Economist 8/20/14

  1. WHEN a few intrepid humans crossed the Bering land bridge from the Old World to the New, to populate the Americas 12,000 years ago, they left many things behind. Among them were several diseases—including smallpox, malaria and tuberculosis—that remained unknown to their descendants until a larger human influx began to arrive in 1492. Or rather, in the case of tuberculosis, remained almost unknown. For New World tuberculosis, they suggest, came from seals.Where the seals themselves picked up tuberculosis remains to be determined. Their strain resembles one found in mice, and direct cross-infection between land-lubbing rodents and aquatic pinnipeds seems implausible. But not, perhaps, impossible.
  2. FIFTY years ago the first United Nations Conference on Trade and Development launched a debate about how much money rich countries should give to poor ones to reduce poverty and bolster growth. In the end, the UN settled on a figure of 0.7% of national income—a target subsequently reaffirmed by endless international powwows. Although few countries have met it, aid spending in real terms has nonetheless increased steadily ever since, to $134.8 billion in 2013.Critics reckon aid hurts its recipients by fostering dependency, propping up oppressive or incompetent regimes and pushing up the value of poor countries’ currencies, thereby undermining the competitiveness of their exports.Assessing the impact of aid on economic growth is complicated by the fact that the causality is not always clear.
  3. Economist Intelligence Unit, our corporate cousin. Its annual “liveability index” puts eight of the ten most comfortable places in Australia, Canada or New Zealand. The index crunches 30 factors related to things like safety, healthcare, educational resources, infrastructure and environment in 140 cities.Over the past five years urban life has deteriorated somewhat: liveability has declined in 51 places and improved in 31 places.Interestingly, the top cities have not changed much over time. The EIU notes that they “tend to be mid-sized cities in wealthier countries with a relatively low population density.” Hence those of us in London, San Francisco and Shanghai must endure the rat-race, and dream of dwelling amid Viennese coffee houses or Vancouver’s sailing and skiing.
  4. Niger is, by the reckoning of the UN’s Human Development Index, the poorest place on earth. Most of its inhabitants eke out a living growing subsistence crops on small plots of dusty, infertile land. Despite this agricultural bias, the drought-stricken country cannot feed itself, even in good years. An estimated 2.5m people out of a total of 17m have no secure source of food.With an average of 7.6 children per woman, Niger has the world’s highest rates. Poverty, ignorance and poor access to contraception are contributing factors, as are cultural issues like competition between wives. Men in Niger tend to be polygamous, and local doctors note that their spouses often try to prove their value by outdoing each other in child births. This contributes to Niger having the highest population growth rate on earth. At current projections, the number of inhabitants will more than triple between now and 2050 to 55m.
  5. Next month Lieutenant-General Sir Nick Carter will take over as chief of the general staff for British army. The army’s new boss is also its architect: asked to find savings of £5.3 billion ($8.9 billion), he devised a plan to cut the number of full-time soldiers from 102,000 to 82,000 by 2018. The army has advertised heavily for reservists, and increased the bounties paid to regular soldiers leaving the army who join the part-timers. But Britain lacks the legal and cultural apparatus to sustain a large reserve. In America part-time soldiers who fail to show up face serious sanctions; employers keep reservists’ jobs open. By contrast the British Territorial Army, recently renamed the “Army Reserve”, has been a more amateur affair.But the most obvious change to the armed forces is a straightforward one: Britain will probably not be engaged in a major foreign war in the near future. That may hamper recruiting.

