Economist 9 July PDF
Preview Economist 9 July
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The industry has been turned upside down, making it more participatory, social, diverse and partisan. Read our special report after page 46 The Economist online Daily analysis and opinion from our 19 blogs, plus audio and video content, debates anda daily chart Economist.com/blogs E-mail: newsletters and mobile edition Economist.com/email Print edition: available online by 7pm London time each Thursday Economist.com/print Audio edition: available online to download each Friday Economist.com/audioedition Wit: Economist Volume 400 Number 8741 First published in September 1843 to take partin "a severe contest between intelligence, which presses forward, and anunworthy, timid ignorance obstructing our progress. " Editorial offices in London and also: Atlanta, Beijing, Berlin, Brussels, Cairo, Chicago, Hong Kong, Johannesburg, Los Angeles, Mexico City, Moscow, New Delhi, New York, Paris, San Francisco, Sao Paulo, Singapore, Tokyo, Washington DC 8 The world this week Leaders 11 The future of news Back to the coffee house 12 Britain’s phone-hacking scandal Street of shame 13 The Republicans and America’s debt Shame on them 13 Debt reduction Handle with care 14 Thailand’s election A precious chance 16 Aircraft and emissions Clean-air turbulence Letters 17 Oncharter schools, the IPCC, fracking, Greece Briefing 23 Thailand's election A surprising new face 24 Yingluck Shinawatra Sister act United States 25 Shutdown in Minnesota Asign of things to come? 26 Immigration A warmer welcome ina colder state 26 The federal debt Countdown 29 Basketball on strike Second down 29 Public pensions Blood on the table, money in the bank 30 Californian freeways Carmageddon 30 Gay rights in the South Still far behind 31 Food deserts If you build it, they may not come 32 Lexington Fat cats and corporate jets The Americas 33 Venezuela’s president The Bolivarian patient 34 Cuba and Venezuela If Hugo goes 34 Security in Colombia Never-ending 35 Competition in Brazil Too little, too late Asia 37 Gujarat’s economy India’s Guangdong 38 The Philippines economy The untouchables 38 Charity in Japan Taxing work 39 Sri Lankan cricket More than just a game 40 Protest in Hong Kong On the march 40 Taiwan Diplomatic slush funds 42 Indonesian schools More cheating, or else! Middle East and Africa 43 Sudan’s separation Their day in the sun 44 Business in South Sudan Ready, steady, invest 44 Hunger in Africa Once more unto the abyss 45 Cote d’Ivoire’s recovery Back in business 45 Syrian rebellion Sledge Hama 46 Morocco’s referendum Avery small step 46 Bahrain’s crisis Shoot first, then talk Special report: The news industry Bulletins from the future After page 46 Phone hacking A fulljudicial inquiry is needed to clean up British journalism: leader, page 12. The saga jeopardises more than merely the News of the World: it threatens Rupert Murdoch, the press as a whole, the police and politicians, page 53. David Cameron under pressure: Bagehot, page 55 Dominique Strauss-Kahn More extraordinary twists in the DSK affair grip France— and torture the Socialist Party, page 47. Isittime to end the perp walk? Page 48 Thailand To stop the country unravelling, Yingluck Shinawatra must keep her word on reconciliation and break it on spending: leader, page 14. The challenge ahead, page 23. Good at business, nicely smiling, buta neophyte in politics, page 24 >> Contents continues overleaf ist July 9th 2011 Chinese consumers What makes the Middle Kingdom’s shoppers tick? Page 59. A Lull inthe number of Chinese listings, page 60 Aviation Airlines and the aircraft industry are belatedly being buffeted by globalisation, pages 67-69. The Europeans are right on emissions trading: leader, page 16 Deleveraging Debt reduction will dominate the rich world’s economies for years. Done badly, it could wreck them: leader, page 13 . The process of reducing the rich world’s debt burden has barely begun, page 71. Britain tries to rebalance, page 54 50 52 53 54 55 56 57 59 60 61 62 63 64 67 Europe Dominique Strauss-Kahn He can’t hide; can he run? America’s judicial system That guilty look Hungary’s EU presidency Back to partisanship Acrackdown in Belarus No applause, please Italy and austerity Berlusconi's bung Angela Merkel Hello to Berlin Balkan peacemaking A beginning Charlemagne The view from the Vistula Britain The news for the world The lowest low Rebalancing the economy Less paper, more iron Bagehot Strong, weak David Cameron International Women in political dynasties The distaff of office Polling religion Unequal zeal Business Chinese consumers What makes them tick? China’s murky ownership rules Who owns what? Germany’s odd media Last-mover advantage Dow Chemical Making itin America Korean animation Of penguins and politics Schumpeter How to make college cheaper Briefing Aviation Climbing through the clouds 71 72 73 73 74 75 75 76 77 79 79 