Table Of Content

An American princess in London Beware Italy’s next government How firms cope with Trump’s sanctions Special report: China in the world MAY19TH–25TH2018 Gaza There is a better way Contents TheEconomistMay19th2018 3 34 TheMurray-Darling 6 Theworldthisweek Frompaddlestopuddles 35 NorthKorea Leaders Forewarnedondisarmament 9 IsraelandGaza 36 Banyan Thereisabetterway AMalaysiantsunami 10 Pharmaceuticals Thepriceiswrong China 10 Italy’snextgovernment 37 Language FiddlingbeforeRomeburns Onecountry,manytongues 11 Thedollar 38 Football TheroyalweddingThe Aboutthatbigstick Thehomeadvantage monarchyisstrongerthanit 12 Non-competeclauses hasbeenforyears—andthe Restraintherestraints governmentisweaker: MiddleEastandAfrica Onthecover Bagehot,page51 Israelmustbeheldto Letters 39 Burundi’sreferendum accountforthisweek’s Backtothebadolddays 14 Onhappiness,crypto- deathsinGaza.Butitistime 40 Zimbabwe currencies,Marx,mental forPalestinianstotakeup Cantheeconomybefixed? health,DeutscheBank, non-violence:leader,page9. thepost 41 StateairlinesinAfrica WhyPalestiniansarereadyto Whereoneisnotenough bravebulletsandriskdeath 41 Gulfpolitics ontheborderfencebetween Briefing WhyQatarisraisingcows GazaandIsrael,page16. 16 Gaza Despitethepoliticsoffear, Siegementality 42 Iran’sstrickeneconomy Israelismoresuccessful Asysteminshock 18 Israelat70 thanever,page18 42 Iraq’selection Promisedland Muqtadaal-Sadr’swin TrumpandsanctionsAmerica TheEconomistonline UnitedStates musttakecarewhenwielding Specialreport: itsextraordinarypowerover Dailyanalysisandopinionto 19 TheJusticeDepartment Chinaintheworld globalfinance:leader,page11. supplementtheprintedition,plus Afingeronthescale Openingthegates Businesshaslittlechoicebut audioandvideo,andadailychart 20 PoliticsinCalifornia Afterpage42 tocaveintotheTrump Economist.com Wackyraces administration’sunpredictable E-mail:newslettersand 22 Gamblingonsport sanctionspolicies,page54. Europe mobileedition Forthebettor Howtoescapeahegemonic Economist.com/email 22 Medicaid 43 Italy’scoalitiontalks currency:Freeexchange, Printedition:availableonlineby Willworkforhealthcare Thewillsofthepeople page68.Europehasfewgood 7pmLondontimeeachThursday 44 SpainandCatalonia optionsfordealingwith 23 Missouri’sgovernor Economist.com/printedition Nosurrender America’spresident: Underfire Audioedition:availableonline 45 SexinFrench Charlemagne,page47 26 Lexington todownloadeachFriday Viveladifférence ADemocraticdeficit Economist.com/audioedition 45 OrbanvisitsPoland Drinkingfromoneglass TheAmericas 46 Georgia’shipsterpolitics 27 Venezuela Dancedancerevolution MrMaduro’smockelection 47 Charlemagne 28 Peru StandinguptoTheDonald Volume427Number9092 Vizcarra’svision PublishedsinceSeptember1843 30 Bello totakepartin"aseverecontestbetween ArgentinaandtheIMF Britain intelligence,whichpressesforward,and 48 Corbynomics anunworthy,timidignoranceobstructing ourprogress." Thegreattransformation Asia EditorialofficesinLondonandalso: 51 Bagehot ItalyThe prospect of a Beijing,Berlin,Brussels,Cairo,Chicago,Madrid, 31 PoliticsinThailand Americanprincess populist government is more MNeewxiYcoorCki,tPy,aMrios,scSoawn,FMraunmcbisacio,,NSaãirooPbai,uNloe,wSDeoeluhli,, Vacuumpower dangerous than people think: Shanghai,Singapore,Tokyo,WashingtonDC 32 RebellionsinMyanmar leader, page 10. The new Rumbleinthejungle administration threatens to 32 BombingsinIndonesia be fractious and risky, page 43 Anewlow 1Contents continues overleaf 4 Contents The EconomistMay19th2018 International Scienceandtechnology 52 Highereducation 71 ConservationinColombia Rankinguniversities Somethingtoshoutabout 72 Glaciologyandhistory Corevalues Business 54 Americansanctions 73 Astronomy WhattheOFAC? Inconstant 55 Musicstreaming 74 Thescienceofsongs Badrap Whatmakesgoodmusic? 56 Samsungandlabour 74 Microdrones UniversityrankingsLeague WorkersoftheGalaxy Petiteflyfromabrightguy Chinese abroadChina’s tablesleaduniversitiesto decision to let its people travel favourresearchoverteaching 56 AirAsia abroad freely is changing the andhardsciencesoverthe Onawingandaslogan Booksandarts world. James Miles argues that humanities.Yettheyalso 57 Bankruptcyadvice 75 Russiantheatre it is changing China, too. See fosterglobalco-operation, Raisingaracket Thebandageandthewound our special report after page 42 page52 57 ChinaThreeGorgesandEDP 76 Modernopera Openingthefloodgates Hisdarkmaterials Subscription service 58 Toyotaandautonomy 77 Organisedcrime For our latest subscription offers, visit Speedlimit Thebiggestgangintown Economist.com/offers For subscription service, please contact by 59 Crypto-currencies 77 Irishfiction telephone, fax, web or mail at the details Bitcoiningit Howthepastholdson provided below: 78 Thehistoryofsilence North America Whereofwecannotspeak The Economist Subscription Center Financeandeconomics P.O. Box 46978, St. Louis, MO 63146-6978 Telephone: +1 800 456 6086 61 Theworldeconomy Facsimile: +1 866 856 8075 Levellingoff 80 Economicandfinancial E-mail: [email protected] 62 Buttonwood indicators Latin America & Mexico The Economist Subscription Center Istanbulsandbears Statisticson42economies, P.O. Box 46979, St. Louis, MO 63146-6979 plusacloserlookatoil Telephone: +1 636 449 5702 MusicstreamingInresponse 63 NAFTAnegotiations Facsimile: +1 636 449 5703 to#MeToo,Spotifykicksoffa Labouringaway E-mail: [email protected] culturalshiftinthemusic 63 BoeingvAirbus Obituary Subscription for 1 year (51 issues) business,page55 Flyingblind 82 Ninalee Allen Craig United States US $158.25 (plus tax) Canada CA$158.25 (plus tax) 64 China’scurrentaccount Awoman walking Latin America US $289 (plus tax) Discoveringdeficits 64 Life insurance Declining years Principalcommercialoffices: TheAdelphiBuilding,1-11JohnAdamStreet, 65 Pension bonds LondonWC2N6HT Will Selfies stick? Tel:+44(0)2078307000 66 Non-compete agreements Ruedel’Athénée32 1206Geneva,Switzerland Ball and chain Tel:+41225662470 68 Free exchange 7503rdAvenue,5thFloor,NewYork,NY10017 The long arm of the dollar Tel:+12125410500 1301CityplazaFour, 12TaikooWanRoad,TaikooShing,HongKong Global growth An economic Tel:+85225853888 slowdown should not cause Othercommercialoffices: too many jitters—yet, page 61. Chicago,Dubai,Frankfurt,LosAngeles, How Turkey went from Paris,SanFranciscoandSingapore investment darling to a junk rating: Buttonwood, page 62. The demise of China’s current- account surplus will change the global economy, page 64 PEFC certified This copy of The Economist is printed on paper sourced from sustainably managed forests certified to PEFC PEFC/29-31-58 www.pefc.org ©2018 The Economist Newspaper Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Newspaper Limited. The Economist(ISSN 0013-0613) is published every week, except for a year-end double issue, by The Economist Newspaper Limited, 750 3rd Avenue, 5th Floor New York, NY 10017. The Economist is a registered trademark of The Economist Newspaper Limited. Periodicals postage paid at New York, NYand additional mailing offices. Postmaster: Send address changes to The Economist, P.O. Box 46978, St. Louis, MO 63146-6978, USA. Canada Post publications mail (Canadian distribution) sales agreement no. 40012331. Return undeliverable Canadian addresses to The Economist, PO Box 7258 STN A, Toronto, ON M5W 1X9. GST R123236267. Printed by Quad/Graphics, Hartford, WI. 53027 6 The world this week The EconomistMay19th2018 Politics ka,atransporthub,raising Fideszgovernment, which lesskeen on givingup itsnuc- fearsthatthe disease will blamesthe Jewish billionaire learweaponsthan ithad previ- advance rapidly. Atleast42 philanthropistformuch that ouslyimplied. people have been infected by goeswrongin Hungary. thislatestoutbreakso far. Chinamarked the tenth anni- Time to talk versaryofan earthquake in Fancy a flutter? Sichuan thatkilled 70,000 The Supreme Courtover- people. PresidentXi Jinping turned a lawthatbanned said Chinahad provided bettingon sports, findingthat “enlightenmentforthe inter- itinfringed on states’ rights. national community” in re- The lawwaspassed in 1992 buildingdisasterzones. Offi- (Nevada wasexempted). cialsimposed tightsecurity, Americansalreadyplace an fearful ofattemptsbyparents estimated $150bn ofillegal to mourn children who died in TensofthousandsofPalestin- wagerson sportseach year. shoddilybuiltschools. iansprotested alongthe border between Gazaand Israelto Anotherround ofprimary The governorofthe Indian highlighttheirvariousgriev- electionswasheld in America Students, businessfolkand state ofKarnataka invited the ances. Israeli soldiersshot and to pickcongressional candi- civicleadersin Nicaragua Bharatiya Janata Partyto form killed about60, accordingto datesforthe mid-terms. Penn- gathered in Managua, the agovernment, though two Gaza’shealth ministry. Some sylvania’sconteststookplace capital, forthe firstdayof talks otherpartieshad won a major- had attempted to breach the undernewdistrictboundaries, with Daniel Ortega, the presi- ityofthe state legislature borderfence; othersthrew aftera courtover-ruled Repub- dent. The “dialogue”, which is between them. The pairap- rocksand Molotovcocktails at lican gerrymandering. Three beingmediated bythe Catho- pealed to the Supreme Court. the Israeli side. Mostofthe women won in heavilyDemo- licchurch, followsweeksof protesters, however, were craticdistricts, so the state’s protestsagainstMrOrtega’s Suicide-bombersattacked unarmed. all-male delegation will prob- socialistgovernment, in which churchesand police stations in ablybe slightlyfeminised in dozensofpeople were killed. Indonesia, killing13 people. On the same dayasthe November. The attackswere mounted by violence, America opened its Margarita Zavala, an indepen- families, includingchildren. newembassyin Jerusalem, Unknown territory dentcandidate in Mexico’s IslamicState claimed recognisingthe contested city Italy’spopulistFive StarMove- presidential election, dropped responsibility. asIsrael’scapital. Binyamin ment(M5S) and far-right outto “free” hersupportersto Netanyahu, Israel’sprime Northern League neared agree- vote formore popularcandi- minister, said itwasa “great menton forminga governing dates. Herwithdrawal could dayforpeace”. Mahmoud coalition, more than two weaken AndrésManuel López Abbas, the Palestinian monthsafteran election. The Obrador, a left-wingpopulist president, described the governmentwould be the first who hasa biglead in the polls. embassyasa “USsettlement all-populistone in western outpost”. Europe. Manyfearitcould pull Venezuela’s socialistregime Italyoutofthe euro and cosy tookovera factorythatKel- Acoalition led byMuqtada up to Russia. The partieshave logg, afood company, had al-Sadr, a Shia clericwho once struggled to reconcile their closed because ofthe coun- urged attackson American programmes, which promise try’seconomicmeltdown. troops, won Iraq’sparliamen- bigtaxcuts(the League) and PresidentNicolásMaduro said taryelection, accordingto benefitincreases(M5S). workersatthe factorycould AnwarIbrahim, Malaysia’s preliminaryresults. Hisallies “continue producingforthe formerfinance ministerand a promised to tackle corruption Catalonia’sparliamentelect- people”, who are goinghungry leaderofthe opposition alli- and curtail foreign influence. A ed Quim Torra aspresidentof because ofprice controlsand ance thatwon the recentgen- coalition led byHaideral- the region. He wasbacked by official corruption. Mean- eral election, wasreleased Abadi, the prime minister, CarlesPuigdemont, who was while, prisonerstookoverthe from prison on the ground that came second. forced from office when he detention centre ofSebin, hisjailinghad been politically declared independence and is Venezuela’sfeared intelligence motivated. MrAnwarisex- Aftera campaign marred by nowin Germany. The Catalan agency, to protestagainst pected eventuallyto take over several murders, Burundiheld parliamentapproved MrTorra, abuses. The governmentsaid it from the currentprime min- areferendum on whetherto ahardline separatistwho has had regained control; prison- ister, MahathirMohamad. extend the president’sterm made disagreeable remarks ersdisputed this. from five yearsto seven. If it aboutSpaniards, bya margin The windscreen ofa Chinese passes, Pierre Nkurunziza, ofone vote. Party poopers passengerjetblewoutwhile who callshimselfthe North Koreacancelled a itwascruisingat32,000 feet. country’s“Supreme Eternal The Open SocietyFounda- meetingwith the South about The co-pilotwassucked Guide”, mightremain tionsdecided to close shop in improvingtiesand threatened halfwayout, butwassaved by presidentuntil 2034. Budapest, the birth place of to pull outofa summitbe- hissafetybelt. The pilotlanded George Soros, itsfounder, and tween itsleader, Kim JongUn, the aircraftsafely, despite the An outbreakofEbolain the move itsHungarian operations and Donald Trump, due to take sudden lossofcabin pressure DemocraticRepublicofCongo to Berlin. MrSoroshasbeen place in Singapore in June. The and a plunge in temperature to spread to the cityofMbanda- scapegoated bythe nationalist Kim regime hinted thatitwas -30°C(-22°F). 