Table Of Content

The mid-terms: our prediction Bribes and bungs at Europe’s firms A glimpse inside North Korea Bartleby, a new column on life at work MAY26TH–JUNE1ST2018 The affair Why corporate America loves Donald Trump Contents TheEconomistMay26th2018 7 37 Russianeducation 10 Theworldthisweek MeettheMinistryof Enlightenment Leaders 38 Putin’spetschool 13 BusinessinAmerica Shine,butremember Theaffair 39 Charlemagne 14 Auditreform ThebattleforSlovakia Shapeup,notbreakup 16 Ebola UnitedStates Backtoblood 40 Themid-terms 16 Colombia’selection Ourprediction Mid-termsOurnewstatistical Faultyfront-runners 41 TrumpvJustice modelgivestheDemocrats 18 Truthandtechnology Theleast-worstoption atwo-in-threechanceof Cinema,notvérité retakingtheHouseof 42 Guncontrol Onthecover Domassacreschange Representatives,page40. Americanexecutivesare Letters minds? Awell-meaningefforttocool bettingthatthepresidentis partisanhatredmostlyshows 22 Onuniversalhealthcare, 42 Telephonescams goodforbusiness.Notinthe howimplacableitis:Lexington, ageism,splitinfinitives, Robocops longrun:leader,page13. page45 DonaldTrumpispresiding theHomeOffice 43 E-cigarettes overatech-ledsurge,notan Startingyoung industrialrenaissance, Briefing 43 Oldprisoners page24.Americasaysa Greybeardsbehindbars 24 BusinessunderTrump threatenedtradewarwith Aboomlikenoother 44 Dutch-Americans Chinaisonhold,butChinese Tulipseason officialsstillhaveplentyto 45 Lexington worryabout,page58.Arare Britain Thepartisanchasm bipartisanmomentallowsa 29 Brexitandcustoms timidregulatoryretreatin Irishstew banking,page74 30 RussiaandBritain TheAmericas ’Vichhunt 46 Colombia’selection Judgingthehorseflesh 31 Policecareers TheEconomistonline ItalyWesternEurope’sfirst Swotteam 47 ColombiaandtheFARC all-populistgovernmenttakes Dailyanalysisandopinionto Peaceinperil? 31 Businesseducation shapeinRome—anditspooks supplementtheprintedition,plus Frommastertoapprentice 48 Archaeoastronomy markets,page35 audioandvideo,andadailychart Asightofthesungod 32 Ocado Economist.com Supermarketorstartup? E-mail:newslettersand 32 Railwayfranchises MiddleEastandAfrica mobileedition Gravytrainsderail Economist.com/email 49 Ebola 33 Theologyandtechnology ContainmentinCongo Printedition:availableonlineby Alexa,whoisGod? 7pmLondontimeeachThursday 50 Justice,Rwandanstyle Economist.com/printedition Stand,thenstandtrial Audioedition:availableonline Europe 50 Mappingpandemics todownloadeachFriday 35 Italy Terraincognita Economist.com/audioedition Theservantoftwomasters 51 IslamicState Losingthepeace 36 GermanyandFrance Merkron,Merkroff 51 MohamedSaleh Ebola A new outbreak in Congo Thepharaohofforwards 37 Turkey’sinternetcensors will test what the world has Blockingboozeandnews 52 YahyaSinwar learned from the calamitous Volume427Number9093 37 Abortion Gaza’sruthlesspragmatist epidemic of 2014: leader, page Thecomputersaysyes 16. The disease can probably PublishedsinceSeptember1843 be contained. If not, it could totakepartin"aseverecontestbetween spread exponentially, page 49 intelligence,whichpressesforward,and anunworthy,timidignoranceobstructing ourprogress." EditorialofficesinLondonandalso: Beijing,Berlin,Brussels,Cairo,Chicago,Madrid, MexicoCity,Moscow,Mumbai,Nairobi,NewDelhi, NewYork,Paris,SanFrancisco,SãoPaulo,Seoul, Shanghai,Singapore,Tokyo,WashingtonDC 1Contents continues overleaf 8 Contents The EconomistMay26th2018 73 Oilprices Asia Thecrudecurve 53 NorthKorea 74 Non-performingloans Pastel-colouredpenury Goingsouth 54 Indianpolitics 74 BankinginAmerica Two-daywonder Dodderingon 55 FertilityinJapan 75 Globalwarming Acorkedtube Carbonatedmarket 55 InsurgencyinThailand 75 Povertyandtherapy Blastsfromthepast Mindfulfinances 56 Taiwan’spresident NorthKoreaAsleadersbicker Hurryup 76 Freeexchange An era passes A tribute to aboutsummits,weglimpselife Allthepeople’smoney Philip Roth, one of the great 57 Banyan insideaverystrangeplace, post-war American novelists, South-EastAsiandemocracy page53.Pyongyang’sthriving page 86. Tom Wolfe, chronicler Scienceandtechnology tailors,page69 of class: Obituary, page 90 79 Childhoodcancer China Germtheory 58 TradewithAmerica 80 Allcreaturesgreat Assessingthepain Subscription service andsmall For our full range of subscription offers, Gottacountthemall including digital only or print and digital International 80 Genetics combined visit Economist.com/offers 61 Economicstatistics(1) Stresstest You can also subscribe by mail or telephone at Don’tevenask 81 Recyclingplastic the details provided below: Telephone: +44 (0) 845 120 0983 62 Economicstatistics(2) Wormfood Datahierarchies 82 Shoemaking Web: Economist.com/offers Post: The Economist Aloadofnewcobblers SubscriptionCentre, P.O. 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Tel: +1212 5410500 69 TailorsofPyongyang 88 Economicandfinancial 1301Cityplaza Four, Thefashionpolice 12 Taikoo Wan Road, Taikoo Shing, Hong Kong indicators Tel: +852 2585 3888 Statisticson42economies, BartlebyIntroducingournew Financeandeconomics plusacloserlookat OChthicearg coo,m Dumbearic, iFarla onffikfcuerst,: Los Angeles, columnonthegrievancesand 70 Companyaudits trade-weightedexchange Paris, San Francisco and Singapore gratificationsoflifeatwork, rates Greatexpectationsgap page64 71 Buttonwood ThejoyofTreasuries Obituary 72 Womenandwork 90 Tom Wolfe Neverdone The man in the white suit 72 Kidnappinginsurance Market capture PEFC certified This copy of The Economist is printed on paper sourced from sustainably managed forests certified by PEFC PEFC/16-33-582 www.pefc.org Registeredasanewspaper.©2018TheEconomistNewspaperLimited.Allrightsreserved.Neitherthispublicationnoranypartofitmaybereproduced,storedinaretrievalsystem,ortransmittedinanyformorbyanymeans,electronic,mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Newspaper Limited. Published every week, except for a year-end double issue, by The Economist Newspaper Limited. The Economist is a registered trademark of The Economist Newspaper Limited. Printed by Wyndeham Peterborough Limited. 10 The world this week The EconomistMay26th2018 Politics Syria’sarmycapturedan the workofinsurgentscam- enclave in Damascusfrom the paigningforgreaterrights for jihadistsofIslamicState. The the region’sMuslim majority. victorybringsthe entire capital area underthe control of China said ithad landed long- Basharal-Assad’sregime for range bombersatan airport in the firsttime since 2012. the South China Seaforthe firsttime. The Centre forStrate- Your country needs you gicand International Studies, a Italy’spresidentappointed a think-tank, identified the non-politician, Giuseppe location asWoodyIsland, in Conte, asprime minister. Mr the Paracel archipelago, which Conte facesthe ticklish task of NicolásMaduro, Venezuela’s isalso claimed byVietnam and tryingto run a cabinetin- president, won re-election in a Taiwan. China also said ithad cludingthe leadersofthe two vote thatwaswidelycon- “expelled” ten foreign fishing- The World Health Organisa- partiesthatwill make up the demned asfraudulent. He took vesselsfrom around the tion rushed to respond to an newpopulistgovernment: 68% ofthe vote. The main islands. outbreakofEbolain the Luigi Di Maio ofthe radical opposition leaderswere DemocraticRepublicofCon- Five StarMovementand Mat- banned from running. The Chinalaunched a satellite that go. So far, health workershave teo Salvini ofthe right-wing governmentsetup tentsnear will actasthe relaystation for done a much betterjob of Northern League. The two pollingstationsto scan voters’ aplanned landingofa space- containingthe virusthan they partybossesagree on little. “fatherland cards”, which crafton the farside ofthe did in westAfrica in 2014. The entitle them to food rations. Moon laterthisyear. fear, however, isthatitmay The Swedishgovernment Some votersfeared being spread to bigcities. began sendingleafletsto every denied food iftheydid not Her time has come household advisingSwedes backMrMaduro. Votersin Burundiapproved a whatto do ifwarbreaksout. It constitutional change thatwill included tipson howto cope if Panama’spresident, Juan allowPresidentPierre “Su- food and waterare short, or if CarlosVarela, said an Israeli preme Eternal Guide” Nkurun- electricity, phonesand com- intelligence agencyhad given ziza, who hasbeen in power putersystemsfail. Such liter- him evidence thata plane that since 2005, to run fora further ature hasnotbeen distributed crashed in the countryin 1994 two termswhen hiscurrent to the publicsince 1961, during wasbroughtdown bya terro- one endsin 2020. The vote the cold war. ristact. The crash occurred on tookplace in a climate offear. July19th, the dayafteran Ken Livingstone, a former attackon a Jewish centre in Two weeksafterAmerica mayorofLondon, resigned BuenosAires. withdrewfrom a nucleardeal from Britain’sLabourParty. Democratsin Georgiaelected with Iran, Mike Pompeo, He wassuspended in 2016 After a brief period in office StaceyAbramsastheircandi- America’ssecretaryofstate, aftera rowoverallegedly The Bharatiya Janata Party, date forgovernor, makingher called fora more sweeping anti-Semiticcommentshe which runsIndia’scentral the firstblackfemale nominee agreement. MrPompeo made. JeremyCorbyn, La- government, emerged asthe from eitherpartyto run for demanded thatIran stop en- bour’sleader, who hasbeen biggestpartyafterelections in governorin America. She will richinguranium, allownuclear accused ofturninga blind eye the state ofKarnataka. Itslocal have to fighthard to win in inspectors“unqualified ac- to anti-Semitism, said resign- leaderwassworn in aschief November; the lasttime cess” and end itsinvolvement ingwasthe “rightthingto do”. minister, onlyto resign two Georgia elected a Democratic in Syria, Yemen and Lebanon, dayslaterbecause he could not governorwas1998. orelse face “the strongest Sergei Skripal wasdischarged cobble togethera majorityin sanctionsin history”. Hassan from hospital in Britain. The the assembly, pavingthe way Officialsin Texasconfirmed Rouhani, Iran’spresident, said formerRussian spyand his foran opposition coalition. thatthe suspectin a school thiswas“unacceptable”. daughterwere exposed to shootingused hisfather’sguns Novichok, a nerve agent, in an India’sarmydeclared a truce to kill ten people. Police arrest- Human-rightsgroupsreported attackin March thatwaslinked in itsfightagainstseparatists in ed the 17-year-old, a studentat thatSaudi Arabiahad de- to Russia, resultingin tit-for-tat the KashmirValley. The the school nearHouston. tained atleast11feminists. The diplomaticexpulsionsand ceasefire, to markthe Muslim kingdom plansto lifta de- criticism ofRussia from NATO fastingmonth ofRamadan, is Gina Haspel wassworn in as cades-old ban on women and the UN. Britain will also the firstsince 2000. the newdirectorofthe CIA drivingnextmonth. Butasit notsend anydignitariesto the afterthe Senate voted to con- loosensup in some areas, it is football World Cup, which Authoritiesin Thailandsup- firm herin the job by54 to 45. also crackingdown on dissent. startsin Russia nextmonth. pressed protestsmarkingthe fourth anniversaryofthe A30-year-old man wastaken Israeliwarplaneshittargets in Flight disaster militarycoup. The junta run- to courtin NewYorkstateby the Gaza Strip aftera group of In Cubaa plane crashed short- ningthe countryhasrepeat- hisparentsto force him to Palestinians, allegedlyfrom lyaftertakingofffrom Havana edlydelayed newelections. leave home. The son, who Hamas, the militantIslamist airport, killing111people on Meanwhile, a seriesofbombs neverdid housework, had group thatrunsGaza, crossed board. The 39-year-old Boeing exploded acrosssouthern refused to go, butthe judge the borderand setfire to an 737 had been leased from a Thailand, damagingbanks. sided with hisparentsand told unmanned Israeli armypost. Mexican company. The bombsare thoughtto be him to packhisbags. 