The Economist: Full print edition

The horse genome: Riding high

Thu, 05 Nov 2009 14:00:12 GMT

The DNA of the domesticated horse shows evolution at work

THE genomes of many mammals have now been completed, including the cow, the dog, the chimpanzee and, of course, the human. This week it was the turn of the horse to have its DNA sequence decoded. With it emerged further evidence of how horses have been close human companions and, like other mammals that share an evolutionary history with man, how they could help the understanding of hereditary diseases. But there was also a surprise: horses have a newly forming part in their genetic make-up which shows the evolutionary process in action in a way that has not been seen before.

A team of researchers led by Claire Wade, then at the Broad Institute, in Cambridge, Massachusetts, collaborated on the project, which is reported in the latest issue of Science. They analysed DNA from a mare called Twilight (pictured above) to reveal a genome that consists of up to 2.7 billion base pairs (the “letters” in which the genetic message is written). This is slightly larger than the genome of a dog, but smaller than that of a human or a cow. They also compared Twilight, a thoroughbred, with members of other horse breeds. ...

Charlemagne: Blair's unbalancing act

Thu, 05 Nov 2009 11:50:52 GMT

Lessons from the unedifying fight over top Brussels jobs

IN THE end, Tony Blair’s great European adventure seems to have been a balancing act too far. As prime minister, Mr Blair built a career on political acrobatics. He was the Labour politician who left in place great chunks of Thatcherism. As prime minister, he swore he was a true European (the “most European of Englishmen”, France’s Nicolas Sarkozy once said) even as he defended opt-outs from such policies as ending internal European Union passport controls. More than any British leader, he backed closer European defence co-operation—and then he split Europe by joining America in Iraq.

But high-wire acts hurt when they fail. And, at an EU summit in Brussels on October 29th and 30th, Mr Blair fell, watching his bid to become the first permanent president of the European Council collapse. Mr Blair needed leaders to agree that he was a sincere European, and they could not. He needed his fellow socialists to admit he was one of them, and they declined (the centre-left Austrian chancellor, Werner Faymann, said Mr Blair represented “Bush and the war in Iraq”.) ...

Award: Philip Coggan

Thu, 05 Nov 2009 11:01:13 GMT

Philip Coggan, our Buttonwood columnist, was named “Journalist of the year-pensions issues (trade)” at the 2009 State Street Press Awards in Britain.

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Failed financial firms: The bust that worked

Thu, 05 Nov 2009 11:01:13 GMT

CIT’s bankruptcy fuels the debate about resolving financial failures

CIT might just be that rarest of things: a financial-services firm that emerges from bankruptcy largely intact. The small-business lender filed for Chapter 11 protection on November 1st with the backing of most bondholders in a so-called “prepackaged” filing. A judge this week agreed to rule on its reorganisation plan on December 8th. If all goes well, a new, creditor-owned company, shorn of $10 billion of debt, could be up and running by the beginning of next year.

If CIT can persuade the judge to approve its plan, its fate will then rest with its regulators, including the Federal Deposit Insurance Corporation (FDIC). Badly burned when bond markets seized up, the company wants to move some important businesses to its Utah-based bank, where they can be funded by cheaper deposits. At the moment it is paying much more to borrow than it can charge for its loans. ...

Monetary policy: Leaders and laggards

Thu, 05 Nov 2009 11:01:13 GMT

Central banks pick different paths back to normality

CENTRAL banks in the rich world cut interest rates in lockstep in 2008 as the world economy spiralled. Their paths back to normal interest rates will be more disparate. Some are already en route. On November 3rd the Reserve Bank of Australia raised its cash rate to 3.5% from 3.25%, the second increase in as many months. On October 28th Norway’s central bank became the first in Europe to tighten, raising its policy rate to 1.5% from 1.25%.

On November 4th the Federal Reserve squelched speculation that it might soon follow suit. The Federal Open Market Committee, the Fed’s main policymaking body, reiterated that it would keep its rate target between zero and 0.25% for an “extended period”, so long as unused economic capacity is ample and inflation, and inflation expectations, remain “subdued”. ...

Contingent capital: CoCo nuts

Thu, 05 Nov 2009 11:01:13 GMT

Lloyds is first out of the gate with a new kind of capital

MENTION hybrids these days, and most people think of fuel-efficient cars. In banking, however, the word has less pleasant connotations. Hybrid forms of capital were meant to combine the cheapness of debt with the support that equity offers to banks in times of crisis. Yet they proved to be less well-bred than originally planned. When an extra capital cushion was needed to protect depositors and other creditors, these hybrid instruments could not provide it without the bank first defaulting.

Now a new version is emerging. On November 3rd Lloyds Banking Group (LBG), Britain’s biggest retail bank, said it would convert existing debt into about GBP7.5 billion ($12.3 billion) of “contingent core Tier-1 capital” (dubbed CoCos). This is a kind of debt that will automatically convert into shares if the bank’s cushion of equity capital falls below 5%. LBG is not the first bank to issue contingent capital, but it is the biggest to do so just as many regulators are looking at ways of giving banks access to equity when they need it and forcing creditors to share the pain of financial distress. ...

Buttonwood: Exit, followed by a bear

Thu, 05 Nov 2009 11:01:13 GMT

The dilemmas facing policymakers

WHEN the fire is raging, it is no time to worry about water damage. Central banks and governments have flooded the system with monetary and fiscal stimulus, desperate to prevent a repeat of the Depression. Now that many countries have returned to economic growth the debate has started about how to reverse some of these extraordinary measures.

A seminar held in London this week by Fathom Financial Consulting, an independent economic forecaster, asked three former members of Britain’s monetary-policy committee—Charles Goodhart, Willem Buiter and DeAnne Julius—for their views on exit strategies. The consensus seemed to be that, in Britain’s case, loose monetary policy might be appropriate but fiscal policy needed to be tightened. Professor Buiter even had a long list of policy suggestions, from freezing health-care spending through to raising the state-pension age very rapidly, that would be politically suicidal for the government to adopt, given that an election is due by June 2010. ...

Hong Kong's property market: Flat out

Thu, 05 Nov 2009 11:01:13 GMT

A boom gathers momentum

HAVING seen the damage caused by property bubbles, Hong Kong officials are determined not to have a repeat on their own patch. Last month the territory’s de facto central bank pushed banks into increasing the amount of cash they demand of homebuyers. John Tsang, Hong Kong’s usually tepid financial secretary, called in big developers to warn of government intervention if the housing market became “unfair” or “unhealthy”. On November 2nd the territory’s chief executive, Donald Tsang, vowed to cool prices.

The mounting disquiet reflects a huge jump in the price of property, particularly luxury flats. Statistics compiled by CB Richard Ellis, an estate agent, show that prices of high-end flats have risen by 40% since January, and are now just 13% below their 2008 pre-crisis peak. Some are once again priced at record levels. One flat, at 39 Conduit Road, was reported by the developer to have sold in October for HK$71,000 ($9,200) per square foot. The spike in flat sales has propelled shares in property companies higher, too. That, in turn, has prompted a flood of primary and secondary offerings in property-related shares. ...

India's gold purchase: Adornment and investment

Thu, 05 Nov 2009 11:01:13 GMT

India is eager for the IMF’s bullion

IF YOU count bangles, necklaces, anklets and other pieces of jewellery, India is the largest repository of gold in the world, according to the World Gold Council. Many Indians see gold as an investment as well as an adornment. India’s post office sells 24-carat gold coins, as small as 0.5 grams, to savers wary of fiat currencies or mutual funds. The latest big investor in the metal is the Reserve Bank of India (RBI). On November 3rd the central bank said it had bought 200 tonnes of gold from the IMF, a purchase that would have cost about $6.7 billion. The news pushed the price past $1,090 an ounce for the first time.

The IMF’s gold holdings are less decorative than India’s, but also impressive: the third-biggest official stash in the world. Its sale to the RBI is part of a plan to offload 403.3 tonnes, or an eighth of its total. The proceeds will create an endowment to cover the fund’s operating expenses and help expand its lending. It is doing its best not to rock the market by selling first to central banks, in keeping with their agreement in August to sell no more than 2,000 tonnes over five years. But the gold market is now interested in how much central banks might buy, not how much they might sell. ...

Rural job guarantees: Faring well

Thu, 05 Nov 2009 11:01:13 GMT

India’s grand experiment with public works enjoys a moment in the sun

AMIT KUMAR must be one of the few bankers in the world turning away depositors. The manager of a village bank in the Indian state of Rajasthan, he was reluctant to take a cheque for 1m rupees ($21,200) from the elected head of the village, or sarpanch. The cheque was meant to pay hundreds of villagers for their work under India’s National Rural Employment Guarantee Act (NREGA), which guarantees 100 days of minimum-wage employment on public works to every rural household that asks for it. But getting the work is not always easy. And getting paid for it is gruelling labour in itself.

Mr Kumar has three colleagues but no computer. It will take him four days of paperwork to distribute the money to hundreds of tiny accounts opened by NREGA workers. He will get to it when he can, he says. It could be worse. In the eastern state of Jharkhand, a banker was more enthusiastic about the NREGA. He conspired with a local official and contractor to fake the number of days worked under the scheme, withdrawing the extra money from oblivious workers’ accounts. ...

Clarification: Home schooling

Thu, 05 Nov 2009 11:01:13 GMT

In “An inspector calls” (October 24th) we said the number of home-schooled children known to social services included disabled children. The author of the official inquiry into the matter has clarified that it did not. Children taught at home are twice as likely to be known to social services as those who attend school.

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Dating in the downturn: Well met by clublight

Thu, 05 Nov 2009 11:01:13 GMT

What online-dating sites are learning from pick-up artists

IN A dark underground room in central London, a group of men scribble intently in notebooks. They are in a class on “how to be funny” and they want to get it right. It has been a long day; they have already attended classes on teeth-whitening, self-esteem and personal finance as part of an intensive course on how to attract women. This evening they will put their work into practice as tutors assess their attempts to score dates in some of the city’s leading clubs.

The programme is run by Love Systems, an American firm that charges up to GBP3,000 ($5,000) for three-day boot camps. Other outfits offer similar “pick-up” courses, though they remain relatively small and almost clandestine. The real money in the “dating industry” is online. ...

Drugs policy: Blinded by science

Thu, 05 Nov 2009 11:01:13 GMT

An outspoken scientist is dumped, leaving the government in a mess

“THE Nutty Professor”, as David Nutt is known in the Sun and other newspapers, has never been far from controversy. As chairman of the government’s Advisory Council on the Misuse of Drugs (ACMD), Dr Nutt, who heads Bristol University’s psychopharmacology unit, issued reports on narcotics and recommended where each should be placed on Britain’s three-point scale of harmfulness. Such is the seething state of the drugs debate that more or less anything he said was guaranteed to enrage somebody.

Most recently he managed to upset Alan Johnson, the home secretary, who promptly sacked him on October 30th. His offence was to have repeated his view that cannabis and ecstasy are both less harmful than the government implies in its classification of them. Cannabis, currently class B, and ecstasy, class A, should both be demoted to class C, he said, adding for good measure that both were less harmful than alcohol and tobacco. ...

Reforming parliamentary expenses: The never-ending story

Thu, 05 Nov 2009 11:01:13 GMT

Those charged with fixing a discredited system are taking their time

IF THE next general election takes place in May, as is expected, a year will have elapsed since MPs were shamed by revelations of their systematically fiddled expenses and allowances. It looks increasingly possible, however, that the broken system will have been fixed only partially by the time voters go to the polls.

Gordon Brown asked the independent Committee on Standards in Public Life to propose reforms to the expenses regime soon after the scandal broke, thanks to the Daily Telegraph. Despite the prime minister’s pleas for a speedy inquiry, Sir Christopher Kelly, the committee’s chairman, reported only on November 4th. His main recommendation concerns the so-called second-homes allowance, which MPs can claim to maintain separate homes in their constituencies and in London. He wants it confined to the cost of renting a place or staying in a hotel. Those who currently claim for mortgage payments can do so for the duration of the next parliament, but any capital gains made over that time must be returned to the taxpayer. ...

New banking measures: Chipped, not broken

Thu, 05 Nov 2009 11:01:13 GMT

The latest chapter in the banking rescue is less novel than it seems

JUST over a year ago, as Britain’s banking system suffered a near-death experience, the government resuscitated it with an emergency infusion of capital. This week Alistair Darling pumped in yet more money, leading to accusations that policy failures had brought about another big bail-out. The chancellor of the exchequer, for his part, made much of moves to create a more competitive banking market, forcing the two big banks that have gobbled up state aid—Royal Bank of Scotland (RBS) and Lloyds Banking Group (LBG)—to pay for it by shedding branches and customers.

In fact, this latest chapter in the banking rescue is neither a new bail-out nor the dawn of a new competitive era. The government’s sudden interest in opening up the market was in any case the result of pressure from Europe (see article). And despite much hoopla before this week’s announcement about breaking up the banks, it amounted to precious little. ...

Policing Northern Ireland: New cop in town

Thu, 05 Nov 2009 11:01:13 GMT

A tough task awaits the new chief constable

JUST when the finishing line was in sight, a stumble. Last month, after long talks with Northern Ireland’s ruling politicians, Gordon Brown agreed to hand over GBP800m-1 billion ($1.7 billion) to the Stormont government to finance the final stage of devolution—giving Belfast responsibility for policing and justice. The self-congratulatory announcement to Parliament was barely out of the prime minister’s mouth when Peter Robinson, Northern Ireland’s first minister, called a halt. Members of his Democratic Unionist Party (DUP) needed to see more “confidence-building measures” on issues such as Orange Order parades before he could give his final approval. Even the promise of a further GBP20m for mainly Protestant police reservists has not moved matters forward.

For all their irritation over unionist foot-dragging, however, mainstream republicans are playing a full part in transforming how Northern Ireland is policed. This has changed radically over the past decade, as the old Protestant-dominated Royal Ulster Constabulary (RUC) has given way to the Police Service of Northern Ireland (PSNI). Thanks to 50-50 hiring of Protestants and Catholics, the proportion of the latter in the ranks has risen from 8% to 28%, and it is growing (in senior ranks the Catholic proportion has doubled to 16%). Women now make up a quarter of a force that has lost much of its former laddish complexion. ...

School places: Admissions of guilt

Thu, 05 Nov 2009 11:01:13 GMT

Ministers want to make the great schools game harder to play

FAKING divorce, claiming to live in a shop, passing off a grandparent’s house as one’s own: not more revelations of MPs’ accounting tricks, but tactics used by parents to get their children into oversubscribed state schools. A report on the subject published on November 2nd listed all these and more. In it Ian Craig, the schools adjudicator, describes those who game the system as “thieves” whose actions deprive the more deserving of places of their own.

It is the latest salvo in an escalating war between ambitious parents who cannot or will not pay independent-school fees— and their ranks have been swelled by recession—and the local councils charged with policing state-school admissions. Officials are not above extreme measures of their own. One head teacher bragged on national television that he had hired private detectives to spy on parents, and town halls have had their knuckles rapped for using surveillance laws normally reserved for serious criminals. ...

Teaching at universities: A sense of entitlement

Thu, 05 Nov 2009 11:01:13 GMT

When demanding students meet reluctant lecturers

A COMIC novel, “Lucky Jim”, published by Kingsley Amis in 1954, portrayed life as a university lecturer as a grubby, tiresome slog, for all that it was shot through with humour. A somewhat drier study of university life has now found that academics no longer devote as much time to teaching as they did because of the bureaucratic burdens they are now forced to carry.

The study, by Malcolm Tight of Lancaster University, examined surveys of academic workloads since 1945. He found that university staff have worked long hours, typically 50 hours a week, since the late 1960s. Academics fiercely protect the time they spend on research. They also do more administrative work than in the past. As a result, he concludes, “the balance of the average academic’s workload has changed in an undesirable way… [making] it more difficult to pay as much attention to teaching as most academics would like to do.” ...

Financial scandals in Thailand: Getting their man

Thu, 05 Nov 2009 11:01:13 GMT

Market panics, old and new

IT TOOK 13 years for Thai justice to catch up with Rakesh Saxena, an Indian-born banker who fled to Canada in 1996. Once there, Mr Saxena (pictured left) dug in his heels during what became Canada’s longest-ever extradition case. Eventually, on October 30th, all his appeals exhausted, Mr Saxena arrived back in Thailand to face criminal charges over his role in the insolvency of Bangkok Bank of Commerce (BBC) in 1996. The sorry tale of BBC, which was milked by bank executives and politicians under the nose of regulators, was, in retrospect, a dry run for the 1997-98 Asian financial crisis that began in Bangkok.

For Thailand, putting Mr Saxena on trial provides a bookend of sorts to the crisis. It also threatens to ensnare several politicians aligned to the present government who had dealings with BBC and may prefer Mr Saxena’s silence. Prison officials have made a show of securing his cell to prevent anyone getting to him. Regulators hope to tie up loose ends from BBC’s collapse under the weight of $3 billion in bad loans. Its president was jailed in 2005 for fraud. But many others escaped censure. ...

Indonesia's anti-corruption commission: The gecko bites back

Thu, 05 Nov 2009 11:01:13 GMT

Yudhoyono: second term, first crisis

THIS was to have been Susilo Bambang Yudhoyono’s second honeymoon. Inaugurated for a second presidential term last month after a landslide election victory in July, he should have been basking in his recent international popularity and preparing for a regional summit in Singapore. Instead, he has been consumed by the fallout from a political scandal. On November 2nd he set up a team to look into an investigation by the police of members of the Corruption Eradication Commission, known as the KPK. The commission’s high-profile prosecutions had helped improve the country’s corrupt image and boosted the president’s standing.

Mr Yudhoyono was responding to mounting public pressure and street protests that followed the arrest of two KPK deputy chairmen on dubious charges of abuse of power and extortion. This was the culmination of a months-long feud pitting the KPK against the national police and the attorney-general’s office. The two KPK officials, Chandra Hamzah and Bibit Samad Rianto, were accused of taking bribes from Anggoro Widjojo, a corruption suspect, so that he could flee abroad. They say their arrests were part of a plot to frame them and weaken the KPK. ...

India's wretched state of Manipur: Not free to starve

Thu, 05 Nov 2009 11:01:13 GMT

A poet from Manipur celebrates nine years of trying to kill herself

IROM CHANU SHARMILA, 37, a poet and aspirant suicide, was this week unable to attend a cultural festival held in her honour in Imphal, capital of India’s north-eastern state of Manipur. She was in hospital, being force-fed lentil soup through a tube inserted into her nose.

