death penalty, whereas Bobby Hamp
gation against Hunter Biden may be com get closer to Joe. Mr Weiss’s statement said ton, a black man, is on death row for alleg
ing to an end. On June 20th David Weiss, that “the investigation is ongoing.” edly killing a conveniencestore clerk dur
the United States attorney in Delaware, the Yet there have already been five years of ing a 1995 robbery in which there is evi
Bidens’ home state, filed charges against investigation, and so far nothing has dence that another man was the shooter.
the president’s son, noting that a plea bar emerged that shows Joe Biden acting in any Though the Supreme Court ruled that it is
gain had been agreed. way other than as a loving father. His son forbidden to execute a person with an in
Hunter Biden will plead guilty to two seems mostly to have overcharged gullible tellectual disability, 40% of those on death
misdemeanour charges of not paying tax foreigners for legal services, which is not row have one. The defence points to a con
es. A felony charge of illegally purchasing a obviously illegal. More charges seem un centration of sentences coming from two
gun (for which Mr Biden apparently lied on likely. For President Biden, his son’s will parishes as evidence of prosecutorial over
a backgroundcheck form about his use of ingness to own up to wrongdoing can be reach; and notes that since 1976, 83% of the
crack cocaine) will be dismissed after a contrasted with Mr Trump, who is fighting state’s capital cases have been reversed.
period of probation. The president’s son his own criminal charges. As long as Hunt Louisiana, however, has less of an appe
thus avoids a prison sentence. The judge er can stay clean, and so not break his pro tite for killing than other states, says Cece
could in theory reject the agreement, but bation, he can probably go back to his lat lia Kappel, a defence lawyer. In the past five
that is unlikely. est pursuit: abstract painting. n decades, the Bayou State executed 28 peo
Donald Trump compared the punish ple (and none since 2010); Texas killed 583
ment to a “traffic ticket”, arranged by a “cor and Oklahoma 120. Beyond a struggle to get
rupt” Department of Justice. Ron DeSantis, Capital punishment the right drugs—some pharmaceutical
the governor of Florida and Mr Trump’s firms now refuse to supply prisons with
main Republican rival, called it a “sweet Murder on the chemicals used to kill—many attribute
heart deal”. But there is little reason to the resistance to the state’s Catholic heri
think that Mr Biden has been especially his mind tage. In 2022 Pope Francis declared capital
generously treated. Mr Weiss was appoint punishment “morally inadmissible” in all
ed by Mr Trump, and kept in place so that cases. Sister Helen Prejean, a nun from
BATO N ROUGE
he could continue the case. Just one in 50 New Orleans, says a prolife state should
Louisiana’s lame-duck governor could
federal criminal cases goes to trial, and few not put people to death. Though Republi
clear death row before he goes
firsttime offenders for nonviolent crimes can lawmakers are gungho about outlaw
are sentenced to prison. Prosecutions of
people who lie on federal forms when buy
ing guns are extremely rare. According to
A final term gives a politician an op
portunity for courage. John Bel Ed
wards, Louisiana’s lameduck Democratic
ing abortion (see next story), their law
andorder convictions seem to trump their
inclinations to preserve adult life.
data extracted from the government by the governor, seemed to be seizing it when he The race to replace Mr Edwards is alrea
Washington Post, just 298 cases were filed announced his opposition to the death dy under way. The attorneygeneral, Jeff
in 2019, though there were almost 170,000 penalty in a conversation on faith and Landry, leads the pack: fundraising reports
refusals from background checks that year. leadership at Loyola University, a Jesuit show he has far more cash on hand than
Will the conclusion of the case mean college, in March. In a state where Donald anyone else. His office plans to fight the
that Hunter’s problems are over? That is Trump trounced Hillary Clinton in 2016 clemency pleas and on the campaign trail
not yet guaranteed. Since January James and easily captured the eight electoralcol he has called for executions to start again.
Comer, the chairman of the House Over lege votes in 2020, most voters have long With each passing day the window for
sight Committee, has released a steady drip approved of putting inmates to death. De mercy in Louisiana closes a little more. n
012
28 United States The Economist June 24th 2023
Abortion politics ing a “monument to unborn children” at

their capitol and Texans are working on the
Radicals v incrementalists legal logistics of criminalising travel for
abortions. Some are flirting with a ban on
morningafter pills, others are attacking in
vitro fertilisation, arguing that too many
“babies on ice” are discarded.
Two broad camps are jockeying to set
BATO N ROUGE
the movement’s direction. Establishment
One year after Dobbs, the prolife movement is in flux
prolifers use political connections to
F OR THE first 12 years of her life Audrey
Wascome’s grandparents raped her to
make child pornography. She dodged preg
Choosing choice
“Abortion should be legal during each
score policy victories with judges and leg
islators. The National Right to Life Com
mittee, the oldest prolife organisation, at
nancy, but because of scar tissue her blad of the following stages of pregnancy” tributes Roe’s fall to years of “chipping
der no longer works as it should. On May United States, % agreeing away” at it. In defence of a 15week ban,
10th Ms Wascome, now an antiviolence 80 Marjorie Dannenfelser, the president of
advocate, testified before the Louisiana Susan B. Anthony ProLife America, anoth
First trimester
House’s criminaljustice committee for a 60 er big group, said that promoting political
bill that would carve out exceptions for ly viable policies is more important than
rape and incest from the state’s abortion 40 gunning for gold. Incrementalists point to
ban. Prolifers responded by calling for Second Kansas and Kentucky, both Republican
punishment for rapists rather than “death 20 states that rejected abortionban referen
penalty” for fetuses, and argued that ex dums last year, as evidence that rash
ceptions would make women clamour to Third 0 moves can backfire.
put exlovers behind bars to “dispense 1996 2000 05 10 15 20 23
Younger prolifers, boosted by groups
with the inconvenience of giving birth”. Source: Gallup
like Students For Life, tend to be more ab
Fixing one tragedy with another, they said, solutist. Though a greater share of older
does no good. At rollcall the bill died, with people think abortion should be illegal in
lawmakers voting neatly on party lines. Fiercer opposition also makes things some or all cases, 18 to 29yearolds are
After the vote, prolifers convened for a harder. Between 2020 and 2022 the share most likely to want total bans. Budding ac
celebratory lunch in the private suite of the of Americans who vowed to vote only for tivists resist any exceptions, dreaming of a
lieutenantgovernor. A pastor prayed for prochoice candidates nearly doubled; in federal ban and of going after birthcontrol
“the unborn life, liberty and limited gov the five years to 2023 the percentage who pills. Being “massively profamily” is
ernment”. Like the movement overall, say thirdtrimester abortions should be le where they break with their parents’ gener
many of the prolifers at the capitol were gal rose from 13% to 22% (see chart). To ation, says Zachary Schnaars, a finalyear
bornagain Christians—a “Godsquad” of many on the left, Dobbs is now the animat student at Louisiana State University. He
mostly white Catholics and evangelicals ing force that Roe was on the right. feels his cohort has suffered more from the
who consider themselves to be wrestling decline of the family unit.
an evil as grave as slavery or the Holocaust. Hearts, minds and “born privilege” Many have replaced the “hardcore, alt
Before the ruling in Dobbs v Jackson Different prolife factions, however, have right talk of hellfire” with language more
Women’s Health Organisation, which one different priorities. Wyoming has extend empathetic to the mother, says Keagen
year ago scrapped Roe v Wade and let states ed Medicaid for new mothers and North Alexander, a student from Houston. Using
ban abortion, prolifers were a pretty unit Carolina pledged $160m for child care, fos the lingo of the left, young advocates talk
ed bunch. Leaders and grassroots organis ter care and parental leave. New Mexicans about “born privilege” (discrimination
ers found a common enemy in Roe. But are looking into the Comstock Act as a ba against the unborn) and the environmen
since the Supreme Court decided to “stay sis for a national ban, Arkansans are build tal costs of “chemical abortions” (for which
out of the dehumanisation business for there is no scientific evidence). They reck
good”, as one prolifer put it, the move on these are the best ways to win over other
ment has been in flux. After the festivi young hearts and minds.
ties—some say the founding fathers re Historically, incrementalists have not
joiced in heaven when Roe fell—prolifers chided the movement’s fringe for going too
realised sending power back to the states far, even when extremists shot providers
was just the beginning. “Dobbs was the day and firebombed clinics in the 1980s, says
we waited for for close to 40 years,” says Karissa Haugeberg of Tulane University.
Gene Mills, head of the Louisiana Family The radicals made the establishment look
Forum, a nonprofit group. “What now?” more reasonable. Things changed when in
They agree on one thing: the work is far May 2022 a Louisiana legislator proposed a
from done. Abortion is not outlawed every bill to let the state bring homicide charges
where, and where it is, women circumvent against women who had illegal abortions.
bans by driving to outofstate clinics or Over 70 prolife organisations opposed it.
buying pills online. In California and New Backing the bill threatened the case that
York, which together recorded a quarter of they had worked so hard to construct: that
America’s abortions before Dobbs, nearly being antiabortion is also prowoman.
23,000 fetuses are still aborted each Radicals pushed back, arguing that if one
month. Many find the new patchwork of truly believes that abortion is murder it is
policies morally untenable, comparing it logically inconsistent to fail to prosecute
to precivilwar times when slavery was le the killer. In this ethical framework, rape
gal in some states, but not in others. The permanent campaign and incest exceptions make no sense. n
012
Lexington Multiplexed
Hollywood’s favourite new plot device offers escape for a society lamenting its choices and traumas
question: Why now? Technology is clearly part of the answer. It
has made these movies possible not just through advances in
graphics but by training audiences to toggle among countless
openbrowser tabs, even as their politics and news media are
teaching them that reality is slippery, hard to name or trust. But
certain themes that come up again and again suggest that these
films also respond to some deeper yearning.
Earlier this year a multiverse movie, “Everything Everywhere
All at Once”, won seven Oscars, including for best picture. It was in
essence a Marvel action film dressed up in musings about identity
(as are, come to think of it, Marvel movies). Evelyn, played by Mi
chelle Yeoh, is a ChineseAmerican immigrant who discovers she
has great power in an alternative reality and must travel the multi
verse to save it from destruction (via a bagel) by another powerful
being who turns out to be a differentreality version of her alienat
ed daughter. The two are reconciled and the multiverse saved by
Evelyn’s embrace of empathy and kindness.
The Flash, by contrast, after disastrously dashing back in time
to tinker with events, discovers that to save the world he must let
his mother die. “The Flash” may be tougherminded, but the basic
message is the same: parenting is hard. One hopes the sprogs take
that in, along with their $12 popcorn.
“O h, JAKE,” brett said, “we could have had such a damned

good time together.” So writes Ernest Hemingway in “The
Sun Also Rises”. “Ahead was a mounted policeman in khaki direct
As those summaries suggest, these films are also obsessed with
choice and contingency. When the show ends and the lights come
up you can feel less inspired than sad, considering a society suf
ing traffic. He raised his baton. The car slowed suddenly pressing fused with regret, more preoccupied with individual trauma and
Brett against me. ‘Yes,’ I said. ’isn’t it pretty to think so?’” with sorting out the past, and recycling its tropes, than dreaming
It is pretty to think so, and if Hollywood got its mitts on Hem of the future. The escapism on offer is not just the old comicbook
ingway’s oeuvre today, the story would not end with such aching fantasy of a humdrum existence transformed by a spider bite. It is
futility. As the baton came down the scene would jump to another that in another reality, right now, the audience member might
world, or timeline, where Brett and Jake—he, in this other reality, have made choices that led to a grander life, or at least Hillary Clin
having dodged that emasculating war wound—are rolling in the ton might have campaigned harder in the Midwest.
hay, then (wave of the baton) another reality in which Brett, now a
matador, is bringing a bull to its knees and then (this time a wave Spidey sense
of her red cape) another where she is helping a wrinkled Cuban For Lexington’s money the best of this multiplying genre is the jaz
fellow in a tiny boat reel in a giant fish, with a heave from the In zy, animated series of “SpiderVerse” movies emerging from Co
credible Hulk and, inevitably, his chuckling buddy Thor. lumbia Pictures, the second of which is in cinemas now. In his
It is a multisplendoured thing, the multiverse: a sciencefic “Hitchhiker’s Guide to the Galaxy” novels, Douglas Adams romped
tion plot device that has been around for decades, yet has sudden with the idea of infinity, positing that it meant that anything imag
ly spread through cinema and television with the speed of Quick inable, such as a planet of sentient mattresses, must exist some
silver and the ensorcelling power of Dr Strange (both © Marvel En where. Each planet of the infinite SpiderVerse hosts a Spider
tertainment). By combining characters and cultural references old creature of some sort—a cat, a punk rocker, a Tyrannosaurus Rex—
and new, it can bind together grandparents, parents and children, with a costume, powers and an agonising back story like that of
as well as many brands and the most convoluted plots. the original SpiderMan, who failed to stop a robber who subse
The newest summer spectacle, “The Flash”, resurrects not only quently killed his beloved Uncle Ben. Interdimensional travel al
three different Batmen (played by Ben Affleck, Michael Keaton lows these Spiderbeings to join forces, and can also bring them
and George Clooney) but also several Superpeople of both genders into conflict with one another.
reaching back to the blackandwhite era. It winks at the audience Intimate tales of trauma and parental struggle are, as usual,
with references to “Star Wars”, “Scooby Doo” and “Back to the Fu chained to the onrush of Armageddon, but the series wears these
ture’‘. The effect is of a selfaware palimpsest begat by TikTok and a themes both more lightly and more soulfully. In a fleeting scene in
pinball machine. “Look at this!” cries the Flash—well, one of the the new film (“Across the SpiderVerse”) the audience glimpses a
two or three Flashes—at the climax. “These worlds collapsing and Spidertherapist listening to a SpiderMan on a couch talking
colliding! We did this!” Indeed they did (truly, it is a metamulti about his uncle. “Let me guess,” Spidertherapist interrupts with a
verse). Just how they did it is worth pondering only in a dorm hint of impatience, looking up from his pad of paper. “He died?”
room blue with pot smoke. Using a bowl of spaghetti, a Batman ex The emerging arc of the series is that the hero, Miles Morales, is
plains that “Time isn’t linear,” though it must be admitted that, determined to transcend the cycle that the other Spiders accept as
during the film’s 144 minutes, it can certainly feel that way. written. “Everyone keeps telling me how my story is supposed to
Much of this is just good fun, of course. Asking why one enjoys go,” he exclaims. “Nah! I’m going to do my own thing.” It may be
a rollercoaster ride is an invitation to turn delight into homework. that the multiverse of cinematic multiverses will, in the end, offer
Yet the ubiquity of the concept of the multiverse does raise the up something new. n
012
30
The Americas The Economist June 24th 2023
Argentina’s upcoming election nounced he will run. Neither is hugely

popular. Instead, the polls are dominated
It’s still the economy, stupid by the centreright opposition, Juntos por
el Cambio (“Together for Change” or JxC),
and La Libertad Avanza (“Freedom Advanc
es”), the party of Javier Milei, a libertarian
congressman (see chart 1 on next page).
For months the strongest candidate
from JxC seemed to be Horacio Rodríguez
Annual inflation of 114% is pushing Argentina to the right
Larreta, the technocratic mayor of Buenos
S aturday June 24th will be a momen

tous day in Argentina: Lionel Messi, a
superstar footballer, will turn 36. It is also
go Perón came to power, Argentina has
mostly been ruled by the populist move
ment that took his name. But Peronism ap
Aires. Yet his emphasis on gradual change
has resulted in him losing appeal as the
economy worsens. This has opened up the
the day the election season officially be pears to be at its lowest ebb: just over a floor for Patricia Bullrich, a former security
gins in the country. As politicians limber quarter of the electorate say they will cast minister. Whereas Mr Larreta is trying to
up to compete as presidential hopefuls for their ballot for a Peronist. Under President bring moderate Peronists into JxC, Ms Bull
the poll later this year, they face a daunting Alberto Fernández annual inflation has tri rich opposes any alliance with the move
backdrop. The annual inflation rate, of pled. Capital controls have tightened, fuel ment. She favours a sharp devaluation and
114%, is the world’s thirdhighest. The ling a gigantic black market for dollars, the a rapid reduction in public spending. Both
share of people who cannot afford basic currency in which Argentines save. The want to enshrine centralbank indepen
foodstuffs and services has risen from 30% central bank has printed so much money dence, reduce the total fiscal deficit (ex
in 2018 to 43% today. Unsurprisingly, the that the amount of cash in circulation has pected to be 3.8% of GDP this year), slash
main concern of voters is the economy. almost quadrupled to 3.8trn pesos. currency controls and unify Argentina’s
And it is pushing them to favour politi Both Mr Fernández and his vicepresi mindboggling array of exchange rates.
cians who offer radical fixes to their coun dent, Cristina Fernández de Kirchner (no Some Argentines find this playbook un
try’s economic malaise. relation), have said they will not run for of appealing. The previous administration
So far, some 20 candidates have thrown fice. The potential Peronist hopefuls in was led by Mauricio Macri, the founder of
their hat in the ring. They will battle it out clude Eduardo de Pedro, a protégé of Ms the main party involved in JxC. He re
to win the backing of their parties in pri Fernández, and Sergio Massa, the economy moved subsidies, lifted currency controls
maries on August 13th. The winners of minister, although he has not formally an and agreed loans totalling $56bn with the
those will move to the first round of the IMF. The formula ended in crisis in 2018.
presidential election on October 22nd. But Instead, many want more extreme sol
the depth of Argentina’s economic pro utions. That has fuelled the rise of Mr Mi
blems means that the election this year is 32 Journalism under fire in Guatemala lei, who calls his programme a “chainsaw
particularly unpredictable. plan”, as it is so sweeping. He wants to
32 A shortage of lifeguards in Canada
Since 1946, when General Juan Domin scrap the central bank and swap pesos for
012
The Economist June 24th 2023 The Americas 31
dollars. He promises to cut taxes, privatise Instead, according to Mr Buscaglia, the

state firms, scrap subsidies and export re government has been selling pesodenom
strictions, and reestablish private pen inated bonds to publicsector entities,
sion funds. He also wants to introduce a which then sell the bonds back to the cen
voucher system in schools and privatise tral bank. This, in effect, puts cash in the
health care. The number of government government’s hands.
ministries would be reduced from 18 to 8. Sorting out the economy will require
Mr Milei attracts voters fed up with a shortterm pain. In order to cut the fiscal
bloated state. But his eccentric style—he deficit, the government will need to reduce
lives with five mastiffs, four of which are public spending and subsidies, on which
named after famous economists, and also around 2% of GDP is spent. Yet that will
wants to create a legal market for organs— raise energy prices, which will push up in
is particularly attractive to young men. flation. Similarly, to boost trade Argentina
When polled, a little over a fifth of voters will need a single exchange rate. Yet that
say they will choose him. will probably require devaluing the peso,
His plans for dollarisation have gained which will push up prices. That could lead
the most attention. Mr Milei’s programme to social unrest.
is unclear, but suggests either a fullscale Implementing such reforms is politi
dollarisation of the economy, or for citi cally challenging. Argentina’s constitution
zens to choose a currency of their liking. divides the country into 24 provinces with
Many economists think official dollarisa lots of autonomy. Much of the surge in
tion is unfeasible. In some forms it would public spending over the past two decades
require the central bank to have large dol Greenback nation? has been fuelled by the provinces rather
lar holdings to back the banking system. than the federal government. Any incom
Yet the central bank’s net foreign exchange Whoever is the next president has a ing president will have to negotiate with 24
reserves are a negative $1.5bn, estimates tricky task ahead. Public spending has governors who often run their regions like
Miguel Kiguel of Econviews, a consultancy. grown from 26% of GDP in 2000 to almost fiefs. In some of Argentina’s poorest prov
Dollarisation is supposed to make it im 40% today. Government revenues, how inces, over twothirds of employees work
possible to plunder the central bank to ever, have not caught up. They represent for some form of government.
fund the government. A previous effort in 32% of GDP. But informality makes the tax The next president may, however, be
the 1990s that pegged the peso to the dollar base small. According to the statistical helped by a stronger harvest. This year one
stopped hyperinflation for a few years. Yet agency, 36% of Argentines work in the in of the worst droughts in Argentina’s histo
the system backing the peg was too lax to formal sector, though many economists ry wiped out over $22.5bn worth of soya,
restrain the government, and so deficits put the figure higher. The few Argentines corn and wheat exports, worth 3.2% of
kept piling up. When it became clear that who do pay taxes are overburdened. The GDP. The harvest is expected to recover
one peso was not worth one dollar, Argen World Bank estimated that in 2019 a typical next year. Increasing demand for lithium
tines rushed to withdraw their dollar sav mediumsized firm in Argentina would could also help. Recent investments in the
ings from banks in 2001. The government owe taxes and social charges equivalent to world’s secondlargest field of shale gas, in
then, in effect, confiscated these. Argen a whopping 106% of its pretax profits (see the West, could boost energy exports.
tines were given devalued pesos, and the chart 2). Ms Bullrich and Mr Milei may tout
worst crisis in the country’s history en Beyond raising taxes, the country has quick fixes. But it will take persistence to
sued. GDP fell by 17% and unemployment few other options to get cash. Since it has win back the trust of foreign investors and
nearly doubled to 24%. defaulted on its sovereign debt nine times, Argentine savers. “None of our problems
Despite this, many like the fact that Mr it is shunned by international capital mar will be solved under one government,”
Milei offers radicalism. However in recent kets and cannot borrow (except from mul says Ricardo Carciofi of the University of
local elections his allies have not done tilateral lenders). Argentina could increase Buenos Aires. “The secret is to solve the
well. This could mean that, in a general revenues by exporting. But successive Pe problems of today and persevere without
election, he may win only in big cities. But ronist administrations have built walls changing direction for years, decades
if Ms Bullrich wins, she has said that she around the country. Trade is equivalent to even.” For Argentina’s volatile politics, that
would make an alliance with Mr Milei. only 33% of GDP, one of the lowest shares is a tall order. n
in the world. Argentina is among only a
dozen countries which tax agricultural ex
The rise of an outsider 1 ports, according to César Litvin, a consul Overburdened 2
Argentina, voting intention in general election, % tant in Buenos Aires. Businesses, tax and social contributions
All this means that Argentina’s govern as % of pre-tax profits, 2019
40
Juntos por el Cambio ments have often turned to the central
(Centre-right) 0 20 40 60 80 100 120
bank, which enjoys only notional indepen
30 Argentina
dence, to finance the fiscal deficit. In
Unión por la Patria
March the government updated an agree Brazil
(Peronist) 20 ment with the IMF to refinance its out
Mexico
standing loan, which stipulates that the
La Libertad Avanza Latin America and
central bank may not finance more than the Caribbean
(Right-wing) 10 0.6% of government spending in 2023. Yet OECD countries
in the first five months of this year central
bank financing has already exceeded this United States
0
2021 22 23
limit, says Marcos Buscaglia of Alberdi Chile
Source: National polls
Partners, a consultancy. Much of the mon Source: World Bank Doing Business
ey is not funnelled directly to the Treasury.
012
32 The Americas The Economist June 24th 2023
Guatemala ed antiimpunity taskforce. This trend more difficult to practise journalism in
deepened under his successor, Mr Giam Guatemala,” he sighed. He believes the ar
No country for mattei. Threatened by questionable legal ticle that particularly irked the authorities
challenges, many lawyers and judges have before his arrest was a report on irregular
journalists fled the country in recent years. Since No ities surrounding the government’s co
vember two dozen journalists have gone vid19 vaccine deal.
into exile. Marielos Monzón, who is part of a me
When interviewed in May the founder dia collective called NoNosCallarán (They
GUATE MALA CITY
of El Periódico was handcuffed, well Will Not Silence Us), believes the sentenc
Press freedom is being stifled
dressed and gaunt after ten months in a ing of the “emblematic” Mr Zamora is a
cell. He correctly guessed that he would re “clear message” to anyone who practises
Jnalist,
osé Rubén Zamora, a Guatemalan jour
has often exposed corruption in ceive between five and seven years in jail, her profession. Ms Monzón thinks the sit
the Central American country. In 2008 he adding that Guatemalan democracy had al uation is the worst in the country since
was kidnapped, beaten and drugged by un ways been imperfect, but that it had signif 1996, when the postcivil war era began.
known assailants, before being dumped icantly worsened of late. “We are passing a “They are leaving us two paths,” she says.
outside the capital. Some 15 years later, he threshold, and it will be progressively “The path to exile or the path to prison.” n
is still being targeted. On June 14th, a court
sentenced Mr Zamora to six years in prison
for moneylaundering and ordered him to Canada
pay a $40,000 fine. He was cleared of char
ges of blackmail and influencepeddling.
Of buoys and men
The case is widely considered spurious. It
VANCOUVE R
is a worrying sign of eroding press freedom
Canada has a shortage of lifeguards
ahead of the first round of a presidential
election on June 25th.
Alejandro Giammattei, the outgoing
president (he cannot run again), insists the
M ichael Olsen first became a life
guard when he was a teenager in
Australia. Now 81 years old, and after
in order to encourage more youngsters to
take up summer jobs.
The shortage is mostly the result of
trial had nothing to do with journalism careers in tech and in the postal service, the pandemic, which shuttered pools.
and everything to do with Mr Zamora’s he has gone back the poolside. Most of When they reopened, many lifeguards
business activities, which included asking his coworkers at the Nepean Sportsplex who were fired during lockdowns did not
an acquaintance to deposit $40,000 in in Ottawa, the capital of Canada, are return. Training can be expensive. Al
cash in a bank for him. Mr Zamora argues highschool and university students. He though the initial course costs hundreds
that the use of cash was necessary to pro is currently the oldest lifeguard in the of Canadian dollars, over the years addi
tect donors from the ire of the authorities. province of Ontario—but he may be tional lessons and the like can add up to
El Periódico, the newspaper Mr Zamora joined by other octogenarians if a nation C$1,500 ($1,134), estimates Christopher
founded in 1996, closed in May—he claims wide trend continues. “I’ve been down Love of the Manitoba Lifesaving Society.
that the authorities repeatedly intimidated sized from jobs before,” he says. “It’s nice Training also takes a whopping 135 hours.
its donors and journalists (the government to know that I’m in demand now.” The number of lifeguards is ticking
denies these allegations). Canada has a shortage of lifeguards. up again. But it is still not what it was
Mr Zamora’s punishment is “a very bad This has caused dozens of pools to close before the pandemic. In 2019, the prov
signal for democracy”, says Carolina Jimé across the country—some temporarily ince of Manitoba trained around 1,000
nez Sandoval, the head of the Washington and others permanently. On June 2nd lifeguards. In 2021 only 200 received
Office on Latin America (WOLA), an Ameri Ontario’s government lowered the mini training. In 2022, 900 did. Ahead of the
can thinktank. Ahead of this year’s presi mum age to be a lifeguard, from 16 to 15, busy summer season, the Lifesaving
dential election, the right to take part in Society, a charity, offered free training for
politics has also been “severely violated”, 12 people in Winnipeg this month. Only
she notes. The country’s electoral authori four people signed up.
ties have made apparently arbitrary deci Similarly, some pools are subsidising
sions to bar candidates, including Carlos the costs of training. Lifeguards who
Pineda, a businessman who became the have worked in other countries, such as
surprise frontrunner after campaigning Mr Olsen, are also being fasttracked into
on TikTok, a video app. jobs; previously, they would have had to
This is part of a broader trend of demo retrain. (Even so, he still had to prove he
cratic backsliding. Several countries in could swim 400 metres in under 12 min
Central America are moving in the direc utes and haul up a weight of 9.1kg from
tion of Daniel Ortega’s Nicaragua, the origi the bottom of the pool.) Other munici
nal model for despotism in the region. The palities are offering gift cards, to Star
rule of law is quickly eroding in El Salvador bucks and the like, to attract recruits.
under Nayib Bukele, its millennial presi Higher wages help, too. Municipal
dent. Unlike these two other nations, ities in British Columbia are trying to
though, Guatemala is not dominated by make waves in the labour market. Life
one individual. Rather, its political, mili guards working for the city of Vancouver
tary and economic elites entrench their can earn C$28 an hour, more than C$12
hold on power through a system described higher than the current minimum wage.
by WOLA as “corporate authoritarianism”. Meanwhile, lifeguards who patrol the
Democracy started to unravel in Guate city’s ten beaches make C$35 an hour.
mala in 2019 when the thenpresident, Jim Not going swimmingly Surf’s up.
my Morales, disbanded CICIG, a UNcreat
012
Middle East & Africa The Economist June 24th 2023 33
Africa and global institutions countries are being squeezed by rising in
terest rates and by higher food and fuel
Demanding a say prices following Russia’s invasion of Uk
raine. They want, but probably will not get,
the IDA’s funds refilled ahead of its next
scheduled replenishment in 2025.
Axel van Trotsenburg, the World Bank’s
senior managing director, points out that
DAK AR AND NAIRO BI
overall funding has risen, “particularly in
African countries are fed up with being marginalised in global institutions
Africa”. Yet the continent is competing for
T here was no shortage of bigwigs at a

developmentfinance powwow host
ed by Emmanuel Macron, France’s presi
Much of the work these institutions do
is in Africa, where they are trying to reduce
poverty (the continent has more than half
funds with two new priorities: Ukraine and
climate change. The Bank is hoping to raise
$12bn for a new IDA crisis facility, but half
dent, in Paris on June 22nd to discuss the world’s poor), rescue listing econo of that would go to Ukraine and Moldova,
pressing global issues including World mies, end civil conflicts and help refugees. which are not poor enough to normally
Bank reform, climate finance and debt dis But African leaders are alarmed by an im qualify for the IDA’s concessional loans
tress. The expected attendees at the Sum pending plunge in cheap financing from and grants. Many Africans see this effort as
mit for a New Global Financial Pact includ the International Development Associa evidence that international institutions
ed Li Qiang, the Chinese premier, Janet Yel tion (IDA), the concessional arm of the apply a double standard by bending their
len, America’s treasury secretary, and no World Bank. When covid19 struck, the IDA own rules for nonAfrican countries.
fewer than 16 African presidents. raised additional funds and stepped up its Bilateral aid (directly between coun
Africa’s large presence reflects a fear support for poor countries. In the past year tries) to subSaharan Africa fell by 8% in
that the continent is being shortchanged it has committed perhaps $37bn around real terms to $29bn in 2022, according to
as priorities shift towards helping Ukraine the world, up from almost $22bn in 2019. the OECD, a club mainly of rich countries.
and dealing with climate change. That is But this depleted its larder, and its com At the same time global bilateral aid rose by
feeding a deeper anger—that the continent mitments will probably be about $10bn 15%, in large part due to $16bn going direct
has too little say in global institutions such lower in each of the next two years. ly to Ukraine and another $29bn being
as the World Bank, the IMF and the UN, and The cuts will happen even as African spent at home in donor countries on host
that some of the proposed reforms could ing (mostly Ukrainian) refugees. “We have
again leave Africa out in the cold. “When seen the international community making
decisionmakers are quite far from the re → Also in this section resources available at scale and swiftly for
alities of the country it’s more difficult to Greece and Ukraine,” says Hanan Morsy of
34 A spreading jihadist menace
build empathy,” says Vera Daves, Angola’s the UN Economic Commission for Africa.
finance minister. “That’s why it so impor 35 America and Iran deescalate “Solutions for Africa are not found in the
tant for us [Africans] to be more present same way, and that has to change.”
36 Israel’s booming military exports
within the institutions.” The Paris summit involves a big push,
012
34 Middle East & Africa The Economist June 24th 2023
mainly by rich countries and small island Jihadists in Africa
states, to do more on climate change. Afri Many troubles, little say
cans worry that this will be at the expense Sub-Saharan Africa, % of world total The spreading
of the poor. New priorities should not avert
the bank’s focus on poverty, says Enoch Go
People in extreme
0 10 20 30 40 50 60
menace
dongwana, South Africa’s finance minis poverty*, 2019
ter. A note seen by The Economist, signed by Poor countries in† debt GO MA
every African member among others, says distress, May 2023 Militants in Congo linked to Islamic
they want “an institution that remains Votes at the World Bank‡, State are extending their reach
strongly committed to end poverty”, warn March 2023
ing that “too broad” a mission will dilute
this focus. They also called for additional
funding for climate projects so that these
IMF votes, June 2023
*Living on less than $2.15 a day, at 2017 purchasing-power parity

