The Economist Articles for Dec. 2nd week : Dec. 8th(Interpretation)

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Leaders | Lessons from a surprising experiment

Javier Milei: “My contempt for the state is infinite”

Argentina’s president is idolised by the Trumpian right. They should get to know him better

Nov 28th 2024

Many people in America hope that the new Trump administration will take an axe to a bloated and overbearing government, cutting spending and rolling back regulation. Whether this goal is even plausible any more is a crucial question for America and the world, after two decades in which government debt globally has risen relentlessly, fuelled by the financial crisis of 2007-09 and the pandemic. For an answer, and a case study of taming an out-of-control Leviathan, head 5,000 miles south from Washington, where an extraordinary experiment is under way.

Javier Milei has been president of Argentina for a year. He campaigned wielding a chainsaw, but his economic programme is serious and one of the most radical doses of free-market medicine since Thatcherism. It comes with risks, if only because of Argentina’s history of instability and Mr Milei’s explosive personality. But the lessons are striking, too.

The left detests him and the Trumpian right embraces him, but he truly belongs to neither group. He has shown that the continual expansion of the state is not inevitable. And he is a principled rebuke to opportunistic populism, of the sort practised by Donald Trump. Mr Milei believes in free trade and free markets, not protectionism; fiscal discipline, not reckless borrowing; and, instead of spinning popular fantasies, brutal public truth-telling.

Argentina has been in trouble for decades, with a state that handed out patronage, politicians who lied and a central bank that printed money to paper over the cracks. To control inflation, its governments resorted to a blizzard of price controls, multiple exchange rates and capital controls. It is so far the only country in modern economic history to have tumbled from rich-world status back into the middle-income bracket.

Mr Milei was elected with a mandate to reverse this decline. His chainsaw has cut public spending by almost a third in real terms, halved the number of ministries and engineered a budget surplus. There has been a bonfire of red tape, liberating markets from housing rentals to airlines. The results are encouraging. Inflation has fallen from 13% month on month to 3%. Investors’ assessment of the risk of default has halved. A battered economy is showing signs of recovery.

What is fascinating is the philosophy behind the figures. Mr Milei is often wrongly lumped in with populist leaders such as Mr Trump, the hard right in France and Germany or Viktor Orban in Hungary. In fact he comes from a different tradition. A true believer in open markets and individual liberty, he has a quasi-religious zeal for economic freedom, a hatred of socialism and, as he told us in an interview this week, “infinite” contempt for the state. Instead of industrial policy and tariffs, he promotes trade with private firms that do not interfere in Argentina’s domestic affairs, including Chinese ones. He is a small-state Republican who admires Margaret Thatcher—a messianic example of an endangered species. His poll ratings are rising and, at this point in his term, he is more popular in Argentina than his recent predecessors were.

Make no mistake, the Milei experiment could still go badly wrong. Austerity has caused an increase in the poverty rate, which jumped to 53% in the first half of 2024 from 40% a year earlier. Mr Milei could struggle to govern if resistance builds and the Peronist opposition is better organised. Investor confidence will be tested if he finally removes capital controls and shifts an overvalued peso to a flexible exchange-rate regime: a currency slump could test nerves and push inflation back up. Mr Milei is an eccentric who could become distracted by culture wars over gender and climate change, and thus neglect his core mission of restoring Argentina’s economy to growth.

Nonetheless, and despite the fact that Argentina is a very unusual country, Mr Milei’s first year holds lessons for the rest of the world, including his admirers and detractors in America. Take the growth of the state. Global public debt has risen from 70% of gdp 20 years ago to 93% this year and will hit 100% by 2030. Debt is a scourge not only in rich countries but also in China and India, which are both running vast deficits.

The financial crisis and the pandemic raised borrowing and created a sense that the government will always step in when people are in adversity. Many countries face rising health-care and pension costs as the population ages. Regulations only ever seem to accumulate. Governments are at a loss as to how to break the cycle. In some places, such as France, the prospect of doing so threatens political chaos.

Some of Mr Milei’s lessons are technical. To cut spending he has asked government departments to slash expenses on procurement, administrative costs and salaries rather than cash transfers to the poorest. He recognised that controlling pension spending is essential because an ageing population eats up vast chunks of the budget, a fiscal reality that many countries have yet to confront. In power, he has learned to add a dose of pragmatism to his convictions. He has set the direction for Argentina, but delegates legislative horse-trading to his staff and asks skilled ministers to oversee the economy—most notably Federico Sturzenegger, his deregulation tsar.

Big ego, small government

Perhaps the biggest lesson is about courage and coherence. Like them or not, Mr Milei’s policies align with each other, which magnifies their effect. Unlike Mr Trump, he has not promised to unleash the power of markets and consumers in one breath, and to protect businesses from competition in the next. By winning the argument for tough but vital reform, he has shown that voters used to sugar-coated banalities can in fact be trusted with hard truths.

Mr Milei, with his biker jackets, “anarcho-capitalist” mantra and explosive temper, is an unlikely saviour, and he may not save Argentina. But his attempt to confront, coherently and systematically, one of the most extreme incarnations of what is now a near-universal problem deserves to be watched closely around the world. Including in the White House. ■

Leaders | Ceasefire at last

Peace in Lebanon is just a start

Donald Trump must build on Joe Biden’s belated success

Photograph: Getty Images

Nov 27th 2024

AT LAST, A flicker of hope. The ceasefire between Israel and Hizbullah, which took effect on November 27th, brings respite to millions of Lebanese and Israelis. It ends a war of nearly 14 months that Hizbullah, a Shia militia, no doubt regrets having started. It also gives Israel much of what it sought, including a right to strike if Hizbullah re-arms. America, meanwhile, has a responsibility for monitoring compliance.

But this agreement is just a start. It offers only a promise that Hizbullah will be disarmed, and such pledges have often been broken. The reason to hope that this time will be different is that Hizbullah has been much diminished and will struggle to regain its former strength.

It was a rare success for America’s diplomats, who have often looked feeble since October 7th 2023. For months, Hizbullah insisted that Lebanon’s fate was entwined with Gaza’s: the only way for Israel to end one war was to end both. For his part, Binyamin Netanyahu, Israel’s prime minister, promised to keep fighting in Lebanon until the residents of northern Israel felt safe to return home.

Both sides finally abandoned those positions. Hizbullah decoupled its war from the one in Gaza, with the blessing (and perhaps the encouragement) of its Iranian sponsors. Mr Netanyahu accepted a ceasefire over the objections of some Israelis. Both sides had good reason to accept a deal, for both are exhausted. Hizbullah and Lebanon have been battered, while Israel’s army has been gasping under the burden of two wars.

Donald Trump was an encouragement, too. Iran may be keen to negotiate with him, which would have been impossible while Hizbullah was shooting at Israel. Iran now has an incentive to restrain its militia, at least for a while. As for Mr Netanyahu, he is also eager to stay in the president-elect’s good graces. Ending the war in Lebanon is a welcome gesture towards Mr Trump, who campaigned on doing just that.

When it takes power in January, though, the Trump administration should demand more. It may seem that the region’s two wars have been separated and, with Lebanon becalmed, Gaza is now just an isolated conflict. That is an illusion. Any path to a grand bargain of the sort Mr Trump’s aides are keen to pursue must begin in the ruins of Gaza.

Far-right Israeli lawmakers see Mr Trump’s second term as a golden opportunity to rebuild Jewish settlements in the narrow Gaza Strip that were dismantled in 2005. They are also keen to annex parts of the West Bank, thus precluding a future Palestinian state. Allowing this would be a disaster, not only for Palestinians but also for Mr Trump’s regional agenda. There is little prospect of his cherished aim of normalisation between Israel and Saudi Arabia if Israeli settlements are sprouting on the rubble of Gazan homes, or if, contrary to Saudi demands, a Palestinian state becomes impossible.

Mr Trump will need to dampen the impulses of Israel’s coalition (and of his own Republican Party). At the same time, he can help strengthen the ceasefire in Lebanon. He should offer to negotiate with Iran but make clear that shipping arms to Hizbullah would instantly end such talks.

Joe Biden has dismally failed to use American leverage in the Middle East. He promised there would be no daylight between America and Israel, even as Mr Netanyahu defied him time after time. He kept Iran under sanctions that he failed to enforce. No side took him seriously, since there seemed to be no consequences for resisting America. Mr Trump will need to be tougher—and remember to use his leverage on America’s regional allies, not only its foes. ■

Leaders | The least bad deal for Ukraine

How to make a success of peace talks with Vladimir Putin

The key is robust security guarantees for Ukrainians

Nov 28th 2024

FOR TWO years the war in Ukraine has been fought metre by blood-soaked metre. Suddenly, dramatic change is at hand. One reason is that Russia’s grinding advance has exposed grave weaknesses in manpower and morale that could eventually lead to a collapse in Ukraine’s lines. More urgent, Donald Trump has made clear that, as president, he will be impatient for the shooting to stop.

The great worry is that Mr Trump will impose a disastrous deal on Ukraine. Vladimir Putin says he might be willing to freeze the front lines, though Russia occupies just 70-80% of four Ukrainian provinces it has annexed. But he is also demanding that the West should lift sanctions; that Ukraine should renounce NATO membership; that it be demilitarised and formally neutral; that it “denazify” itself by jettisoning its leaders; and that it protect the rights of Russian-speakers.

Should Mr Trump back this, Mr Putin would have achieved most of his war aims and Ukraine would have suffered a catastrophic defeat. What is more, Russia’s president would not respect a piece of paper. He would hope that post-war Ukraine, consumed by infighting and recriminations against the West, would fall into his lap. If it did not, he might seize more territory by force. As the self-appointed guardian of Ukraine’s Russian-speakers, he could easily concoct a pretext.

That is the fear. But it is not inevitable, nor even the likeliest outcome. Capitulation to Mr Putin would be a public defeat for America and Mr Trump. It would spill over into Asia, where America’s foes might become more aggressive and its friends might lose confidence in their ally and curry favour with China instead. And Mr Trump would surely want to avoid the humiliation of being known as the man who lost Ukraine by being out-negotiated by Mr Putin. It is in his own narrow interest to forge a deal that keeps Ukraine safe for at least the four years of his term. In that time Ukraine can accomplish a lot.

Mr Trump has leverage over Russia if he wants to use it. Because he is unpredictable, he could threaten to go all-in with Ukraine by sending it more and deadlier weapons, and Mr Putin would have to take him seriously. In addition, the Russian economy is hurting, the rouble is tumbling and Russians are tired of fighting. Although Mr Putin could sustain the war for another year or more, he might also benefit from a pause. As Mike Waltz, Mr Trump’s incoming national security adviser, has suggested, America can therefore also threaten to use sanctions to make that pain worse.

What, then, should a deal aim for? Restoring the borders of 1991 is a pipe dream. Morally and legally, all that land belongs to Ukraine, but it does not have the soldiers, arms or ammunition to recapture it. Instead, the aim should be to create the conditions for Ukraine to thrive in the territory it now controls.

For that it will require stability and reconstruction, both of which depend on being safe from Russian aggression. That is why at the heart of the talks will be how to devise a credible and durable framework for Ukrainian security.

The Economist has argued that the best way of protecting Ukraine would be for it to join NATO. Membership would help prevent it from becoming unstable, embittered and vulnerable to co-option by Mr Putin in pursuit of his ultimate aim, which is to destabilise and dominate Europe. It would also bring Europe’s largest, most innovative and battle-hardened army and defence industry into the alliance—something that Mr Trump might welcome, because NATO would then need fewer American troops.

Membership raises hard questions, because of the alliance’s “Article 5” pledge that an attack on one member is an attack on all. But answers exist. The guarantee need not cover the parts of Ukraine that Russia now occupies—just as it did not cover East Germany when West Germany joined in 1955. Troops from other NATO countries may not need to be based in Ukraine in peacetime, as when Norway joined in 1949.

We still favour these arguments. However, for Ukraine to be in NATO requires the backing of all its 32 members, including Hungary and Turkey, which delayed the accession of Sweden and Finland. As our reporting shows, some countries, including the front-line states, plus Britain, France and, under a new chancellor, Germany, may therefore be open to bilateral deals in which they base their troops in Ukraine as a tripwire force . In effect, they would be seeking to deter Mr Putin with the threat that further Russian action could bring them into the war.

It looks like an elegant solution, but a tripwire force would amount to an Article 5 guarantee by another name. Countries should not offer such a promise to Ukraine unless they are ready to honour it—as walking away under Russian fire would undermine them as members of NATO, too, perhaps fatally. Simply because it was new, the tripwire force would be likely to be probed and tested for weak points by Mr Putin. To be credible it would need formal backing from Mr Trump, even if he provided no troops, because Europe still depends on America to fight wars, especially against an adversary as big as Russia.

It would also need a change of approach in Europe, particularly in Germany. To signal to Mr Putin that they were serious, European countries would need to demonstrate their support for Ukraine. That would involve massive aid for rebuilding the country and weapons, as well as progress in EU accession talks. To signal to Mr Putin that they would fight back if he attacked, they would need to dramatically increase their own defence spending and overhaul their arms industries . Mr Trump, who has long urged bigger European defence budgets, ought to welcome such an outcome.

