Brazil’s fall Dilma Rousseff and the disastrous year ahead Islamic State driven out of Ramadi Xi Jinping’s first tweet The mad world of travel visas Japan and South Korea mend fences Fin tech whaling and venture capitalJANUARY 2ND–8TH 2016 The Economist January 2nd 2016 3 Daily analysis and opinion to supplement the print edition, plus audio and video, and a daily chart Economist com E mail newsletters and mobile edition Economist comemail Print edition available online by 7pm London time each.
Trang 1Brazil’s fall Dilma Rousseff and the disastrous year ahead
Islamic State driven out of Ramadi
Xi Jinping’s first tweet The mad world of travel visas Japan and South Korea mend fences Fin-tech: whaling and venture capitalJANUARY 2ND–8TH 2016
Trang 3The Economist January 2nd 2016 3
Daily analysis and opinion to
supplement the print edition, plus
audio and video, and a daily chart
Economist.com
E-mail: newsletters and
mobile edition
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Print edition: available online by
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The Economist online
Volume 418 Number 8970
Published since September1843
to take part in "a severe contest between
intelligence, which presses forward, and
an unworthy, timid ignorance obstructing
our progress."
Editorial offices in London and also:
Atlanta, Beijing, Berlin, Brussels, Cairo, Chicago,
Lima, Mexico City, Moscow, Mumbai, Nairobi,
New Delhi, New York, Paris, San Francisco,
São Paulo, Seoul, Shanghai, Singapore, Tokyo,
On the cover
Disaster looms for Brazil:
leader, page 7 Latin
America’s biggest economy
faces another lost decade,
Of slavery and swastikas
19 Rating police officers
Revenge of the nerds
Digging for justice
Reagan’s Chinese ghost
Middle East and Africa
33 Iraq
Reclaiming Ramadi
34 Christians in the Middle East
And then there were none
39 Russia’s Far East
Turning towards China
40 Vladivostok’s new casino
Learning the hard way
Islamic StateBy retakingRamadi, Iraq’s security forceshave won a morale-boostingvictory But there is still anawful lot to do, page 33
Japan and South Korea
A surprise deal over wartimesex slaves may soothetroubled relations betweentwo democratic neighbours,page 27
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Xi Jinping’s first tweetThe
Communist Party’s battle with
social media is bitterly fought,
page 31
Travel visasThey have their
uses, but the burden they
impose is too high: leader,
page 8 Governments are
deterring business travellers
and tourists with cumbersome
visa requirements that do
little to make their countries
safer, page 49
WhalesBefore tech startups,
financiers had whaling, page 54
WeatherThe rain gods havebrought a dreadful Decemberaround the world, page 61.The anger rises in pace withthe water across England’sinundated northern cities,page 44
Britain
43 Funding the police
Counting up the coppers
46 The undiscovered world
A new breed of explorer
Business
49 Travel visas
A strange sort of welcome
50 Activists and resources companies
Icahn, you can’t
Finance and economics
More hat than cattle
58 Free exchange
Escaping low interest rates
Science and technology
59 Aircraft engines
Flying’s new gear
60 The Nobel prizes
Throw caution to the wind?
61 Meteorology
Barmy weather
Books and arts
62 The consequences of 1916
A most terrible year
63 Kennedy’s other crisis
China, India and the CIA
Obituary
70 Elsie Tu
From missionary
to firebrand
Trang 66 The Economist January 2nd 2016
Iraq’s armed forces recaptured
Ramadi, the capital of Anbar
province, which fell to Islamic
State in May and is just 100km
from Baghdad The country’s
prime minister, Haider
al-Abadi, said thatIS would be
driven from his country by the
end of 2016.IS also suffered
fresh reverses in Syria; on
December 26th it lost the
important power-generating
Tishreen dam to a mainly
Kurdish force
Saudi Arabia’s stockmarkets
fell sharply after it announced
swingeing spending cuts to
close a gaping budget deficit
Saudi public finances have
been hurt by declining oil
revenues In the middle of 2015
Brent crude was trading at $65
a barrel; now it is under $38
An outbreak of Ebola that
rampaged through three
Afri-can countries officially ended
when the World Health
Orga-nisation declared that Guinea
was free of the disease The
outbreak, which started two
years ago, killed some 11,000
people, most of them in
Guin-ea, Liberia and Sierra Leone
Stockmarkets responded
positively to the Federal
Reserve’s decision on
Decem-ber16th to raise interest rates
for the first time since 2006
After months of dithering the
central bank lifted the range for
its benchmark rate by a quarter
of a percentage point to
between 0.25% and 0.5%
Martin Shkreli was arrested by
the FBI on December17th and
charged with securities fraud.
Mr Shkreli made the headlines
in 2015 when a drugs company
he ran bought the rights to a
medicine and raised its price
by 5,000% The (unrelated)
charges against Mr Shkreli,
which he denies, pertain to his
time as a hedge-fund manager
Poland’s right-wing
govern-ment passed a law requiring
the constitutional court to
approve decisions by a
two-thirds majority, and with at
least 13 of the 15 judges present
The law will force the court to
accept disputed new judges
whom the government has
appointed It will also make itmuch harder to strike downnew laws The oppositionstaged furious demonstrations
Spain held an election before
Christmas, which resulted in
no stable majority The rulingPeople’s Party of MarianoRajoy came first and the Social-ists second Two smaller par-ties took seats, breaking thetraditional two-party system
Brazil’s finance minister,
Joaquim Levy, resigned onDecember18th He came intooffice in January 2015 with amandate to slash the budgetdeficit but was thwarted by asevere recession and politicalturmoil His successor is Nel-son Barbosa, who was theplanning minister
A group of Central Americancountries plus Mexico reached
an agreement to allow some of
the 7,000 migrants from Cuba
who are stuck on Costa Rica’sborder with Nicaragua totravel to the United States
Nicaragua had blocked theirentry The migrants will now
be airlifted to El Salvador andcontinue by bus The number
of migrants from Cuba hasincreased since a diplomaticthaw with the United Statesbegan in 2014 Many fear thatthe rapprochement will end
the United States’ policy ofaccepting émigrés from Cuba ifthey reach American soil
Argentina lifted exchange
controls and allowed the peso
to float freely, days after theinauguration of its new presi-dent, Mauricio Macri Thisforms part of a liberalisationprogramme to reverse populistpolicies of the outgoing gov-ernment of Cristina Fernández
de Kirchner
Carlos Rosales Mendoza, thefounder of La Familia Michoa-
cana, a Mexican drug gang,
was found dead along with thebodies of three other peoplenear a motorway in westernMexico He was on the most-wanted list of the DrugEnforcement Agency in theUnited States
A landslide in the southern
Chinese city of Shenzhenkilled seven people and leftdozens of others missing
Officials called it an “industrialsafety accident”, caused by acollapsing heap of construc-tion waste An official whohad once overseen the sitecommitted suicide
The chairman of one of
China’s largest state-owned
mobile operators, ChinaTelecom, is being investigated
by anti-graft officials Thebusinessman, ChangXiaobing, is among severalsenior executives who havebeen targeted in an anti-corruption campaign beingwaged by President Xi Jinping
Japan and South Korea agreed
to settle a long-standingdispute over women forced towork in Japanese brothelsduring the second world war.Japan apologised and said itwould pay ¥1 billion ($8.3m) tohelp victims
The bodies of six Americantroops killed by a Talibansuicide-bomber near Bagram
air base in Afghanistan were
flown home It was the liest attack on American per-sonnel in the country in years
dead-A sizeable contingent of troops
is to remain in Afghanistanuntil at least the start of 2017.The season of goodwill ex-tended to America’s House ofRepresentatives, which passed
a $1.8 trillion spending sure before Christmas with
mea-little argument and thus
avoid-ed a government shutdown.Paul Ryan, the new Speaker,was commended for his adroithandling of the bill
The world this week
Other economic data and news can be found on page 68-69
Trang 7The Economist January 2nd 2016 7
AT THE start of 2016 Brazilshould be in an exuberantmood Rio de Janeiro is to hostSouth America’s first Olympicgames in August, giving Brazil-ians a chance to embark onwhat they do best: throwing areally spectacular party Instead,Brazil faces political and economic disaster
On December16th Fitch became the second of the three big
credit-rating agencies to downgrade Brazil’s debt to junk status
Days later Joaquim Levy, the finance minister appointed by the
president, Dilma Rousseff, to stabilise the public finances, quit
in despair after less than a year in the job Brazil’s economy is
predicted to shrink by 2.5-3% in 2016, not much less than it did
in 2015 Even oil-rich, sanction-racked Russia stands to do
bet-ter At the same time, Brazil’s governing coalition has been
dis-credited by a gargantuan bribery scandal surrounding
Petro-bras, a state-controlled oil company And Ms Rousseff, accused
of hiding the size of the budget deficit, faces impeachment
pro-ceedings in Congress
As the B in BRICS, Brazil is supposed to be in the vanguard
of fast-growing emerging economies Instead it faces political
dysfunction and perhaps a return to rampant inflation Only
hard choices can put Brazil back on course Just now, Ms
Rous-seff does not seem to have the stomach for them
Dismal Dilma
Brazil’s suffering, like that of other emerging economies, stems
partly from the fall in global commodity prices But Ms
Rous-seff and her left-wing Workers’ Party (PT) have made a bad
situ-ation much worse During her first term, in 2011-14, she spent
extravagantly and unwisely on higher pensions and
unpro-ductive tax breaks for favoured industries The fiscal deficit
swelled from 2% ofGDP in 2010 to 10% in 2015
Brazil’s crisis managers do not have the luxury of waiting
for better times to begin reform (see pages13-15) At 70% ofGDP,
public debt is worryingly large for a middle-income country
and rising fast Because of high interest rates, the cost of
servic-ing it is a crushservic-ing 7% ofGDP The Central Bank cannot easily
use monetary policy to fight inflation, currently 10.5%, as
high-er rates riskdestabilising the public finances even more by
add-ing to the interest bill Brazil therefore has little choice but to
raise taxes and cut spending
Mr Levy made a game attempt to renovate the building
while putting out the fire He trimmed discretionary spending
by a record 70 billion reais ($18 billion) in 2015 and tightened
el-igibility for unemployment insurance But it was not enough
The recession dragged down tax revenues Ms Rousseff gave
her finance minister only lukewarm support and the PT was
hostile towards him The opposition, intent on ousting the
president, was in no mood to co-operate
Although he was a senior treasury official during Ms
Rous-seff’s disastrous first term, Nelson Barbosa may be able to
ac-complish more as finance minister He has political support
within the PT He also hasbargainingpower, because Ms
Rous-seff cannot afford to lose another finance minister One earlytest will be whether Mr Barbosa persuades a recalcitrant Con-gress to reinstate an unpopular financial-transactions tax
A central target should be pensions The minimum benefit
is the same as the minimum wage, which has risen by nearly90% in real terms over the past decade Women typically retirewhen they are 50 and men stop work at 55, nearly a decade ear-lier than the average in the OECD (a club of mostly rich coun-tries) Brazil’s government pays almost 12% ofGDP to pension-ers, a bigger share than older, richer Japan
If Brazil is to fulfil its promise, much, much more is needed
A typical manufacturing firm spends 2,600 hours a year plying with the country’s ungainly tax code; the Latin Ameri-can average is 356 Labour laws modelled on those of Musso-lini make it expensive for firms to fire even incompetentemployees Brazil has shielded its firms from internationalcompetition That is one reason why, among 41 countrieswhose performance was measured by the OECD, its manufac-turing productivity is the fourth-lowest
com-To reform work and pensions, Ms Rousseff must face up toproblems that have been decades in the making Some 90% ofpublic spending is protected from cuts, partly by the constitu-tion which, in 1988, celebrated the end of military rule by en-shrining generous job protection and state benefits Because it
is so hard to reform, Brazil’s public sector rivals European fare states for size but emerging ones for inefficiency Long adrain on economic vitality, Brazil’s overbearing state is now achief cause of the fiscal crisis
wel-Overcoming such deep-rooted practices would be hard forany government In Brazil it is made all the harder by a daft po-litical system, which favours party fragmentation and vote-buying and attracts political mercenaries who have little com-mitment either to party or to programme The threshold for aparty to enter the lower house of Congress is low; today 28 arerepresented, adding to the legislative gridlock Congressmenrepresent entire states, some as populous as neighbouring Lat-
in American countries, which makes campaigning ruinouslyexpensive—one reason why politicians skimmed off hugeamounts of money from Petrobras
It is therefore hard, despite Mr Barbosa’s advantages, to feeloptimistic about the prospects for deep reform Voters holdpoliticians in contempt The opposition is bent on impeaching
Ms Rousseff, a misguided battle that could dominate the cal agenda for months The PT has no appetite for austerity.Achieving the three-fifths support in both houses of Congressneeded for constitutional reforms will be a tall order
politi-Reckless Rousseff
And if Ms Rousseff fails to bring about change? Most of Brazil’sborrowing is in local currency, which makes default unlikely.Instead, the country may end up inflating away its debts Bra-zil’s achievement has been to lift tens of millions of people out
of rag-and-flip-flop poverty Recession will halt that, or evenbegin to reverse it The hope is that Brazil, which has achievedhard-won economic and democratic stability, does not lapseonce again into chronic mismanagement and turmoil.7
Brazil’s fall
Disaster looms for Latin America’s biggest economy
Leaders
Trang 88 Leaders The Economist January 2nd 2016
1
They offer governments away to control their borders,whether to regulate the flow ofimmigrants or to pick out threats
to security But the paperworkand fees they entail also deterlegitimate tourists and businesstravellers Researchers at the Cato Institute, a libertarian think-
tank, reckon that eliminating all travel visas to the United
States would add between $90 billion and $123 billion in
annu-al tourist spending By one estimate, introducing visa
restric-tions can lower trade and foreign direct investment between a
pair of countries by as much as 25%
The job of policymakers is to strike the right balance
be-tween such costs and benefits On short-term business and
tourist visas, they have failed Take security Visas, proponents
say, keep countries safer by controlling who is able to enter
That is true, but they are not very efficient Terrorists can be
home-grown as well as foreign, qualify for visas (as the 9/11
at-tackers did) or slip across borders illegally Imposing
restric-tions on the basis of nationality is the bluntest of instruments,
scooping up legions of ordinary tourists and travellers as well
as the occasional suspect America’s decision to tighten the
rules for anyone who has recently been to Iran, Iraq, Sudan
and Syria will affect aid workers and plotters alike
It is a similar story with unauthorised migration
Identify-ing visitors who might overstay their welcome is a core duty of
visa officers Western countries often require several months’
bank statements, pay slips, proof of financial and property
holdings, tax returns and letters from bosses promising that
their employees will return (see page 49) These strictures also
put off legitimate travellers When Canada lifted visa
require-ments for Czech citizens in 2007, the number of Czech tourists
jumped by a third; when restrictions were reintroduced in
2009, after a rise in asylum applications, arrivals fell by 70%over three years Rather than gumming up all travel, it mademore sense to process asylum claims faster The rules havesubsequently been relaxed again
Governments can take three steps to ease the burden ofvisas without simply throwing borders open to all-comers.The first is to slash the length of their forms Britain, a grave of-fender when it comes to high fees and piles of paperwork, re-quires visa applicants to fill in a ten-page form, provide a list ofevery foreign trip over the past decade and declare that theyhave never incited terrorism to boot This is absurd Schengen-area bureaucrats in continental Europe manage to screen visi-tors in just two pages America’s visa-waiver programme al-lows citizens of 28 countries to visit by filling out a simple on-line form with basic personal information
Second, government departments need to get better at ing that information, both within borders and across them.Most big receiving countries now demand biometric data such
shar-as fingerprints and retinal scans Many also require “advancepassenger information” before a traveller is allowed to board
an aeroplane Cross-checking these data against intelligenceand criminal databases will usually obviate the need forlengthy inquisitions
La visa loca
Usually, but not always Countries will want to investigatesome applicants in greater detail So the third step is to grantlonger visas to those people who have easily cleared the neces-sary hurdles America routinely grants ten-year visas; Europeroutinely grants ten-day ones That means travellers to theSchengen area must repeatedly prove their good intentions,leading to more otiose paperwork, and fewer visits Necessary
as they are, visas need not be so evil 7
Travel visas
Sticker shock
They have their uses, but the burden visas impose on travellers and recipient countries is too high
primary contest in Iowa, theRepublican race is more warlikethan wonkish Yet the candi-dates have found time to writesometimes intricate plans to re-form America’s taxes (see page17) Though no one blueprintwill become law, if America chooses a Republican president,
he may well have a Republican Congress to work with At that
point, the winner’s tax plan will seem less like a campaign
gimmick and more like a promise to be kept
Republicans are right to seek to reform America’s
