The Economist (February 23rd 2019)

75 Pages·2019·4.558 MB·English

by  The Economist

Opioids’ unrelenting toll
Hatred in France
The sly appeal of private equity
How to stay sane on a trip to Mars
FEBRUARY23RD–MARCH1ST2019
Can pandas fly?
The struggle to reform China’s economy
Contents The EconomistFebruary23rd2019 5
The world this week United States
8 Around-up of political 24 Donald Trump’s wall
andbusinessnews
25 Bernie runs again
26 Rahm Emanuel
Leaders
28 Snooping on social media
13 China’s economy
29 The revival of Hawaiian
Can pandas fly?
30 Lexington Diversity and
14 British politics
itsdiscontents
Splitting image
14 Trump’s emergency
The Americas
Imperial purple
31 Brazilian pensions
15 Business and climate
Hot,unbothered 32 Tweeting in Cuba
16 TeachinginEnglish 32 Trudeau’s travails
On the cover
Babelisbetter 33 BelloVenezuela and
If Xi Jinping reforms China’s Trump
economy, he could both calm
Letters
the trade war and make his
18 OnHuawei,Gaelic,light,
country richer: leader,page 13.
Asia
Iran,doctors,work
The struggle over economic
34 India weighs punishing
policy,seeouressay,page41
Pakistan
Briefing
•Opioids’ relentless toll About 21 Opioids 35 Islamabad’s isolation
50,000 Americans are dying
Thedeathcurve 35 Japan’s boom in literature
eachyear from opioid overdoses.
by the elderly
The federal response is sluggish
36 BanyanThe Trump-Kim
and inadequate, page 21
show
•Hatred in FranceA nasty
37 The church in the
brew—anti-Semitic, anti-black,
Philippines
anti-elite—is bubbling,page 51
•The sly appeal of private China
equityIt is not just growth that
38 China’s “weaponisation”
attracts investors: Buttonwood,
of tourism
page 72
39 Aplan for Hong Kong
•How to stay sane on a trip to
40 ChaguanWho’d be a
MarsImagine being cooped up
Chinese journalist?
for three years with the same
handful of irritating people,page
75. Opportunity, a rover on Mars
Essay: China’s economy
that exceeded all expectations,
was declared lost on February 41 Agiant microcosm
12th: Obituary, page 86 43 Consumption and
inequality
44 The market and the state
45 Global challenges
Middle East & Africa
BanyanIn the second
47 Returning jihadists
date of the Trump-Kim
love affair, due next 48 The Israeli left
week, the low 49 Africa’s welfare states
expectations suit North
50 Paid mourners in Congo
Korea, page 36
50 Social mobility
1 Contents continues overleaf
6 Contents The EconomistFebruary23rd2019
Europe Finance & economics
51 Hatred in France 69 Corporate tax avoidance
52 Business risk in Russia 70 UBS’s hefty fine
53 Germany’s fear of China 71 Getting money into
North Korea
54 Vatican scandals
71 Shorting Wirecard
54 Denmark’s pig wall
72 ButtonwoodPrivate
55 CharlemagneSaarland’s
equity’s appeal
secrets
73 Soyabeans and tariffs
Britain 74 Free exchangeRaghuram
Rajanoncommunities
56 Political realignments
57 Honda’s departure
Science & technology
58 BagehotJohn McDonnell
75 Surviving a trip to Mars
76 New crops fix nitrogen
77 The birth of atoms
78 How species spread
International
59 English or mother tongue
in schools?
