The Economists

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• The Maldives after its “coup”: Between Delhi and the deep blue sea May 17, 2012
  A Nasheed supporter fights her own battle ONE of the presidents must be wrong. The ruler of the Maldives, Waheed Hassan, says nothing would please him more than calling early elections. “The Maldives is now more democratic than ever,” he gushed during his first official trip abroad, in Delhi, on May 14th. With a firm handshake, a dapper red tie and a straight-in-the-eye stare, he says he would cheerily go to the polls tomorrow—if only he were not blocked from doing so by the constitution of the sprawling archipelago, and by some regrettably reluctant coalition allies.Nonsense, retorts his high-profile predecessor, Mohamed Nasheed, over a squeaking phone line from Male, the capital. “We need an election. It’s nothing to do with his coalition allies, it’s just him.” Mr Hassan (formerly the vice-president) could quit, but prefers taking time to crush his opponents. Some 600 people, mostly opposition party workers, have been arrested in the past few months, Mr Nasheed complains. Opposition MPs get inducements to defect. Mr Nasheed, an experienced political lag, says he thinks he will soon...
• Presidential politics in Taiwan: Ma’s second stand May 17, 2012
  TAIWAN’S president, Ma Ying-jeou, is to be inaugurated for a second term on May 20th. His first four years, above all else, were marked by an historic detente with China, Taiwan’s old foe across the Taiwan Strait. First, China agreed to a truce in a long-running and increasingly expensive attempt to deny Taiwan diplomatic allies. Then, in 2010, the two countries signed a trade agreement known as the Economic Co-operation Framework Agreement (ECFA). Relations across the strait have never been better since Taiwan and China split in 1949, and Mr Ma can be considered the architect of that.Yet Taiwan’s public remains wary about too close a rapprochement with China, which considers the island to be a part of its territory and which insists on the right to use force to achieve reunification. And so a preoccupation of even as pro-China a leader as Mr Ma continues to be to expand Taiwan’s international ties as a counterbalance to the mainland giant. In selling the idea of an ECFA to a sceptical public, Mr Ma insisted that a framework agreement would not force the young democracy into China’s arms. Rather, he said, it...
• China and Taiwan: Strait talking May 17, 2012
  IT BELONGS to China, but Chinese officials want to spend billions of dollars transforming an island in the Taiwan Strait the size of Malta into a money-spinning model of cross-strait co-operation with a jointly run government. China and Taiwan have not co-operated over territory since the two sides split in 1949 after the Chinese civil war.The island of Pingtan stirs troubled memories in Taiwan. On one end of the island, on a hilltop overlooking a sandy bay, stands a concrete tower, which marks the spot where, in 1996, more than 100 Chinese generals gathered to watch a huge military exercise aimed at intimidating voters and candidates in Taiwan before the island’s first direct presidential elections that year.Pingtan officials now try to play down the past. They focus instead on the island’s 100km (60 miles) of sandy, mostly undeveloped, shoreline, hoping it has the same pulling power as the beaches of Hainan, a (much larger) tropical island off the southern coast that has become the playground of China’s rich. There are plans to build five-star hotels, golf courses and yacht clubs.In 2010 the opening of a 4km...
• JPMorgan Chase: Dimon in the rough May 17, 2012
  A BIG but digestible mistake by a financial institution with abundant profits and capital should normally be viewed as the market equivalent of an electric shock, a jolt that leads to smarter behaviour. The response to JPMorgan Chase’s $2 billion (and rising) loss on a position taken by its chief investment office could not have been more highly charged.The loss has reinforced the political appeal of bashing banks, no matter what the facts. Barack Obama went on a TV chat show on May 14th and responded to questions about the loss by implying it would have been blocked under the Volcker rule banning proprietary trading. Given the proposed wording of the rule and the apparent nature of the trade, which seems to have started out as an attempt to hedge risk, that assertion is at best a stretch.Elizabeth Warren, a senatorial candidate in Massachusetts, also jumped on the bandwagon. “Wall Street isn’t going to change its ways until Washington gets serious about strong oversight and real accountability,” ran a campaign ad. Yet JPM is already among the most heavily regulated institutions in America, if not the world. Supervisors have employees climbing all over the bank; they routinely review its credit and business practices. Perhaps to pre-empt criticisms of inept oversight, a string of regulators has nonetheless announced investigations into the trade.Competing financial firms...
