Hillary Clinton On women Mary Barra Cars that can talk David Blaine The future of magic Bill Gates Set goals, save lives Michelle Bachelet The politics of inclusion Carl Icahn We the activists
Contents
The World in
2015
EDITOR:
Daniel Franklin MANAGING EDITOR:
Yvonne Ryan
DEPUTY EDITORS:
Adam Barnes, Leo Abruzzese EDITORIAL ASSISTANT:
15 From the editor
Leaders 19 The West’s malaise Worries about democracy will grow 20 World disorder Get used to it 24 Parting of the ways A year of economic instability 27 Lessons of a plague Political attitudes to epidemics must change 28 Disruption from above and below A buffeting ahead for business 31 Splitting images Secessionists line up 34 Pride and prejudice The gay-rights divide 36 Mega Carta A Magna Carta for the internet age 37 Fantasy politics The government Britain should get
Faizah Malik
COUNTRIES EDITOR:
Alasdair Ross
INDUSTRIES EDITOR:
Martin Adams
DESIGN AND ART DIRECTION:
Mike Kenny, Bailey and Kenny ART DIRECTOR:
Anita Wright CHARTS:
Michael Robinson
40 Calendar for 2015
United States 43 All the president’s pens To veto, or not to veto? 44 Waiting for the big one The road to the White House
ILLUSTRATIONS:
Steve Carroll, Kevin (“KAL”) Kallaugher, Dave Simonds PICTURE EDITOR:
Juliet Brightmore RESEARCH:
Carol Howard, Jonny Williams EDITORIAL ASSISTANCE:
Ingrid Esling, Patsy Dryden
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46 Point of no return Obamacare is here to stay 48 Gently does it A modest rise in interest rates 50 Time to fly the nest Your children will leave home at last 50 All the tech that’s fit to wear Silicon Valley gets physical 51 A bumpy take-off Drones get ready to fly 54 Pivot back Ian Bremmer on the opportunities for a foreign-policy president
The Americas
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63 Indonesia’s fresh start Jokowi will struggle to get things done 64 A choice of sorts Myanmar goes to the polls
OPERATIONS DIRECTOR:
Jamie Credland PUBLISHER:
Nick Blunden
Asia
Foreign entanglements Barack Obama’s Asian opportunity, page 43. Vladimir Putin succeeds in uniting the European Union’s leaders, for now, page 97; the Russian question sits heavily in the EU intray, page 98. Germany reconsiders its own pacifist attitudes, page 100, as calls for intervention in the Middle East grow louder, page 79. But the return of nationalism is bad news for international co-operation, page 92.
China 75 Ever more muscle Slower growth, rising power 76 A hunger for better services The Magic Kingdom meets the Middle Kingdom 78 The number to watch Prepare for a lower growth target
Middle East and Africa 79 The state of jihadism Western intervention in the wake of the breakdown of Arab states 80 Kurdish calculus A many-sided equation 81 It’s not all bad The Middle East’s bright spots 82 High stakes in Iran Deal or no deal? 82 Ebola’s long legacy The cost won’t just be in lives 83 The coming African debt crisis A worrying build-up of borrowing 84 The rise of Africacapitalism Tony Elumelu on African entrepreneurs
Crisis response Ebola’s cost won’t just be in lives, page 82; politicians should overreact to the disease, page 27. China, where growth is slowing, page 76, and India, where Narendra Modi has work to do, page 65, should take leading roles in debates on a climate-change treaty, page 85. The UN sets new development goals, pages 87, and UNESCO decides if the Great Barrier Reef is in danger, page 72.
International 85 Opinion of climate A climate treaty of sorts will be signed 86 Twenty-fourteen hindsight Our best and worst predictions 87 Goals, goals, goals Setting new development targets 88 Unfinished business Hillary Rodham Clinton on closing the gender gap 89 Yoga stretches up Plentiful pranayama 89 A trio of World Cups Cricket, rugby and women’s football 90 Still on the eve of destruction Obama’s forlorn attempt at a nuclearweapons-free world 92 Nationalism is back Bad news for international co-operation 93 Great expectations Bill Gates on making progress against poverty
Vox populi
s
Editorial close: November 5th 2014
57 The hangover Latin America after the commodity boom 58 Seconds out, Round One Competition heats up for Mexican oil 59 Justin time Another Trudeau to lead Canada 60 The politics of inclusion Michelle Bachelet on development
65 Action man Can Narendra Modi keep his promises? 66 India’s university challenge Quantity without quality 68 Safety in numbers ASEAN’s new economic community 70 Coming to a crunch Time is running out for Abenomics 72 On Australia’s radar From Gallipoli to China 72 Great Barrier Grief Judgment day for the Reef 74 Getting down to business Joko Widodo on reforming Indonesia
9
Democracy is in trouble, page 19, as Britons go to the polls, page 105 (though they won’t get our dream government, page 37). So do Canadians, page 59, and Burmese, page 64. Local elections in America offer hints about the 2016 presidential race, page 44. Hillary Clinton, a likely candidate, calls for a push on women’s rights, page 88.
Contents
10
THE WORLD IN 2015
s
Europe
Those were the days It has been 150 years since Alice fell down a rabbit hole, page 156, 100 since the Gallipoli landings, page 72, 50 since Singapore gained independence, page 136, and one since our last set of predictions, page 86. And it’s the last days for the Land Rover Defender, page 107, the population pyramid, page 96, and escapism, page 158.
change
Fasten your seat belts
2007
2008
2009
2010
2011
A bumpy ride ahead for business, page 28, as volatility returns to the financial markets, page 139. Three places that might set off panic, page 140. Monetary policy is heading in different directions, page 24. Expect more pressure from activist investors, page 146, but less pressure to stay late at the office, page 133.
