Table Of Content

Kim Jong Un, misunderstood youth Macron’s gamble in Washington Have Treasuries tipped? The climate’s methane mystery APRIL28TH–MAY4TH2018 Within reach Universal health care, worldwide Contents TheEconomistApril28th2018 3 37 PoliticsinSingapore 6 Theworldthisweek Notmuchleeway 38 Kazakhpolitics Leaders Tiltingatballoons 9 Globalhealth 38 Women Withinreach Asia’swastedresource 10 LatinAmerica 40 Banyan AneruptioninNicaragua KimJongUn,onaroll 10 Bondmarkets Yieldingtopressure China 13 TheCIA 41 Thepopeandtheparty WindrushThehomesecretary, Situationvacant Lovethineenemy AmberRudd,isdamagedby 14 Financialregulation theimmigrationscandal—but 42 Thebigbeigebook Tamingcrypto XiJinping’slatestwork notfatally:Bagehot,page54 Onthecover Thecaseforuniversalhealth Letters careisapowerfulone— 16 OnAI,sewage,Puerto Specialreport: USbonds includinginpoorcountries: Universalhealthcare Rico,Thailand,Madeleine Ten-yearTreasury-bondyield,% leader,page9.Gettingthere Anaffordablenecessity Albright,techcompanies 15 willbedifficult.Seeour Afterpage42 specialreportafterpage42. 10 Thereisgrowingopposition Briefing MiddleEastandAfrica tothewaymanycountries 20 Globallogistics 5 definedeath,page55 Thinkingoutsidethebox 43 SlumpingJordan Aneconomyundersiege 0 44 SaudiArabia’seconomy 1962 80 2000 18 TheEconomistonline UnitedStates Labourpains Dailyanalysisandopinionto 25 TheEPA 44 Libya’sailingstrongman BondsThereisnoneedto supplementtheprintedition,plus Swampscience AfterHaftar panicaboutrisinggovernment- bondyields:leader,page10. audioandvideo,andadailychart 26 TheWhiteHouse 45 Guinea-Conakry Commoditiesmarketsare Economist.com Veryunique Alpha’sbet rattledbyAmericansanctions E-mail:newslettersand 27 Presidentialauthority 46 FarminginAfrica andtradethreats,page63. mobileedition Thetravelban Squeezedout Momentumintheeuroarea Economist.com/email 27 Regulatingtech 46 Kenya’sslumcinemas slows,page67 Printedition:availableonlineby Thenot-famousfive X-narratedfilms 7pmLondontimeeachThursday 28 Assisteddying Economist.com/printedition Alohasandgoodbyes Europe Audioedition:availableonline 30 Lexington todownloadeachFriday Marco’smakeover 47 Turkey Economist.com/audioedition Erdogan’sambitions 48 MacronandTrump TheAmericas JupitermeetsMercury 31 Nicaragua’sprotests 49 Judicialindependence Fromoasistopowderkeg Luxembourgroars 32 MisogynyinCanada 49 Armenia Volume427Number9089 Thevirginterrorist Peoplepower PublishedsinceSeptember1843 33 JusticeinGuatemala 50 Italy Macron in WashingtonHas totakepartin"aseverecontestbetween Collateraldamage Thenervousnorth France’s president taken too intelligence,whichpressesforward,and anunworthy,timidignoranceobstructing 33 Paraguay’selections 50 Europeanpoliticalparties big a chance? Page 48. ourprogress." Newman,oldparty Thesincerestform Someone has to stand up for EditorialofficesinLondonandalso: 34 Bello offlattery global trade rules. It may as Beijing,Berlin,Brussels,Cairo,Chicago,Madrid, VargosLlosareflects well be Europe: Charlemagne, MexicoCity,Moscow,Mumbai,Nairobi,NewDelhi, 51 Charlemagne NewYork,Paris,SanFrancisco,SãoPaulo,Seoul, TheEUdefendsglobaltrade page 51 Shanghai,Singapore,Tokyo,WashingtonDC Asia 35 China and India Prickly peers 36 Rape in India Almost getting away with it 37 #MeToo in Japan #NotUs 1Contents continues overleaf 4 Contents The EconomistApril28th2018 67 Crypto-currencies Britain Policingthewildfrontier 52 Localelections 68 Cryptomoney-laundering TheWestMidlandswaltz Digitaldetergent 53 Royalbirths 69 Freeexchange Aprincelysum Microeconomics 53 Wales’sgovernment Successionbattle Scienceandtechnology 54 Bagehot WindrushandAmberRudd 71 Climatechange Themethanemystery NorthKoreaEverythingKim 72 Superbugs French intellectualsTo International JongUndoesisaimedat Abiggerkiller understand why they seem to ensuringhisownsurvival: 55 Definingdeath 73 Astronomy be in short supply, consider Banyan,page40 Harderthanyouthink Intotheunknown their old haunt, page 75 74 Humanbirths Business Timetodeliver Subscription service 57 Technologycompanies 74 Utilitymaintenance For our latest subscription offers, visit DeFANGed? 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Printed by Quad/Graphics, Saratoga Springs, NY 12866 6 The world this week The EconomistApril28th2018 Politics ans,killingten,wascharged livesthananinsurgencyin the Germany’sSocial Democrats with murder. Before the attack north-eastofthe countryby formallyelected Andrea the driverannounced on jihadistgroups, includingBoko Nahlesastheirleader, the first Facebookthata revoltofinvol- Haram. woman to head the party. Ms untarilycelibate men—who Nahleshasa battle tryingto resentwomen fornothaving Aparliamentarycommittee in unite the SPDafteritsbattering sexwith them—had begun. Zimbabwesummoned Robert atlastyear’sgeneral election Mostofthe dead were women. Mugabe, the formerpresident, and contentiousdecision to to testifyin relation to allega- join anothergrand coalition Harmony breaks out tionsthatup to $15bn-worth of with the Christian Democrats. North Koreaannounced that diamondswere looted from itwassuspendingmissile government-controlled mines. The ask Haspel show launchesand nucleartests, in The Senate Foreign Relations advance ofa summitbetween Committee voted in favourof itsleader, Kim JongUn, and Mike Pompeoassecretaryof South Korea’spresident, Moon state. AfewhesitantDemo- Dozensofpeople were killed Jae-in. South Korea, forits part, cratsin the full Senate threw in protestsin Nicaragua. stopped blaringpropaganda, theirsupportbehind hisap- People are furiousthatthe includingK-pop music, across pointment. Itwaslessclear regime ofPresidentDaniel the borderwith the North. whetherthe woman chosen to Ortega emptied the public succeed MrPompeo asdirector pension potand then ordered Setya Novanto, a former ofthe CIAwill be confirmed. workersto top itup. The prot- Speakerofthe lowerhouse of Concernshave been raised estslasted fordays, even after Indonesia’sparliament, was aboutGina Haspel’s past MrOrtega backed down. sentenced to 15 yearsin prison involvementin torture. A Several uglysculptureserected forcorruption. The case had Palestiniansin Gazademon- battalion ofretired military byhiswife were wrecked by been seen asa testofthe coun- strated alongthe borderfence officershave voiced their angrymobs. Independent try’sjustice system. with Israel forthe fourth time objectionsto hernomination. newschannelswere blocked in recentweeks. Israelsays bycensors; a journalistwas Asuicide-bomberkilled 60 Hamas, the Islamistmove- The Republicans held a con- killed while recordinga people who were registering to mentthatrulesGaza, isusing gressional seatin the suburbs broadcast. vote in Kabul, the capital of the protestsascoverforat- ofPhoenix, butwith their Afghanistan. Parliamentary tacks. Israel hasshotand killed majorityslashed from 37 Mario Abdo Benítezwon elections, currentlyscheduled 40 Palestiniansoverthe course percentage pointsin 2016 to Paraguay’spresidential forOctober, have alreadybeen ofthe protests, accordingto justfive. Itisthe latest special election, maintainingthe delayed bythree yearsbecause Gaza’shealth ministry. election indicatinga swing rulingColorado Party’sgrip on ofsquabblingwithin the towardsthe Democratsahead power. The formersenator government. An airstrike hita wedding in ofthe mid-termsin November. beatEfraín Alegre, ofthe Yemen, killingdozensof Liberal opposition. Police in Shanghaiarrested people. The Houthi rebels eightpeople in connection blamed the Saudi-led coalition In the firstofthree televised with whatofficialsdescribed thatisfightingon behalfof debates,Mexico’sfive presi- asa Ponzi scheme operated by Yemen’sdeposed government. dential candidatessparred aChinese company, Shanlin The secretary-general ofthe overhowto reduce crime and Financial. Theyhave been UN, António Guterres, called violence. Mostpundits accused ofillegallyraising foran investigation. thoughtRicardo Anaya, the more than 60bn yuan ($9.5bn), centristcandidate, gave the usingmoneydeposited by Out of office message bestperformance, butpolling newinvestorsto paylong- Armenia’spresident-turned- givesAndrésManuel López standingones. prime minister, Serzh Obrador, the left’sman, a lead Sargsyan, resigned daysafter ofup to 20 percentage points. The formerchiefregulatorof beingelected to hisnewjob Emmanuel Macronwentto The election ison July1st. China’s insurance industry, followinghuge demonstra- Washington on a state visit, the XiangJunbo, wasformally tionsagainsthim, including by firstofthe Trump administra- Prosecutorsin Guatemala charged with bribe-taking. Mr off-dutymembersofthe tion. Lastyearthe French workingwith CICIG, a UN- Xiangwassacked lastyear. His armed forces. Russia declined presidentcharmed Donald backed anti-corruption com- agencywasmerged with the to intervene. Trump atthe Bastille parade in mission, accused President bankingregulatorlastmonth. Paris. He used histrip to the JimmyMorales’spartyof PeterMadsen, a renowned American capital to tryto acceptingmore than $1m in Anew terror Danishinventor, wassen- persuade MrTrump notto pull illegal donationsduringthe An attackon a church in tenced to life in prison for the outofthe agreementmonitor- campaign in 2015. Agroup of Nigerialeftatleast19 people murderofa Swedish journal- ingIran’snuclearprogramme, prominentbusinessmen apol- dead, includingtwo priests, in ist, Kim Wall. MsWall’sdis- which MrTrump wantsto ogised forfundinghim. Mr the latestincidentofviolence membered bodywasfound “fix”. In a speech to Congress, Moralesclaimshe isinnocent. between nomadicherdersand offthe coastofCopenhagen in delivered in flawlessEnglish, farmersin the country’svola- August. She had visited Mr MrMacron decried the rise of In Torontothedriverofa van tile middle belt. The escalating Madsen’ssubmarine foran nationalism in variousparts of thatploughed into pedestri- conflictisnowclaimingmore interview. the world. 