The Economist (February 9th 2019)

67 Pages·2019·3.838 MB·English

by  The Economist

Is the German model broken?
Iran, 40 years after the revolution
China’s embrace of intellectual property
On the economics of species
FEBRUARY9TH–15TH2019
Crude awakening
The truth about Big Oil and climate change
Contents The EconomistFebruary9th2019 3
The world this week United States
6 Around-up of political 19 After the INF treaty
andbusinessnews
20 Missiles and mistrust
21 Virginia and shoe polish
Leaders
21 Union shenanigans
9 Energy and climate
22 Botox bars
Crude awakening
23 Elizabeth Warren’s ideas
10 Germany’s economy
Time to worry 24 LexingtonDonald Trump
andconservatism
10 Arms control
Death of a nuclear pact
The Americas
12 Iran’s revolution at 40
Dealing with the mullahs 25 Canada in the global
jungle
13 Anew boss for the
On the cover
World Bank 26 Jair Bolsonaro’s
The oil industry is making a Aqualifiedpass congressional win
bet that could wreck the 28 BelloThe Venezuelan
climate: leader, page 9. dinosaur
Letters
ExxonMobil, a fossil-fuel
14 On the Democratic
titan, gambles on growth:
Republic of Congo, Asia
Briefing, page 16. The Green
hygiene, Brexit, chicken, 29 India’s Congress party
New Deal pays little heed to
KingCrimson,airlines
economic orthodoxy: Free 30 Avoiding military service
exchange,page67 in South Korea
Briefing
31 Turmoil in Thai politics
•Is the German model broken?
16 ExxonMobil
An economic golden age could 31 Facial fashions in
Bigger oil, amid efforts to
be coming to an end: leader, Pakistan
hold back climate change
page 10. How Germany’s 32 BanyanJapan’s lost
decentralisation can inoculate islands
against political unrest: page 41.
The long expansion, page 61
China
•Iran, 40 years after the 33 Cultural diplomacy
revolutionThe Islamic
34 Pets proliferate
theocracy has failed its people,
35 ChaguanUnderstanding
but Donald Trump’s sanctions
Taiwan
could prolong its life: leader,
page 12. Four decades after its
revolution, Iran is still stuck in
the past, page 36
Middle East & Africa
•China’s embrace of
36 Iran’s revolution turns 40
intellectual propertyBelieve it
or not, Chinese firms are not all 38 Iran and its neighbours
serial thieves of intellectual 39 Bibi’s favourite word
property: Schumpeter,page 58
39 East African rifts
•On the economics of species 40 Elections in Nigeria
Conservationists are rethinking
how to preserve nature on a
changing planet—and within a BanyanThe importance
tight budget,page 68 to Shinzo Abe of four
alluring islands occupied
by Russia, page 32
1 Contents continues overleaf
4 Contents The EconomistFebruary9th2019
Europe Finance & economics
41 No gilets jaunes in 61 Deceleration in Germany
Germany 1
62 The first MDB trial
42 Macron’s great debate 63 Optimistic pension plans
43 Phantom fake medicines 63 Bill Gross retires
44 Wish upon Five Stars 64 Australia’s misbehaving
44 Atreadmill for Hungarian banks
dogs
64 Abitcoin banker dies
46 Charlemagne Vestager’s 65 Buttonwood Gauged
progress
against the machine
66 Donald Trump’s tax cuts
Britain
67 Free exchange Brave new
47 Asians, the new Europeans
deal
48 Irish boom and bust
49 BagehotLearning from Science & technology
John Ruskin
68 Ecology and economics
70 Rewilding spreads
International
50 Electricity for the poor
51 What light reveals
Books & arts
71 Eurasia
72 An innovative Chinese
gallery
73 Segregation in America
Business
73 Amemoir of madness
53 America’s manufacturing
74 Womenandthesea
revival
54 Intel’s new boss
Economic & financial indicators
55 BartlebyMcDonald’s and
76 Statisticson42economies
sustainability
56 UNIQLO abroad
Graphic detail
56 Norwegian’s descent
77 Bitcoin’spricecrashhasnotdeterredminers
57 Food pricing in France
58 SchumpeterChina and Obituary
intellectual property
78 Lamia al-Gailani, guardian of Mesopotamian relics
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The world this week Politics
6 The EconomistFebruary9th2019
Thegovernmentandrebel For the ninth week, tens of
groupsintheCentralAfrican thousands of protesters in Aleader, but with little power
Republicsignedapeacedeal Serbia called on Aleksandar A dozen members of the eu,
aimedatendingmorethanfive Vucic to resign as president. He including Germany, France and
yearsoffighting.Theirconflict has offered to hold elections, Britain, recognised Juan
brokeoutin2013afterIslamist but the demonstrators want a Guaidó, the leader of
groupsoverthrewthethen fairer election law and more Venezuela’slegislature, as the
government. media time for the opposition. country’s interim president.
