Germany reinvents itself Congress rolls up its sleeves Spending the Gulf’s oil wealth Why Russia will miss its émigrés AUGUST 13TH–19TH 2022 012
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Contents The Economist August 13th 2022 3 On the cover The world this week United States 6 A summary of political 19 The impressive Inflation Preventing a war over Taiwan is getting increasingly difficult: and business news Reduction Act leader, page 9. The fourth Leaders 20 Minnesota’s primaries Taiwan Strait crisis looks set to 9 America and China 21 Guns at airports usher in a new era of hostility Target: Taiwan 21 Mass timber between China and America, 10 Europe 22 The future of the far right page 33 The new Germany 24 Lexington The Mar-a-Lago 11 America’s Congress Germany reinvents itself Climate policy, at last raid fallout Thanks to Vladimir Putin, 11 The energy crunch Europe’s most important How to help with bills The Americas country has woken up: leader, 12 Ghana and the imf 25 The politics of inequality page 10. The war in Ukraine is Bail early, bail often 26 A Cuban conflagration forcing Germany to face Letters 27 Bello Guatemala’s challenges well beyond those of 15 On esg investing, military prowess. They will be currency conversions, endangered democracy hard to handle: briefing, page 16 alien life Briefing Asia Congress rolls up its sleeves 16 Germany 28 South Asia’s delicate America’s greenplus spending Can it change? bill is flawed but essential: nuclear balance leader, page 11. Joe Biden’s most Bartleby Why would 29 Reform in South Korea significant legislative proposal is anyone want to work for a 30 Australia’s Aboriginals on track to become law, at last, baddy like Big Tobacco or 30 Papua New Guinea’s page 19 a gambling firm? Page 59 flawed election Spending the Gulf ’s oil wealth 31 Banyan Impunity in A vast windfall offers Gulf states one last fabulous chance to post-war Nepal splurge, page 61 32 Afghanistan one year on Why Russia will miss its China émigrés Much of the intellectual 33 Sino-American relations elite has gone into exile. That will have dramatic consequences for and the Taiwan crisis those who have fled—and for the country they have left Middle East & Africa behind, page 52 36 Where jihadists thrive 37 The rainmaking Emirates 38 Kenya’s close election 39 Ghana and the imf → The digital element of your Contents continues overleaf subscription means that you can search our archive, read all of our daily journalism and listen to audio versions of our stories. Visit economist.com 012
4 Contents The Economist August 13th 2022 Europe Finance & economics 40 Risks of escalation 61 The Gulf oil windfall 41 Explosions in Crimea 63 Buttonwood Repeat 41 Conscription in Donbas 42 Hidden injuries in Ukraine inflations shocks 43 Italy’s radical right 64 An American economic 43 France’s missing mustard 44 Charlemagne Feeling the boom? 64 Europe’s energy problem heat 65 China’s mortgage crisis 66 Miserable short-sellers Britain 67 Free exchange America v 45 Summer of discontent 48 An economy under siege Europe 50 Bagehot Interest rates and Science & technology the Tories 69 The battle against aids 71 How continents were International 52 Russia’s brainy exiles formed Business Culture 55 China’s new tycoons 72 Bernanke v Chancellor 57 Silicon Valley and the 73 Jazz and criminals 74 Home Entertainment Pentagon reunite 58 Biotech crashes “Bambi” 59 Bartleby Working for the 74 Taymour Soomro’s novel 75 Johnson The data is in baddies 60 Schumpeter Inside Economic & financial indicators 76 Statistics on 42 economies Tencent Graphic detail 77 An enormous new study vindicates “Bowling Alone” Obituary 78 Ann Shulgin, therapist and experimental-drug researcher Volume 444 Number 9308 Subscription service To manage your account online, please visit PEFC certified For our full range of subscription offers, including my.economist.com where you can also access our This copy of The Economist Published since September 1843 digital only or print and digital bundled, visit: live chat service which is available 24/7. To call us, is printed on paper sourced to take part in “a severe contest between Economist.com/offers contact our dedicated service centre on: from sustainably managed intelligence, which presses forward, forests certified by PEFC and an unworthy, timid ignorance If you are experiencing problems when trying to North America: +1 888 815 0215 www.pefc.org obstructing our progress.” subscribe, please visit our Help pages at: Latin America & Mexico: +1 646 248 5983 www.economist.com/help Editorial offices in London and also: for troubleshooting advice. PEFC/293158 Amsterdam, Beijing, Berlin, Brussels, Chicago, Dakar, Dallas, Dubai, Johannesburg, Madrid, Mexico City, Moscow, Mumbai, New Delhi, New York, Paris, San Francisco, São Paulo, Seoul, Shanghai, Singapore, Tokyo, Washington DC © 2022 The Economist Newspaper Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Newspaper Limited. The Economist (ISSN 00130613) is published weekly except combined issues in July and December, by The Economist Newspaper Limited, 750 3rd Avenue, 5th Floor, New York, N Y 10017. The Economist is a registered trademark of The Economist Newspaper Limited. Periodicals postage paid at New York, NY and additional mailing offices. Postmaster: Send address changes to The Economist, P.O. Box 46978, St. Louis , MO. 631466978, USA. Canada Post publications mail (Canadian distribution) sales agreement no. 40012331. Return undeliverable Canadian addresses to The Economist, PO Box 7258 STN A, Toronto, ON M5W 1X9. GST R123236267. Printed by Quad/Graphics, Saratoga Springs, NY 12866 012
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6 The world this week Politics The Economist August 13th 2022 After months of gridlock, For three days the Israeli air the first black person to hold official to visit the island, America’s Senate passed a force hit members of Palestin the job. At his inauguration Mr which China claims, since the giant spending bill focusing on ian Islamic Jihad in Gaza, Petro urged armed groups that 1990s. After Ms Pelosi left, climate change, health care killing two of its commanders control parts of the country to China fired missiles over and tax reform. In a big and, according to Palestinian negotiate with the government Taiwan and encircled it, as if advance for Joe Biden’s green sources, leaving at least 42 and called for an end to the war practising a blockade. agenda, families and compa other people dead, including 15 on drugs. (Colombia is the nies will be given incentives to children. Israel, which world’s largest producer of Volodymyr Zelensky said that buy electric cars and energy suffered no losses from cocaine.) He also sent a bill to Ukraine’s war with Russia efficient appliances, and hundreds of missiles fired by Congress that would raise could not end until Crimea, cleanenergy generation will the jihadists, said it was acting taxes on the rich. which Russia annexed in be expanded. On health, the preemptively to forestall 2014, is liberated. The Ukrai government will be allowed to planned attacks. Hamas, the Firefighters took five days to nian president was speaking negotiate lower prices with Islamist group that controls control a blaze at Cuba’s larg after explosions rocked a drug firms, which will benefit Gaza, kept out of the fray. Egypt est oilstorage terminal in Russian air base in Crimea, the elderly. The tax reforms helped secure a ceasefire. Matanzas, on the country’s destroying several military include a 15% minimum cor northern shore. At least one planes. Russia blamed ex porate tax based on income Kenyans voted for a new presi person died and 14 are missing. ploding ammunition. Ukraine reported to shareholders. dent. The race appeared to be The fire, triggered by lightning, did not claim responsibility. Named the Inflation Reduc- close. William Ruto, the depu destroyed four tanks. It caused Russian holidaymakers, who tion Act, it is anything but. ty president, squared off a water shortage that led to the are still being allowed to Still, it is a win for Mr Biden, a against Raila Odinga, an oppo shutdown of a power plant travel to Crimean resorts, fled year after the demise of his sition leader running for a fifth nearby. Even before the disas from beaches nearby. larger $3.5trn spending bill. time. Mr Odinga sought to ter Cuba was suffering from assemble an oldfashioned fuel shortages and blackouts. The flow of Russian energy to Nowhere to hide ethnic coalition; Mr Ruto made Europe was disrupted once extravagant promises to The fallout from the assassi- again. This time shipments of The fbi searched MaraLago, Kenya’s havenots. nation of Abe Shinzo, a for oil through the Druzhba pipe Donald Trump’s home in Palm mer prime minister, continued line to the Czech Republic, Beach, apparently looking for Antony Blinken, America’s to rock Japanese politics. Hungary and Slovakia were documents he took from the secretary of state, outlined the Kishida Fumio, the current halted, ostensibly because of White House. Mr Trump com Biden administration’s new prime minister, drew flak for a row over payment. plained: “Nothing like this has strategy for engaging with his party’s dealings with the ever happened to a President Africa, which will focus on Unification Church, a religious Wheat tolerant of the United States before.” promoting democracy. Speak group that raises money ener More ships laden with grain (Which is true.) Republicans ing in Pretoria, South Africa’s getically from its adherents. and sunflower oil set sail from vowed to investigate the in capital, he argued that poor (Mr Abe was murdered by a Ukraine under a deal guaran vestigators, should they win governance and a lack of de man with a grudge against the teeing safe passage that was the midterm elections in mocracy make countries vul church.) Ministers with ties to brokered by Turkey and the November. Democrats were nerable to extremist move the church, including Mr Abe’s un. Two were bound for torn between applauding the ments and foreign influence. brother, were dismissed from Turkish ports, the others for investigation and fretting that the cabinet. China and Italy. it might make Mr Trump look, A nationwide curfew was to his fans, like a martyr. imposed in Sierra Leone, after At least eight people were The British government pub demonstrations in Freetown, killed amid the worst rain lished its legal case against Indiana’s legislature approved the capital, against high food storm to hit Seoul in 80 years. plans by Scotland’s first a neartotal ban on abortion, and fuel prices turned violent Some districts in the South minister, Nicola Sturgeon, to making it the first state to do and morphed into wider anti Korean capital registered 50cm hold a second referendum on so since the Supreme Court government protests. (20 inches) of rain in a day. independence. Its case reiter struck down Roe v Wade, ates that Scotland does not which had created a federal Gustavo Petro, a former mem James Marape won reelection have the power to call a vote. right to abort. However, other ber of the m19 guerrilla group, as prime minister of Papua Ms Sturgeon hopes to get Republican states are hesitat took office as Colombia’s first New Guinea after an election round this by claiming that ing to enact similar bans, leftwing president. His vice marred by violence and wide the vote will be advisory. The which are often unpopular. president, Francia Márquez, is spread fraud. Mr Marape has British Supreme Court will an 18month grace period hear arguments in October. before he can face a noconfi dence vote. A British ultramarathon run ner ran the width of Ireland, China ended its military drills the first person to do so in around Taiwan, but vowed to under 24 hours. Robert Pope, keep patrolling the Taiwan 44, started his 211km (131mile) Strait. The exercises followed a run with a glass of Guinness trip to Taiwan by Nancy Pelosi, in Galway, and finished it the speaker of America’s House with another pint of the black of Representatives. She is the stuff in Dublin. highestranking American 012
The world this week Business The Economist August 13th 2022 7 America’s annual rate of Berkshire Hathaway reported from his latest sale of stock in losses. The airline has urged inflation, measured by the a net loss of $43.8bn for the reserve in case a judge forces the city’s government to end consumerprice index, second quarter, reflecting this him to buy the company. restrictions completely. Still, dropped to 8.5% in July, from year’s broad decline in stock Meanwhile, the war of legal Cathay is in much better shape 9.1% in June. Petrol prices markets. However, operating words between Mr Musk and than in recent years, when it explained the dip. The average income, which excludes the Twitter continued, with the became entangled in rows over price of a gallon of car fuel is effects of market vicissitudes platform describing his rea democracy protests and en now just under $4; in mid on Berkshire’s share portfolio, sons for terminating their dured severe pandemic curbs June it was around $5. The surged to $9.3bn. agreement as “implausible”. on flying. Its share price is up economy is also cooling, by a third this year, the best shrinking by 0.9% at an annual Inflation hasn’t put people off A former employee of Twitter, performance of any big airline. rate in the second quarter after visiting Disney’s theme parks, who worked for the company a contraction of 1.6% in the which notched up their best between 2013 and 2015 oversee Amazon bought iRobot, the first. The labour market is still ever quarter in sales. Custom ing media tieups in the Mid company that makes the red hot, however. Employers ers are also signing up to dle East, was found guilty of Roomba robot vacuum cleaner. created 528,000 jobs in July, Disney+ in droves. The stream spying for Saudi Arabia. The The Roomba collects data not many more than had ing service added 14.4m users man, reported to hold Amer just dirt, which is the acquisi been expected. over the past three months, ican and Lebanese citizenship, tion’s real value to Amazon. It bringing the total to 152.1m. struck up a friendship with an maps the layout of a house and The deputy governor of the aide to Muhammad bin furniture as it busily picks up Bank of England, Sir Dave Last year’s thing Salman, the kingdom’s de facto dust, information that can be Ramsden, said that interest The share price of Novavax ruler, and repeatedly divulged added to a user’s shopping rates would probably have to plummeted after it forecast a the personal information of profile (customers can opt out go up again to tame inflation. slowdown in revenue because anonymous Saudi dissidents of the mapping system). Ques The bank recently lifted its of falling demand for its who use Twitter. tions about privacy have benchmark rate by half a per covid-19 vaccine. Moderna already been raised. centage point, to 1.75%, the recently wrote off $500m The declining value of crypto biggest rise since 1995. The worth of vaccines that have currencies lay behind a $1.1bn Arrivederci move was criticised by some gone unused. net loss at Coinbase, America’s for increasing the possibility largest digitalcurrency It emerged that Domino’s of recession, but the bank Elon Musk sold almost $7bn exchange. Bitcoin is now trad Pizza has pulled out of Italy, faces a tricky balancing act. worth of the stock he holds in ing around $24,000. That is up seven years after opening Not all inflation is within its Tesla, leaving him with a stake from $19,000 in midJune, but branches in the home of pizza. control. One forecast reckons of around 15%. Mr Musk sold still down by 50% since the It had been pushing its Texas the average annual energy bill $8.5bnworth of his shares in start of the year. bbq and pineappletopped will jump to over £4,400 April, as he pulled together offerings in 29 locations, but ($5,320) early next year. financing for his takeover of An easing of covid quarantine quicker than you can say pros- Twitter. He now wants to walk rules for travellers to Hong ciutto e funghi Italian pizza away from that deal. Mr Musk Kong helped boost revenue at chains signed up to Deliveroo may well keep the proceeds Cathay Pacific in the first half and other apps to offer their of the year and narrow its own homedelivery services. The plunging value of investments at its two tech focused Vision Funds pushed SoftBank to a ¥3.2trn ($23bn) quarterly net loss, a record for the Japanese conglomerate. The rout in tech shares was not all to blame. The weakened yen led to a ¥820bn foreignex change loss. “The world is in great confusion,” said Son Masayoshi, SoftBank’s boss. SoftBank later said it would reduce its stake in Alibaba, which it has held for 22 years, from 23.7% to 14.6%, which should raise around $34bn. 012
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Leaders 9 Target: Taiwan Preventing a war over the island is becoming increasingly difficult America and China agree on very little these days. Yet on the stressing every humiliation it has suffered at the hands of per subject of Taiwan, at least in one regard, they are in total har fidious foreign powers. He has linked unification with Taiwan to mony. The status quo surrounding the selfgoverning island, his goal of “national rejuvenation” by 2049. China’s armed forc which China claims and whose thriving democracy America es have been building the capacity to take the island by force; its supports, is changing in dangerous ways, say officials on both navy now has more ships than America’s. Some generals in sides. War does not look imminent, but the uneasy peace that Washington think an invasion could occur in the next decade. has held for more than six decades is fragile (see China section). Ask them who is at fault, however, and the harmony shatters. Fortunately, China’s actions in this crisis have been muscular but calibrated—designed to show its anger and might, while That much is clear from the crisis triggered this month by a avoiding escalation. Its forces have been deployed so as not to visit to Taiwan by the speaker of America’s House of Representa start a war. America has sent similar signals. It postponed a rou tives, Nancy Pelosi. She was well within her rights, but her trip tine test launch of an intercontinental ballistic missile. And Ms was provocative. It infuriated the Chinese Communist Party. Pelosi’s plane took a circuitous route to Taiwan, to avoid flying One of Ms Pelosi’s predecessors had visited the island in 1997, over Chinese bases in the South China Sea. but China’s top diplomat claimed that American “saboteurs” had wrecked the status quo. After Ms Pelosi left, China fired missiles The danger is that China uses the crisis to set new boundaries over the island and carried out livefire drills that encircled it, as for its encroachments into what Taiwan considers its airspace if it were rehearsing for a blockade. and territorial waters. It could also attempt to impose even stricter limits on the island’s dealings with the rest of the world. Since the previous standoff in 199596, America, China and Taiwan have all grown uneasy with the ambiguities and contra That must not happen. The task for America and its allies is to dictions—the status quo, if you will—on which peace precari resist these efforts without getting into a fight. America could ously rests. China, especially, has bared its teeth. If the world is start by reestablishing norms that held before the crisis. It to avoid war, it urgently needs to strike a new balance. should promptly resume military activities around Taiwan, for instance, including transits through the Taiwan Strait and oper In part this reflects the breathtaking change of the past half ations in international waters that China claims as its own. It century. Taiwan has blossomed from a military dictatorship into a prosperous, liberal democ could continue to expand military exercises racy of 24m people, nearly all of them Han Chi with allies, involving them more in contingen nese. Its citizens are more than twice as rich as cy planning over Taiwan. Japan was irked when mainlanders. Their success is an implicit re China fired missiles into its vicinity and has in buke to China’s autocratic regime, and an obvi dicated that it could intervene in a war, which ous reason for them to resist being governed would greatly complicate a Chinese invasion. from Beijing. Taiwan’s president, Tsai Ingwen, has made no formal moves towards indepen The aim is to persuade China that such an in dence, but the island is drifting away from the mainland. China’s vasion is not worth the risk. It makes sense to offer of “one country, two systems” has looked empty since the use the Taiwan Policy Act (tpa), now before mainland crushed civil liberties in Hong Kong, which was given Congress, to provide more training and weapons to Taiwan. But the same deal. Today very few Taiwanese say they want formal Taiwan needs a better strategy based on small, mobile arms like independence immediately, if only because that would surely those Ukraine has used so well, not the costly kit favoured by its provoke an invasion. But even fewer favour prompt unification. generals. The island should become a “porcupine” that would be hard for China to digest. Like Ukraine, Taiwan must also show America has changed, too. After intervening to protect Tai more willingness to defend itself. Its armed forces have long wan twice in the 1950s, it began to doubt that it was worth de been plagued by corruption, waste and scandal. fending, but the island’s democratic success and its importance Sometimes a public standoff with China makes sense. More as a source of semiconductors have upped the ante. Today allies often it causes a lot of trouble for very little gain. The g7 con such as Japan see resolute support for Taiwan as a test of Amer demned China’s missilelobbing, as did Japan and Australia. But ica’s standing as a dominant and dependable power in the west South Korea did not and SouthEast Asian countries have been ern Pacific. America has made no formal commitment to defend loth to take sides. Even as it condemns China’s aggression, the Taiwan directly, adopting instead a policy of “strategic ambigu Biden administration should stress that it does not support for ity”. But amid growing SinoAmerican rivalry, and with politi mal independence for Taiwan. Congress should avoid symbolic cians in Washington vying to sound tough on China, there is lit moves that will bring few real benefits to the island, such as re tle doubt that America would join a fight over Taiwan today. In naming Taiwan’s representative office in Washington, currently deed, President Joe Biden has repeatedly said as much—though in the tpa. Why not pass a trade deal instead? each time his staff have walked back his remarks. War is not inevitable. For all Mr Xi’s ambition, his priority is to keep a grip on power. If the invasion of Ukraine teaches one But no country has done more to wreck the status quo than lesson, it is that even a supposedly easy victory can turn into a China. Whether peace lasts is largely up to President Xi Jinping, drawnout struggle, with ruinous consequences at home. Amer its strongman. He gives ample grounds for pessimism. As China ica and Taiwan do not have to prove that a Chinese invasion has grown rich, he has nurtured an ugly, paranoid nationalism, would fail, just cast enough doubt to persuade Mr Xi to wait. n 012
10 Leaders The Economist August 13th 2022 Europe The new Germany Thanks to Vladimir Putin, Europe’s most important country has woken up To borrow a phrase from the late Emperor Hirohito, the war pected. Faced with higher prices and conservation campaigns, in Ukraine has developed not necessarily to Vladimir Putin’s households will do the same. Germany is restarting mothballed advantage. It has sent Finland and Sweden bolting for the cover coalfired power plants. It will invest in renewables. It should of nato membership. It has deepened Ukrainian nationalism, (and probably will) extend the life of three nuclear plants that strengthened the democratic alternative Ukraine offers to Mr had been rashly scheduled to close. It should also lift a ban on Putin’s own tyranny, and led customers for Russia’s energy to fracking that has put its hefty reserves of shale gas out of reach. look elsewhere. It has also prodded a sleepy giant, Germany, rousing a country that has been both Russia’s best partner and With enough determination, other troubles have fixes, too. its worst enemy. Mr Putin’s warmongering may prove to be the Mr Scholz has pledged to boost defence spending by a third— catalyst that turns Germany into his own nightmare: a stronger, though the core budget this year is flat. New outlays will fund a bolder, more determined leader of a more united Europe. sweeping equipment upgrade. He has also promised a less star ryeyed approach to foreign affairs, sending heavy weapons to Germany badly needed that prod. Complacent and just a little Ukraine in defiance of the old pacifist taboo. His government selfsatisfied, it was late to realise how fast the world was chang has initiated a thorough review of relations with China, and is ing around it (see Briefing). Now, however, a remarkable oppor soon to issue a nationalsecurity strategy. Tellingly, that is Ger tunity is within its grasp, as Germans experience a rare thing in a many’s first such effort at framing its own geostrategic goals. democracy: a consensus about the need for broad, sweeping change to the economy and security. Digitising and greening its industry and adding highend services to the mix will be harder. The myriad companies in its The clouds were long gathering. Yes, Germany boasts an envi Mittelstand could remain the bedrock of Germany’s economic able record as Europe’s strongest economy, most stable polity strength if they embraced the digital challenge. Luckily, busi and, Germans like to think, most responsible citizen. But Ger ness leaders and Mr Scholz’s government both appear pragmat many’s dependence on cheap Russian fuel, carefully cultivated ic. Immigration rules are being tweaked to entice more skilled by Russia, has been exposed by the Ukraine war. Germans are workers into the country. Germany is also much more open to not only vulnerable to the Kremlin’s energy blackmail, but have wards deficit spending, not only at home but in Europe, too. also been bankrolling Mr Putin’s invasion. Its solid relations with Europe are another That wretched situation was a product of an advantage, the result of decades of nurturing al other of Germany’s failings: a reluctance to lies, including an occasionally obstreperous question rosy assumptions rooted in its own America. In the future, as firms look for ways to happy recent history. Comforting notions, such make their supply chains more robust, reliable as that trading with Russia would tame its bel Germany will be an attractive place to invest. ligerence, a theme beloved of Angela Merkel, a longserving chancellor, allowed Germany to Dangers still lurk. Turkey or a second Trump turn a deaf ear for too long to pleas from allies administration could “defect” from the nato al for more robust investment in its own and Europe’s defence. liance. Germany would then face a far more burdensome security challenge as the alliance’s secondbiggest, Germany has shied away from other challenges, too. Its econ but militarily most underpowered, member. Ramping up omy remains overreliant on the export of traditional engineer spending should be just the first step in a radical overhaul of a ing products where there is little room for growth, and overreli squeamish and bureaucratised army that is poorly geared to ant on one country, China, as a source of inputs and a market for defend the more exposed countries on nato’s periphery. its goods. Partly because of strict rules on public spending, Ger Germany has wisely and consistently put Europe at the cen many has underinvested in infrastructure; all too often its trains tre of its concerns. But in the face of political challenges to the do not run on time. The public and private sectors are held back eu from Poland, Hungary and, potentially, a new rightwing gov by the slow digitisation of services as well as a shortage of skilled ernment in Italy, Germany has a vital role to play in holding the workers—a harbinger of a demographic danger, as over the next project together. On this, and matters such as a deeper single decade more Germans will retire than enter the workforce. market, Mr Scholz should get off the back seat and sit up front. Now a new Germany is hatching. Three days after the inva Which came first, the eagle or the egg? sion, Olaf Scholz, then a new chancellor heading an untested co The greatest danger, though, is that this moment is lost and Ger alition, gave his muchapplauded Zeitenwende speech to the many slips back into caution and stasis. Comprehensive change Bundestag, signalling a break with the country’s postwar ten takes years and Mr Scholz is not especially popular. dency towards pacifism. He has set the agenda for years to come. Ukraine will be an early test of Germany’s mettle. Though Mr The good news is the country’s challenges are manageable. Scholz’s tough stance against Mr Putin still convinces most Ger Take energy. When Mr Putin invaded, Germany relied on Russia mans, support has been softening and the cost of the war has yet for 55% of its gas. Doomsayers warned that supplies would be to hit heating bills. If Germany were to abandon Ukraine, that choked off, German factories would close and families would would be a tragedy, for Germans as well as Ukrainians. This is a shiver in their kitchens. In fact, even as Russia’s share of the Ger conflict over the future of a continent. It is also an opportunity man gas market has halved, stores of gas for winter are building for Germany to reclaim its place at the heart of Europe. n at a normal pace. Industry says it can cut back use more than ex 012