T hey came in the dead of night with
guns, axes, machetes and petrol
bombs, shooting, hacking and setting fire
do not reduce spending on development. †Or at high risk of ‡International Development Association to students as they slept in their dormito
Sources: World Bank; IMF
Yet “it’s really a zerosum world,” says Cle ries at a remote school in Uganda’s west.
mence Landers of the Centre for Global De After murdering 41 people, the fighters of
velopment (CGD), a thinktank. concerns are,” complains South Africa’s Mr the Allied Democratic Forces (ADF), an
In response to the uproar, the institu Godongwana. African leaders hope to get a armed group based in eastern Congo
tions are debating some technical fixes. stronger voice at the G20, a club of the linked to Islamic State (IS), spirited them
The G20 thinks the bank could lend more world’s biggest economies, as well as in the selves back across the border, taking at
by tweaking its own rules and borrowing international financial institutions. least six captives with them.
more from markets. Yet doing so could Macky Sall, the president of Senegal and The attack on June 16th is a reminder of
push up the interest rates it charges poor until recently the chair of the African Un how chaos in eastern Congo, which is ter
countries, frets Abdoul Salam Bello, the ion (au), the regional bloc, argues that Afri rorised by dozens of armed groups, is
representative on the World Bank’s board ca’s weak representation in international threatening the wider region. In addition
for 23 African countries. “They are not re institutions results in the continent hav to the ADF, these groups include the M23, a
forming for us,” sums up one Ethiopian of ing decisions foisted upon it on matters rebel movement backed by Rwanda, and
ficial bluntly. “It is for the countries that such as climate change and debt. “The G20 CODECO, an ethnic militia accused of rap
will be giving them money.” undermines its effectiveness and influ ing, dismembering and beheading its vic
Most African countries borrow from ence by leaving out such a large proportion tims. This year alone some 1m people have
the imf at subsidised interest rates. Yet the of humanity and the global economy,” he fled their homes in Congo, taking the total
fund is running short of concessional wrote in an oped in Le Monde. to more than 6m, according to the UN.
cash, says Ernest Addison, the governor of Africans are also trying to push talks Moreover, the attack highlights how ji
Ghana’s central bank. Indeed, without new about international taxation from the hadists have been able to spread their in
money it could be forced to slash conces OECD into the UN, where they have a voice. fluence across a large triangle of east Africa
sional lending in a year or so. The IMF re And they have demanded more of a say in —roughly from Somalia to Mozambique
torts that it has provided unprece global debt discussions, which remain and Congo—often by exploiting local
dented support to poor countries since the dominated by creditors. grievances. Uganda, which is at a nexus of
pandemic and that it is trying to get donors Africa’s most ambitious geopolitical this terrorist activity, has been attacked
to stump up more. demand is for reform of the UN Security several times. The latest is its worst since
But it is not just the availability of mon Council. Roughly half of all Security Coun 2010, when suicidebombers from alSha
ey that is the issue. African countries are cil meetings discuss Africa. Yet the 15 bab, a Somalia affiliate of alQaeda, killed
also hamstrung by the fund’s rules on how member council—comprising five veto more than 70 people in two almostsimul
much countries can borrow, says Mamo wielding permanent members and ten ro
Mihretu, the governor of Ethiopia’s central tating members—has just three rotating
bank. Just when international financial in seats for African countries. “The inertia of
stitutions are most needed to play a big the Security Council in the fight against
role, “they’re not there”, he says. terrorism in Africa underlines the failure
Another technical fix is getting rich of the multilateral system,” declared Mr
countries to make available to poor ones Sall of Senegal. Africa wants two perma
some of their special drawing rights nent seats and five nonpermanent ones
(sdrs), a kind of global reserve currency is on a new 26member council.
sued by the IMF. Mr Macron may trumpet The indifference displayed by African
this in Paris, says the CGD. Yet in November countries in particular to Russia’s invasion
2021 the G20 set a global target for rich of Ukraine seems to have focused minds
countries to contribute $100bn in sdrs and on the need to listen to the continent.
they are still well short of meeting this, Some 11 members of the G20 support the AU
partly because Congress has not released attending, as the EU already does. In No
the $21bn that America pledged. vember President Joe Biden called for per
Faced with the prospect of declining manent seats for countries in Africa, Latin
funding and technical fixes that may not America and the Caribbean. “The time has
add up to much, African countries are ask come for this institution to become more
ing a bigger question: why they have a inclusive,” he said, “so that it can better re
weak voice in the Fund and the Bank, spond to the needs of today’s world.” His
whose boards are dominated by rich coun words apply no less to the IMF, World Bank
tries that pay in the most capital. “If the big and G20. It is high time the continent with
guys, the G7, have formulated an opinion, the world’s fastestgrowing population
they stick to it irrespective of what people’s was given its voice. n The awful aftermath
012
The Economist June 24th 2023 Middle East & Africa 35
taneous attacks in Kampala, the capital. it sends them to various front lines. Money state. Desperate to halt its progress, Amer

Uganda’s army, which has battled alSha comes from several sources, too, according ica wants to negotiate a tacit understand
bab in Somalia for years, officially lost 54 to the Programme on Extremism. IS cells in ing that would offer Iran a dollop of cash to
soldiers (though the real number of casual Somalia extort money from businesses freeze its nuclear work where it stands.
ties is understood to be far higher) when and people. In South Africa its operatives It is a far cry from the pact in 2015, the
the group attacked one of its bases there in raise money through kidnapping, extor Joint Comprehensive Plan of Action
May. But it is the ADF that worries the tion and robbery, which is then used to fi (JCPOA), which imposed strict limits on
Uganda’s security chiefs most. “This threat nance the ADF as well as ISlinked jihadists Iran’s uranium enrichment. Yet it is proba
is more important to us, because it was in Mozambique. This money is moved into bly the best deal on offer right now, and it
born here,” says a senior Ugandan official. east Africa through moneytransfer agen would be tolerated (though hardly cele
The ADF started as an Islamist rebel out cies and then into the ADF’s hands in Con brated) by Arab states keen to avoid a crisis.
fit in Uganda, but fled to Congo in the late go. Similar channels are probably also used The clearest picture of Iran’s progress is
1990s. Its commanders intermarried with to send money to jihadists in northern Mo found in a report in May from the Interna
locals and remained dormant there for zambique. “Unless these money transfers tional Atomic Energy Agency (IAEA), the
many years. Then in 2013 it adopted guer are cut,” says a Western counterterrorism UN’s nuclear watchdog. The agency said
rilla tactics and started massacring civil official, “no amount of military operations Iran had accumulated 114kg of uranium en
ians and attacking the security forces. Con are likely to stamp out this problem.” n riched to 60% purity, a level that has no ci
go’s army fought back, killing many of its vilian use. That is enough to produce at
fighters and scattering the rest. least two nuclear bombs if refined further
By 2017 the ADF was falling apart. It was Iran’s nuclear programme to the weaponsgrade level of 90%.
then that the group started getting funding At Fordow, a fortified facility built into a
from Islamic State, according to a new re An unenriching mountain, inspectors who tested environ
port by the Programme on Extremism at mental samples found traces of uranium
George Washington University. From a low agreement enriched to 83.7% purity. Iran blamed that
of just a few hundred fighters in 2018 the on a momentary hardware glitch, and the
ADF may now have some 2,000 fighters, ac IAEA found no evidence that Iran had
DUBAI
cording to the UN’s peacekeeping mission amassed a stockpile of such highly en
America and Iran try to step back from
in Congo. In 2021 the group infiltrated sui riched uranium. Still, the shock discovery
the brink
cidebombers into Kampala, where they added urgency to diplomatic efforts.
killed four people. In response, Uganda’s
army deployed into Congo.
Though the Ugandan army has bruised
F OR the past five years, since Donald
Trump withdrew America from the 2015
nuclear pact with Iran, American presi
The emerging deal, by all accounts,
would be modest. Iran would promise not
to enrich beyond the 60% threshold,
the ADF and bombed out some of its bases, dents have sought a new bargain with their though it would not have to reduce its ura
the group remains resilient. It also appears old foe. Mr Trump, then president, predict nium stockpile. It now has 4,385kg of the
to be learning from jihadists elsewhere. In ed that tough sanctions would compel Iran stuff at varying levels of purity. The JCPOA,
the past few years it has started using more to sign a “new and lasting deal”. Joe Biden’s by comparison, limited it to just 300kg at
sophisticated bombmaking techniques. administration promised smart diplomacy 3.67% and nothing above that level. There
And in December it attempted another to craft a “longer and stronger” agreement. is optimistic talk that Iran would make
crossborder attack into western Uganda, Those efforts are sputtering towards an promises unrelated to its nuclear work. It
although that one was easily repelled by unsatisfying conclusion. Instead of mak might release at least three American citi
Uganda’s security forces. ing a deal, Iran has enriched more uranium zens held for years on bogus charges.
The ADF has also expanded the territory to higher purity than ever before: it is on America would offer money in return. It
under its influence in Congo. This is be the threshold of being a nucleararmed would not lift sanctions on Iran’s oil indus
cause even as Uganda’s army has deployed
against it, Congo’s army has had to with
draw troops from the group’s strongholds
to fight the M23 elsewhere in North Kivu
province. The ADF has meanwhile expand
ed into two neighbouring provinces: Ituri,
where it is actively fighting, and South Ki
vu, where it is establishing sleeper cells.
“The biggest beneficiary of the M23 war is
the ADF,” says a UN official in Congo.
East Africa’s regional bloc, worried
about instability and the threat of conta
gion, sent troops into Congo late last year
to fight the M23. But they seem to have
done almost no fighting. Félix Tshisekedi,
Congo’s president, recently accused the
force of “cohabitation” with the rebel
group. Now southern Africa’s bloc is pre
paring to send its own multinational force
to fight the M23 and other armed groups.
Meanwhile the jihadists themselves are
internationalising their human resources
and finances. The ADF imports nonCon
golese fighters from east Africa into its safe
zones via Uganda and Burundi. From there
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36 Middle East & Africa The Economist June 24th 2023
try, as it did under the JCPOA, but it would minister, has made Iran’s nuclear pro ment that would leave Iran just shy of the

enforce them less fiercely. It could also re gramme a defining issue of his long rule. nuclear threshold. But it is also hard to see
lease Iranian funds frozen abroad, such as He said this month that he opposes any an alternative. Iran’s ultraconservative
$7bn in oil revenue stuck in South Korea. “miniagreement” between America and rulers are reluctant to negotiate anything
That would be a welcome infusion for a re Iran. Yet he too may be unusually muted in with America, let alone a comprehensive
gime struggling with high inflation and his criticism. Mr Netanyahu believes Mr pact that Mr Trump could tear up (again) in
unnerved by months of protests last year. Biden is serious about trying to midwife a 18 months. Military strikes on Iran’s nuc
All this has been discussed in indirect separate deal with Saudi Arabia that would lear facilities, which both America and Is
talks in recent months, some in Oman, the see the kingdom recognise Israel. That rael have threatened, could drag the region
Gulf state that also hosted the first tenta would do much to ease the sting of an into a war. A minideal would simply kick
tive meetings towards the JCPOA a decade AmericanIranian arrangement. the can down the road—but for now that
ago. America insists it is premature to talk It is hard for anyone to cheer an agree may be the best choice available. n
about an agreement. “Rumours about a nu
clear deal, interim or otherwise, are false
and misleading,” the State Department Israel
said on June 14th.
But diplomats see such denials as lin
Fire sale
guistic hairsplitting. A law passed in 2015
JE RUS ALE M
requires Congress to review any nuclear
The war in Ukraine is boosting Israel’s arms exports
deal with Iran. Republicans would surely
oppose a new agreement, and even many
Democrats would buck at supporting one
that leaves Iran with a stockpile of highly
F or decades the standout product of
the Israeli arms industry was the Uzi,
a submachine gun used by soldiers and
from Iran. Germany and its allies worry
about Russia. At €4bn, the deal will be
Israel’s largestever arms sale. Finland
enriched uranium. The Biden administra action stars the world over. More recent and the Czech Republic, similarly con
tion is loth to risk an embarrassing legisla ly, however, attention has shifted to the cerned, have placed orders for smaller
tive defeat ahead of next year’s election. Iron Dome. Footage of interceptor mis Israeli missiledefence systems. Other
There will be no “deal”, in other words— siles pirouetting in Israel’s skies, shoot European governments plan to do so.
nothing like the JCPOA, a 159page docu ing down Palestinian rockets, has made Israel began developing antiballistic
ment signed by a gaggle of foreign minis it perhaps the world’s bestknown mis missile technology in the late 1980s. It
ters. Instead there may be a quiet, informal siledefence system. The war in Ukraine has since adapted it for use against
understanding. If Iran frees American pris has further increased interest and proved smaller rockets and artillery shells. That
oners, and if the IAEA reports that it has a boon for Israel’s arms exports. Israel has these systems in operational
stopped accumulating highly enriched On June 14th Germany’s parliament use gives them a clear advantage over
uranium, those would be signs that the signed off on a €560m ($615m) instal competitors, says Tal Inbar, an Israeli
talks have made progress. So would any ment on the purchase of the Arrow3, a missiletechnology analyst.
gestures that ease the pressure on Iran’s missiledefence system, by the 17nation Europeans have been on a spending
economy. Earlier this month America European Sky Shield Initiative. The long spree since Russia’s invasion of Ukraine.
granted Iraq a waiver to pay $2.8bn in gas range Arrow3, developed by the state Last year Israeli armsexport deals hit an
and electricity debts to Iran, which had owned Israel Aerospace Industries and alltime high of $12.5bn. Over a quarter of
previously been blocked by sanctions. Boeing, an American aviation giant, is the sales were to Europe, a proportion
Then there is oil. Kpler, a data firm, esti designed to intercept missiles above the expected to grow in 2023.
mates that Iran’s exports have increased Earth’s atmosphere. It is already oper Drones, antitank missiles and ad
from well under 1m barrels per day (bpd) a ational in Israel, which fears attacks vanced training systems have proved
year ago to more than 1.5m bpd now. That is popular, along with missiledefence
the highest level in five years, though still systems. Israel has even found custom
far below the 2.7m bpd that Iran shipped in ers for its used kit. An undisclosed Euro
mid2018, just before Mr Trump ditched pean country wants to buy secondhand
the JCPOA. Most of that oil is sold at a dis Merkava tanks, probably to replace older
count and shipped via third countries on a tanks earmarked for Ukraine.
“ghost fleet” of dodgy tankers to China. Israel has remained on the fence in
Such transactions technically run foul of the war itself. It has sent humanitarian
American sanctions—but only if America aid to Ukraine, but refused its entreaties
bothers to enforce them. for weapons. Israel frets about Russian
In years past, such a quid pro quo would troops near its border in Syria and about
have infuriated America’s friends in the the fate of the large Jewish communities
Middle East. They may be less hostile to in Russia and Ukraine.
day. In March Saudi Arabia and Iran unex The surge in arms sales to Europe is a
pectedly agreed to restore diplomatic ties diplomatic boost for Israel. In the past
after a sevenyear break. The Saudi foreign potential customers have criticised its
minister went to Tehran for talks this treatment of the Palestinians in the
month, the first such visit since 2006. After occupied territories. Now they will be
a yearslong proxy war with Iran, the Sau using Israeli systems developed and used
dis now want calm in the region so they in Israel’s conflicts in Gaza. Europeans
can focus on ambitious plans to build a who suddenly have a front line on their
postoil economy. Even the tiniest agree borders may be more understanding of
ment between America and Iran would Israel, suggests Jeremy Issacharoff, Isra
lower the risk of conflict. Straight as an arrow el’s former ambassador to Germany.
Binyamin Netanyahu, the Israeli prime
012
Europe The Economist June 24th 2023 37
Ukraine cent corridor hangs a photo of a March

crossborder raid into Bryansk in Russia,
The unspooked spook supposedly the work of independent Rus
sian partisans. A large screen, the room’s
only source of light, displays a map of Mos
cow—the target of a drone strike in May.
Ukraine has not claimed either opera
tion. But General Budanov barely respects
KYIV
the official ambiguity. “We are at war,” he
Ukraine’s spymaster Kyrylo Budanov has got under the Kremlin’s skin
says. “Drones over the Kremlin showed the
I T TAKES A certain amount of fear to para
lyse seasoned militaryintelligence offi
cers. But a Russian attack on the officers’
scraped another building. A day later Rus
sia’s president, Vladimir Putin, bragged
about a “precision” attack destroying the
world that Russian defences are just a Po
temkin village.”
Aides huddle close when the general
Rybalsky island headquarters in Kyiv in complex. ProKremlin media reported that speaks. Under his leadership, Ukraine’s
March 2022 crossed that threshold. The of General Budanov had been evacuated to main directorate of intelligence—HUR—
ficers recall “terror” as missiles landed, Germany and put into a coma. The Econo- has become a plucky, autonomous author
windows popped and ramshackle build mist can confirm that neither claim is true. ity that punches above its weight. It resem
ings crumbled at the edges. The men, wait The spymaster’s office, his undisguised bles a gang. “Before we had managers, now
ing in a reception area for a meeting with address for 16 months, exudes chaotic, cre we have a leader,” says one veteran officer.
their boss, fell to the floor. Moments later a puscular energy. Sandbags block windows. Oleg, an operative who has known General
door beside them opened, and MajorGen Machineguns and armour litter the floor. Budanov for decades, speaks approvingly
eral Kyrylo Budanov stepped out. “Every A turntable sits in the corner, though the of his ability to infect others with his fer
thing is fine,” one recalls him grunting, be audible Vivaldi comes from a YouTube vour, comparing him to a snake “hypnotis
fore he ordered them to get back to work. playlist. The sense of absurdity is height ing you before he comes in for the kill. Re
“He dusted himself off, put his cap on and ened by an elderly frog, swimming about a strained, measured, never panicked. You
went outside to inspect the damage.” tank, and a canary. Memorabilia from Gen do anything he asks.”
The 37yearold General Budanov, a for eral Budanov’s war line the wall. In an adja General Budanov has his adversaries at
mer commando, is Ukraine’s youngest home as well as abroad. Competing securi
ever spymaster. As the architect of increas ty agencies fret about his power and re
ingly brazen operations within Russia, he sources. “It’s logical that military intelli
is also a big irritant for the Kremlin. Aides 38 Beefing up French arms gence becomes powerful during war,” says
say there have been “at least ten” attempts one rival officer. “But you can’t get much
39 Tragedy in the Mediterranean
on his life. In the latest, on May 29th, mis done without his signoff now.” Even
siles and drones targeted his Rybalsky of 40 Turkey’s soaring housing costs friends describe the militaryintelligence
fice. They narrowly missed that and an ad chief as “difficult”. Some find it hard to get
41 Charlemagne: Europe’s small cars
jacent road bridge, although drones on with him, says BrigadierGeneral Dmy
012
38 Europe The Economist June 24th 2023
tro Timkov, a partner on “dozens” of opera lose and the other side will win. There are
Moscow
tions. “He doesn’t adapt to others’ opin LITH. no other options.”
ions.” The younger Budanov would answer As a confidant of the president—those
Minsk RUSSIA
back to commanders if he thought them in government call them kindred spirits—
wrong. Yet supporters say he has a “gener General Budanov is understood to be play
BELARUS Bryansk
ous” side, too. A master of mind games in ing an everbigger role in behindthe
the outside world, says Oleg, General Buda scenes peace negotiations. Sources say he
nov never extended that to colleagues. “He is a conduit to secret talks with the Chi
Hostomel Kyiv Belgorod
understands you can’t trick tricksters.” nese, and he has also been in contact with
Volodymyr Zelensky’s decision in 2020 UKRAINE Yevgeny Prigozhin, the leader of Russia’s
to promote a littleknown commander Ukrainian territory mercenary Wagner outfit.
came as a surprise to many. But inside the annexed by Russia Donba In conversation it is clear that General
on Sep 30th 2022 s
services Kyrylo Budanov’s name was alrea Budanov has been thinking hard about
MOLD. Mariupol
dy legendary. The Kremlin knew some postwar Ukraine. Last winter there was
thing about him, too. “It was the equivalent Assessed as Dzhankoi talk of him becoming defence minister. He
Russian-controlled
of holding a red flag to them,” says Andrii June 21st 2023 Crimea insists his only ambition is victory. Yet se
Black
Yusov, an HUR officer. “It’s what convinced Sources: Institute for Sea Ukrainian territory cret polls conducted by Mr Zelensky’s of
many of us of [President] Zelensky’s na the Study of War; AEI’s
250 km
annexed by Russia fice show they are thinking about using the
Critical Threats Project in 2014
tionalsecurity credentials.” cult of their hero spymaster to counterbal
The new spymaster was revered for ance a perceived rivalry emanating from
leading a daring raid, in 2016, to destroy he “He didn’t say anything the whole way. Valery Zaluzhny, Ukraine’s likeable and in
licopters at Dzhankoi air base in Russian That’s how much it hurt.” dependent commanderinchief. General
occupied Crimea. The geography of the op General Budanov made his real mark Budanov’s colleagues say they are con
eration—in the backyard of Russia’s securi after the 2022 invasion. In the early days, vinced he is destined for a big political role
ty services—was brazen enough. On the as saboteurs operated in Kyiv, the general once peace comes—if he lives that long. n
way out General Budanov’s team also en was seen running about Rybalsky with a
gaged Russian special forces, killing sever machinegun. He masterminded critical
al, including a highranking commander. operations at Hostomel airport, Irpin and France
The Russians later avenged that raid with Moschun, on the edge of Kyiv, which
attacks of their own, missing General Bu stopped the Russian advance—if only just. Beefing it up
danov but killing his superior. He sent supplyandrescue helicopters
General Timkov, reputed to be the sec into the cauldron of besieged Mariupol. He
ondincommand on that raid, chortles took part in many frontline operations
through an unconvincing denial of the op himself. The risktaking worried some col
PARIS
eration. But he offers another story that leagues, who felt their leader should be
The army learns from Ukraine and
only adds to the legend. In early 2015, he better protected—“but you try stopping
from a big field drill at home
says, the two were deep inside enemy lines him.” The general says he does it only be
in Donbas, in eastern Ukraine, when the
then LieutenantColonel Budanov was hit
by an antiinfantry mine. Shrapnel sunk
cause other people are in danger. “Lives are
at stake. There is no room for mistakes.”
Western partners describe the Ukrai
I N 2021, a year before Russia invaded Uk
raine, General Thierry Burkhard told The
Economist that the French army had to
into his neck and shoulderblade, and just nian spymaster as a straightforward and “harden” itself and prepare for “highin
below his heart. “Kyrylo asked us to leave incorruptible player. He is now privy to tensity war”, possibly in Europe. One hypo
him.” The group refused, and through more American and British intelligence thetical adversary was Russia. Today, the
force of willpower the wounded officer than the Germans or French, says Philip In exhead of the army is France’s top soldier,
stumbled to safety more than 3km away. gram, a former British militaryintelli in charge of all armed forces. His analysis
gence colonel. Yet his bravado is not uni turned out to be prescient. It also formed
versally welcomed. Leaked documents the basis of a training exercise for French
show that the CIA had to intervene to stop and allied soldiers on a scale not seen for
General Budanov from ordering an attack decades, which finished last month.
on Moscow on the anniversary of the inva For 17 days in April and May General
sion in February. Sabotage and the raids in Burkhard led a fullscale divisionlevel ex
side Russia since have heightened worries ercise in eastern France, on land that the
among Ukraine’s allies about provoking a great powers fought over more than a cen
nuclear power. General Budanov’s state tury ago. The final phase of ORION 23 in
ments about engineering a collapse of Rus volved a fictitious incursion by a neigh
sia do the same. bouring state into “Arnland”, played out in
Yet he says that nine years of studying a 400kmwide zone of fields and woods.
Russian aggression leave him uniquely po Some 12,000 soldiers, 400 combat vehicles
sitioned to assess the risks of nuclear esca and 50 fighter jets took part in livefire ex
lation. “As the head of intelligence, I’m tell ercises, hybrid warfare, simulated drills,
ing you straight out—it’s not going to hap drone attacks and interallied coordina
pen,” he says. “For all my dislike of the Rus tion to push back the invading force.
sian Federation, there are not many idiots In his office in Paris, where a print fea
running the country.” He insists that peace turing Valery Zaluzhny, Ukraine’s top gen
is impossible without the strategic defeat eral, hangs opposite a portrait of Emman
of Russia—and the “reformatting of pow uel Macron, France’s president, General
er” there. “Either everyone will get out of Burkhard reflects on the lessons emerging
Who could it have been? the war at the same time, or one side will from the exercise and from the war in Uk
012
The Economist June 24th 2023 Europe 39
raine. “A highintensity war is fought on a cope without it. “We can no longer hope to Greece election