They acted after Nicolás
ThearmedforcesofBurkina Maduro, who won a rigged
Fasosaidtheyhadkilled146 Keeping up the jaw-jaw election in May, failed to meet
jihadistsneartheborderwith Donald Trump confirmed that a deadline for calling a proper
DonaldTrumpgavehisstate- Mali.Securityinthecountry he would hold a second ballot. Most Latin American
of-the-unionspeechtoCon- hasdeterioratedsinceajiha- summit with Kim Jong Un, democracies back Mr Guaidó.
gress,delayedbyaweekbe- distuprisinginMaliin2012. North Korea’sdictator, in (Venezuela’s constitution
causeofwranglingovergov- Vietnam in late February. Mr makes him interim president if
ernmentspending.Heagain Kim has done little to fulfil his the post is not legitimately
calledfortoughercurbson pledge at the pair’s last meet- filled.) Venezuela’s army
illegalimmigration,callingita ing in Singapore to give up his moved to block the delivery of
“moralduty”.Healsosaidthat nuclear weapons. food aid, which might fill
anynewtradedealwithChina empty bellies but would also
“mustincludereal,structural Australiacancelled the resi- embarrass the regime.
changetoendunfairtrade dency permit of Huang
practices…andprotectAmeri- Xiangmo, a property developer Brazil’sjustice minister, pre-
canjobs”.Inararecordial with ties to the Chinese gov- sented a plan to get tougher on
moment,MrTrumpwelcomed ernment. Mr Huang has given criminals and go easier on
therecordnumberofwomen generous donations to poli- cops. Police who kill in the line
inwork,drawingwhoopsand ticians who express pro-China of duty may escape punish-
cheersfromDemocraticcon- PopeFranciscelebratedmass views, as well as to Australia’s ment if they acted out of “fear,
gresswomen,whohaddressed inAbuDhabi,thecapitalofthe two biggest political parties. surprise or violent emotion”. A
inwhitefortheoccasion. UnitedArabEmirates.Itwas judge convicted Brazil’s former
thefirstvisitbyapopetothe Indian officialsresigned in president, Luiz Inácio Lula da
Virginia’sstategovernment Arabianpeninsula,thebirth- protest at what they saw as the Silva, who is already serving a
seemedunabletofindanyone placeofIslam.Thepope government’s attempts to 12-year sentence for corrup-
toruntheplacewhohasnot lamentedtheregion’swars, suppress unflattering eco- tion, on an additional corrup-
eitherappliedbootpolishto includingtheoneinYemen, nomic data. They say un- tion charge and added a sen-
hisfacewhileatcollegeor wheretheuaeisinvolved.He employment is at a 45-year tence of nearly 13 years.
beenaccusedofsexualassault. alsocalledonGulfcountriesto high of 6.1%. The government
RalphNortham,aDemocrat allowmoremembersof says it is reviewing the data.
whowasinitiallyunsure religiousminoritiestobecome
whetherhewasoneofthose citizens. The British government ap-
depictedinaphotoofamanin proved the extradition of Vijay
blackfaceandanotherinKu Mallya to India, the next stage
KluxKlanrobes,remainsthe Things can only get better in a process that started in 2016
state’sgovernor. Robert Biedron, Poland’sfirst when the beer-and-travel
openly gay mayor, founded a tycoon fled to Britain to escape
CoryBookerjoinedtheraceto new pro-euparty to contest the criminal charges related to the
becometheDemocrats’ European Parliament elections collapse of Kingfisher Airlines.
presidentialnomineein2020. in May. The party, Wiosna Known as the “King of Good
Thefirstblacksenatortorepre- (“Spring”), supports higher Times” both for what he sells
sentNewJersey,MrBookeris social spending, civil part- and for how he lives, Mr Mallya Nayib Bukelewon El Salva-
thefourthheavy-hittertoenter nerships for gay couples and denies the charges. dor’spresidential election. His
thecampaign. ending Poland’s reliance on victory ends three decades of
coal. It is polling at about 10%. A textbook on constitutional power alternating between the
law written by Zhang Qianfan, left-wing fmlnand right-wing
Afriend indeed The euestablished a special- one of China’sleading legal Arena parties. Mr Bukele, who
French warplanes bombed a purpose corporation to help it scholars, was removed from is 37, has promised to fight
convoy carrying rebels who evade sanctions that America the country’s bookshops for corruption and to prevent
had crossed into Chad from has imposed for doing busi- promoting Western ideas such violence by creating jobs. He
Libya. The air strikes in sup- ness with Iran. The company, as the rule of law. A recent edict also favours nicer public parks.
port of Chadian troops are a Instex, will co-ordinate barter requires universities to report
sign of the willingness of exchanges to allow Iran to do any books on the topic to the
France to use force to prop up business with companies from authorities. China’s constitu- Ashes to ashes
the government of Idriss Déby, European countries still partic- tion nods to freedom of speech A bill was proposed in Hawaii
one of its more important ipating in the nuclear non- and religion, but in practice the to raise the legal smokingage
regional allies in the fight proliferation deal, from which Communist Party’s wishes to 100. After that Hawaiians
against jihadists. America withdrew last year. trump it. would be free to light up. 1
The world this week Business
8 The EconomistFebruary9th2019
DonaldTrumpnominated ture which will be overseen by India’scentral bank cut its key Sony’sshare price tumbled
DavidMalpasstobecomethe Michael O’Leary, Ryanair’s interest rate by a quarter of a after it reported a big drop in
WorldBank’snextpresident,a ebullient chief executive. percentage point, to 6.25%. It quarterly profit for its gaming
jobthatisbytraditionfilledby was the first big policy decision division. Rumours that the
theAmericangovernment.Mr Underlining the turbulence in taken under the new governor, Japanese electronics giant
Malpasscurrentlyheadsinter- Europe’s discount-flight mar- Shaktikanta Das. Mr Das was might release PlayStation 5
nationalaffairsattheTreasury. ket, Germaniabecame the given the job after Urjit Patel next year, its first update to the
Acontroversialchoice,hehas latest in a long list of low-cost quit amid a quarrel with the gaming console in six years,
voicedconcernsaboutthe carriers to declare bankruptcy. government, which has been did little to lift its stock.
