The Imperfect Science of How Much Tariffs Will Hurt

Economists try to model the effect tariffs have on the economy but actually believe the impact could be much worse.

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The boss of Pakistan’s ruling party is sentenced to ten years in jail

 

EARLY on the morning of July 6th reporters began to assemble their tripods outside Avenfield House, a posh apartment block on London’s Park Lane. The air of wealthy anonymity that hangs around the red-stone building belies its notoriety; in Pakistan, there are few addresses more famous. The assembled hacks were hoping to catch sight of the alleged owner of flats 16, 16a, 17 and 17a: Pakistan’s former prime minister, Nawaz Sharif.

The four apartments are thought to have been knocked into one, and Mr Sharif is thought to be staying inside it. But it was from his son's nearby office that he gave his response to the verdict that Pakistan’s National Accountability Bureau (NAB), an anti-graft court, delivered later in the day, as to whether Mr Sharif and his family paid for the property with money that they had not properly disclosed to the Pakistani authorities. The NAB—pronounced “nab”—found Mr Sharif guilty just 19 days before a general election in which his party...Continue reading

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Japan is finally starting to admit more foreign workers

WHEN Sakura no Mori hospital and care home in Kawaguchi, 20km north of Tokyo, hired its first foreign workers six years ago, some of the patients would shout “gaijin” (“foreigner”) to summon them; others were wary of having anything to do with them at all. Today Verlian Oktravina, a 26-year-old Indonesian nurse, says the Japanese she works with are more curious than hostile. Yoko Yamashita, the director of the care home, says patients can see that foreign workers are as good as Japanese ones: “They accept them.” She herself, she admits, was initially sceptical about hiring immigrants, but has since changed her mind.

Acceptance of foreign labour is gradually increasing in Japan, one of the world’s most homogenous countries, where only 2% of residents are foreigners, compared with 16% in France and 4% in South Korea. A poll conducted last year found opinion evenly split about whether Japan should admit more foreign workers, with 42% agreeing and 42% disagreeing....Continue reading

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Turkmenistan finds a novel solution to mass emigration

Every manat helps

CITIZENS of Turkmenistan are definitely allowed to leave the country, its immigration service insisted in a statement in mid-April. The declaration came in response to reports that men under the age of 30 were being prevented from boarding international flights. But in recent weeks reports have begun emerging again of men as old as 40 not being allowed to travel abroad. The authorities are so desperate to stem emigration, it seems, that they are simply stopping their countrymen from getting on planes.

With the world’s fourth-largest gas reserves and a population of just 5m, Turkmenistan should be prosperous. But its rulers have fallen out with both Iran and Russia, leaving China as their sole customer for gas. Much of the revenue from sales to China goes towards repaying the loans taken out to build the pipeline through which the gas flows. Some of the rest has been squandered on white elephants, such as a vast, empty, falcon-shaped airport and a ritzy...Continue reading

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The Thai cave rescue

TEN days after a flash flood inundated a 10km-deep network of caves in Thailand which 12 boys and their football coach had been exploring, the missing team was found alive by rescue divers. But the 13, who were discovered 2km into the cave, are still unable to leave. The way out remains flooded. The monsoon rains are impeding efforts to pump the water out. Some of the boys do not know how to swim. The water trapping them is murky and fast-moving and the tunnels they must pass through are narrow and winding in places. As The Economist went to press, rescue workers were trying to teach the children the rudiments of swimming and diving, to allow them to be guided out.

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Australia’s states offer to make treaties with aboriginals

Dancing for recognition

PATRICK DODSON was there on the day, 30 years ago, that prime minister Bob Hawke promised aboriginals a treaty that would at last acknowledge their rights. At the time Mr Dodson was the manager of one of the many “land councils” that aboriginals had formed in an effort to reclaim their traditional lands. He helped Mr Hawke draft his declaration. “It was a breath of fresh air that at long last Australia was prepared to sit down and discuss the way in which the country was taken from first-nations people,” the senator from the Labor party recalls.

Mr Hawke said that negotiations could be concluded within three years, but his plans were scuttled by the conservative opposition. “The whole notion of a treaty got pushed further and further to the background,” says Mr Dodson. Today, aboriginals are no closer to an agreement with the federal government than they were in 1988. Instead, the current conservative coalition had offered to hold a...Continue reading

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Malaysia’s former prime minister is charged with breach of trust

“IF YOU are listening to this message,” began the recording posted on the Facebook page of Najib Razak, the Malaysian prime minister unseated in elections in May, “it means action has been taken.” The action in question was Mr Najib’s arrest, on July 3rd. After a night in jail, he was charged with three counts of breach of trust and one of abuse of power, all tied to the disappearance of billions of dollars from 1MDB, a state development fund. Mr Najib pleaded not guilty and has been released on bail, although he is not permitted to leave the country. His trial will begin in February.