completely different scale,” he says. “I have permanent superiority in all areas,”
probably underestimated that.” During he argues, pointing out that neither Russia Tragedy intervenes
two decades of counterinsurgency in Af nor Ukraine has managed to gain air supe
ghanistan and the Sahel, the death of ten riority. “Superiority in terms of permanent
soldiers was a “national tragedy, and right connectivity…is also an illusion.”
ly so. That is what is happening in Ukraine Does France have the means to achieve
ATHE NS AND RO ME
every halfhour—for weeks on end.” these objectives? Parliament is examining
Greece votes, again, following the
In the Iraqi city of Mosul, recalls Gener a military budget for 202430 worth €413bn
sinking of a migrant boat
al Burkhard, jihadists being tracked by ($452bn), a hefty 40% increase in nominal
French forces would resort to subterfuge to
avoid aerial surveillance. Now it is French
forces that have to contend with a cheap
terms on the budget for 201925. Under Mr
Macron, this should enable France to meet
its NATO commitment to spend 2% of GDP
A devastating shipwreck on June 14th
is feared to have cost the lives of hun
dreds of asylumseekers heading from Af
drone capable of detecting a tank, he says, on defence. The new budget is clearly rica to Europe, throwing into question
and weapons of “extreme precision” that shaped by the war on Ukraine, which is European migration policy, and in particu
can destroy it. “We see a form of transpa mentioned 14 times in the relevant bill. lar Greece’s treatment of migrants.
rency on the battlefield,” he says, “an abili France will modernise its nuclear deter The country’s political party leaders
ty to see almost everywhere.” Armies must rent, build a newgeneration nuclearpo suspended campaigning for the June 25th
learn to reduce their electronic emissions wered aircraftcarrier and add 109 Caesar parliamentary vote as the interim and non
and to stay on the move. Command posts howitzers, 3,000 drones and more. partisan government, established after
not only have to be disguised, but must Paradoxically, however, France has May’s inconclusive election, declared
mask the traffic moving in and out. This re scaled back the acquisition of some extra three days of national mourning in the
quires a change in habits and mentality. kit. The air force will get 48 fewer new Ra wake of the disaster.
If deadliness depends increasingly on fale fighter jets than previously planned, The full details of the disaster are still
technology, yet modern war is also waged and 15 fewer A400M transport aircraft; the unclear, but it is thought that more than
on a grand scale with massive consump army will get 497 fewer Griffon and Jaguar 700 people crammed aboard a 30metre
tion of ammunition and high rates of attri armoured vehicles. “Because we are trying fishing vessel sailing to Italy from Tobruk
tion, how do mediumsize armies balance to do everything at the same time, we are in Libya were left drifting off southwest
quality and quantity? The priority, says the sprinkling rather than defining priorities,” ern Greece when the ship’s engine failed.
general, is integrating platforms: “We need says Hélène ConwayMouret, a senator. The vessel then capsized and sank in the
to be able to have five drones in the air The new budget, retorts the general, early hours of June 14th. Only 104 survivors
linked to an artillery battery, three missile “takes us in the right direction”, even if its were rescued: their statements to reporters
launchers, a tank and in fact have enough full effects will not be felt until 2030. Crit have raised concerns that the Greek coast
agility to decide what we want to do with ics, he says, have failed to understand the guard may have failed to avert the disaster,
what we see.” Having lots of things is use importance of capable forces rather than one of the worst ever recorded in the Medi
less if they cannot talk to each other. sizeable ones. The number of tanks, ships terranean. The Greek shipping ministry,
That requires ubiquitous connectivity. and planes is not growing as fast as it however, insists that the fishing vessel had
General Burkhard gives the Starlink con might, he insists, because of the priority rejected the coastguard’s offers of help be
stellation of thousands of satellites used given to “coherence”. “It’s important that if cause it wanted to keep going to Italy rather
by Ukraine as an example of the highly re you buy a tank, you have men trained on it, than being taken to Greece. Hundreds are
silient networks that armies will rely on. who have ammunition to train and spare still missing.
Ships, aeroplanes and ground vehicles will parts to go in the field with it.” There is no The feared huge loss of life has cast a
need to create a “bubble” of communica point, General Burkhard says, in having shadow over the election campaign. But
tions over a given area—a sort of military “an army that is ready to parade on Bastille the rightofcentre New Democracy (ND)
WiFi. And they will also need to be able to Day, but is not ready to go to war”. n party led by the former prime minister Ky
riakos Mitsotakis is still expected to win an
overall majority in parliament under a dif
ferent proportional electoral system from
that used last month. In that vote ND fin
ished 21 percentage points ahead of the
radical leftist Syriza party, but fell five seats
short of an outright victory.
This time, ND is tipped to take 155 to 160
seats in the 300member house, thanks to
the reintroduction of a topup system that
awards up to 50 bonus seats, on a sliding
scale, to whichever party wins the most
votes. One pollster said: ”This tragedy un
dermines ND’s narrative of competence
and control…and some swing voters may
switch to another party, but they won’t be
enough to impact the outcome.”
As flags flew at halfmast over public
buildings, opponents of the previous gov
ernment’s hardline stance towards asy
lumseekers staged protests around Ath
ens, including outside the offices of Fron
Everything has to change tex, the European Union agency that,
012
40 Europe The Economist June 24th 2023
Housing in Turkey
Rome
BULGARIA
Going through the roof
I T A LY
GREECE
Aegean
Sea
ISTANBUL
Tunis Kalamata Athens
A combination of a crazy interestrate policy and galloping inflation has sent
Approximate location property prices soaring
of trawler before sinking
June 14th 2023
TUNISIA
Tripoli
Mediterranean Sea
Tobruk
R ENTS and property prices in Istanbul
were never low to begin with. In 2015 a
Qatari businessman, thought to be acting
these developments has encouraged those
Turks with access to sufficient credit to
protect their wealth by investing in proper
as a middleman for the country’s emir, Ta ty. Foreign buyers, especially Russians,
EGYPT mim bin Hamad Al Thani, spent over have also helped drive up prices in Istanbul
LI BYA 300 km $100m for a villa on the banks of the Bos and along the Mediterranean riviera.
phorus, the strait that divides Turkey’s big The earthquakes that destroyed large
gest city between Asia and Europe. Earlier swathes of Turkey’s south earlier this year,
alongside the Greek coastguard, patrols this year, another mansion, formerly the killing over 50,000 people, have had an im
the bloc’s maritime borders. home of a sexcult leader recently sen pact as well. Many of the estimated 3m
The Greek Council for Refugees, a lead tenced to nearly 900 years in prison for a people who have been displaced by the di
ing ngo, is carrying out indepth inter range of crimes, sold for $26m. saster have moved to other parts of the
views with all the survivors. The new gov These days, however, even ordinary Is country, causing an almost overnight
ernment, once it takes office, is expected to tanbul properties are beyond the reach of spike in demand. Fears of a similarly de
launch an official probe of the shipwreck, most Turks. In the two years to May, the structive earthquake in Istanbul, which
and international investigators are already price of a square metre of real estate in the sits just north of a major faultline, have
on the case. Europol has sent three officers city has shot up by over 480%, according to caused prices of newer and safer buildings
and a technical expert to Kalamata. Their Endeksa, a consultancy. Even after adjust in the city to soar. The biggest price in
job is to identify the traffickers behind the ing for inflation, which peaked at 86% creases, according to a recent study by Bah
disaster. Specifically, they are charged with yearonyear last autumn before slowing cesehir University’s Centre for Economic
finding as many mobile phones as they can to a mere 40% in May, housing prices in and Social Research, have been in neigh
to see who the migrants were in contact Turkey as a whole increased by 51% last bourhoods far away from the faultline.
with in the days leading up to their embar year, more than in any other major econ One might be forgiven for thinking that
kation and which social media they were omy, according to a study by the Bank for this has the makings of a bubble waiting to
using. But, says a senior Europol official, International Settlements. Israel came a burst. But even a policy Uturn, which was
the investigation has been complicated by distant second, at 11%. Rents have spiked likely to gather speed on June 22nd as Tur
the fact that very few phones survived the similarly. According to a senior municipal key’s central bank prepared to announce a
disaster. official, average rents in Istanbul, which is major interest rate increase, might not be
What is so far known about the sinking home to more than 16m people, have now enough to bring the property market back
of the vessel that cast off from Tobruk is surpassed average incomes. down to earth. Analysts expect prices to
consistent with recent developments in The leading causes are reckless inter keep rising, though at a less blistering pace
human smuggling in the region. Most of estrate cuts, imposed as a result of the than before, as long as expectations of in
the victims are understood to be Egyp misguided policies of Turkey’s president, flation remain high.
tians, Pakistanis, Palestinians and Syrians. Recep Tayyip Erdogan, and a resulting Despite the expected rate hike, they do.
“What unites these nationalities is that, surge in inflation. The combination of A new run on the lira, which has lost 15% of
with the exception of most Egyptians, they its dollar value since Mr Erdogan’s reelec
fly into Libya on regular visas that have tion on May 28th, as well as a recent 34%
been provided for them,” says Mark Mical increase to the minimum wage, on top of a
lef of the Global Initiative Against Transna 55% increase six months ago, are keeping
tional Organised Crime. Such services can inflation bubbling. There is also no telling
only be provided by sophisticated interna whether the pivot to economic orthodoxy
tional criminal networks, and police in will last. Mr Erdogan has given his new
vestigating the disaster hope that it will economic team, headed by Mehmet Sim
give them an opportunity to identify and sek, the finance minister, and Hafize Gaye
dismantle at least one such. Erkan, the centralbank governor, a man
Unlike migrants from subSaharan Af date to undo the damage wrought by his
rica, those who arrive from Asia mostly set earlier policies. But Turkey’s leader contin
off from ports in the east of Libya like To ues to champion the idea, dismissed as
bruk. But since it is farther to Italy from hogwash by mainstream economists, that
there than from ports in the west of the the way to tackle inflation is by lowering
country, the journey requires bigger ves rates. The central bank is only as indepen
sels. That too requires a criminal syndicate dent as he allows it to be. For millions of
that is not only sophisticated but well fi tenants and landlords who have spent the
nanced. “Proportionately, [the bigger ves past couple of years at each other’s throats,
sels] are involved in fewer accidents and renegotiating rental contracts and drafting
make fewer requests for assistance,” says eviction notices, and for young Turks who
Mr Micallef. “But when accidents do hap can no longer afford a new home, this is
pen, they involve hundreds of people.” n Heading ever upwards bad news. n
012
The Economist June 24th 2023 Europe 41
Charlemagne A Farewell to Fiestas
Adieu to small cars, the industrial icons that put Europe on wheels
Europe even turned its reputation for bijou motors into a market
ing asset: in 1959 an ad for the Volkswagen Beetle urged Americans
to “Think Small”. (Teenagers there who got their kicks in the back
of roomy Cadillacs and station wagons probably had other ideas:
not even a couple of eager contortionists could amuse themselves
in the back of a European compact.)
For decades the replacements of these pintsized wheels kept
their ethos. No longer. Sales of small cars in the EU have fallen by
nearly half since 2011, even as those of SUVs are up threefold. Ford’s
little Fiesta, which has charmed Europeans for 47 years, will end
production this month. The Volkswagen Golf, a sensible starter
car, is also said to be on its last wheels. The popular smallcar
brands that endure, such as the Fiat 500 or the Mini, now come in
bloated versions. The original Mini, launched in 1959, was worthy
of the name. The latest iteration of the rebooted model released in
2001 weighs twice as much and is over a quarter longer. Even top
end carmakers have moved away from thinking small: Porsche
and Ferrari made their names with zippy twoseaters, but now sell
great hulking SUVs as well.
The trend to distend seems odd at first. European families are
getting smaller: Italians had to squeeze an average of 2.3 sprogs in
the back of the Fiat 500 when it came out in 1957. Now there are just
P lacing a Peugeot 208, Europe’s bestselling car last year, next
to a Ford F150, its American counterpart, is like comparing a
Chihuahua to a Great Dane. Both have four wheels and typically
1.3 to accommodate. (Fiat, like Peugeot and other brands, is now
part of Stellantis, whose largest shareholder owns a stake in The
Economist’s parent company.) The streets of Florence or Cologne
serve the same purpose: to ferry a single driver from one place to are getting no wider. Europe has ambitions to cut carbon emis
another. Beyond that they have little in common. The F150 weighs sions. Yet bigger cars, by and large, pollute more.
over two tonnes, twice as much as the lithe Peugeot. The driver in In fact, reducing carbon is one reason why small cars are ailing.
the American pickup truck sits a halfmetre higher than the tar New technology to make petrol models comply with green rules is
macscraping Frenchman in his family compact. Forget the flat expensive whatever the car size: manufacturers find it easier to
bed attached to the back of the Ford—its interior alone feels room pass on the costs to buyers of pricey big models than cheaper
ier than the entire European car. A Parisian driver everconfident small ones. Buying an electric vehicle (Europe recently banned
of his parking skills might well attempt to squeeze his vehicle in sales of petrol and diesel cars after 2035) often means plumping
side the cab of the American behemoth. for a midsize ride, given how few good small European electric
When it comes to motoring, Europeans long felt that size did cars are on the market. Regulation has also crimped the appeal of
not matter. The continent was woven together by poky cars po poky motors. Children used to be bundled wherever they would
wered by engines that would have been shamed by American fit. These days boosterseats are compulsory, but try latching
lawnmowers. Yet what European autos lacked in cylinders they down a toddler in the back row of a twodoor car. Couples that
made up for in va va voom. The Fiat 500, Volkswagen Beetle, Aus used to have a main motor and a runaround have sometimes re
tin Mini, Citroën 2CV and even the drab Trabants of East Germany placed the smaller one with an electric bike to zip around cities, as
all became popculture icons, as core to the idea of what Europe many mayors look to throttle cardriving. The vehicles remaining
stood for as Nouvelle Vague cinema or riding on a Vespa while on the road are thus larger—despite attempts by policymakers to
smoking a cigarette. Alas these industrial gems are heading to the slow the march of size with taxes on heavier models.
scrapheap. Since the start of the century cars sold in the EU have
gained over 200kg on average—a third of an original Fiat 500. They Ciao, Cinquecento
have grown taller, wider and longer while legally carrying no more Ultimately, fatter cars in Europe are a consequence of fatter wal
passengers. Sportutility vehicles (SUVs), hunks of automotive lets. “People buy as much car as they can afford,” says Pedro Pache
manhood tailormade for the American plains, increasingly rule co of Gartner, a research firm. “As long as it is within their budget,
cityscapes from Helsinki to Athens. bigger is always better.” The arc of automotive progress is long, but
Europe’s cramped cars were a feature of its history, geography bends towards duller, bigger wheels.
and economics. Whereas America was happy to remodel cities Europe should look in the rearview mirror and realise that it is
and suburbs to accommodate roomy Chevrolets, Europe stuck losing a slice of its heritage, the very thing that made the continent
with its medieval streets and built its cars to fit (just). Fuel duties what it is. Some of this is nostalgia, a remembrance of motoring
were high in Europe (which imports most of its oil), so drivers pre past. Charlemagne grew up squabbling with his brother in the
ferred wimpier engines. Americans drive vast distances for work back of the family Mini as it navigated the streets of Paris. Later, a
and leisure; Europeans sometimes settle for buses, bikes and comically underpowered Peugeot 106 struggled to drag him and
trains instead. Perhaps most important, Europe embraced mass his new bride up hills in Portugal on their honeymoon. For all
motoring in the lean decades after the second world war. People their flaws, those cars had a certain je ne sais quoi. These days such
craved the freedom personal motoring provided, and didn’t mind journeys would take place aboard cookiecutter SUVs: roomy,
if their heads stuck out of the sunroof while they were afforded it. plush—and destined to be forgotten. n
012
42
Britain The Economist June 24th 2023
Selfinflicted pain bal food prices, no longer wash. The rate of
services inflation, overwhelmingly a do
Made in Britain mestic factor, rose in May to an annual rate
of 7.4% from 6.9% previously. The rate of
goods inflation did drop slightly, from
10.0% to 9.7%, in part because foodprice
increases are not quite so rapid as before.
The culprits behind Britain’s problems
Inflation, increasingly, is the result of domestic bad judgments.
are many. Don’t take seriously claims
Tackling it will hurt
about Prince Harry, who recently pub
T HE LATEST, grim, inflation figures in

Britain were not—truly—a shock. For
each of the past few months a routine has
headline rate of 7.6%. Even its trend, un
like in Britain, is firmly downwards. You
have to look to smaller places, such as Aus
lished an overpriced but popular memoir.
It’s true that inflation measured by the cul
ture subindex is soaring, in particular
emerged: the numbers come in worse than tria, Iceland or Sweden, or to eastern Euro nonfiction books are up by 29.4% over the
had been forecast, traders adjust expecta pean economies still battered by war in Uk last year. But the real question is why sell
tions upwards for how fast, and far, the raine, to find examples of economies in the ers in that sector can get away with high
Bank of England will raise interest rates, same—miserable—inflationary boat. prices. The answer: they operate where de
and thus the cost of borrowing jumps. What has gone so wrong? Britain is ex mand for goods and services has grown
After that, mortgage holders fret and the posed to higher prices for natural gas. Put faster than supply.
government makes sympathetic noises. that aside, however, and it is clear infla Demand is strong, in turn, because
The figures for May, published on June 21st, tionary pressures are overwhelmingly the policymakers have long been trying to rev
followed that sorry script to the letter. The result of decisions taken at home. Infla it up. Consider fiscal efforts. Britain stands
headline figure remained steady from the tion, unlike much else, is made in Britain. out for the stimulus it gave to the economy
previous month, at 8.7%. That was above Old excuses that it is imported, because of in the pandemic and then, last year, during
economists’ expectations of a fall to 8.4%. war, snarledup supply chains or high glo the energy crisis. One measure of this is to
More ominous was that core inflation, combine an estimate from the Interna
without food and energy, jumped to 7.1% tional Monetary Fund of covidera support
from 6.8% in the previous month. with one from Bruegel, an EU thinktank,
Britain is an outlier, and not in a good 43 Do bosses need more pay? of help for households and firms hit by
way. Core inflation both in America and painful energy bills. Only America doled
44 An interview with Ben Wallace
the euro zone, though still high, has been out a bigger stimulus. Britain heavily out
ticking down gently—it reached 5.3% in 45 Bagehot: Of luck and politics spent other peers: around 23.1% of national
May, in both places—and headline num income, vastly more, for example, than the
→ Read more at: Economist.com/Britain
bers in those economies, including food 13.3% in France.
and energy, have tumbled faster. Among — The law and abortion Those setting monetary policy are also
the G7 countries, none has higher inflation to blame. In hindsight, they were too cau
— Foreign students
than Britain. Only Italy comes close, with a tious. A socalled Taylor Rule for monetary
012
The Economist June 24th 2023 Britain 43
policy sets a simple guide for the right level tancy, yearonyear pay growth is in dou nus, stock awards and other perks and the

of interest rates given the rate of unem bledigits, he says, as “firms are competing median package is worth about $33m
ployment and core inflation. Even a ver and outcompeting one another on pay”. (£26m). That’s double the going rate of
sion calibrated to avoid big changes in Inflation needs to fall, quickly. A study £13m for those running FTSE 100 firms, ac
rates says the bank should have been pre by the Federal Reserve, America’s central cording to Refinitiv, a data provider. Julia
paring to lift them to around 5.7% at a bank, earlier this year found that British Hoggett, who runs the London Stock Ex
meeting on June 22nd. The day before, inflation is unusually persistent: previous change, suggests that means the City
however, markets were forecasting only a increases in core inflation had more power scrimps on pay. And if companies won’t
25basispoint increase in the main policy to predict further increases than those dole out top pound, she argues, they harm
rate, to 4.75%. It is becoming apparent seen in Canada or the euro area. No one London’s ability to attract global talent.
that—because fewer Britons have a mort should expect the workforce to suddenly The trouble with Ms Hoggett’s argu
gage than in previous tightening cycles grow: rates of economic activity have only ment, however, is that the City brings in
and, in any case, many have fixed rates for modestly improved over the past year as more foreign executives than are attracted
longer—the effects of rate rises have, so far, fewer workers retired and more students to other stock exchanges. Around 45% of
been limited. The result: the bank will took on jobs. The likely alternative is for Britain’s largest businesses have a boss
probably have to tighten more to achieve interest rates to rise. from overseas, whereas fewer than 10% of
the same, dampening, effect. That means heavily indebted mortgage those in America are foreign, only 14% in
holders will feel more financial pressure. France and 25% in Germany. As for those,
Come on down, the price is wrong The chancellor, Jeremy Hunt, has ruled out like Mr Narasimhan, who leave for big
Easy policy combines with a weaker supply government help, such as tax breaks on payouts, such cases are vanishingly rare.
side. Again, Britain stands aside from its mortgage interest, saying, correctly, that Of the FTSE 100 CEOs who stood down since
peers (again, in a bad way). Labourforce would “make inflation worse, and not bet the start of 2022, the vast majority either
participation remains below its prepan ter”. He is due, however, to host a meeting retired or moved to another job in Britain.
demic level. One portion of missing work with banks on June 23rd, where he is ex It is likelier that American firms are
ers are those—perhaps half a million more pected to ask them to show flexibility to overpaying, and perhaps needlessly. Evi
than before—too sick or tired to seek work. struggling borrowers. Should he want to dence is patchy linking higher pay for CEOs
EU workers are also missing. And whereas, break Britain’s pattern of sticky inflation with better company performance. As You
post Brexit, nonEU migrants have poured and everrising interest rates he could con Sow, a shareholder advocacy group which
in, many are refugees or students, not full sider one other option: putting up taxes. n produces an annual ranking of overpaid
time workers. Dario Perkins, of TS Lom S&P 500 bosses, says the most overcom
bard, a research outfit, calculates that total pensated are also those who underperform
labour supply is down by about 3% from Executive pain the index. Alexander Pepper, a professor of
precovid trends. Prepandemic, the la management at the London School of Eco
bour force was growing thanks to migra Nothing to nomics, sees something similar in Britain.
tion and a rising participation rate. He He notes how pay for FTSE 100 bosses accel
adds: “I don’t believe in wageprice spirals, whinge about erated in the 1990s but that had little bear
but if they are going to happen anywhere, ing on the success or otherwise of firms.
the UK seems like the obvious candidate.” Too much, evidently, is out of the control
High demand with constrained supply of the boss.
Is London suffering because bosses
has left some parts of the economy, such as America looks more like an outlier,
there are paid too little?
professional services and hospitality, run therefore, not a standardsetter. Few mar
ning hot while others, including the health
service, struggle with bottlenecks and
strikes. Fullers, a brewer, says it is tapping
B RITAIN’S BOSSES are in a funk. Last year,
onetenth of the CEOs running FTSE 350
companies stood down, more than double
kets could anyway hope to keep pace with
the large sums on offer on Wall Street,
where companies are usually larger, hard
under18s and the over50s to work in pubs the tally for 2021. The number of listed er to run and more at risk from lawsuits
this summer. Other bars and restaurants companies in London has fallen by two than in Britain. A better comparison, then,
are just cutting hours, says Tony Wilson of fifths since 2008. Some of the country’s is with Europe. Brits do tend to outearn
the Institute for Employment Studies, a most treasured companies, such as Arm, a their continental counterparts: in 2021, av
thinktank. In professional services, in chip designer, are defecting to Wall Street. erage CEO pay at the biggest companies in
cluding banking, consulting and accoun Many factors lie behind the malaise. France reached the equivalent of $9.5m
Could relatively paltry pay for those in and in Germany $6.7m. Given that gap, in
charge be a big one? At first glance, yes. stitutional investors in British stocks are
Core, blimey America’s top earners are vastly better re reluctant to fatten compensation packages
Britain, consumer prices warded than those in Britain. Take the more. A survey by the London Business
% increase on a year earlier extraordinary case of Laxman Narasim School suggests that over threequarters of
12 han, who used to run Reckitt Benckiser, a shareholders see corporate pay as already
Londonlisted consumergoods giant. In too high.
10 that job, in 2021, he got by (somehow or Investors will probably keep a lid on pay
All items other) while earning £4.7m ($6.5m), ex rises. Both Pearson and Unilever have suf
8
cluding his bonus. When he decamped last fered shareholder revolts over remunera
6 year to become the CEO of Starbucks he ac tion plans this year. And unlike in Ameri
Core* 4 cepted a package, over $28m, that more ca, British law requires that shareholders
than quadrupled his compensation. approve pay packages: dissenting votes are
2 That pay gap was not exceptional. Aver thus more common. As British households
0 age rewards are far higher over the Atlan come under ever more economic strain,
2019 20 21 22 23
tic. Chiefs of S&P 500 companies enjoy any signs of excess by company bosses will
Source: ONS *Excludes energy, food, alcohol and tobacco
compensation typically more generous also grow harder, politically, to justify. Ex
than Mr Narasimhan’s: combine salary, bo pect more rebellions, not fewer. n
012
44 Britain The Economist June 24th 2023
Tactical retreat try descends on you.”

He remains a political enigma. He
A defensive posture emerged unscathed from the vicious battle
between Mr Johnson, his successor Liz
Truss and her replacement, Mr Sunak. His
views on nondefence issues are largely a
mystery. Some ministers grumble that he
is locked in constant warfare with other
departments. Tory members like the look
The defence secretary says he is out of the race for running NATO
and sound of him, and especially his role
B EN WALLACE is the great survivor of the
most tumultuous recent period in Brit
ish politics. He has held ministerial office,
as dry docks, cranes and the like. Ship and
sub availability has suffered as a result.
Ammunition stockpiles remain a seri
in shaping Ukraine policy. He deserves
“enormous credit in getting arms to Uk
raine before the war in the teeth of opposi
uninterrupted, from the premierships of ous problem, say defence insiders. Mr Wal tion from some in the White House”, says a
David Cameron to Rishi Sunak. He lace notes that the Storm Shadow cruise military official familiar with those de
emerged from the Boris Johnson years missile, which Britain gave to Ukraine in bates. Britain is the secondlargest individ
with his dignity intact and adoring support May, has been out of production for a de ual contributor of military aid to Ukraine,
from the Conservative Party. His relentless cade. It took almost a year to revive supply with over £6bn pledged. Leaked Pentagon
backing, as defence secretary, for Ukraine chains for NLAW antitank weapons, he documents this spring suggested that 50
has earned plaudits abroad. He had also adds. Arms companies retort that Euro British specialforces personnel were in
hoped, until recently, he might succeed pean governments will not place long Ukraine, compared with just 14 Americans.
Jens Stoltenberg as secretarygeneral of term orders. “The big challenge,” reiterates A quiet flow of British intelligence has
NATO. “It’s not going to happen,” he tells Mr Wallace, “is we don’t have the money.” been vital.
The Economist. America wants Mr Stolten The Treasury has agreed that defence All this was evidently not enough to get
berg to stay, he says, visibly deflated. That spending will rise to 2.5% of GDP “as fiscal America’s support for Mr Wallace’s NATO
would defer the decision to next year. and economic circumstances allow”. But candidacy. “Maybe they want a prime min
No time for recrimination exists: a “de unless the prime minister and chancellor ister,” he suggests. The White House may
fence command paper” is due within set a date, says Mr Wallace, “officials will have favoured Mark Rutte, the Nether
weeks, updating the previous one from ignore it”. lands’ longserving leader, but he is said to
March 2021. It will reflect many lessons have twice turned down the job. Mette Fre
from Ukraine. Mr Wallace, a former captain If only I were in charge deriksen, Denmark’s prime minister, was
in the Scots Guards, identifies air defences, Mr Wallace at times sounds like an opposi until recently a frontrunner. But Denmark
electronic warfare and “deep fires”, such as tion politician attacking the Ministry of is far short of meeting the NATO target of
longerrange artillery, as crucial areas for Defence, not the man who has led it for al spending 2% of GDP on defence, which irks
investment. The previous review assumed most four years. He laments a tendency to many eastern European countries that do.
Britain could expand its ground forces over defer big projects rather than cancel them. Sources close to Mr Wallace stress that the
the decade to 2030. The war has accelerated Putting off the f35 fighter jet cost an addi process remains open.
everything. Challenger tanks will be up tional £500m, he says; that of an aircraft Whoever gets the job will have to deal
graded 12 months sooner than planned, carrier, billions. He complains that nation with “a lot of unresolved issues in NATO”,
and new Swedish howitzers, bought in al regulations have hamstrung technologi warns Mr Wallace. Many countries have no
March to replace older guns sent to Uk cal innovation, with rules on civil airspace appetite for the 2% target, he says. And
raine, will be ready next spring. impeding the development of drones: “If there is the question of the alliance’s role
The snag is money. Before a spending you have anything over a certain height, beyond Europe. Britain’s latest foreign
review in March, Mr Wallace asked the the whole bloody civilian aerospace indus policy review, in March, described China
Treasury for roughly an extra £10bn as an “epochdefining challenge” and
($13bn). He got half, which will largely go to talked anew of a “tilt” to the IndoPacific.
submarine projects, nuclear warheads and Mr Wallace is more circumspect. “NATO
the replenishment of munitions. The an should not missioncreep to the Pacific,”
nual defence budget, adjusted for rampant he says, adding that he shares French op
inflation, will be a puny £1.1bn higher in position to opening a NATO office in To
202425 than in 202122. The army, which kyo—an initiative he says was agreed by
has lost almost 20,000 soldiers in a decade, foreign ministers who blindsided him.
is unlikely to grow. He is unapologetic: “I Mr Stoltenberg’s eventual successor “is
would rather we were medium and per going to have to please both Macron and
fectly formed than large and hollow.” Biden”, he says. America wants allies to
He is scathing about retired admirals help in confronting China. France empha
who demand more ships: “These people sises European strategic autonomy. Per
would have us lined up with platforms that haps surprisingly, for it is not a popular
can’t go to sea or regiments that can’t de view in his party, Mr Wallace, while hailing
ploy as long as they can tick the Top America’s extraordinary support for Uk
Trumps box”, a reference to a classic chil raine, expresses sympathy with Mr Mac
dren’s card game. He is similarly harsh on ron, pointing out the importance of col
the military services that he oversees, laboration by Europe’s defence industries.
complaining that the army, navy and air “The French have a point in lots of areas,”
force have favoured “trophy platforms over he says. “The answer to everything is not
the mundane”. The navy, he argues, has ov America first, when it comes to procure
er 30 years purchased warships without in ment.” That is just the sort of thing a secre
vesting in vital enabling capabilities such Medium, and perfectly formed? tarygeneral of NATO could never say. n
012
The Economist June 24th 2023 Britain 45
Bagehot Lucky Labour
Luck trumps skill and strategy in British politics

