The economist europe 30 july 2016

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The new politics of open v closed Europe’s wave of terror

Portrait of an Olympic city Yahoo: the click and the dead

JULY 30TH–AUGUST 5TH 2016

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The Economist July 30th 2016 3

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Volume 420 Number 9000

Published since September 1843

to take part in "a severe contest between

intelligence, which presses forward, and

an unworthy, timid ignorance obstructing

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Editorial offices in London and also:

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Lima, Mexico City, Moscow, Mumbai, Nairobi,

New Delhi, New York, Paris, San Francisco,

São Paulo, Seoul, Shanghai, Singapore, Tokyo,

of attacks, Germans are stayingremarkably calm, page 39

On the cover

What Japan’s economic

experiment can teach the

rest of the world: leader,

page 7 Abenomics may have

failed to live up to the hype

but it has not failed And the

hype was necessary to its

8 Globalisation and politics

The new political divide

9 Russian dirty tricks

Doping and hacking

9 The parable of Yahoo

From dotcom hero to zero

10 Air pollution

Cleaning up the data

Letters

12 On Republicans, Pokémon, blood-testing, Brazil, John Cleese, Italian banks

Briefing

16 Globalisation and politics

Drawbridges up

Asia

19 THAAD and South Korea

Of missiles and melons

United States

25 The Democratic convention

Bridging the torrent

26 On the trail

Philly special

27 Putin, Trump and the DNC

Signal and noise

27 The PGA championship

Cash in bin liners, please

Middle East and Africa

34 Zimbabwe’s president

Comrade Bob besieged

35 Local elections in South Africa

Young rivals

35 Nigeria’s struggling states

Running out of road

36 The Arab League

A new low

36 The Saudi bombardment

of Yemen

Worse than the Russians

37 Water in the West Bank

Nor yet a drop to drink

Europe

38 France’s response to terrorism

Advice for May and Merkel

The new political divide

Farewell left v right The newpolitical contest is open vclosed: leader, page 8 A closerlook at the new divide in richcountries, pages 16-18 Theanger and fickleness ofAmerican voters are forcingchange But in whichdirection? Page 28 Britain isunusually open to trade butalso unusually bad atmitigating its impact, page 42

Rio and the Olympics

The Olympic city has been indecline since the 1960s Thegames will not change that,page 31 A sobering history ofhow the Olympic gamesevolved, page 64

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Pope FrancisDespite his

popularity, the pontiff’s efforts

to reshape his church face stiff

resistance, page 45

Goodbye YahooThe erstwhile

Silicon Valley star is no longer

an independent company Its

failure had many fathers:

leader, page 9 Verizon has

made a bold, risky bet on the

future of advertising, page 47

Big economic ideas

The second article in our series

on seminal economic papers

looks at Hyman Minsky’s

hypothesis that booms sow

the seeds of busts, page 52

City pollutionThe dangers ofdirty air need to be made muchmore transparent to

city-dwellers: leader, page 10

Air-quality indices makepollution seem less bad than it

58 Road taxes in Europe

Not easy being green

58 Private share sales

Trading unicorns

59 Free exchange

Competing for workers

Science and technology

Books and arts

63 American foreign policy

Obama’s long game

64 Olympic games

Dark history

64 American fiction

Mean girls

65 Jazz in the 21st century

Playing outside the box

Obituary

70 Geoffrey Hill

The discomfort of words

The Economist July 30th 2016 5

America’s Democrats

gath-ered in Philadelphia to

nomi-nate Hillary Clinton as their

candidate for president of the

United States Some

suppor-ters of her opponent for the

nomination, Bernie Sanders,

refused to give up the fight and

chanted the Trump cry, “Lock

her up!” But Mr Sanders gave

an impassioned speech

sup-porting Mrs Clinton She also

revealed Tim Kaine, a senator

from Virginia, as her

vice-presidential running mate

Thousands of leaked e-mails

showing that the Democratic

Party leadership favoured

Hillary Clinton over Bernie

Sanders exposed rifts within

the party Debbie Wasserman

Schultz, the head of the

Demo-cratic National Committee

(DNC)—which should have

remained impartial during the

primaries—resigned The DNC

blamed Russian hackers for the

stolen e-mails, which were

released via WikiLeaks

Prosecutors dropped the

re-maining charges against three

Baltimore police officers

relat-ing to the death of Freddie

Gray, bringing an end to the

case without a conviction

Gray died in April 2015, a week

after he sustained a spinal

injury while in the back of a

police van His death had

prompted widespread protests

against police brutality

to-wards black men Three of the

six officers charged in the case

had already been acquitted

Brazilian police arrested a

dozen people who were

plan-ning terrorist attacks during

the Olympic games, which are

due to start in Rio de Janeiro on

August 5th They had beeninspired by Islamic State (IS)

Brazil’s justice minister, andre Moraes, said they were

Alex-“absolutely amateur” and

“unprepared”

Hundreds of Venezuelans

have marched to demand thatthe country’s electoral com-mission rule on whether areferendum to recall the presi-dent, Nicolás Maduro, canproceed The protesters thinkthat the commission has de-layed its decision on whether

to approve nearly 2m tures demanding the vote toprotect the unpopular regime

signa-If Venezuelans vote to remove

Mr Maduro after January 10th

it would not trigger a freshelection Instead, the vice-president, Aristóbulo Istúriz,would become president

Les misérables

In a week of violence, two meninspired by IS slit the throat ofFather Jacques Hamel, an85-year-old priest, during achurch service in Saint-Etienne-du-Rouvray, a suburb

of Rouen in northern France.

The assailants—one of whomhad been jailed twice for try-ing to join IS in Syria—were

shot dead by police In

Bavar-ia, a German-Iranian teenager

shot and killed nine people in

a Munich shopping centre, and

a failed Syrian asylum-seekerblew himself up, injuring15,after being refused entry to amusic festival being held in thetown of Ansbach

Russia’s Olympic athletes will

not all be banned from peting in Rio de Janeiro, theInternational Olympic Com-mittee announced Instead,decisions over bans will be left

com-to individual sports’ ations The World Anti-Doping

feder-Agency, which exposed sia’s massive, state-sponsoreddoping programme and rec-ommended a blanket ban, said

Rus-it was disappointed

Michel Barnier, a former eign minister of France andvice-president of the EuropeanCommission, has been ap-

for-pointed to lead the EU’s Brexit negotiations with Britain Mr

Barnier is seen as a toughadversary for Britain He is bestknown for introducing bankerbonus caps and other regu-lations disliked in Britainwhen he was the EU’s single-market commissioner

Theresa May, Britain’s new

prime minister, continued herBrexit charm offensive thisweek She met the leaders ofNorthern Ireland’s devolvedgovernment to reassure themthat a “hard” border would not

be reimposed between Britainand Ireland She also met fortalks in London Enda Kenny,Ireland’s prime minister, andItaly’s premier, Matteo Renzi,

in Rome

Digging up old history

Palestinian officials nounced a plan to sue Britain

an-over the Balfour Declaration

of1917 that laid out a vision for a Jewish homeland inPalestine

A big truck bomb in the

Kurd-ish-controlled Syrian city of

Qamishli killed 44 people ISclaimed responsibility for theblast, which detonated near asecurity headquarters

Salva Kiir, the president of

South Sudan, has replaced his

vice-president, Riek Machar,the leader of the main opposi-tion, threatening a fragilepeace deal between the two

Mr Machar had fled the capital

a few days earlier after anoutbreak of fighting betweenhis forces and those who arestill loyal to the government

The Shabaab, a jihadist group

in Somalia, used two

suicide-bombers driving car bombs toattack a United Nations basenear the airport in Mogadishu,the capital Thirteen peoplewere killed in the attacks

Unlike previous attacks by thegroup, gunmen did not accom-pany the suicide-bombers

A new retirement home

A military court in China

jailed a retired general, GuoBoxiong, for life for acceptingbribes in return for promo-tions He is the most seniormilitary official to be convicted

of corruption since the munists came to power in 1949

Com-Two Hong Kong journalists

were imprisoned in China forarticles they had published intheir home territory HongKongers are supposed to havepress freedoms not enjoyed inthe mainland But these twojournalists, who were arrested

in 2014, were charged for ing copies of their magazinesinto China

mail-Four officials were suspendedfrom their posts for allegedly

mismanaging floods in na’s northern province of

Chi-Hebei that have killed at least

130 people and affected 9mothers Torrential rain hascaused the country’s worstflooding in several years.Nineteen residents of a carehome for the disabled nearTokyo were stabbed to deathand another 25 wounded, in

Japan’s worst mass killing in

the post-war era Satoshi matsu, a 26-year-old formeremployee with a history ofurging that the disabled beeuthanised, turned himself in

Ue-to the police

At least 70 have died and many

more made homeless in Nepal

after monsoon rains triggeredwidespread flooding andlandslides Rescue and reliefefforts have been launched in

14 of Nepal’s 75 districts

Politics

The world this week

6 The world this week The Economist July 30th 2016

Other economic data and news can be found on pages 68-69

After a months-long bidding

process, Yahoo, a struggling

internet company, announced

that it is to sell its core business

to Verizon Last year the

wire-less carrier also paid $4.4

billion for AOL, another

for-mer internet darling Merging

AOLand Yahoo will give

Veri-zon more eyeballs to sell to

digital advertisers The deal

will surely bring the curtain

down on Marissa Mayer’s

tenure at Yahoo, which is

widely regarded as a failure

Between 2012, when Ms Mayer

took over, and 2015, Yahoo’s

gross earnings have fallen by

44% The firm has also written

off much of the value of

Tumblr, a social-networking

site that it bought for $1.1 billion

in cash in 2013

Sales of Apple’s iPhone

con-tinued to fall The world’s

largest listed company said it

sold some 40m smartphones

between April and June,

around 15% fewer than during

the same period last year It

also forecast sales would drop

again in the coming quarter

The phones are responsible for

around half of Apple’s sales Its

quarterly profit fell to $7.8

billion, down by 27% on the

year before Sales in China,

which produces cheap

com-petitors to the iPhone, were

particularly hard-hit

Ryanair became the latest

European airline to warn of

troubles ahead The

conti-nent’s largest low-cost carrier

followed easyJet, Air

France-KLMand Lufthansa in

suggest-ing that business may be hit

this year European airlines

have had to deal with a litany

of woes, including

air-traffic-control strikes in France,

terro-rist atrocities in Belgium,France and Egypt, and anattempted coup in Turkey

Consumer confidence mayalso be damaged by Brexit andthe subsequent fall of thepound The good news forflyers is that European carriersmay now have to lower fares

to fill their planes

A top-up

AB InBev, the world’s biggest

brewer, raised its offer for

SABMiller, a rival based in

Britain The two firms struck adeal in November but thepound’s fall after the Brexitreferendum prompted ABInBev to revise its offer from

£44 (now $58) to £45 a share

The merged company willhave nearly a third of theworld’s beer market

It was a bad week for man Sachs The firm was sued

Gold-for $510m by a big shareholder

of EON Capital, a Malaysianbank that Goldman onceadvised Primus Pacific Part-ners accused Goldman of aconflict of interests because itconcealed its links with 1MDB,Malaysia’s sovereign-wealthfund, which was launched byNajib Razak, the prime min-ister Goldman also advised onthe takeover of EON by HongLeong Bank, which had ties to

Mr Razak Primus says

Gold-man undervalued EON as aresult, an allegation it denies

Goldman also faced criticismfrom British MPs for its role as

an informal adviser to SirPhilip Green, then owner ofBritish Home Stores BHS wentbust after Sir Philip sold thedepartment-store chain for £1

MPs said he had failed to solve a £571m pension-fundhole No illegality was alleged

re-Sir Philip denies wrongdoing

BP’shalf-yearly profit fell by44% to $720m, compared withthe same period last year Itblamed the low oil price Brentneared $44 a barrel this week;

it was over $50 in May BPreckons the current glut of oilcould last for18 months Thefirm said it hoped it had nowdrawn a line under the Deep-water Horizon disaster of 2010,which has cost it some $62billion Shell also announcedpoor quarterly results, down72% on the year before

This bird has flown

There was little sign of Twitter

escaping the doldrums Thefirm announced that bothrevenue and the number ofpeople using the social net-work had grown slowly in thesecond quarter of this year

The loss-making site alsosuggested revenue for thecurrent quarter might be as

low as $590m, well belowmarket expectations

Ericsson, a Swedish telecoms

firm, ousted Hans Vestberg, itschief executive, following adisappointing financial perfor-mance over the past year Thefirm has also faced probes intoalleged corruption

Deutsche Bank said profits

had dropped by 98% to €20m($22m) in the second quarter,compared with the sameperiod last year It suggestedthat cost-cutting, which hasalready led to 9,000 job losses,may now have to go evendeeper Deutsche is also trying

to come to a settlement withAmerican regulators over itsalleged mis-selling of mort-gage-backed securities It hasset aside €5.4 billion to dealwith litigation

America’s Federal Reserve

decided against raising interestrates, as good news about thecountry’s economy, such asbetter employment data, wasoffset by subdued inflationexpectations and global wor-ries But the Fed kept open thepossibility of a rate rise laterthis year, saying the near-termrisks had diminished

Business

Apple’s iPhone sales

Source: Company reports

Units, m

2013 14 15 16

0 20 40 60 80

The Economist July 30th 2016 7

IN THE 1980s Japan was a

close-ly studied example of nomic dynamism In the de-cades since, it has commandedattention largely for its eco-nomic stagnation After years offalling prices and fitful growth,Japan’s nominal GDP wasroughly the same in 2015 as it was 20 years earlier America’s

eco-grew by 134% in the same time period; even Italy’s went up by

two-thirds Now Japan is in the spotlight for a different reason:

its attempts at economic resuscitation

To reflate Japan and reform it, Shinzo Abe, prime minister

since December 2012, proposed the three “arrows” of what has

become known as Abenomics: monetary stimulus, fiscal

“flex-ibility” and structural reform The first arrow would mobilise

Japan’s productive powers and the third would expand them,

allowing the second arrow to hit an ambitious fiscal target The

prevailing view is that none has hit home Headline inflation

was negative in the year to May Japan’s public debt looks as

bad as ever In areas such as labour-market reform, nowhere

near enough has been done

Compared with its own grand promises, Abenomics has

in-deed been a disappointment But compared with what

pre-ceded it, it deserves a sympathetic hearing (see page 54) And

as a guide to what other countries, particularly in Europe,

should do to cope with a greying population, stagnant

de-mand and stubborn debts, Japan again repays close attention

This arrow points up

Take monetary policy The lesson many are quick to draw from

Abenomics is that the weapons deployed by the Bank of Japan

(BoJ)—and, by extension, other central banks—since the

finan-cial crisis do not work The BoJ has more than doubled the size

of its balance-sheet since April 2013 and imposed a sub-zero

in-terest rate in February; still more easing may be on the way (the

BoJ was meeting as The Economist went to press) Yet its 2%

in-flation target remains a distant dream

The naysayers have it wrong Unlike other countries, Japan

includes energy prices in its core inflation figure Excluding

them, core consumer prices have risen, albeit modestly, for 32

months in a row Before Abenomics, Japan’s prices had fallen

with few interruptions for over ten years; they are now about

5% higher than they would have been had that trend

contin-ued Japan has increased inflation while it has fallen in

Austra-lia, Britain, France, Germany, Italy and Spain

If central banks have more sway than some pundits allow,

Abenomics also shows the limits of their power The BoJ has

buoyed financial assets, but it has failed to drum up a similar

eagerness on the part of consumers or companies to buy real

assets or consumer goods Household deposits are high And

despite bumper corporate profits, firms doubt such plenty will

persist They have been happy to raise prices but less eager to

lift investment or base pay (which are harder to reverse)

Ja-pan’s non-financial firms now hold more than ¥1 quadrillion

($9.5 trillion) of financial assets, including cash

Herein lies another lesson of Abenomics: monetary policy

is less powerful when corporate governance is lax and petition muted Mr Abe has handed shareholders greater pow-

com-er In 2012 only 40% of leading companies had any dent directors; now nearly all of them do But if Japan’s equityculture were more assertive still, shareholders might demandmore of the corporate cash hoard back—to spend or invest else-where And ifbarriers to entry were lower, rival firms might ex-pand into newly profitable industries and compete away theseriches They might also pay more In theory, reflating an econ-omy should be relatively popular, because wage rises shouldprecede price increases In reality, the price rises came first andpay has lagged behind That is why the IMF has pushed for Ja-pan to adopt an incomes policy that spurs firms to raise wages

indepen-Someone must spend

If companies are determined to spend far less than they earn,some other part of the economy will be forced to do the oppo-site In Japan that role has fallen to the government, which hasrun budget deficits for over 20 years Mr Abe set out intending

to rein in the public finances But after a rise in a consumptiontax in 2014 tipped Japan into recession, he has backed awayfrom raising the tax again This week he signalled a large newfiscal-stimulus package worth ¥28 trillion, or 6% of GDP (al-though it was unclear how much of that money will be new).Abenomics has not only demonstrated how self-defeatingfiscal austerity can be, particularly when it comes in the form

of a tax on all consumers It has also shown that, in Japaneseconditions, sustained fiscal expansion is affordable Withoutany private borrowers to crowd out, even a government as in-debted as Japan’s will find it cheap to borrow Japan’s net inter-est payments, as a share of GDP, are still the lowest in the G7.Politicians in Europe make fiscal rectitude a priority Abenom-ics shows that public thrift and private austerity do not mix Many people argue that Mr Abe’s monetary and fiscal stim-ulus has served only as an analgesic, masking the need for rad-ical structural reform To be sure, greater boldness is need-ed—to encourage more foreign workers into the country, forexample, and to enable firms to hire and fire more easily But arevival in demand has encouraged supply-side improvement,not simply substituted for it Stronger demand for labour hasdrawn more people into the workforce, despite the decline inJapan’s working-age population The increased presence ofwomen in the labour force has prompted the government tocreate 200,000 extra places in nurseries, and to make life hard-

er for employers who discriminate against pregnant ees In recognising that reflation and reform go hand in hand,Abenomics is an unusually coherent economic strategy Abenomics has fallen short of its targets and its overblownrhetoric That makes it easy to dismiss as a failure In fact, it hasshown that central banks and governments do have the capa-city to stir a torpid economy And in some senses, the hype wasneeded Japan’s stagnation had become a self-fulfilling proph-ecy; Abenomics could succeed only if enough people believed

employ-it would This is a final lesson that Japan’s economic ment can impart to the rest of the world Aim high

experi-Overhyped, underappreciated

What Japan’s economic experiment can teach the rest of the world

Leaders

8 Leaders The Economist July 30th 2016

AS POLITICAL theatre, ca’s party conventions have

Ameri-no parallel Activists from rightand left converge to choose theirnominees and celebrate conser-vatism (Republicans) and pro-gressivism (Democrats) But thisyear was different, and not justbecause Hillary Clinton became the first woman to be nom-

