Anti-EU parties make big gains in the Italian general election

WITH around two-thirds of the votes from Italy’s general election counted by the morning of March 5th, it was already clear that populism had won.

The leading party was the Five Star Movement (M5S). Capitalising on the anger of the south and the young at Italy’s arthritic economy, the M5S appeared to have broken through the 30% ceiling that it has long failed to breach in the polls. The other big winner from a ballot that will shake the rest of Europe was the hard right, populist Northern League, riding a wave of alarm in Italy over the arrival in recent years of hundreds of thousands of migrants. Taken with a third populist party, the far-right Brothers of Italy, anti-establishment parties look to have won comfortably over 50% of the vote.

Projections of the effect on parliament, which could yet prove unreliable because of Italy’s new and complex electoral system, showed it to be hung, with the M5S occupying more than a third of the seats in both houses; able to block any government it opposed. As one of its leading members,...Continue reading

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The Five Star movement does best, but no one wins a majority

EXIT polling from the Italian general election on March 4th signalled that the anti-establishment Five Star Movement (M5S) had emerged as far and away the largest political force in the country and that mainstream parties of left and right could expect chastening reverses. If the exit polls are borne out in the final results—and they have a disappointing track record in Italy—the M5S and its 31 year-old prime ministerial candidate, Luigi Di Maio, will have won more seats than any other party, and may therefore be given the first chance to attempt to form a government. But with no party, or electoral grouping, looking likely to have won a majority of seats, Italy may have to wait a good few weeks to find out what kind of government it will get next.

The only nationwide true exit poll was conducted for the RAI, Italy’s public broadcaster (other polls included voting intentions). It assigned a range of 29.5-32.5% to the M5S in the vote for the lower house, the Chamber of Deputies; 20-23% to the centre-left Democratic Party (PD), which is the...Continue reading

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Smartwatches Finally Catch On

After a slow start, smartwatches are finally ticking the right boxes for consumers.

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Why Spanish courts censor art, speech and rap lyrics

Now you see it, now you don’t

IF YOU want to give a work of art loads of publicity, censor it. That is what the hosts of Madrid’s Contemporary Art Fair (ARCO) did with a tableau by Santiago Sierra called “Political Prisoners in Contemporary Spain” featuring 24 pixelated mugshots, three of them of jailed Catalan separatist leaders. On February 21st the director of the exhibition centre where ARCO is held ordered a participating gallery to remove the work. With that, he triggered a national debate.

His decision coincided with two other acts of intolerance. The previous day the Supreme Court upheld a 42-month jail sentence against Josep Miquel Arenas, a rapper who calls himself Valtónyc, for insulting the monarchy and glorifying terrorism in YouTube posts. That followed an order by a lower-court judge to withdraw a book about the drug trade in Galicia, published in 2015. A former mayor in a small town, whom nobody had previously heard of, objected to his name...Continue reading

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Emmanuel Macron wants to bring back national service in France

WHEN Sweden brought back conscription at the start of this year, it was a direct response to rising tension in the Baltic region and the difficulty of recruiting soldiers. Now France, too, is debating the reintroduction of military service, which the country used to require of all young men until it was abolished by the Gaullist President Jacques Chirac in 1997. Unlike in Sweden, however, it is far from clear what the point in France would be.

During his election campaign last year, Emmanuel Macron (who is too young to have had to do it himself) promised to bring back compulsory military service, if only for a month. It would apply, he said, to all men and women, and take place in the three years following an individual’s 18th birthday. Nothing detailed is yet on the table. Yet in recent declarations the president has begun to talk about a “universal national service”, which might be partly “civic”, but would involve some unspecified “exposure” to military affairs. Unlike the Swedish system, in which conscripts serve for nine to 12...Continue reading

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Power does not always lie where you might expect in Europe

WHEN Rex Tillerson, America’s secretary of state, dropped in to see the most important politician in Poland a few weeks ago, he might have hoped for grander surroundings. But power in Warsaw resides not in the presidential palace, the prime minister’s chancellery or the parliament. Instead Mr Tillerson had to duck into the headquarters of Poland’s ruling Law and Justice (PiS) party, a dingy office that shares a building with a shuttered Japanese restaurant in an unremarkable corner of the capital. There he was greeted by Jaroslaw Kaczynski, who chairs the party but holds no constitutional position beyond his role as a backbench MP serving Warsaw constituents.

