It is not so much that cheats don’t prosper, but that prosperity does not cheat

FOR the evolutionarily minded, the existence of fairness is a puzzle. What biological advantage accrues to those who behave in a trusting and co-operative way with unrelated individuals? And when those encounters are one-off events with strangers it is even harder to explain why humans do not choose to behave selfishly. The standard answer is that people are born with an innate social psychology that is calibrated to the lives of their ancestors in the small-scale societies of the Palaeolithic. Fairness, in other words, is an evolutionary hangover from a time when most human relationships were with relatives with whom one shared a genetic interest and who it was generally, therefore, pointless to cheat.

The problem with this idea is that the concept of fairness varies a lot, depending on which society it happens to come from—something that does not sit well with the idea that it is an evolved psychological tool. Another suggestion, then, is that fairness is a social construct that emerged recently in response to cultural changes such as the development of trade. It may also, some suggest, be bound up with the rise of organised religion. ...

Alan Greenspan and Ben Bernanke still do not believe monetary policy bears any blame for the crisis

THE desire to rescue a damaged reputation is a powerful motivator. That is one conclusion to draw from a new 48-page paper written for the Brookings Institution by Alan Greenspan, the 83-year-old former chairman of America’s Federal Reserve. A man once hailed as the world’s outstanding central banker is now routinely blamed for the asset bubble and subsequent collapse. This is Mr Greenspan’s attempt to set the record straight.

The crisis, he argues, stemmed from a “classic euphoric bubble” whose roots lay in the sharp global decline in nominal and real long-term interest rates in the early part of the 2000s, which fuelled an unsustainable boom in house prices. Thanks to this euphoria, banks misread the risks embedded in complex new financial instruments. Mr Greenspan reckons the best remedy is to improve the system’s capacity to absorb losses by raising banks’ capital and liquidity ratios and increasing collateral requirements for traded financial products. ...

But which one will succeed the president?

ALTHOUGH he is barred by the constitution from seeking a third term in the presidential election in May, Alvaro Uribe’s influence over Colombia will remain great. As votes were slowly tallied in an election for a new Congress on March 14th, it became clear that parties which formed part of his centre-right coalition will retain a clear majority. Who will command these legislators is less so.

The vote seemed to strengthen the claims of Juan Manuel Santos, a former defence minister who more than anyone else embodies the continuation of Mr Uribe’s “democratic security” policy. Mr Santos’s U Party (that’s U for Uribe) won 25% of the valid votes, and increased its representation in the 102-seat Senate to 28, from 20. ...

Banks’ professional advisers come under scrutiny

IF SUNSHINE really is the best disinfectant, the 2,200-page report into Lehman Brothers’ downfall by its court-appointed bankruptcy examiner may do more to clean up finance than any number of new regulations. It paints a remarkably detailed, and damning, picture of Dick Fuld, Lehman’s ex-boss, and the executives around him. Their spectacularly ill-advised strategy was to take on oodles more risk in property just as everyone else was running the other way. Risk management was risible, with risk limits raised whenever they were breached and dodgy investments excluded from stress tests.

Lehman’s former leaders are not the only ones squirming in the glare. Some of its counterparty banks get a slap on the wrist for changing the terms of their collateral demands, for instance. But the strongest criticism of those who interacted with the flailing firm is reserved for Lehman’s auditor, Ernst & Young (E&Y), for failing to “question and challenge improper or inadequate disclosures”. The main “accounting gimmick” hidden from investors, but apparently known to the auditor, was called Repo 105. This technique helped the firm flatter its numbers by temporarily moving assets off its balance-sheet at the end of each quarter. Lawyers are also in the spotlight: unable to find an American law firm to approve the transaction as a “true sale” of assets, Lehman got the nod from Linklaters in London. Both E&Y and Linklaters deny any wrongdoing. ...

There are lots of private-equity funds in Japan, but very few deals

“PRIVATE equity is the garbage can of corporate Japan,” laments the boss of one fund with more than $1 billion invested in the country. The firm wants to do more deals, but there is nothing worth buying. By the time ailing firms are willing to accept outside capital and advice, it is too late: they are on their deathbeds. “They need morticians, not doctors,” sighs the boss of another private-equity fund.

Across Tokyo it is the same refrain: private equity in Japan barely exists. “I’m in the non-profit sector,” grumbles one manager. The value of all transactions in 2009 totalled a mere $3.8 billion, according to Dealogic (see chart). For the world’s second-largest economy, it is a pittance. Permira, a major international fund, has done one deal since it came to Japan in 2005. Kohlberg Kravis Roberts (KKR), which opened a Tokyo office the same year, has the same tally. Carlyle has done numerous good deals, but on March 12th it saw a $330m investment in Willcom, a bankrupt wireless operator, wiped out in a refinancing. ...

Companies are buying lots of their own shares again

FEW expenditures are more discretionary for a firm than buying its own shares. Although companies collectively were the biggest net buyers of shares before the financial crisis, buy-backs fell by the wayside when the markets froze in 2008 and firms began clinging to any cash they did not urgently need to spend. Sooner than might have been expected, however, companies have regained confidence in their financial health.

On March 15th PepsiCo announced its intention to buy some $15 billion of its shares by June 2013, including $4.4 billion this year—the biggest repurchase programme launched since the crisis hit. Even before Pepsi’s announcement, buy-backs unveiled this year had already reached $65 billion, nearly half of 2009’s total of $137 billion, according to Citigroup. Pepsi’s scheme alone amounts to over a tenth of the entire 2009 figure. ...

Mediobanca’s grip on Generali shows the effects of cross-shareholdings

THE power of Italy’s salotto buono—meaning the “fine drawing room” of top industrialists and bankers which controlled business for decades through a complex system of cross-shareholdings—may have declined, but it still wields influence. By the end of the month Mediobanca, an investment bank which sits at the heart of the web, will use a smallish stake in Generali, Europe’s third-largest insurer, to nominate new management.

Investors have complained for more than a decade that Mediobanca exercises a disproportionate influence over Generali, which itself wields power in Italian business through an investment portfolio of stakes in dozens of big firms. From 1999-2002 Mediobanca replaced Generali’s chairman three times, in the end giving the job back to Antoine Bernheim, a Frenchman it had ousted in 1999. Mr Bernheim has since presided over a period of stability but now, at 85, he is not officially seeking another full term, though he would stay if shareholders asked him to. Mediobanca has just 13% of Generali’s shares, but that stake, plus the votes of allies, will almost certainly ensure that its list of candidates for the board prevails at the insurer’s annual general meeting next month. ...

And the gloom in Toronto

TIME was when the decision over where to put a new Canadian capital-markets regulator would have been automatic. Toronto, Canada’s most populous city and the capital of Ontario, the most populous province, has long been the country’s business and financial centre. The biggest banks are there, as is the stock exchange. Legions of lawyers, accountants and bankers flock daily to the towers surrounding King and Bay streets. And yet the Canadian government is in two minds over the home for the new authority, and may end up splitting it between several cities—partly to placate provincial regulators jealous of their purviews.

This hesitation has brought grumbles from politicians in Ontario. But it is tacit recognition that economic and political power in Canada are slowly shifting westward, and in particular to Calgary, the main business centre in Alberta, a province with a large oil and gas industry. ...

Productivity has surged in America and slumped in Europe. Neither trend can last

LIKE physical fitness or a healthy diet, productivity is a worthy goal that can require an unappetising change in habits. Producing more by working less is the key to rising living standards, but in the short term there is a tension between efficiency and jobs. America and Europe have managed this trade-off rather differently. America has gone on a diet: it has squeezed extra output from a smaller workforce and suffered a big rise in unemployment as a consequence. Europe, meanwhile, is hoping to burn off the calories in the future. It has opted to contain job losses at the cost of lower productivity. That probably means America’s recovery will be swifter. Further out, productivity trends in both continents are likely to be uniformly sluggish.

Analysis by the Conference Board, a research firm, shows just how different the recession was on either side of the Atlantic. America’s economy shrank by around 2.5% last year but hours worked fell at twice that rate, so productivity (GDP per hour) rose by 2.5%. The average drop in GDP in the 15 countries that made up the European Union before its expansion in 2004 was larger, at 4.2%. But hours worked fell less sharply than in America and, as a result, EU productivity fell by 1.1% (see table). Workers that held on to jobs in America and Europe had their hours cut by similar amounts. The reason total hours worked fell by more in America was that there were more job losses there: employment fell by 3.6% last year, compared with a 1.9% fall in the EU. ...

No crisis, says the White House, but American patience with Israel has run out

IT HAS been like a lovers’ tiff without the love—quickly tamped down but with none of the kissing and making up, and no soothing of the underlying rage. As Palestinian violence flared in Jerusalem, Barack Obama’s secretary of state, Hillary Clinton, said through gritted teeth on March 16th that Israel and America enjoyed “a close, unshakable bond”. On the same day Michael Oren, Israel’s ambassador to the United States, said he had been misquoted in a widely leaked report that he had called the quarrel the worst crisis between the allies for 35 years. And on March 17th Mr Obama himself chimed in, denying any crisis but admitting that “friends are going to disagree sometimes.”

And how. The spark was the approval by Israel’s interior ministry of 1,600 new homes in Ramat Shlomo, a Jewish suburb in East (Palestinian) Jerusalem. This coincided with a visit by Vice-President Joe Biden (above, left) and also with the eve of the “proximity talks” America had at last persuaded Mahmoud Abbas, the Palestinian leader, to enter with Binyamin (“Bibi”) Netanyahu, Israel’s prime minister (above, right). Mr Biden is known for his affection towards Israel but took the announcement as a gratuitous insult. So did Mrs Clinton, who on March 12th berated Mr Netanyahu for three-quarters of an hour on the phone. She reportedly told Mr Biden to “condemn” the announcement rather than merely “express concern”. ...

The decline of a once wildly popular idea

IN THE 1990s cap-and-trade—the idea of reducing carbon-dioxide emissions by auctioning off a set number of pollution permits, which could then be traded in a market—was the darling of the green policy circuit. A similar approach to sulphur dioxide emissions, introduced under the 1990 Clean Air Act, was credited with having helped solve acid-rain problems quickly and cheaply. And its great advantage was that it hardly looked like a tax at all, though it would bring in a lot of money.

The cap-and-trade provision expected in the climate legislation that Senators John Kerry, Joe Lieberman and Lindsey Graham have been working on, which may be unveiled shortly, will be a poor shadow of that once alluring idea. Cap-and-trade will not be the centrepiece of the legislation (as it was of last year’s House climate bill, Waxman-Markey), but is instead likely to apply only to electrical utilities, at least for the time being. Transport fuels will probably be approached with some sort of tax or fee; industrial emissions will be tackled with regulation and possibly, later on, carbon trading. The hope will be to cobble together cuts in emissions similar in scope to those foreseen under the House bill, in which the vast majority of domestic cuts in emissions came from utilities. ...

Pennsylvania’s state capital is on the brink of bankruptcy

“IT’S a long way to Heaven. It’s closer to Harrisburg,” sings Josh Ritter, a contemporary singer-songwriter. But these days Harrisburg, Pennsylvania’s picturesque state capital, home to 47,000 people, would make a poor alternative to heaven. Mainly because of a crippling $288m loan guarantee for a trouble-plagued rubbish incinerator, the city is in a hellish financial state. Its budget deficit over the next five years is projected to be $164m, including $68.7m of debt service due this year. Moody’s downgraded its bond rating last month. Some people, including Dan Miller, the city controller, are recommending that Harrisburg should seek protection in the bankruptcy courts. “It’s too late to do anything else,” he says.

Not everyone agrees. Linda Thompson, the new mayor, is adamant that the city will not file under Chapter 9 of the bankruptcy code, which allows cities to come up with a debt-repayment plan while staving off their creditors. Chapter 9 is milder than Chapter 11: the bankruptcy court cannot force a city to sell assets or impose a plan for recovery on it. Although the bankruptcy laws have been on the books since 1937, municipal bankruptcies are rare and are considered a last resort. Municipalities need state authorisation to file for Chapter 9, and 30 states prohibit doing so altogether. ...

Barack Obama’s plan to overhaul No Child Left Behind

HEALTH reform was supposed to be the crowning achievement of Barack Obama’s first year as president. Instead it has riled Republicans, alienated leftists and exhausted everyone else. However, on March 15th Mr Obama presented Congress with a plan that ought to have a greater chance of support: reforming No Child Left Behind (NCLB), America’s main federal education programme. Everyone agrees that America’s public schools are floundering, and NCLB is widely considered to have failed.

NCLB, enacted in 2002, transformed education policy. It gave the federal government a crucial role in education, forcing states to set standards and hold their schools accountable for meeting them. Schools that failed to make progress would face financial sanctions. All students were to be proficient in reading and maths by 2014. George Bush championed the law; Congress supported it wholeheartedly. ...

Jacob Zuma is facing a barrage of criticism. But he won’t give up without a battle

IN HIS new year’s address to the nation, President Jacob Zuma hailed 2010 as “the most important year in our country since 1994”. Even at the time, it seemed like hyperbole to compare the year of South Africa’s first post-apartheid elections to hosting the football World Cup. But little did Mr Zuma know how tough, at least for him, the first few months of 2010 would be. Less than a year into his presidency, he is facing calls from within his own party to step down after just one term. Some in his ruling African National Congress (ANC) say he should go by the end of the year.

Yet 2009 had ended on a high note. According to an Ipsos poll in November, 77% of South Africans said Mr Zuma was doing a good job, up from 50% seven months before, and 70% felt the government was doing well, despite a lack of progress in reducing crime, tackling corruption or creating jobs, nearly 1m of which were lost last year. But fully 71% said they would still vote for the ANC, up from an impressive 66% in the general election a year ago. ...

The annual rate of producer-price inflation in America slowed to 4.4% in February from 4.6% in January. Wholesale prices fell by 0.6% during the month of February, their biggest monthly fall in seven months, after rising by 1.4% in January. Elsewhere in the rich world, wholesale prices have not risen as much over the past year as they have in America. In the euro area, they were 1% lower in January than they were a year earlier, although they rose by 0.7% during the month. In America, the sharp decline in wholesale prices in February was due largely to a 2.9% decline in energy prices. Excluding food and energy costs, wholesale prices in America edged up by 0.1% during the month of February.

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America’s industrial production edged up by 0.1% during February, and was 1.7% higher than a year earlier.

Inflation in the euro area fell to 0.9% in February from 1% in January. Industrial production grew by 1.4% in the year to the end of January. ...

America’s envoy to the Middle East, George Mitchell, pointedly put off a visit to Israel after senior people in Barack Obama’s administration accused Israel’s prime minister, Binyamin Netanyahu, of insulting the vice-president, Joe Biden. The Americans hoped Mr Netanyahu would let indirect talks between Israelis and Palestinians resume by rescinding his decision to allow a new spate of building in East Jerusalem, which the Palestinians see as their future capital. See article

With a fifth of the votes still to be counted after Iraq’s general election on March 7th, an electoral alliance led by the incumbent prime minister, Nuri al-Maliki, is neck-and-neck with a group led by one of his predecessors, Iyad Allawi. A Shia religious alliance that includes followers of a populist cleric, Muqtada al-Sadr, is coming third. Months of wrangling over the formation of a coalition government is likely and Mr Maliki may not retain his post. ...