it £100,000 camper van and other matters to do with party funds.
The snp’s poll rating has collapsed and another 25 seats are set to
fall into the Labour leader’s lap thanks to PC McPlod and (at best)
erratic bookkeeping by the SNp.
It is not the first time police have come to Sir Keir’s aid. He
promised to quit in 2022 if police fined him for having a curry and
beer with campaigners during lockdownaffected local elections
in 2021. Labour’s advisers were adamant no rules were broken. But
police forces were erratic in dishing out penalties, veering be
tween lax and draconian. It was a risk. Sir Keir gambled and won.
Luck will always play a large role in a firstpastthepost system
that generates big changes in electoral outcomes from small shifts
in voting. Margins are often tiny. Mr Corbyn came, according to
one very optimistic analysis, within 2,227 votes of scraping a ma
jority in the 2017 election, if they had fallen in the right places.
Likewise, in 2021, Labour faced a byelection in Batley and Spen, in
Yorkshire. A defeat would almost certainly have led to a leadership
challenge; Labour clung on, and so did Sir Keir. If he enters Down
ing Street in 2024, he will have 323 voters near Leeds to thank.
Sir Keir is hardly the first leader to benefit from Fortune’s fa
vour. Good ones have always needed it. Sir Tony Blair reshaped La
bour and won three general elections. But he had the job only be
M onday June 19th was a typical day in British politics in so far

as it involved a series of humiliations for the Conservative
Party. mps approved a report on Boris Johnson condemning the
cause John Smith, his predecessor, dropped dead at 55. (“He’s fat,
he’s 53, he’s had a heart attack and he’s taking on a stressloaded
job,” the Sun had previously written, with unkind foresight.) With
former prime minister for lying to Parliament over lockdown out the Falklands war in 1982, Margaret Thatcher would have asked
busting parties. Rishi Sunak skipped proceedings for a fortunately for reelection soon afterwards based on a few years of faltering
timed meeting with Sweden’s prime minister. On the same day, experiments with monetarism. Formidable political talent is
the invite emerged for an illegal “Jingle and Mingle” event at the nothing without a dash of luck.
party’s headquarters during the Christmas lockdown of 2020. A Often the most consequential politicians are the luckiest. Ni
video of the event had already circulated, with one staffer over gel Farage has a good claim to be the most influential politician of
heard saying it was fine “as long as we don’t stream that we’re, like, the past 20 years. He should also be dead. The former leader of the
bending the rules”. Labour, through no efforts of their own, had UK Independence Party was run over in 1985. Then, in 1987, testic
their reputation comparatively enhanced. ular cancer nearly killed him. In 2010, he survived a plane crash
Luck is an overlooked part of politics. It is in the interests of after a banner—“Vote for your country—Vote UKIP”—became tan
both politicians and those who write about them to pretend it gled around the plane. Smaller factors also played in his favour:
plays almost no role. Yet, as much as strategy or skill, luck deter when he was a member of the European Parliament he was fortu
mines success. “Fortune is the mistress of one half of our actions, nately allocated a seat next to the European Commission presi
and yet leaves the control of the other half, or a little less, to our dent, providing a perfect backdrop for viral speeches. (“They
selves,” wrote Machiavelli in “The Prince” in the 16th century. handed me the internet on a plate!” chortles Mr Farage.) Britain
Some polls give Labour a 20point lead. Partly this is because, un left the EU, in part, because Mr Farage is lucky.
der Sir Keir Starmer, they have jettisoned the baggage of the Jeremy
Corbynera and painted a picture of unthreatening economic dili Stop polishing that lamp, you’ll go blind
gence. Mainly it is because they are damned lucky. Too much good luck can be a bad thing. David Cameron gambled
If Sir Keir does have a magic lamp, it has been buffed to a blind three times on referendums (on the country’s voting system, on
ing sheen. After all, it is not just the behaviour of Mr Johnson that Scottish independence and on Brexit). He won two heavily and
helps Labour. Britain is suffering from a bout of economic pain in lost one narrowly. Two out of three ain’t bad, but it is enough to
a way that particularly hurts middleclass mortgageholders, who condemn him as one of the worst prime ministers on record. “A
are crucial marginal voters. Even the timing helps. Rather than a Prince who rests wholly on Fortune is ruined when she changes,”
single hit, the pain will be spread out until 2024, when the general wrote Machiavelli. It was right in 1516; it was right in 2016. Labour
election comes due. Each quarter next year about 350,000 house would do well to heed the lesson. It sometimes comes across as a
holds will remortgage and become, on average, almost £3,000 party that expects the Conservatives to lose, rather than one think
($3,830) per year worse off, says the Resolution Foundation. La ing how best to win.
bour strategists could barely dream of a more helpful backdrop. Fortune has left Labour in a commanding position. Arguments
Political problems that once looked intractable for Labour have against a Labour majority rely on hope (perhaps inflation will
solved themselves. Scotland was supposed to be a Gordian knot. drop) not expectation. Good luck may power Labour to victory, but
How could a unionist party such as Labour tempt leftwing voters it will not help them govern. The last time Labour replaced the
of the nationalist Scottish National Party (snp)? The police have Conservatives, in 1997, the economy was flying. Now, debt is over
fixed that. Nicola Sturgeon, the most talented Scottish politician 100% of GDp. Growth prospects are lacking, while public services
of her generation, found herself arrested and quizzed over an illic are failing. It will be a horrible time to run the country. Bad luck. n
012
46
International The Economist June 24th 2023
NATO and Ukraine throughout, hiding behind France in 2008

and America now.)
Joining the club Why the change of heart? Because in
2008, says Ivo Daalder, a former American
ambassador to nato, the idea of war be
tween nato and Russia seemed “preposte
rous”; today it does not. If Article 5 is to
mean anything, he argues, admitting Uk
WASHINGTO N, DC
raine would be tantamount to nato pro
America is not keen for the country to enter the alliance—yet
mising to fight at its side. That is some
P resident joe biden was blunt this

month about Ukraine’s chances of join
ing nato. “I’m not going to make it easier,”
takes”. This secondary offer will fall short
of collective defence, as enshrined in
nato’s Article 5, which holds that an attack
thing Mr Biden has avoided, fearing nuc
lear escalation and even a third world war.
These are not idle concerns, particularly
he declared. Despite its bold fight against on one ally is an attack on all. Instead the given Russia’s threats and its decision to
Russia, the country still has to prove itself: aim will be to enable Ukraine to defend it deploy tactical nukes to Belarus.
“Does it meet all the standards every other self, now and in the future. The Bucharest debacle irked Vladimir
nation in NATO does?” Joining the alliance, The West is struggling to dispel the Putin, Russia’s president, but gave no secu
he insisted, “is not automatic”. ghosts of two past failures, in Budapest in rity to nato aspirants, paving the way for
America thus finds itself unusually iso 1994 and in Bucharest in 2008. In Buda Russia to attack Georgia in 2008, and Uk
lated in the transatlantic alliance it found pest, America, Britain and Russia offered raine in 2014 and 2022. These days, notes
ed and that it has long dominated. It is the Ukraine “security assurances” in a memo Kurt Volker, another exambassador to
indispensable supporter of Ukraine’s war, randum because Ukraine had agreed to re nato, “grey zones are green lights” for Rus
providing the lion’s share of military aid move Soviet nuclear weapons from its sian aggression. The French view is that
(see chart on the next page). Yet it is now soil. The assurances proved hollow. the West must not again fail to act on its se
the most reluctant of the allies to admit In 2008 America was the champion of curity promises. The American view is that
Ukraine to nato. nato enlargement, pushing for Ukraine to it must not again make a promise it does
In the runup to the alliance’s summit be admitted to the “membership action not intend to honour. And given that Mr Bi
in Vilnius next month, its members are de plan” (map), an antechamber to full acces den’s reelection campaign has started,
termined to preserve unity. They will seek sion. France and Germany resisted, wor and that China poses the gravest concern
agreement through two parallel quests. ried about antagonising Russia. The alli to America, he may recoil from making
One is to reach a linguistic compromise ance awkwardly promised that Ukraine deeper commitments to Europe. Yet he
signalling that Ukraine is moving closer to and Georgia “will become members of cannot say no to Ukraine on the grounds
nato membership—without promises of nato” but did nothing to enact the pledge. that it is at war; that would be giving Russia
quick accession. The second concerns a Today the roles are reversed. France wants a veto and an incentive to keep fighting.
lattice of enduring bilateral and multilater a clear “path towards membership” and One compromise promoted by Jens
al security commitments to bolster pledg America resists making firm commit Stoltenberg, the nato secretarygeneral,
es to support Ukraine “for as long as it ments. (Germany has been reluctant would be to let Ukraine skip MAP as Fin
012
The Economist June 24th 2023 International 47
land did when it joined in April. Sidestep American thinktank. His fivepoint plan end. Some hope that diplomacy might fol

ping map would offer Ukraine a sense of seeks to make the Kyiv Security Compact low a Ukrainian battlefield success. More
progress without promising membership more binding, not least though “strong po likely is a process of “fighting and talking”.
soon. America is open to the idea, officials litical and legal codification”, ie, Trump Peace missions are multiplying. Envoys
say, despite Mr Biden’s stern words. proofing the system. It also calls for pre from Brazil, China and African countries
Others want nato to go further. Mr Stol dictable military supplies, mechanisms have recently shuttled between Kyiv and
tenberg’s predecessor, Anders Fogh Ras for talks and datasharing and links to both Moscow. Ukraine says talks can start only
mussen, thinks the alliance should signal Ukraine’s EU accession process and to when Russian forces leave its entire terri
it may be open to inviting Ukraine to join postwar reconstruction planning. tory, including Crimea, which Russia an
next year, at the Washington summit There are concerns that a big interna nexed in 2014. Russia retorts that Ukraine
marking NATO’s 75th anniversary. Mr Vol tional commitment might offer a Republi must first accept “new realities”: its con
ker thinks working to hasten Ukraine’s can president an opportunity to break with trol of nearly a fifth of Ukrainian land.
membership “will shorten this war and Bidenera policy, as Mr Trump did with the
prevent the next one” by sending Russia Joint Comprehensive Plan of Action, which Welcome are the peacemakers
the message that it cannot win. was Barack Obama’s deal to limit Iran’s nu America once dismissed outsiders and
In the White House, bigwigs think this clear programme. Much depends on their calls for an immediate ceasefire. On
is all semantic nitpicking. In practice, whether Congress would enshrine a multi balance, it now thinks their involvement
they say, no ally is pushing for Ukraine to year commitment in bipartisan legislation strengthens Ukraine and isolates Russia.
join while it is at war. So better to focus on so as to resist not only “Americafirst” iso That is because of the attachment of many
how to help Ukraine defend itself, not as an lationism, but also the vagaries of yearly to the UN Charter, which prohibits using
alternative to membership but as a step to appropriations in Congress. force to take another state’s land. An inter
wards it. The need for sustained support Israel shows that America can sustain national “summit for peace” may soon be
may become all the more important if support for other countries when succes held, possibly in Paris. It would exclude
Ukraine’s counteroffensive continues to sive administrations choose to. Yet as an Russia and, European officials hope, in
make only slow progress. Russia seems in example for Ukraine it is imperfect. Israel clude the likes of Brazil, China, India and
tent on a long war. Mr Putin may be waiting is the strongest military power in the Mid others from the global south. Antony Blin
for 2025, hoping that a return to the White dle East and the only one with nuclear ken, America’s secretary of state, says that
House of Donald Trump—or at least a weapons. Ukraine faces a much bigger and during his recent visit to Beijing he and
Trumpist Republican—will disrupt sup richer foe and one with the world’s largest President Xi Jinping “talked a lot” about the
port for Ukraine. arsenal of nukes. Telling Ukraine to fend war in Ukraine and the “positive role” Chi
In many ways, the West will be offering for itself may push it to seek nuclear weap na could play in ending it.
to provide more of the same, more system ons. And strengthening its army so that it So much for the talking. As for the fight
atically, over the coming years: weapons, can deter Russia may prove very costly. ing, Ukraine believes the best guarantee of
intelligence, training, money and so on. America gives Israel $3.8bn a year; it shells peace is a military victory that forces Rus
The new promises would be made bilater out tens of billions a year on Ukraine. sian troops out of Ukraine and, ideally, Mr
ally and collectively—perhaps by the g7 Despite promising to assist Ukraine Putin out of power. Does America back
but more probably the “quad” of America, “for as long as it takes”, the West still has these aims, given the worry it might
Britain, France and Germany—rather than little notion of how or when the war will prompt Mr Putin to use nuclear weapons?
by nato. Some European officials say dif Right now such differences are moot, be
ferent aspects of the package—strengthen cause Ukraine does not seem close to a
ing the defence of Ukraine’s skies or seas, Shelling out spectacular victory. But Ukraine may dis
for instance—might be led by different Government support to Ukraine cover what Israel has long known: America
countries according to their capacity and By type of assistance, January 24th 2022-June 6th 2023 can be a constraint as well as an ally, espe
appetite for risk, eg, sending personnel to Military Humanitarian cially when interests diverge.
train troops in Ukraine. These promises In the end, the West’s promise to sup
may be signed before the Vilnius summit. Total, €bn port Ukraine “for as long as it takes” may
Word choice matters intensely. Ukraine mean only “for as long as it does not lead to
0 10 20 30 40 50
understandably rejects more assurances. nuclear escalation”; or “for as long as there
Rather it wants “guarantees” of help over United States is no reasonable diplomatic solution”. If
decades to ensure that its army can defend Europe* and when the fighting stops, America may
the country, as set out in the “Kyiv Security have to reconsider Ukraine’s accession to
Compact”, a proposal by Mr Rasmussen nato. Ukraine might achieve more than
and Andriy Yermak, the chief of staff to As % of 2022 GDP, selected countries anyone expects but less than it wants to. In
Ukraine’s president, Volodymyr Zelensky. 0 0.2 0.4 0.6 0.8 1.0 1.2 that situation, as with West Germany when
Their paper also envisages guarantors us Estonia it joined in 1955, Article 5 would cover only
ing “all elements of their national and col territory controlled by the government.
Latvia
lective power” to respond to any attack on Ukraine would then, in effect, give up on
Ukraine. This leaves open the possibility of Lithuania retaking lost territory by force. Member
the country’s friends intervening more di Britain ship may offer a way to bridge the gap be
rectly than they have hitherto. tween Ukraine’s demands and what it can
United States
That may explain why the Americans achieve in battle, or what the West is pre
dislike “guarantees”. Instead Eric Ciara Europe* pared to bankroll. Some think Ukraine is
mella, who has worked at the White House Germany becoming so powerful that it would be saf
under both Democratic and Republican ad er to have it within nato than outside.
France
ministrations, proposes more neutral Membership may ultimately offer the best
words such as “arrangements” and “com *EU and European NATO members, and EU funding way to cement a truce and guard against a
Sources: “The Ukraine support tracker”, Kiel Working Paper,
mitments” in a recent report for the Carne 2023; IMF; Haver Analytics; The Economist
renewed conflict. For all his aggression, Mr
gie Endowment for International Peace, an Putin has never attacked a nato state. n
012
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Business The Economist June 24th 2023 49
Trade and geopolitics vent Chinese firms from buying some

dualuse technologies and inboundin
Enter the investment police vestment screening stops them snapping
up American firms that make them, Amer
ican capital should not be allowed to fund
the technology’s development in China.
Placing limits on America’s globetrot
ting investors comes with risks. One is
writing overbroad rules which limit capi
Citing national security, America plans to screen investments into China
tal flows and burden investors without
R ules to police investment by Ameri

can firms in China have acquired a
phantom quality: always imminent, al
um Group, a research firm, American firms
made $120bn of foreign direct investment
in China and $62bn of venturecapital (vc)
good reason. Paul Rosen, a Treasury offi
cial, said in May that the rules would focus
on “investment dollars that come with
ways delayed. In recent months the steady investment during the past decade (see knowhow and expertise”. European lead
beat of debate on the topic has quickened chart on next page). ers say restrictions are needed to prevent
to a drumroll. In March America’s Treasury Geopolitical brakes on American capi “knowhow leaking”. But figuring out what
and Commerce Departments delivered re tal are not an entirely new idea. Some com sorts of investment are leaky is tricky. A
ports on potential rules. The next month panies with ties to China’s military are off tech giant hoping to expand its advanced
Jake Sullivan, President Joe Biden’s securi limits to investors and the CHIPS Act bars computing efforts in China would presum
ty adviser, trailed the policy in a speech. An firms that receive its subsidies from mak ably fall foul of this standard, but the case
executive order from Mr Biden is expected ing investments that could benefit China’s of investment firms, and their ultimate in
to follow. America’s allies are mulling sim semiconductor industry. Advocates say vestors, is less straightforward. A private
ilar restrictions. On June 20th the Euro outboundinvestment rules are a neces equity fund might acquire a company but
pean Commission announced plans, albeit sary extension to America’s patchwork of offer no operational advantage, whereas a
vague ones, to propose an initiative by the trade restrictions: if export controls pre small vc investment could come with tech
end of the year. nical expertise worth protecting.
When Mr Biden’s executive order does According to the Centre for Security and
appear, it is likely to focus on investments Emerging Technology, a thinktank, in
in three “forcemultiplying” technologies: 50 China and Sweden’s graphite dustup 201521 American investors, including the
advanced semiconductors, artificial intel vc arms of chipmakers Intel and Qual
51 Finishing school for executives
ligence (AI) and quantum computing. The comm, participated in funding rounds that
exact permutation of prohibitions and no 51 Doctor Walmart will see you now accounted for 37% of the $110bn raised by
tification requirements remains unclear, Chinese AI companies. American pension
52 India leads an aviation boom
but the rules will affect only a sliver of funds’ appetite for returns has made them
American investments in Chinese firms, 53 Bartleby: “Scaling People” beneficiaries of such investments. Consid
which were worth more than $1trn at the er GGV Capital, one of the most active
54 Schumpeter: Modelo v Bud Light
end of 2021. According to data from Rhodi American investors in Chinese AI compa
012
50 Business The Economist June 24th 2023
nies, according to data from PitchBook. exports could do serious damage. In its
Our analysis of public disclosures suggests Insecurities and investments only official statement on the matter, the
that six American pension funds and en United States and China, $bn European Commission said earlier this
dowments with combined assets exceed year that the drying up of Chinese graphite
Foreign direct investment* Venture capital*
ing $600bn have committed around $2bn exports “is creating negative repercussions
to ggv Capital’s funds in the past decade. US to China China to US for battery production in Europe, a key sec
The nationalsecurity risk presented by 50 50 tor for the eu green transition”.
such investments is an open question. So 40 40
China frequently throws its weight
is that of whether Chinese investors could around when it seeks to punish countries
in any case replace the funding if American 30 30 over political disputes. In a row with Aus
investors were restricted. Some feel the Bi 20 20 tralia that started in 2020, it officially
den administration should provide firmer 10 10 banned imports of coal from down under
answers before it requires asset managers (the restriction was lifted this year) and put
0 0
and pension funds, which are typically ex in place an unofficial ban on lobsters, with
2000 10 22† 2000 10 22†
posed to hundreds of global investment devastating consequences for Australian
*Only including deals worth over $1m †Estimate
funds, to search for traces of Chinese tech Source: Rhodium Group
sellers who had come to rely almost exclu
companies in their portfolios. sively on Chinese appetites. Officials in
Another danger is mission creep. Under China have often threatened to ban exports
Mr Biden, economic and nationalsecurity China depends on the eventual scope of of minerals such as rare earths to America
policy have become increasingly indistin any rules. American investment is already as retaliation for sanctions. Export bans for
guishable. Last year the president directed falling. vc flows to China have plummeted battery minerals such as lithium and co
the Committee on Foreign Investment in by more than 80% since their peak in 2018. balt have become more common. Accord
the United States (CFIUS), the American in As the business environment in China ing to the OECD, a club mostly of rich coun
boundinvestment watchdog, which has worsens, there is no sign of a reversal. This tries, China was the greatest offender in re
seen its caseload explode in recent years, month Sequoia, a big American vc firm, stricting the supply of materials needed for
to consider wider factors including sup announced that it would split off its Chi the transition to renewable energy.
plychain resilience. Scrutinising out nese business by 2024. For now, hawkish Grasping the reasons behind the Swed
bound investments on the basis of broad policymakers can rest assured that China ish graphite ban could be just as important
standards of national interest could be is doing their job for them. n as dealing with it. At first blush, the ban ap
come unwieldy. Fears of a growing invest pears to have been triggered by one of
ment bureaucracy have led some to sug many small diplomatic spats between Chi
gest using existing sanctions rules instead. Batteries na and Sweden in recent years. In late 2019
Though Mr Biden’s initial policy on out Swedish PEN, a freespeech advocacy
bound investment is expected to be nar group, gave an award to Gui Minhai, a pub
rower than anything that could be called a Electric shock lisher and dissident who is imprisoned in
“reverseCFIUS”, there is no shortage of China. The Chinese embassy in Stockholm
hawks outside the White House who imag immediately lashed out with threats
ine outboundinvestment screening as a against Sweden. Mr Gui, a Swedish citizen,
SHANGHAI
tool for industrial policy. In 2021 a biparti has been at the centre of a dispute between
Why is China blocking graphite
san group of congressmen introduced a the two countries since he was kidnapped
exports to Sweden?
bill to screen outbound investment broad by Chinese agents in Thailand in 2015. In
enough to have affected more than 40% of
American investment in China, according
to Rhodium Group. Last month an updated
I N EARLY 2020 Swedish batterymakers
noticed something alarming. Their Chi
nese suppliers were no longer able to sell
2020 and 2021 people familiar with Mr
Gui’s case believed it was the motive for the
graphite restrictions. The same people
version of the bill was released. It would them graphite, a mineral crucial to the pro now believe there could be more to it than
establish restrictions on investments not duction of lithiumion cells. The Swedes a petty quarrel over an award.
just in advanced technology but in indus assumed the problem would pass. Yet
tries including carmaking and pharmaceu three years on, as Chinese investments in
ticals, and give the White House the au the battery industry have surged in Europe,
thority to expand the list. Swedish firms are still largely cut off. In
The proliferation of trade restrictions 2020 China’s exports to Sweden of two
does not stop at America’s borders. Some types of graphite nearly disappeared. In
attribute the delay in Mr Biden’s executive 2021 and 2022 they vanished completely.
order to trouble gathering support for new Although China’s commerce ministry
rules among allied countries. The Group of has issued no formal ban, many Chinese
Seven (G7) jamboree of world leaders came graphite exporters face a prohibition in all
and went in May with only a milquetoast but name. One company was told that li
commitment on the issue. Few countries cences to export graphite to Sweden were
globally place any restrictions on out no longer being issued by Chinese regula
bound investment, but screening of in tors. Given that China supplies more than
bound investment is increasing rapidly. 60% of the world’s natural graphite and al
Europe is beefing up its protections: 18 of most all the manmade version, the situa
the EU’s 27 members have such rules, co tion alarms producers that rely on China
vering an increasingly diverse list of “stra for the graphite anodes used in their cells.
tegic” sectors. The commission’s plans for A halt in supplies from China can upset
outboundinvestment rules threaten a supply chains, raise costs and disrupt pro
growing tangle of red tape. duction. For Sweden, where the industry is
The effect on Western investment in just getting off the ground, a total ban on Mine, all mine
012
The Economist June 24th 2023 Business 51
As graphite exports to Sweden have business is Northvolt of Sweden. The com American medicine

slumped, China’s overall battery and elec pany has begun to expand in Europe and
tricvehicle investments across Europe will receive subsidies to build new fac Doctor Walmart
have soared. In Hungary China’s top bat tories. It is unclear what impact, if any, the
terymaker, CATL, poured $8bn into a fac graphite ban has had on Northvolt. But it is will see you now
tory last year, which amounted to one of believed to have the potential to raise costs
the biggest foreign investments ever made at a time when competition to win market
E LM SPRINGS, ARK ANS AS
in the country. In Poland smaller but simi share is fiercer than ever. The insiders
Why big companies see opportunity
lar factories are being built by Chinese aware of the Chinese graphite ban have
in primary care
firms. At the same time, graphite exports to started to question if the unofficial mea
those two countries have rocketed. Hunga
ry imported more than $230mworth of
one form of graphite in 2022, up from just a
sures have been designed to stymie inno
vation in Europe as China builds a foothold
there. In May one Chinese firm, Putailai,
W ITH HIS long white coat, stethoscope,
genially soothing manner and won
ky eagerness to discuss “population health
few thousand dollars’ worth of the stuff announced a $1.3bn investment to build management” and “patientcentred” med
five years earlier. Europe’s largest factory for making an icine, Ronald Searcy seems the Platonic
As it happens, one of the most compet odes. It will become a core supplier to the ideal of a primarycare doctor. The most
itive firms in Europe’s nascent battery Swedish battery industry. n unusual thing about him is where he
works: a compact facility complete with
examination rooms, dentist’s office, phle
Work and savoirfaire botomy lab and Xray room tucked into a
From debutantes to directors Walmart in northwest Arkansas. Since
2019, Walmart has opened 32 of these
“health centres” in five states; by the end of
GLIO N
next year it plans to more than double that
Europe’s last finishing school targets a new market
number, and expand into two more states.
T he three-martini lunch may be
over, but the business dinner is here
to stay—and it is a prospect that fills
Walmart is not the only big company
expanding its medical offerings. Earlier
this year Amazon acquired One Medical,
some executives with horror. For those a concierge practice (meaning clients pay
who find the multiple rows of cutlery an annual membership fee) with offices in
and wine glasses baffling, or who keep cities across America. Dollar General, a dis
forgetting which sideplate is theirs, help count retailer, has set up a partnership
is on hand to decode the hidden rules of with DocGo, which runs mobile health
etiquette. On the hills overlooking Lake clinics, and has launched a pilot pro
Geneva, a company offers executives an gramme at three shops in Tennessee. Wal
extra layer of social polish to boost their greens and CVS, both retail pharmacies,
confidence—and, perhaps, their career. have robust primarycare offerings; last
Established in 1954, the Institut Villa year more than 5.5m patients visited a CVS
Pierrefeu, perched above Montreux, is MinuteClinic, making it one of the biggest
the last finishing school in Europe. Its providers in the country, and earlier this
courses, which range from one to six year CVS completed its acquisition of Oak
weeks, cover everything from seating Street Health, an elderlyfocused primary
precedence and teaservice protocol to care provider with offices in 21 states. What
blackbeltlevel etiquette challenges do these companies see in the medical
such as eating a banana with a knife and business? The answer, befitting America’s
fork. Historically, most of its students Byzantine and rentfilled healthcare sys
were young women preparing for the of cultures, customs, traditions and tem, is both simple and complex.
marriage market. Today, as social codes etiquette”. Others hope that their refined The simple answer is money. Ameri
relax and demand for such an education manners will command respect from cans spend a stunning amount of it on
wanes, Villa Pierrefeu is exploring a new colleagues. “I wanted to be elevated,” health: roughly 18% of GDP in 2021, far ex
pool of clients: business executives. says one employee of a tech giant based ceeding the richcountry average of about
Viviane Néri, the Institut’s principal, in California. 10% and more than double the ratio of
says it is no longer a finishing school but Some lessons have not changed in some, such as South Korea, with healthier
a “starting school”. years. Students are instructed that, once and longerlived populations. Americans’
A fiveday course in the “European art a meal is over, they can place their linen spending is forecast to rise by 5.4% per
of dining” (which costs around SFr5,000, napkin on the right (French style) or the year over the next eight years (see chart on
or $5,570) features modules on menu left (English style). But in other ways the next page), outpacing economic growth
planning, Englishstyle table setting and school has had to adapt. Ms Néri has and accounting for almost 20% of GDP by
Frenchstyle table manners. The stud changed courses to suit professionals, 2031. The bulk of that spending will come
ents carefully taking notes on wine scrapping the old ninemonth diploma from Medicaid and Medicare, federal pro
pairing and cutlery arrangement work in and offering classes all year round which grammes that cover healthcare costs for,
fields such as technology, corporate law clients can attend on their annual leave. respectively, poor people and over65s.
and banking. Some are there to master a Schools which failed to adapt have had to The complex part reflects changes in
foreign culture. Ahmed Aftab Naqvi, the close, or take on less glamorous roles. Le how insurers, including Medicaid and
head of an advertising network in India, Manoir, a former finishing school in Medicare, pay for coverage; as well as
says that a spell at Villa Pierrefeu has Lausanne, these days serves as the in changes in how consumers are willing to
helped him to “understand the diversity ternational headquarters of Tetra Pak. get it. Start with the insurers. The predomi
nant payment model is feeforservice, in
012
er Pulse Survey by Accenture, a consultan Commercial aviation