1 TheEconomistMay26th2018 Theworldthisweek 11 theywouldfollowthelead briefly.Concernsremainabout retrenchmentprogramme Business takenbytheEUandIndiain thepoliticalpressureonthe havehurtprofits;annualpre- applyingtariffsonAmerican banktolowerinterestrates. taxincomefellby62%to£67m TheAmericanCongress steelandaluminiuminretali- ($89m)fortheyearending passedabillthatexempts ationforthedutiesAmerica Thefirstfemalepresident March31st.Bycontrast,Ocado, medium-sizedbanksfromthe recentlyimposedonsuch StaceyCunninghamwas anonlineretailer,sawitsshare moststringentrulesintro- imports,unlessthoseduties appointedasthe67thpresi- pricesoarafterKroger,oneof ducedafterthefinancialcrisis. arereversed.MrTrump,mean- dentoftheNewYorkStock America’ssupermarketgiants, Onlythosebankswithatleast while,signalledanewbattle Exchange,thefirstwomanto increaseditsstakeinthecom- $250bninassetswillnowbe withEuropeandJapanby holdtheroleinits226-year panyandsaiditwoulduse subjecttostrictfederalover- orderingtheCommerce history. Ocado’stechnologytorollout sight,upfrom$50bnprevious- Departmenttolookatimpos- “seamless”shopping,asit ly.Itwasthemostsubstantial ingtariffsonimportsofcars Therallycontinuedinoil takesonAmazoninthebattle changeyettothemazeofrules onthegroundofnational markets.Brentcrudetradedat foronlinegrocerysales. broughtinundertheDodd- security,thesameargument around$80abarrel,thehigh- Frankact,whichsmallerbanks thatliesbehindthelevieson estlevelinfouryearsandup GeneralElectricstruckadeal havelongbemoanedasbeing steelandaluminium. byalmost50%fromayearago. tomergeitstransportbusiness toocumbersome. Thelatestspurtopricerises withWabtec,whichmakes Rusal,Russia’sbiggestpro- stemsfromtheassumption brakingsystems,locomotives FifthThirdBancorp,a ducerofaluminium,warned thatAmericansanctionson andotherapparatusfortherail medium-sizedbankbasedin thatunlessthesanctionsthat Iranmaycurtailoilexports industry.Valuedat$11.1bn,itis Cincinnati,offeredtobuyMB Americahasimposedonitare fromthatcountry. GE’sbiggestdisposalofassets Financial,asmallerlenderin lifted,internationalbankswill yetunderJohnFlannery,who Chicago,inatransactionthat probablystopdoingbusiness tookoveraschiefexecutivein theyvaluedat$4.7bn.Thedeal withit,affectingitsproduction Marketcapitalisation Augustandisrestructuringthe sparkedspeculationthatthere ofmetal.Thecompanyalso £bn grouparounditsthreecore aremorebankingmergersin saidthatitschiefexecutiveand 6 businessesofaviation,health Marks&Spencer thepipeline.Netprofitsin sevendirectorswouldresign 5 careandenergy. America’sbankingindustry aspartofitsefforttoseekrelief 4 3 rosebyahealthy28%inthe fromthesanctions. Ocado Golddigger firstquartercomparedwith 2 SonyuppeditsstakeinEMI 1 thesamethreemonthslast Atanemergencymeeting, MusicPublishingto90%, 0 year,to$56bn. Turkey’scentralbankraised Jan Feb Mar Apr May givingitacatalogueofmore oneofitskeyinterestrates 2018 than2msongs,includinghits Acourtdismissedcharges from13.5%to16.5%asittriedto Source:ThomsonReuters fromtheclassicMotownlabel, againstBarclaysinrelationto haltanotherrunonthe TherewasmorepainonBrit- QueenandCaroleKing,as aloanitobtainedfromQatar’s Turkishlira,whichhad ain’shighstreets,asMarks& wellasfromDonaldTrump’s investmentcompanyduring plungedby5%againstthe Spencer,astaunchlymid- biggestfan,KanyeWest. thefinancialcrisisinorderto dollarinaday.Itsotherrates marketclothingandfood avoidagovernmentbail-out. stayedthesame.Thecurrency retailer,announcedmorestore For other economic data and Britain’sSeriousFraudOffice ralliedafterthemove,butonly closures.Thecostsfromits news see Indicators section mayyettrytoreinstatethe chargesagainstthebank. Blowing hot and cold Steven Mnuchin, America’s treasurysecretary, said that plansto levytariffson Chinese goodshad been puton hold amid progressin talksover trade. China promised to importmore from America, butalso defended itscontro- versial industrial policies. Donald Trump initiallyhailed the outcome, onlyto declare himselfdissatisfied afterpoliti- cal alliesaccused him ofcapit- ulatingto China. One sticking- pointremainsthe penalties imposed on ZTE, a Chinese makeroftelecomsequipment. AsAmerica and China bar- gained, newfrontsin the trade conflictopened up. Japan, Russia and Turkeynotified the World Trade Organisation that Leaders The EconomistMay26th2018 13 The affair American executives are betting thatthe presidentis good forbusiness. Notin the long run MOST American elites be- therealityisthatthecountry’ssystem ofcommerce islurching lieve thatthe Trump presi- awayfrom rules, opennessand multilateral treatiestowards dency is hurting their country. arbitrariness, insularityand transientdeals. Foreign-policy mandarins are Asthe contoursofthisnewworld become clearer, so will its terrified that security alliances costs to business in terms of complexity and predictability. are being wrecked. Fiscal ex- Take complexityfirst. One ofthe ironiesofthe Trump team’s pertswarn thatborrowingis spi- agenda isthat, although theywantto getoutofbusinesses’ rallingoutofcontrol. Scientists hairathome, when itcomesto trade theywantto regulate. deplore the rejection ofclimate change. And some legal ex- When theytinkerwith tariffs, large numbersoffirms have to pertswarn ofa loomingconstitutional crisis. scurryto respond because theyhave global supplychains. The Amid the tumultthere isa strikingexception. The people steel dutiesproposed in March covera mere 0.5% ofAmerican who run companieshave made theircalculationsaboutthe imports, butso farthismonth 200-odd listed American firms Age ofTrump. On balance, theylike it. Bossesreckon thatthe have discussed the financial impact of tariffs on their calls value oftaxcuts, deregulation and potential trade concessions with investors. Overtime, a mesh ofdistortionswill build up. from China outweighsthe hazycostsofweakerinstitutions Because trade isbecomingmore regulated, a newsurveil- and trade wars. And theyare willingto playalongwith Presi- lance bureaucracyissprouting. On May23rd the Department dent Donald Trump’s home-brewed economic vision, in ofCommerce launched a probe ofcarimports. Abill in Con- which firmsare freed from the state and unfairforeign compe- gressenvisagesvettingall foreign investmentinto America to tition, and profits, investmentand, eventually, wages soar. ensure thatitdoesnotjeopardise the country’s“technological The financial fireworkson displayin the firstquarter ofthis and industrial leadership in areasrelated to national security”. yearsuggestthatthisvision iscomingtrue. The earnings oflist- American firms have $8trn of capital sunk abroad; foreign ed firmsrose by22% compared with a yearearlier; investment firmshave $7trn in America; and there have been 15,000 in- wasup by19%. Butasourbriefingexplains, the investment bound dealssince 2008. The costinvolved in monitoring all surge isunlike anybefore—itisskewed towardstech giants, not thisactivitycould ultimatelybe vast. AsAmerica eschews glo- firmswith factories. When itcomesto gaugingthe full costsof bal co-operation, itsfirmswill also face more duplicative regu- MrTrump, America Incisbeingshort-sighted and sloppy. lation abroad. Europe has already introduced new regimes thisyearforfinancial instrumentsand data. The viewfrom the C-suite The expense ofre-regulatingtrade could even exceed the Since winningCongressand the White House, the Republi- benefits of deregulation at home. That might be tolerable, canshave soughtto unleash the powerofbusiness. After the were itnotforthe otherbigcostofthe Trump era: unpredict- election MrTrump held summitswith tycoons, televised live ability. Athome the corporate-taxcutswill partlyexpire after from the boardroom atTrump Tower, and laterfrom his new 2022. America’snegotiatorsare gunningfora five-year sunset HQin the Oval Office. Though bosseshave tired ofthis kind of clause in a new NAFTA deal, although Canada and Mexico pantomime, particularlyafterMrTrump’sequivocationsover would prefersomethingpermanent. Bosseshope thatthe bel- white-supremacist protests in Virginia last summer, they re- ligerence on trade isa ployborrowed from “The Apprentice”, main bullish. Areason isthe Republican corporate-tax reform and that stable agreements will emerge. But imagine that passed in December, the firston such a scale since 1986. Itdoes America stitchesup a deal with China and the bilateral trade several sensible things, includingcuttingheadline rates to av- deficit then fails to shrink, or Chinese firms cease buying erage European levels. The annual savingof$100bn isworth American high-tech components as they become self-suffi- 6% ofpre-taxprofits(itaccountsfora tenth ofthe fiscal deficit). cient(see China section), orMrTrump ismocked forgetting a Deregulation isin full swing. Thisweeksawa relaxation of bad deal. Ifso, the White House mightrip the agreement up. bankingrules(see Finance section). The leadersofmany agen- cieshave been replaced with Trump appointees. The change at The newlaws ofthe jungle the top, firmssay, meansofficialsare beingmore helpful. Asur- Anotherreason forthe growingunpredictabilityisMr Trump’s prisingnumberofboardroomssupporta muscularstance on urge to showoffhispowerwith actsofpure political discre- trade with China. If, forargument’ssake, China capitulated to tion. He has just asked the postal service to raise delivery American demandsand imported $200bn more goodsa year, pricesforAmazon, hisbête noire and the world’ssecond-most itcould boostthe earningsofAmerica Incbya further 2%. The valuable listed firm. He could easilystrike outin anger atother benefitsforbusinessofMrTrump are clear, then: less taxand Silicon Valley firms—after all, they increasingly control the red tape, potential trade gainsand a 6-8% upliftin earnings. flowofpolitical information. He wantsthe fate ofZTE, a Chi- The trouble isthatcompaniesare often pooratassessing nese telecoms firm banned in America for sanctions viola- nebulousrisks, and CEOs’ overall viewofthe environment is tions, to turn on hispersonal whim. Inevitably, other countries fallible. Duringthe Obama yearscorporate America was con- are playingrougher, too. China’santitrustpolice are blocking vinced itwasundersiege when in fact, judged bythe numbers, Qualcomm’s $52bn takeover ofNXP, a rival semiconductor itwasin a golden era, with average profits31% above long-term firm, asa bargainingchip. When policybecomesa rolling ne- levels. Nowbossesthinktheyhave entered a nirvana, when gotiation, lobbyingexplodes. The lesspredictable business en-1 14 Leaders The EconomistMay26th2018 2vironmentthatresultswillraisethecostofcapital. Republicansarerightthattaxcutsand wise deregulation AsAmerica’sexpansiongetslongerinthetooth,thesearbi- canboostfirms’competitiveness. Butlittle progressis being traryinterventionscouldintensify.MrTrumpexpectswagesto made on other priorities, including repairing infrastructure, rise,but85%offirmsintheS&P500areforecasttoexpandmar- ensuringsmallfirmsarenotsquashed bymonopoliesand re- ginsby2019,reflectingacontrolofcosts.Eithershareholders, formingtheeducationsystem. Mostfirmspride