inated for president by a major party The conventions

high-lighted a new political faultline: not between left and right, but

between open and closed (see pages 16-18) Donald Trump, the

Republican nominee, summed up one side of this divide with

his usual pithiness “Americanism, not globalism, will be our

credo,” he declared His anti-trade tirades were echoed by the

Bernie Sanders wing of the Democratic Party

America is not alone Across Europe, the politicians with

momentum are those who argue that the world is a nasty,

threatening place, and that wise nations should build walls to

keep it out Such arguments have helped elect an

ultranation-alist government in Hungary and a Polish one that offers a

Trumpian mix of xenophobia and disregard for constitutional

norms Populist, authoritarian European parties of the right or

left now enjoy nearly twice as much support as they did in

2000, and are in government or in a ruling coalition in nine

countries So far, Britain’s decision to leave the European

Un-ion has been the anti-globalists’ biggest prize: the vote in June

to abandon the world’s most successful free-trade club was

won by cynically pandering to voters’ insular instincts,

split-ting mainstream parties down the middle

News that strengthens the anti-globalisers’ appeal comes

almost daily On July 26th two men claiming allegiance to

Is-lamic State slit the throat of an 85-year-old Catholic priest in a

church near Rouen It was the latest in a string of terrorist

atroc-ities in France and Germany The danger is that a rising sense of

insecurity will lead to more electoral victories for

closed-world types This is the gravest risk to the free closed-world since

communism Nothing matters more than countering it

Higher walls, lower living standards

Start by remembering what is at stake The multilateral system

of institutions, rules and alliances, led by America, has

under-pinned global prosperity for seven decades It enabled the

re-building of post-war Europe, saw off the closed world of Soviet

communism and, by connecting China to the global economy,

brought about the greatest poverty reduction in history

A world of wall-builders would be poorer and more

dan-gerous If Europe splits into squabbling pieces and America

re-treats into an isolationist crouch, less benign powers will fill

the vacuum Mr Trump’s revelation that he might not defend

America’s Baltic allies if they are menaced by Russia was

un-fathomably irresponsible (see page 27) America has sworn to

treat an attack on any member of the NATO alliance as an

at-tack on all If Mr Trump can blithely dishonour a treaty, why

would any ally trust America again? Without even being

elect-ed, he has emboldened the world’s troublemakers Small

wonder Vladimir Putin backs him Even so, for Mr Trump tourge Russia to keep hacking Democrats’ e-mails is outrageous The wall-builders have already done great damage Britainseems to be heading for a recession, thanks to the prospect ofBrexit The European Union is tottering: if France were to electthe nationalist Marine Le Pen as president next year and thenfollow Britain out of the door, the EU could collapse Mr Trumphas sucked confidence out of global institutions as his casinossuck cash out of punters’ pockets With a prospective president

of the world’s largest economy threatening to block new tradedeals, scrap existing ones and stomp out ofthe World Trade Or-ganisation if he doesn’t get his way, no firm that trades abroadcan approach 2017 with equanimity

In defence of openness

Countering the wall-builders will require stronger rhetoric,bolder policies and smarter tactics First, the rhetoric Defend-ers ofthe open world order need to make their case more forth-rightly They must remind voters why NATO matters for Ameri-

ca, why the EU matters for Europe, how free trade andopenness to foreigners enrich societies, and why fighting terro-rism effectively demands co-operation Too many friends ofglobalisation are retreating, mumbling about “responsible na-tionalism” Only a handful of politicians—Justin Trudeau inCanada, Emmanuel Macron in France—are brave enough tostand up for openness Those who believe in it must fight for it.They must also acknowledge, however, where globalisa-tion needs work Trade creates many losers, and rapid immi-gration can disrupt communities But the best way to addressthese problems is not to throw up barriers It is to devise boldpolicies that preserve the benefits of openness while alleviat-ing its side-effects Let goods and investment flow freely, butstrengthen the social safety-net to offer support and new op-portunities for those whose jobs are destroyed To manage im-migration flows better, invest in public infrastructure, ensurethat immigrants work and allow for rules that limit surges ofpeople (just as global trade rules allow countries to limit surges

in imports) But don’t equate managing globalisation withabandoning it

As for tactics, the question for pro-open types, who arefound on both sides of the traditional left-right party divide, ishow to win The best approach will differ by country In theNetherlands and Sweden, centrist parties have banded togeth-

er to keep out nationalists A similar alliance defeated the tional Front’s Jean-Marie Le Pen in the run-off for France’s pres-idency in 2002, and may be needed again to beat his daughter

Na-in 2017 BritaNa-in may yet need a new party of the centre

In America, where most is at stake, the answer must comefrom within the existing party structure Republicans who areserious about resisting the anti-globalists should hold theirnoses and support Mrs Clinton And Mrs Clinton herself, nowthat she has won the nomination, must champion opennessclearly, rather than equivocating Her choice of Tim Kaine, aSpanish-speaking globalist, as her running-mate is a good sign.But the polls are worryingly close The future of the liberalworld order depends on whether she succeeds

Globalisation and politics

The new political divide

Farewell, left versus right The contest that matters now is open against closed

The Economist July 30th 2016 Leaders 9

IT HAS been a good few daysfor Russia’s dirty-tricks squad

On July 24th the InternationalOlympic Committee (IOC) an-nounced it would not ban theRussian team as a whole fromnext month’s games in Rio de Ja-neiro, even though an investig-ation concluded that the country’s government had been run-

ning an extensive doping programme for athletes Two days

earlier WikiLeaks, a whistleblowing website, had published

embarrassing e-mails from officials of the Democratic

Nation-al Committee, which is meant to be neutrNation-al between

Demo-crats, disparaging Bernie Sanders Security experts determined

the e-mails had been stolen by Russian government hackers

Compared with the other misdeeds of Vladimir Putin’s

re-gime, these ones may seem tame Russia is, after all, a country

that stripped the markings from its soldiers’ uniforms in order

to invade Ukraine while lying about it, and assassinated a

de-fector in London by putting polonium in his tea But cheating

at sport and hacking e-mails to sway an American election are

serious offences too More important, they reflect a broader

pattern of behaviour In arena after arena, Russia is not only

vi-olating the rules; it is trying to break the international order, to

splinter any body or group that might hold it to account

Sex, drugs and Russia’s role

The Russian government routinely humiliates domestic

oppo-nents using kompromat (embarrassing surveillance material,

often sex tapes) gathered by its spooks But using the technique

in a Western election is something new The Russians clearly

wanted to help Donald Trump (see page 27), whose isolationist

tendencies delight Mr Putin (and whose top campaign official

and foreign-policy adviser have ties to Russia) Besides

profess-ing his admiration for Mr Putin, Mr Trump has suggested thatAmerica should not defend its allies unless they have, in hisjudgment, fulfilled their commitments (see page 39) This ismusic to the ears of Mr Putin, who knows that without its guar-antee of mutual defence, NATO is dead

Russia’s efforts to sow discord in NATO mirror its attempts

to divide the European Union In eastern Europe, Russia fundsanti-EU political parties and uses its Russian-language tele-vision channels to support them A Russian bank has providedloans to France’s anti-immigrant National Front; Russiangroups supported French conservatives’ campaign against le-galising gay marriage In Germany, Russian propagandistscooked up a media frenzy over a bogus sexual assault to fo-ment discord over Muslim immigration In 2015 Russia evenhosted a “separatists’ convention” in Moscow, attended by se-cessionists from Northern Ireland and Catalonia (and Hawaii).The goal is to render the West too divided to respond to Rus-sian aggression, as it did by imposing sanctions over Ukraine.America and the EU struggle to cope with these tactics Butone might have hoped that the IOC, ofall international bodies,would respond firmly to Russian rule-breaking Sport is noth-ing without rules; permitting cheating risks destroying thewhole enterprise Yet even in the face of a state-run doping pro-gramme affecting hundreds ofathletes, the IOC would not banthe Russians entirely, but instead kicked the issue down to thegoverning bodies of individual sports Russia trumpeted this

as proof that the doping was a matter of a few bad apples andthe investigation an American-led witch-hunt

Western governments and voters may not be able to stopRussia from hacking politicians’ servers, spreading disinfor-mation or assigning intelligence officers to unscrew the lids onurine samples But they can stop Russia from pitting themagainst each other Mr Putin is exploiting Western democra-cies’ divisions for his own ends They should not let him 7

Russian dirty tricks

Doping and hacking

Russia is waging a silent war on the international order

IT WAS one of Silicon Valley’smost riveting success stories

Now it stands as a warning toothers Yahoo began in 1994 as alark in Stanford’s dormitories,when two students, David Filoand Jerry Yang, assembled theirfavourite links on a page called

“Jerry and David’s Guide to the World Wide Web” The site,

which they renamed Yahoo, quickly became the “portal”

through which millions first encountered the internet At its

peak in 2000, Yahoo had a market value of $128 billion In the

dotcom version of Monopoly, Yahoo got the prime slot

This week its history as an independent firm came to anend On July 25th Verizon, a telecoms giant, announced that itwould pay around $4.8 billion to acquire Yahoo’s core busi-ness (see page 47) The sale will come as a blessed relief toshareholders Yahoo churned through four chief executives inthe three years before the hiring of Marissa Mayer in 2012 Herefforts to turn the company round may have failed, but theseeds of this week’s sale were sown long before she arrived.Three problems explain the firm’s demise

The first was a chronic lack of focus Right from the start hoo was ambivalent about whether it should be a media or atechnology company As a result, whenever the internetzigged, Yahoo zagged It could not decide whether search was a

Ya-The parable of Yahoo

From dotcom hero to zero

Yahoo is no longer an independent company Its failure had many fathers

10 Leaders The Economist July 30th 2016

2“commodity” business to be outsourced or an area worthy of

heavy investment; its prevarication allowed Google to rise It

took too long to respond to the emergence of social media and

the coming of the mobile internet Ms Mayer, and the

com-pany’s toothless board, did nothing to resolve Yahoo’s split

corporate personality

Instead of focusing, Yahoo sprawled By 2001 it had 400

dif-ferent products and services Its cumbersome structure proved

no match for specialised rivals such as Google in search and

eBay in e-commerce Yahoo was notoriously dysfunctional: at

one point it had four different classified-advertising

business-es, each using different technology This contains a warning for

others Silicon Valley is known for its world-changing

ambi-tions, but managers can be distracted by doing too many

things at once Alphabet, Google’s parent company, which

continues to push into new areas, should take note

A second problem at Yahoo concerned dealmaking Some

of its purchases paid off: by the end, its stake in another web

giant—Alibaba, a Chinese e-commerce firm—was worth far

more than its own internet properties Others flopped: Ms

Mayer, for example, bought Tumblr, a social-networking

plat-form, for $1.1billion in 2013, even though it was about to run out

of money But a company’s success depends as much on thedeals it does not do as on the ones it does Yahoo’s history is lit-tered with transactions that should not have been passed up Itdid not buy Google for $1m when it had the chance It agreed tobuy Facebook for $1 billion, but the deal fell through when Ya-hoo tried to negotiate down the price It eschewed the chance

to buy YouTube (subsequently bought by Google), and its chase of eBay fell through because of clashing egos

pur-The long shadow of Steve Jobs

Most galling of all, Mr Yang, the chief executive at the time, hadthe chance to sell Yahoo to Microsoft for around $45 billion inearly 2008 His pride and his desire to head his company ledhim to reject the offer This is the third lesson from Yahoo’s de-mise: founders can often be too attached to their progeny tomake the right strategic decisions Silicon Valley still believes

in the idea of founders as visionary turnaround artists Lastyear Jack Dorsey was brought back to run Twitter, a social-me-dia firm (while continuing to run Square, a payments com-pany that he also founded) Shareholders of both firms shouldconsider Yahoo’s example carefully For every Steve Jobs, whosuccessfully resurrected Apple, there is a Mr Yang 7

WHAT if all Londoners, nomatter how young or frail,smoked for at least six years? Ineffect, they already do The city’sair pollution exacts an equiva-lent toll on each resident, cuttingshort the lives of nearly 10,000people each year and damagingthe lungs, hearts and brains of children

Yet few Londoners realise that things are this bad Citizens

of other big cities in the rich world are equally complacent

(those in the developing world are unlikely to be in any doubt

about the scale of their pollution problem) Official air-quality

indices do exist They alert people when to stay at home,

par-ticularly those with asthma and other medical troubles But

these indices focus on the immediate risks to health, which for

most people are serious only when the air is almost

unbreath-able No equivalent source of information exists to warn

resi-dents about the dangers that accumulate from much lower

amounts of pollution It is all too easy for people to take the

short-term index, which says “low pollution” most of the time,

as a proxy for their lifelong risks

Easy, and wrong Analysis of one year’s worth of pollution

data from 15 big cities in the rich world by The Economist shows

how far from the truth such assumptions can be (see page 61)

Daytime levels of nitrogen dioxide in London exceeded the

World Health Organisation (WHO) limit for hazardous

one-year exposure for 79% of the time, and were on average 41%

above the guideline About halfthe time both nitrogen dioxide

and fine particulates were above the limit In daytime Paris, at

least one of these pollutants exceeded the WHO’s limit for 82%

of the time Pollution is less of a problem in American cities,

partly because most cars run on petrol and emit less nitrogendioxide than diesel vehicles, which are preferred in Europe

A dependable long-term air-quality index, similar in design

to existing short-term gauges, is needed in the world’s big ies That would educate policymakers and voters about thenature of the problem It would help doctors dispense routineadvice to pregnant women, children and other more vulner-able people on how to reduce exposure to pollution And itwould enable the development of apps and products that candeliver practical advice to everyone

cit-Our analysis gives a flavour of what such advice might tain In Paris, for example, 8am is a much better time than 9amfor the morning commute, with levels of nitrogen dioxide low-

con-er by 26% on avcon-erage, and fine particulates by 10% In Amstcon-er-dam, Brussels, London and Paris, there is 10-22% less nitrogendioxide floating around on Sundays than Saturdays, suggest-ing that might be the better day to schedule children’s week-end outdoor activities

Amster-Organising daily and weekly routines in this way can rially affect the amount of pollution inhaled A study in Barce-lona found that, although travel accounts for just 6% of peo-ple’s time, that is when they breathe in 24% of their intake ofnitrogen dioxide

mate-Breezy does it

Reducing air pollution may take lots of money, time and promises But telling people just how bad pollution is for themand how to avoid it is easy, uncontroversial and cheap Noteveryone will heed the advice (for proof, look no further thanthe sunburnt arms and faces on an English summer day) Buteven if a minority do, thousands of people in every big citywill live longer, healthier lives

London Paris

WHO GUIDELINE

The dangers of dirty air need to be made much more transparent to city-dwellers

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12 The Economist July 30th 2016

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

Former Republicans

Donald Trump’s insurgent

takeover of the Republican

Party (“The dividing of

America”, July 16th) has an

ironic counterpart in 1940,

when the party nominated

Wendell Willkie to run against

Franklin Roosevelt Like Mr

Trump, Willkie was a former

Democrat, never held political

office and was perceived as an

alternative to entrenched

politicians in both parties But

there the comparison ends He

positively favoured civil rights,

trade and internationalism By

defeating the Republican

isolationists, he gave crucial

cover to Roosevelt to build

American support for Britain

in its lone defence against Nazi

Germany

Willkie lost the election, but

afterwards he became an

unofficial ambassador for FDR

He also championed equal

rights at home and opposed

the prospect of post-war

colo-nialism When he died

sud-denly in 1944, a journalist

recorded that Willkie had

come “on the American scene

like a meteor and like a meteor

he burned himself out” He

was a “challenging figure

possessed of an integrity,

honesty and courage far

be-yond the average measure.”

It does not seem a trivial

question to ask, but where are

the Willkies of today?

WARD CAMPBELL

Sacramento, California

I would be persuaded by your

thesis that Donald Trump will

leave a lasting mark on the

Republican Party but for one

distinction between him and

the examples you put forth:

Barry Goldwater and George

McGovern were men of

profound and verifiable

conviction Mr Trump is a man

of mirage I predict that the

mirage will fade

FRED LAKNER

San Diego

If people want to know why

Mr Trump says crazy things

they should turn to this

Wiki-pedia article on narcissistic

personality disorder: it “is a

long-term pattern of abnormal

behaviour characterised by

exaggerated feelings of importance, an excessive needfor admiration and a lack ofunderstanding of others’ feel-ings People affected oftenspend a lot of time thinkingabout achieving power, suc-cess or their appearance Theyoften take advantage of thepeople around them.”

self-TIMOTHY COTTONNew York

Pokémon no!