spreadingpowerofmultilater- The Berlin-based airline flew nagging the bank to do more to
alandglobalinstitutionsand 4m passengers last year. boost the economy ahead of Internet companiesare
ofChineseinfluence.Hewas this year’s election. removing 72% of content
partofthenegotiatingteam flagged as racist or xenophobic
thatagreedtoacapitalincrease Turkey, consumer prices American employers created in Europe within 24 hours.
% increase on a year earlier
intheWorldBankinreturnfor 304,000 jobsin January, far That is up from 28% in 2016,
25
restraintonstaffwagesand more than economists had when Facebook, Microsoft,
benefits. 20 forecast and the 100th consec- Twitter and YouTube present-
15 utive month of job growth. ed a voluntary code of conduct
10 Average hourly wages in- on hate speech, which in effect
Off the rails creased by 3.2% during the stopped the eufrom imposing
5
Europe’s competition commis- 12-months ending in January. its own restrictions.
0
sioner blocked the merger of
2017 18 19
Alstom with the rail oper- Following bumper annual
ations of Siemens, reasoning Source: Datastream from Refinitiv earnings from Chevron, Gross mistakes
that the combination of the Turkey’sinflationratecreptup ExxonMobil and Shell, bp Bill Grossannounced his
French and German companies to 20.4% in January. Floods in more than doubled its headline retirement from the invest-
would lead to higher prices in Antalya province, the centre of profit in 2018, to $12.7bn, the ment industry. One of the
the markets for signalling Turkey’s greenhouse produc- most since the downturn in oil founders of Pimco, Mr Gross
systems and high-speed trains. tion of vegetables and fruits, prices that began in 2014. was once known as the Bond
Supporters of the deal, such as helped push food inflation up King for managing the world’s
Bruno Le Maire, the French to 31%, the highest reading Despite a widely panned rede- largest bond fund, which had
finance minister, said it was a since 2004 and up from 25% in sign of its app, Snap, the parent almost $300bn in assets at its
mistake because such mega- December. Although it is under company of Snapchat, peak. He left Pimco in 2014
mergers are vital to take on the political pressure to reduce increased revenues by 36% in after falling out with the firm
might of Chinese companies. interest rates, the central bank the last three months of 2018 and has struggled to repeat his
However, in some markets a recently committed itself to compared with the same quar- success. His current fund
combined Alstom-Siemens maintain its tight monetary ter a year earlier. Having never manages only $1bn in assets.
would have been three times stance until price pressures reported a profit since going Summing up the industry in
bigger than its largest rival. weaken. Happily, it also fore- public in 2017, investors took 2010, Mr Gross said “My clients
cast that inflation will fall by comfort in the halving of its don’t pay me to feel sorry, they
Nissan’sreversal of a promise the end of the year. loss for the quarter, to $192m. pay me to bring them money.”
to build the X-Trail suvat its
factory in Sunderland, a city in
the north of England, was
blamed by Remainers on Brit-
ain’s commitment to leave the
European Union. The carmaker
said that Brexit was a concern.
But its decision was also driven
by the collapse in demand for
diesel and the lower costs of
making the vehicle in Japan.
Ryanairreported its first quar-
terly loss since 2014. Europe’s
biggest low-cost airline said
that although passenger num-
bers had grown, the average
fare it was able to charge had
fallen to less than €30 ($34)
because of excess short-haul
capacity in Europe. In a nod to
shareholder discontent, the
airline is replacing its chair-
man, who has been in the job
for over 20 years. It is also
moving to set up a group struc-
Leaders Leaders 9
Crude awakening
ExxonMobil and the oil industry are making a bet that could end up wrecking the climate
In america, the world’s largest economy and its second big- thereforebeevil.Theyarerespondingtoincentives set by soci-
gest polluter, climate change is becoming hard to ignore. Ex- ety. The financial returns from oil are higher than those from re-
treme weather has grown more frequent. In November wildfires newables. For now, worldwide demand for oil is growing by 1-2%
scorched California; last week Chicago was colder than parts of a year, similar to the average over the past five decades—and the
Mars. Scientists are sounding the alarm more urgently and peo- typical major derives a minority of its stockmarket value from
ple have noticed—73% of Americans polled by Yale University profits it will make after 2030. However much the majors are vil-
late last year said that climate change is real. The left of the ified by climate warriors, many of whom drive cars and take
Democratic Party wants to put a “Green New Deal” at the heart of planes, it is not just legal for them to maximise profits, it is also a
the election in 2020. As expectations shift, the private sector is requirement that shareholders can enforce.
showing signs of adapting. Last year around 20 coal mines shut. Some hope that the oil companies will gradually head in a
Fund managers are prodding firms to become greener. Warren new direction, but that looks optimistic. It would be rash to rely
Buffett, no sucker for fads, is staking $30bn on clean energy and on brilliant innovations to save the day. Global investment in re-
Elon Musk plans to fill America’s highways with electric cars. newables, at $300bn a year, is dwarfed by what is being commit-
Yet amid the clamour is a single, jarring truth. Demand for oil ted to fossil fuels. Even in the car industry, where scores of elec-
is rising and the energy industry, in America and globally, is tric models are being launched, around 85% of vehicles are still
planning multi-trillion-dollar investments to satisfy it. No firm expected to use internal-combustion engines in 2030.
