Table Of Content

Remaking Britain’s politics China’s war on burials The 20th century’s biggest killer Highly effective people’s annoying habits SEPTEMBER29TH–OCTOBER5TH2018 Sex and power #MeToo, one year on Contents The Economist September 29th 2018 7 39 Israel and Russia 11 Theworldthisweek Missiles with a message 39 South Africa Leaders Long walk to growth 15 Sexandpower 40 Somaliland’s heritage #MeToo,oneyearon Restorers required 16 Waste Cashfortrash Asia 16 Citizenshipforsale 41 Public health in India Whatpriceapassport? Modicare 17 LIBOR 42 Banyan British politicsBeneath the Ticktock China and the Vatican chaos of the Brexit talks, big 18 Britain ideas are forming that will 43 Identification in India Thequesttoremakepolitics shape Britain’s next decade: Court gestures On the cover leader,page 18. The world’s 43 Eugenics in Japan Amovement sparked by an oldest political party is under Letters Adverse selection alleged rapist could be the strain, page 23. Jeremy Corbyn 20 OnBrazil,theSupreme most powerful force for 44 The Maldives isn’t the outsider that both his Court,genderidentity, equality since women’s Sun, sea, sand and surprise friends and enemies believe LudwigvonMises, suffrage: leader, page 15. 44 South Korea and Japan him to be: Bagehot, page 55 goodwill,Latin How America’s political Control is not enough parties are coping with a swiftly changing culture, Briefing Special report: Waste page 27. The #MeToo 23 TheConservativeParty movement has raised Aload of rubbish Whenallaboutarelosing awareness. But it has yet to After page 44 theirs... have a lasting effect on the workplace, page 59 China UnitedStates 45 Death 27 #MeTooandpolitics Awar against burials TheEconomistonline Truthandconsequences 46 Student activism Dailyanalysisandopinionto 28 TheSupremeCourt Beware of Marxists Bench-warming supplementtheprintedition,plus 47 Chaguan IranIts problems are mounting audioandvideo,andadailychart 29 Labourmarkets One-way globalisation at home and abroad,page 37 Economist.com Diversityimplosion E-mail:newslettersand 30 Violentcrime mobileedition Stillpilingup Europe Economist.com/email 31 Politicalharassment 48 Average Europe Printedition:availableonlineby Uncivilhands France’s tenth city 7pmLondontimeeachThursday 32 Lexington 49 Dutch politics Economist.com/printedition HakeemJeffries Who doesn’t like a tax cut? Audioedition:availableonline 50 Germany todownloadeachFriday Greying Greens Economist.com/audioedition TheAmericas 50 Romanian royals 33 Chile Thirsty for blue blood Themiddle-incometrap 51 Russia 34 Presidentialplanes Asea of troubles RubbishHow the world should Aerialausterity cope with its growing piles of 52 Charlemagne 35 Bello Volume428Number9111 Britain, a lonely domino rubbish: leader, page 16. Peru’spresident Emerging economies are PublishedsinceSeptember1843 rapidly adding to the global totakepartin"aseverecontestbetween Britain pile of garbage. But solving Middle East and Africa intelligence,whichpressesforward,and anunworthy,timidignoranceobstructing 53 The Labour Party the problem should be easier 37 Iran and the world ourprogress." ¿Hasta la victoria? than dealing with other Isolated and besieged EditorialofficesinLondonandalso: 54 Asecond referendum environmental harms, says Amsterdam,Beijing,Berlin,Brussels,Cairo, 38 Egyptian politics Jan Piotrowski. See our special Vote early, vote often Chicago,Johannesburg,Madrid,MexicoCity, No one is secure report after page 44 Moscow,Mumbai,NewDelhi,NewYork,Paris, 55 Bagehot SanFrancisco,SãoPaulo,Seoul,Shanghai, 38 Dysfunctional Lebanon Singapore,Tokyo,WashingtonDC Corbyn, establishment man Power-boat struggle 1 Contents continues overleaf 8 Contents The Economist September 29th 2018 International Science and technology 56 Investment migration 75 Pandemic disease Ahome in the country Adeadly touch of flu 58 Residence and tax 76 How influenza evolves Sweet deserts Mind your H’s and N’s Business Books and arts 59 American business after 78 The race for AI supremacy Weinstein The gladiator’s edge Behind closed doors 79 Intellectual life in America Passports for saleFlogging Spanish fluThe next few 61 Bartleby Unsafe spaces the right to citizenship and months mark the 100th Executive privilege 80 Contemporary art residence is fine, as long as anniversary of the peak of the 62 Gulf carriers The Rales rules ne’er-do-wells are weeded 20th century’s most deadly Super-connecting out: leader, page 16. It is a big 81 Slavery and escape catastrophe, page 75. Flu’s business—and a controversial 62 Comcast and Sky Flight to freedom success owes much to its one, page 56 Sky high mutability, page 76 81 British fiction 63 Ride-hailing in Keys to the heart South-East Asia Subscription service After Uber 84 Economic and financial For our latest subscription offers, visit 64 French supermarkets indicators Economist.com/offers Shopping and nothingness For subscription service, please contact by Statistics on 42 economies, telephone, fax, web or mail at the details 64 The gold-mining business plus a closer look at world provided below: Panning out GDP North America The Economist Subscription Center 65 Schumpeter P.O. 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Box 46979, St. Louis, MO 63146-6979 did to control births, officials The price of everything Telephone: +1 636 449 5702 Facsimile: +1 636 449 5703 use strong-arm tactics to curb 68 Buttonwood E-mail: [email protected] burials, page 45 Public markets Subscription for 1 year (51 issues) United States US $158.25 (plus tax) 69 World trade (1) Canada CA $158.25 (plus tax) Amatter of dispute Latin America US $289 (plus tax) 69 World trade (2) Familiar KORUS Principal commercial offices: 70 Sovereign bonds The Adelphi Building, 1-11John Adam Street, Atimeless argument London WC2N 6HT 70 Development lending Tel: +44 (0) 20 7830 7000 Building it up Rue de l’Athénée 32 1206 Geneva, Switzerland 71 Argentina Tel: +4122 566 2470 Anew deal 750 3rd Avenue, 5th Floor, New York, NY 10017 72 Free exchange Tel: +1212 5410500 Crude awakening 1301Cityplaza Four, LIBORThe hunt for a new 12 Taikoo Wan Road, Taikoo Shing, Hong Kong benchmark interest rate poses Tel: +852 2585 3888 risks to financial stability: Other commercial offices: leader, page 17. Scandal and Chicago, Dubai, Frankfurt, Los Angeles, rickety economic foundations Paris, San Francisco and Singapore have undermined LIBOR. Ascramble to replace it is under way, page 67 PEFC certified This copy of The Economist is printed on paper sourced from sustainably managed forests certified to PEFC PEFC/29-31-58 www.pefc.org ©2018 The Economist Newspaper Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Newspaper Limited. The Economist(ISSN 0013-0613) is published every week, except for a year-end double issue, by The Economist Newspaper Limited, 750 3rd Avenue, 5th Floor, New York, N Y 10017. The Economist is a registered trademark of The Economist Newspaper Limited. Periodicals postage paid at New York, NYand additional mailing offices. Postmaster: Send address changes to The Economist, P.O. Box 46978, St. Louis , MO. 63146-6978, USA. Canada Post publications mail (Canadian distribution) sales agreement no. 40012331. Return undeliverable Canadian addresses to The Economist, PO Box 7258 STN A, Toronto, ON M5W 1X9. GST R123236267. Printed by Quad/Graphics, Saratoga Springs, NY 12866 The world this week The Economist September 29th 2018 11 warshipto make a portcall in leave the EUwasrejectedata hasimposedsanctionson Politics HongKong. Tension between summitin Salzburg. Donald dozensofmembersofVenezu- the two countrieshasrisen Tusk, the presidentofthe ela’sdictatorialregime. since America decided to European Council, said theEU impose sanctionson Chinafor could notacceptthe British RussiadefendsIraninSyria buyingjetsand missilesfrom prime minister’splans. Mrs VladimirPutinsaidRussia Russia. Maysaid the solutionsde- wouldsupplySyriawithan manded bythe EUwould advancedanti-aircraftmissile Ibrahim Mohamed Solih won “make a mockery” ofBritish system.Israel,whichhas apresidential election in the voters’ decision to leave. Some carriedoutdozensofairstrikes Maldives, defeatingthe ofherhardline backbenchers onIraniantargetsinSyria, incumbent, Abdulla Yameen. saymuch the same abouther opposedthemove.Relations In FebruaryMrYameen had own plan. betweenRussiaandIsrael declared a state ofemergency havebeenstrainedsinceSyria and arrested judgesto stayin Bellingcat, a journalism web- mistakenlyshotdowna More women made allega- power, so Maldivianswere site, said thatthe real nameof Russianplaneinresponseto tionsofsexual assaultagainst surprised and delighted when one ofthe two Russianmil- anIsraeliairstrike. BrettKavanaughdatingback he conceded. itaryintelligence agentsac- to the 1980s, complicatingthe cused byBritain ofcarrying Republicans’ plan forhisswift Police in the Philippines outa chemical attackin Britain confirmation to the Supreme arrested Antonio Trillanes, a isColonel AnatoliyChepiga, Court. The #MeToo move- senatorand criticofPresident who wasawarded Russia’s ment, which began a yearago, Rodrigo Duterte. MrTrillanes highesthonourin 2014 by hasrallied to oppose MrKava- waspardoned forthe crime in VladimirPutin personally. naugh. He deniesall claims of question—mutiny—byMr sexual misconduct. Duterte’spredecessor, butMr VolkerKauder, a close allyof Duterte revoked the pardon. Germany’schancellor, Angela Rod Rosenstein, America’s Merkel, wasousted asheadof deputyattorney-general, India’ssupreme courtruled herCDUparty’sparliamentary described a reportthathe had thata vastbiometricidentifica- group. The move isa further thoughtaboutsecretlytaping tion scheme wasconstitution- sign ofMrsMerkel’sweak- Severalgunmenattackeda Donald Trump and had dis- al, and thatparticipation could eningposition. militaryparadeintheIranian cussed waysto remove him be required forthose receiving cityofAhvaz,killingatleast25 from office as“inaccurate”. Mr publicbenefitsorfilingtax In Sweden, the prime min- people.EthnicArabseparatists Rosenstein appointed the returns. Butitlimited the scope ister, Stefan Lofven, wasfor- andthejihadistsofIslamic special counsel currently forprivate businessesto use mallyousted bya parliamenta- Stateissuedcompetingclaims investigatingRussian med- the system. ryvote followingan tohavecarriedouttheattack. dlingin American elections. inconclusive election on Sep- Thegovernmentclaimed, MrTrump hasoften expressed So that’s sorted then? tember9th. However, he will withoutevidence,thatthe displeasure with him. Britain’sopposition Labour stayon ascaretakeruntil anew gunmenwerebackedbySaudi Partypassed a motion atits governmentcan be formed, Arabia,theUnitedArab Atheists appoint bishops annual conference thatleft the which mighttake a while. EmiratesandAmerica. China and the Vatican agreed dooropen to a second referen- to share responsibilityfor dum on Brexit. SirKeirStarmer, Caputo kaput InaspeechtotheUN,Donald appointingChinese bishops. the party’sBrexitspokesman, The presidentofArgentina’s TrumpaccusedIranof The church had previously won loud applause when he central bank, LuisCaputo,quit “sowingchaos,deathand insisted thatonlyitcould said such a referendum could afterjustthree monthsinthe destruction”intheMiddle decide who washolyenough include the option to remain in job. Hisinterventionsto prop East.Iran’spresident,Hassan forthe job. ButChina’saggres- the EU. Some unionsand MPs up the peso had broughthim Rouhani,retortedthatMr sivelyatheistregime cannot saythiswould be a betrayal. into conflictwith the finance Trumpsufferedfroma abide organisationsthatit does The party’sleader, Jeremy minister, NicolásDujovne, “weaknessofintellect”. notcontrol. The Vatican hopes Corbyn, justwantsan election. who objected to the sale ofthe thatpersecution ofCatholics country’sreservesto defend JoséFilomenodosSantos,the in China will nowease. the currency. The newheadof sonofAngola’sex-dictator the central bankisGuido andhimselftheformerhead The governmentin Hong Sandleris, who wasMr ofAngola’ssovereign-wealth Kongbanned a small political Dujovne’sdeputy. fund,wasarrestedonsuspi- group, the HongKongNational cionofmoney-laundering, Party, which supportsthe The United StatesTreasury embezzlementandfraud.Mr territory’sformal indepen- imposed sanctionson Cilia dosSantosisthemostpromi- dence from China. Itisthe first Flores, the wife ofVenezuela’s nentfigurefromtheformer political partyto be outlawed president, NicolásMaduro, regimetofaceprosecutionin in HongKongsince itwas and three othermembersof PresidentJoãoLourenco’s handed backto China in 1997. hisinnercircle. The sanctions anti-corruptioncampaign. 