• Short-selling litigation: An enlightening mistake May 17, 2012
  A RARE slip-up by lawyers has helped shed some light on a high-profile legal battle, the details of which some of the largest Wall Street firms have been fighting to keep under wraps. The case concerns allegations of illegal “naked” short selling, where the rules have been tightened several times over the past seven years.In 2007 Overstock sued 11 brokers, alleging that they had caused its share price to fall by helping their clients to naked-short the Utah-based retailer. In a normal short sale, shares are borrowed (or at least “located”) with a broker’s help before being sold. In the naked version, there is no attempt to borrow or locate the stock. This can create “fails to deliver”, where the trade is not settled when it should be, and messes with the laws of supply and demand, allowing shorting to take place beyond the natural limits set by the number of borrowable shares.As the pre-trial discovery period proceeded, Overstock narrowed its focus to two firms, Goldman Sachs and Merrill Lynch, now part of Bank of America. Before the case was set to go to trial in California, however, the judge dismissed it on jurisdictional grounds, ruling that not enough of the alleged wrongdoing had taken place in the state. Overstock appealed and pushed for all of the evidence to be unsealed. The defendants objected. Four media groups, including The Economist,...
• The navy: The spirit of 1812 May 17, 2012
  The blasted British FEW Americans remember the War of 1812, and if they do they are likely to forget that it marked the coming of age of their navy. “The Star-Spangled Banner”, written by an amateur poet on the back of an envelope during its battle of Baltimore, makes a bigger impression these days. But it was the heroic performance of America’s frigates against the world’s most powerful fleet that saved the young republic from possible extinction, despite the burning of the White House by the British in 1814.Two centuries on, the navy is hoping to reclaim the memory of its greatest glory, and to polish its own reputation in the process. While the war (which lasted till 1815) may not feature prominently in a potted history of America, the service sees the conflict as a reminder of its enduring importance. It has spent some $12m on a three-year-long bicentennial celebration, to promote stirring events and exhibitions across the country.It was, however, an awkward war—fought against Britain and various Indian tribes, and with no clear winner. But its timing does look handy for today’s...
• The Texas Senate race: Another insurgency May 17, 2012
  AS A former solicitor-general of Texas, Ted Cruz earned his spurs in classic fashion. In 2007 he went to the Supreme Court to argue that the state was within its rights to execute a man who had raped and murdered two teenage girls, even if the offender in question was a Mexican national—and won. That decision, Medellin v Texas, was seen as a rebuke to the federal government, the United Nations, the International Court of Justice, and, indeed, the validity of international law.So now that Mr Cruz is running for the Senate, love is in the air. The National Review, a conservative magazine, popped him on the cover months ago; the Texas Observer, a long-suffering liberal magazine, warned that he could be the next Ronald Reagan. On May 7th he picked up endorsements from Rand Paul, a tea-party darling, and his Texan father, Ron Paul. Several days later, Sarah Palin offered hers. The only odd thing is that Mr Cruz is not, as it happens, winning the race.The seat is being vacated by Texas’s senior senator, Kay Bailey Hutchison. She is retiring, but unlike Indiana’s Dick Lugar, who on May 8th lost his primary to a tea-party backed insurgent, she is doing so voluntarily. Although Ms Hutchison lost a 2010 bid for the Republican gubernatorial nomination to Rick Perry, she would probably have won had she stood again....
