Table Of Content

The race to replace May After the tsunami Trade: why USMCA? Bigging up the gig economy OCTOBER6TH–12TH2018 China’s designs on Europe Contents The Economist October 6th 2018 5 8 The world this week United States 35 The other mid-terms States of play Leaders 36 Amazon and $15 11 Geopolitics and money One-click socialism! China’s designs on Europe 37 Donald Trump’s wealth 12 The Supreme Court Thanks, Pop Kava-no 37 Ending gerrymandering 12 The gig economy Map scrap Workers on tap 38 Wisconsin 13 Italy’s budget plans Schooling Walker ToriesTheresa May clings on Nearer the brink as prime minister, but a crowd 39 Texas 14 NAFTA of contenders is waiting for her Beto together Marginal revolution to fall, page 21. All the energy 40 Lexington On the cover at the Conservative Party From #MeToo to #ScrewYou An increasingly wealthy conference was with the hard Letters China has designs on Europe. Brexiteers: Bagehot, page 28 16 On Jeremy Corbyn, How should Europe respond? The Americas Germany, AI, Singapore, Leader, page 11. Chinese meat inspections, free will 41 North American trade investment in Europe is The new NAFTA growing; so is its influence. 42 Bello The European Union is taking Briefing Coping with Venezuelan notice at last, page 18. It 18 China in the EU refugees was hypocrisy for America to Gaining wisdom, “welcome” China’s rise. Yet 44 Bolivia’s access to the sea marching forward honesty may be worse: Landlocked and out of luck Chaguan, page 56 44 Peru Britain Fujimori unpardoned 21 The Conservative Party TheEconomistonline Succession battle Middle East and Africa Mid-termsThe hollowed-out Dailyanalysisandopinionto 22 Wembley stadium 45 Crime in South Africa Democratic Party tries to regain An own-goal? supplementtheprintedition,plus Gun town control of state legislatures, audioandvideo,andadailychart 24 Channel 4 page 35. A once-dominant Economist.com Hopping 46 Cameroon’s elections Republican governor stumbles, The old man and the E-mail:newslettersand 24 Class and education page 38. The Texas Senate insurgency mobileedition Open the debate race is the most interesting Economist.com/email 47 Middle East security 26 Elderly suicides contest of 2018, page 39. Four NATO for Arabs? Printedition:availableonlineby One foot out of the grave more states could curb 7pmLondontimeeachThursday 47 Saudi Arabia gerrymandering politicians, 26 Disappearing banknotes Economist.com/printedition The long arm of the prince page 37 Paper trail Audioedition:availableonline 48 Tunisian politics 27 Tabletop gaming todownloadeachFriday Athird sheikh emerges Geekiness in miniature Economist.com/audioedition 48 Egypt and Britain 28 Bagehot Obloquy for an obelisk Brexit’s true believers Asia Europe 49 Twin natural disasters 29 Italy’s budget row in Indonesia Volume429Number9112 Di Maio tries to take Wasteland charge PublishedsinceSeptember1843 50 Banyan totakepartin"aseverecontestbetween 30 The defence of Sweden intelligence,whichpressesforward,and What if Kim is sincere? War clouds anunworthy,timidignoranceobstructing 51 Sexism in India ourprogress." 32 Catalonia one year on NAFTAIts renegotiation is a Nuns, pilgrims and starlets EditorialofficesinLondonandalso: The splitters are splitting relief—but not a success: leader, Amsterdam,Beijing,Berlin,Brussels,Cairo, 51 The South China Sea page 14. All three members of Chicago,Johannesburg,Madrid,MexicoCity, 32 Potato prices Hot water the new United States-Mexico- Moscow,Mumbai,NewDelhi,NewYork,Paris, The chips are down SanFrancisco,SãoPaulo,Seoul,Shanghai, 52 The Philippines Canada Agreement are hailing Singapore,Tokyo,WashingtonDC 34 Charlemagne Day-and-night politicians awin-win deal. The reality is In Europe’s McCainland depressingly different, page 41 53 Politics in Bangladesh Bullying begum 1 Contents continues overleaf 6 Contents The Economist October 6th 2018 70 The IMF China Go, Gita Gopinath 54 Socialstability 70 Economics research Enumeratingunrest Tyranny of the few 55 Theprivatesector 71 Pensions in Portugal Solong,andthanksfor One foot in the Algarve allthegrowth 72 Free exchange 56 Chaguan Companies and political TheAnalectsofTrump influence International IndonesiaThe danger has Science and technology BullyingTwo articles look at 57 Schoolbullying not yet passed for victims of 73 The Nobel prizes school bullying—first in its Theunhappiestdays the earthquake and tsunami, Trophy hunting age-old, physical variety and oftheirlives page 49 then its digital form, page 57 75 Marine biology 58 Cyber-bullying Invisibility cloaks Clicksandstones 75 Astronomy Subscription service New moon Business For our full range of subscription offers, 76 Hoax science including digital only or print and digital 59 GeneralElectric Get real! combined visit Blamegame Economist.com/offers You can also subscribe by mail or telephone at 60 Bartleby the details provided below: Books and arts Keepcalmandgohome Telephone: +44 (0) 845 120 0983 77 Anne Frank’s diary 61 Generationgap Web: Economist.com/offers Dear Kitty Millenniallonging Post: The Economist 78 Churchill SubscriptionCentre, 61 Thyssenkrupp P.O. Box 471, The lion’s roar Thisend,cropped Haywards Heath, The gig economyHow 79 New Orleans RH16 3GY 62 Chinesetrademarks UK governments should deal with Big Easy reading Pigstomarket the rise of short-term work: Subscription for 1 year (51 issues) 80 Johnson leader, page 12. The worries 63 Tesla Print only UK – £145 Bubble and squeak about gig-economy workers Onehandoffthewheel are mostly overblown, page 66. 63 Facebook’swoes Principal commercial offices: Amazon raises the minimum GrrrDPR 82 Economic and financial The Adelphi Building, 1-11John Adam Street, wage in America and Britain, 64 Shippingsetssail indicators London WC2N 6HT page 36 Statistics on 42 economies, Tel: +44 (0) 20 7830 7000 Shivermetimbers plus our monthly poll of Rue de l’Athénée 32 forecasters 1206 Geneva, Switzerland Finance and economics Tel: +4122 566 2470 750 3rd Avenue, 5th Floor, New York, NY 10017 66 The gig economy Obituary Tel: +1212 5410500 Serfs up 84 Alan Abel 1301Cityplaza Four, 68 Buttonwood One born every minute 12 Taikoo Wan Road, Taikoo Shing, Hong Kong Keeping it real Tel: +852 2585 3888 69 Indian non-bank finance Other commercial offices: Lurking in the shadows Chicago, Dubai, Frankfurt, Los Angeles, Paris, San Francisco and Singapore 69 Australian banks The charge sheet GEJohn Flannery could not reverse the mistakes of former chiefs rapidly enough. Will Larry Culp do better? Page 59 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. 8 The world this week The Economist October 6th 2018 theChinesemanoeuvrewas withGreecethatwouldallow an“obligationtonegotiate Politics “unsafeandunprofessional”. MacedoniatojoinNATOand sovereignaccesstothesea”for theEUinreturnforthename- Bolivia.Bolivialostitscoast- AcourtinnorthernChina changeisnowindanger. linetoChileinawarin1884. sentencedaformerdeputy Thecourtdidsaythatasettle- chiefofthecountry’ssecuri- Isanywheresafe? mentofthedisputewasa tiesregulator,YaoGang,to18 JamalKhashoggi,aprominent “matterofmutualinterest”. yearsinprisonfortaking Saudijournalistandgovern- bribesvaluedat69myuan mentcritic,vanishedafter Peru’ssupremecourtover- ($10m)andinsidertrading. visitingaSaudiconsulatein turnedthepardongivento Istanbul.MrKhashoggihad AlbertoFujimori,aformer FanBingbing,aChinesefilm beenlivinginexileinWash- presidentwhohadbeenjailed starwhosecreditsinclude ington,DC.“Wedon’tknowif forthekillingof25peoplebya “IronMan3”and“Despicable heisbeingdetained,ques- government-backeddeath Me3”,wasfined883myuan tionedorwhenhewillbe squadintheearly1990s.He ($129m)fortaxevasion.China released,”saidtheWashington waspardonedonhealth Anearthquakeandtsunami iscrackingdownoncelebrities Post,forwhichhewrote. groundsinDecember2017by strucktheIndonesianisland forallegedlymis-statingtheir PedroPabloKuczynski,the ofSulawesi,causingwide- earnings.MsFanhadbeen Iraq’sparliamentelecteda then-president. spreaddestructioninand secretlydetainedsinceJuly. newpresident,BarhamSalih. aroundthecityofPalu.The MrSalihquicklynamedAdel CoalitionAvenirQuébec,a deathtollstandsatmorethan Maygo-go Abdul-Mahdi,aShia centre-rightparty,wonan 1,400andrising.Damaged TheresaMay,Britain’sprime politician,asprimeminister- electioninCanada’sFrench- roadsandbridgeshaveham- minister,dancedtothelectern designate,endingaperiodof speakingprovince,defeating peredemergencycrews.Some attheConservativeParty deadlockfollowinganelection theLiberalParty.Itisthefirst affectedareasremaincutoff. conference.Sheclaimedthata inMay.MrAbdul-Mahdiwas timethatapartyotherthanthe decadeofausteritycouldsoon backedbythetwolargestblocs LiberalsortheseparatistParti RosmahMansor,thejewel- beover,tookaswipeatthe inparliament,avertinga QuébécoiswillgovernQue- lery-lovingwifeofMalaysia’s LabourPartyandwarned potentialdisputebetween becinnearly50years. formerprimeminister,Najib hardlineBrexiteersthat,ifthey Shiapoliticians. Razak,waschargedwithmon- voteagainsther“Chequers” Notmuchmarginforerror ey-laundering.SheandMr Brexitplan,“weriskendingup TheWorldBankraisedcon- TheRepublicanleadershipin Najibarebothbeinginvestigat- withnoBrexitatall.”MrsMay cernsoveranewlawin theSenatepressedtobringa edinconnectionwiththe hasbeendoggedbyspecu- Tanzaniathatwouldallowthe votetothefloorontheconfir- disappearanceofbillionsof lationofaleadershipchal- governmenttojailpeoplewho mationofBrettKavanaughto dollarsfromagovernment lenge.BorisJohnson,herbig- questionofficialstatisticsfor theSupremeCourt.TheFBI investmentfund. gestrival,urgedthepartyto uptothreeyears.Thelawis wastaskedwithinvestigating “chuckChequers”. thelatestattemptbythegov- claimsofsexualmisconduct DennyTamaki,thesonofa ernmenttosuppresscriticism madeagainstMrKavanaugh. Japanesewomanandan Italyplaceditselfonacollision ofitspolicies,whichhave Americanmarine,waselected coursewiththeEuropean slowedeconomicgrowth. TaxofficialsinNewYorkstate governoroftheJapanese Commissionbyproposinga openedaninquiryintoallega- islandofOkinawa.Hewants budgetdeficitof2.4%fornext ThecentralbankofLiberia tionsthatmillionsofdollars anAmericanairbaseonthe year.Sinceeconomicgrowthis deniedearlierclaimsbythe weretransferredtoDonald islandtobeclosed,insteadof anaemic,thiswillresultina governmentthatithadlost Trumpinthe1990sfromhis moved,asthecentralgovern- furtherincreaseinItaly’sal- morethan$100m-worthof father’spropertybusinessin mentproposes. readyhugedebtstockasa cash,theequivalentof5%ofits questionableways. proportionofGDP. GDP.Thebanksaidithad Osakacutits60-yearsister-city foundthenotesinitsvaults. relationshipwithSanFrancis- UnitedStates cooverastatuehonouring AfterNAFTA Drug-overdosedeaths*,’000 “comfortwomen”inthe CanadaagreedtojoinAmerica 80 Californiancity’sChinatown. andMexicoinadealtorevise Other 60 SuccessiveJapanesegovern- theNorthAmericanFreeTrade mentshaveminimisedthe Agreement.Underitsnew 40 scaleofsexslaveryinJapanese name,theUnitedStates- Opioids 20 militarybrothelsduringthe Mexico-CanadaAgreement, 0 secondworldwar,andoffered CanadawillgiveAmerican 2015 16 17 18 half-heartedapologiesforit. farmersabitmoreaccesstoits Source:CentresforDisease *12-month ControlandPrevention movingtotal dairymarketbutthemuch AChinesedestroyersailed largercartradewillbecome Congresspassedabipartisan within40metresofanAmeri- PeopleinMacedoniavotedin lessfree.Americaagreedto billtocombatopioidabuse. canwarshipinadisputedarea areferendumtorenametheir keepNAFTA’sdispute-settle- Themeasuresincludemore oftheSouthChinaSea.The countryNorthernMacedonia. mentmechanism. fundingforthetreatmentof Americanvesselwasperform- Althoughmorethan90%of addictsandacrackdownon inga“freedomofnavigation” thosevotingapprovedthe TheInternationalCourtof theuseoffentanyl.Anestimat- operationnearreefsclaimed change,theturnoutwaswell JusticeinTheHaguerejected ed49,000Americansdiedof byChina.America’snavysaid undertherequired50%.Adeal Bolivia’sclaimthatChilehas opioidoverdoseslastyear. 