1 The EconomistMay19th2018 Theworldthisweek 7 Business returned to shareholders. It aboutthe capacityofTurkey’s guaranteesfrom PNB. Federal recentlystruckan agreement central bankto rein in inflation investigatorshave charged to expand in Europe bybuying and arrestthe currency’sfall. more than 20 people in the PresidentDonaldTrump some ofLibertyGlobal’sas- case, includinga formerchief introduced a plan to lowerthe sets. NickRead, the company’s Britain’sfinancial-conduct executive ofthe bank. costofdrug pricesforcon- chieffinancial officer, steps up regulatorshanded a £642,000 sumersin America. The pro- to the top job. ($865,000) fine to Jes Staley, The stakes are high posalsinclude compelling the chiefexecutive ofBarclays, pharmaceutical firmsto list Xeroxcalled offan agreement forhisattemptto unmaskan theirpricesin advertisements. thatwould have seen itmerge internal whistleblower. The The governmentmayalso get with Fujifilm, with which it regulatorssaid thatMrStaley tough with firmsthatprevent hasa long-standingjointven- “failed to actwith due skill, theirdrugsfrom beingcopied ture in Asia sellingphotocopi- care and diligence” in his when patentsexpire. ButMr ers. The deal had been strongly response to an anonymous Trump stopped shortofkeep- opposed byCarl Icahn and letterthatcriticised a senior inghispopulistpledges, such Darwin Deason, two investors executive atthe bank. asallowingAmericansto who own more than 10% ofthe importprescriptionsfrom sharesin Xerox. Aftermonthsofnegotiations, othercountries. The share Saudi British Bank(SABB) and pricesofleadingdrugcompa- In an acquisition underlining Alawwal Bankstrucka pre- The British governmentre- niesrose afterhisspeech. the popularityofprice-com- liminaryagreementto merge. duced the maximum stake at parison services, SilverLake, The combination ofSABB, fixed-odds betting terminals The great protector an American private-equity which is40% owned byHSBC, from £100 ($135) to £2. Groups Takingmanyin hisadministra- firm, agreed to buyZPG, which and Alawwal, which is40% helpinggamblingaddictshad tion bysurprise, MrTrump ownsseveral such websitesin owned bythe Royal Bankof pressed forchange, claiming tweeted thathe wasworking Britain, includingZoopla and Scotland, would create Saudi punterscould potentiallylose to overturn a ban on American uSwitch, for£2.2bn ($3bn). Arabia’sthird-biggestbank. It £18,000 an hourbecause £100 chip companiesfrom selling to would also markthe largest can be wagered every20 sec- ZTE, a Chinese makeroftele- Ahawkish dove bankingmergerin the king- ondsatthe machines. FOBTs comsequipment, because of The Turkish liratumbled dom since 1999. are the primarysource of the job lossesitentailed in againstthe dollaragain, after income forbettingshops, China. The Commerce Depart- Recep Tayyip Erdogan, Tur- Punjab National Bankreport- generating£1.8bn a year. Each mentimposed the ban on ZTE key’spresident, said thathe ed a netlossof134bn rupees terminal (restricted to four per forcontraveninga settlement will seekgreaterinfluence over ($2bn) forthe quarterending shop) on average takesin oversellingproductsto Iran monetarypolicyifhe wins on March 31st, one ofthe big- £50,000 a yearfora bookie. and North Korea. MrTrump nextmonth’ssnap election. Mr gesteveratan Indian state- The industryhaswarned there said hisremarkswere made in Erdogan’sdistaste forhigh owned bank. The losswas will be bigjob lossesbecause the contextofnegotiatingwith interestrates, which he recent- mostlya resultofsettingaside ofthechange. China to avoid a trade war. lydescribed asthe “mother moneyto covera fraud in- and fatherofall evil”, has volvingdiamond firmsthat For other economic data and America claimed victoryafter increased investors’ concerns raised creditabroad usingfake news see Indicators section the World Trade Organisa- tionupheld a decision thatthe European Union wrongly provided subsidiesto Airbus. RobertLighthizer, America’s trade representative, said that unlessthe EUstopped “break- ingthe rules” America would “have to move forward with countermeasureson EU products”. Airbusretorted that 94% ofBoeing’soriginal claims had been dismissed bythe WTO. Aseparate case brought bythe EUagainstAmerican supportforBoeingwill come up laterthisyear. Vodafoneannounced that Vittorio Colao isto step down asCEOafterten yearsin the job. DuringMrColao’stenure the world’ssecond-biggest wirelessprovidersold its minoritystake in Verizon Wireless, a deal which fetched $130bn, $84bn ofwhich was Leaders The EconomistMay19th2018 9 There is a better way Israel is answerable forthis week’s deaths in Gaza. Butitis time forPalestinians to take up non-violence GAZA is a human rubbish- which administers the PA and parts of the West Bank, has heap thateveryone would withheld salariesforcivil servantsworkingforthe PAin Gaza, ratherignore. NeitherIsrael, nor limited shipmentsofnecessities, such asdrugsand baby milk, Egypt, noreven the Palestinian and cutpaymentsto Israel forGaza’selectricity. Authority(PA) wantsto take re- Hamasbearsmuch ofthe blame, too. Itall butdestroyed the sponsibility for it. Sometimes Oslo peace accordsthrough itscampaign ofsuicide-bombings the poison getsout—when, say, in the 1990sand 2000s. Havingdriven the Israelisoutof Gaza, rocketsorotherattacksprovoke itwon a general election in 2006 and, aftera briefcivil war, ex- afullyfledged war. And then the world isforced to take note. pelled Fatah from the strip in 2007. Ithasmisruled Gaza ever Such a momentcame on May14th. Tensofthousandsof since, provingcorrupt, oppressive and incompetent. Itstores Palestiniansmassed nearGaza’sborderfence, threatening to itsweaponsin civilian sites, includingmosquesand schools, “return” to the lands their forefathers’ lost when Israel was makingthem targets. Cement that might be used forrecon- created in 1948. Israeli soldierskilled about60 protesters—the struction isdiverted to build underground tunnelsto attackIs- bloodiestdayin Gaza since the warin 2014 (see Briefing). In a rael. Hamasall butadmitted itwasnotup to governing when it surreal split-screen moment, the Israeli prime minister, Binya- agreed to hand manyadministrative tasksto the PAlastyear as min Netanyahu, wasexultingoverthe openingofAmerica’s partofa reconciliation deal with Fatah. Butthe pact collapsed embassyin Jerusalem, callingita “greatdayforpeace”. because Hamasisnotprepared to give up itsweapons. Manycountrieshave denounced Israel; a fewhave recalled Israel, Egyptand the PAcannotjustlockawaythe Palestin- diplomats. Some people accuse itofwarcrimes. Others blame iansin Gaza in the hope thatHamaswill be overthrown. Only PresidentDonald Trump forcausingthe clashesbymoving the when Gazanslive more freelymighttheythinkofgetting rid of embassyfrom Tel Avivto Jerusalem. Itissurelyright to hold Is- theirrulers. Much more can be done to ease Gazans’ plight rael, the strongside, to high standards. ButPalestinian parties, withoutendangeringIsrael’ssecurity. Butno lastingsolution is though weak, are also to blame. Seven decadesafterthe cre- possible until the question ofPalestine issolved, too. MrNet- ation ofIsrael asa thrivingdemocracy, there isa better way anyahuhaslongresisted the idea ofa Palestinian state—and than endlessconflictand bloodshed. haskeptbuildingsettlementson occupied land. Itishard to convince Israelisto change. AsIsrael marksits Howmuch blood is proportionate? 70th birthday, the economyisbooming. By“managing” the Everystate hasa rightto defend itsborders. To judge bythe conflict, ratherthan tryingto end it, MrNetanyahuhas kept numbers, Israel’sarmymaywell have used excessive force. Palestinian violence in check while giving nothing away. Butanyfirm conclusion requiresan independentassessment When violence flaresIsrael’simage suffers, butnotmuch. The ofwhathappened, where and when. The Israelissometimes Trump administration supportsit. And Arab statesseeking an used non-lethal means, such astear-gasdropped from drones. allyagainsta risingIran have neverhad betterrelations with it. Butthen sniperswentto workwith bullets. Whatchanged? Israel is wrong to stop seeking a deal. And Mr Trump is Mixed in with protesters, itseems, were an unknown number wrong to prejudge the status ofJerusalem. But Palestinians ofHamasattackersseekingto breach the fence. Whatthreat have made iteasyforIsrael to claim thatthere is“no partnerfor did theypose? Anyfairjudgmentdependson the details. peace”, divided astheyare between a tired nationalist Fatah Just as important is the broader political question. The thatcannotdeliverpeace, and an IslamistHamasthat refuses fence between Gaza and Israel isno ordinaryborder. Gaza isa to do so. Palestinians desperately need new leaders. Fatah prison, nota state. Measuring365 square kilometresand home mustrenewitselfthrough long-overdue elections. And Hamas to 2m people, it is one ofthe most crowded and miserable must realise that its rockets damage Palestinian dreams of placeson Earth. Itisshortofmedicine, powerand other essen- statehood more than theyhurtIsrael. tials. The tap water is undrinkable; untreated sewage is pumped into the sea. Gaza alreadyhasone ofthe world’shigh- The onlywayto stop fighting is to stop fighting estjoblessrates, at44%. The scene ofthree warsbetween Ha- For all their talkofnon-violence, Hamas’s leaders have not masand Israel since 2007, itisalwayson the pointoferuption. abandoned the idea of“armed struggle” to destroyIsrael. They Manyhandsare guiltyforthistragedy. Israel insists thatthe refuse to give up theirguns, orfullyembrace a two-state sol- strip isnotitsproblem, havingwithdrawn itsforces in 2005. ution; they speak vaguely of a long-term “truce”. With this Butitstill controlsGaza from land, sea and air. Any Palestinian, week’sprotests, Hamas’sleadersboasted offreeinga “wild ti- even a farmer, comingwithin 300 metresofthe fence isliable ger”. Theyfound thatIsrael can be even more ferocious. to be shot. Israel restrictsthe goodsthatgetin. Only a tinynum- IfHamasgave up itsweapons, itwould open the way fora berofPalestinianscan getoutfor, say, medical treatment. Israe- rapprochementwith Fatah. Ifitaccepted Israel’srightto exist, it li generalshave longwarned againstlettingthe economy col- would expose Israel’scurrentunwillingnessto allowa Pales- lapse. MrNetanyahuusuallyignoresthem. tinian state. IfPalestiniansmarched peacefully, without guns Egyptalso contributesto the misery. The Rafah crossing to and explosives, they would take the moral high ground. In Sinai, anotherescape valve, wasopen to goodsand people for short, ifPalestinianswantIsrael to stop throttling them, they just17 days in the first fourmonths ofthisyear. And Fatah, mustfirstconvince Israelisitissafe to letgo. 