The Economist (February 16th 2019)

77 Pages·2019·4.21 MB·English

by  The Economist

Don’t tie Medicaid to work
The beauty of big banks
Why the Chinese are so unhappy
Special report: Islam in the West
FEBRUARY 16TH–22ND 2019
The Economist February 16th 2019 5
Contents
The world this week United States
7 A round-up of political 23 The safety-net
and business news 24 The art of the retreat
25 The Democrats and Israel
Leaders
25 Amy Klobuchar
11 The resurgent left
26 Crime in the Bay Area
Millennial socialism
27 Lexington The
12 Gas and geopolitics
interminable abortion war
Putin’s pipeline
13 South Africa
The Americas
Light-bulb moment
28 Tackling teen pregnancy
13 America’s safety-net
Don’t burden Medicaid 29 The Venezuela aid battle
On the cover 14 The politics of religion 30 Bello A meeting with
Muslims are going native Sérgio Moro
A new kind of left-wing
doctrine is emerging. It is not
Letters
the answer to capitalism’s
16 On the World Bank,
problems: leader, page 11. Do Asia
Labour, Virginia,
the radical left’s ideas make
vaccinations, John 31 A political stitch-up in
sense? Page 18. A Finnish trial
Ruskin, pisco, lifts Thailand
of universal basic income,
page 63 32 American troops in South
Briefing Korea
• Don’t tie Medicaid to work
18 Millennial socialism 32 Suspect Indian statistics
Arkansas has made poor
people’s access to health care Life, liberty and the 33 Australia v boat people
pursuit of property
dependent on them having 33 Press freedom in the
work. It is an ill-judged exercise Philippines
that should go no further: Special report: 34 Banyan Filipino seafarers
leader, page 13. The worrying Islam in the West
results of Arkansas’s Here to stay
China
experiment, page 23 After page 40
35 Taking the constitution
• Why the Chinese are so literally
unhappy China has enjoyed
36 Sci-fi meets foreign
unprecedented economic
policy
success. A new book examines
why its people remain gloomy: 37 Chaguan Why the
Chaguan, page 37 Chinese are sad
• The beauty of big banks
Britain
American banking’s chunkiest
merger since the financial crisis 38 The economy since the
may herald further referendum
consolidation, page 59 39 Trade plans run late
• Special report: Islam in the 39 No deal in June?
West Though both sides remain Free Exchange Imagine a 40 Bagehot Lambs to the
wary, they are getting closer, world without Facebook. slaughter
after page 40. One of the great It might be a better place,
religions is experiencing a page 64
little-noticed transformation:
leader, page 14. The caliphate is
nearly dead. Its ideas are not,
page 43
1 Contents continues overleaf
6 Contents The Economist February 16th 2019
Middle East & Africa Finance & economics
41 Saving South Africa 59 At last, a big bank merger
42 Jihadists in Nigeria 60 Buttonwood The case for
gold
42 France in Chad
61 China, America and trade
43 Islamic State’s last stand
61 Bill Gates’s annual letter
43 Conflict in Libya
62 Pink jobs and blue jobs
44 Saudi Arabia’s missiles
63 Finland’s basic-income
Europe experiment
45 Spain’s political crisis 64 Free exchange Imagine a
world without Facebook
46 Nord Stream 2 progresses
47 Threatening Italy’s
Science & technology
central bank
66 Making a border invisible
47 Orban bankrolls babies
67 A new prion disease?
48 Protest in Russia
68 Driving with no brakes
49 Charlemagne Georgia
69 Debittering olives
and Europe
International
50 The old need better
Books & arts
robots
70 A novel of the EU
71 Basque poetry slams
72 The Amritsar massacre
72 A shadow over Test cricket
73 Johnson Truth and talk
Business
52 Bezos v Pecker
Economic & financial indicators
53 Amazon in New York
76 Statistics on 42 economies
54 Bartleby Employee
surveys ticked
Graphic detail
55 Jaguar Land Rover’s woes
77 First names and individualism in 19th-century migrants
55 Renault-Nissan’s future
56 Beigao goes for gold Obituary
57 Schumpeter AMLO and 78 James McManus, the last of New York’s Tammany-style bosses
business
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The Economist February 16th 2019 7
The world this week Politics
dangering state security with Venezuela supplied cheap oil
his poems, had died in one. to Haiti. The protesters were As regular as clockwork
China aired a video apparently also angry about high prices. Facing yet another govern-
showing him alive. Relatives of ment shutdown (the most
other Uighurs who have van- Jody Wilson-Raybould, a recent one ended just three
ished into the camps asked if central figure in a scandal weeks ago) negotiators from
they, too, could see videos of involving allegations that both parties in America’s Con-
their loved ones. Canada’s prime minister, gress thrashed out a deal that
Justin Trudeau, had pushed for would provide money to build
the settlement of a criminal part of Donald Trump’s border
Trials and tribulations case against an engineering wall in return for reducing the
Snap elections looked likely to firm, quit the cabinet. The number of illegal immigrants
Thailand stepped back from be called in Spain after the parliamentary ethics commis- who are incarcerated.
