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.

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