The Economist (March 9th 2019)

71 Pages·2019·4.143 MB·English

by  The Economist

Labour’s pains
Winter for Chinese tech startups
Make Europe’s companies great again
The death of the first-class cabin
MARCH9TH–15TH2019
The new scramble for Africa
And how Africans could win it
Contents The EconomistMarch9th2019 3
The world this week Britain
6 Around-up of political 21 Labour’s open goal
andbusinessnews
22 Where to put transgender
prisoners
Leaders
23 Kumar “Battery Charger”
9 Geopolitics Bhattacharyya
The scramble for Africa
23 Stabbings rise: whodunit?
10 Online news in Russia
24 Housebuilders’ fat profits
Don’t be evil
24 Arow over sex education
10 Industrial policy
25 Cutting carbon emissions
L’Europe, c’est moi
26 BagehotConspiracy
11 Algeria
country
Outwiththeold
12 Aviation
On the cover Europe
Planestupid
There is a new scramble for 27 The Russian internet
Africa. This time, the winners Letters 28 Macron’s EU vision
could be Africans themselves:
16 Onsocialism,San 30 Amafioso nabbed
leader, page 9. The world is
Francisco,taxes,China, 32 Kicking out Orban
flocking to Africa: Briefing,
English,JohnnyCash
page18
•Labour’s painsAstonishingly,
Briefing
the opposition is in even worse
18 Africaandgeopolitics United States
shape than the Conservative
Theworldrushesin 33 Texas politics
government,page 21.Conspiracy
34 Battle lines in Wisconsin
theories are flourishing in
Britain: Bagehot, page 26 35 Cash and poverty
36 Meth use
•Make Europe’s companies
great againOnce a French 37 Democrats and race
habit, dirigisme is taking root 38 LexingtonThe3amcall
across Europe: leader,page 10.
France’s president appeals to EU
The Americas
voters, page 28
39 AMLO’s first 100 days
•Winter for China’s tech
40 Trudeau in trouble
startups A formerly white-hot
40 Carnival history lesson
sector is struggling,page 58.
The trading day in China is 42 BelloMacri’s long odds
starting to influence global
markets: Buttonwood, page 67.
America has found the “China
shock” hard to shrug off. Why? Middle East & Africa
Free exchange, page 70 43 Protests in Algeria
ChaguanChina’s rulers
•The death of the first-class reveal more than they 44 Egypt’s blame game
cabin Demand for the best seats intend about their 44 Drones in the Middle East
on scheduled flights is stagnating, accountability, page 54
45 Nigeria’s state politics
page 55. Private jets receive
46 Knocking down Nairobi
ludicrous perks: leader,page 12
1 Contents continues overleaf
4 Contents The EconomistMarch9th2019
Asia Finance & economics
47 An Uzbek opening 65 Posh property tumbles
48 BanyanCarlos Ghosn 66 China’s dubious data
49 Discontent in Kashmir 67 ButtonwoodThe
Shanghai open
49 Malnutrition in North
Korea 68 LSE brushes off Brexit
50 Palm oil and deforestation 68 Banks and dirty money
51 Palmoilandbiodiversity 69 Development banks
revive
China 70 Free exchangeAmerica
52 Economic anxieties andtradeshocks
53 Tension in Tibet
Science & technology
54 ChaguanThe perfect
democracy 71 Manoeuvring satellites
72 Protecting coffee crops
73 Who are the best hackers?
73 Whisk(e)y and technology
International
74 ADragon visits the ISS
55 The steep decline of
74 CuringHIV
first-class air travel
Books & arts
75 Revisiting Chernobyl
77 Race and sex on stage
77 Love, fame, poetry and
death
Business
78 An eerie Swedish novel
58 China’s tech winter
59 Game of thrones at HBO
60 Offshore wind powers up Economic & financial indicators
in America
80 Statisticson42economies
61 Facebook’s privacy pivot
61 Vale’s dam disaster Graphic detail
62 BartlebyWomen at work 81 MeaslesoutbreaksinAmericaaregettinghardertocontain
63 Ship-breaking in India
Obituary
64 SchumpeterPrivate
equity goes to the vet 82 André Previn, pianist, conductor and populariser
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6 The world this week Politics The EconomistMarch9th2019
signal a change in policy; the the Jaish-e-Muhammad group
consulate’s operations will be Lowering the horizon claimed responsibility for a
handled by the new American China’sprime minister, Li terrorist attack in which 40
embassy to Israelin the city. Keqiang, said the country Indian paramilitary policemen
But the Palestinians suggested would aim for gdpgrowth this were killed, causing a military
that it further undermined year of between 6% and 6.5%, face-off with India. India’s
America’s role as peacemaker. down from 6.6% last year and politicians, meanwhile, rowed
the slowest rate in nearly three about how effective its air
The Netherlandsrecalled its decades. He was speaking at strikes against an alleged
ambassador to Iranafter the the start of the annual ten-day terrorist training camp in
government in Tehran expelled session of China’s rubber- Pakistan had been.