themselves on orworkersandMrTrump,aregoingtobedisappointed.Given beinglevel-headed,butatsome pointthatbleedsinto compla- thatinterestratesarerising,arecessionislikelyinthenextfew cency.Americanbusinessmayone dayconclude thatthis was years.Inadownturn,Americanbusinessmayfindthatitsfa- themomentwhenitbooked all the benefitsofthe Trump era, bledflexibilityhasbeencompromisedbecausethepoliticsof whilefailingtoaccountproperlyforthe costs. Astrategythat firingworkersandslashingcostshasbecometoxic. assumesrevenuesbutnotexpensesrarelymakessense.7 Auditreform Shape up, not break up The auditindustryneeds fixing. Butdismantling the Big Fouris notthe wayto do it WHEN a company goes ofaccountsthatarerestated because ofa material error has bankrupt, recriminations fallen sharplyoverthe pastdecade. Break-up would bring un- tend to follow. Even so, the fury intended consequences. As the world economy shifts from caused bythe recentcollapse of makinggoodsto sellingservices, auditingisbecomingmore Carillion, a British contracting complicated: scale and the multidisciplinaryexpertise oflarge firm, isunusual. Areporton the firmscountformore. Smallerfirmsriskbeingtoo reliant on a debacle by British MPs, which fewlarge clients, which maycloud theirjudgment. was released this month, sav- Ifyouwantradical fixes, there are betterwaysto correctthe aged everyone from the firm’sexecutivesto itsregulators. But incentive problemsatthe core ofthe industry. Youcould sever the MPs reserved special bile for the Big Four accounting the linkbetween auditorsand theirclientsbyrequiring securi- firms—notjustKPMG, which audited Carillion’saccountsfor 19 tiesregulatorsto pickfirms’ auditors. Oryoucould introduce years, butalso itspeers, Deloitte, EYand PwC, each ofwhich mandatoryinsurance ofaccounts, wherebycompaniesmust extracted feesfrom the company, before and afterits fall. The buycoverage forlossesfrom accountingerrorsand the insur- MPshave called fora reviewinto the auditmarketand asked it erswould therefore appointauditorsto assesstheirrisk. to saywhetherthe BigFour’sBritish armsshould be broken up. The rowislocal, butconcernsaboutthe industryare global. One bean ata time Criticsofthe auditorsare rightin two respects: that the in- Such ideashave been floatingaround foryears, buteven these dustrymatters, and thatitneedsreform (see Finance section). are too hasty. Instead regulatorsshould sharpen tools thatare Itisin everyone’sinterestthatauditingworks. Ifinvestors can- alreadyavailable in Europe. Theycould lowerthe cap on non- nottrustfinancial statements, then companies’ costofcapital auditfeescharged to an auditclientfrom today’sgenerouslev- will rise, crimpinggrowth and employment. Itisalso true that el of70% ofthe auditfee. Underrulesintroduced in 2016, Brit- the industryhasflaws. Itishighlyconcentrated. The BigFour ish companieswith the same auditorforten yearsmust re-ten- audit98% ofthe companieslisted on the S&P500 and the FTSE der; theyare forced to rotate after20. Such ruleslookdraconian 350 indexes. And auditorsare paid notbyinvestors, whom to American eyes, where the average auditortenure for the first theyserve, butbythe companywhose accountstheyscruti- 21 companies in the Dow Jones Industrial Average to have nise. Thatraisesquestionsaboutobjectivity, especially since made disclosuresthisyearisa cosy66 years. Newresearch the BigFourearn nearlytwice asmuch from consulting and findsthatauditorsare mostlikelyto find misstatements early otherservicesastheydo from auditing. Pastreforms banned in theirtenure; bythe tenth year, the benefitsofa fresh pairof them from providingboth an auditand certain consulting ser- eyesare lost. Academicsalso find thatthe BigFour’sfeesrise vices to the same client, but conflicts of interest remain. In with tenure. Even Britain’s20-yearlimitistoo long. America non-auditfeescharged to the same clientamount to a Auditors in many countries are already required to add quarterofauditfees; in Britain the figure isaround a half. flesh to the bare bonesofthe auditopinion. Thatis to be en- Abreak-up, whetherto separate the auditarmsfrom the couraged. Transparency over the main points ofcontention consultingbusinessesorto turn the BigFourinto a Middling with management, and the size ofrevisionsmade to the ac- Eight, seemsto offera simple solution to these problems. It countsasa resultofscrutiny, would castlighton auditors’ suc- would atfirstaffectonlythe British partsofthe firms’ global cesses, notjusttheirfailures. And thatin turn would help in- networks, butthe idea could spread. vestorsto assessauditors’ performance. Although a break-up mightbe justified asa lastresort, itis Foryearsshareholdershave waved through a company’s premature. Investorshave exaggerated expectationsof audi- choice ofauditoratannual general meetings. Abitmore bol- tors’ abilityto detectfraud. Because auditsrelyon sampling, shinesscould be salutary. Lastmonth, forinstance, over a third some skulduggerywill inevitablyslip through. There are also ofinvestorsin General Electricvoted againstthe reappoint- signsthatthe industryisimproving. Manycountriestightened mentofKPMG, itsauditorfor109 years. The case forbreaking the rulesaftera scandal in 2001sankEnron, an energy-trading up the BigFourisunproven. Buteveryso often, shareholders firm, and itsauditor, ArthurAndersen. In America the number need to remind the quartetwho theirmain customersare. 7 16 Leaders TheEconomistMay26th2018 Ebola Back to blood AnewoutbreakofEbolainCongowilltestwhattheworldhaslearnedfrom the calamitous epidemicof 2014 INMARCH2014thebravedoc- threemonthstheWHOsaysitneeds$26m.Thatisabargain: EbolainwestAfrica tors of Médecins Sans Fron- lasttimeitcost$3.6bn to contain the epidemicand itknocked Weeklyconfirmedcases,2014 tières(MSF)soundedanalarm. $2.2bnofftheGDPofthe worst-affected countries. WHOdeclares 800 Theywerestrugglingtocontain Technologyhasimproved since 2014. Notonlyisthere a international 600 emergency anoutbreakofEbolainGuinea, quickerdiagnostictest, butthere are also ample supplies ofan 400 200 apoorandviolentwestAfrican effectivevaccine. Thousandsofdosesare beingdeployed in a 0 state. The Ebola virus causes a “ring”strategy, to inoculate those who have been in contact J F M AM J JA S ON D terrifyingdisease:afeversome- withknowncasesofEbola, aswell astheircontactsin turn. timesfollowedbymassiveinternalandexternalbleeding.Itis Jabsarealsobeingoffered to front-line health workers—an es- contagious,viabodyfluids,andfrequentlyfatal.Yetnoone sential precaution, given the large number ofsuch workers paidmuchattentiontoMSF’swarning,andbyJunetheepi- whodiedlasttime. Itisnotyetclearhowwell ring vaccination demichadspreadto60placesinthreecountries.Itwasnotun- willcontainthe earlystagesofan outbreak, when chains of tilAugustthatyearthattheWorldHealthOrganisation(WHO) transmissionare lesscertain. The vaccine isalso hard to ad- declared an international health emergency. The delay al- minister,sinceitmustbe keptaslowas-80°C. However, ifthis lowedEbolatorageoutofcontrol,killing11,000peopleinsix oneprovesunsuitable, anotherisavailable thatmight work. countriesandleaving17,000childrenwithoutoneorbothof their parents. Only after the epidemic had peaked did the Vigilantagainstthe virus worldpayheed.Somegovernmentspanicked,imposingflight Even with all these advantages, containment will be hard. bansonalltravellersfromaffectedcountries.Thisprompted Congoisatrociouslygoverned; gettinganythingdone there is manytogobyroad,wheretheywerehardertotrack. tricky.Theviruscould spread alongthe Congo river, the coun- Globalpublic-healthauthoritiesvowedtolearnfromthis try’smainartery. Furtherinfections, and deaths, are all butcer- catastrophicfoul-up.AfreshoutbreakofEbola,thistimeinthe tain.Still,theworld ismuch betterplaced to fight Ebola than it DemocraticRepublicofCongo,willrevealwhethertheyhave wasfouryearsago. Publicand charitable moneyensured that doneso(seeMiddleEastandAfricasection).Sofar,thesigns therewerevaccine stockpiles. America’sDepartmentofDe- aregood.Thebigmistakelasttimewastodither—containing fencehelpedto fund vaccine research—which for-profit drug anepidemicearlyiseasierandcheaperandsaveslives.This firms are unlikely to do, since such vaccines must be given time medical staff have been rushed to the scene, the 1m- away,notsold.Anewgroup called the Coalition forEpidemic strongcityofMbandakaontheCongoriver.Protectivegear PreparednessInnovations(CEPI) wassetup to raise money andmedicineshavebeenpromptlydeployed.Healthworkers andchannelitto the mostpromisingprojects. haveswiftlystartedtotracethosewhohavebeenincontact Ifthisepidemiciscontained, the world should learn the les- withEbolasufferers.Congo’sneighboursareonalert.Isola- son.Ebolaisjustone ofmanyhorrendouspathogens, includ- tionzonesandtreatmentcentreshavebeensetup.TheWHO ing Lassa fever, Marburg fever, SARS and Nipah virus, that hasreleasedcashfromacontingencyfund.Canada,Germany, couldbecomeepidemics. CEPIwantsto reduce thatriskby de- theEU,AmericaandBritainhavepledgedmore.Forthenext velopingvaccinesnow. Itisan urgenttask. 7 Colombia’selection Faulty front-runners The two leading candidates forthe presidencyare flawed THElasttimeColombiaelect- Candidatesin thisyear’svote are rejectinghislegacy. The ed a president, in 2014, the front-runnerisIván Duque (pictured left), an allyof a conser- countrywasatwar. Itsarmy was vative formerpresident, Álvaro Uribe, who wasthe peace ac- fighting the FARC, a Marxist cord’smostferociouscritic(see Americassection). His closest guerrilla group dedicated to competitorisGustavo Petro (on the right), a formermayor of overthrowing the state and to Bogotá who washimselfa memberofthe M19 guerrilla group making money from drug-traf- in the 1980s. He ispro-peace, buthe ragesfrom the left against ficking and other crimes. In 50 the establishmentto which MrSantosbelongs. years220,000 people died and 7m were displaced. Thisyear’s Either of the front-runners would be a bad choice. Mr presidential election, the firstround ofwhich isscheduled for Duque isa moderniserbuthismentor, MrUribe, isnot. As May27th, isthe firstsince the war’send. PresidentJuan Manuel president, Mr Uribe led the offensive against the FARC that Santosnegotiated a peace deal with the FARCin 2016 and won paved the way for peace. But he also has an authoritarian the Nobel peace prize foritbutcannotrun again. streak, and isallied with large landownerswho will resist re-1 18 Leaders The EconomistMay26th2018 2formsmandatedbythepeacedeal,suchasupdatinglandre- arunningsore.Peopleareangrythatthe peace accord hasnot cords and property tax. Colombians are right to wonder endedtheviolenceinthecountryside and allowsFARClead- whether Mr Uribe would have too much influence over a erswhohavecommittedcrimesto sitin congress. Duquepresidency. Othercandidateshavebetteranswersto mostofthese com- MrDuquesharesMrUribe’sdisdainforthepeacedealand plaintsthanMrDuqueorMrPetro. Humberto de la Calle, the willweakenitifhebecomespresident.Thatwouldnotrekin- government’schiefpeacenegotiator, isa worthyaspirant. Ser- dleall-outwar.Butitmightpreventapeaceagreementwith gioFajardo,amathematician who hasputclean politics and theELN,aguerrillagroupthatisstillinthefield. educationatthecentreofhiscampaign, looksasifhe hasa bet- MrPetrowouldbeaworsepresident.Hisplansincludethe terchance.AformermayorofMedellín and governorof the