Economist 8/19/14

  1. How did America’s police forces get so well-armed? In this as with so much else in American governance, it starts with federal cash. Every year Congress passes the National Defence Authorisation Act, which sets out the Defence Department’s budget and expenditures. The version passed in 1990, in the wake of a sharp rise in drug-related violence, allowed the Defence Department to transfer military gear and weapons to local police departments if they were deemed “suitable for use in counter-drug activities”. Between 2002 and 2011 the Department of Homeland Security, established after the attacks of September 11th 2001, disbursed more than $35 billion in grants to state and local police forces. In addition the “1033 programme” allows the Defence Department to distribute surplus equipment to local police departments for use in counter-terrorism and counter-drug activities. In 1980 SWAT teams across America were deployed around 3,000 times. Deployments are estimated to have risen nearly seventeen-fold since, to 50,000 a year.And while SWAT teams remain essential for high-risk and dangerous situations, most SWAT teams are deployed to serve routine drug-related warrants on private homes, often with disastrous consequences.
  2. During the last 23 years the minimum wage of Mexico has dropped by 43% after accounting for inflation, according to the Economic Commission for Latin America and the Caribbean (ECLAC), a part of the United Nations.Since 1991, annual inflation has fallen from more than 22% to less than 4%.Those who earn the minimum wage in Mexico get 19% of their country’s average wage. In Chile it is 43%.It is often argued in Mexico that the minimum wage hardly matters because few earn it. But base wage serves as a guide for pay rises in the broader economy.
  3. VENEZUELA’S western border is a smuggler’s paradise.The most lucrative trade of all is in petrol: Venezuela’s energy minister, Rafael Ramírez, reckons the equivalent of 100,000 barrels a day of oil is smuggled out of the country.Petrol in Venezuela is so cheap that an entire 50-litre (11-gallon) car-tank can be filled for well under $1, or less than six cents at the black-market rate. Over the border, gasoline costs about $1.20 a litre. The government says it loses to smuggling 40% of the subsidised food that it supplies to state-owned grocery stores. On August 11th, in the latest attempt to plug the leaks, Venezuela began nightly closures between 10pm and 5am of its 2,200km (1,400-mile) border with Colombia. Heavy-goods traffic in the border area is now banned for 11 hours a day, starting at 6pm.
  4. Under Chinese sovereignty since 1997, Hong Kong’arithmetic has got even harder. When untold thousands took to the streets on July 1st for what has become an annual march demanding full democracy for the special administrative region of China, the police estimated 98,600 people took part..In comparison the estimates of attendance at the “pro-China” demonstration on August 17th are in a rather tighter range: 111,000, said the police; 193,000 the organisers.  The aim of the demonstration was to oppose “Occupy Central with Peace and Love” (OCPL), a movement that threatens to occupy Hong Kong’s central business district, bringing traffic and commerce to a halt, if China refuses to meet its demands for genuine “universal suffrage” in the election for Hong Kong’s chief executive in 2017. So the demonstration was not so much “pro-China”, though Chinese flags were much in evidence, as “anti-disruption”.
  5. VISIT an outlet of Chilango, a Mexican food chain in London, and you will be invited to “become part of the story”, not just by eating a burrito but by buying a “burrito bond”. These are four-year loans to the firm of at least £500 ($835), paying annual interest of 8%, along with a variable number of free burritos, depending on how much an individual lends. Helped by Crowdcube, a crowdfunding website, Chilango has already raised £1.8m in this way—80% more than its initial goal—from 585 bond-buyers. In Britain “mini-bonds” are more loans than bonds, in that they are not tradable. But also unsecured, giving them little recourse if the loan sours. They are cheaper to issue than a normal bond, which involves much more paperwork.