embodies this strategy better than ExxonMobil, the giant that ri- So, too, the boom in ethical investing. Funds with $32trn of
vals admire and green activists love to hate. As our briefing ex- assets have joined to put pressure on the world’s biggest emit-
plains, it plans to pump 25% more oil and gas in 2025 than in ters. Fund managers, facing a collapse in their traditional busi-
2017. If the rest of the industry pursues even modest growth, the ness, are glad to sell green products which, helpfully, come with
consequence for the climate could be disastrous. higher fees. But few big investment groups have dumped the
ExxonMobil shows that the market cannot solve climate shares of big energy firms. Despite much publicity, oil compa-
change by itself. Muscular government action is needed. Con- nies’ recent commitments to green investors remain modest.
trary to the fears of many Republicans (and And do not expect much from the courts.
hopes of some Democrats), that need not in- Lawyers are bringing waves of actions accusing
volve a bloated role for the state. oil firms of everything from misleading the pub-
For much of the 20th century, the five oil ma- lic to being liable for rising sea levels. Some
jors—Chevron, ExxonMobil, Royal Dutch Shell, think oil firms will suffer the same fate as tobac-
bp and Total—had more clout than some small co firms, which faced huge settlements in the
countries. Although the majors’ power has 1990s. They forget that big tobacco is still in
waned, they still account for 10% of global oil business. In June a federal judge in California
and gas output and 16% of upstream invest- ruled that climate change was a matter for Con-
ment. They set the tone for smaller, privately owned energy gress and diplomacy, not judges.
firms (which control another quarter of investment). And mil- The next 15 years will be critical for climate change. If innova-
lions of pensioners and other savers rely on their profits. Of the tors, investors, the courts and corporate self-interest cannot
20 firms paying the biggest dividends in Europe and America, curb fossil fuels, then the burden must fall on the political sys-
four are majors. tem. In 2017 America said it would withdraw from the Paris
In 2000 bp promised to go “beyond petroleum” and, on the agreement and the Trump administration has tried to resurrect
face of it, the majors have indeed changed. All say that they sup- the coal industry. Even so, climate could yet enter the political
port the Paris agreement to limit climate change and all are in- mainstream and win cross-party appeal. Polls suggest that mod-
vesting in renewables such as solar. Shell recently said that it erate and younger Republicans care. A recent pledge by dozens of
would curb emissions from its products. Yet ultimately you prominent economists spanned the partisan divide.
should judge companies by what they do, not what they say. The key will be to show centrist voters that cutting emissions
According to ExxonMobil, global oil and gas demand will rise is practical and will not leave them much worse off. Although the
by 13% by 2030. All of the majors, not just ExxonMobil, are ex- Democrats’ emerging Green New Deal raises awareness, it al-
pected to expand their output. Far from mothballing all their most certainly fails this test as it is based on a massive expansion
gasfields and gushers, the industry is investing in upstream pro- of government spending and central planning (see Free ex-
jects from Texan shale to high-tech deep-water wells. Oil compa- change). The best policy, in America and beyond, is to tax carbon
nies, directly and through trade groups, lobby against measures emissions, which ExxonMobil backs. The gilets jaunes in France
that would limit emissions. The trouble is that, according to an show how hard that will be. Work will be needed on designing
assessment by the ipcc, an intergovernmental climate-science policies that can command popular support by giving the cash
body, oil and gas production needs to fall by about 20% by 2030 raised back to the public in the form of offsetting tax cuts. The
and by about 55% by 2050, in order to stop the Earth’s tempera- fossil-fuel industry would get smaller, government would not
ture rising by more than 1.5°C above its pre-industrial level. get bigger and businesses would be free to adapt as they see fit—
It would be wrong to conclude that the energy firms must including, even, ExxonMobil.7
10 Leaders The EconomistFebruary9th2019
Germany’s economy
Time to worry
An economic golden age in Germany could be coming to an end
The world is used to a thriving German economy. A decade balances in competitiveness within the euro zone that would
ago,duringthefinancialcrisis,itshedrelativelyfewjobs,as elsewhereadjustthroughexchangerates.Theriskisnotofover-
unemploymentsoaredelsewhere.Sincethenithasbeenanan- heating but of Europe slipping into a low-growth trap as coun-
choroffiscalstabilitywhilemuchoftheeurozonehasstruggled triesthatneedtogaincompetitivenessfaceaninflationceiling
withdebtanddeficits.Itspublicdebtisbelowthetargetof60% settoolowbyGermany.
