Economist 6/16/15

  1. France is arguably the world’s most self-consciously intellectual country. Public thinkers are cherished like national treasures, given airtime on television and column inches in Le Monde. Their counsel is even heeded. Bernard-Henri Lévy, a contemporary philosopher with an outsized reputation, is credited with a role in persuading Nicolas Sarkozy, a former French president, to intervene in Libya in 2011. As a younger French generation discovered to their defiant delight at a mass march in Paris after the terrorist attacks on Charlie Hebdo in January, French thought is not only about dry stuff to be found in philosophy textbooks; it is a central part of their national identity.
  2. In Crimea, too, people are beginning to feel that they have slipped to the bottom of everyone’s agenda. The jubilation of pro-Russian residents during the referendum campaign for annexation in March 2014 is hard to recall. Western sanctions, obstructed trade with Ukraine, disappointing financial support from Moscow, and the indignities of a botched integration process (such as the Russian passports residents have received, which European governments refuse to honour because they are stamped “Crimea”) have all taken a toll.The Russian government initially made good on promises to hike doctors’ and teachers’ salaries after the annexation, but those raises were cut back in April. Since January prices for food have risen over 19%, almost twice as steeply as in Russia. Sanctions have sharply curtailed business investment, and Kiev periodically threatens to cut off the peninsula’s electricity.The peninsula’s main industry, tourism, is looking at its second meagre summer in a row. The ferry service from Russia’s mainland brings nothing like enough tourists to make up for the absent Ukrainians and the Europeans whose cruise ships once docked in Yalta.
  3. To shore up its military dominance, the Pentagon late last year began the quest for a new range of breakthrough technologies—what it calls a “third offset strategy” (see article). These are likely to include stealthy unmanned planes and underwater vehicles that can operate autonomously.The technical obstacles are formidable—but so are the political and bureaucratic ones. Congress and the White House used to co-operate over military budgets and plan for the long term. The Budget Control Act of 2011 not only cut military spending, but through the mechanism of the sequester also distorted it by locking in spending on old programmes and blocking new ones that the Pentagon actually wants.Lavish pay and benefits (including horribly inefficient health programmes) need curbing, too. The real cost of each active-duty service member has jumped by 76% in the past 16 years. If they were to continue to rise unchecked, personnel costs would swallow the entire defence budget by 2039.And procurement must be more efficient. Thanks to red tape, the Pentagon spent $74 billion more than it needed to on kit in 2012, the Government Accountability Office estimates.
  4. At the peak of Zimbabwe’s hyperinflation in 2008, central-bank officials could barely print new notes quickly enough to keep pace with prices, which were rising at an annualised rate of 231,000,000%. The game was up for the Zimbabwe dollar when the bank issued a new Z$100 trillion note and traders rejected it. Most preferred American dollars to the local kind, which had fallen so far that a loaf of bread cost the same as 12 cars a decade earlier. Since then commerce has been settled in a variety of currencies: mainly greenbacks but also South African rand and even euros or sterling. Today marks an admission of defeat for independent monetary policy in Zimbabwe, as the bank starts “demonetising” Zimbabwe dollars in exchange for American ones, at a rate of $1 per Z$35 quadrillion.
  5. On June 8th the Iceland government announced the lifting of the controls the country imposed in 2008—with one big caveat.Investors with money tied up in Icelandic assets will soon be able to move it out of the country, and Icelanders will be free to buy foreign currencies. The hitch is that those who are owed money by the estates of Iceland’s failed banks, worth about 500 billion kronur ($3.8 billion), or 30% of GDP, must agree to haircuts and maturity extensions on the debts involved before they can sell them and transfer the proceeds out of the country. Alternatively, they must pay a tax of 39% before doing so.Though Iceland’s GDP fell by 10% from 2009 to 2010, the capital controls prevented a complete meltdown, and the economy has recovered faster than many expected.