A ceasefire would present two competing visions of Ukraine’s future. Mr Putin’s calculation is that he will win from a deal because Ukraine will rot, Russia will re-arm and the West will lose interest. But imagine that, with Western backing, Ukraine used the lull to rebuild its economy, refresh its politics and deter Russia from aggression. The task is to ensure that this vision prevails over its grim alternative. ■

United States | Jackson drama

An FBI sting operation catches Jackson’s mayor taking big bribes

What the sensational undoing of the black leader means for Mississippi’s failing capital

Photograph: Barbara Gauntt/Clarion-Ledger/USA Today Network/Imagn

Nov 28th 2024|Jackson

EVERYONE THOUGHT a new hotel would revitalise the downtown area. Nearly two decades ago city leaders in Jackson, the capital of Mississippi, negotiated a $10m loan to fund developers to build on empty land next to a glossy convention centre. But the area was derelict and no one put in a bid for it.

That was until last year, when two Nashville developers met Jody Owens, the district attorney, in a cigar lounge near the Capitol and asked him how to strike a deal. He told them that they needed the mayor’s blessing to build and that $100,000 ought to convince him. The money, he allegedly said, “can come from blood diamonds in Africa, I don’t give a fucking shit”. Soon he and Chokwe Antar Lumumba, the mayor, were flying to Florida on the developers’ private jet. Aboard a yacht in Miami they handed Mr Lumumba a personal cheque and Mr Owens a wad of cash. The mayor called a clerk to get the application deadline moved up and deposited the money into his campaign coffers. That night they partied at Tootsie’s Cabaret, a strip club, on the developers’ dime.

But the Nashville men had no plans to build: they were undercover FBI agents. On October 23rd Mr Owens and Mr Lumumba were indicted for bribery and money-laundering. Both pleaded not guilty. The mayor called the charges a “political prosecution” and said that he still plans to run for re-election in the spring, despite potentially facing a prison sentence of up to 75 years.

A band of self-described “radicals” close to the mayor say the sting operation was a set-up concocted by white extremists to dethrone their black leader. They suggest that the state’s Republican politicians are behind it, even though the case’s federal prosecutor was appointed by Joe Biden. “You’re witnessing a legal lynching,” says Tariq Abdul-Tawwab, a social-justice campaigner. The only crimes the mayor was charged with, they correctly note, are ones he was lured into by the FBI. In order for the ruse to not be considered entrapment, the government must prove at trial that it had dirt on the mayor beforehand.

One sting and another

The indictment is a blow to a city that is already spiralling downwards. After a treatment plant failed in 2021, Jackson went without clean drinking water for a month. When the system crashed again, a court put the utility under third-party control. The city’s sewage system is so leaky that locals complain of faeces bubbling up into the streets when it rains. Four of the seven public libraries have at some point closed due to mould. During the pandemic Jackson became America’s murder capital. In 2022 it had 94 homicides for every 100,000 residents, a rate comparable to notoriously dodgy cities in Mexico and Ecuador. New Orleans, America’s runner-up, had 76.

Even so, the city “is divided over whether the mayor is a colossal failure or a hero”, says Othor Cain, a citizen-journalist. Critics say Mr Lumumba accelerated the city’s decline by staffing his administration with ideologues who didn’t know how to govern. Others reckon the problem is corruption as well as incompetence. In 2021 Kenny Stokes, a city councillor, claimed that the mayor’s “relationship with dope boys” was making him “soft on crime”. Last year Mr Lumumba raised eyebrows by battling with the city council to direct a garbage-collection contract to a specific vendor.

The mayor’s allies say the decline is a result of chronic underinvestment by politicians who want to choke America’s “blackest city”, and that Mr Lumumba is in the cross-hairs because he refuses to bow to them. Mr Lumumba will have his day in court, but there can be no doubt about his commitment to racialised and radical politics. His father, a leader of the Republic of New Afrika, a militant black-nationalist group, moved his family from Detroit to start a black colony. A shoot-out with the police left one officer dead and most of the group’s leaders arrested. Lumumba senior, who was away that day, became a criminal-defence lawyer and represented Tupac Shakur, a rapper, and Geronimo Pratt, a high-ranking Black Panther. In 2013 he was elected mayor of Jackson, before dying suddenly of natural causes.

His son, who wears skinny suits and Rolex watches and lacks his father’s unfussy charisma, made black autonomy his mission. In office he has resisted the state’s attempts to seize control of Jackson’s airport, take over the schools and police the heart of the city. To ease gun violence Mr Lumumba tried, unsuccessfully, to suspend the state’s open-carry law. “He is seen as an incarnation of black Jackson standing up against white supremacy,” says D’Andra Orey, a political scientist at Jackson State University. To the more powerful state politicians who control the flow of federal funds, the mayor is a failed and now allegedly corrupt politician presiding over an urban disaster. “He continues to try to blame the white folks instead of taking responsibility for his administration’s fiscal failures,” says Pete Perry, a former head of the county Republicans.

For now, the mayor’s soldiers are bracing for war. “The gloves have to come off, I tell the movement, this is not training day,” says Danyelle Holmes of the Poor People’s Campaign, an activist group. Clicking her hot-pink nails together she explains that her radicalness is inspired by her great-great-grandfather, who killed his slave master. When asked what happens if Mr Lumumba is convicted of the crimes he is accused of, Ms Holmes’s eyes scan your correspondent fiercely. “The movement continues,” she says, “but it continues in an even more aggressive way.” ■

The Americas | One year of anarcho-capitalism

Javier Milei, free-market revolutionary

Argentina’s president explains how he has overturned the old economic order

Illustration: Alamy/The Economist

Nov 28th 2024|Buenos Aires

Sometimes familiarity breeds fondness. Not so for Javier Milei, Argentina’s president. After running the Argentine state for a year, his contempt for it remains “infinite”, he told The Economist in an interview on November 25th. Holding forth in his office in the Casa Rosada, the red-carpeted and marble-statuaried historic seat of power, Mr Milei has a presidential air. But when he explains the philosophy behind his radical experiment he sounds just like the “mole” that he claims to be, destroying the state from within. Any restraints on free enterprise push society towards socialism, he says. Even neoclassical economics, the framework that guides most economic policymaking, “ends up favouring socialism”. For Mr Milei the lesson is clear: “anything I can do to remove the interference of the state, I’m going to do.”

This resolve has guided a blast of reforms aimed at shaking Argentina out of decades of humiliating decline caused by rampant inflation, absurd handouts and thickets of regulation. The result has been better than almost anyone expected: inflation is down sharply, government spending is almost 30% lower in real terms. These successes could still be reversed; Argentina’s recent history is littered with failed economic reforms. But fortified by the clarity of his convictions and immersed in free-market theory, Mr Milei has a better chance than those who came before him.

Chart: The Economist

He is enjoying his best moment since taking office. His two most important audiences, markets and Argentines, are chuffed. The JPMorgan country-risk index, an influential measure of the risk of default, has fallen from around 2,000 when he took office in December 2023 to about 750 now, its lowest level in five years. Despite huge spending cuts, Mr Milei is more popular with Argentines than his two predecessors were after their first year. In recent months, his popularity has risen.

Argentines are impressed by falling inflation. It has long been their scourge, fuelled by wild government overspending financed by printing money. When Mr Milei took office inflation was running at 13% month on month. It spiked to 25% after he deval‎ued the artificially and unsustainably strong peso. It is now under 3% per month (see chart 1).

The reduction rests upon Mr Milei’s brutal cost-cutting. That impresses markets. He campaigned brandishing a chainsaw, then delivered a primary surplus in his first month—and every month since (see chart 2). The surplus, crucially, eliminates the pressure for the central bank to finance spending by making “temporary” transfers to the government, which are in fact rarely paid back, a form of money-printing.

Chart: The Economist

Mr Milei says he has tried to make sure that the cuts fall upon the state itself, more than its poorest citizens. He slashed the number of ministries from 18 to eight, halted the vast majority of public works and ended most transfers to provincial governments. According to Invecq, an Argentine economic consultancy, spending on both public salaries and universities is 20% lower this year in real terms than it was in 2023. Still, the biggest savings came from holding down the real value of pensions.

At the same time Mr Milei has been trying to clean up the balance sheet of the central bank, which had previously pumped a vast amount of pesos into the system. Its foreign reserves were $11bn in the red when he took office. The balance has improved, but remains negative. Some $20bn has re-entered the formal banking system, thanks to a tax amnesty that brought dollars out of mattresses and home from offshore accounts.

Alongside these efforts to stabilise the macroeconomy, Mr Milei and his team have slashed reams of red tape tangled around everything from air travel and apartment rentals to divorce and satellite internet. He is not finished. “Every day we deregulate and we still have 3,200 structural reforms pending,” he says. Elon Musk, whom he recently met at Mar-a-Lago, is keen to follow suit, he says.

The cuts hurt. The economy entered a recession this year and unemployment jumped. The share of Argentines who are poor surged to 53%, up from 40% in 2023. But the recession seems to have bottomed out. Growth should help ease poverty and unemployment, though it will add inflationary pressure. The government hopes a new law which provides whopping investment incentives, such as multi-decade tax breaks and customs exemptions, will attract capital and boost growth.

To get that law through Congress Mr Milei displayed a streak of pragmatism. “I’ve learned a lot about doing politics,” he says. He eventually empowered his chief of staff to make compromises with the very same political elite that he decries as “thieves” and “criminals”. Surprisingly, Mr Milei now says that he has no enemies in Argentinian politics, only rivals. Even those rivals, he says, “do not explicitly want the country to do badly”.

The president’s newfound pragmatism shines through in foreign affairs, too. While campaigning in 2023 he repeatedly insulted China. At one point he pondered whether it was right to “trade with an assassin”. Now it is “a fabulous partner,” he gushes, having recently met China’s President Xi Jinping. “They don’t ask anything. They want to trade calmly.” In a similar vein, he once called Brazil’s president Luiz Inácio Lula da Silva, known as Lula, “a corrupt communist”. Now he is more nuanced. “I’m not going to be friends with Lula, but I have an institutional responsibility,” he says, enthusing over a recent deal to sell Argentine gas to Brazil.

All this bodes well for Argentina’s continued economic recovery. But big risks loom over Mr Milei’s successes. One is political. He has benefited from disarray among the opposition that will not last forever. Nor will the public’s tolerance for weak growth, high unemployment and poverty, even if inflation has been wrestled down. By frankly telling voters that cuts would hurt he lowered their expectations. Now Mr Milei trumpets that “Argentina is entering its best moment in 100 years.” That is a harder expectation to manage, especially if Argentines do not feel such elation in their wallets. If the Peronists rise in the polls or unmanageable protests break out, it could send investors running and threaten the recovery.

Another risk is economic. The peso looks overvalued again. The government inherited and maintains capital controls. It also sets the official exchange rate; it deval‎ued the peso by 50% in December 2023, then by 2% each month since. But because inflation has been running higher than 2% per month, the real exchange rate has been rising. It is now approaching the level it was at before Mr Milei took office. Argentines understand the peso’s strength; some 55 buses carry eager shoppers to Chile every day, where goods are much cheaper.

This is a drag on exports and growth. And Mr Milei cannot maintain the scheme without capital controls, but these put off investors who want to be sure they can get their money out of Argentina, not just in. If and when he does finally remove capital controls and free up the exchange rate, there is a risk of a sudden depreciation. That could set off another bout of inflation, undermining Mr Milei’s signature achievement, and perhaps his popularity. Overvaluation is a classic Argentine problem. It tends to end in crisis.

Mr Milei rejects all this. He says his reforms justify the peso’s value, and that capital controls don’t deter investors because he has promised to remove them next year. Moreover, he declares, “we are not in a hurry.” If he had more foreign finance he could remove capital controls sooner; he needs hard cash to defend the flexible exchange rate. But the IMF appears unenthusiastic about that use for new money. This may be curdling relations with the Fund. Argentina owes it $42bn. Mr Milei pointedly emphasises that new finance from the IMF “is only one of the options”.

The question of the peso’s value is manageable, for now. Markets are not betting on an imminent deval‎uation as they did, wrongly, earlier this year. But on longer timelines risks remain. Donald Trump’s policies could push the dollar higher and pressure on the peso could rise sharply, warns Robin Brooks of the Brookings Institution, a think-tank.

A different worry is that in his zealotry, Mr Milei may undermine Argentina’s checks and balances. “I don’t deviate one millimetre from the rules that are agreed to in the Constitution,” he says. He does, however, want to reform the courts. Nothing wrong with that, but to do so he has nominated a judge to the Supreme Court who is widely considered unqualified and who faces allegations that he manipulates cases to benefit the well-connected. The nomination has been so slow to progress through the Senate that the government has raised the prospect of forcing it through by decree, a controversial move. Mr Milei also claims that 85% of what is written in the Argentine press is lies.