ofgdpsetbyeutreaties—andfalling.Thankstolabour-market TheslowdownalsoportendsdeeperproblemsforGermany’s
reforms introduced during the 2000s, Germans enjoy levels of globalisedeconomicmodel.Weaknessinpartreflectsthefallout
employmentthatbeatjob-friendlyBritain,evenasinequalityis from the trade war between China and America, two of Ger-
barelyhigherthaninFrance.Itsgeographicallydispersedmanu- many’s biggest trading partners. Both are increasingly keen on
facturingindustries,madeupofabout200,000smallandmedi- bringing supply chains home. America is due soon to decide
um-sizedfirms,havemitigatedtheregionaldisparitiesthathave whether to raise tariffs on European cars. Trade is already be-
fuelledpopulismacrosstheWest(seeEuropesection). coming more regionalised as uncertainty grows. If global com-
Yet the German economy suddenly looks vulnerable. In the mercesplitsintoseparatetradingandregulatoryblocs,Germany
shorttermitfacesaslowdown.Itonlynarrowly willfindithardertosellitsgoodstocustomers
avoidedarecessionattheendof2018.Tempor- Germany’sGDP aroundtheworld.
aryfactors,suchastighteremissionsstandards %changeonpreviousquarter Reform has made Germany’s labour market
1.0
forcars,explainsomeoftheweakness,butthere strong,butitwillsoonfacenewchallenges.In-
0.5
is little sign of a bounceback. Manufacturing dustrial jobs look particularly vulnerable to
* 0
output probably fell in January. Businesses are automation, yet lifelong learning and retrain-
-0.5
losingconfidence.Boththeimfandthefinance ing are relatively rare in Germany. The work-
2015 16 17 18
ministryhaveslashedgrowthforecastsfor2019 force is ageing. Neither the government nor
*Estimate
(seeFinancesection).Inthelongerterm,chang- business is much digitised and neither invests
ing patterns of trade and technology are moving against Ger- enough.Iftechnologicalchangedemandsthatitseconomyem-
many’sworld-beatingmanufacturers.Inresponse,onFebruary bracesdigitalservices,Germanywillstruggle.
15thPeterAltmaier,theeconomyminister,laidoutplanstoblock The government is not blind to these problems, but Mr Alt-
unwantedforeigntakeoversandtopromotenationalandEuro- maier’s protectionism is the wrong medicine. The left, mean-
peanchampions. while, wants to roll back labour-market reforms. Better to ex-
Germany is getting both the short and the long term wrong. pandarecentboosttoinfrastructurespendingandpressahead,
Start with the business cycle. Many policymakers think the atscale,withtaxincentivesforprivateinvestment.Bothshould
economyisclosetooverheating,pointingtoacceleratingwages helpgrowthtodayandboosttheeconomy’slong-termprospects.
and forecasts of higher inflation. In their view, slower growth Significantly lower taxes on households would encourage a re-
was expected, necessary even. That is complacent. Even before balancingawayfromexportsandtowardsconsumption.Adose
theslowdown,theimfpredictedthatin2023coreinflationwill ofcompetitioncouldinvigoratecoddledserviceindustries.The
beonly2.5%—hardlyasignofrunawayprices.Inanycase,high- Germaneconomyhashadanimpressiverun,butcracksareap-
erGermaninflationwouldbewelcome,asawaytoresolveim- pearing.Itistimetoworry.7
Arms control
Death of a nuclear pact
Russian cheating killed the inf treaty. America’s response should be measured
When it turned 30 in 2017, the Intermediate-Range Nuc- ance and jeopardise what is left of global arms control.
lear Forces (inf) treaty was ailing. Russia had proposed Under the treaty, America and the Soviet Union scrapped all
ripping up the pact in 2005. When it was rebuffed it tested an ille- ground-based missiles with ranges of between 500 and 5,500km
gal cruise missile, the 9m729. A few years later the Obama admin- (310-3,400 miles), weapons that could quickly reach targets deep
istration called out Russian cheating. In December 2018 Ameri- into enemy territory. The intention was to remove missiles that
ca’s natoallies belatedly backed America. So, when Russia failed strike so quickly that leaders might be panicked into rash nuc-
to meet a deadline to destroy the missile this month, America lear escalation.
pulled out of the treaty and Russia soon followed. The only pact The temptation is to blame America for the treaty’s demise. It
to ban an entire class of nuclear weapons will thus expire in Au- might have worked harder to win inspections of the 9m729, per-
gust. The task for America and natois to meet the Russian chal- haps in return for allowing Russia to look at what it says is a sus-
lenge without triggering an arms race that would split the alli- pect American missile-defence launcher in Romania. It should 1
12 Leaders The EconomistFebruary9th2019
2have done more to bring allies along—who, in turn, ought to ons. Missiles could be put on Guam, where lush forests provide
have protested about Russian behaviour earlier. Yet there should useful cover. But the island is so far from China that it would re-
be no confusion: Russia, not America, set the pact ablaze. Even quire America to make a new type of missile. Congress may not
strenuous diplomacy may not have put out the flames. indulge this; America is already due to spend some $1.7trn in real
What to do next? A realistic starting-point is to acknowledge terms on its nuclear arsenal over the next 30 years.
that conventional (not nuclear) missiles will play a central role China is unlikely to agree to limits. But its competition with
in future wars. This is why countries like China, India and Israel America is over conventional rather than nuclear missiles, so the
have piled up inf-range missiles as America and Russia de- risks are lower. Even in Europe, America should avoid seeking to
stroyed theirs. It is also why Russia furtively built new ones. match Russia missile for missile. Instead it should work closely
Russia has reportedly deployed four battalions of the 9m729 with its allies to assess how far existing weapons can redress the
(nearly 100 missiles) that allow it to strike targets across Europe military balance, and the impact of any new missiles. America
quickly and precisely—including nato’s nuclear weapons. Such and Russia should discuss how to limit new deployments. Vladi-
land-based mid-range missiles have advantages over those mir Putin has reasons to hold back. Despite his boasts of super-
launched from the air and sea, which were allowed under the inf weapons, Russia’s defence budget is falling and an influx of new
treaty. Mobile ground-launchers are cheaper than a warship or American missiles would stretch it even more.
