Economist 2/27/15

1. Xiaomi’s worldwide sales were 61m handsets last year, a rise of 227% on the year earlier, making it the sixth-biggest mobile-phone firm in the world. In China, Xiaomi had leapt ahead of all its rivals, foreign and local, by the final quarter of last year, to become the top-selling brand of smartphones.This year Mr Lei wants to sell 100m units worldwide.Last year it began selling phones in a few South-East Asian markets, including Singapore. It also struck a deal with Flipkart, India’s leading e-commerce firm, to sell handsets in that market.Profitability is also a big concern. Xiaomi, still private, releases few details of its finances.Even the firm admits it has enjoyed higher margins from selling millions of fluffy promotional toys.Unlike its more experienced local rivals, Lenovo (which has bought Motorola’s smartphone division from Google) and Huawei, Xiaomi does not have a huge patent portfolio.Given these obstacles, why is Samsung still worried?Its best handsets are not quite as good as Apple’s or Samsung’s best, but they are far better than those from other, cut-rate rivals—and they cost half what an unsubsidised new iPhone does.The other reason incumbents should worry about Xiaomi is its financial firepower. Some reckon that this latest investment, which values it at $45 billion, makes the Chinese upstart the world’s most valuable startup.
2. Between 1877 and 1950 almost 4,000 black southerners were lynched, according to a new report by the Equal Justice Initiative (EJI), a human-rights group. That is 700 more than previously reported. During the days of Jim Crow, a black man could be murdered for speaking “disrespectfully” or for knocking on the door of a white woman’s house.Georgia saw more such murders (586) than any other state, followed by Mississippi. Tyrone Brooks, a member of Georgia’s House of Representatives, has spent years researching the lynching at Moore’s Ford Bridge with the Southern Christian Leadership Conference (SCLC), after past investigations went nowhere.On February 13th he sent a letter to Charles Grassley, chairman of the Senate Judiciary Committee, asking for an investigation and hearings into what happened.His campaign is unlikely to get far.
3. AS THE peninsula this year marks 70 years since its division, South Korea’s president, Park Geun-hye, is pushing the idea of unification as a “bonanza”. For the North, whose minuscule economy is roughly 40 times smaller than that of the South and is only beginning to show signs of reform, that would certainly be the case. But what of South Korea’s gains? The costs of reunion will be staggering—by conservative estimates about $1 trillion, or three-quarters of annual GDP. Its social-security system would need to provide for 25m Northerners, many of them brutalised and malnourished, and including tens of thousands of prisoners in the North’s gulag.Yet the South would also merge with a population that is younger and has almost twice as many babies. That would be a demographic boon, as South Korea’s working-age population begins to shrink from 2017. Disbanding the North’s standing army, the fourth-largest in the world, would free up workers. In total, about 17m workers would join the South’s 36m—though admittedly with far lower skills and education.Under Japan’s occupation from 1910 to 1945, Korea’s industrial heartland lay in the north, and therefore North Korea has more railroads than the South.Under the Japanese, Pyongyang (now the North’s capital) was also a thriving centre of Protestant Christianity. Indeed the parents of Kim Il Sung, North Korea’s first dictator, were devout Christians.
4. People may be buying fewer takeaway burgers, but they have a growing appetite for pizza, from both independent pizzerias and pizza chains. One of them, Domino’s Pizza, saw its global sales jump by 14% in the last quarter of 2014, compared with a year earlier. Sales outside the United States grew for the 84th consecutive quarter. Pizza has long been a favoured form of inexpensive fast food in Italy, where people started putting tomato on flatbread sometime in the 18th century.Demand boomed after the second world war, thanks to returning American soldiers, who had gained a taste for pizza in Italy.But the secret ingredient that keeps consumers hooked on pizza is menu innovation. Pizza chains are constantly coming up with alluring new variations of their product to maintain consumers’ interest and loyalty.
5. THE announcement on February 24th by the British prime minister, David Cameron, that Britain is to send 75 military trainers to Ukraine next month has been interpreted by some commentators as an escalation of Western attempts to deter Russian aggression. In fact, the deployment was agreed during NATO’s summit in Wales last September along with a range of other support measures. About 800 American troops will also be arriving in western Ukraine in March to train three Ukrainian battalions in battlefield tactics.According to NATO, five other member countries are thinking about sending in trainers, while Canada and Germany have also agreed to help upgrade the Ukrainian army’s antiquated command and communications systems.However, pressure is growing from Congress for lethal aid. On February 10th the Republican chairman of the House Armed Services Committee, Mac Thornberry, and the ranking Democrat, Adam Smith, introduced legislation calling for a $1 billion package of immediate lethal defensive aid to help Ukraine.A range of equipment is being considered to enhance the Ukrainian army’s ability to inflict heavier costs on the aggressor. These include: light anti-armour missiles; counter-battery radars to identify and target the Grad rockets and artillery that are responsible for about 70% of Ukrainian casualties.The war is losing popularity in Russia and Mr Putin might not want to deal with the political consequences of increased numbers of Russian soldiers returning home in body bags.