7 10 Leaders TheEconomistMay19th2018 Pharmaceuticals The price is wrong Americastilllacksaseriousplantolowerthecostofdrugs POPULISTSoftenputtheirfin- costsforforeign governments. Even ifthisprovespossible— S&Ppharmaceuticals geronproblemsthatirktheir anditseemsunlikelyto succeed with America’sbigtrading Previousdayclose=100 countrymen. Theyalso tend to partners—itwould notcutAmericans’ drugsbillsbya cent. 102 Trump’sspeech come up with inadequate sol- Thatisbecause the price ofdrugsin America would remain 101 utionstothem.SoitiswithPres- atwhatthemarketwill bear. Putanotherway, prices would 100 identDonaldTrump’splan,un- continuetobe largelysetbypharma companies. For, unlike 99 veiledonMay11th,tolowerthe othercountries, America doesa bad job ofnegotiating down 10:00 May11th 16:00 priceofprescriptiondrugs. the prices of new drugs. If America really wanted cheaper DrugsaremoreexpensiveinAmericathananywhereelse. drugs,itwould copywhatEuropean countriesdo, and refuse Amonth’ssupplyofHarvoni,whichcureshepatitisC,costs tobuydrugsthatdo notoffergood clinical value for money. $32,114 in America and $16,861in Switzerland. Some cancer drugs can cost more than $150,000 a year. Mr Trump cam- Asecondopinion paignedonapromisetoreduceprices.Hesuggestedthathe Evenshortofsuch radical action, there are plentyof opportu- wouldmakeiteasiertoimportdrugsfromabroadandwould nitiesforuseful reform. The governmentcould give Medicare, forcedrugcompaniestolowerpricesforAmericans,usingthe the health scheme for the elderly, more power to negotiate state’sbargainingpowertosave$300bnayear—preposterous, pricesandmore freedom to determine the drugsithas to pro- giventhatthisisalmosttheentiresumthegovernmentspends videbylaw.Atthe momentitcannothaggle directlywith drug on drugs. Nevertheless, his promises may have helped Mr companies.Itcould also expose the opaque and hugely profit- Trumpwinthesupportofthemajorityofoldervoters. able array ofintermediaries which sit between the makers Thepresident’splan,whichhecalledthe“mostsweeping and takers of drugs. These firms are supposed to negotiate actioninhistorytolowerthepriceofprescriptiondrugs”,lacks cheaperpriceson behalfofinsurance companies, passing sav- potency.Afewideasarewelcome,includingtheproposalto ingsontoconsumers. In reality, a complexand largely confi- hinderpharmaceuticalfirmsthattrytodelaythearrivalofge- dentialsystem ofrebateson published priceshasdriven up nericversionsoftheirdrugsafterpatentsexpire.Butmanyof thebillforpatients, who payfrom theirown pockets and see MrTrump’ssuggestionsneedlegislation,whichisunlikelyjust littleofthediscounts. now.Nowonderhisspeechtriggeredariseintheshareprices TheTrumpadministration criticisesthe rationingof treat- ofpharmafirms. mentinothercountries. ButAmerican insurersroutinely re- MrTrumpalsorepeatedanargumentbelovedofpharma- stricttheuseofcostlydrugs—onlytheirapproach dispropor- ceuticalcompanies—thatforeignersaretoblameforAmerica’s tionatelyaffectsthose ofverymodestmeans, since they have highprescription-drugprices.BecauseEuropeanspaytoolittle flimsierinsurance plans. The Food and DrugAdministration is fortheirdrugs, goes the argument, Americans make up the settorelaxthe efficacytestin orderto cutthe cost ofdevelop- lossesbypayingmore.MrTrumppromisestoinstructtradene- ingnewdrugs. Extra innovation iswelcome but, unless Ameri- gotiatorstodemandthatothercountriesextendperiodsfor cagetsagripon pricesatthe same time, itwill lead to yetmore patentsonAmerican-madedrugs,whichinturnwouldraise costlynewdrugsofferingpoorclinical value. 7 CoalitionnegotiationsinItaly Fiddling before Rome burns Apopulistflirtation is more dangerous than itseems ITALYhasgonewithoutagov- thepopulistpartiesthatwon the mostvoteshave conflicting ernment for more than two policies. The far-rightNorthern League promised a flat taxrate months. Thatisno greatshock. of15%, which would lowerrevenues. The Five StarMovement Atelectionson March 4th, Ital- (M5S), which claimsto transcend left-rightdivisions, promised ians deserted mainstream par- a universal basic income of€780 ($920) per month, which tiesand backed radical populist would require huge outlays. Bridgingthe gap between these oneswhose leadershave never two parties, in office aswell asin the coalition talks, would be had to haggle to form a coalition. hard forthe mostcharmingand seasoned politicians, let alone The surprise has been the belated reaction of the financial the League’s firebrand ofa leader, Matteo Salvini (pictured, markets, which thisweeksuddenlywoke up to the looming left), and M5S’s31-year-old head, Luigi Di Maio (right). threat. The men who, asThe Economistwentto press, were on Anotherreason to beware isthe parties’ programmes. Their the verge oftakingpowerin Italycannotbe trusted to run it. visceral Euroscepticism threatens the integrity of the euro One reason forthe delay—and forgeneral concern—is that zone. M5S has only recently stepped backfrom pledging to 1 TheEconomistMay19th2018 Leaders 11 2hold a referendum on leavingthe single currency. The League spreadsbetween Italian and German governmentbondswid- goeswell beyond reasonable concern overrefugees, advocat- ened by0.22 percentage points, to 1.5 points—theirbiggestsin- ing xenophobic and unworkable deportation policies. Both gle-dayincrease since the Brexitvote. parties want to scrap sanctions on Russia, threatening the Italianshave reason to be angrywith theirpoliticians. Sil- European unitythatdetersPresidentVladimirPutin’saggres- vio Berlusconi, besetbylegal troubles, neglected the euro crisis sion in Ukraine and elsewhere. Athome theywould undo vi- until he wasforced from power. Matteo Renzi squandered the tal reforms, cuttingthe pension age in a rapidlygreying coun- hopesinvested in him bybettingon an ill-fated referendum to trywith lowfertility. Theyhave otherperverse distractions, change the constitution, leavingotherreformslargely undone. such asM5S’ssympathywith the anti-vaccination movement. The countryisunstable atthe top. Ithashad five prime minis- Dangerous in isolation, their policies could be worse in tersin ten years, and none ofthe pastfourwasthe leader ofhis combination. IfMrSalvini and MrDi Maio reach an accord partyatthe time itwaselected. Europe, too, hasmuch to an- thatincludesboth oftheirbudgetarypriorities, itwould be fis- swerfor. The EUpromised to help Italycope with the refugees callyirresponsible. Implementingthe flattax, the universal ba- thatarrive on itscoast, butbroke itsword. sicincome and the pension roll-backwould costtensof bil- lionsofeurosa year, probablyincreasingthe deficit from 2.3% Circuses, butnotenough bread ofGDPto more than 3% and breachingEuropean rules. The pityisthatneitherthe League norM5Sofferssolutionsto Perhapsthatiswhyan earlyversion ofthe parties’ accord Italy’s real problems. Italian productivity has scarcely risen included demandsthatthe ECBforgive €250bn in Italian debt since 2001. (In Germanyitisup by16%; in Romania, by134%.) To and that the EU send over truckloads of money to finance putthisrightwill require looseninglabourlaws, reforming the M5S’sbasicincome. Italso hinted atscrappingthe euro and courts, investingin education and infrastructure, and attack- bringingbackthe lira. The document’slatestversion drops the ingcorruption. Although the League and M5Spaysome atten- wildestproposals, butretainsplentyofdisquietingones. tion to these issues, theirchiefplan seemsto be a huge burstof The lastreason to worryisItaly’sfragility. With a national stimulus from tax cuts and handouts, financed by wishful debtofover130% ofGDP, the euro zone’sthird-largestecon- thinking. Italyhasstagnated fortoo long; itcannot afford more omyistoo bigto bail out—even ifthe single currency isatstake. yearsofinaction, ora governmentthatmakesmatters worse Although MrSalvini and MrDi Maio have moderated their with incoherentradicalism. IfItaliansdo notsortthis out, the promises, the marketshave suddenlytaken fright. On May 16th marketswill rendera harsh verdict. 7 Thedollar About that big stick America musttake care when wielding its extraordinarypoweroverglobal finance WHATisAmerica’sgreatest Startwithunpredictabledecision-making.America’sfinan- US sanctions source ofpower? Itsmili- cial powerisso greatthatitsapplication ishard to calibrate. Administered by the OFAC, cumulative tary might is unparalleled. Its Afterthe Treasurysharpened sanctionsagainstRussia in April, 6,000 market is vast. Alongside these Rusal, a large aluminium producer, wasfrozen outoffinancial 4,000 assets stands the dollar. The marketseven though itdoeslittle ofitsbusinessin America. Its 2,000 world depends on America’s sharesfell bymore than half. Perhapsawed byitsown might, 0 currency, and hence on access to America backtracked, offeringthe firm a partial reprieve. 2000 05 10 15 18 dollar payments systems and Calibration problemsare exacerbated byinconsistency. In thebanksAmericahaseffective control over. Greenbacks fuel April the Commerce Department banned American firms trade everywhere. On average, countries’ dollarimportsare from doingbusinesswith ZTE, a Chinese telecomsgiantwhich worth five timeswhattheybuyfrom America. More than half violated sanctionsagainstIran and North Korea. The firm im- ofall global cross-borderdebtisdollar-denominated. Dollars mediatelyfoundered. PresidentDonald Trump nowseems to make up nearlytwo-thirdsofcentral-bankreserves. That gives wantto trade ZTE’ssurvival aspartofa largertrade deal with the Treasurya veto overmuch ofglobal commerce. China. Asa resultthe administration issendingcontradictory Mostpresidentshave used the dollar-weapon sparingly. In messages: firstthatIran isbeyond the pale, and second that recentweeksthe Trump administration hasimposed tough fi- sanctions violations involving it may be negotiable. As the nancial sanctionsagainstRussia. Havingwithdrawn from the numberofsanctionsmultiplies, so will the exemptions, con- nuclear deal, America is acting against Iran and European tradictions and unintended consequences. If that happens, firmsthattrade with it. In 2017 the administration’s“blacklist” sanctions’ effectivenesswill fall accordingly. gained roughly1,000 newentries, almost30% more than Ba- Abrupt shifts in policy cause uncertainty for companies rackObama added in hislastyear. (see Businesssection) and riskfinancial turmoil. That isbe- There are timeswhen itiswhollyappropriate forAmerica cause the corollaryofdollardominance isdollardependence. to use itsclout. Butthe countryriskschoosingquick winsre- Atthe end of2007 the financial crisiswentglobal when large gardlessofthe long-term and lessvisible costs. Using the dol- European banksran shortofcurrencywith which to service larasa bludgeon hasalreadyled to capriciousand arbitrary theirdollardebts. The Federal Reserve stepped in to provide decision-making. It also risks destabilising global finance. foreign central banks with liquidity. Since the crisis the off- Eventually, itmayhasten the demise ofthe dominantdollar. shore dollarfinancial system hasgrown, especiallyin Asia. A 1 12 Leaders TheEconomistMay19th2018 2clumsilyantagonisticmove, such ascuttingoffa big Chinese Howorderlythattransition iswill depend in parton how bank—a move which some American officialsmayhave con- America is perceived by its allies as well as its adversaries. templated—could create havoc. Thistime, though, itwould be European countrieswish to continue honouringthe Iran nuc- harderforthe Fed to fightthe fire, because the system isbigger lear deal, for example, from which Mr Trump unilaterally and more dispersed. Even large non-financial firmscould des- withdrewearlierthismonth. Butfaced with the threat ofbeing tabilise offshore finance iftheydefaulted on dollar debt. cut off from American markets and banks, European firms probablyhave little choice butto followAmerica’slead. One reserve, no substitute Thatwill surelybe chalked up asa win bythe White House. Justasseriousare the long-term risksforAmerica. There isno Butitcarrieslong-run costs. The dollarreignssupreme in part obvioussubstitute forthe dollar(see Free exchange). The euro because foreignerstrustAmerican institutionsand because its zone hasyetto recoverfrom itscrisis. China doesnothave a friends thinkthat their interests coincide with America’s. If stable bankingsystem oran open capital account. Only Amer- alliances become chiefly transactional, efforts by others to ica can provide the safe, global assetneeded to keep trade and wean themselvesoffthe dollarwill intensify—and inevitably finance flowing. Butthe dollarisunlikelyto dominate forever. spill overinto militaryand intelligence relationships. Forthere AsAmerica’sshare ofworld outputshrinks, a shiftto a mixof isanotheranswerto the question ofwhatgivesAmerica pow- reserve currenciesis, eventually, probable. er: itscommitmentto a rules-based system. 