the brink of a constitutional minority socialist government sioner has said that he will
crisis when the Election Com- led by Pedro Sánchez lost a vote investigate claims that Mr Mike Pompeo, America’s secre-
mission rejected the candidacy on its budget. Also in Spain the Trudeau had put pressure on tary of state, denied a claim
of Princess Ubolratana Mahi- trials began of a group of Ms Wilson-Raybould when she from Tim Kaine, a senator, that
dol for prime minister in next politicians from Catalonia, was the justice minister to the Trump administration was
month’s election. The princess who were jailed after the settle the case against helping the Saudi government
had been nominated by a party region held an unauthorised Montreal-based snc-Lavalin. cover up the murder of Jamal
tied to Thaksin Shinawatra, a referendum on independence. Khashoggi, a dissident jour-
populist prime minister who nalist who was killed by Saudi
was ousted by the army in 2006 Italy’s populist leaders, Matteo It’s a tough job… agents in Istanbul. The admin-
amid clashes between his “red Salvini and Luigi Di Maio, Abdelaziz Bouteflika, the istration had declined to meet
shirt” supporters and “yellow spooked markets by appearing president of Algeria, is to seek a congressional deadline to say
shirt” backers of the elites. to threaten the independence a fifth term in office, despite ill whether it thinks Muhammad
of the country’s central bank. health. Mr Bouteflika, who has bin Salman, the Saudi crown
Maria Ressa, a journalist in the run the country since 1999, is prince, was behind the death.
Philippines and forceful critic Anti-Semitic incidents in rarely seen in public and is Senators from both parties
of Rodrigo Duterte, the Germany rose by 10% last year, rumoured to have lost the want answers.
president, was arrested under according to media reports. ability to speak after suffering
the country’s “cyber-libel” law Some blamed the rise of the a stroke in 2013. Yet he has the Opportunity, an American
over an article that was pub- far-right Alternative for Ger- backing of the ruling elite Mars rover, is officially
lished on Rappler, the online many party, which denies it is because it cannot agree on a defunct. Contact was lost last
news site she manages, before anti-Semitic. Others pointed to successor. June, after a dust storm. More
the law in question was passed. a sharp increase in immigrants than 1,000 subsequent at-
from Arab countries. Officials from 65 countries met tempts to re-establish commu-
South Korea agreed to increase in Warsaw to discuss Middle nications have failed. The craft
how much it pays to keep East security. America, one of was designed to last a mere
American troops in the coun- A long stretch for Shorty the organisers, had hoped to three months, but it trundled
try, but by less than what A jury in Brooklyn found use the event to rally European on for 15 years.
America wanted. A desire to Joaquín Guzmán, better known support for sanctions against
show a united front ahead of a as El Chapo, or “Shorty”, guilty Iran. But several European
forthcoming summit between of helping to run Mexico’s countries, including France
Donald Trump and Kim Jong Sinaloa drug gang. The trial and Germany, sent only junior
Un, North Korea’s dictator, lent revealed the inner workings of officials, signalling their un-
urgency to the negotiations. the gang, including murder, ease over America’s unilateral
bribery and the use of boats to withdrawal from an agreement
The Australian parliament move cocaine after Mr Guzmán that eased Iran’s isolation in
passed a bill to allow a few discovered that drug agents exchange for the country re-
asylum-seekers held in off- were tracking his planes. Wit- stricting its nuclear activities.
shore detention centres to nesses described his private
enter the country for medical zoo, which housed panthers In the week that Iranians cele-
treatment. The home affairs and crocodiles. Mr Guzmán, brated the 40th anniversary of
minister called this a “disaster who twice escaped from Mex- the Islamic Revolution, a Sun- Amy Klobuchar entered the
for our country”. ican jails, is expected to remain ni militant group claimed race to be the Democratic
in an American prison for the responsibility for a suicide- candidate for president. The
Turkey protested about rest of his life. bombing in the south-east of senator from Minnesota is a
China’s persecution of Iran that killed 27 members of centrist by comparison with
Uighurs, Muslims who live At least eight people were the Revolutionary Guard. her rivals, and reportedly stern
mostly in China’s western killed in protests against with her staff. In 2011 she
region of Xinjiang and speak a Haiti’s president, Jovenel American-backed Kurdish helped block a rule that would
Turkic language. Perhaps 1m Moïse. The protests began after forces began an attack on the have stopped pizza served in
Uighurs are held in “re-educa- the court of auditors said that last bastion of Islamic State in school canteens being counted
tion” camps. Turkey noted officials in a previous govern- Syria. The jihadist group is as a vegetable portion, thus
reports that Abdurehim Heyit, ment had stolen money from a surrounded and confined to an protecting jobs at a school-
a musician arrested for en- programme through which area of about one square mile. pizza caterer in her state. 1
10 The Economist February 16th 2019
The world this week Business
Airbus decided to stop produc- The mood music in negotia- during the financial crisis, is Tata Motors’ share price strug-
tion of the a380 super-jumbo tions over an agreement to redoubling its efforts against gled to recover from the
jet, after Emirates Airline solve the trade conflict be- criminal activity following a hammering it took after it
drastically cut its order. The tween America and China spate of scandals at other wrote down £3.1bn ($4bn) at its
world’s biggest passenger improved considerably. Do- banks in northern Europe, Jaguar Land Rover subsidiary.
