The Economist Articles for Jan. 3rd week : Jan. 19th(Interpretation)

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The Economist Articles for Jan. 3rd week : Jan. 19th(Interpretation)

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Leaders | Immigration

Donald the Deporter

Could a man who makes ugly promises of mass expulsion actually fix America’s immigration system?

Jan 9th 2025

NOTHING SCRAMBLES the mind like a Trump press conference. On January 7th, at his winter palace in Florida, the president-elect mused on annexing Canada, Greenland and the Panama Canal—as well as tilting at offshore windmills for supposedly killing whales. It was a mix of free association, gleeful provocation and serious, world-changing intent.

Less noticed on January 7th, the House of Representatives passed the Laken Riley Act, which makes it easier to deport unauthorised immigrants for minor crimes such as shoplifting. Immigration is where the next administration is likely to direct its first efforts after the inauguration on January 20th. And here, too, Donald Trump promises that same mind-scrambling cocktail. Illegal immigration is a problem that lends itself to wild, crowd-pleasing and destructive policies, as well as presenting opportunities for beneficial reform. The path Mr Trump chooses will not only say something about his presidency, it could also cause ripples in the many other rich countries that have political problems over immigration.

Under President Joe Biden chaos erupted at the border, at least for a while. To their cost in the election, many Democrats responded by blaming voters for being cross about it. In the most recent numbers the Census Bureau records a net increase of 2.8m immigrants in 2023. The share of foreign-born residents in America has been higher since 1885, when Frederick Trump left Germany for New York, but it is the highest in a century. Although most Americans welcome legal migrants and the country is good at assimilating them, they resent it when immigrants claim asylum and then disappear into a shadow labour market while awaiting a court hearing.

Mr Trump takes office with a mandate to tighten controls. In the campaign he extended the abhorrent rhetoric that marked his first term, talking about immigrants “poisoning the blood” of America. The contrast with that first term, when fewer people were actually deported than under Barack Obama, is that this time he seems to want the focus on immigration to be real. His deputy chief of staff is Stephen Miller, who yearns to restrict legal as well as illegal migration. His border tsar is Tom Homan, one of the inventors of the family-separation policy in his first term. And he has threatened to deploy the National Guard to help with deportations, where previous presidents used soldiers just for logistical support.

Mr Trump will not be able to carry through his threat to deport 15m people. Shipping out such a huge number would be extraordinarily expensive and would shock the labour market, raising the prices of goods and services that illegal immigrants help provide. Research suggests that deportations under Mr Obama slowed housebuilding by throwing out so many plasterers and bricklayers. And mass expulsions would be unpopular, because over half of all irregular migrants have been in America for more than a decade. They have jobs and families, and often live in blue states that will not co-operate.

Instead Mr Trump is likely to look for a more practical policy. The temptation will be to dump the problem on Mexico. When deporting people, a big obstacle is finding governments to take them. Mr Trump might therefore simply turn back those who arrive via the southern border, threatening Mexico with tariffs unless it lets them in. Yet it is not in America’s long-term interest to destabilise its poorer, southern neighbour. Mexico’s president, Claudia Sheinbaum, recognises that helping America with immigration enforcement is a high card in any negotiation with the Trump administration and has signalled a willingness to help. He should meet her halfway.

Another temptation will be to focus on theatrical cruelty as a substitute for real action. Expect workplace raids with camera crews in tow, harsh internment in border states and ICE agents surging in sanctuary cities. As with the Conservative Party’s plan to outsource Britain’s asylum system to Rwanda, the point is partly to deter would-be migrants. It is also to persuade voters that the government is serious.

Cruelty for its own sake is wrong. By denying migrants’ humanity, it coarsens American values. It may also prove unpopular. In the first Trump term Americans reacted against splitting up families and caging children; support for immigration rose. As soon as Mr Biden took office, support for immigration fell. That dynamic creates room for Mr Trump to accomplish something less harsh and more enduring.

The first step is to beef up the border. Mr Trump is lucky, because irregular crossings have already fallen sharply from their peak in 2022, after the Biden administration made deals with Mexico and other Latin American countries to help curb the flow. Mr Trump may build on this by surging immigration officials to the border, to make quick rulings on whether claims are valid. He could also oblige asylum-seekers to remain in Mexico until their cases are decided, as he did in his first term. The second step is to focus deportations on criminals, as his chief of staff has suggested he will.

That could create consent for a third step that has long been obvious yet unattainable politically. Both as a practical matter and as an exercise in justice, America cannot deport every unlawful migrant. Doing nothing means that around 11m people will spend their whole lives in America without ever acquiring the right to live there. But unless immigration flows are under control, amnesty for those already in the United States risks attracting another wave to try to enter illegally. The only solution is a deal that combines effective border enforcement with a right to stay for law-abiding migrants.

Deal of the century

Such a compromise is possible. No Republican politician can outflank Mr Trump on immigration, and Democratic alarm helps him appear tough. The chances are that he will want to keep immigration as a wedge issue, pick fights with Democratic governors and mayors, and leave things broadly as he found them. But the conditions are there for him to do a deal that has eluded the past five presidents—if he wants to. ■

Leaders | Free markets

The capitalist revolution Africa needs

The world’s poorest continent should embrace its least fashionable idea

Jan 9th 2025

In the coming years Africa will become more important than at any time in the modern era. Over the next decade its share of the world’s population is expected to reach 21%, up from 13% in 2000, 9% in 1950 and 11% in 1800. As the rest of the world ages, Africa will become a crucial source of labour: more than half the young people entering the global workforce in 2030 will be African.

This is a great opportunity for the poorest continent. But if its 54 countries are to seize it, they will have to do something exceptional: break with their own past and with the dismal statist orthodoxy that now grips much of the world. Africa’s leaders will have to embrace business, growth and free markets. They will need to unleash a capitalist revolution.

If you follow Africa from afar you will be aware of some of its troubles, such as the devastating civil war in Sudan; and some of its bright spots, such as the global hunger for Afrobeats—streams on Spotify rose by 34% in 2024. Less easy to make out is the shocking economic reality documented in our special report this week and which we call the “Africa gap”.

In the past decade, as America, Europe and Asia have been transformed by technology and politics, Africa has, largely unnoticed, slipped further behind. Income per person has fallen from a third of that in the rest of the world in 2000 to a quarter. Output per head may be no higher in 2026 than it was in 2015. Two giants, Nigeria and South Africa, have done atrociously. Only a few countries, such as Ivory Coast and Rwanda, have bucked the trend.

Behind those figures lies a depressing record of stagnant productivity. African countries are experiencing disruption without development. They are going through social upheavals as people move from farms to cities but without accompanying agricultural or industrial revolutions. Services, where ever more Africans find work, are less productive than in any other region—and barely more productive than in 2010. Poor infrastructure does not help. For all the talk of using digital technology and clean energy to leapfrog ahead, Africa lacks the 20th-century kit needed to thrive in the 21st. Its road density has probably fallen. Less than 4% of farmland is irrigated and almost half of sub-Saharan Africans lack electricity.

The problem also has another, under-appreciated, dimension. Africa is a corporate desert. In the past 20 years Brazil has spawned fintech giants and Indonesia e-commerce stars, while India has incubated one of the world’s most vibrant corporate ecosystems. But not Africa. It has fewer firms with at least $1bn in revenues than any other region and since 2015 the number looks to have declined. The problem is not risk so much as the fragmented and complex markets created by all the continent’s borders. For investors, Africa’s balkanised stock exchanges are an afterthought. Africa accounts for 3% of world GDP, but attracts less than 1% of its private capital.

What should Africa’s leaders do? A starting-point is to ditch decades of bad ideas. These range from mimicking the worst of Chinese state capitalism, whose shortcomings are on full display, to defeatism over the future of manufacturing in the age of automation, to copying and pasting proposals by World Bank technocrats. The earnest advice of American billionaires on micro-policies, from deploying mosquito nets to designing solar panels, is welcome but no substitute for creating the conditions that would allow African businesses to thrive and expand. There is a dangerous strand of development thinking that suggests growth cannot alleviate poverty or does not matter at all, so long as there are efforts to curb disease, feed children and mitigate extreme weather. In fact in almost all circumstances faster growth is the best way to cut poverty and ensure that countries have the resources to deal with climate change.

So African leaders should get serious about growth. They should embrace the self-confident spirit of modernisation seen in East Asia in the 20th century, and today in India and elsewhere. A few African countries such as Botswana, Ethiopia and Mauritius have at different times struck what Stefan Dercon, a scholar, calls “development bargains”: a tacit pact among the elite that politics is about increasing the size of the economy, not just a fight to divvy up who gets what. More of those elite deals are needed.

At the same time governments should build a political consensus in favour of growth. The good news is that powerful constituencies are keen on economic dynamism. A new generation of Africans, born several decades after independence, care a lot more about their careers than they do about colonialism.

Narrowing the Africa gap calls for new social attitudes towards business, similar to those that unleashed growth in China and India. Instead of fetishising government jobs or small enterprises, Africans could do with more risk-taking tycoons. Individual countries need much more infrastructure, from ports to power, more free-wheeling competition and vastly better schools.

Another essential task is to integrate African markets so that firms can achieve greater economies of scale and attain an absolute size big enough to attract global investors. That means advancing plans for visa-free travel areas, integrating capital markets, plugging together data networks and finally realising the dream of a pan-African free-trade area.

Free to get rich

The consequences for Africa of simply carrying on as usual would be dire. If the Africa gap gets bigger, Africans will make up nearly all of the world’s very poor, including the most vulnerable to climate change. That would be a moral disaster. It would also, through migration flows and political volatility, threaten the stability of the rest of the world.

But there is no reason to catastrophise or give up hope. If other continents can prosper, so can Africa. It is time its leaders discovered a sense of ambition and optimism. Africa does not require saving. It needs less paternalism, complacency and corruption—and more capitalism. ■

Leaders | From nickel to pickle

Just because Indonesia has nickel, doesn’t mean it should make EVs

Economic nationalists are making a reckless bet

Photograph: Hariandi Hafid/SOPA Images/ZUMA Press Wire/eyevine

Jan 9th 2025

Nothing emboldens politicians like defying the world’s advice and being proved right. Such is the case in Indonesia. In 2014 the country moved to ban exports of unprocessed ores. The idea was to force companies that crave its abundant minerals to refine them inside the country, capturing valuable investment and creating jobs. Multilateral institutions were sceptical. So was The Economist. Falling ore-export earnings could widen the current-account deficit and weigh on the shaky currency, the rupiah, we warned at the time.

For one commodity, however, the arm-twisting has worked. Indonesia has the world’s largest reserves of nickel, a crucial ingredient in certain electric-vehicle (EV) batteries. Since 2020, when the export ban came into full force, it has come to dominate the nickel market. Dozens of nickel smelters have opened since 2020, as investors submit to the government’s rules in order to lay hands on the metal. Indonesia’s share of the world’s refined-nickel production has doubled since 2020, to nearly half the total. In 2023 Indonesian exports of processed nickel were $22bn, or 9% of the country’s total exports, up from 2% in 2019. The nickel bonanza lifted Indonesia’s trade surplus to a record high in 2022.

Indonesia’s resource nationalism has overwhelmed other producers. Nickel mines are going bust from Australia to Brazil; perhaps half are unprofitable. Indonesia’s, by contrast, have been buoyed by a surge of investment from Chinese mining giants such as Tsingshan. Chinese smelters in Indonesia have been innovative. Because of Indonesia’s geology, it was once thought that its nickel-ore deposits were too expensive to refine at scale. But Chinese companies have found a way.

Now Indonesia’s elite, led by Prabowo Subianto, the new president, wants to go further. His government may soon curtail supply to prop up prices, as if it were a one-country OPEC for nickel. Those around Mr Prabowo dream of building a top-to-bottom electric-car supply chain, from raw mineral extraction and processing to battery-making and vehicle assembly. Indonesia has nearly all the natural resources necessary to build EVs, they reason. Why should anyone else capture the value? The government is now trying to pump up domestic demand for EVs with subsidies, and is courting EV supply-chain investments from the likes of BYD and Hyundai.

Yet Indonesia’s gung-ho industrial policy is wrong-headed. Market power in nickel does not imply similar power over the whole EV supply chain. Raw materials are only a small part of the cost of the average EV. And when it comes to other factors that determine where carmakers produce, such as logistical capacity and local know-how, Indonesia is less attractive than neighbours such as Vietnam and Thailand. Indonesia is expanding supply during a period of brutal competition in both the EV and battery markets, with muted demand worldwide and overcapacity in China. What’s more, the pricey nickel-based batteries Indonesia is best-equipped to make are not what local consumers want. They prefer vehicles made with cheap lithium-iron-phosphate batteries. So far, domestic EV sales have been paltry.

In short, Indonesia’s nationalistic approach is likely to be a costly failure. In contrast to nickel processing, where its grip on the ore gave it power over miners, in EVs it is trying to subsidise its way to market share. Though its public finances are sound, the fiscal toll of so many giveaways will be heavy.

Given enough money and political attention, some sort of supply chain will surely end up being created. But the costs to Indonesia could vastly exceed the benefits. Officials argue that foreign carmakers will train Indonesians, but this seems unlikely on a large scale. The tally of planned investments looks modest. And a lack of local expertise will tempt firms to import foreign high-skilled labour.

A different approach is needed. Indonesia could specialise in parts of the EV supply chain, such as nickel-battery precursors, rather than trying to do everything. And if Mr Prabowo wants to promote prosperity, he should focus on broader reforms, such as curbing corruption, cutting red tape and fixing a leaky tax system. If Indonesia must subsidise something, then improving primary health care or inefficient ports would be a better use of the cash than a reckless bet on EVs. ■

Leaders | Women and the armed forces

Pete Hegseth’s culture war will weaken America’s armed forces

Donald Trump’s nominee for defence risks driving away talent

Photograph: Hilary Swift/The New York Times/Redux/Eyevine

Jan 9th 2025

FOR MILLEnNIA war has been a largely male undertaking. Women may have sparked conflict—think of Helen of Troy—or in countless numbers been its victims. They have also conducted daring missions behind enemy lines as spies and saboteurs. But until recently most Western armies barred women from serving in “ground close combat”. Over the past decade, in America and Europe, many of those restrictions have been lifted. Pete Hegseth, Donald Trump’s nominee to run the Department of Defence, believes that was a mistake. He is wrong. His effort to import the country’s culture wars into the Pentagon will weaken American military power.

The American and British armed forces opened all combat positions to women a decade ago. Canada and some European states did so before that. Many countries had long resisted these steps. They worried that women would not be up to the physical demands of being in the infantry, which is tasked with closing with and killing the enemy; that they would be more susceptible to injuries; and that the presence of women would affect the cohesion of small units, a vital factor in combat.

Some of those concerns were reasonable. Female recruits do tend to be at greater risk of injury. Infantry combat remains physically demanding. Technology has not entirely changed that—even drone operators in Ukraine still lug heavy equipment over difficult terrain under fire. An experiment by the US Marine Corps showed that all-male crews tended to be faster or better at key tasks, such as loading artillery guns, moving ammunition and evacuating casualties, compared with units that included women. In practice, only tiny numbers of women will seek out infantry roles. Even fewer will meet the requisite standards. In Canada, which opened infantry roles to women 36 years ago, women make up 4% of that branch. In America it is 1.4%. Even in Ukraine’s war of survival, there are vanishingly few women serving in assault units.