7 Non-competeclauses Restrain the restraints America would benefitifworkers had greaterfreedom to choose theirnextemployer THEnon-competeclausehas workers’jobmobilityfellby8%whennon-competeswereal- been causing trouble for lowed. When people cannotworkforanotheremployerwho over600 years. In 1414 an Eng- would value their skills, wage growth suffers, too, because lish courtheard the case of John people typically achieve the biggest bumps in their salary Dyer, an apprentice whose mas- when theymove firm. Non-competesare also associated with terhad stopped him from plying adecline in enterprise. One studyfound thatthe rate ofentry his trade for six months. The ofnewfirmsinto knowledge-intensive industriesfell by18% judge was having none of it. when non-compete clausescould more easilybe enforced. Itis “The contractiscontraryto common law,” he ruled. Individ- no accidentthatCalifornia, a notablyinnovative state, isone ualsshould be free to pursue the livelihood oftheir choice. ofonlythree to make the clausesunenforceable except in spe- Thatprinciple hasbeen diluted in the interveningcentu- cial circumstances, such asthe sale ofa business. ries—mostcountriesgive businessessome leewayto use non- The costsspill overto all workers—even those who are not compete clauses, wherebyworkerspromise notto start orjoin subjectto non-competes. Youngfirmsare disproportionately firmsthatgo head-to-head with theirex-employer. But their important for job growth, for example; if fewer firms are prevalence in America isstriking(see Finance section). Accord- formed, itwill affecteveryone in the labourmarket. And non- ingto a studybythe Treasuryin 2016, almost20% ofAmerican competescan have a chillingeffecteven in placesthat do not workersare bound bya non-compete agreement, and almost recognise them. One studyfound that40% ofemployeeswho 40% have been subjectto one atsome point. Effortsto rein turn down job offersfrom competitorscite the clauses asa rea- them in are intensifying. Rightlyso. son, whethertheyare in enforcingornon-enforcingstates. The drawbacks ofnon-compete clauses are all the more Incumbencywe trust worryingbecause oftoday’sbusinessclimate. The incentive to Defenders of these agreements put forward several argu- investand train countsforlesswhen, asnow, the American ments. One is that non-competes encourage innovation by economysuffersfrom a lackofcompetition. Clampingdown stoppingrivalswaltzingoffwith trade secrets; there issome ev- on such agreementswould notsolve the problem—justlook at idence thatlevelsofinvestmentare higheratfirmswhere they the tech giantsthatcall California home—butitwould help. are used. Anotherargumentisthatfirmsare lesslikely to train Non-competesare also more worryingwhen the balance workersifnewlyskilled employeesare able to up sticks and of power between companies and employees is already take whattheyhave learned with them to a rival. Again, re- skewed. The spread ofmandatory-arbitration clausesin em- search backsup thisclaim. Athird argumentisthatfirms and ploymentcontractsand the decline oftrade unionsare both employeesshould be free to contractastheywish. signsofthatimbalance. The counter-arguments are stronger. The prevalence of The barto makingall non-compete clausesillegal is high. non-compete agreementsisclearevidence thattheyare being Butthe circumstancesin which theycan be enforced should used indiscriminately. Roughly15% ofAmerican employees be narrow, astheyare in California. Theyshould be negotiated withouta college degree, and a similarshare ofthose earning before employeesaccepta job offerand theyshould apply for lessthan $40,000 a year, are bound bythem. Burger-flippers short times. Ifa company takes an ex-employee to court, it and care-home workersdo nothave trade secretsto hawk. should be required to demonstrate genuine harm to its busi- The gainsin investmentand trainingmustbe setagainst the ness. Non-compete agreementswere a bad idea in the 15th cen- widercosts. In one study, in Michigan, researchersfound that tury. Theystill are. 7 14 Letters The EconomistMay19th2018 outthesefeatures,money- backinhospital,sectionedand competitive position in Ameri- We’renotjustunitsofoutput launderingwouldhavebeen caredforatevengreatercost. ca and Asia isnotstrong ThecriticisminaFree muchharderincrypto-coins Peoplewithmental-health enough to challenge the likes exchangecolumnofGDPasa thaninregularcurrencies. problemsneedpropercare. ofGoldman Sachson a global measureofprogresswasexcel- OMERLEV Scrimpingonskilledcarersis basis. However, itiswell posi- lent(May5th).Butitbarely Ben-GurionUniversityofthe cruel,misguidedandultimate- tioned to be the largestcor- mentionedtheconceptof Negev lymoreexpensive porate and investmentbankin subjectivewell-being,whichis Beersheba,Israel ROSIEHOARE the euro zone, servingregional thepreferablealternativeto Ipswich,Suffolk customers. Deutsche should GDP.Notonlycanwenow reaffirm itscommitmentto Loafersoftheworld,unite! measureit;wealsohavea Thetoneofyourarticleisthat these businessesin Europe. goodunderstandingofwhat beingdetainedunderthe RAY SOIFER determinesit.Thismakesit MentalHealthAct,or“being Green Valley, Arizona easiertotargetpolicyatthe sectioned”asyoucallit,is well-beingofpeople. punitiveandpotentiallyda- Waita minute, MrPostman AsThomasJeffersonsaid, maging.Idisagree.TheMHA “Thecareofhumanlifeand focusesontherightsofpa- Yourleadercallingforthe happiness,andnottheirde- tientssufferingfrommental United StatesPostal Service to struction,isthefirstandonly illnessandincludesnumerous be privatised gave shortshrift legitimateobjectofgoodgov- safeguardstoempowerand to deliveriesin remote areas ernment.”Wenowhavethe protectthem.Unanimous (“Deliverance”, April 21st). The knowledgetoimplementthat agreementisrequiredbyva- USPSistryingto close the post approach.Muchofitisfound riousprofessionalsinaMHA office in Pie Town, NewMexi- intheannualWorldHappiness YoupresentedKarlMarx’s assessment.Apatientwho co. Asthere isno home deliv- ReportandtheGlobalHappi- visionofapost-capitalist challengesdetentionhasthe eryhere, localswill thushave nessPolicyReport. futureas“peopleessentially havetherighttolegalassis- to travel 40 milesto collect RICHARDLAYARD loafingabout”(“Secondtime, tanceanddueprocess;thisis theirmail, includinglegal Director farce”,May5th).Youwenton notpossibleforvoluntary notifications, billsand medi- Well-BeingProgramme toenumeratetheiractivitiesas patients.Inthecaseofatreat- cation, notto mention my LondonSchoolofEconomics “huntinginthemorning, mentorderpatientsgetaccess subscription to The Economist. fishingintheafternoon,raising tofullyfundedlifelongafter- To drive to the nearest post cattleintheeveningandcriti- careoncetheyrecover. office to pickup mymail even Laundering in public cisingafterdinner.”Mayone Idonotwishtopainta once a weekwould costme The factthatmoney-launder- inquirewhatTheEconomist’s completelyrosypicture;pro- 10% ofwhatI live on. I cannot ingwith crypto-currencies visionofastrenuouslife blemsremain.Ethnicdis- do this. There are also people persists(“Digital detergent”, wouldentail? paritiesarealarming,though in Pie Town who are notphysi- April 28th) actuallyshowsthat MATTHEWDRAPER theactitselfisnotracist.The callycapable ofdrivingthat criminals, justlike the general Charlottesville,Virginia factthatitisbeingusedmore far. Some items, especially public, do notyetfully oftenislargelyexplainedby legal documents, can onlybe understand them. The ledger theshrinkingnumberofin- delivered bypost. Whatwill Mental-health policy forthese currencies—the block- patientpsychiatricbeds. happen to people in rural areas chain—iscompletelyopen. The risingnumbersofpeople BENJAMINPERRY if, say, theydon’treceive Everyperson can download it with mental-health conditions NIHRacademicclinicalfellowin summonsto jurydutyin a and trackeach and every (“Locked away”, April 21st) can psychiatry timelymanner? transaction. The benefitsof also be explained byshort- Warwick UNCLE RIVER speed orprocessinglittle sighted budgetconstraints. I Pie Town, New Mexico chunks(ora longchain of knowsomeone in hisearly40s Whatto do with Deutsche? transactions, also common who wasdiagnosed with On the outside ofthe Post when launderingregular schizophrenia 20 yearsago. He Schumpeter’scall forDeutsche Office buildingin NewYork is currenciesand observed in can live an independentlife, Bankto be dismantled con- aplaque thatreads: “Neither bitcoin) matterlittle when a provided hismedication is tained an inherentflaw(April snownorrain norheatnor verysimple scan oftransac- supervised, aswasthe case 21st). Ifyouwere a corporate gloom ofnightstaysthese tionscan reveal the ultimate when he waslivingin a house customer, whywould youstay couriersfrom the swift destination ofanycrypto-coin. run byMIND. In an attempt to with a bankthatisin the pro- completion oftheirappointed Thisisa more powerful and save moneyspenton such cessofbreakingup and going rounds”. To which a graffito extensive registrythan what is outsourced care byskilled outofbusiness? Whatdoes wasonce scrawled alongside: available to the authorities for professionals, the National make sense isto divestthe “Whatisit, then?” conventional currencies. Health Service moved him to a bank’sGerman retail business, ROBERT GENTLE The convenience ofcrypto- flatin “the community”. which isunlikelyeverto earn a Johannesburg7 currenciesforlaunderers He became isolated and decentreturn because ofnot- comesfrom the basicano- soon relapsed, stopped his for-profitcompetition from nymityofthe network. There medication and lethisnew state and mutual institutions. Lettersarewelcomeandshouldbe isno need to presentanyiden- accommodation fall into Thatwould leave Deutsche addressedtotheEditorat tification to open a crypto-coin chaos. He wasfound byNHS with corporate and investment TheEconomist,TheAdelphiBuilding, 1-11JohnAdamStreet, “banking” account, and, using staffwanderingaround near- bankingand wealth manage- LondonWC2N6HT secure online connections, one bywoodsbarefootand scanti- ment, itslong-standingand E-mail:[email protected] can accessthe internetwithout lyclad. Justmonthsafterthis steadycore businesses. Morelettersareavailableat: Economist.com/letters revealingone’slocation. With- budget-savingexercise he was Realistically, Deutsche’s

ebook img

The Economist (May 19th, 2018) PDF

78 Pages·2018·5.505 MB·English
by  The Economist
#
Save to my drive
Quick download
Download
Upgrade Premium
Most books are stored in the elastic cloud where traffic is expensive. For this reason, we have a limit on daily download.

