The Economist (March 16th 2019)

79 Pages·2019·4.645 MB·English

by  The Economist

Plane truths about Boeing
Thailand’s sham democracy
Goodbye to China’s surplus
A special report on NATO at 70
MARCH16TH–22ND2019
OH
UK!
Whatever next?
Contents The EconomistMarch16th2019 3
The world this week United States
6 Around-up of political 23 The techlash continues
andbusinessnews
24 College admissions
25 Illegal migration
Leaders
26 New York property
9 Brexit
26 Mar-a-Lago massages
Whatever next?
27 The hot labour market
10 The transatlantic
relationship 28 Lexington
Worth fighting for Irish-Americans
11 The aircraft industry
Plane truths The Americas
11 China’s balance of 29 Bolsonaro’s digital bully
pulpit
payments
On the cover
The big flip 30 Venezuela’s blackout
Britain’s Brexit crisis has 12 Mental health 30 The peace process in
plumbed new depths. Shrinks, expanded Colombia takes a knock
Parliament must seize the
14 Thailand’s bogus 31 BelloMexico’s reluctant
initiative and get the country
election liberal
out of it: leader, page 9.
Generaldecline
Conservatives are
Middle East & Africa
manoeuvring to replace a
broken prime minister: Letters 32 Kenya’s loyal opposition
Bagehot,page51 16 On Islam, China, priests, 33 Tanzania’s wannabe
medicine, defence, the
despot
•Plane truths about Boeing
periodictable,theOscars
The crash of Ethiopian Airlines 34 Freeing Ethiopia’s press
flight ET302 shows why a golden 34 Syria’s broken schools
Briefing
age for the world’s aircraft
35 Bouteflikabowsout
duopoly may be over: leader, 19 American corporate
debt
page 11. Troubled times for
Carrythatweight Asia
America’s aerospace giant,
36 Thailand’s rigged election
page 54
Special report: Nato at 70 37 BanyanVoting in India
•Thailand’s sham democracy
Mature reflection 38 Afghanistan’s Syrian
The election marks a new phase
After page 40 problem
in military misrule: leader,
page 14. The generals plan to 39 Sterilising transgender
remain in charge, whatever the people in Japan
voters say, page 36 39 Renaming the
Philippines
•Goodbye to China’s surplus
China is switching from being a 40 NeglectedIndonesians
net lender to the world to being
anet borrower. The implications China
will be profound: leader,page 11.
41 Selling quackery
Why a current-account deficit
42 Bawdy comedy
could remake China’s financial
system,page62 43 ChaguanA think-tank
boom
•Aspecial report on NATO at 70 Free exchangeModern
The Atlantic alliance has proved monetary theory is
remarkably resilient, says Daniel gaining in popularity.
Franklin. To remain relevant, it Eminent economists
needs to go on changing, after think it’s nuts, page 67
page 40
1 Contents continues overleaf
4 Contents The EconomistMarch16th2019
Europe Finance & economics
44 Ukraine’s tragicomic 62 China’s shrinking surplus
election
63 ButtonwoodBill Gross,
45 Turkey’s Russian missiles rock star
46 Annegret Kramp- 64 The euro area’s economy
Karrenbauer tilts right
65 Wells Fargo pasted
46 Croatia’s supercar 65 India cools on gold
47 Norway, Switzerland and 66 Turkey in recession
the EU
67 Free exchangeModern
48 CharlemagneLePen3.0 monetarytheory
Britain
Science & technology
49 Brexit and Parliament 68 Geoengineering troubles
50 Extending Article 50 69 Amonkey puzzle
51 BagehotThe race to 70 Aketamine-based
replace Theresa May
antidepressant
70 Food and diplomacy
International
Books & arts
52 Acheaper approach to 71 Artemisia Gentileschi’s
mental health
life and art
72 America’s forgotten
empire
73 Laila Lalami’s new novel
73 Rap therapy in Congo
74 JohnsonLanguage
Business
academies
54 Boeing down
55 The computer in the Economic & financial indicators
cockpit
76 Statisticson42economies
56 BartlebyWage inequality
and the internet
Graphic detail
57 Big tech woos big energy 77 Germanvotersin1933andnow
57 How to sell video games
58 VW chases after EVs Obituary
59 SchumpeterBusiness 78 Mags Portman, campaigner against HIV
bust-ups
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6 The world this week Politics The EconomistMarch16th2019
tamedTurkey’smedia.Hehas Theunsaidthatatleast535 Yanqui imperialist “electro-
nowtrainedhissightsonthe andasmanyas900people magnetic attack”. Others
foreignpress. werekilledinfightingbetween blamed the government’s
twocommunitiesinthe incompetence and corruption.