But war is not just about ground close combat. Women serve daily as fighter pilots and aboard warships. Moreover, the soldiers at the front rely on support from the rear. That includes logistics, intelligence and engineering. Almost 9% of American field-artillery crews are women. In Afghanistan and Iraq, where the distinction between rear and front line often blurred, nearly 300,000 women served in America’s armed forces with distinction. The range and precision of modern missiles mean that women doing those ostensibly non-combat jobs are at considerable personal risk. Western armies, struggling to fill their ranks, need these women.

One problem is that armies have long accorded the greatest prestige to combat branches, recruiting commanders and generals disproportionately from them, assuming that only those with direct combat experience will have the authority to lead forces in battle. That need not be so. The Royal Air Force recently appointed an engineer, rather than a pilot, as a chief for the first time. The head of Finland’s army, one of Europe’s most capable, served in a signals regiment. The danger is that ambitious female soldiers, seeking promotion, will feel compelled to pursue combat roles for which they are typically less well suited. Modern armies that want to maximise the talent in their ranks should reflect on the pathways for promotion and the status accorded to different roles.

Sisters in arms

The next administration is likely to do the opposite. Mr Hegseth’s antipathy to women in combat is rooted in a belief that the Pentagon has gone “woke”. He and others in Mr Trump’s orbit believe that diversity, equity and inclusion initiatives have infected the armed forces, undermined combat effectiveness and eroded the warrior ethos. They have no evidence.

It is true, for instance, that the US Army did change standards for its basic fitness tests in 2022, allowing women to lift less weight and to take more time to complete runs. But studies conducted at the behest of the army showed that scores on the older, sex-neutral tests did not predict performance in combat or rates of injury. Female soldiers who want to serve in combat positions must still pass more demanding and specialised tests, which remain the same for men and women.

Mr Hegseth has vilified General Charles “CQ” Brown, the chairman of the joint chiefs of staff, and Admiral Lisa Franchetti, the chief of naval operations, suggesting that one got his job because he is black and the other because she is a woman. These attacks are not just baseless, but harmful and dangerous. America is at risk of losing its military edge over China. Mr Hegseth’s crusade risks driving out talented women and minorities from a force that needs them more than ever. ■

Leaders | Thinking about the demon drink

Health warnings about alcohol give only half the story

Enjoyment matters as well as risk

Illustration: Mariaelena Caputi

Jan 9th 2025

For many people, the new year brings both a banging hangover and a solemn resolution never to get drunk again. More than a decade ago Alcohol Change UK, which campaigns to cut drinking, launched its “Dry January” campaign. This year it reckons a third of British men will try to stick to it.

In America Vivek Murthy, the surgeon-general, is also keen to discourage drinking. Dr Murthy has recommended placing warnings on alcohol to highlight the fact that it raises the risk of some cancers, including breast and bowel cancer. If so, America could become the third country, after South Korea and Ireland, to require labels.

Drinking a lot is indisputably bad for you. Boozing has long been associated with heart attacks, liver disease, stroke and obesity. Drunks are more likely to get into fights or accidents. Alcohol is addictive, and the World Health Organisation (WHO) blames it for about one death in 20 around the world. The link with cancer is less familiar to most people. Dr Murthy’s statistics suggest that women who drink occasionally have about a 16.5% lifetime risk of several common cancers, whereas those who have one drink a day—America’s recommended maximum—have about a 19% chance.

As the evidence of alcohol’s harms has piled up, the public-health messages have become starker. The WHO says flatly that there is “no safe level” of alcohol consumption. America’s guidelines say that those who do not drink should not start “for any reason”. In 2023 Canada published guidelines recommending two drinks (roughly two cans of beer) a week for those who want to remain in the “low risk” category, down from 15 a week for men and ten for women.

It is all very sobering. But over-zealousness can be counter-productive. Taken literally, the WHO implies that it is unsafe to have even a sip of communion wine. If one bit of public-health advice seems absurd, people may start to doubt other bits, too.

And although there is unanimity that heavy drinking is very bad for you, there is less agreement around light indulgence. In December America’s National Academies of Science, Engineering and Medicine concluded, with “moderate certainty”, that moderate drinking (up to two cans of beer a day for men or one for women, as per official American advice) was associated with benefits rather than harms. Benefits in heart health appeared to outweigh the risks from cancer and other ailments, though the effect disappeared quickly with extra quaffing.

Many scientists think that the benefits of light drinking are a statistical mirage. But even if the WHO is right, and no amount of alcohol is safe, that is only half the picture. After all, there is no completely safe level of almost anything, from flying to going on a date. Walking is good for you, and touted at book length by the surgeon-general (“Step It Up!”). But 7,500 American pedestrians were killed by cars in 2022.

People balance the dangers of an activity against the benefits it brings. These days, suggesting that drinking might have any benefits at all feels faintly heretical. But many enjoy the taste of a good beer or wine, appreciate the buzz it provides, or take pleasure in the social rituals, like a pub visit or a dinner party, which it lubricates. That is why the world is willing to spend $1.8trn a year on drink. All that enjoyment belongs on the scales with the (equally real) harm.

Some perspective: Canada’s new guidelines define “low risk” as a one-in-1,000 chance of premature death owing to alcohol. Boosting consumption from two to six drinks a week raises the odds to one in 100. With walking, the lifetime risk of being run over in America is about 1 in 470.

What to do in 2025? If you are a heavy drinker, almost everyone would agree that it would be wise to cut down. For all but the most risk-tolerant, the middle-class habit of downing half a bottle of wine with dinner is worth examining. But if you fancy a pint or two with friends every now and then, you will be trading a tiny risk of harm for an evening of warmth and good company. That is a trade many rational people will be happy to make—especially amid the cold and gloom of January. ■

United States | Going big

America’s bet on industrial policy starts to pay off for semiconductors

Trump will not reverse the chip subsidies, but will he reinforce them?

She took care of businessPhotograph: AP

Jan 9th 2025|WASHINGTON, DC

IN THE FINAL days of Joe Biden’s presidency, most parts of his administration are winding down. Not so the top brass in the Department of Commerce: on an almost daily basis, they are signing giant funding contracts with chipmakers, racing to dole out cash before Donald Trump enters the White House. When all is said and done, they will have awarded nearly $40bn to semiconductor makers in little more than a year—arguably the biggest single bet on industrial policy by the government in decades, and one that could end up as Mr Biden’s most lasting economic legacy.

The rush to disburse cash has invited questions about whether the funding commitments—the cornerstone of the CHIPS and Science Act, passed in 2022—are at risk under Mr Trump. On the campaign trail, he called CHIPS a “bad” deal, saying the government could have just slapped tariffs on imported semiconductors.

Gina Raimondo, commerce secretary in the Biden administration, is not fretting about a rollback by Mr Trump or Howard Lutnick, nominated as her successor. In an interview with The Economist, she notes that support for the law is bipartisan, with both Republicans and Democrats keenly aware that a capacity to make chips, a critical component in every electronic device, is needed for national security. Moreover, she adds, people forget that it was Mr Trump who got things started by urging TSMC, a Taiwanese firm that is the world’s most advanced chipmaker, to build a semiconductor factory (or fab) in America.

She also rejects the notion that Commerce is rushing money out the door. The stated plan had always been to complete allocations by the end of 2024, and the due diligence began much earlier. “I see it as getting the job done efficiently with taxpayer money,” says Ms Raimondo.

In fact, the recent concern about the frenetic pace is the exact opposite of the criticism that previously dogged the CHIPS programme—namely, that it was moving too slowly because of conditions attached to deals, including requirements that chipmakers ensure access to childcare for their workers. Much of the initial slowness also reflected basic prudence on the part of the commerce department as it built up its CHIPS office from scratch, recruiting a mixture of semiconductor veterans and Wall Street dealmakers. It was charged, in effect, with implementing a major departure from the usual distaste for industrial policy on Capitol Hill (apart from when it comes to weapons). “There are large numbers of congressional staffers just waiting for the first mistake so they can denounce the investment,” says Charles Wessner of Georgetown University.

Could the CHIPS programme yield a more durable change in America’s attitudes towards industrial policy? The other part of Mr Biden’s industrial policy—the Inflation Reduction Act (IRA), focused on clean-tech spending—is bigger but much more diffuse, covering everything from hydrogen production to electric-vehicle charging stations. Climate wonks had hoped that the IRA would be politically protected from a future Republican Congress because so much of its spending goes towards Republican states. But given a choice between keeping green tax credits associated with the Biden administration and cutting voters’ taxes, most Republican lawmakers know which they would prefer.

In the case of CHIPS, by contrast, funds have already been promised to companies contractually, provided they hit specific production milestones. Early returns are impressive: the programme has catalysed about $450bn of private investments. And this money is spread across much of the industry, from high-tech packaging to memory chips. One marker of success is the production of the most advanced chips, measuring less than 10 nanometres in size. In 2022 America made few such chips. By 2032 it is on track to have a share of 28% of global capacity, according to the Semiconductor Industry Association, a trade group. “That is not chopped liver,” says John Neuffer, its CEO.

The subsidies have helped to shrink a gap of roughly 30% in the cost of building and operating fabs in America compared with in Asian countries. In part costs are lower in Asia because Asian governments lavish handouts on companies. But Asian producers have also reaped the benefits of dense manufacturing clusters, with well-trained workforces and plenty of suppliers nearby. The hope is that CHIPS has started this process in America. “It’s enough to get the flywheel going,” says Ms Raimondo.

But neither she nor just about anyone in the industry thinks that it will ultimately prove to be enough. It can take five years to build a cutting-edge fab, while the CHIPS Act itself runs for just five years. TSMC alone spends more than $30bn annually on expanding and upgrading its manufacturing operations, and China is throwing multiples of that at its companies. “I think we should be sober about how challenging it will be to keep the investment going,” says Chris Miller, author of “Chip War”, a book about the industry. The question facing the Trump administration thus will not be whether to repeal CHIPS but how to build on it. For starters it is likely to come under pressure to extend a 25% tax credit for manufacturing investment that is due to expire in 2027.

Mr Trump will also have to decide what to do with the newly muscular Department of Commerce. The department’s headquarters in Washington, DC, was the largest office building in the world when completed in 1932, a measure of its institutional importance at the time. But over the decades it faded into the background, mainly handling trade missions. Over the past few years its labyrinthine corridors have pulsed with energy again, with the department leading not just the semiconductor push but also much of the effort to restrict exports of advanced technology to China. “This shouldn’t be a blip for the commerce department,” says Ms Raimondo. “This is where the world is today.” ■

United States | Against expensive excellence

The US Army needs less good, cheaper drones to compete

It seems obvious. So what is stopping it from happening?

Photograph: US Army

Jan 5th 2025

IN UKRAINE BOTH sides are deploying millions of low-cost drones, which play a role in combat as both scouts and weapons. The US Army, long considered a leader in this field, has been following events in Ukraine closely. But the Pentagon is acquiring only small numbers of drones at high cost. Why are American drones so expensive, and can prices be brought down?

A typical FPV (“first-person view”) attack drone costs Ukraine’s army less than $500. Based on racing quadcopters, these are typically made by small suppliers. Some are assembled at kitchen tables through a government initiative which shows people how to make drones at home. Though rough and ready, they can knock out a Russian tank, artillery piece or bunker from several miles away.

The nearest American equivalent is the Marine Corps’ new Bolt-M made by Anduril. This is a slicker, more polished quadcopter with more on-board intelligence and requiring less operator skill, but it performs the same basic task of hitting a target with a 1.5kg warhead. The cost though is “low tens of thousands” of dollars. The similar Rogue-1 comes in at an eye-watering $94,000 apiece. In Ukraine, FPVs are so numerous that two or more may pursue each Russian footsoldier. The US cannot issue drones quite so lavishly when each costs as much as a sports car.

Critics accuse American companies of “gold plating”, adding unnecessary expenses to push prices up, or of excessive profits. Certainly there have been cases of gross overcharging, such as when the Pentagon has bought hammers for $48 apiece when the same hammers cost $9 from another supplier. But the situation with drones is more complicated.

One issue is sourcing. Ukrainian drones are typically assembled from cheap components made in China. The Pentagon has banned its forces from acquiring Chinese drones, both because it worries about security and because it does not want its supply chain to be controlled by a potential future adversary. Higher specifications also quickly push prices up. Most Ukrainian drones only have daylight cameras; a few are fitted with thermal imagers for night operations, which add hundreds of dollars to the price. All American military drones come with far more expensive high-resolution imagers.

For reconnaissance, Ukrainian operators typically use the Chinese DJI Mavic 3 Pro, which sells for around $3,000. The US Army’s new Short-Range Reconnaissance quadcopter will carry out similar missions. The current version costs around $20,000. The difference is partly accounted for by the need to meet US military requirements such as resistance to shock and vibration, extreme temperatures and radio interference. New capabilities, including better GPS, higher-resolution thermal imaging, automated target tracking and obstacle avoidance are pushing the price up to around $40,000. Experience suggests this type of cost spiral keeps going. And the more expensive such drones become, the less expendable and less useful they are.

And while Ukraine maintains a fleet of about 40,000 reconnaissance quadcopters, the Pentagon is acquiring about 1,000 a year, so economies of scale are not kicking in. Chinese drone-maker DJI has dominated the consumer drone market since the 2010s and produces several million drones each year. In the 2010s commercial drone-makers were forced out of business in America, or into supplying the niche market for government drones. Teal and Skydio, which supply the US Army reconnaissance drones, both followed this route.

George Matus, the boss of Teal, believes America needs to build up its drone infrastructure. An ecosystem of companies making flight controllers (the brains of the drone), cameras, communications and other components could enable drone manufacture at prices and quantities to rival China. Mr Matus believes this could all be achieved for the cost of a single high-tech jet fighter. Some companies are also drawing on alternate supply chains in Europe and Taiwan.

Since 2023 a Pentagon initiative called Replicator has been exploring how to produce large numbers of small drones rapidly at low cost, and how to learn from the Ukrainian experience. Replicator faces a deeply entrenched culture of expensive excellence. The American way has been to make world-beating systems, like the F-35 fighter jet and the M1 Abrams tank, regardless of cost. Making “good enough” hardware in bulk is a departure which faces resistance. In June, Replicator announced a contract to buy SwitchBlade loitering munitions, exactly the sort of expensive legacy drones that it was expected to replace.

Going on and on

Russia’s drone industry is ramping up. Vladimir Putin estimated Russia would make 1.4m drones in 2024. Meanwhile China has reportedly placed an order for almost 1m attack drones from one supplier (some experts dispute this). The low cost of this technology, and the fact that drones and their components can be bought easily, mean the technology is rapidly proliferating. Small drones played an important role in aiding Syria’s rebel offensive in December, for instance. Elon Musk, the tycoon tapped by Donald Trump to find government savings, has drawn attention to the wastefulness of America spending $100m on a manned jet in lieu of cheap, expendable drones. In truth, the two platforms perform wildly different tasks. But unless the Pentagon succeeds in rebalancing its arsenal, America could be heavily out-droned in any future conflict. ■

The Americas | Caught in the middle

Does made in Mexico mean made by China?

Donald Trump believes Mexico is a trojan horse for Chinese mercantilism

Illustration: Klawe Rzezcy/Getty Images

Jan 5th 2025|Mexico City

In 2018 United States President Donald Trump started a trade war with China. Mexico benefited; companies seeking to avoid tariffs by diversifying production out of China saw the country as a good option thanks to affordable labour, decent infrastructure and, most importantly, its free-trade agreement with the United States.

As Mr Trump’s second term approaches, that logic is souring. Chinese companies looked to Mexico more than most. Their investment in the country has surged. Mr Trump (who has already threatened to apply a tariff of 25% to Mexican imports “on day one” unless it stops migrants and drugs from illegally crossing the border) believes those firms are using Mexico as a tariff-free gateway to the United States. His conviction may end up blowing apart the United States-Mexico-Canada Free Trade Agreement (USMCA).