Economist 2/26/14

1. Mr Jerrim analysed the OECD’s Programme for International Assessment of Adult Competencies and measured the quality of education of migrants from those countries who came to Britain between 1964 to 2011. Focusing on the numeracy scores that are divided into quartiles, Britain lost 684,000 highly skilled people in those years, but this was cancelled out by an equal number of highly skilled immigrants coming in. In addition though, Britain also took in a large number of immigrants with lower numerical skills. The result was that almost four times more immigrants came from the lowest quartile compared with the highest. The countries that benefit most from British emigrants with the highest numerical abilities are those that have the tightest entry requirements. Australia, Canada and the United States took in twice as many who were ranked in the top quartile compared with the lower three quartiles.
2. On February 15th Islamic State (IS) released a typically horrific video of the decapitation of 21 Egyptian Copts. What alarmed Italians was the title, “A Message Signed With Blood to the Nation of the Cross”, and a warning that the jihadists are “south of Rome”. Italians knew their capital, the papal seat, was a target. Commenting on IS’s advance, the foreign minister, Paolo Gentiloni, said that, if a UN peace initiative failed, “the issue needs to be raised with the United Nations to do something more.” Wholly out of character with Italy’s cautious attitude to military involvement, such statements reflect pent-up frustration over the failure of Italy’s allies to address the deteriorating situation in Libya.The threat from IS is linked to a surge in immigration from Libya of asylum seekers and others. More than 6,000 people have fled from north Africa so far this year, twice as many as a year ago.
3. BORIS JOHNSON, the mayor of London, is British-American by birth—and by temperament. Yet Mr Johnson  is so fed up with the Internal Revenue Service (IRS) that he is renouncing his US citizenship. The number of Americans giving up their passports has shot up, from less than 1,000 a year in the late 2000s to a record 3,415 in 2014. A new spur is the Foreign Account Tax Compliance Act (FATCA) of 2010, which makes it a lot harder for Americans overseas to get (or keep) bank accounts, pensions and mortgages, because foreign financial firms don’t want the administrative hassles that FATCA throws up. The law also increases filing requirements for citizens—and thus stokes fears that honest mistakes will be punished.
   
4. Today two billion phones are in use worldwide, and this number is expected to double by the end of the decade.To get an idea how much time people will then spend on their smartphones it helps to look at today’s young people: the chart shows that they report much more use during all times of the day than older generations. In total, according to Ofcom, the British telecoms regulator, those aged between 16 to 24 years use their device nearly four hours a day; those aged between 55 to 64 only half as much.
5. Smartphones have also penetrated every aspect of daily life. The average American is buried in one for over two hours every day. Asked which media they would miss most, British teenagers pick mobile devices over TV sets, PCs and games consoles. Nearly 80% of smartphone-owners check messages, news or other services within 15 minutes of getting up. About 10% admit to having used the gadget during sex.The greater fear is over privacy.Many app vendors, who know a great deal about you, sell data without proper disclosure; mobile-privacy policies routinely rival “Hamlet” for length. And if leaked documents are correct, GCHQ, Britain’s signals-intelligence agency, has managed to hack a big vendor of SIM cards in order to be able to listen in to people’s calls (see article).

Economist 2/25/14

1. BINYAMIN NETANYAHU after an anti-semitic attack killed a Jew in Copenhagen urged his coreligionists to leave “the soil of Europe” and to go to their real home: Israel. Many Jews are irked by being told they must respond to terrorist attacks in Paris and Copenhagen by fleeing to Israel.Yet in some ways such appeals are not new.Ben-Gurion drafted a policy that has guided relations between Israel and the Jewish diaspora since the 1950s, saying that “Israel speaks only on behalf of its own citizens” and not Jews elsewhere. Jewish community organisations abroad felt that a corollary of this was that they should avoid criticism of the Israeli government of the day.Both ends of this bargain are being upset, particularly with the emergence of vocal, if still small, Jewish advocacy groups such as J Street in America, which campaign for Israel to agree to the establishment of a Palestinian state.In 2014 26,500 Jews came to Israel, the highest figure for a decade. Despite a doubling of emigration from France, that is still barely 0.3% of the total diaspora.
2. IN THE only interview he ever gave, to La Stampa, Michele Ferrero did not once remove his sunglasses. This was not just to shield his weak eyes, but to conceal himself. Modesty was a habit.His love of privacy also had a commercial purpose. He needed to keep secret the recipe for his hazelnut-chocolate spread, Nutella, of which 365m kilos are now consumed each year round the world, and which along with more than 20 other confectionery lines made him Italy’s richest man, worth $23.4 billion. He laughed when he heard that the recipe for Coca-Cola was known to only a few directors of the company. Even fewer knew exactly what went into each jar of Nutella. The basic gianduja paste, ground hazelnuts with a little cocoa, had been known in northern Italy since Napoleonic times. His father Pietro, who ran a corner café and pastry-shop in the small town of Alba, had revived this idea in the second world war when cocoa was hard to get. Finding the perfect blend became a passion. Michele, taking over the recipe after his father’s death in 1949, did what no one else had, and added enough drops of vegetable oil to make it beautifully spreadable. The result was revolutionary. By not going public, he could also resist outside pressure. He waited until 1983 to take Nutella to America, sending his tiny white Tic-Tac mints first, because he did not want to compete with the national staple, peanut butter.He insisted in 1974 on introducing Kinder Surprise, little chocolate eggs with plastic toys inside, though everyone around him objected that eggs should only be large and only for Easter.Each product was exhaustively researched in his two labs, one in Alba and one in Monaco where he lived later, and tested out on board member. At the centre of his business strategy were two women. The first was “la Valeria”, his name for the typical housewife, mother, nonna or aunt who had to decide what to buy every day. The second woman was Maria, the Virgin Mary. He could achieve nothing without her. Each morning he prayed to her and placed his business in her hands. Every year he went on pilgrimage to Lourdes, and arranged for his workers to go.
3. NEXT week the Supreme Court will hear arguments in a case that could fatally undermine the Affordable Care Act (ACA), the health-care law also known as Obamacare.Of the thousands of petitions for certiorari they have considered thus far during the present term, which began in October, the justices have agreed to hear only 69. How does the winnowing work?The culling process occurs in 28 closed-door sessions each year. The largest reaping is the so-called Long Conference, a meeting at the end of September during which the nine justices consider dozens of petitions that have piled up over their summer break. The justices’ clerks, crack graduates of elite law schools, will have already read through the petitions and summarised them in writing, recommending whether to grant or deny “cert”. It takes five justices to decide a case, but four are enough to agree to hear one. The justices tend to grant review in cases where two or more of the 13 US courts of appeals have issued contradictory rulings on significant matters of federal law.
4. IT IS not hard to find reasons why disaffection with the European Union might be growing within Europe. GDP in the euro area has declined for the sixth successive quarter and unemployment is running at record levels in many countries.As the table shows, when asked to name the most trustworthy nation, every country voted for Germany except for the Greeks. Instead, they awarded themselves that accolade, while casting Germany as the most arrogant and least compassionate nation. (In the 2012 poll, Greeks considered themselves to be the most hardworking, to general bemusement.)Indeed, Germany’s economic dominance is reflected in its several nominations as the most arrogant and least compassionate country.