The festival and an attendant fast, joined by hundreds of Ms Sharmila’s sympathisers in recent months, were to mark an anniversary. On November 2nd 2000 the poet, known as the “Iron Lady”, embarked on a “fast unto death”—a threat respected as an act of protest in India, often used to great effect by Mohandas Gandhi. Yet Ms Sharmila’s case, like the wretched condition of Manipur, the most violent of seven troubled north-eastern states, is a national embarrassment. ...

Chile's Mapuches: The people and the land

Thu, 05 Nov 2009 11:01:13 GMT

A fight over history and poverty

HOW far can the clock be turned back? That is the question facing Chile’s government in the Araucania region, the homeland of the Mapuche Indians in the country’s forested south. Under a law approved in 1993, soon after democracy was restored, Chile has gradually been returning land to its indigenous peoples. Far from satisfying the Mapuches, the largest of them, this has fuelled further claims, land seizures and, recently, violence.

Some 600,000 of Chile’s 15m people are Mapuches. Three-fifths of them now live in the cities rather than their traditional rural communities. But all are united in demanding the restitution of their former lands—for them, a matter of religious significance as well as custom. In their own, still widely spoken, language, Mapuche means “people of the land”. ...

Arizona's budget: Stumped

Thu, 05 Nov 2009 11:01:13 GMT

An intra-Republican row

EARLIER this year Republicans seemed to be in the ascendant in Arizona, the state of Barry Goldwater, even as they struggled in much of the country. Not only had they retained control in both houses of the state legislature, but a fluke turned a Democratic governor into a Republican one when Janet Napolitano, who became Barack Obama’s homeland-security secretary, vacated the office for Janice Brewer, who was secretary of state at the time. But Arizona’s Republicans instead descended into a bitter feud that is bankrupting their state and amusing not even Democrats.

Arizona is among the states worst hit by the recession, and years of tax cuts combined with more spending under Ms Napolitano had left its budget out of balance when Mrs Brewer took over. “By her tenth day in office, she had cut more than any Arizona governor in history,” boasts her spokesman. In March Mrs Brewer went before the legislature to ask for a temporary one-cent increase in the state sales tax alongside yet more cuts. The Republicans balked. ...

Hispanic higher education: Closing the gap

Thu, 05 Nov 2009 11:01:13 GMT

Improving performance is linked in part to immigration policy

THE University of Texas-El Paso (UTEP) is one of the most binational of America’s big universities. Some 90% of its students come from the borderplex—the Texan city of El Paso and its much larger sister-city, Ciudad Juarez, on the Mexican side of the Rio Grande. More than 70% of its students are Mexican or Mexican-American.

And that, in turn, means that the El Paso campus is rather different from the University of Texas’s flagship campus in Austin. More than half of UTEP students are among the first in their families to go to college, and roughly a third come from families with incomes below $20,000 a year. Diana Natalicio, UTEP’s president, says that for many of her students trouble at work, or an unexpected expense, can derail a whole year of college. UTEP tries to help, offering after-hours advice and instalment plans for tuition fees. Such measures have helped it to become one of the country’s leading sources of degrees for Hispanic students. ...

Health reform: Now or never?

Thu, 05 Nov 2009 11:01:13 GMT

Efforts to speed health legislation hit some snags

WILL the health bill making its way through Congress reach Barack Obama’s desk before the end of the year? In May he insisted: “If we don’t get it done this year, we’re not going to get it done.” Alas, the timetable may be slipping.

The House is further along: a 1,990-page final bill was unveiled on November 3rd, and a vote by the full chamber may come as early as November 7th. But as this newspaper went to press, the Senate was still waiting for the Congressional Budget Office to put a cost on the Senate Democratic leadership’s own final bill before it is debated, a process that, by design, is slower than in the House. And whenever the upper chamber passes a final bill, the outcome still needs to be reconciled with the different version that will come out of the House. ...

The HIV travel ban is lifted: You're welcome

Thu, 05 Nov 2009 11:01:13 GMT

HIV-positive people will at last be allowed to visit America

FOR 22 years America has banned HIV-positive people from entering the country without a hard-to-get waiver for fear of the virus spreading. It has not hosted a big international AIDS conference in more than a decade either, because many HIV-positive activists would not be allowed to attend. Only a dozen other countries, including China and Russia, have similar restrictions, and there is no evidence that these bans halt the spread of AIDS. Instead, many say, it makes things worse by stigmatising carriers of the virus.

On October 30th Barack Obama announced that he will do away with this cruel rule. From 2010, HIV-positive people will be able to travel to America and will also be able to apply for citizenship there. Reversing the ban will bring families together who were separated because of HIV. “Thank you. Thank you. Thank you,” wrote Andrew Sullivan, a British journalist who is HIV-positive after Mr Obama’s announcement. He has been nervous when visiting his family in Britain for fear that he would not be allowed to re-enter America, where he and his husband live. ...

Guinea's strife: Don't let it be contagious

Thu, 05 Nov 2009 11:01:13 GMT

The neighbours of a shaky west African state fear that its instability could spread

WHEN Moussa Dadis Camara, a 45-year-old captain, seized power at the end of last year, many Guineans and foreigners were by no means unhappy. He seemed sure to be better than his corrupt and dictatorial predecessor, President Lansana Conte, who had just died after 25 years in charge. But hope evaporated at the end of September, when security forces smashed up an opposition rally in a stadium in Conakry, the capital. Soldiers and police killed at least 150 demonstrators and raped scores of women, says Human Rights Watch, a lobby based in New York.

A worldwide storm of outrage ensued. The African Union has frozen the assets held abroad by junta members. The European Union has imposed an arms embargo and has also, along with the United States, stopped giving visas to Guineans close to the regime. France, the former colonial ruler, has cut military ties. Its foreign minister has called for “international intervention”, so far unspecified. ...

Saudis and Yemenis versus jihadists: A bloody border

Thu, 05 Nov 2009 11:01:13 GMT

Trouble on the frontier between Saudi Arabia and Yemen is getting out of hand

TWO separate incidents underline the growing shakiness of Yemen’s government and the increasing fear of Saudi rulers that their own fairly successful campaign to quash Islamist terrorism may be undermined by neighbouring Yemen’s feared descent into chaos. On November 3rd suspected al-Qaeda fighters ambushed a Yemeni government convoy in the remote Hadramawt region, near the border with Saudi Arabia, killing three senior security men. A day later Yemeni rebels at the other end of the country crossed the frontier into Saudi Arabia, killed a Saudi officer and claimed to have captured a strategic mountaintop inside the kingdom. The very next day, Saudi aircraft were reported to have bombed rebel positions in Yemen.

In the first attack the Yemeni officers were targeted in what may be an emerging strategy by al-Qaeda’s resilient local branch to hit local security forces rather than symbols of “crusader” influence, such as Western embassies. The attack on Saudi Arabia, by contrast, was a spillover from the civil war in northern Yemen between government forces and rebel tribesmen loyal to a powerful local clan, the Houthis. The government accuses Shia Iran of backing the Houthis, most of whose supporters are Zaydis, a Yemeni branch of the Shia faith, whereas the rebels say Sunni Saudi Arabia is backing the government’s ferocious counter-insurgency. ...

Protests in Iran: Green November

Thu, 05 Nov 2009 11:01:13 GMT

The opposition takes to the streets again

THIRTY years ago, the world was mesmerised by pictures of 52 blindfolded Americans being taken hostage in their embassy in Tehran by Iranian students. This week’s anniversary provided more gripping scenes, as Iranians used the official celebration of that event to take to the streets once again, this time to protest against their own government and their country’s controversial president, Mahmoud Ahmadinejad, whose re-election in June they still hotly dispute.

The green movement, as the opposition calls itself, had held no big rally since Jerusalem Day in mid-September, when protesters turned an officially sponsored event into an anti-government one. On November 4th they did it again. Thousands came on to the streets, despite dark warnings from the authorities. There were big demonstrations in Tehran, and reports of others in provincial cities such as Arak, Isfahan, Mazandaran, Rasht, Shiraz and Tabriz. The internet hummed with tales of opposition protests, replete with videos and photographs. It was hard, however, to assess the size of the crowds. ...

The flagging peace process: Is Israel too strong for Barack Obama?

Thu, 05 Nov 2009 11:01:13 GMT

As America drops its demand for a total freeze on the building of Israeli settlements in the West Bank, angry Palestinians say there is no scope for resuming talks

FIVE months after Barack Obama went to Cairo and persuaded most of the Arab world, in a ringing declaration of even-handedness, that he would face down Israel in his quest for a Palestinian state, American policy seems to have run into the sand. The American president’s mediating hand is weaker, his charisma damagingly faded. From the Palestinian and Arab point of view, his administration—after grandly setting out to force the Jewish state to stop the building of Jewish settlements on Palestinian land as an early token of good faith, intended to bring Israelis and Palestinians back to negotiation—has meekly capitulated to Israel.

The upshot is that hopes for an early resumption of talks between the main protagonists seem to have been dashed. Indeed, no one seems to know how they can be restarted. The mood among moderates on both sides is as glum as ever. ...

Market performance

Thu, 05 Nov 2009 11:01:13 GMT

Despite a wobble in global stockmarkets at the end of October, investors in equities have had a rewarding year. The shares in the MSCI index, which covers 23 rich countries, have risen by more than a quarter in dollar terms since the start of 2009. Hedge funds have delivered steady returns, if not quite as much as stocks. The Hedge Fund Research (HFR) index, an industry standard, rose by 11% from the beginning of January to the end of October. The HFR index has been much less volatile than the MSCI this year. That is just as well. One selling point of such investments is that they are supposed to deliver steadier profits. Rich-country government bonds have returned a modest 4.4% since the start of the year.

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Trade, exchange rates, budget balances and interest rates

Thu, 05 Nov 2009 11:01:13 GMT

Markets

Thu, 05 Nov 2009 11:01:13 GMT

Output, prices and jobs

Thu, 05 Nov 2009 11:01:13 GMT

The Economist commodity-price index

Thu, 05 Nov 2009 11:01:13 GMT

The Economist poll of forecasters, November averages

Thu, 05 Nov 2009 11:01:13 GMT

Overview

Thu, 05 Nov 2009 11:01:13 GMT

The Federal Reserve kept the target range for its benchmark federal funds rate at 0-0.25%. The Fed said economic activity had picked up but would probably remain weak for a while. With inflation subdued, the federal funds rate was likely to remain “exceptionally low” for “an extended period”.

In America the Institute for Supply Management’s (ISM) index of manufacturing activity jumped from 52.6 to 55.7 in October, its highest reading since April 2006. The ISM’s non-manufacturing gauge pointed to modest growth in business for a second month. Home sales that had been agreed but not yet completed rose by 6.1% in September, as first-time buyers rushed to qualify for a tax credit that expires on November 30th. ...

KAL's cartoon

Thu, 05 Nov 2009 11:01:13 GMT

Business this week

Thu, 05 Nov 2009 11:01:13 GMT

America’s Federal Reserve kept interest rates at a level close to zero. The Fed’s accompanying statement, which markets were keenly awaiting for any sign of a shift in policy, reiterated its intent to keep rates “exceptionally low” for an “extended period”.

The Bank of England decided to inject a further GBP25 billion ($42 billion) into the British economy through its quantitative easing programme, raising the cumulative total to GBP200 billion. The extra asset purchases will be made over the next three months, a slower rate than before. ...

Politics this week

Thu, 05 Nov 2009 11:01:13 GMT

Hamid Karzai was declared re-elected as president of Afghanistan when a second-round run-off ballot was cancelled. The other candidate, Abdullah Abdullah, withdrew in protest at the failure to remove officials accused of involvement in the widespread fraud that marked the first round in August. Meanwhile, the UN decided to relocate 600 of its foreign workers in Afghanistan and halted development work in north-west Pakistan because of deteriorating security. See article

Five British soldiers in Helmand province were killed by an Afghan policeman, whom a British military spokesman said “went rogue”. ...

Correction: Wouter Bos

Thu, 05 Nov 2009 11:01:13 GMT

In “Denial or acceptance” (October 24th) we inadvertently rechristened the Dutch finance minister. Apologies to Wouter (not Walter) Bos, and to readers. This has been corrected online.

...

Bagehot: Plan B

Thu, 05 Nov 2009 11:01:12 GMT

David Cameron's wisely pragmatic approach to the Lisbon treaty still carries risks—mostly for him

SOME pairs of terms seem somehow to be linked ineluctably in Britain’s political discourse. “Proportional” is followed by “representation”, “expenses” is now eternally yoked with “scandal”, “boom” with the unabolished “bust”. So it has been, for the last few years, with “Lisbon treaty” and “referendum”: if European integration is the problem—and for several in the Conservative Party and the commentariat, it is—a referendum is the only solution. At least, it has seemed so until now.

On November 4th, the day after the Czech president signed the treaty, David Cameron, the Tory leader, severed that association, for the time being. If the Tories win the impending general election, he said, there will not be a plebiscite of any kind on Europe. His idea of what a Tory government would do over Europe, however, was less robust than his statement of what it will not. ...

The Chirac trial: Liberty, equality, no impunity

Thu, 05 Nov 2009 11:01:12 GMT

The salutary shock of a former president going on trial

THE French have greeted the decision to put Jacques Chirac on trial for misappropriation of public funds with mixed feelings. A surprising number of politicians have suggested that the former president should be left in peace. But voters seem pleased that an era of impunity is ending: 72% told one poll that they approved of treating Mr Chirac as an ordinary citizen before the law.

When he was president, from 1995 to 2007, Mr Chirac was immune from prosecution, and his lawyers argue that he remains so for acts during his time in office. The case going to trial is the only one of many compiled against him, mostly dating from his time as mayor of Paris in 1977-95, not to be dropped. (For the others, the statute of limitations has expired or prosecutors have said there is not enough evidence.) Mr Chirac is accused of employing 21 friends in allegedly “fake jobs” at the Paris town hall, a relatively minor charge. ...

Italy and the CIA: Conviction time

Thu, 05 Nov 2009 11:01:12 GMT

A damning verdict in an Italian court against America’s CIA

NOBODY knows how many people have fallen victim to CIA-organised “extraordinary renditions”—operations in which suspected terrorists are snatched and shipped to third countries for interrogations that often involve torture. In 2007 the CIA director, Michael Hayden, suggested the figure was around 50. But a European Parliament report the same year concluded that more than 1,000 flights had been run by the CIA through European Union airspace.

What is certain is that only one extraordinary rendition has led to a trial. On November 4th that trial, in Milan, ended with the conviction of 22 alleged CIA officers and agents, an American air force colonel and two Italian agents, all for helping to kidnap an Egyptian cleric known as Abu Omar, who vanished from a Milan street in 2003. He was released four years later and claimed to have been tortured in Cairo, where he was hung up “like a slaughtered sheep” and given electric shocks. ...

Russia and Britain: Frozen diplomacy

Thu, 05 Nov 2009 11:01:12 GMT

More of an update than a reset

EVER since the new American administration popularised the phrase, it has been fashionable to talk of a “reset” with Russia. Few relationships have needed resetting more than the one between Russia and Britain. It has been all but frozen since Russia refused to hand over Andrei Lugovoi, an ex-KGB officer suspected of murdering his former colleague (and British citizen), Alexander Litvinenko, in London in 2006. Diplomats have been expelled, contacts between security services severed and visa restrictions imposed.

On November 1st David Miliband, Britain’s foreign secretary, flew to Moscow for talks with his Russian counterpart, Sergei Lavrov. It was more of an update than a reset. His host was courteous, which is progress. The two men signed joint statements on nuclear non-proliferation, Afghanistan and the Middle East. Yet none of the sticky bilateral issues was resolved—nor was any expected to be. Mr Miliband repeated Britain’s request to hand over Mr Lugovoi, only to hear, yet again, Moscow’s response that this would be against Russia’s constitution (which is sacred unless for lengthening presidential terms). For now, at least, Mr Lugovoi will carry on as an elected member of the Russian parliament. ...

The euro-area economy: Recovery, of sorts

Thu, 05 Nov 2009 11:01:12 GMT

The European Commission reckons that today’s growth will not last

EUROPE’S emergence from its worst post-war downturn seems assured. Figures released on November 13th will confirm that the euro-area economy came out of recession in the third quarter. The fourth quarter also looks promising. Output rose at its fastest rate in almost two years in October, says a survey of purchasing managers. Business and consumer confidence have continued to improve. A jump in foreign orders for German capital goods in September is a sign that export demand is returning.

The latest forecasts from the European Commission reflect this new mood. The commission says euro-area GDP will rise by 0.7% in 2010, a brighter prospect than seemed likely in May, when it forecast a 0.1% drop. The upgrade would be larger if today’s growth rate were sustained. But the commission thinks the economy will hit a soft patch early next year, as the temporary effects of fiscal stimulus and of firms’ restocking begin to fade. ...

Eastern Europe's economic woes: Down in the dumps

Thu, 05 Nov 2009 11:01:12 GMT

The ex-communist economies have not collapsed. But finding new ways to catch up with the West will be hard

EVEN at the height of the ex-communist countries’ boom in 2006, almost half their citizens felt they lived worse than in 1989. Yet that glum verdict on 17 years of liberalisation, privatisation and stabilisation was tempered by another finding. Most of those polled by the World Bank and European Bank for Reconstruction and Development (EBRD) said they were optimistic about their children’s prospects.

The worry is that the global economic crisis has dented confidence in the future and intensified gloom about the present. Fast growth eased dissatisfaction with corrupt politicians and bossy bureaucrats. It offered at least the chance of better health care and education, which lag far behind western standards. But the average decline in GDP this year is a whopping 6.2%; recovery is expected to be slow. So east Europeans face higher taxes, bigger debts, less public spending, lower pay and fewer jobs. They do not have the same shock-absorbers as in the west—which is where, in the eyes of many, the crisis originated. ...

Religion and climate change: Sounding the trumpet

Thu, 05 Nov 2009 11:01:12 GMT

A link-up between faith and greenery brings unlikely people together

ENVIRONMENTALISM is a hard corner to fight in Louisiana, a state where oil, gas and chemical companies are big in the economy and politics. But it takes a lot to frighten Albertha Hasten, a larger-than-life campaigner for poor citizens, and above all for fellow African-Americans, who in her view suffer disproportionately from contamination of the air, water and soil.