Once upon a time, adults whochased fairies at the bottom ofthe garden were locked up

Now, through “Pokémon GO”

and the wonders of phone technology, they areencouraged to play with otherfairy-chasers (“I mug you,Pikachu!”, July 16th) I’m stilltrying to work out if this repre-sents progress or regress

smart-NICK WILLS-JOHNSONPerth, Australia

Testing blood

You wrote about the problems

at Theranos, a blood-testingstartup that gave incorrectresults to patients (“Red alert”,July 16th) The underlyingreason for Theranos’s ascentwas the lack of general aware-ness of the advances in thein-vitro diagnostics field overthe past 50 years and the criti-cal and widespread contribu-tion it makes to health care

The biggest irony is that “theability to perform multipletests in a tiny droplet of blood”

has long been a reality inmedical diagnosis and is actu-ally carried out millions oftimes a day in laboratorieseverywhere The challengedoes not lie in the instrumentsused, but in the lack of reliablemethods to transfer the sample

to those instruments

Diagnostic tests were ready performed routinelyusing a drop of blood from apinprick long before Theranosexisted However, the bloodobtained that way differs from,and is far more variable than,that drawn from the vein Thisfact is widely known in theindustry For example, last yearthe Centres for Medicare andMedicaid prohibited the unre-stricted use of fingerstick glu-

al-cose-testing on critically illpatients, after several fatalincidents that were linked tospurious pinprick tests

The silver lining aroundTheranos’s lamentable cloudmight be a wider awareness ofthis important practice

SAMUEL REICHBERGLaboratory Assessment andBiotech Systems

New York

Brazil’s future

The problems in Brazil cannot

be denied (“A sporting chance

of safety”, July 9th) The bras scandal makes Watergatelook like child’s play Butanother way of looking at it isthat, after a long history ofcorruption throughout coloni-sation and dictatorship, thecrooks are at last getting round-

Petro-ed up, oustPetro-ed from office andsent to jail In fact, Brazil is asuccess story for the globalanti-corruption movement,the Olympic spirit and the rule

of law

In the midst of a buying scandal, a recession,the rare back-to-back hosting

vote-of the world’s biggest sportingevents, and a much-resentedincrease in fares on publictransport, Brazilians took to thestreets to protest against cor-ruption and mismanagement

Its Congress responded byenacting a dramatic series ofanti-corruption laws In 2011,public-procurement reformsand a new freedom of infor-mation law In 2013 a statuteaddressing corporate complic-ity in public corruption andanother giving federal prosecu-tors important new enforce-ment tools These laws madepossible the investigations andconvictions of today

So let’s turn the tional narrative on its head

conven-Short-term, Brazil is in a cal and economic crisis Butlong-term, Brazil is becomingless corrupt; democracy andthe rule of law are becomingstronger, not weaker In thisregard, its prospects may actu-ally be improving

politi-ANDY SPALDINGAssociate professorUniversity of Richmond School of Law

Richmond, Virginia

A pair of comedians

If Theresa May wanted acomedian as foreign secretary(“Maytime”, July 16th), JohnCleese would have been abetter pick than Boris Johnson

He openly supported Brexitand has ministerial experience(at the ministry of silly walks).And although both are classi-cal scholars, Boris is fact light,whereas Mr Cleese is intellec-tually rigid, pointing out that

Romani ite domum is the

cor-rect Latin spelling for “Romans

go home” in “Life of Brian”.With those attributes he ismuch better equipped tonegotiate the complexities ofBrexit

MICHEL VAN ROOZENDAALHelsinki

The self-preservation society

You wrote about the parlousstate of the Italian bankingsystem and the lessons that gounheeded in the bankingindustry Your headline, “TheItalian job” (July 9th) was anamusing parallel with thatwonderful film and onlyserved to underline the scale

of the problem, on whose rearend the stash of gold seized byCharlie Croker and his mobwould represent but a pimple.Perhaps you could have takenthe parallel one step further byusing another line from thefilm, which sums things upneatly: “Camp Freddie, every-body in the world is bent.”ARCHIE BERENS

Abu Dhabi7

Letters

The Economist July 30th 2016

Executive Focus

The Economist July 30th 2016

Director of sales for Europe and United States

Vacancy for an European director of Salesand an United States director of sales

Grupo Noboa, a worldwide conglomerate of companies focused on the production and sale of food: such as fresh fruit, packaged food, high end gourmet food, and high consumption products like packaged coffee and packaged chocolate.

The Corporation would like to fi ll the following vacancies, which require candidates with exceptional competences and experience:

1 Director of Sales for USA.

The successful candidate will develop a nationwide sales strategy and with a sales team manage and conduct all of the sales of the company in the USA.

2 Director of sales for Europe.

The successful candidate will develop a region wide sales strategy and with a sales team manage and conduct all of the sales of the company in Europe.

• We are looking for an executives with proved experience in the sales

of a wide range of food products to supermarkets and/or distributors.

• The candidate’s needs to have been a Nationwide Director of Sales or have been a candidate for that position.

• Proactive, dynamic, creative and responsible.

The Corporation offers a high end market level of remuneration package with fi x pay and variable pay Great possibilities to growth.

Interested candidates are requested to send their CV to:

phuerta@gnoboa.com.

Luxembourg House of Financial

Technology: Appointment of a CEO

With a view to further strengthen Luxembourg’s FinTech ecosystem,

Luxembourg for Finance is currently setting up the Luxembourg

House of Financial Technology or LHoFT Offering start-up

incubation as well as co-working spaces, the LHoFT brings together all

parts of the FinTech community with the aim of fostering innovation

in fi nancial services

We are looking for a dynamic and highly motivated CEO, with an

international profi le, to set up and lead this exciting new platform

What does your mission involve?

You will set up and run the Luxembourg House of Financial

Technology You will lead the activities of the LHoFT, including the

development of acceleration and innovation programs as well as

coordinate and successfully implement collaborative R&D projects

Internationally, you will connect the LHoFT with leading FinTech

platforms in other countries

What profi le are we looking for?

You have a passion for entrepreneurship and at least 15 years of

experience in leading digital transformation projects or running

start-ups in fi nancial services You have extensive exposure in the

international FinTech scene and a robust understanding of the

underlying technological, regulatory and business trends Profi cient in

English, you have outstanding communication skills and are a

solution-driven leader than can inspire your team and others around you

How To Apply

Please send your CV and a brief description of what makes you

uniquely qualifi ed to lead the LHoFT to Nicolas Mackel, CEO of

Luxembourg for Finance, by 31 August 2016: nicolas.mackel@lff.lu

Executive Focus

16 The Economist July 30th 2016

IS POLAND’S government right-wing or

left-wing? Its leaders revere the Catholic

church, vow to protect Poles from

terro-rism by not accepting any Muslim refugees

and fulminate against “gender ideology”

(by which they mean the notion that men

can become women or marry other men)

Yet the ruling Law and Justice party also

rails against banks and foreign-owned

businesses, and wants to cut the retirement

age despite a rapidly ageing population It

offers budget-busting handouts to parents

who have more than one child These will

partly be paid for with a tax on big

super-markets, which it insists will somehow not

raise the price of groceries

“The old left-right divide in this country

has gone,” laments Rafal Trzaskowski, a

liberal politician Law and Justice plucks

popular policies from all over the political

spectrum and stirs them into a nationalist

stew Unlike any previous post-communist

regime, it eyes most outsiders with

suspi-cion (though it enthusiastically supports

the right of Poles to work in Britain)

From Warsaw to Washington, the

polit-ical divide that matters is less and less

be-tween left and right, and more and more

between open and closed Debates

be-tween tax-cutting conservatives and

free-spending social democrats have not gone

away But issues that cross traditional party

lines have grown more potent Welcomeimmigrants or keep them out? Open up toforeign trade or protect domestic indus-tries? Embrace cultural change, or resist it?

In 2005 Stephan Shakespeare, the ish head of YouGov, a pollster, observed:

Brit-We are either “drawbridge up” or bridge down” Are you someone who feels your life is being encroached upon by crimi- nals, gypsies, spongers, asylum-seekers, Brussels bureaucrats? Do you think the bad things will all go away if we lock the doors?

“draw-Or do you think it’s a big beautiful world out there, full of good people, if only we could all open our arms and embrace each other?

He was proven spectacularly right in June,when Britain held a referendum on wheth-

er to leave the European Union The ers of the main political parties wanted tostay in, as did the elite of banking, businessand academia Yet the Brexiteers won, re-vealing just how many voters were draw-bridge-uppers They wanted to “take backcontrol” of borders and institutions fromBrussels, and to stem the flow of immi-grants and refugees Right-wing Brexiteerswho saw the EU as a socialist superstatejoined forces with left-wingers who saw it

lead-as a tool of global capitalism

A similar fault line has opened where In Poland and Hungary the draw-bridge-uppers are firmly in charge; in

else-France Marine Le Pen, who thinks that theopposite of “globalist” is “patriot”, willprobably make it to the run-off in nextyear’s presidential election In cuddly, car-ing Sweden the nationalist Sweden Demo-crats topped polls earlier this year, spurringmainstream parties to get tougher on asy-lum-seekers Even in Germany some fearimmigration may break the generous safe-

ty net “You can only build a welfare state

in your own country,” says Sahra necht, a leader of the Left, a left-wing party

Wagenk-In Italy, after the Brexit vote, the leader

of the populist Northern League partytweeted: “Now it’s our turn.” Japan has nobig anti-immigrant party, perhaps becausethere are so few immigrants But recentyears have seen the rise of a nationalistlobby called Nippon Kaigi, which seeks torewrite Japan’s pacifist constitution andmake education more patriotic Half theJapanese cabinet are members

There’s no we in US

In America the traditional party of freetrade and a strong global role for the armedforces has just nominated as its standard-bearer a man who talks of scrapping tradedeals and dishonouring alliances “Ameri-canism, not globalism, will be our credo,”says Donald Trump On trade, he is close tohis supposed polar opposite, Bernie Sand-ers, the cranky leftist who narrowly lostthe Democratic nomination to HillaryClinton And Mrs Clinton, though the mostdrawbridge-down major-party candidateleft standing, has moved towards theTrump/Sanders position on trade by dis-avowing deals she once supported

Timbro, a Swedish free-market tank, has compiled an index of what it calls

The Economist July 30th 2016 Briefing Globalisation and politics 17

2“authoritarian populism”, which tracks

the strength of drawbridge-up parties in

Europe On average a fifth ofvoters in

Euro-pean countries back a populist party of the

right or left, it finds Such parties are

repre-sented in the governments of nine

coun-tries The populist vote has nearly doubled

since 2000 (see chart1) In southern Europe

austerity and the euro crisis have revived

left-wing populism, exemplified by Syriza

in Greece and Podemos in Spain In

North-ern Europe the refugee crisis of 2015 has

boosted the populists of the right

Drawbridge-up populists vary from

place to place, but most share a few key

traits Besides their suspicion of trade and

immigration, nearly all rail against their

country’s elite, whom they invariably

de-scribe as self-serving British people “have

had enough of experts”, said Michael

Gove, a leader of the Brexit campaign Mr

Trump last week said that the elite back

Mrs Clinton because “they know she will

keep our rigged system in place….She is

their puppet, and they pull the strings.”

Distrust of elites sometimes veers into

conspiracy theory Poland’s defence

minis-ter suggests that Lech Kaczynski, a Polish

president who died in a plane crash in

2010, was assassinated Mr Trump talks of

“the plain facts that have been edited out

of your nightly news and morning

news-paper” Panos Kammenos, a member of

Greece’s ruling coalition, wonders if

Greeks are being sprayed with

mind-alter-ing chemicals from aeroplanes

Nearly all drawbridge-up parties argue

that their country is in crisis, and explain it

with a simple, frightening story involving

outsiders In Poland, for example, Law and

Justice accuses decadent Western liberals

of seeking to undermine traditional Polish

values (A recent magazine cover spoke of

“Poland against the Gay Empire”.) It also

plays up the threat of Islamist terrorists,

who have killed no one in Poland since the

days of the Ottoman Empire—but will start

again, unless the government is vigilant

Poland’s previous government, led by a

party called Civic Platform, agreed last

year to take a few Middle Eastern gees—7,000 in total—to show solidaritywith fellow members of the EU Law andJustice accused them of recklessly endan-gering the lives of Poles Voters kickedthem out of office

refu-The recent string of terrorist attacks inFrance, Belgium and Germany has boost-

ed support for drawbridge-raising out Europe On Bastille Day a jihadist in atruck killed 84 people in Nice; on July 26thtwo men linked to Islamic State slit thethroat of an 85-year-old Catholic priest cel-ebrating mass near Rouen These assaults

through-on symbols ofFrench culture—the sary of the revolution and the dominant, ifdeclining, religion—prompted PresidentFrançois Hollande to declare war on Islam-

anniver-ic State He vowed that: “No one can divideus.” Ms Le Pen retorted on Twitter: “Alas,

@fhollande is wrong Islamic talists don’t want to ‘divide’ us, they want

Speaking by video link, Kent Terry and

Kel-ly Terry-Willis described the murder oftheir brother Brian, a border-patrol agent,

in a shootout in Arizona Later, three ents told the audience how their childrenhad been murdered by illegal immigrants

par-There is no evidence that illegal grants commit more crimes than otherpeople But Mr Trump said that to BarackObama, each victim was “one more child

immi-to sacrifice on the altar of open borders”

The great disruption

Mr Trump’s charisma aside, the success ofdrawbridge-up parties in so many coun-tries is driven by several underlying forces

The two main ones are economic tion and demographic change

disloca-Economics first Some 65-70% of holds in rich countries saw their real in-comes from wages and capital decline orstagnate between 2005 and 2014, com-pared with less than 2% in 1993-2005, saysthe McKinsey Global Institute, a think-tank If the effects of lower taxes and gov-ernment transfers are included, the picture

house-is less grim: only 20-25% of householdssaw their disposable income fall or stayflat In America nearly all households sawtheir disposable income rise, even if theirheadline wages stagnated Such figuresalso fail to take full account of improve-ments in technology that make life easierand more entertaining

Nonetheless, it is clear that many and less-skilled workers in rich countriesfeel hard-pressed Among voters whobacked Brexit, the share who think life isworse now than 30 years ago was 16 per-centage points greater that the share whothink it is better; Remainers disagreed by amargin of 46 points A whopping 69% of

mid-Americans think their country is on thewrong track, according to RealClearPolit-ics; only 23% think it is on the right one Many blame globalisation for their eco-nomic plight Some are right Althoughtrade has made most countries and peoplebetter off, its rewards have been unevenlyspread For many blue-collar workers inrich countries, the benefits of cheaper, bet-ter goods have been outweighed by joblosses in uncompetitive industries Forsome formerly thriving industrial towns,the impact has been devastating (see page

42 for a report from Blackburn, Britain) Economic insecurity makes other fearsloom larger Where good jobs are plentiful,few people blame immigrants or trade fortheir absence Hence the divide betweencollege-educated folk, who feel confidentabout their ability to cope with change,and the less-schooled, who do not

Consider Austria, where a presidentialelection on October 2nd will pit NorbertHofer of the anti-immigrant, Euroscepticand protectionist Freedom Party against aglobal-minded Green candidate, Alex-ander van der Bellen In Linz, an industrialcity on the Danube, the central Kaplanhofdistrict is full of startups and technologyfirms that have moved into former fac-tories and warehouses Here, globalisationmeans customers and opportunities; pro-openness messages go down a treat In anearby café, Mr van der Bellen told cheer-ing regulars: “Don’t forget that in Austria,every second job is directly or indirectlylinked to trade with the rest of the world.”

A couple of miles south is a differentLinz: the Franckviertel Vast chimneys fromchemical plants loom over rusting railwaysidings Streets are lined with cheapclothes shops and empty video-rental out-lets Here, globalisation has meant decline.Like Kaplanhof, it has an above-averageproportion of foreigners (32% of the popu-lation), but these tend to be the poorer, lesswell qualified sort: Afghans and north Af-ricans attracted by low rents This has bred

1

Left, right, left, right

Source: Timbro

Votes for totalitarian and

authoritarian populist parties

As % of votes in most recent national elections*

*33 European countries; post-communist

states included from the year of first democratic elections

0 2 4 6 8 10 12

Do you think having an increasing number of people of many different races, ethnic groups and nationalities in our country makes it a better

or a worse place to live*, %

*United States survey conducted March 2016, European surveys April-May 2016

United States Britain Spain France Germany Italy Poland Greece

Doesn’t make much difference

18 Briefing Globalisation and politics The Economist July 30th 2016

2resentment: “It’s the Moroccans They

rape, they sell drugs Have you seen the

train station?” complains Peter, a “Linzer

born-and-bred” waiting for the trolley bus

into town In these parts Mr Hofer is likely

to win

This divide is new in Austria For

de-cades it was dominated by a centre-left and

a centre-right party But both have

strug-gled to reconcile the cosmopolitan and

na-tivist parts of their electoral coalitions In

the first round of this year’s presidential

election, they won just 22.4% of the vote

between them and had to drop out

The second force pulling drawbridges

up is demographic change Rich countries

today are the least fertile societies ever to

have existed In 33 of the 35 OECD nations,

too few babies are born to maintain a

sta-ble population As the native-born age,

and their numbers shrink, immigrants

from poorer places move in to pick

straw-berries, write software and empty

bed-pans Large-scale immigration has brought

cultural change that some natives

wel-come—ethnic food, vibrant city centres—

but which others find unsettling They are

especially likely to object if the character of

their community changes very rapidly

This does not make them racist As

Jon-athan Haidt points out in the American

In-terest, a quarterly review, patriots “think

their country and its culture are unique

and worth preserving” Some think their

country is superior to all others, but most

love it for the same reason that people love

their spouse: “because she or he is yours”

He argues that immigration tends not to

provoke social discord if it is modest in

scale, or if immigrants assimilate quickly

When immigrants seem eager to embrace

the language, values and customs of their

new land, it affirms nationalists’ sense of

pride that their nation is good, valuable and

attractive to foreigners But whenever a

country has historically high levels of

immi-gration from countries with very different

moralities, and without a strong and

success-ful assimilationist programme, it is virtually

certain that there will be an authoritarian

counter-reaction.