self-defeatingnotionofpullingColombiaoutoftheoilbusi- departmentofAntioquia,he hasshown that, unlike Mr Petro, ness,itschiefsourceofexports.HistermasmayorofBogotá hecanrunagovernmentsuccessfully. Unlike MrDuque, he wasmarkedbyclasheswiththecitycouncilanddisputeswith wouldseektoimprovetheimplementation ofthe peace agree- contractors,oneofwhichleftrubbishuncollected.Hisoppo- ment,notundermineit.Hegetsourvote. nentscomparehimtoHugoChávez,wholaunchednext-door Venezuelaonitscoursetowardseconomicandpoliticaldisas- It’snotVenezuela ter. That is an exaggeration. But neitherMrPetro’s tempera- Evenifthewrongmanwins, do notdespairforColombia. Un- mentnorhisideasequiphimforthepresidency. like Venezuela, whose president, Nicolás Maduro, has just Colombians’hungerforchangeisunderstandable.Income won a fraudulent election, Colombia is a solid democracy inequality,thoughfalling,isthesecond-highestinLatinAmeri- withrelativelystronginstitutions. Atleastthe next president, ca.Schoolsandhealthcarearenotgoodenough.Corruptionis whoeverhemaybe,isunlikelyto change that. 7 Truthandtechnology Cinema, not vérité Afaked video ofDonald Trump shows howAI will make propaganda cheap and easy “DEAR people ofBelgium. shadeinsubtlewaysthatexaggerate ordownplaywhat isreal- This is a huge deal. As lyhappening. The video, sp.a says, wasnotintended to de- you know, I had the balls to ceive. The game isgiven awaynearthe end, when MrTrump withdrawfrom the Parisclimate says: “We all knowclimate change isfake—justlike this video!” agreement, and so should you.” Butnoteveryone will be so scrupulous. Itsoundslike Donald Trump—a Thisprospectwould be worryingatanytime. Itisparticu- bit, anyway. Itisdefinitely a pic- larly unwelcome now. The internet has already given parti- ture of Donald Trump. But the sans and provocateurs a cheap and effective way to spread person in the video, produced bysp.a, a left-wingBelgian polit- written rumoursand untruths. Faked videoswill be similarly ical party, isnotquite the American president. Itis a computer- easyto disseminate, butwill be more powerful precisely be- tweaked facsimile, into whose mouth hasbeen puta not-en- cause people have notyetlearned to mistrustfilm and sound- tirelyserioushomilyaboutBelgium’scarbon emissions. tracks. Justimagine the mayhem sown bya faked video show- Faked imagesare notnew. Stalin airbrushed hisenemies ing Mr Trump confessing that he had taken money from outofhistorybyhavingthem removed from official photo- Russia’spresident, VladimirPutin. graphs. Visual-effectsstudiosin Hollywood transpose actors’ facesonto the bodiesoffitter, more disposable stunt doubles. The camera often lies Buttinkeringwith video ishard. Doingitwell requires special- Whatto do? Ideally, people will adapt, becomingmore scepti- istswho are scarce and expensive. cal, and the world will be quickto applythe lessons from “fake Technologyismakingthingscheaperand easier. The video news”. Butthatwill be hard. Technologiessuch asencryption bysp.a isa “deep fake”—which drawson “deep learning”, an and digital signingcan help trace a film orpicture back to a artificial-intelligence technique used in everythingfrom recog- trusted source, although maliciousactorswill have no incen- nisingfacesto playingGo, a complexboard game. To produce a tive to use them. Fact-checkingwill devote more time to videos deep fake, all youneed isa piece offree software, some pic- and picturesasdigital fakerybecomeswidespread; but such turesofthe person whose face youwish to transpose, an exist- servicescan onlyeverbe reactive, sendingthe truth panting ingpiece offilm to paste itinto and a scriptforyour digital cre- aftera lie thatisalreadyhalfwayacrossthe world. Journalists ation to read. The computertakescare ofthe rest. And unlike and bloggerswith a reputation foraccuracymightsee demand special-effectsartists, computersare cheap and widespread. fortheirservicesrise—though onlyifpeople wanttruth rather Fornow, the resultsare often amateurish. The video ofMr than titillation orconfirmation oftheirbiases. Trump issuspiciouslyblurry. Hisspeech isstilted. His mouth Before the era ofmassmedia, massliteracyand cheap com- movesin odd, not-quite-human ways. Butasalgorithms are re- munication, knowledge ofthe world wasfoggy. Itwasa strug- fined and computingpowergetscheaper, thatwill change. A gle to sortfactfrom rumour. Cheap, high-qualitypropaganda previous demonstration, involving an ersatz BarackObama risksmakingthe truth harderto find, furtherdebasing demo- and considerablymore care, produced slickerresults. Pictures craticpolitics. Technologycould make the global village feel and video will become like text: easierto fake outright orto more like a fearful, distrustingswamp. 7 22 Letters The EconomistMay26th2018 able,standardsvary;60%of outstrippedthatinAmerica, Yourchange in grammarrules Forthe good ofall thepathologyreportson butGDPperpersonhasnev- will surelylead to the sad Universal health care isachiev- breast-cancercasesinLagos erthelessgrownevenfaster? demise ofthatfinestsubgenre able ifitiscarried outin stages failedtorecordwhetherthe JOHNBEARD ofcorrespondence to The (Special report, April 28th). The tumourhadspreadtothe Director Economist: the letterdesigned ultimate aim isto provide lymphnodesornot. DepartmentofAgeingand grammaticallyto mockyour servicesto all. Butin countries Withoutaccuratediagnosis, LifeCourse avoidance ofthe splitinfin- where resourcesare limited, asubstantialproportionof WorldHealthOrganisation itive. I will continue mournful- don’tprovide all services; patientswillreceiveinappro- Geneva lyto rememberthose halcyon instead focuson solutionsthat priatetreatmentandbeillfor days, while the wavesof are the mostcost-effective, in longer.Withoutincorporating modernitybegin to inexorably To boldlygo particularthe onesthatbenefit forgottencomponentslike erode the shoresoftradition. poorpeople the most. Known effectivesurgery,pathology Congratulationsto The Econo- OSCAR DESPARD asprogressive universalism, andlaboratorymedicineinto miston slaughteringthe old Dublin thisiswhywe alreadyhave a broad-basedsystems,achiev- rule againstsplitinfinitives well-defined firststep towards ingtheaimofuniversalhealth (Johnson, April 28th). Please Ahostile environment universal health care in the carewillremainoutofreach. relentlesslycontinue to radi- form ofchildhood immunisa- KENNETHFLEMING callycull prescriptive language tion. Today86% ofthe world’s Senioradviserforpathology rules. There are manymore children receive basicvaccina- CentreforGlobalHealth thatneed discarding. You tions. With more than 30 NationalCancerInstitute mightconsultRobert vaccine dosesadministered Washington,DC Burchfield’s“The English everysecond, no otherhealth Language”: “No construction is intervention reachesso many Thereisanincreasingburden everlastinglystable, no people. With routine immuni- ofchronicdiseasesindevel- cherished rule remains sation comessupplychains, opingcountries,causedbythe unbroken.” Anystyle-guide cold storage, trained health- adoptionofthelifestylein editorsinclined to massexecu- care staff, data monitoring, developedcountrieswitha tionsshould be reassured that disease surveillance, health higherrelianceonconve- historyison the reformers’ recordsand more. Itcreates a niencefoods.Thisleadsto side. Burchfield again: “There is IfBritain’snewhome secre- platform forotherhealth inflammation,diabetes,obesi- little doubtthatmostofthe taryhasthe stamina to read interventions, such asmalaria- tyandcardiovasculardisease. newfeaturesthatare intensely the same piece ofAyn Rand’s prevention measures. Manyrichercountriesare disliked bylinguisticconserva- turgid prose twice a yearhe SETH BERKLEY tryingtoreversethisbygoing tiveswill triumph in the end. mighthave whatittakesto Chief executive backto“ancestral”diets,hence Butthe language will notbleed reform the dysfunctional Gavi, the Vaccine Alliance thepopularityoffarmers to death. Norwill itseem in Home Office (Bagehot, May Geneva marketsandagricultural anywaydistorted once the old 5th). Then again, histaste in co-operatives. observanceshave been literature maybelie an imagi- Even iflow-income countries F.RAMZIASFOUR forgotten.” nation too sterile forthe task in increased theirtaxesto the CaliforniaCentrefor Carryon culling! hand. Asone witpithilyput it: maximum extentthatthe IMF FunctionalMedicine JACK WINKLER “There are two novelsthatcan suggestsisrealistic, and they SanRafael,California London change a bookish 14-year-old’s increased the proportion of life: ‘The Lord ofthe Rings’ and thatrevenue allocated to Ettu, Brute? I pen thismissive, ‘AtlasShrugged’. One isa Redefining the old health, theycould still only heavyofheartand slumped in childish fantasythatoften afford to spend $10 a person. “Small isn’tbeautiful” (May despair. Nowthatyourvener- engendersa lifelongobsession The World Bankestimatesthey 5th) mentioned the “depen- able publication, the lastbas- with itsunbelievable heroes, need to spend $76 a person to dencyratio” and defined the tion ofgrammatical fortitude, leadingto an emotionally achieve universal health care. working-age population as15- hasabandoned itsprincipled stunted, sociallycrippled MARCUS MANUEL to 64-year-olds. Itistime to stand againstsplittingthe adulthood, unable to deal with Senior research associate challenge these outdated infinitive, are anyofthe sacred the real world. The other, of Overseas Development Institute stereotypes. Overone-third of rulesofgrammarsafe? What course, involvesorcs.” London people in thisage group in the next? Will we all soon be Given thatthe Home Office EUisnotactuallyworking. ponderingthe question ofto ismore Mordorthan the new Ifsurgeryisthe “neglected And ratherthan beingdepen- be orto notbe? Jerusalem, perhapsSajid Javid stepchild” ofglobal health, dent, people overthe age of 64 H. COLEMAN SWITKAY would have been betteroff diagnosisisitsorphan. In contribute in manyways, by Bala Cynwyd, Pennsylvania with Tolkien. manylow- and middle-income workingand payingtaxes, JONATHAN KENT countriesproblemsarise from particularlyconsumption The Economistshould nottake Wadhurst, Sussex7 alackofcapacityand stan- taxes. Theyalso often fund anynotice ofthatFabian dardsfordiagnosis. To illus- theirown retirement. windbag, George Bernard trate the problem, 15 countries An ageingpopulation can Shaw. Perhapsyourstyle has Lettersarewelcomeandshouldbe in sub-Saharan Africa have presentchallenges, butsound been changed to appeal to addressedtotheEditorat TheEconomist,TheAdelphiBuilding, five orfewerpathologists policyresponsescan address yourlarge North American 1-11JohnAdamStreet, (Britain hasaround 1,800). In them. Otherwise howdo you readership, unsplitinfinitives LondonWC2N6HT China the shortfall of explain that, since 2000, the beingextinctin those parts. E-mail:[email protected] pathologistsisestimated at up growth ofthe old-age depen- J.M. HALLINAN Morelettersareavailableat: to 120,000. Even where avail- dencyratio in Germanyhasfar Sydney Economist.com/letters