Economist 6/8/15

  1. AMID mounting protests by rebellious teachers the Mexican government has taken a risky gamble. On May 29th, just days before mid-term elections scheduled for June 7th, it “indefinitely suspended” the most important part of its landmark education reform. The education ministry issued a curt, 33-word statement saying it was suspending examinations of teachers. The exams were due to take place for the first time in July as part of the education reform approved by Congress in 2013. Officials later elaborated that the announcement was an attempt to placate teachers from the CNTE, their most radical union who have threatened to boycott the elections—to choose 500 congressmen, nine governors and hundreds of mayors.But the CNTE saw straight through the ploy. Instead of quieting down, it has stepped up its protests.
  2. On June 19th Title IV of the JOBS (Jumpstart Our Business Startups) Act of 2012 goes into effect. It will change how small companies raise money. Those seeking $20m-50m will be able to offer their shares to the public while skipping some of the most costly regulatory requirements that normally involves.In the past, firms that did not meet those requirements could only raise money from investors with a net worth in excess of $1m or $200,000 in annual income. Ten thousand people who did pass that test have signed on to SeedInvest’s system. With the lifting of the rules on income, any adult American can now invest in small share offerings.SeedInvest is among a handful of new electronic platforms that are designed to facilitate the process. In its brief existence, it has already channelled $25m to 40 firms. Qualifying companies must meet certain standards, such as having a functional prototype of any planned product (not just an idea), customers, and reasonable investment terms. Only 1% of applicants pass the test.
  3. WHEN Affirmed won the Triple Crown of American thoroughbred racing in 1978, the achievement merited little more than a shrug. It was the third time in five years that the same horse had won the Kentucky Derby, Preakness Stakes and Belmont Stakes, and the eleventh in the sport’s history. . It would be 37 long years for racing fans until this June 6th, when American Pharoah— whose owners are clearly better at horse-training than they are at spelling—at last equalled the feat.There are good reasons why the Triple Crown has proven so elusive. Raw speed is of course essential to secure it, but adaptability, endurance and a quick recovery time are almost as important. The three races, all for three-year-olds, occur within a five-week stretch in May and June in three different states.But the Belmont, held in Long Island just east of New York City, favours precisely the opposite type of horse. At a mile and a half, it is the longest track in the United States and a veritable equine marathon.
  4. Iceland was the first country to be hit by the financial crisis—and it was hit hard. Small wonder: it had a massive exposure to the volatile world of global finance. By 2008, the combined assets of its three biggest banks—Glitnir, Kaupthing and Landsbanki—were 14 times larger than Iceland’s entire GDP.These three banks had lent excessively and recklessly. But only about one-fifth of their loans were in Icelandic kronur, since interest rates on these were punitively high. Ordinary citizens instead borrowed from their banks in cheaper currencies such as Swiss francs to buy their homes and cars. That proved to be a big problem when the banks failed: when the kronur slumped, foreign-currency debts became much harder to service.These days, though, Iceland’s economy is looking much stronger. It grew by 2% last year, and should expand even faster this year.
  5. Illinois is one of the most mismanaged and corrupt of America’s states. Illinois is burdened with the country’s lowest credit rating and one of the highest numbers of federal public-corruption convictions. It banned the “revolving door” by which state employees pass on to lobbying firms, tightened restrictions on gifts to state employees and expanded the required disclosure of their economic interests.Illinois remains the country’s third-most-corrupt state after New York and California, and Chicago is still the corruption capital of America, according to a report by Messrs Simpson and Gradel and others that was published on May 28th. With 45 public-corruption convictions in 2013, almost one a week, and 1,642 convictions between 1976 and 2013, the federal judicial district for northern Illinois reported more public-corruption convictions than any of the country’s 92 other judicial districts.He estimates the monetary loss from corruption to be at least $500m a year for Illinois. The opportunity for corruption was far greater in Illinois than in Idaho or Iowa in the late 19th century, as Chicago was a big railway hub and the state was deeply involved in industry. This created a rotten political culture and a sense of entitlement, says Kent Redfield at the University of Illinois in Springfield, and it continues to this day.