Estonia’sprimeminister,Juri DemocraticRepublicof America, one of many democ-
Ratas,invitedtheanti-im- CongoinDecember.Investiga- racies that recognises Mr
migrantekrepartytocoalition torsfoundthatvillagechiefs Maduro’s rival, Juan Guaidó, as
talks,reversingapromisenot helpedplanthekillingsand the interim president, with-
todealwiththegroup. thatregionalofficialshadnot drew its remaining diplomatic
doneenoughtopreventthe staff. It also revoked the visas
Finland’sgovernment violence,despitewarnings. of 77 officials connected to Mr
resignedaheadofageneral Maduro.
The British government’s draft electionnextmonth. TherulingpartyinNigeria,the
Brexitdeal was again roundly AllProgressivesCongress,took Two former police officers
defeated in Parliament. The anearlyleadinstateelections, were arrested in Brazilfor the
prime minister, Theresa May, Debilitating democracy strengtheningthehandof murder last March of Marielle
had won assurances from Protests continued in Algeria, MuhammaduBuhari,whowon Franco, a councilwoman in Rio
Brussels that the “backstop”, where the ailing president, re-electionaspresidentin de Janeiro. One of the suspects
which would keep Britain in Abdelaziz Bouteflika, dropped February.Internationalobserv- used to live in the same
the eu’s customs union to his bid for a fifth term and erssaidthepollwasmarredby building as President Jair
avoid a hard border in Ireland, postponed an election sched- violence. Bolsonaro and his daughter
was temporary, but this failed uled for April 18th. A confer- dated one of Mr Bolsonaro’s
to satisfy Brexiteers. mps also ence tasked with sorting out sons. The other appears in a
voted against a no-deal Brexit. Algeria’s political future is Power vacuum photo with Mr Bolsonaro taken
expected to be led by Lakhdar A malfunction at a hydroelec- before he was president. The
Two Germanjournalistswere Brahimi, a veteran diplomat. tric dam in eastern Venezuela detective in charge of the
forced to leave Turkeyafter Most Algerians believe Mr plunged most of the country investigation said that these
President Recep Tayyip Erdo- Bouteflika, who can hardly into darkness for days, paralys- facts were “not significant at
gan’s government refused to speak or walk, is a figurehead ing hospitals and destroying this time”. Mr Bolsonaro said
renew their accreditation. Mr for a ruling cabal of generals food stocks. Nicolás Maduro, he had posed with thousands
Erdogan has successfully and businessmen. the socialist dictator, blamed a of policemen. 1
The EconomistMarch16th2019 Theworldthisweek 7
2Fivepupilsandtwoteachers The results will be announced centreswillbefewerandfewer beefing up a court-ordered
wereshotdeadbytwoformer on May 23rd. and,oneday,thecentreswill moratorium that has been in
studentsataschoolonthe disappearwhensocietyno place since 2006.
outskirtsofSãoPaulo.One A court in Australiasentenced longerneedsthem,”hesaid.
shooterthenkilledtheother George Pell, a cardinal and Paul Manafortreceived an
andturnedthegunonhimself. former senior Vatican official, America’ssecretaryofstate, additional sentence of 43
to six years in prison for mo- MikePompeo,accusedChina months for conspiring to sway
lesting two altar boys in 1996, ofusing“coercivemeans”to witnesses. That comes on top
On the campaign trail when he was Archbishop of blockaccesstoenergyreserves of the 47 months Mr Trump’s
Melbourne. Mr Pell is the most intheSouthChinaSeaworth former campaign chief recent-
senior member of the Catholic $2.5trn.China’sforeign ly received for tax and bank
hierarchy to have been found ministrycalledhisremarks fraud. After his sentencing,
guilty of sexual abuse. “irresponsible”. New York state filed separate
charges against Mr Manafort.