The Economist August 13th 2022 Leaders 11 The Inflation Reduction Act Climate policy, at last America’s green-plus spending bill is flawed but essential After a long path through Congress, a giant taxandspend big companies to a minimum tax is an appealing idea. But levy package is on the verge of being passed by Democrats. It will ing it on their book incomes, as this new tax will do, makes a be America’s first significant climate law and a cornerstone of messy American tax system even messier. President Joe Biden’s agenda. Just weeks ago the bill seemed Despite these drawbacks, the ira should also be judged on dead, but a backroom deal brought it back to life. It cleared the two important advances. First, it will enable Medicare, the pub Senate along party lines by a single vote. The House looks set to lic health insurance for Americans over 65, to negotiate drug approve it on August 12th, after we go to press (see United States prices for the first time. This will cover just ten drugs initially, section). As a feat of legislative legerdemain, it is impressive. starting in 2026. But it is a step towards restraining America’s What of the law itself? It has many imperfections, most of healthcare spending, which, at about 19% of gdp, is nearly dou which stem from the politicking needed to keep it alive. But it ble the average of developed countries. The pharmaceuticals also scores two big achievements—a semblance of healthcare lobby, usually a fearsome force, fought against the price negotia sanity and America’s most serious effort yet to face up to climate tions, and lost. With any luck, it will face more such setbacks. change. And these easily outweigh the flaws. Second, and most crucially, the ira marks a The “Inflation Reduction Act” (ira), as it is Net greenhouse-gas emissions new chapter for America’s climate policy. By officially known, will do next to nothing to re US, gigatonnes of CO equivalent weaving together a vast array of tax credits, loan duce inflation, especially in the short term. The 7 guarantees and grants, it will encourage people Forecast 5 to make lowcarbon purchases, such as of elec name of the bill is a transparent attempt to sell Current policies it to a public worried about soaring prices. 3 tric cars, and encourage businesses to invest in Moreover, its provisions are a shadow of Inflation Reduction Act green technologies. Rhodium Group, a consul what Democrats once dreamed of. Last year 2005 10 15 20 25 30 35 tancy, predicts it will cut America’s net green they sought a $3.5trn package that would have housegas emissions by 40% in 2030 from 2005 dramatically expanded the welfare state. But they received no levels. Without the ira, the reduction would be 30%. The extra Republican support and their ambitions were whittled down by reduction is about two years’ worth of British emissions. Amer two stubborn senators from their own ranks: Joe Manchin of ica will now be working alongside most of the rest of the world West Virginia and Kyrsten Sinema of Arizona. in trying to limit global warming—something that would other Some of the ugliest compromises were over taxes. Mr Biden wise have been in doubt. had pledged to raise taxes on big companies and the very rich. The climate measures are far from perfect. Market mecha This package was the perfect opportunity. One simple idea was nisms such as a carbon price or a capandtrade scheme under to partially reverse Donald Trump’s massive tax cuts from 2017, pin the energy transitions under way in many other countries. which would have paid for many climate and social policies. In America’s current political constellation, they are, alas, non Ms Sinema, however, rejected all such proposals. So the starters. By the same token, passing any kind of ambitious legis Democrats settled on a 15% minimum tax on profits reported by lation in that constellation is a triumph. All the more so when it corporations with more than $1bn in annual income. Subjecting promises real benefits for both America and the world. n The energy crunch How to help with those bills There are better, fairer and cheaper ways than meddling with prices The energy crisis unleashed by Russia’s war on Ukraine is bills, many have resorted to price caps and energytax reduc crushing Europe’s consumers and panicking its politicians. tions. Liz Truss, a Conservative politician vying to become Brit Naturalgas prices are eight times higher than they were last ain’s next prime minister, is talking of cutting payroll taxes. But summer and traders expect precious little respite over the com price ceilings do nothing to reduce energy use and tax cuts will ing year. Global oil prices are nearly twice their level in January not protect the poorest. With no immediate end to the crunch in 2021. The result is rampant rises in living costs. By October a sight, it is time for some hardheaded thinking about how to live household in Britain could be paying more than £3,500 ($4,200) with higher energy bills. a year for energy, more than three times last year’s bill, leading the Bank of England to warn of inflation passing 13% before the The cheapest protection is to trade natural gas across nation year is out. Annual consumerprice inflation rates are already in al borders, which imf modelling suggests could nearly halve the double digits in half of the euro area’s member countries. blow to gdp in the worstaffected countries. Next, within do mestic markets, price signals have a vital role to play in curbing Alas, politicians are botching their response. To stop rising demand and ensuring that precious gas gets to where it is most wholesale energy prices passing through fully to consumers’ needed. Ceilings on the price of natural gas used by power gener 012
12 Leaders The Economist August 13th 2022 ators, as in Spain and Portugal, or a cap on household bills, as in But governments also need to protect those most in need, no France, may serve as emergency measures when a shock is fleet tably poor people, for whom energy bills make up a bigger share ing. But today’s scarcity is likely to be longlasting. Consumers of household spending. Politicians cannot stop rising energy and businesses need to adapt. prices from making economies worse off, but they can deter mine who bears the brunt of the shock. Support, in the form of Hearteningly, there are signs that people and businesses can rebates on energy bills for the poorest, or even cash bonuses (as and do respond to high prices by conserving energy. They are recently enacted in Italy), would help the neediest, while still also more resilient than fearful governments might think. In encouraging consumers to conserve energy where they can. Germany farmers and industrialists are importing more ammo nia and other energyintensive chemicals, rather than relying Targeting is essential to keep the cost in check. According to on dearer domestically produced inputs. Studies suggest that the imf, some European governments are on course to spend both German households and firms have reduced their con 1.5% of gdp on energy policies by the end of the year. Measures sumption of natural gas since mid2021. that protect the poorest fifth of the population would cost only 0.4% of gdp; the poorest twofifths, 0.9%. Trying to buy support Sometimes conservation can be galvanised by regulation. by including everyone is a bad use of public money. Spanish businesses and shops now go dark after 10pm, and the airconditioning standards for public and commercial buildings Windfall pitfall are set at a minimum of 27°C, to encourage Spaniards to go shop Who, then, should pay? The crowdpleasing choice is the energy ping in their tshirts. Likewise, energy companies can help companies, which are making out like bandits, but general tax change behaviour by telling people how much energy they use ation makes more sense. Windfall taxes on energy producers are compared with their neighbours. Such interventions are cheap undesirable if their fortunes follow the boom and bust of the (though some have the drawback of muffling price signals), and commodities cycle. That only leads to underinvestment—and can help defuse the incendiary politics of high prices. Affecting the next bout of skyhigh prices. n rich and poor alike, they are seen as fair. Ghana and the IMF Bail early, bail often Ghana is asking for a 17th bail-out. Surprisingly, that is a good sign Even after Ghana threw off the colonial yoke in 1957, its first There are few downsides to going early. The fund’s lending is president, Kwame Nkrumah, complained that it was not usually dirt cheap (in many cases no interest is charged), and its truly free. Rich countries still held it back, he said, and the imf involvement gives investors confidence to resume lending and was a “neocolonialist trap”. His spirit lives on. Ghana’s current investing. Waiting too long before calling for help, by contrast, finance minister likens imf programmes to the way Israelites usually multiplies a country’s misery. Zambia, which failed to were treated in ancient Egypt. engage with the imf and defaulted in 2020, now needs an imf package worth about 7% of gdp. And because its debt is unsus All told, Ghana has spent 22 of the past 35 years under the tainable, it needs its debt restructured with its many creditors fund’s supervision. In July it asked for a new bailout, its 17th before the imf is allowed to lend it more. Other countries are tak (see Middle East & Africa section). You might think that a coun ing note. Bangladesh has preemptively asked the imf for try that keeps asking for money is a mess. But Ghana is one of the $4.5bn, while insisting that its economy is not in bad shape. most prosperous in the region, and a lively democracy to boot. Its problem is that its politicians, starting with Ghana also illustrates the advantages of ask Nkrumah, have been addicted to spending. The ing often. Its rulers tend to borrow and spend latest crisis follows a surge of borrowing and an profligately before elections, and then ask the economic crunch, which have priced Ghana out imf to soothe the postpoll hangover. The of credit markets and raised the risk of default. fund’s help is typically conditional on painful Given that it is only three years since Ghana reforms that politicians know are necessary but completed its previous imf programme, this dare not enact under normal circumstances. suggests woeful economic management. Such reforms are often only feasible if politi cians can blame the imf for them. Yet Ghana routinely notches up impressive In an ideal world they would be honest with voters and em economic growth. At $6,178, its gdp per head (adjusted for pur brace fiscal rectitude. In the real world the benefits of sensible chasing power) is nearly twice the west African norm. One rea reforms outweigh the harm unfairly done to the fund’s reputa son it has succeeded despite its recklessness is because, largely, tion. The fund, for its part, has grown better at sparing essential it has gone to the imf early and often. social spending, such as on health and education. Activists are cottoning on. Bright Simons of Imani, a thinktank in Ghana, Asking for help early can nip problems in the bud. Bailouts used to protest against the imf. Now he campaigns for African can be smaller and the spending cuts required to put public countries to think of it like the family doctor. They should use its finances on a sound footing can be less painful. When Ghana en cheap loans as “preventive care”, asking for them “frequently tered its 16th programme in 2015 it needed less than $1bn (2% of and proactively”, before they need to be carried on stretchers gdp) from the imf to regain access to credit markets. When the into intensive care. He is right. n country later issued a foreigncurrency bond, investors bid for five times more than was on offer. 012
Executive focus 13 Executive Director The SEACEN Centre Location: Kuala Lumpur, Malaysia The South East Asian Central Banks (SEACEN) Research Contract Type: Fixed Term (3 years) and Training Centre The SEACEN Centre (SEACEN) seeks an outstanding and experienced leader as Desired Attributes its Executive Director for a three-year fixed term during the period from July The candidate must have at least master’s degree qualification in core central 1st 2023 to June 30th 2026. The contract for the position has an option to be banking areas such as macroeconomics, monetary economics, accounting, renewed for up to three years. finance and banking. A Ph.D. and a good record of academic publications will be an added advantage. He or she must have at least 10 years of working Based in Kuala Lumpur, SEACEN represents a learning and research experience in a senior management position in a central bank, the financial collaboration among 19 member central banks and monetary authorities sector, a multilateral organisation or academia. Candidates with extensive from the Asia-Pacific region. Established in 1982, the Centre has provided experience in overseeing learning and research programmes will have a learning and research opportunities to generations of central bankers. distinct advantage. He or she must have a positive and collaborative leadership SEACEN has strengthened its internal faculty of experts in central banking style that motivates and inspires performance and excellence. Outstanding in order to elevate its position to become the leading regional hub for communication skills in English language and being highly result-oriented are learning and research in central banking, with a focus on macroeconomic and also essential. monetary policy management, financial stability and supervision, payment and settlement systems, as well as leadership and central bank governance. The position provides a competitive tax-free remuneration package and other benefits including a car with a driver, full home rental reimbursement, Job Description allowance for children’s education and other allowances. The Executive Director of SEACEN heads a team of experienced staff from diverse backgrounds and nationalities, and collaborates with member central Applications, which include a curriculum vitae, should be submitted by banks and international strategic partners to deliver high-impact and vibrant September 12, 2022, to [email protected]; minh.nguyenquang@ learning and research programmes in order to effectively build the capacity sbv.gov.vn, addressed to: of member central banks and establish an effective platform for the building of regional views. The Executive Director will also drive organisational The Chairman development strategies to ensure continuous operational efficiency and SEACEN Board of Governors effectiveness in serving SEACEN’s current and future business needs. The SEACEN Centre Reporting to Governors and Deputy Governors of its member central banks, Level 5, Sasana Kijang the successful candidate is expected to contribute strategic direction and Bank Negara Malaysia visionary leadership in raising the profile of SEACEN as the leading regional hub for learning and research in central banking. 2, Jalan Dato’ Onn 50480 Kuala Lumpur http://www.seacen.org 012
14 Executive focus The OPEC Fund for International Development The OPEC Fund for International Development (the OPEC Fund), based in Vienna, Austria, is a development finance institution established in 1976 that supports socio- economic progress in all developing countries other than its own members. The OPEC Fund works proactively with the international donor community and provides agile solutions to the urgent needs of developing countries, helping to overcome some of the world’s most pressing development challenges. To date, the OPEC Fund has committed more than US$22 billion to development projects in over 125 countries with an estimated total project cost of US$187 billion. Our Mission: Together, we drive development, strengthen communities and empower people. Our Vision: A world where sustainable development is a reality for all. To help maximize its development impact, the OPEC Fund is looking to engage smart individuals who thrive in an environment that values: integrity, empowerment, innovation, community and excellence. Some of the current job opportunities are listed below: • Senior Policy Officer - Risk Management • Head of Corporate Procurement - Administrative Services • Senior Counsel - Financial Operations (Treasury and Funding) • Senior Portfolio Management Officer - Financial Operations • HR Analytics Specialist - Human Resources • Talent Acquisition Specialist - Human Resources • IT Infrastructure Specialist - Information Technology • Business Application Specialist - Information Technology • Syndication Facility Officer - Private Sector & Trade Finance Operations • Country Manager - Public Sector Operation Temporary vacancies - One year: • HR Business Partner - Human Resources • HR Policy Officer - Human Resources • HR Operation officer - Human Resources Interested applicants are invited to visit the OPEC Fund’s website at www.opecfund.org for a complete list of Job opportunities, detailed descriptions of duties and required qualifications, and information on how and by when to apply. Applicants from the OPEC Fund’s member countries are especially encouraged to apply. Due to the expected volume of applications, only short-listed candidates will be contacted. We look forward to receiving your applications. The International Institute for Strategic Studies Director of Editorial and Digital Strategy IISS, London Headquarters The International Institute for Strategic Studies (IISS) intends to hire a full-time Director of Editorial and Digital Strategy based in its London headquarters. The selected candidate will report to the Director-General and Chief Executive overseeing the digital strategy programme across research and client delivery departments. The IISS is the world’s leading authority on international conflict and geopolitical trends. It is international in its composition, perspective and reach. The Institute provides objective facts and independent analysis for its core audiences in government, the private sector, and the expert and opinion-forming communities. Summits convened by the IISS facilitate intergovernmental consultations, while its research helps companies to understand political risk and its publications shape the international strategic debate. The Director of Editorial and Digital Strategy’s principal responsibilities will include: • Devising and implementing an integrated digital transformation strategy to increase the reach of the Institute and its engagement with its target audiences. • Managing the governance of the digital transformation programme, with transformation of the Institute’s content sets as one important area of focus. • Providing senior leadership and direction to the Editorial Services, Global Communications Engagement, and Design Services departments. • Evaluating individual processes and projects to arrive at a clear roadmap for digital change. • Raising awareness of the needs of digital transformation internally by engaging and influencing department leaders and colleagues at all levels across research, editorial, communications, website and design teams. • Devising quality control measures and optimising performance where required. The successful candidate will be a dynamic, entrepreneurial and ambitious individual, able to take on a wide variety of tasks with tact and efficiency. Relationship-building and influencing skills are also essential, as is team-management experience. The position will suit a person with strong intellectual qualifications, an interest in international affairs and an international outlook. Salary will be commensurate with skills and experience, and will attract a pension and private medical benefits package. Applications should include a cover letter stating the skills the candidate would bring to the IISS, a CV and list of references, and should be submitted by Monday 15th August via our website www.iiss.org/careers. 012
Letters The Economist August 13th 2022 15 Equitable social goals through a derisking lens, or as This evolution is exempli is to decrease the number of a niche overlay to mainstream fied by the efforts of the Impact stakeholders in such enter esg (environmental, social and investment products, rather Weighted Accounts Initiative prises to weaken their political governance) investing should than to align economic activity at Harvard Business School. It power, so that proper pricing focus just on emissions, you with what our planet can has published, in monetary and regulation can be put in say, concluding that esg sustainably provide. terms, the environmental and place. One need only look to investment is an outdated and social impacts of thousands of the decline of the tobacco flawed idea (“Three letters that Therefore, I am deeply firms, allowing for a compari lobby, and the end of tobacco won’t save the planet”, July concerned by the suggestion to son between their different advertising, to see how things 23rd). esg exists because reduce esg to emissions alone, impacts and profits. Its analy might proceed if fewer had a efforts to price the planet’s which ignores wider environ sis shows that a correlation vested interest in continued boundaries and social mental impacts such as water exists between the higher level profits from highemitting institutions have been too security, biodiversity and of pollution companies create enterprises. little and too late to make a deforestation. Focusing on and their lower stockmarket difference. Companies and emissions alone will not help value relative to their less Deeppocketed investors investors alike have spent the us to build resilience to the polluting competitors. interested in saving the planet best part of 20 years climate shocks coming our might best be served by worshipping at the altar of way. Without biodiversity Integrating standardised donating to politicians and carbon markets only to find humans cannot eat or make impact measurement into organisations that might that politics gets in the way of medicines. Indeed, we cannot mainstream investment prac actually act to raise carbon a sufficient price. As a result, solve the climate crisis, as at tice, in the same way we did prices, or accelerate the investors have had to evaluate least a third of all scientifically with risk measurement in the adoption of electric vehicles. emissions (and other esg required emission reductions second half of the 20th centu james jampel factors such as board compe are linked to forestation and ry, is the path that leads esg Founder and cochief tency, transition plans and the water cycle. More than half beyond greenwashing. By investment officer stakeholder impacts) and trade of the world’s gdp relies on elevating esg to a discipline hite Hedge Asset on the risk of future prices and nature and its services. Losing focused on measuring busi Management regulation to prepare for the it is an existential threat. ness impacts alongside profits, Boston economic transition ahead. Companies and financial we turn esg into impact markets are finally waking up investment. Doing so revolu Preaching to the converters esg provides a framework to this reality and we must use tionises the ability of market to assess the interconnected this momentum to regulate economies to deliver solutions Sometimes The Economist can ness of these issues in a way and standardise more, not less. to our great challenges take its obsession with that better reflects policy and alongside rising prosperity. clarification a little too seri economic realities. For An established accounting ously. When Sajid Javid spoke example, the economic framework for emissions sir ronald cohen of his father arriving from transition required to reduce already exists, and if compa Pakistan “with £1 ($1.20) in his emissions is also an inherently nies generally do a poor job of Chair pocket”, I died a little inside social transition. Take the reporting emissions in their Global Steering Group for (“The British dream”, July 16th). gilets jaunes protests in France, value chain (scope 3) this is Impact Investment Surely your newspaper could where an increase in fuel duty, where the focus for improve London have discarded precision for nominally with the aim of ment should lie. prosody on this occasion? curbing carbon emissions, led Socalled “engagement” strat adrian fogarty to months of disruptive civil nicolette bartlett egies, whereby investors own unrest. No government, highemitting companies in London investor or business can Chief impact officer order to change them for the consider pathways for policy better, are not only devilishly On another planet reforms without considering cdp difficult, but also beset by their wider ramifications and potential conflicts of interest. Reading about the latest the volatility that may result London A fiduciary investor owning advances in astronomy (“I’m in for markets. The e, s and g the likes of ExxonMobil, for heaven”, July 16th) ignites the must be solved together. The impending transforma example, could hardly be an ageold question of whether tion of esg is coming through effective advocate for the rapid we will make contact with nathan fabian impact investing, in which I curtailment of its oil and gas intelligent life. Not to burst have been intimately involved production, or for badly need anyone’s bubble, but as Arthur Chief responsible investment for over 20 years. I estimate ed public policies that would C. Clarke humbly observed: officer that more than $2trn of global price carbon emissions, or “I’m sure the universe is full of Principles for Responsible capital is invested according to boost substitutes, any of which intelligent life. It’s just been Investment impact principles. These prin could tank Exxon’s stock. The too intelligent to come here.” London ciples rest on transparency. line between engagement and dave glantz The International Sustainabil complicity is a fuzzy one, if it cdp runs the global disclosure ity Standards Board, the Secu is there at all. Or is investor Fairfax, Virginia system to help firms reduce rities and Exchange Commis engagement just another their environmental impacts. I sion and the European Union “greenwashing” to justify the Letters are welcome and should be agree that it is often hard to are pushing for the standardi opportunity to capture some addressed to the Editor at link products to progress sation of physicalimpact juicy returns? The Economist, The Adelphi Building, towards a sustainable, equita measurements. Big data, artifi 1-11 John Adam Street, London wc2n 6ht ble economy through esg cial intelligence and machine Also, the key goal of Email: [email protected] investing. That is because learning are enabling us to divestment strategies is not to More letters are available at: many of its aspects are seen measure and value physical drive up the cost of capital of Economist.com/letters impacts and integrate them high emitters. Instead, the idea into financial analysis and the valuation of companies. 012
16 Briefing Germany The Economist August 13th 2022 Schafft Deutschland das? technology and a country comfortable with asserting itself using its armed forces. BERLIN If things go right, Germany’s warspurred transformation may prove one of Vladimir The war in Ukraine is forcing Europe’s most important country to face challenges Putin’s biggest regrets. well beyond those of military prowess. They will be hard to handle But that is a big if. Much of germany’s success in recent the hilt, he said. It would punish Russia To be fair, not all the credit for Ger decades can be put down to staying with sanctions and pump up its own army. many’s newfound openness to change the course. Even its dramas were dramas of It would reverse its willingness—partly a should go to Mr Putin. Pressure had been continuity—as when, in 2015, Angela Mer policy of engagement through trade, partly building for years. Prosperous as they kel refused to change the country’s asylum opportunism—to depend on Russia for in were, Germans could see that their infra policy in the face of a huge influx of Syrian ordinate amounts of natural gas. structure was aching after decades of un refugees. “Wir schaffen das,” she said as derinvestment, that their industry was she held open the door—”We can handle The tough words opened up a much overdependent on exports to China, that this.” The muchquoted remark projected wider debate on the need to part from well companies struggled to find the right staff. compassion and confidence while offering worn paths, a debate in which almost Many felt longerterm challenges such as voters astute reassurance. Germany was nothing seems sacred anymore. The climate change and keeping the pensions strong and stable enough to cope with this Greens in Mr Scholz’s coalition seem will system solvent were being neglected. extraordinary development. There would ing to bite bullets on nuclearpower sta The poor showing of Mrs Merkel’s be readjustments, but no deep changes, tions and coal power. Conservatives talk of Christian Democrats in last year’s election nor serious costs. releasing the deficitspending caps that reflected the nation’s accumulated impa have hogtied public investment; titans of tience. The government that replaced hers The crisis brought on by Russia’s attack industry admit that yes, German business is the youngest and most diverse Germany on Ukraine this February is of a different will sink if it does not learn to swim in new has seen. This Ampel (”trafficlight”) co order. Olaf Scholz, who took over from Mrs and rougher waters. alition, so called because of the red, yellow Merkel last December at the head of a co and green of its three parties, started with a alition of social democrats, greens and lib If all the rhetoric is to be believed, a new strong agenda for domestic reform. Its talk erals, was quick to grasp the shift. Speaking Germany is emerging: one more pragmatic was of a greener, highly digitised “social just three days after Russian tanks rolled and less preachy, less selfsatisfied and market economy”. This was quickly over over the border he declared the arrival of a more decisive. It promises to evolve into a shadowed by the Zeitenwende. But ele Zeitenwende—a change in the spirit of the more selfreliant and more assertive loco ments of it are moving forward in step with times. Germany would support Ukraine to motive for an expanding European project, the drive to improve the armed forces and a global hub for new industries and green reshape the energy landscape. Six months on from the chancellor’s speech, his government’s record of moving 012