Concerns about Chinese activity in Mexico are bipartisan and long-running. In 2019 American officials worried that Chinese exporters were simply using Mexico as a route to the United States market, especially for steel and aluminium. This has largely been dealt with by Mexico imposing tariffs on imports of the metals from China, and a “melt and pour” rule that requires steel to be “substantially transformed” in Mexico before it is exported to the United States. Outright fraud—where products are imported from China, relabelled as Made in Mexico, then exported to the United States—is probably rare.

Chart: The Economist

Today the focus is on Chinese firms assembling or manufacturing products in Mexico for sale in the United States. There is plenty of this happening. In 2023 Mexico overtook China to become the leading exporter of goods to the United States; meanwhile, Chinese exports to Mexico have boomed (see chart 1). In 2002, Mexican exports to the United States contained less than 5% Chinese components by value. By 2020 that number was 21%.

Electric-vehicle (EV) production is the big issue. Most of the EVs sold worldwide are Chinese-made, usually at a lower price than those made by American firms, and of equivalent or higher quality. In September President Joe Biden raised tariffs on imports of EVs from China to 100%; without them, sales would boom. But the tariffs do not apply to vehicles made in Mexico.

Mr Trump claims that Chinese carmakers are constructing “monster” factories south of the border. That is false. Just one Chinese joint venture makes EVs for the Mexican and regional market. BYD, China’s leading EV manufacturer, has said it will build a factory in Mexico to churn out 150,000 vehicles a year, but it has yet to materialise. This month Solarever, a smaller producer, announced it would build a factory in northern Mexico.

The areas where Chinese firms really are expanding tend to be further down the supply chain. Eight Chinese auto-parts manufacturing companies operated in Mexico in 2018. By the end of 2023 there were at least 20. They make trims and battery casings as well as high-tech elements such as software to assist drivers. Many cars made in Mexico with Chinese components meet the USMCA requirement that 75% of a car must be made in Mexico, whether by Chinese companies or otherwise, to qualify for free trade. But it doesn’t matter if it is legal, says Joshua Meltzer of Brookings, a think-tank in Washington: “Political tolerance [for China] is going down.” Anything with a whiff of China is seen as suspicious. “Made by China is the new Made in China,” says Jorge Guajardo, a former Mexican ambassador to China.

Today the free trade that USMCA enshrines is subordinate to the China concern, says Enrique Dussel Peters, who runs the Centre for Chinese-Mexican Studies at the National Autonomous University of Mexico. The issue looms over a review of the deal in 2026. In September Marco Rubio, Mr Trump’s nominated secretary of state, warned of “China’s rampant exploitation of Mexico as an intermediary,” and its “manipulation of USMCA”. Politicians in Canada have suggested booting Mexico out of USMCA and drawing up a bilateral free-trade agreement.

Chart: The Economist

Mexican officials complain that the focus on Chinese investment in Mexico is hypocritical; Chinese FDI into Mexico is small compared with the billions China invests in the United States every year. But in Mexico Chinese FDI has been growing sharply, while its FDI into the United States has fallen. It does not help that Mexico’s official FDI figures seem to undercount Chinese investment by a factor of six (see chart 2), according to the Rhodium Group, a research firm, which finds that $13bn has been invested cumulatively since 2013. Mexico is paying the price for “being slow to read the writing on the wall”, says a North American diplomat.

Claudia Sheinbaum, Mexico’s president, has read it. Her government is scrambling to please its northern neighbour, setting up a body to screen foreign investments that apes those in the United States and Canada. It has plans to substitute imported Chinese components with ones made in Mexico. Marcelo Ebrard, the economy secretary, says Mexico must start making microchips and lithium batteries. Other Trump-pleasing measures are coming thick and fast. “Mexico wants to be a team with Canada and the United States,” says Luis Rosendo Gutiérrez, an official with Mexico’s economy ministry.

Photograph: Erin Schaff/New York Times/Redux/ eyevine

Yet the discussion is detached from the reality of the complex nature of trade, says Mr Dussel Peters. Foreign companies in Mexico, predominantly American ones, account for 70% of the exports to the United States. American car makers like General Motors and Ford are among those that have integrated Chinese companies into their supply chains. Some encouraged Chinese suppliers to set up shop in Mexico.

Import substitution takes time and requires incentives. Mexico’s cash-strapped government cannot offer the kinds of subsidies that are available for domestic production of chips and batteries in the United States. And some items simply can’t be sourced outside China. “We haven’t developed supply chains in the region for items like batteries for EVs,” says Odracir Barquera of the Mexican Automotive Industry Association.

Meanwhile Mexico has another reason to fret. In the early 2000s it lost out to China in exports to the United States. Now, if Chinese companies start displacing Mexican ones in North American supply chains, Mexico will suffer again, notes Margaret Myers of the Inter-American Dialogue, a think-tank in Washington. Here American and Mexican officials see eye-to-eye. “The message to the United States is ‘how do I help you make what you import from Asia?’” says Mr Gutiérrez. “Because it will help us, too.” ■

Asia | Banyan

By resisting arrest, South Korea’s president challenges democracy

His attempt to impose martial law failed. But Yoon Suk Yeol is still causing trouble

Illustration: Lan Truong

Jan 7th 2025

AFTER YOON SUK YEOL’S attempt in early December to impose martial law on South Korea failed, two stories emerged. One was a tale of vulnerability: an assault on democracy by the president himself is worrying, even if it falters. The other was about resilience: South Korea’s democratic institutions rose to the challenge, with citizens rallying and lawmakers taking action to stop the self-coup and, eventually, to impeach the president. In the immediate, bleary-eyed aftermath, the resilient parts of the country seemed dominant.

In recent weeks, however, vulnerability has come to the fore. The constitutional crisis has only deepened and partisan warfare has only become more bitter. That culminated in the sorry spectacle of a stand-off on January 3rd between the country’s police, who sought to arrest Mr Yoon on insurrection charges, and the presidential security service, which chose instead to protect him. Ostensibly an arm of the same state, the president’s bodyguards barricaded the road to his residence to prevent his detention. Mr Yoon and his lawyers contend that the criminal proceedings against him are themselves illegal. On January 7th a court granted an extension of the arrest warrant; investigators are gearing up for a second attempt to enforce it.

Mr Yoon, ironically, first made his name as a defender of the law, rising through the ranks of South Korea’s prosecutorial service before launching his political career. He pledged to “not avoid legal or political responsibility” for his declaration of martial law. But he has done exactly that—and in so doing has only brought more shame upon himself and his country. The president’s residence is not a foreign embassy, a sovereign island unto itself; it is subject to the laws of the land it sits on. Mr Yoon is surely familiar with that principle.

Resolving the stand-off might be easier if South Korea’s interim leaders had more authority. But the country is now on its third president in as many weeks. Following Mr Yoon’s impeachment, Han Duck-soo, the prime minister, took over as acting president on December 14th. Just two weeks later the National Assembly, led by the main opposition force, the Democratic Party (DP), impeached Mr Han as well. DP leaders contend that Mr Han played a role in the insurrection; they were also peeved that he refused to appoint new justices to the constitutional court, which is hearing Mr Yoon’s impeachment case. Yet by rushing to oust the caretaker president, a career technocrat, the DP has hardly helped restore stability.

Choi Sang-mok, the deputy prime minister and finance minister, took over from Mr Han. Mr Choi has ably led the response to the crash of Jeju Air Flight 2216 on December 29th, the deadliest air disaster to occur on the country’s soil. But he has largely stayed silent on the matter of Mr Yoon’s arrest. The acting president says he is pursuing a principle of non-intervention in political affairs. He may also fear that he lacks the political capital to assert control.

The erosion of the rule of law and the chain of command comes at a worrying moment. On January 6th, with Antony Blinken, the outgoing secretary of state, visiting Seoul to reiterate America’s commitment to its ally, North Korea tested an intermediate-range ballistic missile. Although the test was mostly a message to Donald Trump, ahead of his inauguration later this month, it also serves as a reminder that the turbulent world around South Korea will not wait for it to resolve its own crises.

And a resolution remains months away. Impeachment proceedings against the president, which are separate from the criminal charges against him, have only just begun: the first full hearing at the constitutional court will take place on January 14th. While some two-thirds of South Koreans believe that Mr Yoon should be impeached, even attitudes on that question have split sharply along partisan lines. According to a recent poll by KBS, the national broadcaster, fully 96% of DP supporters believe Mr Yoon should be impeached, whereas among supporters of Mr Yoon’s party 84% believe the case should be dismissed.

Mr Yoon has encouraged his base’s basest instincts. During one rally outside his residence last week, a lawyer representing Mr Yoon cast the struggle in existential terms. “We are at war,” he railed. “You are the fighters in the war to set the Republic of Korea back on track.” South Korea’s democracy may have survived the initial assault, but the battle for its future is far from over.■

China | Debt, deficits and depressed consumers

Does China have the fiscal firepower to rescue its economy?

There is a fierce debate over whether it can afford to keep spending

Photograph: Reuters

Jan 9th 2025|HONG KONG

MAASTRICHT IS A small Dutch city that casts a big economic shadow. European leaders gathered there in 1992 to sign the treaty that led to the euro. Serenaded by a marching band, they vowed to keep their budget deficits below 3% of GDP and their government debt below 60%.

The numbers made little sense; one prominent economist has dismissed them as “fiscal numerology”. But they came to define what counts as a respectable, squared-away fiscal policy—even far beyond Europe. China, for example, has taken pride in meeting these norms through thick and thin. In 2009, at the height of the global financial crisis, its official deficit was less than 2.8%.

It is striking, therefore, that China has breached the Maastricht limit three times in the past five years (see chart). “Special measures are required for special circumstances,” the finance ministry said in 2020 after the covid-19 pandemic struck. Five years later, what was special is becoming routine. China plans to increase its deficit to 4% of GDP in 2025, according to Reuters, a news agency.

Chart: The Economist

With household confidence low, property investment shrinking and exports threatened by tariffs, the economy needs the extra fiscal push. By spending more itself, the government hopes to encourage others to do likewise. On January 8th China’s planning agency said it would enlarge two “trade-in” schemes which offer financial help to firms and households replacing old kit for new. Consumers can now be offered subsidies of up to 500 yuan ($68) for new smartwatches, phones and tablets. The scheme will also encompass dishwashers, rice cookers and home decoration. China’s government has long insisted that homes are for living in, not for speculation. Now they’re for renovation, too.

In November the finance minister, Lan Fo’an, insisted China can afford such generosity, claiming it has plenty of fiscal “room”. Is he right? One reason to worry is that the official deficit covers only a fraction of public borrowing. If you add the government’s three other accounts—covering social insurance, land-financed infrastructure spending and transactions with state-owned enterprises—the deficit was probably 7.1% of GDP in 2024, according to Fitch, a ratings agency. Even broader measures are possible. The IMF calculates an “augmented” deficit, which includes a lot of red ink that does not appear in the budget. One example is borrowing by local-government “financing vehicles”, which invest in infrastructure and other ventures. By this measure, the IMF thinks China’s deficit this year could exceed 13% of GDP and its debt could reach almost 129%.

When plugged into the IMF’s models, these figures suggest China’s risk of debt stress is “high” in the medium term. Credit-rating agencies have also taken note. China’s (on-budget) deficit is more than double that of the median country with a similar A credit rating, Fitch points out. In April it said China was at risk of a downgrade. That could make borrowing more expensive for the many state-owned banks and enterprises whose ratings are tightly linked to the sovereign’s.

China’s public finances also face longer-term strains. With an ageing population, the share of GDP devoted to pension spending will increase by about nine percentage points by mid-century, estimates the IMF. The erosion of China’s government revenues appears persistent. They began to decline even before the pandemic, notes Jeremy Zook of Fitch, falling from about 30% of GDP in 2018 to roughly 23% in 2024. And China has yet to find a source of revenue to replace land sales, which have suffered from the property slump. In light of such difficulties, Rhodium Group, an American research firm, has argued that China’s “fiscal space” is a myth.

But a government’s room to borrow and spend partly depends on what else is going on in the economy. The space available depends on who else wants to fill it. If the private sector is in an expansive mood, government deficits get in the way, pushing up borrowing costs and inflation. China, sadly, has the opposite problem. Households and private entrepreneurs are in retreat, reluctant to spend and all too eager to accumulate safe financial assets instead. That has left the economy short of demand and prone to deflation: consumer prices rose by only 0.1% in December, compared with a year earlier. The rest of the economy’s eagerness to save, not spend, has also made it extraordinarily cheap for the central government to finance itself. It can now borrow for ten years at yields of about 1.6%, a record low. The rest of the economy is, in other words, making plenty of room for the state to extend itself.

The demand for the government’s paper is helped by China’s capital controls, which make it harder for domestic investors to seek safe havens abroad. Many government bonds are held by banks that the government happens to own. Indeed, just as China’s tentacular state has liabilities scattered all over the economy, it has a sprawling collection of assets, too. W. Raphael Lam and Marialuz Moreno-Badia of the IMF estimate that fiscal deposits in the banking system amounted to about 18% of GDP in 2019 (excluding money earmarked for payments for services). The government’s equity holdings in state-owned firms and financial institutions totalled another 68%. The social-insurance funds also held assets exceeding 2% of GDP.

Whatever the long-term risks, the central government therefore has the wherewithal to rescue the economy from its immediate predicaments. The IMF has urged Beijing to end China’s property crisis by providing more of the financing required to complete pre-sold, but unfinished, buildings (or to compensate their buyers).

The likely aim of China’s fiscal push is to bolster the confidence of households, according to Mr Zook. The more of their income households spend, the less the state will have to do to prop up demand.

A revival in private borrowing and spending could make government deficits more expensive and harder to sustain. But it will also make deficits less necessary. The government can then cut back without jeopardising the recovery. “The boom, not the slump, is the right time for austerity at the Treasury,” said John Maynard Keynes during the Great Depression. His budgetary maxim is many decades older than the Maastricht treaty. It deserves to cast an even longer fiscal shadow. ■

China | Grains for the iron rice bowl

A pay rise for government workers sparks anger and envy in China

The effort to improve morale has not had the intended effect

Photograph: Getty Images

Jan 9th 2025

In China’s private sector, many complain that jobs and wages are being cut as the country’s economy flounders. So as news spread online in late December that people on the government payroll were being given a salary increase, some netizens were outraged. “Reminds me of a famous Soviet joke,” wrote one. “Brezhnev on stage says, ‘Our lives will get better and better.’ A worker in the audience asks, ‘What about ours?’” Life can be tough as a state employee, but envy of them is growing.

The government is keeping typically quiet about the pay rise. On social media, however, users have been confirm‎ing their pay packets are bigger (though some say they have not been notified). Those affected include civil servants as well as others paid by the government, such as teachers. The raise is hardly massive: a few tens of dollars per month, backdated to July, according to examples cited on the internet. It would amount to an increase of a few percent on their basic pay. But it appears to be the first hike since 2021. After several years of urging by the government that officials tighten their belts, it signals a little easing. Reuters, a news agency, reckons it could involve a one-off injection of between $12bn and $20bn into the economy.

That is handy as the government tries to boost consumption as a way of reviving growth. But China’s roughly 50m government workers may not be overjoyed. In recent years there have been widespread reports of cash-strapped local authorities delaying or cutting payments of other benefits. These extra remunerations usually exceed employees’ basic salary, says Alfred Wu of the National University of Singapore. Staff woes may abate as local governments benefit from a national campaign, launched last year, to stimulate the economy. It has involved allowing lower-tier administrations to refinance their crippling debts by issuing bonds worth up to 10trn yuan ($1.4trn) over the next five years. For now, though, morale appears patchy.