2012
Britain2014
2013
2015
Source: Chicago Board Options Exchange 105 Coalition, the sequel Hung Parliament 106 After the referendum What happens next for Scotland 107 Italian lessons Friendly advice for 2015 107 Land Rover Defender, RIP The end of the line for the boneshaker 108 Plane thinking Where to fit London’s new airport 108 Keeping the lights on Britain will avoid a blackout—just 109 Entente frugale François Heisbourg on Britain’s relations with France
The world in numbers
Back to the future After 800 years, a second Magna Carta, for the internet age, page 36. Silicon Valley rediscovers hardware, page 50. Phones become mindreaders, page 127, and virtual reality gets real, page 130. Technology transforms the way people drive, page 137. Hydrogen-powered cars hit the road, page 134, while planes, boats and cars seek new world records, page 147. And a space probe reaches Pluto, page 149.
133 The return of nine-to-five No more eight-till-late 134 Foot on the gas Hydrogen-powered cars hit the road 135 Adapter and verse Print books thrive 135 Lights, camera, fraction! Hollywood tightens its belt 136 Happy birthday, Singapore The best place to do business 137 It’s time for cars to talk Mary Barra on the cars of the future
Finance 97 Living with a bear What Europe must do about Russia 98 Brussels in-tray Big tests for the new EU team 99 France’s political marathon And a belated dash for economic reform 100 Italy exposed Its delights—and difficulties—on show 100 Power v piffle Germany’s debate about its role in the world 101 Et tu, Berlin Property booms 102 Unfinished business The pain continues in Spain 104 The plan for Italy Matteo Renzi on getting growth
ndex (Vix)
2006
94 Landmarks of the year Charting a changing world 96 The world reshaped The end of the population pyramid
1 11 Forecasts for 81 countries 121 Forecasts for 14 industries
Business 127 When smart becomes spooky Phones turn into mind-readers 128 Mi too A Chinese superbrand goes global 129 Payback time Labour will cost more 130 Seeing and believing Virtual reality gets real 132 Property on the move Pete Flint on transforming the property industry
139 A stormier time Volatility is back 140 Crisis? What crisis? Three places that could cause panic 141 A limited lift-off Where interest rates will rise—and where they won’t 142 Saints and sinners Bankers try to regain trust 143 Bank rupture Europeans should use capital markets more 144 Perfectly formed Small banks punch above their weight 144 Tanking The consequences of cheaper oil 145 Yield of dreams Investors will need to be creative 146 An activist manifesto Carl Icahn on making boards accountable
Science and technology 147 Going for it The quest for air, land and water records 148 Death in the far south South Georgia takes on its rats 149 Year of the dwarf Strange new worlds come into view 150 Genes, unzipped So many uses for genetic data 151 Small steps, big change Alastair Reynolds on science fiction becoming fact
Culture 153 The Louvre comes to the Gulf Welcome to a brand -new culture hub 154 Dedicated followers of fashion Museums turn to the catwalk 155 Paperless cartoons The drawing pen is mightier than the sword 156 Grins galore Alice’s 150th birthday party 157 The future of magic David Blaine on illusions and the mind
Obituary 158 Farewell to escapsim There will be no hiding place from technology
PHOTOGRAPHIC SOURCES © akg-images. © Alamy: AF Archive, Yao Dawei/ Xinhua, EPA/Alessandro Di Meo, EPA/Alexey Nikolsky, FLPA, Robert Fried, Susana Guzman, Tim Hill, Brian Jackson, Mark A Johnson, The Protected Art Archive, Walker Art Library, White House Photo, Paul Wishart/Zoonar GmbH. © AP/PA/Press Association Images: Nick Ansell, Saurabh Das, Danny Lawson, Vahid Salemi, Rebecca Vassie, Barbara Bella. © Matt Bors. © Corbis: Partha Sarkar/Xinhua Press. © General Motors. © Getty Images: Jason Alden/Bloomberg, H F Davis, Carl de Souza/AFP, Chris Jackson, Miguel Medina/ AFP, Cindy Ord, Jewel Samad/AFP, Lisa Maree Williams.© Louvre Abu Dhabi. © Mark Mawson. Nick Merrill. © Musée du Louvre/ RMN/Angèle Dequier. © QWSR Ltd. © Sabir Nazar. © The Picture Desk/Art Archive/CCI. Andreas Poupoutsis and Alexandra Wolf. Courtesy of Productions Vox Populi 1 inc. © Reuters: Akintunde Akinieye, Faisal Al Nasser, Carlo Allegri, Eloy Alonso, Martin Bureau, Andreea Campeanu, Remo Casilli, Neil Chatterjee, China Daily, Navesh Chitrakar, Kevork Djansezian, Fred Dufour, Regis Duvignau, Albert Gea, Yves Herman, Filip Klimaszewski, Stephen Lam, Jason Lee, Francois Lenoir, Maks Levin, Luke MacGregor, Raouf Mahmoud, Ueslei Marcelino, Toby Melville, Hadi Mizban, Anindito Mukherjee, Daniel Munoz, Gustau Nacarino, Rebecca Naden, Alexander Natruskin, Phil Noble, Michaela Rehle, Dan Riedlhuber, Maxim Shemetov, Yuya Shino, Edgar Su, US Air Force, Ander Wiklund. Rex Features: © Columbia Pictures/ Everett Collection, © IFC Films/Everett Collection. © Shutterstock: A-R-T, Francois Loubser, Madlen, Sergey Nivens. Siemens NX. © Solar Impulse/Revillard/ Rezo.ch. Angus Suparto. Courtesy of Victoria & Albert Museum, London.
