The Economist_110511

           Politics this week

              

               

             Greece was thrown into political turmoil, after the prime minister, George Papandreou, looked on the verge of defeat. Having said he wanted a referendum on the latest euro-zone rescue package, he rapidly lost the support of his cabinet and his party. With so much effort put into securing the deal, Mr Papandreou’s announcement stunned European leaders, who threatened to suspend further payments from the bail-out fund and told Greece that it must decide whether or not it wants to remain in the euro zone. See article

             The Paris offices of a satirical French weekly, Charlie Hebdo, were burnt out by a petrol bomb after it printed a cover cartoon of the prophet Muhammad. Politicians denounced the attack. The prime minister, François Fillon, declared that “freedom of expression is an inalienable value.” See article

             The ruling Christian Democrats in Germany looked set to back a national minimum wage, having previously been strongly against it. It is the latest of the party’s beliefs to be junked by Angela Merkel, as she tries to steal opposition ideas before the next election. See article

             Russia and Georgia settled most of their remaining differences over Russian membership of the World Trade Organisation, paving the way for Russia to join shortly. See article

             Julian Assange, the public face of WikiLeaks, lost his appeal in Britain against extradition to Sweden, where he faces allegations of rape and sexual assault. See article

             At last, some initiative

               

             Syria’s foreign minister met a delegation of the 22-country Arab League in Qatar to discuss ways of ending eight months of civil strife. The league said it would seek to arrange for representatives of Syria’s opposition to negotiate soon with government officials at a second meeting.

             The UN General Assembly voted by 107 votes to 14, with 52 abstentions, to admit Palestine as a full member of UNESCO, the UN’s cultural agency. The United States, which provides 22% of its funds, and Israel, which provides 3%, said they would stop their contributions.

             Libya’s transitional council voted for Abdurrahim al-Keib, an academic, to be the country’s prime minister. He will head an interim government that is set to rule at least until elections to a constituent assembly next summer.

             The head of Liberia’s election commission resigned after complaints of malpractice from Winston Tubman, who is bidding to unseat the incumbent, Ellen Johnson Sirleaf, in a run-off for the presidency on November 8th.

             Herman’s monsters

             In a remarkable turn of events in the Republican race for the presidential nomination, Herman Cain, who has vaulted into the lead in some polls, blamed campaign staff working for Rick Perry, the governor of Texas and a rival candidate, of organising a smear campaign to discredit him. Press reports emerged this week that at least three women who worked with Mr Cain had accused him of sexual harassment in the 1990s. See article

             Anti-capitalist activists in Oakland, California, stepped up their protests by causing the shutdown of the city’s port, one of the busiest in America. In London, the dean of St Paul’s Cathedral resigned over the handling of an anti-capitalist camp that has pitched tents close to the steps of the building. See article

             Wishes for a speedy recovery

             Luiz Inácio Lula da Silva, Brazil’s president between 2003 and 2010, was diagnosed with throat cancer. He will undergo chemotherapy and radiotherapy. See article

             Gustavo Petro, an economist and former leftist guerrilla, was elected mayor of Bogotá, Colombia’s capital. He campaigned against corruption and has been outspoken on national issues, such as free trade and reparations for war victims.

             Viktor Bout, an infamous arms dealer, was convicted by a court in New York of selling weapons to FARC rebels in Colombia so that they could attack American support operations. Mr Bout learned his trade in the Soviet army. He has allegedly supplied arms to various conflicts elsewhere, including Sierra Leone, earning him the sobriquet, “Merchant of Death”.

             Providing a hopeful precedent

             Kyrgyzstan’s first presidential election as a parliamentary democracy was won by Almazbek Atambayev, leader of the Social Democratic Party. He will replace Roza Otunbayeva, the country’s interim president, who took office after a coup unseated her predecessor in 2010. True to her word, Ms Otunbayeva did not run for re-election. The new president-elect announced plans to close a large American military base.

             A suicide-bomber attacked a convoy of military vehicles in Kabul, killing 17 people, including 13 troops and civilian employees of the International Security Assistance Force. Three Australians and an Afghan interpreter were killed in a separate attack in Afghanistan’s Uruzgan province.

             Nepal’s political parties settled on a plan to disperse the Maoist army. The status of the former rebels has been one of the main obstacles to securing a lasting peace since the end of the civil war in 2006. A third of the ex-Maoists will now join the national army. See article

             Nine Thai soldiers turned themselves over to police to face charges of murdering 13 Chinese sailors on the Mekong river near the border with Myanmar. The soldiers say they are not guilty and merely found the victims, along with 1m methamphetamine tablets. The incident prompted the four countries through which the upper Mekong flows to agree to police the river jointly.

             Pakistan’s cabinet voted to grant India most-favoured-nation status, a fillip for the peace process that began in February. India had granted the same status to Pakistan in 1996, but the balance of trade has fallen heavily in India’s favour since then.

               

             The UN marked October 31st as the day the world’s population reached seven billion, just a dozen years after it reached six billion. Unlike the previous milestone the UN declined to identify baby seven billion, but that did not stop several candidates from claiming the mantle, including a baby girl in Uttar Pradesh, India’s most populous state.

             Two Chinese spacecraft docked in orbit for the first time, when an unmanned craft was attached to the Tiangong-1 space laboratory.

             Business this week

              

               

             The political commotion in Greece over the latest euro-zone rescue package put an abrupt end to hopes that the deal would resolve the debt crisis. As investors fretted that the entire agreement, including plans to increase the firepower of the euro-zone’s bail-out fund, was under threat the spread of Italian bond yields over those of German Bunds shot up. Banks’ share prices slumped. See article

             Enter the man from Italy

             Mario Draghi took over from Jean-Claude Trichet as president of the European Central Bank, just as the ECB reportedly set about purchasing more Italian bonds.

             The unemployment rate in the euro zone was 10.2% in September, the highest it has been since 1998. Unemployment rose in Germany for the first time since June 2009. Across the zone the youth-unemployment rate stood at 21.2%; it was a staggering 48% in Spain, and 43.5% in Greece.

             At its latest policy meeting the Federal Reserve said it expects America’s economy to continue growing at a “moderate pace” over the coming months. A first estimate put GDP growth in the third quarter at 2.5% at an annualised rate, the quickest pace so far this year. Britain’s economic growth also improved in the quarter, growing by 2.0% at an annualised rate.

             MF Global, a broker, filed for bankruptcy protection. With listed assets of $41 billion it is the biggest failure of a financial company in America since 2008. Jon Corzine, a former chairman of Goldman Sachs and an ex-governor of New Jersey, has led the company since March 2010, building up its trading activities and overseeing the bets in Europe’s sovereign-debt market that eventually sunk it. See article

             No substitute

             Bank of America scrapped its plan to charge customers a monthly fee on debit-card purchases after a customer backlash. Other banks also retreated from imposing similar fees, which they had hoped would make up for revenue they will soon lose from new limits on the amount banks are allowed to charge retailers for debit-card transactions.

             Japan made another effort to rein in the rise of its currency, by selling an estimated {Yen}7 trillion ($89.7 billion). The government’s action to weaken the yen was much larger than a previous intervention in August.

             Both Sony and Panasonic partly blamed the appreciating yen for a reversal of fortunes in their businesses. Both Japanese electronics giants now expect to make a loss for the year, mostly because of restructuring efforts at their television-making factories, which are facing cheaper competition from South Korea and Taiwan. Sony also said the flooding in Thailand, which has upset its camera-production lines, would hurt profits.

             Investors reacted positively to Hewlett-Packard’s decision not to sell its personal-computing division, which accounts for around a third of its revenue. HP’s volte-face came a little over a month after it sacked Léo Apotheker, who had wanted to spin off the PC business in order to focus on computing services, and appointed Meg Whitman as chief executive.

             G4S ditched its £5.2 billion ($8.3 billion) plan to buy ISS and create a behemoth in security and property facilities, after its shareholders balked at the deal.

             Qantas grounded its entire fleet of airliners around the world to counter a series of strikes by employees. It resumed flying after Australia’s federal industrial-relations tribunal interceded and told both sides to reach a settlement. Air France also faced down a walkout, succeeding in flying around 90% of its scheduled departures. See article

             Saab was thrown a lifeline when a long-mooted deal to sell the troubled Swedish carmaker to Chinese buyers was signed. But the contract could still unravel as agreement is required from other parties, including General Motors, Saab’s former owner.

             GlaxoSmithKline, a British drug company, said it had reached a tentative agreement with prosecutors in America that will see it pay $3 billion to settle claims arising from its marketing practices and the methods it used to promote medicines to doctors.

             Every penny counts

             Germany’s finance ministry discovered an embarrassing accounting error at a nationalised “bad bank”, which meant the country’s debt had been overstated by €55.5 billion ($77 billion). The mistake affects Germany’s overall indebtedness, which now drops from 84% to 81% of GDP. Ireland’s finance ministry also uncovered a happy blunder. A €3.6 billion accounting mistake at its housing agency means that Ireland’s debt load is two percentage points lower than had been thought. See article

           KAL's cartoon

              

               

              

             The presidential race one year out

           America’s missing middle

             The coming presidential election badly needs a shot of centrist pragmatism

              

               

             IT IS a year until Americans go to the polls, on November 6th 2012, to decide whether Barack Obama deserves another term. In January the Republicans start voting in their primaries, with the favourite, Mitt Romney, a former governor of Massachusetts, facing fading competition from Herman Cain, a pizza tycoon, and Rick Perry, the governor of Texas. Already American politics has succumbed to election paralysis, with neither party interested in bipartisan solutions.

             This would be a problem at the best of times; and these times are very far from that. Strikingly, by about three to one, Americans feel their country is on the wrong track. America’s sovereign debt has been downgraded. Unemployment remains stubbornly above 9%, with the long-term unemployed making up the largest proportion of the jobless since records began in 1948. As the superpower’s clout seems to ebb towards Asia, the world’s most consistently inventive and optimistic country has lost its mojo.

             Some of this distress was inevitable. Whatever the country’s leaders did in Washington, the credit crunch was always going to cause a lot of suffering. Rising inequality, unfunded pensions and bad schools are not new problems. But politics, far from offering a remedy, is now adding to the national angst. Eight out of ten Americans mistrust their government. There is a sense that their political system, like their economy, has been skewed to favour the few, not the many.

             The European Union may seem the epitome of political dysfunction, but America has been running it close. All this year the deadlock between the Republicans in Congress and Mr Obama has meant that precious little serious legislation has been passed. The president’s jobs bill is stuck; the House of Representatives’ budget plans have been scuppered by the Democrat-controlled Senate. At the end of this year temporary tax cuts and other measures, worth around 2% of GDP, are set to expire—which could push America back into recession.

             Surrender to extremists

             On the face of it, neither side has gained from this stand-off. Only 45% of Americans approve of Mr Obama’s performance. The approval rating for Congress dropped to 9% in one recent poll. A plurality of Americans call themselves independents, and on the most divisive economic argument—how to solve the budget mess—two in three of them back a combination of spending cuts and tax rises. But politics is being driven by extremists who reject any such compromise (see article).

             The right is mostly to blame. Ronald Reagan, a divorcee who did little for the pro-life lobby and raised taxes when he had to, would never be nominated today. Mr Romney, like all the Republican presidential candidates, recently pledged to reject tax rises, even as part of a deal where spending cuts would be ten times bigger. Mr Cain surged briefly to the front of the pack because of a plan that would cut personal taxes to 9% (see Lexington); Mr Perry lost support for wanting to educate the children of illegal immigrants. Meanwhile, in Congress, the few remaining pragmatic Republican centrists, like Senator Richard Lugar, are being hunted down by tea-party activists.

             Mr Obama has tried harder to compromise. But he foolishly failed to embrace a long-term budget solution put forward by the bipartisan Simpson-Bowles commission, which he himself appointed. Ever since the furore over the debt ceiling this summer, he has “pivoted” to the left, dabbling in class war, promising his supporters that the budget can be solved by taxing “millionaires and billionaires”. He is also trying to issue more executive orders, to bypass Congress (see article).

             The divisiveness is hardly new, but it is increasingly structural. As the battle for billions of campaign dollars heats up, neither side dares grant the other any modicum of success, or risk the ire of its donors by appearing to compromise. Gerrymandered districts mean that most congressmen fear their partisans in the primaries more than their opponents in the general election. Ever more divisive media feed the activists’ prejudices. So, at worst, a bitter contest could merely reinforce the gridlock, with a re-elected, more leftish Comrade Obama pitted against a still more intransigent Republican Congress.

             Wishing on a star

             In other countries such a huge gap in the middle would see the creation of a third party to represent the alienated majority. Imagine a presidential candidate next year who spelled out the need for deep future cuts in spending on entitlements and defence, as well as the need to raise some revenue (largely by getting rid of deductions); who explained that the pain would be applied only after the recovery was solidly in place; who avoided class or culture wars; who discussed school reform without fear of the Democrats’ paymasters in the teachers’ unions. Better still, imagine a new centrist block in Congress, which might give that candidate (or for that matter a President Obama or Romney) something to work with in 2013.

             And so the fantasy continues, for that is sadly what it is. Even if the money were forthcoming, there are all sorts of institutional barriers, especially to starting new parties, and the record of even very well-heeled third-party presidential candidates is bleak. Instead, the middle will have to be recreated from what is already there.

             The immediate, rather slim, chance is of a grand bargain on the budget emerging out of a congressional “supercommittee” set up after the debt-ceiling fiasco. If it were to embrace a centrist option, politics over the next year would be considerably more civilised. But it too appears deadlocked, with the Republicans once again ruling out tax increases of any kind.

             So, back to the campaign. It is not entirely without hope. You can win the White House only by winning that disenfranchised middle. For Mr Romney and his party the danger is clear: the Republicans’ intolerant obstructionism could drive independents away. But Mr Obama also has a lot to prove. Why re-elect a man who has failed to unite Americans? Now should surely be the time for the president to seize the centre ground. Otherwise, in a year’s time he may well see his own name added to the rolls of those who have lost their job.

             A euro referendum

             Greece’s woes

             The markets are not the euro’s only threat. Voters may be too

              

               

             EVEN by the euro zone’s undemanding standards, a summit deal that survived less than a week is lamentable. Early on October 27th Angela Merkel, the German chancellor, and Nicolas Sarkozy, the French president, hailed a “comprehensive package” to save the euro. Yet by the time The Economist went to press, their plans were in tatters. Greece’s prime minister, George Papandreou, looked doomed, rejected by some of his ministers, many in his party—and, possibly, most of his country.

             The shallowness of the summit’s achievements has been brutally exposed. Instead of settling into a period of calm, markets were thrown into new turmoil (see article). One way or another, the euro is destined for an unavoidable test of popular support. Unless the euro zone’s leaders shape up, this is an encounter their currency may well lose.

             Heed the messenger

             Mr Papandreou was in part the author of his own misfortune. Seeking the backing of the Greek people in a referendum, he was immediately condemned in the capitals of Europe as a fool or a traitor. Why had he wrecked all their good work? How dare he bring disaster on the rest of the euro zone when it had so generously bailed out his scapegrace of a country? A furious Mr Sarkozy and Mrs Merkel summoned him for a dressing-down on the fringes of the G20 summit in Cannes. Mr Sarkozy’s hopes that this gathering might set the stage for generous emerging-market investment to support the euro were already faint. They now look impossible.

             There is no disputing that Mr Papandreou, in spectacularly chaotic style, has left the euro zone racked by uncertainty. His referendum now seems unlikely to take place. Perhaps Pasok, his party, will enter a government of national unity with New Democracy, the opposition, headed by a technocrat. Perhaps there will be an election. Perhaps even these plans will fall apart, just as the last did (see article). All the while, the clock is ticking: within a month or so, Greece must receive fresh funds from the IMF and its European rescuers—or messily default.

             Mr Papandreou has created an almighty mess, but he is better cast as the messenger than the villain. He was not to blame for the summit’s shortcomings. The spreads between Italian and German government debt had begun to widen well before Mr Papandreou dropped his bombshell. If the euro zone had put a credible firewall around the government bonds of Italy and other troubled euro countries, a Greek default would not now be threatening contagion. Stable sovereign borrowers would have helped to safeguard Europe’s banks, and a decent plan to strengthen the weakest banks would have secured the door. But last week’s summit deal—concocting a jerry-built firewall and asking the banks to boost their capital ratios by June next year—was not up to scratch. No wonder the markets took fright only days later.

             At one level, Mr Papandreou does not deserve blame even for seeking a mandate on the summit’s main achievement (though he must now be ruing his decision). Although the proposal to write down the face value of privately held Greek-government debt by 50% would be substantial and welcome, Greece’s stock of debt would, even on best assumptions, still add up to 120% of GDP by 2020. All the while, the Greek people would be living with austerity.

             Hence Mr Papandreou’s most important message. Until now the euro crisis has chiefly been about pressure from the markets. But a country’s finances are not defined by markets alone. Rather the limits of solvency are tested by people’s willingness to accept tax rises and spending cuts. A government runs out of political capital long before it runs out of things to tax. In the end, won’t pay matters more than can’t pay.

             Greece is farther down this road than any other member of the euro zone—even though other countries such as Portugal and Ireland have already seen their governments toppled and Spain is about to follow suit. Beset by rebels in his own party, by a hostile media and by strikes and protests, Mr Papandreou concluded that he would find it hard to impose the austerity being asked of Greece. Every quarter the EU, the IMF and the European Central Bank (ECB) scrutinise Greece before releasing the next chunk of money. With nowhere to hide, he decided to appeal over the heads of his opponents to the people.

             Greece’s next government, whatever its composition, cannot escape the growing resentment of the country’s political class. A growing but still small contingent of Greeks wants to defy the EU’s treaties and quit the euro altogether. Fully 60% reject the summit deal. But Greek withdrawal still looks like a terrible mistake. Depositors would rush to pull their money out of Greek banks to protect their savings from being converted into new drachma. Greek firms would be bankrupted by their euro debts. The gain in competitiveness from devaluation would be transient if, as is likely, wages inflated along with prices. Even Greece’s EU membership would be in doubt.

             What to do?

             Greece’s government must wisely spend what scant political capital it may have. Above all, the economy needs to grow. Despite their anger, 70% of Greeks say they want to remain in the euro, but their tolerance for austerity has limits. The government must devote less effort to growth-destroying tax rises and instead undertake growth-promoting structural reforms. It will have to begin facing down public-sector unions and enforcing barely implemented reforms. Mr Papandreou’s government consistently took the easy way out.

             The euro zone’s emphasis on austerity rather than structural reforms has aggravated Greece’s political woes. Instead it should favour medium-term fiscal consolidation. The creditor nations could boost domestic demand, to provide a bigger market for debtors’ exports. Most of all, they should dispel the threat of contagion by putting the ECB’s balance-sheet behind the debt of solvent governments, like Italy and Spain. Throughout this crisis, creditors—particularly Germany—have worried about being too soft on the euro zone’s weaklings, for fear that they would go slow on reform. Mr Papandreou has shown that they also need to worry about being too austere.

             Japan’s nuclear conundrum

             The $64 billion question

             Once the Fukushima nuclear plant is stable, the government should temporarily nationalise its operator

              

               

             “THIS is a war between humans and technology. While that war is being fought, we should not talk about bankruptcy.” So says a Japanese official responsible for channelling the first tranche of ¥5 trillion ($64 billion) in government support to Tokyo Electric Power (Tepco) following the meltdown of its three reactors at Fukushima Dai-ichi nuclear power plant after the tsunami on March 11th.

             The support has two valid aims. It helps pay compensation to the 89,000 people forced to abandon their homes within a 20km (12.5-mile) radius of the plant: in the twilight zone only farm animals and the odd feral ostrich roam the streets (see article). It also spares Tepco the chaos of insolvency as it races towards a year-end deadline for Fukushima’s full shutdown.

             Don’t let it off the hook

             Yet the aim must surely be to create a stronger, safer energy industry as well. Tepco’s continued existence as a private, gravely crippled entity works against that. The government should act fast to nationalise Tepco and hold it temporarily in public ownership as it clears out the old management and oversees the clean-up. Then it should reprivatise a thoroughly reformed utility. Three reasons argue for Tepco to be nationalised.

             First, as a basis for holding the company to account. Despite failing to anticipate the devastating earthquake and tsunami, and a dismal performance after they hit, Tepco’s management remains broadly in place, and shareholders and creditors are being bailed out. Injecting money into the company smacks of the sort of complicity between the nuclear industry and its political overseers that helped get Japan into this nuclear mess. Though the ¥5 trillion will pass through Tepco’s hands, the company has no legal obligation to register it as a loan on its balance-sheet or say how it will be repaid. For now, taxpayers, not the shareholders or bondholders, bear all the risk.

             Second, to ensure that Tepco’s financial restructuring is safe. The firm has agreed to cut costs by ¥2.5 trillion over the next ten years, but this may well compromise safety. Already there are reports of workers slopping about in radioactive water wearing leaky boots. In the short run the state can better oversee this transition as an owner with day-to-day responsibilities, before privatising Tepco in order to re-establish the necessary division between operator and regulator.

             Third, as a demonstration that the government will no longer grant special favours to the nuclear industry. Failure to intervene would underline how Tepco, along with Japan’s other power utilities, continues to intimidate the government. The utilities have huge political power, helped by a pliant media and the support of big businesses selling services at inflated prices. If the government fails to discipline Tepco, it will struggle to win the country’s confidence over other aspects of nuclear oversight. That includes the promise by Yoshihiko Noda, the prime minister, to conduct “stress tests” to ensure that the rest of Japan’s 54 nuclear reactors, most of them now suspended, can safely be restarted.

             At Fukushima, more bills will come due, including for removing radioactive topsoil from a vast area. The longer the government dithers over nationalising Tepco, the more the costs will rise and the impetus for action will wane. Tens of thousands have lost homes, businesses and confidence in their children’s health as a result of the disaster at Fukushima. Don’t let their suffering be for nought.

             Brazil’s economy

             The devil in the deep-sea oil

             Unless the government restrains itself, an oil boom risks feeding Brazil’s vices

              

               

             DEEP in the South Atlantic, a vast industrial operation is under way that Brazil’s leaders say will turn their country into an oil power by the end of this decade. If the ambitious plans of Petrobras, the national oil company, come to fruition, by 2020 Brazil will be producing 5m barrels per day, much of it from new offshore fields. That might make Brazil a top-five source of oil (see article).

             Managed wisely, this boom has the potential to do great good. Brazil’s president, Dilma Rousseff, wants to use the oil money to pay for better education, health and infrastructure. She also wants to use the new fields to create a world-beating oil-services industry. But the bonanza also risks feeding some Brazilian vices: a spendthrift and corrupt political system; an over-mighty state and over-protected domestic market; and neglect of the virtues of saving, investment and training.

             So it is worrying that there is far more debate in Brazil about how to spend the oil money than about how to develop the fields. If Brazil’s economy is to benefit from oil, rather than be dominated by it, a big chunk of the proceeds should be saved offshore and used to offset future recessions. But the more immediate risks lie in how the oil is extracted.

             The government has established a complicated legal framework for the fields. It has vested their ownership in Pré-Sal Petróleo, a new state body whose job is merely to collect and spend the oil money. It has granted an operating monopoly to Petrobras (although the company can strike production-sharing agreements with private partners). The rationale was that, since everyone now knows where the oil is, the lion’s share of the profits should go to the nation. But this glides over the complexity in developing fields that lie up to 300km (190 miles) offshore, beneath 2km of water and up to 5km of salt and rock.

             To develop the new fields, and build onshore facilities including refineries, Petrobras plans to invest $45 billion a year for the next five years, the largest investment programme of any oil firm in the world. That is too much, too soon, both for Petrobras and for Brazil—especially because the government has decreed that a large proportion of the necessary equipment and supplies be produced at home.

             How to be Norway, not Venezuela

             By demanding so much local content, the government may in fact be favouring some of the leading foreign oil-service companies. Many would have set up in Brazil anyway; now, with less price competition from abroad, they will find it easier to charge over the odds. Seeking to ramp up production so fast, and relying so heavily on local supplies, also risks starving non-oil businesses of capital and skilled labour (which is in desperately short supply). Oil money is already helping to drive up Brazil’s currency, the real, hurting manufacturers struggling with high taxes and poor infrastructure.

             When it comes to oil, striking the right balance between the state and the private sector, and between national content and foreign expertise, is notoriously tricky. But it can be done. To kick-start an oil-services industry, Norway calibrated its national-content rules realistically in scope and duration, required foreign suppliers to work closely with local firms and forced Statoil, its national oil company, to bid against rivals to develop fields. Above all, it invested in training the workforce.

             But Brazilians need only to look at Mexico’s Pemex to see the politicised bloat that can follow an oil boom—or at Venezuela to see how oil can corrupt a country. Petrobras is not Pemex. Thanks to a meritocratic culture, and the discipline of having some of its stock traded, Petrobras is a leader in deep-sea oil. But operating as a monopolist is a poor way to maintain that edge. Happily, too, Brazil is not Venezuela. Its leaders can prove it by changing the rules to be more Norwegian.

             Turkish foreign policy

             Ottoman dreamer

             Recep Tayyip Erdogan’s activist foreign policy has its strengths. Cheap populism is not one of them

              

               

             IN THEIR awakening this year, many Arabs have looked to Turkey for inspiration. Turkey is not just a fellow Muslim country and their former imperial power. It also offers, for all its faults, a shining (and rare) example in the Islamic world of a strong democracy and a successful free-market economy. And the Turks have responded well, if sometimes belatedly. They were early to call for change in Egypt. They endorsed NATO’s intervention in Libya. They are now unequivocally backing the opposition to the Assad regime in neighbouring Syria.

             Yet Turkey’s active foreign policy has attracted censure in parts of the West, especially America. Critics in Washington recall the Turks’ 2003 refusal to allow American troops to cross their territory to invade Iraq. Nowadays they accuse the Turkish government of turning its back on the European Union and NATO. They point to continuing harsh treatment of Turkey’s Kurds and soft treatment of Iran. Above all, they blame Turkey for switching from being a firm friend of Israel, the only other established democracy in the region, into an implacable foe.

             Are such sweeping accusations justified? On the whole, no. The mildly Islamist Justice and Development (AK) government led by Recep Tayyip Erdogan, the prime minister, is right to pursue a policy, first enunciated by Ahmet Davutoglu, now foreign minister, of “zero problems with the neighbours”. This is a big improvement on previous governments that largely ignored their own backyard. Turkey remains a bastion of NATO, with the biggest army after the United States and a vital American air-force base at Incirlik. It is EU members like Cyprus, France and Germany—and not Turkey—that have done most to stall Turkish negotiations to join their club.

             Even if broad-brush criticisms of Turkey’s foreign policy are overdone, some narrower ones are closer to the mark. It is no use professing to want zero problems with the neighbours without making a much broader effort to resolve such ancient quarrels as those with Armenia or over Cyprus. Turkey’s newly strong support for the Syrian opposition may be both brave and admirable, but the Turks should have urged reform and some dialogue between the opposition and the regime at an earlier stage (see article).

             The mercurial and often autocratic instincts of Mr Erdogan are not conducive to careful diplomacy, as his belligerent recent outbursts over Greek-Cypriot and Israeli gas exploration in the eastern Mediterranean have shown. As complex relations with Syria, Iran and Iraq are also confirming again, Turkey must reach a political settlement with its own Kurds if it is to play a positive role in the region. Yet Mr Erdogan seems to be moving back to a purely military solution to the conflict with rebels in the Kurdistan Workers’ Party (PKK).

             Mend fences with Jerusalem, too

             And then there are relations with Israel, which have never recovered after the Israeli army’s killing of eight Turks and one Turkish-American aboard a Gaza-bound ship, the Mavi Marmara, last year. The intransigent Binyamin Netanyahu, Israel’s prime minister, is not popular with many EU governments or with the current American administration. He has been foolishly stubborn to refuse even the smallest apology over the Mavi Marmara. But if Mr Erdogan calculates that he can pander to anti-Israeli prejudice at home without paying a price abroad, he is making a mistake. Turkey stands to gain from stable Arab-Israeli relations, which it ought ideally to be well-placed to promote. And, like it or not, many in the West take Turkey’s attitude to Israel as a yardstick of its broader intentions. If Turkey wants to preserve good relations with the West, it must find some way of mending fences with Israel as well.

             Letters

             On Occupy Wall Street, solar power, climate change, the Netherlands, aluminium, monarchy, personhood

              

             Letters are welcome via e-mail to letters@economist.com

             Views from the street

               

             SIR – In response to your weekly news summary describing the Occupy demonstrations in New York and other cities around the world as “anti-capitalist” (The world this week, October 22nd), I would like to state that there is no official anti-capitalist sentiment within the Occupy Wall Street movement. There are people here from every imaginable walk of life, from all political parties, right as well as left, races, classes, military veterans, celebrities, homeless people, millionaires, union members, punks, anarchists, capitalists, magicians, social workers, athletes, cooks and indeed police.

             Capitalism, or the destruction of it as a system, is not the objective. Rooting out and holding to account the people and or entities that knowingly and wantonly break the law and violate our constitution is the goal. We know who we are fighting for and if our message is not exactly refined yet, it will be. After all, we are only into our second month.

             I assure you, if voting worked, we would all be home right now.

             Brendan Burke
Head of de-escalation security
Occupy Wall Street
New York  

             SIR – It is disingenuous of you to claim that we are “Raging against the machine” (October 22nd). The “machine” in America is about as far from free-market capitalism as one can get. Instead, it is a corporatist system of crony-capitalism where welfare for the masses is a dirty phrase, and corporate welfare, in the form of subsidies for business and financial bail-outs, is the norm.

             You cited a statistic showing that people are angrier at the government than at Wall Street. But there is no clear distinction between the two. We are protesting against the same set of people, whether in Washington or Manhattan.

             Benjamin Koatz
Member of the Occupy Wall Street Student Assembly
New York

               

             SIR – I had to sigh when reading your leader. A “cumbersome state” is the subject of justified middle-class fury, yet Barack Obama has responded with “class warfare”. You even managed to blame the housing crisis on the government’s distortion of the free market. Then there was the obligatory deft shift to “politicians spending too much”.

             Don’t you read conservative sources? Studies from the Fraser Institute, the Cato Institute and even your own Economist Intelligence Unit consistently show that America has a relatively small government and is very lightly regulated. I direct you to a chart in the very same issue that ranks America as the fourth-best place in the world in terms of ease of doing business (“It’s a jungle out there”, October 22nd).

             Gaylord George Candler
Jacksonville Beach, Florida  

             SIR – Your association of the tea party with the populism of the 1930s was incomprehensible. Why do you find the idea of tax reform, limited government and a balanced budget so abhorrent? Unlike the Wall Street occupiers, the tea partiers protested, moved on, and entered the political process by electing candidates in 2010 and continue peacefully to exert their influence.

             Gary Franklin
Lakeville, Minnesota  

             SIR – For people who are supposedly demonstrating against greed and the wickedness of a consumer society, most of the protesters that I have observed seem to carry the latest smartphones and wear expensive sneakers. The celebrities in attendance are always well dressed. Naomi Wolf looked particularly fetching in a little red number as she was handcuffed and arrested near a demonstration in Manhattan because of some apparent confusion over what she later described as our “Stalinist” system of protest permits.

             Radical chic is definitely back in fashion this fall.

             Thomas Walker
New York

             Energy and the sun

               

             SIR – The breakthrough in affordable solar cells over the past few years has been driven entirely by the “feed-in tariffs” that you criticise (“A painful eclipse”, October 15th). The replacements on offer—carbon pricing and renewable-energy quotas—have proved ineffective at supporting crucial, emerging technologies.

             Quotas on renewables generate windfall profits for old hydropower and nuclear facilities that have long been written off, and subsidise the most profitable renewable- energy projects. Feed-in tariffs are limited in support to new power plants and can be differentiated to curb excess profit. By guaranteeing a reasonable return on investment, feed-in tariffs decrease the cost of capital, thus decreasing the market power of large utilities.

             Germany’s solar-panel boom has both created employment at home (150,000 jobs last year) and driven the development of a flourishing solar-panel industry in China, with global benefits in the form of rapidly dropping costs. The trade goes both ways: China imports German manufacturing equipment.

             The most cost-efficient long-term climate strategy is to support renewable technologies that have the potential for rapid cost reductions, including solar photovoltaic and solar thermal power. This will not be achieved through a carbon price alone. No big energy-generation technology has ever been commercialised without targeted support.

             Lauri Myllyvirta
Sven Teske
Greenpeace International
Amsterdam

             The BEST data?

               

             * SIR – You reported on the efforts of the group behind the Berkeley Earth Surface Temperature (BEST) to measure global warming (“The heat is on”, October 22nd). But the BEST curve is rather odd because it shows a 100-year temperature rise over the 19th century. However, every local instrumental record of that period instead shows a temperature decrease.

             In our peer-reviewed paper of September 2011 the most reliable temperature series, Hohenpeissenberg, Prague, Paris, Munich and Vienna that go back about 250 years, are analysed. Those data contain monthly records of the northern hemisphere.

             As a further oddity, the standard deviation of BEST (the degree of fluctuation) which is strong in 1800 nearly vanishes for the present time. That is fictitious because such a decrease is not known in the literature nor is it imaginable.

             Finally, another recent paper produces results that differ severely from BEST. We find a global warming of about 0.5°C for the period 1906-2005, where BEST publishes a value above 1 °C. In contrast to the scientists that “constructed” BEST, we applied unadjusted monthly temperatures.

             The process of establishing “global” temperature curves on the basis of adjusted and averaged station data is prone to sophistic errors. Most probably, this explains a BEST curve, which contradicts any reality based on measurements.

             Professor Horst-Joachim Lüdecke
Rainer Link
Professor Friedrich-Karl Ewert
Heidelberg, Germany

             The hardy Dutch

               

             SIR – Your description of cold snaps as “nasty” is unacceptable to this English resident of the Netherlands (“Chilling out in the winter sun”, October 15th). Severe coldness always cheers the Dutch, as skating is a national passion. An intensely frigid snap can freeze the canals between 11 towns in the province of Friesland, sparking a frenzy of optimism. The 200km (124-mile) Elfstedentocht skating tour through the towns last took place in 1997. Bring it on, Solaris.

             Michael Cooper
Haarlem, the Netherlands

             Aluminium v copper

             * SIR – I would like to respond to the statements in your article on copper about the use of aluminium in electric cables (“Red bull”, September 24th). Although your article positions copper as the preferred metal for electrical-wiring applications, aluminium has increasingly replaced copper over the past few decades. The transformation started with the use of aluminium conductors for the transmission and distribution of electrical power over the national grid, and has continued to service drop, entrance and building-wire feeder cables.

             The article stated that aluminium is inferior to copper in residential-wiring applications based on improper connections of aluminium branch circuit wiring in the 1970s. This issue was eliminated decades ago through the development of aluminium alloy conductors and the use of connectors suitable for use with aluminium or copper wiring.
Aluminum alloy feeder cables are safely terminated with industry standard dual-rated aluminium connectors which always result in reliable terminations.

             Although copper is currently the most popular choice for small branch circuit wiring, aluminium alloy cables are a fully viable solution for power distribution applications, proven in service for almost 40 years, and recognised in North America by the US National Electrical Code, the Canadian Electrical Code and the Mexican Electrical Code.

             Howard Atkins
Vice-president, marketing
Alcan Cable
Atlanta

             Need not apply

             SIR – Regarding the arguments in the Commonwealth about whether women should be equal to men or Catholics equal to Protestants when it comes to inheriting royal titles (“Equality and the monarchy”, October 15th), surely the debate has ignored a rather more fundamental and damaging inequality?

             Professor David Limond
Trinity College
Dublin

             Patter of tiny personhoods

               

             SIR – I was delighted to read your article about the effort in Mississippi to pass a state constitutional amendment to recognise embryos as people from the moment of fertilisation (“A person already?”, October 8th). My wife and I have been considering IVF to address our lack of success in conceiving a child. Mississippi’s proposed amendment gives us even more reason to pursue this treatment, and to move to Mississippi.

             After the procedure we will insist on taking custody of any extra embryos that result from IVF—it is our right as parents after all. Once safely in our home we plan to keep them in a freezer in our basement and list them as child dependents for tax purposes, thus giving us a tax deduction. To protect the lives of our children in case of a power outage we will buy a backup generator. Anything less would be bad parenting.

             Benjamin Iwai
St Louis, Missouri

             * Letter appears online only

             The Republicans

             A dangerous game

             Despite becoming more extremist and obstructionist, the Republicans triumphed in the mid-term elections. Next time round, they may be in for a shock

              

               

             NOT all that long ago—three years, to be exact—the Republican Party was rooting for John McCain to be president of the United States. The senator from Arizona, you may remember, had in his time worried about climate change, shown an open mind towards “cap-and-trade” to reduce carbon emissions, and worked closely with Democrats like the late Ted Kennedy to reform immigration law to give illegal immigrants a path to citizenship. Bit by bit, he had to retreat from these positions to win his party’s nomination.

             Today the Grand Old Party has moved even farther to the right. Herman Cain, the former pizza mogul from Georgia now leading some polls in the race for the nomination, had to clarify that he was joking when he said he wanted to build a lethal electrified fence along the entire border with Mexico. As for global warming, most Republicans say that there is no such thing, or that if the Earth really is warming it has nothing to do with human activity. Another candidate, Governor Rick Perry of Texas, has called global warming a “contrived phoney mess that is falling apart under its own weight”.

             The party’s shift on economics is no less striking. The big-government conservatism of George Bush’s presidency is seen not only as a mistake but as a betrayal. “We had our chance and we blew it,” says Eric Cantor, the majority leader in the House of Representatives, of the party’s consecutive terms in government between 2000 and 2008. George Bush senior is remembered no more fondly. Didn’t his decision to break a promise and raise taxes lose the Republicans the White House in 1992?

             On the face of it, this shift to the right has already paid dividends. In the presidential election three years ago Barack Obama romped to victory with 365 electoral-college votes, 192 more than Mr McCain, and almost 53% of the popular vote. Since then, however, the Republicans have experienced an almost miraculous resurrection.

             In the mid-terms of November 2010 they won control of the House of Representatives, an extra six seats in the Senate and six more state governorships, bringing the total number of state houses under Republican management to 29 out of 50. They have an excellent chance in November next year of capturing the Senate, and a fair chance of grabbing the White House, turning Mr Obama into the first one-term president since George Bush senior. An average of polls maintained by RealClearPolitics, a website, suggests that 44.8% of voters intend to vote for a Republican in 2012 and 41.8% for Mr Obama.