incoher-ent, tangled-up tax system America’s corporate tax is a toxiccombination of a high rate—the highest in the OECD—and a se-ries of complex distortions, which encourage bad behavioursuch as gorging on debt and stashing cash in foreign subsidiar-ies Republicans rightly want to cut the rate and put an end tomost of the distortions Marco Rubio and Jeb Bush would alsolet businesses deduct the cost of their investments from theirtaxes immediately, rather than as their assets deteriorate andlose value This would encourage investment and boost eco-nomic growth
The candidates have interesting ideas for helping low ers, too Mr Bush and Donald Trump want to raise the standarddeduction (the amount Americans can earn before paying in-
earn-Republican tax plans
Be serious
The Republican candidates’ tax plans are welcome for their detail, but not their contents
Trang 9The Economist January 2nd 2016 Leaders 9
1
2come tax) That would be a simple way to encourage work and
to help low- and middle-income households: a similar policy
has proved a success in Britain Mr Bush would also double the
earned-income tax credit, a wage top-up for low-earners, for
childless workers Mr Rubio wants to replace the standard
de-duction with a universal payment to those in work, which
would help even those who earn too little to benefit from an
increased tax allowance
These ideas, though, are mere footnotes to the plans’ central
chapters: huge tax cuts for high earners At 39.6%, America’s
top federal income-tax rate is hardly high by global standards
Yet the candidates are racing to see who can promise to cut it
most Mr Bush aims for 28%; Mr Trump 25% Ted Cruz wants to
replace income tax entirely with a 10% flat tax and a
value-add-ed tax Mr Rubio, whose promise of a 35% top rate seems timid
by comparison, serves up largesse elsewhere by promising to
abolish levies on capital gains and dividends
The first problem with these schemes is their cost On
to-day’s growth forecasts, even Mr Bush’s relatively moderate
plan would reduce revenues by $715 billion, or 13.5%, a year by
2026—more than the projected national defence budget
Pay-ing for Mr Trump’s plan with reduced day-to-day spendPay-ing (as
opposed to mandatory spending on things like pensions and
health care) would require cutting budgets by a staggering 82%
The candidates claim that tax cuts will spur the economy,
filling the government’s coffers with new revenue But the
pace of any economic acceleration is uncertain The evidence
that income-tax cuts for high earners boost growth is thin atbest Predictions that tax cuts in the early 2000s would causeenough growth to pay for themselves look foolish today This is no time to be taking chances with America’s budget.Retiring baby-boomers are increasing the cost of providingpensions and health care for the old There is no appetiteamong Republicans for defence cuts, and other day-to-dayspending has already been cut by 22% in real terms since 2010
If tax cuts were paid for with more borrowing rather than
low-er spending, they would end up as deadweight for the omy rather than as fuel
econ-The plans would also greatly exacerbate inequality, whichhas increased in the 15 years since George W Bush cut taxes forhigh earners Under Mr Trump’s plan, for instance, the top 1%ofearners would receive a windfall worth 18% oftheir after-taxincome Middle-earners have to settle for a 5% boost; the bot-tom fifth, just1% This belies Mr Trump’s claim to champion thecause of ordinary working people The other plans are littlebetter; Mr Rubio’s plan is probably more generous at the bot-tom than at the top, but he gives middle-income Americans lit-tle to cheer about
The Republicans have spent much ofBarackObama’s dency denouncing debt and deficits Yet their proposals to in-troduce unaffordable tax cuts for the rich would send both bal-looning So long as such schemes are a prerequisite forwinning the Republican nomination, a party that prides itself
presi-on ecpresi-onomic management will lack a credible policy.7
because they know, said J.K
Galbraith; they forecast becausethey’re asked A question that isincreasingly put to them iswhether inflation, which hasbeen remarkably quiescent foryears, will spring a surprise in
2016 After all, the debt troubles that have weighed down rich
economies since 2007 are fading; labour markets in America,
Britain and Germany are increasingly tight; housing markets
are gathering steam; and the Federal Reserve has just raised
in-terest rates for the first time in almost a decade
Inflation in America and Europe should indeed pick up
from its present, near-zero state as the big declines in energy
prices at the turn of 2015 drop out of the headline rate But a glut
in the supply of crude means that oil prices are falling again If
debt is receding as a problem in rich countries, it looms larger
in emerging markets, where overcapacity brought on by
binge-borrowing exerts a downward force on prices There is
infla-tion in commodity-exporting countries, such as Brazil, whose
currencies have been trashed But global inflation is a
tug-of-war between bottlenecks in parts of the rich world and
im-ported deflation from emerging markets, and the enduring fall
or stagnation of prices looks set to dominate for a while yet
(see page 53) Indeed, this “lowflation” means that three
as-pects of the world economy are worth watching in 2016
Start with Saudi Arabia The falling price of crude is in part aconsequence of its commitment (reiterated byOPEC ministers
on December 4th) to produce at full tilt The idea is to flush outthe weaker producers in America’s shale-oil industry and else-where This is proving a costly gambit Saudi Arabia needs abarrel of oil to fetch around $85 to finance public spending andaround $60 to keep its current account in balance Yet the oilprice recently fell below $36, to an 11-year low, before rebound-ing a little America has sustained oil production of above 9mbarrels a day, despite a sharp fall in the number of oil rigs, sug-gesting that shale firms are becoming more efficient
This week Saudi Arabia said that it would cut local dies on petrol, electricity and water in order to chip away at abudget deficit that reached 367 billion riyals ($98 billion), or15%
subsi-ofGDP, in 2015 The Saudis are burning through their (ample)foreign-exchange reserves to pay for imports while maintain-ing the riyal’s peg with the dollar But the cost of this strategyhas already forced two other oil exporters, Kazakhstan and,more recently, Azerbaijan, to abandon their dollar pegs Thepublic finances of other big oil producers, such as Russia andNigeria, are also under pressure No wonder a devaluation ofthe riyal this year is a favoured tail-riskfor currency forecasters
A second place to watch is China A construction boom hasleft it with a mountain of debt and excess capacity in some in-dustries—notably steel, whose falling global price has claimedjobs in Europe’s industry and led to growing complaints ofChinese dumping Factory-gate prices have fallen in China for
Global inflation
Low and behold
Brent crude oil
$ per barrel
2014 2015 0
40 80 120
Another year of low prices will create strains in the world economy
Trang 1010 Leaders The Economist January 2nd 2016
245 consecutive months Further fiscal and monetary stimulus
should help to boost demand, but will also hinder the
man-agement of China’s exchange rate, which is already under
pressure from an outflow of capital
As with the riyal, the yuan has just about kept pace with the
dollar’s ascent over the past two years, leaving it looking
ex-pensive Beijing has signalled that it wants to benchmark the
yuan against a basket of currencies, and some forecasters
ex-pect a gradual decline in its value against the dollar in 2016 But
there is an understandable fear that the yuan may slip anchor,
potentially touching off a round of devaluations in Asia
A third outcome from continued lowflation will be
increas-ingly lopsided economies in the rich world, particularly in
America, where recovery is more advanced than in Europe If
productivity stays as weak as it has been recently,
unemploy-ment is likely to fall still further At the same time, slow growth
in emerging markets is likely to keep downward pressure oncommodity prices and on their currencies A strong dollar hasalready driven a wedge between the performance of Ameri-ca’s manufacturing and service industries Further apprecia-tion would make it harder for the Federal Reserve to pushthrough more increases in interest rates
Strong on jobs, weak on prices
All this would make for a strangely configured economy by theend of the year An unemployment rate of 4%, a Fed Funds ratebelow 1%, an overvalued dollar, a strong housing market andinflation below the Fed’s target of 2% is a plausible, if very odd,mix, which could portend either a sudden burst of inflation orenduringly feeble demand (see page 58) An honest economistwill admit the uncertainties in any forecast But another year
of lowflation will surely tax policymakers 7
in-ternet traffic might as well
be written on postcards So ernments, bankers and retailersencipher their messages, as doterrorists and criminals
gov-For spy agencies, crackingmethods of encryption is there-fore a priority Using computational brute force is costly and
slow, because making codes is far easier than breaking them
One alternative is to force companies to help the authorities
crack their customers’ encryption, the thrust of a new law just
passed in China and a power that Western spy agencies also
covet Another option is to open “back doors”: flaws in
soft-ware or hardsoft-ware which make it possible to guess or steal the
encryption keys Such back doors can be the result of
program-ming mistakes, built by design (with the co-operation ofthe
en-cryption provider) or created through unauthorised tinkering
with software—or some combination of the three
The problem with back doors is that, though they make life
easier for spooks, they also make the internet less secure for
everyone else Recent revelations involving Juniper, an
Ameri-can maker of networking hardware and software, vividly
demonstrate how Juniper disclosed in December that a back
door, dating to 2012, let anyone with knowledge of it read
traf-fic encrypted by its “virtual private network” software, which
is used by companies and government agencies worldwide to
connect different offices via the public internet It is unclear
who is responsible, but the flaw may have arisen when one
intelligence agency installed a back door which was then
se-cretly modified by another The back door involved a faulty
random-number generator in an encryption standard
champi-oned by America’s National Security Agency (NSA); other
clues point to Chinese or British intelligence agencies
Decrypting messages that involve one or more intelligence
targets is clearly within a spy agency’s remit And there are
good reasons why governments should be able to snoop, in
the interests of national security and within legal limits The
danger is that back doors introduced for snooping may alsoend up being used for nefarious ends by rogue spooks, enemygovernments, or malefactors who wish to spy on the law-abid-ing It is unclear who installed Juniper’s back door or used itand to what end
Intelligence agencies argue that back doors can be kept cret and are sufficiently complex that their unauthorised use isunlikely But an outsider may stumble across a weakness orsteal details of it America, in particular, has a lamentable re-cord when it comes to storing secrets safely In the summer itbecame known that the Office of Personnel Management,which stores the sensitive personal data ofmore than 20m fed-eral employees and others, had been breached—allegedly bythe Chinese Some call that the biggest disaster in American in-telligence history It is rivalled only by the data taken by Ed-ward Snowden, a formerNSA contractor now living in Mos-cow (The authorities responsible for airport security also letslip the details of master keys that can open most commercial-
se-ly available luggage—a form of physical back door.)
Push back against back doors
Calls for the mandatory inclusion of back doors should fore be resisted Their potential use by criminals weakens over-all internet security, on which billions of people rely for bank-ing and payments Their existence also underminesconfidence in technology companies and makes it hard forWestern governments to criticise authoritarian regimes for in-terfering with the internet And their imposition would be fu-tile in any case: high-powered encryption software, with noback doors, is available free online to anyone who wants it.Rather than weakening everyone’s encryption by exploit-ing back doors, spies should use other means The attacks inParis in November succeeded not because terrorists used com-puter wizardry, but because information about their activitieswas not shared When necessary, the NSA and other agenciescan usually worm their way into suspects’ computers orphones That is harder and slower than using a universal backdoor—but it is safer for everyone else 7
there-Internet security
When back doors backfire
Some spy agencies favour “back doors” in encryption software, but who will use them?
Trang 11The Economist January 2nd 2016 11
Letters are welcome and should be addressed to the Editor at The Economist, 25 St James’s Street, London sw1A 1hg
E-mail: letters@economist.com More letters are available at:
Economist.com/letters
Changing gears
It is true that businesses need
to make deliberate decisions
about clock speed, and
there-fore strategy, according to their
individual circumstances
(“The creed of speed”,
Decem-ber 5th) Research for our
re-cent book, “Your Strategy
Needs a Strategy”, showed that
competitive conditions overall
have accelerated in some
important respects For
ex-ample, the volatility of
com-petitive rankings has increased
several fold in many
indus-tries, and the five-year
mortal-ity rate for public corporations
has increased from around 5%
to over 30% in recent decades
However, a more important
finding is that there has been a
marked divergence in
compet-itive conditions, requiring
companies to adopt very
different approaches to
strat-egy according to what they
face Although short-term
adaptive strategies are
appro-priate for some fast-moving,
unpredictable businesses,
others will be best served by
more classical plan-based
approaches Furthermore,
large companies will need to
master the art of running
strategies with different clock
speeds in different parts of
their business
One might say that
busi-nesses need not only an
accel-erator pedal, but a gearbox too
MARTIN REEVES
Director
BCG Henderson Institute
New York
I am amazed that your leader
(“Hyperactive, yet passive”,
December 5th) cited
length-ening maturities of company
bonds as evidence against
corporate short-termism
Rather, that is evidence of
companies locking-in
histori-cally low interest rates driven
down by governments’
mone-tary policies The proceeds of
this low-cost debt have been
used to repay high-cost debt, or
to fund share buy-backs, both
enhancing earnings per share
in the short term This is hardly
value-creating for the economy
For time-based tion, the critical measures ofspeed are the response time tocustomers and the devel-opment time for new productsand services In most indus-tries these dropped dramati-cally in the 1970s and 1980s
competi-JOSEPH BLACKBURNProfessor of operations management, emeritusVanderbilt UniversityNashville, Tennessee
Invasive species
Although eradicating invasivespecies is indeed difficult(“Day of the triffids”, Decem-ber 5th), the primary goal ofmost management efforts is toreduce their damage In thecase of invasive brown treesnakes on Guam, the eco-nomic and ecological damage
is clear Only two of the 12native forest-bird speciesremain, $4m is lost a year inproductivity from the snakeselectrocuting themselves onpower lines and one out of1,000 emergency-room visits isfrom a snake bite If the snakeswere to colonise Hawaii, theestimated damage could be ashigh as $2 billion a year
It is important to note thedifference between exotic andinvasive species The lattercause great harm ecologicallyand economically But thereare numerous exotic species,such as rainbow trout, whichare not considered invasive
We agree that a knee-jerkreaction to all exotic species isnot the best policy However,when an exotic species be-comes injurious and its costshigh, investing in control mea-sures is justified
LARRY CLARKDirectorUSDA National Wildlife ResearchCentre
Fort Collins, Colorado
Legitimacy at the polls
Venezuela’s Bolivarian tion was “resoundingly reject-ed” in the recent parliamenta-
revolu-ry election, you say (“Ademocratic counter-revolu-tion”, December12th) Yet thedefeated party of PresidentNicolás Maduro got 41% Thatwas a larger share of the votethan the 37% that the victo-rious Conservatives gained inBritain’s election last May
JULIA BUXTONProfessor of comparative politicsCentral European UniversityBudapest
Rewarding whistleblowers
Whistleblowing has increasedbecause of the success ofAmerican whistleblower-reward programmes (“The age
of the whistleblower”, ber 5th) These programmesoffer monetary awards, confi-dentiality and job protection
Decem-In 2015 British regulators failed
to enhance their anti-fraudefforts in the financial industrywhen they decided againstintroducing such incentives
My law firm has been
contact-ed by dozens of people inBritain hoping to participate inAmerican whistleblowerprogrammes
In instances where theirclaims did not fall under Amer-ican jurisdiction, every one ofthem chose to keep quietrather than contact Britishregulators Without thepotential for financial rewards,not one was willing to risk hislivelihood by steppingforward
In the financial world, it’sall about risk versus benefit
For whistleblowers, it’s thesame calculation
ERIKA KELTONPhillips & Cohen LLPWashington, DC
Plural sex
According to Dennis Baron’sWeb of Language Distin-guished Usage Panel, singular
“they” is the word of the year
But I may not be the onlyone of your readers to be trou-bled by the ambiguity of aproposition in “Pot luck”:
“I have to be closely
at-tached to someone before I amcomfortable having sex withthem” (December12th)
RONALD MACAULAYClaremont, California
Better than the primaries
The qualities associated withstrong leadership are wellknown Potential businessleaders are often evaluated ontheir verbal and non-verbal IQ,communication skills, tem-perament, physical fitness andhealth, and the ability to han-dle stressful situations
Rather than dwelling on thebuffoonery of Republicancandidates for president (“Thegreatest show on earth”,December 5th), why not callfor formal leadership testing?Those who are likely to excelwill relish in brandishing theircredentials Those who refusetesting would be brandedcowards Those who are testedand perform poorly would beexposed and humiliated,giving the voting public apicture of their true calibre.GOUTHAM RAO
Clinical associate professorPritzker School of Medicine University of Chicago
I was relieved to read of NateSilver’s calculation that onlyabout 6-8% of the electorate—roughly equal to the propor-tion who think the moonlandings were faked—reallysupport Donald Trump
Can I assume we are talkingabout the same 6-8%?