In her small, rickety home town of White Castle, the tap-water often comes out “blacker than me”, she has complained. Mrs Hasten fights the cause of communities affected by oil spills in the wake of Hurricane Katrina, and she makes indignant phone calls to the Environmental Protection Agency in Washington, DC, to say federal pollution standards are being violated. And like many people in and around New Orleans, she fears the city could again be threatened if sea levels rise and hurricanes become even more frequent as a result of climate change. ...

Climate change and public opinion: (Not yet) marching as to war

Thu, 05 Nov 2009 11:01:12 GMT

Even as politicians and protesters gear up for a fateful climate-change meeting in Denmark, some of their fellow citizens have little stomach for a fight

IF THE forthcoming United Nations meeting in Copenhagen truly is a precious chance to save the planet from rising seas and advancing deserts, then one might expect voters all over the world to be egging on their leaders to make bold decisions.

That is the impression created by a wave of eye-catching demonstrations—such as the globally co-ordinated protest on October 24th that called, ambitiously, for carbon concentration in the atmosphere to be kept at 350 parts per million (see above). But awkwardly, there are clear signs in several democracies of sentiment moving in the other direction. ...

Bangladesh and Myanmar: Fenced in

Thu, 05 Nov 2009 11:01:12 GMT

More grief for the Rohingyas

“WE HAVE an excellent relationship with the soldiers on the other side,” says Khalilar Rahman, a Bangladesh Rifles commander at a remote outpost on a hillock in Ghumdhum, on the border with Myanmar. A Burmese outpost is a stone’s-throw away, across the paddy-field below, where Burmese labourers are frantically working to build a border fence. Concrete pillars stretch as far as the eye can see. The movement of people and goods here—in happier days earmarked as the route for a highway—has stopped completely.

As Myanmar prepares for elections next year, tensions along the 320km (200-mile) border with Bangladesh have risen. As usual, that involves more persecution for the Rohingyas, a Muslim minority whom Myanmar refuses to recognise as Burmese. Because of them, though no one says it openly, Bangladesh is probably quite happy with the fast-emerging fence. ...

Afghanistan's “re-elected” president: Karzai's tattered victory

Thu, 05 Nov 2009 11:01:12 GMT

The world agrees to pretend he won; not all Afghans suspend disbelief

BRINGING Afghanistan’s disastrous presidential election to a close, ten weeks after the voting, the chairman of the country’s Independent Election Commission (IEC) said he would only accept three questions. Incredulous journalists gathered in a glum conference room in a fortified Kabul compound would have none of it. They mobbed him as he tried to make a quick exit. The announcement that Hamid Karzai had been declared president without a second round of voting raised many more than three questions.

Top of the list is whether the next government is legitimate. Afghanistan’s legal experts lined up to say an emphatic no. Under the constitution, the winning candidate needs more than half the available votes cast in a national ballot. It was irrelevant that the second-placed candidate, Abdullah Abdullah, would not take part in a run-off, fearing massive pro-Karzai rigging, as in the first round. It had been assumed that the IEC, which many lawyers say has no right to make such a decision, might seek some legal cover by asking for a Supreme Court opinion. But that was unnecessary, as Western leaders rushed to endorse the IEC’s interpretation. ...

Politics and the war in Sri Lanka: To which victor the spoils?

Thu, 05 Nov 2009 11:01:12 GMT

The mysterious ambitions of Sri Lanka’s victorious army commander

NOT even six months has elapsed since the protracted war with Tamil Tiger rebels ended in a bloody climax, leading to the Sri Lankan government’s triumph. But already the leaders of the military campaign are sparring ahead of an election due next year. For weeks the press has been speculating about friction between the administration of President Mahinda Rajapaksa and Sarath Fonseka, the hawkish army general who commanded troops in the final assault against the Tigers.

Jittery over rumours, spread mostly by opposition parties, that General Fonseka will challenge Mr Rajapaksa in the election, the government in October banned reports about his political ambitions. A communique from the army’s spokesman warned the press that several laws would be used against those who published “false reports” using the names of serving senior army officers. ...

Banyan: Having it both ways

Thu, 05 Nov 2009 11:01:12 GMT

Despite protestations to the contrary, China needs NATO to fight in Afghanistan

ONE day early this summer, when it was still possible to claim progress in Afghanistan, Robert Gates, America’s defence secretary, was at an Asian security gathering, reeling off the names of countries who had contributed to it. The list—Canada, Mongolia, Poland—went on and on, while the harrumphing of a Chinese general in the third row grew ever louder. Eventually, he held back no longer. “Why no China?” he demanded. “Where is China on this list?”

Where indeed? The question seemed odd. Unlike the other countries on Mr Gates’s list, China has no military presence in Afghanistan. Though China has peacekeepers as far afield as Haiti and Sudan, it is allergic to sending them to neighbouring countries. Perhaps, this columnist later inquired of the general, he meant the modest intelligence that China shares with the United States on jihadists with connections in Xinjiang, China’s restive, preponderantly Muslim, western region? No, he replied testily. “I mean the mine. Our copper mine.” ...

Venezuela's energy shortage: Losing power

Thu, 05 Nov 2009 11:01:12 GMT

Communism is a cold shower

THE economy is in recession but sales of at least two items are booming in Venezuela: water-storage tanks and portable generators. A country that has claimed the world’s biggest oil reserves and is home to its fourth-mightiest river, the Orinoco, has recently been forced to ration both water and electricity. Hugo Chavez, the leftist president, blames the profligacy of consumers and a drought caused by El Nino weather. Certainly, lower rainfall has cut the flow to the country’s main hydroelectric dam (which provides three-fifths of its electricity) by a tenth. But the opposition, and several independent experts, say the underlying cause is the government’s failure to plan, maintain and invest in the necessary infrastructure.

Only a quarter of the funds budgeted for power generation have in fact been spent on it, says Victor Poleo, who was deputy minister for electricity early in Mr Chavez’s decade in power. In 2007 the president compounded the problem by nationalising what remained of the private power industry. Since then there have been half-a-dozen national blackouts. Meanwhile, demand for electricity has grown by an annual average of 4.5%. ...

Rebuilding Haiti: A step backward

Thu, 05 Nov 2009 11:01:12 GMT

The dumping of the prime minister raises fears of drift

FIVE years after the United Nations set out to build a nation in the poorest territory in the Americas, and after three years of relative political stability under President Rene Preval, outsiders have begun to express modest optimism about Haiti. Bill Clinton, a former American president and now a UN special envoy for the country, last month took a large group of foreign businessman to Haiti and told them that political risk there was “lower than it has ever been in my lifetime”.

Then came a swift reminder that Haiti’s democracy is still precarious. On October 30th the Senate voted to dismiss the prime minister, Michele Pierre-Louis, claiming that in a year in office she had done too little to solve Haiti’s miseries. Ms Pierre-Louis, who formerly ran an NGO promoting education, was widely seen as honest and capable. Appointed after food riots toppled her predecessor, she sought to cut unnecessary spending, raise tax revenues and make government more open and efficient. This checked corruption but caused political frustration. She was “refreshingly critical of the selfishness of Haiti’s political class,” says Robert Maguire, a Haiti analyst at Trinity University in Washington, DC. ...

Honduras's political conflict: Zelaya's scrap of paper

Thu, 05 Nov 2009 11:01:12 GMT

Unless outsiders continue to press, a deal to end a stubborn political conflict risks coming unstuck even before it is implemented

EVEN before it was signed on October 30th, the Tegucigalpa-San Jose Accord was hailed as a diplomatic breakthrough. For four months after Manuel Zelaya was roused from bed at gunpoint, flown to Costa Rica and replaced as president of Honduras by Roberto Micheletti, outsiders failed to reverse what they universally saw as a coup. Despite the withdrawal of foreign aid, the severing of diplomatic ties and the cancellation of dozens of American visas, Mr Micheletti refused to contemplate Mr Zelaya’s restoration. Yet diplomats from the United States took just two days to get the two men to strike a deal that, on paper, ends Honduras’s political stalemate. “I cannot think of another example of a country in Latin America that, having suffered a rupture of its democratic and constitutional order, overcame such a crisis through negotiation and dialogue,” said Hillary Clinton, the American secretary of state.

In fact it is too soon to declare victory. The agreement requires Mr Zelaya to drop his plan for a referendum on constitutional reform, which his foes saw as a bid to allow him another term. A national-unity government is to be formed by November 5th. Next year a truth commission will be set up to look at the coup. Another committee, of four people, will oversee the accord’s implementation; Ricardo Lagos, a former president of Chile, and Hilda Solis, Barack Obama’s secretary of labour, were named as its international members. ...

Elections in New Jersey and Virginia: Lessons from a double defeat

Thu, 05 Nov 2009 11:01:12 GMT

Barack Obama will find it hard to take much comfort from this year’s election day

CREIGH DEEDS is a farm boy turned country lawyer from the Alleghenies, in the south-west of Virginia. On a chilly night before this week’s governors’ elections in Virginia and New Jersey, he convened a get-out-the-vote rally in Alexandria, a well-to-do suburb just across the Potomac from Washington, DC. It was a cheerless event. Of the few hundred Democratic stalwarts who showed up, many had kind words for their candidate’s heart, but not for his political skill. “He hasn’t run a very good campaign,” George Pera, a local pastor, admitted sadly. “I guess everyone knows that.”

Every four years Virginia and New Jersey elect their governors, one year after the presidential election and a year before Congress’s mid-term elections. And every four years these off-year races are pounced upon as political bellwethers, even though they have proved to give little indication of which way voters will swing in the ensuing mid-terms, let alone in the presidential election two years further on. ...

Mayoral races: Money can't buy you love

Thu, 05 Nov 2009 11:01:12 GMT

A shabby victory for Michael Bloomberg, but breakthroughs elsewhere

ON ELECTION day in Queens, one voter asked a fellow New Yorker a question about using the voting machine. “Honey,” she replied in a smoky New York accent, “as long as you vote for Bloomberg, it doesn’t matter.” And how right she was. Michael Bloomberg, New York’s incumbent and independent mayor, only narrowly defeated Bill Thompson, his far less well-known and much poorer Democratic rival. In what turned out to be an embarrassing nail-biter, Mr Bloomberg won by just 5%, days after polls had showed him to be ahead by double digits. This was a far cry from his 20% win in 2005.

Mr Bloomberg is reckoned to have spent $100m to win himself a third term in office, exceeding even the $85m he spent last time and the $74m he spent in 2001. Still, to a man worth some $17 billion, more than anyone else in New York, this is small change. Whether it is good for democracy is another matter. Mr Bloomberg was able to outspend his rival by around 16 to one. ...

Lexington: Republicans, riven but resurgent

Thu, 05 Nov 2009 11:01:12 GMT

Why conservative in-fighting may matter less than you might think

ARE the Republicans storming back towards national power? Or do the party’s ideological divisions doom it to irrelevance? Democrats looking for hope amid the ashes of this week’s elections point to New York’s 23rd district. Not only did they win in an area that had been sending Republicans to the House of Representatives since the 19th century; they also watched the Republicans devour one another. Local Republican Party bosses picked a candidate, Dede Scozzafava, to whom conservatives took an instant dislike. Not only was she pro-choice on abortion; she also favoured, until recently, letting unions organise without a secret ballot. National stars such as Sarah Palin and Tim Pawlenty stuck their harpoons in, urging Republicans to back the candidate of the tiny local Conservative Party. Ms Scozzafava pulled out of the race and endorsed the Democrat, who went on to win.

All this shows that the Republicans are tearing themselves apart, salivate the Democrats. “The most extreme wing of the Republican Party [has] made it clear…that they’re not going to tolerate any dissent,” said Vice-President Joe Biden. Perhaps. Some Republicans do indeed care more about doctrinal purity than winning. “Moderates by definition have no principles,” growls Rush Limbaugh, a talk-radio host, adding that RINOs (Republicans in Name Only) “may become extinct”. Frank Rich, an excitable liberal columnist, gloats that conservatives are “re-enacting Stalinism in full purge mode”. ...

Battling joblessness: Has Europe got the answer?

Thu, 05 Nov 2009 11:01:12 GMT

Not entirely. But America could still learn from some of the continent’s ideas for tackling unemployment

AT FIRST sight, the idea that Europe has anything to teach America about tackling unemployment seems preposterous. America has some of the most flexible labour markets in the developed world, while continental Europe, in the popular imagination, is a sclerotic place with powerful unions, rigid labour markets and high entrenched joblessness. Over the past quarter-century America’s unemployment rate has averaged 5.8%, compared with 9.5% in France and 9.1% in Germany.

This picture may be changing. Although output in the euro area has fallen as much as in America, the unemployment rolls have not grown as much. The euro-wide jobless rate is up by less than a third, compared with a doubling across the Atlantic. At 9.7%, euro-area unemployment is high, but slightly lower than in America, where new figures due on November 6th were expected to show joblessness hitting double digits. ...

Restructuring banks: The living dead

Thu, 05 Nov 2009 11:01:12 GMT

Europe has raced ahead of America in dealing with its dud banks. But there is more work to be done

IN FILMS zombies are dealt with using anything from automatic weapons to kitchen implements. In banking few countries seem to have the guts to tackle their walking dead.

An unlikely figure, however, is now waving a frying pan at them: Europe’s competition commissioner, Neelie Kroes. While national regulators debate the finer points of moral hazard, she has walloped some of Europe’s biggest recipients of state aid, including Royal Bank of Scotland (RBS), ING, Commerzbank and WestLB. Partly as the price for European Union approval of their bail-outs, and partly under their own steam, these banks are poised to shrink their balance-sheets dramatically—typically by 40% or more from the peak. More banks are expected to follow (see article). ...

Barack Obama and the “mini mid-terms”: The change he didn't seek

Thu, 05 Nov 2009 11:01:12 GMT

This week’s results carry warnings for both parties: but the Democrats—and their leader—should worry more

SO WAS it a referendum or wasn’t it, and if so on whom? On November 3rd (see article) the Republicans trounced the Democrats in governors’ races in New Jersey and Virginia, kicking out an incumbent multimillionaire in the former, and winning in the latter by the whopping margin of 18% after eight years of Democratic rule. The pundits of the right were swift to see this as a sign of the resurgence of their battered party, after heavy losses in the 2006 mid-terms and worse ones a year ago, capped by the triumph of Barack Obama. The augurs of the left noted that reverses in the “off-year” elections held by New Jersey and Virginia have a history of being predictive of nothing at all, having sometimes been the precursors for drubbings for the ruling party at the mid-terms a year later (as in 1994) and sometimes precisely the opposite, as in 2002.

One thing seems obvious: a lot is likely to happen to Mr Obama’s fortunes between now and the 2010 mid-terms. The economy will either continue to recover or sputter again; health-care reform will either pass or collapse monumentally; Afghanistan, Iraq and Iran all contain the potential to wreck his presidency. And as for Mr Obama’s re-election prospects in 2012, it is far too early to say anything meaningful about those. Bill Clinton, after all, bounced back from the catastrophe of losing the House of Representatives to the Republicans in 1994. ...

Europe's leadership: After Lisbon

Thu, 05 Nov 2009 11:01:12 GMT

The European Union is likely to choose weak leaders. It needs strong ones

THE ratification of Europe’s Lisbon treaty, now completed by the reluctant signature of the Czech president, Vaclav Klaus, has been dispiriting. The treaty does little to make the European Union any simpler or more transparent, two supposed goals when the negotiations began eight long years ago. Nor will it make the EU more democratic or bring it any closer to ordinary citizens: indeed, voters in three countries said no to its provisions, only for their wishes to be steamrollered.

Yet with Lisbon now entering into force, it is time to move on from the EU’s introspective decade of institutional navel-gazing and turn to the pressing task of making it work better. Even the British Conservatives, who have wisely dropped their promise of a referendum on Lisbon, are slowly realising this (see Bagehot). The first task may come next week, when European leaders choose candidates for the two top jobs being created by Lisbon: the president of the European Council and a beefed-up high representative for foreign policy. Unfortunately, the continent’s rulers are likely to flunk it. ...

The war in Afghanistan: Last chance in Kabul

Thu, 05 Nov 2009 11:01:12 GMT

The election was a disaster. Hamid Karzai must reform quickly if he wants to save his country, and himself

THE election is over and it was a charade. A fortnight ago, Western leaders pushed Hamid Karzai, Afghanistan’s president, into a second round of voting to wash out the stain of wholesale fraud (1m-odd votes, most in Mr Karzai’s favour were declared invalid). Now Barack Obama and others have rushed to congratulate Mr Karzai on winning another five years. Never mind that he was unchallenged because his rival, Abdullah Abdullah, withdrew, complaining that officials who oversaw the cheating had not been sacked. Never mind that those same Afghan officials quickly ruled Mr Karzai the winner, despite doubts about the legal process (see article).

Many in Afghanistan were relieved to be spared a second poll in the face of Taliban threats, voter indifference and the approaching winter. Westerners coping with the crisis were also relieved that they had averted, for now, street protests by Dr Abdullah’s supporters, which would have risked political violence and open Pushtun-Tajik rivalry. ...

The Berlin Wall: So much gained, so much to lose

Thu, 05 Nov 2009 11:01:12 GMT

Over the past 20 years economic freedom has outpaced political liberty. Neither should be taken for granted

“OF ALL places it was in divided Berlin in divided Germany in divided Europe that the cold war erupted into an east-west street party,” this newspaper observed 20 years ago. Even to those who had been confident of the eventual triumph of the West, the fall of the Berlin Wall was surprisingly accidental. When 200,000 East Germans took advantage of Hungary’s decision to open its borders and fled to the West, their communist government decided to modify the travel restrictions that imprisoned them. Asked about the timing, the unbriefed propaganda minister mumbled: “As far as I know, effective immediately.” When that was reported on television, the Berliners were off. Baffled border guards who would have shot their “comrades” a week earlier let the crowd through—and a barrier that had divided the world was soon being gleefully dismantled. West Germany’s chancellor, Helmut Kohl, was so unready for history that he was out of the country.

The destruction of the Iron Curtain on November 9th 1989 is still the most remarkable political event of most people’s lifetimes: it set free millions of individuals and it brought to an end a global conflict that threatened nuclear annihilation. For liberals in the West, it still stands as a reminder both of what has been won since and what is still worth fighting for. ...