The Economist August 13th 2022 Briefing Germany 17 from words to deeds is not too bad. Germa Scraping the bottom 1 on the battlefield and take the initiative.” ny has sent money and arms of its own to Challenging though the increase in mil Ukraine’s government. It has provided fur Military spending, % of GDP 6 ther money through the eu and “backfill” 5 itary ambition is, the change in energy deals in which German arms supplied to United States Russia 4 policy carries bigger implications for the nato allies have allowed those allies to 3 domestic economy. Mrs Merkel’s various send more weapons to Ukraine. It is also France Britain 2 administrations not only let Russia’s share hosting close to a million refugees. Some 1 of gas imports reach 55%. They also ap 150,000 Ukrainian children are now regis Poland 0 proved the sale of refineries, gasstorage tered in German schools. 21 facilities and other crucial infrastructure Germany to Russian firms. They built no terminals Many, though, have found fault with as for liquefied natural gas (lng) tankers pects of this response. Though Germany 1989 95 2000 05 10 15 coming from more distant providers; they has sent money, others have sent more, es banned fracking, a technology that could pecially when measured as a share of gdp. Source: SIPRI have allowed Germany to exploit its own In Ukraine, there have been complaints gas reserves. Marketbased reforms to re that Germany was slow to get going and the legitimate tool for peace. “It is not talking newables funding damped the exponential long list of goodies it has given is domin about war that leads to war,” he said in a re boom of the early 2010s down into steadier, ated by obviously surplus and handme cent speech. “Closing your eyes to reality less dramatic growth. Nuclear power was down kit. There are signs that the German leads to war.” phased out in an illthoughtthrough re army, hollowed out by decades of under sponse to the disaster at Fukushima. spending, has been reluctant to part with So does an unwillingness to be serious what little it has. about defence. The part of Mr Scholz’s In terms of its stated aim of using mu speech that most heartened his nato allies tually beneficial trade to encourage change That said, a ploddingbutsteady ap was his pledge to crank military spending in Russia this was a complete bust. And it proach may see Germany helping Ukraine up to 2% of gdp, a goal which the alliance has left Germany in the embarrassing, in more than most over the longer term. Mil agreed on more than a decade ago but deed tragic, situation of funding Mr Putin’s itary aid has certainly accelerated. The ar which Germany has egregiously failed to aggression. Germany’s payments for fossil rival this month of the first Germanmade meet. In the mid2010s it was spending fuels have put some €18bn into Mr Putin’s mobile rocket launchers marked the most only just over 1% (see chart 1). pocket since his tanks rolled into fresh significant contribution yet from a country parts of Ukraine on February 24th, accord that for decades has routinely refused to A special fund of €100bn ($103bn) will ing to the Helsinkibased Centre for Re send weapons into a war zones. be used to increase spending on the armed search on Energy and Clean Air. forces from the €51bn in the 2021 budget to More red balloons needed an annual €80bn or so. Its first big dollops The anticipated difficulty of weaning When it comes to isolating the nonenergy are destined for the scrawny Luftwaffe, the country off Russian energy by the sum sectors of the Russian economy, the record which will be receiving 35 f-35 fighters mer of 2024, as the government hopes to is more consistent. Despite sanctions im from America in an $8.4bn deal. do, has provoked fears of catastrophic posed following Mr Putin’s annexation of deindustrialisation and popular uprising Crimea in 2014, at the beginning of this Increasing investment is not enough on in the press. So far, though, reductions year Germany remained Russia’s top for its own. “It is necessary to spend a lot of have been faster than expected and not eign investor, with some 4,000 German money on the Bundeswehr,” says Nico particularly painful. As Mr Putin has firms active there. More than 200 German Lange, a former chief of staff at the defence squeezed gas supplies, Germany has found firms continue to do business in Russia, ministry, “but what you really need to various replacement sources, often by out including Globus (supermarkets) and Fre change is its bureaucratic culture.” He says bidding other countries. The amount of senius (health care). But the vast majority the army has become deskbound. “We gas coming from Russia is now just 26% of have now closed operations and pulled out fuss about training Ukrainians to handle the total, according to the government. staff, going beyond what was made neces our ‘advanced’ weapons, when it is us who Storage facilities, which were at a very low sary by new eu sanctions because of con should learn from them how to improvise ebb before the war, have been filled to the cerns about safety, deference to public normal level for August. By early next year opinion and a belief it was the right thing Fortunes of war 2 the first of five new lng terminals should to do. This has hit investments, partner be on stream. ships and sales hard, blows which have Germany, voting intention in federal election, % been borne with little complaint. Reductions in demand are moving Election result 30 ahead. Big firms such as MercedesBenz Politicians, too, have upped their game. and basf, a chemicals giant, now say they The Green party has long had a strong pac CDU/CSU can make do with a lot less gas than they ifist streak, but it was nowhere to be seen initially thought; the carmaker says it has when Annalena Baerbock, the 41yearold 25 already cut its gas use by 10% and can get to foreign minister, one of the government’s 50% by the end of the year, though it does two leading Greens, told students at the The Greens 20 not specify how. The government plans to New School in New York that Russia’s “bru SPD launch an auction mechanism that will let tal war” is an attack on “freedom, democra firms offer reductions in gas use at a spe cy and human rights”. Mr Scholz’s own par 15 cific price, allowing the government to ty was long associated with a gosoftly ap find the most efficient options. To encour proach to Russia. Its previous chancellor, The Left AfD age frugality among domestic users, who Gerhard Schröder, in office at the turn of 10 are typically on longterm fixedprice gas the century, became a lobbyist for Russian contracts, the government will be charging interests after leaving office. Yet the party’s FDP a gas surcharge from October, while at the 44yearold current cochair, Lars Kling 5 same time promising further support for beil, bluntly describes military force as a the finances of hardhit consumers. 0 Both industrial and household gas SOND J FMAM J J A 202 2022 Sources: National polls; Wahlrecht.de 012
18 Briefing Germany The Economist August 13th 2022 consumption will also be cut by Germany’s selfsufficient. But with high prices for gas unlikely to make up for the shortfall. European neighbours (which have pledged and also for carbon emissions (which Industry also faces the problem of mar 15% reductions). Coupled with more gas means coal is not a cheap option) there are coming into Europe from sources such as large nearterm costs and a widespread kets for its manufactures. Russia is lost. Qatar, Algeria and America and a tempor fear that industries which have relied on The bdi, Germany’s industry association, ary switch back to coal for electricity gen cheap Russian gas, could be in real trouble. warned as long ago as 2019 of the need to eration that should enable Germany to get avoid overexposure to China. And the na through the winter without rationing and That need not be the case across the ture of the things the world wants is chang with minimal reliance on Russian gas—say board. As Monika Schnitzer of Munich ing as a result of the energy transition. 20% of the full capacity of the Nordstream 1 University points out, it is relative costs pipeline. If the winter is particularly cold, that matter, more than absolute ones. “If Take the beloved car industry. The though, or if flows from Russia cease com other countries face similarly high gas agreement which saw Tesla, an electricve pletely, further measures will be needed. prices, which in global gas markets will hicle maker, build a factory near Berlin was happen over time, production may well re hailed as a great success. But even if, de The energy crunch has put a spotlight main in Germany, especially of those pro spite the company’s predilection for verti on Robert Habeck, who as vicechancellor ducts that use both gas and technology.” cal integration, the factory boosts the for and minister for economic affairs is the se But an economy with a large chemical in tunes of some suppliers, it will bring little nior Green in government. The war has dustry and a dependence on manufactur cheer to the country’s network of highly provided strong tailwinds to the Greens’ ing cannot look at higher energy prices skilled engineering companies devoted to ambitious plans to expand renewable ca with equanimity. the intricacies of the internalcombustion pacity in Germany, and Mr Habeck is using engine. And their own car companies are the crisis to overcome political resistance German manufacturing is no longer moving in a Teslalike direction—and thus to those plans in states governed by the growing in absolute terms. But in 2019, be in need of batteries Asia knows how to Christian Democrats. In July the upper fore the pandemic, it still accounted for al make cheaply, not fuel injectors Germany chamber of parliament (in which the states most 20% of gdp, compared with 11% in knows how to make exquisitely. are represented) approved a package of America and 9% in Britain. Though econo measures to speed up planning, approval mists expect the economy to shift further Hopes for growing tech clusters around and construction of greenenergy projects towards services, its industrial character the Tesla factory, and in the “Silicon Junc he had brought forward. will persist. As Jens Südekum of the Uni tion” near Magdeburg (also in the east) versity of Düsseldorf puts it, “Germany’s where Intel, an American chipmaker, is Mr Habeck has been helped by his will services will not be the new Facebook, but spending €17bn on a semiconductor fab, ingness to be pragmatic, as in the tempor rather services closely tied to manufactur may be borne out. Further foreign invest ary reopening of mothballed coalburning ing, like the internet of things.” ment may follow. But the economic bene power stations. He has not yet buckled on fits will not necessarily flow to Germany’s longstanding plans to shut down the last But transforming an industrial econ settled manufacturers. Wrenching change three nuclear plants in December, a move omy requires digital skills, and there Ger of the sort the country has largely sought to which will reduce electricity supply by 6%. many has lagged behind. Mrs Merkel was avoid will be the order of the day. That said, But with his own popularity high, with calling the internet “new territory” as late European efforts to “friendshore” existing European allies pleading for such action as 2013. While the availability of broadband supply chains away from China are bound and with polls showing that some 80% of and highspeed mobile connections has to benefit some German manufacturers. Germans, including a majority of Greens, improved, the integration of digital tech favour keeping the plants open for at least nologies into businesses or public admin The importance of enemies a few more months, giving in on this issue istration remains unimpressive. A key Germans may well forgive their politicians looks like a nobrainer. challenge in this, as many other areas, is a for privations closely connected to the war. lack of qualified staff. Germany’s working Recent polling shows strong majorities re Germany thus seems well on its way to age population is on course to shrink faster main in favour of sanctioning Russia and expanding its roster of energy suppliers, in the current decade than that of any other sending arms to Ukraine. But among the making it less strategically vulnerable. In major economy save South Korea. Even coalition partners only the Greens are see the long run more renewables, and a tran with high immigration, which Germany ing growing support. Mr Scholz’s ratings sition away from natural gas to hydrogen now, in another sign of its turn to pragma and those of his party have steadily dwin made by electrolysis, may make it more tism, plans to encourage, the country is dled since February (see chart 2). Suppor ters of its third part, the Free Democrats, are increasingly defecting to the Christian Democrats. A sense of national purpose is already being undermined by squabbling as to the respective roles of the federal gov ernment and the states in reducing gas de mand and the siting of wind turbines and transmission lines. Constanze Stelzenmüller of Brookings, a thinktank, feels confident that Germany will not slump back into old habits. The Zeitenwende is real, she believes, and the government is working allout to make it happen. But she adds a caution. “It is real because of Putin and the fact that he is not going to stop,” she says. “If this had been a oneweek war, things might be different.” It may be that, for Germany to make a sus tained commitment to change, a sustained challenge is needed. n 012
United States The Economist August 13th 2022 19 → Also in this section 20 Primary elections in Minnesota 21 Flying with guns 21 The promise of mass timber 22 What next for America’s far right? 24 Lexington: The raid on Mar-a-Lago The Democrats’ tax-and-spend bill from Kyrsten Sinema, a Democratic sena tor from Arizona, who refused to back a bill And now for my next act that would lead to higher tax rates. WASHINGTON, DC So the party settled on a workaround: a new 15% minimum tax on book income re Joe Biden’s signature legislative proposal is on track to become law, at last ported by companies with profits of more than $1bn. Many tax experts are highly crit “This has been decades in the making, stalled in Congress due to intransigence ical of this new levy. Book income is con and it will reshape the decades from the right (not one Republican senator ceptually different from income as report ahead.” That is how Fred Krupp, a longtime voted for the ira on August 7th) and was ed to tax authorities; taxing two separate champion of congressional action on cli whittled down by oldstyle centrist Demo statements of income will add complexity mate change as head of the Environmental crats, in particular Joe Manchin, a senator to America’s overburdened tax system. Defence Fund, a green group, describes the from West Virginia. Last month Mr Man Inflation Reduction Act (ira). Mr Krupp chin appeared to scuttle bbb altogether. Still, the tax reform deserves praise for and his fellow advocates have watched raising muchneeded revenue. Nonparti every bold American climate proposal of Then came the shock. On July 27th he san analysis suggests it will cut the federal the past few decades flop. Now they have and Chuck Schumer, the Democratic leader budget deficit by a cumulative $300bn over real grounds for optimism. in the Senate, revealed that secret negotia the coming decade (see chart 1). The exche tions had led to an agreement on a slimmer On August 7th the Senate passed the version of bbb that would tackle the cli Saving grace 1 ira; the House of Representatives is ex mate and health care, and jettison much of pected to follow suit within days. Once law, the rest. Besides providing green subsi United States, forecast budgetary impact of the act will shower $369bn of subsidies dies, the ira will reduce the cost to the el Inflation Reduction Act, $bn and tax credits over the course of a decade derly of some prescription drugs, and raise on renewable energy and electric vehicles, taxes on some big American firms. Health insurance Tax revenue Net deficit hydrogen hubs, carbon capture and stor reduction age, and more. It is the largest package of The ira is a big deal, even if each of its Energy security Savings on climate spending in American history. victories was clinched only with big trade & climate change drug prices 100 offs. Start with the portion that involved For months President Biden’s landmark some of the largest compromises: tax re ↑ Spending 50 policy proposal, initially known as Build forms. In Democrats’ original conception Back Better (bbb), looked doomed to fail. of bbb, tax provisions were nearly as im 0 Only a year ago Democrats had hoped to portant as spending commitments. The pass a package of climate and energy poli goal, on which Mr Biden campaigned, was ↓ Revenue & saving -50 cies, healthcare reforms and social pro to raise taxes on big companies and the ve -100 grammes costing $3.5trn over a decade. It ry wealthy. But that ran into opposition -150 2023 24 25 26 27 28 29 30 31 Sources: CBO; Joint Committee on Taxation; Moody’s Analytics 012
20 United States The Economist August 13th 2022 quer may raise twice that amount from Out of thick air 2 crats including Nancy Pelosi, the House both the reform of drug pricing and impo Speaker, who condemned her for equating sition of the 15% tax. United States, forecast change in greenhouse-gas American misdeeds abroad with those of emissions under IRA relative to current policy the Taliban. All of this Ms Omar has sur That points to a second reason to ap Gigatonnes of CO equivalent vived and, to some extent, thrived on. plaud the ira. For decades the only cor porate lobbying group in Washington 2024 2026 2028 2030 2032 2035 0 But on August 9th it was a local fight more powerful than Big Oil has been Big that came close to undoing her: one over Pharma. During his term Mr Trump sur Transport -0.5 policing and crime, hot issues in the prim prised many by vowing to rein in drug pric Power -1.0 ary race for nominee of the Democratic es, but largely failed. Despite attempts by Industry -1.49 FarmerLabour Party (dfl), Minnesota’s congressional leaders in both parties to Buildings DemocraticParty affiliate. When protests tackle runaway drug prices, the industry Other erupted in Minneapolis in 2020 after the undermined every big reform. No longer. murder of George Floyd, a 46yearold un 20 0 Biden target armed black man, by a local police officer, The ira gives Medicare, the giant gov Ms Omar backed nine of the city’s 13 coun ernment health scheme for the aged, the Source: REPEAT Project cil members in calling for the police de power to negotiate the price of some high partment to be abolished. She argued that cost drugs for the first time. If drug prices 35% in that timeframe. The new law should “you can’t really reform a department that for Medicare rise faster than inflation, reduce them by about a third to 44%. is rotten to the root”. firms will now be forced to issue a rebate. The law will cap copayments and elimi Perhaps most encouragingly, the ira Ms Omar has maintained that stance— nate coinsurance costs for Medicare re should be politically durable. Paul Bledsoe even after a referendum in Minneapolis cipients, and extend some healthcare sub of the Progressive Policy Institute, a think roundly rejected a proposal last November sidies. Tricia Neuman of the Kaiser Family tank, reckons the tenyear tax credits are so to replace the police with a new depart Foundation, a healthcare thinktank, says popular with firms and investors that they ment of public safety. Her primary rival for it is “hard to overstate” the significance of are “very unlikely” to be repealed even if the dfl‘s nomination, Don Samuels, is a the drugs provisions: in overcoming fierce Republicans control the White House and 72yearold former council member who, industry opposition, achieving the first big Congress come 2024. The bill’s reforms en unlike Ms Omar, has almost no digital Medicare reform in over a decade and lo joy broad support from voters of both par presence. Mr Samuels ran on a toughon wering the cost of pricey drugs. ties, polling suggests; in the long run it is crime message and, to the surprise of expected to lower households’ energy bills. many, came within two percentage points The vote heard round the world of unseating her. The third reason is perhaps the most po If the ira kickstarts a cleanenergy rev werful: at the heart of the ira is a bold at olution at home, abroad it already signals The tight race was just one indication of tempt to turbocharge America’s cleanen that America takes seriously its leading how crime and policing continue to unset ergy transformation. True, the bill is all role on the climate. For years, says Mr tle Minnesotan politics more than two carrot and no stick: it lacks a national plan Krupp, the country was seen as “all talk and years after Mr Floyd’s murder. Minneapolis for carbon pricing or a mandated cap on no action”. It looked set to show up empty has long been one of America’s most left greenhousegas (ghg) emissions. But an handed to the un’s next climate summit, in leaning cities. But since the spring of 2020, exception to that is a fee that will be levied November in Egypt. Now, hopes Heather violent crime has soared. In 2021 it record on methane emissions from oil and gas op Zichal of the American Clean Power Asso ed 93 murders in a population of just erations. Lindsey Griffith of the Clean Air ciation, a trade group, this will be “the vote 425,000, double the number in 2019. Other Task Force, an advocacy group, expects this heard round the world”. n rates of violent crime, including carjack relatively high fee will be “critically impor ings, have risen even faster. tant” in mobilising the energy industry to Minnesota’s primaries tackle emissions of methane, a potent Meanwhile the police, having lost many greenhouse gas. Cops, robbers officers to early retirement, is now 100 shy and votes of the legal minimum required by the city’s Crucially, the ira replaces the stopgo charter (Mr Samuels had led an effort to tax credits, which have hitherto hobbled MINNEAPOLIS sue Minneapolis over this). Taken togeth the development of renewable energy, er, this helps explain the result of the refer with tax credits that offer ten years of poli Crime and policing continue to endum pushed by the council. Unusually cy certainty. Christopher Seiple of Wood split Democrats among American cities, the council then Mackenzie, a consultancy, estimates that held more sway than the mayor; it was sub the ira will boost total spending on renew Since entering Congress in 2019, Ilhan sequently stripped of many of its powers. ables by $300bn by 2035 compared with Omar has become one of the best known current policies, to $1.2trn. Wellcrafted and most divisive figures on the American The dfl is now split on the issue of subsidies for nuclear power will extend the left. Ms Omar represents Minnesota’s fifth crime. Ms Omar won the party’s endorse life of many plants, which produce carbon district, which covers the city of Minne ment. But Mr Samuels was backed by Jacob free energy and a fifth of America’s power. apolis and some of its suburbs. She came to Frey, the mayor of Minneapolis (who op America from Somalia as a refugee, and is posed the referendum), as well as several The upshot will be a significant reduc one of only three Muslims in the House of suburban mayors and various trade un tion in climaterelated emissions. Mr Bi Representatives. During her few years in ions, which are influential in the state. den had made a bold promise to reduce Congress, she has picked fights with Do Moreover, the race for the fifth district was America’s ghg emissions by 2030 to half nald Trump, who has questioned her citi not the only one in which crime was a cen their level of 2005. The ira alone will not zenship; the American Israel Public Affairs tral issue. For the first time in two decades, fulfil that, but it will help America get most Committee, a lobbying group that accused voters were asked to pick candidates for of the way there (see chart 2). Modelling by her of antiSemitism; and fellow Demo the district attorney of Hennepin county, the Rhodium Group, a consultancy, finds which covers Minneapolis and a large that businessasusual would have re chunk of its suburbs. The dflbacked can duced annual emissions by a quarter to didate, Mary Moriarty, is a former public defender whose campaign focused on 012
The Economist August 13th 2022 United States 21 holding the police accountable. She won Mass timber ing. Can mass timber—strong, light and 36% of the vote in the primary on August fireresistant—give the sector a boost? 9th, a substantial plurality. Yet all six other Seeing the wood candidates ran on a tougher message. for the trees Since its invention in Austria in the 1990s, mass timber has been used exten In November’s general election, Ms Mo PORTLAND, OREGON sively in Europe. But it has only recently riarty will face Martha Dimick, a black for caught on in America: 1,500 masstimber mer prosecutor and judge from north Min A new sustainable building material structures have been built or planned since neapolis, a largely black area. Ms Dimick may help revitalise forests 2015 (when the country’s national building says that police reform is vital, but that Ms code approved the material), up from the Moriarty is too divisive to achieve it, and America’s pacific northwest was 23 that existed in 2013. In July a 25storey has lost sight of what the city needs most: a largely built on timber. But the indus block in Milwaukee was certified as the response to violent crime. “We are going to try lost an estimated $1.8bn in 2020, so world’s tallest masstimber building. do something with these children that are oncebustling towns are scrambling to running around carjacking everybody with find alternative sources of income. Some Such buildings are much greener to guns,” she says. Like Mr Samuels, Ms Dim are pinning their hopes on what can be a erect than those made from energyinten ick has the mayor’s endorsement. more sustainable use of the material: sive steel and concrete. Mass timber is “mass timber”, small sections of wood held made from newgrowth trees, which are Last month the Biden administration together with resin or a similar binder. usually the result of plantings and more said it had set aside funds to hire 100,000 quickly reach their age of use. It helps keep police officers across America. The plan Big logging firms have pushed the small “working forests working”, says Marcus was immediately denounced by some on ones out of timber towns. Poorly managed Kauffman of the Oregon Department of the left, including the American Civil Lib wildfires have ruined trees that might have Forestry. Masstimber projects are the erties Union, an advocacy group. As long as been used for products. And green groups main beneficiaries of $32m earmarked for worries about crime stay high, it seems have raised the alarm about overharvest woodrelated innovations and grants in bound to keep dividing Democrats. n President Joe Biden’s infrastructure bill. Flying with guns Sustainability is a big part of the appeal. Forests are made more resilient by cutting Oops, I did it again small trees and brush that do not have mar ket value, says Mr Kauffman. Yet masstim AT L A N TA ber’s suitability for affordable housing and rapidly deployable shelters means the sec More people are trying to take their weapons on planes tor can expect robust demand, he says. In 2020 Oregon said the masstimber indus Hartsfield-Jackson International decreased by only 27%. This might sug try presented “unique opportunities” for Airport, south of Atlanta, is, by pas gest that quieter airports enabled agents highwage jobs and “statewide prosperity”. senger numbers, America’s biggest. to catch a higher share—so in normal Flying through it offers a quintessen times, a worrying number of guns may Environmentalists, including Laurie tially American airport experience. At the be making it onto planes. In 2021 the Wayburn of the Pacific Forest Trust, a con security checkpoint, where in other number of guns caught at airport checks servation group, worry that a booming sec countries signs would remind you to hit a record just shy of 6,000, more than tor may eventually do more to degrade for discard liquids, televisions display a twice as many as in 2015. ests than protect them. But for now, Ms revolving 3d image of a handgun. Pas Wayburn too thinks mass timber holds “a sengers are reminded in large lettering According to Mark Howell, a tsa lot of promise”. The material strikes her as that no weapons are allowed in the con spokesman, most guns found are a case “a great blending of commerce and com course. For guns to be transported, they of “oops, I forgot” rather than any sinister modities and conservation”. n must be checked as baggage, unloaded, intent. They crop up far more often in and locked in a dedicated container. states with loose gun laws. People in Lodgepole pine for lodgings Georgia or Texas often carry a gun as Atlanta’s airport also holds a less others carry their keys. Roughly 90% of desirable accolade: as the airport where firearms found are loaded. When pas the most Americans are caught trying to sengers are stopped by tsa agents, they bring guns through security. In 2021 are fined (sometimes several thousand Transportation Security Administration dollars) and handed over to police, who (tsa) agents found 507 guns in pas see if they have broken any local laws. sengers’ hand luggage, a record. In the first six months of this year, another 200 In Atlanta, police now simply direct were caught—a slight dip on the same passengers to return any guns to their period last year. More visible signage in cars, or to check them in as luggage. In the airport may have helped. April Brian Kemp, Georgia’s governor, signed a “constitutional carry” law, al Across America, the number of guns lowing people in the state to carry a found each year has been rising sharply. concealed weapon without a permit. As a Occasionally weapons even scarier than result, local police can no longer con guns are intercepted. In 2019 officials at fiscate weapons found by tsa agents at BaltimoreWashington airport found a the airport, or even compel owners to rocket launcher in the luggage of a Texan submit to questioning. “We are working man flying home from Kuwait. In 2020, on it,” Darin Schierbaum, Atlanta’s inter even though the number of passengers im police chief, told the city council in flying in America fell by 60% compared June. Some might worry it is only a mat with 2019, the number of guns found ter of time before one goes off in the air. 012