A final risk comes from Mr Milei’s own volatility. He has recently fallen out with his vice-president. At the very least that will make it harder for him to pass laws in the Senate. And he is increasingly engaged by culture wars, much like his allies abroad. He rails against “transgender ideology”, abortion and climate change, which he denies is caused by man. These causes are Marxism’s new front, he claims. But with Argentina’s economy still balanced on a knife edge, any distraction is a danger. ■

The Americas | The noose tightens

Bolsonaro’s bid to regain Brazil’s presidency may end in prison

Brazilian police have accused some of his backers of involvement not just in a coup, but in an assassination plot

Photograph: Getty Images

Nov 22nd 2024|São Paulo

On November 21st Brazilian police formally accused Jair Bolsonaro, Brazil’s former far-right president, and 36 others of attempting to prevent the country’s elected government from taking office in late 2022. It was the third time Brazil’s federal police recommended criminal charges against the ex-president, but these accusations are by far the most serious. They sharply increase the likelihood that Mr Bolsonaro will spend time in jail. The former president denies all charges and claims he is being politically persecuted.

This is not how Mr Bolsonaro (pictured) expected his November to pan out. After his misleadingly named Liberal Party won big in Brazil’s local elections in October, he triumphantly proclaimed that he would be the candidate of the right in 2026, when Brazil will hold presidential elections. More good news arrived with the re-election of Mr Bolsonaro’s idol, Donald Trump, as president of the United States. Mr Bolsonaro seems to have taken this as a harbinger of his own return to power. “May Trump’s victory inspire Brazil to follow the same path,” he posted on X.

Not likely, it seems, if Mr Bolsonaro is involved. Brazil’s top federal prosecutor will now review the police report which alleges Mr Bolsonaro’s involvement in an attempted coup, and decide whether to pursue charges. Mr Bolsonaro could be tried next year for alleged crimes which carry a maximum prison sentence of 28 years.

The police report describes Mr Bolsonaro’s efforts to stay in power. In the months running up to the election, the former president and his allies repeatedly claimed that voting machines could be rigged. The report claims that Alexandre Ramagem, the head of the national intelligence agency and a confidant of Mr Bolsonaro’s, directed the agency to spy on political enemies, and to produce false reports discrediting the electoral process. After losing the election, Mr Bolsonaro became desperate. The report alleges that on December 7th 2022 he called the heads of the navy, army and air force and presented them with a decree declaring a state of emergency and giving him powers to call a new election. The head of the navy agreed to go along with it—the others did not.

The most damning part of the report alleges that after Mr Bolsonaro’s electoral defeat, his associates plotted to murder Luiz Inácio Lula da Silva (known as Lula), who was then Brazil’s president-elect, his running mate Geraldo Alckmin, and Supreme Court judge Alexandre de Moraes. According to the report, police obtained material about the plot from the devices of Mauro Cid, Mr Bolsonaro’s personal aide, and General Mário Fernandes, a deputy minister in the Bolsonaro government.

The report claims that Mr Fernandes used a printer in the presidential palace to print a plan for the assassination plot, including details of the weapons to be used. The report also alleges that Mr Cid and others started monitoring Lula and Mr Moraes’s movements after a meeting on November 12th 2022 at the house of Walter Braga Netto, who had been Mr Bolsonaro’s running-mate. The report says the police found documents owned by Mr Fernandes outlining how a “crisis cabinet”, co-led by Mr Braga Netto, was to be set up after the assassinations had been carried out.

No assassinations ever happened. On January 8th, 2023, a week after Lula was inaugurated, Bolsonarista zealots attacked Congress, the Supreme Court and the presidential palace. Since then, the report alleges, Mr Bolsonaro and his allies have tried to put pressure on witnesses involved in the case, to prevent them from dishing dirt. A probable target is Mr Cid, who was already in trouble over Mr Bolsonaro’s first two indictments (for alleged embezzlement and forging covid-vaccine certificates). When police found the material on his phone they threatened to cancel an agreed plea deal because he had not mentioned the assassination plot. Mr Cid now appears to be working with the police in order to maintain his plea bargain.

The indictment has galvanised the left. “The chances are very high” that Mr Bolsonaro now goes to jail, according to Marco Aurélio de Carvalho of Grupo Prerrogativas, a left-leaning legal association. He calls Mr Bolsonaro “the intellectual author” of the coup. “His prison sentence is a question of when, not if.”

Yet even if Mr Bolsonaro does go to jail, it may not end his involvement in politics. Right-wing hopefuls for the presidential election in 2026 have minimised the accusations, wooing his voters. One of the most popular right-wing politicians after Mr Bolsonaro, Tarcísio de Freitas, the governor of São Paulo state, wrote on X that “there is a widespread narrative against President Bolsonaro that lacks evidence”. Some supporters believe that deeper legal trouble could turn Mr Bolsonaro into a martyr. Sóstenes Cavalcante, a federal Congressman for Mr Bolsonaro’s party, puts it more succinctly: “The more persecution there is, the stronger Bolsonaro and the right become.” ■

Asia | Hands on

Fathers are doing more child care in East Asia

About time, too

A home run for houseworkPhotograph: Noriko Hayashi

Nov 28th 2024|Taipei, Tokyo and Seoul

For years Ito Tsubasa never questioned his family life: he worked long hours while his wife did all the housework. So it came as a shock when his wife, pregnant with their second child, suggested he take parental leave so she could focus on her career. After a heated argument, he eventually gave in, taking six months of parental leave. His experience of staying at home has transformed his understanding of what it means to be a father. “I used to think I was a great dad just because I played with the child on the weekends,” says Mr Ito (pictured), whose children are now eight and four. “I couldn’t have been more wrong.” Today, he and his wife share the housework evenly.

Mr Ito is not alone. Across East Asia a quiet revolution is reshaping fatherhood. Rigid and conservative gender roles, which involve a male breadwinner and a female caretaker, have been the norm for decades and remain entrenched across the region. Yet younger men are increasingly setting their priorities outside work, and married couples are moving towards a more egalitarian approach to child care. In Japan the share of eligible men taking paternity leave reached 30% in 2023. That is a sharp increase from 17% in the previous year and a mere 2% a decade ago. In South Korea, 6.8% of eligible men took paternity leave in 2022. That is still shockingly low, but up from less than 1% in 2016.

Photograph: Noriko Hayashi

Photograph: Noriko Hayashi

Alongside this, women are educated and employed at levels never seen before. In Japan the employment rate for women aged 25-39 surpassed 80% for the first time in 2022. In South Korea 74% of women aged 25-29 are now employed. In Japan and Taiwan more than 60% of households have two incomes. In South Korea the share is close to half.

Daddy issues

What is perhaps surprising is that it has taken so long. According to one ranking, Japan and South Korea have the best paid parental-leave policies for men worldwide. Fathers in both countries are entitled to a full year of paid leave. In Japan, nearly 70% of pay is compensated for the first 180 days. Yet young employees often hesitate to use such benefits, largely due to the desire to conform to the expectations set by gerontocratic male managers. Even if they do, it tends to be somewhat performative. In Japan, most men go on leave for less than two weeks, whereas 95% of women do so for six months or more.

Photograph: Noriko Hayashi

Photograph: Noriko Hayashi

By contrast Taiwan is relatively progressive compared with its neighbours. In 2023 its gender pay gap was as narrow as 15%, compared with 31% in South Korea and 21% in Japan. According to the World Values Survey, a global research outfit, fully 64% of Taiwanese men disagree that it is a “problem if women have more income than their husband”, whereas only 26% of Japanese and 28% of South Korean men do. But Taiwan’s paid parental leave lacks flexibility and sets a monthly upper limit of NT$36,640 (around $1,100), which means a huge cut in pay for higher earners. Even so, Teng Kai-yuan, a Taiwanese man with a nine-year-old son, was determined not to become like his own aloof father. “Both my wife and I hated the fact that our fathers did not spend time with us,” he says. Mr Teng splits the housework with his wife 50-50; his weekends are dedicated to family activities such as camping.

The implications of such shifts could be profound. A study by Matthias Doepke, an economist at the London School of Economics, revealed a positive correlation between men’s share of the housework and fertility rates across rich countries. That could help reverse a demographic crisis. Last year South Korea’s fertility rate reached a record low of 0.72, while Japan’s was at 1.2 and Taiwan’s at 0.87. Babies—and better dads—are urgently needed. ■

Asia | The roads to the top

Meet the outspoken maverick who could lead India

Nitin Gadkari, India’s highways minister, talks to The Economist

Illustration: Klawe Rzezcy/Getty Images

Nov 28th 2024|Nagpur

Nitin Gadkari leans back into his sofa and takes a hard-earned slurp of his tea. India’s roads minister, one of its most popular and controversial cabinet members, has just done his 72nd rally in 13 days of campaigning for a state election in his native Maharashtra. He began the day in Mumbai, in the west, and ended it 430 miles (690km) eastwards in his hometown of Nagpur. It was a brutal schedule, more suited to his earlier years, he admits. But at 67, he knows a thing or two about endurance in Indian politics.

When he became the youngest ever leader of the Bharatiya Janata Party (BJP) in 2009, he was hailed as a rising star, only to be ousted four years later because of a tax scandal. Later cleared of wrongdoing, he rebuilt his reputation as a member of Prime Minister Narendra Modi’s cabinet, overseeing a huge expansion of India’s highways. Then he was suddenly removed from the BJP’s parliamentary board, its top decision-making body, in 2022 amid rumours of tensions with the prime minister.

Now he is one of the candidates to succeed Mr Modi. And his chances may have just improved with American prosecutors’ allegations against Gautam Adani, Mr Modi’s closest business ally. Even before those charges became public on November 20th, Mr Gadkari had raised his profile with several controversial public remarks in recent weeks. Some of those were widely seen as oblique criticism of Mr Modi. And in an interview with The Economist on November 18th, Mr Gadkari strikes a markedly different tone from that of the prime minister, who cultivates an image of semi-divine infallibility.

“No one is perfect and no one can claim that he is perfect,” says Mr Gadkari. The BJP lost its parliamentary majority in this year’s general election in part because the opposition promoted the idea (falsely, in his view) that Mr Modi wanted to change India’s secular constitution. But the BJP erred, too. It needed to communicate better and focus on development, not identity. “We need to establish a good atmosphere between the parties and between people who have different types of ideology.”

He also doubles down on his assertion, made in September, that “the biggest test of democracy is that the king tolerates the strongest opinion against him.” That was widely seen as referring to Mr Modi. “I’m not talking about any person or leader,” Mr Gadkari says, when asked about the remark. Still, he adds that tolerance and respect are integral to India’s political system. “It doesn’t mean that we are enemies if we are in opposition,” he says. “That is the culture of our democracy.”

Those and other remarks seem to distance him from Mr Modi’s Muslim-bashing campaign speeches and demonisation of India’s opposition. They also echo the leadership of the Rashtriya Swayamsevak Sangh (RSS), the Hindu-nationalist group from which the BJP emerged. Mohan Bhagwat, the RSS chief, recently made plain his frustration with Mr Modi’s divisive oratory and aversion to advice or criticism.

Mr Modi’s position is not immediately under threat. Aged 74, he seems in good health and BJP officials have denied that the party’s rules require retirement at 75 (although it has ousted some veterans that way). Nor is Mr Gadkari the only potential successor. Opinion polls suggest that the frontrunner is Amit Shah, who is home minister, the BJP’s electoral strategist and Mr Modi’s confidant. Yogi Adityanath, the chief minister of Uttar Pradesh, India’s most populous state, usually ranks in second place, with Mr Gadkari third.

But Mr Modi’s successor will be decided by the upper ranks of the BJP and RSS, not by opinion polls. And many of them do not trust Mr Adityanath, who hails from a rival Hindu-nationalist group. He is also highly controversial among foreign governments and secular-minded Indians because of his own record of Islamophobic remarks and policies. Mr Shah, meanwhile, is so closely tied to Mr Modi (and has so many enemies) that he could well be sidelined as soon as the prime minister retires.

Both Mr Modi and Mr Shah have also been tainted by the general-election result. And on top of the Adani scandal, they face allegations that Indian officials were involved in the killing of a Sikh activist in Canada and the attempted murder of another in America (India denies all the Canadian allegations but is co-operating with the American investigation).

Mr Gadkari is untarnished by such problems. He is seen by foreign officials as the BJP’s moderate face and by business leaders as a champion of public-private partnerships in infrastructure. He is liked by some opposition leaders, which helps in coalition building. And his popularity in Maharashtra, including among Muslims, has helped the BJP keep control of Nagpur (whose national parliament seat he has held since 2014) and to win, with its allies, the recent state election there.

His other strength is his relationship with the RSS, which is headquartered in Nagpur. He joined it in the 1970s. Although married, which is forbidden for most full-time RSS workers, he still describes himself as a volunteer. “The RSS is my life’s conviction,” he says. It handpicked him as BJP leader in 2009, an appointment of which he is clearly still proud. It was, he says, “a big thing for me” that conveyed “tremendous respect and regard”. That support has not been unwavering: the RSS backed his removal from the post in 2013 (albeit reluctantly) and from the party’s parliamentary board in 2022. In the latter case, it was reported to have shared Mr Modi’s frustration with Mr Gadkari’s outspokenness and more moderate politics.