Economist 2/24/15

1. SMOKING cannabis becomes legal today in Alaska, the latest state to lift its prohibition of the drug after Colorado and Washington, which took the plunge last year. Alaskans over 21 can now grow up to six of their own plants, share up to an ounce (28g) of harvested pot, and smoke as much as they like in private without breaking the law. Selling the stuff commercially will become legal next year, once the state authorities have hammered out a set of rules to regulate the business.The high price of illegal pot in Alaska means that the legal market ought to be able to undercut the street dealers pretty easily. In Colorado, where illegal cannabis is much cheaper than in Alaska, licensed dispensaries sell a product that cannot quite beat the illegal sort in terms of price (though it eclipses it in terms of quality).There doesn’t seem to be much of a correlation between price and consumption at the moment: in spite of its high prices, Alaska currently has some of the highest rates of marijuana usage in the country.he second reason Alaska is interesting is that it is the first Republican state to legalise.
2. Of the 1 billion vehicles on the world’s roads fewer than 1m are powered by electricity alone. Battery power can cut the bills considerably. An electric car with a range of 90 miles, typical for most new models, can cost as little as $2 to recharge. But buyers are not looking for cheap motoring. Electric cars are pricey. Compared to diesel and petrol models with super-frugal new internal combustion engines, even after the generous subsidies that many governments provide, the upfront costs are prohibitive. Electric cars attract some buyers not because they are cheap but because they are expensive. They serve as a badge for committed greens to demonstrate to the world that they care about the environment no matter what the cost.Over time the cost of the vehicles will be far more influential than the oil price.
3. AFTER several years of glittering profits, the prospects for Prada, an Italian maker of luxury goods, are starting to look less fetching.But some analysts are worrying that the firm has been taking its eyes off profitability in favour of revenue growth. Over the past few years, Prada has been investing heavily in new bricks and mortar stores—with more than 50 opening in the past 12 months alone.Store-building plans have been scaled back: only around half the 65 outlets the group had in the pipeline for 2015 will now open this year.Prada has taken advantage of the rise in prices—as much as 60% in a decade—for shoes, perfume and handbags, the areas of luxury that are most profitable.Analysts have started to worry that luxury firms, with their focus on high-end products and cheaper diffusion brands, are ignoring the middle of the market in favour of the top and the bottom.
4. MEASLES is the greatest vaccine-preventable killer of children in the world today. Nine out of ten people who are not immunised will contract the virus if they share the same living space with an infected person. In 1980 the disease was responsible for 2.6m deaths globally. By 2013, when 84% of children aged 12 months or less received a dose of the vaccine, the death toll had fallen to 145,700.But worries about a supposed link between the measles-mumps-rubella (or MMR) vaccine and autism, though scientifically discredited, have led to a drop in immunisation rates in the rich world over the last ten years.There were over 600 cases in America last year—more than in the prior five years combined—and another 154 in first 51 days of 2015.The average vaccination rate in America is a troubling 91%, but among some communities it has fallen distressingly low.
5. FOR central banks in the rich world, two is a magic number. If prices rise at 2% a year, most shoppers can more or less ignore their slow ascent. And a touch of inflation is hugely helpful: it gives bosses a way to nudge unproductive workers—a pay freeze actually means a 2% cut—and an incentive to invest their earnings.Today 15 of the area’s 19 members are in deflation; the highest inflation rate, in Austria, is just 1%.Oil explains a lot. A year ago a barrel of Brent crude cost $110; today it is $60 (see article). This 45% price cut is trickling through economies.But even if it is short-lived, this sort of deflation can dull an economy. With inflation at 2% a boss sitting on a cash pile has a clear choice: invest it in something that returns more or give it back to the shareholders as dividends. Either step—boosting investment or investors’ incomes—is a good one. But when prices flatline, risk-averse bosses can justifiably sit on funds.Central banks are at last leaping into action. The European Central Bank (ECB) has been late to the game on quantitative easing (QE) but will begin creating money to buy government debt in March. The Bank of Japan is committed to as much QE as it takes to get inflation back to 2%.