In sickness and in wealth cy, showed that nearly onethird of con
United States, health spending, $trn sumers—and more than onethird of those Jet stream
8
between 18 and 35—were open to getting
Forecast medical care at a grocery store or bigbox
retailer, and more than 90% of customers
6 would trust a retailer with their medical
LE BOURGET AND MUMBAI
data. Retailers believe that this sort of
India leads a boom in orders for
4 trust, along with their convenience (75% of
passenger planes
Americans live within five miles of a Dollar
2 General, and 90% within ten miles of a
Walmart) is a winning combination.
Better technology improves VBC, both
T raditions abound at the annual air
show that rotates between Paris and
Farnborough. One is visitors’ observation
* 0
by giving insurers more health measures that a glittering capital city, with the Eiffel
2019 21 23 25 27 29 31 to judge a doctor’s success, and by provid Tower visible through the haze at the end
Source: “National Health Expenditure Projections, ing doctors with a better way to stay in of the runway, is preferable to a British
2022–31”, by S.P. Keehan et al., Health Affairs, 2023 *Estimate
touch with their patients. Walmart Health town so unremarkable that its main attrac
and OneMedical, for instance, use apps tion is its biennial airshow. Another is
which insurers reimburse doctors for each that show patients their medical history, complaints about the heat from those
visit or procedure. Its advantage is simpli including upcoming appointments and trudging airstrips covered in commercial
city. Its downside is that it encourages when they need to repeat their prescrip jets, fighter planes, helicopters and other
medical consumption but, for the most tions. Both of these companies also have pieces of hightech kit.
part, is indifferent to outcomes: doctors inhouse pharmacies to which they can di The most predictable convention is that
get paid the same amount whether a pa rect patients. And the primarycare doctor Airbus, a European aerospace giant, will
tient gets healthier or not. is the de facto coordinator and gatekeeper take the opportunity while on home tar
From 2016 to 2021, however, the share of for a patient’s whole medical care. Some mac to deliver a blow to Boeing, its Ameri
healthcare spending on “alternative pay worry that VBC could provide an incentive can rival in the duopoly supplying the
ment models” rose from 29% to 40%. In a for insurers to deny referrals and necessary world’s big passenger jets. On June 19th it
survey in 2022 most payers believed that care, and keep the savings. But if the pa did not disappoint. Amid a slew of smaller
these payment models, in particular those tient gets sicker, they share those costs too. deals, the most eyecatching was a whop
that let doctors share in the upside of keep Managing that downside risk will be per from IndiGo, an Indian lowcost carri
ing patients healthy, would rise. This ap tricky. The sort of proactive care and pa er. Its order for 500 narrowbody jets from
proach, known as “valuebased care” (VBC), tient contact that VBC requires may be Airbus’s A320 family, to be delivered in
is an artefact of the Affordable Care Act. It cheaper with a smartphone than without 203035, is the biggest ever struck. Boeing’s
incentivises doctors to keep patients one, but it is not cheap. Providers need to only significant riposte was to confirm an
healthy—for instance, by letting them invest in technology, but may also need to order made in February by Air India for 190
share in savings if a patient with a chronic keep on top of patients with repeated of its competing 737 maxs and 30 of its
condition takes her medication and stays phone calls and home visits—the sorts of widebody longhaul jets.
out of hospital—rather than simply paying things that apps cannot do. Firms that get If Boeing was disheartened, Darren
them for every procedure performed. Com it wrong will struggle. Those that get it Hulst, its boss of commercial marketing,
panies are betting that they can make more right will increase their share of the im did not show it. The orders unveiled in Par
money on this model than the old one. mense tide of money sloshing around is are part of a rush by airlines to expand
Retailers launching or expanding their America’s bloated and inefficient health their fleets, in order to cope with a resump
primarycare offerings are also betting on care system, and may also, incidentally, tion of rapid growth in air travel as the pan
consumer habit. The most recent Consum keep people healthier. n demic recedes. Mr Hulst noted that Boe
ing’s order book swelled by over 1,100
planes in the ten months following last
year’s Farnborough show, and that the
world’s airlines would require 42,600 new
planes by 2042.
Carriers are clamouring for new metal.
The combined backlog at Boeing and Air
bus is around 12,000 planes. Air India
wants almost as many as IndiGo; it con
firmed in Paris that it would buy 250 Airbus
jets. In May Ryanair, Europe’s biggest air
line, ordered 300 737 maxs. Late last year
United, an American carrier, ordered 200
jets, split between Airbus and Boeing. At
the Paris show, Riyadh Air displayed a Boe
ing 787 painted in a striking purple livery.
The new airline, financed by Saudi Arabia’s
sovereignwealth fund, has ordered 39 of
Boeing’s popular widebody jets, with a
view to starting operations in 2025. Using
the Saudi capital as a base, it aims to open
up the country to international tourism. It
Make money, live better is expected to place a huge order for short
012
The Economist June 24th 2023 Business 53
haul planes soon. traffic, will be the world’s fastestgrowing failure of other Indian carriers. One com

Amid the bonanza, questions remain. airtravel market over the next two de petitor, Jet Airways, went bankrupt in 2019
First, can Airbus and Boeing increase pro cades, according to Boeing. Whereas China and another, Go First, collapsed last
duction, laid low during covid19, to meet has a fleet of 4,000 planes, India’s fleet month. Their grounding should enable
demand? Airbus, which saw delivery rates numbers just 700. IndiGo, which operates surviving operators to increase ticket pric
of its A320s sink to 40 a month during the around 300 of them, has 1,330 more com es, but officials have been clear that such
pandemic, aims to deliver 75 a month by ing, to serve what has already become the rises must be constrained.
2025. Ramping up supply chains will not thirdlargest domestic aviation market in A consequence is that underlying the
be easy, especially as many firms laid off the world. excitement around the colossal new orders
their costliest and most experienced staff. Yet the rapid expansion of IndiGo, are concerns about whether some buyers
Another question lingers over India. which controls around 60% of the domes will stay aloft. Another airshow tradition is
Demand there is soaring, as the world’s tic market, has come at a cost. Its latest fis for pundits to suck air through their teeth
most populous country gets richer. South cal year was the fourth in a row to end with and wonder if the future is really as rosy as
Asia, where India accounts for 90% of the losses. Part of its success is down to the the numbers suggest. n
Bartleby Textbook writing
“Scaling People” is not like every other management book. Thank God
T oo many management books rest on
a vague idea that has been stretched
to breaking point. You can tell from the
task of bringing new employees on board.
There are chapters on improving team
performance and on giving feedback.
Among other things, Ms Hughes
Johnson gives tips on how to run an
effective meeting; these include having a
depth of the margins just how hard an “Scaling People” is a product of Silicon round of “checkins” at the start (getting
author has had to work to draw the thesis Valley. It grapples with the problems of everyone to say what they want from the
out. Their covers are bright and zingy. very fast growth; its context is one of meeting, for instance) so that people are
Their titles either contain actionpacked founders, developers and product teams. focused and so that the quietest mem
words like “strive” and “ignite” or give For incumbents in highly regulated in bers of the group participate early. She
birth to some ghastly new portmanteau dustries or employees in publicsector offers advice on how to do performance
like “stressilience” or “charismility”. bureaucracies, the problems of scaling up reviews, which decisions you can and
They are determined to take lessons for may seem very remote. Stripe’s early deci should delegate to other people, and how
bosses from anywhere but an actual sion to run a programming competition to save highperforming employees from
business: termites, huntergatherers, called “Capture the Flag”, for instance, burnout. It is all refreshingly pragmatic.
Novak Djokovic, salad dressing. The helped build its reputation as a place for Behind the tactics lies a clear philoso
unspoken rule of most management talented developers to go to. Established phy, which is to make the implicit explic
titles, it seems, is to avoid the actual firms need to work less hard to create it. That means being clear about how
practice of management. awareness among potential candidates specific decisions are going to get taken:
What a relief, then, to read a book that but may have a tougher time building a is this a consensual process or an au
breaks the mould. It lands with an in name for innovation. tocratic one? It means writing things
timidating thud. It looks and feels like a But the insights on which such practic down: by articulating Stripe’s culture, the
textbook. It is full of exercises and tem es are founded—in this instance, getting startup can be clear to prospective join
plates. And it is unapologetically practi candidates to do actual work as part of an ers what the company’s norms are. It
cal in its focus. “Scaling People” is writ application process and filling a hiring means saying things that other people
ten by Claire Hughes Johnson, a tech pipeline rather than waiting for jobs to are not saying, especially if those things
industry veteran who spent more than a open up—are transferable. And most of are causing dysfunction.
decade at Google before joining Stripe, a the book is devoted to problems that It also means being aware of your own
digitalpayments unicorn, as its chief bedevil all industries and companies. behaviour and preferences. Ms Hughes
operating officer in 2014. By the time she Johnson has long kept a “Working with
left that role in 2021, the firm had gone Claire” document that spells out to new
from 160 employees to over 7,000. In a members of her team what they can
world of coders, creators and visionaries, expect: how she likes to take decisions,
her work was to make things work. how quickly she will respond to messag
Much of the book is a manual for es, what she wants from them in a one
creating what Ms Hughes Johnson calls toone meeting.
an operating system—the set of docu Her advice will not suit everyone.
ments, metrics and processes that pro There will be too much emphasis on
duces a consistent framework for mak process for some corporate cultures. But
ing decisions and improving perfor there is something thoughtprovoking
mance. There is a section on planning, for every boss. Your bedside table may
with advice on setting good goals and groan with books on what Mr Djokovic
deciding on the cadence of meetings and can teach you about leadership or the
reviews that sets the right drumbeat for a lessons to be learned from mayonnaise.
company. There is another on hiring This book is trying to do something far
people, from building a recruitment more original and useful: turn you into a
pipeline to the interview process and the better manager.
012
Schumpeter The MexicanAmerican wave
Move over, Bud Light. Surrender to the power of the Hispanic market
hand”. When the company noticed that the beer was taking off, it
did not let a perception that Corona was the frontrunner distract
it. It threw its weight behind the mood of the marketplace.
Its priority was to ensure that supply met demand. That in
volved making a huge bet on Mexico. When Constellation ac
quired the brands, it resolved to brew them south of the border.
Since then it has increased its production capacity in Mexico four
fold, at a cost of $6.4bn—more than the $4.8bn it paid for the
brands in 2013. It is not stopping there. It plans to invest up to a fur
ther $4.5bn over the next three fiscal years, boosting capacity by
more than 70%. Investing in Mexico has not been without set
backs. In 2020 protesters, backed by Andrés Manuel López Obra
dor, Mexico’s populist president, voted in a plebiscite to stop Con
stellation from building a factory close to the border because of
concerns about water shortages. So it moved the factory to Vera
cruz, on Mexico’s wetter east coast, with the president’s blessing.
Distribution in America was the next challenge. To start with,
Constellation focused on bringing Modelo Especial to a few cities
with big Hispanic communities, such as Los Angeles and Chicago.
After the brand took off there, it expanded farther afield. It built
brand awareness one step at a time and worked closely with its
distributors to ensure that supply kept flowing. Once in shops,
T he king is dead. ¡Viva el rey! That is the cheer ringing through

drinking dens this summer as Bud Light, America’s selfstyled
“king of beers” for 22 years, is dethroned by Modelo Especial, a
Constellation focused on showcasing the Modelo brand. “They’re
wine guys, they know the value of display,” says Mr Williams. They
also got pricing right. Instead of foisting large increases on con
Mexican brew. Spare a thought for the vanquished. Rarely has an sumers, Constellation made incremental price rises. For many
effort to rejuvenate a brand gone as spectacularly wrong as when years, Modelo Especial has been the fastestgrowing beer in Amer
Bud Light’s marketers entered into a liaison with a transgender so ica, says Scott Scanlon of Circana, a marketresearch firm. Yet
cialmedia star, only to fall victim to America’s culture wars. On more impressive is that it is a premium brand, rather than a bud
the bright side, it offers a chance to examine a littleknown suc get one, at a time when wallets are stretched—and a fullbodied
cess story. Constellation Brands, an American firm that went into beer, rather than a lowcalorie one, when waistlines are.
brewing only a decade ago, offers a lesson in how to wage an old The reasons for its consumer appeal are twofold. First is adver
fashioned corporate insurrection, MexicanAmerican style. tising. Unlike Bud Light’s, it is not gimmicky. It tells stories of or
Schumpeter should declare an interest. Having lived for many dinary people who have overcome hardship. That has helped it
years in Mexico, parts of his life have been spent accompanied by pull off the trick of remaining authentically Mexican even as it
one Mexican brew or another. Modelo Especial was rarely one of joined the bigbeer league. Second is the market itself. Its core
them. South of the border, it doesn’t have huge cachet. Yet in consumers are Latinos, who have growing economic power in
America the same beer, with the same taste, has overtaken even America. According to McKinsey, a consultancy, it is not just their
Corona Extra, its betterknown sister brand. That is because, in population that is increasing faster than the American average. So
straightforward business terms, Constellation got everything is their spending power. If America’s Latinos were their own coun
right, from manufacturing to distribution to retailing. Most of all, try, they would have had the thirdfastestgrowing economy after
it grasped the growing power of the Latino consumer. China and India during the past decade.
The Modelo Especial story starts with antitrust. Not the new
fangled sort in which size itself is considered taboo, but the old The flamin’ hot hand
school idea that buying a competitor can lead to higher prices. It This power may cast a halo effect on other products of Mexican de
dates back to 2013, when AB InBev, the Belgiumbased owner of scent. Tequila looks likely to overtake vodka as America’s best
Budweiser, paid $20bn to take control of Grupo Modelo, Mexico’s selling spirit. Grupo Bimbo, a Mexican multinational that is Amer
largest brewer, whose brands such as Corona and Modelo Especial ica’s biggest baker is, like Constellation, a respected consumer
were rivals to Bud Light north of the border. America’s Justice De goods company. In a sign of the times, a new film, “Flamin’ Hot”,
partment intervened. It determined that, in order to maintain tells the story of how a MexicanAmerican janitor convinced Frito
competition, AB InBev should divest Modelo’s entire US business Lay, owned by PepsiCo, to produce spicy Cheetos to win over the
to Constellation, which was then a relatively littleknown wine Hispanic market, reviving its business. (The snack’s true genesis is
and spirits seller worth $8.1bn. (AB InBev kept the Grupo Modelo disputed, but its popularity is in no doubt.)
business in Mexico and the rest of the world.) Today Constellation Modelo Especial may yet lose its crown as Bud Light gets over
is worth $45bn and is one of the most respected consumergoods its current crisis. Yet the fizzing growth of the MexicanAmerican
companies in America. brand suggests it could eventually gain a more lasting lead. It is la
Bump Williams, a consultant who first noticed that in the four mentable for business in general that America’s cultural divide
weeks to June 3rd, athome sales of Modelo Especial had shot past has done so much damage to Bud Light’s reputation. But the con
Bud Light in dollar terms, uses a vivid expression to describe the solation is that Modelo Especial’s success suggests the cultural di
way Constellation nurtured the brand. He calls it “feeding the hot vide between America and Mexico is narrowing. n
012
Briefing Inflation and investing The Economist June 24th 2023 55
search arm of BlackRock, the world’s big
gest asset manager, makes his argument
bluntly. “Central banks can always bring
inflation back to 2% if they really want to,
but now it would require too big of a de
mand crush to bear.” He believes it will in
stead settle around 34%. Richard Clarida,
vicechair of the Federal Reserve from 2018
to 2022, has a similar view. “Mr Powell’s
Fed…will eventually get the inflation rate it
wants,” he recently wrote for this newspa
per. “But it is likely to be something more
like ‘two point something’ than ‘two point
zero’.” Asked what “something” means, he
replies: “It could be 2.8% or 2.9% when
they start to consider rate cuts.”
The likelihood of monetary guardians
explicitly admitting that they will tolerate
inflation above 2% is low. Every time Je
rome Powell, the chairman of the Federal
Reserve, is asked about the possibility, he
vehemently denies it. Such a shift, espe
cially with prices already rising much fast
er than 2%, would immediately damage
the Fed’s credibility: if the target can be ig
nored once, why not again?
Yet the forces ranged against central
bankers, which will push up prices by con
straining supply and boosting demand, are
fearsome. Demographic trends are shrink
ing workforces in much of the rich world,
which may lead to shortages of labour. The
fragility of global supply chains—exposed
by the covid19 pandemic, the war in Uk
raine and fracturing SinoAmerican
trade—has incentivised countries to repli
cate them locally. On the demand side,
higher defence spending, the investment
required to cut greenhousegas emissions
and the costs of supporting ageing popula
tions are all increasingly seen as essential.
Ratesetters could, through ultrahigh
interest rates, destroy enough demand in
A steady grind other parts of the economy to bring infla
tion down to 2%. But with so many struc
tural factors pushing prices up, the scep
tics argue, this would involve inflicting a
politically unacceptable level of economic
damage. And the longer inflation remains
above target the more it raises expecta
tions of future price rises, which can then
NEW YO RK
become selffulfilling. The world may thus
Persistent inflation is as corrosive to investing as it to the real economy
have entered a regime in which central
I t is more than two years since high in
flation returned to the rich world, and
hopes that it will quietly fade are them
fects will quickly be felt in financial mar
kets. Sustained price rises do not affect all
asset classes equally, so a relative repricing
bankers pay lipservice to their inflation
targets but shy away from measures severe
enough to meet them. In other words, 4%
selves fading. True, prices are rising more will be required. But those oneoff profits may be the new 2%.
slowly than in 2022, when the pace hit 9.1% and losses will not be the only conse
in America, 10.6% in the euro area and quence. In the real economy, inflation cor Another roll of the price
10.4% globally. But the view that this was rodes trust by continually and arbitrarily An extra percentage point or two in the an
just a passing lurch looks ever less plausi redistributing wealth. In the financial one nual rate of inflation may not seem much.
ble. Britain’s rate has been stuck at 8.7% for this corrosive dynamic is less obvious, but Yet the impact on investment returns is
two months. American “core” prices, just as real. huge. Buy a tenyear government bond
which exclude volatile food and energy, are Central bankers remain adamant that when inflation is 2%, and the principal
5.3% higher than a year ago, a rate that has they will return inflation to their targets, that is eventually returned will be worth
barely fallen for the past six months. typically 2%. Many on Wall Street, though, 82% of its original value. When inflation is
If inflation continues to fester, the ef are sceptical. Jean Boivin, who runs the re 4%, that figure falls to 68% (see chart 1 on
012
56 Briefing Inflation and investing The Economist June 24th 2023
next page). Over the longer run the gap return on equities flipped from positive to

yawns even wider. The principal on a 30 Tatters of principal 1 negative. Even when inflation was lower
year bond will, when returned, be worth Real face value of a $100 bond, $ than this, it tended to reduce the real re
55% of its original value if inflation averag By inflation rate turns from shares. In other words, though
es 2% over that time. With 4% inflation, it 100 stocks tend to outpace inflation in the long
will be worth 31%. term, in the short term they do not offer a
2% inflation
But the erosion of the value of both the 80 true hedge against it.
principal and the fixed interest payments Real assets will fare much better if in
60
is not the only way that higher inflation af flation remains high (see chart 2). Property
fects investments in bonds. Rising prices 4% and infrastructure generate income
40
fuel expectations that central banks will streams, in the form of rents and usage
raise rates, which in turn pushes yields in 20 charges, that can often be raised in line
the bond market up to match those expec 0 with inflation or may even be contractually
tations. Bond prices are an inverse func 0 5 10 15 20 25 30
linked to it. As the supply of such assets is
tion of yields: when yields rise, prices fall. Bond term, years
constrained, their real prices are also likely
The scale of this second effect would Source: The Economist
to rise as investors seek out assets that car
depend on the duration of the bond. If mar ry some protection against inflation.
kets think central banks are prepared to That is also true of commodities. Mea
tolerate slightly elevated inflation, they annualised real return of 5%. sured by returns on commodity futures (fi
will assume there will be fewer increases But there is a snag: the higher inflation nancial contracts that give investors expo
in rates in the immediate future, not more. rises, the less stable it tends to be. Take sure to commodities without the hassle
This expectation would push shortterm American consumerprice inflation going and expense of owning actual iron ore or
yields down and prices up. Meanwhile, in back to 1913, when official data begin. After cattle), this class of assets has historically
addition to the expectation of higher rates years in which prices rose by between 0% done even better in real terms than stocks.
eventually, the volatility and uncertainty and 5%, the average inflation rate for the In years of aboveaverage inflation, the ex
brought on by higher inflation would raise subsequent 12 months was within 1.8 per cess real return of a diversified portfolio of
the “term premium” (financial jargon for centage points of the first one. (So a year of commodity futures over cash has averaged
the extra yield longterm lenders demand 2% inflation was, on average, followed by 11.4%. The asset class even tends to do well
in return for taking on more risk). The one of between 0.2% and 3.8%.) When when high inflation combines with low or
overall effect would be that, during the ini prices rose by between 5% and 10%, the av negative growth, with excess returns aver
tial adjustment, bond portfolios with shor erage change for the subsequent year aging 10% in such “stagflationary” years.
ter durations would do much better than jumped to 3.8 percentage points. Inflation The trouble with all such physical as
those with more distant maturities. of 4% would leave little room for error. sets is the difficulty of investing in them.
Could inflationlinked bonds offer The total value of all commodity futures is
more protection? In theory, yes, though in Once bitten, price shy less than $500bn—barely 1% of that of
practice there are not enough of them to go Such volatility is much harder for busi America’s stockmarkets. Should investors
around. Inflationlinked Treasuries, for ex nesses to handle. Mr Cole points to indus pile into them en masse, they would push
ample, comprise just 8% of the total. And tries with high fixed costs, such as IT out prices up enough to render the exercise fu
even these can fare badly under inflation sourcing, commercial services and con tile. Infrastructure, meanwhile, is domin
that is not merely high but also volatile and struction, in which firms can do little to ated by private investment managers, who
unpredictable, if this instability prompts trim wage bills while remaining in busi tend to focus on selling to big institutional
large swings in real yields. Last year was a ness. If those costs rise in line with infla investors, such as pension funds and uni
case in point. Real yields soared alongside tion, but revenues are slower to adjust, vo versity endowments. Individuals, in con
inflation, hurting the value of inflation latile inflation can generate big swings in trast, struggle to buy such assets despite
linked bonds alongside the vanilla sort. An margins and earnings. their appeal in a highinflation world.
index of inflationlinked Treasuries com Moreover, during individual periods of Other vendors poised to capitalise on
piled by Bloomberg, a data provider, fell by high inflation, the historical record is less churn in the financial markets are active
12% over the course of the year. comforting for shareholders. Between assetmanagers. They have had a miserable
On the face of things, shares are ideally 1900 and 2022, in years in which inflation time during the years of easy money that
suited to weathering spells of high infla rose above around 7.5%, the average real followed the financial crisis of 200709.
tion. They derive their value from the un
derlying companies’ earnings, and if prices
are rising across the economy then those A real downer 2
earnings, in aggregate, ought to be rising as Asset prices, Q1 1970=100, $ terms
well. Suppose inflation stays elevated but
stable and the economy is otherwise hum Nominal Real*
ming along, says Ed Cole of Man Group, an 500 500
asset manager. Managers should be able to Commodities
control costs and adjust prices in response. (The Economist’s index) 400 400
And in any case, “Equities are nominal 300 300
beasts. If the numbers are going up, every Commodities
Housing (US) (The Economist’s index) Housing (US)
one pats themselves on the back.” 200 200
In the very long run, data compiled by
100 100
Elroy Dimson, Paul Marsh and Mike Staun
ton, three academics, for Credit Suisse’s Equities (S&P 500)
0 Equities (S&P 500) 0
Global Investment Returns Yearbook back 1970 75 80 85 1970 75 80 85
this up. Globally, between 1900 and 2022, Sources: BEA; Refinitiv Datastream; US Census Bureau; The Economist *Personal-consumption-expenditures deflator
stocks beat inflation handily, posting an
012
The Economist June 24th 2023 Briefing Inflation and investing 57
inflation, funding ratios shot up.
Yet, as in the real economy, each winner
from inflation creates a loser. In this case,
the workers who have contributed to de
finedbenefit schemes that are not infla
tionlinked will lose out. After ten years of
4% inflation, someone who expected to re
tire with an income of $50,000 a year
would see the purchasing power of that in
come fall by around a third. In effect the
boon for definedbenefit schemes would
be paid for by an arbitrary reduction in
their members’ wealth. Many pensioners
would be in the same position as workers
who struggle to secure pay rises that keep
pace with inflation, and just as aggrieved.
The final category of participants in fi
nancial markets that might welcome high
er inflation is governments. The world ov
er, their debt burdens have ballooned—
first in the aftermath of the financial crisis
of 200709 and then during the covid19
Data compiled by Strategas Securities, a Do so, and the numbers look much pandemic, on which the rich world spent
brokerage and research firm, show that in worse. Nominally, the S&P 500 index fell 10% of its GDP. Europe’s energy crisis has
each year from 2010 to 2021, the majority of by 19% in 2022, but it would need to rise by triggered yet more spending. Six of the G7
active managers who measure their perfor more than 30% over the course of this year group of large, developed economies have
mance against the S&P 500 share index to recoup its losses in real terms. And as in gross governmentdebttoGDP ratios
failed to beat it. Such underperformance is vestors see chunks of their savings being above 100%; only Germany’s is below.
not limited to America. S&P Global, anoth eaten away by inflation, paying another The only ways to chip away at these vast
er research firm, reckons that in the ten couple of percentage points to their fund piles of debt other than inflation are turbo
years to 2022, 90% of European active managers will become much harder to charged growth, tax rises or spending cuts.
managers produced worse returns than the stomach. Just as, in the real economy, in The first is unlikely; the others are politi
broader market. flation prompts consumers to suspect cally painful. So governments may quietly
In part this is down to arithmetic. Over firms of profiteering, in the financial one it rejoice as the real value of their debt is in
all market performance is the average of will pit both retail and institutional inves flated away.
each investor’s, which makes beating the tors against those managing their money. Yet in doing so, they risk falling foul of
index a zerosum affair. On top of this, ac two groups. One is voters, whose savings
tive managers charge fees (often 12% or Sugar and price lose purchasing power at the same time.
more a year), which brings their average A surprising winner from sustained high The more immediate danger comes from
performance down—so in aggregate, they inflation, argues Martin Jaugietis of Black the bond market. Investors in sovereign
are likely to underperform. Even account Rock, might be definedbenefit pension debt will be acutely aware that inflation is
ing for this, though, the years of rockbot schemes, which in America hold assets eating into their returns. Expect them to
tom interest rates and relentlessly buoyant worth some $17trn. Such schemes invest rake through governments’ fiscal state
markets were hard on stockpickers. “If regular payments from workers and their ments with ever finertoothed combs for
everything goes up together, it doesn’t employers in return for the promise of a set signs that worse is to come.
matter how much skill you’ve got,” says income in retirement (usually a fixed per Emergingmarket countries are used to
Luke Ellis, Man Group’s boss. centage of the worker’s final salary). The fi this treatment, and to the wild swings in
By contrast, the return of high inflation nancial health is determined by their borrowing costs and exchange rates it can
and the volatility it brings allow skilled in “funding ratio”, or the value of their assets bring. But for the rich world the adjust
vestors to outperform. In particular “dis relative to the present value of the future ment would be painful. Britain’s flirtation
persion”, or big differences in performance payments they must make to retirees. As with disaster in September, when an irre
among different assets, offers active man interest rates rise, this present value sponsibly inflationary budget sent gilt
agers the chance to prove their worth. “Lots shrinks, since schemes can buy higher yields soaring and the pound through the
of people having a tough time doesn’t yielding bonds, locking in cash flows that floorboards, may offer a taste of things to
mean a bad opportunity set,” says Mr Ellis. will help pay future liabilities. come. Governments that lose the trust of
Yet even Mr Ellis does not think that Provided their assets do not fall too lenders are in for a rough ride.
“you’ll suddenly see 70% of active manag much, the higher nominal interest rates The idea that central banks might quiet
ers outperforming the index”. Many will be brought on by persistent inflation would ly allow inflation to fester, taking a chunk
wrongfooted by macroeconomic condi therefore be a fillip for definedbenefit of society’s stability and trust with it, may
tions that they have never had to grapple schemes. This is especially true for Ameri seem speculative. But look back at the past
with before. More insidiously, their clients can ones, says Mr Jaugietis, since they do century and you will struggle to find an in
will only gradually adjust to the wealthde not typically raise payouts to pensioners in stance of inflation rising as far as it did in
stroying effects of inflation. Jeremy Gran line with inflation. Sure enough, in 2022 2022, then immediately coming back un
tham, a veteran fundmanager, recently the funding ratios of American schemes der control. The tradeoffs required to get it
wrote of his surprise that moneymanag improved markedly as inflation and inter there look nightmarish. The generation of
ers have not yet started to routinely adjust est rates rose, despite plunging asset pric investors that is learning for the first time
shareperformance charts for inflation, as es. Even in Britain, where retirement how to deal with elevated inflation may
was routine in the 1970s and 1980s. payouts tend to be linked more closely to have plenty of time to study it. n
012
58
Finance & economics The Economist June 24th 2023
Double dip developers to raise money so that they

