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The world this week

- Politics this week

- Business this week

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Politics this week

David Cameron, the British prime minister, shuffled his cabinet for the first time since taking office. The promotions and sackings pleased restless Conservative backbenchers, who have been calling for a more muscular right-wing agenda. George Osborne, the architect of Britain’s austerity programme, kept his job as chancellor. The government relaxed planning rules to try to boost infrastructure projects. See article

Mr Cameron’s shake-up escalated a row that has been brewing about whether to build a third runway at Heathrow. The prime minister kicked the issue into the long grass by setting up a commission to study aviation policy, which will report after the next election in 2015.

Andalusia became the fourth Spanish region to ask for a bail-out from the central government. It requested €1 billion ($1.3 billion) as an advance from the government, rather than from a special regional liquidity fund.

Russia criticised the European Commission’s decision to launch an antitrust inquiry into Gazprom as being motivated by “political factors”. The Russian state energy company is a big supplier of gas to east European countries.

Azerbaijan’s decision to pardon an army officer who was serving a sentence for hacking an Armenian counterpart to death at a military training school in Budapest caused a diplomatic furore. He was serving his sentence in Hungary, which claims it sent him back to Azerbaijan on the understanding that he would complete it there. Instead, he was given a hero’s welcome. See article

Election-night horror

Parti Québécois, a separatist party, narrowly won an election in Canada’s mainly French-speaking province of Quebec, but fell short of a majority. As its leader, Pauline Marois, was giving her victory speech, a gunman entered the building and shot two people, shouting (in French), “The English are waking up.” See article

Enrique Peña Nieto was confirmed as Mexico’s president-elect, two months after winning the election. An electoral tribunal threw out a flimsy claim of fraud brought by Andrés Manuel López Obrador, who came second; Mr López Obrador called for civil disobedience. Felipe Calderón, the outgoing president, used his final state-of-the-union address to defend the war on drug cartels and said it would make Mexico stronger in the long run.

Venezuela’s Yanomami Indians said that more than 70 of their people had been killed by illegal goldminers in July. The government insisted that there was no evidence of such a massacre taking place, but the Yanomami countered that the official investigation was inadequate.

Liberation’s day

The ruling Popular Movement for the Liberation of Angola (MPLA) won an election, getting 72% of votes cast, according to preliminary results. The new parliament is sure to re-elect José Eduardo Dos Santos as president. The main opposition, Unita, doubled its vote to 19%, whereas the MPLA tally was down by ten percentage points and it lost a lot of ground in the capital, Luanda. See article

Kenya’s navy shelled Kismayo, the biggest town in Somalia that is still controlled by the Shabab, an Islamist group linked to al-Qaeda.

More than 1,000 workers demonstrated at the Marikana mine in South Africa’s North West province, where police shot dead 34 striking miners in August. The national prosecutor initially charged 259 miners who were arrested after the confrontation with the murder of their colleagues, citing a “common purpose” law, but the charges were dropped. See article

Government forces in Syria shelled parts of the city of Aleppo, killing at least 19 people. At an Arab League summit in Cairo, Egypt’s president, Muhammad Morsi, called on his Syrian counterpart, Bashar Assad, to step down. See article

Rooting them out

Afghanistan halted new recruitment for its police force, while hundreds of soldiers are purged from the army. Some 45 soldiers in the NATO coalition in Afghanistan have been killed this year by fellow Afghan soldiers, prompting fears that Taliban infiltrators are often behind such “green-on-blue” attacks.

A local imam in the Pakistani capital of Islamabad who accused a mentally disabled Christian girl of blasphemy for burning a copy of the Koran was himself arrested on suspicion of planting the burned pages in the girl’s bag. Over 1,000 cases of blasphemy have been brought since the 1980s, frequently on trumped-up charges. The victims are sometimes lynched. See article

In Vietnam the former boss of a state shipping company hit by fraud was brought back from abroad and charged with economic crimes. He is the latest of several executives arrested this year, as the government faces criticism for tolerating corrupt practices at troubled state enterprises.

Setting aside mutual suspicions, and differences over their shared border, India and China agreed to resume joint military exercises, including against pirates off Somalia.

The former police chief at the centre of China’s biggest political scandal for years was charged with defection, abuse of power and taking bribes. Wang Lijun fled to an American consulate in February, triggering a series of events that led to the downfall of Bo Xilai, a prominent politician.

Xi Jinping, China’s leader-in-waiting, cancelled a meeting with Hillary Clinton, America’s secretary of state, in Beijing. Mrs Clinton repeated her call for a code of conduct to be agreed between China and other countries in order to lower tensions in the South China Sea. See article

Four more years?

The Democrats held their national convention in Charlotte, the biggest city in North Carolina, which is a swing state in the presidential election. At the gathering the party agreed on a wide-ranging policy platform that for the first time recognised the rights of gay couples to marry (in America a party platform is a general statement of values rather than specific policy proposals). See article

America’s total national debt, which includes government debt owed to businesses and foreign government, passed $16 trillion for the first time. It passed $15 trillion only ten months ago.

Business this week

The Spanish government announced another clean-up of its banking system, including plans for a “bad bank” to house dud property loans. It will also provide a €4.5 billion ($5.6 billion) bridging loan, in the form of government bonds, to Bankia, a particularly troubled lender. See article

The French finance ministry scrambled to rescue Crédit Immobilier de France, a small bank specialising in supplying credit to lower-income households. The ministry said it would underwrite an immediate €5 billion ($6.3 billion) of funding so that the lender could continue operating, though that figure could rise.

Nordic blues

Finland’s economy shrank by 1.1% in the second quarter. The country had been one of the euro zone’s best performers, but the crisis is now starting to take its toll on exports, which account for 40% of Finnish GDP. In July the finance minister said Finland would “not hang itself to the euro at any cost”. Some wonder if a “Fixit” (a Finnish exit from the euro) is more likely than a Grexit.

Nokia unveiled its first smartphones that run on Microsoft Windows. The devices are central to the Finnish company’s struggle to survive in the smartphone market, but it didn’t announce pricing details or say when the new models will be available to buy. Its share price fell sharply. Samsung and Motorola also exhibited new devices. Apple is expected to launch the iPhone 5 on September 12th.

Facebook’s stock fell below $18 a share for the first time, after Morgan Stanley and JPMorgan Chase, the two biggest underwriters of the social network’s IPO last May, slashed their targets of how high they think the share price will be by the end of 2013, to $32 and $30 respectively. Facebook floated on the market at $38 a share. The company took a number of steps to shore up its stock. Mark Zuckerberg, Facebook’s boss, said he would not sell any of his large stake for at least a year.

A purchasing-managers’ index compiled by HSBC suggested that manufacturing output in China had shrunk in August at its fastest pace since the worst of the financial crisis in March 2009. Other indices from America, India, South Korea and Taiwan confirmed that their manufacturers are also struggling to cope with weaker global demand.

Emirates Airline, based in Dubai, and Australia’s Qantas Airways announced an alliance. The pair will co-ordinate flight schedules and Qantas is to move its long-haul hub in Asia to Dubai from Singapore. The decision marks a departure for Emirates from its long-standing resistance to forging closer ties with airlines, which may have been prompted by the rise of Abu Dhabi’s Etihad Airways.

Lufthansa cancelled hundreds of flights because of a strike by cabin crew over pay and conditions. The threat of staff action has been hanging over the German airline’s operations all year.

The unemployment rate for people aged under 25 in the euro area stood at 22.6% in July. In Spain it rose to 52.9%. The International Labour Organisation, meanwhile, warned that the situation was worsening for young jobseekers in some regions of the world and that “youth labour markets will now take longer to revert to levels seen prior to the global financial crisis.”

Upping the pressure

America’s Department of Justice filed strongly worded court papers in a civil case that will examine the extent of BP’s responsibility for the 2010 oil-spill disaster in the Gulf of Mexico. In the documents the department expounded its view that the explosion at the rig that led to the spill is an example of “gross negligence”, which if proved in court could leave BP facing a fine of up to $21 billion. The energy company denies the claim and said it would present evidence to the contrary at the trial, which starts in January.

A big legal fight between two Russian oligarchs came to a conclusion in London. Boris Berezovsky, who made a fortune from the privatisation in the 1990s of Sibneft, a Russian oil firm, had claimed that Roman Abramovich, his one-time partner, who is now the owner of Chelsea football club, had forced him to sell his stake in the firm at an unfairly low price after the two fell out. But the judge dismissed Mr Berezovsky’s claims, saying they were “exaggerated and at times, incredible”. See article

No meat, please

McDonald’s said it would open its first-ever outlets with vegetarian-only options in India next year. The fast-food chain has been dishing up fish burgers and Chicken McNuggets in the country since 1996, but it is building two diners near pilgrimage sites (Amritsar for Sikhs and Katra for Hindus) that will instead serve McAloo Tikki burgers (made from potato patties) and Pizza McPuffs (a vegetable pastry).

KAL's cartoon

More KAL's cartoons

Leaders

- Rethinking the welfare state: Asia’s next revolution

- Trade: Goodbye Doha, hello Bali

- British universities: Picking on foreign students

- Saving the euro: Tick tock

- Drugs and emerging markets: Tripped up

Rethinking the welfare state

Asia’s next revolution

Countries across the continent are building welfare states—with a chance to learn from the West’s mistakes

ASIA’S economies have long wowed the world with their dynamism. Thanks to years of spectacular growth, more people have been pulled from abject poverty in modern Asia than at any other time in history. But as they become more affluent, the region’s citizens want more from their governments. Across the continent pressure is growing for public pensions, national health insurance, unemployment benefits and other hallmarks of social protection. As a result, the world’s most vibrant economies are shifting gear, away from simply building wealth towards building a welfare state.

The speed and scale of this shift are mind-boggling (see article). Last October Indonesia’s government promised to provide all its citizens with health insurance by 2014. It is building the biggest “single-payer” national health scheme—where one government outfit collects the contributions and foots the bills—in the world. In just two years China has extended pension coverage to an additional 240m rural folk, far more than the total number of people covered by Social Security, America’s public-pension system. A few years ago about 80% of people in rural China had no health insurance. Now virtually everyone does. In India some 40m households benefit from a government scheme to provide up to 100 days’ work a year at the minimum wage, and the state has extended health insurance to some 110m poor people, more than double the number of uninsured in America.

If you take Germany’s introduction of pensions in the 1880s as the beginning and Britain’s launch of its National Health Service in 1948 as the apogee, the creation of Europe’s welfare states took more than half a century. Some Asian countries will build theirs in a decade. If they get things wrong, especially through unaffordable promises, they could wreck the world’s most dynamic economies. But if they create affordable safety nets, they will not just improve life for their own citizens but also become role models themselves. At a time when governments in the rich world are failing to redesign states to cope with ageing populations and gaping budget deficits, this could be another area where Asia leapfrogs the West.

Beyond Bismarck and Beveridge

History offers many lessons for the Asians on what to avoid. Europe’s welfare states began as basic safety nets. But over time they turned into cushions. That was partly because, after wars and the Depression, European societies made redistribution their priority, but also because the recipients of welfare spending became powerful interest groups. The eventual result, all too often, was economic sclerosis with an ever-bigger state. America has kept its safety net less generous, but has made mistakes in creating its entitlements system—including making unaffordable pension and health-care promises, and tying people’s health insurance to their employment.

The record in other parts of the emerging world, especially Latin America, is even worse. Governments have tended to collect insufficient tax revenue to cover their spending promises. Social protection often aggravated inequalities, because pensions and health care flowed to affluent urban workers but not the really poor. Brazil famously has a first-world rate of government spending but third-world public services.

Asia’s governments are acutely conscious of all this. They have little desire to replace traditions of hard work and thrift with a flabby welfare dependency. The region’s giants can seek inspiration not from Greece but from tiny Singapore, where government spending is only a fifth of GDP but schools and hospitals are among the best in the world. So far, the safety nets in big Asian countries have generally been minimalist: basic health insurance and pensions which replace a small fraction of workers’ former income. Even now, the region’s social spending relative to the size of its economies is only about 30% of the rich-country average and lower than any part of the emerging world except sub-Saharan Africa.

That leaves a fair amount of room for expansion. But Asia also faces a number of peculiarly tricky problems. One is demography. Although a few countries, notably India, are relatively youthful, the region includes some of the world’s most rapidly ageing populations. Today China has five workers for every old person. By 2035 the ratio will have fallen to two. In America, by contrast, the baby-boom generation meant that the Social Security system had five contributors per beneficiary in 1960, a quarter of a century after its introduction. It still has three workers for every retired person.

Another problem is size, which makes welfare especially hard. The three giants—China, India and Indonesia—are vast places with huge regional income disparities within their borders. Building a welfare state in any one of them is a bit like creating a single welfare state across the European Union. Lastly, many Asian workers (in India it is about 90%) are in the “informal” economy, making it harder to verify their incomes or reach them with transfers.

Cuddly tigers, not flabby cats

How should these challenges be overcome? There is no single solution that applies from India to South Korea. Different countries will, and should, experiment with different welfare models. But there are three broad principles that all Asian governments could usefully keep in mind.

The first is to pay even more attention to the affordability over time of any promises. The size of most Asian pensions may be modest, but people collect them at an early age. In China, for example, women retire at 55; in Thailand many employees are obliged to stop work at 60 and can withdraw their pension funds at 55. That is patently unsustainable. Across Asia, retirement ages need to rise, and should be indexed to life expectancy.

Second, Asian governments need to target their social spending more carefully. Crudely put, social provision should be about protecting the poor more than subsidising the rich. In fast-ageing societies, especially, handouts to the old must not squeeze out investment in the young. Too many Asian governments still waste oodles of public money on regressive universal subsidies. Indonesia, for instance, last year spent nine times as much on fuel subsidies as it did on health care, and the lion’s share of those subsidies flows to the country’s most affluent. As they promise a broader welfare state, Asia’s politicians have the political opportunity, and the economic responsibility, to get rid of this kind of wasteful spending.

Third, Asia’s reformers should concentrate on being both flexible and innovative. Don’t stifle labour markets with rigid severance rules or over-generous minimum wages. Make sure pensions are portable, between jobs and regions. Don’t equate a publicly funded safety net with government provision of services (a single public payer may be the cheapest way to provide basic health care, but that does not have to mean every nurse needs to be a government employee). And use technology to avoid the inefficiencies that hobble the rich world’s public sector. From making electronic health records ubiquitous to organising transfer payments through mobile phones, Asian countries can create new and efficient delivery systems with modern technology.

In the end, the success of Asia’s great leap towards welfare provision will be determined by politics as much as economics. The continent’s citizens will have to show a willingness to plan ahead, work longer and eschew handouts based on piling up debt for future generations: virtues that have so far eluded their rich-world counterparts. Achieving that political maturity will require the biggest leap of all.

Trade

Goodbye Doha, hello Bali

The Doha trade talks are dead. Replace them with a rapid new deal, called the "Global Recovery Round”

TRADE and growth go hand in hand. When the economic crisis first hit in 2008, world trade and growth collapsed together. In 2009 both recovered, and did reasonably well until this year, when both slipped again (see article). Cutting tariffs and red tape would boost trade, and support the faltering recovery. This should spur efforts to replace the failed Doha trade talks with a new effort to do a multilateral deal.

The aims of the Doha round, launched by the World Trade Organisation (WTO) in 2001, were laudable. It deliberately put poor countries first, placing particular priority on improving the access of their farmers to rich-country markets. It was ambitious too, covering not only trade in manufactured goods, agriculture and services, but also a host of things more indirectly related to trade (antitrust, intellectual property and foreign-investment rules, for example). According to the Peterson Institute, a think-tank, the potential gains were around $280 billion a year. Its failure is a tragedy.

The villains are powerful lobbies, notably in agriculture, such as America’s cotton and sugar industries and Japan’s rice farmers and fishermen. But there were also two structural problems with Doha. One was the number of countries. At the end of the first world-trade talks in 1947, 23 countries were involved. When Doha started, 155 were. Second, the idea was to achieve a grand bargain in which agriculture, manufacturing and services would all be liberalised. But reaching agreement on some areas was so difficult that the WTO’s mantra— “Nothing is agreed until everything is agreed”—proved fatal.

Less ambition, more achievement

After many missed chances to conclude a deal, an “absolute deadline” was set for December 31st 2011. That too, was missed. Since then, protectionism has been intensifying. In the past two weeks Argentina has lodged complaints against America over lemons and beef and against Spain over biofuels. Altogether, tit-for-tat actions mean that new restrictions cover 4% of global trade, more than Africa’s exports. On the plus side, disputes over these are being adjudicated by the WTO system.

With Doha paralysed, regional alternatives to a multilateral deal are springing up. They are not all bad, but regional deals tend to benefit insiders at the expense of outsiders, so that global gains will be achieved only if they can be fitted together. And the small deals often enshrine rules—such as electrical and emissions standards—which vary from region to region, so they make global deals harder to forge.

Instead of allowing the Doha round to be replaced with a patchwork of regional deals, the WTO’s boss, Pascal Lamy, should close it and resurrect the best bits in a “Global Recovery Round”. He should drop the all-or-nothing “single undertaking” rule that helped kill Doha. Instead, talks would be broken up into small chunks and allowed to progress independently of one another. Negotiations would be open, so that any member could leave or join. Some deals, therefore, would not include everyone. But another of the WTO’s guiding principles—the “most-favoured-nation” clause—must apply. This rule means that any deal between a smaller group must be applied to all WTO members, even if they do not reciprocate. WTO-brokered regionalism would thus lower trade barriers for all.

The Global Recovery Round should focus on manufacturing and services. Manufacturing represents around 55% of total trade. There is much to be gained: tariffs on cars, buses and bicycles are still high. Even low-tariff countries maintain a selection of high ones. In America ski boots attract a zero tariff, but golf shoes can face a 10% rate, and steel-toe-capped boots 37.5%. Services, which account for only 20% of world trade but are more important on a value-added basis, have hardly been liberalised at all.

If progress on agriculture is slower, so be it. Farm protectionism, which this newspaper was founded to oppose, still starves millions. New madnesses appear by the day: Russia has blocked the import of pigs from the EU because of a virus that affects cows and sheep. But an industry that makes up only 7% of world trade cannot hold everything else hostage.

The timing should be as tight as possible. When G20 finance ministers meet in Mexico City in November 2012, they should ask the WTO to launch the Global Recovery Round, and to finish it by the time of the WTO’s next big meeting, in Bali in December 2013. It would be the best thing to happen to the world economy for five years.

British universities

Picking on foreign students

A case of xenophobic populism that will harm one of Britain’s long-term competitive advantages

THE government, half way through its term, is now focusing on the next election. That was clear from the two political stories that dominated the rentrée: the cabinet reshuffle and the revocation of London Metropolitan University’s licence to teach foreign students. The first illustrates some sensible ways in which the government is reacting to voters’ concerns (see article). The second is a nasty piece of populism.

Hostility to immigrants is rising all over Europe, but opinion polls suggest it is worse in Britain than in any other rich country. David Cameron’s government came to power promising to cut net migration to “tens of thousands” by the next election. This was not only wrong, in terms of both Britain’s obligations and its economic needs, but also impractical, since last year the number was 216,000. Since many immigrants are entitled to entry—because, for instance, they come from the EU—turning away students, who account for about 40% of the total, is pretty much the only way of cutting numbers significantly. So Mr Cameron has had to curtail the right to work after graduation—especially tough for students from poor countries, who need to work to repay the median annual cost of courses of £11,200 ($17,800). And universities have been required to keep an ever-closer watch on foreign students to ensure that they are in Britain to study, not to work. That is the policy of which London Metropolitan (LMU) fell foul.

What will happen to LMU is unclear, since it is taking the government to court. It blames its problems in part on the rules requiring universities to monitor students which, it says, have changed 14 times in the past three years. A report by a parliamentary committee, published this week but written before the revocation of LMU’s licence, describes the system as “poorly planned and ill thought out”. What will happen to LMU’s bona fide foreign students is equally uncertain. The government is helping them find places at other universities, but there is no guarantee they will get them, nor is any system in place to compensate them. They have been cruelly treated.

The many benefits of teaching foreigners

It is right for the government to keep a watch on colleges and universities to ensure that they are not being used as conduits for workers pretending to be students. When aspiring migrants outnumber society’s ability to absorb them, immigration should be restricted. But the desire for social stability needs to be balanced against other goods, such as prosperity.

In the wake of the economic crisis, the government is keen to foster industries other than financial services with export potential. Higher education is one. A government report estimates earnings from foreign students at around £7 billion a year, and suggests that could double by 2025. And there are far broader potential gains. Foreigners who study in Britain are likelier to create wealth in the country later on. Education is the most effective way of wielding the “soft power” that is voguish in foreign-policy circles—bringing people round to your point of view without training your guns on them, in other words. All that is jeopardised by using universities as an arm of the UK Border Agency. The job of universities is to teach students, not to police the country’s frontiers.

If Mr Cameron insists on capping migrant numbers, he should exempt students, who contribute not just to the country’s coffers but also to its intellectual wealth, and who stay for a limited time. Better still, adopt a more liberal approach, and remember how Britain first became great: through openness to the world, not through xenophobia and isolationism.

Saving the euro

Tick tock

Events as early as next week could challenge the assumption that time is on the euro zone’s side

AT LEAST August was quiet. Thanks to Mario Draghi, chief of the European Central Bank (ECB), euro-zone policymakers got some badly needed R&R. His promise in July to “do whatever it takes” to protect the euro from speculation was enough to persuade traders to pack their bags and head for the Riviera. Yet the euro zone now looks woefully behind in its mission to save the single currency. That is partly because a rescue is genuinely complicated. But it is also because too many people think that time is on their side.

Just now, sluggishness may seem like an odd accusation. The next month will contain a summer’s worth of news. As we went to press, Mr Draghi was to put flesh on his pledge to limit the cost of medium-term borrowing by governments (and hence companies). On September 12th Germany’s senior court will rule on whether a euro-zone rescue fund is constitutional. The same day the Dutch will vote and the European Commission will unveil its thoughts on a Europe-wide banking supervisor—a step towards a banking union. Within weeks the troika that has just arrived in Athens will report back on whether to give Greece its next slug of rescue money. And all the while, a restless succession of meetings will continue as leaders prepare for a big summit in October.

But, measured against what needs to be done, this is inadequate. Even if the ECB successfully intervenes, the euro zone’s politicians must ultimately determine the euro’s fate. Although work on a banking union has begun, they are many months away from actually setting one up. Leaders increasingly recognise the dangers of excessive austerity, but they still routinely demand harsh budgets as a token of merit. The debate about mutualising some government debt, which this newspaper thinks essential to restoring confidence, has barely begun. The vague German demand to shift political power to federal Brussels has hardly been broached in France.

Some euro-zone leaders think that is fine. With time, the reform under way in the euro zone’s troubled economies will bear fruit. If sceptical politicians and voters have a chance to contemplate the ruinous alternative of a euro break-up, they will come round to mutualisation and federation, just as they have put up with bigger transfers of money and sovereignty than ever seemed possible at the outset of the crisis two years ago. In the end, self-interest and good sense will win out.

Onward and downward

In fact, time may be working against the euro. Uncertainty and austerity are deepening Europe’s economic plight. The euro zone looks to be back in recession. Unemployment is at a record high. Surveys of consumers and business activity make dismal reading—and the malaise has spread to Germany. Prolonged economic stagnation will make it more expensive to keep the euro together—and poison the politics of a rescue.

Any of next week’s events could throw up another barrier. Germany’s court ruling against the bail-out fund would be the most dramatic. But the Dutch vote could further tie the hands of its politicians (see article), and the banking-union talks could spark a row over regulation (see Charlemagne). Far from bringing countries together, the crisis is tugging them apart.

To stop the rot, France and Germany, still at the heart of Europe, need to settle on a rescue and prepare their parties and their peoples to accept it. Nothing will happen without that. It means grappling with the sort of federalism that statist France has always rejected. It means Germany accepting some debt mutualisation. Nobody said this would be easy. But if Angela Merkel and François Hollande just wait for time to do their job for them, they will lose control of their fate.

Drugs and emerging markets

Tripped up

For developing countries to get new drugs, both Big Pharma and governments must compromise

A NEW kind of drug war is brewing. As economies grow, so do their rates of chronic disease, such as cancer and diabetes. Governments in emerging markets want their citizens to have better drugs. The big pharmaceutical firms are keen to sell to them. But they are fighting bitterly over the terms.

Nowhere is the battle more intense than in India. The crucial question is how to protect patents while also expanding access to drugs. The “pharmacy to the world” did not recognise drug patents until 2005. Its generics industry, which manufactures cheap copies, makes India the third-largest drug producer, by volume. Domestic demand is rising—the market may be worth up to $74 billion by 2020, six times its value in 2010. Much now depends on two court cases (see article).

In 2006 India refused to grant a patent to Novartis, a Swiss drug giant, for Glivec, a blockbuster cancer drug, saying it was merely a new form of an older medicine. That case is now before the country’s Supreme Court. Meanwhile Germany’s Bayer is appealing an order, issued in March, which forces it to license its patented cancer drug to an Indian firm, Natco. The Novartis case is a test of what qualifies as incremental innovation. The Bayer one sets a more dangerous precedent.

Natco’s “compulsory licence” for Nexavar, a kidney-cancer drug, is India’s first. This device, by which a country orders a patent-holder to license a product against its will, has been accepted in international treaties for more than a century. It was reaffirmed in the hotly contested Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement of 1994. But views differ on when it should be used. It can be a negotiating tactic: America threatened to employ it (against Bayer, again) to get hold of Ciprofloxacin during the anthrax scare of 2001. It serves a purpose in emergencies: African countries invoked it against Big Pharma to get cheap drugs to fight HIV. But compulsory licences for chronic diseases are more controversial.

India’s patent controller justified using it on three grounds. Bayer did not make Nexavar “reasonably affordable”; it did not provide enough of it; and the patent was not “worked in the territory of India” (implying that Bayer should have made its drug locally). The patent controller ordered Natco to sell Nexavar for one-thirtieth of Bayer’s price and pay a 6% royalty.

The German firm is far from faultless: it offered its drug for a ludicrous $5,000 a month, nearly four times India’s per head gross national income. But even allowing for that, the patent controller is being shortsighted. The suggestion that Bayer should have made the drug in India smacks of protectionism (which could hurt India’s own drug exporters). Patent officials should not be in the business of setting prices. And weakening patent protection means less incentive to invest in new drugs.

Make access, not war

These brawls are likely to get worse, with America wanting new protection for drugmakers and China talking about allowing compulsory licensing. In an ideal world, TRIPS would be revised with clearer guidelines. That will not happen fast, if at all. So the onus is on firms and governments to sort it out.

America should not use trade deals to swaddle drugmakers in excessive patent protections. Developing countries should enforce patent rules vigorously (Indian regulators have let a local firm sell its version of Nexavar for years), and avoid a rush to compulsory licences. Western giants could be more flexible on pricing. Roche, another Swiss firm, is cutting the price of four drugs in India. It is rebranding them and using a local packager, to distinguish the Indian products from those sold elsewhere. Such experiments must proliferate, if the new drug war is to be contained.

Letters

- Letters: On Mitt Romney, currency mints, Brazilian mergers, Canada's First Nations, women in business

Letters

On Mitt Romney, currency mints, Brazilian mergers, Canada's First Nations, women in business

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

Assessing Mitt

SIR – You raised the issue of Mitt Romney’s flip-flopping (“So, Mitt, what do you really believe?”, August 25th). In all fairness it is only right to highlight a few of Barack Obama’s back and forths. For instance, Mr Obama favoured same-sex marriage in 1996, only to say in 2004 when running for the Senate that he believed marriage is between a man and a woman. He was “still working on” his position until he finally came out in favour of gay marriage in May, crediting his new found stance to his “evolving” views.

And on health care Mr Obama criticised Hillary Clinton several times during the Democratic primaries in 2008 for pressing for an individual mandate that “forces everyone to buy insurance, even if you can’t afford it, and you pay a penalty if you don’t”. He has since signed such a requirement into law and champions it as one of his most significant accomplishments. For the sake of brevity I will not harp on about Guantánamo Bay and the trial of Khalid Sheikh Mohammed.

Rather than focusing on who said what and other largely irrelevant issues, I hope this election can revolve around what most voters agree to be the most important issue: the economy. It is still possible to have a lively and intelligent debate on the proper role of the government in citizens’ lives and whether that role enhances both their own and the country’s economic well-being.

Alexander Fulbright

San Francisco

* SIR – America seems to be deeply confused. Mr Romney, a proven manager, is criticised because he is not likeable. Ronald Reagan was well liked but was criticised because he did not fit the mold of a hands-on manager. America currently has a likeable president and a faltering economy. In Germany the strict and not-too-popular Angela Merkel presides over an enviable economy. Greek voters loved their politicians as long as they enjoyed the luxuries provided by unsustainable borrowing and duplicitous bookkeeping.

Voters should decide whether they prefer to be loved or to be fed, clothed, and sheltered. It is wonderful when both are fulfilled in an ideal candidate, but when it is not responsible people should deal with reality and not complain about the lack of perfection. History contains many examples of successful, pragmatic people and nations who overcame obstacles in an imperfect world. It is also littered with the failures of those who could not cope.

Jerry Hartke

Lancaster, Massachusetts

SIR – I agree that you should find much to like in Mr Romney’s business acumen, free-market approach and history of accomplishment. What you’ve missed is the strength of character that those of us who know him see as his greatest quality. I met Mitt almost 30 years ago and have worked with him and seen him in action over decades.

He is a man of the highest integrity. He is also a man who seeks solutions, results and progress. When he gets new information or better insights he incorporates them into his positions. I much prefer that approach to those who try to twist reality to meet their own fixed world view.

As Ralph Waldo Emerson wrote, “A foolish consistency is the hobgoblin of little minds, adored by little statesmen, philosophers, and divines.”

Michael Miles

Wayland, Massachusetts

SIR – Your article on Mr Romney brought to mind a remark made by Adlai Stevenson, the Democratic candidate in the 1956 presidential campaign, about Vice-President Richard Nixon: “That man will sail downwind no matter which way the wind is blowing.”

Martin Weingartner

Nashville, Tennessee

How to make money

SIR – I take issue with your claim that “minting developed not as a private-sector attempt to minimise the costs of trading, but as a government operation” (“On the origin of specie”, August 18th). Historical accounts of private minting during the California gold rush clearly demonstrate that a government mint is not necessary for regulating the amount of metal in each coin.

In his 1913 book, “Private Gold Coinage of California 1849-55”, Edgar Holmes Adams describes the establishment of a private mint in San Francisco: “A keen need being felt at this time for a circulating medium to supersede that of gold dust, which, owing to the lack of coins, constituted the chief currency.” Moffat & Company “began the issue of small rectangular pieces of gold of various values, ranging from $9.43 to $264…The bars were stamped with the name of the assaying firm, the quality of fineness of the metal, the weight in pennyweights and grains, and the value in dollars and cents.”

The Treasury contracted Moffat to mint official American government-stamped coins in 1850. Moreover, when the government finally opened the San Francisco mint in 1854, it operated with equipment previously employed by this private company.

If one should look to history as you suggest, the lesson seems quite clear: the private sector led the way while government lagged behind.

William Luther

Assistant professor of economics

Kenyon College

Gambier, Ohio

Merger reviews in Brazil

SIR – You compared the 330-day maximum waiting period for reviewing mergers in Brazil with the 30-day period in the United States (“A champion for choice?”, August 25th). But this mixes apples and oranges.

In Brazil 330 days is used for transactions that merit an intensive review as assessed by CADE, the regulator. In America enforcement agencies respond to similar transactions by issuing a broad information request. The merging parties can respond at their convenience, but cannot close their deal until 30 days after they substantially comply. In practice, merger reviews in America for deals that raise concerns take between 150 and 270 days, or longer if challenged in court. That is still below the 330-day maximum in Brazil, but not by a factor of ten.

You also mentioned what may be the biggest change in the Brazilian merger notification regime: introducing a threshold for a merger target’s revenues. Under the previous regime there were many instances where the target company’s Brazilian revenues were less than the filing fee and the cost of advice.

The new system kicks in when the company being acquired has revenues of at least 30m reais ($15m). This will permit CADE to focus on reviewing the deals that matter most to Brazilian consumers. Hopefully in less than 330 days.

Gil Ohana

Senior director

Antitrust and competition

Cisco Systems

San Jose, California

Talking with Canada's First Nations

* SIR – In response to your article about talks in British Columbia on the land rights of the First Nations (native peoples), I understand that some people have concerns about the treaty process and the length of time it takes to reach a common goal, but there are many good reasons to continue to pursue these accords (“More pow than wow”, August 25th).

Treaties provide certainty on the land base and give communities the ability to govern themselves. Treaties encourage investment, stimulate business activity and generate economic benefits for First Nations and surrounding regions.

The cost of not settling treaties is far greater than the cost of treaty making. A recent PricewaterhouseCoopers study estimated that uncertainty surrounding unresolved aboriginal rights and land title could cost C$1 billion in lost investment. Achieving treaties will pump billions of dollars into the British Columbia economy and the financial benefits to First Nations could be as much as $10 billion.

Furthermore, you understate the level of progress that has been made: the Maa-Nulth represent five First Nations, making the Tla’amin the ninth nation to sign a treaty.

The process of reaching a treaty is lengthy, and we realize we can’t expect First Nations to wait indefinitely for economic benefits. That is why, increasingly, British Columbia is pursuing Incremental Treaty Agreements and non-treaty agreements. These allow First Nations to begin realizing the benefits of shared economic arrangements with the BC government. Perhaps most importantly, these types of agreements build towards more comprehensive forms of reconciliation and treaties.

Mary Polak

Minister of aboriginal relations and reconciliation in British Columbia

Victoria, Canada

Mothers of convention

SIR – I was pleased to see Schumpeter’s column on the “real reason why more women don’t rise to the top of companies” (“The mommy track”, August 25th). I even read it out loud to my two-year-old, as I am now a stay-at-home mother. With all the talk of corporate culture, I notice that no one ever seems to mention how to change domestic culture, which maintains that it is mommy who should always be leaving the office at 5:30 to take care of the tykes. Until that alters, I’m afraid women will always be doomed to show up at meetings with puréed carrots on their suits.

Karen Landes

Chicago

SIR – My wife is a successful geriatrician. She was able to reach this position because I took primary responsibility for the children and incurred many of the consequences described in your article.

Tim Svenson

Adelaide, Australia

SIR – I worked for a big company for 40 years and had no desire to climb up the corporate ladder. The problem with quotas is that they don’t take into account the limited pool of candidates that give a hoot about climbing to the top. The assumption seems to be that everyone is dying to be chief executive.

Vic Arnold

Westerly, Rhode Island

SIR – As a man who has interrupted his career to bring up two young children, maybe it is fathers that are limited in life options, and instead of setting quotas for women on boards, we should be setting quotas for stay-at-home fathers.

Marlon Motha

London

* Letter appears online only

Briefing

- Asian welfare states: New cradles to graves

Asian welfare states

New cradles to graves

The welfare state is flowering in Asia. Will it free the continent from squalor? Or sink it in debt?

