The Economist (September 7th 2019)

63 Pages·2019·13.252 MB·English

by  The Economist

Britain’s political meltdown (cont’d)
Who lost Argentina?
Battle algorithm: AI and war
Why Americans pay more for lunch
SEPTEMBER7TH–13TH2019
Assad’s hollow
victory
Contents The EconomistSeptember7th2019 5
The world this week United States
8 Asummary of political 25 The federal bureaucracies
andbusinessnews
26 North Carolina’s election
27 Michael Bennet, wonk
Leaders
27 Shootings and gun laws
11 Syria
28 Straight pride
Assad’s hollow victory
29 Space Command
12 British politics
The Unconservative Party 32 LexingtonAfghanistan
12 The European Central
Bank The Americas
Parting gifts 33 The FARC’s return to war
14 Argentina 34 Hurricane Dorian’s wrath
Asuperclassiccrisis
35 BelloWill the “pink tide”
On the cover
16 AIandwar return?
Bashar al-Assad is on the verge Mindcontrol
of vanquishing his enemies.
But Syria will poison the
Letters
region for years to come:
20 OnHungary,thegreat Asia
leader,page 11. In Idlib a near-
auk,Brexit,HongKong, 36 Thailand’s armed forces
decade of war is grinding
language,conservatism
towards a close: briefing, 37 Afghanistan’s drug trade
page22 38 Refugees in Australia
Briefing
•Britain’s political meltdown 38 Homophobia in South
22 TheSyriancivilwar
(cont’d)The Tories’ tightening Korea
TheassaultonIdlib
embrace of radical populism 39 BanyanA comeback in
24 RefugeesinTurkey
sets Britain up for a dangerously SriLanka
Themigrantcrisis,
polarised election: leader,
revisited
page 12. A revolution in the
China
Conservative Party leaves MPs
40 Aconcession to Hong
uncomfortable, page 51. After a
Kong’s protesters
tumultuous week for Boris
41 Belt and Road: the movie
Johnson, what next? Page 52.
Acountry that prides itself on its 42 ChaguanGay marriage by
common sense and moderation stealth?
is doing ever stranger things:
Bagehot, page 54
•Who lost Argentina? Middle East & Africa
Populists, not its reformers, 43 The pope in Africa
deserve most of the blame for
44 Gambling in Ethiopia
the latest fiasco: leader,page 14.
45 Israeli Arabs’ votes
In its death throes, Mauricio
Macri’s government emulates its
opponents, page 63
•Battle algorithm: AI and war
As computers play a bigger role
in warfare, the dangers to
humans rise: leader,page 16.
Artificial intelligence is
transforming every aspect of
warfare, page 71
•Why Americans pay more for ChaguanGay Chinese
lunchConsider the lobster roll, take a cautious first step
page 66 towards civil unions,
page 42
1 Contents continues overleaf
6 Contents The EconomistSeptember7th2019
Europe Finance & economics
46 Putin’s brutality 63 Argentina’s agony
47 Venice’s pickpockets 64 ButtonwoodTales of the
expected
47 German elections
48 Poland’s coal capital 65 China’s bank bail-outs
49 CharlemagneThe new 66 The price of lunch
commission 66 Part-time work
68 Free exchangeMartin
Britain Weitzman
51 The Tory transformation
52 Parliament and the PM Science & technology
54 BagehotStranger things 71 How AI is changing war
International
55 The world’s biggest NGO
tries to reinvent itself Books & arts
74 Candidates’ books
75 Salman Rushdie’s novel
76 Poland’s war
76 Litvinenko on stage
77 JohnsonLanguage
Business
nationalism
57 Digital assembly lines
58 Deutschland AG v AfD Economic & financial indicators
59 BartlebyRetirement 80 Statisticson42economies
postponed
60 Samsung’s prodigal son Graphic detail
60 Chinese netizens get 81 LatinAmericanswanttoemigrate
privacy-conscious
61 High-tech fitness Obituary
62 SchumpeterPopenomics 82 Jan Ruff O’Herne, war-rape victim turned fighter
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8 The world this week Politics The EconomistSeptember7th2019
InGermany,theChristian declaredthatthetwosideshad Iván Márquez, a former sec-
DemocratsinSaxonyandthe reachedapreliminarydeal. ond-in-command of the farc,
SocialDemocratsinBranden- Theplanisforaquickwith- a guerrilla group that ended its
burgsawoffchallengesfrom drawalof5,400ofthe14,000 52-year war against the Colom-
thehard-rightAlternativefor Americantroopsinthecoun- bianstate in 2016, announced
Germanyinstateelections, try,followedbythestaggered that he would lead fighters
whichmeansthatatthe departureoftheremainder, back into battle, accusing
nationallevel,thegrand providedtheTalibanmeet Colombia’s government of
coalitionbetweenthecduand certainconditions. “shredding” the peace agree-
thespdislikelytocontinue. ment. Most leaders of the farc,
Thegovernmentof now a political party with seats
Bangladeshorderedmobile- in congress, condemned Mr
The squabble over Britain’s Theringleaders phoneoperatorstoendservice Márquez’s return to war.
withdrawal from the European AmilitaryjudgesetJanuary inthecampshousing
Union intensified in Parlia- 11th2021asthestartdateforthe RohingyaMuslimrefugees Police in Guatemalaarrested
ment. mps in the House of trialofthefivemenaccusedof fromMyanmar,andtostop Sandra Torres, the runner-up
Commons defied the govern- plottingthe9/11attacks.The sellingmobileaccesstoresi- in the presidential election in
ment by passing a bill that trial,tobeheldatGuantánamo dentsofthecamps.Theun August, on charges of violating
seeks a delay to Brexit until Bay,maynothappenifitis saidthemovewouldfurther campaign-finance laws. She
January 31st if a deal has not foundthatthedefendants’ isolatethe750,000Rohingyas, claimed that she was being
been passed in the chamber by statementswereextracted whofledapogrombackedby politically persecuted.