1 barAmerican citizensfrom Chinapostponed military Labour’sBrexitmanoeuvres doingbusinesswith themand Correction:Last week we said that Gérard Collomb is to run for mayor of talkswith America and denied came afterTheresa May’s subjectanyassetstheyhave in Toulouse. In fact, he is running for arequestforan American “Chequers” deal forBritainto America to seizure. America mayor of Lyon. Sorry. 12 The world this week The Economist September 29th 2018 Germany’sfinancial regulator, BMWissued a profitwarning. hasgrown snappilyand now Business BaFin, appointed an auditorto Itblamed a numberoffactors, boasts1bn monthlyusers. That monitorDeutsche Bank’s includinghighercostsassociat- isin contrastto Facebook, TheFederalReserve lifted its progressin preventingmoney- ed with stricteremissionstests which haswarned thatits benchmarkinterestratebya laundering. Itisthe first time in Europe and the trade war growth will slowasitbrings in quarterofa percentage point, BaFin hastaken such a step, between America and China. newprivacymeasures. Ob- to a range ofbetween 2% and apparentlyoutoffrustration Carsexported fromBMW’s serversattributed the pair’s 2.25%, the third rise thisyear. It with Deutsche’scompliance factoryin South Carolina to departure to effortsbyFace- also hinted thatratesmaybe procedures. The bankwas China have been hitbystiff bookto exercise tightercontrol approachingthe level atwhich fined lastyearbyAmerican tariffs. overInstagram. theyno longerstimulate and British regulatorsfollow- growth, nearlya decade after ingan investigation into Rus- Creeping up No static at all theywere cutto near-zero in sian asset-laundering. Oil priceshita four-yearhigh, In a deal thatcould help both response to the financial crisis. with Brentcrude tradingat firmsbettercompete with Anotherrise ison the cards around $81.30 a barrel, in Spotifyand Apple Music, before the end ofthisyear and reaction to the decision by SiriusXM said itwould ac- three more forecastfor2019. OPECand Russia to maintain quire Pandora for$3.5bn. currentoutputand defya call Siriusofferssatellite radio to Aresolution ofthe trade war from PresidentDonald Trump cardriversand Pandora allows between America and China to ramp up production. Pros- listenersto customise stream- remained a distantprospect, as pectsforIranian crude are also ingplaylists. Both disrupted newtariffscame into force. afactorin the price spike, as the musicindustryin the early One Chinese official said talks tradersweigh up the conse- 2000s, butsince then digital could nottake place aslong as quencesofsanctionsthat musicserviceshave grown America “holdsa knife” to America will impose on Iran’s enormously. China’sneck. Meanwhile, oil exportsin November. Japanchanged tackand an- Daimlerannounced that Michael Kors, an American nounced thatitwould enter DieterZetsche(pictured) will In the gold-miningindustry’s fashion companythatholds into trade talkswith America. step aside aschiefexecutive in biggestacquisition foryears, swayin the middle ofthe The Trump administration had Maynextyearto be replaced BarrickGoldsaid itwould luxury-brand market, agreed been seekinga bilateral negoti- byOla Kaellenius, who is pay$6bn forRandgold, a to buyVersace, one ofthe few ation formonths. The Japa- overseeingthe carmaker’s smallerrival. remainingbigindependent nese had held outforan Amer- push into electricvehicles. A fashion houses, for$2.1bn. ican return to the Trans-Pacific Swede, MrKaelleniuswill Kevin Systrom and Mike Donatella Versace, who has Partnership. become the firstnon-German Kriegerresigned from led the Milanese firm since the to lead the company. Mr Instagram, which theyfound- murderofherbrother, Gianni, End of an era Zetsche steered the Mercedes ed. Instagram wasboughtby in 1997, will remain asitsprin- Comcastwon a blind auction brand asitovertookBMWin Facebookin 2012; MrSystrom cipalcreativeforce. forSky, Britain’spremier luxury-carsales; he will be- served aschiefexecutive and subscription-TVbroadcaster, come chairman ofthe supervi- MrKriegeraschieftechnical For other economic data and with a £30.6bn ($40.3bn) offer. soryboard in 2021. officer. The photo-sharingapp news see Indicators section Thatbeata competingbid from RupertMurdoch’s21st CenturyFox, endinghisin- volvementwith Sky, which he launched in 1989 asan upstart rival to Britain’sestablished TV channels. Disney, which is buyingFox’sentertainment assets, consented to Foxselling its39% stake in Skyto Comcast. Santander, a Spanish retail bankwith an empire that spansEurope and the Ameri- cas, named Andrea Orcel asits newCEO. MrOrcel hasbeen in charge ofthe investment- bankingbusinessatUBSforsix years, undertakinga restruc- turingthatslashed itsbalance- sheet. He isa confidantofthe Botín family, which hasheld the reinsatSantanderfor decades, advisingthem on several bigacquisitions, in- cludingthe takeoverofBrit- ain’sAbbeybankin 2004. Leaders The Economist September 29th 2018 15 #MeToo, one year on Amovementsparked byan alleged rapistcould be the mostpowerful force forequalitysince women’s suffrage AYEARagoHarveyWeinstein taintyaboutwhatcountsasproof.Thatislargelybecause evi- was exposed as a sexual dence ofan instance ofabuse often consistsofsomething that predator. Until then his treat- happened behind a closed door, sometimeslongago. mentofwomen wasan open se- Strikinga balance between accuserand accused ishard. Ms cret among some ofthe film in- Blasey Ford has the right to be heard, yet so does Mr Kava- dustry’s publicists, lawyers and naugh. MrKavanaugh’sreputation isatstake, butso is the Su- journalists. Mr Weinstein had preme Court’s. In weighing these competing claims, the bur- been protected byan unspoken den ofproofmustbe reasonable. MrKavanaugh isnotfacing a assumption thatin some situationspowerful men can set their trial thatcould costhim hisliberty, butinterviewing fora job. own rules. Overthe pastyearthatassumption hasunravelled The standard ofproofshould be correspondinglylower. Nei- with welcome speed. In everywalkoflife powerful men have therthe courtnornatural justice isserved byhaste. been forced out, and not just in America. Now Brett Kava- Also a problem isthe greyzone inhabited bymen who have naugh maybe denied a seaton America’shighestcourtfollow- not been convicted in court, but are judged guilty by parts of ing a series ofaccusations that he committed sexual assaults society. Justnow, everycase isfreighted with precedent-setting decadesago asa student. Whatbegan on the castingcouch has significance, perhapsbecause attitudesare in flux. This month made itswayto the Supreme Courtbench. Ian Buruma wasforced outaseditorofthe NewYorkReviewof Thatisprogress. And yetthe fate ofthe #MeToo movement Books after publishing an essay by an alleged abuser which still hangsin the balance in America, the countrywhere itbe- failed to acknowledge the harm he had done. MrBuruma did gan and where ithashad the greatesteffect. To see why, only not deserve to go and, were values more settled, his critics lookatthe case ofMrKavanaugh—who, aswe wentto press, might have been content with an angry letter to the editor. wasdue to give testimonyto the Senate JudiciaryCommittee #MeToo needsa path towardsatonementorabsolution. alongwith Christine BlaseyFord, hismain accuser. The good And #MeToo hasbecome bound up with partisanship. Ac- newsisthatthe appetite forchange isprofound; the bad news cordingto pollingearlierthis yearby Pew, 39% ofRepublican is that men’s predation of women risks becoming yet one women thinkitisa problem thatmen getawaywith sexual ha- more battlefield in America’sall-consumingculture wars. rassment and assault, compared with 66% of Democratic women; 21% of Republican men think it is a problem that Anmer’s kick women are not believed, compared with 56% ofDemocratic Thanks to #MeToo, women’s testimony is at last being taken men. Mr Kavanaugh, however his nomination turns out, is more seriously. Fortoo long, when a woman spoke outagainst likelyto deepen thatdivide—ifonlybecause Republican zeal to a man, the suspicion was turned back on her. In 1991 when rush his confirmation is further evidence that the party puts Anita Hill accused Clarence Thomas, now a Supreme Court powerfirst. Thatwasclearwhen itbacked MrTrump, despite judge, ofsexual harassment, his defenders smeared her as “a hisboastsofforcinghimselfon women and allegations ofsex- little bitnuttyand a little bitslutty”. The machine backingMr ual misconductbyatleast19 accusers. UnderBill Clinton, who Kavanaugh is equally determined. However, it has refrained wasalso accused ofsexual assault, the Democratswere notso from questioningeitherMsBlaseyFord’ssanityorhermorals. verydifferent. Theynowofferlessprotection. In 2018 voterswould find thatunacceptable. If #MeToo in America becomes a Democrats-only move- Abuse bymen isbeingtaken more seriously, too. Mr Wein- ment, it will be set back. Some men will excuse their behav- stein allegedlycommitted dozensofsexual assaults, including iouron the ground thatitishysteria whipped up bythe leftto rape. The contrast between his brutality and his impunity getatRepublicans. Those questionsaboutproof, fairness and shookthe world outofitscomplacency. ThisweekBill Cosby, rehabilitation will become even harderto resolve. once America’shighest-paid actor, wasjailed forbeing a sexu- allyviolentpredator. Butwomen in collegesand workplaces Thinkahead all overAmerica are harmed byabuse thatfallsshort ofrape. It takes a decade or more for patterns of social behaviour to Thanksto #MeToo, thisismore likelyto be punished. Mostde- change. #MeToo isjustone yearold. Itisnotaboutsex so much fencesofMrKavanaugh have focused on hispresumed inno- as about power—how power is distributed, and how people cence; 30 yearsago theywould have insisted thatthe drunken are held accountable when powerisabused. Inevitably, there- fumblingsofa 17-year-old are a fussaboutnothing. fore, #MeToo will morph into discussions about the absence These shifts reflect a broad social change. Before the elec- ofsenior women from companies and gaps in average earn- tions of 2016, 920 women sought the advice of EMILY’s List, ings between male and female workers. One protection which promotes the candidacy of pro-choice Democratic againstabuse isforjuniorwomen to workin an environment women. Since Donald Trump was elected president, it has thatotherwomen help create and sustain. been contacted by42,000 (see United Statessection). Outside Conservatives often lament the role Hollywood plays in politics, companiesare keen fortheirstaffand their customers underminingmorality. With #MeToo, Tinseltown hasinadver- to thinkthattheybuyin to #MeToo. tentlyfostered a movementforequality. Itcould turn outto be One worry is that there may be a gap between corporate the most powerful force for a fairer settlement between men rhetoric and reality (see Business section). Another is uncer- and women since women’ssuffrage. 