two Dutch diplomats. Tension stamp parliament. Mr Li said
Abdelaziz Bouteflika, the between the countries has the economy faced danger Thailand’sconstitutional
president of Algeria, defied risen since last year, when the from abroad, a reference to the court banned Thai Raksa Chart,
protesters by registering to run Dutch government expelled trade war with America. a party linked to Thaksin
for a fifth term in office. The two Iranian embassy workers Shinawatra, an exiled former
ailing octogenarian is widely over suspicion that Iran was Satellite images suggested that prime minister. The party had
seen as a figurehead for a cabal involved in the assassination North Koreais rebuilding a upset King Vajiralongkorn by
of generals and businessmen, of two Dutch-Iranian citizens. facility it had used to launch nominating his sister for
who hold real power. They satellites and test missile prime minister.
have sought to assuage critics Rwanda accused neighbouring engines, but had partially
by promising that if Mr Uganda of supporting rebel dismantled. The construction
Bouteflika is re-elected, he will movements aimed at over- was interpreted as a signal that Agovernment of the centre
hold an early election, which throwing its president, Paul the country might resume Estonia’scentre-right Reform
he would not contest. Kagame, and closed a key testing missiles if it did not get Party won a legislative election
border crossing between the its way in stalled talks with with 29% of the vote. Kaja
America closed its consulate- two countries. Relations be- America about nuclear Kallas, its leader, began
general in Jerusalem, which tween the two countries have disarmament. coalition negotiations with the
had acted as a de facto embassy soured as they battlefor influ- centre-left Centre Party and
to the Palestinians. The State ence in the eastern part of the Pakistanarrested dozens of could become the country’s
Department said this did not Democratic Republic of Congo. militants in a clampdown after first female prime minister. 1
The EconomistMarch9th2019 Theworldthisweek 7
2eumember states vetoed a similartreatmentin2007still withoutparentsaccountedfor ministerhas claimed that Mr
blacklist prepared by the jus- remainsfreeofthevirus. 60%ofthe66,450whowere Trudeau and his aides sought
tice commissioner of 23 terri- apprehended;theycamepre- to discourage her from
tories that facilitate money- dominantlyfromGuatemala, authorising the prosecution of
launderingor terrorist financ- Leaving it to the left HondurasandElSalvador. an engineering firm charged
ing. The proposed list included Michael Bloomberg ruled out a Illegalcrossingsremainfar with bribing Libyan officials.
Saudi Arabia and four Ameri- run for the American presi- belowtheirpeakinthe1990s.
can territories. Saudi and dencyin 2020, disappointing A court in Argentinaconvicted
American opposition probably those who wanted a strong eight people, including a for-
torpedoed the list. moderate voice in the race. He’s got friends mer judge, of obstructing an
JuanGuaidó,recognisedas investigationintothebombing
Emmanuel Macron, the Venezuela’sinterimpresident ofaJewishcentreinBuenos
Frenchpresident, addressed Border apprehensions bythelegislatureandbymore Airesin1994,whichkilled85
United States, south-west, ’000
European citizens with a mani- than50countries,returnedto people.Thecourtacquitted
festo on the future of the eu 80 thecountryafterafailed fivedefendants,including
printed in newspapers in every attempttosendinhumanitar- CarlosMenem,whowasthe
60
eucountry. Mr Macron has ianaidandatourofLatin thenArgentinepresident.
been trying to rally a co-ordi- 40 Americancapitals.Hewas
nated liberal pro-eucampaign greetedbylargecrowdsop- “Whatisagoldenshower?”