1 The Economist October 6th 2018 The world this week 9 Model 3 forthe firsttime. It doubled lastyear, itspre-tax erate will spin offitsprofitable Business produced 53,239 Model 3sin annual losshad widened to elevator-technologybusiness, the latestquarter, butisstill £185m ($240m) asitforked out car-partsunitand factory- Investorsresponded positively strugglingwith deliveries. fornewtechnology. Deliveroo construction assetsinto a to General Electric’sdecision issaid to be discussinga part- separatelylisted company. to oustJohn Flanneryaschief Honda said itwould invest nership with Uber. executive. He had held the job $2.75bn in General Motors’ Petrobraswasfined $853m by fora year, a blinkofan eye autonomous-vehicledevel- Aprimepackage America’sJustice Department compared with histwo prede- opmentproject. GMCruise to settle allegationsofcorrup- cessors, JeffImmelt(16 years) hopesto have itsfirstcarson Recommended living wage tion. Because Brazil’sstate oil and JackWelch (20 years). the road nextyear. Toyotaand Britain, per hour, £ companytradeson American Duringhisabbreviated time in SoftBank, meanwhile, formed marketsitwassubjectto in- 12 the job MrFlanneryan- astrategicpartnership to de- Amazon’s vestigation underthe Foreign announced wage nounced a plan to refocusGE velop “newmobilityservices”. 10 CorruptPracticesAct. on three core areas—power, London 8 aerospace and health care—but Aston Martin’sshare price fell Funding Circle’shighlyantici- Rest of Britain 6 investorsweren’thappyatthe sharplyon itsfirstdayof trad- pated IPOwasa let-down. slowpace ofthe turnaround, ingon the stockmarket. The Sharesin the peer-to-peer 200305 10 15 17 noratGE’slacklustre share British makerofsportscars lender, a bellwetherofLon- price. The newCEOisLarry priced itsIPOat£19 ($24.70) a Source:LivingWageFoundation don’sfintech industry, closed Culp, an outsiderwho joined share, givingita lowervalua- Amidpoliticalpressureabout 17% belowthe offerprice on the the board thisyear. tion than ithad sought. itspaypracticesin America firstfull dayoftrading. and Britain, Amazonan- Thanks, but no thanks Volkswagen ended the con- nounced newminimum Harvard’s loss Danske Bankremoved tractofRupertStadlerasCEO wagesforitsworkersin both Gita Gopinathwasnamed as ThomasBorgen aschiefexec- ofitsAudiunit, asa criminal countries. In America its the IMF’snewchiefeconomist, utive with immediate effect investigation continuesinto national hourlywage will be replacingMaurice Obstfeld, followingthe revelation that hisalleged role in VW’semis- $15, smoothingoutdifferences who isretiring. MsGopinath is much ofthe €200bn ($230bn) sions-cheatingscandal. Mr amongcities. In Britain Ama- aworld authorityon exchange in foreign money, mostly Stadlerhasnotbeen charged zon will paystaffin London rates, sovereign debtand Russian, thatflowed through a with a crime, buthe hasbeen £10.50 ($13.70) an hour. Thatis capital flowsand haswritten branch ofthe Danish bankin keptin custodysince June at 30 pence above the minimum extensivelyaboutthe dollar’s Estonia had been laundered. the requestofprosecutors, recommended bythe Living continued supremacyin world MrBorgen had resigned but who thinkhe mightattemptto Wage Foundation, an advisory trade. The strength ofthe offered to stayon until a interfere with theirwork. body. Outside London itwill greenbackhasexacerbated replacementwasnamed. pay£9.50. currencycrisesin placessuch Deliveroo, a food-delivery asArgentina, which has Facebookbegan an investiga- firm and one ofthe fastest- Followingpressure from activ- turnedtotheIMFforabail-out. tion into the source ofa cyber- growingstartupsin Britain’s istinvestors, thyssenkrupp attackthatcompromised the gigeconomy, reported that announced a plan to splititself For other economic data and accountsofup to 50m users, although saleshad more than in two. The German conglom- news see Indicators section the biggesthackyetto hit the social network. Itwasanother setbackforthe company, which hashad to contend with privacyscandalsand criti- cismsaboutthe infiltration of itsnetworkbyrogue groups. Tesla’s share price yo-yoed. It plunged by15% afterthe Securi- tiesand Exchange Commis- sion accused Elon Muskof makingfraudulentstatements when he tweeted in August thathe planned to take the companyprivate. Itrebounded when MrMuskreached a quicksettlementwith the regulator, relinquishinghis role aschairman butremain- ingchiefexecutive. The elec- tric-carmakerisalso to strengthen itsoversightof Mr Musk’soften mercurial com- munications. The imbroglio overshadowed Tesla hittingits production targetsforthe Leaders The Economist October 6th 2018 11 China’s designs on Europe And howEurope should respond EUROPE has caught China’s will surelyremain closerto itstraditional allies. eye. Chinese investments Europe thusneedsto take a path thatavoidsthe extremes of there have soared, to nearly naivetyand hostility. Itshould avoid mimickingChinese pro- €36bn ($40bn) in 2016—almost tectionism. Itmightsound “fair” to subjectChinese firmsin Eu- double the previousyears’ total. rope to the restrictions European firms face in China, but it Chinese FDI fell in 2017, but the would be a mistake. The permeability of European societies share spentin Europe rose from and economiesto ideasand influencesisa strength. a fifth to a quarter. Forthe most But such openness also makes them vulnerable. Hence, part, this money is welcome. Europe’s trading relationship governments should vet investments case by case. Montene- with China hasmade both sidesricher. gro should not have allowed its debts to China to become so However, China isalso usingitsfinancial muscle to buypo- perilously vast. Hungary and Poland should have looked litical influence (see Briefing). The Czech president, Milos Ze- harderatcertain Chinese infrastructure projectsthat offerpoor man, wantshiscountryto be China’s“unsinkable aircraft-car- value formoneyorwere neverproperlycompleted. rier” in Europe. LastyearGreece stopped the European Union Europeanscould do more to substantiate theirtalkof “reci- from criticising China’s human-rights record at a UN forum. procity”, orthe mantra thatthe EUand China should treateach Hungary and Greece prevented the EU from backing a court otheraseach wishesto be treated. Theycould, forexample, in- rulingagainstChina’sexpansive territorial claimsin the South troduce new instruments to make it clearer who is buying China Sea. Faced with such behaviour, it is only prudent for stakesin firmsand thuswhethertheyare doingso fairly. They Europeansto be nervous. should also increase funding for impartial China research. And notonlyEuropeans. The termson which the emerging Transparencyshould be demanded from political parties, uni- undemocraticsuperpowerinvestsin the outside world are of versities, think-tanks and lobbyists. Sometimes Chinese cash interestto all countries—particularlyifotherthings, such asfor- buys unsubtle happy talk. More often, it leads to self-censor- eign policy, may be affected. Americans, increasingly con- ship and punch-pullingfrom even prestigiousacademies. sumed by fears that China poses a commercial and military And Europe should aim to speakasone. None ofitsstates threat, should be mindful ofcompetition forthe loyalties ofits alone can face down China but, actingtogether, theycould do oldest ally. For everyone’s sake, it matters that Europeans so fordecadesto come. The EU could, forexample, use quali- gauge theirwelcome to China wisely. Justnow, theydo not. fied-majority voting (QMV) rather than unanimous votes on some subjects sensitive to China, such as human rights. This Asense ofperspective would notworkforeverything—mostEUnationswould balk ManyofChina’splansin Europe are justwhatyouwould ex- at givingBrussels a veto overhow they deploy theirmilitary pectofa risingeconomy. Some investmentsare private, profit- forces. But QMV would make it harder for China to paralyse seekingand harmless. Acquiringtechnologybybuyinginno- the EUbypickingoffone small memberata time. The EUcould vative firms, includingin Germany’sMittelstand, isreasonable, also co-ordinate investment-screening processes by member too, so longasdealsare scrutinised fornational-security risks. states. And itcould take bettercare ofthose southern and east- There are also thingsthatChina, unlike Russia, does notwant, ern countriesparticularlyvulnerable to China’sinfluence and such as to undermine the EU or sow chaos by furtively sup- provide alternative sourcesofinvestmentforthe projects they porting populist, xenophobic parties. It would rather Europe deem important. A little more intra-European solidarity remained stable and open forbusiness. On issuessuch ascli- would go a longway. mate change and trade, China has acted more responsibly than the Trump administration, seeking to uphold global ac- Whatmoneycan’tbuy cordsratherthan chuckgrenadesatthem. America hasa role to play, too. Ideallythe Trump administra- Some Europeanstake thisto suggestthatChina isa useful tion would stop treatingEuropeansasfree-riderson American counterweight to an unpredictable Uncle Sam. That is mis- power who deserve a good kicking. On trade, especially, the guided. Europe has far more in common with America than EUisa powerful potential allyin gettingChina to abide byglo- China, howevermuch Europeansmaydislike the occupant of bal norms. America should also workmore closelywith Euro- the White House. Moreover, China hasused the EU’sneed for pean governments to set up common standards of transpa- unanimityin manyofitsdecisionsto pickoffone or two mem- rency, graft-bustingand the prevention ofinfluence-peddling— berstatesin orderto blockstatementsoractionsof which itdis- which would make itharderforChina to impose itsown rules approves—aswith human rights. on small countries. Ata time when standardsforITand artifi- OtherEuropeansseize on such examplesto jump to the op- cial intelligence risk splitting into a Chinese camp and an posite conclusion. They fear that Chinese lucre will one day American one, Europe can help find a middle path. undermine Europe’s military alliance with the United States. As China rises, the benefits for the world of an indepen- Fortunately, thatisa longwayoff, asthe French and British na- dent, open and free Europe will only increase. Conversely, a vies have shown by joining America and Japan to challenge Europe weakened and divided bythe world’smostpowerful China in the South China Sea (see Asia section). Until China it- authoritarian regime would exacerbate problems far beyond selfbecomes a democracy, ofwhich there is no sign, Europe the EU’sborders. Europe mustnotletthathappen.7 12 Leaders The Economist October 6th 2018 The Supreme Court Kava-no Whateverthe FBI finds, BrettKavanaugh’s own testimonyshould disqualifyhim from America’s highestcourt IT MAY never be possible to men)becameadrinkinggamenobodyhasheardof;“boofing” know what really happened (anal sexorinfusion ofdrugsoralcohol) became farting. The in the suburban Maryland real meanings might be awkward for Mr