The arrest had been a long time coming. News of the scandal first emerged in 2015. But Mr Najib sacked the attorney-general and any other colleagues who wanted it properly investigated. He airily dismissed the $681m that had appeared in his personal accounts as a gift from an unnamed member of the Saudi royal family, since returned. Authorities in America, Switzerland, Singapore and elsewhere...Continue reading

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From dusty villages to Delhi, Indians seek people to persecute

WHEN the two old friends set off in early June for a day in the country, they had no inkling of what was in store. Abhijit Nath, a 30-year-old businessman, liked cooking, dogs and fancy pet fish. Nilotpal Das, 29, a dreamy, dreadlocked sound technician, had recently motorbiked the breadth of India, from the beaches of Goa in the west all the way back to their shared hometown, Guwahati, capital of the north-eastern state of Assam. Both loved the outdoors, which is why they steered Mr Nath’s shiny black SUV out of the city towards Kangthilangso Falls, three hours to the east, in jungle-wrapped hills.

Accounts vary, but the outcome is not in question. Towards dusk, as the two friends headed down from the falls into flatter, more open country, a crowd of villagers surrounded their car. Many carried clubs or metal bars and shouted, “Child-snatchers!” Footage of the scene captures the bloodied victims pleading that they are not child-snatchers nor even outsiders, but native Assamese—to no...Continue reading

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Italy’s government proposes to limit fixed-term job contracts

SO INGRAINED is the dream of the “posto fisso” in Italian culture, that the highest-grossing film of 2016 was a comedy about a man who stops at nothing to keep his permanent job in the country’s public bureaucracy. A series of reforms in recent years has liberalised Italy’s labour market. On July 2nd the government introduced legislation which changes tack.

The “dignity decree” aims to limit the prevalence of short-term job contracts and of firms shifting jobs abroad and simplifies some fiscal rules. (It also bans advertising of gambling, except for government-run lotteries). Businesses are livid; unions have offered mild praise. But the real impact on the job market may be less than its political effect.

The reform is the first big bit of legislation by the month-old government, an uneasy coalition between the anti-establishment Five Star Movement, led by Luigi Di Maio, and Matteo Salvini’s right-wing League. It is the brainchild of Mr Di Maio, minister...Continue reading

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Poland’s government sacks a third of its Supreme Court

JUDGES are a pampered caste of crooks, according to Poland’s governing Law and Justice party (PiS). On July 3rd its new law on the Supreme Court took effect, the culmination of a series of judicial changes pushed through by the party. The European Union has urged the government to back down, warning that it is undermining the rule of law. Poland represents a vital battle for Brussels. If the EU cannot defend its fundamental values, including the rule of law, within its own borders, other illiberal leaders will surely take note.

The latest judicial reform lowers the retirement age from 70 to 65 for judges on the Supreme Court, which, among other responsibilities, rules on the validity of elections. As the law took effect on July 3rd, more than a third of its 72 judges were forced to step down. Some have asked the president for permission to stay on for the rest of their six-year terms, but critics fear the only judges to be granted that permission will be the pliant ones.

The...Continue reading

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Angela Merkel’s flawed deal on migrants

THE drama roiling German politics lately had little to do with the bare facts. Notionally the dispute between Angela Merkel’s Christian Democratic Union (CDU) and the Christian Social Union (CSU), its more conservative Bavarian sister party, concerned asylum-seekers who are registered and meant to stay in other EU countries, especially Italy, but then travel to Germany. The number of such “secondary” arrivals so far this year is under 20,000: eminently manageable in a country of 83m. The subject did not even come up during coalition talks between the two parties (and the centre-left Social Democrats, or SPD) this spring.

Yet until July 2nd, when the CDU and CSU reached a shaky compromise, it seemed this modest subject could fracture that young government and even end Mrs Merkel’s long chancellorship—because for both sides it was the symbol of something larger. The CSUers were driven by years of frustration at what they deem the chancellor’s complacent and haughty leadership...Continue reading

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Europe’s anti-immigrant parties are becoming more gay-friendly

I’m here, I’m queer, I fear sharia

AMID a sea of rainbow flags, Sebastian Tynkkynen sings along to ABBA’s “Dancing Queen” and waves a pro-gay placard. “Christians, don’t hate us. Islam, don’t kill us” reads his sign. Like many others at an LGBT pride parade in Kokkola, a small town in Finland, Mr Tynkkynen is proud to be bisexual. Unlike most of them, he is also proud to be anti-immigrant.