Preview The Economist (May 19th, 2018)

An American princess in London Beware Italy’s next government How firms cope with Trump’s sanctions Special report: China in the world MAY19TH–25TH2018 Gaza There is a better way Contents TheEconomistMay19th2018 3 34 TheMurray-Darling 6 Theworldthisweek Frompaddlestopuddles 35 NorthKorea Leaders Forewarnedondisarmament 9 IsraelandGaza 36 Banyan Thereisabetterway AMalaysiantsunami 10 Pharmaceuticals Thepriceiswrong China 10 Italy’snextgovernment 37 Language FiddlingbeforeRomeburns Onecountry,manytongues 11 Thedollar 38 Football TheroyalweddingThe Aboutthatbigstick Thehomeadvantage monarchyisstrongerthanit 12 Non-competeclauses hasbeenforyears—andthe Restraintherestraints governmentisweaker: MiddleEastandAfrica Onthecover Bagehot,page51 Israelmustbeheldto Letters 39 Burundi’sreferendum accountforthisweek’s Backtothebadolddays 14 Onhappiness,crypto- deathsinGaza.Butitistime 40 Zimbabwe currencies,Marx,mental forPalestinianstotakeup Cantheeconomybefixed? health,DeutscheBank, non-violence:leader,page9. thepost 41 StateairlinesinAfrica WhyPalestiniansarereadyto Whereoneisnotenough bravebulletsandriskdeath 41 Gulfpolitics ontheborderfencebetween Briefing WhyQatarisraisingcows GazaandIsrael,page16. 16 Gaza Despitethepoliticsoffear, Siegementality 42 Iran’sstrickeneconomy Israelismoresuccessful Asysteminshock 18 Israelat70 thanever,page18 42 Iraq’selection Promisedland Muqtadaal-Sadr’swin TrumpandsanctionsAmerica TheEconomistonline UnitedStates musttakecarewhenwielding Specialreport: itsextraordinarypowerover Dailyanalysisandopinionto 19 TheJusticeDepartment Chinaintheworld globalfinance:leader,page11. supplementtheprintedition,plus Afingeronthescale Openingthegates Businesshaslittlechoicebut audioandvideo,andadailychart 20 PoliticsinCalifornia Afterpage42 tocaveintotheTrump Economist.com Wackyraces administration’sunpredictable E-mail:newslettersand 22 Gamblingonsport sanctionspolicies,page54. Europe mobileedition Forthebettor Howtoescapeahegemonic Economist.com/email 22 Medicaid 43 Italy’scoalitiontalks currency:Freeexchange, Printedition:availableonlineby Willworkforhealthcare Thewillsofthepeople page68.Europehasfewgood 7pmLondontimeeachThursday 44 SpainandCatalonia optionsfordealingwith 23 Missouri’sgovernor Economist.com/printedition Nosurrender America’spresident: Underfire Audioedition:availableonline 45 SexinFrench Charlemagne,page47 26 Lexington todownloadeachFriday Viveladifférence ADemocraticdeficit Economist.com/audioedition 45 OrbanvisitsPoland Drinkingfromoneglass TheAmericas 46 Georgia’shipsterpolitics 27 Venezuela Dancedancerevolution MrMaduro’smockelection 47 Charlemagne 28 Peru StandinguptoTheDonald Volume427Number9092 Vizcarra’svision PublishedsinceSeptember1843 30 Bello totakepartin"aseverecontestbetween ArgentinaandtheIMF Britain intelligence,whichpressesforward,and 48 Corbynomics anunworthy,timidignoranceobstructing ourprogress." Thegreattransformation Asia EditorialofficesinLondonandalso: 51 Bagehot ItalyThe prospect of a Beijing,Berlin,Brussels,Cairo,Chicago,Madrid, 31 PoliticsinThailand Americanprincess populist government is more MNeewxiYcoorCki,tPy,aMrios,scSoawn,FMraunmcbisacio,,NSaãirooPbai,uNloe,wSDeoeluhli,, Vacuumpower dangerous than people think: Shanghai,Singapore,Tokyo,WashingtonDC 32 RebellionsinMyanmar leader, page 10. The new Rumbleinthejungle administration threatens to 32 BombingsinIndonesia be fractious and risky, page 43 Anewlow 1Contents continues overleaf 4 Contents The EconomistMay19th2018 International Scienceandtechnology 52 Highereducation 71 ConservationinColombia Rankinguniversities Somethingtoshoutabout 72 Glaciologyandhistory Corevalues Business 54 Americansanctions 73 Astronomy WhattheOFAC? Inconstant 55 Musicstreaming 74 Thescienceofsongs Badrap Whatmakesgoodmusic? 56 Samsungandlabour 74 Microdrones UniversityrankingsLeague WorkersoftheGalaxy Petiteflyfromabrightguy Chinese abroadChina’s tablesleaduniversitiesto decision to let its people travel favourresearchoverteaching 56 AirAsia abroad freely is changing the andhardsciencesoverthe Onawingandaslogan Booksandarts world. James Miles argues that humanities.Yettheyalso 57 Bankruptcyadvice 75 Russiantheatre it is changing China, too. See fosterglobalco-operation, Raisingaracket Thebandageandthewound our special report after page 42 page52 57 ChinaThreeGorgesandEDP 76 Modernopera Openingthefloodgates Hisdarkmaterials Subscription service 58 Toyotaandautonomy 77 Organisedcrime For our latest subscription offers, visit Speedlimit Thebiggestgangintown Economist.com/offers For subscription service, please contact by 59 Crypto-currencies 77 Irishfiction telephone, fax, web or mail at the details Bitcoiningit Howthepastholdson provided below: 78 Thehistoryofsilence North America Whereofwecannotspeak The Economist Subscription Center Financeandeconomics P.O. Box 46978, St. Louis, MO 63146-6978 Telephone: +1 800 456 6086 61 Theworldeconomy Facsimile: +1 866 856 8075 Levellingoff 80 Economicandfinancial E-mail: [email protected] 62 Buttonwood indicators Latin America & Mexico The Economist Subscription Center Istanbulsandbears Statisticson42economies, P.O. Box 46979, St. Louis, MO 63146-6979 plusacloserlookatoil Telephone: +1 636 449 5702 MusicstreamingInresponse 63 NAFTAnegotiations Facsimile: +1 636 449 5703 to#MeToo,Spotifykicksoffa Labouringaway E-mail: [email protected] culturalshiftinthemusic 63 BoeingvAirbus Obituary Subscription for 1 year (51 issues) business,page55 Flyingblind 82 Ninalee Allen Craig United States US $158.25 (plus tax) Canada CA$158.25 (plus tax) 64 China’scurrentaccount Awoman walking Latin America US $289 (plus tax) Discoveringdeficits 64 Life insurance Declining years Principalcommercialoffices: TheAdelphiBuilding,1-11JohnAdamStreet, 65 Pension bonds LondonWC2N6HT Will Selfies stick? Tel:+44(0)2078307000 66 Non-compete agreements Ruedel’Athénée32 1206Geneva,Switzerland Ball and chain Tel:+41225662470 68 Free exchange 7503rdAvenue,5thFloor,NewYork,NY10017 The long arm of the dollar Tel:+12125410500 1301CityplazaFour, 12TaikooWanRoad,TaikooShing,HongKong Global growth An economic Tel:+85225853888 slowdown should not cause Othercommercialoffices: too many jitters—yet, page 61. Chicago,Dubai,Frankfurt,LosAngeles, How Turkey went from Paris,SanFranciscoandSingapore investment darling to a junk rating: Buttonwood, page 62. The demise of China’s current- account surplus will change the global economy, page 64 PEFC certified This copy of The Economist is printed on paper sourced from sustainably managed forests certified to PEFC PEFC/29-31-58 www.pefc.org ©2018 The Economist Newspaper Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Newspaper Limited. The Economist(ISSN 0013-0613) is published every week, except for a year-end double issue, by The Economist Newspaper Limited, 750 3rd Avenue, 5th Floor New York, NY 10017. The Economist is a registered trademark of The Economist Newspaper Limited. Periodicals postage paid at New York, NYand additional mailing offices. Postmaster: Send address changes to The Economist, P.O. Box 46978, St. Louis, MO 63146-6978, USA. Canada Post publications mail (Canadian distribution) sales agreement no. 40012331. Return undeliverable Canadian addresses to The Economist, PO Box 7258 STN A, Toronto, ON M5W 1X9. GST R123236267. Printed by Quad/Graphics, Hartford, WI. 53027 6 The world this week The EconomistMay19th2018 Politics ka,atransporthub,raising Fideszgovernment, which lesskeen on givingup itsnuc- fearsthatthe disease will blamesthe Jewish billionaire learweaponsthan ithad previ- advance rapidly. Atleast42 philanthropistformuch that ouslyimplied. people have been infected by goeswrongin Hungary. thislatestoutbreakso far. Chinamarked the tenth anni- Time to talk versaryofan earthquake in Fancy a flutter? Sichuan thatkilled 70,000 The Supreme Courtover- people. PresidentXi Jinping turned a lawthatbanned said Chinahad provided bettingon sports, findingthat “enlightenmentforthe inter- itinfringed on states’ rights. national community” in re- The lawwaspassed in 1992 buildingdisasterzones. Offi- (Nevada wasexempted). cialsimposed tightsecurity, Americansalreadyplace an fearful ofattemptsbyparents estimated $150bn ofillegal to mourn children who died in TensofthousandsofPalestin- wagerson sportseach year. shoddilybuiltschools. iansprotested alongthe border between Gazaand Israelto Anotherround ofprimary The governorofthe Indian highlighttheirvariousgriev- electionswasheld in America Students, businessfolkand state ofKarnataka invited the ances. Israeli soldiersshot and to pickcongressional candi- civicleadersin Nicaragua Bharatiya Janata Partyto form killed about60, accordingto datesforthe mid-terms. Penn- gathered in Managua, the agovernment, though two Gaza’shealth ministry. Some sylvania’sconteststookplace capital, forthe firstdayof talks otherpartieshad won a major- had attempted to breach the undernewdistrictboundaries, with Daniel Ortega, the presi- ityofthe state legislature borderfence; othersthrew aftera courtover-ruled Repub- dent. The “dialogue”, which is between them. The pairap- rocksand Molotovcocktails at lican gerrymandering. Three beingmediated bythe Catho- pealed to the Supreme Court. the Israeli side. Mostofthe women won in heavilyDemo- licchurch, followsweeksof protesters, however, were craticdistricts, so the state’s protestsagainstMrOrtega’s Suicide-bombersattacked unarmed. all-male delegation will prob- socialistgovernment, in which churchesand police stations in ablybe slightlyfeminised in dozensofpeople were killed. Indonesia, killing13 people. On the same dayasthe November. The attackswere mounted by violence, America opened its Margarita Zavala, an indepen- families, includingchildren. newembassyin Jerusalem, Unknown territory dentcandidate in Mexico’s IslamicState claimed recognisingthe contested city Italy’spopulistFive StarMove- presidential election, dropped responsibility. asIsrael’scapital. Binyamin ment(M5S) and far-right outto “free” hersupportersto Netanyahu, Israel’sprime Northern League neared agree- vote formore popularcandi- minister, said itwasa “great menton forminga governing dates. Herwithdrawal could dayforpeace”. Mahmoud coalition, more than two weaken AndrésManuel López Abbas, the Palestinian monthsafteran election. The Obrador, a left-wingpopulist president, described the governmentwould be the first who hasa biglead in the polls. embassyasa “USsettlement all-populistone in western outpost”. Europe. Manyfearitcould pull Venezuela’s socialistregime Italyoutofthe euro and cosy tookovera factorythatKel- Acoalition led byMuqtada up to Russia. The partieshave logg, afood company, had al-Sadr, a Shia clericwho once struggled to reconcile their closed because ofthe coun- urged attackson American programmes, which promise try’seconomicmeltdown. troops, won Iraq’sparliamen- bigtaxcuts(the League) and PresidentNicolásMaduro said taryelection, accordingto benefitincreases(M5S). workersatthe factorycould AnwarIbrahim, Malaysia’s preliminaryresults. Hisallies “continue producingforthe formerfinance ministerand a promised to tackle corruption Catalonia’sparliamentelect- people”, who are goinghungry leaderofthe opposition alli- and curtail foreign influence. A ed Quim Torra aspresidentof because ofprice controlsand ance thatwon the recentgen- coalition led byHaideral- the region. He wasbacked by official corruption. Mean- eral election, wasreleased Abadi, the prime minister, CarlesPuigdemont, who was while, prisonerstookoverthe from prison on the ground that came second. forced from office when he detention centre ofSebin, hisjailinghad been politically declared independence and is Venezuela’sfeared intelligence motivated. MrAnwarisex- Aftera campaign marred by nowin Germany. The Catalan agency, to protestagainst pected eventuallyto take over several murders, Burundiheld parliamentapproved MrTorra, abuses. The governmentsaid it from the currentprime min- areferendum on whetherto ahardline separatistwho has had regained control; prison- ister, MahathirMohamad. extend the president’sterm made disagreeable remarks ersdisputed this. from five yearsto seven. If it aboutSpaniards, bya margin The windscreen ofa Chinese passes, Pierre Nkurunziza, ofone vote. Party poopers passengerjetblewoutwhile who callshimselfthe North Koreacancelled a itwascruisingat32,000 feet. country’s“Supreme Eternal The Open SocietyFounda- meetingwith the South about The co-pilotwassucked Guide”, mightremain tionsdecided to close shop in improvingtiesand threatened halfwayout, butwassaved by presidentuntil 2034. Budapest, the birth place of to pull outofa summitbe- hissafetybelt. The pilotlanded George Soros, itsfounder, and tween itsleader, Kim JongUn, the aircraftsafely, despite the An outbreakofEbolain the move itsHungarian operations and Donald Trump, due to take sudden lossofcabin pressure DemocraticRepublicofCongo to Berlin. MrSoroshasbeen place in Singapore in June. The and a plunge in temperature to spread to the cityofMbanda- scapegoated bythe nationalist Kim regime hinted thatitwas -30°C(-22°F). 