Tensions between America and China over exchange-rate policy intensified. One hundred and thirty American lawmakers demanded sanctions unless China allows the yuan to appreciate. Meanwhile Wen Jiabao, the Chinese premier, warned that any attempt by other countries to depreciate against its currency amounted to protectionism. The American Treasury has until the middle of April to decide whether officially to label China as a “currency manipulator”. See article

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A derivatives farce makes its way to court in Milan. Others are sure to follow

ONE of the great advantages of financial innovation, it was often said, was that risk would end up going to those best qualified to hold it. In fact, much of it seems to have ended up in the hands of those least able to understand it. How some of it got there may soon be revealed in an Italian court. On March 17th four big banks, 11 bankers and two former city officials were charged with fraud in connection with the sale of interest-rate derivatives to the city of Milan. The trial is due to start in May.

The prosecution relates to a huge bet on interest rates that the four banks—UBS, JPMorgan Chase, Deutsche Bank and Hypo Real Estate’s DEPFA unit—helped the city authorities to take in 2005. The banks helped arrange the sale of €1.7 billion ($2.3 billion) of bonds for the city and then also helped it swap the fixed interest rate it was paying on the bonds for a lower, floating rate. Part of the contract is thought to have involved a “collar”, a way of limiting the range of outcomes on a bet, which protected Milan from rising rates but which also meant it would have to pay out if they fell. ...

The Senate bill is finally published

CHRIS DODD, the soon-to-retire chairman of the Senate Banking Committee, has staked his legacy on overhauling America’s financial regulations. If he fails, it won’t be for lack of trying.

On March 15th Mr Dodd unveiled a sweeping proposal to rearrange the duties of America’s financial regulators while creating new powers and authorities to sniff out and squelch the risks that brought on the financial crisis. This is not the first reform blueprint: the House of Representatives has passed its own bill, the Treasury issued proposals last year, and Mr Dodd himself had already unveiled one, aborted draft of the Senate bill. This version, however, is the first to reflect substantial input from Republicans, whose support is necessary to reach the 60-vote margin needed in the Senate for the bill to become law. ...

Private-equity managers face a difficult outlook

THE locusts went hungry in 2009. The private-equity industry, the bete noire of many a European politician, managed just $81 billion of buy-outs, compared with more than $500 billion in 2007. Indeed, almost anything that could go wrong for the industry last year did so, as a recent report from Bain, a consultancy, makes clear.

Private equity has prospered for most of the past 25 years thanks to a favourable combination of circumstances: easy access to cheap credit, rising asset prices, a relatively stable economy and a friendly regulatory environment. But credit was neither available nor cheap last year. The industry raised just $20 billion of new loans in 2009, perhaps because managers were unwilling to pay double the spread (or excess interest rate) they had paid in the middle of the decade. ...

Hotel owners and operators have their banks over a barrel

FEW industries are as adept as hotels at providing tempting offers—a well-stocked minibar, for instance—that lead to regret the next day. Lenders to the industry are now firmly in the regret phase. Over the next year banks in Europe and America may be forced to write down billions in bad loans, further impairing already strained balance-sheets. In many cases they are also likely to become the proprietors of debt-ridden hotels.

It is difficult to determine exactly how much outstanding commercial-property debt was used to finance hotels. But if commercial property has long been seen as the next shoe to drop in financial markets, hotels are the steel toecap. “There is a vast wall of properties out there that is underwater,” says Paul Bartrop of CB Richard Ellis, a property consultancy. ...

In a picture caption (”The best plane loses”) in last week’s issue we wrongly suggested that the aerial tanker based on the Airbus A330 (known in America as the KC-45, but elsewhere as the A330 MRTT) had no customers. In fact, it has been ordered by the air forces of Australia, Britain, Saudi Arabia and the United Arab Emirates. This caption has been removed online.

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Ron Dennis of McLaren, which launches itself as a carmaker this week, is driven by the pursuit of perfection

RON DENNIS can’t help himself. His passion for the tiniest detail haunts him even in his sleep. “Sometimes I think I need a brain transplant because I can drive myself absolutely bonkers,” he says. For example, not many car factories are built with glass walls, but that is the material that Mr Dennis chose for McLaren’s GBP300m ($454m) technology centre designed by Norman Foster. Why? “Because glass is either perfect or it’s broken. If you have metal panels and somebody bashes into one you have to decide whether to replace it or not. Then if glass is broken it makes this wonderful noise and everyone comes running and everyone knows who did it. The result is that people are careful and the building doesn’t have all the dents and scuffs that you usually get and we save money on repairs.”

Few have done more than Mr Dennis to change Formula One, the pinnacle of motorsport, from a cottage industry for enthusiasts into the slickly professional global show of today. The perfectionism that has driven the McLaren Grand Prix team to 10 driver’s championships (Lewis Hamilton’s in 2008 is the most recent) since Mr Dennis took it over nearly 30 years ago is now being channelled into turning McLaren into a serious maker of sports cars. This week Mr Dennis formally launched McLaren Automotive as a fully fledged carmaker with the debut of the MP4-12C, a GBP150,000 supercar said to outperform the latest Ferraris and Lamborghinis. ...

Western internet firms have found a big market in China, but few opportunities

BARRING an unlikely reconciliation, it is all but certain that by the end of March Google will withdraw from China, a place where it has succeeded commercially but failed to convince the authorities that information wants to be free. The expected departure comes after several attempts to hack its e-mail system, ever stronger censorship of its searches, legal complaints tied to its digitisation of books, and—always a worrying sign in China—growing vitriol in the state-controlled press.

If Google, which first raised the prospect of withdrawal in January, seems to have hesitated on the way to the door, there are 400m reasons why. That is the number of people in China, the government reckons, who use the internet. Increasingly, they are choosing it over other media, notably television, as a source of entertainment, information and opinion, say Max Magni and Yuval Atsmon of McKinsey, a consultancy. Over the past decade revenues from digital advertising have grown exponentially, admittedly from a tiny base, and the trend, predicts Mr Atsmon, will continue for some time. ...

The perils of a frigid labour market

NEW university graduates across Japan start work on April 1st—in a job that some presume they will hold for life. It is almost impossible to get hired for an executive-track position at any other time of year, or any later in life. This year firms have cut their hiring due to the economic crisis. That has raised the prospect of a second “ice age” akin to the freeze in hiring during Japan’s slump in the 1990s.

Some 20% of students graduating this month have no offers of a job, up six percentage points from last year and the highest tally since records began in 2000, in the midst of Japan’s banking crisis. Worse, almost half of big and medium-sized firms do not plan to hire any “regular” employees at all this year. ...

External pressures force the giants of aviation to spruce up their bestselling planes

ARE Boeing and Airbus the fierce competitors they claim to be, or have they become a cosy duopoly? The answer is probably a bit of both. Most of the time the rivalry between the two firms that dominate the commercial aviation industry is intense and has been of huge benefit to their customers. But over the past few years, airlines have become increasingly frustrated by the ever-receding time horizon for the replacement of the two workhorses of the world’s fleets, the Boeing 737 and Airbus A320 families, now not expected until the middle of the next decade. With a backlog of around 4,500 orders for these 110-180 seat single-aisle jets, split more or less equally between the two aircraft and stretching to 2015 at current production rates, neither Boeing nor Airbus has had much interest in offering anything new. But developments beyond their control are now forcing them to rethink.

John Leahy, Airbus’s vice-president for customers, has promised to provide “an update” on the firm’s thinking in July, at the time of the Farnborough air show. It is widely believed within the industry that Airbus will use the occasion to launch a enhanced version of the A320 (and its derivatives) with a new generation of efficient engines that will reduce emissions and cut fuel consumption by up to 15%. But a decision could come sooner. If it does, staff at Boeing admit they will have little choice but to follow suit. The spruced-up planes would enter service in about five years’ time, extending the models’ lives until around 2025. By then, Airbus and Boeing believe that radical new designs and technologies will have matured sufficiently to improve efficiency by 40% from today’s levels. That should provide a platform for new aircraft that will last 40 years or so—an age already exceeded by the 737. ...

In “For whom the bell tolls” (March 13th) we said that Lilac Sky Schools had failed at Sawyers Hall College, which is now slated for closure. In fact, the firm was asked only to improve standards, and in that it has succeeded. We apologise for the error.

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A city with a mission, and still some way to go

MANCUNIANS think their city is on a roll. Manchester has pipped Frankfurt, Dublin and Chicago, rising to 15th among cities around the world that attracted investment in 2008, according to a recent report by IBM Global Business Services. Another outfit, UK Cities Monitor, ranks it as Britain’s top location for a new head office—or back office, for that matter.

Manchester has attracted a lot of investment in the past few years, from companies including Bank of New York Mellon, Google, Nike and Credit Suisse. MIDAS, the agency that looks after such matters, reckons inward investment provided over 3,000 additional jobs during the first four quarters of the recession. Greater Manchester, an agglomeration of ten local authorities, is about to see a big relocation of BBC staff to MediaCityUK, a planned media hub at Salford Quays, which aims to create up to 15,000 local jobs. ...

Why the election fight in Islington South matters

THE number 4 bus starts its journey along the spine of Islington near the Whittington Hospital. Last month some 4,000 people met there to protest against proposals to close the hospital’s accident and emergency department, and its maternity unit. Local politicians of all hues turned out. Jeremy Corbyn, a Labour MP in whose Islington North constituency the hospital is based, and the MP for Islington South and Finsbury, fellow Labour member Emily Thornberry, both oppose closure. So do the Liberal Democrats, Greens and Conservatives who will be standing in the coming general election.

The point is not to stake out different positions but to own the popular issue. The Lib Dems accuse Labour of “hypocrisy” because the plans to reorganise London health care stem from a former health minister, Lord Darzi. Labour blames National Health Service bureaucrats instead. It has become a “political turf-war”, says Shirley Franklin, co-chairman of a coalition to save the hospital. ...

A parliamentary committee calls for the government to own up to what it owes

ACCOUNTING ruses to flatter balance- sheets are a bad idea, as Enron and Lehman have shown. Disquietingly, something similar has been going on in Britain’s public sector through the Private Finance Initiative (PFI). There has been no full-scale parliamentary examination of the PFI for ten years. And it has taken a House of Lords committee to press for reform.

Before the PFI was invented in the 1990s, public investment in new hospitals and the like was financed upfront through government borrowing or taxation. Once a project was completed the public body met the bills for upkeep. The PFI turns this approach on its head. Private consortia finance projects which they build and maintain. Taxpayers repay the cost of the investment along with subsequent services over the lifetime of the deals, typically 25 years. ...

A strike reminds voters that Labour, too, is vulnerable over party funding

ABSENT a last-minute outbreak of peace (of which there was no sign as The Economist went to press), March 20th will see a three-day walkout by up to 12,000 British Airways (BA) cabin crew, with another four-day strike planned from March 27th and the possibility of more after Easter. Although the stoppages will affect roughly half a million travellers, BA insists that some services will fly with the aid of volunteer cabin crews drawn from the rest of its workforce.

On one level, this is a simple industrial dispute. BA lost GBP342m ($545m) in the final nine months of 2009, compared with a GBP70m loss recorded in the same period in 2008. The recession only partly explains its woes: its customers continue to desert to cheaper, no-frills carriers. To cut costs, the firm has reduced cabin-crew numbers on long-haul flights from 15 to 14, frozen pay for two years and drawn up a less generous contract for new employees. Unite, the union representing the strikers, says that it has not been properly consulted, and has suggested its own package of pay cuts and part-time working. Neither side seems much interested in concessions. ...

Are Britain’s new jobs cutting-edge and wealth-creating? Not on your nellie

IF THERE is one thing that all main political parties agree on in this economic vale of tears, it is that Britain’s global future, post-crisis, is to be high-tech, value-added, creative and buzzy. Manufacturing may have been outsourced to eastern Europe and the BRICs, finance may be moving to Asian hubs and tax havens, but clever Britons will lead the world in the things that really matter—not least green technology.

If so, they had better get their skates on. The first government-commissioned National Strategic Skills Audit for England, released on March 17th, showed a striking increase in occupations that are anything but cutting-edge. Heavy-manufacturing and factory-floor jobs have fallen, as expected. But it is not nuclear physicists who are replacing them. ...

Cuts all round, but elite universities fare better than middling ones

TREASURE the things that are difficult to attain, urges a Chinese motto. It is sage advice that the body which distributes money to English universities seems to be following. On March 17th it said that, although there was less cash in the pot than last year, it would spend less on shiny new buildings (and propping up ancient ones) so that it could afford more for first-rate research and the harder sorts of teaching.

Like other public services, universities have enjoyed a funding boom for more than a decade. Their total income doubled between 1997 and 2009, whereas student numbers increased by just 20%. Academic pay rose and spending on the stuff that motivates many of them—that is, research—rocketed. Wise financial officers squirrelled away money into physical assets such as student accommodation. ...

The potential—and limits—of the internet in political campaigning

THE transatlantic trade in political tactics has not always been one-way. In 1994 America’s Republican Party adopted a Westminster-style policy manifesto for its conquering mid-term election campaign. Thanks to Barack Obama, though, the British have more recently been relegated to taking notes. The part played by internet campaigning in his rise from upstart senator to president has been studied forensically by the Labour Party, the Conservatives and the Liberal Democrats. Veterans of the Obama campaign often sweep through London to show the natives how to use new media to organise activists, raise money and communicate with voters. There is talk of Britain being on the verge of its first truly digital election.

Measured against these hopes, the coming campaign will disappoint, and not because British politicians are irredeemably analog. Labour and Tory insiders agree that the Obama model is hard to export beyond America’s unusual polity, with its weak party organisations, primary races and endless, costly campaigns. “Almost any other Western democracy would be a more useful comparator for us,” says one. ...

Tories who think their policies are their main problem are mistaken

IT IS often nicer to believe your destiny is in your hands than that your fate is sealed by nature or circumstance. So it has been with the Conservative Party and its erratic poll lead (up a bit this week in some surveys, but much less solid than it seemed last year), and the sudden feeling that, like a tight basketball game, this general election will be decided at the death. Many rattled Tories instinctively reach for a solution that seems within their grasp, namely a change in their policies, though they disagree on what sort. This is an understandable and (in a way) consoling response. But it is probably mistaken.

For some chuntering MPs and fulminating columnists, the wobble proves what they have always known: that David Cameron and his cohorts should talk more and tougher about crime, immigration, and tax and spending cuts. Some in this brigade see the moment last autumn when Mr Cameron decided not to promise a (pointless) referendum on the ratified Lisbon treaty as the turning point in their fortunes. Their war cries are familiar: more red meat (and more William Hague)! Slash the NHS! And so on. ...

A new film suggests France is finally coming to terms with its wartime history

THE French have tended to confront their record under Nazi occupation with a mixture of denial, silence and myth. The second world war was not on the school curriculum until 1962. Textbooks scarcely mentioned the Holocaust. No French leader from de Gaulle to Mitterrand acknowledged the state’s part in deporting Jews to Nazi death camps. It was not until Jacques Chirac became president in 1995 that the French state accepted its official complicity, prompting much soul-searching over collaboration, memory and guilt.

That makes the reaction to the recent release of “La Rafle” curious. This film recreates the French police’s round-up in 1942 of 13,000 Paris Jews, including 4,000 children, and the families’ transfer to the capital’s Velodrome d’Hiver, en route to the death camps. It unfolds through the eyes of Jo Weismann, an 11-year-old who later escaped from an internment camp near Orleans after his parents were sent to Poland. It offers the first cinematic reconstruction of the vast velodrome, in which families endured hot and unsanitary conditions. When Mr Weismann, who is still alive, visited the set he walked out, gasping for air. ...

A new candidate for the task of saving la Serenissima

BY ANY yardstick, Renato Brunetta is an unusual character. Born the son of a wretchedly poor Venetian souvenir vendor, he grew up a decidedly short man. Yet he has shaped two prominent careers for himself, as an economist and a politician.