20
for the European Parliament posedtothedictatorialregime Thatquestionwassurprisingly
elections in May. 0 ofNicolásMaduro. posedonTwitterbyBrazil’s
2015 16 17 18 19 president,JairBolsonaro,who
Source: US Customs and Border Protection
A man in London may become JanePhilpott,thepresidentof hadearliertweetedavideoofa
only the second person in the America’sborder-protection Canada’sTreasuryBoard, manurinatingonawoman
world to be cured of hiv agency reported a sharp rise in which oversees government during the country’s Carnival
infection. A stem-cell trans- the number of migrants trying spending, quit the cabinet in celebrations. “I’m not comfort-
plant to treat lymphoma to cross from Mexico illegally. dismay over allegations that able showing this, but we have
means his immune-system More than 76,000 people tried the office of the prime min- to expose the truth” of what
cells are now coated with to cross in February, the high- ister, Justin Trudeau, had tried many Carnival street parties
proteins that hivcannot latch est number for that month in 12 to improperly influence the have become, wrote the con-
onto. An American who had years. Families and children judiciary. A former justice servative Christian president.
8 The world this week Business The EconomistMarch9th2019
region. Chevron’s boss tradepractices,notablyitsstiff spoken to the bank, half are
remarked that “the shale game tariffsonimportsofAmerican unprepared for a no-deal
has become a scale game.” motorcycles.Meanwhile,ina Brexit. Of the half that do have
blowtoMrTrump,America’s plans, 50% claim to be “as
The American economygrew tradedeficitingoodswas prepared as we can be”.
by 2.9% in 2018, its best perfor- $891bnin2018,arecord.
mance in three years. The Lyftfiled for an ipo, overtaking
surge in growth in the middle Huaweilaunchedalawsuit Uber, its bigger rival in the
of the year, thanks in part to tax againsttheAmericangovern- ride-hailing business, in the
cuts, was offset by decelerating mentoveritsbanonthecom- race to float on the stockmark-
consumer spending towards pany’stelecomsequipment et. Lyft will probably list in
the end of the year. fromofficialnetworks.Ameri- April on the nasdaqexchange.
CarlosGhosnwasreleased casaysthattheChinesefirm Uber is expected to launch its
fromdetentioninTokyoafter A slowdown in the fourth representsasecuritythreat, ipolater this year.
postingbailof¥1bn($9m).The quarter hit South Africa’s whichitdenies.InCanadaa
sackedchairmanofNissan, economy, which grew by just courtheardAmerica’srequest Gapdecided to hive off its Old
MitsubishiandRenaulthad 0.8% last year, well below the fortheextraditionofMeng Navybusiness into a separate-
beenheldincustodysince roughly 5% that is needed to Wanzhou,Huawei’schief ly listed company. Old Navy
mid-Novemberonchargesof make a dent in an unemploy- financialofficer. sells a cheaper clothing range
financialwrongdoingatNis- ment rate of 27%. than Gap-branded apparel and
san,whichhedenies.Under provides almost half of the Gap
strictbailconditions,Mr Mizuho, one of Japan’s biggest Be prepared company’s sales. Gap became
Ghosnwillstayatahouse banks, booked a ¥680bn Mark Carney said that “con- big when it cottoned on to the
under24-hourcamerasurveil- ($6.1bn) write-down. That was structive developments” had fashion for pastel colours in
lance.Heisnotallowedto mostly because of restructur- reduced the Bank of England’s the 1980s, but it has struggled
communicatewithpeopleover ing costs, though Mizuho also estimate of the economic recently, announcing more
theinternet. lost money trading in foreign damage that would result from store closures.
bonds, which many Japanese a disorderly Brexit. The bank
banks turned to in search of had previously put the cost to Days after defeating the gov-
For personal reasons higher yields when interest the economy at around 8% of ernment’s appeal against its
In an announcement that took rates turned negative at home. gdp. Mr Carney said that had takeover of Time Warner, at&t
Washington by surprise, Scott fallen by about 3.5 percentage undertook a broad restructur-
Gottliebsaid he would resign America removed Indiafrom points but continued to warn ing of the business. A newly
as commissioner of the Food its Generalised System of of a “material” shock. The bank created WarnerMedia Enter-
and Drug Administration. Mr Preferences, which lowers the also reported that the potential tainment will house a string of
Gottlieb had worked to speed barriers of entry for trade on disruption to cross-border assets, including hbo. The
up the approval of new drugs, certain goods, claiming that financial services had been swift departure of Richard
but he was greatly disliked by India had failed to provide mitigated in Britain, but it Plepler as hbo’s boss spawned
the tobacco industry for his equal access to its markets. criticised the eufor a lack of comparisons to “Game of
forceful attempt to halt the Donald Trump has stepped up action on its part. Of the thou- Thrones”, one of the channel’s
epidemic of teen vaping and his complaints against India’s sands of businesses that have many hits.
proposal to ban menthol ciga-
rettes. Before his resignation,
conservative groups had been
trying to halt his efforts to
crack down on the vaping
industry. Biotech stocks sank
on the news, whereas tobacco
stocks rose.