1 TheEconomistApril28th2018 Theworldthisweek 7 Business vestment-bankingandtrading mentswiththetechcompany guidelines;four-fifthsofthem divisions.Revenuefromtrad- constitutedillegalstateaid. hadbeenidentifiedbymach- ingplungedby17%inthefirst Untiltheappealsprocessis ine-learningalgorithms. TheyieldonAmerica’sten- quartercomparedwiththe exhausted,Applewillpaythe Around30mpeopleobjected yearTreasurybondpassed sameperiodlastyear,astark €13bnintoanescrowaccount. tovideos;1.5mweretaken 3%forthefirsttimesinceearly contrastwithDeutsche’s downbecauseofhuman 2014.Stockmarketsfrowned, Americanrivals,whichposted Soaringrevenuesfrom complaints.Ofthosethatwere asinvestorsworriedthata stronggrowthintradingin- advertisingpushedFace- flaggedbypeople,sexual climbingyieldonthebench- come.Deutschenowplansto book’snetprofitinthefirst contentcausedthemostcon- markbondwouldleadto shrinkitsbusinessinAmerica, quarterupby63%yearonyear, cern,accountingfor30%ofall higherborrowingcosts.Inthe amovethatactivistinvestors to$5bn.Thenumberof videosreported. aftermathofthefinancial hadbeenpushingfor,inorder monthlyactiveusersgrew crisis,whencentralbanks tofocusoncommercialclients sharplyto2.2bninthethree- Twitterreportednetincome hoovereduptrillionsofdol- inEurope.TheGermanbank’s monthperiod(theCambridge of$61mforthefirstthree lars-worthofgovernment overallnetincomefellby79% Analyticascandalemergedat monthsoftheyear,itssecond bonds,theten-yearyieldfellto to€120m($147m). thetailendofthequarter). consecutivequarterlyprofit historiclows.Ithasrisen Alphabet,Google’sparent followingyearsoflosses.The steadilythisyearinpartbe- BarclayssaidthatBritain’s company,sawitsnetprofit socialnetworknowhas336m causetheFederalReserveis financial-conductregulators increaseby73%to$9.4bn. monthlyactiveusers.Itspro- continuingalongitspathof hadfinishedtheirinvestiga- filehasbeenliftedbyonevery tighteningmonetarypolicy. tionintoJesStaley,thebank’s Plantingaflag activeuser,DonaldTrump, chiefexecutive,overhisat- whohasposted37,400tweets AmuddleforMurdoch tempttouncovertheidentity YouTube (andcounting)sincesigningup Comcastformallysubmitteda ofawhistleblower,andthat Contentreportedbyusers,bytype inMarch2009. October-December2017,m £22bn($31bn)bidforSky, theyhaveproposedhepaya 0 2 4 6 8 10 Britain’spremiersubscrip- financialpenalty,but“arenot Baby,youcan’tdrivemycar tion-TVbroadcaster.That alleging…thathelacksfitness Sexualnature Compelledtomakeitsdeliv- Misleading/spam promptedSkytowithdrawits andpropriety”tocontinuein eriesevermoreconvenient, Hate/abuse recommendationtoacceptan hisjob. Amazondemonstrateda Violence offerfrom21stCenturyFox, servicethatallowscouriersto whichowns39%ofSkyand TheIrishgovernmentreached Harmfulacts leavepackagesincustomers’ wantstobuytheremaining anagreementwithAppleover Childabuse cars,whichcanbeunlocked 61%inordertosellthelotto repayingthe€13bn($16bn)in Promotingterrorism withawirelessconnection. Disney,alongwithFox’sother backtaxesthattheEuropean Source:GoogleTransparencyReport Theserviceisavailablefor entertainmentassets. Union’scompetitionregulator Meanwhile,YouTube,which certaintypesofvehicleswith hasdecidedareowedto isownedbyGoogle,published therequiredtechnologyand VincentBolloré,oneofthe Ireland.Thegovernmentand itsfirstdataonthevideosit certaintypesofdriverswith richestbusinessmeninFrance, Applearebothappealing removesfromitswebsite. therequiredleveloftrust. wasplacedunderformal againsttheregulator’sruling Nearly8.3mvideosweretaken investigationinacorruption from2016,whichfoundthat downinthelastthreemonths For other economic data and probe.Aformersubsidiaryof Ireland’slow-taxarrange- of2017forviolatingYouTube’s news see Indicators section hisBolloréGroupisallegedto havesupportedtheelection campaignsofpoliticiansin Guinea and Togo in 2009 and 2010 in return forportcon- tracts. MrBolloré and hisfirm denywrongdoing. Afterrejectingfourprevious offers, Shire, which specialises in drugsforrare diseasesand is listed in London, said itwas willingto recommend to shareholdersa preliminary takeoverbid from Takeda, a smallerJapanese rival. The deal isworth £46bn ($64bn). If completed the combined companywould rankalong- side industrygiantssuch as Bayerand GlaxoSmithKline. Christian Sewingused hisfirst quarterlyearningsreportsince becomingchiefexecutive at Deutsche Bankto layout sweepingchangesto itsin- Leaders The EconomistApril28th2018 9 Within reach The case foruniversal health care is a powerful one—including in poorcountries BYMANYmeasurestheworld throughout-of-pocketpayments. More servicescould be pro- has never been in better vided ifthatmoney—and the riskoffallingill—were pooled. health. Since 2000 the number The evidence forthe feasibilityofuniversal health care goes ofchildren who die before they beyond theoriesjotted on the backofprescription pads. Itis are five hasfallen byalmost half, supported byseveral pioneeringexamples. Chile and Costa to 5.6m. Life expectancy has Rica spend aboutan eighth ofwhatAmerica doesperperson reached 71, a gain offive years. on health and have similarlife expectancies. Thailand spends More children than everare vac- $220 perperson a yearon health, and yethasoutcomes nearly cinated. Malaria, TBand HIV/AIDSare in retreat. asgood asin the OECD. Itsrate ofdeathsrelated to pregnancy, Yetthe gap between thisprogressand the still greater poten- forexample, isjustoverhalfthatofAfrican-American moth- tial thatmedicine offershasperhapsneverbeen wider. Atleast ers. Rwanda has introduced ultrabasic health insurance for halfthe world iswithoutaccessto whatthe World Health Or- more than 90% ofitspeople; infantmortalityhasfallen from ganisation deemsessential, includingantenatal care, insecti- 120 per1,000 live birthsin 2000 to under30 lastyear. cide-treated bednets, screeningforcervical cancerand vacci- And universal health care ispractical. Itisa way to prevent nationsagainstdiphtheria, tetanusand whoopingcough. Safe, free-ridersfrom passingon the costsofnotbeingcovered to basicsurgeryisoutofreach for5bn people. others, forexample by cloggingup emergency rooms or by Those who can get to see a doctor often pay a crippling spreadingcontagiousdiseases. Itdoesnothave to mean big price. More than 800m people spend over10% oftheirannual government. Private insurersand providerscan still play an household income on medical expenses; nearly180m spend importantrole. over25%. The qualityofwhattheygetin return isoften woeful. Indeed such a practical approach isjustwhatthe low-cost In studiesofconsultationsin rural Indian and Chinese clinics, revolution needs. Take, forinstance, the design ofhealth-insur- just12-26% ofpatientsreceived a correctdiagnosis. ance schemes. Manycountriesstartbymakinga small group Thatisa terrible waste. Asthisweek’sspecial reportshows, ofpeople eligible fora large numberofbenefits, in the expecta- the goal ofuniversal basichealth care issensible, affordable tion thatothergroupswill be added later. (Civil servants are, and practical, even in poorcountries. Withoutit, the potential mysteriously, common beneficiaries.) Thisisnotonly unfair ofmodern medicine will be squandered. and inefficient, butalso riskscreatinga constituency opposed to extendinginsurance to others. The betteroption is to cover Howthe otherhalfdies asmanypeople aspossible, even ifthe servicesavailable are Universal basichealth care issensible in the waythat, say, uni- sparse, asunderMexico’sSeguro Popularscheme. versal basiceducation issensible—because ityieldsbenefits to Small amountsofspendingcan go a longway. Research led societyaswell asto individuals. In some quartersthe very byDean Jamison, a health economist, hasidentified over 200 idea leadsto a dangerouselevation ofthe blood pressure, be- effective interventions, includingimmunisationsand neglect- cause itsuggestspaternalism, coercion orworse. There isno ed proceduressuch asbasicsurgery. In total, these would cost hidingthatpublichealth-insurance schemesrequire the rich to poorcountriesaboutan extra $1perweekperperson and cut subsidise the poor, the young to subsidise the old and the the numberofpremature deathsthere bymore than a quarter. healthyto underwrite the sick. And universal schemes must Around halfthatfundingwould go to primaryhealth centres, have a wayofforcingpeople to pay, through taxes, say, orby not city hospitals, which today receive more than their fair mandatingthattheybuyinsurance. share ofthe money. Butthere isa principled, liberal case foruniversal health care. Good health issomethingeveryone can reasonably be The health ofnations assumed to wantin orderto realise theirfull individual poten- Consider, too, the $37bn spenteach yearon health aid. Since tial. Universal care isa wayofprovidingitthatis pro-growth. 2000, thishashelped save millionsfrom infectiousdiseases. The costsofinaccessible, expensive and abjecttreatment are Butinternational health organisationscan distortdomestic in- enormous. The sickstruggle to getan education orto be pro- stitutions, forexample bysettingup parallel programmes orby ductive atwork. Land cannotbe developed ifitisfull ofdis- divertinghealth workersinto petprojects. Abetterapproach, ease-carrying parasites. According to several studies, confi- seen in Rwanda, iswhen programmestargetinga particular dence abouthealth makespeople more likelyto setup their disease bringbroaderbenefits. One example isthe way that own businesses. the Global Fund to Fight AIDS, Tuberculosis and Malaria fi- Universal basic health care is also affordable. A country nances community health workers who treat patients with need notwaitto be rich before itcan have comprehensive, if HIVbutalso those with otherdiseases. rudimentary, treatment. Health care isa labour-intensive in- Europeans have long wondered why the United States dustry, and communityhealth workers, paid relatively little shunsthe efficienciesand health gainsfrom universal care, but compared with doctorsand nurses, can make a bigdifference its potential in developing countries is less understood. So in poorcountries. There isalso alreadya lotofspending on longashalfthe world goeswithoutessential treatment, the health in poorcountries, butitisoften inefficient. In India and fruitsofcenturiesofmedical science will be wasted. Universal Nigeria, for example, more than 60% of health spending is basichealth care can help realise itspromise. 7 10 Leaders TheEconomistApril28th2018 LatinAmerica An eruption in Nicaragua Lessonsfromthetroublesofacaudillo AMONG Latin America’s people. It is often forgotten that authoritarian governments handfulofautocracies,that tend to depend even more on popularity than democratic of Daniel Ortega in Nicaragua onesdo.MrOrtega hasneutered the institutionsthat might once stood out for its stability. serveasshockabsorbersagainstpopularire. In this predica- MrOrtegawasthemostpromi- mentauthoritarian rulerscan negotiate, ordigin and tough it nentleaderoftherevolutionary out.Whichwill MrOrtega pick? Sandinista regime ofthe1980s, Hehasoffered to talkto the private-businesslobby and the butlostanelectionin1990.He church.Theyshould insiston a broaderdialogue. This cannot laterforgedadirtydealwithaconservativerivalthatlethim onlybeaboutpension reform. Itshould include, atthe very returntopowerwithjust38%ofthevotein2006,andhassince least,aninvestigation into the recentdeaths, an independent clungtoofficebynobblingdemocraticinstitutions.Atthelast auditofthegovernment’saccountsand ofaid money, the res- electionin2016,hebannedthemainopposition.Nicaragua torationofpolitical freedomsand the reform ofthe Ortega- thusjoinedVenezuela,theonlytwoLatinAmericancountries nobbledelectoral authorityand supreme court. tohaveregressedfromdemocracytodictatorship. MrOrtegarulesbycombiningleft-wingrhetoricwithmain- Ortegafamilyvalues lyright-wingpolicies,lettingtheprivatesectorandtheCatho- UnfortunatelyMrOrtega isunlikelyto go alongwith much of licchurchdowhattheylikeandavoidingquarrelswiththe this.Aged72,he appearsto wantto install MsMurillo as his UnitedStates.Hehaskepthispoliticalbaseamongthepoor successor.Thechancesare thathe cannotdo thatdemocrati- thankstoroughly$5bninVenezuelanaid.Hehasmadehis