Police in Kazakhstanarrested
Serikzhan Bilash, a Chinese- Snakes and ladders Milwaukee, a city renowned
born activist trying to raise Donald Trump presented a for its beer, beat Houston and
awareness of the internment of $4.75trn budgetto Congress, Miami to host the Democratic
perhaps 1m ethnic Uighurs in which calls for a 5% increase in convention next year. Mean-
Xinjiang province in China. defence spending and cuts to a while, Beto O’Rourkethrew
The authorities said Mr Bilash wide range of social pro- his hat into the ring to be the
India’sElection Commission had been “inciting ethnic grammes. It also seeks $8.6bn party’s presidential candidate;
announced that voting for a hatred”. His supporters for his border wall. Democrats he came a close second in the
new parliament will take place contend the government said it was dead on arrival, Senate race in Texas last year.
in seven phases in April and arrested him to maintain good though that has been the case
May. There will be 1m polling relations with China. with presidential budgets for Nancy Pelosi, the Democratic
stations for the country’s many years now. Speaker of the House, said that
900m-odd eligible voters. Separately, an official in she would not support an
Narendra Modi’s Bharatiya Xinjiangsaid the mass deten- California’sgovernor, Gavin effort to impeach Donald
Janata Party is seeking a second tion camps there may be Newsom, issued a moratorium Trump. She said: “He’s just not
five-year term in government. phased out. “Trainees in the on executions in the state, worth it.”
8 The world this week Business The EconomistMarch16th2019
endoftheyear.Italso produce ai-related technology company stakes that each
announcedanewprogramme are flourishing. carmaker holds stay the same.
ofcheaploansforbanks.
Volkswagenramped up its Barrick Golddropped its $18bn
plans for electric cars, an- hostile bid for Newmont
Statistical outliers? nouncing that it intends to Mining, ending a short but
In a grim week for economic launch almost 70 new models fierce takeover battle in which
news, American employers over the next decade, instead of each side criticised the other’s
added just 20,000 jobsto the the 50 it had planned. It now management strategy. The pair
payrolls in February, far below expects battery-powered vehi- are instead to create the world’s
the 311,000 that were created in cles to account for 40% of its largest goldmining site in a
January. Still, February marked sales by 2030, making it the joint venture in Nevada.
The crash of an Ethiopian the 101st consecutive month of largest car firm that is commit-
Airlines jet, killing all 157 peo- job growth, a record streak. ted to electrification by some
ple on board, raised safety distance. The switch to electric The latest twist
questions about Boeing’s737 Ned Sharpless, the director of cars, which need fewer work- Levi Straussfiled for an ipoon
max8 aircraft. It was the America’s National Cancer ers to make than the gas-guz- the New York Stock Exchange,
second time a max8 has Institute, was appointed the zling sort, threatens jobs. This which could see the inventor of
crashed within five months, acting commissioner of the is likely to provoke a confron- blue jeans valued at up to
with what appear to be similar Food and Drug Administra- tation with the firm’s powerful $6.2bn. The 165-year-old cloth-
problems on take-off. As a tion, following the surprise unions. ier was taken private in 1985
precaution the eustopped the announcement by Scott Got- after 14 years as a public com-
plane from flying, as did many tlieb that he is standing down Renault, Nissanand Mitsub- pany on the stockmarket.
countries, including Australia, for personal reasons. In one of ishi Motorscreated a new
China and, eventually, Ameri- his final acts Mr Gottlieb this “consensus based” structure As Teslaprepared to launch its
ca. Amid reports that the air- week issued regulations that in for their alliance, as they try to newest vehicle, the Model Y,
craft’s software may be at fault, effect will stop convenience move on from the arrest of Elon Musk’s lawyers filed a
Boeing was forced to ground stores and petrol stations from Carlos Ghosn for alleged defence against the Securities
the entire global fleet of 737 selling a wide range of financial wrongdoing (Mr and Exchange Commission’s
max8s. flavoured e-cigarettes. Ghosn denies the charges). The claim that he was in contempt
new board replaces an arrange- of court for tweeting mis-
Turkey’s economyfell into In a deal that highlights its ment where Mr Ghosn sat at leading company information,
recession at the end of 2018. For shift away from making high- the pinnacle of the alliance. It which would contravene last
the whole of 2018 the economy end chips for the video-game is chaired by Jean-Dominique year’s settlement with the
grew by 2.6%, the weakest pace industry, Nvidiaagreed to buy Senard, Renault’s new chair- regulator. The filing accuses
in a decade and far below the Mellanox, which provides man. The ceos of the three the secof trampling on Mr
7.4% recorded in 2017 in the technologies for artificial carmakers are the board’s other Musk’s right to free speech.
wake of the government’s intelligence, machine learning members. Mr Senard will not, Tesla, meanwhile, made a
construction-led stimulus. The and data analytics, for $6.9bn. however, also become Nissan’s sharp U-turn and said it would
economy took a hit last year Mellanox was founded in chairman, settling instead for not close most of its
from a run on the lira, caused Israel, where companies that vice-chairman. The cross- showrooms after all.
in part by uncertainty about
the political independence of
the central bank.