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The mid-terms: our prediction Bribes and bungs at Europe’s firms A glimpse inside North Korea Bartleby, a new column on life at work MAY26TH–JUNE1ST2018 The affair Why corporate America loves Donald Trump Contents TheEconomistMay26th2018 7 37 Russianeducation 10 Theworldthisweek MeettheMinistryof Enlightenment Leaders 38 Putin’spetschool 13 BusinessinAmerica Shine,butremember Theaffair 39 Charlemagne 14 Auditreform ThebattleforSlovakia Shapeup,notbreakup 16 Ebola UnitedStates Backtoblood 40 Themid-terms 16 Colombia’selection Ourprediction Mid-termsOurnewstatistical Faultyfront-runners 41 TrumpvJustice modelgivestheDemocrats 18 Truthandtechnology Theleast-worstoption atwo-in-threechanceof Cinema,notvérité retakingtheHouseof 42 Guncontrol Onthecover Domassacreschange Representatives,page40. Americanexecutivesare Letters minds? Awell-meaningefforttocool bettingthatthepresidentis partisanhatredmostlyshows 22 Onuniversalhealthcare, 42 Telephonescams goodforbusiness.Notinthe howimplacableitis:Lexington, ageism,splitinfinitives, Robocops longrun:leader,page13. page45 DonaldTrumpispresiding theHomeOffice 43 E-cigarettes overatech-ledsurge,notan Startingyoung industrialrenaissance, Briefing 43 Oldprisoners page24.Americasaysa Greybeardsbehindbars 24 BusinessunderTrump threatenedtradewarwith Aboomlikenoother 44 Dutch-Americans Chinaisonhold,butChinese Tulipseason officialsstillhaveplentyto 45 Lexington worryabout,page58.Arare Britain Thepartisanchasm bipartisanmomentallowsa 29 Brexitandcustoms timidregulatoryretreatin Irishstew banking,page74 30 RussiaandBritain TheAmericas ’Vichhunt 46 Colombia’selection Judgingthehorseflesh 31 Policecareers TheEconomistonline ItalyWesternEurope’sfirst Swotteam 47 ColombiaandtheFARC all-populistgovernmenttakes Dailyanalysisandopinionto Peaceinperil? 31 Businesseducation shapeinRome—anditspooks supplementtheprintedition,plus Frommastertoapprentice 48 Archaeoastronomy markets,page35 audioandvideo,andadailychart Asightofthesungod 32 Ocado Economist.com Supermarketorstartup? E-mail:newslettersand 32 Railwayfranchises MiddleEastandAfrica mobileedition Gravytrainsderail Economist.com/email 49 Ebola 33 Theologyandtechnology ContainmentinCongo Printedition:availableonlineby Alexa,whoisGod? 7pmLondontimeeachThursday 50 Justice,Rwandanstyle Economist.com/printedition Stand,thenstandtrial Audioedition:availableonline Europe 50 Mappingpandemics todownloadeachFriday 35 Italy Terraincognita Economist.com/audioedition Theservantoftwomasters 51 IslamicState Losingthepeace 36 GermanyandFrance Merkron,Merkroff 51 MohamedSaleh Ebola A new outbreak in Congo Thepharaohofforwards 37 Turkey’sinternetcensors will test what the world has Blockingboozeandnews 52 YahyaSinwar learned from the calamitous Volume427Number9093 37 Abortion Gaza’sruthlesspragmatist epidemic of 2014: leader, page Thecomputersaysyes 16. The disease can probably PublishedsinceSeptember1843 be contained. If not, it could totakepartin"aseverecontestbetween spread exponentially, page 49 intelligence,whichpressesforward,and anunworthy,timidignoranceobstructing ourprogress." EditorialofficesinLondonandalso: Beijing,Berlin,Brussels,Cairo,Chicago,Madrid, MexicoCity,Moscow,Mumbai,Nairobi,NewDelhi, NewYork,Paris,SanFrancisco,SãoPaulo,Seoul, Shanghai,Singapore,Tokyo,WashingtonDC 1Contents continues overleaf 8 Contents The EconomistMay26th2018 73 Oilprices Asia Thecrudecurve 53 NorthKorea 74 Non-performingloans Pastel-colouredpenury Goingsouth 54 Indianpolitics 74 BankinginAmerica Two-daywonder Dodderingon 55 FertilityinJapan 75 Globalwarming Acorkedtube Carbonatedmarket 55 InsurgencyinThailand 75 Povertyandtherapy Blastsfromthepast Mindfulfinances 56 Taiwan’spresident NorthKoreaAsleadersbicker Hurryup 76 Freeexchange An era passes A tribute to aboutsummits,weglimpselife Allthepeople’smoney Philip Roth, one of the great 57 Banyan insideaverystrangeplace, post-war American novelists, South-EastAsiandemocracy page53.Pyongyang’sthriving page 86. Tom Wolfe, chronicler Scienceandtechnology tailors,page69 of class: Obituary, page 90 79 Childhoodcancer China Germtheory 58 TradewithAmerica 80 Allcreaturesgreat Assessingthepain Subscription service andsmall For our full range of subscription offers, Gottacountthemall including digital only or print and digital International 80 Genetics combined visit Economist.com/offers 61 Economicstatistics(1) Stresstest You can also subscribe by mail or telephone at Don’tevenask 81 Recyclingplastic the details provided below: Telephone: +44 (0) 845 120 0983 62 Economicstatistics(2) Wormfood Datahierarchies 82 Shoemaking Web: Economist.com/offers Post: The Economist Aloadofnewcobblers SubscriptionCentre, P.O. Box 471, Business Haywards Heath, CorruptionGovernmentsin 63 CorporategraftinEurope Booksandarts RH16 3GY UK Europearecatchingupwith Cleanerliving 83 SatireinZimbabwe Americainpursuingcorporate Subscription for 1 year (51 issues) 64 Bartleby Thelastlaugh Print only UK – £145 graft,page63 Labouroflove 84 Johnson 66 ExecutivesinAmerica Weaselwords Hittingpaydirt 85 ThetragedyofArnhem Principal commercial offices: The Adelphi Building, 1-11John Adam Street, 67 Tesla Fallenheroes London WC2N 6HT Pluggingaway 85 Americanfiction Tel: +44 (0) 20 7830 7000 68 GazprominEurope Insidethecage Rue de l’Athénée 32 Outofthefryingpan 86 AtributetoPhilipRoth 1206 Geneva, Switzerland Tel: +4122 566 2470 68 Privacyandadvertising Theatreofone 750 3rd Avenue, 5th Floor, New York, NY 10017 GDParrgh... Tel: +1212 5410500 69 TailorsofPyongyang 88 Economicandfinancial 1301Cityplaza Four, Thefashionpolice 12 Taikoo Wan Road, Taikoo Shing, Hong Kong indicators Tel: +852 2585 3888 Statisticson42economies, BartlebyIntroducingournew Financeandeconomics plusacloserlookat OChthicearg coo,m Dumbearic, iFarla onffikfcuerst,: Los Angeles, columnonthegrievancesand 70 Companyaudits trade-weightedexchange Paris, San Francisco and Singapore gratificationsoflifeatwork, rates Greatexpectationsgap page64 71 Buttonwood ThejoyofTreasuries Obituary 72 Womenandwork 90 Tom Wolfe Neverdone The man in the white suit 72 Kidnappinginsurance Market capture PEFC certified This copy of The Economist is printed on paper sourced from sustainably managed forests certified by PEFC PEFC/16-33-582 www.pefc.org Registeredasanewspaper.©2018TheEconomistNewspaperLimited.Allrightsreserved.Neitherthispublicationnoranypartofitmaybereproduced,storedinaretrievalsystem,ortransmittedinanyformorbyanymeans,electronic,mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Newspaper Limited. Published every week, except for a year-end double issue, by The Economist Newspaper Limited. The Economist is a registered trademark of The Economist Newspaper Limited. Printed by Wyndeham Peterborough Limited. 10 The world this week The EconomistMay26th2018 Politics Syria’sarmycapturedan the workofinsurgentscam- enclave in Damascusfrom the paigningforgreaterrights for jihadistsofIslamicState. The the region’sMuslim majority. victorybringsthe entire capital area underthe control of China said ithad landed long- Basharal-Assad’sregime for range bombersatan airport in the firsttime since 2012. the South China Seaforthe firsttime. The Centre forStrate- Your country needs you gicand International Studies, a Italy’spresidentappointed a think-tank, identified the non-politician, Giuseppe location asWoodyIsland, in Conte, asprime minister. Mr the Paracel archipelago, which Conte facesthe ticklish task of NicolásMaduro, Venezuela’s isalso claimed byVietnam and tryingto run a cabinetin- president, won re-election in a Taiwan. China also said ithad cludingthe leadersofthe two vote thatwaswidelycon- “expelled” ten foreign fishing- The World Health Organisa- partiesthatwill make up the demned asfraudulent. He took vesselsfrom around the tion rushed to respond to an newpopulistgovernment: 68% ofthe vote. The main islands. outbreakofEbolain the Luigi Di Maio ofthe radical opposition leaderswere DemocraticRepublicofCon- Five StarMovementand Mat- banned from running. The Chinalaunched a satellite that go. So far, health workershave teo Salvini ofthe right-wing governmentsetup tentsnear will actasthe relaystation for done a much betterjob of Northern League. The two pollingstationsto scan voters’ aplanned landingofa space- containingthe virusthan they partybossesagree on little. “fatherland cards”, which crafton the farside ofthe did in westAfrica in 2014. The entitle them to food rations. Moon laterthisyear. fear, however, isthatitmay The Swedishgovernment Some votersfeared being spread to bigcities. began sendingleafletsto every denied food iftheydid not Her time has come household advisingSwedes backMrMaduro. Votersin Burundiapproved a whatto do ifwarbreaksout. It constitutional change thatwill included tipson howto cope if Panama’spresident, Juan allowPresidentPierre “Su- food and waterare short, or if CarlosVarela, said an Israeli preme Eternal Guide” Nkurun- electricity, phonesand com- intelligence agencyhad given ziza, who hasbeen in power putersystemsfail. Such liter- him evidence thata plane that since 2005, to run fora further ature hasnotbeen distributed crashed in the countryin 1994 two termswhen hiscurrent to the publicsince 1961, during wasbroughtdown bya terro- one endsin 2020. The vote the cold war. ristact. The crash occurred on tookplace in a climate offear. July19th, the dayafteran Ken Livingstone, a former attackon a Jewish centre in Two weeksafterAmerica mayorofLondon, resigned BuenosAires. withdrewfrom a nucleardeal from Britain’sLabourParty. Democratsin Georgiaelected with Iran, Mike Pompeo, He wassuspended in 2016 After a brief period in office StaceyAbramsastheircandi- America’ssecretaryofstate, aftera rowoverallegedly The Bharatiya Janata Party, date forgovernor, makingher called fora more sweeping anti-Semiticcommentshe which runsIndia’scentral the firstblackfemale nominee agreement. MrPompeo made. JeremyCorbyn, La- government, emerged asthe from eitherpartyto run for demanded thatIran stop en- bour’sleader, who hasbeen biggestpartyafterelections in governorin America. She will richinguranium, allownuclear accused ofturninga blind eye the state ofKarnataka. Itslocal have to fighthard to win in inspectors“unqualified ac- to anti-Semitism, said resign- leaderwassworn in aschief November; the lasttime cess” and end itsinvolvement ingwasthe “rightthingto do”. minister, onlyto resign two Georgia elected a Democratic in Syria, Yemen and Lebanon, dayslaterbecause he could not governorwas1998. orelse face “the strongest Sergei Skripal wasdischarged cobble togethera majorityin sanctionsin history”. Hassan from hospital in Britain. The the assembly, pavingthe way Officialsin Texasconfirmed Rouhani, Iran’spresident, said formerRussian spyand his foran opposition coalition. thatthe suspectin a school thiswas“unacceptable”. daughterwere exposed to shootingused hisfather’sguns Novichok, a nerve agent, in an India’sarmydeclared a truce to kill ten people. Police arrest- Human-rightsgroupsreported attackin March thatwaslinked in itsfightagainstseparatists in ed the 17-year-old, a studentat thatSaudi Arabiahad de- to Russia, resultingin tit-for-tat the KashmirValley. The the school nearHouston. tained atleast11feminists. The diplomaticexpulsionsand ceasefire, to markthe Muslim kingdom plansto lifta de- criticism ofRussia from NATO fastingmonth ofRamadan, is Gina Haspel wassworn in as cades-old ban on women and the UN. Britain will also the firstsince 2000. the newdirectorofthe CIA drivingnextmonth. Butasit notsend anydignitariesto the afterthe Senate voted to con- loosensup in some areas, it is football World Cup, which Authoritiesin Thailandsup- firm herin the job by54 to 45. also crackingdown on dissent. startsin Russia nextmonth. pressed protestsmarkingthe fourth anniversaryofthe A30-year-old man wastaken Israeliwarplaneshittargets in Flight disaster militarycoup. The junta run- to courtin NewYorkstateby the Gaza Strip aftera group of In Cubaa plane crashed short- ningthe countryhasrepeat- hisparentsto force him to Palestinians, allegedlyfrom lyaftertakingofffrom Havana edlydelayed newelections. leave home. The son, who Hamas, the militantIslamist airport, killing111people on Meanwhile, a seriesofbombs neverdid housework, had group thatrunsGaza, crossed board. The 39-year-old Boeing exploded acrosssouthern refused to go, butthe judge the borderand setfire to an 737 had been leased from a Thailand, damagingbanks. sided with hisparentsand told unmanned Israeli armypost. Mexican company. The bombsare thoughtto be him to packhisbags. 