Economist 8/18/14

  1. The court system in China is often just a rubber-stamp for decisions made in secret by party committees in cahoots with police and prosecutors.In June state media revealed that six provincial-level jurisdictions would become testing grounds for reform.Those Shanghai courts that are participating in the pilot reforms (not all are) are expected to raise judges’ pay. They are also expected greatly to reduce the number of judges.The most important reforms will affect the bureaucracies that control how judges are hired and promoted. Responsibility will be taken away from the cities and counties where judges try their cases, or from the districts in the case of provincial-level megacities like Shanghai.It will be shifted upwards to provincial-level authorities—in theory making it more difficult for local officials to persuade or order judges to see things their way on illegal land seizures, polluting factories and so on.
  2. Mr Humphrey was jailed for two-and-a-half years; his wife, Yu Yingzeng, for two. They  were found guilty of violating laws protecting personal privacy.Since Mr Humphrey had spent years as a reporter and private investigator, his claim that he did not understand China’s privacy laws may seem a stretch. In fairness to him, though, there have always been grey areas.The court ruling makes it clear that China now intends to enforce its laws on data privacy, which are closer to the EU’s tough laws than to America’s business-friendly approach. Investigators will now have to spend more time conducting personal interviews and reference checks. 
  3. Since it opened in late May in Beijing, more than 100,000 people have visited Madame Tussauds in Beijing. It is the third such attraction in China; the first opened in 2006 in Shanghai and the second in the central city of Wuhan last year. The popular exhibit of waxworks, which was launched in London in 1835, is now in 20 cities across the world.If visitors want to pretend they mix with Chinese celebrities, they must make do with those who are solidly apolitical—the likes Lang Ping, a volleyballer.
  4. Since China and Vietnam normalised relations in 1991, Vietnam’s government has stressed ideological harmony with its larger Communist neighbour. That front appears to be fraying. Some members of Vietnam’s ruling Communist Party are putting rare public pressure on the prime minister, Nguyen Tan Dung, to follow through on a threat, which he floated in May, to take China to international court over its territorial claims.Vietnam is finding support from elsewhere. Japan announced on August 1st that it will give Vietnam six naval boats to boost its patrol capacity. This week an Indian frigate conducted joint exercises with the Vietnamese navy. And on August 8th John McCain, an American senator, announced on a visit to Hanoi that it was time for America to ease its embargo on weapons exports to Vietnam.Vietnam buys most of its weaponry from Russia, where arms are cheaper.China is Vietnam’s largest trade partner, and Vietnam’s annual trade deficit with it is nearly $24 billion. Factories in Vietnam—many owned by multinational firms—depend on Chinese inputs.
  5. THE government of Shinzo Abe, Japan’s prime minister, has put a brave face on the news that Japan’s GDP shrank by 1.7% in the second quarter of this year. Akira Amari, the economy minister, blamed the fall, of an annualised 6.8%—the steepest since the earthquake and tsunami that pummelled Japan in 2011—on the decision to raise the consumption tax from 5% to 8% in April and said the economy will rebound. Worryingly, private consumption plunged by 5% from the previous quarter.The Bank of Japan has pumped billions of dollars into the economy to buy up government debt, which has driven the yen down against the dollar.

Economist 8/15/14

  1. Geothermal is a minnow among power sources. America has the world’s highest installed capacity of geothermal generating plants—3.4 gigawatts’ worth at last count (see first chart)—but they generate only 0.4% of its electricity. New “enhanced geothermal systems” (EGS), however, look set to make geothermal a bigger contributor—and potentially as controversial as shale.The industry may dislike the comparison, but EGS is geothermal fracking. Millions of gallons of water and chemicals are injected into mostly vertical wells at relatively high pressure, and the combination of cold-meets-hot, pressure and chemistry shears the deep, hot rock. This creates new “fracture networks” through which water can be pumped, heated and sent back to the surface to generate power.e trouble is that successful existing geothermal plants do not need EGS, and for many failed wells it is uneconomic to introduce it. EGS can trigger earthquakes. Most are minuscule but an early project on a seismic fault in Basel, Switzerland was scrapped after several not-so-small quakes.
  2. On August 10th Andreessen Horowitz, a venture-capital firm, said it was investing $50m in BuzzFeed, reportedly valuing the eight-year-old website at $850m, half the market value of the New York Times. According to comScore, a research firm,BuzzFeed had around 75m unique visitors in June—more than the websites of the Times and other bigdailies. It makes money through “sponsored content”—which often looks remarkably and deliberately like a normal article, but is commissioned by advertisers.
  3. On August 8th Malaysia’s sovereign-wealth fund offered to buy the 30% of Malaysian Airlines shares in private hands in order to restructure the airline. The root cause of Malaysia’s troubles should elicit far less pity. Like many national carriers, it was losing money as a matter of course.On August 8th the country’s sovereign-wealth fund offered to buy the 30% of shares in private hands in order to restructure the airline. The root cause of Malaysia’s troubles should elicit far less pity. Like many national carriers, it was losing money as a matter of course.The exceptions are few. The thriving airlines of Singapore and Ethiopia, and the Gulf carriers, Etihad, Emirates and Qatar Airways, all benefited from government money but have been allowed to operate as commercial enterprises with minimal interference.Poor management, overstaffing and strong unions have left airlines struggling in a changing business and with little hope of cost-cutting or streamlining.
  4. LINKEDIN is not the only game in town. With 60m members, Viadeo is the world’s second-biggest professional social network. It is strong in its home country, France, and in China. Xing of Germany, the third largest with 14m members, guards the gate of the German-speaking world. Viadeo is the biggest professional network by membership in France and Francophone Africa, has a significant business in Russia and, most important, is in first place in China. It bought Tianji, a Chinese business-networking site, in 2008 and has built its membership to 20m.The big problem for Viadeo is making money outside France, which accounts for 95% of its turnover—€31m ($42m) in 2013. Viadeo has yet to turn an operating profit (though it claims it is profitable in France).Viadeo is also under threat from its rivals. Profitable Xing, which had pulled back from foreign ventures, got a new boss in 2012, who is going after business recruitment. LinkedIn, meanwhile, is encroaching on two markets that Viadeo hoped it had sewn up.
  5. LinkedIn is more than just a means for aspiring professionals to make friends and influence people. It has changed the market for their labour—how they find jobs and how employers find them. Recruiters are LinkedIn’s main source of revenue. They pay for licences to trawl for likely job candidates and to e-mail them about vacancies, as well as for placing advertisements on the site. This business—called “talent solutions”—accounts for about three-fifths of sales. LinkedIn’s main benefit to recruiters has been to make it easier to identify people who are not looking for a new job, but who might move if the right offer came along. These “passive” jobseekers, says Dan Shapero, head of sales in the firm’s talent-solutions business, make up perhaps 60% of the membership (active jobseekers make up 25%; those who will not budge for any money make up the rest.  For the top jobs, LinkedIn is still too public. Denizens of the executive suites often expect a discreet tap on the shoulder from a bespoke headhunting firm. That is why Korn/Ferry, one of the biggest headhunting firms, reported record revenues and profits last year. Even so, LinkedIn is working its way up the greasy pole. Since early June the number of jobs on its site has jumped from 350,000 to about 1m. As well as openings for software engineers at IBM can be found jobs as delivery drivers for Pizza Hut or on the tills at Home Depot—which until now no one would have expected to find there. This is because LinkedIn has added jobs from employers’ websites or human-resources databases to its existing paid advertisements.