For the Communist Party, this is a problem. Government workers are the party’s backbone: more than 80% of government employees are party members, noted China’s leader, Xi Jinping, in 2016. They play a vital role in maintaining the party’s legitimacy. Ill-motivated ones are unlikely to perform it with vigour. Pay—even when received on time and in full—has often failed to reflect the amount of effort put in. So workers are putting in less effort. In 2022 two scholars from a party academy wrote of a growing tendency among officials to “lie flat” rather than work. State television, not known for its gibes at the bureaucracy, lampooned the lying-flat phenomenon in 2023 in its much-watched “Spring Festival Gala”, an annual programme on the eve of the lunar new year. Thousands posted approving comments on social media.

Mr Xi’s relentless anti-corruption campaign may have helped to improve the image of officials, but it may have also contributed to their lack of motivation. Opportunities for kickbacks have become scarcer. Fearful of being accused of graft, officials avoid getting involved in projects that might be linked with it. Morale has not been improved either by Mr Xi’s stepping up of political indoctrination among cadres. In recent years they have had to spend more time attending mind-numbing meetings to study his pronouncements and, out of hours, using a smartphone app that drills these lessons in. Points scored on the app can be reviewed by superiors and used to determine bonuses.

To make matters worse, in the past couple of years the party has been making it harder for government employees to travel abroad, even for private purposes. Now a wider range of people in non-sensitive jobs, such as academics and even primary-school teachers, have to hand their passports to officials for safekeeping. Getting the document back requires submitting a detailed explanation of the reason for travel. The tightening appears to relate to efforts to stop corrupt officials fleeing, and to prevent the leaking of secrets and contacts with overseas dissidents.

Government jobs remain coveted. In December a record 3.4m people sat the annual civil-service exam, about 400,000 more than in 2023. Fewer than one in 80 applicants were expected to succeed. It is clear why so many are keen: high youth unemployment and the increasing precariousness of work in private firms. But scorn is rampant, too. On January 8th much was vented at a district party leader in the south-western region of Chongqing who suggested that officials take the lead in reviving consumer spending by buying new clothes and taking their families out to meals. “Who wouldn’t spend money if they had it? Spending requires earning first,” said one. “The first big joke of the year,” another chimed in. Censors scrambled to stem the flood of cynicism. ■

Middle East & Africa | Certifiably genocidal

America concludes genocide has been committed in Sudan—again

The move highlights the magnitude of Sudan’s civil war but does little to end it

Seeking safetyPhotograph: Joost Bastmeijer

Jan 9th 2025

For months America has been criticised for not doing enough to help end the catastrophic civil war in Sudan that began nearly two years ago. It took ten months for President Joe Biden to appoint a special envoy to Sudan, and then another nine for his top emissary to pay the country a visit. An American-led push for ceasefire talks fizzled in August after the Sudanese Armed Forces (SAF), the regular national army, did not show up.

Just days before leaving office Mr Biden appears to be trying to save face. On January 7th Antony Blinken, America’s secretary of state, said that the Rapid Support Forces (RSF), a brutal paramilitary force fighting the SAF for control of Sudan, had committed genocide in the western region of Darfur. Mr Blinken slapped sanctions on the RSF’s leader, Muhammad Hamdan Dagalo (better known as Hemedti), and on seven companies owned by the RSF in the United Arab Emirates (UAE). America’s Treasury says the firms have supplied the group with arms and money.

It is the second time America has concluded that a genocide has been carried out in Sudan. The first was two decades ago, when Mr Blinken’s predecessor, Colin Powell, told Congress that the rape and slaughter of black Africans in Darfur by government-backed Arab militias known as the Janjaweed (“devils on horseback”) amounted to genocide. Mr Powell’s speech helped turn Omar al-Bashir, Sudan’s dictator at the time, into a global pariah.

This time, Mr Blinken’s statement adds weight to what many observers, including this newspaper, concluded within months of the war’s eruption. The RSF, a descendant of the Janjaweed (which were also led by Mr Dagalo), launched a campaign of ethnic cleansing in West Darfur in the first months of the war in 2023. As many as 15,000 members of the Masalit, a black African ethnic group, were killed in the city of el-Geneina alone. Hundreds of thousands fled to neighbouring countries.

Back in the 2000s the authors of a report to the UN Security Council questioned whether Mr Bashir’s military campaign in Darfur included “the crucial element of genocidal intent”. Today there are fewer voices of dissent. “The US government has had all the information it needs for a genocide determination for months now,” says Kholood Khair of Confluence Advisory, a Sudanese think-tank.

What took so long? Apart from bureaucratic hold-ups, some inside the Biden administration worried that the move might weaken America’s ability to act as a mediator. Others were concerned about angering the UAE, an American ally that stands accused of supplying the RSF with weapons (a charge the UAE denies in the face of plentiful evidence). Yet in the end, “I think they realised this is a real stain on their legacy,” says Cameron Hudson, a former American diplomat now at the Centre for Strategic and International Studies in Washington. The last-minute announcement serves as a salve on their conscience.

Will it do more than that? By sanctioning the leadership of the RSF but not that of the SAF—whose continued blocking of aid has contributed to a famine that could kill millions—the Biden administration appears to have abandoned its policy of cautious evenhandedness. Yet the timing of the decision makes its strategic value questionable, argues Jonas Horner of the European Council on Foreign Relations. The incoming Trump administration is likely to be motivated less by protecting human rights in Sudan than by advancing American interests in the Horn of Africa. It will probably have little interest in alienating the RSF or, more crucially, the UAE.

Twenty years ago, the American genocide designation galvanised an international campaign to “Save Darfur”, helped to bring war-crimes charges against Mr Bashir and spurred the deployment of a joint UN and African peacekeeping force three years later. There seems little prospect of a similar effort today. ■

Europe | Charlemagne

How extremist politics became mainstream in France

Jean-Marie Le Pen paved the way for his daughter, Marine

Illustration: Peter Schrank

Jan 7th 2025|PARIS

He lived his life in lurid colour. But it often felt as if Jean-Marie Le Pen, who died on January 7th at the age of 96, belonged to an era of black and white. There was Indochina (where he served as a paratrooper); French Algeria (where he fought for the homeland, and admitted to torture); the French Fourth Republic (during which he was first elected to the National Assembly, in 1956, two years before Charles de Gaulle wrote the modern constitution). Even Mr Le Pen’s 19th-century mansion, perched magnificently on a ridge overlooking Paris, appeared to be the product of decades of neglect; its walls were dark brown, furniture shabby and it “stank of death”, noted Yann, his middle daughter. Like Mr Le Pen’s unapologetic extremist politics, the far-right leader’s formative moments seem to belong to history. Yet his influence on French politics could hardly be more current.

Little about Mr Le Pen’s life was tempered. With his broad frame and bombastic manner, the son of a Brittany fisherman thundered through life without a filter. He relished public provocation, which often landed him in court, just as he did belting out Breton sea shanties at the family mansion after a boozy dinner. Given a platform Mr Le Pen would rant against anything—fists punched into the air, articulation precise—even the country’s winning multi-ethnic football team (too many “foreigners”). An apologist for Pétain’s collaborationist regime, he was periodically convicted: for hate speech, antisemitism and denying crimes against humanity, the latter after claiming that the Nazi gas chambers were a “detail” of the history of the second world war.

In two respects in particular, Mr Le Pen was also a precursor for today’s nationalist-populist right. In the 1950s he was first drawn into politics by Pierre Poujade, a proto-populist whose movement represented shopkeepers, tradesmen, artisans and “the little people”. His was the politics of the “downtrodden” against the elite, which finds a wide echo today. As co-founder of the National Front in 1972, Mr Le Pen was also a proponent of “great replacement” thinking, long before it became a fashionable theory for the far right. From his study in the mansion above Paris, filled with nautical memorabilia, it was almost as if he imagined himself to be single-handedly commanding the country’s maritime defences. There, beside brass-mounted binoculars and model frigates, Mr Le Pen once held forth to this columnist about the upcoming “submersion” of France by an “invasion” of “all the miserable populations of the world”. “We lived through German military occupation, but afterwards they left,” he roared at her; “immigrant populations have no intention of leaving.”

Ultimately, Mr Le Pen’s unfiltered approach was too much even for his own daughter, Marine Le Pen, who took over the party in 2011. Four years later she expelled her father, and then changed its name, to the National Rally. It was a seminal political moment, and a brutal, humiliating personal disavowal. Ambition triumphed over affection; rivalry overrode filial duty. All his life, Mr Le Pen thrived on conflict; Ms Le Pen sought to appear respectable. He swaggered about on the untouchable fringes of polite society; she dines coolly at upscale Parisian restaurants. He never really sought political power; she wants to govern France.

The trace that Mr Le Pen left on French politics was noxious and incremental, but not as linear as it appears in some telling—and not all of his own making. The political cynicism of his adversaries also played a part. The lepénisation of French minds, or the spread of his core discourse, began to take hold in the 1980s. But it was François Mitterrand, then the Socialist president, who changed the electoral rules to favour small parties, in an attempt to split the right. In 1986 Mr Le Pen and his group of assorted extremists, nativists and colonial apologists secured a record 35 parliamentary seats, before losing all but one when the rules changed again two years later. Indeed the very toxicity of Mr Le Pen’s extremism served the left, prompting an anti-racism movement that bred a new generation of politicians and helped Mitterrand to win re-election. A serene debate about controlled immigration in France has been difficult ever since.

Le Pen is mightier

For Ms Le Pen the moment has never seemed so favourable. The best Mr Le Pen ever managed in his five runs for the presidency was 18% in 2002, when he shocked France by making it into the second round against Jacques Chirac. Twenty years later, in the run-off against the centrist Emmanuel Macron, Ms Le Pen scored 41.5%. The judges may yet keep her from running for office, when they decide on March 31st whether to rule her ineligible in a trial over the misuse of public funds. Barring this, she looks better placed than ever. Mr Macron, who has twice kept her from power at the ballot box, cannot run again at the next presidential election, due in 2027; no clear successor has yet emerged. If he calls fresh parliamentary elections this summer, Ms Le Pen’s party could enter government earlier still.

In the end, Mr Le Pen’s legacy is also hers: the normalisation of anti-immigrant nationalist politics. Mr Le Pen may have belonged to the toxic fringe. But he also laid the foundations for a form of politics which, purged of its extreme imagery and elements, has become mainstream, in France and Europe. Today its champions hold power (Italy, Hungary, Slovakia), or share it, in over half a dozen countries. The lepénisation of minds has spread even to places, such as Germany, once thought immune.

Two decades ago Mr Le Pen’s brand of xenophobic politics was rejected by a majority of French, and European, public opinion. Today Ms Le Pen is one of the most popular politicians in France. Ms Le Pen had to turn on her father to get to where she is today. But she would not be there if he had not come first. ■

Britain | Dangerous liaisons

The phenomenon of sexual strangulation in Britain

A survey suggests the risky practice is more common than you might think

Illustration: Hokyoung Kim

Jan 9th 2025

“I’m vanilla, baby/ I’ll choke you, but I ain’t no killa, baby,” raps Jack Harlow on his number-one hit from 2023, “Lovin’ On Me”. According to a survey of over 2,000 people published in December by the Institute for Addressing Strangulation (IFAS), a charity, more than one in three Britons aged between 16 and 34 have been strangled during consensual sex on at least one occasion. IFAS was established with Home Office funding in 2022, when non-fatal strangulation was made a distinct offence in England and Wales. Previously, crimes involving strangulation were often charged as common assault (a category that also covered simply shaking a fist at someone or using threatening words).

Despite the perils, sexual strangulation—or “choking”, by its friendlier name—appears to be widespread. It refers to the obstruction or compression of airways and blood vessels in the neck by external pressure, usually a hand. Starving the brain of oxygen is known to induce feelings of euphoria. A survey in Australia found that most first encountered such strangulation in online porn.

The IFAS survey probed the quality of “consent”. It found that only half of those who said they had experienced strangulation had always agreed to it beforehand; 17% said they had never agreed to it. For consent to be genuine, it must also be informed. Yet the dangers are not widely known. The oxygen deprivation from even modest pressure to the neck can lead to brain injury. Damage to blood vessels in the throat can cause clotting and, ultimately, a stroke—weeks or months later. A meta-study in 2020 suggested that strangulation may be the second-most common cause of stroke in British women under 40.

Data are, unsurprisingly, scarce. In 2019 a BBC survey of over 2,000 women aged 18-39 found that more than one-third had experienced unwanted strangling, slapping, gagging or spitting during sex. According to one study, women who are non-consensually strangled face a seven-fold increase in the odds of being murdered by their partner.

Victims now have better recourse to the law, at least on paper. A strangulation case typically takes about three years to get to court. Campaigners say their work has just begun. Although they raised the alarm about sexual strangulation several years ago, the IFAS survey is the first major British study on its preval‎ence. IFAS wants to conduct more detailed research and (like the recent “Breathless” campaign in Australia) raise awareness of the practice’s risks among those most likely to experience it. But that will take money. And despite the Labour government’s pledge to halve violence against women within a decade, cash can be in short supply. ■

Britain | Offline Keir, online Kemi

What Elon Musk’s tweets about sex abuse reveal about British politics

An offline prime minister faces an online leader of the opposition

Illustration: Nate Kitch

Jan 9th 2025

ELON MUSK’S barrage of posts about sexual-abuse scandals in Britain tells you a lot about the temperament of the owner of X, a man with the ear of America’s president-elect. The predation by largely Pakistani gangs on girls in English towns was first seriously reported on in 2011. Sir Keir Starmer, the prime minister (who was chief prosecutor back then), was “complicit in the rape of Britain”, Mr Musk wrote; he mused about whether America should “liberate” the British people.

But the reaction to Mr Musk’s rant also reveals something about the prime minister and his principal political opponent. The most important biographical difference between Sir Keir and Kemi Badenoch, the new leader of the Conservative Party, is not that she was brought up in Nigeria and he in Surrey; nor even that he is a self-declared socialist and she a Thatcherite. It is that he came of age professionally before social media transformed politics, and she afterwards. British politics is now a contest between an offline prime minister and a very online leader of the opposition.

In 2004, two years before the launch of X (then Twitter), Michael Goldhaber, an American thinker, published an essay arguing that the internet would produce a new type of human, just as printing had. Homo typographicus would be followed by Homo interneticus. His “mentality significantly altered” by the effects of intense internet use, interneticus would be unmoored from time and space, disrespectful of old sources of authority and facing a constant battle for his attention.

Sir Keir is a politician of the pre-internet age. He was born in 1962, and he became a national figure in 2008 as director of public prosecutions (a fine job for typographicus). Britain’s low-tolerance approach to wild talk online was shaped during his tenure, with the prosecution of a man who joked on Twitter about blowing up an airport. As prime minister in 2024 he insisted that prosecutors throw the book at those who encouraged riots on social media—and drew a first salvo from Mr Musk.

In a sympathetic biography of Sir Keir by Tom Baldwin, social media appear as either a nuisance or a threat. Trolls say vile things about him; his strategists warn that Labour activists should spend less time in their online bubbles. On the brink of electoral victory, Sir Keir promised that a Labour government would cool online populism. He can, Mr Baldwin says, be the prime minister “for the 80% of normal people who don’t abuse each other as ‘rape genocide enablers’ before they have had their cornflakes”.