cally. After several years ofrapid growth, the economy has wife, Rosario Murillo, vice-president. Corruption has flour- startedtoslow. The fiscal accountsare underpressure. Unlike ished.AllthiscarriesawhiffoftheSomozas,thebrutal,thiev- hisfriendNicolásMaduro in Venezuela, MrOrtega has no oil. ingdictatorswhomtheSandinistasoverthrewin1979.Never- His economy depends on the confidence of investors and thelessithasworked.Thecountry,ravagedbycivilwarinthe lenders.Allthissuggestsharsherrepression maynot work. 1980s,hasbeenatpeace.Theeconomyhasgrownstrongly. Inonesense, MrOrtega isnotalone. Hisfellowpopulist ButonApril18thsomethingsnapped.Afteryearsofhisgov- caudillosinLatin America are each in varyingdegrees oftrou- ernmentplunderingthenationalpensionpot,MrOrtegaim- ble.Havinglostmajoritysupport, MrMaduro abolished Vene- posedbydecreea5%cutinpensionsandraisedcontributions. zuela’s parliament and is dragging his country to socio- Furiouscitizensrioted(seeAmericassection).Policeandpro- economiccatastrophe. In EcuadorRafael Correa lostcontrol regimethugsrespondedwithclubsandbullets.Almostthree afterhesponsored a successorwho hasadopted more moder- dozen people were killed. The government silenced several ateanddemocraticpolicies. In Bolivia Evo Moralesmay face televisionchannels.AdegreeofcalmreturnedonlyafterMr electoraldefeatifhe insistson tryingto prolonghis more than Ortegacancelledthedecree. adecadeinpoweratan election in 2019. Soonerorlaterpeople MrOrtega’sproblemsmayhavejustbegun.Everythingin- tireofcaudillos. MrOrtega facesa starkchoice: retreat while he dicates that the rulingcouple have lost the consent of their stillcan,orriskplunginghiscountryinto fardeeper turmoil.7 Bondmarkets Yielding to pressure There is no need to panicaboutrising government-bond yields ROUNDnumberswouldbeir- andconsumers. When theyrise, the weakestcompaniesand US bonds relevantifinvestorswere ra- the mostindebted consumersare likelyto getinto difficulty. If Ten-year Treasury-bond yield, % tional. But they are not. This the costofgovernmentborrowingrises, itbecomesharder to 15 week the ten-year Treasury- finance budgetdeficits. Politiciansmaybe forced into cutting 10 bond yield passed the 3% spendingorraisingtaxes. Ifthe breachingofthe 3% threshold 5 threshold for the first time in were to presage an abruptrise in yields, there could be trouble 0 over four years and investors ahead (which iswhystockmarketswobbled thisweek). Yet a 1962 80 2000 18 shuddered. Their worry is that bond-marketbloodbath seemsunlikely. thelongdownwardmarch in yields, which began in 1982, may Itisno surprise thatbond yieldshave been trending up- atlastbe over. Isit? wards. Theyreached historicallylowlevelsafterthe financial That question is not of interest just to bondholders, for crisisof2007-08, when central bankspulled outall the stops in whom higher yields mean lower prices. Government-bond an attemptto revive the global economy. Trillionsof dollarsof yieldssetthe benchmarkforthe borrowingcostsofcompanies governmentbondswere boughtaspartofquantitative-easing 1 TheEconomistApril28th2018 Leaders 13 2(QE)programmes.Asworriesmountedabout“secularstagna- Jumpy investors should remember Japan. Government- tion”,anextendedperiodofslowgrowthandlowinflation,in- bondyieldstherehave defied two decadesofforecasts that vestorswereevenpreparedtolockinlosses.Atonepointmore theywillmovehigher. BettingagainstJapanese bonds proved than$10trn-worthofbondstradedonnegativeyields. tobesuchabadtradingstrategythatitbecame known as“the Lastyear,however,theglobaleconomyseemedtopickup widow-maker”.Itistoo earlyto proclaim the end ofthe low- again.Centralbankswithdrewsomemonetarystimulus.At yielderaelsewhere,too. Economicdata so farthisyear have thesametime,governmentsstartedtoeasefiscalausterity.The beenratherdisappointing, particularlyin Europe (see Finance developed world may have reached a turning-point, where section).Andthegap between two-yearand ten-yearTreasury theamountofQEsteadilydwindlesandtheamountofgov- yieldshasnarrowed since earlyFebruary, from three-quarters ernment-bondissuancerises.Americaisleadingtheway.The ofapercentagepointto around halfa point. Thisflattening of FederalReserveisparingbackitsbondholdings.Andafterthe theyieldcurveisoften seen asa sign thatthe market believes taxcutspassedinDecember,trillion-dollardeficitsareforecast thepeakininterestratesmaybe gettingclose. from2020. Themainthreattothegovernment-bondmarkethashis- Theworldisflatter toricallybeenhigherinflation.Headlineinflationrateshave Someeventhinkthatthe lowsforgovernment-bond yields are tickedupabitandtherecentsurgeintheoilpricemayaddto stilltocome.Whenthe nextrecession hits, asiteventually will, the pressure (see Finance section). Tighter labour markets centralbanksmaynothave the leewayto cutshort-term rates couldyetpushupwagesandhaveamorelastingimpact.Butat by the four percentage points or so that are the typical re- themoment,theonlyOECDcountrieswithannualinflation sponsetoadownturn. Theymayhave to unleash a newround ratesofmorethan3%areMexicoandTurkey. ofQEandbuylotsmore bonds. Asharpriseinbondyieldsmaybeself-limiting.TheIMF Sodonotpanic.Even ifbondsyield a bitmore than 3%, that warnedonApril18ththatglobaldebtishigherthanever,rela- isalotlowerthanthe level which prevailed before 2007. Pen- tivetoGDP.Theriskthathigherborrowingcostscouldsharply sionfunds,insurance companiesand retired saverswill still be slowgrowthoughttodissuadecentralbanksfromtightening willingbuyersofbondsatthese rates. Unlessinflation unex- monetarypolicytooquickly. pectedlysurges,thisisnota rout. 7 TheCIA Situation vacant Mike Pompeo deserves to be confirmed. Gina Haspel has questions to answer WANTED: qualified candi- seemsdeterminedto restore confidence atthe State Depart- dates to work for the ment, which became demoralised underRexTillerson. At the world’smostscrutinised organi- CIAhe did notcreate anypublicscandal, unlike several ofMr sation. Applicants should be Trump’sothernominees. Itishard to thinkofmanybetter- aware thatthe CEOhasa history qualified choiceswho would wantto workforMrTrump, and ofunderminingstaffand firing all too easyto thinkofworse ones. them publicly. Theyshould also Gina Haspel, MrPompeo’ssuccessoratthe CIA, who isdue know that his lawyer is under to appearin Senate hearingson May9th, isa hardercase. Ms criminalinvestigation.Oh,and thatthe formerhead of the FBI Haspel isa highlyregarded careerofficer, who can be expected islookinginto howthe CEOgotthe job. The successful candi- to insulate the CIAfrom political interference bya president date will face a televised inquisition bymembersofthe Senate who doesnotrecognise boundaries. Butshe ran a black site in in which questionswill be raised abouttheircharacter. Thailand where a prisonerwaswaterboarded. (She also trans- Fifteen monthsinto the presidencyofDonald Trump, no- mitted herboss’sordersto destroyvideo evidence ofinterro- body who chooses to join his administration can say they gations, though an investigation found she wasnotat fault.) have notbeen warned. Hisformerpresssecretaryhassaid he regretted misleading the public, under instruction from Mr Desperate times Trump, on the firstfull dayofthe presidency. Hisformer com- In usingwaterboarding, MsHaspel wasfollowingorders that municationsdirectorsaid she told “white lies” forhim. Hisfor- she believed mighthelp preventfuture terroristattacks, orders mersecretaryofstate did notdenyreportsthathe called the which had been approved bythe White House’slegal counsel. presidenta “fuckingmoron”. The formerhead ofthe FBIsays Yetthatdefence isnotenough, fortwo reasons. MrTrump is“morallyunfit” to be president. When asked what First, the UNConvention againstTorture, which America workingforMrTrump waslike, hisformerchiefofstaff re- signed, banspunishmentthatcausesphysical ormental pain plied: “Take everythingyou’ve heard and multiplyitby50.” orsuffering. The CIAwasresponsible forboth atitsblack sites. And yetforAmerica to have a functioningdemocracy, the “I couldn’tgetawayfrom the mental picturesofnaked men presidentshould be able to appointa cabinet, made up ofcom- chained to the ceilingin a cold, blazinglylitcell for endless petentpeople willingto serve him. Mike Pompeo, who is setto days, defecatingin theirdiapers, unchained onlyto be further be approved as secretary of state by the Senate this week, abused,” writesJamesComey, deputyattorney-general in the meetsthisstandard. MrPompeo maybe too eagerto flatter the Bush administration, in hismemoirswhich came outearlier president but, sadly, that is a requirement for survival. He thismonth. SenatorJohn McCain wrote ofthe harm the CIA1 14 Leaders The EconomistApril28th2018 2didAmerica,sayingthatit“compromisedourvalues,stained ingwaterboarding;JeffSessions, the attorney-general, voted our national honour, and threatened our historical reputa- againstthelawof2015because he thoughtthe CIAoughtnotto tion.”Torture,evenwhenitiscarriedoutindefenceofAmeri- beconstrained.Intherightcircumstancesitisnothard to imag- ca,isun-American.MsHaspelshouldhaveseenthat. inetheWhiteHousechangingitslegal guidance. Second,theprohibitionontortureislesssecurethanitwas TheCIA’sleadingrole in interrogation and MsHaspel’sre- whenBarackObamaleftoffice.In2015Congresspassedalaw cordputtortureattheheartofherconfirmation in a waythatit restrictingthearmyandtheCIAtousingtechniquesapproved hasnotbeenforotherappointees. In herhearingshe mustset intheArmyFieldManual.However,whencampaigning,Mr outwhatsheconsidersto be torture, and then saywhether she Trumpsaidhefavouredbringingback“ahellofalotworse wouldfollowanorderfrom a presidentto carryoutsuch treat- than waterboarding”, though there is no sign that he has ment.Onlyifsheacknowledgesthatwhatshe did before was soughttodosoinoffice.MrPompeohassaidheisopentous- wrongshouldMsHaspel win control ofthe CIA.7 Financialregulation Taming crypto Crypto-assets need corralling. Here is a guide to howmuch oversightis required THEwildrideseemstohave Criminalswereamongthe earliestadoptersofdigital curren- calmed. Late lastyearspecu- cies. Regulation could help smoke them outbyextending ex- lators sent the price of crypto- istinganti-money-launderingrulesinto the crypto-sphere (see currenciessoaring. The value of Finance section). The obvioustargetsare the exchanges where bitcoin, the best-known, has fall- ordinarymoneyisswapped forcrypto and vice versa. Regula- en by half since then. But the torsshould demand thatthese exchangesapplysimilar stan- momentum behind all things dardsto those ofbanks. These include requiringidentification crypto remains powerful. Bit- from all customersand keepinga record ofunusual transac- coin isstill worth seven timeswhatitwasjusta year ago. In the tions. Several countries, includingAustralia and South Korea, firstquarterofthisyear, accordingto CoinDesk, a news ser- alreadydo this; earlierthismonth the EU passed a directive vice, $6.3bn wasraised through initial coin offerings(ICOs), a stipulatingthe same thing. There