22 United States The Economist August 13th 2022 The far right 1970s to People’s Rights and the attack on the Capitol on January 6th 2021. Some 50 Extreme goes mainstream years ago a coalition of ranchers, miners, loggers, oilmen and officials in western DE NVE R , CO LO RADO, AND S AND PO INT, IDAHO states were radicalised by opposition to new landmanagement laws that they Right-wing extremists are adapting to a post-Capitol-riot America—by pushing viewed as a land grab by the federal govern into politics ment. Mr Bundy’s father, Cliven, counted himself among those “Sagebrush” rebels. About 15 people file into a sunny real voters who attended a recent campaign For 20 years he refused to pay fees for graz estate office in Denver, take their seats event for Mr Bundy in Sandpoint, Idaho, a ing his cattle on federal land. and face the front as if ready for a lecture. small town that is an hour’s drive south of The next three hours are part sermon, part the Canadian border. Here, participants In 2014, when the feds arrived to confis support group for conspiracy theorists. At complain about federal overreach, “ex cate his cows, militia members from tendees discuss events and concerns that treme environmentalists” and the main across the country assembled at Bundy preoccupy them. By their account, the stream media. “Am I an extremist?” one Ranch to resist what they viewed as federal World Economic Forum wants to lead a woman asks, rhetorically. “I don’t know!” overreach bordering on tyranny. Jason Van global government; Colorado's primary Tatenhove, a former spokesman for the elections were rigged; the pope, and possi Mr Bundy’s evolution from militia lead Oath Keepers, recently told the House bly Joe Biden, are holograms; and society is er to candidate for governor reflects a committee investigating the January 6th only ever two weeks away from collapse. merging of the far right with electoral poli riot that Oath Keepers were among the mil tics. Rather than fomenting insurrection, itants who showed up. Mr Bundy tried to The gathering is a local meeting of Peo many extremists have adopted a new men replicate the standoff two years later by ple’s Rights, a network for those who fear tality: if you can’t beat them, join them. occupying a wildlife refuge in eastern Ore that their individual rights are being erod gon to protest against the imprisonment of ed by America’s federal government. It is The origins of political disorder two ranchers. the brainchild of Ammon Bundy, a candi The far right in America is a decentralised date for governor in Idaho who is best network of groups and militias, not a co It was probably not a deep passion for known for having led armed standoffs herent movement. Factions differ in sub ranching that brought the Oath Keepers to against the federal government at his fam stance and style. The Oath Keepers recruit Nevada. Militias “are looking for the photo ily’s ranch in Nevada in 2014 and at a wild current and former police officers and sol op where they can be in a confrontation of life refuge in Oregon in 2016. The main sell diers to their ranks; the Boogaloo Bois are their choosing, on their terms”, says James ingpoint of the group, which Mr Bundy set hostile to law enforcement; the Proud Boys Skillen of Calvin University, who has writ up in 2020, is its dialamilitia function: if are street brawlers; People’s Rights often ten a book about the Sagebrush Rebellion a member feels threatened, he or she can looks for justification for its actions in the and its heirs. The confrontation, he adds, summon compatriots for help. constitution or religious texts. These dif should prove “that the federal government ferences affect how each group operates. is the aggressor”. Charles Tappan, who led the meeting, People’s Rights members in Denver, for ex disavows Mr Bundy, and argues that the ample, are more likely to attend a meeting Mr Bundy keeps a small copy of the con group is more interested in preparing for than make mischief on farright websites stitution in his shirt pocket, and often three scenarios—a globalist world take such as 8kun. reads aloud from it to defend his beliefs. over, alien invasion or the Rapture at the On a break from driving his campaign bus end of times—than taking up arms against Yet many militias have been inspired by around Sandpoint, he explains that Peo the feds. Yet the conspiracies being voiced the same events. A straight line can be ple’s Rights aims to systematically dupli in Denver are similar to the concerns of drawn from the Sagebrush Rebellion of the cate the calltoarms his family sent out from their ranch in 2014. There seems to be a growing constitu ency for militiasondemand, although private militias are banned in all 50 states. In 2021, one year after its founding, Peo ple’s Rights boasted at least 33,400 mem bers in 38 states, according to the Institute for Research & Education on Human Rights (irehr), a research group that stud ies the far right. A chilling poll from the University of Chicago’s Institute of Politics recently found that 38% of conservatives agreed it may soon be necessary to take up arms against the government. Covid19 provided a rare opportunity for disparate militias to rage against the same thing. Farright groups rallied around the idea that government officials were trampling on their individual free dom by imposing mask mandates and lockdowns. Mr Bundy says that fighting pandemic restrictions was the push he needed to start People’s Rights two years ago. Despite his penchant for leading armed militias against federal officials, Mr Bundy professes to be an “introvert” who 012
The Economist August 13th 2022 United States 23 just wants to be left alone. “The covid for People’s Rights.’” analysis of leaked Oath Keepers records comes around and you realise that they’re January 6th marked a turningpoint for suggested that at least 28 elected officials not going to leave us alone,” he says. “I had ties to the group. would love to just stay on my property and farright militias. In Nevada and Oregon grow my garden and take care of my family. the Bundys beat the charges levied against They may not be the only ones. A recent But it’s not the first time people have had to them. But hundreds of rioters have been irehr investigation combed through the leave the fields to go and pick up a sword.” held accountable for their assault on the Facebook profiles of all 7,383 state lawmak Capitol. By August 10th at least 226 people ers in 2021 and 2022. Researchers found The Armed Conflict Location & Event had been sentenced for taking part in the that 12% of all legislators, and 22% of Re Data Project (acled), which tracks political attack, according to the Department of Jus publican ones, belonged to at least one far violence around the world, has identified tice. Their sentencing fed paranoia among right Facebook group. nearly 4,000 protests against covid con rightwing groups, leading many to tem straints across America since 2020. The ex porarily halt their protests. acled noted a This cohort has sponsored a smorgas tremists who plotted to kidnap Michigan’s steep decline in farright violence after bord of bills that aim to limit governments’ Democratic governor, Gretchen Whitmer, January 6th. publichealth powers and restrict voting in 2020 were motivated by opposition to rights, among other things. Many bills sup pandemic restrictions. Laboratories of autocracy ported by these legislators have become Extremist groups did not go completely law. And the study probably does not cap Some 228 different militias, mostly dormant, however. Mr Burghart suggests ture all state lawmakers with farright rightwing, have organised 2,335 events ov that they reached the height of their re views, as some may use other socialmedia er the past two years (see map). Many of cruiting prowess before the riot, and are sites or messaging services, such as Gab them were protests against covid rules, or now preparing for a new phase. For many, and Telegram. rallies for Donald Trump’s “Stop the Steal” that includes taking part in mainstream campaign. Perhaps the most obvious fore politics—not from behind a police barrier, The types of bill sponsored by farright shadowing of the riot on January 6th was but through the ballot box. lawmakers provide clues to the next issue the involvement of farright extremists in that could galvanise militias in the way op at least 39 armed demonstrations at legis Until recently there were two distinct position to covid19 restrictions did in lative facilities in the 12 months before the wings of the farright movement: a para 2020. In June, 31 members of the Patriot insurrection. military cohort that uses violence and in Front, a violent hate group, were arrested timidation to get what it wants, and a more in Idaho for plotting to riot at a local lgbt Where People’s Rights was set up to mainstream crowd that participates in pol pride celebration. In pursuing “parental combat perceived federal overreach, other itics. But the gap between these wings is rights”, farright activists aim to gain con militias were formed in response to the narrowing. Mr Bundy is not the only mili trol over what their children are taught in elections of Barack Obama and of Mr tia leader trying to bridge the divide. Mark schools. Aaron Weiss, deputy director of Trump. Mr Obama’s ascent to the presiden Finchem, who admitted to being an Oath the Centre for Western Priorities, a conser cy, and the global financial crisis of 2007 Keeper in 2014, is the Republican candi vation group, worries that fights over water 09, agitated many white men who were an date vying to be Arizona’s top election offi in the West could escalate to armed stand gry at the ways in which America was cial. Indeed, last year a Buzzfeed News offs. Common to many farright extremists changing. The Oath Keepers and the Three is disdain for environmentalism. Percenters, another militia, were formed On manoeuvres in 2009 and 2008, respectively. If involvement in local politics does not United States, events by militia groups, 2020-22 bring about their desired changes, militia Among the most striking aspects of the members have suggested they will pull evolution of rightwing militias in recent By political ideology away from politics. Rather than a civil war years has been their rejection of antigov or a revolution, Mr Bundy envisages a “sep ernment principles in order to embrace Mr 40 aration” from civil society of his acolytes Trump. But Devin Burghart, the executive and others like them. It is already happen director of irehr, argues that “antigov Far-right Other 10 ing, to some degree. Disaster “prepping” ernment” is a misnomer. “They have al has long been fashionable among right ways had a vision for government,” he Selected militias People’s Rights wingers, and that impulse has only inten says, “but their vision has always been Oath Keepers sified since January 6th. People’s Rights about them controlling it.” members in Denver discussed planting Proud Boys Three Percenters community gardens and subsistence farm At key moments Mr Trump gave mili ing to become more independent. Some tias the impression that someone sympa Source: ACLED seek “safe havens” in case of electricity thetic to their beliefs was finally in power. blackouts. But it is not hard to imagine less He said, for instance, that there were “very extreme forms of dissociation happening fine people” at a whitesupremacist rally in more widely as the politics of red and blue Charlottesville, Virginia, in 2017; he told states increasingly diverge. the Proud Boys to “stand back and stand by” in 2020. The insurrection on January Mr Bundy has a slim chance of becom 6th was a lastditch attempt to keep Mr ing Idaho’s next governor. Brad Little, the Trump in power, and thereby preserve incumbent, easily beat his Trumpen many militias’ vision for government. dorsed rival in the Republican primary in May. To skip the primary, which he almost Mr Bundy was not at the Capitol on Jan certainly would have lost, Mr Bundy decid uary 6th; he prefers local uprisings to the ed to run as an independent, despite his national sort. But he admits that his antics professed affinity for the Republican Party. in Nevada and Oregon probably embold His support among the fringe offers a ened those who flocked to Washington. warning of how quickly things are shifting. And the riot was useful to him. “People “Probably three years ago I wouldn’t have were going there with or without me,” Mr been a viable candidate,” Mr Bundy tells his Bundy says. “So I said, ‘Hey, if you’re going audience in Sandpoint. “But I am now.” n there it’d be a great opportunity to recruit 012
24 United States The Economist August 13th 2022 Lexington Utmost gravity How the raid on Mar-a-Lago could shake America’s foundations “Another day in paradise,” Donald Trump cheerfully observed campaign. Instead, he would have even greater reason to foment after fbi agents raided his home in Florida as part of a crimi distrust and even hatred of the American legal system, as well as nal investigation. There is no reason to assume he was being sar the administration of President Joe Biden. castic. The raid had conjured a Trumpian Eden: the nation’s eyes were riveted upon him once again; Republican legislators who Even a speedy trial and conviction would be less likely to bar a had been edging away rallied behind him, as did potential rivals Trump candidacy than to start more rounds of litigation. The con for the Republican presidential nomination; some of his suppor stitution, which spells out the qualifications for serving as presi ters were again calling online for a civil war to defend their cham dent, is silent on the question of a criminal record. This is a hypo pion. Mr Trump was able to present himself in his favourite light, thetical scenario, but not a farfetched one: America faces the pos as the victim of dark, partisan forces out to protect the establish sibility of an indicted or convicted candidate winning a presiden ment by dragging him down. Having trashed the fbi and Depart tial election while campaigning against the rule of law. Or, maybe ment of Justice for years, he had prepared not just his core believ worse, losing that election. You do not need to rely on speculation ers but probably half the country to suspect that the rule of law was to picture what that would look like. being undermined, not honoured. Yet maybe the raid will yield such damning evidence that even For these reasons and more, the raid is a nightmare for Ameri the Republican legislators who are threatening to investigate Mr ca. Merrick Garland, the attorneygeneral, would have anticipated Garland will instead repudiate Mr Trump at last. Or maybe one of that. He is a painstaking former prosecutor and judge—too pains the many other lines of inquiry into Mr Trump’s doings, or their taking for many Democrats who, just as Republicans claim, are cumulative weight, will have that effect. Mr Trump is under inves quivering to see Mr Trump prosecuted. If Mr Garland made the de tigation in Georgia and New York. The raid appears to stem from cision himself to proceed, as seems likely, he must have conclud an investigation into how he handled classified information; the ed that legal considerations left him with no choice. Justice Department is conducting a separate investigation into his flailing to cling to office. But if so the Justice Department’s determination to keep things on the level is playing into the hands of a man for whom nothing is Do not hold your breath. Lawmakers who crawled back to Mr on the level. Mr Trump’s power to warp reality is so great that en Trump after the January 6th insurrection are not likely to abandon forcing the law against him may actually help wreck the republic. him over a crime like making off with classified documents, par Having withstood his attempts to steal the election, America’s ju ticularly given a president’s vast power to declassify information. dicial system could be in for a ferocious assault. And Mr Trump, who studied under the ruthless redbaiting attor ney Roy Cohn, has shown how slippery he can be. Michael Cohen, There are precious few facts about this investigation to rely another former lawyer to Mr Trump, testified to Congress that he upon; much of what is known comes from Mr Trump. This column acted “like a mobster”, not giving direct orders that might impli is going to be speculative, maybe annoyingly so. For once, though, cate him but speaking “in a code”. The president who had the fore speculating how bad things might become is responsible, rather sight to bar the White House photographer from his presence on than frivolous. Mr Trump has again and again broken through the January 6th, and leave no trail of telephone calls that day, seems boundaries of the American political imagination. unlikely to have left incriminating evidence lying around Mara Lago. For a man so zealous in pursuit of his selfinterest, that Mr Trump was already expected to run for a second term as would be an astonishing lapse. president. He seems certain to do so now. Imagine that the raid yields evidence of criminality, leading to his indictment. Nothing Mr Trump dines out in the former president’s history would suggest that, out of some One warm evening in 1999, Donald Trump stepped out of a famous sense of propriety, let alone shame, he would then suspend his restaurant, Sylvia’s, on Malcolm X Boulevard in Harlem. Word had spread that the famous developer was eating there, and a large, ex cited crowd had gathered to greet him. He had been feted all eve ning by tv stars, financiers and former ballplayers. The stakes seemed lower then, before the attacks of September 11th 2001, and his boasting and lies came off as funny, even roguishly charming. As Lexington, in those days a writer at a different publication, followed Mr Trump into the crowd and towards his limousine, he called out the question that had been on his mind all night: what was it about Mr Trump that drew people to him like this? “I don’t think about it…” he called back over his shoulder, with a grin. “Whatever it is, it is.” All these years later, the answer is obvious. The force is Mr Trump’s own desperate need, his vaulting narcissism. That is now the mightiest force in America’s public life, the black hole at the centre of its politics. It has warped the principles of the Republi can Party, yanked the Democratic Party off balance and ripped rep utations away from oncerespected men and women. It is tearing at America’s governing institutions. The raid on MaraLago may have been necessary to serve justice. A prosecution may eventual ly prove necessary as well. The hope is that the rule of law has weight enough to survive the contest. n 012
The Americas The Economist August 13th 2022 25 → Also in this section 26 A Cuban conflagration 27 Bello: Authoritarian Guatemala Inequality by global standards, is only slightly more severe than in other parts of Latin America. The jet set and the rest The region is the world’s most unequal, along with subSaharan Africa. Figures BUENOS AIRES from the World Inequality Database, over seen by Thomas Piketty, an economist, Inequality in Latin America is fuelling populist politics provide estimates of top incomes based on tax data. They show that the richest 1% of On august 7th Gustavo Petro was typical poor Colombian family to reach the Latin Americans capture 25% of their sworn in as Colombia’s president. He is country’s average income, according to the countries’ national incomes, compared the first leftwing politician to hold that of oecd, a club of mostly rich countries. That with 18% in the United States (see chart 2 fice. Together with his vicepresident, is more than double the average in the on next page). In much of the region the Francia Márquez, a humanrights activist oecd (see chart 1). “Equality is possible if rich have recently become relatively rich and environmental lawyer (and the first we are able to generate wealth for all,” de er. In Mexico the share of income earned AfroColombian to have the job), Mr Petro clared Mr Petro at his inauguration. by the richest 1% rose by more than ten per campaigned on promises to redistribute centage points between 2000 and 2019. wealth from Colombia’s richest to its poor Colombia’s inequality, though unusual est, to expand public education and to Across much of Latin America income scrap all new oil exploration in the coun Catching up is hard to do 1 inequality fell during the 2000s, thanks try. “We will cease to be one of the most un largely to high commodity prices and rapid equal societies in the world,” his pro Number of generations needed for the growth that allowed governments to insti gramme declared. The radical message descendants of someone with a low-income tute relatively generous social pro worked: in June’s election he was backed background* to reach the average income level grammes. But a subsequent decade of low by 11m people, or 50.4% of voters. 2018 growth, coupled with the pandemic, re versed many of these gains. The Inter It is not surprising that many Colombi 0 3 6 9 12 American Development Bank says that Gi ans are fed up. The country’s Gini coeffi Colombia ni coefficients rose by 68% in Colombia, cient, which measures how income is dis Peru and Bolivia between 2019 and 2020. tributed in a country—zero implies that it Brazil Losses of jobs and incomes have been big is shared equally and 100 implies that one ger among the poorest households. Ac person scoops up all the nation’s income— Argentina cording to the Economic Commission for is, at 54, higher than almost anywhere else Latin America and the Caribbean (eclac), a in the world. At current levels of social mo Chile un agency, the number of people who are bility, it would take a whopping 11 genera extremely poor—meaning they are unable tions for the descendants of parents in a OECD† *Bottom 10% of the income distribution to buy enough basic food—rose by 5m from †Based on 2 member countries 2020 to 2021, to 86m. Source: OECD Even before covid19, the region’s yawn 012
26 The Americas The Economist August 13th 2022 ing inequality contributed to huge and, at Re: distribution several attempts to raise it. Many people times, violent protests in Chile and Colom- and companies do not pay what they owe: bia. This summer the biggest demonstra- Pre-tax income earned by top 1%, 2021 2 according to the latest estimates by eclac, tions in more than 30 years took place in % of national income Latin America lost revenues worth around Panama, one of Latin America’s most 6% of gdp in 2018 to tax evasion and avoid- stable countries. Inflation was the trigger 0 5 10 15 20 25 30 ance, the equivalent of $325bn. but inequality was one of the protesters’ main grievances. Mexico Governments have taken some steps to address these problems. In 2013 Mexico Its significance is also increasingly evi- Chile overhauled its telecoms sector to spur dent at the ballot box. Along with Mr Petro competition. By 2017 prices in mobile several broadly leftist leaders have been Brazil broadband had fallen by 61%. Chile beefed elected in the past year. In March Gabriel up its antitrust regulator in 2016. Since the Boric, a 36-year-old former student leader Latin America mid-2000s, several countries have set up and protester, was inaugurated as Chile’s Argentina independent commissions to tackle cor- most left-leaning president in 50 years. ruption, which accentuates perceptions of Last year Pedro Castillo, a former rural Colombia unfairness. In Guatemala the findings of schoolteacher and union leader, became one such body led a president to resign in president of Peru. And Luiz Inácio Lula da United States 2015 (see Bello). Yet reform is not easy. A Silva, a left-wing former president of Bra- score of judges and prosecutors investigat- zil, is the favourite to win back his old job World ing corruption in Guatemala have been at elections in October. forced into exile since 2018. Britain One of the causes of Latin America’s in- The feeling that democracies are rigged equality is lack of competition. The region Income inequality, 201 or latest available 3 in favour of the rich and powerful under- is dominated by huge, well-connected, of- 1 =maximum inequality mines both democracy and economic re- ten family-owned business groups in sec- form. According to a survey conducted last tors with needlessly high barriers to entry. Before taxes and transfers After taxes and transfers year by Vanderbilt University in Tennes- Many fantastically rich people benefit see, over 90% of Paraguayans and Colom- from highly uncompetitive markets. 30 40 50 60 bians believe that the rich sometimes or al- ways buy elections. An average of three- For example Carlos Slim, Latin Ameri- Brazil quarters of respondents to Latinobaróme- ca’s richest man and one of the world’s tro, another regional survey, believe that wealthiest billionaires, made his money by Costa Rica governments cater to “powerful groups”. dominating Mexico’s telecommunications industry in the 1990s. A report by the oecd Britain These inequities, both real and per- in 2011 found that his company, América ceived, have paved the way for politicians Móvil, controlled 80% of the fixed-line United States such as Mr Petro and Mr Boric. As candi- market and 70% of the mobile-phone mar- dates, both made big promises, such as, in ket, and that profit margins were nearly Chile Chile, forgiving student debt and making double the average in the oecd. It estimat- public transport free or, in Colombia, giv- ed that between 2005 and 2009 the lack of Mexico ing every unemployed person (11% of the competition cost Mexico $129bn, the workforce) a state job if they could not find equivalent of nearly 2% of gdp per year. OECD Measures intended to help poorer Sources: World Inequality Database; OECD workers in fact lock them out of formal work. Expensive levies to fund health and cus on goods and services instead of in- unemployment insurance, along with come, hitting the poor hardest. Across the mandatory social-security benefits, can region money raised through personal in- amount to as much as 47% of the average come taxes comes to only 2% of gdp, com- cost of hiring someone in Argentina and pared with 10% in the United States, for in- Brazil. In Colombia almost 20% of firms stance. El Salvador does not have taxes on say that labour regulations are a major ob- property or inheritance; Guatemala’s top stacle to creating new jobs, significantly rate of income tax is a paltry 7%, despite higher than in most developing countries. The minimum wage there is higher relative A Cuban conflagration to the median income than in most oecd economies. The result is that just 40% of Lightning hit a storage tank at Cuba’s main oil terminal in Matanzas, starting a fire that Colombian workers have formal jobs, one spread to three other tanks. One firefighter died and 14 are missing. The lightning rod of the lowest shares in the region. Across had not been maintained, say reports in independent media. The fire contributed to a Latin America, only around half of workers water shortage that forced the shutdown of a nearby power plant. Cuba was already have a formal job; in some countries, such suffering from fuel shortages and blackouts, which had triggered protests. as Bolivia and Peru, scarcely one-third do. Taxes do little to reduce inequality. Tax revenues make up only 22% of gdp in Latin America, compared with 34% in the oecd. In richer countries with better tax collec- tion, inequality decreases after taxes and transfers redistribute income to the poor- est. But in Chile and Mexico, almost no change occurs (see chart 3). Taxes also fo- 012
The Economist August 13th 2022 The Americas 27 one in the private sector. These implausi greater burden on rich individuals while wealth tax, of 1% for people with more than ble promises were part of their appeal. also protecting growth. $5m in assets. “Economic benefits have gone to the same people for so long. We are exhausted,” says Mr Petro has proposed a reform that Things could go awry. Chile’s new tax Angela MartínezLighton, a 33yearold ac seeks to increase revenue by nearly 2% of reform proposal levies hefty fees on the tivist who voted for Mr Petro. gdp next year in part by raising rates paid mining industry, which could discourage by the top 2% of income earners, imposing investment in copper mining, a mainstay It remains to be seen whether Mr Petro a wealth tax (starting at 0.5% on assets of of the economy. The war in Ukraine, and and Mr Boric become more pragmatic around $700,000) and taxing exports of oil rising interest rates in the United States, when faced with the realities of office. Both and other commodities. Mr Boric hopes to have put Latin America’s economies in a have already tried to calm market jitters by increase the share of tax revenue by four tight spot, making it harder for govern appointing sensible finance ministers (Mr percentage points to 31.7% of gdp by 2026, ments to keep their promises. Mr Boric’s Petro’s has already ruled out making the slightly below the oecd average. He would approval rating has sunk from 50% when state the employer of last resort). And both increase personal income taxes for the top he took office in March to 37%. Mr Petro want to pass tax reforms that aim to place a 3% of earners and introduce Chile’s first will hope his honeymoon lasts longer. n Bello Darkness returns to Guatemala The drift to authoritarianism accelerates in Central America For more than 30 years José Rubén Nations in 2006 to set up an anticorrup prosecutors and judges as well as several Zamora’s newspaper has crusaded tion commission known as cicig. Work journalists have been forced into exile; against corruption in Guatemala, making ing with invigorated local prosecutors and others have been arrested. “The political many enemies along the way. On July judges, cicig secured the conviction of a class has united behind impunity” for 29th police raided Mr Zamora’s home and former president. Another president, Otto corruption, says Daniel Haering, a politi arrested him. This week he appeared in Pérez Molina, a retired general, resigned cal scientist in Guatemala City. court on charges including money laun in 2015, after big street demonstrations dering and blackmail. According to persuaded Congress to lift his immunity Many in Washington worry about the Rafael Curruchiche, the anticorruption from prosecution. He has spent the years weakness of democracy and the rule of prosecutor, the publisher was not arrest since then in preventive detention on law across Central America, a big source ed for his journalism but for his “busi charges of customs fraud. of migrants. Under Daniel Ortega, Nic ness activity”, for allegedly trying to swap aragua has become a dictatorship. El some $40,000 in cash for a cheque from But cicig overreached. Headed most Salvador’s wildly popular strongman a former banker accused of corruption recently by Iván Velásquez, a Colombian president, Nayib Bukele, has taken con who is now collaborating with the au prosecutor who this week became his trol of Congress and the judiciary and has thorities. Mr Zamora says he is a victim country’s defence minister, it sought locked up some 45,000 suspected gang of “political persecution”. Many Guate criminal charges against Mr Pérez’s suc members. Honduras’s former president, malans believe him. His arrest is another cessor, Jimmy Morales, for a campaign Juan Orlando Hernández, is in jail in New milestone in the country’s seeming finance transgression of which he said he York, facing charges of drugtrafficking; return to authoritarian rule. was unaware. Mr Morales refused to renew the country’s outlook under a new left cicig’s mandate. It departed in 2018. wing government is uncertain. Joe Bi For much of Mr Zamora’s career Gua den’s administration has named and temala, with 17m people, saw halting The government of Alejandro Giam sanctioned 36 Guatemalans, mainly democratic progress. A long civil war mattei, a conservative who won in 2019, officials and business people, as “corrupt between leftist guerrillas and military has gone on to assault the Guatemalan and undemocratic actors” in Central dictatorships, which caused some judiciary. The government’s allies in Con America. They include Ms Porras and Mr 200,000 deaths, ended with a peace gress have hobbled the Constitutional Curruchiche, who both deny wrong agreement in 1996. The economy has Court and installed a pliant attorney doing. Yet American pressure has so far grown steadily. But roughly half of Gua general, Consuelo Porras. Two dozen proved ineffective. temalans, many of them indigenous, live on less than $5.50 a day (adjusted for The worry now is that next year’s local purchasing power), and the country general election will be rigged. In 2019 has the world’s fourthhighest incidence the Constitutional Court blocked the of child malnutrition. Its biggest export candidacy of Thelma Aldana, a popular is people: the 1.5m or more Guatemalans former attorneygeneral who collaborat who live in the United States sent back ed with cicig and who might have won. remittances equal to 15% of gdp in 2020. With an approval rating of just 19% in a recent poll by cid Gallup, Mr Giammat Reformers blame many of the coun tei, who is constitutionally barred from try’s ills on the corruption of an en running again, is one of Latin America’s trenched power structure, “a political least popular presidents. But his suppor criminal network of big business, organ ters dream of installing an ally by block ised crime and politicians who become ing more candidates this time, reckons businesspeople”, as Bernardo Arévalo, an Mr Haering. They may manage it. The opposition legislator, puts it. That net opposition is divided and the streets are work was placed on the defensive after a quiescent. Guatemala’s political class reforming president invited the United includes many more like Mr Giammattei. 012