And so Sir Keir tried to brush off Mr Musk’s onslaught. “I think most people are more interested in what’s going to happen to the NHS, frankly, than what’s happening on Twitter,” he told a press conference at a hospital on January 6th. His rivals, he said, needed to decide if they wanted politics rooted in truth or in lies.

If for Sir Keir social media are a distraction from real politics, for Ms Badenoch they are the essence of it. She is the right honourable member for interneticus. Born in 1980, she took a course in Apple repairs and later a computer-engineering degree. She is reputed to have been busy on Nigerian-diaspora message-boards; a job on the website of the Spectator, a conservative magazine and keen participant in the culture wars, would follow.

Interneticus, wrote Mr Goldhaber, would attach himself to new communities based on affinities “unshackled by space, unbounded by borders”. So the causes that most animate Ms Badenoch are litigated online and heavily influenced by America: gender identity; critical race theory; diversity, equity and inclusion schemes. She wants her party to think deeply about the civilisational questions the internet poses, such as the loss of presumption of innocence that emerges from online “pile-ons”. She was quick to defend Allison Pearson, a conservative journalist questioned by police over remarks on X.

Whereas Sir Keir speaks with lawyerly caution, Ms Badenoch does not so much talk as post, whether online or off. When she stood for the leadership, Tory members (though mostly older than Sir Keir) loved her pithy, contrarian hot-takes, served up in a style familiar to those who dwell on X. Sir Keir is criticised for being dull; she is unusually interesting.

Little wonder that she embraced the intervention of Mr Musk, who she says has made X much better since buying it in 2022. Soon after his onslaught began, she proposed a new national inquiry into the grooming gangs; she brought a vote (though doomed by Labour’s huge majority) in Parliament on January 8th.

Sir Keir was baffled: had her party not been in power for 14 years, while reports into the abuse gathered dust? Why was she tweeting about it now? Yet, wrote Mr Goldhaber, the internet would erode notions of time, because unlike musty books which immediately betray their age, pixelated text is continually refreshed. Interneticus would live in a “space devoid of chronological ordering…an ever-changing now”. And so the court judgments of over a decade ago pinging round X seem as urgent as if they had been written yesterday.

Mr Musk was also rumoured to be mulling a donation of $100m, a huge sum in British politics, to Reform UK, until a spat—on X, naturally—with the populist outfit’s leader, Nigel Farage. (Mr Farage, as it happens, was early to see the potential in YouTube and Facebook for propelling the fusty Eurosceptic movement.) Yet Mr Musk’s posts on sexual abuse had MPs gyrating without his spending a cent.

Neither Sir Keir nor Ms Badenoch has the balance right. Sir Keir is too slow and unagile to react to developments online, his colleagues complain, and does not give the real debates on race and gender that play out there due credence. In 2024 online platforms overtook television as Britons’ main source of news; amid the vitriol, millions of voters of all ages head there.

Ms Badenoch, though, seems too online for her own good. Even on Boxing Day, as Britons digested their turkey, she was rowing on X with Mr Farage over whose party had more members. Yet she has little to say about public services, still the most important issue to voters, polls suggest.

It is possible to be both interesting and irrelevant. A decade ago another prime minister, David Cameron, crowed that his defeated rivals had tangled themselves in online debates: “Britain and Twitter—they’re not the same thing.” Or as Mr Goldhaber put it: “For Homo interneticus, cyberspace is most of the real world, and the rest is an appendage of it.“ ■

Britain | Bagehot

How means conquered ends

British politics has become a prisoner of process

Illustration: Nate Kitch

Jan 8th 2025

“We can’t afford not to act,” said Wes Streeting, the health secretary. After six months in office the Labour government on January 3rd unveiled its scheme to sort out England’s social-care system. All parties agree the system is a disgrace. It jams the ailing National Health Service, heaps pressure on close-to-bankrupt local councils and causes misery for the infirm and disabled. So act Mr Streeting did: he unveiled an independent commission on social care. Its final report is due in 2028.

British politics has become a prisoner of process, with social care simply the latest topic to be banged up. “Process is a worthy means to an end,” wrote Sir Tony Blair in “On Leadership”, a self-help book for people who think they should run G7 countries. “The trouble is its tendency to become the end.” The result is “a continuous loop of deliberation not decision”.

Commissions, consultations and inquiries designed to improve policy instead delay and distort it, allowing politicians to duck difficult but necessary decisions, such as who pays for social care and how. In the 20th century arrogant and over-powerful governments trampled voters with the view that the ends justified the means. Now means trump the ends. Guardrails introduced to avoid the errors of the 20th century are instead enabling the errors of the 21st, in which stasis has led to decay.

Decisions that can be made are delayed. Consider the Lower Thames Crossing, a £9bn ($11.1bn) tunnel to the east of London. In 2023 Sir Keir Starmer, who has styled himself as a builder, bemoaned its slow progress, pointing out that the tunnel had cost the best part of £800m before building had even begun. After several consultations, the project was due to receive a yea or nay from ministers in the autumn. Instead, the government delayed its decision, and launched another consultation. It is a controversial project: environmentalists hate it; local MPs love it. Someone will be angry, whether it is blocked or built. A belief in immaculate conception has been replaced by the immaculate consultation: the idea that something can happen without someone being screwed.

If the purpose of a system is what it does, then consultations, commissions and inquiries are there to ensure decisions are simply not made. After all, in Westminster, doing nothing is wise. Sophisticated operatives quote “Yes, Minister”, a 45-year-old television satire about a minister and his wily civil servants. “He is suffering from politician’s logic,” says one mandarin of a minister keen on action. “Something must be done; this is something; therefore we must do it,” replies another. SW1 is a world where sins of commission are everywhere and sins of omission do not exist.

When stasis is the norm, legislation at normal speed can seem irresponsibly quick. The most consequential moment of Labour’s tenure so far came when a bill on assisted dying whisked through its first stages in Parliament in November. Rather than representative democracy in action—mps debated a topic, and sent it through to the next stage—some saw an abuse of process. A Royal Commission would have been a better approach, they said. People who see assisted dying as little more than state-sanctioned murder would care little if the policy were first suggested by a panel of grandees with a soup of letters after their names. In such a moral case, the means hardly matter when the ends are so profound.

When the choice is between doing and discussing, British politicians instinctively opt for the latter. Consider the recent frenzy over “grooming gangs”—the abuse of thousands of girls by men of mainly Pakistani heritage in Rotherham and other towns from the late 1990s to the early 2010s. The facts are well-known; culprits were jailed; hundreds of pages of reports, detailing wretched abuse and the screw-ups that led to it, are available to read.

Rather than action to prevent a repeat, Conservative mps and far-right outriders combined to demand a more comprehensive inquiry. Even extremists, whose policy prescriptions sometimes involve mass deportation or the death penalty, called for a grandee to re-examine what is already known. In response the government confirmed it would enact some of the recommendations of an inquiry into child abuse from 2022, which included basic measures such as a statutory duty for certain people working with children to report suspicion of abuse. That the Tories did not enact them while in office is telling. After all, the inquiry had done its job; the means to a better policy had instead become the end.

The outcomes were terrible but the process was immaculate

People worry, fairly, about the future of democratic politics in Britain. The stability of Parliament, where Labour enjoys an unassailable majority, stands in contrast to the chaos of public opinion, where both main parties are remarkably unpopular. Too often, the saviour is more process. Citizens’ assemblies, in which randomly selected people chew over knotty issues and present their conclusions to lawmakers, are beloved by wonks. At their heart is the mistaken idea that people are unhappy with the manner of decisions, not their effect. Forget the ends, consider the means.

Offering another commission, consultation or an assembly becomes little more than an ineffective “accountability sink”, into which blame for a decision can be poured. The term was coined by Dan Davies in “The Unaccountability Machine”, one of the most useful books of 2024. In it, he defined accountability thus: “The extent to which you are able to change a decision is precisely the extent to which you can be accountable for it, and vice versa.” In other words, a shop assistant might be able to fob off an angry customer by blaming a system they have no power to change. Politicians have no such defence. After all, a government is almost always able to change something. It can hide behind process only for so long. Voters see through it, eventually. Means are no protection if voters are unhappy with the ends. ■

International | The Telegram

Donald Trump has a strong foreign-policy hand, but could blow it

Bullying foreigners can be sadly effective, but also a dangerous distraction

Illustration: Alex Nabaum

Jan 7th 2025

FOR the spies, diplomats and military types tasked with keeping America safe and prosperous, Donald Trump’s bullying long ago lost its power to shock. Indeed, the national-security establishment—including officials who currently serve President Joe Biden—concedes that Mr Trump’s brand of statecraft, involving America First bombast, cruel jokes and offers that can’t be refused, is at times effective. Mr Trump’s ability to generate leverage leads to a different lament. Shrewd professionals worry that the 47th president has a potentially strong hand, but might blow it.

Mr Trump’s foreign-policy pronouncements on January 7th at his Florida residence, Mar-a-Lago, were a case in point. At moments he mangled facts like a rich uncle at Thanksgiving dinner, falsely claiming that China controls the Panama Canal and hinting that America might have to “do something” about that. Yet he also showed off a salesman’s knack for spotting unhappy punters possibly open to a new deal. In this case some of Greenland’s 56,000 people chafe under semi-colonial rule from Denmark. Mr Trump’s demand that Denmark sell the resource-rich island to America or face “very high” tariffs might be a show for supporters or a ploy to soften up allies. But it touches on a real dissatisfaction.

To be clear, Mr Trump’s land-grabbing bluster is a propaganda win for aggressors such as Russia’s president, Vladimir Putin. But Mr Trump did actual harm by saying that he can “understand” why Russia feels threatened by potential NATO membership for Ukraine—endorsing a key Kremlin argument ahead of peace talks that he said could end the Ukraine war in six months.

Mr Trump’s ability to amass and squander leverage is at the heart of messages that the Biden administration hopes to pass to its successor. This will be a struggle, for serving and former officials concede that Mr Trump and his team view Mr Biden’s foreign-policy record with scorn. For all that, some messages may get through. Mr Trump’s chosen national security adviser, Mike Waltz, has been talking intensively to the incumbent, Jake Sullivan. Mr Trump and top aides are consuming top-secret intelligence from America’s spy agencies.

Transitions between political parties can be productive as well as fraught, argues Rick Waters, who in nearly three decades as a career diplomat served on the National Security Council of President George W. Bush, and from 2021 to 2023 co-ordinated China policy at the State Department. When one party stays in office, it can be hard to question settled policies. Newcomers have an interest in learning about looming crises, secret negotiations and other “things that are not obvious outside government”.

Grown-ups in the Biden team and Trump-world agree on more than some might expect. They concur that Mr Trump’s impatience with Ukraine gives him power over President Volodymyr Zelensky. It may even give Mr Zelensky a political excuse to enter negotiations that involve the loss of some territory—an endgame that Mr Biden’s team, like Mr Trump’s, considers inevitable. The message from the outgoing Biden team involves the need for corresponding leverage over Mr Putin. In their telling, for the fighting to end soon Mr Trump must be willing to let the war run, otherwise Mr Putin will think he can wait America out. Knowing that this advice is unwelcome, some in Biden-world draw analogies with America’s chaotic departure from Afghanistan, and ask whether Mr Trump wants to preside over comparable failure in Ukraine.

On the Middle East, the Biden team agrees with Trump aides that Iran is weaker than in decades. The devastation by Israel of its proxies, Hizbullah and Hamas, and the collapse of the Assad regime in Syria, offer a huge strategic opportunity. That may help Mr Trump with his goal of normalising relations between Israel and Arab states, including the great prize, Saudi Arabia. The Biden team has risks to flag, too. Islamists could end up controlling Syria. Should Mr Trump push regime change in Iran, that overreach will undermine American leverage regionally. Iranian vulnerability could lead the regime to sprint for nuclear weapons.

Mr Trump has generated leverage over China. Chinese leaders are braced for pressure over their industrial policies, trade practices and the modernisation of the People’s Liberation Army. Global markets have priced in some disruption. All this gives Mr Trump negotiating clout. The question is how to use it. Trump aides will hear that Chinese leaders are resigned to attempts to rebalance the US-China trade relationship, but will respond fiercely if the Communist Party’s legitimacy is questioned. Meanwhile, China’s levers of retaliation should be taken seriously, as should its rampant hacking and spying on American infrastructure.

Away from the TV lights

Whether they listen or not, Trump aides will hear how Team Biden views the axis of adversaries formed by China, Iran, North Korea and Russia. Co-operation between the four is real and dangerous, they will hear, but China is also an outlier. China has a stake in a stable international order. The other three have little to lose. The advice is for America to impose costs on China, without binding it more tightly to the axis. Space warfare offers an example. Some time ago, America spotted that Russia might deploy a satellite-killing nuclear device in space. Mr Biden’s team urged China to warn Russia against such a terrible idea.

Finally, national security involves a lot of hard, thankless work. Biden aides have warned their successors that two differently failing states, Haiti and Venezuela, may soon generate flows of migrants to America. They have messages to share about AI governance and AI diffusion, meaning the tricky business of deciding which technologies to sell to which countries. These are dull problems that cannot be bullied away, but may shape the coming world. Wish the grown-ups luck. ■

International | The Kevlar ceiling

Women warriors and the war on woke

Trump’s Pentagon pick wants women off the battlefield

Photograph: Hilary Swift/ New York Times/ Redux / Eyevine

Jan 6th 2025

ON JANUARY 14TH Pete Hegseth, Donald Trump’s nominee for secretary of defence, will be grilled by senators on his suitability for the job. He will be quizzed on allegations of sexual assault and excessive drinking. He is also certain to face questions about women and war. “We should not have women in combat roles,” he said in a recent podcast. He acknowledged that women had served “amazingly” in America’s armed forces and that female fighter pilots were welcome, but argued that women were simply not strong enough to serve in infantry, armour and artillery units. Since admitting women, “the standards have lowered,” he said.

Mr Hegseth’s intervention comes after a decade of integration in America. Some armed forces lifted restrictions on women years before: Sweden’s and Canada’s in 1989, Finland’s in the 1990s. In others the change is more recent. America gradually eased its rules in the 1990s and 2000s, but its biggest step came in 2015 when Barack Obama’s administration opened all combat positions to women (see chart 1). Britain made the same move a year later, declaring that women could serve on the front lines, beginning in the armoured units and expanding to the infantry by 2018. That experience has thrown up a number of lessons.

Chart: The Economist

Mr Hegseth complains that sex differences in “bone density and lung capacity and muscle strength” preclude women from combat. This has two aspects. One is the heightened risk of injury during training. A study by the British Army found that the rate of musculoskeletal injuries in initial training was twice as high in women as men. Female trainees were three times more likely to suffer a stress fracture—and ten times more likely to suffer one at the hip—than men.

The second aspect is the physical ability to perform the tasks involved in combat. Some of the most detailed evidence of this has come from a study by the US Marine Corps, in which mixed units, each including one or two women, were pitted against all-male ones in a battery of realistic tests—marksmanship, loading artillery shells and the like. In 93 out of 134 tasks, the all-male units performed better. Only in two did the mixed units come top. The time it took to evacuate casualties was higher in mixed units (see chart 2). The study was controversial. Ray Mabus, then secretary of the navy, criticised its design and overruled its conclusions, demanding that the marines integrate regardless.