China’s exportsdeclined by
almost 21% in February com-
pared with the same month
last year, a much worse show-
ing than most economists had
forecast. Imports fell by 5.2%.
The Chinese new-year celebra-
tions may have had a distorting
effect. China’s overall trade
surplus for the month nar-
rowed sharply, to $4.1bn.
Another big monthly drop in
German industrial production
led to more concern about the
euro zone’s economy. The
European Central Bank
recently slashed its forecast for
growth this year to 1.1% from a
previous projection of 1.7% and
pushed back any rise in
interest rates until at least the
Leaders Leaders 9
Whatever next?
Britain’s crisis has plumbed new depths. Parliament must seize the initiative to lift the country out of chaos
When historians come to write the tale of Britain’s at- more, replacing Mrs May would do little to solve the riddle of
tempts to leave the European Union, this week may be how to put together a deal. The parties are fundamentally split.
seen as the moment the country finally grasped the mess it was To believe that a new tenant in Downing Street could put them
in. In the campaign, Leavers had promised voters that Brexit back together again and engineer a majority is to believe the
would be easy because Britain “holds all the cards”. This week Brexiteers’ fantasy that theirs is a brilliant project that is merely
Parliament was so scornful of the exit deal that Theresa May had being badly executed.
spent two years negotiating and renegotiating in Brussels that Calls for a general election are equally misguided. The coun-
mps threw it out for a second time, by 149 votes—the fourth-big- try is as divided as the parties. Britain could go through its fourth
gest government defeat in modern parliamentary history. The poll in as many years only to end up where it started. Tory mps
next day mps rejected what had once been her back-up plan of might fall into line if they had been elected on a manifesto pro-
simply walking out without a deal. The prime minister has lost mising to enact the deal. But would the Conservatives really go
control. On Wednesday four cabinet ministers failed to back her into an election based on Mrs May’s scheme, which has twice
in a crucial vote. Both main parties, long divided over Brexit, are been given a drubbing by mps and was described this week even
seeing their factions splintering into ever-angrier sub-factions. by one supportive Tory mpas “the best turd that we have”? It does
And all this just two weeks before exit day. not have the ring of a successful campaign.
Even by the chaotic standards of the three years since the ref- To break the logjam, Mrs May needs to do two things. The first
erendum, the country is lost (see Britain section). Mrs May is to consult Parliament, in a series of indicative votes that will
boasted this week of “send[ing] a message to the whole world reveal what form of Brexit can command a majority. The second
about the sort of country the United Kingdom will be”. She is not is to call a referendum to make that choice legitimate. Today ev-
wrong: it is a laughing-stock. An unflappable place supposedly ery faction sticks to its red lines, claiming to be speaking for the
built on compromise and a stiff upper lip is consumed by accusa- people. Only this combination can put those arguments to rest.
tions of treachery and betrayal. Yet the demolition of her plan of- Take these steps in turn. Despite the gridlock, the outlines of a
fers Britain a chance to rethink its misguided approach to leav- parliamentary compromise are visible. Labour wants permanent
ing the eu.Mrs May has made the worst of a bad membership of the eu’s customs union, which
job. This week’s chaos gives the country a shot at is a bit closer to the euthan Mrs May’s deal. Al-
coming up with something better. ternatively, mps may favour a Norway-style set-
The immediate consequence of the rebellion up—which this newspaper has argued for and
in Westminster is that Brexit must be delayed. would keep Britain in the single market. The eu
As we went to press, Parliament was to vote for is open to both. Only if Mrs May cannot estab-
an extension of the March 29th deadline. For its lish a consensus should she return to her own
own sake the eushould agree. A no-deal Brexit much-criticised plan.
would hurt Britain grievously, but it would also Getting votes for these or any other approach
hurt the eu—and Ireland as grievously as Britain. would require thinking beyond party lines. That does not come
Mrs May’s plan is to hold yet another vote on her deal and to naturally in Britain’s adversarial, majoritarian policies. But the
cudgel Brexiteers into supporting it by threatening them with a whipping system is breaking down. Party structures are fraying.
long extension that she says risks the cancellation of Brexit alto- Breakaway groups and parties-within-parties are forming on
gether. At the same time she will twist the arms of moderates by both sides of the Commons, and across it. Offering mps free votes
pointing out that a no-deal Brexit could still happen, because could foster cross-party support for a new approach.