October 19th. Boris Johnson undertorture.Ifitdoesoccur theBurmesearmyin2017.
purged the 21mps who rebelled KhalidSheikhMohammedand
against him from the Conser- fourotherswillfaceacourt,20 Kazakhstan’spresident, No end in sight
vative Party, leaving the prime yearsaftertheatrocities. Kassym-JomartTokayev, The international Red Cross
minister in charge of a govern- promisedtoeaselawsre- said that as many as 100 people
ment 43 short of a working Thirty-fourpeoplediedwhena strictingpublicprotests.Police were killed when an air strike
majority. Mr Johnson now firebrokeoutonaboatchar- havesuppressedsporadic by the Saudi-led coalition that
wants to hold an election. He teredforascuba-divingex- demonstrationsagainsthis is fighting Houthi rebels in
has a lead in the polls—but so cursionoffthecoastofLos stage-managedsuccessionto Yemenhit a detention centre
did Theresa May before a set- Angeles.Itwastheworstloss thepresidencyearlierthisyear, under rebel control. The Saudis
back at an election in 2017. oflifeonavesselinAmerican aftertheabruptresignationof said the centre had been used
watersinfourdecades. NursultanNazarbayev,the to store drones. A unreport
In what many considered to be strongmanof30years.Mr listed possible war crimes that
a pre-election giveaway, the TokayevalsoaffirmedMr have been committed in the
government outlined plans to Abit of a climbdown Nazarbayev’sdaughterDariga five-year conflict, which
increase spending, which for Hong Kong’schief executive, asheadofthesenateandthus include the use of indiscrimi-
the first time in 11years would Carrie Lam, said she would nextinlinetothepresidency. nate air strikes.
enlarge the size of the British formally withdraw the legisla-
state relative to gdp. Sajid tion that triggered the past Israelexchanged fire with
Javid, the chancellor of the three months of protests in the Seeking shelter Hizbullah, the Lebanese mili-
exchequer, said that Britain territory. The bill would have tia-cum-party backed by Iran,
could “afford to turn the page allowed the extradition of in their most serious border
on austerity”. criminal suspects to courts on clash in years. Israel was re-
the Chinese mainland. In a sponding to a missile attack
hs2, Britain’s controversial leaked off-the-record speech, from Hizbullah, which the
high-speed rail project, faced Mrs Lam said China had no militia said was in retaliation
more delays and an estimate plans to send in the army to for an Israeli drone attack in
for the final bill soared to control the unrest. the suburbs of Beirut.
£90bn ($110bn), or £260m per
mile. The projectwas planned The Chinese Communist Police in South Africaarrested
in two phases and originally Partysaid its Central Commit- 300 people after riots directed
costed at £30bn in 2010. The tee would meet on an un- at migrants from other parts of
escalating price means hs2 is specified date in October. The Hurricane Dorian, thought to Africa broke out in Johan-
in danger of being derailed. committee, comprising more be equal in strength to the nesburg and Pretoria, killing at
than 300 of the country’s most most powerful ever recorded in least five people. Violence
Members of the Five Star Move- powerful officials, has not met the Atlantic to make landfall, against workers from other
ment in Italyvoted to accept a since early last year—the lon- devastated the Bahamas. With areas of the continent is rela-
new government in coalition gest gap in decades. It is due to sustained winds of up to tively common in South Africa,
with their former enemies, the discuss ways of “perfecting” 185mph (300kph) the storm hit which has an official unem-
Democrats, to be headed by the the country’s socialist system. the Abaco islands, which have ployment rate of 29%.
incumbent prime minister, 17,000 inhabitants, before
Giuseppe Conte. This means Zalmay Khalilzad, the dip- moving on to Grand Bahama, Pope Francisstarted a
that the plan by the hard-right lomat conducting talks with which has 52,000. It caused the week-long visit to
leader of the Northern League, the insurgents of the Taliban sea to rise nearly eight metres Mozambique, Madagascar and
Matteo Salvini, to force an regarding an American with- (26 feet) above normal. At least Mauritius, his second trip to
election has failed, for now. drawal from Afghanistan, 20 people died. sub-Saharan Africa. 1
The world this week Business The EconomistSeptember7th2019 9
The Argentine government lira and decreasing price pres- from flying to Chinese air-
introduced emergency capital sures have boosted expecta- The rural-urban split ports. Cathay has sacked two
controls, restricting the tions that the central bank will Walmartdecided to stop sell- pilots who joined the marches.
amount of dollars that people again slash interest rates when ing ammunition that can be The new chairman, like the
and firms can buy. The mea- it meets on September 12th, used in military-style weapons new ceo, comes from Swire
sures are meant to stop money though probably by not as and handguns. The retailer has Group, a conglomerate with a
gushing out of the country much as the 4.25-percentage- come under pressure to do 45% stake in Cathay.