Kavanaugh, but a home where Christine Blasey judge should notredefine wordsto avoid embarrassment. Ford recalls being sexually as- Norshould a judge give the impression ofbeingconsumed saulted by Brett Kavanaugh in byhatred forone ofthe main political parties. MrKavanaugh the summer of 1982. Mr Kava- described the allegations against him as “a political hit”, “re- naugh vehemently denies the venge on behalfofthe Clintons” and the fruitof“millionsof accusation. Given the difficultyoflitigatinga 36-year-old case, dollarsin moneyfrom outside left-wingopposition groups”. the riskofdestroyingthe reputation ofa man who may be in- Defenders of Mr Kavanaugh, worried about an open sea- nocent, and the partisan nature ofthe opposition—Democrats son on powerful men, point out that any innocent person in were againstMrKavanaugh longbefore he faced allegations of hisposition would rage againsthisaccusers. YetMrKavanaugh sexual assault—should Republican senatorsconfirm the presi- was not just angry, but conspiratorial. He chose to direct his dent’snominee when the Senate votes? fury at the Democrats personally, as if he were a signed-up Theyshould not. Even ifan FBIinvestigation failsto turn up memberofthe otherside. new evidence about what happened in a bedroom 36 years As it happens, that is precisely what Democrats have al- ago, there isno disputingwhatMrKavanaugh said in his con- waysalleged—and howRepublicansare nowhonouringhim. firmation hearingslastweek. And itwasdamning. Before he became a judge, MrKavanaugh worked forKen Starr on the impeachmentofBill Clinton. He waspartofGeorge W. Overhis skis Bush’slegal team, which opposed a recountin Florida in 2000, MrKavanaugh wasevasive and disingenuous. Underoath, he and laterworked in the Bush White House. Thisexplains why depicted himselfasa typical teenage drinkerand in control. A hostilityto MrKavanaugh haseclipsed thatfaced byNeil Gor- numberofcontemporariesatschool and college dispute that. such, who joined the Supreme Courtlastyear. MrKavanaugh He claimed that he could legally drinkin Maryland in his se- sayshe putpartyallegiance aside on becominga judge. After nioryear—hence the “100 KegsorBust” boastin hisyearbook. lastweek, thatclaim looksmisleading, too. In fact, bythe time he turned 18, the drinkingage was21. Lotsof Itishard to see howsomeone who harbourssuch feelings American teenagers drinkbefore they are legally allowed to. can decide cases on gerrymandering, say, in a credibly non- Theydo notmislead the Senate aboutitthree decades later. partisan way. Mr Kavanaugh’s conservative judicial philoso- MrKavanaugh told othersmall fibsunderoath. He said that phyisnota problem. Hisvisible loathingofDemocrats is. That referencesbyhim and hisfriendsto a girl called Renate, which isnotjustouropinion. In 2015 a prominentjuristtold the Cath- contemporaries say were boasts of sexual conquest, real or olicUniversityofAmerica: “Agood judge, like a good umpire, pretended, were “intended to showaffection, and thatshe was cannot act as a partisan...Ifyou are playing the Yankees, you one ofus”. He changed the meanings ofslang from his year- don’t want the umpires to show up wearingpinstripes.” The book: the “Devil’sTriangle” (sexbetween one woman and two jurist’sname wasBrettKavanaugh.7 The gig economy Workers on tap Howgovernments should deal with the rise ofthe gig economy THE Archbishop of Canter- ern capitalism hasfailed. Criticsrail thatitallows firmsto rid bury sees it as “the reincar- themselves of well-paid employees, replacing them with nation ofan ancientevil”. Eliza- cheap freelancers. Workerswho once relied on an employer to beth Warren, a senator from payinto theirpension, orto covertheirhealth care when they Massachusetts, says that, for fell ill, must instead save for the future themselves. On this many workers, it is the “next reading, the gigeconomyturbochargesinsecurityand the ero- step in a losing effort to build sion of workers’ hard-won rights. There is a grain of truth to some economic security in a this. Butitmissesthe biggerpicture. world where all the benefitsare floatingto the top 10%”. Luigi Forone thing, despite citystreetsclogged with Uber drivers Di Maio, Italy’sdeputyprime minister, isgoingafterit aspart of and Deliveroo cyclists, gigging is not about to take over the his“waron precariouswork”. world (see Finance section). Across the OECD club ofmostly Formany, the “gigeconomy”, in which short-term jobsare rich countries, the share of workers in full-time positions, assigned via online platforms, isa potentsymbol ofhow mod- which dropped afterthe financial crisisof2008-09, hasbeen 1 The Economist October 6th 2018 Leaders 13 2rising. In America the average job tenure hasbarelychanged in category of worker, sitting somewhere between self-em- the past30 years. Dependingon whom youask, 1-5% ofAmeri- ployed and employed. Yetthe boundariesbetween classifica- cansgig—butmanyofthose have salaried jobsaswell. tionswill alwaysbe fuzzy. Britain alreadyhassuch a third cate- However, the factthatitissmallerthan youmight thinkis gory. Itisalso the place where argumentsaboutthe legal status notthe gigeconomy’sstrongestdefence. Thatrestson how gig- ofgigworkersare mostvigorous. gingbringsimportantbenefitsto the economy. The advantages Betterto relyon two othermechanisms. The firstis the mar- forconsumersare clear. With a swipe ora click, almost anyone ket. Unemploymentislowand payisstartingto rise—Amazon can get Rover walked in the park or a vital document copy- this week announced big bumps in the minimum wages it edited within hours. paysAmerican and British workers. The platformswill need to Crucially, benefits also accrue to workers. The algorithms respond. Some gig-economy firms are voluntarily offering thatunderpin gig-economyplatformsimprove the “matching” their workers health insurance. Competition between gig between giggers and jobs, leading to less dead time. The evi- firmsalso helps. Italian food-deliveryridersboastof howthey dence thatgigworkersface a paypenaltycompared with con- playplatformsoffagainsteach otherin theirefforts to getbet- ventional employeesispatchy; manysaytheyvalue the extra terpayand benefits. Innovationssuch asAustralia’sGigSuper, autonomy they enjoy compared with salaried workers. Gig afund which makesiteasierforgigworkersto save for a pen- platformsare a useful wayoftoppingup income orsmoothing sion, are also welcome. out earnings if other sources of work dry up. They can also breakopen closed industries. Research showsthatthe arrival Ahelping hand ofUberin American citiesleadson average to a 50% surge in The other mechanism is to help workers claim their existing the numberofself-employed taxi-drivers. rights. One option is to make it simpler for disgruntled gig Butthe gigeconomyisnotperfect. Platformsargue theyare workers to use the judicial system. Precedent-setting rulings no more than neutral marketplacesin which workersand cus- on the statusofgigworkersmaybe pilingup, butthe barriers tomersmeet. Bythislogic, workersoughtto countas self-em- to goingto court in the first place are often too high. Another ployed. Butthe standardsto which some platformshold work- option isto help giggersorganise, in orderto mitigate the low ers tell a different story. Food-delivery riders are often told to bargainingpowerthe self-employed often face compared with weara uniform; driversforride-hailingappsneed to maintain employees. Athird option isto boostthe credibility ofthe sys- agood ratingorcan be kicked offthe platform. Platforms have tem fordetectingand prosecutingdeliberate infractions ofem- alegitimate interestin maintainingtheirqualityof service. But ploymentlaw. America hasjustone labourinspectorfor every it cannot be right that some firms specify how workers must 100,000 employed people, the world’sjoint-lowestratio. Sim- submitto the dutiesofactinglike employeeseven as theyre- ply insisting that firms follow the rules would give workers jectthe responsibilitiesofactinglike employers. greater protection while ensuring that the gig economy lives One proposal, beingfloated in America, isto create a third up to itsenormouspromise. 7 Italy’s budget plans Nearer the brink The Italian governmenthas senta worrying signal. Itwill notenactreforms—and will undo old ones ITALIANS are frustrated—and Thebudgetproposesafiscaldeficitof2.4% ofGDPnextyear General government debt theyare rightto be. Because of (see Europe section). It includes goodies for both governing %ofGDP the financial crisis and chroni- parties. Luigi Di Maio, leaderofM5S, hopesthatfundingfor a 150 Italy callylowgrowth theyare on av- basic minimum income, his key pledge, will stem his party’s 100 erage no richer, in real terms, fall in opinion polls. The Northern League, led byMatteo Salvi- Euro area 50 than theywere atthe turn of the ni, seemslikelyto make progresstowardsitsflattax. century. Some 10% are out of Thisplan hasa numberofproblems. True, the deficit isnar- 2007 10 15 18* *Estimate work; 20% live on less than rower than election promises had suggested. Much-needed €10,000($11,500)ayear.Inan election in March theyvoted for publicinvestmentwill grow. Butitstill breakseuro-zone fiscal change by choosing political outsiders in the form of the rules. It is also higher than Giovanni Tria, the technocratic fi- Northern League and the Five StarMovement(M5S). nance minister, had led investorsto expect. Thatcarried an im- On September27th a coalition ofthe two partiesunveiled mediate price. ByOctober2nd the mostcloselywatched gov- itsplan to startthe job ofliftingthe countryoutof itsfunk—in ernmentbond yield was3.4%, itshighestsince 2014. the form oftheirfirstbudget. Itisboth disappointing and wor- rying. The governmentmakesno attemptto correctItaly’slow Stopping atEboli productivitygrowth, withoutwhich both the country’sliving Even before the budget, Italy’sborrowingcosts, relative to Ger- standardsand itsabilityto paydown debtcannotsustainably many’s, were overa percentage pointhigherthan atthe elec- improve. Under previous governments, a lack of reform has tion. Itwill take time forthe rise in yieldsto raise the govern- held Italyback. Thislotgo one furtherbysettingout to unpick ment’s cost of borrowing, which rises only as debt is rolled pensionslaw—a rare example ofa reform thatwassuccessfully over. Buthighergovernment-bond yieldsare alreadytranslat- legislated. The coalition came into office promisinga newway inginto higherinterestratesforthe widereconomy. Thatwill ofgoverning. Ithasfluffed itschance. countermuch ofthe impact from stimulus, which makes the 1 14 Leaders The Economist October 6th 2018 2government’s expectations of robust growth next year even lower unemployment by nearly four percentage points. But more unlikely—and could swell the deficitstill further. thatwould mean takingon unions, a challenge thatsuccessive The plan is even more striking for the issues that it ducks. governments have avoided. Far from showing courage, this Productivitygrowth isdismal. Moneyearmarked forpublic in- governmentwill use the budgetto reverse reformswon under vestmentoften remainsunspent, because ofa risk-averse bu- a previous administration that raised the retirement age, but reaucracy. Cumbersome rulesand longcourtcasesstifle busi- which were deeplyunpopular. ness. The trade surplus shows that firms exposed to Without reform, Italy’s exorbitant debt burden of about competition are thriving. But the services sector is sheltered. 