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1 DATA ON MORE COUNTRIES ARE AVAILABLE TOSUBSCRIBERSATWWW.ECONOMIST.COM . r

-,"GING-MARKET INDIC:ATORS

''..,....--~

f% change on yearearlier Latest 12 months, $bn Foreignreserves*, $bn

GO, Industrial Consumer Trade Currerit Latest Year agoproduction prices balance account

China + 7A Q4 + 2.3 Jan + . 1.5 .uec +24.0 Jan +15.7 1999 163.9 Nov 156.8Hong Kong +10A Q3 0.1 Q3 1.8 Dec -10.9 Dec + 9.2 Q3 107.5 Dec 963India + 7.2 Q4t + 6.5 Nov + 3.5 Dec 83 Dec 5.6 Q3 373 Dec 32.7Indonesia + 5.1Q3 +38.4 Q4t + 8.3 Jan +28.3 Dec + 6.2 Ql 22.6 Dec 26.5Malaysia + 7.7 Q3 + 15.1 Dec + 1.4 Dec +16.0 oec +11.3 02 29.5 000 30.6Philippines + 4.8 Q3 +36.6 Nov 6.9 Jan + 5.7 Nov + ·9,1 Aug 12.5 Oct 12.8Singapore +10.5 Q4 +20.0 Dec + 2.1 Dec + 4.0 Nov +21.6 Q3 77.5 Nov 743South Korea + 9.2 Q3 + 4.7 Dec + 4.2 Jan +12.9 1an +11.7 Nov 96.2 Dec 74.0Taiwan + 6.6 Q3 - 2.1 Dec + 2.4 Jan + 8.1 1an + 7.5 Q3 106.7 Dec 106.2Thailand + 2.6 Q3 + 1.5 Dec + 1.3 Jan + 5.6 De<: + 9.2 O.c 32.0 Dec 34,1

Argentina nil Q3 3.4 Dec 1.5 Jan + 1.1 De<: 10.5 Q3 25.2 Oec 263Brazil + 4.4 Q4 + 7.5 Dec + 5.4 Jan 1.1 Jan 24.6 Dec 32.5 Nov 42.2Chile + 5,8Q3 - 3.8 Dec + 4.7 Jan + 1.5 De<: ...;0] 03 14:2 Nov 14.1Colombia + 3.1 03 + 0.2 Dec + 85 Jan + 2.3.0e<: +.0.1.02 8.1 ,,, 7.6Mexico + 7.1 03 0.4 Oec + 8.1 Jan 8.0 De<: 16.4 03 35.5 Dec 31.8Peru - 1.8 Dec + 0.9 Nov" + 3.9 jan - 0.4 Nov - 1.603 8,5 Nov 8.9Venezuela + 3.3 03 ra + 12.6 Jan +14.4Ju[ +11.803 13.1 ", 12.3Egypt + 6.5 2000* + 9.4 2000' + 2.4 Nov 10.8Q3 0.9 03 12.9 Oct 15.4Israel + 3.004 + 6.0 Nov nil Dec 6.9 Jan -. .0.7 03 23.2 Jan 22.1South Africa + 4.5 Q3 + 4.1 Dec 7.0 Dec + 3,2 De<: - 0.7 03 6.1 ", 63Turkey + 7.4 03 4.2 Dec + 35.9 Jan 27.4 Nov "'"10.3 Nov 18.8 Nov 22.7Czech,Republic + 2.2 03 + 1.4 Dec + 4.2' Jan 3.3 De<: 1.903 13.1 ,,, 12.9Hungary + 4.6 03 +10.1 Dec + 10.1 Jan 23 De<: - '.1.8 Dec 11,2 Dec 11.0Poland + 2.2 04 2.2 Dec + 8.5 bee -11.0'0e<: - 9:9 Doc 25.3 Dec 24.5Russia + 7.9 Q4 +2.5 Dec + 20] Jan +59.8 Nav +43.8 03 24.3 oec 8.5'EXcluding gold, except SingaPQre; IMF definition.t1999: ~Year ending June. *'Newseries

ECONOMY Brazil's GOP grewby44%intheyearto thefourthquarter.It washelpedbyasurgein industrialproduction.whichclirnbedv.g'a inthe12 monthstoDecember.Turkey'smonthlycurrent-accountdeficit widened to a record $1.7 billion in November. Russiaheld $24'3billionin foreign-currencyreserves at theendof2000,Up from$8.5 billion ayearearlier.'

FINANCIAL MARKETS Moscow gained7.2%this weekasspeculative interestbuoyedanal-readyvolatile market. Financial amiconstruction shareshelpedpush Seoul up by 4;8(fJ, whileBangkok's gainsfrom earlier in the week werereversed following MSc:I'sdecisiqll,nqtto in-crease Thailand's countryweights in itsindices.

Currency units Interest rates Stockmarkets % ~hangeori

per $ per £ short-term reb 14th Dec atse 15199

Feb 14th year ago Feb14th % p.a. 0", in local inSweek currency terms

China 828 8,28 12:1 5.40 2,077.3 - 0.8 +' 43.1 + 43.1Hong Kong 7.80 7.78 11.4 5.21 15,860.4 1.2 6.5 6.8lridia 46.6 43:6 68.0 8.58 4,363,1 + 1.2 - 12,8 - 18.6Indonesia 9;603 7,425 14,021 15.04 423.2 __ 4.8 - 37.5 - 54:·1Malaysia 3.80 3.80 5.55 3.30 714.5 -.2.0 ,---.1.2.0" 12.0Philippines 48.0 40.5 70.1 12.31 1,687.7 + 1.7 21.2 33.9Singapore 1.75 1.70 2.55 2.08 1,966.1 + 1.2 20;7 24.3South Korea 1,252 1,126 1,827 5.69 603.8 + 4.8 - 41.3 - 46.8Taiwan 32.3 30.7 47.1 5.15 5,887:7 + 3.4 - 30.3 - 32.3Thailand 42.4 37.7 61.9 2.75 315.3 . 3.7 34.6 42.0Argentina 1.00 1.00 1.46 6.45 494.9 1.8 9.8 9.8Brazil 1.99 1.77 2.90 15.28 17,120.1 + 1.8 + 0.2 9.7Chile 560 513 817 4.21 * 4,949.3 - 1.3 4.2 9.4Colombia 2;243 1,947 3,275 13.33 839.7 + 4.7 - 15.8 29.6Mexico 9.73 9.37 142 17.07 6,360.1 + 0.2 10.8 13.1 'Peru 3.53 3.45 5.2 11.04 1,318.5 + 0.2 28.2 - 28.5Venezuela 703 659 1,927 16.22 7,706.9 - 2.7 + 42.2. + 31.2'Egypt 3.88 3.42 5.66 9.09 7,267.3 3.6 44.2 50.8Israel 4.10 4.04 5.99 5.72 457.1 + 2.9 6.2 4:8South Africa 7.89 6.34 11.5 10.45 9,191.9 + 0.4 + 7.6 - 16.0Turkey 683,085 564,050 997,372 46.00 9,971.7 + 2.5 34.4 47.9Czech Republic 37.6 36.3 54.9 5.31 465.7 4.2 4.9 9.1Hungary 289 260 422 11.06 7,635.8. - 1.4' 13.4 - 23.9Poland 4.09 4.14 5.97 18.55 16,561.9 -1:6 8.4 7;.2

Russia 28.7 28.8 41,9 25.00 178.6+ + 7.2 + 4.7 + OS,

·Irifl;itl(ln·~dju,ted.tin dollar terms.Sources:National statlsncs offtces, central banks andstockexchanges; Thomson Financial Datastre~m; EIU; Reuters; W~rburg Dillon Read;J .• MorqanChase; Hong Kong MonetaryAuthonty; CentreforMOnitOring lndan Economy; FIR;EFG-Hermes; Bank leumlle-israel;Standard Bank Group; cerennB~[]k; Deutsche Bank; Russi~n Economic Trends.

'.'1'" Despite.con­wnin itseconomy;

M most-attractive des­..a direct.investment, 'ac~

.mualsurveybyAT;Kear...;.jement.:..consulting:firm. Exec­

~350f .the world's:,1,000, biggest.nes gave marks on a scale of one to

.ror their likelihood toinvestinforeignantries..Size. matters. Thoughthe. sheer

scaleof the American marketstillpulls in-,vestors in,ChinaandBrazil, twobigemerg­ing economies that are expected to growquickly, now occupythe secondand thirdspots.Indiaisalsointhe t9Pseven.The big­gest shift in investors' outlook, says AT.Kearney, hasbeen towardsMexico. Ameri­can firmsr~te, their NA:FT~ partner as theirtop destinanonfor investment, Executiveshave alsobrightenedtheirview ofAsian"tiger" economies.The ratings of both Sin­gaporeandTaiwanhave ~rnproved.rn.ark-'

edly in thepast year.Britainhas dropped tofourth place, from second last year. Al­thoughtheexecutivessaidthat uncertaintyoverBritain's entrytothe eurocouldaffectinvestment,' general.teconomic perfor­manceand exchangeratesmattered more.

/

104 TH E'.ECONOMIST FEBRUA~,{.17!H2001

.. FEBRUARY 17TH 2001•...•.. -:,:>:',::'-.;:''0;:".''.:'':'' •.'.'.--''':-,.,i."';":::,,-

POLITICS THIS WEEK

JacquesChirac,France's'con­servative presideht,disagreedwith a plan of Lionel jospin,itssocialist prim~ minister.fordevolving powe~ to Corsica.

IMore peac, talksLeaders of sevedl ofthe coun­tries and rebel filctions in­volved in Co"g~'s civil warmet.for peace talks in Zambia.But the presidenis of Rwandaand Ugandasta~ed away.

Some 250,000. reougees re­mained trapped.,by fightingbetween the Guinean armyand rebelsencreaching fromSierra Leone and elsewhere.Ruud Lubbers, t~e new UnitedNations high commissioner forrefugees,visitedlGuinea andSierraLeone to arrange emer­gencyaid and tlle evacuationof refugees. I'

Isra.eI'Smilitar-["killed· a se­nior'Palestinian :se~urity offi­cial in a rocket ttack. A Pal­estinianbus'driyerdrove intoa queue ata bU1stop, killingeightIsraelis anp injuringrrothers,and raiS[.g tensionsstill further.

People flocked 0 the polls inBahrain, an aOthoritarianGulf emirate; talvote on a newconstiti.ttionthatwould:insti­tutea partially.elected parlia­ment and gran~-women politi-cal rights. I

Iraq's nationall:airline re­sumed schedule d interna­tional flights fol the first timesince the Gulf J..ar, in appar­ent defianceof !uN sanctions.

Germany's new farm andconsumer-protection minister,Renate Kiinast, fiercely crit­icised the EuropeanCommis­sion's latest plan for cullingmore cattlein its effort to fendoff BSE, or mad-cow dise~se.

The Social Democratic primeministerof Sweden, GorahPersson, said he would nothold a referendumbeforethenext general election due in,2002. onYJh~ther Sweden, oneof the three su.countnes notwithin the'euro-zone, wouldjoin'Europe's single currency.

Ireland was formally repri­manded by the EuropeanCommission fur the expan­sionary budget it plans for thisyear,,but,the Irishfinanceminister, CharlieMcCreevy,refused to change it.

Kohl's fine

Germany's Iormerchancellor,Helmut Kohl, acceptedafineof DM300,oOO ($141,000)for accepting.secr~t',and there­fore illegal contributions to hisChristian Democratic Union.If he 'agrees tppay,criminalcharges, againsthim willbedropped, but a parliarnentaryinquiry into the affair willcontinue.

Protesters on the streets-ofUkraine's capital,Kiev, con­tinned to call for their presi­dent,Leonid Kuchma, to re­sign, while, a leadingcriticofhis, Yulia Timoshenko, a dep­uty prime ministerin chargeof energy, was arrested for al­leged corruption.

AVAlLABLEBY E-MAIL FROMWWW.ECONOMIST.COM

Thailand closeda cr()ssiI1gwith,Myanmar, after lVly<itI1-:mar's soldiers,were reported" tobe massing on the border andfiring into Thai territory.Myanmarsaid,it was shootingat,rebels.

Afghanistan's rulingTalibantold the United Nations toclose its political officein Ka­bul,the capital,after Ameri­can officials closedthe Tali­ban's office in New York.Opposition fighters in Af­ghanistan seizedBarniyan, atown held by the Taliban.

, ::,.. '., ,.. ,';

Mori in the rough

It was announced in HongKong that the financial secre­tary, Donald Tsang Yam-Kuen,would replace a champion ofthe territory's autonomy,An­son Chan Fang On-sang,aschief secretary. A banker, An­thony Leung Kam-chung,would take over from Mr'Isang,

Japan's unpopular primeminister, YoshiroMoribe­came even-less secureafter hewascriticisedfor continuingagameof golfafter being toldof an accideI1tinWl1ic~,:aJap­anese trawlerhad been sunkby an Americansubmarine,drowning nine people.

Senators in the Philippinesexamined a bank account saidto belongto the deposed pres­ident,Joseph Estrada. Morethan $60mhad allegedly beenwithdrawn before Mr Estrada

, was ousted last month, ac­cusedby his opponents of .corruption.

At least 225 people, including22 children and their teacherin one school,were killedinan earthquake' in BlSalva­dor, the second in the pastfour weeks.

PresidentGeorge Bush an­nounced that he wanted-tocreatea "new architecture" fordefence by investing in newtechnologiesand weaponssystems, ratherthan tinkeringwith the old. He also declared"God bless'NATO'',' takinghis";listeners by surprise.

Mr Bush was due to visitMexico, his first trip abroadas president.

Outrage continued to swirlround Bill Clinton as heplunged into his post-presi­dential career. Under severemedia pressure, he shifted hisnew office from swankymid­town Manhattan to low-rentHarlero, a placewith which heclaimed longand heartfeltconnections. Meanwhile, Con­gress said that it wanted tolook into Mr Clinton', pardonof Marc Rich, a fugitive finan­cier.The us attorney in NewYork, MaryJO White, said shewould conduct a-criminal in­vestigation into the affair.

Architect of defence

A 13-pointdeal was signed be­tween Colombia's.PresidentAndresPastranaand theleader of the left-wing FARC

rebels, Manuel Marulanda,re­newingthe lifeof a demili­tarised zone controlledby therebels and thus preparing theway for a .ceasefire.

6 TH'E ECONOMlsl FEBRUARY 17TH 2001

" "

ECONOMIC INDICATORS

All items 87.9 89.0 2.2 + 2:2food 86.2 87.4 3.1 + ~.2

lndustrials 90:1 91.1 1.0 1.4

Gold

$ peroz 263.25 261.05 13 -14.0Crude oil North Sea Brent$ per barrel 28.58 28.09 + 8.0 - C.5West Texas Intermediate

$ per barrel 30.26 30:12 - 0.5 + C.l• Prcvslonal. t Ncn-food a9ricultUrals.

Dollar index

All items 71.8 71.2 - 1:9 - ~3

food 70.5 70.0 2.8 2.5

IridLstrials

AI 73.7 72.9 0.7 - E.7

Nfaf 66.6 65.1 2.6 .,.123

Metals 79.7 79.5 + 0.6 E.1Sterling index

All items 77.6 77.4 0.7 :+ 4:2food 76;1 76:0 1.6 + 7:2IndL:strials 79.6 79.2 + 0.6 + CA,

surolndexAll items 101.4 J01.7 + 0.2 + 1.1Food 99.5 99:9 0,8 + 4.1lndt.strials 104.0 104.1 + 1.4 2.5Yen index

_ COMMODITY PRICE INDEX.America's timbermanufactur­

erswantthe Bushad~i~i~tr~tionto irylp()sesteep.duties on Canadian softwood im­portsornegotiatea: newbilateralpactwhena five-year agreementexpires at the end.ofMarch. Theyclaimthat Canadian millsgetunfairsulJsiciies, thanksto pricessetby thegovernmentthat providethem with cheaplogs.{The Canadian governmentowns 95%ofthe country'stimber.) The, currefl1t pactbetween the countries limits imports toAmerica by imposinga tariffabove an ini­tialquota. Butrecordi~ports of Canadiansoftwood-95% of them tariff-free-stillcompriseda third of the American marketin 2000. Withtimber pricesat decade-longlows,it is no surprisethat American millsarelosingmoney aridmanyhaveclosed.

OUTPUT, D~ND AND JOB~ Germany's industrial output rose by o:flo in December. Itsyear-on-yeargrowthquickenedto 5.5"10. Britain'sunemployment.measuredby totalclaimants,unexpectedly fell in january.towithin a whiskerof one million-e-the lowestin 26 years. In thesamemonth thejoblessrate in Canada edgedupto6.9%.% change at annual rate The Economist poll Industrial Retail sales Unemployment

GDP GDPforecasts production (volume) % rateamthst 1 year 2000 2001 3 mthst 1 year ~ latest year ago

Australia + 2.6 + 4.2 03 + 4.3 + 3.2 1.5 + 4.2 Q3' 0.8 03 6:7 Jan 6.9Austria + 1.2 + 1.9 03 + 3.4 + 2.4 na + 6.7 Oct' - 1.1 Oct 33 Dec 3:6

Belgium + 2.0 + 3.2 Q3 + 3.9 + 2.7 na + 7.3 Dec~ '+ 6.4 Nov 10.7 jan~ 11.3Britain + 1.0 + 2.4 04 + 3.1 + 2.5 - 2.9 + 0.5 Dec + 3.3 Jan 53 Dee* 5.9Canada + 4.8 + 5.0 Q3 .+ '4:9 + 2.8 + 1.2 + 4.5 Nov + 4.6 Nov 6.9 Jilli 6.8Denmark + 2.0 + 2.7 Q3 + 2.6 + 2._1 na + 8.6 D,ec 1.0 Dec 5.4 Dec 5.4France + 2.3 + 3.0 Q3 + 3.1 + 2.6 + 3.6 + 2.3 Nov 1.5 Dec 9.2 Dec 10.6Germany + 2.3 + 2.8 Q3 + 3.1 + 2.4 + 0.9 + 5.5 De<: 2.9 Dec 9.3 Jan 10.1Italy + 3.2 + 2.7 Q4 + 2.6+ 2.2+ 5.9 ':".3.3 D,ec .,. 1.2 Nov 10.0 Oct 11.1Japan - 2.4 + 0.5 Q3 + 1.7 + 1.4 + 1.4 + 3.8 Dec .: 1.1 Dec 4.8 Dec 4.7Netherlands + 5.1 + 3.1 Q4 + 3.9 '+ 3.0 + 8.5 + 9.4 De<: + 2.9 Nov 2.6 Dee§ 2.7Spain + 2.2 + 3.9 Q3 + 4.1 + 3'.1 + 0.1 + 4.4 Dec na 13.7 Dec 15.1Sweden + 3.9 + 4.0 Q3 + 4.0 + 3.2, na + 9.9 Nov + 3.7 Dec 3.7 Dec' 53Switzerland + 2.0 + 3.6 Q3 + 3.4 +·2:2 na:+- 6.9 Q3# 2.0 Dec 2.0 Jan' 2.6United States + 1.4 + 3:5 Q4 +' 5:0 +-1:81:1 +3::f,Dec. + 2.6 Dec 4.2 Jan 4.0Euro area + 2.4 + 3.3 Q3 + 3.4 + 2.6 + 5.4 + 4.4, Nov + 1.2 Nov 8.7 Dec 9.6·Notseasonallyadjusted,tAverage oflatest 3 months compared with av~r~ge pI previous3 months; ilian'nual' rate. eoct-oecclaimant count rate 3.5%inJanuary.§?cl:Dec

PRICES ,,' AND WAGES In January Britain's annual consumer-price inflationrateJell to 2.7%.Excluding mortgages, the ratewasonly1.8%, the lowestsincerecords beganin january 1976.lntheNetherlandsinflationjumped t04.2%,thehi~hestsinceMay 1992.In theyeartojanuarypro­ducer-priceinflationslowedto1.9% inBritain and t03.8,%in Germany.0/0 change at annual rate The Economist poll

Consumer prices" consumer, prices forecast Producer prices" -Wagesfearnings3 mths" 1 year 2000 2001 3 mthst 1 year 3 mthst 1ye«lr

Australia + 1.2 + 5.8 04 + 4.6 + 4.1 +10.2 + 8.4 Q4 -3.3 + 5.0 Q4

Austria + 2.8 + 2.6 Dec + 2.1 + 1.7 +- 2.1 + 3.2 Jan + 1.9 + 2:2 Dei:Belgium + 0.7 + 2.2 Jan + 2.6 + 2.1 +16:2 +10.0 Nov + 3.7 + 1,6 04

Britain + 1.3 + 2.7 Jan + 2.4 + 2.2 + 0:2 + 1.9 Jan + 7.0 + 4.4 DecCanada + 2.5 + 3.2 Dec + 2.7 + 2.4 + 4.9 + 3.5 Dec + 0.7 + 3.4 NovDenmark + 1.3 + 2.3 Jan + 2.9 + 23 + 3.0 + 3.9 Dec + 7.0 + 3.8 03

France + 1.7 + 1.6 Dec + 1.7 + 1.4 + 5.2 + 4.7 Dec " 4.6 + 5.3 03

Germany + 1.7 + 2.4 Jan + 2.0 + 1.5 + 0.8 + 3;8 Jan na + 1.8 Nov·Italy + 3.1 + 3.0 Jan + 2.5 + 2.1 + 6.1 + 6.2 oec + 0.9 + 1.-7 Dec'Japan + 0.7 - 0:2 Dec - 0.7 - 0.4 + 1.4 + 1.2 Jan na + 1.8 DecNetherlands + 23 + 4.2 Jan + 2.5 + 3.0 + 7.4 + 7.6 Dec + 1.4 + 3.0 DecSpain + 3.0 + 3.7 Jan + 3.4 + 2.9 + 4.8 + 5.0 Jan + 3.2 + 2.4 03

Sweden na + 1.4 Dec + 13 + 1.7 + 6.7 + 3.7 oec + 0.1 + 2.1 Nov'Switzerland + 2.0 + 13 Jan + 1.6 + 1.4 nil + 1.4 Dec na + 0.2 1999United States + 2.7 + 3.4 OK + 3.4 + 2.5 + 3.5 + 3.6 »ec + 4.8 + 3.9 JanEuro area + 2:1 + 2.6 Dec + 23 + 1.9 + 5.7 + 5.4 Dec + 1.2 + L8 Q3

'Notseasonally adjusted. tAveragea! latest 3 monthscompared withaverageo! previous 3 months. at annual rate.

1995=100 % chanqe onFeb 6th" Feb 13th" one one

month year

Sweden

DECO

as

"""'"ott 02f2000*

~.----...;:;~

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9998

Sweden

" OEeD§

OEeD ...,.:;~-~---

Consumer prices"0;" inrr",,,~,,, on a year eeruer..

Sweden

GOP% lncrease on a year earlier

1997I 0

• SWEDEN The outlook for Sweden re­mains good,according to the.OECO'S latest'assessment. The economic trauma of theearly1990S is now a distant memory.Aftertwoyearsinwhich-the economyhas grownat around 4% a year,the expansionis pre.,.dieted to slow only .modesrly, to 3.2%, .in2001. Notuntil nextyearwilltheslowdownbringactualgrowthinto line.with potentialgrowth, which the osco calculates' to beabout 2.5'10. Theunemploymentrate,whichwasabovetheoren's average asrecentlyas1997, is'. forecast to continue its decline,reaching 4% ofthelabour forceby 2002.Theonlysmallcloudon the horizonisinflation:it has been below the Riksbank's targetof2.0% for the pastfive years,but evenwithhigher interest rates the QECO expects it toexceedthe targetin 2002.

102 THE ECONOM[STFEBRUARY 17TH 2001

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People power

Sta-c-voubring to 'the forelegltl­. mate coricerns about the' stabilityof the new Philippine .govem­ment and the fate of democracy("After the a movie, a new mainattraction' for Filipinos", January27th). At the crux of the issue. iswhether the Filipinos judiciouslyused, "people power" this time.

"People pOVier two" might nothave advanced the cause of de­mocracy in the, Philippines ,be­cause it impinged upon.thecon­stitutional pr9cess of impeachingan ineffective' and lawless, presi­dent. Also,it was used not to ousta dictatorship but to eliminateimmorality end . corruption 'ingovernment. But I would not faulttheFilipinos for what they did: Iwould suggest; instead, that-in thePhilippines, as in 'many develop­ing societies, -. the meaning andpurpose of true constitutional de­mocracy is yet to be adequatelyunderstood and appreciated.

Populist Klaus

SIR-I realise .that to combinefree-nlarket ardour with a Euros­ceptical tone-asyou think VaclavKlaus '.' does, can be attractive(Charlemagne, February jrd). But,alas, Mr Klaus is no free mar­keteer; indeed, he is the last per­son deserving the label Thatche­rite. Henever truly embracedthemarket. When' he privatised theCzech economy his main concernwas to keep it in'Czech hands. As­sets were soldfor, rather, trans­ferred) to individuals and-groupswho borrowed from the Czechs'state-owned banks. And who gotthe loans? Political friends of Mr

.._'''"'' james's Street, London-swrx rac ,,,' ozo .... """ letter~~lsacrifice their rights and respon- Klaus and his party. Under' Mr F~r all their jLal indignationsibilities regarding their ~lients; Kla.us no.ta,single ba.nk was fully (admirable ,ill:,.tseIf)" .FilipinosEither choice hurts the world's privatised, Foreign direct invest- must allowdemd cracyto flourishpoorest and most. marginalised ment remained 'low; thepurchase by allowing the rideof lawto takecommunities. We had expected to of Skoda by volkswagen wastar- hold; by aiming~ for genuine re­receive $8m from USAID for the ried out despite the objections of publicanism whbrein leaders de­period between September 2001 Mr Klaus.." '. ... ' .' .. . . rive their' authoJity from the err­and. August 2003. We will now He is the" worst sort of Central lightened conse~t ofthegovernedlose this. .'.. Europeanpoliti?an, alltoocom-, and rule ,t?,prorp.otepeople's in-

The social impact is unmistak- mon at present, who knows-how terests overandl'above 'their oli­able: under thegagrule recipients to play the nationalistic card and garchic. interestsl by demandingof American .,family-planning conducts politics in a crude-and from .. that government a fulfil­funds must give up the ability to abusive manner. -He invariably ment of its ,duty- to secure andprovide legal health services and dubs his' opponents, including maintain individual rights andthe right to take part in important President vaclav Havel, as stupid, liberties; .and, inithe spirit of thepolicy debates in their own coun- criminal, elitist, spoiled, middle- principle of sep4ration of churchtries. To place these restrictions on class and so on. Of course he does and state, by drawing from thefamily-planning .choices disem- not understand the meaning of Catholic church fnoral inspirationpowers women .' and men, and, "civil society". and not pOlitical agitation.crucially, undermines their efforts Prague JAN rIENDRIK SIEMSSEN Burbank, '., •to extricate themselves from pov- • Califomm PRISCILLA TACUJANerty. That is harsh in anyone's '., . ',' ' , .' '. f . , •book. .... .... Good pint . I

INGAR BRUEGGEMANN .. •....• Fo~tlJall colnmentaryDirector General SIR-'I must, take-exception 'with ~

London IPPF the. cornment"madebyjohn S~R~I'am;welIt aware that The----~-~--c'---~. Wakely, that ":,'when" Budweiser Economist -is la. British-based

goes up against Tsingtao in China, newspaper but lhis does notfor­what is-uhecdifference cexcept give or explain hll transgressions.price?" (''The big pitcher",January Youstate that tlXe NFL "ties Amer­zoth). His taste buds must have ican males to their sofas on Satur­gone walkabout. Your description days" ("Rage v Nrtaniax", Februaryof Budweiser as "watery fizz" is 3rd). NFL games pre played almostspot .on; Tsingtao, . along with exclusively on.Sundays. I supposeSingha beer here in Thailand, has I should be, t4ankful, that youflavour, The only similarity to were able, to Irestrain yourselfBudweiser is the fizz,bit. from,prefacingl' "football" withBangkok PATRICK TAYLOR the modifier "J\1nerican".