Since the election, however, Mr Gadkari appears to have found favour again as the RSS recalibrates its own political message. And he has done so without changing his maverick ways. In July he wrote a (widely leaked) letter to India’s finance minister asking her to lift a tax on insurance. In September he alleged that an opposition leader offered to make him prime minister if he defected before the election.

Asked if he wants the top job one day, Mr Gadkari gives the quintessential politician’s response. “I’m here, happy, I’m doing my work. I don’t have any aspiration or ambition to become prime minister,” he says. And if he was asked by his own party? “No one is going to ask me, so no question arises,” he says with a chuckle. Endurance is not the only key to Indian politics. A bit of media savvy helps, too. ■

Asia | Bureaucrats, not bridge-builders

Is India’s education system the root of its problems?

A recent comparison with China suggests that may be so

Photograph: Getty Images

Nov 28th 2024|Singapore

For most of history the economies of India and China grew in lockstep. In 1970 the countries were almost identically wealthy. But today China’s GDP per person, at around $13,000, is nearly five times India’s. The chasm is traditionally explained by the way their economies opened up. China became the world’s factory, which turbocharged growth. India became its back office. But what shaped these paths?

A big, underrated factor is education policy, suggests a new study by Nitin Kumar Bharti and Li Yang. The researchers at the Paris School of Economics’ World Inequality Lab track how education evolved in both countries from 1900 to 2020. At the beginning of the 20th century, less than 10% of Indian and Chinese children attended school; today almost every child does. But the route to universal education has been strikingly different, and has had profound effects on development.

Chart: The Economist

China took a “bottom-up” approach to schooling. In the 1950s, officials in the newly formed People’s Republic prioritised expanding access to primary and secondary education. Independent India, however, took a “top-down” stance. That meant supporting high-quality universities, such as the Indian Institutes of Technology, at the expense of primary schools. By 1980 93% of Chinese children were enrolled in primary school, but just 1.7% of youngsters were in college; in India, the equivalent shares were 69% and 8%.

Another striking difference is what college-aged youngsters study. In China they are more likely to pursue engineering degrees. In India they favour humanities, business or law. Vocational degrees are also treated more seriously in China. Since the 1980s more than 40% of Chinese youngsters have pursued a vocational education, compared with just 10% in India.

All this created different labour forces as their economies liberalised. In 1988 around 60% of Indian adults were illiterate compared with 22% in China. That hindered Indians from moving out of agriculture into more lucrative jobs. It also lowered their productivity. In addition, China’s higher share of engineering and vocational graduates, combined with more widespread primary schooling, helped its manufacturing sector thrive. India’s relative advantage in tertiary education made it more suitable for services-led growth.

The contrasting approaches to education have historical roots. China’s Qing dynasty leaders focused on vocational skills in the late 19th century to equip their armies. India’s British colonial rulers wanted a school system to churn out administrators to manage their empire. Indian leaders after independence reinforced that bias.

Since then, though, India has tried to fix these issues. A big push increased access to primary schooling in the 2000s—but at the expense of quality. The government is also promoting vocational education. And at the tertiary level, a lot more Indians are studying engineering. Yet it might be too late. Many economists reckon that the era of manufacturing-led growth has bypassed India. A report released in September supported such fears. Of the 1.5m engineering students who will graduate this fiscal year, only 10% are expected to actually land a job in the year after leaving university. ■

China | Exercises in fertility

China’s government is badgering women to have babies

It is testing an expanded pro-natalist playbook

Just pretendingPhotograph: Shutterstock

Nov 28th 2024|Beijing

MS MAO WAS making lunch one day at her home in the eastern city of Wuxi when she got the phone call. Rather than the courier’s delivery update she was expecting, she found herself subject to an intimate interrogation by a neighbourhood official: When was your last period? Are you pregnant? Do you plan to have a baby? “It doesn’t seem like the kind of thing that could happen in the 21st century,” says the 28-year-old.

Such intrusive calls to young, recently married women are part of an intensifying government campaign to stem China’s falling birth-rate and reverse the drag it is having on economic growth. Demographers estimate Chinese women have one child each on average, far below the 2.1 needed to keep the population stable.

In late October the State Council, China’s cabinet, unveiled a sweeping set of pro-natalist measures, including child tax credits, more maternity and paternity leave, and, importantly, easier access to housing loans, a big concern for Chinese families. Research by Tunye Qiu and Weifeng Liu of the Australian National University has found that a 10% rise in housing prices leads on average to a delay of 0.73 months in marriage and 1.8 months in first childbirth for urban residents.

He Yafu, an independent Chinese demographer, notes that the State Council has yet to specify the scale or the source of all the goodies it is promising, making it impossible to gauge how much effect they are likely to have.

Cash for kids is only part of the government’s strategy. China’s president, Xi Jinping, believes fixing the country’s baby bust requires cultural change, too. At the five-yearly National Women’s Congress in 2023, he preached the importance of telling “good stories about family traditions”. With two divorces occurring for every five marriages in the first three quarters of this year, Mr. Xi worries that young people do not share the right “marriage and child-rearing” values.

The government is doing its best to instil those values. The picture of a one-child family that used to be on the cover of school textbooks for eight- and nine-year-olds has been replaced by one showing a pregnant mother and her two children. The school curriculum is being adjusted to stress the virtues of family and marriage. The government has also called for the production of more TV shows that extol the virtues of having kids.

Staffing much of the pro-natalist push, including the phone campaign, are family-planning committees embedded in local communities. Known for their strict, sometimes brutal, enforcement of the country’s one-child policy between 1979 and 2015, they have a new mission: trying to ensure that more women get pregnant.

After decades of making unscientific claims to deter baby-making—such as that pregnancy reduces a woman’s intelligence—the authorities are arguing the opposite. On October 30th a magazine overseen by China’s National Health Commission published an essay on “the four benefits of childbirth”, including increased brainpower and lower risk of cancer and menstrual pain. Online, this prompted a rapid backlash. “To get people pregnant, the government will literally come up with anything they can,” fumed one writer.

The party is also playing matchmaker, setting up dating websites and forums for young adults. A dating platform set up by the Communist Youth League in Zhejiang province had 300,000 new registrants in just three months earlier this year. Users can join party-organised camping trips, flag-football matches and murder-mystery games. Relationship problems? The party has that covered, too. Counsellors and psychologists are on hand to offer advice.

In many residential districts in China, banners promoting childbirth are on display. Common slogans promise a fulfilling life with three children, not least because they will take care of their parents as they age. More threatening ones remind village officials of their duty to ensure every household has more than one child.

Chart: The Economist

After decades of successfully forcing women to have fewer children, China’s government is finding it cannot force them to have more. Take Ms Mao. She told the importunate official on the phone that she and her husband are not yet trying for a baby. The baby-booster said she would call every two weeks over the next three months to check in.

Ms Mao is indignant: “This type of private matter should be a personal decision and not reminiscent of ‘The Handmaid’s Tale’.” On Xiaohongshu, an Instagram-like platform where she posted about the call, others too saw parallels with Margaret Atwood’s dystopian novel about a society in which fertile women are forced to bear children.

But as countries from Singapore to Sweden have found, a decline in fertility rates is very hard to reverse. The success of the Chinese government’s redoubled efforts—from macro-level cultural reform to micro-level menstruation-tracking—will depend on the decisions of tens of millions of women like Ms Mao. She declined the official’s offer of pre-natal vitamins and blocked her number. ■

Middle East & Africa | A ceasefire in the Middle East

Israel and Hizbullah strike a fragile deal to end their war

Joe Biden makes a last push to bring peace to the Middle East

Photograph: AFP

Nov 26th 2024|DUBAI

AT FIRST the mood in Lebanon was jubilant. Thousands of people jumped into their cars and drove south on the morning of November 27th, hours after a ceasefire ended the year-long war between Israel and Hizbullah, a Shia militia. They were eager to return to homes from which they had fled months earlier.

But as the day wore on, a sobering reality set in. The returnees found terrible damage in southern cities like Tyre and Nabatieh (see map). The Lebanese army warned them not to go too far south, citing the risk of unexploded bombs. Then Israel issued its own warning, declaring some areas in south Lebanon to be closed military zones. On at least one occasion Israeli troops fired warning shots at cars trying to enter a village near the border. The ceasefire held, but the friction was a reminder that it will be fragile and complex.

Map: The Economist

The deal, which took effect at 4am local time on November 27th, called for a 60-day halt to the fighting. During that period Hizbullah will move its fighters north of the Litani river, about 30km from the border with Israel, which will gradually withdraw its own forces from Lebanon. The Lebanese army will deploy around 5,000 soldiers to the region (it has already sent an initial batch). All of this will be monitored by a panel of five countries, led by America. Israel will retain the right to strike at “immediate threats” in Lebanon.

Both sides have good reason to end the war. It began last year, when Hizbullah started firing rockets at Israel in solidarity with Hamas, the Palestinian militant group that massacred more than 1,100 Israelis on October 7th, 2023. For almost a year Israel and Hizbullah limited the battle to back-and-forth bombardment near the border. In September, though, Israel expanded its air strikes across Lebanon, and in October it launched a ground invasion.

Read all our coverage of the war in the Middle East

A year of combat, both in Lebanon and in Gaza, has placed enormous strain on the Israeli army. Many reservists have been called up for long tours of duty: 54% of those mobilised since October 7th have done more than 100 days of service. To continue the war in Lebanon would mean expanding it, and Israel’s generals are reluctant to impose an even heavier burden on the force. Binyamin Netanyahu, the Israeli prime minister, alluded to these pressures in a speech announcing the truce: he said the army needed a breather.

As for Hizbullah, its leadership has been largely wiped out this year, including Hassan Nasrallah, its charismatic boss for more than three decades. It has lost much of its advanced missile arsenal and its military infrastructure in southern Lebanon. Those losses will only mount if the war drags on. Most Lebanese did not want it to begin in the first place and have become increasingly desperate for it to end.

But both sides also have concerns about the deal. Many Israelis fear a repeat of 2006: their previous war against Hizbullah ended with UN Resolution 1701, which called for the militia to disarm. Hizbullah ignored that edict and the Lebanese army, which was meant to patrol the region south of the Litani, was too weak to enforce it. Some Israeli politicians fear that this agreement will prove equally hollow. “We must not do half the job,” said Benny Gantz, the opposition leader.

The Lebanese army is still weak. Five years into an economic crisis that bankrupted the Lebanese state, many soldiers moonlight as taxi drivers to supplement monthly salaries that are worth as little as $100. The army will need donations from Western and Arab backers to recruit and equip more troops. Even with financial help, it is unclear if Lebanese troops will be willing and able to confront Hizbullah.

Around 70,000 Israelis have been displaced from towns near the border for more than a year. Israel’s stated goal in the war was to make them feel safe enough to return home. It is unclear if this agreement will do the job. Mayors of some northern towns criticised the deal, saying they want stronger guarantees that Hizbullah will be kept away from the border.

The five-country monitoring panel is meant to review alleged violations of the agreement. If the Lebanese army and UN peacekeepers fail to act, Israel says it will. “The length of the ceasefire depends on what happens in Lebanon,” said Mr Netanyahu. That may not mean a return to all-out war, but there will probably be new rules of engagement between Israel and Hizbullah in the coming years, with frequent Israeli strikes in Lebanon.

Many Lebanese will be unable to return home. The World Bank estimates the war has caused $8.5bn in damage and economic losses, more than one-third of Lebanon’s GDP. Close to 1m people have been displaced and around 100,000 homes have been damaged. Entire villages in the south have been razed.

Yet for all the caveats, the ceasefire is a rare bit of good news. A regional war that seemed to be inexorably growing will now shrink. American officials used to say the way to end the crisis in Lebanon was to get a deal in Gaza. Now they hope they might do the opposite. “One of the things that Hamas has sought from day one is to get others in on the fight,” said Antony Blinken, America’s secretary of state. “If it sees that the cavalry is not on the way, that may incentivise it to do what it needs to do to end this conflict.” Joe Biden, the American president, sent his top Middle East adviser to Saudi Arabia to make one more push for a broader regional agreement.

He will probably come back empty-handed. The Israeli prime minister has political cover to end the war in Lebanon. Though some of his coalition partners are unhappy with the terms of the ceasefire, they did not threaten to bolt from the government over it. A truce will also please Donald Trump, who told Lebanese-American voters in October that he would end the war in their homeland.

Mr Netanyahu has very different incentives in Gaza. His far-right allies dream of rebuilding the Jewish settlements there that were evacuated in 2005. They have vowed to bring down the coalition if Israel withdraws. The prime minister himself fears that a ceasefire would clear the way for a commission of inquiry into Israel’s failure to prevent the October 7th massacre (he is unlikely to come out of it looking good). And Mr Trump does not seem eager to squeeze him.