Chart: The Economist

Some argue that technology has made physical strength less important to soldiering. That may be true of some roles, such as for pilots. But, in practice, strength still matters. Anthony King, professor of war studies at Exeter University, who recently wrote an internal report for the British Army on its culture, including the role of women, points out that the average infantryman in the second world war carried around 20kg of equipment in battle compared with 36kg carried in Helmand province in Afghanistan, with loads routinely hitting 45kg. Even among men, he notes, only 30% of recruits meet the requirements for serving in combat arms and even fewer actively want to serve in the infantry.

In Canada women make up almost 17% of the total force, but just 4% of the infantry. In 2023 in Britain only ten female recruits started infantry and armour basic training. Just 85 women have joined those two branches since 2019. Even in the Israel Defence Forces, which are widely held up as an example of successful integration, female soldiers serve overwhelmingly in support units. Some armed forces have targets, such as Britain’s wish for 30% of new recruits to be women by 2030. However, Mr King is sceptical that this will mean many more women serving in the infantry: “In combat arms and infantry there is no historical or contemporary evidence for the notion you could even get close to 10%.”

Mr Hegseth and those who share his views do not just argue that women are unsuited to combat. They also believe that the presence of women undermines cohesion. There is much less evidence supporting this view. The conscript forces of the 20th century often relied on male bonding (and racial solidarity) to gel their unskilled troops, says Mr King, but in modern professional armies, good training is an effective substitute. A study commissioned by Britain’s defence ministry found that men did not rate cohesion as being weaker when women were present. Women themselves experienced lower cohesion than men. But the study was not clear on whether that was because they were women, or because women tended to serve for less time, knew other team members less well and were likely to be more junior.

Mr King says that, in his experience, there are occasions when standards may have been relaxed to accommodate female recruits. What is more common is that women are judged by a double standard. “A successful woman will be given the status of an honorary man and treated as a good bloke,” says Mr King. “But the minute she makes a mistake, the mistake gets gendered.” That is compounded by other factors, including sexual abuse.

Still, the climate for women is improving in some ways. In the US Army, unwanted sexual contact affected 6.8% of women in 2023, down from 8.4% in 2021. In Britain 2% of rape cases and 6% of broader sexual offending cases resulted in conviction in the civilian justice system, compared with 8% and 23% respectively in the military system. Culture is also changing more broadly. “Ten years ago you would never get senior people talking about menstruation, bras or anything like that with anything other than a sense of profound embarrassment,” says Andrew Murrison, a former British junior defence minister. “These days, it is common parlance.”

The experience of integrating women into combat roles has been “overwhelmingly positive”, says Mr Murrison. Opponents like Mr Hegseth are vocal, but they are in a minority. Even in 2013, two-thirds of Americans supported integration, which has expanded the potential pool of recruits at a time when armed forces in America and Europe are struggling to fill their ranks.

Many of the challenges of integrating women have nothing to do with combat or culture wars, points out Katherine Kuzminski of the Centre for a New American Security (CNAS), a think-tank. Some of these are purely practical. “I used to have one set of barracks,” commanders might ask, she says, “but what do I do if I now have two women and 100 men? Do I need to build an entirely separate barracks?”

Earning their jump wingsPhotograph: U.S Air Force

Others are about providing a level playing field. Men have often had access to training programmes that give them a better shot when they join the armed forces, says Ms Kuzminski. Yet that can be addressed by relatively simple interventions. The Marine Corps found that a 12-week training programme led to a 30% increase in the number of women who could perform the requisite number of pull-ups.

In the past, women’s body armour tended to be scaled-down versions of male armour. Yet this puts disproportionate pressure on women’s hips. A study by the US Army’s special-operations command in 2021 found that 44% of women had experienced problems with the fit of equipment and pointed out the absence of devices to allow female aviators and flight crew to urinate. “Gender bias is deeply embedded into staff processes and equipping, at all echelons,” it concluded.

In many ways, these are old issues. The first female American paratroopers graduated from the army’s airborne school more than 50 years ago, in 1973. Two decades later America lifted its “risk rule”, which decreed that women could not be assigned even to non-combat support positions—say, as an intelligence officer—if they would be at the same risk of becoming involved in combat as a front-line unit. Thousands of women received the combat action medal in Afghanistan and Iraq, where there was often little distinction between a rear area and a combat zone. That distinction has been further blurred by the growing range, precision and proliferation of drones and missiles. As much as Mr Hegseth may hanker after a more sexist past, he cannot turn back time itself. ■

Business | Bartleby

The signals of workplace submissiveness

Deference is all around you, unfortunately

Illustration: Paul Blow

Jan 9th 2025

Animals have evolved many different ways to signal submissiveness to their more powerful counterparts. Lower-ranking chimpanzees might greet a dominant chimp by producing a breathy sound known as a pant-grunt. Hanuman langurs present their hindquarters. Spotted hyenas of both sexes (yes, both) have a habit of displaying erections to acknowledge that they sit lower down the pecking order. Chickens invented the very concept of pecking orders.

The spotted hyena would not survive for long in most organisations. But patterns of deference and dominance are as natural for humans as they are for other animals, and the workplace is no exception. Most companies have org charts that show who outranks whom. Job titles are used to advertise not just what a person does but also where they sit relative to others. Sometimes hierarchies are obvious. In the armed forces, people must salute their superior officers. But deference shows up in other, less explicit ways, too.

Seating arrangements are a good example. Imagine entering a meeting room first. You know that lots of people are going to be sitting around the table, some more senior than you, and that the meeting will be chaired by the chief executive. Your task is to work out where to sit. Chances are that you will not take a seat at the head of the table or midway along either side: these are places where the boss would naturally sit. Somewhere along the sides and towards the end are the safest places to head.

If the CEO is already sitting there when you arrive, your choice now becomes simpler: anywhere but the adjacent chairs. Unless you are very senior yourself, sitting too close to the alpha executive risks being a transgressive act. If someone has an empty chair on either side of them at a boardroom table they either have halitosis or the top job. (Something similar is at work in conference halls: the front rows remain stubbornly empty for a reason.)

Another form of deference has more obvious roots in the animal kingdom. In his book “Mama’s Last Hug”, Frans de Waal, a primatologist and author, describes how monkeys and apes use a teeth-baring grin as a signal of submissiveness to a dominant animal. The office equivalent is observable when the most senior person in the room makes a joke and everyone laughs. Seen from a distance, it might look like the filming of a Netflix special. Inside the room it’s much more likely to be a display of deference than an outbreak of genuine hilarity.

The language of the workplace is also suffused with an awareness of hierarchy and territoriality. People will say things like “this is above my pay grade” to preface conversations where they want to be clear that they are not challenging anyone’s authority even as they explain why things would be so much better if they were running things.

Deferential language is not just used when underlings communicate upwards; it is also a way for peers to signal that they are not going to trample on each other’s turf. A paper published in 2012 by Alison Fragale of the University of North Carolina and her co-authors analysed email communications within organisations for signs of verbal deference—imagine the use of a qualifying phrase like “I’m not 100% sure I agree” to mean “I totally disagree but am not intending to threaten your status.” The authors found that this kind of language was more common between people at similar levels in an organisation than between its junior and senior members.

Hierarchies are useful. They incentivise people to aim higher in their careers, they enable co-ordination and they mean that decisions are taken and then stick. When someone higher up the food chain has the power to promote or sack you, a bit of deference is not just inevitable but also wise. But hierarchies can also cause a lot of damage, by quelling debate, gumming up decision-making and reducing autonomy.

This is why it is worth being alert to quietly submissive workplace behaviours. Their pervasiveness is a reminder to managers that power is always likely to distort interactions—in ways that are subtle as well as obvious, small as well as large. If you hear someone say “that’s above my pay grade”, then your attempts to instil a sense of ownership have a long way to go. If your employees express mild concern about a decision of yours, it is probably best to assume they are really worried about it. And if someone laughs at your jokes, don’t start planning a career in stand-up.■

Business | Schumpeter

Meet the ambitious wolf cubs of Wall Street

A duo of whippersnappers is taking on Goldman Sachs

Illustration: Mari Fouz

Jan 9th 2025

THE MASTERS of the universe will have hoped for some peace and quiet over Christmas. The holiday period was the last time for Wall Street financiers to catch a breath before Donald Trump is handed the keys to the White House on January 20th. Even if he does not make Canada the 51st state or annex Greenland, his second term promises lots of excitement. Currency traders are watching the Canadian dollar, Danish krone and other monies—though this has less to do with Mr Trump’s territorial ambitions and more with the tariffs he has vowed to slap on allies and foes alike. Stockpickers are waiting to see which firms find favour with the mercurial president and which fall foul.

Yet it is investment banks’ rainmakers who expect to be the most hyper-caffeinated. President Joe Biden’s zealous trustbusters, with their mantra that “big is bad” and novel ideas about what mergers and acquisitions (M&A) count as anticompetitive, are out. Their Trumpian replacements, though as leery of big tech, look more relaxed about most other transactions, so long as these do not raise prices for consumers. Mr Trump himself has declared he wants “clear rules that facilitate, rather than stifle, the ingenuity of our greatest companies”. Translation: deals, deals, deals.

With rising corporate profits (which fill prospective buyers’ coffers with cash), easing monetary policy (which makes it cheaper for them to borrow more) plus high stockmarket valuations (which strengthen the currency of their shares), before long boards will be asking CEOs, “What’s your M&A strategy?” sums up Ryan Kenny, a banking analyst at Morgan Stanley. Mr Kenny’s employer and its investment-banking arch-rival, Goldman Sachs, stand to benefit from this dealmaking FOMO. Their market values hit records in late November, each surpassing $200bn (if briefly, in Goldman Sachs’s case).

Impressive. But look at growth and it is two independent competitors, Evercore and Jefferies, that have really set investors’ pulses racing. Their share prices have more than doubled in the past two years, roughly twice the gains of the industry giants. Evercore is now worth over $10bn. Jefferies is closing in on $17bn.

Both are rising up various league tables. Last year Jefferies came seventh in Dealogic’s latest ranking of banks by investment-banking revenue, up from tenth in 2023. On January 8th it reported total revenues of $7bn in the 12 months to November, compared with $4.7bn the year before. Net profit more than doubled to $669m. If analysts are right, in 2024 Evercore surpassed Morgan Stanley in terms of global advisory revenues, behind only JPMorgan Chase and Goldman Sachs.

The two firms, with headquarters on opposite sides of the intersection of 53rd Street and Madison Avenue, represent distinct visions of high finance. Evercore makes little use of its balance-sheet and earns most of its money from fees clients pay it to advise on transactions. Its founder, Roger Altman, a former Treasury official, created it in 1995, when standards on Wall Street in matters such as treatment of confidential information and conflicts of interest were slipping. Mr Altman stresses his firm’s “fanatical commitment to quality and integrity”. Corny? Sure, he concedes. But also good business.

Where Evercore is genteel, Jefferies looks, in the words of a hedge-fund admirer, “swashbuckling”. Its CEO of 24 years, Rich Handler, posts photos on Instagram of himself wielding a laser-tag gun. Its $64bn in assets is wee and unleveraged next to Goldman Sachs’s and Morgan Stanley’s trillion-dollar balance-sheets, and it relies on a joint-venture with SMBC, a giant Japanese bank, to fund some of its activities. But it seems risk-tolerant in other ways. In 2009 aggressive recruitment tactics led UBS, a Swiss lender, to sue it for poaching a star rainmaker. After the Adani Group, an Indian conglomerate, was attacked by a short-seller in 2023 over alleged fraud, Jefferies stood by its client as others steered clear. It reportedly began reviewing its ties only once American prosecutors charged the founder, Gautam Adani, with bribery in November. (The Adani Group and Mr Adani deny all charges.)

Yet Evercore and Jefferies share commonalities, too, and not just their address. Both fetishise talent even more than their industry as a whole. “I spend a tremendous amount of time recruiting,” says John Weinberg, Evercore’s chief executive. Its ranks of senior investment bankers rose by 27% in the past three years. Relative to size, it was out-hired only by Jefferies, whose equivalent head count rose by 46% in the period.

Both display an aversion to middle management. Just two layers separate a managing director from Mr Handler and Brian Friedman, Jefferies’ president. “Managers are player-coaches,” explains Mr Friedman. “Everyone is on the field and leading by example.” Evercore is similarly flat. Goldman Sachs and Morgan Stanley have at least one more layer.

Spot the next Goldmen

In some ways the two starlets are becoming more alike. Jefferies is raising its advisory revenues, paring back some capital-intensive activities such as buying stakes in companies, and wants a bigger slice of the company mega-mergers that are Evercore’s forte. Evercore, for its part, is increasingly helping clients raise capital, on top of offering deal counsel, and is eyeing the not-so-mega-deals involving private-equity investors, which Jefferies dominates. Both are sizing up advisory opportunities in private credit, which is replacing bank lending in many mergers and buy-outs.

Both must also prove they can put their highly paid hires to work. Their dealmakers are the most productive among listed rivals, last year bringing in an estimated $10m each in fees at Jefferies and $18m at Evercore. To ensure this continues, Messrs Handler and Weinberg had better keep those coffee cupboards full. ■

Business | Making friends

Will Mark Zuckerberg’s Trump gamble pay off?

He risks making enemies elsewhere

Photograph: AP

Jan 8th 2025

“It feels like we’re in a new era now,” said Mark Zuckerberg, Meta’s chief executive, as he announced sweeping changes to the firm’s social-media platforms in a video on January 7th. Two weeks ahead of Donald Trump’s presidential inauguration, Mr Zuckerberg outlined an overhaul of Meta’s content-moderation policy that meets many of the demands of American conservatives. The initiative says much about both the future of social media and the relationship between American business and government.

After building probably the world’s largest fact-checking operation, including hiring thousands of content moderators, Meta will stop attempting to verify the truth of posts on Facebook, Instagram and Threads, starting in America. Checking will instead be left to volunteers via “community notes”, a user-run system championed by X, a social network run by Elon Musk, an adviser to Mr Trump.

Meta will also “get rid of a bunch of restrictions” on topics such as immigration and gender, on which the firm’s existing rules “are just out of touch with mainstream discourse”, Mr Zuckerberg said. Automated filters will no longer weed out minor violations of Meta’s content rules; instead, such posts will be removed only if they attract a complaint from a user. In an accompanying blogpost, Meta said that 10-20% of the content that it has removed until now has been taken down in error.

Mr Zuckerberg was frank about his rationale. “The recent elections also feel like a cultural tipping-point towards once again prioritising speech,” he said. Meta is rejigging its team in a Trump-friendly fashion. Sir Nick Clegg, the firm’s left-leaning global-affairs chief, will be replaced by Joel Kaplan, who worked in the White House under President George W. Bush. Dana White, a Trump ally and boss of Ultimate Fighting Championship, a martial-arts company, will join Meta’s board. (So will John Elkann, CEO of Exor, which part-owns The Economist‘s parent company.)

Meta is not alone in seeking favour with the incoming government. Tech bosses from Tim Cook to Sam Altman are said to have donated to Mr Trump’s inauguration fund ($1m appears to be the going rate). Amazon’s streaming studio has just spent a reported $40m on a flattering documentary about Mr Trump’s wife, Melania. Mr Trump has described Facebook as an “enemy of the people” and threatened to put Mr Zuckerberg in jail for “the rest of his life” if he interferes in elections. The firm also faces an antitrust trial in April that seeks to undo its acquisitions of Instagram and WhatsApp.

Chart: The Economist

Yet even before Mr Trump’s victory last year, Meta had begun to loosen its approach to moderation. Mr Zuckerberg, formerly a free-speech advocate, launched a crackdown on misinformation around five years ago, amid accusations of Russian interference in Mr Trump’s first election and an epidemic of harmful nonsense about covid-19. But lately it has been removing less content (see chart). Its rules on misinformation have also been relaxed. In 2023 Meta decided to allow ads falsely claiming that America’s election of 2020 had been “stolen”. Mr Zuckerberg was at pains to portray the latest changes as part of a return to business as usual, saying three times in his five-minute video that Meta was “getting back to our roots” on free speech.