For future reference: baseball isplayed throughout the week,golfand tennis toutnaments' tend to·finish on Sundays, and at mywork our spirited departmentaltable-soccer outings usually' take

~~~~:~edn.l.sday evenings.

rtinois .: JULIAN JAMISON

SIR-I read the! piece on the XFLleague with a s&nseof deja vu. Inthe 1970S an Arj.erican science fic­tion writer; forman Spinrad,wrote a short story based. on theconcept of a Tf network, lockedout of mainstream Americanfootball, that devised analter~a­tive version onhe game to set upits 'own' leagu~ unhindered bycopyright h.11e§; This began withthe kind of'{relatively) minor ruletinkerings plan\led by XFL. It rap­idly,movedonito a format whereplayer .armou~was .dispensedwith, every forb of violence.pos­sible without-at-tual weapons waslicit and" findlly, where teamswere conscioJsly structured on

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8

Bush and abortion

LETTlERS

SIR- Tq say that George Bush's re­instatement. of the '~Mexico. citypolicy" (''Trench warfare", janu­ary 27th) .was not "particularlyharsh in its impact" is an insult to,the, women, .men and childrenwho .will suffer .as a resultYouhave to live ina country' wherewomen can get safe and legalabortion to say something as cas­ually . dismissive .as "in' manyparts -of .the .developing worldabortions .are illegal anyway."This ignores the. fact that unsafeabortion, particularly prevalent inthose countries, kills,thousands ofwomen every year, and that it, isprecisely . the programmes thatthe Mexico city policy hits' thehardest that have, the best pros­pect ofsaving those lives.

The. policy is, known as the"global gag rule" for the restric-·tions itplaces on the way orga­nisations .'. outside America usetheir own money. It stops peoplespeaking out about abortion,whether it,is to. advise a womanabout options open to her ordemocratically trying to stimulatea change in the law.This is noth­ing less than an affront to theprinciple of free speech, as guar­anteed)n ,America's. constitution,and ironically will hurt those ac­tivities that reduce the demandfor ahortionsworldwide by pro­viding, contraception.

The gag, rule forces overseascommunity-based -.organisationslike the" International PlannedParenthood .Federation (IFPF)·tomake an' impossible' decision:forgo desperately needed Arneri­can family-planning assistance or

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100 THE ECONOMlSTFElIRUARYl17TH 2001

LETTERSracial and othergrouplines(therewas a gayteam, for instance) toimprove audience.: i~entificationwith the sid~$" the whole. thingwas,of coursehugelypopular.Gininglumt,Kent BRIANDITCHAM

Israel's future

SIR-YOU criticise Ehud'<Barak'speace plan as not having worked,and Ariel Sharon's as being un­workable ("Saying no to peace",Pebruary grd). Fair" enough;' butVasser Arafathas neversubmitteda peaceplan of any kind,andhasno intention of doing so.Why notcriticise him?

Like any fully functioning de­mocracy,'Israel has itsextremists,whom you label "crazies". Israeldoes a good job of.marginalisingits crazies, By, cO,ntrast, the nearlytwo-dozen Arabgo~~rrrneflts~ill~eluding Mr Arafat's dictat0l"Ship­in-waiting,have no problem withpolitical crazies. They also _haveno democracy, no representativeelections..no :free, speech or freepress; etc.

You denigrate as "myth" theheartfelt jewish belief "that [eru­salem should be Israel's eternal,undividedcapital." SOlTIe twode­cades before the, state" of Israelwas recalled to life in 1948,AithurBalfour suggested to his friendChaim 'Wcizrnan,that ajewishhomeland might be establishedsome place other than in biblicalIsrael, Weizman asked Balfour ifhe, as Gtn,,:E:nglisllman, would ex­change London for Paris. "But wehave London," protested Balfour;"Yes," answered weeman. "Andwhen London was a swamp, wehad jerusalem:'Miami MILTON HIRSCH

Sm-s-ArielSharon has, not madepublic his plans for the occupiedterritories but it is likely that thepresentpolicies of collective pun­ishment 'against Palestinian civil­ians and expansion of .illegal.set­tlements will continue. It.istherefureimportant to .restate rs­rael's obligations,',under, interna­tionallaw.

On many occasions the inter­national community has' "reef­firmed in the UN General Assem­bly, and Security "Council thatIsrael is -an occupying power .ofGaza and the west.sank includ­ing East Jerusalem; and bound bythe fourth Geneva Convention.This guarantees protection to Pal­estinian civilians in the occupied

10

territories against torture, killingsand the 'use of excessive. indis­criminate and disproportionateforce, land' confiscation and de­molition of homes, and othermeasures whether applied by ci­vilians or soldiers.

A new era, of Israelicompli­ance with international law' andrespect for the human rights ofPalestinians under its occupationis the only basis for progress. Suchan era will not dawn if the inter­national community continues totreat Israel as if it had a specialdispensation to ignoreits interne­tional obligations.' We call on theBritish government", acting withits EU, part~ers, to take a le;:tdingrole" in: implementing prastic:almeasures to ensure Israel's adher­ence to' the convention,

DANiEL MACfioVERLawyers for,Palestinian,

London Human' Rights

Greer\lmd pleasant

SIR-YOUask how prosperity andgreenery.are"related ("Green ,aIldgrowing", january 27th).YaleUni­versity's Environmental Sustain­ability' Index is certainly a com­mendable effort but is tooComplicated. The environmentalintensity, of .economic activity,increasingly industrial activity, isthe variable we have to control.FOrfunately,there' is~flirik'~e-­tween this imperative and green­erY;'fh~flip'sideo( erivirol}ri}'~~--'

tatiwensity"js eco~efficierI.cY,<'irtlresource productivity-conceptslinked directly to competitiveness'and open-market policies: Simpleperhaps, but on target Hard as itmay be to accept, the globatdrivefor, competitive advantage; mayhave within it a powerful drivertoward, sustainability-increasingefficiency .andproductivi~;,::::,

OWENCYLKE:'Director

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Catholic taste

such modish terms as "participa­tion", "comrnunity'' 'and "solidar­ity" would reinvent the churchfrom the bottom up; and thatother terms such as "ecumenism","tolerance" and "understanding"would " animate" .a ,moral andphilosophical awareness, It hasnot happened. What has hap­pened is a marginalisationof thechurch because it is perceived asboth sentimental and authoritar­ian. It does' not teach, it dog­rnatises; it does not guide, it con­fuses; it isnolonger convincingnot uplifting, it has become anexcuse to practice a faith on one'sown terms.

The church has' a role to play.:which 'goes beyond boldness or

prudel1ce and, which relates toand is supportive,of individualsfacedwithproblemsdifferentlydefined from .even zg years ago.Contraceptiori Ts :no longer aquestionof personalmorality butis.amatter.for AIDS and the de­veloping world; abortion is less aquestion oflifethan of femininedignity; euthanasia relates not somuch to death and' murder as tocharity; fears of genetic engineer­ing are not to be exploited, theyneed a church to provide objec­tive answers. These will not comefrom "below"; as diktats they willnot be accepted.Chazemais,France J. LE CLERCQ

SIR'-2:.You do noraddressthemainproblem "of the vast Institutionthat is the Catholic church. It is amost un-Christlike creation.Thoughfounded on the teachingsof Jesus it has lost itsorigins andhas become' 'irrelevant and un­recognisable. -Jesus has beensmothered by ..droning -liturgies,lavish cardinals' robes, the hierar­S~y:sL1~rounding the,' "vicar ofqhii~t';'and"pagan incense .pots~Y"~rging down the aisles. If thereVI,a~ tobe a second coming, Christ .would-nor fit in at all.

~,¥~oro,g~org~a. EDWARD' RAPP.Reflating Japan

S'I'R-Yourepeat two COmmon fal­lacies, about, reflating Japan'seconomy ("'Coming out 'of, de­nial"; "February3rd). First, youclaim that' bond 'prices will col­lapse if the Bank of Japan raisesitsinflation target This is not nec­essarily true, and depends on thedifference between the inflationtarget chosen and the market-

APPOINTMENTS

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The International HIV/AIDS Alliance supports communityactiont')n,I\IDSin,d~veloping countriesTo support thegrowth of our work, we are recrutttngthe.following twonew positions in our UK.secretariat:

Regional Co-ordinator: Latin America @.£40-<\S,000plusexcellent benefits, Candidates-should-have str()rlg technic.alskills in. cpmrnunity based HIV/AIDS programming.andfluent Spanish (knowledge of Portuguese would: beadvantageous).

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ITEM-HSG is a major research instituteat theUniversity ofSt. Gallen engaged in graduate teaching and.research in thearea of Manufacturing, Quality, Inn;ovation and SupplyChain Management. It employs more than 50 faculty andstaff members. The professor is expected-toprcvideacademic leadership in the area ofTechnologyManagement, with an emphasison Innovation.Responsibilities include lecturing on the area of TechnologyManagement at .the Graduate Ievel; supervising candidatesfor advanced degrees, spearheading sponsored researchprojects and industrial researchconsortia, and providingadvanced executive education and international outreach.The candidate is also expected to be involved in themanagement of the Institute.

Interested candidates should have a Ph.D' or equivalentdegree-ina relevant-area such as business administration orscience of,engineering, considerable tea~hirlg,exJ?erience,astrong publication record and preferably managementexperience.

The successful candidate is expected to ,assume the positionOctobe.r 1, 20Q1 .or at <l,Jillutuallr acceptable date:

Detailed.application should include-a current curriculumvitae-selected pttblic:atiOl1s andnames.of references andshould lle sent to _thePr~-~ident of Unhrer~ityof St. Gallen,Professor Dr, Peter. Gomez, Dufoursb:asse 50/ CH-9000St.Gallen, Switzerland.

Professor .«)f Comparative Politic"

The Faculty of.Arts of the University of Zurichinvites applications for the position of

for its Institute for-Technology Management' (ITEM-HSG).

senior position at the Full Professor Level

The University of St. Gallen, Switzerland (Graduate Schoolof Business, Economics, Law and Social Sciences - HSG)j~ ;seeking a candidate for,a

'l11eappllcationdeadlillEds March 15,2001. Applicationswill be kept corifidential.

Applicants should have experience in comparative empirical researchand knowledge in the field of different political systems. Prerequisite:"Habilitation" or equivalent qualification as university lecturer. Theteaching languageisGerman.

A curricui~m vitae, a list of publications and further application- . materials should besent to:

Dekanat der Phllosophischeu Fakuftat der Ualversltat Zurich,,Rfunistr~sse71,CH~8006Zurich,Switzerland.

Application.deadline: 13 ,April 2001

'e~~-: University of St.Galien

98 THE ECONOMIST FEBRUARY 17TH·2.001

EXECUTIVE FOCUS

SUFFOLK UNIVERSITYDeallrJh~FrallkSal<\TYer School of Managementl I

Suffolk University invites nominations and applications for the position of Dean for the Frank Sawyer

School of Management. . .•JThe Dean is the chief executive officer ofthe School and is responsible for the faculty andprdgrams,administrative staff, facilities, and budget. .. ' . .........•·1SuffolkUniversity consists of three faculties, the Law Faculty, theF~cultyofArtsandSciencrs,andThe Frank Sawyer School of Management. The Sawyer School serves over 1,000 undergraduate

stude.n.. t.s an.d. 1,2.00.. gr.:a.d.u..ate.students.a.nd..offers 56 underg.rad.uate...•an•...d..• g..r.a..duat.e.de.g.r.e.e,e~nd. c.etcif.icateprograms and is one of 300 schoolsnati?nwide named inBarron'sBest Buys in College Ed cation.There are more than 60 full-time facility members, 95 percent of whom hold Ph.D. degrees, gi ing theSawyer School of Management one of the highest faculty Ph.D. ratios in the country. The Universityhas innovative programs built on scholarship and is responsive to the marketdemandfor graduajes, TheUniversity is incorporating new technology, including an online MBA program, to reach wider Iharketsand to enhance the excellent service to their traditional student body. The University is loc~ted on

~Ojto,?'ShistoricBeacon 0l1as\VellaSOther locations in the Boston area and abroad. ... .>'bQIf~{i..f1:c~tiqns:TJjef(e3JJ. forT;h!"F~ank Sawyer School of Management providesleadersHiptoadiverse arid innovative community that values excellence in scholarship and teaching; in a nAture ofc?op~nltion, t~amwork,transparent and fair processe~ of ascountability 3JJ.dre""ards, 3JJ.d6Jntinualchange. It is desired that the Dean have an academic recordthat merits a senior tenured appointknent tothe Faculty of Management. The successful candidate will have a record of 'distinguished sch&larshipand administrative accomplishments; experience in personnelman~gement 3JJ.d fiscal responsibilities;an understanding of the potential of technology to transform tI1e ?ehvery,ofInanagement education andeffective servicing of student needs. The successful candidate will be a dYnamic,p~rS?l1Wit~.a clearvisionfor management education and research. Preferred candidates ""ill have an, earned doctl rate orother appropriate terminal credential. Candidates with executive level' experience' outside o. highereducation are welcomed. '

Nolllirtations an1 Applications: For best consideration, Illaterial,s should be submitted prior tJ March12, 2001. Review of applications and nominations will begin irnrnedi~rely and will continue luntil anappointment is made. Application materials should 'include a letter of application addressing how thecandidate's experiences. match the position requirements; a curriculum vitae; and the name, titlel e-mail,business address, and business and horne telephone. numbers of at leastfive references, SUbmiksion of,materials as an MS Word attachment is strongly encouraged. Individuals wishing to nominatecandidates for the position should submit a letter ofnomination, including the name, position, kddress,andtelephone number ofthe nominee.

Nominations and applicationswill be considered in confidence and should be sent to:Dr. Jan Greenwood, Vice President

,AT Kearney, Inc., Suffolk University Dean .Search333 John Carlyle Street, Alexandria; Virginia 22314

greenwoodtearri@atkearney.com

Suffolk University is an Equal Opportunity!Affirmative Action Employer~ttp:llwwws~~?lk.~~ul

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12

.' "

APPOINTMENTS

•UNIVERSITY OF AMSTERDAM

Faculty of Economics-and EconometricsDepartment of Economics '

The Faculty.vof Economics: and, Econometrics, Department ,ofEconomics invites applications for the position of an AssistantProfessor of International Economics.

Assistant.ProfessorofInternational Economics (F1M)

The appointment will be a full-time position, with a possibility fortenure. The salary will be based on qualifications and experience, witha maximum of Dfl. 9;150 gross a month:

Application:Applications, together with a Curriculum Vitae, research papers andtwo recommendation letters, should be submitted within three weeksofappearance of.this advertisement to:

The' Personnel DepartmentFaculty of Economics and Economet;r:icsUniversit)' of AmsterdamRoetersstraat 111018 Wls AmsterdamThe Netherlands

Information:For further information; please contact Professor H. Jager,phone +3120 525 4195 •• e-mail: jagercsfee.uva.nlFor more; information aboutthe pYA: www.uva.nlFor more information about the Department ofEconomics:www.fee.uva.nl/ae

Economist/Financial JournalistBright economist with ability to write quickly and interestingly aboutmonetary policy and other central banking topics required. to join smallteam launching new on-line service for financial market participants world­wide. Good economics rdegree-anditwo yea:rs~:.,exp.erience as .financialjournalistyfinancial ~nalyst or similar essential. Great opportunity to joinexciting ne\Vventure. Salary negotiable.

Write to:

Managing Director, Central Banking Publications-Ltd6, Langley Street;London WC2H 9]A

c-mail:roriul'!:le@centi'albariking-,co.uk

Privatisatian Transaction and ChemicaUndustry ExpertsA 'leading U'K. consulting firin seeks European.experts forlong-. orshort­term participation in a privatisation project in Egypt. Experiencedspecialisrs in-rhe following fields are invited to immediately apply:

i. Privatisation transactions/negotiations• International and Egyptian law• Financial advisory andvaluation• Management information systems• Distressed c0rrtpanylturn,ar0tlnd ,management• Training and human resources redeployment• Chemical and manufacturing industry specialists

All candidates. must. have prior .experience. ill privatisation and corporaterestructuring in the. chemical industry., Knowledge,: of ,Arabic:. andinternational donor project experience in Egypt i~ a significant advantage.

Please apply before 24 February to e-rrpil:.EgyptPriv@Consultant!Y1.Fax: +44 20 8846 4336

Adviser, Gender BudgetsWithin the' Governance Section,' the Gender Budget Adviser will support theimplementation of a global gender budget initiative. Responsibilities includeprogramme development and support to country offices in more than 20 in­country initiatives, involving global monitoring, evaluation, reporting anddocumentation, and support to the development of tools and capacity buildingactivities ...The' Adviser will liaise with partner -implementing institutions,support a Global. Advisory Committee, ccordinatecstrategic linkages. withintern~tiollal an?regional fmancial Institutions, and develop partnerships withother relevant non-governmental organisations. .

Candidates :will have a post-graduate degree in Bconomicsy Pinance,Development or a related field. Ar Ieasr eightyears ofdevelopment:relatedwork dealing with gender issues and project and programme development, andexperience and/or strong networks in more than one major geographic area.Good knowledge and .contact with specialist,agencies".intergovernmentalorganizations and NGO networks .. ""or1d""ide~ ..A ... proven track ... record, inprogramme implementation and management in working on women'sempowerment issues would be a distinct advantage. Fluency in English andeither Prcnch.or Spanish required.

The United Nations Development Fund for Women (UNIFEM) providesfinancial and technical assistance to innovative. programmes and strategies thatpromote women's human rights, political participation and economic security.UNIFEM works in partnership. with UN bodies, governments and non­govemmental organizations' and networks to promote 'gender equality.

Please send CV or UN Personal History Forni (Pll)to the attention of SallyCampbell, in English, by fax: (1-212) 906-6705 or e-mail:sally.campbell (glundp.org.' Deadlinefor: submissiOilS is.2 l\iarch,200L Onlyshort listed .... candidates·., will'. beicontacted. .For. rrioreJinformation aboutUNIFEM's' governance programme, see http://www:unifem.undp.org

AccountableII

t!)iversity The difference starts-with you

POLICY ADVISER ­FINANCE & SOCIAL POLICY

E)Oxfam

Oxford 36 hours I).w.£24,500 Contract: 4 YE~ars

We seeka.soclaleconomist to contributeto work on a widerange of poverty issues, including social sector financinq,international markets,financing for development andeconomic reform. Leading,lhe research and.advocacywork of the team, you will focus on thetherrie5 of improvingaccess to basic services and making markets work ferthe poor,working with colleaquee qlobally arid in Oxford:You will also represent oxrem.et thehighestlevei withexternal agencies and the media.Highly motivated, with excellent research andcommunications sklila, you will be 'educated10Masterslevel in economics or social science, with proven abilityin complex.economic policy ari<ilysis.'Specialist knowlE~ein the field oUinanceand social policy, market reformand povertyreductionis eesemlal-and a cleacunderstandincof development.issues,.including a strong qender- ­perspective, is expected.

,Closing date: 2nd.March 2001'

Reference: ID/POL/PAiRB

Fot further. details, ple.a,se, send a large S;AE,quoting appropriate reference,to: InternatlorlalHuman Resources, Oxfam, 274 Banbury Road;Oxford 0X2 7DZ"or e.mall: Ihrapps@oxfam.orll.uk

Guam workS withothers to find

lasting solutionsto poverty

and SUffering;

"1rWW.oxfam.org.uk

UOIIIOII!!p. , United Nations\,.,]/ DevelopmentFund.~ forWomen

0Iill]j).~

96 THE ECONOMIST FEBRUARY 17TH 2001

EXECUTIVE FOCUS

_Dep'~~.tt.t.orEdueatlo:i'and Employment. I

DfEE is an equal opportunities employer.

Salary up to £65,000 (more may beavailable for an exceptional candidate) • Lond&nDfEE is looking for aSenlor:Economist;or other appropriately This'is rict-a reserveo post-and rstheretore 'open.it> Britishqualif~ed ~ocial scienti~t,to lead the Department'sanalyti~al Natlonal~~:Commonwealth cttlzens and EuropeanjEconomicwork In Higher Education. Youwould alsosupport the Chief Area nationals. veryexGeptionally,someon"eouts~tletheEconolllist in developingthe capacity of theDepartment to groups listed may be consid~red foran appointm~nt in theappraise.and evaluate its policies. non-reserved category for up to 5 years..' .• : JYouwlll.be.closely involved lnthe excltinq process of ....•. ,..; .: ':'.developing policy on Higher Education,working with ministers Further informatlon 8!ld how t~aJlP~Y .: .".' .. 'and other senior officials, Yourkey role will be to make For further informationand an application form, lease sendevidence and analysiscount in policy making, You will need to your name, address and day time phone number,tquotingidentify.. Wh.ere analytical work can,"mak.e.. a difference" and will vaca,ncy re!8.rence 'SECON,' to Paul Ag.utu in the}Senior'9'Jilhave the ablllty to drive work through to meetobjectives, You Servlce~nlt, DfEE,. Room 306, Caxton House, 6-.2 TothillwilllTlanage,ahigh,quality teamof~5 analysts. .... .... Street, LondonSW1H 9NAYouwill have an impressivetrack record in public or private Alternatively, email him at scs:unit@dfee~gov.ukohelephOi1esector, in consultlnq or academia.An excellent micro ,020??7357:8B(24 houranswerphone),lf youh.aJ~ anyeconomist with a-stronq policy focus, or-other- social scientist queries plt3aSe,telephone 020 727.3 5789.with expertise.in~.research, evaluatlonand appraisal,you wlll Pleasenote: Theinformatiori pack is not evatalso need to demonstrate your ability to take on a senior electronically.managerial role. The flexibility to be, able toapply yourskills to The closin,g date for receiptother areasrequiring analytical input will also be important. of applicatic:ms is 3 March 2001.

""...'"!~,~~ ~ ~!:~~_'""" Challenging Intern.a.ti.ol1.aI Po.sitions in Research for Developinent"".rd>c.,b'O d"'l,p",~.ntl'''",,~,",1 . . '" ':.', '. . .. : .. '.:. ...." ~

The International Developmert Research Centre (IDRC) lsapublic cciporencn created bythe Canadian Government 10 help societies inlh~ developingworld line solutions 10 social, economic and environmental problems through research. lOR.. C.iSQ...,.e..o.1.,..eadi~.9.. inSti.fu..".'ons inthe world.•.. concerned with generating and applying new knOWledgj.:to meet thechallenges ofinternational ceveopmert IDRe supports research indeveloping countrieso~~~yproble~areas:a~d builds international networks toshare and apply this knowledge. .'

lORe has presently FOUR positions to fill in three different locations '

REGIONAL PROGRAM OFFICER - SOCial andEconomic EquilyProgram REGIONAL PROGRAM OFFICER - Economics, Nairobi (Ref,#, RO·ED6jArea, Dakar (Ret..t: RO·W20) . .... .. ... .. ·.·IDRCislooking joraRe'gionalProgram qfficerfor the Social and Economic Equ~ Program Area.IDRe is seeking a Regional Program Officer lorlisSocial and Economic Equity Program who will He/she willwork asa member oftheTrade;Employmen\ and Competitiveness Rrogram Initiative,work asa member ofIhe Micro Impacts/Macro-economic and Adjustment Pdides Program Initiative principally developing and mon~oring lisac\iv~lesin Eastern andSoulhern Africa, bu!alsopartlcipati~and with Ihe Benor Sclerfltc Advisor-Heallhlo identify critical research issues inan emerging area of inIhe global activities ofthis program. He/she will support Ihe Centre's work int~e region on SMEIDRC programming, .namefy, governance in Sub-Saharan Africa (SSA), and assist in the further development and employment issues, oron the interaction between macrcecoromcano adjustmentelaboration otneCentre'scurrentresearchstrategy. Ascurrentlydefined,the;ocus ofthe govemance policies and poverty outcomes. He/she will develop, manage and evaluate projebts through multi-progrc.mming will bethe changing relationship between states and citizens asmanifested through the disciplinary collaboration within the" Centre.- Candidates should have a post-graduate degree inprovision 01 health services. Candidates should possess apost-graduate degree inPolitical Science, Economics orInternationalEconomicRelalionsandpossess aminimum offiveyearsofprolessionalPolitl:::al Economy, History or Public Policy and more than five years of professional joe-related job-related experience In adeveloping country, and possess professional knowle4!e inone ormoreexperience ina developing country, and proven research intwo ofthe folklwing areas: economic, ofthe following areas.lnlema'onal trade, intemationalfinance, public finance, labour economics,social and political reform with focus on retorrn offf-e health sector, manaqer aland leadership skills. industrial eceromcs, socio-economicsurvey lechniques, poverty and equity. Thi~pos~ion Isafwo-This position Isfora three-year term with possibility Ofrenewal. Candidates should befluent in year contract. Candidales must befluent in English and have a working knoWledge 01 French.English,and French, and competency inone ofthe other languages ofthe region isdesirable, _ Compelencyin one ofthe other languages ofthe region isdesirable, '1SENIOR PROGRAM OFFICER - Economics, Ottawa SENf0I!:PROGRAM OFFICER" Peacebuifding andReconstruction .(Ref,#: PR·222) Program Inlliafive, Onawa (Rel,#: PR·915) ~Asamember oftwo multi-discipl'naryteams, the Senior Program Offlcerwlll idenlily ctilical research:T.he Senior Program Offterwlllbe responstejcr identifying,ooveloping, managi' ,andevauab'ngissues intheareaol Micro Impacts ofMacroeconomicand Adjustment Policies and Trade, Employmenl projects. He/she will provide professional expertise inone ormore topics ofres rch and provideand Competitiveness Program Inltlatr/es (PI) and assist inthe elaboration ofPis'current research back-Up suppo~to regional staff. Candidates should possess apostijraduate deg~ee, orequlvalant,slrategy, The Incumbent will develop, monitor, manage, and evaluate research projects, and liaise Inarelevanlsocial science field, demonstrated research Interest inthe IntersectlO~between secur~ywith program colleagues inOttawa and abroad. candidates should have a postgraduate degree in and development studies, orpolitical economy ofpeacebuildlng and aminimum five years ofjob-Economics, eight years of professional job-related eoenercewith background in research related epenence especially inadeveloping country: the Middle East, Southern frica and Cenlralmanagement, and leadership skims, and possess professional knowledge Inone ormore 01 the America, Candidates should be.ready to travel extensively internationally ana befamiliar withlollowlngareas: Internationaltrade,publicfinance, labour economics, Industnaleconomlcs, international international and Canadian donor agency,. governmental and. NGO progr~ms andactlvilies injnance, development economics. This posnon Isfor a three-year term with possibility of renewal. peacebuildlng and reconstruction. This position isforathree-year term with pos!>lbllity ofrenewal.Canddates should befluent inEI)~lish and French. Spanish ishighly deslraale. Candidates should befluent inEnglish and French. Knowledge ofSpanish orPO(luguese orArabic

, isdeSirable,.. •." '. .,;

Can.::fklates can lind out more abootlDRC on itswebsite and access the cor'lplete jobdescriptions (http://www.ldrc.ca).ResumesshouldbesenttoCompelition IORC quoting thereferen,ce number, eitherbymall toHuman Resources, IORC, P.O. Box 8500, ottawa, Ontario K1G 3H9, Canada, byfaxto(613) 23&7230 orbye-mall tocompetilions@ldrc.ca nolater than March 2,2001.

We thank allapplicants fortheirinterest ~nd will·contact those candidates whose skilis andexpe(ierice bestmatch therequirements of thepositioJs.lOReISCOMMITTED rOI:AlPLOYMENT .EQU~T~.

(JcA\UO

t,.L,%""'-'~V~~

~I$A'~"'-'

INVnSTOR IN PI!OPLE

14

APPOINTMENTS

vacanciescan be found at, http://www.unimaas.nl

Applications shouldbesubmitted-withintwo weeksto: University of Maastricht(pleasestate the numberof the relevantvacarx:y on letter and envelope) POBox 616, 6200 MD Maastricht, or to thee-ma!l addressprovided.

Optingforthe UM means optingforan innovative environmentoffering ampleopportunityfor individualityinworkand working methods,as wellas regardfor personal development.TheUM isseekin,g: tc? ,achieve avariegatedworkforce with a-proportional number ofwomen representedon everylevel. Itgoeswithoutsayingthat the employmentconditions,whichinclude parental leaveand daycareoptions,are outstanding'.

Universiteit Maastricht

",";:-----::-::-:::--------:----------._. ':i'

i,' -".: ....'...,..,.: .,:.i.::: .::.. : .... ..,.. :..::,-" ..•..-. .. ,: .. _

The UniyerSity,()f~~flS~.riCht(LJM) is famed forthe u~iqu,elysmall-scale, stimulatin~~mt~eli-~otilJ~ti~gapproach of,t~ete~c~ir,gprovi~ed (problem-based learning).The UMis highly lntemetlonal.ln.lts()rientatiol1;Res:~flr~his multidisciplinary and approachedth~n1atical1y.:, .. ',"; .. ":':TheUM boastsseven faculties:Medicine,Health Sciences; Law; Economics andBusinessAdrrliristratiot1;',GeneralSciences,Arts and Culture,and Psychology. It has a student populationof around11..o()O,{of""h'ichsoll)e1S':1Jarefr,orn abroad)and g.ooo employees.The.raculty ofjconomlcs & BusinessAdm,inistrationoffersstudy programmesin (Fiscal) Economics, Eccnometrlcs and International BusinessAdminlstratfcn.

.ln addltlcn,th~ postgraduate courses(International)Controller and Accountancyare taught anda,n MBAprogrammelsavailablethat lsjolntlyorganlzedwith the HausderTechnik.The revision and renewalofthe economicsandbusrness administration programmes,whichare largelytaught in English, play~ apivotal, rolewlthin the faculty~Recently, a new programme calledlnfonomicswas launched.Nextto theEnglish language programmesoffered,the internationalorientation of the university isalsoevldencedbythe numerous exchangefacilities with universities' abroad.The researchperformedbythe faculty i~

concentrated mainlyinthe METEOR researchschool.METEOR islargelyfocussedon the functioning oforgenizatlons.The researchinstitutes of ROA and MERIT are also part of the faculty.

Professor of Industrialn."~n;~ation flm40 noursa week

Professor of BusinessAdministrationlI:----micsflm40 hours a week

94 THE ECONOMIST FEllRUARY 17TH 2001 .

EXECUTIVE FOCUS I

Appointment of Vice-ChancellorThe. University of Northumbrla Is rec~g~ised.as. t.he 1.8adlngpos,c1992 unIVerS~Y.' VVlth 22.·,060studentsln hlqnereducation loca.. ted on lour

campuses, .Northumbrla's incomeexce~dS£100 ,rnillion,Therequirement is to appointe Vice-Chancellor from September, 2001. ',. ..'tNorthumbria seeka erroutetandmq leaderwith strategic vision anda proven track recordof personal achievement, in running large, tc~mPlexenterprises,jdeaIlYin highereducation. Buildingon a record of wideningaccess to highereducation, whilstmaintalninq excelent

qualNy,'Northumbrials ambitiousfor the future. 'Successful candidatesmust havethe'stattse.presence and management styleto lea·

Northumbria in a fast-changing, globaleducational 'and business'envirohhlenfand to be abletohsplre. amonqstotherthings,the cre*tive

generatibliof-newand eoonorersoocee otncorre, in supportof the Uliiversity;sacademic objectives. Possessing excellent Internal and

exte.r.na..1c.ommu..nicatlon S.killS' halShe must be. ane,ff.ectlve amba.ssado.r.fo.r, the unlver.Slty, reglon..ally,nationally and Internationally, Il.

This Is a highly challenging positionfor exceptional candidates who possess the determination ~nd commitment to leadNorthurrorla, .

bUilding uponan exisungdynamic culture'of excellence and enterprise andtaking the Unlverslty'lorward to new dimensions of succesi.I

northumb 118

Requests for further information, and subsequently applications, in the, formof a comprehensive CV and covering letterincluding remuneration details, should be made to: Claire Lane, Heidrick & Struggles, 100 Piccadilly, London W1V 9FFax: 0207 491 5991 Email: lac@h-s;com.

Closing date for applications is: Friday:16.March 2001.

U.NIVER'sfTY o{'i"'" ,; HEIDRICK & STRUGGL,ES~~'RTHU~BRIA'~~atNEWCASTLE ,,,'" "'" " "'" .

GLOBAL ENVIRONMENT FACILITY COORDINATION OFFICE (GEF)

IN ALLCORRESPONDENC.ElINQUiRIESP~EASE QUOTE THERElEVANT VACANCYANNOUNCEMENT NUMBER.

The Int",rnationaiFoodand AgribusinessMaJtgement'ASSOdation.,lAMA, is a Worldwide Educational Forum hich brings industryleaders from all segments of the global foo chain together withthe teachtnq and research faculties of ove1'100 universities andgovernment policymakers. Through an an. ual World Food andAgribusiness Forum, publications. and pDfessional networks,lAMA fosters the discussionand examinatioh of the critical ideasand technologies needed to create a hiphlY productive andefficient food system that is responsiveto t:i needs of consumersacrossthe globe. Tosubstantially expand i 'contrlbutlon to thosegoals, .IAMA is seeking to fill the position f Executive Director(chief administrative officer), with the resp~n$ibility for directing~lIprogra~ and administrative activitiesof r.MA.

Principa1f~nction5 Ofthe ExecutiveDirectorinclude:

• .. Enga!3et,he Boar~and lTlernbership in establishing and implementi . policy;• Activepursult~f membership growth and fund·raising to support 14MA programs;

Developand produce the annual lAMA global educational forum;

• Expandthe glcibalreach'of lAMA through activenetworking withbusinesses.

Requirerrients/Qualifkations:The ExecutiveDirectorwilt bring slgnlficaof 10, years) at the senior executive level of industry. academia, orestablished networks and knowledge of the global agribusinessand f,

Demonstrated excellence in leadership skills. knowledge. ,andbusiness ex&utives, universityfaculty.researchers, and governn

Knowledge of the global food"systemand an appreciation for manY different cultures;

• ,l,bilityto recruit new members and motivate current members in a~hieving lAMA goals,

,Strong positiveapproach to e~panding corporate membership ant,sponsorshiPS throughdemonstrating the value of a global professional, membership bas. organization;

compensatio~ ~ackage:$100.000 to S135,OO~ USD commensurate with xcertence plus healtha~d retirement benefits. ~The lAMABusiness Office is located at TexasA M University, CollegeStation; Texas, 'U.S.A. The Executive Director maychoose to locate at thisbfflce or to work fromanother location; SUbject to the approval of the Board. [

Contact and Application:Application deadline is March 3, 2~1. Intere: ed individualsshouldsend a letter of application.(2 page) along with a resum~. The letter S~OUld state dearly theapplicant's quallfiratlnns, and brief statement of philosophy or approach to the ExecutiveDirector'srole of lAMA. The letter and r~5ume should be in MSWord or WordPerfectformat andsubmittedeleetronically to the. attention' of Russell Garrett I'at iama@tamu.edu.<http:/twww.ifama.org> .

(l) •Scientific Coordinator, (L-G) NA-Ol-0S Geneva(2) Programme Officer (Asia/Pacific), (L·4) NA-Ol-03 Geneva(3) Programme Officer, {Latin America and the Caribbean},

(L-4) NA"01-04 Geneva(4) Programme Officer (Africa), (L-4) NA-Ol-02 Nairobi(5) Programme Management Officer (Fund Management),

(L-3) NA-Ol-0G Geneva

Interested applicants are requested 10 send detailed CV before 20 February 2001 to theChief 0; Classification and Recruitment Section, Human Resources Management Services,United. Nations Office at Nairobi (UNON), POBox 67578, Nairobi, Kenya. Fax: (254) 2524212/624 -

The United Nations Environment Programme (UNEP) is seeking to recruit a teamhighly qualified and dedicated professionals for the implementation of a 'Biosafetv Projectfinanced by the Global Environment Facility aimed at assisting 1OO.eligible' countries toprepare for the entry into force of the Cartagena Protocol on Biosafety. The project willentail providing ~ss,istance to governments to develop their National Biosafety Frameworksas well as promoting regional and sub-regional cooperation.

The team.teo-located between Nairobi and Geneva comprises a Scientific Coordinator atL-6 and three Programme Officers at L4 for Africa, AsialPacific, and for Latin America andthe Caribbean Regions and a Programme Management Officer (Fund Management) at L-3.

An internationally competitive salary and benefits ,at standard ,UN rateswi1l be offered.

more information visitlheUNEP'~webjJilgeathttp'xvwww.unep.orge-mail: gefinfo@unep.org

. '@ United Natio~~!~~~!"O.~~':?~Programme~ UNE """"••M"'.,..••~"""UNI..POIJR"''''',.O""'~,.,.. 'Il<>ORAlMOELM".o,eIOK"".."...F'AM""'''''' ....~rm:p """""'""' mo~~

DURATION ,OFPROJECr:· Three and a half yearsDEADLINE FOR APPLICATIONS: .28 February 2001

TITLE/ LEVEL/VACANCY-ANNOUNCEMENTNUMBER!DUTY STATION:

16 TlIE ECONOMlS)i: FEBRUARY 17TH 2001

COURSES

in world-classdevelopment

Carnbridge e-MBA isintensive, interactive andbusiness­I~§~~~g!needs of world-class managers and8fltffi¥lng across conti~ents andtime,~on~s.

l~ Developed bythe Judge InstituteinassoctanonwthFTKnowledge, the €-:-MBA combines residential periods inCarnbridge with virtual team learningtooffera flexible andconvenient wayof achieving,this highly prestigious award; .

Tofind out how theCambridge e-MBAcan give you andyourorganisation theedge intoday's global economy.~all +44 (0)1223508321 quotingreference JIMA/0202.

'*+ VisitwwwJtknowledge-cambridge.com for moredetails,or to enrol online.

• AMBA Accredited Degree.

.. An intensive nine-month bilingual program (French/English).

• The leading school in Political Science and Economics,founded in 1871.

• Adistinguished international faculty.

• An urban campus in the heart ofParis.

~ UNIVERSITY OF'lWCAMBRIDGE III Knowledg~I

Next information session ihourprellJises:Thursday, March IS"2001 ilt 6.30 p.m.

Wo,ld Bu,I"", Edu,.Uori

www.anderson.ucla.edu/progranns/execed

Join senior executivesfrom leading companiesworldwide in an innova­tive Califomia.environ­ment to:

• Examine key management functions

• Hone your strategic thinking andvisilming skills

• Use hands-on a-business applications to integratebusiness and technology

• Developworkabl~ solutions to your organization'smost pressing challenges

• Learn to attack and manage organizational risk

CALL +1 310.825.2001-execed@anderson.ucla.edu

UCLA STRATEGICLEADERSHIP INSTITUTE

I JULY 29 - AUG. 24, 2001 I__ .L~___ IIIHIIlIIIibil!

92 THE ECONOMIST fEBRUARY 17TH 20·01

EXECUTIVE FOCUS

m['N S r'quT,E,F O,FtD.E,MOCIlAOY "NO

't t E·'-C".r:O,'R<A,,:tASSiSTANCE Falkland Islands Government

Qualifications and skills

Duties and Responsibilities

Underthe .overall authority of .the Secretary-General theDeputySecretary-General (DSG) shall:

Department of IEducation, IEmployment andTraining i

DIRECTORVICTORIAN QUALIFICATIONS AUT ORITY

The' State Govem~ent has announced a revamping of Ivictoria's publiceducation and training authorities which includes thecstabljshment of a newVictorian Quali.ficationsAuthority, (Victoria, a state in Australia).

The Di~tor,ofthe,VictorianQualification,sAutl:tqrity Wi~I~Lage and providestrategic direction to the Office' of the Authority to facilitatei6 achievement ofits objectives. ,IThe objectives ofthe VQA are to: '

• develop and monitorstandards for education and traininaftef year 10• ensure and support appropriate linkages between qualifications, and

facilitate procedure.s to make.it easier for peOPle. to.. re-etter education andtraining and to acquire qualifications throughouttheirli es .

The Director will be required to provide .authoritative and, imely advice andreport to the Minister on post compulsory education and tnllning courses andqualifications: The Director will possess a -genuine ability.tojmanage people inan educational context and a proven, capacity to liaise e[fe~tiVelY with seniormanagement; heads of related authorities within the portfolio nd of educationalinstitutions (at a state, national arid international level), an members of theeducation and training and business communities. !Normal State Government Executive contract arrangement would apply. Itwould be a requirement for. the. successful applicant to si¥n an employmentcontract for a period of up to five years. ..tFurther enquiries should be referred to Kathy Townsend on (~13) 9639 5966.

Written applications should.be lodged by Friday 9 March 1001 with KathleenTownsend ExecutiveSolutions, Level12,30CollinsStreet,Melbourne, 3000,Australia.

I

•

Economic Adviser c£50,000+25% gbtnity.' _.",', (two year contract) , " j

Th~Falk1andIslaiJ.dsisim: Oversea~ Territory of the United Kingdom, self­sufficient in all government services other than defence. GNP is around £55million, W.ith a population of 2600. Principal industries arethe!offshore fishery,and wool, with future potential in, tourism and in mineralsl explorarlon.Tbefishery nets government around £25 million pa, and o';ffersscope forconsiderable development. Agriculture earns around.Ef.qm tablltis heavilysubsidised, and isundergoing diversification. Economic devel pment initiativesare promotedby a Falkland Islands Development Corporation.

The Econornio Advisar reports directly to the govenitllfint'sCilief Executive, asthe senior economist, He or she gives "macroeconomic" ad~ice, but will beparticularly involved in assessing and guiding econOmiCChan~e in the principalindustries. Forthi~ reason.ewe are keen to, recruit a aenio 'economist, with

"snccesstut experience ideally in fishery, or our otherbusin tsses.es wen ashaving some public sector experience: Postgraduatequalifi ations would beadvantageous. '" ",1,.: .

The post is f?r t\V0 y~ars~n thefirstinstanc~.Be'n~fits incl 'e a world classenvironment, relocation and education grants, flightshome'aAd favourable taxrates, and a 25% terminal gratuity. ~

Further details from Falklan,ds:.IslaIulsGoveriiDle,nt,Offi~," 14 Broadway,London, Tel: 020 7222 25A:2,fiax:0:20722,2?-37s:,emaij're, itment@figo.u­net.com. To discuss the J..ob, e.mill! 0' "1<Ph.od'eh".f E "uti", MichaelBlanch mblancb@sec.gov.fk, Tel: (500) 271JO.

Closing date for all these applications is Monday 12 :prch 2001. _"', ' Interviews will be-held in London after Easter. "

Proven' managementand te~rn-~ulldirig,' skillsStrong communication and presentation skills, written and spokenExtensive -experience in managerial positions in an inter­national/intergovernmental organisation or·a· governmentalorganisation that deals with int~rnational affairsAbility to operate effectively ina multi-cultural environment, begender-sensitiveAdvanced university degree in international relations; politicalscience, law or related fieldsFluency in English, any other languages an advantage

(>

Visit our web site: http:Uwww.ideaointfor the full job details.Copies of VacancyNotice 01105 may be obtained from Ms Kristiansen

Telephone +4<1 8.69~3725, Fax:+46 8 20 2422,applications may be addressed to m.boudard@idea.int

or IDEA 103 34 Stockholm; Sweden.

Deadline 15 March 2001

[)eputy·..S~cretary-General

.:.

.:.

.:.

(;0 Assume the operational leadership within the Institute, and beresponsible for all operational.aspects of its work with particularattention given to:- Institutionalprogramme planningand monitoring with.aview

to ensuring integrated programme planning arid co-ordinatedprogr~mrn~,ifllplefllentatio~;

- Financial managernerlt co-ordination;- Human resource planning and management;~ Development of appropriate managementinformation systems.

.> Play' a.key co-ordination' role in the' Management Committee(MC),particularIy'inits developmentand maintenance as a self­managed, decision-making body providing regular and timelyoperational guidance throughout the organisation

.:. ACtas a mainpolicy adviser, together with other members.of theMC;t6 the'Secretery-General.on strategicmatters for the Institute

.:. Assume s~pervis01Y, responsibilities for all operational staff ofthe Institute, including programme and support division directors

.:.

International' IDEA (The International Institute 'for Dernocracy andElectoral Assistance) promotes and advances sustainable democracyand strives to improve' and' consolidate electoral practices worldwide. International IDEA is an intergovernmental organisationfounded in 1995 with 19 member states and 5 international NGOs asassociate members. Independent of specific national interests,International IDEA provides a forum for interaCtion and-experiencesharing among a wide variety of global actorsinvolved indeinocracypromotion.;Intemational,IDEA is.based in.Stockholm, Sweden, andcurrently employs 65 staff from 30 countries. Due to expectedgrowth, applications are now sought for the following position:

.>

18

COURSES

Don't be taken in by appearances.

at least 13 monthsto.fully

And studying hard is not

MBA is also a school of life.

The

Templeton College I

it, you'll have to useyour strengths. All of them.

This way, by raising your specific quaiities to their

full potential, you will learn to work by enjoying

yourself. A (orma mentis that. Will last a.Ilfetlrne.

SDABOCCONIBcccni UJID~rsiry SchoOl of Man3.gl~nienl

,'He who wishes to fight must flrstcourit-thecost'.

Sun Tsu

The Oxford Senior. Executive. Finance. Programme29 April''""' 4 May 2001 1-25 - 30 November 2001

Oxford' has for generations prepared the world'sleadersto:harness chenge tc the advantage. oftheir corporations, their n~tiol)sand:th~widerworld. A sound grasp of.the principles offmancialperformance still underpins effective leadership.Dotcomvaluations have strategic implicatiohsforthemselves and traditional firms. The OxfordSenior Executive Finance Programme 8Cjuipsyou.with' a critical understanding of the elements ofbusiness which create value.

Name

Addr~ss

T,I

90

For further information, please visit,www.templeton.ox.ac.uk/finance,orreturn to:Caroline Lomas,Templeton College,University of Oxford,Oxford OX15NY,EnglandTel+44 (0)1865 422767Fci.x+44 (0)1865422501Email' s'efp@teinplet6n~oxford.a:cJik·

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THE'ECONOMIST FEBRUARY'[7TH2001

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BOOKS, AND ARTS

THE DEVIL MADE ME Do IT. ByZapiro.David Philip; 160 pages; 72 rand.THE MADAMS ARE RESTLESS. By S.Francis, H. Dugmore and Rico. RapidPhase; 176 pages; 77 rand.P:~~PRIC,KS:-:,TJ:fE:.I>RA~INP-(){,,~OUTI1:.AF,RICA'S'P:Pi.I1'ICAL BAT.rLEFNEs.;By­I<:~nyern01V-Spearhend Press;2()o_pctg~s;

153 rand

EVlORYOtJE: DOE)(Ac"Tt..YA$ I 'SA.'l

OR THE eASE:- - - -. IT!!

t99¥a ¥~ar0fJ't9find his bearillgsand ull­c9y~r:llevV tfirgets. Newspap~l'Efl~~9qn,ists,:by.c9ntras~ obliged.to produce a new doo­dle5veryday, had to grapplewith the.newwder strai~t away. On the whole, theyhave. done a good job.

Mr Shapiro, who goes bytile nom de.. c""Yqn "Zapiro' (seecartoon bel0V\'),isthe

best. Last year, when the SouthAfricang()yepment;was pondering _wl).eJhe(:tosend peacekeeping troops to Congo'zapiroshowed with a single cartoon why. thiswould be impractical;A SouthAfrican soledier at a roadblocksees the tip of a rocket­propelled grenade.· launcher ..protrudingfrom a ,bush~ "Halt," he'crles.vwho.goesthere?" The guerrilla in the bush replies:"Congolese Rally fur Democracy," "Hangon,"says thepeacekeeper, and he turns. toconsulta chart of parties to theCongowar;on which seven groups are 'listed -_-_: as"friend'veight arelistedas"foe" andtenarelistedas "not sure".TheCongolese Rally forDemocracy, by the way, is labelled "notsure", along with the Congolese Rally forDemocracy(breakaway). Congo has grownno simpler since President Laurent Kabilawas shot dead last month.

Befure 1994, Zapirounhesitatinglysup­ported the black liberation movement.Now that the liberators-are in government,he is still sympathetic, but lampoons theabuses that •power makes . possible.Crooked officials feel the jab of his pencil,but he' cheers on Willem Heath, a coura­geousjudgewho was in chargeof collaringthem. Inone cartoon, Mr Heathisdepictedas a character from "Ghostbusters",enter­ing a spooky-lookinggovernment buildingto smoke out the "ghosts"--,dead workers

'""

South African cartoonists

JOHANNESBURG

Inky devils

sold to the Museumof Modem Art in NewYork a Mona Lisa, mischievously painted inthestyleofanabstractexpressionist-Sales ofhis paintings began. to rise, and in 1979 hiswork was crowned with a retrospective atthe Hirshhorn Museum in Washington, DC.(This success.did not come without familymisfortune: in t974acarsmash had killedhis.smallson and lefthim badly injured.)

Does the adversity show? Crossing~is

arms and.raising.his chin,MrBotero says~<'~

have never been guidedby what critics sflY,.but by what Iadmire in the historyof art," Itsounds arrogant Buthe concedesthat land­scape-v'empty space"~has defeated him,..and he ends with the thought that he willneverresolve anythingcompletely;

MrBotero stillworksevery day in oneofhismany studioson eithersideof the Atlan­tic.Butnot inColombia,wherea kidnappingthreat hangs over the rich or famous (he isboth). If peacecame to his country, he s~ys,

he would love to return home, adding-casmatador or paintert--fhat maybe he couldthen"teachsomeonea thing or.two,"

JONATHAN SHAPIRO had yearned to be'a, cartconist sinceihewas 'smalL-Butgrowingup in South Afticaunder apart­

heid,he was not free todo as he pleased.Asayoung white man, he-was'. conscriptedinto the army, where' hewas harassed'forhis radicalism, and put on sentry duty witha dummy riflemade of wood and lead pip­ing. Hisdrawing skills were forcibly squan­dered on menu illustrations and get-wellcards for: officers 'injured in stupid acci­dents, such as the one who burned himselftrying to douse a braai with petrol.

In his spare time-Mr Shapiro drewsatirical-cartoons .forundergroundpam­phlets. The authorities objected. Hisworkwas periodically banned. He was hauledout of bed at night by the security police,frequentlyinterrogatedand brieflyjailed. At one-point, he was forcedto go into hiding behind grannyglasses, inexpertly dyed orangehairand a goatee. -

It was easier then to be a car­toonistin South Africa. "It is muchharder now.tsays 'Mr 'Shapiro. "Inthe old days;you knew where youstood; --and -who the-enemy -was.Butnow Ihave to take a morenu­anced-line,"

Such'sentiments'are .common,The end of apartheid deprivedSouth Africanartists ofa bottom­less.treasure chest- of material. Atleast one cross-dressingcomedian

88 THE ECONOMIST FEBRUARY:qTH 2001

LEADERS

long run counter-productive,to expect the cost of this aid tobe met out of drug-company profits. Instead, rich-world tax­payers should pay. It would be much better to spend aid

. money on drugs for developing countries than it is to waste itin the usual ways.

'" from compromising. science, profit1both thesecases-the development of new medicines an~ the elucida­tion of the genome-has animated it, and diredted ittowardsmeetingpressing human needs. It is a happy ,*arriage.Davyand Pasteurwould surelyhave approved.

"'"O"OM"I "'RVAR' 'FH aces

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22

Indonesia cannot afford both an Incompetentpresidentand anequivocating vice-president. If only they would pull together

govern~enthas tried to reducediscri~inati!n against theChineseminority, for example,and has at leastltried totalk toseparatists, But too many of his policies haJ" been vague.When th"l' have been clear, they have soon &hanged, or, aswith the sensible-seeming efforts to give greate~ autonomy tothe provinces, they have been botched. Moreover, the stylethat suited Mr Wahid when he was the dissident leader of an~n-goverflmental organisation does notworkl.now that he ispresident.Hisjokey wayof shrugging off troub e onceseemedcharming. It has become a refusal to face criticism, punctu­ated by ill-tempered bouts of ineffectual aut~'oritarianism.

Megawati's mini-voltage . IMr Wahid's popular support stems from his formerleader­ship of Nahdlatul Ulama (NU), a Muslim socihlorganisationwith more than 30m members, founded byHis grandfather.He used toacknowledge that thisgavehimalkind offeudalpower that, he said, he could use to foster.democracy, It canno longerbe taken for granted that hisdemocrAtic instinctslie,deeper than the feudal ones.Unfortunately, exactly the samecould be said of Miss Megawati, whose prornirienceoriginallystemsfrom the reverence felt for her father,Sukarno,Indone­sia's first president. Too often in recent.years.Miss Megawatthas appeared aloof from the rough-and"turhbleof demo"eraticpolitics, as if,likea queen, she could simplywaitfor themantle of power toalight on her shoulderStThiS,her sup­porters would say, is the way things are don in Java;

But not in a democracy. Miss Megawati oeshave onestrong claim to the presidency:herpartywbn more votesthan any other in the parliamentary elections In 1999.Shewasthen outmanoeuvred byMr Wahid in the electoral collegethat chose the president. She still has, in theory, a betterchance than Mr Wahid of leading a cohesiv~ parliamentarycoalition, and enjoys broad popular support. More worry­ingly, the army,too, would probably prefer h&r to Mr Wahid.Itsbackingmightbringstrongergovernment, Hutalsoincreas­ingly restiveregions. It would be a mistake tq try to bind to­gether the nation her father founded by milit~ry mightalone.

In the event, a Megawati presidencymight turn out allright. It is not a prospect, however, until tM impeachmentuncertainty is over-s-unless Mr Wahidshouldlresign.Hemayin fact still be able to redeem himself, if hecAlls off the NU'Sstreet-fighting elements, admits that he hims~lf is not abovethe law, and appeals to Miss Megawati for-her support, asanationalist icon.That remainsthe best hope. ~t is certainlyfarbetter than a longpower-struggle.played.outlnotjust in par­liament and the presidential palace,but on the streets.

I •

Indonesia's divided leaders

PLAIN speaking is not one of Megawati Su¥arnClPlItri's. strong points. So when Indonesia's vice-pr"sidentthis

month said her country had never been in a wors".state sinceits foundation 56 years ago,her words carried qUit" a punch,But, as usual, Miss Megawati was not as clear as she mighthave been. That she spokeout at all was an implicitcriticismof the president, Abdurrahman Wahid, and carried the hintthat she mightbe ready to replacehim,just 16months into hisfive-year term. But such nods and winks serye only toheighteninstability. It would be better if Miss Megawati madean open bid for power, or, failing that, threw her supportwholeheartedly behind the president.

Her lament Was an exaggeration: Indonesia, sadly, hasbeen through worsethan this before, both during the slaugh­terthat accompanied the rise to power of ex-President Su­harto in 1965-66and inthe bloodshed and economiccollapsethat precipitated his downfall over 30 years later. But MissMegawati was right that her country is in a mess (seepage27).The economy has never.fully recovered from the whirlwindof '997-98. political uncertainty detersforeigninvestors, whilethe IMF and aid donors are exasperatedby the slow progressof refurmsthat have been promised and, worse,the attemptsto reverse some,such as the new independence of the centralbank, that have actually been achieved.

Mr Wahid, who has suffered two strokes and is nearlyblind,nowfaces a drawn-out processof impeachment for al­leged corruption. Demonstrations fur and against him haveturned violent. He has flirted with declaring some sort ofmartial law,but his promisesto bringtojustice thoseguiltyofplundering the nation during the Suhartoyears have provedlargely empty:witness the failureof the policeto arrestMrSu­harto's son, Tommy-hardly a shrinking violet or master ofdisguise. Separatist pressures mount at either end of the hugearchipelago, in Aceh to the west, and Irian jaya to the east,while communal killings disfigure the Moluccas:

Allof this mattersfurbeyond Indonesia'sborders.With itsziom people,its troublescasta shadow over the Whole region.Its neighbours treat it indulgently out of fear not so much ofits strength but of its weakness, and of the spectres thatevokes: in' the short term, economic stagnation; in the longterm, waves of refugees; pirate-infested seas and a powervacuum to be filled by competitors such as China.

Is this the president's fault? Yes, partly. Many, includingthis newspaper, gavea cautious cheer when Mr Wahid tookoffice. His record as a Muslim leader known for his tolerance,and fur his long-standing, if often bewildering, commitmentto' democracy, .suggested he might, however improbably,make a success of thejob. Infact, he has done somegood.His

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BOOKS AND ARTS

,suasive investigative reporter, seesall.thisas a damaging corruption of thefree mar­ket. He is especially incensed by promo­tional techniques aimed at impressionablechildren.A 1997 giveaway of 'IeenieBeanieBabies increased the sale of McDonalds'Hippy Meals from lorna week to 10m aday. And a survey found that 96% of Amer­ican schoolchildren could identify RonaldMcDonald, the chain's mascot. Only SantaClaus scored higher.

India's choices

Agree to differNEW DELHI

INDIA UNBOUND. By GurcharanDas. Knorffi384pages; $27-50; 495 Indian rupees.MISTAKEN MODERNITY; INDIA. BETWEENWORLDS. By Dipankar Gupta; Harper Col­tins; 225 pages; 195 Indian rupees

A DECADE after discarding comforting. but self-destructive ideals of self-suffi-.

ciency and economic planning, India is,inthe midst of a greatdebate about the conse­quences; The antis mourn two lasses: dedi­cation to equality and an approach to de.,...velopment that was distinctly Indian. Theyfear, ina word, that India is losing its soul.The pros revelin.India's new.information­technology prowess, the unshackling ofbusiness, faster growth and the.hope that itwill reduce the country's appalling poverty.They celebrate India's reconditioned body.

"India Unbound" is by an unabashedpro, an ex-boss of the Indian part.of Proc­ter &, Gamble who has moved into busi­ness consultancy and writing (he has donea novel and three plays). Thanks to econ­omic reforms, he writes, "we have glimp­sed paradise again and are on:our way toregaining.it," The author of"Mistaken Mo­dernity", a sociologist at Delhi's leftish Ja­waharlal Nehru·University,.is anambiva­lent anti. He does not condemn outrightthe reforms of 19% which entailed deregu­lating business and opening India up(partially) to foreign trade and invest­ment. Like many Indian sceptics, he isnostalgic for the days when productiondecisionst'were tied umbilically to na­tional development and sovereignty."

Gurcharan Das is. correct that theumbilicus was strangling the baby. Butthere is less conflict here than itseems. Both sides in this debate areavowed enemies of what might becalled old India, which remains inmany respects the India of today. Itsfeatures include discriminationagainst women, caste barriers.Hinduchauvinism, official corruption,' ad....,vancement based on patronage and,for business, profits without compe-

86

tmon. Dipankat Gupta ' contends, justly,that India's fascination with .western gad­getry and lifestyles has not brought moder­nity. Youcan subjugate women and make aweapon ofreligion just as wellwith a mo­bile phone as without one, probably better.True.rnodernity,' MrGupta write's, entailsadhering. to .universal. norms; .upholdingindividual rights,making the state account­able, His book pleads. with India to. putmodernisation in .place of"westoxication".

There is nothing here that true globalis­erswould .not .support-with.enthusiasm.Their argument- with the- antis is-reallyabout money. Mr. Gupta and others whoare·suspicious of reform seem.tc share thehigh-minded attitudes of India's first primeminister, jawaharlal.Nehrin.who once .toldJ.RD. Tata, head of the country's most re­spectedbusiness .house, .. that profitis "adirtyword".To take a more recent.example,Arundhati Roy, India's Booker-prizenovel­ist,>notlong,agowrote a long and, impas­~ione~ ~l1icle in oneof India's\Ve~kl)fmag­azines . portraying capitalists, . especiallyforeign ones, as plunderers.

Mr Das, on the other hand, thinks thatcapitalism will cure many.of. the. ills thatNehru's socialism compounded; The .ccsycorruption of old Indian business habitscannot withstand competition, he suggests.Althou,gh the commercial baniacaste wasuseful in kick-starting Indian capitalism,Mr .Das points out. that in a .liberalisedeconomygoverned by rules rather than pa­tronage; companies. cannot afford. to. hireemployees on the basis of caste.Asfor pov­erty, contemporary India's worst blight,education will spread the benefits.of econ­omic growth to the masses.

. One problem supporters of reform faceis that its-effects do not look very egalitar­ian, especially in an Indian.context. Indiansdisagreewhether the past decadeof.haltingreform hasreduced poverty.No one dis­putes that it has thrown up a vulgar, sharp­elbowed new middle class.Mr Gupta, witha. tweedy disdain, has. made its membersthe villains of his book, not without reason:many dodge taxes and 'welcome the starkdifference: ofincome that ensures an end­less supply of cheap servants. Mr Das nev­crthelcss concludesvthat. "whether" Indiacan deliver the goods" will depend a greatdeal on this new middle class.

Despite its occasional repetitions; "In­dia Unbound" is not only more persuasivebut more 'enjoyable.'Mr. Das,whose careerspanned the darkest and. brightest eras inIndian economic policy, tells much of hisstory autobiographically. When. he wasmanager ofthe VicksVapoRub brand in In­dia, flu epidemics posed absurd dilemmas;should he boost production beyond li­censed ·limits (a punishable. offence).orleave market demand unsatisfied?

Mr Das looks back to the rise of Indianbusiness families; some ofwhich often be­gan with enterprising young men outwit­ting British monopolists, and offers man­agement advice to their heirs.. many ofthem now addled by decades of planningand protection. His.real interest, though, isin the info-tech companiesthatsprang upin the 1990S. They are India's chance toachieve the rates of growth 'and poverty re­duction that East Asia accomplishedthrough manufacturing, or so Mr Das andmany. other IT-besotted Indians'believe.

Though Mr Gupta prefers sovereigntyto success, he makes good observationsabout the grip of tradition. India's tendencyto throw up humanitarian heroes like Ma­

hatma Gandhi and Mother Teresa isa sign of weak institutions, he be-lieves: where these "are stronger,

saints are less needed to protect theweak.. Women stand out ,in SouthAsian politics, he explains, becausethey are assumedto lack charactersof their own. and can take on .thecharisma of their (often martyred)husbands or fathers. All in all, how­

ever, his book relies too much onthe author's opinions .?l1:ct too littleon his expertise.

Mr Das's faith that IT plus.edu­cation will restore India to greatnessand prosperity , can .sound .over­hopeful. And he mentions only in

passing the urgent needs of agricul-ture; which continues to occupy two­

thirds of India's people. But his book is in­formative, entertaining, and basically cor­rect about India's. need to embracecapitalism more whole-heartedly, for allthe costs and risks.----------~~-------"

THE. ECONOMiST FEBKU~RY 17TH 2001

The European Commission is wrong to reprimand the Irishfor their ·loosening of fiscal policy

LEADERS ,ternationalist" adminis!rations, like the previous one,are tooinclined to see the IMP and the World Bank as ends in them­selves, assigrsof enlightenment and virtue, however much amess theymay make of things. It is quite right to ask, as thenew adminis~rationis more likely to, whether these bodiesneed to exist at all, exactly what purpose they are intended tosenre, and just how well they are discharging their duties,whatever these may be.

It is also encouraging that a useful blueprint for reform-astarting-point, at any rate-vis already to hand. Last year, mak­ing itself heard above the general racket, was a plan set out bythe Meltzer Commission. This group, sponsored by Congress,was chaired by Allan Meltzer of Carnegie Mellon University,and drew on an impressive range of expertise, including thatof Harvard's Jeffrey Sachs, who is a leading thinker on de­velopment, not noted as a Republican Party patsy, but none­theless a trenchant critic of the Bank and, especially, theFund. The group did not achieve unanimity, but it did pro­duce a report that commanded support from across the ideo­logical spectrum, laid down some radical yet sensible basicprinciples, and was warmly applauded by senior congres­sional Republicans. All this is quite promising.

The commission's main idea can be stated briefly. In difc

ferent ways, both the Fund and the Bank have been trying todo far too much. The IMP, first conceived as a provider of Ii"quidity in emergencies, has become a development institu­tion, advising and requiring borrowers not merely to repay,but to reform the deep micro-structure of their economies. Ithas little expertise in this area; such policies, furced on gov­ernments in circumstanceslike these; tendnot to stick; andsowide a development remit in any case overlaps with that of

Ireland's euro-sins

I T ISa pretty rum way to promote the merits of Europe's sin­gle currency. The European Commission has taken the

euro-zone country whose economy has been growing thefastest, which has broken no rules either from the Maastrichttreaty or from the subsequent "stability and growth pact",whose public debts are falling, which has the largest fiscalsurplus (as a share ofGDP) in Europe, and, frankly, whose suc­cess or failure makes just about the least difference to all theothers. And, on Pebruaiy 13th,it publicly criticised that coun­try-Ireland-for having recently loosened its fiscal policy,and thus flouted the euro-zone's "broad economic policyguidelines". This was the first time it had delivered such a for­mal reprimand to a euro-country, A better way to discreditthe single currency in the eyes of potential members-such as,well, a certain large country between Ireland and the conti­nent-could scarcely have been dreamt up.

Tosome degree, this judgment is unfair. After all, the com­mission merely wagged its finger at Ireland, something inter­national institutions do all the time to one country or another,and Ireland is free to wag its finger, or rather two fingers, back.Even so, the question remains whether, at a time when theeuro sorely needs to become more popular, this reprimand

.24

the Bank.'" ""'~M ili'0.0 "'."", has J",,",,,,,,, ttsoperations; rather, it has failed to narro", 1m as condi­tions-notably, the development of global 'fina4cial markets­have changed. Most of itsloans go to countrie~with access toprivate international capital. The countries which, accordingto the Bank's own analysis, could mak..e bes.~. us.e of its re­sources receive a comparatively small share. ,L

1b be more effective, the Fund and the Bank both need IDdo less. The bosses of both lnstitutionshavcjduly declaredthemselves committed to sharpening the foc~~and so on (seepage 73). They always say that. Almost certainly, If It meansshedding lots of people and seeing their budgJts shrink, theydon't mean it. That is where theadministrati~ncomes in. Itwill have to lean heavily if things are to move ih the directionthe Meltzer Commission proposed:

Covert operationsWill it? Maybe not. Especially in the case of thdFund,the pro­blem of mission creep is atleast as much theJault of succes­sive American administrations as ofthe Pundjs own manag­ers. Often, notably in Russia, the Fund has stepped in to doAmerica's foreign-policy bidding, eventhou~hby its ownlights its actions were risky at best. The quidl pro quo for aproperly focused Fund and Bankis.greater willingness on thepart of Congress arid the administration'tog~~e more aid oftheir own explicitly, either to serve national-security goals orto pursue development objectives which li~ .for whateverreason; outside the scope of the institutions. Sa8ly, the admin­istration may, like its predecessors, find it a1l1?0 convenientto have a misdirected Fund andBarik do its bidding and thentake the brickbats. .: J '

-. ,- -.

was wise. For, strictly, unless Ireland breaks the stability pact'srule against funning a budget deficit of more Ihan3% ofGDP,Irish fiscal policy is none of thecommission'~ business.

Was the criticism even justified? Far from fuaving a deficit,Ireland has a fiscal surplus of+6% of GIlP. Lasl year, its econ­omy.grew by nearly 10%, and it has recordedlan average an­nual growth rate almost as good over the past five years. Thissmall, once-poor country has been catching up with its richerpartners, which is meant to be one of the purposes ofjoiningthe European Union in the first place. Barely rPore than 4% ofthe working-age population is jobless, and iriward immigra­tion is expanding the labour force. Nor does this success arisefrom the EU handouts, amounting at timeslo 4c7% of cor,which have helped it build so many roads ahd other publicworks during the past 30 years. This Irish sJccess is of Irishmaking, as successive governments have opened the coun­try's markets, lowered taxes, improved educAtion and man­aged the public finances in a sensibly austere-way,

The blot on Ireland's record is its highinflillion, which hitan annual rate of 7% last December. It is this figure, easily the·highest in the EU, that has caught the eye of ils European col­leagues. In December, rather than raising ta~es as some rec-

THE ECONQMlS't FEBRUARY 17TH 2001

BOOKS AND ARTS

an ambiguousword could meandearh.andnotl1ecessarily th~i.r,own. Turkey was a fer­rn"ent,of intrigue.<M,ersln, ,an '., outpost.ofmulticultural Levantines, hard. by. the dis­puted territory of Hatay and the Britishcontrolledprotectorate of Palestine, had itsfull share of foreign visitors looking furmore than the beach. And over CountyCork, home to the O'Neills, hung the pres­ence of the IRA and a frightening numberof unsolved sectarian killings.

The experience of wartime made bothmen wary and unapproachable. The gen­eration that they fathered in its shadowwere not keen.to questionthe past.ButMrO'Neill, born in 1964 and one generationre­moved from thetrauma, has.a farless in­hibited curiosity,which: takes him from anancientmonastery near Jerusalem.to :thewild, west of Cork turning over familystoneswithhappy abandon. At one stagehe wonders if he is not doingit "as a pun­ishment for the hurt silencewhich, I rightlyor wrongly sensed, they'd bequeathed tomy parents,'

To uncover his grandfathers' secretshehas to go still further back, to see wbatformed. these .complex.men. His journeytakes him to the Armenian massacres.of1909,the fringes of which his Mersingrand­father must have witnessed,and to an out­burst of Pro,testant killing in west Cork inthe 1920S; wherethe familyconnection wascloserand more sinister. It is a journey thatthrows up hard-to-answer questionsaboutthe conflict between nationalism and' therightsof minorities.

It is alsoajoumey that throws up someextraordinary coincidences which, occa­sionally,the author allows to carry him toofar.He tries,for example,to establish a par­allelbetween his maternal grandfather,Jo­seph Dakak,and Franzvon Papen,the Ger­man chancellor who ended up as his

Family loyalties

On the edge

Harris's "TheSilence of the Lambs"-andthe 1990 filmwith Anthony HopkinsandJodieFoster-eompelling.

Mr Hopkins is back again in "Hanni­bal", which is taken from another of MrHarris's,Lecter.: novels: and' directed, byRidley Scott. When the film opened inArnerica onFebruary9th,it tooka stagger­ing$s8m initsfirst three days. Alas, thetension is gone.Hannibal at large.inIus­cany isjust not as scary as,When -hewasevilly manipulating events from a high­securitycell.HehasbecomeastockHolly­wood fugitive, buffeted by events but al­

waysastepahead ofhispursuers,'Ihese i include a revenge-bentmillionaire;a corrupt policemanand an FBI agent;ClariceStarling,played by Julianne Moore, whotook the,part when Ms Fosterwiselyturned-it down.

Starling and Lecter do notmeet until the film is two-thirdsdone, and then, the eroticchargeof the,earlier.film. is.. missing. MrScott has alsochanged tbe novel'shorrid "bappy" ending, playinghis film'sgruesomelast sceneforlaughs instead-and leaving thestory open, for "Hannibal m".Viewers .mayprefertocurl upwith Dante-and Count.Dgolino,

BLOOD-DARK TRACK. By Joseph O'Neill.Granta; 333 pages; £16.99 ,

I F YOUR maternal grandfather was a',Iy1ar0I'lite .:Chris.tiar), from ."",Iy1ersi~"",•.iI'l

southern Turkey who was interned by theBritishnearjerusalem.for 010re than:tbree';yearsduringthesecond worl4\¥~r,a.w~,rinwhichhiscountry was,nominallYl1~tl7-'traljandif yow Pa~~rnalgrandfatherwas :a.m~InPerpf.the"l~" V1bo,vv~s. it1terrl~,9~nthe:rl()to~Otls~urragh prison in then()11li-, _nally neutral Irish republic for four-and-a­halfyearsat,ITloreorless the s~11le tim~~that. cpii:lcic1enc~"alone ,".wol1lcl., :',' .make. astrongenough theme for a book. When thecircumstancesof thetwomen'sdetentionat:~mys~erious' and ,their grandson isawriter of joseph O'Neill's calibre, then thatboo~.p~C()rn~S, several)l-lil:lgsatagee,:',agripping detective story, a thoughtful en­gttily Into.nationalism, .1111~la 'll1()vi~g:ev()­cationofworldwarattbe edges.ofitsEuro­pean theatre.

Bothgrandfatherslived in a time when

I N iHE gorierbits of"Hannibal"-andthere areplenty "of them-ssqueamish

viewersmay welldecidetoshut their eyesand think insteadofDante,thecannibal'sfavourite' poet:of Paoloand Francesca, orof thelove that moves the starsOh yes,and of the '. treacherous: Ugolino in thedeepest circle of hell, eating away at anarchbishop'sbrain.

Hannibal Lecter isboth repellentandattractive; urbane and deranged;.Hc candrop a tercetfromthe Florentine bard andheeats realfingers with bisbreakfasteggs.Thetensionin hischaractermadeIhomas

Not horrid enough

translator. In nothing is Dante's feeling fororder moreapparent than in the poem's un­ique and beautiful form. The celebratedrhyme-scheme, called "terza rima", drivesthestoryon ina waythat suggests ascendingsteps.It alsobreaks that forwardmovementintostanzas,which gives the poemitsfeelingoflyricalreflectiveness withintheepicscopeof the narration. Toabandon rhyme mightseemequivalenttoabandoning the poem.

Butno translationcancapturethe wholeof a poem,as Robertand Jean Hollanderareaware. Their new versionof "The Inferno"attemptsasortofcompromise: a moreor lessliteralversionwithout rhymeor regularme­tre..Their rhythms. hover' uncertainly be':"tweentheordinary Shakespearean pentam­eter and a fairly prosy free verse. Althoughthere havebeen more exciting versions-thatgive us something ofDante's music andmagic, there has rarely been such a usefulone.TheHollanders-cheis a Dante scholar,she a poet-tact as latter-day Virgils, guidingus through the Italiantext that is printed onthe facing page.TheirEnglish is not remark­able as poetry, but it can be poetic, and ithelps us to come to terms with a foreignpoem that is perhaps the most magnificenteverwritten.

AI Dante

84 THE. ECONOMIST FEBRUARY 17TH 2001

LEADERS

ommended, Ireland's finance minister, Charlie McCreevy,lowered them and raised public spending in a mildlyexpan­sionary budget. Helped by cheaper oil, the inflation rate isnow dipping.But there are fears that Mr McCreevy's budget"ill stoke the economy up again, and revive inflation.

And so it may. But it is a closecall,on which reasonablepeople can disagree. Ireland's inflation.may be too high, al­though given the Irisheconomy's currentsuper-competitive­ness it may well be that higher wageswill prove an effectiveway to even things out again, in the absence of currencymovements that could have done the same.Butthe most im­portant point is that, whatever Your view,Ireland's inflation'harms nobody but the.Irish. It will not affect the euro's credi­bilityon world markets,nor have the slightest measurableef­fect on.euro-zone inflation as a whole.

The Eco1tcmdsfs view has longbeen that, with monetarypolicynow exclusively in the hands of the European CentralBank, and with the Maastricht treatyhavingexplicitly banned

the zcs r""""", "'""~" ""'~""1 countriesshould be allowed moeefreedom to set their oivn fiscal poli-cies, not less. The European Commission dishgrees, feelingth~t fiscal policies need "co-ordinating", and tIlat limits mustbe set to deter "bad" behaviour.Evenon its0+ terms, how­ever, this policydoes Ilot justify the reflrimanjll to Iceland.

Blarney from BrusselsIf a big economy, such as France, Germany, taly or Spain,were to pursue mflationary policies, then tha .could indeedaffect inflation in the whole currency zone andI, on the com­mission's argument, might merit a reprimand.But that is noreason to make a scapegoatof tiny Ireland. SO*,e officials ar-

. guethat if Ireland'ssins are ignored, then it will not be possi­ble to chasebigger countries'sins when they reallymatter.Yetthis is surely nonsense. To launch a scarcely ¢redible attacknow on the euro'smost successful member isn,b way to boostthe credibilityoe authority of any future attacks.

I •

Dressing for the downturn. i·';·-.::,.:•..l'.:::.-:'::.;·.::;.';-:'.""'•• "": ••'.;-•• -;::-,.-.:_,:__.: .

,., : .. ,: , ....•.. , ":.'.'"-,',' ,'-

As America's economy SIO~.S.,.1'.~SitleSSca.:s.1l~liSproving rather too casual IF """"--(--~~II I

.• ..•. ',>: ..... . IO NLY a yea.r ago, the .suitandtie.s..e.~l11.e.d.•.. h.e~de.d ft.?r ex-. House, has banned jeans from the Oval Office a..n.d. w-.ears a

. tinction-along with other 0Id-ec?nol11yanomalieslike suit almost everywhereexcepton the ranch.~ •.• ' ".profits, proven products and paymentin cash.Ifl the new . Thetime has surelycome to replacethe 01 "'hemline the-economy, workers would wear whate"erslqthingbest got ory" of economic cycles with a hew the?ryosuits. Back intheir creative juices flowing, without und~IYrestrictiIlg free- thetsaos, George Taylor, an econol11ist~t th· University ofdom of mov~l11~nt whil~ playingtable footballaIld engaging Pennsylvania, argued that hemliIle~ otlwol11e4's skirtswereain other acnvities de ngueur in the mode'31cuttmg"Cdge useful indicator of economic actlvlty'1heYfI\bved higher mworkingenvironment.This sartorial revolution~tarted, inev- good times, because women could afford to wear, and showitably,in Silicon Valley, but by last springit had stoemedeven off,expensive silkstockings.Inhard times.they moved lower,the most sober and traditional banks, consultanciesand law ~smodesty required that lessexpensively clad legs be cov-firmsof Manhattan and the CityofLondon. One by one, they eredSureenough, skirts were short in the rdaring twenties,all went "business casual". A charity was established to re- and long in thec;re~tDepressioIl' Idistribute suits to the unemployed-not that a jacket and tie, ","> :.. ..••.• Iwere any longer going to help anybody get a job. ..Attl,,?,__~l'fr?mt~()users. .•••. .•••. I