Economist 6/5/15

  1. KATSUSHIKA HOKUSAI, a Japanese printmaker who died in 1849 aged nearly 90, is one of those artists whose long, impressive career has come to be known for a single iconic work.“Under the Wave off Kanagawa (The Great Wave”—pictured)” is so famous, and has been reproduced in such a wide variety of contexts and formats.Like media-savvy artists of recent decades, Hokusai appealed to the mass market rather than serving the interests of court or temple.And, like many contemporary artists, he was a master showman, enticing potential customers with bravura performances.When Paul Gauguin and Vincent van Gogh first saw Hokusai’s prints, with their vivid colours and startling, off-kilter points of view, it sparked a revolution in their own art. Above all, Hokusai was a master of line and pattern, inscribing his forms within contours that eddy and spill like the currents of a mountain stream.
  2. The Justice and Development (AK) party of Turkish president Recep Tayyip Erdogan suffered a stinging setback in Sunday’s elections. With 97% of the ballots counted, the party had 41% of the votes, a dramatic drop from its 49% total in 2011 and too few to allow it to govern alone. The pro-Kurdish HDP party’s share was running at 13%, enough to gain it between 70 and 80 seats against the roughly 280 seats won by AK. The HDP’s supporters, especially in the eastern city of Diyarbakir (pictured), were ecstatic. The liberal CHP party was on course to win about 25%, roughly the same as its share in 2011. The result will force AK to form a minority or coalition government, and it has put an end, at least for now, to Mr Erdogan’s ambition to change Turkey’s constitution to grant the presidency executive powers.
  3. FOR more than a century, Canadian governments removed aboriginal children from their homes and put them in residential schools modelled on Victorian poor houses. Some 150,000 passed through 139 of these Dickensian establishments from 1883 to 1998. In the 1940s they housed nearly a third of aboriginal children of school age. Half were physically or sexually abused and around 6,000 died. Today Canada’s 1.4m aboriginal people have lower incomes on average and higher rates of incarceration, suicide and disease than the general population. Those brutal boarding schools are part of the reason.he government has so far paid out C$4.4 billion ($3.5 billion) in compensation. On June 2nd, after seven years of sometimes excruciating testimony, the commission issued 94 recommendations.Non-aboriginal Canadians and the country’s three indigenous groups, the First Nations (who are like native Americans in the United States), the Inuit and the Métis (mixed-race descendants of French settlers). Britain instituted the policy of forced assimilation, which Canada’s government continued after self-rule began in 1867. This tried to eradicate indigenous peoples as distinct legal, cultural and religious groups. Canada eventually abandoned the policy; the constitution enacted in 1982 recognises indigenous rights.
  4. Rohingya was used several times at a summit between 18 Asian countries, as well as Switzerland, America and several UN agencies.Even by delegates from Myanmar (ethnic Burmese tend to call Rohingyas “Bengalis”, as a way of distancing Myanmar from the problem). The UN High Commissioner for Refugees and the International Organisation for Migration (IOM) were promised access to the migrants. America pledged millions to the IOM.One week before the Bangkok meeting, Myanmar’s president signed the Population Control Health Care Bill into law. This measure grants local authorities the power to mandate that mothers in areas deemed to have high rates of population growth have children no fewer than three years apart. Buddhist chauvinists in Myanmar have fomented fears of high birth rates among Muslims; this measure is likely to be used against Rohingyas.
  5. SO NUMEROUS are the controversies surrounding Qatar’s hosting of the World Cup in 2022 that there is a 3,000-word Wikipedia page dedicated to them. In total the emirate hosts 1.5m migrants who toil under a system that has been compared to slavery. In May 2014 Qatar promised reforms to protect labourers. But over a year later, little has changed. At the heart of the abuse is the kafala system, under which local employers sponsor migrant workers, generally from poorer countries such as India, Pakistan and Nepal. They are thus allowed to enter Qatar, but prohibited from changing jobs or leaving the country without their employer’s permission. Many owe money to unscrupulous recruitment agents back home. Desperate for cash and lacking leverage, they are often forced to work long hours in unsafe conditions.Abdullah bin Saleh al-Khulaifi, the minister of labour and social affairs, says he is “90% hopeful” that the kafala system will be replaced by the end of the year. The new system would rely on employment contracts lasting up to five years, after which employees could change jobs. Workers would also be given more freedom to leave and return to the country. But few other proposed reforms have actually been implemented. Housing is one area where the government has made progress. Qatar is building seven new “cities” to house 258,000 migrant workers.

