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The Economist - Leaders
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     ISSN (Online) 1358-274X
     Published by The Economist Group Homepage  [4 journals]
  • Fund managers: Fundamental fears
    • Abstract: WHERE will the next financial crisis occur? Not, almost certainly, where the last one did. Since the late 1990s, the world has coped with economic meltdown in South-East Asia, the dotcom boom and bust, and the American housing bubble and subsequent banking collapse. The place that regulators are worried about now is the fund-management industry.In a sense, their worries are the result of the regulatory response to the last crisis. Banks now have to hold more capital than before, so they are less willing to lend money to companies or to act as marketmakers in the corporate-bond market, and companies are now more dependent on the bond markets (and thus asset managers) for finance. Investors have piled into corporate bonds, not least because central-bank policy has pushed down returns on government bonds. Speculative or junk bonds yield just 4.5% compared with 8.1% in October 2011.This has led to crowded positions in a market where liquidity, by one estimate, has declined by 70% since before the 2007 crisis. Regulators are worried that if everybody tries to sell, the absence of willing buyers could cause prices to tumble, the cost of finance for companies to shoot up...
      PubDate: Thu, 31 July 2014 15:00:42 GMT
  • Business in India: An unloved billionaire
    • Abstract: IN A country full of both ambition and frustration, Reliance Industries is a “role model for all Indians who dare to dream,” says its boss, Mukesh Ambani. The company certainly has much to boast of. It is hugely profitable, earning more than any other private Indian firm. It is brave, going where others fear to tread, constructing refineries, drilling for oil and gas, building supermarkets and broadband networks. It invests more in India and pays more corporation tax there than any other firm. Without Reliance, which generates 15% of the country’s exports, the balance of payments would be a wreck.Yet in other ways, Reliance is a rotten role model for corporate India. When it comes to governance this secretive and politically powerful private empire is not a national champion but an embarrassment.The father of Indian capitalismReliance’s culture reflects its roots. In the days before India liberalised its economy in 1991, the firm’s founder, Dhirubhai Ambani, fought his way up from a menial job in Yemen through Mumbai’s heaving tenements to the top of Indian business. Socialist dogma and meddling officials were his foes, charm and cunning his tools. He managed to...
      PubDate: Thu, 31 July 2014 15:00:42 GMT
  • Crime and punishment: Stuffed
    • Abstract: “PRISON works,” declared Michael Howard, then the Conservative home secretary, in 1993—and few politicians from any party have dared to argue with him. As sentences have gradually ratcheted up, England and Wales have acquired the largest prison population in western Europe. The ratio of prisoners to violent crimes is now four times what it was in the mid-1990s. Ken Clarke, another Conservative, tried to reverse the trend; he was roundly attacked (including by Mr Howard, from retirement) and was turfed out of his job in 2012.At 149 per 100,000, the incarceration rate in England and Wales is still way below America’s 707, but it is far greater than Germany’s 78 and the Netherlands’ 75. Successive governments have failed to build capacity to accommodate Her Majesty’s proliferating guests, so English and Welsh prisons are stuffed, and conditions are worsening (see article). Some are at more than 180% of their official capacity. Inspectors catalogue multiple failings—filthy cells, widespread...
      PubDate: Thu, 31 July 2014 15:00:42 GMT
  • Israel: Winning the battle, losing the war
    • Abstract: HAMAS has ruled Gaza since 2007 and there is not much to admire. The Islamist party is harsh, narrow-minded and intolerant of dissent. Its charter is anti-Semitic. It fires rockets into Israeli territory and builds tunnels under it to kill or kidnap Israeli soldiers. It knows that the Israeli attacks it provokes will kill hundreds of Palestinian civilians, which will garner sympathy around the world. It is also weaker than it was, for it is now losing the military battle against Israel.By contrast Israel is the most successful state in the Middle East. It is the region’s only true democracy—a hub of invention, enterprise and creativity. Israel has overwhelming firepower in the fight in Gaza. Most of its people are united behind their soldiers and have the firm backing of America’s Congress. Yet, though Israel is winning the battle, it is struggling in the war for world opinion (see article). That matters in part because Israel is a cosmopolitan trading country that looks to its American ally...
      PubDate: Thu, 31 July 2014 10:03:06 GMT
  • Argentina defaults: Eighth time unlucky
    • Abstract: ARGENTINA’S first bond, issued in 1824, was supposed to have a lifespan of 46 years. Less than four years later, the government defaulted. Resolving the ensuing stand-off with creditors took 29 years. Since then seven more defaults have followed, the most recent this week, when Argentina failed to make a payment on bonds issued as partial compensation to victims of the previous default, in 2001.Most investors think they can see a pattern in all this, but Argentina’s president, Cristina Fernández de Kirchner, insists the latest default is not like the others. Her government, she points out, had transferred the full $539m it owed to the banks that administer the bonds. It is America’s courts (the bonds were issued under American law) that blocked the payment, at the behest of the tiny minority of owners of bonds from 2001 who did not accept the restructuring Argentina offered them in 2005 and again in 2010. These “hold-outs”, balking at the 65% haircut the restructuring entailed, not only persuaded a judge that they should be paid in full but also got him to freeze payments on the restructured bonds until Argentina coughs up.Argentina claims that paying the hold-...
      PubDate: Thu, 31 July 2014 09:03:12 GMT
  • Helicopter parents: Relax, your kids will be fine
    • Abstract: IN 1693 the philosopher John Locke warned that children should not be given too much “unwholesome fruit” to eat. Three centuries later, misguided ideas about child-rearing are still rife. Many parents fret that their offspring will die unless ceaselessly watched. In America the law can be equally paranoid. In South Carolina this month Debra Harrell was jailed for letting her nine-year-old daughter play in a park unsupervised. The child, who had a mobile phone and had not been harmed in any way, was briefly taken into custody of the social services.Ms Harrell’s draconian punishment reflects the rich world’s angst about parenting. By most objective measures, modern parents are far more conscientious than previous generations. Since 1965 labour-saving devices such as washing machines and ready meals have freed eight hours a week for the average American couple, but slightly more than all of that time has been swallowed up by childcare. Dads are far more hands-on than their fathers were, and working mothers spend more time nurturing their sprogs than the housewives of the 1960s did. This works for both sides: children need love and stimulation; and for the parents,...
      PubDate: Thu, 24 July 2014 14:58:42 GMT
  • Israel and Gaza: Stop the rockets, but lift the siege
    • Abstract: THE mounting toll of innocents in Gaza is reason enough for anyone with compassion to demand a ceasefire. Since July 8th, when Israel began its campaign to clobber Hamas, the Palestinian Islamist movement that has run the Gaza Strip since 2007, at least 700 Palestinians have been killed, most of them civilians and many of them children, along with at least 35 Israelis, including three civilians. After Israel undertook a ground invasion of Gaza on July 18th, the casualty rate on both sides soared. Hospitals have been hit and scores of buildings flattened, often with civilians inside. A Palestinian family of 25, said to have been hosting a Hamas fighter during a supper to break the Ramadan fast, was wiped out.Yet it would be a grievous mistake to bring about a ceasefire that achieved nothing more than to revert to the status quo. In the longer run, if a more durable peace is to be built, the Israelis must seek a sovereign state for Palestinians, who, including Hamas, must in turn reiterate their support for a government that disavows violence and recognises Israel. Unless a ceasefire is couched in such terms, the poison will in time well up all over...
      PubDate: Thu, 24 July 2014 14:58:42 GMT
  • Corporate tax in America: How to stop the inversion perversion
    • Abstract: ECONOMIC refugees have traditionally lined up to get into America. Lately, they have been lining up to leave. In the past few months, half a dozen biggish companies have announced plans to merge with foreign partners and in the process move their corporate homes abroad. The motive is simple: corporate taxes are lower in Ireland, Britain and, for that matter, almost everywhere else than they are in America.In Washington, DC, policymakers have reacted with indignation. Jack Lew, the treasury secretary, has questioned the companies’ patriotism and called on Congress to outlaw such transactions. His fellow Democrats are eager to oblige, and some Republicans are willing to listen.The proposals are misguided. Tightening the rules on corporate “inversions”, as these moves are called, does nothing to deal with the reason why so many firms want to leave: America has the rich world’s most dysfunctional corporate-tax system. It needs fundamental reform, not new complications.America’s corporate tax has two horrible flaws. The first is the tax rate, which at 35% is the highest among the 34 mostly rich-country members of the OECD. Yet it raises less revenue than the OECD...
      PubDate: Thu, 24 July 2014 14:58:42 GMT
  • Indonesia’s new president: Fanfare for the common man
    • Abstract: IN A year thick with bad news, much of it about Islam, it is perhaps surprising that the world’s biggest Muslim-majority country should produce the most heartening piece of politics so far. Yet the announcement on July 22nd that Joko Widodo, universally known as Jokowi, had won Indonesia’s general election is just that.Above all, this is a triumph for democracy, albeit a somewhat messy one. In a country which was run by the Suharto dictatorship 16 years ago, the election marks the first time that one popularly elected leader, Susilo Bambang Yudhoyono, makes way for another. Democratic transitions in Asia do not always go smoothly—think of Burma in 1990 or Thailand’s recurring dramas. Indonesia’s is still not wholly secure. The runner-up, Prabowo Subianto, a volatile former general and son-in-law of the late dictator, has claimed large-scale fraud and is leaning on the Constitutional Court to annul the result (see article). But given the six percentage-point margin of Jokowi’s victory, Mr Prabowo is unlikely to get far.Indonesia’...
      PubDate: Thu, 24 July 2014 14:58:42 GMT
  • Russia, MH17 and the West: A web of lies
    • Abstract: IN 1991, when Soviet Communism collapsed, it seemed as if the Russian people might at last have the chance to become citizens of a normal Western democracy. Vladimir Putin’s disastrous contribution to Russia’s history has been to set his country on a different path. And yet many around the world, through self-interest or self-deception, have been unwilling to see Mr Putin as he really is.The shooting down of Malaysia Airlines flight MH17, the killing of 298 innocent people and the desecration of their bodies in the sunflower fields of eastern Ukraine, is above all a tragedy of lives cut short and of those left behind to mourn. But it is also a measure of the harm Mr Putin has done. Under him Russia has again become a place in which truth and falsehood are no longer distinct and facts are put into the service of the government. Mr Putin sets himself up as a patriot, but he is a threat—to international norms, to his neighbours and to the Russians themselves, who are intoxicated by his hysterical brand of anti-Western propaganda.The world needs to face the danger Mr Putin poses. If it does not stand up to him today, worse will follow.Crucifiction and other storiesMr...
      PubDate: Thu, 24 July 2014 14:58:42 GMT
  • American college sports: Justice for jocks
    • Abstract: IT MAY have invented trust-busting, but for decades America has tolerated an insidious cartel. Unlike most price-fixers, who seek to inflate their products’ value, this one acts as a monopsony—using market power to obtain cheaper inputs—to squeeze its vulnerable employees.The name of this syndicate is the National Collegiate Athletic Association (NCAA), the governing body for American college sports. Uniquely among major team sports, the top leagues in basketball (the NBA) and American football (the NFL) do not recruit from lower professional circuits. Instead, they delegate training to universities: the NFL requires new players to finish three seasons in college, and the NBA’s minimum age is 19. This has helped turn the schools into entertainment juggernauts. At $10.5 billion a year, college sports revenues—mainly from TV, attendance and merchandise—exceed those of any single pro league. Even this understates the profitability of college sports, because the NCAA maintains an amateurism policy that caps athletes’ compensation at the cost of their education.Trading labour for a degree sounds fair. But the income elite players produce far exceeds the price of their...
      PubDate: Thu, 14 August 2014 14:59:23 G
  • Ebola: Unseating the first horseman
    • Abstract: WHAT should the world do about Ebola? A rationalist might say: nothing. Rich countries with decent health infrastructure are not at risk because—unlike airborne viruses, such as influenza, or mosquito-borne ones, such as yellow fever—the disease can be isolated if treated with sufficient care. In the poor countries that are infected (see article), the thousand-or-so lives this irruption is believed to have taken so far are fewer than the slaughter inflicted every single day by malaria, by AIDS, by tuberculosis or even by diarrhoea. In a world of limited resources, then, it is arguably best to concentrate on those big killers, whose treatment and prevention are well understood, rather than chase after an illness that is incurable and, on a global scale, trivial.Yet looking at the problem from a different angle produces a different answer. Though its pathology, symptoms and means of transmission are different, Ebola has certain similarities to AIDS. Both were new diseases that came out of African jungles....
      PubDate: Thu, 14 August 2014 14:59:23 G
  • Turkey’s president: Erdogan on top
    • Abstract: RECEP TAYYIP ERDOGAN, Turkey’s prime minister, certainly knows how to win elections. Since he helped to found the Justice and Development (AK) party 13 years ago, he has scored eight victories in a row. On August 10th he made it nine, winning Turkey’s first direct election to the presidency, with a crushing 52% of the vote. Given what have been broadly fair polls, with mostly high turnouts, nobody can seriously challenge Mr Erdogan’s democratic credentials.His achievements in over 11 years as prime minister are equally impressive. Since AK came to power in November 2002, economic growth has averaged some 5%. Inflation has been tamed. The army has been brought under greater civilian control. Mr Erdogan has made more progress than any previous political leader in giving Turkey’s Kurds greater rights. In 2005 he achieved something that had eluded all his predecessors: the start of membership talks with the European Union.Yet there are reasons to worry about Mr Erdogan’s ascendancy to Ankara’s Cankaya palace. With the army, the secular establishment and the political opposition all cowed, he has grown more autocratic. When Turks took to the streets in last summer’s...
      PubDate: Thu, 14 August 2014 14:59:23 G
  • Illegal immigration: Europe’s huddled masses
    • Abstract: IT IS a grand European project, born of integrationist ideals yet undermined by participants’ unwillingness to share costs as well as benefits. No, not the euro zone, but the Schengen agreement between 26 European countries to eliminate controls at their common borders. Europeans benefit enormously from their ability to move freely between countries. But the waves of migrants looking to enter the continent impose a burden on its southernmost countries that must be shared more evenly. If not, Schengen itself could unravel.Whether they seek shelter from persecution or economic opportunity, illegal migrants are keenest to reach Europe’s richer, northern countries. Many migrants head directly to these countries, often by air, arriving on a legal visa and staying on when it expires. But geography and the economics of migration mean that the most desperate travel by sea and land from Africa and the Middle East. And their first contact with western Europe is on the continent’s periphery—Mediterranean islands like Lampedusa and Malta for the dangerously overcrowded boats from Africa, Greece’s eastern frontier with Turkey for those trekking from Syria and beyond.The risks...
      PubDate: Thu, 14 August 2014 14:59:23 G
  • America and the Middle East: Back to Iraq
    • Abstract: AMERICA’S last two presidents have got things wrong in Iraq in opposite ways. George W. Bush went into the...
      PubDate: Thu, 14 August 2014 10:18:09 G
  • Mexico’s reforms: Keep it up
    • Abstract: FEW governments can truly claim to be radical. The administration of Enrique Peña Nieto is on its way to joining this rare breed. The Mexican president came to office in late 2012, promising big changes to the way the country was run. The legislative phase of this reform process is now complete. Next comes implementation.Much has been done in the past 20 months. Mexico has the lowest tax take in the OECD as a percentage of GDP: a fiscal reform has started to broaden its sources of revenues. Measures to shake up the telecoms and broadcasting industries last month prompted América Móvil, the monopolistic telecoms firm owned by Carlos Slim, the world’s richest man, to announce it will divest assets to avoid antitrust pricing regimes. Teachers will face more scrutiny, banks more competition.No reform matters more than the liberalisation of Mexico’s hidebound energy sector. The state has controlled the hydrocarbons industry since it was nationalised in 1938. Pemex, the state oil firm, is a cash cow for the government—it contributes a third of revenues—but it is poorly managed and its production levels have been steadily declining. Industrial electricity prices are...
      PubDate: Thu, 07 August 2014 15:01:09 G
  • Reforming Leviathan: Mandarin lessons
    • Abstract: THE French call them hauts fonctionnaires, the Germans Beamte im höheren Dienst and the British, somewhat more economically, know them as “mandarins”. The senior echelons of civil services are a powerful arm of the state. They implement the reforms dreamed up by politicians, and design public services ranging from welfare systems to prisons. Compared with private-sector bosses, the bureaucrats who manage the public sector tend to be less well paid but have more cushioned lives, with more secure jobs and far less pressure to improve productivity. Now the mandarins face change (see article).There has long been taxpayer fury when big projects go awry. Berlin’s new airport is three years overdue and predicted to cost €6 billion ($8.1 billion), three times the original estimate. But voters, and thus politicians, are especially intolerant of civil-service inefficiency nowadays. One prompt is austerity. Another is technology, which is changing not...
      PubDate: Thu, 07 August 2014 15:01:09 G
  • China’s far west: A Chechnya in the making
    • Abstract: THE Uighurs have never been particularly comfortable in China. Xinjiang, the region where these Turkic Muslims once formed the vast majority, came unwillingly into the Chinese empire. Rebels in parts of it even set up independent republics; a short-lived one was snuffed out by the Communist Party in 1949. Since then the regime in Beijing, 1,000 miles (1,600km) to the east, has sought to keep Xinjiang quiet. The policy is not working. The presidency of Xi Jinping risks sinking into a quagmire of ethnic strife. This could be China’s Chechnya.Over the past few decades the party has used several tactics to assert control. First it encouraged massive migration of Han Chinese into Xinjiang from other parts of China. Later it poured money into infrastructure and beefing up industry; the jobs thus created have gone overwhelmingly to Hans, who now make up more than 40% of the province’s 22m people. In tandem the party has adopted a hard line towards the merest hint of dissatisfaction on the part of the Uighurs.Discontent is spilling into the open, nonetheless. The past few days have been the bloodiest in Xinjiang since clashes in the provincial capital, Urumqi, left around...
      PubDate: Thu, 07 August 2014 15:01:09 G
  • Trade and protectionism: No more grand bargains
    • Abstract: THERE is a fine line between laudable perseverance and a stubborn refusal to admit that change is needed. Those running the World Trade Organisation (WTO) risk falling into the latter category. On July 31st an agreement to lubricate trade by streamlining customs rules worldwide collapsed. Narendra Modi, India’s new prime minister, refused to sign the deal, painstakingly thrashed out in Bali last year, because the WTO would not change its rules to let him expand food subsidies. The spat raises a new question-mark over Mr Modi: sound economics was the most respectable bit of his chequered CV. But it also shows that the WTO needs radical reform to survive.India is hardly the only protectionist when it comes to agriculture. Rich countries are the worst culprits. Japan’s tariffs—778% on rice and 328% on sugar—aim to block trade completely, insulating its small and inefficient producers from competition. The European Union’s common agricultural policy soaks up 40% of its budget. But Mr Modi has run away from reform. India’s food subsidies are massive, costing around 1% of GDP. They lead to huge stockpiles of unwanted, rotting produce, and fan pervasive...
      PubDate: Thu, 07 August 2014 15:01:09 G
  • Prostitution: A personal choice
    • Abstract: STREET-WALKERS; kerb-crawlers; phone booths plastered with pictures of breasts and buttocks: the sheer...
      PubDate: Thu, 07 August 2014 08:03:10 G
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