             To a degree, they owe this turnaround to luck—Mr Obama’s bad luck. Within months of his election he bet $800 billion on a Recovery Act that was supposed to jolt the economy back to life. This stimulus, alas, was not stimulating enough: though growth perked up to 2.5% in the last quarter, unemployment is stuck obstinately above 9% (that is 14m Americans) and is not expected to fall much before next November’s election. The RealClearPolitics average shows that the proportion of Americans disapproving of Mr Obama’s performance jumped to 51% in October from 20% in January 2009. Around 75% say the country is on the wrong track.

             For the Republicans, these are mouth-watering numbers. Nothing seems to stand in their way. But to triumph next November they need a plausible presidential candidate and a programme that appeals to the broad electorate, not just the party faithful who will select a nominee after January’s caucuses in Iowa kick off the season of primary elections. And this, in turn, poses a question. Are Americans looking for nothing more than a safe alternative to a president who has failed? If so, they might do worse than plump for Mitt Romney, a former governor of Massachusetts and a primary candidate last time: a known quantity with what looks like a safe pair of hands. Or are they hankering after a revolution?

             The Republican Party finds it hard to get the answer right because it has just undergone a revolution of its own. One of the main things that snapped the party out of its doldrums after the debacle of 2008 was the eruption of the tea-party movement, a largely self-organising group of small-government conservatives who believe that big government has throttled the freedoms bequeathed by the Founders.

             Tea-partiers ascribe the party’s resurrection not only to Mr Obama’s bad luck and “socialist” policies but also to their own determination to slay the Leviathan-state and restore lost liberties. The last person they want in the White House is another government-expanding “compassionate conservative” like Bush the younger. They yearn for a radical who will yank an out-of-control federal government up by its roots, or at least starve it of revenue, prune entitlements, chop away job-strangling regulation and free (or force) citizens to take more individual responsibility for their pensions and health care.

             To many Republicans this is an inspiring prospectus. And yet its very radicalism may become the party’s Achilles heel. It could enable Mr Obama to win a second term by proclaiming that to vote Republican in 2012 is to opt for a reckless experiment that will tear down all the social protections Americans have come to take for granted.

             Mr Obama is already pushing this line. One of his chief exhibits is the Republicans’ comportment during the past year of divided government. The freshmen swept in when the Republicans recaptured the House in 2010 dragged a Republican caucus that was already conservative by historical standards farther to the right. One of the first things the new majority did was to pass a bill repealing what they call Mr Obama’s “job-killing” health-care law, or “Obamacare”. They also cheered through a radical budget plan drawn up by Paul Ryan of Wisconsin that would scythe down entitlements and, in particular, will make the well-loved Medicare plan for the elderly much less generous. Voters do not like that idea.

             Taxes as poison

             Because the Democrats still control the Senate, neither the repeal of Obamacare, nor Mr Ryan’s plan, nor many of the other bills the House has passed has become law. The year of gridlock reached a low point in the midsummer showdown over the federal debt ceiling. The Republicans boast that, by refusing to raise the amount the government could borrow until the Democrats agreed to reduce spending, they forced Mr Obama to make a belated start on tackling the deficit. But they also brought the United States close to its first-ever default, prompting Standard & Poor’ s to downgrade its AAA credit rating to AA+. Though none of the politicians emerged with much credit in voters’ eyes, a poll afterwards showed that more (72%) were inclined to disapprove of how the Republicans had handled the crisis than blamed the Democrats (66%) or Mr Obama (47%).

             The Republicans say they won a victory. But the showdown exposed the party to the charge of recklessness, highlighted its rigidity on taxes and seemed to reveal a rift. At one point John Boehner, the speaker and nominal leader of the Republicans in the House, started to talk to Mr Obama about a “grand bargain” entailing not only the spending cuts the Republicans insisted on but also the tax increases Democrats call unavoidable to protect vital programmes. These talks broke down, however, leaving the impression that the pragmatic Mr Boehner had been overruled by the anti-tax ideologues in his own caucus.

             Even the sainted Ronald Reagan was willing to raise taxes when circumstances required. Most of today’s Republican lawmakers have signed an explicit pledge never to do so, even though this puts the party on the wrong side of public opinion. Most voters tell pollsters they favour a balanced approach to the deficit, meaning tax increases as well as spending cuts, with a bigger share of the taxes coming from the rich. And this issue is not going away.

             After the debt showdown the two parties created a congressional “supercommittee”, which by November 23rd must present a plan to reduce the deficit by $1.2 trillion-1.5 trillion over the next ten years. The Republicans still say that this must be done by spending cuts alone, the Democrats that tax rises must be part of the solution. To encourage compromise, Congress has pointed a pistol at its own head. If the committee fails to produce an agreement, or Congress fails to approve it, $1.2 billion of cuts—half of them falling on the hallowed defence budget—will be triggered automatically. Yet the Republicans have squeezed themselves into a straitjacket. In a debate in Iowa in August, all eight presidential candidates said that even if the Democrats were to offer $10 of spending cuts for every dollar of increased taxes, they would turn such an offer down.

             One of the things that keeps the party in its straitjacket is the tea-party movement. Its influence is hotly debated. When the movement began the Democrats disparaged it as an “astroturf” phenomenon, an artificial protest stirred up by corporate interests. That was nonsense, as anyone visiting these spontaneous gatherings could see. Since then, however, the tea parties’ role has evolved. They may be no less “authentic” than at the start, but they are now woven tightly into the Republican grassroots, co-ordinated nationally and plugged into a variety of deep-pocketed small-government outfits, such as the Club for Growth, FreedomWorks and Americans for Prosperity, which feed them with policy ideas and help them organise.

             In a forthcoming book (“The Tea Party and the Remaking of Republican Conservatism”), two Harvard University academics, Theda Skocpol and Vanessa Williamson, say that the emergence of the tea-partiers was “just what the doctor ordered” for a group of billionaire ideologues, such as brothers Charles and David Koch of Koch Industries, who lost no time exploiting the movement’s anger and energy. Dick Armey, the founder of FreedomWorks, and Matt Kibbe, its president, have been candid about their efforts to turn the tea-party movement into “a permanent grassroots army” and mount a “hostile takeover” of the Republican Party.

             The new Jacobins

             This is code for a merciless purge. Seniority in the party and length of service in Congress are no protection. In the primaries before last year’s mid-terms, tea-partiers helped to scalp long-serving Republicans, such as Senator Bob Bennett of Utah, who used to be considered solid conservatives. Now the Jacobins are on the warpath again. FreedomWorks is hoping to unseat Senator Richard Lugar, who has represented Indiana admirably for six terms, by throwing its weight behind Richard Mourdock, “a reliable, consistent supporter of limited government”. Mr Lugar stands accused of spending his 34 years in Congress “voting to spend too much and to expand the federal government too far beyond its constitutional limits.”

             Campaigns such as these push the party in Congress to the right. They have also coloured the search for a presidential nominee. The contenders are by no means clones. Ron Paul, a libertarian from Texas, is only too happy to challenge party dogmas, such as reflexive support of Israel. The three social conservatives—gut ones such as Rick Santorum of Pennsylvania and Michele Bachmann of Minnesota, and the more cerebral Newt Gingrich—differ on many details. But they differ within a relatively narrow spectrum.

             Almost all the candidates oppose gay marriage and several say they would reinstate “Don’t ask, don’t tell”, the ban on homosexuals serving openly in the armed forces, which Mr Obama recently repealed. When Mr Cain said on television that although he opposed abortion, it was ultimately a decision for the family or the mother, he came under withering attack and quickly backtracked. He now says, as Mr Santorum does, that there must be no exceptions, even in cases of rape or incest.

             Above all, the whole Republican field has embraced the mantra of small government. To judge by their promises, a Republican victory in 2012 would see a night of long knives in Washington, DC. On his very first day Mr Gingrich would abolish 39 White House “tsars”. In his first year Mr Paul would lop away $1 trillion in federal spending and abolish the departments of energy, commerce, interior, education, and housing and urban development. Mrs Bachmann would do away with the department of education and have the “doors locked and lights turned off” at the Environmental Protection Agency. Whoever wins, Obamacare—and who knows what else?—will be on their way to the chopping-block. Mr Perry has called Social Security, the pension system on which millions of Americans depend, not only unconstitutional but a Ponzi scheme.

             A wobbly heir-apparent

             Obstructive, reckless, extreme, willing to dismantle the whole edifice of the New Deal—if Mr Obama can make that picture of the Republicans stick, their hopes of victory will be at risk. In recent weeks the White House has rolled out a series of initiatives under the rubric “We can’t wait”, designed to portray the Republicans as running a do-nothing Congress like the one that tried to obstruct Harry Truman’s efforts to minister to the economy after the second world war.

             Is it fair? Republicans retort that they have passed more than a dozen bills in the House, only to see them blocked by the Democrats’ do-nothing Senate. They can also point to bold policies in states across the country, where Republican governors have been slashing spending, clipping the wings of over-mighty public-sector unions and spurning handouts from the federal government. Harsh remedies are needed, they say, in states short of revenue and deep in debt. Some governors (John Kasich in Ohio, Scott Walker in Wisconsin) have pushed further than voters like, but others have won plaudits. Last week Bobby Jindal cruised to re-election in Louisiana, where voters give him high marks for streamlining government and tackling ethics abuses. Mitch Daniels of Indiana or Chris Christie of New Jersey might have been excellent presidential candidates had they chosen to run.

             But they didn’t, and for those who did it has so far been a peculiar race. The usual Republican pattern is to settle early on an heir-apparent. In this cycle Mr Romney is the closest the party has to that. He enjoys a commanding lead in early-voting New Hampshire and Florida. In a National Journal survey of “political insiders” at the end of October, Republicans said virtually unanimously that he would emerge as the nominee. Intrade, an online betting firm, gave him a 70% chance of winning the nomination (against 11% for Mr Perry and just over 7% for Mr Cain).

               

             And yet in months of campaigning Mr Romney has struggled to win over more than 25% of Republican voters, and every so often another candidate shoots ahead of him (see chart). For a while Mrs Bachmann did well. Then, after declaring in August, Mr Perry soared ahead of Mr Romney, only to plummet because of ghastly debate performances and a row over his alleged softness towards illegal immigrants. In recent weeks it has been the likeable Mr Cain’s turn to lead the field, buoyed up not only by his oratorical skills and folksy charm but also by his snappy plan to reform the tax system.

             What is it that turns Republicans off Mr Romney? Apart from being dull and being Mormon, which still fans suspicions, the famous flip-flopper is also—with the exception of his fellow Mormon, Jon Huntsman—the least authentic conservative in the race. As governor of Massachusetts, he introduced an early form of Obamacare. Once pro-choice, he is now pro-life. That has given his rivals an easy line of attack—voters won’t get any “shape-shifting nuance from me”, boasts Mr Perry—and makes it extremely hard for him to win the support of the tea-partiers. Chris Chocola, president of the Club for Growth, said last month that Mr Romney would be an improvement on Mr Obama (not extravagant praise in such circles), but that his economic ideas were not yet “bold” enough.

             In short, the tea-partiers are still looking for their revolutionary. Perhaps they should beware of what they wish for. Since the election of Mr Obama, the Republicans have done an admirable job of shifting the debate. The need for America to reform the spending programmes, such as Medicare, which are pushing the country towards bankruptcy is now widely accepted. But the party is also seen as the party of the rich. In a recent New York Times/CBS News poll, 69% of respondents said that Republican policies favoured the wealthy, while only 28% said that of Mr Obama’s policies. This is not a plus at a time of stark and rising inequality.

             Rich v poor

             The Congressional Budget Office reported last week that the top 1% of earners had more than doubled their share of national wealth over the past three decades. The Occupy Wall Street movement, “the 99%”, is kicking up a ruckus. And yet Republican candidates have been falling over themselves to invent tax proposals that look bound to squeeze the poor and reward the rich even more. Mr Cain’s 9-9-9 plan would cut corporate and personal income taxes to 9% and make up the revenue with a sales tax. Mr Paul would abolish the federal income tax altogether. Mr Perry and Mr Gingrich have different blueprints, but all are highly regressive and none seems likely to sustain government revenue at present rates. That may be fine for the zealots: government is the problem, remember. But is it what most voters want?

             Maybe not. Larry Bartels, a political scientist at Vanderbilt University who has studied election results since the recent great recession, concludes that they are seldom decided by ideology. “In periods of economic crisis, as in more normal times, voters have a strong tendency to support any policies that seem to work, and to punish leaders regardless of their ideology when economic growth is slow,” he says. That is bad news for Mr Obama. But the Republicans still need to unite around a plausible candidate—and a programme that is not so scary that voters will decide to stick with the president they know.

               

             Brazil’s oil boom

             Filling up the future

             Its remarkable offshore oil bonanza could do Brazil a lot of good. But getting the most out of it will not be easy

              

               

             GEOLOGICAL structures of vast antiquity are more often called on to bolster the arguments of atheists than enlisted as tokens of a deity’s existence—let alone his nationality. But the deep Cretaceous salts which trap oil in rocks off Brazil’s coast are “strong evidence”, in the words of President Dilma Rousseff, “that God is Brazilian.” It is not a new conceit, but it has rarely been a more apposite one. The pré-sal (“below the salt”) oilfields look set to generate wealth on a scale that could transform Brazil’s economy.

             Before the pré-sal finds, which started in 2007, the country’s total proven and probable reserves were 20 billion barrels. Conservative estimates for the total recoverable pré-sal oil now come in at 50 billion barrels: a little less than everything in the North Sea, all in the waters of one country. Optimists expect three times as much. “In the pré-sal area, our exploration has a success rate of 87%, compared with a world average of 20% to 25% for the industry,” says Sergio Gabrielli, the president of Petrobras, Brazil’s state-controlled oil company.

             The first shipment of pré-sal oil, 1m barrels from the Lula field (formerly known as Tupi), set sail for Chile in May. Petrobras is producing 100,000 barrels a day from the pré-sal, a third of it from the remarkably productive Lula test well (see map). By 2020 Petrobras expects to be pumping 4.9m barrels each day from Brazilian fields, 40% from the pré-sal, and exporting 1.5m: at the moment the country falls a little short of self-sufficiency. Today Brazil is the world’s 11th-largest oil producer. By 2020 it should be in the top five.

               

             Becoming an oil exporter could complete the development process that began with the conquering of hyperinflation in 1994. Because the country’s previous period of economic development was brought to an end by the oil shocks of the 1970s, self-sufficiency in energy looks more than usually enticing to Brazilians. Plentiful hard currency looks good, too; it is just nine years since the country last had to borrow from the IMF to stabilise its currency. Petro-dollars will boost national saving—currently just 16% of GDP—creating room for Brazil to upgrade its decrepit infrastructure. And oil would add pleasingly to the geopolitical heft of a country keen to assert itself as a global power.

             The possible missteps, though, are legion. Huge, technically challenging projects tend to run late and over budget everywhere. Last year’s disaster in the Gulf of Mexico is a grim reminder of the risks in such “ultra-deep” drilling projects. And countries with big oil finds are prone to an ominous list of economic ailments: capital absorption (the diversion of funds from other worthwhile investments); Dutch disease (oil exports pushing the currency to a level that hurts other industries); and reform fatigue (governments’ unwillingness to tackle structural economic problems when they can see vast wealth on the horizon).

             Since the pré-sal was discovered Brazil’s politicians have talked much less about reforming burdensome tax and labour laws. The corrupting tendency of oil is worrying in a country where the president has had to sack five ministers since taking office in January over accusations of illicit enrichment. Without a lot of care, oil might block development as much as spur it on. In the 1970s, looking at what its oil reserves might mean for Venezuela’s future in terms of waste, misallocated money and corruption, a former hydrocarbons minister, Juan Pablo Pérez Alfonso, did not thank a providential god; the country’s oil, he said, was but “the devil’s excrement”.

             A key to success in the pré-sal is Petrobras. The company’s older offshore fields are deep enough that it already accounts for 22% of the world’s deepwater production. The pré-sal should give it the know-how to become the world leader in “ultra-deep” drilling, too, opening new possibilities for it off Africa (where the geology is similar) and beyond.

             A moonshot under the ocean

               

             But it is an extraordinary technical challenge, and not just because of the depth, and thus the pressure, at which the drills must operate (see diagram). New seismic techniques are needed to see what’s going on. The salt shifts during drilling. The oil comes out of its reservoirs very hot, and must then pass through wellheads that are only a few degrees above freezing. It is mixed with corrosive gases.

             The dozens of floating production platforms required, which cost billions of dollars each, will be an uncommonly long way out to sea. Lengthy pipelines will have to be laid along the sea floor for the fields’ gas (flaring it is illegal, as well as a waste). Oodles more platforms will be needed to act as way-stations for helicopters ferrying personnel out and back. The distances would also hamper the response to a disaster. Mr Gabrielli has warned that more needs to be done to prepare for such a Deepwater-Horizon-style catastrophe, not just by Petrobras, but by the government and armed forces, too.

             Pedro Cordeiro of Bain & Company, a consultancy, says all this makes developing the pré-sal a national commitment comparable to that of the Apollo programme. In terms of cost it is actually a good bit larger. Apollo cost less than $200 billion in today’s dollars; the total bill was a few percent of America’s annual GDP at the time. Ten years’ aggressive development of the pré-sal could take a trillion dollars, around half of Brazil’s 2010 GDP.

             The lion’s share of the pré-sal investment will come through Petrobras. Last year it raised $25 billion in cash with a share offer plus the rights to 5 billion barrels of pré-sal in an oil-for-shares swap with the government. It will be borrowing another $47 billion in the next few years, and plans to raise $14 billion more by selling assets. It is already engaged in nearly 700 projects costing more than $25m each, mostly to do with the pré-sal, and it has plans for $224 billion in capital expenditure from 2011 to 2015. This will account for a tenth of Brazil’s gross fixed-capital formation over the next few years. Petrobras claims that exploiting the pré-sal will make it a bigger company than Exxon Mobil well within the decade.

             For most of this year, though, the company’s share price has been falling. There are two linked concerns: overstretch and political interference. The oil-for-shares swap means the government now owns more of Petrobras than it did before the share offering (48%, up from 40%). It has always held a majority of voting shares.

             The government’s role does not stop there. In the 1990s Petrobras was part-privatised and the system for allocating oil concessions was liberalised: concessions were to be sold at auctions in which any company, Brazilian or foreign, could bid equally. For the pré-sal, that model has been torn up. A new state enterprise, Pré-Sal Petróleo, will own all pré-sal deposits and can veto projects it deems not in the national interest. Future pré-sal concessions will be auctioned to consortia which must include Petrobras as their operator, with a stake of at least 30%. Once a consortium has pumped enough to cover its costs, what remains must be shared with the state: winning bids will usually be those that hand over more of this “profit oil”.

             The oil is ours

             Luiz Inácio Lula da Silva, Brazil’s president at the time, justified these 2010 changes on the basis that “you offer risk-sharing contracts when there is risk. In the case of the pré-sal, we are sure.” This is a bit blithe. Mr Gabrielli has recently started emphasising the distinction between “exploration risk”, which seems low for the pré-sal, and “development risk”, which is high. And it is not obvious that a winning recipe needed more than tweaking. Brazil taxes oil relatively lightly. If the government felt it was underselling a close-to-sure thing it could have raised taxes on companies operating in the pré-sal. That would be a lot simpler than cost-plus calculations, which Norman Gall of the Fernand Braudel Institute, a São Paulo think-tank, expects to cause endless legal disputes. Adriano Pires, a Brazil-based energy consultant, says the changes to the regime have fed a perception of regulatory risk. He points to Lula’s worrying resurrection of a slogan from state-monopoly days: “The oil is ours.”

             Compared with lumbering state-run oil firms like Mexico’s Pemex and Venezuela’s PDVSA, treated as cash cows and employers of last resort, partially privatised Petrobras is fit and strong. Colombia’s Ecopetrol is already following the Petrobras model, having placed some of its shares in the stockmarket, and Mexican politicians talk of similar steps. But navigating Brazil’s mixed economy is never easy, for companies or their leaders. Earlier this year a posse of shareholders cobbled together by the government ousted Roger Agnelli, president of the privatised mining company Vale, who had laid off workers in the credit crunch against Lula’s wishes and showed an excessive zeal for investment abroad.

             So far Mr Gabrielli has handled such tensions rather niftily. But minority shareholders complain that the government is forcing the company to make uneconomic decisions. There are doubts as to whether it needs four new refineries when there is excess capacity abroad, and if so whether it makes sense to put two of them in the north-east, which pleases politicians but does not best serve markets. Then there is the purchase of supertankers from Brazilian yards with costs almost twice those of South Korea’s. The government, concerned about inflation, regularly stops Petrobras from putting up petrol prices in line with rising world prices. Mr Pires calculates it has lost at least 9 billion reais ($4 billion) in the past eight years as a result.

             Such tricks may end up weakening the firm’s capacity to use its development expertise elsewhere. “By letting in competitors and letting Petrobras go abroad, [Brazil] created a real national champion,” says Sarah Ladislaw of the Centre for Strategic and International Studies, a think-tank. She thinks Petrobras’s recent decision to pull out of projects in Cuba, citing domestic commitments, may be evidence of overstretch. “Folks respect Petrobras and don’t want to see it pull back internationally to be hamstrung at home.”

             Perhaps the biggest challenge for Petrobras will come from the strict local-content requirements the government is imposing on pré-sal projects. The government intends to make these progressively more demanding, applying them to the entire supply chain. By 2017 they may reach as high as 95% for some parts of it. The oil-and-gas supply chain, broadly defined, accounts for 10% of Brazil’s economy now. By 2020 its share should grow to 25%, say analysts.

             Jobs for the boys from Brazil

             The policy is meant to stop foreign suppliers from gouging Petrobras and its partners as they buy hardware by the $100 billion. It is also meant to stimulate domestic industry. “This is a very important demand pull on the Brazilian economy,” says Mr Gabrielli. “We think it will respond.” If it does, the benefits will be not only in quantity, but quality: a study by IPEA, a government-funded think-tank, found that Petrobras’s domestic suppliers were more technologically advanced and productive than the average Brazilian firm, and paid higher wages and more taxes.

             New oil-and-gas service companies are already springing into being, providing everything from undersea electrical cabling to industrial quantities of popcorn (light, cheap and biodegradable, it can be thrown overboard to simulate the evolution of oil spills). A high-tech hub is forming around Cenpes, Petrobras’s research centre in Rio de Janeiro: leading service firms, including Baker Hughes, GE and Schlumberger, are building laboratories close by. The area will be the southern hemisphere’s largest research complex, says Petrobras. In the state of São Paulo, the port city of Santos will be transformed into a managerial hub, with bases for fleets of helicopters and support ships.

             Nevertheless, forcing Petrobras and its partners to buy Brazilian, and international companies to locate themselves there, will push up costs and cause delays. According to Booz & Company, a consultancy, Brazilian suppliers to the oil and gas industry charge 10-40% more than world prices. Part of the problem is a scarcity of staff. Brazil’s labour market is already so tight that employers complain about a “labour blackout”. Petrobras itself is unlikely to suffer: it gets hundreds of applicants for each job. But its suppliers will struggle.

             According to a wide-ranging study of the pré-sal’s impact by Mr Gall, most workers starting courses at Prominp, a government-funded trainer for the oil and gas industry, needed remedial Portuguese and arithmetic lessons before they could read manuals or carry out simple calculations. Many dropped out and quite a few who finished their training were still of too low a standard to work in the industry. When Aker Solutions, a Norwegian oil-services company, explained weak results in August, it cited an overspend in Brazil caused by “too many inexperienced people”.

               

             The attempt to stimulate supply-chain industries is in part a way to offset the Dutch-disease damage of high exchange rates. Some of the inconvenient strength of the currency is down to high real interest rates which attract footloose foreign capital. But soaring commodity exports are another factor (see chart). Brazil is the world’s largest, or second-largest, exporter of iron ore, soyabeans, sugar, ethanol, coffee, poultry and beef. The commodity boom has led to a big improvement in Brazil’s terms of trade—and hard times for Brazilian industry. Imports, mostly of manufactured goods, have grown even faster than exports, and the country’s trade balance is now negative. Though the economy grew by 7.5% in 2010, and is forecast to grow by more than 3% this year, industrial output, long flat, is starting to fall.

             Local-content rules for the oil industry may help, but are of little comfort to, say, dressmakers, who are unlikely to become part of Petrobras’s supply chain. And they may have unintended consequences beyond reducing the oil industry’s efficiency. Less spending outside Brazil by Petrobras and friends will reduce demand for foreign currency—thus pushing the real higher than it would be otherwise.

             One way to counter Dutch disease is to raise productivity in the rest of the economy. Brazil is planning a fund to invest a good part of pré-sal revenues along these lines. Its aims, as yet ill-defined, include education, culture, science and technology, environmental sustainability and poverty eradication. Bain & Company, asked by Brazil’s national development bank to analyse the lessons of similar funds in Norway, Chile and elsewhere, said such spending could be worthwhile, provided clear targets were set and the money was professionally managed (not something the government’s penchant for appointing placemen makes likely). It also recommended spending on the sort of infrastructure that would benefit other industries and help to lower the cost of exports, such as roads and ports. With 60% of all of Brazil’s industrial investment currently in the oil and gas industry, according to the National Petroleum Industry Organisation, a trade body, that could be a welcome fillip.

             But the sovereign fund may end up with little to invest in anything. A ferocious battle is being waged in Congress between the coastal states, which have in the past received most of the royalties from offshore oil, and the rest, which want a share. Until a solution is found, in the supreme court if need be, there can be no new pré-sal auctions. The answer will probably involve the federal share shrinking, which will be bad for the fund and its chances of strategic investment. State revenues, whichever the state, will go straight into current spending.

             Still going Dutch

               Made in Brazil

             Tony Volpon of Nomura Securities, an investment bank, points to the disturbing possibility that Brazil could already be suffering from the Dutch disease associated with success in the pré-sa l—without yet enjoying any of the benefits. “Brazil’s growing current-account deficit is similar to big investments in a company with present negative cashflows, but excellent earnings prospects,” he says. Most of the assets Brazilians hold abroad are low-yielding, such as treasury bonds; foreigners’ assets in Brazil earn much more. For a commodity exporter like Brazil, those growth expectations can only be met by large current-account surpluses.

             Running the numbers, Mr Volpon reckons that the current strength of the real implies Brazil’s trade balance switching to surplus in a few years and then increasing by 20% or so year on year. Only the pré-sal, he thinks, can possibly justify such high expectations. If Petrobras disappoints by not producing oil quickly enough, it will find it difficult to go on attracting the foreign cash Brazil, and Petrobras, need. In consolation, though, the real would fall, providing a natural remedy for Dutch disease, and giving the rest of the economy time to breathe.

             Mr Gabrielli, whose company plunges drill bits into the bowels of the Earth with a precision measured in centimetres, seems confident of steering a course that threads its way between the dangers of damaging haste and disappointing delay. For him, the providence invoked by Ms Rousseff lies not only in where the oil was found, but also when. “God hid it until Brazil was strong enough to cope,” he says with a laugh. It will soon become clear whether Mr Gabrielli is right.

             Housing and the economy

             Rising from the ruins

             The housing market still looks grim, but the rental side hints at recovery

              

               

             THERE are two things everyone knows about American economic recoveries. The first is that the housing sector traditionally leads the economy out of recession. The second is that there is no chance of the housing sector leading the present economy anywhere, except deeper into the mire. In the two years after the recession of the early 1980s housing investment rose 56%; it is down 6.3% in the present recovery. America is saddled with a debilitating overhang of excess housing, the thinking goes, and as a result is doomed to years of slow growth and underemployment.

             The economic landscape is unquestionably littered with the wreckage of the crash. Home prices languish near post-bubble lows, over 30% below peak. The plunge in prices has left nearly a quarter of all mortgage borrowers owing more than the value of their homes; nearly 10m are seriously delinquent on their loans or in foreclosure. The hardest-hit markets are ghost neighbourhoods, filled with dilapidated properties. Housing markets are far from healthy. Yet current pessimism seems overdone. A turnaround in sales, prices and construction may be closer than many imagine.

               

             The potential for a strong housing recovery lies in the depths of the bust. America’s housing boom was remarkable for its impact on prices and for the flow of new households into the market, which pushed the home-ownership rate above 69%, the highest on record. Construction also boomed, but less wildly. Housing completions were above average during the boom, but not unusually so, particularly in light of the relatively restrained growth in housing supply during the 1990s (see chart 1). The bust, by contrast, dragged new construction to unprecedented depths. At the current rate, fewer homes will be added to the housing stock this year than in any year since records began in 1968.

             America therefore has only a minor problem of excess housing supply. Under normal conditions, that small glut would quickly have disappeared in a bust on the present scale. But America is now adding new households at a rate well below normal—not because the population is growing more slowly, but because, for example, young people are opting to stay longer in their parents’ home. According to one analysis, there are now 1.5m more young adults (aged 18 to 34) living at home than would be expected, given long-term trends. Thrift imposed by a sickly economy is probably the principal cause. Better prospects for young adults would encourage the forming of new households, buoying the demand for new homes.

             Although total housing supply is not far out of line, the distribution of supply between the rental and owner-occupied markets remains distorted. In September the inventory of newly built houses for sale fell to its lowest level since record-keeping began. But the inventory of existing houses, while falling, remains high. In September the figure dipped below 3.5m, down from over 4.5m in 2008 but still above the 2.5m registered early in the last decade. The total number of vacant homes for sale has steadily declined and is at the lowest level since 2006. But the pace of sales remains extraordinarily low, and foreclosures will continue to prevent a faster decline in inventory.

               

             Rental markets, by contrast, look far stronger. America’s rental vacancy rate stood at 9.8% in the third quarter of 2011, down from a high above 11% in 2009. Vacancy rates in some cities are strikingly low—2.4% in New York City, for instance, and 3.6% in San Francisco—which translates into rising rents. Nationally, rents rose 2.1% in the year to August, in stark contrast to house prices (see chart 2).

             Strength in the market for rentals is beginning to seep into the more troubled owner-occupied sector. Rising rents help housing markets heal on both the supply and demand side, by encouraging renters to consider buying and through the movement of supply into the rental market, easing the glut of houses for sale. The Obama administration hopes to take advantage of better rental conditions to unload some of the more than 200,000 foreclosed-on homes held by the two government-sponsored mortgage giants, Fannie Mae and Freddie Mac, and the Federal Housing Administration (which account for roughly half of all such inventory), on to investors who may rent the properties out.

             Rental-market strength is also rousing a long-dormant building industry. New housing starts rose 15% from August to September of this year, driven by a 53% surge in new structures containing five units or more. In the three months to September construction employment rose by 29,000 jobs. The sector is still some 2.2m jobs below its pre-recession peak, and new hiring there would help a dismal labour market.

             A stranglehold on lending

             The convalescence, however, may be complicated. Housing recoveries have seemed imminent before, only to peter out when the economic outlook weakened. Foreclosures are falling, but they continue to place downward pressure on prices. New proposals from the administration aim to help underwater borrowers refinance, but more lavish assistance for troubled borrowers is too politically unpopular and expensive for Washington’s taste.

             The macroeconomic environment, too, remains troublesome. Housing markets could lurch sharply downwards if a new shock, perhaps from Europe, disturbed the global economy. A new financial shock could rattle confidence and send buyers fleeing, while the flow of mortgage credit from exposed banks would dry up. Lenders carry the scars of the housing crash. Cautious banks are reluctant to lend. Housing-finance institutions, having kept credit standards too loose during the bubble, now seem to be setting them too tight, preventing rising demand and low rates from translating into new sales.

             Yet once the housing sector finds its footing it may quickly gain momentum. A switch from falling to rising prices should encourage banks to make more loans. Higher house values would chip away at negative equity, stanching the flow of defaults and foreclosures.

             A new analysis by Goldman Sachs argues that housing can “punch above its weight” in recoveries. Rising house values boost confidence and spending, and home construction is more labour-intensive than other sectors. A housing recovery should also give monetary policy more traction; low interest rates do less to perk up the economy when housing markets are depressed. Indeed, the Federal Reserve is considering nudging recovery along by buying mortgage assets, which should ease the flow of credit to borrowers.

             Such hopes for housing would smack of an effort to reanimate a corpse, had the bust not so far outpaced the boom. But a turnaround now seems probable on many measures. If it happens, the recovery should become much more vigorous.

             Drugs shortages

             Can’t wait? Must wait

             Barack Obama tries to take matters into his own hands

              

               

             SITTING in the Oval Office on October 31st, Barack Obama tried to look like a man in charge. “We can’t wait for action on the Hill,” he declared. “We’ve got to go ahead and move forward.” The president then signed his latest executive order. With Congress frozen and an election looming, Mr Obama has been trying to exert power on his own. “We can’t wait” is his new slogan.

             The new executive order tries to alleviate a dire scarcity of drugs. This year has seen a shortage of 232 medicines, up from 70 in 2006, according to the University of Utah, which keeps the country’s most comprehensive list. These are mostly injected medicines, such as generic chemotherapy drugs. Many patients have had to delay treatment. A grey market has flourished, with middlemen hoarding drugs and selling them at a premium.

             Fixing this problem has been difficult, in part because its causes are so complex. Concentration among generic drugmakers may be to blame. The top three makers of generic injectables control 71% of the market by volume. When one drugmaker has a manufacturing problem, others rarely step in. It takes time to begin or ramp up production. Firms may also be loth to enter the market; margins on generics are hair-thin. Some argue that Medicare, the public programme that pays for many injected drugs, keeps prices from rising with demand.

             Unfortunately for Mr Obama, his executive order will have limited effect. He has asked the Justice Department to investigate the grey market, a step that will treat a symptom of the shortage but not its cause. The order will shift staff within the Food and Drug Administration (FDA) to speed the review of new suppliers and factories. This “surge team” will help, but it is not a permanent fix, merely shuffling resources within a strained department. The order also urges firms to tell the FDA about production changes that could lead to a shortage of vital drugs. But this is not a new requirement.

             A proper fix will require political co-operation. Mr Obama cannot relax Medicare reimbursement rules on his own, nor does he seem to want to. Creating new reporting rules for industry would require an act of Congress. Indeed, two pending bills would do just that. Unfortunately they have sat still for months, like so much else, and there is little Mr Obama can do about that.

             Murder in New Orleans

             Telly Hankton’s town

             A murderer sows terror, even from jail

              

               

             FOR years New Orleans has been the murder capital of America. And few men in the city are more dangerous than Telly Hankton. In May 2008 he and a cousin engaged in a high-speed gun battle with a rival along South Claiborne Avenue, one of the city’s busiest streets, then rammed the man with their silver Mustang as he fled, in terror, on foot. Mr Hankton calmly killed him with four bullets in the face.

             Once arrested Mr Hankton paid bail of $1m and, according to the district attorney’s (DA’s) office, shot another enemy in June 2009. Police collected 59 shell casings at the scene. He was soon back in jail, but the carnage was not over. Last October John Matthews, owner of the Jazz Daiquiri Lounge on South Claiborne and a witness to the first murder, was shot 17 times in his own house. Police arrested another Hankton cousin in connection with that crime.

             Miraculously, Mr Matthews survived to testify against Mr Hankton in July at the trial for the first murder. It ended with a hung jury, in large part due to the star alibi witness, a manager at the zoo who said she was having drinks with Mr Hankton at a hotel when the murder occurred. But the alibi did not hold up long. The zoo-manager has since confessed that she gave bogus testimony because she was terrified.

             Prosecutors fared better at a retrial in September. This time the alibi witnesses, facing up to 40 years in prison if they were convicted of perjury, failed to show up, and Mr Hankton was convicted of second-degree murder. Under Louisiana law he is now behind bars for life, and the DA’s office intends to go forward with a trial for the 2009 murder. But there are signs that the Hankton reign of terror is not over.

             Nine days after the guilty verdict, someone drove a pick-up truck through the glass doors of the DA’s office at high speed, then backed up and roared off. Two weeks later, on October 15th, John Matthews’s brother Curtis was “shot like a dog”, a friend said, in front of the Jazz Daiquiri Lounge. Curtis Matthews, a retired postman from North Carolina, was running the bar as a favour to his brother, who had left Louisiana after the attempt on his life the year before.

             The city’s leading politicians have wasted little time in condemning this latest killing. “I’m sending a message loud and clear to Telly Hankton and his family and anyone else associated with this: we’re coming to get you,” said Mitch Landrieu, the mayor, on October 18th. The DA’s spokesman acknowledged he had received “certain non-specific threats”, and it is said that other officials have been threatened too.

             The politicians’ chest-beating is overdue. Such crimes might not be shocking in Medellín, but they are not supposed to happen in America. When a known killer is caught, but innocent witnesses are still killed and perjured testimony is conjured up from nowhere, the entire justice system is on shaky ground. As Mr Landrieu put it, the Hankton case is “the symbol of everything that doesn’t work.” It will take a successful resolution of the case, in all its dangerous ramifications, for New Orleanians to have confidence in the system again.

             Artists in America

             Painting by numbers

             An overlooked minority who are not all starving in garrets

              

               Useful for urban revivals, too

             IN A recession the arts may seem a luxury. But they have proved a valuable way to rejuvenate industrial districts and boost communities that once relied on manufacturing. Studies show that in a labour market that prizes well-educated workers, the best way to lure them is often by attracting creative people first.

             Yet there is little reliable information about where artists live and how they are contributing to the national economy. Many still envision them as loners toiling in their garrets, perhaps with a nasty cough. In fact artists (broadly defined to take in all the creative industries) are well integrated into the workforce, and more than half work in the private sector. Though they make up only 1.4% (2.1m) of America’s total labour market, they are highly entrepreneurial and twice as likely to have college degrees. All this comes from a new report by the National Endowment for the Arts (NEA), using data from the annual American Community Survey and the quarterly census of employment and wages.

             Few will be surprised to learn that artists are abundant in New York and California, and thin on the ground in Mississippi and West Virginia. But it turns out that Michigan has an especially high number of industrial designers (presumably because of its once-shiny car industry), and Vermont is rich in graphic designers. The Minneapolis metro area relies heavily on book publishing, whereas Pittsburgh has a disproportionate number of museum workers. Though home to few artists, Mississippi (famous for bluegrass) has quite a number of musicians, though not as many as Tennessee—which also does a thriving line in musical-instrument-making.