130% ofGDPwill fall slowlyatbest. Politicscould yet push the Opening closed professions would help, as would speeding countrynearerdefault. The budgetisa slap in the face forthe the sale ofpublicassets. Too fewItalianswork. Italian women European Commission. Yet Italy’s politicians, with an eye on are less likely to do so than most oftheirsisters in the OECD. next year’s European parliamentary elections, may relish the Employers are loth to hire people because it is so hard to fire prospectofa Brusselsbust-up. Keen to shore up hispopularity, them. This is doubly so in the poorersouth, where firms pay MrDi Maio could call formore spendingnextyear. Investors high wagesnegotiated atthe national level. maynotyetbe readyto dump Italy’sbonds—notleastbecause The prize to the governmentthatcould seize the agenda for the European Central Bank will do what it takes to save the reform would be vast. The IMFreckonsthatsimplyshifting to euro. Butwith itsextravagance and itsrefusal to face reality, the company-level, rather than national, wage bargaining could governmentistestingtheirpatience. 7 Trade Marginal revolution The renegotiation ofNAFTAis a relief. Butitis nota success NOT long ago President Do- goals.Italsoraisesthethresholdunderwhichgoodscanenter Merchandise exports nald Trump nearly with- Canada or Mexico without incurring taxes or duties, or too 2017,$trn drew from the North American much paperwork. Thiswill benefitAmerican exporters. 0 0.5 1.0 1.5 United Free Trade Agreement (NAFTA). Yeteven formercantilistslike MrTrump, the agreement has States NAFTA Rest of world Now he has replaced it. On Oc- downsides. Ascarmakingcostsrise, manufacturersin all three Canada tober1st the administration an- countrieswill find itharderto compete with producers in Asia nounced that Canada would and Europe. When, say, Mexican carmakerslose marketshare, Mexico join a pactithasalreadynegoti- American parts-makers, who contribute overa quarterof the atedwithMexico. The resultingUnited States-Mexico-Canada contentofMexican vehicles, will suffertoo. Agreement(USMCA) keepsitspredecessor’smostvital feature: In anycase, trade dealsshould notbe judged byhow well tariff-free trade in most goods. These economies should now they protect domestic industries, but by whether they serve avoid one source ofchaoticdisruption. the public as a whole. Against this yardstick, the USMCA is Havingsolved a crisis ofhis own making, the president is clearly worse than the deal it is replacing. Amarginal liberal- takinga victorylap, hailing“an amazingdeal fora lotofpeo- isation ofthe Canadian dairy industry is welcome but is not ple”. Thatisaccurate onlyaccordingto MrTrump’smisguided worth highercosts and lowerproductivity in carmaking. Ca- protectionism (see Americassection). Although the new pact nadians spent $11bn on dairy products in 2017; Americans doescontain improvementsto NAFTA, taken asa whole it isa spent$498bn on carsand parts. The strong-armingwasunnec- step backwardsforfree trade. Asa result, itwill harm America. essary, too. The Trans-PacificPartnership, a pactfrom which Mr Trump withdrewin 2017, modernised rulesfortrade in digital WhyUSMCA? industriesand financial serviceswithoutretreatingon cars. The president is pleased with himself mainly because the Free tradersmighttake solace from the factthat, to seal the agreementshould shiftcarmakingjobsfrom Mexico to Ameri- USMCA, America has proved willingto compromise—by, say, ca. When itisfullyimplemented, carswill escape tariffs onlyif acquiescingto Canada’sinsistence thatitdrop MrTrump’sde- asmuch astwo-fifthsoftheircontentismade byworkers earn- mand to scrap one of NAFTA’s dispute-resolution mecha- ingatleast$16 an hour—seven timestoday’saverage manufac- nisms. The presidentstrucka deal ratherthan prolong the fight. turing wage in Mexico. Three-quarters of a vehicle’s value Should this raise hopes that he will pull off a deal in his mustoriginate inside the free-trade zone, up from about two- trade warwith China? Notso fast. Western complaints about thirds. And because the USMCAmustbe re-authorised atleast Chinese trade practices run deep. Persuading the Chinese to every16 years, firmsmaywell be discouraged from big invest- rip up theireconomicmodel isa fartougherjob than renegoti- ments in cross-border supply chains. America imports more atingNAFTA. And in the shortterm China dependsmuch less lightvehiclesthan are sold in Canada and Mexico combined. than either Canada or Mexico on selling to America. As a re- With a sunset clause—not to mention the riskthat Mr Trump sult, MrTrump haslessleverage, even ifthe USMCAclearsthe may renege on his promises—firms may prefer to produce in wayforthe Westto take a united stand againstChina. America. Accessto Uncle Sam’svastmarketiswhatmatters. Aboutall thatcan be said in favourofthe USMCAisthatthe There are further reasons for Mr Trump’s boasting. The uncertaintycastbyMrTrump overNorth American trade has USMCA marginally opens up Canada’s dairy market and eased. However, America would be better off had he never lengthenssome pharmaceutical patents—longtime American raised anydoubtsin the firstplace. 7 16 Letters The Economist October 6th 2018 Notall German residentsof Inspection Post. Ifhowever, Outoftheleftfield PoliticsinSingapore Turkish origin are Turkish these checkswere to be im- Bagehotseemeddetermined citizensand able to vote in Banyansuggestedthatthe posed on UK-to-EUmeatthey toreachtheeventualand Turkish elections. Alarge governmentofSingaporewins would threaten the just-in- comfortingconclusionthatwe numberofpeople with a electionsbecauseithounds time supplyofproducts, such shoulddiscounttheavowed Turkish background have criticsanddeniespublic- aschilled chicken breast, with radicalismofJeremyCorbyn’s become, and are exclusively, housingupgradestoopposi- ashelflife ofaround ten days. LabourParty,as“theBritish German citizens. Moreover, tiondistricts,andwondered Halfofthe poultryimports establishmentisforeverchang- halfofthose who were eligible whytherulingPeople’sAction from outside the EUare physi- ing—andyetsomehowforever to vote did notdo so. In short, Party“holdsonsotena- callychecked. Cartonsare remainsthesame”(September the numberofTurkish citizens ciously”topower(September opened and inspected bya vet. 29th).Comfortingbut,inthis who voted in favourofthe 22nd).ThePAPhasbeen Thiscan also involve a sample instance,profoundlywrong.It reform wassome 450,000. repeatedlyre-electedbecause beingsentto a laboratoryand isnotLabour’spolicies:a50% ARNDT LEININGER ithasbeenhonestwiththe the consignmentbeingde- marginaltaxrate,renationalis- Research fellow at the chair for voters,deliversonitsprom- tained until a cleartestresult ingutilities,workers’stakesin German political sociology ises,andprovideslong-term comesback. Forbeef, lamb largecompanies.Allofthese, Free University Berlin stabilityandprogress.Whenit and pork, 20% ofshipments orvarietiesthereof,couldbe hasnotfullymetvoters’ are physicallyinspected. After foundinvariouscentre-left expectations,andsolostvotes, Brexit, such checkswould pose Europe’s privacyadvantage manifestosoverthepastde- ithasrespondedwithappro- achallenge to supplychains, cade.Itisnoteventheocca- Youpainted quite a dire pic- priatepolicyadjustments.It particularlywhere chilled sionalpreeningthatLabour ture ofEurope’sposition when hasalsoconsciouslyrenewed productsare involved. hassomehow,uniquely, itcomesto expertise and tech- itsleadership,withafourth KATIE DOHERTY caughtthezeitgeist.Rather,itis nologyin artificial intelligence generationsinceindepen- Policy director thattheparty’salternative (“Bigdata, small politics”, dencereadyingitselftotakeon International Meat Trade worldviewissoatoddswith September22nd). Yougave theresponsibility. Association thepost-war,post-colonial, much credence to the factthat Thealternative—aconstant London Western,liberal-democratic large firmsin America and merry-go-roundofcontending consensusthatIdoubtitcan China have the king’sransom parties—doesnotnecessarily Resistance is futile becontainedwithin“the ofaccessto data and, therefore, producebetteroutcomes. establishment”. expertise in thisfield. As an Politiciansfailtokeepthe Historicalanalogiesare American entrepreneur, based promisestheymake,the problematic,butweshould in Cardiffworkingatthe sharp peoplebecomedisillusioned, perhapslooktotheeruptionof end ofthe AIindustry, I have andeventuallylosefaithin ProtestantismintoWestern seen thatitisnotgovernance, democracy.Witnessthelow Christianityinthe16thcentury butthe resolve, expertise and voter-turnoutsinmany forasimilardisruptive public-sectorsupportwithin Westerndemocracies. perspective.TheCorbynista thisarea thatwill provide a FOOCHIHSIA versionoftheHorribleHistory seatatthe top table forEurope. Highcommissionerfor ofTheWestisfundamentally Large institutionsenthusi- Singapore flawed,akindof“1789,1917and asticallylookoutside estab- London AllThat”forourage.But lished hubsto find AIpracti- realityisalmostirrelevant. tionerswho can give them a The meatofBrexit Peoplearepreparedtobelieve strategicorcompetitive edge. Ienjoyed yourbookreviewof it;hereticsarehunteddown Europe isplayingitshand Since Britain voted to leave the Yuval Noah Harari’slatest withapassionthatwouldnot cleverlyon thisfront. The European Union there has forecastofourshared future havedisgracedtheInquisition. aforementioned accessto data been a greatdeal ofmisinfor- (“In the kingdom ofcyborgs”, Theyareclearlynotinterested isn’tnecessarilya benefit, mation aboutthe potential for September1st). ButI was ingradualchange. either, asprivacyisa signif- regulatorychecksto be perplexed byyourprescription Thereisnothingcosy,com- icantconcern. The strangle- imposed on meatmoving foravoidingthe pitfallsof the fortingorconventionalinthat hold thatlarge firmssuch as between the United Kingdom comingcyborgsymbiosis. If atall.Thenewestablishment? Google orMicrosofthave on and the EU(“Chequers, the human brainsare recondi- Idon’tthinkso. data isbecominga worryfor unlikelysurvivor”, September tioned bybeingmelded with SIMONDIGGINS manyand, in some cases, 15th). There are presentlyno digital ones, do youreally Rickmansworth,Hertfordshire potentiallya barrierto com- veterinarycheckson meat thinkwe can enshrine free will merce. Traders, investors, big productsmovingacrossany in “the code”? The verynature banksand otherglobal organi- borderwithin the EUsingle ofcodingisdeterminism. Turkish origins sationsneed to be sure that AI market, includingon ferries ALEJANDRO EMMANUEL MORENO Itwasincorrectto saythat, of isusingtheirdata responsibly crossingthe Irish Sea. Moving San Diego7 the 3m people ofTurkish origin and securely. Thisisthe next meatfrom Aberdeen to in Germany, “almosttwo- bighurdle forcompanies London isthe same asmoving thirds” voted in favourof developingAI, and itisan area itfrom Aberdeen to Austria or Lettersarewelcomeandshouldbe Recep Tayyip Erdogan’sconsti- in which Europe isalreadya from Northern Ireland to the addressedtotheEditorat TheEconomist,TheAdelphiBuilding, tutional reform in 2017 (“Hello world leader. British mainland. 1-11JohnAdamStreet, to Berlin”, September22nd). CHRIS GANJE Veterinarychecksdo apply LondonWC2N6HT Rather, itwastwo-thirdsof Chief executive to non-EUimportsofmeat, E-mail:[email protected] eligible Turkish citizensin AMPLYFI where the consignmentmust Morelettersareavailableat: Economist.com/letters Germanywho voted in favour. Cardiff enterthrough a Border