JOSEPH FRAZIERYachats, Oregon7
Letters
Trang 12The Economist January 2nd 2016Executive Focus
Trang 13The Economist January 2nd 2016 13
1
THE longest recession in a century; the
biggest bribery scandal in history; the
most unpopular leader in living memory
These are not the sort of records Brazil was
hoping to set in 2016, the year in which Rio
de Janeiro hosts South America’s first-ever
Olympic games When the games were
awarded to Brazil in 2009 Luiz Inácio Lula
da Silva, then president and in his pomp,
pointed proudly to the ease with which a
booming Brazil had weathered the global
financial crisis Now Lula’s handpicked
successor, Dilma Rousseff, who began her
second term in January 2015, presides over
an unprecedented roster of calamities
By the end of 2016 Brazil’s economy
may be 8% smaller than it was in the first
quarter of 2014, when it last saw growth;
GDP per person could be down by a fifth
since its peak in 2010, which is not as bad as
the situation in Greece, but not far off Two
ratings agencies have demoted Brazilian
debt to junkstatus Joaquim Levy, who was
appointed as finance minister last January
with a mandate to cut the deficit, quit in
December Any country where it is hard to
tell the difference between the inflation
rate—which has edged into double digits—
and the president’s approval
rating—cur-rently 12%, having dipped into single
fig-ures—has serious problems
Ms Rousseff’s political woes are as
crip-pling as her economic ones Thirty-two
sit-ting members of Congress, mostly fromthe coalition led by her left-wing Workers’
Party (PT), are under investigation for cepting billions of dollars in bribes in ex-change for padded contracts with the state-controlled oil-and-gas company, Petrobras
ac-On December 15th the police raided
sever-al offices of the Party of the BrazilianDemocratic Movement (PMDB), a partner
in Ms Rousseff’s coalition led by the president, Michel Temer
vice-Brazil’s electoral tribunal is ing whether to annul Ms Rousseff’s re-elec-tion in 2014 over dodgy campaign dona-tions In December members of Congressbegan debating her impeachment Theproceedings were launched by the speaker
investigat-of the lower house, Eduardo Cunha (whothough part of the PMDB considers himself
in opposition) on the grounds that MsRousseff tampered with public accounts tohide the true size of the budgetary hole
Some see the impeachment as a way to vert attention from Mr Cunha’s own pro-blems; Brazil’s chief prosecutor wants himstripped of his privileged position so thathis role in the Petrobras affair can be inves-tigated more freely Mr Cunha denies anywrongdoing
di-Brazil is no stranger to crises Followingthe end of two decades of military rule in
1985, the first directly elected president, nando Collor, was impeached in 1992
Fer-After a “lost decade” of stagnation and perinflation ended in the mid-1990s theeconomy was knocked sideways by theemerging-markets turmoil of 1997-98 Inthe mid-2000s politics was beset by thescandal of a bribes-for-votes scheme
hy-known as the mensalão (“big monthly”, for
the size and schedule of the payments),which eventually saw Lula’s chief of staffjailed in 2013
Yet rarely, if ever, have shocks both ternal and domestic, political and eco-nomic, conspired as they do today Duringthe original lost decade global conditionswere relatively benign; in the crisis of thelate 1990s the tough measures to quell in-flation and revive growth taken after MrCollor’s departure stood Brazil in moder-ately good stead; when scandal rocked the2000s commodity markets were booming
ex-A sad convergence
Now prices of Brazilian commodities such
as oil, iron ore and soya have slumped: aBrazilian commodities index compiled byCredit Suisse, a bank, has fallen by 41%since its peak in 2011 The commoditiesbust has hit economies around the world,but Brazil has fared particularly badly, withits structural weaknesses—poor productiv-ity and unaffordable, misdirected publicspending—exacerbating the damage Re-gardless of what she may or may not havedone with respect to the impeachmentcharge, Ms Rousseff’s cardinal sin is herfailure to have confronted these problems
in her previous term, when she had somepolitical room for manoeuvre Instead, thatterm was marked by loose fiscal and mon-etary policies, incessant microeconomicmeddling and fickle policymaking thatbloated the budget, stoked inflation and
Irredeemable?
RIO DE JANEIRO
A former star of the emerging world faces a lost decade
Briefing Brazil’s crisis
Trang 1414 Briefing Brazil’s crisis The Economist January 2nd 2016
1
2sapped confidence
Poor though her record has been, some
of these problems have deeper roots in
what is in some ways a great achievement:
the federal constitution of 1988, which
en-shrined the transition from military to
democratic rule This 70,000-word
door-stop of a document crams in as many
so-cial, political and economic rights as its
drafters could dream up, some of them
highly specific: a 44-hour working week; a
retirement age of 65 for men and 60 for
women The “purchasing power” of
bene-fits “shall be preserved”, it proclaims,
creat-ing a powerful ratchet on public spendcreat-ing
Since the constitution’s enactment,
fed-eral outlays have nearly doubled to 18% of
GDP; total public spending is over 40%
Some 90% of the federal budget is
ring-fenced either by the constitution or by
leg-islation Constitutionally protected
pen-sions alone now swallow 11.6% ofGDP, a
higher proportion than in Japan, whose
citizens are a great deal older By 2014 the
government was running a primary deficit
(ie, before interest payments) of 32.5 billion
reais ($13.9 billion) (see chart)
Mr Levy tried to live up to the nickname
he had earned during an earlier stint as a
treasury official—“Scissorhands”—with
re-cord-breaking cuts of 70 billion reais from
discretionary spending But Mansueto
Al-meida, a public-finance expert, points out
that this work was more than countered by
constitutionally mandated spending
in-creases; government expenditure as a
share of output rose in 2015 On top of that,
a new scrupulousness in government
ac-counting surely not unrelated to the
im-peachment proceedings has seen 57 billion
reais in unpaid bills from years past newly
recognised by the treasury
Nor could Mr Levy easily fill the fiscal
hole by raising taxes Taxes already
con-sume 36% ofGDP, up from a quarterin 1991
And the recession has hit tax receipts hard
On December18th, days after Fitch, a rating
agency, followed the lead of Standard &
Poor’s in downgrading Brazilian debt, Mr
Levy threw in the towel His job went to
Nelson Barbosa, previously the planning
minister, who insists he is committed to
following the same policies But before his
elevation Mr Barbosa made no secret of
fa-vouring a more gradual fiscal adjustment—
for example, a primary surplus of 0.5% of
GDP in 2016, against Mr Levy’s preferred
0.7% (and an original promise of 2% a year
ago) The real and the São Paulo
stockmark-et tumbled on news of his appointment
Analysts at Barclays, a bank, expect
debt to reach 93% ofGDP by 2019; among
big emerging markets only Ukraine and
Hungary are more indebted The figure
may still seem on the safe side compared
with 197% in Greece or 246% in Japan But
those are rich countries; Brazil is not As a
proportion of its wealth Brazil’s public
debt is higher than that of Japan and nearly
twice that of Greece
Unable to increase taxes, Ms Rousseff’sgovernment may prefer something evenmore troubling to investors and consum-ers alike: inflation Faced with the infla-tionary pressure that has come with thedevalued real, the Central Bank has held itsnerve, increasing its benchmark rate bythree percentage points since October 2014and keeping it at 14.25% since July in theface of the recession But despite this juicyrate the real continues to depreciate
There is a worry that the bank may beunable to raise rates further for fear of mak-ing public debt unmanageable—what isknown as “fiscal dominance” This yearthe treasury spent around 7% ofGDP ser-vicing public debt What is more, raisingrates may have the perverse effect of stok-ing inflation rather than quenching it; anincreasing risk of default as borrowingcosts grow is likely to see investors dump-ing government bonds, provoking furthercurrency depreciation
A handful of economists, includingMonica de Bolle of the Peterson Institutefor International Economics, believe thatBrazil is on the verge of fiscal dominance
And once interest rates no longer have ahold on inflation, she says, it can quicklyspiral out of control Forecasts by CreditSuisse warn that prices could be rising by17% in 2017 Three-quarters of governmentspending remains linked to the price level,embedding past inflation in future prices
That said, the economy as a whole is muchless indexed than it was in the hyperinfla-tionary early1990s That leaves the govern-ment a bit more time, thinks Marcos Lisboa
of Insper, a university in São Paulo But notmuch more: perhaps a year or two
Despite this pressing economic need forspeed there seems to be no political capaci-
ty for it Members of Congress are sumed by Ms Rousseff’s impeachment ByFebruary they must decide whether tosend her case to the Senate, which wouldrequire the votes of three-fifths of the 513deputies in the lower house To fend offsuch a decision Ms Rousseff is rallying herleft-wing, anti-austerity base
con-Gently doesn’t always do it
These efforts are meeting with some cess: in December pro-government ralliesdrew more people than anti-governmentones for the first time all year It looks un-likely that the impeachment will indeedmove to the Senate (which would trigger afurther six months of turmoil) But thishardly provides a political climate condu-cive to belt-tightening, let alone to theamendment of the constitution which MrBarbosa has said is needed to deal with theratchet effect on benefits Fiscal adjustment
suc-is anathema to the government workersand union members who are Ms Rous-seff’s core supporters
Like the country’s economic problems,its political ones, while specific to today’sparticular scandals and manoeuvring, can
be traced to the transition of the 1980s tory reveals a consistent tendency towardsnegotiated consensus at Brazil’s politicalwatersheds; it can be seen in the war- andregicide-free independence declared in
His-1822, the military coup of 1964, which wasmild compared with the blood-soaked af-fairs in Chile and Argentina, and the transi-tion that created the new constitution Oneaspect of this often admirable trait is a re-sistance to purging The mid-1980s saw alot of institutions—the federal police, thepublic prosecutor’s office, the judiciary, as-sorted regulators—overhauled or createdafresh But many of the old regime kepttheir jobs in the civil service and else-where The transition was thus bound to
be a generational affair
So it is now proving, with a retiring oldguard being replaced by fresh blood ofteneducated abroad In 2013 the average judgewas 45 years old, meaning he entered uni-versity in a democratic Brazil Civil ser-vants are getting younger and better quali-fied, says Gleisson Rubin, who heads theNational School of Public Administration.More than a quarter now boast a postgrad-uate degree, up from a tenth in 2002 SérgioMoro, the crusading 43-year-old federaljudge who oversees the Petrobras investi-gations, and Deltan Dallagnol, the case’s35-year-old lead prosecutor, are the mostfamous faces of this new generation.Unfortunately, this rejuvenation doesnot extend to the institution most in need
of it: Congress Its younger faces typicallyhave family ties to the old guard “Party
Deteriorating
Sources: Codace;
IBRE/FGV; Economist Intelligence Unit
+ –
1998 00 2002 04 06 08 10 12 15
Primary balance
Interest payments
Budget deficit Federal government*, as % of GDP
Trang 15The Economist January 2nd 2016 Briefing Brazil’s crisis 15
2politics is a market for lemons,” says
Fer-nando Haddad, the fresh-faced PT mayor
of São Paulo and a rare exception to the
dy-nastic rule, nodding to George Akerlof’s
classic analysis of adverse selection in the
market for used cars: it attracts the venal
and repels the honest Consultants who
have advised consecutive Congresses
agree that each one is feebler than the last
Brazilians have noticed the decline, and
are transferring their hopes accordingly
“Judges and prosecutors are becoming
more legitimate representatives of the
Bra-zilian people than politicians,” says
Nor-man Gall of the Braudel Institute, a
think-tank in São Paulo Everyone wants a selfie
with Mr Moro and, disturbingly, nearly
half of Brazilians think that military
inter-vention is justified to combat corruption,
according to a recent poll Barely one in five
trusts legislators; just 29% identify with a
political party
Monthly, oily, deeply
That last fact is perhaps particularly
im-pressive given that they have so many
par-ties to choose from Keen to promote
plu-ralism the constitution’s framers set no
national cut-off below which a party’s
votes would not count It is possible to get
into Congress with less than 1% of the vote:
in principle, it could be done with 0.02%
As a result the number of parties has
grown from a dozen in 1990 to 28 today
The three biggest—the PT, the PMDB and
the opposition centre-right Party of
Brazil-ian Social Democracy (PSDB)—together
ac-count for just 182 of 513 seats in the lower
house and 42 out of 81 senators
One of the causes of the mensalão
scan-dal was corruption that provided Lula’s
government with a way to get the votes it
needed from the disparate small parties
The petrolão (“big oily”, as the Petrobras
af-fair is widely known) apparently shared a
similar aim Such ruses may have helped
PT governments pass some good laws,
such as an extension of the successful
Bolsa Família (family fund) cash-transfer
programme But the party was not able to
do all that it had said it would; potentially
helpful reforms in which it was less
invest-ed fell by the wayside Raphael Di Cunto of
Pinheiro Neto, a big law firm in São Paulo,
points to many antiquated statutes in need
of an update, such as the
Mussolini-in-spired labour code (from 1943) and laws
go-verning foreign investments (1962) and
capital markets (1974)
A Congress in which dysfunction feeds
corruption which feeds further
dysfunc-tion is not one likely to take the hard
deci-sions that the economy needs But this is
the Congress Brazil has: though there will
be local elections in October 2016,
congres-sional elections, like the next presidential
poll, are not due until 2018 Can Brazil’s
public finances hold out that long?