7 16 Leaders The Economist September 29th 2018 Waste Cash for trash Howthe world should cope with its growing piles ofrubbish THE world is producing ever ofmore waste athome orno longerproduce asmuch. more rubbish. Households For environmentalists the preference for recycling is obvi- and businesses took out 2bn ous. Some even want economies to become “circular”—ie, to tonnes of trash in 2016, the reuse orrecycle everything. Butanyone arguingthatreducing equivalent of740g each day for physical waste isa moral imperative needsto reckon with re- everyperson on the planet. The cycling’s hidden costs. Somebody must pick out, clean, tran- World Bankpredictsthe annual sport and process junk. When the time and effort obviously pile could growby70% by2050, payoff, the economyisalreadynaturallycircular. Three-quar- asthe developingworld getsricher. tersofall aluminium eversmelted remainsin use, and there is Such waste isnotsimplyunsightly, italso threatens public athrivingmarketforused aluminium cans. Butforother mate- health. Diarrhoea, respiratory infections and neurological rials, recyclingjustisn’tworth it. conditionsare more common in areaswhere waste isnot regu- larlycollected. And even where itis, itcan cause environmen- Round and round tal problems (see our special report this week). Greenhouse That is partly because chucking stuffout is artificially cheap. gasesfrom the waste industry, principallyin the form ofmeth- Were landfill and incineration priced to reflect their environ- ane from older landfill sites, could account for as much as a mental and social costs, people would throwtheirrubbish in tenth ofthe global total by 2025. The case for taking action is the river or dump it by the road instead. Rules to discourage clear. Butwhatkind ofaction dependson where youare. waste should therefore focuson producersratherthan house- Poorercountriesoften lackgood waste infrastructure. Rub- holds. The principle oftaxingpollution should be extended to bish pilesup on open dumps, ifnotin the street. In July, forex- covermakersofthingsthatwill need disposingof. Agood ex- ample, India’sSupreme Courtwarned thatDelhi isburied un- ample isthe requirement, pioneered in Europe, forfirms to fi- der “mountain-loads of garbage”. Such places must invest nance the collection and recyclingofelectronicwaste. enough to getthe basicsright. One studyfound thatburning, Transparentsubsidiesforthe recyclingindustrywould also dumping or discharging rubbish into waterways costs south help. Itisbetterto paythe industryto absorb trash, and letthe Asian economies$375 pertonne in pollution and disease. Ba- markettake care ofthe rest, than to craftcrude rules with un- sic disposal systems would cost only $50-100 per tonne. Mo- knowable costs, such asSan Francisco’sambition to send zero rocco’sgovernmentreckonsthe $300m ithasrecentlyinvested waste to landfill. If recycling is sufficiently profitable, more in sanitary landfills has already averted $440m in damage. waste will become a valuable commodity. Some of it might Such spendingmakessense even when budgetsare tight. even be dugbackoutofthe ground. The rich world hasa differentproblem. Itisgood at collec- Thankfully, rubbish is one environmental issue where tion. Butatthe startof2018, China, until then the destination there is little need to worry about political incentives. Voters for many ofthe world’s recyclable material, stopped import- everywhere wantrubbish to be taken away—and theydo not ing most waste plastic and paper, and severely curtailed im- wantto live nearlandfill sitesand incinerators. The trickisto portsofcardboard. Rich countriesmustrecycle more, dispose getthe economicsright, too. 7 Citizenship for sale What price a passport? Selling citizenship and residence is fine, as long as ne’er-do-wells are weeded out WHEN Roman Abramovich choice.Citizenship-and residence-for-sale schemes, typically had problems renewing chargingbetween $100,000 and $2m, are booming(see Inter- his British visa, he turned to national section). More than a dozen countries sell passports Switzerland. It rejected his resi- and around 100 sell residence. An industryoflawyers, bank- dence application, however, ers, accountants, consultants and estate agents has sprouted afterSwiss police said he posed up to serve well-heeled “investmentmigrants”. a “reputation risk”. (He denies The idea of selling passports repels some people. Citizen- wrongdoing.) The colourful Rus- ship isa sacred bond, theyargue, and should be granted only sian billionaire and owner ofChelsea football club now has to foreignerswho prove themselvesworthy. Whyshould the an Israeli passport, allowinghim visa-free travel to Britain, and rich be allowed to jump the queue? Especially since some of isconvertinga formerhotel into hisTel Avivpad. the queue-jumpersare crooksortax-dodgers, who want a new Israel offersnationalityto anyJewwho asksforit. Otheroli- home in which to hide orlaundertheirloot. garchs have to pay for the privilege, but they are spoilt for There are legitimate reasonsforwantinga second passport. 1 The Economist September 29th 2018 Leaders 17 2Travelling businessfolk from poor or Muslim countries face a deeper connection with the place, for instance by residing endlessvisa hasslesunlesstheyhave one. Othersseek an extra there fora minimum period each year. passportasinsurance againstinstabilityorpersecution. More All citizenship-sellers, large and small, should do more to than a third of rich Chinese would like a foreign bolthole weed out undesirables. Too often, their programmes open a (which may mean flouting China’s ban on dual citizenship). backdoorto dirtymoney; thinkofthe ill-gotten Russian gains Countriesmeetingthisdemand gain a straightforward benefit: that have been laundered through Cyprus, one of the EU’s easymoneyto spend on publicservices. Forhurricane-hit Ca- most enthusiastic hawkers ofpassports. The industry talks a ribbean states, passport-flogginghasbeen a lifeline. good game, emphasising recent improvements in client-vet- Regardless of who gains, a principle is at stake. Countries ting. Butithasmoved too slowly. have every right to reserve citizenship for people who try to The time hascome forstricter“know-your-customer” rules become like the native-born population, forinstance by learn- and the blacklistingofcountriesthatofferhavensfor migrants ingthe language. Buttheyalso have the rightto sell it, ifvoters with dirtymoney. Stifferrulesare also needed to thwart pass- agree. Citizenship isa basicmatterofnational competence. port-buyerswhose aim isto evade taxon moneythatwas law- fullyearned. In the United Arab Emirates, forinstance, foreign- Citizens ofsomewhere, and somewhere else ers are buying residence and using it to secure tax residence Itssale should notbe unconstrained, however. Member states too, which allowsthem to blockthe flowofdata to tax authori- ofthe European Union need to agree on common principles ties elsewhere. Banks should be required to establish where governingwhom to admit, since a passportfrom one gives ac- clients’ personal and economic links are strongest, and to cessto live and workin all. Tinystatesthatsell lots ofpassports snitch on those whose taxresidence lookslike a sham. face anotherrisk. Iftheyoverdo it, native voterscould eventu- There are manysound reasonsto grantresidence orcitizen- allybe outnumbered bycitizensofconvenience. Some states ship to foreignerswho are prepared to payforit. Abetting crim- maytherefore wish to restrictvotingrightsto those who forge inalsisnotone ofthem.7 LIBOR Tick tock The huntfora newbenchmarkinterestrate poses risks to financial stability ITHASbeencalledtheworld’s nancial contracts that are based on LIBOR are forced, after its US dollar LIBOR market most important number. LI- discontinuation, to anchor themselves to a new benchmark 2018, $trn BOR, which stands for the Lon- rate. Thatshiftcould have bigeffects, such asa sudden jump to 0 50 100 150 200 don InterbankOffered Rate, isa higherinterestratesforborrowers. Thisisnotjust a theoretical Over-the-counter benchmark interest rate, repre- concern. The BankofEngland pointed outin June that in the derivatives senting the amount that banks previous12 months the stockofLIBOR-linked sterlingderiva- Exchange-traded Other pay to borrow unsecured from tivesstretchingbeyond 2021had grown. The answerto this is derivatives each other. Globally, it under- for contracts to have proper “fallback” clauses which specify pins$260trnofloansandderivatives, from variable-rate mort- whathappenswhen LIBORdisappears. Regulatorsare apply- gagesto interest-rate swaps. ButLIBOR’sdaysare numbered. It ingpressure to getthese included, buteffortsto amend existing is due to be phased out in three years. Broadly speaking, LI- contractsbefore 2021could easilyend up in the courts.  BOR’splanned demise isa good thing. Butthatdoesnot mean itwill go smoothly. The devil you know The case formovingawayfrom LIBORasa reference rate is The otherriskconcernsthe post-LIBORworld, where the new powerful. The rate isbased on a panel ofbankssubmitting esti- reference rates may cause banks’ assets and liabilities to be- matesoftheirown borrowingcosts. The riggingscandals that come disconnected. Flawed though it is, the use ofLIBOR of- made LIBORnotoriousin 2012 showed howthisprocesscould fersbanksa hedge againstsudden movesin theirown borrow- be manipulated. Theyhave also made manybanksnervous of ing costs. The interest rates they charge and the interest rates beinginvolved. The interbankmarkethasbecome lessimpor- theypay, whetherforone dayorone year, are linked byLIBOR. tant since the financial crisis, because new rules encourage The alternatives may not move in sync. They refer to the banksto use otherformsofborrowing. Thatmeansthere are costofborrowingovernight, notfora range ofmaturities. The fewer transactions to base the rate on. Anyway, it is unclear rate being promoted by the Federal Reserve is for borrowing whya measure dependingin parton banks’ creditriskshould secured againstAmerican governmentsecurities. In a crisis, it be partofan interest-rate swap, say, between two companies. iseasyto imagine thatdemand forsuch high-qualitycollateral Hence the decision by British financial regulators to cease would go up even aswillingnessto lend to banksgoes down. requiringbanksto submitratesafter2021. Hence, too, the race Thatwould mean banks’ income from loanswould fall just as by central banks, regulators and the industry to cook up re- theirown borrowingcostsrose.  placements (see Finance section). An alphabet soup of new Neitherofthese dangerscan be wished away. Finding a rate reference rates, from SOFRand SARONto SONIAand TONAR, that is both immune to manipulation and an accurate reflec- isalreadysimmeringaway. tion ofbanks’ borrowingcostsishard. And replacinga number Welcome though it is, the end of LIBOR poses two risks. thathasbecome embedded in the financial system risks insta- One is ofmarket instability, as trillions ofdollars-worth offi- bility. LIBORdeservesto be buried. Itmaystill be mourned. 