For more than a year, Hizbullah insisted it would not stop fighting Israel until Israel stopped fighting in Gaza. Israel has now broken the link between the two fronts. That will take some of the pressure off its overstretched army. But by ending one war, Mr Netanyahu may make it easier to continue the other. ■

Europe | America and NATO

The maths of Europe’s military black hole

It needs to spend to defend, but voters may balk

Photograph: AFP

Nov 25th 2024

ON NOVEMBER 23rd Mark Rutte, the head of NATO, and Donald Trump, America’s president-elect, were photographed grinning and shaking hands in Palm Beach, Florida. Yet the mood in Europe’s defence ministries is one of foreboding. At a gathering of defence officials and industry executives in Prague a few days after the election, the most optimistic sentiment was that Mr Trump was “unpredictable”. Others were a lot less upbeat.

Some at the meeting, run by the International Institute for Strategic Studies (IISS), took heart from the fact that this year 23 out of 32 NATO members are meeting or exceeding a target to spend 2% of GDP established ten years ago after Russia’s annexation of Crimea. Since 2022, when Russia launched its full-scale invasion of Ukraine, defence budgets across Europe have risen steadily. This year total spending has increased by an average of 9% in real terms, reaching $436bn.

Few believe this will persuade Mr Trump that America’s allies are doing enough. He seems to dislike the very notion of NATO, which was founded on the principle that all members must regard an attack on one as an attack on all. During the campaign he invited Russia to “do whatever the hell they want” to any NATO country that is not paying its way.

Mr Rutte has warned that the 2% spending goal is now obsolete: meeting it is enough neither to impress Mr Trump, nor to deter Vladimir Putin should Europe be forced to bear most of the responsibility for its own security, as seems all too possible. If Mr Trump cuts military support for Ukraine to bully it to the negotiating table, Europe will have to contribute a lot more funding and weaponry while struggling to replenish its own stocks.

Chart: The Economist

Poland is setting the pace, with an ambition to spend 5% of GDP on defence next year; all three Baltic states are on course to spend more than 3%. Mr Rutte has not so far set a new target. He thinks it may make more sense for specific countries to be given “capability targets”. But assuming that Mr Trump deigns to attend the next NATO summit, in The Hague in June, a commitment to hitting 3% may be needed to stop him from “throwing his toys out of the pram”, as one official in Prague put it. Bastian Giegerich, the director-general of the IISS, says that 3% is, moreover, easy for everyone to understand. To meet it, Europe would have to increase its annual spending by $280bn at current prices, Mr Giegerich says. In practical terms, Germany, for instance, would need to find an extra $40bn a year, roughly.

For all Mr Trump’s antagonism towards NATO, his nominees for secretary of state—Marco Rubio—and national security adviser—Mike Waltz—understand the value of the alliance, says Sir Lawrence Freedman, a British military strategist. (Grave doubts exist about some of his other picks, though.) There will also be strong resistance within America’s armed forces to major changes to the status quo, and pushback from many Republican senators who would balk at relinquishing American leadership of NATO.

Instead, Sir Lawrence thinks there may be more coalitions formed within NATO to perform specific tasks, such as the Joint Expeditionary Force, a military alliance of ten European nations that was founded in 2014 to protect northern Europe. Other more recent ones include the German-led 21-nation European Sky Shield Initiative to create an Israel-style layered air defence; and a coalition between Britain, France, Germany, Italy and Poland to develop long-range strike missiles.

Rather than planning to do without America, European countries should be developing the capabilities to operate, at least under certain circumstances, with only minimal American assistance, Mr Giegerich suggests. Europe still falls short in air-defence missiles of all ranges, precision strike power, airborne surveillance, and command and control. Mr Giegerich reckons that, even with adequate funding, it would take ten years for Europe to substantially reduce its reliance on America.

Many member countries struggle to recruit for the possibility of high-intensity warfare, points out a senior NATO official. Several that scrapped conscription after the cold war are looking at bringing some form of it back as a way to rebuild adequate reserves. Decades of neglect after the cold war have left both personnel and equipment levels severely depleted. Europe will require sustained higher levels of funding and a more resilient defence-industrial base to repair the damage.

It is unclear where all the money for this will come from, much less the political will. It will need to come at the expense of social programmes that are much more popular with voters. Defence big-spenders such as Britain and France have new governments that are scrambling to lower their fiscal deficits, too. Germany’s constitutional debt brake limits its support for Ukraine (though the question of how to find a way around it is being debated on the campaign trail ahead of an election early next year). This has created pressure on the EU to cut some budgetary slack for member countries wanting to borrow to bolster their armed forces. The idea would be for it to rule that Europe faces a security crisis similar to the covid emergency.

The European Commission took a big step in this direction on November 11th by allowing some “cohesion funds” from its seven-year common budget, possibly worth up to €130bn ($137bn), to be spent on military-related programmes. According to a report in the Financial Times, in the next few weeks member governments will be told the money can be used to support their defence industries and invest in projects to improve military infrastructure.

Reappointed for a second term, Ursula von der Leyen, the president of the commission, has made building a “European Defence Union” a priority. She has nominated politicians from two front-line states for key positions. Kaja Kallas, the former prime minister of Estonia, will become the EU’s top diplomat from December 1st; Andrius Kubilius, a former Lithuanian prime minister, will be its first commissioner for defence. The main focus of Mr Kubilius’s work will be co-ordinating defence procurement and helping to steer Europe’s fragmented defence industry towards creating shared programmes that cut out wasteful duplication, and investing in new capacity.

NATO has previously been suspicious of EU ambitions to muscle in on its patch. The senior NATO official says: “It’s all hands on deck. If the EU can mobilise money and raise military and industrial capacity, it will be great.” But he says the EU must avoid protectionism. A competitive defence market must include NATO members such as Britain, Norway and Turkey—not to mention America—who are not in the EU. France has now reportedly dropped its long-standing opposition to giving EU-funded incentives for Europe’s defence industry to non-EU firms.

Mr Trump could conceivably be persuaded that Europe is moving fast enough to keep America committed, at least to some degree, to the continent’s security. But America is preoccupied with confronting China, and Russia will seek any opportunity to divide and weaken NATO. Europe’s leaders know that, for everything to stay the same, everything must change when it comes to defence spending. Whether Europe’s voters realise this, still less accept it, is another matter. ■

Britain | Sexual courting

Britain’s Supreme Court considers what a woman is

At last. Britons had been wondering what those 34m people who are not men might be

Photograph: REX Shutterstock

Nov 28th 2024

“Court rise.” A hush falls in the Supreme Court. Five judges—three lords, two ladies, roughly two centuries of accumulated professional experience—walk in. The question that the country’s highest court and finest legal minds have come to consider, in a two-day hearing that took place on November 26th and 27th, is: what is a woman? Finally, an answer looms for those who wonder what those 34m people in Britain who are not men might be.

Inside the Supreme Court, with its supremely institutional grandeur (portraits, panelled walls, truly tasteless carpets), there is talk of cervixes and men who are women and women who are men. There is talk of “women” who have penises and of pregnant “men”. The word “prostate” is used. It is strong stuff for a Tuesday. Britain’s finest legal minds sound a little confused. This, says one, is “quite difficult”.

Sex in Britain was once quite simple. The Oxford English Dictionary stated, with Hemingwayesque brevity, that a woman is an “adult human female”—and more or less all Britons agreed. Then came the rise of trans rights and the mantra that “trans women are women”. This case came about because the Scottish authorities have stated that when the Equality Act 2010 says “woman” this means not just “woman” but also any man with a full gender recognition certificate (GRC). A group called For Women Scotland (FWS) cried “bunkum” and went to court. That it has reached the Supreme Court makes this, says Michael Foran, a lecturer in law at Glasgow University, a “monumental case”.

Britain’s legal system has tackled the question of what a woman might be before. Not always to its credit: in a 1914 case it concluded that a woman is not a “person”. It has also considered how someone might become a woman. In a 1970 case a British judge ruled that four factors (chromosomes, gonads, genitals and “psychological factors”) make someone a woman—but that a “sex-change” operation did not. Many who underwent one signed a document stating that they understood that it would “not alter my male sex”.

In 2004 the GRC was introduced in Britain. This government document can be acquired by obtaining a diagnosis of gender dysphoria, jumping through some legal hoops and paying £5 ($6.30). It changes a person’s legal sex for such things as birth, death and marriage certificates. It made it possible for a man, with full male genitalia, legally to become a woman, and vice versa.

Such transubstantiation sounds odd but is not unprecedented. The law allows for “legal fictions”. It calls a company a “person” (when clearly it is not) and states that “the King never dies” (when kingly corpses in Westminster Abbey amply prove otherwise). But these should be understood as a judicial sleight of hand (which the law is good at) and not as metaphysical mastery (which it is not).

Supporters of the GRC say that it helps alleviate the undoubted pain of gender dysphoria. Critics say that it spreads confusion, and sometimes worse; in one case a trans woman (a biological male) was made the head of a rape-crisis centre. No one, tellingly, is that interested in the question of “what is a man?”. Since women are underrepresented among murderers (7%), assaulters (a fifth) and sexual assaulters (2%), women who transition are rarely considered a threat.

To have a certificate that transforms a man into a woman is, says Naomi Cunningham, the chair of Sex Matters, a human-rights charity, “as stupid as…[giving someone] a certificate to say that they are dead when they are alive or that they are alive when they are dead”. Unshackle the meaning of words such as “man” and “woman” from biology, said Aidan O’Neill KC, acting for FWS, and it results in “absurd” and “nonsensical outcomes”.

There was a bit of this absurdity in the Supreme Court. Is there, asked one judge, a “third gender”? The court tittered. The barrister speaking demurred: there is not a third gender. And, as FWS argues, there are also just two sexes: male and female. The lords and ladies of the Supreme Court will give their ruling in a few months’ time. And it will matter. ■

International | The Telegram

“Tariffers” v “traders”: the new contest for Donald Trump’s ear

Eye-witnesses to the drama of the first Trump presidency brace for the sequel

Illustration: Chloe Cushman

Nov 28th 2024

TO DONALD TRUMP, the current world order is a criminally bad deal for America. He is ready to play good cop and bad cop to fix this. Public enemy number one is China’s economic model, which he has called a conspiracy to steal wealth and manufacturing jobs from America. But allies are prime suspects, too, accused of cheating America in trade while doing too little for America’s national security. Allies from Europe to North America and Asia can expect to meet both the smiling and snarling versions of President Trump, all too soon.

Your columnist is in Washington, where he attended a closed-door gathering of serving and former government officials from America and Europe, joined by business bosses and experts on trade and security, as well as scholars from China. This writer has attended these biannual gatherings—known as the Stockholm China Forum, and co-hosted by the Swedish foreign ministry and the German Marshall Fund, a think-tank—since 2008. The latest forum stood out for its hard-boiled, grimly serious mood.

Mr Trump’s good cop, bad cop swagger is “how he thinks about diplomacy”, said a participant with first-hand knowledge of the next president’s negotiating style. Mr Trump, in his first administration, praised Xi Jinping as brilliant, and Vladimir Putin as smart, while slapping trade tariffs and export controls on China and harsh sanctions on Russia. That same disconcerting approach is about to return, as Mr Trump prepares to announce fresh tariffs and other arm-twisting moves on Day One in the Oval Office, targeting adversaries and allies alike. His aim is not to reform Mr Xi or other foreign leaders: Mr Trump has little interest in changing other men’s souls. In a wicked world, his interest is in cutting deals to secure America’s jobs, borders and security interests.

The dealmaking starts with US-China trade. Mr Trump is not by instinct scandalised by China’s use of subsidies or coercive transfers of technology. Indeed, early in his first presidency, aides often struggled to alert him to the security implications of this or that Chinese ploy to buy American technology, or geopolitical move on the far side of the world. Mr Trump was focused on the trade balance with China, believing “viscerally” that America is a loser when it buys more from than it sells to another country, in the words of a former official. His alarm about China as a security threat deepened, notably after he concluded that Mr Xi lied to him about the covid-19 pandemic, triggering a crisis that cost him the 2020 election. Chinese officials fret that Mr Trump bears a grudge and might “re-politicise” the pandemic. They are right.

Even now, Mr Trump believes that the foreign-policy establishment has its priorities backwards. To him, foreign-policy grandees focus on shows of military might or diplomacy with allies rather than on the task that—in his view—underpins all other sources of strength, namely making America’s economy great again.

Like a cop with a new Taser, Mr Trump seems to see tariffs as a way to inflict non-lethal but instructive pain. Early evidence came on November 25th, when he threatened 25% tariffs on imports from Mexico and Canada, and an extra 10% on Chinese imports, as a prod to do more to stop flows of migrants and drugs.

More shocks are inevitable. The forum debated the influence of “traders”, meaning tycoons and Wall Street financiers with Chinese business interests and whose counsel Mr Trump heeds. On past form, if tariffs were to spook markets, that would also weigh on Mr Trump’s thinking. Such voices of restraint will compete with “tariffers” working on trade policy for Mr Trump.