Now, it turns out, the vision of an open-neck future was j\/01iV that liVornen have moreto think about than their stock-but a mirage. Suits are back.According to the DonegerGroup, ings, t~e wearing of suits may be a more rJliable guide toa "styleconsultancy",salesof suits and dress shirts bottomedecon?rni,trends. IIlany case, many female Jxecutives havein the third quarter of last year, and have since rebounded aband?ned h~rnliflesaltogetherin favour of Irousers.sharply.Theevidence is clearest in New Yoek, where many a 'i1hesuitisthe perfect attire foe hard ecohomic times. Itsuit has been rescued from the wardrobe, with chinos and speaksof seriousnessofpurpose and self-discipline. It speakspolo-shirts relegated to the weekends. Only woekers who of dulln~~~,too'liVhich is a welcomecontrastlwith the anar-never come face to face with customers or senioe managers chiccreativity ofthe dotcoms. A suit savestime,because it re-can still fearlessly wear jeans and T-shirts-with the notable quires n?thought and still looksall right-a clucial competi-exception of technical staff, of whom nothing smarter was tive advantage-in the labour market that mel, long enjoyedever expected in the first place. over womeIl.'How foolish it was to throw th~t away. If you

Even America's congenitally casual west coast is going want to show you are more than new-economy flotsam, getconservative. The new vogue is "dressy casual". At a mini- yourselfa smart three-piece. Imum, The Economisthas found, shirts ~re once more being Above all, the backlash against suits re~ealed a labourtucked into trousers. New.-economy. trendsetters such as Bill m.arket so tight that workers had all the car s. Bosses hatedGates,Michael Delland LarryEllison have all been seen look- seeing their staff slouch contemptuously in torn jeans anding dapper. When SteveCase,boss of AOL, wore a tie at the jumpers, but had to put up with it. Now,joljls are harder toannouncement of hIS firm's purchase of TIme Warnera year come by, and mvolve more work and less play. The SUIt ISago, it was int..err.reted.• as ag.es.ture to reass.ur.e.·.Time workers. back EVerYWhere. exceptT.heECOndmist,ofcorrse. Here,free-With hindsight, it seems Mr Case simply had a feel for fash- dom of movement is a religion. .

. ion. George Bush, sure-footedin his first weeks in the White .•

26 m"CONOM"l"",UAR' '7'" ,,,,

Is

SCIENCE AND TECHNOLOGY

,THE ECONOMIST F~BR.UARY 17TH 2001

-------------~----"

aspectof the genomemay yieldmoreimme­diate benefits.This is the analysis of singlenucleotidepolymorphisms(SNPs).

SNPS, as their name suggests, are placeswherethegenomesofindividuals differbyasinglegeneticJetter.They are likelyto be im­portant for two reasons.Wrst, they can beused as signposts-. Each SNP is assumed tohavean independent evolutionaryorigin, soiftwopeopleshareone,the chancesare theywillsharethesame versionsof thegenesthatarenear that SNP. The SNPS can thus act asmarkersfor particular versionsof genes,in­cludingthose versionsthat predisposepeo­ple.to disease.The second reason that SNPSare medicallyimportant is that some ofthem (the?l)e§that areactuallyfound insidegenes)are among the causesof those differ­ent versionsofgenes.

IIIthiscontext,oneofCelera'sfindingsisparticularly intriguing. The firm's research­

ershavediscoveredthat lesstban 1%ofSNPS seemtoalterthecompositionofaprotein.Thissuggests that human ge­netic variation is the result of only afew thousand minor differences be­tweenproteins.

Of course;'as anyone who playscards knows,even a fewdozendiffer­ent things, let alone.'a few thousand,can be shuffled into -a vast array ofcombinations.Butthis resultconfirmsthe idea that Homo sapUlrt$ isa youngspecies-too. young to have accumu­lated significant genetic variation.

Gr~ssi~.g'.~~.~i~~SOWho.'#?Hthe,race?: Itqependsol1whomyouask.The.publicproject'sre­searchers, .•.. ~tung by .th~sllgges~ormade when Celeraopened for busi­ness th~tth~yshould fold their t~l)tsand letth~ .. Il)?neyfunding them bespent 'Ol1"~()rIlething else.are clearly

the deposition of the amyloid plaques.that convinced-that theyciid. Given that Celeraoccur in the br<lins.,ofpeople:\o\'ithJ\lz-e\,el1tuCilly,cho$~J())p.co,rporCite data .£1:0Ipheimer'sdisease.It.however, islocatedinthe ...,the ,p~l:>lic •. t1a.ta8ClS,~$illt()its, Own.analysis,chromosomalregiol1that(",hend.uplis.ted) . th~y have a point. In retrospect, thecom­is implicated in Dowll's;:syn<:lrqrpe.,':rh,atis. PClnY's.~metable was too ambitious .. if.theinteresting because Do,#n's, isalsocharac- .' realprizewasintended tobe a compl€:t~Cel-terisedby the depositionof ~Il1y~oip .• /,":"", .<era..:;?nIysequenl:e~, .•.•.. : ,'. .... .....,:,';

Eachofthesethreegenesispeil1gs\11diSd . . Butthis is to miss abigger.pointThoughby drugcompanies,and the chan<':~~'.~fe;t,hat Q~le~<l:5researchersarescieritists ofil1,tegrity,many more potential targetswillbe,t1,imec.i tl1e~.are. ultimately a,nsVierable. t()·.theirup when each of the genes in the sequence ..'sl1areholders~Theirsequerce.doesl1()t havehas been welldescribed.Indeed, the public . to be ideologically pure,jt.just has: to be.paper lists18further paraloguesof common right~.ccurMe en?ughanddetailed enoughdrug targets that its authors haveidentified to formthe basisof (he "value-added" geeduring the courseof their researches. At the netic-informati()llpa~~Clgesfr0l!lwhich themoment, fewer than 500human genes (or, companycurreJ:1tlym<l15.€:~its,money. That.itrather, their products)are known,to be the certainlyis,targetsof existing drugs.Evenif only 10% of . The real win.l1er,: therefore, is science.the human genometurnsourtoberesponsi- When Dr Venterand Celeramade their au:-'ble for proteins that would makegood drug daciousgamblein1998,thepublicprojectre­targets, that would multiply the inventory sponded byspeedingup Significantly.With­around sixfold. .' .., , '...... out that stimulus,it isunlikelyyou wouldbe

Turning.this..potelltial, illtp,mecii/:ines readingthisarticletoday.will take a lot of time and money. Another

newly discovered receptor is' explainingmany aspects of serotonin's function thatwere previouslymysterious. Thegenefor 5­HT3Bisaclas,sicexampleof thevalueofhay­ingthe fullhuman genome. It was identifiedby searching". the genome for sequences ofDNA that looked' similar to a.known seroto­nin receptor,5-HT3A.

A second medically significant gene,responsible for producing a protein ,calledc:ySLT2, is active in the muscles of the air­waysleadingto the lungs,and is implicatedin the development of asthma. This wasfound not by analogywith a known humangene,but rather by comparing the humangenome with the partially sequenced ge­nomeof the rat,whereasimilar.genehadal­readybeen discovered,

A third gene,which is responsiblefor aproteincalled BACE2, was found becauseofits similarityto one of the genesinvolvedin

paraphernalia needed togetthe cellthey in­habit totranscribethem.

Theexistenceof pseudogenes isone rea­son why it ishard to put a precisefigure ontheactualnumber ofgenesin thehuman ge­nome. Merelyfinding a gene-like. sequence.in the DNAis not enough.An independentlineofevidence,such asa matchingprotein,isneeded tohe sure.

A good example is the sense of smell.Thisdepends on a hugenumber ofdifferentreceptor proteins, each tuned to a differentsortof chemicalstimulus.Theproduction ofthese proteinsrequires,in turn.a largenum­ber of genes.Inthe human genomethere aremorethan 900 stretchesof DNA that look,atfirstsight,likegenesfor thesesmell-receptorproteins.Butthe senseofsmell,thoughquiteimportant to people, is by no means as im­portant as itwastohumanity's ancestorsbe­fore they took to the trees and came.to relymainly on visionThe DNA' reflectsthis. close scrutiny of those soc-odd"genes" shows that 60% of-them arebroken in ways that mean no proteincan becopiedfromthem.

Evenbroken genes, however,canbe useful to biologists. Together withthe transposableelementsand thefactthat significant blocksof DNA willoc­casionally duplicate themselves andpass down the. generations withoutapparent harm to the creatures con­tainingthem, they form a sortof fossilrecordofa species'past.It isearlydaysyet-sdatafrom other species,neededto make useful comparisons, aresparse-but it is possibletostart look­ingat the historyof thegenomeitself.

One surprise is the sheer amountofduplication.Morethan 1,000 exam­pleswereidentified.Usually, suchdu­plications cause illness, if not death(Down'ssyndrome is the resultof thepartial or completeduplication of chromo­some 21). Those that persist,however, havean important role' in evolution.. The.addi­tional copies of genes they .create can be.modifiedto do n~w jobs, whilethe originalscarryon with the old ones,It is another wayforcreaturesto becomemorecomplex.

Cui bono?Somuch for the science; what-use is it all?The main hoped-foruses, ofcourse.raremedical-particularly tbe development ofnew drugs.One obviousapproach is.~O: lookforgenesthat produceproteinssimilartoex­istingdrug targets. Suchgenesarecalledpa­ralcgues, and the public paper illustratestheir.potential withthreeexamples alreadyunderinvestigation.

One is the genefor areceptor protein inthebrain.Thisprotein,known as 5:-'HT3B, in:'teractswith a neurotransmitter called sero­tonin. This neurotransmitter'affects mood(anti-depressiondrugs such as Prozacworkby boosting the effectof serotonin)and the

82

THE ECQNOMISV FEBRUARY l~TH 2001

1more authority to' Miss'Megawati .in ex-changefor keepingthe pres\tlency. .

MrWahid'sbackersargtie that thereisnoevidence that he has done bnything wrongand that, at worst,he is guiltyonly ofcamepaign-financeoffences. Par!iament is push­ing him out, they say; only Thecause MPS dis­like his effurts at reform. IMr Wahid hasshrewdlyplayed to thissenHmentinseveralways. Hehas said that helwill respond toparliament's treachery by rehewinghis driveagainst corruption, pledgi~g this week toconcentrate on tenparticul&r offenders.'

Moreover,:althoughlhe ,denies or­chestratingtheNO'S attacks1mGolkarofficesin EastJava,MrWahidhas Sought to portraythis movement as a battle betWeen the oldregime(confusingly harned the NewOrder)and his new reformist -onel Mr Wahid toldThe Economist thisweek that his empathyfor the NU gangs-he said lhstweek that he"understood" why they wfre violenr--hadbeen misinterpreted. He says thathewill dowhatever he can to preveht violence, andthat hewastryingto point cJut that heagreed

",,,,,,,,,,,.,,,,,._1._.~""",,,,,,",,,,,,,,.h_,'"former ruling party, has s~nctioned this,since it,is in -the interests of~he two biggestparties fapay some attentiortto the rules.

Miss Megawati in particular is stayingstudiouslysilent,This is pa11ybecause shedoesnot want tobe comparddtoGloriaMa­capagalArroyo, the preside"t of the Philip­pines,who ledtheopposition'seffortstoun­seat her predecessor, JOsejh Estrada. For

although Miss Megawati, likeMrsArroyo,wo ,1dprobahlyen­~oy the support qf the army,thatisnorablessing.in Indonesia,wheresoldiersaie sodiscredited,

Mr wahid'~ opponents inthe PDI-P are convinced thatthey have a greeh lightto unseathim,but thisweh therewastalkfrom other quarters of givinghim one more ctlance. He might,perhaps, be as~ed to yield yet

thereany clearplan to managethe policyofradical decentralisation, which allows hun­dreds of corrupt local governments to exer­cise more control over their own develop­ment budgets and, in consequence, to dowhatever they please. More political insta­bilitywillalsohamper othereffurtstoattractinvestment, And, yet again; fresh assistancefrom the IMF has been suspended becauseof stalled reform.Thisparalysiscould easilystretchinto themiddleofthe year.UnlessMr

Wahid manages to avert the im­peachment effort, that is whenthe procedure to unseat him willcome to a head.

That procedure began lastmonth, when a decision wastaken to censure Mr Wahid overthe two financial scandals, one­concerning the national foodagency,Bulog,the otherconcern­inga donation from the sultan ofBrunei. The scandals occurredlast vear.after Mr Wahid tried toappropriate funds from Bulog, They want Wahid to goostensibly fat humanitarian aidin Aceh, at th~ north-western tip ofIndone­sia. The president has admitted that helookedinto this,but saysthat he latergotthemoney from-the sultan of Brunei, who gave$2m. Shortly after Mr Wahid had ap­proached Bulog,his masseur, Suwondo, ar~ranged an illegal disbursementof 35billionrupiah ($3.7m at current rates), claiminghewasactingon the president'sbehalf.MrWa­hid sayshe knewnothingabout this.

Although Mr Wahid's story is a littlefuzzy, theevidence.iagainsthim is cir­cumstantial.Nevertheless, parliamentvoteddecisively. to' accept the report.: which ac­(used him ofbeing involved in.the Suwondoaffair and of misusing the sultan's money.Mr Wahid now has until early May to ex­plain himself to parliament; If it is unirn­pressed, he gets a second warning, and.onemore month; then parliament is allowed tocall a special MPR session to vote on remov­inghim,

Already, more than 200 MPS seem con­vinced ofMr Wahid's guilt, or at least of hisunsuitability as president. They wanted him

ponents-cincludingArnienRais, an Islamistself-promoter,leaderof one of the main co­alitions in parliament, and chairman of theMPR-warned him that he had no more thana year toshape up. Moreover, by that time itwas already clear that a pair of multi-mil­lion-dollar financial scandals would pro­vide the pretextfor impeachment when thetimecame.

Mr Wahidalso went on to construct hisnewcabinetwithout takingMissMegawati'sadvice on appointments.muchof which proved to be prescient.Despite -his .minority govern­ment. he has continued totreatparliament .as-an -insignificantnuisance;Mostbafflingof all,hehas prepared himself for thisbattlenot by cementingtieswithMissMegawati, but by insultingher personally in settings whereaccounts of what he said werebound togetbackto her.

CollateraldamageThegreatfearnow isthat, ifGusDur's presidency collapses, hewill not be the only victim.Things couldstillbemuch worsefurIndone­sia, the world's fourth-biggest country, andits 210m people. In '965-66, the period thatusheredin MrSuharto'srule,500,000 peoplewere killed in Central and EastJava in riots inwhich the NU played a central role. Now,even outside the hotspots ofAceh, Irian [ayaand the Moluccas, the country is racked byvigilante violence and frequent unexplainedbombings-the latest being a string ofchurch bombings on Christmas Eve. Sincethe Indonesian army is distrusted and de­moralised, there isno tellinghow much trou­blea politicalupheavalcouldcause.

Indonesia's neighbours are dearly wor­ried.This week, Malaysia's deputy primeminister, Abdullah Ahmad Badawi,gavewarning of "anew wave of boat people"ifthings go wrong.The governments of.Aus­tralia and ... Singapore 'have similar fears.Giventhe difficulties of patrollingthe area,Malaysia and thePhilippinesalsoworry thatIslamic militants will find it easier to operateintheir ·southern islands; Sincemuch of theworld's piracy occurs in.Indonesia's ship­ping lanes, a breakdown ofauthority couldgive it free rein.It iseasy to see why ColinPowell,America's new secretary ofstate, hassingled outIndonesia asa country thatbearsdose watching.

Evenifthese nightmares never come topass, the present difficulties will prohablycost Indonesia another year in its efforts togetback on itsfeet More than two years afterthecountry'sbankscollapsed,pledgestosellassets from the bank-restructuringagency,IBRA;continue to .go unmet, Such saleswould amount to the biggest step Indonesiacould take to restore confidence. Yetthey re­main blocked by politicalstalemate.Nor is

28

INDONESIA

SCIENCE AND TECHNOLOGY

;, .",

complex of regulatory sequences .. of DNA

that switch them on and off in response tochemical signals from the rest of the cell.Anythingthat interrupts this regulation willget short. shrift from natural selection. Soonly 2% of the DNA in theseparts of the ge­nomeconsists of transposableelements.

It is difficult to avoid concluding that,where they do persist, transposable ele­mentsmust beconferringsomebenefit,Onepossibility, suggested for a type of parasitecalleda SINE (shortinterspersedelement), isthat it helps promotethe productionof pro­teins when a cellis put.under stress. SINES,

and other .. transposable elements, are notnormally transcribed by the cell's machin­ery to producethe molecularmessengers bywhichgenesact.Butin thecaseofSINES thereis an exception: they are transcribed instressedcells. Themolecularmessenger thatresults serves to block a substance thatwould otherwise slow. down protein pro­duction;"Thanks,,..to: SINES, therefore, astressed cell may be able to respond morerapidlyto thethreatin question.

Similar advantagesto the continued ex­istence of other sorts of transposable ele­ment will probably tum up when peoplestart looking in detail.And in a few casesthoseelementshavebeen co-opted by theirhosts toeven bettereffect: it looksas thoughat least20 genesthat playa usefulrolein thehuman body originally came from tran­sposableelements. That.is hardly surprising.Genomesarenotpickyaboutwheretheyac­quire usefulmaterial. and transposableele­ments are notthe only thingsto have beenplundered. More. than 200."human' geneshaveactuallybeen pinchedfrombacteria.

Theseslaves, or .immigrants-ccall themwhat you will-are part of the grand-totalnumber of genes that each of the projectshas come' up .with.. But those totals aresmallerthan many peopleexpected,

Outforth~ c';u~tIn the '98os,Walter Gilbert, one of the pio­neersof genomics, estimated that the nUJ11"'"ber of human genes wasaround roo.ooo.Hebased thison knowingthe number of ge­netic letters in the DNAinthechromosomes ofa humancell's nucleus (which can beworkedout from their weight)and guessinghow many genes'mightlurkinany givenstretch.

More recent estimateshave varied wildly. Based onhis early results,Craig Venter;the boss of Celera, came upwith a figure ofbetween50,000and 80,000. Incyte .Pharma­ceuticals and Human GenomeSciences, two other Americanfirmsthat have been busycre­atingprivate,though lesscom­prehensive, versions of the hu-

80

Somewhat llke a fly

man genotg~;,llave talked of numbersbetween l?-O,t:)0?3l)d 150,000. It shows how'wrong you can be. (Though some cynicshavesuggested that highern~mberswouldmake drug companies willing to pay morefor access to the genomicdatabases main-tained by thesefirms.) i >i '" '

Another surprise is that the geneticdif­ferences between people and other speciesseemsmallerthan had been supposed.Cel­eraannounced thisweekthat ithad finishedsequencing the genome of that laboratoryworkhorse, the mouse.Thelastcommonan­cestorofmiceand men probablylived100myears ago. Yet according to Dr Venter, thefirm'sscientists have found only 300genesthat peoplehaveand micedo not.

The public project, though it does notname sucha precisefigure, comesto a.simi­lar general conclusion based on publiclyavailable mouse-genome data. To. a reason­ableapproximation,a human genome islikea mousegenomethat hasbeenchopped intopiecesand rearranged(seediagram), Theex­actgenetic sequencesof thesharedgenesare

different. in the ,two species, so the proteills.that result fromthem'are not perfectcopiesof each other. But they are close. It looks,therefore, as thoughthedifferences betweenmiceand people have more to do·with thewaythat theirgenesareregulatedthan withwhat theyactuallyproduce.

Human self-importancecan, however,salvage something from the fact that miceand people are significantly more sophisti­cated than invertebrates. Theyhave112 timesas many genes as anematode worm, andtwiceasI11any asa fruitfly(thetwootheran­imalsthat have had their geromes com­pletely sequenced). A1arge core of sharedgenesdeal~~~tl1,:sucl:tshared processes asthe release ofenergyfromglucose. Butin ad­dition to this core.. there has been.a massiveexpansipniI)humar~s,(andmice) of thegroups ofgenes thatcontrol several othersorts9ffuI1cti()n:

Someof.these areno surprise.ImmuneSystemsarea s!?eci,a!ity ofverrebratesingen­eraland mallll11alsitl particular.One differ­erl~e betweenthehumatlgenome and thoseofworms and flies is' therefore the largenumber of genesdedicated to keepingthiscostlybut effectivesystemgoing.

Otherareasof expansioninclude thegenesthat regulate the nervoussystem(par­ticularly those that are responsible fix thesignalling molecules known ~sneurotrans,

mitters) and the blood system. Butperhapsthe most interesting were in two groups ofgenesthat help tocreatecomplexity. One ofthesewas thegroupwhoseproteinproductsbind toDNA and thus regulate theexpressionofgenessuchas thosein thehomeoboxclus­ters.Theotherwasforthegroupthat controlsthe processby which acellkills itself, whichisknown asapoptosis,

Apoptosisisan,essentialact,not acasualone. It firstcameto lightin the studyof can­cer:one way the body dealswith cancerouscells is to order them to self-destruct. Butapoptosis is alsocrucial during embryonicdevelopment. Somevdevelopmental pro­cessesarelikesculptinginclay.Theyinvolve

adding' bits of tissue wherenone previouslyexisted. Oth­ers .areIike sculpting in stone.They involvecarvingawaytis­suethatis,alreadythere.Thisisdone, by apoptosis. The cellsthat diehelp tomakeyouwhatyou are.

The lessons ofh1storyJust as cellsdie out when theybecomeredundant during de­velopment- so genes die outwhen they becomeredundantduring evolution. The humangenome bears witness to thisprocess; too. It is littered withthings called pseudogenes,Theselookat firstsightlikerealgenes, but lack the additional

THE, ECONOMIST FEBRUARY lZTH 2001

INDONESIA

withhissupporters'attitudetowards Golkaronly"becausel feelthe sameway".

Mf.yvahiCi's enemies.ofcourse.havere­formistargut11entsoft~eir ?Wll. They pointout that he has donenothing during thepast16months tostemcOfruption.or improvethejusticesystem, and they accuse hilnoftned­dling unwisely in many govemment deals,especiallythose involvingtycoons who oweIB RA money.Since.MrWahidhasdone noth­ingtoestablishaccountability, theysay,theyhave their own ideas about which corrup­tion casesto concentrate on: start with thepresidentand gofromthere.

In thefiring lineSois Gus Dur a corruptpresident being im­peached by a reformistparliament,or a re­formistbeing impeached by a corrupt par­liament? In truth, neither descriptiotl isaccurate, Toseewhy,considertwoof the de­cisions that have most haunted Mr Wahid:hissackings of aPDI-P cabinetminister and awell-knowngeneral,

Manyof the president's problems withparliament can be traced back to a cabinetshuffle last April, in which he sacked twoministers from his economicsteam. Oneofthose ministers, Laksamana.Sukardi, was atrusted adviser of MissMegawati, and hadearned wide respect for takingon the state­owned enterprisesministry. Mr Wahid notonlysackedhim,replacing him with a loyal­ist, but botched the explanation horribly,tellingparliament-with no proof-that hehad removed Mr Sukardi for corruption.This infuriated many of his coalition part­ners, includingMiss Megawati, who guardsher clean reputation jealously and did notlikethe sideswipeat her party.

Mr Wahid's other big personnel fiascoinvolved his attempt, last year, to establishfirmer control over the army by promotingan outspoken junior general, Agus Wiraha- ­dikusumah. Shortly after taking commandof Kostrad, the army's elitestrategic reserve,General Agus revealed an audit that hadfound widespread corruption in the unit.This did not endear him to fellow officers,who also resented the favour the presidentwas showinghim. When Mr Wahidtried topromote him again, the senior generals re­sistedby lobbying Miss Megawati-vandwon. Iri the end, General Agus ended upwith nothingand MrWahidrevealedhisim­potence.Themessagewas driven home byadecision in the,MPR shortly afterwards,al­lowingthe armed forces to retain the guar­anteed seats in parliament that they hold astoken of their "dual function" in both de­fenceand politics.

Thisepisodewas similar,in someways,to the sackingof MrSukardi. Thepresident'ssupposedly keen tactical skills failed himmiserably on both occasions, helping toplacehirn in hiscurrent predicament.In thefi~t ca~e,:Mr»'<lhid's opponents were,sup­portingthe reformer; in thesecond.the re-

30

formerwassupported by MrWahid. Inbothcases, as friendsofIndonesia gloomily pointout, the reformerlost.

Asa resultof all this,many advocatesofreform are now fed up with all sides."Theelitemachinations of Jakarta politicsare soflagrant, it's disgusting," says one cabinetminister.Dennis Heffernan,a localconsul­tant and long-time friend of MrWahid, isdistressedtoseethe presidentplay into par­liament's hands. "Everybody knows theyarea bunch ofhastilycleanedup NewOrdercreeps,"he says,''but GusDuris just makingireasyforthem,"

Althoughhe islessofa GusDur fan,thissentiment is echoed by Erros Djarot, whowasan adviserto MissMegawatt for most ofthe 1990S before he left in frustration earlylastyear.MrDjarotderidesMrWahidas"thepresidentofEastJava".Buthe isjustasquickto denounce Miss Megawati, complainingthat "the two of them are always blockingus". As for the members of parliament,

Would Megawati unleash them?

"They are like hungry dogs hunting freshmeat." A piece of graffiti in 'centralJakartacaptures the mood of the moment: it urgesMrWahid,Miss Megawati, MrTandjungandMrRaisallto resign.

Atmost,only one of thisquartet willbegonein thenextfewmonths.with MrWahidout ofthe way,is thereany chance that MissMegawatt wouldimproveher performance?In,manY,'respects, reassuringly, she wouldrepresentsimilarvalues to, those ofMr wa­hid.Unlikethe "centralaxis"of Islamistpar­ties led by Mr Rais, both she and Gus Durhave stood up for a secularapproach to life.Since Miss Megawatt has never been a Mus­limcleric, isa woman, and has1:>een accusedof consorting'too closely with the ethnic­Chinese minority, she may find it slightlyharder to carry this messagewith authority.And she might well inspire the fragmentedIslamistopposition,thoughit remainsweak,to uniteagainsther.

When it comes to the army, MissMega­vvati's courseis harder to predict.Shewouldprobablybe lesslikely topush for structural

re.forms, suoch as the.,oJthe territorialsystem that gives the arm~its widespreadpolitical influence. And alt ough some ofher ministersmight prod t e army to cleanup itsoff-budgetbusinesseslthatwouldbe apainfullyslowprocessin ani,case.Miss Me­gawati's reluctanceto interferein theseareaswould have little practicalIeffe~t, since MrWahidhas had no successtltereeither.

One Indonesia IAMegawatt presidencymightmakeabiggerdifference to the way the a)my treats trou­blemakers. Partly out of respect for her fa-

· ther's legacy, shewants Indcfuesia to holdon· to all of its present territory] and appears tohavebeen vexedby MrWallid's willingnessto negotiatewith separatists. Since her ownsupporters we~e among thJ1,victims ofmili­tary heavy-handedness in Suharto's time,she would no doubt urgelthe generals tomaintain somediscipline. B;Llt if Miss Mega­wati were to become', president, it wouldprobably be the residentsof Acehand Irian[aya whose lives would cHange most, andfor the worse.Shemight also tum the armylooseon Islamic extremistssuch as the Las­karJihad; which has injecteditselfinto sec­tarian violencein the Moludca islands.

Asfor economicpolicy! Miss Megawatthas afewgoodpeoplein hel party,including

· Mr Sukardi. Butshe alsoha§some bad ones.Like MrWahid,she has espbused few econ­omicideasofher own,and ,)",ould havetodoa lotofnegotiating; her.charkeswould hingelargely on whose advice slle chose to take.And although she wouldJ be unlikely tomake progress on 'corruptfon, even a startwould be good in Indonesi~, where the onlythingpeopledoopenly islidtojournalists.

Will she be willingto tq'pple Mr Wahid?Apartfromhergung-hoad~isers,many whoknow her still doubt that lhe will take therisk.Had she not been so ~autious in 1999,she would alreadybepresidenr, she refusedto negotiate and ended uPlas number two.Moreover, there is the small matter of herhusband, Taufik Kiernas, vlho is one of thePD(-P'S chieffundraisers.F4wpeople doubtthai, should she take overlthe searchlightswould swivelon' to his bdsiness activities.Besides, saysMrHeffernanj'The presidencyright now is a flaming bag of cow dung. Ithink she'stoosmart to touchit."

It is still conceivable Ithat Mr Wahidcouldwork out a deal.On february 14th, hesaidhe needed arest.He is~bout toembarkon a longtripnextweek,wHichwillincludeapilgrimage to Mecca. OncJ again, there arerumours of a shuffle whert he returns.Thistime, he could do it differently, listening tohis vice-president and in~talling a cabinetshe can live with. But sucH a deal is gettingharder to imagine. Even <Gus Dur's confi­dants admit that he would rather drive atrain over a cliffthan admit to hisold friendthat hehad been wrong. I. .

,THE ECONOMist FEBRUARY qUI 200l

1I

FlNANGE AND. EGONOMIGS

A matter oftrust

Behaviour such as reciprocity and co~operati()n is hot bred in the bone.Rather.it responds to incentives and experience

How MUCH do you trust your busi­nesspartners,andhow muchdo they.

trustyou?Evenin rules-based,litigious so­cieties,' some measure. of trust is essential.Contracts cannot plan for every eventual­ity, and outcomes are often hard to verifyanyway.The.issue of trust is that muchmore pressing in emerging economies,whose threadbare legal systems and poorenforcementoffer.little assuranceto inves­tors.·So:'how',much trust can we, expectfrom otherszResearchers arebeginningtofind out.

Intuitively, at least two sets of factorsmight fosteradegree of trust.Forone, trustcould serve as a signalof goodwill, either tosecureco-operation in the short term or toensurethe success of a long-term relation­ship. On.the other hand, the ori­gins of trust might be simpler:some people might just feel goodabout trustingothers.

Kenneth Clark ofthe Univer­sity of Manchester and MartinSefton of the University of Not­tingham examine the first ofthese motivations in a recent pa­per. By having subjects playa secdes of simplegames; the academ-ics measured levels of trust andtrustworthinessamongstrangersattheir first encounter; andthen.re­corded how the levels of trustchanged over time-The. format: foreach game was the "sequential pris­oner's dilemma" (SPD), which imagi-

, nes two prisoners being heldsepa­rarelyfor-interrogation-on their'partsin an allegedcrime.Thereare four possibleoutcomes, depending on the prisoners'ac­tions. Should the first prisoner to be in­terrogated confess, whilst.thesecond doesnot,then thefirstisreleased and thesecondgets 20 years (or vice versa). Should bothconfess, then both get' ten years. Shouldneitherconfess,both gettwoyears.

In this game-the outcome that showsthe greatest mutual trust between the twoprisoners is where the first one refuses toconfess, and the ·second. does. the, same.True, the second player might wellbe in­clined.to confess.and so get off scot-free.

Thepapersreferred to are: "TheSequential Prisoner's Di­lemma: Evidence on Reciprocation", by Kenneth Clarkand Martin. Sefton, Economic-journal (january 2001);

"MeasuringTrust",by Edw,arci L Glaeser et al,QuarterlyJournalofEconomics {August 2(00); and "Who TrustsOthers?", by Alberto Alesina and ElianaLarerrara.joer­nat qf PubLic Economics (forthcoming).

78

--Butif the game is played:sev,~raltiwes,maintaining trust gives the'.bestoveralloutcome: players receive two-year sen­tences every round rather than each time

_riskingten or 20 years in the slammer.Using money as a payoff rather. than

prison' sentences as a threat, Messrs Clarkarid Sefton had student subjects play theSPO ten times. Players kept the same role(firstor second mover) in each round, butwere randomly paired with different, hideden 'Partners. During initial rounds, thefirst mover began by trusting (not confess­ing) 51',(, of the time. In 35% of those casesthe second mover followed suit, thus.ob-

taining.the trustingoutcome. By-the tenthround, however, only 32% of first moverswere still trusting; And these co-operatorswere rewarded.with trust in return only38% of the time. The levels of mutual dis­trust had ratchetedup in the interveningrounds. This evidence belies the idea thatany given person is.by nature, consistentlytrustful or mistrustful.

The authors refined their results in twoways. They doubled the payoffs across alloutcomes, and they offered far greater re­wards for a solitary confessor.Simplyrais­ing the stakes had no effect.But in the sec­ond case,' where-the. cost. of trust wasincreased, the frequency of the trustingoutcome fell substantially. Again theideathat some people are inherently, trusting,whilst others are not, appears ill-founded.Changes in incentives countfor much.

Despite: the, 'evidence/that trust re-

spondsto incentiyes, certain situations fos­tertrustrl1()retilat1 others.In an?ther ~ar[1e,

0rtrtls~, ~clwar~t9Iaes~rofI-iClry,ClrdlJr~i":""versity and hiscolrabq~~tors paired offplayers, some ofwhom kIlew each ?ther inreal life. In thisgal)1~, the firstplayer re­ceived$.s, ofwhich he could give~flY ]Jartto the second player,hidden from view.The amount transmitt~dwas doubled Ibythe researchers,~nd the second playerthensent Clnyparth~wishedofthenev,ramoufltback to the first player. Here the trustingoutcome isfor the first player to send all $'5to the second. Then, provided that the sec­ond player is Worthy of t~e first's trust,both can walk away with $'5.Nevertheless,the first player has an incentive to keep theentire $15. He can only do better ifthe sec­ond player returnsmorethan he keeps.

Sadly for those with a high regard forhuman nature-the first players sent an av­erage .of $1241 to 'their partners, who re­tumed an average of 45% of the doubledsum. Firstmovers who declared before thegame that they trusted strangers sent $~~21

more across-other. things equal;than .. counterparts: who remern­bered .their 'mothers' .. advice onthis subject-The; existence of aprevious acquaintance also af­fected behaviour: both theamount. initially sent, and :thepercentage returned by the sec- .ondplayer.rose.in proportion tothe length of time the players hadknown each other. Perhaps unsur­prisingly, when players were ofdifferent races or nationalities, thereturn ratio was much lower,

A vice10 trust all?The findings on group identity re­ceivemore support froma forthcom­ing paper by Alberto Alesina of Har­vard and Eliana LaFerraraofBocconi

University, They merged two decades ofresponses to, an American, social surveywith census data on racial mixes in differ­ent parts of the country. Their statisdcsshowthat blacks and members of raciallymixed communities were. far less likely totrust others than were whites or others liv­ingin racially homogeneous communities,Respondents who had recently suffered apersonal setback-for instance, serious ill­ness or financial problems-also reportedlower. levels of trust. This suggests .thatwhen' people' revise their expectations' offellow:humans, it may sometimes be forapparentlyirrelevant reasons.

'Iogether.the studiesargue that trust isshaped by experience not native personaltraits.Jt also seems that trust is a fragilething, prone to break down altogether. Thelesson? A handshake, is no substitute forready money, or a hard-eamedreputation.

THE ECONOMIST- FEBRUARY 1'7;fH 2001

UNITED STATES

mate would reduce the surplus by a third.It seems unlikely that the Pentagon

would get as much as it wants,consideringthat reform of Social Security and Medicarewould make huge demands on the remain­ing pie. As the Brookings Institution's Mi­chael O'Hanlonargues in his forthcomingbook, "DefencePolicy Choices fo; the BushAdministration", theanned forcescannotbuy theirwayoutoftrouble'Thi~is p,res1.un­ably why MrBush refused toauth9rise animme~iat~iilcr~<:tseirtthe_defe~cebudget.

t>jorcan !he forces ea~ilyd9 what thepresident 9ccasionallysuggested.on t~e

cart1paig~ trail: skip aVlh()~e_~ener<lti()n ()~weapons (cal1celling, say, th~ troubled V-22

Ospreytiltc",ing helicopter, which keeps~rashing)andp;oceed directly to ~. "thirdgeneration' ofvveapons~This charig~;some­times called t.he Revolution in Military Af­fairs'eI1:vi~ionsailpaft carriers beingre­pla<;ed_~y _._.,'.-. unt11anned__ '~arsen~l __ '.'-s~ips"stuffed ",ithmissiles, large infantrydivi­sions lleingreplaced by individualsoldierswith all manner of high-tech arms, andtanks retiring into history. A11 these thingsmay one day c9rnetOpass, Butit could be upto 20 years before thatday has fullyarrived,aworryin~gapafterthetimewhen the currentlotof'N~apol1sbecomeobsolete.

\Vhat!Od9? 11ii~ is ",here MrMarsp,,1land thestrategicreviewcomein.Unlikepre­vious, largely ineffectual reviews, this one isin the hands of a genuinely radical thinker.Mr Marshall has called tanks and aircraftcarriers "millstones"..He thinks Americandefence' focuses too much. on Europe andnot enough on thegeostrategic challenge ofChina. In the past he has advocated a half­way house between the Joint Chiefs' de­mand for the whole array of vastly expen­sive newweapons and Mr Bush's notion ofskipping a generation. Americahe "argues,could cut back on some ofits new arms planswhile bringing into active service soon a fewexperimental "third-generation" weapons.

Mr Marshall's willingness to rethinkAmerica's defence commitments whenthere isnot enough money to buy everythingeverybody wants raises other questions.Does America need 40,000 troops in Japanor 70,ooo·in Germany, which is now sur­rounded by NATO allies?Does it need 7,000nuclear weapons on full alert, and threeweapons laboratories? Does it even need a"two-war strategy" (the ability to fight tworegional conflicts simultaneously)? Thepromised review may well answer no to atleast some ofthose questions.

If that happened, the result might not bea Great Leap Forward into high-tech war­fare. But it could well be the start ofa transi­tion that moved America away from its old,cold-war military ideas. Financial, techno­logicaland bureaucratic obstacles would re­main. Butfor even beginningto plan for sucha transition, MrBush deserves credit.

•

32

Bill Clinton's reputation

Muddier yetWASHINGTON, DC

H E HAS always loved the limelight. Butperhaps even BillClinton isgettinga bit

tired of all the attention he has been receiv­inglately.Day after day the former presidentwins almost as much coverage as his succes­sor-but Mr Clinton's comes with savagebarbs and uncomfortable questions.

Mr Clinton's decision to pardon MarcRich will probably do more lastingdamageto his reputation than his tryst with MonicaLewinsky. The Lewinsky affair producedmillions ofClinton supporters, who thoughthe was being persecuted over a private mat­ter. But even his most sycophantic bag­handlers have failed to come forward tode­fend the pardon ofthe fugitive financier.

Roger .Adams.rhc Justice Departmentofficial in charge of reviewing pardon appli­cations, has told the Senate Judiciary Com­mittee that "none ·of ·the.·regular proce­dures ... were followed" in -Mr Clinton'spardons ofMr Rich and his partner PincusGreen; The .House Govemmcnt ReformCommittee has issued subpoenas intendedto uncover any possible links between con­tributions to. various Clinton "causes (par­ticularlyby Mr Rich's former wife, Denise)and the pardon. Mr Clinton promises tOCQ':'operate with any "appropriate" inquiry.

'Withthe continuing scandals beginningtoaffect the ex-president's earning power(UBS warburg.has quietly scotched plans tohire him to speak at an investmentconfer­ence in April),MrClintonis scramblingto re­pair his reputation. He has not only returneda small treasure chest offurniture and fineryto the White House.•He may also move his

futureI>r~sidential office .1.. midtownManhattan totheheartofHa lem.

This last move suggests lhat the formerpresident has not entirely lolt his touch. MrClinton was greeted by a hu~e crowd shout­ing "We love you" when he'~isitedHarlemthis week. Harlem is .. an adt~rtisement forone ofMrClinton's best policies: creatingeconomic empowermentzones to revivede­caying bits of America's inher cities. Andblacks have always been clinton loyalists,growing even more enthusihstic when thewhite establishment turns aJainst him.

Mr Clinton still has to cu1a deal with thecity's Republican mayor, IRudy Giuliani(who once prosecuted Mr Rith), to persuadehim to relinquish a lease ob behalf of thecity's child-welfare agencY; But Harlemcould be an ideal base for Nir Clinton's at­tempts to rehabilitate himself. It would beespecially handy ifhe were tfHun fur mayorof New York. ~

Some of his critics maybe in danger ofoverplaying their hands. Thill of impeachingthe ex-president could reviv! suspicions of a"vast right-wing conspiracy!" (George Bushhas been careful to insist tfuat "it's time tomove on.") And some of thebash-and-carrycharges have been exaggeraled. Borsheim's,the store at the heart of Giftgate;denies anallegation that Hillary Clintdn set up a secretregistry of goodies. All the pther living ex­presidents helped themselves to some "per­sonal" effects from the WblteHouse"-andall live pretty comfortably. ~onald Reagan(whoonce made gam for two ao-minute lee­tures injapan) let some rich friends buy hima $2.smhouse in BelAir. i···

So far it still looks as if IMr Clinton caneasilysurvive a fewquestiorisabour his tastefor White House loot. Butthe MarcRich par~don looks dodgier by the dAy. That will testeven MrClinton's powers 01recuperation.

THE E<;:ONOM1SiFEBRUARY 17TH 20D1

------------------------------'--"

Pakistan's banks have four months to tum Islamic

Islamic banking

Forced devotion

borrowers and depositors·may choose be­tween conventional and Islamic banks. AI..:.though the first Islamic banks opened only25 yearsago,they havemultiplied.Therearenow about,170 Islamicfinancial institutionsworldwide-managing over $150 billion offunds. In recent: years, conventional bankssuch as HSBC and Citibankhave started of­feringIslamic financialservices.

Instead.of paying.interest on. depositsand charging it on·loans,Islamicbanksairnto enter into profit-and 'loss-sharing agree­merits with depositors and borrowersUn­der mudarabtl~ for instance, a bank willgive ,money to a borrower 'on· the under­standing that it will later share the resultinggains accordingto a ratio agreed upon be'­forehand. The bank's depositors will thentakea shareof the bank's profitson itsmud"arabah and other contracts.jnstead of re­ceiving fixedinterest.

SomeIslamicbankersclaimthat thissys-

sayitisan about-face.MsVieirasaysshewassimplyclarifying their misunderstandingofher firstannouncement,which saysearlyre'­tirement can be granted,provided the regu­latordeemsthat the fund can pay forit.

Shortly beforethis rowtherewasyetan­other, over a ban on' pension schemesputting money into investment funds thatchargedperformance-basedfees.Again, thepensionsbossesprotested,and a freshregu-

, lation was issued that seemedto counter­mand the original. MsVieira says it was an,..other financial·' regulator, the NationalMonetary Council, that put out the firstregulation; she realised they had erred, andissued another to overrule it. Performancefees are now acceptableonly so long astheinvestment fund outperforms the yield' ongovernment. bonds, which ' are currentlyaround 15%~Regulatois suspectthat sornein­vestment funds have bribed pension-fundbosses.in.return for over-generous perfor­mancefees.

Thepension-fund bossescomplain thatMs.vieire's edicts.heavy-handed and inco­herent, actuallydiscourage companies fromsetting up schemes. -Irr. principle, they areperhaps entitled to be sensitiveto'this pro­blem:Braziliangovernmentshavetradition':'ally suffered from,legislative incontinence,issuinga constant stream of ill-considered

.and badlydrafted lawsand rules.Inpractice,years of slack-supervision; in which pen­sions problems have mounted, give MsVieira every reasonto act Apity that com­munication between herand the funds hasbrokendown.

A pension that smells like these?

ventures that have bombed. Byher reckon­ing, merelyto Value pension-fund invest­ments at book value would mean an injec­tion of 9 billion reais ($+5billion) to meetfutureobligations.

Thebiggestfuss has been over the regu­later's announcement last month that theminimum retirement age'will be raised,instages, from55 t065(Brazilians arenow livinglonger than they used to).The funds com"plained that the move would stop compa­rues-that. needed to' restructurefrom beingable to offer early retirementto a greyingworkforce. The regulator responded byputting out a further instruction. Thefunds

W HEN Pakistan's Supreme Court ruled.: . at the end ofr999that Islamic bankingmethods had to be used from July ist thisyear, most bankers assumed .that nothingmuch would change. This is not the firsttime,afterall,that Pakistanhas triedtointro­duceanIslamic-bankingsystem.

Now,however,it appears that the high"est figures in the ·land, .including PervezMusharraf, the country's military ruler, aswell'as Shaukat Aziz, the finance minister,arecommitted to the idea.Pakistanibankersfacethe awesometask of completelytrans­forming the way in which they do busi­ness-all in littlemorethan fourmonths.

The Koran'. clearly.condemns interest,which iscalledriba inArabic.asexploitativeand unjust. Butof the world'sIslamiccoun­tries,only Iran and Sudanhaveimposed in­terest-freebanking on their populations. Inmost of the places where Islamic bankingflourishes, such.' as Malaysia. and Kuwait,

All shook up

FINANCEAND ECONOMICSPensions in Brazil

SAO PAULO

T.WO of Brazil's chronic economic pro­blems: are that its people do not-save

enoughfor theiroldage,and that itscompa­nies struggle to raise long-term financing.One solution to both is to get more firms tosetup pension schemesfor their employeesto which.bothfirmsand workerscontribute:the employees.would have an. attractivemeansof saving for retirement; and thecon...tributions would provide the Brazilianecon­amy with 'a growing .source of long-termfunding.

Though Brazil's pension funds havegrown steadilyin recent years,they arestillverysmallinrelationto theeconomy,under15% ofonr.The greatbulkoffinns stilllackapension.scheme; The government-wants toboost the growthofpension funds as part ofits. plans to develop the country'sstuntedcapital markets. It is trying to update thepensions-law in.waysthat would encouragemore·pension'funds.to be' set up.improvetransparency and toughen the penaltiesformismanagementand fraud,

Yet rows within .the governing coalitionmean thattheproposals are stalled in Con"gress, alongwith many other needed finan­cialreforms.So in.themeantime,the govern­ment is .trying .to scrt ··out.' scandals' andfinancialproblemsthat havelongfesteredatexistingpensionfunds.LastNovemberitap­pointedSolangeVieira,a younghigh-flyerinthe civil:service,as the chief-pension-fundregulator. There has since.been.a flurry ofrule changes-as well as an unprecedentedamount of intervention in theaffairs ofthepensionfunds.

Most recently;'. on February ··7th,,·MsVieira fined eight funds for exceeding thelimitsfor investingin the sharesor bonds ofany particular company. On the same dayshe askedpublicprosecutorsto file criminalchargesagainstTransbrasil, an airline, whichhas been collecting pension contributionsfrom its staff but not paying them into itsfund.Theproblemsareworstat the pensionfunds of publicly owned companies, longprone to politicalmeddlingand corruption.Thesefunds have a history of blowinghugesums on property.speculation .. and failedbusinessventures. .

Sharpeningthe funds' regulationseemsreasonable. All the same, the funds' bossesare furious. with Ms Vieira, whom they ac­cuse of making hasty and ill-thought-outdecisions. Instead of building public confi­dence in pension schemes,they say,sheun~dennines trust by exaggerating the scaleofthe problems.Ms Vieira, in turn.complainsof funds' reluctance to admit to the short"comings: they should, for instance, beputting more realistic. values on property

76· THE ECONOMIST FEBRUARY 17TH 2001

UNITED STATES

make itsold businesses, particularlymanu­facturing, much moreprodubive. Chicago'sMayorRichard Daley revels~"n the fact thatone ineverysixjobsin theci -isinmanufac­turing.Manufacturing isnea jly twiceas im­portant to the 'mid-westecohomy as it is tothe nationalone.; 1,

Thedrivingforce has beenthe car busi­ness.Butlastyear salesfigurJs dived forDe­trait and inventoriesstatted!tb climb.Localsuppliers to· 'Ford, General Motors andDaimlerf.hrysler have all felt the conse­quences: Tenneco Automotive, .with itsheadquarters in affluent L:lke Forest, justnorth of Chicago, recently ahnounced thatitsNorthAmericanrevenueswere11% downill thefourth,quarteroflast~earcomparedwith a year earlier.The'cotrlpany'schief fi­nancial officer, Mark Mcdollum, expectsthis tobe another difficult ye\,r, eventhoughthe company began to redirce costs early,cuttingjobsin sales,marketiigand adminis­tration as early as lastSep{mber. Several

The mid-west's economy

~~o:~~,~.:.:~~,from '00 country' ,~JU SUALLY, Chicagolovesto proclaimthe

architectural glory of its soaring sky­scrapers. Now,it looksglumlyat the ratherbanal office blockwhich servesas the head­quarters ofMontgomerywardtn Decem­ber, after 128 years, the retailer announcedthat it was filing for bankruptcy. Some450members of its head-office staff lost theirjobs immediately.The 28,000 people it em­ployed in its shops and distribution systemawaittheir fate.

I,n retrospect.Montgomery Ward'smis­takemayhave been to assulYle that retailingwas an art that only people who lived nearLake Michigan could understand. It spent somu~htimecompetingwith itsfellowCl1ica~

goan,Sears Roebuck,that both failed to no­ticethe growthof wal-Mart. Butthe coup degrace wasdelivere~ by,thef\lnerica,rlecon­0Oly:sluggish Christmassalesgetthe blameforMontgomeryWard'sdemise.

Theend of Montgomery.ward isa harshreminder to the mid-west •that America'scurrent,economic problems are notjust amatterof plungingtechnologysharesout inCalifornia. TheChicagoFed'sfigures show asharp ,rise •in unemployment' insuranceclaimsin December(seechart).Energy costshave alsohit hard: some mid-westerners'heatingbillshavenearlydoubled in a year.

Forallthis,theregionseemsprettyconfi­dent that the economy can still bring off asoft landing. Once dismissed as the '~rust~

belt", .the mid-west has reinvented itselfover the pastdecade.That includesbringingin new high-techbusinesses(someofwhicharenow in trouble;two other bigrecentjob­cutters are' Lucent and Motorola). But the

. mid-west's real-achievement has' been- to

First of her kind, plus twins

Chuck Hunt-as well as using a state heli­copter for her personal use and accepting alargesalary for a teachingjob that took littleeffort, Someof these things,done by a man,might have been more easily forgiven. ButMs Swift would not apologise, and "QueenJane"wasborn.

Sheis, to be sure, only 35years old. Shecomes from-western Massachusetts, wherepeople are pretty blunt. Shehas admitted tofeeling out ofplacein the male,Irish-Catho­lic,Boston-eentredState House.MrCelluccichoseher ashisrunning-mate twoyearsago,partly inorder toattractyoungfemalevoters.Shealsohappened tobe pregnantduringthecampaign,which won lots of publicityandhelped to keepthecampaigncivilised.

MsSwift's new pregnancycouldbuy hera little time. The state's legislators will notwant to look as if they are bullyingher, ar­gues.Oeri Denterlein.a Democraticsympa­thiser,Alot of femalevotersmay like a gov­ernor who worksbut also has a family life;MsDenterleinhas helped toorganisebreak­fasts for.women from both the big partieswho, she says, found the RepublicanMsSwift more impressive than they had ex­pected. Butfew ordinary voters will get thechance to breakfast with Queen Jane. Andtherewillbe limits to the chivalryextendedby the male-dominated StateHouse.

Inshort,MsSwift has a chance,but not aparticularly big one. Much will depend onwhether she has learned from her mistakes.Andthereisalwaysachancethat the Demo­cratswho willwant to challengeher in nextyear's electionwill get soinvolved in fightswith eachother that theywillnothavemuchtimetoattackthe ladygovernor.

Still, Ms Swift takes office under criticaleyes."Ldon'tknow that there willbea hugemarginoferror," MsDenterleinsays.Historyis also not auspicious. The best-knownQueen Jane-the wretched Lady JaneGrey-lasted a merenine dayson thethronebefore the nobles sent her packing, andeventuallyto herexecution.

34 THE ECONOMIST!FE8RUARY 17TH ZOOl

FINANCE AND ECONOMICS

.,

Madison Avenue Bear

the marketsfromtimeto timeas the "moral­hazard play".) Yet concerns about moralhazard can he taken toofar.Fewof those in­volvedwhen a country finds itselfin finan­cial crisis escape without penalty: ask ex­PresidentSuhartoofIndonesia.Second,oncea crisis strikes, moral hazard seems rathertheoretical. Suddenly, what matters are theinternational-economic or political conse­quences of failingto respond;

Thechances are that the Bushteam willbe very interested in the report of the Meltzer

NEW YORK

As MILLIONS of CNBC junkies, will.t"\.agree, nothing is quite so thrillingaswatching R manicbull-run broadcast livefrom the floor of the New York StockEx­change.As for the stock-tippersand day­traders that inhabited the dozens of fi­nancial.websites, they were geniusesall,And who couldresist leaving the browser.window open alldayto watch hisportfo­lioclimb?

Seeing it go the other way isjust toodepressing. Traffic at Bloomberg.com isdownalmost45% from ayear ago,accord­ing-to Media Metrixtraffic at SiliconIn­vestorhas alsofallenoffacliff, whileMar­ketWatch and creefn.com allof a.suddenseeno growth; Last-week Motley Fool,an­other-leading financialwebsite, laidoffIISpeople, a third of its staff. It joins The­Street.com, Bulldogkesearch, RedHerringand Inc.comin cuttingjobs recently.Evenat CNBC,.viewership '.' has .... peaked..Thenumberofviewers last monthwas almostexactlywhat it had been last March,ac­cordingtoNielsen, a ratingsfirm.

No.onefollowing the number ofbro­keragetradesconducted onlinewould besurprised-Behavieural economics pre­dicts.that, people: trade' less 'in.bear mar­

-kets-",-and:indeedAmeritrade;oneonline

You're,shortin~·us?

74

Commission-published last March. whichrecommended a dramatic scalingback ofthe activities of both the IMF and the Bank.The commission, sponsored by Congresshut headed by AllanMeltzer, an economistat Carnegie MellonUniversity, wants to seetheIMF concentrate mainly on short-termcrises in emerging-market economies, pro­viding funds only to solvent governmentsthat meet .pre-set conditions. The WorldBank would change its name to the WorldDevelopment Agency,underlining a more

firm; has: s~en .the .average num1:>er oftrades p~r.· accountfall from morethanfoura monthlast l\1arch, near thepeak oftheNasdaq market.to below twol9day.Thelesspeopletrade,thelessfinancialinc

. formation they seek, and the less inter~ested they are inwatching how their betshavefared.

Thefinancialmediaget hit esreci~llyhard by thesetrends.Notonlydoes a bearmarket hurt viewership, it also wallopstheir main advertisers: brokerage houses,investment banks and financial-in­formation providers. TheStreet.com,Jorinstance, saw year-on-year . revenuegrowth fall from nearly 250% to 23% in itsmost recent quarter,which was stillone ofthe best performances in itssector.Forthedotcoms, which are facingtheir own capi­tal-raising.problems.. the experience .isparticularly painful. Now all are lookingfor a firmer footing. Lastmonth Terra Ly­cos, a portal, bought RagingBull, andcxxfn.com isbeing restructured aspart'ofa total revamp of its parent company, .Meanwhile, Motley Fool is pushing itspersonal-finance side, which has kept itstraffic growing whilerivals' trafficshrinks.Bullmarketsmaycomeand go.Mortgagesand taxes are forever.

tightlyfocusedrolein helpingtheverypoor­est countries, Overall.the commission's aimisto render the institutions more effective,toreduce overlap and to ensure that policy rec­ommendations do not conflict.

There ismuch to commend in the report.Sharper focusis aflaitn.thatb()Jh institt;~tionsshare-though to j\1dgeJrom recent, well­publicisednavel-gazing at the WorldBank,there is a long way·to.go.0n.eattthoritativewatcher of the instituti()l1s, ]V10rrisGold­stein,()f,the Institute for Iflt~l11,ati(JnC:11Ef9­

nomics,thiflks that the !\Ilel~~Tr~p()~tg9~stoo far,thou~hheagrees in.~re~entpaper.()nthe IMP'S structural polici~st4at-"The 'Fundhas bitten off more-in bothscope and de­tail~than,itsmelTIbers can chew." Hie en­dorses Mr.Kohler's'.' aim of ending missioncreep, with the Fund constantly extendingthe scopeofitsactivities., . In the end.the new American team maybemore pragmatic than somefear, or othershope. Mr Dam, apparently the deputy­secretary-In-waiting is a .scholarly fellow,no wild-eyed zealot, the author of well-re­garded volumes on inJemational economicpolicy. He is' experienced. in the ways ofWashington and no stranger to the realities'of power. Nor has Mr Taylor's.na[~esetalarmsringing at the IMF. Hetoo ishighlyre­spected amongtheeconomists there.

Pragmatism goes with the:territory. It ispolitically impossibleto stand aloofand in­sist that national governments sort out theirown troubleswhen thestabilityofthe wholeinternational financial system is at stake, orwhen America's vital interests are threat­ened. And by that stageit isno use saying-'­however true it may be-sthatthe crisisshould not havehappened in the firstplace.Mr O'Neill; the treasury secretary, struck achord even with some inside, the IMP whenhe questionedthe West's bailoutofRuissia inI99KButwouldthe administration let dis­taste for corruptgirssianfinanciers dictate apolicy where profound geopolitical conse­quences are atissuez

,The main threat to the institutions prob­ably comes not from the WhiteHouseor theTreasurybut fromCapitolHill. Congress haslittleregardfor the Fund and the Bank. Get­tingcongressional approval for fresh capitalinjections for the IMF is always a painfullylong process; the Meltzer Commissionwaspart of the price that Congress exacted forauthorisingan additional $18billionfor theFund in 1998.Closing the Bankand the IMF isseen as a serious option by some of the an­griercriticson the Hill.

They overlooksomething Often, thosebeleaguered. institutions have' enabledAmerica to protect its interests while sharingthe burden ofcostwith others.Adam Posen,at the Institute for International Economics,argues that the real moral-hazard problemliesnot with the Bankand the Fundbut withAmericanforeign policyitself.---------------"

THE ECONOMIST. FEBRUARY '17TH 2001

Wyoming's foot on the gas

wi.~_,-J-_both to theslowdownand to~ny recovery.

Themostconfusing sign'llofall,though,seemstobe the labour market.Unlikeprevi­ous downturns, this one h~s seen unem­ployment remain,so far, relatively low:thenational rate roseonly slightly inJanuary to4-2% (thoughit is higherin sobe partsof themid-west,and currentlystands at 4.8% in Il­linois). Brachs, aconfectionerycompany,re­centlytook Chicagoby surprisewhen it an­nounced the closureof its localfactory. ButBillStraussoftheChicagoFedpointsoutthatjob losses in manufacturingl are not a newphenomenon. Many layoffl, such as Ten­neco Automotive's cutbacIJ in marketing,wouldhavehappened anyviayascorporaterestructuring ploughson. I

Inshort,themid-west'si:fudustrialists areno surer than the nation'secbnomists.or thepoliticiansin Washington whether Americais headingfor a recession. tle real test,sus­pects Mr Gidwitz, will be when "the sleep­lessnights come, the red in~ starts to flow,and the bankscomeknockin~on thedoor.".

,

2000. Thelargest privateemployerin Wyo­ming is Wal-Mart. Many oflhe state's oiland gasjobs tend to be te;,jporary ones,and its workers are ageing fast. A recentstate report gloomily preditted that themain labour force (aged 25-4l4), which hasalready declined from 148,~46 in 1990 to134,480 in 1998, will leveloff in 2008 at amere126,560 persons. I

A particular worry is tht brain drain.AlbanyCounty,home of thelUniversity ofWyoming, lost 5.6% of its po~ulation dur­ingthe 1990S, a reduction shared by otheruniversity towns in the PlaidS states,suchas Grand Forks in North Ddkota, Vermil­lion in South Dakota and Manhattan inKansas. Wyoming's teacherslrank aand inthe country in the pay theyleam,and tbestate'sonly four-year college, the Univer­sityofWyoming, hasa totalehdowmentof$141m.The University of Tekas at Austin,alsowith its rootsingasand bil moneybutmore recently enriched byJfsoftware andcomputermoney,hasanen owmentofszbillionfromprivatedonationsalone.

in trust funds during a decadeof highen­ergypricesfrom1973 to1983.

Thecurrentflushofcashcomesmostlyfrom soaring, "severance' tax" 'collectionson. oiland gasproduction,whichjumpedfrom$69m in 1998 to an expected$t57m in2002. Roughly 1.5% of all severance taxesgoesintoa permanent trustfund.Lastyearthis put $1t7m-worth of interest into tbestate'sgeneral fund.

What to do with the unexpected in­come hasdivided the politicians.Poorfor

most of its111 years,Wyoming loosensthe purse-strings reluctantly. It re­members with dismay"that the

$800m surplus it had in the early1980shad allbeenspentwithin threeyears.' In his state-of-the-state ad­dress; GovernorJim Geringer re­minded hisaudienceof a bumper-sticker, commonly seen on Wyo­ming vehicles in the 1980s: "DearGod,please give us one more

boom. This time we won'tscrewitup."

Yet the pressure to makeup for 15 thin years is strong.For all its wonderful coun­tryside, Wyoming is poor atcreatingthe sortof jobs thatmight persuade younger,thrustingtypestomoveto the

state.ThiswastheonlyRockyMoun­tain state' to have less than' a '10%population expansion from 1990 to

monetaryeasing.Why is this downturn so difficult to

read? Glohalisation provides one answer.The downturn in Tenneco Automotive'sAmerican business(moretban halfof theto­tal)bas been partly offsetby better salesinLatin: America and Europe. Even amongAmerican customers, thedownturn seemstohe patchy, Giddings &. Lewis, a machinetoolmakerbased in Fonddu Lac, Wisconsin,saysthat many bigmanufacturersare hold­ing'back on capital-equipment'purchases.Butthe firm'schiefexecutive, StephenPeter­son, points to cheeringsigns of a growth inorders from the energyindustryand in or­dersforportablegeneratingequipment fromdotcomcompanies.

Flexibility isanotherconfusingfactor. Ascompanies get leaner and betterinfonned,theyare much quickerto take action.WhenDaimlerChrysler decided on productioncutsforsomemodelsinJanuary,it tookTen­neco Automotive just one day to work outwhat the implications would be for.its busi­ness.MrGidwitzpredictsthat thedowntumwill be much more v-shaped than before,

SHERID."N

A SPOLITICIANS in the industrial mid­fi.west ponder a bout of economic'so­briety; their counterparts in a RockyMountain state are at last pouring out thechampagne.Withitsnative sonDickChe­ney in the vice-president's house,and nat­ural-gaspricesshatteringrecords, the stateofWyoming isflying high,

The economic boom of the 1990Sstopped cold at' the Wyoming border.Whileits neighbours, especiallyColoradoand Utah,werethriving, Wyoming sawtheslowest economic growth of anyRocky Mountain state.Before the re­cent upswing in energyprices, thesrate govemmeritexpected a bud­get shortfallof $t83rn. Butnow ithas a glowing $700m surplus,thanks mostly to a quintuplingofnatural-gaspricesinthe pasttwovears,

The Cowboy Stateis usedto beingout of step.ForWyo­ming, the Great, Depressionstarted in 1920; and left its gen­eral fund overdrawn by sim, In1968, after the United States had en­joyed a long economic' expansion,the state's then governor, StanleyHathaway,discovered that Wyominghad only $80 in the general fund.Morerecently, Wyoming would havefound itselfbrokeby t990, but forpay­mentsfrom the' federal governmentand prodigious sums squirrelled'away

UNITED· STATES

factories havebeen"flexing down",sendingworkershome without payor makingthemtakeholidays.

Yet MrMcCollumisnot despondent.Hearguesthat a downturn wasinevitableafterthe boom of the.late ;990S: indeed, he says,there was almosta senseof reliefwhen it fi­nally came.Jim Gidwitz, the boss of Conti­nental Materials Corporation,a family-runfirm in downtown Chicago, takes broadlythe same'line.Asyet,there-has been Only amodest softening,in the sectors in whichContillental Materialsoperates (principallyconstructionand the manufacture of heat­ers}.But he regardedthe Fed's cut in interestratesonJ~rluarY3rd a~_0rrrinO\.ls.

Over atSears, the chieffimlncialofficer,JeffBoyer, blames energypricesand inter­est-raterisesduring the firsthalfof 2000 forthe slowdown in his company's clothingsalestowardstheend oftheyear.Sears reck­onsthat;it,takes sixmonthsfor interest-ratechanges'telfeed,through into its customers'spendingpatterns,sO/Vlr Boyerishopingfora correspondingpick-up in the second halfof this year in tbe wake of the Fed's recent

:J8 ECONOMIS~fEBRUARY 17TH aoor

ONLINE EDUCATION

been a commercialfailure. "Peopleare un­willingto subscribe online for the latest in­formation from anywhere in the world,"mourns MrHume."Instead,they willgoto alectureand pay much, much more.Wehavean enormous revenuestream from our fac-ultygivinglectures,' .

Theone area where the Internet isaboutto save the universitymoneyisin ·purchas­ing,James-Davis,who came to UCLA-a fewmonths agoto reorganisethe way thatit usesinformation technology; has been makingitpossibleto combine online the institution'spurchases of everythingfrom computers topencils,giving itmorebuyingmuscle.

Many of the other-uses of informationtechnology on the:UGLA -campus .neithersavemoney norvisibly.enhance productiv­ity.They simply raise the quality of the.ex­perience.One exampleis the web-sitesthatnow existfor almost all yooo or so under­graduatecourses,About 55-60% of them notonly supply lecture notes; they also allowstudents totaketests online and to seetheirresults.AnotherexampleisMy.uct.Aj an in­house"portal", Students can useit to searchfor advice.such asthe entry requirementsforgraduateschool.

Given -the University of California'ssprawlingsize,'it is-surprising that its ninecampuses havenotcombined forces more,usingtheInternet as a bond. Themain areawherethey haveactedjointly isin settingupthe CaliforniaDigital Library, which driveshard bargainswith the publishersofperiod-

claim to have studied there:, car damage' Gluniversity's reputation.ifthose students donot receive the levelof teachingthat the uni­versity'sname wasbuilton.

Prominent universities have thereforetended to band together for support in theearlystagesofexploring e-learning, and theyhave often launched their efforts under.names other than their own,' even thoughthey have some of the strongest brands ineducation. Thebusiness schoolsof Colum­bia, in New York, the University of Chicago,the London School of Economics, Stanfordin Californiaand Carnegie!V1ellon in Pitts­burgh,forexample,have teamed up behindCardean University, an earlyeffortat an on­line institution for tertiary education.Car­dean: offers,' complete. courses, mostly' inbusiness subjects, aimed at people workingfull-timewho want to learn inthe evenings,at weekends or whenever; It plans to offerfulldegreeseventually.

There are more than 250 firms eager tohelp established universities to go:online.Thesefirmsbuild the Internet infrastructureand manage the electronic delivery ofclasses. Cardean,forexample,is the work ofurcext, an lllinoiscompanythatgrewout ofKnowledge Universe, an educationbusinessstarted byLarryEllison, the CEO of Oracle,and Michael Milken, the developer ofthejunk bond marketwho·spent24,months,injail for fraud-Several prominent businessschools-cincluding Wharton at-the Univer­sityof Pennsylvania, FuquaatDuke Univer-

predominate. Butsomehope to findanau­dience for less.utilitarian subjects 'amongadults who feel that they missedsomeedu­cation when young.MarkTaylor, a sociolo­gistat Williams College in Massachusetts, isleadinganefforttooffercoursesin theliberalarts.Taughtby professorsfrom top universi­ties-most of them so far irithe eastern Un­ited States, such as Wellesley, Brown andAmherst-they are marketed under thename GlobalEducationNetwork(GEN}. TheGEN project is funded by Herbert Allen, arichalumnus ofWilliams, and itdoesnotyetofferanycompletecourses, merelyfreesnip­pets of lectures, But ifwas founded on thebeliefthat thereisa potential marketforvig­orousonline intellectual stimulation.

Boxmind, with anumber ofOxfordUni­versityacademics on its board, is anothersuch .ambitious project By,putting "';star':'academicsat the centreofa stageawayfromtheir home institutions, websitessuch asGEN and Boxmind threaten (ifthey takeoff)to raisethe tensionbetweenuniversitiesandtheir facultyover the ownership of intellec­tual property. With e-learningsitesofferingstudents accesstothe best teacherswithouthavingto call in at theirInstitutional home;there isa danger that the universities" aca­demicsuperstarsmay choosetogosolo.

The mouse atemyhomeworkThereis nothing new about the useoftech':'nology as a teaching tool in s~hool~. Ma­chines (from record-players and overhead

;">M'_ 4i.- ••.;.... ...,. :A.-•......~"::'~~',~,~ ?

icalsto licensethe useof theirelectronicver­sions.Buteven here,- no money is saved:theuniversitystillbuys paper copies,"Paper,isso much 'more permanent than bits andbytes,"explains Gloriawerner, the univer­sity'slibrarian.

The Internet ,has undoubtedly.encour­aged universities to reach out beyond theirown campuses'in order to offermore/'dis­tancelearning", and atgreaterdistances.TheUniversity of Phoenix,setup in1989 toteachadults through a combination of old-fash­ioned distancelearningand eveningclasses,is incorporating'more and more e-learninginto its courses,which are mostly taken bypeoplewith full-timejobs.Butthe extensionof aninstitution's brand is not without risk.Increasing.',' the: number-of students, who

- 70

sity; and INSEAD, near Parise-have workedwith Pensare, a company based in Sunny­vale,California, to put their materialonline.A host of other firms,includingBlackboard,Campus Pipeline,eCollegeand ",,;ebcT,offerdifferentplatformsforputting coursemate­rialonthe Internetand forbuildingastudentcommunity aroundthe material.'

Somefirms have decided not.to be.theinvisibleforcebehind the e-learningeffortsof established universities, butrather to be­comebrands known: in their ownright asaplacef()r studentsto findcourses,Sometimesthese are'simply portals: that: consolidatecourse'information.from other institutions,such asHungry Minds.Others offercoursesof theirown: .

Business and .other vocational subjects

projectors'to televisions) ',have'.long,beenused to makelessonsmorevividand engag­ing: Thefirstcomputersinclass weretreatedas 'noveltieson which children'couldlookthings up in encyclopediasand play arith­meticalgameson multi-media CD·:-ROMS.

The co-aoxc hasnow been-largelyre­placed by networked databases as therepositoryofleaming material,but researchcontinues into ·howto impart lessons.thattake advantage of acomputer's capacity topresent moving imagesand sounds as wellas-text, and theircapacity to respondto auser's input Pearson's Mrs Scardinothinksthat the bigadvantageofonlineeducation isthat it personalises the learningexperience,allowing each student to moveat hisor herown paceand-inhisor herown way.

THE ECONOMIST FEBfl,UARY I'7TH 2001-

THE AMERICAS

President Andres Pastrana and the left-wing FARe rebels have been talking.There's a long way to go yet

A hug in the Colombian jungle

Marulanda gets eight more months

ported by .landowners,buJiness .interestsand drug traffickers.Some arlny officerscol­lude with it. It is believediqsome quartersthat,.if the Aucbecomes too isolatedasa re-sult of an-anti-paramilitary drive,it willshrug off the shackles of itsbackers and de­velopitsown bloodymomentum,

In the first sign that the a'rmycommandrecognises the politicalcostsbfbeing associ­ated with such unsav.oury ~llies, a militarytribunalon Februaryizth co1victeda formerarmy generalin.a human-rights case.Gen­eral Jaime Uscategui was gi~en a 40-tnonthsentencefor failing to prevent a massacreofcivilians by paramilitaries ip the southerntownofMapiripanin icc-. I

The picture of a dovish nresident pulledin opposite directions by tbugs on both rightand leftisnotentirelyaccurate.Thearmy,forexample,has becomestrongbr sinceMrPas­

trana came to dower. It is true,though, that h~ is under greatpressuretoproduceresults,andfew analysts &elieve he canachievethem. ·1

Parallels ar~ already beingdrawn betweeh Mr Pastranaand Israel's fonrer prime min­ister, Ehud Barak,whose searchfor peace eventually alienatedan exasperated public andplayed into t~e hands of ahawkish succe!sor. In Colom­bia, Alvaro Uril1e is the name towatch. A right-Wingerwho dis­plays far less tblerance for theFARe than M~.Pastrana, hishardline viewr have earnedhim some support as a possiblecandidate for lhe presidentialelection in20o~

But even i~'a deal with theFARC proves e usive; Mr Pas­tranamay ge. a consolationprize. The,government recently

1St. Most of that was in areas controlled by announced a ''pre-accordl with the left­right-wing pararnilitaries, The next stage of wing National Liberation Almy (ELN) to setspraying will be in FARc-eontrolled areas. up another.ismaller demil~arised zone forThe aim is to cut the rxnc's drug income and talks.TheELN will be allowed toconvene in aforce it to take the peace efforts more seri- 40o,ooo-hectare area near ~he oil town ofously. But tensions may well riseagain. Barrancabermejaas long a~it promises to

The biggest stumbling-block to peace stop kidnapping and intimiSating localpeo­maybe the paramilitanes, who terrorise and ple,who are wearyofviolerlce.murder anyone suspected of supporting the An incessantparamilitary campaign hasguerrillas. It was the government's failure to pushed themx into a comb;, adding to therein in the increasingly powerful Self-de- group's enthusiasm to neg6tiate. It may befence Union of Colombia (AUC) that caused here that Mr Pastrana's beSthopes ofendingthe FARc~or so it said-e-tcbreak off talks last his term witha peace deal ie.He can leaveNovember. Carlos Castafio,a warlord his successor, whoever: he ay be, to dealwhose operation fans out from a mountain with the FARc-..:eitheratthb negotiating ta­lair in northern Colombia, has built the AUC ble,or on the battlefield. Iinto a force of as many as 8,000 men sup- .: . f - •

~_-c-c-,-c--c--c--c--c--c-C"T-,"".o;t~·- .,I

lombia, to which the United States iscontributing $1 billion, scaled down in fa­vour of programmes to wean poor farmersoff growing coca. But the government hasbeen pushing ahead withfumigation in thesouthern jungle province of _Putumayo,spraying some 25,000 hectares (nearly ioosquare miles}of cocaplantationsfr0n'l theair between Decemberroth and February

,,;..,:...,,-

40

BOGOTA

"SLEEPING with the enemy", the presscalled it.Lookingslightlylost ina sea of

rebels toting guns, there was Andres Pas­trana last week, photographed during twodays ofintensive talks in the sweltering vil­lage ofLos Pozos. He had dared to visit thepiece ofsouthern jungle, the size of Switzer­land, that iscontrolled by Colombia's largestguerrilla group, the Revolutionary ArmedForces of Colombia '(FARC).After a period in which Colom­bia's efforts to, achieve peacehad swayed on the brink ofcol­lapse, .President Pastrana andthe rebel leader, Manuel Maru­landa, were talking again.

Mr Pastrana's audacity wasroundly applauded, but therewas less enthusiasm for whathe managed to achieve. Theup­shot of the talks, on February9th, was a 13-point agreementrich in well-meaning but vaguesuggestions. 'The firmest pointwas that the FARC. agreed to re­start peace talks, and at a fasterpace. In return, MrPastrana ex­tended for eight months theFARC'S control over its enclave,which. was granted two yearsago to get peace efforts going.

A subcommittee of the ne­gotiating team will be set up toprevent the breakdown ofne­gotiations in the future, and.there was talk ofestablishing a group of observers, perhapsincluding foreigners, to ensure that the zonewas used only for talks and not forsuch ac­tivities as under-age troop recruitment.An­other subcommittee will look at ways to re­duce the intensity of the conflict, especiallythe use of improvised gas-cylinder mortars.Lastweekend jorge Bricefio, the FARc'smili­tary commander, admitted for the first timethat such weapons have killed civilians.andsaid that the' FARcwas "investigating thepossibility"of using such weapons onlyagainst militarytargets.

Then thereisPlan Colombiawhich isdesigned to, eradicate cocaine production.'TheFARC wants the military side of'Plan Co-

Man on the run

" ,,'

Tony White has managed to transform a sleepy sfientiiic.-iristruments:firm, into a genomicspowerhouse: That was the easy bit

1" A11TH hiseasymanner, shrewd senseofY V humour and slight southern drawl,Tony Whiteisa farcryfromthe popular per­ceptionthat a high-techexecutive shouldbeunpredictable and slightlypeculiar. Yet MrWhiteisheadofAppIera Corporation,whosetwo component businesses-Applied Bio­systems (ABI) and Celera-lead thegenomicsrevolution. He harbours an exceptionalam­bition: to build Applera's shareholder valueby industrialising modem biology.

WhenCelerawascreatedin 1998, itsgoalwas ambitious too: to sequence the humangenome in three years, becoming the"Bloomberg of biology" by selling access tothe information in a comprehensive, user­friendly database, This week, Celera pub­lished its version of the human genome se­quence (see page 79), completed 18 monthsearlierthan thedivision's presidentand chiefscientific guru,Craig Venter, had predicted.

Sofarmorethan 30institutionalcustomershavesubscribedtothe web-enableddatabasesinceit waslaunched.While stillnot inprofit, Celera's revenues in the year to the end ofJune 2000 were$42.7m. In spite of its losses, though, Celera'sshares have risenmore than threefold since the tracking stock was launched twoyearsago(seechart).

The key to Celera's success, according to Mr White, was theidea that the genomecould be crackedby usinga factory full ofautomated sequencingmachines and powerful computers,This isin stark contrast to the cottage industry of internationallabora­tories making up the rivalpublicly financed Human Genome Pro­ject, which spent years piecing a sequence together.

Even though the public project has criticised Celera's ap­proach, it has had to take on some of its tools in order to keep up.Chief among these is the world's most efficient gene sequencerwhich, conveniently enough for Applera, is made by ABI. WhenMr White first joined as head of the firm in 1995, ABI was sub­sumed in Perkin-Elmer Corporation, a struggling conglomeratemaking analytical instruments mainly for the slow-movingpetro­chemicals industry,Byfocusing iton biology instead,hebuilt it toa point where it has a market capitalisation of $15 billion. Sales inits last accounting year were $1.4 billion,and are expected to grow this year bymore than 20%.