A CARTOON cat decorates the T-shirt worn by Agus Kurniawan, a two-year-old cradled in his mother’s lap. But the cat is hard to see, because young Agus cannot hold himself upright. His body is bowed by microcephaly, an undersized skull and brain, which plays havoc with his motor functions.

His mother has been advised to seek therapy in Bandung, 60km (37 miles) away from their home in Gunturmekar, a village in the Indonesian province of West Java. The family’s medical bills there would in principle be paid by the government under a scheme called Jamkesmas, which has covered over 76m of Indonesia’s poorer citizens since 2008.

But his mother says she cannot afford to make the trips. Her hopes now rest with another scheme called PNPM Generasi. It gives funds to the village (about 47m rupiah, or $5,300 last year) which a board of 11 villagers decides how to spend. But it is doubtful Agus will qualify. PNPM Generasi is dedicated to improving school attendance, maternal health and infant nutrition. But feeding is not Agus’s problem, his mother admits. He’ll eat anything.

For decades Indonesia’s government has tried to improve the lot of villages like Gunturmekar through piecemeal projects. Some, like Jamkesmas, have breadth but no depth: it has an annual budget of less than $10 per person. Others, like PNPM Generasi, respond to the community’s demands not the individual’s. But Indonesia is now embarking on something more systematic: it is laying the foundations of a welfare state.

Last October Indonesia’s parliament passed a law pledging to provide health insurance to all of the country’s 240m citizens from January 1st 2014. One government agency will collect premiums and foot the bills, making it the biggest single-payer system in the world, says Dr Hasbullah Thabrany of Universitas Indonesia in Jakarta. The same law also committed the government to extend pensions, death benefits and worker-accident insurance to the nation by July 2015. The government has said little about the cost or generosity of these broader benefits. If Indonesia tried to universalise the kind of package now enjoyed by civil servants and 9m salaried employees, it would have to collect over 18% of wages to fund the scheme fully, according to calculations by Mitchell Wiener of the World Bank. Passing the law is always easier than paying for it.

Indonesia is not the only country in developing Asia rapidly expanding health insurance. In the Philippines, 85% of the population are now members of PhilHealth, the government-owned health insurer, compared with 62% in 2010. China’s rural health-insurance scheme, which in 2003 covered 3% of the eligible population, now covers 97.5%, according to official statistics. India has also extended (albeit modest) health insurance to roughly 110m people, more than twice the number of the uninsured Americans whose plight motivated Obamacare; this is, as America’s vice-president once said about his boss’s reforms, a “big fucking deal”.

This new Asian interest in social welfare goes far beyond health. Thailand, which achieved universal health care in 2001, introduced pensions for the informal sector in May 2011. China’s National Audit Office last month declared that the country’s social-security system was “basically” in place. India expanded its job-guarantee programme to every rural district in 2008, promising 100 days of minimum-wage work a year to any rural household that asks for it.

Tigers turning marsupial

Rich countries like South Korea and Taiwan have gone further. In 2008 Korea introduced an earned-income tax credit, a universal basic pension and an insurance scheme providing long-term care for the elderly. December’s presidential election is fast becoming a game of welfare one-upmanship. Even Singapore, long opposed to the idea of a “crutch economy”, offered cash handouts, disguised as tax rebates, to people with low incomes and low-rent homes in this year’s budget.

Although poorer countries still limit themselves to ad hoc welfare offerings, fitting the spending level to revenues one budget at a time, there is an increasing trend towards entitlements served by statutory institutions that will outlive the budgetary cycle. As these systems mature, welfare provision will be demand-led, not supply-driven; welfare will become integral to the state. Asia’s tigerish economies are turning marsupial, carrying their dependants along with them as they prowl.

Some of the national leaders who unleashed those tiger economies would be shocked and disturbed by the development. To them the welfare state was a Western aberration that would serve only to undermine thrift, industry and filial duty. Those virtues, they argued, underpinned their economic miracles and won envious admiration abroad, not least in Western countries bent under the weight of their social obligations.

That is not to say that Asia boomed in the complete absence of welfare provisions. But its arrangements took a distinctive form which Ian Holliday of Hong Kong University has termed “productivist”. This model subordinated social policy to economic goals. In Europe, some politicians like to say growth is necessary to pay for health care and other goodies. Productivism reversed that logic: welfare provision is a means to the end of economic progress, not the other way around.

Institutionalised welfare provision was reserved not for the neediest cases, but for workers in the most productive industries. Even for these lucky few, welfare was not a right or an entitlement; it was more like an investment in manpower. Welfare services (injury insurance, health care, pensions) were delivered by state-owned corporations rather than ministries, in part so that no one would come to think of pensions and health as the state’s responsibility. This model of welfare tried to keep savings high and work incentives sharp. In Korea, for example, anyone aged 18-65 used to be ineligible for public assistance.

Thus Asia’s tigers kept social spending low as a percentage of GDP while their economies grew at unprecedented rates. This rapid economic progress was combined with big social advances in literacy and life expectancy. But the model fell foul of two closely linked disruptions and one implacable trend.

The trend was a steep decline in fertility. The average South Korean woman can now expect to give birth to only 1.39 children in her lifetime; in Singapore, the figure is 1.37; in Hong Kong, only 1.14. This welfare model assumed that Asia’s tightly knit families would take care of the social responsibilities its governments refused to shoulder. But asked to tutor their children, care for their parents and supplement their husband’s income, women have rebelled. The Singaporean women interviewed by Shirley Hsiao-Li Sun, a sociologist at Nanyang Technological University in Singapore, “want more direct and universal state subsidies, especially for education and health care,” she writes.

The disruptions were the interruption of miracle growth and the erosion of authoritarian rule. The Asian financial crisis of 1997-98 resulted in a spike in lay-offs among industrial workers, and governments found it impossible to leave the jobless masses to their fate. Before 1998, none of Taiwan’s unemployed got state benefits. By 2001, all of them did. In South Korea President Kim Dae-jung pushed through a controversial 1999 act guaranteeing a minimum income to the poor, even if they could work. That minimum is now about 97% of America’s poverty guideline, measured at purchasing-power parity, in a country with only about 67% of America’s GDP per head.

Asian values and welfare

At the same time, in much of Asia, newly assertive opposition parties showed that the distaste for welfare expressed by authoritarian leaders was not shared by the population at large. Welfare promises won votes. Even in China, where there are no national votes to win, policymakers began to promise a “harmonious society” not just a fast growth rate.

It seems that every country that can afford to build a welfare state will come under mounting pressure to do so. And much of Asia has hit the relevant level of prosperity (see chart 1). Indonesia is now almost as developed as America was in 1935 when it passed the landmark Social Security Act, according to figures compiled by the late Angus Maddison, an economic historian. China is already richer than Britain was in 1948, when it inaugurated the National Health Service (NHS) which, to judge by political ructions—and Olympic opening ceremonies—has become crucial to its sense of national identity.

Asian welfare still looks lean by Western standards. Public health spending is still only 2.5% of GDP, compared with about 7% in the OECD group of rich nations. That will change as Asia ages, but high co-payments (in South Korea), low payments to hospitals (in Thailand) and sparse facilities (in Indonesia and elsewhere) have also contained costs.

The results of the region’s welfare-state-building are neatly summarised by the Asian Development Bank’s Social Protection Index (see chart 2). It divides a country’s social spending by the number of potential beneficiaries and expresses the result as a percentage of the country’s GDP per head. If Japan’s social-security spending were divided in this way, each beneficiary would receive about 13% of the country’s GDP per head. For South Korea, even after two decades of democracy, that figure is only 7.1%

Asian countries have tended to spread their spending thin. South Korea’s means-tested basic pension covers about 70% of the elderly but pays only 5% of the average wage, according to Randall Jones of the OECD. Indonesia’s Jamkesmas scheme purports to cover everyone in the bottom 30%. But in reality, about 80% of cardholders do not know what they are entitled to, and some, like Agus’s mother, could not make it to a hospital even if they did.

The paucity of Asia’s coverage partly reflects distinctive problems. One is informal workers, who remain a big share of the labour force by rich-world standards even in relatively prosperous countries, where they include everyone from day labourers to self-employed lawyers. When Thailand tried to enroll people who were neither poor nor employed by big firms in a voluntary health-insurance scheme in the 1990s, the sick tended to join but the healthy stayed away, leaving a large share of the population uncovered. In 2001 the government decided it was cheaper to pay for their coverage itself, demanding only a 30-baht co-payment per visit to the doctor.

Just as contributions are hard to collect, so beneficiaries are often hard to identify. Many Asian programmes are intended only for the poor, but they can be hard to distinguish from everyone else. Over half of the Indonesians who now hold the free Jamkesmas health-insurance card do not belong to the bottom 30% for whom such cards are intended, says Matthew Wai-Poi of the World Bank. With the bank’s help, the government has drawn up a new list of the indigent, based on proxies for poverty (dirt floors, unprotected wells, shared toilets without drains, and so on) that are easier to verify and harder to manipulate. That said, in other countries people have been known to hide their motorbike and borrow the neighbours’ kids to seem more deserving than they are.

At least Jamkesmas attempts to target the poor. One of Indonesia’s biggest fiscal giveaways subsidises motor fuel regardless of who uses it, and thus mostly ends up with the car-owning rich. Last year those subsidies cost the government nine times what health care did.

The third problem is the sheer size of some countries and their range of living standards. Enforcing national welfare standards in a country like China, India or Indonesia is more akin to establishing common standards, not in a single country like Germany or Greece, but in the European Union as a whole—not something that has advanced noticeably far in 50 years.

Second-mover advantage

Under the current system migrant workers in China worry that their pension entitlements will not follow them if they move from one province to another. The owner of the Fukang Market store in a village outside Beijing is originally from Shanxi province, 500km away. He and his wife have not joined the local pension scheme, worried that if, say, their store were torn down, they would have to move—but their pension would not follow.

However, as latecomers to the welfare state, Asian countries also have certain advantages. They can learn from the West’s mistakes, and they can leapfrog some of its obsolete practices.

The starkest lesson they can learn is fiscal. Bambang Widianto, the head of Indonesia’s task-force against poverty, confesses to being scared by the example of Greece. Unlike Singapore, where citizens are required to contribute to a provident fund from which their pensions will be drawn, the pensions Indonesia has promised to offer to the nation in 2015 will be partly on a “defined benefit” basis, under which a person’s pension may not necessarily match his contributions. The government thus has crucial decisions to make about the size of the benefits and the distribution of the burden. Unfortunately, Mr Widianto says, “no one is doing those calculations right now.”

Statutory retirement ages tend to be low in developing Asia: averaging 59 for men and 58 for women, according to the OECD. In Thailand, people can withdraw their pension fund at 55 and many workers are required to retire at 60. Thai women can expect to live for 27 years after retirement, the OECD calculates; Sri Lankan women for almost 35 years. Fortunately, the fiscal problems implicit in such longevity can be headed off before the new schemes mature. As M. Ramesh of the Hong Kong Institute of Education points out, South Korea cut the benefits offered by its national pension scheme, introduced in 1988, before anyone had made the 20 years of contributions required to qualify for it.

New technological possibilities should make Asia’s schemes cheaper to run than the West’s old ones. Britain’s NHS spent almost ten years and £6.4 billion trying to get its records digitised before abandoning the effort last year. India’s new health-care scheme for the poor aims to be cashless and paperless from the start, using swipeable smart cards to make payments and convey information. In Pakistan over 140,000 poor people have received cash transfers over the phone under the Benazir Income Support Programme.

Some Asian countries will increasingly stake out the welfare frontier. The region has already set some records. Singapore must be the only capitalist society to house more than 80% of its population in public housing. South Korea beats the world in college enrolment (it has more students than 18- to 23-year-olds).

Beyond catch-up

But Asian countries will also face new challenges—or at least old challenges accelerated (see chart 3). Singapore, South Korea and Hong Kong are ageing faster than any other countries. By 2040 they will have fewer than two people of working age to support every person aged 65 or more. They will have to pioneer ways to lighten that burden and keep the elderly active. In the West, the welfare state rescued the elderly from indigence. In the East, it will have to spare them from indolence.

South Korea already subsidises the employment of the elderly. It is now also beginning to socialise the burden of caring for them. In 2008 it introduced insurance for long-term geriatric care. Needy cases are given a score out of 100 for decrepitude, based on whether they can brush their teeth, remember their birth date, and so on. If their score is bad enough, they may get help from the state with daily tasks like bathing or housework.

Singapore is helping people to flog their homes rather than to tidy them. It is offering S$20,000 ($16,000) to over-54-year-olds if they sell their flat, save the proceeds and move into one of the small studios the government is building.

By 2030 Asia (excluding Japan) will account for over half of the world’s elderly and about half of the global burden of non-communicable diseases, like cancer and diabetes. If Asia’s welfare provision continues to widen and deepen, the region will host most of the world’s pensioners and patients. Asia may no longer boast a distinctive welfare model. But by the time Agus’s mother retires, the world of welfare will have become increasingly Asian.

United States

- The Democratic convention: Private effort, common good

- Mayors at the convention: Urban nation

- Abortion laws: And then there was one

- Health-care services: The good old ways

- Transport in cities: Vive la révolution

- Air pollution: Breathing room

- Lexington: Shindig fatigue

The Democratic convention

Private effort, common good

Democrats and Republicans are now arguing over who can best be trusted with the American Dream

BARACK OBAMA’S Republican challengers have a plan for defeating the president. They want to confront him with a question so weighty that he cannot use his charm, personal popularity or powers of lofty rhetoric to escape from it, namely: is America better off today than it was four years ago, when he took office?

For some months Mr Obama and the Democratic Party have struggled to craft a response, seemingly hesitating to run on the president’s record at a time of high unemployment, soaring energy prices and other indicators of tough times for ordinary Americans. Instead, the Democratic campaign has been largely negative, blaming the Republicans for leaving behind a mess when they lost the White House in 2008, and attacking their presidential nominee, Mitt Romney, as an out-of-touch capitalist raider.

That unimpressive stalemate budged a bit this week, as Democrats gathered in Charlotte in the battleground state of North Carolina from September 4th-6th for their national convention. True, the meeting offered its fair share of cheap shots at Mr Romney (were the Republican candidate Santa Claus, one speaker suggested, he would “fire the reindeer and outsource the elves”). It left questions unanswered about how Mr Obama, in a second term, might tackle America’s looming crisis of debt and public spending. Indeed, too many of the governors, senators, congressmen and union bosses invited to speak seemed to see no crisis at all, as they hailed the importance of continued government spending (or “investment”) on everything from new infrastructure to preserving middle-class jobs.

But, more interestingly, leading Democrats attempted a political and philosophical counter-attack, directly tackling arguments unveiled by Republicans at their own convention the week before in Florida. That gathering had heard repeated calls for smaller government, less regulation, lower taxes and an end to what conservative speakers called un-American levels of welfare and redistribution.

In Charlotte several speakers, among them a former president, Bill Clinton, the First Lady, Michelle Obama, and a young Hispanic mayor from Texas, Julián Castro, accused today’s Republicans of misrepresenting the American dream, and even their party’s own traditions. Speaker after speaker reached into their country’s mythic past to paint a communitarian vision of American success. The mayor of Minneapolis hailed “pioneer ancestors” who had not settled the prairies alone but in wagon trains. Success in America was a “relay”, not a lone marathon, said Mr Castro. The governor of Colorado declared that western history was not just about “rugged individuals” but communities coming together to “raise barns”.

Mr Clinton gave a bravura speech that deftly recalled Mr Obama’s nasty primary fight with Mrs Clinton, but turned it into a positive by noting that Mr Obama now pragmatically worked with his former party rival. The 42nd president, who enjoys high approval ratings from a public that remembers his two terms as a time of prosperity, solemnly painted the present-day Republican Party as captured by a hate-filled far-right and living in an “alternative universe” in which all those who have achieved success are “completely self-made”. This he suggested, ignored a centrist case for business and government working together to promote growth and “broadly share prosperity”.

For her part, Mrs Obama gave an unusually partisan speech for a First Lady, taking swipes at the privileged background and competence of Mr Romney, which she contrasted with the humble upbringings of her and her husband. More interestingly, she also queried Republican arguments about the individualistic nature of American success.

Republicans have spent weeks attacking Mr Obama for a garbled remark in July in which he appeared to say that successful entrepreneurs “didn’t build” their firms—though in truth he was making a more complicated (but still pretty statist) point about the importance of good schools, roads and other public infrastructure. Their convention in Tampa rang to angry cries of “We did build it.”

In Charlotte, Mrs Obama attempted to recast that Republican slogan as betraying bad manners and ingratitude. She and the president had been brought up to be grateful and humble and to remember that many people had a hand in their success, “from the teachers who inspired us to the janitors who kept our school clean”, she said. She described how her father had hardly missed a day of work despite suffering from multiple sclerosis, and had saved and scrimped to pay that share of his children’s college tuition that was not covered by government grants and student loans. The rebuke to Republicans was there to be heard: this was Mrs Obama asserting that the poor (or less than wealthy) can be just as deserving as the bosses whose hard work was the focus of so much attention at the Republican convention.

Yet if the chasm between the two parties is astonishingly wide, the Democratic convention revealed that Mr Obama’s party also suffers from its own internal tensions. Democrats are able to unite around a belief that the government has a role in promoting opportunity and ensuring a “level playing field”. But what that means in practice is less clear, as was demonstrated by the speech that preceded Mr Clinton’s. In that address, Elizabeth Warren, an academic running for the Senate in Massachusetts, described the American economic system as “rigged” against small businessmen and workers and evoking the era when Theodore Roosevelt, a century ago, had fought against the forces of “corrosive greed”. Mr Clinton preferred to focus on practical measures to educate Americans for new sorts of jobs, telling an adoring audience bluntly: “The old economy is not coming back.”

Diversity’s problems

Mr Obama’s fellow Democrats, gathered for a convention, are a far more diverse bunch than their Republican counterparts, whether racially, politically or by age (today’s Republican activist base is remarkably white-skinned and grey-haired). But that diversity poses its own headaches.

Explore our interactive guide to the 2012

presidential election

To win in November, Mr Obama must revive the enthusiasm that saw black, Hispanic and young supporters turn out to vote for him in 2008 in record numbers. His convention duly placed huge weight on a rainbow array of policies dear to different segments of his core coalition. Sitting in the hall, it would have been possible to imagine that the bail-out of Michigan’s unionised car industry was the biggest economic story of the past five years, and that allowing openly gay men and women to serve in the armed forces ranked alongside killing Osama bin Laden in terms of military importance.

Yet for victory, Mr Obama must also win over a separate group: independents who backed him in 2008, but who are now gravely disappointed by the gap between his promises to transform Washington politics, and a reality that has seen him look like a prisoner of congressional dysfunction and obstructionism.

On September 6th the president was due to address just such wavering supporters, in a speech that would have to explain not just how things could be worse with Republicans in the White House, but how a second Obama term would move the country forwards, and preserve its spirit of opportunity.

Politicians have lauded America as a land of opportunity in every election in living memory. As it enters its final weeks, the 2012 election campaign is seeing the argument move from rhetoric to something crunchier: a debate about how to balance freedom, fairness, the rights of the individual and the responsibilities of the state. This is, in short, an election about which party can be trusted with the American Dream itself.

Mayors at the convention

Urban nation

Democrats give cities their due respect

At last, a good Castro

ONE, the grandson of an immigrant maid, delivered a moving keynote address centred on upward mobility, opportunity and education. Another praised the “black and white families [who] met and decided together to break down the barriers that had so long divided their children.” A third recalled his widowed mother’s struggles to run an inner-city pharmacy. And a fourth introduced his party’s platform, which, he said, “is not about partisanship but pragmatism”.

These four mayors—respectively Julián Castro of San Antonio, Anthony Foxx of Charlotte, R.T. Rybak of Minneapolis and Cory Booker of Newark—all spoke on the opening night of the Democratic convention. So did Barack Obama’s former chief of staff, Rahm Emanuel, now mayor of Chicago. Three more mayors spoke the next night, including Antonio Villaraigosa of Los Angeles, who chaired the convention. The Republican convention, by contrast, featured just three, including Bob Buckhorn, mayor of Tampa, the host city, who, as is customary, welcomed the delegates early on the first day; and Mia Love, a picture-perfect candidate (a black woman and a Mormon who is mayor of a small city in Utah).

The uncharitable might point out that the Democratic convention featured mayors because they have little else left. In the 2010 mid-terms Democrats lost 63 House seats, six Senate seats, six governorships and a whopping 680 seats in state legislatures, giving Republicans bicameral legislative and executive control in 15 states and the biggest tally of state legislators since 1928. Cities remain one of the few reliably Democratic power bases: of America’s 20 biggest, just three (San Diego, Indianapolis and Fort Worth) have Republican mayors.

But the featured role given to American cities also is a useful reminder that while Mitt Romney’s roots, like George W. Bush’s, are in the business world, Mr Obama’s are in the messy pragmatism of city politics. He worked as a community organiser in Chicago before representing the city’s South Side in the Illinois senate. Less than a month after his inauguration he created the White House Office of Urban Affairs in order to “articulate goals for cities and metropolitan areas” and to “advance the goals of competitiveness, sustainability and inclusion”. Many of his cabinet secretaries share his urban roots: Shaun Donovan, for instance, ran New York’s public-housing department before becoming secretary of housing and urban development, while Arne Duncan, Mr Obama’s education secretary, previously ran Chicago’s schools.

Those positions, like much of city governance, tend to be more pragmatic than partisan, and tend to focus on more tangible goals than national politics does. A candidate can get elected to Congress on the strength of a shiny grin and gauzy rhetoric; people want their mayors to fix potholes and keep the streets safe. And as much as the right wants to turn Mr Obama into a blend of Karl Marx and Huey Newton, he is at base a rather cautious pragmatist—an approach that reflects not just his temperament but also his roots in urban politics.

The prominence given to mayors at the convention is also a reminder that, for all the amber waves of grain and frontier nostalgia, more than four out of five Americans today live in urban areas. The rate of population growth in America’s cities exceeds the national average. America’s large cities generated nearly 85% of its GDP growth in 2010—a greater share of national output than cities in Europe, India or China. To feature the leaders of America’s economic engines and population centres is simply sound politics.

Abortion laws

And then there was one

Having failed to ban abortion, activists are trying to regulate it out of existence

MISSISSIPPI’S sole remaining abortion clinic is a small single-storey sandstone building on a street corner in the state’s capital. The Jackson Women’s Health Organisation (above) appears unremarkable, until you notice the reflective glass in all the doors and windows, the multiple security cameras and the thick black plastic draped over the wrought-iron fence to shield clients from protesters, who have kept vigil daily for decades.

Their vigil may soon end. On July 1st a law went into effect requiring abortionists who work in Mississippi to have admitting privileges at a local hospital. Privileges can be denied for any reason, and so far no Jackson hospital has granted them to any of the clinic’s doctors. Supporters claim that the law is a simple health-and-safety measure, but occasionally the masks slip. After the law passed, Bubba Carpenter, a state representative, boasted: “We stopped abortion in the state of Mississippi.” Phil Bryant, the governor, said as he signed the law: “If it closes that clinic, so be it.”

Making a state “abortion-free”, as Mr Bryant says he wants Mississippi to be, has long been a goal of anti-abortion activists. Since 1973, when the Supreme Court held, tendentiously, in Roe v Wade that a “right of privacy” allows a woman to abort her fetus before it is viable, anti-abortion activists have tried and failed to have that decision overturned. Before it, states regulated abortion as they saw fit; since then state-level abortion bans have been tried and failed, thanks to the constitution’s supremacy clause, which holds that when state and federal law conflict, federal law wins. Activists have also tried to get “personhood” measures—defining life as beginning at fertilisation—on to the ballots of several states in recent election cycles.

A more successful strategy, however, is to shut down abortion clinics by piling on regulations. Abortion-rights activists call such provisions “TRAP (targeted regulation of abortion providers) laws”, and argue that they have little to do with health or safety—it is difficult to see how having wider hallways in Virginia’s clinics would decrease complications, for instance—but instead aim to make running an abortion clinic impossible in practice.

According to the Guttmacher Institute, an abortion-rights advocacy group, in 2011 state legislatures enacted 92 provisions restricting access to abortion services—nearly three times the previous record of 34, in 2005. That trend has continued this year. The proposed restrictions take a variety of forms. Six states have enacted laws allocating funding for services designed to discourage women from having abortions. Three states have banned all abortions after 20 weeks. Four states have banned the health exchanges to be created under Obamacare from financing abortions. Three states have banned doctors from prescribing abortifacient medicine remotely, as is often done in rural areas; such prescriptions now account for roughly one in five non-hospital abortions in America. Last year, Virginia enacted a law requiring abortion clinics to meet the same building, parking and record-keeping requirements as hospitals.

The renovation costs imposed by that law may drive many of the state’s 20 or so abortion clinics out of business. Not only may Mississippi soon outlaw abortion, in effect, but Tennessee’s admitting-rights’ law forced a clinic to close in August. A three-judge panel has upheld the decision by the state of Texas to end state funding for Planned Parenthood because it performs abortions (not in Texas, but elsewhere in the country) and advocates abortion rights.

But these laws have not gone unchallenged. A federal court struck down Arizona’s ban on all abortions after 20 weeks; opponents argue that viability generally starts at around 24 weeks, and that the law is therefore unconstitutional. An Oklahoma law requiring women seeking abortions to undergo ultrasound exams and doctors to show and describe the images to the women has also been struck down: opponents argued it was unconstitutional because it applied only to abortions and not to other procedures. Court challenges to other laws are likely.

And abortion is likely to become a heated issue in presidential politics once again. It had lain dormant for some time: from 1996 to 2008, the proportion of Americans who said they would vote only for a presidential candidate who shared their views on abortion fell, while the proportion who said abortion was “not a major issue” rose. This year Todd Akin, a Senate candidate from Missouri, claimed that women rarely get pregnant from what he called “legitimate rape”. That not only provoked calls from Republicans for him to drop out, but also revealed that his total opposition to abortion, however clumsily put, is not outside the Republican mainstream. Paul Ryan, the party’s vice-presidential candidate, opposes abortion even in cases of rape and incest. The platform adopted at this year’s party convention endorses his position.

At first blush, this seems something that should cause problems for Republicans. Americans have long been more or less evenly split between “pro-choice” and “pro-life”. But overwhelming majorities in both parties believe that abortion ought to be legal in cases of rape, incest and threats to the mother’s health. Whether this will win the Democrats more votes at a time of high unemployment and economic uncertainty—particularly considering the strong advantage they already enjoy among women—is another question entirely.

Health-care services

The good old ways

Doctors and hospitals are rediscovering a few ideas from the 1990s

Correction to this article

JANET DUNI has a tiny office and a wide reach. From her desk in the heart of Vanguard Medical Group in New Jersey she combs through data, helping to co-ordinate care for thousands of patients. She checks on those who have recently left hospital, for example, and tries to encourage best practice among the staff. Thomas McCarrick, a primary-care doctor and chief medical officer, is grateful for Ms Duni’s help. Working with her, he hopes to lower costs, see more patients and keep them well—the holy grail of American health care. But Ms Duni is not Vanguard’s employee. She works for an insurer.

Beneath the interminable squabbles over Barack Obama’s health law, a transformation is taking place. To date most doctors have been rewarded for providing more rather than better services. This is unsustainable. Health care gobbles nearly 18% of GDP. Now a myriad experiments are under way, as described in the newest issue of Health Affairs, the wonk’s Bible. Some programmes are prodded by Mr Obama’s reform. Others are independent of it. But they share a common goal: pushing doctors and hospitals to provide better, cheaper care.

This seems familiar. In the 1990s health maintenance organisations (HMOs) used primary-care doctors to co-ordinate patient services and try to lower spending. HMOs usually gave a fixed fee for each patient to groups of doctors and hospitals—if a patient got too expensive, the groups bore the cost. Many lost money. Patients complained that HMOs encouraged doctors to skimp on care (“drive-through deliveries”, with mothers ejected from hospital soon after birth, were particularly notorious). For some, the acronym “HMO” remains lodged in the pantheon of toxic terms, somewhere between “rationing” and “death panel”.

The 1990s are not being repeated, but some elements are. Vanguard is a “patient-centred medical home”, an absurd term for a promising idea. The “home” does not house patients; rather Vanguard is a hub, where a group of doctors oversee the health of patients. It is part of a broader experiment with Horizon Blue Cross Blue Shield of New Jersey, the insurer that employs Ms Duni. Horizon still pays for specific services from Dr McCarrick and 47 other primary-care practices. But Horizon also pays them fees and bonuses to co-ordinate care, keep patients well and limit unnecessary procedures.

Such patient-centred medical homes are sprouting across the country. Centres for Medicare and Medicaid Services (CMS), in charge of public-health programmes, is accelerating the change. Thanks to CMS, 37 of Horizon’s medical homes, including Vanguard, will extend their model to patients in Medicare, the health programme for the old.

CMS’s boldest new initiative, however, may be the new “accountable care organisations” (ACOs) authorised by Mr Obama’s health law. ACOs are groups of hospitals and doctors that are held responsible for a distinct set of Medicare patients. If an ACO meets goals for the quality of its care and pushes costs below a set level, it may receive a bonus. Other experiments introduced by CMS include paying a set price for a procedure and any medical complications that follow. The private sector is moving forward apace. UnitedHealth, the biggest insurer by revenue, is rolling out pay-for-performance contracts for hospitals, as well as testing its own medical homes and ACOs.

Bob Atlas of Avalere Health, a consultancy, offers a curt sketch of the ACO model: “HMO wannabe”. But he points to important differences. Unlike HMOs, the Medicare ACOs let patients see a range of doctors if they wish. And ACOs do not get one payment for each patient. The bonus complements regular fee-for-service.

Two other factors may make the new reforms succeed where others failed. First, the old systems had few incentives to offer patients good care. Second, they tried to co-ordinate services but had meagre tools to do so. This has changed, thanks not just to electronic health records but to software that analyses patients’ data and finds areas where care could be improved.

Still, the new experiments remain just that. New Jersey’s Horizon has yet to recoup its investment in medical homes. The new emphasis on quality and efficiency may encourage even more consolidation among hospitals—bigger hospitals can spread risk across patients, invest in information technology and create standardised procedures that can easily be replicated. Bigger hospitals may, in turn, use their market power to drive up prices. The main question, however, remains how to balance incentives for efficiency with incentives to skimp. “There are two ways it could fail,” suggests Austin Frakt of Boston University. “It’s too much like what happened in the 1990s… or it is not enough like the 1990s.”

Correction: UnitedHealth is not buying hospitals, as the original version of this story suggested. This was corrected on September 7th 2012.

Transport in cities

Vive la révolution

A cycling renaissance is taking place in America

Heaven and El

MORE and more Americans are taking to the road on two wheels. Between 1977 and 2009 the total number of annual bike trips more than tripled, while the bike’s share of all trips rose from 0.6% to 1%. Commuting cyclists have also increased in number, with twice as many biking to work in 2009 as in 2000.

Cities are increasingly vying to be bike friendly. Among them, Chicago wants to become the most cycle-friendly large city in the country—and has said it will build over 30 miles of protected cycle lanes this year. At the moment it ranks fifth, according to Bicycling magazine. Ahead of it are Washington, DC, Boulder, Colorado, Minneapolis and Portland, Oregon. And cycling is growing fast in all these cities, as it is in New York and San Francisco.

The growth comes thanks to cycle-friendly policymaking and increases in government spending. In Portland, which brought in a comprehensive programme, cycling levels have increased sixfold since the early 1990s. In Chicago the motivation is to improve the quality of life, and thus encourage both businesses and families to move there.

In a forthcoming book, “City Cycling”, John Pucher and Ralph Buehler argue that the bike boom needs to be expanded to a broader cross-section of people. Almost all the growth in cycling in America has come from men aged 25-64. Rates of cycling have actually fallen slightly among women and sharply among children, most probably because of nervousness about safety. But in fact cycling is getting safer all the time. According to a paper* by Messrs Pucher and Buehler with Mark Seinen, fatalities per 10m bike trips fell by 65% between 1977 and 2009, from 5.1 to 1.8. In their book, the authors claim that the health benefits of cycling far exceed the safety risks.

Chicago is also planning one of the largest bike-sharing programmes in the country, with 3,000 steeds. Bike-sharing increases the number of trips by bicycle in a city and improves the cycle culture. Growth in cycling is also spurred by weekend closures of streets to motor vehicles and mass cycling events. All these look likely to become more common in America.

As 48% of trips in American cities are shorter than three miles, there is big potential for further growth. Yet while the future looks bright, America will struggle to catch up with northern Europe, where the proportion of local trips done by bike can be as high as 30%.

One reason for this is that car ownership remains far cheaper in America. Another is the absence of restrictions on car use, which would greatly improve cycle safety. Europeans are far keener on traffic-calming measures, car-free zones, fewer parking spaces and road “diets”—where cars are allocated a narrower piece of road. America may be flirting with the bicycle, but it has by no means ended its long love affair with the car.

*“Bicycling renaissance in North America? An update and reappraisal of cycling trends and policies”, by John Pucher, Ralph Buehler and Mark Seinen. Transportation Research Part A 45 (2011)

Air pollution

Breathing room

The Environmental Protection Agency suffers setbacks in the courts

Another fine day in El Paso

PROTECTING the air, let alone improving it, is a challenge. America was reminded of that last month, as courts handed federal regulators two setbacks in as many weeks. On August 13th a federal appeals court ruled that the Environmental Protection Agency (EPA) had overstepped its authority in rejecting a plan Texas had devised in 1994 for curbing emissions. And on August 21st a different appeals court struck down the EPA’s cross-state air pollution rule, a 2011 measure designed to protect states from pollutants emitted by coal- and natural-gas-fired power plants in neighbours upwind of them.

Both conflicts were almost inevitable. The 1970 Clean Air Act gives the federal government the right to set air-quality standards and emissions limits. The states, however, retain the right to decide how they will meet those standards, and may also set stricter standards of their own.

That led to the first case. Texas (unsurprisingly) did not feel moved to be especially strict, and it took the opportunity to devise its own programme for reducing emissions. The state’s flexible permit system required power plants and certain other polluters to reduce their overall emissions, but left them considerable latitude over how to get there. The idea was to help businesses contain costs. In 2010 the EPA announced that the scheme did not pass muster. It left too much to chance, and was too hard to enforce. That ruling itself has now been overturned.

The second case also involved the Clean Air Act’s uneasy federalism. The states are resigned to being responsible for their own emissions, but they are assessed on the quality of the air itself, even if some of the emissions present have sneaked across the border. The federal law includes a “good neighbour” provision, but it also emphasises the autonomy of the states.

Some states have co-operated with each other, even without the federal government telling them to do so. Voluntary efforts, however, may not go far enough and cannot be enforced. In 2008 the EPA issued the cross-state air pollution rule to revise a 2005 regulation that had also been challenged in court. The new rule required about half the states to reduce their emissions of sulphur dioxide, nitrogen oxide and other emissions based on projections of how many pollutants were crossing state lines, and told them how to do it.

The states affected argued that this was an unfair burden. The EPA had estimated the cost of the new rule at $800m in 2014, the year the emissions standards were officially meant to take effect. The appeals court agreed that the EPA’s new rule was too bossy, and federal law trumps it.