Many prominent economists think
they just about can They forecast a dling-through” in which Ms Rousseff holds
“mud-on to her job, C“mud-ongress passes a few est spending cuts and tax rises, including afinancial-transactions levy, the CentralBank continues to fight inflation, the cheapreal boosts exports and investors don’tpanic After three years of this, the theorygoes, an electorate fed up with stagnationand sleaze will give the PSDB a clear man-date for change Ms Rousseff narrowly de-feated the party’s candidate in 2014 by de-riding his calls for prudence as heartless
mod-“neoliberalism”, only to propose a similaragenda (through gritted teeth) immediate-
ly after winning If proposed by aPSDB inpower that actually believed in them, suchmeasures might receive cross-party sup-port—though given the PSDB’s spiteful un-willingness to support Mr Levy’s measures
in 2015 this would not be without irony
Such a scenario is possible Figures forthe third quarter of 2015 show exports pick-ing up Price rises could slow down assteep increases in government-controlledprices for petrol and electricity put in place
in 2015 run their course Politicians andpolicymakers are keenly aware that Brazil-ians are less tolerant of inflation than in the1980s and 1990s, when rates of 10% wouldhave seemed mild
Investors are staying put, at least in gregate Yield-hungry asset managers aretaking the place of pension and mutualfunds that left in anticipation of Brazil’s in-evitable demotion to junk status The realhas fallen 31% since the start of 2015 and thestockmarket is down by 12.4%; but thoughbattered they are not knocked flat Thebanking system is well capitalised and, ob-servers agree, diligently monitored by theCentral Bank The $250 billion in foreign-denominated debt racked up by Braziliancompanies during the commodity-price-fuelled binge has ballooned in local-cur-
ag-rency terms and remains a worry Butmuch of it is hedged through the firms’own dollar revenues or with swaps—though settling some of those swaps hascost the government, which sold them,some 2% ofGDP this year
The sardonic Mr Lisboa observes withuncharacteristic optimism that “at last peo-ple are talking seriously about Brazil’sstructural problems” Fiscal dominancehas left arcane discussions among eco-nomic theorists and burst onto newspapercolumns Mr Barbosa is openly discussingpension reform and the constitutionalchange that would have to go with it InOctober the PMDB, which tends to lag be-hind public opinion more than to lead it,published a manifesto that talked aboutprivatising state businesses and raising theretirement age Even the famously stub-born Ms Rousseff has begun to listen rath-
er than to hector, says a foreign economicdignitary who met her recently
But the fact that muddling through may
be possible does not mean it is assured Ithinges on the hope that politicians come totheir senses more quickly than they havedone in the past (witness the lost decadebegun in the 1980s) It also assumes thatBrazil’s penchant for consensus will holdits people back from social unrest on thesort of scale that topples regimes in othercountries The anti-government protests of
2015 were large, drawing up to a millionpeople in a single day But they were mid-dle-class affairs which took place on spo-radic Sundays, causing Ms Rousseff moreannoyance than grief As wages sag andunemployment rises, though, temperscould flare If they do there will be everychance of a facile populist response thatdoes even deeper economic damage Should Ms Rousseff be booted out—through impeachment, annulment of theelection or coerced resignation (none ofwhich looks likely just now)—chaos wouldsurely ensue Her core supporters may beless numerous than they once were, butshe has many more than Mr Collor had in
1992 They would close ranks against the
“coup-mongers”
The strength of Brazil’s institutions gests something shy of the failed populistexperiments of some South Americanneighbours And the fact that voters in Ar-gentina and Venezuela rebuffed that popu-lism in the past few months has not es-caped the notice of Brazil’s politicians Butevery month of dithering and every new
sug-petrolão revelation chips away at Brazil’s
prospects The 2010s are already certain to
be another lost decade; GDP per personwon’t rebound for years to come
It will be a long time before a presidentcan match the pride with which Lulashowed off his Olympic trophy But if Bra-zil’s politicians get their act together, the2020s could be cheerier Alas, if they donot, things will get a great deal worse.7
Trang 17The Economist January 2nd 2016 17
For daily analysis and debate on America, visit
Economist.com/unitedstates Economist.com/blogs/democracyinamerica
1
ASK Republicans how best to reform
tax-es, and they will inevitably mention
Ronald Reagan In 1986 the Gipper slashed
levies on earnings; the highest income-tax
rate tumbled from 50% to 28% At the same
time, Reagan simplified taxes by closing
loopholes and killing off exemptions
To-day’s Republican presidential contenders
would dearly love to repeat the trick But
they have given up a key ingredient in the
recipe The 1986 reform cost nothing,
main-ly because taxes on businesses went up In
starkcontrast, today’s Republican tax plans
are jaw-droppingly expensive
American taxes are a mess There are
seven different rates of federal income tax,
up from three after Reagan’s reform (in
Canada there are four; in Britain, three)
Endless exemptions and deductions cost
just over 7% ofGDP These distort
incen-tives and benefit mainly richer folk, but are
hard to keep track of because their cost
stays off the government’s books Filling in
tax returns takes the average non-business
filer eight hours and costs $110 every year
By one recent estimate, the inconvenience
costs of filing add up to 1.3% ofGDP
Business taxes are no better At 39%, the
tax on corporate profits is the highest in the
OECD In reality, businesses pay less
be-cause of a whirlwind of
incentive-distort-ing exemptions Want to invest in
Ameri-ca? Issue shares to finance your project,
ing economists One thing keeping theplan on the shelf is that Mr Bush lags be-hind in the polls But thanks to its detail—and the scrutiny poured on it as a result—it
is a useful benchmark
Mr Bush rightly wants to reduce thenumber of income tax bands, to three Indoing so, though, he calls for a whoppingreduction in the top rate of income tax to28%, from 39.6% today Mr Bush wouldslash the corporate tax rate to 20% and allbut abolish the tax incentive to borrow To-day, if a firm buys a new computer or piece
of machinery, it can knock the cost off itstax bill only incrementally as the newequipment loses value; but under MrBush’s plan it could deduct the full cost up-front That should encourage investment.The plan is hugely expensive Before ac-counting for its economic effects, it wouldcost $6.8 trillion, or 2.6% ofGDP, over a de-cade, according to the Urban-BrookingsTax Policy Centre, a think-tank About two-thirds of the bill comes from income-taxcuts Cuts for high-earners are costly, be-cause the highest-earning 1%—who wouldsee a 12% increase in after-tax income un-
and your marginal tax rate ends up at 38%
Load up on risky debt and the rate mets—in fact, you will benefit from a 6%
plum-subsidy Across industries, average taxrates range from 40% for making software
to 15% for building mineshafts The WorldBank and PricewaterhouseCoopers, an ac-counting firm, ranks America’s tax system53rd in the world, wedged between Jordanand Vanuatu It takes American businesses
87 hours, on average, to pay their taxes; inFrance it takes just 26 hours
Tax reform, then, is essential, and publicans have embraced the cause
Re-Among the presidential candidates, JebBush has proposed the most detailed plan,and is cheered on by a crew of right-lean-
Republican tax plans
na ‡ 10,000
*On income over $85,750 † On income over $150,000 ‡ Replaced by $2,000 tax credit Sources: Tax Foundation; Tax Policy Centre
1.8 3.1
2.5 4.9
2.5 5.2
5.8 9.5
10 Percentage increase in after-tax income in 2025 under the tax plans of:
By income quintile Ted Cruz (flat tax)
11.9 17.6
13.0 18.3
top 1% top 0.1%
of which:
Jeb Bush Donald Trump
Jeb Bush Donald Trump Marco Rubio
Trang 1818 United States The Economist January 2nd 2016
1
2der the plan—produce almost half of
in-come-tax revenues By 2026 the $715 billion
annual cost of the plan exceeds the
project-ed budget for national defence
The plan would wrench on
purse-strings that are already stretched By 2025
government health-care and pensions
pro-grammes will have nearly 60% more
bene-ficiaries than in 2007 Mr Bush, like most
Republicans, wants to increase rather than
cut defence spending And non-defence
day-to-day spending has already been
slashed by 22% in real terms since 2010
Mr Bush’s plan, then, looks
unachiev-able Incredibly, though, it is one of the
most modest in the pack Donald Trump,
who tops opinion polls, wants to cut
in-come taxes still further; under his plan, the
top rate of tax falls to 25% Whereas Mr
Bush would nearly double the standard
deduction, the amount that can be earned
before paying income tax Mr Trump
would quadruple it The Donald would cut
business taxes more aggressively, too
Though he talks about raising taxes on
hedge-fund managers by removing the
“carried interest” provision, Mr Trump’s
cuts to income tax are so deep that the
pro-vision barely matters In all, reckons the
Tax Policy Centre, Mr Trump’s plan is
al-most 40% more expensive than Mr Bush’s
Must be funny
Where to look for realism? Marco Rubio
of-fers more modest income-tax cuts, but
would eliminate most taxes on capital
gains and company dividend payments
Many economists view these taxes as
inef-ficient Yet capital is mostly the preserve of
the well-off: only a fifth of adults who earn
less than $30,000 tell pollsters they have
stockmarket investments, compared with
nearly nine in ten who earn more than
$75,000 Citizens for Tax Justice, an
advoca-cy group, reckons Mr Rubio’s plan would
make the pockets of the top 1% of earners
bulge more than Mr Bush’s would
Ted Cruz has the boldest plan The
Tex-an senator promises to replace all income
taxes—including payroll taxes which fund
Social Security and Medicare payments—
with a10% flat tax Business taxes would be
replaced with a value-added tax of 16%
This plan is roughly as expensive as the
Bush plan, before accounting for its
eco-nomic effects, according to the Tax
Founda-tion, a right-leaning think tank But it
would be still more generous to the highest
earners, as value-added taxes are less
pro-gressive than income tax
The candidates all say their plans will
increase economic growth, boosting
tax-revenues and dramatically bringing down
costs Mr Bush’s cheerleaders say his plan
will add 0.5 percentage points to growth
each year, knocking two-thirds off the
so-called “static” cost Mr Trump claims—with
a straight face—that his plan is
revenue-neutral
Done right, reforming and simplifyingtaxes would boost growth Yet the gargan-tuan cost of the plans comes from tax cutsfor high earners, and the evidence thatthese help the economy is patchy Cru-cially, whether tax cuts boost growth de-pends on how they are paid for If theycause deficits to gape larger, tax cuts willweigh on growth rather than support it, bygradually pushing up interest rates
There is better evidence that tax cuts forbusinesses help the economy But thatdoes not mean they would pay for them-selves—as Mr Trump suggests—or make upfor expensive giveaways elsewhere Thebest evidence suggests that taxes on divi-dends, which Mr Rubio would abolish,have no effect at all on investment Morethan most proposals, Republican tax plansare articles of faith.7
WISHING for his death “in a fiery caraccident” was only one of manymessages directed at Chuck Henson when
he became the University of Missouri’snew interim vice-chancellor for inclusion,diversity and equity Mr Henson does notfollow social media, but his wife does Re-cently she agreed to stop reading the deaththreats and other missives intended for herhusband, and instead to help him focus onhis task, which is to end the racial turmoilthat has made the university the centre of anationwide campus protest movementover race for the past three months
“We have a unique history and we have
a unique problem,” says Mr Henson, a lawprofessor Missouri was a slave state until1865; its first public university was founded
in 1839 by James Rollins, an owner ofslaves It first admitted black students only
in 1950 (Yale’s first black student graduated
in 1857, Harvard’s in 1870) The relations of
African-Americans both with other dents, and with the overwhelminglywhite faculty, have frequently been un-easy Anger boiled over in November, lead-ing to the resignation of Tim Wolfe, the uni-versity’s president and chancellor, afterweeks of protests by students outraged bywhat they saw as Mr Wolfe’s failure to dealwith racism on campus
stu-Offensive incidents last year included aswastika smeared with faeces on the wall
of a dormitory bathroom and racial thets hurled at black students, includingPayton Head, the president of the studentbody Cynthia Frisby, a member of faculty,recounted in a Facebook post how, whenjogging along a road, a white man in a lorryflying the Confederate flag stopped, spat ather, delivered racist abuse, gave her the fin-ger and drove off “I have been called the N-word too many times to count”, she wrote,including, she says, by other members of
epi-Race on campus
Of slavery and swastikas
COLUMBIA, MISSOURI
The University of Missouri’s efforts to placate protesters have created a backlash
Where intersextionality meets microaggressive adultism
Trang 19The Economist January 2nd 2016 United States 19
Rating police officersRevenge of the nerds
THE Christian siblings were doingtheir homework when the policearrived Two officers entered the house,guns drawn, pursuing what was evident-
ly a prank tip-off about a captive beingheld at their address The guns stayed outeven when the mistake became appar-ent The officers ran the details of thechildren’s father—who, like them, isblack—through the police system on theoff-chance of turning something up
The family was traumatised Theincident, in 2013, brought home to ImaChristian, now 18, that Americans could
be vulnerable to rough policing “nomatter where you live, or who you are”;
her sister Asha, who is 16, says it is “notuntil you are face to face with an officerthat you realise what the deal is.” Thesisters—from Stone Mountain, just out-side Atlanta—didn’t get even, exactly
Instead, with their brother Caleb (now15), they developed an app, called Five-O,intended to help improve police behav-iour and community relations It letscitizens rate their experiences with offi-cers, record both parties’ race and sex andthe purpose of the interaction, and findaggregate scores for county forces
Five-O (a slang term for cops) waslaunched in 2014, but will get a boost thisspring from the €20,000 ($22,000) prize
it won at an international contest forjustice-related initiatives, organised by athink-tank in the Netherlands The mon-
ey will go towards marketing the tool inBaltimore and Chicago Attracting inputfrom broad cross-sections of such com-munities is one of the ways the Chris-tians believe they can neutralise an obvi-ous potential bias—ie, that the ratings will
be skewed by the aggrieved, legitimate asthose grievances may sometimes be
That composite picture, combining goodand bad feedback, is, they reckon, one ofthe ways their product differs from otherpolice-related apps, which concentrate
on uploading video They also want toextend its availability from Android to
iPhones The long-term plan is to includeBritain, Brazil, Canada and Russia, mak-ing Five-O, as Asha puts it, “a global re-pository of unbiased police data”
That is an ambitious goal for teenagerswho mostly taught themselves to code.(Their parents used to work for an in-ternet start-up and, Caleb recalls, noticedyoungsters “getting paid insane amounts
of money” for programming.) In 2016they aim to launch another app throughtheir firm, Pinetart Inc: this one, Coily, letswomen rate hair-care products, and soavoid shower-stall accumulations ofhalf-empty bottles Studies permitting,that is Ima is a freshman at StanfordUniversity; Asha—who is finishing highschool online, to free up time for en-terprise—hopes to join her or go to Co-lumbia “I’m very proud of them,” saystheir mother Karen
ATLANTA
How one family of high-school students is policing the cops
Steve McGarrett, awaiting feedback
faculty The student protests gained
mo-mentum when Jonathan Butler, a graduate
student, staged a hunger strike to force Mr
Wolfe to resign Yet the turning point was
the announcement by members of the
football team that they would not play or
practise and boycott a game against
Brigham Young University (BYU) unless
Mr Wolfe stepped down The footballers’
boycott of the game would have cost the
university around $1m
Mr Wolfe was replaced as president of
the university, temporarily, by Michael
Middleton, a long-standing member of the
law faculty and graduate of the university,
who founded its Legion of Black
Colle-gians in 1968 Mr Middleton promises to
meet all the demands of “Concerned
Stu-dent 1950”, the group of black stuStu-dents
leading the protests, which include the
cre-ation of a “comprehensive racial
aware-ness and inclusion curriculum” and an
in-crease in black members of faculty to 10%
from around 3% Mr Middleton cautions,
however, that some demands will be
tricky to meet by the deadline the student
group proposes, adding that he will
ex-plain why
Mr Middleton insists that racism at the
University of Missouri, nicknamed
Miz-zou, is no worse than at other big
universi-ties He calls the often inadvertent
“micro-aggressions” against minority students a
“national problem” that is embedded in
American history, and adds: “We are the
first in finding effective solutions.” So far
that has meant a clean-out of the
universi-ty’s leadership Seven temporary officials,
in addition to Mr Middleton, are now
run-ning the university, including Mr Henson
and Hank Foley, Mizzou’s new interim
chancellor
Yet while the university is making
changes, the student protests have also set
off a different kind of reaction Kurt Bahr, a
Republican state representative, says some
of his constituents have told him that they
regret attending Mizzou and do not want
their children to go there, because they do
not trust the new leadership of the
univer-sity One of his constituents even said that
he feared for the safety of his daughter on
campus thanks to the “instability” there
Mr Bahr co-sponsored a bill in
Decem-ber that would strip scholarships from any
athlete who “calls, incites, supports or
par-ticipates in any strike”, and would require
colleges and universities to fine coaching
staff who encourage them The bill has
been withdrawn since because its author,
Rick Brattin, another Republican state
law-maker, realised that the state could not
mandate the revocation of privately
fund-ed athletic scholarships such as the
foot-ball scholarships at Mizzou But Mr Bahr
insists that the proposed bill “made its
point”, which is that a strike is not a good
way to cope with a possible systemic
pro-blem “Are we promoting anarchy within
our university system?” he asks
The backlash against the changes atMizzou is likely to continue, led by self-styled defenders of the First Amendment(which protects free speech) Yet the FirstAmendment does not give people a freepass to go round saying hateful things,points out Mr Henson To help studentsand faculty realise this, Mizzou has devel-oped a new guide to “inclusive terminol-ogy” which ensures a healthy level of re-
spect for all minority groups It includesterms such as “adultism” (prejudice againstthe young), “minoritised” (when under-represented groups are made to feel inferi-or) and intersextionality (obscure) Somewill see this stuff as movement in the rightdirection But it is also likely to increase theire of those who watched the protests andthought they saw a group of privileged col-lege students complaining about how ter-rible their lot is.7
2
Trang 2222 United States The Economist January 2nd 2016
IF YOU believed the pollsters, America’s
2012 presidential election looked like a
nail-biter Most national surveys had Mitt
Romney and Barack Obama tied; Gallup,
the country’s oldest scientific polling
out-fit, had the challenger ahead, 49% to 48%
When the votes were counted, however,
Mr Obama won by four percentage points
To many political pundits, as to Mr
Rom-ney, Mr Obama’s margin of victory came
as a shock Among bettors, however, it
barely elicited a shrug: prediction markets,
in which punters wager on the outcomes
of elections, had always considered the
in-cumbent a heavy favourite An Irish
book-maker, Paddy Power, was so confident of
his chances that it paid out £400,000
($640,000) two days before the election to
people who had bet on Mr Obama Will
this trick be repeated in 2016?