Europeans got used to dealing with back-seat drivers when Vladimir Putin ran Russia as prime minister in 2008-12, while his factotum, Dmitry Medvedev, kept the presidential throne warm. But now they are found closer to home. Mr Kaczynski is perhaps the most prominent among them. Polish prime ministers serve at his pleasure. In December he...Continue reading

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Italy risks political confusion when it votes on March 4th

WITH a rosary in one hand and a copy of the New Testament in the other, the leader of the Northern League, Matteo Salvini, swore himself in on February 24th as Italy’s next prime minister. No matter that Italy’s general election was not to be held until March 4th, or that his party was polling just 13% of the national vote. One day, he told his audience at a rally in the cathedral square of Milan, they would look back and say: “I was there.”

Acting like a prime minister before becoming one is not uncommon in Italy among those who aspire to the job. The day before, Luigi Di Maio, candidate of the anti-establishment Five Star Movement (M5S), had gone to the Quirinal palace in Rome to tell the president, Sergio Mattarella, that he would soon be sending him the names of his cabinet. Embarrassingly for Mr Di Maio, the president chose not to receive him. Worse still, one of his putative ministers turned the job down.

The originator of this optimistically anticipatory technique was...Continue reading

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Germany prepares for a new coalition government

TWO weeks ago, Germany’s chancellor seemed to be in trouble. Her Christian Democrat (CDU) party and the more conservative Christian Social Union (CSU), its Bavarian sister, hated the bland coalition deal she had just forged with the Social Democrat (SPD) leadership. They also hated the fact that she had conceded the mighty German finance ministry to her prospective centre-left partners to help them win a membership vote, the result of which is due on March 4th. And they hated the fact that she had not brought any prospective successors into the cabinet.

Since then, however, Angela Merkel has rewritten the final chapters of her chancellorship. At a CDU conference in Berlin on February 26th Annegret Kramp-Karrenbauer, her preferred candidate to be general secretary (and, many reckon, to succeed her as chancellor) was elected to the job with 98.9% of votes. The party also opted for a new “grand coalition” with the SPD by a similar margin. In her speech, Mrs Merkel blamed her poor election result in...Continue reading

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As Morocco’s economy slows, the jobless are getting restive

FOR over a year, fishermen, miners and jobless graduates in northern Morocco have demanded more help from the government. To be fair, the government is acutely aware of the need to create more jobs. Even as the protests rage, workers are putting the finishing touches on Marchica, the first of seven eco-resorts planned for the northern coast under the king’s ten-year plan to increase tourism. “We can’t just build hospitals and schools,” says Sami Bouhmidi, one of Marchica’s managers. “We need to lay the foundations for investment and regeneration.”

Morocco’s development has been impressive. A growing manufacturing sector, investment by European and Chinese firms, and stronger links with sub-Saharan Africa have boosted the economy. Since 2000 GDP per person has increased by 70% in real terms. Tax breaks have drawn a splurge of foreign investors, including 110 aerospace firms and 150 automotive companies, to the north. Progress can be seen in new roads that cut through the mountains and a high-speed train that is set to hurtle down...Continue reading

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Zimbabwe’s new president says he is a democrat. Is he?

WILL parliamentary and presidential elections, which must be held by late July, be free and fair? If so, will Emmerson Mnangagwa and his Zanu-PF party, which has run Zimbabwe since independence in 1980, win? And if they lose, will they hand over power to the victors, as they have brazenly failed to do in the past? This set of questions hangs over the country. One certainty, however, is that Zimbabwe is better off now that it is no longer under the thumb of Robert Mugabe, who ruled it for 37 years. Even better is that it has not fallen under the sway of his greedy wife, 52-year-old Grace Mugabe, whose tightening grip over her then 93-year-old husband prompted the army to step in, shove the old man into retirement and lift Mr Mnangagwa into the top spot in November.

Yet the new 75-year-old leader, known as the Crocodile, remains an enigma (see article)....Continue reading

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For the Gulf states, diplomacy involves buying weapons they don’t need

Tools of diplomacy, or just mirages?

WHEN Qatar celebrated its national day in December, warplanes whizzed over the seaside corniche in quick succession: six French-made Mirage fighters, six cargo planes and a squadron of propeller-powered trainers. That was half of the air force. The world’s wealthiest state, with a native population of only 300,000, has never been known for its martial prowess. The first three aircraft deployed to enforce a no-fly zone over Libya in 2011 had to make emergency landings in Cyprus.