28 Asia The Economist August 13th 2022 Nuclear weapons in South Asia many there were or the targets over which they might have to be dropped. The three-body problem All that has changed. China has been The arsenals of China, India and Pakistan are growing. But the countries adding hundreds of new missile silos in re are not yet in an arms race cent years. When Pakistan celebrated its 60th birthday in 2007 it had roughly 60 nu For most of the 75 years since India and American mainland until the 1980s. When clear warheads. Fifteen years on, that num Pakistan became independent states, at India and Pakistan fought a war over Kar ber has nearly tripled (see chart on next midnight on 15th August 1947, nuclear gil, in the disputed region of Kashmir, in page). The combined arsenals of China weapons have cast a shadow over South the summer of 1999, India’s air force, (350 warheads), India (160) and Pakistan Asia. China got the bomb in 1964, two years tasked with delivering the bombs if need (165), though modest by American and Rus after thumping India in a border war and ed, was not told what they looked like, how sian standards (several thousand each), forcing its policymakers to confront their now exceed British and French stockpiles country’s vulnerabilities. India showed it → Also in this section in Europe (around 500 in total). All three too could build one with a demonstrative 29 South Korea’s prosecution complex countries are emulating the American and explosion just a decade later. Pakistan was 30 A voice for Australia’s Aboriginals Russian practice of having a nuclear a screwdriver’s turn away by the 1980s. In 30 Papua New Guinea’s dismal election “triad”: nukes deliverable from land, air 1998, both India and Pakistan conducted 31 Banyan: Nepal’s festering war wounds and sea. South Asia’s nuclear era is enter nuclearweapons tests, making official 32 One year under the Taliban ing a more mature phase. what was already an open secret. That need not mean a more dangerous Yet, in many ways, all three countries one. A new report by Ashley Tellis of the were hesitant nuclear powers. China did Carnegie Endowment, a thinktank in not deploy a missile capable of hitting the Washington, explores the dynamics among Asia’s three nuclear powers. Since 1998, most Western attention has focused on the risk of a conflagration between In dia and Pakistan over Kashmir. That dan ger persists. Yet the risk of an arms race has been exaggerated, argues Mr Tellis, a for mer State Department official. India’s arsenal has grown slowly, he ob serves—it remains smaller than Pak istan’s—and its nuclear posture remains “remarkably conservative”. The compari son with the nuclear behemoths is instruc tive. America and Russia both maintain huge arsenals designed to enable socalled counterforce strikes—those which pre emptively target the other side’s nuclear weapons to limit the damage they might do. That means their arsenals must be large, sophisticated and kept on high alert. In contrast, China, India and Pakistan, despite their manifold differences, all view nukes as “political instruments” rather than “usable tools of war”, argues Mr Tellis. Both China and India, for instance, pledge that they would not use nuclear weapons unless an adversary had used weapons of mass destruction first, a commitment known as “no first use”. America disbe lieves China’s promise, much as Pakistan doubts India’s. But the Chinese and Indian arsenals are consistent with the pledges, insists Mr Tellis. He calculates that if India wanted to use a tactical (or lowyield) nuclear weapon to take out a Pakistani missile on the ground, it would have to do so within a few minutes of the Pakistani launcher leaving its stor age site. That is implausible. India does not have missiles that can launch within min utes of an order, nor those accurate to with in tens of metres of their target. And, for now, China’s rocketeers also train and op erate on the assumption that their forces would be used in retaliation. The result is 012
The Economist August 13th 2022 Asia 29 that things are more stable than the swell na; Pakistan follows. The reality is more fore Moon Jaein, the previous president, ing arsenals suggest. complex, insists Mr Tellis. China has an left office in May. Building on similar bills eye on India, too. India increasingly pays from 2020, they transferred to the police There are two wrinkles, though, and more attention to China than to Pakistan. much of the authority over criminal inves both concern China. The Pentagon says And Pakistan—specifically, its powerful tigations previously held by the prosecu that China’s arsenal could expand to 1,000 army—is set on its own path, its pro tion service, which is ultimately answer warheads by 2030, as it seeks to overwhelm gramme “increasingly driven less by what able to the president. Mr Moon had entered American missile defences and narrow the India is actually doing and more by its fer office promising to weaken the service, numerical gap with its chief rival. If that vid imaginings of Indian capabilities”. which enjoyed a degree of autonomy un comes to pass, India might fear that its paralleled in other democracies. Unlike comparatively meagre arsenal no longer In one sense, nuclear weapons are sta the police force, it did not undergo serious serves as a credible deterrent. If India has bilising. They preclude, among their pos reform after democratisation in the late fewer warheads, it will want to be sure they sessors, the big wars that have roiled South 1980s. The idea is to increase accountabil can inflict unacceptable damage on Chi Asia through its history. But they do not ity and impede the use of the prosecutor’s nese cities. But the thermonuclear device prevent small or peripheral ones. And the office in political vendettas. which India tested in 1998 was widely con terror they evoke can be exploited. Pakista sidered to have fizzled. ni generals have used their nuclear shield Yoon Sukyeol, Mr Moon’s successor to harbour jihadists. China might one day and a career prosecutor (pictured), was liv The real problem, though, is not so seek to emulate Russia’s use of nuclear id. His administration is asking the Consti much the number of weapons as what Chi threats in Ukraine to keep America from tutional Court to void the laws. The bureau na might be able to do with them. India intervening in a war over Taiwan. is plan b. It is explicitly designed to control gets by with a small arsenal because it is the newly empowered npa. highly secretive about the location of its South Asia’s nuclear future will depend nukes—the same approach that China has on whether nuclear conservatism with Yet even with Mr Moon’s reforms the taken for most of its history. Yet improve stands the pressures of power politics and prosecution service retained significant ments in surveillance technology (such as the temptations of technology. The direc power. It can unilaterally investigate cor new spy satellites), artificial intelligence tion of China’s arsenal does not offer ruption and economic crimes. It also that can find patterns in huge amounts of grounds for optimism. n maintains a degree of influence over the data and cyberespionage against nuclear police, since the npa still cannot get war commandandcontrol networks could South Korea rants without its approval. As a bonus, that one day pierce “the veil of opacity”, warns shields prosecutors from police investiga Mr Tellis. That, in combination with more The crownless tion, since their colleagues are unlikely to warheads and more accurate missiles, again shall be king approve the warrants required. might enable China to “hold at risk almost every Indian nuclearstorage site”, a pre SEOUL The prosecutor’s office has always been requisite of counterforce. “a valuable political weapon”, says Ethan Yoon Sukyeol tries to claw back the Shin, a lawyer. Even Mr Moon, for all his re It is, in part, to hedge against such a powers of the prosecutor’s office formist zeal, was not above using it. Early destabilising rupture that India has decid in his term he appointed Mr Yoon as his ed to hide its nukes in the ocean. Its first The disgruntled in South Korea have prosecutorgeneral and set him on both big nucleararmed submarine, the Arihant, be long shaved their heads. The tonsure, a business and the previous president, Park gan patrols in 2018. Another, the Arighat, is symbol of sacrifice, works as a form of pas Geunhye, who was jailed for corruption. undergoing sea trials. Two more are under sive resistance. Hence the number of dissi Mr Shin likens the service to the powerful construction. But Mr Tellis doubts that In dent officials and putupon shopkeepers yet corrupting ring in “Lord of the Rings”: dia, despite extensive Russian help, has who ask their friends to wield a defiant ra “Everyone knows the ring has to be de been able to build a sufficiently compact zor before the cameras. Hence, too, the stroyed, but you have it, it’s your ‘pre and powerful naval nuclear reactor for ex scene last month outside the headquarters cious’.” Little wonder that Mr Yoon wants tended spells at sea, and a vessel quiet of the National Police Agency (npa) in his powers back. n enough to remain undetected. Seoul, the capital, as the locks of four offi cers fell on capes bearing the words “With Prosecco for the prosecutors The conventional wisdom is that a cas draw the mois police bureau. Guarantee cade is under way: America and Russia are police neutrality.” abandoning arms control; China races to catch up with America; India pursues Chi That “police bureau”, which started work on August 2nd, gives the Ministry of Quantity v quality the Interior and Security (mois) oversight of certain decisions within the police Estimated nuclear warhead inventories force, including appointments. Many cops are furious about the infringement on 700 their autonomy. Opposition politicians and civic groups complain that the bureau India 600 was set up without proper parliamentary Pakistan 500 oversight. They worry it means the police China 400 will be forced to kowtow to the administra tion. That fear is not unreasonable: the npa 300 was made independent in 1991 because of its history as an attack dog of the former 200 military dictatorship. 100 The bureau’s establishment is a reac tion to a pair of reform bills passed just be 1964 70 80 90 2000 10 0 22 Source: Federation of American Scientists 012
30 Asia The Economist August 13th 2022 Australia’s indigenous people Papua New Guinea Voice recognition Worst. Election. Ever. ULURU, NORTHERN TERRITORY Person of colour More violence, more corruption, more fraud. But fewer deaths—so far The prime minister wants to include Mr Albanese has embraced this idea. Aboriginals in the constitution For the referendum campaign, his govern In parliament on August 9th, 97 mem ment will draw on a report by Marcia Lang bers voted for the incumbent, James Ma “This rock is an awesome feature,” ton and Tom Calma, two Aboriginal lead rape, to remain prime minister of Papua says James, a ranger of the Anangu ers, explaining how the voice would work. New Guinea. None voted against him. His people in central Australia. “It’s a story They propose a body of 24, chosen by Ab rival and predecessor, Peter O’Neill, walked book.” The story may be about to get lon original people, to advise the federal gov out of the chamber in disgust. ger. James is standing at the base of Uluru, ernment whenever legislation affecting a humungous monolith embedded in the indigenous Australians’ “social, spiritual The parliamentary vote concludes a red desert near the middle of Australia. The and economic wellbeing” is in the works. lengthy and deeply flawed election, even country’s indigenous people have made it a This approach, Mr Albanese argues, would by the standards of a country known for civilrights symbol: they want Australians mean policies “are always more effective”. dismal polls. Mr Marape’s Pangu party se to change the constitution to guarantee He, too, points to shocking statistics, such cured only 36 of 118 seats. But he also has them a say in laws that affect their lives. as that Aboriginals die on average 20 years the backing of 17 parties in his coalition The battle over the call for an Aboriginal earlier than other Australians. and several independents, giving him “voice to Parliament” is looming as a big neartotal control of parliament, at least test for Anthony Albanese, the newish Some critics, including a handful of Ab until some lawmakers are inevitably lured prime minister (pictured), and his centre original figures, deride the idea as mere away by rivals. Not that their seats were all left Labor government. symbolism. Mr Albanese is keen on sym honourably won. Paul Barker, the director bolic gestures: his government’s press con of the Institute of National Affairs, a think In late July Mr Albanese flew to an Ab ferences now feature the flags used by Aus tank in Port Moresby, the capital, believes original festival in Arnhem Land, some tralia’s indigenous peoples next to the Aus that each poll is getting worse in terms of 2,000km north of Uluru, to add his own tralian one. Yet changing the constitution the scale and extent of fraud. This one, he voice to the campaign. On July 30th he will not be as easy as unfurling extra flags. says, was the “worst election ever”. promised the region’s Yolngu people a ref The document’s 19thcentury framers set a erendum on the idea within his govern high bar for amendments: a “yes” vote both Papua New Guinea’s 9m people inhabit ment’s threeyear term, calling it “a mo nationally and in at least four of the coun the most linguistically diverse nation on mentous change” and a step “in our na try’s six states. Just eight of 44 proposed Earth, with some 850 mutually incompre tion’s journey of healing”. changes have passed in 121 years. hensible languages. Despite abundant nat ural resources, including gas, gold, timber, Aboriginal people make up barely 3% of There are some hints, however, of bi tin and coffee, gdp per person remains be Australia’s 25m inhabitants. But their fore partisan political support. The conserva low $3,000, about the same as Honduras. bears had lived on the continent for some tive opposition seems to have warmed Over the past decade the country has be 60,000 years before the British landed in slightly to the Uluru Statement since leav come a big exporter of natural gas, but few 1788. They played no part in drafting Aus ing government. Julian Leeser, its Aborigi locals have benefited. Mr Marape has tralia’s constitution and were not accorded nal affairs spokesman, has publicly sup promised to “take back” a greater share of any rights in it. ported a constitutional voice. Peter Dutton, the wealth from the mostly foreign re the opposition leader, is more vague. sourceextraction companies. But corrup Five years ago Aboriginal delegates tion is a big part of the problem. Even hon gathered at Uluru, a sacred site also known The election result that swept Labor to est prime ministers end up doing deals by the name colonists gave it, Ayers Rock, power in May suggests Australians are with unscrupulous politicians. Voters see after a long quest to find a formula to give tired of the culture wars that prevailed un little prospect of any longterm improve “First Nations” a say in government poli der nine previous years of conservative ment, so they resort to the shortterm cies over their people. The delegates pro government. Penny Wong, the foreign gains that come from selling their votes. duced the “Uluru Statement from the minister, even talks of a “First Nations ap Heart”, a short, elegant cry for constitu proach to foreign policy”. Mr Albanese is Electoral fraud is most rampant in the tional change. Their peoples’ “ancient optimistic that a referendum will pass. As highlands, the central spine of the country, sovereignty”, it said, had never been ceded, he puts it, “If not now, when?” n where around 40% of the population lives. and still coexisted with that of the British One tactic is the hijacking of ballot boxes, Crown. The statement added that the either to destroy them or to stuff them. Joe shocking levels of imprisonment and bro Ketan, an expert on politics and society in ken families among Aboriginal people Papua New Guinea, who lives in the moun were proof of the need for change. tainous interior, observed the election in two provinces near his home. He found The conservative government of the that “all the ballots were marked by candi day greeted the plea coldly. It misrepre dates and their agents”. Much of this fraud sented the statement as a call for a third is orchestrated at the local level, with rival chamber of parliament, and said new laws candidates agreeing to distribute all the would be better than a constitutional available ballot papers among themselves. amendment. But Aboriginal leaders recall In one province, women queued for hours how John Howard, a former conservative in the heat to vote only to be turned away prime minister, abolished a commission by youths armed with bush knives. charged with protecting Aboriginal inter ests. Only the constitution can truly pro tect them, they argue. 012
The Economist August 13th 2022 Asia 31 Authorities halted the count in many ally run much more smoothly. Mr Marape promises to rectify many of constituencies, leaving it to the courts to Deaths, at least, have so far been fewer these problems. He needs to do so quickly. decide whether to declare these elections Incoming prime ministers have an 18 “failed”. Fear of official bias in declaring than in the previous election. Some 55 peo month grace period during which they ballot boxes suspicious can itself be a trig ple were killed during polling this year, cannot legally be removed from office. ger for violence. Schools in the capital had compared with 200odd in 2017. Many of Most then face a noconfidence vote, to close for a week after machetewielding the murders then occurred after results which was how Mr Marape himself initial men rampaged outside a counting centre were declared and during the recrimina ly became prime minister—at the expense because the returning officer set aside sev tions that followed. This time around, of Mr O’Neill—in 2019. If Mr Marape can eral ballot boxes from their candidate’s there has been a much heavier security sustain himself in government without area. Mr Barker warns of a corrosive “high presence. In some cases, though, police doing too many dodgy deals, he may even landisation” of the process in the northern and soldiers have themselves been respon manage to do some good for his belea part of the mainland. In the south and on sible for fatalities. On August 9th police of guered citizens. More likely is that the the islands off its east coast, elections usu ficers shot and killed five people protesting elections of 2027 will be even worse. n about the result in a highland province. Banyan Lost in transition Post-war justice is a nice idea. Too bad about the politics It has been 20 years since Sushila In 2014, after years of dillydallying, the the central goal of his tenure. The go Chaudhary’s sister was abducted from government set up two commissions— verning parties, keen to curry favour her village by Nepal’s army, never to one to investigate disappearances and the with international donors, looked likely return. It has been 18 years since soldiers other to examine other humanrights to play along. Moreover, some younger came to her brother’s house, locked him violations—as partfulfilment of condi army brass had begun to grumble about in a room, and tortured and killed him. tions laid down in the peace agreement. being barred from wellpaying un peace Ms Chaudhary, now a lawyer in her The commissions received a combined keeping jobs because of lingering ques mid30s, has spent the better part of two total of more than 60,000 complaints and tions over past atrocities, raising hopes decades trying to find out who killed her have had their mandate extended several that the armed forces’ resistance might brother and what happened to her sister. times, most recently in July. Yet neither be softening, too. Like many others who lost family mem one has ever held a single hearing or re bers during Nepal’s civil war from 1996 to ferred a case to the courts. Most observers Last month Mr Bandi presented to 2006, or who themselves suffered abuse, reckon that they were set up to fail. “They Parliament a bill amending the flawed she has been frustrated by the authori had enough good people to make them law that set up the commissions in 2014. ties. “I am sure there are records of who look plausible, but enough saboteurs to It would make it harder for those who is responsible,” she says. “But they have ensure nothing would happen,” says committed serious crimes to receive never given them to us.” Kanak Mani Dixit, a journalist who has amnesty. It would also give victims the kept a close eye on them. right to reparations and relatives of the More than 17,000 people were killed, disappeared the right to their property. 1,300 were “disappeared”—kidnapped Earlier this year, Ms Chaudhary and Critics say the new version is still riddled and probably killed—and tens of thou other advocates had reason to think that with loopholes that would allow culprits sands were displaced during the war, things might change. In April Govinda to escape justice, and that it provides which pitted Maoist insurgents against Sharma Bandi, a prominent lawyer who insufficient resources for investigations. the government of what was then still a had long pushed the government to do Still, Mr Bandi hopes it will clear the way constitutional monarchy. The war ended more to investigate war crimes, was ap for a new commission to start working with a negotiated peace supervised by pointed justice minister in a cabinet re on the mountain of complaints at last. the un after the king, who had sought to shuffle. He said he planned to make the “It is not perfect,” he admits, “but some crush the insurgency by assuming total revival of the push for transitional justice level of compromise is necessary in control late in the conflict, was forced to transitional justice.” return some powers to Parliament. Soon after, Nepal became a republic. If the law passes, the government must implement it. However, the politi One stipulation of the peace deal was cal environment has not changed a commitment by both parties to a prop enough for that to happen. Former com er process of what lawyers and human batants from both sides remain in power. rights types call “transitional justice”, or Their appetite for investigating them healing war wounds by revealing the selves has not grown. The law may end whereabouts of the disappeared, making up as a fig leaf. a record of atrocities and trying perpetra tors in court. That commitment re That possibility—even likelihood— mained on paper. Democratisation end provides a useful, if disheartening, les ed the 240yearold monarchy, but it also son for those pursuing postwar justice turned former adversaries into poli elsewhere: when prosecuting wartime ticians. They had little desire to draw abuses, formal legal provisions matter attention to past sins. Neither side ever less than politics. As long as those who released any information about the committed the crimes remain in power, whereabouts of the disappeared. it is fiendishly difficult for victims to obtain justice, or even a hint of the truth. 012
32 Asia The Economist August 13th 2022 Life under the Taliban back into secondary schools. Yet some Afghans, like Mahmood, are Peace, of a sort better off than they were a year ago. Villag Afghanistan is poorer and hungrier than a year ago. But it is safer ers who once lived on the front lines of the conflict, in provinces like Helmand and One year ago Lema had a good life. Baghlan Kandahar, are safer than they have been in Armed with a bachelor’s degree in law years. According to Crisis Group, a think and political science, the 27yearold had a Kabul tank, violent incidents—armed clashes, steady job in Kabul, Afghanistan’s capital. drone strikes, suicide bombings—in the She worked out at a local gym in her spare AFGHANISTAN ten months to midJuly were down 87% time. But since the Taliban took control of compared with the same period the previ the country last year, women have been Kandahar 250 km ous year (see map). barred from many jobs, from travelling Helmand without a male escort and from dressing as For many rural Afghans, not much else they please. Lema has lost her job. Her Violent events in Afghanistan* has changed. Fierce conservatism is not household of 13—parents, siblings, their Sep 15th 2021-July 15th 2022, % change on previous year new in villages in the south of the country, families—is struggling to get by. Her fiancé which produced the Taliban. Women there has also lost his job. Her brother’s business -100 -90 -80 -60 -40 0 are used to covering up and staying home. has gone bust. She cannot walk the streets Such farflung places never saw much of alone. The gym is out of the question. Sources: ACLED; Crisis Group *Battles and explosions the aid money that poured into the coun try. As security has improved, humanitar For Mahmood, a watermelon farmer in 2001. The Ministry of Virtue and Vice has ian assistance has started arriving. Baghlan province, north of the capital, been reconstituted and its morality police things are looking up. Shortly before the are out in force, harassing men who trim Residents in these remote parts are re Taliban took over, his house was targeted their beards and women who are not co building their lives, sowing crops and fix by government forces, who thought it was vered from head to toe. And the Taliban are ing up their homes. In a recent World Bank being used as a militant hideout. They ap still offering haven to their terrorist survey of heads of households, the share of proached the property and opened fire. friends. On July 31st an American drone rural respondents who said they were em Mahmood rushed his family to safety at strike killed Ayman alZawahiri, alQaeda’s ployed rose to 81% in the last three months the back of the building. It was not unusual leader, in central Kabul. of 2021 from 73% two years earlier. (In cit for farmers to get caught up in the fighting. ies, that share dropped slightly.) They are But since the Taliban returned to power, Women are undoubtedly the worst off. hardly thriving—being employed does not the guns have mostly fallen silent. True, In two decades under an Americanbacked mean earning a decent wage, and many poor rains have ruined Mahmood’s har government, many had grown accustomed will be sole breadwinners covering ex vest, his relatives have lost their jobs and to a degree of freedom. The female literacy penses for large families. But they are at his family is broke. But at least he no longer rate more than doubled between 2000 and least able to work. has to worry about his children being shot. 2018, albeit to only 30%. A generation of Moreover, charities are once again coming women got jobs as doctors, journalists and Peace may not last, of course. Afghans to his village and handing out cash. lawyers. Now they are being forced out of have been changed by 20 years of Ameri public life once more. In March the Taliban canbacked rough democracy. Women, un The Taliban’s capture of Kabul on Au backtracked on their promise to let girls willing to live with the Taliban’s bigotry, gust 15th last year capped a lightning ad are taking to the streets in protest. Eco vance through the country. The ease of nomic hardship is stirring discontent. their victory surprised everyone, including Newly poor Afghans blame the Taliban for the fighters themselves. The world mismanagement and foreign powers for watched in horror as America botched its cutting them off. “There are winners and withdrawal and desperate Afghans losers yet again,” says Ashley Jackson, an thronged the airport hoping to flee. The Ta analyst at the Overseas Development Insti liban swiftly established total control, and tute, a thinktank in London, “and that sets the country fell into crisis. the stage for conflict.” n The main problems are financial. The From poacher to gamekeeper economy collapsed as the West cut off Af ghanistan from the global banking system and froze its foreign reserves. Between September and December last year, gdp fell by a third compared with the same period a year earlier. Most of the country is desti tute and hungry. Prices for food and fuel were 50% higher in June than a year before. Only one in 20 families have enough to eat. The Taliban are not helping matters. Despite claims that they have changed and promises of “a better future” for Afghans, the new Taliban behave a lot like the old lot, who ruled the country from 1996 to 012