There are big questions, too, about whether Mr Trump sees tariffs as a means or an end. His defenders insist that tariffs are a negotiating gambit. Yet in Washington, those same levies are starting to sound worryingly permanent. Republicans in Congress are enthusiastic about using revenues from tariffs to “pay for” cuts to taxes on income or corporate profits, the forum heard. Advocates argue that the first Trump administration carefully imposed preventive tariffs on industries in which American firms still have an edge, but which China has in its sights.

For a rough world, rough methods

The Biden administration’s industrial policies may live on, though Mr Trump is less keen on subsidies for green technologies, and more gung-ho about tasks like reviving American shipbuilding to counter China on the high seas. He is equally keen on supplying factories with cheap fossil fuels. Controls to stop Chinese components entering American markets via third countries will be tightened. If Chinese exporters respond by diverting trade flows to Europe or emerging markets, wreaking havoc outside America, Mr Trump will not greatly care.

Differences over policy extend to the security realm, too. Mr Trump’s choice for national security adviser (NSA), Mike Waltz, is a fierce China hawk. So are his picks for deputy NSA, Alex Wong, and for secretary of state, Marco Rubio. For all that, nobody can exclude that Mr Trump sees national security as a realm for unsentimental dealmaking with China. His first weeks in office may prove revealing, given his pledges to end the war in Ukraine quickly. The forum heard about Chinese offers to play peacemaker in Ukraine and to rebuild its shattered cities. That was too much for some Europeans. Ukraine’s cities need repair because Chinese firms are helping Russia build the drones and missiles now destroying them, they growled. There were accounts of European governments telling Chinese leaders that China’s enabling of Russia’s war machine is gravely damaging their country’s image in Europe. But indignant Europeans also know that Mr Trump is an unsqueamish man, who might just welcome Chinese help as he imposes a messy peace on Ukraine. Like the star of a gritty crime drama, Mr Trump is not one for niceties. ■

Business | Bartleby

On stupid rules and quick wins

Why every boss can benefit from asking employees what most infuriates them

Illustration: Paul Blow

Nov 28th 2024

Interrogate the internet about the most ridiculous rules people have experienced at work, and the stories roll in. The lab assistant instructed to label the expiry dates on all chemical samples, who was reprimanded for not writing when a bottle of sand would go off (to comply, they put in a date 65m years hence). The accounting firm where only partners were allowed to have plants over a certain height. The company where employees were required to submit requests to maintenance if they wanted the height of their office chairs to be adjusted. The baroque limitations on how often people are allowed to go to the lavatory.

These are extreme examples of corporate red tape. But most companies will have at least one pettifogging rule that hinders more than it helps. Does it really make sense to enforce a rigid definition of time off if someone has suffered a bereavement? Does getting an expenses claim paid have to feel like something Kafka would reject as implausible? By the same token, every company will have settled into a way of doing things that might once have served a useful purpose but no longer does. Such stones in the corporate shoe are that most welcome of things for managers: the quick win.

Quick wins are often associated with incoming bosses. A new broom is more likely to see things that seem to make little sense, and on closer inspection, actually make none. Staff are happier to say what bothers them: any implied criticism is aimed at the old regime. It helps a new chief executive if they can make changes that quickly demonstrate to staff and customers their ability to make things better. Small victories also give them permission to take their time over bigger decisions.

Hubert Joly, whose turnaround of Best Buy, an electronics retailer, has become case-study catnip, found nothing but quick wins when he became the CEO in 2012. He credits an initial stint working at a Best Buy store in St Cloud, Minnesota with giving him many of his ideas. Staff were upset that the previous management had cut employee discounts on products. The store gave too much space to fading product categories like DVDs and CDs, and not enough to fast-growing ones like mobile phones. Flat-screen televisions were frequently damaged, partly because of the way they were stacked. All of these were easy enough to change.

In “The New CEO”, a book on how to make a successful start to life in the top job, Ty Wiggins of Russell Reynolds, an executive-search firm, tells a couple of other quick-win stories. One boss found that people at headquarters were distributed chaotically throughout two buildings just across the street from each other. Within a month he had decided where everyone should be sitting, and saved a lot of time and moaning in the process.

Stephanie Tully, the boss of Jetstar, a low-cost Australian airline, made it her business to meet as many employees as she could in her first weeks. Time and again, she heard complaints from crew about how much they hated the uniform. An early decision to design a new range sent a very visible signal that they were being listened to.

After a while, though, it gets harder for bosses to spot this low-hanging fruit. They may have moved on to bigger things; they may well have introduced the rule that most infuriates everyone. But they should be in no doubt that quick wins will still exist. Even in efficient companies, rules and bureaucracy accumulate. The trick is to have a way to keep finding them.

In “The Friction Project”, a recent book by Robert Sutton and Huggy Rao, two Stanford University academics, the authors write about a programme at Hawaii Pacific Health called “Getting Rid of Stupid Stuff”. Clinical staff were asked to nominate idiotic record-keeping processes that they wanted to ditch. Eliminating a single data-entry requirement, to click on a patient’s name each time nurses and nursing assistants did an hourly round, freed up thousands of hours a year. In a similar vein AT&T has a scheme called Project Raindrops, which encourages employees to submit ideas for policies that should be ditched, from excessive approval processes to a virtual private network that logged people out more often than anyone could bear.

There is no reason why bosses cannot do “listening tours” throughout their tenure. Getting managers to do front-line work is another way for them to see where process has got out of hand. Running a business is hard. Why turn down the chance of a quick win? ■

Business | Schumpeter

Has Sequoia Capital outgrown its business model?

Venture capital’s hardiest perennial gets back to its roots

Illustration: Brett Ryder

Nov 28th 2024

THE FIRST thing that catches your eye when you enter the poshly serene headquarters of Sequoia Capital on Sand Hill Road in Menlo Park, California, is a metre-wide cross-section of what appears to be a redwood. On closer inspection it turns out to have been a tree in the past—38m years ago, according to a plaque on the back. Now it is solid stone. A gift from Roelof Botha, the venture-capital (VC) firm’s current boss, and his wife, it reminds employees and guests of the durability of the organisation they are visiting, which has existed since 1972. In the accelerated time of Silicon Valley, that is aeons.

Sequoia is not just perennial but hardy, too. In contrast to some other VC old growths like Kleiner Perkins, whose reputation for spotting the next hot startup has wilted in the past decade, it has managed to thrive more or less continuously for half a century. Over the years it has made its limited partners (LPs, as VC firms’ outside investors are known) and its own rainmakers (who pocket around a quarter of gains plus a management fee of a couple of percent of a fund’s assets) a total of over $70bn, thanks to early bets on future tech darlings including Airbnb, Apple, Google and Nvidia. Of that, $43bn has been disbursed since 2019.

Alfred Lin, who co-led Sequoia’s investments in OpenAI, the world’s leading builder of cutting-edge artificial-intelligence (AI) models, topped this year’s Midas ranking of the world’s 100 most successful venture dealmakers, compiled by Forbes magazine. Mr Botha came 11th. Another three Sequoia employees made the list.

Mr Botha puts things in Darwinian terms, paraphrasing the father of evolutionary science: “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most responsive to change.” For Sequoia, responding to change has included hatching a “growth fund” to bankroll larger startups that would once have gone public (in 1999), expanding into China (in 2005) and India (a year later), and creating a hedge fund (in 2009) and a wealth-management arm (in 2010).

Lately, as geopolitical rifts have made investments in Asia trickier and deep-pocketed “tourists”, first from New York and Tokyo, then from Riyadh and Abu Dhabi, have stiffened competition for growth deals, adapting has meant once again going after more earlier-stage businesses at home and in Europe. Two years ago Sequoia launched its Arc programme for young startups. In 2023 it parted ways with its Chinese and Indian units.

This seems like a sound idea in principle: why endure cross-border headaches, or compete with spendthrift foreigners like SoftBank of Japan or MGX of the United Arab Emirates as they bid up valuations of today’s sexy AI startups, when ferreting out tomorrow’s stars at home offers potentially higher returns? The niggle is that both Sequoia and the ground beneath it have changed in a way that makes returning to its roots difficult.

For one thing, the VC landscape has become much more crowded. PitchBook, a data-provider, counted 3,417 conventional VC firms active in America last year, up from fewer than 1,000 in the mid-2000s when Mr Botha got into the business. Last year they managed $1.2trn-worth of assets, compared with $150bn 20 years ago. The value of new deals in the first nine months of this year exceeded $130bn. That pales beside $352bn in all of 2021, a white-hot year for startups, but is nearly twice the figure for 2014.

At the same time, as Mr Botha acknowledges, “The number of smart founders is not a function of the amount of money available.” With lots more cash chasing roughly the same supply of startup talent, industry-wide returns have duly disappointed. According to Cambridge Associates, an investment firm, the LPs of American VC firms have made compound annual returns of 1.45% in the past three years, compared with 41% in the three years before and less than the 8% they could have earned in public markets. As one VC veteran sums up with astonishing candour, “You would be better off investing in Microsoft or Meta.” (Sequoia is tightlipped about its funds’ recent performance, though to judge by its five Forbes Midases it is likely to be above average.)

As with other old growths of Sand Hill Road, Sequoia is also contending with smaller “seed” investors, often ex-entrepreneurs, getting between old-school VCs and the next generation of founders. These newcomers are closer to the young entrepreneurs in age, inhabit the same WhatsApp groups and offer counsel on negotiating with the Sequoias, having been through it themselves. The phenomenon dates back to the creation of Y Combinator, a startup kindergarten, in 2005. But it is not letting up. On November 26th the Information, a tech publication, reported that a young former startup manager turned partner at Andreessen Horowitz, Sequoia’s rival, was leaving to start her own $50m seed fund.

Out of the woods

Sequoia has no plans to cede what Mr Botha calls its “unfair advantage”: a respected brand name, a strong network and sophisticated data analytics. It is beefing up Arc, its startup school, and maintains a “scout” scheme, lending asset-rich, cash-poor founders money to invest and sharing the upside. In 2023 it backed five startups as they were still incorporating. It is also marketing itself more intensely. Partners speak at conferences and appear on podcasts, two of which the firm has launched in the past couple of years. It offers startups help with sales, recruiting and the like.

This costs money. More important, it takes up time that could be spent actively seeking out fresh prospects. It has led Sequoia, too, to expand. Collective decision-making, on which it prides itself, is necessarily less nimble with 25 investment staff than it was with a dozen two decades ago. In the fast-paced VC business that can be a handicap. Time and again Sequoia has proved its sturdiness. It still has its work cut out if it is not to turn into a fossil. ■

Business | What’s in store

TikTok wants Western consumers to shop like the Chinese

It still has some convincing to do

Photograph: AP

Nov 28th 2024|

As the end of the year draws closer, shopping season is in full swing. On Black Friday, November 29th, retailers will offer steep discounts to lure customers. Some sales started weeks ago. Soon will come the mad dash for Christmas gifts.

This year, though, many consumers will shop not in stores or on e-commerce sites, but via social-media apps. Social commerce—online purchases that originate on social media—will reach $72bn in America in 2024, reckons eMarketer, a research firm, accounting for 6% of online sales. That is up from $47bn in 2022, and expected to reach $100bn in 2026 (see chart). A growing share of those transactions can be completed without requiring shoppers to leave the social-media platform.

Chart: The Economist

Leading the trend is TikTok, a short-video app owned by Bytedance, a Chinese tech giant. The app, which is battling an effort by lawmakers in America to have it banned or sold off, hopes to bring to the West a business model that blurs the line between shopping and entertainment. TikTok Shop, an e-commerce feature added to the app in Britain in 2021 and America last year, lets users scroll through posts about products, watch live shopping events and buy items with just a few clicks. The app takes a 9% commission on sales in Britain and 6% in America. TikTok also now has a logistics service that takes care of packing, delivery and returns for merchants.

Although TikTok Shop is growing fast, making social commerce as widespread in the West as it is in China will not be straightforward. Meta has made various attempts to embed e-commerce into Facebook and Instagram without gaining much traction. For TikTok Shop to continue expanding, it will need to overcome hesitancy from consumers, brands and the influencers that connect them.

In China, the distinction between shopping and entertainment has already grown fuzzy. Social commerce will account for $900bn of online sales in the country this year, according to eMarketer, representing almost 30% of all e-commerce. Douyin, TikTok’s sister-app in China, and Kuaishou, its main local competitor, are now among the country’s biggest e-commerce platforms, based on the value of merchandise sold through them.

In the West, however, shoppers have been slower to embrace social media as a place to buy stuff. In a recent survey of Americans by Simplicity DX, a marketing-software firm, 62% thought social media was a helpful place to learn about new products, but 74% still preferred to buy things on traditional e-commerce sites.

It doesn’t help that the products currently sold on social media tend to be cheap impulse purchases, from snacks to silly toys. When your correspondent opened TikTok Shop, she was offered a 30-pack of Diet Coke and a stuffed toy shaped like French fries. Joe Gagliese of Viral Nation, a marketing agency, points out that many merchants on the platform are unknown companies that sell a single item. TikTok Shop is designed to encourage impulse shopping; when products are discounted, for instance, a clock is sometimes displayed with a countdown to the end of the sale. Another recent survey found that more than half of Americans who shopped on social media regretted their purchase.