Yet Qatar plans to increase the size of its air force. Since June it has signed $20bn in contracts to buy 96 new jets from three countries: F-15s from America, Typhoons from Britain and Rafales from France. The shopping spree is one side-effect of the nine-month-old blockade of Qatar by Bahrain, Egypt, Saudi Arabia and the United Arab Emirates (UAE). The quartet wants Qatar to end its support for Islamist groups, among other things. But the move has awakened...Continue reading

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How a small African nation is beating AIDS

AS A middle-class Senegalese man, Salou (not his real name) was rather proud of his roundness in 2002. But by 2003 his clothes were falling off. He got tested and found he had AIDS. His pregnant wife was also infected with HIV. They went to Dakar, Senegal’s capital, and she was put on antiretroviral drugs to prevent the infection of her unborn child. “When my son was born he tested negative, thank God,” exclaimed Salou.

The hopeful tale of Salou’s baby is far from universal. Although west and central Africa have long had a lower prevalence of HIV than the south and east (see map), the region still has a stubbornly high rate of new infections. In south and east Africa close on 20m people have the virus, almost four times more than in west and central Africa. From this high base, the number of new infections each year in the south and east has fallen by 29% since 2010, to 790,000. Alas, new infections in west and central Africa have fallen just 9%, to 370,000. Moreover, about 310,000 people die from HIV-related illnesses each year in west...Continue reading

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A chat with Zimbabwe’s new president

“THE land resettlement was a huge success in terms of our people, 367,000 of our people, back in possession of the land,” says President Emmerson Mnangagwa of the expropriation of most of Zimbabwe’s white-owned farmland since 2000—a move that wrecked the economy and pushed millions into poverty. Was it fair that bigwigs of his ruling Zanu-PF party took several farms each? “No, no, it is one farm, one person,” he says. “I have 404 hectares and I paid for the equipment myself.”

Mr Mnangagwa admits, however, that Zimbabwe “became almost a country without friends” under Robert Mugabe, who was ejected in a coup last year. Now “Zimbabwe is open for business,” says Mr Mnangagwa, speaking in his home in Borrowdale, the poshest suburb of Harare, the capital.

Stockily built, with watchful hooded eyes and a friendly gap-toothed smile, Mr Mnangagwa is viewed as a pragmatist. And he says much to reassure Western diplomats and investors. He wants to arrange compensation for those whose land was seized. But his economic vision is hardly liberal. He extols a “command” model where agriculture is guided by government. He blames the economy’s collapse on sanctions, even though these were targeted on leading figures such as himself. He testily rejects a suggestion that they were far lighter than those levelled against the white-supremacist regime...Continue reading

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Myanmar’s government unveils a 238-point economic reform plan

THE Yangon Stock Exchange does not lack ambition. It is housed within the imposing former headquarters of the central bank. The two guards manning the entrance protect a stack of visitor badges, mostly unused. Inside, a list of “missions”—integrity, fairness and openness—hangs beside a Christmas tree which still has presents stacked beneath it in late February. Books by Warren Buffett and Thomas Piketty are prominently displayed. The centrepiece is a series of television screens tracking the fortunes of the five companies listed on the exchange. When a power cut momentarily shuts everything down, one of the 20 employees is reassuring. “Don’t worry—we have a generator,” he explains, as the lights gradually return.

When Myanmar’s transition to democracy began in 2011, the government seemed equally hopeful for the economy. The president of the day, Thein Sein, a former army general, started reversing half a century of stasis and isolation. He gave the central bank more independence and awarded mobile licences to foreign telecoms...Continue reading

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The price of toilet paper triggers a panic in Taiwan

Bummer

IN ANXIOUS times, political leaders try to assuage fears. So it was this week when William Lai, Taiwan’s prime minister, appealed for calm after a run on that most essential of goods, toilet paper. Reports of looming price increases had started the panic. When local television and newspapers featured stories about people stocking up, even more rushed to the shops to follow suit. Supermarket shelves were stripped bare; tissue paper and kitchen towels were also snapped up. As the frenzy spread, Mr Lai assured the country that supplies would be more than sufficient to meet needs.

The mess began on February 23rd when Taiwanese retailers, including several supermarket chains, said that toilet-paper producers would increase prices by as much as 30% in mid-March because the cost of raw pulp had gone up. The announcements aroused suspicions of collusion. On February 27th the Fair Trade Commission met with three toilet-paper suppliers and five retailers to look into...Continue reading

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Japan is trying to get doddering drivers to give up their licences

AFTER nearly half a century behind the wheel, Hisao Matsumoto, who is 85, is not ready to stop driving. He and his wife depend on their car to escape the confines of Hakone, the lakeside town where they live. Horror stories of pile-ups involving elderly drivers do not ruffle him. “I’m not that old yet,” he says. “I still have 15 more years to go till I reach 100.”