Several European countries have struggled

to assimilate newcomers, and this is

re-flected in popular attitudes Asked

wheth-er having an increasing numbwheth-er of people

of different races in their country made it a

better place to live, only 10% of Greeks and

18% of Italians agreed (see chart 2 on

previ-ous page) Even in the most cosmopolitan

European countries, Sweden and Britain,

only 36% and 33% agreed In America, by

contrast, a hefty 58% thought diversity

im-proved their country Only 7% thought it

made it worse

Most immigrants to America find jobs,

and nearly all speak English by the second

generation For all Mr Trump’s

doomsay-ing, the recent history of race relations is

one of success But that cannot be taken for

granted In one respect, America is ing uncharted waters Last year whiteChristians became a minority for the firsttime in three centuries By 2050 whites will

enter-no longer be a majority The group that hasfound these changes hardest—whites with-out a college education—forms the core of

Mr Trump’s support

White Americans, like dominantgroups everywhere, dislike constantly be-ing told that they are privileged For laid-

off steelworkers, it doesn’t feel that way

They do not like being accused of racism ifthey object to affirmative action or of

“microaggressions” if they say “America is

a land of opportunity” Another Pew pollfound that 67% of American whites agreedthat “too many people are easily offendedthese days over language” Among Trumpsupporters it was 83%

How to fight back

What can drawbridge-downers do? Themost important thing is to devise policiesthat spread the benefits of globalisationmore widely In the meantime, and de-pending on how their national politicalsystem works, they are trying various tac-tics In Sweden, France and the Nether-lands, the mainstream parties have formedtactical alliances to keep the nationalistsout of power So far, they have succeeded,but at the cost of enraging nationalists,who see the establishment as a conspiracy

to keep the little guy down

Instead of, or in addition to this, stream politicians sometimes borrow thenationalists’ clothes In Britain the Conser-vatives have taken a far tougher line on im-migration than many of their cosmopoli-tan leaders would have preferred TheresaMay, the new prime minister, was the ar-chitect of this policy In America Mrs Clin-ton’s flip-flop on free trade is a tactical con-cession to her party’s protectionist wing:

main-among the free-trade deals she now

de-cries is one that she helped negotiate Virtually no politicians have forthright-

ly argued that free trade and well-regulatedimmigration make most people better off.Emmanuel Macron, France’s economyminister, says it is time to try Drawbridge-downers in France’s main parties havemore in common with each other thanwith the National Front, he says, so he haslaunched a new movement

An obvious objection is that if partiesalign themselves into explicitly globalistand nationalist camps, this might lend thenationalists legitimacy and accelerate theirascent Piffle, says Mr Macron “Look at thereality,” he says: in France the NationalFront was already the top party in voting atthe most recent (regional) elections It’s not

a risk; it has already happened

Although the drawbridge-uppers haveall the momentum, time is not on theirside Young voters, who tend to be bettereducated than their elders, have moreopen attitudes A poll in Britain found that73% of voters aged 18-24 wanted to remain

in the EU; only 40% of those over 65 did.Millennials nearly everywhere are moreopen than their parents on everythingfrom trade and immigration to personaland moral behaviour Bobby Duffy of Ip-sos MORI, a pollster, predicts that their atti-tudes will live on as they grow older

As young people flock to cities to findjobs, they are growing up used to heteroge-neity If the Brexit vote were held in tenyears’ time the Remainers would easilywin And a candidate like Mr Trumpwould struggle in, say, 2024

But in the meantime, the raisers can do great harm The consensusthat trade makes the world richer; the toler-ance that lets millions move in search ofopportunities; the ideal that people of dif-ferent hues and faiths can get along—all areunder threat A world of national fortress-

drawbridge-es will be poorer and gloomier.7

The Economist July 30th 2016 19

For daily analysis and debate on Asia, visit

Economist.com/asia

NEAR the Seongju county office, Lee

Soo-in mans a makeshift stand for

citi-zens wanting to renounce their affiliation

to the ruling Saenuri party Over 800 have

signed up in a week Mr Lee, born in this

ru-ral town of 14,000, is stunned:

conserva-tives in North Gyeongsang, a

south-east-ern province, are normally staunch

supporters of Park Geun-hye, South

Ko-rea’s president But “now we feel

be-trayed,” says Mr Lee

At issue is the planned installation, on a

hilltop a few kilometres away, of an

Ameri-can-funded missile-defence battery called

THAAD (Terminal High-Altitude Air

De-fence) Fearful of upsetting China, South

Korea had long dithered over whether to

add the sophisticated system—which

could shoot down incoming North Korean

ballistic missiles above the atmosphere—to

its crop of Patriot batteries, which destroy

missiles at lower altitudes But after a suite

of North Korean bomb and missile tests it

is no longer delaying Chinese opposition

to the news, on July 8th, that a THAAD

bat-tery would be set up in South Korea within

18 months has been predictably shrill It

says that the system’s powerful radar

might be used to snoop on China

Yet it is the intensity of protests at home

that has wrong-footed Ms Park’s

adminis-tration Misinformation about the battery

has proliferated, in part because of the

se-crecy surrounding it Residents in Seongju

and nearby appear to fear irradiation from

South Korea has tried to quell panic bymeasuring what waves are emitted fromits existing anti-missile systems, as well asfrom a THAAD battery at an Americanbase in Guam The military is trying to gainlocals’ trust On July15th, two days after an-nouncing that Seongju would host the bat-tery, the prime minister and minister of de-fence visited to explain their decision (themayor, Kim Hang-gon, says he first heardabout it on television) Protesters peltedthem with eggs and water bottles Local of-ficials, including Mr Kim, shaved theirheads in protest and wrote petitions intheir own blood

Such zeal is common in South Korea’syoung, raucous democracy In the past de-cade civic groups have banded togetherwith farmers and villagers to resist nuclear-power plants, naval bases and Americanmilitary installations These went ahead,but not without delays, ugly evictions andcompensation Katharine Moon of theBrookings Institution, a think-tank inWashington, DC, says state heavy-handed-ness has repeatedly irked local communi-ties, particularly when it suggests the bilat-eral military alliance takes precedenceover their livelihoods and self-governance Nationally, support for THAAD hoversabove 50% And America enjoys far higherapproval ratings today in South Ko-rea—84%, according to the Pew ResearchCentre, another think-tank—than it did adecade ago Though small leftist outfitsthat resent its 28,000 troops and championengagement with North Korea have ralliedagainst THAAD in the capital, Seoul, theyhave managed to mobilise only a few hun-dred people For now Seongju’s conserva-tive protesters scoff at joining forces

That suggests that there is still a chancefor Ms Park to cool tempers in a region that

is so important to her party Yet her early buke to protesters for being “divisive” was

re-THAAD’s electromagnetic waves morethan the (real) threat of nukes from NorthKorea—which has lately promised, withsignature bombast, to turn Seongju into “asea of fire” and “a pile of ash”

The town is festooned with protest ners: “Opposed to THAAD with our lives”

ban-and “We must not pass the waves on to ouryoung” Residents turn out nightly for atwo-hour vigil at the county office, holdingcandles (supplied by a local Buddhist tem-ple) and sporting anti-THAAD pins (fromthe church) Rumour has it that no onewants to marry a Seongju bride Farmers inthe area grow melons, which they fearmight somehow be contaminated

Defending South Korea

Of missiles and melons

S E O N G J U

South Koreans fear their country’s new missile-defence system

Asia

Also in this section

20 Murdering the disabled in Japan

20 A bad man is back in Indonesia

21 Islamic State in Afghanistan

21 Australia’s Abu Ghraib

22 Travails in Taiwan

S O U T H

K O R E A

Seoul Pyongyang

Jeju Strait

Busan Seongju

US Army/Air force bases

Source: IFES Approximate range of THAAD Battery

100 km

20 Asia The Economist July 30th 2016

2taken as “an indirect declaration of war”

on Seongju’s people by one South Korean

daily A group of elderly local women—

anti-THAAD badges tacked to their

flow-ery pinkpyjamas—recently pulled an

enor-mous portrait of Ms Park from the wall of

their community centre, which stands not

far from where some of her ancestors are

buried In the election in 2012, 86% in

Se-ongju voted for her; since July 15th her

ap-proval rating in North Gyeongsang hastumbled from 50% to 41%

Ms Park’s presidency has been shadowed by botched responses to adeadly ferry accident and a national healthscare over an outbreak of Middle East Res-piratory Syndrome Her party is still reel-ing from the loss of its majority in legisla-tive elections in April—the first time for aruling party in 16 years Two minor opposi-

over-tion parties are drafting a resoluover-tion manding that THAAD require parliamen-tary ratification In a survey of SouthKoreans by Realmeter, a pollster, only athird agreed that deployment should notrequire MPs’ approval

de-Such churn may delay deployment.South Korea and America plan to have thebattery set up by late 2017—which, neatly, iswhen South Koreans go to the polls to electtheir next (single-term) president ChoiJong-kun of Yonsei University, in Seoul,thinks that presidential hopefuls will buildelection platforms on the promise of post-ponement Perhaps by then some of thefervour will have cooled.7

Politics in Indonesia

Look who’s back

JOKO WIDODO, Indonesia’s president,

universally known as Jokowi,

reshuf-fled his cabinet on July 27th for the

second time since taking office in late

2014 Although observers had expected

only minor fiddling, he made big

changes

Most contentious is the appointment

of Wiranto (who like many Indonesians

uses only one name) as chief security

minister Mr Wiranto (pictured) served as

defence minister and head of the armed

forces under Suharto, Indonesia’s late

strongman, and afterwards during the

independence referendum in East Timor

(now Timor-Leste) in 1999 Between 1,000

and 2,000 civilians are thought to have

lost their lives before and after the vote

Many more were forced to flee their

homes In 2003 a UN-backed court in

Timor-Leste indicted Mr Wiranto for

crimes against humanity He has never

appeared before it to answer the charges

Human-rights groups reacted with

dismay They were already decrying

Indonesia’s plans to execute by firing

squad 14 people, most of them foreigners

convicted of drug offences Keith

Lo-veard, a political-risk consultant in

Jakar-ta, thinks that Mr Wiranto’s appointment

may be a “wily” balancing act aimed at

setting meddlesome former generals in

the cabinet against one another If so it

could eventually allow Jokowi more

room to manoeuvre

Another notable change is the return

of Sri Mulyani Indrawati to the post of

finance minister Ms Mulyani, who has

been a director at the World Bank since

resigning from the government of

In-donesia’s previous president, was

praised for her management of the

econ-omy in 2005-10 She returns at a time

when slumping commodity prices are

weighing down Indonesia’s growth Her

first priority will be a tax-amnesty

scheme intended to lift dwindling

rev-enues and prevent the budget deficit

from breaching a legal limit of 3% of GDP

Though the currency and stockmarket

rallied on news of her return, Ms Mulyaniwill have to work alongside ministerswho spoke against her during investiga-tions into a controversial bank bail-outduring the financial crisis of 2008-09

These include the vice president, JusufKalla

After a shaky start to his presidency,Jokowi—Indonesia’s first leader fromoutside the political or military elite—islooking more confident In part thisreflects a rapprochement with Golkar, thesecond-largest party in parliament Itbacked a rival candidate for the presiden-

cy but has since changed its chairmanand pledged to support Jokowi, strength-ening him in the legislature He rewardedthe party with its first cabinet post, whichwent to Airlangga Hartarto, who takesthe industry ministry, a portfolio hisfather held before him under Suharto

No one can accuse Jokowi of ering after so sweeping a reshuffle YetIndonesia’s international standing, al-ready shaken by its policy of executingdrug traffickers, will surely be tarnished

dith-by the return of Mr Wiranto to one of themost powerful positions in government

J A K A R T A

A sweeping cabinet reshuffle installs an unloved former general

Surprise!

IN A world tormented by violence, Japan

is remarkably safe Muggings are rare andthe murder rate low Last year police re-corded just a single gun death in a countryof126m people

The weapon of choice when someoneruns amok is a knife And so it was on July26th when a young man broke into a carehome for the disabled and carried out Ja-pan’s worst mass murder in decades Thekiller methodically stabbed over 40 peoplelying in their beds, killing 19 Most of thewounds were to his victims’ necks

Police have named the only suspect asSatoshi Uematsu, a 26-year-old former careworker at the home, who is now under ar-rest Mr Uematsu had repeatedly threat-ened to kill disabled people In February

he wrote a letter explaining his goal of aworld in which people unable to live unat-tended lives would be euthanised It washand-delivered to the residence of Japan’sLower House speaker

The pathology of mass killers is tent, whatever their nationality Almost allare young and male, fuelled by aggressionand testosterone In many cases the trip-wire for murderous sprees can be an eventthat unravels their lives—losing a job, forexample Only Mr Uematsu knows whatwas going through his mind when hedrove to the care home in the dead of night,armed with a bag of knives He had report-edly been fired—hardly surprising, givenhis attitude to the disabled—and may havenursed a grudge A brief enforced spell inhospital earlier this year ended when hewas released into the care of his family His attack will almost certainly triggermore scrutiny of Japan’s post-bubble gen-eration, the children who have come of age

The Economist July 30th 2016 Asia 21

2in leaner times In June 2008 Tomohiro

Kato murdered seven people by driving a

truck into a crowd of shoppers in Tokyo

and jumping out to slash pedestrians with

a dagger Mr Kato traced his failures in life

in part to his vertiginous descent, aged 25,

into the insecure world of temporary

em-ployment But he added: “The crime I

com-mitted is all my responsibility.”

Such horrific events have triggered

tighter controls (daggers of 6cm or longer

have been banned since Mr Kato’s killing

spree), and handwringing that Japan is

be-coming as dangerous as everywhere else

The statistics say otherwise Crime last

year hit a post-war low Japan still

incarcer-ates fewer of its citizens than almost any

other rich country

The main danger is overreaction In

2001 a former school janitor murderedeight primary-school children in Osakawith a kitchen knife Mamoru Takuma’srampage is the reason why security guardsstand outside some schools in Japan to thisday—a sad reminder to millions of childrenthat the world can be a scary place

Japan’s biggest newspaper, the Yomiuri

Shimbun, said this week that care homes

for the mentally ill might consider ing suit Security is weak and many facili-ties lack strong doors or gates But whatev-

follow-er follows, it is hard to protect evfollow-eryonefrom the actions ofan unstable citizen who

is determined to do harm

Terror in Afghanistan

Unwelcome guests

EVEN for a country as inured to war as

Afghanistan, the strike on a crowd of

peaceful protesters in Kabul on July 23rd

was shocking Bombs killed 81 people,

perhaps the deadliest such attack in the

capital since the civil war two decades

ago Islamic State (IS) claimed

responsi-bility, saying it had sent two

suicide-bombers to “a Shiite gathering” (the

protesters were mainly Hazaras, a Shia

minority) It hinted it would attack again

should Afghan Shias keep travelling to

Syria to fight on the side of its president,

Bashar al-Assad

The Afghan government said it

thought IS was indeed guilty The group

published photos of two men they said

were the bombers, and details of the

attack bear IS’s hallmarks But as with

massacres in Europe, it seems likely that

the culprits were inspired by IS’s

propa-ganda rather than following direct orders

Though the exact number of self-styled IS

fighters in Afghanistan is disputed, their

ranks remain small and are not obviously

growing The group is opposed by the

Taliban (which looks askance at its Arab

origins) A cluster of fighters in

Nan-garhar, an eastern province, looks fairly

well contained

All this is no comfort to Afghanistan’s

battered citizens Civilian casualties have

risen every year since the UN started

counting in 2009 (during which time

nearly 23,000 have been killed) On July

26th the government said it had cleared

ISfighters from parts of Nangarhar But it

said something similar four months ago,

and that did not prevent the bloodshed in

the capital

The Hazaras commonly face

dis-crimination; they had gathered to protest

against the planned rerouting of a power

line around the Hazara-dominated ince of Bamiyan Security forces werepresent, but focused mostly on keepingprotesters away from the city centre; theyblocked roads with shipping containers

prov-Such marches are an increasinglypopular way for young Afghans to exer-cise political rights; many now shunolder politicians, whom they associatewith tanks and guns And for all its vio-lence Afghanistan has managed to avoidthe kind of sectarian bloodletting thatafflicts neighbours such as Iraq Afghans

of all ethnicities are loudly decrying theattacks That is some small solace, at least

K A B U L

Islamic State claims an appalling attack

More common than ever

WHEN he announced plans on July25th to strengthen Australia’s anti-terrorism laws, Malcolm Turnbull, theprime minister, declared that his adminis-tration’s “primary duty” was to keep citi-zens safe Within hours Australians werewatching videos of government employ-ees doing harm Inmates of a youth deten-tion centre at Darwin, in the Northern Ter-ritory, most of them indigenous children,were shown being thrown on floors, man-acled, stunned with tear gas and subjected

to other cruel treatment by prison guards.Dylan Voller, then aged 17, was left alone in

a cell for two hours after guards had tiedhis arms, feet and head to a metal chair andput a hood over his face

The prison videos were shown on

“Four Corners”, an Australian ing Corporation (ABC) programme MrTurnbull said he was “shocked and ap-palled” and announced a royal commis-sion inquiry to “expose the culture that al-lowed it to occur and allowed it to remainunrevealed for so long”

Broadcast-In fact, lawyers and indigenous leadershave long called for government action tocut Australia’s high rate of aboriginalyouth imprisonment Mick Gooda, an ab-original official at the Australian HumanRights Commission, calls it “one of themost challenging human-rights issues fac-ing our country” The Northern Territory, afederal dependency, has one of the worstrecords Indigenous people are almost athird of the territory’s population, com-pared with 3% for Australia as a whole Butthey account for 96% of youngsters agedbetween 10 and 17 in detention AmnestyInternational reported last year that thenumber of indigenous young people in de-tention in the territory nearly doubledover the four years to 2014

Nationwide, Amnesty says young digenous Australians are 26 times morelikely to be in detention on an averagenight than their non-indigenous counter-parts It says governments have failed to re-spond to a “national crisis” The exposure

in-of the territory’s prison footage, recordedover the past six years, seems to bear thisout Lawyers and journalists had unsuc-cessfully sought the footage under free-dom-of-information laws; whistle-blow-ers apparently enabled the ABC finally toreveal it Yet Adam Giles, the territory’schief minister, claimed he had not seen itbefore He blamed a “culture of cover-up”

He could have added blame-shifting Nigel

Young aborigines

Australia’s Abu Ghraib

S Y D N E Y

Abuses at a juvenile prison prompt a national inquiry

22 Asia The Economist July 30th 2016

2Scullion, Mr Turnbull’s minister for

indige-nous affairs, “assumed” the territory

gov-ernment was handling the problem: “It did

not pique my interest.”