             The best-paid jobs go to architects (at least 16% of them foreign-born, the most of any field), followed by film directors and producers. These workers also tend to be the best educated, and male. More than a third of all artists in the study are “designers”, a field that ranges from industrial to floral. Dancers and choreographers seem to have the toughest time of it, earning the worst pay and with the least education. In general, artists’ median earnings are higher than those of the rest of the labour force: $43,000 compared with $39,000 in 2009. Yet sexual bias obtains here too: women artists make just 81 cents for every dollar earned by their male counterparts.

             Conservatives in the West

             Bully meets Nice Guy

             A bitter state Senate race in Arizona has wider ramifications

              

               Immigrants not welcome at the Pearce office

             RUSSELL PEARCE is a tough-talking Mormon Republican from Mesa, Arizona, a bedroom community near Phoenix that was settled by Mormons and is a conservative stronghold. He likes to wear bulging belt buckles and American-flag shirts. He was a deputy of the notoriously forceful county sheriff, Joe Arpaio, before entering politics and, with his gun-loving and government-hating conservatism, rising to become president of the state Senate. Last year he became famous as the author of SB1070, Arizona’s harsh law against illegal immigrants, whom he blames for most things. Sometimes called a “shadow governor”, he has become a sort of brand statement for Arizona politics.

             For many of Mesa’s conservative Mormons, not to mention the rest of the population, all this started seeming excessive. So, earlier this year, Mesans invoked a rarely used Arizonan privilege and petitioned to recall Mr Pearce. Mobilised by Randy Parraz, a Latino activist, volunteers stood on Mesa’s sun-scorched streets and collected signatures. Mr Pearce called them anarchists, and worse. The volunteers called Mr Pearce a sociopath, and worse. The petition succeeded, and Mr Pearce became the first Arizona state legislator ever to be recalled.

             This means that he now has to stand in a special election on November 8th to keep his seat. The big question was who in this tight-knit community would dare to run against him. In July Jerry Lewis, an accountant who now manages a chain of charter schools, began publicly contemplating a run. (Arizona also has a politician called Dean Martin, but that is coincidence.) Mr Lewis had never sought public office and had not even signed the recall petition. But he felt that Mr Pearce gave his district an undeserved reputation for meanness.

             One morning in July Mr Lewis and his brother-in-law were on a 14-mile jog (Mr Lewis likes to run marathons) when a pick-up truck passed them and a man hurled a padlock into Mr Lewis’s groin. The police investigated, but could prove nothing. “This is third-world,” Mr Lewis remembers thinking. He saw the event as a calling and declared his candidacy.

             It has become a bizarre contest. Like Mr Pearce, Mr Lewis is a Mormon and a conservative Republican. “This is a Mormon family feud,” says Dave Richins, a Mesa councilman (and also Mormon and Republican, like most local leaders). What makes it odd is that “I don’t disagree with Pearce on much,” Mr Lewis insists. They both want small government and low taxes, and the rest of it. With so much agreement, a debate between the two candidates was unbearably boring.

             If politics really is about “issues”, the differences come down to tiny nuances on education funding (Mr Lewis, a former teacher, values schools more than Mr Pearce, which Mr Pearce naturally denies.) Immigration, perhaps surprisingly, is a subject that Mr Lewis prefers not even to mention. Yes, he would have opposed SB1070, but for the parts of it that are excessive, not because it is wrong in principle.

             Mesa’s Mormon elders become very discreet when explaining what is really going on. With two Mormons running for president of the United States, the Church of Jesus Christ of Latter-day Saints, much distrusted by mainstream Christians, is currently taking great pains to prove that it stays out of politics. But its theology values families (and thus frowns on the separation, through deportation or incarceration, of illegal family members). Its image is inclusive and global. Mr Pearce and SB1070 have “damaged missionary work” in Latin America, says one Mormon.

             So tone and style have become substance in this race, as arguably in national politics. And what a contrast emerges there. Next to Mr Pearce’s aggression, Mr Lewis embodies niceness and politeness. Aged 55 and fit, he seems to have stepped out of a Norman Rockwell painting. He used to be a Boy Scout leader and a missionary in Hong Kong (he proudly vocalises the eight tones of Cantonese), as well as a baseball coach. His manner of speaking is strange because he is always smiling. His seventh grandchild is due next month, there are Halloween pumpkins all over his modest house, and he displays endless patience in explaining the stark Mormon iconography of the paintings on his walls.

             This, then, is Mr Lewis’s message: he is for civility, good listening and compromise. Mr Pearce’s proxies, by contrast, have sent other signals. After the padlock incident, a fake Twitter account was online for a while, in which Mr Lewis appeared as some sort of pervert. Most brazenly, a third candidate entered the race. Also Mormon but an immigrant from Mexico, Olivia Cortes ostensibly ran against Mr Pearce. But it became clear that she had been placed on the ballot by Mr Pearce’s supporters, including his nieces and a local tea-party boss. A judge ruled that “Pearce supporters recruited Cortes, a political neophyte, to run in the recall election to siphon Hispanic votes from Lewis to advance Pearce’s recall election bid.” Ms Cortes withdrew, but her name remains on the ballots, which may confuse some voters.

             And so Mesans will choose between Mr Lewis, an avuncular amateur with mostly local donors, and Mr Pearce, a sauntering state bigwig with far-flung donors and national fame. It appears to be a tight race. Mr Pearce still commands strong personal loyalties in a small place where most leaders and many voters meet at the local Mormon temple, Arizona’s oldest and biggest. But Mr Lewis, with hardly a proper campaign, has a good chance. Mr Lewis is “a way of getting Pearce’s policies without the asshole”, as one Mormon Republican says. He adds that, in some ways, Mesa is a microcosm of present-day America.

             Lexington

             Sex and pizzas

             The fairy tale of a political original heads towards a sticky end

              

               

             HERMAN CAIN likes to tell the story of his father, Luther, who in the 1950s in Atlanta, Georgia, scraped a living by holding down three jobs, one of which was being chauffeur for Robert Woodruff, the boss of Coca-Cola. Woodruff took such a shine to his driver that when Luther asked for stock in the company instead of occasional gifts of cash, the old man was happy to oblige. If Luther Cain, chauffeur, was half as charming as Herman, would-be president of the United States, the story makes perfect sense. Of all the front-runners for the Republican nomination, Mr Cain has been by far the easiest to like.

             Mr Cain’s charm and intelligence had by the start of this week propelled the self-made pizza plutocrat to the front of the pack in the race for the Republican nomination. Not for nothing does his latest book, “This Is Herman Cain!”, the promotion of which has sometimes appeared to take precedence over his actual campaign, have an exclamation mark in its title. Almost everything about Mr Cain invites some sort of exclamation. He was a rocket scientist for the Navy! He survived stage-four cancer! Mr Cain is a Baptist preacher and motivational speaker: he can fire up an audience, stoke it to its feet and have it erupt with fist-pumping cheers. Voters who meet him in person are beguiled by his big smile and southern twinkle.

             Could he really be the One?

             Even before the harassment stories reared their head, his popularity was beginning to perplex professional political analysts. True, he was surging in the polls, but should they take his chances of becoming president seriously? Was he even serious about his own chances, or simply angling for book sales and a bigger chat show? Signs that he might not expect actually to win the nomination include a failure to campaign strongly in first-voting Iowa or to build an organisation or war-chest strong enough to carry him through later states if he did win there. The consensus among the cognoscenti was that he was a no-hoper, though Nate Silver, a statistical wiz, touched off a fierce debate by musing on the New York Times website as to whether Mr Cain had absolutely no chance of winning the nomination or, say, one chance in 50.

             This week, alas, all such calculations were knocked to one side. Mr Cain’s spell between 1996 and 1999 as chief executive of the National Restaurant Association in Washington, DC, had appeared to be one of the duller way-stations in the candidate’s otherwise compelling life story. This week he returned to Washington to explain the snappy beauty of his “9-9-9” plan to revive the economy by scrapping the income tax and replacing it with a flat tax and sales tax. On his arrival, however, news broke that when he was the association’s boss at least two of its female employees complained that he sexually harassed them.

             Up to this point, Mr Cain’s campaign had been gloriously unorthodox. An ad in which, against the usual bombastic soundtrack, his manager stares silently into the camera drawing on a cigarette struck some people as dotty, others as brilliant. “Let Herman be Herman” became his slogan, as the candidate came to see his relaxed personality as his most devastating weapon.

             Can Herman continue to be Herman in the face of the harassment allegations? Perhaps, especially if the complaints against him are shown to have been untrue, unproven or exaggerated. But some of the originality has already started to drain out of the Cain narrative. For all the unorthodoxy of his campaign so far, the tale that unfolded this week has followed a script containing many of the plot twists that have become drearily familiar from previous political sex scandals in America.

             First, Mr Cain, like many before him, ignored the golden rule, which is to tell all at once before the media find out anyway. The day after Politico broke the story, he denied (and continues to deny) ever having harassed anyone, claiming that after an investigation the charges against him were dismissed. He also said he was unaware of any financial settlement being paid. As the day wore on, however, he started to recall more details. Yes, there had been some sort of agreement under which one of the women might have been paid three months’ salary, but he could not remember whether he signed that agreement himself. The next day the New York Times reported that one of the women had in fact been paid a full year’s salary of $35,000.

             Next Mr Cain complained, and some of his friends agreed, that the story was not a case of the newspapers doing their job but a racist “witch-hunt”. Brent Bozell, president of the Media Research Centre, which purports to unmask “liberal bias”, said that Mr Cain had predicted months ago that he might face a “high-tech lynching” like the accusations of sexual harassment that afflicted Clarence Thomas during his confirmation hearings for the Supreme Court. “In the eyes of the liberal media”, said Mr Bozell, “Herman Cain is just another uppity black American who has had the audacity to leave the liberal plantation. So they must destroy him, just as they tried destroying Clarence Thomas.” By November 2nd Mr Cain was accusing his bouffant Republican rival, Rick Perry, of orchestrating a smear campaign against him.

             And so it invariably goes in America’s paranoid, super-charged politics. The lovely bubble of the Cain story has popped, making it harder for those bewitched by his silver tongue and folksy charm to continue to overlook his frequent gaffes and flaws, which include flip-flops on abortion and a comprehensive ignorance of the world beyond America’s shores. On television this week he gave a grave warning: China is trying to develop nuclear weapons! It has had them for half a century. For a while, Mr Cain and his story reminded Americans of something rather wonderful about their country. Now, perhaps, too much light has been let in on the magic.

             Economist.com/blogs/lexington

             Nicaragua’s presidential election

             The survivor

             Buoyed by a growing economy and Venezuelan cash, the Sandinista leader who toppled a dictator is set to win an unconstitutional third term

              

               

             SPORTING sunglasses and military fatigues, Daniel Ortega’s portrait graced thousands of student-bedroom walls in the 1980s. His Sandinista guerrillas overthrew Anastasio Somoza, whose family had run Nicaragua as a private fief for four decades until 1979, and inspired even more support when the United States began an unsuccessful covert war to remove them. Mr Ortega lost power in the country’s first-ever free election in 1990, but was voted back into office in 2006. On November 6th he is likely to win another five-year term.

             The world’s romance with his Sandinista National Liberation Front (FSLN) has soured. Whereas Mr Ortega was once a symbol of victory over tyranny, he is now a cheat. Local elections in 2008 saw vast fraud, with the FSLN wrongly awarded some 40 mayoralties. Foreign donors suspended over $100m in protest. This year the signs are ominous. Voting cards have not been delivered in some areas, and accreditation of opposition parties’ agents has been slow. The government has admitted a few EU election monitors, but no independent domestic observers.

             Even Mr Ortega’s presence on the ballot is disputed. Since presidents are limited to two non-consecutive terms, the incumbent and two-time officeholder is doubly barred. But the Supreme Court gave him the go-ahead in 2009, deciding (on a weekend, when hostile judges were away) that the ban violated his right to equal treatment. Mr Ortega later extended the terms of several of its judges after the legislature could not agree on their successors.

             After Fidel Castro, Mr Ortega is the joint-least popular leader in the Americas, according to Latinobarómetro, a regionwide poll. But at home he has more support than ever. Polls give him around half the vote, up from the FSLN’s typical 40%. The opposition has formed an alliance against him. But its candidate, Fabio Gadea, a 79-year-old radio journalist, lags behind with about 30%. The FSLN is set to win control of the legislature, and perhaps a constitution-changing supermajority.

             The Sandinistas are popular in much of the country. In León, a northern city where the first Somoza dictator was shot dead in 1956, the FSLN’s end-of-campaign parade drew thousands. “Daniel is the president of the poor, and Nicaragua is on the up,” says Marco Urroz, a revolutionary veteran who gives tours of a museum showing photos of teenaged compañeros wielding rifles. Rosario Murillo, the first lady and communications minister, has helped transmit this enthusiasm to the 70% of the population that is under 30.

             The rhetoric is backed up by an economy that is far stronger than it was during Mr Ortega’s first term, when inflation topped 30,000%. Nicaragua is still the poorest country on the American mainland, with an average income of $1,100. But last year it had the fastest growth in Central America after Panama, a feat it may repeat in 2011. Part of the mini-boom is caused by the rising price of food, which makes up a big chunk of Nicaragua’s economic output. Mr Ortega has also courted investment with tax breaks and business-friendly regulations that belie his “socialist” brand. Garment factories are moving from Honduras to a Nicaraguan free-trade zone. Call-centres are the next target. And whereas Venezuela has expelled the “imperialist” IMF and World Bank, Nicaragua recently got a friendly write-up from the Fund. The Bank rates it as the Central American country that best protects investors’ rights.

             The treasury has been helped by Mr Ortega’s alliance with Venezuela’s president, Hugo Chávez. Nicaragua buys $1 billion a year of Venezuelan oil, and gets half of it back in low-interest, long-term loans. The money is split between investments that range from wind farms to takeovers of troublesome TV channels; subsidies for electricity and transport (a bus ride costs just 11 cents in Managua); and social programmes like Zero Hunger, which gives livestock to poor families. The spending is opaque, and may have favoured FSLN members. But poverty has fallen, and the share of homes with electricity has risen from 55% in 2007 to 70%. Mr Chávez may squirm, but his cash is funding a World Bank-designed update of the land registry.

             The opposition calls the Chávez bonus, worth 7-8% of GDP, a form of electoral blackmail. The FSLN likes to hint that it will vanish if anyone else takes power. On October 25th Rafael Ramírez, Venezuela’s energy minister, said in Managua that the deal was contingent on continued “revolution”—a heavy hint in favour of the FSLN.

             But the bonus may soon evaporate. The ailing health of Venezuela’s economy, and of Mr Chávez, has caused Mr Ortega to look for allies in the private sector. Businesses have benefited from the country’s macroeconomic stability—and from the government’s social spending which, says Manuel Ortega (no relation) of the University of Central America, helps to keep wages low. Campaign finances suggest that companies are supporting the president. Eduardo Montealegre, the runner-up to Daniel Ortega in 2006, says he received $6m in business donations that year. This time Mr Gadea has got less than $1m. Up to September, the FSLN had outspent him by a ratio of over three to one. Pictures of Mr Ortega are all over Managua, but Mr Gadea has just 16 billboards nationwide.

             The blurring of the line between the FSLN and the state makes it hard to gauge Mr Ortega’s true level of support. At a pro-Sandinista rally in Managua, a group of teenagers declare that they are marching “for the love of the party”. Another young man admits he is there because he fears missing the event would cost him his job in a public hospital. Long lines of people wait in the rain for public buses, which have been diverted to ferry people to the march.

             Some predict trouble if Mr Ortega resorts to fraud once again. “In 2008 people were angry and I stopped them burning down the [offices of the] electoral authority,” says Mr Montealegre, who is widely believed to have won Managua’s mayoral election that year. “This time, I won’t be able to stop anybody.” The government is taking no chances: already, it has put up a steel barricade around the electoral offices, where officials will count, or miscount, the votes. More and more, Mr Ortega’s government has a counter-revolutionary feel.

             Brazil’s former president

             A new battle for Lula

             The political implications of a cancer diagnosis

              

             ON OCTOBER 29th Brazilians learnt that Luiz Inácio Lula da Silva, their former president, had been diagnosed with cancer. The tumour on his larynx was probably caused by smoking: though high blood pressure prompted the 66-year-old to quit last year, he started as a teenager and liked cigarillos (unfiltered small cigars). Two days later he started chemotherapy at the Sírio-Libanês Hospital in São Paulo, where his successor, Dilma Rousseff, was treated for lymphoma in 2009. He expects to undergo radiotherapy as well, and has cancelled all travel plans for three months.

             Lula’s openness about his illness stood in marked contrast to the secrecy regarding the health of Venezuela’s president, Hugo Chávez. Brazilians learnt of Lula’s cancer the same day that he did; Venezuelans only found out weeks after Mr Chávez was treated for a “pelvic abscess” in Cuba that a cancerous tumour had been removed. Details of his condition are still unknown. Lula told his doctors to release bulletins on his progress; Mr Chávez’s medical team has still not said a word.

             The Brazilian press responded to Lula’s frankness in kind. Will Lula have to stay off the booze, journalists asked? (Definitely). Will he lose his hair? (Perhaps, and his beard.) His voice? (For a while, probably, though chemotherapy and radiotherapy were chosen over surgery partly to protect his growly delivery.) Public curiosity thus satisfied, the media have now moved on. Meanwhile in Venezuela, state-run television repeats that Mr Chávez is cured—and on the streets rumour runs wild.

             Barring a remarkable recovery, candidates for Lula’s Workers’ Party in the 2012 local elections will have to campaign without his endorsements. But the words he does manage will be hard to ignore. Sympathy will add weight to his picks for candidates and calls for coalition unity.

             Ms Rousseff likes to talk things over with her predecessor. But she can easily stand on her own two feet. And Lula’s counsel has missed the mark of late. He has repeatedly advised her to retain ministers despite claims of corruption—only for her to end up having to fire them days later.

             Before she took office, Ms Rousseff’s limited electoral experience meant that she was widely regarded as a placeholder in office—Brazilian presidents must take an election off after serving two consecutive terms. Her strong performance so far has put paid to that idea, and Lula himself has said he will support her re-election in 2014. But behind the scenes some party members have called for Lula’s return.

             As Ms Rousseff herself proves, cancer survivors can be elected president in Brazil. But though Lula’s doctors say his prognosis is “very good”, such voices are now likely to fall quiet—for a while at least.

             Currency controls in Argentina

             Unfree exchange

             An ill-advised attempt to prop up the peso

              

               

             INFLATION and capital flight have steadily weakened Argentina’s peso since Cristina Fernández became president in 2007. Back then one peso bought $0.32; today it buys just $0.24, despite recent support from the central bank (see chart). Long accustomed to currency crises, Argentines price homes and cars in dollars, and race into greenbacks at the first sign of economic trouble. Fresh from re-election, Ms Fernández is now pre-emptively stopping them from trying.

             On October 31st the government began requiring bureaux de change and banks, who could previously conduct transactions with little oversight, to submit clients’ tax-identification numbers online to the tax agency for approval. It sent 4,400 inspectors to money-changers nationwide to enforce the rule.

             Officially, the restriction targets money-laundering. “People above board should remain calm,” said Amado Boudou, the economy minister. “Those in the black economy should be very nervous.”

             But in practice it is ensnaring everyone. Some operators closed their doors, saying they had to process the new rules. Those that did open drew queues up to two hours long. Yet most people who lined up waited in vain: around 70% were rejected on the first day, including many who were wrongly accused of lacking legitimate funds to change the sums they had put forward.

             If the government hoped to strengthen the peso or improve financial transparency, it has accomplished the opposite. Fearful they would lose access to hard currency, investors bought Argentina’s dollar-denominated bonds and dumped their peso equivalents. If legitimate exchanges remain blocked, a black currency market will surely emerge.

             These could just be teething troubles while the new system beds down. Even if Ms Fernández is serious about imposing currency controls, she may have to retreat if an uproar ensues. However, nervous Argentines must feel even more jittery now that a presidential whim can stop them from changing money.

             Cleaning up Japan’s nuclear mess

             The twilight zone

             Its owner fears not just radiation leaking out of the Fukushima plant, but also bad news

              

               

            IT IS another world beyond the roadblocks stopping unauthorised traffic from entering the 20km (12.5-mile) exclusion zone around the Fukushima Dai-ichi nuclear power plant. The few people inside are dressed in ghostly white protective suits. Town after town was abandoned after March 11th, and spiders have strung webs across the doorways. An old lady’s russet wig lies in the road, lost perhaps as she took flight after the earthquake, tsunami and nuclear disaster. Outside the “Night Friend” nightclub in Tomioka, 9km from the nuclear plant, this correspondent was confronted by an ostrich with a feral glint.

             Journalists are supposedly barred from the exclusion zone, though sympathetic evacuees, many furious with the authorities about their state of limbo, help provide access. Some of the 89,000 displaced residents have been given one-day permits to go home and each collect a box of valuables. To an outsider, the size and recent prosperity of the abandoned communities is striking. As well as the rice paddies, now overrun with goldenrod, are large businesses and well-built schools for hundreds of children.

             Patrol cars stop passing vehicles. The police are particularly vigilant in preventing unauthorised people getting near the stricken plant, owned by Tokyo Electric Power (Tepco), Japan’s biggest utility. The air of secrecy is compounded when you try to approach workers involved in the nightmarish task of stabilising the nuclear plant. Many are not salaried Tepco staff but low-paid contract workers lodging in Iwaki, just south of the exclusion zone.

             It is easy to spot them, in their nylon tracksuits. They seem to have been recruited from the poorest corners of society. One man calls home from a telephone box because he cannot afford a mobile phone. Another has a single front tooth. Both are reluctant to talk to journalists, because a condition of their employment is silence. But they do share their concerns about safety. One, who earns ¥15,000 ($190) a day clearing radioactive rubble at the plant, says he was given just half-an-hour of safety training. Almost everything he has learned about radiation risks, he says, came from the television.

             A strict hierarchy exists among the workers at Fukushima. Tepco’s own salaried staff are in a minority. The firm employs a top tier of subcontractors, from the builders of reactors such as Toshiba and Hitachi. They, in turn, subcontract work to builders and engineers, who subcontract further, down to small gangs of labourers recruited by a single boss. Some lower-ranking companies may have ties to the yakuza, Japan’s mafia, and among the lowest-paid recruits are members of the burakumin minority, who have long been discriminated against.

             Those on the lower rungs, say labour advocates, are particularly vulnerable. They often have no corporate health, pension or redundancy benefits. Hiroyuki Watanabe, an Iwaki councillor from the Japan Communist Party who is campaigning to protect Dai-ichi workers, has a document showing one worker’s accumulated radiation exposure. In two months it had reached almost 33 millisieverts, or a third the level normally permissible for those working on a nuclear accident in a year. Mr Watanabe reports many safety breaches. Workers wading through contaminated water complain that their boots have holes in them. Some are not instructed in when to change the filters on their safety masks.

             Mr Watanabe believes Tepco is cutting corners because cash is tight. Even such basic tools as wrenches are in short supply, he claims. Tepco is shielded by a lack of media scrutiny. The councillor shows a Tepco gagging order that one local boss had to sign. Article four bans all discussion of the work with outsiders. All requests for media interviews must be rejected.

             Those higher up the rungs appear to be treated better—though they, too, are sworn to secrecy. One engineer who has played a front-line role in helping cool the meltdown of Fukushima’s three reactors spoke unwittingly to The Economist. A swarthy man in his 50s, he had worked in nuclear-power stations for 25 years. Once he heard about the accident, he knew it was his duty to help, since so few people understood how to run reactor systems. He came to the Dai-ichi plant in May, despite family protests. Then, he said, the hardest work was done by the low-level labourers. They had so much rubble to clear, he says, that they often keeled over in the heat under the weight of their protective gear. Taken out in ambulances, they would usually be back the following day.

             The engineer’s most stressful months, he said, were in June and July, once enough rubble was cleared to let him work on the systems. Seven-hour shifts usually involve an hour on and an hour off. Before he starts he must put on two sets of protective clothing, four pairs of gloves and a helmet with breathing apparatus, all of which is taped up so that not a particle of skin is exposed. At the end of every hour, he has to take off the protective layers and replace them with new ones before starting again. (Tepco says, with attention to finickety detail, that it has accumulated a mountain of 480,000 such suits in need of disposal.) During the busiest months, the hour-on, hour-off rule was foregone, the engineer said. “Though everyone is really trying their best, most of the Tepco guys in head office are clueless about what’s going on. No one has any idea of the conditions we’ve had to work under.” But then he added: “I’m not leaving this until I’m done. Never.”

             The brink of bankruptcy

             Government officials say some of the low-level safety breaches may be justified, given that Tepco is on a war footing and that its top priority is to stabilise the reactors. This week Yasuhiro Sonoda of the ruling Democratic Party of Japan drank a glass of water from the Dai-ichi plant in an attempt to play down safety concerns. On November 1st the government also said that it intended to invite journalists to Dai-ichi for the first time—though it muddied the message by discouraging women (for health reasons, it said, and because there are no women’s loos at the plant). The following day Tepco reported unexpected signs of nuclear fission in one of the stricken reactors, forcing it to inject boric acid against renewed radiation leaks. Tepco’s share price fell sharply.

             The physical mess at Dai-ichi is mirrored in Tepco’s finances. A leaked plan drawn up with the government proposes to cut costs by ¥2.5 trillion over ten years. Government officials insist they will not let the utility cut corners on safety. But Tepco is already expected to lose ¥570 billion this financial year, rendering it barely solvent. The government was expected to confirm massive support of Tepco on November 4th, with a ¥1 trillion injection, mainly to help the 89,000 evacuees.

             For those forced from their homes as a result of the disaster, compensation cannot come soon enough. But increasingly they are fed up with the shroud of secrecy thrown over the Fukushima plant and the abandoned towns and villages where families had lived for centuries. The less media coverage there is, the more they worry that their plight will be forgotten—and the less pressure there will be on Tepco to cough up proper compensation. That appears to be one reason some are starting to take the law into their own hands and smuggling journalists into the forbidden zone.

             Thailand’s floods

             Rising damp

             Waters threaten the capital, the economy and the new government

              

               Bangkok sandbagged

             THE capital is now under siege from the waters slithering down from the north towards the Gulf of Thailand. Shops, businesses and government offices in Bangkok cower behind makeshift concrete parapets and piles of sandbags. Bridges and elevated expressways are filling up with fleets of parked cars, to spare them from the deluge below. And all the time people speculate about just how bad it might get in a city the Europeans once called the Venice of Asia.

             Despite the defences, there is likely to be some flooding. The government desperately wants to divert water around the capital, to east and west, but the volume is too great. The desire to save densely populated Bangkok is understandable. But the strategy is angering those in the northern suburbs, where neighbourhoods are filling up with water as the sluice gates remain closed. An admirable steadfastness among Thai people is wearing thin.

             Even if much of central Bangkok is spared, the flooding has had a dramatic enough impact already. Over 400 people have died and about 1.6m hectares (4m acres) are now under water. South-East Asia’s second-largest economy has been battered. So, too, has the reputation of the new government under Prime Minister Yingluck Shinawatra, elected in a landslide just four months ago.

             The economic consequences could persist for months, if not years. Take the experience of one midsized textile manufacturer, representative of many sodden local businesses. The owner employs about 2,000 people at two factories. One factory has been overwhelmed by water almost 1.5 metres (4 feet) deep. The other is now under threat. The employees from the first had to be evacuated, although about 100 have stayed behind to look after what is left as best they can. They live in the factory’s dormitory, and survive on food deliveries brought in by boat.

             The owner estimates that if the factory remains under water for a full month, it could take two months more to clean up. But so badly has his supply chain been affected that it will take a further three months before he ships out his first end-product again, ie, next April—a loss of about half a year’s production. He is insured for damage to his property, but not for his loss of earnings. The latest estimate of the total flood damage, from the University of Thai Chamber of Commerce, is $17 billion. The central bank has slashed its forecast for economic growth this year from 4.1% to 2.6%.

             Thailand is an attractive destination for overseas investment, and foreign companies, particularly Japanese ones fleeing a strong yen, have been badly disrupted. A quarter of Japan’s 2,000 manufacturers in Thailand, located in the vast industrial estates north of Bangkok, have been hit by the floods. Divers have been used to salvage valuable equipment from submerged plants.

             For some, the consequences have been severe. Honda’s main car plant at Ayutthaya, north of Bangkok, has been shut since October 4th. Normally 6,000 workers churn out 240,000 cars a year, a twentieth of Honda’s global output. The company is not sure when the factory will reopen. It has withdrawn its earnings guidance for the year, admitting that it was in a “really tough spot”. Toyota and Mitsubishi have also been affected. Canon says that the Thai floods may cut annual sales, mainly of printers and cameras, by ¥50 billion ($690m).

             Perhaps Thailand’s longer-term prospects are not so bad. If foreign manufacturers move their plants, it will probably be to drier places in Thailand. The impact on the government is another matter. No one blames Ms Yingluck for the lapses in planning and water management that exacerbated this fiasco, let alone an unholy slew of rain this year. But her critics say she should have better co-ordinated the response. Little was done to force provincial governors to work out a common strategy. The prime minister and the governor of Bangkok have even rowed in public over which of them has authority to open particular sluice gates. Not a glorious start to Ms Yingluck’s term in office, and it is unclear that people’s memories of it will recede with the floodwaters.

             Activism in China

             Blind man’s bluff

             The case of a blind Chinese activist spurs internet activism

              

               

             ON A local-government website, Chen Guangcheng is still listed as one of Linyi prefecture’s top news personalities of 2003: “a young blind person who upholds the rights of the handicapped”. As well as helping the disabled win benefits, Mr Chen helped farmers in his coastal Shandong province resist illegal land-seizures. Local officials, however, have long since tired of Mr Chen’s activism. In 2006 he was sentenced to four years in jail for exposing the brutality of officials enforcing family-planning regulations. Since his release, Mr Chen has been a prisoner in his own home, watched around the clock by hired thugs. They prevent well-wishers even from entering his home village of Dongshigu, sometimes with violence. Yet recently an online campaign has encouraged a growing number of Mr Chen’s supporters to attempt to visit.

             The use of the internet to mobilise people to visit Mr Chen has rattled officials far beyond Shandong province. It is the first time in China that activists have made such a persistent effort to show up in solidarity with someone under house arrest. It also coincides with attempts to use weibo, or microblogs, to gain support for independent candidates in elections to low-level “people’s congresses” that have been taking place around the country. Though the congresses have little power, and it is very difficult for truly independent candidates to stand, the polls still make the Communist Party nervous.

             Activists know they have little chance of meeting Mr Chen, whose house is floodlit at night and cut off from mobile-phone networks. But there have been numerous quixotic forays. On October 14th a number of disabled men and women from neighbouring Anhui province were turned away. On October 30th, says Human Rights in China, an NGO based in New York, a group of 37 people who made the attempt to get through was attacked by around 100 thugs.

             Some state-controlled media have been emboldened, too. One Beijing newspaper, Global Times, published an editorial on October 12th saying allegations that Mr Chen’s human rights were being abused “may not be simply invented”. A Shanghai newspaper, Oriental Morning News, then criticised Global Times for being too soft on the local government. It described how a reporter for a publication owned by the official news agency, Xinhua, had been beaten up while trying to visit Dongshigu on October 5th. This journalist, as it happens, has since been forced to resign.

             The central authorities, however, have shown no disapproval of the Linyi authorities’ heavy-handedness, even though Mr Chen has posed no direct challenge to the Communist Party itself, while his case has featured prominently among human-rights concerns raised by Western governments. The only concession has been to allow Mr Chen’s six-year-old daughter to leave the family house to go to school.

             The authorities in Beijing show increasing anxiety about activists’ use of the internet. Beijing Daily said on October 17th that “serious flaws and problems” in the rapid development of weibo services needed to be addressed in order to prevent “huge social harm”. A day later an annual meeting of the party’s Central Committee called for strengthened “management” of the internet. This presumably will not involve letting Mr Chen and his family use it.

             Nepal

             Peace, in your own time

             A breakthrough over former fighters could ease political chaos

              

               

             NEPAL’S nasty Maoist insurgency ended five years ago, after ten years of fighting and 18,000 deaths. A ceasefire saw some 19,000 rebel fighters moved into camps across the country, but brought little stability. As long as no one could decide what to do with the leftist ex-fighters, parties could not agree on a new constitution. Without one, politics has been a mess. Governments have formed and disintegrated faster than a snowflake in a Himalayan gale.

             So the relief was palpable in Kathmandu on November 1st, when the leaders of four main political parties held hands and announced a deal for the Maoist ex-fighters. Nearly two-thirds will don civvies, their pockets stuffed with a handout of up to $11,500 each (more than nine times an average Nepali’s annual income). The remaining 6,500 or so ex-fighters will be shunted into a new army unit to guard forests, provide disaster relief and do other useful things.

             Getting the army to accept its former Maoist enemies was hard. Tougher still was wrangling among the Maoists themselves, who now dominate the government. Pragmatists like the current prime minister, Baburam Bhattarai, managed to overrule party ideologues who do not want full integration and still openly oppose the deal. Mr Bhattarai has been shrewd in other ways too, for instance, in warming up relations with India that had cooled as Nepal grew closer to China.

             With luck, more problems can now be resolved. “We’ve been waiting for this moment for five years”, enthuses Anagha Neelakantan of the International Crisis Group, a think-tank. Drafting the constitution may take another six months. That looks tricky but doable. An unusual, informal deal has reportedly been struck allowing the parties, each of which is too small to rule alone, to take turns in government. Mr Bhattarai is likely to stay in office until the constitution is done, probably next year. Then the opposition Nepali Congress Party expects to move into government to oversee elections. None of this will be easy. But at least parties are finding a framework for peaceful compromise, and that must count as progress.

             Indian rural welfare

             Digging holes

             A maverick minister lays into a hallowed programme

              

               Machine-free zone

             IT LOOKS like risky politics for Jairam Ramesh, who runs India’s biggest civilian ministry, in charge of rural development, to lash out at his own government’s flagship welfare scheme. Mr Ramesh, who got his cabinet post in July, has sparked a row in the past week over corruption and poor results within a public programme that guarantees 100 days of paid work a year for any unskilled rural labourer who wants it.

             Sadly, he is only stating the obvious. India’s biggest single welfare project was launched in 2006 and costs over $8 billion a year. Alone, it eats up over 3% of all public spending, and officials say over 50m households last year got some benefit from it. Supporters say it has helped to lift rural wages—on average workers get about 120 rupees ($2.40) a day—which should mean falling poverty. But in many districts, especially poorer ones, huge amounts are stolen or wasted.

             In his office in Delhi, listening to Vivaldi, Mr Ramesh criticises “uneven, patchy” implementation of the scheme. He complains about months-long delays in getting workers paid. And he describes wasteful construction of items such as roads that quickly crumble away. The results, in many areas, fall short of the huge sums spent. Mr Ramesh says he has written furiously to all the states’ chief ministers to highlight the deficiencies.

             Too much money ends up in crooked officials’ pockets. The gloomiest estimates, such as one by Surjit Bhalla, a prominent economist, suggest two-thirds of funds might be squandered. That looks extreme, but abuse can be crass. In Gonda, a sugar- and rice-farming district in eastern Uttar Pradesh, an anti-graft campaigner, Brijesh Pandey, claims he has tracked how “ongoing scams” divert a quarter of the jobs funds. Common complaints are of officials who pocket wages signed out for non-existent workers.

             Mr Ramesh is still a big supporter of the scheme. But he blames state politicians for ignoring or even colluding in “brazen” theft of central funds by officials of the country’s 250,000 panchayats (village administrations), who run it on the ground. His ire is aimed especially against giant Uttar Pradesh. In late October he sent an open letter to its chief minister, Mayawati, saying her administration had ignored 22 demands from monitors in his ministry that she look into graft. He talked of cutting jobs funds for the state or sending in the Central Bureau of Investigation. In truth, neither option is practicable, so Ms Mayawati rebuffed him.

             That attack, picking on a high-profile opponent ahead of looming state elections, looks like political opportunism. But at least when Ms Mayawati’s supporters and others dared the minister to take on similar abuse in states run by his own Congress Party, to his credit he did so: on October 29th he accused Maharashtra of rotten implementation of the jobs scheme. Unhappily that state’s politicians, his own political allies, also sent him packing. Internal audits and various investigative teams suggest he could make examples of gross irregularities in over 100 villages in several more states. Other audits are now scheduled to follow.

             Why air all this now? Much is about politics. Mr Ramesh, who is close to Sonia Gandhi, the Congress boss, runs a ministry that will dish out huge sums to the poor ahead of elections. He knows urban folk are fed up with Congress over other massive scams and may not be pulled back to the fold. So it will be more pressing than ever to tap huge banks of rural voters. Congress would like the man in the paddy to credit it for rolling out rural welfare—the scheme’s official name, the Mahatma Gandhi National Rural Employment Guarantee, helps with that—but also for fighting graft within it.

             Mr Ramesh’s openness, however, could go further, taking on problems beyond corruption. The programme has many supporters, including the World Bank and other international bodies. Poor rural folk like it, a sign that many are indeed getting money. It has brought unexpected benefits to some, including banks: 100m rural Indians have opened accounts so they can receive their wages. And there is tentative evidence of rural lives improving under the scheme, with more land coming under cultivation, dietary habits changing and fewer villagers being forced to leave home in search of work.

             Yet even the scheme’s boosters admit to structural flaws. A review published by the ministry in September conceded that the lack of skilled technicians at almost every site, along with rules banning the use of machinery or contractors (labour is usually by shovel), mean that the ponds, roads, drains, dams and other assets are often of wretched quality. The public works do little to better India’s awful infrastructure: many get washed away each monsoon, only to be rebuilt, badly, the following year. Nor are villagers getting together, as had originally been hoped, to decide what they most need to build.

             Others grumble more loudly. Private employers, including builders and farmers in Punjab who rely on migrant workers at planting and harvest times, say the scheme pushes up labour costs. And at times workers are simply not available. That may be inevitable, as the most desperate see their incomes rise. More worrying, the jobs scheme gives its workers no skills or training, leaving them as unproductive and ill-equipped for other work as before. Welfare in the villages is welcome; wealth-creating jobs would be better yet.