Books & arts
79 The quantification of
everything
80 An overheating world
81 The Irish border
Business 81 Gumbo: a love story
62 Firms and climate change 82 Lecturesasart
64 The future of Chanel
64 Nvidia in trouble Economic & financial indicators
65 BartlebyAristocrat CEOs 84 Statisticson42economies
66 Coffee trading
Graphic detail
66 The risk from Huawei
85 VotersareunimpressedbyTheresaMay’sBrexitdeal
67 Self-driving cars
68 SchumpeterIndustrial
Obituary
cockroaches
86 Opportunity, humankind’s longest-lived emissary to Mars
Subscriptionservice
Forourfullrangeofsubscriptionoffers,includingdigitalonlyorprintanddigitalcombined,visit:
Economist.com/offers
Volume430 Number9131
PublishedsinceSeptember1843 Youcanalsosubscribebymail,telephoneoremail: One-yearprint-onlysubscription(51issues): Please
totakepartin“aseverecontestbetween NorthAmerica
intelligence,whichpressesforward, TheEconomistSubscriptionCenter, UnitedStates....................................US$158.25(plustax)
andanunworthy,timidignorance P.O.Box46978,St.Louis,MO63146-6978 Canada................................................CA$158.25(plustax)
obstructingourprogress.” Telephone: [phone] LatinAmerica.......................................US$289(plustax)
Email: [email protected]
EditorialofficesinLondonandalso: PEFCcertified
Amsterdam,Beijing,Berlin,Brussels,Cairo, LatinAmerica&Mexico ThiscopyofTheEconomist
Chicago,Johannesburg,Madrid,MexicoCity, TheEconomistSubscriptionCenter, isprintedonpapersourced
Moscow,Mumbai,NewDelhi,NewYork,Paris, P.O.Box46979,St.Louis,MO63146-6979 fromsustainablymanaged
SanFrancisco,SãoPaulo,Seoul,Shanghai, Telephone: [phone] forestscertifiedtoPEFC
Singapore,Tokyo,WashingtonDC Email: [email protected] PEFC/29-31-58 www.pefc.org
©2019 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, NY 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, Hartford, WI. 53027
Politics
8 The world this week The EconomistFebruary23rd2019
Salman, visited Pakistan and American soldiers out of Syria
India, where he promised large Polling errors and called for up to 1,500 inter-
investment deals. The Saudi Nigeriadelayed its presi- national troops to remain.
foreign minister offered to dential election by a week after
help ease tensions between the officials said they had not Poland withdrew from a
two neighbours, underscoring managed to distribute ballot central European summit in
the Saudis’ new-found confi- papers and other voting mate- Jerusalem after a dispute with
dence on the world stage. rials in time for the scheduled Israel over how to characterise
date of February 16th. The delay Poland’s treatment of its Jew-
A fire broke out in the is expected to reduce voter ish community during the
Chawkbazar district of Dhaka, turnout, as many people had to second world war. Israel’s
Bangladesh’scapital, killing travel to their home districts in acting foreign minister said
Pakistan’sprime minister, scores of people. Poor safety order to cast their ballots. Poles “suckle anti-Semitism
Imran Khan, warned Indianot regulations have led to hun- with their mother’s milk”.
to attack his country in retalia- dreds of people being killed in South Africa’sgovernment
tion for a suicide-bombing in building fires in recent years. pledged 69bn rand ($4.9bn) to
Kashmirthat killed 40 Indian prop up Eskom, a state-owned Independents’ day
security personnel, the worst Fang Fenghui, a former chief of power utility that is close to InBritain, eight Labour mps
attack on security forces in the the joint staff in China’sarmy, bankruptcy. Power cuts caused quit the party over Jeremy
region in 30 years of conflict. A was found guilty of corruption by poor maintenance have Corbyn’s poor leadership,
militant group based in Paki- and sentenced to life in prison. slowed economic growth. which has led to dithering over
stan said it was responsible. As Mr Fang had been allied with Brexit and failed to clamp
tensions mounted between the Zhang Yang, who served on Hundreds of civilians were down on a surge in anti-Sem-
two arch-rivals, a gun battle China’s military commission evacuated from the last enclave itism among party activists.
between police and suspected before his arrest for corruption held by Islamic State in eastern The eightback a second refer-
militants killed nine people in and subsequent suicide in Syria. Kurdish-led forces endum on Britain leaving the
a village in Kashmir. 2017. President Xi Jinping has backed by America have eu. Rather than form a new
undertaken an unprecedented pushed the jihadists to the party they will for now sit in
Amid the hostilities Saudi crackdown on graft, which brink of defeat. A Kurdish the House of Commons as the
Arabia’scrown prince and de some believe to be a cover for a commander urged Donald Independent Group. They
facto leader, Muhammad bin purge of his opponents. Trump to halt his plans to pull called on centrist mps from any1
The EconomistFebruary23rd2019 Theworldthisweek 9
2partyto join them. Three Con- 28th.MrSánchez’ssocialist-led schemes. His proposal, which Bank. The government will
servative mps duly did so. coalitionhadsufferedaheavy requires amendments to the reduce fuel subsidies and
defeatinparliamentwhen constitution, would establish a employment at state-owned
partiesfromCataloniathat minimum retirement age of 65 enterprises.