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The race to replace May After the tsunami Trade: why USMCA? Bigging up the gig economy OCTOBER6TH–12TH2018 China’s designs on Europe Contents The Economist October 6th 2018 5 8 The world this week United States 35 The other mid-terms States of play Leaders 36 Amazon and $15 11 Geopolitics and money One-click socialism! China’s designs on Europe 37 Donald Trump’s wealth 12 The Supreme Court Thanks, Pop Kava-no 37 Ending gerrymandering 12 The gig economy Map scrap Workers on tap 38 Wisconsin 13 Italy’s budget plans Schooling Walker ToriesTheresa May clings on Nearer the brink as prime minister, but a crowd 39 Texas 14 NAFTA of contenders is waiting for her Beto together Marginal revolution to fall, page 21. All the energy 40 Lexington On the cover at the Conservative Party From #MeToo to #ScrewYou An increasingly wealthy conference was with the hard Letters China has designs on Europe. Brexiteers: Bagehot, page 28 16 On Jeremy Corbyn, How should Europe respond? The Americas Germany, AI, Singapore, Leader, page 11. Chinese meat inspections, free will 41 North American trade investment in Europe is The new NAFTA growing; so is its influence. 42 Bello The European Union is taking Briefing Coping with Venezuelan notice at last, page 18. It 18 China in the EU refugees was hypocrisy for America to Gaining wisdom, “welcome” China’s rise. Yet 44 Bolivia’s access to the sea marching forward honesty may be worse: Landlocked and out of luck Chaguan, page 56 44 Peru Britain Fujimori unpardoned 21 The Conservative Party TheEconomistonline Succession battle Middle East and Africa Mid-termsThe hollowed-out Dailyanalysisandopinionto 22 Wembley stadium 45 Crime in South Africa Democratic Party tries to regain An own-goal? supplementtheprintedition,plus Gun town control of state legislatures, audioandvideo,andadailychart 24 Channel 4 page 35. A once-dominant Economist.com Hopping 46 Cameroon’s elections Republican governor stumbles, The old man and the E-mail:newslettersand 24 Class and education page 38. The Texas Senate insurgency mobileedition Open the debate race is the most interesting Economist.com/email 47 Middle East security 26 Elderly suicides contest of 2018, page 39. Four NATO for Arabs? Printedition:availableonlineby One foot out of the grave more states could curb 7pmLondontimeeachThursday 47 Saudi Arabia gerrymandering politicians, 26 Disappearing banknotes Economist.com/printedition The long arm of the prince page 37 Paper trail Audioedition:availableonline 48 Tunisian politics 27 Tabletop gaming todownloadeachFriday Athird sheikh emerges Geekiness in miniature Economist.com/audioedition 48 Egypt and Britain 28 Bagehot Obloquy for an obelisk Brexit’s true believers Asia Europe 49 Twin natural disasters 29 Italy’s budget row in Indonesia Volume429Number9112 Di Maio tries to take Wasteland charge PublishedsinceSeptember1843 50 Banyan totakepartin"aseverecontestbetween 30 The defence of Sweden intelligence,whichpressesforward,and What if Kim is sincere? War clouds anunworthy,timidignoranceobstructing 51 Sexism in India ourprogress." 32 Catalonia one year on NAFTAIts renegotiation is a Nuns, pilgrims and starlets EditorialofficesinLondonandalso: The splitters are splitting relief—but not a success: leader, Amsterdam,Beijing,Berlin,Brussels,Cairo, 51 The South China Sea page 14. All three members of Chicago,Johannesburg,Madrid,MexicoCity, 32 Potato prices Hot water the new United States-Mexico- Moscow,Mumbai,NewDelhi,NewYork,Paris, The chips are down SanFrancisco,SãoPaulo,Seoul,Shanghai, 52 The Philippines Canada Agreement are hailing Singapore,Tokyo,WashingtonDC 34 Charlemagne Day-and-night politicians awin-win deal. The reality is In Europe’s McCainland depressingly different, page 41 53 Politics in Bangladesh Bullying begum 1 Contents continues overleaf 6 Contents The Economist October 6th 2018 70 The IMF China Go, Gita Gopinath 54 Socialstability 70 Economics research Enumeratingunrest Tyranny of the few 55 Theprivatesector 71 Pensions in Portugal Solong,andthanksfor One foot in the Algarve allthegrowth 72 Free exchange 56 Chaguan Companies and political TheAnalectsofTrump influence International IndonesiaThe danger has Science and technology BullyingTwo articles look at 57 Schoolbullying not yet passed for victims of 73 The Nobel prizes school bullying—first in its Theunhappiestdays the earthquake and tsunami, Trophy hunting age-old, physical variety and oftheirlives page 49 then its digital form, page 57 75 Marine biology 58 Cyber-bullying Invisibility cloaks Clicksandstones 75 Astronomy Subscription service New moon Business For our full range of subscription offers, 76 Hoax science including digital only or print and digital 59 GeneralElectric Get real! combined visit Blamegame Economist.com/offers You can also subscribe by mail or telephone at 60 Bartleby the details provided below: Books and arts Keepcalmandgohome Telephone: +44 (0) 845 120 0983 77 Anne Frank’s diary 61 Generationgap Web: Economist.com/offers Dear Kitty Millenniallonging Post: The Economist 78 Churchill SubscriptionCentre, 61 Thyssenkrupp P.O. Box 471, The lion’s roar Thisend,cropped Haywards Heath, The gig economyHow 79 New Orleans RH16 3GY 62 Chinesetrademarks UK governments should deal with Big Easy reading Pigstomarket the rise of short-term work: Subscription for 1 year (51 issues) 80 Johnson leader, page 12. The worries 63 Tesla Print only UK – £145 Bubble and squeak about gig-economy workers Onehandoffthewheel are mostly overblown, page 66. 63 Facebook’swoes Principal commercial offices: Amazon raises the minimum GrrrDPR 82 Economic and financial The Adelphi Building, 1-11John Adam Street, wage in America and Britain, 64 Shippingsetssail indicators London WC2N 6HT page 36 Statistics on 42 economies, Tel: +44 (0) 20 7830 7000 Shivermetimbers plus our monthly poll of Rue de l’Athénée 32 forecasters 1206 Geneva, Switzerland Finance and economics Tel: +4122 566 2470 750 3rd Avenue, 5th Floor, New York, NY 10017 66 The gig economy Obituary Tel: +1212 5410500 Serfs up 84 Alan Abel 1301Cityplaza Four, 68 Buttonwood One born every minute 12 Taikoo Wan Road, Taikoo Shing, Hong Kong Keeping it real Tel: +852 2585 3888 69 Indian non-bank finance Other commercial offices: Lurking in the shadows Chicago, Dubai, Frankfurt, Los Angeles, Paris, San Francisco and Singapore 69 Australian banks The charge sheet GEJohn Flannery could not reverse the mistakes of former chiefs rapidly enough. Will Larry Culp do better? Page 59 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. 8 The world this week The Economist October 6th 2018 theChinesemanoeuvrewas withGreecethatwouldallow an“obligationtonegotiate Politics “unsafeandunprofessional”. MacedoniatojoinNATOand sovereignaccesstothesea”for theEUinreturnforthename- Bolivia.Bolivialostitscoast- AcourtinnorthernChina changeisnowindanger. linetoChileinawarin1884. sentencedaformerdeputy Thecourtdidsaythatasettle- chiefofthecountry’ssecuri- Isanywheresafe? mentofthedisputewasa tiesregulator,YaoGang,to18 JamalKhashoggi,aprominent “matterofmutualinterest”. yearsinprisonfortaking Saudijournalistandgovern- bribesvaluedat69myuan mentcritic,vanishedafter Peru’ssupremecourtover- ($10m)andinsidertrading. visitingaSaudiconsulatein turnedthepardongivento Istanbul.MrKhashoggihad AlbertoFujimori,aformer FanBingbing,aChinesefilm beenlivinginexileinWash- presidentwhohadbeenjailed starwhosecreditsinclude ington,DC.“Wedon’tknowif forthekillingof25peoplebya “IronMan3”and“Despicable heisbeingdetained,ques- government-backeddeath Me3”,wasfined883myuan tionedorwhenhewillbe squadintheearly1990s.He ($129m)fortaxevasion.China released,”saidtheWashington waspardonedonhealth Anearthquakeandtsunami iscrackingdownoncelebrities Post,forwhichhewrote. groundsinDecember2017by strucktheIndonesianisland forallegedlymis-statingtheir PedroPabloKuczynski,the ofSulawesi,causingwide- earnings.MsFanhadbeen Iraq’sparliamentelecteda then-president. spreaddestructioninand secretlydetainedsinceJuly. newpresident,BarhamSalih. aroundthecityofPalu.The MrSalihquicklynamedAdel CoalitionAvenirQuébec,a deathtollstandsatmorethan Maygo-go Abdul-Mahdi,aShia centre-rightparty,wonan 1,400andrising.Damaged TheresaMay,Britain’sprime politician,asprimeminister- electioninCanada’sFrench- roadsandbridgeshaveham- minister,dancedtothelectern designate,endingaperiodof speakingprovince,defeating peredemergencycrews.Some attheConservativeParty deadlockfollowinganelection theLiberalParty.Itisthefirst affectedareasremaincutoff. conference.Sheclaimedthata inMay.MrAbdul-Mahdiwas timethatapartyotherthanthe decadeofausteritycouldsoon backedbythetwolargestblocs LiberalsortheseparatistParti RosmahMansor,thejewel- beover,tookaswipeatthe inparliament,avertinga QuébécoiswillgovernQue- lery-lovingwifeofMalaysia’s LabourPartyandwarned potentialdisputebetween becinnearly50years. formerprimeminister,Najib hardlineBrexiteersthat,ifthey Shiapoliticians. Razak,waschargedwithmon- voteagainsther“Chequers” Notmuchmarginforerror ey-laundering.SheandMr Brexitplan,“weriskendingup TheWorldBankraisedcon- TheRepublicanleadershipin Najibarebothbeinginvestigat- withnoBrexitatall.”MrsMay cernsoveranewlawin theSenatepressedtobringa edinconnectionwiththe hasbeendoggedbyspecu- Tanzaniathatwouldallowthe votetothefloorontheconfir- disappearanceofbillionsof lationofaleadershipchal- governmenttojailpeoplewho mationofBrettKavanaughto dollarsfromagovernment lenge.BorisJohnson,herbig- questionofficialstatisticsfor theSupremeCourt.TheFBI investmentfund. gestrival,urgedthepartyto uptothreeyears.Thelawis wastaskedwithinvestigating “chuckChequers”. thelatestattemptbythegov- claimsofsexualmisconduct DennyTamaki,thesonofa ernmenttosuppresscriticism madeagainstMrKavanaugh. Japanesewomanandan Italyplaceditselfonacollision ofitspolicies,whichhave Americanmarine,waselected coursewiththeEuropean slowedeconomicgrowth. TaxofficialsinNewYorkstate governoroftheJapanese Commissionbyproposinga openedaninquiryintoallega- islandofOkinawa.Hewants budgetdeficitof2.4%fornext ThecentralbankofLiberia tionsthatmillionsofdollars anAmericanairbaseonthe year.Sinceeconomicgrowthis deniedearlierclaimsbythe weretransferredtoDonald islandtobeclosed,insteadof anaemic,thiswillresultina governmentthatithadlost Trumpinthe1990sfromhis moved,asthecentralgovern- furtherincreaseinItaly’sal- morethan$100m-worthof father’spropertybusinessin mentproposes. readyhugedebtstockasa cash,theequivalentof5%ofits questionableways. proportionofGDP. GDP.Thebanksaidithad Osakacutits60-yearsister-city foundthenotesinitsvaults. relationshipwithSanFrancis- UnitedStates cooverastatuehonouring AfterNAFTA Drug-overdosedeaths*,’000 “comfortwomen”inthe CanadaagreedtojoinAmerica 80 Californiancity’sChinatown. andMexicoinadealtorevise Other 60 SuccessiveJapanesegovern- theNorthAmericanFreeTrade mentshaveminimisedthe Agreement.Underitsnew 40 scaleofsexslaveryinJapanese name,theUnitedStates- Opioids 20 militarybrothelsduringthe Mexico-CanadaAgreement, 0 secondworldwar,andoffered CanadawillgiveAmerican 2015 16 17 18 half-heartedapologiesforit. farmersabitmoreaccesstoits Source:CentresforDisease *12-month ControlandPrevention movingtotal dairymarketbutthemuch AChinesedestroyersailed largercartradewillbecome Congresspassedabipartisan within40metresofanAmeri- PeopleinMacedoniavotedin lessfree.Americaagreedto billtocombatopioidabuse. canwarshipinadisputedarea areferendumtorenametheir keepNAFTA’sdispute-settle- Themeasuresincludemore oftheSouthChinaSea.The countryNorthernMacedonia. mentmechanism. fundingforthetreatmentof Americanvesselwasperform- Althoughmorethan90%of addictsandacrackdownon inga“freedomofnavigation” thosevotingapprovedthe TheInternationalCourtof theuseoffentanyl.Anestimat- operationnearreefsclaimed change,theturnoutwaswell JusticeinTheHaguerejected ed49,000Americansdiedof byChina.America’snavysaid undertherequired50%.Adeal Bolivia’sclaimthatChilehas opioidoverdoseslastyear. 