Despite these setbacks, however, the environmentalists should not be wholly bereft. By the time the EPA lost the court case in Texas, for example, it had already achieved its immediate goal. Elena Craft, a health scientist with the Environmental Defence Fund’s Austin office, points out that since the EPA had rejected the Texas scheme, and no one had expected the court to second-guess the agency, the Texas plants had all complied anyway.

Worth noting, too, is that in both cases the plaintiffs were complaining about authority and expenses. None was disputing the premise that pollution is bad. This seems to be a public consensus. In a survey published by the American Lung Association in March 2012, three-quarters of respondents said that protecting air quality was “extremely” or “very” important. The Clean Air Act itself was more popular than Congress, Barack Obama and, for that matter, the EPA.

Lexington

Shindig fatigue

Disillusion with party conventions is rife. But they have their points

FOR those who were in any doubt, Lexington can assure readers that the big-party conventions in Tampa and Charlotte were not the most riveting or suspenseful of affairs. The acolytes of Ron Paul, a libertarian presidential candidate with a devoted and disgruntled following, did not disrupt the Republican pow-wow in Tampa as feared. Nor did Hurricane Isaac, which had appeared to be heading that way. The biggest suspense at the Democratic shindig in Charlotte centred on the weather too: whether, given the downpours all week, Barack Obama would be able to give his acceptance speech on September 6th in an open-air stadium. In the end, it was moved indoors; but few outside Mecklenburg County, North Carolina were on the edge of their seats.

The past two weeks of speechifying were a far cry from the Democratic convention of 1924, when it took 103 ballots to settle on a nominee. The outcome of a convention has not been in doubt since 1980, when Ted Kennedy tried to grab the delegates already pledged to Jimmy Carter. Although it is theoretically still possible that the primaries may yield an inconclusive result, leaving it up to the convention delegates to pick a presidential candidate, in practice the parties are keen to avoid the public bickering and unsavoury deal-making that would entail, so tend to rally around the favourite long beforehand. In fact, the Republican Party was so determined to present a united front this time round that it did not even bother to announce a proper tally of votes for the nomination—the whole reason, in theory, that all the delegates had gathered.

There was not even much suspense about what would be said in the speeches. The parties now carefully vet all utterances from the podium to make sure they hew closely to the theme: how wonderful their man is, especially when compared with the horrors the other guy will unleash. The last time any politician said something truly unexpected and memorable at a convention was in 1992, when Pat Buchanan overshadowed the Republican nominee, George Bush senior, with a stem-winding tirade against “a religious war going on in this country”. By contrast, the organisers in Charlotte seemed all in a lather this year because Bill Clinton was late handing in his speech. In Tampa, when John Kasich, the governor of Ohio, departed from his approved script, a red light beneath the teleprompter began flashing frantically. It was one of the better speeches of the night.

Conventions are not just becoming duller to watch, they are also getting more unpleasant to attend. Security has been ratcheted well past airport levels. In Tampa, a whole elevated highway that ran past the venue was closed to all traffic for a week. Unsmiling security screeners in Charlotte confiscated umbrellas from the sodden delegates by the hundreds. Even the lobbyists and hangers-on are having a tougher time of it. The Democrats, reluctant to seem in hock to big business, have largely banished corporate sponsors. Invitations to side events and parties in both cities came with elaborate legalese about meeting federal anti-corruption laws. In an era of cameras in mobile phones and “citizen journalists”, the parties are anxious to avoid displays of conspicuous boozing and cigar-smoking.

Even attending a convention can be seen as something of a political liability for politicians running against the partisan tide. Republicans running for Congress in Democratic-leaning spots, such as Hawaii and New Mexico, skipped their party’s party, as did Democrats in Republican strongholds, such as Utah and Missouri. Both Senate candidates in Montana gave their conventions a miss, too. Party leaders on both sides have allowed their underlings to stay at home and focus on their own campaigns.

No wonder that it has become fashionable to argue that conventions should be done away with, or at least dramatically curtailed. Few Republicans mourned the forced compression of their jamboree into three days, thanks to Isaac. The Democrats had already done the same, voluntarily, without obvious ill effects. The festivities are expensive to mount, after all, and the official business, plus a good dose of oratory, could easily be dispensed with in a day-long pep rally. Some Democrats have floated the idea of a series of such rallies in different cities around the country, the better to appeal to local voters.

New stars rising

All this is an acknowledgment that the free publicity the conventions used to provide is atrophying. The big television networks, for example, seem eager to cut things short. They scandalised Republicans this year by declining to air the first night of speeches from Tampa, forcing Ann Romney’s appearance to be pushed back by a night. Ratings have been in decline since 1976, except for a blip in 2008. Only 30m viewers tuned in to hear Mr Romney accept the nomination, whereas John McCain drew 39m four years ago. By the same token, convention “bounces” in the polls, usually fleeting, are also getting smaller. Hence the increasingly desperate theatrics, including enlisting a rumpled Clint Eastwood to chat to an empty chair.

But even if the conventions are largely irrelevant to the present election, they are critical to future ones. No other event gives a party’s rising stars the chance to shine in front of so many of the activists, donors and pundits who will help shape future races. This year Marco Rubio, a Republican senator from Florida, burnished his already glowing reputation, and Julián Castro, the Democratic mayor of San Antonio, drew attention by becoming the first Latino to give his party’s keynote address. It is a safe bet that Mr Obama’s speech this year (admittedly, after The Economist went to press) will not have nearly as much bearing on his political career as the one he gave, to a rapturous reception, at the Democratic convention in Boston in 2004.

Economist.com/blogs/lexington

The Americas

- Quebec’s election: The separatists are back

- Peru’s Shining Path: Still smouldering

- Argentina’s dubious poverty line: The six-peso diet

Quebec’s election

The separatists are back

But only just. A dramatic election night may herald a turbulent term

PAULINE MAROIS, leader of the separatist Parti Québécois (PQ), was in the middle of congratulating supporters on the party’s narrow election victory on September 4th when a gunman entered the theatre where she was speaking, shot two people (one of whom died), then set fire to the building. Ms Marois had just confirmed that she wanted to make the largely French-speaking province an independent country when she was bundled offstage by her security guards. The gunman, caught by police behind the building, shouted in French: “The English are waking up!” as he was led away in handcuffs.

The incident shocked the PQ loyalists, known as péquist es, who had been waving blue-and-white Quebec flags and loudly cheering their leader. Little is known about Richard Henry Bain, the 62-year-old whom police arrested. But the tragedy is likely to be the first of many difficulties ahead for Ms Marois, her fragile new government and Quebec.

Ms Marois had spent the five-week campaign urging Quebec’s almost 5m voters to grant her a majority so that she could keep her party’s long-held commitment to make an independent country of Canada’s second-most-populous province. (Referendums held under PQ governments in 1980 and 1995 were defeated.) In the end voters gave her much less than she sought. The PQ won 54 of the 125 seats in the provincial assembly, enough to form only a minority government (see chart).

In the popular vote, the ruling Liberal Party was less than one percentage point behind the PQ. Its leader, Jean Charest, Quebec’s premier since 2003, lost his seat and resigned as party leader the following day. The newly merged Coalition Avenir Québec, a right-leaning party that wants to put all talk of independence on hold for a decade, came third.

Ms Marois skated over her thin mandate in her election-night comments. Stephen Harper, the Conservative prime minister of Canada, did not. In a stiffly worded communiqué, he congratulated the new premier on her minority government, but warned: “We do not believe that Quebeckers wish to revisit the old constitutional battles of the past.” He added: “We believe that economic issues and jobs are also the priorities of the people of Quebec.”

Mr Charest’s staunch support of federalism helped to put separatist talk on the back burner during the nine years that he was in power. But the Liberal leader’s long stay in office worked against him in the campaign, as did accusations of corruption within his party. The Coalition party won support with its oft-repeated message, “We’ve got to clean house”. The graft allegations are being investigated by a commission that Mr Charest reluctantly appointed last year, which has been holding public hearings since June. Some wonder if Mr Charest called the election this month, well ahead of the December 2013 deadline, to ensure the vote took place before more dirty laundry was aired.

He may also have been capitalising on public support for his stand against the university and college students who for the past six months have been protesting against an increase in tuition fees. The students have disrupted classes and gathered in their thousands for noisy street demonstrations, partly financed by Quebec’s strong union movement. A hundred or so were still marching in the rain on election night near the ill-fated PQ celebration. “We don’t vote, we fight,” said their banner.

They are Ms Marois’s problem now. Placating them may prove to be the easiest of the challenges that lie ahead for the new government. The PQ promised to abolish the tuition-fees increase and repeal a law known as Bill 78, which was passed last May to restrict where and how students may demonstrate. The party also persuaded one of the student leaders, Léo Bureau-Blouin, to run under its banner. He won.

Much more daunting will be persuading opposition members to support promised legislation to tighten laws on the use of the French language, a new “secular” charter banning public employees from wearing religious symbols, and to raise taxes on mining companies. A mining levy could undermine Plan Nord, Mr Charest’s ambitious programme to encourage the development of minerals, timber and hydroelectricity in northern Quebec.

Jean-François Lisée, a former journalist who won a Montreal constituency for the PQ, brushed aside those difficulties on election night. He says the party plans to copy the tactics of Mr Harper, who led minority governments between 2006 and 2011 but was able to govern as if he had a majority by skilfully soliciting support from opposition parties. Mr Harper was eventually able to transform his minority government into a majority last year. The PQ may struggle to match that record.

Peru’s Shining Path

Still smouldering

An attempt to form an extremist party

TWENTY years ago this month, police arrested Abimael Guzmán, the founder of the Shining Path, and Elena Iparraguirre, his partner. With that, the group’s violent insurgency soon came to an end. A truth commission reckoned that the Maoist guerrilla group, which engaged in terror, was responsible for a majority of the 70,000 or so killings that took place during its battle with Peruvian society and the security forces.

Is that nightmare about to return? Interviewed in her small cell on the top floor of Lima’s main women’s prison, surrounded by books and watercolours she has painted, Ms Iparraguirre says she has not changed her views. She remains a dogmatic communist, but she accepts that the Shining Path was defeated militarily. Before being allowed to talk to Ms Iparraguirre your correspondent was required to submit to questioning by a committee of five other Shining Path prisoners. Both she and Mr Guzmán, who is 77, are serving life sentences, and will not be released. But other senior leaders of the group will start emerging from prison early next year, having served sentences of 20 years or more.

This coincides with an effort initiated by the Shining Path’s lawyers to register a political party promoting its fundamentalist Maoist ideology. (Mr Guzmán, who dubbed himself “President Gonzalo”, abhorred Deng Xiaoping as a traitor and revisionist, and Ms Iparraguirre lumps China in with the United States and Britain as “imperialist” nations.) The lawyers originally created the Movement for Amnesty and Fundamental Rights (Movadef) to work for the release of, in their words, “political prisoners”. Movadef has gained a foothold in the teachers’ union in some regions of Peru. It submitted 360,000 signatures last year to register as a party, but was turned down. The electoral authority argued that Movadef was promoting terrorism by stating that its guiding principle was “Marxism-Leninism-Maoism-Gonzalo Thought”. Alfredo Crespo, the lawyer for Mr Guzmán and Ms Iparraguirre, accuses the authority of an anti-communist witch hunt. “We may not be a registered party, but we exist and will continue to fight for political transformation,” he says.

A breakaway armed rump of the Shining Path still operates in a corner of the Peruvian Amazon, in the valleys of the Apurímac, Ene and Mantaro rivers. It has killed a score of soldiers and police so far this year, including five in an attack last month. On September 5th security forces killed one of its senior commanders. But they have struggled to weaken the group. Mr Crespo disowns this faction, calling them traitors for disobeying Mr Guzmán’s call to abandon armed struggle in favour of peaceful political action. “We don’t know who they are,” claims Ms Iparraguirre.

The great majority of Peruvians believe the country cannot afford to give Movadef the benefit of the doubt. President Ollanta Humala’s government last month sent to Congress a bill, based on German legislation, to make it a crime for anyone publicly “to approve, justify, deny or minimise” the crimes of terrorism. A bill to reform the education system also bans anyone convicted of terrorism from teaching in public schools. Teachers promoting terrorist ideology face immediate dismissal. Peru is much less poor than it was 20 years ago, but it still has pockets of people sufficiently frustrated to be susceptible to Mr Guzmán’s nihilism. Peruvians will have to remain vigilant.

Argentina’s dubious poverty line

The six-peso diet

Rumbling stomachs, grumbling citizens

SIX Argentine pesos ($1.30 at the official exchange rate, or about $1 on the black market) is just enough to buy an alfajor, a sweet biscuit nibbled between meals over coffee. But according to the government, it is more than sufficient to buy an entire day’s food. On August 10th INDEC, the national statistics agency, declared that a family of four should be considered above the poverty line if its monthly food bill exceeded 688 pesos, equal to about six pesos per person per day.

The claim has stuck in the throats of ordinary Argentines, who have to spend far more than this to keep hunger at bay thanks to galloping inflation. Indignant citizens created mock advertisements featuring pizzas the size of finger nails. Hackers disabled the INDEC website, tweeting: “Now you’ll have to use your six little pesos to restore your page :)”.

Experts also doubt the government’s claim. A study by the University of Buenos Aires puts the minimum daily budget for a healthy diet at 24 pesos per person, four times the official figure. “It is totally impossible to eat healthily with six pesos,” says Sergio Britos, one of the study’s authors. INDEC’s report “loses all credibility” by supposing unrealistically low food-prices, he says.

It is not the first time that official reports have played down the cost of living. Since 2007 the government has published bogus inflation statistics to beguile voters and investors. In February, with independent estimates running more than twice as high as official ones, The Economist stopped publishing INDEC’s inflation figures.

The gap between official pronouncements and reality is not lost on the public. Margarita Barrientos, the founder of a soup kitchen in one of Buenos Aires’ poorest barrios, spends about six pesos per person for a single meal, and calls INDEC’s statement “insulting”. “What can you do? The government will always give the figures that suit its needs,” she shrugs. A beggar in one of the city’s trendier neighbourhoods laughs heartily when asked if she could feed her family for six pesos each. “If that were true, I would be rich,” she says.

Asia

- Strained relations between Japan and South Korea: Lame ducks and flying feathers

- Bangladesh: Troubled waters

- The blasphemy law in Pakistan: Contemptuous

- India’s youngest chief minister: Another dynasty in trouble

Strained relations between Japan and South Korea

Lame ducks and flying feathers

Domestic political upheaval in both countries makes a damaging row worse

IN RECENT administrations in South Korea a pattern has emerged for how presidents treat Japan. For the first three of their five years in office, they are in a friendly swoon, focusing firmly on the future. Then, as if rudely awoken, they remember that Japan was once a brutal coloniser, and things go swiftly downhill.

Lee Myung-bak, in his last few months as South Korea’s president, is following the same script, but with a twist. On August 10th he made an unexpected visit to an islet that South Korea, which occupies it, calls Dokdo, and that Japan, which covets it, calls Takeshima. That suddenly upset the diplomatic limbo in which the territorial dispute had lain for years. A South Korean president had never set foot on the island before. A few days later Mr Lee added what the Japanese saw as insult to injury, by saying that if the emperor, Akihito, were to visit South Korea, he should first apologise for Japan’s wartime sins. Then followed a Dokdo nonsense, in which the South refused to receive a diplomatic letter and Japan refused to take it back. Even Japan’s relations with North Korea appear to have more scope for improvement.

The question is why Mr Lee, who must leave office shortly after elections in December, is going out of his way to be so provocative. Now that Park Geun-hye, no friend of the president, has become the ruling party’s candidate to contest the elections, Mr Lee looks like a lame duck. His brother, who wielded influence over his administration, was indicted in July on kickback charges, joining other former presidential aides accused of corruption. In a country where ex-presidents’ families and friends are often hounded by their enemies, Mr Lee’s visit to the island can best be explained as a way of shoring up his defences before he goes.

The trouble is, he is not the only diminished leader in the neighbourhood. In late August Yoshihiko Noda, the Japanese prime minister, was defeated in an opposition censure in the upper house, in effect killing his chances of pushing legislation through both houses of parliament during this session.

The immediate consequence is that his government is running out of cash. On September 4th it postponed ¥4.1 trillion ($52.4 billion) in tax grants to towns and cities, following its failure to pass a bill to issue bonds to help fund this year’s budget. Soon, though, the censure motion may leave Mr Noda no choice but to dissolve parliament, pushing him into an autumn election that polls suggest his ruling Democratic Party of Japan (DPJ) will lose. The fight is likely to be liveliest on the nationalist right, where some of the DPJ’s most potent challengers include people spoiling for a verbal confrontation with South Korea. That will make the bilateral tensions even harder to diffuse.

Pundits are struggling to understand how matters deteriorated so swiftly. They are mystified as to why Mr Lee brought the emperor into the fray. The 78-year-old has worked hard to improve relations with South Korea, as with all neighbours who suffered under Japanese imperialism. He is not shy of apologising.

As for the surprise visit to the island, Mr Lee has broken what the Japanese see as a diplomatic taboo. And he has sought to aggravate the thorny territorial issue with the emotive issue of “comfort women”, South Koreans press-ganged during the second world war, along with other nationalities, to provide Japanese soldiers with sex.

A year ago South Korea’s Constitutional Court compelled Mr Lee’s government to take steps to address the grievances of some of the victims who every week hold protests outside the Japanese embassy in Seoul. Park Cheol-hee of Seoul National University reckons that Mr Lee decided to go to the island partly out of frustration, because his government was unable to persuade Mr Noda’s administration to offer compensation to the comfort women, along with profounder apologies than Japan had issued to date.

In South Korea the blame for this fell largely on Mr Noda. However, Hitoshi Tanaka, a Japanese foreign-policy expert who has taken part in comfort-women negotiations in the past, says it was long ago agreed between the two countries that Japan could not offer state handouts to individuals, however much they suffered, on the (admittedly curious) ground that the demands would be endless. He says the Lee administration ignores numerous past apologies, as well as indirect compensation payments.

A big risk now is that the row could inflame anti-Korean sentiment in Japan. Charismatic right-wing politicians such as Toru Hashimoto, mayor of Osaka, who is preparing to launch a nationwide political party to take part in the elections, is one of several influential figures who have called for a review of the 1993 “Kono Statement”, named after the then chief cabinet secretary, which is Japan’s fullest apology for the incidents of sexual slavery. So has Shinzo Abe, a nationalist whose disastrous spell as prime minister has not snuffed out his ambitions. Such a review would infuriate South Koreans.

Deteriorating relations have already had material consequences. In June, and at the last moment, South Korea shelved a deal to share intelligence with Japan, mainly about North Korea. Military exchanges, which are encouraged by the United States, an ally of both countries, were suspended this week. Japan is mulling whether to renew a currency-swap agreement that expires in October. Politicians are even threatening to stop a Korean soap-opera star from visiting Japan, after he took part in a swimming relay to Dokdo. For Japanese women obsessed with the “Korean wave” of popular culture, that is extremely serious.

Five million tourists travel between the two countries each year, and the business ties are so thick that a huge incentive exists for South Korea and Japan to overcome their differences. It will not happen, however, before Mr Lee leaves office. By then, Mr Noda may be gone too.

Bangladesh

Troubled waters

A foreign-funded bridge is hostage to murky local politics

THE biggest infrastructure project in South Asia to be paid for by foreign donors is a $3 billion bridge in Bangladesh intended to span the Padma river, which is what the main branch of the Ganges is called as it flows through its delta to the Bay of Bengal, receiving the flow from the vast Brahmaputra river for good measure.

The bridge is the stuff of donors’ dreams. Its point is to end the isolation of Bangladesh’s poor south-west, home to 30m people who are cut off by these vast waters from the capital, Dhaka, and the rest of the country. The region’s isolation is compounded, to the south-west, by a high-security fence along the border with the Indian state of West Bengal; and, to the south, by the tidal Sundarbans, where dense mangrove forests are home to tigers. The proposed 6km (3.8-mile) bridge could be a gateway to India, tying Dhaka to the great metropolis of Kolkata. It is also a crucial piece of an even more ambitious dream of connecting South Asia with South-East Asia, via Bangladesh and Myanmar. Official estimates say the bridge could raise Bangladesh’s annual growth rate by 1.2 percentage points.

The planned bridge, some 40km south-west of the capital, is designed to carry four lanes for traffic, as well as a freight railway and a gas pipeline. Complex works to channel the Padma’s flow are planned. Alas, it is easier to train the 5km-wide river than Bangladesh’s politicians to keep their hands out of the till. In June the World Bank cancelled a $1.2 billion loan, citing alleged corruption by Bangladeshi public servants. The World Bank has identified various officials as being unable to leave the money for the bridge alone. Sacking crooked-seeming officials has, for the World Bank, become a precondition for resuming lending. Bangladeshi newspapers have said that the prime minister’s chief economic adviser, Mashiur Rahman, is in the Bank’s sights. He says he has done nothing wrong and will only resign if the prime minister, Sheikh Hasina, tells him to. Regardless of Mr Rahman’s case, Bangladesh has a culture of impunity. Only one senior politician has ever gone to jail under an elected government for corruption, and that was a former dictator.

The Asian Development Bank is more ready than the World Bank to be a cheerleader for the Bangladeshi government and is keen to resuscitate the project. Like the Japan International Co-operation Agency, another backer, it has kept the door open. However, more Bangladeshi officials will have to step down before the World Bank is prepared to return. Probably the government will come back to the table, but not without hectoring its perceived enemies first. Sheikh Hasina has accused Mohammad Yunus, a pioneer of microfinance and a Nobel peace laureate, of putting the World Bank up to walking off.

The Padma bridge project has been in the works for over a decade. Western governments do not want to see it snapped up by a state-backed Chinese company (in return, perhaps, for an equity stake and for economic influence, as has happened with ports in Sri Lanka and Pakistan). India, with which Bangladesh has usually had good relations, would do its best to block a high-profile Chinese involvement in its neighbour’s economy.

Sheikh Hasina says Bangladesh will “not beg” from the World Bank. A sense of injured national pride has given rise to the unworkable notion that the bridge must now be built with Bangladesh’s “own resources”. The government is mulling a levy to help finance the bridge.

The only politician openly to reject Sheikh Hasina’s obsession with self-reliance is A.M.A. Muhith, the finance minister and a former World Bank official himself. Mr Muhith is too venerable to be required to call the prime minister “elder sister”. He knows that Bangladesh needs the multilateral agencies: only earlier this year the IMF helped out with a $1 billion loan. Bangladesh relies heavily on Western aid for a vast array of projects that otherwise would not exist. Without the Bank, there can be no bridge.

Sheikh Hasina’s Awami League is livid enough that it will be unable to keep its election promise of building the bridge before the end of 2013. Yet it would be even more appalled if the Bangladesh Nationalist Party, led by Sheikh Hasina’s arch-rival, Khaleda Zia, took office at the next election, bagging credit for the bridge. (That prospect is real: no elected government has won a second term.) And so, in the end, Sheikh Hasina has no strong incentive, other than the country’s best interests, to mollify the World Bank.

The blasphemy law in Pakistan

Contemptuous

For once, the government pushes back on intolerance

Accuser accused

TO JUDGE solely by its high number of blasphemy cases, Pakistan seems to be a nation of wanton profanity where the Koran is routinely desecrated and the prophet Muhammad insulted. Yet given that the crime of blasphemy is punishable by death, that 97% of Pakistanis are Muslim, and that the remainder are an intimidated and largely impoverished sliver, then the country’s many blasphemy cases more obviously represent an abuse of both religion and the law.

The case of Rimsha Masih, a Christian girl, underlines that interpretation. On August 16th she was arrested in her slum on the outskirts of the capital, Islamabad, and charged with blasphemy after a neighbour and a local cleric claimed that she had burned pages of the Koran. A 500-strong mob swiftly gathered outside her family’s one-room home, causing the whole Christian community of the area to flee in terror of reprisals.

Rimsha’s parents, now in protective custody, say that she is just 11 and has Down’s syndrome. A medical report submitted to an Islamabad court says that she is about 14, seems uneducated, and has a mental age “below her chronological age”. Whether 11 or 14, she is a juvenile under the law, yet she has been held in solitary confinement at an adult maximum-security jail—an experience that her lawyer says has traumatised her. The court has repeatedly refused to give her bail after frivolous objections raised by the lawyer for the accusing neighbour.

The blasphemy law under which Rimsha has been arrested dates back to colonial times, but it was given teeth in the 1980s by the dictator of the day, General Zia ul Haq, who promoted Islamism. Over 1,000 blasphemy cases have since been brought, many on the flimsiest of evidence. When they do not drag on for years, they lead to convictions on hearsay. Dozens of accused have been murdered, in or out of jail. In July a mentally disturbed Muslim man, arrested for blasphemy in the Punjab city of Bahawalpur, was dragged out of the police station by a crowd of 2,000 and set on fire. In 2009 accusations of blasphemy led a mob to attack Christians in Gojra in Punjab province. At least eight were burned to death. Most blasphemy cases turn out to be about something else, often settling personal scores or grabbing property. In Rimsha’s case, the aim seems to have been to drive several hundred Christian families from the area for good.

Yet her case offers a chink of light. This time neighbours neither killed the girl nor burned down her house. A plucky mullah, Tahir Ashrafi, often associated with hardline causes, has championed Rimsha, calling her a “daughter of the nation”. He has brought a few other clerics with him.

And, for the first time, the state has pushed back. Over the weekend one of her accusers, the local imam, was himself arrested and charged with blasphemy, after his deputy said that he had seen the imam tear up pages of the Koran in order to fabricate evidence against the girl. Rimsha’s torment is so extreme that the local media and some of the population have for once taken the side of the accused. Many of the law’s victims are Muslims, which could drag the issue into the political mainstream. Last year 20 of 26 cases of blasphemy involved allegations against Muslims, according to the independent Human Rights Commission of Pakistan. Even if repeal seems impossible, some see a chance to reform the blasphemy law—demanding a higher burden of evidence for accusations, for instance.

However, the coalition government led by the Pakistan Peoples Party (PPP) is weak. It believes that changing the law is of interest only to the country’s religious minorities, a tiny liberal class and the meddling West. In 2011 two of the PPP’s leaders were gunned down after criticising the law. With a general election due in the next few months, this timid government looks unlikely to defang a venomous law, even as a scintilla of hope shows for poor Rimsha.

India’s youngest chief minister

Another dynasty in trouble

The leader of Uttar Pradesh learns how hard it is to change India’s politics

“I AM a traditionalist,” says Akhilesh Yadav in his offices in stately Lucknow, capital of Uttar Pradesh (UP) in north India. The chief minister is being disingenuous. A good two decades younger than most senior Indian politicians, and the introducer of cybercafés as portals for government services, Akhilesh—as he is known everywhere—is self-consciously rejecting the ways of earlier chief ministers, especially his predecessor in UP, Mayawati, whose lurid pink tiles he had torn off the walls of the waiting room.

Yet traditions die hard in UP, malign ones especially. At the very time Akhilesh was speaking, a five-year-old girl, Soni, was breathing her last in Raitara, a dirt-poor hamlet 320 kilometres (200 miles) to the south-east. She belonged to the Musahar, or rat-catcher, caste. The village school does not teach Musahar children, who work in brick factories most of the year. Musahar adults cannot get the temporary work that the government supposedly guarantees to all, and supplies of state-subsidised food are patchy. Soni died of malnutrition.

A lot rests on Akhilesh’s shoulders. With 200m people, UP is the world’s largest local-government unit. It is bigger than Brazil and contains more than 20% of India’s poorest people. Anyone who can dent poverty there would make a difference to global poverty statistics.

At 39, Akhilesh represents a new generation. He is half the age of the prime minister. In UP he is seen as modest and well-intentioned, unlike the older lot, who seem jaded and grasping. Riding a wave of disaffection at Ms Mayawati’s autocratic rule, his Samajwadi (Socialist) party unexpectedly won a sweeping majority in elections for the state assembly in March. National politics then produced a bonus for Akhilesh. In India states get their money partly from taxes and partly from deals negotiated with the central-planning commission in Delhi, the capital. This year’s settlement, a fifth more than in 2010-11, was a boon to UP. It enabled Samajwadi to budget for large social programmes.

All seemed set fair for Akhilesh to run a big-spending, modernising administration. But there is a twist: his father, Mulayam Singh Yadav. Mr Yadav was chief minister himself, and is the grand old man of Samajwadi. Where the son studied in Australia and embraces new technology, the father, when he was in charge of the state, refused to use English or computers. Within four months of Samajwadi coming back to power, Mr Yadav was upbraiding ministers for their failures and scolding the government for its performance. It was Akhilesh who said sorry.

The father was back-seat driving. Yet the government is indeed in trouble. For a start, it is not clear who is in charge. Many ministers are either members of the Yadav clan or people loyal to the family—ie, to the father. The Yadavs are notorious for their squabbles, with uncle set against nephew and uncle against uncle.

The result is policy confusion. Measures are announced, and withdrawn. The chief minister first said beneficiaries of a planned unemployment scheme for the young would have to work in government jobs for a time, but then scrapped the criterion. He also amended the age limit for the scheme. Changing direction, Akhilesh argues, is a democracy-affirming improvement on the autocratic style of previous UP governments. Yet it adds to a sense of drift.

In the election campaign, Akhilesh promised a clean government (some of Ms Mayawati’s ministers had gone to jail on corruption charges). He computerised 26 government services as a way of introducing badly needed transparency. But not everyone in the family got the message. The public-works minister, Shivpal Singh Yadav, was caught on videotape telling officials it was all right to “steal a little” but not to “resort to banditry”. Missing the point by a wide margin, he criticised the press for publicising remarks intended to be kept private. One imagines they were.

Worst, the Socialists are threatened by communal violence. For all her faults, Ms Mayawati was credited with reducing caste and communal tensions. In the six months since Akhilesh took over, rioting between Hindus and Muslims has erupted on five occasions. A large town, Bareilly, is still under curfew. The chief minister says the violence is being controlled. But further trouble would hugely damage him.

Abhishek Mishra, a former business professor who is now a UP minister, argues that these are all teething troubles. The first few months of government, he says, needed to be devoted to changing the bureaucracy. Now Akhilesh can turn to his spending priorities, which are education and infrastructure. Every district will get a four-lane highway, and he plans a public-private partnership to build a motorway from Lucknow to Delhi. He is also about to start giving away “graduation bonuses” to girls who get through ten years of schooling, as well as free laptops to 700,000 of the state’s poorest families. These look like gestures. In Raitara village the chief, Prahlad, is dismissive. “We are illiterate,” he says. “What good are laptops to us?”

The economy will be the yardstick by which Akhilesh will be measured. He told the planning commission he could increase UP’s growth to 10% a year by 2016-17, from 6.5% in 2010. That is a tall order.

To achieve it, says Ajit Kumar Singh of the Giri Institute of Development Studies in Lucknow, UP will need more than education and infrastructure spending. Business investment is being held back by state regulations to protect small farmers and established firms. Leasing farmland is banned, so UP has no contract farming. It helps explain why the state which is India’s biggest producer of vegetables has no proper food-processing industry. UP needs to deregulate, Mr Singh argues, but the Socialists are unwilling to offend the farmers and small businessmen who support them. “Maybe Akhilesh will be different,” says Prahlad in remote Raitara. But as the chief minister is finding, youth, affability and good intentions are only a start.

China

- AIDS activism: Bad blood

- Internet freedom: Plus ça change

- The Catholic church: Serving two masters

- Banyan: Too small an ocean

AIDS activism

Bad blood

In central China AIDS activists step up pressure on the government

AMID the daily drumbeat of protest across China involving citizens aggrieved by local injustices, a demonstration by around 300 AIDS victims outside the headquarters of the Henan provincial government late last month might have seemed routine. But the protesters’ growing frustration worries officials far beyond AIDS-wracked Henan. As the Communist Party prepares for an imminent leadership change it is more than usually anxious to keep the AIDS scandal quiet.

“The government is procrastinating, covering up and clamping down,” says an activist who joined the protest in the provincial capital, Zhengzhou, on August 27th. His son was found to be infected with HIV, the virus which causes AIDS, at the age of six after a blood transfusion at a Beijing hospital a decade ago. Many of the other participants were infected in government-backed blood-selling schemes in the 1990s. Donors, mostly poor farmers, were re-infused with pooled blood once its plasma had been removed. Tens of thousands contracted HIV this way. The government has never admitted responsibility.

As the protesters grew impatient at the lack of an official response to their demands for more financial assistance, some attacked (and eventually toppled) the low retractable gate in front of the government building. Witnesses say riot police wielded batons to beat them back.

The man who is preparing to take over as China’s prime minister, Li Keqiang, has particular reason to prefer that Henan’s AIDS crisis is dealt with quietly. Mr Li was the province’s governor and then party chief between 1998 and 2004. Although the blood-selling infections mostly occurred before he arrived, Mr Li, who is now deputy prime minister, is widely blamed by activists in Henan for maintaining tight controls on media coverage of the calamity and for the harassment of whistle-blowers by police.

Blood ties

Mr Li is generally viewed as one of China’s more reform-minded leaders (including in health care, which he oversees). But protests such as the one in Zhengzhou are likely to prove a recurring embarrassment to him after he takes over as prime minister next March. In recent months Henan’s AIDS activists have been stepping up their efforts to put pressure on the government to take the blame and improve care for sufferers and their families. They are being helped by the rapid growth of microblogs.

In recent years the central government has become more open in admitting the extent of the problem and has provided a little more aid to those affected. But activists say that local officials often ignore central-government orders to improve care for victims. Last month’s protest was the latest in a series of demonstrations aimed at persuading the government in Henan to carry out the centre’s wishes. Of particular concern is “Document 26”, a proposal issued in 2009 by the Ministry of Civil Affairs. It suggests that HIV-infected children and orphans whose parents have died because of the disease be given a minimum monthly subsidy of 600 yuan ($95).

Few local governments, which are notoriously averse to forking out for welfare, have taken up the idea. When they protested in Zhengzhou in April, demonstrators said an official promised a reply to their demands in a couple of months. They say they heard nothing. As the party prepares for its five-yearly congress in Beijing, officials are using increasingly heavy-handed measures to enforce stability.

An HIV-infected campaigner in Gongyi, one of Zhengzhou’s satellite towns, is one of the few who can claim his efforts have prompted any change. Last December he was in Beijing just as officials were looking for someone like him to meet the prime minister, Wen Jiabao, on World AIDS Day with TV cameras present. Mr Zhang (who does not want his full name used because of fears that fellow villagers might despise him for his illness) says that officials in Gongyi rapidly agreed to implement Document 26 after his handshake with Mr Wen. It was a low-cost decision: Gongyi is one of Henan’s wealthiest areas and therefore few of its farmers were attracted by the blood-selling scheme.

Mr Wen’s concern has done little to help Mr Zhang. He and his wife (who is also infected) still live with his brother, having sold their house to pay for treatment. Mr Zhang says courts have rebuffed his attempts to sue the hospital where he received the transfusion that he blames for infecting him. The government likes to give the impression that it is concerned about AIDS, says his wife, “but it does nothing to back it up”.