Mr Tynkkynen (pictured) represents the nationalist Finns Party (formerly the “True Finns”) on the city council of nearby Oulu. He also used to lead the party’s national youth wing. Last year a court fined him €300 ($350) for inciting hatred after he wrote a Facebook post that said: “The fewer Muslims in Finland, the better.”

Mr Tynkkynen’s gay-friendly Islamophobia is not unusual. Nationalist and anti-immigrant parties in Europe’s more socially liberal countries are trying to shed their old reputation for gay-bashing. Partly, this is because...Continue reading

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Europe is moving towards the tough immigration policies of Sebastian Kurz

IT WAS all smiles this week as Austria assumed the rotating presidency of the Council of the European Union, one of the club’s law-making bodies. But behind the scenes Sebastian Kurz, Austria’s young chancellor, provokes knotted brows. Mr Kurz’s political identity, more than that of most other European leaders, is bound up with illegal immigration. Fans say his tough line, honed as foreign minister during the 2015-16 refugee crisis, blunts the appeal of the far-right Freedom Party (FPÖ), the junior coalition partner to his centre-right People’s Party. Foes say his shift towards harshness makes it hard to tell the difference between moderates and extremists. “Kurz is on a dangerous course,” said Jean Asselborn, Luxembourg’s foreign minister, this week.

In office for barely six months, Mr Kurz has made his share of enemies. Some detect a whiff of demagoguery. There have been mis-steps: a meeting with the Bavarian government, which raised eyebrows in Berlin; Mr Kurz’s call for a European...Continue reading

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French vegans are tormenting France’s butchers

Not for the faint-hearted

THICK, fleshy, severed cow’s tongues, their tips curled neatly on to the butcher’s tray. Skinned whole rabbits, limbs stretched taut as on a rack, eyes glassy. A moist pink blooded pig’s brain, decorated jauntily with a sprig of parsley. A butcher’s counter in France is a feast for carnivores—and a shop of horrors for the squeamish. Now it has also become the object of a violent anti-meat campaign, which is stirring a resistance movement among the country’s bouchers.

In recent months, a growing number of boucheries, particularly in northern France, have been vandalised or sprayed with fake blood. “Meat is murder”, or “Stop speciesism”, a campaign message designed to halt abuse of one species by another, are the attackers’ signature graffiti. Such has been the concern among butchers that last month they sent a joint letter to Gérard Collomb, the interior minister, to demand...Continue reading

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Egypt is optimistic about new gas discoveries in the Mediterranean

FIVE years ago the country that hopes to become a Mediterranean energy hub couldn’t even keep the lights on. When Abdel-Fattah al-Sisi took power in a coup in July 2013, Egypt was plagued by blackouts. Factories shut down. Surgeons operated by torchlight.

Egypt’s energy supply is still spotty. But on June 27th newspapers trumpeted the discovery of an enormous natural-gas field, called Noor, off the coast of North Sinai (see map). They billed it as the largest in the region. That title is already held by Egypt’s massive Zohr field, discovered in 2015, which is expected to change the country from a net importer to a net exporter of gas by next year.

Much of the enthusiasm is premature. The Egyptian government has downplayed reports of the Noor field’s size. Eni, the Italian firm working on the field, has done only seismic surveys of the area. It will not drill an exploratory well until August. Still, it is clearly optimistic. It paid $105m for exploration...Continue reading

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NGOs in Lebanon want to dig up mass graves from the civil war

LINA MAHFOUZ was six years old when Lebanon’s civil war began. She remembers hearing screams outside her bedroom window. One evening she saw a man in black carrying what looked like a dead body into the orange grove behind her home. “Years later I realised what they were doing. They were torturing and then burying people in the orchard,” she says. “The bodies are there.”

It has been nearly 30 years since the civil war ended. But thousands of people are still missing. Most are probably dead: killed in Syrian prisons, dumped in the Mediterranean or buried in one of more than 100 mass graves dug by sectarian militias. The men who started the war also negotiated the peace, granting themselves amnesty for their crimes. Many are still in power. The government has had scant interest in digging up the past.

But several Lebanese NGOs think bringing up the bodies will provide closure to the families of the missing. They support a bill that would establish an independent...Continue reading

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Emmanuel Macron pays tribute to Fela Kuti, a Nigerian musician

Selfie-promotion

THE old Afrika Shrine, a music venue in Lagos, the commercial capital of Nigeria, was burned down by soldiers in 1977. Its founder, the late Fela Kuti, a musical megastar, had called them “zombies” in a song. The soldiers beat Kuti badly and threw his mother from a first-floor window. But Kuti’s children, Yeni and Femi, rebuilt a nearby venue in 2000. Ever since, the New Afrika Shrine has attracted hip Nigerians and expats, including a young Emmanuel Macron, who once worked as an intern in the French embassy in Abuja.