Though now a fringe asset class,
predic-tion markets are in fact among the oldest
exchanges in America In the 1820s
promi-nent supporters of candidates frequently
offered public wagers on them as a
demon-stration of their conviction Punters who
could not afford to pony up cash would
compensate with offers of public
humilia-tion: one common wager made losers
trun-dle winners around in a wheelbarrow;
an-other required them to roll peanuts up and
down streets with toothpicks Some losers
had to eat real crow
Half a century later, these expressions
of bravado had evolved into semi-formal
financial markets Trading volume began
to approach that of actual shares: in 1916
$10m ($218m in current dollars) was
wa-gered on the photo-finish race between
Woodrow Wilson and Charles Hughes
The markets were wrong that year,
predict-ing a win for Hughes But in 11 of 12
elec-tions between 1884 and 1940 when bettors
had identified a clear favourite by
mid-Oc-tober they were vindicated, despite
operat-ing in an era without any reliable polloperat-ing
Newspapers diligently reported
presiden-tial betting odds: according to Paul Rhode
and Koleman Strumpf, the economists
who unearthed the records of these
mar-kets, the press published prices five days a
week in the month before an election
The death knell for the electoral
mar-kets of yesteryear sounded in 1936, when
George Gallup of the American Institute of
Public Opinion stationed pollsters on
street corners and asked passers-by whom
they would vote for, thus obtaining a
ran-dom sample The well-known Literary
Di-gest survey, which relied on readers
mail-ing in postcards, had over-sampled thewell-off and called the election for the Re-publican Alf Landon, while Gallup accu-rately predicted an easy victory for the in-cumbent, Franklin Roosevelt Punters were
not fooled by the Digest’s “poll”, and also
forecast that Roosevelt would win But thedawn of scientific polling made gamblingodds look amateurish, and allowed news-papers to publish campaign updates with-out having to cite markets of dubious legal-ity and (in their view) morality
Nonetheless, the markets might havesoldiered on had history not conspiredagainst them The industry was centred inNew York, and during the second world
war Fiorello La Guardia, the city’s mayor,launched a crackdown on unauthorisedgambling His raids drove political book-makers deep underground or out of town
At the same time, competing forms of gering began to offer alluring substitutes
wa-In 1939 the state legalised betting on horseraces, allowing punters to slake their thirstfor action dozens oftimes a day rather thanonce every four years, without any riskthat a bookie would fail to pay out
By the late 1940s, what was once aneight-figure marketplace had all but van-ished Electoral betting would not make acomeback until 1988, when Jesse Jacksondefied expectations to win Michigan’sDemocratic presidential primary His vic-tory highlighted how unreliable pollscould be, and led a group of professors atthe University of Iowa to hunt for an alter-native Though unaware of predictionmarkets’ pre-war history, they reinventedthe idea by setting up an “Iowa PoliticalStock Market”, in which students and fac-
ulty could wager modest sums on the coming general election Four years later,America’s Commodity Futures TradingCommission (CFTC) authorised the IowaElectronic Markets to take money from thepublic because they were at heart an aca-demic enterprise, though the regulatorscapped bets at $500 to prevent speculationwith meaningful sums
up-For the next 20 years the IEM
consistent-ly out-performed polls in various tive, legislative, national and local elec-tions in a dozen different countries But thelogistical difficulty of placing bets on theexchange (particularly before internet ac-cess became widespread), along with thelow wagering ceiling, limited it to trivialvolumes of a few hundred thousand dol-lars a year It was not until 2008, after theinternet had globalised both informationand financial flows, that pre-war predic-tion markets found a worthy heir
execu-During the 2004 presidential campaign
an Irish sports-betting site called Intradestarted taking bets without the low limitsofthe IEM Even though credit-card compa-nies in America would not process depos-its to the site, punters flocked to it A whop-ping $230m was wagered on the 2012election—an even greater sum in constantdollars than on the Hughes-Wilson contest
of 1916 And like its predecessors, Intradewas deadly accurate Its markets correctlypredicted the results of 47 of the 50 states inthe election of 2008, and 49 of 50 in 2012.But just like the street-corner action ofthe 1930s, Intrade soon came under legalscrutiny In November 2012 the CFTC or-dered the site to stop offering contracts onthe price of goods under the agency’s over-sight, such as oil and gold Four months lat-
er, the risks of investing in Intrade’s ulated marketplace were laid bare whenthe site abruptly shut down after it dippedinto its clients’ funds to transfer money toits late founder It took months for account-holders to be made whole The site’s un-timely demise provided fresh ammunitionfor those who regard prediction markets asunsavoury speculation
unreg-The collapse of Intrade did not late prediction markets, though The IEM isalive and well, and in late 2014 PredictIt, anonline exchange sponsored by VictoriaUniversity of Wellington in New Zealand,entered the fray with an $850 wager capand official authorisation from the CFTC.But these operations still fall far short of re-alising prediction markets’ full potential.Their low betting limits prevent investorswith extremely valuable information—say,
annihi-a looming scannihi-andannihi-al—from cannihi-ashing in on thevalue of their knowledge and incorporat-ing it into the market price
At the time of writing, PredictIt reckonsthat the fight for the Republican nomina-tion is between Ted Cruz and Marco Rubio,and that Hillary Clinton has a 54% chance
of becoming the next president.7
Sources: News clips;
The Economist *New York Times, Washington Postand Wall Street Journal
Articles in major US newspapers*
containing selected phrases
0 20 40 60 80 100 120
“election bet” or
“election betting” “prediction market” or “Intrade” or “PredictIt” or “PredictWise”
Trang 23The Economist January 2nd 2016 United States 23
BEFORE Donald Trump, there was Patrick Buchanan More
than two decades before Mr Trump kicked over the
Republi-can tea table, Mr Buchanan, a former speechwriter and White
House aide to Presidents Richard Nixon and Ronald Reagan,
launched his own revolt against Republican grandees He made
bids for the Republican presidential nomination in 1992 and 1996,
the first of which challenged a sitting president, George H.W
Bush Like his billionaire successor, Mr Buchanan ran against free
trade and called for restrictions on immigration As early as 1991
he called for a fence on the border with Mexico (talk of a “great,
great” wall would have to wait for Mr Trump)
On foreign policy, the end of the cold war turned him into a
non-interventionist Mr Buchanan—who in 1972 accompanied
Nixon on his trip to Maoist China—now concluded that America
should shun foreign entanglements and defend only vital
nation-al interests In January1991 Mr Buchanan found himself speaking
in New Hampshire during the American-led operation to expel
Iraqi forces from Kuwait, which he opposed Stepping from the
podium, he was given a message: America had just started
bomb-ing Baghdad There goes my non-interventionist line, he recalls
telling the watching governor of New Hampshire, Judd Gregg: it is
“all over once the bombs begin to drop” Mr Bush’s approval
rat-ings rose to 90% Yet by the time of the 1992 election the president
was not saved by victory in the Gulf
Timing matters—a political lesson that Mr Buchanan learned
early He was one of the first aides to describe a new voter
co-alition that Nixon might assemble This would unite business
bosses with doctrinaire conservatives, southern whites, socially
conservative Roman Catholics and middle Americans who liked
such government safety nets as pensions for the old, but despised
Democrats for seeming to condone social unrest—whether race
riots, campus radicals or flag-burning protesters opposed to the
war in Vietnam In a memo of 1968 Mr Buchanan spoke of a
“si-lent majority” to be won Nixon made the phrase his own
Today Mr Trump calls his own supporters a “silent majority”,
though his borrowing comes with a twist In the late 1960s Nixon
asked the “great silent majority” for their support In 2015 the
businessman assumes he has already sealed the deal Printed
signs handed out at his rallies declare: “The silent majority stands
with Trump” Asked about the slogan’s Nixonian overtones by
the Washington Post, Mr Trump denied the connection, scoffing:
“Nah Nobody remembers that.”
Speaking in his home in northern Virginia, Mr Buchanan doesnot grumble about Mr Trump’s swiping of his phrase He is too in-terested in a new question of political timing As a candidate, hewas less successful than as an adviser His high point was his win
in the 1996 New Hampshire primary, after a populist surge thatsaw him declare: “The peasants are coming with pitchforks.” Afull-size silver pitchfork (a gift from campaign aides) hangs in hiswood-panelled study, alongside a souvenir mug that asks: “Whatwould Nixon Do?”
Back in the 1990s moderate Republicans agreed that date Buchanan was doomed by his ferocious opposition to abor-tion, homosexuality and feminism: in 1992 he told his party’s na-tional convention that America faced a “cultural war” He alsocaused alarm with intemperate talk about Israel’s clout in Wash-ington Today, though, he argues that his timing was off when itcame to three big issues: immigration, globalisation and non-in-terventionism “Those issues are mature now,” says Mr Buchan-
Candi-an, rattling off statistics on undocumented immigrants in
Ameri-ca (their numbers have more than tripled since 1991) and factoryclosures since such pacts as the North American Free TradeAgreement (NAFTA) was signed At 77, MrBuchanan writes news-paper columns and is a frequent public speaker He reports thatpeople “constantly” voice the same complaint to him: “This isn’tthe country I grew up in.” He lists reasons why he thinks they areright: immigrants have reached even small communities, factoryjobs have vanished and interventionist wars launched by George
W Bush left Americans “with ashes in our mouths”
Mr Buchanan was called a fringe candidate, a protectionistand an isolationist in the style of the America First Committee,which argued against declaring war on Nazi Germany Now to-day’s frontrunner, Mr Trump, echoes his scorn for free-trade pactsand nation-building overseas, and praises Vladimir Putin (Mr Bu-chanan has long admired the Russian president’s ethno-national-ism) Senator Ted Cruz of Texas, Mr Trump’s big rival on the hardright, recently said: “I believe in an “America first” foreign policy.”
The silent majority, outnumbered
Yet Mr Buchanan cannot conceal a thought that grieves him dence to support his beliefs is, to him, now irrefutable But if hewas early in the 1990s, demographic and cultural shifts nowmake it too late to rally the conservative majorities that electedNixon or Reagan If given $100 to bet on the Republican nomina-tion, Mr Buchanan would put at least $40 on Mr Trump and atleast $30 on Mr Cruz, whom he compares to an earlier “down-the-line” conservative, Barry Goldwater (who lost the 1964 presi-dential election by a landslide) If he were Mr Trump, he wouldattack Hillary Clinton over free trade in rustbelt states such asOhio, Pennsylvania and Michigan that are key to winning theWhite House He would tell voters that “she and her husband”backed NAFTA and deals that “sent yourjobs overseas” No otherRepublican has Mr Trump’s potential to win some blue-collarDemocrats, he says: “It is hard to see how Cruz, for example, takesOhio.” For all that, he thinks the odds probably favour Mrs Clin-ton to win the election Either way he sees a country “at war withitself ideologically and politically, culturally”, triggering a mea-sure of foreign policy “paralysis” If even half-right, it is a bleakprediction: America first nationalism, in a divided America.7
Evi-Pitchfork politics
A pioneer of Trump-style populism wonders if it can succeed in today’s America
Lexington
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Y 1 1
Trang 25The Economist January 2nd 2016 25
1
ONE afternoon eight months ago in the
mountains of eastern El Salvador,
Ro-sario Sánchez peered into a pit where
fo-rensic experts were at work They were
un-earthing human remains—two skinny leg
bones, several ribs and two halves of a
skull One held up a thin chain hardened
with blood and soil Ms Sánchez gasped
“My sister loved that necklace,” she said
Over three days in December 1981
sol-diers from the Salvadorean army, who had
been trained by the United States,
machinegunned hundreds of unarmed
men, women and children in the village of
El Mozote and surrounding hamlets It was
the worst atrocity committed during the
12-year-long war between leftist guerrillas
and El Salvador’s right-wing government,
in which some 75,000 Salvadoreans died
No one has been punished for the
massa-cre, and almost no one has been held to
ac-count for any other human-rights crime
committed during the conflict An
amnes-ty law in 1993 shielded perpetrators on
both sides from prosecution, and helped
make a political settlement possible
As the exhumations in La Joya, near El
Mozote, show, the amnesty is being called
into question El Salvador’s Supreme
Court is considering a constitutional
chal-lenge to it The court ruled in 2000 that the
amnesty does not apply to violations of
“fundamental” rights, but left it to judges
and prosecutors to decide which crimes
both leftist and conservative politiciansagree “We chose peace over justice,” saysMauricio Vargas, a retired general who rep-resented the army in the peace process.Without the amnesty, “the whole buildingcomes crashing down.” Salvador Sa-mayoa, who represented the guerrillas,warns that if the left demands trials of for-mer military officers the right will go afterex-guerrillas, including the president, Sal-vador Sánchez Céren He was a command-
er of the FMLN, which became a politicalparty after the war
Other countries in Latin America, haps surer that their democracies are sta-ble, are testing whether justice in the courtswill jeopardise peace In Guatemala, a UN–backed commission to investigate corrup-tion has strengthened the justice system.That helped make it possible for prosecu-tors to bring several human-rights cases,including against the former dictator,Efraín Rios Montt Colombia, which isclose to a peace agreement with leftistFARC guerrillas, whom it has been fightingfor more than 50 years, will not offer a gen-eral amnesty, although just how criminalswill be punished has yet to be decided
per-Not even past
The United States, once a haven for nals from Latin America’s wars, haschanged its stance It is seeking to deportJosé Guillermo García, a former Salvador-ean defence minister, on charges that hebears responsibility for the El Mozote mas-sacre and the murder in 1980 of threeAmerican nuns and a lay worker A pro-posed $750m aid package for three CentralAmerican countries sets as one conditionthat governments must prosecute soldiersand police officers suspected of human-rights violations, including past warcrimes
crimi-are grave enough to qualify
Some human-rights advocates arguethat impunity for war crimes is one reasonwhy El Salvador has the world’s highestmurder rate, although other factors, such
as the lack of economic opportunity, doubtedly also play a role “The same sys-tem that was incapable of investigating hu-man-rights violations has found itselfincapable of confronting post-war vio-lence and crime,” says David Morales, ElSalvador’s Human Rights Ombudsman
un-The country’s post-war reconciliationwas in many ways exemplary Both sidesdisarmed, the army shrank and the securi-
ty forces were transformed into a civilianpolice After the war’s end in 1992, a UNTruth Commission spent six months inves-tigating “serious acts of violence” It regis-tered 22,000 complaints, 85% of themagainst the armed forces, paramilitarygroups and right-wing death squads Theirleft-wing foe, the Farabundo Martí Nation-
al Liberation Front (FMLN), was accused in5% of the cases The commission’s reportblamed the army’s elite Atlacatl battalionfor the murder of six Jesuit priests in 1989and for the El Mozote massacre, amongother findings
For the leaders of post-war El Salvador,the commission’s revelations were justiceenough Five days after its report was pub-lished the government enacted the amnes-
ty law It is one of the few things on which
Human rights in El Salvador
Digging for justice
EL MOZOTE
Survivors of wartime atrocities are questioning the country’s amnesty
The Americas
Also in this section
26 Mauricio Macri’s fast start Bello is away
Trang 2626 The Americas The Economist January 2nd 2016
2 In El Mozote daily reminders of the
atrocity keep alive the demand for an
ac-counting One farmer, digging the
founda-tion for a new house, recently uncovered
skeletons of 15 of his relatives He
recog-nised his mother’s skull from the crown on
a tooth Still isolated and poor, the village
trades on its tragedy: locals sell mementos
of the massacre at stalls near the site and
jostle to relate the story to tourists in
ex-change for small tips
The demand for justice is chipping
away at El Salvador’s amnesty In 1990
rela-tives of the victims, helped by Tutela Legal,
a human-rights group, filed a suit at the
In-ter-American Court of Human Rights
Twenty-two years later the court ordered El
Salvador’s government to investigate the
massacre, punish the culprits and
compen-sate victims’ relatives El Salvador’s
then-president, Mauricio Funes, admitted the
state’s responsibility and, weeping
public-ly, begged forgiveness A trickle of aid to El
Mozote followed: a clinic, computers for
the school and road repairs
But the messy conduct of the
exhuma-tion shows how little official enthusiasm
there is for investigation and punishment
The human-rights unit of the
attorney-gen-eral’s office, which promised in 2013 to
in-vestigate El Mozote and seven other
mas-sacres, put in charge of the dig a systems
engineer with no formal training in
exca-vation Work started in the rainy season,
when floods threatened to damageDNA
evidence The villagers received no
ad-vance notice, and at first no counselling
from psychologists Instead of healing
wounds, the investigation reopened them,
their lawyers said
The intervention of the government’s
forensics agency, the Legal Medicine
Insti-tute, improved matters, and showed that
the government’s apparent hostility to the
investigation is not uniform The agency
assigned three Canadians—two
anthropol-ogists and an archaeologist—to help with
the excavation The attorney-general’s
of-fice sought to undermine the three
wom-en, claiming that they were unqualified
The director of the human-rights unit,
Ma-rio Jacobo, declined to comment on the
conduct of the excavation He recently lost
responsibility for it A judge suspended it
after two weeks of digging, and said it
should resume under the direction of the
Legal Medicine Institute Work is likely to
restart in early 2016
Although opinion may be shifting,
many Salvadoreans are loth to unpick an
amnesty that has served the country well
in many ways There is speculation that
the Supreme Court will strike a
compro-mise: uphold the amnesty law, but compel
prosecutors and judges to pursue
viola-tions of fundamental rights, rather than
leaving the decision to them, as its earlier
ruling did On November 23rd six
mem-bers of the United States House of
Repre-sentatives sent a letter to legislators in ElSalvador urging them to choose a “new at-torney-general focused on defeating cor-ruption and organised crime” This waswidely interpreted as a slap at the incum-bent, Luis Martínez, who hopes to be re-elected by El Salvador’s Congress
The families of El Mozote hope thatpressure to investigate and punish today’scrimes will lead to prosecutions for pastatrocities In December laboratory tables
in the San Salvador headquarters of the gal Medicine Institute were covered withthe bones of Ms Sánchez’s murdered rela-tives Brittle and brown, they lay amongbundles of tattered clothing and stacks ofrusted coins Other tables displayed larger,lighter-coloured bones They belonged tounidentified victims of recent gang vio-lence The government—and probably stillmost Salvadoreans—think going after to-day’s murderous gangs should be the pri-ority: 95% of murders are unsolved To thesurvivors of El Mozote, both groups of vic-tims are entitled to the same justice.7
Argentina’s president in December,has wasted little time in undoing the popu-list policies of his predecessor On Decem-ber 14th he scrapped export taxes on agri-cultural products such as wheat, beef andcorn and reduced them on soyabeans, thebiggest export Two days later Alfonso Prat-Gay, the new finance minister, lifted cur-rency controls, allowing the peso to floatfreely A team from the new governmentthen met the mediator in a dispute withforeign bondholders in an attempt to endArgentina’s isolation from the internation-