7 18 Leaders The Economist September 29th 2018 2Britain The quest to remake politics Beneath the chaos ofthe Brexittalks, big ideas are forming thatwill shape the nextdecade PITY the disaffected British boss,JeremyCorbyn—proposes“the greatestextension of eco- voter who looks to the au- nomicdemocraticrightsthatthiscountryhaseverseen”. tumn conferences for inspira- MrMcDonnell correctly identifies that powerhas drained tion. Both the main parties are from labourtowardscapital in recentyears. Buthisproposals hypnotised by Brexit. Labour, to redressthisbalance would see the state strong-arm itsway which gathered thisweekin Liv- deeply into the economy (see Britain section). Companies erpool, tried to fudge itsposition would have to nominate workers to make up a third oftheir only to fall into more bickering. boards, while paywould be determined bycollective bargain- The Conservatives, who will meetin Birmingham nextweek, ing. Ten percentofcompanies’ equitywould be expropriated are so divided overEurope thattheyare openlyconspiring to and put in funds managed by workers’ representatives, that ousttheirown prime minister. The earthquake ofthe referen- would become the largestshareholdersin manyofthe biggest dum two yearsago hasenergised Britain’spartieslike nothing firms. Workerswould receive some dividends, butthe major- else—and crowded outdebate on everythingelse. ity would go to the government. The Treasury would be “re- However, atlastthere are signsthatpoliticiansare starting programmed” to channel moneyto favoured industries. Cou- to think about the direction that Britain should take after it pled with a plan to raise the minimum wage so that it leaves the EU (see Briefing). Some of the fundamental ideas embraces60% ofemployeesunder25, the package represents a thathave underpinned Western governmentsofall stripes for transferofpowernotjustto workersbutalso to the state and decades are being questioned from right and left. A party the unions. Labour-supportingeconomistspropose still more which could come up with persuasive answerswould stand to ideas, including the introduction of capital controls. “The dominate British politicsformanyyears. And justas the Brexit greaterthe mess we inherit, the more radical we have to be,” rebellion hasbeen followed bypopulistrevoltsin other coun- Mr McDonnell told the conference. Brexit is likely to provide tries, so the ideasfermentingin Britain maywell spread. Some the messrequired to justifya socialistshock-doctrine. ofthem are promising; othersdownrightdangerous. The Tories have been slower to regroup, but they too are teeming with ideas. Some want to dust off the free-market The people have spoken principlesofThatcherism and applythem to newareas, lifting The Leave campaign’sdemand to “take backcontrol” resonat- planningrestrictionsto encourage housebuilding, say. Others ed because it applied to more than just Britain’s relationship wantthe partyto bluntcapitalism’ssharperedges, forinstance with Europe. Itchimed with those sickofa hyper-centralised bymimickingthe trust-bustingofTeddyRoosevelt, whose tar- state, where feeble councilstake marchingordersfrom an out- gettodaywould be the overmighty, rent-seekingtech monop- of-touch London. Ittapped into growingangeratthe outsourc- olies. Still othersbelieve the remedyforBritain’sfractiousness ingofpublicservicesto remote and incompetentprivate com- isto update Benjamin Disraeli’s“One Nation” Conservatism, panies. Itpointed to the firmsthatbypassemployment lawby arguingthatitsmodern mission should be to unite a country treatingstaffas“gig” workerswith fewrights. And itreflected a whose deep divides—byage, class, region and more—were ex- feelingofimpotence in the face ofa system ofglobal capital- posed byBrexit. ism which, ten yearsago, sentBritain into recession afterbank- ers thousands ofmiles away mis-sold securities that no one, Butwhatdid theymean? includingthemselves, understood. These ideas could mark a dramatic break with the past. But On becomingprime ministerin 2016, Theresa Mayassured whereasan insurgentLabourhasunited behind a growing list voters that she had heard their cry, and boldly vowed to re- ofdetailed plans, the Tories’ thoughts are ill-defined, and the shape “the forces ofliberalism and globalisation which have partyfarfrom agreed on which to pursue. Theirleader, on the held sway...across the Western world.” She has not kept this rackin Brusselsand fightingforherjob in Westminster, hasno promise. Her lack of imagination, squandered majority and time forphilosophising. She isunlikelyto make wayfor a suc- the all-consuming Brexit negotiations—the ones with her cessoruntil Britain hasleftthe EU. Yetthere isno time to lose. party, ratherthan the EU—mean that, more than two yearson Too manyToriesdoubtthatplansasdrasticasMrMcDonnell’s from theirgreathowl, the British people have seen nothing in could everbe enacted in Britain. Thatiscomplacent. The gro- return. When BrexitdaycomesnextMarch, and Britain isleft tesque folly of Brexit will be enough to persuade many with eithera bad deal orwith no deal atall, the call forrevolu- wealthyBritonsto ditch the Tories, even ifitmeans electinga tionary change will not have been sated—it will be stronger far-left chancellor. And Britain’s winner-takes-all system lets than ever. governments quickly and dramatically reshape the country. Alarmingly, the camp readiest to answer that call is a La- Mr McDonnell would not face the checks and balances that bourPartymarchingeverfurtherand more confidently to the have restrained PresidentDonald Trump. left. Manyofthe ideasin itsmanifesto lastyearrecast old poli- Britain is at last getting the battle ofideas that the referen- cies, such asrenationalisingthe railways, which would notan- dum result demanded. That presents big opportunities, but swerthe fundamental newquestionsbeingasked ofthe state. also grave risks. Itistime forthose who dislike the sound ofthe Butsince then Labour’seconomicplan hasevolved. The shad- future described byLabourthisweekto do some hard think- ow chancellor, John McDonnell—a bigger thinker than his ingoftheirown. 7 20 Letters The Economist September 29th 2018 decisionsbreakfive-to-fouron tionsofvonMisestoliberal posed showingthe non-allo- GiveBolsonaroachance partisanlines(allRepublican philosophywerefarreaching cated excesspurchase price as Youmadeagoodcaseforall appointeesvotingtogetherasa andmoreinfluentialthanyou asubtraction from the ac- thatiswrongaboutJair bloc)onmattersimportantto think.In1922hepublished quirer’sshareholders’ equity. Bolsonaro,thoughyoushould thoseinterests,theirwinrateis “Socialism:AnEconomicand Thismighttrouble those who alsohavecomparedhimwith 100%acrossmorethan70 SociologicalAnalysis”,in are fixated on financial ratios, thealternativethatBrazilians decisionsunderChiefJustice whichhedemonstratedthe butitalso would provide a faceintheforthcomingelec- JohnRoberts.Thisisnostatis- impossibilityofsocialismas clearerindication ofhow tions(“LatinAmerica’slatest ticalfluke.Thatiscapture. aneconomicandsocialsys- much the acquirerhaspaid for menace”,September22nd). Hencetheotherwiseinexpli- temanddescribedhowit undocumented expectations. Thiselectionisaboutchoosing cablebehaviourofRepub- leadstothedestructionofthe ROBERT STRAHOTA theleast-worstpresidential licansintheKavanaughnomi- socialfabric. Chevy Chase, Maryland candidate.Ifthepollsaretobe nation,desperatetokeepthat Hisbook,“Omnipotent believed,thesecond-round five-to-fouradvantagefortheir Government”,publishedin Latin lessons run-offwillbebetweenMr bigdonors. 1944,thesameyearasHayek’s BolsonaroandFernando SENATORSHELDONWHITEHOUSE “TheRoadtoSerfdom”,isa Haddad,whorepresentsthe Newport,RhodeIsland thoroughanalysisofthecol- Workers’Party.MrHaddad’s lapseofliberalideasinGer- campaignisbeingmaster- manyandtheriseofnation- Treatinggenderdysphoria mindedbyLuizInácioLulada alism,whichledtoNazism. Silva,theparty’sleader,from Regardingtransgenderbehav- VonMises’sworksoneconom- hisprisoncell. iourduringadolescence icsincludethefirstcoherent Forallhisfaults,andhehas (“Transparenting”,September applicationofthetheoryof many,thereisachancethatMr 1st),sometimesteenagerswith marginalutility(whichwas BolsonarowillprovideBrazil generalidentityweakness developedbyCarlMenger)to withtherightleadershipand developtransientsymptoms money(“TheTheoryofMon- makebadlyneededreformsto ofgenderdysphoria.These eyandCredit”)andastudyof thepensionandtaxsystems, adolescentssometimeseven theepistemologyofeconom- Iwastickled byJohnson’s privatisepoorlyrunstate considerthemselves“trans- ics(“EpistemologicalProblems column on the use ofLatin companiesandreducethe gendered”inanefforttoim- ofEconomics”). wordsin English (September overallsizeofgovernment. provepeerrelationshipsand FRANCISCONADALDESIMONE 8th). Mywife wasrecentlyin Basedontherecordofthe buttresstheirsenseofidentity. LuxembourgSchoolofFinance physical therapyand had Workers’Partythereisno Ifthesymptomsaresignificant difficultygraspingthe differ- chancethatitwillundertake theycangenerallyberesolved ence between adductorand Whatconstitutes goodwill? thesevitalmeasuresandevery throughpsychotherapy. abductormuscles. I explained chancethatitwillleadBrazil Patientsliketheserepresent Ienjoyed Schumpeter’scol- thatin Latin admeans downthepathofVenezuela. asubgroupofadolescents umn on goodwill, an impor- “toward” and abmeans“away Thatwouldbeafarbigger whoaredifferentfrom tanttopicthatrequiresbetter from”; thus, an adductor threattodemocracyinBrazil (althoughsuperficiallysimilar accountingon firms’ balance- muscle isone thatpullsa limb andLatinAmerica. to)thosewhoaretrulytrans- sheets(September1st). How- toward the central line ofthe UnderthisscenarioMr gendered.Thetherapeutic ever, goodwill doesnotrepre- body, an abductormuscle one Bolsonarobecomesarisk stanceweadvocateistore- sentthe difference between thatpullsa limb awayfrom worthtakingformanyBrazil- spectthepatient’stotal“per- the price the acquirer“paid to thatline. We explored other ians.Theyhavebecomecom- sonhood”andunderstand buyanotherfirm and the examplesofadand abwords pletelydisillusionedwiththe howidentitydevelopsinthe target’soriginal bookvalue”. butran into a bitoftrouble politicalclassesofthisbeauti- contextoffamilialandpeer Before the amountofgoodwill with adverse and averse fulandbountifulbutbadly relationshipsandthesenseof arisingfrom an acquisition is (where abhasbeen replaced mismanagedcountry. theself.Inpractice,doctors determined, the acquirer’s by“a” forease ofpronuncia- ADRIANFINCH shouldnotreinforcespecific accountantsallocate asmuch tion) because theirfunctional RiodeJaneiro gender-rolebehaviours,nor ofthe purchase price to what meanings(“inimical to” and determinewhetheritisdesir- theycan justifyasthe fair “feelingrepugnance toward”) ablefortheadolescentto“be” value ofthe target’stangible are much more alike than their The court’s decisions femaleormale,orneither. and otherintangible assets etymological meanings(“turn- Yousuggested thatAmerica’s RICHARDFRIEDMAN acquired and liabilitiesas- ingtoward/against” and “turn- Supreme Courtbecame poli- Clinicalprofessorofpsychiatry sumed. Onlythe remaining, ingawayfrom”). To mymind ticised through exposure to the DAVIDLOPEZ unallocated excesspurchase such subtletiesare one ofthe quarrelsin American society, Clinicalinstructorinchildand price isrecorded asgoodwill. infinite charmsoflanguage. asifa communicable disease adolescentpsychiatry Itisworth notingthat be- ROBERT NICHOLSON had been transmitted (“And WeillCornellMedicalSchool cause ofthe above require- Des Moines, Iowa7 Brettmakesfive”, September NewYork mentand the factthatgood- 15th). Abetteranalogyisthe will isnotsomethingthatcan phenomenon ofagencycap- be boughtorsold separately, a Lettersarewelcomeandshouldbe More than justa mentor ture. Powerful Republican minorityviewheld bysome addressedtotheEditorat TheEconomist,TheAdelphiBuilding, interestshave foryearssought The Philosophybriefon accountantsisthatgoodwill is 1-11JohnAdamStreet, judicial nomineeswho will Schumpeter, Popperand notan asset. In the 1950sand LondonWC2N6HT followan agenda theycon- Hayekreferred to Ludwigvon 1960s, when accountingwasa E-mail:[email protected] stantlypresentthrough “friend MisesasHayek’smentor more principles-based profes- Morelettersareavailableat: Economist.com/letters ofthe court” filings. When (August25th). The contribu- sion, ArthurAndersen pro-