Mr Macron, now president of France, seems to have developed an attachment. When visiting Nigeria on July 3rd he went out of his way to visit the nightclub, known for its gyrating dancers and counterculture vibe. “What happens in the Shrine remains in the Shrine,” Mr Macron told the unusual crowd. Musicians, artists and stars from the Nollywood film industry drank champagne with government dignitaries, few of whom had ever visited the...Continue reading

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Ceasefires in South Sudan seldom last

CEASEFIRES in South Sudan’s civil war tend to be short. At least nine such agreements have been signed since the war started in 2013. Only one has lasted longer than a month. The latest ceasefire, agreed to on June 30th, is already in danger of falling apart. On paper it sets the stage for power-sharing talks between President Salva Kiir and rebel leader Riek Machar, a former vice-president. But hours after it took effect both sides reported violations. Analysts say Messrs Kiir and Machar have lost full control of their forces, which have splintered into factions. To make matters worse, Mr Kiir unveiled plans on July 2nd to extend his term by three years, to 2021. The opposition said the move would derail the peace talks.

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Uganda’s politicised police force is not reducing crime

“STOP killing us!” chanted a crowd of several hundred people as they marched through Kampala on June 30th. Their protest has good cause. Last year the bodies of more than 20 women, many strangled and mutilated, were found after being dumped in two neighbourhoods close to the Ugandan capital. Scores more people have been kidnapped. “You never know, maybe I’m next,” says Shamim Masika, a student.

Insecurity has become a hot political issue in Uganda. Newspapers have chronicled a wave of crime, from armed robberies to the murder of Muslim clerics. In June an MP was gunned down. Most startling of all was the murder last year of the police spokesman, who was shot in broad daylight outside his home. That case, like many others, remains unsolved.

Yoweri Museveni, the president, has proposed solutions ranging from more security cameras to a ban on hoodies. But many see the ageing guerrilla himself as part of the problem. When he fought his way to power in 1986 he had little trust in...Continue reading

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On the edge of the Sahara, people mourn the decline of people-smuggling

ON JUNE 14th the Sultan of Aïr, the traditional leader of the Touareg people of Agadez, came out to pray. It was a grand spectacle. Thousands had gathered to mark the end of the Muslim fasting month of Ramadan at a huge open ground. When the Sultan had finished praying, he rode back to his palace, flanked by nobles on horseback and tootling trumpeters. In the streets everyone was smiling and waving. It must have been a relief for the Sultan: a few blessed hours of not having to listen to his subjects moaning about the collapse of the people-smuggling trade.

For centuries Agadez, home to perhaps 200,000 people, has lived off trans-Saharan commerce. Once camel trains set off from here with slaves, pilgrims, salt and gold. More recently it has prospered from a boom in the traffic of people north across the sands to the Mediterranean and onward to Europe. Many Europeans think of this flow of people as a vast, terrifying flood. It has prompted Italy to close its ports to rescue ships, and almost led to...Continue reading

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Why some countries are turning off the internet on exam days

AS LONG as there have been exams, students have found ways to cheat. Today the correct answers are just a few taps away on a smartphone. So countries have come up with new ways to stop the funny business. Some use metal detectors, surveillance cameras, mobile-phone jammers and even drones. Others have taken a more drastic step.

Cheating in high-school leaving exams got so bad in Mauritania and Algeria that this year the authorities turned off the internet for the entire country. Algeria did so for at least an hour during tests (which last about a week); Mauritania cut access from morning until evening on exam days. Other countries, such as Iraq, Uzbekistan and Ethiopia, have for years been shutting down the internet during exam time.

In each country students are under enormous pressure to do well in the tests, which often determine whether they can continue their education at a good university. A splendid grade may mean a scholarship abroad. But high marks are rare. In Algeria only around...Continue reading

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Scott Pruitt’s grubby tenure at the EPA is over

NOT even his tactical pants could save him in the end. Beset by at least 13 investigations into his alleged grifting and abuse of power—including his office’s expenditure of almost $3,000 on hardwearing pants and polo shirts—Scott Pruitt resigned as the administrator of the Environmental Protection Agency on July 5th.

Washington will be a duller place in his absence—so relentless and uproariously grubby were the scandals his roving eye for a freebie and Napoleonic sense of self-importance kept landing him in. An exhaustive list would be beyond the capacity of this blog. For illustrative purposes, however, in less than 18 months in the job Mr Pruitt was alleged to have spent over $3m on a 24-hour security detail that was three times bigger than his predecessor’s; spent $43,000 on a sound-proof phone booth for his office that was subsequently found to be illegal; spent $5,700 on biometric locks;; spent over $100,000 on first-class flights, on the basis that his security would be compromised in economy (allegedly because a fellow traveller...Continue reading

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Oil's Twitter War May End Badly for Trump

President Donald Trump’s use of Twitter to jawbone the price of oil is in danger of backfiring and nearly did before the OPEC meeting in Vienna.