According to Mr White, ABI'S closerelationship-with Celera is mutually ben­eficial. NotonlydoesCeleragainearlyac­cess to new equipment, but it can alsohelp shape the technology to its needs,And for its part, ABI has a convenienttestbed for its prototypes, as well as aready source of genetic information' toadd value to its equipment.

Racing to startAdding value, or rather making money, isMrWhite's forte. As he admits, science isnot his strongest suit. He comes from a

68

backgroundofsalesand managementat Bax­ter",Inte~ation~l> a-medical-devices ,~Ol~"pany.ThevisionofbuildingCeleraand lever­aging ABI'S technology was that of MichaelHunkapiller, headof ABI, and.MrVenter. MrWhite leaves the technical breakthroughs tosuch scielltificwizards. His jobis to make surethat theirgrand ideasmakegood'commercialsense, and to woo investors.

.Btltthere .arelimits to how much moneyhiscolllpanycanmakejustsellingtools or ge-:n()micsequenc~. .SoMrWhite.hasalreadystarted t()pur~1Je hig~ervall1e.btlsir1esses','In:N9yelllb~r,thecompan~. announced a,newl1:l0leclllar.diagllostics Vellture, ,combiningAJ;J.I'S technology \"lithCelera's g~netickrl0Y':-:

how to tackle early detection ofailments. Ap­plera 'also plans to extend its industrial ap-:proachrothebody's proteins, andto discoverhow they interact in human disease." ,,'

In thelongrun,genomics and proteomics willprobablytrans­form the pharmaceuticalbusiness, helping drug makers to de­velopbetterdrugsfasterand with fewerside-effects, 11Iat is whysuch firmshave been so keen to signdeals with genomics compa- .nies.Butrather than hand overits ideas,Celerahasdecided togetintothedrug-makingb\lsinessitself. Othercompanieshav~ hadasimilar idea: Millennium'pharmaceuticals 3 I1d 'Human GenomeSciences,two other American biotech companies with roots in ge­nomics, have already moved .intc drug development and .. havehome-grown products in clinical trials.

MrWhitereckonsthat Celerawillneed the restof this year toput its.pharmaceutical strategy inplace, decidi llg which areas totarget, such as cancer vaccines, and hiring more good people. AI,..;thoughthe firmis furbehind rivals suchas Millennium, MrWhiteis'confidentthatCelera can race ahead. The.company has goodscientists; canny managers, great technology. and more thansi.ibillionin the bank.

However, older pharmaceutical companies understand thechemistry ofcreating powerful drugs without. poisoning patients,testingthem in clinical trials, and getting them to market CeJleradoes not, Mr White's plans therefore include buying up bits ofother drug makers; hiring top executivescut loose by mergers in

the drug industry, and partneringwithotherswhen itcomestosellingthe goods.

Fewin the industry are s\!'prised byApplera'schangeoffack.but Illanydoubtwhether 1\1r White, for all his businessacumen, will be able to pull it off. Drugmaking sounds easy when youbreak itdown into its component .parts,but ·i~

takes time for the whole to gel, and Cel­era's past successis no guaral1tee ofits fU-:turein suchullcharte.d territory -,!virWhiteis keen to takehis company. iIl,aneVJ;di-:rection.But.as FranklinBerger;abiotechanalyst.atJ.P. MorganChase,points out,the finn mayfindthe bumpy roadofclin­ical drug development rather harder go­ingthan thesuper-highwayofgenomics,

THEECONOMIST FEBRUARY 17TH 2001

THE AMERICAS

he has contrived to nJtchIp a total of tenyears, on and off, in Yucatatb.'s seatofpowerby haggling with PRJpresid¢nts. He is fam­ous for handing out tholls~ndsofbicyclesand washing rnachilies,~upposedly oncredit; to loyal,supp<?rters. He is'a classic ex­ample of-the old-style regibnal strongmenwho flourished under: the' ~RI ami; thoughfew are quite'asblatant,he±ould se~ an un­comfortable precedent if He won a' show­downwith Mr Fox'sgovernjnent, .

On February isth, thelrederalgovem­ment had backed away frbm its threat-tosend in thepolice. Mr Cervha and his sup­porters have said they mal! accept a fourthelectoral council, formed'fuy 'some ·sort ofconsensus. The upshot for yucatan may bethe same; But for MrFoxit rould be a tacitadmission:thathe cannot y~tmake Mexico'slaws and institutions work dsthey should.

!

Less tolerant than they Took, . !

Boom bye-bye batty-boy -IPORT-Of-SPAIN

THIS week, on St Valentine's day, a ing those laws." In Trinid d, an ann­. • mass nude wedding took place at He- discrimination law has been carefullydonism Ill, a holiday resort in Jamaica. It crafted: to exclude sexualonentation, Awas touch andgo, "Indecent", thundered constitutional amendmentohtlawingdis­theoutraged mayorof'Spanish Town:"No crimination, including,thd,'sexual-ori­government should allow this type of be- - entation,kind,' was' unanim&uslypassedhaviour ina countryguided by Christian in Guyana las~month; but the presidentprinciples," It was "begging for the wrath will not sign it and itis likely10lapse.of God," said a prominent Pentecostal A handful of Caribbean countriesleader. • . . have had tochange Withotlt debate. On

Jamaica markets itselfas a free~and- january ist.in line v,rithitsotlligations un­easy place, but when it comesto sexual derEUr?peanhuman~rights!treaties,Brit­mores it can be startlingly prudish. The ain reformed the laws of its [five tiny Ca­same is, true of most,other Caribbean ribbean ()verseasTerrit?rieS;Theymustcountries, and it shows up particularly in llow stop t!eating h0tn0sexilialsasc~mi;ctheir laws relating to homosexuals. nals.Church ministers in th& Cayman Is-

Most English-speaking. islands lands are getting up a petitiOn.in protest,threaten their gay'm,ale citizens, with buttheydonotexpectBritaih to listen.imprisonment The ,laws 'are 'rarely' en- ' ',lforced, but they matter.Police may ignorecrimes if the victim isgay, and thereforea"criminal" 'too. Dance-hall 'lyricsInja­maica seemto encourage the taunting andviolence gays, often encounter there:"Boom bye-bye in a batty-boy head," is arefrain that means, "Shoot a gayman;"

Many Caribbean politicians privatelyadmit that their laws are an tiquated. ~tifthey say so in public, the reaction can befearsome.Tiominica's attorney-general;Bernard Wiltshire, dared hint in Decem­ber that his island's laws were unfair. Hehas been cruelly pilloried in the press, onradio and in Carnival calypsos. '

Most politicians court easy popular­ity."Nobody ever sing 'Boom bye-bye' forme," says jamaica's elderly oppositionleader.Eddie Seaga,"I am notone," saysthe prime minister,PJ. Patterson: "Wehave no intention whatsoever of chang-

'power, 'it does MrFox no good to appearauthoritarian.Particularlynot now; when heistrying to resolve the long-running gu~rrilla

conflict in the'state ofChiapas witha softly­softly approach, and has George Bush drop­ping by for a visit on the isth,

Yetit does him no good to appear weakeither. The zarstill rules in 19'ofthe 31 states(excluding the capital). Mr Cervera isnot thefirstto try his luck-the row in Tabasco wasov~rth~ attempt' by·that,'state's, outgoillggovernor, Roberto Madrazo, to twist the elec­tion in favour of his chosen successor-candhe will probably not be the last. PRJ presi­dents used to resolve disputes between thestates and the centreby deal-making, but MrFoxhas to 1UI~,,()r at least look as if he is rul­ing,in a legal and upright fashion.

J\rii, Cervera' is no' stranger to ,playing, around with the law. Although governorsare supposedly limited to onesix-year term,

M~XI_CO CITY

Mexico

How tough (anFoxbe?

workers to wear protective clothingduringspraying and providing' temporary childcareat harvest time. _

Other .. ,changes.c.including rallowingtemporarywcrkersto formunions;hingeona wider reform oflabour laws to be debatedby Congress this year. But thatwill be a slowbusiness,and a bit of tinkeringwith existinglaws, adapting them to the realities of fruitfarming, might do more for the lives of thewornen who pick the grapes.

THROWING his weight around is not-. -something that Mexico's new president,Vicente Fox, has had to domuch. Since tak­ingoverthe country in -December after 71yearsof ruleby the InstitutionalRevolution­ary Party (PRJ), he has handled delicate situa­tions.such as the budget talks and an elec­toral squabble in thestate of Tabasco,with amixture of quietdiplorn3cyand patience; Ithas worked well-up to now. Another elec­toral dispute, this time in the south-easternpeninsular state ofvucatan.isglvtng Mr Foxthe first real test of his authority.

It started in October, When oppositionparties in Yucatan complained that the PRJ';'

dominated state' congress 'had 'packed' the­electoral council.which will run this May'selection for the state's governorship, with earsympathisers, The federal electoral tribunal,a sort of electoral supreme.court.agreed, andorderedthe congress topickane\¥counciI.

That in itself Was unprecedented. Dur­ing PRJ rule, the tribunal had been little morethan a tool of the regime.Yucatan's state con­gressobeyed the electoral tribunal and chosea'newcouncil, but the opposition said that itwas justas loaded as thefirst one. The tribu­nal agreed again, andin December named anew council itself and ordered the ?riginal ­councillors to hand over their offices and re-sources to the newones, ,

They refused. Rowdy PRJ. supportersbarricaded themselves into the council's of­fices.Yucatan's quixotic rargovemor, VictorCervera, rallied his followers with stirringspeechesin the plazaofthe state capital, Me­rida; denouncing' the' federal' government'sattempts to trespass on, the state'~sov~r~

eignty, The federal government threatenedto send in its police to retake the council byforce ifit was not handed over by the tribu­nal's deadline of February ioth, But as thatdeadline passed, and then another, it be­came dear that Mr Fox's 'resolve was ,notquite as strong as he had suggested.

Nowonder. After seven decadesofa sys­tem in 'which presidents had almost total

42 THE ECQNQM1SrlFEBRUARY'17T'H 2001

BUSINESS

Globalisation to the rescUe

countriesis stillRussophobic.Any politicalinfluencewould have to be so discreetas tobe largelyuseless. And even for a monopolyprovider, gas is a hard weapon to.use.Cut­ting off supplies for political reasons .toweak, farawaycountrieslike Georgiais onething.ButPolandismuch lessdependentongas, has,a much. stronger economy, and isbotha NATO member andhopes soon tojointhe EuropeanUnion.Any attempt by Russia

KOSICE

170SICE, thesecondcityofxlovakia.isan.l'.0Id-fa1hioned company town dom­inated by thesteel plant of the EastSlova­kian Ironworks (V1Z). Unemployment inKosice(prcmounced kosh-itz-ee). is,high,but vsz employs.za.ooo.. at-wages higherthan the national average. ,A third.of thefamilies in Kosice, reckons.a city official,have arelative workingatthe plant.

Fewofthecompany towns spawned,like.Kosice, by communist, autarky' havebeen 10 lucky. The saviourof those thathave has invariably been a western com­pany that has spotted a promisingindus­trialplant at a good price,and has then in­jected money and management skills totum the place, around-cwitnessVolks­wagen'ssuccesswith the Czechcompany,SkodaAuto,andthe ensuingprosperityforSkoda's company town of MladaBoleslav,Kosice'ssaviour has been the·Pittsburgh­

, based U1 Steel, which bought thecompanyin November lastyear for$soom,$32sm ofwhich wasin assumeddebt.TheAmericancompany a110 agreedto pump in$700mofnew investment and to .guarantee thattherewould be no forcedredundancies for17,0.00 of theworkforcefor ten years.

A1 befitsits local importance, the steelplant isbuilt on the scaleof Darth Vader'sDeathstar,Thereareclinics,schools,shops,banks,even a travel agent, "Ferrotour",One hall isover a mile10ng.A greyglintingblizzardofironflakes fallslikemow inthesmelterswhere, with computerised preci­sion,vats ofmolten iron begin.their jour­ney of treatments-s-a journey.which,endsin shiny value-added products like.tin­coated metal for cans or galvanisedauto­motive.steel, which is.where the marginsare made in today'ssteelbusiness.

The Slovak prime. minister,.MikulasDzurinda, fur whom the sale of V1Z 1D awestern strategic .investor.was a .politicalimperative,receiveda congratulatorytele­gram from Bill Clinton after the deal withU1 Steel was.signed-e-as well he might.V1Zaccounted for 10-20% of Slovak exports inthe 19901 and the plant still accounts forlS% of Slovak GDP, 1aY1 John Goodish, thenewly appointed head of the business,

,66

to muck around would be both 'ineffectiveand damagingto plan1to sellgaselsewhere.

Not all captive nations are a~jl~I11Py.Es7

tonia, which suffered grievQl1slr U114erS9~viet occupation, was quick tovvelco:rne)l1:::vestment _by Gazpromin its national ,ga"scompany. (To be on thesafe side, though, ita110 soldan equallylargestaketo Germany'sRuhrgas.) The E1\011ian government arguedthat this would givY:R':lssia~stakeiI1their

. .

Had the deal failed, the Whole oreasternSlovakia, not just Kosice, would have suf­fered;' The economic hopelessness of Uk­raine, locals ghoulishly speculate, wouldhavemoved westand swallowedthem up.At the very least,the failureofV1Z wouldhave put.offSlovakia's.hopes ofjoining theEuropeanUnion.

The U1 Steel takeover marked the endofa crisis that had been ,running .at vsz

~

There's money in it

(now calledus Steel Kosice) since1998. Theproblems for the company began when itwasfarmedout by VladimirMeciar, Slova­kia'spopulist,nationalistleaderuntiI1998,to AlexanderRezes, one of his cronies.MrRezes and his Family, using the steel-pro­ducing coreof the company.as collateral,then went on a. spending spree.. Theybought UP a number of unrelated busi­nesses, including SpartaPraguevCentralEurope'stop footballclub.InOctober 1998,the .banksithreatened .vsz with bank­ruptcy, A Slovak-born American,GabrielEichler.whohadcverseen the transforma­tionof the Czech state electricity utility,wasbrought in tosort thingsout.

Mr Eichler'sfirst task was to sell offvsz'sodder acquisitionsand fashionit intotwoparts:thecoremetalconcern,tobesoldon to us Steel-e-which already: operated a

country's prosperity.and thereforeJess: rea.;..son tomake mischief:

However, until Russian companies aremore transparently run, and for as long asthe Kremlin seems unable to getover itsim­penalhangover, countries likePoland andHungary will. be understandably edgy-.even about deals which from a businesspoint of viewmakeundeniably goodsense,--~~~~--~~~-~~'-------"

successful joint venture at the mill-s-and aremnant vsz whichwould hold a numberofthe mill's suppliersand a few other lesssaleableconcerns,includinga largeKosicehospital,

Next,MrEichler focusedon,gettingthesteel-producingcore in better shape.Thatmeant firing the worst managers,raisingproduction, getting rid of exclusive sup­plier contractsand.actually making cus­tomerspay for the steelthey received. Un­der Meciarism, much of thesteelwasneverpaid for. Stolen? "Let'sjust say somebodyforgotto pay for $20Qm ofit," explainsMrEichler. It wasn't just the Rezes familybenefiting,he carefullyadds, but manag­ers,tradeunions,and customerstoo---:any­one who knewhow to work-the' system.

The results of the overhaul were im­mediate, say bankerswho.watched overthe process;When it introduced competi­tive tendering for its suppliers, vsz saw a15% drop in prices. "It was not a challenge,but anidiocy," Mr Eichler sayswryly. Butthetumaround was possible because thesteel plant wasagoodone;new equipmentwas producing a decent product' at com­petitive prices. us Steel. plans,to increaseproduction from j.jm tonnes last.year to4mthi1,despitea globaloversupply.

Morale at the plant is high. Managersnow speak constantly of customer care."Quality used to be somethingof an after­thought,"one admits.Workers say they nolonger fear for their jobs and. professamazement at being consulted over com­pany decisions.The arrivalof us Steelhasgivennewhope to the town of Kosice 1tOO.

'Ibe.Slovakgovernmenthopes itmight be­comea sortofanchor tenant for foreignin­vestors.TheAmericancompany isplayingits part. by setting up an office.to .att:ractsomeof itscustomerstoinvest in Slovakia.Thereis talkofa BMW car planton the way,and the city says it is hoping that a largeelectronics company will, move' in thisyear,bringingin another a.ooo-or-sojobs.

Itisnot hard to seeSlovakia's appeal. It1labour isamong thecheapest,relativeto itsskills, in the world.i'ThebiggestassetIhaveon thisline,"says'IonyPacilio.aChicagoanwho has. been in Kosice for' three yearswith us Steel's joint venture, "is my work­ers,Theequipmentisokay,buttheworkersare.waybettereducated than back home."

THE ECONOMIS,T .FEBRUARY .1TTH 2001

· LAHORE

AFTERov~r two yearsof rllative oblivion.l"\.in self-imposedexile, Bdna2ir Bhutto, aformer prime minister of! Pakistan, hasjumpedon tothefrontpagesbfthecountry'snewspapers.Shehas done sd,as it happens,on thebasis of a report in a *ritish newspa­per. The report claims that the former gov­emment of Nawaz Sharif ldaned on somejudges to convict Miss Bhuttband her hus­band; Asif Zardari, for corruption in '999.

. Theevidencefor this issaid t& be in the formof taped conversationsbew{eeri seniorgov­ernment officials and a Judge at MissBhutto's trial. The tapes were made by amember of pakistal"liintel1it!el1~e who de­camped toLondonand has Jow, sothe storygoes,been prickedbyconsc&nce.

Miss Bhutto's footprint~ seem to be allover the story.Afterherco~viction in 1999,siteclaimedthat she had not had a fair trial.Butthe SupremeCourt routinelypostponedhearing her petition for on~ reason or an­other. LastDecember,whed Mr Sharifwasexiled to saudi Arabiaby t*e present mili­tary governmentof-General fervez Mushar-

· raf,Miss Bhuttosensedapoliticalvacuuminthe country and considered returning lDPakistanand takingon thegdnerals.

TheMusharraf regimeshid it would ar­resther ifshe set foot in Paklstanand digupmor~evidence, of. hercotrupt acti~ities.Meanwhile,the SupremeC0urt announcedthat it would hear her 1999fetition on Feb­ruary zsth,Thisledpundits ospeculatethatthe militaryregime.ihaving got rid of oneprime minister,was gearingup tofinish offanother. Butthe tapeshavb compromised

· the judiciary, whose credibility is alreadylow after decadesofbattejing by generalsand politicians. TheSuprerrte Court willbeunder pressure to'acquitMissBhutto or or­der a lengthy retrialwhichlwould give herlawyersachance toarrhergHevances.

Thismay be just the be~inning of Gen­eral Musharraf's troubles. Disgrunded orrponents of the regime ltaJe asked the Su- .preme Court to strille down an"accountability" law undh which hun­dreds of?oliticians, and bLreaucrats·havebeen imprisoned orsidelin~d from politics.Lawyers' .organisations acrass the 'countryhave banded together to Announce a na­tional strike onFebruary':hth, .demandingan earlyrestorationof civili~n rule.And theAlliance forthe Restoration~fDemocracy­comprisingsupporters of Miss Bhutto andMrSharif, along with several other par­ties-:-is planning a demonstrationon March23rd,'Pakistan Day. i

. Worse, the religious p~rties are begin­ningto suspect that GeneralMusharrafmaynot be too kindlydisposed towards them,

ASIA

Japan

BunkeredTOKYO

FRANCISDRAKE did it,althoughItisgame. •was' bowls,and onceit was over he sunkthe Spanish'armada. Yoshiro Mori, Japan'smuch-abused prime minister,has been lessfortunate;When newsof a collision, on Feb­ruary sth.: between an American' nuclearsubmarine and a Japanese fishing boatreachedMr Mori, hewas enjoyinga-roundofgolf. He played on for another three holesand arrived back at his official residencesomethreehours later.Beset bya weakeningeconomy, a falling stockmarket,' assortedscandals and riot within his own ranks,MrMori's golfing gaffe has done him moreharm, This-week, senior officials-from NewKomeito,' 'which shares power with" MrMori'sLiberal Democratic' Party in a three­waycoalition, Were calling forhishead.

Like theLDP~NewKomeito faces anelec­tion for Japan's upper house in July. But itmust alsocontest localelectionsfor Tokyo'smetropolitan assemblyin June.Theparty isstrongin Tokyo. Because ids in bed with theLOP,however.NewKomeito's strainedrepu­tation for clean politics is coming' underdaily'assault.A campaign-finance: scandalinvolvingsso.a.small-business.foundationtltat showered the LOP with money, has al­ready ledto the arrestof an'r.orpolitician.A

By train to lhasa

FOR those whose idea of happiness is a. "long-distancetrain ride;there isa treatcomingup. On Februarysth, the Chinesegovernmentapproved a plan toconstructa railway: line from Colmud, in westernChina, toLhasa, thecapital ofTibet. Whenitiscompleted,in about sevenyears'time,itwillbe possibleto takea train allthe wayfrom Beijing to Lhasa, a distance of3.900krn (2,f25 miles). TheGolmud-Lhasastretch will itself be 1,125krn long and, toadd to the thrill,it willbe the highestrail­wayin t~eworld.TheviewsacrosstheHi­malayasshouldbe stupendous.

Not everyone is thrilled by the pros-

scandal in the foreign ministry, involving alow-levelbureaucrat said to have used gov­ernment money to buy racehorses, is doingyetmoredamage-

ThegossipillNagatacho,Thkyo'spoliti­cal district,is-thatMr,Mori'sfate may-havebeen sealed at a meetil1g between NewKo­meito and LOPdons in an AzaburestaurantonJanuaryzath.MrMoriwould supposedlybe required. to .announce his resignation,perhaps at the end of February. Theannualelection for the.party's presidency, whichdecides theprime ministership,wouldthenbe brought forward, from Septemberto theparty's generalmeetingon March13th. Withthe much-fancied Yohei Kono, the foreignminister.donein by the scandalinhis minis­try, the main candidates are RyutaroHashi­moto, a former prime minister who joinedMr Mori'scabinet in December, and juni­chiroKoizumi, who heads MrMori's factionin the t.nr. After some early gainsbyMrHashimoto, Mr Koizumi now seemsto beinchingahead.

The difficulty will be persuading MrMorito leave.Thexsn messmay lead to thearrest of other LOP politicians. The foreign- .ministry scandal may claim the scalpof MrKonc. Mr Mori'stax position isnot entirelyclear. Yet nothing' seems to penetrate hisleatheryhide.Heseemsstillto enjoylife,es­pecially away from Tokyo. Next time heplays a round, he may be tempted to leavehismobilephone behind.

pect of the new railway. Tibetwas occu­pied by the Chinese in 1950, shortly afterChina'siCommunist .revclution.. andmade an "autonomous region"; Eversince,China has been tryingtoabsorb theregioriintothemainstreamChineseecon­omy.Therailway, sayTibetanoppositionleadersin exile, willmakeiteasier to reset­tlemoreChineseworkersinTibetandex-' 'ploit itsresourcesofoilandgas, During hisworldwide wanderings, the DalaiLama,Tibet's spiritual leader, has told interna­tionalcompaniesthatitwouldbebest notto get involved in industrial develop"ments in hiscountry;

The Chinese prime minister, ZhuRongji, has appeared to confirm Tibetansuspicions.Therailway.he says;willhelpto speed up "economic and cultural ex­changes". Because of the difficulty ofbuildingin theHimalayas,TibetisChina'sonly regionwithout a railway network.Now its engineers are apparently confi­dent of laying the line safely, even on atrickysookm stretchof permafrost,In Ticbetan temples they may be prayingforglobalwarming.

Pakistan

Generals a bay

44 TIU ECONOMIS"lfFEBRUARY 17TH 2'001

BUSINESS

Keita"The Raider'I inhostile times

ness,but they areglacially slowand the tim­ingof their impact is unpredictable.Crosseshareholdingsbetweenbanksand their.cor­porate.chums, for exampleare.unwindingand many of thefreed-up shares havebeenbought by foreign investors. Thus, whenBoehringer lngelheim, a German pharma­ceuticalscompany,made an unsolicitedbidlastyearforSSP, ajapaneseover-the-counterdrugs maker, analysts predicted that a newwave of similar bids might follow. Someeven forecast the imminent arrival of an"Anglo-American" M&A (mergers andac­quisitions) market;whereinvestmentbanks,company bossesand investorswould wres­tleforcontrolofcompanies.

japan might not be quite there yet, butsigns'of more rapid change have emergedover the past year.Thanksto the troublesofthe banks,for instance,cross-shareholdingsare getting dumped on to the market fasterthan ever.FujiBank,a hugesourceof previ-

ously unavailable stock, is thought to haverecentlydumped up t02%ofCanon'sequity.

Another sign of change is the work ofM&A Consulting, a boutique. setup by vosh­iakiMurakami,a former top bureaucrat.MrMurakamimade headlineslastyearwithja­pan's first hostile bid, for Shcei, a -raw-silkmakerwhich now makes batteries; Thebidfailed, soMrMurakamisetoffon a differenttack,this time asan activistshareholder.Heiscurrentlyraisingfunds fromjapanese andAmericaninvestorstobackhim,

The idea; saysKenya, Takizawa, one ofthe firm'sthree partners, is to take a gentlerapproach, buying stakes in undervaluedcompanies, thenworkingon theirmanage­ment to persuadethem tochange; There arepots ofgoldhidden everywhere,he says.Be­causethe marketis soinefficient.aboutone':"tenth of japan's 3,500 listedcompanies havebreak-up values of.more than twice theirmarket capitalisation. Thanks to the perva-

sive system of cross-shareholdmgs, alistedsubsidiary (such as Fuji Electric) will quiteoftenown shares in itslistedparent (Fujitsu)worth morethan itsown marketvalue.

M&A Consulting's medicine might bebitter for many managers, but it is a lotsweeter than some of the potential alterna­tives.Forexample,foreign asset-strippersarebelievedtobeeyeingwobblycompanies.es­peciallyin the property sector.SnowBrand,a milkcompany involvedin a food-poison­ingscandal last year, is talked about as onepossible target because its share price hasslipped as a result of the scandal. Using thesame logic, other disgraced companies suchasBridgestone, a tyremaker;and Ajinomoto,another food company, are also potentialtargets. Meanwhile, there.are rumours thatinternational telecoms giants are sniffingaround forbargains.

Thekeychangeinjapanese marketsthistime is-in investors'<attitudes, Individualsand •. foreigners, who are increasing theirstakes;have alwaysbeenexpected to voteintheir own best interests.Butnow Japaneseinstitutions are increasingly joining them.Twoyears ago,the Pension Funds Associa­tion, a trade organisation,drewup new in­vestmentguidelines that requireinvestmentmanagers_to.vote their sharesresponsiblyand solely in the interests of shareholders.Lastmonth, the health and labour ministrvcame up with similar guidelines. Throughpublic-pension funds, the ministry Investsno small amourit of money itself jill thestockmarket. Butthe most important thing,says Nicholas Benes of japan TransactionPartners, an M&A boutique, isthe signallingeffect: "Peopleare comingtosee what is therightthingtodo!'

-------------------------------------~----"

PARIS

This week's dispute over the Schneider ILegrand merger shows how farFrance is behind in matters of corporate governance

Corporate governance in France

Where'sthe Michelin woman?

ON MANY issues of corporate gover­. nance,Franceis waybehind best prac­

tice. Michelin, for example, the world's big­gest tyre maker, is .one of France'sbest-known and mostinternationalcompa­nies.Itssharesare listedon the CAC indexofFrance's 40, leading companies bymarketvalue, and it sells its products all over theworld,so much so that itshome market ac­counts for. only 15-20%' of its sales. So-howmany members of itsboard comefromout­sideFrance? None.

In fact, Michelin barely has a board tospeak of. Although its shares are listed inParis, it remains family-controlled. And al­though it boasts a supervisory .board; inpracticeit isrun by an all-powerfultriumvi-

64

rate of so-calledmanaging partners, twoofwhom are scioris of the Michelin dynasty.Among the CAC4O, it and Lagardere, a de­fencegroup,are examplesof an odd Frenchcompany structure whereby:shareh()ldershand overpower tomanagementand retainalmost no serutinyovertheir decisions. Theremaining 38companies in the index havemoretypicallimitedliabilitystructures.

Small wonder, then, that Michelin hasone of the worst corporate govemancere­cordsin France, perhaps in Europe; A recentstudy by Korn/Ferry, a headhunting firm,saysthat Michelinisthe onlymember of thecxcaothat has made no progress towardsmeeting the standards set by thesecond ofthe twoVienotreports(publishedin1999)on

how to improvecorporate governance. Theissueisespeciallyfraughtbecauseforeign incvestorsown around 40% of the shares in theCAC40 and have been pushingfor greateropenness'.

According to the Korn/Ferry study; Mi­chelinisincreasingly isolated.Of the leading40 companies;onlytwo othershavefailedtoimplement all ofthe rather limited recom­mendations of the firstVienotreport (pub­lishedin1995).One isCapGemini,a consult­inggroupthat recentlymergedwith Ernst&.Young and which gets barely any scrutinyfromoutsidedirectors. Theother isSodexho,an international food and business-servicesgroup that is heavily influencedby the Bel­lon family, whichownsa 41%stake.Like Mi-_chelin,it hasno non-Frenchboard membersdespite depending on external markets fornearly90%ofitsturnover.

In general, corporate governance at bigFrenchcompanies issteadilyimproving. Butprogress towards the more ambitious. goalsof thesecondVienotreportisslow.Thegoalsinclude such measures as the separationofthe roles of chairman and chief executive,

THE ECONOMIST FEBRUARY 171;H 2001

LUDHIANA

ASIA

Indian agriculture

Prowling tiger, slobbering dog

last summer's poor monsoon, whichhas de­pressed agricultural growth this year. De­spite this, MrVaradharajan claims. that"prices have crashed" for a variety of com­modifies.includingcoconuts, cotton, tea andrice,' Even for products with floor prices, hesays, farmers are getting less than the mini­mum. When farmers dare to diversify awayfrom them, the results can be catastroPllic~ Itis they.not the state, who borethe costs ofPunjab's potato glut. In Andhra Pradesh,diversification disastershave led to a seriesofhighly publicised suicides.

Part of the distress is caused by supportprices; which have raised costs for farmersgrowing other crops, says Abhijit Sen, aneconomist at ]awaharlal Nehru Universitywho was recently head of the Commissionon Agricultural Costs and Prices.Some dis­tress reflects adeterioration in governmentservices,such as public investment in irriga­tion and credit to farmers, which has slowed

growth.Itdoesnot help thatLe"",and shrinking .with . eadh generation(whereas the population Mependentonthem is not). ManYdirectf1eir .ire at theWorld Trade Organisation,!,:"hich allowsrich countriesto subsidise tl:{eir farmers butobliges India .to .·dismantleguotason im­ports, The last ofthese areduJ goon April ist,MrVaradharajan wants high tariffs to re-place them. . i

There are less-defensive approaches.Sharad Joshi, a farmer and aJtivist from Ma­harashtra who recently becaine chairmanofthe government's agriculturejask-force,saysthe farmers' movement"is,SPl't between "ti­gers'rthatwant to escape thei' cagesto prowlfor excitingnew prey, and "d, gs"that preferthe certain sustenance ofthe [kennel.

A tigerish policy woulji free farmersfrom India's obsession "lith producingenough food to reed itself ana bid them taketheir cues from markets, both domestic andforeign, Current policies, W!cle touched bythe economic liberalisationjthat began tenyears ago, discourage this. Some examples:states may forbid the expo* of produce toother states; private traders 'are barred fromstocking commoditiesbeyoiidcertain limits(to prevent hoarding);privat~ investment indairies is restricted; in punj~b, farmers maysell most major crops only!through highlytaxed mandis (markets); futures trading inmost commodities isbanned. -

All' this subtracts valde from India'scrops.: McKinsey,a consuliing firm, esti­mated not long ago that after middlemenand poor infrastructurehadltaken their toll,a fifth of the value offood output was lost.For fruit and vegetables the roroportion wastwice that. Regulations discdurageinvestorsfrom improving the way fooa gets from fieldto shop, which would mak{ diversificationless risky and raise incomes. I_

When Cargill, an American multinat­ional, tried to buy wheat dir~:ctfrom farmers,bypassing the mandi syst,m, middlemenpersuaded the state government toforce thecompany out. But the obstacles are not al­ways insurmountable. Pepsi, an Americancompany, has 2;000 farmer§ growing toma­t()esand potatoes for proce~ing in Punjab.. MrJoshi is trying to get ,pund the small­farm problem by promotirlg a new sort ofcompany, in which farmed' land would beco~verted into an equity $take. But Indiamust reform its farming industry ifit is to at­tract big investment in fooa. A new policyunveiled by the government ,last.summersuggests some of the necessary reforms, butit remains. a draft. Meanwhile, farmers aregetting angrier and official! are wonderinghow to cope with theneX~bigdeliveries ofgrain. The government has yet to specify asupport price fur the fo coming wheatcrop. The situation is "ve~ explosive" saysanofficial of India's Plannihg Commission;Everyone but the livestock it worried.

I •

Obsesssion witb self-sufficiency is a bar to reform

RATS and buffaloes in Punjab, India's.. ' breadbasker.are in fine fettle. The ro~

dents are feasting on millions-of tonnes.ofwheat andrice storedin government ware­houses (or, frequently, in the open air), thecattleondiscarded potatoes;Butno one elseishappy. The government cannot afford thehuge cost of buying and storing the graincomingfromfarmsin Punjaband elsewherein india,norcanthe poor affordto buy it.Bysomemeasures, neatlyhalfthepopulationisunder-nourished.

Farmers, who feel themselvespinionedby high costs, low prices and the threat ofimports as India opens its,markets, are inafoul.enough mood to scare politicians. Withelections comingup beforelonginfivestates,says K. Varadharajan, general secretary ofthe All-India Kisan Sabha, which claims torepresent 16m small farmers, rural discon­tent will "terribly affect" India's ruling Bha­ratiyajanataPartyand itscoalitionpartners,

India has come a long way since the19~OS, when it had to beg for food from for­eign granaries such as the United States.Thanks to the green revolution and invest­ment inirrigation, roads and other.sorts ofrural infrastructure, India can now feed itselfand still have leftovers. But it has not decveloped a modem food industry, Valueadded in. Indian agricultureis 15~20%of thetotal, compared withanadditional1oo% ormore in some developed countries, says Ka­ram Singh,director of the Agro EconomicsResearch Centre at Punjab Agricultural Uni­versity in Ludhiana.

India exports less than 5% of its agricul­tural produce. The Himalayan stocks of riceand wheat represent food that is fillingnei­ther rich western stomachs-nor poor Indianones. Like some of the cows that wanderabout Indian roads, farmers are protectedyet apparently miserable. Important inputslike electricity and water are free, or almostso, and fertiliser is subsidised (though farm­ers complain that the fertiliser industry cap':'tures most of that subsidy). For wheat andrice,in some places, farmers have an assuredbuyer in the Food Corporation ofIndia (FCI)at an assured price. That minimum supportprice has been. rising, even though worldprices have fallen, one reason why govern­ment storehouses are choked with un­wanted grain. India's economic reformshave also helped farmers by reducing therelative price ofmanufactured goods, shift­ing the terms of trade in their favour duringthe 1990S.

This is not how it seems to India's angryagriculturists. Their list of woes begins with

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market bynowinstead ofjust over10%.

Notthat the Indian carmarket isa push­over any longer. The streets of New Delhiand Mumbaimay stillbe gracedwith statelyold MorrisOxfords, churned out by Hindu"stan Motorsas the Ambassadormodel, buttheyareaperiod relic inanichemarket.TheMaruti small-car company isnowthedomi­nant force.: Formed in the early 19805 as ajointventure betweenSuzuki of japan.andthe.Indian government of Indira Gandhi" iteventually captured 80% .of the market,helped by government money. When 'Iatachallengedit head-on in 1999. MarutiCOun­tered with new models arid big' pike cuts.But the arrivalon the market of both 'lataand Hyundai from SouthKorea has pushedMaruti'ssharebelow 60%;

Nearlyall the world's leadingcar corn­paniesnow havea presence in India, ratheras theyhave in Brazil. B11t, for the moment,the- competition .and. overcapacity is suchthat nofactoryisoperatingatmorethan halfcapacity. Giventhat carfactories need to beoperatingat four-fifthscapacitytomakedeccentprofits.thisisa big problem.

Thecar-industry mess could be furthercomplicatedbytheplannedprivatisation ofMaruti announced 'this week,-None of theworld's carcompanies; towhich·the stake tobe privatised has been quietly hawked, ismuch interested.Theoutcomeislikelyto bethatGeneral Motors(which now owns 10%

of Suzuki and drivesit fromthe backseat)orTatawilltakeup the MarutiSlake.

Whatever the fall-outfromthe privati­sation,MrTataalreadyhas a strategyto bol­ster hisventure intothe carmarket. Heisne­gotiating a deal with the FrenchPSA PeugeotCitroengrouptodevelop asaloonversionofits little 206 hatch-back, Such a vehiclewouldhe manufactured in Peugeot's Brazilfactory for theLatin American .market, andby.Tataat home for its localand South-EastAsia market.

Thedealis interestingin twoways: first,Indians rather than Europeans will bedoingthe high-value engineering developmentwork, atone-third oftheEuropean cost; sec­ond, it could lead to closer collaborationwith the French group, which might evenbuy into Tata's car business. Peugeot's chiefexecutive; jean-Martin Folz, is desperate tobuild on his company's purely Europeansuccess byselective expansion infast-grow-

ing markets suchasIndia.But Mr 'Iata has another optionshould

the carventure proveonerous. Tata's com­puter ccnsultancy, TCS, unlike other Tatagroupcompanies,isawhollyownedsubsid­iary ofTSL.1t isIndia's biggest software com­pany by far, and has become the new life­blood of the Tata empire. Its client Iistfeatures manyof thetop American compa­nies with whom it does businesson highlyprofitable terms. TCS, founded more. than30years ago,hasitsown range of sofu.y~re,pro­ducts and,a reputation .for on-~it~impl~:­

mentation. For some,time, Tat~,llC1~.,~eet1consideringa flotation of the cornpanY,MrTata will not commithimselftothetiming,nor willhesaywhat percentagepftheshareswillbefloated. But, forsure, itis,c<:n'l):ing.

Tata, with its, paternalistic.icharitableheritage, cannot re-shape itselfasblithely.asan American or European group. "Howcould Igetoutof steelwhen 100,000workersand rmpeoplein]amshedpurdepend on us,in' a verypoorpart of India?" asksMr Tata.Instead, at [amshedpur, his managers con­centrate on making their steelworks world­class, while elsewherein the group they areprepared to take audacious moves,suchasthatintocarmaking. ,

MrTata isadamant thatheisnotgoingtopour away the group's software wealth intraditional industries" such as car making.Buthe knows that the harvest to be reapedfrom thesoftware investment might havetocarryTatathroughsomeleanyearsahead.

Napster

And the bandplaY$onSAN FRANCISCO

THEmusic is stillplayingat Napster, theInternet service that, allows its users to

swap music files for free. But only just, OnFebruaryrzth an appeal court partially up­held an injunction,granted lastJuly, callingfor the service to be shut down. The goodnewsfortheRecording Industry Associationof America (R1AA), which hadapplied for the injunction onthe ground that Napster wasfacilitating piracy,was that theappealcourt, rejected _most ofthe argumentsthat Napsterof­fered in its defence. But thecourt quibbled with the in­junction -in its' current form,and asked for it to be slightlyrewritten. So'Napster's tens ofmillions of users, who facedtheprospect of theservicebe­ingunplugged, cancontinuetouseit-sfornow.

Specifically, the appeal

court complained that the ihjl1llctiori'is:tq6broad, in.that it seeks to prevent all file­swapping activity via Napster. While thecourt agreed with the RIAA that,Napster"knowingly encourages and assists" in theexchange of copyrighted. material, it notedthatasmallamountof legitimate material isalsoavailable on theservice. Thecourt ruledthat expectingNapster to be able to distin­guishbetween legaland pirated music,andtoallowtrade intheformer butnotthelatter,was unreasonable, So the new injunctionwillre.9:tlire record companies to informN~psterof,specific examples of piracy, sothattheycan beremoved.

Ifl'\lapster fails to removepirated files, itwill, be ill1:)reach of thenew injunction, andsinceremoving individual ,files from a de­centralisedservicelikeNapster isessenti.allyimpossible.this willineffectforceit t?shutdown. Preparation of the new injunctionwill take days, if not weeks" however, andNapster stillhasafew morecards toplay.Inparticular,it~anc<ll1 for another.hearinginfrontof a panelofjudges, and itcan then ap­pealto the SupremeCourt.

Evenso,Napster'sdefenceisinruins, Thefinn's suggestions that 'swappingof files byitsusers countedas"fairuse", andthatsuchswapping was protected by a previous caserelating totheuseof videorecorders fortimeshifting,wereboth rejected. Worse, sincethecourt determined that Napster knew its ser­vicewasbeingusedforpiracy.it couldillowbe found guiltyofvicariousinfringementbyitsusers, andfacehugefines. .

The rulingis also bad news for Bertels­marin,t~eparentcompanyofBMG,a recordcompanythatswitchedsidesandformedanalliancewith Napster lastOctober.Theideavvas'that in return fordropping its suit.Ber­telsm~nnwouldworkwithNapster tocreatea: legal," subscription-based.' ,service,' ,'andwouldencourage otherrecord companies toco-operate,Napster:users, after, all, consti­tutethe largestcommunity ofmusic-loversonearth.Theservice claimstohaveover'som.registeredusers,and su~eys sh;oyt thatmostofthemwouldbeprepared topayamonthlysubscription; .

But despiteoptimistic noises from An­dreas Schmidt, chief executive of Bertels,

62 THE ECONOMIST FEBRUARY 17TH 2001

1i

II

cai"reasons. It is a questiAn of prestige:northern bigwigs are determmed to have astadium in their patch. I '

The project is just one of several issuesthat have made people quer,tion Mr Oba­sanjo's priorities. Beforehis election in,1999,the soldier-turned-politictanlwas a memberofthe board of Transparency International,a Berlin-basedgroupthat car\1paigns against

graft. He pror\1ised, in his incaugural spee}h, to wage anunceasing fight against thecorruption tijat bedevils hiscountry, andto assert therule oflaw. Lkter,he set up anew anti-corruption agency.

Despite Mr· Obasanjo'sprofessed *al, however,only one senior official-thehead of the Fountry's avia­tion vauthority-chas beensacked for cprruption, andnot one has bfenjailed. Law­makers have mocked at­tempts by tll.e police to in­vestigate MPS for corruption.Craftremains as mucha partof doing business in Nigeriaas ever.including, it appears,in theinstigalionofbig-bud­get infrastrltcture projectsthat allow plentyofroom for

the amyOfinvo~ementinJmassacres­prompting pressure-groups t6 demand in­terviewswith thetop brass. t

Meanwhile, after falling f6r a few years,violence is on the increase a~ain. Over 500people have been slaughtered in the pasttwo months. Shadowybands!ofkillerscon­tmuetowlpeoutentuefamlhesmattackson'isolated communities in western Algeria.Thearmy's intelligence is notlgood,and themilitants do not followa predictable strat­egy.Somepeople,however,s6spect that thekillings suit the broader purpdsesof thoseinpower. They show that "civif concord" is amyth-esc the army must keerlcontrol.

Moreworryingfor the ge~erals, saydip­lomats, is the number of soldierskilled bythe Salafist Group for Preaching and Com­bar.which operates in. the !:centre···· of thecountry. Rumours speak of ~ome 200 sol­diersrecentlykilledin efficient assaults.Un­likethe throat-slittersofwesternAlgeria, theSalafis confine their attacks tbmilitary tar­gets. Thearmy has recently~ombarded thegroup's hideouts in the forest ofSidi AliBou­nab, but the results are uncertain. Indeed,the entire militarysituation, lIkemost press­ingquestions in Algeria,isopaque,

I •

ABUJA

unendi,ngflow of embarrassing questionsfrom human-rights organisations. Despiteinvitingsttch groups to visit Algeria'1\1rBou~teflika has not succeededin stemming theircriticism. Former officerscontinuetoaccuse

An odd sort of concord

Nigeria

Bill, borrow and embezzle

SOUNIJING •only .faintly •• embarrassed,··President' Olusegun Obasanjo claims

that his ,government has no choice but tobuild the grand new stadium going up nearthe capital,Abuja.Afterall, it inherited thedecision to hold the Z003 All-Africa Gamesin..Nigeria from, the military regime. thatcame .• before. it. But some.spoilsports .. stillwonder why a country that recentlyhad toreschedule$23 billionoffor­eign debt is building a sta­dium due to cost at least38billionnaira (around $347mat the official exchangerate).That is roughly the amountthe government. has bud­geted for recurrent spendingon education this year, andtwice what it plans to spendon health.

Nigeria already hasplenty of stadiums:iU1999itheld the FIFA World YouthChampionships in eight in­ternational-sized grounds,including a huge one in La­gos, the country's commer­cial hub. But Lagos is in thesouth, and Abuja in thenorth. Mr Obasanjo ex­plained that the stadiumwas being built for "politi- Balancing the regions

INTERNATIONAL

soon, to plant crops before the rains start,which is usually in May. The World FoodProgramme says that as many as em peoplemay need aid this year in the two countriesbecauseof drought and war.Any economicrecovery, in Eritreain particular,depends ongetting soldiers. and refugees back into thefields. With luck, the two sides will havemoreimportant thingstodo than argue.

CAIRO

Alg!!ria

Sour cherry

•

M UCH faith was put in tbe "Bouteflikaeffect". When Abdelaziz Bouteflika

was ~lected Algeria's president in April1999,many people persuaded themselves that allwould bewell,or at leastbetter.Hiselectionvictory may have been manufactured, hispolicies vague and his dependence on thearmy clear, but at least he promised to putAlgeria's seven-yearinsurrectionto anend.

Less than two years later, the faith hasevaporated. Mr Bouteflika and thearmyleaderswho gavehim thejob are lockedinapowerstruggle. Meanwhile, massacresandambushes continue in the countryside. OnFebruarynth, furexample,guerrillas slaugh­tered 27 civilians; including13 children.Asever.therewasno whollyplausibleexplana­tion for theviolence, nor for the army's fail­ure tocrushthosewho had committed it,

The. president.jsfacing an u~pr~ce~

dented waveof criticism from the Algerianpress, and even from the parties in the gov­ernment coalition. They say that he does notconsult with people,' that he travels abroadtoo much and.rmos: damningly.' that: his"civil.concord", peace initiative .has failed;They even say that the amnesty he champi­oned for Islamic militants who have surren­dered has fuelled an increase in violence bygivingthe impression that there isno need tofear'punishment According to one analyst,Mr Bouteflika "has .1Jecome isolated, andthere isan attempt to lumber him with morethan his fair share of responsibility. It.is asign' that relations between him and thearmy are in crisis,"Arecent newspaper edi­torialput it morebluntly.It said that the sol­diers regretted having chosen MrBouteflika.

The dispute between thepresident andsenior officers is more about influence thanpolitical visionMr Bouteflika was broughtinto polish the regime's image after years ofblo?dshed.But, saying thathe does not wantto be "the cherryon the cake",the presidenthasbeen trying to exercise his full constitu­tionalpowers, including the appointment oftop officials. The army, longaccustomed torunning the country from the shadows, re­senisthis encroachment.

The soldiersarealsodisappointed by MrBoureflika's failure to shield them from an

4$ THE ECONOMIST fEBRUARY 17TH 2001

"";,,,/

allWhat women want

"TADONNA emobile," wails that duke in. "Rigo.letto"; a..nd",Lwomenare especially fickle.when.it comes to voting.Opin- 'ion polls consistently find them more likely than men 'to declarethemselves "undecided" about which party they intend.tosup­port in the coming election -. On the other hand, once they havemade up their minds, women are more willing than men to dosomething about it. For two,decades now, British women havebeen likelier than mentocasttheir votes; in the general election of1997,3% morewomen voted than men-sa tum-out gap ofalmostzm votes.which leads the Fawcett Society, an organisation thatchampions sexual equality, todeclare happily, "women's voteswilldecide the outcomeofthe.next election." ,

Whereas American .womenhave tended to support the Demo­crats" British women; ,especiallyolder women.are more Conserva­tive.Whyis a bit of a mystery, sincethe Labour Party has always es­poused.enthusiastically the sortsofissues-shealth, education-vthatwomensay they care about. It maybe that women have tended to shyawayfrom Labour because it cameout ,ofthe only environment moremisogynistic than the Tories'gentle­men's clubsC'"thetrade .unionmovement Certainly, as the linksbetween the Labour Party and theunions have weakened, so the gen­dergap hasnarrowed.It washugeinthe 1950Sl' at about 17points. It nar­rowed in the W80s;widenedagainin 1992;and, in1997,shrank to acou­pIeofpercentagepoints.

Surely, with its caring, sharingpolicies, New Labour should beableto reversethe gendergap?Afterall, the ladies do love Tony Blair.Notwithstanding, the humiliationthe Women's ,Institute inflicted onhim ,last year, when its membersbooed, him, into a flummoxed si­lence, women likehim muchbetterthan they likethat smug.patronising.bald Mr Hague. Yeteven so,women are less likely than men to express satisfaction with thegovernment, and have been slower than men toforgive the gov­ernment after last September's fuel crisis,when Labour's poll rat­ingsplungedbrieflylowerthan the Tories'.

What has the government done wrong? It has wooed womenassiduously. Bydiscriminating in favourof female candidates be­fore the 1997election, New Labour got a record 101 women intoParliament. Thatgaveriseto a famous photograph-now deridedas patronising-eofMr Blair with his "babes". Several women gotbigjobs: Harriet Harman was,made secretary ofstate for social se­curity.overthe head ofFrankField, the MP who had done most inoppositionto"think theunthinkable" about welfarereform.Mar­garetBeckett became president of the Boardof Trade. Therewaseven talk, before the last election, ofa ministry for women.

Theargument for more womenpoliticians was not just thatfe­malevoterslikedseeing theirprettyfaces, but alsothat theywoulddevelop more female-friendly policies.And the governmenthasindeed come up with some (whisperit)feminist policies onchild-

careand employment.Butmuchof thishasbeen down totheonlyrecentlymarried,still-childless chancellor, Gordon Brown; while.over other sorts cf.vwomen's issues" the government has got itsknickers in a twist.

Bothmain partiessuspect that oneway into women'sdispro­portionately conservative hearts is to goon about the traditionalfamily.Inone ofseveralneuroticmemosleakedlastyear;MrBlairmoaned about how unfair it was thatheofall people was s~enas"outoftouch" with ','gut Britishinstincts'lonseveralissues,includ­ingthe family. Hedemanded robustpolicyinitiativeswith whichhe could be "personallyassociated". Butsincefamiliesnowadayscomein allshapes and sizes, and it isnot coolto be 'Judgmental",

this has not been so,easy.Whereas the, Conservatives

have chosen to make the case fortraditional marriage, and to reflecttheir preference, by restoring, themarried-couple's tax allowance.La­bour ministers havefallen out overwhether it is right even to, endorse

~ ~ marriageinp~ncipl~;,~efirstdraft~' ~ ofafurthcommgwhitepaperonthe

family, drawn l1P by PaulBoateng atthe Home Office, dared to venturethe opinion that children broughtup by married couples were more,likely to have stable childhoods,This assertion attracted the scorn ofa trio offemalerninisters-a.adyJay;Margaret Hodgeand Tessa Jowell--­who argued that it would offendsingle, co-habitingor divorcedpeo­ple who were alsocapable of beingperfect parents. Righteous praise oftraditional family structures mightanyway sound a, discordant notefrom a cabinet in which about oneminister in three has been divorcedor co-habits" and which containstwo openly gaymembers.Thecon­tentious white paper now, awaitsMrBlair'scasting vote.

":"';"",' ,'Norhasthe increased numberof MPS led to. the political power that some had hoped. Thatwomen's,ministry.for one-thing,never came into, being: all thatemerged was a "yt0lTIen's,unit"'which, has attracted, as, muchmockery as respect,~specially after convening a summiton''bodyimage", and now seems to be fading away altogether. As for thosehigh-profile. cabinet ministers, Ms Harman was sacked,' in MrBlair'sfirst reshuffle and Mrs Beckettwasdemoted.

IfNlr~lairdoes win a second term, he is likely to have fewerbabes topose with.But, as his first term hasshown, having a repre­sentative p~rF~mentarycadre does not, in itself, solve anything, Ithas}~,ot,h~lped Labour resolve the contradictions betweenvv0p1en's,traditional, and modem.roles. The MPS have,attractedmost public attention for their strongviews about baby-changingfacilities at the Houseof Commons (fur) and the longhours MIPS

work (against). Thesepreoccupationsmayhave suggestedtovot­ers that female MPS are just as self-serving and remote as the maleof thespeciesiswidelyheld tobe.Thegapbetweenpoliticiansandordinary people may be even more important-sand difficult--tobridge.thanthe gendergap.

60

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For more information and an' application contact:Jane LOlchom, Associole ·DirectorTelephone: (617) 491·0811,exl. 187. fox: (617) 495·8561e-mail: lonejolchom@harvard,edu, www.execprog.org

HARVARD UNIVERSITYJOHN F, KENNEDY SCHOOL OF GOVERNMENT

Program for Senior Executives inNatip+al ~ndlnternational Security

http:,~/gsb,~chicago.edu/execmhaeuropeToconfirm attendance, please write to irifosessions''-ad@~ksb.uchicago.edu

or call +34-9,3-505 :"~i56,

',; ~."

BRITAIN, " .

It's darkupn()rthINVERNESS

D ESPERATEthough the government isto be seen to be bridging the "digital

divide", its appetite for using taxpayers'moneyto bringbroadband .tothe ScottishHighlandsseemsdistinctlylimited.There­luctance to subsidise bringing the latestthing in telecommunicationsto one of theremotestand most thinly populated partsof Britain might at first seem surprising,giventhe region'spast experience.

In 1989, the localdevelopmentagency,Highlands and Islands Enterprise (HIE),gavea scepticalBT £4..9m ($pm) to)"ard~

the cost of upgrading the region's tele­phone exchanges to digital standards. Inaddition, J;lT spent a lot of its own moneyrunning fibre-optic cables up and downthe glens. Soin19,9JitcClme to pass'that foraboutsasm.the Highlands and Islandsbe­cameone ofthe firstbitsofBritaintohaveatelephone system capable:of providing astate-of-the-art, ISDN:(integrated systemsdigitalnetwork} service.

Ken Mac'Iaggart, nrs's head of tele­communications.saysthat thereareabout3,300 jobs in the region, ranging from call­centre-work to new .. Internet.businesses,which could not exist without modemcommunications.He expectsthere will be5,000 such jobs by 2005. Enthused by thisrather low-costjobcreation, HIE pas gone

detestit;and stubbornlyrefusetoco-operatewith rivals.'

BT, has learnt. from the delayingtacticsthat have been skilfully deployed by Arner­ica'sBabyBells, Evennow, fewerthan zx ofAmerican,access-lines have .been.unbun­dIed,and severalwould-be broadband ser­viceprovidershave gonebust.Rivals accuseBTOf offering upan unattractive mix of ex­changesforco-location, and alsoofexagger­ating the difficulties of getting the equip­ment in.Currently,700exchanges, arebeingsurveyed for co-location, but Mr MaineofKingston Communications says that .theones that have been chosen do not createalargeenoughnumber ofpotential customersinany one area tomake it economicallyvia­bletooffer a-service.

According to Richard Feasey.who is inchargeofregulatcry affairsat the Britisharmofworldcom.iunomer operator that re­cently withdrew from LLU trials, whereasBT'S engineersmay-wantto.doa goodjob inmakingLLU-work, businessstrategy.is setbythe firm'sdominant retailoperation.There­taildivisionbringsin themoney and has theloudestvoice in the boardroom-s-and it hasevery interest,in delaying, the arrivalof un­bundled DSL, which it believeswill allowcompetitors to undermine its highlyprofit-

58

on to give Eqmof mainly EU money to Vo­dafoneand Cellnetto provide95% ofHigh­landersaccess tomobiletelephony.Thus,atelecoms company,has been given£3mtowire the .scattered campuses of the newUniversity of the Highlandsand Islands.

. However, for BT the resultshave beenmoremixed.Mostof the dark fibreit soex­pensively laid remains stubbornly unlitand, unused. B1' .won't say exactly howmuchof itsHighlandfibreisdark,claimingit is.a commercial secret. But there is evi­dently enough of it for WendyAlexander,the Scottishenterpriseminister,to use it asan argument to counter those who thinkthat thegovernmentshouldnow subsidisebringillg broadband technology to .theHighlands. If the fibreremains unlit it willbe like one of those roads that politicians

.build to service factories that never mate­rialise.

The problem with broadband is thatnobody yetevenknowshow itwillbe pro­vided in such sparsely,populated, areas'where cable does not penetrate and ex­changesare toofar fromcustomersfor PSLto operate, Satellite or fixed, wireless Hnksarepossible.but the technologies and theeconomics "are untried." Ms. Alexanderthinks that rather than subsidise the sup­ply of broadband-it wouldbebetter to

able business of leasing dedicated lines tobusinesses. MrFeasey does not blame Oftel."Noregulator", he says; "canadequately re­strain the,commercial imperativesofaverti­callyintegratedincumbent,'

Otherstake a more hostileview of bothOftel-under its currentdirector.David Ed­monds, and a'rv.Mr Maine accuses BT notonlyofstoppingthird parties-such ashim­self__from offering broadband, but also ofdenyingthe country the benefitsof the tech­nologyby doingsolittleitself. Heisata losstoexplainwhat he seesas the "laid-back"atti­tude of both the regulator and the govern­ment.Adirector ofa firm that isusingDSL asa platform for video-on-demand says thatBT has neverapproached nst in the, rightway."Theyarequite visionless. Other busi­nesseswant to work with us.With BT, whatcomesback isa.lumpen sullenness." Othersclaim that the till1ii:1ity of the regulator indealing with "anti-competitive practicesthat areendemicwithinBT" istoblame,

A common complaint is that Mr Ed­monds refuses touse the extensive powersOftel has under the Competition Act. Theyallege thathe worriesabout BT'S threats toresort to judicial review and is prepared toprosecuteunder theCompetitionActonlyifhis legal advisersbelievethat there isat least

Hl-tech des res

identify the likely demand for it.Ina smalltown, one of the biggest initial users ofbroadband will be the public sector­schools, hospitals and local councils. MsAlexander reckons that, telling.telecomsfirms what the Scottish governmentplansto,spend over the. next three years' willmakeiteasierforthem toreachinvestmentdecisions.•It. is a .sensible approach; butHighlanders waiting for the delights ofvideo-on-demand and high-speed In­ternetaccess should not hold theirbreath.

a 70%chanceof success-saveryhighbar forany test casetoovercome.

MsHewittblamesotherpeople.Thepro­blems,she told a parliamentary.committee,havearisen"becausethe lastadministrationand the previoushead of Oftel [DonCruik­shank, now chairman.of the London.StockExchange] were not interested in local loopunbundling." She professes complete faithin Oftel'scurrentdirector,pointingtoa moreaggressive stance in recentmonths and pro­gress bym-in readyingmoreofits exchangesforco-location. If firmssuch as WorldCOJ;n,Kingston and Thusno longerwantto pro­ceedwith co-location.that is their commer­cialdecision-they can alwayschange. theirmind lateron. That is a fair point. Kingstonhopes to re-enter the residentialbroadbandmarket next year, .perhaps by pooling re­sources with Energis-e-although how thatsquares with .the government's professeddeterminationforBritain tohave theworld'smostcompetitivebroadband marketwithinjust fouryearsis not entirelyclear.

The irony.is that BT itselfhas proposed apossible solution. to the present unhappysituation, Under far-reaching plans drawnup lastyeartobreak itselfintoseparate busi­nesses, BT isseriously considering dividingits retail and wholesale operations, just. as

THE ECONOMIST FEBRUARY 17T::t 2001

EUROPE

The criminal crucible that is KosovoPRISTINA

1:A 11TH his blackthorn stick, formal•Y Vbearingand toughtalkof''zero toler­ance"',ChristopherAlbistonis a police­man's policeman; Butthe UN'S new policechief in Kosovo,a 4~FyeaFold Veteran ofthe Royal Ulster Constabulary,may soon feel that the problemsof Northern Ireland are simplecompared with' the devil's brewhe hasnow takenon.

'With NATO and the UN run­ning- KOSDVQ-aSa 'virtualprotec­torate, there is onepeacekeepingserviceman, or 'foreign or localpolice officer, for every 3.6 of its1.8m people--one of the highestratios in the world. But then Ko­sovo's guardians face a complexmixture of threats: an ethnicstand-off in the town of Mitrov­ica,a small war to KOSQVO'S east,and plainold-fashionedcrime.

Inthis volatile mess; one ofMrAlbiston's mosturgenttasksisnot just to arbitrate between eth­nic Serbs and Albanians but toimprove relations between hismultinational. police force andthe FrenchsectionofNATO'S xfor mission:eachaccusesthe otherofbeingunhelpful.

Buthis hardest task is simply totacklecrime; DespiteKosovo's ethnic hatreds,thecriminalclans of all stripes,readilyco-op­erate inKosovo'slively underworld.Sotoodo the' MacedonianscMontenegrins 'andother' East Europeans who do a 'thrivingtrade, in weapons, illegal ,immigrants,drugs, prostitutes,' cigarettes, petrol and

thority of the Haguecourt andtheYugoslavjudiciary.If this provesunworkable,the au­thoritiesin Belgrade may stillinsiston hold­ingat least a short trial before packingtheirex-presidentoffto theNetherlands.

As Mr Kostunica weighs the politicalodds, hiseconomicadvisersarepointingoutSome hard realities. ThoughYugoslavia canlivewithout the small amount of direct aidpromisedby the Americans, it cannot easilymanage without help from multilaterallenders,sinceit urgentlyneeds toreschedulean external debt of perhaps $12 billion. Itsnominal GDP has fallenby half overthe pastdecade,toonly$10 billion.And theYugoslavstateowesanother $4.5billiontoitsown citi­zens, whose'hard-currency bank accountsare frozen,and as much again in debts de­nominated in localdinars.

Miroljub Labus, the Yugoslav deputyprimeminister,hassaidhebelievesitshouldbe possible to negotiatesome sizeable debtrelief within four months, but not if the

52

muchelse.Kosovo worried the world's crime­

fighters longbefore NATO moved in. It liesacross the drug route westward fromAf­ghanistan'Pakistanand Turkey, in an area,

between Albania','Bulgaria, "Macedoniaand Montenegro, where frontier controlsare lessthan watertight; Every month fourto eight tonnes of heroin are thought 'topasswestwardthroughthe Balkans. WhenNorway's police Iast month made theirbiggest-ever 'heroin haul, they arrested acoupleofex-guerrilla Kosovars.

Thesedays,however,most of the drugtraffic, skirtsround Kosovc.because NATO

country is again isolatedbecause of its lackofco-operationwith the courtat TheHague,and not ifa complexdivorcewith Montene­groalsohas tobe arranged.

Atleastthereisone formofinternationalco-operationthat MrKostunica does enthu­siastically" supp()~ working with westerngovernments to defuse the bomb tickingawayin the Presevo valley. On that score, heand his government in Belgrade have wonplaudits from' some unlikely quarters, in­cludingthe United States, the EU and NATO,

for restraint' in dealingwith the guerrillaswho have dug into the "ground security'zone", a five-kilometre (three-mile) strip onthe boundary of Kosovo, Under the June1999 agreement that ended xxro's air war,Yugoslavia may deploy nothing more thanlightlyarmed policein thisarea.

Butthe guerrillas, known astheArmyforthe Liberation ofPresevo,Medvedjaand Bu­janovac(UCPMB) afterthe main towns in thestrip,havetaken advantageof that restraint

troops on the lookout for illelal weaponsmightalsospotlorriesfilled ;;rth narcotics.What does flood through the~rovince isariverof youngwomen from Moldova, Ro­mania, Bulgaria and Ukrainellured by of~fers of fictitiousjobs in We tern Europeandthen soldintosex-slave~.

Afterten yearsof war, the Balkans arealso awash with weapons, frbm pistolsto

heavy mortars. T~e anti-tankrocketfiredat a British intelligenceheadquarters in Lontlon last au­tumn by the RealI~ may havecome from Kosovo, hn a societytraditionallyarmed a\>d with a fe­rociousappetite for domestic andclan violence, wher~ the rules ofthe medievalblood feudoftenstillhold good, armed crime and kid­nappingsarcboth common.

Tofight all this, Ihe UN fields3,50o--plus policernenfrom40-oddcountries;many brihg their ownintelligence agencie!along. Somepolicemen,such as the NorthernIrish, Canadiansj Austrians,Scandinavians" 'and 'Egyptians;are doing better thAnothers. MrAlbistonhas to ma~e it all work.A new organised-crime intelli­genceunit, in which17 of the 30

officers are British, i& cited as oneexample of the UN'S determination to gettougher;'so too are draconiJn 'anti-terre­rismlawsnow beingdraftedrButboth thenew policechiefand Ha~s mekkerup, theDanewho hasjust startedruJning Kosovoforthe UN, willhave to convibcethe world(including the criminals) thadthey willnotcond0tle crime~as,;theiripredecessorswere sometimesthought todo-when thecriminalshavepoliticalfriends.

.' ...

Bertrand Delanoe, a Socialist mayor for Paris?

N....·-orsolong ago, it was apoliticalgiven: Paris.vthe most beau­tiful city in the world" (a constant. and perhaps justified.

self-description). wasand alwayswouldbe abastionoftheFrenchright and the Rallyfor.the Republic (RPR). as the main Gaullistparty is called,Forget the financialscandalscomingto lightfromthe 19805 and'early 1990S; when politiciansgavefictitious jobstotheir friendsand stuffedparty cofferswithcontractors'kickbacks.That couldbe solvedby castingthe present maYor, Jean Tiberi, asscapegoat for the past and selecting PhilippeSeguin, a partyheavyweight(literally as wellas figuratively), as candidate for thefuture.Come the municipal electionsof March11t1l and rsth, thecapital's voters wouldonce againvote conservative.After all,MrSeguin would surely see off his.Socialist opponentBertrandDelanoe,a50-year,-()ldsenatorfor.ra~~sso,littlekr19wn thatsome,onthe right teasehim as'Bernard".

So much for hubris. For the pastmonth the opinion pollshaveallbeenpredicting a-victory for Mr Delanoe;even the RPR'S official spokesmannow speaks of defeat.Takea creativereadingofhistory(themodemmayor­alty of Parisdates back only to 1977) .and Parisis about to fall to theleft forthe first time since therevolutionaryCommuneoh871. Addthe strongpos­sibility .that ,'Lyons,' France's second.city,willalsofalltotheleft,and thepo­liticallandscapewilllookincreasinglygrim for the right in general and forPresident[acquesChirac inparticular.Thethreat isthatthemomentum fromthemunicipal elections willcarry overto next spring'sgeneral and presiden­tialelections, keeping the.left inpowerinparliament andensuring that Lioneljospin, the Socialist prime ministerwith whom Mr Chirac is at presentcondemned to "cohabit", will defeatMrChiracfor the presidency.

In which case,the rightwillhaveonly itself to blame-sand on severalcounts.Oneisitsinternecineimpulse.MrTiberi, a founder memberwithMrChirac of the RPR; has refused to goquietly.Whyshouldhe,when hewasa loyalassistanttoMrChiracduringthe isyears.from 1977t01995;when Mr Chiracwas himselfmayor of Paris? Instead, Mr Tiberi insistson.running for re-elec­tion,albeit asan independent,andhints that hemayreveal things,MrChiracwouldprefer to keephidden.

A second cause forblame is Mr Seguin's campaign strategy:notonlydoesherefusetocountenance analliance withMr Tiberi,but hehasalso perversely lengthenedtheodds by runningin adis"trict that is a left-wingstrongholdand by placinghimselffourth,notfirst; on the ars's listof candidates. (Paris isdividedinto 20 arc­rondissements, ordistricts, eachwithitsown mayorand.council­lors; these; in tum, choose from. among themselves themayor forthe capital.) Alreadytherearemutteringsthat MrSeguin istoo im­pulsiveto be trusted:witnesshow,in '999, heabruptly resignedasRPR presidentjustbeforethe Europeanelections.

But perhaps themostcareless causewastounderestimate MrDelanoe,Ashe himselfwrylyputs it,"Theythoughtthe bigSeguinwould gobble up the littleDelanoe,"Admittedly,it was an easy

56

mistake to make.AlthoughMr Delanoe's team claim he had hiseye on becomingmayor two yearsago,the fact is that the Social--.ists'firstchoicewasthethenfinance minister, DominiqueStrauss­Kahn, untilhewasruled outbyjudicial inquiries intohisfinancialaffairs. Then there was a second choice; jack Lang, until he wassuddenlydrafted intoMrjospin's cabinet aseducationminister.

Third choice, and thereforethird best? The logic is simplistic, .Gobacka couple of decadesandMrDelanoewasseenasone oftheSocialist Party's best and brightest: a member of parliament,the party'sofficial spokesman,and a friendand allyof itsnewfirstsecretary, Lionel jospin. In short, the slightly-built young manfrom Tunis, whoseparents movedthefamily backtoFrancewhenhewasia.was anapparatchik alreadyclose tothetop.

And then in the mid-icsos the career abruptly faltered: aswitch in the electoral system meanthe had to be "parachuted" from Paristo seek a seat in parliament for theVaucluse, deepinruralFrance, andthevoters said no. A disillusioned Dela­nee retired from the political fray(though retaining a seat on the Pariscouncil) to found hisown public-rela­tionsandadvertising agency.

Sowhy is he back?"I choseto livein Paris. I love Paris. It's a cityof free­dom, culture, dynamism." well, ofcourseit is.but anycandidate will sayexactly the same, and promise votersmoreor less thesame things: cleanerair, less dogs'mess (a Parisian night­mare), better security, affordablehousing, stabletaxesand so on. If MrDelanoe scores higher forcreativity, itis with ideas.to bring unused privatehousing intopublicmanagement, ortoemploy the legions ofjoblessyoungto guard schoolcrossings and so freethe policetofightcrime,Or toofferbet­ter-directed treatment programmesfor drug addicts. Meanwhile, theremust,surely,be a desire to embarrassthe politicaland mediaestablishmentthathad soquickly written himoff,toprove he is more than just the- rare

French politicianwho declares himselfahomosexual.Doubtless there is. After all, as leader of the left in the last

municipalelections, in1995, hewasproud thattheleft defied pre­dictions andtooksix districts, Imaginethesatisfaction ifthistimeittook the majority.

Butthe politicaldesiregoesonlysofar.MrChiracalwayssawthe mayor's sumptuous Hotelde Ville as a stepping-stoneto thepresidential Elysee Palace. Mr Seguin's own' presidential.ambi­tions areno secret. Mr Delanoehasno such pretensions. Hiseco­nomicsadviser, Christian Sautter (sacked asfinance ministerjustoverayearago), saysthat"with Bertrand, it'sParis, Paris, Paris."

Indeed so. When MrDelanoe, chain-smoking his cigarillos,sayshehas other thingsin hislifethan politics, you believehim."Idon'tdream of power." You' believehim.too, when he says hetakes the opinion pollswith a pinch ofsalt.You believeboth himandhisstaffin saying thathenever, ever, underestimates hisop­ponents. Andyoubelieve, too,thatthissomewhat unrevolution­ary com;munaret has a goodchanceofbeatingthem,

THE ECONOMIST FEBROARY17TH 2001

EUROPE

~stscam~not from the goyemmenfssup­portersbut fromtheopposition'sownranks.''We'mustnotsinkanylower,"declaredFne­drich Merz, the ambitious leader of theChristian Democrats' parliapentary group,"Theremust be achangein leadershipstyle."whose si4ewasheon?Af~wdays later,inaneyenmoredirectchallenge'to MrsMerkel,hesuggested that, by virtueofhisoffice, hewasjust aseligible aseither she orEdmund Stoi­ber, head of tile Christian Social Union, theChristianDe111?cr~ts' 'Bavarian sister. party.tol'UnaSr~e oppositi?n's,candidatefor thechancellorshipnextyear.

,T11ougll there isn0ntle inGermany-thatthe partyleader mttstbecome its candidatefOf"hancellor, it had beenwidely assurIledthat MrsMerkel, as leaderof the biggestce!1­tre-rightparty, would carry thejoint centre­right opposition's'colours into the generalelection..Shehad certainly givenevery signthat she would like-to. But as her star haswaned, doubts about her suitability havegrown.Tenmonths ago,opinion polls hadher breathing down Mr Schroder's neck;now she trails him by some 25 percentagepoints.MostGermans say they likethe pas­tor's daughterfrom eastern Germany asaperson,but barelya fifthof them can pictureher aschancellor;

Most,right-wing.voters'nowthinkMrStoiberthe betterbet.Hestilldenieswantingto run for thejob,but he mightyetgofor it ifhe thought he couldwin;at presentheprob­ably does not.,No" Christian Social Unionleader- has everbecome chancellor. The lateFranzJosefStrauss, whodominated Bavariafor many years,ran for the job once,in 1980;he dismallyfailedtogetit.

Sothe search goes on. The technocraticMr Merzis not yet a seriouscontender.Rol­and Koch, the tough premier of the state ofHesse, hasa betterchanceofbeingchoseninthe longer run. But,because of his involve­mentin a party-finance scandal in his ownstate, he will probably hold back until.thegeneral election due in :2006. SomeleadingChristian Democrats, have even begun totalk once more about. Wolfgang Schauble,MrKohl's successorasparty leader,who wasforced to step down a year ago after beingsucked into the national party's slush-fundscandal.Butfew people think he has a seri-ouschanceofacomeback. .

The beleaguered .party.at least hopesSoonto put itsslush-fund scandalbehind it.Lastweek the public prosecutor persuadedMrKohl to agreeto pay a fineof DM300,000($141,000) in exchange for the dropping ofcriminalinvestigations intohis behaviour.Asimilar offer has been made to two ofMrKohl's former.aides, Ifthecourtsapprovethedeal,the full truth willprobablynevercomeoutthe governmenthas no say inthe mat­ter,Theparliamentarycommitteeof inquiryinto the affairsaysit willcontinue its work,but it willbe difficultfor it to getto the bot­tom of the scandal.Sothe Christian Demo-

54

cratsmay be unable to persuade the votersthat they havereallycleanedthemselvesup.

If the party does badly in the state elec­tionscomingup nextmonth in Baden-wurt­temberg and Rhineland-Palatinate, MrsMerkel willagaintakemuch ofthe rap.Somewill call for her to giveup her party chair­manshipt her, chances .of running, for, thechancellorshipwilldiminish stillmore. Hermain comfort is that the alternativeson theright,foreithertask,stilllookinadequate.

European defence

Along march

To BELIEVE some recent headlines.the.. likely first victim of the European Un­ion's embryonic rapid-reaction forcecouldbe Europe's alliancewith America.asthe EUmuscles in rudely on NATO'S military turf.Yet, even. if that were itsambition-infact, itisvolunteeringonlyfor somebits ofsoldier­ingthat NATO decidesnot to do-the so-led

forceto be assembledby 2003is more likelyto be severely hobbled in itsformativeyearsby politicaland militarygrowing pains,andby Europeangovernments'reluctancetoputup the' money needed, to match perfor­mance to promise.

EU governments together spend abouttwo-thirds of what more globally-commit­ted America spends on defence.and thereare SOme zm EU citizensunder arm's. $0 itought not, in theory, to be hard to meet theEU'S goalof being able by 2003 to assembleup to 60,000 combat troops, deploy themwithin 60.days and sustain them for upto ayear.Butitwillbe harder than somedefenceministersseemto think..

The troops have been found simply bygiving soldiers .alreadyassigned,to NATO anewEO "hatvfas happens when, say,British

or Frenchtroops are assignetl to UN peace­keepingduties). What theysblliack-as firstthe Gulf war, thenthecrisdin Bosnia andKosovo demonstrated-is ub-to-date COm­mand-and-control, the right equipment,from communications to p~ecision weap­ons, and the transport aircrJft and ships togetthem swiftlytoa trouble-Ipot.

Europeanshavebeen fai ingtocomeupwith thesegoods in NATO fof years.Stickingan EU label on their plans P.Jay make Eu­rope'sgovernments morelikely tostump upthe cash, thereby benefiting NATO too; Butresultssofarhavebeen meagre.

Defence budgets,across. the EU have'been plundered to meet tiglltspending tar­getsforthe launch of the singlecurrency.Yetmilitaryspending willneedto be sustainedat a minimum-of 2% of GDP a year over thenext decade if the missing efence equip­ment is to be paid for.Afterlyears of steadycuts(seechart),eightof the 1~EU membersofNATO have told the alliance this year thatthey plan to increas.e defe~ce spending.inreal terms, though the extr will be small.Franceand Germany are n ' t among them,though Francewillspend m,bre on procure­ment for what by 2003 willbe its newlyall­professional army.Germani's defencemin­isterseems to be hoping tojfind extra cashmostly from base closures'f.ibut already hissums.arefailing toadd.up,

lflittle extra moneycan '. efound.rnightexisting budgetsbe spent m. re wisely? Ger­many, to the puzzlernentoflsomeof it ownsoldiers, plans tospend scarcedefenceeuroson satellites that NATO already has. Butde­fencebudgetscould bestret~hed a bit to af­fordmoreusefulkitby elimjnanngduplica­tion and pooling some exishngoperations:forexample,air-to-air refuelling.

Literally to give themselvesa lift,Britain;France, Germanyand Spainareamongthosehoping to buy Airbus. Ihdustrie's newA400M heavy-lift transpdrt. aircraft. Butthese planes will not be r~dy by the W03deadline,sothe ED isconsideringleasing Uk­rainiantransport aircraft,asIDritain and oth­ershave done forux-relatedduties.

Eventhose staffingthe iliew committeesin Brussels that are busy pJtting the ED de­fenceefforttogetheradmit that by 2003 theywill at best be ready for sore verymodestmilitaryduties,not the rangeof tasksthe EDhas set itself. As a pamphleqto be publishedshortly by the London-based Centre forEuropeanReformargues», Jvhetherthe EU'Seffortevolves into somethirlg moreeffectiveovertimedepends on Eurode's politicalwill:to back Europe's SOldiers't.Whether repre­sentingthe EUOfNATO, wit., the equipmentthey need, and to work ou who-certainlynot those Brusselscomm ttees-swill-leadsuch a forceintoharm's wa~.

on" by1 11esAndreani,Chris­

toph&rtram and~harles Gra~tl" .' .' .... ".,THE ECONOMIST/FEBR.UAR.Y 17TH 2001

ii

EUROPE