On the war in Afghanistan, China, bankers' bonuses, mobile phones, work, nannies, taxes

Thu, 05 Nov 2009 11:01:12 GMT

SIR – I thought Lexington misapplied the conclusion of Lewis Sorley’s book about America’s last years in Vietnam when he compared that time to present-day Afghanistan (October 17th). Although Mr Sorley does say that America could have saved South Vietnam by not cutting off military aid to its government, he puts this in the context of a Vietnam where the Vietcong had been defeated; American troops had been withdrawn; the South Vietnamese were in effective governance; and the threat was from a conventional cross-border invasion. None of those conditions would appear to apply to Afghanistan today.

Moreover, the defeat of the Vietcong was achieved with the help of the US CORDS programme, the precursor of today’s COIN, or counter-insurgency, effort. US CORDS was implemented in co-operation with a South Vietnamese government that was considered to be “good enough”. ...

The fall of Communism: Wall stories

Thu, 05 Nov 2009 11:01:12 GMT

How communism in eastern Europe collapsed, and what came next. Scholars and journalists give their account

Uncivil Society: 1989 and the Implosion of the Communist Establishment. By Stephen Kotkin. Modern Library; 197 pages; $24. Buy from Amazon.com

1989: The Berlin Wall: My Part in its Downfall. By Peter Millar. Arcadia; 220 pages; GBP11.99. To be published in America by Arcadia in April 2010; $16.95. Buy from Amazon.com, Amazon.co.uk ...

France and England in the 16th century: The tale of two families

Thu, 05 Nov 2009 11:01:12 GMT

The rise of the Guises and the Cecils

Martyrs and Murderers: The Guise Family and the Making of Europe. By Stuart Carroll. Oxford University Press; 368 pages; $34.95 and GBP18.99. Buy from Amazon.com, Amazon.co.uk

The Cecils: Privilege and Power Behind the Throne. By David Loades. The National Archives; 256 pages; $34.95 and GBP9.99. Buy from Amazon.com, Amazon.co.uk ...

Bridget Riley: Livid lines

Thu, 05 Nov 2009 11:01:12 GMT

A British painter colours her palette

Bridget Riley's exhibition at the Timothy Taylor Gallery in London shows the 77-year-old painter in a new experimental phase. She has replaced the familiar black-and-white stripes with vivid curves of colour shaped into layers, each one different, and yet all so full of energy and movement they hustle and strain to escape. Prices: up to GBP400,000. ...

Knut Hamsun: Terrible man, celebrated writer

Thu, 05 Nov 2009 11:01:12 GMT

Norway's greatest novelist re-examined

Knut Hamsun: Dreamer and Dissenter. By Ingar Sletten Kolloen. Yale University Press; 378 pages; $40 and GBP25. Buy from Amazon.com, Amazon.co.uk

KNUT HAMSUN, known as Norway’s greatest novelist, was a difficult and destructive person. He wreaked havoc with his family and his two wives and no day went by without some outburst or perceived slight. He hated and envied Ibsen and he loved Hitler. As an old man (born in 1859, he died in 1952) he refused to deny his worship of Hitler and his delight at the prospect of Norway becoming part of a greater Germany. After Hitler committed suicide, he sent a telegram of condolence to the German people. And throughout his life he railed against the Anglo-Saxons. ...

Suburbs: Invincible green lawns

Thu, 05 Nov 2009 11:01:12 GMT

Much derided, suburbs are where city-dwellers like to go

The Freedoms of Suburbia. By Paul Barker. Frances Lincoln; 240 pages; GBP25. Buy from Amazon.co.uk

SUBURBIA, at least in its British form, seems to be in good odour at the moment. The London Transport Museum has a show of the posters that did so much to promote suburban living in the early 20th century. Now Paul Barker, a respected writer on British society, has issued a trenchant defence of suburbia, which he describes as the great balancing act between urban and rural living, between privacy and price. ...

Arlington cemetery: Hope eternal

Thu, 05 Nov 2009 11:01:12 GMT

What happened to General Robert E. Lee's family estate

On Hallowed Ground: The Story of Arlington National Cemetery. Robert M. Poole. Walker & Company; 343 pages; $30. Bloomsbury; GBP25. Buy from Amazon.com, Amazon.co.uk

THIS engaging history of Arlington National Cemetery, America’s most hallowed military burial ground and home to over 300,000 soldiers, officers and statesmen, is also the story of America’s maturation through death and war. ...

Japan's technology champions: Invisible but indispensable

Thu, 05 Nov 2009 11:01:12 GMT

A host of medium-sized Japanese electronics firms have developed dominant positions in many areas of technology. Can they keep them?

Correction to this article

ABOUT 40 nuclear reactors are under construction around the world, designed by half a dozen companies from America, China, France, Japan and Russia. But to obtain a huge, solid-steel vessel to contain the radioactivity, all must turn to a single firm, Japan Steel Works, on the northern island of Hokkaido. Though smaller or welded vessels exist, only the Japanese company has the technology to forge the critical $150m part from a single 600-tonne ingot. ...

Baghdad's Green Zone goes dry: Stop that naughty Western habit

Thu, 05 Nov 2009 11:01:12 GMT

Life for Westerners in Iraq’s capital becomes less bearable

RESIDENTS of Baghdad’s fortified Green Zone, where nearly all Western civilians in the capital still live in around 100 compounds, along with several thousand soldiers, have long enjoyed a relatively privileged life. Unlike just about everyone else in Iraq, they have electricity that keeps them permanently cool, lights their rooms, plays their music, and runs their fridges around the clock. Their water is clean; loos flush. Above all, suicide-bombers and other insurgents are generally kept out by a maze of high concrete walls and stringently checked entry points, though the occasional lethal bomb has gone off and in bad times rockets and mortars have rained down. Compared with the rest of Baghdad, fatalities have been rare.

Now, however, the residents of the Green Zone are taking a big hit. Many of its diplomats, security people, lobbyists and aid workers have been used to whiling away their evenings at cocktail parties or in bars. But the Iraqi government is banning the transport and sale of alcohol inside the zone even though alcohol will remain legal in other parts of the country. Liquor stores must close after selling off their stock. Restaurants have been told to go dry. ...

Iraq's coming election: The region's liveliest system

Thu, 05 Nov 2009 11:01:12 GMT

Amid the bickering and chicanery, people are engaging in democracy

SOMETIMES it seems as if Iraqi politicians cannot agree on anything. Parliament has taken months debating a bill to pave the way to elections on January 16th, though at least 296 parties have declared their intention to compete at the polls. Yet outside the chamber many members say they want the same things. The era of sectarian division, they all insist, is over. Shias and Sunnis embrace at press conferences as they present electoral alliances. In the name of reconciliation, politicians disavow the militias that once killed on their behalf. Banners proclaim the goal of “national unity”. Is there any sign that such fine dreams might ever come true?

For all the backbiting, progress is plain. After months of negotiations, six main electoral blocks have emerged to meet a looming deadline for registering alliances. The three that look most genuinely post-sectarian may well be the strongest. The rest sport fig-leaves of diversity but are tainted with past sectarian violence. ...

Alan Peters

Thu, 05 Nov 2009 11:01:12 GMT

Alan Peters, furniture-maker, died on October 11th, aged 76

REACHING blearily, in the morning, for a pair of socks, few people give a thought to the smooth running of a drawer. But to Alan Peters, who for many years was probably Britain’s best furniture-maker, a properly fitted and functioning drawer was the acme of his craft. A perfect drawer, he would say, had to slide in on a cushion of air, and when pulled out had to cause the other drawers to retract, very slightly, into the almost airtight case. It must show no hint of “slop” from top to bottom or side to side. The front must fit into the opening like a plug, with no light or gaps visible.

All very well to say; but Mr Peters, true to the Arts and Crafts Movement in which he had been trained, was working with “timber rather than walking sticks”, in William Morris’s phrase. Solid wood moved: it faded in sunlight, swelled in humidity, dried out in central heating, in constant sympathy with its surroundings. In Mr Peters’s hands it adjusted to the user, too: to sit in one of his chairs was to feel the back give a little, graciously, as if “it wants you to”. Wood moved slowly, but not equally, with its mixture of springwood and summerwood, straight and wavy grain, knots, rings and imperfections. And it would always go the way it was naturally inclined. ...

Agriculture and satellites: Harvest moon

Thu, 05 Nov 2009 11:01:12 GMT

Artificial satellites are helping farmers boost crop yields

FOR farmers, working out the optimal amount of seed, fertiliser, pesticide and water to scatter on a field can make, or break, the subsequent harvest. Regular laboratory analyses of soil and plant samples from various parts of the field can help—but such expertise is costly, and often unavailable. A new and cheaper method of doing this analysis, though, is now on offer. Precise prescriptions for growing crops can be obtained quickly, and less expensively, by measuring electromagnetic radiation reflected from farmland. The data are collected by orbiting satellites.

The spectrum of this radiation—which can be in the form of either natural sunlight or artificial radar—can reveal, with surprising precision, the properties of the soil, the quantity of crop being grown, and the levels in those crops of chlorophyll, various minerals, moisture and other indicators of their quality. If recent and forecast weather data are added to the mix, detailed maps can be produced indicating exactly how, where and when crops should be grown. The service usually costs less than $15 per hectare for a handful of readings a year, and can increase yields by as much as 10%. ...

Europe's troubled banks: The muscles from Brussels

Thu, 05 Nov 2009 11:01:12 GMT

Decisive action on zombie banks from…the European Commission

NEELIE KROES has, according to one analyst in London, “cut through all the bullshit”. Europe’s competition commissioner has trod where national regulators dare not, by imposing harsh penalties on the banks that received the biggest bail-outs in Europe. On November 3rd Britain’s two monsters, Royal Bank of Scotland (RBS) and Lloyds Banking Group (LBG), got the treatment. In the preceding week ING, a Dutch insurance and banking conglomerate, surprised investors by announcing a break-up and a capital raising. Over the summer Germany’s Commerzbank and WestLB both agreed to tough penalties. Several more banks, including Dexia and KBC, both based in Belgium, and Germany’s Hypo Real Estate, are next in the commission’s line of fire.

Ms Kroes is acting under a generous interpretation of her mandate. The objectives of reversing the damaging effects of state aid on competition and of ensuring that bailed-out firms have viable business plans are not controversial. But the commission’s apparent desire to address concerns over moral hazard by punishing firms that have been rescued by the state is much more provocative. National governments have so far done precious little to tackle this issue. That partly reflects their defence of national champions, but also a reluctance to start messing about with big banks while the supply of credit to the economy is still under threat and while they still need to raise more equity from private investors. ...

Video games move online: A giant sucking sound

Thu, 05 Nov 2009 11:01:12 GMT

The internet swallows another media business, but spits out some hope

IN THE eyes of media executives, the internet is a malevolent vacuum-cleaner, sucking in one business after another. Music, software and videos are all increasingly obtained online—often free of charge. Now it is the turn of video games. A combination of new technology and compelling economics means that many, if not most, of them will be played online soon.

Online gaming is not new. Since the early days of the internet, netizens have indulged in “massively multiplayer role-playing online games”, a genre that, now complete with fancy graphics, is still very popular, particularly in Asia. Some console games can be played online. “Episodic” gaming, in which new add-ons for console games can be downloaded for a fee, is gaining ground. And there are many “casual” online games, often web-based versions of board and card games. Yet in 2009, all these online offerings are expected to account for just $9.4 billion of the $55 billion market for video games, according to PricewaterhouseCoopers, a consultancy. ...

America's carmakers make a comeback: Rinsed and raring to go

Thu, 05 Nov 2009 11:01:12 GMT

After a terrible year there are signs of hope for Detroit

AMERICA’S carmakers appear to have returned from the grave. This week the three big ones—Ford, General Motors and Chrysler—all had good news to report. Ford recorded a wholly unexpected profit for the third quarter of nearly $1 billion, thanks in large part to a huge improvement in its North American operations. Sergio Marchionne, boss of Fiat and now Chrysler, laid out a detailed five-year plan for restoring the American company to health in a seven-hour presentation. Most sensationally, GM’s board, citing both the improving business environment and the firm’s own recovering financial health, reversed its decision to sell a majority stake in Opel/Vauxhall, its European subsidiary, to Magna International, an Austrian-Canadian partsmaker, and Sberbank, a Russian bank. Both GM and Ford were also able to post year-on-year increases in sales in October, of 4.7% and 3.3% respectively.

A year ago, such a turnaround seemed unimaginable. GM had declared losses of $4.2 billion in the third quarter and Ford of $2.7 billion. Both firms had burned their way through nearly $7 billion of cash each during the quarter. The smallest of the three, privately held Chrysler, did not say how much it had lost, but an educated guess was about $2 billion. ...

Foreign investors in Hungary: Less welcome

Thu, 05 Nov 2009 11:01:12 GMT

Are populist politicians turning on foreign capital?

FOREIGN investment helped catapult central Europe to prosperity over the past 20 years. To escape the current recession it will need more of it. But a populist response to the economic crisis is pulling in the opposite direction, as several recent incidents in Hungary illustrate.

The body that administers Hungary’s airwaves, ORTT, has taken the two nationwide radio licences away from foreign-owned stations and given them to two local firms, one of which has links to Fidesz, the right-wing opposition party. The body’s chairman, Laszlo Majtenyi, has resigned, complaining that the decision—by delegates from Fidesz and the ruling Socialist party—broke the law. A parliamentary investigation has been blocked, prompting speculation about a political stitch-up. ...

Gift certificates get a makeover: The gift that gives back

Thu, 05 Nov 2009 11:01:12 GMT

Retailers are using gift certificates to drum up more business

GIFT certificates, or rather their high-tech new replacements, gift cards (certificates in the form of credit cards), are America’s most popular present. They spare gift-givers the strain of choosing anything specific, and recipients the horror of having to keep the result. Retailers like them too, because they are quite profitable. But like most goods in the recession, they have become harder to shift, prompting some radical redesigns.

Gift cards are profitable because retailers receive money for them up front, and around 10% of them are never redeemed, according to Lew Paine of the GFK Group, a market-research firm. When people do use them, they often spend more than the amount given, on products with high margins. ...

Berkshire Hathaway buys BNSF: Express from Omaha

Thu, 05 Nov 2009 11:01:12 GMT

America’s most famous investor buys a railway company

WARREN BUFFETT describes his latest deal as “an all-in wager on the economic future of the United States”. On November 3rd his investment firm, Berkshire Hathaway, agreed to buy the 78% it did not already own of Burlington Northern Santa Fe, America’s second-biggest railway operator, in a deal valued at $44 billion. Saluting the flag has become an integral part of Mr Buffett’s carefully cultivated folksy image, but the deal also looks like a bet on many less stirring ideas, including ever-higher imports from China, heavier traffic through the Panama Canal, higher oil prices and the preservation of coal’s big role in power generation in America.

The purchase is Mr Buffett’s biggest yet, but the size is no surprise. Back in 2002 he said, “We are looking for big deals…We have got an elephant gun and it’s loaded.” Berkshire Hathaway is paying around 30% more for Burlington Northern’s shares than their price on the day before the deal was announced, and barely 10% less than their all-time high. Unlike with Mr Buffett’s $5 billion investment in Goldman Sachs in the depths of the crisis last September (now worth over $7 billion), he could have bagged this elephant for a lot less money: in March, Burlington Northern shares hit a low of $51, compared with the $100 Berkshire is paying for them now. ...

Economics focus: Pay for delay

Thu, 05 Nov 2009 11:01:12 GMT

Wage subsidies and fatter jobless benefits have softened the impact of the recession but may yet hurt recovery

AMERICA may lead the rich world in periods of prosperity, but Europe has shown a greater talent for dealing with recession. Unemployment in the euro area has risen by 30% from its pre-crisis levels. America’s jobless rate has more than doubled. In Germany, the largest country in the euro zone, output fell far harder than America’s during the worst months of the crisis but Germany’s unemployment rate barely rose. Consumer spending has held up surprisingly well in a country where high saving is the norm even in good times. “Germany is calm,” says one official with satisfaction. By comparison, America is deeply troubled.

What explains the resilience of continental Europe? Some of it was already built-in. Job-protection laws make it costly for firms to lay off workers, and where posts are sacrificed, the newly unemployed are preserved from penury. They receive benefits worth around two-thirds of their lost salaries in most countries. Only in Italy are benefits anywhere near as skimpy as in America and Britain, where new claimants receive just 28% of their previous earnings. European governments also have fewer qualms about intervention. A new report from the OECD identifies 14 kinds of job-market initiatives put in place since recession struck. France ticks 12 of those boxes, more than any other country. ...

Nanobiotechnology: Seeding the seeds

Thu, 05 Nov 2009 11:01:12 GMT

Carbon nanotubes find an unusual use as fertilisers

MANURE, compost and ash were used as fertilisers for centuries before the 1800s, but people did not understand how they worked until the science of chemistry was developed in the 19th century and it became clear that they supply plants with nitrogen, phosphorous and potassium. Today, something similar may be happening with a different sort of fertiliser altogether. For reasons that are not yet entirely clear, it looks as though exposing seeds to carbon nanotubes before they germinate makes the seedlings that subsequently sprout grow faster and larger.

A carbon nanotube is, as its name suggests, a tiny cylinder of carbon atoms. Such tubes have been proposed for all sorts of fancy uses, particularly in electronics, but they and other nanoparticles (so called because their dimensions are measured in nanometres, or billionths of a metre) have also been objects of concern. The fear is that if they became ubiquitous, they might damage living creatures, people included, by interfering with the way cells work. ...

Climate change: For peat's sake, stop

Thu, 05 Nov 2009 11:01:11 GMT

The world’s wetlands are big sources of greenhouse gases

BOGS, mires, marshes, swamps, fens and quagmires—whatever they are called, and wherever they are found, peaty wetlands emit about 1.3 billion tonnes of CO2 a year as a result of human activity that drains them and thus exposes them to the oxidative effect of the atmosphere. Nor does this figure include the effect of fire on dried-up bogs. That can double the amount of CO2 released in a year, in those places it affects.

That, at least, is the conclusion of a report published by Wetlands International, a lobby group, at the United Nations Framework Convention on Climate Change meeting being held in Barcelona this week. Hans Joosten of the University of Greifswald, in Germany, who is one of the report’s authors, said that although drained peat occupies a mere 0.3% of the world’s land surface, it is responsible, in total, for 6% of man-made CO2 emissions. ...

Mikhail Gorbachev and the fall of the wall: The man who trusted his eyes

Thu, 05 Nov 2009 11:01:11 GMT

Why the Soviet Union’s leader did not send in the tanks

THE fall of the Berlin Wall was not big news in Russia. Neither was it a surprise. It was a logical consequence of the process that began in Moscow in 1985 when Mikhail Gorbachev came to power.