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How endangered is Roe v Wade?

MANY times in his 30-year Supreme Court career Justice Anthony Kennedy gave the crucial fifth nod to a conservative ruling. But the biggest abortion cases were not among them. In 1992 he was the fifth vote in a ruling that reaffirmed Roe v Wade, the Supreme Court ruling from 1973 that declared abortion a constitutional right. In 2016 he played the same role in striking down a Texas law that restricted access to abortion.

His retirement has therefore sparked both hope and fear that whoever replaces him will join the court’s four conservative justices to overturn Roe. Long a professed aim of Republicans, this would not ban abortion. Rather, it would allow states to make their own abortion laws. But it would be momentous. For one thing, abortion would immediately become illegal in four states that have “trigger laws” awaiting such a ruling: Louisiana, Mississippi, North Dakota and South Dakota. How likely is this to happen?

A lot more likely than it was. During his presidential campaign Donald Trump promised he...Continue reading

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Bruce Rauner discovers bipartisanship

One down, 43 to go

BY HIS own admission Governor Bruce Rauner has not ticked off many of the 44 points on the “turnaround agenda” that four years ago the voters of Illinois, in their wisdom, elected him to pursue. If he were to give himself a grade for his first term in office, it would be “incomplete”, says the governor, sitting at a desk at his campaign headquarters that are adorned with pictures of Ronald Reagan and Abraham Lincoln. Running in a state that Hillary Clinton won by a million votes, he may be the most vulnerable Republican governor up for election this year. He squeaked through the Republican primary against a little-known state legislator and he will be the underdog in November, when he will face J.B. Pritzker, a billionaire businessman who comfortably won the Democratic primary. What went wrong for the successful private-equity investor, who ran for the first time for office in 2014 and managed to win the gubernatorial election by four...Continue reading

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The Trump-Putin summit in Helsinki

WASHINGTON is scandalised by a report that President Donald Trump has insisted on seeing his Russian counterpart, Vladimir Putin, one-on-one, with no witness present, during their summit in Helsinki on July 16th. Yet it seems more surprising that he could consider such a precaution necessary. To amend one of his more outlandish boasts, Mr Trump could walk down Fifth Avenue and publicly thank Mr Putin for his help in delivering him the White House and it might not cost him a vote. Of all the ways Mr Trump has altered the party of Ronald Reagan, none is more remarkable than its new complacency about Mr Putin and his ongoing effort to undermine American democracy.

Before Mr Trump entered politics in 2015, Republicans took a bleaker view of Russia than Democrats. Yet over the course of a presidential run in which Mr Trump expressed bizarre, fawning admiration for the Russian strongman, Republican opinion flipped. The proportion of Republicans who approved of Mr Putin doubled, to around...Continue reading

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America’s amateur diplomats

Sam from Afghanistan

WHEN Jim Byrum returned to America in 1970 after a two-year tour of Chile with the Peace Corps, he found himself hankering for Chileans to hang out with. Then he discovered the Columbia Council for Internationals, a volunteer organisation that receives visiting scholars, students, journalists and foreign government officials on State Department fellowships. Half a century later, Mr Byrum remains closely involved with the council, which has 100-odd members. They organise meetings and field visits, potluck dinners and Sunday brunches, and sometimes become friends with their guests.

Mr Byrum is one of thousands of what the State Department call “citizens diplomats” at nearly 90 non-profit organisations in more than 40 states. Each year about 5,000 foreigners visit the United States on the State Department’s International Visitor Leadership Program (IVLP). Participants are chosen by embassies and invited to America for tailored tours. Alumni include...Continue reading

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The list of charges against Scott Pruitt keeps growing

THE past week saw heat records set across the world. Even Scott Pruitt, who heads the Environmental Protection Agency (EPA), might have been sweating a bit. Not because of the temperature (Mr Pruitt has the unruffled air of a man who sets the air-conditioning to Arctic mode), but because, after months of mounting scandals, President Donald Trump’s spokesman said on July 3rd that the president finds Mr Pruitt’s reported behaviour “troublesome”.

Mr Pruitt is facing no fewer than 13 federal inquiries. Last year he spent $50 a night to stay in a condominium on Capitol Hill owned by the wife of an energy lobbyist who had business before the agency he runs (stays at the Capitol Hill Holiday Inn, by way of comparison, can run above $250 on weeknights). He spent $3.5m on his round-the-clock, 20-man security detail in his first year in office—nearly double what his predecessors spent, on average, and a much larger security detail.