Economist 8/14/14

  1. AMERICA’S last two presidents have got things wrong in Iraq in opposite ways.AMERICA’S last two presidents have got things wrong in Iraq in opposite ways.Mr Obama’s gamble has been to withhold all but minimal military support in order to force political change in Baghdad. That strategy has come at a cost. IS has consolidated its hold on Iraq’s second-biggest city, Mosul. In all events, Western leaders must prepare the public for a lengthy military engagement in this part of the world. Even if confronted by America’s full military might, the extremists could melt back into the population of Mosul, a city of 2m people where they have had a strong underground presence for years. They could also slip back across the nearby border with Syria, where they have a safe haven in swathes of land they have seized during the civil war.
  2. RECEP TAYYIP ERDOGAN, Turkey’s prime minister, certainly knows how to win elections. On August 10th he made it nine, winning Turkey’s first direct election to the presidency, with a crushing 52% of the vote. His achievements in over 11 years as prime minister are equally impressive. Since AK came to power in November 2002, economic growth has averaged some 5%. Inflation has been tamed. The army has been brought under greater civilian control. Mr Erdogan has made more progress than any previous political leader in giving Turkey’s Kurds greater rights.What makes this more troubling are Mr Erdogan’s plans to give the presidency, hitherto a ceremonial job, far more power. He wants to turn it into an executive position, as in France.That would put Mr Erdogan in sight of his goal of an enhanced presidency, backed by a pliable prime minister, in which he could stay up to and beyond 2023. 
  3. The main source of new infectious diseases is animals. Ebola, which was identified only in 1976, is thought to be spread by fruit bats. HIV was originally a chimpanzee virus. Boosting efforts to monitor wild animals, and those who routinely come into contact with them, such as hunters and butchers of “bush meat”, to see which viruses are jumping species, might help stop further plagues before they get started. The American government’s Emerging Pandemic Threats programme is already doing this, in collaboration with independent groups such as Metabiota.
  4. According to a recent report by Amnesty International, a lobby group, at least 23,000 migrants have lost their lives trying to reach Europe since 2000. From January to July alone around 100,000 undocumented migrants crossed the Mediterranean into Italy, already much more than the record 60,000 who made the crossing in all of 2011. In the same period, the number of illegal migrants arrested by the Greek authorities at the border with Turkey rose by 143%. That puts a big strain on the countries on the geographical front line. Italy spends €9m ($12m) a month on Operation Mare Nostrum, a laudable search-and-rescue effort in the Mediterranean, which was launched in October 2013 in response to the drowning of 360 migrants off Lampedusa. Italian patrol boats picked up around 5,000 people on a single weekend in June; Spanish ones over 1,200 in two days earlier this week. Malta has more asylum-seekers per person than any other rich-world country. Greece spent €63m in 2013 to prevent illegal immigration; just €3m came from Europe’s border agencies.That is unfair and short-sighted. Unfair, because migrants themselves see a place like Greece as a way station, not a final destination.
  5. Uniquely among major team sports, the top leagues in basketball (the NBA) and American football (the NFL) do not recruit from lower professional circuits. Instead, they delegate training to universities: the NFL requires new players to finish three seasons in college, and the NBA’s minimum age is 19. This has helped turn the schools into entertainment juggernauts. At $10.5 billion a year, college sports revenues—mainly from TV, attendance and merchandise—exceed those of any single pro league. Even this understates the profitability of college sports, because the NCAA maintains an amateurism policy that caps athletes’ compensation at the cost of their education. But the income elite players produce far exceeds the price of their scholarships—which colleges are free not to renew in case of injury or violations of the NCAA’s stringent rules on gifts.They are recruited with little regard for grades, spend too much time on sports to attend class, and often depend on school-sponsored academic fraud to retain eligibility to compete. Just 44% of male basketball players at leading programmes graduate within six years. At present, young athletes have no choice but to take a raw deal from colleges, because pro teams refuse to sign them. If players could go pro straight from high school, those with truly valuable talent could earn a fair market wage. For the rest, attending university for free would be reasonable compensation—so long as the NCAA instituted reforms to make the “student-athlete” slogan a reality.