By 1989 his perestroika, or reconstruction and opening, was in full swing. Andrei Sakharov, Russia’s most famous dissident and nuclear scientist, returned from his forced exile in Gorky and was elected to the first Soviet parliament. Banned films and books flooded the intellectual space. The physical space also opened up, as Russians started to travel to the West. ...

After the Soviet collapse: A globe redrawn

Thu, 05 Nov 2009 11:01:11 GMT

Welcome to the new world disorder

TO RUSSIA’s once and possibly future president, Vladimir Putin, the collapse of the Soviet Union—two years after the fall of the Berlin Wall—was “the greatest geopolitical catastrophe” of the 20th century. It set off shocks that were felt across the globe. Russians who lived through the ruinous inflation and currency woes of the early post-Soviet years paid a heavy price. Yet few ouside Russia lamented the passing of the century’s last failed empire.

Even Russians had seen worse. For them, the 20th century had already brought the first world war, with the Bolshevik grab for power, followed by Stalin’s self-induced famine, which killed millions. By contrast, the end of the cold war was hardly devastating. The post-1945 nuclear stand-off between the Soviet Union and the West had brought a perilous stability, but had generated proxy wars from Korea and Vietnam to Angola, Central America and Afghanistan—a continuation of cold war by more traditional bloody means. Indeed the collapse of Soviet influence around the world went unmourned outside Russia, except by those who had relied on it to seize and hold power. Yet how had the end come so fast? And how would it refashion a world forged over four decades of superpower domination and rivalry? ...

China's reaction to Communism's collapse: Keep calm and carry on

Thu, 05 Nov 2009 11:01:11 GMT

How Deng Xiaoping neutralised the country’s worst moment

“THE East German people are now strengthening their unity under the leadership of the party.” So declared China’s Communist Party mouthpiece, the People’s Daily, in October 1989. A month later the Berlin Wall fell. Even today, China’s leaders find the memory painful.

China’s state-owned media have mostly avoided the subject, as they have also stayed silent about the anniversary in June of China’s own pro-democracy upheaval of 1989—tumult that was witnessed by Mikhail Gorbachev, Russia’s leader, and which was bloodily suppressed only when he had gone home. They are probably obeying instructions from the Central Propaganda Department of the party. The party’s keen interest in the cause of national unification (in its case, reclaiming Taiwan) has not helped ease its qualms about the fate of East Germany. ...

The world after 1989: Walls in the mind

Thu, 05 Nov 2009 11:01:11 GMT

The ex-communist countries of central Europe have fared well, mostly, since 1989. But they still have to shed their image as poor and troubled relations

PICTURE yourself in a smoky cafe somewhere in the middle of Europe—Prague, say—in late 1989. Sipping muddy coffee sweetened with gritty sugar, served by a sullen waiter at a greasy table, you are discussing the future with friends. Their ill-cut clothes are in dull blue, brown and green, the hallmarks of planned-economy tailoring. Your foreign gear stands out a mile.

In the cafe window, posters tell of a revolution won (see article). One is a poignant death notice for “Comrade Fear”—the once omnipresent and omnipotent embodiment of the totalitarian regimes, newly toppled by candles, flags and courage. Another poster shows a simple starburst, with the words “Gloria in Excelsis Deo”. Religion, like so much else, is now a matter of free choice. But a third poster shows the task ahead. It depicts Europe divided by a cliff that runs along the old Iron Curtain. A precarious ladder leads from the gloomy east to the sunny western uplands. “Back to Europe”, it reads. Before the communist era, countries such as Czechoslovakia, Poland and Hungary were at the centre of the continent, not its impoverished and isolated backwater. ...

Berlin re-united: Not quite grown up

Thu, 05 Nov 2009 11:01:11 GMT

Still sparsely peopled, and still an island

UNTIL the Berlin Wall fell, Jutta Wrase photographed mostly in black and white. You could buy colour film in East Berlin, but the colours were bad and few shops would develop it. After the wall fell Ms Wrase was too shocked for a while to photograph much. Not that she mourned the old regime: she had photocopied forbidden books for her friends and was once detained by the Stasi, East Germany’s secret police. But on November 9th 1989, when a bungled East German government announcement sent a surge of people westwards, swamping the checkpoints in the wall, “something emotional fell away”. Kodak could not make up for that, at least not at first.

Twenty years after Germans crowded disbelievingly through the wall, it is a fading scar in the capital of a united Germany. But Berlin has not attained urban adulthood. It abounds in things a great city needs, such as opera houses and underground transport, but still wants for others, notably people and jobs. It has a population of 3.4m but could easily take a million more. Where other city centres bustle, in Berlin’s you can often hear your own footfalls. ...

Schumpeter: Food fight

Thu, 05 Nov 2009 11:01:11 GMT

Kraft and Cadbury need to think about the loyalty of future consumers as well as existing ones

IT SEEMS that food still trumps everything. The past few months have seen a parade of proposed corporate marriages in all sorts of gee-whiz industries, from entertainment (Disney and Marvel) to information technology (Xerox and ACS). But none of these has attracted as much attention as a possible tie-up between America’s biggest food conglomerate, Kraft, and Britain’s best-loved chocolate-maker, Cadbury.

There are lots of reasons for this interest. The mating dance has been unusually long and the deal is unusually large. Kraft first proposed a purchase at a price of GBP10.2 billion ($16.7 billion) in early September and it now has until November 9th to make a formal offer or give up the fight. The courtship has unleashed a barrage of bad puns (“Cadbury gags on Kraft bid”). It has also stirred up atavistic fears across Britain of a faceless American conglomerate wrecking a great British institution and forcing Britons to give up Dairy Milk chocolate and Creme Eggs in favour of Cheez Whiz and Jell-O. ...

NASA's new rocket: The first (and last?) flight of Ares

Thu, 29 Oct 2009 11:53:58 GMT

The launch of the Ares I-X raises hopes at NASA

NASA’s new Ares I-X rocket was launched successfully from the Kennedy Space Centre, in Florida, on October 28th. It is part of the American space agency’s programme to replace its ageing shuttles and create a vehicle that could take people to the moon. The political backdrop to this test flight, which cost $455m and lasted only a few minutes before splashing down in the Atlantic Ocean, is uncertainty over whether Barack Obama’s administration will continue the course set by President Bush (high in ambition, low in funding) or set out on a new path that matches the agency’s goals with its budget. Without more money, this will mean conceding that Americans will not return to the moon by 2020, as Mr Bush hoped. And a change in this direction might mean scrapping Ares in favour of something cheaper.

...

Politics this week

Thu, 29 Oct 2009 11:53:58 GMT

More than 100 people were killed by a car bomb in a crowded market area in Peshawar, capital of Pakistan’s North-West Frontier Province. The attack coincided with a visit to Pakistan by Hillary Clinton, the American secretary of state, and with a continuing campaign by Pakistan’s army against Taliban militants in the tribal area of South Waziristan. The Taliban denied involvement in the bombing, but the government blames them for a series of attacks in October across Pakistan, in which more than 300 people have been killed. See article

Violence continued in Afghanistan as it prepared for a run-off on November 7th in its presidential election. The Taliban claimed responsibility for a gun attack on a guesthouse in Kabul in which at least eight people were killed, including five foreign United Nations employees. See article ...

Cheaper desalination: Current thinking

Thu, 29 Oct 2009 11:53:58 GMT

A fresh way to take the salt out of seawater

THERE is a lot of water on Earth, but more than 97% of it is salty and over half of the remainder is frozen at the poles or in glaciers. Meanwhile, around a fifth of the world’s population suffers from a shortage of drinking water and that fraction is expected to grow. One answer is desalination—but it is an expensive answer because it requires a lot of energy. Now, though, a pair of Canadian engineers have come up with an ingenious way of using the heat of the sun to drive the process. Such heat, in many places that have a shortage of fresh water, is one thing that is in abundant supply.

Ben Sparrow and Joshua Zoshi met at Simon Fraser University in Vancouver, while completing their MBAs. Their company, Saltworks Technologies, has set up a test plant beside the sea in Vancouver and will open for business in November. ...

Nutrition and health: Food, glorious food

Thu, 29 Oct 2009 11:53:58 GMT

The way health claims about food are regulated is changing

BARELY a day seems to pass without a new study reporting the benefits of omega-3 fatty acids. A high intake of omega-3s has been linked with reduced rates of depression, cardiovascular disease and homicide. In pregnant women the consumption of these wonder molecules has even been associated with an uplift of the IQ of their offspring. The food industry has responded to this bonanza of evidence by putting omega-3s into everything from baby milk to drinks to margarine in the hope of increasing sales while bringing health benefits to fat and sickly customers.

Behind the silver lining, though, looms a black cloud: not all omega-3s are created equal. The good ones (long-chain fatty acids) come from expensive sources such as fish. The far less beneficial ones (short-chain fatty acids) come from cheap plant oils like flax seed and soya, as well as from leafy green vegetables. No prizes for guessing which type of omega-3s some less-scrupulous manufacturers have chosen to put in their products in order to imply health benefits. ...

Business this week

Thu, 29 Oct 2009 11:53:58 GMT

America’s GDP grew in the third quarter, the first time its economy has expanded in more than a year. Home resales jumped by 9.4% in September from August, the biggest rise in 26 years, as first- time buyers rushed to take advantage of a tax credit that is about to expire. But sales of new homes dropped unexpectedly, consumer confidence fell sharply and a number of polls showed Americans are still deeply concerned about the economy, particularly jobs. Stockmarkets have slipped from their recent bullish highs.

Britain’s economy contracted by 0.4% in the third quarter, compared with the previous quarter, surprising most observers, who had expected the data to show that Britain had pulled out of recession. ...

Wine and sea food: Red rags

Thu, 29 Oct 2009 11:53:58 GMT

An old rule of cuisine is explained by chemistry

THAT red wine is not to be paired with seafood is nearly a religious dogma among connoisseurs. Their reason is that the combination usually results in a strong and unpleasant fishy aftertaste. The traditional explanation for the bad pairing is based on the presence of tannins—the chemicals that make red wines taste dry and cause the mouth to pucker. Yet, every now and again, a tannin-rich red wine that does go well with seafood turns up. Which wines can manage this pairing, and why, has remained a mystery that even the best-trained sommeliers do not understand. A series of experiments just published in the Journal of Agricultural and Food Chemistry has, however, provided the answer.

Takayuki Tamura and his colleagues work at the Product Development Research Laboratory of Mercian Corporation in Kanagawa, Japan. They started their exploration of what was behind the strange aftertaste by asking seven experienced wine tasters to sample red wines and white wines while eating scallops. The panellists were instructed to rate the presence of any fishy aftertaste on a scale of zero to four, with zero indicating no such aftertaste and four indicating an extremely strong one. Over the course of four sessions, they were presented with a grand total of 38 red wines, 26 white ones, 2 sherries, a dessert wine, a port and a Madeira. The drinks were offered in random order, in coded glasses. ...

Nutrition: Note to self

Thu, 29 Oct 2009 11:53:58 GMT

The best ways to get enough omega-3 oils

THE best ways to get enough “good” (ie, long-chain) omega-3 oils are either to eat lots of oily fish or to take, every day, supplements that contain at least 500mg of eicosapentaenoic acid (EPA), or docosahexaenoic acid (DHA), or both (though some studies have suggested as much as 1,100mg a day is better). Products that contain short-chain omega-3s, such as alpha-linolenic acid from plant oils like flax-seed oil, have not been linked with the strong health benefits shown by fish oils.

Having got enough long-chain oils, though, it is important to let them do their work. That means reducing consumption of omega-6 oils—those found in maize, sunflower, olive and most other seed oils. Many people have turned to these seed oils as a way of reducing their intake of saturated fats, but omega-6 fatty acids compete in the body with omega-3s, since the two have similar chemical properties. The best dietary ratio of omega-6 to omega-3 is reckoned to be less than 4:1. In Western diets, it is typically more like 10:1. The message, then, is: eat less fat and get more of it from fish. And those who buy omega-3 supplements that also contain omega-6s are probably wasting their money. ...

Schumpeter: Fish out of water

Thu, 29 Oct 2009 11:53:58 GMT

Policymakers are turning their minds to the tricky subject of promoting entrepreneurship

UNEMPLOYMENT is creeping ever higher. In the United States it will soon exceed 10%. In parts of Europe it is closer to 20%. Around the world young people are finding it all but impossible to get a job.

So far policymakers have focused on rescuing the economy from free fall, boosting demand, however indiscriminately, and rescuing failing companies, however expensively (AIG received $180 billion-worth of government support). But policymakers are beginning to turn their minds to the potentially more rewarding question of creating tomorrow’s jobs, rather than trying to save yesterday’s. The buzzwords in government circles are entrepreneurship, innovation and venture capital. ...

Fertility and living standards: Go forth and multiply a lot less

Thu, 29 Oct 2009 11:53:57 GMT

Lower fertility is changing the world for the better

SOMETIME in the next few years (if it hasn’t happened already) the world will reach a milestone: half of humanity will be having only enough children to replace itself. That is, the fertility rate of half the world will be 2.1 or below. This is the “replacement level of fertility”, the magic number that causes a country’s population to slow down and eventually to stabilise. According to the United Nations population division, 2.9 billion people out of a total of 6.5 billion were living in countries at or below this point in 2000-05. The number will rise to 3.4 billion out of 7 billion in the early 2010s and to over 50% in the middle of the next decade. The countries include not only Russia and Japan but Brazil, Indonesia, China and even south India.

The move to replacement-level fertility is one of the most dramatic social changes in history. It manifested itself in the violent demonstrations by students against their clerical rulers in Iran this year. It almost certainly contributed to the rising numbers of middle-class voters who backed the incumbent governments of Indonesia and India. It shows up in rural Malaysia in richer, emptier villages surrounded by mechanised farms. And everywhere, it is changing traditional family life by enabling women to work and children to be educated. At a time when Malthusian alarms are ringing because of environmental pressures, falling fertility may even provide a measure of reassurance about global population trends. ...

Low fertility : The rich are different

Thu, 29 Oct 2009 11:53:57 GMT

Rich nations are also reaching replacement fertility—by boosting their rates

WHAT happens in poor countries when they reach replacement fertility? The lesson of rich countries is that they stay there for decades. German fertility dipped below replacement in 1970 and is still low. America is the only rich country that, having fallen below the replacement rate, has risen back above it.

Except in a few extraordinary cases—Hong Kong, Macao, parts of eastern Germany—fertility has not fallen to the very low rate of 1.0. In most rich countries, the rate stabilises at about 1.3 and begins to rally. But the rally varies. Northern Europe—Britain, Scandinavia, France—is seeing big rises in fertility, though not yet to above-replacement levels. Russia and eastern Europe have seen little increase in fertility and Mediterranean countries only modest rises. ...

Nestlé: The unrepentant chocolatier

Thu, 29 Oct 2009 11:53:57 GMT

The world’s biggest food company is betting on an emerging class of health and nutrition products to spur its growth. But risks abound

IT IS a curious blend of kitchen and laboratory. From one room wafts the bittersweet smell of chocolate being gently heated and stirred by chocolatiers. Around the corner it is all science. A double row of cubicles contains human guinea pigs who sniff and taste from little tubs, scoring each on criteria such as sweetness or bitterness to produce complex flavour charts. Down the corridor, women in comfortable chairs talk about how chocolate makes them feel. Cameras and microphones record their most minute gestures for the scrutiny of psychologists and anthropologists.

This is the science behind Nestle’s 110-year-old chocolate factory next door, which each morning exhales the aroma of roasting almonds and cocoa beans over Broc, a chocolate-box-perfect Swiss village where even the weeds in an overgrown lot seem orderly. It is in these laboratories, where a pinch of art is mixed with SFr25m ($23.6m) of technology, that new chocolate recipes are devised. At another Nestle research centre in Lausanne, meanwhile, researchers have been working out how chocolate affects metabolism and the behaviour of gut microbes—in other words, analysing chocolate as a pharmaceutical product, rather than a treat. ...

Protecting displaced Africans: Selective rescue

Thu, 29 Oct 2009 11:53:57 GMT

A new treaty promises much, but will not help those who need help most urgently

AFRICA contains half of the world’s Internally Displaced Persons (IDPs)—those who have fled their homes but continue to live in their own countries. Sudan alone has over 4m of them, about the same number as the whole of Asia. Congo has another 2m or so, Somalia at least 1.3m. A score of other countries including Uganda, Zimbabwe and Kenya have hundreds of thousands more. In sum, there are about 12m IDPs across the continent.

On top of that, Africa has 3m refugees, who, by crossing an international border, have rights and can expect assistance from the United Nations High Commissioner for Refugees (UNHCR). IDPs, however, are not so fortunate. No binding agreements protect them. UNHCR will help out, but generally they have to rely on the generosity of foreign-aid organisations and, occasionally, the goodwill of their own governments. Sometimes though, as in the Darfur region of Sudan, those very same governments have driven the IDPs from their homes in the first place. ...

Riots in Jerusalem: Just like old times?

Thu, 29 Oct 2009 11:53:57 GMT

Not quite. But the riots afflicting Jerusalem are worrying, all the same

BLACK smoke again rose over the al-Aqsa mosque on October 25th, as Palestinian rioters and Israeli security forces clashed after two weeks of quiet. Just as they had earlier in the month, Palestinian youths set tyres and piles of rubbish on fire in the Old City and threw stones at Israeli policemen storming the holy compound. Three Israeli policemen and about 30 Palestinians were injured.

The clashes were sparked by rumours that extremist Jewish groups planned to harm al-Aqsa, which sits atop a compound that Jews call the Temple Mount and Muslims Haram al-Sharif. In biblical times two Jewish temples stood here. Since then the rabbis have ruled that the precinct is too holy for Jews to enter, let alone pray in. The ban on Jewish worship was enforced by the Israeli government after the country took East Jerusalem from Jordan in 1967. In recent years, however, some nationalist rabbis have urged a reversal of the religious proscription and led Jewish worshippers onto the Mount. On the fanatical fringes, some believe that the mosque must be destroyed in order for the “third temple” to be built. Imams urged Muslim worshippers to defend a site that is as holy to Islam as it is to Judaism. ...