The high detention rates echo broader

problems: indigenous Australians are

poorer, unhealthier and do worse in

school than their compatriots Eight years

ago, the federal and state governments set

targets for “closing the gap” with the rest of

the country The scheme’s latest report says

two crucial areas, jobs and life expectancy,

are “not on track” Some lawyers blame

governments for spinning “law and order”

as a quick fix although locking up young

people often sets them back even more

Mr Voller was first detained when he

was 11 years old Now 18, he is in an adult

prison and is due for release this year

Gil-lian Triggs, head of the human rights

mission, says it is “not too extreme” to

com-pare his treatment to that of prisoners in

Abu Ghraib prison during the Iraq war

Some want the inquiry to cover youth

detention centres around Australia Mr

Turnbull will keep it “focused” on those in

the Northern Territory; he wants it to port early next year It will need to be moreproductive than another inquiry carriedout 25 years ago, into high death-in-custo-

re-dy rates among indigenous people Sincethen, says Mr Gooda, “our people are morelikely than ever to be incarcerated.” 7

Looks familiar

TAIWAN’S first female president has

had a testing start Within weeks of Tsai

Ing-wen’s inauguration in May, China

an-nounced that it had cut off important

chan-nels of communication with her

govern-ment, because she refuses to accept the

idea of “one China”, with Taiwan as part of

it Ms Tsai has inherited a struggling

econ-omy, hampered by sluggish global

de-mand, and has had to contend with a

se-ries of mini-crises, too: a flood crippled the

capital’s main airport; flight attendants at

the largest airline, China Airlines, went on

strike to demand better working hours and

benefits (stoppages are rare in Taiwan); the

navy accidentally fired an anti-ship

mis-sile, killing a fisherman

At the annual congress of her

Demo-cratic Progressive Party (DPP) in mid-July,

Ms Tsai displayed photographs of these

events “I would like everyone here to take

a good look at these pictures, and this

na-tion,” she said “This is Taiwan under a DPP

government.” Her words were meant to

goad officials into action, not (presumably)

to describe how she saw the coming four

years of her term But there is little doubt

that her leadership risks being beset by

problems at home and abroad that may

eclipse those experienced by her

predeces-sor, Ma Ying-jeou, of the Nationalist Party,

or Kuomintang (KMT)

Start with the economy Having tracted for three consecutive quarters, itlooks unlikely to grow by much more than1% in 2016 Ms Tsai’s rocky relationshipwith China endangers cross-strait eco-nomic activity, a vital underpinning ofgrowth during Mr Ma’s presidency (Tour-ists from the mainland have become spars-

con-er since hcon-er victory.) It will not help thatthis year Taiwan’s working-age populationhas begun to shrink

Continued economic malaise could gravate social tensions that led to big prot-ests in 2014, ostensibly against free tradewith China but fuelled just as much bywidening inequality, stagnant wages andinflated house prices Demonstrators gath-ered outside the DPP’s meeting this month,decrying a decision to cut seven nationalholidays; they accused the party, whichlikes to present itself as a supporter ofworkers’ rights, of siding with bosses

ag-Abroad, Ms Tsai has found herself expectedly embroiled in a legal wranglenot just with China, but with the world atlarge On July 12th an international tribu-nal in The Hague, in a ruling on a caselodged by the Philippines against China’sclaims in the South China Sea, concludedthat an island controlled by Taiwan and

un-commonly known as Itu Aba was merely arock This meant Taiwan could not claim

an “Exclusive Economic Zone” of up to 200nautical miles around it Ms Tsai said thetribunal had “seriously infringed” Tai-wan’s territorial claims and that the ruling,which was based on the UN Convention

on the Law of the Sea, did not bind Taiwan,which is not a UN member

Ms Tsai’s hands may have been tied by

Mr Ma’s efforts, just before his term ended,

to whip up public support for Taiwan’s zarre claim to Itu Aba, which is 1,400km(870 miles) away He paid a rare visit thereand separately invited foreign media to go.Lin Chong-pin, a former deputy minister

bi-of defence, says that with all the troubles

Ms Tsai faces, she cannot afford to arouseyet more controversy by retreating fromTaiwan’s claims—a legacy of the dayswhen the KMT ruled the mainland as well

as Taiwan

While all this plays out, strife between

Ms Tsai’s party and the KMT is intensifying

On July 25th the DPP-dominated ture voted to establish a government com-mission empowered to retrieve assets sto-len by political parties since 1945—a moveclearly aimed at the KMT, which the rulingparty accuses of having (long ago) pinchedproperties and other state-owned goodiesthat Japanese colonials gave back to Tai-wan at the end of the second world war.But Ms Tsai must also handle rifts withinher own party At its recent congress somedelegates said the DPP should drop its callfor an independent Taiwan (which wouldplease China), while others called for Tai-wan’s official name, the Republic of China,

legisla-to be abolished (which would infuriate it)

Ms Tsai’s travails are mostly not of hermaking But supporters fret that her gov-ernment, despite enjoying a large majority,looks shy ofunpopular reforms Conserva-tive picks in the cabinet have disappointedyoung adherents without much placatingthe opposition “I am worried that we willtry to please everybody and end up offend-ing everyone,” says Parris Chang, a formersenior DPP official As the glow from a bigelection win fades, the president’s troublesmay only increase.7

*Forecast 0 2 4 6 8

Taiwan

Emerging and developing Asia

World

The Economist July 30th 2016 23

For daily analysis and debate on China, visit

Economist.com/china

OUTSIDE China, the monster Three

Gorges dam across the Yangzi river is

one of the most reviled engineering

pro-jects ever built It is blamed for fouling the

environment and causing great suffering

among the 1.2m people who were

relo-cated to make way for its reservoir Inside

China, officials insist that the dam is an

“unsung hero” (in the recent words of the

Yangzi’s chief of flood control) But

contro-versy over the project occasionally flares

Amid the country’s worst flooding in

years, it is doing so again

The Communist Party took enormous

pride in the completion of the Three

Gorges dam a decade ago; officials said it

would play a vital role in taming a river

which, when it flooded, often claimed

hundreds or thousands of lives Recently,

however, censors have permitted a few

rip-ples of complaint to disturb the glassy

sur-face of state-run media Online critics have

asked whether the dam has failed to

pro-tect cities from flooding or whether it has

caused earthquakes—and have not had

their posts deleted Granting permission to

complain may seem surprising But

offi-cials have reason to feel confident The

much-denounced dam seems to be

pass-ing its first big test as a flood barrier

This season has been one of the wettest

in China’s recent history, with 150 towns

and cities suffering record amounts of rain

The Yangzi basin has been particularly

hard hit In the week to July 6th Wuhan, a

giant city downstream from the dam,

re-compounded disasters caused by tial rain in the middle and lower reaches:some of the heaviest rains have occurreddownstream from the dam It is too soon todeclare victory over the floods The rainyseason is only halfway through and moredownpours are expected in August But sofar, as a method of flood control, the damhas done more or less what it was sup-posed to

torren-That doesn’t necessarily justify the ject One of the most important criticisms

pro-of it, by the late Huang Wanli, a hydrologist

at Tsinghua University in Beijing, is that somuch silt will eventually build up behindthe dam that it will have to be taken down,leaving the Yangzi basin worse off than ifthe barrier had never been built The re-gion in which the dam stands is also one ofthe world’s most seismically active Geolo-gists worry that the weight of water in thesinuous reservoir, 600km (370 miles) fromend to end, and the rise and fall of it, iscausing more frequent tremors along thefault lines Even small earthquakes cancause perilous landslides

Considered purely as a means of floodcontrol, the dam is a mixed blessing Thesilt-free water that gushes through it fails toreplenish embankments downstream,thus weakening them as flood barriers(several have collapsed this year) Belowthe dam, the water now runs faster; it hasscraped away and lowered the Yangzi’sbed by as much as 11 metres, according toFan Xiao, a geologist working for Probe In-ternational, a Canadian NGO As a result,nearby wetlands drain into the river, da-maging their ability to act as sponges dur-ing a flood

In 2000 another academic at Tsinghua,Zhang Guangduo (who had done the envi-ronmental feasibility studies for the dam),told the man in charge of building the bar-rier that “perhaps you know that the flood-control capacity of the Three Gorges Pro-

ceived 560mm (22 inches) of rain, its gest ever downpour (residents are pictured

big-on a temporary bridge)

China’s most recent experience ofweather like this was in 1998, which wasalso the last time El Niño, a shift in theweather patterns of the western Pacific,had a big impact on the world’s weather

That summer the Yangzi burst its banks,causing more than 1,300 deaths So far thisyear fewer than 200 people have died inthe river’s basin

One big difference is that in 1998 theThree Gorges dam was still under con-struction (it went into full operation in2012) By July 24th it had held back about 7.5billion cubic metres (260 billion cubic feet)

of potential floodwater, which would have

Also in this section

24 Having fun with Jiang Zemin

24 A blow to online journalism

C H I N A

MONGOLIA RUSSIA

VIETNAM PHILIPPINES LAOS

TAIWAN

THAILAND

STAN

Yangzi Xingtai Shanghai

None

Cumulative rainfall, mm

June July 26th 2016

27th-Source:

weather.com.cn

10-25 25-50 50-100 100-200 200-400 400-800 1-10

24 China The Economist July 30th 2016

2ject is smaller than declared by us,”

accord-ing to leaked documents Peter Bosshard of

International Rivers, an environmental

NGO, asks whether it was wise to spend so

many billions on one project, rather than

strengthen flood-protection measures all

along the Yangzi

That point has been borne out by the

many failures of local flood-control

mea-sures that have also occurred this year In

July parts of Wuhan’s metro system filled

with water This seems to be the result of

bad management or corruption According

to People’s Daily, a party newspaper, only 4

billion yuan ($600m) of the 13 billion yuan

allocated to improving drainage in the

metro was actually spent Local media say

that one of the people responsible for

drainage projects in the city is under arrest

for taking huge bribes

Such problems have been exacerbated

by urban expansion Wuhan used to have

more than 100 lakes, but it has lost

two-thirds of them to construction sites since

1949 The city’s wetlands have been bled up, too Those that remain are toosmall to store flood waters It is a relief thatfar fewer people have died in floods alongthe Yangzi this year compared with 1998

gob-But it is no indication of the basin’s broaderenvironmental health

The Three Gorges dam has a historicalparallel In 1928 a tropical hurricane causedLake Okeechobee, in central Florida, toflood, drowning 2,500 people in the south-ern half of the state Determined that such

a thing would never happen again, ca’s Army Corps of Engineers over the nextfew decades drained much of the Ever-glades, which then covered much of thesouthern part ofthe state No human disas-ter has recurred but the Everglades is ashadow of its former self and conserva-tionists are battling to save it from destruc-tion The Yangzi is in danger not only fromfloods but from its flood controls 7

Ameri-Jiang Zemin

Jiang of Jiang Hall

ONE of the least understood players in

Chinese politics is the former

presi-dent, Jiang Zemin On August 17th he will

celebrate his 90th birthday, yet he is still

thought to exert influence Rumours swirl

in Beijing about strife between him and

the current president, Xi Jinping The life

sentence imposed this week on a former

general who was once close to Mr Jiang,

Guo Boxiong, will fuel such speculation:

Mr Guo is the highest ranking military

officer to be jailed for corruption since the

Communists seized power in 1949

But there are some in China who are

rooting for Mr Jiang, who led China from

1989 to 2002 They call

themselves “toad-worshippers” Mr Jiang (pictured, in the

Dead Sea) has earned the nickname Toad

thanks to his broad mouth, oversize

glasses and generous waistline At first it

was meant as an insult Now it is

com-monly used with affection

When he was president, Mr Jiang was

widely regarded as a bit of a buffoon,

given to occasional boorishness (eg,

combing his hair in front of Spain’s king)

More recently, however, he has acquired

a cult status online Fans share videos of

him on social networks In one he angrily

accuses Hong Kong reporters in English

of being “too simple, sometimes

na-ive”—a phrase that entered common

internet parlance in China In another, Mr

Jiang is seen breaking into song and

reciting parts of the Gettysburg address

(again, in heavily accented English)

Some admire Mr Jiang’s willingness

to extemporise, in contrast with Mr Xi’sscripted public persona Mr Xi would notdeign to express such poisonous Ameri-can ideas as those of Abraham Lincolnthat Mr Jiang enjoyed quoting Last yearstudents in Beijing conducted an onlinesurvey of toad-lovers Among the 508people polled, fondness for Mr Jiang wasbalanced by disapproval of Mr Xi

Censors have tried to purge worship from the internet But Mr Jiang’sfans are a dedicated lot Some have taken

toad-to buying mobile-phone cases, flashdrives or T-shirts adorned with the for-mer president’s thick-rimmed glasses

One user on Zhihu, a answer forum, said she owed her job totoad-knowledge When she was beinginterviewed for the post, she wrote, thequestioner used one of Mr Jiang’s catch-phrases and she responded with another

question-and-“That moment he realised we were onthe same path.” Unfortunately for politi-cal fun-lovers, Mr Xi is on a different one

B E I J I N G

It began as mockery of a former leader Now it has a strange life of its own

He has some great qualities has Toady

WHEN reading about themselves ortheir country’s affairs of state, Chi-na’s leaders do not like to be surprised orcontradicted They have little to worryabout in conventional media, over which—for the most part—the Communist Party ex-erts tight control But matters are differentonline, where journalists sometimes havehad better luck in dodging the party’s cen-sors They may not for long

On July 24th the Beijing municipalbranch of the Cyberspace Administration

of China ordered some of China’s biggestinternet companies, including Sina, Sohuand Netease (which are listed on NAS-DAQ), to stop publishing independent re-ports on politically sensitive topics Offi-cial media said some news portals would

be fined Such restrictions have been inplace at least since 2005 But internet com-panies have often ignored them (albeitcautiously), hoping to attract more readersamong the country’s 700m netizens One violation that is believed to haveangered the leadership was a typo thismonth in the headline of a story published

by Tencent News Instead of “Xi Jinping livered an important speech”, it said thatthe president had “flipped out” when do-ing so—a difference of only one Chinesecharacter With such stories even head-lines are supposed to be copied from offi-cial media Tencent’s failure to do so prop-erly was an egregious error in the party’seyes: the report was not only about Mr Xi,but the party’s own birthday

de-Censors may also be worried that line media might contradict official reports

on-on recent floods They have clampeddown hard on users of social media whohave done so In the northern city of Xing-tai, three people have been punished forspreading “rumours” online about flashfloods there that caused at least 34 deaths.One of those sanctioned was a 35-year-oldman who was jailed for five days for claim-ing the flood was caused by an intentionaldischarge of water from reservoirs

Mr Xi is wary of any hint of journalisticdaring In February he visited the coun-try’s three biggest party-controlled newsorganisations, and reminded them thattheir job was to serve the party This month

a prominent liberal journal, Yanhuang

Chunqiu, closed after a purge of its top

edi-tors On July 22nd a court in Beijing

reject-ed an attempt by the former reject-editors to lenge their removal Among China’sjournalists, despondency is spreading

The Economist July 30th 2016 25

For daily analysis and debate on America, visit

Economist.com/unitedstates Economist.com/blogs/democracyinamerica

IN THE end, Bernie Sanders came

through The senator from Vermont had

threatened to take his fight for a “political

revolution” to the floor of the Democratic

National Convention, which was held in

Philadelphia between July 25th and 28th

But when his aggrieved supporters had the

temerity to take that threat seriously, by

booing the convention’s early stages, Mr

Sanders tried to calm them, and just about

succeeded Reprising the healing role

Hilla-ry Clinton played on behalf of Barack

Obama in 2008 when she was the loser, it

was he who declared her the Democratic

presidential nominee Mrs Clinton is the

first woman to fill that role for either of

America’s main parties

Mr Obama, who is currently enjoying

his highest approval ratings in years, was

another star turn Before a stadium hushed

in adoration, he talked up his former

secre-tary of state, rebuked the divisiveness of

her Republican rival, Donald Trump, and

sought to breathe self-confidence back into

a country too short of it “Anyone who

threatens our values, whether fascists or

communists or jihadists or home-grown

demagogues, will always fail in the end,”

he said It was perhaps his last great speech

as president—though arguably his family’s

second-best in Philly

Earlier, Michelle Obama had elegantly

placed Mrs Clinton’s nomination in the

sweep of America’s march to equality “I

Water” Not everyone was mollified.Among the 4,763 state delegates attendingthe convention, a few dozen Sanders sup-porters kept up a determined protest Sev-eral complained, before banks of televi-sion cameras, that their “voices were notbeing heard” Outside the arena, mean-while, Philadelphia saw bigger protests, bythousands of Sanders voters, anarchistsand pro-dope campaigners carrying agiant inflatable spliff Yet the lasting im-pression, which opinion polls support,was of the Democrats uniting against acommon enemy; 90% of Mr Sanders’s sup-porters in the primaries say they will votefor Mrs Clinton

The convention illustrated another bigDemocratic advantage In Cleveland, thedelegates were lily-white In Philadelphiathey were the multi-hued representatives

of an electorate that is growing rapidly lesswhite, and where minorities vote blue In

2000, non-whites accounted for 23% of theelectorate; this year they will representover 31% No wonder the convention waslargely dedicated to issues, such as guncontrol, criminal justice and immigrationreform, that concern non-whites especial-

ly This is the demographic wave that MrObama rode to electoral victories; theboard, and a tremendous natural advan-tage, now passes to Mrs Clinton Yet thequestion, which lurked beneath the jollityand the protest in Philadelphia, is whetherthe former secretary of state can surf

It is amazing how badly she is doing.The latest opinion polls suggest she is atbest level-pegging with Mr Trump, havingforfeited a seven-point lead in the pastmonth According to calculations by NateSilver, a respected number-cruncher, MrsClinton currently has only a 53% chance ofwinning in November In other words, giv-

en Mr Trump’s stated plans, her

perfor-wake up every morning in a house thatwas built by slaves,” she said “And I watch

my daughters, two beautiful, intelligentblack young women playing with theirdogs on the White House lawn And be-cause of Hillary Clinton, my daughters andall our sons and daughters now take forgranted that a woman can be president ofthe United States.” Mrs Clinton, in her own

speech (due on July 28th, after The

Econo-mist had gone to press), could hardly have

hoped to do better

The contrast with the much smaller publican convention, which was held inCleveland the previous week, and boycott-

Re-ed by most Republican heavyweights, wasstriking In Mr Sanders, the Obamas, BillClinton, Joe Biden and Senator ElizabethWarren, among others, the Democrats pa-raded speakers whose popularity, in theblue half of America, was a rebuke to thecynicism about politics upon which MrTrump has fed A notable independent, Mi-chael Bloomberg, the billionaire formermayor of New York, also made an appear-ance to offer a more direct rebuke He urgedAmericans to elect Mrs Clinton on the ba-sis that she, unlike her rival, is “sane”

The entertainment was better in Philly,too Where Mr Trump, by way of showbizglitz, had produced a couple of reality-tele-vision stars, the Democrats paraded astream of A-listers To recommend unity,Paul Simon sang “Bridge over Troubled

The Democratic convention

Bridging the torrent

27 Trump, Putin and e-mails

27 The PGA championship

28 Popsicles in the South

28 Political realignment

30 Lexington: Able Kaine

26 United States The Economist July 30th 2016

CNN cuts from demonstrators outside the convention to watch an ageing pop band

No speaky

“I’m hoping I’m not going to have to startkind of brushing up back on my Dora theExplorer to understand some of thespeeches given this week.”

A CNN political consultant is upset that Senator Tim Kaine, Hillary Clinton’s run- ning-mate, speaks Spanish

Accentuate the positive

“But boring is the fastest-growing mographic in this country.”

de-Senator Tim Kaine defends himself NBC

Meme of the moment

“I don’t know who created Pokémon Go,but I’m trying to figure out how we getthem to Pokémon Go to the polls!”

Mrs Clinton keeps up with popular culture

History repeating

“Today is the anniversary of Dylan goingelectric at the 1965 Newport Folk Fest,basically the last time the Left felt thisbetrayed.”

Olivier Knox Twitter

“OK Fine Hillary, I guess.”

A bumper-sticker for resigned Bernie Sanders fans, circulating on the internet

RIP

“Before the dawn comes the deepest dark

of night.”

A huddle of #NeverTrump Republicans

in Washington, DC hold a wake for their party

With friends like these

“It’s probably China Or it could havebeen somebody sitting in his bed

…Russia, if you’re listening, I hope you’reable to find the 30,000 e-mails that aremissing I think you will probably berewarded mightily by our press.”