Internet freedom

Plus ça change

An internet campaigner is released from prison

APRIL 23rd 2002 was a turning-point in American internet companies’ relations with China, though few knew so at the time. On that day Beijing’s state-security bureau requested information from the Beijing office of Yahoo!, an American internet company, about the creator of an online forum, as well as e-mail registrations and messages, in a case of what the bureau called “inciting subversion”. Yahoo! complied with this notice and another one that year, and soon the authorities had detained Wang Xiaoning, a democracy activist who had anonymously been using the forum and e-mail accounts to press for free elections. He was sentenced to ten years in prison.

Mr Wang, now 62, was released on August 31st. Much about the internet, both in China and globally, has changed in the intervening decade. American companies, notably Yahoo!, have learned from the ghastly lesson offered by his case. Before then, China had been viewed simply as a promising commercial market. Then, from 2002 to 2004, Yahoo! complied with government requests in at least three other cases similar to Mr Wang’s. This emerged publicly in 2005, when Shi Tao, a Chinese journalist, was sentenced to ten years for an e-mail he sent from a Yahoo! account to an overseas pro-democracy website.

Yahoo! was vilified, as were other companies which had caved in to Chinese pressure. In 2005 Microsoft deleted the blog of an activist, Michael Anti, and in 2006 Google launched a Chinese-based, censored version of its search engine (the company shut it down in 2010). All three firms were hauled before an American congressional hearing in 2006, along with Cisco, which sells equipment that China uses for internet monitoring and filtering. At another congressional hearing, in 2007, Jerry Yang, a founder of Yahoo!, apologised to Mr Shi’s mother. Yahoo! also settled a lawsuit with the families of both Mr Shi and Mr Wang, and has since condemned the suppression of free speech.

Today Yahoo!, Microsoft and Google are members of the Global Network Initiative, an organisation that has agreed on principles of free expression and online privacy. The companies have limited their presence in some authoritarian countries. Rebecca MacKinnon, an expert on internet freedom, notes that Microsoft and Google, keen to avoid Yahoo!’s fate, never introduced Chinese-based versions of Hotmail and Gmail. To keep its nose clean in Vietnam, Yahoo! maintains its Vietnamese-language servers in Singapore. (Facebook and Twitter, used by some Chinese activists, are blocked in China and accessible only using special tools.)

Yahoo!’s Chinese operations, meanwhile, have been under the control of Alibaba Group, a Chinese internet company, since 2005. Chinese companies, though often listed overseas with significant foreign ownership, must co-operate with authorities in self-censorship, shutting down accounts and identifying users if they want to stay in business.

China’s microblogs are a much more vibrant space for discussion than the internet of Mr Wang’s day, but the authorities still impose harsh punishments for speech they deem subversive, wherever they find it. In May 2011 Lu Jiaping, his wife, Yu Junyi, and a friend, Jin Andi, were imprisoned for “inciting subversion” by posting and e-mailing essays criticising the Communist Party, much as Mr Wang did ten years ago. Chinese internet companies, including Sina (listed on America’s NASDAQ), provided authorities with information that helped convict them.

The Catholic church

Serving two masters

A bishop’s public resignation creates more problems for the church

A shining light

STUDENTS at Shanghai’s Sheshan Catholic seminary, one of China’s biggest, learned on August 22nd that classes would be suspended indefinitely. The announcement was another twist in the latest standoff between Catholics and the government that began on July 7th. On that day, Bishop Ma Daqin, the new auxiliary bishop of Shanghai, announced at the end of his ordination homily at the Cathedral of St Ignatius that he would need to devote every effort to his new post, and it would therefore be “inconvenient” to remain a member of the government’s Chinese Catholic Patriotic Association (CCPA), the body which oversees China’s Catholic church. The faithful, packed into the pews, rose in spontaneous applause. Shanghai’s government was less thrilled; he has since been held under house arrest.

The very public resignation is a blow to the CCPA’s already tenuous authority. Since it was established in 1957 to ensure Catholics no longer acted “contrary to the interests of their country”, the Vatican and many of China’s Catholics have taken a dim view of the body, which does not recognise the authority of the Pope and often appoints its own bishops. One Shanghai bishop, who requested anonymity, calls the CCPA a bully. Its members, he says, seek power, status and government accolades without having the faith’s best interests at heart.

There are between 8m and 12m Catholics in China, according to Anthony Lam of the Holy Spirit Study Centre, a research institute in Hong Kong. Almost 6m worship in official churches, according to the Chinese Academy of Social Sciences while many others worship in “underground” churches loyal to the Pope. Although the line between official and underground churches is becoming more blurred, Tao Feiya, a religious scholar, says he cannot see any resolution to the dispute over final authority.

That is why there was such hope in Bishop Ma. Although he says his grandfather and father served time in prison for their faith, the 44-year-old had achieved the rare feat of being approved by both the Vatican and the CCPA, where he once served on the standing committee.

But you can only serve two masters for so long, says Joseph Kung, founder of the Cardinal Kung Foundation, an American group that supports persecuted Chinese Catholics. Bishop Ma’s choice of master is clear among his flock too. After a recent mass at the cathedral, a 55-year-old retired worker called Mrs Li held up a photocopied diatribe against the CCPA that is circulating among the congregation. It says Bishop Ma is a “shining light” in a dark China, and calls on the congregation to keep the faith.

Banyan

Too small an ocean

A proposal for a middle path for America, between confronting China and giving way to it

“THE Pacific is big enough for all of us,” declared Hillary Clinton, America’s secretary of state, on August 31st. Or is it? Xinhua, the official Chinese news agency, countered this week that the ocean is also “small enough to create conflicts that can threaten peace in the region and the world at large”. Certainly, America and China have recently been bumping heads in the western Pacific. And a visit by Mrs Clinton to Beijing this week served only to underscore the difficulty in managing their rivalry.

The two sides disagree about the cause of the problem. For America it is China’s increasingly assertive stance on territorial disputes: with South-East Asian countries in the South China Sea, and, farther north, with Japan. To China it is American meddling, which, as Xinhua put it, “has apparently emboldened certain relevant parties to make provocations against China”. The competition is more fundamental, however, than either of these finger-pointing explanations allows. It is the inevitable rivalry between an incumbent superpower and a rapidly rising one.

“The China Choice”, a new book by Hugh White, an Australian writer on strategic affairs, elaborates on this rivalry without the usual fuzzy coating of diplomatic obfuscation. America is the pre-eminent military power in the western Pacific and wants to stay that way. That is the message of the Obama administration’s “pivot” or “rebalancing” to Asia, and its commitment to keep most of its naval forces in the Pacific. China, newly confident in its wealth and military muscle, wants to challenge this American primacy so close to home.

Hence the “choice” for America: to try to resist China’s challenge (as it does now) and maintain primacy; to yield to Chinese regional dominance, which would be repugnant to many Americans and would scare its Asian allies; or, as Mr White favours, to negotiate “a new order in which China’s authority and influence grow enough to satisfy the Chinese, and America’s role remains large enough to ensure that China’s power is not misused”.

To many Americans, this will seem as unnecessary and defeatist as withdrawal itself. American primacy has worked well not just for America but for the entire Asia-Pacific, creating the peaceful backdrop for economic miracles—most spectacularly in China itself. And America’s economy is still the world’s largest, with a defence budget that dwarfs China’s and an edge in military technology that China is years away from overtaking.

Mr White argues these advantages are, if not wholly illusory, then at least deceptive. American power is constrained by the danger of escalation. Its ability to defend Taiwan from a Chinese invasion, say, or even to back up the Philippines or Vietnam in a clash with China over a contentious rock in the South China Sea relies on its willingness to see these conflicts become wars involving the superpowers or even nuclear confrontations. A compelling passage in the book spells out just how a minor maritime tiff could swiftly get out of hand.

Another argument against an accommodation with China is that its rise cannot continue at the pace seen in the past 33 years, and that, once its economy falters, its political system could also look shaky. Mr White calls this “Micawberesque”—hoping something will turn up, or China will turn down. Even if it does, barring a cataclysm such as a Soviet-style collapse, it will still, in a few years, have a bigger economy than America’s. And any new regime in a post-fall China would probably be weaker than the present one and perhaps more prone to populist nationalism.

America’s other big strength in the Asia-Pacific region is its network of alliances and friendships with other countries that welcome its reassuring presence. Indeed, American pronouncements in the past couple of years over the importance of the South China Sea might have been designed to provoke China into fierce responses that alarm its neighbours and push them closer to America. But if they should ever find themselves asked to take sides in a war between America and China, almost every Asian country would try to find a seat on the sidelines.

One reason is that China is now the biggest single trading partner of most of them. America’s economy, too, is tightly bound up with China’s. Some argue that this economic integration—in sharp contrast to the days of America’s cold war with the Soviet Union—makes the risks of conflict too high. Others point out that a similar period in history of surging globalisation ended not in universal peace but the first world war.

Still others argue that America and China are in fact rather adept at defusing rows. After her talks in Beijing, Mrs Clinton praised the “strength and resilience” of a relationship, where it is possible “to talk about anything”. Certainly, the showdown in May over the fate of Chen Guangcheng, a blind Chinese dissident, soon blew over. Mr White finds it hardly reassuring that one man can still raise such basic questions about the world’s most important bilateral relationship.

No lead guitar

Mr White’s solution is for a “concert” of Asia’s great powers—America, China, India and Japan—in which they agree not to seek primacy, and to gang up on any member that tries. This would involve conceding to China a “sphere of influence” (in Indochina, for example). The proposal seems far-fetched, if only because of the political obstacles in all four countries—not to mention those denied an instrument in the concert.

Mr White’s views are controversial but he is not quite alone in contemplating Sino-American power-sharing. A decade ago Bill Clinton suggested America could use its unprecedented power to create a world in which it would be comfortable living when it was “no longer top dog on the global block”. But it would take a very brave serving president to advocate a negotiated end to American leadership in the Pacific; and perhaps an even braver Chinese leader to agree to limit his country’s rise.

Economist.com/blogs/banyan

Middle East and Africa

- South Africa: It’s not just the mines

- Reforming electricity in Nigeria: A bright spark is extinguished

- Israel v Iran: Holding his horses for the moment

- The Gulf: Those annoying democrats

- War and diplomacy in Syria: No letting up

South Africa

It’s not just the mines

The rainbow nation and its ruling party are failing to live up to their ideals

“WE THOUGHT we were having a nightmare”, said Archbishop Desmond Tutu, a South African Nobel peace prize laureate and a veteran of the struggle against apartheid. But no, he cried, “it was us, in 2012, in our democracy.” His howl of rage and disbelief has echoed across South Africa. Many of its people experienced flashbacks to the horrors of an earlier time, after last month’s killing by police of 34 striking workers at a platinum mine near Marikana, in the North West province.

Disbelief grew after the national prosecutor charged 259 miners, arrested after the confrontation, with the murder of their colleagues, citing a “common purpose” law that had been enacted under apartheid but upheld in a restricted form by the constitutional court in 2003.

That the miners were charged was bizarre and shocking. Though still on the books, the use of what has been described as a “lazy prosecutor’s law” prompted outrage across the country. Days later the murder charges were dropped, though prosecutors insisted on their soundness in law. It is not clear whether they came under pressure from the government either to lay the original charge or to rescind it, but the affair has inevitably cast doubt on the national prosecutor’s independence.

Marikana has highlighted and inspired unrest elsewhere. On September 3rd four miners were wounded by rubber bullets when security guards fired on a hostile crowd at the gates of a gold mine near Johannesburg, the commercial capital. Around 12,000 miners at another gold mine have downed tools in a wildcat strike, demanding more pay.

The Marikana fiasco has also prompted a wave of criticism of the ANC for its seemingly inept management and for its failure, more broadly, to fulfil its promise, trumpeted long and loud, of a better life for all. Inequality has grown since the ANC took charge in 1994, even though poverty in absolute terms has declined and the number of South Africans living on less than $2 a day has fallen substantially.

At an ANC conference in June South Africa’s president, Jacob Zuma, bemoaned that most of the country’s economy is still in white hands. Nonetheless, there is a growing feeling in the country that a rich black elite has profited most from South Africa’s liberation, while doing little to improve the lot of ordinary people. Cyril Ramaphosa, once boss of the National Union of Mineworkers (NUM), is often cited as a case in point. Now a multimillionaire businessman and still an ANC bigwig, Mr Ramaphosa earlier this year bid 19.5m rand ($2.3m) for a prize buffalo at a farm near Marikana. On average black South Africans earned around 26,000 rand a year in 2010, when incomes were last tallied.

The country’s official trade unions, who are in a formal ruling partnership with the ANC and the South African Communist Party, are in danger of losing credibility. In the past five years the Congress of South African Trade Unions (Cosatu) has been criticised by many of its members for not fighting their corner hard enough. Among the established unions, the mineworkers’ has been chastised, rightly or wrongly, for being closer to big business than to its members in the mines.

As a result, at least one loud voice of dissent has resonated among the poor. Julius Malema, once the leader of the ANC Youth League but recently cast out of the party for insubordination, has used Marikana to attack the government, blaming it for the tragedy and calling for Mr Zuma’s resignation. He has demanded a revolution in mining, telling workers—as campaigners did under apartheid—to make mines ungovernable. Investors have not so far been deterred, but their confidence is waning.

Strikes are becoming ever more common. Protests take place almost every week and often focus on a lack of basic necessities such as water or electricity. Most demonstrations are small and local. No political party has managed to co-opt them. Most protesters probably still support the ANC, with its cachet of liberation.

Might that change? The ANC is still by far the most powerful and popular party, with Nelson Mandela its icon. At the latest general election, in 2009, it got 66% of the vote (down from 70% the time before) against only 17% for the biggest opposition party, the liberal Democratic Alliance (DA), still seen by most blacks as an essentially white-led organisation. But the DA is gaining ground. It runs the Western Cape province and the city of Cape Town. At the next general election, in 2014, it hopes to make inroads in Gauteng, the country’s richest and most populous province, which includes Johannesburg, where a growing number of middle-class blacks are disillusioned with the ANC for what they see as incompetence and corruption. But the DA is still miles away from having a real chance of taking over.

In the long run, the ANC might lose power if it were to suffer a serious split, perhaps with a substantial capitalist or socialist chunk of the party peeling away. But in the past it has easily survived the departure of dissident factions.

Nonetheless, the ANC is not at ease with itself. Infighting in the run-up to a party conference in December, when the leadership will be elected, is sure to get fiercer. At a similar meeting in 2007, Mr Zuma ousted his predecessor, Thabo Mbeki. The president will have to pull out the stops to avoid facing the same fate.

Marikana has done little to help him. Some leading lights in Cosatu do not support him. Its leader, Zwelinzima Vavi, has been particularly outspoken about the failings of the government. But none of Mr Zuma’s mooted rivals within the ANC looks strong enough at present to be sure of ousting him. Those most mentioned are Tokyo Sexwale, a vastly rich tycoon who is currently housing minister, and Kgalema Motlanthe, the deputy president.

Though strikes at places such as Marikana have become common in mining, they have not yet spread widely into other parts of the economy, as they did in the struggle against apartheid. But they have drawn attention to South Africa’s many painful problems, especially poverty and low wages, poor policing and questionable judicial authority. Above all, as the gap between poor and rich yawns, they point to the smell of corruption.

Reforming electricity in Nigeria

A bright spark is extinguished

The president’s most vaunted reform is flagging but must be revived

Barth takes a bath

ALTHOUGH Nigeria has almost as many inhabitants as Brazil, it produces only 5% of the electricity. Many Nigerian leaders have tried to boost the state’s power supply, but many more have become rich by obstructing it, earning fees from private generation and stealing official funds meant for new power plants. When he was elected last year, President Goodluck Jonathan promised to make electricity reform his big thing, hoping to transform the lives of millions of Nigerians who have spent decades in the dark.

But the resignation of his power minister on August 28th over a conflict of interest has exposed the rot in a process that seemed to be running relatively smoothly. Bartholomew (“Barth”) Nnaji, a respected technocrat who had been minister of power since last year, was meant to sell six generating companies and 11 distribution companies. Months ago he declared that a firm in which he owns shares held in a trust was involved in the bidding. It is not unusual for Nigerian politicians to engage in business overseen by their office; what is unusual is for any of them to resign.

Mr Nnaji’s supporters say that opponents of privatisation belatedly and unfairly engineered his departure. “Nnaji was the best person for the job,” says an adviser at the presidential task-force on the reform of power. “But he was getting in the way of other interests.”

The minister had certainly made enemies. He took on trade unions opposed to mass job cuts. A key aspect of privatisation is unbundling the Power Holding Company of Nigeria, a bloated and ill-managed monopoly, with thousands of “ghost” workers on the payroll. Two-fifths of the staff are apparently listed as drivers. Mr Nnaji tried for months to negotiate redundancy terms, as otherwise serious investors are unlikely to bid. It remains to be seen whether the unions have won the battle. Privatisation may be delayed.

Mr Nnaji also warred with the vice-president, Namadi Sambo, who owns companies with interests in the public power sector, oversees the government’s national privatisation council and heads a programme to build ten new state power stations that Mr Nnaji hoped to privatise. This may have hastened his departure.

Worrying signs have also emerged over transparency. Watchdogs were at the last minute relegated from being active participants in evaluating bids to observers, says a consultant. Their role is important because firms may win bids with lofty promises but fail to get finance or honour their contracts. This has hampered past privatisations. The current list of bidders is longer than expected and includes many local firms. Preferred bidders may be announced next month.

According to the government, the power sector needs $10 billion of investment a year for at least a decade. Mr Nnaji’s resignation is troubling investors who feel he brought expertise to a process that had previously been paralysed by corruption. Watched by foreign development agencies, eligible bidders have so far been selected in a clean and efficient manner. When a bid from Nigeria’s richest tycoon, Aliko Dangote, arrived apparently minutes late, it was rejected.

Most important for investors, a new tariff system, which will see a gradual increase in electricity prices over the next two years, came into effect in June. It is meant to ensure profitability. President Jonathan imposed the new tariffs despite worries that they would spark mass protests. In January Nigeria came to a standstill when he removed fuel subsidies. He partially reinstated them. This time, taking no chances, he agreed to new electricity subsidies for the poorest households for at least two years. But he no longer has a high-profile power minister to hide behind.

Israel v Iran

Holding his horses for the moment

Israel may have been persuaded to back off—at any rate, for the time being

Read my lips: no attack plans

BINYAMIN NETANYAHU, Israel’s prime minister, seems to have signalled that he will wait at least until after the American presidential election before deciding whether to bash Iran’s nuclear facilities. He let it be known that he expects Barack Obama, in return, to toughen his line on Iran by issuing something close to an ultimatum to the Islamic Republic that, if it still refuses to curb its nuclear programme and provide for intrusive monitoring and verification, the United States will take military action itself.

Speculation had been mounting that Mr Netanyahu viewed the American pre-election period as the best time to attack, despite Mr Obama’s evident discouragement, on the presumption that no candidate could be seen to condemn, let alone abandon, Israel. Mitt Romney, the Republican candidate, has accused Mr Obama of weakness towards Iran and of “throwing allies like Israel under the bus”. If Israel were to strike at Iran, hawks on both sides of the Atlantic hope that America would be drawn in militarily, aiming its own far bigger firepower at the Iranian sites.

Senior Israeli military and intelligence officials, past and present, who oppose the notion of a unilateral Israeli strike against Iran, made sure their views were leaked in the press. This in turn drew mutterings in Mr Netanyahu’s circle and in that of the defence minister, Ehud Barak, about people “covering their arses” and preparing for post-war commissions of inquiry.

This strangely public controversy over the most secret of national decisions included a petition by authors and artists denying Mr Netanyahu’s right to decide whether to attack Iran. Nine members of his own parliamentary party then issued a counter-petition eagerly upholding his right and duty to do so. A senior former judge, Eliyahu Winograd, who headed an inquiry into Israel’s war in Lebanon in 2006, weighed in with a blistering broadcast swipe at Messrs Netanyahu and Barak, urging them not to “endanger the future of Israel” and risk losing “everything we have built” by launching an attack.

The strategic chatter has frightened a lot of Israelis. Behind a summery façade of relaxed spirits, thousands of people queued anxiously at army distribution points to upgrade their gas-masks. A cacophony of war punditry assailed citizens’ ears, with talk of Syria’s chemical stockpile falling into the hands of Hizbullah, Lebanon’s Shia party-cum-militia which is Iran’s ally and might then launch it at Israel in retaliation for an attack.

Mr Netanyahu’s apparent climb-down followed a realisation by policymakers in Jerusalem that his brinkmanship had become dangerously caught up in an American election too close to call. The Israeli prime minister’s apparently less bellicose stand seems to have been co-ordinated with the White House. On September 2nd he told his cabinet that “the international community is not setting Iran a clear red line.” Until Iran sees it, he added, “it will not stop the progress of its nuclear project.”

The next day, the New York Times reported, the administration was “considering new declarations by President Obama on what might bring about American military action.” On September 4th, sounding more conciliatory, Mr Netanyahu said that “the clearer the red line, the less likely we’ll have conflict.” Several other muscle-flexing actions by the Americans were also heralded in the American press. A naval exercise led by the United States with a score of friendly countries would soon take place in the Gulf. The Americans were likely to sign a new batch of anti-missile deals in the region, plainly directed against Iran. Still-tighter sanctions against Iran were in the offing, along with plans for renewed cyberwarfare against it.

Such measures were hailed in America as intended to forestall an attack by squeezing the Iranians yet harder in the hope of forcing them to curb their nuclear ambitions. But the latest quarterly report of the International Atomic Energy Agency, the UN’s watchdog, said that Iran had sharply increased the size of its stockpile of higher-grade uranium and its capacity to enrich more.

The Gulf

Those annoying democrats

Even the Gulf monarchs are being buffeted by the winds of change

SINCE the wave of Arab uprisings started last year, the theory of “Arab exceptionalism” promoted by many Western governments to justify supporting dictatorships has looked a lot weaker. There was virtually no demand for democracy in rich, pro-Western or strategically valuable Arab countries, it was once breezily argued. Now the buzz phrase is “monarchical exceptionalism”. After all, the Arab world’s eight monarchies, all but two of them in the Gulf region, seem plainly a lot better at fending off popular pressure for democracy than the republics. That, at any rate, has been the argument.

The monarchies do not pretend to be democracies but openly and honestly espouse hereditary rule, whereas the likes of Libya, Syria, Egypt and Yemen clothed ruling dynasties in the language of democracy while entrenching a ruling family in power. Moreover, Arab kings, it is said, have been cleverer than their republican counterparts. Some, such as the kings of Morocco and Jordan, two non-Gulf survivors, have given political ground without losing their dignity—or their ultimate power; Morocco’s bolsters his authority by vaunting his ancient dynasty’s heritage. In any case, say the Arab monarchs’ Western backers, people under benevolent monarchies are happy to see the odd troublemaking dissident locked up. Western notions of human rights are deemed out of place and unwanted, so the argument runs.

The surviving octet of monarchies is strengthened by economic and strategic factors. Six of them export oceans of oil. All are close allies of the United States. In 2011, a record year for American arms sales abroad that were worth $66 billion in all, more than half in value went to Saudi Arabia, an absolute monarchy with no pretence of democracy. The Royal Military Academy at Sandhurst, where British and foreign officers are trained, has accepted a donation of $3m from the king of Bahrain.

Yet the Gulf monarchies are no longer immune to protests. Only Qatar has been virtually untouched. In Bahrain a court has just upheld sentences against 13 opposition leaders accused of crimes that range from plotting to overthrow the government to insulting the army. In Saudi Arabia, where a succession crisis persists and the 88-year-old king has again been abroad for medical treatment, two human-rights campaigners went on trial this month for setting up unlicensed organisations and turning international ones against the kingdom, among other crimes. Thousands of Saudi political dissidents, some of them violent, are already behind bars.

Even the United Arab Emirates (UAE), long regarded as a beacon of stability, seems beset with anxiety. Six Emiratis have recently been arrested, taking to 56 the number of activists detained since the fasting month of Ramadan began on July 20th. The UAE news agency said the first 50 had plotted to destabilise the country and to “distort its shining image before the world”. An American professor of journalism, Matt Duffy, who encouraged his students to debate such issues as press freedom, was recently expelled from the UAE.

All the Gulf monarchs spend fortunes on public-relations firms and lobbyists. According to Bahrain Watch, a pro-democracy lobby, the kingdom has paid at least 15 such firms in the United States $33m since its uprising started more than a year ago. Not surprisingly the monarchs are infuriated when opposition people, thanks to Twitter and YouTube, nowadays publicise human-rights abuses gratis.

War and diplomacy in Syria

No letting up

As the violence worsens, the UN’s new peace envoy has no plan to proffer yet

Every bullet has its billet

LAKHDAR BRAHIMI, the experienced Algerian peacemaker who recently replaced Kofi Annan as the UN’s special envoy for Syria, describes his new task as “nearly impossible”. That seems a sound judgment. Syria’s beleaguered but ruthless regime refuses to talk to its opponents until they lay down their arms. For their part, the outgunned, fractious but resilient rebels will not talk to the regime until President Bashar Assad goes. The rest of the world watches in dismay or quietly fuels the conflict, as misery mounts. In August alone, the number of Syrian refugees applying for asylum abroad doubled, to 200,000.

Mr Assad has tried various tactics to stamp out the uprising, now entering its 18th month. First he promised reform, as his security forces shot at peaceful protesters. Then the regime claimed that all was well but for a few rogue “terrorists”. Now, having admitted that he is fighting a real war, Mr Assad is offering a choice: his regime must be accepted or his army will scorch the earth of those who go against it.

The regional governor in charge of Daraya, a rebellious working-class suburb of the capital, Damascus, that was devastated by Mr Assad’s forces in August, recently visited it bearing bread. A kindly speech about resupplying the stricken town was followed by a stark warning, says a resident at the scene: harbour the rebels again and Daraya will be razed to the ground.

Such warnings are taken seriously. Across the country, the army’s snipers, artillery and war planes ceaselessly pummel areas suspected of rebel sympathies. With growing frequency clusters of corpses, usually of young men with hands bound, have been found dumped by the road in government-held areas. On September 5th, 45 such bodies were said to have been retrieved in one incident. Ruthless loyalist assaults have kept central Damascus firmly under government control. Loyalist forces have regained patches of ground in Aleppo, the fiercely contested second city.

Yet there are signs of ebbing government strength. The practice of pushing oil drums full of explosives out of helicopters suggests that the air force may be running out of bombs. The regime has also begun drafting reservists into the army, whose combat strength, on paper, of 280,000 men is being badly depleted by casualties, defections and dipping morale. “We don’t know if they need us or just want us so we can’t fight against them,” says a 30-year-old who left for Lebanon as soon as the police came knocking to call him up.

But the regime’s threats and its determination to consolidate may work in some areas. Its narrative of an armed Islamist and sectarian uprising is becoming self-fulfilling, thanks largely to the violence inflicted overwhelmingly against Syria’s Sunni Muslim majority. Playing on fears of Sunni vengeance, the ruling clan now offers arms to local self-defence militias that draw from minorities other than its own Alawite sect, which makes up a tenth of the population but dominates the security forces. A mysterious spate of attacks attributed by the regime to “terrorists” has stoked anxieties in Jaramana, a sprawling Damascus suburb that houses many Christians and Druze. “Some people want to throw their hands up and say OK, whoever, we just want it to stop,” says a local.

Light your neighbours’ fire

Mr Assad may be signalling a willingness to spread fires abroad, too. In Lebanon alleged transcripts of an interrogation by the Lebanese police of Michel Samaha, a former government minister close to Mr Assad arrested in August, suggest that top Syrian security officers had supplied him with bombs intended to kill various Lebanese Sunni and Christian figures.

Turkish officials suspect that Mr Assad’s regime has handed Syria’s north-eastern Kurdish areas to militias tied to the Kurdistan Workers’ Party (PKK), a guerrilla group that has been fighting Turkish forces for over 30 years. The PKK was blamed for an attack in southern Turkey on September 3rd that killed nine Turkish policemen.

Such divisive tactics have long been a hallmark of the Assad family’s rule. Although opposition fighters have alienated some propertied city dwellers, they retain the support of much of the rural population and have continued to wear down Mr Assad’s forces. Attacks on government supply convoys have stranded remoter army units and ground assaults on air bases are beginning to take a toll on Mr Assad’s air force: three out of its 27 bases may no longer be operable. Helicopters are now rarely sighted in Syria’s rebel-dominated north-west because fighters have fashioned weapons to shoot them down.

Pointing to their successes, rebel commanders say they will push on, with or without outsiders’ help. The American administration has licensed the Syrian Support Group, an organisation of exiles, to ignore the American arms embargo and fund opposition fighters. Western leaders are growing less squeamish about dishing out aid. “We are behind the curve in seeing this as a military conflict while other regional actors step up what they are doing,” admits a Western diplomat, echoing reports of a boost in arms shipments to the regime from Iran. Moves by the disparate rebel militias to unify their command structures have been quietly encouraged, in a sign of the West’s impatience with Syria’s squabbling political opposition.

Rather than press for negotiations, Mr Brahimi may concentrate instead on simply maintaining a UN foothold in Syria’s quagmire, with the intention of mediating at a more opportune time. That moment is unlikely to result from a bold diplomatic initiative for a long while. There is no sign of either side wanting to cease fire. Perhaps a particularly jarring spike in violence might jolt outside governments into more urgent diplomatic or even military action. “I hope one day I see my home again,” says a dejected young writer now in exile. “But who knows if I will recognise it.”

Europe

- The Netherlands votes: Cycling against windmills

- A German wealth tax: Umfairteilung

- Truth and power in Italy: Cash will do nicely, Silvio

- Armenia, Azerbaijan and Hungary: The axeman goeth

- Books about the French president: Decoding normality

- Russia’s Far East: A bridge to Asia?

- Charlemagne: Eurobankingfragilistic

The Netherlands votes

Cycling against windmills

What does the euro crisis mean for everyday politics? The forthcoming Dutch elections offer a clue

FEW nations beat the Dutch for practicality. Befuddled voters, who have 20 or so parties to choose from in the general election on September 12th, can save hours of poring over manifestos by submitting to the StemWijzer. This government-backed website presents 30 pithy statements (“All [drug-selling] ‘coffee-shops’ in the Netherlands should be closed down”; “European supervision of banks should be implemented”), and matches voters to the party that best fits their views. Separately, the Central Planning Bureau also runs the main parties’ programmes through an economic model, to compare how each will affect things like jobs, output and, miraculously, queues on motorways.

Despite these aids, the Dutch are disenchanted with politics. At J.H. Van Dijk’s cheese stall in Amsterdam’s main street market customers are fed up with all those politicians and their confusing parties. Further into town, at the Independent Outlet music store (where “corporate rock still sucks”), a young man behind the counter complains how “politicians always let you down”. A hairdresser in The Hague, who in her time has shorn plenty of MPs, cannot make up her mind. The StemWijzer is all very well, she says, but politicians “don’t do what the people vote for.”

Dutch discontent dates back to well before the euro crisis. But complex coalition politics makes the Netherlands a test bed for a question that today concerns the entire euro zone. As leaders strive to save Europe’s currency and integrate its politics, is the crisis galvanising voters and politicians, or is it driving them apart?

The economy partly explains the Netherlands’ sour mood. The Dutch are thriving compared with the Greeks; unemployment, at about 5.3%, is a fifth of the rate in Greece. Yet the Dutch are not inclined to look on the sunny side: life is getting harder. The value of pensions is shrinking, and charges for services such as health care are likely to increase. Tax breaks on mortgages are bound to be cut for first time buyers, putting further downward pressure on house prices and sentiment.

Altogether, output is set to slow sharply in the second half of the year, with GDP for 2012 falling by about 0.6%. Charles Kalshoven at ING, a Dutch bank, reckons that a provisional “austerity budget” for 2013 will lop 0.5 points off growth. By the end of 2013, he says, mortgage debt will eclipse the property value of about 800,000 Dutch households—fully one in four.

Optimists say that for this very reason the nation will now roll up its sleeves and sort out its difficulties. The polls predict that the largest party will be the liberal VVD, with about 35 seats—41 short of a majority. Its leader, the outgoing prime minister, Mark Rutte, is an astute political tactician. Perhaps he can join other established parties to form a strong coalition. This might dare to court short-run unpopularity, calculating that steps to restore the economy and deal with the euro crisis will be rewarded at the next election in four years.

Yet the once-proud Dutch record of coalition government has become increasingly threadbare. It takes months to form new governments. A succession of short-lived, inflexible administrations has tended to tussle over small, unambitious programmes in what Bas Heijne, a Dutch journalist, quoting Freud calls “the narcissism of small differences”. The more parties and the greater the ideological spectrum they cover, the harder it is to hold them together.

Thirty years ago Dutch politics was stable, dull even. Now the centre has collapsed. The Christian Democrats, who ran the post-war Netherlands for decades, have shrunk so much that they were not included in the four-way prime-ministerial television debates. Each established party has its insurgent counterpart. Mr Rutte’s liberals are shadowed by the anti-immigrant, Eurosceptic PVV, led by Geert Wilders. The Labour Party (PvdA) has been trailing the anti-globalisation, anti-elite Socialist Party, which—though now far from its Maoist roots—has never been in government. Even Green Left has to watch out on its radical flank for the Animal Rights party, which under the Dutch proportional-voting system might pick up a couple of seats.

Some take comfort from voters’ weariness with Mr Wilders’ aggression. His decision to pull down the previous government, over that austerity budget, was deemed irresponsible, and he is likely to lose seats. Labour has seized back the lead over the Socialists. After a stellar performance in the television debates, its new leader, Diederik Samsom, must even fancy his chances of becoming prime minister.

But parties in government are soft targets for their insurgent rivals—particularly when they peddle unpopular policies. With municipal and European elections in 2014, a reforming coalition would have to show improbable discipline and resolve. Analysts doubt that the established parties’ new leaders are strong enough to ride a wave of popular dissent. And they doubt that the cautious Mr Rutte has it in him.

In the end it comes down to the fragmentation of the Dutch party system. André Krouwel, a political scientist, argues that the populist Mr Wilders has warped Dutch politics by pulling parties to the right and rendering them narrower and more radical—even as he has taken up centrist positions on health care and pensions. Maurice de Hond, a pollster, notes that when he asks voters about the coalitions they want, the one that ends up in power is often ninth or tenth on the list. Because governments are less representative and more inflexible, they can get less done.

Where does that leave the euro? The Netherlands is a trading nation. Most Dutch remain instinctively pro-European. There is no popular call to leave Europe or the single currency. Yet many Dutch resent the idea that Europe might interfere with their health care and pensions. They no longer assume that dealmaking in Brussels is fair and do not trust their own politicians to sort out the mess. And they do not want to surrender more Dutch savings or Dutch sovereignty. To shore up the euro, Germany foresees give-and-take in which core countries pay to save the periphery in exchange for a more federal Europe. To the Dutch, that looks like take-and-take.

A German wealth tax

Umfairteilung

’Tis the season for class warfare

THE folks at Umfairteilen, a movement one month young, are preparing for September 29th, when supporters plan to hit the streets across Germany. Umfairteilen is a play on the German word for redistribution, with the English word “fair” substituting for one syllable. Its goal, already adopted by the opposition parties in parliament, is a wealth tax.