plane entered commercial nald Trump remarked that he such as Danske. The write-down pushed Tata
service in 2007 following many would be willing to extend a Motors to a $3.8bn quarterly
production delays. At the time deadline of March 1st if the After three years of restructur- loss, the largest-ever for an
it symbolised the fierce com- talks are making progress. ing, Credit Suisse reported an Indian company.
petition between Airbus and annual net profit of SFr2.1bn
Boeing to shape the future South Korea’s unemployment ($2.1bn), the Swiss bank’s first Twitter reported annual net
aviation market, with Boeing rate leapt to 4.5% in January, a since 2014. income of $1.2bn for 2018, its
betting on its rival 787 nine-year high. The economy first full year of profitability.
Dreamliner. The a380 was grew at its weakest pace in six An analysis of smartphone But it also lost more monthly
supported by just a handful of years in 2018, weighed down by sales by idc, a market-data active users in the fourth quar-
carriers such as Emirates and the trade dispute between firm, found that shipments of ter. Twitter said it would no
Singapore Airlines, which has China and America. Apple’s iPhone in China longer publish that measure-
already scrapped the first two slumped by 20% in the last ment of engagement, prefer-
a380s it had flown. The chief executive of quarter of 2018 compared with ring a new count of daily users
SunTrust said that the bank’s the same three months in 2017, who see ads on its platform.
planned combination with while those of Huawei rose by
2018 GDP bb&t would result in $100m 23%. Apple was China’s biggest
% increase on a year earlier
being spent on innovative provider of smartphones as Brewer’s droop
0 0.5 1.0 1.5 2.0 2.5 technology when the new recently as 2015. It has now A fall in quarterly sales at
Spain company opens its head- slipped to fourth place. Molson Coors helped push its
Euro area quarters in Charlotte, North share price down by 9%. The
France Carolina. The $66bn merger is jab Holdings offered to in- company, which includes the
Germany the biggest in banking since crease its stake in Coty, a beau- Blue Moon, Carling and Miller
Britain the financial crisis. ty company that owns a wide Lite brands in its line up, is to
Italy range of brands, including Max focus on boosting its appeal
A rise in bad-debt charges and Factor and Calvin Klein fra- among 21- to 34-year-olds, a
Sources: Haver Analytics; national statistics
a splurge on spending to im- grances, from 40% to 60%, group that is drinking less beer
Britain’s economy grew by prove its monitoring of mon- following Coty’s troublesome than it used to. Last year the
1.4% last year, the weakest pace ey-laundering helped reduce acquisition of Procter & Gam- company stopped making Two
in a decade. Brexit was clearly a fourth-quarter net profit at ble products. Although it is a Hats, a citrus-flavoured brew
factor, though other European abn amro by 42% compared longtime shareholder in Coty, peddled to millennials, after
countries are slowing, too. with the same three months a privately held jab has focused just six months. It might be
Britain’s economy outper- year earlier, to €316m ($361m). on expanding its food and able to narrow the generation
formed Italy’s and was only The Dutch bank, which is still beverages empire, snapping up gap when it launches Truss, a
slightly worse than Germany’s. half-owned by the government Dr Pepper, Krispy Kreme and cannabis-beverage joint ven-
The euro area saw growth slow a decade after its bail-out Pret A Manger in recent years. ture, in Canada later this year.
during 2018, and forecasts do
not indicate any improvement
for this year. Britain’s inflation
rate fell to 1.8% last month,
mostly because of lower energy
prices. Cheaper prices coupled
with decent growth in real
wages is a welcome relief for
workers who have felt a
squeeze in living standards.
Shifting gears
In a possible harbinger of debt
problems, the Federal Reserve
Bank of New York reported that
7m Americans are at least 90
days behind with their car-
loan payments, a million
more than in the wake of the
financial crisis. Although the
overall pool of creditworthy car
loans has improved, the frbny
noted a sharp rise in delin-
quencies among borrowers
under 30 years of age.
Leaders 11
Leaders
Millennial socialism
A new kind of left-wing doctrine is emerging. It is not the answer to capitalism’s problems
fter the collapse of the Soviet Union in 1991, the 20th cen- indeed soared over the past 40 years. In America the average in-
Atury’s ideological contest seemed over. Capitalism had won come of the top 1% has risen by 242%, about six times the rise for
and socialism became a byword for economic failure and politi- middle-earners. But the new new left also gets important bits of
cal oppression. It limped on in fringe meetings, failing states its diagnosis wrong, and most of its prescriptions, too.
and the turgid liturgy of the Chinese Communist Party. Today, 30 Start with the diagnosis. It is wrong to think that inequality
years on, socialism is back in fashion. In America Alexandria must go on rising inexorably. American income inequality fell
Ocasio-Cortez, a newly elected congresswoman who calls her- between 2005 and 2015, after adjusting for taxes and transfers.