Economist 6/4/15

  1. AFTER a spate of murderous attacks in Durban and Johannesburg on migrant workers from neighbouring countries, South Africa badly needs to improve its image on the continent.One ongoing mission is undiplomatically called Operation Fiela, a word meaning “sweep away dirt” or “clean up” in the Sotho family of languages. It has led to the arrest of at least 1,650 migrants without documents across the country, police say.Meanwhile, the home-affairs department hastily devised a competition to showcase the merits of “outstanding migrants”; and on June 7th Johannesburg will host an AU summit.
  2. ANTHONY DOUGLAS ELONIS may have won his Supreme Court case on June 1st, but no one would mistake him for Pennsylvania’s most charming resident. When Mr Elonis’s wife left him in 2010, he turned to Facebook to lambast her under the nom de plume “Tone Dougie”.These online scribblings, among others, earned him an indictment under a federal law that prohibits “any communication containing any threat…to injure the person of another”.In Elonis v United States, the Supreme Court reversed the appeals court. It was not enough, the justices said, for a jury to decide that reasonable listeners would interpret Mr Elonis’s nasty words as threats.But the court took no position on whether “recklessness”—knowing the words might frighten, and not caring—is enough to convict.
  3. AN UNUSUAL outbreak of Middle East respiratory syndrome, or MERS, has occurred in South Korea, where a few dozen people have tested positive for the disease and two have reportedly died. Hundreds of South Korean schools have shut down as a safety precaution.New human pathogens arise in two ways. They may evolve from old ones, or they may jump to humanity from other species. The second, more common route, is the one taken by both Ebola and MERS. Infections that jump in this way are called zoonotic diseases, or zoonoses. Bats also look like the origin of MERS, a viral illness that appeared in 2012 in the Middle East, and SARS, another virus, which burst upon the world from southern China at the end of 2002. HIV, meanwhile, came from other primates. The pandemic version, HIV1, was once a chimpanzee virus. HIV2, largely restricted to west Africa, came from the sooty mangabey, a monkey.Zoonoses are particularly likely to develop when people and animals live in close proximity to each other. One reason southern China often spawns them (SARS was not unique; a lot of influenza begins there, too) is that the region has a plethora of small farms, in which many species of animal live in close quarters with each other and with human beings.
  4. THE WORLD JUSTICE PROJECT Rule of Law index, a new global report that ranks countries’ adherence to the rule of law, puts Botswana in the top spot for Africa.the diamond-rich southern state has been regarded for decades as among the best-run on the continent. Botswana also placed near the top in the latestIndex of African Governance, published annually by Mo Ibrahim, a Sudanese-British telecoms magnate.Indeed, on a global scale, the World Justice Project (WJP) report puts Botswana 31st out of the 102 countries measured, one spot behind Italy and two ahead of Greece.The worst African performer in the WJP report, issued this month, was little surprise either: Zimbabwe. In the WJP index, Ghana comes a notable second, while in the Ibrahim index it places seventh. That marks it out as west Africa’s most creditable country in both listings. Another strong performer is Senegal, which comes an admirable fourth in the law index and ninth in Mr Ibrahim’s table.
  5. A recent IMF working paper estimated the subsidies to fossil fuels (including the uncompensated costs of air pollution, congestion and global warming) at $5.3 trillion. Perhaps more important, subsidies for renewables are dropping (at least on a per watt basis); America’s tax credit is being cut, and Britain is ending subsidies for onshore wind. Meanwhile renewables’ efficiency is rising fast. Unsurprisingly, renewable use is growing dramatically. According to the International Energy Agency (an energy agency created by the OECD, a club of mostly rich countries) renewables accounted for almost 22% of global electricity generation in 2013, a 5% increase from 2012. China and India are investing heavily in renewables (China, notably, in wind). Wind used to be the cheapest, but solar is now overtaking it in most markets.