The chief executive of Vale
stepped down. Prosecutors had
asked for his “temporary”
suspension after the collapse
of a dam in Brazil that held
waste from one of Vale’s iron-
ore mines, killing at least 186
people. Scores are still missing.
Chevron and ExxonMobil
significantly increased their
production targets for shale oil
in the Permian Basin,
underlining how bigger oil
companies are putting
pressure on smaller indepen-
dent firms that operate in the
Leaders Leaders 9
The new scramble for Africa
This time, the winners could be Africans themselves
The first great surge of foreigninterestinAfrica,dubbedthe EthiopiaandRwanda.TurkishAirlines flies to more than 50 Afri-
“scramble”, was when 19th-century European colonists can cities. Greater openness to trade and investment is one rea-
carved up the continent and seized Africans’ land. The second son why gdp per head south of the Sahara is two-fifths higher
was during the cold war, when East and West vied for the alle- than it was in 2000. (Sounder macroeconomic policies and few-
giance of newly independent African states; the Soviet Union er wars also helped.) Africans can benefit when foreigners buy
backed Marxist tyrants while America propped up despots who everything from textiles to holidays and digital services.
claimed to believe in capitalism. A third surge, now under way, is Even so, Africans can do more to increase their share of the
more benign. Outsiders have noticed that the continent is im- benefits. First, voters and activists can insist on transparency. It
portant and becoming more so, not least because of its growing is heartening that South Africa is investigating the allegedly
share of the global population (by 2025 the unpredicts that there crooked deals struck under the previous president, Jacob Zuma,
will be more Africans than Chinese people). Governments and but alarming that even worse behaviour in the Democratic Re-
businesses from all around the world are rushing to strengthen public of Congo has gone unprobed, and that the terms of Chi-
diplomatic, strategic and commercial ties. This creates vast op- nese loans to some dangerously indebted African governments
portunities. If Africa handles the new scramble wisely, the main are secret. To be sure that a public deal is good for ordinary folk as
winners will be Africans themselves. well as big men, voters have to know what is in it. Journalists,
The extent of foreign engagement is unprecedented (see such as the Kenyans who exposed scandals over a Chinese rail-
Briefing). Start with diplomacy. From 2010 to 2016 more than 320 way project, have a big role to play.
embassies were opened in Africa, probably the biggest embassy- Second, Africa’s leaders need to think more strategically. Afri-
building boom anywhere, ever. Turkey alone opened 26. Last ca may be nearly as populous as China, but it comprises 54 coun-
year India announced it would open 18. Military ties are deepen- tries, not one. African governments could strike better deals if
ing, too. America and France are lending muscle and technology they showed more unity. No one expects a heterogeneous conti-
to the struggle against jihadism in the Sahel. China is now the nent that includes both anarchic battle zones and prosperous
biggest arms seller to sub-Saharan Africa and has defence-tech- democracies to be as integrated as Europe. But it can surely do
nology ties with 45 countries. Russia has signed better than letting China negotiate with each
19 military deals with African states since 2014. country individually, behind closed doors. The
Oil-rich Arab states are building bases on the power imbalance between, say, China and
Horn of Africa and hiring African mercenaries. Uganda is huge. It could be reduced somewhat
Commercial ties are being upended. As re- with a free-trade area or if African regional blocs
cently as 2006 Africa’s three biggest trading clubbed together. After all, the benefits of infra-
partners were America, China and France, in structure projects spill across borders.
that order. By 2018 it was China first, India sec- Third, African leaders do not have to choose
ond and America third (France was seventh). sides, as they did during the cold war. They can
Over the same period Africa’s trade has more than trebled with do business with Western democracies and also with China and
Turkey and Indonesia, and more than quadrupled with Russia. Russia—and anyone else with something to offer. Because they
Trade with the European Union has grown by a more modest have more choice now than ever before, Africans should be able
41%. The biggest sources of foreign direct investment are still to drive harder bargains. And outsiders should not see this as a
firms from America, Britain and France, but Chinese ones, in- zero-sum contest (as the Trump administration, when it pays at-
cluding state-backed outfits, are catching up, and investors from tention to Africa, apparently does). If China builds a bridge in
India and Singapore are eager to join the fray. Ghana, an American car can drive over it. If a British firm invests
The stereotype of foreigners in Africa is of neocolonial ex- in a mobile-data network in Kenya, a Kenyan entrepreneur can
ploiters, interested only in the continent’s natural resources, not use it to set up a cross-border startup.