Since becoming Silvio Berlusconi’s public-administration minister two years ago, he has shown a rare talent for stirring controversy (recently he suggested that Italy’s stay-at-home youngsters should be driven by law from their parental homes). A liberal in a society where liberal ideas are often taboo, he cheerfully forges ahead without creating the sort of consensus that many Italians see as indispensable. To the outrage of trade unions, he has shaken up Italy’s legendarily torpid civil service, in which he claims to have reduced absenteeism by 40%. He has since focused on modernising the administration by digitisation, and is preparing for the (possibly superhuman) task of introducing Italian bureaucrats to gentilezza and cortesia. ...

The EU and America are no longer prepared to tolerate graft in Kosovo

ON MARCH 10th a small earthquake shook Kosovo. A worse one would have toppled many of the country’s new, shoddily constructed buildings. Worryingly for Kosovo’s leaders, other parts of the national edifice are also coming under test—and they may not fare so well.

In February 2009, a year after Kosovo declared independence from Serbia, the mood among the new country’s foreign supporters was upbeat. The Serb minority was staying put. Serious violence was negligible. The UN mission that had run Kosovo since 1999 was winding down fairly smoothly. But a year on, Kosovo’s leaders are under unprecedented foreign attack for tolerating high-level corruption. ...

How linguistic variations affect where Germans choose to live

FEW Germans now say Appel rather than Apfel (apple) or maken instead of machen (to make). The north German dialects that use such variants are mostly dead or dying. But the cultural differences that they reflect still govern behaviour today, says a paper from the Institute for the Study of Labour, in Bonn*.

Acting on imperial orders in the 1880s, a linguist called Georg Wenker asked pupils from 45,000 schools across the new Reich to translate standard German sentences into local dialect. The results were used to compile an atlas of linguistic diversity. The new paper shows that Wenker’s dialect regions still define the comfort zones in which Germans prefer to live. When people migrate within Germany, they tend to go to places where dialects resemble those spoken in their home region 120 years ago. ...

Reforming Russia’s violent and corrupt police will not be easy

THEY shoot, beat and torture civilians, confiscate businesses and take hostages. They are feared and distrusted by two-thirds of the country. But they are not foreign occupiers, mercenaries or mafia; they are Russia’s police officers. The few decent cops among them are seen as mould-breaking heroes and dissidents.

Daily reports of police violence read like wartime bulletins. Recent cases include a random shooting by a police officer in a Moscow supermarket (seven wounded, two dead), the gruesome torture and killing of a journalist in Tomsk, and the case of Sergei Magnitsky, a young lawyer for an American investment fund. He was denied medical treatment and died in pre-trial detention in Moscow having accused several police officers of fraud. ...

Has the British prime minister handed his possible successor an almighty headache?

GORDON BROWN, a former head of the British civil service once remarked, has a “Macavity quality” to him. Like TS Eliot’s poetical cat, he said, Britain’s prime minister has a knack of vanishing when there is “dirty work to be done”. Now Mr Brown looks as though he may have pulled a Macavity again, by condemning the next British government to a nasty clash over European Union regulation of hedge funds and private equity.

In the run-up to a Brussels meeting on March 16th, a thumping majority of EU finance ministers looked set to oppose Britain and vote for a directive imposing new rules on hedge funds and private-equity firms. Backed by supportive noises from the American government, representatives of these firms had described the draft directive as protectionist, flawed, and an incentive for managers to flee the EU for more welcoming spots like Switzerland (London hosts more than 70% of EU-based fund managers). ...

A region that a year ago looked as bad as Greece does now has averted catastrophe—but is not yet completely safe

BELIEVE the headlines and Europe’s worst economic headache by far is Greece, financially feckless and socially volatile. Uncontained, its problems could infect other Mediterranean countries like Spain, Portugal and even Italy. The euro’s future and the European Union’s credibility are at risk. And so on.

This week EU finance ministers talked of the possibility of bilateral loans to rescue Greece, as a reward for the government’s new fiscal austerity—though details were conspicuously lacking. But history shows how fast the tide of worries can ebb. Twelve months ago, it was ex-communist countries—Hungary, Latvia, Ukraine and others—that were seen as the biggest problems. Banking and currency collapses loomed, stoking dreadful risks for the region and beyond. A year on, their problems seem humdrum, not horrific. ...

The growing scandal about child abuse reaches the top of the Vatican

A SUBTLY disquieting photograph greets visitors to the website of the northern Italian diocese of Bozen-Brixen. The dark recesses of a sunken passageway end in a flight of steps leading to daylight. A click leads to an e-mail address for reporting sexual or physical abuse by priests. The first person to use it spoke anonymously to the newspaper Corriere della Sera. As a wartime evacuee, he recalled how a village curate “felt my trousers, tried to kiss me and asked me to caress him”. His younger brother told him the priest was still molesting boys 13 years later.

The web initiative has recently been praised as an exercise in openness and may be extended to other parts of Italy. Yet the e-mail address had long been on the site, and came to prominence only amid the mushrooming worldwide scandal involving hundreds of people molested by priests or in church-run institutions. ...

Emerging powers have helped poorer nations weather the global recession

IN COLD-WAR days America and the Soviet Union vied for influence among the poor world’s minnows. Now the BRICs—Brazil, Russia, India and China—are getting into the game, and changing it. This month, Sri Lanka got $290m from China for a new international airport and $67m from India to upgrade its railways. As poor countries emerge from recession and the rich world flounders, big middle-income countries see a once-in-a-generation chance to win friends and influence people.

The process is sometimes direct (through aid, trade, remittances, investment) and sometimes indirect (through commodity prices or competition in third markets, for instance). But it is always hard to pin down. None of the new donors (all of which, except Russia, still get aid themselves) publishes comprehensive, or even comprehensible, figures. But a new study* by the Overseas Development Institute (ODI), a British think-tank, says the emerging countries (such as the BRICs) increasingly affect the growth prospects of poorer ones. In other words, after decades of talk about the importance of “south-south” ties, those links have finally started to mean something. ...

A belated attempt to curb a pernicious form of child pornography

IN HER high-school uniform, neatly brushed hair and sweet smile, the young girl represents the innocence of youth. Next she is naked, having sex and seeming to enjoy it. The manga, or comic book Puru-Mero (Jiggle-Melons), picked up at a convenience store, is meant to titillate. But although children are depicted sexually, the images are not illegal in Japan, because they are illustrations.

This may change. The Tokyo municipal government plans to vote on March 30th to amend an ordinance against child pornography to include “non-existent minors”. Much Japanese porn comes in forms that escape rules covering photos and videos: manga; anime (cartoons); and video-games. Existing bans are meant to protect the child victims. “Virtual” porn—where there is no harm to a real person—is illegal in some countries to protect public morals and ensure a safe environment for children. Last month an American court sentenced a man to six months in prison for possession of Japanese manga child pornography. ...

Pakistan wants a say in ending the war, and it knows how to ask

A HIGH-LEVEL delegation of Pakistanis is due to sweep into Washington for the restart on March 24th of a “strategic dialogue” with America. The Pakistanis have muscled their way to the table for what looks like a planning session for the endgame in Afghanistan. The recent arrest of the Taliban’s deputy leader, Mullah Abdul Ghani Baradar, and a clutch of his high-ranking comrades, has won them a seat.

The Pakistani team, led by the foreign minister, will include both the army chief and the head of the army’s spy agency, the Inter-Services Intelligence (ISI). America has upgraded its own representation at the talks, last held in mid-2008, from deputy-secretary to secretary-of-state level. The dialogue is supposed to cover the gamut of bilateral issues, including help for Pakistan’s fragile economy, and even, on its ambitious wish-list, civil nuclear technology. ...

Neither comrades nor spouses

“THERE are three ways of being an unfilial son,” argued Mencius, an ancient Confucian philosopher. “The most serious is to have no heir.” The desire for male descendants has had many baleful consequences in China, and in recent years one that used to be hidden has come to light. Millions upon millions of women are trapped in loveless and often miserable marriages to homosexual men. Thanks to the internet their cries for help have been heard widely enough in mainstream culture to earn their plight a commonly accepted abbreviation. They are known as “tongqi”, combing the words “tongzhi”, or comrade, Chinese slang for “gay”, with “qizi”, meaning “wife” in Mandarin.

It is estimated that 15-20% of gay men in America marry heterosexual women. But Liu Dalin, a pioneering sexologist now retired from the University of Shanghai, has put the share in China at 90%. If so, the number of tongqi in China may be as high as 25m. Li Yinhe, a sociologist at the Chinese Academy of Social Sciences, explains this in almost the same terms as Mencius: “The name for a family without descendants is juehu, which means ‘a house that is severed’. That is considered the biggest tragedy and causes huge pain.” ...

Defensive and assertive in its words, China for the time being has a bark that is worse than its bite

“WE ARE opposed to the practice of engaging in mutual finger-pointing among countries,” said China’s prime minister, Wen Jiabao, on March 14th, resisting for the moment his own index-finger-wagging habit. Speaking at a news conference, Mr Wen was at pains to dismiss suggestions that Chinese foreign policy was becoming more assertive. Not all Chinese officials seem to have got the message. In their dealings with a stricken West, they appear conflicted.

“There are already views about China’s arrogance, China’s toughness, and China’s inevitable triumph. You have given me an opportunity for me to explain how China conducts itself,” said Mr Wen. The opportunity was a rare one. Mr Wen is the only Politburo member to hold regular press conferences, just once a year at the end of the brief annual rubber-stamping session of China’s parliament, the National People’s Congress (NPC). He has only two to go before he steps down in 2013. ...

India's rights-based activism is bound to yield less than it promises

BESIDE the sluggish, stinking Yamuna river, on Delhi’s eastern edge, Kamli minds her two precious goats. These animals, a mud-built shelter and the fertile scrap of floodplain where the 35-year-old, her husband and five offspring are squatting, are all they have. Kamli sells milk, her husband vegetables, and he and three teenaged sons labour, when they can, on construction sites. This earns them a combined monthly income of around 3,000 rupees ($65). But poor though they are in fixed assets, Kamli and her family, like all Indians, have recently grown rich in legal “rights”. In theory these guarantee them education, health, food and many other boons. What good, students of Indian poverty wonder, does this do them?

So far, not much. None of the family, of dalits, as Hinduism’s former “untouchables” are called, has ever seen a doctor. Kamli says she once tried taking a sick child to a state-run hospital, but was rebuffed. The family’s school record is also poor: only a 14-year-old daughter has ever attended one. From the innumerable schemes that India earmarks for its 400m-odd poor, Kamli says the family receives nothing but some cut-price food—and then only half the ration it is entitled to. ...

Lacking his predecessor’s popular touch, Sebastian Pinera (below) and his team of business technocrats will face pressure from Chileans for quick results

HE HAS always been hyperkinetic. But taking office as Chile’s president just 12 days after a devastating earthquake has thrown Sebastian Pinera into a frenzy of activity. No sooner had he been sworn in on March 11th as the country’s first elected right-of-centre leader in half a century than he was off on a helicopter tour of the damage from a big aftershock, cancelling lunch with seven visiting Latin American presidents. Having set up an emergency committee under his interior minister to handle the disaster, Mr Pinera is doing much of the work himself, holding cabinet meetings late into the night and making whistle-stop visits to the worst-affected areas in south-central Chile.

He has a big task ahead of him. The ground is still shaking. Parts of the coast have been raised by two metres. The death toll (at around 500) is lower than at first feared. An official in the outgoing government reckons that 150,000 families were made homeless (down from an initial guess of 500,000). Even so, the new team guesses that the earthquake has caused damage to infrastructure, businesses and homes of some $30 billion (a sum equal to around a fifth of GDP), though it will be weeks before an accurate tally is made. ...

Inflation figures fuel a debate over when the Fed should tighten

TRACKING American interest rates is like watching paint dry. At its meeting on March 16th the Federal Reserve left its short-term rate target between zero and 0.25% for the tenth consecutive time, and, given “subdued inflation trends”, said it would probably leave it there for an “extended period”.

But just how subdued is inflation really? Frustratingly, the latest data provide ammunition for both the hawks, who question the need for extended low rates, and the doves, who don’t. ...

Not what was asked for

A YEAR ago, Congress asked for a plan that would provide affordable broadband service to all America’s citizens. On March 16th, the Federal Communications Commission responded with a non sequitur: a national wireless plan which is good in its way, but which largely fails to tackle the problem it was asked to solve.

There is much to like in the FCC’s proposal. It proposes to auction a large chunk of radio spectrum that could be used to provide data to wireless devices, and to encourage existing licence-holders, in particular broadcasters, to auction or sell any capacity they are not using. It also frees up more spectrum for tinkering on unlicensed space. This is no small thing; the standard for Wi-Fi was developed on unlicensed spectrum that had been considered “junk band”, cluttered with low-intensity signals from microwave ovens and baby monitors. None of this, though, will do much to make broadband access universal or more affordable. ...

Virginia bans mandatory health insurance. Does it matter?

IF AMERICAN constitutional law is a centuries-old struggle between Alexander Hamilton and Thomas Jefferson—between expansive and narrow views of federal power—Virginia’s general assembly struck a blow for Jefferson, its native son, on March 10th, when it became the first state legislature to ban mandatory health insurance, such as Barack Obama’s health plan insists everyone must have. The legislation, which states that Virginians can neither be required to have health insurance nor be penalised for not having it, passed both chambers of Virginia’s legislature with significant Democratic support—21 of the House’s 39 Democrats voted for it.

Idaho followed suit a week later. Arizona’s voters will decide whether to write such protections into the state’s constitution later this year. According to the American Legislative Exchange Council, a small-government advocacy group that drafted model anti-mandate legislation, similar measures are in the works in no fewer than 35 other states. ...

The House speaker is not popular with voters. But she can count noses

WHEN Nancy Pelosi moved to San Francisco, she struggled to find somewhere to live. For months, and with four small children, she lodged with her mother-in-law. So she was relieved when she found a perfect home to rent: big, childproof and with swings in the garden. She was about to seal the deal when she discovered that the owner’s husband was heading east to join the Nixon administration. “We won’t be able to live here,” she said. “I could never live anyplace that was made available because of the election of Richard Nixon.”

If this story were told by a Republican, Lexington would dismiss it as apocryphal. It confirms too neatly the caricature of Mrs Pelosi as a petty and tribal partisan. But the source is Mrs Pelosi’s autobiography, “Know Your Power: a Message to America’s Daughters”. And in case you think it out of character, she adds that her daughter Alexandra “often says to me that she knows everything she needs to know about me by hearing that story.” ...

Action on climate is justified, not because the science is certain, but precisely because it is not

CLIMATE-change legislation, dormant for six months, is showing signs of life again in Washington, DC. This week senators and industrial groups have been discussing a compromise bill to introduce mandatory controls on carbon (see article). Yet although green activists around the world have been waiting for 20 years for American action, nobody is cheering. Even if discussion ever turns into legislation, it will be a pale shadow of what was once hoped for.

The mess at Copenhagen is one reason. So much effort went into the event, with so little result. The recession is another. However much bosses may care about the planet, they usually mind more about their bottom line, and when times are hard they are unwilling to incur new costs. The bilious argument over American health care has not helped: this is not a good time for any bill that needs bipartisan support. Even the northern hemisphere’s cold winter has hurt. When two feet of snow lies on the ground, the threat from warming seems far off. But climate science is also responsible. A series of controversies over the past year have provided heavy ammunition to those who doubt the seriousness of the problem. ...