amid a run on the peso, which point cut to rates in July. more to curb gun sales since
has tumbled as investors fret last month’s mass shooting at Nickelprices soared to five-
that October’s presidential America and China agreed to one of its stores in El Paso. This year highs after the Indonesian
election will be won by a ticket resume high-level talks in week a gunman murdered government brought forward a
that includes Cristina Fernán- early October to try to resolve seven people at random in ban on exports of nickel ore to
dez de Kirchner, a former their trade dispute. Negotia- west Texas. Walmart stopped December, two years earlier
president whose spendthrift tors last met in July and there is selling handguns in the 1990s than it had proposed. The
policies ruined the economy. little hope that a breakthrough and semi-automatics in 2015, metal is used in stainless steel
will come soon. There was but the latest surge in shoot- and increasingly in batteries
evidence this week that the ings has led to calls for parents for electric cars, an industry
India’s GDP dispute is having an effect on to boycott its stores in the which Indonesia wants to
% increase on a year earlier
manufacturing. Factory back-to-school season. develop domestically.
10
output in America surprisingly
8 contracted in August for the A key ally of Muhammad bin
6 first time in three years. In Salman, Saudi Arabia’s crown Aweb of intrigue
4 Britain manufacturing activity prince and de facto ruler, was There were moreprivacy
2 fell to a seven-year low. And in put in charge of Saudi Aramco. scandalsinvolving internet
Germany a purchasing-manag- The promotion of Yasir al- companies. Google was fined
0
ers’ index suggested that Rumayyan to chairman makes $170m in America for illegally
2016 17 18 19
manufacturing had shrunk for the on-off ipoof the state oil collecting data from child
Source: Haver Analytics
an eighth consecutive month. company more likely; it could users on its YouTube site in
India’seconomygrewby5% Figures in China showed come as early as next year. order to target them with ads.
in the second quarter manufacturing contracting for And a two-year hacking cam-
compared with the same three the fourth month in a row. Cathay Pacific’schairman paign was uncovered (by
months last year, the country’s stood down, three weeks after Google’s researchers) that
slowest growth rate in six years Uber’sshare price hit a new its chief executive resigned tapped into text messages and
and well below market fore- low ahead of the expected amid the political turmoil in photos on hundreds of thou-
casts. Separate figures showed passage of a bill in California Hong Kong, Cathay’s home sands of iPhones. As a remind-
that domestic car sales that would reclassify the em- hub. The airline draws a lot of er that no one is immune, the
slumped in August (by 49% for ployment status of the com- business from the Chinese Twitter account of Jack Dorsey,
Tata Motors compared with pany’s drivers in the state from mainland, where the govern- Twitter’s boss, was briefly
August 2018) and that manu- contractor to employee, a ment has told it to bar cabin hijacked; a number of offen-
facturing activity was cooling threat to its low-labour-cost crew who participate in Hong sive messages and a bomb
rapidly. More government business model. Kong’s pro-democracy protests threat were tweeted out.
stimulus is now on the cards.
The Indian government also
announced plans to streamline
the country’s state-controlled
banks, which hold lots of bad
debt, cramping their ability to
lend, and proposed that ten
state banks be merged into
four new ones. Markets gave
the idea a cool reception.
Australia’sgdpgrew by 1.4%
in the second quarter, the
slowest pace since the
financial crisis. Exports are
booming, but consumers in
the Lucky Country are reining
in their spending.
Turkey’sannual inflation rate
fell to 15% in August, the lowest
it has been for 15 months.
Inflation soared to 25% at the
end of last year amid a curren-
cy crisis. Today’s more stable
Leaders Leaders 11
Assad’s hollow victory
The dictator is on the verge of vanquishing his enemies. But Syria will poison the region for years to come
“Assadorweburnthecountry.”ForyearsBasharal-Assad’s maininthedungeons,thoughmanyareprobablydead.Even as
troops have daubed that phrase onto walls in the towns the war nears its end, the pace of executions is increasing. Al-
they recapture. The insurgents pushed the dictator to the brink. most every Syrian has lost someone close to them in the war. Psy-
But Mr Assad shrugged off the empty threats of Western leaders, chologists speak ominously of a breakdown in society.
and enlisted the help of Iran and Russia. True to his slogan, he Last is Mr Assad’s debt to Iran and Russia. He owes his victory
destroyed whole cities and gassed and starved his own people. to their supply of firepower, advice and money and their willing-
What rebels remain are holed up in Idlib province. It, too, will ness to back a pariah. They will expect to be paid, with interest.
soon fall. Against all the odds, the monster has won. For Syrians, therefore, Mr Assad’s victory is a catastrophe. But
Yet it is a hollow victory. Far from bringing order to the coun- his opponents are exhausted so, in spite of his weaknesses, he
try, as the Russians and Iranians claim, Mr Assad has displaced could yet cling to power for years. And for as long as he is in
half the population. Eight years of civil war have destroyed the charge, Syria’s misery will spread across the region.