ests came not from the government's sup­portersbut fromthe opposition'sown ranks.~"Wemustnot sinkanylower,"declaredFrie­drich Merz, ,the ambitious leader of· theChristian Democrats' parliamentary group."Theremustbe~ changein leadershipstyle."Whosesidewasheon?Afewdayslater,irianevenmoredirectchallengetoMrsMerkel,hesuggested that, by virtueof hisoffice, he wasjust aseligible aseither sheorEdmund Stoi­ber, headofthe.'~hristianSoci~rUnion,th~ChristianD~,1118crats',Bavarian: sister, party,to run as theopposition's candidate for thechancellorship nextyear. .

Thoughthereisno rulein Germanythatth~ party leapermust becomeits candidatefor chancellor, it happe.eflwidely assumedthat MrsMerkel, as leaderof thebiggest cen­tre-rightparty,wouldcarrythejoint centre­right opposition's :colours into the generalelection. Shehad certainlygivenevery signthat she would.like-tc.But as her star haswaned, doubts- about her suitability havegrown. Ten months.age.opinion polls hadher breathing down Mr Schroder's .neck;now she trails him by some 25 percentagepoints.MostGermanssaythey likethe pas­tor's daughter fromeastem Germany asaperson,but barelya fifthof them canpictureheraschancellor.

Most.right-wingvoters now think .MrStoiber thebetterbet.Hestilldenieswantingto run for thejob,but he mightyetgofor it ifhethoughthecouldwin;at presentheprobeably does.not. No. Christian Social Unionleader-has everbecome chancellor. The lateFranzJosefStrauss, who dominated Bavariaformany years,ran for the job once,in 1980;hedismallyfailedtogetit.

Sothe search goeson. The technocraticMr Merz isnot yet a serious contender.Rol­and Koch, the tough premierof the state ofHesse, hasa betterchanceofbeingchoseninthe longer run. But, becauseof his involve­ment in a party-financescandal in his ownstate, he will probably hold back until thegeneral election due in 2006. SomeleadingChristian Democratshave. even begun totalk once more, about Wolfgang Schauble,MrKohl's successor aspartyleader,whowasforced. to step down a year ago after beingsucked into the national party's.slush-fundscandal,Butfew people think he has a seri-ouschanceofa comeback '

The beleaguered .party at least hopessoon to put itsslush-fund scandalbehind it.Lastweek the public prosecutorpersuadedMr Kohl to agreeto pay a fineofDM300,000($141,000) in-exchange for the dropping ofcriminalinvestigations intohisbehaviour,Asimilaroffer has been made to two of MrKohl's former.aides, Ifthecourtsapprovethedeal,the full.truthwillprobablynevercomeout.The governmenthasno say in the mat­ter;Theparliamentarycommitteeof inquiryinto the affairsaysit willcontinue its work,but it willbe.difficultforit to get to the bot­tom of the scandal.SotheChristian Demo-

54

cratsmaybe unable topersuade -the votersthat theyhavereally cleanedthemselves up.

If the party doesbadly in the stateelec­tionscomingup nextmonth in Baden-Wurt:-::temberg and Rhineland-Palatinate, MrsMerkelwill again-take muchof therap.Somewill call for.her to give up her party chair­manship.her chances ofrunning for thechancellorship willdiminish stillmore.Hermain comfort is. that the alternativeson theright.foreithertask,stilllookinadequate..

European defence

Along march

To BELIEVE some recent headlines, the. likely first victim of the European Un­ion's embryonic rapid-reaction: force. couldbeEurope'salliancewith America, as the EU

musclesin rudely on NATO'S military.turf.vet.even.if.that were itsambition-infact, itisvolunteeringonly forsomebitsof soldier­ingthat NArD decidesnot todo-the su-led

force to be assembled by 2003 is more likelyto be severely hobbled in its formative yearsby political and militarygrowing pains,andby Europeangovernments' reluctance to putup the money needed to match. perfor­manceto promise.

EU governments together spend abouttwo-thirds of what more globally-commit­ted America spends on .defence; and. thereare some zm EU citizens under:arms. So itought not; in theory, to be hard to meet theEU'S goalof being able by 2003 toassembleup to so.coo combattroops, deploy themwithin so.daysand sustain them for up.toayear.Butitwillbe harder than somedefenceministersseemtothink

The troops have been found simplybygiving soldiers.alreadyassignedto NATO anewsu.rhat" (ashappens when, say,British

or Frenchtroops are assigned to UN peace-keeping duti~s). What they stilllack as firstthe Gulfwar.fhenthecrises in BosniaandKosovo demonstrated-cisup-to-date com­mand-and-control, the right equipment,from communications to precision weep­ons.and the transport aircraftand ships togetthem swiftlyto a trouble-spot.

Europeanshave been failing tocome: upwith these goods in NATO for years.Stickingan, su labelon. their plansmay make Eu­rope'sgovernmentsmore likely to stump upthe cashthereby benefiting NATO too. Butresultssafar havebeen meagre.

Defence.budgets across the EU have,been plundered to meet tightspending taregetsfor the launch of thesingle currency, Ye,militaryspendingwill need to be sustainedat a minimum of 2% of GDP a year over thenext decade if the missing defence equip­ment isto bepaid for. Afteryearsof steadycuts (seechart),eightof the 11 EU members-ofNATO have told the.alliance this year thatthey plan to increase defence spendinginreal terms, though the extra will be small.Franceand Germany are not among them,though France willspendmoreon procure­ment forwhat by 2003 willbe itsnewly all­professional army.Germany'sdefencemin­ister seems.tobe hoping to find extra-cashmostly from base closures, but already hissumsarefailingtoadd.up,

Iflittleextramoneycan be found,mightexisting budgetsbe spent morewisely? Ger­many, to the puzzlement of someof it ownsoldiers, plans tospend scarce defenceeuroson satellites that NATO already has. But: de­fencebudgetscouldbe stretcheda bit to af­fordmoreusefulkitby eliminating duplica­tion and pooling-some existing.operationsforexample,air-to-air refuelling.

Literally togivethemselves a lift, Britain;France,GermanyandSpainareamongthosehoping to buy Airbus Industrie'snewA400M heavy-lift transport aircraft. Butthese planes will not be ready by the 2003deadline.so the EU isconsidering leasing Uk­rainiantransportaircraft, asBritain and oth­ershave doneforUN-related duties.

Eventhose staffingthe new committeesin Brussels thatare busy putting the Elf de­fenceefforttogetheradmit that by 2003 theywill at best be ready for some very modestmilitaryduties,not.the rangeof tasksthesuhas set itself. Asa pamphlet to be publishedshortly by the London-based Centre forEuropeanReform argues's.whether the EU'S

effortevolves into somethingmoreeffectiveovertime dependson Europe's political will:to back.Europe's soldiers, whether reprc­sentingthe EU or NATO; with the equipmentthey need, and to work out who-eertainlynot those. Brussels committees-cwillIeadsucha force intoharm'sway.

*"Europe's Military Revolution" by GillesAndreani,Chris:'"toph Bertreniand.Charles Grant

--~---~----_.----"

THE ECONOMIST, FEBRUARY 17TH 2001

~:~;::t mayor for paril?mistaketo make.AlthoughMr Delanoe'steam claiJ he had hiseyeon becoming mayor two years ago, the fact isthal theSocial­ists' first choice wasthethenfinance minister,Dominihue Strauss­Kahn, until hewasruled outbyjudicial inquiries intohisfinancialaffairs. Then there was a second choice.jack Lang, bntilhe wassuddenlydrafted intoMr)ospin's cabinetaseducatio!' minister.

Thirdchoice.and therefore third best? The logic Is simplistic.Gobacka couple of decades and Mr Delanoewas sJen asoneofthe Socialist Party'sbest and brightest: a member 01parliament,theparty'sofficial spokesman,and a friendand allyot itsnewfirstsecretary, Lionel )ospin. In short, the-slightly-built Iyoung manfromTunis, whoseparentsmoved the familybacktoFrancewhenhewas14,wasan apparatchikalreadyclosetothe topl

And then in the mid-issos the career abruptly faltered: aswitch in the electoral s~stem meanthehadtobe "parachuted" from Paristo seek a seat in parliament for theVaucluse,deepinrural Fr4nce,andthevoters said no. A disillusioned Dela­nee retired from. the rlolitical fray(though retaining a seat bn the Pariscouncil)tofound hisownlpublic-rela­tionsand advertising agertcy.

SO why is he back?"Ithose to livein Paris. I love Paris. It's a!city of free"dom, culture, dynamism," Well, ofcourseit is,but any candi~ate willsayexactly thesame.and premlse votersmore or less the same things: cleanerair, less dogs' mess (a Pahsian night­mare), better security] affordablehousing,stable taxes an~ so on. If MrDelanoe scores higher fo~ creativity, itis with ideas to bring unused privatehousing into public management, ortoemploy the legions ofjbbless youngto guard school crossings and so freethe policeto fightcrime,ohooffer bet­ter-directed treatment' programmesfor drug addicts. Meanwhile, theremust, surely; be a desire to embarrassthe politicaland mediaeltablishmentthat had soquicklywrittJn him off,toprove he is more thanjust the rare

Frenchpoliticianwho declareshimselfa homosexual,Doubtless there is. After all, as leader of the left in the last

municipalelections, in '995,hewasproud that the leftdefiedpre­dictions andtooksixdistricts.Imaginethesatisfactionifthistimeittook the majority..1

But the political desire goesonly so far. Mr Chirac always sawthe- mayor's sumptuous Hotel de Ville asa stepping-stone to thepresidential Elysee'Palace. Mr Seguin's ownpresid~ntial ambi­tions areno secret. Mr Delanoe hasno such pretensions, Hiseco­nomics adviser, Christian Sautter (sacked asfinancefrninisterjustoverayearago);says that "with Bertrand, it's Paris, Paris, Paris."

Indeed so. When MrDelanoe,chain-smoking his cigarillos,sayshe hasother thingsin hislifethan politics, you ~elievehim."1don't dream' of power." You' believe him; too,whenhe says hetakes the opinion pollswith a pinch of salt.You believeboth himandhisstaffinsayingthat henever, ever, underestimates hisop­ponents. Andyoubelieve, too; thatthissomewhatdnrevolution.;.arycom;munardhas a goodchanceofbeatingthem.]

Bertrand Delanoe, a

N.," or solong ago,it wasa politicalgiven: Pans.vthemostbeau­. tiful city in the world"(a constant, and perhaps justified,

self-description), wasand alwayswouldbeabastionofthe Frenchright arid the Rallyfor the Republic (RPR), as the main Gaullistparty is called.Forget thefinancialscandals comingto lightfromtheissos and'early19905,'when politi~iaI'lsgave fictitious jobs totheirfriendsand stuffedparty coffers ",ithcontractors' kickbacks,That couldbe solvedby castingthep:e~entmaY9r,)ean Tiberi,asscapegoat for the past and selecting Philippe Seguin, a partyheavyweight(literally aswellas figll:~tively), as candidate for thefuture.Come the municipal electiq!]10fMarchnth .and isrh, thecapital'svoters would ,once againv9t~,s()n_~ervati?~<i\fter all.MrSeguin would surely see off hi~ S8cialist oPP9!]ent, BertrandDelanoe,a 50-year-old senator forParis solittleknown thatsomeontheright teasehim asr'Bernard'Y": > '

So much for hubris. For the Pcast .month the opinion pollshaveallbeenpredicting a victory forMr Delarioe;even '·the' -RPR'S' 'official "spokesmannowspeaks ofdefeat.Take a creativereadingofhistory(themodem mayor"alty of Parisdates back only to 1977)and Parisis about to fall to the left forthe first time' since the revolutionaryCommune of1871.Add the strongposesibility. thatLyons, France's"secondcity.willalsofalltotheleft,and thepo­liticallandscapewilllookincreasinglygrim for the right in general and forPresidentjacques Chirac in particular.Thethreat is that the momentum fromthemunicipal elections willcarry overto nextspring's general and presiden­tial elections; keeping the.left inpowerinparliamentandensuring thatLioneljospin, the Socialist prime ministerwith whom Mr Chiracisat presentcondemned to "cohabit", will defeatMr Chirac forthepresidency.

In which case,the rightwill haveonly itself to blame-and on severalcounts.Oneisits internecineimpulse.Mr Tiberi, a founder member withMrChirae of the RPR,· has refused to goquietly.Whyshouldhe.when h~was a loyalassistanttoMrChiracduringthe 18years,from1977 to1995;whenMrChiracwas himselfmayor ofParis?Instead, Mr Tiberi insists on running forre-elec­tion, albeit asan independent, andhintsthat hemayreveal thingsMrChiracwould prefertokeephidden;

A second cause forblame is Mr Seguin's 'campaign strategy:notonlydoes.he refuse tocountenance an alliancewithMr Tiberi,buthe hasalsoperverselylengthenedtheodds by runningin adis­trict that is a left-wingstrongholdand by placinghimselffourth,notfirst,on the eva's listofcandidates; (Paris isdivided into 20 ar­rondissements,or districts,each withits ownmayor andcouncil­lors; these, in tum,choosefrom among themselves themayor forthe capital.) Alreadytherearemutteringsthat MrSeguin istooim­pulsive to be trusted: witness-how; ino1999, he abruptly resigned asRPR president justbefore theEuropean elections.

But perhaps the-most careless causewas tounderestimate MrDelanoe,Ashehimselfwryly puts it,"TheythoughtthebigSeguinwould gobble up the littleDelanoe,' Admittedly,it was an easy

56

'.

EUROPE

The criminal crucible that is KosovoPRISTINA

"l A lITH his blackthorn stick, formalV Vbearing and toughtalkof"zerotoler­ance", Christopher -Albiston is a police':'man's policeman;Butthe UN'S new policechief in Kosovo.a 48-year.:...old veteran ofthe Royal: Ulster Constabulary,may soon feel that the problemsof Northern Ireland are simplecompared with the devil's brewhehas nowtaken on.

With NATO and the UN fun­ning Kosovoas a virtual protec­torate, there-is one peacekeepingserviceman, or-'foreign or localpolice officer, for every 36·of its1.8m people-cone of-the highestratios in the world. Butthen Ko-.sovo's guardians face a complexmixture' 'of threats: an ethnicstand-off in the town of Mitrov­ica,a small war to KOSQVO'S east,and plainbid-fashionedcrime.

In this' volatile mess; one ofMrAlbiston's mosturgenttasksisnot just to arbitrate between eth­nic Serbs and Albanians but toimprove: relations between hismultinational: police force andthe Frenchsectionof NATo'sKfor mission:each accusesthe other ofbeingunhelpful.

Buthis hardest taskis simplyto tacklecrime.DespiteKosovo's ethnichatreds,thecriminalclans ofall stripes readilyco-op­erate inKosovo'slively underworld.Sotoodo the Macedonians, "Montenegrins ·andother East Europeanswho· do' a 'thrivingtrade in weapons, illegal immigrants,drugs, prostitutes, cigarettes, petrol and

thority of the Haguecourt and the Yugoslavjudiciary.If this provesunworkable,the au­thoritiesin Belgrade may stillinsiston hold­ingat leasta short trial before packingtheirex-presidentoffto the Netherlands.

N; Mr Kostunica weighs the politicalodds,hiseconomicadvisersarepointingoutsome hard realities. ThoughYugoslavia canlivewithout the small amount of direct aidpromisedby the Americans, it cannot easilymanage without help from multilaterallenders,sinceiturgentlyneeds to reschedulean external debt of perhaps $12 billion. Itsnominal GDP has fallenby half overthe pastdecade,toonly$10 billion.Andthe Yugoslavstateowesanother $4.5billiontoitsown citi­zens, whose hard-currency bank accountsare frozen,and as much again in debts de­nominated in localdinars.

Miroljub Labus, the Yugoslav deputyprimeminister,has saidhebelievesitshouldbe possible, to negotiatesome sizeabledebtrelief within four months, but not if the

52

muchelse.Kosovo worried the world'scrime:

fighters longbefore NATO moved in. It liesacross the drug route westward from Af­ghanistan,Pakistanand Turkey, in an area,

between Albania, Bulgaria; ·Macedoniaand Montenegro, where frontier controlsare lessthan watertight.Every month fourto' eight tonnes of heroin are thought 'topasswestwardthroughthe Balkans. When .Norway's police last,month made theirbiggest-ever heroin haul, they arrested acoupleofex-guerrillaKosovars.

Thesedays,however,most of the drugtraffic skirtsround Kosovo, because NATO

country is again isolatedbecause of its lackofco-operation with the court atTheHague,andnot ifa complexdivorcewith Montene­groalsohas tobe arranged.

Atleastthereisone formofintemationalco-operation that MrKostunica does enthu­siastically. support: working with westerngovernments to defuse the bomb ticking

. awayin the Presevovalley.On that score, heand his government in Belgrade have wonplaudits from' some' unlikely quarters, in­cluding the United States,the EU and NATO,for restraint in.dealing.• with the guerrillaswho have dug into the. "ground securityzone",a five-kilometre (three-mile) strip onthe boundary of Kosovo. Under the June1999 agreement that ended NATO'S air war,Yugoslavia may deploy nothing more thanlightlyarmed policein thisarea.

Buttheguerrillas, knownas theArmyfortheLiberation ofPresevo,Medvedjaand Bu­janovac (UCPMB) after the main towns in thestrip;havetaken advantageof that restraint

troops on the lookoutfor illegal weaponsmightalsospot lorriesfilledwith narcotics.What does flood through the provinceisariverof youngwomen from Moldova, Ro­mania, Bulgaria and Ukraine,lured byof­fers of fictitious jobs in Western Europeand then soldinto sex-slavery.

Afterten yearsof war, the Balkans arealso awash with weapons, from pistols to

heavy mortars. The anti-tankrocketfiredat a British intelligenceheadquarters in London last au.­tumn by the Real IRA may havecome from Kosovo.Tn a societytraditionallyarmed and with a fe­rociousappetite for domestic andclan violence, where the rules ofthe medievalblood feudoftenstillhold good, armed crime and kid­nappings areboth common.

Tofight all this, the UN fields3,500-plus policemenfromao-oddcountries;many bring their ownintelligence agencies along. Somepolicemen,such as theNorthernIrish, Canadians, Austrians,Scandinavians'and:' Egyptians.are doing better than others. MrAlbistonhas to make it all work.A new organised-crime intelli­genceunitin which 17 of the jo

officers are British, is cited as oneexample ofthe UN'S determination to gettougher; so too are draconian anti-terro­rism lawsnow beingdrafted Butboth thenew policechiefandHans Baekkerup, theDanewho hasjust started running Kosovofor the ox, willhave toconvincethe worJ.d(including the criminals)that they willnotcondone crime-as -their . predecessorswere sometimesthought todo-when thecriminalshavepoliticalfriends.

to reinforce their positions both inside thesecurity zone and even deeper into Serbia,close to the main road from Austria toGreece. NebojsaCovic,a'deputy primemin­isterof Serbia, went to NATO'S headquartersthis week to present a plan to"demilitarise"the regionwhileattendingto the woesof theimpoverished Albanians in the affectedarea.

Both the governments in Belgrade andNATO are having.their own lively debatesabout how far this unlikely friendship be­tween Serbiaand the alliancecan go.Butal­ready NATO .... peacekeepers who patrol theeastern stripof Kosovo and Serbian troopsare co-operating rather well. The NATOforces regularlynab Kosovars tryingtodossthe border. NATO officials are even discuss­ingthe ideaofnarrowingthe securityzonetogive the Serbianforces more freedom of ac­tion.Atleast for Serbs, a hopefulnew moodindeed.

THE ECONOM\STI'EBRUARY 17T1-1 200~

BRITAIN

It's dark upncrthINVERNESS

DESPERATE though the government is. to be seen to be bridging the "digital

divide", its appetite for using taxpayers'money to bring broadband to the ScottishHighlandsseemsdistinctlylimited.There­luctance to subsidise bringing the latestthing in telecommunications to one of theremotestand most thinly populated .partsofBritain might at first seem surprising,given the region's pastexperience.

In 1989,the localdevelopment agency,Highlands and Islands Enterprise (HIE),gavea sceptical BT £4-9m ($pm) towardsthe cost of upgrading the region's tele­phone exchanges to digital standards. Inaddition, BT spent a lot of its own moneyrunning fibre-optic cables up and downthe glens. Soin 1993it came to pass that forabout £251I1, theHighlandsand Islandsbe­carneoneofthefirstbitsofBritainto haveatelephone system capable.of.providing astate-of-the-artrsorefintegrated systemsdigitalnetwork)service.

Ken:MaoTaggart, -HIE'S .head-of tele­communications.saysthat thereareabout3,300jobs in the region, rangingfrom call­centre work to new -Internet businesses,which -could not exist without modemcommunications.Heexpectsthere willbe5,000 such jobs by 2005. Enthused by thisrather low-costjob creation, HIE has gone

detestit;and stubbornlyrefusetoco-operatewith rivals,

BT has. learnt from the delayingtacticsthat have been skilfully deployed by Amer­ica'sBabyBells. Evennow, fewerthan 2% ofAmerican.access Jines have been unbun­dled, and severalwould-bebroadband ser­viceprovidershave gonebust.Rivals accuseBT ofoffering up-an unattractive mix of ex­changesforco-location,and alsoofexagger­ating the difficulties of getting the equip­mentin.Currently, zooexchangesare beingsurveyed for co-location,butMr MaineofKingston Communications says that, theones that have been chosen donot createalargeenoughnumber ofpotentialcustomersin anyone area to makeit economically via­bletooffer: a service.

According toRichard Feasey, who is inchargeof regulatoryaffairsat the British armof WorldCom, another operator that re­cently.withdrew from LLU. trials, whereasBT'S engineersmay want to doa goodjob inmakingLLU work.business.strategyis setbythe firm'sdominant retailoperation.There­taildivisionbringsin the moneyand hastheloudest voicein the boardroom-and it hasevery interest in delayingthe arrivalof un­bundled DSL, which it believes will allowcompetitors to undermine its highly profit-

58

orito giveEarnof mainly EU money to Vo­dafoneand Cellnetto provide95% ofHigh­landersaccess tomobiletelephony.Thus,atelecoms company, has been givenEjm towire the scattered campuses of the newUniversity of theHighlandsand Islands.

However,for B'T the resultshave beenmoremixed.Mostof the dark fibreitsoex­pensively'laid remains stubbornly unlitand, unused; BT won't say exactly howmuchof itsHighlandfibreisdark,claimingit isa commercial secret. But there is evi­dently enough of it for WendyAlexander,the Scottish enterpriseminister,to use it asan argument to counter those who thinkthat the governmentshouldnowsubsidisebringing broadband technology to theHighlands. If the fibreremains unlit it willbe likeone of those roads that politicians

.build to service factories that never mate­rialise. '

The problem with broadband is thatnobody yetevenknowshow itwillbe pro­vided in such sparsely populated •areas'where cable does not penetrate and ex­changesaretoo far fromcustomersforOSLto operate,Satellite or fixed wireless linksare possible, but the technologies and theeconomics .are untried.Ms Alexanderthinks that ratherthan-subsidise the.sup­ply of broadband, ,it would be better to

able business of leasingdedicated lines tobusinesses. Mr Feasey does not blameOftel,"No regulator", he says;"can adequately re­strainthe commercialimperativesofa verti­callyintegratedincumbent."

Others take a more hostileview ofbothOftel under' its current director,'David Ed:­mends, and nr. Mr Maine accuses BT notonlyof stoppingthird parties-such ashim­self-from offering broadband, but also ofdenyingthe country the benefitsof the tech­nologybydoingsolittleitself. Heisata losstoexplainwhat he seesas the "laid-back"atti­tude of both the regulator and the govern­ment.Adirectorofa firm that isusingDSL asa platform for video-on-demand says thatBT has never approached osr. in the rightway."Theyare quite visionless. Other busi­nesseswant to work with us.WithBT,whatcomesback isalumpen sullenness,'; Othersclaim that the timidity of the regulator indealing with "anti-eeompetitive, practicesthat areendemicwithinwr" istoblame.

A common complaint is that Mr Ed­monds refuses to use the extensive powersOftel has under the Competition Act.Theyallege that he worriesabout BT'S threats toresort to judicial reviewand is prepared toprosecuteunder the CompetitionActonlyifhis legaladvisersbelievethat there isat least

Hi-tech-des res

identify the likely demand fof it.In a smalltown, one of the biggest initial users ofbroadband will be the public sector­schools, hospitals,and local!councils. MsAlexander reckons that -telllngtelecomsfirmswhat the Scottish govdnment plansto spend over the next thrJe years willmakeiteasierforthemto reachinvestmentdecisions. It is-a sensible a~proach, butHighlanders waiting for th~ delights ofvideo-on-demand and high-speed In­ternetaccessshouldnot hold!heirbreath.

a 70~)(, chanceof success-a -J1e.. ryhighbar forany testcaseto overcome.. .

MsHewittblamesother jeople.Thepro­blems,she told a parliamenary committee,havearisen''becausethe las~administrationand the previoushead of Oftel[DonCruik­shank, now chairman of th~ London StockExchange] were not interested in local loopunbundling." She professesl complete faithin Oftel'scurrentdirector,pdintingtoa moreaggressive stance in recentn10nthsand pro­gress by ar in readyingmbre~b... f itsexchange.sfor co-location, If firmssue, as WorldCom,Kingston and Thus no lon&~r want-to pro­ceed with co-location,that is their commer­cialdecision-they can alWIYS change theirmind later on. That.is a fair point. Kingstonhopes to re-enter the reside' tial broadbandmarket next year, perhaps by pooling re­sources with Energis-calth ugh how thatsquares with the governrr!ent's professeddeterminationforBritain tohavethe world'smostcompetitivebro~dban& marketwithinjust fouryearsisnotentirelyclear.

The ironyis that er itsel~hasproposed apossible solution to the present unhappysituation. Under far-reaching plans drawnup lastyeartobreak itselfinjoseparate busi­nesses, BT is seriously consideringdividingits retail and wholesale operations, just as

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What women want"TA DONNA emobile," wails that duke in ''Rigoletto''; and

Lwomen are especiallyfickle-when it comes to voting.Opin­ion polls consistentlyfind them more likely than men to declarethemselves "undecided" about which party they intend.to sup­port in the comingelection.On the other hand, once they havemade up their minds, women are morewilling than men to dosomethingabout itFor two,decades now, British women havebeen likelier than menta casttheirvotes;in thegeneral electionof1997,J%·morewomen voted than men-.e turn-out gapof almostzm votes. Which leads the Fawcett Society, an organisationthatchampions sexual equality, todeclare happily, "women's voteswilldecidetheoutcomeofthe nextelection,' .

Whereas •.American .womenhavetended tosupport the Demo­crats" British women" especiallyolder women" are more Conserva­rive.why is a bit of a mystery,sincethe Labour, Party has, always,es­pousedenthusiastically the sortsofissues-shealth, education-thatwomensay they careabout. Itmaybe that women have tended to shyaway fromLabour because it cameout ,oftheonly environment moremisogynistic than theTories' gentle­men's. clubs-cthe trade unionmovementCertainly, as the linksbetween the Labour Party and theunions have weakened,so the gen­del'gaphas narrowed.It washugeinthe. 1950S, at about 17points. It nar­rowed in the 1980sj widened againin1992;and, in1997, shrank toacou­pIeof percentagepoints.

Surely, with its caring, sharingpolicies, New Labour should beableto reverse the gendergap?Afterall, the ladies do love TonyBlair.Notwithstanding the humiliationthe Women's'Institute inflictedonhim last year, when its membersbooed hirn into a flummoxed si-'Ience, women likehim much bettertban they liketbat smug,patronising, baldMrHague. Yet even so,women are,lesslikely than men to expresssatisfactionwith thegovernment,and have been slower than men to forgive the gov­ernment after lastSeptember's fuelcrisis, when Labour'spoll rat­ingsplungedbrieflylowerthan the Tories'.

what has the governmentdone wrongr It has wooed womenassiduously. Bydiscriminatinginfavour of femalecandidatesbe­fore the,1997 election,New Labour got a record 101 women intoParliament. Thatgaverisetoa famousphotograph-now dericied,as patronising-of Mr Blairwith his "babes".Several women gotbigjobs:HarrietHannan,wasmade secretaryof stateforsocialse­curity,overthe head ofFrankField, the MP who had done most inoppositionto"think the unthinkable" about welfarereform.Mar­garetBeckett became president, of theBoard of Trade. Therewaseventalk;beforethe lastelection,ofa ministryforwomen.

Theargumentformore women politicianswasnotjust that fe­malevoterslikedseeing their prettyfaces,but alsothat they woulddevelop more female-friendly policies. And the government hasindeed comeup with some(whisperit)feministpolicies onchild-

careand employment.Butmuchof thishasbeendown totheonlyrecentlymarried, still-cbildless chancellor, Gordon Brown; whileove.r other.sortsof "women's issues"the goverrimep•t has got itsknickers in a twist., , : '

Bothmain partiessuspect that one wayinto woren's dispro­portionatelyconservative hearts is to go on about the traditionalfamily. In oneofseveralneuroticmemosleakedlastyear;MrBlairmoaned about how unfair itwas that he of allpeoplewas seenas"outoftouch"with"gutBritish instincts"on severali§sues, includ­ingthe family. Hedemanded robustpolicyinitiativJswith whicbhe could be "personallyassociated". Butsincefamilies nowadayscomein allshapes and sizes, and it isnot coolto be '~udgmental",

thishas not been soeasy.Whereas rhe. donservatives

have chosen to makclthe case'fortraditional,marriage, ~nd to reflecttheir preference by testoring themarried-couple'staxalIowance, La­bour ministershave fallenout overwhether it is right ev~n to endorsemarriagein principle. fhe firstdraftofa forthcoming whitepaper on thefamily, drawn up by P~ulBoatengatthe Home Office, dared to venturethe opinion that Chit•.ren broughtup by married coupl ,sO were morelikely to have stabl • childhoods.Thisassertionatrractellthe scornofa triooffemalerriinisters-Ladyjay,Margaret Hodgeand tessa Jowell­who argued that it,,\,ould offendsingle, co-habitingor ~ivorced peo­ple who were alsocapable of beingperfectparents.Right&ous praiseoftraditional family strbctures mightanyway sound a, diJcordant notefrom a cabinet in whtch about oneministerin three has been divorcedor eo-habits, and w~ich containstwo openly gaymembers.Thecon-

_, tentious white papei, now awaits§.I '.,'. MrBlair's castingvoter

" , Nor has ,the incr6ased number-of MPS le~iothepoliticalpower that some had hoped. Thatwomen'sminis~iy;~orone'thing,never came into being: all thatemerged was a "women's unit" which has attraeted as muchmockeryasrespect.especially afterconveningasunimiron ''bodyimage",and now seemsto be fadingawayaltogethe~. Asfor tbosehigh-profile, cabinet ministers,'Ms Hannan was t'acked in MrBlair'sfirst reshuffleand MrsBeckett wasdemoted. '

I~ :¥t~lair does win a second term,he is likely l 0 have fewerbabes toposewith;But, ashisfirsttermhasshown,Having a repre­se•.nt.a.t.ive pa••f.liamentary cadredoesnot, in itself, SOlt~e anything.Ithas Ilot ,helped Labour resolve, the contradict ens betweenwomen'straditional, and modem.roles, The MPS aave attractedmost publicattentionfor their strongviewsabout lJi'by-changingfacilities at the Houseof Commons (for) and the longhours-Mrswork (against). Thesepreoccupationsmayhave suggested to vot­ers that femaleMPS arejust as self-serving and remdteas the maleofthe speciesiswidelyheldtobe.Thegapbetweendoliticiansandordinary people may be even more important-aqtl difficult-tobridgethan the gendergap.

60

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INTERNATIONAL

ABUJA

~-------~-----~~------~~-----~--,~

cal" reasons. It is.a question of. prestige:northern bigwigs are determined to haveastadium in.theirpatch.

The project is just one of several issuesthat have made people question Mr Oba­sanjo's priorities. Before his electioninl999,the soldier-tumed-politician was a memberofthe board of TransparencyInternational,a Berlin-basedgroupthatcampaigns against

graft.He promised,in his in­augural speech, to wage anunceasing fight against thecorruption that bedevils hiscountry, and to assert theruleoflaw,Later, he set up anew anti-corruption agency.

Despite Mr Obasanjo'sprofessed zeal, however,only one senior official--thehead of the country's avia­tion authority-shas beensacked for corruption, andnotonehasbeenjailed.Law­makers have mocked at­tempts by the police to in­vestigate MPS forcorruption.Graftremainsasmuch apartof doingbusiness.in Nigeriaasever,including.itappears,in theinstigationof big-lbud­get infrastructure projectsthat allowplentyof roomfor

thearmy ofinvolvementin past massacres",",prompting pressure-groups to demand in­terviewswith the topbrass.

Meanwhile, after falling for a few years,violence is on the increaseagain.Over 500

people have been slaughtered in the pasttwo months. Shadowybands of killers con­tinue towipeoutentirefamiliesin attacksonisolated communities in western'Algeria.Thearmy's intelligence is not good,and themilitants do not followa predictable strat­egy.Somepeople,however,suspect that thekillings suit thebroader purposesof thoseinpower. They show that "civil concord" is amyth-e-so the army must keepcontrol.

Moreworryingfor the generals, saydip­lomats, is the number of soldierskilled bythe Salafist Group for Preaching and Comebat, which operates in the centre of thecountry.Rumours speak of some 200 sol­diersrecentlykilledinefficient assaults.Un­likethe throat-slittersofwesternAlgeria, theSalafis confine their attacks, to military tar­gets, Thearmy has recentlybombarded thegroup'shideouts in the forestofSidiAliBou­nab, but the results are uncertain. Indeed,theentire military.situation,likemost press­ingquestionsinAl,geria, isopaque.

An odd sort of concord

unending flow of embarrassing que~ti91'1s

from human-rights organisati?)!s. Despiteinviting;such groupstovisitAlge~ia'!\!lrBou-:­teflikahas not succeededin stemmingtl1,eircriticism. Formerofficers continue to accuse

Nigeria

Bill, borrow and embezzle

SOUNPING only faintly .embarrassed,"" President' Olusegun Obasanjo .claimsthat his government has no choice but, tobuild the grand new stadium going up nearthe capital,Abuja.Afterall, it inherited thedecision to hold the Z003 All-Africa Gamesin Nigeria,from, the military, regime•.thatcame, before it. But some spoilsports stillwonder Why a country that recentlyhad toreschedule$z3billionof for­eign debtis building a sta­dium due.to.cost at Ieast 38billion naira (around $347ffiat the official exchangerate).That is roughly the amountthe, government.has bud­getedfor recurrentspending()neducation this year, andtwicewhat it plans to spendon health.

Nigeria already hasplentyofstadiums:in 1999 itheld the FIFA World YouthChampionships in eightin­temational-sized grounds,includinga huge one in La­gos, the country's commer­cial hub. But Lagos is in thesouth, and Abuja in. thenorth. Mr Obasanjo ex­plained that the stadiumwas being. built for "politi- Balancing the regions

soon, to plant crops before the rains start,which is usually in May. The World FoodProgramme saysthat as many as 9m peoplemay need aid this year in the twocountriesbecauseof drought and war.Any economicrecovery, in Eritreain particular,depends ongetting soldiers and refugees back into thefields. With luck, the two sides will havemoreimportant thingstodo than argue.

~AIRO

Algeria

Sour cherry

MUCH faith was put in the ''Bouteflikaeffect". When Abdelaziz Bouteflika

waselectedAlgeria's president in April1999,many Peoplepersuaded themselves that allwould be well,or at leastbetter.Hiselectionvictory may have been manufactured, hispolicies vague and his dependence on thearmy clear,but at least he promised to putAlgeria's seven-yearinsurrectionto anend.

Less than two years later, the faith hasevaporated. ;Mr .Bouteflika and the, armyleaderswho gavehim thejob are lockedin apower struggle. Meanwhile, massacresandambushes continue in the countryside.'OnFebruarynth, forexample,guerrillas slaugh­tered 27civilians,including13chilqren. Asever,therewasno.wholly plausibleexplana­tion for theviolence,nor for.thearmy's fail­ure tocrush thosewho had committed it,

The presidentIs facing, an unprece­dented waveof.criticismfrom the Algerianpress,and even fromtheparties in the gov­emment coalition, Theysay that he.doesnotconsult with' people, that he travelsabroadtoo much and, most damningly" that his"civil concord".peace initiative.has failed;Theyeven say thatthe amnesty he champi­oned for Islamic militantswhohave surren­dered has fuelled an increaseinviolencebygivingthe impressionthat thereis no needtofear punishment. According toone analyst,Mr Bouteflika "has become isolated, andthereisan attempt tolumber him with morethan his fair .share of responsibility.jt.is asign that relations between him and thearmy are in crisis." Arecent newspaper edi­torialput it morebluntly. It said that the sol­diersregrettedhavingchosenMrBouteflika.

Thedispute between the.president andseniorofficers is more about influencethanpolitical vision.Mr Bouteflika was broughtin to polish the regime's imageafteryearsofbloodshed.But, sayingthat hedoesnot wantto be "the cherryon the cake", the presidenthas been tryingto exercise his full.constitu­tionalpowers,includingthe appointment oftop officials. The army, long.accustomed torunning.the country from theshadows, re-sentsthisencroachment. '

Thesoldiersarealsodisappointed by MrBouteflika's failure to shield them from an

48 THE ECONOMIST FEBRUARY 17TH 2001

BUSINESS

marketbynowinstead ofjustover 10%.Notthat theIndian carmarket isa push­

over any longer; The streets of New DelhiandMumbaimay stillbe gracedwitb statelyold MorrisOxfords,churned out by Hindu­stanMotors asthe Ambassador model,buttheyare a period relic ina nichemarket. TheMaruti small-car cqmpany isnowthedomi­nant force. Formed in the early 1980s as ajoint venture between Suzuki of Japan andthe Indian government of Indira Gandhi, iteventually captured 80% of the market,helped by governmentmoney. When Tatachallengedit head-on in 1999,MarutiCOutl­tered with new ,modelsandbigprice cuts.Butthe arrival on the market of both Tataand Hyundai from South Korea has pushedMaruti'ssharebelow 60%:

Nearly all the world's leadingcar com­paniesnow have apresencein India, ratherastheyhave in'Brazil. But, for the moment,thecompetition :and overcapacity issuchthat nofactoryisoperatingatmorethan halfcapacity.Giventhatc:arfactoriesneedto beoperatingat four-fifthscapacityto makede­cent profits,this isa bigproblem.

The tar-industry mess could be furthercomplicatedby the plannedprivatisation ofMaruti announced this week; None of theworld'scar companies,to whichthe staketo

.be privatised has been quietly hawked, ismuchinterested. The outcome islikely tobethat General Motors (whichnow owns 10%

ofSuzuki and drivesit from the backseat)OrTatawilltakeup the Marutistake.

Whatever the fall-out from the privati­sation.MrTataalready.has a strategy tobol­ster hisVenture intothe carmarket. He isne­gotiatinga dealwiththe FrenchI'SA PeugeotCitroeo'group'todevelopa'saloonversionofits little 206 hatch-back. Such a vehiclewouldbe manufactured in: Peugeot's Brazilfactory for the Latin American market, andby Tataat home for its localand South-EastAsia market.

Thedeal is interesting in two-ways: first,Indians rather than Europeanswillbe doingthe high-value engineering developmentwork, atone-third oftheEuropean cost; sec­ond, it could lead to closer collaborationwith the French group, which might evenbuy intoTara'scarbusiness. Peugeot's chiefexecutive, jean-Martin Folz, is desperate tobuild' on,'his company's purelyEuropeansuccess byselectiveexpansion infast-grow-

ingmarkets suchasIndia,But Mr Tata has another option should

thecarventure prove onerous. Tata's com­puter consultancy, TCS, unlike other Tatagroupcompanies,isa whollyowned subsid­iaryofTSL.1t isIndia'sbiggest softwarecom­pany by far, and has become the new life­blood of the Tata empire. Its client listfeatures manyof thetopAmerican compa­nies with whom it does business on highlyprofitable terms. TCS, founded more than 30years ago, hasitsownrange ofsoftware pro­ducts and a reputation for on:-sit~:i!Uple__mentation. For some time, Tata.lia~been

considering a flotation of the c?IYlpany~:,Mr

Tatawill not commithimself to the timing,nor willhesaywhatpercentageo~Weshareswillbe floated.But, forsure, it isc()rnil1g.

Tata, with its patemalistic.-charitableheritage,cannot re-shap~ itselfas blithelyasan American or European, group. "HowcouldIgetoutof steel when100,000 workersand im peoplein[amshedpurdepend on us,in a very poor part of India?"asksMr Tata.Instead, at jamshedpur, his managers con­centrate on making their steelworks world­class,whileelsewherein the group they areprepared to take audacious moves, suchasthat intocarmaking. ,

MrTata isadamant that heisnot goingtopour away the group's software wealth intraditional industries 'such· ascarrnaking"Buthe knows that the harvest to be reapedfrom thesoftware investment might havetocarry Tatathrough someleanyears ahead.

-----~.

Napster

And the b'a noplays on

SANFRANCISCO

T''" HE'musicis~till playingat ~apster,theInternet service that, allows its users to

SWap music files for free: But only just. OnFebruaryiath an appeal court partiallyup­held an injunction,granted lastJuly, callingfor the service to be shut down. The goodnewsfor theRecording Industry Associationof America (RIAA), which hadapplied for' the injunction onthe ground that Napsterwasfacilitating piracy,was that theappeal court rejected most ofthe argumentsthat Napsterof­fered in its defence. But thecourt quibbled with the in­junction in its current form,and asked for it to be slightlyrewritten. So'Napster's tensofmillions of users, who'facedtheprospect of the-service be­ingunplugged, cancontinue touse it-for now.

Specifically, the appeal

court complainedthat the ij:,""",""",broad, in that it seeks to revent all file­swapping activity via Nap!ter. While thecourt agreed with the RIAl\. that Napster"knowingly encourages and, assists" in theexchange of copyrighted. m~terial, it notedthat asmallamount oflegiti~atematerial isalsoavailable on theservice.jfhe court ruledthat expectingNapster to b¢ able to distin­guishbetween legal and pirated music,and

. to allowtrade in the formerbpt not the latter,was unreasonable. So the new injunction.will}~gtlire ~e~ord companies 'to informNapster9f.specific exampl~s of piracy, soth~~ theycanberemoved. ~'

lf.Napsterfailsto removepirated files, itwillbe in breachof the.new~njunction, andsinceremoving individual,fles from a de­c~nttalisedservice like!'oJaps~er isessentiallyimpossible.this willin effed forceit toshutdown.Preparation of the hew injunctionwill take days, if notweeld, however,andNapsterstillhas a few morefards to play.Inparticular, it ~anc~ll for another ~earinginfrontofa pandofjudges,anft itcan then ap­pealto the SupremeCourt. I

Even so,Napster's defende isinruins.Thefirm's suggestions that swapping of files byitsusers counted as"fair us1" al1d thatsuchswapping wasprotected by~a previous caserelating totheuseofvideorecorders fortimeshifting,werebothrejected. ~orse, sincethecourt detennmedthat.Napsterkrtew its ser­vicewasbeing usedforpira-ty, itcouldnowbe found guiltyofvicariousInfringementbyitsusers,and facehugefinesl

The ruling is alsohad l~w; for Bertels­mann, the parentcompany fBMG;are~ord

company that switchedsid and formedanalli.an.ce. WithNapsie..r last. O{tobe.r.The idea-was,that inreturn for dropping itssuit, Ber­telsmannwouldworkwithWapstertocreatea legak subscription-based .service, andW?uld,encourageothertec:otdc6mpaniestoco-operate,Napster,' users,' ffter all,consti­tute, the Iargestcommunity of-music-loversonearth.Theserviceclaims 0 haveover samregistered Users, and survey' 'showthatmostof themwouldbe prepared/0 paya monthlysubscription. I

But despite optimistic doises from An­dreas Schmidt, chief execdtive of Bertels"

6z

0,;"."

THE ECbNOlinS~FEBRUARY 2001

C 20ClSsmsung Eleicli~nlcs Amerloa, I~G.

!

Do you 1are?Declare your frJedom.

IDare to choose.

Be extrabrdinary.

shinle.

Go farther. Li{e Better.

. Transcerd.I .Stand out.

Experi erl

ce.

True Visio i .

I

(i)CA->0< ...-c:Z ....(i)­_0~Z-all'0.,.~3ii~r-rne

rn...or

these days, you can't afford to haveholes in your network dlefense.

\Nithhac~ers posinga cdnstantthre~t toiheprivacy ~f information, networksec~ritYliScrucial to anycompetitive business. That is why, at Ernst & Young, we provide clients wi h

(/) comprehensive eSecurity solutions, including a mock network attack that letsyou knbwyoLrQ) . .. . .. < ... ...•.... .. ••... ••... I::J weaknesses before a hackerdoes.ltalltransiates topeace of mind foryou andy~ur customers,3: Because the lastthingyouwant is foryourdefensesto go AWOL whenyouneed themmoh

n0Weconomy'l::

©2000 ERNST & YOUNG LlP

LUDHIANA

ASIA

Indian agriculture

Prowling tiger, slobbering dog

lastsummer's poor monsoon,which hasde­pressed.. agricultural .. growth this '. y~ar.,. De­spite,:this,·Mr,..'Varadharajan claims..• that"prices-have <:rGishe.d"f9ra variety of com­modities,-includingcoconuts,cotton, teaandrice. Evenfor products with floor prices,hesays;farmers are gettingless than the mini­mum. Whenfarmers dare to diversifyawayfrom.them,the resultscan be catastrophic,Itis they, not the state,who bore the costs ofPunjab's potato glut. In AndhraPradesh,diversifi.c.,a.. ~iondis.,aste.. rsha",.e.le.d.,:..~o:a seriesofhighly publicisedsuicides.. •••

Part of the distress i~ caused by supportprices,y.r~ichl1~yeJaised costsfo~ faffilersgrowing mher crops, says Abhijit Sen, aneconomist at .J~v.'al1arlal. Nehru University~how~sJecent1Y,head of theCommissionon AgrisulturalSosts and Prices. Somedis~tress reflects a deterioration'in governmentservices, such as public investment in irriga­tion and credit to farmers, which has slowed -----------_.--"

growth.Itdoes not help that farms aresmall,and shrinking .with each generation(whereas the' population dependent-onthem..is not).'Many direct. their .ire.attheWorld,Trade... Organisation,.which '., allowsrich countries to.subsidisetheir farmersbutobliges India to.dismantle quotas. on im­ports,Thelastof thesearedue goon April1St.Mr Varadharajan wants high tariffs to re­placethem.

There are less-defensive. approaches.Sharadjoshi, a farmer and activistfromMa­harashtra who.recentlybecamechairman ofthe government'sagriculture task-force, saysthe farmers' movementis split between "ti­gers"that wantto escapetheircagestoprowlforexciting new prey,and "dogs-that preferthecertainsustenanceof the kennel.

A tigerish policy would free farmersfrom India's, obsession with producingenoughfood to feed itselfand bid them taketheir cues from markets,both domestic andforeign. Current policies, little touched bythe economic liberalisation that began-tenyears ago, discourage this. Some examples:states may forbid the export of produce toother states;private traders are barred fromstocking commoditiesbeyond certain limits(to prevent hoardinguprivate investment indairies is restricted;in Punjab, farmers maysell most major crops only through highlytaxed mandis (markets); futures trading inmostcommodities isbanned.

All' this subtracts value, from. India'scrops. McKinsey, a consulting firm, esti­mated not long ago that after middlemenand poor infrastructurehad taken their toll,a fifth of the value of.food output was lost.For fruit and vegetablesthe proportion wastwice that. Regulations discourageinvestorsfrom improvingthe wayfood getsfromfieldto shop, which would make diversificationlessriskyand raiseincomes,

When Cargill; an American multinat­ional,triedtobuy wheat directfromfarmers,bypassing the marnli system, middlemenpersuaded the state government to forcethecompany out. But the obstacles are not. al­ways insurmountable.Pepsi, an AmericancOl1lpany~has2,ooo farmers growing toma­toesand potatoes forprocessingin Punjab.

MrJoshi is tryingto getround the small­farm problem by promoting a new sort ofcompany, in which farmers' land would beconverted into an equity stake. But Indiamust refOrm its farmingindustryifit is toat­t~~st bighwestl1lent in food. A new policyunveiled 1JY the.governmentlast summer'sttggestssollleofthe necessary reform",butit remains .. a draft. Meanwhile, farmers aregettingal1g~er 'and officials are wonderinghow to cope with the next big deliveriesofgrain.The government has yet to specify asupport price for the forthcoming wheatcrop.Thesituation is "very explosive" saysan officialof India's PlanningCommission,Everyonebut the livestockisworried.

Obsesssion with self-sufficiency is a bar-to reform

:RATS and buffaloes in Punjab, India's.• breadbasket, are in fine fettle. The ro­

dents are feasting onmillions of tonnes ,ofwheat and ricestored in government ware­houses (or, frequently, in the open air), thecattleon discarded potatoes. Butno one elseishappy. Thegovernmentcannotaffordthehuge cost of buying and storing the.graincomingfromfarmsin Punjaband elsewherein India,nor can.thepoor affordtobuy it.Bysomemeasures,nearlyhalf thepopulation isunder-nourished.

Fanners;who feelthemselves pinionedby high costs, low prices and the threat ofimports as India opens its markets, are in afoulenoughmood to scare politicians. Withelectionscomingup beforelongin fivestates,says K. Varadharajan, general secretary ofthe All-India Kisan Sabha,which claims torepresent 16m ,small farmers, rural discon­tent will "terriblyaffect" India's rulingBha­ratiyajanata Partyand itscoalitionpartners.

India has come a long way since the1960s, when it had to begfor food from for­eign granaries.. such as:the United. States.Thanks to the green revolution and invest­ment in irrigation, roads and othersorts ofruralinfrastructure,Indiacan now feeditselfand still have leftovers. But it has not de­veloped a modem food industry. Valueadded in.Indian agricultureis '5"20% of thetotal, compared with anadditional ioo's.ormore in somedeveloped countries,says.Ka­ram Singh, director of the AgroEconomicsResearchCentre at Punjab Agricultural Uni­versityin Ludhiana.

India exports lessthan 5% of its agricul­tural produce.The Himalayan stocksof riceand wheat represent food that isfillingnei­ther rich western stomachs nor poor Indianones. Like some of the,cows that wanderabout Indian roads, farmers are protectedyet apparently miserable. Important inputslikeelectricityand water are free,or almostso,and fertiliser issubsidised (thoughfarm­erscomplain that the fertiliser industry cap­tures most of that subsidy).Forwheat andrice, in someplaces,farmershave an assuredbuyer in the FoodCorporation of India (FCI)at an assured price.That minimum supportprice has been ri~ing, even though worldpriceshave fallen,one reason why govern­ment storehouses..are choked . with. un­wanted grain. India's economic reformshave also helped farmers by reducing therelativepriceof manufactured goods;shift­ing the terms of trade in their favour duringthe1990S.

Thisis not how.it seemsto India's angryagriculturists. Their listof woes begins with

46 THE ECONOMIST FEIlRUARY 17TH 2001

BUSINESS

sivesysternof_HhareLings,a listedsubsidiary (such as Fuji Elbctric) will quiteoftenown sharesin itsliste& parent (Fujitsu)worth morethan itsown m~rketvalue.

M&A Consulting's met:Hcine might bebitter for many managed, but it is a lotsweeter than some of the ~otential alterna­tives.Forexample,foreigna~set-strippers arebelievedtobeeyeingwobblycompanies,es­peciallyin the property sedtor. SnowBrand,a milk company involved ih a food-poison­ingscandal last year, is talked about as onepossible target because itS] share price hasslipped as a result of the s<landa!. Using thesame logic,other disgraced!companies suchasBridgestone, a tyremaker, and Ajinomoto,another food company, afealso potentialtargets. Meanwhile, there are rumours thatinternational telecoms gidnts' are sniffingaround for bargains. ,"j

Thekeychangeinjapanese marketsthistime' kin ·investors"attitddes. Individualsand' foreigners, who'arelincreasing"theirstakes,havealwaysbeen ewected to voteintheir own best interests. Blitnow Japaneseinstitutions are increaslngiy joining them.Two years ago, the PensioJ Funds Associa­tion, a trade organisation, &irew up new in­vesrmentguidelines that rebuire investmentmanagers',tovote their s~tares.responSiblYand solely in the interests.of shareholders.Lastmonth, the health an labour ministrycame up with similar guitlelines.Through'public-pension funds,thelministry investsno small amount of money itself in thestockmarket. But the mostjimportant thing,says Nicholas Benes of Jdpan TransactionPartners, an M&A boutiqu~, isthe signallingeffect:"People are coming to see what istherightthingtodo." I .

ously unavailable stock,is thought to haverecentlydumped up toa'xofCanon'sequity.

Another sign of change is the work ofMM Consulting, a boutique setup by vosh­iaki Murakami, a former top bureaucrat.MrMurakarni made headlineslastyearwithja­pan's first hostile bid, for Shoei, a raw-silkmaker which now makes batteries. Thebidfailed, soMrMurakami setoff on adifferenttack,this time as an activistshareholder; Heiscurrentlyraising funds fromJapanese andAmerican investorsto backhim.

The'idea,' saysKenyaTakizawa;one ofthe firm's three partners, isto take a gentlerapproach, 'buying stakes in undervaluedcompanies, then workingon their manage­ment to persuade themto change.TherearePOtS ofgoldhidden everywhere,hesays.Be­cause the market isso inefficient-about one­tenth of[apan'sj.soo listedcompanies havebreak-up:values of more than twice theirmarket capitalisation. Thanks to the perva-

Keitit"TheRaider"illhostile times

ness,but they areglacially slowand the tim­ingof ~h~irimpactiS1Jnpr~dictable.Cr,?ss~shareholdingsbetweertbanks and theircor­P?rate chums,for ~xarnple,are unwinding,and many of the freed-up shares havebeenbought by foreign investors. Thus, whenBoehringer lngelheim, a German pharma­ceuticalscompany,made an unsolicitedbidlastyearforssp, aJapaneseover-the-counterdrugs maker, analysts predicted that anewwave of similar bids might follow. Someeven forecast the imminent arrival of an"Anglo-American" M&A (mergers and ac­quisitions) market.whereinvestmentbanks,company bossesand investorswould wres­tiefor controlofcompanies.

Japan might not be quite there yet,butsigns of more rapid change have emergedover the past year.Thanksto the troublesofthe banks,for instance;cross-shareholdingsare getting dumped on to the market fasterthan ever.FujiBan~, a huge sourceof previ-

PARIS

This week's dispute over the Schneider/Legrand merger shows how farFrance is behind in matters of corporate governance

Corporate governance in France

Where'stheMichelin woman?

O N MANY" issues 'of corporate gover­". 'nance, France.isway behind best prac­

tice.Michelin, for example,the world's big­gest tyre maker, is one of France'sbest -known'and most international compa­nies. Itsshares are listed on the cxc.index ofFrance's 40. leading companies by marketvalue, and it sells its products all over theworld, 56much so that its home market ac­counts for only 15-20% of its sales. Sohowmanymembers of itsboard come from out­side France?None.

In fact, Michelinbarely has a board tospeak of. Although its shares are listed inParis, it remains family-controlled, And al~

though it boasts a 'supervisory board, inpractice it is run by an all-powerful triumvi-

rate of so-called managing partners; two 'ofwhom-are scions of the Michelin dynasty.Among the CAC40, it and Lagardere, a de­fence group, are examples ofan odd Frenchcompany structure whereby shareholdershandover powet t0t11anagementand retainalmostno scrutiny'overtheir decisions.Theremaining 38companies in the-index havemoretypicallirnitedliabilitystructures.

Small wonder, then, that Michelin hasone of the worst corporate governance re­cords inFrance.perhaps in Europe;A recentstudy by Kom/Ferry.ra headhunting firm,saysthat Michelin is the onlymemb~r of thecacaothat has made no progress towardsmeeting the standards set by thesecondofthetwovienot reports(publishedinrssslon

how to itnprovecotporatlgovernance. Theissueisespeciallyfraughtblicauseforeign in­vestorsown around 40%of the shares in thecxcao and have been pU\hing,forgreateropenn,ess.·. . , ,l ,_.

Accordingto the KomfFerry study, MI­chelinisincreasingly isolated.Of the leading40 ~ompanies;onlytwo ot~ers havefailed toimplement allofthe rathdrIimited recom­mendations of the first Vitnot report (pub­lished in1995).One isCap Gemini, aconsult­inggroupthat recentlymefgedwith Ernst&Young and which gets barely any scrutinyfr.om outside directors.,Th~I.other isSodexho,an international food and ,usiness-servicesgroup that is heavilyinflu.need by the Bel­lon family, which ownsa ~% stake.Like Mi­chelin, it has no non-French board membersdespite dependingon external markets fornearly90% of itstumover.J

In general, corporate' overnance at bigFrench companies issteadily improving. Butprogress towards the mor~ ambitious goalsof the secondVienot repori isslow.Thegoalsinclude such measures asjhe separation ofthe roles of chairman an41 chief executive,

64 THE ECOIirOMISW FEBRUARY -17~H 2001

ASIA

Japan

BunkeredTOKYO

FRANCISDRAKE did it,althoughhisgame. was bowls,and onceit was over he sunk

the Spanish'armada. Yoshiro Mori,Japan'smuch-abused prime minister, has been lessfortunate.Whennews of a collision, on Feb­ruary '9th, 'between an American' nuclearsubmarine and a japanese fishing boatreachedMr Mori, hewas enjoyinga round ofgolf. He played on for another three holesand arrived' back at his official residencesomethreehourslater.Besetby a weakeningeconomy, a falling stockmarket, assortedscandals and riot within his own ranks,MrMori's golfing gaffe has done him moreharm. This'week,senior officials 'from NewKomeito, which shares power with MrMori'sLiberal DemocraticParty in a three­waycoalition.werecallingforhishead;

Like the LDP,NewKomeito faces an elec­tion for japan's upper house in July. But itmust alsocontest localelectionsforTokyo'smetropolitan assembly in june. Theparty isstrongin Tokyo. Because ids in bed with theLDP, however, New Komeito's strained repu­tation for clean, politics, is. coming' underdaily assault. A campaign-finance scandalinvolving KSD, a.small-business foundationthat showered the LOP with money.has al­readyled to the arrestof an'coe.politician. A

By train to Lhasa

FOR thosewhose ideaofhappiness is a'" long-distance train ride, there is a treat

comingup. On February8th,the Chinesegovernment approved a planto constructa" railway:line from Golmud, in westernChina, toLhasa.thecapitalof'Tibet, Whenit iscompleted,inaboutseven years' time,itwill bepossibleto takea train allthe wayfrom Beijing to 'Lhasa, a' distance" of3>900km (2,425 miles). TheGolmud-Lhasastretch will itself be i.izgkm.long and, toadd to the thrill,it willbe the highestrail­way in the world. The views across the Hi­malayasshouldbe stupendous.

Not everyone is thrilled by the pros-

44

scandal in the foreign ministry, involving alow-level bureaucrat said to have used gov­ernment money to buy racehorses, is doingyetmore damage.

Thegossipin-Nagatacho, Tokyo's politi­cal district, is that Mi Mori's fate mayhavebeen sealed at a meetingbetween New Ko­meito and LDPdons in anAzabu restauranton januaryaath.Mr Moriwouldsupposedlybe,required to announce his resignation,perhaps at the end of February.Theannualelection for the party's presidency, whichdecidesthe prime ministership, would thenbe brought forward,from Septemberto theparty'sgeneralmeetingon March13th. Withthe much-fancied Yohei Kono, the foreigl1minister, done in by the scandal in his minis­try, the main candidates are Ryutaro Hashi­moto, a former prime minister who joinedMr Mori's cabinet in December, and juni­chiro Koizumi, who heads Mr Mori'sfactionin the LDP. After .some early gains 'byMrHashimoto. Mr Koizuminow seems to beinchingahead. .

The difficulty will be persuadingMrMori to leave.The KSp mess may lead to thearrest of other LDP politicians. The foreign- ,ministry scandal may claim the scalp of MrKono, Mr Mori's tax position is not entirelyclear. Yet nothing seems, to penetrate hisleatheryhide.Heseemsstilltoenjoy life,es­pecially away from Tokyo. Next time heplays a round, he may be tempted to leavehismobilephone behind.

pect ofthe new railway. Tibet was occu­pied by the Chinese in 1950, shortly afrerChina's Communist revolution, andmade an, "autonomous region". Eversince,China hasbeen tryingtoabsorb theregion into the mainstream Chineseecon­omy.The railway, say Tibetanoppositionleaders in exile,willmakeiteasierto reset­tle more Chinese workers in Tibet and ex­plait its resources of oiland gas.During hisworldwide wanderings, the Dalai Lama,Tibet's spiritual leader, has told intema­tionalcompaniesthat itwouldbebestnotto get involved in industrial develop­ments in his country.

The Chinese prime rminister.iZhuRongji, has appeared to confirm Tibetansuspicions. The railway;he says,willhelpto speed up "economic and cultural ex­changes". Because of the difficulty ofbuildinginthe Himalayas, TibetisChina'sonly region without a railway network.Now its engineers are apparently confi­dent of laying the line safely, even on atricky600kmstretchof permafrost.In Ti­betan temples they may be praying forglobalwarming.

Pakistan

Generals at bay'lAH~RE

, AFTER over two years of relative oblivion:t"\..in self-imposed exile,Benazir Bhutt:o, aformer prime minister of Pakistan, hasjumpedon tothe frontpagesof tbecountry'snewspapers. Shehas done so, as it happens,on the basis of a report in a Britishnewspa­per. The report claims that the former gov­emment of Nawaz Sharif leaned on somejudges to convict Miss Bhuttoand her hus­band, Asif Zardari, for corruptionin 1999.The. evidence for this issaid to be inthe formof taped conversations between sel1ior ~~ov­ernment officials,', an~ ,a judge at MissBhutto's trial. The tapes were made by amember of Pakistani intelligence who de­camped to London and has now.so the storygoes,been pricked.by.conscience.

Miss Bhutto's footprints seem to he allover the story, After her conviction in 1.999,sheclaimedthat she had not had a fair trial.Butthe SupremeCourt routinelypostponedhearing her petition for one reason or an­other. Last December, when Mr Sharif wasexiledto Saudi Arabiaby the present mili­tary government of General PervezMushar­raf,MissBhutto sensed a politicalvacuum inthe country and considered returning" toPakistanand takingon the generals.

TheMusharraf regimesaid it would ar­resther ifshe set foot in Pakistanand digupmore .evidence of her. cOrrupt activ~ties.Meanwhile, the Supreme Court announcedthat it would hear her 1999 petition on Feb­ruaryzeth.Thisledpundits to speculatethatthe military regime, having gotrid of oneprime-minister, was gearing up to finish offanother. But the tapes have compromised

. the judiciary, whose credibility is alreadylow afrer decades of battering by generalsand politicians. TheSupremeCourt will.beunder pressure to acquit Miss Bhutto or or­dera lengthy retrial which would giveherlawyers a chance to air hergrievances.

Thismay be just the beginningof Gen­eral Musharraf's troubles. Disgruntled op­ponents of the regime have asked the.Su- .preme Court to strike. down an"accountability" law underwhich hun­dreds of politicians and bureaucrats havebeen imprisoned or sidelined from politics.Lawyers' organisations across the countryhavebanded together to announce a na­tional strike on February 27th, demandingan earlyrestoration of civilian rule. And theAlliancefor the Restoration of Democracy­comprising supporters of Miss Bhutto andMr Sharif, along with several other par­ties-sis planning a demonstration on Marchzjrd, PakistanDay.

, worse, the religious parties are begin­ningtosuspect that GeneralMusharrafmaynot be too kindly disposed towards them,

THE ECONOMIST I'.EBRU....RY 17TH 2001

Globalisation to the rescue

~~.,",,~".~Lk.~sonto makemischief; i

However, until,Russiah companies aremore transparently run, a~d for as long asthe Kremlin seemsunablejo getover its im­perial hangover,countriesilike Poland andHungary will be understandably edgy~even about deals which ffrom a businesspoint ofviewmakeundenfablygoodsense.

,successfuljoint venture at 4~e mill-and aremnant vsz which would hold a numberof the mill'ssuppliersand ~few other lesssaleableconcerns,includinga largeKosicehospital. I

Next,MrEichler focused on getting thesteel-producingcore in be~er shape, Thatmeant firing the worst rriabagers, raisingproduction, getting rid of bxclusive sup­plier contracts, and, actually making cus­tomerspay for the steelthey received. Un­der Meciarism, muchof thesteelwasneverpaid for. Stolen? "Let'sJustjbay somebody.forgot to pay for$zoomof i ,"explainsMrEichler. It wasn't just th [Rezes familybenefiting, he carefullyadds, but manag­ers,trade unions,and customerstoo-any­onewho knewhow to worl~.the system.

The results of the overhaul were im­mediate, say bankers wholwatched overthe process.When it introduced competi­tive tendering for its suppliers,vsz saw a15% drop in prices."It was not a challenge,but an idiocy,"Mr Eichler lays wryly.Butthe turnaround was possi1:he because thesteelplant wasagoodone;rtewequipmentwas producing a decent p{oduct-atcom­petitive prices. us Steel plans to increaseproduction from 3'3m·tom~es last year tozm.this,despitea globalovdrsupply.

Moraleat the plant is fuigh. Managersnow speak constantly of bustomer care."Qualityused to be sometljlng of an after­thought,"one admits.Wort<ers say they nolonger fear for their Job~ .and professamazement at beingconsulted over com­pany decisions. ThearrivalJof us Steel hasgivennewhope to the town of Kosice too.TheSlovak governmentho~es it mightbe­comeasortof anchortenan\ forforeign in­vestors. TheAmerican company isplayingits part by setting up an Jffice to attractsomeof itscustomersto invest in Slovakia.Thereistalkofa BMW carplknton the way,and the city says it iShOpn'g that a largeelectronics company Will,move in thisyear,bringing in anothera.e oo-or-sojobs.

Itisnothard toseeSlovJkia's appeal.Itslabour isamongthe cheapest,relativeto itsskills, in theworld."Thebiggest assetIhaveon thisline,"saysTony,Pacifio,a Chicagoanwho has been in Kosice for three yearswith us Steel'sjointventurb,"is my work­ers.Theequipment is-okay,but theworkersarewaybettereducated thdn backhome."

There's money in it

(nowcalledus Steel Kosice) since1998.Theproblems for the company began when itwasfarmedout by VladimirMeciar, Slova­kia'spopulist-nationalist leader-until 1998,to AlexanderRezes, one of his cronies.MrRezes and his family, using the steel-pro­ducing core of the company,as collateral,then went on a spending spree. Theybought up a number of unrelated busi­nesses, including Sparta Prague, CentralEurope'stopfootballclub.Inoctober.ices,the banks threatened vsz with bank­ruptcy. A Slovak-born American,GabrielEichler, who had overseenthe transforma­tionof the Czech state electricity utility;wasbroughtin tosortthingsout.

Mr Eichler's first task was to sell offvsz'sodder acquisitions and fashion-it intotwoparts.thecore metalconcern,tobe soldon to us Steel-which already operated a

Had·the deal f;iled, the Whole ofeasternSlovakia, not just Kosice.wouldhave suf­fered.The economic hopelessnessof Uk­raine, locals ghoulishly speculate, wouldhave movedwestand swallowedthem up.At the veryleast, the failureofvsz wouldhaveput offSlovakia's hopes ofjoiningtheEuropeanUnion.

Theus Steel takeovermarked the endof' a' crisis, that, had been,running at vsz

to muck around would be both ineffectiveand damagingto rl~ns to sellgasels~where.

Not allcaptivenati0 l1s areasjulllPY~ Es.­tenia, which suffered grievously under So­viet occupation.was quickto welcome-in­vestment by Gazpromin its national gascompany. (To be on thesafe side,though,italsosoldan equallylargesta~etoGermany'sRuhrgas.} TheEstonian government arguedthat this would give Russia'a stake in their

KOSICE

'UOSICE,thesecondcityofSlovakia, isanl'old-fashioned companytown dom­inatedby the steelplant of the EastSlova­kian Ironworks (vsz). Unemployment inKosice (pronounced kosh-itz-ee) is high,but vsz employs Z4,000 at wages higherthan the national average. A third.of thefamilies in Kosice, reckons a city official,havea'relative workingat the plant.'

Fewof the company towns spawned,IikeKosice, by communist .autarky havebeen so lucky. The saviour-ofthose thathave has invariablybeen a western com­pany that hasspotted a promisingindus­trialplant ata good price,and hasthen in­jected money and management skills totum the place around-witness Volks­wagen'ssuccesswith the Czechcompany,SkodaAuto,and theensuingprosperityforSkoda's company town of MladaBoleslav.Kosice's saviour has been the Pittsburgh­based us Steel, which boughtthe companyin Novemberlastyear for$50om, $325m ofwhich wasin assumeddebt.TheAmericancompanyalsoagreedto pump in sroom ofnew investment, and to guarantee thattherewouldbeno forcedredundanciesfor17,0000ftheworkforceforten years.

Asbefitsits localimportance, the steelplant is built on the scaleof Darth Vader'sDeathstar.Thereareclinics.schools.shops,banks, even a travel agent.v''Ferrotour",One hall isovera milelong. A greyglintingblizzardof ironflakesfalls likesnow in thesmelterswhere,with computerised preci­sion,vats ofmolten iron begin their jour­ney,oftreatments-a journey which endsin shiny value-added products like tin­coated 'metal for cans or galvanisedauto­motive steel.which is where the marginsaremade in today'ssteelbusiness.

The Slovak prime minister" MikulasDzurinda, for whom the sale of vsz to awestern strategic investor was a politicalimperative, receiveda congratulatorytele­gram from Bill Clinton after the deal withus Steel was signed-as well he might.vszaccounted for 10-20% of Slovakexportsinthe 1990S and the plant still accounts for15% of Slovak GDP, saysJohn Goodish, thenewly appointed head of the business.

countriesis still Russophobic, Any politicalinfluencewould have to be so discreetas tobe largely useless. And evenfora monopolyprovider,gas is a hard weapon to use,Cut­tingoff supplies for political reasons toweak;farawaycountrieslike Georgia is onething.ButPolandismuch lessdependent ongas, has a much stronger economy, and isbotha NATO memberandhopes soon tojointhe EuropeanUnion.Any attempt by Russia

BUSINESS

66 THE ECONOMI~T 2001

THE ·AMERICAS

aQOrt:1 bye....byebatty-boyworkers to wear protectiveclothingduringspraying and providing temporary childcareat harvesttime.

Other changes: .' including , allowingtemporaryworkersto formunions,hingeona wider reformof labour lawsto be debatedby Congressthisyear.Butthatwill be aslowbusiness,and a bit of tinkeringwith existinglaws,adapting them to the realitiesof fruitfarming, might do more for the livesof thewomenwho pickthegrapes.

Mexico

How tough canFox be?M€XI,COCITY

THROWING his weight around is not,- -something that Mexico's new president,Vicente Fox, has had to do much, Since tak­ing over the country in,December after 71yearsofruleby the InstitutionalRevolution­aryParty(PRI), hehas handled delicatesitua­tions,such as the budget talks and an elec­toralsquabble inthestate ofTabasco;with amixtureof quiet diplomacy and patience; Ithas workedwell-sup to now.Anotherelec­toraldispute, this timein the south-easternpeninsular stateofYucatan, isgiving MrFoxthe firstrealtestofhisauthority.

It started in October, when oppositionparties in Yucatan complained that the-ear­dominated state congress had packed theelectoral council,which will run this May'selectionforthestate'sgovernorship,with PRI

sympathisers. Thefederalelectoraltribunal,a sortofelectoralsupremecourt,agreed,andorderedthe congress topicka newcouncil.

That in itself-was unprecedented. Dur­ingPRI rule,the tribunal had been littlemorethan a toolofthe regime.Yucatan's statecon­gress obeyedtheelectoral tribunal and chosea new council; but the opposition said that itwasjust as loaded as the firstone.Thetribu­nal agreedagain,and in Decembernamed anew council itself and,ordered the original'councillors to hand overtheir offices and re­sourcesto the newones.

They refused. Rowdy PRJ supportersbarricadedthemselvesinto the council'sof':"fices. Yucatan's quixoticeargovernor,VictorCervera, rallied his followers with stirringspeechesinthe plazaofthestatecapital,Me­rida, denouncing the federal government'sattempts to trespass on the state's.sever­eignty, The federal government threatenedto send in its policeto retakethe councilbyforce if it was not handed over by the tribu­nal's deadline of February ioth, But as thatdeadline'passed, and then another, it be­came clear that Mr Fox's 'resolve was .notquiteasstrongashehad suggested.

Nowonder.Aftersevendecadesofasys­tem in which presidents had almost total

42

THIS week, on St Valentine's day, a, massnude Wedding took placeat He­

donism III, a holiday resort in Jamaica.Itwas touch and go. "Indecent",thunderedtheoutragedmayorofSpanishThwn: ''Nogovernmentshould allowthistype ofbe­haviour in a country guided by Christianprinciples:' Itwas "begging forthe wrathof God," said a prominent Pentecostalleader.

Jamaica markets itselfasa free-and­easy place, but when it comes, to sexualmores it can be startlingly prudish. Thesame. is true of most other Caribbeancountries,and it shows up particularlyintheir lawsrelatingto homosexuals.

Most English-speaking islandsthreaten their gay male citizens withimprisonment..The laws are rarely en­forced,but they matter.Police may ignorecrimesif the victimisgay,and thereforea"criminal" too. Dance-hall"lyrics in Ja­maicaseem.toencourage the tauntingandviolence gays often encounter there:"Beombye-bye in a batty-boy head," isarefrainthat means,"Shoota gayman."

Manycaribbean politiciansprivatelyadmit that theirlawsareantiquated.Butifthey say so in public,the reactioncan befearsome..Dominica's. attorney-general,BernardWiltshire, dared hint in Decem­ber that his island's laws were unfair.Hehas.been cruellypilloriedin the press.onradioand in Carnivalcalypsos.

Most politicianscourt easy popular­ity."Nobodyeversing'Boom bye-bye' forme," says jamaica's elderly oppositionleader, EddieSeaga "lam not.one," saysthe prime' minister. P]. Patterson: ."Wehave no intention whatsoever of chang-

power, it does Mr Fox no good to appearairthoritarian.Particularlynotnow,when heistryingto resolve the long-runningguerrillaconflictin the'stateof Chiapaswith asoftly­softlyapproach,and has GeorgeBushdrop­pingby fora visiton the isth,

Yetit does him no good to appear weakeither.The PRI stillniles in19of the 31 states(excluding the capital). MrCerveraisnot thefirst to try his luck-the row in Tabasco wasoverthe attempt by that state's outgoinggovernor,RobertoMadrazo, totwist theelec­tion in favourof his chosen successor---'-andhe will probably not be the last. PRI presi­dents used to resolve disputes between thestatesand thecentreby deal-making,but MrFox has to rule,or at leastlookas ifhe is rul­ing,in a legalariduprightfashion.

1'v1rCetyera is' no 'stranger to playing, around with the law. Although governorsaresupposedly limited toone six-yearterm,

iug those laws." In Trinidad, an. anti­discrimination law has been carefullycrafted to exclude sexual'orientation. Aconstitutionalamendmentoutlawirigdis­crimination,' including the ... sexual-ori-:entationkind; was unani01ou~ly passedin Guyana last month, but the presidentwillnot signitand itislikely to lapse.

A handful of Caribbean countrieshave had to change without debate. On[anuary rst.in linewith itsobligationsun­der Europeanhuman-rights treaties,Brit­ain reformedthe laws of its fivetiny Ca­ribbean Overseas Territories. They mustnow stop'treatinghomosexuals'ascrimi­nals,Church ministersin theC;a.ymaifIs­lands are getting up a petition in protest,but theydo notexpectBritaintblisten;

Less tolerantthan they look

he has.contrived to notch up a total of tenyears,on and off.in Yucatan's seat'ofpowerby haggling with PRI presidents.He is fam­ous far handing out thousands ofbicyclesand'··washing" machines, .supposedly oncredit to loyalsupporters.He is a das~ic ex­ample of the old-style regionalstrongmenwho flourished under the PRI and, thoughfewareCluiteasblatant, he would set~n un­comfortableprecedent if he won a show­downwithMr Fox's government

On February isth, the federal govern­ment had backed away from its threat tosend in the police. Mr Cervera and his'sup­porters have said they may accept.a fourthelectoral council, formed by some·sort ofconsensus.Theupshot for Yucatan'may bethe same;Butfor Mr Foxit would be a tacitadmission. that hecannot yetmakeMexico'slawsand institutionswork asthey should.--~~---~-~~-_.--'--"

THE ECONOMIST FEBRU....RY '17TH 2001

Racing to startAdding value,or rather making money, isMrWhite's forte. As he admits, science isnot his strongest suit. He comes from a

Man on the run

Tony White has m.anaged to transform a sleeP.·.. y.• ·.• ·.s.: C....i.en.: tl.'6.c.. -.I.'.n.s.. t..rum...en.• ts.•. firm int.".•·. a. ge.. l1o..•.m i._.. powerhouse. That",astheeasYbit i i .. i · J

"{ A TiTH his easy manner, shrewd sense of .. .• .•••. >. / background of salesandman~Jementat Bax-Y V humour and slight southern drawl, ',. terlnternational,a,medical-!,eVices' ~om-TonyWhite is a far cry from the popular per- pany. Thevision of building Ce era and levercception that a high-tech executiveshould be . aging ABI'S technology was th t of Michaelunpredictable and slightly peculiar. Yet Mr Hunkapiller, head of ABI, atrd Mr Venter.MrWhiteisheadofAppleraCorporation,whose White-leaves the technical brehkthroughs totwo component businesses-Applied Bio- such scientificwizards.Hisjobfsto make suresystems (ABI) and Celera-lead the genomics that their grand ideas make gOOL'dcommercialrevolution. He harbours an exceptional am- sense,and towoo investors. ," _ _bition: to build Applera's shareholder value Butthere are limits to how, uch moneyby industrialising modem biology.. his company can make just sellingtoolsor ge-

When Celerawas createdin 1998, itsgoal nomic sequence. So Mr Whit~ has alreadywas ambitious too: to sequence the human started to pursue highervaluebusinesses.Ingenome in three years, becoming the November, thecompanyanndunced a new"Bloomberg of biology" by selling access to molecular diagnosticsventu(e, combiningthe information in a comprehensive, user- ,A~I'stechnologywith~elera's genetic know-friendly database. This week, Celera pub- .•ho", to tackleearly detection o~ailments. Ap-lished its version of the human genome se- .: plera also plans to extendits ndustrial ap-quence (see page 79), completed 18 months preach to the body's proteins,a dtodiscoverearlier than the division's president and chief " ',' ,,': .",'","'.,',,;>,·'_h0'Wthe)'inter~ctin hUlnaridi~Ease.,scientificguru,CraigVenter,had predicted. . In the longrun, genomicsand proteomics will P.obably trans-

Sofar more than 30institutional customers have subscribed to form the pharmaceutical business, helping drug akers to decthe web-enabled database since itwas launched; Whilestillnot in velop better drugs faster and with fewer side-effeds. That is whyprofit, Celera's revenues in the year to the end of June 2000 were such firms have been so keen to signdealswithgen~micS compa­$42.7m. In spite of its losses, though, Celera's shares have risen nies,Butrather than hand over its ideas;Celera has decided to getmore than threefold since the tr.acking stock was l.aunched two intothedru.g-makingbu.,siness.itself. Other com._paqles have hada.years ago (seechart). ",', "'", ,,',', < ", , similaridea:MillenniumPharmac~uticalsaI1dHumanGenome