self a democratic socialist, has become a sensation even as the Median household income rose by 10% in real terms in the three
growing field of Democratic presidential candidates for 2020 years to 2017. A common refrain is that jobs are precarious. But in
veers left. In Britain Jeremy Corbyn, the hardline leader of the La- 2017 there were 97 traditional full-time employees for every 100
bour Party, could yet win the keys to 10 Downing Street. Americans aged 25-54, compared with only 89 in 2005. The big-
Socialism is storming back because it has formed an incisive gest source of precariousness is not a lack of steady jobs but the
critique of what has gone wrong in Western societies. Whereas economic risk of another downturn.
politicians on the right have all too often given up the battle of Millennial socialists also misdiagnose public opinion. They
ideas and retreated towards chauvinism and nostalgia, the left are right that people feel they have lost control over their lives
has focused on inequality, the environment, and how to vest and that opportunities have shrivelled. The public also resents
power in citizens rather than elites (see Briefing). Yet, although inequality. Taxes on the rich are more popular than taxes on
the reborn left gets some things right, its pessimism about the everybody. Nonetheless there is not a widespread desire for rad-
modern world goes too far. Its policies suffer from naivety about ical redistribution. Americans’ support for redistribution is no
budgets, bureaucracies and businesses. higher than it was in 1990, and the country recently elected a bil-
Socialism’s renewed vitality is remarkable. In the 1990s left- lionaire promising corporate-tax cuts. By some measures
leaning parties shifted to the centre. As leaders of Britain and Britons are more relaxed about the rich than Americans are.
America, Tony Blair and Bill Clinton claimed to have found a If the left’s diagnosis is too pessimistic, the real problem lies
“third way”, an accommodation between state with its prescriptions, which are profligate and
and market. “This is my socialism,” Mr Blair de- politically dangerous. Take fiscal policy. Some
clared in 1994 while abolishing Labour’s com- on the left peddle the myth that vast expansions
mitment to the state ownership of firms. No- of government services can be paid for primarily
body was fooled, especially not socialists. by higher taxes on the rich. In reality, as popula-
The left today sees the third way as a dead tions age it will be hard to maintain existing ser-
end. Many of the new socialists are millennials. vices without raising taxes on middle-earners.
Some 51% of Americans aged 18-29 have a posi- Ms Ocasio-Cortez has floated a tax rate of 70%
tive view of socialism, says Gallup. In the prima- on the highest incomes, but one plausible esti-
ries in 2016 more young folk voted for Bernie Sanders than for mate puts the extra revenue at just $12bn, or 0.3% of the total tax
Hillary Clinton and Donald Trump combined. Almost a third of take. Some radicals go further, supporting “modern monetary
French voters under 24 in the presidential election in 2017 voted theory” which says that governments can borrow freely to fund
for the hard-left candidate. But millennial socialists do not have new spending while keeping interest rates low. Even if govern-
to be young. Many of Mr Corbyn’s keenest fans are as old as he is. ments have recently been able to borrow more than many policy-
Not all millennial socialist goals are especially radical. In makers expected, the notion that unlimited borrowing does not
America one policy is universal health care, which is normal eventually catch up with an economy is a form of quackery.
elsewhere in the rich world, and desirable. Radicals on the left A mistrust of markets leads millennial socialists to the wrong
say they want to preserve the advantages of the market economy. conclusions about the environment, too. They reject revenue-
And in both Europe and America the left is a broad, fluid co- neutral carbon taxes as the single best way to stimulate private-
alition, as movements with a ferment of ideas usually are. sector innovation and combat climate change. They prefer cen-
Nonetheless there are common themes. The millennial so- tral planning and massive public spending on green energy.
cialists think that inequality has spiralled out of control and that The millennial socialist vision of a “democratised” economy
the economy is rigged in favour of vested interests. They believe spreads regulatory power around rather than concentrating it.
that the public yearns for income and power to be redistributed That holds some appeal to localists like this newspaper, but lo-
by the state to balance the scales. They think that myopia and calism needs transparency and accountability, not the easily ma-
lobbying have led governments to ignore the increasing likeli- nipulated committees favoured by the British left. If England’s
hood of climate catastrophe. And they believe that the hierar- water utilities were renationalised as Mr Corbyn intends, they
chies which govern society and the economy—regulators, bu- would be unlikely to be shining examples of local democracy. In
reaucracies and companies—no longer serve the interests of America, too, local control often leads to capture. Witness the
ordinary folk and must be “democratised”. power of licensing boards to lock outsiders out of jobs or of Nim-
Some of this is beyond dispute, including the curse of lobby- bys to stop housing developments. Bureaucracy at any level pro-
ing and neglect of the environment. Inequality in the West has vides opportunities for special interests to capture influence. 1
12 Leaders The Economist February 16th 2019
2 The purest delegation of power is to individuals in a free market. Rather than shield firms and jobs from change, the state
The urge to democratise extends to business. The millennial should ensure markets are efficient and that workers, not jobs,
left want more workers on boards and, in Labour’s case, to seize are the focus of policy. Rather than obsess about redistribution,
shares in companies and hand them to workers. Countries such governments would do better to reduce rent-seeking, improve
as Germany have a tradition of employee participation. But the education and boost competition. Climate change can be fought
socialists’ urge for greater control of the firm is rooted in a suspi- with a mix of market instruments and public investment. Mil-
cion of the remote forces unleashed by globalisation. Empower- lennial socialism has a refreshing willingness to challenge the
ing workers to resist change would ossify the economy. Less dy- status quo. But like the socialism of old, it suffers from a faith in
namism is the opposite of what is needed for the revival of the incorruptibility of collective action and an unwarranted sus-
economic opportunity. picion of individual vim. Liberals should oppose it. 7
Gas and geopolitics
Putin’s pipeline
Nord Stream 2 is a Russian trap. Germany has fallen into it
hen a megaproject makes no commercial sense, there energy consumers, at least in the short term. But further relying
Ware two possibilities. Either its sponsors are fools, or they on Russia contradicts eu policy, which for the past decade has
have other motives. Since Vladimir Putin is no fool, one must as- been to diversify its energy supply, partly for security reasons.