avoiding it depends on the agreement of the eu, which is losing The second step is a confirmatory referendum. Brexit re-
patience. It is a desperate tactic from a prime minister who has quires Britain to trade off going its own way with maintaining
lost her authority. It forces mps to choose between options they profitable ties with the eu. Any new Brexit plan that Parliament
find wretched when they are convinced that better alternatives concocts will inevitably demand compromises that disappoint
are available. Even if it succeeds, it would deprive Britain of the many, perhaps most, voters. Mrs May and other critics argue that
stable, truly consenting majority that would serve as the founda- holding another referendum would be undemocratic (never
tion for the daunting series of votes needed to enact Brexit and mind that Mrs May is prepared to ask mps to vote on her deal a
for the even harder talks on the future relationship with the eu. third or even fourth time). But the original referendum cam-
To overcome the impasse created by today’s divisions, Britain paign utterly failed to capture the complexities of Brexit. The
needs a long extension. The question is how to use it to forge that truly undemocratic course would be to deny voters the chance to
stable, consenting majority in Parliament and the country. vouch that, yes, they are content with how it has turned out.
An increasingly popular answer is: get rid of Mrs May. The And so any deal that Parliament approves must be put to the
prime minister’s deal has flopped and her authority is shot. A public for a final say. It will be decried by hardline Brexiteers as
growing number of Tories believe that a new leader with a new treasonous and by hardline Remainers as an act of self-harm.
mandate could break the logjam (see Bagehot). Yet there is a high Forget them. It is for the public to decide whether they are in fa-
risk that Conservative Party members would install a replace- vour of the new relationship with the eu—or whether, on reflec-
ment who takes the country towards an ultra-hard Brexit. What’s tion, they would rather stick with the one they already have. 7
10 Leaders The EconomistMarch16th2019
The transatlantic relationship
Worth fighting for
How Europe and America must set about preventing a great unravelling
The atlantic oceanisstartingtolookawfullywide.ToEuro- gestexercisessincethecoldwar.
peans the United States appears ever more remote, under a In America polls suggest that public opinion towards nato
puzzling president who delights in bullying them, questions the has actually grown more positive since Mr Trump became presi-
future of the transatlantic alliance and sometimes shows more dent. In Congress, too, backing for the alliance is rock-solid, re-
warmth towards dictators than democrats. Americans see an flected in supportive votes and the presence at the Munich Secu-
ageing continent that, though fine for tourists, is coming apart at rity Conference last month of a record number of American
the seams politically and falling behind economically—as feeble lawmakers. Nancy Pelosi, the Democratic leader of the House of
in growth as it is excessive in regulation. To Atlanticists, includ- Representatives, has extended a bipartisan invitation to nato’s
ing this newspaper, such fatalism about the divisions between secretary-general, Jens Stoltenberg, to address a joint session of
Europe and America is worrying. It is also misplaced. Congress on the eve of the 70th anniversary.
True, some gaps are glaring. America has abandoned the Paris nato’s success holds lessons for the transatlantic relation-
climate accord and the nuclear deal with Iran, whereas Europe ship as a whole. To flourish in the future, it must not just survive
remains committed to both. Other disagreements threaten. Mr Trump, but change every bit as boldly as it has in the past.
President Donald Trump has called the European Union a “foe” First, this means building on its strengths, not undermining
on trade and is weighing up punitive tariffs on European cars. them: removing trade barriers rather than lapsing into tariff
Trust has plummeted. Only one in ten Germans has confidence wars, for example. Mr Trump is right to badger his allies to live up
that Mr Trump will do the right thing in world affairs, down from to their defence-spending promises. But he is quite wrong to
nearly nine out of ten who trusted Barack Obama in 2016. Twenty think of charging them cost-plus-50% for hosting American
years ago natocelebrated its 50th anniversary with a three-day bases, as he is said to be contemplating. Such matters should not
leaders’ summit. Fear of another bust-up with Mr Trump has rel- be treated like a “New York real-estate deal”, a former vice-presi-
egated plans for the alliance’s 70th birthday party on April 4th to dent, Dick Cheney, told the current one, Mike Pence, last week.
a one-day meeting of foreign ministers. Those European bases help America project power across the
Past intimacies are not enough to keep warm feelings going world (see Books & arts section).
today. Europe inevitably counts for less in Second, realism should replace nostalgia.