             Banyan

             Echoes of dreamland

             Forty years on, a cold-war security pact rooted in the colonial past survives

              

               

             IT HAS not drawn much attention. But as 40th-birthday bashes go, it has been rather a spectacular affair. About 4,000 servicemen from five countries, 19 warships, 68 military aircraft and two submarines have been taking part in exercises in South-East Asia to mark the anniversary of the conclusion on November 1st 1971 of the “Five Power Defence Arrangements” (FPDA). And the five defence ministers—from Australia, Britain, Malaysia, New Zealand and Singapore—convened in Malaysia and Singapore to give the occasion a high-level gloss.

             You might imagine that they would be discussing an overdue retirement for arrangements made for an entirely different world. The security threats perceived in 1971 have evaporated. British colonial rule, which had come to an end just a few years before, is now ancient history to most Singaporeans and Malaysians, born since independence. For them the idea of looking to the British, Australian and New Zealand armies for security must seem bizarre. Meanwhile, regional co-operation has spawned a plethora of new security forums and organisations.

             Yet the FPDA survive, and show no signs of packing up. Indeed, sheer longevity has in some ways strengthened them. They remain, in a phrase coined in Australia’s defence ministry, South-East Asia’s only “multilateral security arrangement with an operational dimension”. Their durability is testimony both to the flexibility of the armed forces that have looked after them, and to a continued nervousness about the region’s security.

             The FPDA were a response to Britain’s precipitate withdrawal of its forces from “East of Suez”, which caused deep anger and resentment in the other four countries. They are far from a full-fledged military alliance. They provide merely for the five countries to “consult” in the event of an attack on Singapore and Peninsular Malaysia (Sabah and Sarawak, the Malaysian states on Borneo, are excluded). This gave Singapore and Malaysia breathing space to build up their own armed forces, while under some protection from British air defences.

             Earlier in 1971, when asked in Parliament in London about the threat the arrangements were intended to counter, Edward Heath, prime minister at the time, referred to “forces outside [Malaysia] in southern Thailand and north of the Malaysian border”. Presumably, he meant the communist insurgency still simmering in the border area. Presumably, too, he was fibbing tactfully: the real danger was seen as Indonesia, which until recently had been eyeing Malaysia and Singapore as bits of its territory lopped off by an accident of colonial history. Among other worries, the Philippines had not dropped a claim to Sabah. And, of course, the Vietnam war was raging, raising fears of South-East Asian dominoes toppling to Soviet-aligned communism.

             Malaysia’s and Thailand’s armed communists have long given up the ghost. Indonesia and the Philippines have for over 40 years been joined with Malaysia and Singapore in the Association of South-East Asian Nations (ASEAN), and have stopped pursuing irredentist claims. Even Vietnam, the first domino in the queue, has been part of the family since 1995. And Britain’s weight in the world has dwindled, as have its defence budgets. Even before its latest defence review outlined painful cuts, and despite the war in Afghanistan, Britain’s defence expenditure, as a proportion of GDP, was less than half what it was in 1971.

             So the FPDA’s survival seems puzzling. Partly, put it down to inertia—no compelling reason to terminate them. But also all five powers gain different benefits from them. Britain keeps a toehold in South-East Asia. New Zealand and Australia, which has made the biggest commitment of the “travelling” powers, see their own security as bound up with that of the region. Singapore and Malaysia acquire expertise and training from the other armies. Importantly, their armies also learn to work together, even when relations between their governments occasionally turn fractious.

             The FPDA have also deftly diversified. The ministers now discuss piracy, cybersecurity and humanitarian and disaster-relief operations. And the pact provides a mild sort of reassurance against other forms of instability. In the late 1990s that again meant Indonesia, in turmoil after the end of the Suharto dictatorship, sparking fears of disintegration and mass flight.

             Now, though it is a fear that dares not speak its name, it means China, and the assertive posture it has adopted in recent years towards disputed territorial claims, such as in the South China Sea. As Philip Hammond, Britain’s defence minister, put it this week, a possible threat to regional security is a “miscalculation over a territorial claim, probably over an island somewhere”. Another area of possible miscalculation might be the Malacca Strait, through which most of China’s oil passes.

             Tim Huxley, in Singapore for the International Institute of Strategic Studies, a British think-tank, points out that there is no way the FPDA can be part of “a balancing mechanism” to China, or that it will come into play in the South China Sea. Of the five, only Malaysia has a direct stake there. Rather, the FPDA’s persistence reflects “a concern that the distribution of power is in flux, creating a pervasive sense of insecurity that is hard to pin down.”

             On the way to the forum

             The bewildering array of regional security talking-shops has so far failed to still such worries. Most hopes now are vested in a grouping known, with Asia’s flair for alphabetical nomenclature, as the ADMM+ (for ASEAN Defence Ministers’ Meeting). It groups ASEAN with America, China, India, Japan, Russia and South Korea, as well as Australia and New Zealand. One day, it might become a forum for settling disputes. Today it is barely even one for airing them. And in that context, the FPDA provide members with a vague sense of comfort that is also hard to pin down, and certainly less easy to explain than the premise of their 40th-anniversary exercises: the seizure of an island by a hostile power.

             The rise of Qatar

             Pygmy with the punch of a giant

             The burgeoning influence of Qatar in the Arab world arouses admiration, suspicion and puzzlement. But its motives are mainly pragmatic

              

               

             VISITORS to Qatar tend to share the same bafflement that Hosni Mubarak expressed when shown the Al Jazeera satellite channel’s news studio in the Qatari capital, Doha. “All that noise from this little matchbox?”, Egypt’s then strongman grumbled, amazed that the station, paid for by Qatar’s rulers, could stir popular passions and big trouble for governments from the Persian Gulf to the Atlantic.

             Such wonder is not surprising. Until oil and gas made it rich, beginning in the 1960s, this tiny, scalding, pancake-flat peninsula scarcely boasted a settled population, let alone a town of any size. Even now, with a population that has trebled in the booming 16 years since Sheikh Hamad bin Khalifa al-Thani overthrew his father, the emirate holds just 1.7m people. Fewer than one in seven of them is a native-born citizen, which helps explain why Qatar’s army is the smallest in the Gulf.

             That minority status is also a reason for the Qataris’ feeble appetite for democracy. Their general response, when Sheikh Hamad announced recently that a first-ever parliamentary election would be held in 2013, was a mild nod of approval, even though the emir has dragged his feet on promised democratic reforms for a decade.

               

             The bigger reason for such complacency is simply cash. Statistics showing Qatar’s residents to be the richest in the world, with a GDP per person of $80,000-plus at purchasing-power parity, vastly underrate the wealth of a pampered 250,000 or so who hold the privilege of citizenship.

             Yet despite the bristling of shiny towers on its waterfront and the freshly acquired treasures in its lavish new Islamic museum, Doha retains a dowdy provincial feel. Residents find the artful recreation of a traditional bazaar in the town centre cosier than the sprawling malls on its edges.

             In any event, Qatar punches far above its weight: witness its recent proclaimed triumph in Libya. Its muscle, in the form of weapons, cash, fuel, airlift, six fighter-bombers, 100-plus field advisers and vigorous diplomacy, bolstered NATO’s bombers and drones and—more than any other Arab country—helped oust Colonel Qaddafi, even as Al Jazeera’s relentless coverage speeded his messy slide to extinction.

             While cheerleading the Arab spring, Qatar has interposed itself, with mixed diplomatic success, in conflicts as far away as Lebanon, Palestine, Sudan, Syria and Yemen. Its sheikhs sit on an array of big European boards and own choice chunks of London. Their spreading portfolios embrace Chinese refineries, French fashion houses and Spanish football teams. In 2022 Qatar will host football’s World Cup.

             Such clout carries a cost in controversy. Critics sniff that the global shopping sprees of institutions such as the ruling Thani family’s investment arm, Qatar Holdings, along with the Qatar Investment Authority, a sovereign-wealth fund worth $70 billion, are a crude attempt to buy influence. Chastened dictators obviously resent what they see as Al Jazeera’s meddling, whereas leftists, citing the presence of a giant American airbase just outside Doha, charge Qatar with being Washington’s cat’s paw. Arab liberals, meanwhile, look at the generous air time which Al Jazeera gives to Islamists and at the Qataris’ enthusiasm for radical Islamist groups such as Hamas in Palestine and Hizbullah in Lebanon, and conclude that the emirate is promoting not popular revolution but a fundamentalist power grab.

             Such doubts have long lingered, stoked in part by the innovation, when Al Jazeera was launched in 1996, of airing religious voices at a time when stodgily secular state monopolies filled Arab airwaves. But the charges grew more pointed during Libya’s seven-month conflict. The way much of Qatar’s aid seemed to end up in the hands of a closely knit coterie of Islamist radicals, boosting armed Islamist factions, rang alarm bells not just in neighbouring capitals and in the West but in Libya too.

               

             Last month Ali Tarhouni, the liberal oil and finance minister in Libya’s ruling national council, issued a rebuke. “Anyone who wishes to come to our house should knock on the front door first,” he said, in a thinly veiled warning to Qatar to stop favouring ambitious Islamists at the expense of the shaky central government.

             But there may be simpler reasons for Qatar’s sudden enthusiasm for a far-off war. Opportunism, in a word, is what has guided policy, along with heaps of cash and ambition mixed with a mild appetite for risk that stands in contrast to other more shy-mannered Gulf potentates. The quiet protection of America’s heavy bootprint also lent encouragement.

             It helps, too, that even for an untrammelled if benign autocracy, Qatar’s command structure is slim. Only three people really count: the emir, his cousin the long-serving and dynamic prime minister, Sheikh Hamad bin Jassim al-Thani, who also runs foreign policy and holds vast business interests, and, increasingly, Crown Prince Tamim, the Sandhurst-trained army chief. A score of intimates, drawn largely from two clans aside from the Thanis, runs nearly everything else.

             Such corporate streamlining has allowed Qatar to put its assets into action swiftly and efficiently, at a time when other regional actors, including America, have grown increasingly hesitant. “If there wasn’t a power vacuum across the region, Qatar would never have got away with it,” says a young Qatari businessman, referring to the Libyan adventure. A foreign diplomat adds that countries such as Egypt and Saudi Arabia, which might in the past have blocked a Gulf upstart from flaunting such ambition, no longer have the will to try. Moreover, Qatar’s big role in Libya has been a useful training ground for Crown Prince Tamim, who is being groomed to rule. His popularity with the army, whose pay for officers was more than doubled as a reward in September, has soared on the back of such a success.

             Qatari insiders doubt whether the Thanis have a master plan for Islamist domination of the Middle East. Rather, Qatar’s rulers tend, with cool calculation, to see Islamists simply as part of the new order. “Where others perceive black and white, they see shades of grey,” says a diplomat. Many secular-minded Libyans such as Mr Tarhouni have spent much time in the emirate and have benefited from its largesse. Moreover, the Qatari link with Libyan Islamist radicals, such as the Salabi brothers in Benghazi, who include a prominent preacher and a leader of the strongest armed Islamist brigade, is probably personal more than ideological. Ali Salabi, the scion of the family, has lived in Qatar for nearly a decade. Sheikh Hamad himself is said to have a romantic pan-Arab nationalist streak. His generous patronage of exiles of all stripes harks back to the fabled courts of Baghdad and Cairo, with their similarly fabulous wealth.

             Like Saudi Arabia, Qatar follows Wahhabism, an arch-conservative branch of Sunni Islam. Yet, unlike its neighbour, the emirate pursues modernising and tolerant social policies, especially via its first lady, Sheikha Mozah. Despite strong influence from the Muslim Brotherhood, many of whose members fled to Qatar from Egypt and Syria in the 1960s and 1970s to serve as teachers and preachers, Qatar’s rulers have in practice frowned on organised political Islam. Jassim Sultan, a renowned Qatari intellectual, strikes a chord by rejecting the Brotherhood’s demand for strict obedience from its followers, and derides its slogan, “Islam is the solution”, as facile. The dominant Qatari brand of faith is middle-of-the-road. The Qataris and their rulers are pragmatists, not ideologues.

             Iran’s politics

             President v supreme leader

             Mahmoud Ahmadinejad is fighting tooth and nail to keep his presidency

              

             THE feud between Iran’s president, Mahmoud Ahmadinejad, and its supreme leader, Ayatollah Ali Khamenei, is becoming increasingly bitter and public. Mr Khamenei has hinted that he may abolish the presidency altogether, replacing it with an honorary post elected by members of parliament rather than directly by the people. It was a pointed reminder that the supreme leader has the final say.

             Mr Ahmadinejad seems reluctant to take the hint. He responded with a defiant speech of his own, declaring that anyone who defied the will of the Iranian people would be “destroyed”. Months of simmering mistrust had already boiled over in April when Mr Ahmadinejad sacked Heydar Moslehi, Iran’s intelligence minister, only to see him promptly reinstated by the supreme leader.

             Mr Ahmadinejad is fighting his corner with tenacity. But his support has been ebbing. The recent exposure of a banking fraud involving $2.6 billion may have fatally weakened his grip on the presidency. Several of his close allies are implicated. His opponents scent blood.

             The president was called before parliament to face questions over the affair. Forged documents, it is said, were used to get loans from seven Iranian banks and the money used to buy stakes in state-owned companies. Loyalists of Mr Khamenei want to pin the scandal on Mr Ahmadinejad’s friends and lay the blame for Iran’s drooping economy at the president’s door.

             One ally, Seyed Hamid Pour-Mohammadi, the central bank’s deputy governor, has been arrested. Another, Shamsoddin Hosseini, the finance minister, narrowly survived a bid to have him impeached. The speaker, Ali Larijani, urged MPs to back him, switching tactics after previously threatening to name other presidential allies for alleged involvement in the scam.

             Both Mr Pour-Mohammadi and Mr Hosseini have been proponents of the president’s economic strategy. Mr Pour-Mohammadi heads a committee set up to soften the impact of international sanctions against Iran. Mr Hosseini was an architect of Mr Ahmadinejad’s controversial plan to abolish subsidies on electricity, fuel and food, which used to cost $100 billion a year. The plan to replace them was forced through parliament earlier this year. Since then the price of basic commodities has soared and a new system of cash handouts targeted at the poor has not kept pace with inflation. Protests and strikes over unpaid wages and the cost of living are increasing.

             Mr Khamenei’s supporters are baying for the president’s blood but the supreme leader is wary of delivering the coup de grâce; he is meant to be above petty politics. He looked weak when his endorsement failed to win Mr Ahmadinejad the presidential election in 2009 fair and square. Instead, he was obliged to order a harsh crackdown to crush the thwarted opposition. Discarding the president two years later might further undermine Mr Khamenei’s position. But the banking scandal may present him with an irresistible chance to sack Mr Ahmadinejad while maintaining the moral high ground.

             Mr Ahmadinejad was handpicked by ultra-conservatives to sweep away the corruption of previous reform-minded governments. But if his own administration is found guilty of sleaze, many senior clerics may sense an opportunity to end what they see as Iran’s ill-advised experiment with democracy—by seeking to abolish the presidency altogether.

             Satire in Iran

             Mocking the mullahs

             A satirical television programme is undermining the rulers’ authority

              

               Naughtily parasitical

             THEIR irreverent sense of humour is a source of pride to Iranians, a way to puncture the gloom of successive repressive regimes. It is no surprise that a satirical television programme called “Parazit” that delights in skewering Iran’s politicians is going down a storm.

             “Parazit”, meaning “static” in Persian, itself a dig at the government’s tendency to block seditious broadcasts, came on the air shortly before the disputed presidential election of 2009. It is produced by Voice of America (VOA), the state-funded international broadcaster. Despite—or perhaps because of—its tie to the Great Satan, the programme has proved enormously popular in Iran.

             Exact viewing figures are hard to gauge; most people watch it online through proxy servers or on bootleg DVDs, since satellite dishes are banned in Iran, though they sprout from many rooftops. “Parazit” has almost 750,000 fans on Facebook. Each of its videos posted online gets over 1m hits.

             Raina Kumra, head of innovation at the broadcasting board of governors which runs VOA, says that most Iranians who watch the show either do not know it is produced by VOA—or do not care. “We’re just the holding company”, she says; “Parazit” is its own creature. The producers insist that it is not a tool of American propaganda. “Our job is to present the facts and highlight the hypocrisy,” says Saman Arbabi, one of the show’s presenters. “We’re not here to lead any movement, to lead any regime change.” If the people of Iran want to topple the regime, he says, they must do it themselves.

             “Parazit” has not gone unnoticed by Iran’s government. Mr Arbabi and his co-host, Kambiz Hosseini, have been subject to character assassinations in state-run newspapers. Iran’s state television has started its own satire show called “Just for your information” to counter the invidious influence of “Parazit”. Its audience so far has been small.

             Israel and Palestine

             One side gets even lonelier

             Binyamin Netanyahu gets brickbats from Palestinians and Israelis

              

             TZIPI LIVNI, the leader of Israel’s opposition Kadima party, says that Binyamin Netanyahu, the prime minister, does not seriously intend to negotiate peace with the Palestinians. He is not prepared, she says, to make the concessions that peace would entail. Instead, she believes, he sees himself on a single-minded mission to save his country from the threat of a nuclear-armed Iran. “You won’t listen to me,” Ms Livni railed at him in Israel’s parliament on October 31st. “But listen to the defence chiefs. Listen to them on the Palestinians and start negotiating. And listen to them on the Iranian threat.”

             This last was a rare reference, albeit cryptic, to a subject usually discussed only in whispers: Israel’s contingency plans to bomb Iran’s nuclear facilities. It followed a front-page campaign spread over several days by Yedioth Ahronoth, the country’s largest-selling newspaper, stridently arguing against an Israeli attack. The paper claims that Mr Netanyahu and his defence minister, Ehud Barak, are contemplating giving the order to bomb soon, before winter weather makes it impracticable.

             Asked about the newspaper campaign, Mr Barak insisted that “Israel cannot permit a nuclear Iran.” A situation might arise, he added, “in which Israel has to defend its interests without being able to rely on others.” Mr Netanyahu told his parliament that the government in Tehran was going ahead with its efforts to get the bomb and that this was “a direct and serious threat to Israel” as well as to the wider region.

             Ms Livni’s pointed appeal to the prime minister to heed his security experts appeared to confirm reports that his top army generals and past and present heads of Mossad, Israel’s external-intelligence service, all oppose an Israeli attack as foolhardy and ultimately ineffectual. The president, Shimon Peres, is also known to oppose it.

             Some people suggest that Mr Netanyahu has deliberately stirred up this wave of speculation about an Israeli strike in an effort to stiffen international sanctions against Iran. The International Atomic Energy Agency, the UN’s nuclear watchdog, is poised to publish a new report on Iran’s nuclear programme.

             Israel’s minister of interior, Eli Yishai, told colleagues in Shas, the religious party that is part of the ruling coalition, that he was “losing sleep” thinking about “the complex and complicated attack” being contemplated and its possible repercussions; he later, rather lamely, said he had been “misinterpreted”. A former defence minister, Binyamin Ben-Eliezer, now in opposition, gave warning that “every citizen needs to be worried that these two jokers, Netanyahu and Barak, are sitting and planning an attack on Iran.”

             Ms Livni’s assertion that Mr Netanyahu was unenthusiastic about peacemaking echoed sentiments addressed to Israelis on October 28th by the Palestinian president, Mahmoud Abbas. In an interview on Israeli television, he said he was ready to agree on “the end of conflict, the end of claims.” It has long been an Israeli demand that the Palestinians, in any deal, should categorically disavow any future plan to reopen territorial or other issues. He noted that Mr Netanyahu, by contrast, was demanding that Israeli troops should remain in parts of the West Bank for 40 years. “In that case, I told him, I prefer occupation.”

             Mr Abbas full-throatedly confirmed he had been “very close” to a deal with Mr Netanyahu’s predecessor, Ehud Olmert, who had to resign in 2009 amid allegations of financial misfeasance. The pair had been negotiating the details of land swaps based on one-for-one exchanges. “If it happens that way, I am ready,” said Mr Abbas. “If [Mr Olmert] had stayed [in office] two or three months, we would have had an agreement.” But “Olmert disappeared… and this man [Netanyahu] came, and nothing happened after that.”

             A similar account of that missed opportunity appears in a just-published book by America’s then secretary of state, Condoleezza Rice. As she tells it, Ms Livni, then Israel’s foreign minister, balked at some of Mr Olmert’s concessions and doubted his ability to garner sufficient political support to carry them.

             Mr Abbas said there was nothing “unilateral” in his appeal to the UN General Assembly for recognition of Palestine’s independence. Nor did his UN move contradict the need for eventual negotiations between Palestine and Israel over the “core issues”. The real unilateral impediment to such talks, Mr Abbas insisted, was Israel’s continuing settlement-building on the West Bank, which Palestinians view as the main part of their future state.

             Their application to the UN is currently under scrutiny in the Security Council, where, Mr Abbas, acknowledged, it may not get the required nine votes—and will anyway be vetoed by the United States. But in something of a dry run for the expected debate and decision on statehood in the UN General Assembly, the UN’s cultural agency, UNESCO, voted on October 31st to admit Palestine as a full member. The vote of 107 to 14, with 52 abstentions, was greeted with cheers at UNESCO’s plenary session in Paris. For the agency it meant the immediate loss of a quarter of its operating budget: 22% from the United States and 3% from Israel.

             In addition Mr Netanyahu has decided to punish the Palestinians by building 2,000 new homes in settlements around Jerusalem, by withholding tax monies Israel collects for Mr Abbas’s Palestinian Authority and by cancelling “VIP passes” which enable senior Palestinian officials to travel freely. All that will be of little comfort for friends of Israel who fear and deplore its increasing isolation.

             Palestine’s Bedouin

             We want recognition too

             The Bedouin under Israeli rule have begun to campaign for their rights

              

               The Bedouin’s new megaphone diplomacy

             THE Bedouin of Israel are not a happy lot. Once nomadic lords, Binyamin Netanyahu’s government plans to pen tens of thousands of them into cities. This may be Israel’s biggest removal of Arabs from the land since the 1948 war.

             In the Israeli-occupied West Bank, soldiers knock down their shacks with abandon. Plans are afoot to transfer some 2,000 to the edge of a rubbish dump to make way for more Jewish settlers east of Jerusalem. To cap it all, religious Jews recently torched a mosque in Tuba, a Bedouin town in the north of the West Bank.

             Traditionally split into often feuding clans, the nomads have been easy for Israel to divide, conquer, shift and, at least in the Israeli state’s early days, expel. Whole tribes of Bedouin once roamed from Libya to Iraq. But concrete walls and a regime of permits have splintered them, reducing contact, commerce and marriage between Israel’s 200,000 Bedouin, the West Bank’s 40,000 and millions beyond, in Gaza, Jordan, Sinai and the Arabian peninsular.

             Forced first into narrow enclaves and then into towns, they have generally downsized from camels to goats. Many have abandoned their herds entirely. The West Bank’s last surviving herders are hemmed in by Israeli military bases, by-pass roads and Jewish settlements. Israeli soldiers confiscate flocks that stray. The settlers see them as trespassers and bar access to springs.

             Life in Israel proper is little better. Nearly half the Negev’s Bedouin live in villages often predating the state but officially unrecognised and so denied state support. There are no paved roads, public transport, electricity or water. Alongside Wadi Naam, a dusty Bedouin camp of 4,000 people, a toxic waste plant puffs away.

             The Bedouin once hoped to integrate. Unlike most Israeli Arabs, bar the Druze, some volunteered to serve in Israel’s army. But the latest plan for mass resettlement is changing the mood. Mr Netanyahu’s advisers say they are simply rehousing squatters. Even the Palestinian Authority, the proto-government on the West Bank, seems to hold its nose.

             Israeli officials say the masterplan for mass resettlement will entail an unprecedented transfer of government land to Israeli Arabs. Bedouin who can prove entitlement will receive half their land, or compensation. “By law the government owns the land,” says Ehud Prawer, the official who devised the plan. “But as long as the dispute continues, the Bedouin can’t cultivate it and we can’t develop it. We need a compromise.” “Concentrated” in new towns, he adds, the Bedouin will get all the services they are now denied.

             The Bedouin are refusing to budge. “When a Jewish Israeli wants to go and live in the Negev, it is called the development of the south,” says Rawia Abu Rabia, a Bedou lawyer. “But when Bedouin already living there want to go on living in the same place, it is considered an effort to take over state lands.” Some people say it could be a dry run for transferring Arabs in northern Israel to the West Bank.

             The Negev’s Bedouin are forming a Council of Bedouin Tribes. Less genially, Tuba’s youths protested against the torching of their mosque by vandalising the town council building. The sole Bedou in Israel’s parliament, Taleb al-Sana, warns of a Bedouin intifada if the planners persist.

             In neighbouring countries, the Bedouin are also on the move. In Jordan, where they once were top dogs, they have staged protests against a monied, urbanised Palestinian elite. In Egyptian Sinai they have risen up against the remnants of the ousted Hosni Mubarak’s security regime.

             Might a pan-Bedouin identity yet arise, linking the Bedouin under Israeli rule with the million or so scattered across the region? Many of Sinai’s angry Bedouin carry Israeli mobile telephones, renewing contact across borders after decades of separation. The lucrative tunnels linking Gaza to Sinai are reviving commercial ties. A high birth-rate adds confidence in numbers. A newly educated elite is fashioning a political identity. “We’re all victims of the same policy to dispossess us,” says Muhammad Korshan, a West Bank Bedou activist.

             This year he went to New York to ask the UN’s Forum on Indigenous Peoples to recognise the Bedouin as an ethnic-minority people with rights to tribal lands. They have a long way to go. Unlike Berbers and Kurds, they have no flags or leaders. But a belated bid for recognition has begun.

             Human rights in Libya

             Bad habits

             The new rulers must ensure that the victors do not imitate the vanquished

              

             A MONTH before Muammar’s Qaddafi’s death, a group of young Libyans in Benghazi, where the revolution began, were debating justice and human rights. “Don’t send him to the International Criminal Court [at The Hague],” one of them argued. “They cannot torture him there—and we need to know the truth about his crimes”. “Well, okay, but if he is tortured in Libya, it will give us a bad name”, said another participant. “No, no, you cannot torture anyone, anywhere, don’t you know that?” exclaimed a third. Then the oldest in the group, a 28-year-old engineer, pleaded: “Let us stop thinking about Qaddafi and the past and think about Libya’s future.” Then came a vote on the motion that “This house believes that Qaddafi and the others should be tried in Libya, not in The Hague”. The motion was defeated.

             The debate was part of a week-long training scheme set up by a non-governmental Polish organisation, the Helsinki Foundation for Human Rights, at the request of two new groups in Benghazi. Like Libya, Poland came up for air after 40 years of totalitarian government. Poland and Libya offer useful comparisons.

             For the two dozen Libyan students, most of them in their early 20s, the concept of human rights was new. Under Colonel Qaddafi they were not so much violated as non-existent. The father of one of the students was taken when she was four years old to Abu Salim prison in Tripoli. For 14 years her family brought him clothes and food. Yet she was unaware until recently that he was one of more than 1,200 prisoners massacred on one day in 1996.

             During the course, the students learned about the Universal Declaration of Human Rights, discussed the right to life (including the death penalty, abortion and euthanasia), argued over the difference between physical and mental torture, took part in a mock court-room case, watched a documentary film on the International Criminal Court, and studied its indictment of Colonel Qaddafi, his son, Seif, and his intelligence chief, Abdullah al-Senoussi.

             The question of where to try the latter pair, if and when caught, is still current. The new authorities say that a commission will investigate the circumstances of the colonel’s death. They said they would also investigate the death in June of General Abdel Fatah Younis, the rebels’ military commander, who was killed while in the custody of a rival militia. The authorities’ failure so far to publish any findings on that murky matter is not reassuring.

             Not quite Queensberry rules yet

             At the height of the war, the new authorities sent out text messages to fighters in the field telling them to treat prisoners decently. “Remember when you arrest any follower of Qaddafi that he is a Libyan like you and has his dignity like you…” Judging by the images of the last gruesome moments of Colonel Qaddafi, such messages were not widely taken to heart.

             More recent postings on Facebook, by youth groups rather than the new authorities, call on people to “throw away weapons and rebuild Libya.” Mahmoud Jibril, who was the de facto prime minister until recently replaced by Abdurrahim al-Keib, now wants to lead his country’s nascent civil society.

             Since February 17th, when the revolt against Colonel Qaddafi started in Benghazi, under the aegis of a clutch of human-rights lawyers, an impressive network of lobbies have sprung up there. In Misrata, which withstood a three-month siege and is the country’s third city, similarly sturdy groups have been formed. But Tripoli, the capital, which fell only two months ago, is further behind.

             Human-rights groups have become anxious lest a desire for revenge among supporters of the new order prompts a witch-hunt for suspected pro-Qaddafi people. Many hundreds of them have been rounded up and put in the prisons previously full of anti-Qaddafi dissidents. After the fall of Sirte, the colonel’s last redoubt, at least 50 people, presumed to be his loyal followers, were found dead with their hands tied behind their backs, suggesting summary execution.

             Fighting units from Misrata, in particular, have been accused of venting their fury on pro-Qaddafi people. According to Human Rights Watch, a New York-based lobby, Misrata militias have “terrorised” the displaced residents of Tawergha, a nearby town of 10,000 people, “accusing them of having committed atrocities” on behalf of Colonel Qaddafi. There were reports of Misrata militias shooting unarmed Tawerghans. Some Misrata brigade commanders are said to have told the town’s residents never to return. It is said to have virtually emptied. In Jemel, another small town, which lies south-west of Tripoli, other militias broke into houses to look for Qaddafi loyalists, detaining dozens and killing at least four of them, according to an uncle of one of the dead.

             It will be a long and bumpy road for the Helsinki Foundation and other groups that are seeking to spread respect for human rights in the new Libya.

             Transport in South Africa

             By the seat of your cheap pants

             Shut your eyes and pray

              

               

             ASK any middle-class South African what are his country’s worst scourges and taxis will almost certainly come in the top four, along with violent crime, HIV/AIDS and corruption. By taxi people do not mean the Western-style saloon cab but the privately owned 16-seat minibus “kombi”, used throughout Africa as the main form of public transport. It is cheap, friendly, convenient and performs a vital service in countries with meagre public transport systems. But it is often lethal—for both passengers and other road users.

             South Africa has 150,000 taxis, almost all owned and operated by blacks, carrying some 15m passengers a day, with a turnover of R16.5 billion ($2.2 billion) a year. Often dented and overloaded, they have no timetables or formal stops but swerve at high speed in and out of traffic, carving up other drivers, running through red lights and mowing down pedestrians in their rush to pick up passengers on the kerb. Competition is fierce and drivers’ pay is usually a cut of the day’s takings. They are a law unto themselves and the police generally seem to turn a blind eye.

             South Africa has one of the world’s highest road accident rates, with around 14,000 deaths a year. Many victims are minibus passengers; a disproportionate number are children. The Automobile Association found that minibus taxis were involved in almost 200 crashes a day, twice the rate of other passenger vehicles. Owners tend to cut costs by skimping on repairs. Many drivers are unlicensed.

             In the past, the police have seemed to ignore taxi-drivers’ lawlessness. But in a bid to stop the carnage, the transport minister, Sbu Ndebele, recently ordered a crackdown on all road offenders. In the past 11 months, more than 14m vehicles have been stopped and checked, 6m fines issued, 20,000 drunk drivers arrested, and more than 50,000 defective vehicles taken off the roads, most of them buses and taxis. In September alone, some 1,500 lawbreaking public-transport drivers were arrested. Mr Ndebele has called for reckless drivers who cause death to be charged with murder.

             The South African National Taxi Council, representing some 95% of taxi operators, has aired the idea of launching a low-cost taxi airline to cater for the urban poor, few of whom have been anywhere near a plane. It says it might one day fly between Johannesburg, Cape Town and Bisho, capital of the Eastern Cape province, almost as cheaply as going by kombi. It has yet to explain how costs can be kept so low. Few South Africans dare ask.

             Greece and the euro

             Papandreou’s people

             The uncertain political ramifications surrounding Greece and the euro

              

               

             “WE SHOUT outside parliament, we call the politicians thieves and traitors, but they don’t take any notice, they just go on letting us down,” said Alexis Anagnostopoulos, an unemployed welder, after hearing about this week’s plan by George Papandreou, his prime minister, to hold a referendum in December on the euro crisis. Yet as it turns out he and other angry Greeks may not even get to vote.

             A first hurdle was a vote of confidence to endorse Mr Papandreou’s proposed plebiscite. By the end of the week it seemed unlikely that his Panhellenic Socialist Movement (Pasok) could muster the required 151 votes and thus that he would even keep his job. After the October 2009 election Pasok had 160 seats in the 300-seat parliament. At the start of the week it had 152, but several more deputies promptly broke ranks. The most likely outcome as we went to press was a new government of national unity, perhaps led by a technocrat such as a central banker. Or there might be a fresh election.

             Mr Papandreou had already infuriated Greece’s partners. He announced it without informing them or even his finance minister, Evangelos Venizelos, who conveniently retired to a hospital bed. The prime minister then demanded to renegotiate the country’s €130 billion ($179 billion) bail-out, less than a week after it had been accepted. The plebiscite would be held on the renegotiated package, he said at first. But an angry EU response and a summons to the Cannes G20 summit for a reprimand led Mr Papandreou to back down. The question would now be in or out, he said. Greeks feel blackmailed. Polls show that 60% are against the rigorous terms of the bail-out; but 70% want to stay in the euro.

             But Mr Venizelos upped the stakes by openly opposing a referendum and, behind the scenes, fomenting a revolt within Pasok. Mr Papandreou was forced to call yet another emergency cabinet meeting on November 3rd, with most of his allies apparently deserting him. Whether this presages an abandonment of the referendum, an election or a new national government remained unclear.

             To add to the turmoil, Panos Beglitis, the defence minister and a close ally of Mr Papandreou’s, had earlier sacked the armed forces’ chiefs of staff. Sources in his office say that the generals, who were appointed by the previous New Democracy government, were “misbehaving.” They had encouraged a group of retired officers to stage a protest inside the ministry over planned cuts in military pensions. Mr Beglitis said the top brass should have gone months ago. Yet the move suggests that, almost 40 years after the fall of the junta, Greek politicians are still nervous about the army’s capacity to stir up trouble.

             Whatever now happens, it is clear that Mr Papandreou’s risky gamble has backfired. The IMF and the European Commission made plain that they will withhold €8 billion of funding due by mid-November. That would mean the government could not pay civil servants’ salaries and hospital suppliers at the end of the month and might have difficulties meeting €2 billion in debt repayments due in early December. As it is, a lot of Greece’s much-touted reforms, including such promised privatisations as the loss-making Agricultural Bank of Greece, seem to be delayed or stuck, not least because the public sector is paralysed by protests.

             As Greece’s recession deepens (GDP is expected to shrink by at least 6% this year and a further 2.5% in 2012) the mood is growing ever bleaker. If the referendum went ahead, it is not even certain that 40% of the electorate, the required minimum to validate the result, would turn out to vote. At last year’s local elections, turnout fell below 50% in many places. Many Greeks living in Athens and other cities are unlikely to make the journey back to the islands and villages where they are registered to vote. “The price of a ferry ticket has doubled and it only goes twice a week. Why should I pay to participate in a political charade?” says Angelos Papadakis, an engineer from the Cyclades.

             If Greece ends up with an early election, New Democracy will surely finish ahead of Pasok, but it may not win an outright majority. Mr Papandreou’s departure from office, and perhaps from politics, would not make Greece’s relations with its creditors any easier. Antonis Samaras, New Democracy’s leader, is unpopular in Europe because of his sustained opposition to the EU-IMF reform programme. Greece might have to settle for a new coalition, backed by EU officials installed in key ministries to push reforms through a recalcitrant bureaucracy. In any event, the prospect for ordinary Greeks is grim.

             Wages in Germany

             Merkel and the minimum

             Another about-turn: the centre-right ruling party wants a minimum wage

              

             IT MAY be the opening shot of Angela Merkel’s re-election campaign. Her Christian Democratic Union (CDU) has abandoned one core belief after another (conscription, nuclear power), and is about to do so again. At its convention in Leipzig in mid-November the CDU is likely to back an economy-wide minimum wage.

             Germany is one of the few European countries to lack a statutory minimum wage. Unions and employers negotiate wages sector by sector. In ten sectors agreed minimums apply to all. But jobs are growing in fragmented services not in manufacturing. Just over half of workers in western Germany are now covered by central agreements; in the east it is only a third. In 2007, 3.7m workers earned under €7 ($9) an hour and 1.2m under €5.

             The opposition Social Democrats and Greens have long backed a minimum wage. Now CDU leaders have endorsed a plan for a “binding lower limit for wages”, set by an independent body representing unions and employers, similar to Britain’s Low Pay Commission. The expectation is that it will be close to the floor for temporary workers: €7.79 in the west and €6.89 in the east. “This was a movement that came from the bottom up,” says Karl-Josef Laumann, chief of the workers’ branch of the CDU. “If you work for eight hours you should be able to live from your wages.”

            By embracing a minimum wage Mrs Merkel may deprive the opposition of a vote-winner in the next election, due in September 2013. The canny chancellor has noticed that bottom-up activism against inequality is on the rise everywhere. And she may now be convinced that a wage floor will not cost jobs. German economists have always seen minimum wages as job killers. A 2010 study said that a €7.50 minimum could eliminate 840,000 jobs at a cost of €4 billion a year. But the CDU seems to be heeding newer British and American ideas. Studies of eight sectors that have minimum wages commissioned by the labour ministry show little damage to employment. “This contradicts all the fears of mainstream economists in Germany,” says Gerhard Bosch of the University of Duisburg-Essen.

             Employers may hold down wages, for example because women are tied to a local kindergarten. Minimum wages could help to correct that and even raise employment in low-wage sectors by making work more attractive, argues Joachim Möller of the Institute for Employment Research. Most businesses still hate the idea. The number of unemployed is at its lowest level in 20 years, Dieter Hundt, head of the employers’ organisation, noted in a newspaper. “Why should we risk that with a legal minimum wage?” But some entrepreneurs are relaxed, since a minimum wage could blunt competition from rivals who employ cheaper workers, perhaps imported from eastern Europe.

             That softens opposition from the Free Democratic Party, the CDU’s pro-business coalition partner. The coalition agreement rejects a minimum wage, but the FDP may do a deal if the CDU accepts other priorities, including tax cuts. Relations between the two have become fraught. Might a wage floor furnish a new foundation?