normallysupportthegovern- for men and 62 for women and
mentjoinedconservativesin would limit the scope for
votingdownthebudget.The pensioners to collect more Constitutional showdown
CatalanshadtriedtoforceMr than one benefit. The first lawsuits were
Sánchezintodiscussingin- launched against Donald
dependencefortheirregion. Gerald Butts, the principal Trump’s declaration of a
private secretary of Canada’s national emergencyon the
prime minister, Justin Mexican border, which allows
The ball’s in your court Trudeau, resigned. He denied him to sequester funding for
Donald Trump urged Venezue- allegations that he or anyone his border wall. Sixteen states,
la’sarmed forces to back a else in the prime minister’s including California, filed a
Demonstrations were held political transition and said office had put pressure on Jody court motion arguing that Mr
across Franceto protest they should accept the offer of Wilson-Raybould, then justice Trump’s edict would divert
against the rise in attacks amnesty by Juan Guaidó, who minister, to settle a criminal money from law enforcement.
against Jewish people and has been recognised as the case against an engineering
symbols, which were up by country’s interim president by company based in Montreal. Bernie Sandersannounced
74% last year. This week 80 Venezuela’s legislature and by Mr Trudeau has also denied that he is to run again for
Jewish graves were daubed some 50 countries.Mr Trump that he put pressure on Ms president as a Democrat in
with swastikas, and Alain held open the possibility of Wilson-Raybould to intervene. 2020. The 77-year-old senator
Finkielkraut, a prominent military intervention to topple from Vermontwas describing
philosopher, was heckled with the repressive regime of Ecuadorreached an agreement himself as a socialist years
anti-Semitic abuse by gilets Nicolás Maduro. with the imfto borrow $4.2bn before today’s crop of young
jaunes(yellow vest) protesters. to help it cope with a large pretenders in the party was
Jair Bolsonaro, Brazil’spresi- external debt and budget def- even born. He raised nearly
Pedro Sánchez, the prime dent, presented an ambitious icit. It will also borrow $6bn $6m in the 24 hours following
minister of Spain, called a plan to reform the country’s from other multilateral his campaign launch, out-
snap general election for April publicly funded pension lenders, including the World stripping his rivals.
Business
10 The world this week The EconomistFebruary23rd2019
It is shaping up to be a bad year didn’tpay,promptingReliance accusations, which he says are newly emboldened left-wing
for Britain’s car industry. In the topromisetocomply. rooted in a dispute involving Democrats, who questioned
latest blow, Hondadecided to two shareholders. the subsidies it would receive.
close its plant in Swindon in Thenosediveinfinancial Mr de Blasio said Amazon had
2021, putting 3,500 jobs at risk. marketstowardstheendoflast A French court found ubs been offered a “fair deal”.
It is the first time the Japanese yearledhsbctoreportalower guilty of helping people evade
carmaker has closed one of its annualprofitthanhadbeen tax and fined it €3.7bn Walmartreported solid
factories (it is also stopping expected.Thebankannounced ($4.2bn). It also ordered the growth in sales for the quarter
production of one of its models netincomeof$12.6bn.That Swiss bank to pay €800m to the covering the Christmas period.
at a facility in Turkey). Honda wasbelowanalysts’forecasts French state in damages. ubsis Online sales in America surged
said it was accelerating its of$13.7bn,whichJohnFlint, to appeal against the verdict, by 43% as the retailer ramped
commitment to electric cars, thechiefexecutive,ascribedto arguing that it was based on up its grocery delivery and
and stressed that Brexit was being“verymuchafourth- “unfounded allegations”. It pick-up services. Meanwhile,
not a factor in its calculation to quarterproblem”. said the court had failed to Britain’s competition regulator
shut up shop. Many observers establish that any offence had said it might block the planned
think otherwise. been committed in France, and merger of J. Sainsburywith
Has he annoyed the Kremlin? therefore it had applied French Asda, a subsidiary of Walmart.
Flybmiwas less shy about law to Switzerland, posing The merger would create Brit-
blaming Brexit for its troubles. “significant questions of ain’s biggest supermarket
The British regional airline territoriality”. company. A furious J. Sains-
called in the administrators bury criticised the Competi-
amid rising fuel and carbon Estonia’s financial-services tion and Markets Authority,
prices, but was explicit about regulator ordered Dansketo saying it had “moved the goal-
the uncertainty surrounding close its sole Estonian branch, posts” in its analysis.