• Banyan: Trading strategies May 17, 2012
  TRADE negotiations sometimes seem like scrubbing the floor. They feel virtuous, take for ever and entail back-breaking work; but, when done, it is often hard to see any difference. So a first reaction to the announcement on May 13th that China, Japan and South Korea are to open talks on establishing a trilateral free-trade area is to shrug. The idea has been around for a decade. There are many obstacles to its realisation. And not so much as a date has been announced for the talks to begin.A second response is to recognise that, if it did come to anything, this would be a very big deal. In aggregate, the three countries account for nearly a fifth of global output—more than the euro area—and 18% of world exports. A third is to note that, with the stalling of the Doha round of multilateral trade talks, regional free-trade agreements (FTAs) in Asia have become one of many arenas of strategic competition between America and China.There are a couple of shrug-worthy elements to the proposed free-trade area. The first is that it will be terribly hard to bring to fruition. In all three countries, important lobbies will...
• The Australian Federal Police in the Pacific: Booting out big brother May 17, 2012
  VANUATU, a nation of just 257,000, expelled the 12-member police contingent from neighbouring Australia on May 10th. The action was in retaliation for an incident at Sydney airport involving Vanuatu’s prime minister, Sato Kilman. While in transit to Israel, Mr Kilman and his entourage were made to pass through immigration, rather than being ushered into a VIP lounge. Once on Australian soil, Mr Kilman’s private secretary, Clarence Marae, was promptly arrested by federal police on charges of tax fraud. The Vanuatu government has been careful to justify the expulsion of the Australian Federal Police (AFP) not by complaining about Mr Marae’s arrest but by protesting at the discourtesy shown to the prime minister. Australia’s foreign minister, Bob Carr, responded by threatening to cut aid to Vanuatu.This is not the first time Pacific Island leaders have taken umbrage at their treatment in Australian airports. In 2005 security officers in Brisbane airport required Papua New Guinea’s then prime minister, Sir Michael Somare, to remove his shoes, sparking angry protests. Nor is it the first time Vanuatu has clashed with the...
• India’s parliament at 60: Badly drawn May 17, 2012
  INDIA’S parliament marked its 60th birthday, on May 13th, with an apparently nonsensical row. MPs of all parties worked up a froth, claiming to be offended by a cartoon older than parliament itself. The drawing, now reproduced in a textbook, shows the architect of India’s constitution, B.R. Ambedkar, astride a snail; beside him is Jawaharlal Nehru, the first prime minister. Each holds a whip.Mayawati, a national MP who leads a pro-dalit (low-caste) party in Uttar Pradesh, says that demeans Ambedkar, a hero to fellow dalits, by suggesting that the high-caste Nehru had to whip him to finish the constitution. Kapil Sibal, the communications minister, promptly apologised and said he would banish the sketch from future books. MPs then leapt on other drawings in the textbook they disliked. How could scribblers possibly depict politicians as crooked, or the Indian electorate as a stubborn elephant?It all fits a regrettably mirthless trend. West Bengal’s chief minister, Mamata Banerjee, defends the arrest last month of an academic in Kolkata who had e-mailed a cartoon...
• Turkey’s cultural ambitions: Of marbles and men May 17, 2012
  IN THE spring of 1887 a Lebanese villager named Mohammed Sherif discovered a well near Sidon that led to two underground chambers. These turned out to be a royal tomb containing 18 magnificent marble sarcophagi dating back to the fifth century BC. The Ottoman sultan, Abdul Hamid II, ordered the sarcophagi exhumed, placed on rails and carried down to the Mediterranean coast, where they were sent by ship to Istanbul. The largest sarcophagus was believed to contain the remains of Alexander the Great. The coffin is not Turkish and Sidon is now in Lebanon, but the sarcophagus is regarded as Istanbul’s grandest treasure, as important to the archaeology museum there as the “Mona Lisa” is to the Louvre.The mildly Islamist government of Recep Tayyip Erdogan, led by the Justice and Development (AK) party, likes to think of itself as the heir of the Ottoman sultans. The Turkish authorities have recently launched a wave of cultural expansionism, building new museums, repairing Ottoman remains, licensing fresh archaeological excavations and spending more on the arts. A grand museum in the capital, Ankara, is due to open in...