Mr Trump, answering questions about the hacking of DNC e-mails, brings up Hillary’s deleted ones and appeals to Vladimir Putin

to help retrieve them

mance is threatening a catastrophe for

America and the world

The tightness ofthe race is largely due to

Mr Trump’s success in rallying

working-class whites with his dystopian vision,

ra-cially loaded language and promise to

re-verse globalisation His conference speech,

in which he described America as a

“divid-ed crime scene” which he alone could fix,

went down a storm with them According

to a poll for CNN, his lead over Mrs Clinton

with non-college-educated whites has

since doubled, to almost 40 percentage

points The consensus view has long been

that there are too few ofthese voters to give

Mr Trump victory It is estimated that he

would need to bag around 70% of them,

which seems unlikely Yet that assumes

Mrs Clinton does almost as well as Mr

Obama in turning out non-white and

younger voters, and she may not

Her trouble with working-class whites

is fuelled by deep forces, including wage

stagnation and rage against the elite, that

might poleaxe any establishment

politi-cian Yet Mrs Clinton’s struggle is

exacer-bated by her wretched trust ratings, for

which she is clearly to blame Her irregular

e-mail arrangements as secretary of state,

and, what was worse, her spiky

mishan-dling of the furore this caused, has trashed

her standing with millions of voters Only

30% consider her honest; by comparison,

43% say the same of Mr Trump, though his

speeches are packed with untruths

This has encouraged a notion that the

nominees are as bad as each

other—“Hilla-ry and Trump are Coke and Pepsi, both bad

for you,” spat out a retired teacher fromMinnesota at an anti-Clinton rally in Phila-delphia Disenchanted by their choice, aquarter of voters say they are still undecid-

ed Among younger voters, an importantpart of Mr Obama’s winning coalition, aquarter say they mean to vote for a candi-date other than Mr Trump or Mrs Clinton

Beyond reconciliation, the Democraticconvention was largely designed to re-launch Mrs Clinton’s image—most obvi-ously in her husband’s address It was, forthe most part, a schmaltzy, meanderingrecollection of the couple’s early years to-gether “In the spring of1971, I met a girl,” hebegan, then recounted details of the court-ship that ensued: the fine public swim-ming-pool close to her parents’ house in Il-linois, his two failed marriage proposals

It would have been more moving, haps, if all this wasn’t familiar from a cou-ple of biographies The strength of thebond he described would certainly havebeen more convincing had he mentionedthe infidelities with which he tested it;

per-“She’ll never quit on you She never quit on

me,” was as close as he came But theDemocratic crowd was gripped Andwhen Mr Clinton set his own portrait of anindefatigably public-spirited Mrs Clintonagainst the devious caricature her oppo-nents describe—“One is real, the other ismade up”—he won her her first seriousovation of the convention

It was well done, though unlikely tosway many partisans Republicans havespent three decades hating the Clintons In

a rousing speech Mr Biden, the dent, delivered a more promising defence

vice-presi-“Everyone knows she’s smart, everyoneknows she’s tough, but I know what she’spassionate about,” he roared In otherwords: you may not like her, you may notbelieve her, but at least trust that, in a life-time of public service, Mrs Clinton hasbeen motivated mainly to do good

It is a low bar but, 100 days from theelection, perhaps the biggest reset MrsClinton can hope for A popular slogan inPhiladelphia was “Love trumps hate” But,well as the convention went, there was nogreat love in the air for her there

You get me too, folks!

Correction: Our obituary of Michael Cimino (July 16th)

claimed that the town of Clairton, Pennsylvania, setting

of “The Deer Hunter”, was fictional Not so; it is a real

and thriving place on the Monongahela river Our

apologies

The Economist July 30th 2016 United States 27

The PGA championship

Who’ll win?

ALL eyes will be on Henrik Stenson atthe PGA Championship, the last ofthe year’s four major men’s golf tourna-ments, which began on July 28th inSpringfield, New Jersey At the BritishOpen two weeks before he led a men’sfield by the biggest margin since 1955 ButEAGLE(Economist Advantage in Golf

Likelihood Estimator), our new golfprediction system, is unimpressed

Based on data from 450,000 holesplayed in past tournaments, it thinks MrStenson has only a 5.0% chance of win-ning Instead—though he is under theweather at the moment—it favours thevictor of last year’s PGA, Jason Day(above), giving him a 10.5% chance ofdefending his title You can follow EA-GLE’s projected win probabilities, updat-

ed every 15 minutes during the event, ateconomist.com/eagle

Crunching the probabilities

Today’s the Day

Sources: Betfair Exchange; The Economist

Probability of winning the 2016 PGA Championship, %

Jason Day Dustin Johnson Jordan Spieth Rory McIlroy Henrik Stenson Justin Rose Adam Scott Sergio García Phil Mickelson Rickie Fowler

Best bets

Danny Willett Chris Wood The Economist forecast Betting market

NEVER interfere in other countries’

ternal affairs, Vladimir Putin has

in-sisted—except by invading them,

bankroll-ing their nastiest politicians and, perhaps,

conspiring to embarrass America’s

Demo-cratic Party and its presidential candidate

The Kremlin’s precise role and purpose

in the scandal over the Democratic

Nation-al Committee’s (DNC’s) e-mails, and

whom it will harm most, remain to be

seen The known facts of the story are that,

on July 22nd, WikiLeaks published over

19,000 e-mails hacked from the DNC’s

ac-counts (Five days later it followed up with

a clutch of purloined voicemails.) Some

confirmed the conviction of supporters of

Bernie Sanders that party apparatchiks

fa-voured Hillary Clinton in its primaries In

one of the grubbiest messages, an official

seemed to float the idea of insinuating that

the senator was an atheist Disgruntled

Sandernistas were already intending to

disrupt the convention in Philadelphia;

Debbie Wasserman Schultz, a Floridian

congresswoman, duly resigned as the

com-mittee’s chairman on July 24th

Russian involvement had already been

identified by CrowdStrike, a cyber-security

firm, which the DNC enlisted in May In a

judgment supported by digital clues and

shared by other cyber-sleuths—including,

it seems, American spooks—it found that

the hack began last summer, and was

per-petrated by two groups thought to be

asso-ciated with Russian intelligence agencies

They are known to aficionados as “Fancy

Bear” and “Cozy Bear”; the latter was also

implicated in cyber-raids on the State partment, the White House and the JointChiefs of Staff Andrei Soldatov, an expert

De-on the Russian security services, offers other hypothesis: that one of the intruders

an-is a private outfit, the second its ated client The claim to responsibility of apseudonymous hacker, who said he wasRomanian but couldn’t speak the lan-guage, looks like an unconvincing decoy

state-affili-WikiLeaks—whose founder, Julian sange, used to present a TV show on a Rus-sian propaganda channel—denied the Rus-sian connection; the Kremlin scoffed at it

As-Nevertheless, Mr Putin’s aversion to MrsClinton, and thus a possible motive to un-dermine her, is well-documented In 2011

he blamed her for protests against Russia’srigged parliamentary election: she “set thetone” and “gave them a signal”, railed MrPutin, for whom unrest in the post-Sovietworld is generally a sign of Americanmachinations In Moscow she is widelyseen as a warmonger and sanctions hawk

Donald Trump seems much more able He prefers bilateral dealmaking toalliances and isolationism to global activ-ism He downplays Russian human-rightsabuses and America’s role in addressingthem; most encouragingly for Mr Putin, hedisparages NATO, suggesting that its mutu-al-defence commitment might be optional

palat-All that leads some to discern a Russian bid

to boost his candidacy; the

conspiratorial-ly minded even suspect a link between hiscampaign and the Kremlin They point tohis business dabblings in Russia, syco-phantic comments about Mr Putin and hisconfidants’ pasts Paul Manafort, his cam-paign chairman, once advised Viktor Ya-nukovych, a former Ukrainian presidentwho fled to Russia A foreign-policy advis-

er, Carter Page, has ties to Gazprom

Mr Trump scoffed, too—then, ingly, seemed to call for the Russians to dig

astonish-up Mrs Clinton’s private e-mails as well

He also entertained the prospect of nising Russia’s annexation of Crimea Still,the overlap in personnel could be ex-plained by correlation rather than conspir-acy: working for Mr Putin’s stooges, and for

recog-Mr Trump, require similar lacks of scruple

Maria Lipman, editor of Counterpoint, a

journal of George Washington University,thinks the Kremlin knows its influence inAmerican politics is small If Russia is re-sponsible, the aim might be to portrayAmerican democracy as tawdry andflawed, rather than, more ambitiously, toswing the contest for Mr Trump

An FBI probe might clarify whether thishack fits alongside other Kremlin-directedexposés of inconvenient politicians, moretypically involving tapped conversations

or fuzzy footage of extramarital sex ever the intention, meanwhile, Mr Trumpseems more likely to be damaged by theepisode than Mrs Clinton—if, that is, he isstill embarrassable at all

What-Putin, Trump and the DNC

Signal and noise

P H I L A D E L P H I A

A hack fuels suspicion of plots against

Bernie Sanders—and against America

Dreaming of Donald

28 United States The Economist July 30th 2016

BIG structural changes to political partieshappen only once in a generation Aca-demics reckon that in 219 years Americahas seen just six different party systems,each attracting a distinct coalition of vot-ers Donald Trump’s idea of turning the Re-publican Party, long the ally of big busi-ness, into a “workers’ party” may yet force

a seventh To track the trend, The Economist

has melted down the American electorateinto their policy choices and prioritiesalone, freeing them from party labels to seewhat kind of winning policy platformsmight emerge in future

First-past-the-post voting like America’stends inevitably to yield two-party sys-tems, which usually require awkward co-alitions What determines which interestgroups coalesce? In 1929 Harold Hotelling,

an economist, wrote that a rational voterwould choose a candidate whose views

showed most “proximity” to his own Inturn, a political party serious about win-ning should take the positions most likely

to convince the voter in the electorate’sideological middle Since both partiesneeded to attract most votes from a broadelectorate, this “median-voter theorem”would push them both towards the centre.Hotelling observed that American candi-dates tended to “pussyfoot” for just thatreason, giving ambiguous answers to poli-

cy questions for “fear of losing votes”.Hotelling’s logic remains airtight today

If a hypothetical party system is to remainstable, it will have to give both sidesroughly equal opportunities to cobble to-gether 50.1% of the electorate To identifythe most viable potential coalitions, weused an online poll ofover 7,000 registeredvoters conducted by YouGov from May toJuly, which asked respondents both to ex-

Political parties

Defining realignment

The anger and fickleness of voters are forcing change But in which direction?

WHEN Steven Carse began hawking

ice lollies on a corner in Atlanta, one

of his best customers was a lawyer

repre-senting Unilever Mr Carse’s brand name

was King of Pops, but his marketing used

the word Popsicle—a trademark indirectly

acquired by the conglomerate from a

Cali-fornian who, as a child, accidentally

in-vented the delicacy on a wintry night in

1905 The lawyer would serve him “cease

and desist” notices, Mr Carse recalls But

she always bought some pops, too

That was in 2010, when he was 25 He

had abandoned a brief stint in Idaho as a

journalist and returned to Georgia, where

he grew up, to be a data analyst for an

in-surance firm Losing that job in a post-crash

cull, he reverted to selling candyfloss at

baseball games, as he had in college: good

practice, he says, for making eye contact

and ten-second sales Hoping to buy a

pop-freezing machine, he became embroiled

with a Cypriot businessman in West Palm

Beach, who undertook to import one from

Brazil (he didn’t) He made his pops by

night in a shared Atlanta kitchen, lugging a

cart to his corner to sell them by day

Soon his brother, Nick, ditched his

ca-reer as a prosecutor and joined him Six

years on, Mr Carse reckons he may hit

an-nual sales of 2m lollies King of Pops is still

a family concern: his dad deals with

wholesale distribution—they deliver for

other outfits as well—while his mum

over-sees collections But it now has around 100

street vendors in eight cities, supplies

hun-dreds of retailers and runs a catering arm

Much of this success came from hard

work But evolutions in taste, and in

Atlan-ta itself, have contributed The supremacy

of King of Pops is also a parable of trends in

consumerism and in urban living

Mr Carse traces his enthusiasm for pops

to the trips he made to Latin America to

visit his other brother, an anthropologist

He ate lots of paletas, Popsicle-esque treats

that make use of otherwise superfluous

produce Those origins suggest one

advan-tage pops offer startups: low overheads

and, potentially, high margins Twitter

helped Mr Carse to realise those, letting

him inform his customers where his cart

was and which flavours he was peddling

Meanwhile, as in other places, growing

numbers of Atlantans have been attracted

by his reliance on local ingredients At first

he bought at farmers’ markets, but two

years ago King of Pops invested in its own

farm—King of Crops—30 miles west of the

city Touring it, Mr Carse points out

pep-pers used in pineapple habanero,

cucum-bers soon to be mixed with lime and ongrass with coconut These exoticcombinations are part of another relevantshift: the rise of posh street food, driven byenlightened licensing authorities, a cohort

lem-of shoestring entrepreneurs and dinerslooking for low-cost sophistication

Coincidentally, in Atlanta as elsewhere,more people are getting around by foot orbicycle; in a related change, more youngprofessionals are choosing to live in town,often with their pop-happy offspring TheKing of Pops’ HQ and kitchen has a win-dow counter on the BeltLine, a convertedrailway trail that is the axis of Atlanta’s re-development A mile up, it has opened abar in a revamped mall On Tuesdays hun-dreds of people gather on the BeltLine for aKing of Pops-sponsored yoga class It hasbecome the flagship brand of a newly pe-destrianised lifestyle

How far can Mr Carse’s pops go, beforetheir hip and eco-credentials melt? Once

he couldn’t afford a store; now King of Popshas bricks-and-mortar outlets in Atlanta,Charleston, Charlotte and Richmond

From the farm to the carts, it is an

integrat-ed crop-to-pop producer: a bold, unusualmodel that might prove impractical on abigger scale And between King of Crops,Poptails (cocktails, frozen and otherwise)and King of Pups (icy dog treats), it may bereaching its alliterative limit

For now, Mr Carse hopes that—within

the South, with its long pop season—it cancontinue to take in roughly a city a year Inany case, King of Pops is already an institu-tion, a status that might take decades to ac-quire in other cities but in Atlanta, novelty-seeking and hungry for hometown cham-pions, can be won at speed Two recentevents sealed it Dad’s Garage, a local the-atre, put on a musical in which the King ofPops does battle with a corporate villain-ess, the Ice Queen of Cones Then in Maythe city’s mega-brand, Coca-Cola, enlistedthe firm to make a celebratory float for its130th anniversary On the wrapper a Cokebottle sports a King of Pops crown 7

Southern living

From crop to pop

A T L A N T A A N D W I N S T O N , G E O R G I A

What the rise of a vertically integrated

lolly-maker says about urban trends

Competition royally licked

The Economist July 30th 2016 United States 29

2press their preferences on 12 different

is-sues (see table) and say how much they

cared By multiplying each position by its

importance and adding them up for every

voter, we could tell not just which present

party they might support, but also which

way they would lean in more than

300,000 hypothetical alternative systems

Leftward shifts

Starting with the candidates’ actual

plat-forms in the 2016 race, this approach shows

that, free of party loyalties, 52% of

regis-tered voters are closer to Hillary Clinton’s

basket of policies than to Mr Trump’s That

suggests a win for the Democrats in

No-vember And, surprisingly, Mrs Clinton has

room to shift further leftward Around 9%

of voters hold views currently closer to Mr

Trump’s, primarily because of their

sup-port for building a border wall with

Mexi-co, but would wind up on Mrs Clinton’s

side if she embraced a $15 federal

mini-mum wage and fully-taxpayer-funded

col-lege tuition In that case, the Democrats’

share of the vote would increase to 54%

However, Mrs Clinton should not stray

too far in this direction The positions of

her left-wing rival, Bernie Sanders—raising

taxes without cutting spending, reluctance

to wage war on terrorism—are anathema to

much of the electorate Forced to choose

between Mr Trump’s positions and Mr

Sanders’s, 57% would vote for Mr Trump

Nonetheless, the poll still indicates that

Hotelling’s coveted median voter sits to the

left of the midpoint between the

presiden-tial candidates Mr Trump’s opposition to

American military intervention in Syria

does cost him votes, particularly against a

hawkish Democrat like Mrs Clinton But

on almost every other topic save

immigra-tion, he would have to slide left to cut into

his rival’s lead Given Mrs Clinton’s

posi-tions, he could conceivably win 70% of the

non-college-educated vote if he backed a

liberal wish-list diametrically opposed to

his current platform, including legal

abor-tion and gun control (If anyone could pull

off such a flip-flop, it would be him.)

Although candidates are usually

re-warded for taking the centre ground, there

is no simple rule of thumb for winning

over the median voter Views on many

top-ics tend to be correlated: for example, 65%

of people who want gay marriage banned

also want more restrictions on abortion

This forces politicians to adopt these

paired opinions as a package, even if one is

far more popular than the other So parties

continually attract and repel votes as they

shift their platforms The more eclectic the

average voter’s mix of positions, the more

unstable the party system becomes

On pure policy grounds, American

vot-ers hold far more heterogeneous views

than their perfectly-polarised

representa-tives in Congress Just 12% have

down-the-line liberal or conservative positions on

economic and social questions And gration, which has split both parties, is anunusually potent issue Not only do 53% ofrespondents expressing an opinion sup-port building a wall on the Mexican bor-der; 94% ofthose said doing so was “impor-tant” or “very important”

immi-As Hotelling would predict, the mostconceptually consistent (and thereforeideologically extreme) platforms are notpolitically viable A mercantilist party thatfavoured moral and fiscal conservatismand intervention abroad would collect lessthan 30% of the vote against Mrs Clinton or

Mr Trump And a pure libertarian ing all restrictions on guns, abortion, immi-gration or free trade would pick up a mere26% of the vote against Mrs Clinton and34% versus Mr Trump

oppos-The YouGov survey suggests, however,that a winning coalition could be builtaround an anti-globalisation message Thecandidate would have to take centrist posi-tions on abortion, gay marriage and guncontrol, and alienate business by backingpopular but costly government benefitslike national health insurance When com-bined with supporting a border wall, op-posing the North American Free TradeAgreement and ignoring climate change,this basket would secure 51.2% of the voteagainst a more socially liberal platformbacking NAFTA and immigration: closeenough to maintain a stable two-party sys-tem across election cycles

Hotelling’s theory of proximity rately predicts how people will actuallyvote The YouGov figures show that a ro-bust 84% of respondents already supportthe party closer to their beliefs The re-maining 16%, our model suggests, oftencling to a party for reasons other than poli-

accu-cy, such as party identity In 2004 Thomas

Frank, a journalist, argued that America’swhite working class acts against its owneconomic interests by backing the Republi-cans on cultural grounds; and our analysisproves that an additional 2.5% of the whitenon-college-educated vote would go over

to the Democrats if policy choices alonemattered However, this effect is more thanoffset by a similar number of people whosupport the Democrats despite holding Re-publican-friendly views These are dispro-portionately less-educated non-whites,many of whom associate Republicanswith hostility to immigrants As Marco Ru-bio, a Republican senator, put it in 2012 re-garding Hispanics: “It’s really hard to getpeople to listen to you…if they think youwant to deport their grandmother.”