al credit markets
This flurry of decisions is the first steptowards normalising an economy that hadbeen skewed by the interventionist poli-cies of ex-president Cristina Fernández deKirchner and her late husband, NéstorKirchner, who governed before her Theycarry an immediate cost, which Mr Macriwill seek to pin on the Kirchners Some ofthe new president’s other early initiativesare proving more controversial
The economic reforms seem to beworking Farmers who had hoarded grain
in the hope that the tariffs would be liftedare now selling, replenishing foreign-ex-change reserves that had been drained todefend the artificially strong peso Thenewly freed currency fell by more than
30%, a further boost to exporters It has bilised at around 13 pesos to the dollar
sta-“Substantive” talks with holdout holders starting in early January could lead
bond-to a return bond-to credit markets in 2016.But the devaluation has pushed up theinflation rate, already more than 25% when
Mr Macri took office To rein it back, on cember15th the central bank raised interestrates on short-term fixed deposits by eightpercentage points to 38% The governmenthopes to persuade business and trade-un-ion leaders to keep tight control of pricesand wages But that may prove difficult: theunions are fragmented and little disposed
De-to help Mr Macri, a centre-right politician;businesses may balk at holding downprices Barclays, a bank, expects the econ-omy to contract by 1.1% in 2016 But in-creased foreign investment should lead torenewed growth of 3.5% in 2017
Mr Macri’s attempts to bring fresh ent into institutions dominated by Ms Fer-
tal-nández’s kirchneristas have run into
resis-tance, from both foes and allies OnDecember 14th, with the Senate in recess,
Mr Macri temporarily appointed by decreetwo Supreme Court judges He thenbooted out the chief of the media regula-tor, Martín Sabbatella
In both cases his motives were worthy
He wants independent jurists in the courts
Mr Sabbatella had clashed with GrupoClarín, a big media group Mr Macri thinkshis removal will strengthen press freedom.But critics say he misused his authority Onthe judges, at least, he has relented He willnow wait for the Senate’s approval.Touring northern Argentina, where20,000 people have been displaced fromtheir homes by floods, Mr Macri blamedthe former president, saying she had failed
to invest in flood defences (see page 61) Fornow, Argentines are likely to believe theirnew president However, if the economicslowdown is prolonged, the honeymoonwill not be.7
Argentina’s new president
Trang 27The Economist January 2nd 2016 27
For daily analysis and debate on Asia, visit
Economist.com/asia
THE bronze statue of a teenage “comfort
woman” in Seoul, South Korea’s
capi-tal, is intended as a daily rebuke to the
Japa-nese embassy opposite The figure
repre-sents one of many thousands of Korean
women who were forced to serve as
prosti-tutes in wartime military brothels catering
to imperial Japanese soldiers Citizens’
groups paid for the figure to be erected in
2011 when relations between Japan and
South Korea were at a nadir Well-wishers
bring her flowers, shoes and, in stormy
weather, even a hat and raincoat Yet now
the statue is meant to move elsewhere as
part of a landmark agreement struck
be-tween the two countries on December
28th to try to settle their dispute over
com-fort women once and for all—and
trans-form dangerously strained relations
Of former sex slaves who have come
forward in South Korea, only 46 survive
Under the deal, South Korea will set up a
fund for them into which the Japanese
gov-ernment will pay $8.3m for their medical
and nursing care The Japanese prime
min-ister, Shinzo Abe, has expressed “sincere
apologies and remorse” for their suffering,
which was appalling In all, there were tens
of thousands of comfort women Many
were raped dozens of times a day, beaten
and infected with venereal diseases
It is a big change for Mr Abe, who has in
the past questioned whether the comfort
women were coerced at all But he hopes to
have found what the two countries’
for-legal responsibility, which was settled inJapan’s normalisation treaty with SouthKorea in 1965 “We didn’t give an inch,” says
a government adviser Indeed, one
observ-er critical of Japan’s attitudes towards tory, Tessa Morris-Suzuki of the AustralianNational University, says that the agree-ment rows back from the landmark Konostatement of 1993, Japan’s first official ac-knowledgment of wartime coercion For itrefers only to the imperial army’s “involve-ment” in the recruitment of comfort wom-
his-en, while excluding references to the use ofdeception or force
The agreement is more likely to faceproblems in South Korea Groups repre-senting the survivors say that the womenwere not consulted, and at least one ofthem has already railed against it as a be-trayal South Korean activists will opposemoving the statue, something Japan caresdeeply about Calls may grow for Mr Abe
to come and make a personal apology tosurvivors, rather than through Ms Park.Whether he would swallow his pride to do
so is unclear Chung-in Moon of YonseiUniversity in Seoul says it is a fragile dealborn of diplomatic necessity
Make it work
Yet both sides have good reason to try tomake it stick, for the bilateral relationshipcould quickly improve, on military matters
as well as others For instance, an ment to share military intelligence thatwas scuppered in 2012 could be revived.The benefits could also show in trade di-plomacy, with Japan and America work-ing together to bring South Korea into theTrans-Pacific Partnership, a free-tradegrouping recently agreed among a dozencountries With luck, the idea of two de-mocracies in a dangerous corner of theworld not talking to each other will soonlook too absurd to go back to.7
agree-eign ministers called a “final and ble” resolution to an issue that has poi-soned the relationship for years SouthKorea’s president, Park Geun-hye, hailedthe deal—hastened by the two leaders’ firstbilateral meeting in November—as a key toimproved relations
irrevoca-The administration of Barack Obama iscock-a-hoop that its two closest Asian al-lies are making up It had long pressedSouth Korea to do so Better relations be-tween the two should help America’s strat-egy to balance China’s rise
But some South Korean policymakershad also grown uneasy that relations withJapan were at a dead end and—thoughthey would not say it out loud—that MsPark sometimes seemed to hew too closely
to China Meanwhile, a stronger trilateralrelationship with Japan and Americawould help in dealing with dangerousNorth Korea It has taken time for Ms Park
to see all this, and her family history helpsexplain why Her late father, Park Chung-hee, was a star officer in the Japanese impe-rial army, and later the South Korean dicta-tor who normalised relations with Japan
These were liabilities for the cautious MsPark as anti-Japanese hysteria grew
A question now is whether a deal willhold Some of Japan’s loony ultranational-ists will feel betrayed by Mr Abe But he istoo politically dominant at home to beworried by that Besides, the governmentcan argue that saying sorry does not imply
Japan, South Korea and their history wars
Saying sorry for sex slavery
TOKYO
A surprise deal over forced prostitution during the war may soothe troubled
relations between two democratic neighbours
Asia
Also in this section
28 Family planning in Vietnam
28 Thailand’s southern insurgency
30 India’s endangered economic reform Banyan is away
Trang 2828 Asia The Economist January 2nd 2016
1
BRIGHTLY coloured plastic flowers greet
patients at the reception desk of
Nguyen To Hao’s abortion clinic Yet the
mood in her waiting room is grim Ms Hao,
an obstetrician and gynaecologist, says
that many of her patients are teenagers
who know shockingly little about sex or its
consequences Some young women with
late-term pregnancies are sent to a nearby
hospital for abortions; others carry their
pregnancies to term and leave their
new-born babies in the care of Buddhist monks
Unwanted pregnancies could be
avoid-ed if only Vietnam had better sex avoid-
educa-tion in secondary schools A Vietnamese
adage claims that avoiding discussions of
sex is the surest way to “prevent the deer
from running” Yet the deer are “already
running”, Dr Hao insists, and the
govern-ment is failing to guide them
Vietnam’s abortion rate is not known
for certain, but is thought to be among the
world’s highest According to researchers
at the Central Obstetrics Hospital in Hanoi,
the capital, two-fifths of all pregnancies in
Vietnam end in abortion—double the
gov-ernment’s tally
Ignorance about sex and contraception
is one glaring factor Some women who
have abortions never meant to get
preg-nant Others desperately wanted a boy,
since male children keep the family
blood-line going and are traditionally expected to
look after their elderly parents
Sex-selec-tive abortions have been illegal since 2003,
but the ban is hard to enforce Ultrasounds
are widely available Nguyen Thi Hien, a
mother of two in Hanoi, says that for $75
doctors at the capital’s private clinics are
happy to tell couples the sex of their fetus
So for every 100 girls, 111 boys are born
in Vietnam, according to theUN
Popula-tion Fund—a sex ratio at birth nearly as
lop-sided as neighbouring China’s Vietnam’s
Communist Party worries that this sex
im-balance will leave a generation of men
struggling to find a mate As in other
societ-ies with lots of frustrated single men, that
may mean more trafficking and
prostitu-tion, more rape and a greater risk of
politi-cal instability
Vietnam’s reproductive and
demo-graphic policies are in flux China’s recent
decision to relax its one-child policy may
prompt Vietnam to reconsider its own
(more loosely enforced) two-child policy,
says a former official from Vietnam’s
health ministry The ministry is now
solic-iting public comments for a revision of that
law, and the National Assembly may take it
up this spring
It is not a moment too soon A ping two-thirds of the country’s 90m peo-ple are of working age That gives Vietnam
whop-a chwhop-ance to boom economicwhop-ally over thenext three decades But the “demographicdividend” may then stop abruptly Fertilityrates in some Vietnamese cities have fallen
to below the population replacement rate,
a trend that could eventually lead to ashortage of workers, as Japan and otherrich countries have learnt to their cost Thedifference is that Vietnam risks growingold before it grows rich
The new population law, in its currentwording, would not help It proposes toleave the two-child policy in place and banabortion after 12 weeks, down from thecurrent limit of 22 weeks, except in cases ofrape That may send even more pregnantVietnamese into shadowy abortion clin-ics In September some 17 public-healthprofessionals complained about the pro-
posed law in a letter to the health minister.Such pressure may prompt the govern-ment to extend the proposed 12-week limit However, the population-control mea-sures being mulled by the ministry containanother troubling feature: a pre-natal focus
on “population quality” That soundsharmless enough, but the underlying idea,according to a foreign health-policy expert
in Hanoi, is that health officials could courage mothers to abort fetuses showingsigns of disability
en-Some in the ministry have also posed lifting the two-child policy in citieswhile continuing to enforce it in the coun-tryside—ie, encouraging the better-educat-
pro-ed and better-off to have more childrenwhile denying the same right to poor folk,including ethnic minorities, who viewtheir children and grandchildren as theironly social safety net That would allowthe bureaucrats in charge of the two-childpolicy to keep their jobs But the idea is re-gressive, unfair and needs to be junked 7
Family planning in Vietnam
Running deer
HANOI
A draft population law looks
ill-considered and discriminatory
Voiding the topic ain’t gonna stop it
SITTING on the floor with neighbours,Sakariya uses a mobile phone to flickthrough photos of his son In one, Kholidstands dressed in his school uniform Inanother he sits hunched over his universi-
ty work In a third he is dead—lying cold on
a mortuary slab The picture was taken inMarch, only hours after soldiers sur-rounded a group of men at a constructionsite in Toh Chud, their home in Thailand’srestive south Seven bullet holes perforatehis chest
Kholid was one of four to die that day—victims of a botched operation seeking tocollar murderous separatists who for yearshave dreamed of resurrecting an indepen-dent sultanate in Thailand’s southern bor-derlands Nearly two dozen villagers weredetained and interrogated but later re-leased The men who were shot may havetried to run, perhaps for fear ofbeing foundwith soft drugs on them A fact-findingpanel says the killings were an error Com-pensation is promised But what the fam-
Thailand’s southern insurgency
No end in sight
TOH CHUD
A southern village tries to remain united as divisions elsewhere grow
Trang 29The Economist January 2nd 2016 Asia 29
2ilies want is justice, says Mohammad,
an-other parent whose son is among the dead
Toh Chud up in the hills had mostly
managed to escape the nightmares
suf-fered by so many communities in
Thai-land’s southernmost provinces Of
2m-odd people in the region, over four-fifths
are ethnic-Malay Muslims Hotheads
among them have long agitated against the
Thai government in Bangkok and its
poli-cies of assimilation—denying the region
autonomy, for instance, and even
recogni-tion of the local Malay language In 2004
secretive insurgent groups began a
cam-paign of exceptionally violent attacks on
security forces as well as on their own
Bud-dhist neighbours
Since then about 6,500 people have
died in this lush coastal strip, most of them
civilians Terrorists have bombed shops
and restaurants and murdered scores of
schoolteachers, who are seen as agents of
the state; victims’ bodies are sometimes
beheaded or set alight Moderate
ethnic-Malays considered to be collaborators are
also targets On December 13th an
ethnic-Malay Thai soldier and his father were
blown up in a graveyard, where they had
gone to bury his mother
State violence has done much to boost
the body count The apparent legal
immu-nity enjoyed by trigger-happy soldiers and
pro-government vigilantes continues to
radicalise new generations of combatants
Kholid’s family say his killers placed an
as-sault rifle next to his body to make him
look like an insurgent
Over the past decade seven Thai
gov-ernments, swept in and out of power by
broader political problems, have grasped
for a resolution Officials say that regional
autonomy of the type that has soothed
Is-lamist insurgencies in Indonesia and the
Philippines is off the table But so are
small-er concessions, such as formal recognition
of the region’s odd Malay language Some
argue that the fat budget the security forces
get to prosecute the conflict gives them
lit-tle incentive to end it Three checkpoints
clog the road out of Pattani, a seaside town,
each manned by a different force
Some energy has gone into boosting
the deep south’s economy, which depends
greatly on its rubber trees Though it
re-mains far poorer than Bangkok, the region
is not as hard-up as some other far-flung
parts of Thailand But locals tend to
com-pare their fortunes with those of ethnic kin
across the border in Malaysia, where laws
grant the Malay majority a host of
advan-tages over ethnic-Chinese and Indian
mi-norities Christopher Joll, an academic,
says the region is like “meat in a
sand-wich”, squeezed by inflexible
national-isms from either side
Thailand’s ruling junta, which had said
it would try to fix the conflict by the end of
2015, trumpets progress Lured by the
pro-mise of fresh peace talks, a gaggle of
once-shadowy separatist groups has formed acommon political wing The violence hasebbed markedly in recent months But DonPathan, a local security analyst, speculatesthat militants may be swapping frequentsmall assaults for better planned and morelethal ones As for dialogue, hardlinerswithin BRN, the most powerful rebelgroup, say they will play no part in thejunta’s proposed talks
Peace-builders on the ground complainthat it is getting harder to discuss unpopu-lar solutions The army has long refused tocountenance international mediation, one
of the separatists’ principal demands, forfear of legitimising separatist claims And it
is hardly likely to consider devolving ers when it is busily recentralising the state,
pow-in part to neuter the government’s nents in other provinces and in part to keep
oppo-a lid on the dissent which moppo-ay follow oppo-alooming royal succession
Matt Wheeler of the International sis Group, a research outfit, thinks the gen-erals are simply “kicking the can down theroad” Yet that carries two risks Althoughthe insurgents have largely rejected inter-
Cri-national jihadism, some people fret that lamic State’s flashy propaganda may yetfind an audience among the region’s un-happy young Lately someone in cyber-space has been adding Thai subtitles to thejihadists’ video-nasties
Is-A deeper worry is that the bubblingsouthern war may fuel Buddhist chauvin-ism Perhaps a tenth of Thais are Muslim,most of them living well-integrated livesfar from the conflict zone On a recent pub-lic holiday girls in black headscarves cy-
mosque, one of Bangkok’s oldest, whichwas festooned with royal flags Yet Thai-land’s Muslims are gradually growingmore conservative under the influence ofMiddle Eastern doctrines, which unnervestheir Buddhist compatriots And somepeople think that Buddhist authorities aregrowing more strident as the influence ofThailand’s royal establishment, which hastraditionally checked them, begins towane In October a senior Buddhist monksaid that Thais should set fire to a mosqueevery time southern “bandits” kill a monk.The locals gathered at the house in TohChud worry that outsiders are seeking tosow division Unlike nearby ghettos, theirvillage of 300 households includes 30 Bud-dhist families, and the tragedy in Marchhas tightened their village bonds On theday of the raid local Buddhists helped toconceal one young man who had escapedthe soldiers’ cordon
As lunch approaches, Somkhuan, aBuddhist who once served as village head-man, joins the group for a smoke Whenhis daughter got married he threw two par-ties, his neighbours recall enthusiastically,
one of them halal Such good relations are
not a big deal, Somkhuan says: it has ways been this way But what if Toh Chudstarted to become the exception?7
al-He’s backed by a fat budget
e a
VIETNAM CAMBODIA
Pattani Toh Chud
250 km
Trang 3030 Asia The Economist January 2nd 2016
splash abroad On December 25th he
turned up in Pakistan, the first visit by an
Indian prime minister in more than a
de-cade, for an impromptu summit with his
counterpart, Nawaz Sharif At home,
though, Mr Modi appears less impressive
Despite his Bharatiya Janata Party (BJP)’s
thumping general-election victory in 2014,
his promises of business-friendly reforms
are stuck
The passage of an all-embracing
value-added tax, known as the goods and
ser-vices tax (GST), has become the litmus test
of his liberalising credentials It is the one
reform that both the BJP and the
opposi-tion Congress party ostensibly agree on
Raising funds for both the federal
govern-ment at the centre and the states, it is meant
to replace a monstrous excrescence of
tax-es, dutitax-es, surcharges and cesses levied by
the centre, the states and local
authori-ties—a system that fragments the economy
and gives huge scope for corruption by
offi-cials and politicians Replacing most taxes
with a GST would, forthe firsttime, create a
single market in India—of1.3 billion people
The latest and perhaps most promising
attempt to pass the necessary
constitution-al amendment failed with the closing of
the winter session of parliament in
De-cember Mr Modi will try again in the
bud-get session, which opens in February But if
he is to succeed, he will have to overcome
India’s cynical politics
The economy grew at a pleasing
annu-alised rate of 7.4% from July to September—
faster than China’s Yet many economists
cast doubt on the official figures, and Mr
Modi’s attempt to boost manufacturing is
not making much progress Indeed, the
best chance of turning his slogan of “Make
in India” into reality is through a singlemarket—“Make in India by Making One In-dia”, as a recent government report put it
The existing system, senior officials say,taxes production more than consumptionand, in effect, subsidises importers at theexpense ofdomestic producers Perversely,trade between states is taxed, through acentral sales tax of 2% Some states also im-pose duties on products entering from else-where in India Lorries are held up at inter-nal checkpoints (see picture)
An executive from a prominent Indianfirm explains that, because trade betweenone state and another is subject to the cen-tral sales tax while the transfers of inven-tory are not, his company has set up ware-houses in every state to avoid the tax Andbecause duties paid on inputs often cannot
be claimed back, there is a “cascade” of
tax-es levied upon previous ontax-es Among
oth-er things, it discourages investment in chinery “The entire ecosystem”, he says,
ma-“works to optimise tax, not productivity.”