Mr Matsumoto is one of more than 5m drivers in Japan aged 75 or older. A million more will be on the roads by 2021. Unnerved, the police are trying to coax many out of their cars. Over-75s are twice as likely to cause a fatal accident as younger drivers, says the National Police Agency (NPA). Nearly half of older drivers who caused fatal accidents last year had signs of cognitive impairment.

Hundreds of older drivers turn the wrong way into motorways every year. In January an 85-year-old man steered his vehicle into oncoming traffic on a country road, hitting a car and mowing down two schoolgirls. Police believe...Continue reading

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No one in Turkey dares report accurately on the war in Syria

AT THE start of its offensive against Kurdish insurgents in Syria’s Afrin province last month, Turkey’s prime minister, Binali Yildirim, held a morning briefing with more than a dozen editors of the country’s leading news outlets. According to accounts of the meeting, the journalists were provided with guidelines on how to cover the unfolding war. Reporters were asked to “bear in mind Turkey’s national interests”, one participant recalled. News published in the foreign media was to be treated with caution as it was likely to give a platform to “terrorist propaganda”. Readers were to be reminded that the army would take the utmost care to avoid civilian casualties. The coverage was to highlight that Turkish troops would be fighting Islamic State (IS) gunmen in addition to Kurdish ones—though IS has no presence in Afrin.

With a handful of exceptions, Turkey’s media have followed the government’s recommendations to the letter. The main channels have competed to be first to report on...Continue reading

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Afghanistan’s fragile government picks a dangerous fight

President Ghani does not have much to smile about

FROM behind the counter of his optician’s shop on the north bank of the Kabul river, Noorullah looks anxiously at his ten-year-old son. He fears for the boy’s education under the current government and—worse—for his life. In the past month terrorists from Islamic State and the Taliban have run amok in the city, killing 150 civilians. Police recently found a suicide vest at a nearby checkpoint. “These attacks are good for the government,” he says bitterly. “They are the only reason it is still surviving. People are afraid to go on the streets and protest.”

Pressure is building on the government of President Ashraf Ghani nonetheless. He has labelled a recent suicide bombing, which killed 105 civilians, as his “9/11”. But the government does not seem capable of stopping the attacks. Its haplessness is emboldening critics. Mr Ghani remains in a stand-off with the governor of the northern province of Balkh,...Continue reading

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A history of the Trump slump

LOOKING back from the vantage point of 2025*, economic historians are starting to write their analyses of the Trump slump. It seemed to appear from nowhere with the economy growing at around the trend rate (2.3% in 2017) and the stockmarket booming. The abrupt change came in March 2018 when the President decided to impose tariffs on steel and aluminium imports. Both China and the EU retaliated in kind without trying to escalate the tensions. It might have ended there.

But unfortunately, the President's more mainstream advisers like Gary Cohn had been sidelined by a more aggressive group that saw the trade deficit as the key measure of economic progress. In this mercantilist view, any US deficit was proof of cheating. Unfortunately, the President had also enthusiastically passed a tax-cutting programme which resulted in demand sucking more imports into the country. The trade deficit widened rather than declined. So in late 2018, just before the mid-term Congressional elections, an enraged President passed a general tariff on the line of the...Continue reading

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Volatility Is Back but Volatility Funds Are Duller

Volatility is back in the stock market, but the investments that imploded spectacularly in February are gone except for one survivor. That fund is now a much tamer version of its former self.

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VMWare Is Under the Wrong Kind of Cloud

VMware has vastly improved its prospects as a software business. Investors now just have to wonder whether that is what they actually are buying into.

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A lesson in American greatness

NOTHING is more American than Emmanuel Makender’s discontent. A 35-year-old taxi driver in Grand Rapids, Michigan, Mr Makender has a comfortable four-bedroom house and two cars outside it. He earns $40,000 a year, the average family income in Grand Rapids, which means his pregnant wife need not work. Yet when congratulated on his achievements, he says he hopes “to be successful one day”. Dissatisfaction, hunger and striving are intertwined. “Still living the American dream, we struggle on!” he says, at the end of a two-hour catch-up.

Lexington had met Mr Makender 18 years before, in different circumstances. He was then a destitute war orphan living in a fly-blown refugee camp in northern Kenya. A fugitive from the war in Sudan, which had claimed an estimated 2m lives, including most of Mr Makender’s immediate family, he had fled his village six years earlier, after soldiers attacked it one night. They killed his father, three of his siblings and, he thought, his mother, leaving him, aged...Continue reading

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Should the army subsidise high-school soldiering?