Economist 2/23/15

1. A firm now called Gogo, purchased a thin sliver of air-to-ground spectrum in the United States, and began service in 2008, deploying dozens of ground stations that point upwards at aircraft, rather than downwards at people on the ground, and use a variant of 3G mobile-data technology called EV-DO. Service was extended to Canada in 2014. This provides enough bandwidth for e-mail and basic web browsing.After Boeing’s early, failed attempt, satellite equipment became lighter, cheaper and more capable, and newer planes are designed to accommodate Wi-Fi gear. Several firms now operate in-flight internet service via satellite; some own the satellites, like Panasonic Avionics (United’s contractor for its newer internet service), while others, such as Row 44 and OnAir, license the necessary capacity. Gogo has added satellite-based internet to its options.
2. IT IS often described as the world’s biggest recurring movement of people: a 40-day period spanning the lunar new year (which fell on February 19th this year), during which astonishing numbers of people travel to join distant family members to celebrate the “spring festival” in China. Officials call this period chunyun, or spring transportation.This year the projected number of journeys on public transport during chunyun, which will end on March 15th, is nearly 2.9 billion, a 10% increase over the comparable period a year ago.Many of the journeys involve mingong, or peasant workers, as the nearly 300m migrants from the countryside who work in urban areas are often snootily called.Children and parents stay in the villages, because a fragmented social-security system makes it difficult for migrants to enjoy subsidised education and health care in the cities.Alibaba says there has been a “tremendous increase” in the number of elderly parents travelling from their rural homes to industrial centres such as the southern city of Guangzhou to spend the festival with their children.
3. THE Kurds, at least 25m-strong, are one of the world’s most numerous peoples without a state. Today the Kurdish Region of Iraq, home to at least 6m people, is independent in all but name (see article). It is that benighted country’s only fully functioning part.A sustainable economy is within the Kurds’ grasp. They are exporting increasing amounts of oil, and Iraq’s central government in Baghdad has at last agreed a formula that will let them keep the lion’s share of the profits. Soon they hope to produce 800,000 barrels a day, worth $17 billion a year at today’s prices.Democracy is established, though still rough-edged. Iraqi Kurdistan has regular elections, a boisterous parliament, an array of political parties and a raucous media.Turkey and Iran have long been opposed to an independent Kurdistan carved out of Iraq, lest their own Kurds try to follow suit, if Iraqi Kurdistan becomes a magnet for neighbouring Kurdish rebel movements.Western countries should make plain that an independent Kurdistan will get no help if it stirs up secessionist Kurds across its border.
4. Under American law, mutual funds that advertise past performance are required to use set time periods of one, five and ten years. Unsurprisingly, funds tend to advertise more heavily when their performance has been good. The industry spent $28.5m on advertisements about their returns in 2005 but only $1.6m in 2009, after the financial crisis had laid waste to stockmarkets.So a fund that has a great-looking ten-year record might have had a stellar 2014 or a dismal 2004 that no longer shows up in the numbers. The latter is dubbed a “horizon effect”.Some academics are not convinced that investors should pay any attention to past performance, since almost no fund managers consistently beat the market.
5. Parents pay fees of as much as 180,000 yuan to 300,000 yuan ($29,000 to $48,000) to American and Chinese companies to help polish their children’s applications for Ivy League universities.They even assume students’ identities in e-mail correspondence with universities. Some agents charge fees (of up to 100,000 yuan, or $16,000) only if a client’s application for a “top 50” American university is successful.The cheating goes well beyond embellishing credentials. Some students pay for advance copies of the Scholastic Aptitude Test (SAT).Two companies in Beijing started by Americans, InitialView and Vericant, as well as the Council on International Educational Exchange, an American NGO, offer to conduct video interviews with candidates in China to help American universities get a better understanding of the students.