Hugely expensive and full of flaws though it is, Barack Obama’s health-care plan is still worth having—just

IT WILL cost close to a trillion dollars over the next ten years, a vast sum of money at any time and a heart-stopping prospect when America’s budget deficit is gobbling up nearly 11% of GDP and unemployment seems stuck at close to 10%. It takes only tentative steps towards controlling the relentless above-inflation rise in health-care costs that has gone on for decades, squeezing corporate and personal budgets alike and threatening, if unchecked, to overwhelm the federal budget entirely. It squanders a golden opportunity to shift away from a payment model that encourages doctors to prescribe too many overpriced tests. Its sponsors in Congress are likely to suffer in the mid-term elections, and it will probably always be cited as an example of Barack Obama’s leftish mismanagement during much of his first year as president.

So the latest version of health reform which Democratic leaders hope to vote on in a matter of days is, to put it mildly, a terrible disappointment. Despite that, the Democrats must summon up their courage and vote for reform. This poor bill is still better than no bill at all for two reasons. ...

The pope should say plainly and loudly that sexual abuse of children is not just sinful. It is criminal

IT COULD hardly get worse. Sex scandals are breaking over the Catholic church with such fury (see article) that the Vatican has felt bound to defend Pope Benedict XVI himself. Children at some Catholic schools in Germany have been systematically abused; paedophiles were transferred to other jobs, rather than dismissed or prosecuted. Abuse has surfaced in Austria and the Netherlands. In Ireland Cardinal Sean Brady, the primate, has admitted that he was present in 1975 when two teenage boys were persuaded to sign oaths of silence about their abuse by Father Brendan Smyth. The church defrocked Smyth, but nobody, including Cardinal Brady, told the police about his crimes and he remained free to abuse boys for two decades.

Yet denial still reigns. Bishop Christopher Jones, head of the Irish episcopate’s committee on family affairs, has complained that the church is being singled out, when most abuse happens inside families and other organisations. “Why this huge isolation of the church and this huge focus on cover-up in the church when it has been going on for centuries?” he asked. ...

Israel’s prime minister has enraged his main ally and hurt the peace process: it is not too late to change course

BINYAMIN NETANYAHU is one of the great survivors of Israeli politics. Whether he is the man to secure his country’s long-term survival is more questionable. In 1997 The Economist acknowledged his “easy eloquence and optimistic approach”, yet called for him to resign as Israel’s prime minister after dubbing him a serial bungler with an “extraordinary talent for coming up with ill-conceived, provocative decisions at the wrong moment”, such as his insistence on building “a new Jewish suburb” on the east side of Jerusalem which Palestinians saw—and still see—as their part of their future state’s shared capital. We condemned Mr Netanyahu for the “arrogance of his assumption that the Palestinians will in the end accept whatever he offers them”. More than a dozen years on, has Mr Netanyahu changed?

His recent behaviour eerily suggests not. It is hardly wise to enrage your most vital ally on the eve of negotiations, as he did by seeming to flaunt Israel’s decision to build new settlements in East Jerusalem, just when America’s vice-president, Joe Biden, arrived to hail the talks’ resumption. Piqued by this apparent insult, Barack Obama let it be known that his patience with the Israeli leader was running out. The Palestinian leader, Mahmoud Abbas, is refusing to resume talks unless the building decision is revoked. Clashes erupted between Israeli security forces and stone-throwing Palestinians. A Gaza rocket killed a Thai worker in Israel. Fears of another intifada grew. ...

At last a decent effort to tackle the problem of “too big to fail”

IN LATE 2008 the American government threw its weight behind its biggest financial institutions to avert a systemic meltdown. It worked. The banking crisis has largely passed, but the guarantees (many of them implicit ones) remain—and therein may lie the seeds of another crisis. America’s financial system is now dominated by a few dozen firms that are assumed to be too big to fail. The danger is that they will in the coming years exploit that assumption to add leverage, girth and risk, leading to another collapse and more bail-outs.

As regulators around the world try to work out how to bombproof the financial system, dealing with the problem of “too big to fail” is the most vexing issue. The initial response has been to prescribe thicker buffers of capital and liquidity in the hope that this will insulate banks from future crises. But this is a partial solution. Even the bigger buffers could not have prevented the worst blow-ups of the past two years. Regulators therefore need a way to unwind firms when they teeter on the brink of failure—a “resolution” regime, as it is known. ...

If Spain, Portugal, Italy and Greece want a lesson in how to take hard decisions, they should look eastward

IN THE depths of the financial crisis a year ago, it was easy to see how the woes of the ex-communist economies could cause huge problems for the rest of Europe. Western banks had lent recklessly in foreign currency to firms and households stricken by the downturn. If they all fled for the exit at once, dumping assets and stopping lending, the result would be carnage both at home and abroad. Also scary was the prospect of a currency crisis. If Latvia were forced off its peg with the euro, its Baltic neighbours might topple too. A combination of weak governments and angry voters looked ominous enough for some commentators, including this newspaper, to fret that the bill for bailing out new members from the east could be big enough to threaten the European Union.

In the event, the ex-communist economies have so far ridden out the storm (see article). Ex-communist Europe still has to grapple with its share of problems: an ageing workforce, bossy officials and poor infrastructure. But nobody has defaulted and nobody has rioted. Something went right—and it holds lessons for troubled countries in western Europe. ...

Ban the trade in bluefin tuna—but set a clear path to sustainable exploitation

THE majestic bluefin tuna has been fished in the waters of the Mediterranean and the Atlantic for at least 7,000 years, doing its fish bit to sustain human wealth, health and happiness. But in the past four decades an orgy of overfishing has reduced its population by more than 80%. The situation is now so bad that the bluefin may be declared sufficiently endangered for trade in it to be banned at a meeting of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), which gathers in Doha this week.

The bluefin was supposed to have been managed by an intergovernmental body, the International Commission for the Conservation of Atlantic Tunas (ICCAT). But this was so stunningly bad at the job that it was dubbed the International Conspiracy to Catch All Tuna. In one recent year the scientific advice was to catch at most 15,000 tonnes of tuna. ICCAT imposed a limit of 30,000 tonnes. The actual catch was 60,000 tonnes. Little wonder the bluefin is vanishing fast. ...

Political chaos beckons—unless there is an election and an honest discussion about the monarchy’s future

FOR decades Thai politics suffered from a surfeit of pragmatism. Indeed, grimy compromises were dignified as “Thai solutions”. Parties tussled over the perks of office, without letting policies or principles get in the way. When the bickering became too intense, the army would step in—18 times since the advent of constitutional monarchy in 1932. Presiding over a messy but largely functioning polity has been a revered king, Bhumibol Adulyadej, whose admirers have no difficulty in reconciling the contradictory ideas that he is both “above politics” and also the guarantor of stability.

These days, pragmatism has given way to dogmatic intransigence. Huge demonstrations on the streets of Bangkok this week by red-shirted anti-government protesters have produced few hints of compromise. Contributing to this febrile atmosphere is an unspoken fear. King Bhumibol, 82, has been hospitalised for several months. Although he is reportedly in better health now, Thailand needs to start thinking about what will come when his reign ends. That the succession may be rocky only adds to the threat from the political stand-off. Thailand urgently needs to rediscover its lost flair for pragmatism and to rebuild a functioning political system. ...

SIR – Your special report on managing information (February 27th) and data visualisation was a good update for the general reader, but adding a few caveats would have provided some foundation to think critically about what they were seeing. The sheer quantity, speed, beauty, complexity and sophistication of new visualisation techniques are amazing. But they are still susceptible to the prosaic deceptions of data displays such as scale, aspect ratio and placement.

In addition, intensive processing for visualisation can actually destroy information. Some methods average data-points across vast reaches of time, space and magnitude. Many techniques destroy the natural variation in the data and treat outliers as anomalies to be edited or ignored. Our knowledge of physical and economic reality requires that we understand both variability and extremes. If you doubt this, consider the original deceptive climate-change hockey stick, the Challenger O-ring failures, or the meltdown of securitised assets. ...

Behind the present unrest in Thailand lie far deeper fears about the royal succession. And those may not be spoken publicly

IN TRUCKS, boats and buses, protesters streamed into Bangkok for a non-stop rally that was billed as a “people’s war against the elite”. By March 14th the crowd, all wearing bright red and brimming with elation, had passed 100,000. On the stage, speakers railed against the government and its royal and military enablers. Banners read “No Justice, No Peace”. Another bruising round in Thailand’s protracted power-struggle was under way, with no clear end in sight.

By mid-week the red shirts seemed no closer to their goal of forcing out the prime minister, Abhisit Vejjajiva, and forcing new elections. The army stands squarely behind Mr Abhisit, who took power 15 months ago by a parliamentary fix and remains the hero of Bangkok’s myopic monied classes, as well as the yellow-shirted protesters who support the status quo. But in a one-man, one-vote democracy, the have-nots hold the key to success. ...

There are lots of uncertainties in climate science. But that does not mean it is fundamentally wrong

FOR anyone who thinks that climate science must be unimpeachable to be useful, the past few months have been a depressing time. A large stash of e-mails from and to investigators at the Climatic Research Unit of the University of East Anglia provided more than enough evidence for concern about the way some climate science is done. That the picture they painted, when seen in the round—or as much of the round as the incomplete selection available allows—was not as alarming as the most damning quotes taken out of context is little comfort. They offered plenty of grounds for both shame and blame.

At about the same time, glaciologists pointed out that a statement concerning Himalayan glaciers in the most recent report of the Intergovernmental Panel on Climate Change (IPCC) was wrong. This led to the discovery of other poorly worded or poorly sourced claims made by the IPCC, which seeks to create a scientific consensus for the world’s politicians, and to more general worries about the panel’s partiality, transparency and leadership. Taken together, and buttressed by previous criticisms, these two revelations have raised levels of scepticism about the consensus on climate change to new heights. ...

A row over whether alcohol should be tolerated for some or banned for all

TOURISTS may be forgiven for thinking that drinking alcohol in Morocco is legal. You can happily buy the stuff in supermarkets, bars and smarter restaurants, but Muslims, who make up the vast majority of Moroccans, are strictly forbidden to drink it. Islamists dislike this compromise—and were delighted when the mayor of Fez, the religious capital, recently suggested it could become Morocco’s first entirely dry city.

It is not the first time that the Islamists have opposed the country’s tolerant attitude. In December Ahmad Raissouni, a hardline cleric, issued a fatwa calling on Moroccans to boycott supermarkets that sell alcohol. Two years earlier Islamist politicians had been outraged by the holding of a wine festival in Meknes, a conservative city at the heart of Morocco’s wine-producing region. Columnists in the populist press grumbled that Morocco was losing its Islamic identity. ...

How the government is stacking the odds in its favour

CAMPAIGNING is under way for the country’s first real multi-party elections since 1986, due to be held on April 11th. Voters, opposition politicians and foreign governments, all seemingly united in their dislike of President Omar al-Bashir, had hoped that these polls would bring about a “democratic transformation” of the country. But there is every sign the Sudanese will have to wait quite a bit longer for genuinely fair elections.

The coming polls are the result of a peace deal signed in 2005 to end a 50-year on-and-off war between the Muslim northern half of the country and the Christian and animist south. According to the UN, they are also “some of the most complicated elections ever”. Voters will choose a national president, a national assembly, state governors, state assemblies, the president of the semi-autonomous south, and the southern assembly. In addition there are several different types of voting systems, including first-past-the-post, a straight majority one for choosing the president, proportional representation and a women’s list. In all, voters in the north must cast eight different votes and those in the south must cast 12. ...

Some of Iran’s most celebrated film-makers are being hounded abroad

FILM-makers in Iran have always had to get by with just a few breaths of artistic air yet made memorable movies in the process. The country’s cultural tsars disliked the taboo-busting productions of Jafar Panahi but reluctantly allowed them onto the screen. Films such as “The Circle”, about the wretchedness of women, and “Offside”, a story of girls who dress as boys in order to get into the male-only environment of a football match, at least showed that Iranian censorship had failed to kill creativity. But now the accommodation has ended. Earlier this month Mr Panahi was arrested, along with several other people, while shooting what a loyalist website called “an anti-regime film”.

Mr Panahi’s strained relations with the authorities broke down after last June’s disputed election. As a judge at the Montreal film festival, he infuriated the government by wearing a green scarf to show his support for the opposition and was briefly detained back home for attending a ceremony for victims of official brutality. ...

The rulers sound cocky as an inchoate opposition ponders its next move

IF THERE were an Oscar for chutzpah, Iran’s Mahmoud Ahmadinejad would be a shoo-in. Ever since last June’s disputed election spawned a serious opposition movement, Iran’s polarising president has exuded self-confidence, not hesitating to proclaim a new world order even as Tehran, the capital, descended into mayhem. Now, with the opposition in the doldrums and the West seemingly unable to check Iran’s progress towards nuclear self-sufficiency, its leaders are beamingly proclaiming the crisis to be over. The Islamic Republic is again shining its anti-Western, anti-Israeli light across the world.

Last month’s arrest of Abdolmalek Rigi, whose Jundullah guerrillas have carried out bombings and assassinations in the country’s south-east in the name of his fellow Baluchis, a Sunni minority ethnic group that straddles the border with Pakistan, occasioned much self-congratulation on high. Shorn of his distinctive beard, Mr Rigi was paraded before Iran’s television cameras and “confessed” to receiving aid from the American arch-enemy. Mr Ahmadinejad taunted the Americans for their heavy-handed approach to tackling terrorism. “If you want to arrest terrorists,” he said, “learn from Iran.” ...

A United Nations agency under attack

THE World Food Programme (WFP), created by the United Nations in 1962 to save lives, has since grown into the behemoth of the aid business, envied and disliked in almost equal measure by many of its smaller peers. It says it feeds 90m people a year in 73 countries. Yet some query whether it always fulfils the high ideals of its humanitarian mandate.

The WFP has had to get used to fierce criticism, particularly of its operations in Africa. The main complaint is that food aid creates a dependency culture among the poor. The WFP employs large numbers of press officers in its headquarters in Rome and elsewhere to jump to its defence. Even so, a recent scandal over its work in Somalia has pricked it. An internal UN report accuses the WFP of abjectly failing to get food to starving Somalis. The report says that systematic collusion between local WFP staffers, Islamist militants and food transporters has led to the diversion of up to half of the food it ships to Somalia, with some of it going to jihadists. The WFP has hotly denied the allegations of corruption, but it has ceased working with three transport contractors who are alleged to have been involved in arms trading. ...

More than 15,000 people died or went missing as a result of natural and man-made catastrophes in 2009, according to Swiss Re, an insurance firm. In Asia, the region that was hardest hit, nearly 9,400 lives were lost, around 1,200 of them in an earthquake in Indonesia in September; the total damage was $2.3 billion, of which only $50m was insured. The insurance firm puts the total economic losses from catastrophes in 2009 at $62 billion, of which $26 billion, or less than half, was covered by insurance. Winter storm Klaus, which hit France and Spain in January, was the most costly event of 2009. The storm caused heavy rain and flooding, claimed 25 lives and cost insurers almost $3.4 billion.

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John Thorbjarnarson, saviour of crocodiles, died on February 14th, aged 52

THE rippling fire of the tiger, the cuddliness of the panda, the viridian flash of the green-cheeked parrot, all argue that these most-endangered species should be saved. It’s harder to make the case for crocodilians. That bony, hideous head, with its unblinking yellow eye; those huge teeth, smelly with fish-debris, overhanging the long, cruel, curling smile; the slithering slide of the white underside down a muddy slope, into the water where those jaws, the strongest in Nature, will smash round the leg of a man and pull him under, thrashing and screaming.