Economist 8/13/14

  1. The usual assumption is that bodily symmetry is a proxy for good health. Symmetry suggests orderly development in the womb and during childhood, and thus, the theory has it, captures a range of desirable things from good genes to infection-resistance. In the Proceedings of the Royal Society, by Nicholas Pound of Brunel University, London there was no correlation between health and symmetry.Dr Pound looked at the relationship between facial asymmetry and illness in more than 4,700 15-year-olds.  As far as susceptibility to infection is concerned, then, asymmetry is a useless indicator. They found an inverse relation between a child’s facial asymmetry at 15 and the results of an IQ test given to ALSPAC’s participants when they were eight.
  2. SOUTH KOREA, a dynamo of growth, is also afire with faith. About 5.4m of South Korea’s 50m people are Roman Catholics. Perhaps 9m more are Protestants, of many stripes. Yoido Full Gospel Church’s 1m members form the largest Pentecostal congregation on Earth. In the 18th century curious intellectuals encountered Catholicism in Beijing and smuggled it home. Confucian monarchs, brooking no rival allegiance, executed most early converts.Yet by 1945 only 2% of Koreans were Christian.Today 23% of South Koreans are Buddhist and 46% profess no belief.  But the world is now their oyster: only America sends more missionaries than Korea.
  3. The 480 high-speed trains (Trains à Grande Vitesse, or TGV) that radiate around France from Paris are struggling to remain in the black. Most of the lines are running at a loss and even the profitable ones are not earning enough to cover their cost of capital.SNCF boss Guillaume Pepy has pointed out how the rise of low-cost airlines in France has won them over half the air traffic at the expense of Air France. He sees no reason why TGVs should not be similarly squeezed as carriers such as easyJet, Ryanair and Vueling multiply their services in and around France. The other squeeze is coming from the rising track costs TGVs have to pay to Réseau Ferré de France, the owner and operator of the rail lines. This will continue even when RFF and SNCF’s train operating units (TGV, suburban and regional and freight) are brought under one holding company. About 40% of the cost of a TGV ticket goes to cover these track tolls, which have risen by over half in since 2007.
  4. Unlawful abductions, torture and killings of civilians have tainted the legacy of the war that George Bush brought to Afghanistan. But they are not a thing of the past. From 2009 to 2013 international troops killed at least 1,800 Afghan civilians, according to the report. Over this five-year period there were only six cases in which military officers or enlisted men were prosecuted for unlawful killings. In one of those six, Army Sgt Robert Bales was sentenced to life in prison without parole for shooting and killing 16 civilians in 2012. Amnesty also claims that in at least two cases, the American army covered up “abundant and compelling evidence of war crimes.”
  5. Almost everywhere women are in a minority in government cabinets.In a forthcoming paper, Maria Escobar-Lemmon and Michelle Taylor-Robinson of Texas A&M University compare the experience and accomplishments of the men and women among 447 cabinet ministers in recent administrations in five countries in the Americas: Argentina, Chile, Colombia, Costa Rica and the United State, Although female ministers initiated fewer bills than comparable male ones, overall they were as likely to succeed. Nor was there much evidence of tokenism in individual countries among the five.