Economist 2/20/15

1. In Philadelphia and San Francisco, presumed gentrifiers have been the target of protests and attacks. Elsewhere, the term is used as an insult.Yet the evidence suggests that gentrification is both rare and, on balance, a good thing.Newcomers with more money supposedly crowd out older residents. In Washington DC, according to a study by Governing magazine, 52% of census tracts that were poor in 2000 have since gentrified—more than in any other city bar Portland, Oregon.Between 1990 and 2010, the number of African-Americans in the District declined by almost 100,000, falling from 66% of the population to 51%.In New York and San Francisco, which both have rent-control rules, soaring property prices create an incentive for property owners to get rid of their tenants. Stories abound of unscrupulous developers buying up rent-controlled properties and then using legal loopholes or trickery to force residents to leave.Yet there is little evidence that gentrification is responsible for displacing the poor or minorities.The bigger problem for most American cities, says Mr Butler, is not gentrification but the opposite: the concentration of poverty. Of neighbourhoods that were more than 30% poor in 1970, just 9% are now less poor than the national average.
2. Next month the European Union is due to abolish its national quotas on milk production, allowing those big dairy producers being held back by their limits—including Germany, the Netherlands, Poland, Denmark and Ireland—to expand output and seek new export markets.The quotas were a bad idea introduced in 1984 to try to fix the ill-effects of another curdled policy. The EU’s price-intervention scheme, by which it bought farmers’ output whenever milk prices fell below a certain level, was leading to overproduction, and politically embarrassing “milk lakes” and “butter mountains”.Both New Zealand and America, the world’s third-biggest exporter, have expansion plans of their own, of course.Russia’s ban on dairy imports last year, in retaliation for Western sanctions over the Ukraine conflict, hit its European suppliers hard.
3. THE contrast between the compound of Saudi Aramco, Saudi Arabia’s national oil company, and the kingdom beyond its walls is stark. The box-style houses with neatly manicured lawns make it look more like American suburbia than the surrounding city of Dammam, with its apartment blocks.Aramco is a rare example of competence in the country’s often mediocre and royal-infused bureaucracy.Aramco was believed to be making profits of more than $180 billion a year, far outstripping the $33 billion of Exxon Mobil, the largest listed oil firm.It is developing a new industrial city in Jizan in the country’s south-west, to boost non-oil exports. It runs KAUST, the kingdom’s first mixed-gender university. It was called on to take over from Jeddah’s local council in protecting the Red Sea city from floods. It is charged with building a cultural centre in Dammam, along with 11 sports stadiums. It runs an energy think-tank in Riyadh and a technology cluster in Dhahran.Aramco is not the only national oil company to get dragged into doing the state’s economic-development work, but no other has quite such a smorgasbord of tasks.
4. Kaspersky Lab has repeatedly impressed sceptics by exposing genuine and serious cyber-security problems. In 2010, for instance, it helped uncover Stuxnet, a computer worm designed to sabotage the Iranian nuclear programme. On February 16th Kaspersky appeared to repeat this feat, not once, but twice. First it released a report detailing how a gang it calls Carbanak had hacked the computer systems of banks around the world. It said the gang had stolen several hundred million dollars by moving money to fake accounts and making cash machines dispense their contents. The same day the firm said it had discovered the “Equation Group”, apparently part of the NSA, which it said was able to embed spyware in computers that gives it total control over them, even after the hard disk has been erased and the operating system reinstalled.Kaspersky Lab, founded in 1997 in Moscow, the company now has offices in 30 countries, 3,000 employees and 400m users, and had $667m in sales in 2013. Consumers generate about 60% of revenues, the rest comes from corporate customers.
5. Reports emerged this week that Apple is planning to make an electric car. Apple’s plans are unclear and unconfirmed.Despite a reputation, once richly deserved, for sloth in adopting new technologies, most big carmakers are pouring resources both into battery power and other alternative forms of propulsion, and into automated driving. Ford and Nissan have both opened research labs in Silicon Valley.The likes of Apple may not know much about pistons and gearboxes, but the big challenge for electric cars is batteries. Nissan’s Leaf, the world’s best-selling electric car, attracted only 40,000 buyers last year compared with the 250,000 the company once hoped to shift. Tesla aspires to enter the mass market but so far it has dealt with the battery problem by putting lots of them in a big, expensive car, thereby limiting it to a luxury niche.he hope of would-be entrants to the industry may well be that the big carmakers have invested so heavily in internal-combustion engines that they will be loth to switch to electric power. That is overoptimistic. Even if a breakthrough in battery chemistry makes electricity competitive with petrol, big carmakers may yet be able to change course fast.The Chevrolet Bolt, for example, unveiled as a concept car in January, is expected to arrive in 2017 with a price tag of $30,000 and a range of 200 miles.