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From the editor
15
The World in
2015
O
ptimism is in short supply as thoughts turn to 2015. Two grand gatherings towards the end of the year, the un’s meeting to set “sustainable development goals” and a get-together in Paris to combat climate change, will show whether countries can agree on ways to tackle some of the planet’s biggest issues. But for much of 2015 it will be the world’s divisions—economic, political and cultural—that will draw most attention. The West’s economies are coming to a fork in the road. America and Britain, now moving ahead at a decent pace, are heading towards higher interest rates courtesy of the Federal Reserve and the Bank of England; the euro zone and Japan, in danger of slipping into recession and deflation, will take the
It will be the world’s divisions—economic, political and cultural— that draw most attention opposite path of more monetary stimulus. That will make for volatility in financial markets. Fed rate rises, the troubles of the euro zone’s laggards and worries about Chinese growth all have the potential to cause periods of panic. In 2015 international co-operation on many issues will suffer from the strength of nationalism. The West will argue over how robustly to respond to a rising China and a rogue Russia. Within America, political divisions will be even more glaring than before as a Republican-controlled Congress confronts President Barack Obama. Culturally, a particularly striking divide will be evident in attitudes to gays. Half the world will be more liberal than ever. Elsewhere, restrictions will spread. The noise surrounding these divisions will stop many people noticing progress in all sorts of areas in 2015. The world economy should grow a bit faster than it did in 2014, led by America. The West’s belated
response to the outbreak of Ebola and the rise of Islamic State should begin to have an impact. A transPacific free-trade deal is within reach. So is a peace agreement between Colombia’s government and the farc guerrillas; with luck, that will end more than half a century of fighting. At times the progress in technology will be almost spooky, as smartphones seem to read their owners’ minds, cheap sequencing reads genomes and cars accelerate towards intelligent communication. In Silicon Valley, wearable technology will be all the rage. The reach of technology prompts Ann Wroe, The Economist’s obituaries editor, to bid farewell to escapism. Yet Lucy Kellaway of the Financial Times cheerfully expects a return to nine-to-five at the office. Not everyone can agree on what the future will hold or what will matter most; the range of voices in The World in 2015 helps to make it a rich read. Politicians outline plans for reforms (Matteo Renzi for Italy, Joko Widodo for Indonesia). Others focus on hopes for human development (Hillary Clinton for women, Bill Gates for children and the world’s poorest). Carl Icahn offers thoughts for investors. David Blaine reassures us that magic will still work in an age when the secret behind almost any trick is only a Google search away. Indeed, there will be magic moments to suit all tastes in the year ahead. Plucky teams will prepare to break world records on land, on water and in the air. Sports fans can look forward to a trio of World Cups (cricket, rugby and women’s football). Cinema-goers will flock to a new Bond movie, a Star Wars sequel and the film adaptation of “Fifty Shades of Grey”. Film buffs will recall that 2015 was the year to which the heroes travelled forward in “Back to the Future Part II”. No time-travel will happen in the next 12 months, but an extraordinary space voyage will capture the imagination: after travelling for nearly nine years and across 3 billion miles, nasa’s New Horizons spacecraft will reach Pluto in July. For all its divisions, the world will have a chance to join together in wonder. Daniel Franklin Editor, The World in 2015
19
The World in
2015
The West’s malaise Worries about democracy will resurface in 2015, says John Micklethwait
O
John Micklethwait: editor-in-chief, The Economist
s
f all the predictions to be made about 2015, none seems in May with fewer than 200,000. In 2015 François Hollande may safer than the idea that across the great democracies peo- well break his own record for French presidential unpopularity, ple will feel deeply let down by those who lead them. In with his 13% approval rating descending into single digits. MaBritain, Spain and Canada, elections will give voters a chance to rine Le Pen of the National Front will be a big gainer. unleash some of those frustrations—perhaps to the advantage Second, no matter how much moderate Western politicians of mavericks like Nigel Farage and his United Kingdom Inde- might scorn populists like Ms Le Pen and Mr Expect a pendence Party. America’s voters, having vented their fury in the Farage, the democratic establishment has 2014 mid-terms, now face still more gridlock, with a Republican proved unequal to the challenges of the day. lot of talk Congress at loggerheads with a Democratic president. At least This will seem especially clear in Europe in about a Americans will have an economic recovery to cheer about. In 2015, as the euro crisis enters its sixth year, failure of the recession-stalked European Union, where voters angrily de- the continent’s leaders having flunked endmanded change in the parliamentary elections of 2014 only to less opportunities to deal with it. You can ex- leadership get very little, the mood will be darker. And the same may be true pect a lot of talk about a failure of leadership in Japan, where 2015 could be the year when voters run out of in 2015, which will be the 50th anniversary of Winston Churchpatience with Abenomics. ill’s death and the 200th anniversary of Otto von “So what?” you might argue: Western politiBismarck’s birth. cians have always been unloved, and voters have America’s leaders have done less harm than rarely felt satisfied. But that ignores three things Europe’s but they still opt for partisan pointwhich will lead to a lot of soul-searching about scoring over sound policymaking. The 114th the state of democracy in 2015. Congress, which will gather in Washington, dc, First, the levels of unpopularity and disenin January 2015, may well set a new record for gagement in the West have now risen to staglegislative inaction, with Republicans drafting gering levels. Since 2004 a clear majority of bills that they know Barack Obama will veto. Americans have told Gallup that they are dissatThe dysfunction in Brussels and Washingisfied with the way they are governed, with the ton will be all the more noticeable because of numbers of those fed-up several times climbthe third worry about Western democracy: ing above 80% (higher than during Watergate). there is now an Asian alternative. China’s verBritain’s Conservative Party, one of the West’s sion of autocratic modernisation claims to be most successful political machines, had 3m better at long-term planning. The poor in China have surged forward much more quickly than members in the 1950s; it will fight the election Leadership personified
20
Leaders
s
their counterparts in democratic India; hence the enthusiasm of India’s prime minister, Narendra Modi, to learn from China. China will certainly have problems in 2015—especially with an emerging middle class chafing at corruption, poor services and the lack of freedom. But even pro-democracy protesters in Hong Kong must look at the West and wonder whether democracy can deliver good government. So the West’s malaise is dangerous. The failure of democracies to get things done will lead to questions about other features of an open society, such as freedom of the press, free markets and relatively open borders. Populists will keep on demanding easy answers to complicated questions. On the right, immigrants will be the scapegoats and politicians will play with nationalism. For the left, the redistribution of wealth will be a big theme.