1 TheEconomistMay26th2018 Theworldthisweek 11 theywouldfollowthelead briefly.Concernsremainabout retrenchmentprogramme Business takenbytheEUandIndiain thepoliticalpressureonthe havehurtprofits;annualpre- applyingtariffsonAmerican banktolowerinterestrates. taxincomefellby62%to£67m TheAmericanCongress steelandaluminiuminretali- ($89m)fortheyearending passedabillthatexempts ationforthedutiesAmerica Thefirstfemalepresident March31st.Bycontrast,Ocado, medium-sizedbanksfromthe recentlyimposedonsuch StaceyCunninghamwas anonlineretailer,sawitsshare moststringentrulesintro- imports,unlessthoseduties appointedasthe67thpresi- pricesoarafterKroger,oneof ducedafterthefinancialcrisis. arereversed.MrTrump,mean- dentoftheNewYorkStock America’ssupermarketgiants, Onlythosebankswithatleast while,signalledanewbattle Exchange,thefirstwomanto increaseditsstakeinthecom- $250bninassetswillnowbe withEuropeandJapanby holdtheroleinits226-year panyandsaiditwoulduse subjecttostrictfederalover- orderingtheCommerce history. Ocado’stechnologytorollout sight,upfrom$50bnprevious- Departmenttolookatimpos- “seamless”shopping,asit ly.Itwasthemostsubstantial ingtariffsonimportsofcars Therallycontinuedinoil takesonAmazoninthebattle changeyettothemazeofrules onthegroundofnational markets.Brentcrudetradedat foronlinegrocerysales. broughtinundertheDodd- security,thesameargument around$80abarrel,thehigh- Frankact,whichsmallerbanks thatliesbehindthelevieson estlevelinfouryearsandup GeneralElectricstruckadeal havelongbemoanedasbeing steelandaluminium. byalmost50%fromayearago. tomergeitstransportbusiness toocumbersome. Thelatestspurtopricerises withWabtec,whichmakes Rusal,Russia’sbiggestpro- stemsfromtheassumption brakingsystems,locomotives FifthThirdBancorp,a ducerofaluminium,warned thatAmericansanctionson andotherapparatusfortherail medium-sizedbankbasedin thatunlessthesanctionsthat Iranmaycurtailoilexports industry.Valuedat$11.1bn,itis Cincinnati,offeredtobuyMB Americahasimposedonitare fromthatcountry. GE’sbiggestdisposalofassets Financial,asmallerlenderin lifted,internationalbankswill yetunderJohnFlannery,who Chicago,inatransactionthat probablystopdoingbusiness tookoveraschiefexecutivein theyvaluedat$4.7bn.Thedeal withit,affectingitsproduction Marketcapitalisation Augustandisrestructuringthe sparkedspeculationthatthere ofmetal.Thecompanyalso £bn grouparounditsthreecore aremorebankingmergersin saidthatitschiefexecutiveand 6 businessesofaviation,health Marks&Spencer thepipeline.Netprofitsin sevendirectorswouldresign 5 careandenergy. America’sbankingindustry aspartofitsefforttoseekrelief 4 3 rosebyahealthy28%inthe fromthesanctions. Ocado Golddigger firstquartercomparedwith 2 SonyuppeditsstakeinEMI 1 thesamethreemonthslast Atanemergencymeeting, MusicPublishingto90%, 0 year,to$56bn. Turkey’scentralbankraised Jan Feb Mar Apr May givingitacatalogueofmore oneofitskeyinterestrates 2018 than2msongs,includinghits Acourtdismissedcharges from13.5%to16.5%asittriedto Source:ThomsonReuters fromtheclassicMotownlabel, againstBarclaysinrelationto haltanotherrunonthe TherewasmorepainonBrit- QueenandCaroleKing,as aloanitobtainedfromQatar’s Turkishlira,whichhad ain’shighstreets,asMarks& wellasfromDonaldTrump’s investmentcompanyduring plungedby5%againstthe Spencer,astaunchlymid- biggestfan,KanyeWest. thefinancialcrisisinorderto dollarinaday.Itsotherrates marketclothingandfood avoidagovernmentbail-out. stayedthesame.Thecurrency retailer,announcedmorestore For other economic data and Britain’sSeriousFraudOffice ralliedafterthemove,butonly closures.Thecostsfromits news see Indicators section mayyettrytoreinstatethe chargesagainstthebank. Blowing hot and cold Steven Mnuchin, America’s treasurysecretary, said that plansto levytariffson Chinese goodshad been puton hold amid progressin talksover trade. China promised to importmore from America, butalso defended itscontro- versial industrial policies. Donald Trump initiallyhailed the outcome, onlyto declare himselfdissatisfied afterpoliti- cal alliesaccused him ofcapit- ulatingto China. One sticking- pointremainsthe penalties imposed on ZTE, a Chinese makeroftelecomsequipment. AsAmerica and China bar- gained, newfrontsin the trade conflictopened up. Japan, Russia and Turkeynotified the World Trade Organisation that Leaders The EconomistMay26th2018 13 The affair American executives are betting thatthe presidentis good forbusiness. Notin the long run MOST American elites be- therealityisthatthecountry’ssystem ofcommerce islurching lieve thatthe Trump presi- awayfrom rules, opennessand multilateral treatiestowards dency is hurting their country. arbitrariness, insularityand transientdeals. Foreign-policy mandarins are Asthe contoursofthisnewworld become clearer, so will its terrified that security alliances costs to business in terms of complexity and predictability. are being wrecked. Fiscal ex- Take complexityfirst. One ofthe ironiesofthe Trump team’s pertswarn thatborrowingis spi- agenda isthat, although theywantto getoutofbusinesses’ rallingoutofcontrol. Scientists hairathome, when itcomesto trade theywantto regulate. deplore the rejection ofclimate change. And some legal ex- When theytinkerwith tariffs, large numbersoffirms have to pertswarn ofa loomingconstitutional crisis. scurryto respond because theyhave global supplychains. The Amid the tumultthere isa strikingexception. The people steel dutiesproposed in March covera mere 0.5% ofAmerican who run companieshave made theircalculationsaboutthe imports, butso farthismonth 200-odd listed American firms Age ofTrump. On balance, theylike it. Bossesreckon thatthe have discussed the financial impact of tariffs on their calls value oftaxcuts, deregulation and potential trade concessions with investors. Overtime, a mesh ofdistortionswill build up. from China outweighsthe hazycostsofweakerinstitutions Because trade isbecomingmore regulated, a newsurveil- and trade wars. And theyare willingto playalongwith Presi- lance bureaucracyissprouting. On May23rd the Department dent Donald Trump’s home-brewed economic vision, in ofCommerce launched a probe ofcarimports. Abill in Con- which firmsare freed from the state and unfairforeign compe- gressenvisagesvettingall foreign investmentinto America to tition, and profits, investmentand, eventually, wages soar. ensure thatitdoesnotjeopardise the country’s“technological The financial fireworkson displayin the firstquarter ofthis and industrial leadership in areasrelated to national security”. yearsuggestthatthisvision iscomingtrue. The earnings oflist- American firms have $8trn of capital sunk abroad; foreign ed firmsrose by22% compared with a yearearlier; investment firmshave $7trn in America; and there have been 15,000 in- wasup by19%. Butasourbriefingexplains, the investment bound dealssince 2008. The costinvolved in monitoring all surge isunlike anybefore—itisskewed towardstech giants, not thisactivitycould ultimatelybe vast. AsAmerica eschews glo- firmswith factories. When itcomesto gaugingthe full costsof bal co-operation, itsfirmswill also face more duplicative regu- MrTrump, America Incisbeingshort-sighted and sloppy. lation abroad. Europe has already introduced new regimes thisyearforfinancial instrumentsand data. The viewfrom the C-suite The expense ofre-regulatingtrade could even exceed the Since winningCongressand the White House, the Republi- benefits of deregulation at home. That might be tolerable, canshave soughtto unleash the powerofbusiness. After the were itnotforthe otherbigcostofthe Trump era: unpredict- election MrTrump held summitswith tycoons, televised live ability. Athome the corporate-taxcutswill partlyexpire after from the boardroom atTrump Tower, and laterfrom his new 2022. America’snegotiatorsare gunningfora five-year sunset HQin the Oval Office. Though bosseshave tired ofthis kind of clause in a new NAFTA deal, although Canada and Mexico pantomime, particularlyafterMrTrump’sequivocationsover would prefersomethingpermanent. Bosseshope thatthe bel- white-supremacist protests in Virginia last summer, they re- ligerence on trade isa ployborrowed from “The Apprentice”, main bullish. Areason isthe Republican corporate-tax reform and that stable agreements will emerge. But imagine that passed in December, the firston such a scale since 1986. Itdoes America stitchesup a deal with China and the bilateral trade several sensible things, includingcuttingheadline rates to av- deficit then fails to shrink, or Chinese firms cease buying erage European levels. The annual savingof$100bn isworth American high-tech components as they become self-suffi- 6% ofpre-taxprofits(itaccountsfora tenth ofthe fiscal deficit). cient(see China section), orMrTrump ismocked forgetting a Deregulation isin full swing. Thisweeksawa relaxation of bad deal. Ifso, the White House mightrip the agreement up. bankingrules(see Finance section). The leadersofmany agen- cieshave been replaced with Trump appointees. The change at The newlaws ofthe jungle the top, firmssay, meansofficialsare beingmore helpful. Asur- Anotherreason forthe growingunpredictabilityisMr Trump’s prisingnumberofboardroomssupporta muscularstance on urge to showoffhispowerwith actsofpure political discre- trade with China. If, forargument’ssake, China capitulated to tion. He has just asked the postal service to raise delivery American demandsand imported $200bn more goodsa year, pricesforAmazon, hisbête noire and the world’ssecond-most itcould boostthe earningsofAmerica Incbya further 2%. The valuable listed firm. He could easilystrike outin anger atother benefitsforbusinessofMrTrump are clear, then: less taxand Silicon Valley firms—after all, they increasingly control the red tape, potential trade gainsand a 6-8% upliftin earnings. flowofpolitical information. He wantsthe fate ofZTE, a Chi- The trouble isthatcompaniesare often pooratassessing nese telecoms firm banned in America for sanctions viola- nebulousrisks, and CEOs’ overall viewofthe environment is tions, to turn on hispersonal whim. Inevitably, other countries fallible. Duringthe Obama yearscorporate America was con- are playingrougher, too. China’santitrustpolice are blocking vinced itwasundersiege when in fact, judged bythe numbers, Qualcomm’s $52bn takeover ofNXP, a rival semiconductor itwasin a golden era, with average profits31% above long-term firm, asa bargainingchip. When policybecomesa rolling ne- levels. Nowbossesthinktheyhave entered a nirvana, when gotiation, lobbyingexplodes. The lesspredictable business en-1 14 Leaders The EconomistMay26th2018 2vironmentthatresultswillraisethecostofcapital. Republicansarerightthattaxcutsand wise deregulation