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Remaking Britain’s politics China’s war on burials The 20th century’s biggest killer Highly effective people’s annoying habits SEPTEMBER29TH–OCTOBER5TH2018 Sex and power #MeToo, one year on Contents The Economist September 29th 2018 7 39 Israel and Russia 11 Theworldthisweek Missiles with a message 39 South Africa Leaders Long walk to growth 15 Sexandpower 40 Somaliland’s heritage #MeToo,oneyearon Restorers required 16 Waste Cashfortrash Asia 16 Citizenshipforsale 41 Public health in India Whatpriceapassport? Modicare 17 LIBOR 42 Banyan British politicsBeneath the Ticktock China and the Vatican chaos of the Brexit talks, big 18 Britain ideas are forming that will 43 Identification in India Thequesttoremakepolitics shape Britain’s next decade: Court gestures On the cover leader,page 18. The world’s 43 Eugenics in Japan Amovement sparked by an oldest political party is under Letters Adverse selection alleged rapist could be the strain, page 23. Jeremy Corbyn 20 OnBrazil,theSupreme most powerful force for 44 The Maldives isn’t the outsider that both his Court,genderidentity, equality since women’s Sun, sea, sand and surprise friends and enemies believe LudwigvonMises, suffrage: leader, page 15. 44 South Korea and Japan him to be: Bagehot, page 55 goodwill,Latin How America’s political Control is not enough parties are coping with a swiftly changing culture, Briefing Special report: Waste page 27. The #MeToo 23 TheConservativeParty movement has raised Aload of rubbish Whenallaboutarelosing awareness. But it has yet to After page 44 theirs... have a lasting effect on the workplace, page 59 China UnitedStates 45 Death 27 #MeTooandpolitics Awar against burials TheEconomistonline Truthandconsequences 46 Student activism Dailyanalysisandopinionto 28 TheSupremeCourt Beware of Marxists Bench-warming supplementtheprintedition,plus 47 Chaguan IranIts problems are mounting audioandvideo,andadailychart 29 Labourmarkets One-way globalisation at home and abroad,page 37 Economist.com Diversityimplosion E-mail:newslettersand 30 Violentcrime mobileedition Stillpilingup Europe Economist.com/email 31 Politicalharassment 48 Average Europe Printedition:availableonlineby Uncivilhands France’s tenth city 7pmLondontimeeachThursday 32 Lexington 49 Dutch politics Economist.com/printedition HakeemJeffries Who doesn’t like a tax cut? Audioedition:availableonline 50 Germany todownloadeachFriday Greying Greens Economist.com/audioedition TheAmericas 50 Romanian royals 33 Chile Thirsty for blue blood Themiddle-incometrap 51 Russia 34 Presidentialplanes Asea of troubles RubbishHow the world should Aerialausterity cope with its growing piles of 52 Charlemagne 35 Bello Volume428Number9111 Britain, a lonely domino rubbish: leader, page 16. Peru’spresident Emerging economies are PublishedsinceSeptember1843 rapidly adding to the global totakepartin"aseverecontestbetween Britain pile of garbage. But solving Middle East and Africa intelligence,whichpressesforward,and anunworthy,timidignoranceobstructing 53 The Labour Party the problem should be easier 37 Iran and the world ourprogress." ¿Hasta la victoria? than dealing with other Isolated and besieged EditorialofficesinLondonandalso: 54 Asecond referendum environmental harms, says Amsterdam,Beijing,Berlin,Brussels,Cairo, 38 Egyptian politics Jan Piotrowski. See our special Vote early, vote often Chicago,Johannesburg,Madrid,MexicoCity, No one is secure report after page 44 Moscow,Mumbai,NewDelhi,NewYork,Paris, 55 Bagehot SanFrancisco,SãoPaulo,Seoul,Shanghai, 38 Dysfunctional Lebanon Singapore,Tokyo,WashingtonDC Corbyn, establishment man Power-boat struggle 1 Contents continues overleaf 8 Contents The Economist September 29th 2018 International Science and technology 56 Investment migration 75 Pandemic disease Ahome in the country Adeadly touch of flu 58 Residence and tax 76 How influenza evolves Sweet deserts Mind your H’s and N’s Business Books and arts 59 American business after 78 The race for AI supremacy Weinstein The gladiator’s edge Behind closed doors 79 Intellectual life in America Passports for saleFlogging Spanish fluThe next few 61 Bartleby Unsafe spaces the right to citizenship and months mark the 100th Executive privilege 80 Contemporary art residence is fine, as long as anniversary of the peak of the 62 Gulf carriers The Rales rules ne’er-do-wells are weeded 20th century’s most deadly Super-connecting out: leader, page 16. It is a big 81 Slavery and escape catastrophe, page 75. Flu’s business—and a controversial 62 Comcast and Sky Flight to freedom success owes much to its one, page 56 Sky high mutability, page 76 81 British fiction 63 Ride-hailing in Keys to the heart South-East Asia Subscription service After Uber 84 Economic and financial For our latest subscription offers, visit 64 French supermarkets indicators Economist.com/offers Shopping and nothingness For subscription service, please contact by Statistics on 42 economies, telephone, fax, web or mail at the details 64 The gold-mining business plus a closer look at world provided below: Panning out GDP North America The Economist Subscription Center 65 Schumpeter P.O. Box 46978, St. Louis, MO 63146-6978 Luxury cars Telephone: +1 800 456 6086 Obituary Facsimile: +1 866 856 8075 86 Shan Tianfang E-mail: [email protected] Finance and economics Tradition’s voice Latin America & Mexico The Economist Subscription Center Burial in ChinaAs they once 67 Replacing LIBOR P.O. Box 46979, St. Louis, MO 63146-6979 did to control births, officials The price of everything Telephone: +1 636 449 5702 Facsimile: +1 636 449 5703 use strong-arm tactics to curb 68 Buttonwood E-mail: [email protected] burials, page 45 Public markets Subscription for 1 year (51 issues) United States US $158.25 (plus tax) 69 World trade (1) Canada CA $158.25 (plus tax) Amatter of dispute Latin America US $289 (plus tax) 69 World trade (2) Familiar KORUS Principal commercial offices: 70 Sovereign bonds The Adelphi Building, 1-11John Adam Street, Atimeless argument London WC2N 6HT 70 Development lending Tel: +44 (0) 20 7830 7000 Building it up Rue de l’Athénée 32 1206 Geneva, Switzerland 71 Argentina Tel: +4122 566 2470 Anew deal 750 3rd Avenue, 5th Floor, New York, NY 10017 72 Free exchange Tel: +1212 5410500 Crude awakening 1301Cityplaza Four, LIBORThe hunt for a new 12 Taikoo Wan Road, Taikoo Shing, Hong Kong benchmark interest rate poses Tel: +852 2585 3888 risks to financial stability: Other commercial offices: leader, page 17. Scandal and Chicago, Dubai, Frankfurt, Los Angeles, rickety economic foundations Paris, San Francisco and Singapore have undermined LIBOR. Ascramble to replace it is under way, page 67 PEFC certified This copy of The Economist is printed on paper sourced from sustainably managed forests certified to PEFC PEFC/29-31-58 www.pefc.org ©2018 The Economist Newspaper Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Newspaper Limited. The Economist(ISSN 0013-0613) is published every week, except for a year-end double issue, by The Economist Newspaper Limited, 750 3rd Avenue, 5th Floor, New York, N Y 10017. The Economist is a registered trademark of The Economist Newspaper Limited. Periodicals postage paid at New York, NYand additional mailing offices. Postmaster: Send address changes to The Economist, P.O. Box 46978, St. Louis , MO. 63146-6978, USA. Canada Post publications mail (Canadian distribution) sales agreement no. 40012331. Return undeliverable Canadian addresses to The Economist, PO Box 7258 STN A, Toronto, ON M5W 1X9. GST R123236267. Printed by Quad/Graphics, Saratoga Springs, NY 12866 The world this week The Economist September 29th 2018 11 warshipto make a portcall in leave the EUwasrejectedata hasimposedsanctionson Politics HongKong. Tension between summitin Salzburg. Donald dozensofmembersofVenezu- the two countrieshasrisen Tusk, the presidentofthe ela’sdictatorialregime. since America decided to European Council, said theEU impose sanctionson Chinafor could notacceptthe British RussiadefendsIraninSyria buyingjetsand missilesfrom prime minister’splans. Mrs VladimirPutinsaidRussia Russia. Maysaid the solutionsde- wouldsupplySyriawithan manded bythe EUwould advancedanti-aircraftmissile Ibrahim Mohamed Solih won “make a mockery” ofBritish system.Israel,whichhas apresidential election in the voters’ decision to leave. Some carriedoutdozensofairstrikes Maldives, defeatingthe ofherhardline backbenchers onIraniantargetsinSyria, incumbent, Abdulla Yameen. saymuch the same abouther opposedthemove.Relations In FebruaryMrYameen had own plan. betweenRussiaandIsrael declared a state ofemergency havebeenstrainedsinceSyria and arrested judgesto stayin Bellingcat, a journalism web- mistakenlyshotdowna More women made allega- power, so Maldivianswere site, said thatthe real nameof Russianplaneinresponseto tionsofsexual assaultagainst surprised and delighted when one ofthe two Russianmil- anIsraeliairstrike. BrettKavanaughdatingback he conceded. itaryintelligence agentsac- to the 1980s, complicatingthe cused byBritain ofcarrying Republicans’ plan forhisswift Police in the Philippines outa chemical attackin Britain confirmation to the Supreme arrested Antonio Trillanes, a isColonel AnatoliyChepiga, Court. The #MeToo move- senatorand criticofPresident who wasawarded Russia’s ment, which began a yearago, Rodrigo Duterte. MrTrillanes highesthonourin 2014 by hasrallied to oppose MrKava- waspardoned forthe crime in VladimirPutin personally. naugh. He deniesall claims of question—mutiny—byMr sexual misconduct. Duterte’spredecessor, butMr VolkerKauder, a close allyof Duterte revoked the pardon. Germany’schancellor, Angela Rod Rosenstein, America’s Merkel, wasousted asheadof deputyattorney-general, India’ssupreme courtruled herCDUparty’sparliamentary described a reportthathe had thata vastbiometricidentifica- group. The move isa further thoughtaboutsecretlytaping tion scheme wasconstitution- sign ofMrsMerkel’sweak- Severalgunmenattackeda Donald Trump and had dis- al, and thatparticipation could eningposition. militaryparadeintheIranian cussed waysto remove him be required forthose receiving cityofAhvaz,killingatleast25 from office as“inaccurate”. Mr publicbenefitsorfilingtax In Sweden, the prime min- people.EthnicArabseparatists Rosenstein appointed the returns. Butitlimited the scope ister, Stefan Lofven, wasfor- andthejihadistsofIslamic special counsel currently forprivate businessesto use mallyousted bya parliamenta- Stateissuedcompetingclaims investigatingRussian med- the system. ryvote followingan tohavecarriedouttheattack. dlingin American elections. inconclusive election on Sep- Thegovernmentclaimed, MrTrump hasoften expressed So that’s sorted then? tember9th. However, he will withoutevidence,thatthe displeasure with him. Britain’sopposition Labour stayon ascaretakeruntil anew gunmenwerebackedbySaudi Partypassed a motion atits governmentcan be formed, Arabia,theUnitedArab Atheists appoint bishops annual conference thatleft the which mighttake a while. EmiratesandAmerica. China and the Vatican agreed dooropen to a second referen- to share responsibilityfor dum on Brexit. SirKeirStarmer, Caputo kaput InaspeechtotheUN,Donald appointingChinese bishops. the party’sBrexitspokesman, The presidentofArgentina’s TrumpaccusedIranof The church had previously won loud applause when he central bank, LuisCaputo,quit “sowingchaos,deathand insisted thatonlyitcould said such a referendum could afterjustthree monthsinthe destruction”intheMiddle decide who washolyenough include the option to remain in job. Hisinterventionsto prop East.Iran’spresident,Hassan forthe job. ButChina’saggres- the EU. Some unionsand MPs up the peso had broughthim Rouhani,retortedthatMr sivelyatheistregime cannot saythiswould be a betrayal. into conflictwith the finance Trumpsufferedfroma abide organisationsthatit does The party’sleader, Jeremy minister, NicolásDujovne, “weaknessofintellect”. notcontrol. The Vatican hopes Corbyn, justwantsan election. who objected to the sale ofthe thatpersecution ofCatholics country’sreservesto defend JoséFilomenodosSantos,the in China will nowease. the currency. The newheadof sonofAngola’sex-dictator the central bankisGuido andhimselftheformerhead The governmentin Hong Sandleris, who wasMr ofAngola’ssovereign-wealth Kongbanned a small political Dujovne’sdeputy. fund,wasarrestedonsuspi- group, the HongKongNational cionofmoney-laundering, Party, which supportsthe The United StatesTreasury embezzlementandfraud.Mr territory’sformal indepen- imposed sanctionson Cilia dosSantosisthemostpromi- dence from China. Itisthe first Flores, the wife ofVenezuela’s nentfigurefromtheformer political partyto be outlawed president, NicolásMaduro, regimetofaceprosecutionin in HongKongsince itwas and three othermembersof PresidentJoãoLourenco’s handed backto China in 1997. hisinnercircle. The sanctions anti-corruptioncampaign. 