warplane, can be hidden more easily and have no other missions Most worrying, the death of the inf treaty threatens New
to distract them. America’s army is right to explore whether they start, a pact which governs American and Russian long-range
offer an effective way to strike key military targets, including “strategic” nuclear weapons. The problem is threefold. First, the
those deep behind enemy lines. Trump administration holds arms control in contempt. Second,
But inf-type missiles come with problems, too. Their limited Russia has poisoned the well of trust by playing fast and loose
range means that they must be parked on allied soil, rather than with the inf treaty. And third, an accumulation of long-legged
in America. nato, to its credit, has resoundingly backed America intermediate-range missiles might devalue the limits on strate-
so far, but it may be less unified about new weapons. If America gic ones. If New start is allowed to expire in 2021, there will be
cuts a bilateral deal with an enthusiastic volunteer, such as Po- no constraint on the nuclear forces of America and Russia for the
land, it would be divisive and destabilising. Suitable sites are first time in almost 50 years. It is almost certainly too late to save
even scarcer in Asia. Japan and South Korea would be wary of the the inf treaty. But its collapse must not mean a return to the fren-
political backlash from China were they to host American weap- zied arms race of the cold war.7
The Iranian revolution at 40
How to deal with the mullahs
The Islamic revolution has failed, but Donald Trump’s sanctions could prolong it
The cryof “Death to America!” has rung out in Tehran every Iran’s was not the Middle East’s only convulsion in 1979. The
Friday since the Islamic revolution of 1979. But the ritual is siege of the grand mosque in Mecca stung Saudi Arabia into pro-
hollow. The mullahs know they have failed their people. Iranians moting its rival Sunni brand of ultra-puritanism at home and
are much poorer than they should be; promises of justice have abroad. Together with America, the Saudis helped weaponise
been drowned in the blood of enemies and supposed sinners; Sunnism by supporting mujahideen fighters against the Soviet
and theocracy has made Iranians less pious. Protests occur of- invasion of Afghanistan. Arabs who volunteered to fight with
ten, even among the poor who make up the regime’s base (see them became the godfathers of jihadism. America, pledging to
Middle East & Africa section). protect Gulf oil against outsiders, was drawn deep into the re-
Yet the mullahs remain in charge, despite gion’s conflicts.
war, sanctions and decades of enmity with America has rarely been able to think clearly
America—or perhaps because of them. To the about Iran; not least because the regime’s fol-
alarm of Israel and many Arab states, Iran has lowers held 52 of its citizens hostage for 444
spread its influence, helping save the odious re- days after seizing the American embassy in Teh-
gime of Bashar al-Assad in Syria, and ensuring ran in 1979. But if Iran has recently extended its
that the Saudis remain bogged down in Yemen. power it is in large part because of the mess
Its Lebanese client, Hizbullah, poses a grave caused by America’s invasion of Iraq in 2003.
threat to Israel. In Europe Iranian spooks are ac- Iran is confusing and infuriating to deal
cused of plotting to kill dissidents. with. Power is shared ambiguously between a weak president,
For President Donald Trump, Iran is a unique menace. He has who is elected from a field of loyalists and deals with day-to-day
abandoned Barack Obama’s nuclear deal in favour of tight sanc- problems, and a nebulous revolutionary caste that controls the
tions. His officials will try to forge an anti-Iran alliance at a con- instruments of coercion. Sometimes Iran has proved pragmatic,
ference in Poland on February 13th-14th. In seeking “maximum for instance acquiescing in America’s overthrow of the Taliban
pressure”, America may hope to stir another uprising to reverse in Afghanistan. Yet, under the supreme leader, Ali Khamenei,
the one of 1979. But it will probably make things worse. ideology often trumps rational policymaking. Neither confron-
The mullahs have a woeful record. Their theocracy helped tation nor diplomacy can reliably sway the mullahs. And neither
turn Islam into a tool of radical, and often violent, politics. But economic carrots nor sanctions seem to work as an alternative. 1
The EconomistFebruary9th2019 Leaders 13
2 That said, Mr Obama’s accord, the jcpoa, succeeded in freez- bomb and the dangers of a bombing campaign to stop it.
ing Iran’s nuclear programme in exchange for the lifting of many America’s apparent efforts to bring down the regime are un-
sanctions. Mr Trump thinks this was a terrible deal that failed to appealing to most Iranians, given the bloody chaos they see all
halt the nukes for good or stop Iran from stirring trouble around around. The mullahs are still willing to shoot opponents; few or-
the region. Renewed sanctions are pushing Iran into a deep eco- dinary Iranians are yet ready to die trying to overthrow them. The
nomic crisis. But re-imposing them when Iran was abiding by best hope for change in Iran may come with the death of Ayatol-
the jcpoacasts America as the rogue. This has deepened the split lah Khamenei, who is 79 and in poor health.