China The Economist August 13th 2022 33 China, Taiwan and America brated to advertise its profound displea sure and newfound capabilities, while Danger ahead stopping well short of war. Yet these are probably just the opening salvoes. Xi Jin BEIJING, TAIPEI AND WASHINGTON, DC ping, China’s leader, appears keen to avoid a direct military confrontation with Amer The crisis over Taiwan could mark the beginning of a perilous new era ica. At the same time, he cannot appear of hostility between China and America timid, having styled himself as a strong man and promised progress towards re In january 1950, three months after the speaker of America's House of Representa unification. On Chinese social media, Communist victory in China’s civil war, tives, Nancy Pelosi, on August 2nd and 3rd. rabblerousers are already outraged that President Harry Truman issued a state Ms Pelosi was the most senior American China did not shoot down Ms Pelosi’s ment. America, he declared, would not in politician to visit the island, which China plane. The stakes for Mr Xi are especially tervene militarily to help China’s defeated still claims, since one of her predecessors, high in the runup to a Communist Party Nationalists, who had fled to the island of Newt Gingrich, went in 1997. Although the congress later this year, when he is expect Taiwan. Mao Zedong was already prepar crisis is far from over, it already looks set to ed to secure a third fiveyear term as party ing an invasion and probably would have usher in a dangerous new era of hostility leader, violating recent norms. succeeded had the Korean war not erupted between China and America. in June that year. The conflict prompted China’s countermeasures are thus like Truman to change tack, backing South Ko Ms Pelosi’s visit was a “manic, irrespon ly to play out on many fronts, over weeks, rea and ordering the Seventh Fleet to de sible and highly irrational” act, declared months or years. They will probably in fend Taiwan in a bid to halt the spread of China. Its diplomats accused America of clude more economic sanctions targeting communism in Asia. Four years later, violating commitments it made when it Taiwan’s governing Democratic Progres when Chinese forces attacked some of Tai first recognised the People’s Republic of sive Party. There will surely be efforts to de wan's outlying islands, American officials China (prc) in 1979. Since Ms Pelosi left ter other foreign politicians from visiting threatened nuclear strikes on China, forc Taiwan, China has fired ballistic missiles the island, and to woo the last dozen or so ing Mao to back down again. over the island for the first time, sent mili countries that have diplomatic ties to Tai tary ships and aircraft across the median wan. Most importantly, though, China is With hindsight, that was the first in a line of the Taiwan Strait in record num likely to try to establish a “new normal” of succession of military showdowns over bers, and conducted livefire drills encir military activities around Taiwan, includ Taiwan that have defined SinoAmerican cling the island in a rehearsal for a block ing regular forays into waters and airspace relations and had consequences for the ade. China has also imposed economic that the island claims and, possibly, fur world beyond. Seven decades later the sanctions on Taiwan and cut military and ther missile tests over the island. China’s fourth such crisis is unfolding, this time other cooperation with America. Eastern Theatre Command, which con triggered by a visit to Taiwan from the ducted the latest drills, said on August 10th So far China’s response appears cali that it had completed “various tasks” in the 012
34 China The Economist August 13th 2022 exercises but would continue to monitor position that Taiwan is part of a single Chi an economic slowdown. This month, if the Taiwan Strait closely and conduct regu na. But America does not recognise the tradition holds, party bigwigs will meet in lar combatreadiness patrols there. prc’s sovereignty over Taiwan and main the resort town of Beidaihe, where in the tains unofficial links to the island. It is also past they have had informal discussions Where things go from here will partly obliged by domestic law to provide Taiwan about policies and personnel. How much depend on what America and its allies do with defensive arms and to maintain its of that still goes on under Mr Xi is uncer to help Taiwan. America has shown re own capacity to protect the island. Yet tain. But he and other leaders must soon straint so far but has pledged to resume America has long observed “strategic am make some important decisions, on who regular military operations in the area, in biguity”, not specifying whether or how it will surround him at the top and what pri cluding transits through the Taiwan Strait. would intervene in a war over the island. orities to pursue in the years ahead—in It will probably provide more training and cluding with respect to Taiwan. weapons to Taiwan. Some foresee a cycle of China’s concerns intensified after 2016 action and reaction, with increased risks of as the Trump administration expanded Xi’s multi-tasking accidents and miscalculations. “Histori highlevel official visits and arms sales to Once it was clear that Ms Pelosi’s visit was ans may very well look back at the summer the island—including offensive weapons. going ahead, Mr Xi appears to have sensed of 2022 as the moment when usChina re To China’s frustration, Mr Biden has broad an opportunity to try to achieve several lations shifted from competition for rela ly continued that approach. He has also goals at once: projecting strength at home, tive advantage to overt confrontation, with publicly suggested three times that Ameri reversing the trend of closer American en a much greater risk of crises and escala ca would directly defend Taiwan. Last year, gagement with Taiwan, deterring other tion,” says Taylor Fravel of the Massachu he said that Taiwan was independent. His countries from interfering, and conduct setts Institute of Technology. aides walked back all those comments. ing the largestever rehearsal for an assault Chinese officials seethed nonetheless. on the island. At the same time, he appears Pelosi plays with fire to have telegraphed his desire to avoid a di The fourth Taiwan Strait crisis began in Taiwan, as a selfgoverning democracy rect military confrontation with America, April, with reports that Ms Pelosi would of 24m mostly Han Chinese people, repre for example by not trying to intercept her visit the island. A critic of China’s human sents a challenge to the giant autocracy plane and delaying the livefire drills until rights record, she no doubt had her legacy next door; especially since its free citizens after she had left. in mind: at 82, she is probably in her last are richer than their voteless kin across the term as speaker. A bout of covid19 delayed strait. The island has also drifted further When the drills did start, they were cali her visit. When asked about the trip in July, from the mainland politically in recent brated to echo, yet surpass, those that Chi President Joe Biden said military officials years, notably since Mr Xi snuffed out civil na conducted during the previous big Tai thought it was “not a good idea right now”. liberties in Hong Kong, rendering deeply wan crisis, in 199596, after the island’s A few days later Mr Xi warned him: “Those unattractive the “one country, two sys thenpresident visited America. The six ar who play with fire will perish by it.” But to tems” formula that has governed the for eas marked out for live fire were closer to cancel would be to yield to Chinese bully mer British territory, and which Mr Xi has the island than they were back then, and at ing. And Mr Biden did not want to chal offered as a template for a peaceful union some points came within 12 nautical miles lenge the prerogatives of Congress. of China and Taiwan. Although polls show (22km) of Taiwan’s shores, overlapping that most people in Taiwan favour main what it claims as territorial waters and air In the end, Ms Pelosi’s flight into Tai taining the status quo over declaring inde space (see map). This “encirclement” cre wan went unchallenged. Welcomed by pendence immediately (which would ates “very good conditions for reshaping cheering wellwishers, she met Taiwan’s surely provoke an invasion), only a small the strategic situation in a way that ben president, Tsai Ingwen, as well as Chinese minority favour unification, and nearly all efits unification,” MajorGeneral Meng Xi dissidents. Dismissing China’s threats, she reject “one country, two systems”. angqing, a professor at the People’s Libera echoed American officials in arguing that tion Army (pla) National Defence Univer her trip did not disrupt the status quo, cit The timing of Ms Pelosi’s visit was espe sity, told China’s state broadcaster. ing Mr Gingrich’s trip and regular visits by cially sensitive. Mr Xi has already faced un congressional delegations. expected difficulties this year, in finessing In the first days of the crisis in July 1995, his support for Russia over Ukraine and China fired just six missiles, one of which In fact, the status quo has been unravel sustaining his zerocovid strategy despite malfunctioned. On August 4th that it fired ling for years. Since taking power in 2012, 11, according to Taiwan’s ministry of de Mr Xi has stoked a fiery form of national Matsu East fence. Japan said that five landed within its ism and placed stronger emphasis than China exclusive economic zone (which stretches any leader since Mao on winning back Tai Sea 200 nautical miles from its shore). Of wan. Without setting a clear timetable, he those, four were believed to have flown ov has said unification cannot be postponed CHINA er Taiwan. In another first, dozens of Chi indefinitely. He has linked it to his goal of nese military aircraft and ships crossed the “national rejuvenation” by 2049, the prc’s Taiwan Taipei Senkaku/ Taiwan Strait’s median line on consecutive centenary. The armed forces have been Strait Diaoyu days in a simulated air and sea attack. equipped and drilled to prepare for an as Kinmen Islands sault: Chinese jets and bombers often buzz Joseph Wu, Taiwan’s foreign minister, near Taiwan’s airspace. Some American Median TAIWAN accused China of using Ms Pelosi’s visit as a generals think Mr Xi, now 69, could at line pretext to rehearse an invasion plan that tempt an invasion in the 2030s—or even Philippine also included cyberattacks, disinforma this decade—hoping to achieve unifica South China Sea Sea tion and economic coercion. The scale and tion in his lifetime. 150 km complexity of China’s drills reflect the Territorial transformation of the crossstrait military Chinese officials, meanwhile, have be waters balance over the past two decades, as well come convinced in recent years that Amer as the lessons China drew from the previ ica is steadily hollowing out its “oneChi Chinese live-fire exercise areas ous crisis, when it could do little to deter na” policy. Under that convoluted formula, August 2022 1995-9 America from sending two aircraftcarri America recognises the prc as China’s sole ers to the region, one of which passed legal government and “acknowledges” its Sources: Australian National University; Flanders Marine Institute; Xinhua News Agency 012
The Economist August 13th 2022 China 35 through the Taiwan Strait. Advantage mainland Looking ahead, though, America will In 1995 China’s defence budget was only need at the very least to resume regular Military balance across the Taiwan Strait, 2022 military activities around Taiwan, includ twice the size of Taiwan’s, though China ing transits through the Taiwan Strait, to had (and still has) close to 60 times as Personnel China Taiwan maintain credibility among its regional al many people. Today China spends roughly 2,035,000 16 ,000 lies. The Pentagon’s undersecretary for 20 times as much as Taiwan. By the Penta policy, Colin Kahl, said on August 8th that gon’s account, the pla has achieved parity Reserves 510,000 1,657,000 the navy would continue such transits in or surpassed America in the number of the coming weeks. That could be a flash ships and submarines, longrange surface Main battle tanks 5,400 750 point, especially if China continues its toair missiles and conventional cruise drills around the island. and ballistic missiles it can deploy. Submarines 65 4 America is also likely to strengthen Tai Whether all this means it could con Warships* 86 26 wan's defences by selling it more offensive quer Taiwan is unknown. A war game con weapons, training more of its troops, and ducted in May by the Centre for a New Attack helicopters 308 6 lending or giving it cash to buy more kit, American Security, a thinktank in Wash including small, mobile arms like those ington, found that in a week of fighting, Other combat- 2,475 474 that have proved so effective in Ukraine. China was able to land troops on the island capable aircraft 270.0 12.1 “Confrontation will go to a higher gear,” but could not reach Taipei, let alone predicted Shi Yinhong of Renmin Univer achieve a quick victory. The conflict, set in Defence spending, $bn† sity in Beijing. 2027, settled into a protracted war. Sources: IISS; SIPRI *Bigger than corvette class †2021 Congress will probably demand more. Still, the latest drills served as a warn It is currently considering the Taiwan Poli ing that China has many ways, short of in the pla will have learned many lessons cy Act, which would allow the island to vasion, to harm Taiwan, especially via a from their military drills,” she says, pre join military exercises with America and blockade. The exercises covered the ap dicting more of the same kind of exercises. declare it a “major nonnato ally”, facili proaches to three of Taiwan’s most impor tating the provision of more advanced tant ports and the airspace that planes use “There will be no return to the status weaponry. It would also authorise “de facto to descend to Taiwanese airports. They “are quo ante,” says Mr Fravel. He draws paral diplomatic treatment for Taiwan equiva tantamount to an air and sea blockade”, lels with China’s response in 2012 to Ja lent to other foreign governments”. China complained a Taiwanese general. pan’s nationalisation of the Senkaku Is would almost certainly consider any one of lands, which China also claims and calls those moves as crossing a red line. That is a slight exaggeration, but in a the Diaoyu. Chinese forces started regular sign of how a blockade might play out, air and naval patrols within 12 nautical America must somehow tailor its re commercial shipping was forced to take miles of the islands. sponse to avoid putting Taiwan further at longer, costlier routes. Shiptracking web risk and to maintain cohesion with allies sites showed vessels avoiding the exercise The challenge for America and its allies and partners. The g7 condemned China’s zones. It was a reminder of how China will be to resist such Chinese efforts with drills, as did Japan and Australia. But South could isolate Taiwan, which imports over out provoking another crisis. They have so Korea, another American ally, did not. 60% of its food and 98% of its energy. far tried to avoid escalation. Ms Pelosi’s SouthEast Asian nations have also been flight to Taiwan took a circuitous route that reluctant to take sides, just as many were One effect of the drills might be to spur skirted the disputed South China Sea. after the first crisis in 195455. more consideration about how to help Tai America does not appear to have sent new wan survive a blockade, says Lonnie Hen warships to the region. The Pentagon also One lesson from previous Taiwan crises ley, formerly of the Pentagon’s Defence In said on August 4th it had postponed a rou is that their consequences are unpredict telligence Agency. “Defeating a crossstrait tine test launch of an intercontinental bal able. When China began shelling Taiwan’s landing operation is hard but relatively listic missile that week. outlying islands in 1958, America inter straightforward—just sink a lot of ships,” vened again, breaking an artillery blockade he says. “Defeating a blockade is much Message by way of missile on Kinmen by escorting supply vessels. more difficult because of the location and But as Taiwan’s leadership pushed for a terrain. My assessment is that China could counterstrike, and America considered keep Taiwan sealed off for many months, using nuclear weapons, the Soviet Union perhaps years, with devastating effect.” threatened to retaliate and America faced a backlash in the West for risking war over a The drills also sparked fresh concerns cluster of islands. Nearly four decades lat over the vulnerability of Taiwan’s outlying er, the crisis in 199596 deterred China islands, including Kinmen (formerly Que from military action in the near term, but moy), a cluster just six miles (10km) from fuelled antiunification sentiment in Tai China’s coast which came under attack by wan and convinced the mainland to accel Mao’s forces in 195455 and again in 1958. erate its military modernisation. On the day of Ms Pelosi’s departure, Tai wanese troops on Kinmen fired flares at The consequences of the latest show Chinese drones overhead. The next day down may not become clear for years. In Chinese missiles were fired near Taiwan’s the short run there is still hope for a peace Matsu archipelago. ful outcome if each side stages a show of force and then pulls back, claiming victory, China’s next moves will probably de as they did in 1996. But over the longer pend, in part, on how America and Taiwan term, with China now determined to con respond. If it believes they will continue to solidate perceived gains around the Tai challenge its red lines (by expanding offi wan Strait, and America committed to cial contacts, for example), it may well in push back, all sides appear to be heading crease pressure on them, says Bonnie Gla for dangerous waters. n ser of the German Marshall Fund of the Un ited States, a thinktank. “In the meantime, 012
36 Middle East & Africa The Economist August 13th 2022 Jihadism before Kabul fell. But that infrastructure shows signs of revival, according to a un Al-Qaeda and Islamic State are both monitoring team. AlQaeda has an “adviso digging into Africa ry” role with the Taliban, it notes. AlQaeda in the Indian Subcontinent (aqis) has 180 DAKAR AND DUBAI 400 members, many of whom recently fought alongside the Taliban. Their African franchises are now punchier than those in the Middle East “We don’t have evidence that there is Thirteen years have passed since al ia’s civil war to prohijab protests in India. any nascent international attack capability Qaeda’s last big plot against America, a In one sense Mr Zawahiri’s tenure, from that is starting to blossom in Afghanistan,” botched effort to blow up New York’s sub says Edmund FittonBrown, the un team’s way in 2009. The war in Afghanistan is ov 2011 to 2022, was a failure. His group coordinator. But he notes that Mr Haqqa er. Americans and Europeans are preoccu mounted few big attacks in America or ni, as interior minister, oversees citizen pied with other crises, from Ukraine to Tai Europe for a decade. Nor did it topple any ship, passports and travel. “This could be a wan. But the two Hellfire missiles that supposedly “apostate” Arab regimes like longer game plan” that could lead to fresh killed Ayman alZawahiri, alQaeda’s lead Saudi Arabia’s or Egypt’s. The rise of Islam acts of terrorism by the likes of alQaeda er and Osama bin Laden’s successor, on a ic State (is) in Syria and Iraq, which had anywhere, planned in Afghanistan. balcony in Kabul on July 31st were a re split from alQaeda and in 2014 set up a me minder of his group’s staying power. diasavvy caliphate that held territory for That will depend on whether the Tali several years, made Mr Zawahiri’s outfit ban rein it in, fearful of the consequences Mr Zawahiri would not have dreamed of look like an alsoran. of another attack mounted from Afghan watching the sunrise from the luxury of soil. But what already distinguishes al Kabul’s diplomatic enclave, had the Tali It is not. “The alQaeda terrorist infra Qaeda’s position today, compared with ban not conquered Afghanistan last sum structure we faced in 2001 is long since 2001, is the breadth of its activity. In recent mer. His safe house was owned by the Haq gone,” said Ken McCallum, head of mi5, years the movement has become remark qani network, a group with ties to Pakista Britain’s security service, last year, shortly ably decentralised (see map on next page). ni intelligence. Siraj Haqqani, its leader, is both deputy head of the Taliban and interi → Also in this section The Sahel, a vast, poorly governed or minister of Afghanistan. No wonder stretch to the south of the Sahara desert, is that Mr Zawahiri, whose communications 37 The Emirates make rain now the world’s terrorism hotspot, ac were once so patchy that many thought counting for more than a third of all terro him dead, felt secure enough there to re 38 Kenya’s close election rism deaths in 2021. It is home to Jama’at lease a stream of videos on topics from Syr Nasr alIslam wal Muslimin (the Support 39 Ghana’s 17th IMF bail-out Group for Islam and Muslims, or jnim), a coalition affiliated to alQaeda. Last year it was the world’s fastestgrowing jihadist or 012
The Economist August 13th 2022 Middle East & Africa 37 ganisation, measured by the increase in Afghanistan, most of the 700 people killed cate and command may be less than Mr Za the tally of attacks and deaths. since America left a year ago have died at wahiri enjoyed for most of his tenure. the hands of is’s local branch, isKhorasan. In Mali nearly 2,700 people were killed Does this centrifugal tendency among in conflict in the first six months of this This alphabet soup of local groups can jihadists spell more or less danger for the year, almost 40% more than in all of 2021. be confusing. The links to their parent or West? Some argue that the violence they Last month jihadists attacked a military ganisations are often fuzzy. isgs, for in perpetrate in places like the Sahel and Af checkpoint 60km from Bamako, the capi stance, is really a form of “major gang ghanistan is dreadful for the locals but a tal; a week later they hit the country’s main criminality”, argues General Marc Conruyt, sideshow for the West. “These are areas of military camp on its doorstep. In Niger, who led French forces in the Sahel until a limited interest to the United States,” says deaths in conflict have fallen slightly but year ago. It wraps itself in a jihadist flag but Daniel Byman of Georgetown University. will probably exceed 1,000 in 2022. In Bur does not have a clear political project. The centrally run jihad of the 1990s against kina Faso in the first half of the year about the West that culminated in 9/11 has, in this 2,100 people have been killed. Djibo, a Most of the groups that make up jnim view, reversed. “AlQaeda has become a lo town in the north, is often cut off from Ba are run by Malians, with local agendas in cal group that doesn’t really prioritise ex mako by jihadist roadblocks. mind. Among the coalition of groups in ternal attacks,” says Mr Hamming. jnim, the one perhaps most closely tied to Crossing the continent “core alQaeda”, as the leadership is Western intelligence agencies are less AlQaeda is also finding fertile ground in known, is alQaeda in the Islamic Ma sanguine. The un monitoring panel reck east Africa. AlShabab, its affiliate, controls ghreb. Yet even it largely ignored Mr Zawa ons that jihadists in the Sahel and else large parts of rural Somalia. General Ste hiri’s entreaties to attack Americans rather where must be crushed, or “one or more of phen Townsend, America’s commander than local security forces. them will incubate an external operational for Africa until August 9th, told the Senate capability for alQaeda or a related terrorist in March that alShabab is “the largest, The disconnect between the jihadists’ group.” Complacency would be unwise. n wealthiest and most lethal alQaeda affili core and periphery may be partly due to ate in the world today”. It has “grown stron counterterrorism successes. AlQaeda’s The United Arab Emirates ger and bolder over the past year”. In May it affiliate in Syria, then known as Jabhat al overran an African Union base, killing Nusrah, was unable to communicate with Joule in the rain more than 50 people and stealing weap Mr Zawahiri for three years, between 2013 ons. In July a force of 500800 alShabab and 2016, says Tore Hamming of the Inter DUBAI fighters penetrated a security zone main national Centre for the Study of Radicalisa tained by Ethiopia, then crossed 150km tion at King’s College London. It reached The Emirates hope to jolt clouds into into that country with the aim of setting up out to other alQaeda leaders in Iran but sharing their bounty in an arid land a base in the Bale mountains. “basically ran its own business”. The same is probably true of some African affiliates. Especially in the summer months, life is has also spread from its core territory In the case of is, many affiliates even col in Dubai can feel like a denial of nature. in Iraq and Syria to an array of local con lect money and send it to the central lead The malls, the hotels, even the swimming flicts. Its rivalry with alQaeda in Syria has ership, not vice versa, adds Mr Hamming. pools are frosty. But the air outside is bak abated; both groups struggle to survive ing, with temperatures above 40°C and hu there, though thousands of is sympa This decentralisation may help keep al midity so thick it fogs glasses and seeps thisers still lurk among Sunnis aggrieved Qaeda and is alive. America has now assas from airconditioning vents. by the Shias’ new dominance in Iraq. And it sinated both of alQaeda’s leaders, the first keenly recruits, funds and influences jiha five heads of is in Afghanistan, and succes The United Arab Emirates (uae), a sev dists in Africa and Afghanistan. sive is leaders in Syria, most recently in enmember federation of which Dubai is February. Yet this relentless decapitation part, wants to put some of that humidity to In Nigeria, for instance, Islamic State seems to have made little difference. use. The country has one of the world’s West Africa Province (iswap) has replaced keenest cloudseeding programmes, flying Boko Haram as the main jihadist group. The two organisations look more dif some 200 missions a year from an airfield One of its offshoots, Islamic State in the fuse, however, and Mr Zawahiri’s succes in Abu Dhabi, the capital. Every week or Greater Sahara (isgs), has mounted indis sors are unlikely to reverse this trend. Sayf two, planes zip into the clouds to try to criminate attacks in Burkina Faso, Mali alAdl, alQaeda’s heir apparent, and Abd squeeze out a shower. Lately they have and Niger. An islinked group has wrought ulRahman alMaghrebi, its next most se been joined by experimental drones: if na havoc in northern Mozambique. Back in nior figure, both live in Iran, where they are ture will not share rain of its own accord, kept on a tight leash by Iranian intelli the uae hopes to jolt it into compliance. gence. Their freedom to travel, communi Cloudseeding has been practised for Caucasus almost a century. SouthEast Asian coun tries use it to clear dryseason haze; ski re Turkey Azerbaijan sorts in America to help carpet the slopes with snow. China tried it during the sum Tunisia Syria Iraq Iran Afghanistan mer Olympics in 2008. Officials wanted to cajole clouds into casting out their con Algeria Libya Egypt Saudi Pakistan Philippines tents before they reached Beijing—and Arabia India Indonesia ruined the festivities. Mali Niger Chad Nigeria Yemen Bangladesh In the early days planes would dump dry ice into clouds. Today they carry chem Burkina Cameroon Somalia icals, usually silver iodide or other salts. Faso Kenya They are meant to attract water droplets, in Congo the hope they become heavy enough to fall to earth as rain. Whether this works is not Mozambique Countries with declared presence of groups tied to al-Qaeda or Islamic State, 2022 Sources: US Director of al-Qaeda IS al-Qaeda and IS National Intelligence; ExTrac 012