Bombs and politics in Iraq: No end in sight

Thu, 29 Oct 2009 11:53:57 GMT

Another “spectacular” raises doubts about American troop withdrawals

TWO car bombs that exploded on October 25th in the centre of Baghdad claimed the lives of at least 155 people and injured more than 700. The main targets were the Ministry of Justice and the office of the governor of Baghdad province. Almost simultaneously the explosions blew windows and their frames several hundred metres along Haifa Street, near the fortified Green Zone. Burst water mains flooded parts of the area, washing over charred bodies and through burned cars. This was the second such attack in two months and the bloodiest in two years. On August 19th bombs destroyed several government buildings, including the ministries of finance and foreign affairs, killing about 100 people.

Since then, a new sense of crisis has enveloped the Iraqi capital. The overall number of attacks has decreased in the past year, but spectacular assaults are on the rise. This is affecting politics. Elections are due in January and security is now a big issue. Within hours of the bombings, some politicians were pointing fingers. “Voters know these are manipulations by the Saddamists,” says Ammar al-Hakim, the new leader of the largest Shia party. Many other Iraqis blame the same Sunni insurgents, including al-Qaeda and members of Saddam Hussein’s former regime. On October 27th a group calling itself Islamic State in Iraq, which is affiliated with al-Qaeda in Iraq, claimed responsibility for the bombings, saying it had attacked “dens of infidelity” in the capital. ...

Tunisia's durable president: One-man show

Thu, 29 Oct 2009 11:53:57 GMT

Another meaningless election

THERE were no surprises at the polls on October 25th. President Zine el-Abidine Ben Ali was re-elected for a fifth five-year term with 90% of the vote. Not bad—although surely something of a let-down after previous results in 1989, 1994 and 1999 when he got 99%. The slump began in 2004, when the president got a mere 95%.

Despite the opposition gaining a further five percentage points, the election results can hardly be described as a step towards democracy. Since he took power in 1987, Mr Ben Ali and his Constitutional and Democratic Union party have kept a firm grip. Though the constitution originally limited the presidency to two terms, Mr Ben Ali has twice amended it to let himself stay on. Opposition is rigorously controlled; the only candidates allowed to run against Mr Ben Ali were the leaders of parties authorised by the Constitutional Council, an institution close to the ruling party. Ahmed Brahim, the only candidate critical of the regime, won just 1.6% of the vote. ...

Turkey and the Middle East: Looking east and south

Thu, 29 Oct 2009 11:53:57 GMT

Frustrated by European equivocation, Turkey is reversing years of antagonism with its Arab neighbours

IT IS a thousand years since the Turks arrived in the Middle East, migrating from Central Asia to Anatolia. For half of that millennium they ruled much of the region. But when the Ottoman Empire fizzled out and the Turkish Republic was born in 1923, they all but sealed themselves off from their former dominions, turning instead to Europe and tightly embracing America in its cold war with the Soviet Union.

The Turks are now back in the Middle East, in the benign guise of traders and diplomats. The move is natural, considering proximity, the strength of the Turkish economy, the revival of Islamic feeling in Turkey after decades of enforced secularism, and frustration with the sluggishness of talks to join the European Union. Indeed, Turkey’s Middle East offensive has taken on something of the scale and momentum of an invasion, albeit a peaceful one. ...

Overview

Thu, 29 Oct 2009 11:53:57 GMT

Britain’s GDP fell by 0.4% in the third quarter, the sixth consecutive quarterly decline.

The news from America’s housing market continued to be mixed. Sales of new homes unexpectedly fell by 3.6% in September but sales of existing homes surged by 9.4%. The S&P/Case-Shiller index of prices in 20 big cities rose for a fourth successive month in August, by 1.2%. ...

Pension funds

Thu, 29 Oct 2009 11:53:57 GMT

Pension funds in the OECD had a torrid time last year, losing over 20% of their value between the end of 2007 and the end of 2008. Funds heavily invested in equities, such as those in Ireland and Australia, proved particularly vulnerable. The big rally in financial markets since their nadir in March has allowed some of the losses to be recouped in the first half of 2009, though there is still a long way to go. Pension funds in Turkey and Norway fared especially well. But the crisis has bruised faith in equities. Exposure to shares fell during 2008 largely because of the collapse in stockmarkets, but funds in some countries, such as the Netherlands, have been deliberately seeking to reduce the weight of equities in their portfolios.

...

Markets

Thu, 29 Oct 2009 11:53:57 GMT

Trade, exchange rates, budget balances and interest rates

Thu, 29 Oct 2009 11:53:57 GMT

Output, prices and jobs

Thu, 29 Oct 2009 11:53:57 GMT

The Economist commodity-price index

Thu, 29 Oct 2009 11:53:57 GMT

Greenhouse-gas emissions

Thu, 29 Oct 2009 11:53:57 GMT

The volume of greenhouse gases emitted by 40 industrialised countries that report under the United Nations Framework Convention on Climate Change increased by 1% in 2007. Between 1990 and 2007 emissions fell by 4% in these countries. Control of greenhouse gases varied widely over the period. Emissions in Spain rose by more than 53%, but in Germany they fell by more than 21%. Britain’s switch from coal- to gas-fired power stations has helped its green credentials. Countries with significant primary industries, such as mining or forestry, tend to emit far greater quantities of greenhouse gases. Australia’s emissions are greater than France’s, for example, even though France has a much larger economy.

...

KAL's cartoon

Thu, 29 Oct 2009 11:53:57 GMT

Richard Sonnenfeldt

Thu, 29 Oct 2009 11:53:57 GMT

Richard Sonnenfeldt, chief interpreter at Nuremberg, died on October 9th, aged 86

HE HAS almost been cropped from the photograph, and his name is a blank in the key. An interpreter’s lot, perhaps. But there on the extreme left, legs crossed, with his long, intent nose and his immature moustache (he is 22, young for such work), sits Richard Sonnenfeldt. His fingers are hooked softly round the table-end, like a cat about to pounce.

The setting is Room Number One in the Palace of Justice at Nuremberg, the time the summer of 1945. Beside him, past the stenographer, is Colonel John Amen, the chief pre-trial interrogator for the tribunal that will put Hitler’s henchmen on trial for war crimes. Opposite him, placed directly in the window light, is Rudolf Hess. Hess, who flew an abortive “peace mission” to England in 1941, is already “the original lunatic” to Mr Sonnenfeldt. The pockets of his greatcoat are filled with scraps of food brought from England, the proof, he says, that the British tried to poison him. He is playing the amnesiac, remembering nothing of his career. But Mr Sonnenfeldt will catch Hess out when he uses Kladde, a student word for a folder, and then quickly says he doesn’t know why. Teenage slang, said Mr Sonnenfeldt firmly, “could hardly be the vocabulary word of an amnesiac.” ...

The outlook for private equity: Sticking-plasters of the universe

Thu, 29 Oct 2009 11:53:57 GMT

The buy-out barons say the worst is over. They would

IN THE half-century since private equity first appeared, the industry has produced stretches of great profitability, culminating in a spectacular run from 2002-07. During that golden age, private equity was charmed. Investors poured record amounts into the industry. Bankers did their bit by relaxing standards on credit. Nine of the ten largest buy-outs in history occurred between 2006 and 2007 (see chart), averaging $30 billion each. Four-fifths of that was borrowed. Can private equity ever regain those glory days?

As a result of the crash the industry faces four big obstacles to recovery. Thanks to frothy equity markets, the industry is closest to overcoming the first barrier—exiting current investments. TPG this week offloaded its remaining shares in Debenhams, a British department store. Blackstone is reportedly planning initial public offerings (IPOs) for as many as eight portfolio companies and trade sales for another five. Kohlberg Kravis Roberts (KKR) recently filed for an IPO of Dollar General, a discount retailer, amid reports that it plans to float six more companies. ...

ING breaks up: Slimming cures

Thu, 29 Oct 2009 11:53:57 GMT

The great carve-up of European banking continues

EUROPEAN bank presentations used to be filled with graphs of assets that sloped pleasingly upward. For those at the mercy of the European Commission, they now all lurch sickeningly downward.

On October 28th the commission approved plans to split Northern Rock, which was nationalised by the British government last year, into two. The bigger surprise came two days earlier when ING, the biggest bank in the Netherlands, said that it would dismember itself—splitting its banking and insurance businesses and selling its American online-banking arm—and shrink its balance-sheet by almost half. Such butchery was unexpected. Earlier plans for “back to basics” banking entailed salami-slicing businesses worth just €2 billion-3 billion ($3 billion-4.5 billion). ...

Dubai's debt mountain: Dredging the debt

Thu, 29 Oct 2009 11:53:57 GMT

A chastened Dubai goes back to what it does best: borrowing money

IT IS a story every banker in Dubai likes to tell: in the 1950s the emirate borrowed money from Kuwait to dredge Dubai creek, the first of many leveraged bets on infrastructure. Dubai’s government is now looking to borrow $6.5 billion to help clear a different kind of sediment: the accumulated debts of over $80 billion left behind by Dubai’s years of speculation and irrational exuberance.

According to a prospectus issued on October 21st, Dubai hopes to raise the money by selling a $4 billion bond and an Islamic bond, or sukuk, worth $2.5 billion. It is a sign of how quickly sentiment is turning that Dubai can even contemplate such a pitch (see chart). Until recently, investors were expecting Dubai to meet its obligations by running down its assets or rolling over its loans—not by issuing fresh liabilities to new investors. ...

India and capital flows: A world apart

Thu, 29 Oct 2009 11:53:57 GMT

India is caught in two minds about financial globalisation

THE world is divided into two, according to Shachindra Nath, chief operating officer of Religare Enterprises, an Indian financial firm. On one side of the divide is a world with “cash but no opportunities”; on the other, a world with “no money, just opportunities.” In October Religare announced its ambition to shepherd money across this divide, by creating an “emerging-market investment bank”. The bank will be run from London by Martin Newson, a former head of global equities at Dresdner Kleinwort.

Religare will start small, attaching itself to growing companies and expanding with them. As India’s companies go global, finding customers and buying companies abroad, they will want their banks to be global too, Mr Newson argues. His bank may still lack manpower (it has about 80 bankers) and experience (last year, it completed only two deals in its home market), but Mr Newson applauds India’s “get-up-and-go, ‘let’s attack’ attitude”. ...

Buttonwood: Bribing the markets

Thu, 29 Oct 2009 11:53:57 GMT

The impossible task of eliminating uncertainty

LORD SKIDELSKY’s excellent new book, “Keynes: The Return of the Master”, makes one striking claim about the economist’s work. “The centrepiece of Keynes’s theory”, he writes, “is the existence of inescapable uncertainty about the future.”

Uncertainty is different from risk, as Frank Knight, an economist, first pointed out in 1921. A poker player can figure out the odds of success when holding a pair of kings. But when dealing with macroeconomic events or forecasting stockmarket movements, you do not know the potential distribution of outcomes. There are an awful lot of jokers in the pack. ...

JBS spreads its wings: Cluck, moo, oink, ka-ching

Thu, 29 Oct 2009 11:53:57 GMT

A Brazilian livestock firm has grown to prize-winning size

UNLESS you work with quadrupeds, it may have escaped your notice that a Brazilian company, JBS, is about to become the world’s largest processor of meat. Its recent acquisition of Pilgrim’s Pride, a big chicken processor in America and Mexico, and a pending merger with Bertin, another Brazilian firm, will soon give it bigger sales than Tyson Foods, the American firm that currently claims the top spot. Other Brazilian names—Vale in mining, Embraer in aviation, Petrobras in oil—may be more famous. But JBS is now the second-largest private-sector company in Brazil by sales, after Vale. And a large majority of its sales come from outside the country.

This is a stunning transformation for a business that began life in Goias state 56 years ago with a slaughterhouse that could butcher just five cattle a day. Its founder, Jose Batista Sobrinho, used to carry sides of beef on his back to market, according to a friend. The expanded firm will slaughter more than 140,000 animals a day and employ 129,000 people. Mr Batista’s three sons still control and run the company, although 49% of it is publicly traded. ...

Airline alliances and antitrust: All together now

Thu, 29 Oct 2009 11:53:57 GMT

Why antitrust immunity granted in Washington may not wash in Europe

AS MORE and more big companies are learning to their cost, satisfying America’s supposedly tough competition authorities can be a good deal easier than winning over their increasingly assertive counterparts at the European Commission. This week America’s Department of Transportation (DoT) had been expected to grant antitrust immunity for plans by British Airways (BA), American Airlines (AA) and Iberia to integrate their transatlantic operations in a joint venture. But as The Economist went to press it looked as if the decision would be deferred because of concerns at the Department of Justice. The three airlines, members of the oneworld alliance, are still confident of getting the go-ahead from Washington, possibly with a few strings attached. But Brussels seems to be preparing to take a much harder line.

Airlines granted immunity are able to do most of the things that would result from a full merger. They can co-ordinate fares, sales forces, flight schedules and frequent-flyer programmes—efficiencies that are, they claim, in the interests of customers. That allows them to get around protectionist laws that, despite the “open skies” agreement between America and the European Union that came into force in 2008, prevent foreigners from owning more than 25% of big American carriers. ...

Yum! Brands' new corporate culture: Taking the hill less climbed

Thu, 29 Oct 2009 11:53:57 GMT

A management guru leads an overhaul of some iconic fast-food chains

THE fast-food industry is not usually known for lavish investment in its employees, even if dismissive talk of “McJobs” is often undeserved. Yet at Yum! Brands, the owner of chains such as KFC, Pizza Hut and Taco Bell, Dave Novak, the chief executive, is presiding over a training programme that he says is the “biggest culture-change initiative in the world today”, affecting all of the firm’s 1.4m workers spread across 112 countries.

Yum! has prospered since PepsiCo spun it off in 1997. Its share price has risen fourfold, Mr Novak proudly notes, and its earnings per share have grown by more than 10% a year for seven years in a row. It has also fulfilled its ambition to become truly global, with more than 65% of revenue earned outside America. Yet Mr Novak, who became boss in 2000, wants to avoid complacency. So a couple of years ago he launched a review, both to identify best practice internally and to learn from Yum!’s fiercest rival, McDonald’s. ...

America's struggling newspapers: Big is best

Thu, 29 Oct 2009 11:53:57 GMT

Most national papers in America are faring better than metropolitan ones

THE slope down which America’s metropolitan newspapers are tumbling became steeper this week. On October 26th the Audit Bureau of Circulations revealed that the Los Angeles Times had lost 11% of its paying readers in the past year. Circulation at the Boston Globe tumbled by 18%. At the San Francisco Chronicle it fell by 26%.

Many small local newspapers fared better. Take, for example, the Oakland Press, a Michigan newspaper where circulation grew from 63,000 to 68,000. The paper deals with the minutiae of municipal water rates and sex scandals in the local school system—the sort of thing that rarely makes the home page of Yahoo! News. ...

Elections to American boards: Sinecures in peril

Thu, 29 Oct 2009 11:53:57 GMT

A glimmer of hope for corporate democracy

UNTIL recently HealthSouth, which runs a chain of hospitals and clinics, was known more for corporate scandals than for corporate governance. A series of criminal and civil trials have raked over a massive accounting fraud at the firm for the best part of a decade. But on October 26th it took what may be the culminating step in its rehabilitation by adopting a set of new rules to improve its corporate governance, including provisions for clawing back bonuses from employees who are later found to have misbehaved and, most radically of all, agreeing to cover the costs, in some circumstances, of activist shareholders who put up a candidate for election to its board of directors.

That makes HealthSouth the first big American firm to address a fundamental flaw in the country’s system of corporate democracy. In theory the principle of “one share, one vote” prevails. But only candidates proposed by the incumbent board make it onto the ballot that a firm sends to shareholders. Other candidates can seek votes only by circulating “proxies” of their own, at the candidates’ (or their backers’) expense. The cost of this has usually been enough to deter them, allowing the official slate of directors to retain their lucrative boardroom sinecures uncontested—even if only a tiny proportion of shareholders actually vote for them. ...

Geely closes in on Volvo: On a roll

Thu, 29 Oct 2009 11:53:57 GMT

Ford seems likely to sell its last luxury brand to a Chinese upstart

DESPITE lingering misgivings, Ford Motor Company announced on October 28th that it had picked China’s Geely as the preferred bidder for its Volvo subsidiary. If Geely, China’s largest and brashest privately owned carmaker, succeeds in acquiring such a respected brand it would be a testament to the extraordinary ambition of its chairman and founder, Li Shufu, the self-styled Henry Ford of China. Mr Li is thought to be prepared to pay around $2 billion for Volvo, about a third as much as Ford spent to acquire it in 1999.

A deal is unlikely to be signed before the end of the year, but negotiations would not have got this far if Ford had not satisfied itself that its biggest concern, the transfer of intellectual property to the Chinese firm, could be resolved. Because Ford and Volvo are joined at the hip in engineering terms, Geely has been forced to go to considerable lengths to reassure Ford that it will not simply purloin the pair’s advanced platforms and powertrains for its existing car business. If the deal is done, Volvo’s new owner will be a consortium led by Zhejiang Geely Holding Group, a privately held firm. It says Volvo will be run as an autonomous entity, headquartered in Sweden, at arm’s length from Geely’s manufacturing operations in China. Ford insists that Volvo and its technology will be protected by “internationally binding and enforceable agreements”. There is no reason, however, why Volvo and Geely should not co-operate on future research and development projects if Volvo’s “independent” management is willing. ...

The world's ailing postal services: Dead letter

Thu, 29 Oct 2009 11:53:57 GMT

Letter volumes are plummeting around the world, highlighting stark differences among national postal services

ON OCTOBER 28th Japan’s new government ousted the president and almost the entire board of the country’s postal service. It now plans to reverse the privatisation of Japan Post, along with its enormous banking unit—the previous government’s central economic reform. Postal services are in turmoil elsewhere, too. America’s is deep in the red and has had to defer payments to its pension fund. Britain’s Royal Mail is poised for a second round of nationwide strikes. In France, lawmakers are about to consider a change in the legal status of La Poste from a government body into a corporation, which is prompting opposition because it could open the way to privatisation.

Until the recession hit, the business of delivering printed material looked old-fashioned, but it was at least still thriving in rich countries. Electronic substitution, in which businesses and individuals shift billing and communication onto the internet, was reckoned to be inevitable in the long run, but was happening at a manageable speed. Letter volumes were falling by just a few percentage points a year, allowing sufficient cost savings to be found to maintain profit margins. A private-equity firm had snapped up stakes in some postal services, but for most sleepy operators, propped up by lucrative monopolies, it was business as usual. ...