This old idea gained new life in July, when DIW, a think-tank in Berlin, argued that the sovereign-debt crisis in the euro zone could easily be solved if governments confiscated part of the ample private wealth that still exists in Europe, including Germany (see chart). As a bonus, such a levy would also reduce inequality.

The first question is who counts as rich. DIW based its analysis on a starting point of €250,000 ($315,000) of individual wealth. But that would hit the middle-class. So the talk shows, an important political stage in Germany, took up the debate. The consistent answer seems to be that “rich” is anybody who has more than the person answering the question. (Umfairteilen draws the line at €1m.)

In principle, there is nothing wrong with a (regularly recurring) property tax. Milton Friedman, a free-market American economist, endorsed a tax on land as “the least bad”. Germany had a federal property tax, until judges ruled it unconstitutional in 1995.

That ruling concerned the practical problems with taxing “wealth”: who assesses it, and how? Do the machines in the factory of a business count? (If so, then say goodbye to its employees.) How about a Renoir in the attic? The state would have to build a costly and oppressive infrastructure to audit private assets.

As to one-time levies, Germany’s constitution prohibits them except in dire emergencies, according to Paul Kirchhof, a former constitutional judge. The aftermath of the two world wars qualified. But these days tax revenues are hitting records in Germany. It hardly resembles wartime rubble.

The best argument against a one-time wealth tax in normal times is that it is antithetical to freedom. The state has no business helping itself arbitrarily to the belongings of any group of its citizens. Unfortunately, says Hermann Otto Solms, a member of parliament from the liberal Free Democratic Party, that reasoning sounds “too abstract” in today’s German discourse. As politicians begin posturing ahead of next year’s federal election, many find populism is safer.

Truth and power in Italy

Cash will do nicely, Silvio

He may have heard that phrase before, but at least we kept our clothes on

FOR the second time, an Italian court has ruled against the former prime minister, Silvio Berlusconi, in a case in which he is suing The Economist for libel. He had sued the newspaper in 2001, claiming it had libelled him in a report headlined “An Italian story”, published in April of that year.

Seven years later, a judge rejected all of Mr Berlusconi’s claims and ordered him to make a payment for costs to The Economist. Mr Berlusconi, who was by then again Italy’s prime minister, appealed. We are pleased to report that the court in Milan has turned down his appeal. The judges again ordered the former prime minister to pay The Economist’s costs. Mr Berlusconi can now take his case to Italy’s highest appeals court. But he would have to do so on a point of law or procedure.

A separate case involving Mr Berlusconi and The Economist ended two years ago. He had claimed he was libelled in an open letter from our then-editor, Bill Emmott. The letter challenged him to answer questions about his business and political dealings that were set out in detail in an online dossier. That case was thrown out by a judge in 2009, but without any award for costs. Mr Berlusconi did not appeal and in 2010 the judgment became definitive.

During the years when Mr Berlusconi dominated Italian politics, its economy grew more slowly than anywhere else in the world, apart from Zimbabwe and Libya. Perhaps he should have paid more attention to that.

Armenia, Azerbaijan and Hungary

The axeman goeth

Hungary frees an Azeri axe-murderer. Armenia is furious

THE return home to Azerbaijan of Ramil Safarov, who killed a sleeping Armenian fellow-student with an axe in Budapest in 2004, has prompted the region’s biggest diplomatic storm for a decade. Claiming to be enraged by Azeri suffering in the war with Armenia a decade earlier, Mr Safarov murdered Gurgen Margarjan while both men were at a NATO English-language course for military officers from non-member countries. He received a life sentence, which would normally mean 25 years behind bars.

But on August 31st Hungary sent Mr Safarov home, on the understanding, it claims, that he would serve the rest of his sentence in prison there. On arrival in Baku, he was hailed as a national hero: pardoned, given his back pay and promoted.

Armenians are furious. The government has cut diplomatic relations with Hungary. It claims officials in Budapest had repeatedly brushed off concerns about Mr Safarov’s possible release. Angry protesters in Yerevan, the Armenian capital, burned the Hungarian flag and pelted the consulate with tomatoes. (Other missiles in the region are more lethal: skirmishes between Azeri and Armenian forces on the ceasefire line have cost more than 60 lives in the past two years.)

President Serzh Sargsyan said Armenia was ready to fight if need be: “We are not afraid of killers, even if they enjoy the protection of the head of state.” One possible retaliatory move would be for Armenia to recognise the independence of Nagorno-Karabakh, an Armenian-run autonomous territory also claimed by Azerbaijan. That would certainly doom an already moribund peace process.

America said it was “extremely troubled” and would be seeking explanations from Budapest and Baku. Russia, which is Armenia’s military ally and protector, spoke of its “deep concern”.

Hungarian media and opposition scent a dirty deal behind the scenes. They say Azerbaijan had promised to buy €3 billion ($3.8 billion) of bonds from the cash-strapped Hungarian government in exchange for Mr Safarov’s release. Officials on all sides deny this. But Hungary’s protests at the Azeri action were notably late and limp. The prime minister, Viktor Orban, did visit Azerbaijan in June. An opposition leader and former prime minister, Ferenc Gyurcsany, says while in office he rejected a deal offered by the Azeris. He accused the government of “selling the country’s honour for 30 pieces of silver”.

Oil-rich Azerbaijan, with three times Armenia’s population and a much stronger army, seems ready to ride out the storm. Some Azeris also cry double standards: members of Armenian terrorist organisations who committed crimes in the Soviet era are treated as national heroes in Armenia now, they say.

The incident casts light on Hungary’s cack-handed leadership. The foreign ministry is known for its shrewd diplomats; during the Libyan conflict last year the Hungarian embassy in Tripoli was one of a handful to stay open and was representing some 50 states by the end. But it seems that the Safarov affair was masterminded by Mr Orban and Peter Szijjarto, the minister for external economic relations. Hungary’s woeful dealings with the IMF are their responsibility, too.

The case highlights the EU’s struggle to stay credible both with wayward members such as Hungary, and with its eastern neighbours. It has just pledged €19.5m to reform Azeri justice and migration. That counts as small change by the standards of some other deals.

Books about the French president

Decoding normality

The literary challenge posed by the inscrutable François Hollande

THE start of the French school year, la rentrée, also marks the launch of the literary season. And every new president yields a crop of political titles. But this year contains a particular challenge to the genre: in François Hollande, the French have elected an inscrutable leader who wants to be a “normal” president.

The son of a doctor and a social worker, and longtime party hack, Mr Hollande has no exotic back-story to help. So how to capture him? One possibility is the inside-the-campaign approach. Laurent Binet followed the Socialist candidate for a year, joining his private party on election night. No better vantage point to witness his whims, tantrums and other foibles.

Yet the politician who emerges from “Nothing Happens As Planned” is careful, measured, methodical: “calm, sure of himself, at ease everywhere, likeable and impenetrable.” During one speech, an intruder douses him with a cloud of white flour; Mr Hollande scarcely flinches. On election night, Mr Binet watches as the Hollande team, huddled in his provincial office in Tulle, fails to get the television to work minutes before the results are announced. “That’s damn annoying,” is all Mr Hollande can muster in frustration.

Mr Hollande himself dreamed up the “normal” president: a sort of French everyman. “Hollande is a mystery,” Malek Boutih, a Socialist figure, tells Mr Binet: “I’ll tell you my theory: he doesn’t exist. He has completely distanced himself from his own personality to embody the role.” Mr Hollande’s own partner, Valérie Trierweiler, tells the author: “Nobody can say that they know Hollande. Not even me.”

Which is a bit of a problem for biographers, and may be why another batch of books approaches things through his women. Here, normality is not the word that springs to mind. For Mr Hollande is the former partner of Ségolène Royal, the Socialists’ 2007 presidential candidate. He won the presidency; she did not. Ms Trierweiler (pictured left) ended up as “first girlfriend”; Ms Royal lost her man and, this year, her bid for a parliamentary seat.

Who, me?

Three titles chronicle this triangle of jealousy and intrigue. The liaison between Mr Hollande and Ms Trierweiler was kept from the public during the 2007 campaign. By this year, she was officially at his side. But the rivalry persisted, prompting Ms Trierweiler to tweet her support for a parliamentary rival to Ms Royal. One book, “Between Two Fires”, by two journalists, describes Ms Trierweiler’s “irrational hatred” of Ms Royal, and the “hideous” behaviour of Ms Royal, who tried to get her moved from her job as a political reporter.

“It didn’t end the way I would have wanted,” says Ms Royal of her relationship (they never married) with Mr Hollande in yet another book. Ms Trierweiler’s behaviour is not due to jealousy, Mr Hollande himself insists, but because “one never wants a former partner to come back into the picture.” With such a complex ongoing drama, the normal presidency promises to be anything but.

Russia’s Far East

A bridge to Asia?

The country’s far-flung eastern territories need more than big projects to thrive

Leading somewhere, perhaps

THE bridge to Russky Island, a wooded swathe of land just off the coast of Vladivostok, is quite the architectural marvel. It is the longest cable bridge in the world, measuring 3,100 metres, it is as tall as the Eiffel Tower and it cost $1 billion to build. All of which may seem a bit much, given that only about 5,000 people call the island home.

But between September 7th and 9th dozens of heads of state and hundreds of business executives will gather there for this year’s Asia-Pacific Economic Co-operation (APEC) forum, meant to be Russia’s coming-out party in the Asia-Pacific region. As such, the bridge is a symbol of Moscow’s plans to develop Russia’s Far East and strengthen ties with Asia—its “most important geopolitical task”, according to President Vladimir Putin.

Moscow’s attention to its far-flung eastern territories has run in cycles over the years. The tsars built a 9,300km (5,800 mile) rail line from Moscow to Vladivostok. In Soviet times the Primorye region was an important military outpost, a centre of the fishing industry—and the site of many Stalin-era labour camps (many prisoners settled in the region after their release). In the 1990s the Far East fell into neglect and became one of Russia’s more dysfunctional regions, where, as once in America’s west, a bandit capitalism imbued locals with the rather un-Russian spirit of frontier self-reliance.

This attitude, combined with geographical isolation from the capital, explains the region’s feisty and independent politics. The street protests in Vladivostok in 2009 against higher import tariffs on used cars were among the largest in the Putin era until last winter’s demonstrations in Moscow. In the March presidential elections Mr Putin won just 48% of the vote in Primorye, compared with 64% nationally.

During the difficult years, many people simply left. By some estimates, the region has lost as much as 20% of its population in the past two decades. Only 6m people live there today—compared with 130m in the three Chinese provinces on the other side of the border. That huge gap has triggered fears among officials in Moscow of a Chinese takeover, although this seems far-fetched, given that only a tiny minority of the region’s population is Chinese.

At any rate, Russia’s plans for developing its Far East are based not on fears of a growing China, but on the region’s potential. With Europe’s crisis deepening and Asia’s demand for energy and raw materials rising, it has dawned on Mr Putin “that Russia’s least-developed area abuts the world’s most dynamic region”, in the words of Dmitri Trenin of the Carnegie Moscow Centre. He thinks that the Pacific Ocean could become for present-day Russia what the Baltic Sea was for the country in the age of Peter the Great: a source of wealth and a gate to modernity.

Russia’s Far East is certainly rich in resources, including metals, minerals and timber. It is also well placed to be a transit and logistics hub for shipping Russian oil and gas onward to Asia and Asian-made goods deeper into Russia. And the soaring new airport in Vladivostok, as well as the city’s upgraded network of roads and bridges, are a boon to regional trade—not to mention city life.

Yet the region is also a microcosm of Russia, plagued by the problems that impede business everywhere in the country. “In order to create a factory that’s 100 square metres, you need 100 square metres of documents,” an Asian diplomat laments. Cumbersome customs procedures and poor rail links explain why the export capacity of Vladivostok’s port is minuscule compared with similar ports in neighbouring countries.

Tales of corruption abound, in particular of cases that allegedly happened under the rule of Sergei Darkin, who held the post of governor of Primorye for more than ten years until February. When a South Korean firm wanted to bid for a project in the run-up to the APEC forum, an often-told story goes, it was asked to pay bribes double the amount that the firm calculated it would earn from the job.

The new governor, Vladimir Miklushevsky, in contrast, is seen as competent and appears to recognise these problems. He pledges to take “a different look at investors” and to minimise “administrative barriers”, from border controls to logistics at the port. But he is said to lack ties and authority with local elites that undergird politics and business in Russia’s Far East.

Some also wonder who will pay for the upkeep of the high-profile construction projects built ahead of the APEC meeting when Mr Putin’s attention moves on. “A lot of money has been spent irrationally,” worries Natalia Zubarevich of Moscow’s Independent Institute for Social Policy. The campus built for the summit will soon be the home of the Far East Federal University. But federal spending in the region is set to taper off, after having trebled between 2008 and 2011 to reach $21 billion.

The biggest question is whether Russia’s Asian partners care as much about their neighbour as it does about them. Natural resources and energy are of interest, but many Asian countries already have diverse supplies of these. Relations with China, for instance, have become ever less a partnership of equals, with the influence of China’s government now eclipsing that of Russia’s, says Bobo Lo, an expert in relations between the two countries.

With the APEC summit and related investments, Russia has proved that it can pull off big projects in its Far East. Now the region needs less visible, but equally important efforts to improve local governance and economic rules. Otherwise the Russky Island bridge and the rest of Vladivostok’s facelift will become a symbols of how the Kremlin’s rhetoric and ambition went astray in the vast eastern wastes.

Charlemagne

Eurobankingfragilistic

The promise and pitfalls of the euro zone’s plan for a banking union

FOR lack of a child’s tuppence, there was a run on the bank. So goes the tale of the Dawes Tomes Mousley Grubbs Fidelity Fiduciary Bank in “Mary Poppins”, a musical movie classic. These days banks do not rely just on the good name of top-hatted directors. Other defences shore up confidence, including rules, supervision, bank-deposit insurance and government guarantees. But bank failures still take place. This week the French government rescued a century-old mortgage lender, Crédit Immobilier de France, by guaranteeing billions of euros of its debt. This from the Socialist administration of President François Hollande who regards the financial sector to be his “real enemy”.

In contrast with America, which stabilised its financial system relatively quickly after the collapse of Lehman Brothers in 2008, the euro zone’s banks remain fragile. The area’s most troubled countries are suffering a slow run of two sorts in particular: depositors have been pulling money out of banks, and investors have been withdrawing from sovereign bonds. Each panic reinforces the other. Senior Eurocrats sometimes wonder why there has not yet been a real bank run in southern Europe. Were one to start, they fear, it would spread across borders.

To restore calm, Europe’s leaders in June resolved to embark on a “banking union”. On September 12th the European Commission will present proposals for a first element: a new euro-zone supervisor, which is to be an offshoot of the European Central Bank (ECB). Once in place, euro-zone rescue funds could recapitalise ailing banks directly, lifting some of the debt burden from weaker states. This would be an important step in resolving the euro crisis. The core of the bargain—greater mutualisation of risk in exchange for more central control—may be a precedent for a future “fiscal union” in which joint Eurobonds could be issued with tighter controls on national budgets and economic policies.

The new supervisor is an important concession to Germany. So it is odd to hear Berlin complain so loudly about plans to bring all of the euro zone’s 6,000-odd banks within its remit. Germany says the ECB cannot properly supervise so many banks. Better to do a more thorough job on a smaller number of key institutions. But the commission argues that risks come not only from big “systemic” cross-border banks but from smaller ones as well, most recently from Spain’s cajas.

Behind such arguments lurks a contest over national interests. Some Germans suspect the French of trying to burden the ECB to the point where it will supervise nothing at all. The French and others think Germany is trying to exclude most of its banks from new rules. The French financial system boasts a few large banks that will inevitably be subject to central supervision, whereas much of Germany’s is a collection of countless small (and often sickly) regional lenders that are politically powerful.

The differences are not as deep as they appear. In practice the ECB would rely heavily on national supervisors for its day-to-day work. By focusing on, say, the 200 largest banks it would have oversight of more than 90% of the euro zone’s banking industry. The minnows can be left to national authorities. The real question is over where power will ultimately lie: will the ECB be able to probe any bank? And will it have sole authority to issue or withdraw banking licences?

To make a banking union work, the euro zone will have to create more than just a central supervisor. It also needs a central resolution authority to restructure or wind up failed banks (if necessary by bailing in creditors). This should have access to joint resolution funds and deposit guarantees (financed at least in part by the industry itself) and some kind of a European fiscal backstop. Brussels would like one day to create something akin to America’s Federal Deposit Insurance Corporation (FDIC).

But for now the commission will propose only a central supervisor. Eurocrats say they first want all 27 members of the European Union to adopt the same procedures for bank resolution and deposit guarantees (with arrangements for cross-border co-operation). The schemes of the 17 euro-zone members could merge later on. Yet the danger is that the euro zone will end up with a messy system in which the ECB can cut off a bank while leaving national authorities to argue over the bill.

Another problem is reconciling the nascent banking union with the EU’s ten non-euro members. Britain, which has Europe’s biggest financial industry, says it wants the euro zone to integrate, but fears others will gang up against it. The voting methods in the European Banking Authority, a regulatory agency based in London, for instance, will have to be adjusted so that the 17 members of the euro zone do not have an automatic majority against the ten others. For other “outs” the main fear is exclusion. Non-euro countries will be allowed somehow to participate in the supervisory system, though it is hard to see the ECB being able to watch over banks across multiple currency zones or give a meaningful voice to non-ECB members in its councils.

Too European to fail

The euro zone was woefully late in trying to stabilise its banks and ensure that taxpayers do not have to pay when they fail. Moreover, it is unlikely ever to create a regulatory system like America’s which allows the FDIC, for instance, to wind up a bank in a weekend. Banks in Europe tend to be larger as a share of national GDP than those in America, and European companies rely more on banks than American ones. More important, in a corporatist political culture, small banks are often tools of political patronage and big ones are treated as national champions. For a long time to come, European bankers will abide by the dictum of the elder Mr Dawes, the crotchety banker in “Mary Poppins”: “When fall the banks of England, England falls!”

Economist.com/blogs/charlemagne

Britain

- The reshuffle: All the right noises

- Emigration: On the road

- Violence in Northern Ireland: Fiery orange glow

- British banks: The real scandal

- Planning and greenery: Belt too tight

- Alternative parties: Wilting greens

- The Greens in Brighton: Beach party

The reshuffle

All the right noises

The prime minister’s first reshuffle reveals much about the state of the Conservative Party

DAVID CAMERON is by inclination a chairman rather than a chief executive. Not for him the energetic micromanagement of his two predecessors as prime minister, Gordon Brown and Tony Blair. As far as possible, he lets ministers get on with their jobs. He waited more than two years to make the first—and perhaps the only—big cabinet reshuffle of the five-year parliament. When it came, on September 4th, it revealed much about his political strategy.

The Conservative-Liberal Democrat coalition has drifted since 2010, when it embarked on a programme of austerity and an energetic reform of public services. Although schools and welfare are being transformed, reforms to the health service and policing have run into trouble. The economy has stalled, magnifying all other errors. The Conservative Party trails Labour in the polls by around ten points. Because the electoral system disadvantages the party, it needs to be well in the lead to secure a majority in 2015. The Liberal Democrats are in worse shape.

Lack of turnover at the top of government, although pleasant for those with jobs, has added to the pressure on Mr Cameron. With little churn, the disappointed have greatly outnumbered the appointed—all the more so when the largest party must share the ministerial payroll with Liberal Democrats. As a result of this, and a mood of tribal unrest on the right of the party, Conservative MPs are far more unruly than one would expect, for a group that only recently returned to power after 13 years in the wilderness.

During the summer recess the prime minister was branded a “mouse” and a “chambermaid” by backbench malcontents. Others accuse him of spending too much time playing “Angry Birds” on his iPad and not enough time working to stimulate the economy. On September 3rd David Davis, a right-winger who ran against Mr Cameron for the leadership in 2005, delivered a polemic in favour of deregulation and tax cuts. “Britannia Unchained”, a new book by five thrusting young Conservative MPs, is similarly provocative. Tuesday’s reshuffle gave Mr Cameron an opportunity to address these criticisms—to abandon “Angry Birds” and focus instead on angry parliamentarians. He took it.

A hardy new crop

Health, the government’s weakest area, saw the most significant new appointment. Andrew Lansley, the health secretary, was turfed out. On his watch the government communicated its NHS reforms poorly; the promise of adding more competition to health-care provision is still unfulfilled. Jeremy Hunt, Mr Lansley’s successor, ought to be more capable in both areas. Mr Hunt, who used to look after media and sport, is a free-market apostle and an affable sort with the rare ability to persuade people to tolerate policies with which they strongly disagree. He nearly lost his job in the spring, following an entanglement with the Murdochs who run News Corporation—hate figures in Britain. Reshuffling him helps shake off the mud.

Several moves signalled a renewed emphasis on growth and a desire to court business folk, who feel neglected. The environment, transport and local-government ministries were joined by economic liberals keen to accelerate new housing developments, roads and airport runways. The new environment secretary, Owen Paterson, is a fan of shale gas.

Overall, the government has shifted to the right. As Mr Hunt and Mr Paterson rose, Ken Clarke, one of the most left-wing of senior Tories and certainly the most pro-European, fell. Mr Clarke, who had spoken of his dislike of harsh penal policies, was replaced as justice secretary by Chris Grayling, a relative hardliner who is already being encouraged to stand up to European human-rights judges. All this delights conservative backbenchers. Yet the reshuffle does not mark the end of Mr Cameron’s “modernisation” project.

The Tory leader’s initial efforts to detoxify his party, in the middle of the last decade, were almost pure image-making. The Conservative leader visited the Arctic and said nice things about teenagers who wore hooded tops. He then set about persuading his party’s MPs that this repositioning was necessary to win the Tories a hearing after so many years in opposition.

Comparing the political challenge to another computer game, Mr Cameron reportedly told one MP that it was necessary to finish “level one” (change the party’s image) before advancing to “level two” (win an election on traditional Tory strengths such as law and order). To the chagrin of the party’s right wing, though, Mr Cameron kept pressing on cultural change. Social liberalism and greenery were presented as necessary to get on with the Liberal Democrats in the coalition.

With the economy ailing, coalition relations growing poisonous and the party trailing in the polls, the prime minister has crashed out of this game. This week’s reshuffle suggests Mr Cameron has concluded he can no longer make a pragmatic political case to his ranks that greenery and liberal talk on social issues are crucial to future Tory success.

Yet the reshuffle did little to change the Conservatives’ fundamental approach to the problems facing Britain. From 2005 to 2012 there has been a consistent Cameroonian stance on core policies: cutting welfare costs, boosting school choice, tackling immigration and repatriating powers from the EU. The Tories may now be talking more volubly about some of these issues, but the underlying intentions—tempered, of course, by the compromises of coalition—are almost unchanged.

And Mr Cameron has quietly planted new seeds by appointing several promising members of the 2010 intake of Tory MPs to junior ministerial office. Compared with their older colleagues, they are broadly relaxed about immigration, drugs and identity politics, more concerned with child care and the environment, and more female. Socially and economically liberal children of Margaret Thatcher’s Britain, their ascendancy secures the future of the modernisation project.

Emigration

On the road

More Britons are leaving the country, particularly for work

Sheila take a bow

THE British government’s crowd-pleasing target of cutting annual net immigration to below 100,000 by 2015 is impossible, but the numbers are finally moving the right way. Statistics released on August 30th showed that net inflows fell by 36,000 in 2011, to 216,000. Although Britain’s migration figures are ropey, other data point in the same direction. The number of work visas issued in the year to June 2012 was 7% lower than in the previous 12 months, and student visas were down 21%. And there have been shifts in emigration as well as immigration.

Over the past couple of years the government has tended to blame its inability to close in on its target in part on the fact that fewer people were leaving the country. Emigration peaked in 2008 at 427,000, pushed up by the exodus of workers from new EU member states such as Poland, who suddenly found work hard to find. Then the number of leavers declined, to 339,000 in 2010.

Now outflows have started edging up again. One group in particular is responsible for the change. Around 149,000 British citizens left the country last year, up from 136,000 the year before. Fewer Brits returned home, too. All in all, British citizens contributed 27,000 to the 36,000 drop in net migration. More could follow: a poll in April by YouGov said 42% of people would seriously consider leaving. Another 6% claimed to be doing so.

Britons have long had itchy feet. After the second world war countries such as Australia and Canada, hungry for workers, competed for “Ten Pound Poms”. From the late 1990s British baby-boomers made rich by strong sterling and surging house prices rushed to wine-quaffing idylls on the Spanish Costas and in the French countryside. The World Bank estimated in 2010 that there were over 4.5m Britons living abroad, the most of any developed country. Others put the number higher.

Today’s emigrants are subtly different. In 2006 7% of them were of pensionable age; in 2010 less than 2% were. The proportion who are migrating mainly in order to work has risen from 47% to 57%. Sammy Naghi, a lawyer with Taylor Hampton who helps migrants mainly to Australia—still the favourite destination for British leavers, though the pound goes less far there than it did—says struggling self-employed parents make up the bulk of his clientele, although companies are increasingly relocating staff to more dynamic economies too. Australia and New Zealand court British health-care professionals, and Australia’s navy is believed to be trawling for forcibly retired seafaring Brits.

There are several reasons, apart from domestic economic woes, to think that net immigration may well keep decreasing. The first is that, with higher fees at home and more active recruitment from abroad, more Britons are likely to go overseas for university. A poll by the Student Room, Britain’s largest student website, between May and July found that 72% of university applicants had considered or were still considering studying abroad, especially in America. British participation in the EU’s Erasmus programme to encourage study in other member countries has risen strongly over the past five years.

A second reason is that British residents whose roots lie in newly prosperous countries may be more inclined to move there, especially if Britain’s economy continues to stagnate. Emigration to the Indian subcontinent has been rising broadly since 2004. India keeps a keen eye on its diaspora, anxious to woo back know-how and investment. So do other countries.

A third reason is obvious but often overlooked: the natural ebb and flow of people. It is not just that the government is making it harder for foreigners already in Britain to settle, which is likely to mean more of them will leave soon. But periods of high immigration such as Britain has seen for over a decade are anyway apt to be followed by periods of high emigration, says Martin Ruhs of Oxford University’s Migration Observatory. Over two-thirds of non-British emigrants in 2010 had lived in the country for less than five years. Many of them, official statisticians believe, were probably foreign students—like those chucked out of London Metropolitan University this week after its dust-up with the border cops. More will leave because more used to arrive.

Violence in Northern Ireland

Fiery orange glow

An entirely new excuse to fight

Oh, pipe down

NORTH BELFAST is sadly expert at cleaning up after a riot. By mid-morning on September 4th, following several nights of petrol-bombing and brick-throwing in which more than 60 police officers were injured, the streets were back to normal. Only the odd pile of rubble, and the stories of shaken residents, remained to suggest anything was amiss. Yet the riots have revealed deep problems in Northern Ireland which cannot be so easily scrubbed away.

In summers past fire was almost as common as rain. The annual “marching season”, which is at once a celebration of Protestant history and an opportunity to stake out sectarian turf, was frequently accompanied by violence. But the streets had gradually quietened. The most controversial Protestant parades were banned or rerouted, or allowed passage following discussions with Catholic residents. Dozens of flashpoints had dwindled to just a few. An annual riot in Ardoyne, in north Belfast, has taken on something of a ritual character and is not particularly injurious. But the city’s residents have now concocted an entirely new flashpoint.

In July a loyalist marching band on a normally uncontroversial route stopped outside a Catholic church close to central Belfast and struck up the Beach Boys’ tune “Sloop John B”. This has un-Californian connotations in the province. Scottish sectarians have reworked the song into an anti-Catholic anthem (sample line: “The famine’s over, why don’t you go home”) which some bystanders in Belfast began to sing. An amateur cameraman captured the performance, and the footage ended up on YouTube. The Parades Commission promptly instructed bands not to play music outside the church. Some bands angrily defied the ban. Then a Republican parade brought loyalists onto the streets. Both Catholics and Protestants have attacked the police and each other.

Peter Robinson, the Democratic Unionist first minister, and Martin McGuinness, his Sinn Fein deputy, are urgently trying to resolve the issue of who can march where and how before September 29th, when a large loyalist march is scheduled to pass the church. Although the offending loyalist bands have been broadly condemned, the politicians have not come off well either. It is sometimes said that the executive has a “too difficult” file in which knotty issues are crammed—not just the regulation of parades but the promotion of mixed Catholic-Protestant schools, for example. Attempts to resolve the parades issue came to a shuddering halt two years ago when the Orange Order, the main marching organisation, rejected a plan put forward by Mr McGuinness and Mr Robinson. This summer’s riots show that problems filed are not problems forgotten.

These days Catholic and Protestant politicians get along well. Sectarian killings have almost disappeared. But the anger on the streets remains. Traditionally it was Belfast Catholics who complained about inequality and discrimination. Legislation and the peace process have improved their lot, but left a residue of surly loyalist resentment. Walk the streets of Protestant north Belfast now, and it is not difficult to find people who complain that the Catholics are “getting everything they want” and denying Protestants their history. That sense of victimhood can be dangerous.

British banks

The real scandal

Gloom pervades British banks, but parts of them are surprisingly hale

BRITAIN’S banks have seldom seemed in a sorrier state. Four years after the government partly nationalised two of the country’s biggest, Lloyds Banking Group and the Royal Bank of Scotland (RBS), the industry is sunk in scandal and big bits of it are drowning in red ink. American regulators are getting tough. At home, worries about weak banks starving small businesses of credit have prompted the government to propose setting up a state-backed lender.

Lloyds, Britain’s biggest retail bank when judged by its share of the domestic market, reported a pre-tax loss of £439m ($698m) in the first half of this year. RBS, in which the government has an 82% stake, is in a worse state. It posted a £1.5 billion loss—almost twice as much as a year earlier.

Yet the appearance of an industry at bay is misleading. A large portion of these big losses were incurred in racier parts of the business such as wholesale or investment banking. The boring retail bits are performing scandalously well.

The retail and commercial bank at RBS made an operating profit of more than £2 billion in the first six months of the year. The bank as a whole would be turning a handsome profit were it not weighed down by an ailing investment bank and by nonsensical accounting rules that force banks to take losses on their own debt when their credit ratings improve.

Lloyds would have swung back to profitability if it had not been obliged to set aside more than £1 billion to compensate customers to whom it had sold inappropriate insurance policies protecting their loan repayments. Its underlying business is reasonably healthy. And “if they managed to mis-sell that much insurance then their branch staff can’t be too bad at selling,” notes one industry consultant, waspishly.

The main reason for the surprising resilience of Britain’s domestic banking market is that competition has diminished sharply. Before its failure in 2007 Northern Rock was the country’s fifth-biggest mortgage- lender, with ambitions to become the third-biggest. At the peak of the housing bubble in 2007, the average interest rates it charged on mortgages were only about three-quarters of a percentage point higher than the price it paid to borrow. The collapse of Northern Rock and other small lenders has allowed the surviving mortgage-lenders to push up their margins. Lloyds, for instance, has a net-interest margin of more than 2% in its retail bank.

Investment analysts at Citigroup, an American bank, recently noted that over the longer term British banks should be generating hefty returns on equity—a measure of profitability—of 20% or more from their domestic business because of reduced competition. Their counterparts at Deutsche Bank reckon the returns could be well above 30% in mortgage lending, a mouthwatering number compared with the 10% or less that banks are reporting in areas such as investment banking.

Such returns are far juicier than retail banks are enjoying in many other rich countries. In America, for example, earnings have been crushed by tougher regulations and low interest rates, which usually narrow profit margins.

Britain’s banks still face daunting risks. Losses on loans would rise alarmingly if the economy were to contract sharply or official interest rates to rise. There is also not much funding available for lending to households and, in particular, small businesses (although the government is trying to make it more plentiful) forcing many banks to hold back from making potentially profitable loans. But barring a major mishap, the worst of the crisis may finally be behind them.

Planning and greenery

Belt too tight

The green belt is sacred. It should not be

Stop right there

CYCLING north through London, you experience the city’s history. Bloomsbury has grand 18th-century mansions. Farther out, in Camden, you pass pretty Victorian terraces. In Finchley, the houses are neat 1930s villas. And then the city simply stops. At the edge of the pre-war suburbs of Barnet there are fields. Traffic fumes give way to bird calls and the acrid smell of smoke from a bonfire on a nearby farm. This scraggy patch of land, part of London’s green belt, has been protected from the bulldozers for nearly 60 years. Some in the government would like to relax the belt a few notches.

Created in 1955, London’s green belt is one of the world’s most potent planning devices. Some 40 miles deep, it acts as a severe restraint on building. There are now 14 green belts around most of England’s bigger cities (see map) covering 12.7% of the total land area. By contrast, “developed” land, which includes parks, allotments, golf courses and gardens as well as concrete, covers just 10.6% of England.

Green belts are generally held to be inviolable, politically as well as physically. But a grinding economy is shifting opinions. The government is desperate to stimulate building: it is to suspend regulations on home extensions and harry local authorities to approve more projects. George Osborne, the chancellor, has hinted that councils should be more willing to allow building on green-belt land. A new planning law is being prepared, hard on the heels of another one that is still causing ministers problems. Nicholas Boles, an MP who once dismissed conservationists as “Luddites”, has been appointed planning minister to implement it. They will face colossal opposition.

Green-belt land is not chosen for its beauty or environmental value. It exists specifically to constrain cities and to prevent towns from merging together. Not all of it is pretty: some 60% is used for intensive farming. And though it undoubtedly constrains urban sprawl, it also pushes up property prices in cities. Development often jumps green belts, meaning commuters must travel farther to work, emitting more pollution as they do. They also encourage the destruction of valuable green space within cities, such as playing fields, allotments and gardens.

Minor tweaks to the rules are likely to change little. Planning is the responsibility of local government, and, as Mr Osborne pointed out, councils already have the power to redesignate land for building. The reason few do so is simple: local residents tend to fiercely defend green belts. Indeed, in May Mr Osborne supported a campaign against a proposal to build on green-belt land in his constituency in Cheshire, in north-west England.

Max Nathan, of the London School of Economics, notes that councils have few incentives to encourage development. If planning permission is granted, profits flow to developers and to central government, which collects most taxes. The costs—of extra infrastructure and so on—are mostly borne by the council. Existing residents, whose houses may lose value, are not compensated.

The incentives could be changed, argues Tim Leunig, chief economist at Centre Forum, a think-tank. He proposes that local councils be given the power to buy agricultural land from farmers and then sell it, with planning permission, to developers. The resulting profits could be used to cut taxes, build infrastructure or provide compensation. In some areas, these profits could be worth as much as £45,000 ($72,000) per house, calculates Mr Leunig—far more than the “new homes bonus” currently provided by central government to encourage building.

A bold government would trial such a plan, but this one is unlikely to. Eric Pickles, the communities secretary, has signalled a broad opposition to development on protected land, as have many Conservative MPs and pressure groups such as the Campaign to Protect Rural England. Like Mr Osborne, they say they want growth. Just not in their back yards.