38 Middle East & Africa The Economist August 13th 2022 clear. A study partly funded by America’s Kenya’s election Mind the count National Science Foundation found that cloudseeding boosts snowfall under the Too close to call Mr Kenyatta holds the most famous Ki right conditions. Studies in America, Israel kuyu surname. His father, Jomo, was an and elsewhere were inconclusive. G AT U N D U anticolonial hero who became Kenya’s first president. Yet for all his pedigree, the The uae hopes it works. One of the The contest is going down to the wire, president has singularly failed to deliver to driest countries on earth, it sometimes has signalling a momentous shift Mr Odinga the Kikuyu vote. Provisional re less than 100mm (four inches) of rain a sults suggest that he has won a measly 20% year. There are occasional rainy days in Elections in kenya tend to veer be of the vote in Kikuyuland. winter and brief downpours in summer tween emotional extremes. The one in that break the oppressive humidity. But na 2002 was joyful as voters swept an opposi Mr Odinga’s failure to win over the Ki ture does not provide enough water for a tion candidate to the presidency for the kuyu, which has turned what should have population of about 10m people that is still first time. A disputed poll in 2007 was hor been a coronation into a tight race, is not growing. Most drinking water comes from rifying: perhaps 1,400 people were killed in the only surprise in this contest. Perhaps the sea. So much so that 14% of the world’s its aftermath. The latest, on August 9th, more startling is the success of Mr Ruto in desalinated water is produced in the uae. has unexpectedly turned into a nailbiter. winning votes in Kikuyuland, seeing that the International Criminal Court in The Climate change might supply a bit more Opinion polls in the days before the Hague charged him with instigating at water from the heavens. Over the New Year election suggested that Raila Odinga, a vet tacks in which hundreds of Kikuyus were weekend, parts of the uae logged as much eran opposition leader making his fifth killed after the elections in 2007. (Mr Ruto as 142mm of rain, more than a year’s worth, run for president, would stroll to victory has denied wrongdoing and the court has in just three days. Locals saw it as an auspi with a lead of six to eight points over Wil since suspended its prosecution.) cious start to the year: the Prophet Muham liam Ruto, the deputy president. Cynical mad considered rain a blessing. sorts, influenced by Kenya’s history of iffy Mr Ruto’s success among the Kikuyu elections, reckoned that even if Mr Odinga can be attributed partly to the disappoint Summer has also brought unusual lost, the establishment would fiddle the ment many feel about how the president weather, less cheerfully. Fujairah, on the count in his favour. Both assumptions acquitted himself in office. In particular, east coast, saw a freak storm in July that seem to be wide of the mark. Mr Kenyatta has struggled to shake off per flooded houses and washed away cars. Sev ceptions that he faced a conflict of interest en people died. Scientists say climate In 2017 the electoral commission mud since his family has huge commercial in change may have played a role. dled things so badly that the Supreme terests, encompassing everything from Court ordered a rerun. Chastened, it has dairy farming to tourism and banks. “We Still, even a rainier uae will not be rainy conducted this vote admirably. Mindful are ruled by the richest man in the country enough. Last year the government started that delays arouse suspicion, the commis and yet we are still poor,” says Mwangi fiddling with drones. Instead of dropping sion published screenshots of results Githinji, a lorry driver in Gatundu, the Ken chemical payloads into clouds, they deliv forms filled in by no less than 81% of its yatta family’s home town. er an electric shock. The jolt, in theory, 46,229 voting stations within seven hours could cause droplets to clump together: of the polls closing. This step has allowed If Mr Ruto wins it will signal a momen the same result as oldfashioned cloud for much greater public scrutiny of the tous shift in Kenya’s politics, which have seeding, but without the chemicals. counting process. It will surely make it long been sullied by ethnicity. Mr Ruto has harder for the loser to cry foul. campaigned to persuade Kikuyus to forget The uae insists the chemical version about the past by tapping into fresh griev works, even if other researchers are less Although the official result could yet ances. Presenting himself as the champion sure. For Dubai’s residents, however, the trigger violence, the smoothness of the of the poor, he won support from have programme has become something of a process so far bolsters Kenya’s reputation nots across the country. For the first time, a running jest. A day at the beach ruined by a as east Africa’s most robust democracy. As Kenyan election has been fought—and freak storm is not simply bad luck; it might strongmen elsewhere butcher constitu may indeed be won—as much on class as merit a complaint to the government. n tions to remain in power, Uhuru Kenyatta on ethnic lines. n has become Kenya’s third president in a Dubai loves to be drenched row to respect a twoterm limit. Despite Kenya’s improving electoral performance, its political system seems to be ailing, corroded by a selfserving and unaccountable ruling class. If anyone had seemed to stand valiantly outside it, Mr Odinga was the man. In previous elections he ran as the main opposition candidate, being beaten into second place each time in contests that did not always look free and fair. This time he changed his tactics by allying himself with Mr Kenyatta. It seemed like a winning strategy. Mr Odinga, in effect, gained the benefits of in cumbency. The harassment his supporters once experienced at police hands was visit ed on his opponent’s instead. Above all, the president’s endorsement was expected to give him the support of the Kikuyu, Ken ya’s largest ethnic group. 012
The Economist August 13th 2022 Middle East & Africa 39 Ghana and the IMF are involved in corruption in various insti tutions, such as the police or religious Making a success out of failure leaders. When they most recently asked this question in relation to “the president ACCRA AND NGLESHI AMANFRO and officials in his office”, more than half of respondents answered “most” or “all”. Despite frequent bail-outs, Ghana is surprisingly prosperous Rich as Ghana is relative to its hardup Enu, a shopper at Kaneshie market in debt rose from 56% of gdp in 2016 to 63% neighbours, many Ghanaians reckon they Accra, the capital of Ghana, peers into a on the eve of the pandemic in 2019. would be richer still if the economy had small bag of scrabbling crabs with disap been managed better. Yet there may be pointment. “Before, if I buy two cedis’ When covid hit, many African govern more than meets the eye to Ghana’s unor worth, it can make my stew for me,” she ments had little choice but to borrow and thodox and imperfect model of big spend says. “Now, no.” As shoppers moan about spend to support their economies. Ghana ing interspersed with imf programmes. inflation, traders grumble about slow did so more than most. Its budget deficit of Deficitfinanced investment can pump up sales. Many blame the government. “The 16% in 2020 was the secondhighest in growth for a while. Indeed, some of the finance minister, if I catch him, me, I will subSaharan Africa, far above the regional borrowed cash has gone into roads, hospi beat him,” declares Esther, a yamseller average of 6%. This may have helped avoid tals and free secondary schooling. This with a twinkle in her eye. a recession, but Ghana’s debt is now a may not have boosted growth enough to thumping 84% of gdp, reckons the imf. pay back the debt, but it still brings bene Fully 87% of Ghanaians think the coun fits. The spending has also improved social try is going in the wrong direction, accord Mr OforiAtta suggests that it is racist to cohesion, says Mr OforiAtta. That is not to ing to a survey in April by Afrobarometer, a criticise Ghana’s deficit. Rich countries be underestimated given the strife in many pollster. The economy is a big reason. An spent far more in absolute terms, he ob of Ghana’s neighbours. nual inflation hit 30% in June, its highest serves. “Do they have a right to do that for 18 years. This year the central bank has more than we do because we are African?” Perhaps one explanation for Ghana’s increased interest rates by 4.5 percentage He glosses over the fact that rich countries ability to make a success of failure has points, to 19%, but the cedi has nonethe could safely spend more because they raise been its readiness to turn to the imf before less fallen by 28% against the dollar. far more tax than Ghana does. the economy has suffered catastrophic harm. Politicians then blame the fund for The government has been slow to face Borrowed dime prescribing austerity that they know is up to the crisis. “We are not going to the Ghana’s take in taxes is worth only about needed, but would not dare to impose imf, whatever we do, we are not,” declared 12% of gdp, well below the average of 15% without the cover of an imf programme. Ken OforiAtta, the finance minister, in for Africa. It is also perennially vulnerable February. “We are a proud nation.” On July to foreigncurrency shortages because it Ghana’s reputation for peace, democra 1st the government ate its words, asking depends largely on volatile commodity ex cy and, at times, rapid economic growth the imf for help escaping the pit of debt it ports—chiefly gold, oil and cocoa. has helped persuade creditors and donors has dug itself into. Last year 44% of its rev that the country is a worthy candidate for enue went on foreign loans. The unsus Moreover, many worry that Ghana does debt relief when crises hit, argues Bright tainable borrowing, naturally, has scared not always spend its money wisely. Em Simons of Imani, a thinktank in Accra. Its off lenders, leaving it with few options. manuel GyimahBoadi, the cofounder of star image has also brought creditors back Afrobarometer, who is based in Accra, ar after its crises, even when it has not mend This is familiar territory for Ghana, gues that a good deal of spending before ed its ways, allowing its unorthodox which has been nannied by the imf for 22 the general election in 2020 was aimed at growth model to roll on. of the past 35 years. The new programme helping Mr AkufoAddo win a second term. will be its 17th since independence in 1957 This would fit a pattern. Before almost eve Now the government will find out if it and comes little more than three years ry election in recent decades the ruling has run out of road. Mr OforiAtta does not after it graduated from its previous one. All party has tended to splurge (see chart). rule out another debt restructuring, but of this might suggest Ghana has made a nonetheless promises that Ghana will dog’s dinner of managing its economy. Yet Graft is another recurring worry. Poll soon resume borrowing from private cred its people are the richest in continental sters from Afrobarometer regularly ask itors. Yet each bailout dims its star. That west Africa, measured by gdp per person. Ghanaians how many people they think may be why the government is so deter What’s more, politicians regularly and mined to blame covid for its current pickle. peacefully hand power over at elections. Bloat then vote Mr OforiAtta also blames rating agencies This makes it a model for how a country for forcing Ghana back to the imf: his min can develop and democratise, despite its Ghana, general government budget deficit istry says they have an “institutionalised macroeconomic turbulence. % of GDP* bias against African economies”. The government insists that today’s cri 0 Even if Ghana’s odd model has had its sis is not its fault. “We were on a very posi benefits, many Ghanaians are tiring of the tive trajectory” before the pandemic, says -4 cycle of porkbarrel politics followed by Mr OforiAtta. Russia’s invasion of Ukraine imf interventions. Almost half of Ghana and a surge in global inflation compound Election years -8 ians are dissatisfied with the way democra ed the harm, he adds. -12 cy works, by far the highest share since Afrobarometer began polling in 1999. Adia, Yet Ghana was vulnerable well before 2000 05 -16 who runs a tiny shop an hour outside of Ac covid19 struck. The imf had already 10 15 20 22† cra, was once a “full supporter” of Mr Aku warned that it was at a high risk of debt dis Source: IMF foAddo. But she no longer believes in him tress before President Nana AkufoAddo *Estimate for 201 -21 †Forecast or the system, she says, as she pounds fufu, took office in 2017. Despite this, his govern a starchy staple. On the next election day ment kept on borrowing. Ghana’s public her plan is simple. “I will pound fufu,” she says. “After eating the fufu, I will lock my door and sleep.” n 012
40 Europe The Economist August 13th 2022 Conflict in Ukraine threatened outsiders thinking of interven ing with consequences “such as you have The rungs of escalation never seen in your entire history”. State media in Russia fantasise about nuclear WASHINGTON, DC strikes on the West. For now, though, America says there is no sign that Russia What would push the West and Russia to nuclear war? has put its nuclear forces on higher alert. America and Russia still swap information “The word ‘impossible’,” quipped The strongest reason for America’s cau about their longrange nukes. Mr Biden has Oleksii Reznikov, Ukraine’s defence tion, though, is fear of escalation—that called on Russia to resume armscontrol minister, “means ‘possible in the future’.” Russia might lash out militarily at nato talks. Russia said sanctions prevent the re Javelin antitank missiles, forbidden by (“horizontal escalation”, in the jargon) or sumption of onsite inspections. America when Vladimir Putin took the first use chemical or nuclear weapons in Uk chunks of Ukraine in 2014, came in a trick raine (“vertical escalation”). Either version Over five months of fighting, the le from 2017 and then a flood when he in would almost certainly draw nato into di threshold for a direct clash has repeatedly vaded again in February. Stinger antiair rect conflict with Russia, and President Joe shifted, without dire consequences for the craft weapons, similarly refused, arrived in Biden has vowed to avoid “World War III”. West. “nato has been brilliant at salami March. And the longawaited himars slicing its assistance,” says James Acton of rocket launchers have been taking out Ukraine’s looming effort to reconquer the Carnegie Endowment for International command posts and weapons dumps far Kherson is a test. If successful, hawks will Peace, a thinktank. “It has given the Ukrai behind Russia’s front lines since June. F16 see it as proof that Ukraine, given the right nians a fair amount of support, but at no fighter jets may come one day. help, can win. Doves fret that it could pro time did it present Russia with a point at voke Mr Putin to greater villainy. which they could say, ‘No further’.” America and Europe hail Ukraine’s fighting spirit, which raises a nagging On the day he invaded Ukraine Mr Putin Not all agree. “Every salamislice means question: why are they not sending more that more innocent Ukrainians are killed,” weapons, more quickly? The latest $1bn → Also in this section retorts Ben Hodges, a former head of the American military package for Ukraine in American army in Europe. He says the Bi cludes munitions for himars but no more 41 Explosions in Crimea den administration “has overstated the launchers beyond the current 16, which risk of escalation”. Russia does not want to many experts think insufficient. Officials’ 41 Putin’s disposable conscripts take on nato, he says, and a nuclear re answers vary: the West is giving priority to sponse is highly unlikely. weapons that are most urgently needed; it 42 Hidden injuries in Ukraine has to train Ukrainians to use and main Others caution that Mr Putin may esca tain their new kit; and they have to show 43 Italy’s radical right advances late rather than accept defeat. Samuel Cha they can use it effectively in battle. rap of the rand Corporation, a thinktank 43 France’s missing mustard close to the Pentagon, says Russia has un used military capacity. The air force could 44 Charlemagne: Feeling the heat also be committed more fully. The more the West helps Ukraine, the more Russia 012
The Economist August 13th 2022 Europe 41 will raise the stakes. “There is no stable Russia. It would not “prolong the war just Conscription in Donbas equilibrium,” argues Mr Charap. “We are in to inflict pain on Russia”. Mr Biden warned a slowmoving, incremental escalation.” Russia that using nuclear weapons “would Putin’s disposables entail severe consequences”. A response History suggests that countries can go a would depend on the circumstances, but DNIPRO AND KYIV long way in waging proxy wars against nu officials whisper it may involve conven clear powers without atomic retribution tional rather than nuclear strikes. Plainly, Russia is forcing Ukrainian conscripts (albeit with scares). Think of Russia and Mr Biden does not want to get to that point. into battle China supporting North Vietnam against America in the 1970s; or America arming While steering around these selfim Sasha mostly kept to himself. The 18 the Afghan mujahideen to bleed the Soviet posed limits, Mr Biden has left his destina yearold engineering student from Do Union in the 1980s. tion unclear. Sources say officials are con netsk, a city in eastern Ukraine controlled ducting war games to decide their ultimate since 2014 by Kremlinbacked separatists, Russia’s published doctrine envisages objective. For now the administration had no patience for politics. “We were not four scenarios for the use of nuclear weap speaks in bromides, saying it wants “a for Russia, and we were not for Ukraine,” ons: detection of a ballisticmissile attack democratic, independent, sovereign and says his mother, Natalya. “We were never against Russia or its allies; an attack on prosperous Ukraine”. It does not adopt interested in the war.” Yet on February them with nuclear or other weapons of Ukraine’s demand for the return of all lost 23rd—the eve of Russia’s invasion of Uk mass destruction; actions that threaten its territories, including land Russia took in raine—officials from an army recruitment nuclear commandandcontrol systems; 2014. Intentionally or not, Mr Biden’s poli centre turned up at Sasha’s university. and “aggression against the Russian Feder cy is likely to generate a long war or a grind They ordered him to report for duty the ation with the use of conventional weap ing stalemate. This risks the unity and next day. ons when the very existence of the state is staying power of Western countries if in jeopardy”. voters revolt against stagflation, energy Natalya was told that her son would scarcity and the bill for supporting Uk take part in exercises, then return home. In The West’s arming of Ukraine falls well raine. That may be Mr Putin’s plan. fact Sasha was sent to the front, near Khar short of those red lines. Yet the concept of kiv, a Ukrainian city that has been devas an existential threat is elastic, notes Bruno Yet frustration and uncertainty are in tated by Russian attacks. Every few days Tertrais of the Foundation for Strategic Re the nature of nuclear dissuasion: America Sasha would call his mother to say he was search, a thinktank in France. Mr Putin is deterred from intervening directly; Rus okay. The last such call came at the start of has called Ukraine “a matter of life and sia from striking at nato. The late Tom April. The next came from a prison camp in death”. He has also suggested that a major Schelling, an economist and nuclear strat western Ukraine. Sasha had been captured. attack on Crimea, which Russia annexed in egist, argued that the brink of war can be 2014, would be similarly grave (explosions unknowable. It is not “the sharp edge of a He is luckier than others. Since the start rocked an airbase in Crimea on August 9th; cliff where one can stand firmly, look of the war Russian forces and leaders in the see picture). Others ask, what if Mr Putin down, and decide whether or not to occupied “people’s republics” of Donetsk regards himself as the state, so that any plunge”; instead it is a slippery curved and Luhansk are said to have mobilised danger to his regime is deemed an existen slope where “neither the person standing some 100,000 men. Ukrainian officials say tial threat to Russia? there nor the onlookers can be quite sure 25,000 conscripts from the occupied terri quite how great the risk is.” When the peril tories have been killed or are missing in ac A recent rand paper by Mr Charap and is a catastrophic nuclear exchange, who tion, an improbably high figure. Russian others sets out four scenarios of horizontal can blame leaders for treading carefully? n escalation. The first is labelled “Pathway 0” because the escalation spiral may already Explosions in Crimea be under way: Russia is bound to respond to military and economic losses inflicted On August 9th explosions lit up a Russian airbase in Crimea, the peninsula in the Black on it, if not now then “in due course”. Next Sea that Russia seized from Ukraine in 2014. At least eight aircraft were destroyed. is a preemptive attack by Russia if it Ukraine’s government declined to say clearly if its forces had attacked the airbase, thinks nato is about to intervene, after it which lies more than 100 miles (160km) from the front lines. It is the first such incident deploys missile systems near the Russian to take place in Crimea since Russia’s current invasion of Ukraine began in February. border, say. Third is hitting Western mili tary supply lines that support Ukraine. Last is “a dramatic increase in domestic, eco nomic, and political instability in Russia”. In most cases Russia’s retribution would probably begin covertly—through cyberattacks, sabotage, assassination and more. The preemption scenario is most likely to provoke a military attack, perhaps even a nuclear strike. The scenarios may overlap and “all are more dangerous if Rus sia is losing,” adds Mr Charap. In truth, nobody knows where Mr Pu tin’s red lines lie. Perhaps not even he does. America has stopped talking of helping Ukraine “win” and of weakening Russia. Instead it speaks of ensuring Ukraine does not lose. In the New York Times in May Mr Biden listed many things America would not do. It would not seek to unseat Mr Pu tin, nor send troops to Ukraine, nor fight against Russia, nor help Ukraine strike at 012
42 Europe The Economist August 13th 2022 75 km Kyiv lated when the first bodies returned. Con a visit in late July. A soldier had just been scription was reportedly paused as a result. admitted, having turned firearms on a col Kharkiv But now it seems to be restarting, albeit league on the front line. But things were more cautiously. On August 1st 21 men even worse during the battle for Kyiv in Luhansk were enlisted in Donetsk, says Pavel Li March, when missiles were landing all Severodonetsk syansky, of the Eastern Human Rights around the building. The doctors spread Group, a watchdog. Conscription also resources as best they could. They dis UKRAINE Lysychansk seems to have begun in bits of eastern Uk charged all but the most dangerous pa raine that Russia has only recently cap tients. There were tragedies. One of the dis RUSSIA tured, says Mr Arestovych. That includes charged men, who had a history of mental the cities of Lysychansk and Severodo illness, hanged himself after discovering Dnipro D o Luhansk netsk, which were taken in June and July. that his home had been ransacked by Rus s sian soldiers. n b a Protests against conscription in the “people’s republics” have died down. Some Eduard says that many of the patients Donetsk of the women involved have been arrested. he met in the hospital were from Bucha or Russian media claim they were part of a Irpin, suburbs of Kyiv where occupying Donetsk Area controlled by Ukrainian “intelligence operation”, and Russian forces committed atrocities. They Mariupol Russian-backed say they could serve 20 years in prison for included men of all ages and backgrounds. separatists treason (The Economist has changed the One friendly group got it into their heads before Feb 24th names of conscripts and their relatives). that Eduard was God. “They introduced But locals are using social media to share themselves one by one: this is Archangel August 10th 0 *Russia operated in information that can help men aged 1855 Michael, and this soandso is Archangel avoid army recruiters. Natalya considered Gabriel.” Others were too traumatised to Assessed as Russian-controlled or attacked, but hiding Sasha, she says, but decided it was speak, but welcomed Eduard with small does not control not worth the risk. “They told us he would gifts: apples, tea bags, coffee, socks. One only be away for two weeks.” n young patient would bring him oneko Claimed as Russian-controlled Sources: Institute for peck coins. Trauma in Ukraine Assessed Russian advances* the Study of War; Ukraine’s government has sent mental AEI’s Critical Minds in pieces health specialists into some of the worst hit towns. Nataliya Zaretska, a psycholo Claimed Ukrainian counter-attacks Threats Project KYIV gist, has been working in Bucha for three months. She expected her programme to sources mention about 3,000 dead, an im The harm to mental health is only just end after six months, but demand is so probably low one. But data suggest that Uk becoming clear high that she has opened a new mental rainians from the separatist republics are health centre in the town. She works with dying at a higher rate than troops from Eduard cannot remember exactly how soldiers who have returned after being tor Russia. By June 2022 more than half of the he ended up approaching a Ukrainian tured in captivity, and locals who have original members of the Donetsk militia military checkpoint and shouting: “Putin been prisoners in their own homes. had been killed or wounded in combat, is my president.” The fashion designer re reckons Britain’s defence ministry. calls growing panicked as war raged out There are few things as dangerous for side his home in northern Kyiv. He would mental health as feelings of betrayal and Ukrainian officials say that conscripts cry uncontrollably at the news. He became disillusionment, says Olena Nahorna, a from the “people’s republics” are sent into obsessed with Russians, who were then colleague of Ms Zaretska who is embedded battle ahead of others, to draw artillery fire advancing on the other side of a nearby for with Ukrainian troops in Donbas. Before and force the Ukrainians to disclose their est. Perhaps he was searching for them the war “a lot of Ukrainians saw Moscow as positions. “It’s very convenient for Russia, when he left his home, in pyjamas, and a neighbour, albeit an eccentric one,” she because they don’t lose their troops,” says went to Ukrainian positions in the woods. says. “It was a personal tragedy when that Oleksiy Arestovych, an aide to Volodymyr Instead, he remembers saying he was look eccentric friend burst into their homes and Zelensky, the Ukrainian president. “It’s Uk ing for Katya Chilly, a pop singer, before started killing them.” Those who under rainians killing Ukrainians.” announcing his support for Russia’s presi stood from the start that Russia was an en dent. The soldiers roughed him up. emy have coped better than others with the ProRussian sympathies run deep in horrors of the war, she argues. Donetsk and Luhansk. Thousands of the That afternoon Eduard was admitted to men Russia has deployed to the eastern a psychiatric hospital in Kyiv. Yaroslav Zak Ms Nahorna identifies one consolation: front are loyalists who have seen action harov, a doctor who saw him, says his case the national unity forged by shared trau frequently since 2014. Many of them have is hardly unique. War has affected every ma. Eduard says his experience has welcomed the chance to fight Russia’s war. Ukrainian. Stress is making people who brought clarity. “I realise I could be dead, But interviews with relatives and activists were already at risk of mental illness more that soldiers might have shot me, and that suggest that most of the new conscripts are vulnerable. “People like to control things, is a big kick up the backside.” His doctor unprepared, underequipped and unwill and war doesn’t let you.” Ukraine’s health agrees, but says it is too early to know the ing. “He told me many of them did not ministry is already predicting that 3m4m extent of his trauma. He says Mr Putin has know how to use weapons, and nobody people will need to receive drugs to man dropped a delayedaction bomb on the wanted to fight,” says Alina, a woman age mentalhealth problems resulting psyche of every Ukrainian. whose brother, a schoolteacher from Do from the war. Some 15m will require other netsk, also ended up in Kharkiv. “Their kinds of psychological support. The doctor, close to tears, says he tried commanders told them they would be shot to enlist in the army himself. He was per if they turned back.” Dr Zakharov’s hospital was busy during suaded against it by a former patient now fighting in Donbas. “She told me I needed At the start of the invasion factories in to take good care of myself, that I would be Donetsk were asked to assign half their needed by all of them when the war is ov workers to war duty. Some 80 artists from er.” She was right. n the Donbas region, half of them musicians from the local philharmonic, were also conscripted. According to a story in Nova- ya Gazeta, an independent Russian news paper, most are wounded or dead. Some conscripts have been given weapons and uniforms dating back to the Soviet era, and perhaps even the second world war. In March groups of women, outraged that their husbands had been sent to the front, repeatedly confronted officials in Donetsk and Luhansk. Their protests esca 012