             A numerical French obsession

             Twenty times twenty

             The strange suitability of the G20

              

               

             WORLD leaders and their motorcades will pull up even as the resort of Cannes closes down for the annual G20 summit. It is fitting that France is host, not just because the euro is at the centre of the world’s current economic turmoil, nor yet because Nicolas Sarkozy claims credit for reinventing the group after the 2008 financial crisis. It is also because the French have such a strange fetish for the number 20.

             Teachers in France in all subjects, even sport, grade students out of 20, as does the school-leaving baccalauréat. The French language uses 20 as a base for counting between 70 and 100; hence 80 is quatre-vingts (“four-twenties”). Paris has 20 arrondissements, or boroughs. The capital’s annual running race is the 20 Kilomètres de Paris. There is a free newspaper called “20 minutes”. Even the main French television news is the Journal de 20 heures (the eight-o’clock news).

             Jean-Pierre Bourguignon, director of the Institute of Higher Scientific Studies, says numbers like 12 and 60 are more interesting, because they have more divisors. The vigesimal system (counting in base 20) is thought to originate from humans’ fingers and toes. It was used by the Mayans as well as by Celts and in other parts of Europe in the Middle Ages. In old French, 40 was deux-vins.

             The French began to move to base ten in the 16th century; the metric system was first adopted in 1795. Yet traces of the vigesimal system linger, says Bernard Helffer, president of the Société Mathématique de France. The Fifteen-Twenty eye hospital in Paris still keeps its name. Founded in the 13th century, it was named for its 300 beds. The system of grading out of 20 in schools was introduced as recently as 1890. Whatever the origins of this curious French obsession, it has nothing to do with another Gallic passion: it just happens that, when spoken, the word for twenty (vingt) sounds exactly like the word for wine (vin).

             Spain’s election

             Rajoy the reformer

             The centre-right heads towards a big win but a poisonous inheritance

              

               

             MARIANO RAJOY, a mild-mannered man destined to be Spain’s next prime minister, says he is confident and ready. But the country his conservative People’s Party (PP) will govern after the election on November 20th is in a bad way. Unemployment has hit 22.6%, and over 5m Spaniards are jobless (see chart). One in nine households has nobody in formal paid employment. Growth is at a halt; a second recession looms.

             In Castile-La Mancha, officials admit they will overshoot their deficit target by a factor of seven. The outgoing Socialist finance minister, Elena Salgado, insists Spain will meet its target of 6% of GDP this year, but overspending regions (Castile-La Mancha is the worst offender) threaten this, as do flattening tax revenues. Spain’s banks must raise some €26 billion ($36 billion) in new capital by June, a quarter of the total demanded for the euro zone by the European Banking Authority. And they have yet to digest their toxic assets, mostly loans to developers to build on land that is almost worthless or occupied by some of the country’s 700,000 empty homes. The central bank says these problem loans could total €176 billion ($243 billion).

             With polls giving the PP a 15-point lead over José Luis Rodríguez Zapatero’s outgoing Socialists, Mr Rajoy is heading for an absolute parliamentary majority. From this position of strength he could drive through serious reform. So why did the PP’s full manifesto this week fail to make many newspaper front pages?

             Greece’s referendum on the euro bail-out, which sent Spain’s debt yields soaring too, was partly to blame. But another reason was what Alfredo Pérez Rubalcaba, who has replaced Mr Zapatero as the Socialists’ candidate, calls the “calculated ambiguity” of a manifesto that is long on intentions but short on specifics. PP officials argue that, given the euro crisis, promises now may look foolish or impossible tomorrow. But the manifesto is ambitious in tone: a slimmer state, with lower business taxes, looser employment laws and less red tape would, it claims, spur growth and get employers hiring again.

             Privatisation of television stations and other public companies comes with a taste for public-private partnerships and outsourcing public services to private contractors. Reforms could make it cheaper for employers to hire and fire. Collective-bargaining changes should allow companies to make more competitive wage deals. An Austrian-style fund built up by individual workers to cover spells of unemployment is promised. Banks will be encouraged to shed or write down their toxic assets.

             Public austerity and transparency are the watchwords in the manifesto. Few doubt the PP’s commitment to a 3% deficit by 2013. But that will mean increasing the tax take, says Pablo Vázquez of FEDEA, an economic think-tank. So how can Mr Rajoy lower business taxes? And if he cannot, how can he spur the economy? Curing Spain will not be easy—or quick.

             Russia and world trade

             In at last?

             After 18 years Russia is on the verge of joining the World Trade Organisation

              

             THERE was disbelief this week when Arkady Dvorkovich, adviser to President Dmitry Medvedev, told journalists that Russia was close to joining the World Trade Organisation (WTO). Russia has been “close” for ages, but the timing has always slipped. Yet after 18 years of talks, it seems that membership now beckons.

             Both America and the European Union have long agreed, as have all the other 153 WTO members bar Georgia, a small former Soviet republic which fought a brief war with Russia in August 2008 and is still partly occupied. Georgia had insisted, quite reasonably, on placing international observers to monitor the movement of goods at its sovereign border, which includes the territories of Abkhazia and South Ossetia.

             Russia, which has recognised the independence of Abkhazia and South Ossetia, said this compromised their status. Swiss mediators have found a deal that does not mention their status, refers to the border as a corridor and provides for monitoring not by a government agency but by a private foreign company accountable to the Swiss government. Now Georgia has said “yes”, clearing the way for Russia’s entry.

             After a few days, Russia also accepted the deal. There is no doubt that Mr Medvedev would like to go down in history not just as somebody who tinkered with Russian time zones but as the man who took his country into the WTO. The final decision still lies with Vladimir Putin, Russia’s prime minister and likely future president, though he is unlikely to block it now.

             As Vedomosti, Russia’s business daily, points out, Mr Putin has always been the real obstacle to Russia’s entry into the WTO. In 2009, when talks between Russia and America were going full steam, Mr Putin unexpectedly thwarted them by saying that Russia would join only with Belarus and Kazakhstan, with which it has a customs union. Mr Putin, initially eager for Russia to be in the big international clubs, has come to see some WTO demands as a politically motivated nuisance.

             The benefits of WTO membership are debatable. Some estimate that Russia could gain at least $50 billion a year. Others argue that Russia would do better to stimulate exports before joining. As it is, two-thirds of exports are oil and gas, not covered by WTO rules. Apart from extractive industries and metal, few Russian goods are competitive. A World Bank report notes that Russian exporters have trouble not just entering foreign markets but surviving in them.

             The real problem, however, is not trade barriers to Russia’s goods, but the country’s own inefficiency, institutionalised corruption and stifled competition. None of these problems can be solved by WTO membership. But Sergei Guriev, head of the New Economic School in Moscow, says that it would at least expose corruption and increase competition, deeply alien to Russia’s ruling bureaucracy. Indeed, the main benefit of WTO membership may be political. “It will be a sign that Russia is moving towards the civilised world,” says Mr Guriev, “not away from it.”

             Turkish foreign policy

             Dormant power revival

             Tests mount up for Turkey’s newly assertive foreign policy

              

             ON A clear day in 2006 Recep Tayyip Erdogan, Turkey’s prime minister, took a leisurely drive along the Turkish-Syrian border with Syria’s president, Bashar Assad, at the wheel. Ahmet Davutoglu, then Mr Erdogan’s foreign-policy adviser, cheerfully translated from the back seat. With 700km (450 miles) of shared border, Syria is central to Mr Davutoglu’s “zero problems with neighbours” policy. Syria, it was hoped, might make a transition from authoritarian dictatorship to Turkish-style democracy in which secularism, piety and the free market happily co-exist. Turkish experts were sent to Damascus to plot this bright future, just as Turkey was trying to mend fences between Syria and Israel.

               

             Nowadays, Mr Erdogan and Mr Davutoglu hint at military intervention against Mr Assad if he doesn’t stop murdering his own people. The same goes for Israel if it doesn’t stop drilling for gas with the Greek-Cypriots in the east Mediterranean. Friendship with Iran has soured after Turkey agreed to let NATO deploy parts of its missile shield on Turkish soil. Membership talks with the European Union are in effect frozen. So is a set of protocols Turkey signed with Armenia last year to establish diplomatic relations and reopen the border. And the Turks are carrying out air strikes against separatist Kurdish PKK rebels based in northern Iraq, complicating relations with America. Turkey remains busy in many different areas—including in its old Balkan stamping-ground (see article) and, this week, hosting a summit with Pakistan and Afghanistan. Yet Soli Ozel, a political scientist, concludes that “the zero [problems with] neighbours policy has come unstuck.”

             This state of affairs is not entirely of Turkey’s making. Like the rest of the world, it was caught unprepared by the Arab spring. To his credit, Mr Erdogan was the first Muslim leader to tell Egypt’s Hosni Mubarak to step down. After initially rejecting NATO intervention in Libya, Turkey backed its operations. And after months of patiently pressing Mr Assad for reform, Turkey opened its doors to the Syrian opposition.

             The meltdown with Israel came after it attacked Gaza in December 2008 (just as Turkey was about to cement a deal between Israel and Syria). The final blow came when Israeli commandos raided a Turkish-led aid convoy bound for Gaza last year, killing nine civilians. Turkey kicked out Israel’s ambassador, and still rules out reconciliation unless Israel apologises for the deaths and pays compensation to the victims’ families. Mr Erdogan has escalated his anti-Israeli rhetoric, insisting that Israel lift its blockade on Gaza. Such talk has boosted his popularity on the Arab street and among pious Turks. Some of Mr Erdogan’s advisers say America is secretly pleased because, as one says, “only pro-Western moderate Muslim Turkey can burnish America’s battered image, not Israel.”

             This is naive. Not only does the breach with Israel put America in an awkward position (especially close to the next presidential election); but also it reduces Turkish influence. This is particularly apparent in Syria. It was Turkey’s military alliance with Israel that helped to prompt an intimidated Syria to kick out the PKK’s leader, Abdullah Ocalan, in 1998. Nowadays the Syrians are unfazed by the presence of Colonel Riad al-Asaad, a Syrian army defector in the southern border province of Hatay. Waving a cell phone, Colonel Asaad excitedly claims that he is running an armed insurgency from a camp in Turkey and that the regime’s overthrow is nigh. His claims seem hardly credible since Turkey is neither arming nor training his men. Yet they might not ring so hollow had Turkey maintained its military ties with Israel.

             And the bloodshed in Syria continues. NATO says it will not intervene. A war-weary America is not about to wade into what might be an even stickier conflict than the one in Iraq. Pressure is building on Turkey to take the lead. Talk of a buffer zone along the Turkish border is growing louder. Yet Turkey has enough trouble coping with the PKK, let alone getting embroiled in regime change. Syria is said to have resumed support for the Kurdish rebels, who kill Turkish soldiers almost daily.

             America has agreed to give Turkey three Cobra attack helicopters to be used against the PKK, but the sale may run into congressional opposition because of the enmity between Turkey and Israel. One might expect American lawmakers also to worry about the arrests of activists, including this week a veteran human-rights defender and a law professor. Turkey’s Human Rights Association is investigating claims that the army has used chemical weapons against the PKK. These are probably overblown, but the refusal to hand over the bodies of 19 rebels killed in a recent clash in the south-eastern province of Hakkari has not helped. Luckily for Mr Erdogan, America has rarely made much fuss about Turkey’s human rights.

             Turkey in the Balkans

             The good old days?

             Talk of an Ottoman revival in the region seems exaggerated

              

               A shadow over an Ottoman domain

             “SARAJEVO won today as much as Istanbul,” declared Recep Tayyip Erdogan, Turkey’s prime minister, after his election victory in June. His comment excited new debate in the western Balkans about Turkey’s activist foreign policy. Are the Ottomans coming back? Several examples suggest not.

             In Ankara on October 22nd, Muslim politicians from Bosnia and Sandzak in Serbia praised the Turks for mending a rift between Serbia’s two Islamic groups. The deal swiftly collapsed. The Turks were also praised in 2010 for reconciling Serbia with Bosniak (Bosnian Muslim) politicians in Sarajevo. Yet relations between Bosniak, Serb and Croat politicians in Bosnia remain icy. A recent poll showed that views of Turkey in the region divide pretty clearly between Muslims (pro) and Christians (anti).

             Turkey does better with soft power. Turkish soap operas have edged out Latin American ones in popularity. The Turks are busy restoring Ottoman monuments. Turkish schools and universities, some linked to the controversial Gulen movement, now educate several thousand pupils in Muslim regions. Petrit Selimi, Kosovo’s deputy foreign minister, notes that in the past Turkey was seen as “more backward than us.” Now, by contrast, it is a “modernising force.”

             The western Balkans matter little economically. High-profile road and airport projects give a false impression of huge Turkish investment. Except in Albania and Kosovo, there has been more talk than cash. Alida Vracic, an analyst in Sarajevo, says that when Bosniaks go to Istanbul there is a lot of “kiss, kiss” for Balkan cousins, but the money goes to Serbia. Even there Turkey is not among the top 20 foreign investors.

             The Turkish foreign minister, Ahmet Davutoglu, waxes lyrical about a “golden age” of the Balkans with Turkey. But Zarko Petrovic, a Serbian commentator, says the region’s interest is largely emotional. Accession to the European Union remains the priority. And, as one Serbian official mutters, “we don’t want to get too close to Turkey, because we don’t want to be seen as part of an EU losers’ club.”

             Charlemagne

             A Greek bearing gifts

             George Papandreou chose the wrong time to call for a referendum

              

               

             “DOES Greece want to remain part of the euro zone, yes or no?” That was the blunt, existential question European leaders put to the Greek prime minister, George Papandreou, when they summoned him to an emergency dinner in Cannes on the eve of the G20 summit to explain his unexpected call for a referendum on the latest deal to salvage the euro. And that is the question they wanted the Greek people to vote on in the hope that the answer might be yes. But that referendum may never take place. As The Economist went to press, the prime minister’s position seemed untenable, putting the vote into doubt. Much, it must be said, to the relief of some European leaders.

             Greece does not have much time. Nicolas Sarkozy, the French president, said it would not receive “a single cent” until it had cleared up the uncertainty. Barely a week after their “comprehensive” solution to the euro’s crisis, European leaders must openly consider a chaotic Greek default, and its departure from the euro.

             Finance ministers are rushing to erect the €1 trillion ($1.4 trillion) firewall that the euro zone had designed at its last summit. But with markets already in panic, it may not be strong enough. Only the European Central Bank (ECB) can put up the “wall of money” that, in the words of Ireland’s finance minister, Michael Noonan, is needed to protect vulnerable but solvent big debtors like Spain and Italy. Senior officials hope the ECB’s new president, Mario Draghi, will “do what is necessary to ensure that we will still have a euro”. But nobody can be sure.

             No wonder markets are panicking, and no wonder European leaders are furious. “Papandreou is an idiot,” says one senior official. The Greek prime minister did not tell anyone, even his own finance minister, that he was about to gamble Greece, and the euro, on a referendum. His action smacked of ingratitude. The deal was the best yet offered to Greece: writing off half its debt to private creditors, with €130 billion of cheap loans to keep the country going. The Greek move threatened to wreck the euro zone’s painstakingly negotiated big solution. To add insult to injury, it ruined Mr Sarkozy’s hopes for the G20 summit on November 3rd-4th, which was his chance to take the world stage ahead of his re-election campaign next year. But most dramatic of all, the move backfired on the prime minister himself. His finance minister, Evangelos Venizelos, who attended the grim dinner in Cannes, returned to Athens to declare defiantly that Greece’s membership of the euro was an historic achievement that “cannot depend on a referendum”. Mr Papandreou’s last gamble may have hastened his demise.

             In truth, the euro zone’s rescue was coming unstuck even before Mr Papandreou’s blow. The details of the second Greek bail-out were left vague and, even if boosted, the euro’s rescue fund was still inadequate. After a brief rally, the markets soon started worrying about Italy. Despite cobbling together a plan for growth and to bring down Italy’s vast debt, government-bond yields have risen to dangerously high levels.

             This new phase of the euro crisis shows, once again, how the underlying causes are political as much as economic. Doubts persist about the ability of the burlesque Silvio Berlusconi to carry out real reforms. Resistance from creditor countries, mainly Germany, constrains the rescue fund and the ECB. Popular anger in debtor countries, notably Greece, is testing the limits of austerity.

             The Greek population is at the point of revolt; the bureaucracy is refusing to modernise; the ruling Pasok party is scheming against its leaders; and the opposition New Democracy party is refusing to support vital reforms. So, Mr Papandreou must have wondered, why not turn to the people for support? Yet the EU has a deep fear of referendums. Voters in Denmark rejected the Maastricht treaty in 1992, those in France and the Netherlands threw out the draft constitution in 2005; the Irish temporarily blocked the Lisbon treaty in 2008. Eurosceptical British Tories want a referendum to force a renegotiation of Britain’s membership or perhaps get out altogether.

             As a supranational body designed to overcome national jealousies, the EU is vulnerable to a backlash in one or other member. Integration has been slow and partial, often through technocratic measures that maintain enough ambiguity for all to claim victory. Fragmentation may often be inefficient—the EU does not yet have a single system of patents—but it is not usually fatal.

             This time it’s different

             Not so in the case of the euro. The euro zone is a hybrid: a single currency with 17 national fiscal and economic policies. It has no common treasury, no tax-raising powers, no joint bonds and no central bank acting as lender of last resort. In good times, this did not matter. But in the worst financial crisis in decades, the flaws are glaring. Even Mr Berlusconi cruelly described the euro as “a strange currency that has convinced nobody”.

             Countries cannot quit the euro without extreme economic pain, but nor is it easy to fix. Vetoes may be needed to maintain democratic consent, even if they make for poor crisis management. A blockage in one country endangers all. The markets are testing the ambiguities to destruction. Vague promises to “do whatever it takes” to save the euro are not enough. Will the ECB deploy its full resources to stop the crisis? How much intrusion into national policies are Greece and Italy ready to accept? How far is Germany willing to extend its credit? Will the euro zone’s states hang together or hang separately?

             These are big questions, affecting the nature of the state, sovereignty and democracy. Mr Papandreou may have messed up his tactics, but he was right on one point. The changes needed to save the euro are so profound in nature that, sooner or later, they must have the explicit consent of the people—or they will fail.

             Economist.com/blogs/charlemagne

             The reality-television business

             Entertainers to the world

             Many of the world’s most popular television shows were invented in Britain. But competition is growing

              

               

             NOT many Britons watch “Who Wants to be a Millionaire?” these days. The quiz show, which routinely drew more than 15m viewers in the late 1990s, now attracts fewer than 5m. While “Millionaire” is fading in the country that invented it, though, it is thriving elsewhere. This week Sushil Kumar won the top prize on the Indian version of the programme. Côte d’Ivoire is to make a series. Afghanistan is getting a second one. In all, 84 different versions of the show have been made, shown in 117 countries.

               

             Hollywood may create the world’s best TV dramas, but Britain dominates the global trade in unscripted programmes—quiz shows, singing competitions and other forms of reality television. “Britain’s Got Talent”, a format created in 2006, has mutated into 44 national versions, including “China’s Got Talent” and “Das Supertalent”. There are 22 different versions of “Wife Swap” and 32 of “Masterchef”. In the first half of this year, Britain supplied 43% of global entertainment formats—more than any other country (see chart).

             London crawls with programme scouts. If a show is a hit in Britain—or even if it performs unusually well in its time slot—phones start ringing in production companies’ offices. Foreign broadcasters, hungry for proven fare, may hire the producers of a British show to make a version for them. Or they may buy a “bible” that tells them how to clone it for themselves. “The risk of putting prime-time entertainment on your schedule has been outsourced to the UK,” says Tony Cohen, chief executive of FremantleMedia, which makes “Got Talent”, “Idol” and “X Factor”.

             Like financial services, television production took off in London as a result of government action. In the early 1990s broadcasters were told to commission at least one-quarter of their programmes from independent producers. In 2004 trade regulations ensured that most rights to television shows are retained by those who make them, not those who broadcast them. Production companies began aggressively hawking their wares overseas.

             They are becoming more aggressive, in part because British broadcasters are becoming stingier. PACT, a producers’ group, and Oliver & Ohlbaum, a consultancy, estimate that domestic broadcasters spent £1.51 billion ($2.4 billion) on shows from independent outfits in 2008, but only £1.36 billion in 2010. International revenues have soared from £342m to £590m in the same period. Claire Hungate, chief executive of Shed Media, says that 70-80% of that company’s profits now come from intellectual property—that is, selling formats and tapes of shows that have already been broadcast, mostly to other countries.

             Alex Mahon, president of Shine Group, points to another reason for British creativity. Many domestic television executives do not prize commercial success. The BBC is funded almost entirely by a licence fee on television-owning households. Channel 4 is funded by advertising but is publicly owned. At such outfits, success is measured largely in terms of creativity and innovation—putting on the show that everyone talks about. In practice, that means they favour short series. British television churns out a lot of ideas.

             Yet the country’s status as the world’s pre-eminent inventor of unscripted entertainment is not assured. Other countries have learned how to create reality television formats and are selling them hard. In early October programme buyers at MIPCOM, a huge television convention held in France, crowded into a theatre to watch clips of dozens of reality programmes. A Norwegian show followed urban single women as they toured rural villages in search of love. From India came “Crunch”, a show in which the walls of a house gradually closed in on contestants.

             Ever-shrinking commissioning budgets at home are a problem, too. The BBC, which provides a showcase for independent productions as well as creating many of its own, will trim its overall budget by 16% in real terms over the next few years. The rather tacky BBC3 will be pruned hard—not a great loss to national culture, maybe, but a problem for producers, since many shows are launched on the channel. Perhaps most dangerously for the independents, ITV, Britain’s biggest free-to-air commercial broadcaster, aims to produce more of its own programming.

             Meanwhile commissioners’ tastes are changing. Programmes like “Wife Swap”, which involve putting people in contrived situations (and are fairly easy to clone), are falling from favour. The vogue is for gritty, fly-on-the-wall documentaries like “One Born Every Minute” and “24 Hours in A&E”. There is a countervailing trend towards what are known as “soft-scripted” shows, which mix acting with real behaviour. “Made in Chelsea” and “The Only Way is Essex” blaze that peculiar trail.

             These trends do not greatly threaten the largest production companies. Although they are based in London, their operations are increasingly global. Several have been acquired by media conglomerates like Sony and Time Warner, making them even more so. Producers with operations in many countries have more opportunities to test new shows and refine old ones. FremantleMedia’s new talent show, “Hidden Stars”, was created by the firm’s Danish production arm. Britain is still the most-watched market—the crucible of reality formats. But preliminary tests may take place elsewhere.

             There is, in any case, a way round the problem of British commissioners leaning against conventional reality shows. Producers are turning documentaries and soft-scripted shows into formats, and exporting them. Shine Group’s “One Born Every Minute”, which began in 2010 as a documentary about a labour ward in Southampton, has already been sold as a format to America, France, Spain and Sweden. In such cases the producers are selling sophisticated technical and editing skills rather than a brand and a formula. With soft-scripted shows, the trick is in casting.

             The companies that produce and export television formats are scattered around London, in odd places like King’s Cross and Primrose Hill. They are less rich than financial-services firms and less appealing to politicians than technology companies. But they have a huge influence on how the world entertains itself. And, in a slow-moving economy, Britain will take all the national champions it can get.

             Corruption in cricket

             Overstepping the mark

             Pakistan’s former cricket captain is convicted in London

              

               A tabloid in its pomp

             IT WAS the Fake Sheikh’s finest hour. On November 1st two members of Pakistan’s national cricket team were convicted in a British criminal court of fixing episodes of an international match, against England in 2010, for money. They had been exposed in a sting by the pseudonymous Arab, Mazher Mahmood, a star reporter for the now-defunct tabloid newspaper, the News of the World.

             Posing as the Indian head of a Singapore-based betting syndicate, Mr Mahmood had filmed a British associate of the players pocketing £150,000 ($240,000) in marked notes in return for a promise to arrange match-fixing. As proof of his influence, he predicted the timing of two illegal deliveries, or “no-balls”, to be delivered by the Pakistanis’ two best bowlers, Mohammad Asif and Mohammad Amir, in the forthcoming game. The odds of being able to do this successfully, unaided, were 1.5m to one. Yet the no-balls transpired, with Mr Amir, then 18 years old and one of the sport’s brightest talents, overstepping by a huge distance. Bundles of the notes were later found in the possession of Salman Butt, then Pakistan’s captain, and Mr Amir.

             Messrs Butt and Asif were found guilty of crimes including conspiracy to accept corrupt payment, which carries a maximum sentence of seven years in prison. Mr Amir and the players’ associate, Mazhar Majeed—who had claimed to have seven of the Pakistani XI in his pocket—had already confessed to the same charges. Mr Amir claimed to have erred only once and under pressure. But the release of text messages between Mr Amir and an alleged bookmaker before a previous game—in one of which Mr Amir included his bank details—suggested that was nonsense.

             The convictions represent one of the biggest blows against match-fixing in cricket since it emerged that the practice was rife two decades ago. A few top cricketers, from the South African, Indian, Pakistani and Kenyan national sides, have since been banned. But match-fixing—especially “spot-fixing”, as partial fixes such as the Pakistanis engaged in are called—is hard to prove. No cricketer had previously been convicted; and, despite the clean-up efforts of cricket’s governing body, the International Cricket Council (ICC), it has always seemed likely that a good deal of rottenness remains.

             Nor will these convictions change that. The blight is encouraged partly by the enduring mismanagement of Pakistani cricket. Yet it is mainly driven by a vast, illegal and mafia-run gambling industry, based largely in India, where gambling is outlawed. According to the ICC, around $50 billion of illegal bets are placed on cricket matches each year. That suggests the Indian ban isn’t working.

             The St Paul’s protests

             Bells and yells

             The church is more muddled than divided over the anti-banker protests

              

               Bishop Richard listens to reason

             IS THE established Church of England a keystone of a privileged power structure or is it called, like the man it professes to follow, to be a friend of the poor, the marginal and the dispossessed? The shambolic Anglican response to weeks of anti-banker protest on its doorstep suggests that the strain of coping with the conflicting demands of God and Mammon has become almost unbearable.

             On November 1st there was a dramatic reversal by the ecclesiastical authorities who control St Paul’s Cathedral, the precincts of which have been occupied since October 15th by protesters, placards and dozens of tents. The cathedral’s masters had originally urged eviction. But following the resignation of two senior members of staff (the first was Giles Fraser, one of Britain’s best-known lefty clerics, succeeded days later by Graeme Knowles, the dean of St Paul’s), they announced that they would not take steps to remove the malcontents—many of them civil servants and teachers in jerseys, quoting scripture and keen on recycling. More reluctantly, the City of London Corporation, which co-owns the disputed space and represents the neighbourhood’s powerful commercial interests, said it would temporarily suspend its eviction efforts.

             Richard Chartres (pictured), the bishop of London, who ranks third in the Anglican hierarchy, acknowledged that almost everything the cathedral had done in response to the protest had been a mistake. It had been wrong, he said, to close the cathedral’s doors—supposedly for safety reasons—soon after the protests began. (The doors have reopened and services are going on as usual, after some amicable repositioning of tents.) He spoke warmly of the clerics who had resigned.

             But if the intention was to create the impression that the Church of England’s authorities were closing ranks again, it did not immediately succeed. Ever since the protests began, there were suspicions that Rowan Williams, the Archbishop of Canterbury—in earlier life a brainy academic with a liberal, bohemian streak—quietly sympathised with the protesters. More so, at least, than the bishop of London, whose forceful, confident and articulate manner suggests to some that he is more of an establishment type.

             Both clerics have said things that betray a degree of intellectual sympathy with the protesters. But Archbishop Rowan put his cards on the table more dramatically on November 2nd by supporting, in an article in the Financial Times, a “Robin Hood” tax on financial transactions of the kind favoured by France and Germany. David Cameron agreed that corporate greed should be curbed, and said the archbishop spoke “for the whole country” in saying so. But there was no sense in a handful of countries imposing such a tax; financial activities would simply push off elsewhere.

             Bishop Richard, for his part, made clear that he was not about to issue detailed policy prescriptions for the world of finance: “The church doesn’t and shouldn’t claim ordination gives you a tremendously privileged insight into how to solve the euro-zone problems.” Asked whether that implied a difference between himself and his boss, Bishop Richard replied teasingly that he would study the Financial Times article with great respect, given its author’s credentials as a prominent European intellectual. As a proof of the two men’s continuing personal closeness, he cited their common interest in Russian Orthodox theology and culture—a topic on which the number of potential conversation partners is limited.

             But despite the chaotic image it presented this week, the Church of England looks more likely to trundle on eccentrically than to break into establishment and anti-capitalist camps. Buildings like St Paul’s are part of the reason. No matter how compelling the demands of the poor and angry, which faction would ever agree to abandon the cathedrals?

             Child-care costs

             Precious little burdens

             The professionalisation of child-rearing has pushed up its price

              

               

             GONE are the days when a mother’s place was in the home: in Britain women with children are now as likely to be in paid work as their unencumbered sisters. Many put their little darlings in day care long before they start school. Mindful that a poor start can blight a person’s chances of success later in life, the state has intervened ever more closely in how babies and toddlers are looked after. Inspectors call not only at nurseries but also at homes where youngsters are minded; three-year-olds follow the national curriculum. Child care has increasingly become a profession.

             For years after the government first began in 2001 to twist the arms of anyone who looked after an unrelated child to register with the schools inspectorate, the numbers so doing fell. Kind but clueless neighbours stopped looking after little ones, who were instead herded into formal nurseries or handed over to one of the ever-fewer registered child-minders. The decline in the number of people taking in children now appears to have halted. According to data released by the Office for Standards in Education on October 27th, the number of registered child-minders reached its lowest point in September 2010 and has since recovered slightly.

             The new lot are certainly better qualified. In 2010 fully 82% of nursery workers held diplomas notionally equivalent to A-levels, the university-entrance exams taken mostly by 18-year-olds, up from 56% seven years earlier, says Anand Shukla of the Daycare Trust, a charity. Nurseries staffed by university graduates tend to be rated highest by inspectors, increasing their appeal to the pickiest parents. As a result, more graduates are being recruited.

               

             But professionalisation has also pushed up the price of child care, defying even the economic slump (see chart). A survey by the Daycare Trust finds that a full-time nursery place in England for a child aged under two, who must be intensively supervised, costs £194 ($310) per week, on average. Prices in London and the south-east are far higher. Parents in Britain spend more on child care than anywhere else in the world, according to the OECD, a think-tank. Some 68% of a typical second earner’s net income is spent on freeing her to work, compared with an OECD average of 52%.

             The price of child care is not only eye-watering, but has also become a barrier to work. Soon after it took power the coalition government pledged to ensure that people are better off in work than on benefits, but a recent survey by Save the Children, a charity, found that the high cost of day care prevented a quarter of low-paid workers from returning to their jobs once they had started a family. The government pays for free part-time nursery places for three- and four-year-olds, and contributes towards day-care costs for younger children from poor areas. Alas, extending such a subsidy during straitened economic times would appear to be anything but child’s play.

             The economy and the euro

             In bad company

             Britain’s strong links to the euro zone raise the risk of another recession

              

               

             THE third-quarter GDP figures released on November 1st surpassed expectations for once. The economy grew by 0.5% (an annualised rate of 2%), the fastest quarterly rate for more than a year. The estimate was flattered by a bounce-back from a weak second quarter, when output was temporarily depressed by the royal wedding and by interruptions to supplies in the aftermath of the Japanese earthquake. In any case, growing anxiety about a double-dip recession meant the half-decent growth figures were barely celebrated.

             Prospects for the fourth quarter are dim. The Bank of England’s monetary-policy committee reckons that output will be flat, but even that may prove optimistic. The closely-watched purchasing managers’ index for manufacturing plunged from 50.8 to 47.4 in October (a reading below 50 points to falling activity). Order books are slimmer. Manufacturers say nervous customers are delaying new purchases and running down stocks.

             The immediate source of trouble is the euro area, which is struggling to stop the spread of its sovereign-debt crisis. Two-fifths of Britain’s exports go to the 17-country currency block. Even Germany, the euro-zone’s economic motor and its most creditworthy sovereign, has been dragged down by uncertainty over Greece’s bail-out and the failed efforts to protect Italy and Spain. German manufacturing shrank in October, according to the purchasing managers’ index, and unemployment rose for the first time in 18 months.

               

             Britain cannot easily shake off trouble in its export markets. Domestic demand is weak because the government and many householders are struggling with debts of their own. And Britain’s stake in the euro zone is not confined to trade. British banks are exposed to the region’s trouble spots. Their loans to Ireland, Spain, Italy, Portugal and Greece, the five countries on the euro-zone’s periphery whose sovereign debts are under question by bond markets, amount to $350 billion (£220 billion), reckons the Bank for International Settlements (BIS), the bank for central banks. A tenth of that was public debt; a larger slug was loans to banks; most of it was lending to businesses and consumers (see chart).

             A cynic’s view of the euro-zone’s sovereign bail-out schemes is that they were put in place to preserve French and German banks from losses. That suspicion, along with a widespread conviction among Conservative politicians that the euro is doomed, helps explain why some in Britain complain about the country’s notional exposure through IMF membership (even though the fund is always first in the queue to get its money back).

             The value of British bank loans to the euro-zone periphery looks small compared to the $680 billion owed to French banks, equivalent to almost a quarter of France’s GDP. But Britain’s bank exposure is still huge, and a shade larger as a share of GDP, at 14.7%, than Germany’s. And banks are so interconnected that measures of direct lending cannot capture the full risks. British banks have lent $210 billion to French and German banks, which in turn are lenders to Italy and the rest.

             Anxiety about sovereign-default risk, and the budget-cutting measures to counter it, will further sap the peripheral economies, thus raising the chances of big losses on the loans British banks have made there. That in turn may make them less willing to lend at home. Such linkages, along with Britain’s strong trade ties, mean the economy’s fate depends on an orderly resolution of the euro-zone crisis. That is hardly a reassuring thought.

             Cutting legal aid

             Justice for some

             For the poor, access to justice is set to diminish

              

             PITY the justice secretary. Ken Clarke came to office in 2010 with some fine ideas about sending fewer people to prison and rehabilitating offenders. Since then, thanks to a 23% departmental budget cut and opposition within his own Conservative Party, it has been one long retreat from Moscow. The Legal Aid, Sentencing and Punishment of Offenders bill, which passed the House of Commons this week, would jail all 16- and 17-year-olds caught threatening people with knives, along with other bits of eyecatching toughness. Worse, it slashes legal aid, the public funding that helps mainly poor people get access to justice, and just as recession is causing more folk to turn to it.

             England and Wales spend about £2.1 billion a year on legal aid, more than half of it on criminal matters. The bill is less than it was in 2003-04; the previous, Labour, government hacked it back repeatedly. But it is still much more per head than in other countries with similar legal systems, the Ministry of Justice argues. Others dispute the figures, but few deny that savings could be made. The question is how.

             The government aims to cut legal-aid spending by £350m a year. Of that, £280m is to come from civil matters. Solicitors and other providers have already seen a 10% drop in rates. Competitive tendering for work is to become tougher. Legal aid would be largely withdrawn from family law, housing, welfare, debt and employment disputes, as well as from immigration work and clinical-negligence claims. There would be tighter means-testing.

             Many of the cases now paid for are straightforward and do not need legal assistance, the government thinks. Mediation is cheaper and better than court proceedings for most family disputes. Conditional-fee arrangements (“no win, no fee”) will enable people still to bring actions for clinical negligence and perhaps some other matters, ministers hope. Aid for the most urgent problems is to be ring-fenced, including work with asylum-seekers and victims of domestic violence.

             Targeting funds on efficient providers and genuinely needy recipients makes sense, given Britain’s £120-billion budget deficit. But many think the savings calculations are slapdash. Critics include Mark Stobbs, the Law Society’s director of legal policy, whose members stand to lose by the proposals, and the House of Commons Justice Committee, whose members do not. Some judges fear that cuts in legal aid could lead to higher court costs because fewer timewasting cases will be weeded out at an early stage.

             Others worry that the famous ring-fence has large holes. Asylum-seeking may be covered but bringing over your family later may not be, says David Jones, a consultant on migrant issues. Proof of domestic violence is so narrowly defined that many, even most, battered women will fail to meet the test, says the National Federation of Women’s Institutes. As for no win, no fee arrangements, they only work when there is a big pot of money at stake, which is rarely the case in legal-aid claims. Repeated fee-squeezing has already pushed some legal-aid providers out of business. Those who depend on them are usually among society’s most vulnerable.

             More than half of the people who come to the Battersea Law Centre in south London, for example, are on benefits, and some have mental-health problems. Housing is the main reason they come, says Patrick Marples, who runs Battersea’s parent, Southwest London Law Centres. A current case involves a mother of four with a history of mental illness who was evicted from her council flat for rent arrears. The centre has helped her regain her home, sort out the benefit snarl-up that led to the arrears and get money to repair the place. If the cuts had been in force, he says, it could not have dealt with all those issues.

            Legal aid is not quite done for. The bill now goes to the House of Lords, which is expected to put up a fight. The Tories’ Liberal Democrat coalition partners are keen, as is the Labour opposition, to restore some of the cuts, especially those relating to welfare and clinical negligence. Some think more of the savings should come from criminal work. The snag is that, for a ministry that has to find its pound of flesh somewhere, the temptation to cut funds which are often spent challenging government decisions must be almost irresistible.

             London’s sewers

             A busted flush

             Something is rotten at the heart of London

              

               

             LONDON’S sewerage system was one of the great engineering projects of the Victorian age. The 21,000-kilometre network, designed by Joseph Bazalgette, helped to banish cholera and make the capital habitable and fragrant. It was made to last: the sewers were built for a population nearly twice that of the time. But 150 years on, three times as many people live in London and there is less greenery to soak up rain. Sewage and run-off go into the same system, which is full to bursting.

             And burst it does. Bazalgette’s design included a safety valve: when too much waste enters the system, raw sewage runs into the River Thames. The supposedly-exceptional circumstance now happens once a week, on average. Two millimetres of rain in an hour can trigger a discharge; 39m tonnes of untreated sludge flushes into the river every year, says Thames Water, the utility firm that supplies London. Because the Thames is tidal, it can take four weeks for the muck to reach the sea.