Alternative parties

Wilting greens

A new leader will not push the Green Party off the political fringe

A light to all nations

NATALIE BENNETT joined the Green Party of England and Wales in 2006, following a New Year’s resolution. On September 3rd she became its second leader. Meteoric is not the right word for her rise, as the Greens, who gained their first MP in 2010, can hardly be said to occupy the political heavens. But Ms Bennett foresees steady growth ahead. Having her alongside Caroline Lucas (the party’s sole MP, who has stepped down as leader) will increase the party’s airtime, she says, while discontent with the coalition government will boost its appeal. The Greens will target ten seats at the general election in 2015.

Minor parties are attracting more support than ever before, says Matthew Goodwin, an expert on the subject at Nottingham University. Almost 12% voted for parties other than the three main ones in 2010—the highest “other party” vote since the second world war. Polls show that disaffected Liberal Democrats are more inclined to switch to the Greens than to Labour or the Conservatives. The Greens have already built up a base of 133 council seats, far more than any other minority party. Norwich, a fairly conventional city, is their second strongest council after bohemian Brighton (see article).

By European standards, though, the Greens’ success has been paltry. An eye-catching breakthrough in 1989, when they won 15% of the vote for the European Parliament (it helped that Britain’s beaches were then strewn with seal corpses), was never consolidated. Ms Lucas blames Britain’s electoral system: without proportional representation and state funding, nascent parties will struggle to rise as quickly as they do on the continent, she says. That is true of other small parties too: UKIP won more than three times as many votes as the Greens in 2010, but no seats in Parliament. Another reason may be that Britain didn’t have much of a 1968. It lacks the cohort of counter-culturalists who made up the original rump of Green support in Germany and France.

Things are even more difficult in straitened times. The Greens’ core vote—the professional middle class—is now Ed Miliband’s “squeezed middle”, points out Vernon Bogdanor of King’s College London. The proportion of voters who believe climate change is the result of human activity has fallen from 55% to 43% since 2008. In recession the Greens are liable to end up like an appendix: a vestigial remnant of a more vegetarian past.

The Greens are not a single-issue party. They have worked with anti-austerity campaigners like UK Uncut, and strongly oppose a shrivelling of the state. Ms Bennett’s party calls for a living wage of £8.10 ($12.88) an hour, and argues that top pay should be capped at ten times that. Today’s 17-year-olds are more radical than their elders thanks to higher tuition fees, she suggests. But economic populism will deter other supporters. Pledges to rebalance the economy around green energy involve a relaxed attitude to economic growth, which will worry the cash-strapped. It is unlikely that the Greens will soon terrify the Liberal Democrats as much as UKIP does the Tories.

The Greens in Brighton

Beach party

The city by the sea dislikes cars and buildings, but loves a party

BRIGHTON has long been a refuge for the unconventional. George IV, when a rotund prince, liked to gallivant with mistresses there. In “Brighton Rock”, Graham Greene depicted it as a hedonistic hell. Jason Kitcat, the council leader, describes it simply as a place where people are free to be who they want. Outside a hair salon, men in frocks swig cider in celebration of Gay Pride.

In 2010 Brighton elected Britain’s first Green Party MP. Since 2011 the party has run the council with a minority. Most non-drivers seem indifferent to them. Russ Coe, a barman who studied environmental politics (a combination of roles perhaps distinct to Brighton) says he has not noticed much of a difference. That may be because so many politicians have been influenced by the city’s culture. All parties are committed to making the city greener.

Motorists make a fuss, though. Facing a squeezed budget, the Greens have hiked parking fees, with traders’ permits nearly doubling to £600 ($950) a year. A local newspaper reports that the city makes more money from parking than any local authority outside London. A survey by Aviva, an insurance company, voted the Churchill Square car park as the third worst in Britain. At another car park, motorists staying more than four hours must pay £25.

Mr Kitcat, a Green, says parking fees have been simplified and the higher charges have eliminated a waiting list for permits. But traders are furious. Geoffrey Theobald, leader of the council’s Tory group, claims that the council will take in less cash because fewer people will park in Brighton.

Building is even more painful than parking. Colin Brace, a developer of eco-friendly property, hopes to build a block of flats, with small wind turbines attached, on the seafront. He opened negotiations with the planning department in mid-2006. Construction work has still not started. He blames complex planning criteria, all open to interpretation. Architects must protect the character of the area as well as making buildings sustainable.

Students provide much of the Green vote, reckons Lord Bassam, a Brighton Labour peer. He thinks voters will turn against the Greens when they discover the full extent of the council’s cuts. Or perhaps not. Brighton’s reputation for unorthodoxy, so carefully built, may not be eroded by such humdrum concerns.

International

- The Paralympics: Blades of gold

- Disability and business: The new green

- Competitiveness: The wealth of nations

The Paralympics

Blades of gold

London’s Paralympics have changed the image of disabled people—in some countries at least. And business is waking up to the issue (see article)

- Golden blades: Great Britain's Stef Reid, Germany's Katrin Green, Marlou Van Rhijn of the Netherlands and April Holmes of the USA compete in the Women's 100m T44 Athletics Event

Source: Getty Images

- Great Britain's Richard Whitehead (C) crosses the finish line to win the Men's 200 metres T42 Final

Source: AFP

- Ahmed Raourahi of Italy eyes the ball as he is pursued by Dylan Alcott of Australia in the Men's Wheelchair Basketball Preliminary Group A

Source: Getty Images

- Arnulfo Castorena of Mexico competes in the Men's 50m Breaststroke - SB2 heat

Source: Getty Images

- World champion Natalia Partyka of Poland serves during her Singles C10 match against Turkey's Umran Ertis. She is the only woman to be competing in the Olympic and Paralympics

Source: REUTERS

- China's Xu Zhao blows a kiss as he celebrates after winning the men's 200m T46 round 1 race at the 2012 Paralympics in London

Source: AP

- Catherine O'Neill of Ireland competes in the Women's Club throw F51/31/32 classification final. All competitors are seated for their throws and have varying levels of upper limb impairment

Source: REUTERS

- Matt Stutzman of the United States competes in the Men's Individual Compound Archery - Open

Source: Getty Images

- Josh Vander Vies of Canada competes during the Mixed Pairs Boccia - BC4 bronze medal final. Boccia is a form of bowls for athletes in wheelchairs

Source: Getty Images

- Brazil's Adriano de Lima prepares to race in the 50m Freestyle - S6 heats. The S6 category is for swimmers who have amputations of both arms, of short stature or moderate co-ordination problems

Source: Reuters

- New Zealand's Peter Martin competes in the men's Javelin Throw Final F52/53

Source: REUTERS

- Greece's Nikolaos Pananos plays a shot during the Mixed Pairs BC3 Boccia final against Portugal. Boccia is a form of bowls for athletes in wheelchairs

Source: AP

- Sophie Christiansen of Great Britain riding Janeiro 6 reacts after competing in the Equestrian Dressage Individual Freestyle Test Grade Ia event

Source: EPA

WHEN Richard Whitehead, a double amputee who runs on carbon-fibre blades, won a gold medal for Britain in a 200m sprint race, beating his own world record, the cheers in London’s Olympic Stadium recalled those for his famous compatriot Mo Farah in the “other” Olympics two weeks earlier.

The Paralympics end on September 9th. For many spectators and viewers, they have been an astonishing introduction to the athletic feats of people with amputations, severe spinal injuries, learning difficulties and blindness. (Deaf people have separate games.) Houssein Omar Hassan, Djibouti’s first Paralympic athlete, completed his 1,500-metre race at an agonisingly slow pace, exhausted and tottering on the spindliest of legs, but urged home by crowds performing a Mexican wave to boost his morale. Sportsmanship plus heart-rending willpower has drawn far more attention than the organisers expected. The 10,000 fresh tickets released daily have sold in a flash.

The Paralympics are a ratings hit too. The opening ceremony drew 11m British viewers (the Olympic one got 27m). Surprised by the interest, Britain’s Channel 4 has cleared space from its schedule to show 400 hours of coverage. Chinese state television is showing five hours a day (its top ranking in the medals table may help). The main channels in Germany and France have nightly coverage. Despite Italy’s modest showing, Sky Italia has provided fully 500 hours, many of them on a specially created channel.

Yet the enthusiasm is patchy. Despite its athletes’ success Russia provided only brief coverage, as did Japan’s main NHK network. America’s NBC has attracted the greatest criticism for its scanty programming. But Chris McCloskey, of NBC Sport, says the network has increased its coverage since the Beijing Paralympics. And the games in London have to compete with other sporting events that have established and devoted audiences.

America’s performance in the arena is below par, too. It came third in 2008, fourth in 2004 and fifth in 2000. In 2008 the Supreme Court rejected an appeal from three Paralympians who had sued the United States Olympic Committee for stinginess towards disabled sport. Cultural attitudes are different, too: Barack Obama joked publicly in 2009 that his dire bowling skills suited him for the “special Olympics”.

But attitudes can change swiftly. Though Russia still uses the outmoded invalidi to describe disabled people, it now sees the Paralympics as a source of national pride. Yulia Averyanova of Perspektiva, a Russian charity, says that Mikhail Terentiev and Vladimir Krupennikov, two former Paralympians now elected to the Russian Duma (parliament) have helped change attitudes. Russia has 182 athletes in London this year.

Although the Paralympic organisers cover 80% of costs of attending, disabled sport is still mainly a rich-country affair, reflecting the need for costly prostheses and specialist training. Nine countries provide 40% of the athletes. White South Africans make up only a tenth of the population but dominate the team. But participation by African countries is rising. Gallican Mugabonake of Handicap International, an aid organisation, says that improvements in Rwanda’s education system have helped it field 14 athletes.

Good intentions abound, whether they are about boosting opportunities in poor countries, or changing attitudes in the rich West. Presenting seriously disabled people as glamorous, ambitious and capable is a sharp change from the usual image, of a victimised minority (though campaigners did use the games to complain about Britain’s tighter criteria for disability benefit).

Paul Maynard, a Conservative MP who has cerebral palsy, says the games euphoria has been tinged with the view that “disabled people are interesting as long as they can run, jump and score goals”. The British Paralympic Association issued prissy advice to broadcasters, telling them not to dwell on competitors’ personal histories and to avoid comparing their performances with those of Olympic athletes. It decried any comparisons with the “normality” of able-bodied athletes and blacklisted the phrases “suffer from” and “wheelchair-bound”. Those without disability are not “able-bodied”, but, curiously, “non-disabled”. Debate even rages over the use of the word “brave”, which some consider patronising. At the same time, matter-of-fact televised discussions of the classifications of the athletes have certainly reduced the awkwardness many able-bodied people feel in discussing disability.

Humour and disability remain a tricky mix. Channel 4 said it would cut its ties with Frankie Boyle, a comedian, for suggesting that the Saudi team might include thieves with amputated limbs. But on the same channel, Adam Hills, an Australian comedian, regularly joked about his prosthetic foot. “Spasticus Autisticus”, a riotously self-mocking song by the late Ian Dury, a rock-star seriously disabled by polio, was performed to cheers and laughter at the opening ceremony. Only 30 years ago, the BBC thought that was far too offensive to broadcast.

Disability and business

The new green

Business may find disability as important as environmentalism

Curious about the code in the daytime

IF CHIEF executives won medals, Justin King of J. Sainsbury, a British supermarket chain, would be sporting a gold in the marketing marathon for his prescient decision to concentrate sponsorship on the Paralympics rather than the glitzier Olympics. The plaudits he and other companies have received for backing what was previously seen as a sideshow could help change corporate attitudes to disability.

Caroline Casey of Kanchi, a non-profit organisation she founded in 2004, says the cause is “the new green”. Starting in Ireland and then in Spain, Kanchi’s Ability Awards highlight companies that deal with disabled employees and customers. Now in partnership with Telefónica, a Spanish telecoms giant, it plans to hold the awards in other countries too, including Britain, Germany and Brazil.

Jorge Perez of Manpower, an employment-services firm, says disabled people frequently have unusually high productivity. Thorkil Sonne, the founder of Specialisterne, a Danish firm that finds high-tech jobs for autistic people, says they can focus on repetitive tasks that might be boring to other workers. Britain’s electronic-espionage centre, GCHQ, (pictured) eagerly recruits people with autism and Asperger’s syndrome. Their ability to spot patterns can make them ace code-crackers.

But to show their talents, disabled people must first get the job. Susan Scott-Parker of the Employer’s Forum on Disability, a British auditing group, notes that many firms still fall down on basics, such as using online application forms that deter blind people.

Disabled people are not just potential employees. While working at Merrill Lynch, Rich Donovan, who has cerebral palsy, looked at disabled people as an emerging market and found it much bigger than he expected: “1.1 billion people, that’s the size of China.” He noted two trends. A generation of people who had benefited from disability laws is coming out of education and into work; second, as the babyboomers age, disabilities are spreading rapidly. That means rising demand for products and services for this unprecedentedly wealthy and consumerist generation.

Yet when he analysed companies in the S&P 500 index, Mr Donovan—who now runs his own firm—found that only a quarter had a strategy aimed at these markets and only 6% were doing serious business in them. He has devised a “Return on Disability” index, which tracks the shares of the 100 firms that deal best with disabled people. Over the past five years it has outperformed the broader stockmarket. Later this month Bloomberg will include this on its financial-information terminals.

Such approaches contrast with the way businesses usually look at disabled people: as charity cases, or as needing lots of box-ticking compliance rules and as the source of annoying lawsuits. Good treatment can make business sense, too.

Competitiveness

The wealth of nations

SWITZERLAND tops the latest competitiveness ranking from the World Economic Forum, best known for its annual shindig in Davos (a Swiss ski resort). It is closely followed by Singapore. Finland has pipped Sweden to third place. Of the big emerging economies, China remains on top, with Brazil moving up.

The most striking fall is the United States, which has dropped in the rankings for four years in a row. It is now seventh. The rankings are based on criteria such as institutions, infrastructure, financial systems, flexible labour markets, economic stability, innovations and public services. Plotting the scores against GDP per person reveals an unsurprising correlation: competitiveness brings wealth, but rich countries can most easily afford to provide the conditions for it. They can squander competitiveness too.

Business

- Political ads and media firms: Of mud and money

- Indian drug patents: Taking pains

- Crowdfunding video games: Money to play with

- Car hire in Sierra Leone: The heart of the motor

- American beer and spirits: Prohibition hangover

- Small brewers in the Czech Republic: Czech pint

- Schumpeter: Bargain bosses

Political ads and media firms

Of mud and money

The only sure winners of November’s elections are media firms

Look, Grandma! You can see Willie Horton from here

LIKE children eagerly awaiting Christmas, American media firms look forward to even-numbered years. Call it election affection. Every two years political campaigns spend billions of dollars on tasteful, fair-minded adverts. A spot showing Paul Ryan tossing Grandma off a cliff, which first aired last year, is typical (see picture). And where there is mud, there is moolah.

In addition to the presidential race this year, candidates are vying for 435 seats in the House of Representatives, 33 in the Senate, 11 governorships and countless local posts. In 2008 Barack Obama’s extraordinary fund-raising helped push spending on political ads to a record $4.2 billion. Can we top that? Yes, we can. Some expect this year’s haul to be 23% higher, at $5.2 billion.

The biggest profits are still to come. The mudslinging gets really messy only after the conventions (the Democratic one ended on September 6th). This is also the first presidential election to test the impact of a 2010 Supreme Court decision that allows companies and unions to spend unlimited sums on election ads. This has brought a flood of new cash to the airwaves. “Super” political action committees (PACs) have spent around $219m so far, more than Mitt Romney’s $163m and close to Mr Obama’s $263m. Restore Our Future, a super PAC that backs Mr Romney, has already spent around $82m, according to the Centre for Responsive Politics, a watchdog.

The bulk goes to local TV advertising—what David Axelrod, an adviser to Mr Obama, calls the “nuclear weapon” of elections. Local broadcasting stations are a cheaper way to reach specific audiences than national cable spots. Spending on TV will attract $3.4 billion in this election cycle, and 83% of that will go towards local TV (see chart). Most political ads appear during the local news.

Cable companies such as Comcast are courting campaign dollars by promising even more precisely aimed ad placement than is possible on local TV. As a result cable operators have quadrupled politicaladvertising revenues since 2004, to $467m, and doubled their share of the pot. But the biggest winners will be firms such as Sinclair Broadcast Group and Gray Television, which own lots of local stations in critical swing states. The 2008 presidential campaign was fought mostly in 14 swing states; this year’s will focus on a mere nine or so.

Such concentration has given local stations greater pricing power, says Michael O’Brien of Scripps Media, which owns local stations in Ohio and elsewhere. As November 6th nears and advertisers snap up more of the available spots in swing states, rates will soar. Marci Ryvicker, a managing director at Wells Fargo, a bank, reckons that a spot in a swing state that normally goes for $50,000 could go for ten times that as the election approaches. This hurts non-political advertisers, who must pay more to tout their doughnuts and haircuts. Of course, they can always wait for November 7th, when prices will plunge again.

As campaigns harness ever more data, they grow better at “microtargeting”: tailoring messages to specific groups of voters. This works moderately well with traditional media. For example, you can place an ad applauding or denouncing Mr Ryan’s plan for Medicare (health care for the elderly) during a TV show that old people like. Or you can send flyers to people in specific neighbourhoods or to registered independents, who may be swayable.

But the greatest potential for microtargeting is online. By the end of this election cycle spending on online political ads will have increased more than tenfold since 2004 (admittedly from a low base of $30m), and will account for around 6% of advertising revenues.

Google search ads used to account for the bulk of online advertising dollars: it was a straightforward way for campaigns to provide information about their activities to those searching for it. But now social-media firms such as Facebook and Twitter are also competing for political spending.

Campaigns have started to look beyond the usual search and banner ads, and are shelling out more for video ads on popular news sites (such as CNN.com), niche websites and video sites such as YouTube, which is owned by Google. On YouTube viewers can choose which ad they want to see, and a campaign pays only if the video is actually watched. Both parties are growing more ambitious online. Whereas once they used online advertising mainly to raise money and mobilise volunteers, today they are trying to persuade people to vote for them.

Explore our interactive guide to the 2012

presidential election

The other sure winners of this election are the marketing firms that collect data about voters’ incomes, family status and web-browsing history. They sell this information to campaigns, which use it to match appropriate ads to receptive eyeballs. Zac Moffatt, Mr Romney’s digital-campaign director, says online spending is critical because it helps candidates reach “on demanders” and “people who are off the grid”: the 29% of voters who, according to a recent study by firms including Say Media, a digital consultancy, have not watched live TV in the past week.

Media firms have one or two gripes. A new ruling by the Federal Communications Commission will require broadcasters in the 50 largest markets to make public which political groups they have sold ads to, and what they have charged. That could make it harder for them to jack up prices.

Their biggest grumble, however, is that odd years follow even ones. There will be a few ballot initiatives and local races in 2013, but nothing to compare with the bonanza of a battle for the White House. So media companies should enjoy the next two months of mudslinging. Afterwards, they will have to go back to selling ads for soap powder.

Indian drug patents

Taking pains

Indian patent rules infuriate Big Pharma

A CLASH over India’s drug market was inevitable. Foreign drugmakers, facing paltry growth in the West, are eyeing India hungrily. Rising incomes and rates of chronic disease may push sales from $12 billion in 2010 to $74 billion in 2020, according to PwC, a consultancy. But tapping this growth means having patents that protect intellectual property. India is home to a thriving generics industry, whose copycat drugs make up about 90% of the market. India’s drug-patent laws are just seven years old. Its government is keen to encourage generics and keep prices down.

Now India’s patent rules are being put to the test. Novartis, a Swiss giant, is challenging India for denying a patent for Glivec, its blockbuster cancer drug. The fight is due to reach India’s Supreme Court on September 11th. Bayer, a German drugmaker, has a different problem: in March India’s patent controller ordered it to license a drug to a local manufacturer. Its appeal had its first hearing on September 3rd. The cases will help decide how quickly India’s 1.2 billion people get new drugs, and at what price.

India’s drug industry has a unique history. For more than 30 years, the country did not recognise pharmaceutical patents. Domestic firms became masters at copying medicine and making it cheaply. After joining the World Trade Organisation (WTO) in 1995, India had to change its patent policy. But its new system, in place since 2005, includes special protections for both patients and generic manufacturers.

For example, the law bars patents of minor changes to existing drugs, a practice known as “evergreening”. Drug reformulations are often used to extend patents elsewhere; they get no protection in India. The country also has broad criteria for “compulsory licensing”. A WTO agreement allows countries, in some instances, to force a firm to license a patented drug to a generic company. India’s rules give officials broad powers to do this.

Now both provisions are under attack. In 2006 India denied Novartis a patent for Glivec, calling it an unpatentable modification of an existing substance, imatinib. Novartis insists this is nonsense. Only by making it in salt form, imatinib mesylate, did Novartis have a proper drug: the body absorbed the medicine 30% more easily.

Paul Herrling, the chair of Novartis’s Institute for Tropical Diseases, says the case is a test of what is patentable in India. “We are being accused of evergreening,” he says. “Having that concept applied to Glivec, which was one of the major breakthroughs in cancer therapies, is completely ridiculous.” Michelle Childs of Médecins Sans Frontières, a non-profit, retorts that drug firms such as Novartis should not win patents for minor improvements. This would keep generics off the market, driving up prices.

Bayer’s case is equally heated. In 2008 it won an Indian patent for Nexavar, a kidney-cancer drug. But in March India’s patent controller issued the country’s first compulsory licence. He wrote that Bayer had not made Nexavar “reasonably affordable” (Bayer offered it for a whopping $5,000 a month), that the company failed to provide enough of the drug and, in a protectionist nod, reckoned that importing Nexavar further hurt Bayer’s case. The controller ordered an Indian company, Natco, to sell Nexavar for one-thirtieth of Bayer’s price. Bayer will receive a 6% royalty. Meanwhile Bayer is fending off another competitor, Cipla, which has sold generic Nexavar in India for years.

As these cases drag on, India’s government is considering other ways to get cheaper medicine. It plans to offer free generics in public hospitals, which would drive up sales of very cheap copies. It may also set price controls for patented drugs. However, generic companies are not immune to regulatory pressure. Ministers plan to expand price controls for a broader swathe of generics.

Cost versus innovation

“We realise the industry will take a hit,” explains D.G. Shah of the Indian Pharmaceutical Alliance, which represents big generic companies. “We’re trying to find a solution so that the government’s concerns on access and affordability are addressed without threatening the long-term growth of the pharmaceutical industry.” Nice work, if they can get it.

Crowdfunding video games

Money to play with

Video games dominate Kickstarter’s list of biggest projects. Why?

SINCE its launch three years ago, Kickstarter, a website on which people who want to make things can ask other people to pay for their projects, has offered hope to penniless musicians, artists and designers. But what the world’s modern Medicis really want to bankroll is new video games. Of the ten most-funded Kickstarter projects, five are related to video games (see chart). Three—“Double Fine Adventure”, “Wasteland 2” and “Shadowrun Returns”—are actual games. Two are bits of gamer hardware: an open-source games console called the OUYA, and a virtual-reality headset called the Oculus Rift.

One reason that games get financed is that gamers are tech-savvy. With an average age in America of 37, they also have plenty of disposable income. They expect no return on their money, save a free or cut-price copy of the game itself.

There are structural reasons within the games industry for Kickstarter’s popularity, too. As development budgets for games have risen, says Aubrey Hesselgren, a games-industry programmer, big publishers such as Electronic Arts and Activision have become risk-averse. Like Hollywood studios before them, they have taken the safe option of churning out endless sequels to already-popular titles in big-selling genres, such as military-themed shooting games. That leaves a long tail of disgruntled fans who can’t find new games they enjoy. The three biggest Kickstarter games are all from underserved genres.

Meanwhile, developers are unhappy, too. Making games is a hard way to earn a living. Contracts are often short. Long hours are common. Deadlines arrive like a never-ending shower of “Tetris” blocks. Publishers keep most development studios on a tight leash; many developers feel creatively stifled. Stories of burnout and depression abound. “The games industry doesn’t retain developers very well,” notes Mr Hesselgren dryly. “But it’s pretty good at training up rebels.”

Raising money from fans offers a route to creative control and sane working conditions. “I don’t have any crazy people [from a publisher] in my office telling me what to do,” enthuses Brian Fargo, the veteran developer in charge of “Wasteland 2”.

The combination of dissatisfied fans and mutinous developers is leavened with a dose of nostalgia for the good old days. “Wasteland 2” is a sequel to a game made in 1988. “Shadowrun Returns” is a computer version of a pen-and-paper role-playing game released in 1989. “Double Fine Adventure” is an adventure game, a relaxed, cerebral genre that has been commercially dead for more than a decade.

As word spreads among fans and developers about the possibilities offered by cutting publishers out of the loop and raising money directly from fans, the number of video-game projects on Kickstarter is mushrooming. Not all are successful, and some observers worry about what might happen when a fan-funded game flops. Still, Mr Fargo hopes that Kickstarter could evolve into a fully-fledged alternative funding source. He has promised to plough 5% of the profits from “Wasteland 2” back into other Kickstarter games, and has encouraged others to do the same.

Car hire in Sierra Leone

The heart of the motor

The key to success is a good breakdown service

DEEP in the sweaty Sierra Leonean bush, the Land Cruiser’s air conditioning broke down. No problem: the car-hire firm sent another car. Dirty diesel from a diamond-mining town fouled its engine, and the second car broke down. Again, no problem. Flash Vehicle Rentals sent a third Toyota.

The small west African nation of Sierra Leone is not a good place to be stranded. It has few trustworthy places to get a car fixed. And it is not entirely safe. The civil war, during which thousands of people had their hands hacked off as a punishment for voting, ended in 2002. But your correspondent narrowly missed a riot in another mining town, and the roads are always littered with cars wrecked by untrained drivers.

None of the big global car-hire firms operates in Sierra Leone. Yet the foreigners who have flocked here to invest in mines and farms need a reliable way to get around. David Dobrowolski, a 30-year-old Canadian, seeks to supply one. With two friends, he set up Flash Vehicle Rentals two years ago.

Today its fleet comprises 70 four-wheel-drive Toyotas, which are good on terrible roads. Some were bought at auctions—the aid agencies and UN bodies in Sierra Leone typically sell their cars after five years or 100,000km (62,000 miles). Most are simplified versions of the cars sold in the rich world, with fewer temperamental electronics.

Sierra Leone is, though, a tricky place to keep any vehicle going. There is no unleaded petrol available, no Toyota dealership and no recovery service. Flash keeps its own store of spare parts and has imported a mechanic. It protects its highly portable assets with a GPS system, which tracks the location of each car and transmits it back to head office using the mobile-phone network. If necessary, Flash can immobilise a car from afar.

Its chief selling point, however, is its breakdown service. It vows to send a replacement if any of its cars malfunctions, anywhere in Sierra Leone. This gives customers peace of mind, but it does not come cheap. Within Freetown, the capital, a Flash car costs $110 a day, excluding fuel. In the most remote patches of bush, that can rise to $225 a day. Some 90% of Flash’s customers sign long-term leases with bespoke rates. Short-term hires cost more.

Mr Dobrowolski, who came to Sierra Leone in 2008, started Flash because he was frustrated at the costly, shoddy car-hire services in Freetown. It is a tough business—credit is expensive in Sierra Leone. But Flash rushes in, where Avis fears to tread.

American beer and spirits

Prohibition hangover

As puritanical rules retreat, the American market for beer and spirits is growing more competitive

A PRESIDENT must waste long hours on trivial issues such as foreign policy, the economy and his own re-election. But Barack Obama has found time for something more important: home-brewing beer. And on September 1st he revealed his secret recipe to a grateful nation.

Mr Obama owes a debt to one of his predecessors. Jimmy Carter, though a teetotaller, loosened restrictions on homebrewing when he signed the Cranston act in 1978. That act also changed federal excise taxes so that homebrewers were whacked with lighter levies than big breweries when they sold their product. Deregulation allowed America’s fledgling craft-brewing industry to flourish.

American beer drinkers, who once had little option besides gassy, mass-produced bathwater, may now choose from hundreds of beers of all shades, styles and strengths. Craft beers’ share of the national throat remains small, but it is growing. And as beer goes, so go spirits, as laws dating from Prohibition are whittled away.

The Brewers Association, a lobby group, defines a craft brewer as one that makes at most 6m barrels a year, in which big companies have a stake of less than 25% and that uses traditional malt ingredients such as barley. In 2011 such brewers shifted nearly 11.5m barrels of beer. Within that category, sizes vary: Boston Beer Company, the largest craft brewer, sold around 2.5m barrels, whereas Sweetwater, of Atlanta, sold 95,000. In the same year Anheuser-Busch InBev, which makes Stella Artois, Becks and Budweiser, sold 106m barrels, almost ten times as much as the entire craft industry, and mopped up 48% of the American market. But craft sales rose between 2010 and 2011, as overall American beer sales declined (see chart).

These days bars with 20 taps are common. Connoisseurs of chocolate stouts, blueberry wheats and hopmonsters are spoiled for choice. Even the big breweries recognise the value in craft-beer cachet. Shock-Top, for instance, may be “a Belgian-style unfiltered wheat ale brewed with real citrus peels and coriander spice”, but it is brewed by Anheuser-Busch.

According to the Brewers Association, in 2011 there were 1,940 craft breweries in operation. In one sense, this is a novelty; as recently as 1979 America had fewer than 200 breweries in total. But it is also a renaissance: on the eve of Prohibition, which lasted from 1920 to 1933, there were around 1,200 active breweries. With refrigeration scarce and refrigerated trucks scarcer, shipping American beer was then hard; most breweries served only local markets. Today, even small brewers may range far and wide. Drinkers in San Diego can sip a Maine-brewed Allagash, and Dogfish Head, the pride of Delaware, can be bought in Seattle.

America is also enjoying, if not a spiritual renaissance, at least a renaissance of spirits. At the dawn of the 19th century the country boasted 14,000 distillers. By the time Prohibition ended there were barely a dozen (excluding moonshiners). Much like American beer in the 1970s, American spirits were mostly produced by big companies with big brands: Jack Daniel’s whiskey, Jim Beam and Wild Turkey bourbon and Smirnoff vodka, for instance.

That has changed. Frank Coleman of the Distilled Spirits Council of the United States says that in 2001 there were perhaps 24 craft distilleries in America—producers of at most 40,000 nine-litre cases a year. Today there are ten times as many. But even that ceiling is high for many independent distillers. Tuthilltown Spirits, a New York-based company that makes vodka, whiskey and gin, expects to produce around 8,000 cases this year. By way of comparison, in 2011 Jack Daniel’s sold 4.7m cases in America and 10.6m worldwide.

Craft distillers’ overall sales may be small, but they tend to be more profitable. They accounted for just over 25% of the volume of spirits sold in America last year, but more than 45% of the revenue. Their share of the overall spirits market is growing—measured in both revenue and volume—whereas that of “value” spirits (think $8 litres of formaldehyde-tasting vodka in plastic bottles) is shrinking.

Walk into a specialist bourbon bar and you will see scores, perhaps hundreds, of brands arrayed behind the counter. Despite the ersatz homeyness on the labels, many are made by big firms: Jim Beam, for instance, distils and bottles expensive brands such as Knob Creek, Basil Hayden’s and Booker’s. The label on bottles of Pappy Van Winkle Family Reserve bourbon, which can sell for $50 a glass, says it is “Bottled by Old Rip Van Winkle distillery”. No such place exists. The fluid is made and bottled by Buffalo Trace, a Kentucky distillery that makes 12 different bourbons, a vodka, a couple of ryes and an eye-watering, 125-proof white dog (unaged whiskey).

But small, or the image of small, sells; it connotes authenticity, care, continuity. That holds true even for the big guys: John Hayes, the managing director of Jack Daniel’s, attributes his brand’s global success to “the smallness of Jack Daniel’s. It’s all made right there…in the small town of Lynchburg, Tennessee. That resonates around the world.” In recent years Jack Daniel’s has rolled out two new brands—Gentleman Jack and Jack Daniel’s Single Barrel—designed to capitalise on Americans’ increasing fondness for craft spirits.

Some craft distilleries, of course, are wholly independent. Bill Welter, an ex-banker and passionate golfer who got the distilling bug while living in Scotland, makes vodka, bilberry gin, rum, rye and whiskey in Michigan. His Journeyman spirits are available in four states. Some grew out of other operations: Rogue, from Oregon, makes gin, rum and whiskey, but is better known for its line of craft beers, just as Anchor, a San Francisco brewery, began making a first-rate Junipero gin and Old Potrero rye only after a century of brewing beer. This model helps mitigate start-up costs, and gives distillers a steady stream of non-spirit revenue.

That is an immense help, because unlike brewers, distillers are taxed at a single excise rate, whatever their size. Last year Maurice Hinchey, a congressman from New York, introduced a bill to tax small distillers at a lower rate. It was forecast to save small distillers around $1.71 per bottle of spirits, but died in committee.

Spirits are also subject to stricter regulation than beer and wine, which may be made at home for personal use; spirits may not. Beer and wine tend to be available at more retail outlets—grocery stores and petrol stations, for instance—than spirits.

Beyond control

Some of the sillier regulations are fading. Take “dry counties” (counties in which alcohol sales are restricted). How much they actually curb drinking is unclear, but they are certainly a boon for liquor stores just outside their borders. Around 6% of Americans live in dry counties or towns, largely in the evangelical South. Yet such places are growing scarcer. Since 2004 voters in Texas have made 450 out of 576 dry municipalities “wet”.

Some states still prohibit alcohol sales on Sundays, though those “blue laws” are fading, too. Since 2002, 16 states have voted to repeal bans on Sunday sales. Today buying spirits on Sunday remains illegal in 12 states, but only one (Indiana) maintains a blanket ban on all alcohol sold on Sundays. Even majority-Mormon Utah is changing. In 2009 it ended its requirement that people who wanted a drink join a “private club”. Still, restaurants that serve alcohol must keep their booze out of customers’ sight, and it may not account for more than 30% of their total revenue.

From bootlegger to leg

But if the trivial legacies of Prohibition are fading, two more market-defining ones remain. First, 18 states maintain some form of monopoly control over the sale of alcohol, whether at the wholesale or retail level. Some “control states” merely sell to independent shops through state-owned distributors; in others consumers can buy alcohol only from state-owned outlets. Some states maintain that tight regulation reduces alcohol abuse. Utah, for instance, claims that not having independent shops eliminates incentives to sell more alcohol and to sell to underage patrons. Such arguments are specious at best. There is little difference in alcohol-abuse rates, deaths from alcohol-related causes, binge-drinking or drink-driving rates between “control” states and those that license alcohol sales through private shops.

Control states tend to offer consumers two things they do not want: higher prices and less choice. High prices can mean less tax revenue: customers in Pennsylvania, for instance, a control state with the highest average alcohol prices in the country, can simply head to a neighbouring state to buy their booze. Control-state laws also tend to criminalise consensual, non-harmful behaviour. A bartender in North Carolina who wants to stock a particular spirit that the state does not sell has to drive across the border to South Carolina to buy it. When he brings his booze back into North Carolina, he commits a crime. Such laws are so widely flouted that they erode respect for the law in general, just as Prohibition did (see picture).