81 82 82 83 83 84 85 89 Finance and economics Deleveraging You ain’t seen nothing yet Spain’s economy Split personality Rating agencies More contortions Chinese IPOs A pause or a plunge? Carson Block Red-flag raiser Global house prices Rooms with a view The WTO and China Hands slapped Economics focus Privatisation Science and technology Robots Zoobotics Physiognomy Facing the truth Cell biology On your marks... Books and arts Alain Mabanckou Africa’s Samuel Beckett The CIA and al-Qaeda Question time Alan Hollinghurst Club of members The war on drugs What everyone needs to know Stem-cell medicine Hope over hype A festival on the Mafia Fearless words Obituary Robert Oakeshott The joy of co-ops Economic and financial indicators Statistics on 42 economies, plus our poll of forecasters and a closer look at insurance Robots A new generation of animal-like robots is about to emerge from the laboratory, page 77. Faces, violence and orgasms, page 79 = Principal commercial offices: 25 St James's Street, London SW1A 1HG Tel: 020 7830 7000 Boulevard des Tranchées 16 1206 Geneva, Switzerland Tel: 4122 566 2470 750 3rd Avenue, 5th Floor, New York, NY 10017 Tel: 1212 5410500 60/F Central Plaza 18 Harbour Road, Wanchai, Hong Kong Tel: 852 2585 3888 Other commercial offices: Chicago, Dubai, Frankfurt, Los Angeles, Paris, San Francisco and Singapore Subscription service For our latest subscription offers, visit Economist.com/offers For subscription service, please contact by telephone, fax, web or mail at the details provided below: Telephone: 1800 456 6086 (from outside the US and Canada, 1314 447 8091) Facsimile: 1866 856 8075 (from outside the US and Canada, 1 314 447 8065) Web: Economistsubs.com E-mail: [email protected] Post: The Economist Subscription Services, P.0. Box 46978, St. Louis, MO 63146-6978, USA Subscription for 1 year (51 issues) United States US$138 Canada CN$189 Latin America US$270 An Economist Group business PEFC certified This copy of The Economist is printed on paper sourced from sustainably managed forests certified by PEFC www.pefc.org yy PEFC/29-31-75 Cc recycle © 2011 The Economist Newspaper Limited. Allrights reserved. Neither this publication nor any part of it may be reproduced, stored ina retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Newspaper Limited. The Economist (ISSN 0013-0613) is published every week, except for a year-end double issue, by The Economist Newspaper Limited, 750 3rd Avenue, 5th Floor, New York, NY 10017. The Economistis a registered trademark of The Economist Newspaper Limited. Periodicals postage paid at New York, NY and additional mailing offices. Postmaster: Send address changes to The Economist, P.0. Box 46978, St. Louis , MO. 63146-6978, USA. Canada Post publications mail (Canadian distribution) sales agreement no. 40012331. Return undeliverable Canadian addresses to The Economist, PO Box 7258 STN A, Toronto, ON M5W 1X9. GST R123236267. Printed by RR Donnelley, Strasburg, VA. 22657 WorldMags ITUB g LISTED ee NYSE & io (elm ole) taiie-le| <i) Today, I'm 27 and Ic elcenwulare mcaeeyejaliee) a PNate Ric lena tar-ke|(e)ey-)8-\8/0) [what lset-out to do.| ey davon (er-lella lencing on the global stage. My name Learn about us: www. eu.com The world this week The Economist July 9th 2011 The Pheu Thai party won an election in Thailand. Led by Yingluck Shinawatra, the younger sister of Thaksin Shinawatra, who was deposed as prime minister in a military coup in 2006, the party wona majority in the lower house of parliament and added co- alition partners to form a government. It is the fifth consecutive victory for a pro- Thaksin party and is a sharp rebuke to the governing elites. The army indicated thatit would not challenge the result. Australia resumed exports of live cattle to Indonesia, just a month after suspending them because some Australian cows were being slaughtered inhu- manely. Export agents are supposed to assume responsi- bility for the cattle they sell. A court in Bangladesh issued a warrant for the arrest of ason of Khaleda Zia, a former prime minister, charging him with having organised a grenade attack that killed 24 people ata political rally in 2004. Sheikh Hasina, the apparent target of that attack and nemesis of Mrs Zia, is now prime minister. Vaults containing vast quanti- ties of gold and jewellery from the 18th-century kingdom of Travancore were found under a Hindu temple in the capital of the Indian state of Kerala. One conservative estimate put the hoard’s value at one tril- lion rupees ($22 billion). This is equal to half Kerala’s Gpp. The 2018 winter Olympics were awarded to Pyeongchang in South Korea, which will be only the second Asian country to host the winter games. Hugo home Hugo Chavez, Venezuela’s president, announced that his recent surgery in Cuba was for cancer. Mr Chavez returned to Caracas after three weeks abroad, but did not take partin person in the celebrations for the 200th