John Thorbjarnarson knew he could not end men’s fear of crocodilians, hard-wired since hominids first ventured down from the trees into swamps that seethed with them. But in his 20-odd years working for the Wildlife Conservation Society he did more than anyone else to try. He commended the grace of their straight, silent swimming, their camouflage mottlings of yellow, grey and olive green, and the jewelled beauty of new, damp hatchlings no bigger than the span of his hand. He stressed their cultural importance, even magic: the dragon of China, bringer of good fortune, and the water god of ancient Egypt who made the grasses green. He extolled their niceness, snapping them as they basked companionably on warm mud or on a favourite bank of long grass, the forefoot of one embracing the back of another. Most crocodilians, he reminded people, preferred to dine on fish or molluscs rather than farmers. Most were sensitive, even shy. ...

Fast cars will go even faster with electric power

SOME people think sports cars are threatened with extinction by tightening restrictions on carbon-dioxide emissions and unacceptable fuel-guzzling. They fear the roar of the V8 will be replaced by the whirr of the electric armature—and that motoring will never be the same again. Well, it ought to be quieter, that is true. But the Jeremy Clarksons and J. Bonington Jagworths of this world need not fear that it will be slower.

The secret (whisper it, lest puritanical greens find out) is that electric motors are better than combustion engines. They have more oomph, and no need of a gearbox to deliver it. No self-respecting supercar should be without them. And, at this month’s Geneva motor show, at least three supercar-makers showed that they had got the message. Lotus, Porsche and Ferrari each unveiled vehicles driven partly by electric motors. These cars have petrol engines, too, to back the electric ones up; technically, therefore, they are hybrids. But that should change in the future as batteries’ storage capacity goes up, and charging time comes down. Most importantly they show that, sometimes, doing the right thing can be fun. ...

A disease-free society helps effeminate men attract women

IT IS not just a sense of fairness that seems to be calibrated to social circumstances (see article). Mating preferences, too, vary with a society’s level of economic development. That, at least, is the conclusion of a study by Ben Jones and Lisa DeBruine of Aberdeen University, in Scotland, published this week in the Proceedings of the Royal Society.

Dr Jones and Dr DeBruine, themselves a married couple, examined what might be called the Deianira paradox. Hercules, demigod and paragon of masculinity in the ancient world, was indirectly done for by his own sexual prowess—his jealous wife, Deianira, accidentally poisoned him with a potion she thought would render him eternally faithful. Deianira’s predicament is a woman’s ultimate dilemma. In a man, the craggy physical characteristics associated with masculinity often indicate a strong immune system and thus a likelihood of his producing healthier offspring than his softer-featured confreres will. But such men are also more promiscuous and do not care as much about long-term relationships, leaving women to raise their kids alone. ...

Personal animosity is a mighty force in business, for good as well as ill

THE third world war, it seems, has broken out in an unexpected place: Silicon Valley. Apple and Google were once so close that Eric Schmidt, Google’s boss, joked that they should merge and change their name to AppleGoo. Now, however, the two companies are at loggerheads over everything from apps to acquisitions—and Mr Schmidt and Apple’s boss, Steve Jobs, are taking the fight personally.

So personally, in fact, that tech types are lost for superlatives. The New York Times quotes a long list of gobsmacked comments. Meetings have been “heated” and “confrontational”. The sense of rivalry is “intense”. The two men are treating the world to “an unusually vivid display of enmity and ambition”. One of the Times’ insiders not only likens the squabble to “world war three” but also dubs it “the biggest ego battle in history”. So much for Julius Caesar and Mark Anthony. ...

A magnificent late achievement

White Egrets. By Derek Walcott. Farrar, Straus and Giroux; 96 pages; $24. Faber; GBP12.99. Buy from Amazon.com, Amazon.co.uk

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The pleasures of being a contrarian

LUC BONDY, a mischievous 61-year-old Swiss theatre and opera director, thrives on controversy. He provoked sections of the audience at the Metropolitan Opera in New York to boo his recent production of Puccini’s “Tosca”. Directorial touches such as Scarpia being pleasured by prostitutes and Cavaradossi painting a bare-breasted Mary Magdalene were not universally admired. He is not apologetic: “It makes me more famous than I was,” he says.

Mr Bondy was already quite famous. A precise, inventive director, he has run two of Germany’s most prestigious theatre companies, the Berliner Ensemble and the Schaubuhne. His opera productions have included a memorable “Don Carlos” at the Royal Opera House. His “Tosca” moves on to La Scala in Milan and then to the Bayerische Staatsoper in Munich. ...

A handful of outsiders come out of the crisis in credit

The Big Short: Inside the Doomsday Machine. By Michael Lewis. Norton; 266 pages; $27.95. Allen Lane; GBP25. Buy from Amazon.com, Amazon.co.uk

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Tensions between two styles of foreign policy have endured for 200 years

Choose Your Weapons: The British Foreign Secretary, 200 Years of Argument, Success and Failure. By Douglas Hurd. Weidenfeld & Nicolson; 414 pages; GBP25. Buy from Amazon.co.uk

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Wit and wisdom for the general reader

IOU: Why Everyone Owes Everyone and No One Can Pay. By John Lanchester. Simon & Schuster; 223 pages; $25. Published in Britain by Allen Lane as “Whoops! Why Everyone Owes Everyone and No One Can Pay”; GBP20. Buy from Amazon.com, Amazon.co.uk

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Two influential economists take a potshot at financial policymakers. Why don’t their criticisms add up?

Freefall: America, Free Markets and the Sinking of the World Economy. By Joseph Stiglitz. Norton; 361 pages; $27.95. Allen Lane; GBP25. Buy from Amazon.com, Amazon.co.uk

13 Bankers: The Wall Street Takeover and the Next Financial Meltdown. By Simon Johnson and James Kwak. Pantheon, 280 pages; $26.95. Buy from Amazon.com ...

As Barack Obama embraces exports, trade friction looms

A GLOOMY office park in suburban Chicago is the home of NewMedical Technology. At the moment the young company has only one main product, silicone strips to reduce scarring after surgery. But in its tiny warehouse, employees busily pack boxes to be shipped to Brussels. In the past year the firm’s business has expanded quickly; NewMedical now exports to South America, Europe and Asia.

It is the type of growth Barack Obama dreams of. Consumers are nursing battered balance sheets and the government is wallowing in debt. That puts the burden on exports to carry the recovery; Mr Obama wants them to double over the next five years. ...

Temporary work may dim future employment prospects

IS ANY job better than no job? Some research has suggested that unemployed workers should take up any job they can get, including temporary work, as a bridge to higher-paying employment. But what may be good for the economy, reducing the drain on government coffers, may be bad for the individuals concerned. In a forthcoming paper in the American Economic Journal: Applied Economics, David Autor of the Massachusetts Institute of Technology and Susan Houseman of the W.E. Upjohn Institute for Employment Research in Michigan show that taking up temporary work after a spell of unemployment can hurt future earnings.

The authors looked at data from Detroit’s “Work First” welfare-to-work initiative, which uses placement agencies to put low-skilled unemployed people into paid jobs. They then assessed participants’ earnings and job tenure before and after their involvement in the programme. ...

The merits of inflation as a solution to the rich world’s problems are easily overstated

IT HAS long been considered a scourge, an obstacle to investment and a tax on the thrifty. It seems strange, then, that inflation is now touted as a solution to the rich world’s economic troubles. At first sight the case seems compelling. If central banks had a higher target for inflation, that would allow for bigger cuts in real interest rates in a recession. Faster inflation makes it easier to restore cost-competitiveness in depressed industries and regions. And it would help reduce the private and public debt burdens that weigh on the rich world’s economies. In practice, however, allowing prices to rise more quickly has costs as well as benefits.

The orthodoxy on inflation is certainly shifting. A recent IMF paper* co-authored by the fund’s chief economist suggests that very low inflation may do more harm than good. Empirical research is far clearer about the harmful effects on output once inflation is in double digits. So a 4% inflation target might be better than a goal of 2% as it would allow for monetary policy to respond more aggressively to economic “shocks”. If the expected inflation rate rose by a notch or two, wages and interest rates would shift up to match it. The higher rates required in normal times would create the space for bigger cuts during slumps. ...

Imposing quotas for women in boardrooms tackles a symptom of discrimination, not the cause

IF YOU are a youngish man who sits on a European corporate board, you should worry: the chances are that your chairman wants to give your seat to a woman. In January the lower house of France’s parliament approved a new law which would force companies to lift the proportion of women on their boards to 40% by 2016. The law would oblige France’s 40 biggest listed firms to put women into 169 seats currently occupied by men. Spain has also introduced a quota at 40%, to be reached by 2015. Italy and the Netherlands are contemplating similar measures. This week Britain’s government threatened to make companies report formally on their recruitment of female directors.

Compared with America, where women held 15% of board seats at Fortune 500 companies in 2009 according to Catalyst, a lobbying organisation, European countries have relatively few female board members. Britain is not too far behind at 12%, according to a survey of Europe’s 300 biggest firms by the European Professional Women’s Network (EPWN). Spain, Italy, France and Germany, however, all lag behind the European average of 10%. ...

Giving parents a real choice

Correction to this article

BRENTWOOD in Essex is an unremarkable town, once derided as the most boring in Britain. It is home not only to Brentwood School, a moderately well-known independent school founded in 1558, but also to two more modern establishments: Sawyers Hall College and, five minutes down the road, Shenfield High School. In 2006 Sawyers Hall was deemed a failing school, one that was not educating its pupils as required. Since then, parents have voted with their feet. Rolls have fallen even as efforts to improve results have paid off. Sawyers Hall is slated to close as a comprehensive in the summer; a further-education outfit teaching hairdressing and the like will take its place. ...

Why independent candidates may yet break the political mould

ESTHER RANTZEN gestures at the gaslit machines in Wright’s hat factory in Luton. The iron machines are more than 100 years old, but the aluminium moulds on which the hats are shaped are new. “The queen may favour it, but I don’t like the asymmetric brim. How difficult is it to make a new mould?” she asks the milliner, Philip Wright. A little expensive, but not too difficult if you know how, he replies.

The television celebrity is hoping to redesign more than hats in Luton South, a marginal constituency about 30 miles north of London. She, like other independent candidates in the coming general election, would also like to break the mould of British politics. A flurry of them have appeared in seats where incumbent MPs were discredited in last year’s parliamentary-expenses scandal. ...

In the corporate-tax armoury the next government must pick carefully

WHAT do Shore Capital, a boutique financial firm, and Ineos, the remnant of various giant chemical companies, have in common? Both announced plans this month to move their headquarters to countries with lower taxes—Shore to Guernsey and Ineos to Switzerland. As Britain’s cash-strapped exchequer faces shrinking revenues from recession-hit businesses, the exodus of these firms and others raises an important question. Is Britain’s company-tax regime competitive?

The system isn’t fit for the 21st century, says Michael Devereux, professor of business taxation at Oxford’s Said Business School. It is a 19th-century apparatus, struggling—like many tax regimes around the world—to keep fiscal tabs on global earnings, intra-group cashflows, migration of intellectual property and the elusive proceeds of financial and other services. ...

An infamous murder returns to the national consciousness, with worrying implications

MOST eras have their symbolic murders: crimes that are not only terrible but seem also to reflect the nation’s pathologies. Victorian London had Jack the Ripper; modern Britain has the death of James Bulger, a two-year-old who in 1993 was abducted from a Merseyside shopping centre, tortured and killed by Jon Venables and Robert Thompson, both aged just ten. Their trial inspired national fury, revived in 2001 when they were released under new names. Mr Venables has now been returned to custody for an unspecified breach of his licence. Unspecified by the government, that is; channelling the ire the crime still arouses, newspapers have gleefully relayed rumours of his offence.

It is not surprising that this incident retains its power to appal: the grainy CCTV image that captured the small boy being led away by a bigger one has become an icon of depravity. The trouble is, the case held up a mirror less to the real state of Britain than to its dark, psychic fears. The confusion of those things has led to mistaken conclusions being drawn from it. They may be again. ...

The Slovak leader deploys national culture as a political weapon

IN THE run-up to Slovakia’s parliamentary election in June, Robert Fico, prime minister and leader of the centre-left Smer party (pictured), is busy bolstering his nationalist credentials. His supporters say that ordering schoolchildren to sing the national anthem is just an example of a legitimate effort by a newish country to strengthen its sense of self (Slovakia became fully independent only in 1993, after the break-up of Czechoslovakia). Critics find Mr Fico’s cocktail of history and culture stodgy or downright creepy.

The focus of protests is a new “patriotic act” just passed by parliament that awaits presidential approval. It mandates weekly anthem-playing in all state educational establishments. School officials who disobey risk being sacked. Its champion is Jan Slota, the bombastic leader of a nationalist party that is part of Mr Fico’s coalition. Mr Fico himself takes a softer line, defending only what he calls “reasonable historicism”. But even this is sparking angry squabbles over Slovakia’s past. ...

The pioneer of home births in Hungary faces jail

IF HISTORY were a guide, obstetrics in Hungary should be wonderful. In 1847 Ignac Semmelweis pioneered mother-friendly childbirth, insisting that doctors should wash their hands between autopsy and delivery rooms (they objected to this slur on gentlemanly cleanliness).

Obstetric care in Hungary is indeed excellent today. It is tightly run by skilled doctors, with low mortality rates. But those who challenge the medical profession still face problems. Agnes Gereb, a pioneer of home births, is facing up to eight years in jail. Prosecutors are going after her over one fatality in childbirth, one case in which a baby died some months after birth and two births that ended up as emergency hospital admissions. In the eyes of many Hungarians, such incidents show that home births are insanely risky and that those who promote them are little more than irresponsible cranks. ...

The new president of the European Council will be worth watching

TO ENGLISH ears, the word “compromise” often has a shabby ring. When safety or quality are compromised, people get hurt. Yet in continental Europe, compromise is often a political ideal. Nowhere is this truer than in Belgium, a country whose Dutch- and French-speaking populations tolerate each other (just), thanks to endless fudges and deals lubricated with taxpayers’ money. Belgium’s six governments are all baggy coalitions that balance social-market capitalism with a free-spending public sector (one in three active adults works for the state).

A third of parliamentarians from Flanders would like Belgium to vanish, says one senior politician. Belgian governments fall often, yet the place trundles along because most leaders agree to disagree. One thing that unites them is faith in deeper European integration. Apart from those on the extreme right, most Belgian politicians would welcome European Union taxes, a European army and nation-states reduced to a vestigial role. It is not hard to see why: to Belgian leaders trapped in the national equivalent of a bad marriage, the EU’s free love must look like bliss. ...

In the aftermath of fighting or repression, people are often told to forget things. But in free societies, selective memory cannot be imposed for ever

THE 15 boxes of bones were wrapped in the red, yellow and purple flag of the Second Republic. Each held the remains of a man whose support for a brief political experiment in the 1930s had proved fatal. At a ceremony in Madrid on March 6th the bones were given to descendants: mostly middle-aged grandchildren, but sometimes already aged sons or daughters.

They wept for men they had mostly never known. The victims had died of hunger and disease in one of the makeshift prison camps set up by General Francisco Franco in the early days of his 36-year dictatorship, established after the republic’s defeat in a bloody, three-year civil war. ...