its people, and ready to bribe local bigwigs in shady deals that do Last, Africans should take what some of their new friends tell
nothing for ordinary Africans. The stereotype is sometimes true. them with a pinch of salt. China argues that democracy is a West-
Far too many oil and mineral ventures are dirty. Corrupt African ern idea; development requires a firm hand. This message no
leaders, of whom there is still an abundance, can always find for- doubt appeals to African strongmen, but it is bunk. A study by Ta-
eign enablers to launder the loot. And contracts with firms from kaaki Masaki of the World Bank and Nicolas van de Walle of Cor-
countries that care little for transparency, such as China and nell University found that African countries grow faster if they
Russia, are often murky. Three Russian journalists were mur- are more democratic. The good news is that, as education im-
dered last year while investigating a Kremlin-linked mercenary proves and Africans move rapidly to the cities, they are growing
outfit that reportedly protects the president of the war-torn Cen- more critical of their rulers, and less frightened to say so. In 1997,
tral African Republic and enables diamond-mining there. Un- 70% of African ruling parties won more than 60% of the vote,
derstandably, many saw a whiff of old-fashioned imperialism. partly by getting rural chiefs to cow villagers into backing them.
However, engagement with the outside world has mostly By 2015 only 50% did. As politics grows more competitive, voters’
been positive for Africans. Foreigners build ports, sell insurance clout will grow. And they will be able to insist on a form of global-
and bring mobile-phone technology. Chinese factories hum in isation that works for Africans and foreigners alike. 7
10 Leaders The EconomistMarch9th2019
Online news in Russia
Don’t be evil
Western firms should not help the Kremlin stifle the internet
Sometimes it seems as if Vladimir Putin’s presidency has Another reason for Western platforms to resist being co-
beenmadefortelevision.Hisbare-chestedexploitsonhorse- optedisthattheycan.UnlikeChina,whoserulersquicklyrecog-
back,microlightflightswithcranesandthefightinginUkraine nisedtheinternet’sthreatandbuilta“GreatFirewall”,Russiaal-
and Syria were planned with the cameras in mind. Having lowedittogrowintertwinedwiththeoutsideworld.Anewlaw
helpedturnalittle-knownkgbofficerintoapatrioticicon,tele- on“digitalsovereignty”wouldlettheKremlincensororcutoff
visionhassustainedhiminpower.Butrecently,therearesigns thenationalinternet,butactuallydoingsowouldbetechnically
that the spell of Russia’s gogglebox is weakening. Meanwhile, and politically hard. Russian internet companies have servers
evermoreRussianslooktotheinternetfortheirnews. abroad.YoungRussianscatchtheYouTubehabitwhentheyare
Russia’sstate-controlledbroadcastchannelsmustnowcom- tots,becauseparentsrelyonittoentertainthem.Abigmarchis
petewithsocial-mediastars,YouTubersandonlineactivists(see plannedinMoscowonMarch10thindefenceoftheinternet.
Europesection).Overthepastdecadetrustintelevisionhasfall- Foreign internet companies do not have an entirely free
enfrom80%tobelow50%;82%of18-to44-year-oldsuseYou- hand.WesterninternetgiantshaveserversinRussia.However,
Tube and news is its fourth-most-watched category. Some theRussiangovernmentwouldrathercajolethelikesofGoogle
vloggershaveaudiencesthatdwarfthoseofthe than cut them off. This gives Western compa-
nightlynewscasts. niesclout.Theyshoulduseit.