isa need fora harmonised form offundingin which firmsissue digital tokens, more than approach, in orderto preventillicitflowsofmoneyto crypto- in all of2017. Lastmonth the StudentLoan Report, a website, havens. found thatone in five American studentsitasked had used As for how much protection consumers should enjoy partoftheirloan to join the crypto rush. when theyinvestin crypto-assets, some advocate restricting No wonderregulatorswantto exertgreatercontrol over the the market to accredited investors, on the ground that they crypto-sphere. The chance to raise moneyvia ICOshasattract- maybe betteratjudgingrisksthan ordinarypuntersand are ed asmanycon men asithasgenuine entrepreneurs. The head certainlymore cushioned againstanylosses. Butthe bar to im- ofEuropol, Europe’spolicingagency, hasestimated that 3-4% posingbanson howpeople can risktheirown moneyought to ofthe region’scriminal proceedsare nowlaundered through be high. The authoritiesin manycountriesissue explicit warn- crypto-assets. Plentyin the industrythinkregulation would ingsaboutthe risksassociated with crypto-speculation; sever- help legitimise crypto. Yetcrypto-enthusiastsare also rightto al are clampingdown on the advertisingofICOs. That, allied fearthatoverzealousregulation, like China’sban on crypto-ex- with existingrulesto punish out-and-outfraud, issufficient. changesand ICOs, could throttle a promisingtechnology. To The third question is easily answered at the moment. achieve the right balance, regulators must find sensible an- Crypto-assetsdo notyetpose a riskto global financial stability; swersto three questions: whatare crypto-assets? How should cumulatively, theyare worth lessthan 3% ofthe combined bal- day-to-dayrisksbe managed? And whatthreatdo theypose to ance-sheetsofthe central banksin America, Britain, Germany financial stability? and Japan. Butthe wild swingsofbitcoin are a warning that Todaythere isno consensuson whata crypto-assetis. Even thingscan quicklychange. Regulatorsmustkeep a weather eye within countries, authoritiesdisagree on howto classify them. on the factorsthatcould heighten systemicrisk, such asthe Are theya commodity, a currency, a securityortheir own, pe- amountofborrowingdone bycrypto-investors. culiar asset class? In America the Securities and Exchange Commission hashinted thatitwill treatmosttokensissued Lassoing cryptos through ICOsassecurities. Thatwould mean onerousdisclo- Regulatingcrypto-assets is no easy task. Too much red tape sure requirements. Buta blanketapproach doesnotcapture mayhamperinnovation. Some think, forexample, thatICOs the shape-shiftingnature ofmanydigital assets. Better to go could give rise to a newform of“crypto co-operative” in which the wayofthe Swissregulator, FINMA, which in Februarysaid digital tokensprovide founders, employeesand userswith a itwould base treatmenton theiractual function—ie, whether shared interest in its success. At the same time, a market in theyare used forpayments; asa utilitytoken thatgives itshold- which scammersand criminalsroam freelydetershonest ac- eraccessto a specificservice; orasan investment. Thisalso torsfrom takingpart. The factthatall ofthisisnew technologi- meansa token’sclassification can change overtime. cal terrain addsto the pressure on regulatorsto show unusual Such decisionspointtowardshowto deal with day-to-day flexibility. Foraslongascrypto hasitsWild Westimage, regu- crypto-risks, from money-launderingto consumerprotection. latorswill need to keep theirfrontiermentality. 7 16 Letters The EconomistApril28th2018 people’slivesincludesimprov- navy’sevictionhascontribut- partnership projectshave been LessonsfromthepastforAI inghealthandproductivity edgreatlytoPuertoRico’s announced, orare in the pipe- Yourspecialreportonartificial andgettingmorechildreninto generaleconomicatrophy. line, in portinfrastructure, toll intelligenceinbusiness(March schools. WILLIAMGEMBUS roads, high-speed rail, LNG 31st)musedthat“AIwillmake Butthebattleisnotyet FortLauderdale terminalsand publictransport. workplacesmoreefficient, won.Nearlyoneinthreepeo- To putitmildly, the Thai safer—andmuchcreepier”.The pleuseunimprovedsanitation Iamaformerchiefexecutive governmentisgearingup for emphasisonindustrialengi- services.Diarrhealdiseases ofapowerutilityandvisited massive infrastructure neeringonthefactoryfloorin stillclaimthelivesof2,220 PuertoRicolastmonth.De- developmentand the private themid-20thcenturybrought childreneachyear.Moreover, spiteaco-ordinatedeffortfrom sectoriseagerto take part. aboutmenwithclipboards Bangladesh’slocationonthe thefederalgovernmentand DAVID BECKSTEAD tellingemployeesexactlyhow frontlineofclimatechange theAmericanarmytorestore Consultant todotheirjob,evengoingso threatenstoreversethispro- electricity,theunderlying Tilleke & Gibbins farastotellworkersnotto gress,throughrisingsealevels infrastructure,subjectedto Bangkok think,justperform.Butinthe andextremeflooding.One- decadesoftheft,incompe- 1970sonecompanythatgotits thirdofourdeltanationwas tenceandcronyism,wasbare- She can write quality-controlprocessright submergedundermonsoon lyfunctioning.Thepower wasToyota.Thesecrettoits rainslastyear.Without systemissofragilethatthe YourreviewofMadeleine successwasintegratingwork- adaptationtobecomemore slightestweatherorprocedural Albright’s“Fascism: A erswithnewproduction- resilienttoflooding,these hiccupcausesblackouts. Warning” commented thatthe systemtechniques.Employees rainscansweepawaylatrines, Agroupofexperts,ledby author’s“waywith wordsisa wererespectedforknowing contaminatewatersources theNewYorkPowerAuthority, happysurprise” (“March ofthe mostabouttheprocessesthey andthreatenareturnof hasofferedsuggestionsto times”, April 14th). Your usedeachdayand,aftertrain- widespreaddiarrhealillness. makethesystemmorereliable. reviewermustnothave read ing,werehandedmorecontrol Sothoughthereiscausefor Microgrids,hardeneddis- “Prague Winter”, Mrs overtheirwork.Moreimpor- celebration,thereislittleroom tributionsitesandimproved Albright’smemoirofchild- tant,theyweregiventhe forcomplacency. transmissionlinesareallon hood, adolescence and double opportunitytosolveproblems KHAIRULISLAM thedrawingboard,butthere exile, firstbythe Nazisand andcontinuouslyimprove Countrydirector arenotenoughfundstocom- then bythe Communists, from theirprocesses.Itwasthe WaterAidBangladesh pleteitall.Privatisation,ifa hernative Czechoslovakia. It is workerswhocouldconnect Dhaka buyercanbefound,willhelp, one ofthe mostengaging thedots. butitwon’tbeeasy. memoirsofanypolitician on Companiesseekingto PuertoRico,likeother eitherside ofthe Atlantic. Theirbangs broughtbucks utiliseAIasthenextstagein non-votingterritoriesofthe TERRY PHILPOT industrialmanagementmust UnitedStates,isattheendof Limpsfield Chart, Surrey incorporatetheselessonsinto thelinewhenitcomesto theirsystems,appreciating assistance.Onlywhenthe Corporate haze workersfortheirknowledgeof PuertoRicanpeoplethem- whatreallyhappensinthe selvesdecidethattheyhave We should find waysto replace day-to-dayprocess,theircre- hadenoughandimplement the elaborate gobbledygook ativepotentialandtheirbasic changewilltheybeableto used to describe tech compa- humanity.Otherwise,aswith improvetheirownlot. nies(“Grabbingback”, March industrialengineering,Isus- STEVEWALSH 31st). Computerscan make pecttheymayfindthemselves Fredericksburg,Virginia workmore efficient, butthey withbitteremployeerobots, do notfundamentallyalterthe antagonisticunionsand nature ofthe workitself. Thailand is notsclerotic disappointingresults. Accountantsdid notstop being TIMLEVEQUE One overlooked factorin Idisagree with yourargument accountantswhen theystarted HiltonHeadIsland, Puerto Rico’sdecline overthe thatThailand isdestined to usingPCs. In the same wayit is SouthCarolina pastdecade (“Afterthe hurri- meetthe same fate asJapan (“A irrelevantifone tapsan app to cane”, April 14th) isthe closure newshade”, April 7th). Thai- call a taxi, orwhethera ofRooseveltRoadsNaval land’spopulation isageing, catalogue existsin paperor Sewage treatment Station in 2004. Roosevelt but, unlike Japan, the country digital form. Whatiswrong Itistrue that, seemingly Roadswasone ofthe largest importslotsofforeign labour. with “Uber, a taxi firm”, againstthe odds, Bangladesh naval basesin the world, Aswell astakingin millions of “Amazon, a mail-order hasmade enormousprogress supporting17,000 personnel migrantsfrom Laos, Myanmar company” and “Facebookand in reachingourpoorestand and pumpinghundredsof and Cambodia, itisan attrac- Google, two media groups”? mostmarginalised communi- millionsofdollarsa yearinto tive destination forskilled THOMAS LINSINGER tieswith bettersanitation the local economy. Home to foreign workers. Geel, Belgium7 facilities(“Beatingthe bugs”, the Southern Area Command Contraryto yourconten- March 24th). The countryhas itwasan economicand politi- tion, there isroom to be almosteradicated open cal powerhouse. Italso an- hopeful forThailand’spros- Lettersarewelcomeandshouldbe defecation through communi- noyed those who were benton pects. The governmenthasset addressedtotheEditorat TheEconomist,TheAdelphiBuilding, ty-led sanitation programmes gettingAmerican armed forces optimisticinfrastructure ob- 1-11JohnAdamStreet, and byinvestingheavilyin to leave the island. An errant jectives, especiallyrelating to LondonWC2N6HT shared latrines, particularly in shell killed a civilian guard, energy. Itisahead oftargets to E-mail:[email protected] itsfast-growingslums. The ignitinga social uproarthat led increase solarand wind Morelettersareavailableat: positive effectthishashad on to the base’sclosure. Butthe capacity. Bigpublic-private Economist.com/letters