It takes many hands to reconcile two peoples so divided by history

FOR centuries, a stone bridge spanning the emerald green waters of the Akhurian River connected the southern Caucasus to the Anatolian plains: a strategic pivot on the Silk Road, running through the ancient Armenian kingdom of Ani. Today the bridge would have linked tiny, landlocked Armenia to Turkey. But war and natural disasters have reduced it to a pair of stubs—a sad commentary on the relations between the two states.

This grim image prompted an Ankara-based think-tank, called Tepav, to devise a plan to rebuild the bridge and in so doing to reopen the long-sealed land border by stealth. “The idea is to promote reconciliation through cross-border tourism,” explains Tepav’s director, Guven Sak. Turkey’s doveish president, Abdullah Gul, has embraced the plan. The Armenian authorities and diaspora Armenians with deep pockets are also interested. If all went to plan, the bridge’s restoration would only be the start of a broader effort to repair hundreds of other Armenian architectural treasures scattered across Turkey. ...

The generals leave nothing to chance

THE junta ruling Myanmar has had 20 years to digest the lessons from the country’s most recent election. It was trounced by the National League for Democracy, even though the opposition’s charismatic leader, Aung San Suu Kyi, was already under house arrest. This year on an unnamed date (perhaps its astrologers cannot agree) the junta will hold another election. It will not lose this one.

Election laws published this week do not quite spell out the result. But a “political-parties registration law” bars Miss Suu Kyi and other political prisoners, of whom there are more than 2,000, from belonging to a party because of their criminal convictions. Cut off from politics by her house arrest, Miss Suu Kyi is anyway barred from office as the widow of a foreigner. Her party now has to expel her and other detainees. The law also bans civil servants from joining parties, along with monks, who led anti-government protests in 2007. ...

Technology complicates life for vote-riggers and counters alike

RIGGED elections and the instability they create have been the bane of the Philippines for much of its democratic history. Filipinos are fervently hoping that the computerisation of the vote-counting in May’s presidential, congressional and local elections will solve the problem. But faith in the technology is less fervent. Many fear it is no solution.

In past elections voters had to write down the names of their preferences for up to 32 national or local positions on blank ballot forms. Their votes were tallied by hand at the precinct, municipal, provincial and finally national levels. Definitive results could take weeks to emerge, giving ample opportunity for vote-padding and shaving. Vote-rigging by President Ferdinand Marcos led to his downfall in 1986. The incumbent president, Gloria Macapagal Arroyo, has had a shaky grip on power since she was accused of rigging her election in 2004. ...

That some liberals want and local governments fear

A GRANDMOTHER killed trying to stop developers flattening her home; university graduates forced to live in crowded slums: China’s ebullient property market has generated many tales of woe, and a promise from the prime minister, Wen Jiabao, to “rein in” the speculators. But calls for this to be achieved with a new property tax have put the government in a bind.

In the past year property prices have surged to new highs in some places, helped by a torrent of carefree lending from state-run banks. Mr Wen made his pledge on March 5th, in a speech to China’s parliament, the National People’s Congress (NPC), launching its annual ten-day session. The NPC is filled with party loyalists. But some have fretted openly about property bubbles. The government says house prices in 70 cities rose 10.7% in February compared with a year earlier, the fastest rise in 20 months. There are early signs that this is denting sales. In both January and February the volume of housing sales fell sharply from the previous month. ...

In a sea of international opprobrium. But a compromise may be at hand

IF YOU’RE tempted by a slab of meat gristle which surrenders little but an ooze of grease when chewed, then you’ll love whale. Add to the sensory experience the accumulated mercury to be found in whale meat. Consider the suffering caused by the hunt to these intelligent mammals; and a military-industrial approach to their extermination. Japan going a-whaling is, to borrow from Oscar Wilde, the unspeakable in pursuit of the almost uneatable.

As with foxhunting in Britain, views seem irreconcilable. Since 1986 the International Whaling Commission (IWC) has imposed a moratorium on commercial whaling. Yet every Antarctic summer, Japan sends a whaling fleet south to catch hundreds of whales for “research”. And every year at the IWC’s meeting, pro- and anti-whaling camps gather in sullen deadlock. On the whaling grounds the Japanese fleet encounters the Sea Shepherd Conservation Society. The ocean warriors hurl rancid butter on Japanese decks, use warps to foul propellers and attempt citizen’s arrests of the whaling captains. Early this year a Sea Shepherd boat sank after a collision. Now an American film has turned a spotlight on Japan’s coastal hunt for cetaceans. “The Cove”, shot largely in secret, shows the annual dolphin slaughter in Taiji, a village on Japan’s main island. This week it won an Oscar. ...

Attempts to stop drugs money corrupting public life in Guatemala are making some progress. In Jamaica (see article) the worries are growing

FOR the second time in less than a year, Guatemala’s national police chief has become one of its most prominent criminal defendants. Last August Porfirio Perez Paniagua was arrested for stealing drugs and cash. He was replaced by Baltazar Gomez (pictured above, left), a respected officer who had passed a polygraph test. Yet on March 2nd Mr Gomez was himself apprehended, along with Nelly Bonilla, the country’s anti-narcotics tsar. They were charged with involvement in drugs trafficking and with thwarting the investigation of a firefight last April, when five corrupt cops attempting to seize cocaine for resale were killed by the drugs’ owners. This parade of police chiefs in the dock shows both how much progress has been made in the fight for justice in Latin America’s most lawless country, and how much remains to be done.

Just a few years ago, such high-level arrests would have been unthinkable. Guatemala’s 36-year civil war was the Americas’ worst armed conflict of the 20th century: it killed 200,000 indigenous people, and was declared a genocide by a commission sponsored by the United Nations. Yet unlike most of its regional peers, the country was unable to establish a clear break with the past after a peace treaty was signed in 1996. A generous amnesty law meant that no members of the army were jailed for their participation until last year. One of the authors of a truth-commission report, Juan Jose Gerardi, was bludgeoned to death two days after its publication. Efrain Rios Montt, who was president of the military regime when the worst atrocities took place, remained a congressman until his unsuccessful bid to return to the presidency via the ballot-box in 2003. ...

Religion is causing the president headaches

IT COULD all come down to abortion. Health-care reform hangs in the balance. Nancy Pelosi, the speaker of the House of Representatives, is desperately trying to round up the last few votes. If the House passes a bill the Senate passed in December, it can then be tweaked through the “reconciliation” process and sent to President Barack Obama for signature. But every single House Republican is likely to vote no, so Ms Pelosi needs 216 Democratic votes (out of 253) for a majority. This is proving surprisingly hard. Among the holdouts are a dozen or so pro-life Democrats, several of them Midwestern Catholics, who object to the abortion provisions in the Senate bill.

Thanks to the Supreme Court, abortion has been legally protected since 1973 and neither Congress nor any state has the power to ban it. But a law called the Hyde amendment bars federal funding for abortion, except in cases of rape or incest, or to save the life of the mother. The question now is whether Obamacare will use taxpayers’ money to subsidise abortion more widely. Mr Obama insists that it will not. Under his plan, many individuals and small businesses will buy subsidised health insurance through state-sponsored exchanges. Under the Senate bill, they would only be able to obtain abortion coverage through these exchanges if they paid for it with a separate, unsubsidised, cheque. Thus, federal dollars would be kept out of abortion clinics, say the bill’s supporters. But many pro-lifers are not convinced. So the version of the health bill that was passed by the House would have required those who wanted abortion coverage to buy a completely separate insurance policy. The Democrat who wrote the House abortion provision, Bart Stupak, says he won’t back the Senate bill. Several other pro-life Democrats may also balk. ...

The president is trapped between an angry Congress and a stubborn China

HE HAS missed his own deadlines, he may not have enough votes and even if the measure passes it is likely to be a watered-down affair. That is the position in which Barack Obama finds himself not only on health reform but also in his efforts to prevent Iran from acquiring a bomb.

As with health care, Mr Obama entered office with a bold idea. He would break with his predecessor and extend the hand of friendship to Iran. If Iran failed to grasp it or to come clean about its nuclear activities, the world would know whom to blame for the continuing enmity between the two countries. That would enable the UN Security Council to impose a fourth lot of economic sanctions—“crippling” ones this time—that would force the ayatollahs to comply with their nuclear obligations. ...

Why Germany needs to change, both for its own sake and for others

ELSEWHERE in the world, Europe is widely regarded as a continent whose economy is rigid and sclerotic, whose people are work-shy and welfare-dependent, and whose industrial base is antiquated and declining—the broken cogs and levers that condemn the old world to a gloomy future. As with most cliches, there is some truth in it. Yet as our special report in this week’s issue shows, the achievements of Germany, Europe’s biggest economy, tell a rather different story.

A decade ago Germany was the sick man of Europe, plagued by slow growth and high unemployment, with big manufacturers moving out in a desperate search for lower costs. Now, despite the recession, unemployment is lower than it was five years ago. Although Germany recently ceded its place as the world’s biggest exporter to China, its exporting prowess remains undimmed. As a share of GDP, its current-account surplus this year will be bigger than China’s. ...

The best thing American politicians can do to encourage a stronger Chinese currency is keep calm

ONE of the few good things about the Great Recession of 2008-09 was a merciful absence of complaints from America’s Congress about China’s currency. The yuan’s gradual appreciation stopped in July 2008, and China has since kept its currency tightly pegged to the dollar. But even as America suffered its worst downturn in the post-war period, its legislators steered clear of ranting against China.

That restraint was driven partly by fear. At the depths of the crisis even the most myopic Congressmen worried about a descent into 1930s-style protectionism. And it was driven partly by the facts. As investors’ flight to safety strengthened the dollar in late 2008, the yuan rose along with it. With America’s imports slumping it was hard to blame Chinese workers for American joblessness. And thanks to its huge domestic stimulus China added to global demand last year, as its current-account surplus shrank sharply. ...

Blaming speculators for sovereign-debt woes is misguided. Banning them would be worse

GREECE had a budget deficit of 12.7% of GDP in 2009. It has a record of dodgy accounting. Its own leaders acknowledge how dire its fiscal situation is. George Papaconstantinou, the country’s finance minister, summed it up pretty well last month. “People think we are in a terrible mess. And we are.”

That hasn’t stopped his boss, George Papandreou, and other European leaders from jabbing fingers elsewhere. To judge by this week’s political rhetoric, the blame for Greece’s woes lies largely with speculators, who stand accused of buying sovereign credit-default swaps (CDSs), a form of insurance against government default, in the hope of profiting from jitters about sovereign debt. “Unprincipled speculators are making billions every day by betting on a Greek default,” said Mr Papandreou in a speech in Washington, DC. ...

Modernisation is hard to argue with. But it may not be what Russia needs

IMAGINE a town or settlement of 30,000 people, probably near Moscow. Its high-tech laboratories and ultra-modern glass houses make California’s Palo Alto look ancient. It has a greater concentration of scientists than anywhere else in the world. The atmosphere in the town is free, cosmopolitan and creative, almost anarchic at times. Police harassment is minimal, “at least to start with”. Riff-raff and drunks from surrounding villages are kept away by tight security.

The streets are clean, and shops are stuffed with organic food to stimulate the brain. Here, in this exclusive “zone of special attention”, the state is extracting creative energy from Russian and foreign scientists that is driving the country along the path of modernisation and innovation. ...

Newly economic, widely distributed sources are shifting the balance of power in the world’s gas markets

SOME time in 2014 natural gas will be condensed into liquid and loaded onto a tanker docked in Kitimat, on Canada’s Pacific coast, about 650km (400 miles) north-west of Vancouver. The ship will probably take its cargo to Asia. This proposed liquefied natural gas (LNG) plant, to be built by Apache Corporation, an American energy company, will not be North America’s first. Gas has been shipped from Alaska to Japan since 1969. But if it makes it past the planning stages, Kitimat LNG will be one of the continent’s most significant energy developments in decades.

Five years ago Kitimat was intended to be a point of import, not export, one of many terminals that would dot the coast of North America. There was good economic sense behind the rush. Local production of natural gas was waning, prices were surging and an energy-hungry America was worried about the lights going out. ...

A government reflecting the people’s will should slowly and messily emerge

DOZENS of explosions woke up voters in Baghdad on March 7th, heralding the day of the general election. Every few minutes another thunderous bang reminded them to stay at home, away from polling stations. Officials said the city had been hit by a barrage of mortars. Voter turnout was lower than before, in Baghdad little more than 50%. It was hardly a shining model of democracy.

The American army played down the violence. Most of the bangs, said its spokesman, had been caused by water bottles stuffed with explosives. Insurgents had put them in bins around the city and set them off by mobile phones to terrify voters. Two big bombs had killed at least 38 people but nobody was badly hurt by the bottle-bombs, said General Ray Odierno, the American commander. The bangs were an act of desperation by a fading insurgency. The turnout overall was said to be 62%. Despite the fear, many Iraqis were plainly determined to assert their democratic right to choose their leaders. Barack Obama called the election a “milestone in Iraqi history”. ...

A religious issue is threatening the government’s cohesion

AFTER a year in office, Israel’s right-wing-cum-religious coalition is feeling an ominous tremor of internal discord. The issue, the bane of so many past coalition governments, is state and synagogue. A bill easing conversion to Judaism, championed by the foreign minister, Avigdor Lieberman, and his ex-Soviet immigrant party, Yisrael Beitenu, has run into furious resistance from the ultra-Orthodox party, the United Torah Judaism (UTJ), a coalition partner.

“When I die, I’ll go straight to heaven just for having pushed through this bill,” says David Rotem, chairman of parliament’s law committee and a member of Yisrael Beitenu (meaning “Israel is our home”). “I don’t know where opponents of the bill will go.” Ultra-Orthodox members, apparently confident of their place in heaven, protested. A member of the Labour party, another coalition partner, said that if the ultra-Orthodox were in heaven he would rather not go there. ...

The administrative costs per $1m lent by the World Bank and the International Development Bank during 2009 were $20,600 and $15,314 respectively, not $19,000 and $26,833 (“Cap in hand”, March 6th). And despite "general consensus", shareholders of the European Bank for Reconstruction and Development do not vote on its capital-increase plan until May. Sorry.

...

AIG reluctantly hands its crown as America’s global life insurer to MetLife

ANOTHER week, another opportunity for AIG’s rivals to expand at the American insurer’s expense. Days after sealing a $35.5 billion deal for its Asian life-insurance operations with Britain’s Prudential, the firm, which is being dismembered to recoup bail-out costs, agreed on March 8th to sell another crown jewel, Alico. This will propel New York-based MetLife, which is paying $15.5 billion, into the industry’s global elite. Although it is the biggest life insurer in America, where its Snoopy mascot is ubiquitous, it has been tentative abroad. Alico will give it a presence in 64 countries, up from 17 now, taking its non-American revenue from 15% of the total to 40%.

The biggest leap will be in Japan, the world’s second-largest life market, in which Alico is a top-tier competitor. But MetLife’s boss, Robert Henrikson (who took over in 2006 from Robert Benmosche, now AIG’s chief executive), also has his eye on the faster-growing markets in eastern Europe, the Middle East and Latin America that make up almost a quarter of Alico’s business. Another attraction is its distribution network: 60,000 agents, brokers and other local middlemen. ...

A financial system in suspense

THAT old Spanish stereotype of putting things off until manana still applies today. For nearly two years bankers have been talking about the need to restructure a bloated financial system, particularly the country’s 45 unlisted savings banks, the cajas de ahorros. About half of the cajas, which are controlled by local politicians, have announced their intention to merge, hoping to tap into the €99 billion ($135 billion) Fund for Orderly Bank Restructuring (FROB), which was created in June.