He regularly travelled first-class at...Continue reading

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A court with a solid conservative majority could reshape American life

WHEN Anthony Kennedy announced his retirement from the Supreme Court on June 27th, Democrats rushed to the barricades. “This is the fight of our lives,” announced Senator Elizabeth Warren of Massachusetts. Senator Kamala Harris proposed delaying confirmation hearings for Mr Kennedy’s successor until after the next election, which falls in November 2018, just as Mitch McConnell, the Senate majority leader, did with Barack Obama’s nominee in 2016. In practice, Democrats cannot stop Mr Trump from placing his second justice on the country’s highest court. Mr McConnell is serenely untroubled by the precedent he set, and President Donald Trump plans to announce his nominee on July 9th. When the nominee is confirmed in the autumn, he or she should cement a reliable conservative majority that could, among other things, make abortion less accessible and federal agencies less powerful, though not quite in the way that many seem to expect.

The next justice will almost certainly be young (Mr Trump...Continue reading

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Why Detroit is the most expensive city in America to buy car insurance

Call the underwriter

ASK Mike Duggan, the mayor of Detroit, what keeps him up at night and he replies, without a second’s hesitation, “car insurance”. For those familiar with the city’s precarious finances, bad schools and blighted neighbourhoods, this might seem a strange answer. But even among this throng of flashy ailments, Detroit’s car-insurance problem looks egregious. The average cost of insurance premiums in the city is $5,414 per year, more than twice the state average and nearly four times the national average. For the typical Detroit household, making $26,300 a year, this would represent 21% of pre-tax income. Cars are an inescapable necessity in Motor City, a 140-square-mile expanse lacking robust public transportation. Residents therefore flout the law by registering their policies at addresses outside the city, where insurance costs less than half what it does inside, or by driving without any insurance at all. Good numbers are understandably difficult to...Continue reading

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The wage gap between white and black men is growing wider

WRITING in 1978, William Julius Wilson, an influential sociologist, began a controversy in “The Declining Significance of Race.” Mr Wilson argued that the plight of poor black Americans was due more to labour-market forces than to contemporary racial discrimination. “I wanted to call attention to the worsening condition of the black underclass, in both absolute and relative terms, by relating it to the improving position of the black middle class,” he later wrote. Four decades later a bevy of economic studies provide some vindication for Mr Wilson. While highly educated African-Americans are now more successful than ever, the bottom appears to have fallen out for poor blacks. Although the earnings gap between the typical white and black man began narrowing from 1940, the trend stopped in the mid-1970s. Many assume that the earnings gap then stayed constant, but it has in fact widened. Today the difference is as large as it was in the 1950s.

That is one result from a recent working paper by the...Continue reading

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The EU Has No Easy Answers to Trump's Car Tariff Threats

Investors should curb their enthusiasm over hopes that the European Union can sign a quick car deal with President Donald Trump. This isn’t how the EU works.

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China’s statistics are bad. Many criticisms of them are worse

“Our people crave, more than anything else, to know the extent of the nation,” says the narrator in “Do You Love Me?”, a short story by Peter Carey set on an imaginary world that lionises cartographers. To satisfy that craving, the country carries out a regular, exhaustive census: a “total inventory of the contents of the nation”. Helpful householders even move their possessions—furniture, appliances, utensils, heirlooms—into the street for easier counting.

China, like many countries, is keen to know its own extent. This year it is preparing its latest economic census, a twice-a-decade undertaking. Like the census in Mr Carey’s fable, it is a “mammoth task”. The most recent one employed 3m people, counted more than 8m enterprises and estimated a GDP of almost 59trn yuan ($9.5trn at the time). This year’s census may find that GDP per person has exceeded $10,000, enough to form a tidy pile of possessions on the street.

But why, many people will ask,...Continue reading

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The growth of index investing has not made markets less efficient

IN THE autumn of 1974 Paul Samuelson, a prominent economist and Nobel prizewinner, issued a challenge. Most stockpickers should go out of business, he argued. Even the best of them could not always beat the market average. But there was a snag. “If this advice to drop dead is good advice, it is obviously not counsel that will be eagerly followed.” An alternative was needed to set an example. Someone should set up a low-cost, low-turnover fund that simply tracked the S&P 500 index of stocks.