economy and cost 500,000 lives. Mr Assad has nothing good to The war has already drawn in a handful of outside powers, but
offer his people. His country will be wretched and divided. The the chaos could grow. Iran treats Syria as a second front against
consequences will be felt far beyond its borders. Israel to complement Hizbullah, its proxy in Lebanon. Israel has
The precise moment of Mr Assad’s triumph will be deter- launched hundreds of air strikes on Iranian positions during the
mined in Idlib. About 3m people live there, many of whom fled war. One in August prevented Iranian and Hizbullah operatives
fighting elsewhere. The area is controlled by the hardest-core re- from attacking Israel with armed drones, the Israeli army says.
bels, jihadists linked to al-Qaeda, who will not go quietly. That, Turkey, which has troops in the north, is threatening to launch
too, is a legacy of Mr Assad’s ruthlessness. He released hundreds an offensive against Kurdish forces, whom it considers terro-
of jihadists from prison in 2011, hoping that they would taint the rists, near its border. That could lead to a face-off with America,
once-peaceful, multi-confessional uprising. Now the regime is which supports the Kurds and had been trying to calm the Turks.
bombing them, along with civilians and hospitals. The offensive Refugees will destabilise Syria’s neighbours, too. Those who
will take time—and it will be bloody (see Briefing). have fled Mr Assad do not want to go home—indeed their num-
When the fighting stops, the tensions that bers will grow because of the offensive in Idlib.
originally threatened the regime will remain— The longer they stay in camps, the greater the
but they will be worse than ever. Start with reli- danger that they become a permanent, festering
gion. Mr Assad’s father, Hafez, a member of the diaspora. They are already unsettling host coun-
Alawite minority, clung to power partly by hold- tries, such as Jordan, Lebanon and Turkey,
ing the line between the country’s faiths. His where many locals accuse them of draining re-
son, though, painted his Sunni opponents as sources and taking jobs. Turkey is sending some
fundamentalists as a way of rallying Christians, back, even to places like Idlib.
Druze and secular-minded Syrians to his side. And that could spill over into the wider
Millions of Sunnis have fled the country, creating what Mr Assad world. Dispossessed at home and unwanted abroad, refugees are
calls “a healthier and more homogeneous society”, but millions at risk of radicalisation. Mr Assad’s ruthless tactics have left large
remain. They have seen their homes looted, property confiscat- parts of his population bitter and alienated. His prisons will in-
ed and districts overrun by Assad supporters. Resentful, fearful cubate extremism. What better breeding ground for al-Qaeda
and oppressed, they will be a source of opposition to the regime. and Islamic State (is), which the American government says is
Next are Syrians’ grievances. Back in 2011corruption, poverty already “resurging in Syria”? In May America dropped 54 bombs
and social inequality united the uprising. Things have only got and missiles on jihadists in Iraq and Syria. That number rose to
worse. Syria’s gdpis one-third of what it was before the war. The over 100 in each of June and July.
unreckons that more than eight in ten people are poor. Much of Having failed to act in the war’s early days, when they might
the country lies in ruins. But the government’s plans to rebuild have pushed the dictator out, Western countries can do little
Syria risk tearing it further apart. Reconstruction will cost be- now to change Syria’s course. Some European leaders think it is
tween $250bn and $400bn, but Mr Assad has neither the money time to engage with Mr Assad, participate in reconstruction and
nor the manpower to carry it out. So he has focused resources on send the refugees home. This is misguided. The refugees will not
areas that remained loyal. The Sunni slums that did not are being return willingly. Reconstruction will only benefit the regime and
demolished and redeveloped for his bourgeois supporters. His the warlords and foreigners who backed it. Better to let Russia
cronies reap the profits, as the country’s class and religious fault and Iran pay.
lines grow wider. Instead the West should try to spare Syria’s suffering by offer-
Then there is Mr Assad’s cruelty. Hafez kept Syria in check ing strictly humanitarian assistance and threatening retribution
with a brutal secret police and occasional campaigns of murder- for heinous acts, such as the use of chemical weapons. America
ous violence. His son, in danger of losing power, has tortured should stay to keep isand al-Qaeda in check. But for as long as Mr
and killed at least 14,000 people in the regime’s sprawling net- Assad is allowed to misrule Syria, most aid money would be bet-
work of clandestine prisons, according to the Syrian Network for ter spent helping its neighbours. Syrians have suffered terribly.
Human Rights, an ngo. Nearly 128,000 people are thought to re- With Mr Assad’s victory, their misery will go on. 7
12 Leaders The EconomistSeptember7th2019
British politics
The Unconservative Party
The Tories’ tightening embrace of radical populism sets Britain up for a dangerously polarised election
Boris johnson has been Conservative leader for little more dishedoutbillionsofpoundsworthofpre-electiongoodies. He
than a month, and until this week had appeared in Parlia- gave money to public services without demanding much in the
ment as prime minister only once. But that did not stop him car- way of reform, and focused on day-to-day spending rather than
rying out the biggest purge in the party’s history on September investing for the future. Spending power was supposedly being
3rd. After a backbench rebellion led to a resounding defeat of his kept aside to cope with a no-deal crash-out. But faith dictates
uncompromising Brexit policy, 21moderate Conservative mps, that no-deal will do no great harm to the economy, so no safety-
including seven former cabinet members and a grandson of net is required. To show any such caution, as Mr Javid’s predeces-
Winston Churchill, had the whip withdrawn and were told they sor (now an ex-Tory) did, is a form of heresy.