• Crime in the shadow of the Great Wall: In the old days May 17, 2012
  Midnight in Peking. By Paul French. Penguin; 260 pages; $26. Viking; £12.99. Buy from Amazon.com, Amazon.co.ukCHINA in the early part of the 20th century was home to an itinerant mix of foreign scholars, refugees, businessmen, missionaries, soldiers and diplomats, with many settling in the former imperial capital, then known as Peking. Some had been at Harvard, others in the gutter. The most highly educated were all too often the most debased.Into this dangerous world a British diplomatic couple adopted a baby girl, naming her Pamela. Her grey eyes and Western features marked her as one of the many children cast into China’s orphanages by white Russian parents fleeing the bloody Bolshevik purges. Her new mother died when she was five, leaving her in the care of her father.Edward Theodore Chalmers Werner was a formidable figure in the Peking community, a genuine China hand who was fluent in Mandarin, courageous and very curious. He had retired, or been retired, early from the diplomatic corps, lacking the clubbable personality that rose easily through the Foreign Office hierarchy. A distant personality who often took long...
• Demography: A new science of population May 17, 2012
• American business in wartime: Democracy’s arsenal May 17, 2012
  Her country needed her Freedom’s Forge: How American Business Produced Victory in World War II. By Arthur Herman. Random House; 413 pages; $28. Buy from Amazon.com“WHAT is America but beauty queens, millionaires, stupid records and Hollywood?” asked Adolf Hitler in 1940. With hindsight, this ranks as just about the most foolish rhetorical question posed during the second world war. But it did not seem so at the time. As Arthur Herman shows in his wartime history, when Hitler mocked its prowess America had experienced not so much a double-dip as a double-dive depression. Yet somehow the country’s moribund military-industrial complex was able to respond with great force to President Franklin Roosevelt’s call to arms.The production statistics cited by Mr Herman, a think-tank scholar at the American Enterprise Institute, still astound. Preparations for war got off to a stuttering start. But everything changed in 1941 when Germany invaded Russia and then...
• The endangered public company: The big engine that couldn’t May 17, 2012
  PUBLIC companies have been the locomotives of capitalism since they were invented in the mid-19th century. They have installed themselves at the heart of the world’s largest economy, the United States. In the 1990s they looked as if they would spread round the world, shunting aside older forms of corporate organisation such as partnerships, and newer rivals such as state-owned enterprises (SOEs). China’s former president, Jiang Zemin, described NASDAQ as “the crown jewel of all that is great about America”. Russia rejected five-year plans in favour of stockmarket listings and Wall Street banks abandoned cosy partnerships in favour of public equity: Goldman Sachs, the last big holdout, went public as the decade came to an end. Public companies triumphed because they provided three things that make for durable success: limited liability, which encourages the...
• Bagehot: The nightmare scenario May 17, 2012
  IN “The Night Face Up”—a 1956 short story by Julio Cortázar, an Argentine master of magical realism—a young man lies in a hospital at night, one injured arm held aloft by weights and pulleys. He is tormented by a recurring nightmare in which he is being hunted by Aztec warriors. The dreams are vivid, from the cling and reek of the jungle swamp in which he is captured to the chill of a dungeon floor and the hands dragging him up stone steps to an altar slick with human blood. The gore is mostly hinted at. The story’s menace turns on the man’s repeated struggles to wake and return to his darkened ward.Across the rich world and above all in western Europe, lots of voters know just how that young patient feels. They yearn to hear that today’s unhappy realities—of austerity and spending cuts, debt, intermittent growth and relative decline—are a nightmare from which they can wake. They long to return to the “normality” of the boom years ended by the credit crunch of 2007. As incumbents wobble or fall across the continent, opposition politicians fall over themselves to agree with voters that today’s miseries are a bad...