The key to Celera's success, according to Mr White, was the Sciences.twoother American biotech companies '1throots in ge­idea that the genome could be cracked by using a factory full of nomics, have already moved into drug devel.opent and haveautomated sequencing machines and powerful computers, Thisis home-grown products inclinical trials. " "',,'. ,. ' ,in stark contrast to the cottage industry of intemationallabora- "Mr White reckons that Celera will needthe res~of this year totones making up the rivalpubliclyfinanced Human Genome Pro- put its.pharmaceutical strategy in place, deciding Whichareas tojeer,which spent years piecinga sequence together. target.such as cancer vaccines,and hiringmore gopd people.Al-

Even though the public project has criticised Celera's ap- though the firm isfar behind rivalssuch as Millennium, MrWhiteproach, it has had to take on some of its tools in order to keep up. is confident that Celera can race ahead. The comRany has goodChief among these is the world's most efficient gene sequencer scientists.canny managers, great technology and !nore than Si.i

which, conveniently enough for Applera, is made by ABI. When billion in the bank. . ±Mr White first joined as head of the firm in 1995, ABI was sub- However, older pharmaceutical companies' ", derstand thesumed in Perkin-Elmer Corporatiotr, a struggling conglomerate chemistry of creating powerful drugs without poisq nmg patients,making analytical instruments mainly for the slow-moving petro- testing them in,clinical trials, and gettingthem.to /narket. Celerachemicals industry. Byfocusing iton biology instead, he built it to does not. Mr White's plans therefore include bu~ing up bits ofa point where it has a market capitalisation of $15 billion.Salesin other drug makers"hiring top execut•. ives cut 100se!bY. me.rgers inits last accounting year were $14 billion, the drug industry.iand p rtnering withand are expected to grow this year by otherswhenitcomestosel·ngthegoods.more than 20%. ,Few in the industry ar surprised by

According to Mr White, ABI'S close ',Applera'schangeoftack,b1tmanydoubtrelationship with Celera is mutuallyben-whether Mr White, for all his businesseficial.Not only does Celeragain early ac- acumen, will beable to pLll.it off. Drugcess to new equipment, but it can also making sounds easy whe~ you break ithelp shape the technology to its needs. down into its component parts, but itAnd for its part, ABI has a convenient takes time for the whole t6 gel,and Cel-testbed for its prototypes, as well as a era's past successis~o gua~antee of its ttl-ready source of genetic information to ture in such uncharted terr\tory.MrWhiteadd value to its equipment. is keen to take his company in a new di-

rection.But"aSFr~l1ldinB~er, a biotechanalyst at J,J?,'!v1organS:h~se;pointsout,the firm may find the bumpy road of clin­ical drug development rather harder go­ing than the super-highwayofgenomics.

[

68

_______________________~-------------. '_H_'__'_C_O_"'1'-'"' rvrn aocr

!I

THE AMERICAS

BOGOTA

Marulanda gets eight more months

President Andres Pastrana and the left-wing FARe rebels have been talking.There's a .long way to go yet

------------_.---"

ported by landowners, businessInterestsand drugtraffickers. Somearmyofficers col­Iude with it.It is believed in some quartersthatifthe xucbecomes too isolatedas a. re­sult,of an anti-paramilitary drive; it, willshrugoff the shacklesof its backersand de­velopitsown bloodymomentum.

In the firstsigntbat the army commandrecognises the politicalcostsofbeingassoci­ated with such unsavoury allies, a militarytribunalonFebruary tzth convicteda formerarmy generalin" human-rights case.GeneeralJaime Uscategui was givena 40';'"monthsentencefor failing to prevent a massacreofcivilians by paramilitaries in the' southerntownofMapiripan in '997.

Thepictureof a.dovishpresident pulledin oppositedirectionsby thugson both rightand leftisnotentirelyaccurate. Thearmy,forexample,has become strongersinceMr Pas­

trana came to power. It is true,though, that he is under grea;pressureto produceresults,andfew analysts believe he canachievethem.

Parallels are already beingdrawn between Mr: Pastranaand Israel's former prime min­ister,Ehud Barak, whosesearchfor peace eventually alienatedan exasperated public andplayed into the hands of ahawkish successor. In Colom­bia,AlvaroUribeisthe name towatch.Aright-wingerwho dis­plays,far less tolerancefor theFARC .than Mr Pastrana, hishardline views have earnedhim somesupport asa possiblecandidate for the presidentialelectionin 2002.

Buteven if a deal with theFARC proves elusive, Mr .Pas­trana may get .a consolationprize.Thegovernment recently

announced .a "pre-accord" with,' the left­wing National Liberation Army (ELN)to setup another, smaller demilitarised zone fortalks.TheELN willbe allowedtoconvene in aaoo.ooo-hectare area'near the oil town ofBarrancabermeja aslong .as 'it promises tostop kidnappingand intimidatinglocalpeo­ple,who arewearyofviolence.

Anincessantparamilitarycampaignhaspushed the aue into a corner;adding to thegroup's enthusiasmto negotiate. It may beherethat MrPastrana'sbest hopes ofendinghis tenn with a,peace deal lie.He can leavehis successor, whoever'he:may be, to dealwith the FARc-either at the negotiatingta­ble,oron thebattlefield.

ist.Most of that was in areas controlledbyright-wingparamilitaries. The next stageofsprayingwill .be in FARc-controlied areas.Theaim istocut the FARC'S drugincomeandforce it to take,the peace efforts more seri­ously.Buttensionsmaywellriseagain.

The.biggest.stumbling-block to peacemay be theparamilitaries.whoterrorise andmurder anyonesuspected ofsupportingtheguerrillas, ltwas the government'sfailuretorein in the increasingly powerful Self-De­fenceUnion of Colombia(AUC) that causedtheFARC----:-or soitsaid---:to breakofftalkslastNovember.'__Carlos Castafio;: a .. warlordwhose operation fans out from a mountainlair in northern Colombia,has built the AUC

into a force of as many as 8,000 men sup-

lombia, to which the United States iscontributing $1 billion, scaled down in fa­vour of programmesto wean poor fannersoff growing coca.But the government hasbeen pushing ahead with fumigationin.thesouthern jungle province of Putumayo,spraying some 25,000 hectares (nearly100

square miles)of coca plantations from theair between December isth and-February

A hug in the Colombian jungle

"SLEEPING with the enemy", the presscalledit.Looking slightly lostin aseaof

rebels toting guns, there was Andres Pas­trana last week, photographed during twodays of intensivetalks in the sweltering vil­lageof LosPozos. He had dared to visit thepieceof southern jungle,the sizeof Switzer­land, that iscontrolledbyColombia'slargestguerrilla group, the Revolutionary ArmedForces of Colombia' (FARC).Aftera period inwhich Colom­bia's efforts to, achieve peacehad swayedon the brink ofcol­lapse, President Pastrana andthe rebelleader,ManuelMaru­landa,weretalkingagain.

Mr Pastrana's audacity wasroundly applauded, but therewas less enthusiasm for what.hemanaged toachieve. Theup­shot of thetalks, on Februarysth, was a rj-point agreementrichin well-meaningbut vaguesuggestions•. The firmest pointwas that the rxac agreedto re­start peace talks.and at-afasterpace.In retum.Mr Pastranaex­tended for eight months theFARe's controlover its enclave,which was:granted two yearsagotogetpeaceeffortsgoing.

A subcommitteeofthe ne­gotiating team willbe setup toprevent the breakdown of ne­gotiationsin the future,and therewas talk ofestablishinga group of observers, perhapsincludingforeigners, to ensure that the zonewas usedonly for talksandnot for-such ac­tivities as under-agetroop recruitment.An­other subcommitteewill lookat waysto re­duce the intensityof the conflict,especiallythe useof improvisedgas-cylinder mortars,LastweekendJorgeBriceno, the FARC'S mili­tary commander, admitted for, the first timethat suchweapons have killedcivilians; and.said that' the rxnc was,"investigating thepossibility" of using such weapons onlyagainstmilitarytargets;

Then there is Plan Colombia, which isdesignedto eradicate cocaine production.TheFARC wants.themilitarysideof'PlanCo-

40 THE ECONOMlSTFEBRUARY.17TH.2001

.7"*

ONLINE EDUCATION

been a commercial failure. ''Peopleare un­willing to subscribeonline for the latest 10­formation from anywhere in the world,"mourns MrHume."Instead,theywillgotoalectureand pay much,much more.Wehavean enormous revenuestream from our fac­ultygiving lectures."

Theoneareawhere: theInternetis aboutto save the universitymoney is'in'purchas­ing. James Davis.who came to UCLA 1:1 fewmonthsagororeorganisethewaythat it usesinformationtechnology, has been makingitpossibleto combine online the institution'spurchases of everything from computers topencils, giving it rnorebuyingmuscle.

Many oftheother uses_of informationtechnology on the UCLA campus neithersave money norvisibly enhance productiv­ity.Theysimply raisethe quality of the.ex­perience. One example is the web-sites thatnow 'existfor almost all 3;000 or so under­'graduatecourses~About 55-60% of them notonly supply lecture notes; they also allowstudents.totaketests online and to seetheirresults, Another example is My.uccx.an in':'house "portal". Students can use it to searchfor advice, such 'as the entry requirementsforgraduateschool.

Given" the University' 'of California'ssprawling size,'it is 'surprising that its ninecampuses have not 'combined forces m'or~,

using the Internet as,'abond; The main.areawherethey haveactedjointlyisin setting upthe CaliforniaDigital Library, which driveshard bargainswith the publishersofp~riod-

\~~~

t~ ~

icalstoficense the use oftheir'electronicver­sions, But even here, no money is saved: theuniversitystillbuys paper copies. "Paper isso muchmore permanentthan bitsandbytes," explains Gloria 'Werner, the univer­sity's librarian.

'1helnternet has undoubtedly. encour­aged universities to reach out beyond theirownca~puses·in order to offer 'more ','dis­tance learning", and at'greater distances. TheUniversity of Phoenix, set up in 1989 toteachadults throughacombination of old-fash­ioned distance learning and evening classes,is incorporating more and more e-Ieam:inginto its courses, which are mostly taken bypeoplewith full-timejobs.Buttheextensionofan 'institution'sbrand is not without risk.Increasing ., the number of students who

70

claim to have studied' there call damage 'auniversity's reputation.if.those students donot receive the levelof teachingthat the uni­versity's name was built on.

Prominent universities have thereforetended to band togetherfor support in theearlystagesofexploring e-leaming, and theyhave often" launched their efforts undernames other than their own, 'even thoughthey have some of the strongest brands ineducation. The business schools of Colum­bia, in New York, the University ofChicago,the London School of Economics, Stanfordin California and Carnegie I\1elloni~,Pitts­

burgh,furexample, have teamed up behindCardean University, an early effort at an on­line institution for tertiary education. Car­dean, offerscomplete courses, mostly inbusinesssubjects, aimed at people workingfull-timewho want to learn itt-theevenings,at weekends or whenever; Itplans to offerfulldegreeseventually.

There are more than 250 finns~ager'to

help established universities' to' go 'online,These firms build the Internet infrastructureand manage', the 'electronic" delivery ofclasses.Cardean.for example.is the Workofureext, an Illinoiscompanythat grewoutofKnowledge Universe, an educationbusinessstarted byLarry Ellison, the CEO of Oracle,and MichaelMilken, the developer of-thejunk bond market who spentza months injail for fraudSeveral prominent businessschools-sincluding Wharton at the Univer­sity of PennsylvaIlia,FuquaatDuke Univer-

sitv,and INSEAD,'near Paris-shave' workedwfth Pensare, 'a company-based in Sunny­vale, California, to put their material online.A host of other firms,includingBla<:~board,CampusPipeline.et.ollegeand weber, offerdifferentplatformsforputtingcoursernateerialon theInternetand forbuildingastudentcommunity around the material.

Somefirms have decided not to' be,theinvisible force behind the e-leaming effortsof established universities, but rather to be­come brands known in their ownright as aplacef?tstlidents tofind courses;Sometimesthese are simply portals ,that consolidatecourse information from other institutions,such as Hungry Minds: Others-offer coursesoftheir own. .

Business and .. other vocationalsubjects

I

'd •. ' .. 'hi fi dpre ommate, But some' ope to' nd anau-dience For less utilitariaq subjects amongadults who feelthat they missedsomeedu­cation when young. MarktaYlor, a sociolo­gistat Williams College in Massachusetts, isleadinganefforttoofferco ,rsesinthe liberalarts.Taught byprofessors &omtop universi­ties-mostof themso far ih the eastern Un-

~h~~::~;~~~ha~~ ;;;~~l~::d B~~:: at~~name GlobalEducationNetwork(GEN).'!heGEN project is funded bY11'Herbert Allen, arich alumnus ofWilliams; nd it does not yetoffer any cOl?pletecoursesimerely free snip­pets oflectures.Butitwas founded on thebeliefthat thereisa potentialmarketforvig­orousonline intellectual stimulation.

Boxmind, withanurn~erofOxfurdUni­versity academics on its,board, is anothersuch ambitious project. By putting "star"academics at the centreof~ stage away fromtheir. horne .institutions, .~ebsites -: such asGEN and Boxmind threaten (ifthey takeoff)to raise the tension betweeh universities andtheir facultyover the ownershipof intellec­tual property. With e-Iearning sites offeringstudents access to the bes~ teachers withouthaving to call in at their irlstitutional-home,there is a danger that thejuniversities' aca..:.demic superstars may chooseto go solo.

The mouse ate myhoJeworkThereis nothing new abo¥ the use of tech­nology as a teaching tool in schools. Macchines (from record-players and overhead

-~-Jr~

projectors to televisions)! have long beenused to make lessons more VIVId and engag­ing.Thefirst computers in~lass were treatedas novelties on which children could lookthings up in encyclopedias and play arith­metical games on multi-nibdia CD~ROMS.

The CDCROM hashoJ, been largely re­placed by networked qatabases as therepository oflearning material, but researchcontinues into how to itrlpart .lessons thattake advantage of,!comduter's capacity topre... sent moving im.agesa1,dsound.sas wellas text; and theircapaci . to respond-to auser's input. Pears?n's M Sca~dino thinksthat the bigadvantageofdnlineeducatiOn isthat it personalises the·leJtl1ing experience,allowing each student to~ove at his or herown pace andin his or he~ownway.

THE Et:ONOMI~TFEBIl;UARY17TH aooi .

UNITED STATES

Wyoming's foot on th.e gas

factories have been "flexingdown", sendingworkershome without payor making themtake holidays.

Yet MrMcCollumisnot despondent. Hearguesthat a downturn was inevitableafterthe boom of the late 1990S: indeed, he says,there was almost a senseof reliefwhen it fi­nally came. Jim Gidwitz, the boss of Conti­nental Materials Corporation, a family-runfirm in downtown Chicago, takes broadlythe same line.Asyet, there-has been only amodest softening- in the sectors in whichContinental Materials operates (principallyconstruction; and the manufacture of heat­ers). Buthe regardedthe Fed'scut.in interestrates.onjanuary jrd.asominous.

Over at Sears, the chief financial officer,Jeff Boyer,blames energy prices and inter­est-rate risesduring the firsthalfof 2000 forthe slowdown in his company's clothingsalestowards the end of the year.Sears reck­ons that it.takes sixmonths for interest-ratechanges to feed through into its customers'spending patterns, so Mr Boyerishoping fora corresponding pick-up in the second halfof this year in the.wake of the Fed's recent

SHERIDAN

As POLITICIANS in the industrial mid­.t"\...west ponder a bout of economic so­briety,theircounterparts in a RockyMountain state are at last pouring out thechampagne. With its native son Dick Che­ney in the vice-president's house, and nat­ural-gas prices shattering records, the stateofWyoming isflyinghigh.

The economic boom of the 1990Sstopped .cold at-the Wyoming border.While its neighbours, especially Coloradoand Utah, were thriving, Wyoming saw theslowest economic .growth of anyRocky Mountain state. Before the re­cent upswing in energy prices, thestate government expected a bud­get shortfall of $183m. But now ithas a glowing s-oom surplus,thanks mostly to a quintuplingofnatural-gas prices in the pasttwo years.

The Cowboy State is usedto being out of step. For Wyo­ming, the Great Depressionstarted in1920, and leftits gen­eral fund overdrawn by snn, In1968, after the United States had en­joyed a long. economic expansion,the state's then governor, StanleyHathaway,discovered that Wyominghad only $80 in tbe general fund.More recently, Wyoming would bavefound itselfbroke by '990, but for pay­ments from the federal governmentand prodigious sums squirrelled away

38

monetary easing.Why is this downturn so difficult to

read? Globalisation provides one answer.The downturn in Tenneco Automotive'sAmericanbusiness (more than halfofthe to­tal) has been partly offset by better sales inLatin America and Europe. Even amongAmerican customers, the downtumseemstobe patchy. Giddings &. Lewis, a machinetoolmaker based in Fond du Lac,Wisconsin,says that many big manufacturers are hold­ing back on capital-equipment purchases.But the firm's chiefexecutive,Stephen Peter­son, points to cheering signs of a growth inorders from the energy industry and in or­ders for portablegenerating equipmentfromdotcom companies.

Flexibilityisanother confusing factor. Ascompanies get leaner and better informed,they are much quicker to take action. WhenDaimlerChryslerdecidedon .productioncuts for some models injanuary, it took Ten­neco Automotive just one day to work outwhat the implications would be for.itsbusi­ness.Mr Gidwitz predicts that the downturnwill be much more v-shaped than before,

in trust funds during a decade of high en­ergy prices from 1973 to 1983.

Thecurrent flush ofcash comes mostlyfrom soaring "severance tax" collectionson oil and gas production, which jumpedfrom $69m in 1998 to an expected $157m in2002. Roughly 1.5% of all severance taxesgoes into a permanent trust fund. Lastyearthis put $117m-worth of interest into thestate's general fund.

What to do witb the unexpected in­come has divided the politicians. Poor for

most ofits111 years.wyoming loosensthe purse-strings reluctantly. It re­members. with dismay that the

$800m surplus it had in the early1980s had all been spent within threeyears..In his state-of-the-state ad­dress, Governor Jim Geringer. re­minded his audience of a bumper-sticker commonly seen on Wyo­ming vehicles in the 1980s: "DearGod" please give us one more

boom. This time. we won'tscrewit up."

Yet the pressure to makeupfor 15 thin years is strong.For all its wonderful coun­tryside, wyoming is poor atcreating the sort ofjobs thatmight persuade younger,thrusting types to move to the

state. This was the only Rocky Moun­tain. state to have less than a 10%population expansion from 1990'to

with companies responding more rapidlyboth to the slowdown and to any recove:ry.

The most confusing signalofall, though,seems to be the labour market. Unlike previ­ous downturns, this one has seen unem­ployment remain, so far, relatively low: thenational rate rose only slightly in January to4.2% (though it is higher in some parts ofthemid-west, and currently stands at 4.8% in Il­linois).Brachs,a confectionery company, re­cently took Chicago by surprise when it an­nounced the closure of its local factory. ButBillStraussofthe Chicago Fedpointsout thatjob losses in manufacturing are not a newphenomenon-.Many layoffs, such as Ten­neco Automotive's cutbacks in marketing,would have happened anyway as corporaterestructuring ploughs on.

In short, the mid-west's industrialists areno surer than the nation's economists.or thepoliticians in Washington whether Americaisheacling for a recession. The real test, sus­pects Mr Gidwitz, will be when "the sleep­less nights come, the red ink starts to flow,and the banks come knockingon the door."------~~---~~."-"

2000.The largest private employer in Wyo­ming is Wal-Mart. Many of the state's oiland gas jobs tend to be temporary ones,and its workers are ageing fast. A recentstate report gloomily predicted that themain labour force (aged 25-44h which hasalready declined from 14.8,446 in 1990 to134,480in 1998, will level off in 2008 at amere 126,,560 persons.

A particular worry is the brain drain.Albany County, home ofthe University ofWyoming, lost 5.6% of its population dur­ing the 1990S, a reduction shared by otheruniversity towns in the Plains states, suchas Grand Forksin North Dakota, Verrnil­lion in South Dakota and Manhattan inKansas. Wyoming's teachers rank aznd inthe country in the pay they earn, and thestate's only four-year college, the Univer­sity ofWyoming,hasa total endowmentof$141m. The University of Texas at Austin,also with its roots in gasand oil money butmore recently enriched by software andcomputermoney, has an endowment Of$2billion from private donations alone.

THE ECONOMIST FEBRUARY 17TH 2001

Madison Avenue Beal"

FINANCE AND ECONOMICS

the marketsfromtimeto timeas the"moral':hazard play".) Yet concerns about moralhazard can be taken toofar.Fewof those in­volvedwhen a country finds itselfin finan­cial crisis escape without penalty: ask ex­PresidentSuhartoofIndonesia~Second,oncea crisis strikes;moral -hazard seems rathertheoretical. SUddenly, what matters are theinternational-economic or political conse­quencesoffailing to respond.

Thechances are that the-Bush team willbeveryinterested inthe reportof theMeltzer

NEW YORK

AS MILLIONS of CNBC junkies will.l'"'\.agree,nothing is quite so thrillingaswatchinga manic bull-run broadcast livefrom the floor of the New York Stock-Ex­change,As for the stock-tippersand day­traders that inhabited the dozens of fi­nancial websites, they were geniusesall.And who couldresistleavingthe browser.window open allday to watch hisportfo­Iioclimb?

Seeing it gothe other way isjust toodepressing. Traffic at Bloomberg.com isdown-almost45%froma yearago;accord­ingto Media Metrix.Traffic at Silicon In...vestorhas alsofallenoffa cliff, whileMar­ketWatch and cnvfn.com allof a suddenseeno growth,LastweekMotleyFool, an­other leadingfinancialwebsite,laidoff115people, a third of its staff. It joins The­Street.com, BulldogResearch, RedHerringand Inc.com in cuttingjobs recently.Evenat crcsc, viewership has peaked. Thenumber ofviewerslastmonth wasalmostexactlywhat it had been last March,ac­cordingto Nielsen, a ratingsfinn.

No one following the number of bro­keragetrades conducted onlinewould besurprised-Behavioural economics pre­diets that people:trade lessin ,bear mar­kets-sandindeed Ameritrade,-oneonline

Commission,published last Marth, whichrecommended a dramatic scaling back ofthe activities of both the IMF and the Bank.The commission, sponsored by Congressbut headed by AllanMeltzer, an economistat Carnegie Mellon University, wants to seethe IMF concentrate mainly on short-termcrises in emerging-market economies,pro­viding funds only to solvent governmentsthat meet pre-set conditions. The WorldBank would change its name to the worldDevelopment Agency, underlining a more

firm, has seen the average numberoftrades per account fall from more thanfoura month lastMarch, near thepeak oftheNasdaq market, to below two today.Thelesspeopletrade,the lessfinancialin­

. formation they seek, and the less' inter-ested theyare in watchinghow theirbetshavefared.

Thefinancialmedia gethit especiallyhard by thesetrends.Notonlydoes a bearmarket hurt viewership, it also wallopstheir main advertisers: brokerage houses,investment banks and financial-in­formation providers. 'thestreet.com' forinstance, saw year-on-year. revenuegrowth fall from nearly 250% to 23%in itsmostrecentquarter,whichwasstilloneofthebest performancesin itssector.Forthedotcoms, whicharefacing theirown capi­tal-raising" problems.itheexperience 'isparticularly painful. Now all are lookingfor a firmer footing. Lastmonth Terra Ly­cos, a portal, bought RagingBull,andcxxfu.com isbeingrestructure~ aspartofa 'total, revamp of its' parent company: 'Meanwhile, Motley Fool is pushing itspersonal-finance-side, which has kept itstraffic growing while rivals' trafficshrinks:Bull marketsmaycomeand go.Mortgagesand taxesareforever. .

tightlyfocusedroleinh1.:",est countries.Overall,the cbmtnission's aimisto renderthe institutionsmore effective, toreduceoverlapand toensure that policyrec­ommendationsdo not conflict.

Thereismuch tocommend in the report.Sharperfocusisanaim thaIboth institutionsshare-s-though to judge tm recent, well­publicised navel-gazing a the WorldBank,there is a longwaytogo, une authoritativewatcher of the institutiolts, Morris. Gold­stein;ofth~Institute forI~temati?nal EcS­nomlcs;thu:~ksthat the Mbltz~r reIJo~tgsestoofa.r, thoughhe agreesinlare.~en.•,tpapergnthe IMF'sstructural policiJs that ''1he Fundhas bitten off more-sin bdthscope and de­tail-tl1anitsmembers c~n chew." He en­dorses Mr.Kohler's' aim or ending missioncreep,with the Fund constantly extendingthe scopeof'itsactiVitieS~

In the end, the new -ericanteam maybemOrepragmaticthans' e fear.or othershope. Mr Dam, apparently the deputy­s'ecretary-in"'waiting, is'alscholarly fellow,no wild-eyed zealot,the duthor of well-re­garded volumeson interr(ational economicpolicy. He is experienced in the ways of,Washington and no stranser to the realitiesof power. Nor has Mr Taylor's, name set.~larns rin~ingat the IMF. $e too ishighlyre­spectedamongjhe economiststhere.

Pragmatism goeswitHthe territory. It ispolitically impossibleto sland aloofand in'sistthatnational governtrlents sortout theirown troubleswhen thestabilityof thewholeinternational financialsyJtemis at stake,orwhen America's vital inferests are threat­ened. And by that stageit~s·nouse saying­however true it may be---'that', the crisisshould not have happene!! in the firstplace.Mt O'Neill.fhe treasury Jecretary, struck achord-evenwith somein§ide,the IMF whenhequestionedthe West's l1ailout ofRussia in1998.-Butwouldtheadministrationlet dis­taste forcorruptRussianflnanciers dictateapolicy where profound gtopolitical conse-

quencesareat issue? ""t'" ".Themain threat tothinstitutions prob-

ablycomes'notfrom the iteHouse-or theTreasurybut fromCapitoliHill.Congress haslittleregardfor the Fund Jnd the Bank. Get­tingcongressional approval for freshcapitalinjections for the IMF is Jlways a painfullylong process; the MeltzerlCommission waspart of the price that Cohgress exacted forauthorisingan additionall$18 billionfor theFundin1998.Closingthe Bankand the nes isseen as a seriousoption bVsomeof the an­griercriticson theHilL!

They overlook something. Often, thosebeleaguered institutions have enabledAmerica to protectitsinterestswhilesharingthe burden ofcostwith others.AdamPosen,at the InstituteforInternJtional Economics,argues that the real moral-hazard problemliesnot with the BankanditheFundbut withAmericanforeign policyitself

I .

;""-

74_<~ -,-- ~ ._-,-- '_H_'_'_c_o_"0f'mom""-,

I,

UNITED STATES

CHICAGO,

When the production line wobbles

make its old business~s,particu1arJYt11anu­

facturiog, much moreproductive.C:hicago'sMayorRichard Daley,eve!s in the fact thatone in everysixjobs in thecity isinmanufac­turing. Manufacturing isnearly' twice as im~pOf!atlt t?tllell1id~west economy ash is tothe national one.

The driving force~asbee~'th~-car busi­ness, Butl~styear sales figuresdived for De­troit and inventories st~~ed toclimb.Localsuppliers, to: Ford, '" qetleral¥otp_r5 ,., andDaimlerChrysler have all felt the C011se­quences:Tenneco Automotive.iwith itsheadquarters in affluent Lake forest, justnorthofChicago, recently announced.thatits North American revenues wereu% downin the fourti"l, quarter oflast yearcomparedwith a year earlier. The company's chief fi­nancial officer, Mark McColltlm" expectsthis tobe another difficultyear,even thoughthe company began to reduce costs early,cuttingjobs insales.markedng and adminis­tration as early as last September. Several

The mid-west's economy

Down, nor out

How does America's economy look from the country's heartland?

U.SUALLY, Chicagolovesto proclaimthe. architectural glory of its soaring sky­scrapers. Now, it looks glumlyat the ratherbanal officeblockwhich servesas the head­quarters of MontgomeryWard. In Decem­ber, after 128 years, the retailer announcedthat it was filing for bankruptcy. Some450members of its head-office staff lost theirjobs immediately.The 28,000 people it em­ployed in its shops and distribution systemawaittheir fate;

In retr()~p~Ct,Montgoll1eryWard's',mis':

takemay have been t()assull1ethatr~t(lilit1g­

was an art that only people who lived nearL~ke ¥icbigan could understand. Itspent somuchtime eompetingwithitsfellowC~ica;gO~ll,~earsRoellUck, that both failed tono­tis~ the gr9wth9f':Val-Mart.But the coup degracewas delivered.bytl1e~eIicaJ1 e~on.,.

on'Y'~luggi~hChri~tmas sales getthe blameforMontgomery':Vard's demise:

Theel1dof¥9ntgomeryvvard isa harshreminder tome.rpicl__west thatArnerycC1'~cllrr~ntec,onqll1ic_p~obleIYl~~re notjust ',8

metter of plungingtechnologysharesout inCelifomia.The<:;hisago Fed" figuressb9W asharp',," r~se.ip.-uneITlploYl1l~nt,> illsur~rC~claimsin.December(see chart).Ene'S"WSts

have -also hit hard:-some mid-westerners'hsatingbillshaveriearlydoubled in a year,

, For.all.this.the regionseemspretty.confi­dent that the economy can still bring off asoft landing. Once dismissed as the, "rust­belt", the mid-west has reinvented itselfover the pastdecade.That includesbringingin new high-techbusinesses(someofwhicharenow in trouble;two otherbig recentjob­cutters are.Lucent and Motorola). But the

. mid-west's real achievement has been to

Firstof her kind, plus twins

Chuck Hunt-cas well as using a state heli­copter for her personal use and accepting alargesalary fura teachingjob that tooklittleeffort. Someofthese things,done by a man,might have been more easily. forgiven. ButMs Swift would not apologise, and "Queen[ane'twas born;

Sheis, to be sure, only 35years old. Shecomes fromwestern Massachusetts; wherepeople are pretty blunt. Shehas admitted tofeeling out ofplacein the male,Irish-Catho­lic,Boston-centredStateHouse;Mr Celluccichoseher ashisrunning-mate twoyearsago,partlyinordertoattractyoungfemale voters.Shealsohappened tobe pregnantduringthecampaign,which won lotsof publicityandhelped tokeepthe campaigncivilised.

MsSwift's new pregnancycouldbuy hera little time;The state's legislators will notwant to look as if they arebullying her, ar­guesGeriDenterlein.a Democraticsympa­thiser. A lot of female voters may like a gov­ernor who works but also has a family life.MsDenterleinhas helped toorganise break­fasts for women from both the big partieswho, she says, found the RepublicanMsSwift more impressive than they had ex­pected. Butfew ordinary voterswill get thechance to breakfast with Queen Jane. Andthere willbe limits to the chivalryextendedby themale-dominated StateHouse.

In short,MsSwift has achance,but not aparticularly big one. Much will depend onwhether she has learned from her mistakes.And thereisalwaysachance that the Demo­crats who willwant to challengeher in nextyear's electionwill get so involved in fightswitheachother that theywill nothavemuchtime toattackthe ladygovernor.

Still, MsSwift takes office under criticaleyes."I don't know that therewillbe a hugemarginoferror,"MsDenterleinsays.Historyis also not auspicious. The best-knownQueen Jane-the wretched Lady JaneGrey-e-lasted a merenine days on the thronebefore the nobles sent her packing, andeventuallyto herexecution.

34 THE ECONOMIST FEBRUAR'l17TH 2001

Pakistan's banks have four months to turn Islamic

,.".----,-

borrowersand depositolsmay choose be­tween conventionalandhslamic banks. Al­though the first Islamic Hanks opened only25 yearsago, they havemlIltiplied. Therearenow about 170 Islamic firlancial institutionsworldwide; managing oyer $150 billion offunds. In recent: years, cenventional bankssuch as HSBC anp.CitibaJIk have started of­feringIslamic financialselvices.

Instead of paying inlerest on depositsand charging iton loans,flslamic banks aimto epter into profit- and ·ioss-Sharing. agree-.ments with depositors a ad borrowers.'Un­der muda:mbah;·for instance, a bank' willgive money to a borrower on the under~standing that it willlater{share the resultinggains according to a ratio agreed upon be­forehand. The bank's depositors will thentakea shareofthebank,sfrofits on itsmud­arabahand other contr cts, instead of re­ceiving fixedinterest.

.SomeIslamic bankers

1c1aimthat thissys-

'H' 'CON0h,~"um'7'H aocr

I!

sayitisanabout-face.MS*'ieirasaysshewassimplyclarifying their misunderstandingofher firstannouncement; zhich saysearlyre­tirementcan be granted,~rovided the regu­latordeemsthat the fundfan payforit.

Shortly beforethisrmytherewasyetan­other, over a ban on !pension schemesputting money into invettment funds thatchargedperformance-baled fees. Again, thepensionsbossesprotested,and a fresh regu-

. lation was issued that seemed to counter­mand the original, MsViJira saysit wasan­other financial regulai]», the NationalMonetary Council, that! put out the firstregulation; she realised tl~ey had erred, andissued another to overrule it. Performancefees are now acceptable bnly so longas theinvestment fund outper~nns the yield ongovernment bonds, which are currentlyaround 15o/o.ReguiatorSsuspect that somein­vestment funds have bribed pension-fundbosses in return for Dvet-:-generolls perfor-mancefees. ,i

Thepension-fundbo~ses complain thatMsVieira's .edicts.heavyjhanded and inco­herent,actuallydiscourade companies fromsetting up schemes. In wrinciple, they areperhaps entitled to be sebsitive to this pro­blem.Braziliangovernmentshavetradition­ally suffered, from"legiSI~tive incontinence,issuinga constant strea , ofill-considered

.and badlydraftedlawsa d rules.Inpractice,years'of slack supervision; in which pen­sions problems'haverftounted, give MsVieira everyreasontoact A pity that com­munication betweenherland the funds hasbrokendown. I .

A pension that smells like these?

Islamic banking

Forced devotion

venturesthat havebombed. By her reckon­ing, merely to value pension-fund invest­ments at book value would mean an injec­tion of 9 billion"",,is ($4.5 billion) to meetfutureobligations.

, Thebiggest fusshas been over the regu­lator's 'announcement .last month that theminimum retirement age will be raised instages,fromssroes (Braziliansarenowlivinglonger than they used to). The funds com­plainedthat the move would stop compa­nies that needed to-restructurefrom beingable to offer early retirement.to a greyingworkforce. The 'regulator 'responded byputtingout a further instruction.Thefunds

'( 'ATHENPakistan's Supreme Court ruledVVat theend of1999 that Islamic bankingmethods had to be used from July 1St thisyear; most bankers assumed that nothingmuch wo¥ld· change..This is.not the firsttime,after,all,that Pakistanhas triedto intro­ducean Islamicbankingsystem.

Now,however,it appears that the high­est figures in the land, including PervezMusharraf the country's military' ruler; asw'ell· as Shaukat Aziz, the finance minister,arecommitted to-the-idea. Pakistanibankersfacethe awesometask of completelytrans­forming the way in which they do busi­ness-all in littlemorethan fourmonths.

The Koran clearly condemns interest,which iscalledriba inArabic.asexploitativeand unjust.Butof the world'sIslamic coun­tries,only Iran and Sudanhave imposed in­terest-freebanking on their populations. Inmost of the places where 'Islamic bankingflourishes, such as Malaysia and Kuwait,

76.

SAO PAULO

All shook Up

FINANCE·AND ECONOMICS

Pensions in Brazil

T. ... WO of Brazil's chronic economic pro­blems are that its people do not save

enoughfor their old age, and that itscompa­nies struggleto raise long-term financing.One solution to both is to get more firms tosetuppension schemesfor their employeestowhichboth firmsand workers contribute:the ·employees would have an attractivemeans ofsavingforretirement,and the con­tributionswouldprovidetheBrazilianecon­amy witha growing source-of long-termfunding.

Though Brazil's pension funds havegrown·steadily in recent years, theyare stillverysmall in relation to the economy,under15%ofGDP. Thegreatbulkof firms stilllackapension-scheme. The governmentwants toboostthe growthofpensionfunds aspart ofits plans to develop the country's stuntedcapital markets. It is tryingto update thepensionslaw inways that-wouldencouragemore pension funds to beset up, improvetransparencyand toughen the penalties formismanagementand fraud,

Yet rows within the governingcoalitionmeanthat the proposals are stalled in Con­gress, alongwith many other needed finan­cialreforms.So inthe meantime,thegovern­ment. is ,trying ·,to"sort'out-scandals andfinancialproblemsthat have longfesteredatexistingpensionfunds.LastNovemberitap.;..pointedSolangevieira,a younghigh-flyer inthe civil: service, as ,the chief pension-fundregulator..There has since been a flurry ofruler changesaswell as an unprecedentedamount ofintervention in the affairsofthepensionfunds.

Most.' recently.con February""7th,,'MsVieira fined eight funds for exceeding thelimitsfor investingin the sharesor bonds ofany particular company. On the same dayshe askedpublicprosecutorsto file criminalchargesagainstTransBrasil, an airline.whichhas,been collecting pension contributionsfrom its staff but not paying them into itsfund.Theproblemsare worstat the pensionfunds of publicly owned companies,longpron~ to politicalmeddlingand corruption:Thesefunds have a historyof blowinghugesums,on property speculation and failedbusinessventures.

Sharpeningth~ funds' regulationseemsreasonable. All the same,the funds' bossesare furious with Ms Vieira, whom they ac­cuse of making hasty and ill-thought-outdecisions. Instead of buildingpublic confi­dence in pension schemes,they say,she'un­dermines trust by exaggerating the scaleofthe problems.Ms Vieira, in tum, complainsof funds' reluctance to admit to the short­comings: they should, for instance, beputting more realistic values on property

UNITED STATES

-~----------~-------~-~-----------"

matewould reducethe surplusby a third.It seems unlikely that the Pentagon

would get as much as it wants, consideringthat reformof Social Security and Medicarewould make huge demands on the remain­ing pie. As the Brookings Institution's Mi­chael O'Hanlon argues in his forthcomingbook, "DefencePolicy Choicesfor the BushAdministration!', the armed forces cannotbuy their wayout oftrouble.Thisispresum­ably why Mr.Bush refused. to authorise.animmediateincrease in thedefencebudget.

Nor can the forces easily do what thepresident occasionally .. suggestedon-fhecampaign.trail: skip a whole generation ofweapons (cancelling, say, the troubled V c22Osprey tilt-wing helicopter, which keepscrashing) and proceed directly to a "thirdgeneration't ofweapons, Thischange.some­times called the Revolution in MilitaryAfcfairs, envisions.aircraft carriers being re­placed by •• unmanned "arsenal ships"stuffed with missiles, large infantry divi­sions being replaced by individual soldierswith all manner of high-tech arms, andtanks retiring into history. All these thingsmayoneday cometo pass.Butit couldbe upto20yearsbeforethat dayhas fullyarrived,aworryinggapafter.thetimewhenthecurrentlotofweaponsbecomeobsolete.

What to do?This is whereMr Marshalland thestrategic reviewcomein.Unlikepre­vious,largely ineffectual reviews, this one isin the hands of a genuinelyradical thinker.Mr Marshall has called tanks and aircraftcarriers'"millstones", He thinks. Americandefence focuses, too 'much.on' Europe.andnot enough on the geostrategic challengeofChina. In the past he has advocated a half­way house between the Joint Chiefs' decmand for the whole array of vastly expen­sivenew weapons and Mr Bush's notion ofskipping a generation. America; he- "argues,couldcutbackon someofitsnew armsplanswhilebringing into activeservice soon a fewexperimental"third-generation'tweapons,

Mr Marshall's willingness to rethinkAmerica's defence commitments whenthereisnotenoughmoneyto buyeverythingeverybody. wants raises other questions.Does America-need 40,000 troops in Japanor 70,000 in Germany, which is now sur­rounded by NATO allies? Does it need 7,000

nuclear weapons on full alert, and threeweapons laboratories? Does it even need a"two-war strategy"(the ability to fight tworegional conflicts simultaneously)? Thepromised reviewmay well, answer no to atleastsomeof thosequestions.

Ifthat happened, the resultmightnot bea Great Leap Forward into high-tech war­fare. Butit couldwell be the start ofa transi­tion that moved America away from itsold,cold-war military ideas.Financial, techno­logicaland bureaucraticobstacleswould re­main.Butforevenbeginningtoplan forsucha transition,MrBushdeservescredit. .

Bill Clinton's reputation

Muddier yetWASHINGTON, DC

H E HAS always loved the limelight. Butperhaps evenBill Clintonisgetting abit

tired of all the attention he has been receiv­inglately. Dayafterday the formerpresidentwinsalmost asmuch coverage ashissucces­sor-but Mr Clinton's comes with savagebarbs and uncomfortablequestions.

Mr Clinton's decision to pardon MarcRichwill probably do more lastingdamageto his reputation than his tryst with MonicaLewinsky. The Lewinsky affair producedmillionsofClintonsupporters,who thoughthewasbeing persecutedovera privatemat­ter.But ,even,·his most sycophantic bag­handlers have failedto comeforwardto decfend the pardon of the fugitive financier.

Roger Adams; the Justice Departmentofficial in chargeof reviewing pardon appli­cations,has told the Senate[udiciaryCom­mittee that "none of. the regular proce­dures...were followed" in Mr Clinton'spardons of Mr Richand his partner PincusGreen. The House, Government ReformCommitteehasissued subpoenas intendedto uncover any possiblelinks between con­tributions tovariousClinton causes (par­ticularly.byMr Rich's former wife,Denise)and the pardon. MrClinton promisestoco­operatewith any"appropriate' inquiry.

With the continuingscandalsbeginningto affect the ex-president's earning power(UBS Warburg.has quietly scotchedplans tohire him to speakat an.investment confer­encein April), MrClintonis scramblingtore­pair hisreputation.Hehas not onlyreturnedasmalltreasurechestof furnitureand fineryto the White. House.He may also move his

At least they love him in Harlem

future-presidential ()~ce fr0111 midtownManhattan to the heartofHarlem. -

This last move suggests thatthe formerpresident has not entirelylost his touch.MrClintonwasgreetedby a hugecrowd shout­ing"Welove you" when'he visited Harlemthis week. Harlem is.an advertisement forone of Mr Clinton's best policies: creatingeconomicempowermentzonestorevivede­caying bits of America's inner cities. Andblacks have always been Clinton loyalists,growing even more enthusiastic when thewhiteestablishmentturnsagainsthim.

MrClintonstillhas tocut a dealwith thecity's Republican mayor, Rudy Giuliani(whoonce prosecutedMrRich), to persuadehim to relinquish a lease on behalf of thecity's child-welfare agency, But Harlemcould be an ideal base for Mr Clinton's at­tempts to rehabilitate himself. It would beespeciallyhandy ifhe weretorun formayorof NewYork.

Someof his criticsmay bein danger ofoverplayingtheir hands. Talk of impeachingthe ex-presidentcould revivesuspicionsofa"vast right-wingconspiracy." (George Bushhas been careful to insist that "it's time tomoveon.")Andsomeof the cash-and-carrychargeshave been exaggerated. Borsheim's,the store at the heart of Giftgate, denies anallegation that HillaryClintonsetupa secretregistry of goodies. Allthe 'other living ex­presidentshelped themselves to some"per­sonal"effects 'from,the White'House-sandall live pretty comfortably. Ronald Reagan(whoonce made $2mfortwoao-minute lec­turesinjapan) letsomerichfriendsbuy hima $2.sm housein Bel Air.

So far'it still looks as if Mr Clinton caneasilysurvivea fewquestionsabout histasrefor WhiteHouseloot.Butthe MarcRichparcdon looksdodgier by the day. That will testevenMrClinton'spowersof recuperation.

32 TtiE ECONOMIST FEBRUARY 17li"ti 2001

I'INANCEAND ECONOMICS

Behaviour such as reciprocity and co-operation is not bred in the bone.Rather, it responds to incentives and experience

A matter Of trust

H ow MUCHdo. you trust your busi­.nesspartners,and how muchdo they,

trustyOU?Evenin rules-based,litigious so­cieties, 'some measure of trust is essential.Contractscannot plan forevery eventual­ity, and outcomes are often hard to verifyanyway.The issue of trust is that muchmore pressing in emerging economies,whose threadbare legalsystems-and poorenforcementofferlittleassuranceto inves­toraSo.howmuch trust can we, expectfromothers?Researchers arebeginningtofind nut.

Intuitively.at least two'sets of factorsmightfoster adegree of trust.Forone,trustcouldserveasasignalofgoodwill, eitber to.secureco-operation in the.shortterm or toensurethe success of a long-termrelation­ship.On the other.hand, the ori­gins oftrust might be simpler.somepeoplemightjust feelgoodabout trustingothers.

KennethClarkof tbeUniver­sity of Manchester and MartinSeftonof the University of Not­tingham examine the first ofthese motivations in a recent pa­per. Byhaving subjectsplaya se­riesof simplegames,the academ-ics.measured levels of trust andtrustworthinessamongstrangersattheir first encounter, and thenre­corded how the levels of trustchanged over. time. Thefermat.foreach gamewas the "sequential pris­oner'sdilemma" (SPD), whichimagi­

, nes two prisoners.being held sepa­rately forinterrogation on their partsin an allegedcrime.Therearefour possibleoutcomes,dependingon the prisoners'ac­tions. Should the firstprisoner to bein­terrogatedconfess, whilst the-second doesnot,then thefirstisreleasedand the secondgets 20. years (or vice versa). Should bothconfess, then both get ten years. Shouldneitherconfess, both gettwoyears.

In this game the outcome that showsthe greatestmutual trust between the twoprisonersiswhere the first one refuses toconfess, and the second does the, same.True, the second player might wellbe in­clined to confess and so get 'offscot-free.

Thepapers referredto are: "TheSequentialPrisoner's Di­lemma:Evidenceon Reciprocation"; by KennethClarkand Martin Sefton, EconomicJournal (fanuary 2001);"Measufinglhist",byEdward t.cleeser et ai,QuarterlyJournal Qf Economics(August 2000); and "Who TrustsOtherst'',by AlbertoAlesinaand glianaLa Ferrara.jour­nal qf PublicEconomics(forthcoming).

78

-But if the game is played .several times,maintaining trust gives theb~stoverall

outcome: players receive two-year .sen­tences every round rather than eachtimerisking ten or 20 yearsin the slammer.

Using money as a payoff rather thanprison sentencesas a threat, MessrsClarkand Sefton had student subjects play theSPD ten times. Players kept the same role(first or second mover) in each round.butwere-randomly pairedwith different; hid­den partners. During initial rounds,. thefirstmover beganby trusting(notconfess­ing)57% of the time. In 35% of those casesthe second mover followedsuit, thus ob-

-taining the trustingoutcome.Bythe'tenthround, however,only 32% of first moverswere still trusting; And these co-operatorsWere. rewarded .with trust in return. only38%o.f the time. The levels of mutual dis­trust had' ratchetedup in the intervenirigrounds. Thisevidencebelies the idea thatany givenperson is.by nature.consistentlytrustfulormistrustful.

Theauthors refinedtheir resultsin twoways.Theydoubled the payoffsacrossalloutcomes,and they offeredfar-greater re­wards fora solitaryconfessor. Simply rais­ingthe stakeshad no effect. Butin the sec­ond case, where.'the. cost of. trust wasincreased, the .frequency of the trustingoutcome fell substantially.Againthe ideathat some people are'inherently trusting,whilst others are not, appears ill-founded.Changesin incentivescountfor much.

Despite'·the.· 'evidence that. trust re-

spondst()'~ncehtiv~s,cel1ai~ituatio~s fos­ter trust morethan others.Inhnother gameof trust, Edward c;la"ser o.f j-!arvard Uni­versity and~isco.llabo.riltlrs pairedoffplayers,someofwhom kne . '. eachother inreal life. In this game, the rst player re­ceived$15, o.f""hich hecoul give any partto. the second player,hidd n fromview.The amount transmitted~'s doubled bytheresearchers, and the seco"d playerthensentany part hewishedofth new amountback to. the first player. Hele the trustingoutcomeisforthe firstplayejto send all$15tothe second.Then,provided that the sec­end player is worthy of tIle first's trust,both can walkawaywith $15!Nevertheless,the firstplayerhasan incentiveto keeptheentire $15. Hecan only do bJtter if the sec­ond playerretumsmorethar. hekeeps.

sadly for those with a High regard forhuman nature,the firstplayfrs sent an av­erageof $1241' to their partners,who re-,turned an average of 45% of the doubledsum.Firstmoverswho. declaredbeforetbegamethat they trusted-strangers sent $2.21

more across.othej things'equal,, than counterparts!who remem-

bered their mothers' advice onthis subject..The histence of aprevious acquaintance also af­fected behaviou]: both theamount 'initially ~ent,"and :thepercentagereturned by the sec­ondplayer,.rosej~ proportion tothe lengthof time the playershadknown eachother.Rerhapsunsur­prisingly, when pl~yers were ofdifferentraces. or nf.tionalities. theretum ratiowasmu . lower.

A vice to trust all?The findings on gm6p identity re­ceivemoresupport fr6maforthcom-

-j':,' b lb ". f'<"RBi!:;- mg paper y A erto~esma 0 Har-vardand ElianaLaFertaraofBocconi

University. They merged +0. decadesofresponses to'an American .social surveywithcensus data on racialr!xes in differ­ent parts of the country'r!neir statisticsshow,that blacksand membersof raciallymixed communitieswere fur less likely totrust others than werewhitf.sor othersliv­ingin racially homogeneouscommunities.Respondentswho. had recently sufferedapersonal setback-for inst<fuce,serious ill­ness or financial problemslLalSo. reportedlower levels of trust.Thissuggesrs thatwhen people revise their s pectations offellow' humans, it may sometimes be forapparentlyirrelevant reasohs.

Together, the studies-argue that trust isshaped by experiencenot native personaltraits.:It also seems' that.thist is a 'fragilething,pmne to. breakdo.wnl altogether. Thelesson?A handshake, is nb substitute forreadymoney,Ofahard-eamed reputation.

rue ECONOMlfT' fEBRUARY

'."

INDONESIA

" .'. t~:;::' ""

with hissupporters'attitudetowards.yolkaronly"becauseIfeelthe sameway".

Mr.Wahid'senemies,ofcourse.have re­fonnist argumentsoftheir own. Theypointout that he has done nothingduring the past16months tostemcorruprionor improve thejusticesystem,and they accusehim ofmed­dling unwisely in many government deals,especiallythose involving tycoonsWhO(lVVe

IBRA money.Since MrWahidhasdonenoth­ingtoestablishaccounrabiliry.theysay, theyhave their own ideas about which corrup~

tion cases to concentrate on: start with thepresidentand gofromthere.

In the firing lineSois Gus Dur a corrupt president being im­peached by a reformistparliament,or.a re­formistbeing impeached by a corrupt par­liament? In truth, neither description isaccurate.Toseewhy,considertwoof thede­cisions that have most haunted Mr Wahid:hissackings ofa PDI-P cabinetministerand awell-knowngeneral.

Many of the president's problems withparliament can be traced back to a cabinetshuffle last April, in which he sacked twoministersfrom his economicsteam. One ofthose ministers, LaksamanaSukardi, was atrusted adviser of MissMegawati, and,hadearned wide respect for takingon the state­owned enterprises ministry. Mr Wahid notonlysackedhim,replacing him with a loyal­ist, but botched the explanation horribly,telling parliament-with no proof-that hehad removed Mr Sukardi for corruption.This infuriated many of his coalition part"ners, includingMiss Megawati, who guardsher clean reputation jealously and did notlikethe sideswipeat her party.

Mr Wahid's other big personnel fiascoinvolved his attempt, last year, to establishfirmer controlover the army by promotingan outspoken junior general, Agus wlraha- ­dikusumah. Shortly after taking commandof Kostrad, the army's elitestrategic reserve,General Agus revealed an audit that hadfound widespread corruption in the unit.This did not endear him to,fellow officers,who also resented the favour the presidentwas showinghim. when Mr wahid tried topromote him again, the senior generals re­sisted by lobbying Miss Megawati-i-andwon. In the end, General Agus ended upwithnothingand MrWahidrevealedbisim­potence.Themessagewasdrivenhome by adecision in the MPR shortly afterwards, al­lowingthe armed forces to retain the guar­anteed seatsin parliament that they hold astoken of their "dual function" in both de­fenceand politics.

Thisepisodewas similar,in someways,to the sacking of MrSukardi. Thepresident'ssupposedly keen tactical skills failed himmiserably on both occasions, helping toplacehim in his current predicament.In thefirst case.Mr :W~l1id's opponents weresup­porting the reformer, in the:second,the re-

30

formerwassupported by Mrwahid. Inbothcases, as friendsofIndonesia gloomily pointout, the reformerlost.

Asa resultof all this,many advocatesofreform are now fed up with all sides."Theelite machinations of Jakarta politicsare soflagrant, it's disgusting," says one cabinetminister.Dennis Heffernan,a local consul­tant and long-time friend ofMr Wahid, isdistressedtoseethe presidentplay into par­liament's hands. "Everybody knows theyarea bunch ofhastilycleanedupNewOrdercreeps,"he says,"butGusDur isjust makingiteasyforthem."

Althoughhe islessof a GusDur fan, thissentiment is echoed by Erros Djarot,whowasan adviserto MissMegawati for mostofthe '990S before. he left in frustration earlylastyear.MrDjarotderidesMrWabidas"thepresidentofkastjava", Buthe isjustas quickto denounce Miss Megawati, complainingthat "the two of them are always blockingus". ,As for the, members of parliament,

Would Megawatt unleash them?

"They are like hungry dogs hunting fteshmeat." A piece of graffiti in centralJakartacaptures the mood of the moment: it urgesMrWahid, Miss Megaweti, MrTandjungandMrRaisallto resign.

Atmost,onlyone of this quartet willbegoneinthenextfewmonths.WithMrWahidout of theway, isthere any chance that MissMegawati would improveher performance?In, many,. respects, reassuringly, she wouldrepresent similarvalues to, those ofMr Wa­bid.Unlikethe "centralaxis"of Islamistpareties led by Mr Rais, both sbe and Gus Durhave stood up fora secularapproachto life.Since MissMegawati has neverbeen a Mus­limcleric, isa woman,and has peen accusedofconsorting, too closelywith the ethnic­Chinese minority, she may find it slightlyharderto carry this messagewith authority,And she might well inspire the fragmentedIslamistopposition,though it remainsweak,to uniteagainsther.

When it comes to the army, MissMega­wati'scourseisharder to predict.Shewouldprobablybe lesslikely to push for structural

reforms, such as the repeal of the territorialsystem that gives the army its widespreadpolitical influence. And although some ofher ministersmight prod the army to cleanup itsoff-budgetbusinesses, that wouldbe apainfullyslowprocessin any.case. Miss Me­gawati's reluctanceto interferein theseareaswould have little practical effect, since MrWahidhas had nosuccessthere either.

One IndonesiaAMegawati presidencymightmakea biggerdifference to the way the army'treats trou­blemakers. Partlyout of respect for her fa­ther's legacy, shewants Indonesiato hold on

, to all of its present territory,and appears tohavebeen vexedby Mr wahid's willingnessto negotiatewith separatists. Since her ownsupporters were among the victimsof mili­tary heavy-handedness' in Suharto's time,she would no doubt urge the generals tomaintain somediscipline. Butif MissMega­wati were to become president, it wouldprobablybe the residentsof Acehand Irian[aya whose lives would change most, andfor the worse.Shemightalso tum the armylooseon Islamic extremists such as the Las­kar jihad, which has injected itselfinto sec­tarian violencein the Moluccaislands.

As for economicpolicy,MissMegawatihasa fewgoodpeoplein her party,including

, MrSukardi. Butshe alsohas some bad ones.Like Mr Wahid, she has espoused few econ­omicideasofherown,and would havetodoa lotofnegotiatingherchances wouldhingelargely on whose advice she chose to take.And although she would be unlikely tomake progress on corruption, even 01 startwould be good in Indonesia,where the onlythingpeopledo openly islietojournalists.

Will sbe be willingto topple Mr Wahid?Apartfrom hergung-hoadvisers, many whoknow her still doubt that she will take therisk. Had she not been so cautious in 1999,shewould alreadybe president;she refusedto negotiate and ended up as number two.Moreover, there is the small matter of herhusband, TaufikKiemas, who is one of thePDI-P'S chief fundraisers. Fewpeople doubtthat, should she take over, the searchlightswould swivel onto his business activities.Besides, saysMrHeffernan,"Thepresidencyright now is a flaming bag of cow dung. Ithink she'stoosmart to touch it."

It is still conceivable that Mr Wahidcouldwork out a deal.On Februaryiqrh,hesaid he needed arest.He isabout toembarkon a longtrip nextweek,which willincludeapilgrimage' to Mecca. Once again, there arerumours of a shuffle when he returns.Thistime, he could do it differently, listening tohis vice-president. and installing a cabinetshe can livewith. Butsuch a deal is gettingharder to imagine. Even Gus Dur's confi­dants admit that he would rather drive atrain overa diff than admit to hisold :friendthat hehad been wrong.-------------"---"

THE ECONOMIST FEBRUARY 17TH 2001

SCIENCE AND TECHNOLOGY differ~nt in the two specie!,00",_that result fromthemare n t perfectcopiesof each other. But they a(e close. It looks,therefore, as thoughthe differences betweenmice and people have mo~e to do with theway that theirgenesare regularedthan withwhat they actuallyproduce!

Human self-importandecan, however,salvage something from tHe fact that miceand people are significantl~ more sophisti­cated than invertebrates. n{ey have lIz timesas many genes-as a. nematode worm, andtwiceasmany asa fruitfly(thetwootheran­imals_that' have had theif ,genomes com­pletelysequenced). A large core of sharedgenes deals with such shated processes asthe release ofenergyfromglucose. Butin ad­ditionto this core, there ha~ been a massiveexpansioninhumans (a~d mice) of thegroups of genes that.con 01 several othersortsof function.

Someof}hesear¢no surprise,Immunesystemsareaspecialityofv rtebratesingen­eraland maTlllals-inparti :ular. Onediffer­et1~e ~etweerthe human g~rt0meand thoseof worms and flies isth~refore the largenumber ofgenesdedicatekto keepingthiscostlybut effective systemgoing.

Other a~easof expansion include thegenesthat regulatethe nenlous system(par­ticularly those that are re~ponsible for the

.Sig. nailingmolec.ul.e~.kn()~.r:•as neuro,t.rans­mitters) and the blood sys em. Butperhapsthe most interestingwere two groups ofgenesthat help tocreatecolnplexity. One ofthesewas the groupwhoseprotein productsbind toDNA and thus reguhlte theexpressionofgenessuch as thosein th¢homeoboxclus­ters.Theotherwasforthegfoupthat controlsthe processby which a cellikills itself, whichiskn0wtl,as apoptosis.. 't - _ .

Apoptosisisan,essentialact,not acasualone. It firstcame to lightin~he studyof can­cer.one way the body deals with cancerouscells is to order .them:to !elf-destruct.. Butapoptosisis: also crucial dpring embryonicdevelopment. Some developmental pro­cessesare likesculptingin &ay.They involve

adding bits bf tissue. wherenone previoJsly existed.Oth­ers are like squlptingin stone.Theyinvolvecarvingaway tis­sue that is.already there.Thisisdone by apdptosis. The cellsthat diehelp fo makeyou whatyouare. I 'The lessons pfhistoryJust as cells die out when theybecome reduhdant duringde­velopment, {o genes die outwhen they becomeredundantduring evolufion.The humangenome bears witness to thisprocess,_too. ITt is littered withthings callel:! pseudogenes,Theselooka¥rst sightlikerealgenes, but lack the additional

Somewhat like a fly

man genome-have talked of _numbers',between~'29'999a?dlSo,ooo. It shows howwrong you can be. (Though some cynicshave suggestedthat higher npmbers wouldmake drug companies willing to pay morefor access to the genomicdatabases main­tained by thesefirms.)

Another surprise is that the geneticdif­ferences between people and other speciesSeem smallerthan had been supposed.Cel­eraannounced thisweekthat ithad finishedsequencing the genome of that laboratoryworkhorse,the mouse.Thelastcommonan­cestorofmiceand men probablylived100myears ago. Yet according to Dr Venter, thefirm's scientists have found only 300genesthat peoplehaveand micedo not.

The public project, though it does notname such a precisefigure; comesto'asimi."lar general conclusion based on publiclyavailablemouse-genomedata. To. a reason­ableapproximation;a human genome islikea mousegenomethat hasbeenchopped intopiecesand rearranged(seediagram), Theex­actgeneticsequencesof the sharedgenesare

complex of regulatory sequences' of ONA

that switch them on and off in response tochemical signals from the rest of the cell.Anythingthat interrupts this regulationwillget short shrift from natural selection. Soonly 2% of the DNA in these parts of the ge­nomeconsistsoftransposableelements.

It is difficult to avoid concluding that,where they do persist, transposable ele­ments must be conferringsomebenefit.Onepossibility, suggestedfor a type of parasitecalleda SINE (shortinterspersedelement), isthat it helps promote the production of pro­teins when a cell is put under stress.SINES,

and other transposable' elements, are notnormally transcribed by the cell'smachin­ery to produce the molecularmessengers bywhich genesact.Butin the caseof SINES thereis an ' exceptiore they are transcribed, instressedcells. Themolecularmessengerthatresults serves to block a substance thatwould,otherwise,slow" down protein pro­duction. Thanks, .,' to SINES, therefore,astressed cellmay be able to respond morerapidlyto the threat in question.

'Similar advantagesto the continued ex­istence of other sorts of transposable ele­ment will probably tum up when peoplestart looking in detail. And in a few casesthoseelementshavebeen co-opted by theirhosts toeven bettereffect: it looksas thoughat Ieastzogenesthat playa usefulrolein thehuman body originally came from tran­sposableelements.That ishardly surprising.Genomesarenot pickyabout wheretheyac­quire usefulmaterial,and transposableele­ments are hat the only thingsto have beenplundered. More than zoo vhuman' geneshaveactuallybeen pinched frombacteria.

These slaves," or immigrants-ecall themwhat you will-are part of the grand-totalnumber of genes that each of the projectshas come up with. But those totals aresmallerthan many peopleexpected.

Out for the countIn theissos WalterGilbert, one of the pio­neers'of genomics; estimated that the num­bertof vhuman .genes '"wasaround lOO,OOO. He based thison knowingthe number of ge­netic letters in the DNA in thechromosomes ofa . humancell's nucleus (which can beworked out from their weight)and guessingh()wmany genes'mightlurk in any givenstretch.

More recent estimateshave varied wildly. Based onhis early results,CraigVenter;the boss of Celera, came upwith a figure ofbetween 50,000and.' 80,000; Incyte ..,Pharma­ceuticalsand Human GenomeSciences. two other Americanfirms that have been busy cre­atingprivate,though lesscom­prehensive, versionsof the hu-

80 ,THEECONOM1S!I'FEBRUARY 17TH 2001

I

INDONESIA

more authority, to Miss Megawatiin ex­changeforkeepingthepresidency.

MrWahid'sbackersarguethat thereisnoevidence that he has done anything wrongand that, at worst, he is guiltyonly of.cam­paign-finance offences. Parliament.is push­ing him out, they say; only because MPS dis­like his efforts at reform. Mr wabid hasshrewdly played to this sentiment-in severalways. He has said that he will respond toparliament's treacheryby renewing his driveagainst corruption; pledging this week toconcentrate on ten.particularoffenders,

Moreover,' although ",he denies or­chestratingthexu's attacks on Golkarofficesin Eastjava,MrWahidhas soughtto portraythis movement as a battle between the oldregime(confusingly harned the New Order)and his.new reformist one. MrWahid toldThe Economist thisweek that his empathyfor the NU gangs-she said last week.that he"understood" why they were violent-hadbeen misinterpreted.He says that he willdowhatever he can to prevent violence.randthat he.wastryingtc point out that he"greed

impeached at once.Neither Miss Megawatinor AkbarThndjung,whoheads Golka" theformer ruling party, has sanctioned this,since it is in the interests of the two biggestparties to pay some attention to the rules.

Miss Megawati in particular is stayingstudiously silent. This ispartly because shedoes notwant tobe comparedto GloriaMa­capagalArroyo,the president of the Philip~

pines,who led theopposition'seffortstoun­seat her predecessor, Joseph Estrada. For

although Miss Megawati, likeMrsArroyo, would probablyen­joy the support of the army, thatis nota: blessing in Indonesia,where soldiers are so discredited.

Mr Wahid's opponents inthe PDI-P are convinced thatthey have a green light to unseathim, but this week there was talkfrom other quarters of 1ivinghim one more chance,He might,perhaps, be asked to yield yet

W(lhid manages to avert the im­peachment effort, that is whenthe procedure to unseat him willcometo a head.

That procedure began lastmonth, when a decision wastaken to censure Mr Wahid overthe two.financial scandals, one­concerning the national foodagency, Bulog,the otherconcern­inga donation from the sultan ofBrunei. The scandals occurredlast year,after Mr Wahidtried toappropriate funds from Bulog, They want Wahid to goostensibly for humanitarian aidin Aceh, at the north-western tip ofIndone ­sia, The president has admitted that helookedinto this,but saysthat he latergotthemoney from the sultan of Brunei, who gave$~m, Shortly •after Mr Wahid had ap­proached Bulog his masseur.Suwondo, ar~ranged an illegal disbursement of 35 billionrupiah ($3.7m at current rates),claiminghewas acting on the president's behalf. Mr.wa­hid sayshe knew nothingabout this.

Although Mr Wahid's story is a littlefuzzy, the evidence. against. him iscir­cumstantial.Nevertheless, parliamentvoteddecisively to accept the report., which, ac­cused himof beinginvolvedin the Suwondoaffair and of misusing the sultan's money.Mr Wahid now has until early May to ex­plain himself to parliament. If it is unim­pressed, he gets a second warning, andonemore month; then parliament is allowed, tocall aspecial MPR session to vote on remov­inghim.

Already, more than zoo MPS seem con­vinced of Mr Wahid'sguilt,or at least of hisunsuitabilityaspresident.Theywanted him

there any clear plan to manage the policy ofradical decentralisation, which allows hun­dreds of corrupt local governments to exer­cise more control over their own develop­ment budgets and, in consequence, to dowhatever, they please. More political insta­bilitywillalsohamper other effortsto attractinvestment And, yet again, fresh assistancefrom the IMP has been suspended becauseof stalled reform.Thisparalysiscould easilystretchinto themiddleofthe year.UnlessMr

ponents-including Amien Rais,an Islamistself-promoter,leaderof one of the main co­alitions in parliament, and chairman of theMPR-warned him that he had no more thana year to shape up.Moreover,by that time itwas already clear that a pair of multi-mil­lion-dollarfinancial scandals would pro­vide the pretext for impeachment when thetimecame.

Mr Wahid alsowentonto construct hisnew cabinetwithout takingMissMegawati'sadvice on appointments, muchof which proved to be prescient.Despite- his minority .: govern­ment.he.has continuedto treatparliament-as. an- insignificantnuisance.Mostbafflingof all;hehas prepared himself for thisbattlenot by cementingtieswithMissMegawati, but by insultingher personally.in settingswhereaccounts of what he said werebound.to getbackto her.

CollateraldamageThegreatfear now is that, ifGusDur's presidency collapses, hewill not be the only victim.Thingscouldstillbe much worseforIndone­sia, the world's fourth-biggestcountry, andits 210m people. In 1965~66, the period thatusheredin MrSuharto's rule,500,000 peoplewerekilled inCentraland Eastjavainriotsinwhich the NU played a central role. Now,even outsidethe hotspots of Aceh,Irian]ayaand the Moluccas, the country is racked byvigilanteviolenceand frequent unexplainedbombings-the. latest being a string ofchurch bombings on Christmas Eve. Sincethe Indonesian army is distrusted and de­moralised, thereisnotellinghowmuchtrou­bleapolitical upheavalcouldcause.

Indonesia's neighbours are clearlywor­ried..This week, Malaysia's deputy primeminister, Abdullah Ahmad Badawi, gavewarning of "a new wave of boat people" ifthings go wrong. The governments of Aus­tralia and. Singapore.:have. similar' fears.Given the difficulties of patrollingthe area,Malaysia and the PhilippinesalsoworrythatIslamicmilitants will find iteasierto operatein their southern.islands.Since much oftheworld'spiracy occurs. in-Indonesia's ship­ping lanes, a breakdown of authority couldgive it.free.rein.It iseasy to see,why ColinPowell, America's newsecretaryofstate,hassingledoutlndonesia asa country that bearsclose watching.

Even if these nightmares never come topass, the present difficulties will probablycost Indonesia another year in its efforts togetbackon itsfeet.Morethan twoyearsafterthecountry's bankscollapsed,pledgestosellassets from the bank-restructuring agency,IBRA, continue togounmet, Such saleswould amount to the biggeststep Indonesiacould take to restoreconfidence.Yet they re­main blocked by political stalemate. Nor is

28 THE ECQNOMISTFEBRUARY 17TH 2001

newly' discovered receptorvistexplainingmany aspects of serotonin's function thatwere previouslymysterious. Thegenefor 5­HT3Bisaclassicexampleof the valueofhav­ingthe fullhuman genome. It wasidentifiedby searching the genome for sequences ofDNA that looked similar to a known seroto­ninreceptor.s-rrrsx.

A second medically significant gene,responsible for producingaproteincalledCySLT2,-is active in the muscles of the air­waysleadingto the lungs,and is implicatedin the development of asthma; This.wasfound not by analogywith a know~humangene, but rather by comparing the humangenome with the partially sequenced geenomeof the rat,whereasimilargenehad al­readybeen discovered.

A third gene" which is responsible for aproteincalled BACE2) was found becauseofits similarityto one of the genesinvolvedin

the deposition of t~e ainyloig plaques thatoccur in the br~ins,ofp'~opl~':yitf1,:'Alz­heimer'sdisease.It),ho,VV~ve~,i~l?c~te~i~thechromosomalregiol1 that (whendUl'licated)is implicated in Down's,syndr?l11e;TlJat-jsinteresting because Down's is alsocharac­terisedby thedepositionofamyloid.,

EachofthesethreegenesisI;~iflg~tugiedby drugcompanies,and thechance~al'etllatmany more potential targetswillbeturnedup when each of the genes in the sequencehas been well described.Indeed, the publicpaper listsisfurther paraloguesofcommondrug targets that its authors have identifiedduring the courseof their researches-At themoment, fewer than 500human genes (or,rather, their products) are known,to be thetargetsof existing drugs.Evenif only 10% ofthe human genometurnsouttob_~.responsi­ble for proteins that would make gooddrugtargets, that would multiply the. inventoryaround sixfold.

Turning.this potentialjntomedicineswill take a lot of time and money. Another

';,:../

~fr.,.,~.~L.~diate benefits.This is the ~nalysis of singlenucleotidepolymorphism! (SNPS).

SNPS, as their name suggests, are placeswherethe genomesofindividuals differbyasingle geneticletter.Theyafe likely to be im­portant for two reasons. Hirst, they can be

, used.as signposts-. EachsItp is assumed to

~~oagl:;:I~~h~~:6~~~~~t~~~~~~~~i:;;~~willshare thesame versio111ofthegenesthatare near that SNP. The sNds can thus act asmarkersfor particularversionsof genes,in­cludingthose versionsthai predisposepeo­ple to disease.The secondlreason that SNPS

ar~I1ledically importantjis that some ofthem (the?nes that areaC«lally found insidegenes) are amongthe causesof thosediffer-entversionsofgenes. ~ ,

Inthiscontext, oneofae1era's findings isparticularly intriguing. Th~ firm's research­

ershavediscovered that lessthan l%ofsNPS seemtoalter thJcompositionofaprotein.Thissuggesls that human ge­netic variation is tht result of only afew thousand mindr differences be­tweenproteins. I . ', Of course,as anyone who plays. cards knows/even affew dozendiffer­ent things, let alond, a few thousand,can be shuffled into·a vast array ofcombinations.Butt~is resultconfirmsthe ideathat Homo §apie11$ isa youngspecies-too youngho have accumu­latedsignificant gen&tic variation.

~:~~~n;:~et~r;aL It depends onwhomyouask.Thepublicproject's re­searchers, stung b~ the suggestionmade when Celeralopened for busi­ness that they should fold their tentsand let the money !funding them besp~nt()l1,.s().tl1~thing. else; ar~ ..clearl:y

convin~edthattlle)'gid.Giyel1 that Celeraeventu~lly,.cHos~'t{}j!1c,oT?!ate ..•datafrom

:·.·~~:~fB~e~.~~J6?:£~I~i~~il~~p~':th~a~~~~pany's timetable was tool ambitious if therealprizewasintend~d tobe acompleteeel"~r~:~()llly sequence. ~'... ",l31lt thisis totniss,api '. ~r~9i~t']1ough¢~l~fa~s researchersa!e~ci '11tistsofinte~rity i:they are .ultimately, ans~werable to-theirshareholders.Theirseque -ce ~oes_nothaveto be ideologically pure, it just has to beright__accurateen?ugh an detailedenoughto form the basis of the '}alue-added" ge­netk-il1formati()t1'pa~~agesfronlwhkh thecompanyc.ur~~ntly ~ak~I~its m.one.y.That,itcertainlyis.- ..' . . ....

'[l1e .feal winrier),th fore, is science.WhenDr Venterand CelJramade their au-­daciousgamblein 199il,th~ publicprojectre­sponded byspeedingup significantly. With­out that stimulus)Hisunlikelyyou wouldbereadingt~isarticletodaY'1 . •

.THE ECONOMltFEB~UARY17T1;200~

==~-== ~~=--~----T'_L__-·.I

SCIENCE AND TECHNOLOGY

paraphernalia needed togetthe cellthey in­habit totranscribethem.

Theexistence ofpseudogenesis0Ilerea­son why it is-hard to put a precisefigure onthe actualnumber ofgenesinthe human ge­nome. Merely finding a gene-like sequencein the DNA is not enough.An independentlineofevidence,such as a matchingprotein,isneeded tobe sure.

A good example is the sense of smell.Thisdepends on a huge number of differentreceptorproteins, each tuned to a differentsortofchemicalstimulus.Theproductionoftheseproteinsrequires,in .tum,a largenum­ber ofgenes In the humangenome therearemore than soo stretchesof DNA that look,atfirstsight,likegenesfor thesesmell-receptorproteins.Butthe senseofsmell,thoughquiteimportant to people, is by no means as im­portantas itwas tohumanity's ancestorsbe­fore they took to the trees and came to relymainly on vision-.'. TheoNA reflectsthis. Closescrutiny of those 90o-odd"genes" shows that 60% of them arebroken in Ways that mean'no proteincan be copiedfromthem.

Evenbroken genes,however, canbe useful to biologists, Together withthetransposableelementsand thefactthat significantblocksof DNA willoc­casionally duplicatethemselves andpass down the generations withoutapparent harm to the creatures con­tainingthem,they form a sortof fossilrecordofa species'past.It isearlydaysyet-data fromotherspecies, neededto make useful comparisons, aresparse-but it is possibleto start look­ingat the historyof the genomeitself.

One surprise is the sheer amountofduplication.Morethan 1,000 exam­pleswereidentified.Usually, suchdu­plicationscause illness, if not death(Down'ssyndrome is the resultof thepartial or completeduplication of chromo­some 21}.. Thosethat persist,however, havean important role' in evolution. The addi­tional copies'of genesthey create cart be.modified todo newjobs, while the originalscany on with the old ones.It is another wayforcreaturesto becomemorecomplex.

'Cui bono?So much for the science. Whatuse is it all?The main hoped-for uses, orcourse. uremedical-eparticularly the development ofnew drugs.One obviousapproach is tP,19okforgenesthat produceproteinssimilartoex~

istingdrug targets, Suchgenesare calledpa­ralogues, and .the public paper' illustratestheir potential with threeexamplesalreadyunderinvestigation. ,: ..... '. , :. '. " ; '. :

One is the genefor areceptor protein'inthebrain.this protein)known aS5-:-'H+3B, in':'teractswith a neurotransmitter calledsera"tonin, This neurotransmitter affects.mood(anti-depressiondrugs such as Prozac workby boosting the effectof serotonin)and the

82

LEADERS

ommended, Ireland's finance minister, Charlie MCereevy,lowered them and raised public spending in a mildlyexpall­sionary budget. Helped by cheaper oil, the inflation rate isnow dipping.But there are fears that Mr McCreevy's budgetwill stoke the economy up again, and reviveinflation.

And so it may. But it is a closecall,on which reasonablepeople can disagree. Ireland's inflation may be too high, alethough given the Irisheconomy'scurrentsuper-competitive­ness it may well be that higher wageswill prove an effectiveway to even things out again, in the absence of currencymovements that could have done the same.Butthe most im­portant point is that, whatever Your view,Ireland's inflation'harms nobody but the. Irish. It will not affectthe euro's credi­bility0ll world markets,nor have the slightestmeasurableef­fect0t1.e\l:o~zone inflation as a whole.

TheEcqnomist's view has longbeen that, with monetarypolicyno", exclusively in the hands of the European CentralBank, and with the Maastricht treatyhavingexplicitly banned

the ECB from ever bailingouta defaultingmelllber, countries.shouldbe allowed more freedomto settheir.own fiscal poli­cies, not less. The European Commission disagrees, feelingthat fiscal policiesneed "co-ordinating", and tha:t limits mustbe set to deter "bad" behaviour. Evenon its own terms,how­ever,this policycloes not justify the reprimand to Ireland.

Blarneyfrom BrusselsIf a big economy, such as France, Germany, Italy or Spain,were to pursue inflationary policies, then that could indeedaffect inflation in the whole currency zone and, on the eom­mission'sargument, might merit a reprimand. But that is noreason to make a scapegoatof tiny Ireland. Someofficials ar-

. guethat if Ireland'ssins are ignored, then it will not be possi­ble to chase bigger countries'sins when they reallymatter.Yetthis is surely nonsense. To launch a scarcely credible attacknow on the euro'smost successful member isno way to boostthe credibility or authority of any future attacks.