Economist 2/19/15

1. The study, by Stephen Cecchetti and Enisse Kharroubi, is a follow-up to a 2012 paperwhich outlined the negative link between the finance sector and growth, after a certain point.The 2012 paper suggests that when private sector debt passes 100% of GDP, that point is reached. Another way of looking at the same topic is the proportion of workers employed by the finance sector. Once that proportion passes 3.9%, the effect on productivity growth turns negative. Ireland and Spain are cases in point. During the five years beginning 2005, Irish and Spanish financial sector employment grew at an average annual rate of 4.1% and 1.4% respectively; output per worker fell by 2.7% and 1.4% a year over the same period.In short, the finance sector lures away high-skilled workers from other industries. The finance sector then lends the money to businesses, but tends to favour those firms that have collateral they can pledge against the loan. This usually means builders and property developers. Businessmen are lured into this sector rather than into riskier projects that require high R&D spending and have less collateral to pledge.
2. HOLLYWOOD’s biggest box-office successes are usually splashy, expensive films packed with slick special effects that appeal to audiences the world over. But these popular spectacles are unlikely to carry off with an Oscar for the best picture.The eight nominees for this year’s prize were cheap by Hollywood’s standards: their average production budget was $21m, against $153m for the eight highest-grossing films of 2014, according to our calculations.
3. Last year E.L. James’s delighted publishers, Vintage, announced that 100m copies of“Fifty Shades of Grey” had been sold worldwide—45m in America alone—and that the erotic tale of a billionaire’s S&M seduction of a college virgin could be bought in over 50 languages.Over its opening weekend, worldwide, the film took $248m—in Britain it took more money than any previous 18-certificate picture.Firstly, although it is likely that heterosexual women will make up the vast majority of the film’s viewers, far more is seen of the body of Anastasia Steele (played by Dakota Johnson) than that of Mr Grey (Jamie Dornan).This brings us to the second problem with the franchise’s sexy selling point: what viewers are being shown is not sex but violent abuse.Perhaps, in the end, the moral of “Fifty Shades” is that it isn’t sex but fantasies that sell.
4. Greece’s parliament is due to vote today on a series of social reforms, some of which may not be liked by its EU partners.The crisis has raised a wide range of issues, from the rights of creditors and debtors, the (in)effectiveness of eurozone austerity, the political impact of the suffering of the Greek population (and its implications for other EU nations), the need to reform Europe’s ageing economy (7% of the world’s population, 25% of its GDP and 50% of its social costs, as Angela Merkel has remarked), and so on.Since 1945, a country that is struggling to refinance its debts can ask for money from the IMF, but this comes with conditions attached. Such conditions override the wishes of voters.Countries can simply default on their debts; this may cut them off from international finance for a while but eventually lenders forgive.The Greeks neither want to default, nor to borrow money from the EU on the terms currently on offer (initially they seemed to reject the idea of monitoring their adherence to any changed conditions as well).If the EU were a true nation like the US then these issues could be debated in a national parliament and aid could be sent to Greece rather as fiscal spending is diverted to Louisiana or Mississippi. But that would mean a very real loss of local control for Greek voters, who would have a very small weight in an EU electorate; it would probably mean an EU-wide retirement age, benefits system, tax collection agency and the rest.
5. The four biggest British supermarket chains all offer some form of price-match guarantee, promising that their customers could not save any money by shopping elsewhere. On the face of it, they seem like a good thing: a sign that fierce competition is lowering prices. But economists have long been suspicious of such promises, which can leave consumers worse off.Suppose a car dealership worries about a rival undercutting its prices and stealing customers. Even if the dealership can respond by cutting its prices too, it might lose sales in the interim. A price-match guarantee offers a pre-emptive defence. By promising to match any discounts, the dealership can persuade its customers that they need not shop around: they will always pay the lowest price available.As a result, cutting prices no longer wins the competitor new business; buyers stay loyal and invoke the guarantee instead of switching. All that price cuts achieve for the competitor is the erosion of profits on existing sales. It will probably conclude that prices—and margins—are better left high. The result is “tacit collusion”: the maintenance of high prices, without any explicit communication between firms. Consumers end up suffering due to a guarantee that at first glance seems good for them.

Economist 2/18/15

1. American farm subsidies are egregiously expensive, harvesting $20 billion a year from taxpayers’ pockets. Most of the money goes to big, rich farmers producing staple commodities such as corn and soyabeans in states such as Iowa.To this day, to be treated as a farmer in America doesn’t necessarily require you to grow any crops.Between 2008 and 2012, $10.6m was paid to farmers who had been dead for over a year.Few politicians are inclined to vote against farm subsidies: though farmers make up only a small number of voters, even in agricultural states, they are loud and organised enough to punish lawmakers who vote against a farm bill.The 2014 bill, which passed with 68 votes in the Senate and comfortably in the House, at least nodded to reform. Most importantly Congress abolished direct payments based on land ownership. Instead, farmers now get more subsidised insurance, and new payments which are linked to past crop prices and productivity. Those not “actively engaged” in farming are in theory banned from collecting subsidies—though Congress delegated the task of defining who is really a farmer to Mr Vilsack’s department.
2. About 1,140 children were in detention on the mainland, Nauru and Christmas Island, an Australian territory in the Indian Ocean. Most were from Iran, Sri Lanka, Vietnam, Iraq, Afghanistan and Somalia; many were stateless.Over the 15 months to March 2014, they document 233 assaults and 33 reported sexual assaults against children in these camps. Authorities have since released most of these into Australia (including more than 100 over the past two weeks) while their asylum claims are heard. That still leaves more than 300 children in detention, including 119 in Nauru, where the Australian camps are a mainstay of the economy.Facing a thorny election in 2001, John Howard, Mr Abbott’s predecessor as Liberal prime minister, opened the offshore detention camps in Nauru and on Manus Island in Papua New Guinea. Four years later, Mr Howard released all child detainees and their families into Australia—only after members of his own party, who had demanded a more humanitarian policy.Kevin Rudd, when Labor prime minister, banished all boat people to the offshore camps while contesting the last election, in 2013.
3. According to Real Capital Analytics, an information provider, Europe saw €213 billion ($241 billion) of commercial-property transactions last year, up by 13% from 2013 and the highest annual total since 2007. The number of transactions more than doubled in Spain last year and there were big gains in Switzerland and the Netherlands, too.Europe’s rebound outpaced the 9% rise in global property transactions, although not a 15% rise in American deals.Office buildings and hotels were the most active sectors worldwide.Yields of 5% on American property or even 4% on office blocks in central London look attractive.The long-term returns from property look very respectable. In the ten years to end-September, American commercial property delivered a total annualised return of 7.9%. That compares with the 8.1% annual return (including dividends) achieved by American equities over the same period.Property is vulnerable to three things: a rise in interest rates, a downturn in the economy that hits demand, and a burst of speculative building that leads to oversupply. On the first point, central banks are still cutting rates in much of the world.
4. A recent survey by Mexicanos Primero, an education NGO, found that four-fifths of secondary-school graduates in Mexico  had “absolutely no knowledge” of English, despite having spent at least 360 hours learning it in secondary school. English teachers were not much better: one in seven had no English whatsoever.Common problems include bad teachers hired via written tests rather than oral ones, and an outmoded approach that sees English as a foreign language to be taught about, rather than a lingua franca to be taught in. Just over 1m English-language staff teach over 200m Chinese pupils, a heroic, if mind-boggling, teacher-pupil ratio.Uruguay takes a different, and more novel, approach. It makes up for its dearth of English-speaking teachers by contracting Filipinos who teach via videoconferencing from Manila to pupils’ laptops or tablets in Montevideo.
5. ON FEBRUARY 5th, the day the beleaguered chain of Radio Shack electronics stores filed for Chapter 11 bankruptcy.At the peak of its popularity in the 1970s, Radio Shack (owned since 1963 by Tandy Corporation of Fort Worth, Texas) had over 7,000 neighbourhood stores spread across three continents.Things started going pear-shaped for suppliers of electronics kits in the 1980s. The seeds had been sown a decade earlier when Radio Shack—spurred on by its success with products for citizens-band radio—introduced the TRS-80 personal computer.The “trash-eighty” hit the market around the same time as the first Commodore and Apple computers and, for a while, handily outsold both of them.From then on, Radio Shack became hooked on pricier, pre-assembled products. When kits and components dominated its business, the average sale in Radio Shack’s busy little stores was said to be $30. By contrast, the first TRS-80 sold for $600. This was  well beyond the reach of Radio Shack’s hobbyist following. Radio Shack’s migration from components to commodity products gathered pace after AT&T, America’s telephone monopoly, was dismantled in 1982. Subscribers then became free to buy their own telephone equipment, instead of having to rent it expensively from Ma Bell.Since its founding in 1985, Fry’s has managed to do all that Radio Shack ever dreamed about: sell consumer electronics, household appliances, mobile phones, computer hardware and software—as well as electronic components and circuit boards, while also offering in-store hobbyist advice and repair work.