American eyes than it once did. The generation Europeans should not fool themselves that
that formed bonds fighting side-by-side in the America’s next president will simply turn the
second world war is passing away and even the clock back. Instead, to make themselves useful
cold war is becoming a distant memory. Mean- to America, Europeans need to become less de-
while, America is becoming less European. A pendent on it. For instance, in defence, they
century ago more than 80% of its foreign-born have taken only baby steps towards plugging big
population came from Europe; now the figure is gaps in their capabilities and avoiding wasteful
only 10%. Surging economies in Asia are tugging duplication. Their efforts should extend beyond
America’s attention away. the eu, whose members after Brexit will account for only 20% of
Yet, through its many ups and downs, the relationship has natocountries’ defence spending.
proved resilient. Trade flows between the eu and the United A more capable Europe would help with the third and biggest
States remain the world’s biggest, worth more than $3bn a day. change: adjusting to China’s rise. America’s focus will increas-
Shared democratic values, though wobbly in places, are a force ingly be on the rival superpower. Already China’s influence is
for freedom. And, underpinning everything, the alliance pro- making itself felt on the alliance, from the nuclear balance to the
vides stability in the face of a variety of threats, from terrorism to security implications of, say, Germany buying 5gkit from Hua-
an aggressive Russia, that have given the alliance a new salience. wei or Italy getting involved in the infrastructure projects of the
At the heart of this security partnership is nato. By reaching Belt and Road Initiative. Yet the allies have barely begun to think
its 70th birthday the alliance stands out as a survivor—in the past seriously about all this. A new paper from the European Com-
five centuries the average lifespan for collective-defence alli- mission that sees China as a “systemic rival” is at least a start.
ances is just 15 years. Even as European leaders wonder how long
they can rely on America, the relationship on the ground is thriv- Unfettered in deliberation
ing. As our special report this week explains, this is thanks to If the allies worked hard on how best to pursue their shared in-
nato’s ability to change. No one imagined that the alliance’s Ar- terests in dealing with China, they could start to forge a new
ticle 5 mutual-defence pledge would be invoked for the first, and transatlantic partnership, with a division of labour designed to
so far only, time in response to a terrorist attack on America, in accommodate the pull of the Pacific. This would involve Euro-
September 2001, or that Estonians, Latvians and Poles would be peans taking on more of the security burden in their own back-
among natomembers to suffer casualties in Afghanistan. Since yard in exchange for continued American protection, and co-or-
2014 the allies have responded vigorously to Russia’s annexation dination on the economic and technological challenge from
of Ukraine. They have increased defence spending, moved China. Today the leadership to do this is lacking. But Europeans
multinational battlegroups into the Baltic states and Poland, set and Americans once before summoned the vision that brought
ambitious targets for military readiness and conducted their big- decades of peace and prosperity. They need to do so again. 7
The EconomistMarch16th2019 Leaders 11
The aircraft industry
Plane truths
The crash of Ethiopian Airlines flight ET302 shows why a golden age for the world’s aircraft duopoly may be over
When a boeing 737 max 8 crashed near Addis Ababa after interactionbetweenhumanpilotsandmachinesisstillunpre-
take-offonMarch10th,157peoplelosttheirlives.Itdidnot dictableandexperimental(seeBusinesssection).IntheIndone-
take long for the human tragedy to raise questions about what sian crash the pilots fought a losing battle against anti-stalling
went wrong. That has fed a crisis of trust in Boeing and in the softwarethatforcedtheplane’snosedownatleast20times.
faa, the American regulator which, even as its counterparts Theindustry’stechnicalcomplexityisamplifiedbyitsorga-
groundedthemax8,leftitflyingforthreedaysbeforePresident nisational complexity. In the 1990s a few Western airlines
DonaldTrumpsteppedin,suspendingallmaxplanes. dominated and a handful of regulators had global clout. Now
MrTrumpnotedthatBoeingwas“anincrediblecompany”.In therearehundredsofairlinesand290,000pilotsworldwide.In
fact the crash is a warning. After a 20-year boom, one of the 2018,forthefirsttime,lessthanhalfoftheglobalfleetwasbased
West’smostsophisticatedindustriesfacesadifficultfuture. in the West. Maintaining common standards on training and
Themax8isoneofBoeing’smostadvancedmodels.Untilthis procedures is harder. China and other countries want a bigger
week it has been a commercial triumph, with 370 in operation say.ThecredibilityofAmericanregulatorshasslippedbecause
and 4,700 more on order. The 737 series makes they have let domestic competition decline.
upathirdofBoeing’sprofitsandmostofitsor- Thissuggeststheyarecosywithindustry.