The following year Vanguard, then a fledgling firm, took up Samuelson’s challenge and launched an index fund for retail investors. It was not eagerly received. Denounced on Wall Street as “un-American”, the index fund raised a mere $17m in the half-decade after its launch. It has been only in the past two decades that index investing has prospered. Indexed funds have grown around six times faster than those tended by active fund managers who select stocks to buy. Lots of investors now get the average...Continue reading

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Central Europe’s Goldilocks economies

THEY evoke metal gorillas in a cavernous, floodlit hall: 640 robots with riveting guns and arms for handling parts. They will spring into action this autumn at the opening of a new plant for Jaguar Land Rover (JLR), built at a cost of €1.4bn ($1.6bn) on former farmland in Nitra, in western Slovakia. Cars under construction will travel along 3.9km of elevated maglev track, taking just two days from start to completion. The robots, together with 2,800 human workers, will assemble a Land Rover Discovery every two minutes.

JLR is just the latest carmaker to come to Slovakia. VW arrived 27 years ago, followed by Kia and PSA. The firms together churn out over 1m cars annually, more per head of population than any other country. JLR considered 30 or 40 locations, says Alexander Wortberg, who oversees operations at Nitra. Mexico has cheaper workers and (for now, at least) favourable access to the American market. But Nitra is close to a new motorway and Slovakia has an impressive supply chain,...Continue reading

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Argentina’s currency crisis is far from over

Too pricey to drown sorrows

ON A residential street corner in Buenos Aires, Van Koning Market sells imported beers to the city’s well-heeled. Since it opened in June last year costs have soared. The peso has plummeted, meaning wholesale prices have shot up. Inflation is running at 26%; the reduction of government subsidies means the monthly electricity bill has risen from 700 pesos to 4,000 pesos ($142). Already losing customers, Sergio Discenza, the manager, is reluctant to raise prices much. “In a normal country this would be a viable business,” he says. “But here everyone is struggling.”

The year started badly for Argentina when the worst drought in 50 years hit the harvest of maize and soyabeans, both important exports. In May a stronger dollar and higher US Treasury yields prompted international investors to flee risky assets. Most emerging-market currencies suffered, Argentina’s especially. Its twin fiscal and current-account deficits have seen the peso...Continue reading

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Companies appear to be gaining market power

COMPETITION forces companies to keep prices low to attract customers. But if a few firms become powerful enough, they can see off competitors and charge more. A new working paper by Jan De Loecker of the University of Leuven and Jan Eeckhout of University College London presents evidence that this is happening across the rich world.

The researchers examine markups—selling prices divided by production costs. At 1, products are sold at cost; above 1, there is a gross profit. Using the financial statements of 70,000 firms in 134 countries, the authors find average markups rose from 1.1 in 1980 to 1.6 in 2016.

America and Europe saw the biggest increases (see chart). But in many emerging markets markups barely rose. In China they fell. That suggests rich-world firms may have been able to increase markups by outsourcing to cut labour costs. Another possibility is that corporate concentration may have increased because of lax antitrust enforcement or the growing heft of companies benefiting from...Continue reading

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As its trade tussle with America heats up, China is on the back foot

FOR months Chinese officials have stuck to the same script: China does not want a trade war, but will win if dragged into one. As hostilities turn more serious, this confident façade has taken a blow. Chinese equities have plunged into bear-market territory. The yuan had its biggest monthly fall against the dollar on record. Economic indicators have weakened. Even bombastic state-run media have turned introspective, counselling against arrogance.

All this, and the tit-for-tat trade battle is only just getting under way. On July 6th, after The Economist went to press, America was due to impose its first major set of tariffs on China: 25% duties on $34bn-worth of imports, notably machinery and electronic parts. China was set to retaliate with tariffs on goods worth the same amount, hitting products from soyabeans to sport-utility vehicles. Both countries have listed more tariffs to follow, on goods worth another $16bn. Both have also warned that they are willing to inflict much...Continue reading

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Will Donald Trump be Triumphant, Tetchy or Torpedo?

FIRST came the fiasco of the G7’s summit last month in Charlevoix, Canada, when President Donald Trump refused to sign the final communiqué amid angry tweets from Air Force One. Now for the sequel. Many fear an even more damaging bust-up at the NATO summit to be held in the 29-member alliance’s new headquarters in Brussels on July 11th-12th. It features the same lead characters. “We’ve seen that movie and it didn’t end well,” says Admiral James Stavridis, dean of the Fletcher School at Tufts University and a former supreme allied commander Europe.

Although as president Mr Trump has affirmed his commitment to the alliance, some suspect his support is at best skin-deep. On the campaign trail he described NATO as “obsolete” and at Charlevoix he is said to have called it “as bad as NAFTA”, a trade agreement he regards as a rip-off. The president resents his allies for failing to bear their fair share of the costs of defending Europe. Never mind that some of them put their soldiers in...Continue reading

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The American president is stirring up trouble in a volatile oil market

Losing room for manoeuvre

IT USED to be said that America’s shale producers were the new “swing factor” in global oil markets. It turns out that role is being taken by America’s president.