sume that his pet pipeline is not really a business venture—and One aspect of this policy was to require suppliers of gas to be
that the fools are the Europeans, in particular the Germans. more open and transparent about their costs, to ensure proper
This week, after sustained German pressure, the European competition and prevent state subsidies. In particular, gas pro-
Union agreed how its energy rules should apply to Nord Stream duction is meant to be separated from gas transport.
2, an $11bn, 1,200km (750 mile) gas pipeline. As a result it is all but It was the attempt to apply this rule to pipelines that originate
certain that the project will go ahead, though perhaps with de- abroad, like Nord Stream, that was clarified this week. German
lays (see Europe section). It runs from Vyborg in western Russia regulators will have responsibility for implementing the eu’s
through the Baltic Sea to Greifswald in north-eastern Germany. pro-market energy rules. The European Commission will retain
Work on it began last year, and it could be finished by the end of some oversight—better than nothing, but a retreat nonetheless.
this one. Economically, it is unnecessary. There is no shortage of Angela Merkel, Germany’s chancellor, appears to value cheap en-
capacity in the existing Russian networks, which run from east ergy more than European security. This is rash. As Russia dem-
to west mostly through Ukraine and Poland, or through the exist- onstrated in 2006 and 2009, when it restricted the flow of gas
ing Nord Stream 1 pipeline directly to Germany. European de- through Ukraine, it is ready to use gas as a political weapon.
mand for imported gas, because of energy efficiency, weak de- Finally, Nord Stream has divided Western allies, setting east-
mand for manufacturing and the rise of ern Europe against much of western Europe and
renewables, is not expected to reach a level that driving a wedge between Europe and America,
would require the new pipeline anytime soon. Nord Stream 2 which has long opposed the pipeline. Under
Unsurprisingly, Russia’s majority state-owned DENMARK LEAST. RUSSIA President Donald Trump, who wants Germany
energy behemoth, Gazprom, is the scheme’s BRITAIN POLANDLITH. to import American gas, it may yet impose sanc-
only shareholder. GERMANY UKRAINE tions on participating firms.
The project’s real aims are political. There are FRANCE In short, Nord Stream 2 could make Ukraine,
three main aspects to this. First, Nord Stream 2 Poland and the Baltic states less secure, under-
directly harms Poland and Ukraine, two coun- mine the eu’s energy strategy, give Russia a big-
tries that Mr Putin loathes and one of which he invaded in 2014. ger stick for threatening western Europe and sow discord among
Currently, most Europe-bound Russian gas passes through Uk- nato allies. To Mr Putin, causing so much trouble for a mere
raine. Nord Stream 2 will make it easier for Russia to cut supplies $11bn must seem like a bargain. For Europe, it is a trap.
to Ukraine without affecting Germany; it will stop Ukraine from The mystery is why Germany has fallen into it, and has been
dragging Germany into a dispute with Russia by interfering with twisting French arms into doing the same. Since the invasion of
the supply of gas; and it will deprive the Ukrainian government Ukraine, Mrs Merkel has become one of the strongest advocates
of transit fees. Without Nord Stream 2, there is a limit to how of eu pressure on Russia. Perhaps the demands of German busi-
much mischief Russia can do in Ukraine before it endangers its ness, heightened since her wrongheaded decision to close Ger-
own economy. Thus, bypassing Ukraine (and Poland, for which many’s nuclear power stations in 2011, trump all else. Or perhaps
the same considerations apply to a lesser extent) is the main something darker is at work. She relies for her coalition on the
point (as it was of an earlier failed venture, South Stream). Nord Social Democrats (spd), staunch defenders of Nord Streams 1and
Stream 2 also gives Russia infrastructure in the Baltic region, a 2. The spd’s Gerhard Schröder, a former German chancellor, now
possible justification for beefing up its military presence there. sits on the boards of both Nord Stream 2 and also Rosneft, Rus-
This worries the Baltic states and Nordic states; as well as Poland. sia’s oil giant.