Brexit, which caused it difficul- which is at the centre of a
ties securing valuable flying €200bn ($227bn) money-
contracts in Europe. laundering scandal. Mean- Not so half-baked after all
while Swedbank, which is Greggs, a cheap but cheerful
The European Union threat- based in Stockholm, saw its purveyor of sandwiches and
ened to react in a “swift and International investors reacted share price plunge after a tv bakery food in Britain, report-
adequate manner” if America with shock to the arrest of programme aired accusations ed an “exceptionally strong
imposes additional tariffs on Michael Calveyin Moscow. Mr that it was involved in the start” to 2019, which it attribut-
European car imports. Ameri- Calvey, an American, runs scandal. ed to the roll out of its vegan
ca’s Commerce Department Baring Vostok, a big private- sausage roll. Derided by some
recently submitted a docu- equity firm in Russia. He has New York’s mayor, Bill de (Piers Morgan pilloried Greggs
ment to Donald Trump that been accused, along with other Blasio, criticised Amazon’s for being “pc-ravaged clowns”)
reportedly recommends levy- executives, of defrauding a decision to cancel its plan to the company said the publicity
ing duties on European cars on bank that is owned by Baring build one of its two new head- had boosted sales of its other
the ground that damage to Vostok and will remain in quarters in Queens. The online “iconic sausage rolls” and food.
America’s car industry is a custody ahead of a trial in retailer pulled out in the face of Some predict this will be the
threat to national security. The April. Mr Calvey denies the growing opposition from year of the vegan.
president has 90 days to decide
whether to act.
The decision by India’scentral
bank to increase the interim
dividend it pays to the govern-
ment raised more questions
about its political indepen-
dence. The payment will help
the government meet its fiscal
targets ahead of the forth-
coming election.
Anil Ambani, one of India’s
most prominent businessmen,
was found guilty of contempt
of court by the country’s
supreme court for not paying
Ericsson, a Swedish network-
equipment company, for work
it carried out at Reliance
Communications. Mr Ambani
founded Reliance, which
recently filed for bankruptcy.
The court said Mr Ambani
would be sent to prison if he
Leaders Leaders 13
Can pandas fly?
If Xi Jinping reforms the economy, he could both calm the trade war and make China richer
For the past two weeks Chinese and American negotiators alshiftsareworkingagainstChina.Theworking-age population
have been locked in talks in Beijing and Washington to end is shrinking. Investment is a swollen 44% of gdp. As resources
their trade conflict before the deadline of March 1st, when Ameri- are sucked up by wasteful projects and inefficient state firms,
ca will ratchet up tariffs on Chinese goods or, perhaps, let the productivity growth has slowed. Now that debt has surged, inter-
talks stretch into extra time. Don’t be distracted by mind-numb- est payments will amount to nearly three-quarters of new loans.
ing details on soyabean imports and car joint-ventures. At stake The backlash abroad risks becoming yet another drag. As bar-
is one of the 21st century’s most consequential issues: the trajec- riers to trade rise, China cannot rely on the rest of the world for
tory of China’s $14trn economy. growth. Its share of world exports will struggle to rise above to-
Although President Donald Trump started the trade war, day’s 13%. Its biggest and most sophisticated firms, such as Hua-
pretty much all sides in America agree that China’s steroidal wei, are viewed with suspicion in Western markets (see Business
state capitalism makes it a bad actor in the global trading system section). Mr Xi promised a “great rejuvenation” but what beck-
and poses a threat to security. Many countries in Europe and Asia ons is lower growth, more debt and technological isolation.
agree. At the heart of these complaints is the role of China’s gov- China’s leaders have underestimated the frustrations behind
ernment, which funnels cheap capital towards state firms, bul- the trade war. They have assumed that America could be placated
lies private companies and breaches the rights of foreign ones. with gimmicks to cut the trade deficit, and that the row will end
As a result, China grossly distorts markets at home and abroad. when Mr Trump leaves the Oval Office. In fact American negotia-
The backlash is happening just as China’s model of debt, tors, with the support of Congress and the business establish-
heavy investment and state direction is yielding diminishing re- ment, have demanded deep changes to China’s economy. West-
turns. Growth this quarter may fall to 6%, the worst in nearly ern opposition to China’s model will outlast Mr Trump.
three decades. Many suspect that the true figure is lower still. By To deal with hostility abroad and weakness at home, Mr Xi
opening the economy and curbing the state, Xi Jinping, China’s should start by limiting the state’s role in allocating capital.
autocratic leader, could boost performance within China’s bor- Banks and financial markets must operate freely. Failing state
ders and win a less hostile reception beyond them. He is loth to firms should go bust. Savers must be permitted to invest abroad,
limit the power of the government and the party, so that asset prices reflect reality, not financial
or to accept American demands. But China’s repression. If money flows to where it is produc-
path leads to long-term instability. tive, the charge that the economy is unfairly
Its leaders are entitled to feel smug. The party rigged will be harder to sustain and the build-up
has presided over one of history’s great success- of bad debts will slow.
es. Since 1980 the economy has grown at a 10% Mr Xi also needs to temper China’s industrial
compound annual rate as nearly 800m people policy. It is too much to imagine that it will pri-
have lifted themselves out of poverty. A country vatise its 150,000 state firms. But it should copy
that struggled to feed itself is now the world’s Singapore, where a body called Temasek holds
biggest manufacturer. Its trains and digital-payments systems shares in state firms, giving them autonomy while requiring that
are superior to those of Uncle Sam, and its elite universities are they operate as efficiently as the private sector. Spending on in-
catching up in the sciences. Although inequality and pollution dustrial policy should shift away from grandiose schemes such
have soared, so have living standards. as Made in China 2025 towards funding basic research.