             In 2005 an independent commission proposed a solution. A giant 7.2 metre-wide sewer running beneath the river, known as the Thames Tunnel, would intercept all but two of the most polluting overflows and ferry waste to east London for treatment. Similar tunnels exist in Milwaukee and Portland, Oregon. Thames Water has adopted the scheme. On November 4th it launches the second phase of its consultation on a preferred 25km route and construction sites. The company hopes to begin digging in 2013 and finish in 2020.

             The government is eager for the project to start: it needs to clean up the river to comply with European rules on treating waste water. It judges London’s tunnel to be “nationally important”, which means that planning should be streamlined. Ministers are also keen on a project that will employ people: this week they reiterated their thirst for infrastructure schemes.

               

             But not everyone supports the super-sewer. Chris Binnie, who chaired the commission that proposed the tunnel, has retreated from his conclusion. He suggests considering a shorter tunnel along a 9km route from Hammersmith to Heathwall (see map). This would be cheaper and would allay the worst of the problem in the most-used stretch of the Thames. Others argue for green solutions like more porous surfaces and grassy trenches.

             Yet such modest alternatives might still leave the Thames down in the dumps. A shorter tunnel would tackle only 19 of the 34 polluting overflows. Sewage would be stored until space was available in existing sewers, but with little spare capacity in the current network, waste could still spill into the river. Flows would be screened to remove big chunks, but filthy water would remain untreated. The tidal river would push detritus into the most-used spots.

             That does not make it an easy decision to go ahead with the long tunnel. Thames Water’s 14m customers will pay for the scheme. Because the firm has invested so little in infrastructure historically, local bills have been lower than the national average. Thames Water says bills will rise “for the foreseeable future”. In 2006 the project was estimated to cost £3.6 billion. That figure is sure to go up.

             And 24 construction sites must be picked. That will set off a fierce battle: suggested locations include some of the most populous and well-heeled parts of London. Local groups are already pitched against each other, as well as against Thames Water. Such a major engineering project will certainly cause a lot of disruption and fuss. But, judging by Bazalgette’s record, a good sewerage system can last 150 years. That’s not to be sniffed at.

             Bagehot

             Britain runs out of Euro-allies

             David Cameron cannot keep his pledge to repatriate hefty powers from the EU

              

               

             ACCORDING to Britain’s tabloid press, a swaggering Germany is using the euro crisis to impose what one title dubbed a “Fourth Reich”. The Conservative-led coalition government is more diplomatic. Logic is driving the single-currency club towards closer integration, ministers murmur.

             Yet tabloids and Tory ministers agree that a grand opportunity looms. Mighty Germany, they explain, thinks that the European Union must change its treaties to save the euro. What Germany wants, Germany gets, with one proviso: a new treaty must be ratified by all 27 members of the club. The mood at Westminster is febrile, as Conservative MPs debate the concessions that Britain should demand in exchange for allowing single-currency members to huddle closer. Conservative ministers and MPs differ over timing (new treaties are not conjured up overnight, ministers have warned backbenchers). But they share a broad strategy: Britain should demand powers back from Brussels and “refashion” its relationship with the union, seek to freeze the next EU budget, stand aloof from euro-zone bail-outs, shield the City of London from meddling Euro-regulations and push for deeper single-market liberalisation. Patience, the prime minister, David Cameron, recently urged MPs demanding a referendum on EU membership. The time for reform is coming and when it does, he vowed: “Every country can wield a veto until its needs are met.”

             The heady mood hides a flaw in this scheme to take the euro crisis hostage. Rather few Westminster politicians seem curious as to whether other EU countries have views about their plan. As it happens, they do.

             A golden sun shone in a cloudless sky when Bagehot visited the German capital this week. Even the glass and concrete blocks of the central political district seemed to glow with prosperity. But the mood in Berlin is not sunny, or swaggering. Seen from Germany, troubles seem to crowd in from across Europe.

             Greece is discussed with near-despair. Italy provokes something not far from contempt. Italians must decide between “a European future, or an African one,” a politician says, before exchanging looks with an assistant and asking for the remark to be struck from the record. Britain is praised as a valued and important EU member. But as players in the euro-zone crisis, the British are viewed with head-shaking exasperation.

             Germany knows many countries worry about a new treaty. But it thinks rules intended to prevent euro-zone profligacy have failed. New legal structures are needed for the 17 countries that share the single currency. Germany would strongly prefer to embed them in a formal EU treaty agreed on by all 27 members. Others, notably France (which feels its Gallic influence diluted in the enlarged EU) would prefer integration around an inner core of 17.

             Germany’s preference for a larger group is partly about protecting established EU institutions. In part, it is responding to alarm from countries, such as Poland, which are pledged to join the euro one day and unwilling to languish in an outer circle. Finally, Germany reckons saving the euro will require laggards to embrace greater budgetary discipline and openness. Many of Europe’s strongest advocates for free markets, free trade, fiscal rigour and reform, such as Britain, Denmark, Sweden and Poland, are euro “outs”. Germany wants their voices in the room.

             At a Brussels summit last month, the French president, Nicolas Sarkozy, told Mr Cameron that euro-zone leaders were “sick of you criticising us and telling us what to do”. For good measure, the Frenchman reminded the euro “outs” that—apart from Britain and Denmark—they were all committed to join the single currency, so it was not in their interest to side with Mr Cameron. Several failed to contradict him. Some in Britain talk of leading a block of ten “outs”. No such block exists.

             Not just the French who are sick of Britain

             When it comes to EU diplomacy Germany does not do histrionics. But there is frustration in Berlin at what are seen as British double-standards. Mr Cameron tells euro-zone members to do more to save their currency. Yet Britain does not offer to help and demands to be consulted on big decisions, for example on bank recapitalisation. In Brussels Mr Cameron tells the EU to beware of breaking up the single market, and stoutly defends free-trade rules that apply to all. Yet back in London, ministers talk of special opt-outs giving British business low-cost, deregulated membership of the common market.

             In Berlin the belief is that rewriting single-market rules would lead to many countries demanding more protections—the opposite of what Britain wants. Belgium, for instance, might push for more workers’ rights. Facing a tough re-election fight, Mr Sarkozy last week declared that Europe should not be a “dupe” when it came to global trade, and proposed EU import taxes to help pay for European welfare systems.

             Germany’s priority is rules establishing unprecedented oversight of euro-zone economies. If Britain asks too high a price for its consent, Germany will reluctantly agree to a new treaty outside the EU system. This, it is expected, would involve more than 17 countries but fewer than 27. Britain would lose its veto.

             What about democracy, MPs in Westminster might (justifiably) retort? British voters are overwhelmingly unhappy with the EU status quo. And if Britain’s government is accused of bowing to populist forces, well, German voter outrage explains why the chancellor, Angela Merkel, has spent more than a year resisting a credible solution to the euro crisis.

             All true. But diplomacy is a test of relative power, not virtue. Mr Cameron has promised MPs that the euro crisis offers a golden opportunity to advance Britain’s national interest. Other EU countries disagree. Something, at some point, will have to give.

             Economist.com/blogs/bagehot

             Wikipedia’s fund-raising

             Free but not easy

             The online encyclopedia needs its users’ money and volunteers’ time. Gaining the first is the easier task

              

               

             MANY mocked, but the money rolled in. For the last few weeks of 2010 Jimmy Wales fixed his piercing gaze on Wikipedia users, imploring them from banner ads to help “the free encyclopedia that anyone can edit” pay its bills for this year. The founder’s plea worked. Wikipedia reached its target of $16m in just 50 days (compared with $8.7m in 67 days at the end of 2009).

             This month those pleading banners will return—but with many sets of eyes. Backing up the earnest Mr Wales in the attempt to raise $25m by the year-end will be Brandon Harris, a long-haired programmer wearing a full-sleeved T-shirt and a surly expression, who says he quit his job building “some crappy thing that’s designed to steal money from some kid who doesn’t know it” to work with Wikipedia. 400m unique users every month make it the world’s fifth-biggest website, according to Alexa, an internet research company. It also has a good claim to be the world’s most important provider of non-entertainment content.

             Wikimedia Foundation, the non-profit company that runs the online encyclopedia, has devoted much effort towards finding a way around its reliance on its founder. The banner featuring Mr Harris was the first to outperform the one with Mr Wales, and more successes have followed. Though Wikimedia received $3.6m from a charity, the Stanton Foundation, it wants to raise money from large numbers of happy users rather than big donors who might want some clout for their cash.

             Wikipedia has just 78 full-time staff (due to reach 117 in 2012) and 370 servers, against some 60,000 for Facebook and over 1m for Google. Unlike other internet giants, its content comes from unpaid editors. It spends 44% of its income on technology (including programmers); other administration costs make up just under a quarter. Fund-raising takes up 8% of the budget. It accepts no advertising.

             Raising time

             But raising cash to keep Wikipedia running is an easier task than getting people to donate time. Month-on-month article growth in the English Wikipedia was as high as 5% in 2006 but has stayed stubbornly at 1% for the past two years. Worse, Wikipedia fears that without remedial steps, the number of active editors will decline to below 80,000 by the middle of next year (in March, the figure was 90,000).

             Editors are a scarce and hardy breed. They must understand the site’s policies, gain authority among other Wikipedians so that their decisions stick, and be able to write in the cumbersome code required by Wikipedia’s software. Moreover, says Barry Newstead, Wikimedia’s chief global development officer, 90% of users outside Wikipedia’s “core community” aren’t even aware that they can edit the encyclopedia. Users seem to ignore the plentiful invitations to get involved: “We’re furniture in the living room,” he says plaintively.

             Sue Gardner, executive director of the Wikimedia Foundation, says she wants to break down the “psychological barrier” between reading and editing, so that improving an article feels like a natural extension of reading it. Attracting people dedicated (and thick-skinned) enough to fend off special interests and trolls (internet hooligans) is tough. So Wikipedia is trying to make its editors’ lives simpler and more attractive. One move is to try to cut the number of discouraging automated messages warning editors of style breaches and other peccadillos.

             Another change, due by the end of 2012, will make editing a lot easier, and more like using popular blogging software. But the Wikinauts are steering clear of the bandwidth-hungry features favoured by other content-rich websites. The aim is that a humble user visiting the site from a cheap mobile phone in Africa will find loading a page just as quick and simple as a rich-world user with a powerful computer and a broadband connection.

             By the end of this year, Wikimedia will have opened an office in India, its first outside the United States. Branching out to the far side of the world (rather than opening an office in somewhere comfortable like Europe) is meant to signal the foundation’s global ambitions. India is a sensible choice for an outfit with limited resources: a large, English-speaking Wikipedia community already exists there. Indians are the fifth-largest donors and rank sixth among most-active editors. The encyclopedia has two dozen versions in Indian languages. But even the largest of these, Hindi, has only 100,000 articles (against over 3.8m for English). 300m Hindi speakers mean plenty of scope for growth. India alone is expected to triple the number of its internet users to nearly 300m by 2014. The push should provide useful know-how for expansion under way in two other big growth areas: Brazil and the Arab-speaking world.

             Despite rosy forecasts for emerging-market growth, Wikipedia still faces two big obstacles. It is good that so many people in the developing world now access the encyclopedia from mobile phones, but such devices are ill-suited to editing. In deferential cultures and those with little experience of public participation, Wikipedia has also had particular trouble explaining that every single user has the right (and indeed the duty) to edit an article if he thinks he can improve it.

             One solution is partnerships with universities. Wikipedia works with three institutions in the western Indian town of Pune, an education hub. Students are assigned a theme—corporate social responsibility, for example—and must write articles for course credit. They are happy to gain a wider readership than just their professors, while Wikipedia gets an enthusiastic batch of new recruits. Articles created through these partnerships range from topics as broad as “output (economics)” to an arcane entry on a 1985 committee on Indian monetary policy.

             The aim is to encourage the indigenous creation of information and to lessen reliance on imports from outside. The university focus also helps Wikipedia inch closer to meeting one of its diversity targets—increasing the share of women editors from 9% in 2011 to 25% by 2015.

             Wikipedia has suffered in the past from ill-informed criticism from outside, and complacency on the inside. Signs now are that both are diminishing. The idea that an online encyclopedia that anyone can edit can provide high-quality content is increasingly established. Wikipedia entries are rarely perfect, but their flaws are always open to instant remedy; that is a big plus. The outfit also seems to be moving away from its dependence on the charismatic Mr Wales, and from its over-reliance on a narrow caste of Anglophone enthusiasts. Wikipedia’s survival and expansion are also encouraging signs for those that worry the internet is in danger of becoming too commercial and closed off. Wikipedia is not just collating knowledge: it is making news too.

             Pilgrimages

             Hot steps

             Pilgrimages are booming. Time to make them less destructive

              

               Ganges water, reverently abused

             TIME was when religious travellers had light footprints. The hero of “Way of a Pilgrim”, a 19th-century Russian spiritual classic, asked only for dry bread and seasonal farm work as he roamed the tsar’s realms, dreaming of the day when he (and perhaps a few thousand others in a typical year) would embark for Jerusalem.

             Now around 100m people a year make a pilgrimage, according to the Alliance of Religions and Conservation, a body that this week summoned representatives of the world’s main faiths to the pure air of Assisi, an Italian hilltop town, to see how religious travel might be made more environmentally benign. As well as the Assisi authorities, delegates at this week’s gathering came from pilgrimage destinations such as the Sikh holy city of Amritsar, the Armenian sacred capital of Echmiadzin, Haifa in Israel, revered by Bahais, and Kano in Nigeria, an important centre for Muslims.

            In the Western world, a Catholic making for a shrine like Walsingham in England or the (still hugely popular) medieval pilgrimage site of Santiago de Compostela in Spain can assuage his conscience by walking part of the way or paying for a “carbon offset” to balance the ecological costs of air travel. It is much harder to mitigate the side-effects of piety in places like India, where Hindu gatherings on the banks of the Ganges (especially a peripatetic cycle of festivals known as Kumbh Mela) attract tens of millions of people. These folk become both victims and perpetrators of the sacred river’s pollution.

             At one such festival last year in Haridwar, the state authorities used newspaper advertisements to implore the faithful not to use detergent or soap when bathing. In the river’s holiest place, Varanasi, the permanent population has soared in the last 30 years to around 3m, and a chronic pollution problem (mostly caused by human detritus) becomes uncontrollable whenever electricity fails and sewage treatment plants break down—though that does not seem to deter pilgrims from bathing in waters they see as eternally sacred.

             The Saudi authorities are building a $2 billion railway in Mecca to whisk pilgrims making the Hajj (a once-in-a-lifetime duty for Muslims) from one holy site to another, replacing thousands of buses (one caught fire on November 1st, killing a British couple). But few other destinations can afford that kind of provision. As with mass tourism, pilgrims risk destroying the destinations they love.

             WikiLeaks

             Out of time and money

             Julian Assange loses an appeal while WikiLeaks runs out of cash

              

               Single to Stockholm, economy class

             NO LONGER quite the cause célèbre he once was, Julian Assange was in court without his celebrity backers on November 2nd, when he failed in an appeal against his extradition to Sweden, where prosecutors want to question him on sex-assault charges. The WikiLeaks whistle-blowing site he founded is in trouble too: it has suspended most of its operations as it grapples with banks and payment-card companies that block its transactions.

             Mr Assange’s lawyers had challenged a European Arrest Warrant (EAW), normally enforced automatically, on four main grounds. Two High Court judges firmly rejected them all in terms that leave little room for a further appeal. They did not accept that the Swedish prosecutor was the wrong judicial authority to order an extradition; their judgment also said it did not matter that Mr Assange has not yet been accused of an offence in Sweden. Nor did it accept that the events being investigated were too minor, or too poorly described, to be an offence in England too (this “dual criminality” test is a central feature of the EAW). It also rejected the argument that extradition was disproportionate to the potential crime involved.

             Unless he gains leave to appeal, Mr Assange will be sent to Sweden within ten days. There he will have a chance to explain his treatment of two Swedish female fans in August last year. This dented his reputation and prompted the allegations: one of rape, two of sexual assault, and one of coercion. Mr Assange’s supporters believe that the furore is a smokescreen and that Sweden is acting as a tool of American influence; some even say he may end up eventually being extradited there.

             Mr Assange has been living under strict bail conditions with a wealthy backer since his arrest in December. He appeared at the tent-dwellers’ protest outside St Paul’s Cathedral last month, but has had diminishing success in drumming up wider support for his cause. A blunder in September, when the unedited versions of purloined American diplomatic cables were released thanks to a stray password, brought a temporary flurry of publicity.

             But WikiLeaks as a publishing venture is dormant: in a statement on October 23rd it said it would concentrate its efforts on fighting what it calls a “financial blockade”: a boycott by banks and other financial institutions that has severely hampered its fund-raising. An Icelandic company, DataCell, which tried to handle credit card payments for WikiLeaks, complains of sweeping sanctions against it. These prevent it dealing with its regular customers. WikiLeaks and DataCell have also lodged a joint antitrust complaint at the European Commission, saying that Visa and MasterCard are unlawfully colluding against them (Visa says vaguely it suspends payments “if appropriate” when a merchant breaks “applicable laws”).

             Life may not be much fun for Mr Assange. But being a lawyer for WikiLeaks is a most interesting job.

             Bribery

             Supply side

             A new index of bribe-payers highlights slow progress in curbing sleaze

              

             BRIBERY involves two parties, not one. Lambasting officials in poor countries for their sticky fingers is usually easier (and less open to legal challenge) than investigating those who suborn them.

             But on November 2nd Transparency International, a Berlin-based campaigning group, published an updated version of its Bribe Payers Index. Based on questions to 3,000 businessmen, this ranks 28 countries (accounting for 80% of global trade and investment) by the perceived likelihood of their companies paying bribes. Russia and China scored worst by a hefty margin. Dutch and Swiss companies were seen as the cleanest, with Belgium, Germany and Japan close behind. Construction and industries involving government contracts, unsurprisingly, were the dirtiest.

             Disappointingly, the latest version of the index shows no significant change since the previous edition in 2008. That comes despite some big shifts in national legislation and international anti-bribery activity. Recent prosecutions under America’s Foreign Corrupt Practices Act have sent culprits to jail for record terms. The former boss of an America-based telecoms firm, Joel Esquenazi, received a 15-year jail sentence on October 25th for paying nearly $900,000 in bribes to Haiti’s national telephone company. An accomplice received a seven-year sentence.

               

             Britain has introduced a tough anti-bribery law too. Laurence Cockcroft, a British economist who specialises in anti-bribery campaigns, says the dozen recent prosecutions by the Serious Fraud Office belie its reputation for feebleness: “it’s a huge improvement on five years ago.”

             Even countries best known as sources and recipients of corrupt payments are trying to meet international standards, at least on paper. Saudi Arabia has set up an anti-corruption agency. China, India and Indonesia have passed anti-bribery laws. So too has Russia, in what most observers think is an attempt to ensure membership of the World Trade Organisation and support a pending application to join the Organisation for Economic Co-operation and Development (OECD), a Paris-based think-tank for advanced industrialised countries.

             But practical progress has been a lot thinner. Transparency International complains that Germany, Japan and Saudi Arabia have not yet ratified a UN convention on bribery. 21 of the 38 states that signed the OECD anti-bribery convention, including Australia, Brazil, Canada, Mexico, South Africa and Turkey, show “little or no enforcement” of it. Attempts to get the G20 group of the world’s biggest economies to tighten rules on transparency and bribery have also bogged down. The agenda for a summit this week in Cannes was dominated by avoiding an immediate economic meltdown, rather than dealing, as the incumbent French presidency initially hoped, with financial mischief.

             Robert Palmer of Global Witness, a London-based campaigning group, says that bribery indices, though welcome, fail to highlight the crucial role of intermediaries: banks that handle corrupt payments and lawyers who advise clients how to get around anti-bribery laws—for example by making “facilitation payments” which are a common loophole. He and other campaigners want new rules to make companies record payments to governments publicly and to publish accounts reporting their activity country by country.

             But perhaps the biggest pressure is likely to come from shareholder ire. Next year Transparency International will publish an updated ranking of big global companies, highlighting their use of offshore finance and their perceived willingness to pay bribes. A plunging share price may be the biggest disincentive to the corrupters of the weak and greedy.

             Indian technology firms

             Seeking to avoid a mid-life crisis

             India’s most dynamic, but no longer so youthful, industry tries to reinvent itself

              

               

             INDIA’S technology firms are no longer spring chickens. Infosys had its 30th birthday this year and its lead founder retired, hailed as a visionary by his colleagues and celebrated as the man who kick-started the country’s first world-class industry. Yet judged by their share prices of late, the three big firms, TCS, Infosys and Wipro, are still giddy, uncertain things. Last month TCS’s shares, which had swaggered earlier in the year, slumped as it posted disappointing quarterly figures. Wipro’s shares are well down on the year and this week’s news of quarterly profits little changed from a year ago sent them a bit lower still.

             The volatility partly reflects investors’ fears of a depression in the rich world, where the three make the bulk of their money. But it is also a symptom of mild paranoia about whether these firms can in their dotage still deliver perky growth. The worry is that they might go the way of Nokia: for years the Finnish handset firm maintained high margins, in defiance of its many doubters. Then, suddenly, the naysayers were proved right.

               

             Regarding the slump in rich economies, the recent past does offer a chilly precedent. During the Wall Street crisis in mid-2009 the IT firms’ revenue growth slowed almost to zero as customers, especially financial ones, slashed spending. But activity bounced back smartly (see chart) as clients recovered their nerve and redoubled efforts to cut costs through outsourcing and reorganising their back offices.

             Today the hope is that customers will be less panicky. All of the big three insist there has been no sudden slowdown in spending and are continuing their colossal hiring programmes in India (together they now employ almost half a million people, almost all in their home country). Natarajan Chandrasekaran, TCS’s chief executive, has visited more than 100 customers worldwide in the past three months and says they are resolute. “They are going about their business in a systematic way. They realise the situation in the US and Europe is going to take time to sort out.”

             But even if “Financial Armageddon: The Sequel” does not happen, what about the industry’s long-term growth potential? “I don’t think it is over by a long stretch,” says K.V. Kamath, the chairman of Infosys. “Indian IT is just starting to come of age.” Optimists point to a steady widening of the boundaries of outsourcing and argue it will continue. Pioneers such as General Electric turned to India’s firms first, followed by the banks; the public sector in the West may be next. Hospital bosses in Ohio may not yet be thinking about running their diagnostic-test results from India, but clever people in Mumbai are. Likewise the habit of outsourcing should expand further from its core geography of rich English-speaking countries to places like southern Europe, Japan and emerging markets. India’s IT-industry body, NASSCOM, reckons the total potential market will triple between 2008 and 2020.

             There have long been questions about whether the three firms are becoming unmanageably big. Yet so far they have doubled in size every few years without exhausting the supply of passable warm bodies from India’s lousy education system. Even so, large numbers may catch up with them in other ways. Nimish Joshi, an IT analyst at CLSA, a broker, says their biggest clients are themselves approaching the limits to growth. Citigroup is thought to fork out $350m-400m to TCS a year: is it really going to increase that at 20% a year?

             The Indian firms have survived the decline of clients before: BT Group, a British phone company that used to be a big customer, is now but a shadow of its former self. Still, it is likely that the biggest spenders—the top ten customers typically account for 20-25% of each IT firm’s sales—will grow more slowly than the rest, bringing down overall growth.

             There is a second consideration: that high unemployment and economic distress in the rich world may impose political limits to outsourcing there. In an interview in May, S. Gopalakrishnan, one of Infosys’s top brass, noted that the boom in labour mobility over the past 30 years had coincided with strong growth. Now, at a time of stagnation in the West, worries about a backlash were “not going to go away”. Since his prescient comments, the Indian IT firms have found it harder to get visas to send staff out to America to liaise with clients on big projects there. One firm says the rejection rate for its visa applications has doubled, to 40%. Political pressure over unemployment is surely a factor.

             More than just cheap

             The law of large numbers; the sense that big clients may have matured; the political limits of outsourcing; not to mention wage pressures in India. All these explain a second pillar of Indian IT firms’ strategy: to go beyond exploiting lower labour costs back home and become creators of intellectual property and purveyors of consultancy.

             The industry has evolved before. It began in the 1990s simply maintaining software and systems designed and owned by others. Then came the Y2K bug, in which Indian firms helped save the world from the disaster-that-never-quite-was, boosting their profile. For the past five years the quest has been to evolve again, beyond just competing on price. The latest, slightly woolly, incarnation of this is to offer “solutions”; a package of services, sold on a continuing basis for fancy prices, ranging from the design and operation of software applications to advising customers on restructuring their businesses.

             Using a narrow definition, such high-end activity probably accounts for less than a tenth of revenues today, says Noshir Kaka of McKinsey & Company, a consulting firm. Western firms such as IBM and Accenture can be sniffy about their Indian rivals’ sophistication. Yet customers seem to be getting more promiscuous about whom they buy their “solutions” from: witness the rise of salesforce.com, a web-based, off-the-shelf product that helps companies manage their sales staff. This suggests that barriers to entry have fallen. The three Indian firms certainly hope so, and are throwing resources at muscling into higher-value services. If they get the formula right, their sales from this line of business “could go up fast”, says Mr Kaka.

             To make the leap into the top league of global IT services, India’s three giants may have to hire many more people in rich countries. That is partly because the required skills are scarce in India, and partly because a physical presence is needed for some tasks, especially in consulting. Japan’s carmakers were pilloried in America until they shifted some production there, hiring locals and thus creating local loyalty. India’s IT firms are now following their footsteps, as our next article explores.

             TCS in America

             From Mumbai to the Midwest

             Far from home, Tata Consultancy Services strives to move upmarket

              

               

             DRIVE up the leafy Leadership Trail in Milford, Ohio and you reach what appears from the outside to be a luxury ski lodge. Inside, large windows with forest views are a constant reminder of the surrounding American heartland. This is Tata Consultancy Services’ new American facility, a stark contrast to TCS’s colonial-era headquarters overlooking sweltering cricket pitches in Mumbai. Bought in 2008, the Ohio facility is a symbol of TCS’s efforts to polish its brand and move to higher-margin services.

             One reason for choosing Milford, a satellite of Cincinnati, was the proximity of Midwestern clients: ten Fortune 500 companies are based in Cincinnati alone. Another is cost: it is one of the cheapest among America’s main cities and has plenty of land on its fringes.

             A third reason for choosing Ohio is the presence of decent universities nearby. TCS set up shop in Milford not only to be closer to clients but to begin in earnest to hire American graduates. Most of TCS’s new coders in Ohio are fresh from the nearby universities of Kentucky, Cincinnati, Purdue, Ohio State and others. They are cheaper than Ivy League graduates and TCS offers them interesting work with a booming company. The facility has 450 employees now, nearly all American, thanks to the difficulty of getting visas for Indians, and the plan is to increase their number to 1,000. They are a fraction of TCS’s 215,000-strong workforce but represent the bridgehead of its ambitions to go beyond being merely an outsourced back-office and coding shop and take on such consultancy giants as IBM, Hewlett-Packard (HP) and Accenture on their home turf.

             Having pleased clients with its work for them so far, TCS should have a decent chance at getting them to buy fancier and pricier services. David Johns, chief information officer at Owens Corning, a building-materials maker, is full of praise for TCS; his company has doubled its overall spending with the firm in recent years. Citigroup sold its India-based business-process unit to TCS, guaranteed it $275m annually in business for several years, and then proceeded to spend more than that.

             However, Jagdish Rao, a technology chief at Citigroup, says most of the consulting work TCS has done so far has been on systems TCS had built or implemented itself. Tom Rodenhauser of Kennedy Information, which studies the consulting industry, agrees that it has yet to make a breakthrough in high-end work. Although TCS is “printing money” with its outsourcing business, he “can’t say with a straight face they’re doing great at consulting—they’re giving away what other companies charge for”, as a way of selling their legacy outsourcing services.

             Amar Naga, the boss of the Milford facility, admits that consulting proper is so far just 2.6% of TCS’s revenue. But it is growing more than twice as fast as the company’s overall revenues, themselves still increasing at around 25% a year. Such eye-catching growth, combined with its reputation for high-quality work, suggests clients can be convinced that TCS’s consultancy work is worth paying for.

             For the American rivals it is planning to take on, TCS may so far be no more than a blip on the edge of their radar screens. But as it pushes up into high-value consulting, several of them—such as IBM and HP—are trying to capture more work by moving downstream into TCS’s traditional outsourcing territory. When they meet in the middle it could be quite a fight.

             Qantas

             Scorched earth on the runway

             The boss of Australia’s flag-carrier takes a big gamble

              

               Now departing for Asia

             LABOUR disputes and stoppages are a way of life in the airline business. This week alone, as Air France and Philippine Airlines were hit by strikes, talks were being held to try to avert industrial action at Britain’s Thomas Cook Airlines. What is pretty unusual, though, is for an airline’s boss to respond to strikes by grounding its planes and halting all flights until the unions back down.

             That is what Alan Joyce, the chief executive of Qantas, did on October 29th, seeking to end disputes with pilots, engineers and other staff that have dragged on for over a year. Two days later flights restarted after the government referred the dispute to Fair Work Australia (FWA), the national labour-relations authority, which ordered both sides into 21 days of talks and banned either from taking action in the meantime.

             Mr Joyce’s drastic move got, to put it mildly, mixed reviews. Julia Gillard, the prime minister, condemned his “extreme and irresponsible” actions. A leader of the pilots’ union said he had gone “completely mad”. Stranded passengers swore they would never fly Qantas again. Delighted rival airlines, led by Virgin Australia, welcomed such defectors with open arms. The Sydney stockmarket seemed to approve of the scorched-earth tactics, marking up Qantas’s shares, even as Moody’s and Standard & Poor’s put it on review for a possible cut in credit ratings on concerns that the grounding would hurt the airline’s future bookings, profits and brand image.

             Mr Joyce’s short-term bet, that a temporary shutdown would force the government to send the dispute to FWA, paid off. For now the airline will suffer no stoppages, and if at the end of the three weeks of talks there is no agreement, FWA will impose binding arbitration on both sides.

             His longer-term calculation is that it will be worth the one-off hit to the airline’s reputation to push through a restructuring of Qantas’s money-losing international operations. What the unions fear most is a plan Mr Joyce announced in August. This would cut 1,000 jobs and some long-haul routes while setting up a new premium airline based somewhere in Asia and forming a joint venture to operate a low-cost carrier in Japan.

             The unions want guarantees of job security. Qantas told FWA that these and other demands risked destroying its commercial viability, and that the disputes had already cost it A$70m ($73m). The cost of compensating passengers stranded by the shutdown, of business lost as travellers switch to other airlines and of the discounts and big advertising campaigns that will be needed to win them back will probably exceed this. But Qantas says its international operations are losing around A$200m a year, so the potential gains from making cuts in high-cost Australia and switching the airline’s focus to high-growth Asia are considerable.

             The bet is risky, however. First, there is no guarantee that if the dispute goes to arbitration the eventual ruling will be in Qantas’s favour overall: its domestic routes are highly profitable, so FWA may decide it can afford to be more generous to workers than it claims. In ordering both sides into talks, FWA noted that whereas the union’s strike action did not seem to pose serious risks to Australia’s tourist industry, the airline’s shutdown did, suggesting it may share politicians’ and passengers’ indignation at Mr Joyce’s tactics.

             Second, there are no guarantees that Qantas’s Asian ventures will be a success. Yes, demand for air travel is set to continue booming among the rising Asian middle classes. But Qantas is not the only airline to have noticed this and it will be competing against airlines backed, and in some cases owned, by Asian governments.

             Meanwhile, by showing such apparent disregard for the Australian passengers it stranded last weekend, Qantas risks losing a chunk of its domestic traffic to Virgin Australia and other competitors: business-class travellers, who are especially profitable, were already said to have started switching as the Qantas disputes dragged on. Bosses at other high-cost airlines around the world, trying to push through cost-cutting plans against resistance by the unions, will no doubt be watching the outcome of Qantas’s saga closely. But it is not yet clear if Mr Joyce is a trailblazing hero or a reckless gambler.

             Fiat and Italy

             Arrivederci, Italia?

             Italy worries that its biggest manufacturer may leave

              

               Will they drum Fiat out of Italy?

            DUTY, history, and responsibility are what keep Fiat, Italy’s biggest private-sector employer, based at home. Running counter to such fine notions, said the carmaker’s boss, Sergio Marchionne, earlier this year, is Fiat’s need to make decisions “rationally”. It has lost money in Italy for years. It expects things to get worse as sales slump at home. Small wonder that the country regularly goes into hysteria over whether Fiat will stay.

             Its takeover of Chrysler, an American carmaker, is one reason to worry. Fiat (whose chairman, John Elkann, is a director of The Economist’s parent company) has not decided whether the combined group’s headquarters will be in Turin or Detroit. That may involve little more than a plaque on the wall, as the company argues. But Fiat’s manufacturing presence in Italy is under threat too. Despite earning two-thirds of its revenues abroad, it still has almost half its employees and 40% of its plants in Italy. Mr Marchionne has repeatedly threatened to shutter Italian capacity if he cannot make it productive.

             On October 20th Consob, Italy’s stockmarket regulator, demanded details of a 2010 plan called Fabbrica Italia, in which Fiat promised to invest €16 billion ($22 billion) in its Italian plants over four years in return for new agreements on working conditions. As part of this plan, it is repatriating production of the Panda, a small car, from Poland. But Fiat has also changed some elements: two prestigious models it was going to bring to its Mirafiori plant in Turin will be replaced with smaller cars.

             Fiat rejected Consob’s demands for more detail on the plan and attacked the regulator for asking for it publicly. Maurizio Landini, secretary-general of Fiom-Cgil, a metalworkers’ union which has fought hard against Fiat’s new working conditions, says his main fear is that Fabbrica Italia only exists on paper. He claims that Fiat is basing the development of its most innovative future projects, such as hybrid and electric cars, in America.

             Fiat’s Italian plants are 15-20% less efficient than those of competitors elsewhere in Europe. Its Polish, Serbian and Turkish plants run at more than 70% of their capacity, whereas Italian ones run at 33%. (Part of the gap comes from lower productivity, part from Fiat choosing to make cars elsewhere and part from varying levels of demand). Flexibility has been the firm’s main problem. For example, if a car on one production line sold badly and a model on another line sold well Fiat could not move workers across under the old rules.

             The firm’s employees proved this year that they are ready to compete. A majority at three Italian plants voted to accept new working practices and, apart from Fiom-Cgil, all unions signed the deal. At a long-shuttered plant near Turin that Fiat has bought from another carmaker, 89% of the idled workers voted for the changes despite Fiom-Cgil’s strong presence.

             So it can bargain directly with workers at factory level, Fiat has also decided to quit Confindustria, Italy’s main employers’ lobby, after it offered the unions’ national chiefs a final say on pay deals. Fiat has thus made two big breaks with Italy’s collective-bargaining tradition, says Roberto Pedersini, a labour-relations expert. First, it has repudiated industry-wide, national labour standards. Second, it is taking away labour protections when company-level agreements usually give more rights to workers. To be rational, Fiat’s Italianità has to be less dutiful.

             Personalised news

             Your digital paper, sir

             The struggle to make money out of news on tablets

              

             A CUSTOMISED, constantly-updating newspaper used to be the stuff of science fiction. Now, thanks to tablet devices like the iPad, there are several. Livestand, a news app launched this week by Yahoo!, joins a field that already includes Zite, bought recently by CNN; Editions, created by AOL; and Flipboard, which Google tried to buy last year. Rebuffed, Google is expected at some point to launch its own news app, code-named Propeller.

               

             These corporate giants aim to cash in on the desperation of traditional news publishers. A study last month by the Pew Research Centre with The Economist Group (this newspaper’s parent company) found that, less than two years after the iPad went on sale, 11% of American adults now own a tablet and more than half of this group read news on it each day. They are more avid news consumers than those without tablets (see chart), and for long articles they prefer their tablets both to ordinary computers and (remarkably) to print. Ken Doctor of Outsell, a media consultancy, says the study is the best evidence yet that tablets are gradually replacing print.

             For news outlets facing dwindling print circulations and meagre online advertising rates, this is a glimmer of hope. Yet turning this readership into revenue is tricky. Not all publishers can afford to build their own tablet apps. For those that can, readers are somewhat readier to pay for subscriptions than on the web; advertising rates are (for now) six to ten times higher than online, according to Mr Doctor. But it is not yet clear how many readers will make the switch. And for publishers without an app, tablet users are just like other web users: worth very little money.

             Flipboard and its rivals let users create a personalised digital magazine from a mix of sources, which can include magazines, newspapers, blogs and articles posted by their contacts on Facebook or Twitter. On the web, similar “aggregator” sites, personalised or not, have a bad name as freeloaders that create no content of their own. And the app versions have been of dubious benefit thus far to publishers, which must provide their stories free (or at least the first few lines, with a link to their websites) in return for the vague hope of getting more readers. But compared with a website cluttered with links and ads for penis enlargement, the apps are clean, stylish and nice to use. And some have started carrying glossy, high-end ads and sharing the revenue with publishers.

             Livestand is the most publisher-friendly app so far. It is more like a digital news-stand than a personalised magazine: users can subscribe to various publications, but must read each one separately instead of seeing all their stories together. Publishers must provide the full text of their stories, but can control their visual design, and from next year they will be able to charge for subscriptions too. There will be interactive and video ads, for which Yahoo! will charge advertisers big premiums.

             Some publishers may benefit from all this; others may lose subscribers from their own apps to the aggregators. Readers will be spoilt for choice. For Yahoo! and the rest it should be a nice little business—as long as there are any publishers left to fuel it.

             Retailing

             Spies in your wallet

             Loyalty cards do not make customers loyal, but retailers are devoted to them

              

               A penny for your thoughts

             ALTHOUGH they are often called “loyalty” cards, the rewards cards that many retailers and service companies issue to shoppers are not about winning their undying allegiance. “The real value-added is the data,” explains Rupert Duchesne, the chief executive of Aimia, a Canadian firm which runs Britain’s Nectar card scheme, among others. By cleverly using the information collected when customers’ cards are swiped at checkouts, the companies can offer them well-targeted discounts. Even small shifts in buying habits, multiplied by very large numbers of customers, can provide a welcome boost to profits.

             Nectar is Britain’s biggest loyalty programme, with 18m subscribers. Set up in 2002, it has hundreds of member companies, ranging from Sainsbury’s, a supermarket chain, to Expedia, an online travel portal. Shoppers can spend the “Nectar points” they earn on everything from food and drink to gadgets and cinema tickets.