MrPutin’sgovernmentisattemptingtogain The internet companies’ long-term self-in-
control over social media through legislation, terestmatchestheirprinciples.Complyingwith
intimidation and new surveillance infrastruc- morally dubious government demands threat-
ture. However, this needs the co-operation of enstheirreputation.Whennewsemergedthat
Western internet platforms such as Facebook Yahoo, a web portal, had been telling the Chi-
andGoogle,whichownsYouTube.Increasingly, nesegovernmentaboutitsusers,itsreputation
the government is ordering them to take down suffered. So far, Facebook and Google have re-
politically objectionable material or demanding private data sistedRussianrequeststorevealusers’identities.Announcinga
about their users. Internet companies should resist collaborat- pivottoamoreprivacy-friendlystancethisweek(seeBusiness
inginstateoppression—intheinterestsoftheirownprofits,as section),Facebook’sboss,MarkZuckerberg,saidhisfirmwould
wellasofRussiandemocracy. notstoresensitivedata“incountrieswithweakrecordsonhu-
OnereasonWesternplatformsshouldstandtheirgroundisto man rights”. Google has been fined for not removing banned
keepfaithwiththeirownprofessedbeliefs.Thedayswhenpeo- websitesfromsearchresults.Butinthefirsthalfof2018Google
plethoughttheinternetwouldnaturallyspreaddemocraticval- accededto78%oftheRussiangovernment’srequeststoremove
uesareover.ButSiliconValley’sliberalisingmantrasarenoten- material.Thefirmscoulddomoretostandtheirground.
tirelyhollow:risinginternetuseismakingRussia’sinformation Russia’sfirstinternetconnectionsweresetupin1989atthe
space more competitive. Alexei Navalny, an opposition leader Kurchatov nuclear institute, by scientists who wanted closer
banned from television, has millions of viewers on YouTube. contact with the West. They called their network “Demos”. To-
Abroad,MrPutinisknownasamastermanipulatorofsocialme- day’sinternetcompaniesshouldmakesuretheinternetremains
dia,butathomeheisfightingtocontainitspoliticalimpact. atoolforbuildingdemocracy,notdismantlingit.7
European industrial policy
L’Europe, c’est moi
Once a French habit, dirigisme is taking root across Europe. It must be resisted
If you can’t beat them, adopt their worst economic policies. ownership. At Renault-Nissan, the downfall of Carlos Ghosn has
Worried about the “aggressive strategies” of America and Chi- become intertwined with a struggle for control between the
na, France’s president, Emmanuel Macron, issued a Europe- French and Japanese governments (see Banyan). Last month Pe-
wide proclamation on March 4th that, among other things, pro- ter Altmaier, Germany’s economy minister, called for champi-
posed a new revolutionary era of government intervention in ons such as Siemens and Deutsche Bank to be protected. Last
European Union businesses (see Europe section). “We cannot week it emerged that the Dutch government has built up a 14%
suffer in silence,” he declared, while other global powers flout stake in Air France-klmto help its former flag-carrier “perform
the principles of “fair competition”. better”. And Italy is poised to increase to 10% its stake in Telecom
Mr Macron is not alone. Across the continent, politicians are Italia, which it began privatising 21years ago.
seeking to influence business using a range of tactics including This resurgence of state intervention is intended to make
regulation, nudging managers to do deals and boosting state European industries stronger. Instead it is more likely to hurt 1
The EconomistMarch9th2019 Leaders 11
2consumers and dim the prospects of business. fits, really warrant special treatment? And intervention is un-
Granted, Europe has never been a haven of unfettered free likely to achieve its aim of creating champions. Of Europe’s five
markets. The European Coal and Steel Community, the precursor most valuable firms, three (Nestlé, Novartis and Roche) are based
to the eu, was created in 1951to co-ordinate industrial activity. in Switzerland, which spends heavily on education and research
France has long adopted a dirigiste policy of strategic planning and development but does not engage in central planning. One
by enlightened technocrats. Nonetheless, by the 1990s, the state (Royal Dutch Shell) is transnational and the other is a French lux-
was in retreat. The launch of the single market in 1993 promised a ury-goods firm, lvmh, that has thrived because it answers to
continent-sized playing field for European firms, which could at China’s consumers, not the strategic plans of French bureau-
last exploit economies of scale and compete unfettered by na- crats. Europe’s one corporate success with dirigiste roots, Air-
tional subsidies and politics. bus, has soared since 2012, when its shareholding pact was re-
The lurch back towards intervention partly reflects the desire vised to reduce political influence.
of Mr Macron and other politicians to show grumpy voters that Instead of pursuing an activist industrial policy, Europe
they are making capitalism fairer. But it also reflects the fear that should put consumers first. That means enforcing competition.