Summoning the spirit of Churchill
World disorder Don’t expect too much from a belated Western response, warns Edward Carr
“O
rder! Order!” Every Wednesday in Britain’s Parliament the thin, strangulated cry of the Speaker rises above the din of Prime Minister’s Questions. Rarely does this vocal stamping of the foot succeed in restoring mps to reasoned debate for long. In the same way, foreign-policy pundits have been pleading for something they call “world order”. The international fabric is fraying, they fear. Whether it is mayhem in the Middle East, Russia’s seizure of parts of Ukraine, China’s pushy tactics in its extended coastal waters or the epidemic of Ebola in west Africa, the world is coming apart at the seams. In 2015 the call for order will be partly met but, as with Mr Speaker’s exertions, the sense of impending chaos will endure. Just now the world seems uncommonly hard to manage. Citizens are fed up with the elites that govern them: Ukrainians rose up against their country’s kleptomaniac nomenklatura, students occupied Central district in Hong Kong and Europe’s populists, such as France’s National Front and the uk Independence Party, are plotting to overthrow the technocrats in Brussels. The jihadists of Islamic State (is) threaten to wreak havoc in the Middle East and beyond. Whereas democratic governments seem weak and vacillating, authoritarians are busy arresting their opponents, muzzling their media and invading their neighbours. You know something is wrong when Henry Kissinger, the gravel-voiced elder of foreign-policy pundits, writes a book called “World Order” warning that “chaos threatens”. Part of the difficulty the world faces in reacting to these developments is that expectations of what governments can achieve in foreign policy run far ahead of what is feasible. After the collapse of the Soviet Union, American power was untrammelled. Far from declaring victory and going home, America became more involved than ever, across the globe. For a while, intervention seemed just a question of willpower and shrewd policies. But the past decade has shown up that view as naive. The world is messy. As they say, success in politics is not perfection; it is going from failure to failure without loss of enthusiasm.
Look on the bright side Armed with more realistic expectations, optimists can point to three reasons for hoping for something better in 2015. The first is that democracies take time to respond to new threats and dangers, but when they do they tend to be committed to their new Edward Carr: foreign editor, The Economist
s
Against this toxic background, two great debates should begin. One is about the reform of the state. In terms of productivity and its use of technology, the public sector in the West looks a generation behind the private sector. Western governments have added over $13 trillion of debt since the credit crunch and with ever older populations demanding ever more health care and pensions, many are running out of money—and, as Churchill put it, “when we run out of money, we have to start thinking.” As the debate about the public sector spreads even to countries like France in 2015, Western politicians may find an echo in Asia. Not only are some of the smallest, most efficient states, notably Singapore, to be found outside the West. The new emerging powers—China, Indonesia, India—are also looking to build up their welfare states. They are unlikely to want to copy the West’s bloated Leviathans. The other debate is to do with democracy itself. Like an old fighter that got too used to winning contests, Western democracy has got a little bit paunchy. In America, there is nothing particularly democratic about the ascent of money politics, the arcane blocking procedures of Congress or the gerrymandering of district boundaries. Indeed, they are all reminiscent of the rotten boroughs of 18th-century England that infuriated the Founding Fathers. The elites in the European Union, always wary of popular opinion, have slipped into the habit of trying to push things through the back door; the tragicomedy of the European Parliament is more a mask than a solution. Democracy is the worst system of government except for the others: that is another of the torrent of Churchillian quotations you can expect to hear in the year ahead. He was right: democracy is still more flexible and fair than any alternative. But that is not an excuse for failing to tackle its imperfections. And 2015 is a good year to start. n
THE WORLD IN 2015
THE WORLD IN 2015
Leaders
23
No end of trouble s
policies. There is much to lament in the delay before the world took Ebola seriously—and many tens of thousands might die before the disease is brought under control. Disappointing, too, has been European reluctance to impose sanctions on Russia for its annexation of Crimea and trouble-making in parts of eastern Ukraine. But now that these tragedies have fought their way on to the agenda, governments are acting. The second reason to temper pessimism is adaptation. In post-1945 Europe Germans were always supporters of engagement with Russia, but a newly assertive Germany has come to see Russia as a threat. Similarly, in 2015 China and Japan will begin to put aside their differences. Not because either is willing to give ground in their long- Just now the running territorial dispute over some rocky world seems outcrops in the East China Sea, but because both need the economic boost from sus- uncommonly hard to tained trade and investment between them. And the third reason concerns Amermanage ica. Pundits have been critical of Barack Obama, with some saying that the president is weak and distracted, and others that the United States is falling into decline. The charges distort Mr Obama’s thinking and vastly overstate America’s loss of power. The president who ordered special forces into Pakistan to seize Osama bin Laden is not a defeatist, and the armed forces that carried out the mission have not suddenly become weak. But in the past couple of years Mr Obama has put forward the argument that America cannot act alone as the world’s policeman: countries that benefit from the Pax
Americana, blessed by open trade and the rule of law (however imperfect), and that share a broadly Western view of human rights have a responsibility to help the United States keep order. Analytically, that argument has much going for it. Yet politically it has failed. When Mr Obama advertises the limits to his country’s power, Americans hear defeatism, allies detect wavering American commitment to their security and America’s rivals, in Moscow and Beijing, spot a chance to meddle. The lesson for Mr Obama is that, because foreign policy abhors a vacuum, he has to fill the role of leader. That is what he has begun to do in the Middle East, by forming a coalition against is—though even then his visible reluctance to use special forces to spot targets and train Iraqi troops and Syrian militias has undermined the mission. Coalition-building is hard work, but Mr Obama needs to pivot against his rhetoric of the past two years: America gets others to bear a greater burden not when it steps back, but when it engages with the world’s problems. The lesson for other countries is harder still. Europeans are absorbed in the psychodrama of eu stagnation. Many of the larger emerging powers, such as India, Brazil and South Africa, both ride on the coat-tails of Uncle Sam and also sneer at him, if only because they see the diminishment of the global superpower as a boost to their own regional influence. But this combination of buck-passing and local ambition is highly destructive. When global economic and political collaboration suffers— whether it is because of war, pestilence or simple neglect—all these countries suffer, too. If 2015 is to count as a big improvement, America must have help. n