             Nectar’s founders tried to avoid overlap but with so many members, some is inevitable: shoppers can use their points to buy drinks from Sainsbury’s or Laithwaites Wine, and flights from Expedia or easyJet. That is why Tesco, Britain’s largest supermarket chain, and Boots, its largest chemist, each set up its own, exclusive loyalty scheme. Tesco’s Clubcard, launched in 1995, now has 15m members.

             America’s second-largest chemists’ chain, CVS/pharmacy, has 69m signed up to its ExtraCare rewards scheme. Shoppers get 2% off most purchases, plus coupons and other incentives. David Denton, chief financial officer at the retailer’s parent, CVS Caremark, says the scheme is more about holding on to existing customers than attracting new ones. For example, someone who buys baby food might be offered a discount on nappies, encouraging her to visit the store again.

             At first the expense of setting up and running rewards programmes meant they were affordable only for the largest retailers, or groups of retailers. But as IT costs have fallen, such schemes have multiplied, while becoming an ever more central part of retail firms’ marketing strategies, says David Bassuk of AlixPartners, a consultancy. The growth of Aimia (formerly called Groupe Aeroplan) into a multinational with annual turnover of C$2.2 billion ($2.2 billion) is testament to this. Its operations now range from Europe to the Middle East, and on October 19th it agreed a joint venture with Tata Group, India’s biggest family-run conglomerate, to set up a loyalty scheme there broadly modelled on Nectar.

             The Tata scheme will have to be tailored to India’s fragmented retail market, says Vikas Choudhury of Aimia. Store chains account for only 6.5% of the $428 billion Indians spend on private consumption, which is why even its biggest retailers are relatively small. That implies lots of firms will need to take part. To encourage Indian consumers to sign up, Mr Choudhury plans to offer them a choice between a straightforward loyalty card, a mobile-phone app or a jointly-branded credit card serviced by a financial firm.

             Such a programme will be a novelty in India. “Retailers’ schemes are still at a very basic stage of sophistication and have very few features and options,” says Rama Bijapurkar, the author of “Winning in the Indian Market: Understanding the Transformation of Consumer India”. Suhel Seth, another marketing pundit, says Indians have a healthy scepticism of such loyalty schemes, regarding them as a plot to make them buy things they don’t want. Tata’s scheme will need to overcome such doubts but such is the trust Indians place in the Tata brand that Mr Seth thinks its chances are strong.

             The success of Clubcard and Nectar in Britain seems to have persuaded a leading rewards-card sceptic to rethink. Waitrose, an upmarket rival to Tesco and Sainsbury’s, used to say loyalty schemes were expensive and intrusive. But on October 25th it started sending out its new “myWaitrose” card to shoppers on its mailing list (while cheekily claiming that it is “not another loyalty scheme”).

             Still, there remains one notable holdout: Asda, Britain’s third-biggest supermarket chain, once experimented with reward cards but since being bought by Walmart in 1999 it has stuck to its American parent’s credo that a focus on low prices across the board makes it unnecessary to lure shoppers with discounts. Taking a stab at its big rival, Asda proclaims: “No Clubcard. No gimmicks. Just lower prices every day”.

             Loyalty cards and insurance

             Every little helps

             As it pushes into finance, Tesco’s Clubcard gives it a competitive edge

              

             SOME young drivers get tanked up and wrap their cars round lampposts; others drive carefully, and sober. Insurers would love to collect more background information on the personal habits of those buying motor, household and life policies, but do not want to put off potential customers with intrusive questionnaires. So they end up pooling groups of people by such basic factors as age, occupation and postcode, which means that some low-risk customers are lumped in with risky ones and subsidise their cover.

             If only insurers could stealthily gather a few titbits about their potential policyholders’ consumption habits. Such hints might help them more accurately target those customers least likely to make claims, and attract them with better rates. As it happens, Tesco routinely collects such information from holders of its Clubcard loyalty card. As it bulks up in financial services, that may give Britain’s largest supermarket chain an edge over traditional insurers.

             To give an obvious example, it would be worth offering pet insurance to someone who has started buying kitty-litter. Buying lots of booze does not make you a drunk-driver, but someone who buys little or none seems less likely to be one. Buyers of window locks are likely to be more security-conscious, and so on.

             Tesco declined to discuss how it uses Clubcard data for this article. But a group of students at the London School of Economics carried out a class project in which they made several applications for Tesco car insurance. When they gave the number of an unused Clubcard it earned a 1% discount. When they gave the same personal details but quoted the numbers of heavily used Clubcards, the discounts varied greatly, reaching 18%. To paraphrase Tesco’s slogan, it seems that every little scrap of information helps.

             Schumpeter

             Land of the wasted talent

             Japanese firms face a demographic catastrophe. The solution is to treat women better

              

               

             UNLIKE an earthquake, a demographic disaster does not strike without warning. Japan’s population of 127m is predicted to fall to 90m by 2050. As recently as 1990, working-age Japanese outnumbered children and the elderly by seven to three. By 2050 the ratio will be one to one. As Japan grows old and feeble, where will its companies find dynamic, energetic workers?

             For a company president pondering this question over a laboriously prepared breakfast of steamed rice, broiled salmon, miso soup and artistically presented pickles, the answer is literally staring him in the face. Half the talent in Japan is female. Outside the kitchen, those talents are woefully underemployed, as Sylvia Ann Hewlett and Laura Sherbin of the Centre for Work-Life Policy, an American think-tank, show in a new study called “Off-Ramps and On-Ramps: Japan”.

             Nearly half of Japanese university graduates are female but only 67% of these women have jobs, many of which are part-time or involve serving tea. Japanese women with degrees are much more likely than Americans (74% to 31%) to quit their jobs voluntarily. Whereas most Western women who take time off do so to look after children, Japanese women are more likely to say that the strongest push came from employers who do not value them. A startling 49% of highly educated Japanese women who quit do so because they feel their careers have stalled.

             The Japanese workplace is not quite as sexist as it used to be. Pictures of naked women, ubiquitous on salarymen’s desks in the 1990s, have been removed. Most companies have rules against sexual discrimination. But educated women are often shunted into dead-end jobs. Old-fashioned bosses see their role as prettifying the office and forming a pool of potential marriage partners for male employees. And a traditional white-collar working day makes it hard to pick up the kids from school.

             Even if the company rule book says that flexitime is allowed, those who work from home are seen as uncommitted to the team. Employees are expected to show their faces before 9am, typically after a long commute on a train so packed that the gropers cannot tell whom they are groping. Staff are also under pressure to stay late, regardless of whether they have work to do: nearly 80% of Japanese men get home after 7pm, and many attend semi-compulsory drinking binges in hostess bars until the small hours. Base salaries are low; salarymen are expected to fill their pay packets by putting in heroic amounts of overtime.

             Besides finding these hours just a bit inconvenient, working mothers are unlikely to get much help at home from their husbands. Japanese working mums do four hours of child care and housework each day—eight times as much as their spouses. Thanks to restrictive immigration laws, they cannot hire cheap help. A Japanese working mother cannot sponsor a foreign nanny for a visa, though it is not hard for a nightclub owner to get “entertainer” visas for young Filipinas in short skirts. That says something about Japanese lawmakers’ priorities. And it helps explain why Japanese women struggle to climb the career ladder: only 10% of Japanese managers are female, compared with 46% in America.

             Japanese firms are careful to recycle paper but careless about wasting female talent. Some 66% of highly educated Japanese women who quit their jobs say they would not have done so if their employers had allowed flexible working arrangements. The vast majority (77%) of women who take time off work want to return. But only 43% find a job, compared with 73% in America. Of those who do go back to work, 44% are paid less than they were before they took time off, and 40% have to accept less responsibility or a less prestigious title. Goldman Sachs estimates that if Japan made better use of its educated women, it would add 8.2m brains to the workforce and expand the economy by 15%—equivalent to about twice the size of the country’s motor industry.

             Filthy foreigners are more female-friendly

             What can be done? For Japanese women, the best bet is to work for a foreign company. Two-thirds of university-educated Japanese women see European or American firms as more female-friendly than Japanese ones. Foreign firms in Japan (and similarly sexist South Korea) see a wealth of undervalued clever women and make a point of hiring them. One woman who switched from a Japanese bank to a foreign one marvelled that: “The women here have opinions. They talk back. They are direct.”

             Japanese companies have much to learn from the gaijin. IBM Japan encourages flexitime. BMKK, the Japanese arm of Bristol-Myers Squibb, a drug firm, has a programme to woo back women who have taken maternity leave. Why can’t native Japanese firms do likewise? A few, such as Shiseido, a cosmetics firm, try hard. But apparently small concessions to work-life balance can require a big change in the local corporate mindset. Working from home should be easy: everyone has broadband. But Japanese bosses are not used to judging people by their performance, sighs Yoko Ishikura, an expert on business strategy at Keio University.

             The firms that make the best use of female talent are often those where women can find sponsors. Most of the women interviewed for the study by Ms Hewlett and Ms Sherbin who got back on the career track after time off did so because a manager remembered how good they were and lobbied for them to be rehired. Eiko, one of the women interviewed, felt pressure from her male colleagues to quit when she became pregnant and announced that she was leaving to do an MBA. Her clear-sighted boss realised that this was not what she really wanted to do. He suggested leaving Tokyo and working at another branch with a more supportive atmosphere. Eiko transferred to Hong Kong, where career women are admired and nannies are cheap.

             Economist.com/blogs/schumpeter

             Award: Tom Easton

              

              

             Tom Easton, our former China business correspondent, now based in New York, is one of two winners of this year’s Bastiat Prize for Journalism, for his report in March on “Bamboo capitalism”.

              

             Financial markets

             Greece lightning

             The prime minister’s botched referendum plan has left the debt deal in trouble

              

               

             “JUST when I thought I was out, they pull me back in.” Investors must be tempted to echo the words of Al Pacino in “The Godfather: Part III”. Markets rally every time euro-zone leaders announce a plan to solve their debt crisis, as they did again on October 27th. But within a few days, it becomes apparent that each package has not solved the underlying problems, and investors are pulled back into the mayhem.

             On October 31st the unheralded announcement by George Papandreou, the Greek prime minister, that he would call a referendum on the debt deal turned market sentiment drastically. It prompted intense pressure from Angela Merkel, the German chancellor, and Nicolas Sarkozy, the French president, that any such referendum be held as soon as possible and become a vote on staying in the euro. By November 3rd, as The Economist went to press, the prospect of a vote that could pave the way for an exit from the euro, and a disorderly default, had pushed the Greek government to the brink of collapse.

             A Greek default would alarm investors in other indebted nations, such as Portugal and Italy, and might trigger the very financial meltdown the authorities have been striving to avoid. European bank shares, which rallied on initial news of the deal, slumped again on the referendum news (see left-hand chart). There is also the risk that depositors will shift their funds from banks in weak countries to safer havens. David Owen, an economist at Jefferies International, notes that Portuguese and Irish banks have pushed up deposit rates in recent months in an attempt to dissuade savers from withdrawing their money.

               

             If Mr Papandreou is ousted or his government falls, a referendum becomes much less likely. But uncertainty about Greece’s ability to stay the painful course and remain in the euro will persist.

             Doubts about the deal had emerged even before the Greek thunderbolts. It was not clear that the euro-zone leaders had done enough to bolster their rescue fund, the European Financial Stability Facility (EFSF), so that it could plausibly stand behind the debts of Italy and Spain. Ten-year Italian bond yields rose back above 6%, with the spread over German Bunds reaching a record euro-era high.

             European leaders hoped that emerging economies, particularly China, might put money into a special purpose investment vehicle (unhappily, SPIV) capitalised by the EFSF. That would help bolster the EFSF’s remaining firepower to €1 trillion ($1.4 trillion). But the early signs were that such countries would be willing to invest only small amounts, and then on terms that would leave European governments bearing even more of the risks. A €3 billion bond issue by the EFSF was postponed on November 2nd because of the uncertainty.

             Nor was it clear whether the requirement for banks to raise €106.5 billion of capital would be enough to reassure investors, or if it would instead force banks to shrink their balance-sheets, thereby shrinking the supply of credit to industry.

             Investors were also unnerved by signs that the European economy seems to be slipping closer to recession. The euro-zone purchasing managers’ index for the manufacturing sector fell to 47.1 in October, the third month it has been below the crucial 50 level, signifying a decline in activity. Unemployment in the region rose to 16.2m in September, the highest since the launch of the euro. The OECD cut its forecast for euro-zone growth in 2012 from 2% to 0.3%.

             European stockmarkets fell heavily on November 1st, with Greek and Italian indices falling by 7%. The euro also dropped to $1.37, having been as high as $1.42 in the wake of the debt deal. It made for a very uncomfortable first day at work for Mario Draghi, the new head of the European Central Bank. The ECB was reportedly buying Italian bonds this week but it has not made the kind of unlimited commitment to purchase bonds desired by many commentators. Many have their eyes on the huge amount of bond redemptions Italy faces next spring (see right-hand chart).

             Global markets took their cue from Europe, with the Dow Jones Industrial Average falling by 573 points over the course of October 31st and November 1st. In October stocks on Wall Street enjoyed their best monthly gain since 1974 on the back of economic data that soothed fears of a double-dip recession and robust third-quarter earnings reports from S&P 500 firms. But a European collapse would still be very bad news for American banks and exporters.

             Investors rushed for the safety of Treasury bonds, where the ten-year yield dropped back below 2%. Worries about the euro also prompted traders to flee to the perceived safety of the yen, prompting the Japanese authorities to attempt to weaken their currency. All of which meant yet another crisis-strewn agenda for the G20 leaders meeting in Cannes as The Economist went to press. If only summits created economic wealth, the world’s problems would all have long been solved.

             Buttonwood

             Two tiers, too complex

             The European debt deal changes the nature of government bonds

              

               

             MIGHT the European debt “deal” on October 27th turn out to be too clever for its own good? One result has been to create a two-tier market in government bonds. Even before the shock news of the Greek referendum, this seemed to be causing problems in the markets.

             Historically the great appeal of government bonds to investors is that they are a risk-free, liquid asset. Cautious investors can hold them for the long term and bank the interest. More active investors have used government bonds as a bolthole when riskier markets (such as equities) have been in free fall.

             The term “risk-free” looks distinctly dubious these days now that Greece is set to default. But a crucial part of the deal was the divide between private-sector creditors and official lenders. The former will take a 50% haircut; the latter will be paid off in full, albeit over the long term.

             This provision seems, in part, to be politically motivated. Governments want to reassure their own voters that they will not be penalised for aiding Greece; the burden will fall on hazily identified “speculators” instead. Many of these speculators turn out to be banks, which then have to be rescued by governments, so this process is a bit of a charade.

             But there are consequences to protecting official creditors. The deal makes a smaller dent in Greece’s borrowings; the country will still have a 120% debt-to-GDP ratio in 2020. In addition, private-sector creditors will be well aware that they are second-class citizens. The more that euro-zone countries come to depend on official support, the greater the eventual losses that private creditors may take.

             This higher risk for private investors may be one reason why Italian bond yields have been rising, even though the European Central Bank has reportedly been buying Italian debt. On November 1st, ten-year bonds were yielding 6.21% and the spread (or excess interest rate) over German government bonds was the highest since the euro area was created.

             The danger here is that Italy descends into the kind of vicious circle that other European nations have faced. The higher the yield on its debt, the harder the debt is to service. In turn, that makes investors more nervous, forcing yields even higher.

             The European rescue deal also created another way in which the bond market could be bifurcated. One part of the plan involves the creation of an insurance scheme whereby certain bonds would carry a guarantee from the European Financial Stability Facility (EFSF), the euro zone’s bail-out pot, under which investors would be protected against a first loss on their holdings of up to, say, 20%.

             It is not clear whether this scheme is practical. One potential pitfall is that it may mean that some bondholders have more rights than others, a provision that may break “negative pledge clauses” which specifically forbid such a situation.

             The insurance may trade as a separate instrument and could thus be transferred from investor to investor. But that makes it sound remarkably like a credit-default swap (CDS), an instrument European politicians profess to hate. Indeed, in another “too clever by half” device, the Europeans have gone out of their way to ensure that the 50% Greek haircut does not trigger payments under CDS contracts. Investors may reasonably presume that buying a CDS on European debt is an ineffective form of protection. That will make them less likely to buy European government bonds altogether.

             If the scheme goes ahead and the EFSF does not insure all existing Italian and Spanish debt (it doesn’t have the money to do so), some bonds will have a guarantee and some won’t. The latter will presumably trade at a discount to the former.

             Some would say this doesn’t matter. After the 2008 crisis governments guaranteed some bank debt, creating two types of security. Already investors have to choose between government bonds of different maturities and between conventional and inflation-linked debt.

             But the authorities play with the government-bond market at their peril. It plays such a vital part in the financial system—setting the benchmark rate for other borrowers, acting as collateral for other debt deals, forming part of banks’ liquidity reserves—that it needs to be as liquid and transparent a market as possible.

             October’s euro-zone debt deal already looks like the latest in a long line of summit packages that provide a short-term boost to confidence but fail to deal with the fundamental problems of high debt and uncompetitive economies. Indeed, by fragmenting markets, it may actually make things worse.

             Economist.com/blogs/buttonwood

             MF Global’s bankruptcy

             Broke broker

             An old hand on Wall Street is crushed by a bet on Europe

              

               No sympathy for the fallen

             THE euro-zone crisis had already brought Dexia, a Franco-Belgian lender, low. This week it claimed its first American scalp. On October 31st, in the biggest collapse of a financial firm since that of Lehman Brothers in 2008, MF Global went bankrupt. Courts in more than half a dozen jurisdictions will be pressed to sort out billions of dollars in claims. Investigators are reportedly searching for hundreds of millions of dollars in missing client funds.

             MF’s demise comes less than two years after it was intentionally transformed from a dull institutional broker to an ambitious investment bank by its new chief executive, Jon Corzine. A veteran of Goldman Sachs, which he left in 1999 after a palace coup, Mr Corzine turned to politics, winning campaigns to be first a Democratic senator and then governor of New Jersey before being dumped for failing to get to grips with the state’s dire finances.

             After Mr Corzine took charge of MF Global, its star initially burned bright. In February the New York Federal Reserve Bank admitted the firm into a select club of “primary dealers” in government debt. The risks that it was taking with its own balance-sheet were seen as offsetting a slowdown in its traditional businesses of helping clients make trades.

             Mr Corzine’s stock rose, too. His position as a conduit between Wall Street and Washington, DC made the prospect of his becoming treasury secretary likely enough—and painful enough—that a special provision was included in MF’s August bond issues providing a higher payout if Mr Corzine left for that office.

             It is too soon for a definitive autopsy on MF, but excessive leverage and proprietary bets were clearly to blame. The largest of these was a leveraged punt on the bonds of peripheral euro-zone governments, notably Spain and Italy, exceeding $6 billion. In theory, these bets promised large profits at little risk: MF Global revealed the basic components of its European bet in May, prompting no evident concern in markets.

             The first serious cracks emerged in September when America’s Financial Industry Regulatory Authority, a now-autonomous agency once tied to the major exchanges, told MF to put up more capital. On October 24th Moody’s, a ratings agency, downgraded the firm, citing its capital and operating environment. The next day MF disclosed a quarterly loss.

             A rout ensued. By the end of the week banks and exchanges had stopped doing business directly with MF. There was little doubt but that an agreement to sell or shore up the firm had to be reached over the weekend. Prospects of a deal, however, disappeared when more than $700m of customer funds could not be found.

             Numerous lessons will be drawn from MF’s collapse. In its bankruptcy filing, it revealed that it had less than $1 billion in equity supporting more than $40 billion in assets, a staggering level of leverage in an era when financial firms were meant to be ratcheting down risk. That a primary dealer could be so leveraged may well prompt questions about the New York Fed’s scrutiny of firms it routinely deals with.

             Sorting out creditors’ claims will not be easy. Firms listed on the bankruptcy-petition say numbers are either misleading or wrong. In its frantic final days, MF drew down its credit lines, leaving many banks exposed. They, at least, should be first in line among the pre-bankruptcy creditors to be paid. Also among the creditors are several of the most prominent New York law firms. Competitors have been hired to work through the mess.

             Whether any part of MF survives is questionable. Good employees will be poached. The protection from creditors afforded by the court means there needn’t be an outright dump of assets but very few securities firms ever rebound from bankruptcy. Some, such as Lehman, have had operating segments bought. Others, such as Drexel Burnham, were liquidated. MF is too small to be a test of the government’s ability to handle the failure of a financial titan. But a quick death would set a pleasing post-Lehman precedent.

             Swiss banks

             The Swiss diet

             Banks in Switzerland are slimming down, but slowly

              

             HARD TIMES for investment bankers on Wall Street and in the City of London also mean trouble on Bahnhofstrasse, the Zurich street that is home to Credit Suisse and UBS. Switzerland’s two global banks both recorded losses in investment banking for the third quarter.

             On the back of these bad numbers, Brady Dougan, the boss of Credit Suisse, on November 1st announced a shift in its investment-banking strategy. The business of fixed-income sales and trading, which has suffered two bad quarters, will be cut back. Instead the bank will concentrate more on trading foreign exchange, equities and commodities for clients.

             UBS, Credit Suisse’s bigger and more accident-prone rival a few doors up on Bahnhofstrasse, will probably announce further-reaching plans for its investment bank on November 17th. It recorded a SFr650m ($738m) loss in this bit of its business for the third quarter, mainly because of a SFr1.8 billion loss from an “unauthorised trading incident” in London.

             Other banks may be forced to rejig their investment-banking arms as the impact of higher capital charges proposed under Basel 3 rules begin to bite. Mr Dougan says that Credit Suisse will have a “first mover advantage”. Yet the changes at Credit Suisse still seem rather cosmetic. He plans to downsize only a couple of businesses and is not moving away from the bank’s “integrated banking model” whereby investment banking is supposed to mesh ever more closely with asset management and private banking. He also hopes to produce a heady 15% to 20% annual return on equity by 2014, not that far from the 25% target that global banks used to set themselves before the crisis.

             Swiss regulators will be disappointed. They had hoped that new capital requirements would nudge the two biggest banks to cut back on risky activities. The new rules require them to hold core capital of 10% and up to 9% of contingent capital, a type of debt that converts to equity in times of trouble, and to show how they would wind up their business in a crisis. The aim is to prevent a severe jolt to the economy if one or both of them were to fail, as UBS very nearly did in 2008. The regulators’ intention had been that the law would force the two banks to move away from volatile capital-markets activity to concentrate on the more stable wealth-management services that Swiss banks are famous for.

               

             The banks do pay lip service to the idea of streamlining investment banking to serve asset management, but not much more. A senior manager at UBS asks: “Do I need to be good at equities? No. But why should I give it up?” Why indeed? Investment banking, which even in good times provided only around 15% of the two big banks’ profits, has to be backed by around two-thirds of their capital. Most of this profit has historically gone to investment bankers, notes Philipp Hildebrand, chairman of the Swiss National Bank. Shareholders, who should be concerned, do not appear to mind. That said, traditional wealth managers, such as Bank Julius Baer, are more highly valued (see chart).

             One problem is that the classic Swiss banking model is also under regulatory attack. A tradition of banking secrecy, which protected clients from tax collectors, is giving way to an era of more transparency. With both parts of their businesses threatened, Switzerland’s big banks are in an uncomfortable spot.

             China’s financial regulators

             All change

             The main supervisory agencies get a new set of bosses

              

               Facing a tough task

             THE grey men at the top of China’s main financial-regulatory agencies do not change often. So the appointment of new bosses to the agencies supervising the banking, securities and insurance industries has created a splash.

             The most important job, that atop the China Banking Regulatory Commission (CBRC), goes to Shang Fulin (pictured), a careful bureaucrat who most recently served as the chief securities regulator. His widely applauded reforms allowed illiquid shares of state-owned enterprises to be traded, as well as the introduction of index futures and margin trading. But Alicia Garcia-Herrero of BBVA, a Spanish bank, argues that he moved too slowly on bond-market reforms and fears that “this reduces the likelihood of interest-rate liberalisation and further opening up of the capital account any time soon.”

             Mr Shang’s former job running the China Securities Regulatory Commission goes to Guo Shuqing, who until recently was chairman of China Construction Bank, a giant state-controlled bank. A fluent English speaker who spent time at Oxford, he is outspoken and seems market-minded: “If you don’t take any risk how can you make any money?” he asked in an interview with Reuters last year.

             Xiang Junbo, the former boss of the Agricultural Bank of China (ABC), another government-run banking goliath, is the new insurance regulator. He made his mark with the dual listing of ABC shares last year in Hong Kong and Shanghai, which at $22 billion was then the biggest public placement ever.

            The trio have a tough task ahead. They must overcome meddling from above as well as crises brewing below. Zhao Xinge of the China Europe International Business School observes that “CBRC clearly does not have total control in how the banks should be regulated.” He points to fresh demands from the country’s leaders that banks be “more tolerant” of bad loans made to small and medium enterprises, which, he quips, are “too many to fail”.

             That hints at another sort of trouble for Mr Shang and his colleagues. Ostensibly, China’s banks are in good health. Several publicly-listed state-controlled banks unveiled impressive third-quarter profits: Bank of China’s quarterly profits rose by 9% from a year ago, ABC saw a rise of 40% and China CITIC posted a 41% increase.

               

             The snag is that these profits may be built on a mountain of bad debt. Few analysts believe the government’s rosy figures on non-performing loans, given the lending binge that the big banks went on as part of China’s official stimulus policy (see chart). One concern is that the property bubble will burst. Another is the meltdown of the informal lending sector, which Credit Suisse estimates may be worth 4 trillion yuan ($629 billion).

             The main worry, however, is local-government debt. This week the CBRC hinted for the first time that it may allow the special investment vehicles holding most of this debt to delay loan payments. That would help ease an immediate crunch—but it would also further muddy the banks’ accounts and delay a proper clean-up of balance-sheets. Unless Mr Shang and his colleagues prove exceptionally deft, investors will be in for a rocky ride.

             Climate finance

             He who pays the paupers…

             Who will foot the bill for green development in poor countries?

              

               Sunshine and leverage

             AMID the wreckage of the 2009 Copenhagen climate summit, an agreement that rich countries would, by 2020, furnish developing ones with $100 billion a year to help them mitigate and adapt to global warming looked like a rare achievement. This commitment will also be a big talking point at the next annual UN summit, due to start in Durban on November 28th. With almost no hope of a big new pact, many expect progress on the formation of a global Green Climate Fund to be one of its few successes. Yet there is huge uncertainty about how developed countries will deliver on their promise, including what role the fund will play.

               

             The good news is that there is already a surprisingly large flow of climate finance—as investment into warming abatement and resilience measures is called. According to the first big study of the issue, by Climate Policy Initiative (CPI), a think-tank, at least $97 billion a year is going to developing countries, mostly from private lenders in rich countries. They contributed around $55 billion, with another $39 billion drawn from public budgets and capital markets by multilateral and bilateral development banks. Western taxpayers provided at least $21 billion of the latter amount. Less than $3 billion flowed from Western carbon markets (to offset emissions) and as philanthropy (see chart).

             This does not mean the rich world is close to fulfilling its promise at Copenhagen. That accord referred to “new and additional” money, and it is obvious that most of last year’s investment would have happened in any event. It is also unclear what sorts of funding should count towards the totals that were pledged. The Copenhagen Accord refers to both public and private sources of capital. Yet many developing countries and NGOs argue that it should be aid money, delivered from public budgets, and with no strings attached. A more coherent view is that it should be money used to cover the “incremental costs” of low-carbon developments. This is a term in the growing lexicon of climate finance that refers to the additional cost of low-carbon investments—building a wind farm, say, compared with lower-cost alternatives such as coal-fired power stations. By contrast the CPI study, which uses broad definitions of climate-related schemes—to include railways as well as renewable energy and forestry, for example—captures the total sums invested.

             Its findings are nonetheless striking. The figure of $97 billion, caveats admitted, is much bigger than most people, the study’s authors included, would have expected. Andrew Steer, the World Bank’s special envoy for climate change, attributes this partly to an exaggerated impression of paralysis created by the UN process. “The world of action on climate change is a long, long way ahead of the world of negotiation,” he says. Most progress has been made on measures to mitigate warming, such as renewable energy, which account for $93 billion of CPI’s total estimate. Last year about $200 billion was invested in renewable energy, low-carbon transport and energy efficiency in developing countries—more than a third of the global total.

             The magnitude of the private sector’s contribution to climate finance suggests an obvious lesson for the Green Fund. It needs to be designed in such a way as to encourage much more of the same. And with the global investment industry sitting on over $100 trillion of assets, this would be true even if Western governments had $100 billion to spare from their budgets, which they do not.

             The ability of development banks to obtain large amounts of private capital through borrowing also suggests how this might be done. The loans they dispense are further multiplied when it comes to individual projects, because their funding encourages additional private investment. According to the World Bank, loans issued at market rates by multilateral lenders are typically leveraged with private capital by a factor of three to six, and soft loans and grants by a factor of eight to ten.

             This suggests the promised $100 billion a year could, if loosely defined, be raised with a relatively small contribution from Western taxpayers. According to a proposal by Bloomberg New Energy Finance, a research firm, it might consist of $30 billion of equity, some of which could be provided by developing-country investors, which would then be used to raise $70 billion of cheap debt, $50 billion of which would come from private lenders. Having thus brought down the cost of capital, the “incremental costs” of renewable-energy projects over the standard sort would be relatively low. These could be covered by between $5 billion and $10 billion a year from public budgets, philanthropy and new sources of cash, such as taxes on bunker fuels or carbon markets.

             This plan would not impress most developing countries. Yet it would at least be feasible, fiscally and politically, for rich ones. Limiting the role of the new fund would reduce a risk of it getting bogged down by disagreements between its many owners. It would also put more onus on developing countries to become more attractive recipients of investment, green or otherwise. Liberalising financial sectors and scrapping wasteful fuel subsidies would be good ways to begin.

             Economics focus

             Pulling for the home team

             Central-bank lending to government serves a valuable, though risky, purpose

              

             IT CANNOT be pleasant to start a new job with a continent’s fate resting on your shoulders. On November 1st, Mario Draghi’s first day as president of the European Central Bank (ECB), peripheral-government bond yields shot up and stockmarkets sank on fears that Greeks might reject a rescue plan agreed days earlier.

             On November 3rd, as The Economist went to press, Mr Draghi was presiding over his first policy meeting. Much is riding on what the ECB decides then and in coming weeks because it alone currently has the means to stem the intensifying crisis. It has bought Greek, Portuguese and Irish debt; since early August, it has also purchased Spanish and Italian bonds. But its purchases have been intermittent and begrudging. Without a firm commitment to buy as much as needed to prevent yields on Italian and Spanish bonds rising so high that both countries become insolvent, investors have less incentive to return.

             The ECB’s reluctance to make such a commitment is understandable: its legal mandate and doctrinal persuasion bar it from directly supporting governments. Yet throughout history central banks have been lenders of last resort to their governments. In 1694 the English monarchy was broke and in need of a loan so that it could wage war with France. A group of financiers agreed to lend the crown £1.2m in return for a partial monopoly on the issue of currency. Thus was born the Bank of England.

             Central banks routinely serve as their government’s agent: they accept payments, disburse outlays, auction and redeem their bonds. Most buy and sell government bonds to carry out monetary policy. At times they have done so to finance government, especially in wartime. The Bank of England suspended the convertibility of its notes to gold from 1797 to 1821 to enable it to better finance Britain’s wars with France. In the 1930s the Bank of Japan was compelled to buy the government’s bonds, and from 1942 to 1951 the Federal Reserve agreed, at the Treasury’s request, to hold Treasury yields to 2.5% or below.

             The risks are obvious: bond purchases expand the money supply, potentially leading to inflation. Virtually all hyperinflations begin with such monetisation of budget deficits, including Germany’s in 1920-24, which explains the Bundesbank’s, and now the ECB’s, reluctance to lend to governments.

             The mere possibility of inflation can force governments with weak central banks to pay punitive interest rates. But as Chris Sims of Princeton University, who shared this year’s Nobel prize for economics, notes in a recent presentation, there is another side to the story. Bonds of a country with its own central bank are simply a promise to repay one government obligation (ie, debt) with another (ie, currency). The owner of such a bond is confident he can always sell or redeem it, and thus does not demand a higher yield to compensate for counterparty risk.

             A country that gives up its monetary sovereignty by dollarising or adopting the euro may gain greater credibility on inflation but may have to pay more to compensate investors for counterparty risk. This may seem like a good idea when counterparty risk is low, but that can change abruptly and dramatically. Mr Sims, in a 2002 paper, says the option of using inflation to repay debt is a valuable fiscal-shock absorber that over time may be less expensive than the risk, or fact, of default.

               

             This can be seen starkly by comparing Britain with Spain (see chart). Based on debts, deficits and inflation, Britain should be the riskier credit. But British bonds yield around 2.3% whereas Spain’s yield around 5.5%. One reason is that Britain can still devalue to boost growth; Spain can’t. Another is that it has a lender of last resort; Spain doesn’t. Paul De Grauwe of the University of Leuven says that if Britain couldn’t roll over its debt at acceptable interest rates, it could ultimately force the Bank of England to buy it. “This means that investors cannot precipitate a liquidity crisis in the UK that could force the UK government into default.”

             No central bank wants to be put in that position, of course, and institutional arrangements have sprung up to prevent it. The most common is to require that bonds be purchased only at market prices. The Federal Reserve is prohibited from buying bonds directly from the government, except to roll over a maturing issue in its portfolio. It can buy bonds on the secondary market, which is how it enforced the yield ceiling during the second world war, but its accord with the Treasury in 1951 ended that obligation. The Bank of Japan can buy bonds on the secondary market, but not directly from the government unless the Japanese Parliament votes to require it. The Chilean central bank may not buy government securities while Israel, Argentina, Canada and South Korea impose limits on how much the central bank may purchase.

             The European Union’s Maastricht treaty is in keeping with these arrangements: it prohibits the ECB from buying bonds directly from member governments, but not from buying them on the secondary market. The ECB claims it buys only to ensure its monetary policy is transmitted to interest rates.

             How could the ECB be enticed into becoming lender of last resort? Mr Sims says the ECB needs to be reassured its own balance-sheet has sound fiscal backing. That is because it may deplete its capital by selling assets at a loss or paying interest on reserves to prevent bond purchases from fuelling inflation. He suggests empowering the European Financial Stability Facility, Europe’s bail-out fund, both to issue euro-denominated bonds (backed by a euro-zone-wide tax) which the ECB could buy during open-market operations, and to recapitalise the ECB if needed.

             But the ECB may not have time to await such arrangements. Brad DeLong of the University of California, Berkeley, notes that central banks have taken liberties with their mandates when financial stability was at stake. The Bank of England lent aggressively during the financial crisis of 1825-26, for example, despite lacking the legal authority. Sir Robert Peel, First Lord of the Treasury, later said: “If it be necessary to assume a grave responsibility, I dare say men will be willing to assume such a responsibility.” Whether Mr Draghi does so may determine the euro’s fate.

             Correction: Europe's bail-out plan

              

             In our article on Europe's bail-out plan ("No big bazooka", October 29th 2011) we incorrectly said that Greece's partners would have to lend €100 billion more than the €109 billion they promised in July. In fact they plan to lend €130 billion in total. Sorry.

              

             Ageing

             Forever young?

             A way to counteract part of the process of growing old

              

               

             BIOLOGISTS have made a lot of progress in understanding ageing. They have not, however, been able to do much about slowing it down. Particular versions of certain genes have been shown to prolong life, but that is no help to those who do not have them. A piece of work reported in this week’s Nature by Darren Baker of the Mayo Clinic, in Minnesota, though, describes an extraordinary result that points to a way the process might be ameliorated. Dr Baker has shown—in mice, at least—that ageing body cells not only suffer themselves, but also have adverse effects on otherwise healthy cells around them. More significantly, he has shown that if such ageing cells are selectively destroyed, these adverse effects go away.

             The story starts with an observation, made a few years ago, that senescent cells often produce a molecule called P16^INK4A. Most body cells have an upper limit on the number of times they can divide—and thus multiply in number. P16^INK4A is part of the control mechanism that brings cell division to a halt when this limit is reached.

             The Hayflick limit, as the upper bound is known (after Leonard Hayflick, the biologist who discovered it), is believed to be an anticancer mechanism. It provides a backstop that prevents a runaway cell line from reproducing indefinitely, and thus becoming a tumour. The limit varies from species to species—in humans, it is about 60 divisions—and its size is correlated with the lifespan of the animal concerned. Hayflick-limited cells thus accumulate as an animal ages, and many biologists believe they are one of the things which control maximum lifespan. Dr Baker’s experiment suggests this is correct.

             Age shall not weary them

             Dr Baker genetically engineered a group of mice that were already quite unusual. They had a condition called progeria, meaning that they aged much more rapidly than normal mice. (A few unfortunate humans suffer from a similar condition.) The extra tweak he added to the DNA of these mice was a way of killing cells that produce P16^INK4A. He did this by inserting into the animals’ DNA, near the gene for P16^INK4A, a second gene that was, because of this proximity, controlled by the same genetic switch. This second gene, activated whenever the gene for P16^INK4A was active, produced a protein that was harmless in itself, but which could be made deadly by the presence of a particular drug. Giving a mouse this drug, then, would kill cells which had reached their Hayflick limits while leaving other cells untouched. Dr Baker raised his mice, administered the drug, and watched.

             The results were spectacular. Mice given the drug every three days from birth suffered far less age-related body-wasting than those which were not. They lost less fatty tissue. Their muscles remained plump (and effective, too, according to treadmill tests). And they did not suffer cataracts of the eye. They did, though, continue to experience age-related problems in tissues that do not produce P16^INK4A as they get old. In particular, their hearts and blood vessels aged normally (or, rather, what passes for normally in mice with progeria). For that reason, since heart failure is the main cause of death in such mice, their lifespans were not extended.

             The drug, Dr Baker found, produced some benefit even if it was administered to a mouse only later in life. Though it could not clear cataracts that had already formed, it partly reversed muscle-wasting and fatty-tissue loss. Such mice were thus healthier than their untreated confrères.

             Analysis of tissue from mice killed during the course of the experiment showed that the drug was having its intended effect. Cells producing P16^INK4A were killed and cleared away as they appeared. Dr Baker’s results therefore support the previously untested hypothesis that not only do cells which are at the Hayflick limit stop working well themselves, they also have malign effects (presumably through chemicals they secrete) on their otherwise healthy neighbours.