with European allies, which have created a system to help firms To nudge Iran towards normality, America needs to mix firm-
sidestep them. America has bound itself more tightly to auto- ness with pragmatism, rather as it did in the cold war with the So-
cratic Arab regimes, such as Saudi Arabia, that have themselves viet Union. This means containing Iran until its people grow
fomented instability and radicalism. What “moral clarity” can weary of their rulers, and negotiating partial deals that limit the
America claim in denouncing Iran’s human-rights abuses when risk of outright conflict. America should seek unity with its own
it turns a blind eye to those committed by its friends? democratic allies and attempt to isolate Iran’s revolutionaries
Above all, indiscriminate sanctions are likely to strengthen from their subjects. It should aim sanctions at hardliners rather
Iran’s hardliners. American pressure gives them excuses for bad than the country as a whole. It should do more to expose the re-
behaviour; adventurism abroad becomes self-defence; oligar- gime’s brutality and corruption, counter its propaganda and in-
chic control of the economy is portrayed as a means to bust sanc- crease contacts with Iranian citizens—giving them more visas to
tions; and critics are dismissed as puppets of the Great Satan. If visit America, not fewer. And it should offer to talk to Ayatollah
Iran casts off the jcpoa’s nuclear constraints, America and Israel Khamenei. To him, America’s outstretched hand may be more
will have to choose between the risk of Iran building a nuclear terrifying than its fist. 7
Anew boss for the World Bank
A qualified pass
David Malpass is America’s candidate to lead the World Bank. He should get the job
It has long been obvious that the boss of the World Bank served in three administrations and speaks four languages. He
should be chosen on merit, not by nationality. When President helped forge an unlikely agreement passed in April last year to
Harry Truman picked its first head in 1946, India was still a colo- increase the bank’s lending capacity. The reforms he has been
ny and the People’s Republic of China did not exist. America pro- urging on the bank during his time at America’s Treasury are
vided most of the institution’s capital and it was felt that its cred- mostly unobjectionable and reassuringly unoriginal (more tran-
itors on Wall Street needed the reassurance of an American at the sparency, better measurement of results). America’s allies can be
helm. Today China is the second-biggest economy and America relieved that Mr Trump’s administration cares enough about the
provides less than 17% of the bank’s capital. But America still World Bank to pick one of its few remaining grown-ups to lead it.
picks the bank’s president as part of a deal with European gov- The bank’s shareholders must also know that, if they were to
ernments who choose the head of the imf. reject Mr Malpass, Mr Trump could turn violently against the in-
True to this anachronistic tradition, President Donald Trump stitution. That would scupper the chances of America’s Congress
this week named David Malpass, a senior official at America’s ratifying the agreed capital increase. It would also jeopardise fu-
Treasury, to fill the vacancy created by Jim Yong ture American contributions to the World
Kim’s early departure on February 1st. Uncom- Bank’s fund for helping the neediest countries.
fortably, Mr Malpass has been a vocal critic of What of Mr Malpass’s hostility to China? He
multilateral institutions such as the World is right to fret about elements of its bri, which is
Bank, imfand World Trade Organisation, which a mix of chequebook diplomacy, white elephan-
he believes have tied America’s hands. Nonethe- titis, export promotion and mutually beneficial
less, despite his views and his passport, it would investment. But that is no reason for the bank to
be a mistake to oppose him. steer clear of it altogether. In so far as China’s
Accepting him will not be easy for the bank’s global initiatives are furthering the bank’s goal
staff or for its other shareholders (who in principle could veto of eradicating poverty, the bank should offer whatever guidance
the appointment). Mr Malpass does not hide his misgivings and assistance it can. The bank’s shareholders will have to im-
about the institution he aspires to lead. To him, it is part of a press on Mr Malpass that the institution cannot abet American
sprawl of international organisations, vulnerable to mission attempts to contain China’s economic rise.
creep, which pamper their staff and put their own growth above Ultimately, the World Bank’s own bureaucratic habits will
the countries they serve. He believes the bank has also become probably entangle Mr Malpass. Truman’s pick to lead the World
too close to China, especially the country’s Belt and Road Initia- Bank resigned after just six months, frustrated by rival voices in
tive (bri), which aims to build infrastructure and other links the organisation. “I could stay and fight these bastards…but I’m
around the world (and in space). The bank, Mr Malpass fears, too old for that,” he complained. Institutional inertia remains a
could be viewed as endorsing China’s geopolitical ambitions. powerful force in a sprawling international body. Mr Malpass is
Nonetheless, the choice could be worse. Mr Malpass is one of right about that. Inertia, after all, is the chief reason why Ameri-
the best-qualified members of Mr Trump’s government. He has ca’s president still gets to pick people like him to run one.7
Letters
14 The EconomistFebruary9th2019
Contrarytothenegativemain- benefits from direct and
Congolese politics No to a second referendum streamopinionaboutamessy indirect subsidies. Consumers
Your leader about the The Economist’s chronic anti- Brexit,Iamabsolutelythrilled in Africa and elsewhere do
presidential election in the Brexit bias continues to surface bythediscussions,theparlia- enjoy some benefit, mainly
Democratic Republic of Congo in issue after issue (“The mentaryproceduresand from price suppression, while
(“The great election robbery”, mother of all messes”, January democratictraditions.What the middle men grow rich.
January 26th) missed the key 19th). What I find most objec- wearewitnessingistheflexi- Meanwhile substantial poultry
point. The alternative to the tionable is the idea that, since bilityandevolutionarypower industries, the grain producers
selection of Félix Tshisekedi as Parliament has rejected the ofanolddemocracyinapeace- that depend on them, and the
the winning candidate was not withdrawal proposal it now fulway.Thepowerplaysare jobs of thousands of workers in
Martin Fayulu, but Ramazani becomes necessary to have akinto“GameofThrones”,but rural areas, are at risk.