~~~~~~~~~~~-~-----------~~~~-~~~~~----------_.------'

As America's economy proving rather too casual

Dressing for the downturn

O NLY a year ago, the suit all<1iiese,erne,8I1e~4~4for eX-. tinction-salongwith other old,efonolllyallomalieslike

profits, proven products and paymelltjllcas~.Ill,theneweconomy, workers would wear whateverclothing best gottheir creative juices flowing, without undulyrestricting free­dom of movement while playingtable footlJ~1l~1l8ellgaging

in other activities de rigueur in the modellleuttillg~4geworkingenvironment.Thissartorial revolutionstarted,illeY­itably,in Silicon Valley, but by lastspringit had stormedeventhe most sober and traditional banks, consultanciesand lawfirmsof Manhattan and the Cityof London. One by one, theyall went "business casual". A charity was establishedto re- .distribute suits to the unemployed-not that a jacket arid.tiewere any longer going to help anybody get a job.

Now, it turns out, the vision of an open-neck future wasbut a mirage. Suits are back.According to the DonegerGroup,a "styleconsultancy",salesof suits and dress shirts bottomedin the third quarter of last year, and have since reboundedsharply.The evidenceis clearest in New York, where many asuit has been rescued from the wardrobe, with chinos andpolo-shirts relegated to the weekends. Only workers whonever come, face to face with customers or senior managerscan still fearlessly wear jeans and T-shirts-with the notableexception of technical staff, of whom nothing smarter wasever expected in the first place.

Even America's congenitally casual west coast is goingconservative. The new vogue is "dressy casual". At a mini­mum, The Economist. has found, shirts ,are once more beingtucked into trousers. New-economy trendsetters such as BillGates,Michael Dellan>! LarryEllison have all been seen look­ing dapper. When Steve. Case,boss of AOL, wore a tie at theannouncement of his firm's purchase of Time Warnera yearago, it was interpreted as a gesturetoreassureTime workers.With hindsight, it seems Mr Case simply had a feel for fash­ion.George Bush, sure-footed in his first weeks in thewhite

26

House, has banned jeans from the Oval Officeand wears asuit almost everywhereexcepton the ranch.

Thetime has surelycometo replacethe old "h¢rnlmethe­ory" of economic cycles with a new the?ry ofsuits. Back intheiczos, George Taylor, an economistatthe University ofPennsylvania, argued that hemlineson ",0nten's skirtswereausefulindicator of economic activity. Theymoved higher ingoo>! times, because women could affordto wear, and showoff,expensivesilkstockings.Inhare! times,they moved lower,as-modesty required that less expensively clad legs be cov­eree!.Sure ellough,skirtswere short in the roaring twenties,and long inthe .Great.Depression,

'J\ltJrn-~pfroi1Itl'()users!'I();vthatwomen ,!lave moreto think about than their stock­ings, the wearing ()fsuitsmay be a more reliable guide toeC9rl()111jstrends;Il1 any case, many female executives haveabandonedhemlines.altogether in favour of trousers.

Th,esuitis(heperfect attire for hard economic times. Itspeaksof seri?u~rre~~ of purpose and self-discipline. It speaksof dullll~s~,to(),w!lich is a welcomecontrast with the anar­chiccreativityof.thedotcoms.A suit savestime,because it re­quires nothought and still looksall right-a crucialcompeti­tive advarrt~gein the labour market that men long enjoyedover women.How foolish it was to throw that away. If youwant to show you are more than new-economy flotsam, getyourselfa smart three-piece.

Above all, the backlash against suits revealed a labourmarket so tight that workers had all the cards. Bosses hatedseeing their staff slouch contemptuously in tom jeans andjumpers, but had to put up with it. N01,V, jobs are harder tocome by, and involve more work and less play. The suit isback.Everywhere exceptTheEconomist,of course. Here, free­dom of movement is a religion.~----------------_.---"

THE-ECONOMIST FEBRUARY 17TH 2001

an ambiguous word coull mean death, andnot necessarily theirownl Turkey was a fer­ment of intrigue. Mersih; an outpost ofmulticultural Levantines! hard by the dis­puted territory of Hatav and the Britishcontrolledgrotectprate'of Palestine, 'had itsfull share of foreign visitors looking formore than the beach. And over CountyCork, home to the O'Ne~.ls, hung the pres­ence of the IRA and a ghtening numberof unsolved sectarian'kit ings,

The experience of wArtime made bothmen wary and unapproachable. The gen­eration that they fathe,led in its shadowwere·riotkeento questioh the'past.But MrO'Neill, born in 1964 andfhnegenerationre­moved from the trauma has a far less in­hibited curiositywhich, . kes him from anancient monastery near!Jerusalem.• to ·thewild west' of Cork turning over familystones withhappy abaridon, At one stagehe wondersif he is not doing it "as a pun­ishmentfor the hurt silertce which, I rightlyor wrongly sensed, thd'd bequeathed tomy parents." "j

To uncover his grandfathers' secrets" hehas to go still further ~ack, to see whatfurmed these complex Inen. His journeytakes.him -to the:' Armeaian massacres of1909, the fringes ofwhiclj his Mersingrand­father must have witnessed,and to an out­burst ofProtestant killi~g in west Cork inthe 1920S, where the familyconnection wascloserand.more sinister'lIt is a journey thatthrows up hard-to-answer questionsaboutthe conflictbetween nationalism and therightsof minorities. l

It is also a journey th t throws up someextraordinary -coincidences which, occa­sionally,the author allowsto carry him toofar.He tries,forexamplelto establish a par­allelbetween his matern'al grandfather,Jo­seph Dakak,and Franzvlmpapen, the Ger­man chancellor· who ~nded up as his

m, 'CONot ""'OAR, '7'H aocr

C~· I

Family loyalties

On the edge

Harris's "TheSilence of the Lambs"-andthe 1990 filmwith Anthony HopkinsandJodie joster-ccompelling

Mr Hopkins is back again in "Hanni­bal", which is taken from another of MrHarris's Lecter novels: and 'directed byRidley Scott. When the film opened inAmericaon February9th,it tooka stagger",ing $s8m in its first three days. Alas, thetension is gone.Hannibal at largein-Tus­cany is just not as scary aswhen hewasevilly manipulating events from a high"securitycell.He hasbecomeastockHolly­wood fugitive, buffeted by events but al­

waysastepahead ofhispursuers,These', include a revenge-bentmillionaire-a 'corrupt policemanand an FBI agent,ClariceStarling,played by Julianne Moore; whotook the part when Ms Fosterwisely turned it down.

Starling and Lectcr do notmeet until the film is two-thirdsdone; and then:the eroticchargeof the earlierfilm is missing. MrScotthas alsochanged thenovel'shorrid "happy" ending, playinghis film'sgruesomelast sceneforlaughs instead-and leaving thestory open for "Hannibal III".Viewers mayprefer to curl upwith Dante-andCountOgolmo.

BLOOD-DARK TRACK. By Joseph O'Neill.emnta; 333 pages; £16.99

I F YOUR maternal grandfather was aMaroniterChristian from" Mersin in

southern Turkey who was interned by theBritish near Jerusalem fur more than threeyears during the second world war, a warin' which his country was'nominally neu­tral;and if your paternal grandfather wasamember' of the' IRA. who was interned inthe-notoriousCurragh prison in the nomi­nally neutral Irish republic for four-and-a­half years at more or less the same time,that coincidence alone: would make astrongenough theme for a book. When thecircumstances of the two men's detentionare-mysterious .and their grandson is awriter of joseph O'Neill's calibre, then.thatbook becomes several things atonce: agripping detective story, a thoughtful en­quiryintonationalism, and a moving evo­cation of world war at the edgesof itsEuro­pean theatre.

Bothgrandfathers lived in a time when

Not horrid enough

I N THE gorier bits of "Hannibal"-sand.. there areplenty of.them-esqueamishviewersmaywelldecide toshut theireyesand thinkinsteadofDante,theeannibal'sfavouritepoet: of Paoloand Francesca, orof thelove that moves the stars.Oh yes~

and of the. treacherous' Ogoline inthedeepest circleof hell, eating away'at anarchbishop'sbrain.

Hannibal Lecter is both repellentand'attractive; urbane and' deranged- He candropatercet fromthe Florentine bard andheeats realfingers with hisbreakfasteggs.Thetensioninhischaractermade'Ihomas

": -. "

AI Dante

translator. In nothing is Dante's feeling fororder moreapparent than in the poem's un­ique and beautiful form. 111e celebratedrhyme-scheme, called "terza rima", drivesthe storyon in a waythat suggests ascendingsteps.Italso breaks that forward movementintostanzas,which gives the poem itsfeelingoflyricalreflectiveness within the epicscopeof the narration. To abandon rhyme mightseemequivalenttoabandoning the poem.

Butno translationcan capturethewholeof a poem, asRobertand Jean Hollanderareaware. Their new version of ''The Inferno"attemptsa sortofcompromise: a moreor lessliteralversionwithout rhymeor regularme­tre. Their rhythms hover" uncertainly be­tweenthe ordinary Shakespearean pentam­eter and a fairly prosy free verse. Althoughthere have been more exciting versionsthatgive us something of Dante's music andmagic, there has rarely been such a usefulone. TheHollanders-he is a Dante scholar,she a poet-act as latter-day Virgils, guidingus through the Italiantext that is printed onthe facingpage.TheirEnglish is not remark­able as poetry, but it can be poetic, and ithelps us to come to terms with a foreignpoem that is perhaps the most magnificenteverwritten:

84

BOOKS AND ARTS

LEADERS ,temationalist't administrations, like the previous one, aretooinclined to see the IMFand the World Bank as ends in them­selves, assjgtlsof enlightenment and virtue, however much amess theymaymake of things. It is quite right to ask, as thenew administration is more likely to, whether these bodiesneed to exist at all, exactly what purpose they are intended tos~rve, and just how well they are discharging their duties,whatever these may be.

It is also encouraging that a useful blueprint for reform-astarting-point, at any rate-sis already to hand. Last year, mak­ing itself heard above the general racket, was a plan set out bythe Meltzer Commission. This group, sponsored by Congress,was chaired by Allan Meltzer of Carnegie Mellon University,and drew on an impressive range of expertise, including thatof Harvard's Jeffrey Sachs, who is a leading thinker on de­velopment, not noted as a Republican Party patsy, but none­theless a trenchant critic of the Bank and, especially, theFund. The group did not achieve unanimity, but it did pro­duce a report that commanded support from across the ideo­logical spectrum, laid down some radical yet sensible basicprinciples, and was warmly applauded by senior congres­sional Republicans. All this is quite promising.

The commission's main idea can be stated briefly. In dif­ferent ways, both the Fund and the Bank have been trying-todo far too much. The IMF, first conceived as a provider of li­quidity in emergencies, has become a development institu­tion, advising and requiring borrowers not merely to repay,but to reform the deep micro-structure of their economies. Ithas little expertise in this area; such policies, forced on gov­ernments in circumstances like these, tend not to stick; and sowide a development remit in any case overlaps with that of

the Bank. The Bank, on the other hand, has not broadened.itsoperations; rather, it has failed to naqoV{the l11 as condi­tions-notably, the development ofglobal financial markets~have changed. Most of its loans go to countries with access toprivate international capital. The countries which, accordingto. the Bank's own analysis, could make. best use of its re­sources receive a comparatively small share.••....

To be more effective, the Fund and the Bank both need todo less. The bosses ofboth institutions have duly declaredthemselves committed to sharpening the focus and so on (seepage73). They always say that. Almost certainly.jfit meansshedding lots of people and seeing their budgets shrink, theydon't mean it. That is where the administration comes in. Itwill have to lean heavily if things are to move in the directionthe Meltzer Commission proposed.

Covert.operationsWill it? Maybe not. Especially in the case of the Fund, the pro­blem of mission creep is at least as much the fault of succes­sive American administrations as ofthe Fund'sown manage"ers. Often, notably in Russia, the Fund has stepped in to doAmerica's' foreign_policy. bidding, even though by its ownlights its actions were risky at best. The quid pro quo for aproperly focused Fund and Bank is greater willingness on thepart of Congress arid the administration to give more aid oftheir own explicitly, either to serve national-security goals orto pursue development objectives which lie, for whateverreason, outside the scope of the institutions. Sadly, the admin­istration may, like its predecessors, find it all too convenientto have a misdirected Fund and Bank do its bidding. and thentake the brickbats.

Ireland's euro....sins

The European Commission is wrong to reprimand the Irishfor theirloosenlng of fiscal policy

I T ISa pretty rum way to promote the merits of Europe's sin­gle currency. The European Commission has taken the

euro-zone country whose economy has been growing thefastest, which has broken no rules either from the Maastrichttreaty or from the subsequent "stability and growth pact",whose public debts are falling, which has the largest fiscalsurplus (as a share ofGOP) in Europe, and, frankly, whose sue­cess or failure makes just about the least difference to all theothers. And, on February 13th, it publicly criticised that coun­try-Ireland-rfor having recently loosened its fiscal policy,and thus. flouted the euro-zone's "broad economic policyguidelines", This was the first time it had delivered such a for­mal reprimand to a euro-country; A better way to discreditthe single currency in the eyes of potential members-such as,well, a certain large country between Ireland and the conti­nenr-could scarcely have been dreamt up.

Tosome degree, this judgment is unfair. After all, the com­mission merely wagged its finger at Ireland, something inter­national institutions do all the time to one country or another,and Ireland is free to wag its finger, or rather two fingers, back.Even so, the question remains whether, ata time when theeuro sorely needs to become more popular, this reprimand

,24

was wise. For, strictly, unless Ireland breaks the stability pact'srule against running a budget deficit of rIlore than 3% of GOP,Irish fiscal policy is none of the commission's business.

Was the criticism even justified? Far from having a deficit,Ireland has a fiscal surplus Of4.6%of GIJP.Lastyear, its econ­omygrew by nearly 10%, and it has recorded an average an­nual growth rate almost as good over the past five years. Thissmall, once-poor country has been catching up with its richerpartners, which is meant to be one of the purposes ofjoiningthe European Union in the first place. Barely more than.4% ofthe working-age population is jobless, and inward immigra­tion is expanding the labour force. Nor does this success arisefrom the EU handouts, amounting at times to 4-7% of GI.JP,which have helped it build so many roads and other publicworks during the past 30 years. This Irish success is of Irishmaking, as successive governments have opened the coun­try's markets, lowered taxes, improved education and man­aged the public finances in a sensibly austere way.

The blot on Ireland's record is its high inflation, which hitan annual rate of 7% last December. It is this figure, easily thehighest in the su.that has caught the eye of its European ,01­leagues. In December, rather than raising taxes as some rec-

THE ·ECONQMISTFEIIRUARY 17TH2QOI

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Olt THE a"aE:Cons IT!!

who still draw salaries. ,.1Thenew ~egimehassurtriSed many by

I pursuing cautious fiscal rand monetarypolicies. Economists applaftd; but macro­economic' orthodoxy ha~ yet to, spurgrowth, and the poor are still poor. Zapiroshows a woman with a bdby strapped to

I her back, washingclothes ih a puddle out-side her shack. Her son ~its on -a cratenearby, reading a newspaper, "You'll be

.glad to know," says the boy, "that accord­ingto the analysts, the 'eebnomic funda-mentals are in place." 1

Forlighter, but stillbarHedcartoons,tryMadam and Eve. This podular strip (nowalso on TV) tells of a whit~ "madam"-bigperITI, big earrings, BMw-tand her blackmaid, Eve. Thethree cartoonists; S~ Francis,

"H. Dugmore and R. Schacherl, take SouthAfrican stereotypes and g&ntly play withthem. Gwen, the madam, ~ bossy, stingyand idle. How many madams does it taketochangea lightbulb?Two:pneto watch TV

and the other to call the maid. Eve, muchthe smarter,of the two,is forever 'devisingnew ways to make extra mlmey or goofoff.

When this formula flagt the cartooniststhrow in topical fantasies.For example.thesoccerofficial who denied South Africa thechance to host the Worldd.lp in 2006 visitsthe country and Issent ~ungee-jumpingwith only knotted bedsheets to break hisfall.The authors even SoUth"Africanise oldnursery tales.Rapunzel.lets down her hairfrom her window only to bee it singed onan 'electric fence below. H!nsel and Gretelnibble at thewi~ch's ~in~erbrea? house,whereupon theWitch hits;er pamcbuttonand summons securitygU<\rds.

Finally, for anyone irlterested in thepast but lackingthe energy to read a moreacademic tome/Ken" \Tembn,a j?um~list,has compiled a cartoon ~istoryofSouthAfrica. It is"~mpressionistie, 'pt1tJ~\le~ling.Nineteenth-cel1tury ,cartobns ",a!~,~itherpro-British or pro-Boer; bldtks appear onlyas peripheral savagesBylll.elattet half-ofthe zoth century, thougIi,> the .drawingsshow a struggle between t~bsewho wantedto grant more rights to backs, and thosewho wanted to deny the .

Acartoon by Dohn]ackson inthe C"pe Argusirl 1959 was espe­cially prescient. Itlshows HendrikVerwoerd,the then prime minister,trying to .lead tw~ ferocious dogsover a narrowbridge.each strain­ing atthe leash tb bite the other.

'One dog is labelled "apartheid",the other representsthe SouthAfri­caneconomy; Partlybecause itwas

,sodifficulttodo b~siness when thej law compelledfirrhs to hireby skin• colour in~tead oft skill, al'artheid

SI South Africa stag'\ated. It IS a .les­til' son thecountry'~. current rulers~ would do well to heed.

! •

run 'CONOM"i ""UAR' '7" "M

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THE DEVIL MADE ME Do IT. By zapiro.D"vid Philip; 160 pages; 72 mrId.THE MADAMS ARE RESTLESS. By' S.Francis, H. Dugmore and Rico. RapidPh",e; 176 pages; 77 mnd.

P~J'lPRIC.K,S:-TI-I~:DRAWING-OF;SOUTH.AFRICA'S'. ~OLITICAL BAT!LELINES.:.ByKenVernon.Spe"rhectd Press, 200 pages;153ran~

topk a year oiftofind his bearingsandun­cgv~rpe:wtCltgf:tS. Newspaper S~l1()9nists,bY5?l1trast, obliged to produce anewdoo­dle~veryday, had to grapplewith th~ ne",order straight away. On the whole, theyhave done a good job.

Mr Shapiro, whogoesby the.nom decmy"" "Zapiro' (seecartoon belo"",),isthe

'best. Last year, when the South AfricangovemITIent. was pondering whether tosend peacekeepingtroops to Congo,z::piroshowed with a single cartoon why thiswould be impractical. A South Africansol"dier at a roadblocksees the tip of a rocket­propelled grenade . launcher protrudingfrom a bush; "Halt," he cries,."VVhd'goesthere?" The guerrilla in the bush replies:"CongoleseRally for Dernocracy.""Hangon," says thepeacekeeper, and he turnstoconsult a chart of parties to theCongowar;on which seven groups arevlistedias"friendr.eight are listed as "foe" and tenarelistedas "not sure".TheCongoleseRallyforDemocracy, by the way, is labelled "notsure", along with the Congolese Rally forDemocracy(breakaway). Congo has grownno simpler since President Laurent Kabilawas shot dead last month.

Before 1994. Zapirounhesitatinglysup­ported the black liberation movement.Now that the liberators are in government,he is still sympathetic, but lampoons theabuses that . power makes -possible'.Crooked officials feel the jab of his pencil,but,he' cheers on Willem.Heath,' a coura­geousjudgewho was in chargeof collaringthem. Inone cartoon, MrHeathis depictedas a character from "Chostbusters", 'enter­inga spooky-lookinggovernment buildingto smoke out -the "ghosts'v-dead workers

JOHArmeSBURG

South African cartoonists

Inky devils

88

sold to the Museum of Modem Art in NewYork a Mona Lisa, mischievously paintedinthe styleofan abstractexpressionistSales ofhis paintings began to rise, and in 1979 hiswork was .crowned with a 'retrospective atthe.Hirshhorn Museum in Washington, DC.

(This success-did not come withoutfamilymisfortune: in1974 acarsmash had killedhissmallson and lefthim badly injured.)

Does the adversity show? Crossinghisanusandraising hischin,Mr Botero says:'~_!

have neverbeenguided bywhat criticssay;but by.what Iadmire in the historyof art." Itsounds arrogant. But heconcedesthat land­scape-vempty space'<-has defeated him,and he ends with the thought that he willnever resolve anythingcompletely.

MrBoterostillworkseveryday in one.ofhIS many studioson eithersideof the Atlall­tic.Butnot in Colombia,wherea kidnappingthreat hangs over the rich or famous (he isboth). If peacecame to his country, he s~ys,

he would love to return home, adding-asmatador or painterz-sthat maybe he couldthen "teachsomeonea thingortwo,"

BOOKS AND ARTS

JONATHAN SHAPIRO had yearned to bea -cartoonist since he' was small. But

. growingup in South Africa under apart­heid;he was not freeto do as he pleased.Asa' young" white man," he'was ... conscriptedinto the army, where he Was harassedforhis' radicalism; and puton sentry duty witha dummy riflemade of wood and lead pip­ing.Hisdrawing skillswereforcibly squan­dered on'menu illustrations, and get-wellcards,for"officers, 'injured": in stupid acci­dents, such as the one who 'burned himselftrying to douse abraai withpetrol,

In-hisispare timer-Mr Shapiro drewsatirical cartoons .for undergroundpam­phlets. The authorities objected. His workwas periodically banned.' He was hauledout of bed at night by the security police,frequentlyinterrogated and brieflyjailed. Atone point;he was forcedto go into hiding behind grannyglasses, inexpertly dyed orangehair and a 'goatee.

It was easier thento bea car­toonist in South Africa "It :'is muchhardernow," 'says Mr Shapiro, "Inthe old days,you knew where youstood; and who the enemy :was.'But now Ihave to take a more nu­anced line."

Suchsentiments are' common,The end of apartheid deprivedSouth African artists of a bottom­less treasure chest of material. -Atleast 'ohecross~dressing,comedian

LEADERS

long run counter-productive, to expect the cost of this aid tobe met out of drug-company profits. Instead, rich-worldtax­payers should .pay, It would be much better to spend aidmoney on drugs for developingcountries than it is to waste itin the usual ways.

Far from compromismg science, profit in both thesecases-the development of new medicines and the elucida­tionof the genome-has animated it, and directed it towardsmeeting pressinghuman needs. It is a happy marriage. Davyand Pasteur would surely have approved. .

-----------'----~------------~--------------------"

Indonesia's divided leadersIndonesia cannot afford both an incompete#tpresideflt"n~aflequivocating.vice-president. If only they wfJ,-\ld>pUlltogether

PLAIN speaking is not one of Megawati Sukarnoputri's. strong points. So when Indonesia's vice-president this

month said her country had never been in a worsestate sinceits foundation 56years ago, her words carried quiteapunch,But, as usual, Miss Megawati was not as clear as ~he mighthave been. That she spoke out at all was an implicitcriticismof the president, Abdurrahman Wahid,and carried.the hintthat she might be ready to replacehim,just 16 months into hisfive-year term. But such nods and winks sel'\'e only toheighten.instability, Itwould be better if Miss Megawati madean open bidfor power, or, failing that, threw her supportwholeheartedly behind the president. .

Her lament was an exaggeration: Indonesia, sadly, hasbeen throughworse than this before,both during the slaugh­ter that accompanied the rise to power of ex-President Su­harto in1<J65-66 and in.the bloodshed and economiccollapsethat precipitated his downfall over 30 years later. But MissMegawati was right that her country is in a mess (seepage 27).The economy has never.fully recovered from the Whirlwindof '997-98. Political uncertainty deters.foreign investors, whilethe IMP and aid donors are exasperated by the slow progressof reformsthat have been promised and, worse,the attemptsto reverse some,such as the new independence of the centralbank, that have actually been achieved.

Mr Wahid, who has suffered two strokes and is nearlyblind, nowfaces a drawn-out processof impeachment for al­leged corruption. Demonstrations for and against him haveturned violent. He has flirted with declaring some sort ofmartiallaw, but his promisesto bringtojustice those guiltyofplundering the nation during the Suharto years have provedlargely empty:witness the failureof the policeto arrest MrSu­harto's son, Tommy-hardly a shrinking violet or master ofdisguise. Separatistpressuresmount at either end of the hugearchipelago, in Aceh to the west, and Irian [aya to the east,while communal killings disfigure the Moluccas'

Allof this matters far beyond Indonesia'sborders.With its210m people, its troublescasta shadow over the whole region.Its neighbours treat it indulgently outof fear not so much ofits strength but of its weakness, and of the spectres thatevokes: in the short term, economic stagnation; in the kingterm, waves of refugees; pirate-infested seas and a powervacuum to be filled by competitors such as China.

Is this the president's fault? Yes, partly. Many, includingthis newspaper, gavea cautious cheer when Mr Wahid tookoffice. His record as a Muslimleader known for his tolerance,and for his long-standing if often bewildering, commitmentto democracy, suggested he might, however improbably,make asuccess of thejob. In fact, he has done somegood.His

22

government has tried to reduce discrimination against theChinese minority,for example,and has at least tried to talk toseparatists, But too many of his policies have been vague.\N)Iel) they have been clear, they have soon changed, or, aswith the.sensible-seeming effortsto givegreaterautonomy tothe provinces, they have been botched. Moreover, the stylethat suited Mr Wahid when he was the dissident leader of anon-governmental organisationdoes not work now that he ispresident.Hisjokey way of shrugging offtrouble onceseemedcharming. It has become a refusal to face criticism, punctu­ated by ill-tempered bouts of ineffectual authoritarianism.

Megawati's mlni-voltageMr Wahid's popular support stems from his former.leader­ship of Nahdlatul Ulama (NU), a Muslim social organisationwith more than. 30m members, founded by his grandfather;He used to acknowledge that this gave him a kind offeudalpower that, he said, he could use to foster democracy. It canno longerbe taken for granted that his democratic instinctsliedeeper than the feudal ones. Unfortunately,exactlythe samecould be said of Miss Megawati, whose prominenceoriginallystems from the reverence felt for her father, Sukarno,Indone­sia'sfirst president. Toooften in recent years Miss Megawatthas appeared aloof from the rough-and-tumbleof demo­craticpolitics, as if, likea queen, she could simplywaitfor themantle of power to alight on her shoulders. This, her sup,­porters would say, is the way things are done in Java.

But not in a democracy. Miss Megawati does have onestrong claim.10 the presidency: her party won more votesthan any other in the parliamentary electionsin '999.Shewasthen outmanoeuvred by Mr wahid in the electoral collegethat chose the president. She still has, in theory; a betterchance than Mr Wahid of leading a cohesive parliamentarycoalition, and enjoys broad popular support. More worry­ingly, the army,too, would probably prefer her to Mr wahid.Itsbackingmight bringstrongergovernment,but also.increas­ingly restiveregions, It would be a mistake to try to bind to­gether the nation her father founded by military might alone,

In the event, a Megawati presidency might tum out allright. It is not a prospect, however, until the impeachmentuncertainty is over-s-unless MrWahid should resign. He mayin fact still be able to redeem himself, if he callsoff the NU'Sstreet-fighting elements,admits that. he himself is not abovethe law, and appeals to Miss Megawati for her support, as anationalist icon.That remainsthe best hope. It is certainlyfarbetter than a long power-struggle, played out not just in par­liament and the presidential palace,but on the streets.-------------------------"

, '.- ..... : .... ' .... ',' :HIE ECONOMIST FEBRUARY' 17TH 2001

BOOKS AND ARTS

,suasive investigative' reporter,'sees 'all.thisas a damaging corruption of the free mar­keto He is especially .incensed by Promo­tional techniques aimed at impressionablechildren.A 1997 giveaway of Teenie BeanieBabies increased the sale of McDonalds'Happy Meals from 10m'a week to 10m aday. And a survey found that 96%of Amer­ican schoolchildren could identify RonaldMcDonald,the chain's mascot. Only SantaClaus scored higher. .India's choices

Agree to differNEW DELHI

INOIKUNBOUND. By Ourcharanpas.xnopf384 pages; $27.50; 495 Indianrupees.MISTAJ<ENMoDERNITV:" INDIA BETWEENWORLDS,:By- Dipankar Gupta. 'Harper COL­lins; 225 pages; 195 Indian rupees

ADECADE after discarding comforting• but self-destructive ideals of self-suffi­

ciency-and economicplanning, India 'is inthe midst of a greatdebate about the conse­quences,The antis mourn two losses: dedi­cation to equality and an approach to de­velopment that was distinctly Indian. Theyfear,ina word, that India is losing itssoul.The pros revel in India's new information­technology prowess, the unshackling ofbusiness, faster growth and the hope that itwill reduce the country's appalling poverty.They celebrate India's reconditioned body;

"India Unbound" is by an unabashedpro, an ex-boss of the Indian part of Proc­ter & Gamble who has moved into busi­ness consultancy and writing (he has donea novel and three plays). Thanks to econ­omic reforms, he writes, "we, have glimp­sed paradise again and .are on· our way toregaining·it" The author of "Mistaken Mo­dernity"; a sociologist at Delhi's leftish ]a­waharlal Nehru-University; is anambiva­lent anti, He does not' condemn outrightthe reforms of '99', which entailed deregu­lating.business and' opening India up(partially) to foreign trade and invest­ment Like marty Indian sceptics, he isnostalgic for the days when productiondecisions "were tied umbilically to na­tional development-and sovereignty."

Gurcharan Das is correct that, theumbilicus was strangling the baby. Butthere is' less conflict here than itseems. Both .sides.in 'this ,debate areavowed enemies of what might becalled old India, which remains inmany 'respects the India 'of today. Itsfeatures include discriminationagainst womeri,caste barriers, Hinduchauvinism, official corruption, ad"vancement based on patronage.and,for business, profits without compe-

86

titian. Dipankar 'Gupta "contends,' justly,that India's fascination with western gad­getry and lifestyles hasnot brought moder­nity. Youcan subjugate women and make aweapon ofreligion just aswell with a mo­bile phone as without one, probably better.Truemodernity, MrCupta writes, entailsadhering' to universal norms, upholdingindividual rights, making the State account­able. His book pleads with India to putmodernisation in.place.of'westoxication".

There is nothing here that true globalis­ers 'would 'not .supportwith 'enthusiasm..Their argument with the antis is reallyabout money. Mr Gupta and others whoare suspicious of reform seem to share thehigh-minded attitudes ofIndia's first primeminister, [awaharlal Nehru, .who once told].RD. Tata, head of the country's most re­spected business house, that pr()~~ }s"adirty word". Totake a more recent example,Arundhati Roy.India's Booker-prize.novel__ist,not'longagowrote a long a~dimpas-'

si0tled article in one of India's Vie~klymag­azines, portraying capitalists, .especiallyforeign ones, as plunderers.

Mr Das, on the other hand, thinks thatcapitalism will cure many of the ills thatN~hru's,socialism compounded. The "cosyC?ITUprion of old Indian business habitscannot withstand competition, he syggests.Although th~ commercial baue caste wasuseful in kick-starting Indian capitalism;Mr Das points out that in a,'liberalisedec(?nomygoverned by rules rather Wan pa­tr()nage, companies cannot afford ,to,hireemployees on the basis ofcaste.As for pov­erty, contemporary, India's', worst-blight,,educ<:ttionvvillspr~ad.~hebenefits of econ­ernie growth tothe

I. One problem supporters of reform faceis that its effects do not lbokvery egalitar­ian, especially in an Indiahcontext Indiansdisagree whether the past/decade ofhaltingreform has reduced poJ~rty.No one dis­putes that it has thrown up a vulgar, sharp­elbowed new middle c1aJs. Mr Gupta, witha tweedy disdain, has nlade its membersthe villains of his book, n~t without reason:many dodge taxes andwelcome the starkdifferenceof income that ensuresan end­less supply of cheap servants,Mr Das nev­ertheless concludes. thai "whether Indiacan deliver the gOOdS"w1ll deP.end a greatdeal on this new middle lass.

Despite its 'occasion .repetitions, "In­dia' Unbound" is not 0nl~more',persuasivebut more enjoyable. MrIDas, whose careerspanned the darkest anj' brightest erasinIndian economic-policy, tells much of hisstory autobiographically When he wasmanager of the VicksVapbRub brand in In­dia, flu epidemics posed Absurd dilemmas:should he boost production beyond li­censed limits (a punisHable offence) orleave market demand un~atisfied?

Mr Das looks back tojthe rise ofIndianbusiness families; some of which often-be­gan with enterprising yoimg men outwit­ting BritishmonoPolists,Jand offers man­agement advice tothei I heirs, many. ofthem now addled by decades of planningand protection. His real irterest, though, isin the info-tech companies that sprang upin the 1990S. They are India's chance toachieve the rates of growth and poverty re­duction that,' East.· Asia· accomplishedthrough manufacturing, clr so Mr Das andmany other rr-besotted Ihdians believe.

Though Mr Gupta plefers sovereigntyto success, he makes g~od observationsabout the grip.of traditio~India'stendencyto throw up humanitariah heroes like Ma­

hatma Gandhi and Mother Teresa isa sign of weak i~stitutions, he be­lieves: where these are stronger,

saints are less heeded to protect theweak Women stahd out in SouthAsian politics, he hplairts, becausethey are assumed to lack charactersof their own and can take on thecharisma of their (often martyred)husbands or fathers. All in all, how­ever, his book re'ies too much onthe author's opinions and too little

on his expertise. 1Mr Das's faithlthat IT plus edu­

cation will restore India to greatnessand prosperity dm. sound over­hopeful. And he rhentions only in

passing the urgent heeds of agricul-ture, .which continuesjto occupy two­

thirds of India's people. But his book is In­formative, entertaining, ~nd basically cor­rect about India's n~ed to embracecapitalism more whole-heartedly, for allthe costs and risks." I

; .. ' .THEECONOMIS1r'fEBRU~RY 17TH 2001

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90 THE ECONOM(sT FEBRUARY 17TH200t

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EXECUTIVE FOCUS

Qualifications and-skills

Duties and Responsibilities

Under the overall authority. of-the Secretary-General-the DeputySecretary-General' (DSG) shall:

Deputy ••S~cretary-G~l1eral

Departmentof

Education,Employment and Training

Falkland.Islands Government

Economic Adviser c£50,000 + 25% gratuity(two year contract)

The Falkland Islands is an Overseas Territory of the United Kingdom, self­sufficient in all government services other than defence. GNP is around £55million, with a population of 2600. Principal industries are the offshore fishery,and woot.. with future potential in tourism. and. in minerals exploration.Thefishery nets government around £25 million _pa, and offers scope forconsiderable development. Agriculture earns around.f2Am pa but is heavilysubsidised, and is undergoing diversification. Economic development initiatives,are promoted by a Falkland Islands Development Corporation.

The Economic-Adviser reports directly to the government's Chief Executive; asthe senior economist. He or she gives "macroeconomic't advice, but will beparticularly involved in assessing and guidingeconomic change in the principalindustries. For' this-reason, we are keen to recruit a senior economist withsuccessful experience ideally in fishery, or our other businesses; aswell ashaving some public sector experience. Postgraduate qualifications would beadvantageous.

The post is for two years. in the first instance. Benefits include a world .classenvironment, 'relocation and education grants, flights home and favourable taxrates, and a 25% terminal gratuity.' ,

Further details from Falklands~slands.G()yernm~Ilt O~fi~e, 14 Broadway,London, Tel: 020 7222 25.42,fax: 020. 7322237:i,emaiLrecruitment@figo.u­net.com. To discuss the job, email or telephone the Chief Executive, MichaelBlanch mblanch@sec.gov.fk, Tel: (500)27110.

Closingdate for all these applications is M.onday 12 March 2001.Interviewswill be,held inLondon afterBaster.

The .State Government has announced a revamping of Victoria's publiceducation and training authorities which includes the establishment of a newVictorian qualillcations Authority,.(Victoria, a stnte in Australia).

The Director of the Victorian QualificationsAuth~ri!y will manage and providestrategic direction to the Office of the Authority to facilitate the achievement of­its objectives.

10JJ"1

.... ,:." ..

The objectives of the VQA are to:

• develop' and monitor standards for education and training after year 10• ensure and support appropriate linkages between qualifications, and

facilitate procedures to make it easier for people to re-enter education andtraining- and to acquire qualifications throughout their lives.

The Director will be required to provide authoritative and timely. advice andreport to the Minister on post compulsory education and training courses andqualifications; The Directorwill possess a genuine ability to manage people inan educational context and a proven. capacity to liaise effectively with seniormanagement,heads of related authorities within the portfolio and of educationalinstitutions (at a state, national and international level), and members of theeducation and training and business communities.

Normal State Government Executive contract arrangements would apply. Itwould be a requirement for the. successful applicant to sign an employmentcontract for a period of up to five years.

Further enquiries should be referred to Kathy Townsend on (613) 96395966.

Written applications should.be lodged by Friday 9 March 2001 with KathleenTownsend Executive Solutions.Level12,30 CollinsStreet,Melbourne, 30GO,Australia.

DIRECTORVICTORIAN QUALIFICATIONS AUTHORITY

•

m• I'~.S T'I:T ,UTE f (HI

DE,MOCRACY AND>E '~, E-C,TO, RA:~

ASlilSTAI{CE

Proven managementarid team-building skills '_'

Strongcommunicationand presentation skills, written and spoken

Extensive-experience in managerial positiona.Jn. an inter­

nationalJintergovernmental organisation or' a - governmental

organisation that deals with International affairs

Ability to operate effectively in a multi-cultural environment, be

gender-sensitive

Advanced university degree-in international relations, political

science, law or related fields

Pluencyin English,~yother.languages an advantage

.:. Assume the operational leadership within the Institute, and be

responsible for all operationalaspectsof its work with particularattention given to:

- Institutionalprogrammeplanningand monitoring with a viewto ensuring integrated programme planning and co-ordinated

programme implementation;- Financial' management co-ordination;- Human resource planning and management;

- Development of appropriate management information systems.

.;. Playa key ,co-ordination ,role in theMan~gelYlent Committee(Me), particularly in its development and maintenance as a self­

managed, decision-making body providing regular and timelyoperational guidance throughout the organisation

.:. Act as a main 'policy adviser, together with other members of the

Me, to the Secretary-General, on strategic; matters for the-Institute

,.. i\ssume supervisory_responsibilities for all operational staff of

the Institute, including programme and support division directors

+

International IDEA (The International Institute for Democracy andElectoral Assistance) promotes and advances sustainable democracyand strives to improve' and consolidate electoral practices worldwide. International IDEA is an intergovernmental organisationfounded in 1995 with19 member states and 5intemationalNGOs asassociate members. Independent of specific national interests,International IDEA provides a forum for interaction and experiencesharing among a wide variety of global actors involved indemocracypromotion-.International.IDEA is based in. Stockholm, Sweden.endcurrently employs. 65 staff from 30 countries.. Due to, expectedgrowth, applications are now sought for the following position:

;,.

+;,.;,.

Visit ourweb site: http://www.idea.intforthefulljobdetails.

Copies ofVacancy Notice 01/05 may beobtained from M~ Kristiansen

Telephone +46 8 6983725; Fax +468 20 2422,applications may be addressed to m;boudard@idea.int

or IDEA 103 34 Stockholm, Sweden.

Deadline 15 March 2001

+

i 8 THE.ECONOMISTFEBRUARY. 17TH2DOI

• AMBA Accredited Degree.

• An intensive nine-month bilingual program (frenCh/EngIiSh).

• The leading school in PoliticalScience anL Economics,. founded in 1871. I

. • Adistinguished internationalfaCr"y

• An urban campus in the heart of Paris.

Next information session iin.ou.r.p,lmises: ..•.. !

ThursdaY,March 15" 2001at6.3~p.m... _.. ,,'e"Educotlon

III<nowledgel,'-.lm'"R','"

www.anderson.ucla~edU:l

programs/execed

~

in world-classdevelopment

in association withFTKnowledge, the e-MBAcombines residential peri6dsin/Cambridge with virtual teamlearningto offera flexible and 'convenient wayof achievingthis highly prestlgtous award.

Tofind out howthe Cambridge e~MBA cangive youandyourorganisation the edge in todav's global economy.Call +44(0)1223508321 quotingreference JIMA/020L:

execed @anderson.ucla~edu

im!111;i!l~~~ •.B::::::i~~:e-MBA isintensive, interactive andbusiness­lneeds of world-class managers andrs across continents andtime zones.

;w+ Visitwww.ftknowledge-cambridge.com for moredetailsor to enrol online.

Join senior exec.... LlVv~from leading companiesworldwide in an innova­tive California environ­ment to:

• Examine key management functions

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• Use hands-on e-business applications to integratebusiness and technology

• Develop workable solutions to your organization'smost pressing challenges

• Learn to attack and manage organizational risk

CALL +1 310.825.2001

M l.1NIVERSITY OF• CAMBRIDGE

UCLA STRATEGICLEADERSHIP INSTITUTE

I JULY 29 - AUG. 24,2001 I.••+iu.....,. __

92

COURSES

EXECUTIVE· FOCUS

north um b riaAppointment of Vice-ChancellorThe UniversITy of Northumbria Is recognised as the leading oost-t992 university. With22,000students in'higher education located on four

campuses, Northumbria's incomeexceeds £100million, The requirement is to appoint a Vlce-Ohancellor.from September, 2001.