would not be allowed to stand as Tories at the next election. The most unconservative behaviour of Mr Johnson’s govern-
It was the most dramatic step in a long process: the transfor- ment has been its constitutional recklessness. Not only has it
mation of Britain’s ruling party from conservatives into radical suspended Parliament (having said that it would not), so as to
populists (see Britain section). The capture of the Tories by fanat- limit mps’ time to legislate on Brexit (which, again, it said was
ics determined to pursue a no-deal Brexit has caused the party to unconnected). It also toyed with using even more underhand
abandon the principles by which it has governed tactics, such as recommending that the queen
Britain for most of the past century. With an not enact legislation passed by Parliament.
election looming, and the Labour opposition Would the government abide by the law, a cabi-
captured by an equally radical hard-left, the net ally of Mr Johnson was asked? “We will see
Tories’ sinister metamorphosis is terrible news. what the legislation says,” he replied. In a coun-
Junking more than 40 years of cautious pro- try whose constitution depends on a willing-
Europeanism after the referendum of 2016 was ness to follow convention and tradition, even
itself a big change. But under Mr Johnson and making such a threat weakens the rules—and
his Svengali-like adviser, Dominic Cummings, paves the way for the next round of abuses, be it
who masterminded the Leave campaign, the Tory party has be- by a Labour or Tory government.
come not just pro-Brexit but pro-no-deal. Mr Johnson claims he This week there were still just enough conservatives in the
is working flat-out to get a better withdrawal agreement from the Conservative Party to block the most dangerous part of Mr John-
eu. Yet in his flailing performance before mps this week, like an son’s Brexit policy. As we went to press, a bill designed to stop no-
undergraduate bluffing his way through a viva, he was found out. deal was making its way through the House of Lords. But the de-
He has no real proposal for replacing the contested Irish back- feat of the government, and its loss of any sort of majority, points
stop. Reports that Mr Cummings privately admitted the negotia- towards an election. It will be a contest in which, for the first
tions in Brussels are a “sham” ring all too true. Mr Johnson’s un- time in living memory, Britain has no centre-right party. Nor,
conservative plan seems to be to win a quick election, either after thanks to Labour’s far-left leader, Jeremy Corbyn, will it have a
crashing out with no deal or, as it has turned out, claiming to mainstream opposition. Instead the two leading parties will, in
have been thwarted by “enemies of the people” in Parliament. their different ways, be bent on damaging the economy; and
The religion of no-deal has wrecked other Conservative prin- both will pose a threat to Britain’s institutions. Brexit’s dreadful
ciples. Sajid Javid, the fiscally prudent chancellor, this week consequences continue. 7
The European Central Bank
Parting gifts
Before he steps down, Mario Draghi must make one last stand
If mario draghihad been hoping for a quiet few months be- Investors’ jitters about a recession and the impact of the trade
fore he retires from the European Central Bank (ecb)at the end war have sent bond yields tumbling. The ecb’s hawks—such as
of October, he has been disappointed. He has been in charge for Jens Weidmann, the head of the Bundesbank, and Klaas Knot, of
eight high-wire years. In 2012 he quelled panic about the the Dutch central bank—caution against overreacting with a
break-up of the euro zone by pledging to do “whatever it takes” to large stimulus. But the economic data are dreadful. Output in
save the single currency. In 2015 he introduced quantitative eas- Germany shrank in the second quarter, and some economists are
ing (qe, creating money to buy bonds) in the face of fierce oppo- pencilling in another contraction in the third. Italy is stagnating.
sition from northern member states. Now the euro zone is flirt- According to a survey of purchasing managers released on Sep-
ing with recession and governments are not helping by being tember 2nd, Europe’s manufacturing decline shows no sign of
slow to loosen fiscal policy. At the central bank’s meeting on Sep- abating. The deeper it is and the longer it lasts, the more likely
tember 12th, Mr Draghi must dust himself down one last time. that trouble brims over into the rest of the economy. In Germany 1
14 Leaders The EconomistSeptember7th2019
2retail sales are already slipping and firms are planning to hire the offing. Until governments loosen the purse-strings, the ecb
fewer workers. has no choice but to act. It is the only game in town.
Inflation is dangerously low. Both the headline figure and the Mr Draghi must therefore be bold on September 12th. Al-
“core” measure—which strips away volatile food and energy though the scope for interest-rate cuts is limited, it still exists.
prices—are stuck at around 1%, below the ecb’s target of infla- The important thing is to mitigate the impact on financial stabil-
tion below, but close to, 2%. Investors’ medium-term expecta- ity by, say, “tiering” deposit rates—giving banks a rebate on some
tions, as measured by swap rates, have drifted down to 1.2%, well of the interest they would otherwise have to pay to park spare
below levels in 2014-15, when the bank prepared to launch qe. cash with the central bank. This would signal that the ecbcan cut
The views of professional forecasters surveyed by the ecbhave rates further without blowing up the banking system.
fallen to their bleakest since polling began in 1999. In an attempt He should also restart qe and commit the bank to buying
to bolster its credibility, the bank has tweaked its language to bonds until underlying inflation shows a meaningful recovery.