-2.4
24
-0.9
-0.9
-0.9
-0.65
Leaders
-0.15
0.05
0.95
THE WORLD IN 2015
Transatlantic gap The Fed’s main interest rate minus the ECB’s at year-end, percentage points 0.95 0.05
0
Parting of the ways Policy in the world’s main regions will head in different directions, forecasts Leo Abruzzese
C
entral banks have a long history of causing (and curing) recessions. In 2015 the world’s most important money masters will be on starkly different paths, which will make for an unsettled year. On balance, the global economy will grow slightly faster than it did in 2014 as businesses, especially in America and Asia, create more jobs and consumers step up spending. But with markets worried for much of the year about shifts in interest rates—courtesy of central bankers—the risk of a nasty shock is uncomfortably high. Rarely have the world’s big central banks pursued such divergent policies. America’s Federal Reserve and the Bank of England will raise their main lending rates in 2015 despite worries in financial markets and fears of a slowdown elsewhere. The European Central Bank (ecb), by contrast, will be doling out cash to euro-zone banks and businesses in the hope of preventing another recession, and to fend off deflation. The Bank of Japan (boj) is in the midst of its own record-breaking stimulus plan, although the economy has been on something of a rollercoaster, leaving the bank unsure of its next steps. The People’s Bank of China, whose global influence is puny compared with that of the big four, is also in a quandary, caught between the urge to stimulate a slowing economy—it will inject more cash into China’s commercial banks—and the need to tame a debtfuelled financial sector. The different paths reflect different fortunes. America’s economic recovery at last looks durable. Save for a wintry contraction in early 2014, the economy has been growing at an annual pace of more than 3% for the past 18 months, above its trend rate. American employers created more than 2.5m new jobs in 2014, the most in eight years, and should approach that level again in 2015. Housing has not completely bounced back from the 2008-09 crash, but more improvements are coming. America will lead the advanced economies in 2015, growing by around 3%, its best showing in a decade. Janet Yellen, the Fed’s doveish chief, will not boost interest rates much until wages rise faster. That too will begin to happen in 2015. Britain’s economy is also on the mend. Although the government remains committed to austerity, manufacturing and service industries have been doing well, especially—this is Britain, after all—the property and finance sectors. Consumers are still groaning with debt and vulnerable to higher borrowing costs, Leo Abruzzese: global forecasting director, Economist Intelligence Unit
-0.9
-0.9
-0.9
2009
2010
2011
-0.65
-0.15
-2.4 2008
2012
2013
2014*
2015*
*Forecast Source: Economist Intelligence Unit
so the Bank of England will not want to raise rates too far or too fast. Spending will be helped by better job growth, more bank credit and the wealth effects (for some) of higher house prices. Growth should reach 2.5%. The euro zone’s goals are more modest: to avoid a third recession in seven years. It will succeed—just barely—but faces another disappointing year. The spectre of deflation hangs over Europe: consumer prices will rise by little more than 1%, if that. Germany, Europe’s bulwark, is looking surprisingly fragile as ructions in Russia depress business sentiment at home. The ecb is trapped between the splash-the-cash sentiment of Mario Draghi, its president, and the curmudgeonly Germans, who have never seen a stimulus plan they liked. Indeed, if Europe’s woes infect America and Britain, their central banks may yet decide to keep rates where they are.
Bumpier but brighter When interest rates eventually rise in America, money will flow back there, and away from developing economies that still need it. Periodic, though short-lived, panics are on the cards in 2015 as asset managers pull their money out of places like Turkey and South Africa and send it to America and Britain. As the Fed’s official interest rate rises and the ecb’s stays near zero, the investment gap in favour of American assets will widen. This will push the dollar higher, restoring some Emerging Asia more of the lustre it lost during the worst of the recent recession. will still be Asia’s giants will struggle to find the fastesta clear path in 2015. Japan’s battle growing region against deflation seems to be working, though most of the recent price rises have come from an increase in the consumption tax in April 2014. The tax rises—another is planned for October 2015—are a sign of Japan’s commitment to start bringing down its mountain of debt, but they pose a risk to the country’s fragile recovery. As China veers between stimulus and squeeze, India wants an acceleration of growth—though not of inflation. Emerging Asia will still be the fastest-growing region, and many other countries will see a bit more growth than in 2014. But the threat of contagion from Europe and interest-rate jitters will make for an unusually risky ride in 2015.n
Leaders
THE WORLD IN 2015
Lessons of a plague The Ebola outbreak should change political attitudes to epidemics, says Geoffrey Carr
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oliticians often talk of waging war on this or that disease. The Ebola epidemic that emerged in west Africa in 2014 will ensure that 2015 is a year when they mean it. Besides dealing with Ebola directly, there will be lots of talk, and at least some action, about building a better system to detect emerging epidemics, and to suppress those that do break out. After a decade off the table, the idea that infectious diseases are a security threat, as well as a humanitarian one, will be back on it. This idea comes and goes. The last time it came was with aids. Though detected first in America, the virus that causes it, hiv, was rapidly traced to Africa. At first, aids was a threat to rich world and poor world alike. That, and the fact that it cut a swathe through Africa’s professional classes and thus threatened the continent’s economic development, resulted in a wellfinanced and reasonably successful effort to deal with it. Success, though, meant that aids dropped out of the headlines. Subsequent threats (sars and various strains of influenza) fizzled. So political attention turned away from infection. It has taken Ebola to bring it back again.