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Kim Jong Un, misunderstood youth Macron’s gamble in Washington Have Treasuries tipped? The climate’s methane mystery APRIL28TH–MAY4TH2018 Within reach Universal health care, worldwide Contents TheEconomistApril28th2018 3 37 PoliticsinSingapore 6 Theworldthisweek Notmuchleeway 38 Kazakhpolitics Leaders Tiltingatballoons 9 Globalhealth 38 Women Withinreach Asia’swastedresource 10 LatinAmerica 40 Banyan AneruptioninNicaragua KimJongUn,onaroll 10 Bondmarkets Yieldingtopressure China 13 TheCIA 41 Thepopeandtheparty WindrushThehomesecretary, Situationvacant Lovethineenemy AmberRudd,isdamagedby 14 Financialregulation theimmigrationscandal—but 42 Thebigbeigebook Tamingcrypto XiJinping’slatestwork notfatally:Bagehot,page54 Onthecover Thecaseforuniversalhealth Letters careisapowerfulone— 16 OnAI,sewage,Puerto Specialreport: USbonds includinginpoorcountries: Universalhealthcare Rico,Thailand,Madeleine Ten-yearTreasury-bondyield,% leader,page9.Gettingthere Anaffordablenecessity Albright,techcompanies 15 willbedifficult.Seeour Afterpage42 specialreportafterpage42. 10 Thereisgrowingopposition Briefing MiddleEastandAfrica tothewaymanycountries 20 Globallogistics 5 definedeath,page55 Thinkingoutsidethebox 43 SlumpingJordan Aneconomyundersiege 0 44 SaudiArabia’seconomy 1962 80 2000 18 TheEconomistonline UnitedStates Labourpains Dailyanalysisandopinionto 25 TheEPA 44 Libya’sailingstrongman BondsThereisnoneedto supplementtheprintedition,plus Swampscience AfterHaftar panicaboutrisinggovernment- bondyields:leader,page10. audioandvideo,andadailychart 26 TheWhiteHouse 45 Guinea-Conakry Commoditiesmarketsare Economist.com Veryunique Alpha’sbet rattledbyAmericansanctions E-mail:newslettersand 27 Presidentialauthority 46 FarminginAfrica andtradethreats,page63. mobileedition Thetravelban Squeezedout Momentumintheeuroarea Economist.com/email 27 Regulatingtech 46 Kenya’sslumcinemas slows,page67 Printedition:availableonlineby Thenot-famousfive X-narratedfilms 7pmLondontimeeachThursday 28 Assisteddying Economist.com/printedition Alohasandgoodbyes Europe Audioedition:availableonline 30 Lexington todownloadeachFriday Marco’smakeover 47 Turkey Economist.com/audioedition Erdogan’sambitions 48 MacronandTrump TheAmericas JupitermeetsMercury 31 Nicaragua’sprotests 49 Judicialindependence Fromoasistopowderkeg Luxembourgroars 32 MisogynyinCanada 49 Armenia Volume427Number9089 Thevirginterrorist Peoplepower PublishedsinceSeptember1843 33 JusticeinGuatemala 50 Italy Macron in WashingtonHas totakepartin"aseverecontestbetween Collateraldamage Thenervousnorth France’s president taken too intelligence,whichpressesforward,and anunworthy,timidignoranceobstructing 33 Paraguay’selections 50 Europeanpoliticalparties big a chance? Page 48. ourprogress." Newman,oldparty Thesincerestform Someone has to stand up for EditorialofficesinLondonandalso: 34 Bello offlattery global trade rules. It may as Beijing,Berlin,Brussels,Cairo,Chicago,Madrid, VargosLlosareflects well be Europe: Charlemagne, MexicoCity,Moscow,Mumbai,Nairobi,NewDelhi, 51 Charlemagne NewYork,Paris,SanFrancisco,SãoPaulo,Seoul, TheEUdefendsglobaltrade page 51 Shanghai,Singapore,Tokyo,WashingtonDC Asia 35 China and India Prickly peers 36 Rape in India Almost getting away with it 37 #MeToo in Japan #NotUs 1Contents continues overleaf 4 Contents The EconomistApril28th2018 67 Crypto-currencies Britain Policingthewildfrontier 52 Localelections 68 Cryptomoney-laundering TheWestMidlandswaltz Digitaldetergent 53 Royalbirths 69 Freeexchange Aprincelysum Microeconomics 53 Wales’sgovernment Successionbattle Scienceandtechnology 54 Bagehot WindrushandAmberRudd 71 Climatechange Themethanemystery NorthKoreaEverythingKim 72 Superbugs French intellectualsTo International JongUndoesisaimedat Abiggerkiller understand why they seem to ensuringhisownsurvival: 55 Definingdeath 73 Astronomy be in short supply, consider Banyan,page40 Harderthanyouthink Intotheunknown their old haunt, page 75 74 Humanbirths Business Timetodeliver Subscription service 57 Technologycompanies 74 Utilitymaintenance For our latest subscription offers, visit DeFANGed? Thewaterwitch Economist.com/offers For subscription service, please contact by 58 Chinesemergerreviews telephone, fax, web or mail at the details Commandandcontrol provided below: Booksandarts 59 VincentBolloréarrested North America 75 IntellectuallifeinFrance The Economist Subscription Center Intothesands Insearchoflosttimes P.O. Box 46978, St. Louis, MO 63146-6978 60 BuddhistIPOs Telephone: +1 800 456 6086 76 Superherofilms Facsimile: +1 866 856 8075 Floatinglotuses E-mail: [email protected] Dieanotherday 60 Chaebolreform Latin America & Mexico 76 Thefutureofwarfare The Economist Subscription Center Bigjob,hardgoing Crypto-currenciesThey Oncewerewarriors P.O. Box 46979, St. Louis, MO 63146-6979 remainlargelyunregulated. 61 BrexitandIreland Telephone: +1 636 449 5702 77 Johnson Facsimile: +1 636 449 5703 Butasthestakesincrease,a Hardcheese E-mail: [email protected] Doingthesplits legalframeworkisstartingto 62 Schumpeter Subscription for 1 year (51 issues) 78 Homerinfiction takeshape,page67.Aguideto Chicagobears United States US $158.25 (plus tax) Adriftonthewine-dark sea howmuchpolicingisneeded: Canada CA $158.25 (plus tax) leader,page14 Latin America US $289 (plus tax) Financeandeconomics 80 Economicandfinancial 63 Commodities indicators Principal commercial offices: The800-poundgorilla Statisticson42economies, The Adelphi Building, 1-11John Adam Street, 64 Buttonwood plusacloserlookat London WC2N 6HT AIandmarkets remittances Tel: +44 (0) 20 7830 7000 65 RenegotiatingNAFTA Rue de l’Athénée 32 1206 Geneva, Switzerland Adealundone Obituary Tel: +4122 566 2470 66 Universalbasicincome 82 Avicii 750 3rd Avenue, 5th Floor, New York, NY 10017 Notfinnished Tel: +1212 5410500 When it’s all over 66 Prizewinningeconomics 1301Cityplaza Four, 12 Taikoo Wan Road, Taikoo Shing, Hong Kong Schoolrules Tel: +852 2585 3888 67 The euro area Other commercial offices: MethaneScientists struggle Catching a cold Chicago, Dubai, Frankfurt, Los Angeles, to understand what is behind Paris, San Francisco and Singapore arecent rise in emissions of a powerful greenhouse gas, page 71 PEFC certified This copy of The Economist is printed on paper sourced from sustainably managed forests certified to PEFC PEFC/29-31-58 www.pefc.org ©2018 The Economist Newspaper Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Newspaper Limited. The Economist(ISSN 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, N Y 10017. The Economist is a registered trademark of The Economist Newspaper Limited. Periodicals postage paid at New York, NYand additional mailing offices. Postmaster: Send address changes to The Economist, P.O. 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 Quad/Graphics, Saratoga Springs, NY 12866 6 The world this week The EconomistApril28th2018 Politics ans,killingten,wascharged livesthananinsurgencyin the Germany’sSocial Democrats with murder. Before the attack north-eastofthe countryby formallyelected Andrea the driverannounced on jihadistgroups, includingBoko Nahlesastheirleader, the first Facebookthata revoltofinvol- Haram. woman to head the party. Ms untarilycelibate men—who Nahleshasa battle tryingto resentwomen fornothaving Aparliamentarycommittee in unite the SPDafteritsbattering sexwith them—had begun. Zimbabwesummoned Robert atlastyear’sgeneral election Mostofthe dead were women. Mugabe, the formerpresident, and contentiousdecision to to testifyin relation to allega- join anothergrand coalition Harmony breaks out tionsthatup to $15bn-worth of with the Christian Democrats. North Koreaannounced that diamondswere looted from itwassuspendingmissile government-controlled mines. The ask Haspel show launchesand nucleartests, in The Senate Foreign Relations advance ofa summitbetween Committee voted in favourof itsleader, Kim JongUn, and Mike Pompeoassecretaryof South Korea’spresident, Moon state. AfewhesitantDemo- Dozensofpeople were killed Jae-in. South Korea, forits part, cratsin the full Senate threw in protestsin Nicaragua. stopped blaringpropaganda, theirsupportbehind hisap- People are furiousthatthe includingK-pop music, across pointment. Itwaslessclear regime ofPresidentDaniel the borderwith the North. whetherthe woman chosen to Ortega emptied the public succeed MrPompeo asdirector pension potand then ordered Setya Novanto, a former ofthe CIAwill be confirmed. workersto top itup. The prot- Speakerofthe lowerhouse of Concernshave been raised estslasted fordays, even after Indonesia’sparliament, was aboutGina Haspel’s past MrOrtega backed down. sentenced to 15 yearsin prison involvementin torture. A Several uglysculptureserected forcorruption. The case had Palestiniansin Gazademon- battalion ofretired military byhiswife were wrecked by been seen asa testofthe coun- strated alongthe borderfence officershave voiced their angrymobs. Independent try’sjustice system. with Israel forthe fourth time objectionsto hernomination. newschannelswere blocked in recentweeks. Israelsays bycensors; a journalistwas Asuicide-bomberkilled 60 Hamas, the Islamistmove- The Republicans held a con- killed while recordinga people who were registering to mentthatrulesGaza, isusing gressional seatin the suburbs broadcast. vote in Kabul, the capital of the protestsascoverforat- ofPhoenix, butwith their Afghanistan. Parliamentary tacks. Israel hasshotand killed majorityslashed from 37 Mario Abdo Benítezwon elections, currentlyscheduled 40 Palestiniansoverthe course percentage pointsin 2016 to Paraguay’spresidential forOctober, have alreadybeen ofthe protests, accordingto justfive. Itisthe latest special election, maintainingthe delayed bythree yearsbecause Gaza’shealth ministry. election indicatinga swing rulingColorado Party’sgrip on ofsquabblingwithin the towardsthe Democratsahead power. The formersenator government. An airstrike hita wedding in ofthe mid-termsin November. beatEfraín Alegre, ofthe Yemen, killingdozensof Liberal opposition. Police in Shanghaiarrested people. The Houthi rebels eightpeople in connection blamed the Saudi-led coalition In the firstofthree televised with whatofficialsdescribed thatisfightingon behalfof debates,Mexico’sfive presi- asa Ponzi scheme operated by Yemen’sdeposed government. dential candidatessparred aChinese company, Shanlin The secretary-general ofthe overhowto reduce crime and Financial. Theyhave been UN, António Guterres, called violence. Mostpundits accused ofillegallyraising foran investigation. thoughtRicardo Anaya, the more than 60bn yuan ($9.5bn), centristcandidate, gave the usingmoneydeposited by Out of office message bestperformance, butpolling newinvestorsto paylong- Armenia’spresident-turned- givesAndrésManuel López standingones. prime minister, Serzh Obrador, the left’sman, a lead Sargsyan, resigned daysafter ofup to 20 percentage points. The formerchiefregulatorof beingelected to hisnewjob Emmanuel Macronwentto The election ison July1st. China’s insurance industry, followinghuge demonstra- Washington on a state visit, the XiangJunbo, wasformally tionsagainsthim, including by firstofthe Trump administra- Prosecutorsin Guatemala charged with bribe-taking. Mr off-dutymembersofthe tion. Lastyearthe French workingwith CICIG, a UN- Xiangwassacked lastyear. His armed forces. Russia declined presidentcharmed Donald backed anti-corruption com- agencywasmerged with the to intervene. Trump atthe Bastille parade in mission, accused President bankingregulatorlastmonth. Paris. He used histrip to the JimmyMorales’spartyof PeterMadsen, a renowned American capital to tryto acceptingmore than $1m in Anew terror Danishinventor, wassen- persuade MrTrump notto pull illegal donationsduringthe An attackon a church in tenced to life in prison for the outofthe agreementmonitor- campaign in 2015. Agroup of Nigerialeftatleast19 people murderofa Swedish journal- ingIran’snuclearprogramme, prominentbusinessmen apol- dead, includingtwo priests, in ist, Kim Wall. MsWall’sdis- which MrTrump wantsto ogised forfundinghim. Mr the latestincidentofviolence membered bodywasfound “fix”. In a speech to Congress, Moralesclaimshe isinnocent. between nomadicherdersand offthe coastofCopenhagen in delivered in flawlessEnglish, farmersin the country’svola- August. She had visited Mr MrMacron decried the rise of In Torontothedriverofa van tile middle belt. The escalating Madsen’ssubmarine foran nationalism in variousparts of thatploughed into pedestri- conflictisnowclaimingmore interview. the world. 