emphasise that it does not want to undershoot the target of 2% Mr Draghi has said before that he views asset purchases as partic-
consistently. But without action, those words count for little. ularly helpful in reviving inflation expectations. One constraint
Some economists, among them Larry Sum- is the ecb’s self-imposed limit on the share of a
mers of Harvard University, argue that, with lit- Euro-area consumer prices country’s government bonds that the bank can
tle ammunition left, central banks should re- %changeonayearearlier buy. This should be lifted from a third to a half,
3
frain from action so as to force governments to sending a powerful signal that the ecb means
Headline
step into the breach with fiscal policy. They are Target 2 business. The legality of qe is still being ques-
right that the root cause of the economic woe is a 1 tioned in Germany’s constitutional court, but a
Core
shortfall of demand. Sovereign borrowing costs 0 ruling by the European Court of Justice last year
in much of the euro area are near zero or below 2017 18 19 appears to give the ecbroom to raise those lim-
it. In an ideal world governments would leap at its in its quest for price stability. The promise of
the chance to borrow so cheaply in order to invest. And it is also lower borrowing costs for longer might even prompt national
true that monetary policy is likely to be less effective because treasuries into issuing more debt.
rates are so low. The ecb’s deposit rate is already -0.4%. At some Last, Mr Draghi must use the bully pulpit to urge governments
point the benefits of further cuts will be offset by their costs, for to exercise their fiscal powers to fend off a recession. You might
example if customers begin to withdraw funds from banks and think that he should avoid taking action at the end of his tenure,
thus destabilise them. With financial conditions already much so as not to bind the hands of his successor, Christine Lagarde.
looser, qewill not be as effective as it was in 2015. Not so. A determined response now will save her much work lat-
But for the ecb to stand back and do nothing would be irre- er. Mr Draghi is in a unique position. His stature with investors
sponsible. It is legally obliged to achieve price stability. Ger- and governments gives him real clout. And since he departs in a
many’s government shows little appetite to borrow to spend, few weeks he can be blunter than he has been in putting across
even if its entire bond yield-curve is submerged below zero. the message that governments, not just the ecb, must act. That
There is even less sign of co-ordinated regional fiscal stimulus in would cement his legacy as the man who saved the euro.7
Argentina
A superclassic crisis
Populists, not reformers, deserve most of the blame for Argentina’s latest fiasco
Before he became president of Argentina in 2015, Mauricio 2015 election, with Wall Street chiefs such as Jamie Dimon, boss
Macri was president of a Buenos Aires football club, Boca Ju- of JPMorgan Chase, proclaiming that Argentina had come in
niors. On September 1st the team faced its crosstown adversary, from the cold. And when the financial markets became choppier,
River Plate, in the superclásico, as contests between the sides are in 2018, the imfbacked him with $57bn, its largest-ever loan. A
called. The two armies of fans at last had something to agree year on, the position could hardly be worse. Inflation is over
about. As they made their way to the stadium, Mr Macri’s govern- 50%. The peso has dropped by 30% in the past 12 months, and the
ment announced an emergency reimposition of currency con- country’s dollar bonds trade at less than half their face value.
trols. Almost everyone believes that the new policy marks the Plenty of Argentines and some outsiders may conclude that
end, in effect, of his time in office. It also confirms the horrible Mr Macri’s agenda to liberalise the economy, and the imf’s sup-
reality that Argentina has once again become a financial outcast. port, were misplaced. In fact much of the blame for Mr Macri’s
The controls limit the amount of dollars that Argentines can failure lies with his populist predecessor, Cristina Fernández de
buy and force exporters to repatriate their earnings. They come Kirchner, who is running again in the upcoming elections as a
shortly after the government said it would delay repayments of vice-presidential candidate. Ms Fernández left behind a gaping
some of its short-term debt and seek an extension of longer-term budget deficit, artificially low utility prices, statistics that were
liabilities. Intended to prevent capital flight and stabilise the brazenly manipulated and ruinously high public spending. After
peso, the measures are the final humiliation for Mr Macri, a busi- years of such mismanagement it has become ever harder to per-
nessman who promised to revive the economy by scrapping con- suade Argentines that prices and the currency will be stable.
trols and reforming a bloated public sector. Their mistrust of their economic institutions is sadly self-vindi-
Foreign investors bought into his liberalising vision after the cating. It makes investors unusually skittish. Who would trust a 1
16 Leaders The EconomistSeptember7th2019
2country with so little faith in itself? the opposition would do led to panic and capital flight, and led
Mr Macri and the imfmade mistakes (see Finance section). To the government to do some of those things itself, including de-
avoid a public backlash Mr Macri decided to narrow the budget laying debt repayments and imposing currency controls.
deficit gradually, testing the bond market’s patience rather than Although Mr Fernández has drained Mr Macri of power, he
the electorate’s. In hindsight he should have balanced the books has been reluctant to act as Argentina’s next leader himself. He
sooner. Perhaps the imf should have made a smaller loan (cou- has instead struck vague and contradictory positions. If he wins,
pled, presumably, with an earlier debt restructuring). But it Mr Fernández will not be formally inaugurated until December.