Fever pitch The first aim of rich-country politicians will be to keep Ebola contained in the relatively small part of west Africa it now infects. That, of course, is what most concerns those politicians’ electorates, but it also makes good epidemiological sense. Isolated cases in North America or Europe should be reasonably simple to contain. They will be stamped on by the full force of relatively well-organised health systems. But if the virus, which relies on physical contact between people to spread, were to take hold in a crowded country such as Nigeria, let alone India, the result could be catastrophic. More closed borders and checks on travellers are therefore a near-certainty. So, to use a military metaphor, are boots on the ground—for dealing with the epidemic where it is already rampant means breaking the pattern of infection by isolating and treating the infected. Doctors and nurses from the outside world can help in the short term, as can non-medical pairs of hands (most probably foreign troops) to do the heavy lifting. The worse things get, the more of these will be needed, and the more like a real war the response will look. But once the enemy (ie, the virus) is defeated, politicians should pursue the military analogy a little further. Geoffrey Carr: science editor, The Economist
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As recent events in the Middle East have shown, it is often unwise at the end of a war just to declare victory and go home. Building something lasting out of the rubble means you are less likely to have to return. In the case of Africa and disease, that means building better public-health systems and making sure the countries they are in have both the human and the financial wherewithal to keep them running. It is no coincidence that Ebola emerged in places—Guinea, Liberia and Sierra Leone— whose health systems are a joke. Besides helping people in immediate need, health systems act as early-warning beacons for emerging epidemics. But for an early-warning system to work, people have to believe it. And here, perhaps, is the final thing that should More closed happen in 2015: a shift of attitude. Politiand also their electorates, need to borders and cians, examine their own behaviour more carechecks on fully, and to be willing to forgive well-intentioned judgments that turn out, with travellers to be wrong. are a near- hindsight, It is easy to tease people for crying certainty “wolf ” when no wolf turns up, as happened in Britain in the case of the human version of “mad cow” disease. Ebola and similar haemorrhagic fevers have arisen several times in the past few decades, provoking global worries while having only local consequences. But consider what would have happened if any of these had become rampant. Knowing when to press the alarm button is a perennial problem, but both public and politicians need to accept that until the nature of a threat is clear, over-reaction is a safer response than under-reaction. A few red faces are surely better than a host of graves. n
On the front line in Sierra Leone
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Disruption from above and below Zanny Minton Beddoes predicts a year of instability for global business
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irtually every firm in every industry is being shaken up by the digital revolution. No chief executive can ignore the onslaught of mobile computing, big data, artificial intelligence and the like. These new technologies offer the promise of huge efficiency gains, but also the threat of being walloped by some upstart from Silicon Valley. So far, this turbulence has taken place against an unusually placid backdrop. The world economy has been sluggish, but relatively stable: global gdp has grown at almost exactly the same (slow) pace of around 3% every year since 2012. Financial-market volatility has been low, and share prices have mostly marched upwards. Slow growth is not normally good news for business. But, oddly, the broad economic stability has helped counter the turmoil from technology. Rather than make difficult decisions about new capital spending in fast-changing industries, ceos have ploughed their profits into buying back their own shares. In America, the pace of such buybacks hit a record annual rate of some $500 billion in mid-2014. Buoyant profits have also boosted mergers and acquisitions (m&a). The value of such deals is likely to have exceeded $3 trillion in 2014, as firms from media to health care try to protect their positions amid the tech tumult (and, in some American cases, cut their tax bills) by buying each other.
The double squeeze In 2015 this complementarity will come to an end. Bosses will no longer be able to count on financial-market stability as a buffer against disruption in their industries, because the macro-environment will become more volatile even as the microeconomic upheaval gets worse. The digital revolution will gain pace. Some 4.5 billion people will have a smartphone by the end of 2016, up from 2.8 billion today. Half of all the money that firms spend on information Zanny Minton Beddoes: business affairs editor, The Economist
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technology will be spent on cloud computing by 2016. Ever more jobs will be displaced, or remade. Uber, a San Francisco firm that is disrupting taxi services in cities across the globe, has 7,000 drivers in London today; by early 2016 it expects to have 42,000. Meanwhile businesses will also face disruption of a more conventional kind in 2015, as share prices, interest rates and currencies all become more volatile. One source of instability will be the growth gap: America and Britain will enter 2015 with their economies in relatively good shape and their central bankers hoping to start raising interest rates. The euro area, Japan and much of the emerging world will start 2015 with growth slow or even negative. Both the European Central Bank and the Bank of Japan are likely to loosen monetary policy further in 2015. This growth and interest-rate gap will push the dollar higher against the yen and the euro. At some point in 2015 the dollar-euro exchange rate will hit parity. A stronger dollar and slower growth in the emerging world will also hit share prices. (The firms in America’s s&p 500 make 40% of their profits abroad.) And as confidence falters, the pace of buybacks and m&a will slow. Financial markets will be jittery. Rather than shrug off shocks, as they have in recent years, investors will react strongly to bad news. Not all firms will be affected equally. Those in emerging economies will have a particularly hard year, caught in the double vice of slower growth and a stronger dollar. They will also be squeezed by technology, as more and more tasks are automated, reducing the relative advantage of cheap labour. Companies in the euro zone are in for a rough time, too. Politicians there will bicker and do little even as the economy flirts with recession and deflation. Regulators will hamper firms’ efforts to keep up with the digital revolution. There will be shamefully little progress towards creating a single market in digital services. Instead, The dollar-euro European competition authorities will exchange rate crack down on big technology firms will hit parity with heavy-handed investigations. Businesses have not had an easy ride for the past few years. Steering companies through a technological revolution is testing, even when financial markets are kind. But steering them through simultaneous disruption from above and below is much harder still. Get ready for the toughest year for global business since the recession of 2008-09. n
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Splitting images Plenty of countries have regions eager to secede. Discourage them, urges John Grimond
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he centenary of the Sykes-Picot agreement, which carved up the non-Arabian-peninsular provinces of the Ottoman empire between Britain and France, does not fall until 2016, but anyone wanting to celebrate it would be wise to do so in 2015: it may be in tatters before it hits 100. Whether or not the Islamic State that Sunni jihadists want to establish in the Levant endures, a redrawing of borders in that part of the Arab world is surely on the cards. Elsewhere others are agitating for new countries: in eastern Ukraine, northern Spain, Western Sahara, Myanmar and so on. The Scots’ attempt at secession in 2014 may have failed, but it has not put an end to the vogue for the division and multiplication of new nation-states that has helped to swell the un’s membership from 51 countries in 1945 to 193 today. True, the Scottish vote may have served to chill the ardour of separatists in some rich countries. But it won’t put off separatist Moro in the Philippines or Uighurs in China. It will not bother the would-be state-makers of eastern Ukraine and Islamic State. These people do not take their cue from democrats like the Scots. In the grand If altered borders and new states sweep of emerge in the Middle East (a shrunken Syria, a country for the Kurds?), the history, most changes may superficially resemble the countries are reordering in Africa and Asia when the transitory colonial powers upped sticks after the second world war. But the current turmoil in the Middle East is not simply a messy expression of self-determination: much of it is propelled by religious zeal. Whether the democratic impulses behind the Arab spring will predominate over the religious impulses of Islamism is far from clear. The war in eastern Ukraine may also look like a run-of-themill attempt at a post-colonial redrawing of borders. It isn’t: the imperial power, Russia, is promoting the secession of a neighbouring state’s territory. Although Ukraine’s insubstantial statehood makes it particularly susceptible to outside interference, the main source of its troubles is the diminished superpower next door. If Russia thinks it can get away with its Ukrainian land-grabs, other ex-Soviet neighbours may be at risk in 2015. Democratic countries that wish to preserve their unity would be wise to devolve and decentralise. Britain has been slow to learn this lesson. It, like Spain and some other multinational John Grimond: contributing editor, The Economist
polities, faces genuine difficulties in satisfying the demands of some groups for more autonomy without foisting on others less ardent a degree of self-government they do not want. Successful, though fissiparous, countries may have to master the art of providing asymmetric solutions, as well as making plain the conditions of any separation. Canada, which has passed a Clarity Act and given Quebec greater powers than other provinces (over immigration, for example), shows this can be done.