Europe is falling behind America and China. Bosses worry that German and French attempts to stymie eu antitrust rules are
European firms are too puny. If you take the top 500 firms in both misguided. Allowing oligopoliesto form, as America has, creates
Europe and America, the median European one is 52% smaller by big companies that overcharge their customers and, sooner or
market value. Europe has no giants to rival Amazon or Alphabet later, exert more effort controlling markets than innovating. In
and hosts few of the world’s dynamic startups. China’s plan to tech, Europe ought to satisfy itself with rules, such as its gdpr
dominate various strategic technologies, such as new materials regulation, that protect consumers’ rights over their data and
and ai, and its pursuit of state-backed takeovers in Europe, seem privacy. Europe can also continue to deepen the single market.
threatening and unfair. And the White House’s me-first habit of The main reason some industries, such as banking and tele-
telling firms where to build factories has legitimised the kind of coms, are struggling and fragmented is because they still operate
overt meddling that had become taboo in the West. in national silos that hinder firms from achieving economies of
Yet Mr Macron’s solution is self-defeating. Germany and scale. And Europe should be proportionate in the way it screens
France have urged on the merger of the rail divisions of Siemens foreign investment, for example from state firms based in au-
and Alstom, which would have resulted in a firm with a 50% thoritarian countries, notably China. The aim would be to block
market share in Europe. But that would have pushed up the price investment in only the most sensitive industries, such as de-
of rail travel (the European Commission has sensibly blocked the fence, police it rigorously in important ones, such as technology,
deal). Intervention often incites national rivalries, too. The and otherwise step back.
Dutch bought into Air France-klmin order to offset French influ- Mr Macron is right that trade and markets are being distorted
ence. It can be a recipe for cronyism. Does Deutsche Bank, which by the actions of China and, increasingly, America. That does not
paid 1,098 staff more than €1m a year in 2017, despite paltry pro- mean Europe should copy their mistakes.7
Algeria
Out with the old
How to revive a country with enormous potential, but decrepit rulers
In most countries candidates for president must prove that But the ruling clique of generals, businessmen and politicians
they are in command of their senses. In Algeria, for example, has proved incapable of reform, unable even to pick a successor
they are required to register in person. But that rule apparently to the cadaverous Mr Bouteflika. It is time it handed power to a
does not apply to Abdelaziz Bouteflika, the ailing president, who new generation, which might unlock Algeria’s vast potential.
was lying in a Swiss hospital bed when his campaign manager What critics call stagnation, le pouvoircalls stability. The last
filed papers this month for him to run for re-election. Mr Boute- time the country held a free and fair parliamentary election, in
flika—or his coterie—is hoping he will win a 1991, Islamists won the first round and the gen-
fifth five-year term on April 18th. erals cancelled the rest. That led to civil war,
He probably does not remember his fourth. which raged for most of the 1990s and killed
The 82-year-old suffered a stroke in 2013 and has 200,000 people. Mr Bouteflika guided the coun-
rarely been seen since. Occasionally the govern- try out of the “dark decade”. Algeria has avoided
ment releases video of Mr Bouteflika looking the unrest that shook many of its neighbours
confused, as aides fawn over him. The old man since 2011. Today it is one of the safest countries
can hardly speak or walk. Yet he still ran away in the Arab world.
with the last election. The secretive cabal But the price has been high. The elite evokes
known as le pouvoir (the power) that really rules Algeria, and the civil war, and the threat of jihadism, to justify a ruthless re-
grows rich from it, is planning another stitch-up. gime. A 19-year-old state of emergency was lifted in 2011, but po-
Algerians have had enough of this farce. Tens of thousands of litical speech is still restricted, the media are muzzled and critics
them have taken to the streets in cities across the country, de- of the government are harassed. The authorities lock up people
manding one thing: that Mr Bouteflika not run again (see Middle using vaguely worded bans on “inciting an unarmed gathering”
East & Africa section). Algeria is in desperate need of renewal. and “insulting a government body”. State institutions, such as 1
12 Leaders The EconomistMarch9th2019
2the parliament and judiciary, are rubber stamps. is using his pen, recently promised that, if he wins in April, he
Following the old rules, the army chief of staff, General Ah- will organise an “inclusive national conference” and hold anoth-
med Gaid Salah, claims: “There are parties who wish to bring Al- er election, which he would not contest. But playing for time will
geria back to the years of violence.” Perhaps, but not the protes- not resolve Algeria’s underlying problems.
ters. They shout “silmiya, silmiya” (peaceful, peaceful) and even The regime treats Mr Bouteflika like El Cid, an 11th-century
clean up after themselves. Many feel disconnected from the likes Spanish nobleman whose dead body was supposedly strapped
of General Salah, who fought in the country’s war of indepen- on a horse and sent into battle to inspire his troops. To most Al-
dence from France. Most Algerians were born three or more de- gerians, however, he is an object of derision or pity. Algeria can-
cades after that conflict ended in 1962. While officials communi- not say what will happen when the strongman dies. Far from pre-
cate by fax, protesters are organising on social media. venting another civil war, the regime risks stoking one.