hoped that a large bail-out would restore investor confidence, al- Until then Argentina will face a damaging political vacuum. The
lowing Argentina to recover without spending all the money the outgoing government is introducing measures, including price
fund had promised. freezes and handouts, to try to protect the population from the
On top of the tactical errors by the government, what finally shock rippling through the economy. But the situation is still
broke investors’ confidence was the spectre of populists return- dire, and the new man will still face the long-term problem that
ing to power. Alberto Fernández and his controversial running- defeated Mr Macri: how to bring Argentina’s economy back in
mate, Ms Fernández (they are not related and he is more moder- line with market realities. A large part of the electorate and the
ate than she), triumphed in a primary vote on August 11th and are probable next president seem keen to dodge that question. Until
almost certain to win October’s election. Investors’ fear of what it is confronted, decline and crisis will beckon.7
AI and war
Mind control
As computers play a bigger role in warfare, the dangers to humans rise
The contestbetween China and America, the world’s two su- the threat posed by aiis less lurid and less clear. It might aid sur-
perpowers, has many dimensions, from skirmishes over prise attacks or confound them, and the death toll could range
steel quotas to squabbles over student visas. One of the most from none to millions. Likewise, cold-war arms-control rested
alarming and least understood is the race towards artificial-in- on transparency, the ability to know with some confidence what
telligence-enabled warfare. Both countries are investing large the other side was up to. Unlike missile silos, software cannot be
sums in militarised artificial intelligence (ai), from autonomous spied on from satellites. And whereas warheads can be inspected
robots to software that gives generals rapid tactical advice in the by enemies without reducing their potency, showing the outside
heat of battle. China frets that America has an edge thanks to the world an algorithm could compromise its effectiveness. The in-
breakthroughs of Western companies, such as their successes in centive may be for both sides to mislead the other. “Adversaries’
sophisticated strategy games. America fears that China’s auto- ignorance of ai-developed configurations will become a strate-
crats have free access to copious data and can enlist local tech gic advantage,” suggests Henry Kissinger, who led America’s
firms on national service. Neither side wants to fall behind. As cold-war arms-control efforts with the Soviet Union.
Jack Shanahan, a general who is the Pentagon’s point man for ai, That leaves the last control—safety. Nuclear arsenals involve
put it last month, “What I don’t want to see is a complex systems in which the risk of accidents
future where our potential adversaries have a is high. Protocols have been developed to ensure
fully ai-enabled force and we do not.” weapons cannot be used without authorisation,
ai-enabled weapons may offer superhuman such as fail-safe mechanisms that mean bombs
speed and precision (see Science section). But do not detonate if they are dropped prematurely.
they also have the potential to upset the balance More thinking is required on how analogous
of power. In order to gain a military advantage, measures might apply to aisystems, particular-
the temptation for armies will be to allow them ly those entrusted with orchestrating military
not only to recommend decisions but also to forces across a chaotic and foggy battlefield.
give orders. That could have worrying consequences. Able to The principles that these rules must embody are straightfor-
think faster than humans, an ai-enabled command system ward. aiwill have to reflect human values, such as fairness, and
might cue up missile strikes on aircraft carriers and airbases at a be resilient to attempts to fool it. Crucially, to be safe, aiweapons
pace that leaves no time for diplomacy and in ways that are not will have to be as explainable as possible so that humans can un-
fully understood by its operators. On top of that, aisystems can derstand how they take decisions. Many Western companies de-
be hacked, and tricked with manipulated data. veloping aifor commercial purposes, including self-driving cars
During the 20th century the world eventually found a way to and facial-recognition software, are already testing their aisys-
manage a paradigm shift in military technology, the emergence tems to ensure that they exhibit some of these characteristics.
of the nuclear bomb. A global disaster was avoided through a The stakes are higher in the military sphere, where deception is
combination of three approaches: deterrence, arms control and routine and the pace is frenzied. Amid a confrontation between
safety measures. Many are looking to this template for ai. Unfor- the world’s two big powers, the temptation will be to cut corners
tunately it is only of limited use—and not just because the tech- for temporary advantage. So far there is little sign that the dan-
nology is new. gers have been taken seriously enough—although the Penta-
Deterrence rested on the consensus that if nuclear bombs gon’s aicentre is hiring an ethicist. Leaving warfare to comput-
were used, they would pose catastrophic risks to both sides. But ers will make the world a more dangerous place.7
20 Letters The EconomistSeptember7th2019
thecommongoodfirst.An Inthiswayboththefreedomof person can be compared to an
Hungary’s government illiberalisonewhoprotectsthe theuktoestablishitsown overflowing steam boiler. The
The achievements of Viktor country’sborders,who customandregulatoryregime use of invective, in his view,
Orban, Hungary’s prime min- protectsthenation’sculture. forallitsterritory,including serves as a relief valve that
ister, “are bad for Hungarian zoltankovacs NorthernIreland,andthe restores emotional and
liberty”, you say in your brief- Statesecretaryfor absenceofanintra-Ireland physical balance.