AsAmerica’sexpansiongetslongerinthetooth,thesearbi- canboostfirms’competitiveness. Butlittle progressis being traryinterventionscouldintensify.MrTrumpexpectswagesto made on other priorities, including repairing infrastructure, rise,but85%offirmsintheS&P500areforecasttoexpandmar- ensuringsmallfirmsarenotsquashed bymonopoliesand re- ginsby2019,reflectingacontrolofcosts.Eithershareholders, formingtheeducationsystem. Mostfirmspride themselves on orworkersandMrTrump,aregoingtobedisappointed.Given beinglevel-headed,butatsome pointthatbleedsinto compla- thatinterestratesarerising,arecessionislikelyinthenextfew cency.Americanbusinessmayone dayconclude thatthis was years.Inadownturn,Americanbusinessmayfindthatitsfa- themomentwhenitbooked all the benefitsofthe Trump era, bledflexibilityhasbeencompromisedbecausethepoliticsof whilefailingtoaccountproperlyforthe costs. Astrategythat firingworkersandslashingcostshasbecometoxic. assumesrevenuesbutnotexpensesrarelymakessense.7 Auditreform Shape up, not break up The auditindustryneeds fixing. Butdismantling the Big Fouris notthe wayto do it WHEN a company goes ofaccountsthatarerestated because ofa material error has bankrupt, recriminations fallen sharplyoverthe pastdecade. Break-up would bring un- tend to follow. Even so, the fury intended consequences. As the world economy shifts from caused bythe recentcollapse of makinggoodsto sellingservices, auditingisbecomingmore Carillion, a British contracting complicated: scale and the multidisciplinaryexpertise oflarge firm, isunusual. Areporton the firmscountformore. Smallerfirmsriskbeingtoo reliant on a debacle by British MPs, which fewlarge clients, which maycloud theirjudgment. was released this month, sav- Ifyouwantradical fixes, there are betterwaysto correctthe aged everyone from the firm’sexecutivesto itsregulators. But incentive problemsatthe core ofthe industry. Youcould sever the MPs reserved special bile for the Big Four accounting the linkbetween auditorsand theirclientsbyrequiring securi- firms—notjustKPMG, which audited Carillion’saccountsfor 19 tiesregulatorsto pickfirms’ auditors. Oryoucould introduce years, butalso itspeers, Deloitte, EYand PwC, each ofwhich mandatoryinsurance ofaccounts, wherebycompaniesmust extracted feesfrom the company, before and afterits fall. The buycoverage forlossesfrom accountingerrorsand the insur- MPshave called fora reviewinto the auditmarketand asked it erswould therefore appointauditorsto assesstheirrisk. to saywhetherthe BigFour’sBritish armsshould be broken up. The rowislocal, butconcernsaboutthe industryare global. One bean ata time Criticsofthe auditorsare rightin two respects: that the in- Such ideashave been floatingaround foryears, buteven these dustrymatters, and thatitneedsreform (see Finance section). are too hasty. Instead regulatorsshould sharpen tools thatare Itisin everyone’sinterestthatauditingworks. Ifinvestors can- alreadyavailable in Europe. Theycould lowerthe cap on non- nottrustfinancial statements, then companies’ costofcapital auditfeescharged to an auditclientfrom today’sgenerouslev- will rise, crimpinggrowth and employment. Itisalso true that el of70% ofthe auditfee. Underrulesintroduced in 2016, Brit- the industryhasflaws. Itishighlyconcentrated. The BigFour ish companieswith the same auditorforten yearsmust re-ten- audit98% ofthe companieslisted on the S&P500 and the FTSE der; theyare forced to rotate after20. Such ruleslookdraconian 350 indexes. And auditorsare paid notbyinvestors, whom to American eyes, where the average auditortenure for the first theyserve, butbythe companywhose accountstheyscruti- 21 companies in the Dow Jones Industrial Average to have nise. Thatraisesquestionsaboutobjectivity, especially since made disclosuresthisyearisa cosy66 years. Newresearch the BigFourearn nearlytwice asmuch from consulting and findsthatauditorsare mostlikelyto find misstatements early otherservicesastheydo from auditing. Pastreforms banned in theirtenure; bythe tenth year, the benefitsofa fresh pairof them from providingboth an auditand certain consulting ser- eyesare lost. Academicsalso find thatthe BigFour’sfeesrise vices to the same client, but conflicts of interest remain. In with tenure. Even Britain’s20-yearlimitistoo long. America non-auditfeescharged to the same clientamount to a Auditors in many countries are already required to add quarterofauditfees; in Britain the figure isaround a half. flesh to the bare bonesofthe auditopinion. Thatis to be en- Abreak-up, whetherto separate the auditarmsfrom the couraged. Transparency over the main points ofcontention consultingbusinessesorto turn the BigFourinto a Middling with management, and the size ofrevisionsmade to the ac- Eight, seemsto offera simple solution to these problems. It countsasa resultofscrutiny, would castlighton auditors’ suc- would atfirstaffectonlythe British partsofthe firms’ global cesses, notjusttheirfailures. And thatin turn would help in- networks, butthe idea could spread. vestorsto assessauditors’ performance. Although a break-up mightbe justified asa lastresort, itis Foryearsshareholdershave waved through a company’s premature. Investorshave exaggerated expectationsof audi- choice ofauditoratannual general meetings. Abitmore bol- tors’ abilityto detectfraud. Because auditsrelyon sampling, shinesscould be salutary. Lastmonth, forinstance, over a third some skulduggerywill inevitablyslip through. There are also ofinvestorsin General Electricvoted againstthe reappoint- signsthatthe industryisimproving. Manycountriestightened mentofKPMG, itsauditorfor109 years. The case forbreaking the rulesaftera scandal in 2001sankEnron, an energy-trading up the BigFourisunproven. Buteveryso often, shareholders firm, and itsauditor, ArthurAndersen. In America the number need to remind the quartetwho theirmain customersare. 7 16 Leaders TheEconomistMay26th2018 Ebola Back to blood AnewoutbreakofEbolainCongowilltestwhattheworldhaslearnedfrom the calamitous epidemicof 2014 INMARCH2014thebravedoc- threemonthstheWHOsaysitneeds$26m.Thatisabargain: EbolainwestAfrica tors of Médecins Sans Fron- lasttimeitcost$3.6bn to contain the epidemicand itknocked Weeklyconfirmedcases,2014 tières(MSF)soundedanalarm. $2.2bnofftheGDPofthe worst-affected countries. WHOdeclares 800 Theywerestrugglingtocontain Technologyhasimproved since 2014. Notonlyisthere a international 600 emergency anoutbreakofEbolainGuinea, quickerdiagnostictest, butthere are also ample supplies ofan 400 200 apoorandviolentwestAfrican effectivevaccine. Thousandsofdosesare beingdeployed in a 0 state. The Ebola virus causes a “ring”strategy, to inoculate those who have been in contact J F M AM J JA S ON D terrifyingdisease:afeversome- withknowncasesofEbola, aswell astheircontactsin turn. timesfollowedbymassiveinternalandexternalbleeding.Itis Jabsarealsobeingoffered to front-line health workers—an es- contagious,viabodyfluids,andfrequentlyfatal.Yetnoone sential precaution, given the large number ofsuch workers paidmuchattentiontoMSF’swarning,andbyJunetheepi- whodiedlasttime. Itisnotyetclearhowwell ring vaccination demichadspreadto60placesinthreecountries.Itwasnotun- willcontainthe earlystagesofan outbreak, when chains of tilAugustthatyearthattheWorldHealthOrganisation(WHO) transmissionare lesscertain. The vaccine isalso hard to ad- declared an international health emergency. The delay al- minister,sinceitmustbe keptaslowas-80°C. However, ifthis lowedEbolatorageoutofcontrol,killing11,000peopleinsix oneprovesunsuitable, anotherisavailable thatmight work. countriesandleaving17,000childrenwithoutoneorbothof their parents. Only after the epidemic had peaked did the Vigilantagainstthe virus worldpayheed.Somegovernmentspanicked,imposingflight Even with all these advantages, containment will be hard. bansonalltravellersfromaffectedcountries.Thisprompted Congoisatrociouslygoverned; gettinganythingdone there is manytogobyroad,wheretheywerehardertotrack. tricky.Theviruscould spread alongthe Congo river, the coun- Globalpublic-healthauthoritiesvowedtolearnfromthis try’smainartery. Furtherinfections, and deaths, are all butcer- catastrophicfoul-up.AfreshoutbreakofEbola,thistimeinthe tain.Still,theworld ismuch betterplaced to fight Ebola than it DemocraticRepublicofCongo,willrevealwhethertheyhave wasfouryearsago. Publicand charitable moneyensured that doneso(seeMiddleEastandAfricasection).Sofar,thesigns therewerevaccine stockpiles. America’sDepartmentofDe- aregood.Thebigmistakelasttimewastodither—containing fencehelpedto fund vaccine research—which for-profit drug anepidemicearlyiseasierandcheaperandsaveslives.This firms are unlikely to do, since such vaccines must be given time medical staff have been rushed to the scene, the 1m- away,notsold.Anewgroup called the Coalition forEpidemic strongcityofMbandakaontheCongoriver.Protectivegear PreparednessInnovations(CEPI) wassetup to raise money andmedicineshavebeenpromptlydeployed.Healthworkers andchannelitto the mostpromisingprojects. haveswiftlystartedtotracethosewhohavebeenincontact Ifthisepidemiciscontained, the world should learn the les- withEbolasufferers.Congo’sneighboursareonalert.Isola- son.Ebolaisjustone ofmanyhorrendouspathogens, includ- tionzonesandtreatmentcentreshavebeensetup.TheWHO ing Lassa fever, Marburg fever, SARS and Nipah virus, that hasreleasedcashfromacontingencyfund.Canada,Germany, couldbecomeepidemics. CEPIwantsto reduce thatriskby de- theEU,AmericaandBritainhavepledgedmore.Forthenext velopingvaccinesnow. Itisan urgenttask. 7 Colombia’selection Faulty front-runners The two leading candidates forthe presidencyare flawed THElasttimeColombiaelect- Candidatesin thisyear’svote are rejectinghislegacy. The ed a president, in 2014, the front-runnerisIván Duque (pictured left), an allyof a conser- countrywasatwar. Itsarmy was vative formerpresident, Álvaro Uribe, who wasthe peace ac- fighting the FARC, a Marxist cord’smostferociouscritic(see Americassection). His closest guerrilla group dedicated to competitorisGustavo Petro (on the right), a formermayor of overthrowing the state and to Bogotá who washimselfa memberofthe M19 guerrilla group making money from drug-traf- in the 1980s. He ispro-peace, buthe ragesfrom the left against ficking and other crimes. In 50 the establishmentto which MrSantosbelongs. years220,000 people died and 7m were displaced. Thisyear’s Either of the front-runners would be a bad choice. Mr presidential election, the firstround ofwhich isscheduled for Duque isa moderniserbuthismentor, MrUribe, isnot. As May27th, isthe firstsince the war’send. PresidentJuan Manuel president, Mr Uribe led the offensive against the FARC that Santosnegotiated a peace deal with the FARCin 2016 and won paved the way for peace. But he also has an authoritarian the Nobel peace prize foritbutcannotrun again. streak, and isallied with large landownerswho will resist re-1 18 Leaders The EconomistMay26th2018 2formsmandatedbythepeacedeal,suchasupdatinglandre- arunningsore.Peopleareangrythatthe peace accord hasnot cords and property tax. Colombians are right to wonder endedtheviolenceinthecountryside and allowsFARClead- whether Mr Uribe would have too much influence over a erswhohavecommittedcrimesto sitin congress. Duquepresidency. Othercandidateshavebetteranswersto mostofthese com- MrDuquesharesMrUribe’sdisdainforthepeacedealand plaintsthanMrDuqueorMrPetro. Humberto de la Calle, the willweakenitifhebecomespresident.Thatwouldnotrekin- government’schiefpeacenegotiator, isa