anniversary of the country’s independence. Mexico’s Institutional Revolu- tionary Party (PR) handily won three governor’s races, including the contest in heavi- ly populated Mexico state. The governor of that state, Enrique Pena Nieto, is the front-runner to win the Pr1’s presidential nomination next year. The United States and Mexico signed an agreement that will allow lorry drivers to deliver cross-border ship- ments all the way to their final destinations, implementing a long-overdue requirement of the countries’ 1994 free-trade deal. In 2009 Mexico imposed tariffs on $2.3 billion of Ameri- can goods, after the United States stopped letting Mexican lorries past the border area. Brazil’s transport minister resigned amid allegations that employees in his department had skimmed money from infrastructure projects. He is the second member of Dilma Rousseff’s cabinet to quit within a month over corrup- tion claims. An unwanted sight St he | ore ey ie Two bombs in Taji, a town north of Baghdad, killed at least 35 people. Violence in Iraq is on the rise six months before the scheduled depar- ture of American troops. Zine el-Abidine Ben Ali, the former dictator of Tunisia now resident in Saudi Arabia, was again convicted in absen- tia, this time of illegally pos- sessing drugs and weapons. Last month a court sentenced Mr Ben Ali and his wife to 35 years on theft charges. He fled Tunisia in January. The German parliament ques- tioned the recent sale of 200 tanks to Saudi Arabia because of the country’s human-rights record, including its participa- tion in the crackdown on protesters in Bahrain in March. Around 98.5% of Moroccan voters approved a new consti- tution in a referendum pro- posed by King Mohammed VI, who faced pro-democracy protests earlier this year. South Sudan prepared to celebrate its secession from Sudan following decades of political infighting and civil war. It officially gains indepen- dence on July 9th. The lessons of Saint Paul Minnesota’s state govern- ment was shut down, affecting non-urgent services, after the Democratic governor and Republicans in the legislature failed to agree on a plan to plug a $5 billion budget deficit. As well as cutting spending Democrats want to raise taxes on Minnesota’s wealthiest residents. With the Treasury’s deadline to avoida default of August 2nd looming into view, the pace picked up in negotiations in Washington over raising the federal debt ceiling. Barack Obama held private talks with John Boehner, the Republican speaker of the House, and asked Democratic and Repub- lican leaders to attend dis- cussions at the White House. The Transport Security Admin- istration warned that recent intelligence indicated that terrorists linked to al-Qaeda were looking at ways to con- ceal bombs on aircraft by surgically implanting them into an operative’s body. The agency said there was no imminent threat, but intro- duced extra security at airports. Red-faces at a red-top as =} Wa In Britain the scandal sur- rounding phone-hacking by the News of the World, a Sun- day tabloid owned by Rupert Murdoch’s News Internation- al, forced an emergency debate in the House of Commons, after allegations surfaced that the phones of young murder victims and people killed in 2005's terror attack in London had been hacked. Allegations also emerged that police offi- cers had been paid by the newspaper for providing information on stories. David Cameron, the prime minister, promised a public inquiry but not until the police end their investigation. The Dsk scandal continued to enthrall France. After prosecu- tors in New York admitted that the alleged victim had lost credibility in an attempted- rape case against Dominique Strauss-Kahn, the former head of the mF, some speculated that he might return to the French presidential race. But another attempted-rape case against Mr Strauss-Kahn was pursued by a complainant in France, which may dim his prospects. A court in the Netherlands ruled that the Dutch state was responsible for three deaths in the Srebrenica massacre in 1995. Dutch peacekeepers were meant to be protecting Bosni- an Muslims atthe time. Silvio Berlusconi, Italy’s prime minister, was forced to with- draw a clause he had slipped into an emergency budget. The clause would have helped his Fininvest holding company to delay for some years compen- sation it had been ordered by a court to pay to Carlo De Bene- detti, a business rival. >> The Economist July 9th 2011 The world this week &) Business The World Trade Organisation ruled that China’s curbs on exports of raw materials are illegal, upholding a complaint lodged by the United States, the European Union and Mexico. China criticised the decision, justifying its limits on exports of metal ores and other materials on environ- mental grounds. The wTo’s ruling could help America and others in any dispute with China over rare-earth materi- als, which are used in high- tech products. China has