How long such rules will survive is an open question. They may be irksome, but governments seldom abandon a steady source of taxes. Still, the retreat of other laws that tell adults when and where they may tipple gives hope—as does a market increasingly hospitable to start-ups, innovation and quality.

Small brewers in the Czech Republic

Czech pint

Belatedly, capitalism brings choice to Czech boozers

FEW countries, you might suppose, need a brewing revolution less than the Czech Republic. Czechs are famed for their skill both at brewing and imbibing. Yet all is not well.

After the velvet revolution of 1989, Czech breweries shifted to private hands. Global chains moved in, bought local brands and, with their marketing and distribution know-how, soon came to dominate the market. A handful of brands, such as Pilsner Urquell, Staropramen, Krusovice and state-owned Budvar, crowded out the rest.

“I knew something was wrong when I moved to the country of beer and ten years later saw the same three beers everywhere,” says Max Munson, the American proprietor of Jama, a pub in Prague. In 2009 and 2010 domestic beer sales contracted. Bars started looking for variety to attract customers.

In 2010 Mr Munson hooked up with Pivovary Lobkowicz, a new firm that buys local breweries and helps them market and distribute their tipples better. Lobkowicz now sells beer in 200 Prague pubs and has seen sales grow by 13% and 7.2% in the past two years.

Craft beer is now booming. Unfiltered, unpasteurised or speciality beers, brewed by the likes of Bernard, Kocour, Svijany, Uneticky and Zatec, are available like never before. “It exploded,” says Max Bahnson, a beer writer who uses the pen name Beer Philosopher. Overall domestic beer sales rose by 2.7 % last year. Euromonitor, a market-research firm, predicts solid growth through 2016. “Sales have never been better,” beams Mr Munson.

Schumpeter

Bargain bosses

American chief executives are not overpaid

THE idea that American bosses are obscenely overpaid is conventional wisdom, and not just among the true believers at the Democratic convention. The New York Times complains of “fat paychecks [awarded] to chief executives who, by many measures, don’t deserve them.” Forbes, hardly the in-house journal of Occupy Wall Street, frets that CEO pay is “gravity-defying”. An issue in April gave warning that “our report on executive compensation will only fuel the outrage over corporate greed.”

This orthodoxy rests on three propositions: that CEO pay just keeps on going up; that it is not tied to performance; and that boards are not doing their job of holding fat cats’ paws to the fire. These propositions in turn rest on a bigger argument: that CEOs are using their political power to rig the system, and that an efficient market for talent would produce very different results.

Steven Kaplan of Chicago’s Booth School of Business has been poking holes in this orthodoxy for years. He has now gathered his research together in a new paper (“Executive Compensation and Corporate Governance in the US: Perceptions, Facts and Challenges”).

His argument is well-grounded and intricate. He distinguishes, for example, between “estimated” and “realised” pay. Estimated pay is the estimated value of the CEO’s pay, including stock options, when the board does the hiring. Realised pay is what the CEO actually makes when he exercises his options. There is a big difference. It is now impossible to talk sensibly about this subject without first grappling with Mr Kaplan.

He starts off by questioning the idea that CEO pay always goes up. Granted, it shot up between 1993 and 2000. But since then it has fallen. Average estimated pay for the bosses of S&P 500 companies has declined by 46% since 2000. Median CEO pay has declined since 2001, though only slightly. In 2010 CEOs were paid about as much in real terms as they were in 1998.

The captains of the corner office are hardly going short. In 2010 the average package for an S&P 500 CEO was $10m and the median CEO took home $8.5m. Egalitarians will not be thrilled to learn that the average S&P 500 CEO, who made 350 times the median household income in 2000, now makes only 200 times as much. But S&P 500 CEOs are not doing well when compared with other 0.1 percenters. Bosses of unlisted companies and people in the hedge-fund and private-equity industries have pulled rapidly ahead. (Leading lawyers, in contrast, have roughly kept pace with S&P 500 CEOs.) The top 25 hedge-fund managers regularly earn more as a group than all 500 S&P CEOs put together. The ratio of average CEO pay to the average pay of other 0.1 percenters is comparable to or lower than the ratio in the early 1990s and roughly similar to the average ratio since the 1930s.

What about the relationship between pay and performance? Mr Kaplan argues that CEOs are clearly paid for improving the performance of their company’s stock. Firms with CEOs in the highest 20% of realised pay generated stock returns 60% greater than those of other firms in their industries over the previous three years. Firms with CEOs in the bottom 20% underperform their industries by almost 20%. CEOs are also kicked out if they fail to perform well. In the 1970s one Fortune 500 boss in ten was tossed from the top floor in any given year. In the 2000s that number increased to one in six. The sharp decline in CEO tenure—from eight years in the 1990s to six years today—also means that the average CEO spends 25% less time on the payroll.

Mr Kaplan provides a valuable corrective to much of the rhetoric that surrounds this subject. But two questions remain troubling. One is about short-termism. Many critics of CEO pay argue that the problem lies not with the size of the pay packets but with the incentives that they create. Many bosses receive options that are worthless unless the company’s shares reach a certain price, but fabulously lucrative if they exceed it. This may spur them to take big risks to boost share prices in the short term, and then cash out. But if their bets go sour, other shareholders suffer. It would be better to pay bosses in restricted shares, which they must hold for a specified period rather than choosing when to sell.

The second question concerns the political economy of inequality. It is one thing for CEOs to earn $10m a year when the economy is booming, but quite another when unemployment is 8%. Big companies are still refusing to hire, despite sitting on piles of cash. And a handful of bosses are still making eye-popping sums: the CEOs of CBS, Oracle and Viacom all earned more than $50m in 2010. Bosses should not underestimate the risk that their riches could provoke a backlash against business.

Pay for performance; fire failures

Nonetheless, Mr Kaplan is surely right to argue that there is no quick fix. Some fat-cat floggers want governments to regulate pay to reduce inequality within firms. That would have perverse consequences. To appear more equal without losing their best people, many firms would outsource more low-paid jobs. Other reformers say the way to deal with high pay is to give more power to boards or shareholders. The Dodd-Frank law of 2010 required all public firms to hold an annual “say on pay” vote for top executives. But turnover rates suggest that boards have been getting tougher on CEOs for years. And last year, despite a lot of noise by activists, shareholders voted to uphold 98% of pay proposals.

The evidence suggests that CEO pay is determined mostly by supply and demand, not bad corporate governance or skewed incentives. Companies compete for scarce talent. They reap big rewards for a smart hire because they are growing larger and more global. They suffer big losses from a bad hire for much the same reason. They pay what it takes to woo the best bosses, and sack them if they stumble. That is how it should work.

Economist.com/blogs/schumpeter

Finance and economics

- International trade: Boxed in

- Buttonwood: Rover the regulator

- Sports investments: Losing their shirts

- Legislation and investing: My little crony

- Foreign investment in India: They just keep on keeping on

- Bank bail-outs: Bad or rubbish?

- Free exchange: The mystery of Jackson Hole

International trade

Boxed in

Global trade has turned down sharply this year. The outlook is pretty bleak, too

TRADE-WATCHERS often look to the oceans to gauge activity. Bustling docks and harbours mean importers and exporters are busy, and trade figures are likely to be strong. Empty quays are ominous. At the end of 2011 data from big ports started to turn choppy, fuelling fears of a slowdown that has come to pass. The OECD reports that exports fell by over 4% in the second quarter of 2012 in Britain and India; Russia and South Africa lost more than 8%. That is particularly bad news for places like Singapore and Hong Kong, which are important trade hubs (see chart 1); open euro-zone countries like Ireland and Belgium are also highly exposed.

The obvious cause of falling trade is the global economic slowdown. Since exports are sales to foreigners, they tend to weaken when buying power is low. That means trade often tracks global GDP quite closely. At a more granular level, too, the patterns of trade match the fortunes of economies. Since 2011, imports into the stagnant European Union have fallen by 4.5%. In contrast the oil-rich Middle East has increased imports by 7.4%.

If the global economy were the only factor in determining trade, a pick-up in world output would translate automatically into rising trade. The IMF, for example, thinks that trade will grow by 5.1% in 2013 on the back of a strengthening economy. But the fund’s predictions assume that looser policies in the euro area and emerging markets will be successful. If that turns out to be too optimistic then growth, and trade, could undershoot its forecasts. The latest shipping data hold out little hope for a rapid rebound. A survey reported by Lloyd’s List on September 5th showed that container volumes from Asia to Europe plunged by 13.2% in the year to July.

What’s more, trade does not track business cycles perfectly. Trade has generally grown faster than GDP in recent years, rising from 22% to 33% of world GDP between 1996 and 2008. Its downturn this year has been more pronounced than that of the world economy (see chart 2). That suggests other factors may be at work beyond the pace of global growth.

One candidate is decreased availability of trade finance. Businesses that operate internationally rely heavily on banks. Take exporters. Once they have bought raw materials and other inputs, they must make their products before exporting them to a destination country. They may deliver them to a final buyer before receiving payment. This creates a lag between incurring costs and receiving revenues, a gap bridged by short-term trade-finance loans.

European banks are major players in trade finance. According to a recent World Bank study, large euro-area banks accounted for 36% of global trade finance in 2011. French and Spanish banks alone provided 40% of trade credit to Latin America and Asia. But euro-zone banks have been cutting back their trade-financing operations, according to Jean-François Lambert of HSBC, an international bank.

One reason for this withdrawal is that international trade takes place in dollars, and risky-looking euro-zone lenders are finding it harder to access dollar liquidity. Another is the need for European banks to slim their balance-sheets: trade finance, because of its short-term nature, is easy to prune. Many lenders are also under pressure to concentrate their activities on domestic markets. The likes of HSBC can pick up some of the slack left by departing Europeans. Japanese banks, and local banks in China and Brazil, are also moving to fill gaps. But trade finance is likely to be less abundant than it was.

Increased protectionism may also be starting to drag on trade. In the early phases of this crisis, it seemed that protectionism was one thing the world did not have to fret about: the lessons of the 1930s (avoid trade wars at all costs) had apparently been learned. But the number of new trade disputes is ratcheting up to a level that is beginning to look worrying. Argentina is involved in a host of arguments. America, India and China are embroiled in a spat over steel. On September 4th Brazil said it would raise tariffs on 100 products. The risk, according to Jagdish Bhagwati of Columbia University, is that commitment to free trade could flag, particularly as electoral pressures take their toll.

Even if a new round of protectionism can be avoided, ambitions to liberalise trade further are disappointingly limited. The 11-year-old Doha round of global trade negotiations, which could add 0.5% a year to global GDP by opening up new markets, is as good as dead. In its place a tangle of regional deals—a “spaghetti bowl”, in Mr Bhagwati’s words—has emerged. The hope is that the most promising elements of Doha can somehow be revived in a new deal. An agreement on “trade facilitation” (cutting red tape at borders) would more than offset the petty protectionism of some G20 members. But the tide of support for free trade is ebbing.

Buttonwood

Rover the regulator

Simple rules may be best for monitoring banks

PITY the financial regulator. The evidence suggests that bank executives, and the independent directors on their boards, fail to understand the complex organisations they control. How is an outside supervisor to manage, particularly when the best and brightest of its staff can be lured away by the higher salaries on offer in the City or on Wall Street?

In practice, as Andrew Haldane of the Bank of England highlighted in a speech at the recent Jackson Hole meeting of central bankers (see Free Exchange), regulators have responded by trying to match the complexity of the firms they supervise. The first set of Basel rules on bank capital was just 30 pages long; the second go had 347 pages; Basel 3 has 616. In America the Glass-Steagall act of 1933, which separated commercial and investment banking, was a concise 37 pages; the Dodd-Frank act of 2010 ran to 848, and may spawn a further 30,000 pages of detailed rule-making by various agencies.

All these rules require banks to fill in reams of forms, and regulators to monitor the results. Mr Haldane estimates that Basel 3 may consume the time of 70,000 workers in the European banking industry. In 1935 there was one American financial regulator for every three banks; now there are three regulators for every bank.

The financial crisis of 2007-08, and the continued weakness of banks, suggest that complexity has not served its purpose. In a world of multiple connections, where the distribution of future probabilities cannot be known (unlike the probabilities involved when spinning a roulette wheel), simple rules of thumb may be more useful than sophisticated models.

Mr Haldane uses the analogy of dogs, such as border collies, which are very reliable catchers of Frisbees without being aware of the complex calculations (wind speed, air resistance, etc) that might be involved. The rule which the dog’s brain has subliminally worked out is to run at a speed so that the angle of gaze to the Frisbee remains constant. Baseball players and cricketers follow similar strategies.

The simple rule that Mr Haldane suggests for regulators is to look at the “leverage ratio”, the relationship between a bank’s equity capital and the assets on its balance-sheet. (A bank’s assets are, largely, the loans it makes; customer deposits count as liabilities.) A low leverage ratio is (counterintuitively) a bad thing: if a bank’s loans turn bad, there is more risk that its equity will be wiped out.

The regulators behind the Basel rules have tended to think a leverage ratio is too unsophisticated. Take two banks, each with $4 billion of equity and $100 billion of assets. On a simple measure of leverage, they look equally risky. But Bank A’s assets are invested entirely in Treasury bonds and Bank B’s are lent to Miami condominium developers. Common sense suggests Bank B’s balance-sheet is much more risky, and the Basel rules “risk-weight” assets so that it ends up holding more capital.

But risk weighting creates problems of its own. Before the crisis, the Basel rules provided an incentive to create AAA-rated securities (such as the infamous structured products linked to subprime mortgages), since they carried a low capital charge for banks. In addition, banks were allowed to use their own models to calculate the riskiness of their balance-sheets. Unsurprisingly they erred on the side of optimism. The result, as the world headed into 2007, was that banks’ balance-sheets were much riskier than they appeared.

Of course, no regulation is foolproof. American commercial banks were subject to a leverage ratio in the run-up to the financial crisis: they still ran into trouble. Herein lies the regulators’ dilemma. Focus on any one measure and banks will find ways to get around it. The temptation is to add further measures to restrict their wiggle-room (Basel 3 uses both risk weights and a leverage ratio). But the more measures that are used, the more complex the system becomes.

Although the thrust of Mr Haldane’s analysis is surely right, it is surprising that he does not focus on another simple factor: change. As Peter Hahn of the Cass Business School in London points out, a bank that suddenly increases its market share, or expands its balance-sheet, is usually the one to watch. That was the case with Northern Rock, a British bank that grew explosively before failing in 2007. There is always a chance that the bank has a new model that is transforming the industry. But the odds are that the bank is either lowering its credit standards or undercharging for the risks it is taking. A regulator who has lived through a few cycles should be able to spot the danger, without the need for a sophisticated model.

Economist.com/blogs/buttonwood

Sports investments

Losing their shirts

Do sports and stockmarkets mix?

THAT Manchester United, a perennially successful English football team managed by Sir Alex Ferguson (pictured), lost its league title to Manchester City last year surprised many. That investors in the club’s initial public offering (IPO) on the New York Stock Exchange have lost money is less of a shock. Almost a month after Manchester United’s shares began trading at $14 a share, they have dipped to $12.90. Many recall how a spate of European football-club IPOs in the 1990s ended badly. Is there a case for backing professional sports teams off the pitch as well as on it?

European football teams have been particularly patchy bets. Many clubs are managed with the goal of securing trophies, not turning a profit. Those that do try to balance the books are hard-pressed to win bidding wars for players against owners who want success at all costs: free-spending Manchester City, for example, is owned by Mansour bin Zayed Al Nahyan, an Emirati sheikh. Many clubs keel over. There were 54 insolvencies in England’s top four divisions between 1992 and 2011, according to Deloitte, a consultancy.

Things may be getting better. The English Premier League recently signed a domestic television deal worth over £1 billion ($1.6 billion) a year, and is expected to secure a similarly rich pact for its foreign rights. Manchester United itself derives around a third of its income from merchandise sales, which do not directly depend on its record on the pitch. And a new set of salary restrictions, called “Financial Fair Play”, is scheduled to take effect across European football in the coming years, which should stop wage bills from spiralling ever higher. Much of this good news is already baked into the share price of Manchester United, whose investors include George Soros, but it suggests that European football teams will have a better chance of earning sustainable profits.

For evidence, look to North America, where sports teams have generally been great investments: the average National Football League (NFL) team has increased in value by 282% since 1998, according to Forbes magazine. They often receive favourable leases to play in taxpayer-funded stadiums. Since there is no such thing as promotion or relegation, they stay in the highest (“major”) league and get a share of its generous revenues, no matter how they play. Salary restraints prevent free-spending owners from driving up the cost of talent. When the clubs’ profits have dwindled, they have not hesitated to lock players out to negotiate better terms, as both the National Basketball Association and the NFL did in 2011. That option is not credible in Europe, since players can earn shedloads by moving to another country.

The problem for ordinary investors is that American teams rarely sell shares to the public. They must secure approval from their sports’ commissioners to issue stock, and the leagues have been reluctant to disclose clubs’ financial information. In the past few decades only three American teams have traded on public markets—baseball’s Cleveland Indians, basketball’s Boston Celtics and ice hockey’s Florida Panthers. All have since delisted.

That said, massive appreciation in franchise values in North America has pushed the cost of acquiring a team past the means of all but the richest private investors. An IPO may soon be the only way for an owner to cash out. And if the Dallas Cowboys or the New York Yankees were ever to hit the market, the record of publicly traded sports teams should swiftly improve.

Legislation and investing

My little crony

You too can enjoy the benefits of Beltway capitalism

THE nexus between politics and commerce may conjure thoughts of whispered deals in smoke-filled corridors. But connections are not everything. A new NBER working paper*, by Lauren Cohen and Christopher Malloy of Harvard Business School and Karl Diether of Dartmouth College, shows how ordinary investors can also get in on the action by predicting the impact of new legislation on American firms.

The authors first assigned firms domiciled in a senator’s home state to one of 49 standard industry classifications. That allowed them to identify the industries of interest to each senator: if an industry ranked in the top three in terms of sales, it was labelled “important” to that state.

Next they looked at bills that were voted on by the Senate between 1989 and 2008 and screened them for industry-related keywords, such as “crude oil” or “military”. If a bill affected an industry that mattered in a specific state, the relevant senator was tagged as “interested”.

Armed with these data, the authors could start ploughing through voting records. If the proportion of interested senators voting “yes” exceeded the proportion of uninterested senators giving their assent, the bill was presumed to be positive for the industry in question. If the ratios of negative votes fitted the same pattern, then the law was bad for the industry. On this basis, the authors tested a simple investment strategy that bought or shorted industries accordingly when bills were passed, and found that the portfolio would have delivered steep annualised returns of 9-12%, independent of how the overall market had moved.

The more interested senators voted in favour of bills, the more positive it was for their industries’ shares. The biggest returns of all came from picking out individual firms that were likely to be particularly affected by a bill. Although specific firms are not mentioned in laws, the authors found success with a strategy of investing in companies headquartered in the states of interested senators.

The mystery is why the broader market is so slow to recognise the effect of legislation. You might expect gains or losses to materialise in the run-up to a vote or on the day of passage, but it actually takes a long time for the impact of a bill to show up in share prices. The prospect of wading through pages of legalese might be one explanation: returns increased if a bill went back and forth between the House and the Senate, a process that typically adds to laws’ complexity and unreadability. Whatever the explanation, a clever observer of Washington, DC, has 60 trading days to front-run the broader market. At least, he did until the paper was published.

* “Legislating Stock Prices”, August 2012

Foreign investment in India

They just keep on keeping on

Against all the odds foreign investors continue to pile into India. Why?

AT THE start of 2012 India offered a cocktail that seemed guaranteed to be lethal for foreign investment: a faltering economy, corruption and political gridlock. In March came the final flourish, the equivalent of the barman spitting into your Death in the Afternoon. A budget was passed that aimed retroactively to tax Vodafone, the country’s biggest foreign direct investor, and to clamp down on the holding structures used by most foreign investors, in particular the routing of money through the low-tax paradise of Mauritius.

In April alone, foreigners sold almost $1 billion of portfolio investments in listed shares and debt. Such outflows are scary. India runs a current-account deficit, which it aims to plug with portfolio inflows and foreign direct investment. After a record deficit relative to GDP of 4.2% in the year to March 2012, the deficit this fiscal year is expected to be 3-3.5% of GDP, or $50 billion-60 billion. To fund that kind of gap safely, India needs the world to be bullish about it most of the time.

Since April, however, portfolio investors have piled back in (see chart), with net buying of some $5 billion of shares and bonds. This is surprising. There has been no clear improvement in India’s fortunes. Yes, there is a new finance minister and those tax rules have been delayed and diluted (although Vodafone’s fate is still unclear). But the political climate has soured further, lessening the chances of reforms or more prudent fiscal policy. Private firms are still reluctant to invest. A credit-rating downgrade to junk status looms. Stockbrokers say that their usual foreign clients—pension and mutual funds, and specialist India funds—are bearish. “The people who know India are not buying,” says one.

So who is? The figures on portfolio flows are a puzzle. Sanjeev Prasad of Kotak, a broker, studied inflows in the 2011 fiscal year, and found only a fifth could be explained by mainstream funds (excluding most sovereign-wealth funds, where data are scarce). Conspiracy theories abound. Indian firms are siphoning cash out of and then back into the country to avoid tax, or to prop up their own shares, some say. Many believe there is a vast pool of dodgy offshore money owned by Indians, which is brought home in dribs and drabs. Even the central bank worries about the quality of capital flows.

Some of this year’s inflows may reflect a statistical quirk surrounding the sale of a stake in an Indian bank by Citigroup. But another possibility is buying by sovereign-wealth funds keen to diversify from America and Europe, with their zombie economies and rock-bottom interest rates. Neelkanth Mishra of Credit Suisse, a well-known bear on India’s immediate outlook, reckons investors with decades-long horizons are still being drawn by India’s demography and rising middle class.

That might explain a paradox. The best-performing shares are not in sectors that would benefit from a recovery, such as infrastructure and banks. Instead what have soared are the share prices of firms that seem able to grow however bad the rest of the economy is. Consumer-goods firms such as Hindustan Unilever and Nestlé’s Indian arm now trade on their most expensive multiple of profits since the late 1990s, when the economy was last in the doldrums. The capital flows that India is attracting may say more about the resilience of some of its firms than about the odds of a rapid bounce in its economy.

Bank bail-outs

Bad or rubbish?

“Bad banks” seldom turn a profit but are still useful

“IT WILL be viable and will not post losses,” promised Luis de Guindos, Spain’s finance minister, on August 31st, as he unveiled plans for a “bad bank” to take over the dud property assets of Spain’s troubled lenders. Experience suggests that such pledges are not easily kept.

America’s Resolution Trust Corporation (RTC), for instance, was set up in 1989 to clean up savings-and-loans institutions with $394 billion in assets. The process cost taxpayers almost $76 billion.

The example of Sweden’s widely admired bad bank in the 1990s is even less encouraging. Sweden’s bank regulators vigorously marked down souring assets, forced banks to recapitalise (or be nationalised) and moved dud loans into specialised asset-management companies. This was to allow cleaned-up lenders to operate as “good banks” that lent to the real economy. Judged by its overall impact the Swedish bad bank was a success: growth bounced back quite quickly. But the cost to taxpayers was high. Sweden paid about 4% of its GDP to bail out its financial system, yet got back only about half of that from selling off loans and stakes in banks.

More reassuring to Spanish taxpayers is Maiden Lane, a vehicle created by the New York Federal Reserve to house assets owned by Bear Stearns and AIG that have turned out to be less toxic than expected. In June this year Maiden Lane repaid in full (and with interest) the money it had borrowed to fund its purchases. It still has some assets left to sell, so the government will probably turn a profit on the deal, in contrast to earlier estimates that it might lose as much as $6 billion on its $29 billion in assets from Bear Stearns alone.

Another relative success may be found in Britain’s bad bank, which took over some of the loans issued by Northern Rock, and all of the ones held by Bradford & Bingley. By the end of June 2012 it had £90 billion ($141 billion) on its books, on which it seems to be turning a profit thanks to cheap funding from the government. British taxpayers have fared rather worse with nominally good banks: the government’s equity stakes in Lloyds Banking Group and Royal Bank of Scotland have fallen in value by over £30 billion.

Ireland’s bad bank, the National Asset Management Agency (NAMA), also seems to be doing fairly well in managing the €74 billion ($93 billion) in loans it took over, mainly because it bought the assets from Irish banks for just €32 billion. Yet it is now in the invidious position of being a long-term manager of a large portfolio of state-owned properties with all the risks of political interference that this entails.

These precedents suggest a few lessons for Spain’s bad bank. The first is to be conservative when valuing the assets that will go into the bad bank, even if this imposes steeper losses on the banks handing them over. Cautious valuations will help set a floor for property markets and make it easier for the bad bank to sell assets quickly.

A second lesson is that borrowing costs matter. Bad banks in Britain and America turned good because they could borrow cheaply. Unless Spain’s borrowing costs fall sharply, the government will be hard-pressed to make a turn on even deeply discounted banking assets. Last is the lesson from Sweden and the RTC, that bad banks may be judged successful even if they incur large losses. Rather than promising profits, Mr de Guindos might do well to start reminding people of that.

Free exchange

The mystery of Jackson Hole

Central bankers wonder why success eludes them

IMAGINE that the world’s best specialists in a particular disease have convened to study a serious and intractable case. They offer competing diagnoses and treatments. Yet preying on their minds is a discomfiting fact: nothing they have done has worked, and they don’t know why. That sums up the atmosphere at the annual economic symposium in Jackson Hole, Wyoming, convened by the Federal Reserve Bank of Kansas City and attended by central bankers and economists from around the world*. Near the end Donald Kohn, who retired in 2010 after 40 years with the Fed, asked: “What’s holding the economy back [despite] such accommodative monetary policy for so long?” There was no lack of theories. But, as Mr Kohn admitted, none is entirely satisfying.

His question could hardly be more timely. As The Economist went to press, the European Central Bank (ECB) was meeting to discuss a resumption in purchases of bonds of peripheral euro-zone members, in a bid to alleviate strains on the single currency. Ben Bernanke, the chairman of the Federal Reserve, suggested in his speech in Jackson Hole that a third round of quantitative easing (QE), the purchase of bonds with newly created money, would be on the table when the Fed’s policy committee meets on September 12th-13th. Mr Bernanke cited research by the Fed that previous bouts of QE had lowered bond yields and boosted GDP by as much as 3%. That is good, but not good enough. In America, Britain and the euro zone, interest rates are at or near zero and central banks’ balance-sheets have ballooned, yet unemployment remains high and growth sluggish (see chart).

One school of thought is that a high unemployment rate is structural and immune to the stimulative effects of monetary policy. Edward Lazear of Stanford University and James Spletzer of America’s Census Bureau argue otherwise. In a paper presented to the conference, they showed that those sectors and demographic groups that contributed most to the rise in unemployment in 2007-09 also contributed most to its decline in 2009-12, which suggests that shifts in relative demand for workers could not explain the high level of unemployment. The mismatch between the skills of the unemployed and the skills employers demand did rise during the recession. But by late 2011 the mismatch was back down to pre-recession levels.

If most unemployment is cyclical, not structural, the Fed could theoretically help by stimulating demand with easier monetary policy. But how? Michael Woodford of Columbia University told the conference that with short-term rates around zero, central banks have tried two broad strategies: “forward guidance”, or promising to keep the interest rate at zero for some time, or expanding their balance-sheets through QE and the like. Mr Woodford acknowledged these strategies had brought down expected short-term and actual long-term interest rates, but was sceptical about their impact on economic output. In his paper he recommended that the Fed commit to keeping policy easy until the economy reaches a particular target, such as nominal GDP (ie, output unadjusted for inflation) returning to its pre-recession path. The Fed is not about to do that, although it might decide to link future policy action to progress on unemployment.

Adam Posen, who recently left the Bank of England’s monetary-policy committee, had a different explanation for the apparent impotence of monetary policy. Since many financial markets are dysfunctional, the monetary medicine isn’t getting into the economy’s bloodstream. The solution is for central banks to buy more assets in the markets that are most obviously impaired. That is what the Bank of England is doing by providing subsidised credit to banks that lend more, what the ECB is set to do when it resumes purchasing sovereign bonds, and what the Fed could do by buying more mortgage-backed securities.

Sages or dinosaurs?

In another paper, Markus Brunnermeier and Yuliy Sannikov of Princeton University provided theoretical justification for this approach. Monetary easing usually works by encouraging businesses and households to move future consumption and investment forward to today. But it also has “redistributive” effects. For example, low short-term interest rates redistribute income from depositors to banks, which allows them to rebuild capital and encourages them to lend more. Similarly, purchases of ten-year government bonds enrich some investors while hurting others, such as pension funds, that depend on bond income to meet longer-dated liabilities. By tailoring their instruments to sectors most in need of support, central banks can get more bang for their buck.

One problem is identifying the areas where direct intervention will do the most good. Amir Sufi of the University of Chicago told the conference that raising banks’ profits has not done much to restart demand because the real problem is that indebted households cannot or will not borrow. He presented evidence that retail spending and car sales have been weaker in states that entered the recession with higher household debt.

An even bigger issue is the political controversy that ensues when central banks favour particular sectors. Fed officials are constantly told that zero interest rates are hurting savers without helping businesses. ECB purchases of peripheral countries’ bonds transfer risk from debtor to creditor states, prompting opposition from the Bundesbank and voters in creditor countries. Mr Posen decried the “self-imposed taboos” and “prehistoric thinking” that makes central banks worry that targeted lending will distort the allocation of credit or turn into politically motivated money-printing. This drew a retort from Larry Lindsey, a former Fed governor: “In a free society, individuals and institutions don’t do unusual things because if you do, and break custom and happen to be wrong, you’re betting the farm.”

*Papers presented at Jackson Hole are available here

Economist.com/blogs/freeexchange

Science and technology

- Human genomics: The new world of DNA

- Evolution: The nature of man

- The science of conducting: Von Karajan was right

- Restarting hearts: Crash course

Human genomics

The new world of DNA

A long-term effort to catalogue all the bits of the human genome that do something has released its results

WHEN John Keats read George Chapman’s translation of Homer he felt, in his elevated, poetical way, like “some watcher of the skies/When a new planet swims into his ken”. So may many biologists feel when they get their hands on the first full release of analysis from a project called ENCODE—a release which includes some 30 research papers, six of them in the journal Nature, and a huge amount of well-curated data being made freely available online (yes, there’s even an app). This is biology on a scale that takes hundreds of people years of their lives, costing as much as all but the biggest telescopes used by today’s watchers of the skies. And it reveals a new world.

The revelation’s effect may be poetic in its grandeur. Its nature, though, is prosaic. It is a parts list: ENCODE stands for Encyclopedia of DNA Elements. The consortium that created it—442 members in 32 institutes around the world—has used the increasingly impressive tools available for sequencing genomes to mount a systematic analysis of 147 different types of human cell, attempting to say just what each part of the genome is doing in them. Their results confirm on a grand scale what has become clear over the decade since the Human Genome Project first produced a sequence of the three billion “letters” of which the genome is made: there is a great deal more to genomes than their genes.

When genes were first given a molecular basis, it was a fairly simple one. A gene was a piece of DNA that described a protein. When a cell had need of that protein it would cause a copy of the gene to be transcribed from DNA into RNA, a similar molecule capable of taking on more diverse forms. That RNA transcript would then be translated to make a protein. The bits of the genome which describe proteins this way have long been known to be only a fraction of the whole—a bit more than 1%—though it was accepted that some of the surrounding DNA was necessary to get the transcription machinery on and off the genes, thus turning them on or off as required. Human genes proved to be longer than might have been expected, with the RNA transcripts edited and rearranged before being translated into protein. Still, it seemed as if only a small fraction of the genome was actually doing anything, and that a lot of the rest was, or might as well be, “junk”.

Junk, schmunk

Now ENCODE has shown that fully three-quarters of the genome is transcribed into RNA at some stage in at least one of the body’s different types of cell. Some transcripts are whittled down more or less immediately, but 62% of the genome can end up in the form of a transcript that looks stable. There is a sense in which these transcripts are the basic constituents of the genome—its atoms, if you like. The transcripts which are associated with genes describing proteins are just one type among many.

All this RNA has a wide variety of uses. It regulates what genes actually make protein and how much is made in all sorts of complicated ways; some transcripts are millions of times more common than others. Even ENCODE has not been able to catalogue all of this diversity, but it has made headway in clarifying what to look for.

Whereas 62% of the genome may be turned into finished transcripts in some cell or other, only about 22% of the DNA ends up in such transcripts in the typical cell. This is because of molecular switches that turn parts of the genome on and off depending on what the cell in question is up to. Such switches are as worthy of their place in the parts list as the locations of particular regions that code for proteins. They are, though, harder to find—and, it turns out, much more numerous.

That you need a profusion of such switches to get the right pattern of genes turned on and off in a given cell at a given time is obvious. But the scale of the regulatory system has taken even some of its cartographers by surprise. Ewan Birney of the European Bioinformatics Institute, who was the lead co-ordinator of ENCODE’s data-analysis team, says he was shocked when he realised that the genome’s 20,000-odd protein-coding genes are controlled by some 4m switches.

The ENCODE parts list makes available to biologists the places where RNA is transcribed; where proteins attach themselves to DNA to turn genes on or off; where the DNA is chemically altered from its normal state; where it is linked to the protein scaffolding that it is wrapped around in unusual ways; and more. This is fascinating to people interested in the question of how genomes switch from state to state—say, from the state of a stem cell, which can grow into almost anything, to that of a muscle cell, committed to an existence of contraction and expansion. It is also interesting for people who want to understand how cells go wrong.

One of the hot areas of research since the human genome was originally sequenced has been genome-wide association studies. These look at many possessors of an interesting trait, or sufferers from a disease, to see where they seem to have unusual DNA in common. Many of the places in the genome deemed relevant to disease in this way have turned out not to be actual genes. The ENCODE studies now show, though, that they often contain regulatory elements.

So, for example, a number of sites in the genome that appear relevant to Crohn’s disease—an inflammation of the digestive tract—are not associated with any known protein-making gene. But the parts list says those regions contain, or are close to, a particular kind of genetic switch turned on and off in various types of immune cell. This should help researchers focus on the specific immune-system problems that underlie the disease.

Another way in which ENCODE could have an impact on medicine is simply by showing doctors what cells of a specific type look like on a molecular level. There is a lot of hope, and hype, around the idea of “regenerative medicine” that would reprogram cells. Tim Hubbard, the director of informatics at Britain’s Sanger Institute, a factory-sized sequencing lab, says one thing ENCODE offers the world is a much better idea of what it looks like for a cell to be programmed to be a muscle cell, or a stem cell, or whatever. Thus it offers a way to check whether the genomes of artificially reprogrammed cells—which might, for example, be intended to serve as new nerve cells after a spinal injury—really are working like the genomes of the cells they seek to mimic. To be able to look at the pattern of a genome’s activity in such detail could open a door to worlds of new therapy as well as new knowledge.

No end in sight

Keats saw the right response to such revelations as rapt, silent awe. For the ENCODErs there will be quick celebrations and a resumption of the effort. Impressive as it is, ENCODE is far from the last word. For one thing, its expertise and carefully calibrated techniques need to be spread far and wide—to be adopted and made useful by people doing clinical research. And there is more basic research to do. Only six of the 147 cell types looked at in ENCODE were studied in the amount of detail now possible. The others still await their close-up.