Big brands have also been wary. Plenty have embraced social media as a place to advertise their products, often with the help of influencers. And some, including Puma, a sportswear brand, and L’Oréal, a beauty giant, have begun to sell through TikTok Shop. Jack Timpany, a marketing executive at L’Oréal, says that it is a useful way to get new products in front of consumers. “It’s pretty hard to do that on your traditional e-commerce channels where you’re limited by what people put in the search bar,” he says. “It’s all about discovery,” says Jan Wilk, head of operations for TikTok Shop in Britain.

Other companies, however, have balked at the idea. GymShark, a sportswear brand that has relied heavily on influencer marketing to raise its profile, has held off on selling directly through TikTok. Noel Mack, who looks after brand strategy for the company, says that is because much of the emphasis on TikTok Shop is around selling products at deep discounts.

Influencers, whose content helps drive engagement on TikTok, also need more persuading. They may be happy to promote products on behalf of brands, for a fee, but many have been reluctant to push the cheap wares typically found on TikTok Shop. Social-media users in the West have grown more sceptical of influencers who act as salesmen. “The follower has become a lot smarter,” says Samantha Bergmann, founder of SESAMY, an influencer-marketing agency. “You can no longer sell them something that doesn’t actually fit your brand.” The buzzword in the industry is “authenticity”, explains Eric Sheridan of Goldman Sachs, a bank. That may be hard to maintain while peddling stuffed toys. ■

Finance & economics | Free exchange

Why Black Friday sales grow more annoying every year

Nobody is to blame. Everyone suffers

Illustration: Alvaro Bernis

Nov 28th 2024

When is black Friday? The obvious answer is a literal one. It is the day after Thanksgiving, an American holiday when families gather to gorge on turkey and pumpkin pie, which this year falls on November 29th. Yet Black Friday is not simply a date, it is also an idea. The day traditionally marked the beginning of the festive shopping season, when people would start to stock up on Christmas presents. Today, it is the time of year during which everything goes on sale. And pinpointing when this begins is a much more difficult endeavour. In a bid to find an answer your columnist searched her inbox for the earliest Black Friday discount offered by a retailer. The missive came in early October.

To understand this baffling development, consider the underlying economics. American retail is a fiercely competitive market—but that is different from being a “perfectly” competitive market. Léon Walras, a brilliant 19th-century French economist, defined such a market as existing when large numbers of buyers and sellers meet, with perfect information, in order to exchange homogeneous products. In a perfect market no single seller has the power to set prices across the board, and there are no barriers to entry for new arrivals. Although real life is almost never like this, it comes close in markets for standardised commodities, such as a bushel of a certain grade of wheat. At the Chicago Mercantile Exchange, there is pretty perfect information about what is being bought and sold. There are lots of buyers and sellers, who all gather in the same place at the same time. There are lots of transactions. And sellers compete exclusively on price, which should equate to the marginal cost of producing an extra bushel. Needless to say, none of them offer Black Friday deals.

The markets for toaster ovens or slippers do not quite operate in the same manner. For a start, goods are differentiated by design and quality. Information is far from perfect, hence the popularity of recommendation services such as The Strategist and Wirecutter, which test and rank products. Retailers compete on price, of course, but, critically, they also compete on timing.

Imagine a customer who is looking to purchase a blender. Bob is torn between the “top pick” on Wirecutter—the Vitamix 5200, a pricey $450 model—and a cheaper runner-up option, the Cleanblend Blender, which is sold for around $170. He prefers the Vitamix, and is willing to pay perhaps $200 more for it. Then, in late October, he receives an email from a small retailer offering the Cleanblend for just $120. He knows the Vitamix will go on sale soon, but does not know how big the discount will be, and perhaps the other retailer will have sold out of Cleanblends by then. He decides to make a purchase. Two weeks later, while whizzing up a morning smoothie in his Cleanblend, he sees the Vitamix has been discounted to just $300, and feels a pang of regret.

As this tale indicates, retailers have an incentive to offer discounts early, ahead of rivals, since doing so just might snag them an extra few sales. Some customers might enjoy this long window during which they can peruse discounted goods. But, just as on the Chicago Mercantile Exchange, there is an advantage for buyers when they are able to see all offers at once. And anecdotally, at least, the prolonged approach to Black Friday quickly becomes exhausting. Rather than a short frenzy, fuelled by leftover turkey sandwiches and pie, the discount season feels like a never-ending barrage of targeted advertisements and email reminders.

The expansion of Black Friday is not necessarily to the advantage of retailers in aggregate, either. Although there is a benefit to kickstarting a sale before your competitor does, offering discounts six weeks early doubtless means that retailers are giving up full-price purchases. This dynamic is even clearer with Christmas sales. When these actually started on Boxing Day, last-minute present buyers whose demand was surely inelastic (what choice do they have on Christmas Eve?) were forced to pay full price. Now, more often than not, they are able to snag a last-minute deal. If each retailer acts out of rational self-interest, and nudges forward their sales a little each year, the collective problem becomes a little worse each season. Even if the majority of consumers and retailers might prefer that holiday sales start on Black Friday and last for a short period, the equilibrium cannot hold.

Judging the problem

This kind of market failure, which economists call “unravelling”, is common in “matching markets”, such as job markets for doctors and lawyers. In his book, “Who gets What—and Why?”, Alvin Roth of Stanford University, who in 2012 shared a Nobel prize for work on matching markets, described how acute the problem once was in the market for clerkships. Although judges in the most prestigious courts were more than happy to wait to see who was the most talented student at Harvard University before offering them a clerkship, there was a strong incentive for judges in slightly less prestigious courts to make earlier offers to students who were very likely to be at the top of their piles, so as to pinch the best. This forced the most prestigious courts to respond. As a consequence, offers crept earlier and earlier. They also “exploded”. For early offers to work they had to expire. Mr Roth recounted the tale of a student in 2005 who boarded a flight from one interview to another and received an offer from the judge he had just met via voicemail while taxiing. By the time he landed the offer had been pulled. The flight was just 35 minutes long.

When it comes to clerkships, judges have managed to establish rules about how offers ought to be made, which has helped reduce the scale of the problem. Alas, no such solution is possible for retailers—clubbing together to decide how best to sell things would understandably be frowned upon by competition regulators. By 2035 Black Friday might, therefore, be a summertime affair. ■

Finance & economics | Buttonwood

The great-man theory of Wall Street

Why finance is still dominated by bold individuals

Illustration: Satoshi Kambayashi

Nov 28th 2024

At this time of year, as they await their Christmas bonuses, people on Wall Street ponder their worth. Two questions can sharpen the mind of even the most senior employee. Imagine first accepting a position in Donald Trump’s new administration. How great a financial loss would your employer suffer? Before Mr Trump picked Scott Bessent as his treasury secretary, two of America’s biggest financial institutions weighed that question. Analysts quizzed Jamie Dimon, the boss of JPMorgan Chase, about whether he would leave the bank for public office. Shareholders of Apollo worried about a future without Marc Rowan, who has transformed the investment firm in recent years.

The second question is dicier still: how much damage could you inflict on your employer? Whether by fat fingers or fraud, the quantum of losses an individual is trusted to avoid is a good proxy for their importance. Anyone can steal a paper clip. Few are able to tank a hedge fund (and, indirectly, a big bank) with huge, concentrated trades like Bill Hwang, an investor who received an 18-year prison sentence on November 20th. Wall Street rewards those who are very good at doing risky jobs.

This parlour game also elucidates one of the most important truths of finance. For an industry obsessed with managing risk, it remains greatly exposed to the triumphs and failures of a small number of individuals. From Warren Buffett at Berkshire Hathaway to Ray Dalio at Bridgewater Associates, firms reflect the style of their leaders to an uncanny extent. Tech firms may run finance close, but nowhere else in business is hero worship quite as common.

A financial equivalent to the great-man theory of history might seem counter-intuitive. Compare the current leadership of America’s largest banks with those hauled before Congress after the global financial crisis of 2007-09. That the country now has bigger banks run by smaller bosses is an inescapable conclusion. Of the crisis-weathered class, only Mr Dimon remains. The replacements are less macho. Dick Fuld, the hard-driving leader who led Lehman Brothers to bankruptcy, would struggle to be promoted today.

In reality, the action (and idolatry) have moved elsewhere in the financial system. That includes firms such as Apollo in private markets, and also institutions designed specifically to avoid concentrations of power. “Multi manager” hedge funds spread investment decisions between hundreds of largely independent and often competing stockpickers. Yet it is hard to imagine Citadel or Millennium prospering as much without their prominent founders, who shape the structures in which their underlings compete. The top brass at quant-heavy firms such as Jane Street are more secretive, but doubly keen to shield their most talented mathematicians from the glare of competitors. Although Gordon Gekko might not have the numerical acumen to thrive in today’s financial system, he would certainly recognise its egotism.

It is also still eminently possible for individuals to blow up firms. Mr Hwang’s folly earns him a statue in the pantheon of financial disaster alongside Sam Bankman-Fried (who ran FTX, a cryptocurrency exchange that collapsed in 2022) and Nick Leeson (whose derivatives trades nuked Barings Bank in 1995). The location of rogues might change: these days working-class Mr Leeson would be underqualified to join the credential-clinging cadres of junior bankers; Mr Bankman-Fried, by contrast, was too qualified and started his career at Jane Street. Rest assured, though, that more like them are lurking somewhere.

For all the succession planning and risk management, finance will never really be a team sport. That is because, perhaps with the exception of staid activities like deposit taking, its institutions are in a permanent state of renewal. When firms survive the loss of visionary founders, supine managers often take their place. The same thing happens when they become big and diversified. Risk takers leave and the cycle starts afresh. After the death of Siegmund Warburg, the peerless post-war banker, his outfit was bought by what became UBS, a Swiss lender. The operation lost its lustre and its best struck out: founders of Moelis and Centerview, two top advisory houses, used to work there. Mr Hwang hails from Julian Robertson’s Tiger Management, a hedge fund known for its successful offspring. Today private-market firms and hedge funds may be ascendant, but in time the same thing will happen to them. ■

Science & technology | Nutrition

Scientists are learning why ultra-processed foods are bad for you

A mystery is finally being solved

Photograph: Getty Images

Nov 25th 2024

For millennia, people have altered food to please their palates. More than 3,000 years ago Mesoamericans, living in what is Mexico and Central America today, cooked corn kernels in a solution of wood ash or limestone. The process, known as nixtamalisation, unlocked nutrients and softened the tough outer shells of the corn, making it easier to grind.

With the invention of tinned goods and pasteurisation in the 19th century, food alchemy became possible on an industrial scale. Processing innovations made food cheaper, more convenient and plentiful. According to the UN, the average daily food supply available for a person in the rich world increased by over 20% between 1961 and 2021, to 3,500 kilocalories. In that time, obesity rates have more than tripled; today, nearly one in three people globally is obese or overweight.

Now concerns are growing that the heavy processing used to cook up cheap, tasty nibbles may itself be harmful. A particular target is “ultra-processed foods” (upfs), a relatively recent label put forward by Carlos Monteiro, a Brazilian scientist. Robert F. Kennedy junior, Donald Trump’s nominee for secretary of health, has likened processed food to “poison” and promised to reduce the share of UPFs in American diets. In November 2023 Colombia imposed a tax on highly processed foods and drinks. Authorities in Brazil, Canada and Peru have advised the public to limit consumption of these foods. In Britain parliamentarians are investigating the effects of UPFs on people’s health.

At the heart of the debate is a question: are upfs unhealthy because their nutritional content is poor, or does the processing somehow pose risks in itself? New research may soon provide answers that could reformulate what people eat.

At the turn of the 21st century Dr Monteiro noticed that people in Brazil were buying less sugar and oil than in the past. Yet rates of obesity and metabolic diseases were still rising. This coincided with the growing popularity of packaged snacks and ready-made meals, which were loaded with sugar, fats and other additives.

In 2009 Dr Monteiro came up with a classification system, called Nova, that sorts foods into four buckets depending on the degree of processing they undergo. The first group includes minimally processed foods including fruit and milk. The second covers basic ingredients like butter and sugar. Next are foods such as tinned vegetables, bread, and cold cuts.

The fourth group, UPFs, includes heavily processed items, for example fizzy drinks, sugary cereals and frozen pizzas. These are made with ingredients not typically found in a home kitchen, such as hydrogenated oils, high-fructose corn syrup, flavouring agents and emulsifiers. UPFs are made by breaking down whole foods into components such as sugars, proteins, starches and fibre. These are chemically modified and reassembled along with additives like artificial colours and sweeteners to make the food more appealing.