could complete delayed construction pro
Vanishing growth jects. Households that refrained from buy
ing last year, when China was subject to
sudden lockdowns, returned to the market
in the first months of 2023 to make the pur
chases they had postponed. Some analysts
even allowed themselves the luxury of
HO NG KO NG
worrying about whether the property mar
China’s postcovid economy was supposed to roar. Instead, it is faltering again
ket might bounce back too strongly, reviv
C hina prides itself on firm, unswerv

ing leadership and stable economic
growth. That should make its fortunes easy
bal benchmark, from falling by more than
10% from its January peak. Steel and cop
per have also got cheaper. China’s producer
ing the speculative momentum of the past.
Yet this pentup demand seems to have
petered out. The price of new homes fell in
to predict. But in recent months, the prices—those charged at the factory gate— May compared with the previous month,
world’s secondbiggest economy has been declined by more than 4% in May com according to an index from Goldman
full of surprises, wrongfooting seasoned pared with a year earlier. And the yuan has Sachs, a bank. Although property develop
Chinawatchers and savvy investors alike. weakened. The price Americans pay for ers are keen to complete building projects,
Early this year, for example, China’s imports from China fell by 2% in May com they are reluctant to start them. Gavekal
economy grew faster than expected, pared with a year earlier, according to Dragonomics, a consultancy, calculates
thanks to the country’s abrupt exit from America’s Bureau of Labour Statistics. that property sales have fallen back to 70%
covid19 controls. Then, in April and May, Much of the slowdown can be traced to of the level they were at in the same period
the opposite happened: the economy reco China’s property market. Earlier in the year of 2019, China’s last relatively normal year.
vered more slowly than hoped. Figures for it seemed to be recovering from a disas Housing starts are only about 40% of their
retail sales, investment and property sales trous spell of defaults, plummeting sales level then (see chart on next page).
all fell short of expectations. The unem and mortgage boycotts. The government How should the government respond?
ployment rate among China’s urban youth had made it easier for indebted property For a worrying few weeks, policymakers
passed 20%, the highest since data were looked as though they might not do much
first recorded in 2018. Some now think the at all. The official growth target for this
economy might not grow at all in the sec → Also in this section year—around 5%—lacks ambition. Beijing
ond quarter, compared with the first. By seemed keen to keep a lid on the debts of
59 How to rebuild Ukraine
China’s standards this would be a “double local governments, which are often urged
dip”, says Ting Lu of Nomura, a bank. 60 What’s behind low energy prices? to splurge for the sake of growth. The Peo
China has also defied a third prediction. ple’s Bank of China (PBOC), the central
61 Buttonwood: Mixed animal spirits
It has failed, thankfully, to become an in bank, seemed unperturbed by falling pric
flationary force in the world economy. Its 62 India’s verdant farms es. It may have also worried that a cut in in
increased demand for oil this year has not terest rates would put too much of a
63 Free exchange: Military spending
prevented the cost of Brent crude, the glo squeeze on banks’ margins, because the in
012
The Economist June 24th 2023 Finance & economics 59
terest rate they pay on deposits might not If monetary easing does not work, the
fall as far as the rate they charge on loans. government will have to explore fiscal
But on June 6th the PBOC asked the stimulus. Last year localgovernment fi
country’s biggest lenders to lower their de nancing vehicles (LGFVs), quasicommer
posit rates, paving the way for the central cial entities backed by the state, increased
bank to reduce its policy rate by 0.1 per their investment spending to prop up
centage points on June 13th. The interest growth. That has left many strapped for
rate banks charge their “prime” customers cash. According to a recent survey of 2,892
then fell in tandem, which will further of these vehicles by the Rhodium Group, a
lower mortgage rates. Although the cut was research firm, only 567 had enough cash on
negligible, it showed the government was hand to meet their shortterm debt obliga
not oblivious to the danger. A meeting of tions. In two cities, Lanzhou, the capital of
the State Council, China’s cabinet, on June Gansu province, and Guilin, a southern ci
16th, dropped hints of more to come. ty famous for its picturesque Karst moun
Robin Xing of Morgan Stanley, a bank, tains, interest payments by LGFVs rose to
expects further cuts in interest rates. He over 100% of the city’s “fiscal capacity” (de
also thinks restrictions on home purchas fined as their fiscal revenues plus net cash
es in first and secondtier cities may be re flows from their financing vehicles). Their
laxed. The country’s “policy banks” may debt mountains are not a pretty picture.
provide more loans for infrastructure. Lo If the economy needs more of a push,
cal governments may be allowed to issue the central government will have to engi
more bonds. China’s budget suggests it ex neer it. In principle, this stimulus could in
pected land sales to stay steady in 2023. In clude extra spending on pensions and con
stead, revenues have so far fallen by about sumer giveaways. The government has, for War economics
20%. If the shortfall persists for the entire example, extended tax breaks on electric
year, it would deprive local governments of vehicles that have helped boost car sales. The big sweep
more than 1trn yuan ($140bn) in revenue, Officials could also experiment with
Mr Xing points out. The central govern hightech consumer handouts of the kind
ment may feel obliged to fill that gap. pioneered by cities in Zhejiang province
Will this be enough to meet the govern during the early days of covid. They distri
ment’s growth target? Mr Xing thinks so. buted millions of coupons through ewal
Rebuilding Ukraine will require
The slowdown in the second quarter will lets, which would, for example, knock 70
money, but also tough reforms
be no more than a “hiccup”, he argues. Em yuan off a restaurant meal if the coupon
ployment in China’s service sector began
this year 30m short of where it would have
been without covid, Mr Xing calculates.
holder spent at least 210 yuan in a week. Ac
cording to Zhenhua Li of Ant Group Re
search Institute and coauthors, these cou
U kraine suffered a brutal winter.
Russia lobbed missiles at civilian and
energy infrastructure, attempting to ter
The rebound in “contactintensive” servic pons packed a punch. They induced more rorise the population and cut off the green
es, such as restaurants, should restore 16m than three yuan of outofpocket spending shoots of economic growth. It had some
of those jobs over the next 12 months. for every one yuan of public money. success. A sentiment indicator surveying
When jobs do return, income and spend Unfortunately, China’s fiscal authori Ukrainian firms hit a low in January. But as
ing will revive. Another 10m of the missing ties still seem to view such handouts as the country’s soldiers began their counter
jobs are in industries like ecommerce and frivolous or profligate. If the government is offensive, so the economy pushed back. In
education that suffered from a regulatory going to spend or lend, it wants to create a April and May the sentiment indicator sig
storm in 2021. China has struck a softer durable asset for its trouble. In practice, nalled economic expansion. Vacancies
tone towards these firms in recent months, any fiscal push is therefore likely to entail continue to rise, as businesses seek work
which may embolden some of them to re more investment in green infrastructure, ers. Forecasts are increasingly rosy, too.
sume hiring as the economy recovers. intercity transport and other public assets Dragon Capital, an investment firm in Kyiv,
Others economists are less optimistic. favoured in China’s fiveyear plan. That expects gdp growth of 4.5% this year.
Xu Gao of Bank of China International ar would be an utterly unsurprising response There is nevertheless a long way to go:
gues that further monetary easing will not to China’s year of surprises. n Ukraine’s economy shrank by more than a
work. The demand for loans is insensitive third at the start of the war. Agriculture has
to interest rates, now that two of the econ been hit hard by the bursting of the Kak
omy’s biggest borrowers—property devel Hitting a wall (again) hovka dam; many iron and steel facilities
opers and local governments—are ham China, 2019 average=100 are destroyed or in Russianoccupied terri
strung by debt. The authorities cut interest Seasonally adjusted tory; foreign investors are understandably
rates more out of resignation than hope. 150 cautious; many workers are fighting or
He may be right. But it is odd to assume have fled the country. Thus policymakers,
Exports
monetary easing will not work before it has 125 financiers and business types gathered in
Retail sales
really been tried. Loan demand is not the London on June 21st and 22nd for an annu
only channel by which it can revive the 100 al conference. Their task was to work out
economy. Zhang Bin of the Chinese Acad how to support Ukraine’s recovery.
emy of Social Sciences and his coauthors 75 The first order of business was the im
estimate that if the central bank’s policy Property starts mediate reconstruction of the country, so
50
rate dropped by two percentage points, it that it can meet the basic needs of its peo
Property sales
would cut interest payments by 7.1trn 25 ple, especially next winter. Ukraine has
yuan, increase the value of the stockmark 2019 20 21 22 23
asked for $14bn to cover this year, of which
et by 13.6trn yuan and lift house prices, bol Source: Gavekal Dragonomics
a chunk will go on grants to households to
stering the confidence of homeowners. rebuild their homes and to firms to repair
012
60 Finance & economics The Economist June 24th 2023
their businesses. So far, only a portion of Energy prices
these funds have been raised. Thirsty
Ukraine also needs cash for its long Failing to ignite China, oil imports, barrels per day, m
term recovery. In March the eu, un, World 12
Bank and Ukrainian government together
put the cost at $411bn over the next decade, 10
a figure reached before the destruction of
the Kakhovka dam. The International Fi 8
Against widespread expectations,
nance Corporation, an arm of the World 6
oil and gas prices remain low
Bank, thinks twothirds of the money will
need to come from public sources because
of the difficulty of enticing private money.
This would amount to an annual cost of
I n the months after Russia’s invasion of
Ukraine any hint of bad news sent energy
prices into the stratosphere. When a fire
4
2
0.1% of the West’s gdp over the same per forced an American gas plant to close, 0
iod. In London, Ursula von der Leyen, head strikes clogged French oil terminals, Rus 2013 15 17 19 21 23
of the European Commission, proposed sia demanded Europe pay for fuel in rou Source: Kpler
that the eu should provide 45% of the bles or the weather looked grimmer than
funding until 2027 in grants and loans. usual, markets went wild. Since January,
Next comes reform. Seasoned donor however, things have been different. Brent covery, China consumed 16m barrels per
country experts are impressed by what Uk crude, the global oil benchmark, has ho day (b/d) of crude in April, a record. A re
raine has so far achieved under war condi vered around $75 a barrel, compared with bound in trucking, tourism and travel
tions. The country has completed an imf $120 a year ago; in Europe, gas prices, at €35 since the grim zerocovid period means
programme and continued with changes ($38) per megawatthour (mwh), are 88% that more diesel, petrol and jet fuel is being
to improve the transparency of property below their peak in August. used. In America, a 30% drop in petrol pric
transactions and public procurement, It is not that the news has suddenly be es compared with a year ago augurs well for
meaning international donors can use the come more amenable. The Organisation of the summer driving season. In Asia and
country’s lauded Prozorro online platform, the Petroleum Exporting Countries (opec) Europe, high temperatures are expected to
which makes information public and digi and its allies have announced swingeing last, creating more demand for gasfired
tally accessible. The country has also com cuts to output. In America the number of power generation for cooling.
pleted two out of seven judicial and anti oil and gas rigs has fallen for seven weeks A more convincing explanation can be
corruption reforms required to open for in a row, as producers respond to the mea found on the supply side of the equation.
mal accession negotiations with the eu. gre rewards on offer. Several of Norway’s The past two years of high prices have in
The integration of electricity markets gas facilities—now vital to Europe—are in centivised production outside of opec,
between Ukraine and the eu shows the val prolonged maintenance. The Netherlands which is now coming online. Oil is gushing
ue of pushing ahead. Longplanned as part is closing the largest gas field in Europe. from the Atlantic basin, through a combi
of a shift towards the West, the process Yet any uptick in price quickly fades away. nation of conventional wells (in Brazil and
sped up after Russia’s invasion. It involved What is keeping things steady? Guyana) and shale and tarsands produc
technical adjustments and painful market Disappointing demand may be part of tion (in America, Argentina and Canada).
reforms on Ukraine’s side to create a com the answer. In recent months expectations Norway is pumping more, too. JPMorgan
petitive, open wholesale market. “It was for global economic growth have fallen. Chase, a bank, estimates that nonopec
quite brave of eu politicians to realise the The failure of several banks this spring output will rise by 2.2m b/d in 2023.
integration so quickly,” says Maxim Tim raised fears of recession in America. Infla In theory, this should be balanced by
chenko, boss of dtek, one of Ukraine’s big tion is hitting consumers in Europe. In production cuts announced in April by
gest energy firms. The bravery has paid off. both places, the full impact of interestrate core opec members (of 1.2m b/d) and Rus
Ukraine and the eu are able to trade elec rises is still to be felt. Meanwhile, in China, sia (of 500,000 b/d), to which Saudi Arabia
tricity, and investors can begin to tap the postcovid rebound is proving weaker added another 1m b/d this month. Yet out
Ukraine’s vast potential for green energy. than expected. Anaemic growth, in turn, is put in these countries has not fallen by as
The question now is whether such priv dampening demand for fuel. much as promised—and other opec coun
ate money will actually arrive. Under war Yet look closer and the demand story is tries are increasing exports. Venezuela’s
conditions, investors usually need some partial at best. Despite its disappointing re are up, thanks to investment by Chevron,
kind of guarantee from a public body to an American giant. Iran’s are at their high
take the leap. One idea under consider est since 2018, when America imposed
ation in London was for donors not only to On troubled waters fresh sanctions. Indeed, a fifth of the
provide war insurance or guarantees, but Oil and gas prices world’s oil now comes from countries un
to help prop up a reinsurance market. der Western embargoes, selling at a dis
If such guarantees can be arranged, the Brent crude Natural gas* count and thus helping dampen prices.
final step will be to take advantage of op $ per barrel € per MWh For gas, the supply situation is trickier:
portunities, which ought to be plentiful 125 300 the main Russian pipeline delivering to
given the amount of aid pouring into Uk 250 Europe remains shut. But Freeport lng, a
100
raine and the country’s economic poten facility which handles a fifth of America’s
200
tial. Some observers even think private in 75 exports of liquefied natural gas, and was
vestment could surpass the $411bn esti 150 harmed by an explosion last year, is back
50
mated to be required for Ukraine’s long 100 online. Russia’s other exports to continen
term reconstruction. Yet that is only if 25 50 tal Europe continue. Norwegian flows will
everything goes to plan. Ukrainian reform 0 0 fully resume in midJuly. Most important,
ers will need to take inspiration from their 2021 22 23 2021 22 23
Europe’s existing stocks are vast. The bloc’s
countrymen’s bravery on the battlefield, as Source: Refinitiv Datastream *Dutch TTF front-month futures
storage facilities are 73% full, compared
will foreign investors. n with 53% a year ago, and on track to reach
012
their 90% target before December. Rich has slumped. Higher rates also raise the proaches, competition for lng cargoes be
Asian countries, such as Japan and South opportunity cost of holding crude stocks, tween Asia and Europe will intensify.
Korea, also have plenty of gas. so physical traders are offloading their Freight rates for the winter are already ris
When inflation was soaring and inter stock. The volume in floating storage fell ing in anticipation.
est rates remained modest, commodities, from 80m barrels in January to 65m barrels Still, last year’s nightmare is unlikely to
notably crude oil, were an attractive hedge in April, its lowest since early 2020. be repeated. Many analysts expect Brent
against rising prices, pushing up prices as Prices could well rise later in the year. crude to stay close to $80 a barrel and not
investors flooded in. Now that speculators The International Energy Agency, an offi to reach triple digits. Gas futures markets
expect inflation to drop, the appeal has cial forecaster, projects that global oil de in Asia and Europe point to a 30% rise from
dimmed—just as higher rates make safer mand will reach a record 102.3m b/d over today’s levels by the autumn, rather than
assets like cash and bonds more alluring. 2023. Oil supply, too, will hit a record, but anything more extreme. Over the past 12
As a result, speculative net positioning the forecaster reckons the market will tip months commodity markets have adapted.
(the balance between long and short bets into deficit in the second half of 2023—a It now takes more than a hint of bad news
placed by punters on oil futures markets) view shared by many banks. As winter ap to send prices rocketing. n
Buttonwood Quokkas v porcupines
Animal spirits in financial markets are hopelessly divided
T he quokka, an Australian marsupial
about the size of a domestic cat, has
full cheeks and a curved mouth that
Recent ructions in American banking
were hardly on the radarscreens of in
vestors until days before Silicon Valley
economic fallout, the development and
deployment of vaccines, and the pace of
economic reopening. Then inflation
convey the impression—often to delight Bank and Signature Bank went bust. The picked up and the Fed’s actions became
ed tourists—that the critter is smiling. It failure of another lender, First Republic, the overwhelming focus.
has been dubbed the happiest animal on came at the beginning of May. Today’s It might be tempting to observe the
Earth. Yet these days it has competition optimism makes it hard to remember that difference and judge that either the bond
from another species: the American those troubles were so recent. or stockmarket must be wrong. But that
stock investor. The s&p 500 has already Yet there is another species that looks would not be quite right. If artificial
risen by 14% this year. An increase of rather less placid. If stock investors are the intelligence emerges as a transformative
another 10% would take the index back to quokkas of the financial kingdom, bond force for the bottom line of major tech
its alltime high, set in January last year. investors are the porcupines: wary and nology companies, but not for econ
Excitement about artificial intelligence naturally defensive. The decline of the vix omywide growth, it would be a tremen
has lit a fire under companies seen as stands in stark contrast to its equivalent in dous boon for investors in shares and
potential beneficiaries. the Treasury market. Although the move mean little for government bonds.
Although climbing stock prices repre index, which tracks the price of insuring The problem is that such an outcome
sent an impressive turnaround, they are against bondmarket volatility, has de is far from assured—and investors are
not the most astonishing market shift. clined from a 13year high in March, it is beginning to price stocks based on earn
That award goes to the collapse in volatil still twice as high as it was precovid. Bond ings that are unlikely to materialise any
ity. In the past 12 months the vix, an investors remain far from convinced that time soon. The pricetoearnings ratio of
index that measures expected volatility the good times have returned. the s&p 500, based on expected earnings
in stock prices, using the cost of insuring The divergence in sentiment between over the next 12 months, has climbed
against extreme moves, has declined by the quokkas and porcupines is very differ from below 16 late last year to 19 now.
more than half, falling from around 30 to ent from the early stages of the pandemic, This is still below the highs set during
13. The last time it was so depressed was when stocks were extremely volatile and the pandemic, when earnings expecta
in early 2020, before the disruption of government bonds far less so. Back then, tions were smothered by lockdowns and
covid19, when concerns about stagna investors were preoccupied with covid’s restrictions, but is higher than at any
tion were more common than worries other point in the past two decades.
about inflation. Considering that the vix What the divergence in animal spirits
is sometimes referred to as the “fear does say is that investors in the stock
gauge”, its low level suggests a quokka market—mistakenly or not—have left
like placidity in the stockmarket. behind concerns that preoccupied them
This outlook is all the more astonish just a couple of months ago. They have
ing given the surfeit of things about traded their manifold worries for an
which an investor could worry. There is, optimistic narrative about artificial
for instance, considerable uncertainty intelligence. The rosy outlook suggested
about the Federal Reserve’s next move, by the lack of volatility is ultimately a
which would be a good reason for in judgment not just that the new tech
vestors to want a little more protection. nology will become a revolutionary
When the s&p 500 touched an earlier moneymaker for America’s listed compa
peak in 2021—a period of higher volatil nies, but that the Fed’s decisions will not
ity—the federal funds rate sat at zero (it is shake the financial system again and that
now 5%) and tenyear Treasury yields at the economy will withstand the impact
1.5% (now 3.7%). Moreover, high rates of interestrate rises. As things stand, it
may prompt something else to break. looks like a bold bet.
012
62 Finance & economics The Economist June 24th 2023
Asian farming the region of a third to half the rates that

are typically found in the informal market.
Making hay And where hdfc goes, other privatesector
banks follow. This lending boom is helping
sharply reduce costs for farmers, and
means they are less likely to fall foul of oc
casionally violent loan sharks.
Supply chains are also increasingly in
MAUJGARH, PUNJAB
novative. In 2020, during a covid19 lock
India’s evolution from agricultural basket case to breadbasket
down, Anushka Neyol moved from Delhi,
I ndian agriculture has a poor reputa

tion, which is not unfair. About half the
country’s workforce toils on the land. Their
They’ve had their Weetabix
India, cereal production, 1966=100
where she worked on startups including a
baby spa, to her family farm, which sits
near the Pakistani border. She began to ex
labour unfolds in the brutal heat and tends 1,000
periment with types of wheat, as well as
to be done by hand or in unsheltered, rudi distribution through the internet, selling
Wheat
mentary vehicles. Seasonal financing of 800 directly to bakeries and restaurants in big
ten comes through informal channels, cities, bypassing a sclerotic government
with lending at annual rates approaching 600 auction apparatus known as the mandi
30%. Paralysing debts are not uncommon. system. Clients include Subko, a coffee
Production efficiency is low; yields for Rice 400 chain in Mumbai that boasts of uniquely
corn, rice, wheat and other crops are a frac sourced coffee, chocolate and wheat.
200
tion of those in America, China and Another approach can be seen in Nash
Europe. In Punjab, the country’s agricul Other 0 ik, a city 170km or so inland from Mumbai.
tural heartland, roadside signs forgo typi 1966 80 90 2000 10 22
In 2004 Vilas Shinde, a local resident, be
cal advertisements for cars, films and Years beginning April 1st
gan exporting grapes from a small farm.
phones, and instead hawk foreignlan Source: Centre for Monitoring Indian Economy
Six years later he founded a cooperative,
guage training, overseas education and ex Sahyadri Farms. Cooperatives have a long
pedited visas. What local farmers want is and decidedly mixed record in India. They
not a new gadget but a way out. However, Indian agriculture has begun have been tried in a number of different
Yet in some senses, rather than stagnat a subtle evolution—in terms of policies, forms, but usually dissolve in disagree
ing, Indian agriculture is flourishing. technology and finance—that is helping ment within a few years. Sahyadri’s suc
Working conditions may be grim, but re bypass the many official constraints. This cess suggests at least that another outcome
cord harvest follows record harvest—and is apparent in the economic data. A little is possible. The cooperative now compris
famine is a thing of the past. Farming ex more than a decade ago, agriculture and es around 21,000 farms, which mostly pro
ports in the fiscal year ending in March manufacturing produced similar amounts duce fruits and vegetables excluded from
were up by 9% on the previous 12 months, of gross value added, a measure that sub the official pricing and distribution sys
hitting $26bn and representing 7% of In tracts purchase costs from revenues to cap tem. It has the scale to justify the inspec
dia’s outbound trade. During the global ture contributions to economic activity. tions and shipping required for interna
food scare that followed Russia’s invasion The most recent numbers show that agri tional markets. Customers include Hindu
of Ukraine last year, India became a pivotal culture contributes a quarter more. stan Unilever for tomatoes, Walmart for
exporter of rice and wheat (it is the world’s hdfc Bank, India’s most important frozen fruits and a network of European
second biggest producer of both), as well as private financial institution, has increased grocers for grapes, reflecting a national
other grains. In one of many such exam agricultural lending from $1.2bn in 2015 to trend towards such crops, which are more
ples, it recently agreed to send 20m tonnes $7.5bn last year, charging somewhere in amenable to India’s hot weather and cheap
of wheat to the Taliban in Afghanistan, labour. Surrounding Sahyadri is an embry
adding to 40m tonnes last year. onic Indian wine industry, which includes
India would be more important still to a winery named Sula Vineyards.
global agriculture were it not for the per Meanwhile, technology and market
iodic export restraints and tax surcharges forces are seeping into the broader produc
that the government imposes. Such re tion processes. McKinsey, a consultancy,
strictions are not the only official obsta reckons that there are at least 1,000 Indian
cles. Subsidies for fertilisers and pesticides “agtech” companies, which have raised
have depleted soil fertility. Some countries some $1.6bn. Through cheap smartphone
occasionally ban imports from India out of apps, satellite data can now provide guid
concern about chemical residue. Mini ance on soil treatment, sowing and harvest
mum price supports have led to an empha dates, as well as when and how to employ
sis on thirsty crops, such as rice, in regions fertilisers and pesticides. These changes
where water is scarce, depleting aquifers. attract plenty of attention and excite inves
Restrictions on sales mean farms are often tors, blurring practical limitations. Visit a
divided among children into smaller, less farmer whose inexpensive mobile phone
efficient plots. The average holding has has a cracked screen, limited memory and
shrunk from 5 acres in the late 1970s to 2.5 spotty connections, and it is evident that
today. To maximise output on such tiny transformation will have to unfold gently.
plots, wheat farmers throughout northern By the time it comes, some of the likely
India burn the postharvest stubble in or adopters will have read the writing on the
der to shrink the time between reaping and billboards next to Punjabi roads and gone
sowing, producing a thick, toxic cloud over elsewhere. But change—halting, hidden,
much of the land. In the green partial—is taking root. n
012
Free exchange Lockheed’s law
The rule that will make it cheaper for the West to build up its armed forces
be more about buying additional and superior equipment rather
than going on a hiring spree.
Although Russia and Ukraine have deployed enormous con
scripted armies, Western countries that are rearming remain
mostly committed to the idea that quality beats quantity. Better,
the logic goes, to have a smaller army equipped with stateofthe
art artillery, tanks, planes and equipment than a bigger one with
rusty kit. To the extent it seeks to compete in manpower with its
adversaries, the West tries to do so through big alliances such as
nato (ie, by spreading labour costs among countries, rather than
turning a greater proportion of workers into soldiers).
There is also plenty of scope for the automation of defence:
machine learning is already replacing human satelliteimagery
analysts, for instance. Those companies, like Lockheed, which
make military gear have no productivity problem—quite the op
posite. America’s statisticians produce price indices for kit, cover
ing everything from missiles to ships. The calculations behind
these indices are fiendishly complicated. They can answer the sort
of question that a tenyearold boy might ask. How much does it
cost to blow up an enemy’s position? How much does it cost to tra
vel at 1,000 miles an hour in a military jet? The data produced
show that armedforces capabilities have been getting relatively
A round the world a boom in defence spending is under way.