IN 2016 the Junior Reserve Officers’ Training Corps (JROTC), a Pentagon-funded programme that provides military-style training to high-school pupils, notched up its centenary. The occasion was marked with balls, dinners and fun runs. Today the mood among JROTC units is less celebratory. On February 14th a former JROTC cadet opened fire at a high school in Parkland, Florida, killing 14 students and three teachers. When the shooter, 19-year-old Nikolas Cruz, was arrested by authorities, he was wearing a polo shirt emblazoned with the JROTC crest. As if this were not enough, days after the shooting it emerged that in 2016 Mr Cruz’s unit had received $10,827 from the National Rifle Association.

This is not the first time the JROTC has faced public scrutiny. Parents and advocacy groups have criticised the programme, which offers courses in military history and marksmanship, for steering pupils towards the armed services rather than higher education. Such recruitment efforts, they say, target pupils in poor minority neighbourhoods. The JROTC...Continue reading

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America’s intelligence agencies find creative ways to compete for talent

And the truth shall make you free

AMERICA’S intelligence agencies are struggling to attract and retain talent. Leon Panetta, a former Pentagon and CIA boss, says this is “a developing crisis”. Barbs from President Donald Trump have chipped away at the prestige of work that some consider already tarnished by leaks and the belief that “enhanced interrogations” is another way of saying torture. The backlog of people waiting for a security clearance approval or renewal has swollen to 700,000 or so, with an average waiting time of well over a year. Many applicants simply give up.

The squeeze is tightest in cyber-security, programming, engineering and data science. Deborah Kircher at the Office of the Director of National Intelligence (ODNI) says entry-level data analysts earn $25,000-50,000 more a year in the private sector. Others report bigger differences. At the Pentagon’s Central Command in Tampa, some data scientists’ salaries have fallen from about $180,000...Continue reading

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For how much longer will the Velvet Hammer rule Illinois?

Michael Madigan, political immortal

TWO well-known Chicago dinosaurs are attracting gawpers right now. One is Sue, the city’s beloved 40-foot-long Tyrannosaurus rex, who is moving from the Field Museum’s main exhibition hall to her private suite on the second floor. The other is Michael Madigan, the Democratic Speaker of the Illinois House, who has represented his district on the south-west side of Chicago for 47 years and been Speaker for 33 years. For the first time in his long career, Mr Madigan is facing calls to resign from members of his own party, because of the way he handled allegations of harassment at his office. Yet this episode has served mainly as a reminder of the extraordinary grip Mr Madigan has on state politics.

Daniel Biss, a state senator, and Christopher Kennedy, a businessman, both Democratic candidates for governor, are leading the charge. Mr Biss called on Mr Madigan to resign immediately as chairman of the Democratic...Continue reading

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The future of public-sector unions hinges on the vote of Neil Gorsuch

What is going on at the VA?

Every day is Halloween for David Shulkin

DAVID SHULKIN, the secretary of veterans’ affairs, did a dim-witted thing when he took a leisurely trip to Europe in July 2017 at taxpayers’ expense. The government paid his wife’s travel costs while the pair toured Westminster Abbey, cruised down the Thames, improperly accepted tickets to Wimbledon and went shopping in Denmark. For this, Mr Shulkin has been appropriately excoriated by his department’s inspector-general in a report that was released on February 14th.

In most administrations, such daft behaviour would be a sacking offence. In the Trump administration, where five cabinet members have faced investigations over travel expenses, it seems rather pedestrian. Only one, Tom Price, the health secretary, has had to resign. Yet in Mr Shulkin’s case, the flap has pushed another scandal to the fore. Some top Veterans’ Affairs (VA) officials, installed by the White House, appear to have divided loyalties and are, in Mr...Continue reading

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School choice does not work as well as its advocates hope

WILLIAM HITE, Philadelphia’s school superintendent, has a difficult job. His school district, which contains some of the poorest pupils in the nation, has been under state control since 2001, an arrangement that will end this year. Proficiency in reading and maths lags about 30 percentage points behind the rest of the state. To boost results the district has turned to proliferating charter schools, which receive public funds but have independent management and now educate one in three children in the district. Twenty-one low-performing public schools, christened “Renaissance schools”, have been turned over to charter operators. At a school-board meeting on February 15th vocal charter supporters, mostly black parents frustrated with poor local schools, confronted angry, mostly white, teachers.

“I can’t and I won’t let my sons down,” testified Rasheeda Fossey, whose children are in the school system. After a lawyer for charter schools finished speaking, teachers booed and hissed...Continue reading

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Poverty in America

IT IS often said that efforts to fight poverty have failed. Surveys suggest only 5% of Americans think that anti-poverty programmes have had a big impact; 47% say they have had no impact or a negative one. And most people think that poverty is spreading—a view expressed by many politicians. In 2014, the current House Speaker, Paul Ryan, then chairman of the House Budget Committee, issued a scathing critique of welfare programmes arguing they “are not only failing to address the problem. They are also in some significant respects making it worse.”