Chart: The Economist

Since the 1990s the share of UPFs in diets worldwide has grown; they now account for more than half of the calorie intake in America and Britain (see chart). And for several decades, evidence has also been building that these foods are harmful in some way. Numerous studies show that people who consume diets high in UPFs tend to have more health problems, including obesity, type-2 diabetes, cardiovascular disease, various cancers and mental-health problems. UPFs often contain higher concentrations of fat, sugar and salt than processed foods, which could explain their negative effects. But a recent analysis by Samuel Dicken and Rachel Batterham at University College London reviewed 37 studies and found that even after adjusting for fat, sugar and salt UPFs were still strongly linked to poor health. That suggests there is more to their harm than just a poor nutrient profile.

Where those harms come from is still unclear, however. With so many competing factors that could also explain poor health—such as income, education and social conditions—observational studies alone cannot offer conclusive answers. Arne Astrup, a researcher at the Novo Nordisk Foundation in Denmark, argues that most of the studies that make statistical adjustments to try to isolate the effects of processing are “not good enough”.

A better way to assess the question is with a randomised controlled trial (RCT), where researchers track a person’s food intake and control for all other variables. In one of the few such trials, published in 2019, Kevin Hall, a researcher at the National Institutes of Health (NIH) in America, admitted 20 adults to the NIH Clinical Centre for four weeks. The participants received either ultra-processed or minimally processed foods for two weeks before swapping diet for the next fortnight. Participants in both diets had access to the same amount of calories and nutrients like sugars, fibre and fat. People were free to eat as much or as little as they wanted.

The results were striking. People on the ultra-processed diet ate about 500 more calories per day than those on the unprocessed one. They also ate faster and gained an average of 1kg (2.2 pounds) over two weeks. On the other diet, participants lost a similar amount of weight. Dr Hall says that, though the study was short and conducted in an artificial setting, the results suggest that excess amounts of salt, sugar and fats might not be fully to blame for the ill effects of processed food.

Further RCTs will be needed to confirm‎ Dr Hall’s results. Even then, a bigger question remains—why do people overeat UPFs? Dr Hall has some ideas. One is that highly processed foods pack more calories per bite. When creating them, manufacturers often remove water to dry the food, to improve their shelf life. But this also makes foods more energy dense.

Another theory—as anyone who has tried, and failed, to eat just one crisp from a bag can attest—is that highly processed foods are also engineered to be irresistible. UPFs often contain combinations of nutrients—higher in either fat and sugar or fat and salt, or carbohydrates and salt—known as “hyper-palatable” mixes. These combinations do not appear in nature and tend to encourage people to eat more quickly, not giving the gut enough time to tell the brain that it is full.

To test these ideas Dr Hall is running another study where 36 people check into his diet hotel for a month. They will be rotated through four different diets: two similar to those in his previous study and two new ultra-processed regimes. One of these is low in both energy density and hyper-palatable foods, while the other is high in energy density but low in hyper-palatable combinations. As before, all diets are balanced for key nutrients and Dr Hall is tracking changes in the participants’ weight and other health measures. Though the full results of the study are not expected until next year, early findings suggest that both hyper-palatability and energy density seem to cause most of the excess calorie consumption of UPFs. Dr Hall is hopeful that his study will help to move the conversation on UPFs from opinion to science. The extent of reformulations of food that might be needed, meanwhile, is uncertain. If the harms are found to be focused on just a few ingredients or processing methods, foodmakers could easily adapt. However, says Dr Hall, if it turns out to be a “combinatorial nightmare” of many ingredients or processes that cause harm only in certain combinations, solving the problems of UPFs will become much more challenging. Properly mapping the territory, though, is the first step.

Even if the results show conclusively that processing, and not just nutrients, leads to poor health, policymakers will face another difficulty: the definition of UPFs remains woolly. The Nova classification has no tolerance at all for artificial ingredients. The mere presence of a chemical additive classifies a food as a UPF, regardless of the amount. This can lead to confusing health outcomes. A recent observational study from Harvard University, for example, found that whereas some UPFs, such as sweetened drinks and processed meats, were associated with a higher risk of heart disease, others, like breakfast cereals, bread and yogurt, were instead linked to lower risks for cardiovascular disease. Dr Astrup warns that the current classification risks “demonising” a lot of healthy food. Insights from Dr Hall’s work could therefore help refine the understanding of UPFs, paving the way for more balanced and useful guidelines. ■

Culture | Angela’s ashes

Germany’s former chancellor sets out to restore her reputation

But her new memoir is unlikely to change her critics’ minds

Not facing the issues head-onPhotograph: Alamy

Nov 26th 2024

Freedom. By Angela Merkel. St Martin’s Press; 720 pages; $40. Macmillan; £35

Few world leaders have left office as lauded as Angela Merkel. When she stepped down as chancellor in 2021, after 16 years, Germany’s economy was the envy of Europe. Mrs Merkel had saved the euro and guided her nation through the pandemic. Her style of politics set an example, too. In an age of increasing demagoguery, fake news and partisanship, “Mutti”—or Mum, as Germans affectionately called her—was low-key and empirical. Instead of demonising her opponents, she was the architect of compromises that had something for everyone.

How rapidly her legacy has turned to ashes. Under Mrs Merkel, Germany got cheap energy from Russia, sold expensive cars to China and outsourced its security to America. Today, all those policies look like strategic mistakes. The economy is in a mess. China dominates electric vehicles. Vladimir Putin is threatening Europe and, under Donald Trump, America will no longer be willing to pay full freight for nato. As Germany prepares for an election in February 2025, its centrist parties are being squeezed by the unMerkel-like extremes on the left and right.

“Freedom” is Mrs Merkel’s attempt to restore her reputation. Over around 700 pages, she and her long-time confidante, Beate Baumann, chronicle her life in East Germany, her entry into politics after the collapse of the Berlin Wall and her career as Germany’s first female chancellor. Mrs Merkel is eminently reasonable and modest. But she fails to mount a persuasive defence of her good name. Regrettably, the most striking question this book raises is: why cannot she better defend her legacy?

As a memoir, “Freedom” does not soar. Mrs Merkel is a shrewd judge of character, but uninterested in gossip and too discreet to break confidences. She is also a doer, rather than a thinker. Her book’s title reflects her fundamental beliefs, but freedom is not a theme she explores in any depth, despite having lived the first 35 years of her life under communism.

Fortunately, Mrs Merkel was assiduous about keeping a diary. Unfortunately, it listed her appointments, not her reflections. Readers learn a great deal about her travel schedule and her meetings with the likes of the Association of German Cities. But too often she cannot remember details. The reader is in the room where it happened in only a handful of dramatic encounters that lodged in her mind, as when she first grasped the magnitude of the euro zone’s financial problems in February 2010, or the tortured ceasefire negotiations between France, Germany, Russia and Ukraine in Minsk in February 2015.

The politician who emerges from these pages has strengths. Mrs Merkel is a Stakhanovite with a rare ability to navigate technical and political complexity. Somehow, in 2010, while on a visit to Moscow, she managed to organise a fund to help stabilise the euro, even as her own coalition was rebelling. She is also blessed with uncanny timing—withdrawing, for example, from her first run for the chancellorship in favour of Edmund Stoiber in January 2002. Mr Stoiber lost the election, which was the making of her.

These virtues will not silence Mrs Merkel’s critics. They say, for example, that she should not have blocked Ukraine’s path to nato membership in 2008. She rebuts them with the argument that accession would have taken years and, in the meantime, Mr Putin would have aggressively tried to forestall it.

However, if Mrs Merkel so clearly understood the threat from Mr Putin, why did she increase Germany’s dependence on Russian gas by closing the country’s nuclear power stations? And why did she tolerate defence spending of just 1.33% of gdp when she stepped down, far below the 2% she had agreed to at a nato meeting in 2014? Her suggestion that her coalition partners were to blame is feeble.

That gets to the heart of the matter. Compromise is all very well in a politician. But without a vision, it can easily become the art of splitting differences. In “Freedom” Mrs Merkel assures readers that she always got the best deal possible. She is asking them to take a lot on trust. ■

Obituary | Our Lady of the Carnations

Celeste Caeiro’s small gesture named a revolution

The Portuguese restaurant worker and single mother died on November 15th, aged 91

Photograph: Getty Images

Nov 28th 2024

People told all sorts of stories about carnations. That they were a divine flower. That they sprang from the eyes of a shepherd whom the Goddess Diana blinded for being too handsome, or from the tears of Our Lady as she stood by the cross. The only thing that Celeste Caeiro knew for sure about carnations, that morning of April 25th 1974, was that an awful lot of them were waiting in the warehouse in buckets, and that she and the rest of the staff at Sir Restaurant would have to fetch them and put them on all the tables, because the bosses wanted to throw a party.

That was what bosses did. Extra work for the staff, but did that mean extra pay? Not likely. As it was, her pay for a basic 14-hour day of clearing tables, mopping, taking coats, etc, etc, barely covered the rent of the one-bedroom flat that she shared with her mother and her daughter Helena, who was five. But Mr Chaves, the owner, told Mr Ramos, the manager, to put on a special menu for the restaurant’s first birthday, with a free glass of port for the men and a flower for the ladies. There was no particular reason, as far as Celeste knew, for carnations. Probably Mr Ramos had found they were the cheapest flowers in the market.

The restaurant deserved some celebration, however. It was huge, with seating for 300, and had self-service as well as sit-down, which was unheard-of in Portugal then. It made up the ground floor of an office building called Franjinhas, which had a rippling façade with fringes of concrete hanging down over the windows. People were horrified by it, but in 1971 it had actually won a prize. Between them, restaurant and building were signs that the modern world was beginning to creep in on Portugal, crushed as it was by the hard-right “New State” of António de Oliveira Salazar. Dictators in Germany and Italy had been brought down by the war. Not he. He had ruled for 36 long years. After him, in 1968, Marcelo Caetano had taken over and was as bad, despite his glasses and his mild plump face, like a banker’s. Celeste was 40, so she had never known any other prime ministers or any other regime.

She had dreamed of others, though. Secretly she was a communist, like her uncle and aunt in Amareleja, 200km east of Lisbon, which was called the reddest village in Portugal. When she stayed there as a child she witnessed meetings at night, and was sworn to silence about them. Later, back in Lisbon, she worked for a tobacconist who also dealt in banned books, like the works of José Vilhena; she would hide them in tobacco sacks. Too many voices were prohibited, including any TV or radio that was not run by the state. So though she was too poor to have a TV set, a radio or even a telephone in her flat, she wasn’t missing much.

Except on that morning in April. Then, Mr Chaves met the staff at the door with the news that Sir was closed and the party was off. Some army captains had launched a coup, objecting especially to Portugal’s costly wars to hang on to its colonies in Africa. Caetano had fled and was holed up in the Largo do Carmo, right beside the ruins of the medieval Carmelite convent. That had been destroyed in the terrible earthquake of 1755, after which most of Lisbon had needed rebuilding. Now another earthquake was happening. “And we’ll let you know”, added Mr Chaves, “whether it turns out well or badly.” They were told to go home, and to pick up bunches of carnations from the warehouse on the way. He didn’t want them going to waste.

She, however, could not possibly go home. This was the moment she had wanted for years. Already ordinary citizens were streaming towards Carmo. Tiny as she was, she showed up in the crowd with her brisk, determined walk and her big sheaf of bright red flowers. Tanks and armoured personnel carriers stood in the square; soldiers on the tanks told her they had been there, waiting for Caetano to surrender, since three in the morning. Not surprisingly one of them, calling her “Ma’am” most politely, asked her for a cigarette. He looked exhausted. She felt sorry for him, but she didn’t smoke and never had, because she was so chesty. Perhaps she could buy him a sandwich? No, everywhere was closed. So, reaching up on tiptoe, she gave him a carnation.

He did not have to accept it. He could have laughed at her, or tossed it away. Many men would have done: her own father, or Helena’s father, the ones who walked out on women. But he took it gladly, and put it in the barrel of his rifle. That meant he could not shoot now; and suddenly, his comrades also wanted one. They would be an army of peace. Her flowers ran out, but soon other people brought carnations too, including all the florists who worried, like Mr Chaves, that their stock would die otherwise.

Back in the flat in Criada later, she stood at the window watching. People filled the streets, and many had carnations. It made her smile. By the evening, Caetano had surrendered. Her mother cried “You could have been shot!”, but she had never thought that. The whole thing seemed almost accidental. She had offered a soldier a flower. He had stuck it into his gun. This had turned into a statement that grew stronger and stronger. Peace against war (only four people died in this revolution); good against evil; freedom against oppression; new versus old. It was a statement that resonated far beyond Portugal, especially in Africa, where one by one the former colonies gained their independence.

She would have liked more recognition from the kinder governments that followed. In 1988, when a fire in Criada destroyed her flat, she was rehoused at first in run-down, dangerous Chelas before they found her somewhere nicer. She still struggled to get by, living on a pension of 370 euros a month. But the people made her their heroine. She was on posters and murals and, at the 50th-anniversary celebrations in April, the centre of attention. As for red carnations, they no longer popped up on browsers as the flowers firstly of Diana or the Virgin Mary. They belonged to Celeste and the Portuguese revolution. They were hers. ■