And then there are more questions. So far ENCODE has looked only at cells from one person for each of the cell types studied. That is a reasonable simplification; in terms of how the genome works, the difference between what’s turned on and off in a liver cell and a skin cell is far greater than the difference between how one person’s skin cells work and those of their neighbour, however genetically different the neighbour. But it will be helpful to get a sense of differences between your liver cells and your neighbour’s—especially if you are ill and he is healthy.

Most beguiling to biologists, though, is the difference between one of your liver cells and another. Spectacularly sensitive as they are, the techniques used by ENCODE and other cutting-edge research still need to take material from many cells in order to put together a picture. But this will blur subtleties—and even hide mechanisms if some cells work one way and some another. Hence a new interest in finding ways to look at what is going on in single cells, not least because that will be the way that models of how the switching systems work can most easily and thoroughly be tested. That, according to Dr Hubbard, is the thrilling frontier for labs like those that worked on ENCODE. In a decade that frontier could go as far beyond ENCODE as ENCODE has surpassed the original genome-sequencing efforts.

Evolution

The nature of man

Large-scale genetic studies are throwing light on what makes humans human

A unique view

HUMANS are peculiar as a species, so what makes them so must be hidden in their genome. To an almost disconcerting extent, though, the human genome looks similar to the genomes of other primates, especially when it comes to the particular proteins it allows cells to make. The powerful new ways of looking at the genome being pioneered by the ENCODE consortium (see article), though, provide ways to seek out the subtle species-specific signals. Lucas Ward and Manolis Kellis of the Massachusetts Institute of Technology report on the results of such sleuthing in a paper just published in Science.

The two researchers used data from ENCODE to identify the bits of the genome that actually do things and data from the 1,000 Genomes Project, which has studied human-genome variation across hundreds of people, to discover how much these functional elements vary from person to person. In particular, they looked for telltales that an element is being maintained by natural selection. If something is evolutionarily important then random variations in its DNA sequence will be slowly eliminated from the population, keeping it on the functional straight and narrow in a process known as purifying selection.

Dr Ward and Dr Kellis found that, in addition to the 5% of human DNA that is conserved between mammals, an additional 4% of human DNA appears to be uniquely human in the sense that it is prone to purifying selection in humans but not in other mammals. Much of this proprietary DNA is involved in regulating gene activity—for example, controlling how much of a protein is produced, rather than changing the nature of the protein itself. This finding is in line with modern thinking that a lot of evolutionary change is connected with regulatory elements rather than actual protein structure. The researchers also found that long non-coding segments that are not conserved in other mammals are in fact highly constrained in humans, suggesting they have human-specific functions.

Some areas identified as particularly human are the regulation of the cone cells of the retina (which are involved in colour vision) and the regulation of nerve-cell growth. These processes evolved rapidly in man’s primate ancestors but are now under strong purifying selection to maintain their beneficial functions. The implications of that, given humanity’s main distinguishing feature—its huge brain—are obvious. Dr Ward and Dr Kellis have thus created a powerful tool for investigating in detail just what it is that makes a human being human.

The science of conducting

Von Karajan was right

Orchestras really can use the smack of firm leadership

…of course I was

DO ORCHESTRAL conductors do anything useful? Alessandro D’Ausilio of the Italian Institute of Technology, in Genoa, and his colleagues tried to answer that eternal question in a study published in the Public Library of Science.

Determining a conductor’s influence is tricky. Does a “good” conductor wangle bravura performances from his players, or simply preside over a self-organising virtuoso ensemble? To find out, Dr D’Ausilio watched two (anonymous) conductors leading five excerpts from Mozart’s symphony number 40 played by eight violinists from the Città di Ferrara orchestra.

Each violinist had an infra-red reflector attached to the tip of his bow, and the conductors had them attached to their batons. Dr D’Ausilio and his team were thus able to follow the movements of both bows and batons by bathing their little orchestra in infra-red light, which their cameras could see, but human beings cannot. They then used the movements of the reflectors to analyse who was affecting whom.

To do this, Dr D’Ausilio employed a mathematical trick called the Granger causality test, which makes it possible to determine how one sequence of data points affects another. The movements of a violinist’s bow—and the waving of a baton—are just such sequences of data.

Ten experienced classical musicians marked each performance on eight measures, including melody, tempo and emotional content, on a scale from 0 to 100. The panel judged both performances of three of the excerpts more or less equal in quality. They were also, it turned out, evenly matched when it came to the two conductors’ assertiveness (as measured by the correlation between the accelerations of his baton and those of the violinists’ bows) and the players’ proclivity to take cues from each other (as gauged by the correlations between the different bows).

The remaining two excerpts is where things got interesting. There, the judges preferred one performance to the other. In the first excerpt, one conductor’s assertiveness went hand in hand with a dip in the violinists’ mutual dependence, compared with the second rendition, where that dependence was high and the conductor’s assertiveness low. The first conductor, it seems, could impose his will on the musicians, where the second could not.

Crucially, the judges rated the dictatorial performance more highly of the two. In the other excerpt, the despotic conductor was just as assertive, but the violinists seemed to pay as much attention to themselves as they did to him. This led to a performance that the panel liked less than the one under the meeker conductor, who exercised little influence over his players.

The findings are in harmony with what conductors knew all along: that baton-toting despots, like the late Herbert von Karajan, do add value—but only if they rein in the uppity musicians in front of them.

Restarting hearts

Crash course

How long should doctors spend trying to restart a stopped heart?

ANY given episode of a television medical drama is likely to feature a patient going into cardiac arrest. As the victim thrashes around, a telegenic doctor summons a posse of helpers, who start zapping the patient, compressing his chest or administering adrenalin jabs until the heart starts ticking again.

On TV these efforts almost always succeed, spectacularly and immediately. The real world, sadly, is crueller: doctors manage to restart only about half of the hearts that stop in a hospital, and only about a sixth of patients will go on to survive long enough to be discharged. One of the toughest decisions faced by hospital staff is how long to keep trying, and when to give up on a particular patient as a lost cause.

A new paper, published in the Lancet, aims to provide some scientific backing for such decisions. A team of researchers led by Brahmajee Nallamothu at the University of Michigan looked at data from more than 64,000 patients who had suffered cardiac arrests in 435 American hospitals between 2000 and 2008. There are no official guidelines specifying how long doctors should keep trying to resuscitate flatlining hospital patients. As a result, the authors wondered whether the amount of time spent attempting resuscitation might vary from hospital to hospital. Sure enough, it did. The median resuscitation attempts in patients who eventually died lasted 16 minutes for the bottom quarter of hospitals; for the top quarter it was 25 minutes.

That matters, for the researchers also found that a greater willingness to persist correlated with better survival chances for patients. Circulation was restored in 45.3% of patients in the bottom quarter of hospitals; 14.5% survived long enough to be discharged. For the top quarter, the figures were 50.7% and 16.2% respectively, a boost of 12% in both cases.

One reason why doctors are reluctant to spend too long attempting to revive patients is that they worry about brain damage caused by prolonged lack of oxygen. But the study found that, after adjusting for factors such as age and general health, patients from hospitals more willing to try long resuscitations showed no greater risk of brain damage.

Such a big discrepancy in a fairly common procedure may look odd—if all hospitals performed as well as the best, thousands of lives a year might be saved. But plenty of medicine has only a thin base in scientifically reviewed evidence, meaning that the opinions, judgments and prejudices of individual doctors often determine how treatment is given.

A difficulty is that medical decisions are complicated. A doctor considering whether to continue with chest compressions, for instance, must weigh any number of factors, from the patient’s age to other conditions he may be suffering from or the effects of drugs used to treat them. The presence of so many confounding factors makes it hard to assess the general effectiveness of any given treatment—unless, like Dr Nallamothu and his colleagues, you have access to a great deal of data.

As with any piece of scientific research, there are caveats. Dr Nallamothu points out that the study could simply be picking up an effect of better hospitals, with a willingness to persist with resuscitation a consequence of better technology or better-trained doctors, neither of which can be detected by the study. And the tricky clinical particulars of any given resuscitation mean that the paper cannot give rise to hard-and-fast rules about exactly how long doctors should persist. But it does suggest that plenty of lives might be saved if medics are willing to keep trying for a little bit longer.

Books and arts

- Gender politics: Female muscle

- Female sexuality: Tunnel of love

- Britain and the 18th century: Feat of clay

- New American short stories: The curse of machismo

- English literature: Epitaph for a poet

- New American fiction: Failure of imagination

- New American fiction: Correction

Gender politics

Female muscle

Now is not a good time to be a man

The End of Men: And the Rise of Women. By Hanna Rosin. Riverhead; 310 pages; $27.95. To be published in Britain in October; £12.99. Buy from Amazon.com, Amazon.co.uk

MEN today are haunted by the “spectre of a coming gender apocalypse”, Hanna Rosin declares in her new book, “The End of Men”. How worried should they be? It is true that women are contributing more than ever to household income. They dominate university attendance around the world. In South Korea more women than men pass the foreign-service exam, which has sparked the foreign ministry to implement a minimum quota for men. In Brazil nearly a third of women earn more than their husbands, a phenomenon that has caused men to form church support-groups calling themselves “Men of Tears”.

Ms Rosin, an editor at Atlantic, whose book grew out of an article she wrote for the magazine in 2010, acknowledges that men are not about to become extinct any time soon. But women today are excelling, while men founder. As part of her research, Ms Rosin travelled to many corners of America, among them Auburn-Opelika, Alabama, where women’s median income is 40% higher than men’s, and men are encouraged to watch virtual simulations to teach them how to get jobs.

The financial crisis has been especially unkind to men: three-quarters of the 7.5m American jobs lost in the recession belonged to men and were in traditionally masculine industries, such as construction, manufacturing and finance. Manufacturing’s flight from America and the evolution of technology in the workplace have left many men jobless—and often despondent. The book is filled with anecdotes from those who are trying to make sense of what has happened to them. “Probably no one has had their wife move up the ladder as far as I’ve moved down,” says one man. Another, who is annoyed that his girlfriend earns more than he does, complains, “All the things we need to be good at to thrive in the world…are things that my female friends and competitors are better at than me.”

The argument Ms Rosin puts forward does not spell out the end of men so much as the deterioration of their condition. The new service-based economy rewards communication and adaptation, qualities that women are more likely to have. Only about 3% of men have taken over raising children full-time while their wives support their families. Instead, many men, especially young ones, have retreated into a world of video games, drinking and prolonged adolescence—a phenomenon identified in “Guyland”, a 2008 book by an American sociologist, Michael Kimmel.

But what happens to men has great consequences for women, and vice versa. Many poorer women who are not well educated are forgoing marriage, believing that a man is simply a drag and an additional mouth to feed, Ms Rosin argues. Educated, wealthier women, on the other hand, are experiencing more fulfilling relationships in which they share responsibilities with partners as each takes up slack at different times. She calls these “seesaw marriages”. One result of women’s rise is that men have more retirement income, better health and happier marriages.

Hard as Ms Rosin tries to argue that the world has embraced “matriarchy”, however, the data does not support her thesis. Only 3% of Fortune 500 bosses are women, as are only 20 of the world’s 180 heads of state. She dismisses evidence that suggests her book is inappropriately titled: “Men have been in charge for about 40,000 years, and women have started edging them out for about 40. So of course there are still obstacles at the top.” She also eschews a more nuanced approach by letting what is mostly an argument about American gender trends strive to be global. For example, she mentions that women own more than 40% of private businesses in China, and that in many countries parents prefer having a daughter. But nowhere does she acknowledge that aborting female fetuses remains a huge problem in China and India.

“The End of Men” is notable, however, for what it says about America’s thinking on women today. In another provocative article in the Atlantic, “Why Women Still Can’t Have It All”, Anne-Marie Slaughter argued that women are deluded if they think that they can have a high-flying career and a family without something giving way. Ms Slaughter used to be a senior official in the State Department, a job she recently gave up in order to spend more time with her children and return to academia. A high-powered job can be compatible with child-rearing only if a woman is wealthy, has a job with flexible hours or works for herself.

Ms Rosin also argues for greater flexibility in the workplace, but ultimately takes a more bullish line than Ms Slaughter about women’s ability to change their workplaces to suit their needs. Both young men and women of the millennial generation want more flexible work hours and see the value of working remotely. And they will seek out employers who try hard to make better work-life balance a reality.

This is not the first recession that has triggered a crisis of masculinity in America. After the recession in the early 1990s, Susan Faludi wrote “Stiffed: The Betrayal of the American Man”, which lamented that men were underworked, underachieving and undersupported. This time the story is somewhat different. Had Ms Rosin put off writing her book for a few years, she would probably have seen women’s jobs go the way of men’s. The economic dislocations that have erupted in male-dominated industries, such as construction and finance, are making their way into industries dominated by women, as governments cut back on services, teaching staff and the like. The real story about men and women is about how this economic crisis will harm both genders, and future generations.

Female sexuality

Tunnel of love

The hands-on approach

Vagina: A New Biography. By Naomi Wolf. Ecco; 400 pages; $27.99. Virago; £12.99. Buy from Amazon.com, Amazon.co.uk

FOR Shakespeare it was a “detested, dark, blood-drinking pit”; to Henry Miller, “that bushy twat”. That special place between a woman’s legs has been a “Heavenly Gate” to Chinese Taoists, and a “gash” or worse in contemporary slang. Each term is a cultural Rorschach test, writes Naomi Wolf, conveying a mess of anxiety and desire about the female sex and informing the way women view themselves. The problem, she argues in “Vagina: A New Biography”, is that despite decades of so-called sexual liberation, “the vagina is not nearly as free today in the West as we are led to believe.”

A practised provocateur, Ms Wolf is never content simply to write a book. Her métier is the call-to-arms, laying bare the injustices of womanhood and contemporary life. So it is with “Vagina”, an ambitious and sprawling lament for the female sex organ, which she claims is both “seriously misunderstood” and disrespected. As evidence, she points to widespread sexual malaise among Western women, who complain of fading libido and an inability to reach orgasm, despite a surfeit of opportunities. The trouble, she writes, is not only that conventional wisdom about female sexuality is “badly out of date”, but also that the needs of women are very different from those of men.

Ms Wolf’s “journey” to understanding the female body better began after she discovered a problem with her own orgasms. They still felt good, mind you, but were less meaningful somehow—she reports that she saw fewer colours, felt fewer dimensions. It turns out that she needed spinal surgery. The female pelvic neural network is surprisingly complex, she learns; more so than men’s. The neural pathways that connect a woman’s clitoris, vulva and vagina to the spinal cord—and from there to the brain—are unique to every woman. This means that women receive pleasure in different ways, despite what has been a long history of shame-inducing theories about what part of the vagina should deliver orgasm (the vulva, said Freud; the clitoris, said 1970s feminists).

The fashion today is to shore up most theories of human behaviour with a bit of neuroscience, and Ms Wolf obliges. This “new science” of female sexuality leads her to some giddy revelations, such as “dopamine is the ultimate feminist chemical in the female brain”; when it is released during sex, it makes women feel more confident and creative. Indeed after conversations with gynaecologists and scientists, tantric healers and other women, Ms Wolf concludes that there is a “profound brain-vagina connection”. The “well-treated vagina”, Ms Wolf writes, “is a medium that releases, in the female brain, what can be called without exaggeration the chemical components of the meaning of life itself.”

This book is entertaining and appalling in turns, with language that tends towards the outlandish (“The vagina may be a ‘hole’; but it is, properly understood, a Goddess-shaped one.”). Ms Wolf also has a habit of stretching concepts past their breaking point—such as her theory that women are more prone to mysticism than men, owing to the fact that they are capable of producing more dopamine during sex. Some women may bristle at the notion that they are “more easily addicted to love and to good sex” than men are. And men may grimace at Ms Wolf’s proposed solution for the problems of this sexually anxious age: “a sweeping change in how most straight men behave in bed with most straight women.”

But there are also some worthy ideas to salvage here. At a moment when a politician has been making absurd pronouncements about a woman’s natural defences against “legitimate rape”, Ms Wolf offers a handy and often unsettling primer for the ways the vagina has been an ideological battleground throughout history. From early Christian views of the vagina as “a temple built over a sewer” to more recent mandatory vaginal examinations for female protesters in Egypt during the Arab spring, the vagina has long been a target for unwieldy ideas about a woman’s place in the world. Surely there is room for some of Ms Wolf’s own theories about its importance as a locus of pleasure, too.

Britain and the 18th century

Feat of clay

The Potter’s Hand. By A.N. Wilson. Atlantic; 505 pages; £17.99. Buy from Amazon.co.uk

COMPANY histories are usually reverential. The flaws of powerful bosses are relegated to the shadows; wit and mischief rarely make an appearance. A.N. Wilson, a prolific British writer of fiction and non-fiction, seeks to overcome the inherent defects of the genre by turning his company history into a novel, and getting in some sex and romance too. His choice of Josiah Wedgwood and Sons is a good one, influenced presumably by tales he heard from his father, who was himself a managing director of the firm and a potter.

Wedgwood was a hero of the industrial revolution. The son of a potter, he took up the trade and became skilled, not just at throwing a piece of clay and turning it into an object of beauty, but at blending different clays. Wearing his historian’s hat, Mr Wilson points out that within a decade of Josiah establishing his factory in Burslem, Staffordshire in 1759 there was hardly a respectable household in England that did not eat off delicate, white Wedgwood plates. Pottery that is instantly recognised as Wedgwood more than 200 years later—the black basalt jugs and vases decorated in white relief, and the pretty pale blue and green Jasperware pottery—were also among Wedgwood’s rich repertoire.

Josiah had no formal education, but he taught himself enough to understand the work and to make some significant friendships; with Joseph Priestley (who discovered oxygen) and Matthew Boulton and James Watt (who built the first steam engine). Wedgwood also grasped the significance of mass production and marketing. A famous 944-piece service made for Catherine the Great, each decorated with English rural scenes, was an early example of branding. (It is still displayed at the Hermitage Museum in St Petersburg, though some of it is on loan from there to the National Museum of Scotland in Edinburgh until October 21st.)

As a man, Wedgwood was interesting and interested. He was enthusiastic about Britain’s spreading canal network and, politically, a bold and unconventional radical. He supported the American colonists and, as a dedicated Unitarian, was on the organising committee of the Society for the Abolition of the Slave Trade. He ordered his potters to make an early example of political sloganeering—a seal for stamping letters showing a kneeling African in chains with the slogan “Am I not a Man and a Brother?” After 1768 he did all this on one leg, having survived an amputation at the right knee without the benefit of anaesthetic.

This is a splendid story, vividly told, but still not enough for Mr Wilson. In an “Afterword” he writes that while the broad outline and most of the details are true, he found the demands of history and the demands of art to be somewhat different. The historian writes of problems in the London showroom; the artist in him wants to know what he imagines Wedgwood and his wife Sarah talk about in bed.

He takes a single known fact and transforms the story into a potboiler. In order to make the white tableware, Wedgwood imported kaolin clay from the Cherokee tribe in the American colonies. The artist in Mr Wilson uses Tom Byerley, Josiah’s nephew who was living in New York as an aspiring actor—a fact—to invent a visit to the Cherokees to buy another shipment of the precious kaolin. When Tom is taken ill, he is cared for by a young woman with sensual lips, high cheekbones and blue-black hair. She is named Blue Squirrel.

They become lovers, but are separated during a white man’s attack on the Indian camp. She is convinced that she and her tribe have been betrayed by Tom, and swears vengeance. By hook or by crook, Mr Wilson gets her to Staffordshire. Once there, she finds a job at Wedgwood, and becomes Josiah’s best potter. But when she and Tom meet again, Blue Squirrel decides against revenge and marries a childhood companion of Wedgwood instead. Conceivably, this trite exercise in romantic fiction is intended to draw more readers into the absorbing world of Josiah Wedgwood. Mr Wilson is more convincing as a historian than a novelist; more entertaining too.

New American short stories

The curse of machismo

This Is How You Lose Her. By Junot Díaz. Riverhead; 213 pages; $26.95. Faber and Faber; £12.99. Buy from Amazon.com, Amazon.co.uk

STRAIGHTFORWARD writing about male lust is rare. Writing that reveals the price exacted by such lust is rarer still. Junot Díaz, a Dominican-born American writer best known for “The Brief Wondrous Life of Oscar Wao”, which won the Pulitzer prize for fiction in 2008, is a master of this self-flagellating and surprisingly tender art.

His new collection, “This Is How You Lose Her”, offers a series of unflinching portraits of the power, if not the curse, of red-blooded Latino libido. The men cheat on their women; the women usually vanish, never to be seen again. Most of the tales are narrated by Yunior, the alter ego who forms the backbone of much of Mr Díaz’s fiction, circling around one relentless question. Is he, as one girlfriend asserts, “a typical Dominican man: a sucio [pervert], an asshole”?

These are stories about the difficulty of love: how hard it is to recognise or hold onto. In one, Yunior tries to save a relationship he has torpedoed yet again by cheating, on a beach vacation to his homeland. In another, he seeks solace from his brother’s death with an older woman, and wonders if she ruins him for girlfriends his own age. Some are bittersweet accounts of the fragile relationships between other recent immigrants. Many bear the names of the women Yunior both desires and is unable to retain. In the mere four pages of “Alma”, Mr Díaz details not just the steamy heat of teen sex, but the inexplicable way Yunior wrecks this idyll by charging wherever his penis leads.

The stories, like those of his debut collection, “Drown”, which came out in 1996, are quieter than the novel that turned Mr Díaz into a literary star. None quite matches the historical pyrotechnics and manic Spanglish that made the life of Oscar Wao so exhilarating. Yet in their exploration of this particular fuku [curse], they are engaging. In all his work, Mr Díaz manages a seamless blend of high diction and low, of poetry and vulgarity. Nilda, the girlfriend of Yunior’s brother Rafa, has “a chest you wouldn’t believe”, whereas Rafa has “the face bones of a saint”. Yunior is at once loutish and baffled; the effect is both funny and piercing. Rafa at one point has “his hand so far up [Nilda’s] skirt it looked like he was performing a surgical procedure.” Look no further for home truths on sex and heartbreak.

English literature

Epitaph for a poet

A Very English Hero: The Making of Frank Thompson. By Peter Conradi. Bloomsbury; 419 pages; $40 and £18.99. Buy from Amazon.com, Amazon.co.uk

THE soldier-poets of the 1914-18 war require no introduction; their poems are well-known, their lives repeatedly retold. By contrast, those who died during the second world war dwell in comparative obscurity. This excellent, absorbing biography rescues one. Frank Thompson was killed in 1944 aged 23, younger even than Rupert Brooke had been when he died in 1915, and in similarly futile and tragic circumstances.

Peter Conradi first became interested in Thompson while researching his acclaimed biography of Iris Murdoch. The two had been contemporaries at Oxford the year before the war. Thompson fell in love with the future novelist and with communism in the same week: “two flights of irrationality…two simultaneous conversion experiences.” Their love could never be fulfilled. But for Murdoch, “Frank grew to combine the roles of heroic martyr, potential husband and lost soulmate.” He was both brilliant and warm-hearted.

The brilliance was apparent from an early age. The elder of two sons in a formidably intelligent and high-minded family, he was from a missionary background on both sides. His father E.J. Thompson wrote many books, lectured in Bengali, and was a friend of Nehru and Gandhi; his brother became the radical historian E.P. Thompson. Frank was something of a child prodigy, always advanced for his years. When he died he was a major in the army and commanding men several years older than himself. A classical scholar at Winchester College and at Oxford, he was proficient in nine languages and a voracious reader. (He read “War and Peace” many times, once in Italian.) A dictionary in his haversack stopped a bullet in his back. The poems of Catullus were found on him after his death. And when not reading he was writing: letters, diaries, poems, 250,000 words during the war alone.

Thompson enlisted in September 1939, trained with the Royal Artillery, and went to north Africa as part of Phantom, an irregular outfit, whose main work was front-line reconnaissance and communication. He enjoyed its eccentricity and air of English amateurism, and he served bravely in Libya and Sicily. But, stung perhaps by letters from his father, he did not consider it heroic enough. Like poets before him, he yearned for Greece and effected a transfer to the Special Operations Executive in Cairo with a view to going on there. Then, disenchanted by embryonic cold-war politics, he switched his interest to the Balkans and in January 1944 parachuted into Serbia, from where he crossed into Bulgaria.

As a British liaison officer, Thompson joined the partisans and helped them with supplies while also seeking information on the political situation. His task was always going to be dangerous and of limited value—the Russians were soon to invade the country and overturn the fascist regime. In June 1944 he was captured, tortured and executed. In Bulgaria Thompson is now a People’s Hero, their Byron or T.E. Lawrence. Near the end of 1944, 50,000 people attended his reburial there and a railway station was renamed after him. A legend grew up about his death.

Mr Conradi tells the true story, movingly and well. He admits that Thompson was never more than an apprentice poet, though his best poem, “An Epitaph for my Friends”, is perhaps the landmark poem of the war; and he convincingly portrays an attractive, brilliant and courageous personality, an intellectual with a heart who loved laughter, an idealist who merits the title of this book.

New American fiction

Failure of imagination

Telegraph Avenue. By Michael Chabon. Harper; 468 pages; $27.99. Fourth Estate; £18.99. Buy from Amazon.com, Amazon.co.uk

READERS of Michael Chabon, a Pulitzer prize-winning American writer, will be familiar with the intricate plotting of his novels. “Telegraph Avenue”, his seventh, tries to weave the stories of nearly a dozen different characters into a cogent narrative. Archy Stallings and Nat Jaffe own a failing record shop; their wives, Gwen and Aviva, are midwives who specialise in home births. The main character of the book, however, is the “Telegraph Avenue” of the title, a four and a half mile (7km) street bordering Oakland and Berkeley, and the point at which Mr Chabon sees the intersection of black and white Californian society.

Two families, one black and one white, are at the centre of this story. Archy’s main problem is his wayward father Luther Stallings, a faded star of the “blaxploitation” era, whereas his wife Gwen’s professional partnership with the white Aviva is tested by a racially aggravated legal case against their midwifery business. A further complication is the gay interracial relationship between Archy and Nat’s adolescent sons.

Mr Chabon’s weaker, secondary theme concerns the arrival of big business in the Berkeley suburbs. “Brokeland Records”, Archy and Nat’s vinyl record shop is threatened by a business mogul (the fifth-richest black man in America) who plans to open a music megastore just down the road. The friendship begins to crack along racial lines.

The book aims to be “a Californian Middlemarch set to the funky beat of classic vinyl soul-jazz”. But it is more like a confused soap opera, overcrowded with characters and suffering from the constant desire to prove itself au fait with its cool surroundings. Archy is introduced as “moonfaced, mountainous” and “moderately stoned” at the front desk of his record shop, while Gwen and Aviva, the “Berkeley Birth Partners”, are repeatedly dubbed “baby catchers” in the novel’s interminable slang.

Overwriting is a problem throughout. Mr Chabon has a liking for metaphors and cliché; he describes the “hot smell” of childbirth as somewhere “between sex and butchery” and a Greyhound station as looming “like a promise of adventure”. Much of his more successful work has been pseudo-historical fiction, set in the first half of the 20th century and involving meticulous research. “Telegraph Avenue” reveals Mr Chabon to be less at home in the present—and with his own imagination.

Correction

Dame Daphne Sheldrick has never been involved in sending orphaned elephants to zoos ("Take a walk on the wild side", August 18th). Her aim is to help return animals to their wild habitat. We are happy to make this clear.

Obituary

- Sun Myung Moon

Sun Myung Moon

The Reverend Sun Myung Moon, founder of the Unification church, died on September 3rd, aged 92

THRUSTING his small strong arm into the firewood piles where they nested, Sun Myung Moon as a boy would flush out sparrows into a net. Usually they were cooked for his siblings; peasant families in North Pyongan province ate what they could get. But he once put two birds in a cage to hear them sing and to watch them mate. It pleased him, he said, to see them express their love for each other.

Critics suspected he got much the same pleasure, many years later, when he presided over the famous mass weddings of his Unification church. Dozens, even hundreds, of couples, in off-the-peg white dresses and dark suits, would parade before him, across lurid carpets and through banks of gladioli, to be soberly scattered with confetti by their high-crowned True Father and their equally unsmiling True Mother, Hak Ja Han. Mr Moon arranged these marriages himself, by pairing photographs. Like the sparrows, many of the candidates had never met before.

Yet this was no whim, he said. It was the most important work that could possibly be imagined. As he wrote in his book, “Explanation of the Divine Principle”, soon after he had founded his church in 1954, he was engaged on restoring mankind to the purity God had intended before Adam fell. When the first parents had sex illicitly, after eating the fruit in Eden, they broke God’s heart. Jesus, when he came, was meant to marry and restore a perfect, united humanity through his children, but he was killed first. Both Jesus and God had appealed to Mr Moon personally (Jesus on a hillside near his village, God in a suffering roar of waves and mountains) to finish the work that had been left undone. An ever-increasing series of pure marriages across races and cultures would remake the relationship between man and God, for whom Mr Moon was now spokesman.

He therefore wasn’t just going his own way, he said, when he built up his church from a cardboard shack in a South Korean refugee camp to a billion-dollar worldwide enterprise encompassing luxury hotels, fishing fleets, ski resorts, gun-manufacturing, the Washington Times, vast estates in Uruguay and the only car-making factory in North Korea. He needed to remake the world for purified humanity: his own many children and grandchildren, the children of the couples he had married, and the church members whose True Parent he had now become. Hence the blessing of “holy ground” all over the world, including a patch on Capitol Hill; the floating of vaporous giant projects, such as an International Peace Highway from Tokyo to London; and his pushing of acolytes to keep raising money, so that ever more property could be added to the sacred pile.

Mr Moon knew he was mocked, but smiled blandly through it; it was the fate of every new religion to be attacked, and his was more revolutionary than most. He was accused of brainwashing church members and breaking up families, but beat off most such charges except the Daily Mail’s. In America, to which he moved in 1971, he was wounded like Jesus—though, unlike Jesus, he eventually had the IRS on his tail for unpaid taxes on a Chase Manhattan account known as “Father’s money”, from which he paid school fees and bought gold watches. Officials of his large church branch in Japan, too, would bring into America bags of cash from the sale of holy trinkets to prop up his American enterprises. It could all be explained away as God’s business, though for 13 months in 1982-83 he ran his church from a federal prison in Connecticut.

Tea in Pyongyang

He had picked America in order to fight communism, an enemy from long before. As a Presbyterian preacher in North Korea in the late 1940s he had twice been jailed by the new red regime, once for “disturbing society”. He had staggered to the South on an ice floe across the Imjin river in 1950, stripped of all except the clothes he stood in. Later he fought communism with the ironclad conservatism of the Washington Times, the daily reading of Ronald Reagan’s White House, and with “God Bless America” rallies in Washington and at Yankee Stadium, mirroring his huge anti-communist rallies in South Korea.

Despite 30 years in America, however, he never spoke English. Korean was God’s language. Some thought he was an agent of South Korea, or perhaps the Korean CIA. He laughed that off, and put out mediating feelers to the North as well. Kim Il Sung, the founder, treated him as an old friend. Kim Jong Il, the strange son, sent him presents of roses and wild ginseng root, to make the honeyed tea that kept him going through a day of sermons after two hours’ sleep.

He discussed reunification with both of them. The reason he desired it, though, was that Korea was God’s chosen nation, the new Israel, the suffering land where heaven’s work would be accomplished. Mr Moon once proposed himself as supreme chairman of the reunited country, with a central ideology of “Godism”.

Even among Koreans, though, his name faded. The “dangerous cult” no longer bothered anyone. His church, for which he claimed 3m members, probably had far fewer. In 2009 another mass wedding, in Seoul and simultaneously worldwide, was said to have involved 40,000 of them. Their True Father presided, but this time nobody much was watching.

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Table of Contents

The Economist

The world this week

Politics this week

Business this week

KAL's cartoon

Leaders

Rethinking the welfare state: Asia’s next revolution

Trade: Goodbye Doha, hello Bali

British universities: Picking on foreign students

Saving the euro: Tick tock

Drugs and emerging markets: Tripped up

Letters

Letters: On Mitt Romney, currency mints, Brazilian mergers, Canada's First Nations, women in business

Briefing

Asian welfare states: New cradles to graves

United States

The Democratic convention: Private effort, common good

Mayors at the convention: Urban nation

Abortion laws: And then there was one

Health-care services: The good old ways

Transport in cities: Vive la révolution

Air pollution: Breathing room

Lexington: Shindig fatigue

The Americas

Quebec’s election: The separatists are back

Peru’s Shining Path: Still smouldering

Argentina’s dubious poverty line: The six-peso diet

Asia

Strained relations between Japan and South Korea: Lame ducks and flying feathers

Bangladesh: Troubled waters

The blasphemy law in Pakistan: Contemptuous

India’s youngest chief minister: Another dynasty in trouble

China

AIDS activism: Bad blood

Internet freedom: Plus ça change

The Catholic church: Serving two masters

Banyan: Too small an ocean

Middle East and Africa

South Africa: It’s not just the mines

Reforming electricity in Nigeria: A bright spark is extinguished

Israel v Iran: Holding his horses for the moment

The Gulf: Those annoying democrats

War and diplomacy in Syria: No letting up

Europe

The Netherlands votes: Cycling against windmills

A German wealth tax: Umfairteilung

Truth and power in Italy: Cash will do nicely, Silvio

Armenia, Azerbaijan and Hungary: The axeman goeth

Books about the French president: Decoding normality

Russia’s Far East: A bridge to Asia?

Charlemagne: Eurobankingfragilistic

Britain

The reshuffle: All the right noises

Emigration: On the road

Violence in Northern Ireland: Fiery orange glow

British banks: The real scandal

Planning and greenery: Belt too tight

Alternative parties: Wilting greens

The Greens in Brighton: Beach party

International

The Paralympics: Blades of gold

Disability and business: The new green

Competitiveness: The wealth of nations

Business

Political ads and media firms: Of mud and money

Indian drug patents: Taking pains

Crowdfunding video games: Money to play with

Car hire in Sierra Leone: The heart of the motor

American beer and spirits: Prohibition hangover

Small brewers in the Czech Republic: Czech pint

Schumpeter: Bargain bosses

Finance and economics

International trade: Boxed in

Buttonwood: Rover the regulator

Sports investments: Losing their shirts

Legislation and investing: My little crony

Foreign investment in India: They just keep on keeping on

Bank bail-outs: Bad or rubbish?

Free exchange: The mystery of Jackson Hole

Science and technology

Human genomics: The new world of DNA

Evolution: The nature of man

The science of conducting: Von Karajan was right

Restarting hearts: Crash course

Books and arts

Gender politics: Female muscle

Female sexuality: Tunnel of love

Britain and the 18th century: Feat of clay

New American short stories: The curse of machismo

English literature: Epitaph for a poet

New American fiction: Failure of imagination

New American fiction: Correction

Obituary

Sun Myung Moon

Economic and financial indicators

Output, prices and jobs

Trade, exchange rates, budget balances and interest rates

The Economist commodity-price index

The Economist poll of forecasters, September averages

Markets