Two caveats are necessary Our analysisshows that far more Americans hold mod-erate views than extreme ones But thismay be because they are uncertain wherethey stand, and are waiting to be persuad-

ed For example, 45% are unsure whetherNAFTAhas helped or harmed economicgrowth A study based, like ours, on Hotell-ing’s policy-preference-maximising au-tomatons, captures this confusion

Perhaps most important, our analysisignores the quality of the candidates them-selves Just 26% of the YouGov respon-dents said that agreeing with a candidate’spositions was the most important factorguiding their vote Personality, or lack of it,accounts for the rest Great campaignerscan and do sway voters who may disagreewith some of their views, while lacklustreones can disenchant even their naturalsupporters And then there are the down-right ornery voters—as many as 10-15% ofrespondents in our survey—who refuse to

be pigeonholed at all As Robert Kennedyobserved in 1964, “One-fifth of the peopleare against everything all the time.” 7

Voters without labels

Presidential preferences if policy alone mattered

% voting*

Sources: YouGov;

The Economist *7,065 registered voters surveyed21st May to 9th July 2016

Donald Trump Hillary Clinton

Democratic Party

Not sure

White men

no college White women

no college White men college White women college

Non-white men

no college

Non-white men college

Non-white women college

Which comes closest to your position on abortion?

Should gun-control laws be more or less strict than they are now?

Would you support/oppose a constitutional amendment allowing states to ban gay marriage?

Do you support/oppose raising the federal minimum wage to $15 per hour?

Should our taxes provide free college tuition?

Do you support/oppose a single-payer health-care system?

Would you say NAFTA has had a positive/negative effect on the US economy?

Is the gov’t doing enough to combat climate change?

What should be done to reduce the federal budget deficit?

Do you favour/oppose building a wall along the border between the United States and Mexico?

Sources: YouGov; The Economist

30 United States The Economist July 30th 2016

TIM KAINE, the senator from Virginia chosen by Hillary

Clin-ton as her running-mate, is endearingly bad at hiding how

ex-cited he is by his new gig The morning ofJuly 27th found the

rum-pled ex-missionary and harmonica aficionado in Philadelphia,

preparing for a televised address that evening to the Democratic

National Convention To limber up, Mr Kaine dropped in on the

Virginia state delegation as they breakfasted at their hotel He

de-scribed the telephone call in which he was invited to join the

Democratic presidential ticket Hillary Clinton called “at 7.32pm”,

he told them, before pausing, abashed by the precision of the

memory “Now, who’s counting?” he blushed “I mean just

7.32-ish.” Mr Kaine is good at folksy self-effacement

Vice-presidential picks are chosen less to sway many votes in

their own right than to complement the top of the ticket That

makes them revealing—their strengths are a guide to the qualities

that presidential candidates fear they lack Mr Kaine is affable He

is detectably a normal human being, despite decades in politics

He first ran for the city council in Richmond, Virginia’s mostly

black capital, then as mayor, before serving as Virginia’s governor

and senator He sent his children to Richmond public schools In

this he followed a family tradition—his wife, Anne, was also sent

to Richmond schools by her father, a Republican governor of

Vir-ginia with an unusually progressive record on civil rights There

are Republican senators who like Mr Kaine, and who have

admit-ted to this in public since his elevation

In a rancorous election season, Mr Kaine sends an important

signal about how Mrs Clinton thinks she may win Political

cam-paigns can be boiled down to two tasks, one nobler than the

oth-er The first involves maximising turnout on voting day, too often

by pandering and stoking the passions of core supporters The

second task is persuasion At its finest, this involves crafting

argu-ments that lure voters to cross party lines

In choosing Mr Kaine, Hillary Clinton is placing at least a

par-tial bet on persuasion Mr Trump has gone the other way His

Re-publican National Convention in Cleveland was a four-day

gam-ble on turnout, with angry, dystopian speeches aimed at mostly

white voters who believe their country has been stolen from

them In his statewide races Mr Kaine has done well with black

voters and with the state’s growing Hispanic population His

ear-ly work as a civil-rights lawyer, fighting racist landlords, helped,

as does his fluent Spanish, picked up as a Catholic missionary inHonduras in a year out from Harvard Law School But some of hismost impressive vote tallies were run up in suburban countieswith names like Loudoun and Fairfax—places filled with college-educated whites in leafy cul-de-sacs, where folk like taxes lowand yearn to feel safe from terrorism, but are repelled by angryculture wars and anti-government slogans

Mr Kaine is not exactly a centrist Doctrinaire conservativescannot forgive his support for legal abortion (though personallyopposed to the practice, he says that such decisions fall in thesphere of personal morality) Virginia Republicans have attackedhis stance against the death penalty, though he fought back by ex-plaining that his beliefs flowed from his Catholic faith—and as go-vernor he oversaw11 executions, saying that he bowed to the law.His is a social-justice strain of Catholicism, with a whiff of LatinAmerica and of Pope Francis to it He was an outspoken advocatefor immigrants, an early supporter of gay rights, and pushed forgun controls after a shooting at Virginia Tech University in 2007when a gunman killed 32 people

Yet unlike some politicians who hold similar views, he knowshow to present progressive goals in a patriotic light In his firstcampaign event as Mrs Clinton’s running-mate in Miami on July23rd, he said immigration was a vote of confidence in America,asking naturalised citizens to raise their hands and telling them:

“Thank you for choosing us.” Addressing those Virginia delegates

in Philadelphia, he praised Mrs Clinton for her plans to tackle nomic inequality, the great cause that animates the DemocraticParty’s loud populist wing But rather than denouncing the econ-omy as “rigged”, in the manner of Senator Bernie Sanders, MrKaine said his boss has “the right ideas about how to grow theeconomy and make sure that we grow it for everybody and notjust a few” That focus on growth as a motor of social justice putshim in the Bill Clinton tradition of Democratic politics

eco-The Truman Show, revisited

In foreign policy Mr Kaine is an admirer of Harry Truman, theDemocratic president whose doctrine established America as acold-war defender of democracy against Soviet dictatorship Heangers the left by backing free trade, though he has had to joinMrs Clinton in saying the next big trade pact, the Trans-PacificPartnership, is too flawed to support In his convention speech heattacked the Republican nominee from the right on national se-curity, noting that his son, Nat, is a marine who this month de-ployed to Europe “to defend the very NATO allies that DonaldTrump now says he would abandon”

The new running-mate talked of growing up in Kansas City,and the small ironworking business that his father ran He notedthat his father-in-law remains a Republican in his 90s, but feelsabandoned by a party that could nominate Mr Trump Directlyaddressing any Republicans in despair at what has become oftheir “party of Lincoln”, Mr Kaine told them: “We’ve got a homefor you right here in the Democratic Party.”

This is only part of the Kaine mission: expect to see him ployed to drive up Democratic turnout, too He is a master of de-livering partisan blows with an aw-shucks smile But Mr Trump’sgruesome demagoguery has left millions of Republicans bereft.Genial Mr Kaine represents a pitch by Mrs Clinton for some ofthose votes If he bridges the partisan divide, even a little, somegood may come out of the Trump era.7

de-Able Kaine

Hillary Clinton’s choice of running-mate suggests she hopes to heal the partisan divide

Lexington

The Economist July 30th 2016 31

WHEN Rio de Janeiro won the right

al-most seven years ago to host the

Olympic games in 2016, the cidade

maravil-hosa (wonderful city) seemed to deserve

its nickname Violence, as much part of

Rio’s image as its beaches, had been falling

for more than a decade (see chart, next

page) Rio’s economy, and that of the

sur-rounding state (also called Rio de Janeiro),

was booming, thanks to the world’s

de-mand for the oil that lies off its shores The

games would show off a prosperous,

self-confident city, its organisers claimed As

important, if Rio could show that it can

plan as well as it parties, it would bury the

idea that “Brazil is not a serious country,” as

a Brazilian diplomat put it in the 1960s

“Those who give us this chance will not

re-gret it,” promised Luis Inácio Lula da Silva,

the president who brought the games to

Brazil

With days to go before the opening

cer-emony on August 5th, Rio’s self-confidence

is looking shaky On July 24th the

Austra-lian team stormed out of the Olympic

vil-lage in the district of Barra da Tijuca,

com-plaining of clogged toilets and loose wires

But those are trivial glitches compared

with the other problems plaguing the host

city Guanabara Bay, where Olympic

sail-ors are to compete, remains in parts an

open sewer An outbreak last year of the

mosquito-borne Zika virus, which causes

birth defects, has scared away some

sports-sources The federal government has giventhe state 2.9 billion reais ($890m) in emer-gency aid in part to pay policemen’s sala-ries It has sent 27,000 soldiers and nation-

al guards to fight crime and preventterrorism (on July 21st police said they hadfoiled a plot by home-grown jihadists) Thebus links are late but working; organiserspromise that the metro will be running byJuly 30th After quick repairs to their quar-ters, the displaced Australians returned They and the 500,000 sports fans ex-pected to attend the games will leave thecity once they are over Rio’s 6.5m inhabit-ants will remain Whether the Olympics

dazzle or disappoint, cariocas will find that

they have done little to arrest the city’slong decline

Beauty is not enough

Whether they live on Rio’s glitzy seafront,

in one of the city’s 1,000-odd favelas

(shantytowns) or in dowdy dormitory tricts, the mood is grim A law student whocame three years ago, intending to stayafter her studies, now wants to leave: she isfed up with cuts to the budget of her stateuniversity and strikes that have forced it tocancel classes A group of businessmentried to improve the state’s governance in

dis-2008 by paying for a renowned consultant

to offer management advice to the istration A few years later the bureaucrats

admin-slipped back into clientelistic habits

Cario-ca friends of José Padilha, a film director

who lives in Los Angeles, have been tellinghim to stay there According to a poll con-

ducted last September, 56% of cariocas

want to leave the city, up from 27% in 2011

No tourist will fail to notice the jarringjuxtapositions of wealth and poverty, aconsequence of Rio’s exuberant topo-graphy as well as its poor governance Resi-dents of lush Gávea can expect to live past

men Male golfers, in particular, are ning Rio as if Ipanema beach were a giantsand trap Policemen, whose salaries weredelayed by a bankrupt state government,have greeted visitors at the internationalairport with signs that read (in English)

shun-“welcome to hell” A new metro line and

bus corridor, the games’ main legacy to

ca-riocas, as the city’s residents are called, are

behind schedule

These local difficulties are

compound-ed by national crises Brazil is sufferingfrom a severe recession Its president,Dilma Rousseff, is being impeached oncharges that she manipulated governmentaccounts; an interim government, led byMichel Temer, is in charge Rio is one of thecentres of national dysfunction Petrobras,the state-controlled oil firm at the centre of

a multibillion dollar scandal that fuelleddemands for Ms Rousseff’s impeachment,has its headquarters there The city’s po-licemen are no exception to the violentBrazilian norm: they killed 40 people inMay alone Its reputation as an urban Dor-ian Gray—gorgeous to behold but infected

by corruption—is not entirely undeserved

Rio may yet confound doubters It hosts

a huge Carnival every year without ing into chaos The sporting arenas areready Rio’s cost overruns for buildingthem and for other Olympic spending aresmaller than average for host cities, andmost of the money was from private

Also in this section

33 Bello: Cash in bin liners, please

32 The Americas The Economist July 30th 2016

280, 13 years longer than their neighbours in

Rocinha, a large favela next door Crime

rates vary wildly Last year 133 people died

violently in Santa Cruz, a deceptively

tran-quil district at Rio’s western tip, where

broccoli and books are sold side by side in

a shabby central market In the three

beachfront bairros of Zona Sul (the

south-ern zone), whose joint population is

roughly equal to Santa Cruz’s, just 11 did A

priority in middle-class Copacabana,

where a quarter of residents are 65 or older,

is fixing uneven pavements, says Fernando

Gabeira, a writer who was an unsuccessful

candidate for mayor in 2008 In Complexo

do Alemão, a large northern favela with a

young population, it is better schools and

jobs Everyone worries about crime

The vast majority of cariocas live

nei-ther along beachfront avenues nor the

alleyways of ramshackle favelas Zona Sul

is home to 11% of the city’s inhabitants

Fa-velas account for 3.7% of the city’s area and

house 22% of its people Most live in

charmless low-rise apartment blocks that

arch across Rio’s north and west And then

there is Barra da Tijuca, a fast-growing

mini-Miami of car dealerships, marshland

and identikit condominiums with names

like “Sunflower” and “Villaggio Felicitá”

Tourism and other services provide

most jobs: a quarter of young people work

in bars and restaurants Many have long

commutes Emanuel, a jovial 60-year-old

with a missing front tooth, grumbles that it

takes him an hour-and-a-half to commute

to Leblon, where he sells biscuits and iced

tea along the beachfront, from

Jacarepa-guá, 24km (14 miles) to the west Some 2m

workers stream into Rio daily from its

un-derdeveloped periphery

The roots of Rio’s discontent go back at

least to 1960, when Brazil’s federal

govern-ment moved to Brasília, the purpose-built

capital Rio had lost industrial leadership

to São Paulo, which had more space and

more immigrants, 40 years before The loss

of its capital-city status was a blow from

which it has yet to recover The idea of

moving the seat of government to spur

de-velopment away from the coastline is anold one, set forth in an early constitutionenacted in 1891 Few Brazilians took it seri-ously until Juscelino Kubitschek, electedpresident in 1956, pushed through a law tomake it happen Even after civil servants

began moving to the modernist capital,

ca-riocas thought important ministries would

stay put Who, they wondered, would

swap the cidade maravilhosa for a barren

savannah in the middle of nowhere? Riothrived briefly as a city-state, called Guana-bara, but was soon merged into the poorersurrounding state of Rio de Janeiro

By the 1980s nearly all federal agencieshad disappeared The financial sector fol-lowed Brazil’s central bank stopped usingthe city as the main centre for trading gov-ernment securities Bankers were fright-ened away by a spate of kidnappings forransom in the 1980s Rio’s stock exchange,founded 180 years earlier, was taken overpiecemeal by São Paulo’s exchanges in the2000s Brazil’s state development bankstillhas its headquarters in Rio and a few assetmanagers moved in But the city’s impor-tance for Brazil’s economy has progressive-

ly diminished

Apart from the annual bacchanal ofCarnival, Rio has found no vocation to re-place banking and bureaucracy The dis-covery of huge underwater oil deposits in

2007 seemed to offer the city (and the state)

an alternative source of jobs and growth.But the industry has been devastated by acombination of low oil prices and thePetrobras scandal The oil boom reversedthe relative decline of Rio’s economy, butperhaps only briefly The city is home to aclutch of creative enterprises and universi-ties: Rede Globo, Brazil’s biggest mediagroup, and research units of Microsoft and

GE.But these are no more than a kernel for

a more dynamic economy

Culture has not replaced commerce.Bossa nova was conceived on Rio’s beach-

es in the 1950s, but since then the city hasbecome stifling, says Caetano Veloso, one

of Brazil’s most famous musicians, who

lives in the city Tropicalismo, a blend of

Brazilian and pop music that Mr Velosohelped pioneer, was born in São Paulo

“Rio was too blasé,” he says Blessed withthe natural riches of oil and scenery, it has

not striven to create its own wealth

Cario-cas do not plant, they “just pluck”,

ob-serves Ruy Castro, a chronicler of the city

Olympic hopefuls

Politics have done little to stir them fromcomplacency Rio’s status as the nationalcapital stunted its institutions Presidentsappointed the mayor; the senate couldoverturn his decisions Mayors offeredjobs to senators’ sons, encouraging habits

of patronage that Rio has yet to break Themerger between Rio de Janeiro and Gua-nabara, imposed by military dictators,brought the state’s clientelistic culture tothe city The state especially has been pro-fligate, while spending too little on the ser-vices and infrastructure needed to spur in-vestment and improve welfare

In June the acting governor of Rio state,Francisco Dornelles, declared that its fi-nances constituted a “public calamity”, aformality that allowed the federal govern-ment to send aid during the Olympics Theimmediate cause was a drop in taxes androyalties from oil, but years of fiscal mis-management had paved the way

Cariocas hoped that the games might

be a catalyst for better public services andmore jobs The city’s government haspartly met those expectations The mayor,Eduardo Paes, nearly trebled spending onhealth and education He hired 43,000teachers and 21,000 health workers, 80% ofwhom work in the city’s impoverishednorth and west Now 4.4m people have ac-cess to family doctors, up from 329,000when Mr Paes took office in 2009 The pro-

portion of cariocas served by mass transit

rose from 18% to 63% during his tenure Cityhall should be making these improve-ments anyway, the mayor admits, but the

Gently down the sewer

Sadder, but safer

Sources: IBGE; NECVU/IFCS/UFRJ; ISP; The Economist

State GDP as % of Brazil’s GDP Murders per 100,000 population*Municipality of Rio de Janeiro

Military coup

Return of democracy First direct mayoral election

Luiz Inácio Lula da Silva elected president Rio wins right to host 2016 Olympics

Dilma Rousseff elected president

Olympic games †

Move to Brasília begins Creation

of Guanabara state

Juscelino Kubitschek elected President

Guanabara and Rio de Janeiro states merge

Eduardo Paes elected mayor First Pacifying Police Unit implemented

The Economist July 30th 2016 The Americas 33

2

IN THE early hours of June 14th a

suspi-cious neighbour spotted a man armed

with an automatic rifle throwing bulging

black bin liners over a convent wall in

General Rodríguez, a suburb on the

west-ern fringes of Buenos Aires The man then

leapt over the convent’s big wooden

gate-way Fearing for the safety of the three

el-derly nuns who lived there, the

neigh-bour called the police Two patrol cars

turned up The officers say they refused

the man’s attempt to bribe them

The bin liners contained 90 kilos (200

pounds) of banknotes: $9m, plus

€153,000 ($168,000) and smaller amounts

in other currencies The man was José

Ló-pez, who for12 years was secretary

ofpub-lic works in the governments of Cristina

Fernández de Kirchner and her late

hus-band and predecessor, Néstor Kirchner

The antics of Mr López, who has been

charged with illicit enrichment, have

pro-vided a defining retrospective image of

the Kirchner era in Argentina

As president Ms Fernández adopted a

regal manner, never admitting mistakes

and browbeating anyone, from

business-men to media owners and judges, who

got in her way After the narrow victory in

November’s presidential election of

Mauricio Macri, a centre-right opponent

of her political heir, Daniel Scioli, there

was talk that she would remain the

domi-nant power in Argentina Yet out of office,

Ms Fernández has quickly been exposed

as a paper tigress Much of her Peronist

movement has deserted her And now

she faces a real threat of jail

Three judges are investigating her or

her associates One case involves her

gov-ernment’s sale of dollar futures last year

to prop up the peso before the election,

which cost the central bank $4 billion

when Mr Macri’s inevitable devaluation

followed More personally damaging are

two judicial probes into two hotel nies she and her family own in Santa Cruz,

compa-a province in Pcompa-atcompa-agonicompa-a Scores of roomswere block-booked (but few occupied) formonths on end by Aerolíneas Argentinas,

an airline which she renationalised, and

by companies controlled by Lázaro Báez, aformer bank clerk, and by another closebusiness associate of the Kirchners MrBáez, who is in jail on suspicion of money-laundering, received the lion’s share ofpublic-works contracts from Néstor Kirch-ner when he was governor of Santa Cruzand, later, many federal contracts