1 barAmerican citizensfrom Chinapostponed military Labour’sBrexitmanoeuvres doingbusinesswith themand Correction:Last week we said that Gérard Collomb is to run for mayor of talkswith America and denied came afterTheresa May’s subjectanyassetstheyhave in Toulouse. In fact, he is running for arequestforan American “Chequers” deal forBritainto America to seizure. America mayor of Lyon. Sorry. 12 The world this week The Economist September 29th 2018 Germany’sfinancial regulator, BMWissued a profitwarning. hasgrown snappilyand now Business BaFin, appointed an auditorto Itblamed a numberoffactors, boasts1bn monthlyusers. That monitorDeutsche Bank’s includinghighercostsassociat- isin contrastto Facebook, TheFederalReserve lifted its progressin preventingmoney- ed with stricteremissionstests which haswarned thatits benchmarkinterestratebya laundering. Itisthe first time in Europe and the trade war growth will slowasitbrings in quarterofa percentage point, BaFin hastaken such a step, between America and China. newprivacymeasures. Ob- to a range ofbetween 2% and apparentlyoutoffrustration Carsexported fromBMW’s serversattributed the pair’s 2.25%, the third rise thisyear. It with Deutsche’scompliance factoryin South Carolina to departure to effortsbyFace- also hinted thatratesmaybe procedures. The bankwas China have been hitbystiff bookto exercise tightercontrol approachingthe level atwhich fined lastyearbyAmerican tariffs. overInstagram. theyno longerstimulate and British regulatorsfollow- growth, nearlya decade after ingan investigation into Rus- Creeping up No static at all theywere cutto near-zero in sian asset-laundering. Oil priceshita four-yearhigh, In a deal thatcould help both response to the financial crisis. with Brentcrude tradingat firmsbettercompete with Anotherrise ison the cards around $81.30 a barrel, in Spotifyand Apple Music, before the end ofthisyear and reaction to the decision by SiriusXM said itwould ac- three more forecastfor2019. OPECand Russia to maintain quire Pandora for$3.5bn. currentoutputand defya call Siriusofferssatellite radio to Aresolution ofthe trade war from PresidentDonald Trump cardriversand Pandora allows between America and China to ramp up production. Pros- listenersto customise stream- remained a distantprospect, as pectsforIranian crude are also ingplaylists. Both disrupted newtariffscame into force. afactorin the price spike, as the musicindustryin the early One Chinese official said talks tradersweigh up the conse- 2000s, butsince then digital could nottake place aslong as quencesofsanctionsthat musicserviceshave grown America “holdsa knife” to America will impose on Iran’s enormously. China’sneck. Meanwhile, oil exportsin November. Japanchanged tackand an- Daimlerannounced that Michael Kors, an American nounced thatitwould enter DieterZetsche(pictured) will In the gold-miningindustry’s fashion companythatholds into trade talkswith America. step aside aschiefexecutive in biggestacquisition foryears, swayin the middle ofthe The Trump administration had Maynextyearto be replaced BarrickGoldsaid itwould luxury-brand market, agreed been seekinga bilateral negoti- byOla Kaellenius, who is pay$6bn forRandgold, a to buyVersace, one ofthe few ation formonths. The Japa- overseeingthe carmaker’s smallerrival. remainingbigindependent nese had held outforan Amer- push into electricvehicles. A fashion houses, for$2.1bn. ican return to the Trans-Pacific Swede, MrKaelleniuswill Kevin Systrom and Mike Donatella Versace, who has Partnership. become the firstnon-German Kriegerresigned from led the Milanese firm since the to lead the company. Mr Instagram, which theyfound- murderofherbrother, Gianni, End of an era Zetsche steered the Mercedes ed. Instagram wasboughtby in 1997, will remain asitsprin- Comcastwon a blind auction brand asitovertookBMWin Facebookin 2012; MrSystrom cipalcreativeforce. forSky, Britain’spremier luxury-carsales; he will be- served aschiefexecutive and subscription-TVbroadcaster, come chairman ofthe supervi- MrKriegeraschieftechnical For other economic data and with a £30.6bn ($40.3bn) offer. soryboard in 2021. officer. The photo-sharingapp news see Indicators section Thatbeata competingbid from RupertMurdoch’s21st CenturyFox, endinghisin- volvementwith Sky, which he launched in 1989 asan upstart rival to Britain’sestablished TV channels. Disney, which is buyingFox’sentertainment assets, consented to Foxselling its39% stake in Skyto Comcast. Santander, a Spanish retail bankwith an empire that spansEurope and the Ameri- cas, named Andrea Orcel asits newCEO. MrOrcel hasbeen in charge ofthe investment- bankingbusinessatUBSforsix years, undertakinga restruc- turingthatslashed itsbalance- sheet. He isa confidantofthe Botín family, which hasheld the reinsatSantanderfor decades, advisingthem on several bigacquisitions, in- cludingthe takeoverofBrit- ain’sAbbeybankin 2004. Leaders The Economist September 29th 2018 15 #MeToo, one year on Amovementsparked byan alleged rapistcould be the mostpowerful force forequalitysince women’s suffrage AYEARagoHarveyWeinstein taintyaboutwhatcountsasproof.Thatislargelybecause evi- was exposed as a sexual dence ofan instance ofabuse often consistsofsomething that predator. Until then his treat- happened behind a closed door, sometimeslongago. mentofwomen wasan open se- Strikinga balance between accuserand accused ishard. Ms cret among some ofthe film in- Blasey Ford has the right to be heard, yet so does Mr Kava- dustry’s publicists, lawyers and naugh. MrKavanaugh’sreputation isatstake, butso is the Su- journalists. Mr Weinstein had preme Court’s. In weighing these competing claims, the bur- been protected byan unspoken den ofproofmustbe reasonable. MrKavanaugh isnotfacing a assumption thatin some situationspowerful men can set their trial thatcould costhim hisliberty, butinterviewing fora job. own rules. Overthe pastyearthatassumption hasunravelled The standard ofproofshould be correspondinglylower. Nei- with welcome speed. In everywalkoflife powerful men have therthe courtnornatural justice isserved byhaste. been forced out, and not just in America. Now Brett Kava- Also a problem isthe greyzone inhabited bymen who have naugh maybe denied a seaton America’shighestcourtfollow- not been convicted in court, but are judged guilty by parts of ing a series ofaccusations that he committed sexual assaults society. Justnow, everycase isfreighted with precedent-setting decadesago asa student. Whatbegan on the castingcouch has significance, perhapsbecause attitudesare in flux. This month made itswayto the Supreme Courtbench. Ian Buruma wasforced outaseditorofthe NewYorkReviewof Thatisprogress. And yetthe fate ofthe #MeToo movement Books after publishing an essay by an alleged abuser which still hangsin the balance in America, the countrywhere itbe- failed to acknowledge the harm he had done. MrBuruma did gan and where ithashad the greatesteffect. To see why, only not deserve to go and, were values more settled, his critics lookatthe case ofMrKavanaugh—who, aswe wentto press, might have been content with an angry letter to the editor. wasdue to give testimonyto the Senate JudiciaryCommittee #MeToo needsa path towardsatonementorabsolution. alongwith Christine BlaseyFord, hismain accuser. The good And #MeToo hasbecome bound up with partisanship. Ac- newsisthatthe appetite forchange isprofound; the bad news cordingto pollingearlierthis yearby Pew, 39% ofRepublican is that men’s predation of women risks becoming yet one women thinkitisa problem thatmen getawaywith sexual ha- more battlefield in America’sall-consumingculture wars. rassment and assault, compared with 66% of Democratic women; 21% of Republican men think it is a problem that Anmer’s kick women are not believed, compared with 56% ofDemocratic Thanks to #MeToo, women’s testimony is at last being taken men. Mr Kavanaugh, however his nomination turns out, is more seriously. Fortoo long, when a woman spoke outagainst likelyto deepen thatdivide—ifonlybecause Republican zeal to a man, the suspicion was turned back on her. In 1991 when rush his confirmation is further evidence that the party puts Anita Hill accused Clarence Thomas, now a Supreme Court powerfirst. Thatwasclearwhen itbacked MrTrump, despite judge, ofsexual harassment, his defenders smeared her as “a hisboastsofforcinghimselfon women and allegations ofsex- little bitnuttyand a little bitslutty”. The machine backingMr ual misconductbyatleast19 accusers. UnderBill Clinton, who Kavanaugh is equally determined. However, it has refrained wasalso accused ofsexual assault, the Democratswere notso from questioningeitherMsBlaseyFord’ssanityorhermorals. verydifferent. Theynowofferlessprotection. In 2018 voterswould find thatunacceptable. If #MeToo in America becomes a Democrats-only move- Abuse bymen isbeingtaken more seriously, too. Mr Wein- ment, it will be set back. Some men will excuse their behav- stein allegedlycommitted dozensofsexual assaults, including iouron the ground thatitishysteria whipped up bythe leftto rape. The contrast between his brutality and his impunity getatRepublicans. Those questionsaboutproof, fairness and shookthe world outofitscomplacency. ThisweekBill Cosby, rehabilitation will become even harderto resolve. once America’shighest-paid actor, wasjailed forbeing a sexu- allyviolentpredator. Butwomen in collegesand workplaces Thinkahead all overAmerica are harmed byabuse thatfallsshort ofrape. It takes a decade or more for patterns of social behaviour to Thanksto #MeToo, thisismore likelyto be punished. Mostde- change. #MeToo isjustone yearold. Itisnotaboutsex so much fencesofMrKavanaugh have focused on hispresumed inno- as about power—how power is distributed, and how people cence; 30 yearsago theywould have insisted thatthe drunken are held accountable when powerisabused. Inevitably, there- fumblingsofa 17-year-old are a fussaboutnothing. fore, #MeToo will morph into discussions about the absence These shifts reflect a broad social change. Before the elec- ofsenior women from companies and gaps in average earn- tions of 2016, 920 women sought the advice of EMILY’s List, ings between male and female workers. One protection which promotes the candidacy of pro-choice Democratic againstabuse isforjuniorwomen to workin an environment women. Since Donald Trump was elected president, it has thatotherwomen help create and sustain. been contacted by42,000 (see United Statessection). Outside Conservatives often lament the role Hollywood plays in politics, companiesare keen fortheirstaffand their customers underminingmorality. With #MeToo, Tinseltown hasinadver- to thinkthattheybuyin to #MeToo. tentlyfostered a movementforequality. Itcould turn outto be One worry is that there may be a gap between corporate the most powerful force for a fairer settlement between men rhetoric and reality (see Business section). Another is uncer- and women since women’ssuffrage. 