Regional politicians, reluctant to give away their piggy banks, are prepared to sanction some internal mergers. Catalonia, for example, has allowed some consolidation, as has Andalusia. Progress is slower elsewhere. Caixanova, a savings bank in Galicia, is resisting a union with Caixa Galicia, a rival. The sector has also been waiting for Spain’s second-largest savings bank, Caja Madrid, to make a move. Until recently, it was paralysed by a political power struggle at the top. ...

Beijing signals a crackdown on borrowing by local governments

ENDLESS arcane pronouncements spew forth from China’s bureaucracies. But some matter much more than others. In recent weeks a number of the country’s senior leaders and regulators have signalled an end to the practice of local governments extending guarantees on loans taken out by their special financing entities. That could spell big trouble for Chinese banks.

The comments have focused attention on research done by Victor Shih, a professor of Northwestern University in America, into China’s local investment companies. These financing vehicles allow municipalities to circumvent central-government restrictions on direct borrowing. As many as 8,000 of these investment companies may exist, estimates Mr Shih, whose work draws on regulatory filings and various government announcements. ...

Microfinance focuses on lending. Now the industry is turning to deposits

IT IS hard for people in the rich world to imagine what it is like to live on $2 a day. But for those who do, the problem is often not just a low income, but an unpredictable one. Living on $2 a day frequently means living for ten days on $20 earned on a single day. The task of smoothing consumption is made more complicated if there is nowhere to store money safely. In an emergency, richer people might choose between dipping into their savings and borrowing. The choice for the great mass of the unbanked in the developing world is limited to whom to borrow from, often at great cost.

That they can borrow at all is partly due to the rapid growth of microfinance, which specialises in lending small amounts to poor people. Several big microfinance institutions (MFIs) also offer savings accounts: Grameen Bank in Bangladesh is a prominent example. But the industry remains dominated by credit, and the ability to save through an MFI is often linked to customers’ willingness to borrow from it. Of 166 MFIs surveyed in 2009 by the Microfinance Information Exchange, a think-tank, all offered credit but only 27% offered savings products. Advocates of a greater variety of financial services for the poor argue for more balance. ...

A surfeit of farmers and shortage of buyers tarnishes a once lustrous business

YOU can hear the relief in Rosario Autore’s voice when he talks about how his firm, Autore Pearls, one of the world’s largest pearl suppliers, survived the past 18 months. “Within the pearling industry we had a tough time,” he says. A slump in sales thanks to the global economic downturn and unexpected currency movements played a part. But the main problem underpinning the industry’s woes is a supply glut.

Andy Muller, a dealer based in Japan, estimates that the worldwide production of cultured “South-Sea” pearls (from South-East Asia, Australia and the Pacific) increased from 2.4 tonnes in 1998 to 12.5 tonnes last year. The increase was due chiefly to the rapid expansion of pearl-farming in Indonesia, the Philippines, and, to a lesser extent, Myanmar. This has dimmed South-Sea pearls’ glow: the value of the harvest at the farm gate fell from $220m to $172m over the same period. “At present, the cake served to overfed and cash-strapped consumers is too large to be digested,” Mr Muller says. ...

What a bizarre leadership row says about Japanese business

MANY former executives find retirement dull. But few react like Kuniaki Nozoe, the former boss of Fujitsu, one of Japan’s biggest computer companies. He stepped down as president in September, but is now demanding that Fujitsu “nullify” the resignation.

In a four-page letter sent last month to the board of directors, the 62-year-old Mr Nozoe claims that he was unjustly forced out without even having submitted a formal resignation. After a hastily convened board meeting on March 6th, Fujitsu admitted that it had ousted Mr Nozoe due to his association with a person suspected of having ties to organised crime—not for the “health reasons” cited at the time. Such ties could, in theory, get a firm delisted from the Tokyo Stock Exchange (TSE). But Fujitsu has found itself in trouble with the TSE anyway. On March 9th the exchange scolded the company for its “inadequate disclosure” of the reasons for Mr Nozoe’s departure. Mr Nozoe, meanwhile, does not really want his old job back or a payout, but rather to have his honour restored, says his lawyer, Kei Hata. ...

Politics decided the contest to supply America’s new aerial fuel tanker

Correction to this article

IN THE end, they bowed to the inevitable. The decision this week by Northrop Grumman and its partner, EADS, to withdraw from a $35 billion contest with Boeing to provide the United States Air Force (USAF) with a new generation of aerial tankers had been well trailed, but it was still a bitter blow to the two defence firms. It was also a bad day both for America’s taxpayers and its armed forces. ...

The future of two commodity titans is complicated by their ties

IN HIS early teens, long before going in to bat as boss of Xstrata, Mick Davis qualified as South Africa’s youngest-ever cricket umpire. The game’s complex rules may remind him of Xstrata’s intertwined relations with its biggest shareholder, Glencore. The private commodity trader based in Switzerland, which owns 34% of the miner and the marketing rights to some of its output, gives little away about its operations, usually earning it the tag “secretive”.

Xstrata, one of the world’s biggest mining firms, was born out of the initial public offering (IPO) of Glencore’s coal mines in 2002. It has grown spectacularly since and is now worth some $52 billion. The latest shifting of assets between the pair came on March 5th when Xstrata said Glencore had exercised an option to repurchase Prodeco, a Colombian coal mine. Glencore had sold the mine to Xstrata last year for $2 billion, to raise the funds to participate in Xstrata’s rights issue. ...

Processing capacity is becoming a tradable commodity

IF YOU are tired of hearing the word “cloud” attached to every term in the computing lexicon, you are not alone. Disillusioned tech folks are beginning to succumb to “cloud fatigue”. But the concept of computing as a basic utility delivered over the internet is here to stay. In fact, the industry is already taking the first steps toward turning computing power into a tradable commodity akin to electricity.

In the electricity business, it was the invention of something called the “rotary converter” and other transformers that led to the rise of the power utility. It allowed power from different generators to be pooled and distributed over the grid. The analogous technology in cloud computing is virtualisation. This separates software from hardware, allowing many programs to run on any machine, and indeed to switch between them. Although hardware stays in one place, “virtual machines” consuming processing power can jump around, even between far-flung data centres. Virtualisation has also given rise to big “cloud providers”, which offer computing power on demand, such as Amazon Web Services, a subsidiary of the eponymous online-shopping giant. ...

Efforts to reform how bosses’ salaries are set are unlikely to work

SPRING is in the air, bringing with it angry thoughts about executive pay. This year the economic downturn is adding extra emotion to the season’s familiar fury. Unions are, for example, outraged at the $21m paid in 2009 to Sam Palmisano, IBM’s boss, not least because his firm laid off 10,000 workers in America last year. A union that owns shares in Goldman Sachs is suing to stop it paying bonuses to its employees. It wants the investment bank’s senior managers to shell out personally for the $500m charitable donation it made last year, which the lawsuit, filed on March 8th, describes as “an apology for taking enormous bonuses”.

Some boards and bosses have made concessions to the public mood. Jeff Immelt, the boss of General Electric, declined to take the cash bonus he was due for the second year in a row. His basic salary has not gone up since 2005, although his total compensation for 2009 was still a healthy $10m, 6.5% more than in 2008. Howard Schultz, the boss of Starbucks, opted out of the executive bonus scheme last year and asked for his basic salary to be cut from over $1m to almost nothing. But he ended up receiving $12m, after the board awarded him a discretionary bonus. ...

Private investment is helping India’s farmers in a way government support cannot

INDIA is the third-biggest producer of potatoes in the world. The humble spud finds itself stuffed into flatbread, encrusted in cumin seeds or tucked into pancakes. But the truckloads of large, oblong potatoes that arrive at the McCain Foods plant in the Mehsana district of Gujarat face a more exacting ordeal. Ferried by a conveyor belt and propelled by water, they are sized, steam-peeled, sliced, diced, blanched, dried, fried (for precisely 42 seconds in vegetable oil at 199ºC), chilled, frozen, bagged and then boxed.

The 15kg boxes of fries that emerge at the other end of this pipeline supply the growing chain of McDonald’s restaurants in India. When McDonald’s first entered India in 1996, the food-processing industry was confined largely to ice cream and ketchup. Even importing frozen fries was complicated by the fact that such an exotic item did not appear on India’s schedule of tariffs and quotas. It took McDonald’s roughly six years and $100m to weld a reliable supply chain together. ...

Justice and policing are now devolved. What difference will it make?

THE Northern Ireland peace process passed another milestone this week when the Belfast Assembly voted by a large majority to approve the transfer of policing and justice powers from London. It was a significant breakthrough, given that quite a few assembly members have themselves attracted the attention of the police in the not-so-distant past. Now even those once considered dangerous will have a say on how the remaining paramilitary rumps are dealt with.

But, as is so often the case in Belfast, the advance took place not amid harmony and good cheer but against a background of attention-seeking and discord, as a single party held out against all the others. The Ulster Unionist Party (UUP), once Northern Ireland’s largest but today a shadow of its former self, insisted on voting against devolution of policing and justice powers. The measure passed nonetheless, by 88 votes to 17. ...

Professional fathers are downing tools to play with their children

AS THE rich have got richer and those in work ever busier, people with children have discovered a new way of spending their money: on handymen to do the sorts of odd jobs fathers used to roll up their sleeves and take care of. Despite the recent recession, dads, it seems, would rather spend quality time with their offspring than put up shelves or fix dripping taps at the weekend. So their wives, themselves hard pressed, are hiring other men to change fuses and the like, thus making time to dine out, kick a football or visit museums en famille.

Domestic help has long been a mostly female preserve, involving nannies, cleaners and laundry maids. That is changing, according to a forthcoming study by Majella Kilkey of the University of Hull and Diane Perrons of the London School of Economics. The pair reckon that nowadays 39% of domestic helpers in Britain are men, up from 17% in the early 1990s; in London, many are also migrants. Many households hiring handymen already employ a small army of nannies, cleaners and gardeners. ...

Even for the lords spiritual, the times are changing

TO OUTSIDERS, one of the oddest features of Britain’s semi-theocracy is that 26 Anglican bishops have the right to sit in the upper chamber of the legislature, even though their church can claim the active adherence of less than 5% of citizens. But the “lords spiritual” still have clout, especially when the established church acts as an advocate for religion in general. That became clear in February, when the government backed away from a confrontation over the question of whom churches should employ—and, in particular, over which posts can be barred to gays.

The government’s hopes were fairly modest. It was not questioning the right of religious bodies to follow their own beliefs when hiring priests or imams; it merely wanted to clarify that, in recruiting for non-religious jobs (accountants, for example), churches must obey the law and refrain from discrimination against gays. But pursuing even this cautious aim was deemed unwise at a time when many religious leaders, including Pope Benedict, were opposed (and perhaps considering how their flock should be encouraged to vote). ...

Child-abuse scandals in the Catholic church come a bit nearer the pope

THE Domspatzen have been singing in Regensburg, Bavaria, for a thousand years. But in the 1960s some choirboys there were victims of a “refined system of sadistic punishments connected with sexual lust”, according to Franz Wittenbrink, a composer who attended the choir’s boarding school until 1967. Their traumas are among scores of cases coming to light at Catholic institutions across Germany and elsewhere in Europe, mostly decades after the crimes were committed. The church is struggling to dispel the impression that it is the most flagrant abuser of its own principles. And Germany’s political leaders seem torn between their concern for children’s welfare and their ties to the church.

Christianity matters in Germany. Around two-thirds of west Germans identify themselves as Catholics or Protestants. Christians who pay income tax hand over an extra “church tax” that accounts for two-thirds of church revenue. Germans are not devout: 4% of Protestants and 14% of Catholics in the west are weekly churchgoers. But, says Detlef Pollack of the Wilhelms University in Munster, many count on the church to succour the sick, to offer counsel in times of need or to educate their children. The Christian Democratic Union (CDU) of Chancellor Angela Merkel, daughter of a Protestant pastor, has its roots in the pre-war Centre Party, which was closely linked to the Catholic church. ...

A farcical failure to register candidates in time

THE elections on March 28th and 29th in 13 of Italy’s 20 regions were meant to seal Silvio Berlusconi’s resurgence after a run of scandals over his private life. Eleven regions are held by the centre-left opposition. The prime minister, coasting on a wave of sympathy after an attack by a mentally unstable man in December, had hoped his People of Freedom (PdL) movement might oust up to five centrist and left-wing governors. But its campaign is in chaos—and the government’s ratings are plunging.

To think that it all started with a bread roll. That is what Alfredo Milioni, a former bus-driver charged with registering the PdL’s candidates in Lazio (which includes Rome), first said had lured him from the queue at the electoral office on February 27th. He later offered two other explanations for missing the deadline. Party leaders claimed he had fallen into a trap set by the opposition. But nobody disputes that he returned after the deadline had expired. Electoral officials duly refused to accept the PdL’s slate. That, and two failed court appeals, has left the ruling party out of the race in Lazio, one of five potential swing regions. It was almost excluded in Lombardy too, this time because some of its signatures seemed dubious. ...

An international court ruling injects new life into fast-fading peace talks

ON ANY small Mediterranean island, property is jealously protected. Orange and olive groves can be as valued as posh villas and sea views. Nowhere more than in Cyprus, split into Greek- and Turkish-Cypriot zones ever since Turkish troops invaded in 1974 after a coup aimed at Enosis, or unification with Greece.

For Greek-Cypriots who lost homes and businesses in the north, a settlement on property is key to reunifying the island. “Who gets their home back, who gets another property in exchange, who gets compensation: this is what really matters,” says a seasoned observer of the Cyprus talks. In 18 months of UN-sponsored negotiations, Demetris Christofias and Mehmet Ali Talat, respectively the Greek- and Turkish-Cypriot leaders, have broadly agreed over how a bizonal, bicommunal Cyprus should be governed. But they have avoided discussing in any detail the thorniest issues, including property. ...

The ruling party of Nicolas Sarkozy is bracing itself for a bad result in France’s regional elections

THIS ought to be a buoyant time for Nicolas Sarkozy. France’s economy is holding up better than its neighbours’: GDP rose by 0.6% in the fourth quarter of 2009 over the previous quarter, whereas it was flat in Germany. No big French bank has had to be rescued, nor has there been a wave of mortgage repossessions. The top 40 quoted companies have just reported combined profits of €47 billion ($64 billion) for 2009. The French president has a big parliamentary majority and faces no credible opposition leader. He even has a popular prime minister, Francois Fillon.

Yet Mr Sarkozy faces an imminent political humiliation, as disillusioned voters snub him in regional elections. The two-round poll, being held on March 14th and 21st, will elect governments in France’s 22 mainland regions (plus four overseas). All the opinion polls agree that the results will be terrible for Mr Sarkozy’s ruling UMP party. As it is, the party runs only Alsace and Corsica. With turnout likely to be low, and uncertainty over the vote for the far-right National Front, there could still be a surprise. But even the UMP has resigned itself to at best one region gained—and, at worst, Corsica and even Alsace lost. ...

Najib wavers over undoing affirmative-action policies

Update to this article

WHEN Najib Razak took office last April as Malaysia’s prime minister, the timing could hardly have been worse. The export-led economy was in recession. The ruling coalition was in the dumps after an unprecedented near-defeat in elections in March 2008. Opponents warned that Mr Najib’s government would crack down on political dissent to save its skin. ...

The DPJ stumbles in its efforts to grant foreigners the vote

BY RIGHTS, giving long-term South Korean residents in Japan the right to vote in local elections should be uncontroversial. They pay taxes, speak Japanese, and come from families that have lived in Japan for decades. Most were dragged here to work under the colonial cosh before and during the second world war.