Roused from their complacency by Russia’s invasion of Uk
raine and China’s designs on Taiwan, the 24 of 31 nato members
cheaper: qualityadjusted missile prices have fallen by about 30%
since the 1970s. In cash terms, America spends about the same on
military aircraft as it did in the mid1980s. Even though the pur
that do not meet the club’s 2%ofgdp defencebudget target have chasing power of the dollar in the wider economy has fallen over
promised to make good. China’s own military spending grew by that period, it will buy about the same amount of airpower.
4.2% in real terms last year. Globally, new defence commitments The result is that shrinking budgets can still buy awesome ar
and forecast spending add up to over $200bn, a figure that could mies. Economic growth makes the effect even starker. As soldiers
rise as high as $700bn under plausible assumptions. posted in the South China Sea are well aware, China has vastly
This represents an abrupt reversal of a decadeslong decline. more military might than it did three decades ago. Yet in 2021 it
During the second world war the Allies devoted half of their gdp to spent 1.7% of its gdp on defence, down from 2.5% in 1990.
fighting. In the 1960s, at the height of the cold war, governments
typically spent 6% of gdp on defence. But after the Soviet Union Under the gun
collapsed, the world reaped a “peace dividend” from shrinking de Lockheed’s law is not without limitations. Periods of sudden de
fence spending. Last year global defence spending was $2.2trn, or fence spending tend to cause shortages, which send prices soar
just above 2% of gdp—close to an alltime low. ing. Having armed Ukraine, nato now needs to replenish its
As spending starts to rise, there is a puzzle. Why is the coming stocks of weapons, but defence supplylines are stretched. More
bill not bigger still? Even if politicians honour recent pledges, the profoundly, health and education spending make peoples’ lives
world will spend less on defence, relative to gdp, than in 1990. better. Defence spending is usually about forestalling threats and
Part of the answer lies in the fact that defence spending escapes repelling adversaries. To the extent that military outgoings must
a problem plaguing many governments: that of cost disease. This rise simply because the world has become more dangerous, they
issue was first outlined by William Baumol, an economist, in the are an unwelcome extra cost. The peace dividend was no myth.
1960s. The malady applies in labourintensive industries, such as Ultimately what matters in war is not the absolute level of a
health care and education, in which productivity grows only slow country’s defence capabilities, but its strength relative to that of
ly because automation is difficult. As innovation boosts output enemies. If everyone is upgrading capabilities, then the result will
and wages in, say, manufacturing, it becomes necessary to pay be an arms race in which, for every innovation, there must be a
nurses and teachers more, to stop them quitting and heading for countervailing rise in spending. The technological change that
the nearest factory. As a result, industries suffering from cost dis has enabled Russia to launch Iranian drones stuffed with explo
ease must, over time, spend more in real terms in order merely to sives at civilians has raised the cost of defending Ukraine, for ex
stand still. Baumol presciently worried about healthcare spend ample. In a zerosum battle, only technologies that the West alone
ing swallowing up an everlarger share of gdp. has access to can really be thought of as helping to contain costs. A
Armed forces benefit from the reverse phenomenon. Call this hot war between great powers would still send defence spending
“Lockheed’s law”, after the giant American defence contractor. soaring to agonisingly high levels.
Cost disease bites in places where, in Baumol’s words, “the human Nevertheless, it will reassure Western politicians—many of
touch is crucial”. Yet in America only onethird of total defence whom are struggling to meet the needs of ageing populations, ac
spending goes on paying salaries. Indeed, every country that is celerate decarbonisation and deal with rising interest payments—
falling short of nato’s 2% target is closer to America’s spending on that not everything on which they must spend gets more expen
armedforces personnel, as a share of gdp, than it is to Uncle Sam’s sive through the sheer force of economic logic. Some military
other armedforces spending. This suggests that arming nato will muscle can be put on without endlessly rising costs. n
012
64
Science & technology The Economist June 24th 2023
Artificial intelligence same time. And even once the training is
complete, actually using the resulting
Time for a diet model can be expensive as well. The bigger
the model, the more it costs to run. Earlier
this year Morgan Stanley, a bank, guessed
that, were half of Google’s searches to be
handled by a current GPTstyle program, it
could cost the firm an additional $6bn a
year. As the models get bigger, that number
If AI is to keep getting better, it will have to do more with less
will probably rise.
W hen it comes to “large language

models” (LLMs) such as GPT—which
powers ChatGPT, a popular chatbot made
times as many as its predecessor. Sam Alt
man, the firm’s boss, put its development
costs at more than $100m. Similar trends
Many in the field therefore think the
“bigger is better” approach is running out
of road. If AI models are to carry on im
by OpenAI, an American research lab—the exist across the industry. Epoch AI, a re proving—never mind fulfilling the AIre
clue is in the name. Modern AI systems are search firm, estimated in 2022 that the lated dreams currently sweeping the tech
powered by vast artificial neural networks, computing power necessary to train a cut industry—their creators will need to work
bits of software modelled, very loosely, on tingedge model was doubling every six to out how to get more performance out of
biological brains. GPT3, an LLM released in ten months (see chart on next page). fewer resources. As Mr Altman put it in
2020, was a behemoth. It had 175bn “pa This gigantism is becoming a problem. April, reflecting on the history of giant
rameters”, as the simulated connections If Epoch AI’s tenmonthly doubling figure sized AI: “I think we’re at the end of an era.”
between those neurons are called. It was is right, then training costs could exceed a
trained by having thousands of GPUs (spe billion dollars by 2026—assuming, that is, Quantitative tightening
cialised chips that excel at AI work) crunch models do not run out of data first. An Instead, researchers are beginning to turn
through hundreds of billions of words of analysis published in October 2022 fore their attention to making their models
text over the course of several weeks. All cast that the stock of highquality text for more efficient, rather than simply bigger.
that is thought to have cost at least $4.6m. training may well be exhausted around the One approach is to make tradeoffs, cutting
But the most consistent result from the number of parameters but training
modern AI research is that, while big is models with more data. In 2022 research
good, bigger is better. Models have there ers at DeepMind, a division of Google,
fore been growing at a blistering pace. 65 Why study drugs don’t work trained Chinchilla, an LLM with 70bn pa
GPT4, released in March, is thought to rameters, on a corpus of 1.4trn words. The
66 The advantages of wooden buildings
have around 1trn parameters—nearly six model outperforms GPT3, which has 175bn
012
The Economist June 24th 2023 Science & technology 65
parameters trained on 300bn words. Feed actly how their programs will behave on firms are therefore designing their own,
ing a smaller LLM more data means it takes the chips that run them. The price of ab more specialised hardware. Google already
longer to train. But the result is a smaller stracting such details away is slow code. runs most of its AI projects on its inhouse
model that is faster and cheaper to use. Paying more attention to these implemen “TPU” chips. Meta, with its MTIAs, and Am
Another option is to make the maths tation details can bring big benefits. This is azon, with its Inferentia chips, are pursu
fuzzier. Tracking fewer decimal places for “a huge part of the game at the moment”, ing a similar path.
each number in the model—rounding says Thomas Wolf, chief science officer of That such big performance increases
them off, in other words—can cut hard Hugging Face, an opensource AI company. can be extracted from relatively simple
ware requirements drastically. In March changes like rounding numbers or switch
researchers at the Institute of Science and Learn to code ing programming languages might seem
Technology in Austria showed that round In 2022, for instance, researchers at Stan surprising. But it reflects the breakneck
ing could squash the amount of memory ford University published a modified ver speed with which LLMs have been devel
consumed by a model similar to GPT3, al sion of the “attention algorithm”, which al oped. For many years they were research
lowing the model to run on one highend lows LLMs to learn connections between projects, and simply getting them to work
GPU instead of five, and with only “negligi words and ideas. The idea was to modify well was more important than making
ble accuracy degradation”. the code to take account of what is happen them elegant. Only recently have they
Some users finetune generalpurpose ing on the chip that is running it, and espe graduated to commercial, massmarket
LLMs to focus on a specific task such as cially to keep track of when a given piece of products. Most experts think there re
generating legal documents or detecting information needs to be looked up or mains plenty of room for improvement. As
fake news. That is not as cumbersome as stored. Their algorithm was able to speed Chris Manning, a computer scientist at
training an LLM in the first place, but can up the training of GPT2, an older large lan Stanford University, put it: “There’s abso
still be costly and slow. Finetuning LLaMA, guage model, threefold. It also gave it the lutely no reason to believe…that this is the
an opensource model with 65bn parame ability to respond to longer queries. ultimate neural architecture, and we will
ters that was built by Meta, Facebook’s cor Sleeker code can also come from better never find anything better.” n
porate parent, takes multiple GPUs any tools. Earlier this year, Meta released an
where from several hours to a few days. updated version of PyTorch, an aipro
Researchers at the University of Wash gramming framework. By allowing coders Nootropics
ington have invented a more efficient to think more about how computations are
method that allowed them to create a new arranged on the actual chip, it can double a Hard-working,
model, Guanaco, from LLaMA on a single model’s training speed by adding just one
GPU in a day without sacrificing much, if line of code. Modular, a startup founded by but incompetent
any, performance. Part of the trick was to former engineers at Apple and Google, last
use a similar rounding technique to the month released a new AIfocused pro
Austrians. But they also used a technique gramming language called Mojo, which is
Study drugs can make people worse
called “lowrank adaptation”, which in based on Python. It too gives coders con
at problem-solving, not better
volves freezing a model’s existing parame trol over all sorts of fine details that were
ters, then adding a new, smaller set of pa
rameters in between. The finetuning is
done by altering only those new variables.
previously hidden. In some cases, code
written in Mojo can run thousands of
times faster than the same code in Python.
F OR MORE than six months Americans
have been struggling to get their hands
on medications like dextroamphetamine
This simplifies things enough that even A final option is to improve the chips on (better known as Adderall) and methylphe
relatively feeble computers such as smart which that code runs. GPUs are only acci nidate (Ritalin). Officially, these stimulant
phones might be up to the task. Allowing dentally good at running AI software—they drugs are used to treat attentiondeficit hy
LLMs to live on a user’s device, rather than were originally designed to process the peractivity disorder (ADHD).
in the giant data centres they currently in fancy graphics in modern video games. In Unofficially, the drugs are also popular
habit, could allow for both greater perso particular, says a hardware researcher at with devotees of “nootropics”—chemicals
nalisation and more privacy. Meta, GPUs are imperfectly designed for that supposedly boost brainpower. Stu
A team at Google, meanwhile, has come “inference” work (ie, actually running a dents and workers in industries from tech
up with a different option for those who model once it has been trained). Some to finance take the medications in the hope
can get by with smaller models. This ap they will improve their concentration and
proach focuses on extracting the specific ability to get things done. But a new paper
knowledge required from a big, general Galaxy brains suggests that this may be illadvised. The
purpose model into a smaller, specialised Computing power used in training AI systems drugs seem to make people slightly worse
one. The big model acts as a teacher, and Selected systems, floating-point operations, log scale at solving problems, not better.
the smaller as a student. The researchers GPT-4
In the paper, published on June 14th in
ask the teacher to answer questions and Industry 1025 Science Advances, a group of researchers led
GPT-3 175B (davinci) PaLM 2
show how it comes to its conclusions. Both Academia by Peter Bossaerts, an economist at the
GPT-NeoX-20B 1020
the answers and the teacher’s reasoning Research University of Cambridge, tested how Ad
consortium
are used to train the student model. The 1015
derall, Ritalin and another stimulant drug
team was able to train a student model called modafinil (Provigil) affected 40
with just 770m parameters, which outper 1010 healthy people’s ability to perform optimi
formed its 540bnparameter teacher on a sation problems. They used the “knapsack
specialised reasoning task. 105 task”, in which participants had to work
Rather than focus on what the models out which items to put into a bag. The idea
are doing, another approach is to change Theseus 1 was to maximise the value of the items
how they are made. A great deal of AI pro 1950 60 70 80 90 2000 10 23 without exceeding the carrying weight of
gramming is done in a language called Py Year the sack. The researchers used several
thon. It is designed to be easy to use, free Sources: Sevilla et al., 2023; Our World in Data
trials of varying difficulty, each with differ
ing coders from the need to think about ex ent weight limits and lists of items.
012
66 Science & technology The Economist June 24th 2023
The participants visited the lab on four Sustainable construction sphere while growing. As with other mod

separate days. On each day they were given ern construction projects using timber,
either a placebo pill or one of the drugs un Growing Wood City will still use some concrete and
der study. The study was doubleblind, steel in places like the foundations, but the
meaning neither the participants taking timber town overall amounts will be greatly reduced. As
the pills nor the experimenters handing wooden buildings are much lighter, their
them out knew which had been adminis foundations can be smaller.
tered on which day. They found that partic The Swedish project will, as existing
Sweden plans to build a city made
ipants achieved slightly worse endresults wooden skyscrapers do, employ large pre
from cheap, green, fireproof wood
on the task after taking a drug. The drugs fabricated sections made from what is
did not impair people’s ability to find an
optimal solution. Participants managed
this in around half of the trials, whether
T here is a global race to build the tallest
wooden skyscraper. The record was
held by Mjostarnet, an 85metre tower on
called “engineered timber”. Instead of or
dinary lumber, chipboard or plywood, en
gineered timber is a composite in which
they took the drugs or the placebo pills. But the shore of Lake Mjosa in Norway, which layers of wood are laminated together in
they did cause a small drop in the value of hosts flats, a hotel and a swimming pool— specific ways. The wood grains in each lay
participants’ knapsacks across all trials, by until Ascent, an 87metre structure, was er are aligned to provide individual com
making the nonoptimal solutions worse. completed in Wisconsin in July 2022. And ponents of the building, such as floors,
Perhaps more striking was how drugs it will be put in the shade in turn by other walls, cross braces and beams, with ex
changed the way people attacked the task. buildings: a 90 metre tower is planned for tremely high levels of strength. And be
After taking Adderall or Ritalin (but not Ontario, and a 100 metre one for Switzer cause these parts can be manufactured in a
Provigil) the participants spent far longer land. (By way of comparison, St Paul’s ca factory, where tolerances are finer and
working on their knapsacks than they did thedral in London is 110 metres tall.) quality control is easier to maintain than
when they had taken the placebo pill. (Par This week, though, a Swedish firm an on a building site, the use of prefabricated
ticipants were given four minutes to com nounced it was going for a different sort of sections cuts down on the delivery of raw
plete each trial but could submit an answer record. It unveiled plans to build what materials and allows construction to pro
earlier if they thought they had found a could be the world’s biggest wooden city. ceed more quickly.
good solution). When given Ritalin in par Stockholm Wood City will be built in Sick
ticular, subjects were around 50% slower la, an area in the south of the Swedish cap The burning question
at completing trials. That was roughly ital. Construction on the 250,000 square Another advantage is that construction
equivalent to the delay expected from go metre site will begin in 2025. When com will not be as noisy as it would be if the
ing from the easiest to the most difficult plete, ten years later, it will contain 2,000 town were built from concrete and bricks,
trial in the placebo session. homes and 7,000 offices, along with res adds Ms Anäs. This makes wooden build
This extra time was spent moving items taurants and shops. The 12bnkrona ings particularly suitable for urban rede
in and out of the knapsack, somewhat er ($1.4bn) project is led by Atrium Ljungberg, velopment in general, since putting them
ratically. The authors assessed the produc a Swedish urban development company. up is less likely to annoy the neighbours. It
tivity of each move by measuring how By using wood the company hopes to should also be profitable. Ms Anäs is look
much it increased the value of a sack, and reduce the project’s carbon footprint by up ing for a return on investment of 20% or
found that participants were about 9% less to 40%, compared with building in con better. “Sweden is progressive when it
productive when they had taken one of the crete and steel, says Annica Anäs, the com comes to wood construction,” she says.
study drugs compared with a placebo pill. pany’s boss. Wood is a sustainable material “But I don’t see any reason why it shouldn’t
“It was like they were trying to solve a jig that can be produced from renewable for work elsewhere.”
saw puzzle by randomly throwing pieces in ests, which Sweden has in plenty. When The biggest concern most people have
the air,” says Dr Bossaerts. used for building, it locks up the carbon about wooden buildings is the risk of fire.
The authors argue that although the that the trees absorbed from the atmo The buildings in Wood City will be fitted
drugs made people more motivated and with several fireprotection systems, such
helped them put more effort into the task, as sprinklers and flameresistant layers, as
this was more than cancelled out by the would also be found on their concrete or
fact that the drugs decreased the quality of brick counterparts.
all that effort. In other words, although At the same time, researchers are com
people tried harder, they became far less ing to believe that engineered timber is, by
competent. Just how much the drugs hin its nature, extremely fire resistant. To help
dered performance seemed to depend on win approval for the construction of the
how good a participant was without them. Ascent building, the us Forest Service car
Star performers during the placebo session ried out tests on the laminated timber col
fell to the bottom of the pack when they umns it would use. After finding them dif
had taken the drugs. ficult to burn, the columns were awarded
Popping stimulants is commonplace in an exemplary threehour fireresistance
industries like software and finance. One rating because they maintained their
survey of 6,500 American college students structural integrity.
reported that 14% had used the drugs for Without a sustained heat source the
nonmedical reasons. This latest study charring of the outer layer of a big piece of
adds to a growing pile of evidence suggest timber protects the structure inside—try
ing that such drugs do little to improve lighting a camp fire when you only have
cognitive performance in people who do logs. Many of the large urban fires of old,
not need them. For tech bosses looking for like the Great Fire of London in 1666, were
efficient employees, and workers hoping mostly fuelled by small sections of timber
to clock off at a reasonable hour, the stimu acting as kindling. So when it comes to
lant shortage may be a good thing. n When houses grow on trees building in wood, it is best to think big. n
012
Culture The Economist June 24th 2023 67
#MeToo in Taiwan out by his friends for missing protests

because he was busy making partypropa
The breaking wave ganda videos. His wellworn riposte is that
power, not protests, brings about change.
The compromises that have most
stirred Taiwanese viewers are those de
manded of the two main characters. Played
subtly by Hsieh Yingxuan (pictured left),
TAIPE I
Weng Wenfang is the lesbian daughter of
A television drama about Taiwanese politics has sparked a social reckoning
an influential elder in the liberal party. She
T he clock is ticking down to presiden
tial elections in Taiwan. Functionaries
in the two main parties frantically smear
to stand up for themselves.
The fictional election is a vehicle to ex
amine thorny questions of politics and
loses a local election after a public spat
with one of her father’s conservative
friends, who insults her girlfriend. Weng’s
the rival candidate and scramble to shape morality. How much should people be will mother urges her to apologise. In politics,
the image of their own, hiring influencers, ing to give up for the sake of a wider goal? she says, you think of the “big picture” and
coining catchy slogans and framing touch Where is the line between pragmatic com compromise. Weng refuses. The “greater
ing moments with voters on the street. But promise and hypocrisy? All the characters good”, she realises, is often just an excuse
there is one key difference between the wrestle with clashes between their politi to cover up wrongdoing.
universe of “Wave Makers”, a hit political cal mission and personal ideals. The liberal When she discovers that a young mem
drama that came out on Netflix in April, presidential nominee is against the death ber of the campaign team, Chang Yaching
and Taiwanese reality: in the series, the penalty, but dare not say so in public. A (Gingle Wang, pictured right), is being
China question, usually the fulcrum of the young campaigner is castigated as a sell asked to “let things go” for the sake of the
island’s politics, does not exist. party’s image, she insists that they fight
This conceit means that the focus is on back. Chang has fled from an affair with
domestic issues rather than grand matters → Also in this section her former boss, a slick politician now run
of national identity or the threat of inva ning for vicepresident with the rightwing
68 San Francisco’s art island
sion. Drawing on deep research and inter party. He has a USB stick full of naked pho
views, the show zooms in on the sacrifices 69 Lorrie Moore’s new novel tos, which he uses to harass and control
women are asked to make for supposedly Chang and others. After Chang is molested
70 North Korea’s next dictator?
important causes. It tells a hopeful story of by another man in her new job, Weng urges
one character standing up for another— 70 The world’s waste problem her to report it. But holding the assailant to
and, in a feedback loop between life and account is tough: their party is nominally
71 Johnson: The ghost in the AI machine
art, it has inspired real women in Taiwan progressive, but its internal structures are
012
68 Culture The Economist June 24th 2023
stiff and patriarchal. Its female candidate to serve a noble cause, whether that was was the mostviewed show on Netflix Tai

for president asks them to hush things up. artistic, political or the security of a place wan within two days of its release; it stayed
Much of the plot was drawn from life. that sees itself as the idealised foil of a big in the top ten for five weeks. And it has
The two screenwriters of “Wave Makers”, bully: “They always make you think about sparked a social reckoning. Tsai Ingwen,
Chien Liying and Peng Weichao, a former the greater interest and swallow it.” Today Taiwan’s president, has apologised for fail
campaigner who goes by the pen name Taiwan is entering a reallife election sea ing to prevent sexual harassment in her
Cynical Chick, spent two years interview son and faces a military threat from China. party and across society. The cabinet has
ing political operatives. At first, says Ms But high stakes don’t justify silencing vic promised to review the legal framework for
Chien, they simply thought that Taiwan’s tims, Ms Chien insists—and Taiwanese such cases and to propose amendments in
election culture would be colourful mate women are no longer willing to be treated parliament this summer. The writers are
rial for a television series. Sexual harass like hostesses. “We are educated intellec not surprised by the torrent of allegations,
ment did not feature in their plans. But as tuals, not the armrests for your sofa. Please but didn’t expect their show to unleash it.
they developed the characters, they real remove your hand from my thigh.” “Everyone must have been holding it in,”
ised that almost every woman they spoke Witty and propulsive, “Wave Makers” says Ms Chien, “until they couldn’t.” n
with, in politics and other professions, had
experienced it. Hardly any had reported it.
That mirrors wider evidence about gen Public art in California
der relations in Taiwan. On the face of it,
they are more equal than elsewhere in East Dreaming spire
Asia. A higher proportion of women sit in
Taiwan’s parliament than in others in the
region, for example. But ossified norms
and taboos have hindered reporting of ha
rassment, says Chi Huijung, an activist
S AN FRANCISCO
who serves in the government’s supervis
A sculpture on an island in San Francisco Bay points towards regeneration
ory body: “Girls are taught to be very polite.
You can’t be badtempered. You can’t com
plain.” As a result, Taiwanese women who
are abused convince themselves “that it’s
V iewed up close atop an island in San
Francisco Bay, the city’s newest public
artwork rises like a tapering needle of pol
is a meditation on eternity and human
imagination in a place that has seen its
share of innovation and neardeath experi
no big deal”. A survey in 2021 found that ished steel. From a different angle, it blazes ences. Perspective is everything, it sug
82% of women sexually harassed in the like a beacon at sunrise and sunset. From gests. As this newspaper and others have
workplace did not make formal com the vantage of a departing visitor turning reported, San Francisco may have entered
plaints. Nearly half of those who kept quiet to look back, Hiroshi Sugimoto’s “Point of an economic “doom loop”. The spire is a
had “brushed it off as a joke”. Infinity” seems to be matte blue and nearly sliver of hope for a rebirth.
disappears, leaving a faint outline like a The rocky outcrop called Yerba Buena
Taken at the flood doorway cut into the sky. Island sprouted the adjacent manmade
“Wave Makers” has helped shatter the Continuously shifting but always sub expanse named Treasure Island in the
omertà. On May 31st a woman who once lime, the monumental sculpture is a fitting 1930s as a Depressionera project to host
worked for Taiwan’s ruling Democratic and first commission for San Francisco’s ambi America’s world’s fair. The Golden Gate In
Progressive Party declared: “I’m going to be tious scheme to turn two Bay islands into a ternational Exhibition opened on it in 1939,
my own Weng Wenfang.” In a Facebook new offshore neighbourhood and art desti the pavilions stocked with art, including a
post she recounted being sexually nation. Rising 69 feet (21 metres), the piece huge mural begun on the spot by Diego Ri
harassed at work and how she was encour
aged not to report it.
A cascade of #MeToo testimonies
followed. Within a fortnight scores of
allegations of sexual harassment were
made against members of all the island’s
main political parties. The wave of
accusations took in prominent academics,
doctors, musicians, writers, artists, dip
lomats and exiled Chinese dissidents.
On June 2nd Ms Chien disclosed her
own #MeToo experience. As a student, she
said, she idolised a Chinese poet. She was
flattered when, on a visit to Taiwan, he
asked to meet her. Then, she alleges, he
sexually assaulted her (he denies it). Ms
Chien said nothing about the episode for
years, even while writing “Wave Makers”.
The man was famous; she felt she was a no
body. But the surge of denunciations in the
show’s wake—and the overwhelming sup
port for accusers in Taiwanese society—
encouraged her to tell her story, too.
In the past, Ms Chien says, it was espe
cially hard for women to speak up if an
offence occurred in an organisation meant To infinity and beyond
012
The Economist June 24th 2023 Culture 69
vera. The aim was to showcase America’s

modernity and urban progress. Decades
later the city’s goal is the same: to reinvent
the urban experience for the 21st century,
as a walkable community of 8,000 homes
surrounded by water and parks and world
class works of art.
Taking inspiration from two famous
arty islands, Governors Island in New York
and Naoshima in Japan, the city’s arts com
mission seized on the rare opportunity to
build “a magnet for cultural tourism” from
scratch on the site, which was occupied by
the Us Navy after the fair. The private de
velopment has a budget of some $5bn to
build homes, shops, hotels and a ferry
landing. The investors are subsidising the
dwellings designated as “affordable”
(around a quarter of the total), along with
nearly 300 acres of parks and a budget of
$50m for public art. Kooky American fiction
Mr Sugimoto’s sculpture was chosen
unanimously by the commission from 495
A road trip in limbo
contenders, says Jill Manton, director of
the city’s Public Art Trust. The Japanese art
ist, who lives and works in Tokyo and New
York, was initially approached to make a I Am Homeless If This Is Not My Home. Lily, Finn’s exgirlfriend, is a suicidal
piece for San Francisco’s airport, but the By Lorrie Moore. Knopf; 208 pages; $27. depressive who works as a “laugh thera
hilltop location seized his imagination. Faber; £16.99 pist”, dressing up as a clown to shake
The spectacular spot with panoramic people, mostly children, out of their
views called for a special installation, one
representing what Mr Sugimoto calls “hu
manity’s yearning for the infinite”. His
F inn is a schoolteacher who traffics in
conspiracy theories. “The real story is
never the official one,” he insists. He
gloom. (She “even wore floppy shoes, the
laces of which she had once used to
strangle herself”.) While Finn is in New
sculpture is based on the mathematical believes that PowerPoint augurs the end York to spend time with his dying broth
formula for infinity, and is made up of two of civilisation, and he tests his own er—whose eyeballs “were turning the
converging curved lines, rendered in high sanity by replying to newspaper editori golden earwax brown of bruised fruit”—
grade mirrored steel, which get closer and als and waiting to see if his screeds are he is summoned home to Illinois to deal
closer but never meet. The piece tapers to a published: “In this manner he could tell, with a crisis concerning Lily, who may
vanishing point only 21 millimetres wide. roughly, how deranged he was that day.” have at last succeeded in doing away
It is meant to be “symbolic of human Finn is still hung up on his “richly bleak” with herself.
kind’s pursuit of knowledge and innova former girlfriend, so he is glad to find Does Finn actually spot Lily wander
tion”, Mr Sugimoto said at its unveiling himself on an unexpected road trip in ing around in her filthy shrouds and
earlier this month. It is also a meditation her company. The only hitch is that his clown shoes in the cemetery where she
on time, one of his enduring interests as a ex happens to be dead. had been buried, pulling stink bugs from
photographer and architect. Acting as a “Everyone at some point in their lives her sleeve and smelling vaguely of rot? “I
huge sundial, it will throw a shadow on a should have a long great love affair with a suppose I’m deathadjacent,” she ex
precise point at noon on the autumn and magnificent lunatic,” Finn declares in “I plains to him. Do they in fact take a long
spring equinoxes, registering the move Am Homeless If This Is Not My Home”, drive together to what will be her final
ment of the Earth. When it is formally Lorrie Moore’s weird and beautifully resting place, discussing their fraught
opened later this year, visitors will wend idiosyncratic new novel, her first since love and many trials? Stretches of the
their way up an elegant approach to a park 2009. (She is better known for her short book have a hallucinogenic quality,
designed by Walter Hood, an acclaimed stories, which have won numerous disorienting and unreal. Finn, whose
landscape architect. awards.) Running to only around 200 hold on reality was already tenuous, may
For V. Fei Tsen, president of the city de pages, this deceptively slim volume simply be undone by his grief.
velopment agency that is overseeing the packs a wallop. It’s not just that the book It is not entirely clear what relation
project, the piece “sets the tone for what ponders weighty themes, such as love, ship Finn’s story has with a series of
this island can be for art”. Not just interna death, suicide and the meaning of life. interspersed letters from the mistress of
tional stars but local artists and commun It’s also that Ms Moore writes in a way a 19thcentury boardinghouse, except
ity schemes will be represented. In its time that demands constant attention, imbu that these missives are written to a be
Naoshima, too, was a disused military base ing each of her sentences with an almost loved sister who also happens to be dead.
that was revived through culture, Ms Tsen antic ingenuity. Perhaps life is always haunted by past
points out. Neither a recent spate of law The American author’s talent—evi loves, past wounds, old memories barely
suits between the investors nor San Fran dent in abundance here—is for using remembered, and perhaps these are all
cisco’s wider woes have dismayed her. humour and beguilingly odd details to essential parts of it. As Finn observes:
“Economic cycles always come into play,” yield grand truths about what it means to “No longer caring about a thing was
she says phlegmatically. Like many in a be human. Her characters are decidedly key to both living and dying. So was
place built on the booms and busts of gold offkilter, but feel more real than twee. caring about a thing.”
rushes, her credo is: “I have faith.” n
012
70 Culture The Economist June 24th 2023
North Korea’s ruling family Department of sanitation
Granddaughter of Heaps of trouble

the revolution
The Sister. By SungYoon Lee. Macmillan; Wasteland. By Oliver FranklinWallis.