1 TheEconomistApril28th2018 Theworldthisweek 7 Business vestment-bankingandtrading mentswiththetechcompany guidelines;four-fifthsofthem divisions.Revenuefromtrad- constitutedillegalstateaid. hadbeenidentifiedbymach- ingplungedby17%inthefirst Untiltheappealsprocessis ine-learningalgorithms. TheyieldonAmerica’sten- quartercomparedwiththe exhausted,Applewillpaythe Around30mpeopleobjected yearTreasurybondpassed sameperiodlastyear,astark €13bnintoanescrowaccount. tovideos;1.5mweretaken 3%forthefirsttimesinceearly contrastwithDeutsche’s downbecauseofhuman 2014.Stockmarketsfrowned, Americanrivals,whichposted Soaringrevenuesfrom complaints.Ofthosethatwere asinvestorsworriedthata stronggrowthintradingin- advertisingpushedFace- flaggedbypeople,sexual climbingyieldonthebench- come.Deutschenowplansto book’snetprofitinthefirst contentcausedthemostcon- markbondwouldleadto shrinkitsbusinessinAmerica, quarterupby63%yearonyear, cern,accountingfor30%ofall higherborrowingcosts.Inthe amovethatactivistinvestors to$5bn.Thenumberof videosreported. aftermathofthefinancial hadbeenpushingfor,inorder monthlyactiveusersgrew crisis,whencentralbanks tofocusoncommercialclients sharplyto2.2bninthethree- Twitterreportednetincome hoovereduptrillionsofdol- inEurope.TheGermanbank’s monthperiod(theCambridge of$61mforthefirstthree lars-worthofgovernment overallnetincomefellby79% Analyticascandalemergedat monthsoftheyear,itssecond bonds,theten-yearyieldfellto to€120m($147m). thetailendofthequarter). consecutivequarterlyprofit historiclows.Ithasrisen Alphabet,Google’sparent followingyearsoflosses.The steadilythisyearinpartbe- BarclayssaidthatBritain’s company,sawitsnetprofit socialnetworknowhas336m causetheFederalReserveis financial-conductregulators increaseby73%to$9.4bn. monthlyactiveusers.Itspro- continuingalongitspathof hadfinishedtheirinvestiga- filehasbeenliftedbyonevery tighteningmonetarypolicy. tionintoJesStaley,thebank’s Plantingaflag activeuser,DonaldTrump, chiefexecutive,overhisat- whohasposted37,400tweets AmuddleforMurdoch tempttouncovertheidentity YouTube (andcounting)sincesigningup Comcastformallysubmitteda ofawhistleblower,andthat Contentreportedbyusers,bytype inMarch2009. October-December2017,m £22bn($31bn)bidforSky, theyhaveproposedhepaya 0 2 4 6 8 10 Britain’spremiersubscrip- financialpenalty,but“arenot Baby,youcan’tdrivemycar tion-TVbroadcaster.That alleging…thathelacksfitness Sexualnature Compelledtomakeitsdeliv- Misleading/spam promptedSkytowithdrawits andpropriety”tocontinuein eriesevermoreconvenient, Hate/abuse recommendationtoacceptan hisjob. Amazondemonstrateda Violence offerfrom21stCenturyFox, servicethatallowscouriersto whichowns39%ofSkyand TheIrishgovernmentreached Harmfulacts leavepackagesincustomers’ wantstobuytheremaining anagreementwithAppleover Childabuse cars,whichcanbeunlocked 61%inordertosellthelotto repayingthe€13bn($16bn)in Promotingterrorism withawirelessconnection. Disney,alongwithFox’sother backtaxesthattheEuropean Source:GoogleTransparencyReport Theserviceisavailablefor entertainmentassets. Union’scompetitionregulator Meanwhile,YouTube,which certaintypesofvehicleswith hasdecidedareowedto isownedbyGoogle,published therequiredtechnologyand VincentBolloré,oneofthe Ireland.Thegovernmentand itsfirstdataonthevideosit certaintypesofdriverswith richestbusinessmeninFrance, Applearebothappealing removesfromitswebsite. therequiredleveloftrust. wasplacedunderformal againsttheregulator’sruling Nearly8.3mvideosweretaken investigationinacorruption from2016,whichfoundthat downinthelastthreemonths For other economic data and probe.Aformersubsidiaryof Ireland’slow-taxarrange- of2017forviolatingYouTube’s news see Indicators section hisBolloréGroupisallegedto havesupportedtheelection campaignsofpoliticiansin Guinea and Togo in 2009 and 2010 in return forportcon- tracts. MrBolloré and hisfirm denywrongdoing. Afterrejectingfourprevious offers, Shire, which specialises in drugsforrare diseasesand is listed in London, said itwas willingto recommend to shareholdersa preliminary takeoverbid from Takeda, a smallerJapanese rival. The deal isworth £46bn ($64bn). If completed the combined companywould rankalong- side industrygiantssuch as Bayerand GlaxoSmithKline. Christian Sewingused hisfirst quarterlyearningsreportsince becomingchiefexecutive at Deutsche Bankto layout sweepingchangesto itsin- Leaders The EconomistApril28th2018 9 Within reach The case foruniversal health care is a powerful one—including in poorcountries BYMANYmeasurestheworld throughout-of-pocketpayments. More servicescould be pro- has never been in better vided ifthatmoney—and the riskoffallingill—were pooled. health. Since 2000 the number The evidence forthe feasibilityofuniversal health care goes ofchildren who die before they beyond theoriesjotted on the backofprescription pads. Itis are five hasfallen byalmost half, supported byseveral pioneeringexamples. Chile and Costa to 5.6m. Life expectancy has Rica spend aboutan eighth ofwhatAmerica doesperperson reached 71, a gain offive years. on health and have similarlife expectancies. Thailand spends More children than everare vac- $220 perperson a yearon health, and yethasoutcomes nearly cinated. Malaria, TBand HIV/AIDSare in retreat. asgood asin the OECD. Itsrate ofdeathsrelated to pregnancy, Yetthe gap between thisprogressand the still greater poten- forexample, isjustoverhalfthatofAfrican-American moth- tial thatmedicine offershasperhapsneverbeen wider. Atleast ers. Rwanda has introduced ultrabasic health insurance for halfthe world iswithoutaccessto whatthe World Health Or- more than 90% ofitspeople; infantmortalityhasfallen from ganisation deemsessential, includingantenatal care, insecti- 120 per1,000 live birthsin 2000 to under30 lastyear. cide-treated bednets, screeningforcervical cancerand vacci- And universal health care ispractical. Itisa way to prevent nationsagainstdiphtheria, tetanusand whoopingcough. Safe, free-ridersfrom passingon the costsofnotbeingcovered to basicsurgeryisoutofreach for5bn people. others, forexample by cloggingup emergency rooms or by Those who can get to see a doctor often pay a crippling spreadingcontagiousdiseases. Itdoesnothave to mean big price. More than 800m people spend over10% oftheirannual government. Private insurersand providerscan still play an household income on medical expenses; nearly180m spend importantrole. over25%. The qualityofwhattheygetin return isoften woeful. Indeed such a practical approach isjustwhatthe low-cost In studiesofconsultationsin rural Indian and Chinese clinics, revolution needs. Take, forinstance, the design ofhealth-insur- just12-26% ofpatientsreceived a correctdiagnosis. ance schemes. Manycountriesstartbymakinga small group Thatisa terrible waste. Asthisweek’sspecial reportshows, ofpeople eligible fora large numberofbenefits, in the expecta- the goal ofuniversal basichealth care issensible, affordable tion thatothergroupswill be added later. (Civil servants are, and practical, even in poorcountries. Withoutit, the potential mysteriously, common beneficiaries.) Thisisnotonly unfair ofmodern medicine will be squandered. and inefficient, butalso riskscreatinga constituency opposed to extendinginsurance to others. The betteroption is to cover Howthe otherhalfdies asmanypeople aspossible, even ifthe servicesavailable are Universal basichealth care issensible in the waythat, say, uni- sparse, asunderMexico’sSeguro Popularscheme. versal basiceducation issensible—because ityieldsbenefits to Small amountsofspendingcan go a longway. Research led societyaswell asto individuals. In some quartersthe very byDean Jamison, a health economist, hasidentified over 200 idea leadsto a dangerouselevation ofthe blood pressure, be- effective interventions, includingimmunisationsand neglect- cause itsuggestspaternalism, coercion orworse. There isno ed proceduressuch asbasicsurgery. In total, these would cost hidingthatpublichealth-insurance schemesrequire the rich to poorcountriesaboutan extra $1perweekperperson and cut subsidise the poor, the young to subsidise the old and the the numberofpremature deathsthere bymore than a quarter. healthyto underwrite the sick. And universal schemes must Around halfthatfundingwould go to primaryhealth centres, have a wayofforcingpeople to pay, through taxes, say, orby not city hospitals, which today receive more than their fair mandatingthattheybuyinsurance. share ofthe money. Butthere isa principled, liberal case foruniversal health care. Good health issomethingeveryone can reasonably be The health ofnations assumed to wantin orderto realise theirfull individual poten- Consider, too, the $37bn spenteach yearon health aid. Since tial. Universal care isa wayofprovidingitthatis pro-growth. 2000, thishashelped save millionsfrom infectiousdiseases. The costsofinaccessible, expensive and abjecttreatment are Butinternational health organisationscan distortdomestic in- enormous. The sickstruggle to getan education orto be pro- stitutions, forexample bysettingup parallel programmes orby ductive atwork. Land cannotbe developed ifitisfull ofdis- divertinghealth workersinto petprojects. Abetterapproach, ease-carrying parasites. According to several studies, confi- seen in Rwanda, iswhen programmestargetinga particular dence abouthealth makespeople more likelyto setup their disease bringbroaderbenefits. One example isthe way that own businesses. the Global Fund to Fight AIDS, Tuberculosis and Malaria fi- Universal basic health care is also affordable. A country nances community health workers who treat patients with need notwaitto be rich before itcan have comprehensive, if HIVbutalso those with otherdiseases. rudimentary, treatment. Health care isa labour-intensive in- Europeans have long wondered why the United States dustry, and communityhealth workers, paid relatively little shunsthe efficienciesand health gainsfrom universal care, but compared with doctorsand nurses, can make a bigdifference its potential in developing countries is less understood. So in poorcountries. There isalso alreadya lotofspending on longashalfthe world goeswithoutessential treatment, the health in poorcountries, butitisoften inefficient. In India and fruitsofcenturiesofmedical science will be wasted. Universal Nigeria, for example, more than 60% of health spending is basichealth care can help realise itspromise. 