One study suggests that a “flawless”
GST—with a single rate for all goods andservices, and minimal exemptions—couldboost Indian growth by anything between0.9 and 1.7 percentage points a year Anoth-
er benefit would be to create a paper trailand an incentive for firms to declare tran-sactions in order to claim tax credits, so re-ducing overall tax evasion
Attempts to streamline indirect taxesdate back to liberalisations in the 1990s, yetmoves towards forms ofvalue-added taxeshave been partial at best A version of amore encompassingGST bill was passed
by the lower house in May Unwisely, itpostponed imposing the tax on oil pro-ducts (a vital input) till an unspecified fu-ture date It exempted alcohol entirely That
these two categories currently account for
a large share of states’ revenues (and of licit party funding) is no coincidence Thebill also still stipulates a temporary centralsales tax, of1%, on interstate trade Even this watered-down law has beenstuck in Parliament’s upper house, wherethe BJP lacks a majority When Congresswas in office, its own attempt to introduce aGST was blocked by the BJP Now it acts asthe spoiler Congress rightly objects to thecentral sales tax But its demand that theconstitution should enshrine a maximumrate for the GST of18% makes little sense (Athird demand is for a different mechanism
il-to resolve disputes over the working of thetax.)
For more than a year Mr Modi
haughti-ly ignored the opposition He no doubthoped that the momentum from his gen-eral-election victory would carry him towins in subsequent state elections, auto-matically sending delegates to the upperhouse and giving him a majority there, too.But lately the BJP has been defeated in keyplaces, most recently in Bihar, the third-most-populous state
So Mr Modi has become a bit humbler
He belatedly invited Sonia Gandhi, dent of Congress, and Manmohan Singh,his predecessor as prime minister, to tea inthe hope of finding a deal on a GST A com-mittee led by the finance ministry’s chiefeconomic adviser, Arvind Subramanian,offered some concessions: scrapping thecentral sales tax and setting two bands forthe GST (a standard rate of17-18% and a low-
presi-er 12% rate for cpresi-ertain sensitive goods)which are within Congress’s declared ceil-ing The committee also proposed that al-cohol as well as property transactionsshould be subject to the GST; in return,states could levy “sin taxes” on things likealcohol and tobacco of up to 40%
Taxing times
The committee’s report appeared to bring
a much-improved GST bill within reach.But Congress took to disrupting the upperhouse The cause of its rowdy outrage atfirst was the government’s “intolerance” ofminorities (especially Muslims); then aminister’s allegedly derogatory remarks
about low-caste dalits; then the BJP’s posed “vendetta” in a court wrangle in-volving Mrs Gandhi, her son Rahul, andthe allegedly corrupt disposal of a failedparty newspaper; and lastly the party’s de-mand that the finance minister, Arun Jait-ley, should step down over claims of cor-ruption in cricket
sup-Congress might have claimed victory inforcing Mr Modi to see sense over the GST,even as it challenged his excesses Instead
it chose obstructionism If he is to secureany economic legacy, Mr Modi may nowhave to spend more time on the art of but-tering up opponents at home rather thanfellow leaders abroad.7
Simplifying Indian taxes
One country, but no single market
DELHI
India’s excitable politics is blocking the best chance of promoting growth
Trang 31The Economist January 2nd 2016 31
For daily analysis and debate on China, visit
Economist.com/china
after taking over as China’s leader, Xi
Jinping posted his first tweet For a man
clearly rattled by the rapid spread of social
media, and grimly determined to tame
them, the venue was fitting Uniformed
military officials stood around as he typed
his message into a computer in the office of
an army-run newspaper (see picture) His
new-year greeting was not to China’s more
than 660m internet users, but to the armed
forces—most of whose members are
banned from tweeting
It was clearly in part to intimidate
feisti-er membfeisti-ers of the country’s online
com-munity that the authorities arrested one of
the country’s most prominent civil-rights
activists, Pu Zhiqiang, in 2014 and
eventu-ally put him on trial on December 14th On
the basis of seven messages posted on
Weibo, China’s heavily censored version
of Twitter, Mr Pu was charged with
“pick-ing quarrels and stirr“pick-ing up trouble” as
well as “inciting ethnic hatred” The court
handed down a three-year suspended
pri-son sentence, which means that Mr Pu will
not be allowed to continue his widely
ac-claimed work as a lawyer (less than three
years ago, he was the subject ofa laudatory
cover story in a state-controlled magazine)
“It was not the worst outcome, but it set the
most odious of precedents,” said a Weibo
user in Beijing in a message to his nearly
57,000 online followers
of rule by law,” said Zhang Ming, a politicsprofessor in Beijing, to his following ofnearly 790,000 people
Mr Pu’s prosecutors also provided dence of the censors’ weaknesses Theysaid one of his allegedly criminal mes-sages, which suggested that a terrorist at-tack in 2014 may have reflected failings inthe government’s policies in the westernregion of Xinjiang, had garnered 1,930 ret-weets—remarkable given Mr Pu’s well-known propensity to criticise officialdom Outside the court, dozens of Mr Pu’ssupporters defied a heavy police presence,which included the deployment of thug-gish men in plain clothes (oddly wearingsmiley badges during the trial) Severalprotesters were dragged away, some afterchanting “Pu Zhiqiang is innocent”
evi-Internet users showed similar disdainfor the censors on the anniversary on De-cember 26th of the birth of Mao Zedong(“He wreaked greater destruction on hu-man civilisation than any other villain,”one businessman told his more than106,000 followers) They piped up, too,after an avalanche of construction waste
on December 20th in the southern city ofShenzhen that killed at least seven peopleand left more than 70 others missing OneWeibo user with nearly 75,000 followerslamented how effective a modern city likeShenzhen was at downplaying such news
“What’s frightening is that this is the wayChina as a whole will be,” he said
Mr Xi need not worry about his own
so-cial-media pulling power By the time The
Economist went to press, his first post on
Weibo—sent through the account of an named journalist at the newspaper he vis-ited—had been retweeted more than380,000 times and had garnered morethan 50,000 comments Most of these arefawning—of those still visible, at least 7
un-Mr Xi is the first Chinese leader to come
to power amid the rapid growth of a dle class whose members are equippedwith a powerful means of airing dissentand linking up with like-minded malcon-tents He inherited an army of internet cen-sors, but despite his efforts to give themmore legal muscle (the country’s first coun-ter-terrorism law, passed on December27th, includes restrictions on the reporting
mid-of terrorist incidents), Mr Xi is still gling Support for Mr Pu both online and
strug-off has shown the scale of the challenge hefaces Some had feared that Mr Pu would
be jailed for years It is possible, in the face
of huge support for the activist and a lack
of strong evidence, that officials blinked
Napping net nannies
Social-media messages relating to Mr Puwere quickly purged from the internet Yet
it is likely that some were seen by manypeople before disappearing Some sensi-tive postings were retweeted by users withlarge followings before they were eventu-ally deleted, suggesting that censors occa-sionally failed to keep up “If you can befound guilty on the basis of a few Weibopostings, then every Weibo user is guilty,everyone should be rounded up,” wrote aBeijing-based journalist to his more than220,000 followers “I don’t understand thelaw, but I do know that [handling Mr Puthis way] was absolutely against the spirit
Social media
Weibo warriors
The Communist Party’s battle with social media is a closely fought one
China
Also in this section
32 Xi’s new economic catchphrase
Trang 3232 China The Economist January 2nd 2016
communism, and Xi Jinping, a
doughty defender of Communist rule in
China, ought to have little in common
Lately, though, Mr Xi has seemed to
chan-nel the late American president He has
been speaking openly for the first time of a
need for “supply-side reforms”—a term
echoing one made popular during
Rea-gan’s presidency in the 1980s It is now
Chi-na’s hottest economic catchphrase (even
featuring in a state-approved rap song,
re-leased on December 26th: “Reform the
supply side and upgrade the economy,”
goes one catchy line)
Reagan’s supply-side strategy was
nota-ble, at least at the outset, for its
controver-sial focus on cutting taxes as a way of
en-couraging companies to produce and
invest more In Xiconomics, the thrust of
supply-side policy is less clear, despite the
term’s prominence at recent
economic-planning meetings and its dissection in
nu-merous articles published by state media
Investors, hoping the phrase might herald
a renewed effort by the leadership to boost
the economy, are eager for detail
Mr Xi’s first mentions of the supply
side, or gongjice, in two separate speeches
in November, were not entirely a surprise
For a couple of years think-tanks affiliated
with government ministries had been
pro-moting the concept (helped by a new
insti-tute called the China Academy of New
Supply-Side Economics) Their hope is that
such reforms will involve deep structural
changes aimed at putting the economy on
a sounder footing, rather than yet more
stimulus Since Mr Xi gave the term his
public blessing, officials have been
scram-bling to fall in line with supply-side
doc-trine, designing policies that seem to fit it
or, just as energetically, working to squeeze
existing ones into its rubric
Mr Xi’s aim may be to reinvigorate
re-forms that were endorsed by the
Commu-nist Party’s 370-member Central
Commit-tee in 2013, a year after he took over as
China’s leader They called for a “decisive”
role to be given to market forces, with the
state and private sectors placed on an
equal footing But Mr Xi lacked a catchy
phrase to sum up his economic vision The
one he most commonly used was simply
that the economy had entered a “new
nor-mal” of slower, more mature, growth That
phrase had its detractors, for it seemed to
imply passive acceptance of a more
slug-gish future “Supply-side reform” is being
made to sound like a call to action Xinhua,
a state news agency, neatly tied the twophrases together: “supply-side structuralreform is the new growth driver under thenew normal.”
But what does it mean? Those who firstpushed supply-side reform onto China’spolitical agenda want a clean break withthe credit-driven past Jia Kang, an outspo-ken researcher in the finance ministry whoco-founded the new supply-side academy,defines the term in opposition to the short-term demand management that has oftencharacterised China’s economic policy—
the boosting of consumption and ment with the help of cheap money anddollops of government spending
invest-The result of the old approach has been
a steep rise in debt (about 250% ofGDP andcounting) and declining returns on invest-ment Supply-siders worry that it is creat-ing a growing risk of stagnation, or even afull-blown economic crisis Mr Jia says thegovernment should focus instead on sim-plifying regulations to make labour, landand capital more productive Making it eas-ier for private companies to invest in sec-tors currently reserved for bloated state-run corporations would be a good place tostart, some of his colleagues argue
There are plenty of differences betweenChina’s supply-siders and those whoshaped Mr Reagan’s programme, not least
in their diagnosis of their respective mies’ ills The Americans thought that pro-duction bottlenecks were fuelling inflationand stifling growth Their Chinese counter-
econo-parts worry about the opposite: excessiveproduction causing deflation and unsus-tainably rapid growth Still, the languageused in China can sound just as radical
“We can no longer delay the clean-up ofzombie corporations,” Chen Changsheng
of the Development Research Centre, agovernment think-tank, wrote recently
“Taking painkillers and performing bloodtransfusions is not enough We need thedetermination to carry out surgery.” There may be another similarity aswell: a revolution that falls short of itshype Reagan had to work with a Congresscontrolled by his political opponents, andthe policies he enacted were more moder-ate and muddled than supply-side puristshad hoped Mr Xi faces no such democraticchecks, but China’s ruling party is split be-tween rival interest groups, and economicpolicy is often implemented in fits andstarts as party leaders try to reconcile theircompeting demands
Supply us with a slogan
Mr Xi’s adoption of the supply-side mantramarks the start of protracted tiptoeing.Over the past two months, party propa-gandists have asked economists at top uni-versities and research institutions to ex-pound on their views of what supply-sidereforms should entail, according to insid-ers It is a slogan in search of content
In the recent proliferation of articlesand speeches about supply-side reforms,there are clearly differences over what theemphasis should be The National Devel-opment and Reform Commission, a pow-erful planning agency, argues that Chinaneeds to become more innovative and effi-cient in making the kinds of things its con-sumers want to buy But its version of “sup-ply-side reform” would look more likestimulus than surgery Tax cuts since 2014
on purchases of electric cars offer a taste ofwhat may lie ahead; sales of these vehicleshave surged nearly fourfold this year Some fret that the supply-side talk is adangerous distraction As Yao Yang of Pe-king University puts it, the economy’smain ailment now is a lack of demand, not
a problem with supply The cure for that,
he believes, is a short-term burst of tary easing, the very thing that ardent sup-ply-siders have been hoping to banish For all the recent debate, early signs arethat the supply-side shift may not amount
mone-to a serious change of course Measuresproposed by the government in late De-cember include lower corporate borrow-ing costs, an easing of entry barriers inunderdeveloped sectors such as healthcare and a reduction of excess capacity insectors such as property It just so happensthat all these policies have already been inplace for months or even years If nothingelse, Mr Xi’s supply-side reforms will provethat China is among the world’s most ac-complished suppliers of slogans.7
Trang 33The Economist January 2nd 2016 33
For daily analysis and debate on the Middle East and Africa, visit
Economist.com/world/middle-east-africa
IT HAS been a long time in coming But on
December 27th Iraq’s security forces
an-nounced they had recaptured the city of
Ramadi from Islamic State (IS), with only
pockets of resistance remaining This
fol-lowed a week of heavy fighting by the Iraqi
army, local police and Sunni tribal fighters,
all backed by American air strikes
The expulsion of jihadists from the
cap-ital of Anbar, a mainly Sunni province, is a
morale-boosting victory for the
belea-guered government of Haider al-Abadi in
Baghdad It will go some way towards
ex-punging the memory of the humiliating
flight of the army from the city seven
months ago, when a numerically inferior
IS force launched a stunning assault,
spear-headed by at least 30 vehicular
suicide-bombs, some of them armoured
bulldoz-ers packing enough explosive to demolish
entire streets Outflanked and outgunned,
even the army’s Golden Division, a highly
regarded American-trained special-forces
unit, succumbed to panic
The carefully orchestrated campaign to
recover Ramadi, which saw much closer
co-ordination between troops on the
ground and coalition air power than in the
past, is an indication of how other battles
to expel IS from Iraqi cities may be
con-ducted Air strikes are claimed to have
killed at least 350 IS fighters in the days
be-fore the ground offensive began in earnest
While it is true that Iraqi forces some
10,000 strong were needed to defeat no
city and start rebuilding it That means viding material support for the Sunnitribes and local police to garrison Ramadi,while freeing up the overstretched Iraqiarmy to take on IS elsewhere in Anbar Thejihadists still control not only Fallujah, butalso Ana, Rawa, Hit and al-Qaim, townswhich between them have (or had) a pop-ulation of over 700,000
pro-The Iraqi army will have little choicebut to work with the Shia militias in thecontinuing attempt to recapture Fallujah,which has seen only intermittent progress
in the past year The tactics used in madi—encirclement and air strikes—are be-ing applied to the city, which is now more
Ra-or less completely cut off But Fallujah,which was al-Qaeda in Iraq’s first strong-hold and the scene of bitter fighting withAmerican troops in 2004, will be muchharder to crack
Mr Abadi promised on December 28ththatIS will be driven from his country bythe end of 2016 “We are coming to liberateMosul, which will be the fatal blow to [IS],”
he said A concerted attempt to retakeIraq’s second city (seized byIS 18 monthsago) does now appear more likely, al-though it will have to wait until Fallujah isrestored to government control and theIraqi army can field more effective units tojoin with Kurdish Peshmerga fighters.Estimates differ as to how manyIS com-batants there are in Mosul IS says it has30,000 Iraqi government sources put thenumber at a more modest 1,500 ButIS hashad a long time to dig itself in to the north-ern city, and at least some of the peoplethere are said to prefer the so-called caliph-ate, for its all brutality, to rule from Bagh-dad Mosul is a huge source of funding for
IS, because it has so many people for the hadists to tax If it should fall, IS’s preten-sions to being a state will fall with it Butthere is still quite a way to go 7
ji-more than 1,000 IS fighters, the difficultiesshould not be underestimated IS had time
to construct a multilayered defence based
on booby traps and a network of tunnelsthat allowed shooters and suicide-bom-bers to move around the town unseen bysurveillance drones The Iraqi army had tospend months encircling the city and slow-
ly cuttingIS off from outside help This lowed Iraqi units to move cautiously intothe ruined city, street by street
al-Significantly, Iranian-backed Shia tias, who have often been in the vanguard
mili-of the fight againstIS during the past 18months, were largely excluded from thebattle This was at the insistence of theAmericans, who want to encourage a Sun-
ni uprising againstIS, like the one they mented against its predecessor, al-Qaeda
fo-in Iraq, fo-in 2006 But the results have beenpatchy, because the promised supply ofAmerican weapons to Anbari Sunni tribeshas been blocked by the predominantlyShia government in Baghdad
Next stop, Fallujah
Given the deep sectarian divisions, ing the role of the Shia “Popular Mobilisa-tion Forces” in Anbar remains a priority forthe Americans Most are backed and fi-nanced by Iran—and Mr Abadi has little in-fluence over such groups
limit-If the government is to build on its cess in Ramadi, it must show displacedSunni inhabitants that it can both hold the
suc-Iraq
Reclaiming the ruins from Islamic State
By retaking Ramadi, Iraq’s security forces have won a morale-boosting victory
Middle East and Africa
Also in this section
34 Beleaguered Christians
35 Vice police in the Middle East
36 Setting Ethiopia free
Trang 3434 Middle East and Africa The Economist January 2nd 2016
1
FAR from spreading cheer this holiday
season, Pope Francis has been in a
Grinch-like mood “There will be lights,
parties, Christmas trees and Nativity
scenes,” he said in late November “It’s all a
charade.” As the Vatican unveiled its own
giant spruce, he sounded downright
de-pressed: “We should ask for the grace to
weep for this world, which does not
recog-nise the path to peace.”