304 pages; £15. To be published in America Hachette Books; 400 pages; $30. Simon &
by PublicAffairs in September; $30 Schuster; £20
C ommunists are fond of vitriol. Karl

Marx called Jeremy Bentham, the fa
ther of utilitarianism, the “insipid, pedan
I n “Our Mutual Friend”, Charles Dick
ens’s last complete novel, stray paper
“hangs on every bush, flutters in every tree,
tic, leathertongued oracle of the ordinary is caught flying by the electric wires,
bourgeois intelligence of the 19th century”. haunts every enclosure”. Since those words
Vladimir Lenin said that Georgi Plekhanov, were published in the 1860s, the world’s
a Russian philosopher, had “set a new re Lady in waiting waste problem has changed in both scale
cord in the noble sport of substituting and composition. These days plastic in one
sophistry for dialectics”, a brutal putdown Still, marshalling what is known about form or another is strewn on verges, clogs
in the lexicon of Marxist jargon. Ms Kim—a woman of such mystery that rivers and swirls around oceans in vast
Now there is a new champion of un the North Korean state has never con gyres. Circulated by winds and tides, tiny
hinged execration. Whether reviling the firmed that she actually is Mr Kim’s sis nanoplastics have penetrated all manner
“stinky breath emanating from [the] bawl ter—is worthwhile. Mr Lee’s book is not of watery ecosystems, reaching both the
ing traps” of South Korean missile experts, just a profile of a central figure in what is Earth’s poles and its highest peaks, with
or telling their president, Yoon Sukyeol, to arguably the world’s most brutal dictator unknown consequences for the planet.
“shut his mouth, rather than talking non ship, but also of her clan. By showing how Worried by the pollution caused by
sense”, Kim Yo Jong has a barbed tongue the family operates, “The Sister” offers a throwaway culture, Oliver Franklin
befitting the sister of Kim Jong Un, dictator insights into the workings of the only Wallis—a British journalist who has writ
of nominally socialist North Korea. Yet as hereditary monarchy to style itself as com ten for The Economist—heads to places
SungYoon Lee argues in “The Sister”, be munist; a regime willing to let millions that best illustrate this profligacy. In
hind the snark is a woman of immense starve while it spends billions on weapons. “Wasteland” he visits an Indian landfill
power: an influence over her nukewield Above all, it shows how Ms Kim and her that is piled almost as high as the Qutub
ing brother and, possibly, his successor. brother learned the art of diplomacy from Minar, a wellknown minaret in Delhi;
Ms Kim came to the world’s attention in their father, Kim Jong Il. The book chroni Ghana’s largest secondhand clothes mar
2018 during the Winter Olympics in Pye cles the senior Kim’s use of kidnapping ket, through which 15m garments are
ongchang, South Korea, when she became and missile tests as overtures to negotia thought to pass every week; a former min
the first member of North Korea’s ruling tions with America and South Korea. His ing area in America that is blighted by
family to visit the South since the Korean children dutifully copied these tactics at dumped lead, zinc and cadmium; and a
war. Now she is almost as prominent a the summits that followed the Olympics. defunct nuclearpower plant in the north
symbol of North Korean despotism as the For now, the younger Mr Kim is fixated on west of England, which contrasts starkly
brother she often accompanies. As head of military development, but history sug with the natural beauty of the nearby Lake
the propaganda operation, her sardonic gests he will one day want to talk. Those District. He sees these places as evidence of
wit has animated North Korea’s invective across the table would do well to have stud human myopia about the Earth’s fragility
for a decade. Her willingness to say vile ied the family’s approach to bargaining and the finitude of its resources.
things to wind up America and South Ko and be adept at decoding its propaganda. n Rubbish, the author notes, is often
rea positions her, in Mr Lee’s words, as deposited “on the margins, and on the
“Even Worse Cop” to Mr Kim’s “Bad Cop”. marginalised”. He explains the concept of
The opacity of North Korea means that Sign up to Plot Twist “toxic colonialism”, whereby trash is
Mr Lee’s claims are often plausible rather shipped by wealthier countries to poorer
than proven. Advanced in an exuberant Plot Twist, our culture newsletter, offers ones, and shows its detrimental effects up
prose style, they sometimes outstrip the insights from our reporting and tips on close. But he also acknowledges that the
evidence. Forensic scrutiny of greetings books, TV shows and more. Subscribers waste trade can sometimes be beneficial to
and handwriting in guestbooks smacks of can sign up at economist.com/ communities on the receiving end: what
overinterpretation, though readers fond newsletters/plottwist one person deems useless, another sees as
of sartorial analysis may enjoy the detailed a potential source of income.
record of Ms Kim’s fashion choices. Throughout his tour of disfigured land
As for his speculation on whether she scapes and industrial incinerators, Mr
might succeed her brother: though a fun FranklinWallis decries the tactic of
parlour game for North Koreawatchers, “planned obsolescence”: ie, the marketing
such predictions should not be taken too of products that quickly need to be re
seriously. As the author recalls, Fujimoto placed. A notorious early20thcentury
Kenji—the Kim family’s sushi chef until he example was the “lightbulb cartel”, who
fled in 2001—may have been the only per conspired to slash the lifespan of their
son outside North Korea to be on the record filaments. These days items ranging from
as having foreseen Kim Jong Un’s ascent. “fast fashion” to wireless earbuds are
012
The Economist June 24th 2023 Culture 71
liable to be thrown away or forgotten in a writes stylishly about ugly things: cranes waste is “not the most appealing subject”

drawer before long. at a site for burning garbage “move slowly, for a book, as the author himself admits
The book comes alive in its descrip Damoclesian, their noise a deep rumble”; near the beginning of his.
tions of people and places. A papermill the flow of rubbish at a waste plant is “re Overall, however, he dispels that im
worker in southern England is “bald and lentless, the choreography balletic”. pression. “Wasteland” does not offer novel
aquiline, monkish, with the gentle stoop of “Wasteland” is heavy on facts, many of solutions to the problem of waste. Mr
an underwatered tulip”. The appearance them interesting and sobering. Twenty FranklinWallis wants you to buy less and
of a zerowaste zealot in the north of Eng thousand plastic bottles are sold around recycle more, along with a crackdown
land is “somewhere between affable cli the world every second. The world pro on “greenwashing” (whereby companies
mate activist and festival drugdealer”. The duced 2bn tonnes of solid waste in 2016, a make exaggerated claims about their envi
colours and buzz of a market day in Accra figure that will rise to 3.3bn tonnes by ronmental credentials). But he succeeds in
are sketched in short, lively sentences, as 2050. But the piles of numbers can occa outlining the size of the challenge. His
is the dusty decay of an abandoned town in sionally be a strain. At such moments, book should prompt serious discussion in
Oklahoma. Happily, Mr FranklinWallis readers may find themselves agreeing that boardrooms and parliaments. n
Johnson The ghost in the AI machine
Talking about artificial intelligence in human terms is natural—but wrong
M Y LOVE’S LIKE a red, red rose. It is the

east, and Juliet is the sun. Life is a
highway, I wanna ride it all night long.
duce output. At their most basic level,
they do nothing more than turn strings
like 0010010101001010 into
Metaphor is a powerful and wonderful 1011100100100001 based on a set of in
tool. Explaining one thing in terms of structions. Other parts of the software
another can be both illuminating and turn those 0s and 1s into words, giving a
pleasurable, if the metaphor is apt. frightening—but false—sense that there
But that “if” is important. Metaphors is a ghost in the machine.
can be particularly helpful in explaining Whether they can be said to “think” is
unfamiliar concepts: imagining the a matter of philosophy and cognitive
Einsteinian model of gravity (heavy science, since plenty of serious people
objects distort spacetime) as something see the brain as a kind of computer. But it
like a bowling ball on a trampoline, for is safer to call what LLMs do “pseudo
example. But metaphors can also be cognition”. Even if it is hard on the face
misleading: picturing the atom as a solar of it to distinguish the output from hu
system helps young students of chem man activity, they are fundamentally
istry, but the more advanced learn that different under the surface. Most impor
electrons move in clouds of probability, tantly, cognition is not intention. Com
not in neat orbits as planets do. “Hallucinations” might be thought of puters do not have desires.
What may be an even more mis as a forgiving euphemism. Your friendly It can be tough to write about ma
leading metaphor—for artificial intell local AI is just having a bit of a bad trip; chines without metaphors. People say a
igence (AI)—seems to be taking hold. AI leave him to sleep it off and he’ll be back to watch “tells” the time, or that a credit
systems can now perform staggeringly himself in no time. For the “lies” crowd, card reader which is working slowly is
impressive tasks, and their ability to though, the humanising metaphor is even “thinking” while they wait awkwardly at
reproduce what seems like the most more profound: the AI is not only think the checkout. Even when machines are
human function of all, namely language, ing, but has desires and intentions. A lie, said to “generate” output, that cold
has ever more observers writing about remember, is not any old false statement. seeming word comes from an ancient
them. When they do, they are tempted by It is one made with the goal of deceiving root meaning to give birth.
an obvious (but obviously wrong) meta others. ChatGPT has no such goals at all. But AI is too important for loose
phor, which portrays ai programmes as Humans’ tendency to anthropomor language. If entirely avoiding human
conscious and even intentional agents. phise things they don’t understand is like metaphors is all but impossible,
After all, the only other creatures which ancient, and may confer an evolutionary writers should offset them, early, with
can use language are other conscious advantage. If, on spying a rustling in the some suitably bloodless phrasing. “An
agents—that is, humans. bushes, you infer an agent (whether pred llm is designed to produce text that
Take the wellknown problem of ator or spirit), no harm is done if you are reflects patterns found in its vast train
factual mistakes in potted biographies, wrong. If you assume there is nothing in ing data,” or some such explanation, will
the likes of which ChatGPT and other the undergrowth and a leopard jumps out, help readers take any later imagery with
large language models (llms) churn out you are in trouble. The alltoohuman due scepticism. Humans have evolved to
in seconds. Incorrect birthplaces, non desire to smack or yell at a malfunctioning spot ghosts in machines. Writers should
existent career moves, books never device comes from this ingrained instinct avoid ushering them into that trap. Better
written: one journalist at The Economist to see intentionality everywhere. to lead them out of it.
was alarmed to learn that he had recently It is an instinct, however, that should
..............................................................
died. In the jargon of AI engineers, these be overridden when writing about AI.
“Writing With Style”, a new version of The
are “hallucinations”. In the parlance of These systems, including those that seem Economist‘s style guide by Lane Greene, our
critics, they are “lies”. to converse, merely take input and pro Johnson columnist, is out now.
012
72
Economic & financial indicators The Economist June 24th 2023
Economic data
Gross domestic product Consumer prices Unemployment Current-account Budget Interest rates Currency units
% change on year ago % change on year ago rate balance balance 10-yr gov't bonds change on per $ % change
latest quarter* 2023† latest 2023† % % of GDP, 2023† % of GDP, 2023† latest,% year ago, bp Jun 21st on year ago
United States 1.6 Q1 1.3 1.1 4.0 May 3.9 3.7 May -3.0 -5.4 3.7 41.0 -
China 4.5 Q1 9.1 6.1 0.2 May 1.2 5.2 May‡§ 2.5 -3.0 2.5 §§ -12.0 7.19 -6.8
Japan 1.9 Q1 2.7 1.3 3.5 Apr 2.6 2.6 Apr 3.2 -5.8 0.4 14.0 142 -4.2
Britain 0.2 Q1 0.5 0.4 8.7 May 6.5 3.8 Mar†† -3.0 -4.8 4.5 205 0.79 2.5
Canada 2.2 Q1 3.1 1.2 4.4 Apr 3.6 5.2 May -0.7 -1.4 3.4 -11.0 1.32 -2.3
Euro area 1.0 Q1 -0.4 0.8 6.1 May 5.7 6.5 Apr 1.5 -3.5 2.4 64.0 0.91 4.4
Austria 1.9 Q1 0.4‡ 1.0 9.0 May 7.6 5.1 Apr 1.1 -2.4 3.0 72.0 0.91 4.4
Belgium 1.4 Q1 1.9 0.7 5.2 May 4.8 5.6 Apr -2.1 -4.9 3.0 63.0 0.91 4.4
France 0.9 Q1 0.7 0.7 5.1 May 5.6 7.0 Apr -1.7 -5.0 3.0 82.0 0.91 4.4
Germany -0.5 Q1 -1.3 -0.2 6.1 May 6.0 2.9 Apr 4.4 -2.5 2.4 64.0 0.91 4.4
Greece 2.3 Q1 -0.3 2.0 2.8 May 3.9 11.2 Apr -7.2 -2.4 3.7 -28.0 0.91 4.4
Italy 1.9 Q1 2.2 1.2 7.6 May 6.4 7.8 Apr 0.1 -5.0 4.0 21.0 0.91 4.4
Netherlands 1.9 Q1 -2.6 0.8 6.1 May 5.8 3.5 May 6.2 -2.4 2.8 68.0 0.91 4.4
Spain 3.8 Q1 1.9 1.8 3.2 May 3.6 12.7 Apr 1.4 -4.2 3.4 66.0 0.91 4.4
Czech Republic -0.1 Q1 -0.2 0.4 11.1 May 10.8 2.8 Apr‡ -2.2 -4.6 4.4 -141 21.7 7.8
Denmark 2.8 Q1 1.0 0.5 2.9 May 5.0 2.8 Apr 9.8 0.7 2.8 62.0 6.80 3.5
Norway 3.0 Q1 1.0 1.6 6.7 May 4.8 3.7 Mar‡‡ 17.6 12.5 1.4 76.0 10.7 -8.2
Poland -0.3 Q1 16.1 1.3 13.0 May 12.3 5.1 May§ -1.2 -4.0 6.0 -174 4.05 8.4
Russia -1.8 Q1 na -1.6 2.5 May 6.0 3.3 Apr§ 5.0 -4.3 11.0 209 84.0 -34.6
Sweden 0.8 Q1 2.4 1.0 9.7 May 6.5 7.9 May§ 3.8 -0.3 2.5 62.0 10.7 -6.0
Switzerland 0.6 Q1 1.1 1.1 2.2 May 2.6 2.0 May 7.5 -0.7 0.9 -50.0 0.90 6.7
Turkey 4.0 Q1 1.3 3.0 39.6 May 41.7 10.0 Apr§ -4.7 -4.6 16.4 -241 23.6 -26.4
Australia 2.3 Q1 0.9 1.5 7.0 Q1 5.5 3.6 May 1.1 -0.1 4.0 -8.0 1.48 -3.4
Hong Kong 2.7 Q1 23.0 3.5 2.0 May 2.3 3.0 May‡‡ 6.4 -1.5 3.6 31.0 7.83 0.3
India 6.1 Q1 5.3 6.2 4.3 May 5.3 7.7 May -1.3 -5.7 7.1 -41.0 82.0 -4.8
Indonesia 5.0 Q1 na 4.7 4.0 May 4.0 5.5 Q1§ 0.7 -2.7 6.3 -114 14,945 -0.9
Malaysia 5.6 Q1 na 3.9 3.3 Apr 2.7 3.5 Apr§ 3.2 -5.0 3.9 -48.0 4.65 -5.4
Pakistan 1.7 2023** na 1.7 38.0 May 31.7 6.3 2021 -1.5 -5.3 15.1 ††† 220 287 -26.5
Philippines 6.4 Q1 4.5 5.3 6.1 May 5.7 4.5 Q2§ -5.3 -6.5 6.1 -61.0 55.6 -2.5
Singapore 0.4 Q1 -1.6 1.0 5.7 Apr 5.1 1.8 Q1 16.2 -0.1 3.0 -14.0 1.34 3.0
South Korea 1.0 Q1 1.3 1.5 3.3 May 3.0 2.7 May§ 2.5 -2.1 3.6 -16.0 1,292 0.1
Taiwan -2.9 Q1 -2.4 0.6 2.0 May 2.0 3.6 Apr 11.3 -2.2 1.2 -8.0 31.0 -4.0
Thailand 2.7 Q1 7.8 3.2 0.5 May 2.2 1.0 Apr§ 2.1 -2.7 2.8 -12.0 34.9 1.3
Argentina 1.9 Q4 -6.0 -3.6 114 May 116.1 6.3 Q4§ -2.6 -4.5 na na 252 -50.9
Brazil 4.0 Q1 8.0 1.7 3.9 May 5.2 8.5 Apr§‡‡ -2.6 -7.6 11.1 -180 4.77 7.3
Chile -0.6 Q1 3.4 0.3 8.7 May 7.9 8.7 Apr§‡‡ -4.3 -1.9 5.2 -125 804 9.4
Colombia 3.0 Q1 5.9 1.6 12.4 May 11.7 10.7 Apr§ -4.2 -3.8 10.2 -175 4,168 -3.6
Mexico 3.7 Q1 4.1 2.1 5.8 May 5.5 2.8 Apr -1.8 -3.7 8.7 -46.0 17.2 17.6
Peru -0.4 Q1 -2.2 1.7 7.9 May 6.8 6.1 May§ -2.0 -1.6 7.0 -93.0 3.64 2.2
Egypt 3.9 Q4 na 2.9 32.7 May 31.8 7.1 Q1§ -1.6 -6.2 na na 30.9 -39.3
Israel 3.8 Q1 3.1 2.8 4.6 May 4.1 3.6 May 4.3 -2.3 3.7 57.0 3.62 -4.7
Saudi Arabia 8.7 2022 na 2.0 2.8 May 2.2 4.8 Q4 3.7 -1.0 na na 3.75 nil
South Africa 0.2 Q1 1.4 0.5 6.6 May 5.7 32.9 Q1§ -1.7 -5.6 10.7 55.0 18.4 -13.7
Source: Haver Analytics. *% change on previous quarter, annual rate. †The Economist Intelligence Unit estimate/forecast. §Not seasonally adjusted. ‡New series. **Year ending June. ††Latest 3 months. ‡‡3-month moving
average. §§5-year yield. †††Dollar-denominated bonds.
Markets Commodities
% change on: % change on:
Index one Dec 30th index one Dec 30th
The Economist commodity-price index % change on
In local currency Jun 21st week 2022 Jun 21st week 2022 2015=100 Jun 13th Jun 20th* month year
United States S&P 500 4,365.7 -0.2 13.7 Pakistan KSE 40,229.8 -3.1 -0.5 Dollar Index
United States NAScomp 13,502.2 -0.9 29.0 Singapore STI 3,223.7 0.2 -0.9 All Items 145.7 150.3 7.1 -11.2
China Shanghai Comp 3,197.9 -1.0 3.5 South Korea KOSPI 2,582.6 -1.4 15.5 Food 134.6 140.6 7.5 -12.1
China Shenzhen Comp 2,039.9 0.1 3.3 Taiwan TWI 17,202.4 -0.2 21.7 Industrials
Japan Nikkei 225 33,575.1 0.2 28.7 Thailand SET 1,522.1 -2.5 -8.8 All 156.1 159.3 6.7 -10.5
Japan Topix 2,295.0 nil 21.3 Argentina MERV 429,908.6 13.5 112.7 Non-food agriculturals 109.3 111.3 4.2 -34.6
Britain FTSE 100 7,559.2 -0.6 1.4 Brazil BVSP* 120,420.3 1.1 9.7 Metals 170.0 173.6 7.2 -3.7
Canada S&P TSX 19,706.0 -1.5 1.7 Mexico IPC 54,063.9 -2.0 11.6
Sterling Index
Euro area EURO STOXX 50 4,322.8 -1.2 13.9 Egypt EGX 30 17,706.1 -0.9 21.3
All items 176.4 180.1 4.4 -14.4
France CAC 40 7,261.0 -0.9 12.2 Israel TA-125 1,810.3 -0.8 0.5
Germany DAX* 16,023.1 -1.8 15.1 Saudi Arabia Tadawul 11,466.2 -0.6 8.7 Euro Index
Italy FTSE/MIB 27,609.4 -0.7 16.5 South Africa JSE AS 75,629.9 -3.1 3.5 All items 149.6 152.9 5.8 -14.0
Netherlands AEX 759.2 -1.6 10.2 World, dev'd MSCI 2,927.7 -0.4 12.5 Gold
Spain IBEX 35 9,436.4 nil 14.7 Emerging markets MSCI 1,004.3 -1.0 5.0 $ per oz 1,950.9 1,935.8 -1.6 5.3
Poland WIG 67,178.6 0.3 16.9
Brent
Russia RTS, $ terms 1,057.7 2.1 9.0
$ per barrel 74.3 75.9 -1.2 -33.8
Switzerland SMI 11,173.7 -0.9 4.1 US corporate bonds, spread over Treasuries
Turkey BIST 5,186.8 -3.2 -5.9 Dec 30th Sources: Bloomberg; CME Group; Cotlook; Refinitiv Datastream;
Australia All Ord. 7,505.6 2.1 3.9 Basis points latest 2022 Fastmarkets; FT; ICCO; ICO; ISO; Live Rice Index; LME; NZ Wool
Services; Thompson Lloyd & Ewart; Urner Barry; WSJ. *Provisional.
Hong Kong Hang Seng 19,218.4 -1.0 -2.8 Investment grade 150 154
India BSE 63,523.2 0.5 4.4 High-yield 462 502
Indonesia IDX 6,702.6 nil -2.2 Sources: Refinitiv Datastream; Standard & Poor's Global Fixed Income For more countries and additional data, visit
Malaysia KLSE 1,393.5 0.6 -6.8 Research. *Total return index. economist.com/economicandfinancialindicators
012
Graphic detail Russian oil The Economist June 24th 2023 73
→ Countries that ban imports of Russian crude still buy refined oil products potentially made from it
Seaborne oil trade, million tonnes Russian crude-oil production

February 24th 2022-June 18th 2023 Million barrels per day
11.5
Crude oil Refined oil
Pre-war forecast
Turkey
EU 11.0
22
30
Actual 10.5
June 2023 forecast
US 10.0
India 10
Russia invades
87 Ukraine
9.5
Russia 2021 22 23 24
Britain 7
190
Seaborne crude-oil imports from Russia

Million tonnes per month
UAE
19 Japan 8 20
15
Other
Australia
12
India 10
China
79
China
5
Britain, Canada,
Japan and US EU
0
Singapore 8 2021 22 23
Sources: CREA; Kpler; Rystad Energy; bruegel.org
What goes around ing other Western countries, also banned

imports of such goods from Russia.
created opportunities for middlemen.
This does not mean that the cap is fail
comes around At first glance, these rules seem to have
scrambled prewar trade routes, with Chi
ing. As long as it cuts Russian profits, it is
doing its job. And the new rules do impose
na and India replacing the eu and g7 as the costs on Russia. Shipping oil to China and
main recipients of Russia’s seaborne oil. then to Europe burns a lot of it in the pro
But a recent report by the Centre for Re cess. Refiners have to adjust to new grades
New buyers of Russian crude are now
search on Energy and Clean Air, a think of crude. And dodging the price cap re
exporting more refined oil to the West
tank, suggests that the real change is not so quires new, possibly unfavourable deals
W estern countries imposing sanc

tions on Russia’s oil industry have
had to thread a needle. Every barrel the
drastic, because the new buyers may still
sell the oil to the West after refining it.
The report designates China, India, Sin
with nonWestern tankers and insurers.
However, these costs are hard to mea
sure. Although tracking firms report that
country sells helps finance its war in Uk gapore, Turkey and the United Arab Emir Russia’s Urals crude sells for $2535 a barrel
raine. But a sharp cut in Russian exports ates as “laundromats” for Russian oil. To below the global Brent benchmark, records
would send prices surging, raising the val gether, during the war’s first year the vol of sales to countries such as India reveal
ue of Russia’s remaining output. ume of their imports of Russian crude much higher prices. Russia also ships oil to
Seeking to avoid this risk, the g7 group climbed by 140% (77.3m tonnes, worth China via pipelines, avoiding the price cap.
of big economies in September announced $50bn) from the previous year. Their ex Official Russian figures show oil pro
a price cap. This lets insurers and shippers ports of refined oil products to pricecap duction 8% below prewar forecasts, and
under their laws deal in Russian oil only if countries also rose in volume by 26% revenues in the first quarter of 2023 down
it is priced below a given level. Firms in the (10.3m tonnes, worth $19.5bn), compared 40% yearonyear. But some of the firms
“pricecap coalition”, which also includes with just 2% to other destinations. handling Russian oil may have Kremlin
the eu and Australia, make up the bulk of The laundromats are not necessarily ties, keeping additional income close to Mr
global maritimeservices capacity. The cap selling products made from Russian crude Putin. And if global oil prices rebound, the
took effect in December at $60 a barrel of to the West. They could easily use oil from $60 cap will prove ever harder to enforce. n
crude oil, 30% below the market price. other sources to generate refined exports,
On February 5th the countries set new and make up for the shortfall with Russian Job: The Economist is looking to hire a political data
scientist to oversee, maintain and improve our poll
limits of $100 for oil products worth more supplies. But on net, bans and price caps aggregators and statistical predictive models of
than crude, like diesel, and $45 for those have not stopped Russian oil from power elections, and to build new ones. For more details
that are cheaper, like fuel oil. The eu, join ing Western economies. They have just visit economist.com/politicaldatascientist.
012
74
Obituary Daniel Ellsberg The Economist June 24th 2023
ing of women and children. When war became nuclear, he re
solved to oppose those weapons always. At the Rand Corporation
in California he took part in planning America’s strategy after nuc
lear attack, but his own aim was to make that insanity impossible.
In 1968 he was back at Rand again, helping to compile for Mc
Namara a “History of the US DecisionMaking Process on the Viet
nam Policy” since 1945, loosely known as the Pentagon Papers.
This played to his strengths. War policy was a perfect worked ex
ample of his Harvard dissertation on how people weighed risk and
uncertainty when they made decisions. His “Ellsberg paradox”
showed that they tended to shy away from ambiguity and act on
what they thought probable, even if the evidence was scant and
equivocal and the outcome might be worse. In the Pentagon Pa
pers, this was the modus operandi. The Gulf of Tonkin incident in
1964, when an attack by North Vietnam on an American ship gave a
pretext for getting involved in Indochina, was largely invented.
The enemy’s intentions were assumed or guessed at. The secret
objective of bombing North Vietnam, in McNamara’s own words,
was to contain China.
As that bombing escalated, Mr Ellsberg knew he had to expose
the lying, killing machine. The evidence was in his own four
drawer safe, easily released. All the same, he waited, weighing the
risks and uncertainties. If he leaked the papers, he would probably
go to jail for a long time. If he did not, he was a coward perhaps, but
would also keep his job and the secrets entrusted to him. Did his
duties as a faithful employee and a provider outweigh his duties to
the human race? The moral course was not clearcut.
Tell me lies about Vietnam Yet the war itself was immoral, and that decided him. When in
1969 he heard a draftresister, Randy Kehler, speak of a world of
nonviolence and the “beauty” of going to jail in the name of
peace, he wept for more than an hour. That was the life he wanted
to lead. He began to smuggle the “History”, 7,000 pages in all, out
of the Rand complex in his briefcase by night, copying it on a Xe
Daniel Ellsberg, leaker of the Pentagon Papers and anti-war
rox machine with the help of a friend. On his way home after the
activist, died on June 16th, aged 92
first session, in the small hours, he paused to bodysurf on the
T wo thatch huts were still smouldering when Daniel Ellsberg
and his group reached the village. It took nothing to destroy
them; just a Zippo lighter. Children were searching for toys in the
waves of the Pacific. He was free; he had found the power to resist.
The copies went to Neil Sheehan, a reporter for the New York
Times, and in June 1971 the Times began to serialise the findings.
ashes. In the first days of his posting to Saigon in 1965, to advise on President Richard Nixon tried to stop publication, both there and
General Edward Lansdale’s “pacification” programme, he had fall in the Washington Post; but when the case went to the Supreme
en in love with Vietnamese children: their nimbleness, their bold Court the court upheld the freedom of the press against executive
ness, their fascination with the hair on his arms. They had fol pressure. It was a famous victory. The Ellsberg trial, in 1973, was
lowed him around like a cloud of birds. Now he watched one little another: he was charged under the Espionage Act, which carried a
girl pull out a blackened doll. maximum sentence of 115 years in jail, but all charges were dis
He was directly implicated in this. Since 1964 he had been missed. He was now a hero of the antiwar movement.
working at the Pentagon as assistant to John McNaughton, num Yet he felt he had failed, because he had not stopped the war. At
ber two to Robert McNamara, the secretary of defence. With Mc best, he had shortened it. And it was not the leak that achieved
Naughton, he had scoured for gory details of Vietcong atrocities to even that; it was Nixon’s decision to “get this sonofabitch” by cre
justify heavier American involvement. (Those burned huts, he ating the “Plumbers” to burgle the office of Mr Ellsberg’s former
was told, were VC hideouts.) Together they had drafted lies for Mc psychiatrist, to prove him unhinged. When the Plumbers moved
Namara to tell the press. on to try to raid the Watergate complex, a scandal erupted that
He did not see the wrongness of that because he was a patriot spared Mr Ellsberg prison and brought down the president. End
and a hawk; an allAmerican, who wanted to serve the president ing the Vietnam war was then only a matter of time.
wherever he was sent. Though he was an intellectual, not any sort He campaigned for it with all his leanbuilt energy and elo
of jock, he had enlisted in the marines, passing out as a first lieu quence. Then, for half a century, he proselytised for peace and
tenant and taking his rifle company briefly to the Middle East. In against nuclear weapons. He was arrested 90 times. The Iraq war
Vietnam, as a civilian, he encountered the enemy in glimpses: energised him especially, founded as it was on the same deliberate
shadows in ricefields, wooden traps dropped on a trail. From those delusion that had underpinned Vietnam. Wholeheartedly, he sup
signs alone, he knew America could not win a war there. With ported the whistleblowers—Edward Snowden, Chelsea Man
luck, however, limited military interventions might do the job. ning—who followed his example. He urged those who knew the
At the same time, his unease was growing. He had a deepseat truth not to wait, as he had, until the bombs were falling.
ed horror of military attacks on civilians, laid down in childhood He had once believed Americans were the good guys. Now, in
as he heard reports of the bombing of Warsaw and Rotterdam. At ured to seeing perfidy and conspiracies everywhere, he accused
school in a tranquil suburb of Detroit he was shown a slim, silver America of imperial ambitions in the postcolonial world. There
magnesium bomb whose flames could not be doused with water, were no good or bad guys any longer, he thought, only right and
only with the sand that stood in a bucket in each classroom. He wrong. And, having weighed all the risks and run several of them,
knew then that nothing was so purely evil as the deliberate bomb he knew without a doubt which side he had come down on. n
012
COMPANIES SHOULD
FOCUS ON PROFITS.
SHOULDN’T THEY?
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what should drive corporate decisions
in the 21st century.
Expand your thinking at

ChicagoBooth.edu/company-profits
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How to build Ukraine 2.

until July 17th, but Russia the government of atrocities. It is unclear if the progressive

Others»» Hindi & English Editorial, Employment News, Malayalam Newspapers

Type in Search box of Telegram @LBSNEWSPAPER And

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er’s boss in 2018 over allega The Italian government took ica’s enticement of chipmak

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A new constitution is cur initiatives, and a one hour site where they would try to

The battle within arms industry. “The fullscale Russian in

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