The Bank of England's next step: Engineering that elusive recovery

Thu, 29 Oct 2009 11:53:57 GMT

The central bank must decide whether to boost its unconventional stimulus

SINCE the recession intensified a year ago, the Bank of England has pulled out the stops. Not only did it yank the base rate down to an historical low of 0.5% in March, but it also embarked on quantitative easing—injecting newly created money into the economy by buying assets, mainly gilts. The programme has expanded from an initial target of GBP75 billion to GBP175 billion. Those purchases have almost been completed, which means that the bank must soon decide whether to leave it at that or raise the target again.

Before the unexpected disclosure of Britain’s continuing recession in the third quarter of 2009, the City was starting to think a halt would be called to quantitative easing when the bank’s monetary-policy committee (MPC) meets in early November. But the 0.4% fall in GDP from its level in the second quarter, bringing the decline in the economy since its pre-recession peak in early 2008 to 5.9%, has made the bank’s next move harder to predict. ...

The pickup in sales: Mall nutrition

Thu, 29 Oct 2009 11:53:57 GMT

Shoppers return, but their habits are changing

FOR over a year retailers have been cowering in their high-street redoubts as recession replaced the longest consumer-spending spree in recent times. Good news appeared this week, and a hint that the economy may be in less-dire shape than third-quarter GDP figures suggest. Sales recovered sharply in early October—particularly in food and footwear, but also in clothing and furniture—according to a survey released by the Confederation of British Industry. The outlook for November is even better, though with the looming uncertainties of Christmas and a return to higher VAT in January.

But the pattern is patchy. London shops have defied the recession better than those elsewhere, bolstered by tourism and the weak pound, and by the spending power of local residents. The divide between “have” and “have-not” shoppers across Britain has widened, according to the Retail Think Tank, an expert panel. The “haves” make fewer shopping trips but buy what they want; the “have-nots” are making more trips but buying less. ...

Scottish history and politics: Old wars, new battles

Thu, 29 Oct 2009 11:53:57 GMT

On the use and abuse of national stories

ALEX SALMOND, the nationalist first minister of Scotland, firmly believes that the 1995 movie “Braveheart” played a big role in persuading Scots to vote for a devolved Parliament in a referendum two years later. The gory biopic relates the life of William Wallace, leader of a 13th-century Scottish rebellion against Edward I of England. Now he seems bent on using another medieval Scottish hero, Robert the Bruce, to work the same magic for his Scottish National Party (SNP). But harnessing history for political profit, Mr Salmond is discovering, can be a two-edged claymore.

Last month the SNP government said it was giving GBP180,000 to finance school visits to three historic places, including the battlefield of Bannockburn, to “help deepen understanding of our nation”. It ruffled feathers. Bannockburn was the site, in 1314, of Scotland’s biggest victory in centuries of Anglo-Scottish warfare. The SNP marches to it each year to commemorate the destruction of Edward II’s army. ...

A prisoner seeks the vote: Conviction politics

Thu, 29 Oct 2009 11:53:57 GMT

One inmate’s appeal is thrown out, but changes beckon

“VOTES for paedophiles” is unlikely ever to be a popular rallying cry, and few mourned the dismissal of Peter Chester’s case before the High Court on October 28th. Thirty-two years ago Mr Chester raped and strangled his seven-year-old niece. Still in prison, he wants to vote, which the law currently forbids. He had hoped that the European Convention on Human Rights might allow him to claim that right, but Mr Justice Burton, judging the case, felt otherwise. Mr Chester and his fellow lags will remain disenfranchised.

Britain is unusual in Europe for applying a near-blanket ban on prisoners voting. According to the Prison Reform Trust, a charity which wants this reversed, the policy is shared by only six other EU countries, mainly eastern European ones. The rest either allow prisoners full voting rights or restrict the franchise only partially. This usually involves taking into account the length of the prisoner’s sentence (as also happens in Australia and New Zealand) or giving judges the discretion to impose a ban as an extra penalty. America, exceptional as ever in penal policy, bans inmates from voting in most states and even bans former inmates in a few. ...

Reshaping British banking: Rock carving

Thu, 29 Oct 2009 11:53:57 GMT

Splitting Northern Rock is just the beginning

NORTHERN ROCK was rescued in September 2007, more than a year before the much-bigger Royal Bank of Scotland (RBS), Lloyds TSB and HBOS. The mortgage bank may also be the first to wriggle out of government hands. On October 28th the European Commission approved a restructuring plan, as required under the European Union’s state-aid rules, splitting it into a good bank and a bad bank.

The good bank will keep the retail deposits and some existing mortgages. The bad bank will take no deposits and look after the remaining assets. UK Financial Investments (UKFI), which manages the government’s shareholdings in RBS and Lloyds, will take over both bits after the split. The plan is to sell the good bank and gradually run down the assets of the bad one, making sure in the process that neither distorts competition. ...

Tony Blair for Brussels: El Presidente

Thu, 29 Oct 2009 11:53:57 GMT

The Tories’ exaggerated loathing for their old adversary

ONE well-known rule of politics is that early front-runners for big jobs often fail to land them. Tony Blair has accordingly been coy about whether he wants to become the first full-time president of the European Council. But his old pals in the government, chief among them David Miliband, the foreign secretary, are suddenly eager to press his claim. And his old foes in the Conservative Party are desperate to wreck it.

William Hague, Mr Miliband’s shadow, is said to have told assorted European diplomats that support for Mr Blair’s candidacy would be viewed as a “hostile” gesture by the Tories. Meanwhile David Cameron, the Tory leader, says that, opposed as he is to the Lisbon treaty that creates the post, he thinks the EU shouldn’t have a president—but if it must, the role should be (in his parlance) “chairmanic”, and not “all-singing, all-dancing, all-acting”. In other words the president should chair meetings but not swan around like a global power-broker. If Mr Blair becomes president, the argument runs, that is what he will do; and since the post’s first occupant may define it, the presidency will become a higher-profile and more powerful position than the Tories would like. ...

Reforming the centralised state: The great giveaway

Thu, 29 Oct 2009 11:53:57 GMT

The growing fervour for handing power to local government and citizens

“NOT English” is how Mr Podsnap deplores the idea of a mighty central state in Charles Dickens’s “Our Mutual Friend”. That was a century and a half ago. Central government in Britain now raises and spends more money in relation to economic output than any OECD country bar New Zealand. This top-heavy state, the legacy of centripetal policies since the war, is no clunkier than the language of those keenest to reform it. In recent years politicians and their favourite thinkers have called for a “post-bureaucratic age” brought about by “double devolution” and “pro-social behaviour”. Rhetorically, it is hardly the stuff of Dickens.

But the opacity of the language should not obscure the momentum behind a policy more simply described as giving power away. At its most basic, it means devolving decision-making from central to local government. Public services would be run by town halls rather than Whitehall, and more cities would have elected mayors with real powers. But the agenda also includes more exotic ideas for transferring power from government to individuals and communities. Examples include letting the recipients of social care and other services manage the money spent on them, allowing almost anyone to set up a state-funded school and spreading data about public-sector performance. ...

Bagehot: Cameron's ransom

Thu, 29 Oct 2009 11:53:57 GMT

What the row about the Conservatives' European allies reveals about their party

THE lands between the Baltic and Black seas endured a 20th century of almost unimaginable horror: it brought war, genocide, famine, invasion, occupation, fascism, communism, economic turmoil and corruption. The politics and parties that emerged have been warped and confused by that awful past. They cannot fairly be judged by the standards of long-established democracies. But that does not mean, as Britain’s Conservatives almost seem to think, that they cannot be judged at all.

Earlier this year, David Cameron fulfilled a pledge to pull his Conservative members of the European Parliament out of the European People’s Party (EPP), the block to which they formerly belonged. Instead the Tory MEPs now form the core of a cobbled-together new group, the European Conservatives and Reformists (ECR). One of their new partners is a mainstream centre-right party from the Czech Republic. But some of the others are less respectable. They include the Law and Justice Party of Poland, and in particular Michal Kaminski, a controversial MEP who has made remarks about homosexuals, and about a wartime massacre of Jews by Poles in Jedwabne (a town he once represented in the Polish parliament), which many find alarming. ...

NATO and Russia: War games

Thu, 29 Oct 2009 11:53:57 GMT

Jitters in eastern Europe over Russia’s military manoeuvres

SCAREMONGERING is where defence-planning and politics overlap. Big military exercises in western Russia and Belarus, which finished earlier this month, were based on the following improbable scenario: ethnic Poles in western Belarus rise up and “terrorists” from Lithuania attack the Russian exclave of Kaliningrad. More than 10,000 troops from Russia and Belarus countered them, reinforcing Kaliningrad from the sea and sending special forces behind the enemy lines. Three NATO–like brigades, one visiting, one Estonian and one Latvian, then invaded western Russia, where they were successfully rebuffed by the elite Pskov-based 76th air assault division, reinforced by a motorised rifle brigade.

Military exercises need a notional enemy and, from Russia’s point of view, NATO is the obvious choice. Because the alliance has expanded to Russia’s borders, taking in a dozen ex-communist members over strenuous protests from the Kremlin, it is all the more desirable to send a strong signal. What is more, Western countries have been urging (and helping) Russia’s military forces to become more professional. That requires practice drills. ...

Baltic economies: The Estonian exception

Thu, 29 Oct 2009 11:53:57 GMT

Estonia gets a boost, but worries persist about its Baltic neighbours

SMUGNESS is Estonians’ least attractive feature, at least in the eyes of their Baltic neighbours, Latvia and Lithuania. A surprise endorsement by the International Monetary Fund of Estonia’s plans to join the euro in 2011, coupled with gloom about the other two countries, will only make that worse.

All three Baltic states are facing double-digit economic declines in GDP this year, following the collapse of credit bubbles created by reckless lending and spending. Many outsiders have wondered if the three countries can maintain their fixed exchange rates, which peg the national currencies to the euro. A currency or banking collapse in the Baltic would spook markets elsewhere in the region, threatening wobbly economies such as Hungary’s. ...

Italy's opposition: Into the ring against Silvio

Thu, 29 Oct 2009 11:53:57 GMT

The Italian opposition gets a new leader—and a new scandal

SILVIO BERLUSCONI, who can claim to have out-punched more than half a dozen left-wing opponents, has a new sparring partner. On October 25th Pierluigi Bersani was elected as the new leader of Italy’s biggest opposition group, the Democratic Party (PD). The vote was open to all, and almost 3m people paid €2 ($3) to take part. The main rival to the 58-year-old Mr Bersani was Dario Franceschini, a former Christian Democrat who stepped in when the previous leader, Walter Veltroni, resigned in February after a disastrous showing in a regional election.

Mr Bersani is the straight-talking son of a mechanic from the “red” heartland of Emilia-Romagna. He rose through the ranks of the Italian communist party (PCI). Mr Bersani’s first move after his victory was to visit workers in a textile factory. But he is not an easy man to pigeonhole. He wrote his degree thesis on the history of Christianity and is best known as the minister who, in the most recent centre-left government, sponsored a programme of economic liberalisation. ...

Spain's political scandals: The problem with Don Vito's friends

Thu, 29 Oct 2009 11:53:57 GMT

Troubling questions for the opposition party, and for Spanish politics

HE OILED his hair, told employees to call him Don Vito (the Mafia boss played by Marlon Brando in “The Godfather” films) and, according to Spanish investigators, allegedly kept politicians on his payroll. Documents released by a Spanish court indicate that for Francisco Correa, a Spanish businessman, bribery, fraud, money-laundering were all part of his way of doing business.

Those same documents have also lifted the lid on Mr Correa’s extensive network of friends and clients inside Spain’s opposition People’s Party (PP). To the immense embarrassment of a party that aspires to govern, they include everyone from a former party treasurer to a son-in-law of the former prime minister, Jose Maria Aznar. ...

French corruption scandals: Peering into the murk

Thu, 29 Oct 2009 11:53:57 GMT

An arms-smuggling trial casts a shadow over the French elite

BIT by bit, the entrails of France’s one-time ruling elite are spilling out. This week Charles Pasqua, interior minister under President Jacques Chirac, was sentenced to a year in prison, with a further two years suspended, for involvement in arms-trafficking to the Angolan government in the 1990s, during its civil war against UNITA rebels.

Jean-Christophe Mitterrand, son of the Socialist former president and his father’s then Africa adviser, was fined for embezzlement and given a two-year suspended prison sentence. The dozens of other defendants also accused of supplying, or aiding the sale of, landmines, shells, tanks, helicopters and naval vessels—despite a United Nations arms embargo—included Pierre Falcone, a French arms dealer, and Arkady Gaydamak, an Israeli-Russian businessman. Both men were sentenced to six years imprisonment. ...

Germany: Angela's new team claims its seats...

Thu, 29 Oct 2009 11:53:57 GMT

…and debates how to promote growth, reform taxes, contain health costs and also balance the budget

AFTER weeks of tension, tantrums and trial balloons, Germans now know which ministers will govern them for the next four years, and roughly how they will do so. In the early hours of October 24th the three parties in the new centre-right coalition government that won September’s federal election—the Christian Democratic Union (CDU), its smaller Bavarian sibling, the Christian Social Union (CSU) and the liberal Free Democratic Party (FDP)—put the finishing touches on a 124-page agreement that promises tax cuts, more spending on education and a reform of health care. It is a “new beginning”, declared Guido Westerwelle (pictured above), the new foreign minister, who led the FDP back into power after an 11-year absence.

Like the most tantalising prizes at a beachside funfair, the new beginning will require a lot of luck to claim. What is immediately on offer is more sparkle than substance. The new government, led by the CDU chancellor, Angela Merkel, plans a “right-away programme” of tax cuts to speed the economy’s recovery from recession. Later on it wants to reform income and business taxes, as well as a health-care system burdened by an ageing population. But finances and disagreements among the coalition partners may upset such ambitions. “The promising ideas are still very vague,” says Clemens Fuest, an Oxford don who heads the finance ministry’s council of advisers. “Things that are concrete are not very satisfactory.” ...

Charlemagne: Deciding Europe's place in the world

Thu, 29 Oct 2009 11:53:57 GMT

The European Union is giving itself better means to conduct foreign policy, but does it have the will?

SOME time ago, just before the European Union enlarged to take in new members from Estonia to Cyprus, two senior EU officials debated an interesting question: with so many governments to consult, how on earth would Javier Solana—the Spaniard who has headed the EU’s foreign-affairs arm since 1999—forge a European consensus on any question of foreign policy?

The more senior of the pair counselled calm. Most countries don’t have foreign policies, he explained cheerfully; Mr Solana’s job was to convince such countries that whatever he was proposing had actually been their policy all along. That would not change with enlargement. The cynical Eurocrat has seemingly been proved right. Today, even with the union enlarged to 27 members, Europe’s foreign policy machinery smoothly churns out common positions all the time. And yet, even ardent pro-Europeans admit that the impact of all this diplomatic activity has, to date, amounted to less than the sum of its parts. ...

Public-service careers: A tough search for talent

Thu, 29 Oct 2009 11:53:57 GMT

In many rich countries, grooming young bureaucrats for a changing world is a struggle for their would-be bosses

AGED 25 and armed with a master’s degree in water management, Andrew Reeves has the very mix of youth and green-mindedness that many governments claim to need. Yet when he attended a Canadian government job fair in Toronto this autumn, he left after 20 minutes without handing out a single resume.

He queued in front of a booth for the Canadian natural-resources ministry, only to be told that information on openings was best found on the ministry’s website. “I’d have preferred to do the whole thing by e-mail,” he grumbles. Such was his frustration that he settled instead for a small non-profit group specialised in recycling. ...

Japan's samurai culture: They need another hero

Thu, 29 Oct 2009 11:53:57 GMT

Swooning over sword-wielding samurais, not sober-suited salarymen

FAT, raccoon-faced, and with the severed head of one of his enemies at his feet, Ieyasu Tokugawa, Japan’s mightiest shogun, hardly looks like a heartthrob. Yet this is the image of him that confronts awestruck young women when they travel to the village of Sekigahara in central Japan.

There, in 1600, Tokugawa used brilliant tactics—and treachery—to win the deciding battle in a civil war that enabled him to found a 265-year ruling dynasty. Now young women are turning him, and the warlords who fought against him, into objects of hero worship. “It’s like a samurai boom,” says a curator at the local museum. “The young women seem to adore the codes of loyalty and friendship by which the samurai lived.” ...

South-East Asian summitry: Distant dreams

Thu, 29 Oct 2009 11:53:57 GMT

Vague hopes of integration and messy bilateral squabbles

AS USUAL at such shindigs, lofty dreams of pan-Asian economic integration got a good airing at a regional leaders’ summit held in Thailand on October 25th. Buoyed by signs of recovery in recession-bound countries, and unbroken expansion in China, India and Indonesia, leaders spoke glowingly of a free-trade zone that would link the world’s most dynamic economies. Yukio Hatoyama, prime minister of Japan, the region’s largest economy, if one of its worst-performing, said such a zone should have a common currency and aspire to “lead the world”. Not to be outdone, Australia’s prime minister, Kevin Rudd, proposed a pan-Pacific economic community that would include America and collaborate on security.

Lest anyone get too carried away, officials were on hand to caution that such grand plans would not happen overnight. Mr Hatoyama, who is trying to give Japan a more prominent role in Asia without jeopardising its security guarantee from America, described his proposal as a “medium-term objective”. Indeed, talk of an East Asian community, with perhaps even a single currency, is nothing new. But the chatter has grown louder since America blundered into a financial crisis that sapped its ability to act as the motor for global growth. As Abhisit Vejjajiva, Thailand’s prime minister, put it, the old model of satisfying Western consumers “will no longer serve” the region. ...

Terrorism in Pakistan: A hostile ally

Thu, 29 Oct 2009 11:53:57 GMT

Clinton flies into a war zone

A VISIT to Pakistan this week by Hillary Clinton, America’s secretary of state, was greeted in the grimmest possible fashion. A suicide-bomber exploded a car packed with explosives and killed over 100 people in a crowded bazaar in Peshawar, in North-West Frontier Province. The presumed culprits, the Taliban, have also reached the capital, Islamabad. On October 22nd an army brigadier was ambushed outside his house and killed by two gunmen on a motorcycle. In two bloody weeks more than 250 people have died in suicide-attacks in Peshawar, Islamabad and Lahore. Security agencies are warning of more murder to come.

Mrs Clinton visited Pakistan for several important reasons. She wanted to assure Pakistanis that America is no longer just a fair-weather friend. Rather, it is here to stay and support Pakistan in its fight against terrorism and poverty. A bill signed by President Barack Obama on October 12th grants Pakistan $7.5 billion in assistance for development and to alleviate poverty in the next five years. ...