1 The EconomistMay19th2018 Theworldthisweek 7 Business returned to shareholders. It aboutthe capacityofTurkey’s guaranteesfrom PNB. Federal recentlystruckan agreement central bankto rein in inflation investigatorshave charged to expand in Europe bybuying and arrestthe currency’sfall. more than 20 people in the PresidentDonaldTrump some ofLibertyGlobal’sas- case, includinga formerchief introduced a plan to lowerthe sets. NickRead, the company’s Britain’sfinancial-conduct executive ofthe bank. costofdrug pricesforcon- chieffinancial officer, steps up regulatorshanded a £642,000 sumersin America. The pro- to the top job. ($865,000) fine to Jes Staley, The stakes are high posalsinclude compelling the chiefexecutive ofBarclays, pharmaceutical firmsto list Xeroxcalled offan agreement forhisattemptto unmaskan theirpricesin advertisements. thatwould have seen itmerge internal whistleblower. The The governmentmayalso get with Fujifilm, with which it regulatorssaid thatMrStaley tough with firmsthatprevent hasa long-standingjointven- “failed to actwith due skill, theirdrugsfrom beingcopied ture in Asia sellingphotocopi- care and diligence” in his when patentsexpire. ButMr ers. The deal had been strongly response to an anonymous Trump stopped shortofkeep- opposed byCarl Icahn and letterthatcriticised a senior inghispopulistpledges, such Darwin Deason, two investors executive atthe bank. asallowingAmericansto who own more than 10% ofthe importprescriptionsfrom sharesin Xerox. Aftermonthsofnegotiations, othercountries. The share Saudi British Bank(SABB) and pricesofleadingdrugcompa- In an acquisition underlining Alawwal Bankstrucka pre- The British governmentre- niesrose afterhisspeech. the popularityofprice-com- liminaryagreementto merge. duced the maximum stake at parison services, SilverLake, The combination ofSABB, fixed-odds betting terminals The great protector an American private-equity which is40% owned byHSBC, from £100 ($135) to £2. Groups Takingmanyin hisadministra- firm, agreed to buyZPG, which and Alawwal, which is40% helpinggamblingaddictshad tion bysurprise, MrTrump ownsseveral such websitesin owned bythe Royal Bankof pressed forchange, claiming tweeted thathe wasworking Britain, includingZoopla and Scotland, would create Saudi punterscould potentiallylose to overturn a ban on American uSwitch, for£2.2bn ($3bn). Arabia’sthird-biggestbank. It £18,000 an hourbecause £100 chip companiesfrom selling to would also markthe largest can be wagered every20 sec- ZTE, a Chinese makeroftele- Ahawkish dove bankingmergerin the king- ondsatthe machines. FOBTs comsequipment, because of The Turkish liratumbled dom since 1999. are the primarysource of the job lossesitentailed in againstthe dollaragain, after income forbettingshops, China. The Commerce Depart- Recep Tayyip Erdogan, Tur- Punjab National Bankreport- generating£1.8bn a year. Each mentimposed the ban on ZTE key’spresident, said thathe ed a netlossof134bn rupees terminal (restricted to four per forcontraveninga settlement will seekgreaterinfluence over ($2bn) forthe quarterending shop) on average takesin oversellingproductsto Iran monetarypolicyifhe wins on March 31st, one ofthe big- £50,000 a yearfora bookie. and North Korea. MrTrump nextmonth’ssnap election. Mr gesteveratan Indian state- The industryhaswarned there said hisremarkswere made in Erdogan’sdistaste forhigh owned bank. The losswas will be bigjob lossesbecause the contextofnegotiatingwith interestrates, which he recent- mostlya resultofsettingaside ofthechange. China to avoid a trade war. lydescribed asthe “mother moneyto covera fraud in- and fatherofall evil”, has volvingdiamond firmsthat For other economic data and America claimed victoryafter increased investors’ concerns raised creditabroad usingfake news see Indicators section the World Trade Organisa- tionupheld a decision thatthe European Union wrongly provided subsidiesto Airbus. RobertLighthizer, America’s trade representative, said that unlessthe EUstopped “break- ingthe rules” America would “have to move forward with countermeasureson EU products”. Airbusretorted that 94% ofBoeing’soriginal claims had been dismissed bythe WTO. Aseparate case brought bythe EUagainstAmerican supportforBoeingwill come up laterthisyear. Vodafoneannounced that Vittorio Colao isto step down asCEOafterten yearsin the job. DuringMrColao’stenure the world’ssecond-biggest wirelessprovidersold its minoritystake in Verizon Wireless, a deal which fetched $130bn, $84bn ofwhich was Leaders The EconomistMay19th2018 9 There is a better way Israel is answerable forthis week’s deaths in Gaza. Butitis time forPalestinians to take up non-violence GAZA is a human rubbish- which administers the PA and parts of the West Bank, has heap thateveryone would withheld salariesforcivil servantsworkingforthe PAin Gaza, ratherignore. NeitherIsrael, nor limited shipmentsofnecessities, such asdrugsand baby milk, Egypt, noreven the Palestinian and cutpaymentsto Israel forGaza’selectricity. Authority(PA) wantsto take re- Hamasbearsmuch ofthe blame, too. Itall butdestroyed the sponsibility for it. Sometimes Oslo peace accordsthrough itscampaign ofsuicide-bombings the poison getsout—when, say, in the 1990sand 2000s. Havingdriven the Israelisoutof Gaza, rocketsorotherattacksprovoke itwon a general election in 2006 and, aftera briefcivil war, ex- afullyfledged war. And then the world isforced to take note. pelled Fatah from the strip in 2007. Ithasmisruled Gaza ever Such a momentcame on May14th. Tensofthousandsof since, provingcorrupt, oppressive and incompetent. Itstores Palestiniansmassed nearGaza’sborderfence, threatening to itsweaponsin civilian sites, includingmosquesand schools, “return” to the lands their forefathers’ lost when Israel was makingthem targets. Cement that might be used forrecon- created in 1948. Israeli soldierskilled about60 protesters—the struction isdiverted to build underground tunnelsto attackIs- bloodiestdayin Gaza since the warin 2014 (see Briefing). In a rael. Hamasall butadmitted itwasnotup to governing when it surreal split-screen moment, the Israeli prime minister, Binya- agreed to hand manyadministrative tasksto the PAlastyear as min Netanyahu, wasexultingoverthe openingofAmerica’s partofa reconciliation deal with Fatah. Butthe pact collapsed embassyin Jerusalem, callingita “greatdayforpeace”. because Hamasisnotprepared to give up itsweapons. Manycountrieshave denounced Israel; a fewhave recalled Israel, Egyptand the PAcannotjustlockawaythe Palestin- diplomats. Some people accuse itofwarcrimes. Others blame iansin Gaza in the hope thatHamaswill be overthrown. Only PresidentDonald Trump forcausingthe clashesbymoving the when Gazanslive more freelymighttheythinkofgetting rid of embassyfrom Tel Avivto Jerusalem. Itissurelyright to hold Is- theirrulers. Much more can be done to ease Gazans’ plight rael, the strongside, to high standards. ButPalestinian parties, withoutendangeringIsrael’ssecurity. Butno lastingsolution is though weak, are also to blame. Seven decadesafterthe cre- possible until the question ofPalestine issolved, too. MrNet- ation ofIsrael asa thrivingdemocracy, there isa better way anyahuhaslongresisted the idea ofa Palestinian state—and than endlessconflictand bloodshed. haskeptbuildingsettlementson occupied land. Itishard to convince Israelisto change. AsIsrael marksits Howmuch blood is proportionate? 70th birthday, the economyisbooming. By“managing” the Everystate hasa rightto defend itsborders. To judge bythe conflict, ratherthan tryingto end it, MrNetanyahuhas kept numbers, Israel’sarmymaywell have used excessive force. Palestinian violence in check while giving nothing away. Butanyfirm conclusion requiresan independentassessment When violence flaresIsrael’simage suffers, butnotmuch. The ofwhathappened, where and when. The Israelissometimes Trump administration supportsit. And Arab statesseeking an used non-lethal means, such astear-gasdropped from drones. allyagainsta risingIran have neverhad betterrelations with it. Butthen sniperswentto workwith bullets. Whatchanged? Israel is wrong to stop seeking a deal. And Mr Trump is Mixed in with protesters, itseems, were an unknown number wrong to prejudge the status ofJerusalem. But Palestinians ofHamasattackersseekingto breach the fence. Whatthreat have made iteasyforIsrael to claim thatthere is“no partnerfor did theypose? Anyfairjudgmentdependson the details. peace”, divided astheyare between a tired nationalist Fatah Just as important is the broader political question. The thatcannotdeliverpeace, and an IslamistHamasthat refuses fence between Gaza and Israel isno ordinaryborder. Gaza isa to do so. Palestinians desperately need new leaders. Fatah prison, nota state. Measuring365 square kilometresand home mustrenewitselfthrough long-overdue elections. And Hamas to 2m people, it is one ofthe most crowded and miserable must realise that its rockets damage Palestinian dreams of placeson Earth. Itisshortofmedicine, powerand other essen- statehood more than theyhurtIsrael. tials. The tap water is undrinkable; untreated sewage is pumped into the sea. Gaza alreadyhasone ofthe world’shigh- The onlywayto stop fighting is to stop fighting estjoblessrates, at44%. The scene ofthree warsbetween Ha- For all their talkofnon-violence, Hamas’s leaders have not masand Israel since 2007, itisalwayson the pointoferuption. abandoned the idea of“armed struggle” to destroyIsrael. They Manyhandsare guiltyforthistragedy. Israel insists thatthe refuse to give up theirguns, orfullyembrace a two-state sol- strip isnotitsproblem, havingwithdrawn itsforces in 2005. ution; they speak vaguely of a long-term “truce”. With this Butitstill controlsGaza from land, sea and air. Any Palestinian, week’sprotests, Hamas’sleadersboasted offreeinga “wild ti- even a farmer, comingwithin 300 metresofthe fence isliable ger”. Theyfound thatIsrael can be even more ferocious. to be shot. Israel restrictsthe goodsthatgetin. Only a tinynum- IfHamasgave up itsweapons, itwould open the way fora berofPalestinianscan getoutfor, say, medical treatment. Israe- rapprochementwith Fatah. Ifitaccepted Israel’srightto exist, it li generalshave longwarned againstlettingthe economy col- would expose Israel’scurrentunwillingnessto allowa Pales- lapse. MrNetanyahuusuallyignoresthem. tinian state. IfPalestiniansmarched peacefully, without guns Egyptalso contributesto the misery. The Rafah crossing to and explosives, they would take the moral high ground. In Sinai, anotherescape valve, wasopen to goodsand people for short, ifPalestinianswantIsrael to stop throttling them, they just17 days in the first fourmonths ofthisyear. And Fatah, mustfirstconvince Israelisitissafe to letgo. 