Largecommercialaircraft
der book. That performance caps an extraordi- Shareoforders,% Then comes geopolitics. With their hubs in
narytwodecadesfortheBoeingandAirbusduo- 100 Seattle and Toulouse, Boeing and Airbus are
poly,asagrowingglobalmiddleclasshastaken Boeing amongtheWest’slargestexportersandarareex-
50
totheair.Over21,000aircraftareinuse;anew ample of an industry in which China cannot
plane is delivered every five hours. Boeing has Airbus compete. It would be depressing, but not im-
0
slimmeddownitssupplychainandAirbushas possible,ifsafetydecisionswereinfluencedby
2000 05 10 15 18
asserted its independence from European gov- tradetensions.Overtime,ChinaandIndiamay
ernments. That has led to a shareholder bonanza. Their com- insistthattheduopolymakemoreaircraftwithintheirborders,
bined market value of $310bn is six times bigger than in 2000. to capture more jobs and intellectual property. That could re-
Andtheiroverallsafetyrecordhasbeengood,withonefatalacci- quirearestructuringofhowbothfirmsmanufacture.Rowsover
dentper2.5mflightslastyear. aircraftemissionswillfurthercomplicatethedebate.
Thisweek’scrashforeshadowstheendofthatgoldenage.An- NeitherBoeingnorAirbusisabouttogobust.Anyflawinthe
othermax8crashedinOctoberinIndonesiainsimilarcircum- max8willprobablyberesolved,asbatteryproblemsinthe787
stances.Althoughinvestigatorshaveyettodeterminethecause Dreamliner were in 2013. Boeing has $12.7bn of cash and bank
of the Ethiopian Airlines accident, regulators suspect that the linestocushionitfromthereputationalcrisis.Bothfirmsareul-
max8hasadesignflaw. timatelybackedbygovernments.Inanycase,demandforplanes
This plays into the worry that a new technological phase is willgrow.Butaheadlieenvironmentalandtechnologicaluncer-
under way. Aircraft are becoming autonomous, as computers tainty,organisationalcomplexityandgeopoliticaltension.The
take charge. This promises safer, more efficient flying, but the yearsofbumpermarginsmaybeover.7
China’s balance of payments
The big flip
China is switching from being a net lender to the world to being a net borrower. The implications will be profound
That china sells more to the world than it buys from it can fact. America’s trade negotiators, meanwhile, seem not to have
seem like an immutable feature of the economic landscape. noticed it at all. Instead of focusing on urging China to free its fi-
Every year for a quarter of a century China has run a current-ac- nancial system, they are more concerned that China keep the
count surplus (roughly speaking, the sum of its trade balance yuan from falling. The result of this myopia is a missed opportu-
and net income from foreign investments). This surplus has nity for both sides.
been blamed for various evils including the decline of Western China’s decades of surpluses reflected the fact that for years it
manufacturing and the flooding of America’s bond market with saved more than it invested. Thrifty households hoarded cash.
the excess savings that fuelled the subprime housing bubble. The rise of great coastal manufacturing clusters meant exporters
Yet the surplus may soon disappear. In 2019 China could well earned more revenues than even China could reinvest. But now
run its first annual current-account deficit since 1993. The shift that has begun to change. Consumers are splashing out on cars,
from lender to borrower will create a knock-on effect, gradually smartphones and designer clothes. Chinese tourists are spend-
forcing it to attract more foreign capital and liberalise its finan- ing immense sums overseas (see Finance section). As the popu-
cial system. China’s government is only slowly waking up to this lation grows older the national savings rate will fall further, be-1
12 Leaders The EconomistMarch16th2019
2cause more people in retirement will draw down their savings. form in 2015 caused widespread volatility. But the system the
Whether or not China actually slips into deficit this year will country is moving to, which treats locals and foreigners differ-
be determined mostly by commodities prices. But the trend in ently, promises to be leaky, corrupt and unstable.