China's navy off Somalia: Cash and carry

Thu, 29 Oct 2009 11:53:57 GMT

A hijack dilemma for China

UNACCUSTOMED to operating far from its own shores, China’s navy is even less used to actual fighting. So news on October 19th that Somali pirates had hijacked a Chinese commercial vessel in the Indian Ocean caused a stir at home. With three of its naval ships taking part in anti-piracy operations off Somalia, China for the first time would be in a position to use force to rescue a China-registered boat and its captured Chinese crew.

The deployment of the Chinese navy in the Gulf of Aden in January was the fleet’s first operational venture beyond the Pacific region. Coming after several years of rapid growth in the Chinese naval armoury, including the acquisition of new frigates, destroyers and submarines, the foray raised questions about whether China’s armed forces were beginning to go global. The pirate-plagued Gulf of Aden, through which shipments to China of oil and other vital commodities pass, would be an obvious place to become more used to distant security tasks. Several Chinese vessels had already been attacked there. ...

Afghanistan's bloody election: An election under siege

Thu, 29 Oct 2009 11:53:57 GMT

The Taliban campaign with bullets. The candidates bicker. Western doubts deepen

JUST ten days before November 7th, when Afghans are due to go back to the polls to decide whether or not to re-elect Hamid Karzai for another five years, the Taliban showed their determination to disrupt the election. In a ruthless onslaught in the heart of Kabul, militants attacked a large guesthouse favoured by United Nations workers. At least five of them were killed by the attackers, who dressed as policemen and carried suicide-bombs.

For years the UN has clung to its reputation as a neutral arbiter, and managed to avoid becoming a militant target. But now the Taliban have declared that anyone involved in organising the “soap opera” of an election is a legitimate target. A spokesman for the movement said the carnage in Kabul was just the beginning. ...

Banyan: Himalayan histrionics

Thu, 29 Oct 2009 11:53:57 GMT

Asia's two giants still cannot agree where one stops and the other begins

IF THIS is to be Asia’s century, a small prerequisite is that its two rising powers rub along together. Yet recent bonding between China and India has turned to repulsion. Breathless Indian commentary talks of irreconcilable rivalry, even future conflict. As for the Chinese, few had bothered much about India. The superiority of China’s economic and political models was taken as read. That makes an October editorial on the website of the People’s Daily, the Communist Party mouthpiece, all the more striking.

The editorial cranked out insults not levelled in decades. India’s superpower dreams, it said, might appear to be justified. But they are mingled “with the thought of hegemony”. This was setting India on the road to “repeated failure”. Damnable, too, was India’s policy of “befriending the far and attacking the near”. Indian hegemony, the editorial decided, was “100% the result of British colonialism”, when the Raj ruled from Pakistan to Burma. Now, the victim was trying to out-empire even the British. ...

Argentina's debt negotiations: Settling up

Thu, 29 Oct 2009 11:53:57 GMT

The government seeks a deal on its remaining defaulted bonds

FOR more than a year Argentina has been mulling an offer put forward by three big foreign banks. It would let the government settle up with the holders of around $20 billion in bonds, part of about $95 billion-worth on which Argentina defaulted in its economic collapse in 2001. The holders of the rest reluctantly agreed to a debt swap in 2005 in which they got just 35 cents on the dollar. So far the terms of the deal being proposed for those who held out against the 2005 swap are unclear—but they are likely to be slightly worse than that. This week Amado Boudou, the economy minister, signalled the government’s keenness by asking Congress to repeal a law that bans negotiations with those who rejected the 2005 deal.

Investors representing about half of the remaining debt, on whose behalf the three foreign banks are mediating, have privately agreed to the proposed settlement. Many of the original holders of the bonds, weary of waiting for a deal, have sold them to others for as little as 12 cents on the dollar, so the purchasers of these bonds stand to make a tidy sum. Some others may choose, once again, to refuse a deal, betting that they will get a better one after 2011, when a more business-friendly candidate is likely to pick up the presidency from Cristina Fernandez de Kirchner, the unpopular incumbent. Miguel Kiguel, a financial consultant in Buenos Aires, judges this a poor bet. ...

Canada and the monarchy: Heir not so apparent?

Thu, 29 Oct 2009 11:53:57 GMT

A royal visit as republicanism rises

WHEN Michaelle Jean, the governor-general of Canada, was described as “head of state” on her website earlier this month, the government issued a quick and very public correction. “All Canadians know that Queen Elizabeth II is the head of state,” huffed Dimitri Soudas, the prime minister’s spokesman. However, in a poll last December only 24% of Canadians did know this. Almost double that number thought that the prime minister was head of state; and one-third thought it was the governor-general, who is in fact the queen’s representative in the country.

Whereas monarchists condemn such ignorance, republicans believe it is a natural consequence of keeping what they see as an archaic and increasingly meaningless link to Canada’s colonial past. Both sides think the ten-day visit of Prince Charles and Camilla, the Duchess of Cornwall, beginning on November 2nd, will help their cause. ...

Panama's financial industry: Shades of grey

Thu, 29 Oct 2009 11:53:57 GMT

The unfinished job of cleaning up the country’s financial reputation

UNDER Manuel Noriega’s dictatorship in the 1980s the world saw Panamanian banks as synonymous with suitcases stuffed with drugs money. So there was little surprise when in April the Organisation for Economic Co-operation and Development (OECD), a rich countries’ club, included Panama on its “grey list” of countries that show insufficient financial openness. Since then, once-notorious tax havens like the Cayman Islands and Liechtenstein have reluctantly accepted reforms to get off the list and escape the threat of sanctions. In contrast, Panama has not budged, reinforcing its reputation as Latin America’s leading financial miscreant.

The country’s business and political leaders insist its financial system has become a paragon of integrity, and that Panama is being unfairly targeted by rich countries starved of revenue by the recession. “The US is the biggest tax haven in the world,” says Juan David Morgan, a lawyer, noting that America exempts foreigners from levies on interest. “But they want to scapegoat us because we’re visible and have a canal. It’s a double standard.” ...

Colombia's paramilitaries: Militias march again

Thu, 29 Oct 2009 11:53:57 GMT

The “justice and peace” process the Colombian government offered to right-wing paramilitaries is at risk of falling apart

ONE of the most horrifying testimonies to Colombia’s gruesome internal conflict is a video sent to prosecutors that shows a paramilitary fighter in the northern town of Aguachica wielding a machete to hack off the hands of a victim who is still alive. The town was in one of the areas hardest hit by militia violence in the late 1990s and early 2000s. On October 24th former members of the same paramilitary forces donated blood at a local hospital in a public act of contrition. The 120 donors are among 32,000 members of right-wing paramilitary groups who laid down their weapons in a demobilisation deal with the government that began in 2005, raising the hopes of war-weary Colombians that such unbridled violence would end.

The paramilitaries were set up in the 1980s by ranchers to protect them from attacks by the country’s main left-wing guerrilla group, the FARC, but they turned into a powerful federation of bandit gangs, accused (like the FARC) of thousands of indiscriminate killings as well as rape, torture and drug-trafficking. Since coming to power in 2002, President Alvaro Uribe has treated the two sides differently, waging war on the FARC with some success, but no final victory, while offering a “justice and peace” process to the paramilitaries. ...

The economy: A joyless recovery

Thu, 29 Oct 2009 11:53:57 GMT

New figures suggest that America has at last moved out of recession

ON October 29th the government reported that gross domestic product rose at an annualised rate of 3.5% in the third quarter compared to the second. This was the first increase since the second quarter of 2008. It backs up other evidence that the recession ended in the third quarter or just before, though the official decision, by the National Bureau of Economic Research, a group of academic economists, is still some way off. Robert Gordon, a member of this group, is confident that the recession, which began in December 2007, ended in June. But at 18 months that would still make it the longest since 1933.

Consumers are sceptical. Their confidence fell in October, according to the Conference Board, a research group. A poll for The Economist by YouGov found that 35% of respondents think the economy is getting worse; just 28% think it is getting better. Unemployment is still rising, and even a White House adviser, Christina Romer, predicts it will remain “severely elevated” throughout next year. A lot of third-quarter growth was the result of temporary government stimulus. Consumer spending grew by 3.4%, the best since early 2007, largely because people were buying new cars in July and August with federal “cash for clunkers”. Sales have since fallen back. Residential construction leapt 23.4%, the first advance since the end of 2005, helped by an $8,000 tax credit for buyers of new homes. But new home sales dipped 3.6% in September, as the time to qualify for the credit expired. ...

Dallas does culture: Lights down, curtain up

Thu, 29 Oct 2009 11:53:57 GMT

While other cities are tightening their belts, Dallas is polishing its buckle

ON ONE side of Flora Street is the Bill and Margot Winspear Opera House, an airy space designed by Norman Foster. Across the street is the Dee and Charles Wyly Theatre, a silver cube designed by Joshua Prince-Ramus and Rem Koolhaas. “Aesthetically, it’s stoic, even off-putting,” said the theatre manager, leading a tour. The beauty of the space, he explained, is its flexibility: the walls retract, the stage moves and the tiers of seats can be hoisted.

Dallas is famous for bold statements—from big hair to Big Tex, the inflatable cowboy who presides over the state fair—and the Dallas Arts District, where the theatre and the opera house have both just opened, is of a piece. It spans 68 acres or 19 city blocks, and also includes several museums, a concert hall, a dance theatre and a performing-arts high school once attended by Erykah Badu and Norah Jones. To city leaders, all this epitomises the confidence and audacity of the place. ...

Cops and crime in Los Angeles: Exit Bratton

Thu, 29 Oct 2009 11:53:57 GMT

The reasons for falling crime rates remain disputed

WILLIAM BRATTON, Los Angeles’s chief of police, has been doing victory laps around the city as he prepares to step down on October 31st. With his broad, scarred face and thick Boston accent, he was already a celebrity cop when he came to Los Angeles in 2002, having previously led the police departments in Boston and New York. Seven years later, his reputation is even starrier.

To many Angelenos—black, brown and white—Mr Bratton is the quintessential good cop. When he arrived, the city’s minorities were at war with its police, even though there had been two consecutive black police chiefs. The beating by white cops of Rodney King, a black man, in 1991, was still festering. The police were being audited under court order. ...

New York's special election: Not right enough

Thu, 29 Oct 2009 11:53:57 GMT

A battle for the soul of the Republican Party in upstate New York

SILVAN JOHNSON has not been this fired up since Sarah Palin joined John McCain’s presidential ticket. Ms Johnson, a mother of four, volunteered to campaign for Doug Hoffman, candidate of the tiny Conservative Party, because, she says, she was disgusted with the Republican pick in the special election, due on November 3rd, for New York’s 23rd congressional district.

The House seat was left vacant when John McHugh, a Republican who had represented the district since 1993, joined the Obama administration as secretary of the army. Ms Johnson now mans Mr Hoffman’s regional office in Fulton, one of 16 to open in recent weeks. “I’ve never done anything like this before,” she says, “but I realised we have a choice and it’s not Dede Scozzafava”—who was hand-picked by state Republican bosses. Ms Johnson describes Ms Scozzafava as “practically a Democrat”, but does “give her credit for being pro-guns”. ...

Mayoral elections: Hard to dislodge

Thu, 29 Oct 2009 11:53:57 GMT

Some big-city incumbents are also up for re-election on November 3rd

POOR Bill Thompson. His heart must have broken a little when Robert Gibbs, Barack Obama’s spokesman, said that the president would support the Democratic nominee in his mayoral bid, but then went on to say nice things about Michael Bloomberg, New York’s incumbent, independent mayor without even uttering Mr Thompson’s name. It is not on the lips of many New Yorkers either. He trails by 18%. He can’t match Mr Bloomberg in advertising. He’s been outspent (Mr Bloomberg has deployed $85m of his own cash so far), but he also has himself to blame. “He never did establish who Bill Thompson is,” says Doug Muzzio, a politics professor at Baruch College. Instead, he has focused almost entirely on one issue: term limits.

Last year Mr Bloomberg, with the backing of the City Council, scrapped New York’s term limits, reversing two referendums in the 1990s which supported the measure. This did not sit well with many New Yorkers, even Bloomberg supporters. But despite Mr Thompson’s constant “Eight is enough” chant, the issue has not galvanised many voters. ...

American Jews and Israel: J Street puts a foot in the door

Thu, 29 Oct 2009 11:53:57 GMT

Can a handful of peaceniks challenge the power of AIPAC?

POLITICAL lore in Washington has long ascribed mighty powers to the Jewish lobby—and especially to the American Israel Public Affairs Committee (AIPAC). In 2007 two academics, John Mearsheimer and Stephen Walt, went so far as to write a book accusing “the lobby” of hijacking American foreign policy and luring America into the quagmire of Iraq to serve Israel’s interests. Henceforth, however, it will not be possible to write of a monolithic pro-Israel lobby in America. AIPAC now has a small but vocal competitor.

More than 1,500 people, mostly American Jews, but including both Israelis and a few Palestinians, showed up in Washington this week for the first annual conference of J Street, a one-year-old, self-describedly “pro-Israel, pro-peace” lobby, whose executive director, Jeremy Ben-Ami, says it is fighting for the “heart and soul” of the American Jewish community. Unlike AIPAC, J Street intends to push aggressively for a two-state solution based on Israel’s pre-1967 borders. ...

Public-school education: Desert excellence

Thu, 29 Oct 2009 11:53:57 GMT

An Arizonan model

AND what was the Minotaur? The ten-year-olds scribble their answer onto tiny whiteboards and hold them up for the teacher to see. Once each has got a nod, they repeat together: “half-man, half-bull.”

By the time these fifth-graders at the BASIS school in Scottsdale, Arizona, reach 8th grade they will have the option of taking Advanced Placement (AP) exams, standardised nationally to test high-school students at college level. By the 9th grade, they must do so. As a result, says Michael Block, the school’s co-founder, our students are “two years ahead of Arizona and California schools and one year ahead of the east coast.” ...

Obama and the unions: Love of Labour

Thu, 29 Oct 2009 11:53:57 GMT

Unions are winning again in Washington, but the big fights are still ahead

THREE years ago, when negotiations with the union representing air-traffic controllers reached an impasse, the administration of George Bush simply imposed a deal that froze salaries, slashed entry-level pay and even set a dress code. Barack Obama, then a senator, sponsored a bill to send the parties to arbitration, without success at the time. As president, Mr Obama ordered talks to resume. In late September, with the help of the arbitrators, the union got its new contract: 3% annual pay increases, higher starting pay and the right, once again, to wear jeans.

Ronald Reagan’s mass firing of illegally striking controllers in 1981 came to signify a turning-point in the fortunes of organised labour, whose share of private-sector workers has fallen to a new low of 7.3% so far this year (see chart). It is tempting to see the controllers’ new deal as marking a turning-point in the other direction. ...

Health-care reform: A public row

Thu, 29 Oct 2009 11:53:57 GMT

Democrats are trying to revive the idea of a government-run health plan

“IT’S not really a public option, it’s a consumer option.” So declared Nancy Pelosi, speaker of the House of Representatives, this week. Her effort to rebrand the hugely controversial proposal to add a government-run insurer (usually called a “public plan”) to the health reforms now being negotiated seems ridiculous at first blush. In fact, it is part of a concerted and clever push by the political left that could—just possibly—revive an idea that had seemed dead and buried.

When Mrs Pelosi revealed, on October 29th, the House's version of a health-reform bill, there were no real suprises; as expected, a public plan featured prominently. The real suprise had come three days earlier. Until very recently, it had looked as though the proposal to tack on a public plan was, despite fervent support among the left, politically doomed. First came Barack Obama’s slippery but clear efforts to back away from it. Then came a crucial vote of the Senate Finance Committee, which rejected the public plan. The final congressional health bill must reconcile the versions coming out of the full House and Senate, and the powerful Finance Committee’s rejection had appeared to be a final nail in the coffin. ...

Capital controls: Raining on India's parade

Thu, 29 Oct 2009 11:53:57 GMT

What India can learn from Brazil about controlling capital flows

IN INDIA, drought sometimes turns to deluge. This summer the country suffered its worst monsoon since 1972, which left half its rural districts parched, followed swiftly by floods that inundated two states. In recent years India’s economic policymakers have confronted a similar phenomenon. A once-sheltered economy is now increasingly open to foreign capital, which rained down on the country in 2007, only to evaporate last year. The rains are now returning: foreigners have invested $13.8 billion in India’s stockmarkets since April, having withdrawn $8.6 billion over the same period last year. The Sensex, India’s most widely watched stockmarket index, has surged by almost 100% since its March lows. On October 27th the Reserve Bank of India (RBI) held its key policy rate at 4.75%, even though it is anxious about rising inflation. It is wary of attracting even more money from foreign investors, who are looking for high returns in a world of meagre yields.

India’s discomfort (see article) is widely shared. Less than a year ago policymakers in emerging economies fretted about capital flight. Their currencies and reserves were falling as foreigners tried to raise cash by ditching whatever assets they could sell. Several governments queued up for emergency loans from the IMF or a currency swap with the Federal Reserve. Now they are worried about capital flowing in the opposite direction. On October 20th Brazil imposed a 2% tax on foreign purchases of equities and debt. Investors are now looking around to see who might follow suit. ...

American health reform: Back from the dead

Thu, 29 Oct 2009 11:53:57 GMT

Unfortunately, a government-run insurance policy is on the table again

THOUGH you would be forgiven for thinking otherwise, around half of all Americans get their health care courtesy of the government. There is Medicare, which provides for the elderly; Medicaid, which looks after the poorest; and a big federal programme that covers children in most of the country’s worse-off families. To their numbers must be added tens of millions of government employees, from the president and the members of Congress down to teachers, firemen, soldiers and veterans. The actual provision of health services, in hospitals, diagnostic labs and doctors’ surgeries is, with a few exceptions (veterans have a NHS-like network of their own), carried out by the private sector. But the government pays the bills.

So what on earth could be wrong with extending this system in the shape of a “public plan” that might offer cover to those who currently lack insurance, or who are obliged to buy costly plans on the open market, or who are unhappy with the plans their employer offers them? To be sure, it would be a big step in the direction of “socialist health care” as practised in the rest of the developed world. But, given that most of those countries get decent care for a lot less than America pays, that might be no bad thing. And anyway, the land of the rugged individual is halfway there already. ...