Mr Ryan based that conclusion on data that may also inform popular scepticism about poverty programmes. In 2014 the US Census Bureau reported that the federal poverty rate was 15%, a drop of only 2.5 percentage points since Lyndon Johnson declared the war on poverty 50 years ago. But the method for calculating the official poverty rate is almost perfectly designed to obscure the effect of government programmes on the quality of life of poor people. And that is a shame, because better measures...Continue reading

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Are Best Buy and Kohl's Good or Just Lucky?

For a certain group of retailers—the winners, as they might like to think of themselves—there is an awful lot of optimism in the air. How much of that success is due to their efforts and how much comes from the strong economy is the big question for investors.

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Can Celgene Save Itself?

Celgene’s hard-won status as a biotech blue chip has unraveled in just months.

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Is WPP Cheap Enough to Own?

Shares in Martin Sorrell’s advertising agency giant WPP have tanked. The value argument is ringing ever louder, but so are the risks.

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The fight to save European dialects in Brazil

THE two dozen old men playing cards in the parish hall in Serafina Corrêa, a small town in the southern Brazilian state of Rio Grande do Sul, seem unremarkable until you eavesdrop. They banter not in Portuguese but in Talian, a dialect that mixes words from Venetian and other Italian dialects as well as Portuguese. It is spoken by perhaps 2m descendants of immigrants who came to Brazil 150 years ago. A sign at a zebra crossing in the town asks, “Parché Corer Cossi? Va Pianpian” (“Why are you racing? Slow down”).

Serafina Corrêa calls itself the “capital” of Talian, one of about 30 non-indigenous tongues used in Brazil, especially in the south. They include Polish, Russian and Dutch, but also rare dialects such as Trentino, another import from northern Italy, and Riograndenser Hunsrückisch and East Pomeranian, both forms of German. Their speakers fret that the advance of Portuguese will drive them to extinction. Marli Zanella, who works in a boutique in Serafina Corrêa, complains that...Continue reading

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How Venezuela tests Latin America’s commitment to democracy

WHEN Bill Clinton called the first Summit of the Americas in Miami in 1994 he wanted to celebrate the shared commitment of all 34 countries in the hemisphere to democracy and free trade—all, that is, except Cuba, the 35th, which was not invited. At the seventh summit in Panama in 2015, regional solidarity prevailed. At Latin America’s insistence, Cuba was invited and Raúl Castro sat down with Barack Obama, setting the seal on their diplomatic détente.

So it was a big diplomatic step when last month Peru’s government, the host of the eighth summit, scheduled for April 13th-14th, announced that it was withdrawing Venezuela’s invitation and that Nicolás Maduro, its president, would be denied entry. Peru acted for the 14-nation ad hoc “Lima group”, which includes most Latin American countries. They rejected Mr Maduro’s decision to hold a sham presidential election on April 22nd. Latin America is once again giving priority to the defence of democracy. Can it do so consistently and...Continue reading

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What’s next for Canada’s economy

“EVERYBODY thinks this is a 50-pound sack of seeds,” says Steven Fabijanski as he hefts a large white bag onto a table. “Actually, it’s 8,000 litres of jet fuel.” That is what Agrisoma Biosciences, the company Mr Fabijanski runs in Quebec, plans to make from the bagful of carinata, or Ethiopian mustard seed. In January a Boeing 787 Dreamliner operated by Qantas flew from Los Angeles to Melbourne on a mixture of jet fuel and juice extracted from Agrisoma’s mustard seeds. Eventually, a third of biofuel for aviation will come from seeds bred by the company, Mr Fabijanski predicts. His slogan is: “don’t drill, plant.”

Biofuel looks like an industry of the future in a country that depends on those of the past. Oil and vehicles, Canada’s two biggest exports, are both declining, and may continue to do so. Oil from Alberta’s tar sands is expensive to produce. The United States, by far its biggest foreign customer, is fracking more and importing less. Carmaking has never fully recovered...Continue reading

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Automation will drive interest rates higher, a new report concludes

REAL interest rates in the developed world have been low ever since the financial crisis of 2008-09 (see chart). The global economy might have struggled to recover had that not been the case; higher rates would have caused many more companies and homeowners to default.