Next, Nord Stream 2 will increase Europe’s dependence on No one has proved that any of this has influenced German
Russian energy. By cutting out transit countries and fees, it will policy towards Russia, but many Germans are alarmed by the
be able to charge its customers less. This will be good for German possibility. Mr Putin, as ever, is happy to stoke such doubts. 7
N
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Y
A
The Economist February 16th 2019 Leaders 13
South Africa
Light-bulb moment
Cyril Ramaphosa has made a good start. But to beat corruption, he must relax state control of business
skom, south africa’s state-owned electricity monopoly, is corruption. And his hiring of honest cops and prosecutors is an
Ein crisis. So said Cyril Ramaphosa, the country’s president, in essential step in that direction. But he will struggle unless he
his annual “state of the nation” speech on February 7th. He was also tackles some of the underlying enablers of graft. One pro-
not exaggerating. Four days later cities were plunged into dark- blem is that many in the ruling African National Congress (anc)
ness as South Africa endured its biggest blackout ever. Some believe that the party should control all the levers of power, and
40% of its total capacity was switched off, forcing mines and fac- that the government should control “strategic” sectors such as
tories to close and all but the wealthiest to reach for candles. It power plants, railways and ports. A tradition of “deploying” party
was an undignified end to Mr Ramaphosa’s first year in office loyalists to run state-owned firms transmogrified, under Mr
(see Middle East & Africa section). Zuma, into a habit of planting cronies into positions that en-
South Africans had grown used to power cuts under his pre- abled them to steal. The leftists in the governing coalition still
decessor, Jacob Zuma, whose cronies looted and mismanaged say South Africa needs a “developmental” state to steer invest-
nearly everything the state controls. Mr Zuma hollowed out in- ment. In fact, state interference has repelled investment. By one
stitutions, appointed crooks and liars to senior estimate, had Mr Zuma been a benign steward,
jobs and ensured that the watchdogs who are the economy would be 25% bigger.
supposed to stop corruption were muzzled. Mr Ramaphosa plans to split Eskom into
Some state-owned firms, such as Eskom and generation, distribution and transmission
South African Airways, were bled so dry that businesses to make it clearer which bits are los-
their debts threaten the stability of South Afri- ing money. He should go further. The state
can banks and even the country’s credit rating. should not be generating power at all. It should
South Africans expect better from Mr Rama- break up and sell Eskom, and regulate the com-
phosa. Will he live up to his promises? panies that buy it. The same goes for the state
He has made a good start, cleaning out the boards of state- firms that run airports, fly planes and dig up diamonds.
owned companies and appointing watchdogs with teeth and the There is a risk that privatisation could be corrupted. State as-
inclination to use them. Shamila Batohi, a tough lawyer from the sets could be transferred cheaply and opaquely to anc bigwigs
International Criminal Court in The Hague, recently started claiming to promote “black economic empowerment”, just as
work as the country’s chief prosecutor. A judicial commission private assets have been in the past. However, this risk can be
into allegations of “state capture” under Mr Zuma has heard riv- mitigated if assets are sold via transparent auctions and the mar-
eting testimony about how firms allegedly funnelled cash to pol- kets thus created are regulated properly. Also, consumers will
iticians for state contracts. One minister’s daughter was said to have to start paying their electricity bills, something many have
have crashed so many freebie sports cars that she was offered grown used to avoiding. If Mr Ramaphosa wants to be remem-
driving lessons, too. bered as the president who turned the lights back on, he will
No one doubts that Mr Ramaphosa sincerely wishes to uproot need to harness the power of the market.7
America’s safety-net
Don’t put work requirements on Medicaid
Arkansas has tied poor people’s access to health care to work. It is an ill-judged experiment that should go no further
ne thursday in January 2018, while cable-news shows were is sound. Asking people to do something in exchange for a pay-
Oscandalised by the latest leak from the White House, the ment can build political support for welfare programmes. With-
Trump administration made a change to America’s safety-net. out the requirements, beneficiaries are easily dismissed as
The new rule lets states experiment with forcing recipients of scroungers. Moreover, encouraging people back into work is the
Medicaid to work, volunteer or study in exchange for their gov- best anti-poverty scheme.
ernment-funded health insurance (see United States section). It Even so, tying health care to work is a mistake, for two rea-
attracted little attention at the time. Yet because about 75m poor sons. The first is practical. Safety-net programmes work best
Americans rely on Medicaid for their health care, this decision when they are simple, well-understood and governed by rules
has the potential to affect an awful lot of people. that are easy to administer. The Arkansas experiment fails this
So far, only one state—Arkansas—has imposed extensive test. To be eligible for Medicaid, you must earn less than $17,000
work requirements on Medicaid. Fourteen other states have ap- a year and must prove that you are working, studying or taking
plied to follow its example. They should look at what has hap- care of young children or infirm relatives for at least 80 hours a
pened in Arkansas and think again. month. Many people who earn so little have unpredictable pat-
The theory behind tying cash benefits to work requirements terns of work. One month they will put in enough hours to meet 1
14 Leaders The Economist February 16th 2019
2 the criteria for eligibility, the next they will not. healthy; they can work because they are healthy already.