At a time when oil prices are at three-and-a-half-year highs, markets are being buffeted by three countervailing forces unleashed by President Donald Trump: his geopolitical agenda, particularly sanctions on Iran; his domestic political agenda, to lower American petrol prices before the mid-term elections; and his looming trade war with China. If he does not get his way, he may have a dangerous weapon up his sleeve—America’s Strategic Petroleum Reserve (SPR). His meddling risks making OPEC, the oil cartel that is a focus of his wrath, look like a paragon of predictability.

First, geopolitics. Despite an agreement late last month by Saudi-led OPEC and Russia to increase output by up to 1m barrels a day (b/d), the price of Brent crude, a benchmark, has risen to...Continue reading

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Russia shows another side at the World Cup

Harsh penalties, scary shoot-outs, foul play: welcome to Russia

THE only thing more improbable than the Russian national team’s performance on the pitch has been the buoyant atmosphere around this year’s World Cup. Fans from around the world have poured into the country despite political tensions—though the poisoning of two more people with the nerve agent Novichok in Britain cast a pall over the next round (see Britain section). At home, Russian security services have turned a blind eye toward minor infractions, allowing city centres to become non-stop parties. When Russia defeated Spain on July 1st cars blocked Moscow streets and started impromptu street discos. Thousands of dancing revellers snaked past the Bolshoi Theatre, where ballerinas had also been watching the match backstage, and up to the doorsteps of Lubyanka, the headquarters of the FSB, the successor to the KGB.

Such permissiveness has made for a more convivial tournament than many expected....Continue reading

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Detroit Needn't Fret Yet About Pump Prices

Light truck sales, which are crucial to the profits of U.S.-based auto makers, are holding up despite pump prices nearing a psychological milestone.

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Tariff Troubles for Germany Won't Stay in Germany

Germany’s role as an anchor for Europe makes its export engine a risk for the continent.

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China, Not the World Cup, Is the Real Worry for Macau

The falling Chinese stock market and currency will likely hit the world’s largest gambling hub.

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Why July is a Risky Month for Drug Price Backlash

Less than two months after its unveiling, President Trump’s plan to lower prescription drug prices is up for a big test.

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Dell Deal Is as Good as It Gets for VMware

The tech giant’s plan to return to public market is one of its least-bad options.

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Tesla's Big Number Doesn't Solve Its Problems

Tesla hit its Model 3 production goal, but there are plenty of lingering questions for investors to worry about.

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How Corey Stewart is helping Democrats in Virginia

PRESIDENT DONALD TRUMP is expected to be a drag on Republican congressional candidates in Virginia this year. He lost the state in 2016 and has angered much of its increasingly Democratic electorate ever since. But Corey Stewart, the Republican nominee for the US Senate, could be a bigger liability in the mid-terms than the president.

Mr Stewart, who for years has played to the hard-right fringe, was always considered a long shot to defeat Tim Kaine, Hillary Clinton’s vice-presidential running mate in 2016. The National Republican Senatorial Committee, the campaign arm of the Senate Republican caucus has said it will not support Mr Stewart, denying him cash and services. They will probably be better deployed in the 10 states carried by Mr Trump that have Democratic senators facing re-election this year. 

The latest public poll, by Quinnipiac University, found that Mr Kaine leads Mr Stewart by nearly 20 percentage points. That suggests that the Democrat is pulling a hefty slice of Republican-leaning independents.

But...Continue reading

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Tariffs Aren't China's Strongest Weapon Against the U.S.

China has yet to really deploy one of its most effective means of economic blackmail.

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The victory of Andrés Manuel López Obrador starts a new era in Mexico

THE result was predictable, but earth-shaking even so. On July 1st Andrés Manuel López Obrador, a charismatic populist, won Mexico’s presidency in the country’s first democratic landslide. His margin of victory suggests that his electoral coalition will control congress and the government of Mexico City, the capital, giving Mr López Obrador unprecedented power for a modern president. As in America and parts of Europe, an angry electorate has repudiated the established political elite. In Mexico’s case voters have elected an unpredictable leftist. Mr Lopez Obrador, a 64-year-old ex-mayor of Mexico City who has run for the presidency twice before, leads an official “rapid count” of ballots, conducted shortly after polls closed, with 47.3% of the vote. His nearest challenger, Ricardo Anaya of the National Action Party (PAN), trails far behind on 26.7%. José Antonio Meade of the governing Institutional Revolutionary Party (PRI) won a dismal 17.3%. The size of Mr López Obrador’s...Continue reading

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