7 16 Leaders The Economist September 29th 2018 Waste Cash for trash Howthe world should cope with its growing piles ofrubbish THE world is producing ever ofmore waste athome orno longerproduce asmuch. more rubbish. Households For environmentalists the preference for recycling is obvi- and businesses took out 2bn ous. Some even want economies to become “circular”—ie, to tonnes of trash in 2016, the reuse orrecycle everything. Butanyone arguingthatreducing equivalent of740g each day for physical waste isa moral imperative needsto reckon with re- everyperson on the planet. The cycling’s hidden costs. Somebody must pick out, clean, tran- World Bankpredictsthe annual sport and process junk. When the time and effort obviously pile could growby70% by2050, payoff, the economyisalreadynaturallycircular. Three-quar- asthe developingworld getsricher. tersofall aluminium eversmelted remainsin use, and there is Such waste isnotsimplyunsightly, italso threatens public athrivingmarketforused aluminium cans. Butforother mate- health. Diarrhoea, respiratory infections and neurological rials, recyclingjustisn’tworth it. conditionsare more common in areaswhere waste isnot regu- larlycollected. And even where itis, itcan cause environmen- Round and round tal problems (see our special report this week). Greenhouse That is partly because chucking stuffout is artificially cheap. gasesfrom the waste industry, principallyin the form ofmeth- Were landfill and incineration priced to reflect their environ- ane from older landfill sites, could account for as much as a mental and social costs, people would throwtheirrubbish in tenth ofthe global total by 2025. The case for taking action is the river or dump it by the road instead. Rules to discourage clear. Butwhatkind ofaction dependson where youare. waste should therefore focuson producersratherthan house- Poorercountriesoften lackgood waste infrastructure. Rub- holds. The principle oftaxingpollution should be extended to bish pilesup on open dumps, ifnotin the street. In July, forex- covermakersofthingsthatwill need disposingof. Agood ex- ample, India’sSupreme Courtwarned thatDelhi isburied un- ample isthe requirement, pioneered in Europe, forfirms to fi- der “mountain-loads of garbage”. Such places must invest nance the collection and recyclingofelectronicwaste. enough to getthe basicsright. One studyfound thatburning, Transparentsubsidiesforthe recyclingindustrywould also dumping or discharging rubbish into waterways costs south help. Itisbetterto paythe industryto absorb trash, and letthe Asian economies$375 pertonne in pollution and disease. Ba- markettake care ofthe rest, than to craftcrude rules with un- sic disposal systems would cost only $50-100 per tonne. Mo- knowable costs, such asSan Francisco’sambition to send zero rocco’sgovernmentreckonsthe $300m ithasrecentlyinvested waste to landfill. If recycling is sufficiently profitable, more in sanitary landfills has already averted $440m in damage. waste will become a valuable commodity. Some of it might Such spendingmakessense even when budgetsare tight. even be dugbackoutofthe ground. The rich world hasa differentproblem. Itisgood at collec- Thankfully, rubbish is one environmental issue where tion. Butatthe startof2018, China, until then the destination there is little need to worry about political incentives. Voters for many ofthe world’s recyclable material, stopped import- everywhere wantrubbish to be taken away—and theydo not ing most waste plastic and paper, and severely curtailed im- wantto live nearlandfill sitesand incinerators. The trickisto portsofcardboard. Rich countriesmustrecycle more, dispose getthe economicsright, too. 7 Citizenship for sale What price a passport? Selling citizenship and residence is fine, as long as ne’er-do-wells are weeded out WHEN Roman Abramovich choice.Citizenship-and residence-for-sale schemes, typically had problems renewing chargingbetween $100,000 and $2m, are booming(see Inter- his British visa, he turned to national section). More than a dozen countries sell passports Switzerland. It rejected his resi- and around 100 sell residence. An industryoflawyers, bank- dence application, however, ers, accountants, consultants and estate agents has sprouted afterSwiss police said he posed up to serve well-heeled “investmentmigrants”. a “reputation risk”. (He denies The idea of selling passports repels some people. Citizen- wrongdoing.) The colourful Rus- ship isa sacred bond, theyargue, and should be granted only sian billionaire and owner ofChelsea football club now has to foreignerswho prove themselvesworthy. Whyshould the an Israeli passport, allowinghim visa-free travel to Britain, and rich be allowed to jump the queue? Especially since some of isconvertinga formerhotel into hisTel Avivpad. the queue-jumpersare crooksortax-dodgers, who want a new Israel offersnationalityto anyJewwho asksforit. Otheroli- home in which to hide orlaundertheirloot. garchs have to pay for the privilege, but they are spoilt for There are legitimate reasonsforwantinga second passport. 1 The Economist September 29th 2018 Leaders 17 2Travelling businessfolk from poor or Muslim countries face a deeper connection with the place, for instance by residing endlessvisa hasslesunlesstheyhave one. Othersseek an extra there fora minimum period each year. passportasinsurance againstinstabilityorpersecution. More All citizenship-sellers, large and small, should do more to than a third of rich Chinese would like a foreign bolthole weed out undesirables. Too often, their programmes open a (which may mean flouting China’s ban on dual citizenship). backdoorto dirtymoney; thinkofthe ill-gotten Russian gains Countriesmeetingthisdemand gain a straightforward benefit: that have been laundered through Cyprus, one of the EU’s easymoneyto spend on publicservices. Forhurricane-hit Ca- most enthusiastic hawkers ofpassports. The industry talks a ribbean states, passport-flogginghasbeen a lifeline. good game, emphasising recent improvements in client-vet- Regardless of who gains, a principle is at stake. Countries ting. Butithasmoved too slowly. have every right to reserve citizenship for people who try to The time hascome forstricter“know-your-customer” rules become like the native-born population, forinstance by learn- and the blacklistingofcountriesthatofferhavensfor migrants ingthe language. Buttheyalso have the rightto sell it, ifvoters with dirtymoney. Stifferrulesare also needed to thwart pass- agree. Citizenship isa basicmatterofnational competence. port-buyerswhose aim isto evade taxon moneythatwas law- fullyearned. In the United Arab Emirates, forinstance, foreign- Citizens ofsomewhere, and somewhere else ers are buying residence and using it to secure tax residence Itssale should notbe unconstrained, however. Member states too, which allowsthem to blockthe flowofdata to tax authori- ofthe European Union need to agree on common principles ties elsewhere. Banks should be required to establish where governingwhom to admit, since a passportfrom one gives ac- clients’ personal and economic links are strongest, and to cessto live and workin all. Tinystatesthatsell lots ofpassports snitch on those whose taxresidence lookslike a sham. face anotherrisk. Iftheyoverdo it, native voterscould eventu- There are manysound reasonsto grantresidence orcitizen- allybe outnumbered bycitizensofconvenience. Some states ship to foreignerswho are prepared to payforit. Abetting crim- maytherefore wish to restrictvotingrightsto those who forge inalsisnotone ofthem.7 LIBOR Tick tock The huntfora newbenchmarkinterestrate poses risks to financial stability ITHASbeencalledtheworld’s nancial contracts that are based on LIBOR are forced, after its US dollar LIBOR market most important number. LI- discontinuation, to anchor themselves to a new benchmark 2018, $trn BOR, which stands for the Lon- rate. Thatshiftcould have bigeffects, such asa sudden jump to 0 50 100 150 200 don InterbankOffered Rate, isa higherinterestratesforborrowers. Thisisnotjust a theoretical Over-the-counter benchmark interest rate, repre- concern. The BankofEngland pointed outin June that in the derivatives senting the amount that banks previous12 months the stockofLIBOR-linked sterlingderiva- Exchange-traded Other pay to borrow unsecured from tivesstretchingbeyond 2021had grown. The answerto this is derivatives each other. Globally, it under- for contracts to have proper “fallback” clauses which specify pins$260trnofloansandderivatives, from variable-rate mort- whathappenswhen LIBORdisappears. Regulatorsare apply- gagesto interest-rate swaps. ButLIBOR’sdaysare numbered. It ingpressure to getthese included, buteffortsto amend existing is due to be phased out in three years. Broadly speaking, LI- contractsbefore 2021could easilyend up in the courts.  BOR’splanned demise isa good thing. Butthatdoesnot mean itwill go smoothly. The devil you know The case formovingawayfrom LIBORasa reference rate is The otherriskconcernsthe post-LIBORworld, where the new powerful. The rate isbased on a panel ofbankssubmitting esti- reference rates may cause banks’ assets and liabilities to be- matesoftheirown borrowingcosts. The riggingscandals that come disconnected. Flawed though it is, the use ofLIBOR of- made LIBORnotoriousin 2012 showed howthisprocesscould fersbanksa hedge againstsudden movesin theirown borrow- be manipulated. Theyhave also made manybanksnervous of ing costs. The interest rates they charge and the interest rates beinginvolved. The interbankmarkethasbecome lessimpor- theypay, whetherforone dayorone year, are linked byLIBOR. tant since the financial crisis, because new rules encourage The alternatives may not move in sync. They refer to the banksto use otherformsofborrowing. Thatmeansthere are costofborrowingovernight, notfora range ofmaturities. The fewer transactions to base the rate on. Anyway, it is unclear rate being promoted by the Federal Reserve is for borrowing whya measure dependingin parton banks’ creditriskshould secured againstAmerican governmentsecurities. In a crisis, it be partofan interest-rate swap, say, between two companies. iseasyto imagine thatdemand forsuch high-qualitycollateral Hence the decision by British financial regulators to cease would go up even aswillingnessto lend to banksgoes down. requiringbanksto submitratesafter2021. Hence, too, the race Thatwould mean banks’ income from loanswould fall just as by central banks, regulators and the industry to cook up re- theirown borrowingcostsrose.  placements (see Finance section). An alphabet soup of new Neitherofthese dangerscan be wished away. Finding a rate reference rates, from SOFRand SARONto SONIAand TONAR, that is both immune to manipulation and an accurate reflec- isalreadysimmeringaway. tion ofbanks’ borrowingcostsishard. And replacinga number Welcome though it is, the end of LIBOR poses two risks. thathasbecome embedded in the financial system risks insta- One is ofmarket instability, as trillions ofdollars-worth offi- bility. LIBORdeservesto be buried. Itmaystill be mourned. 