7 10 Leaders TheEconomistMay19th2018 Pharmaceuticals The price is wrong Americastilllacksaseriousplantolowerthecostofdrugs POPULISTSoftenputtheirfin- costsforforeign governments. Even ifthisprovespossible— S&Ppharmaceuticals geronproblemsthatirktheir anditseemsunlikelyto succeed with America’sbigtrading Previousdayclose=100 countrymen. Theyalso tend to partners—itwould notcutAmericans’ drugsbillsbya cent. 102 Trump’sspeech come up with inadequate sol- Thatisbecause the price ofdrugsin America would remain 101 utionstothem.SoitiswithPres- atwhatthemarketwill bear. Putanotherway, prices would 100 identDonaldTrump’splan,un- continuetobe largelysetbypharma companies. For, unlike 99 veiledonMay11th,tolowerthe othercountries, America doesa bad job ofnegotiating down 10:00 May11th 16:00 priceofprescriptiondrugs. the prices of new drugs. If America really wanted cheaper DrugsaremoreexpensiveinAmericathananywhereelse. drugs,itwould copywhatEuropean countriesdo, and refuse Amonth’ssupplyofHarvoni,whichcureshepatitisC,costs tobuydrugsthatdo notoffergood clinical value for money. $32,114 in America and $16,861in Switzerland. Some cancer drugs can cost more than $150,000 a year. Mr Trump cam- Asecondopinion paignedonapromisetoreduceprices.Hesuggestedthathe Evenshortofsuch radical action, there are plentyof opportu- wouldmakeiteasiertoimportdrugsfromabroadandwould nitiesforuseful reform. The governmentcould give Medicare, forcedrugcompaniestolowerpricesforAmericans,usingthe the health scheme for the elderly, more power to negotiate state’sbargainingpowertosave$300bnayear—preposterous, pricesandmore freedom to determine the drugsithas to pro- giventhatthisisalmosttheentiresumthegovernmentspends videbylaw.Atthe momentitcannothaggle directlywith drug on drugs. Nevertheless, his promises may have helped Mr companies.Itcould also expose the opaque and hugely profit- Trumpwinthesupportofthemajorityofoldervoters. able array ofintermediaries which sit between the makers Thepresident’splan,whichhecalledthe“mostsweeping and takers of drugs. These firms are supposed to negotiate actioninhistorytolowerthepriceofprescriptiondrugs”,lacks cheaperpriceson behalfofinsurance companies, passing sav- potency.Afewideasarewelcome,includingtheproposalto ingsontoconsumers. In reality, a complexand largely confi- hinderpharmaceuticalfirmsthattrytodelaythearrivalofge- dentialsystem ofrebateson published priceshasdriven up nericversionsoftheirdrugsafterpatentsexpire.Butmanyof thebillforpatients, who payfrom theirown pockets and see MrTrump’ssuggestionsneedlegislation,whichisunlikelyjust littleofthediscounts. now.Nowonderhisspeechtriggeredariseintheshareprices TheTrumpadministration criticisesthe rationingof treat- ofpharmafirms. mentinothercountries. ButAmerican insurersroutinely re- MrTrumpalsorepeatedanargumentbelovedofpharma- stricttheuseofcostlydrugs—onlytheirapproach dispropor- ceuticalcompanies—thatforeignersaretoblameforAmerica’s tionatelyaffectsthose ofverymodestmeans, since they have highprescription-drugprices.BecauseEuropeanspaytoolittle flimsierinsurance plans. The Food and DrugAdministration is fortheirdrugs, goes the argument, Americans make up the settorelaxthe efficacytestin orderto cutthe cost ofdevelop- lossesbypayingmore.MrTrumppromisestoinstructtradene- ingnewdrugs. Extra innovation iswelcome but, unless Ameri- gotiatorstodemandthatothercountriesextendperiodsfor cagetsagripon pricesatthe same time, itwill lead to yetmore patentsonAmerican-madedrugs,whichinturnwouldraise costlynewdrugsofferingpoorclinical value. 7 CoalitionnegotiationsinItaly Fiddling before Rome burns Apopulistflirtation is more dangerous than itseems ITALYhasgonewithoutagov- thepopulistpartiesthatwon the mostvoteshave conflicting ernment for more than two policies. The far-rightNorthern League promised a flat taxrate months. Thatisno greatshock. of15%, which would lowerrevenues. The Five StarMovement Atelectionson March 4th, Ital- (M5S), which claimsto transcend left-rightdivisions, promised ians deserted mainstream par- a universal basic income of€780 ($920) per month, which tiesand backed radical populist would require huge outlays. Bridgingthe gap between these oneswhose leadershave never two parties, in office aswell asin the coalition talks, would be had to haggle to form a coalition. hard forthe mostcharmingand seasoned politicians, let alone The surprise has been the belated reaction of the financial the League’s firebrand ofa leader, Matteo Salvini (pictured, markets, which thisweeksuddenlywoke up to the looming left), and M5S’s31-year-old head, Luigi Di Maio (right). threat. The men who, asThe Economistwentto press, were on Anotherreason to beware isthe parties’ programmes. Their the verge oftakingpowerin Italycannotbe trusted to run it. visceral Euroscepticism threatens the integrity of the euro One reason forthe delay—and forgeneral concern—is that zone. M5S has only recently stepped backfrom pledging to 1 TheEconomistMay19th2018 Leaders 11 2hold a referendum on leavingthe single currency. The League spreadsbetween Italian and German governmentbondswid- goeswell beyond reasonable concern overrefugees, advocat- ened by0.22 percentage points, to 1.5 points—theirbiggestsin- ing xenophobic and unworkable deportation policies. Both gle-dayincrease since the Brexitvote. parties want to scrap sanctions on Russia, threatening the Italianshave reason to be angrywith theirpoliticians. Sil- European unitythatdetersPresidentVladimirPutin’saggres- vio Berlusconi, besetbylegal troubles, neglected the euro crisis sion in Ukraine and elsewhere. Athome theywould undo vi- until he wasforced from power. Matteo Renzi squandered the tal reforms, cuttingthe pension age in a rapidlygreying coun- hopesinvested in him bybettingon an ill-fated referendum to trywith lowfertility. Theyhave otherperverse distractions, change the constitution, leavingotherreformslargely undone. such asM5S’ssympathywith the anti-vaccination movement. The countryisunstable atthe top. Ithashad five prime minis- Dangerous in isolation, their policies could be worse in tersin ten years, and none ofthe pastfourwasthe leader ofhis combination. IfMrSalvini and MrDi Maio reach an accord partyatthe time itwaselected. Europe, too, hasmuch to an- thatincludesboth oftheirbudgetarypriorities, itwould be fis- swerfor. The EUpromised to help Italycope with the refugees callyirresponsible. Implementingthe flattax, the universal ba- thatarrive on itscoast, butbroke itsword. sicincome and the pension roll-backwould costtensof bil- lionsofeurosa year, probablyincreasingthe deficit from 2.3% Circuses, butnotenough bread ofGDPto more than 3% and breachingEuropean rules. The pityisthatneitherthe League norM5Sofferssolutionsto Perhapsthatiswhyan earlyversion ofthe parties’ accord Italy’s real problems. Italian productivity has scarcely risen included demandsthatthe ECBforgive €250bn in Italian debt since 2001. (In Germanyitisup by16%; in Romania, by134%.) To and that the EU send over truckloads of money to finance putthisrightwill require looseninglabourlaws, reforming the M5S’sbasicincome. Italso hinted atscrappingthe euro and courts, investingin education and infrastructure, and attack- bringingbackthe lira. The document’slatestversion drops the ingcorruption. Although the League and M5Spaysome atten- wildestproposals, butretainsplentyofdisquietingones. tion to these issues, theirchiefplan seemsto be a huge burstof The lastreason to worryisItaly’sfragility. With a national stimulus from tax cuts and handouts, financed by wishful debtofover130% ofGDP, the euro zone’sthird-largestecon- thinking. Italyhasstagnated fortoo long; itcannot afford more omyistoo bigto bail out—even ifthe single currency isatstake. yearsofinaction, ora governmentthatmakesmatters worse Although MrSalvini and MrDi Maio have moderated their with incoherentradicalism. IfItaliansdo notsortthis out, the promises, the marketshave suddenlytaken fright. On May 16th marketswill rendera harsh verdict. 7 Thedollar About that big stick America musttake care when wielding its extraordinarypoweroverglobal finance WHATisAmerica’sgreatest Startwithunpredictabledecision-making.America’sfinan- US sanctions source ofpower? Itsmili- cial powerisso greatthatitsapplication ishard to calibrate. Administered by the OFAC, cumulative tary might is unparalleled. Its Afterthe Treasurysharpened sanctionsagainstRussia in April, 6,000 market is vast. Alongside these Rusal, a large aluminium producer, wasfrozen outoffinancial 4,000 assets stands the dollar. The marketseven though itdoeslittle ofitsbusinessin America. Its 2,000 world depends on America’s sharesfell bymore than half. Perhapsawed byitsown might, 0 currency, and hence on access to America backtracked, offeringthe firm a partial reprieve. 2000 05 10 15 18 dollar payments systems and Calibration problemsare exacerbated byinconsistency. In thebanksAmericahaseffective control over. Greenbacks fuel April the Commerce Department banned American firms trade everywhere. On average, countries’ dollarimportsare from doingbusinesswith ZTE, a Chinese telecomsgiantwhich worth five timeswhattheybuyfrom America. More than half violated sanctionsagainstIran and North Korea. The firm im- ofall global cross-borderdebtisdollar-denominated. Dollars mediatelyfoundered. PresidentDonald Trump nowseems to make up nearlytwo-thirdsofcentral-bankreserves. That gives wantto trade ZTE’ssurvival aspartofa largertrade deal with the Treasurya veto overmuch ofglobal commerce. China. Asa resultthe administration issendingcontradictory Mostpresidentshave used the dollar-weapon sparingly. In messages: firstthatIran isbeyond the pale, and second that recentweeksthe Trump administration hasimposed tough fi- sanctions violations involving it may be negotiable. As the nancial sanctionsagainstRussia. Havingwithdrawn from the numberofsanctionsmultiplies, so will the exemptions, con- nuclear deal, America is acting against Iran and European tradictions and unintended consequences. If that happens, firmsthattrade with it. In 2017 the administration’s“blacklist” sanctions’ effectivenesswill fall accordingly. gained roughly1,000 newentries, almost30% more than Ba- Abrupt shifts in policy cause uncertainty for companies rackObama added in hislastyear. (see Businesssection) and riskfinancial turmoil. That isbe- There are timeswhen itiswhollyappropriate forAmerica cause the corollaryofdollardominance isdollardependence. to use itsclout. Butthe countryriskschoosingquick winsre- Atthe end of2007 the financial crisiswentglobal when large gardlessofthe long-term and lessvisible costs. Using the dol- European banksran shortofcurrencywith which to service larasa bludgeon hasalreadyled to capriciousand arbitrary theirdollardebts. The Federal Reserve stepped in to provide decision-making. It also risks destabilising global finance. foreign central banks with liquidity. Since the crisis the off- Eventually, itmayhasten the demise ofthe dominantdollar. shore dollarfinancial system hasgrown, especiallyin Asia. A 1 12 Leaders TheEconomistMay19th2018 2clumsilyantagonisticmove, such ascuttingoffa big Chinese Howorderlythattransition iswill depend in parton how bank—a move which some American officialsmayhave con- America is perceived by its allies as well as its adversaries. templated—could create havoc. Thistime, though, itwould be European countrieswish to continue honouringthe Iran nuc- harderforthe Fed to fightthe fire, because the system isbigger lear deal, for example, from which Mr Trump unilaterally and more dispersed. Even large non-financial firmscould des- withdrewearlierthismonth. Butfaced with the threat ofbeing tabilise offshore finance iftheydefaulted on dollar debt. cut off from American markets and banks, European firms probablyhave little choice butto followAmerica’slead. One reserve, no substitute Thatwill surelybe chalked up asa win bythe White House. Justasseriousare the long-term risksforAmerica. There isno Butitcarrieslong-run costs. The dollarreignssupreme in part obvioussubstitute forthe dollar(see Free exchange). The euro because foreignerstrustAmerican institutionsand because its zone hasyetto recoverfrom itscrisis. China doesnothave a friends thinkthat their interests coincide with America’s. If stable bankingsystem oran open capital account. Only Amer- alliances become chiefly transactional, efforts by others to ica can provide the safe, global assetneeded to keep trade and wean themselvesoffthe dollarwill intensify—and inevitably finance flowing. Butthe dollarisunlikelyto dominate forever. spill overinto militaryand intelligence relationships. Forthere AsAmerica’sshare ofworld outputshrinks, a shiftto a mixof isanotheranswerto the question ofwhatgivesAmerica pow- reserve currenciesis, eventually, probable. er: itscommitmentto a rules-based system. 