Northqmbria seeks .an'outstandlng leader wlthstrateqlc vision andaproven trackrecord of personal achievement, in running large,

complex enterprises, Ideally in highereducation.Building on a record of wideningaccess to highereducation,whilst maintaining excellent

quality, Northumbria Isambitious for thefuture.' Successful candidates must havethe stature, 'presence and management styleto lead

Northumbria in a fast-changing, global educational and busbesa envl-orment end to be able to inspire, emonost other things, :he creative

qeneretlon of new and additional sources of income, In support of the Unlverslty'e academic objectives. Possessing excellent internal and

external communication skills; he/she must be an effective ambassador for the University, regionally, nationally and intemationaJly.

This is'ahighlychallenging Position for exceptlonalcandldateswho possessthe deter,mination~ndcommitment to lead Nortbumbrla,

building upon an existing dynami<;: culture of excellence and enterprise and taking theUnlversit{lorward to new dimensions of success.

lJNIVE~SITYofi"'" ", ",', "": HEIDRICK&,STRUG,GLES~~RTH~MBRIA"""atNEWCASTLE ""., "'" " omo", ",,,""',"'

GLOBAL ENVIRONMENT FACILITY COORDINATION OFFICE (GEF)

fI):-'.,@UnitedNationSEnVironmentprogramme', •• """".o.o>.Jl ,.,'/,.,..,.... . *<l-~~'I!1Jl1!fll

. "",,O"M"""""A""'U"'''''''''''L~N~'O",''''''''' ..."".......O'''''N''''''''..U"'OJoO''''''''-M'''OAM''..'"UNEP ..."........""'''"''''''"' '''<JI<I'l'lI<AIIl''''.jlI!

TITlE/ lEVEl/YACANCYANNOUNCEMENTNUMBER/DUTY STATION:

(1) Scientific Coordinator, (L~6)NA-01-05 Geneva(2) Programme Officer (AsialPacific), (L-4) NA-01-03 Geneva(3) Programme Officer, (Latin America and the Caribbean),

(L-4) NA-01-04 Geneva(4) Programme Officer (Africa), (L-4) NA-01-02 Nairobi(5) Programme Management Officer (Fund Management),

(L-3) NA-Ot-06 Geneva

The International Foodand AgribusinessManagement'Association:lAMA, is a Worldwide Educational Forum which brings industryleadersfrom all segments of the global food chain together withthe teaching and research faculties of over 100 universities andgovernment policy makers. Through an annual World Food andAgribusiness Forum, publications, and professional networks,lAMA fosters the discussion and examination of the crit1cal ideasand technologies needed to create a highly productive andeffklent-.food system that is responsive to the needs of consumersacross the globe. Tosubstantially expand its contribution to thosegoals, lAMA is seeking to fill the position of Executive Director(chief administrative officer), with the responsibility for directingall.program and admlnistratjve activities of lAMA.

DURATION OF PROJECT: Three and a half yearsDEADLINE FOR APPLICATIONS: ,28 February 2001

The United Nations Environment Programme (UNEP) is seeking to recruit a team of5highly qualified and dedicated professionals for the implementation of a Bios.afety Projectfinanced by the Global Environment Facility aimed at assisting, 100 eligible countries toprepare for the entry into force of the Cartagena Protocol, on Biosafety, The project, willentail providing a,s.istance ~ogovemments todevelop theirNational Bicsafety Framework,as well a, promoting regional and sub-regional cooperation.

The team, co-located between Nairobi andGeneva comprises a Scientific Coordinator atL-6 and three Programme Officer, at L-4 for Africa, AsialPacific, and for Latin America andthe Caribbean Region, and a Programme Management Officer (Fund Managementjat L-3.

An fntematjonaljy ccmpetltlve salary and benefits at standard UN; rates will be offered,.

For more information visit-the UNEP's web page at hnpvvwwwunep.orgor e-mail: gefinfo@unep.org

Interested applicant, are requested to send detailed CY before 20 February 2001 to theChief of Classification and Recruitment Section, Human Resources Management Services,United. Nations Office at Nairobi (UNON), P a Box 67578, Nairobi, Kenya. Fax: (254) 2524212/624

IN ALLCORRESPONDENCE/INQL/IRIES P~EASE QUOTETHE RELEVANT-VACANCYANNOUNCEMENT NUMBER.

16

Principalfunctions, of,the Executive Director include:

Engage·the aoar~and membership in establishing and implementing policy;

Activepursult of r:neJl1bershlp growth and fund-raising to support lAMA programs;

Develop and produce the annual lAMA global educational forum;

Expandthe global reach of lAMA through active networking with related organization:;andbusinesses:

Requirements/Qualifications: The ExecutiveDirector wiii bring significant experience (minimumof 10, years) at the senior executive level of Industry. academia, or government, providingestablished network, and knowledge of the global agribusiness and food industry.

Demonstrated excellence in leadership skills. knowledge, .and experience working withbusiness executives, universityfawlty, researchers, and government officials:

Knowledge of the global food system and an appreciation for many different cultures;

Abilityto recruit new,members and motivate current members in achieving lAMA gcals;

:strong positive approach to expanding corporate membership and,sponsorships thr:;>ughdemonstrating the value of a global pro:fessional. membership based organization;

Compensation Package: $100,000 to $135,000 USD commemurate with experience plus healthand retirement benefits. :The lAMABusinessOffice is located at texas A&MUniversity. CcllegeStation, Texas,U.S.A. The ExecutiveDirector may choose to locate at this office or to work fromanother location; subject to the approval of the Board.

Contact and Application: Application deadline is March 3, 2001. Interested lndlvlduals shouldsend a letter of application (2 page) along with a resume. The letter should state cleariy theapplicant's qualifications, and brief statement of philosophy or approach to the ExecutiveDirector', role of lAMA. The letter and ri',ume should be in MSWord or WordPerfect format andsubmitted .electronically to the. attention of Russell Garrett at tameetamc.ecc<http://www.lfama.org:>

THE ECONOMIST FEBRUARY 17TH 2001

Ul1iversiteit Maastricht

Th~ Uni.versity6fr0aastrich1: fUM) isfamed forthe uniquelysmall-scale, stimulating andse_lf-mo~vating_~pproach oft~et~~c~ingprovided (problem-based learning).TheUM ishighlyinternation.~l.,in jorientatio,n;Re'searchis multidisciplinary and approached thematically.", ," "-. .-, ,:.. ..The UM boasts sevenfaculties:Medicine, HealthSciences, Law; Economics and Business ~dll1i

Generalsciences.arts and Culture,and Psychology.-It hasa student populationof around 11;0some 15%are from abroad)andg.ooo employees.The.Faculty of Economics & Business Adm.inist,ioff~rs study programmesin (Fiscal) Economics, Bconometrlcs andtnternatlonal Business Adll1i~is·

Inad,d.ition;th~ postgraduate courses(International) Controller and Aq::ountancy are taught and ~n MBApr?gramrlleis availablethat isjointlyorganizedwith the HausderTechnik.Therevision and re~e4alofthe economics and businessadministration programmes,whichare largelytaught in English, pla1sapivotal role within the faculty~ Recently,a new programmecalledlnfonomicswas launched.NeXt~theEng.IiSh language progr.amm.es offered,the internationalorient,ation ofthe university isalsoevid ,n.~ed bythenumerousexchangefadlities with unfversitles abroad.Theresearchperformed bythe faculty's ,concentrated mainlyin the METEOR researchschool. METEOR islargelyfocussedon thefunctioni g oforganizations.Theresearchinstitutes ofROA and MERIT are also part of the faculty.

In!?r;~t'ipn.a,b~~t_the,~,tv\,.~n~ Ufvl vacanciescan be found at: http://www.unimaas.nl

Optingforthe UM means optingforan innovative environmentoffering ampleopportuqityfor indlvidualityinworkand workingmethods,as wellas regardfor personaldevelopment.TheUM isseekingto actieve avariegatedworkforce with aproportionafhumberofwomen representedon eveiylevellt goes wit., outs~yin,g that the employmentconditions, whichinclude parental leaveand daycareoptions,are out andlng.

Applications shouldbesubmittedwithin two weeksto: University of Maastricht(pleasestate.theJ:mberof the relevantv.cancyon letter and envelope) PO Box 6'6, 6'00 MD Maastricht, or to thee-man ~~dressprovided;

Professor of Industrialn~"ni7ation flm4U nours a week

: ,.:' '.•.:.. :;.::.': :..<'.<•.. >.- "•. :>"-::,':-,-:::"11.Proressor of BusinessAdministrationl~,.nnnmics flm

40 hours a week

APPOINlMENTS

94 THE ECONOMtSTFEBRUARY 17TU'2001

EXECUTIVE FOCUS

Challenging International Positions in Research for DevelopmentIDRC~CRI)Ilnt",,,~,".lD.... lo,lm.. ' I:o,rt"do"d>o.d .. po",lo

1t<".«hCo," iIl"'lopp<m..li"",,,,,t'.,,l

The International Development Research'Cenlre'(iOIWlis apubl,iccorporation created by the Canadian Government 10 help societies inthe developingworld find solutions tosocial, economic and environmental problems through research. Iq~Clsoneof leading lnstihfions In the world concerned with generating and applying new knowledge 10 meet thechallenges ofinternational development. lORe supports researcn indeveloping counlriE;!~p~~~~,~_~_blemar_easa~~ builds international neworks 10 share and apply this knowledge.

lORe has presently FOURpositions tofill inthree different locations

REGIONAL PROGRAM OFFICER - Socia' andEconomic EqUity ProgramArea, Dakar (Ref.#: RD·W20jlORe isseeking a Regional Program Ofli'cer lorits Social and Economic Equity Program who willwork asamember ofthe Micro Impacts/Macro-economic and Adjustment Policies Program Ini~alive

and with the SeniorScientific Advisor-Healthto identify cnfcal research issues inan emerging area ofIORC'programming, ·namely, governance in Sub-Saharan Africa (SSA), and assist in the furtherelaboration ofthe Centre's current research strategy. As currently defined,thefocusofthe governanceprogramming will bethe changing rela~onship between states and citizens asmanifested through theprovision ofhealth services. Candidates should possess apost-gradu"tedegree inPolitical Science,Political Economy, History or Public Policy and more than five years otprofessional job-relatedexperience ina developing country, and proven research, intwoof the following areas: economic,social and political reform with focus on rerorm ofthe health sector, managerial and leadership skills.This pcetonjs for a three-year term with poSSibility 01 renewal. Candidates should befluent inEnglish and French, and competency inone ofthe other languages ofthe region isdesirable. _

SENIOR PROGRAM OFFICER - Economics, Ottawa(Re/.#: PR·222)As amember oftwo multi·dlsciplinary teams, the Senior Program Officerwillideillifycrilical researchissues inthe area ofMicro Impacts ofMacroeconomic and Adjustment Policies and Trade, Employmentand Competitiveness Program Initiatives (PI) and assist inthe elaboration ofPis' current researchstrategy. The incumbent will develop, monitor, manage, and evaluate researcn projects, and liaisewith program colleagues inOltawa and abroad. Candidates should have a postgraduate degree inEconomics, eight years ot professional job-related experience with background in researchmanagement, and leadership skills, and possess protesslonal knowledge in one ormore of thefollowing areas: international trade, pUblic finance, laboureconomics, industrial economics, internationalfinance, development economics. This position islora three-year term with possibility of renewal.Candidates should befluent inEnglish and French. Spanish ishighly desirable.

REGIONAL PROGRAM OFFICER - E~onomics, Nairobi (Ref.#: RO·E06jIORC is, looking foraRegional, Program-qfficerfor the Social and Economic Equity Program Area.Helshe will work asamember ofthe Trade,' EfllItlymentand COrJll€titiveness Program Initiative,principally developing and monitoring itsactivities inEastern and Southern Africa, but also participatinginthe global activities ofthis program. He/she will support/he Centre's work inthe region onSMEdevelopment and employment issues, oronthe interaction between macroeconomic and ad;Jstmentpolicies and poverty outcomes, Helshewill develop, manage and evaluate projectS through multi­diSCiplinary collaboration within the Centre~Candidates should have a post-graduate degree inEconomics orInternational Economic Relations and possess aminimum offive yearsofprofessionaljob-related experience inadeveloping country, and possess professional knowledge inone ormoreofthe folloWing areas: internalionaltrade, international finance, public finance, labour economics,industriaieC€lnomics, scco-eccromc survey techniques, poverty and eqUity. This position isatwo·year contract. Candidates must befluent inEnglish and. have a working knowledge ofFrench.Competency inone ofthe other languages ofthe region isdesirable.

SENIOR-PROGFiAM OFFICER· Peacebui/ding andReconstructionPrograinlnitiative, Ottawa (Ref,#: PR~915JThe Senior Program Oflicer will beresponsible loridentifying, developing, managing, and el'aluatingprojects. He/she will provide professional expertise inone ormore topics ofresearcn ana provideback·up support toregional staff. Candidates s10uld possess apost-graduate degree, oreQJivalentinarelevant socel science field, demonstrated research interest inthe intersection between securityand development studies, orpolitical economy ofpeacebuilding and aminimum offive years ofjob·related experience especially inadeveloping country: the Middle East, Southern Africa and CentralAmerica. Candidates should beready to travel extensively internationally and befamiliar withinternational and Canadian donor agency,governmental andNGO programs and activities inpeacebuilding and reconstruction. This posncn isfora three-year term with possibiiity ofrenewal.Candidates should befluent inEngli~h and French. Knowiedge ofSpanish orPortuguese orArabicisdesirable.

Candidates can find_out more about IORG on itswebs~e ;and access the complete jobdescriptions (hllp://www.idrc.ca).ResumesshouldbesenttoCompetltlon lORe: qUCltingthe reerence number, eitherbymall toHuman Resources,IDRC, P.O. Box 8500, Ottawa, Ontario K1G 3H9, Canada, byfaxto (613) 238-7230 orbye-mail tocompetiUonS@idrc.ca nolater than March 2,200t

We thank all applicants fortheirinterest andwill-contact those candidates whose skills andexperience bestmatch therequirements of thepositions.IORC IS COMMtrrED. TOEMPLOYMENT EQUITY.

Salary up to £65,000 (more may beavailabie for.an exceptional candidate) • London

(JINVBSTOR INPEOPLIl

t~7.%4:....VV.f

()IUl\..q

DfEE ls looking for a Senlor. Economist, -or other appropriatelyqualified social scientist, to lead tt:J~ Department's analyticalwork in,Higher Education..You wouldalsosupport the .ChlefEconomist in developing the capacity of the Department toappraise-and evaluate its policies.

You will be closely involved in the exciting process ofdeveloping policy on Higher Education, working with ministersand other senior officials. Your key role will be to makeevidence and analysis count in policy rnakinq, You will need toidentify where analytical work can, "make a difference" and willhave the ability to drive work through to meet objectives. Youwill manage a high quality team of 35 analysts.

You-will have an impressive track record-in public or'prlvatesector..tnconsulting or academia. An excellent microeconomist With astronq policy fOCUS" or-other-social scientistwith expertlse ntesearcn. evaluatlonano aooralsal, youwillalso need to demonstrate your ability to take on a seniormanagerial role. The flexibility to be_able to apply yourskills toother areas requiring analytlcallnput will also be important.

DfEE is an equal opportunities employer.

This is riot-a reserved post and ls theretore cpen to BritishNationals, Commonwealth cmaensand European EconomicArea.nationals. very;e~c.eptionally,_someo~e,oUts,idethegroups .Iisted may be considered for an appointment in thenon-reserved category for up to 5 years.

Further. infonnationalld how tc applyFor further information and an application form, please sendyour name, address-and day time phone number, quotingvacancy reference 'SECON,' to Paul Agutu in the Senior CivilService Unit, DfEE,.Room 306, Caxton House, 6-12 TothillStreet.Lcndon.Swtl-l 9NA.

Alternatively, emailhimat scs.unltesotee.cov.uk or tetephone020 72735788; (24 hour answerphone).lf you have anyqueries please tel~phone 020 7273 5789,

Please note: Theinformatiori pack is not availableelectronically. .' .' ".. '- - '. , .

The closing date for receipt ....IiI'ftDIof appucanonsls a March 2001. l.II.A.II.I

_Depa~",,(lntt_(Jr

Education-and Emjdoymell11

14 "'THE ECONOMIST FEBRUARY. 17TH 2001

APPOINTMENTS

e-matt: ..EgyptPriV@Consultants.at'A£ ,f.".".c", IPlease apply before 24 Februarv to -

Fax: +4420 88," ,"""

.!

Privatisation Transac.tion and ChemicallJdustry ExpertsA leading U .•K..consulting firm-seeks ?mopean expertJJor Iongcorshort­term, ~arti~ipa:tion in.a p~ivatisati~n 'projec!inE,~YPt. Experiencedspecialists 10 the following fields arelO~ltedto muned\ately apply:

• Privatisation transactions/neg~tiatiJns• International and Egyptian law 1• Financialadvisory•and valuation• Managementinformation systems• Distre'"d company/turnaround m ag"cment• Training and human-resources redebloyment• Chemical and manufac~rin~ indusp specialists

All c.andidilte.s.,must hav.epn.'or experience iti.Pfl.'VatiSl ti.on.·and corporaterestructuring in the. chemical. industry, Knowledge .of .Arabic. andinternational donor project experience in Egypt is a sighificam advantage,

Economist/Financial JoufnalistI

Bright economist with ability to write q~ickly and tinterestingly aboutmonetary policy and other central banking topics re1tured to join smallteam launching new on-line service for financial market participants world­wide. Good ,·economics. :d~gre~ .and two 'years".eXPfrience as _financial

jOurnalist/~n.... ancial Falyst..~r similar e.sse.nti'L Great I.pportunity to joinexciting new venture. Salary negotiabl:e. '. .... '

Writeto:

Managing Director, Central Banking Public tions Ltd6, Langley Street, LondonWC2H 9lA

e-mail:rvriiW;le.@centi-albariIOl1g.l.il ,ukr.AssistantProfessor

ofInternatlonal Economics (FIM)The appointment will be a full-time positionv with a possibility fortenure. The salary will be based on qualifications and experience, witha maximum of Dfl. 9;150'gross a month.

Application:Applications, together' with a Curriculum Vitae, research papers andtwo recommendation letters, should be submitted within three weeksofappearance of this advertisement to:

The: Personnel Department-Faculty of Bconomlcs.and BconornetricsUniversity of AmsterdamRoetersstraat 111018'ViE'AmsterdamThe Netherlands

Information:For further 'information, please contactProfessor H. Jager;phone +3120 525 4195.e~mail:jagerwfee.uva.nlFor more information about the UvA: www.uva.nlFor l110reinformation about the Department ofEconomics:www.fee.uva.nVae

Faculty of Economics-and EconometricsDepartment of Economics

The Faculty."()f Bconomics. and: Econometrics, Department. ofEconomics invites applications for the position of an AssistantProfessor of International Economics.

UNIVERSITY OF AMSTERDAM

II

Olid]j).~

unlllm

Q~ :'ll, UnitedNations••,,,~ DevelopmentFund~ forWomen AcceUl1tabl

www.C1xfam.org.uk

Adviser, Gender BudgetsWithin the:'Governance' Section,the Gender Budget Adviser will support theimplementation of a global gender budget 'initiative. Responsibilities includeprogramme development and support to country offices in more than 20 in- .country, initiatives" involving global, monitoring, evaluation, .reporting anddocumentation, and support to the development of tools and capacity buildingactivities. The Adviser will liaise with partner implementing institutions,support a Global Advisory Committee, coordinate strategic linkages withintern~tional and regional financial institutions, and develop partnerships withother relevant non-governmental organisations.

Candidates 'will have a post-graduate degree in Economics, Finance;Development or a related field. At least eight years of development-relatedwork dealing with gender issues and project and programme development, andexperience and/or strong networks in more than one major geographic .area.Good knowledge and comact with specialistagencies,intergovernmentalorganizations and NGO n:etworkswor1dYfide~Aproven track record, inprogramme implementation and management in working on women'sempowerment issues would be a distinct advantage, Fluency in English andeither French or Spanish required,

The United Nations Development Fund-for 'women (UNIFEM) providesfinancial and technical assistance to innovativeprogrammesend strategies thatpromote women's human rights, political participation and economic security,UNIFEM works in, partnership with UN, bodies, governments and non­governmental organizations and networks to promote gender equality,

Please send CY or UN Personal History Fohn '(Pl I) to the attention of SallyCampbell. in English, by fax: (1-212) 906-6705 or e-mail:'sa:lly~c~mpbell@undp'9fg~'.:D:e~dline.ror,:slJbJDi,ssi?n~i~.2 .l\fa~c,h -2001.0rliyshort .Jisted;_candidates,.1,\Ijll __becontac,ted',for>~ore, .infoOl1ation aboutUNIFEM's.·governance programme, .see httn:llwww;unifem.undp:org

Oxfani workS withothers to find

lasting solutionsto poverty

arid sufferIng.

POLICY ADVISER - IFINANCE & SOCIAL POLICY iOxford ··t·36 hours p.w.£24,500':Co tract: 4 yearsWe seeka-soclal economistto contribeto work on a widerange of poverty issues, including so~al sector financing,international markets, finanoing for qevelopment andeconomic reforlll,,Leading_the researchand advocacywork of the team,you will focus o~ the~hernes of improvingaccess to basic services and makin~J"markets work forthe poor, working with colleaguesglcibally arid in Oxford:

YOO.WiII8ISb represent OXfam. 8t.'h.'1'i'.hastle"l withexlemalagencies and the medle.. ... . ..Highly motivated, with excellent search andcommunications skills, you wlUbe edcated to Masterslevel in economics,or social science, yvith proven abilityin complex economic policy analysis. Specialist knowledgein the field of finance and socialpolidy, market reformand povertyreductionisessenlial,and dclearunderstandin'g

0.f d.eve•..Io.pm.e." i.•".oe,..'•.. 1'.'•.10. d. i.'..s....[. e,.ro". qenderperspective, is expected" .•............•..Closing date: 2nd March 2001

Reference: ID/POL/PAIRB

For further details; please send large SAE,quoting appropriate reference, _to: InternationalHuman Resources, Oxfam, 274 BanbUry Road,oDomon7oz'Oih~;;~;

IDiver~ity ThedlffeJnce starts with you

96 THE ECONOMI$r FE8RUARY 17TH 2001

",'..

Dean,.Jhe frallk Sawyer School of Management

EXECUT][VE FOCUS

SUFFOLK UNIVERSITY

12

Suffolk University invites nominations and applications for the position of Dean foe the Frank SawyerSchool of Management.

The Dean is the chief executive officer of the School and is responsible for the faculty and programs,administrative staff, facilities, and budget.

Suffolk University consists of three faculties, the Law Faculty, the Faculty ofArts and Sciences, andThe Frank Sawyer School of Management. The SawyerSchool serv~s oyer 1,000un(:iergraduatestudents and 1,200 graduate students .and offers S6 undergraduate and graduate degree, and certificateprograms and is one of 300 schools nationwide named inBarrorCsB~stBuys in College Education.Thereare more than 60 full-time faculty members, 95percent of whomhold Ph.D. degrees, giving theSawyer School of Management one of the highest faculty Ph.D. ratios in the.country, The Universityhas innovative programs built on scholarship and is responsive to the market demand for graduates, TheUniversity is incorporating new technology, including an online MBA program, to reach wider marketsand to enhance the excellent service to their traditional student body. The University is located onl.3?s)on;.s~storicBe~con Hill as ",ellas other locations in the Boston area and abroad,

Q/J,a.lifjpati.o.ns:TheD.e~ forTh~.Frank Sawyer School of Management provides leadership 19 a.diverse and innovative community that values excellence in scholarship and teaching, in a culture ofcooperation, teamwork, transparent and fair processes of accountability and rewards, and continualchange. It is desired that the Dean have an academic record that merits a senior tenured appointment tothe Faculty of Management. The successful candidate will have a record ofdistinguished scholarshipand administrative accomplishments; experience in personnel management and fiscal responsibilities;an understanding of the potential of technology to transfoflll the deliveryof.management education andeffective servicing of student needs, The successful candidate will be a dynamicp~rs?n'Yith a clearvision.for managementeducation and research. Preferred.~andidat~s willhave an e1lfIled doctorateorother appropriate terminal credential. Candidates with executive Ievelexperienceoutside ofhighereducation are welcomed.

Nominations and Applications: For best consideration, materials should be submitted prior to March12, 2001. Review of applications and nominations willbegin irmnedi~telyandwill continue until anappointment is made. Application materials should include a letter of application addressing how thecandidate's experiences matchthe position requirements, a curriculum vitae.and the name, title, e-mail,business address, andbusiness and-home telephone numbers ofat least five references. Subll1ission ofmaterials as an MS Word attachment is strongly encouraged. Individuals wishing to nominatecandidates for the position should submit a letter of nomination, including the name, position, address,and telephone number ofthe nominee.

Nominations and applications will be considered in confidence and should be sent to:Dr. Jan Greenwood; Vice President

AT Kearney, ~nc.,Suffolk UniversityDeanSearch. 333 John Carlyle Street, Alexandria; Virginia 22314

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Suffolk University is an Equal Opportunity/AffirmativeAction Employerhttp://www.suffolk.edu/

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THE ECONOMIST 'FEBRUARY 17TH 2001

APPOINTMENTS II

lot,m"i~~,'A IliJJMr~.,HIV/AI,71I MIILV

Professor of Comparative Politics

The Faculty ofArts ofthe University of Zurichinvites applications for-the position of

Applicants should 'have experience' in comparative: empirical researchand knowI~ge in the field of different political systems. Prerequisite:"Habilitation" or equivalent qualification as university lecturer. Theteaching language is.German.

A curriculum vitae, a list of publications and further application-" ,,: ll1~teria1sshouldbe,sent to:

Dekanat der Phllosophischen Fakultiit der Universitiit Zurich,Riimistrasse 71, CHMS006 Zurich, Switzerland.

USAManagementConsultants

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Regional Co-ordinator: Latin America. @, 0-45,00.0 plusexcellent benefits. Candidates should have strong technicalskills in, c"mmunity based, HIV/AIDS prdgrammingandfluent Spanish (knowledge of Portuguhe would be'advantageous); JField Support Manager: Fiflance@£O-35,OOO' piusexcellent befl~fits~... c:arld.. i8ates., s"hOU"ld ha,v1 strong skills infinance, management. and accounting.E:}fellent Spanishand French.r~quired (portuguese advantagefLJ~).

Application deadline Friday Marcil 23rd,Foran: .iriforrn<lti()n,,~heetaboutthese,p~sts: and the

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The University of St. Gallen, Switzerland (Graduate Schoolof Business, Economics, Law and Social Sciences - HSG)isseeking a candidate for a

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'rhe.appI1ci:\tiondeadl~eisMarch 15, 2001.Applicationswill be'kept confidential.

for its Institute for Technology Management'(ITEM~HSG).

senior position at the Full Professor Level

ITEM,~HSG is.a major research institute at theUniv~rsity ofSt: Gallen.engaged in'graduate teaching and research in thearea ,0£ Manuf~cturing, Quality, Innpvation .and SupplyChainManagement. It employs more than 50 faculty andstili members. The professor is expectedtoprovideacademic leadership in the area of TechnologyManagement, with an emphasison Innovation.Responsibilitiesindudelecturing on the area of TechnologyManagement at the Graduate level- supervising candidatesfor advanced degrees, spearheadingsponsored researchprojects and industrial researcil consortia, and providingadvanced executive education and international outreach.The candidate is also expected to be involved in themanagement of the Institute.

Interested'candidates should have a Ph.D. or equivalentdegree in a relevantarea such as business administration orscience'of elLgineering,co~ider~~le teachirlg eXBerience,astrong publication record and preferably managementexperience.

The-successful candidate is expected toassume the positionOctobe,!1,2001 or at amutually acceptable date.

Detailedapplication should Include-a current curriculumvitae, selected pll.blicatio11$ and names of references andshould be sent to the Pr~sideIlt of 1.!niversityof S1. Gallen,Professor Dr. Peter Gomez; Dufourstrasse 50,.CH-9000 St.Oallen.Switzerlend.

98

LETTERS

Saving the surplus

clearing real rate of interest,which in a liquidity trap isalwaysnegative. An inflation target of,say, 2%, might be too low to bringabout a savings-investment bal­ance if Japan's equilibrium realinterest rate is, say, minus 2%. Theresult would be.a short-term in­terest rate that remains near zerothroughout the life of a long-termgovernment bond.

Second, you claim that theBank of Japan would suffer fi- )nanciallosses if it bought bondswhose yield subsequently rosebecause of risin,g .infletion expec­tations. This also is untrue. TheBank of japan. would buy bondsyielding 1.5% with its own freshlyminted money, which is a zero­coupon perpetual liability. Heldtomaturity, this generates a sei­gnorage gain of 1.5% per year.Hatfield, PETERHerifordshire VON MAYDELL

SIR-:-With BSE and the price­intluencing Europe~n policy re­sponse, the BigMac index {janu­ary 13lh) must have lost some ofitsedge to gauge the competitive­ness of theeuro. Perhaps this is agood -mcment tc-switch to theChicken McNugget index. Orwould that- be too reminiscent ofthe gold standard?Washington, DC Luc EVERAERT--~----------"

Nugget of informa1tion

SIR-lexington's objections to taxcuts in America are theoreticallysound but not practical (Februarygrd]. The reason.for. separatingWashington politicians from abudget surplus is .the same as for.separating, male and, femaleschoolchildren, on an overnightouting: there is a force of natureinvolved that does not alwayslead to rationalbehaviour.

'As Congress goes through aprocess of "surplus awareness"the excitement will be too muchandreason willnot ~e brought tobear on fiscal policy. The pro­blems facing Social Security andMedicare' will not be addressedand 'a' myriad of new problemsand long-term consequences willbe created. "Irrational exuber­ance" can manifest itself in fiscalpolicy as, well as financial mar­kets. I suspect Alan Greenspan'sconvoluted support ofa tax cut isa pre-emptive strike.Tokyo CHRISTOPHER HELD

-----------------~----"

J. LE CLERCQ

EDWARORAPP

SIR-YOU repeat two common fal­lacies about reflating Japan'seconomy' ("Coming out of, de­nial", 'February jrd), First, youclaim that bond prices' will col­lapse if the Bank of-japan raisesits inflation target This is not nec­essarily true, and depends on thedifference between the inflationtarget chosen and the market-

ReflatingJapan

such modish terms as "participa­tion", "community'tand "solidar­ity" would reinvent the churchfrom the bottom up; and thatother terms such as "ecumenism","tolerance" and "understanding"would ". animate ',~,moral andphilosophical awareness. .lt, .hasnot happened. What has hap­pened is a marginalisation of thechurch because it is perceived asboth sentimental and authoritar­ian. .It does not teach, it dog­matises; it does not guide, it con­fuses; it is no longer Convincingnor uplifting, it has become anexcuse to practice a faith on one'sown terms.

The~hurch,bas'.a role to play. which goes beyo.nd boldness Or

prudence and which relates toand is supportive ,of individualsfaced ,,' with problerl1s differentlydefined from, even 25 years ago.Contraception is,n() longer aquestion of personal morality butis .a.matter, for AIDS, and the de­"eloping world; abortion is less aquestion of life, than of femininedignity; euthanasia relates not somuch to death andmurder as tocharity; fears of genetic engineer­ing are not to be exploited, theyneed a church to provide objec­tive answers. These will not comefrom "below";as diktats they willnot.be accepted.Chazemais,France

Catholic taste

SIR-The sad situation of' theCatholic church ("Between thisworld' 'and the next", January27th) follows from' the expecta­tion' that, mere,good, intention'sproduce', good solutions. On "th~contrary, what is needed is th~

application of rigorous and hon­est intellectual discipline. It hasbeen believed, and still is, that

territories against torture, killingsand the' use of excessive, indis­criminate and disproportionateforce, land' confiscation and de­molition of homes, and othermeasures whether applied by ci­vilians or soldiers.

A new era, of Israeli compli:­ance with international law' andrespect for, the human rights ofPalestinians under its occupationis the only basis for progress. Suchan era will not dawn if the inter­national community continues totreat Israel as if it had a specialdispensation to ignore its interna­tional' obligations. ,We call on, theBritish government, acting ,withits RU' partners, to take a leadingrole, in, implementing practicalmeasures to ensure Israel's adher­encetothe convelition., .

DANIEL MACHOVERLawyers forPalestinian

London Human Rights

Green and plell!;ant

SIR~YOU ask how prosperity andgreenery, are related ("Green andgrowing", january 27th).YaleUrn,versity'sEnvironmental "Sustain"':ability Index is certainly a com­mendable effort but is toocompli~~t,e;d.,The, environmental

. intensity, of .economic activity,increasingly industrial activity, isthe variable we have to control.~0rt1.l,n~telY"the~e i~,a' link,:Pttween this imperative and green-ery.The flip.side of enviroI1n'1¢h..:. SIJ:l-;-;YouclQnotadc:lr~s~.the rraintal.lntensityis ceo-efficiency.. <lpcl problem of the vast' institutionresource productivity-concepts that is the Catholic church. It is alinked directly to competitiveness most uri-Christlike creation.and open~marketpolicies. Simple Though founded on the teachings

,perhaps, but on, target Hard as it of Jesus it has lost itsorigins andmay be to accept, the global drive has becomefrrelevant and un­for competitive advantage may recognisable.' Jesus has beenhave within it a powerful driver smothered by droning liturgies,toward sustainability-cincreasing lavish cardinals' robes, the hierar­efficiencyand productivitY")""': chy.surrounding the,' "Vicar of

OWEN,'~:Y~-I<~ q~ri~(,.and. pagan .incense.pots9ir~~,t()t,: ,s\yillging down the aisles. If there

The policy§r9~p'-'\\,TasJo;l:>e a second coming, Christ' .y~;~~,a.VolQ:ulclnot fit in at all.

Enviropment.al:: . Qre:ell,$~oro,Washington, DC partnership"~iJrg~

.•..2-c~ ~ •

Israel's future

Sta-c-ArielSharon has not madepublic his plans for the occupiedterritories but it is likely that thepresent policies of collective pun­ishment against Palestinian civil­ians and expansion of illegal set­tlements wilL_continue. It istherefore.important to restate ]S:­

rael's obligationsunder interna-tional law. '

On many occasions the inter­national community has reaf­firmed in the UN"General Assem­bly and Security Council thatIsrael is ·an' occupying, power. ofGaza and the West Bank" includ­ing East Jerusalem; and bound bythe fourth Geneva Convention.This guarantees protection to Pal­estinian civilians in the occupied

SIR-YOU criticise ,Eliud'Barak'speace plan as not having worked,and Ariel Sharon's as being un­workable ("saying no to peace";February 3td);Fair' enough; butVasser Arafathas never submitteda peaceplanof any land, andhasno intention of doingso. Why notcriticise him?

Likeany fully' functioning de­mocracy, Israelhas its extremists,whom you -label "crazies". Israeldoes a good job ofmarginalisingits crazies, By; contrast the nearlytwo-dozenArabgovernments, i l1,:"eluding Mr Arafat's dictatorship­in-waiting,have no problem withpolitical crazies. They also haveno democracy, no representativeelectiona.no free' speech or freepress, etc.

You, denigrate-ast'mythvfheheartfelt jewish belief "that jeru­salem should be Israel's eternal,undivided capital." some tve,ro de­cades" before, the",state" of Israelwas recalled to life in 1948.ArthurBalfour suggested to his friendChaim,We~zrl1aI1: that. ajewishhomeland inight be establishedsome place other than in biblicalIsrael. Weizman asked Balfour ifhe, as an,~ngli,shman, would ex­change London for Paris. "But wehave London," protested Balfour;''Yes,'' answered Weizman."Andwhen London was a swamp, wehad Jerusalem;"Miami MILTON HIRSCH

racialand other group lines (therewas a.gay' team, for instance) toimprove audience" identificationwith the sides. The whole thingwas,of course, l:lJ..1gely popular.GiUingha1'n,Kent BRIAN DlTCHAM

10 THE,ECONOMIST,FEBRUARY,17TH'2,OOl

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Football commentary

SIR-I' am •well aware that TheEconomist 'is a>British-basednewspaper but this does not for­giveor explain all transgressions.You state that the NFL "tiesAmer­ican males to their sofasonSatur­days'T'Ragev Maniax", Februaryjrd), NFL gamesare playedalmostexclusively on SUndays. I suppose[ should be thankful that youwere .able•. to. restrain .. yourselffrom .prefacing "football" •.. withthe rn()di~er."American".

Forfuture reference baseballisplayed throughout the week, golfand tennis tournaments tend to'finish on Sundays, and at' mywork our spirited departmentaltable-soccer outings usually takeplace on Wednesday evenings.Evanston,llinois JULIAN JAMISON

SIR-I read the piece on the XFL

leaguewith a senseofdeja vu, Inthe 1970S an Americansciencefic­tion writer, Norman Spinrad,wrote a short story based on theconcept of a TV network, lockedout of mainstream Americanfootball, that devised an alterna­tive.version of the gameto set upits own. league unhindered bycopyright rulea.This began withthe kind of (relatively) minor ruletinkering» planned by XFL; It rap­idly moved on to a formatwhereplayer arrnour.. was .dispensedwith, everyform of violencepos­siblewithoutactual weapons waslicit and, finally, .. where-reamswere consciously structured .. on

Forall their moral indignation(admirable in ': itself), '.Filipinosmust allowdemocracyto flourishby allowingthe ruleoflaw to takehold; by aiming for genuine re­publicanism wherein leadersde­rive their'authority from the en,lightenedconsentofthe governedand rule to promote people's in­terests over and above' their oli­garchic .interests; by demandingfrom that government a fulfil­ment' of its duty to secure: andmaintain' individual rights andliberties; and, in the spirit of theprinciple of separation of churchand state,.. by drawing.from .theCatholicchurch moral inspirationand not politicalagitation.Burbank,CctliforniaPRIscILLA TACUJAN.-,----,---,~---,---,---,----'-"

SIR-YOU bring tothe.fore.legitl­mate concerns about thestabilityof the new Philippine. govern­ment and. the fate of democracy("After the.a movie, a new mainattraction' for Filipinos", Januaryavth). At the crux of the issue iswhether the Filipinosjudiciouslyused."people power" this time.

"Peoplepower two" might nothave advanced' the cause of de­mocracy. in the. Philippines.. be­cause it impinged upon the con­stitutional processof impeachingan ineffective and lawless presi­dent.Also,it was used not to ousta dictatorship but: to .eliminateimmorality and . corruption ingovernment.ButI wouldnot faultthe 'Filipinos for what they did. 1would suggest, instead,thatin thePhilippines,as inmany develop­ing societies, the meaning andpurpose of true constitutionalde­mocracy is yet to be adequatelyunderstood and.appreciated.

People power

Klaus and his party. Under MrKlausnot ..a.single bank was fullyprivatised..Foreign direct invest­ment remained low;the'purchaseof Skodaby Volkswagen was "Car­ried out despite the objections ofMr K1aus~

He is the'worst sort of CentralEuropean politician;all- too com­mon at present.who knows howto play,the nationalisticcard andconducts politics in a crude andabusive manner. He invariablydubs ..his 'opponents, includingPresidentVaclav Havel, as stupid,criminal, elitist,spoiled, middle­class, and soon.Of coursehe doesnot understand the meaning of"civil society".Prague JAN.HENDRIK SIEMSSEN

Good pint

SIR---:.I must take' exception 'withthe commentvmade- byi johnWakely: that "when..Budweisergoesup againstTsingtao in China,what ist the vdifference exceptpncez'j-rbe bigpitcher", Januaryaoth). His taste buds must havegonewalkabout.Your descriptionof Budweiser as "watery fizz" isspot on; Tsingtao, along withSingha beer herein Thailand,hasflavour. The' only similarity. toBudweiser is the fizzbit.Bctngkok PATRICK TAYLOR

INGAR BRUEGGEMANNDirector General

IPPFLondon

Populist Klaus;

sacrifice their rights and respon­sibilities regarding --their clients;Either choice hurts the world'spoorest-and most marginalisedcommunities.Wehad expectedtoreceive sam from USAID for theperiod between _September 2001

and' August 2003. We will nowlose this.

Thesocial impact is unmistak­able:under the gag rule recipientsof American .: family-planningfunds must give up the ability, toprovide legal health services andthe right to take part in importantpolicydebates in their own coun­tries.Toplacethese restrictions onfamily-planning"choices disem­powers. women -. and" men and,cruciall¥, undermines their effortsto extricatethemselvesfrom pov­erty. That is harsh, in anyone'sbook

- fill' 303604 0518or write to:e.TheEconomistSubscription.Services

P.O.Box 55702Boulder, CO 80322-8524e-mailteconcmistgmeodata.corn

SIR-I realise 'that to '"combinefree-markerardourwith a Euros­ceptical. tone.as you think VaclavKlaus r does, can be attractive(Charlemagne, February 3rd)_ But,alas,'Mr Klaus is no free mar­keteert Indeed, he is the last per­son deserving the label Thatche­rite.Henever truly embraced the

. market. whenhe prlvatised theCzecheconomyhis main Concernwas to keepit in Czech'hands.As""'sets were Bold (or, rather, trans­ferred) to-individuals and groupswho borrowed from the Czechs'state-owned banks. And who gotthe loans? Politicalfriendsof Mr

Bush and abortion

SIR-Tqsaythat George Bush's re­instatement: of the "Mexico citypolicy" ("Trench •.. warfare", janu­ary 27th) was not •. "particularlyharsh in its impact" is an insult tothe women," men and childrenwho willsufferasa result-Youhave to live in a country wherewomen can get safe and legalabortion to say something as cas­uallydismissive as "in manyparts .of the developing worldabortions are. _illegal. anyway,':This ignores_the _. fact that unsafeabortion,particularlyprevalent inthosecountries, killsthousands ofwomen every year. and that it isprecisely - the -programmes_thatthe Mexico: city policy hrts tbehardest that have"the best pros­pectof saving those lives.

The policy is -known as the:"global gag'rule" for the restric-:dons it places on the'way orga­nisations' outside'America usetheir own money. It stops peoplespeaking out about abortion,whetherItis.to advise a .womanabout' options' open' to her' ordemocratically trying to stimulatea change in the .law.This.is ncth­ing less than an affront, to, theprinciple of free speech,as guar­anteed in America's constitution,and ironically willhurt those ac­tivities that, reduce, the demandfor abortions worldwide by pro­vidingcontraception.

The ,gag" rule i{)rces overseascommunity-based: organisationslike, the International, PlannedParenthood Federation .(IPPF) 'tomake an' 'impossible'..decisionrforgo desperately needed Ameri­can family-planningassistanceor

r-------~---~~~~-~~-------~----~--------,I _ Reader servicesI •I '. LETTERS TO THE EDITOR ARE WELCOME: Please include your postal address (even on e-mail) and a daytime telephoneI number.Letters will be edited for length and style.

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8 THEECONOMIST·FEBRUARY 17TH Z001

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261.15$ perm 263.25 - 1.3 -14,0Crude oil North Sea Brent

is,t9g per barrel 28.58 + 8.0 - 0.5West Texas Intermediate$ per barrel 30.26 30. 2 - 0.5 + 0.1

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THE ECONOM!STFEBRUARY 17TH 2001

_-·--4Sweden

OECO----'-'6

_ COMMODlTf PRICE INDEXAmerica'stitrlber manufactur-

.erswantt~eBush admiq~tration toi,mp:osesteep.dulles on CanacUim softwoodim­portsor negotiate anew.,"~"lateral pactwhena five-year agreement ex .iresat the end ofMarch. Theyclaimthat fanadian mills getunfair sUbsi~ies,thanks{o pricessetbythe 'govemmentthat providethem with cheaplogs. (The ~anadiangovp~nment owns 'is%ofthe c.ountry's' till1berJ1'IThe current pactbetween the countries .imits imports toAmerica by imposing a tAriff abovean ini­tialquota:But recordim~orts ofCanadiansoftwood-9S% of the,\, tariff-Free-stillcomprised a third of the~erican marketin 2000. Withtimber pricesat decade-longlows, it isno surprisethAt American millsarelosing moneyand mahyhaveclosed.

1995=100 . ..... '.' '. i % change onFeb 6th" Feb 3th" one . one

.'. month ' year

, IndustrialsYen index

Unemploymentas % of labour force

Balance of payments$bn Current-adcount 20

rplus

1

02'01t2000*9998

" OECD§

OECO

Sweden

GDP% increase on a year earlier

1997

% change at annual rate The Economist poll Industrial Retail sales UnemploymentGOP GOPforecasts production (volume) % rate

3 mthst 1 year 2000 2001 3 mthst 1 year 1 year latest year agoAustralia + 2.6 + 4.2 03 + 4.3 + 3,2 15 + 4.2 Q3' 0.8 Q3 6.7 Jan 6:9Austria + 1.2 + 1.9 03 + 3.4 + 2.4 na + 6.7 Oct" 1.1 Oct 3.3 Dec' 3,6

Belgium + 2.0 + 3.2 03 + 3.9 + 2.7 na + 7.3 Dec' + 6.4 Nov 10.7 'Jan' 11.3Britain + 1.0 + 2.4 Q4 + 3.1 + 2.5 2,' + 0.5 Dec + 3.3 Jan 53 DIo'c* 5.9

Canada + 4.8 + 5.0 Q3 + 4.9 + 2.8 + 1.2 + 4.5 Nov .j. 4.6 Nov 6.9 Jan 6,8

Denmark + 2.0 + 2.7 03 + 2.6 + 2.1 na + 8.6 Dec: 1.0 Dec 5.4 nee 5.4France + 2.3 + 3.0 03 + 3:1 + 2:6 + 3:6 + 2.3 NoV 1.5 Dec 9.2 Dec 10.6Germany + 2.3 + 2.8 03 + 3.1 + 2.4 + 0.9 + 5.5 c« - 2.9 Dec 9.3 Jan 10.1Italy + 3.2 + 2.7 Q4 + 2.6 + 2.2 + 5.9 - 3.3 Dec - 1.2 NOV 10.0 Oct 11.1Japan - 2.4 + 0.5 03 + 1.7 + 1.4 + 1.4 + 3.8 Dec - 1.1 Dec 4.8 Dec 4,7

Netherlands + 5.1 + 3.1 04 + 3.9 + 3.0 + 8.5 + 9.4 Dec .,+ 2.9 Nov 2.6 Dec§ 2,7

Spain + 2.2 + 3.9 03 + 4.1 + 3:1 + 0.1 + 4.4 Dei: na 13.7 Dec 15.1Sweden + 3.9 + 4.0 03 + 4.0 + 3.2 na + 9.9 NoV + 3.7 Dec 3.7 Dec' 5,'Switzerland + 2.0 + 3.6 03 + 3.4 + 2.2 na + 6.9 03" 2.0 Dec 2.0 Jan' 2.6United States + 1.4 + 3.5 04 + 5:0 +' L8 U + 3:1,bei: + 2.6 Dec 4.2 Jan 4,0

ELiri:farea + 2.4 + 3.3 03 + 3:4.+ 2.6 + 5.4 + 4.4 Nov + 1.2 Nov 8.7 Dec ',6

,'!'lot searoriallyadjusied:tAverage oflatest3 months compared with average o{previous3 months; iifanhual rate. roo-nee claimant count rate3,5%inJanca rj'. goct-eec.

% cnangeat annual rate The Economist pollConsumer prices" consumer prices forecast Producer prices", Wagesfearnings3 mthst 1 year 2000 2001 3 mthst 1 year 3 mthst 1 year

Austrafla + 1.2 + 5.8 04 + 4.6 + 4.1 +10.2 + 8.4 04 3.3 +5.004Austria + 2.8 + 2.6 Dec + 2.1 + 1.7 + 2.1 + 3.2 Jan + 1.9 + '2.2 DecBelgium + 0.7 + 2.2 Jan + 2.6 + 2.1 +16,2 +10.0 Nov + 3.7 + 1:6 04Britain + 1.3 + 2.7 Jon + 2.4 + 2.2 + 0:2 + 1.9 Jan + 7.0 + 4.4 DecCanada + 2.5 + 3.2 Dec + 2.7 + 2.4 + 4.9 + 3.5 Dec + 0.7 + 3.4 NovDenmark + 1.3 + 2.3 Jan + 2.9 + 2.3 + 3.0 + 3.9 Dec + 7.0 + 3.8 03France + 1.7 + 1.6 Dec + 1.7 + 1.4 + 5.2 + 4.7 Dec -J' 4.6 + 5.3 03Germany + 1.7 + 2.4 JaM + 2.0 + 1.5 + 0.8 + 3.8 Jan na + 1.8 Nov'Italy + 3.1 + 3.0 Jan + 2.5 + 2.1 + 6.1 + 6.2 Dec + 0.9 + 1,7 Dec"Japan + 0.7 0.2 Dec 0,7 0.4 + 1.4 + 1.2 Jan ne + 1.8 DecNetherlands + 2.3 + 4.2 Jan + 2.5 + 3.0 + 7.4 + 7.6 Dec + 1.4 + 3,0 DecSpain + 3.0 + 3.7 Jan + 3.4 + 2.9 + 4.8 + 5.0 Jan + 3.2 + 2.4 03Sweden na + 1.4 Dec +1.3 + 1.7 + 6.7 + 3.7 Dec: + 0.1 + 2.1 NoV'Switzerland + 2.0 + 1.3 Jan + 1.6 + 1.4 nil + 1.4 Dec na + 0.2 1999United States + 2.7 + 3.4 Dec + 3.4 + 2.5 + 3.5 + 3.6 Dec: + 4.8' + 3.9 JanEuro area + 2:1 + 2.6 Dec + 2.3 + 1.9 + 5.7 + 5.4 Dec + 1.2 +1.'8 03*Not seasonally adjusted. tAve,agE of latest 3 monthscomllared with average ofprevious 3months. atannual rate.

mains good,according to theOECD'S latestassessment. The economic trauma of theearly1990S is now a distant memory. Aftertwoyearsinwhichtheeconomyhasgrownat around 4% a year, the expansionispre­dicted to slow only modestly, to 3-2%,in2001. Notuntilnextyearwilltheslowdownbringactualgrowthinto linewith potentialgrowth, which the OECD calculate's to beabout 2.5%. Theunemploymentrate,'-Vhil:l1wasabovethe DECD'S average asrecentlyas1997, is' forecast to' continue .its dedine,reaching 4% ofthelabourforce by2002. Theonlysmallcloudon thehorizonisinflati?n:it has been belowthe Riksbank's targetof2.0% for the pastfive years,but evenwithhigherinterestrates the DECO expectsit toexceed thetargetin 2002.

PRICES AND WAGES InJanuary Britain's annual consumer-price inflationratefell to 2.7%.Excluding mortgages, the ratewasonlyi.8%, the lowestsincerecords beganinJanuary 1976. IntheNetherlands inflationjumpedto4.2%, thehighestsinceMayisca.Intheyeartojanuarypro­ducer-priceinflationslowedto1.9% in Britain and to3.8% inGermany.

• SWEDEN The outlook for Sweden re-

OUTPUT, DEMAND AND JOBS Germany'sindustrialoutput roseby 0,7% in December, Itsyear-on-yeargrowthquickened to 5.5%. Britain's unemployment.measuredby totalclaimants,unexpectedlyfell inJanuary towithinawhisker of one million-crhe Iowestin 26 years. In thesamemonththejoblessrateinCanadaedgedupto 6.9%.,

ECONOMIC INDICATORS

102

" "

.. FEBRUARY 17TH 2001'::,',:...'.c_>_>:'-..::.::. ,:- :-,_ ','.::,_: ,_, -,',' ,,-,:>::,,' .. :'-:, _,'.' "'C.'':::: -':.":::..':._.,'.

POLITICS THIS WEEK

People flocked to the polls inBahrain.en authoritarianGulf emirate,'to vote 'ona newconstitution that would :. insti­tute a partiallyelectedparlia­mentand grant women politi­cal rights.

Some25o,009_refugees re­mained trapped by fightingbetween the Guinean armyand rebelsencroachingfrornSierra Leone and elsewhere.Ruud Lubbers, the new UnitedNations~igh commissioner forre~gees,yisited G~inea, andSierra'Leone to arrangeemer­gency-aidand the evacuationof refugees.

Iraq's national airlinere­sumed scheduled interna­tional flights for the first timesincethe Gulf war, in appar.,.ent defiance of UN sanctions.

Israel's militar~ killed a se­nior Palestinian security offi­cial ina rocket attack, A Pal­estinian: bus driver'drove intoa queue at a bus stopkillingeightIsraelis and.injuring.1'7

others,<il1c:l raising tensionsstill further.

More peace talksLeaders of several of the coun­tries and rebel factions in­volved in Congo's civil warmerfor peaeetalks in Zambia.But the presidents of Rwandaand Uganda stayed away.

JacquesChirac,France's con­servative president,disagreedwith a plan of Lionel [ospin,its socialist prime minister, fordevolving powers to Corsica,

Ireland was formally repri­manded by the EuropeanCommission for the expan­sionary budget it plans for thisyear,but the Irish financeminister,Charlie.McCreevy,refused to change it.

Kohl's fine

Germany's new farm andconsumer-protection minister,Renate KUnast, fiercely crit­icisedthe EuropeanCommis­sion's latest plan for cullingmore cattlein its effort to fendoff ,BSE, or mad-cow disease.,TheSocialDemocraticprimeministerof Sweden, GoranPersson, said he would nothold a referendumbefore thenext general.election due in2002, on.whether Sweden, oneof the three so countriesnotwithin theeuro-zone, wouldjoin Europe'ssingle currency.

Germany's former chancellor,Helmut Kohl, acceptedafine of DM300,OOO ($141,000)for accepting secretand there­fore illegal contributions to hisChristian Democratic Union.If he agrees to pay,criminalcharges, againsthim willbedropped, but a parliamentaryinquiry into,the-affair willcontinue.

Protesters on the streets ofUkraine's capital,Kiev, con-

Thailand closeda crossi~~ tint~edto call for theirpresi-with,Myanmar, after !v1yanb... dent,Leonid Kuchma, to.re-mar's soldierswere reported to sign, while a.Ieading critic ofbe massing on the border and his, Yulia. Timoshenko, a dep-firing into Thai territory.,. '.' uty 'primeminister'in chargeMyanmar'Said· it was shooting of energy, was arrested for'a1-at rebels. legedcorruption.

, 1 AVAILABLEBYE_MAILFROMWWW.ECONOMIST.COM f

It was announced in HongKong that the financial secre­tary, Donald Tsang Yam-Kuen,would replace a champion ofthe territory's autonomy,An­son Chan Fang On-sang.aschiefsecretary.A banker, An­thony.Leung Kam-chung,would take over from MrTSang.

Japan's unpopular primeminister, YoshiroMori, be­came even,less secureafter hewas criticised for'continuingagameof golfafter being toldof an accident in whichajap­anese trawlerhad been sunkby an American 'submarine,drowning nine people.

Mori in the rough

Senators in the Philfppfnesexamined.a bank account saidto belongto the deposed pres­ident,Joseph Estrada. Morethan $60m had allegedly been,~ithdrawn beforeMr Estrada

'was ousted lastmonth, ac:cused by his opponents ofcorruption.

Afghanistan's rulingTalibantold the United Nations to

. close its political office in Ka­bul,the capital,after Ameri­can officials closedthe Tali­ban's office in New York.Opposition fighters in Af­ghanistan seizedBamiyan, atown held by the Taliban.

Mr Bush was due to visitMexico, his first .. trip abroadas president.

Outragecontinued to swirlround Bill Clinton as heplunged into his post-presi­dential career. Under severemedia pressure, ~e ,shift~d hisnew office from swanky mid­town Manhattan to low-rentHarlem) a placewith which.heclaimed longand heartfeltconnections. Meanwhile, Con­gress said that it wanted tolook into Mr Clinton'spardonof Marc Rich, a fugitive finan­cier. Theus attorney in NewYork, Mary[o White, said shewould conduct a.criminal in­vestigation into the affair.

A 13-point deal was signedbe­tween Colombia's.PresidentAndres Pastranaand theleader of the left-wing FARC

rebels, Manuel Marulanda, re­newing the lifeof a demili­tarised zonecontrolledby therebelsand thus preparing theway for aceasefire.

At least 225 people,including22 children and their teacherin one: school, were kiliedinan earthquake in El.Salva­dor, the second in the pastfour weeks.

President"George Bush ari­nounced that he wanted tocreatea "new architecture't fordefence by investing in newtechnologies and weaponssystems, rather than tinkeringwith the old. He also declared"God bless xcro'vtaking hislisteners by surprise.

6 THE ECONOMIST FEBRUARY 17TH 2001

ECONOMY Brazil's GDP grewby44%intheyear tothefourthquarter.It w~Jhelped byasurgein industrialproduction,whichclimbed7.S% in the12 months toDecember,p,urkey's monthly

current-accoun,tdefi,citw,id"e,ned to. a",r,e,cord $1~7bi1lion i,n November. RUS,Silheld $24-3 billionin foreign-currencyreserves atthe endofzooo,up from$805billiona yeareai ier.

%,change on year earlier' " latest 12 months, $bn ' Fo ign reserves*, $bnGOP Industrial Consumer Trade Current Latest Year ago

production prices balance account i

12.9

11.0

24.5

8.5

96.3

74.0

32.7

26.5

30.6

12.8

74.3

42.2

~7,6

106.2

34.1

26.3

156.8

ITHE ECONOMIST FEBRUARY 17rH 2001

+14."l-,.'JUI +11.~'{13 I~.I UK 12.3._~ ~- .4~ 15.4

22.1

6.3

22,7

- O,V UK -IV." \,J~ J+J vee 31.8~." .'" -- <1C 8.9

--~--l

INDICATORjS

Russia + 7.904 + 2.5 Dec + 20.7 Jan +59.8 Nov ~43.8 03 24.3D;'c

Czech Republic + 2,2 03+ 1.4 De<: + 4.2 Jan - 33 Dec - 1.9 03 1{1 Dec:

Hungary + 4.603 +10.1 Dec + 10,1 Jan -2.3D<!c L8 Dec 11.2 Dec

Poland + 2.2 04 2.2 Dec + 8.5 Dec 1t.O Dec 9:9 Dec 2~3 Dec:

Mexico +7.103 0.4 Dec + 8.1 Jan ~~- .r. ....:!r

Peru - 1.8 ,Dec + 0.9 Nov" + 3.9 jan - v ....- ,,~v ,.U 'p ........ "'''

Brazil + 4.4.-04 + 7.5 De<: + 5.4 jan -1.1' Jan ,-24;6Do( 3~.5 Nov

Chile + 5.803 - 3.8 Dec + 4.7 Jan + 1.5 Dec: - 0.703 14:2 Nov

Colombia + 3.1 03 + 0.2 Dec + 8.5 Jan + 2.3 Dec: +,,0.1..,02 $.1 Dec

Hong Kong +10.4,03 - 0.1 03 1.8 Dec -10.9 Dec +,9.2 03 101.5 Dec

China + 7.4 04 + 2.3 Jen ·1.5·Dec +24.0 Jan +15.7 1999 16~.9 Nov

Taiwan + 6.6 03 - 2.1 Dec 2.4 Jan + 8.1 Jan + 7.5 03 1O~.7 Dec

Thailand + 2.6 03 + 1.5 Dec 1.3 Jan + 5.6 Dec + 9.2 De<: 3?0 De<:

Argentina nil 03 3.4 Dec 1.5' Jan + 1.1 Dec 10.5 03 2?2 oec

South Korea +9.203 + 4.7 ,Dec + 4.2 Jan +12.9 Jan +11.7 Nov 9~.2 Dec

*Excluding gOld.~~cept Singapore; IMF definiti~n.t1999, *Year endi~lg June.~~-N-;wseries

Philippines + 4.8 03 +36.6 Nov + 6.9 Jan + 5;7 Nov + ·9.1 Aug 115 Oct

Singapore +10.504 +20.0 Dec + 2.1D';<:: + 4.0 Nov +21.603 71.5 Nov

India + 7.2 04t + 6.5 Nov + 3.5De<: - 8.3 Dec .,..'5.603 37.3 Dec

Indonesia + 5.1 03 +38.4 04t + 8.3 Jan +28.3 Dec + 6.2 01 2:1:,6 Dec

Malaysia + 7.703 +15;1 oec + 1.4 De<: +16.0 Dec +11.3 02 2~.5 Dec

Venezuela + 3.3 03 na +12.6 Jan .. - .~ .

Egypt + 6.5 2000* + 9.41000* + 2.4 Nov - Iv.O,lI' - U.Ol ,,~ lL.::> uaIsrael + 3.0 04 + 6.0 Nov nil Dec 6.9 Jan 0.1· 03 2~.2 Jan

South Africa + 4.5 03 + 4.1 Dec 7.0 Dec: + 3.2 Dec 0.703 ~.1 Nov

Turkey + 7.4 Q3 4.2 Dec + 35.9 Jari 27.4 Nov 103 Nov 1~.8 Nov

FINANCIAL MARKETS Moscow gained7.2%this weekasspeculativeintekst buoyedan al­readyvolatile market. Financial and construction shareshelped push Seoul~p by 4$%, whileBangkok's gains fromearlierin the weekwere reversed following MSCI'S decision not to in-crease Thailand's countryweights in-its indites. I ..

Curren'cy ~nits . . Interest rates' Stockmarkets' .....• %. ~~ange'onper S ~ short-term Feb 14th Dec 31st:1999

Feb 14th year ago ,Feb'14th % p.a. one _ in local in $week currency terms

China 8.28 8.28 12:1 5.40 2,077.3 0.8 T+ 43.1 + 43.1

Hong Kong 7.80 7.78 11:4 5.21 15,860.4 1.2! 6.5 6.8

India 46.6 43:6 68.0 8.58 4,363.' +1.2 1..: 12;8 18.6

Indonesia 9;603 7.425 14.021 15:04 423.2. - 4.8 i~ 37.5 54.-1

Malaysia 3.80 3.80 555 3.30 7145 - 2.oi.,.. 12.0 - 12.0

Philippines 48.0 40.5 70.1 12.31 1,687.7 + 1.7 J 21.2 33.9Singapore 1.75 1.70 2.55 2.08 .1,966.< + 1:2 i 20:7 24.3

South Korea 1,252 1,1261,827 5.69 603.8 + 4.8 ~ 41.3 46.8

Taiwan 323 30.7 47.1 5.15 5,887.7 + 3.4 ,.:... 30.3 - 32.3

Thailand 42.4 37.7 61.9' 2.75 315.3 3:7 t 34.6 42.0

Argentina 1.00 1.00 1.46 6.45 494.9 1.8 1 9.8 9.8

Brazil 1.99 1.77 2.90 15,28 17,120.1 + 1.8 !+ 0.2 9.7

Chile 560 513 817 4.21* 4,9493 1.3 f- 4.2 9.4

Colombia ;2,243' 1,947 3,275 13.33 839.7 + 4:7 F 15.8 29.6Mexico 9.73 9,37 14.2 17.07 6,360.1 + 0.2 r.:... 10.8 - 13.1

Peru 3.53 3.45 5.2 11.04 1,318.5 + 0:2 !.:... 28.2 - 28.5

Venezuela 703 659 1,927 16:22 7,706.9 2.7 ~+ 42.2, + 31:2Egypt 3.88 3.42 5.66 9.09 7,267.3 3,6! 44.2 50.8

Israel 4.10 4.04 5.99 5.72 457.1 + 2.9 t 6.2 4.8

South Africa 7.89 6.34 11.5 10.45 9.191.9 + 0.4 ,ft. 7.6 - 16.0

Turkey 683,085 564,050 997,372 46.00 9,971.7 + 2;5 t:':" 34.4 - 47.9Czech Republic 37.6 363 54.9 5.31 465.7 4.2 i- 4.9 9.1

Hungary 289 260 422 11.06 7,635.8 1.4 ~ 13.4 23.9

Poland 4.09 4.14 5.97 18.55 16,561.9 1:6 i 8.4 7.2

Russia 28.7 28.8 41.9 25.00 17861 + 7.2 i+ 4.7 + OS."Inflation-adjusted, tin dollar terms. . . . ... ' . .. .. . . jsources National statistics offkes.central banks andstockexchanges; Thomson FinanCial Datastream; EIU;Reuters; vvarb~'rg Dillon Read; J.PMorganChase; Hong Kong MonetaryAuthority; CentreforMorutonnq Indian Economy; FIEL; EFG-Herme,; Bank Leumi te-rsrsef St~ndardBank Group: GarantlBank; Deutsche Bank; RuSSian EconomicTrends.'

DATA ON MORE COUNTRIES ARE AVAILABLE TO SUBSCRIBERS AT WWW.ECONOM1ST.COM

"GING-MARKET/T.Despite"con;';

An in its economy;/ most'attractive-des­

/(direct investment,ac­~ual surveyby A.T;·Kear­

6ement.:..:consulting firm; Exec­As of the world's.rooobiggest

..des gave markson '3scaleof one to/rOr their-likelihood toinvestinforeign

.dntries..Size, matters.' Thoughthe sheer.scaleof the.American market-still pulls In­vestorsin,ChinalindBrazil.two bigemerg­ing economies that are expected to growquickly, now occupythe secondand thirdspots.Indiaisalsoin the top seven. Thebig­gest shift in: investors' outlooksays A.T.Kearney, hasbeen towardsMexico. Ameri­can firms rate theirNA:FTA p~rtner as theirtop destinationfor investment.Executiveshave also brightened their view of Asian"tiger'teconomies.The ratings ofbothSin~gaporeandt~iwanhave irtproved ?nark~edlyinthe pastyear.Britairihas dropped tofourth place;.from secondlast year. Al­thoughtheexeclltivessaidthat uncertaintyover Britain's entrytotheeuro couldaffectinvestment,' general ieconornic -.' perfor­manceand exchange ratesmatteredlTI()re.

104

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