7 18 Leaders The Economist September 29th 2018 2Britain The quest to remake politics Beneath the chaos ofthe Brexittalks, big ideas are forming thatwill shape the nextdecade PITY the disaffected British boss,JeremyCorbyn—proposes“the greatestextension of eco- voter who looks to the au- nomicdemocraticrightsthatthiscountryhaseverseen”. tumn conferences for inspira- MrMcDonnell correctly identifies that powerhas drained tion. Both the main parties are from labourtowardscapital in recentyears. Buthisproposals hypnotised by Brexit. Labour, to redressthisbalance would see the state strong-arm itsway which gathered thisweekin Liv- deeply into the economy (see Britain section). Companies erpool, tried to fudge itsposition would have to nominate workers to make up a third oftheir only to fall into more bickering. boards, while paywould be determined bycollective bargain- The Conservatives, who will meetin Birmingham nextweek, ing. Ten percentofcompanies’ equitywould be expropriated are so divided overEurope thattheyare openlyconspiring to and put in funds managed by workers’ representatives, that ousttheirown prime minister. The earthquake ofthe referen- would become the largestshareholdersin manyofthe biggest dum two yearsago hasenergised Britain’spartieslike nothing firms. Workerswould receive some dividends, butthe major- else—and crowded outdebate on everythingelse. ity would go to the government. The Treasury would be “re- However, atlastthere are signsthatpoliticiansare starting programmed” to channel moneyto favoured industries. Cou- to think about the direction that Britain should take after it pled with a plan to raise the minimum wage so that it leaves the EU (see Briefing). Some of the fundamental ideas embraces60% ofemployeesunder25, the package represents a thathave underpinned Western governmentsofall stripes for transferofpowernotjustto workersbutalso to the state and decades are being questioned from right and left. A party the unions. Labour-supportingeconomistspropose still more which could come up with persuasive answerswould stand to ideas, including the introduction of capital controls. “The dominate British politicsformanyyears. And justas the Brexit greaterthe mess we inherit, the more radical we have to be,” rebellion hasbeen followed bypopulistrevoltsin other coun- Mr McDonnell told the conference. Brexit is likely to provide tries, so the ideasfermentingin Britain maywell spread. Some the messrequired to justifya socialistshock-doctrine. ofthem are promising; othersdownrightdangerous. The Tories have been slower to regroup, but they too are teeming with ideas. Some want to dust off the free-market The people have spoken principlesofThatcherism and applythem to newareas, lifting The Leave campaign’sdemand to “take backcontrol” resonat- planningrestrictionsto encourage housebuilding, say. Others ed because it applied to more than just Britain’s relationship wantthe partyto bluntcapitalism’ssharperedges, forinstance with Europe. Itchimed with those sickofa hyper-centralised bymimickingthe trust-bustingofTeddyRoosevelt, whose tar- state, where feeble councilstake marchingordersfrom an out- gettodaywould be the overmighty, rent-seekingtech monop- of-touch London. Ittapped into growingangeratthe outsourc- olies. Still othersbelieve the remedyforBritain’sfractiousness ingofpublicservicesto remote and incompetentprivate com- isto update Benjamin Disraeli’s“One Nation” Conservatism, panies. Itpointed to the firmsthatbypassemployment lawby arguingthatitsmodern mission should be to unite a country treatingstaffas“gig” workerswith fewrights. And itreflected a whose deep divides—byage, class, region and more—were ex- feelingofimpotence in the face ofa system ofglobal capital- posed byBrexit. ism which, ten yearsago, sentBritain into recession afterbank- ers thousands ofmiles away mis-sold securities that no one, Butwhatdid theymean? includingthemselves, understood. These ideas could mark a dramatic break with the past. But On becomingprime ministerin 2016, Theresa Mayassured whereasan insurgentLabourhasunited behind a growing list voters that she had heard their cry, and boldly vowed to re- ofdetailed plans, the Tories’ thoughts are ill-defined, and the shape “the forces ofliberalism and globalisation which have partyfarfrom agreed on which to pursue. Theirleader, on the held sway...across the Western world.” She has not kept this rackin Brusselsand fightingforherjob in Westminster, hasno promise. Her lack of imagination, squandered majority and time forphilosophising. She isunlikelyto make wayfor a suc- the all-consuming Brexit negotiations—the ones with her cessoruntil Britain hasleftthe EU. Yetthere isno time to lose. party, ratherthan the EU—mean that, more than two yearson Too manyToriesdoubtthatplansasdrasticasMrMcDonnell’s from theirgreathowl, the British people have seen nothing in could everbe enacted in Britain. Thatiscomplacent. The gro- return. When BrexitdaycomesnextMarch, and Britain isleft tesque folly of Brexit will be enough to persuade many with eithera bad deal orwith no deal atall, the call forrevolu- wealthyBritonsto ditch the Tories, even ifitmeans electinga tionary change will not have been sated—it will be stronger far-left chancellor. And Britain’s winner-takes-all system lets than ever. governments quickly and dramatically reshape the country. Alarmingly, the camp readiest to answer that call is a La- Mr McDonnell would not face the checks and balances that bourPartymarchingeverfurtherand more confidently to the have restrained PresidentDonald Trump. left. Manyofthe ideasin itsmanifesto lastyearrecast old poli- Britain is at last getting the battle ofideas that the referen- cies, such asrenationalisingthe railways, which would notan- dum result demanded. That presents big opportunities, but swerthe fundamental newquestionsbeingasked ofthe state. also grave risks. Itistime forthose who dislike the sound ofthe Butsince then Labour’seconomicplan hasevolved. The shad- future described byLabourthisweekto do some hard think- ow chancellor, John McDonnell—a bigger thinker than his ingoftheirown. 7 20 Letters The Economist September 29th 2018 decisionsbreakfive-to-fouron tionsofvonMisestoliberal posed showingthe non-allo- GiveBolsonaroachance partisanlines(allRepublican philosophywerefarreaching cated excesspurchase price as Youmadeagoodcaseforall appointeesvotingtogetherasa andmoreinfluentialthanyou asubtraction from the ac- thatiswrongaboutJair bloc)onmattersimportantto think.In1922hepublished quirer’sshareholders’ equity. Bolsonaro,thoughyoushould thoseinterests,theirwinrateis “Socialism:AnEconomicand Thismighttrouble those who alsohavecomparedhimwith 100%acrossmorethan70 SociologicalAnalysis”,in are fixated on financial ratios, thealternativethatBrazilians decisionsunderChiefJustice whichhedemonstratedthe butitalso would provide a faceintheforthcomingelec- JohnRoberts.Thisisnostatis- impossibilityofsocialismas clearerindication ofhow tions(“LatinAmerica’slatest ticalfluke.Thatiscapture. aneconomicandsocialsys- much the acquirerhaspaid for menace”,September22nd). Hencetheotherwiseinexpli- temanddescribedhowit undocumented expectations. Thiselectionisaboutchoosing cablebehaviourofRepub- leadstothedestructionofthe ROBERT STRAHOTA theleast-worstpresidential licansintheKavanaughnomi- socialfabric. Chevy Chase, Maryland candidate.Ifthepollsaretobe nation,desperatetokeepthat Hisbook,“Omnipotent believed,thesecond-round five-to-fouradvantagefortheir Government”,publishedin Latin lessons run-offwillbebetweenMr bigdonors. 1944,thesameyearasHayek’s BolsonaroandFernando SENATORSHELDONWHITEHOUSE “TheRoadtoSerfdom”,isa Haddad,whorepresentsthe Newport,RhodeIsland thoroughanalysisofthecol- Workers’Party.MrHaddad’s lapseofliberalideasinGer- campaignisbeingmaster- manyandtheriseofnation- Treatinggenderdysphoria mindedbyLuizInácioLulada alism,whichledtoNazism. Silva,theparty’sleader,from Regardingtransgenderbehav- VonMises’sworksoneconom- hisprisoncell. iourduringadolescence icsincludethefirstcoherent Forallhisfaults,andhehas (“Transparenting”,September applicationofthetheoryof many,thereisachancethatMr 1st),sometimesteenagerswith marginalutility(whichwas BolsonarowillprovideBrazil generalidentityweakness developedbyCarlMenger)to withtherightleadershipand developtransientsymptoms money(“TheTheoryofMon- makebadlyneededreformsto ofgenderdysphoria.These eyandCredit”)andastudyof thepensionandtaxsystems, adolescentssometimeseven theepistemologyofeconom- Iwastickled byJohnson’s privatisepoorlyrunstate considerthemselves“trans- ics(“EpistemologicalProblems column on the use ofLatin companiesandreducethe gendered”inanefforttoim- ofEconomics”). wordsin English (September overallsizeofgovernment. provepeerrelationshipsand FRANCISCONADALDESIMONE 8th). Mywife wasrecentlyin Basedontherecordofthe buttresstheirsenseofidentity. LuxembourgSchoolofFinance physical therapyand had Workers’Partythereisno Ifthesymptomsaresignificant difficultygraspingthe differ- chancethatitwillundertake theycangenerallyberesolved ence between adductorand Whatconstitutes goodwill? thesevitalmeasuresandevery throughpsychotherapy. abductormuscles. I explained chancethatitwillleadBrazil Patientsliketheserepresent Ienjoyed Schumpeter’scol- thatin Latin admeans downthepathofVenezuela. asubgroupofadolescents umn on goodwill, an impor- “toward” and abmeans“away Thatwouldbeafarbigger whoaredifferentfrom tanttopicthatrequiresbetter from”; thus, an adductor threattodemocracyinBrazil (althoughsuperficiallysimilar accountingon firms’ balance- muscle isone thatpullsa limb andLatinAmerica. to)thosewhoaretrulytrans- sheets(September1st). How- toward the central line ofthe UnderthisscenarioMr gendered.Thetherapeutic ever, goodwill doesnotrepre- body, an abductormuscle one Bolsonarobecomesarisk stanceweadvocateistore- sentthe difference between thatpullsa limb awayfrom worthtakingformanyBrazil- spectthepatient’stotal“per- the price the acquirer“paid to thatline. We explored other ians.Theyhavebecomecom- sonhood”andunderstand buyanotherfirm and the examplesofadand abwords pletelydisillusionedwiththe howidentitydevelopsinthe target’soriginal bookvalue”. butran into a bitoftrouble politicalclassesofthisbeauti- contextoffamilialandpeer Before the amountofgoodwill with adverse and averse fulandbountifulbutbadly relationshipsandthesenseof arisingfrom an acquisition is (where abhasbeen replaced mismanagedcountry. theself.Inpractice,doctors determined, the acquirer’s by“a” forease ofpronuncia- ADRIANFINCH shouldnotreinforcespecific accountantsallocate asmuch tion) because theirfunctional RiodeJaneiro gender-rolebehaviours,nor ofthe purchase price to what meanings(“inimical to” and determinewhetheritisdesir- theycan justifyasthe fair “feelingrepugnance toward”) ablefortheadolescentto“be” value ofthe target’stangible are much more alike than their The court’s decisions femaleormale,orneither. and otherintangible assets etymological meanings(“turn- Yousuggested thatAmerica’s RICHARDFRIEDMAN acquired and liabilitiesas- ingtoward/against” and “turn- Supreme Courtbecame poli- Clinicalprofessorofpsychiatry sumed. Onlythe remaining, ingawayfrom”). To mymind ticised through exposure to the DAVIDLOPEZ unallocated excesspurchase such subtletiesare one ofthe quarrelsin American society, Clinicalinstructorinchildand price isrecorded asgoodwill. infinite charmsoflanguage. asifa communicable disease adolescentpsychiatry Itisworth notingthat be- ROBERT NICHOLSON had been transmitted (“And WeillCornellMedicalSchool cause ofthe above require- Des Moines, Iowa7 Brettmakesfive”, September NewYork mentand the factthatgood- 15th). Abetteranalogyisthe will isnotsomethingthatcan phenomenon ofagencycap- be boughtorsold separately, a Lettersarewelcomeandshouldbe More than justa mentor ture. Powerful Republican minorityviewheld bysome addressedtotheEditorat TheEconomist,TheAdelphiBuilding, interestshave foryearssought The Philosophybriefon accountantsisthatgoodwill is 1-11JohnAdamStreet, judicial nomineeswho will Schumpeter, Popperand notan asset. In the 1950sand LondonWC2N6HT followan agenda theycon- Hayekreferred to Ludwigvon 1960s, when accountingwasa E-mail:[email protected] stantlypresentthrough “friend MisesasHayek’smentor more principles-based profes- Morelettersareavailableat: Economist.com/letters ofthe court” filings. When (August25th). The contribu- sion, ArthurAndersen pro-

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