The company will need to tread carefully. Mr Zuckerberg acknowledged that a more hands-off approach will mean more “bad stuff” on Meta’s platforms. That will not go down well with advertisers. X’s worldwide ad revenue fell by more than half during Mr Musk’s freewheeling first year in charge, estimates eMarketer, a research firm. And although users may like the sound of free speech, they may not enjoy its messy reality. X has lost more than a tenth of its users in America since Elon Musk took over, estimates eMarketer.

Loosening up on moderation will complicate Meta’s business abroad. The EU’s Digital Services Act obliges platforms to limit the spread of misinformation, on pain of steep fines; suspending fact-checking there may prove impossible.

Mr Zuckerberg also promised a revival of “civic” content on Meta’s platforms. The company has spent years saying that users are bored and depressed by political news, even turning it off in countries such as Canada, where news publishers have demanded payment in return for their links being shared. If, as Mr Zuckerberg claims, users are once again looking for more news in their newsfeeds, Meta will not find it so easy to dismiss the demands of those publishers. Meta seems to be making progress in keeping Mr Trump and his friends happy. But it risks making its relations with everyone else trickier. ■

Finance & economics | Free exchange

An American purchase of Greenland could be the deal of the century

The economics of buying new territory

Illustration: Alvaro Bernis

Jan 8th 2025

Although America has a history of taking a commercial approach to international relations, purchases are rarely made without controversy. When Thomas Jefferson bought Louisiana in 1803, doubling the size of the country, he had to set aside his zest for constitutional constructivism, which would have ruled out such bold federal action. Sixty-four years later, when William Seward, then secretary of state, purchased Alaska from Russia for $7.2m ($162m today), the move was dubbed “Seward’s folly”. Now the Alaska deal is seen as a masterstroke and the Louisiana purchase the greatest achievement of one of America’s greatest presidents. In hindsight, both look extraordinarily good value.

History will not be as kind to Donald Trump if he gets Greenland from Denmark under duress. On January 7th the president-elect declined to rule out using military might or economic warfare in his pursuit of Greenland (and of the Panama Canal). America will lose friends if it bullies one into ceding territory. But Mr Trump’s provocations are also foolish because an agreement to buy Greenland, made freely and in good will, could indeed be another deal-of-the-century. Such a deal would increase America’s security, and perhaps that of its NATO allies, too. Autocrats would be dispirited. And a purchase could also benefit the inhabitants of the island, who must—and surely would—have the final say.

What, then, is Greenland worth? One starting point is the island’s annual GDP. At last count, in 2021, it was $3bn, or one seven-thousandth of America’s. Only 56,000 people live in Greenland, despite the fact it is bigger than any American state. Much of the territory’s output is the work of the 43% of the labour force employed by the state (against 15% in America). Over half the government’s bills are paid by Denmark, which gives the territory $500m a year. The biggest industry is fishing. Removing the public sector, ignoring other spending commitments, assuming Greenland’s long-run growth continues and America’s federal government receives 16% of GDP in tax (the national average), as well as discounting using America’s 30-year Treasury yield, produces a valuation of $50bn, or a twentieth of America’s annual defence spending.

Yet Mr Trump covets Greenland for its strategic and economic potential, rather than its puny output. The island sits between America and Russia in a part of the world that is becoming more navigable as Arctic ice melts. Although America’s Pituffik Space Base on the territory’s north-west coast already provides the armed forces with missile-warning sensors, an American Greenland might better monitor the Greenland-Iceland-UK (GIUK) gap, a strip of the Atlantic Ocean that is the access route for Russian submarines to America’s east coast, and to the North Atlantic.

Map: The Economist

On top of this, Greenland’s resource wealth is immense. It has known reserves of 43 of the 50 minerals deemed “critical” by America’s government, including probably the largest deposits of rare earths outside China. These are crucial to military kit and green-energy equipment. Wells off Greenland’s coast could yield 52bn barrels of oil, about 3% of the world’s proven reserves, according to an estimate in 2008 by the US Geological Survey.

Greenland’s resources have gone relatively unexploited owing to the difficulty of operating in the territory’s harsh, remote areas. Four-fifths of the island is covered by ice. There are not even roads linking settlements. And the government banned oil exploration in 2021. But as the climate warms, the minerals become both more accessible and more valuable. Already, perhaps the greatest resource rush ever seen, on a per-person basis, is under way. Firms are drilling at around 170 sites, up from 12 a decade ago.

From whom could the island be bought? In 2009 Denmark all but granted Greenland the right to declare independence should its people choose such an option in a referendum. The island’s nationalist government would very much like to exercise this right. At the same time Denmark granted the territory control of its own natural resources (though as its revenues go up, its block grant from Denmark goes down). Any purchase, therefore, should not be from Denmark, which really would be colonialist, but from the islanders themselves. If America offered merely our crude valuation of the flow of future taxes, it would amount to nearly $1m per inhabitant. Given the territory’s riches and importance, America could probably make every Greenlander a multimillionaire and still benefit enormously from the purchase.

Cold feet

Romantics and nationalists would doubtless call such an arrangement grubby. Couldn’t the island go it alone? After all, the 380,000 citizens of Iceland manage well enough. Greenland could host more American military bases at the same time as exploiting its natural resources on its own terms. Why abandon your identity and subject yourself to political control from Washington?

But natural-resource bonanzas bring risks, too. One is corruption that prevents the benefits from being divided fairly. It is unclear whether 56,000 people can govern effectively in the presence of an immense windfall: imagine an English town council being given Saudi Arabia’s oilfields. Extracting minerals means mass immigrant labour. National security is no longer just about the risk of invasion but also forestalling hybrid warfare, from sabotage to propaganda on TikTok. Selling to America up front would bring the full might of America’s administrative and security apparatus to the territory, while guaranteeing—if your columnist’s advice was followed—an equal distribution of the windfall.

Respecting Greenland’s right to self-determination means respecting its citizens’ right to consider such an offer, which could be put to a referendum. For the choice to be free, Mr Trump would have to retract his threat of force. He should do so—and then try putting some red meat in front of the polar bear. ■

Finance & economics | Buttonwood

How corporate bonds fell out of fashion

The market is at its hottest in years—and a shadow of its former self

Illustration: Satoshi Kambayashi

Jan 9th 2025

There are normally few thrills to be had from investment-grade bonds, which is just the way it should be. After all, this is lending to the very safest companies. Just now, however, bondholders are throwing a veritable rave.

To gauge their mood, look at the “credit spread”, or additional interest they charge corporate borrowers over and above the yield on equivalent government bonds. At 0.8 percentage points, the average credit spread on American investment-grade bonds was last this low in 2005, amid a lending surge that helped set the stage for the global financial crisis. Asian spreads are similar, and European ones not much higher. The bankers who help companies issue new bonds have not been so busy since policymakers flooded markets with liquidity during the covid-19 pandemic.

Interest rates spent much of the past two decades on the floor. Now they have increased sufficiently that, even when accounting for razor-thin credit spreads, the all-in yields on plenty of high-grade corporate bonds are well above 5%. That looks rather good compared with the 4% earnings yield which is implied by the ratio of American share prices to underlying profits expected in 2025. Small wonder investors are keen on bonds, or that companies are exploiting their enthusiasm to issue more.

Yet in another sense, today’s seemingly red-hot market comes as a shock. Racier forms of corporate debt, ranging from risky “junk” bonds to modish private credit, have been booming for decades. In contrast, the stature of the bog-standard corporate bond has trended firmly in one direction—down—for not just decades but centuries.

First issued by municipal Venice in the 1100s, bonds once made up the entirety of capital markets. Companies started selling them in the 1600s, around the same time as they began selling shares. Although stocks stayed grubby for aeons, corporate bonds became respectable more quickly. In the 19th century they were the least volatile securities on the Paris bourse; in America they outperformed shares for decades. Long after the Wall Street crash of 1929, investors still spurned stocks. As late as the 1950s they were happy to accept yields of 3% on corporate bonds, while demanding shares offer earnings yields close to 10%.

Then something in the collective psyche shifted and the cult of equity took off. Shares’ promise of dizzying profits trumped the fixed income on bonds; investors poured money into the stockmarket; valuations soared and so did returns. The ballooning venture-capital industry vividly demonstrated the riches early ownership of high-growth firms could bring. Since 1900, crashes notwithstanding, the annualised real returns on American shares have been 6.5%, compared with 5.3% for corporate bonds.

Over the past ten years the divergence of the two markets has continued apace. Investment-grade bonds issued by American firms were worth $7.5trn in 2014, compared with $19trn for shares in firms in the S&P 500 index. Now the two figures are $11trn and $52trn, respectively. The bond market’s value, then 39% of that for stocks, is now 22%. Issuance volumes hint at a continuing decline. Although 2024 was the busiest year in several, in real terms its $1.6trn of newly minted bonds was below the annual average for the preceding decade. The market is less attractive than it appears.

This is down to more than changing tastes among investors in recent decades. The tech titans that have sent share prices soaring are less suited to issuing bonds than the corporate behemoths that preceded them. They generate torrents of cash, so have less need to raise capital from debt. What is more, their assets are largely intangible rather than the tangible sort against which bonds can be secured: intellectual property as opposed to factory machinery.

Could the corporate bond rise again? It is only natural that, as young and innovative companies have come to dominate markets, investors have wanted equity stakes in their growth. As such firms mature, and their profits rise more slowly, maybe their debt will look comparatively more attractive. They might also have more cause to issue it, as they plough ever more capital into the infrastructure that powers artificial intelligence. Last year Meta, the social-media conglomerate, sold bonds worth $10.5bn, its biggest issuance to date. Maybe investors will regain the enthusiasm they held for the asset class in decades gone by. More likely, though, they will hunt for the shares of tomorrow’s giants.■

Finance & economics | Dark humour

China’s markets take a fresh beating

Authorities have responded by bossing around investors

In the greenPhotograph: Alamy

Jan 7th 2025|Shanghai

As Chinese markets came crashing down at the start of 2025, a joke circulated among investors: “What is the most valuable asset in the market?” The answer, they replied with a chuckle, was “retail investors”. China’s stockmarkets are dominated by amateurs. They buy high and sell low, helping the professionals eke out a living. They also seem to be in endless supply, no matter how much money is lost. “They get cut down like chives but grow right back,” goes a popular saying.

Although retail investors will have suffered most in the recent sell-off, others are being cut down, too. Chinese stockmarkets experienced their worst first day of trading since 2016 as the CSI 300, a benchmark index, fell by 2.9% on January 2nd. During the first four trading days in 2025 it was down by over 3.5%. More striking still, yields on long-dated government bonds have cratered. Those on ten- and 30-year government bonds hit record lows on January 6th. On the same day the yuan sank to 7.33 to the dollar, a 15-month low.

There is no shortage of explanations for the gloom. One is uncertainty linked to the fast-approaching second term of Donald Trump, which starts on January 20th and brings with it the possibility of new tariffs on Chinese exports. The American defence department’s recent decision to add Tencent, one of China’s most valuable tech firms, to a list of companies working with China’s armed forces has not helped. Another is that patience with a state bail-out is evaporating. In September regulators promised to take swift action to solve China’s biggest problems, such as a property crisis and highly indebted local governments. Talk of a hefty stimulus package at the time pushed up the CSI 300 by more than 25% in a week or so of trading.

Chart: The Economist

Yet the state’s delivery has since been underwhelming. In December consumer inflation fell towards zero, China’s statistics authority announced on January 9th. The biggest component of stimulus has gone to paying off local-government debt. Although home sales in a few big cities rebounded in the final weeks of 2024, compared with the previous year, the vast housing inventory in smaller cities means national prices will probably continue to decline. As long as the housing market struggles, sentiment among ordinary folk will be tough to revive. Goldman Sachs, a bank, has suggested that investors look to Japan’s “lost decade” as a guide to the future of the Chinese stockmarket.

Movements in the bond market have worried global investors. China’s regulators have been dealing with falling yields for months as local investors scramble for a haven, with many piling into government bonds. Cuts to the deposit rate have prompted people to shift their money from banks to fund managers. This trend is one factor that prompted investment funds to become the biggest buyers of bonds last year, according to Standard Chartered, another bank. Some investors speculate that the yield on the ten-year government bond could even fall below 1% this year.

Authorities have homed in on market players, rather than economic fundamentals, as the source of the problem. They have told analysts and economists working at banks to avoid topics such as deflation and comparisons with Japan’s stagnation. As bond investors search for safe investments, regulators have instructed them to stop driving down yields. Some small banks have been banned outright from buying government bonds or had purchases cancelled. On January 3rd the central bank called a meeting with fund managers to tell them to reduce bond buying, according to Reuters, a news agency. Stock exchanges have also called meetings with international investors in the hope of calming nerves. A Shanghai-based portfolio manager notes that many of these moves have only increased the sense of panic.

The state has not been stingy when shoring up the stockmarket. China’s central bank has offered up some 800bn yuan ($110bn, or 0.6% of GDP) in relending for stock purchases and swap facilities since September. State-owned firms, collectively known as the “national team”, probably spent over 700bn yuan in 2024 to prop up share prices. This type of state intervention may be dialled up. Rumours of a “national stabilisation fund”, or a centrally controlled investment vehicle for buying stocks, circulated last year. When local traders are not swapping jokes, they are sharing tips on how and when state capital might come pouring into the market. ■

Science & technology | Well informed

Does melatonin work for jet lag?

It can help. But it depends where you’re going

Illustration: Cristina Spanò

Jan 8th 2025

Drop into any pharmacy in America and you will find jars of melatonin promising to relieve you of dreaded jet lag. There are tablets, pink gummies, potent-looking capsules—whatever appeals. But all you want to know is: does it work?

Melatonin is known as the “darkness hormone”. When the sun goes down, it is released by the pineal gland in the brain. Production peaks in the middle of the night before slowly falling as the morning light returns. Although driven by the biological clock, rather than darkness itself, the emergence and disappearance of light helps regulate the clock each day and keeps melatonin production synchronised to the day-night cycle. The night-time increase in melatonin puts people into a pleasant state that makes it easier for them to fall asleep. And when people are given melatonin during the day, they get sleepy then, too.

Disrupted melatonin production can lead to sleep disorders. People who are blind, for example, do not have their biological clocks set by the changing light. Because the natural clock runs a little slower than the 24-hour cycle, their melatonin production can diverge from the external day-night cycle. Drifting melatonin peaks eventually make them sleep during the day, even against their best intentions.

Jet lag, similarly, can cause melatonin disruptions. One reason is that sleep is interrupted by the bright lights of the plane cabin, but the much more detrimental effect comes from arriving at a destination with a day-night cycle out of sync with your biological clock. The clock, and the melatonin, can take days to catch up.

Managing jet lag with melatonin supplements, therefore, has become popular. But understanding whether or not they work is hard. Experiments that mess with people’s biological clocks in a controlled way, and which also recreate real-life scenarios, are not easy to do. Many studies, for instance, have kept people from sleep by exposing them to bright lights all night. But that is not only a little cruel, it is not an ideal way to model sleep disruption.

Instead, scientists have given melatonin to people who were travelling anyway, such as air cabin staff, soldiers and scientists travelling to conferences. In those cases, the supplements do seem to work. A landmark paper that pooled the results of five randomised controlled trials in 2002 found that people given melatonin rate their jet-lag experience as half as bad as those who are given a placebo, on a scale from zero to 100.