Breaking up is hard to do Divorce is nearly always painful, a fact that should be recognised by all parties in any separation. A region long oppressed by an autocratic central power may well owe nothing to that power. But in a democracy, where secession is likely to be regretted even if tolerated, the abandoned citizens may feel hard done by, especially if their union is broken without their consent. Even in Canada some fear that Quebec’s secession would lead to other provinces following suit, much as the departure of an amusing guest can lead to the break-up of a boring party. A successful state is one in which the whole is greater than the sum of its parts, and the majority of its citizens may feel theirs is such a state, even if a minority want out. But let them go and the calculation may no longer work. Take Yugoslavia. Once Slovenia had secured its independence, the Yugoslav federation inevitably, and bloodily, fell apart. States exist to serve their citizens, not vice versa, and sometimes an ethnic or national or other kind of group may have good reason to secede. It is a matter of judgment as to what entity has the right to do this, and how vigorously it may be resisted. Few people would argue that any self-styled nation, be it Long Island, the 16th arrondissement of Paris or mineral-rich Western Australia, should be able to set up as an independent state. Any part of China trying to abandon the Middle Kingdom would receive no mercy: Chinese nationalism does not allow it. Nationalism, alas, is the most enduring of the -isms that begat so many wars in the 20th century. It is high time to dampen it, or at least to channel it into benign activities like ping-pong. In the sweep of history, most countries are transitory. Fatherlands, motherlands, homelands—most tend in time to fade away. Both fugitives and stayers would do well to take note, and pay less attention to their national flags and folderols. n
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Pride and prejudice The West should step up efforts to defend gay rights abroad, argues Andrew Miller
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here has never been a better time to be gay. Dreams of equality that once seemed quixotic have been realised across much of the world—and in 2015 these gains will spread still further. In only a few years homophobia has been relegated from a legally buttressed norm to a widely condemned prejudice. At least, these are the best times to be gay if you live in London, Madrid, Auckland or San Francisco. In many other parts of the world the plight of homosexuals is dire, even deteriorating. These two contradictory trends are connected, and in 2015 Western leaders should confront the retrograde one as well as consolidating the achievements. The two main regions in which gay rights have suffered renewed attacks are Africa and the former Soviet Union. Uganda passed a law that stipulated life imprisonment for “aggravated” homosexuality; a court struck it down on a technicality, but some Ugandan parliamentarians have pledged to revive it. Nigeria also passed a new anti-gay law in 2014; Kenya may follow suit. In all these places, homosexual sex is already a crime, as it is in much of the continent. Message to Museveni In Russia, Vladimir Putin approved a bill that outlaws the “promotion” of homosexuality, a stigmatising move that is being emulated in other ex-Soviet countries: Kyrgyzstan may be next. In both regions these punitive measures have incited a surge in violence, extortion and harassment. Meanwhile, in India, a court has in effect re-criminalPunitive ised homosexuality. In much of the Muslim world and parts of the Caribbean, too, the measures oppression of gays remains atrocious. All this as same-sex marriage becomes have incited a surge in entrenched in the West, along with robust anti-discrimination laws. Colombia and harassment Australia may legalise same-sex marriage in 2015; Ireland is to hold a referendum on it; after its patchwork advance across the states, a successful challenge in America’s Sup reme Court looks increasingly unlikely. Yet it is not altogether a coincidence that, while gays are posing for wedding photos in
Andrew Miller: writer-at-large, The Economist
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ever more countries, in others they are newly afraid for their freedom, even their lives. In some places politicians are combining homophobia with nationalism to create a noxious, hybrid populism—portraying gay rights as a Western imposition and themselves as bulwarks against encroaching foreign depravity. In the former Soviet Union, this rhetoric draws on old, coldwar enmities; in Africa it enlists the mantras of anti-colonialism. Propaganda warned the residents of war-torn eastern Ukraine that allying with the European Union would mean forcible mass conversions to homosexuality—a canard that would be risible were it not widely believed. Signing Uganda’s ghastly law, President Yoweri Museveni decried the “social imperialism” of Western lobbyists. This rhetoric wouldn’t wash, of course, if there were not indigenous currents of homophobia there. But cynical leaders have exploited Western reforms to stir up prejudice.