Worse, Arkansas made it unnecessarily hard for people to reg- Medicaid does have a problem with work incentives, but it is
ister their work effort. In a state with one of the lowest rates of in- not the one the White House has identified. When the Affordable
ternet usage, Medicaid recipients had to log their working hours Care Act, aka Obamacare, became law, the intention was that
on a website that shut down between 9pm and 7am. As a result, low-income Americans would either be eligible for Medicaid or
18,000 of the approximately 80,000 people who were asked to re- for government subsidies to help them buy their own, private in-
port their schedules lost their coverage. surance policies. In fact 14 states decided not to implement part
Supposing these problems can be overcome, tying access to of the law. That left about 2m Americans in limbo, earning too
health care to work is still wrong, because it is based on a mis- much to qualify for Medicaid but too little to be eligible for Oba-
conception about incentives. When the Trump administration macare subsidies. In these 14 states, people whose earnings are
announced the new policy, it observed that “higher earnings are close to the cut-off for Medicaid eligibility can lose their health
positively correlated with longer lifespan.” That is true, but the insurance if they work a few more hours. This is a huge disincen-
White House has the causation backwards: healthy people lead tive to extra work. If states want to fix the real problem with Med-
longer, more productive lives. People do not work in order to be icaid, that is where to look.7
The politics of religion
Muslims are going native
Islam in the West is experiencing a little-noticed transformation
slam frightens many in the West. Jihadists kill in the name veiled, were voted into the United States Congress last year.
Iof their religion. Some Muslim conservatives believe it lets How can Western governments encourage this transition?
them force their daughters to marry. When asked, Westerners Their main task is to focus on upholding the law rather than try
say that Islam is the religion they least want their neighbours or to force Muslims to change their beliefs. The West is enjoying a
in-laws to follow. Bestselling books such as “The Strange Death decline in attacks by jihadists. The number they killed in Europe
of Europe”, “Le Suicide Français” and “Submission” warn against fell from over 150 in 2015 to 14 last year. Attacks not only threaten
the march of Islam. lives and property, they also set back relations between Muslims
Fear of terrorism, not least the danger that jihadists returning and those around them. That is why criminality must be dealt
from Syria will cause bloody havoc at home, and the rise of anti- with firmly by the law and the intelligence services.
immigrant populism are leading governments to try to control The trouble is that governments frequently lump in criminal
Muslims. President Donald Trump has banned travellers from actions with regressive norms. Germany is leading a drive to
some Muslim-majority countries; France and other states have curb foreign influence of mosques, train imams and control
banned Muslim head- or face-coverings. funding. France wants to cajole Muslims into a representative
However, Western Islam is undergoing a little-noticed trans- body. They are echoing the Muslim world, where Islam is often a
formation. As our special report this week sets out, a natural pro- state religion that is run, and stifled, by governments.
cess of adaptation and assimilation is doing However, the top-down nannying of religion
more than any government to tame the threat Jihadist attacks in Europe risks a backlash. Heavy-handed interference
posed by Islamic extremism. The first genera- Number of deaths 150 will alienate communities whose co-operation
tion of Muslim workers who migrated to the is needed to identify potential terrorists and
100
West, starting in the 1950s, did not know how abusers among them. Put on the defensive,
long they would stay; their religious practices 50 Muslims will deepen communal identities and
directed by foreign-trained imams were tied to 0 retreat into the very segregation that interven-
2014 15 16 17 18*
those of their countries of origin. The second *Estimate tion is supposed to reverse.
generation felt alienated, caught between their Rather than intervene in doctrine, it is better
parents’ foreign culture and societies whose institutions they to deal with social conservatism through argument and persua-
found hard to penetrate. Frustrated and belonging nowhere, a sion. That can make for testy debate. This week Ilhan Omar, a
few radicals turned to violent jihad. Democratic congresswoman from Minnesota, had to apologise
Today the third generation is coming of age. It is more enfran- for peddling anti-Semitic tropes. The trickiest balance is over
chised and confident than the first two. Most of its members how to counter the radicalisation of Muslims, whether online or
want little truck with either foreign imams or violent jihadist in prisons. This often involves vulnerable young people becom-
propaganda. Instead, for young Muslims in the West, faith is in- ing more devout before turning to violence. But there are signs of
creasingly becoming a matter of personal choice. Their beliefs progress. Although young Muslims are conservative by the stan-
range from ultra-conservative to path-breakingly liberal. Some dards of Western society (eg, on gay schoolteachers), they are
prominent scholars allow female converts to keep non-Muslim more liberal than their elders.
husbands; a few congregations conduct weekly prayers on Sun- Islam belongs to Western history and culture. Muslims have
days, because the faithful go to work on Fridays; there are even governed parts of Europe for 13 centuries; they helped kindle the
women-led mosques. At the same time Western institutions are Renaissance. If today’s varied and liberal form of Islam contin-
gradually opening up to Muslims. London and Rotterdam are ues to flourish, it may even serve as an example of tolerance for
both run by Muslim mayors. Two Muslim women, one of them the rest of the Muslim world. 7
16 The Economist February 16th 2019
Letters
ambassador from Santiago and sault without an investigation nated: those with impaired
We want a proper contest welcoming thousands of disqualify our lieutenant- immune systems, the elderly
You are right that Donald Chilean refugees to Britain. It governor. Nor are the three or simply the most vulnerable.