Central banks are now starting to push rates slightly higher. And according to a new paper* from Bain, a management consultancy, the trend towards robotics will push them higher still—at least for a decade. That could be a shock for the financial markets.

Bain estimates that by 2030 American companies will have invested as much as $8trn in automation. As companies scramble to borrow money in order to buy machinery and robots, the resulting investment boom will drive up rates.

Automation will boost productivity, which has grown sluggishly in recent years. This slowdown may have been caused by the shift from manufacturing to services, where productivity gains are harder to achieve. Between 1993 and 2014, the American...Continue reading

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Capital is on its way to America, but for bad reasons

ACCORDING to President Donald Trump, money is pouring into America from abroad. The tax reform he signed into law in December means American firms can no longer defer paying taxes on profits left sitting in foreign subsidiaries. The change has led to some uplifting headlines. Apple said that it would make a one-off tax payment of $38bn relating to its past accumulation of $252bn in foreign earnings. Presumably, it will now start to bring this cash home. “Huge win for American workers and the USA!” tweeted Mr Trump. Yet despite the prospect of large-scale profit repatriations, the dollar has been strangely weak of late. Since the start of November, when tax reform began looking likely to pass, the greenback has fallen by about 3%. What is going on?

Start with the fact that repatriations are mostly not true capital inflows. An analysis by Zoltan Pozsar of Credit Suisse finds that, as of March 2017, American corporations had amassed around $2.2trn of earnings in overseas subsidiaries. About half was...Continue reading

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New research suggests the dollar’s level drives world trade

AGUS SACCHAL sells sheets and blankets from a warehouse in Buenos Aires, for which he is paid in Argentine pesos. While the pesos go into his wallet, two other banknotes are stuck to his office window. One is a ten-yuan note from a visit to China, where he went in search of cheap textiles. The other is a $5 bill, pinned next to an invoice, also in dollars. Though he does not trade with America directly, when importing he uses the greenback.

Argentina’s rocky financial history makes the dollar’s dominance there unsurprising. Still, it is an extreme case of a wider phenomenon. After gathering data on 91% of the world’s imports, by value, Gita Gopinath of Harvard University found that America accounts for nearly 10%. But its currency is used in over 40% of invoicing.

Recent research suggests that this creates a link between a weak dollar and buoyant trade flows—and vice versa. Trends since 1999 are suggestive (see chart). During 2017 the dollar depreciated by 7% against a basket of other currencies, as global trade flows surged...Continue reading

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Russia’s credit rating rises; Brazil’s falls

BRAZIL and Russia, the third- and fourth-biggest emerging economies, have much in common beyond their size. Each boasts annual GDP per person of around $10,000, which depends more than either would like on natural riches. After commodity prices tumbled in 2014, their economies shrank and their currencies sank. Their central banks have fought hard against the ensuing inflation, driving it below 3%. That has allowed both to cut interest rates, contributing to modest economic recoveries.

But their fiscal fortunes have diverged. Brazil’s credit rating was cut by Fitch on February 18th, making its sovereign bonds even “junkier” (ie, more speculative). Russia’s rating, by contrast, was raised a few days later by S&P Global, which became the second agency to rate Russian sovereign debt as “investment grade”.

That might seem an odd description for a country embroiled in two wars and encumbered by sanctions. But Russia’s upgrade is not hard to justify. Though its approach to geopolitics is adventurous, its approach to...Continue reading

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Hong Kong and Singapore succumb to the lure of dual-class shares

FOR Charles Li, Alibaba was the one that got away. The head of the Hong Kong stock exchange (HKEX) courted the Chinese e-commerce giant when it sought a venue for its listing five years ago, but he could not push through rule changes wanted by Alibaba to keep control of the company in its leaders’ hands. It opted instead for an initial public offering (IPO) in New York. “Losing one or two listing candidates is not a big deal for Hong Kong,” he wrote at the time. “But losing a generation of companies from China’s new economy is.” Since then he has been determined to make the next big catch.

It is finally within his grasp. After a debate that has trundled on for several years HKEX is, in the coming weeks, poised to allow companies to issue shares with different voting rights. Known as dual-class shares, these give founders the ability to control their firms, even as minority owners. This should make Hong Kong the favoured destination for the next wave of Chinese tech firms to go public, from Xiaomi, a smartphone maker, to Ant Financial,...Continue reading

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Narendra Modi wants to boost formalisation. How is he faring?

WATCHING money drain from your bank account has never been so much fun. On WhatsApp, a messaging service ubiquitous in India, sending rupees is now as easy as posting a selfie. Set-up is a breeze, because all Indian banks have been corralled onto a common payment platform on which anyone, from Google and Samsung to local payment firms and banks themselves, can build their own user interface. Money zips instantly from one bank account to the other, without any need to set up a pesky digital wallet or download some new app. At least outside China, there is no simpler way to shift money today.