Economist 8/12/14

  1. IRAQ depends on the Tigris and Euphrates rivers for drinking water, supplying industry and irrigating massive swathes of farmland. The two rivers account for 98% of the country’s surface water. Until recently the government’s greatest concern has been the fact that the source of neither river is in the country. In the past few decades dams and diversions across Turkey and Syria have steadily reduced the quantity of water reaching Iraq.Both waterways flow through areas of northern Iraq controlled by the Islamic State (IS), an extremist group.Mosul is not the only dam for which IS has fought. IS has already taken control of a number of government wheat-storage sites in Ninewa, Kirkuk and Salaheddin provinces.
  2. “icequakes” are the sudden movements of ice and frozen, saturated earth. While a large earthquake can trigger tremors in distant, tectonically active regions, earthquakes and icequakes have been considered unconnected events.Zhigang Peng, a seismologist at the Georgia Institute of Technology in America, and colleagues noticed that glacial calving—the falling of large chunks of ice from the end of a glacier into the sea—can be triggered by earthquakes that originate thousands of kilometres away.On analysing the data from 42 Antarctic seismographs, they found 12 clear signals that marked the occurrence of icequakes within six hours of the Chilean quake.
  3. CANADA’S long and troubled history with its First Nations (native Indians) hit a new bump this month with a fight over whether First Nations’ chiefs and councils should make public their salaries and expenses. A transparency law passed last year required Canada’s 634 First Nations communities to publish these details online by August 1st. But the deadline passed with barely one-third of communities complying. The federal government is threatening to cut funding to the dissidents.Greater compliance may now be unlikely, given the furore caused by the whopping pay-packet of the chief of an 82-member First Nation in British Columbia.First Nations’ groups counter that the Kwikwetlem case is an outlier, that they already provide salary and expenses details privately to the federal government and that they are now being held to a higher standard of transparency than other levels of government.
  4. A paper examined the records of 2,846 American mutual funds between the start of 1996 and the end of 2008, overseen by 1,825 managers. Turnover was high; fewer than a quarter of the managers lasted more than five years. Just 195 of them lasted a decade.In their last year in charge of their funds, these neophytes underperformed the veterans. However, the veterans did not outperform consistently; what they did do was avoid periods where they did particularly badly.The key to a long career in the mutual-fund industry seems to be related more to avoiding underperformance than to achieving superior performance.” In general, fund managers have access to the same information as their peers and, for liquidity reasons, tend to focus on the largest stocks in the market; this makes it very difficult to perform better than the benchmark, particularly after costs and fees are deducted.
  5. Argentina defaulted on part of its foreign debt.President Cristina Fernández de Kirchner has run by choosing to scotch last-minute talks and defy an order by Thomas Griesa, a New York judge, to settle with hedge funds that are demanding full repayment of their Argentine bonds.Instead, the president has opted to try to turn this battle into a nationalist epic. That offers an immediate, albeit slight, political dividend: her approval rating has crept up to over 40%. In this she is being true to type. In 11 years in power the Kirchners have preferred nationalism and confrontation to pragmatism and professional competence, while focusing relentlessly on the short term.Even before the default, the economy was set to contract by about 1.5% this year. Businesses are laying off workers, or cancelling overtime. The current account and the public finances are both in deficit. Inflation is at 39%.