Yet as our essay this week explains, since Mr Xi took power in Lastly, China must protect the rights of foreign firms. Within
2013, China has in some ways gone backwards. Two decades ago China that means giving foreigners full control of subsidiaries,
it was possible, even sensible, to imagine that China would grad- including over their technological secrets. Beyond its borders it
ually free markets and entrepreneurs to play a bigger role. In- means respecting intellectual property, which will be in China’s
stead, since 2013 the state has tightened its grip. Government- interest as its firms grow more sophisticated.
owned firms’ share of new bank loans has risen from 30% to Given China’s poor record, America will need room to re-
70%. The exuberant private sector has been stifled; its share of spond through tariffs or arbitration if China does not meet its
output has stagnated, and firms must establish party cells which commitments. But America should also reward good behaviour.
then may have a say over vital hiring and investment decisions. If Chinese firms can use greater transparency to persuade it that
Regulators meddle in the stockmarket, critical analysis is they are operating on commercial principles, they should be
suppressed and, since a botched currency devaluation in 2015, treated like businesses from any other country.
capital flows are tightly policed. Mr Xi has ignored Deng Xiao- Today, these reforms seem a distant prospect. But they were
ping’s advice to “hide your capabilities and bide your time”, accepted wisdom among China’s technocrats a decade ago. They
launching the “Made in China 2025” plan, an attempt to use state are also popular at home. Corporate bosses and senior officials
direction to dominate high-tech industries. This has alarmed say that they want American pressure to get through to Mr Xi in a
the rest of the world, though it has yet to produce results. way they cannot. Under him, China is becoming trapped in a bad
Make no mistake, Mr Xi’s approach can continue for some cycle of sluggish growth, debt, state control and hostility abroad.
time. Whenever the economy slows, stimulus is injected. In Jan- A more economically liberal China would end up richer and
uary banks extended $477bn of loans, a new record. But structur- make fewer enemies. It is time for Mr Xi to change course.7
14 Leaders The EconomistFebruary23rd2019
British politics
Splitting image
The resignation of a few mps from their parties may not sound like much, but it could disrupt Britain’s politics
InthepastfewyearsmanyofthempsinBritain’smainparties their own or developed a programme. They are backbenchers
have grown increasingly unhappy. One reason Brexit has with mostly limited ministerial experience. Moreover, a huge
proved tricky is that the party divide does not map onto views obstacle stands in the way. Britain’s brutal first-past-the-post
aboutEurope.Thisweek11moderatemps,eightLabourandthree electoralsystemprotectsincumbentpartiesandcreatesdifficul-
Conservative,decidedthattheyhadhadenough—andmoremay tiesfornewones.Thatiswhythesystemhasenduredforsolong.
jointhem.GiventhatParliamentseats650mps,theirresignation Yetthenewgrouphasachanceofpullingoffsomethingspec-
tocreateanewIndependentGroupmightseemaminortremor. tacular.SomeinLabourfacethecontradictionofstrivingtowin
Butitmatters:asaverdictonLabour’sleader,JeremyCorbyn;as powerwhentheyhaveconcludedthattheirleaderisunfittobe
anothercomplicationinresolvingBrexit;andasawarningofan primeminister.MrsMayhassaidthatshewillnotleadtheCon-
earthquakethatcouldyetreshapeBritain’stwo-partysystem. servativesintothenextelection.Wereshetobesucceededbya
One of the eight Labour mps, Luciana Berger, is Jewish. She hardlineBrexiteer,tensionswithintheToriescouldbecomeun-
hasbeensubjectedtounrelentingracistattacksfromwithinthe bearable.Despitetheweaknessoftoday’sLiberalDemocrats,still
party. Mr Corbyn’s feeble response—he has not met Ms Berger sufferingaftercoalitionwithDavidCameron’sTories,somepolls
since2017—hasledmanyofhismpstoconclude suggest that a new centrist party could attract
that Labour has surrendered to anti-Semitism. manyvotesfromthosedisenchantedwithboth
Thisweekeventhedeputyleader,TomWatson, mainparties’drifttotheextremes.