one- third of the world’s reserves and accounts for almost all of current production but it has restricted exports, which some think is to induce foreign tech- nology firms to place oper- ations inside China. i China’s one-year lending rate % 7.0 6.5 2010 2011 Source: CEIC China raised interest rates for the fifth time in eight months, increasing both the one-year lending and deposit rates by a quarter of a percentage point. The central bank has taken a number of measures this year to restrict credit. Underlining the dangers from a growing mountain of debt to the Chinese economy, Moody’s claimed that China’s first official audit of local- government loans had under- estimated their value by $540 billion, which would take the total to $2.1 trillion. As expected, the European Central Bank lifted interest rates for the second time this year, from 1.25% to1.5%. Portugal reacted angrily to Moody’s downgrade of its sovereign debt to “junk” status, complaining that it had not considered the country’s recent austerity measures. Moody’s made the cut on the basis that Portugal will have trouble raising funds in the markets, if private investors take a hit in a second rescue deal for Greece. Meanwhile, Standard & Poor’s became the first ratings agency to confirm that it may consider French proposals for private investors to roll over their Greek debt to be a “selective default”. Zurich wins, Frankfurt loses UBS nominated Axel Weber to be its next chairman, starting in 2013. Mr Weber is a former head of the German Bundes- bank who earlier this year surprised many by ruling himself out of the running to succeed Jean-Claude Trichet as president of the European Central Bank. Mr Weber’s appointment at the Swiss bank is a big blow for Deutsche Bank, which had spent the past two years courting him for a possible senior position. Cesare Geronzi, one of Italy’s most powerful financiers, was given a four-year prison term in relation to the bankruptcy in 2002 of Cirio, a food company. Mr Geronzi stepped down as the chairman of Assicurazioni Generali, Italy’s largest insurer, in April and is a former chair- man of Mediobanca, an in- vestment bank. He was con- victed of fraud in a separate case in 2006, but won an appeal. He remains free while he appeals against the decision in the Cirio trial. Supermarket sweeps stakes The dispute intensified be- tween Casino and Carrefour, two French retailers, over the latter’s proposed venture for Pao de Acucar (GPA), a fast- growing Brazilian chain. Casi- no, which owns a 43% stake in GPA but was not consulted about the proposal, pressed its claim that Carrefour’s plan to merge its existing assets in Brazil with those of GPA was hostile and arose “out of illegal negotiations”. Carrefour was also criticised by some share- holders for not disclosing that it had held talks. The company insisted that the offer for GPA was not hostile. Microsoft struck a deal that will see its Bing search engine adopted for internet searches in English on Baidu, China’s most popular website. But the deal was criticised by some because searches in China on Bing will be subject to censor- ship rules. Google stopped offering a censored search service in China last year ina spat over the government’s interference with its site. HTC’s net profit and revenues more than doubled in the second quarter compared with a year earlier. Two years ago the Taiwanese smartphone- maker retuned its business to make fewer devices that run on Microsoft’s Windows Mo- bile operating system and more that work on Google’s Android. Verizon Wireless followed AT&T by scrapping its unlimit- ed-data plans for new smart- phone subscribers and in- troducing tiered payment schemes based on the giga- bytes of data used. Wireless operators in America have rapidly moved away from “all you can eat” plans for custom- ers and are providing more selective pricing menus in anticipation of the increased appetite for services from high-speed networks. Great expectations It emerged that Twitter has begun another effort to raise capital from private investors, which could value the micro- blogging website at $7 billion. In February, during a previous fund-raising round, privately held Twitter was thought to be worth $4.5 billion. Other economic data and news can be found on pages 89-90 tNERGY FUTURE. © 2011 Lockheed Martin Corporation THIS IS HOW SOLAR, WAVE & TIDAL, OCEAN THERMAL, BIOMASS, FUEL CELLS Whether the challenge is harnessing the sun’s rays or unleashing the power of the ocean, turning organic material into fuel, or creating state-of-the-art fuel cells, Lockheed Martin is addressing the nation’s energy needs. Applying our unparalleled expertise in systems integration to help our nation achieve energy diversity. Developing renewable sources of energy is all a question of how. And it is the how that Lockheed Martin delivers. nartin.com/energygeneration MARTINA
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