“Melatonin is quite effective if you have to speed up your clock,” says Derk-Jan Dijk, director of the Surrey Sleep Research Centre. “It’s not good at slowing down your clock.” That means taking melatonin may be more useful after eastward flights, when you have to go to bed sooner than your body wants to, than after westward flights, when you have to stay up. Fortunately for those with westward travel plans, there are other things you can do to help your biological clock adjust—gradually shifting the wake-sleep cycle in the days before the flight, for example, and getting natural sunlight and exercise during daytime hours at the destination, which helps adjust melatonin production.■

Culture | Into the woods

Sex and Snow White: how Grimm should children’s books be?

The German authors suggest very, but today trends run the opposite way

Photograph: Alamy

Jan 9th 2025

The Brothers Grimm. By Ann Schmiesing. Yale University Press; 360 pages; $35 and £25

Once upon a time there were two little boys who lived in a deep, dark forest. Their name was Grimm, and so was their life. Their father died, and their mother was poor. She slaughtered pigs, while their aunt castrated cocks with a knife. When the boys grew up Napoleon invaded, and one brother travelled to war. He saw villages burned, girls raped and piles of corpses so big the villagers could not bury them.

But this story has a happily ever after. Because when the boys grew up they wrote down stories. They penned “Snow White” and “Cinderella” and indeed the line “happily ever after”. There were hints of their life in their tales, though, as a new book by Ann Schmiesing, an academic, shows. For they also wrote a tale called “How Some Children Played at Slaughtering”. In it, one boy slits another’s throat; his brother drowns in the bath; his mother hangs herself with guilt; his father dies of grief. A forgotten children’s classic.

This is a story about children’s stories. It is about what stories should include—sugar, spice and all things nice, or frogs, snails and incest?—and how dark their telling should be. In the Grimms’ day, the answer was very. In these stories fathers abuse daughters, Rapunzel falls pregnant and Red Riding Hood is duped into bed (“My, how hairy you are, granny!”) and raped. In a Swiss telling of “Snow White”, the girl is a “slut”, the seven dwarves are murdered and their house is burned down. Disney did not go with that version.

This debate still matters now. Children’s books cause conniptions. In Britain Roald Dahl was edited to remove words such as “fat” that, to some modern eyes, seemed objectionable and (as Dahl might have put it) fizzwiggling. In 2023, 17 American states tried to censor more than 100 books. “There is a sort of tug-of-war through the history of children’s writing between instruction and delight,” says Sam Leith, author of “The Haunted Wood”, a book about children’s literature.

The debate is fraught partly because the stakes—and the sales—are high. The personal stakes are high, too. Reading is dangerously independent. It offers children their first escape from their parents. Go into Narnia or Neverland or Wonderland and you—like Lucy or Peter Pan or Alice—go alone. And what you see there will shape you: for ever after you will know what lies behind the wardrobe door (furs and firs), what eating Turkish delight leads to (trouble) and what to do with bottles saying “DRINK ME” (don’t).

When Martin Amis, a British novelist, said that he would write a children’s book only if he “had a serious brain injury”, he distilled centuries of disdain. Until the 18th century there was no distinct children’s literature. Though not everyone was so dismissive: John Locke argued that, since children’s minds were “as easily turned this or that way, as water”, books should be written specially for them to guide them. And, sounding slightly less like Britain’s foremost political philosopher and slightly more like someone’s six-year-old, they should have “as many pictures of animals…as can be found”.

Publishing eventually caught up. “The New England Primer”, first published in the 17th century, promised young readers illustrated alphabets, a “pleasant guide” to reading—and an arguably muted idea of what constitutes pleasure. From its syllabic spelling guides (three-syllable words offered “Ho-li-ness” and “God-li-ness”), to its illustrated alphabet (“Y” glumly informed readers that “No Youth we see / From death is free”), the tone was sober—though it did brighten for some three- and four-syllable words (“Drunk-en-ness” and “For-ni-ca-tion”).

By comparison, the arrival of the Grimms—with their slaughter, torture and violent animal deaths (a wolf drowns, a hare dies an agonising death)—was almost larky. Though, as Ms Schmiesing points out, their stories were not really intended for children. The Grimms were linguists, not novelists; their aim was preservation, not entertainment. Industrialisation had started to creep through the ancient forests of Germany, destroying habitats, species and stories as it went. Narrative naturalists, they wanted to pluck Germany’s native species of story from its fields and press them between the pages of their anthology before such tales went extinct.

The aim might have been scholarly, but the result was an unexpected children’s bestseller. Not everyone approved: early readers complained about the darkness. Even the very structure of these stories was gloomy: the famous “happily ever after” ending alternated with the glummer “And if they haven’t died, they’re still alive.” The Grimms responded briskly: take the nasty bits away from children’s books and you may as well “blindfold” youngsters so they cannot see at all.

A look at the bestseller chart shows that books that sell sweetness do well. One ever-popular title is “Guess How Much I Love You” (1994), in which Little Nutbrown Hare spends his days trying to tell Big Nutbrown Hare how much he loves him and does not, alas, experience an agonising death. The bestselling book in America in a recent ten-year period was not Shakespeare or even Dan Brown but Dr Seuss’s “Oh, the Places You’ll Go!”. Silly, scatological tomes, such as “The Fart that Changed the World”, are also in vogue.

Children’s literature has never been just for children: adults happily read “Harry Potter” and Philip Pullman. All good children’s writers know that they are “writing for a double audience”, says Cressida Cowell, a former children’s laureate in Britain and the author of the “How to Train Your Dragon” series. There is the child being read to and the adult doing the reading: “The very best children’s books…work on both levels.”

Fashions in children’s literature tend to have great “swerves” says Mr Leith, followed by “massive over-compensation”. After a recent testy period, tensions have calmed a little: attempts to censor books fell in America from January through August 2023. Penguin, after noisy complaints, reinstated the fizzwiggling parts of Dahl. Children’s books are certainly not as dark as they were in the Grimms’ time (incest sells less well these days), nor do they need to be. But perhaps more parents will crave books for their children that better balance dark and light, happily ever afters with big bad wolves. ■

Culture | Free speech in France

Ten years after the Charlie Hebdo attack, satire is under siege

Public support is waning for the right to offend

Photograph: Reuters

Jan 4th 2025|PARIS

On the morning of January 7th 2015 two men, Chérif and Saïd Kouachi, stormed the offices of Charlie Hebdo, a French satirical newspaper. Armed with Kalashnikovs, the pair murdered 12 people, including eight editorial staff, in less than two minutes. The perpetrators, who were linked to al-Qaeda, did not pick Charlie Hebdo by chance. For years the irreverent newspaper had poked fun at religion, including Islam. It was the start of the worst-ever year of Islamist terrorist attacks in Paris, which killed nearly 150 people.

A decade on, Charlie Hebdo is unbowed and unrepentant, turning out a weekly as tasteless, silly and provocative as ever. But the paper now operates from a secure and undisclosed location. Laurent Sourisseau, a cartoonist known as Riss, survived the massacre and took over the editorship after the attack. Radical Islamists have called for his death, and he lives under police protection. The Economist met him at an unmarked third-party office.

Nothing has since been quite the same for Charlie Hebdo. Yet the paper has nurtured a new generation of cartoonists and published every week since that awful winter morning. Its circulation today is some 50,000—over 25% higher than before the attack. “We think about it all the time, but we don’t talk about it all the time,” says Riss. “You can’t be crushed by this history.”

To mark the anniversary, Charlie Hebdo has published a book entitled “Charlie Liberty”. It is a way for survivors to pay tribute to former colleagues, five of them cartoonists: Cabu, Charb, Honoré, Tignous and Wolinski. Charlie Hebdo has continued a French tradition of political caricature, often scurrilous and obscene, which has deep roots. Bawdy, anti-royalist cartoons ridiculed Marie-Antoinette and Louis XVI in the 18th century. Over 1,500 satirical engravings were produced in the decade following the revolution in 1789.

The merit of drawings, says Riss, is that they are a “simple visual language, understood by everyone, to speak about difficult things”. Founded in 1970, Charlie Hebdo spares nothing and no one. Its caricatures range from the irreligious (the Prophet Muhammad displaying his pimply bottom) to the political (Marine Le Pen shaving her pubic hair). The paper regularly irks the regimes in Iran and Turkey, either for mocking their leaders or for joking about Islam.

Charlie Hebdo’s detractors, though, are not only religious rulers. Shortly after the attack in 2015, a handful of American writers boycotted a gala dinner in New York at which the French paper was getting an award for courage, on the ground that its caricatures humiliate Muslims.

In secular France, the law forbids hate speech or incitement to violence but protects blasphemy. Yet Charlie Hebdo is still controversial in its home country. Mediapart, a left-wing newspaper, recently denounced a caricature of the conflict between secular France and hard-line Islamism, which Charlie Hebdo represented as a woman wearing a burqa and a bearded man. It was, said Mediapart, a “sinister” form of Islamophobia lifted straight from the far-right playbook. (Charlie Hebdo dismisses such charges as absurd.)

Today French support for the defiant Charlie Hebdo spirit—known as “Je suis Charlie”—seems more fragile. It was strong in 2020 after Samuel Paty, a school teacher, was decapitated by a terrorist. (He had shown pupils caricatures of Muhammad in a class about free speech.) Yet by 2023 only 58% of the French told a poll “Je suis Charlie”, down from 71% in 2016.

This may reflect a general trend in the West of growing intolerance for causing offence. American stand-up comics including Dave Chappelle have criticised censorious attitudes towards satire. “We can’t say anything anymore!” laments a character in a cartoon in the latest issue of Nouvel Obs, a French magazine; “You can’t say that!” replies his companion. In 2019, after a caricature of Binyamin Netanyahu, Israel’s prime minister, prompted an outcry, the New York Times stopped publishing political cartoons. On January 3rd a cartoonist resigned from the Washington Post after the paper rejected her depiction of its owner, Jeff Bezos, and other bosses kneeling before a statue of Donald Trump.

Self-censorship, rather than the law, now tempers satire. Plantu, a cartoonist at Le Monde, has argued that dessinateurs “no longer [have] the same freedom”. Riss suggests that Charlie Hebdo is “not extraordinarily provocative”, but seems so because “the margin of tolerance” is narrowing. Ten years on, the paper’s voice is gross but precious. “We’re doing exactly the same thing we did before,” Riss insists. “But around us people are much more timid.” ■

Obituary | Listening to the heart

Chiung Yao taught the Chinese all about romantic love

The bestselling novelist and screenwriter died on December 4th, aged 86

Photograph: Chiung Yao/Facebook

Jan 9th 2025

“So we must break up?” he asked her. “Yes,” she said. His face darkened, and he jammed on the brakes. The car screeched to a halt. Without warning, he flung the door open. “Then get out!” he cried. They were on a narrow mountain road, with desolate wilderness all around. Did he really mean to abandon her? But as soon as she left he slammed the door, revved up the engine and aimed for the cliff-edge. Instinctively, she hurled herself onto the bonnet to save him. At the very edge, he stopped and got out. As she almost slid off, into the abyss, he pulled her into his arms.

To cut a long story short, she married him, and they were together for 40 years. But this was not one of Chiung Yao’s 65 novels; it was a scene from her own life. She was the passionate heroine, torn between obeying her lover and living freely. He was Ping Hsin-tao, head of the Crown publishing company. In 1963 he had published her first novel, “Outside the Window”, a huge success all over the Chinese-speaking world. After that, remorselessly, he ordered her to write more, even two at once. When she told him she couldn’t, he shouted that she could, and she succeeded. She and Hsin-tao adapted most of them for film and television, and in 1998 her adaptation of “My Fair Princess”, an imaginary saga of the Qing dynasty, became the most-viewed TV series in China.

At the height of her success in the 1970s and 80s it seemed that everyone, female at least, was reading her books. (”That’s so Chiung Yao!” people would say of anything romantic.) They offered stories of love that triumphed despite differences of wealth or class, parental disapproval, etiquette or stifling tradition. There were many, many ups and downs, much pain, many tears (she loved to cry herself, the sign of a softening heart). Both her book titles and the names of her heroines, which became popular too, suggested something beautiful but fragile: “Dream”, “Cloud”, “Rain”. Yet despite their apparent weakness or submissiveness, these were women who insisted on loving as they chose.

As did she. She took “Chiung Yao”, “beautiful jade”, as her pen-name, pretty but adamant. And from early childhood she was already in love, with words. Her mother taught Chinese literature in primary school, to which girls in conservative Sichuan were not allowed to go. But she would sit by the door, listening. When she was six she startled her mother by correctly reading the characters for “night” in a wistful poem of the Tang era. Both the melancholy, and Tang poetry, stayed with her. From that point, she read and read. At school in Taiwan, to which the family fled in 1949 from the communist revolution, she realised that all she wanted to do was write. Rather than retake the college entrance exam, which she had twice failed, she bought manuscript paper, ink and pens and began her life in earnest. This was not a career, her parents told her. But then, to her, neither was marriage.

Instead, at 18, she fell for the literature teacher at her high school. He was 25 years older, widowed and lonely, but, as in “My Fair Princess”, they could watch “the snow, the stars and the moon” together, and talk poetry. So the affair began, and went on even when the school learned of it and dismissed him for seducing a minor. When she realised she would have to give him up, she was devastated. Even the success of “Outside the Window”, her account of it all, could not dull the pain of losing him.

Yet she fell for a writer again. His clothes were worn almost to romantic rags, and his shack had just a bed, a table and chair, a pen and paper; but that, he said, was all a writer needed. She loved him for that. It was a disaster. He was jealous of her ever-growing success, especially as his attempt to write the Great Chinese Novel was not going well. He called her works shallow and sentimental; she was just “telling stories”. In one of their epic rows, she shot back that yes, she was telling stories. She loved telling stories! He should leave her alone to go on writing her shallow lowbrow stuff!

It was true that, as a writer, she was not a great wife. She could sew, but her kitchen skills ran mostly to rice and fried eggs. She controlled the family budget, but was saving for things, like a refrigerator, whose hidden purpose was to save her shopping and extend her writing time. They had a little son, Xiaoqing, whom she adored, but she wrote in every spare moment when the baby was not crying, or wrote with him in her arms, and sent him to nursery as soon as she could. That marriage could not last; this was not how wives and mothers were supposed to behave.

Nor was a woman supposed to fall for a married man, as she did afterwards. She tried not to, but Hsin-tao insisted, and his insistence had proved right before. So after eight years of wrangling over his divorce they got married. They were discreet; it was billed as a lunch party. They became, officially, a power couple on the literary scene, and she became a model of rebellious, dramatic or improper love, whichever way people saw it.

By far the most dramatic episodes, however, had happened long before, as she and her family struggled across China in the war. Disguised as peasants, they lodged in farmhouse after farmhouse that was torched by the advancing Japanese. When they fled, they narrowly escaped being shot as they hid in woodsheds and ravines. Her brothers went missing, presumed dead; at which point her parents rolled into the Dong’an river to drown themselves. She followed, terrified, and her cries revived their love for her. Having seen death up close, she realised both the fragility of life and the endurance of love. That was her real education.

Life, she learned, was a spark that should blaze, not miserably fade. Twice, in the throes of love, she had taken overdoses. She had watched Hsin-tao, felled by a stroke, linger for three years. As she aged, she vowed to control her own death. Once she had been fiery enough to fling herself on her lover’s moving car. Now, in a poem she left before turning on the gas, she was a snowflake flying lightly away to dance with the sparks of the stars. ■