Economist 2/17/15

1. FOR fashion buyers and editors, New York Fashion Week, which opens on February 12th, marks the beginning of their twice-yearly, month-long tour of the world’s main shows. London, Milan and Paris come next; and in the autumn they repeat the circuit.Fashion houses take part in them for two reasons. First, because buyers from department stores and other retailers are in the audience, ready to sign contracts if they like what they see. Second, as a broader brand-building exercise, to convince consumers that a label is still at the cutting edge. Luxury brands have been cutting out the middlemen in their distribution chains. More than 80% of the shoes, bags and other products bearing the Prada label are now sold in its own shops, compared with about 50% a decade ago.Fashions change faster than they used to: brands can no longer get by with just two collections a year.Burberry has led the way: it was one of the first to live-stream its displays, and last September it became the first to use Twitter’s “buy” function, allowing consumers to purchase items straight off the catwalk.
2. Standing out as a book writer today requires more than a bright idea and limpid prose. Authors need to become businesspeople as well, thinking strategically about their brand, and marketing themselves and their products.Authors mostly used to rely on public-relations staff provided by the publishing house. Now, wise writers hire their own publicists,Authors must court an expanding variety of “influencers”—people whose opinions can determine a book’s success.Entrepreneurial authors find it more effective to devote themselves to a more achievable aim: getting onto the bestseller lists. The secret of such lists, the most prominent of which are those in the New York Times, is that they do not measure total sales, but their velocity. Books that fly off the shelves in their first week make the lists, and that in turn boosts their subsequent sales. Pre-orders of books all count toward the first week’s sales figures, so canny authors try to get people to buy copies in advance of publication.Eric Ries, a lecturer on entrepreneurship and innovation, went on a “pre-book” book tour to drum up interest before his work, “The Lean Startup”, even had a firm name, and started selling it online more than a year in advance of its publication.Even some of the most successful ones make most of their money from public speaking, consulting or teaching, and use the publicity gained by their books to justify higher fees.
3. Russia is one of the three biggest military powers in the world. It has almost 3,000 tanks, many of which have been deployed near the Ukrainian border. By contrast, the entire tank force in European countries now numbers 8,000. Its armed forces number 770,000 active personnel but reservists and paramilitaries add a further 2.5m to that total. Defence spending rose by 10% in real terms annually for the three years to 2014, when it reached $70 billion, or 3.4% of its GDP. Only the United States, China and Saudi Arabia spent more.China’s submarine fleet is the biggest in the world, although only a few are nuclear-powered.
4. GERMANY’S training for young people is medieval—in the best sense. As in the old guild system, young people wanting to join a trade, from welding to hairdressing, go through apprenticeships while completing school, earning formal qualifications.  Many attribute the country’s apprenticeship system for the country’s low youth unemployment, of just 7.4% compared with a European Union average of 21.9%. A quarter of young Germans have foreign roots, but just 15% of the companies currently running apprenticeship schemes have at least one apprentice with what German bureaucrats call a “migration background”. The biggest such group is ethnically Turkish, but the numbers also include ethnic Germans from formerly communist Europe. But when 70% of Mittelstand companies complain of a lack of skilled labour, there is all the more reason to cast a wide net.
5. WHEN disputes arise on Wikipedia, contributors are encouraged to go to a “talk page.” But often an “edit war” ensues: a change is repeatedly done by one person and undone by another—known as a “revert.” These reverts represent the most controversial articles. Taha Yasseri of the Oxford Internet Institute and colleagues looked at Wikipedia’s different language editions from their inception (January 2001 for English) to March 2010.Americans bicker over politics and professional wrestling; among the top French squabbles is Freud. 