saving and investment is clear: the country will soon need to ad- Eventually, then, capital will need to flow freely in both direc-
just to a new reality in which deficits are the norm. That in turn tions across China’s borders. That is to be welcomed. People out-
means that China will need to attract net capital inflows—the side and inside China will benefit from being able to invest in
mirror image of a current-account deficit. To some extent this is more places. The need for freer capital flows will have the wel-
happening. China has eased quotas for foreigners buying bonds come side-effect of forcing China to reform its state-dominated
and shares directly, and made it simpler for them to invest in financial system, not least so that it commands confidence
mainland securities via schemes run by the Hong Kong Stock Ex- among international investors. This in turn will mean that mar-
change. Pension funds and mutual funds all over the world are ket forces play a bigger role in allocating capital in China.
considering increasing their exposure to China. You might expect America’s trade negotiators to welcome all
But the reforms remain limited. Ordinary Chinese citizens of this, and urge China to free its financial system. Unfortunately
face restrictions on how much money they can take out. If many they seem stuck in the past. Obsessed with the idea that China
foreign investors tried to pull their money out of China at once it might depress its currency to boost exports, they are reportedly
is not clear that they would be able to do so, an uncertainty that insisting it commit itself to a stable yuan. That is wrong-headed
in turn may make them nervous about putting large sums in. and self-defeating. Rather than fighting yesterday’s currency
China is terrified of financial instability. A botched currency re- wars, America should urge China to prepare for the future.7
Mental health
Shrinks, expanded
There are not enough psychiatrists. Trained laypeople can often help
In any givenyear one person in six is afflicted by a mental ill- on “friendship benches” set up in courtyards.
ness. Most cases involve mild-to-moderate depression or Both programmes are inspiring imitators. Scotland, whose
anxiety. Some sufferers recover on their own. For many, how- health service is run independently from England’s, has a similar
ever, the condition is left untreated and may become chronic or scheme. Canada, Norway and New Zealand are also using ideas
severe. In the past social stigma meant that people kept their from England. Zimbabwe’s approach has been imitated not only
pain to themselves. The stigma is now melting away. Yet in rich in other African countries but even in New York.
Western countries two-thirds of people with a mental-health The benefits can be enormous. Even mild forms of distress af-
problem do not receive any treatment for it. In poor countries fect work, child-rearing and physical health. Social anxiety may
hardly any do. And almost everywhere, psychiatrists and clinical keep someone at home. A depressed mother may struggle to care
psychologists are scarce. Often they are the only people whom for and play with her child in the early months so crucial for
states or insurers will pay to treat mental illness, so those who brain development. In Britain about 11% of workers’ sick days are
seek help must wait months for it. The cost in human misery is because of mental-health problems. Those who struggle into
huge. Mental-health care needs to change. work despite such problems are, on average, less productive. Add
In particular, the psychiatric profession’s in disability payments to those who drop out
over-tight grip should be challenged. Talk thera- completely, and the annual cost in Europe is
py, which the World Health Organisation rec- nearly 3% of gdp, by one estimate.
ommends as a first line of treatment for mild- Yet too little use is made of cheap talk-thera-
to-moderate depression and anxiety, can be de- py. Critics complain that standardised sessions
legated to non-specialists—a concept known as can never fit the unique circumstances of each
“task-shifting” (see International section). person’s distress. But the alternative is usually
The experiences of two very different no care at all, or advice from charity helplines.
places—England and Zimbabwe—demonstrate Psychiatrists, as eager as any other guild to pro-
that this approach can work on a national scale anywhere. Eng- tect their turf, often warn that therapists who have not studied
land blazed a trail by training a new cadre of talk-therapy practi- psychiatry may provide poor-quality care. In fact, plenty of evi-
tioners using a one-year boot camp. Graduates of the scheme dence shows that, with proper supervision, trained amateurs do
typically provide cognitive-behavioural therapy (cbt). a good job. The old notion that doctors must do everything is not
This involves teaching people to spot the real-world situa- only impractical; it is also disproved by experience. In many
tions that set off their negative thoughts, fears and anxieties, places, nurses do tasks once reserved for doctors, including an-
such as awkward social gatherings or meeting the boss. It then aesthesia, endoscopy and emergency care. Community health
offers concrete steps for dealing with them, such as going on a workers in poor countries (sometimes known as “barefoot doc-
walk with a friend or reminding yourself that you got a bonus so tors”) treat malaria and diagnose pneumonia.
the boss probably doesn’t think you are useless. Half of those The same kind of approach can work for mental health. In-
who complete two or more therapy sessions for depression or deed, with so many more sufferers than can plausibly see a spe-
anxiety recover (though some would have anyway). Zimbabwe cialist, cheap talk with trained laypeople is the only practical way
has been training elderly women to provide something like cbt to bring relief—and turn millions of lives around. 7