• Migrant children: Good things and small packages May 17, 2012
  WHEN her father died, Claire came on her own from Jamaica, aged 12, to join her older half-sister. She misbehaved and the sister kicked her out. The Home Office revoked her authorisation to stay, telling her to go back to the Caribbean; Claire, then 15, absconded instead. A few years later, pregnant and on the streets, she turned to the network of charities that look after the destitute in Birmingham, especially the Children’s Society. After over a year moving between night shelters and temporary rooms, she now has “discretionary leave” to remain with her children. This entitles her to housing and income support, but she will have to reapply before long.Irregular migrants have long been a neuralgic issue in Britain. Under the previous Labour government a backlog in processing asylum claims increased public unease. Numbers fell when the backlog was slashed and immigration policy toughened, but less dramatic forms of overstaying—by visitors, or the growing number of foreign students—mean the total may still be near 600,000. And asylum-seeker numbers are creeping up again.Undocumented children get little attention,...
• Labour’s reshuffle: Wanted: a red Boris May 17, 2012
  RESHUFFLES in opposition parties lack the bloody edge of government ones. Yet Ed Miliband’s rejigging of his front bench gives a clue to his preoccupations. Following encouraging results in local elections on May 3rd (the party won over 800 council seats and added 32 councils to its control) Labour’s leader has tried to set a new direction for the party.Out of the main policy-development role has gone the technocratic Liam Byrne, a heroic producer of detailed reviews (29 at the last count). In comes Jon Cruddas, a creature of bright plumage in the opposition’s stolid ranks. Mr Cruddas is the nearest thing Labour has to Boris Johnson, the re-elected mayor of London, in that he presents an eclectic mixture of political ideas, wrapped in outspoken personal charm.As MP for a poor part of east London, Mr Cruddas helped create a movement dubbed “Blue Labour,” which leans on traditions of working-class social conservatism and stresses family and community. That draws Mr Miliband, because Labour shed many working- and lower-middle-class voters during its last spell in office. Between 1997 and 2010 its vote dropped by nine percentage points among the C1 social group and by 21 points among C2s, according to research by Ipsos MORI, a pollster.The new ideas man is certainly bold. He is a Eurosceptic who favours a referendum on Britain’s membership of the EU. He has upbraided council...
• Scottish universities: Tartan and thistles May 17, 2012
  Your taxes at work SCOTLAND has a glorious educational tradition: in the 16th century the nation boasted four universities to England’s two. But fairness is also a national trait. One of the first things the Scottish Parliament did after being formed in 1999 was to abolish upfront tuition fees for all Scots studying in the country. As the rest of Britain has moved toward higher fees and a market-based approach to higher education, Scotland has become the land of free. The consequences of this generosity are increasingly apparent.Scotland’s universities are a peculiar mix. A few lure posh English people: until recently, the biggest single supplier of undergraduates to the University of Edinburgh was Eton. Some students at the University of St Andrews (pictured) think nothing of popping to Paris for the weekend. A few miles away, at Dundee College, many locals would not consider leaving the city even in order to study.But the universities’ complexion is gradually changing. The number of students from England, Wales and Northern Ireland—who must now pay Scottish universities annual fees...
• Hairdressing: The architect May 17, 2012
  HAIRDRESSING, when the young Vidal Sassoon started learning the craft in London in 1945, was a bothersome business for perpetrator and victim alike. The aim was to make women pretty; their comfort was irrelevant. Heat and chemicals conquered the hair, heaping, crimping and teasing it into fluffy but fragile bangs and curls. Hairnets and rollers could preserve the effect only briefly; soon it would be time for another lengthy and costly session. Keeping a chignon (a kind of loose bun) straight meant sleeping on chocks.Mr Sassoon’s approach, by contrast, was hair-raisingly radical. Bouffant styles and bobby pins were a waste of time, he reckoned. Style meant simplicity and flexibility, not complication and rigidity. He likened his work to architecture: fitting the hair to the bone structure, citing the stark geometric forms of the Bauhaus school as his inspiration. Wet or dry, the razor-sharp lines would fall perfectly into place with the client’s jaw and cheekbones. One good cut would last for weeks.Clients were sceptical. Later, he recalled a customer “in a flurry of mink and dripping with jewels” who demanded a...