lamented that he sometimes no longer recog- If it is not to lose momentum, the Indepen-
nisedhisownparty.Theresigningmpsareright. dent Group has to move fast. It not only needs
Mr Corbyn has failed a test of leadership and moredefections,butmustalsoworkwithother
shownthathecannottellrightfromwrong. parties, including the Scottish and Welsh na-
The mass resignations also underline how tionalistsaswellastheLibDemsandGreens.It
farBrexitnowtrumpspartyloyalties.TheLeave- mustcoherearoundastrongmessage,mostob-
Remaindivideidentifiesvotersandmpsmorethantheoldleft- viouslyitsoppositiontoano-dealBrexitanditscallforasecond
rightonedoes.Thethreatofmoreresignationswillstrengthen referendum. And it will need to unite behind one leader. The
thehandofBrexitmoderateswhohavenotleft.MrCorbynwill likeliest candidate just now is Chuka Umunna, the mp for
be under pressure to show that the option of a second referen- Streatham,whooncemadeabidtobecomeLabourleader.
dum,whichispopularinhisparty,isgenuineandnotamean- RealignmentsarerareinBritishpolitics,buttheydohappen.
ingless ploy, as some suspect. To pacify rebellious Conserva- LabourdisplacedtheLiberalsinthe1920s,theScottishnational-
tives, including some in her cabinet, Theresa May, the prime ists overwhelmed Labour in Scotland in 2015 and the uk Inde-
minister,willbeunderrenewedpressuretopromiseshewillnot pendence Party secured and won a Brexit referendum. This
leavetheEuropeanUniononMarch29thwithoutadeal. week’s rebellion could yet subside—like the Social Democratic
Thehardestquestioniswhetherthisweek’sresignationswill Party (sdp), formed by four former Labour mps in1981. The sdp
lead to a realignment. The mps have only just started on that merged with the Liberals, but not before galvanising Labour
journey(seeBritainsection).Mostalreadyfacedahighriskofde- moderatestoreformtheirparty.IftheIndependentGroupman-
selectionbytheirparty.Theyhavenotyetformedanewpartyof agednothingmore,itwouldstillcountasasuccess.7
Trump’s emergency
Imperial purple
It is no good complaining about how Donald Trump abuses his powers. You have to curtail them
Since theday he became president, Donald Trump has tram- Trump’s attempts to cajole Congress to provide the money, in-
pled political norms. He has cosied up to foreign dictators cluding by shutting down the government, fared no better.
while traducing his own officials. He has demanded that the Jus- Boxed in by his own foolish promises and ineptitude, he has fall-
tice Department investigate his adversaries and mused about en back on the ruse of declaring an emergency and grabbing
pardoning himself. He lies so frequently that it seems like a tic. what money he can from the military budget.
In declaring a spurious state of emergency on America’s south- As a lawsuit already filed by 16 states points out, there is no
ern border, has he at last gone too far and provoked a crisis? emergency on the southern border in any normal sense. Last
The president’s action on February 15th was born of frustra- year 400,000 people were apprehended there, down from 1.6m
tion and fear for his political future. Having repeatedly promised in 2000. Meanwhile the border force has doubled in size. Drug
to build a wall on the Mexican border, he had to do it. Unsurpris- seizures are down, mostly because less marijuana is coming in.
ingly, his original plan of getting Mexico to pay failed. Mr America does face genuine emergencies. Perhaps the greatest 1
The EconomistFebruary23rd2019 Leaders 15
2of these is the terrible opioid epidemic that kills some 50,000 easily. Only Mr Trump’s third target, the military construction
people every year and will continue to do so for years to come budget, requires a declaration of emergency. He has a good
(see Briefing). Mr Trump plans to spend just $1bn over two years chance of getting his way there, too. His emergency powers are
saving some of these lives. Devoting $8bn to putting more barri- broad, and he could veto a motion of disapproval which Con-
ers in the Sonoran Desert is the wrong priority. gress is due to vote on (see United States section).