A limited move to enfranchise them came from the very top of the ruling Democratic Party of Japan (DPJ). It swept to power last September promising to end prejudices built up under the ousted Liberal Democrats. Yukio Hatoyama, the prime minister, backs it. The DPJ’s secretary-general and puppeteer-at-large, Ichiro Ozawa, even assured Lee Myung-bak, South Korea’s president, that he would soon push it through the Diet, or parliament. ...

An historic change in the offing; but India’s ruling party may be overreaching itself

YELLING dementedly, seven lawmakers mobbed the chairman of the Indian parliament’s upper house on March 8th and tore at the document, containing the women’s reservation bill, he was reading from. Yet the bill passed the next day, with the two-thirds majority needed to change India’s constitution. With broad political support, including from the Congress party that leads India’s coalition government and the main opposition Bharatiya Janata Party (BJP), the bill could soon clear the lower house and win the support it needs in at least 15 out of 28 state assemblies. The president would then sign it into law: imposing a 33% quota for women in India’s federal and state assemblies.

This would be momentous, especially for India’s half a billion, badly served women. Today’s Lok Sabha, or House of the People, as India’s lower chamber is known, contains 58 women, a record number, but fewer than 11% of the seats. By greatly boosting women’s membership of India’s legislatures, the proposed amendment, its supporters say, will also begin to make a dent in their more grievous suffering—in a country where female fetuses are often aborted, where wives are battered and women earn on average $1,200 a year, less than a third of the male average. A woman can take credit for this: Sonia Gandhi, Congress’s leader, who has pushed the long-mothballed bill against a furious band of dissenters—of a kind that persuaded previous BJP- and Congress-led governments not to touch it. ...

American anger at Jamaica’s slowness in handing over an alleged gang boss

UNTIL recently the United States was pleased with the co-operation it was getting from Jamaica over the extradition of people accused of serious crimes. The Jamaican authorities were responding promptly to requests and, last year, sent 15 suspects to the United States. But the case of Christopher “Dudus” Coke seems to be different. The American authorities have become frustrated at what they see as foot-dragging by Jamaica’s government over their request last August for the extradition of a man they say is the leader of an “international criminal organisation”.

A “Gang Threat Assessment Survey” conducted by the Jamaican government last year reckoned there were 268 criminal groups in Jamaica, earning cash from extortion, selling cannabis, transporting cocaine, contract killings, prostitution and international cybercrime. Many of them are merely small-time thugs. But the United States Justice Department has put Mr Coke on its “world’s most dangerous” list, accusing him of directing drug deals as far away as New York. ...

A dispute over land becomes an argument about race

OF ALL the peoples that make up Brazil, the quilombolas have perhaps the most remarkable story. Like the Saramaka in Suriname or Jamaica’s Maroons, they claim to be descended from groups of runaway slaves who founded settlements, or quilombos, deep in the forests. Most still live in the countryside, farming rice, bananas and other staples, but increasing numbers now live in towns. In the 1988 constitution, drawn up after the end of Brazil’s military dictatorship (exactly a century after slavery was abolished), the quilombolas were granted special guarantees to the title on their land, in recognition of their ancestors’ suffering.

These rights were amplified in a decree from President Luiz Inacio Lula da Silva in 2003. A bill that would, among other things, solidify their land claims has passed in Brazil’s lower house and is now in the Senate. However, not everybody is carried away with the romance of it all. ...

Bereft of controversy, lawmakers chew seal meat and sing a sexist anthem

WHEN Canada’s prime minister, Stephen Harper, prorogued Parliament in December for more than two months, to avoid some bothersome debates, he said this was so his minority Conservative government could “recalibrate” its policies. Now that the recession was over, he said, the emphasis needed to shift towards budgetary control. However, as the new session began on March 3rd, the throne speech outlining the legislative programme was notable for its dearth of new ideas. Likewise the rather dull budget speech the next day.

The Liberals, the main opposition, were so stumped for something to quibble with in the budget that they decided not to vote it down, which at least spares Canadians a third general election in just over four years. So, with little of substance to joust over, lawmakers have been turning their attention to some less urgent matters. In response to a proposal by a Liberal senator, the parliamentary canteen served seal meat for the first time on March 10th. The idea is to show solidarity with hunters, on Canada’s Atlantic and Arctic coasts, who are enraged at the European Union’s recent ban on imports of seal products. Last year Canada’s governor-general, Michaelle Jean, caused a stir by eating raw seal meat on a visit to the Arctic. The lawmakers enjoyed theirs cooked, in a port sauce. ...

Why is the recovery jobless? Maybe because it isn’t a recovery

IN FEBRUARY, for the twenty-fifth time in 26 months, the American economy shed jobs. The toll—a decline of 36,000—was smaller than feared for a month of severe winter weather. But it was distressing nonetheless; another bit of evidence pointing towards a jobless recovery. Most economists estimate that the recession in America ended around the close of the second quarter of 2009, the last quarter in which GDP shrank. But during the second half of last year the economy still managed to lose more than a million jobs.

One explanation for the divergence of output and employment, which started to emerge while the economy was still shrinking, is that firms are now able to wring more productivity out of their workers. Rising labour productivity is a common feature of the early stages of recovery, as employers respond to increases in demand by working staff harder and delaying new hiring. But this time round productivity figures have been well above normal. Last week the Bureau of Labour Statistics reported fourth-quarter labour-productivity growth of 6.9%, after increases of 7.6% and 7.8% in the previous two quarters. That amounts to one of the strongest nine-month productivity performances America has notched up in the post-war period. ...

Colleges nationwide are asking students to pay more for their education

“NO ONE should go broke because they chose to go to college,” Barack Obama said in January in his state-of-the-union speech. But American college students worry they might, thanks to recent fee increases at technical colleges and universities. On March 4th students and disgruntled faculty staged protests at around 100 campuses in over 30 states, calling on state legislators and university administrators to put a halt to recent tuition hikes and funding cuts. In Oakland, California, student protesters marched onto a big highway and stopped the traffic. Elsewhere students carried coffins to symbolise the death of affordable education.

According to the Centre on Budget and Policy Priorities, a think-tank, at least 39 states have decreased their funding for public colleges and universities or increased their tuition charges. In California some public universities have increased fees by more than 30%. At the same time they are cutting back on their offerings. Many have tried to save money by laying off staff, closing academic departments and reducing the number of classes offered. Some are admitting more out-of-state students, who pay higher fees. ...

Mexico’s drugs gangs are getting ever more clever

ONE case that sticks out, says Jay Abbott, is that of Margarita Crispin. Mr Abbott is the assistant special agent in charge of the FBI’s El Paso bureau, and Ms Crispin was a customs agent working at the busy port of entry between El Paso, Texas, and Ciudad Juarez, in Mexico. The FBI had been tipped off in 2004 that Ms Crispin was crooked, so they started to watch her. Once, in 2006, a van ran out of petrol in her lane, and the driver ran away. It turned out that there was almost 6,000 pounds (2.7 tonnes) of marijuana inside. The next year the FBI had enough evidence for an indictment. The strange thing, says Mr Abbott, was that Ms Crispin had no interest whatsoever in a plea bargain. He reckons the Mexican drug-traffickers had made it clear to her that giving evidence against them would not be a wise move.

Was the Crispin case an aberration, or a sign of things to come? Most of America’s foreign-grown marijuana comes from Mexico, and most of the cartels’ profits come from the American market. In a speech last March the Mexican president, Felipe Calderon, argued that here was evidence of vexing hypocrisy: “How can you account for such a large drug market in the US, the biggest in the world, without corruption of American authorities? I’d like to know which high-ranking officials, like the ones I’ve put in jail, have even been investigated there.” ...

Alabama’s small cities are poised for recovery

TUCKED between the Tombigbee river and a rural highway meandering north from Mobile sits a warren of huge buildings in Willy Wonka-colours: sea-foam blue and green, desert beige and mauve. Though they look like a modern-art installation, in fact they comprise a new steel mill being built by ThyssenKrupp, a German company. According to ThyssenKrupp the $3.7 billion mill represents the largest German investment in America ever. When it reaches full capacity in 2012, it will employ 2,700 workers and produce some 5.1m tons of carbon and stainless steel per year.

In a ranking of 378 American metropolitan areas by job-growth prospects conducted by Moody’s Economy.com, Mobile ranked 12th. Three regions in Alabama finished above it: Huntsville and Auburn-Opelika ranked first and second, and Columbus-Phenix City, which straddles the Georgia border, ranked seventh (the state’s two largest cities, Birmingham and Montgomery, ranked 83rd and 22nd). These areas are quite diverse: Huntsville benefits from an aerospace and defence legacy, as well as from military base realignments that will centralise several commands in the area; Mobile has ThyssenKrupp’s plant as well as continued recovery from the effects of Hurricane Katrina; Auburn-Opelika has Auburn University, recipient of some $47m in stimulus money; and Phenix City abuts a large Kia plant in Georgia and is near Fort Benning, also due to grow thanks to base realignment. ...

The sign is still there, but the film crews increasingly aren’t

MORE than 41m Americans tuned in on March 7th to watch “The Hurt Locker” win the award for best picture at the Oscars, the annual ritual of glitz that reminds the world that Hollywood is the global centre of the film and entertainment industry. “The Hurt Locker”, however, was filmed in Jordan, not Hollywood. Perhaps that is as it should be for a film set in Iraq. But what about “Battle: Los Angeles”? Hitting cinemas next year, it is a film about marines fighting an alien invasion. And it is being shot in Louisiana.

California has been worrying about “runaway production” since 1998, when Canada began luring producers and their crews away from Los Angeles with tax breaks. Other places followed, and all but seven American states and territories and 24 other countries now offer, or are preparing to offer, rebates, grants or tax credits that cut 20%, 30% or even 40% of the cost of shooting a movie. ...

Indian policymakers should see agriculture as a source of growth, not votes

INDIA’S industry is going from strength to strength. Manufacturing grew by 14.3% in the fourth quarter of 2009, compared with the same period in 2008. Politicians celebrate the achievements of “India Inc”, applauding its acquisitions abroad and welcoming the foreign investment it attracts.

They do not show anything like the same confidence in “Bharat Inc”, which is how India’s rural economy is sometimes described. Bharat, which means India in Hindi, is a different country. The rural heartland is courted for votes, smothered with regulations, and shielded from the global economy that corporate India is busy conquering. Yet the government cannot achieve the “inclusive” growth it aspires to without robust progress in agriculture, which still employs about half of India’s workforce. Agricultural growth cuts poverty twice as fast as other kinds, because the poor are mostly rural and they spend more than half of their household budgets on food. ...

Both Turkey and the Armenian diaspora should look for ways of rewriting a familiar script

NOT for the first time, Armenians sense a moment of vindication in their struggle for the acknowledgment of the tragedy that befell their forebears during the first world war. Turkey is angry. And America’s administration is straining to limit the damage.

The latest Turkish-American rift over the Armenian question—after a congressional committee voted on March 4th to recognise the killings of 1915 as genocide—looks wider than some previous ones. It coincides with a general scratchiness between America and its ally. Turkey is reluctant to slap sanctions on Iran. Anti-Americanism is running high among Turks. Some suspect that Barack Obama retains his view (expressed as a senator in 2008) that “the Armenian genocide is not an allegation…but rather a widely documented fact.” ...

Natural gas is becoming less like oil and more like coal, which is a good thing

WOODY ALLEN, in earlier, funnier days, told a joke about two women in a resort in the Catskills bemoaning the cuisine: “The food at this place is really terrible,” says one. “Yeah, and such small portions,” replies her friend. Thus the current thinking about fossil fuels. They are dangerous things, their production and transport often unpalatable, the less visible environmental consequences of their use worse still. And there is not enough of them. The current boom in “unconventional” gas (see article) seems likely to provide good news on both fronts.

The three conventional forms of fossil carbon—oil, coal and gas—differ both in the way the Earth stores them and the way its people use them. Oil is found in relatively few places, and its energy density, pumpability and ease of use in internal-combustion engines makes it particularly well suited as a transportation fuel. Coal is found in many more places—a whole geological era’s worth of rocks, those of the Carboniferous, are named in its honour—and it cannot be pumped around, but can be crushed and burned and so produces baseload power. Gas, typically found and exploited in the same sort of places as oil, is easily moved around through plumbing but is not, usually, seen as a transportation fuel. It has filled niches in between: Europeans warm their homes with it and many developed countries generate some of their electricity with it. ...

SIR – I am pleased that you acknowledged the important work carried out by the European Commission in enforcing competition laws (“Unchained watchdog”, February 20th). The commission’s success in this field is built on sound legal and economic analysis, fair and transparent procedures and a fining policy that seeks to deter misbehaviour. Given what is at stake for consumers, companies and the internal market, I am fully aware of the need to balance effective enforcement with procedural fairness.

Regarding those who think “Europe’s trustbusters should be kept on a tighter leash”, companies under investigation have the opportunity to defend themselves fully and present their case in both written and oral evidence. In terms of transparency and accountability, our administrative system compares favourably with many others. In competition matters the commission is actually kept on a tight rein by the European courts, which require our decisions to be fully reasoned. They subject that reasoning to a very close scrutiny and ensure that the rights of the defence are fully respected. Notably, the courts have unlimited powers to reduce, or indeed increase, antitrust fines imposed by the commission. ...

How not to write “state-of-the-nation” fiction

Solar. By Ian McEwan. Nan A. Talese; 304 pages; $26.95. Jonathan Cape; GBP18.99. Buy from Amazon.com, Amazon.co.uk

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Encircling the globe

Dominion from Sea to Sea: Pacific Ascendancy and American Power. By Bruce Cumings. Yale University Press; 641 pages; $38 and GBP30. Buy from Amazon.com, Amazon.co.uk

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The illicit nuclear trade flourishes because governments let it

Peddling Peril: How the Secret Nuclear Trade Arms America’s Enemies. By David Albright. Free press; 304 pages; $27. Buy from Amazon.com

EVER since the atom was split, governments have struggled to control a force with potential for good that can also wreak awful destruction. Some argue it is impossible to stop technologies that can keep the lights on from being used to make bombs. That is a sobering thought in a world ready to re-embrace relatively carbon-free nuclear power. But David Albright, a respected chronicler of undercover nuclear shenanigans, tells a more alarming story: just how little most governments have done to halt the bomb’s spread. ...

A new exhibition expands what we know about how Matisse worked

ON A trip to Chicago to give a lecture, John Elderfield, then chief curator of painting and sculpture at the Museum of Modern Art (MoMA) in New York, dropped in to see how conservation of Henri Matisse’s monumental painting, “Bathers by a River”, was coming along. He was hooked. The result, five years later, is an exhibition that dramatically changes established ideas about the artist’s work and working methods.

A scholar, Mr Elderfield has always been attracted to questions that are hard to answer. He is from the tough former mining county of Yorkshire, which may have shaped his conviction that if an undertaking is easy, it isn’t worth doing. During his more than 30 years at MoMA (he retired in 2008), there were many thorny problems to engage him. Quite a few concerned Matisse. His 1992 exhibition, “Henri Matisse: A Retrospective”, was a tremendous popular and critical success. He imagined he had probably given the subject everything he could. But not at all, it turned out. His “Matisse Picasso”, the first major exhibition devoted to these two giants, opened in 2003. Only a couple of years later, in Chicago, he was enmeshed again. ...

A new biography highlights the life and work of a British artist and the women he loved

Into the Frame: The Four Loves of Ford Madox Brown. By Angela Thirlwell. Chatto & Windus; 328 pages; GBP25. Buy from Amazon.co.uk

THE Pre-Raphaelites and their “stu