WhatsApp’s offering is being rolled out gradually. The number of transactions routed through the United Payments Interface (UPI), the system on which WhatsApp and the rest are riding, has soared from almost nothing in early 2017 to over 150m a month in January. On current trends, UPI transfers will overtake cash withdrawals from banks within weeks. Some 665bn rupees ($10.2bn) will have shifted hands—or...Continue reading

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Labour-monitoring technologies raise efficiency—and hard questions

BOSSES have always sought control over how workers do their jobs. Whatever subtlety there once was to this art, technology is now obliterating. In February Amazon received patents for a wristband apparently intended to shepherd labourers in its warehouses through their jobs with maximum efficiency. The device, were Amazon to produce and use it, could collect detailed information about each worker’s whereabouts and movements, and strategically vibrate in order to guide their actions. Using such technology seems an obvious step for firms seeking to maximise productivity. Whether workers should welcome the trend, or fear it, is harder to say.

Workplace discipline came into its own during the Industrial Revolution. As production came to depend ever more on expensive capital equipment, bosses, not keen to see that equipment sitting idle, curtailed their workers’ freedom, demanding they work during set hours, in co-ordination with other employees, at a pace dictated by the firm. Technology creates new...Continue reading

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China starts unwinding Anbang, its would-be financial giant

Terminal velocity

“WHEN it comes to the meaning of life, we will all return to zero one day.” So philosophised Wu Xiaohui, a Chinese tycoon, as he reflected on his success in 2015. Little did he realise how soon his words would be proved true. He founded his firm, Anbang, as a small car-insurance company just over a decade ago. By 2017 it ranked among the world’s biggest insurers, with some $300bn of assets, including stakes in hotels and financial firms in America, Europe and Asia. But then, even more vertiginous than its ascent, came its fall. On February 23rd China’s government said it had taken over Anbang and would prosecute Mr Wu for economic crimes.

Rarely in corporate history has a giant grown and collapsed so quickly. But Anbang’s tale is also interesting for what it reveals about China’s economic landscape. It is the clearest demonstration that regulators are serious about defusing debt risks that have built up in recent years. And it reveals the murky...Continue reading

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Why International Investors Aren't Buying Treasurys

The rise in Treasury yields should make U.S. debt more attractive to international investors still struggling with low returns at home—yet few are buying.

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In Xi Jinping's China, Success Is Getting More Dangerous

CEFC Energy appears to have joined the ranks of big, privately held Chinese conglomerates that have run afoul of the changing political environment in China. For investors, dealing with successful private firms in China is getting riskier.

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Time To Get Smart About Chinese Smartphone Maker Xiaomi

The company appears to be growing fast. Its global smartphone shipments rocketed up 75% last year to 92 million, with much of its sales coming in markets like India and Russia. But that success followed a disastrous 2016, when Xiaomi lost ground within China to local rivals.

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U.S.-China Trade War Could Hinge on Feeding Pigs

President Trump looks poised to ratchet up the trade spat with Beijing using new restrictions on steel and aluminum imports. The blowback could hit U.S. soybeans, a key export a feedstock for the China’s pig population.

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Champion of Ethical Investing Owns U.S. Gun Makers

Norway’s sovereign wealth fund, the world’s biggest, has tough restrictions on tobacco companies and weapons makers but gun companies are allowed in.

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Sky Is the Limit in Battle for Sky

How high could Sky stock go in a bidding war between Disney and Comcast? Valuation fundamentals are a poor guide when big-picture strategy meets asset scarcity.

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Pakistan’s army is getting serious about defeating domestic terrorism

A TRIP around Miranshah with an escort of heavily armed soldiers is a surreal experience. The town is the administrative centre of North Waziristan, a lawless region once controlled by jihadists that Barack Obama called “the most dangerous place in the world”. But Pakistan’s army, which fought a 22-month campaign from 2014 to evict militants from North Waziristan, is trying to transform the town from a byword for extremism to a showcase of the stability to which the generals say the country is returning.

The army lost nearly 500 men in the fighting. About 3,400 militants were killed; many more fled across the border to Afghanistan. Signs of the violence are everywhere. But so too are efforts to provide greater prosperity for traumatised civilians (nearly 1m people living in the region were displaced). New roads fan out from the town. Lots of buildings, including shops, clinics and a sports stadium, are going up. A children’s playground has been laid out next to the river that...Continue reading

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