7 Non-competeclauses Restrain the restraints America would benefitifworkers had greaterfreedom to choose theirnextemployer THEnon-competeclausehas workers’jobmobilityfellby8%whennon-competeswereal- been causing trouble for lowed. When people cannotworkforanotheremployerwho over600 years. In 1414 an Eng- would value their skills, wage growth suffers, too, because lish courtheard the case of John people typically achieve the biggest bumps in their salary Dyer, an apprentice whose mas- when theymove firm. Non-competesare also associated with terhad stopped him from plying adecline in enterprise. One studyfound thatthe rate ofentry his trade for six months. The ofnewfirmsinto knowledge-intensive industriesfell by18% judge was having none of it. when non-compete clausescould more easilybe enforced. Itis “The contractiscontraryto common law,” he ruled. Individ- no accidentthatCalifornia, a notablyinnovative state, isone ualsshould be free to pursue the livelihood oftheir choice. ofonlythree to make the clausesunenforceable except in spe- Thatprinciple hasbeen diluted in the interveningcentu- cial circumstances, such asthe sale ofa business. ries—mostcountriesgive businessessome leewayto use non- The costsspill overto all workers—even those who are not compete clauses, wherebyworkerspromise notto start orjoin subjectto non-competes. Youngfirmsare disproportionately firmsthatgo head-to-head with theirex-employer. But their important for job growth, for example; if fewer firms are prevalence in America isstriking(see Finance section). Accord- formed, itwill affecteveryone in the labourmarket. And non- ingto a studybythe Treasuryin 2016, almost20% ofAmerican competescan have a chillingeffecteven in placesthat do not workersare bound bya non-compete agreement, and almost recognise them. One studyfound that40% ofemployeeswho 40% have been subjectto one atsome point. Effortsto rein turn down job offersfrom competitorscite the clauses asa rea- them in are intensifying. Rightlyso. son, whethertheyare in enforcingornon-enforcingstates. The drawbacks ofnon-compete clauses are all the more Incumbencywe trust worryingbecause oftoday’sbusinessclimate. The incentive to Defenders of these agreements put forward several argu- investand train countsforlesswhen, asnow, the American ments. One is that non-competes encourage innovation by economysuffersfrom a lackofcompetition. Clampingdown stoppingrivalswaltzingoffwith trade secrets; there issome ev- on such agreementswould notsolve the problem—justlook at idence thatlevelsofinvestmentare higheratfirmswhere they the tech giantsthatcall California home—butitwould help. are used. Anotherargumentisthatfirmsare lesslikely to train Non-competesare also more worryingwhen the balance workersifnewlyskilled employeesare able to up sticks and of power between companies and employees is already take whattheyhave learned with them to a rival. Again, re- skewed. The spread ofmandatory-arbitration clausesin em- search backsup thisclaim. Athird argumentisthatfirms and ploymentcontractsand the decline oftrade unionsare both employeesshould be free to contractastheywish. signsofthatimbalance. The counter-arguments are stronger. The prevalence of The barto makingall non-compete clausesillegal is high. non-compete agreementsisclearevidence thattheyare being Butthe circumstancesin which theycan be enforced should used indiscriminately. Roughly15% ofAmerican employees be narrow, astheyare in California. Theyshould be negotiated withouta college degree, and a similarshare ofthose earning before employeesaccepta job offerand theyshould apply for lessthan $40,000 a year, are bound bythem. Burger-flippers short times. Ifa company takes an ex-employee to court, it and care-home workersdo nothave trade secretsto hawk. should be required to demonstrate genuine harm to its busi- The gainsin investmentand trainingmustbe setagainst the ness. Non-compete agreementswere a bad idea in the 15th cen- widercosts. In one study, in Michigan, researchersfound that tury. Theystill are. 7 14 Letters The EconomistMay19th2018 outthesefeatures,money- backinhospital,sectionedand competitive position in Ameri- We’renotjustunitsofoutput launderingwouldhavebeen caredforatevengreatercost. ca and Asia isnotstrong ThecriticisminaFree muchharderincrypto-coins Peoplewithmental-health enough to challenge the likes exchangecolumnofGDPasa thaninregularcurrencies. problemsneedpropercare. ofGoldman Sachson a global measureofprogresswasexcel- OMERLEV Scrimpingonskilledcarersis basis. However, itiswell posi- lent(May5th).Butitbarely Ben-GurionUniversityofthe cruel,misguidedandultimate- tioned to be the largestcor- mentionedtheconceptof Negev lymoreexpensive porate and investmentbankin subjectivewell-being,whichis Beersheba,Israel ROSIEHOARE the euro zone, servingregional thepreferablealternativeto Ipswich,Suffolk customers. Deutsche should GDP.Notonlycanwenow reaffirm itscommitmentto Loafersoftheworld,unite! measureit;wealsohavea Thetoneofyourarticleisthat these businessesin Europe. goodunderstandingofwhat beingdetainedunderthe RAY SOIFER determinesit.Thismakesit MentalHealthAct,or“being Green Valley, Arizona easiertotargetpolicyatthe sectioned”asyoucallit,is well-beingofpeople. punitiveandpotentiallyda- Waita minute, MrPostman AsThomasJeffersonsaid, maging.Idisagree.TheMHA “Thecareofhumanlifeand focusesontherightsofpa- Yourleadercallingforthe happiness,andnottheirde- tientssufferingfrommental United StatesPostal Service to struction,isthefirstandonly illnessandincludesnumerous be privatised gave shortshrift legitimateobjectofgoodgov- safeguardstoempowerand to deliveriesin remote areas ernment.”Wenowhavethe protectthem.Unanimous (“Deliverance”, April 21st). The knowledgetoimplementthat agreementisrequiredbyva- USPSistryingto close the post approach.Muchofitisfound riousprofessionalsinaMHA office in Pie Town, NewMexi- intheannualWorldHappiness YoupresentedKarlMarx’s assessment.Apatientwho co. Asthere isno home deliv- ReportandtheGlobalHappi- visionofapost-capitalist challengesdetentionhasthe eryhere, localswill thushave nessPolicyReport. futureas“peopleessentially havetherighttolegalassis- to travel 40 milesto collect RICHARDLAYARD loafingabout”(“Secondtime, tanceanddueprocess;thisis theirmail, includinglegal Director farce”,May5th).Youwenton notpossibleforvoluntary notifications, billsand medi- Well-BeingProgramme toenumeratetheiractivitiesas patients.Inthecaseofatreat- cation, notto mention my LondonSchoolofEconomics “huntinginthemorning, mentorderpatientsgetaccess subscription to The Economist. fishingintheafternoon,raising tofullyfundedlifelongafter- To drive to the nearest post cattleintheeveningandcriti- careoncetheyrecover. office to pickup mymail even Laundering in public cisingafterdinner.”Mayone Idonotwishtopainta once a weekwould costme The factthatmoney-launder- inquirewhatTheEconomist’s completelyrosypicture;pro- 10% ofwhatI live on. I cannot ingwith crypto-currencies visionofastrenuouslife blemsremain.Ethnicdis- do this. There are also people persists(“Digital detergent”, wouldentail? paritiesarealarming,though in Pie Town who are notphysi- April 28th) actuallyshowsthat MATTHEWDRAPER theactitselfisnotracist.The callycapable ofdrivingthat criminals, justlike the general Charlottesville,Virginia factthatitisbeingusedmore far. Some items, especially public, do notyetfully oftenislargelyexplainedby legal documents, can onlybe understand them. The ledger theshrinkingnumberofin- delivered bypost. Whatwill Mental-health policy forthese currencies—the block- patientpsychiatricbeds. happen to people in rural areas chain—iscompletelyopen. The risingnumbersofpeople BENJAMINPERRY if, say, theydon’treceive Everyperson can download it with mental-health conditions NIHRacademicclinicalfellowin summonsto jurydutyin a and trackeach and every (“Locked away”, April 21st) can psychiatry timelymanner? transaction. The benefitsof also be explained byshort- Warwick UNCLE RIVER speed orprocessinglittle sighted budgetconstraints. I Pie Town, New Mexico chunks(ora longchain of knowsomeone in hisearly40s Whatto do with Deutsche? transactions, also common who wasdiagnosed with On the outside ofthe Post when launderingregular schizophrenia 20 yearsago. He Schumpeter’scall forDeutsche Office buildingin NewYork is currenciesand observed in can live an independentlife, Bankto be dismantled con- aplaque thatreads: “Neither bitcoin) matterlittle when a provided hismedication is tained an inherentflaw(April snownorrain norheatnor verysimple scan oftransac- supervised, aswasthe case 21st). Ifyouwere a corporate gloom ofnightstaysthese tionscan reveal the ultimate when he waslivingin a house customer, whywould youstay couriersfrom the swift destination ofanycrypto-coin. run byMIND. In an attempt to with a bankthatisin the pro- completion oftheirappointed Thisisa more powerful and save moneyspenton such cessofbreakingup and going rounds”. To which a graffito extensive registrythan what is outsourced care byskilled outofbusiness? Whatdoes wasonce scrawled alongside: available to the authorities for professionals, the National make sense isto divestthe “Whatisit, then?” conventional currencies. Health Service moved him to a bank’sGerman retail business, ROBERT GENTLE The convenience ofcrypto- flatin “the community”. which isunlikelyeverto earn a Johannesburg7 currenciesforlaunderers He became isolated and decentreturn because ofnot- comesfrom the basicano- soon relapsed, stopped his for-profitcompetition from nymityofthe network. There medication and lethisnew state and mutual institutions. Lettersarewelcomeandshouldbe isno need to presentanyiden- accommodation fall into Thatwould leave Deutsche addressedtotheEditorat tification to open a crypto-coin chaos. He wasfound byNHS with corporate and investment TheEconomist,TheAdelphiBuilding, 1-11JohnAdamStreet, “banking” account, and, using staffwanderingaround near- bankingand wealth manage- LondonWC2N6HT secure online connections, one bywoodsbarefootand scanti- ment, itslong-standingand E-mail:[email protected] can accessthe internetwithout lyclad. Justmonthsafterthis steadycore businesses. Morelettersareavailableat: Economist.com/letters revealingone’slocation. With- budget-savingexercise he was Realistically, Deutsche’s

See more

The list of books you might like

Upgrade Premium
Most books are stored in the elastic cloud where traffic is expensive. For this reason, we have a limit on daily download.
DMCA & Copyright: Dear all, most of the website is community built, users are uploading hundred of books everyday, which makes really hard for us to identify copyrighted material, please contact us if you want any material removed.
Copyright @ PDFdrive.to, 2022 | We love our users