Trump could have picked a was an early example of an men’s hypocrisy legal grounds dr domna michailidou
less-qualified American than “ethical” foreign policy. to dismiss them. But a second Athens
David Malpass to lead the The support of the United woman has accused Mr Fairfax
World Bank, but you are wrong States for Pinochet’s coup, as of sexual assault and all three
in thinking that the rest of the well as for military govern- men vow to remain in office. A view on Ruskin
world should sigh with relief, ments in Brazil, Uruguay and I’m making more popcorn. It’s a pity that Bagehot’s col-
hold its nose and accept him Argentina—regimes responsi- john blair umn on what we can learn
(“A qualified pass”, February ble for the disappearance of Fairfax, Virginia from John Ruskin (February
9th). Nominations for the job thousands of their own citi- 9th) didn’t take the opportuni-
are open for another month. zens—helps explain the scepti- ty to plug “John Ruskin: The
Until then, the shareholders, cism of the left, both in Britain Vaccination is essential Power of Seeing”, an exhibition
and The Economist, should keep and Latin America, about Public health across Europe is at Two Temple Place, a remark-
an open mind. When all the Donald Trump’s motives in indeed being damaged by the able venue in London. It bears
candidates are known, the Venezuela today. populist campaign against out all that Bagehot says.
bank’s board can assess them grace livingstone vaccination (Charlemagne, david bentley
against the qualifications it has Centre of Latin American January 19th). These are devel- London
agreed on, which does not Studies oped economies where infor-
include being the candidate University of Cambridge mation is easily available, and
nominated by America. where parents are increasingly That pesky pisco
In the 21st century the apprehensive about vaccinat- Bello’s column about cherries
World Bank will have a useful Unease in the Commonwealth ing their children. The Syriza- from Chile was wonderful
future only if it can evolve into To say that the scandals led government in Greece has (January 19th). Except for the
a club of countries with the involving Virginia’s top three contributed to this by legislat- part where it inaccurately
resources and legitimacy to elected officials, all Democrats, ing in a manner that enhances labelled Peru’s pisco as a
tackle a growing list of shared began with Governor Ralph the “me-first libertarianism grappa. Pisco from Peru is a
challenges such as climate Northam’s “clumsily worded and anti-expertise herd brandy, most closely resem-
change, financial instability, defence of a loosening mentality” that Charlemagne bling cognac. Grappa uses
the refugee crisis, pandemics restriction on abortion” is an described. In September 2018 stems, seeds and skins
and boosting investment to understatement (“These are the Ministry of Health issued a (referred to as pomace) in its
build prosperity. The informal the breaks”, February 9th). Mr circular allowing parents who production. Pisco has no addi-
bargain that lets America Northam actually suggested do not want to vaccinate their tives; that not only includes no
decide who should lead the that a child could be aborted children to opt-out for perso- pomace, but also covers an
bank was an anachronism even after birth, outside the womb. nal reasons, despite the fact absence of added sugars or
when it was struck more than The details are important that child vaccination has been colouring, which explains why
70 years ago. It should now be because during our statewide mandatory since 1999. With it is rested in clear non-
consigned to history, especial- elections, these men and their this laissez-faire approach the reactive vessels rather than
ly as the bank no longer de- supporters lectured Virginians Greek government has aged in wood.
pends on American financing. on morality, racism and outperformed the demagogu- francine cohen
The Europeans may worry that misogyny. The most memora- ery of even the Italian Five Star New York
they will therefore lose the ble example is a political ad Movement. The decision is
right to nominate the head of that showed a Republican in a peculiar given that Syriza
the imf: good. Both institu- pickup truck attempting to run favours robust state interven- Lift humour
tions deserve better. down children from ethnic tion in other policy areas. Reading about the placebo
owen barder minorities. Now Mr Northam There are compelling rea- effect on pedestrians of
Centre for Global Development and Mark Herring, the state sons why governments should buttons at road crossings (“A
London attorney-general, are accused require vaccinations for all pressing problem”, January
of racism for wearing blackface children, rather than leaving it 26th) I am reminded of the
as young men and Justin Fair- to parents to decide. After an close-door button in lifts,
The left and Latin America fax, the lieutenant-governor, absence of several decades, last which has been made inoper-
Regarding “¡Hasta la victoria faces claims of sexual assault. year Greece saw the return of ative in many buildings
Corbynista!” (February 2nd), Neither party has a monop- measles with 3,500 confirmed around the world. The idea that
the overthrow in 1973 of the oly on moral duplicity. But the cases and four deaths. The these elevator buttons could
democratically elected social- seeds of our local scandals government is exposing its also raise people’s hopes is
ist president of Chile, Salvador were planted long before the citizens to preventable wrong on so many levels.
Allende, had a profound governor’s abortion gaffe. They infectious diseases. This fails anurag chatrath
impact on the British labour were sown when these partic- one of the core functions of the Mukteshwar, India
movement. Such was the ular politicians pontificated state, the provision of public
strength of feeling that the about morality during their goods. It fails in particular to
Wilson and Callaghan Labour bids for office. Their immatu- establish a herd immunity, Letters arewelcome and should be
governments (1974-79) took the rity and insensitivity as young which ensures a level of vacci- addressed to the Editor at
TheEconomist, TheAdelphi Building,
unusual step of imposing a men does not disqualify our nation coverage that is ade- 1-11 JohnAdamStreet, LondonWC2N6HT
unilateral British arms embar- governor or attorney-general quate to prevent a disease from Email: