The Economist

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  • The meaning of 3% Treasury-bond yields

    ROUND numbers would be irrelevant if investors were rational. But they are not. This week the ten-year Treasury-bond yield passed the 3% threshold for the first time in over four years and investors shuddered. Their worry is that the long downward march in yields, which began in 1982, may at last be over. Is it?

    That question is not of interest just to bondholders, for whom higher yields mean lower prices. Government-bond yields set the benchmark for the borrowing costs of companies and consumers. When they rise, the weakest companies and the most indebted consumers are likely to get into difficulty. If the cost of government borrowing rises, it becomes harder to finance budget deficits. Politicians may be forced into cutting spending or raising taxes. If the breaching of the 3% threshold were to presage an abrupt rise in yields, there could be trouble ahead (which is why stockmarkets wobbled this week). Yet a bond-market bloodbath seems unlikely.

    It is no surprise that bond yields...

  • Gina Haspel must give answers before becoming the CIA boss

    WANTED: qualified candidates to work for the world’s most scrutinised organisation. Applicants should be aware that the CEO has a history of undermining staff and firing them publicly. They should also know that his lawyer is under criminal investigation. Oh, and that the former head of the FBI is looking into how the CEO got the job. The successful candidate will face a televised inquisition by members of the Senate in which questions will be raised about their character.

    Fifteen months into the presidency of Donald Trump, nobody who chooses to join his administration can say they have not been warned. His former press secretary has said he regretted misleading the public, under instruction from Mr Trump, on the first full day of the presidency. His former communications director said she told “white lies” for him. His former secretary of state did not deny reports that he called the president a “fucking moron”. The former head of the FBI says Mr Trump is “morally unfit” to be president. When...

  • How to regulate crypto

    THE wild ride seems to have calmed. Late last year speculators sent the price of crypto-currencies soaring. The value of bitcoin, the best-known, has fallen by half since then. But the momentum behind all things crypto remains powerful. Bitcoin is still worth seven times what it was just a year ago. In the first quarter of this year, according to CoinDesk, a news service, $6.3bn was raised through initial coin offerings (ICOs), a form of funding in which firms issue digital tokens, more than in all of 2017. Last month the Student Loan Report, a website, found that one in five American students it asked had used part of their loan to join the crypto rush.

    No wonder regulators want to exert greater control over the crypto-sphere. The chance to raise money via ICOs has attracted as many con men as it has genuine entrepreneurs. The head of Europol, Europe’s policing agency, has estimated that 3-4% of the region’s criminal proceeds are now laundered through crypto-assets. Plenty in the industry...

  • Riots threaten Nicaragua’s autocratic president

    AMONG Latin America’s handful of autocracies, that of Daniel Ortega in Nicaragua once stood out for its stability. Mr Ortega was the most prominent leader of the revolutionary Sandinista regime of the 1980s, but lost an election in 1990. He later forged a dirty deal with a conservative rival that let him return to power with just 38% of the vote in 2006, and has since clung to office by nobbling democratic institutions. At the last election in 2016, he banned the main opposition. Nicaragua thus joined Venezuela, the only two Latin American countries to have regressed from democracy to dictatorship.

    Mr Ortega rules by combining left-wing rhetoric with mainly right-wing policies, letting the private sector and the Catholic church do what they like and avoiding quarrels with the United States. He has kept his political base among the poor thanks to roughly $5bn in Venezuelan aid. He has made his wife, Rosario Murillo, vice-president. Corruption has flourished. All this carries a whiff of the...

  • Universal health care, worldwide, is within reach

    BY MANY measures the world has never been in better health. Since 2000 the number of children who die before they are five has fallen by almost half, to 5.6m. Life expectancy has reached 71, a gain of five years. More children than ever are vaccinated. Malaria, TB and HIV/AIDS are in retreat.

    Yet the gap between this progress and the still greater potential that medicine offers has perhaps never been wider. At least half the world is without access to what the World Health Organisation deems essential, including antenatal care, insecticide-treated bednets, screening for cervical cancer and vaccinations against diphtheria, tetanus and whooping cough. Safe, basic surgery is out of reach for 5bn people.

    Those who can get to see a doctor often pay a crippling price. More than 800m people spend over 10% of their annual household income on medical expenses; nearly 180m spend over 25%. The quality of what they get in return is often woeful. In studies of consultations in rural Indian...

  • The EU should get tough on its illiberal democracies

    THERE was once no brighter star in Europe. Since shaking off communism in 1989 Poland has rivalled the bounciest Asian tigers in GDP growth. It has become a vital NATO ally. But it is also on the front line of what France’s president, Emmanuel Macron, calls a “European civil war” over the rule of law.

    The optimism that attended the EU’s great eastward expansion in 2004 has given way, in some places, to angry, nationalist “illiberal democracy”. In Hungary, having nobbled the courts, media and public prosecutor, Viktor Orban is squeezing civil society and using state (and EU) funds to nurture oligarchs. Romania’s leaders endlessly seek to weaken anti-graft laws that might otherwise ensnare them.

    But the gravest challenge is in Poland. Since taking office in 2015 the nationalist Law and Justice (PiS) party has stacked the courts, skewed public media and stuffed the bureaucracy with supporters (see...

  • Why America’s post office should be privatised

    THE Founding Fathers thought that operating a postal service was a crucial responsibility of the federal government. The constitution allows Congress a monopoly on delivering post. Today the United States Postal Service (USPS) is the third-biggest employer in America, behind Walmart and the Defence Department. For most of the country’s history, USPS provided the arteries along which information flowed.

    Not any more. The number of first-class letters has fallen by almost half from its peak in 2001, as communication has migrated to the internet. About half of what still lands in letterboxes is advertising. USPS’s revenue from its monopoly is down by 35% in real terms since 2008. Seeking a survival strategy, and with online shopping booming, the post office is focusing on delivering parcels. But it has no monopoly in this business, and its network was built for letters. Parcels still comprise less than a third of revenue. Competition from the likes of UPS, FedEx and DHL means that USPS...

  • IKEA furniture and the limits of AI

    COMPUTERS have already proved better than people at playing chess and diagnosing diseases. But now a group of artificial-intelligence researchers in Singapore have managed to teach industrial robots to assemble an IKEA chair—for the first time uniting the worlds of Allen keys and Alan Turing. Now that machines have mastered one of the most baffling ways of spending a Saturday afternoon, can it be long before AIs rise up and enslave human beings in the silicon mines?

    The research also holds a serious message. It highlights a deep truth about the limitations of automation. Machines excel at the sorts of abstract, cognitive tasks that, to people, signify intelligence—complex board games, say, or differential calculus. But they struggle with physical jobs, such as navigating a cluttered room, which are so simple that they hardly seem to count as intelligence at all. The IKEAbots are a case in point. It took a pair of them, pre-programmed by humans, more than 20 minutes to assemble a chair that a...

  • The humbling of India’s tycoons

    FOR decades, personal connections have provided a well-trodden path to success in Indian business. State-owned banks provided cheap financing for firms whose success often rested on winning official approvals. If a venture soured, the taxpayer frequently ended up being left to shoulder losses. There are plenty of gifted businesspeople in India. But cronyism, not competition, has been the surest route to riches, even after the partial dismantling of the “licence raj” nearly three decades ago.

    A new era of Indian capitalism may be dawning. For the first time a large number of struggling tycoons face the prospect of having their businesses seized from them. The fate of 12 troubled large concerns is due to be settled within weeks; another 28 cases are set to be resolved by September. Between them, these firms account for about 40% of loans that banks themselves think are unlikely to be repaid. For enforcing a bankruptcy system that is usually skirted by those with connections, the government of...

  • The Republican Party is organised around one man

    ALL presidents, Republican and Democrat, seek to remake their party in their own image. Donald Trump has been more successful than most. From the start, the voters he mesmerised in the campaign embraced him more fervently than congressional Republicans were ready to admit. After 15 months in power, as our briefing explains, he has taken ownership of their party. It is an extraordinary achievement from a man who had never lived in Washington, DC, who never held public office, who boasted of groping women and who, as recently as 2014, was a donor to the hated Democrats.

    The organising principle of Mr Trump’s Republican Party is loyalty. Not, as with the best presidents, loyalty to an ideal, a vision or a legislative programme, but to just one man—Donald J. Trump—and to the prejudice and rage which consume the voter base that, on occasion, even he struggles to control. In America that is unprecedented and it is dangerous.

    Already, some of our Republican readers will be rolling their eyes. They will say that our criticism reveals more about us and our supposed elitism than it does about Mr Trump. But we are not talking here about the policies of Mr Trump’s administration, a few of which we support, many of which we do not and all of which should be debated on their merits. The bigger, more urgent concern is Mr Trump’s temperament and style of government....

  • If Syria’s despot is not punished, others will use chemical weapons

    AFTER seven years of war and hundreds of thousands of deaths, it takes an act of utter barbarism to shock the world out of its indifference. But every so often, Bashar al-Assad supplies one. On April 7th more than 40 Syrians were killed with poisonous gas in the town of Douma. Videos showed men, women and children lying lifeless, with foam dribbling over their lips. Such horrors are why most countries outlawed the use of chemical weapons long ago—and why Syria’s despot flouts that ban. He has carried out dozens of chemical attacks over the course of Syria’s war, sowing terror in rebel-held areas. The world should not let him get away with it.

    As The Economist went to press, America and its allies were considering responding to the atrocity in Douma with military action. If they are convinced of the evidence against Mr Assad (who denies responsibility), then they should punish him hard enough to deter him from gassing his people again. That will take more than...

  • British productivity is rising at last. But Brexit looms over the economy

    LOW productivity growth has plagued Britain’s economy since the financial crisis. From 2010 to 2016 output per hour grew, on average, by just 0.2% a year, down from 2.5% between 1950 and 2007. In the G7 group of rich countries, only Italy has done worse. Productivity drives a country’s living standards in the long term. It is a relief, then, that the stagnation may at last be coming to an end. In the second half of 2017 productivity grew at an annual rate of 3.4%, the fastest growth since 2005.

    Accelerating productivity is the latest, and most important, piece of good news on Britain’s economy. Capital spending is...

  • Great news for the dead: the funeral industry is being disrupted

    FEW choose how they die, but they can choose what happens next. Most leave this to loved ones who, in their distress, usually outsource the decision to an undertaker. The transaction is often a let-down, with hardly any choices beyond “Burn or bury?” and “Cheque or card?”

    The average American funeral with a burial costs nearly $9,000. In some countries, the exorbitant cost of staging a “proper” funeral can lead families to financial ruin. Nearly everywhere, the bereaved have put up with rip-off last rites because of the lack of better options. At last, technology and competition are starting to disrupt this most conservative of industries (see article). This is good news for anyone who plans to die one day.

    The funeral trade has the most basic of business advantages: inexhaustible demand. Every minute...

  • What to make of Mark Zuckerberg’s testimony

    SAYING sorry can be an enriching experience. For Mark Zuckerberg, who this week endured two days of questioning in front of Congress, the rewards of contrition are not just metaphorical. Over the course of his testimony, as the Facebook boss apologised for the leakage of data on 87m users to a political-campaign firm, his company’s shares rose by 5.7% and his own net worth by $3.2bn.

    Shareholders were doubtless relieved by Mr Zuckerberg’s robotic but gaffe-free display. And even the firm’s fiercest critics ought to acknowledge the distance that it has travelled since the Cambridge Analytica story broke in March. Mr Zuckerberg welcomed the idea of regulation and cautiously endorsed a forthcoming European law on data protection. By saying explicitly that Facebook was responsible for the content on its platform, he has opened the door to bearing greater liability for the material it carries. But the bounce in the share price also signals something worrying: that neither the firm nor American...

  • Germany is becoming more open and diverse

    SINCE the fall of the Berlin Wall the Ampelmännchen, the jaunty, behatted “little traffic-light man” of communist East Germany, has escaped his dictatorial roots to become a kooky icon of Germany’s trendy capital. Tourists pose with life-size models and snap up memorabilia in souvenir shops. The Ampelmännchen’s quirky coolness is an increasingly apt symbol of the country as well as its capital. As our special report in this issue describes, Germany is entering a new era. It is becoming more diverse, open, informal and hip.

    At first blush that seems a preposterous suggestion. The Germany of international newspaper headlines is a country with anxious citizens and stagnant politics. Angela Merkel is Europe’s longest-standing political leader, a woman who epitomises traditional German caution. Last September’s election saw a surge in support for the far-right Alternative for Germany (AfD); it took Mrs Merkel six months to cobble together a lacklustre new coalition. To conservative foreign observers Germany is a byword for a reckless refugee policy; to others it is the country that bullied indebted southern Europeans.

    But take the long view...

  • Chinese aviation takes off

    OVER the past few decades, established airlines in Europe and America have been hit by one thing after another. First came low-cost carriers, chipping away at their short-haul routes. Lately, a new crop of super-connecting airlines in the Gulf, Emirates, Etihad and Qatar Airways, has lured away their long-haul passengers with superior service and lower fares. Now looms the biggest threat of all—the rise of several promising Chinese airlines (see article). Unfortunately, the response of the incumbents risks depriving passengers of the benefits from this latest wave of competition.


  • Railway strikes test Macron’s reforms

    MAYHEM at railway stations. Gridlock on the roads. The scenes of strife in France this week were as familiar as they were symbolic. On April 3rd train drivers and other rail staff began a rolling strike, planned for two out of every five days, that may last for months. It could be a re-run of the strikes that paralysed the country in 1995, forcing Alain Juppé, Jacques Chirac’s prime minister, to back down in the face of chaos. How President Emmanuel Macron handles the confrontation with unions will determine whether he lives up to his electoral promise to “unblock” France, or joins the long list of French leaders defeated by the revolt of the street.

    A grève problem

    Strikes are part of France’s culture of protest. They are seldom just a demand for better wages or working conditions. Rather, they are a political show of force. Having failed to mobilise workers against Mr Macron’s labour reform last September, hardline unions now sense a chance to test his resolve....

  • How to narrow Britain’s gender-pay gap

    PITY Britain’s press officers. April 4th was the deadline for employers in Britain with 250 workers or more to publish details of the difference between the average pay of their male and female employees, under a new annual reporting requirement (The Economist Group recorded a median gap of 29.5%). The overall figures are eye-opening: eight out of ten employers pay men more than women. Theresa May, the prime minister, has promised to tackle this “burning injustice”.

    Some take the numbers to mean that women are paid less than men for the same job. In fact the exercise bluntly compares employees’ pay without accounting for their differing roles—so Premier League football clubs have vast but meaningless pay gaps, as the men on the pitch are compared with the women on the turnstiles. This may even create perverse incentives, as firms could appear better by outsourcing low-paid jobs done by women. Yet the exercise could also lead to deeper questioning of what causes differences in pay (see...

  • America should borrow from Europe’s data-privacy law

    AMERICA rarely looks to the bureaucrats of Brussels for guidance. Commercial freedom appeals more than dirigisme. But when it comes to data privacy, the case for copying the best bits of the European Union’s approach is compelling.

    The General Data Protection Regulation (GDPR) is due to come into force next month. It is rules-heavy and has its flaws, but its premise that consumers should be in charge of their personal data is the right one. The law lets users gain access to, and to correct, information that firms hold on them. It gives consumers the right to transfer their data to another organisation. It requires companies to define how they keep data secure. And it lets regulators levy big fines if firms break the rules.

    America has enacted privacy rules in areas such as health care. But it has never passed an overarching data-protection law. The latest attempt, the Consumer Privacy Bill of Rights, introduced in 2012 by the Obama administration, died a...

  • How to cut the murder rate

    THE planet has rarely been so peaceful. Even with terrible fighting in such places as Congo, Syria and Yemen, wars between and within countries are becoming less common and less deadly. But a dark menace looms. Some of the developing world’s cities threaten to be engulfed by murder.

    Of the 560,000 violent deaths around the world in 2016, 68% were murders; wars caused just 18%. Murder has been falling in rich countries (though London is suffering an outbreak—see article), but it has long plagued Latin America and is starting to climb in parts of southern Africa, the Middle East and Asia. The world often goes to great lengths to stop wars. Just imagine if it put as much effort into stopping murders.

    Latin America shows what is at stake. It has 8% of the world’s people but 38% of its recorded murders (see...


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