1 The Economist October 6th 2018 The world this week 9 Model 3 forthe firsttime. It doubled lastyear, itspre-tax erate will spin offitsprofitable Business produced 53,239 Model 3sin annual losshad widened to elevator-technologybusiness, the latestquarter, butisstill £185m ($240m) asitforked out car-partsunitand factory- Investorsresponded positively strugglingwith deliveries. fornewtechnology. Deliveroo construction assetsinto a to General Electric’sdecision issaid to be discussinga part- separatelylisted company. to oustJohn Flanneryaschief Honda said itwould invest nership with Uber. executive. He had held the job $2.75bn in General Motors’ Petrobraswasfined $853m by fora year, a blinkofan eye autonomous-vehicledevel- Aprimepackage America’sJustice Department compared with histwo prede- opmentproject. GMCruise to settle allegationsofcorrup- cessors, JeffImmelt(16 years) hopesto have itsfirstcarson Recommended living wage tion. Because Brazil’sstate oil and JackWelch (20 years). the road nextyear. Toyotaand Britain, per hour, £ companytradeson American Duringhisabbreviated time in SoftBank, meanwhile, formed marketsitwassubjectto in- 12 the job MrFlanneryan- astrategicpartnership to de- Amazon’s vestigation underthe Foreign announced wage nounced a plan to refocusGE velop “newmobilityservices”. 10 CorruptPracticesAct. on three core areas—power, London 8 aerospace and health care—but Aston Martin’sshare price fell Funding Circle’shighlyantici- Rest of Britain 6 investorsweren’thappyatthe sharplyon itsfirstdayof trad- pated IPOwasa let-down. slowpace ofthe turnaround, ingon the stockmarket. The Sharesin the peer-to-peer 200305 10 15 17 noratGE’slacklustre share British makerofsportscars lender, a bellwetherofLon- price. The newCEOisLarry priced itsIPOat£19 ($24.70) a Source:LivingWageFoundation don’sfintech industry, closed Culp, an outsiderwho joined share, givingita lowervalua- Amidpoliticalpressureabout 17% belowthe offerprice on the the board thisyear. tion than ithad sought. itspaypracticesin America firstfull dayoftrading. and Britain, Amazonan- Thanks, but no thanks Volkswagen ended the con- nounced newminimum Harvard’s loss Danske Bankremoved tractofRupertStadlerasCEO wagesforitsworkersin both Gita Gopinathwasnamed as ThomasBorgen aschiefexec- ofitsAudiunit, asa criminal countries. In America its the IMF’snewchiefeconomist, utive with immediate effect investigation continuesinto national hourlywage will be replacingMaurice Obstfeld, followingthe revelation that hisalleged role in VW’semis- $15, smoothingoutdifferences who isretiring. MsGopinath is much ofthe €200bn ($230bn) sions-cheatingscandal. Mr amongcities. In Britain Ama- aworld authorityon exchange in foreign money, mostly Stadlerhasnotbeen charged zon will paystaffin London rates, sovereign debtand Russian, thatflowed through a with a crime, buthe hasbeen £10.50 ($13.70) an hour. Thatis capital flowsand haswritten branch ofthe Danish bankin keptin custodysince June at 30 pence above the minimum extensivelyaboutthe dollar’s Estonia had been laundered. the requestofprosecutors, recommended bythe Living continued supremacyin world MrBorgen had resigned but who thinkhe mightattemptto Wage Foundation, an advisory trade. The strength ofthe offered to stayon until a interfere with theirwork. body. Outside London itwill greenbackhasexacerbated replacementwasnamed. pay£9.50. currencycrisesin placessuch Deliveroo, a food-delivery asArgentina, which has Facebookbegan an investiga- firm and one ofthe fastest- Followingpressure from activ- turnedtotheIMFforabail-out. tion into the source ofa cyber- growingstartupsin Britain’s istinvestors, thyssenkrupp attackthatcompromised the gigeconomy, reported that announced a plan to splititself For other economic data and accountsofup to 50m users, although saleshad more than in two. The German conglom- news see Indicators section the biggesthackyetto hit the social network. Itwasanother setbackforthe company, which hashad to contend with privacyscandalsand criti- cismsaboutthe infiltration of itsnetworkbyrogue groups. Tesla’s share price yo-yoed. It plunged by15% afterthe Securi- tiesand Exchange Commis- sion accused Elon Muskof makingfraudulentstatements when he tweeted in August thathe planned to take the companyprivate. Itrebounded when MrMuskreached a quicksettlementwith the regulator, relinquishinghis role aschairman butremain- ingchiefexecutive. The elec- tric-carmakerisalso to strengthen itsoversightof Mr Musk’soften mercurial com- munications. The imbroglio overshadowed Tesla hittingits production targetsforthe Leaders The Economist October 6th 2018 11 China’s designs on Europe And howEurope should respond EUROPE has caught China’s will surelyremain closerto itstraditional allies. eye. Chinese investments Europe thusneedsto take a path thatavoidsthe extremes of there have soared, to nearly naivetyand hostility. Itshould avoid mimickingChinese pro- €36bn ($40bn) in 2016—almost tectionism. Itmightsound “fair” to subjectChinese firmsin Eu- double the previousyears’ total. rope to the restrictions European firms face in China, but it Chinese FDI fell in 2017, but the would be a mistake. The permeability of European societies share spentin Europe rose from and economiesto ideasand influencesisa strength. a fifth to a quarter. Forthe most But such openness also makes them vulnerable. Hence, part, this money is welcome. Europe’s trading relationship governments should vet investments case by case. Montene- with China hasmade both sidesricher. gro should not have allowed its debts to China to become so However, China isalso usingitsfinancial muscle to buypo- perilously vast. Hungary and Poland should have looked litical influence (see Briefing). The Czech president, Milos Ze- harderatcertain Chinese infrastructure projectsthat offerpoor man, wantshiscountryto be China’s“unsinkable aircraft-car- value formoneyorwere neverproperlycompleted. rier” in Europe. LastyearGreece stopped the European Union Europeanscould do more to substantiate theirtalkof “reci- from criticising China’s human-rights record at a UN forum. procity”, orthe mantra thatthe EUand China should treateach Hungary and Greece prevented the EU from backing a court otheraseach wishesto be treated. Theycould, forexample, in- rulingagainstChina’sexpansive territorial claimsin the South troduce new instruments to make it clearer who is buying China Sea. Faced with such behaviour, it is only prudent for stakesin firmsand thuswhethertheyare doingso fairly. They Europeansto be nervous. should also increase funding for impartial China research. And notonlyEuropeans. The termson which the emerging Transparencyshould be demanded from political parties, uni- undemocraticsuperpowerinvestsin the outside world are of versities, think-tanks and lobbyists. Sometimes Chinese cash interestto all countries—particularlyifotherthings, such asfor- buys unsubtle happy talk. More often, it leads to self-censor- eign policy, may be affected. Americans, increasingly con- ship and punch-pullingfrom even prestigiousacademies. sumed by fears that China poses a commercial and military And Europe should aim to speakasone. None ofitsstates threat, should be mindful ofcompetition forthe loyalties ofits alone can face down China but, actingtogether, theycould do oldest ally. For everyone’s sake, it matters that Europeans so fordecadesto come. The EU could, forexample, use quali- gauge theirwelcome to China wisely. Justnow, theydo not. fied-majority voting (QMV) rather than unanimous votes on some subjects sensitive to China, such as human rights. This Asense ofperspective would notworkforeverything—mostEUnationswould balk ManyofChina’splansin Europe are justwhatyouwould ex- at givingBrussels a veto overhow they deploy theirmilitary pectofa risingeconomy. Some investmentsare private, profit- forces. But QMV would make it harder for China to paralyse seekingand harmless. Acquiringtechnologybybuyinginno- the EUbypickingoffone small memberata time. The EUcould vative firms, includingin Germany’sMittelstand, isreasonable, also co-ordinate investment-screening processes by member too, so longasdealsare scrutinised fornational-security risks. states. And itcould take bettercare ofthose southern and east- There are also thingsthatChina, unlike Russia, does notwant, ern countriesparticularlyvulnerable to China’sinfluence and such as to undermine the EU or sow chaos by furtively sup- provide alternative sourcesofinvestmentforthe projects they porting populist, xenophobic parties. It would rather Europe deem important. A little more intra-European solidarity remained stable and open forbusiness. On issuessuch ascli- would go a longway. mate change and trade, China has acted more responsibly than the Trump administration, seeking to uphold global ac- Whatmoneycan’tbuy cordsratherthan chuckgrenadesatthem. America hasa role to play, too. Ideallythe Trump administra- Some Europeanstake thisto suggestthatChina isa useful tion would stop treatingEuropeansasfree-riderson American counterweight to an unpredictable Uncle Sam. That is mis- power who deserve a good kicking. On trade, especially, the guided. Europe has far more in common with America than EUisa powerful potential allyin gettingChina to abide byglo- China, howevermuch Europeansmaydislike the occupant of bal norms. America should also workmore closelywith Euro- the White House. Moreover, China hasused the EU’sneed for pean governments to set up common standards of transpa- unanimityin manyofitsdecisionsto pickoffone or two mem- rency, graft-bustingand the prevention ofinfluence-peddling— berstatesin orderto blockstatementsoractionsof which itdis- which would make itharderforChina to impose itsown rules approves—aswith human rights. on small countries. Ata time when standardsforITand artifi- OtherEuropeansseize on such examplesto jump to the op- cial intelligence risk splitting into a Chinese camp and an posite conclusion. They fear that Chinese lucre will one day American one, Europe can help find a middle path. undermine Europe’s military alliance with the United States. As China rises, the benefits for the world of an indepen- Fortunately, thatisa longwayoff, asthe French and British na- dent, open and free Europe will only increase. Conversely, a vies have shown by joining America and Japan to challenge Europe weakened and divided bythe world’smostpowerful China in the South China Sea (see Asia section). Until China it- authoritarian regime would exacerbate problems far beyond selfbecomes a democracy, ofwhich there is no sign, Europe the EU’sborders. Europe mustnotletthathappen.7 12 Leaders The Economist October 6th 2018 The Supreme Court Kava-no Whateverthe FBI finds, BrettKavanaugh’s own testimonyshould disqualifyhim from America’s highestcourt IT MAY never be possible to men)becameadrinkinggamenobodyhasheardof;“boofing” know what really happened (anal sexorinfusion ofdrugsoralcohol) became farting. The in the suburban Maryland real meanings might be awkward for Mr Kavanaugh, but