Whether Mr Trump is overreaching his authority, and in what Mr Trump has made an appallingly sloppy case for his emer-
ways, is a legal question. The courts may rule that the business of gency declaration. He mused publicly for weeks about whether
defining what is an emergency belongs to the executive. Better, to issue it, as though he were still a reality-tvstar building ten-
then, to assume the real problem is not so much that the presi- sion. He cannot even stick to the line that there is an emergency.
dent is exceeding his powers as that those powers are excessive. “I didn’t need to do this,” he explained on February 15th. But, he
This is largely Congress’s fault, and it is for Congress to fix. said, he wants to get the wall built quickly. It is provocative
For decades, presidents both Republican and Democratic enough when a president asserts new powers. It is more so when
have asserted greater powers for themselves, and have often he admits that he is doing so because it is convenient.
been allowed to get away with it. Having declared an open-ended Such shamelessness is clarifying, however. Just as Mr
war on terror, George W. Bush set up military commissions and Trump’s refusal to release his tax returns showed that the tradi-
authorised warrantless wiretaps. Barack Obama invented new tion of presidential candidates doing so was only a tradition, just
categories of illegal immigrant, which he then protected. Every as his failure to divest himself of his business interests demon-
president since Gerald Ford has declared at least one national strated that a president cannot be forced into it, his cynical dec-
emergency. Many are no longer emergencies, yet they linger, laration of an emergency reveals how vague and expansive that
along with some of the powers they brought with them. Nearly power is. It would be best if Mr Trump acted nobly. But a nation
40 years after Iranian revolutionaries took Americans hostage, founded on law should know not to expect that of its leaders.
Jimmy Carter’s emergency declaration is still in force. Congress should take stock of its defences against bad leader-
Congress has also passed laws increasing the power of the ex- ship and strengthen them, as in the 1970s after Richard Nixon’s
ecutive, which Mr Trump is now exploiting. One of the three pots resignation. It could curtail emergency powers, say by changing
of money he intends to raid to pay for his wall is the Defence De- the law so that emergencies expire automatically after a month
partment’s anti-drug fund. In 2016 Congress passed a bill that ap- or two unless Congress re-authorises them. Republicans may be
pears to give him the power to do just that. More cash will come tempted to keep things as they are. They should remember how it
from a Treasury asset-forfeiture fund, which can also be tapped feels when the boot is on the other foot.7
Business and global warming
Hot, unbothered
Corporations need to rethink how they approach climate risk
Chief executiveswho care about climate change—and these Indian subcontinent were underwater for days following epic
days most profess to—often highlight headquarters be- monsoon downpours. That year insurers paid out a monumen-
decked with solar panels and other efforts to lower their carbon tal $135bn in compensation. Another $195bn in estimated losses
footprint. Last week Volkswagen, a carmaker, told its 40,000 was uninsured. Power plants often run slow because the river
suppliers to cut emissions or risk losing its custom. Plenty of in- water they use for cooling is too hot. Last year commercial traffic
vestors, meanwhile, say they are worried about being saddled along the Rhine, the world’s busiest waterway, ran aground when
with worthless stakes in coal-fired power plants if carbon taxes rains failed to replenish its sources.
eventually bite. Yet the reality is that meaningful global environ- Corporate-risk managers have just about come to grips with
mental regulations are nowhere on the horizon. tangled supply chains. But they are rotten at as-
The risk of severe climate change is thus rising, sessing their exposure to a changing climate
Potentialclimate-riskimpact
posing physical threats to many firms. Most re- Mediandecreaseinenterprisevalue,% (see Business section). Unfamiliar with bleed-
March2018
main blind to these, often wilfully so. They -4 -3 -2 -1 0 ing-edge climate models, which tell you what
should start worrying about them. Oil & gas disruption to expect next, risk managers fall
Utilities
Nature disrupting supply chains is nothing back on retrospective tools like flood maps,
Chemicals
new. Businesses have coped with floods, which are tried, tested—and wrong.
Goods & services
droughts and storms since long before the joint- Technology One study last year found that accounting for
stock company became popular in the 19th cen- physical risks to corporate assets would shave
tury. Two things have changed. First, supply chains have grown 2-3% off the total market value of over 11,000 globally listed
complex and global (just look at vw). As links have multiplied so, firms. That is less than many stocks move in a given day, and a
too, have points of possible failure. Many sit in the tropics, more fraction of the estimated 15% downward effect of a transition to
given to weather extremes than the temperate West. cleaner energy. Unlike the energy transition, though, some
Second, global warming is fuelling more such extremes physical harm to corporate assets is all but guaranteed. Not only
everywhere (see Books and Arts section). In 2017 Houston experi- that, but the risks rise as the world warms. And the average con-
enced its third “500-year flood” in less than four decades, Cali- ceals a huge range. Some companies would lose nearly one-fifth
fornia suffered five of its 20 worst wildfires ever and parts of the of their enterprise value. Most have no clue where they stand. 1
16 Leaders The EconomistFebruary23rd2019
2 They have few pressing incentives to find out. Markets tend to tional group set up by the Financial Stability Board, a global set of
punish honesty about previously unacknowledged risks, not re- regulators, issued voluntary guidelines for publiccompanies in
ward it. Rather than learn that nature poses a “material” threat— 2017. These should be made mandatory.