7 10 Leaders TheEconomistApril28th2018 LatinAmerica An eruption in Nicaragua Lessonsfromthetroublesofacaudillo AMONG Latin America’s people. It is often forgotten that authoritarian governments handfulofautocracies,that tend to depend even more on popularity than democratic of Daniel Ortega in Nicaragua onesdo.MrOrtega hasneutered the institutionsthat might once stood out for its stability. serveasshockabsorbersagainstpopularire. In this predica- MrOrtegawasthemostpromi- mentauthoritarian rulerscan negotiate, ordigin and tough it nentleaderoftherevolutionary out.Whichwill MrOrtega pick? Sandinista regime ofthe1980s, Hehasoffered to talkto the private-businesslobby and the butlostanelectionin1990.He church.Theyshould insiston a broaderdialogue. This cannot laterforgedadirtydealwithaconservativerivalthatlethim onlybeaboutpension reform. Itshould include, atthe very returntopowerwithjust38%ofthevotein2006,andhassince least,aninvestigation into the recentdeaths, an independent clungtoofficebynobblingdemocraticinstitutions.Atthelast auditofthegovernment’saccountsand ofaid money, the res- electionin2016,hebannedthemainopposition.Nicaragua torationofpolitical freedomsand the reform ofthe Ortega- thusjoinedVenezuela,theonlytwoLatinAmericancountries nobbledelectoral authorityand supreme court. tohaveregressedfromdemocracytodictatorship. MrOrtegarulesbycombiningleft-wingrhetoricwithmain- Ortegafamilyvalues lyright-wingpolicies,lettingtheprivatesectorandtheCatho- UnfortunatelyMrOrtega isunlikelyto go alongwith much of licchurchdowhattheylikeandavoidingquarrelswiththe this.Aged72,he appearsto wantto install MsMurillo as his UnitedStates.Hehaskepthispoliticalbaseamongthepoor successor.Thechancesare thathe cannotdo thatdemocrati- thankstoroughly$5bninVenezuelanaid.Hehasmadehis cally. After several years ofrapid growth, the economy has wife, Rosario Murillo, vice-president. Corruption has flour- startedtoslow. The fiscal accountsare underpressure. Unlike ished.AllthiscarriesawhiffoftheSomozas,thebrutal,thiev- hisfriendNicolásMaduro in Venezuela, MrOrtega has no oil. ingdictatorswhomtheSandinistasoverthrewin1979.Never- His economy depends on the confidence of investors and thelessithasworked.Thecountry,ravagedbycivilwarinthe lenders.Allthissuggestsharsherrepression maynot work. 1980s,hasbeenatpeace.Theeconomyhasgrownstrongly. Inonesense, MrOrtega isnotalone. Hisfellowpopulist ButonApril18thsomethingsnapped.Afteryearsofhisgov- caudillosinLatin America are each in varyingdegrees oftrou- ernmentplunderingthenationalpensionpot,MrOrtegaim- ble.Havinglostmajoritysupport, MrMaduro abolished Vene- posedbydecreea5%cutinpensionsandraisedcontributions. zuela’s parliament and is dragging his country to socio- Furiouscitizensrioted(seeAmericassection).Policeandpro- economiccatastrophe. In EcuadorRafael Correa lostcontrol regimethugsrespondedwithclubsandbullets.Almostthree afterhesponsored a successorwho hasadopted more moder- dozen people were killed. The government silenced several ateanddemocraticpolicies. In Bolivia Evo Moralesmay face televisionchannels.AdegreeofcalmreturnedonlyafterMr electoraldefeatifhe insistson tryingto prolonghis more than Ortegacancelledthedecree. adecadeinpoweratan election in 2019. Soonerorlaterpeople MrOrtega’sproblemsmayhavejustbegun.Everythingin- tireofcaudillos. MrOrtega facesa starkchoice: retreat while he dicates that the rulingcouple have lost the consent of their stillcan,orriskplunginghiscountryinto fardeeper turmoil.7 Bondmarkets Yielding to pressure There is no need to panicaboutrising government-bond yields ROUNDnumberswouldbeir- andconsumers. When theyrise, the weakestcompaniesand US bonds relevantifinvestorswere ra- the mostindebted consumersare likelyto getinto difficulty. If Ten-year Treasury-bond yield, % tional. But they are not. This the costofgovernmentborrowingrises, itbecomesharder to 15 week the ten-year Treasury- finance budgetdeficits. Politiciansmaybe forced into cutting 10 bond yield passed the 3% spendingorraisingtaxes. Ifthe breachingofthe 3% threshold 5 threshold for the first time in were to presage an abruptrise in yields, there could be trouble 0 over four years and investors ahead (which iswhystockmarketswobbled thisweek). Yet a 1962 80 2000 18 shuddered. Their worry is that bond-marketbloodbath seemsunlikely. thelongdownwardmarch in yields, which began in 1982, may Itisno surprise thatbond yieldshave been trending up- atlastbe over. Isit? wards. Theyreached historicallylowlevelsafterthe financial That question is not of interest just to bondholders, for crisisof2007-08, when central bankspulled outall the stops in whom higher yields mean lower prices. Government-bond an attemptto revive the global economy. Trillionsof dollarsof yieldssetthe benchmarkforthe borrowingcostsofcompanies governmentbondswere boughtaspartofquantitative-easing 1 TheEconomistApril28th2018 Leaders 13 2(QE)programmes.Asworriesmountedabout“secularstagna- Jumpy investors should remember Japan. Government- tion”,anextendedperiodofslowgrowthandlowinflation,in- bondyieldstherehave defied two decadesofforecasts that vestorswereevenpreparedtolockinlosses.Atonepointmore theywillmovehigher. BettingagainstJapanese bonds proved than$10trn-worthofbondstradedonnegativeyields. tobesuchabadtradingstrategythatitbecame known as“the Lastyear,however,theglobaleconomyseemedtopickup widow-maker”.Itistoo earlyto proclaim the end ofthe low- again.Centralbankswithdrewsomemonetarystimulus.At yielderaelsewhere,too. Economicdata so farthisyear have thesametime,governmentsstartedtoeasefiscalausterity.The beenratherdisappointing, particularlyin Europe (see Finance developed world may have reached a turning-point, where section).Andthegap between two-yearand ten-yearTreasury theamountofQEsteadilydwindlesandtheamountofgov- yieldshasnarrowed since earlyFebruary, from three-quarters ernment-bondissuancerises.Americaisleadingtheway.The ofapercentagepointto around halfa point. Thisflattening of FederalReserveisparingbackitsbondholdings.Andafterthe theyieldcurveisoften seen asa sign thatthe market believes taxcutspassedinDecember,trillion-dollardeficitsareforecast thepeakininterestratesmaybe gettingclose. from2020. Themainthreattothegovernment-bondmarkethashis- Theworldisflatter toricallybeenhigherinflation.Headlineinflationrateshave Someeventhinkthatthe lowsforgovernment-bond yields are tickedupabitandtherecentsurgeintheoilpricemayaddto stilltocome.Whenthe nextrecession hits, asiteventually will, the pressure (see Finance section). Tighter labour markets centralbanksmaynothave the leewayto cutshort-term rates couldyetpushupwagesandhaveamorelastingimpact.Butat by the four percentage points or so that are the typical re- themoment,theonlyOECDcountrieswithannualinflation sponsetoadownturn. Theymayhave to unleash a newround ratesofmorethan3%areMexicoandTurkey. ofQEandbuylotsmore bonds. Asharpriseinbondyieldsmaybeself-limiting.TheIMF Sodonotpanic.Even ifbondsyield a bitmore than 3%, that warnedonApril18ththatglobaldebtishigherthanever,rela- isalotlowerthanthe level which prevailed before 2007. Pen- tivetoGDP.Theriskthathigherborrowingcostscouldsharply sionfunds,insurance companiesand retired saverswill still be slowgrowthoughttodissuadecentralbanksfromtightening willingbuyersofbondsatthese rates. Unlessinflation unex- monetarypolicytooquickly. pectedlysurges,thisisnota rout. 7 TheCIA Situation vacant Mike Pompeo deserves to be confirmed. Gina Haspel has questions to answer WANTED: qualified candi- seemsdeterminedto restore confidence atthe State Depart- dates to work for the ment, which became demoralised underRexTillerson. At the world’smostscrutinised organi- CIAhe did notcreate anypublicscandal, unlike several ofMr sation. Applicants should be Trump’sothernominees. Itishard to thinkofmanybetter- aware thatthe CEOhasa history qualified choiceswho would wantto workforMrTrump, and ofunderminingstaffand firing all too easyto thinkofworse ones. them publicly. Theyshould also Gina Haspel, MrPompeo’ssuccessoratthe CIA, who isdue know that his lawyer is under to appearin Senate hearingson May9th, isa hardercase. Ms criminalinvestigation.Oh,and thatthe formerhead of the FBI Haspel isa highlyregarded careerofficer, who can be expected islookinginto howthe CEOgotthe job. The successful candi- to insulate the CIAfrom political interference bya president date will face a televised inquisition bymembersofthe Senate who doesnotrecognise boundaries. Butshe ran a black site in in which questionswill be raised abouttheircharacter. Thailand where a prisonerwaswaterboarded. (She also trans- Fifteen monthsinto the presidencyofDonald Trump, no- mitted herboss’sordersto destroyvideo evidence ofinterro- body who chooses to join his administration can say they gations, though an investigation found she wasnotat fault.) have notbeen warned. Hisformerpresssecretaryhassaid he regretted misleading the public, under instruction from Mr Desperate times Trump, on the firstfull dayofthe presidency. Hisformer com- In usingwaterboarding, MsHaspel wasfollowingorders that municationsdirectorsaid she told “white lies” forhim. Hisfor- she believed mighthelp preventfuture terroristattacks, orders mersecretaryofstate did notdenyreportsthathe called the which had been approved bythe White House’slegal counsel. presidenta “fuckingmoron”. The formerhead ofthe FBIsays Yetthatdefence isnotenough, fortwo reasons. MrTrump is“morallyunfit” to be president. When asked what First, the UNConvention againstTorture, which America workingforMrTrump waslike, hisformerchiefofstaff re- signed, banspunishmentthatcausesphysical ormental pain plied: “Take everythingyou’ve heard and multiplyitby50.” orsuffering. The CIAwasresponsible forboth atitsblack sites. And yetforAmerica to have a functioningdemocracy, the “I couldn’tgetawayfrom the mental picturesofnaked men presidentshould be able to appointa cabinet, made up ofcom- chained to the ceilingin a cold, blazinglylitcell for endless petentpeople willingto serve him. Mike Pompeo, who is setto days, defecatingin theirdiapers, unchained onlyto be further be approved as secretary of state by the Senate this week, abused,” writesJamesComey, deputyattorney-general in the meetsthisstandard. MrPompeo maybe too eagerto flatter the Bush administration, in hismemoirswhich came outearlier president but, sadly, that is a requirement for survival. He thismonth. SenatorJohn McCain wrote ofthe harm the CIA1 14 Leaders The EconomistApril28th2018 2didAmerica,sayingthatit“compromisedourvalues,stained ingwaterboarding;JeffSessions, the attorney-general, voted our national honour, and threatened our historical reputa- againstthelawof2015because he thoughtthe CIAoughtnotto tion.”Torture,evenwhenitiscarriedoutindefenceofAmeri- beconstrained.Intherightcircumstancesitisnothard to imag- ca,isun-American.MsHaspelshouldhaveseenthat. inetheWhiteHousechangingitslegal guidance. Second,theprohibitionontortureislesssecurethanitwas TheCIA’sleadingrole in interrogation and MsHaspel’sre- whenBarackObamaleftoffice.In2015Congresspassedalaw cordputtortureattheheartofherconfirmation in a waythatit restrictingthearmyandtheCIAtousingtechniquesapproved hasnotbeenforotherappointees. In herhearingshe mustset intheArmyFieldManual.However,whencampaigning,Mr outwhatsheconsidersto be torture, and then saywhether she Trumpsaidhefavouredbringingback“ahellofalotworse wouldfollowanorderfrom a presidentto carryoutsuch treat- than waterboarding”, though there is no sign that he has