One judge has blocked Ms Fernández’sbank accounts and credit cards; the otherhas found that Florencia Kirchner, her 26-year-old daughter, had $4.7m in severalsafe-deposit boxes and $1m in a bank ac-count She says this is her inheritance fromher father The Kirchner family’s declaredwealth increased 17-fold during their dozenyears in power to 119m pesos ($8m) Theysay that came from hotels and the revalua-tion of land, which they bought cheaplyfrom local authorities

Ms Fernández’s response to being vestigated has been to embrace victim-

in-hood, blaming “judicial persecution”.Take on powerful interests, such as farm-ers and multinational companies, and

“it’s clear that one of the risks is prison,”she told foreign reporters, whom shesummoned to her retreat in El Calafate inSanta Cruz on July 23rd

Whatever happens to the former dent, several things stand out from theseinvestigations The first is how ham-fistedthe alleged corruption seems Mr López’spreference for crisp notes was shared byothers; in 2013 two sidekicks of Mr Báeztold an interviewer they had sent €55m incash to accounts in tax havens (they laterwithdrew this claim) Another is the bra-zen sense of impunity Much of the sus-pected wrongdoing was known about foryears, thanks to investigative journalists.Judges did nothing about it

presi-“In Argentina while you are in poweryou are untouchable,” says Roberto Saba,

a law professor at the University of

Paler-mo in Buenos Aires “The day you leave”official watchdogs and judges will investi-gate That knowledge may have been be-hind the Kirchners’ quest for permanentpower, by alternating in office (a schemethwarted by Néstor’s death in 2010), byusing the state to build a large clientelisticpolitical base and by subordinating eco-nomic management to popularity

Although the scale may have beengreater under the Kirchners, padding pub-lic-works contracts has been going on fordecades in Argentina As in Brazil andMexico, it has been a means to financepolitics while, in some cases, getting rich.The Argentine clean-up is not comparable

to that in Brazil, where judges are ing those who are now in power Will thatchange? Mr Macri has praised the judicia-

pursu-ry for “starting to work in an independentway” and said he hopes this will contin-

ue That will require deeper changes

Cash in bin liners, please

Bello

The Argentine way of corruption, and of fighting it

Olympics provided a “pretext” to push

them through quickly Games-related

works boosted the local economy while

Brazil was in recession Cariocas’ incomes

rose even as they fell in Brazil as a whole,

according to a study by the Fundação

Getu-lio Vargas, a university

The state government meanwhile tried

to curb violent crime Starting in 2008 it

sent heavily armed troops into 38 favelas to

evict drug gangs, then set up “pacification

police units” (UPPs) to keep the peace It

worked Violent crime in Rio halved

be-tween 2009 and 2012

But police commanders created too

many UPPs too quickly, overstretching theforce In training they continued to empha-sise the skills required to hold territory, ne-glecting those needed to forge strong rela-tions with the community “A year of thisand you could turn a Benedictine monkinto a warrior,” laments Íbis Pereira, a for-mer police commander now at Viva Rio, anNGO In Complexo do Alemão, shootoutsbetween gangsters and trigger-happy po-lice have become frequent, says Luisa Ca-bral, a social worker in the neighbour-hood After its decline, the number ofviolent deaths has crept back up across thecity this year Ms Cabral now thinks the

UPPs should leave the favelas, letting the

drug traffickers return After Mr Paes cused the state of doing a “horrible” job onsecurity in an interview on CNN, 20,000Americans returned their Olympic tickets

ac-A successful games could lift Rio’sdownbeat mood That will not be enough

to make the city an economic dynamo Thespectacular scenery makes people want tocome, but it will take more enlightenedcrime-fighting, better fiscal managementand improved public services to makethem want to stay Until its leaders providethat, Rio will not become a great city, mere-

ly a great setting for one.7

34 The Economist July 30th 2016

For daily analysis and debate on the Middle East and Africa, visit

Economist.com/world/middle-east-africa

WHEN the presidential motorcade

tears through the posh Borrowdale

suburb where Robert Mugabe resides in

Harare, all traffic still pulls onto the verge in

reluctant deference to the despot At 92 he

is plainly bent on staying in power for as

long as he lives But nowadays the vendors

hawking newspapers at the roadside, with

Zimbabwean flags draped around their

shoulders like superhero capes, are selling

a different story “Writing on the wall for

Mugabe,” blares one independent

news-paper’s headline In the past few weeks a

string of setbacks for the old man has

in-creased the chances that his luck may

final-ly be running out, even before he dies

The most striking development is the

sudden rise of a protest movement led by a

previously unknown clergyman, Evan

Ma-warire, whose hashtag #ThisFlag has

caught the nation’s imagination His

cam-paign, bolstered by the clever use of social

media, has drawn support from churches

and the middle class which had hitherto

tended to steer clear of street politics

When Mr Mawarire, whose trademark is

the Zimbabwean flag wrapped around

himself, was arrested earlier this month, a

large crowd, including many lawyers,

con-verged on the court-house where he was

being held, until he was freed amid

trium-phant cheers the next day (More recently

Mr Mawarire has found it wiser to stay in

neighbouring South Africa.)

whom are too young to have seen action inthe civil war of the 1970s) On July 21st anassociation of them deplored his “bank-rupt leadership” “We note with concern,shock and dismay the systematic en-trenchment of dictatorial tendencies, per-sonified by the president and his cohorts,which have slowly devoured the values ofthe liberation struggle,” they declared

“It gives people confidence that gabe has been ditched by his erstwhilefriends,” says Wilson Nharingo of the Zim-babwe Liberators’ Platform, a rival veter-ans’ group that has long derided thosewho have recently turned on Mr Mugabe

Mu-as thugs for propping him up in the firstplace “They have been benefiting from thesystem,” says Mr Nharingo “But nowthey’ve been kicked off the gravy train,they’re seeing the light.”

ZANU-PF heavies have begun a hunt to identify and root out those respon-sible for the veterans’ angry declaration.Saviour Kasukuwere, the local-govern-ment minister and a leading backer of thepresident’s avaricious wife, Grace, to suc-ceed the old man, has warned disgruntledwar veterans that their farms (many ofwhich they seized from whites) would beconfiscated “There could be blood on thefloor,” says Pedzisai Ruhanya, a pundit

witch-“Mugabe is very vindictive He will not letgo.” Newspaper ads summoned all warveterans to ZANU-PF headquarters on July27th to prove their loyalty to Mr Mugabe Amid these ructions the calculations ofEmmerson Mnangagwa, the vice-presi-dent, who is likeliest, at least in the shortrun, to take over if Mr Mugabe falls or dies,have been unclear He has previously hadthe tacit support of the war veterans, thearmy chiefs and the security service But asthe jockeying gets more feverish, new fac-tions in every corner of the ruling estab-

But this is not the only recent setback for

Mr Mugabe As the economy again ens to collapse, feuding within his ownZANU-PF party has intensified Thousands

threat-of civil servants, including teachers andhealth-care workers, are being paid late ornot at all Worse still for Mr Mugabe, self-proclaimed veterans of the liberation warwhom he has long cosseted (and paid to in-timidate his opponents) have turnedagainst him Even the army and policehave become increasingly sour as theirmonthly salaries have been paid late

An old man in no hurry

On July 6th a general strike organised by

#ThisFlag was heeded by an unusuallylarge number of people Many Zimba-bweans, especially the legions who ekeout a living by petty trading, have been in-furiated by a ban on the import of basichousehold goods This provoked demon-strations and the torching of a warehouse

at the Beitbridge border with South Africa

Minibus drivers frustrated by the rooming of roadblocks where police de-mand bribes have also protested violently

mush-Rarely have so many problems hit the ident at the same time, says Eldred Masu-nungure of the Mass Public Opinion Insti-tute in Harare “For the regime, it shouldgive them sleepless nights.”

pres-Mr Mugabe was probably most shaken

by the hostility of the “veterans”, (many of

Zimbabwe’s president

Comrade Bob besieged

H A R A R E

A fresh round of challenges to Robert Mugabe’s deadly grip on power

Middle East and Africa

Also in this section

35 South Africa’s local elections

35 Struggling states in Nigeria

36 The Arab League’s summit flop

36 The Saudi bombardment of Yemen

37 Water in the West Bank

The Economist July 30th 2016 Middle East and Africa 35

2lishment may emerge

Mrs Mugabe, perhaps wary of the wind

blowing in so many directions, has been

away a lot in Singapore The ZANU-PF

Women’s League, which she heads, and

the party’s Youth League, are both deemed

doggedly loyal to the president—and

pre-sumably to herself After the

anti-govern-ment protests earlier this month

thou-sands of youths were bussed into Harare

from the countryside to march in support

of Mr Mugabe and the ruling party, with

loose promises that they would be given

plots of land in Harare and in Bulawayo,

the country’s second city

Some opposition figures have called for

a transitional authority to take over as Mr

Mugabe’s authority dips Joice Mujuru,

who was vice-president until she was

ejected from ZANU-PF in 2014, is hoping to

lead the fray against whoever takes over

her old party But Mr Mugabe has not yet

ceased to astonish his would-be successors

with his resilience and cunning “We are

reaching a tipping point,” says Mr

Masu-nungure “But don’t underestimate the

ca-pacity of ZANU-PF to recreate itself.” 7

WEDDINGS do not come cheap, asKano’s state government has foundout Over the past four years its Islamic mo-rality police, the Hisbah, has arranged, andhelped pay for, marriages for more than4,000 lonely ladies Yet even the most pi-ous can put a price on love As Nigeria’seconomy heads into recession, the statenow says that it cannot afford to pay brideprices or to fill marital homes with furni-ture and cooking kit Ten thousand disap-pointed daters have been left to find loveand marriage the normal way

They can hardly be so aggrieved as geria’s 36 state governors Most of themhave little in the way of either local indus-try or foreign investment, meaning thatthey are incapable of providing for them-selves They borrowed heavily when oilprices were high, and also rely on monthly

Ni-Nigeria’s struggling states

Running out of road

L A G O S

The end of state-sponsored marriages is just the funny bit

FORGET ducking and dodging

corrup-tion charges Jacob Zuma’s new

signa-ture move is the “dab” At rallies ahead of

local government elections on August 3rd,

South Africa’s 74-year-old president drops

his forehead to the crook of one arm and

bops—a dance move borrowed from

American hip-hop culture These elections

will be a crucial test of support for the

Afri-can National Congress (ANC) under the

unpopular Mr Zuma

He is facing two much younger rivals

seeking to knock the ruling party off its

post-liberation perch The ANC, in an

at-tempt to update its image among young

voters, has adopted “dabbing” for its

cam-paign events, along with pop star

endorse-ments and branded leather jackets For

South Africa’s two biggest opposition

par-ties, this election offers their best shot yet

of denting the ANC’s dominance

Mr Zuma’s rivals hail from different

po-litical planets Mmusi Maimane, just 36

years old, leads the Democratic Alliance

(DA), a liberal-leaning party that drew 22%

of the vote in the 2014 general elections

For Mr Maimane, the first black leader of

what many still regard as a

white-domin-ated party, this is a make or break election

The DA, with a record of clean governance,

is desperate to win a big city outside itsWestern Cape base Nelson Mandela Baymetro, which includes the city of Port Eliza-beth, is the party’s likeliest target; taking Jo-hannesburg or Tshwane (Pretoria) would

be a triumph Although Mr Maimane, whountil recently doubled as a preacher, isknown for giving impassioned speeches—

notably, an address in parliament damning

Mr Zuma as a “broken man”—he has faced

an uphill battle in trying to sway a mostlyblack electorate

On the political left is the bombastic lius Malema, 35, “commander-in-chief” ofhis radical Economic Freedom Fighters

Ju-The EFF was formed after Mr Malema, aformer youth league leader in the ANC, fellout with Mr Zuma and was booted out ofthe party Now only three years old, the EFFhas shaken up South African politics withrevolutionary rhetoric and attention-grab-bing moves such as wearing workers’ cos-tumes to parliament—overalls, maids’ uni-forms—topped with Che Guevara-style redberets (these have become a must-have ac-cessory for youth on the march) Theparty’s new smartphone app includes EFF-themed playlists and push notifications for

Mr Malema’s latest missives

Mr Malema, who once said he would

“kill for Zuma”, now accuses the president

of being a dictator He courts angry youngvoters who chafe at the scarcity of jobs andflagrancy of corruption under the ANC He

is also a skilled demagogue, making flammatory remarks that often have a ra-cial overtone Some have compared him toIdi Amin, which is rather unfair as Mr Ma-lema is not a mass murderer

in-The big question is whether tled ANC supporters will stay loyal, stayhome or cast a ballot for an alternative

disgrun-Weekly polls commissioned from Ipsos byeNCA, a private broadcaster, have the DAleading the ANC in all three battlegroundmetro areas The DA’s own polling is lessoptimistic The EFF, which aims to triple itssupport from the 6% received in the 2014general elections (10-12% is thought a more

likely number), has focused on Mr lema’s home province of Limpopo, as well

Ma-as KwaZulu-Natal, where the ANC hMa-asbeen racked by violent internal disputes Sensing danger, Mr Zuma has gone onthe attack, dancing his way past his legalproblems and using crude insults to dis-tract his audiences During a recent cam-paign event he called the DA a “poisonoussnake” and accused the party of being anti-black He said that Mr Malema and the EFFparty leaders were “small boys who have

no respect” “Voting ANC is like opening[the] gates to heaven,” Mr Zuma warned acheering crowd at a rally in the EasternCape “If you do not vote ANC, it’s likechoosing to be with [the] devil.” 7

South Africa’s local elections

Young rivals

J O H A N N E S B U R G

Can an energised opposition, with two

fresh leaders, poach ANC voters?

Will Maimane (left) or Malema hurt the ANC more?

36 Middle East and Africa The Economist July 30th 2016

2

The Arab League

A new low

WHAT if they held a summit and no

one came? That, almost, is what has

just happened in Nouakchott, the capital

of Mauritania—which most Arabs

prob-ably did not know was part of the Arab

League at all On July 25th only seven of

its 22 heads of state bothered to attend

their summit and one of them, Ould

Abdul Aziz of Mauritania, was there

anyway Another, Abd Rabbo Mansour

Hadi of Yemen, was booted out of his

capital by rebels in 2015, and doesn’t have

much else to do A third, Omar al-Bashir

of Sudan, is wanted by the International

Criminal Court for genocide, meaning

that his travel options are severely

limit-ed Not that Nouakchott is a very flash

destination For want of a suitable venue,

the meeting was held in a tent

King Salman of Saudi Arabia said he

was ill—which is probably true since he is

80 and infirm But he did not think it

worth sending his son, Muhammad bin

Salman, the 30-year old deputy crownprince, who actually runs the countrythese days Another no-show was KingMohammed VI of Morocco He wasmeant to have been hosting the summithimself But in February he renouncedthe honour His foreign ministry put out astatement saying that “given the absence

of important concrete initiatives whichcould be submitted to Arab Heads ofState, this summit will only be an occa-sion to take ordinary resolutions anddeliver speeches which pretend to give afalse impression of unity and solidaritybetween Arab States.”

That, of course, is the rub The sion of so many states, the region-widestrife between Sunni and Shia Arabs, andthe economic crises caused by the weakoil price have all combined to produceunprecedented levels of division andbitterness among the League’s members

implo-Far easier just to stay at home

Even by its own dismal standards, the League’s latest summit was a flop

Room at the top

allocations from the federal government to

keep afloat But two years of low oil

rev-enues have eaten nastily into those

dis-bursements (see chart), leaving them

un-able to service their debts or pay their

inflated workforces

Out of the window have gone more

pricey programmes, such as pilgrimages

sponsored by Niger This state (not to be

confused with the country) generated

monthly revenues of 500m naira ($2.5m)

in 2015, while running up a wage bill over

four times that “Other equally

people-ori-ented demands” must now take

prece-dence over journeys to Jerusalem and

Mecca, Governor Abubakar Bello said

re-cently Politicians in Bayelsa, a southern

state that has a reputation for oil and

alarming kidnap rates, waved goodbye to a

five-star hotel which has been over a

de-cade in the making Good riddance, many

said The 18-storey monstrosity cost the

go-vernor 6 billion naira before he shelved it

More important investments in roadsand schools have long since dried up, ac-cording to BudgIT, a fiscal analysis group inLagos Civil servants no longer hope to gettheir salaries on time, and in some placestheir already meagre pay has been slashed

by half Osun state, which previouslysplurged on six stadiums, is now survivingwithout a cabinet Governors best knownfor fast cars and love nests are suddenlyprofessing restraint In Niger state, Mr Bellohas said he will cut spending on housingfor officials by at least 80%; an easy pro-mise to make, given that his books are notmade public

This points to a general problem withinfederal Nigeria With a couple of excep-tions, its local and state governments donot publish budgets, so they can spend atwill It is no surprise therefore that theyfailed to cut spiralling costs as oil prices fell

Or that the governors squandered the 660billion naira federal bail-out package in-tended to pay salaries last year In just onemysterious transaction, Imo decided that 2billion naira might be put to best use on thegovernment accommodation account.Having frittered away this lifeline, theyare now asking for a new one Last monthNigeria’s finance minister agreed to lendthe states 90 billion naira, provided theystart publishing audited accounts That is astart Meanwhile, the governors will takehope from a resurgence in their gross Juneand July allocations (thanks to higher fed-eral tax collections) But in Kano, the His-bah is looking for a quicker solution: priv-ate sponsors for mass weddings “Stopping

it altogether [is] unthinkable,” its general said Recession be damned 7

0 20 40 60 80 100 120

Net revenue allocation

to state governments, naira bn Brent crude oil price$ per barrel

NINETY years ago Britain’s planesbombed unruly tribes in the Arabianpeninsula to firm up the rule of Abdel Azizibn Saud, the founder of the Saudi state.Times have changed but little since then.Together with America and France, Britain

is now supplying, arming and servicinghundreds of Saudi planes engaged in theaerial bombardment of Yemen

Though it has attracted little public tention or parliamentary oversight, thescale of the campaign currently surpassesRussia’s in Syria, analysts monitoring bothconflicts note With their governments’ ap-proval, Western arms companies providethe intelligence, logistical support and air-to-air refuelling to fly far more daily sortiesthan Russia can muster

at-There are differences Russian pilots flycombat missions in Syria; Western pilots

do not fly combat missions on behalf of

The Saudi bombardment of Yemen

Worse than the Russians

The West is abetting vast loss of life