which firms are obliged to disclose to shareholders—it is safer It is in businesses’ long-term interest to own up to the threats
not to look in the first place. Although credit-raters and insurers they face. A post-disaster payout from a cheap insurance policy
are busily reassessing climate risk, companies’ premiums and is better than nothing—but a lot worse than avoiding disruption.
credit have scarcely got more expensive. On the rare occasion Adaptation could mean erecting flood barriers around factories
markets do reprice a company’s risk, they do so in a hurry. pg&e, or battening down warehouse roofs to withstand stronger gales.
a Californian utility, was forced into bankruptcy protection in Insurers reckon a dollar spent on such measures saves five in re-
January after insurers and creditors fled when they concluded construction. It may involve lobbying politicians to fill the esti-
that it could be on the hook for billion-dollar liabilities over its mated $110bn-280bn shortfall in annual public spending on re-
possible role in sparking wildfires. silience. In extreme cases, it may require retreat from a business.
Such cases would be rarer if companies were legally obliged If this lays bare the seriousness of global warming’s effects, the
to assess and disclose their climate vulnerabilities. An interna- world may even get serious about tackling its causes.7
English-medium education
Babel is better
Young children should be taught in their mother tongue, not in English
When winston churchillwas at Harrow School, he was in Khyber Pakhtunkhwa in Pakistan; many Indian states have start-
the lowest stream. This did not, he wrote in “My Early Life”, ed large or small English-medium experiments. In Africa most
blight his academic career, for “I gained an immense advantage children are supposed to be taught in a local language in the first
over the cleverer boys. They all went on to learn Latin and Greek few years, but often, through parental pressure or a lack of text-
and splendid things like that...We were considered such dunces books, it does not happen.
that we could learn only English...Thus I got into my bones the Teaching children in English is fine if that is what they speak
essential structure of the ordinary British sentence—which is a at home and their parents are fluent in it. But that is not the case
noble thing.” in most public and low-cost private schools. Children are taught
Partly thanks to Churchill and the post-war Anglo-American in a language they don’t understand by teachers whose English is
ascendancy, English is these days prized, not despised. Over a poor. The children learn neither English nor anything else.
billion people speak it as either their first or second language; Research demonstrates that children learn more when they
more still as a third or fourth language. are taught in their mother tongue than they do when they are
English perfectly exemplifies the “network effects” of a global taught in any other language (see International section). In a
tongue: the more people use it, the more useful it is. English is study of children in the first three years in 12 schools in Camer-
the language of international business, law, science, medicine, oon, those taught in Kom did better than those taught in English
entertainment and—since the second world in all subjects. Parents might say that the point
war, to the fury of the French—diplomacy. Any- is to prepare children for the workplace, and
body who wants to make their way in the world that a grasp of English is more use than sums or
must speak it. All of which has, of course, been history. Yet by year five the children taught in
of great benefit to this newspaper, which has Kom outperformed English-medium children
floated on a rising linguistic tide. even in English. Perhaps this is because they
It is not surprising that there is a surge in gain a better grasp of the mechanics of reading
“English-medium” education all over the world. and writing when they are learning the skills in
In some regions—such as East Asia and Latin a language they understand.
America—the growth is principally among the rich. In others— English should be an important subject at school, but not
Africa and South Asia, where former colonies never quite es- necessarily the language of instruction. Unless they are confi-
caped the language’s grip—it is happening at all income levels. dent of the standard of English on offer, parents should choose
Parents’ desire for their children to master English is spurring mother-tongue education. Rather than switching to English-
the growth of private schooling; parents in the slums of Delhi medium teaching, governments fearful of losing custom to the
and Lagos buy English-medium education in the hope that their private sector should look at the many possible ways of improv-
children will gain a university degree, obtain good jobs and even ing public schools—limiting the power of obstructive teachers’
join a glittering world of global professionals. unions, say, or handing them over to private-sector managers
Where the private sector leads, governments are following. and developing good curriculums and so on.
Some countries have long chosen to teach in English as a politi- Pakistani Punjab has decided to end the English experiment;
cal expedient, because a local language would prove conten- Uganda has introduced mother-tongue instruction in 12 differ-
tious. But even where public schools teach children in their ent languages in the first four years of schooling. More should
mother tongue, or a local language, education authorities are follow. After all, it was a good education in his mother tongue,
switching to English medium, in part to stem the outflow of chil- rather than in the classics then favoured by the British aristocra-
dren into the private sector. That has happened in Punjab and cy, that won Churchill the Nobel prize for literature. 7