ing (“The entanglement of internationalcommunications borderwouldbepreserved. christopher stehberger
powers”, August 31st). In fact, andrelations Theestablishmentofsuchan Traunstein, Germany
the opposite is true. The past CabinetOfficeofthePrime areaanditsprinciplescouldbe
nine years of the Orban govern- Minister immediatelyagreedinan
ments have been good for the Budapest additionalprotocoltothe The social fabric
country. gdpgrowth is one of withdrawalagreementbefore Bagehot submits that Margaret
the best in the European Union October31st,tobecompleted Thatcher’s famous quote,
and our unemployment rate Anauk-wardlesson duringthetransitionperiod. “There is no such thing as
has hit all-time lows. Debt-to- Youreportedontheconserva- prof.giorgiosacerdoti society”, is a “sin” against
gdpis down and deficits re- tioneffortstoprotectthe Formermemberofthe Burkean conservatism (August
main well below 3%. Invest- puffinsoftheFaroeIslands AppellateBodyofthewto 3rd). But in that interview for
ment is up, interest rates down (“Wellworthsaving”,August Milan Woman’s Ownin 1987, Thatcher
and real wages are growing. 10th).Thisisnotthefirsttime went on to say that we are a
The number of marriages has theFaroeshavewitnesseda “living tapestry” of people,
increased by 43% and divorces survivaldramabetweenhunt- EnglishinHongKong who by “our own efforts” help
have fallen. The employment ersandseabirds.Theislands Therowoverreintroducing those who are unfortunate. In
rate of women has reached an wereoneofthelastredoubtsof Frenchasalanguageof her autobiography she gave
all-time high and abortions thepuffin’slargercousin,the instructioninMoroccan this clarification: “It’s our duty
have dropped by nearly a third. greatauk(Pinguinusimpennis). schools(“Quelestle to look after ourselves and
Those are not the numbers of a Aniconicthree-foot-tallflight- problème?”,August17th) then to look after our neigh-
“hollowed-out” democracy, lessbirdwithacloseresem- remindsmeofthemother- bour.” Her point was that soci-
but point to the optimism and blancetoapenguin,itwasone tongueteachingpolicyinHong ety is not abstract; if everyone
confidence of a free people. ofthegreatestexamplesof Kong,whichwasintroduced thinks that others are respon-
Moreover, we did not build convergentevolution.Sadly whenChinatookcontrolofthe sible for looking after the
“a fence to keep out Middle thelastpairwerekilledin1844 cityin1997.Formanypupils, vulnerable, then nothing will
Eastern refugees”. The fence sothattheireggcouldbesold thismeanslearninginCanton- be done for them. Individuals
was built as a barrier to prevent atauctioninLondon. eseChinese.Inaplacewhere have primacy in Thatcherism,
illegal entries into the eu’s edencottee-jones bothEnglishandChineseare but they do have social duties.
visa-free Schengen area, with London theofficiallanguages,the Edmund Burke would agree.
which Hungary met its Schen- dismalrealityisthatmany william peden
gen treaty obligations to secure localgraduatesleaveschool Ancona, Italy
the eu’s external border. Most Acustom zone for all-Ireland withsubparEnglishproficien-
of those attempting to cross One solution to the conun- cy.Indeed,HongKongiscon- Bagehot might review The
illegally were not refugees. drum surrounding the “back- sistentlyoutrankedbySinga- Economist’s recent coverage of
And, yes, the governing stop” in the Brexit withdrawal poreandShanghaiintheef Boris Johnson, which aptly
parties have won three straight agreement (“Who’s gonna stop EnglishProficiencyIndex, describes him as more
parliamentary elections, and no-deal?”, August 31st) is to blemishingHongKong’srep- Rabelaisian harlequin than
many other electoral contests, create an all-Ireland No-Cus- utationasaninternational “Rousseauan” ideologue.
with big margins. This has tom Area, which would qualify commercialhub.Inaninter- travis white-schwoch
given us the democratic man- as a Frontier Traffic area under connectedworld,notalllan- Chicago
date to pursue these policies. Article 24 of the gatt/wto. guagesareequallyprominent,
Hungary’s free and vociferous This would entail the free particularlyinbusinessand My greatest joy as an American
press do a much better job than circulation within Ireland only diplomacy.Re-establishing reading your publication is to
The Economistat asking why of products originating in culturalidentitycanbe become acquainted with Brit-
the opposition continues to either part of the island, trade achievedwithoutundermin- ish slang. Bagehot lamented
fail to win over voters. which represents the majority ingeffortstokeepupwiththe the “berks” who now control
You, along with many of our of intra-Ireland trade. Products tideofglobalisation. the Tory party. Upon looking
critics, have a hard time with originating from the rest of the justinbong-kwan up the etymology of this partic-
Prime Minister Orban’s un- European Union and directed HongKong ular lingo, I was not disap-
apologetic defence of the to Northern Ireland (or the rest pointed. I recommend your
Christian cultural identity of of the United Kingdom), or vice other readers give it a whirl.
Europe. But the fact is, as the versa, would not benefit from Don’t blow your top jed crumbo
prime minister said in a speech this “passporting”. You rightly questioned the Nashville, Tennessee
in July, “liberal democracy was The issue is one of control- right not to be offended
capable of surviving until it ling circumvention and fraud. (“Speak up”, August 17th). One
abandoned its Christian foun- This can be done by appropri- of the foremost experts on Lettersarewelcomeandshouldbe
dations.” Illiberal democracy, ate controls not at the border offensive language was the late addressedtotheEditorat
TheEconomist,TheAdelphiBuilding,
he said, “is Christian liberty but before products reach their Reinhold Aman, the publisher
1-11JohnAdamStreet,LondonWC2N6HT
and the protection of Christian destination, through labelling, of Maledicta, “an international Email:[email protected]
liberty.” In our view, marks of origins and so on, journal of verbal aggression”. Morelettersareavailableat:
Economist.com/letters
illiberalism is about putting backed by adequate sanctions. Aman argued that an agitated