Le pouvoirworries that it can no longer afford to buy the pub- Sending Mr Bouteflika to a care home should be just the start
lic’s obedience with government jobs and subsidies. The state’s of reform. A temporary government could then oversee a transi-
budget relies on oil and gas revenues. Since 2014, when the price tion to a more open system, creating that national conference to
of hydrocarbons tumbled, it has burned through cash. The un- come up with reforms; presidential and parliamentary elections
employment rate hovers above 11%. Nearly a third of young peo- would be held after the opposition, which is weak and divided,
ple are looking for a job. Rampant corruptioncompletes the dis- had been able to organise. The country’s next leader could im-
mal picture. Rich in natural resources, teeming with cheap prove things by encouraging entrepreneurs, rather than stand-
labour and just across the sea from Europe, Algeria should be do- ing in their way, breaking up the government’s business empire
ing much better. and inviting in foreigners. Like Mr Bouteflika, Algeria has been
Le pouvoirdoes not have la solution. Mr Bouteflika, or whoever ailing for some time. Unlike him, it can still be saved. 7
Aviation
Plane stupid
Private jets receive ludicrous tax breaks that hurt the environment
The blue jeans and t-shirts of the global elite are no more against their corporate-tax bills. In some countries the use of a
comfortable than those worn by the middle class. They drink private jet is a tax-free perk for executives. But a growing volume
the same coffee, watch the same films and carry the same smart- of research suggests that flying the boss privately is often a waste
phones. But a gulf yawns between the rich and the rest when they of money for shareholders. One analysis, by icf, a consultancy,
fly. Ordinary folk squeeze agonisingly and sleeplessly into cheap found that the jets are often used to fly to places where corporate
seats. The elite stretch out flat and slumber. And the truly titans are more likely to have holiday homes than business meet-
wealthy avoid the hassles and indignities of crowded airports ings, such as fancy ski resorts. A study by David Yermack of nyu
entirely, by taking private jets. This would be no one else’s busi- Stern School of Business found that returns to investors in firms
ness but for two things. First, private jets are horribly polluting. that allow such flights are 4% lower per year than in other com-
Second, they are often—and outrageously—subsidised. panies. Users of such planes are also more likely to commit
Private aviation was hit hard by the global financial crisis, fraud: a careless attitude to other people’s money sometimes
when both companies and individuals sought to pare expenses. shades into outright criminality, it seems.
But now private jets are booming again. This is The environmental effects of corporate jets
partly because new booking services and are dire. A flight from London to Paris on a half-
shared-ownership schemes are cutting the cost full jet produces ten times as much in carbon
of going private and luring busy executives emissions per passenger as a scheduled flight,
away from first- and business-class seats on according to Terrapass, a carbon-offset firm.
scheduled flights (see International section). New supersonic business jets under develop-
But the boom is also a result of tax breaks, which ment will make that a lot worse. On one esti-
are even more generous than those lavished on mate, their emissions will be five to seven times
ordinary airlines. In Europe firms and individ- higher than for today’s models. Amazingly,
uals can avoid paying value-added tax on imported private jets these emissions are largely unregulated. Aviation is not covered
by routing purchases through the Isle of Man. This scheme has by the Paris agreement to limit climate change, and most private
cut tax bills by £790m ($1bn) for imports of at least 200 aircraft jets are excluded from corsia, a carbon-offsetting scheme in-
into the European Union since 2011. America’s rules are loopier volving most airlines. All in all, private planes could produce 4%
still. Donald Trump’s tax reform allowed individuals and compa- of American emissions by 2050 compared with 0.9% today.
nies to write off 100% of the cost of a new or used private jet All air travel is bad for the environment. Business class is
against their federal taxes. For some plutocrats this has wiped worse than economy class, because it burns more jet fuel per
out an entire year’s tax bill. For others, it has made buying a jet passenger. Private jets are more damaging by an order of magni-
extraordinarily cheap. tude. The tax breaks for cooking the planet in this way cannot be
The case for flying on a private jet is that it can save time for justified. They should all be scrapped. Carbon emissions should
someone, such as a chief executive, whose time is extraordinari- be taxed, not subsidised by the sleepless masses in steerage and
ly valuable. Hence companies can offset the cost of these flights the even less fortunate souls who never fly.7