ment.Onlyifsheacknowledgesthatwhatshe did before was soughttodosoinoffice.MrPompeohassaidheisopentous- wrongshouldMsHaspel win control ofthe CIA.7 Financialregulation Taming crypto Crypto-assets need corralling. Here is a guide to howmuch oversightis required THEwildrideseemstohave Criminalswereamongthe earliestadoptersofdigital curren- calmed. Late lastyearspecu- cies. Regulation could help smoke them outbyextending ex- lators sent the price of crypto- istinganti-money-launderingrulesinto the crypto-sphere (see currenciessoaring. The value of Finance section). The obvioustargetsare the exchanges where bitcoin, the best-known, has fall- ordinarymoneyisswapped forcrypto and vice versa. Regula- en by half since then. But the torsshould demand thatthese exchangesapplysimilar stan- momentum behind all things dardsto those ofbanks. These include requiringidentification crypto remains powerful. Bit- from all customersand keepinga record ofunusual transac- coin isstill worth seven timeswhatitwasjusta year ago. In the tions. Several countries, includingAustralia and South Korea, firstquarterofthisyear, accordingto CoinDesk, a news ser- alreadydo this; earlierthismonth the EU passed a directive vice, $6.3bn wasraised through initial coin offerings(ICOs), a stipulatingthe same thing. There isa need fora harmonised form offundingin which firmsissue digital tokens, more than approach, in orderto preventillicitflowsofmoneyto crypto- in all of2017. Lastmonth the StudentLoan Report, a website, havens. found thatone in five American studentsitasked had used As for how much protection consumers should enjoy partoftheirloan to join the crypto rush. when theyinvestin crypto-assets, some advocate restricting No wonderregulatorswantto exertgreatercontrol over the the market to accredited investors, on the ground that they crypto-sphere. The chance to raise moneyvia ICOshasattract- maybe betteratjudgingrisksthan ordinarypuntersand are ed asmanycon men asithasgenuine entrepreneurs. The head certainlymore cushioned againstanylosses. Butthe bar to im- ofEuropol, Europe’spolicingagency, hasestimated that 3-4% posingbanson howpeople can risktheirown moneyought to ofthe region’scriminal proceedsare nowlaundered through be high. The authoritiesin manycountriesissue explicit warn- crypto-assets. Plentyin the industrythinkregulation would ingsaboutthe risksassociated with crypto-speculation; sever- help legitimise crypto. Yetcrypto-enthusiastsare also rightto al are clampingdown on the advertisingofICOs. That, allied fearthatoverzealousregulation, like China’sban on crypto-ex- with existingrulesto punish out-and-outfraud, issufficient. changesand ICOs, could throttle a promisingtechnology. To The third question is easily answered at the moment. achieve the right balance, regulators must find sensible an- Crypto-assetsdo notyetpose a riskto global financial stability; swersto three questions: whatare crypto-assets? How should cumulatively, theyare worth lessthan 3% ofthe combined bal- day-to-dayrisksbe managed? And whatthreatdo theypose to ance-sheetsofthe central banksin America, Britain, Germany financial stability? and Japan. Butthe wild swingsofbitcoin are a warning that Todaythere isno consensuson whata crypto-assetis. Even thingscan quicklychange. Regulatorsmustkeep a weather eye within countries, authoritiesdisagree on howto classify them. on the factorsthatcould heighten systemicrisk, such asthe Are theya commodity, a currency, a securityortheir own, pe- amountofborrowingdone bycrypto-investors. culiar asset class? In America the Securities and Exchange Commission hashinted thatitwill treatmosttokensissued Lassoing cryptos through ICOsassecurities. Thatwould mean onerousdisclo- Regulatingcrypto-assets is no easy task. Too much red tape sure requirements. Buta blanketapproach doesnotcapture mayhamperinnovation. Some think, forexample, thatICOs the shape-shiftingnature ofmanydigital assets. Better to go could give rise to a newform of“crypto co-operative” in which the wayofthe Swissregulator, FINMA, which in Februarysaid digital tokensprovide founders, employeesand userswith a itwould base treatmenton theiractual function—ie, whether shared interest in its success. At the same time, a market in theyare used forpayments; asa utilitytoken thatgives itshold- which scammersand criminalsroam freelydetershonest ac- eraccessto a specificservice; orasan investment. Thisalso torsfrom takingpart. The factthatall ofthisisnew technologi- meansa token’sclassification can change overtime. cal terrain addsto the pressure on regulatorsto show unusual Such decisionspointtowardshowto deal with day-to-day flexibility. Foraslongascrypto hasitsWild Westimage, regu- crypto-risks, from money-launderingto consumerprotection. latorswill need to keep theirfrontiermentality. 7 16 Letters The EconomistApril28th2018 people’slivesincludesimprov- navy’sevictionhascontribut- partnership projectshave been LessonsfromthepastforAI inghealthandproductivity edgreatlytoPuertoRico’s announced, orare in the pipe- Yourspecialreportonartificial andgettingmorechildreninto generaleconomicatrophy. line, in portinfrastructure, toll intelligenceinbusiness(March schools. WILLIAMGEMBUS roads, high-speed rail, LNG 31st)musedthat“AIwillmake Butthebattleisnotyet FortLauderdale terminalsand publictransport. workplacesmoreefficient, won.Nearlyoneinthreepeo- To putitmildly, the Thai safer—andmuchcreepier”.The pleuseunimprovedsanitation Iamaformerchiefexecutive governmentisgearingup for emphasisonindustrialengi- services.Diarrhealdiseases ofapowerutilityandvisited massive infrastructure neeringonthefactoryfloorin stillclaimthelivesof2,220 PuertoRicolastmonth.De- developmentand the private themid-20thcenturybrought childreneachyear.Moreover, spiteaco-ordinatedeffortfrom sectoriseagerto take part. aboutmenwithclipboards Bangladesh’slocationonthe thefederalgovernmentand DAVID BECKSTEAD tellingemployeesexactlyhow frontlineofclimatechange theAmericanarmytorestore Consultant todotheirjob,evengoingso threatenstoreversethispro- electricity,theunderlying Tilleke & Gibbins farastotellworkersnotto gress,throughrisingsealevels infrastructure,subjectedto Bangkok think,justperform.Butinthe andextremeflooding.One- decadesoftheft,incompe- 1970sonecompanythatgotits thirdofourdeltanationwas tenceandcronyism,wasbare- She can write quality-controlprocessright submergedundermonsoon lyfunctioning.Thepower wasToyota.Thesecrettoits rainslastyear.Without systemissofragilethatthe YourreviewofMadeleine successwasintegratingwork- adaptationtobecomemore slightestweatherorprocedural Albright’s“Fascism: A erswithnewproduction- resilienttoflooding,these hiccupcausesblackouts. Warning” commented thatthe systemtechniques.Employees rainscansweepawaylatrines, Agroupofexperts,ledby author’s“waywith wordsisa wererespectedforknowing contaminatewatersources theNewYorkPowerAuthority, happysurprise” (“March ofthe mostabouttheprocessesthey andthreatenareturnof hasofferedsuggestionsto times”, April 14th). Your usedeachdayand,aftertrain- widespreaddiarrhealillness. makethesystemmorereliable. reviewermustnothave read ing,werehandedmorecontrol Sothoughthereiscausefor Microgrids,hardeneddis- “Prague Winter”, Mrs overtheirwork.Moreimpor- celebration,thereislittleroom tributionsitesandimproved Albright’smemoirofchild- tant,theyweregiventhe forcomplacency. transmissionlinesareallon hood, adolescence and double opportunitytosolveproblems KHAIRULISLAM thedrawingboard,butthere exile, firstbythe Nazisand andcontinuouslyimprove Countrydirector arenotenoughfundstocom- then bythe Communists, from theirprocesses.Itwasthe WaterAidBangladesh pleteitall.Privatisation,ifa hernative Czechoslovakia. It is workerswhocouldconnect Dhaka buyercanbefound,willhelp, one ofthe mostengaging thedots. butitwon’tbeeasy. memoirsofanypolitician on Companiesseekingto PuertoRico,likeother eitherside ofthe Atlantic. Theirbangs broughtbucks utiliseAIasthenextstagein non-votingterritoriesofthe TERRY PHILPOT industrialmanagementmust UnitedStates,isattheendof Limpsfield Chart, Surrey incorporatetheselessonsinto thelinewhenitcomesto theirsystems,appreciating assistance.Onlywhenthe Corporate haze workersfortheirknowledgeof PuertoRicanpeoplethem- whatreallyhappensinthe selvesdecidethattheyhave We should find waysto replace day-to-dayprocess,theircre- hadenoughandimplement the elaborate gobbledygook ativepotentialandtheirbasic changewilltheybeableto used to describe tech compa- humanity.Otherwise,aswith improvetheirownlot. nies(“Grabbingback”, March industrialengineering,Isus- STEVEWALSH 31st). Computerscan make pecttheymayfindthemselves Fredericksburg,Virginia workmore efficient, butthey withbitteremployeerobots, do notfundamentallyalterthe antagonisticunionsand nature ofthe workitself. Thailand is notsclerotic disappointingresults. Accountantsdid notstop being TIMLEVEQUE One overlooked factorin Idisagree with yourargument accountantswhen theystarted HiltonHeadIsland, Puerto Rico’sdecline overthe thatThailand isdestined to usingPCs. In the same wayit is SouthCarolina pastdecade (“Afterthe hurri- meetthe same fate asJapan (“A irrelevantifone tapsan app to cane”, April 14th) isthe closure newshade”, April 7th). Thai- call a taxi, orwhethera ofRooseveltRoadsNaval land’spopulation isageing, catalogue existsin paperor Sewage treatment Station in 2004. Roosevelt but, unlike Japan, the country digital form. Whatiswrong Itistrue that, seemingly Roadswasone ofthe largest importslotsofforeign labour. with “Uber, a taxi firm”, againstthe odds, Bangladesh naval basesin the world, Aswell astakingin millions of “Amazon, a mail-order hasmade enormousprogress supporting17,000 personnel migrantsfrom Laos, Myanmar company” and “Facebookand in reachingourpoorestand and pumpinghundredsof and Cambodia, itisan attrac- Google, two media groups”? mostmarginalised communi- millionsofdollarsa yearinto tive destination forskilled THOMAS LINSINGER tieswith bettersanitation the local economy. Home to foreign workers. Geel, Belgium7 facilities(“Beatingthe bugs”, the Southern Area Command Contraryto yourconten- March 24th). The countryhas itwasan economicand politi- tion, there isroom to be almosteradicated open cal powerhouse. Italso an- hopeful forThailand’spros- Lettersarewelcomeandshouldbe defecation through communi- noyed those who were benton pects. The governmenthasset addressedtotheEditorat TheEconomist,TheAdelphiBuilding, ty-led sanitation programmes gettingAmerican armed forces optimisticinfrastructure ob- 1-11JohnAdamStreet, and byinvestingheavilyin to leave the island. An errant jectives, especiallyrelating to LondonWC2N6HT shared latrines, particularly in shell killed a civilian guard, energy. Itisahead oftargets to E-mail:[email protected] itsfast-growingslums. The ignitinga social uproarthat led increase solarand wind Morelettersareavailableat: positive effectthishashad on to the base’sclosure. Butthe capacity. Bigpublic-private Economist.com/letters

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