Shadary. He was the “heir” of another referendum. Rubbish! withouttheblood.Yes,the This is the dark side of the
the outgoing president, Joseph The voters have spoken, mak- politiciansaremediocre,but Western preference for white
Kabila. It was expected that the ing it clear in 2016 that Britain theyarecompensatedforby chicken meat.
electoral commission would should leave the European traditionsandasocietywitha francois baird
rig the vote to make Mr Shadary Union. The fact that the gov- democraticdna. Founder
president. But his vote count ernment cannot figure out how andreasschmidt Fairplay
was so low that Mr Kabila could to do it doesn’t mean the voters LeamingtonSpa,Warwickshire Johannesburg
not get away with declaring need to be consulted once
him the winner. On the other again on the issue of whether
hand, he could not accept Mr to stay or leave, which regard- The real pecking order Frippin’ marvellous
Fayulu because his political less of the spin put on it, repre- “Ruling the roost” (January The giant toothy, gaping
backers, Moïse Katumbi and sents nothing more than a new 19th) described the economics mouth at the Oval Office door
Jean-Pierre Bemba, had prom- chance for Remainers to throw of the poultry industry and in Lexington’s piece on Mick
ised to pursue Mr Kabila for his sand into the Brexit machinery. how Westerners will pay a Mulvaney, the new White
ill-gotten gains. Imagine the precedent. If an premium for lean white chick- House chief of staff (January
Mr Tshisekedi is apparently issue is presented to the en meat, while people in Asia 19th), brought to mind the
less of a threat to Mr Kabila, but electorate, and a decision is and Africa prefer dark meat, cover art on King Crimson’s
within a few days of his inau- made that one side very much which includes legs and iconic album from 1969, “In the
guration, the governor of the dislikes, then all that side has thighs. With a preference for Court of the Crimson King”.
central bank was arrested and to do is to make it almost white meat, chicken producers Looking back, that collection
charged with stealing govern- impossible to put in place the in the West make their profits of songs was uncannily
ment money, and the ministers wishes of the voters, suggest- from chicken breasts. They prescient. As Mr Mulvaney
in charge of the budget and the ing that the complexities are so then dump the unwanted takes his daily “March for No
economy were called in for enormous and nuanced that brown meat in frozen bulk in Reason” to confer with the “21st
questioning. Note that the further clarification from the any market that will take them Century Schizoid Man”, I
people who voted for Mr Fay- electorate is the only way out. and at any price they can get. wonder if he’ll be thinking to
ulu have not taken to the What a destructive notion The eupays lip service to himself, “I Talk to the Wind”.
streets in protest. That is be- this is to the basic concept of assisting industries in devel- ronald steenblik
cause Mr Kabila has left office, democracy and letting voters oping countries. In reality Paris
which was everyone’s main have their say. If another vote is economic-partnership agree-
objective to begin with. to be held, it should be to recall ments usually require these
herman cohen those members of the govern- developing countries to agree Love is in the air
United States ambassador ment responsible for this mess not to impose tariffs on eu Your obituary of Herb Kelleher,
(retired) in the first place. goods. Because of a flood of the boss of Southwest Airlines,
Washington, DC bill pollock cheap imports from Europe, concluded that low-fare air
Atlanta the chicken industries all but travel has become synony-
vanished in Ghana, Cameroon mous with extorting charges
Hand-washing history According to you, “doddery, and Senegal until their govern- from passengers (January 12th).
Reading your article on claret-swilling uber-bureau- ments took steps to protect That may be true for most
hospital hygiene (“First, wash crats” in Brussels are among local producers. The South low-fare carriers, but South-
your hands”, January 26th) the very unattractive facets of African chicken industry west still allows two free
brought to mind the ground- the euthat might justify Brexit. declared a crisis as production checked bags, waives fees on
breaking role played by Ignaz However, in a week of meet- was cut and jobs were lost. ticket changes and gives me a
Semmelweis, a Hungarian ings with putative colleagues South African chicken produc- free beer on Valentine’s Day, all
doctor who practically invent- and interviews in Brussels, I ers are more efficient than in coach. There is still some
ed the practice in 1847. By found youngish, highly those in eucountries, but they love left in the air.
introducing the washing of educated, well-motivated and cannot compete with dumped chad priest
hands with chlorinated lime generally rather congenial chicken portions. Dallas
water he greatly reduced the people. Even an Antipodean euexports have been cur-
mortality rate associated with interloper who serendip- tailed since 2016 because of
childbirth infections over two itously held a British passport bird flu, but other exporting Lettersarewelcomeandshouldbe
years at Vienna’s general hos- was impressed. countries, particularly Brazil, addressedtotheEditorat
TheEconomist,TheAdelphiBuilding,
pital. Semmelweis was a pio- I fear the causes of Brexit have filled the gap. Brazil is an
1-11JohnAdamStreet,LondonWC2N6HT
neer of antiseptic procedures. must be found elsewhere. efficient and low-cost Email:[email protected]
andrea traboulsi rex deighton-smith producer, but its agricultural Morelettersareavailableat:
Beirut Paris industry, like that in the eu, Economist.com/letters