a home where Christine Blasey judge should notredefine wordsto avoid embarrassment. Ford recalls being sexually as- Norshould a judge give the impression ofbeingconsumed saulted by Brett Kavanaugh in byhatred forone ofthe main political parties. MrKavanaugh the summer of 1982. Mr Kava- described the allegations against him as “a political hit”, “re- naugh vehemently denies the venge on behalfofthe Clintons” and the fruitof“millionsof accusation. Given the difficultyoflitigatinga 36-year-old case, dollarsin moneyfrom outside left-wingopposition groups”. the riskofdestroyingthe reputation ofa man who may be in- Defenders of Mr Kavanaugh, worried about an open sea- nocent, and the partisan nature ofthe opposition—Democrats son on powerful men, point out that any innocent person in were againstMrKavanaugh longbefore he faced allegations of hisposition would rage againsthisaccusers. YetMrKavanaugh sexual assault—should Republican senatorsconfirm the presi- was not just angry, but conspiratorial. He chose to direct his dent’snominee when the Senate votes? fury at the Democrats personally, as if he were a signed-up Theyshould not. Even ifan FBIinvestigation failsto turn up memberofthe otherside. new evidence about what happened in a bedroom 36 years As it happens, that is precisely what Democrats have al- ago, there isno disputingwhatMrKavanaugh said in his con- waysalleged—and howRepublicansare nowhonouringhim. firmation hearingslastweek. And itwasdamning. Before he became a judge, MrKavanaugh worked forKen Starr on the impeachmentofBill Clinton. He waspartofGeorge W. Overhis skis Bush’slegal team, which opposed a recountin Florida in 2000, MrKavanaugh wasevasive and disingenuous. Underoath, he and laterworked in the Bush White House. Thisexplains why depicted himselfasa typical teenage drinkerand in control. A hostilityto MrKavanaugh haseclipsed thatfaced byNeil Gor- numberofcontemporariesatschool and college dispute that. such, who joined the Supreme Courtlastyear. MrKavanaugh He claimed that he could legally drinkin Maryland in his se- sayshe putpartyallegiance aside on becominga judge. After nioryear—hence the “100 KegsorBust” boastin hisyearbook. lastweek, thatclaim looksmisleading, too. In fact, bythe time he turned 18, the drinkingage was21. Lotsof Itishard to see howsomeone who harbourssuch feelings American teenagers drinkbefore they are legally allowed to. can decide cases on gerrymandering, say, in a credibly non- Theydo notmislead the Senate aboutitthree decades later. partisan way. Mr Kavanaugh’s conservative judicial philoso- MrKavanaugh told othersmall fibsunderoath. He said that phyisnota problem. Hisvisible loathingofDemocrats is. That referencesbyhim and hisfriendsto a girl called Renate, which isnotjustouropinion. In 2015 a prominentjuristtold the Cath- contemporaries say were boasts of sexual conquest, real or olicUniversityofAmerica: “Agood judge, like a good umpire, pretended, were “intended to showaffection, and thatshe was cannot act as a partisan...Ifyou are playing the Yankees, you one ofus”. He changed the meanings ofslang from his year- don’t want the umpires to show up wearingpinstripes.” The book: the “Devil’sTriangle” (sexbetween one woman and two jurist’sname wasBrettKavanaugh.7 The gig economy Workers on tap Howgovernments should deal with the rise ofthe gig economy THE Archbishop of Canter- ern capitalism hasfailed. Criticsrail thatitallows firmsto rid bury sees it as “the reincar- themselves of well-paid employees, replacing them with nation ofan ancientevil”. Eliza- cheap freelancers. Workerswho once relied on an employer to beth Warren, a senator from payinto theirpension, orto covertheirhealth care when they Massachusetts, says that, for fell ill, must instead save for the future themselves. On this many workers, it is the “next reading, the gigeconomyturbochargesinsecurityand the ero- step in a losing effort to build sion of workers’ hard-won rights. There is a grain of truth to some economic security in a this. Butitmissesthe biggerpicture. world where all the benefitsare floatingto the top 10%”. Luigi Forone thing, despite citystreetsclogged with Uber drivers Di Maio, Italy’sdeputyprime minister, isgoingafterit aspart of and Deliveroo cyclists, gigging is not about to take over the his“waron precariouswork”. world (see Finance section). Across the OECD club ofmostly Formany, the “gigeconomy”, in which short-term jobsare rich countries, the share of workers in full-time positions, assigned via online platforms, isa potentsymbol ofhow mod- which dropped afterthe financial crisisof2008-09, hasbeen 1 The Economist October 6th 2018 Leaders 13 2rising. In America the average job tenure hasbarelychanged in category of worker, sitting somewhere between self-em- the past30 years. Dependingon whom youask, 1-5% ofAmeri- ployed and employed. Yetthe boundariesbetween classifica- cansgig—butmanyofthose have salaried jobsaswell. tionswill alwaysbe fuzzy. Britain alreadyhassuch a third cate- However, the factthatitissmallerthan youmight thinkis gory. Itisalso the place where argumentsaboutthe legal status notthe gigeconomy’sstrongestdefence. Thatrestson how gig- ofgigworkersare mostvigorous. gingbringsimportantbenefitsto the economy. The advantages Betterto relyon two othermechanisms. The firstis the mar- forconsumersare clear. With a swipe ora click, almost anyone ket. Unemploymentislowand payisstartingto rise—Amazon can get Rover walked in the park or a vital document copy- this week announced big bumps in the minimum wages it edited within hours. paysAmerican and British workers. The platformswill need to Crucially, benefits also accrue to workers. The algorithms respond. Some gig-economy firms are voluntarily offering thatunderpin gig-economyplatformsimprove the “matching” their workers health insurance. Competition between gig between giggers and jobs, leading to less dead time. The evi- firmsalso helps. Italian food-deliveryridersboastof howthey dence thatgigworkersface a paypenaltycompared with con- playplatformsoffagainsteach otherin theirefforts to getbet- ventional employeesispatchy; manysaytheyvalue the extra terpayand benefits. Innovationssuch asAustralia’sGigSuper, autonomy they enjoy compared with salaried workers. Gig afund which makesiteasierforgigworkersto save for a pen- platformsare a useful wayoftoppingup income orsmoothing sion, are also welcome. out earnings if other sources of work dry up. They can also breakopen closed industries. Research showsthatthe arrival Ahelping hand ofUberin American citiesleadson average to a 50% surge in The other mechanism is to help workers claim their existing the numberofself-employed taxi-drivers. rights. One option is to make it simpler for disgruntled gig Butthe gigeconomyisnotperfect. Platformsargue theyare workers to use the judicial system. Precedent-setting rulings no more than neutral marketplacesin which workersand cus- on the statusofgigworkersmaybe pilingup, butthe barriers tomersmeet. Bythislogic, workersoughtto countas self-em- to goingto court in the first place are often too high. Another ployed. Butthe standardsto which some platformshold work- option isto help giggersorganise, in orderto mitigate the low ers tell a different story. Food-delivery riders are often told to bargainingpowerthe self-employed often face compared with weara uniform; driversforride-hailingappsneed to maintain employees. Athird option isto boostthe credibility ofthe sys- agood ratingorcan be kicked offthe platform. Platforms have tem fordetectingand prosecutingdeliberate infractions ofem- alegitimate interestin maintainingtheirqualityof service. But ploymentlaw. America hasjustone labourinspectorfor every it cannot be right that some firms specify how workers must 100,000 employed people, the world’sjoint-lowestratio. Sim- submitto the dutiesofactinglike employeeseven as theyre- ply insisting that firms follow the rules would give workers jectthe responsibilitiesofactinglike employers. greater protection while ensuring that the gig economy lives One proposal, beingfloated in America, isto create a third up to itsenormouspromise. 7 Italy’s budget plans Nearer the brink The Italian governmenthas senta worrying signal. Itwill notenactreforms—and will undo old ones ITALIANS are frustrated—and Thebudgetproposesafiscaldeficitof2.4% ofGDPnextyear General government debt theyare rightto be. Because of (see Europe section). It includes goodies for both governing %ofGDP the financial crisis and chroni- parties. Luigi Di Maio, leaderofM5S, hopesthatfundingfor a 150 Italy callylowgrowth theyare on av- basic minimum income, his key pledge, will stem his party’s 100 erage no richer, in real terms, fall in opinion polls. The Northern League, led byMatteo Salvi- Euro area 50 than theywere atthe turn of the ni, seemslikelyto make progresstowardsitsflattax. century. Some 10% are out of Thisplan hasa numberofproblems. True, the deficit isnar- 2007 10 15 18* *Estimate work; 20% live on less than rower than election promises had suggested. Much-needed €10,000($11,500)ayear.Inan election in March theyvoted for publicinvestmentwill grow. Butitstill breakseuro-zone fiscal change by choosing political outsiders in the form of the rules. It is also higher than Giovanni Tria, the technocratic fi- Northern League and the Five StarMovement(M5S). nance minister, had led investorsto expect. Thatcarried an im- On September27th a coalition ofthe two partiesunveiled mediate price. ByOctober2nd the mostcloselywatched gov- itsplan to startthe job ofliftingthe countryoutof itsfunk—in ernmentbond yield was3.4%, itshighestsince 2014. the form oftheirfirstbudget. Itisboth disappointing and wor- rying. The governmentmakesno attemptto correctItaly’slow Stopping atEboli productivitygrowth, withoutwhich both the country’sliving Even before the budget, Italy’sborrowingcosts, relative to Ger- standardsand itsabilityto paydown debtcannotsustainably many’s, were overa percentage pointhigherthan atthe elec- improve. Under previous governments, a lack of reform has tion. Itwill take time forthe rise in yieldsto raise the govern- held Italyback. Thislotgo one furtherbysettingout to unpick ment’s cost of borrowing, which rises only as debt is rolled pensionslaw—a rare example ofa reform thatwassuccessfully over. Buthighergovernment-bond yieldsare alreadytranslat- legislated. The coalition came into office promisinga newway inginto higherinterestratesforthe widereconomy. Thatwill ofgoverning. Ithasfluffed itschance. countermuch ofthe impact from stimulus, which makes the 1 14 Leaders The Economist October 6th 2018 2government’s expectations of robust growth next year even lower unemployment by nearly four percentage points. But more unlikely—and could swell the deficitstill further. thatwould mean takingon unions, a challenge thatsuccessive The plan is even more striking for the issues that it ducks. governments have avoided. Far from showing courage, this Productivitygrowth isdismal. Moneyearmarked forpublic in- governmentwill use the budgetto reverse reformswon under vestmentoften remainsunspent, because ofa risk-averse bu- a previous administration that raised the retirement age, but reaucracy. Cumbersome rulesand longcourtcasesstifle busi- which were deeplyunpopular. ness. The trade surplus shows that firms exposed to Without reform, Italy’s exorbitant debt burden of about competition are thriving. But the services sector is sheltered. 