The Economist August 13th 2022 Europe 43 Italy’s election had sealed with Mr Letta just five days ear with a real chance of victory would need to lier. He said he disapproved of deals that take in the Five Star Movement.” Defeat foretold Mr Letta had subsequently made with three other small parties. Mr Letta re The centreleft under Romano Prodi ROME sponded drily, “The only possible ally for won general elections in 1996 and 2006, Calenda is Calenda.” defeating Mr Berlusconi, then the main fig Can anything stop the radical right? ure on the right. But Mr Prodi did not have The Action party may now link up with to cope with the Five Star Movement, Italy’s politics can be bewilderingly Italia Viva, a small centrist group led by which was founded in 2009 with the ec complex. Five big parties and many Matteo Renzi. Mr Letta has never forgiven centric aim of installing an internetbased small ones will compete in the general Mr Renzi for ousting him from the pre system of direct democracy and which election on September 25th. Before that miership in 2014 and has not sought to in continues to defy easy categorisation. Al they will shuffle into an uncertain number clude Italia Viva in his alliance. The ab though its support has slumped from the of electoral alliances. Yet already the race sence of Action and Italia Viva means his 32% it won at the previous election, the to replace Mario Draghi’s fallen govern alliance will sit firmly to the left, which polls still give the Five Star Movement 10% ment is boiling down to one question. Is limits its appeal among centrist voters. of the vote. Mr Letta has said that its role in there anything her adversaries can do to Polls suggest it could end up with less than bringing down Italy’s most recent govern prevent Giorgia Meloni, leader of the hard 30% of the vote. But Mr Calenda’s antics ment disqualifies it from his alliance. But right Brothers of Italy (fdi) party, from be have diverted attention from the real issue, without its support the Italian centreleft coming the next prime minister? says Antonio Noto of Noto Sondaggi, a looks condemned to what Mr Noto calls “a polling firm. “The only centreleft alliance defeat foretold”. n Ms Meloni’s party is part of an alliance that also includes the nationalist Northern Gastronomy League, Silvio Berlusconi’s Forza Italia par ty and some smaller parties. Polling cur The great French mustard shortage rently suggests that this group could win more than 45% of votes, which should be DIJON enough for a majority in parliament. On Ju ly 27th the alliance renewed an agreement A vain search for a condiment in its home town which dictates that, should they triumph, the leader of the party with the most votes Dijon, the historic capital of Burgun Ukraine has prevented French importers will become prime minister. Ms Meloni’s dy in France, might seem a good from turning to suppliers in those two party is polling around ten percentage place to find a pot of the worldfamous countries instead. Local farmers cannot points ahead of the League and 15 points mustard that bears the city’s name. Since compensate, says Luc Vandermaesen of ahead of Forza Italia. the spring supermarkets across France the Burgundy Mustard Association: “The have run short of the sharp, paleyellow market is totally dry; there are zero The centreleft Democratic Party (pd), condiment. Surely shops in Dijon, where stocks, nothing.” led by Enrico Letta, a former prime minis the craft of the moutardier dates to 1634, ter, is about as popular as the fdi. Both must sell the stuff? “None,” says a shop Helpful shopkeepers in Dijon suggest could get around 23% of votes (see chart). keeper, pointing to empty shelves: “A that Moutarde Maille, a shop selling only But Mr Letta’s efforts to build a broad elec delivery this morning sold out within the the famous brand established in 1747, toral alliance are in ruins, in part because hour.” “Ah non!” says another, “we might be the place. Indeed, rows of speci Italy’s progressives seem incapable of haven’t had any for weeks.” In a third ality mustards line its shelves, flavoured burying their differences. On August 7th shop, an apologetic assistant suggests an with garlic, lemon or truffles, but plain Carlo Calenda, a businessmanturnedpol alternative: a squeezable bottle of sauce Dijon mustard has sold out. The French itician who left the pd to form a centrist from a manufacturer that boasts of creat are unlikely to see stocks replenished group, Azione (Action), said he was pulling ing “flavour experiences”. “It’s not Dijon until 2023 at the earliest, predicts Mr out of an electoral pact with the pd that he mustard though,” he says regretfully. The Vandermaesen. In the meantime, the brand is French’s—America’s favourite. milder version may be their only op Meloni on the march tion—even if it is not the kind on which The mystery of the missing Dijon they are, er, mustard keen. Italy, voting intention in general election, % mustard has gripped France for months. Main parties Shops that get stock will sell only one pot Savour it while you can per customer. Humorous clips about 40 ways to circumvent rationing fly around social media. Amateur cooks scramble Northern League 30 for an alternative ingredient to prepare Five Star 20 vinaigrette, mayonnaise, or steak tartare, Movement 10 a dish made of raw meat that is also seasoned with egg yolk and capers. Democratic Party The French eat a kilo of mustard each Brothers of Italy Forza Italia 0 per year. The type they like has a nose 21 22 tingling kick. They do not much care for 2018 19 20 the milder, sweeter sauce that is slath ered on hot dogs in America. Hence the Source: National polls problem. French manufacturers get 80% of the brown mustard seeds (brassica juncea) they need to make Dijon mustard from Canada, where a drought last year halved the harvest. Russia’s invasion of 012
44 Europe The Economist August 13th 2022 Charlemagne Feeling the heat A changing climate is bad news for a continent that doesn’t much like change Economists visit timetested haunts when they want to get a The immediate concerns are around what is happening to food feel for how Europe is faring. The bourses of Milan or Paris pro supplies, energy and the cost of living. European farmers are rare vide a barometer of investor sentiment. Counting container ships ly shy about letting politicians know their gripes: slopping ma coming into Rotterdam and Marseille gives a clue as to the hale nure across highways and in front of parliaments is a panconti ness of trade. Frankfurt, where the European Central Bank sets in nental tradition. This time they have a point. Crops are having to terest rates, is worth a (brief ) visit. Numbercrunchers also drop be picked before they bake in the sun, never mind the measly into finance ministries in Athens or Dublin, where national bud yields. Limits on irrigation are widespread. The levels of the River gets are crafted—and Brussels, where Eurocrats opine on them, Po in northern Italy are so low that saltwater from the Adriatic has before bond vigilantes in the City of London issue their own ver crept up its channel, threatening Italy’s breadbasket; an agricul dict. A detour via the ChampsÉlysées in Paris or the Gran Vía in tural union has warned that conditions are threatening 3040% of Madrid to see if shoppers are splurging completes the road trip. the seasonal harvest. Swiss farmers are flagging a potential short age of Gruyère cheese because of reduced milk production. Food To that list add Kaub in western Germany. In medieval times prices that should be declining as Ukraine starts shipping at least the town on the bank of the Rhine began making money from some of its stored grain may stay high instead. charging barges navigating between the Netherlands and Switzer land. Now a gauge there provides a benchmark for water depth all Europe is rich and can replace what food it cannot grow. The along the 1,200kmlong river. Repeated heatwaves and months of same may not be true of energy. Sizzling heat forced France to lacklustre rain and snowfall have pushed the measured depth at throttle some of its nuclear plants: the water drawn from rivers to Kaub down to around 50cm. That is barely a shin’sworth and just cool reactors could not safely be returned to those already steamy a quarter the usual reading at this time of year. Economists have waterways without parboiling fish. (Amid a shortage of power the joined meteorologists in keeping a close eye. Already ships carry rules were relaxed on August 8th.) Norway is worried about low ing everything from car parts to chemicals up and down Europe’s reservoir levels. It has warned that it could cut exports of hydro main industrial valley are having to travel with half loads or less to electricity to places such as Germany. The power crunch in avoid scraping their hulls on the riverbed. A further decline in wa Europe’s largest economy could be remedied by burning coal—if ter levels—which is all but inevitable as the year progresses— only barges carrying the stuff could navigate down the Rhine. Part would make the river unnavigable. A lesser snarl a few years back ly as a result, energy prices remain stubbornly high. caused German gdp growth to dip noticeably until it was resolved. Adapting in the short term is a question of making do without For months Europe has braced itself for the coming winter, too much added expense. Problems with Rhine barges, for exam wondering how to keep homes warm and factories humming ple, can be alleviated by using lorries to lug stuff instead. But it without full deliveries of Russian gas. Summer has turned out to turns out that this bit of the supply chain has been caught up in the be an unexpected challenge. Freakish heat of the sort made likelier postcovid recovery: there is a shortage of drivers. When it doesn’t by climate change has had the continent sweltering for weeks. The rain, it pours. ensuing drought—less than one centimetre of rain fell across France in July, the lowest of any month in over six decades—has Eins, zwei, dry worsened many problems Europe already faces as a result of the The threat of climate change to Europeans has until now been just war in Ukraine and the reverberations of covid19. Even more un that: a threat. Quite rightly, much effort has been expended on comfortable than sitting in the blazing midday sun is the prospect mitigation. Notwithstanding the odd reopened coalfired power of Europe having to adapt to a warmer world. Change is coming, plant in recent months, the eu seems intent on hitting “net zero” and Europe does not like change. emissions by 2050, with a hefty cut by 2030. But if adaptation was discussed in Brussels and national capitals it was largely to help poor countries deal with rising seas or worse typhoons. A cheque could always be written, sympathy expressed for the kind of coun tries whose economies can still be derailed by the weather. However, Europe is now the one in a tight spot. Many poor places are growing fast, perhaps the handiest tool for adaptation to any sort of change. Europe is not. Rich peers such as Japan and America have long histories of dealing with natural disasters, whether hurricanes, earthquakes or sizzling sunshine. European homes mostly eschew airconditioning. At worst they must put up with local floods, occasional wildfires or the nippy winters in Scandinavia. Whereas America is a land proud of its constant rein vention, Europe has a penchant for keeping things the way they are. Green types oppose dredging rivers. Timeold customs are up held, even as temperatures change. Champagne can only be made in the eponymous region of France, say—never mind that its cli mate may soon not be as well suited as places farther north. No economic history of Europe is complete without a mention of its temperate climate, fertile soils and waterways serving as cheap early highways. It was the lucky continent, as these things go. Perhaps not for much longer. A place that mostly has not thought about the weather will need to start doing just that. n 012
Britain The Economist August 13th 2022 45 State of the nation drought. As well as hot weather, it too was a period of high inflation, industrial unrest The summer of discontent and political turmoil: the prime minister, Harold Wilson, had unexpectedly resigned SOUTHAMPTON in the spring. The weather fused in peo ple’s minds with other problems. Bernard As the country struggles with high prices and temperatures, the state seems to (now Lord) Donoughue, a political adviser, be falling apart lay awake at night, “too hot to sleep”, wor rying about the pound. In southampton 20odd people are pick ances. Instead it is a season of drift and eting Red Funnel, a ferry company that dysfunction. Dry weather has combined Inflation is what keeps people tossing carries people to and from the Isle of with inflation, industrial disputes, trans and turning today. Consumer prices rose Wight, off the south coast of England. The port snafus and political paralysis. As Mi by 9.4% in the year to June, driven in part strikers complain about their pay and chael Gove, until recently a cabinet minis by wholesale energy markets. The govern treatment. But they are most exercised by ter, admitted last month, parts of the state ment has so far opted to help mostly by the rapidly rising cost of living. One young are barely functioning. It is Britain’s sum providing grants to households, with addi woman says that she went into debt to at mer of discontent. tional benefits for the poorest—a contrast tend a friend’s wedding. A man describes to countries such as Germany, which have watching his electricity meter in horror, For the middleaged and old, the ines slashed fuel duty. Britain’s approach is bet knowing that a big bill is coming. “Every capable comparison is with the summer of ter targeted and does not incentivise ener one’s just had enough,” he says. 1976. This year’s peak temperature, of gy use as much. But it makes for scarier 40.3°C, has been considerably higher—the headline figures. Energyprice inflation in The sun pours down on the strikers. extreme heat probably helps explain why Britain stands at 57%, compared with 42% Britain as a whole has had a hot, dry sum the last two weeks of July saw 3,000 more in the euro area, according to the oecd, a mer; southern England extremely so. A deaths than expected. But 1976 had a worse club of mostly rich countries. weather station west of Southampton re corded no precipitation in July—the first → Also in this section A wide range of goods have become zero monthly reading since it began oper more expensive. The price of milk (a fa ating in 1957. On August 5th Southern Wa 48 An economy under siege vourite question for interviewers who ter, the local supplier, banned residents want to discover whether a politician has from watering their gardens or washing 50 Bagehot: Interest rates and the Tories their ear to the ground) rose by 21% in the their cars with hoses. Other water compa year to June. As some products rise in nies will follow. → Read more at: Economist.com/Britain price, others shrink in size. The Grocer, a trade publication that tracks such things, It has not been a long, hot summer in — The revival of stop-and-search finds that ownbrand ready meals at Tesco, the American sense—the country has Britain’s largest supermarket, have shrunk thankfully seen no largescale disturb — Households’ water usage from 800g to 750g and from 450g to 400g. Industrial unrest is spreading as work 012
46 Britain The Economist August 13th 2022 ers try to keep ahead of rising prices, or at Sundowner 40 very next question was about foxhunting. least ensure that they do not fall too far be Britain’s travails are of two types. Some, hind. In 2019, the last year for which offi Britain, Economic optimism index* cial records exist, 234,000 working days such as the hot weather, the passport de were lost to labour disputes. Railway work Lehman Brothers collapse lays and even the political paralysis, are ers alone could drive this year’s figure likely to ease in the autumn. The crush at higher. More than 40,000 walked out on 20 Dover, for instance, was partly the result of June 21st, the start of a series of ongoing a sudden resumption of precovid holiday stoppages. Postal workers will soon follow. 0 habits, aggravated by Brexit and poor plan The Royal College of Nursing is balloting ning (see later story). But other problems, its 465,000 members about a strike, which -20 such as inflation, industrial unrest and the would be the first in its history. dire state of some public services, are more -40 likely to persist and even deepen. That is Nobody on the Red Funnel picket line where the historical comparison is partic in Southampton can remember a previous -60 ularly worrying. strike; the company says that the last one was in 1966. Ian Woodley, the regional or -80 Some things that seemed bad in the ganiser for the Unite union, is surprised by summer of 1976 soon became worse. A dis the speed at which young workers have 2008 10 12 14 16 18 20 22 pute at a photoprocessing firm in west been radicalised: “They’ve never been in a London swelled to include workers in un union before, let alone on strike.” He sus *Share of people who think the economy will improve in the next related industries, such as coal miners, pects that workers have been emboldened 1 months minus the share of people who think it will get worse and turned violent. It was a foretaste of not just by leaping living costs but also by Source: Ipsos more widespread strikes three years later, Britain’s tight labour market. and of the miners’ strike that began in 1984. main seaport for continental Europe, has There was violence at the Notting Hill car Whereas some are angry about pay, seen long queues for passport checks. Even nival in August 1976, which some observers many are quietly grumpy about the state of getting a document can take many weeks, blamed on aggressive policing. The police public services. Over the past five years the as the Passport Office buckles under high carried on behaving much as before. Five proportion of Londoners who think that demand. The 28,000 members of “Passport years later Brixton exploded in a much the police can be relied upon has fallen Appointment Help”, a Facebook group, more destructive riot. from 79% to 57%. Two years ago, during the swap sob stories and advice for speeding worst of the covid19 pandemic, Britons up the process, such as hassling mps or Tricks on the mind felt warmly towards their local councils. turning up at passport offices without Most people expect Britain’s economic ills That did not last. In June only 52% said making an appointment. to linger (see chart). In its monetarypolicy their council acted on residents’ con report on August 4th, the Bank of England cerns—the joint lowest figure for a decade, Meanwhile the government idles. Boris warned of a prolonged recession and said it in a survey conducted three times a year. In Johnson, whose term as prime minister expected the inflation rate to reach 13% lat your correspondent’s street, the weeds that will end in early September, spent part of er this year. Cornwall Insight, an energy grow on the edge of the pavement are al the summer on holiday in Slovenia. The consultancy, projects the energy price cap most two metres high. competitors for his job, Rishi Sunak and (which is not a true cap, but an indication Liz Truss, have begun to sketch plans to of the annual bills paid by the average If the National Health Service is the help with high energy bills. Ms Truss’s in household) to more than double from closest thing England has to a religion (as particular are heavy on tax cuts, which says £1,971 ($2,380) at present to £4,427 next Nigel Lawson, a politician, once put it) the more about the enthusiasm for that mea April. The nhs will probably come under country is falling into unbelief. Only 36% sure among Conservative Party members great pressure in the winter. of people are satisfied with the nhs, the than about its appropriateness. Party ob lowest figure since 1997. Fully 6.6m are on a sessions dominate their debates. At one So the summer of discontent could be waiting list for treatment, up from 4.4m on hustings in Exeter the audience was im followed by a worse winter and spring. But the eve of the covid19 pandemic. Ambu plored to avoid traditional Conservative that is unlikely to be how it is remembered. lances are supposed to respond to “catego subjects such as tax cuts and Europe. The Last year Phil Andrews collected people’s ry 2” incidents, such as suspected heart at reminiscences about 1976 for a book. He tacks and strokes, within 20 minutes. The dredged up a few unpleasant recollections average in June was 52 minutes. One in ten of fires, droughts and terrible violence in waited for at least 1 hour and 54 minutes. Northern Ireland, but many more benign ones. People seem to have remembered the Feelings about general practitioners, as glorious sunshine more than the drought. family doctors are known in Britain, have Punk rock and swarms of ladybirds had deteriorated to levels never recorded be lodged in their minds longer than strikes fore. In the spring 47% of patients said they and inflation. had found it hard to make an appointment with their practice, up from 19% ten years North of Southampton, the grass at the ago. gps have been swamped, not just by Hampshire Hogs’ cricket ground has patients who stayed away during the worst changed from green to the colour of milky of the pandemic and are now turning up tea. This suits some people. The club is sav ill, but also by the millions of people who ing money on mowing, which is welcome are waiting for hospital treatment. “Other given the high price of diesel fuel. And doors are shut, but the gps’ doors are batsmen love the way the ball runs quickly open,” says Dan Wellings of the King’s across the dry outfield, says Peter Came, Fund, a healthcare thinktank. the club president. He too remembers the summer of 1976. It was the first time, on a Britons might wish to escape such pro similarly parched ground, that he man blems by going abroad. But airports have aged to score 100 runs. n cancelled flights for lack of staff. Dover, the 012
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48 Britain The Economist August 13th 2022 The British economy → In Britain the cost of living is increasing, driven by rising energy prices Electric shock Contributions to inflation, percentage points Spiralling prices and deepening gloom Other goods and services Consumer-price index, % 12 Food and non-alcoholic beverages 9 britain’s Electricity, gas and fuel 6 growth crisis 3 Britain’s economy needs to become a 0 lot more productive. But first it has to get through the winter. The big problem is Forecast the spiralling cost of living. Last week the -3 Bank of England predicted that annual in flation would rise to just over 13% this Oc 2018 19 20 21 22 tober. At least of half of this increase will be driven by steep rises in energy prices, ow Average annual Top five actions taken by consumers ing mainly to the war in Ukraine. Estimates household energy bill* because cost of living has increased from Cornwall Insight, a consultancy, sug £’000 July 2022, share of respondents, % gest that households’ average annual ener gy bills could grow from £1,971 ($2,380) Summer Forecast 5 0 20 40 60 now, already a hefty increase on the prior Winter 4 year, to an eyewatering £4,427 in April. 3 Spending less on non-essentials Analysis by the imf suggests that Brit ain’s poor are particularly exposed to this Using less fuel (eg, gas/ price shock, because they tend to spend a electricity in my home) bigger share of their budget on energy than the rich. The question of how to protect the 2 Cutting back on non- poorest households from the energy essential journeys† crunch is dominating the race between Rishi Sunak and Liz Truss to become the 1 Spending less on next leader of the Conservative Party. But food shopping the squeeze is affecting more than the most vulnerable. Of the 89% of adults re 0 Shopping around more porting that their cost of living has in 2018 19 20 21 22 23 creased, 62% say they are already spending less on nonessentials and over half are → Rising prices and interest rates will hurt real incomes and usher in recession cutting back on their homeenergy use. Interest rates Real post-tax labour income As Britain’s politicians squabble over % % change on a year earlier how and who to help, the Bank of England is acting to ensure today’s high inflation 9 % LTV‡ 75% LTV‡ 4 Forecast 6 rate does not become embedded in the sys mortgage mortgage 3 4 tem. It raised interest rates by half a per 2 centage point on August 4th, the largest in 2 0 crease for 27 years and the sixth rise in a row. That is pushing up the price of mort Instant-access deposit Fixed-rate 1 -2 gages and, not quite as quickly, the return account savings bond 0 -4 to savings (see Bagehot). -6 2018 19 20 21 22 1990 95 2000 05 10 15 20 24 The bank is predicting that households will suffer their biggest drop in living stan GDP, quarter before downturn=100 dards in decades: next year posttax labour income is expected to fall in real terms by 100 an annual rate of over 4%. It also forecasts a protracted recession. The coming down Forecast recession Financial-crisis recession 95 turn will be shallower than those prompt Q4 2022-Q4 2023 Q2 2008-Q2 200 ed by the global financial crisis and the pandemic, but bodes ill for Britain’s ability 1 0s recession 90 to break out of its longerterm economic Q3 1 0-Q3 1 1 rut. Recessions are bad for investment, and 85 the costofliving crisis will dominate the government’s agenda for months. How po Covid-1 recession 80 litical energy is used matters, too. n Q1 2020-Q2 2020 012 0 2 4 6 8 10 12 14 16 75 Quarters 18 19 *Capped default tariff rate, based on national average usage, including VAT †In vehicle ‡Loan-to-value Sources: Bank of England; Ofgem; Cornwall Insight; ONS
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50 Britain The Economist August 13th 2022 Bagehot Live by the bank, die by the bank Rising interest rates will split the Conservatives’ electoral coalition Bashing the Bank of England is in vogue in Conservative cir low rates meant cheap mortgages. Fancy cars became affordable. cles. Even during good times, it personifies things the Conser Mondeo Man now drives an Audi: registrations of the sleek Audi vative Party does not like: it is technocratic (boo!), unelected a4 overtook the midmarket Ford Mondeo in 2019. It is hard to feel (shame!) and based in London (hiss!). Now that it has presided ov poor when perched on heated leather seats. People voted Tory not er a surge in inflation, expected to peak at 13% later this year, Con because they had become rich but because a Tory life, with a big servative mps are queuing up to kick it. Liz Truss, the foreign sec Barratt home and a big German car, had become cheap. retary and oddson favourite to become the next prime minister, has suggested tightening its mandate. Kwasi Kwarteng, potential That solves a conundrum which has befuddled Labour since ly the next chancellor, said: “Clearly something’s gone wrong.” 2010. For years Labour pointed to various measures of misery in Suella Braverman, the attorneygeneral, happily trampled on the creasing under the Conservatives. Income growth was lousy; wag bank’s independence and said it should have raised interest rates a es are still, in real terms, below where they were in 2008. Working “long time ago”. Rather than burying the bank, they should be age benefits were sliced to bits. Local services were butchered. Yet praising it. Without it the Conservatives would not be in power. the Conservatives increased their vote share at every election be tween 2010 and 2019. There is a simple explanation: for swing To misquote Milton Friedman, Conservatism is always and voters, things felt fine, largely owing to the central bank. everywhere a monetary phenomenon. Margaret Thatcher won her mandate with a pledge to control inflation, breaking the hold of This arrangement has now come to a halt. The Conservative trade unions on British society as a consequence of that initial government still goes out of its way to protect pensioners. But aim. John Major lost his authority when he, in effect, lost control higher interest rates threaten the Tory lifestyle of their marginal of monetary policy on “Black Wednesday” in 1992, as Britain stum voters. Mortgages will become less affordable. Someone renewing bled out of the Exchange Rate Mechanism. And monetary policy— a £200,000 ($244,000) mortgage today faces paying more than specifically, historically low interest rates—has been at the heart £2,400 extra a year. This is the same amount as the energyprice of the Conservatives’ current string of four election victories. increases that have prompted Martin Lewis, a consumerfinance deity, to warn of civil strife unless the government steps in. Since 2010 a combination of tight fiscal policy (for everyone bar pensioners) and loose monetary policy has created an effective The timing of rate hikes is awkward, too. Barratt Britain will not electoral coalition. Older voters, who overwhelmingly vote Con feel the pain instantly. Many mortgageholders (four out of five by servative, avoided the worst of austerity. Pensioners were protect value) have a fixedrate deal. But over half of them have to renew ed by a “triplelock” rule that kept the state pension rising inexora those deals before 2025, according to the central bank. With an bly, regardless of the wider economy or the state of government fi election due by January of that year at the latest, many voters will nances. The National Health Service, the public service that older be crossing ballot papers fresh from changing to new mortgage people use most, was ringfenced. Boomers, the Conservative Par deals that make them thousands of pounds worse off. As for leas ty’s base, could still rely on the state. But younger Tory voters—the ing a new car, higher costs mean the marginal Tory voter may well crucial marginal voters—could rely on the Bank of England. be squeezing into a secondhand Skoda, the Audi a memory. Low interest rates, partly pushed down by global forces, In the campaign to be Conservative leader, Ms Truss has, in changed Britain’s political landscape. To see how, head to the effect, called on the bank to be the bad cop. Patrick Minford, an country’s newbuild suburbs, filled with boxy, orange Barratt economist of whom Ms Truss is a fan, has suggested that interest homes, that fringe towns across the “red wall” seats of northern rates would have to rise to nearly 7% to control inflation if Ms England. It was voters in Barratt Britain, as The Economist dubbed Truss’s proposed tax cuts go ahead. Rishi Sunak, her opponent, ar it last year, that gave the Conservatives their majority. In the north, gues that higher interest rates mean harder times for the Conser vatives’ most vital voters: Mr Sunak’s campaign launched a calcu lator, pointing out how much extra voters would have to pay on a mortgage. Sound money is not always sound politics. Bank you very much Optimistic Conservative strategists know that their core voters are unaffected by higher interest rates. The number of outright home owners in Britain overtook that of mortgageholders in 2014, and their number has continued to rise. The past decade has been one of cheap debt but lousy returns for savers, which was bad for retir ees, who back the Conservatives by twotoone. For the party’s base, higher interest rates are an irrelevance or a boon. But beyond this cohort, things are less pretty. In Barratt Britain higher interest rates will bring a financial reckoning. Losing mar ginal voters is the quickest way to lose an election. In a firstpast thepost voting system, the difference between clownish failure and onceinageneration success are slim. Theresa May, who is regarded as a cackhanded electionfumbler, won only 300,000 fewer voters than Boris Johnson, who enjoys an undeserved repu tation as a uniquely popular leader. Maintaining the coalition that handed Mr Johnson power is a delicate task. Rising interest rates make it a nearimpossible one. The Conservatives owe their rule to the Bank of England. They will owe their demise to it, too. n 012
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