             Regardless of the biochemical details, the most intriguing thing Dr Baker’s result provides is a new way of thinking about how to slow the process of ageing—and one that works with the grain of nature, rather than against it. Existing lines of inquiry into prolonging lifespan are based either on removing the Hayflick limit, which would have all sorts of untoward consequences, or suppressing production of the oxidative chemicals that are believed to cause much of the cellular damage which is bracketed together and labelled as senescence. But these chemicals are a by-product of the metabolic activity that powers the body. If 4 billion years of natural selection have not dealt with them it suggests that suppressing them may have worse consequences than not suppressing them.

             By contrast, actually eliminating senescent cells may be a logical extension of the process of shutting them down (they certainly cannot cause cancer if they are dead), and thus may not have adverse consequences. It is not an elixir of life, for eventually the body will run out of cells, as more and more of them reach their Hayflick limits. But it could be a way of providing a healthier and more robust old age than people currently enjoy.

             Genetically engineering people in the way that Dr Baker engineered his mice is obviously out of the question for the foreseeable future. But if some other means of clearing cells rich in P16^INK4A from the body could be found, it might have the desired effect. The wasting and weakening of the tissues that accompanies senescence would be a thing of the past, and old age could then truly become ripe.

             Science in South Africa

             All squared

             A new radio telescope may catalyse African science

              

               The KAT is out of the bag

             THE idea for the world’s most powerful radio telescope, capable of seeing back nearly to the origins of the universe, has been around for some time. Known as the Square Kilometre Array, or SKA—as that was originally planned to be the total collecting area of its thousands of dish-shaped antennae—it was conceived of by an international group of astronomers in the early 1990s. No construction has yet begun. Indeed, no site has yet been chosen. However, in the vast quietness of the Karoo, a semi-desert in South Africa, a small prototype is already operating and its first images are, by all accounts, remarkable.

             The Karoo Array Telescope (KAT-7) consists of seven steerable dishes, each 12 metres across. As such, it is already the most powerful array-based telescope in Africa. It is, though, merely a test bed for MeerKAT, a device that will consist of 64 somewhat larger dishes and will be the most powerful instrument in the southern hemisphere as well as one of the three most sensitive in the world.

             The SKA will dwarf these minnows. It will be 50-100 times more powerful than any predecessor, and will be able to peer back through time almost to the Big Bang itself, exploring the formation of the first stars and galaxies, the role of magnetism in the early cosmos, what exactly dark matter and dark energy are, the nature of gravity, whether intelligent life has ever existed anywhere other than on Earth, and the validity of such fundamental scientific concepts as Einstein’s theory of relativity. The world’s astronomers are, understandably, fizzing with excitement.

             Astronomical sums

             There is, though, the small matter of money. The SKA will cost a lot: €1.5 billion-2 billion ($2 billion-2.75 billion), according to the nine-country consortium behind the project; nearer $6 billion, according to America’s National Science Foundation. On November 23rd those nine countries—Australia, Britain, Canada, France, Germany, Italy, the Netherlands, New Zealand and South Africa—and possibly China as well, are due to commit themselves to paying €90m for the initial engineering-planning phase. But it will be when the megabuck work on the actual telescope begins in 2016, that the crunch comes.

             This is where MeerKAT—named after a species of mongoose found in arid areas of south-western Africa such as the Karoo—could play a crucial role. The construction of its dishes is about to be put out to tender, and it is expected to be fully operational by 2016. If MeerKAT succeeds, it might help persuade sceptical governments to cough up for the SKA. It will also enhance South Africa’s chances of hosting this much larger project.

             Originally, America had been expected to participate. But it has now cried off, at least until 2020. The disappointment of this withdrawal, however, is mitigated by the keen interest being shown by China. The country with the world’s second-biggest economy has never invested in a big global science project before.

             China was one of the places originally considered as host for the telescope. But it and Argentina have since been dropped, leaving just South Africa and Australia in the race. They are said to be neck and neck. Both offer remote, sparsely populated areas with low levels of man-made radio interference, along with world-class teams of astronomers. Australia has more experience with radio astronomy, but South Africa has the advantage of lower costs and ease of access. As a developing country in which over a third of the population still live on less than $2 a day, it might also be considered to have the greater moral claim. And it has KAT-7, and will shortly have MeerKAT.

             The victor will be announced in February by the board of the not-for-profit company that is to be formed by the participating countries when they formally sign up to start paying for the project. Regardless of who wins, some critics say South Africa’s contribution would be better spent feeding and housing the country’s poor. But if South Africa did succeed, that would mean part of everybody else’s contribution would be spent there as well—a prize worth fighting for. Moreover, the government believes projects like this help inspire people and encourage young South Africans to consider scientific careers. Naledi Pandor, the science and technology minister, is particularly supportive. She sees the SKA as a way to broaden the country’s scientific base and diversify its current white, male-dominated complexion.

            The bid also involves eight of South Africa’s neighbours—Botswana, Ghana, Kenya, Madagascar, Mauritius, Mozambique, Namibia and Zambia—and could be the launch pad for a wider scientific renaissance in Africa. Australia will not give up easily, and the outcome may be that the telescope is shared, with some of the antennae in one country and the rest in the other. But even that half loaf would be a useful boost for South African science, and a sign that the traditional powers of the subject are willing to share the goodies.

             Science in Argentina

             Cristina the alchemist

             Argentina is trying to build a scientific establishment

              

               

             SOUTH AFRICA is not the only middle-income country which aspires to join the world’s scientific powers (see article). Argentina would like to as well. The place is proud of its three Nobel science prizes—the largest haul of any Latin American nation—even if the most recent was awarded in 1984. But many researchers fled in the 1990s, when budgets were slashed. Now the government is trying to attract them back, and to encourage younger talent to consider a scientific career.

             When Néstor Kirchner, the predecessor and late husband of the current president, Cristina Fernández, took office in 2003, Argentina was spending just 0.41% of its GDP on research and development (R&D). Now, that figure is 0.64%. (Brazil, by comparison, spent 0.95% in 2003 and 1.18% in 2009.) Kirchner raised researchers’ salaries, launched a scheme to repatriate departed scientists and gave tax breaks to software companies. Ms Fernández followed suit by creating a science ministry and putting a biologist, Lino Barañao, in charge of it. She also increased grants to firms that try to develop new products.

             Many of the Kirchners’ critics were sceptical, seeing the ministry either as a political marketing ploy or as a soft touch for lobbyists seeking unjustified subsidies. But the strategy seems to be working. With help from the Inter-American Development Bank the government has, since 2004, lured back 854 expatriate scientists. It has done so by providing new laboratories and equipment for them, moving their families, and forking out extra money for their salaries. As a consequence, according to Dr Barañao, Argentine researchers have published 179 articles in leading journals in the past decade, compared with just 30 in the 1990s.

             Most of the returners are academics. But commercial science has benefited, too. Indear, a joint public-private biotechnology-research centre based in Santa Fe, recently worked out how to transfer a gene for drought resistance from sunflowers to crops such as maize, soyabeans and wheat. That can increase yields in droughts by up to 40%. And the government has also doled out $54m in grants for the development of products that include coagulant factors to treat haemophilia, transgenic cattle which secrete valuable hormones in their milk, and better ways of probing for oil deposits.

             Help for high-tech innovation comes in other forms, too. The state offers, for example, to pay the cost of patenting inventions in foreign jurisdictions and of hiring lawyers to defend those patents. It also acts as a headhunter for information-technology firms seeking employees with PhDs, and will pay part of the salaries of such recruits. None of these programmes has faced allegations of corruption.

             Whether all this activity will have the effect of stimulating high-tech industry, as Ms Fernández hopes, remains to be seen. Argentine scientists are happy to take taxpayers’ money but according to Luis Dambra, a professor at the IAE business school in Buenos Aires, they look down their noses at the idea of actually getting their hands dirty by going into industry. Mr Dambra, though, says industry is equally to blame. In 2009 (the latest year for which data are available), only 21% of Argentine R&D was paid for by the private sector, compared with 44% of Brazil’s. Firms that might recruit academic scientists often do not see the point. Even those that do may struggle to accommodate people with a non-commercial background into the business world.

             Attitudes can change, of course. In the 1980s many British academics were as snobbish about commerce as Argentina’s are now. These days, Britain’s top universities are gung-ho for spin-outs and the revenue they can provide. But it takes time and consistent policy to make such changes and Argentina is notorious for sudden alterations in the political weather. That makes the country a perilous place to invest, whatever the current climate.

             Viking navigation

             Sunstruck

             How Norsemen found their way round in cloudy weather

              

             CENTURIES before Columbus, Viking adventurers ruled the North Atlantic. They sailed as far as America without the aid of magnetic compasses, which was no mean feat. They were, however, assisted in their travels by another sort of magical device. According to the sagas they had stones which could point to the sun, even when the sky was cloudy.

             No such sunstone has survived. But Guy Ropars of the University of Rennes, in France, thinks he knows what they were. He and his colleagues have been experimenting with a mineral called Iceland spar. Their results, just published in the Proceedings of the Royal Society, suggest they are on to something.

             The passage of sunlight through the air polarises it. That means light from the sky itself points towards the sun, if you have the necessary equipment to detect the polarisation. Dr Ropars has shown that a piece of Iceland spar is sufficient.

             Iceland spar is a form of calcite that splits light into two beams. If the light is polarised, there is only one way to orient the crystal to produce beams of equal intensity. Find this orientation by looking through the crystal at the sky at a time when you can see the sun, mark the sun’s direction on the crystal, and your mark will always point towards the sun when you match the beams from even a tiny patch of blue in an otherwise overcast sky. Dr Ropars’s experiments suggest the method is accurate to within 5°. That is good enough for navigation of the sort the Vikings managed.

            Though no sunstones have survived from Viking days, despite the frequency of ship burials of Viking chiefs, there is one tantalising find from a more recent shipwreck. This is a large calcite crystal recovered from a vessel that went down off the coast of Alderney, in the Channel Islands, in Elizabethan times. Several centuries underwater have rendered the Alderney crystal opaque, but Dr Ropars and his team are now examining it, and believe it may be Iceland spar. Dr Ropars suspects it was being used as a sunstone because the magnetic compasses of the day were thrown out of kilter by iron cannon.

             The true nature of the sunstone will probably not be settled until and unless one turns up in either a sunken Viking vessel or a ship burial. Perhaps, though, they not only permitted the Vikings to reach America, but also helped save England from the Spanish Armada.

             Fundamental physics

             Big bang

             Popular physics has enjoyed a new-found regard. Now comes a brave attempt to inject mathematics into an otherwise fashionable subject

              

               

             The Quantum Universe: Everything That Can Happen Does Happen. By Brian Cox and Jeff Forshaw. Allen Lane; 255 pages; £20. To be published in America in January by Da Capo Press; $25. Buy from Amazon.com, Amazon.co.uk

             PREVIOUSLY the preserve of dusty, tweed-jacketed academics, physics has enjoyed a surprising popular renaissance over the past few years. In America Michio Kaku, a string theorist, has penned several successful books and wowed television and radio audiences with his presentations on esoteric subjects such as the existence of wormholes and the possibility of alien life. In Britain Brian Cox, a former pop star whose music helped propel Tony Blair to power, has become the front man for physics, which recently regained its status as a popular subject in British classrooms, an effect many attribute to Mr Cox’s astonishing appeal.

             Mr Cox, a particle physicist, is well-known as the presenter of two BBC television series that have attracted millions of viewers (a third series will be aired next year) and as a bestselling author and public speaker. His latest book, “The Quantum Universe”, which he co-wrote with Jeff Forshaw of the University of Manchester, breaks the rules of popular science-writing that were established over two decades ago by Stephen Hawking, who launched the modern genre with his famous book, “A Brief History of Time”.

             Mr Hawking’s literary success was ascribed to his eschewing equations. One of his editors warned him that sales of the book would be halved by every equation he included; Mr Hawking inserted just one, E=mc², and, even then, the volume acquired a sorry reputation for being bought but not read. By contrast, Mr Cox, whose previous book with Mr Forshaw investigated “Why does E=mc²?” (2009), has bravely sloshed a generous slug of mathematics throughout his texts.

             The difficulties in explaining physics without using maths are longstanding. Einstein mused, “The eternal mystery of the world is its comprehensibility,” and “the fact that it is comprehensible is a miracle.” Yet the language in which the world is described is that of maths, a relatively sound grasp of which is needed to comprehend the difficulties that physicists are trying to resolve as well as the possible solutions. Mr Cox has secured a large fan base with his boyish good looks, his happy turns of phrase and his knack for presenting complex ideas using simple analogies. He also admirably shies away from dumbing down. “The Quantum Universe” is not a dry undergraduate text book, but nor is it a particularly easy read.

             The subject matter is hard. Quantum mechanics, which describes in subatomic detail a shadowy world in which cats can be simultaneously alive and dead, is notoriously difficult to grasp. Its experiments yield bizarre results that can be explained only by embracing the maths that describe them, and its theories make outrageous predictions (such as the existence of antimatter) that have nevertheless later been verified. Messrs Cox and Forshaw say they have included the maths “mainly because it allows us to really explain why things are the way they are. Without it, we should have to resort to the physicist-guru mentality whereby we pluck profundities out of thin air, and neither author would be comfortable with guru status.”

             That stance might comfort the authors, but to many readers they will nonetheless seem to pluck equations out of thin air. Yet their decision to include some of the hard stuff leaves open the possibility that some readers might actually engage in the slog that leads to higher pleasures. For non-sloggers alternative routes are offered: Messrs Cox and Forshaw use clockfaces to illustrate how particles interact with one another, a drawing of how guitar strings twang and a photograph of a vibrating drum. A diagram, rather than an equation, is used to explain one promising theory of how matter acquires mass, a question that experiments on the Large Hadron Collider at CERN, the European particle-physics laboratory near Geneva, will hopefully soon answer.

             The authors have wisely chosen to leaven their tome with amusing tales of dysfunctional characters among scholars who developed quantum mechanics in the 1920s and beyond, as well as with accounts of the philosophical struggles with which they grappled and the occasional earthy aside. Where the subject matter is a trifle dull, Messrs Cox and Forshaw acknowledge it: of Heinrich Kayser, who a century ago completed a six-volume reference book documenting the spectral lines generated by every known element, they observe, “He must have been great fun at dinner parties.” And they make some sweeping generalisations about their colleagues who pore over equations, “Physicists are very lazy, and they would not go to all this trouble unless it saved time in the long run.”

             Whether or not readers of “The Quantum Universe” will follow all the maths, the authors’ love for their subject shines through the book. “There is no better demonstration of the power of the scientific method than quantum theory,” they write. That may be so, but physicists all over the world, Messrs Cox and Forshaw included, are longing for the next breakthrough that will supersede the claim. Hopes are pinned on experiments currently under way at CERN that may force physicists to rethink their understanding of the universe, and inspire Messrs Cox and Forshaw to write their next book—equations and all.

             Vincent van Gogh

             Paint a palette blue and grey

             In a new biography of van Gogh the devil is in the detail

              

               Ear and now

             Van Gogh: The Life. By Steven Naifeh and Gregory White Smith. Random House; 953 pages; $40. Profile; £30. Buy from Amazon.com, Amazon.co.uk

             VINCENT VAN GOGH seemed made for a bittersweet Hollywood biopic. The dazzling colours and dashing brushstrokes of his sunflowers, cornfields and cypress trees are among the most familiar and loved works in the history of art, fetching record-breaking sums in auction rooms. The inevitable biopic was called “Lust for Life”. But as an enormous and engrossing new biography shows, van Gogh’s lust for conflict was strongest of all.

             The book describes a lonely, bad- tempered alcoholic, a syphilitic who liked to bite the hands that fed him. It in no way devalues the quality of the painting, of course, but this portrait by Steven Naifeh and Gregory White Smith, two prolific authors who seem to like writing about drunken artists (Jackson Pollock was an earlier subject) demolishes any romance that still attaches to the artist’s life.

             The book is composed, like a pointillist painting, of thousands of factual details. Nothing is sacrificed to curtail its length; the only concession is to remove the footnotes from the text. (There are enough of these to fill 5,000 typewritten pages and they are all to be found on the book’s website.) But the story has a momentum that justifies the time it takes to tell it, and the authors conclude by making a plausible case for van Gogh’s accidental death rather than his suicide. No gun was found; the fatal bullet entered the body at the wrong angle and seemed to have been fired from too far away for the wound to have been self-inflicted. Strong circumstantial evidence suggests that van Gogh was the victim of schoolboy bullies.

             Van Gogh’s earliest job with an art dealer took him to The Hague, and then Paris and London, but his youthful passion was to be heard as a preacher. His first sermon was delivered, in heavily-accented English, by the River Thames in Petersham, but congregations did not respond to him. Only when he accepted that he would not become a minister, as his father had been, did he turn to art. Since he earned no money van Gogh simply assumed that he was entitled to a share of his brother Theo’s salary, demanding 150 francs a month from him at a time when the wage of a French schoolteacher was 75 francs a month.

             Van Gogh first concentrated on dark charcoal drawings of Dutch peasants. “When I draw I see clearly,” he said. Theo saw clearly that they did not sell, and suggested colourful landscapes instead. Van Gogh was eventually converted to the idea of colour by Rembrandt, and he started to paint bright orange and brown sunflowers in Paris in 1886, hoping they might impress a particularly voluptuous Italian model. His conversion to colour and landscape was not complete, however, until he went south to Arles in 1888.

             When he persuaded Paul Gauguin to join him in Arles, van Gogh believed that they would inspire each other’s work. It was a tragic delusion. Gauguin, the more forceful personality, wanted to draw in the studio, van Gogh to paint in the open air. Van Gogh was quick, Gauguin was languid. Gauguin worked from the imagination and memory, van Gogh surrendered himself to nature. The Arlesiennes adored Gauguin and ignored van Gogh. The two painters quarrelled bitterly. When Gauguin announced he was leaving for Paris on December 23rd 1889, van Gogh reacted by slashing his own left ear, slicing through to the jaw. Confined to asylums as a psychotic, he did not stop painting, but he was dead of a bullet wound only 18 months later, not long after he sold his first painting. He was 37. Decades passed before it was widely appreciated he was a genius. It has taken even longer to fully understand that his life was a disaster.

             Historical salvage

             Ghost stories

             A trawl through an historic underbelly

              

             Vanished Kingdoms: The History of Half-Forgotten Europe. By Norman Davies. Allen Lane; 830 pages; £30. To be published in America in January as “Vanished Kingdoms: The Rise and Fall of States and Nations” by Viking; $40. Buy from Amazon.com, Amazon.co.uk

             HISTORY, most people reckon, is what you can remember about the past. But the forgotten bits can be the most interesting ones. Norman Davies terms his new book, “Vanished Kingdoms”, a work of “historical salvage” in which he brings to the surface long-sunken wrecks of European history.

             The variety is striking: the Byzantine empire lasted more than 1,000 years; the Republic of Carpatho-Ukraine barely 24 hours. Some, like Aragon or the Grand Duchy of Lithuania, grew into empires. Others (Eire and Estonia) started life by breaking away from someone else’s empire. The timeline ranges from the fall of Rome to the present. Mr Davies is not the sort of historian who sticks to books. His magpie’s eye for detail includes not just quirks of the past but first-hand reportage worthy of a fine travel writer.

             Some wrecks have sunk deeper than others. Most readers will have a vague idea about Prussia (or Borussia as he calls it). Few will know of the Visigoths’ kingdom of Tolosa, centred approximately on modern Toulouse, or an ancient English domain in what is now modern Scotland, so completely forgotten that even locals have never heard of it.

             Mr Davies is well known as an iconoclast who punctures the comforting myths of countries (like England or Russia) that history has blessed with conquest, expansion and linguistic dominance. He enjoys highlighting the stories of the underdogs—be they the Welsh or the Estonians. All empires fall and all states eventually fail; the end of the United Kingdom “is a foregone conclusion”. That is a provocative point, but predictions without dates are easy. All trees fall; it is spotting the diseased ones that is tricky.

            Even his fans would not say that Mr Davies’s forte is details; some niggling errors deserve speedy correction. His pen sometimes runs away with him: it is silly to call a language “gobbledygook” (as he terms Estonian) just because you don’t understand it. But like Mr Davies’s other works, “Vanished Kingdoms” gives full rein to his historical imagination and enthusiasms, imparting a powerful sense of places lost in time. All across Europe ghosts will bless him for telling their long-forgotten stories.

             Joan Didion memoir

             Kind of blue

             Ruminating on being the last to survive

              

             Blue Nights. By Joan Didion. Knopf; 208 pages; $25. Fourth Estate; £14.99. Buy from Amazon.com, Amazon.co.uk

             FEW memoirs are worth reading. When they are not tawdry opportunities to air grievances, settle scores or rationalise errors, they tend to be tales of adversity with a triumphant twist. This is what makes Joan Didion unique. Her non-fiction has always considered grand matters from a personal perspective, without making herself the centre of the story. Even when she writes about the hard drama of her own life, such as the sudden death of her husband followed by the death of her only daughter, her stories manage to be larger than her own grief.

             This is how a memoir like “The Year of Magical Thinking” (2005) became a bestseller. In writing about the year that followed the fatal heart attack of John Gregory Dunne, her husband of nearly 40 years, Ms Didion used her experience to reflect on the fundamental absurdity of death. She movingly considered the way time makes the ordinary gifts of life extraordinary. The unmentioned horror of the book—an event that took place after she had finished writing but before it was published—was that her daughter Quintana Roo was dead, too, undone by a series of health problems that ended with acute pancreatitis at the age of 39.

             With “Blue Nights”, her first book since the earlier memoir, Ms Didion conveys the loneliness of living on without her child or husband, and the indignities of ageing. For decades her life had been charmed, even more so than she had realised. But in a matter of months in 2003 everything turned unspeakably grim. “It is horrible to see oneself die without children,” she quotes Napoleon as saying. This is a difficult book, but not a sentimental one. Ms Didion has a remarkable ability to consider her own feelings without letting her prose turn soggy with emotion.

             “Today would be her wedding anniversary,” she writes at the beginning, and then evokes the scene of her daughter’s summer wedding in Manhattan in 2003. There were cucumber and watercress sandwiches, and a peach-coloured cake from Payard. Quintana wore stephanotis in her hair. Ms Didion returns to these details in later chapters—the stephanotis, the cake—using this repetition to illustrate the way she is haunted by memories. After a lifetime of travel and dynamism, she now appears anchored in New York by the detritus of life. Her drawers and cupboards are filled with mementoes (her husband’s raincoats, her daughter’s baby teeth) which serve “only to make clear how inadequately I appreciated the moment when it was here.”

             The appeal of Ms Didion has long been her insight mixed with something glamorous; she is both of this world and a world apart. Memories here are cluttered with brand names (Chanel, Corvette, the Ritz) and glittering friends (Natasha Richardson, Patti Smith). The effect can be distracting, but Ms Didion sometimes uses these details to worry over the oddity of Quintana’s life (her adopted daughter often struggled with depression), and also to marvel at her own naivety. “I do not know many people who think they have succeeded as parents,” she writes. In regarding herself as a mother, her remorse festers unchecked.

             Now 75, Ms Didion’s gaze is turned backwards. Her recollections meander and loop back, interrupted only by distressing questions that no one is left to answer (“Did I get this all wrong?”). Often these questions consider the choices she made as a mother (“Was I always the problem?”) and her own increasing frailty (“What if I can never again locate the words that work?”). With “Blue Nights”, named for the intense and portentous beauty of the dying light on a summer day, Ms Didion has translated the sad hum of her thoughts into a profound meditation on mortality. The result aches with a wisdom that feels dreadfully earned.

             Nikolaus Pevsner

             Set in stone

             A guide to all that

              

             Nikolaus Pevsner: The Life.  By Susie Harries. Chatto & Windus; 866 pages; £30. Buy from Amazon.co.uk

             “THE BUILDINGS OF ENGLAND” series—a solid shelf-full of topographical guides to the country’s architecture, arranged by county—has been a fondly regarded part of British middle-class life for 60 years. Its wide range and its format of close description of architectural detail and building style in succinct, sometimes sly, entries were the invention of one man, Sir Nikolaus Pevsner, who conceived the project and then researched and wrote the first 32 volumes, from “Nottinghamshire” (1951) to “Staffordshire” (1974).

             Pevsner’s purview was then extended to Scotland and Wales, and in the 1990s a similar series on the buildings of Ireland was launched. The influence of the original series of 46 volumes on British heritage bodies and planning commissions is still strong, such that the question, “Is it in Pevsner?” remains an indicator of the aesthetic worth of a church, country house, town hall, school or factory.

             Nikolaus Pevsner, who was born in 1902 into a cultured, bourgeois Jewish family in Leipzig, was forced to abandon a promising academic career as an art historian in Göttingen in 1933. He sought exile in England, and went on to achieve success as a writer, journalist, lecturer and broadcaster, dying in 1983 as Sir Nikolaus, a much-honoured, Festschrift-laden member of the scholarly establishment and a recognisable, even parodiable, public figure. His life provides a focus for numerous cultural and social observations, both high and low: in the meticulous index to Susie Harries’s new full-length biography “Jayne Mansfield” comes after “Thomas Mann” and “Mannerism”.

             Ms Harries’s life of Pevsner traces the great changes in artistic and social attitudes in post-war Britain. She notes the development of ideas, from humanism to the Zeitgeist, and provides factual accounts of anti-Jewish laws in Germany in the 1930s. The book also offers glimpses of anti-academic snobberies in 1950s England among those who held to an aristocratic, connoisseurial view of art history. Thoroughly documented from Pevsner’s letters and working papers, from the personal diaries he kept since adolescence, and from interviews with his friends and students, the book is full of telling observations. The reader sees Pevsner, who was interned by the British as an enemy alien in 1940, on a housing estate in Huyton outside Liverpool, reading Sir Walter Scott’s “Kenilworth” and working on his own book, “An Outline of European Architecture”, which was completed during fire-watching in the Blitz and published in 1942.

             The letters written from his early field trips for “The Buildings of England” in the 1950s document his struggles with motor cars and A-roads. He led a lonely life with overnight stays in dismal provincial hotels, writing up his notes every evening on an unsteady bedside table amid the fumes of a paraffin heater, sustained by sandwiches brought from home and the occasional treat of fish and chips and orangeade. The personal slant of his commentaries may well have been influenced by these heroic journeys, as well as by the limited technologies of a typewriter, longhand notes and a collection of old slides that he brought with him from Germany. Readers learn too of his dislike of Dr Johnson and his fondness for the ice lolly, his deeply held belief in the social role of the artist and his quirky writing style, which gave a personal weight to architectural analysis with adjectives, such as “quaint”, “rum”, “dull” and “unpleasant”.

             Ms Harries addresses the question of Pevsner’s Nazi sympathies by putting in a chronological context his early admiration for theories of Germanness and medievalism in pre-war Germany, his pro-Nazi academic referees and his and his wife Lola’s practical decision not to tell their children they were Jewish. She exposes his scholarly purblindness and political naivety and his late realisation of the true nature of German National Socialism. Almost the last reference he ever made in print to the Third Reich was a critique of its buildings in the Architectural Review in 1941.

             Ms Harries also writes sympathetically about his marriage (his wife whom he married in 1923, had to endure separation, isolation in England, her husband’s romantic infatuations and his nagging letters). And she takes Pevsner’s part staunchly against sniping critics that ranged from John Betjeman, a British poet laureate, to David Watkin, an architectural historian and one-time student of Pevsner’s, chronicling feuds carried out in unsigned reviews and in the letters pages of the Times Literary Supplement.

             Pevsner’s many publications are summarised and assessed. This is a long book, crammed with detail, but its chapters are short and well-paced. And Ms Harries lightens her account with humorous anecdotes, in-jokes, even a touch of slapstick in her descriptions of the bespectacled scholar in old-fashioned clothes tangling with butlers and the owners of country houses. Throughout this long and varied life, there is never any doubt about Ms Harries’s seriousness of purpose and her engagement with her subject.

             Deceit and self-deception

             Suspicious minds

             The importance of trickery

              

               

             The Folly of Fools: The Logic of Deceit and Self-Deception in Human Life. By Robert Trivers. Basic Books; 397 pages; $28. Published in Britain as "Deceit and Self-Deception: Fooling Yourself the Better to Fool Others" by Allen Lane; £25. Buy from Amazon.com, Amazon.co.uk

             DECEIVING others has its advantages. Camouflage in nature is useful to the hunter and the hunted. The smarter the animal, the more likely it is to use (and detect) deception to its benefit. Humans are particularly good at exploiting trickery to get ahead—for more money, more power or a desired mate. Yet deception is difficult, regardless of intelligence. Lying often leaves us nervous and twitchy, and complicated fictions can lead to depression and poor immune function. And then there are the ethical implications.

             In “The Folly of Fools” Robert Trivers, an American evolutionary biologist, explains that the most effectively devious people are often unaware of their deceit. Self-deception makes it easier to manipulate others to get ahead. Particularly intelligent people can be especially good at deceiving themselves.

             Mining research in biology, neurophysiology, immunology and psychology, Mr Trivers delivers a swift tour of links between deception and evolutionary progress. Some of it is intuitive. The grey squirrel, for example, cleverly builds false caches to discourage others from raiding its acorns. Placebos are sometimes as effective as medication without the nasty side effects. Other illustrations require more head-scratching. Mr Trivers argues that competition between our maternal and paternal genes can create “split selves”, which try to fool each other on a biological level. Human memory often involves an unconscious process of selection and distortion, the better to believe the stories we tell others.

             All of this deceit comes at a price. Mr Trivers suggests that the most cunning people (whether conscious fibbers or not) tend to benefit at the expense of everyone else. He highlights the way overconfident Wall Street traders may hurt investors and taxpayers at little personal risk. Then there are politicians who spin stories of national greatness to bolster support for costly wars in which they will not be fighting.

             There is certainly no shortage of human folly to consider. Mr Trivers offers some fascinating evidence of our biological cunning, yet the science of self-deception often takes a back seat to his political views and scepticism of the social sciences. This book could probably do without his long digressions about the Israeli-Palestinian conflict and the Iraq war. But by the time readers reach these last few chapters, they will be wary of taking any story at face value anyway.

             Dennis Ritchie and John McCarthy

             Dennis Ritchie and John McCarthy, machine whisperers, died on October 8th and 24th respectively, aged 70 and 84

              

               

             NOW that digital devices are fashion items, it is easy to forget what really accounts for their near-magical properties. Without the operating systems which tell their different physical bits what to do, and without the languages in which these commands are couched, the latest iSomething would be a pretty but empty receptacle. The gizmos of the digital age owe a part of their numeric souls to Dennis Ritchie and John McCarthy.

             As was normal in the unformed days of computer science in the 1950s and 1960s, both men came to the discipline through maths. They were rather good with numbers. As a teenager Mr McCarthy taught himself calculus from textbooks found at the California Institute of Technology in balmy Pasadena, where his family had moved to from Boston because of his delicate health. Mr Ritchie was not quite as precocious. He breezed through school in New Jersey, of course, and went on to Harvard to study physics. After receiving a bachelor’s degree, however, he decided, with typical modesty, that he was “not smart enough to be a physicist”.

             When Mr McCarthy and Mr Ritchie first developed an urge to talk to machines, people still regarded the word “digital” as part of the jargon of anatomy. If they no longer do, that is because of the new vernaculars invented to cajole automatons into doing man’s bidding. In 1958 Mr McCarthy came up with the list-processing language, or LISP. It is the second-oldest high-level programming language still in use today—one whose grammar and vocabulary were more perspicuous and versatile than the machine code early programmers had to use. A little over a decade later Mr Ritchie created C.

             C fundamentally changed the way computer programs were written. For the first time it enabled the same programs to work, without too much tweaking, on different machines; before, they had to be tailored to particular models. Much of modern software is written using one of C’s more evolved dialects. These include objective C (which Apple favours), C# (espoused by rival Microsoft) and Java (the choice for a host of internet applications). Mr Ritchie and his life-long collaborator, Ken Thompson, then used C to write UNIX, an operating system whose powerful simplicity endeared it to the operators of the minicomputers which were starting to proliferate in universities and companies in the 1970s. Nowadays its iterations undergird the entire internet and breathe life into most mobile devices, whether based on Google’s Android or Apple’s iOS.

             Mr McCarthy has had less direct impact. That is partly because he believed, wrongly, that minicomputers were a passing fad. In the early 1950s, while at the Massachusetts Institute of Technology (MIT), he pioneered “time-sharing”, by which multiple users could work on a single mainframe simultaneously. Mr Ritchie, who moonlighted as a mainframe operator at MIT while a graduate student at nearby Harvard, also dabbled in time-sharing. Yet unlike his younger colleague, whose UNIX spurred the development of mini- and later microcomputers, Mr McCarthy always argued that the future lay in simple terminals hooked up remotely to a powerful mainframe which would both store and process data: a notion vindicated only recently, as cloud computing has spread.

             Needed: 1.8 Einsteins

             As for LISP, Mr McCarthy created it with an altogether different goal in mind—one that was, in a way, even more ambitious than Mr Ritchie’s. Whereas Mr Ritchie was happy giving machines orders, Mr McCarthy wanted them—perhaps because he had never suffered human fools gladly—to talk back. Intelligently. LISP was designed to spark this conversation, and with it “artificial intelligence”, a term Mr McCarthy coined hoping it would attract money for the first conference on the subject at Dartmouth in 1956.

             In 1962 Mr McCarthy left MIT for Stanford, where he created the new Artificial Intelligence Laboratory. He set himself the goal of building a thinking machine in ten years. He would later admit this was hubristic. Not that technology wasn’t up to it. The problem lay elsewhere: in the fact that “we understand human mental processes only slightly better than a fish understands swimming.” An intelligent computer, he quipped, would require “1.8 Einsteins and one-tenth of the resources of the Manhattan Project” to construct.

             Neither was forthcoming, though the Department of Defence did take an interest in Mr McCarthy’s work at Stanford from the start. Mr Ritchie, too, was briefly on the Pentagon’s payroll, at Sandia National Laboratory. He did not stay long, though. “It was nearly 1968,” he later recalled, “and somehow making A-bombs for the government didn’t seem in tune with the times.” So in 1967 he moved to AT&T’s Bell Laboratories in Murray Hill, New Jersey, where his father had worked for many years, and where both C and UNIX were born. He never left.

             For his part, Mr McCarthy continued to tinker away at a truly thinking machine at Stanford. He never quite saw his dream realised. Mr Ritchie had more luck. “It’s not the actual programming that’s interesting,” he once remarked. “It’s what you can accomplish with the end results.” Amen to that, Mr McCarthy would have said.

             Output, prices and jobs

              

               

              

             Trade, exchange rates, budget balances and interest rates

              

               

              

             The Economist commodity-price index

              

               

              

             Markets

              

               

              

             The Economist poll of forecasters, November averages

              

               

              

             Table of Contents

             The world this week

Politics this weekBusiness this weekKAL's cartoon           Leaders

The presidential race one year out: America’s missing middleA euro referendum: Greece’s woesJapan’s nuclear conundrum: The $64 billion questionBrazil’s economy: The devil in the deep-sea oilTurkish foreign policy: Ottoman dreamer              Letters

Letters: On Occupy Wall Street, solar power, climate change, the Netherlands, aluminium, monarchy, personhood             Briefing

The Republicans: A dangerous gameBrazil’s oil boom: Filling up the future             United States

Housing and the economy: Rising from the ruinsDrugs shortages: Can’t wait? Must waitMurder in New Orleans: Telly Hankton’s townArtists in America: Painting by numbersConservatives in the West: Bully meets Nice GuyLexington: Sex and pizzas    The Americas

Nicaragua’s presidential election: The survivorBrazil’s former president: A new battle for LulaCurrency controls in Argentina: Unfree exchange        Asia

Cleaning up Japan’s nuclear mess: The twilight zoneThailand’s floods: Rising dampActivism in China: Blind man’s bluffNepal: Peace, in your own timeIndian rural welfare: Digging holesBanyan: Echoes of dreamland          Middle East and Africa

The rise of Qatar: Pygmy with the punch of a giantIran’s politics: President v supreme leaderSatire in Iran: Mocking the mullahsIsrael and Palestine: One side gets even lonelierPalestine’s Bedouin: We want recognition tooHuman rights in Libya: Bad habitsTransport in South Africa: By the seat of your cheap pants          Europe

Greece and the euro: Papandreou’s peopleWages in Germany: Merkel and the minimumA numerical French obsession: Twenty times twentySpain’s election: Rajoy the reformerRussia and world trade: In at last?Turkish foreign policy: Dormant power revivalTurkey in the Balkans: The good old days?Charlemagne: A Greek bearing gifts      Britain

The reality-television business: Entertainers to the worldCorruption in cricket: Overstepping the markThe St Paul’s protests: Bells and yellsChild-care costs: Precious little burdensThe economy and the euro: In bad companyCutting legal aid: Justice for someLondon’s sewers: A busted flushBagehot: Britain runs out of Euro-allies  International

Wikipedia’s fund-raising: Free but not easyPilgrimages: Hot stepsWikiLeaks: Out of time and moneyBribery: Supply side       Business

Indian technology firms: Seeking to avoid a mid-life crisisTCS in America: From Mumbai to the MidwestQantas: Scorched earth on the runwayFiat and Italy: Arrivederci, Italia?Personalised news: Your digital paper, sirRetailing: Spies in your walletLoyalty cards and insurance: Every little helpsSchumpeter: Land of the wasted talentSchumpeter: Award: Tom Easton       Finance and economics

Financial markets: Greece lightningButtonwood: Two tiers, too complexMF Global’s bankruptcy: Broke brokerSwiss banks: The Swiss dietChina’s financial regulators: All changeClimate finance: He who pays the paupers…Economics focus: Pulling for the home teamEconomics focus: Correction: Europe's bail-out plan  Science and technology

Ageing: Forever young?Science in South Africa: All squaredScience in Argentina: Cristina the alchemistViking navigation: Sunstruck     Books and arts

Fundamental physics: Big bangVincent van Gogh: Paint a palette blue and greyHistorical salvage: Ghost storiesJoan Didion memoir: Kind of blueNikolaus Pevsner: Set in stoneDeceit and self-deception: Suspicious minds      Obituary

Dennis Ritchie and John McCarthy          Economic and financial indicators

Output, prices and jobsTrade, exchange rates, budget balances and interest ratesThe Economist commodity-price indexMarketsThe Economist poll of forecasters, November averages