worthyaspirant. Ser- dleall-outwar.Butitmightpreventapeaceagreementwith gioFajardo,amathematician who hasputclean politics and theELN,aguerrillagroupthatisstillinthefield. educationatthecentreofhiscampaign, looksasifhe hasa bet- MrPetrowouldbeaworsepresident.Hisplansincludethe terchance.AformermayorofMedellín and governorof the self-defeatingnotionofpullingColombiaoutoftheoilbusi- departmentofAntioquia,he hasshown that, unlike Mr Petro, ness,itschiefsourceofexports.HistermasmayorofBogotá hecanrunagovernmentsuccessfully. Unlike MrDuque, he wasmarkedbyclasheswiththecitycouncilanddisputeswith wouldseektoimprovetheimplementation ofthe peace agree- contractors,oneofwhichleftrubbishuncollected.Hisoppo- ment,notundermineit.Hegetsourvote. nentscomparehimtoHugoChávez,wholaunchednext-door Venezuelaonitscoursetowardseconomicandpoliticaldisas- It’snotVenezuela ter. That is an exaggeration. But neitherMrPetro’s tempera- Evenifthewrongmanwins, do notdespairforColombia. Un- mentnorhisideasequiphimforthepresidency. like Venezuela, whose president, Nicolás Maduro, has just Colombians’hungerforchangeisunderstandable.Income won a fraudulent election, Colombia is a solid democracy inequality,thoughfalling,isthesecond-highestinLatinAmeri- withrelativelystronginstitutions. Atleastthe next president, ca.Schoolsandhealthcarearenotgoodenough.Corruptionis whoeverhemaybe,isunlikelyto change that. 7 Truthandtechnology Cinema, not vérité Afaked video ofDonald Trump shows howAI will make propaganda cheap and easy “DEAR people ofBelgium. shadeinsubtlewaysthatexaggerate ordownplaywhat isreal- This is a huge deal. As lyhappening. The video, sp.a says, wasnotintended to de- you know, I had the balls to ceive. The game isgiven awaynearthe end, when MrTrump withdrawfrom the Parisclimate says: “We all knowclimate change isfake—justlike this video!” agreement, and so should you.” Butnoteveryone will be so scrupulous. Itsoundslike Donald Trump—a Thisprospectwould be worryingatanytime. Itisparticu- bit, anyway. Itisdefinitely a pic- larly unwelcome now. The internet has already given parti- ture of Donald Trump. But the sans and provocateurs a cheap and effective way to spread person in the video, produced bysp.a, a left-wingBelgian polit- written rumoursand untruths. Faked videoswill be similarly ical party, isnotquite the American president. Itis a computer- easyto disseminate, butwill be more powerful precisely be- tweaked facsimile, into whose mouth hasbeen puta not-en- cause people have notyetlearned to mistrustfilm and sound- tirelyserioushomilyaboutBelgium’scarbon emissions. tracks. Justimagine the mayhem sown bya faked video show- Faked imagesare notnew. Stalin airbrushed hisenemies ing Mr Trump confessing that he had taken money from outofhistorybyhavingthem removed from official photo- Russia’spresident, VladimirPutin. graphs. Visual-effectsstudiosin Hollywood transpose actors’ facesonto the bodiesoffitter, more disposable stunt doubles. The camera often lies Buttinkeringwith video ishard. Doingitwell requires special- Whatto do? Ideally, people will adapt, becomingmore scepti- istswho are scarce and expensive. cal, and the world will be quickto applythe lessons from “fake Technologyismakingthingscheaperand easier. The video news”. Butthatwill be hard. Technologiessuch asencryption bysp.a isa “deep fake”—which drawson “deep learning”, an and digital signingcan help trace a film orpicture back to a artificial-intelligence technique used in everythingfrom recog- trusted source, although maliciousactorswill have no incen- nisingfacesto playingGo, a complexboard game. To produce a tive to use them. Fact-checkingwill devote more time to videos deep fake, all youneed isa piece offree software, some pic- and picturesasdigital fakerybecomeswidespread; but such turesofthe person whose face youwish to transpose, an exist- servicescan onlyeverbe reactive, sendingthe truth panting ingpiece offilm to paste itinto and a scriptforyour digital cre- aftera lie thatisalreadyhalfwayacrossthe world. Journalists ation to read. The computertakescare ofthe rest. And unlike and bloggerswith a reputation foraccuracymightsee demand special-effectsartists, computersare cheap and widespread. fortheirservicesrise—though onlyifpeople wanttruth rather Fornow, the resultsare often amateurish. The video ofMr than titillation orconfirmation oftheirbiases. Trump issuspiciouslyblurry. Hisspeech isstilted. His mouth Before the era ofmassmedia, massliteracyand cheap com- movesin odd, not-quite-human ways. Butasalgorithms are re- munication, knowledge ofthe world wasfoggy. Itwasa strug- fined and computingpowergetscheaper, thatwill change. A gle to sortfactfrom rumour. Cheap, high-qualitypropaganda previous demonstration, involving an ersatz BarackObama risksmakingthe truth harderto find, furtherdebasing demo- and considerablymore care, produced slickerresults. Pictures craticpolitics. Technologycould make the global village feel and video will become like text: easierto fake outright orto more like a fearful, distrustingswamp. 7 22 Letters The EconomistMay26th2018 able,standardsvary;60%of outstrippedthatinAmerica, Yourchange in grammarrules Forthe good ofall thepathologyreportson butGDPperpersonhasnev- will surelylead to the sad Universal health care isachiev- breast-cancercasesinLagos erthelessgrownevenfaster? demise ofthatfinestsubgenre able ifitiscarried outin stages failedtorecordwhetherthe JOHNBEARD ofcorrespondence to The (Special report, April 28th). The tumourhadspreadtothe Director Economist: the letterdesigned ultimate aim isto provide lymphnodesornot. DepartmentofAgeingand grammaticallyto mockyour servicesto all. Butin countries Withoutaccuratediagnosis, LifeCourse avoidance ofthe splitinfin- where resourcesare limited, asubstantialproportionof WorldHealthOrganisation itive. I will continue mournful- don’tprovide all services; patientswillreceiveinappro- Geneva lyto rememberthose halcyon instead focuson solutionsthat priatetreatmentandbeillfor days, while the wavesof are the mostcost-effective, in longer.Withoutincorporating modernitybegin to inexorably To boldlygo particularthe onesthatbenefit forgottencomponentslike erode the shoresoftradition. poorpeople the most. Known effectivesurgery,pathology Congratulationsto The Econo- OSCAR DESPARD asprogressive universalism, andlaboratorymedicineinto miston slaughteringthe old Dublin thisiswhywe alreadyhave a broad-basedsystems,achiev- rule againstsplitinfinitives well-defined firststep towards ingtheaimofuniversalhealth (Johnson, April 28th). Please Ahostile environment universal health care in the carewillremainoutofreach. relentlesslycontinue to radi- form ofchildhood immunisa- KENNETHFLEMING callycull prescriptive language tion. Today86% ofthe world’s Senioradviserforpathology rules. There are manymore children receive basicvaccina- CentreforGlobalHealth thatneed discarding. You tions. With more than 30 NationalCancerInstitute mightconsultRobert vaccine dosesadministered Washington,DC Burchfield’s“The English everysecond, no otherhealth Language”: “No construction is intervention reachesso many Thereisanincreasingburden everlastinglystable, no people. With routine immuni- ofchronicdiseasesindevel- cherished rule remains sation comessupplychains, opingcountries,causedbythe unbroken.” Anystyle-guide cold storage, trained health- adoptionofthelifestylein editorsinclined to massexecu- care staff, data monitoring, developedcountrieswitha tionsshould be reassured that disease surveillance, health higherrelianceonconve- historyison the reformers’ recordsand more. Itcreates a niencefoods.Thisleadsto side. Burchfield again: “There is IfBritain’snewhome secre- platform forotherhealth inflammation,diabetes,obesi- little doubtthatmostofthe taryhasthe stamina to read interventions, such asmalaria- tyandcardiovasculardisease. newfeaturesthatare intensely the same piece ofAyn Rand’s prevention measures. Manyrichercountriesare disliked bylinguisticconserva- turgid prose twice a yearhe SETH BERKLEY tryingtoreversethisbygoing tiveswill triumph in the end. mighthave whatittakesto Chief executive backto“ancestral”diets,hence Butthe language will notbleed reform the dysfunctional Gavi, the Vaccine Alliance thepopularityoffarmers to death. Norwill itseem in Home Office (Bagehot, May Geneva marketsandagricultural anywaydistorted once the old 5th). Then again, histaste in co-operatives. observanceshave been literature maybelie an imagi- Even iflow-income countries F.RAMZIASFOUR forgotten.” nation too sterile forthe task in increased theirtaxesto the CaliforniaCentrefor Carryon culling! hand. Asone witpithilyput it: maximum extentthatthe IMF FunctionalMedicine JACK WINKLER “There are two novelsthatcan suggestsisrealistic, and they SanRafael,California London change a bookish 14-year-old’s increased the proportion of life: ‘The Lord ofthe Rings’ and thatrevenue allocated to Ettu, Brute? I pen thismissive, ‘AtlasShrugged’. One isa Redefining the old health, theycould still only heavyofheartand slumped in childish fantasythatoften afford to spend $10 a person. “Small isn’tbeautiful” (May despair. Nowthatyourvener- engendersa lifelongobsession The World Bankestimatesthey 5th) mentioned the “depen- able publication, the lastbas- with itsunbelievable heroes, need to spend $76 a person to dencyratio” and defined the tion ofgrammatical fortitude, leadingto an emotionally achieve universal health care. working-age population as15- hasabandoned itsprincipled stunted, sociallycrippled MARCUS MANUEL to 64-year-olds. Itistime to stand againstsplittingthe adulthood, unable to deal with Senior research associate challenge these outdated infinitive, are anyofthe sacred the real world. The other, of Overseas Development Institute stereotypes. Overone-third of rulesofgrammarsafe? What course, involvesorcs.” London people in thisage group in the next? Will we all soon be Given thatthe Home Office EUisnotactuallyworking. ponderingthe question ofto ismore Mordorthan the new Ifsurgeryisthe “neglected And ratherthan beingdepen- be orto notbe? Jerusalem, perhapsSajid Javid stepchild” ofglobal health, dent, people overthe age of 64 H. COLEMAN SWITKAY would have been betteroff diagnosisisitsorphan. In contribute in manyways, by Bala Cynwyd, Pennsylvania with Tolkien. manylow- and middle-income workingand payingtaxes, JONATHAN KENT countriesproblemsarise from particularlyconsumption The Economistshould nottake Wadhurst, Sussex7 alackofcapacityand stan- taxes. Theyalso often fund anynotice ofthatFabian dardsfordiagnosis. To illus- theirown retirement. windbag, George Bernard trate the problem, 15 countries An ageingpopulation can Shaw. Perhapsyourstyle has Lettersarewelcomeandshouldbe in sub-Saharan Africa have presentchallenges, butsound been changed to appeal to addressedtotheEditorat TheEconomist,TheAdelphiBuilding, five orfewerpathologists policyresponsescan address yourlarge North American 1-11JohnAdamStreet, (Britain hasaround 1,800). In them. Otherwise howdo you readership, unsplitinfinitives LondonWC2N6HT China the shortfall of explain that, since 2000, the beingextinctin those parts. E-mail:[email protected] pathologistsisestimated at up growth ofthe old-age depen- J.M. HALLINAN Morelettersareavailableat: to 120,000. Even where avail- dencyratio in Germanyhasfar Sydney Economist.com/letters

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