It is easy to see why the pope is so
downhearted Look no further than
Beth-lehem, where young Palestinians throw
stones at Israeli soldiers manning the wall
separating the West Bank from Israel From
afar, the Israeli tear gas looks like the smoke
from frankincense, of the sort that pilgrims
burn when visiting the Church of the
Na-tivity But there were few pilgrims this
Christmas—they were too scared
Most victims of war and terrorism in
the Middle East are Muslims, since they are
by far the majority of the population But
the tiny Christian minority often feels
sin-gled out Their numbers are declining
where the fighting is worst (see chart)
Overall, the proportion of Middle
Eastern-ers who are Christian has dropped from
14% in 1910 to 4% today Church leaders and
pundits have begun to ask whether
Chris-tianity will vanish from the Middle East, its
cradle, after 2,000 years
An exodus is under way Many
Chris-tians feel more at home in the West and
have the means to get there Some are
leav-ing because of the general atmosphere of
violence and economic malaise Others
worry about persecution A recent video
of three Assyrian Christians in orange
jumpsuits being made to kneel before
be-ing shot in the head by Islamic State(IS)
ji-hadists fuelled this fear—though IS treats
many other groups equally badly
Fewer births, virgin or otherwise
The Christians who remain tend to have
fewer babies than their Muslim
neigh-bours, according to the Pew Research
Cen-tre Regional data are unreliable, but in
Egypt the fertility rate for Muslims is 2.7; for
Christians it is 1.9
Mosul, in northern Iraq, was once
home to tens of thousands of Christians
Perceived as supporting the Americans,
they were targeted by insurgents after the
invasion A wave of killings in 2008,
in-cluding that of the local Chaldean
arch-bishop, seemed to mark the low point for
the community Then came IS When the
ji-hadists entered the city in 2014, they edly tagged Christian houses with an “N”
report-for “Nazarene”, and gave their occupants a
choice: convert, pay the jizya, a tax on
non-Muslims, or face possible death Most fled
In July 2014 IS announced that the city wasfree of Christians
Many who left Mosul went to Erbil, theKurdish capital of northern Iraq, wherethey have trouble finding work or obtain-ing public services Even there, some refu-gees chafe at the enforcement of Muslimcustoms “You wouldn’t want to livethere,” says Samir, a Christian refugee now
in Lebanon In general, Christians plain that their Muslim neighbours aregrowing increasingly intolerant
com-Some retort that Westerners exaggeratetales of Christian persecution to justify in-terventionist policies “There is talk as ifthe West is genuinely interested in Chris-tians, but most of the time they only usethem for their own political ends,” says Mi-tri Raheb, pastor of a church in Bethlehem
He says that the Israeli occupation hurtsPalestinian Christians far more than perse-cution by Muslims, but provokes less out-rage in the West
Christian leaders are in a tough spot “Icannot preach to people: ‘Do not leave,’”
says Father Raheb But other priests have
In an open letter published in Septemberone of Syria’s most senior Catholic leaders,Melkite Patriarch Gregory III, wrote: “De-spite all your suffering, stay! Be patient!
Don’t emigrate! Stay for the church, yourhomeland, for Syria and its future!” Ran-kling many, he then urged Europe not to
“encourage Syrian Christians to emigrate”
Haitham, a refugee from Mosul, says thepleas go “in one ear, out the other”
In the decades before the Arab spring,many Christian leaders lent their support
to authoritarian rulers in return for the tection of Christians—and their own loftystatus But the deals broke down when thedictators fell or wobbled, leaving Chris-tians in a predicament “In Iraq, when Sad-dam Hussein was removed, we lost a mil-lion Christians,” said Bechara Boutrosal-Rahi, Lebanon’s Maronite Christian Pa-triarch, to AFP in 2012 “Why? Not becausethe regime fell, but because there was nomore authority, there was a vacuum InSyria, it’s the same thing, Christians do notback the regime [of Bashar al-Assad], butthey are afraid of what may come next.”Christian leaders have often supportedwhichever strongman is in power The latePope Shenouda III, head of the Copticchurch, the largest in the Middle East,backed Hosni Mubarak, Egypt’s formerdictator, and discouraged Copts from join-ing the protests that would eventually top-ple him In 2012 Shenouda was succeeded
pro-by Tawadros II, who supports the currentstrongman, Abdel-Fattah al-Sisi He has de-scribed the Arab spring as being more like
a “winter, plotted by malicious hands” inorder to break up the region into smallerstates
Yet the Copts have gained little fromtheir leaders’ loyalty Mr Mubarak stood by
as relations between Christians and lims deteriorated and sectarian violenceincreased Mr Sisi is seen as better than theIslamist government that he toppled Adraft law would make it easier to buildchurches But Copts are still expelled fromvillages for such crimes as falling in lovewith a Muslim
Mus-Even in Lebanon, where Christianswere once a majority and still hold consid-erable power, their political leaders havedisappointed Under the country’s uniquesystem, government posts are shared outbased on sect The presidency goes to aMaronite, the largest group of Christians.But in recent decades many Christians
Christians in the Middle East
And then there were none
BEIRUT, BETHLEHEM AND CAIRO
Fed up and fearful, Christians are leaving the Middle East
Exodus
Source: “Ongoing Exodus: Tracking the Emigration
of Christians from the Middle East” by T Johnson and G Zurlo, 2015 *Forecast
Christians, as % of population
0 5 10 15 20
Available years
2010 25*
Saudi Arabia U.A.E
Trang 35The Economist January 2nd 2016 Middle East and Africa 35
2have left Muslims are now a majority, and
want power to match their numbers
Christian political leaders complain of
per-secution, but many seem more concerned
with enhancing their own power
Bicker-ing between politicians has left the
presi-dency vacant for18 months
Oddly enough it is the Gulf, home to the
most conservative brand of Islam, which
has welcomed the largest number of
Chris-tians recently, though not from Iraq or
Syr-ia A wave of migrant labourers from the
Asia-Pacific has dramatically increased the
share of Christians in countries such as
Saudi Arabia and the United Arab
Emir-ates (UAE), which had few before
Toler-ance varies between countries Saudi
Ara-bia, for example, bans the practice of
Christianity (though many Christians
wor-ship in private) TheUAE restricts
proselyti-sation, but has otherwise supported itsChristians The number of churches in thecountry has grown from 24 in 2005 to 40today The emirate’s rulers often providechurches with free land, water and electric-ity But these new Christian enclaves maynot last Migrant workers in the Gulf can-not easily become citizens or put downroots
In any case it is the loss of ancient munities that most concerns church lead-ers “Christians are not guests in the Mid-dle East,” says Father Paul Karam, thepresident of Caritas, a Catholic charity, inLebanon “We are the original owners ofthe land.” But none of the Christian refu-gees who spoke with your correspondentplans to return home “We don’t belongthere,” says Samir, who expects Iraq soon
com-to be empty of Christians alcom-together.7
IT WAS a disquieting announcement On
November 25th Egypt’s President
Abdel-Fattah al-Sisi approved a committee tasked
with “improving the morals and values” in
his country Efforts to reduce littering or
sexual harassment, both plagues in Egypt,
might be welcome But experience in the
Middle East suggests that the boot will be
put into more harmless activities
In September, for example, Egypt
locked up two belly-dancers for “inciting
debauchery” after they showed a little skin
in online videos; one of the dancers,
known as “Egypt’s Shakira”, is most
fam-ous for a video which features much
sug-gestive use of a pestle and mortar, but no
more flesh than is revealed by a low-cut
blouse and an above-the-knee skirt A
young Egyptian couple tells of police
ac-cusing them of being together without
be-ing married, somethbe-ing that is not banned
in the country Across the region gay
peo-ple, atheists and dissidents are punished
for their supposed moral transgressions
Saudi Arabia and Iran, regional and
reli-gious rivals, are the bossiest Both regimes
claim to be Islamic Both have vice squads
In Iran they berate women for showing too
much fringe; in Saudi Arabia, for wearing
too flirty an abaya, the big, usually black,
cloak that is mandatory for females there,
or being in the company of unrelated
males They enforce bans on alcohol,
par-ties and other things that normal people,
even the most morally upright, enjoy
Sau-di meSau-dia recently reported that female
bu-reaucrats wearing too much make-up
would be fined 1000 riyals ($266)
Police in Algeria, Morocco and Sudan,too, have powers to stamp out immorality
Sudan’s criminal code, which outlawsadultery and women wearing trousers, isparticularly harsh Vague laws across theregion such as causing offence and encour-aging indecency are broad and open toabuse Violators can be flogged
In November Saudi Arabia sentencedAshraf Fayadh, a poet, to death He was ac-cused of apostasy and of having illicit rela-tions with women, whose images hestored in his phone He denies the charges
He had previously posted a video showing
the religious police whipping a man; hissupporters think the police are taking re-venge Saudi Arabia beheads people formoral transgressions Iran hangs them.Since the 1970s Arab populations havegrown more devout This makes it easierfor rulers to use “morality” to keep them inline Women, especially, are told how todress and under what circumstances theymay have sex In Morocco and Algeria,women who are raped are sometimesmade to marry their rapist
Social censure is pervasive, and can bedeadly Even in moderate countries such asJordan, men sometimes kill women to up-hold family “honour” The murderers—usually a father or brother—often escapewith light sentences “If I go out with a boy-friend in Beirut it’s fine,” says a LebaneseChristian woman “But in the villages, peo-ple will say, ‘Look, she’s seeing him andthey’re not married’.”
Some among the region’s ever moreglobalised young are pushing back Grindrand Tinder, two hook-up apps for gays andstraights respectively, have a fair number
of users in the Middle East Men and
wom-en mix and, more and more, choose theirown partners When parts of films are cut,such as an explicit scene in “The Wolf ofWall Street”, people go online to watch thefull version In Jeddah, if not Riyadh, col-
ourful abayas swing open as unrelated
men and women mingle in cafés
A few leaders say they want to give ple a break Hassan Rohani, Iran’s relative-
peo-ly moderate president, has talked aboutstopping the religious police from finingwomen for failing to conceal their hair,wrists and bottoms Such small freedoms,
so far only very partially implemented,would be popular
Some of the region’s moral arbiters donot practise what they preach, as bartend-ers and madams in posh parts of Europecan attest Imagine if the vice policecracked down on hypocrisy 7
Trang 3636 Middle East and Africa The Economist January 2nd 2016
1
THE Ben Abeba restaurant is a
spiral-shaped concrete confection perched on
a mountain ridge near Lalibela, an
Ethiopi-an town known for its labyrinth of
12th-century churches hewn out of solid rock
The view is breathtaking: as the sun goes
down, a spur of the Great Rift Valley
stretches out seemingly miles below in
subtly changing hues of green and brown,
rolling away, fold after fold, as far as the eye
can see An immense lammergeyer, or
bearded vulture, floats past, showing off its
russet trousers
The staff, chivvied jovially along by an
intrepid retired Scottish schoolmarm who
created the restaurant a few years ago with
an Ethiopian business partner, wrap
yel-low and white shawls around the guests
against the sudden evening chill The most
popular dish is a spicy Ethiopian version of
that old British staple, shepherd’s pie, with
minced goat’s meat sometimes replacing
lamb Ben Abeba, whose name is a fusion
of Scots and Amharic, Ethiopia’s main
lan-guage, is widely considered the best eatery
in the highlands surrounding Lalibela,
nearly 700km (435 miles) north of Addis
Ababa, the capital, by bumpy road
Yet the obstacles faced by its owners
il-lustrate what go-ahead locals and foreign
investors must overcome if Ethiopia is totake off Electricity is sporadic Refrigera-tion is ropey, so fish is off the menu So arebutter and cheese; Susan Aitchison, therestaurant’s resilient co-owner, won’t usethe local milk, as it is unpasteurised Hon-
ey, mangoes, guava, papaya and avocados,grown on farmland leased to the enterpris-ing pair, who have planted 30,000 trees,are delicious All land belongs to the state,
so it cannot be used as collateral for rowing, which is one reason why commer-cial farming has yet to reach Lalibela Con-sequently supplies of culinary basics arespotty Local chickens are too scrawny Thegovernment will not yet allow retailerssuch as South Africa’s Shoprite or Kenya’sNakumatt to set up in Ethiopia, let alone inLalibela, a UNESCO World Heritage site
bor-Bookings at Ben Abeba are tricky totake, since the internet and mobile-phoneservice are patchy Credit cards work
“about half the time”, says Ms Aitchison
Imports for such essentials as kitchenspares are often held up at the airport,where tariffs are sky-high: a recent batch ofT-shirts with logos for the staff ended upcosting three times its original price Wine,even the excellent local stuff, is sometimesunavailable, because transport from Ad-
dis, two days’ drive away, is irregular andprivate haulage minimal The postal ser-vice barely works Fuel at Lalibela’s sole(state-owned) petrol station runs out Visi-tors can fly up from Addis on EthiopianAirways every morning, but private air-lines are pretty well kept out
Many of these annoyances could be moved—if only the government werebrave enough to set the economy free “Theservice sector here is one of the most re-strictive in the world,” says a frustrated for-eign banker The government’s refusal toliberalise mobile-telephone services andbanks is patently self-harming Ethiopianshave one of the lowest rates of mobile-phone ownership in Africa (see chart); theWorld Bank reckons that fewer than 4% ofhouseholds have a fixed-line telephoneand barely 3% have access to broadband.The official reason for keeping Ethio Te-lecom a monopoly is that the governmentcan pour its claimed annual $820m profitstraight into the country’s grand road-building programme In fact, if the govern-ment opened the airwaves to competition,
re-as Kenya’s hre-as, it could probably sell chises for at least $10 billion, and reap taxesand royalties as well; Safaricom in Kenya isthe country’s biggest taxpayer
fran-Moreover, Kenya’s mobile-banking vice has vastly improved the livelihood ofits rural poor, whereas at least 80% of Ethio-pians are reckoned to be unbanked For en-trepreneurs like Ms Aitchison and herpartner, Habtamu Baye, local banks maysuffice But bigger outfits desperately needthe chunkier loans that only foreign banks,still generally prevented from operating inthe country, can provide A recent survey
ser-of African banks listed 15 Kenyan ones inthe top 200, measured by size of assets,whereas Ethiopia had only three
Land reform is another big blockage,though farmers can now have their plots
“certified” as a step towards greater
securi-ty of tenure Given Ethiopia’s tant feudal past and the dreadful abusesthat immiserated millions of peasants indays of yore, especially in time of drought,the land issue is sensitive; the late Meles
not-so-dis-Ethiopia
What if they were really set free?
ADDIS ABABA AND LALIBELA
If the government let people breathe, they might fly
Disconnected
Source: International Telecommunication Union
Per 100 people Mobile-phone subscriptions Internetpenetration
0 15 30 45 60 75
2000 05 10 14
Kenya
Kenya Rwanda
Rwanda
0 15 30 45 60 75
2000 05 10 14