130% ofGDPwill fall slowlyatbest. Politicscould yet push the Opening closed professions would help, as would speeding countrynearerdefault. The budgetisa slap in the face forthe the sale ofpublicassets. Too fewItalianswork. Italian women European Commission. Yet Italy’s politicians, with an eye on are less likely to do so than most oftheirsisters in the OECD. next year’s European parliamentary elections, may relish the Employers are loth to hire people because it is so hard to fire prospectofa Brusselsbust-up. Keen to shore up hispopularity, them. This is doubly so in the poorersouth, where firms pay MrDi Maio could call formore spendingnextyear. Investors high wagesnegotiated atthe national level. maynotyetbe readyto dump Italy’sbonds—notleastbecause The prize to the governmentthatcould seize the agenda for the European Central Bank will do what it takes to save the reform would be vast. The IMFreckonsthatsimplyshifting to euro. Butwith itsextravagance and itsrefusal to face reality, the company-level, rather than national, wage bargaining could governmentistestingtheirpatience. 7 Trade Marginal revolution The renegotiation ofNAFTAis a relief. Butitis nota success NOT long ago President Do- goals.Italsoraisesthethresholdunderwhichgoodscanenter Merchandise exports nald Trump nearly with- Canada or Mexico without incurring taxes or duties, or too 2017,$trn drew from the North American much paperwork. Thiswill benefitAmerican exporters. 0 0.5 1.0 1.5 United Free Trade Agreement (NAFTA). Yeteven formercantilistslike MrTrump, the agreement has States NAFTA Rest of world Now he has replaced it. On Oc- downsides. Ascarmakingcostsrise, manufacturersin all three Canada tober1st the administration an- countrieswill find itharderto compete with producers in Asia nounced that Canada would and Europe. When, say, Mexican carmakerslose marketshare, Mexico join a pactithasalreadynegoti- American parts-makers, who contribute overa quarterof the atedwithMexico. The resultingUnited States-Mexico-Canada contentofMexican vehicles, will suffertoo. Agreement(USMCA) keepsitspredecessor’smostvital feature: In anycase, trade dealsshould notbe judged byhow well tariff-free trade in most goods. These economies should now they protect domestic industries, but by whether they serve avoid one source ofchaoticdisruption. the public as a whole. Against this yardstick, the USMCA is Havingsolved a crisis ofhis own making, the president is clearly worse than the deal it is replacing. Amarginal liberal- takinga victorylap, hailing“an amazingdeal fora lotofpeo- isation ofthe Canadian dairy industry is welcome but is not ple”. Thatisaccurate onlyaccordingto MrTrump’smisguided worth highercosts and lowerproductivity in carmaking. Ca- protectionism (see Americassection). Although the new pact nadians spent $11bn on dairy products in 2017; Americans doescontain improvementsto NAFTA, taken asa whole it isa spent$498bn on carsand parts. The strong-armingwasunnec- step backwardsforfree trade. Asa result, itwill harm America. essary, too. The Trans-PacificPartnership, a pactfrom which Mr Trump withdrewin 2017, modernised rulesfortrade in digital WhyUSMCA? industriesand financial serviceswithoutretreatingon cars. The president is pleased with himself mainly because the Free tradersmighttake solace from the factthat, to seal the agreementshould shiftcarmakingjobsfrom Mexico to Ameri- USMCA, America has proved willingto compromise—by, say, ca. When itisfullyimplemented, carswill escape tariffs onlyif acquiescingto Canada’sinsistence thatitdrop MrTrump’sde- asmuch astwo-fifthsoftheircontentismade byworkers earn- mand to scrap one of NAFTA’s dispute-resolution mecha- ingatleast$16 an hour—seven timestoday’saverage manufac- nisms. The presidentstrucka deal ratherthan prolong the fight. turing wage in Mexico. Three-quarters of a vehicle’s value Should this raise hopes that he will pull off a deal in his mustoriginate inside the free-trade zone, up from about two- trade warwith China? Notso fast. Western complaints about thirds. And because the USMCAmustbe re-authorised atleast Chinese trade practices run deep. Persuading the Chinese to every16 years, firmsmaywell be discouraged from big invest- rip up theireconomicmodel isa fartougherjob than renegoti- ments in cross-border supply chains. America imports more atingNAFTA. And in the shortterm China dependsmuch less lightvehiclesthan are sold in Canada and Mexico combined. than either Canada or Mexico on selling to America. As a re- With a sunset clause—not to mention the riskthat Mr Trump sult, MrTrump haslessleverage, even ifthe USMCAclearsthe may renege on his promises—firms may prefer to produce in wayforthe Westto take a united stand againstChina. America. Accessto Uncle Sam’svastmarketiswhatmatters. Aboutall thatcan be said in favourofthe USMCAisthatthe There are further reasons for Mr Trump’s boasting. The uncertaintycastbyMrTrump overNorth American trade has USMCA marginally opens up Canada’s dairy market and eased. However, America would be better off had he never lengthenssome pharmaceutical patents—longtime American raised anydoubtsin the firstplace. 7 16 Letters The Economist October 6th 2018 Notall German residentsof Inspection Post. Ifhowever, Outoftheleftfield PoliticsinSingapore Turkish origin are Turkish these checkswere to be im- Bagehotseemeddetermined citizensand able to vote in Banyansuggestedthatthe posed on UK-to-EUmeatthey toreachtheeventualand Turkish elections. Alarge governmentofSingaporewins would threaten the just-in- comfortingconclusionthatwe numberofpeople with a electionsbecauseithounds time supplyofproducts, such shoulddiscounttheavowed Turkish background have criticsanddeniespublic- aschilled chicken breast, with radicalismofJeremyCorbyn’s become, and are exclusively, housingupgradestoopposi- ashelflife ofaround ten days. LabourParty,as“theBritish German citizens. Moreover, tiondistricts,andwondered Halfofthe poultryimports establishmentisforeverchang- halfofthose who were eligible whytherulingPeople’sAction from outside the EUare physi- ing—andyetsomehowforever to vote did notdo so. In short, Party“holdsonsotena- callychecked. Cartonsare remainsthesame”(September the numberofTurkish citizens ciously”topower(September opened and inspected bya vet. 29th).Comfortingbut,inthis who voted in favourofthe 22nd).ThePAPhasbeen Thiscan also involve a sample instance,profoundlywrong.It reform wassome 450,000. repeatedlyre-electedbecause beingsentto a laboratoryand isnotLabour’spolicies:a50% ARNDT LEININGER ithasbeenhonestwiththe the consignmentbeingde- marginaltaxrate,renationalis- Research fellow at the chair for voters,deliversonitsprom- tained until a cleartestresult ingutilities,workers’stakesin German political sociology ises,andprovideslong-term comesback. Forbeef, lamb largecompanies.Allofthese, Free University Berlin stabilityandprogress.Whenit and pork, 20% ofshipments orvarietiesthereof,couldbe hasnotfullymetvoters’ are physicallyinspected. After foundinvariouscentre-left expectations,andsolostvotes, Brexit, such checkswould pose Europe’s privacyadvantage manifestosoverthepastde- ithasrespondedwithappro- achallenge to supplychains, cade.Itisnoteventheocca- Youpainted quite a dire pic- priatepolicyadjustments.It particularlywhere chilled sionalpreeningthatLabour ture ofEurope’sposition when hasalsoconsciouslyrenewed productsare involved. hassomehow,uniquely, itcomesto expertise and tech- itsleadership,withafourth KATIE DOHERTY caughtthezeitgeist.Rather,itis nologyin artificial intelligence generationsinceindepen- Policy director thattheparty’salternative (“Bigdata, small politics”, dencereadyingitselftotakeon International Meat Trade worldviewissoatoddswith September22nd). Yougave theresponsibility. Association thepost-war,post-colonial, much credence to the factthat Thealternative—aconstant London Western,liberal-democratic large firmsin America and merry-go-roundofcontending consensusthatIdoubtitcan China have the king’sransom parties—doesnotnecessarily Resistance is futile becontainedwithin“the ofaccessto data and, therefore, producebetteroutcomes. establishment”. expertise in thisfield. As an Politiciansfailtokeepthe Historicalanalogiesare American entrepreneur, based promisestheymake,the problematic,butweshould in Cardiffworkingatthe sharp peoplebecomedisillusioned, perhapslooktotheeruptionof end ofthe AIindustry, I have andeventuallylosefaithin ProtestantismintoWestern seen thatitisnotgovernance, democracy.Witnessthelow Christianityinthe16thcentury butthe resolve, expertise and voter-turnoutsinmany forasimilardisruptive public-sectorsupportwithin Westerndemocracies. perspective.TheCorbynista thisarea thatwill provide a FOOCHIHSIA versionoftheHorribleHistory seatatthe top table forEurope. Highcommissionerfor ofTheWestisfundamentally Large institutionsenthusi- Singapore flawed,akindof“1789,1917and asticallylookoutside estab- London AllThat”forourage.But lished hubsto find AIpracti- realityisalmostirrelevant. tionerswho can give them a The meatofBrexit Peoplearepreparedtobelieve strategicorcompetitive edge. Ienjoyed yourbookreviewof it;hereticsarehunteddown Europe isplayingitshand Since Britain voted to leave the Yuval Noah Harari’slatest withapassionthatwouldnot cleverlyon thisfront. The European Union there has forecastofourshared future havedisgracedtheInquisition. aforementioned accessto data been a greatdeal ofmisinfor- (“In the kingdom ofcyborgs”, Theyareclearlynotinterested isn’tnecessarilya benefit, mation aboutthe potential for September1st). ButI was ingradualchange. either, asprivacyisa signif- regulatorychecksto be perplexed byyourprescription Thereisnothingcosy,com- icantconcern. The strangle- imposed on meatmoving foravoidingthe pitfallsof the fortingorconventionalinthat hold thatlarge firmssuch as between the United Kingdom comingcyborgsymbiosis. If atall.Thenewestablishment? Google orMicrosofthave on and the EU(“Chequers, the human brainsare recondi- Idon’tthinkso. data isbecominga worryfor unlikelysurvivor”, September tioned bybeingmelded with SIMONDIGGINS manyand, in some cases, 15th). There are presentlyno digital ones, do youreally Rickmansworth,Hertfordshire potentiallya barrierto com- veterinarycheckson meat thinkwe can enshrine free will merce. Traders, investors, big productsmovingacrossany in “the code”? The verynature banksand otherglobal organi- borderwithin the EUsingle ofcodingisdeterminism. Turkish origins sationsneed to be sure that AI market, includingon ferries ALEJANDRO EMMANUEL MORENO Itwasincorrectto saythat, of isusingtheirdata responsibly crossingthe Irish Sea. Moving San Diego7 the 3m people ofTurkish origin and securely. Thisisthe next meatfrom Aberdeen to in Germany, “almosttwo- bighurdle forcompanies London isthe same asmoving thirds” voted in favourof developingAI, and itisan area itfrom Aberdeen to Austria or Lettersarewelcomeandshouldbe Recep Tayyip Erdogan’sconsti- in which Europe isalreadya from Northern Ireland to the addressedtotheEditorat TheEconomist,TheAdelphiBuilding, tutional reform in 2017 (“Hello world leader. British mainland. 1-11JohnAdamStreet, to Berlin”, September22nd). CHRIS GANJE Veterinarychecksdo apply LondonWC2N6HT Rather, itwastwo-thirdsof Chief executive to non-EUimportsofmeat, E-mail:[email protected] eligible Turkish citizensin AMPLYFI where the consignmentmust Morelettersareavailableat: Economist.com/letters Germanywho voted in favour. Cardiff enterthrough a Border

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