Economist 2/16/15

1. THE eleventh Cricket World Cup, which began in Australia and New Zealand on February 14th, consists of 42 largely meaningless games, followed by 7 important ones. To understand why this is, consider what happened in the 2007 rendition of cricket’s biggest tournament, which was held in the West Indies. It was a financial disaster because the Indian team, traditionally a poor traveller, was knocked out in the early stages. As a result, most of the world’s cricket fans switched off their television sets. This (perfectly sporting) calamity cost Indian broadcasters millions of dollars in lost advertising revenues.If India has the commercial heft to shape international cricket, why are its cricketers not better? Cricket, after all, has an almost monopolistic hold on the sporting affections of India’s 1.2 billion people. According to a survey by an Indian think-tank, 80% of Indians under the age of 25 followed cricket “to a great extent” or “somewhat”. By contrast, New Zealand has a bit over 4m people, who mostly prefer rugby to cricket, yet their cricketers have a good chance of winning the World Cup. The explanation for India’s underperformance is complicated; it has to do with malnutrition and poverty, as well asbad sports administration, and an elitist cricketing culture that favours batsmen over the hardworking attacking bowlers required to succeed abroad.
2. Revenues at Rolls-Royce fell for the first time in a decade and annual pre-tax profits sagged by 8% to £1.6 billion ($2.5 billion).The poor results should come as no surprise. In 2014 Rolls-Royce issued two profit warnings, laid off 2,600 workers, lost its chief financial officer and saw its share price sink by a third.Aggrieved investors should have anticipated the slowdown in defence spending that has hit its military-aerospace business over the last year.Bulging order books for wide-bodied passenger planes mean that the company will have to double production, from its current level of 300 engines a year. It has expanded globally, opening new plants in America and, more recently, Singapore.Despite the huge orders, Rolls-Royce blames delays to Boeing’s 787 Dreamliner for part of its problems.It may provide half the engines for all wide-bodied planes but it left the much larger narrow-body market when it abandoned a joint venture with Pratt & Whitney, an American aerospace manufacturer, in 2013.
3. In 2013 more businesses were created in Britain than in any year for at least a decade. Many of them are laid-off builders and architects setting up on their own. But among these “necessity entrepreneurs” are a valuable clump of more ambitious folk, who are taking on established businesses with more innovative technology and better customer service.But the government has also made it easier to run a business from home by changing the tax code: in most circumstances home businesses will no longer attract business rates. The government has just doled out its 25,000th start-up loan. In January 2014 it introduced “growth vouchers” to help businesses pay for advice from experts.After prodding, immigration rules have been relaxed to allow more software engineers to work in Britain under the “exceptional talent” visa scheme.A current-account switching service introduced in 2013 in theory allows customers to move accounts in no more than seven days.These changes have contributed to what the regulator calls an “unprecedented” demand by entrepreneurs to start new banks.
4. The new prime minister of Greece, Alexis Tsipras has sound ideas on attacking corruption, fighting tax evasion and shaking up Greece’s cosy business elite. His ministers now talk of keeping 70% of the old government’s reforms (see article). But his first moves in office included promises to raise the minimum wage to pre-crisis levels, reverse labour-market reforms, restore pension increases, rehire thousands of public servants and scrap privatisation projects. These would not just breach Greece’s bail-out terms, but also wreck the country’s economic prospects. Mr Tsipras foolishly refuses to prolong Greece’s bail-out programme when it expires at the end of the month, talking instead of a bridging loan that would create time for negotiations to take place without monitoring by the hated “troika” of the European Commission, the European Central Bank and the IMF. Greece’s total debt stock stands at an unpayable 175% of GDP (up from 109% before the euro crisis). Here, then, is a simple message for European leaders to give Mr Tsipras. They will negotiate, but only once the bail-out is extended. They will help him on debt and the budget, but only if he is prepared to make his economy more competitive.
5. Crowdfunding—in which artists, authors and designers raise money directly from their fans—has been good to the makers of video games.”Star Citizen”, a video game being developed by Cloud Imperium Games (CIG) crowdfunding campaign run simultaneously in 2012 on Kickstarter and CIG’s website, raised about $6m. But the donations kept coming. So far the game has accumulated $72m; another few million dollars rains down every month. That makes it the biggest crowdfunded project, of any sort, yet seen. Its nearest competition is Ethereum, a Bitcoin-inspired publishing platform, which raised $18m. Every cent has come from roughly 750,000 ordinary fans. In return for pledges—ranging from $36 to $18,000—they get virtual spacecraft to use in the game, early access to unfinished versions, T-shirts and so on. What they do not get is equity in the business or a cut of any profits.CIG’s owner, Chris Roberts’s reputation has made it easier to get them to part with their cash: he made his name in the 1990s with a popular game called “Wing Commander”.