Follow the Magnitsky model As gay rights have come to be regarded as a fundamental question of justice, rather than merely a lifestyle issue, so Western governments are growing less tolerant of intolerance elsewhere—at least rhetorically. Barack Obama’s administration has been scathing about repressive laws such as Uganda’s. Yet efforts to coax such nations into a more enlightened stance face several problems. One is that reprimands can be seized on as yet more evidence of a conspiracy to homosexualise the world—and of the demagogues’ bravery in resisting it. This is the win-win gambit of rabble-rousers everywhere: keeping quiet leaves their smears unchallenged, while criticism victimises them. That should not stop Westerners striving to protect imperilled minorities. Most gay activists in these countries would prefer them to speak up. A bigger quandary is deciding what, beyond protests, to do. Economic sanctions risk misfiring, by immiserating innocent people and boosting nationalists. Still, renouncing blunt economic tools need not mean doing nothing at all. The West should adopt the model already in use for other types of human-rights abuses: that is to focus on individual perpetrators, as in the “Magnitsky Act”, which targets Russian officials implicated in offences for visa bans and asset freezes. America has tried this approach with Uganda’s most egregious gay-haters, but in 2015 it should be used elsewhere, too, and by the European Union. That would show that the West sees the rights it upholds at home—all of them—as truly universal. n
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June 15th 2015 is the 800th anniversary of the Magna Carta, which limited the powers of England’s king and inspired many a constitution. Ludwig Siegele adapts it to cyberspace This present charter confirms for us and our heirs in perpetuity, that the internet shall be free and open, and shall have its rights undiminished, and its liberties unimpaired. To all free people of our virtual realm we have also granted, for us and our heirs for ever, all the liberties written out below. No “scutage” or “aid” on data and networks, even in Bitcoin or Dogecoin, may be levied in our realm without its general consent. To obtain the general consent of the digital realm for the assessment of an “aid” or a “scutage”, we will cause the Cardinal of Cupertino, the Archbishop of Armonk, the elders of Herzliya, Tech City, Berlin Mitte and Block 71 as well as all greater tech barons, but not Kim Dotcom, to be summoned individually by encrypted electronic mail. The business appointed for the day shall go forward in accordance with the resolution of those present, even if some have appeared via dodgy Skype connections and are wearing inappropriate t-shirts. Inquests shall be taken only in their proper cybercourt. For a trivial offence, such as posting too many selfies or subtweeting, a free man shall be fined only in proportion to the degree of his offence, and for a serious offence, such as trolling or spamming, correspondingly, but not so heavily as to deprive him of his internet connection. In the same way, a bankrupt startup shall be spared the implements of its husbandry and its ping-pong table, if it falls upon the mercy of a court. No town or person shall be forced to build networks except those with an ancient obligation to do so. All networks shall be neutral in perpetuity. If a free man dies intestate, his Facebook profile, World of Warcraft characters and in-game items and currency, code in GitHub and other personal data are to be distributed to his next-of-kin and friends, under the supervision of a firm’s advisory council. No cyber-tsar or any one of the Five Eyes (being the intelligence alliance of the West) shall take data or devices from any free man without his consent. No royal official shall take virtual goods for their castle without the consent of the owner. All intercept devices shall be removed from undersea cables, communications satellites, data centres and routing Ludwig Siegele: technology editor, The Economist
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equipment, except if that device has been approved by a proper court. Prism, Echelon, XKeyscore and other such projects shall be shut down. There shall be standard measures of connection speed throughout the realm, to ensure smooth streaming of Netflix and lag-free access to online games. There shall also be a standard for cables and wireless connections. In particular, USB connectors shall finally be reversible. No free man shall be seized or imprisoned, or stripped of his rights or files, or outlawed or disconnected, or be deprived of his domain name, nor will we proceed with hacking against him, or send tabloid journalists to do so, except by the lawful judgment of his peers. All entrepreneurs may enter or leave the realm unharmed and with their laptop, smartphone or other devices untouched, and may stay or move within it for purposes of trade, free from all illegal exactions. It shall be lawful for all software developers to leave and return to our realm unharmed and without fear, even if they talk at length about agile development and scrums. All access fees that have been given to us unjustly and against the law of the land, and all fines that we have exacted unjustly, in particular for infringement of copyright and software patents, shall be entirely remitted or the matter decided by a majority judgment of the twenty-five barons referred to below. If we have deprived or dispossessed any net knight of land or liberties, domain names, Twitter handles or document caches without the lawful judgment of their equals, these are at once to be returned to them.
Keepers of liberties The tech barons shall elect twenty-five of their number to keep, and cause to be observed with all their might, the peace and liberties granted and confirmed to them by this charter. If we, our chief justice, our chief yahoo, our officials, or any of our servants offend in any respect against any man or woman or 13-year-old wonderkid, or transgress any of the articles of the peace or of this security, and the offence is made known to four of the said twenty-five barons, they shall send a Tweet to declare it and claim immediate redress. If we make no redress within forty days, the twenty-five barons may distrain upon and assail us in every way possible, including denial-of-service attacks and spearphishing, with the support of the whole ecosystem of the land. Both we and the tech barons have sworn that all this shall be observed in good faith and without deceit. Given by our hand in the area that is called Redwood Shores, between San Francisco and San Jose, on the fifteenth day of June two thousand and fifteen.
Leaders
THE WORLD IN 2015
Fantasy politics The government Britain should get in 2015— but sadly won’t, laments Joel Budd
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hen trying to woo their countrymen to the independence cause in 2014, Scottish nationalists often promised that a separate Scotland would always get the government it voted for. In a straightforward sense, this was true: there could be no more Tory rule foisted on the Scots by English voters. But, like much of the nationalist campaign, it was a hollow promise. Not once since the second world war has any political party won over 50% of the vote in Britain. And people never get precisely the government they want; they have to choose the least unattractive of three or four options. A more liberal But what if we could have just what we want? immigration In an optimistic spirit, The World in 2015 would like to endorse a gov- policy than any existing party ernment for Britain’s general election in May. Yet it is not an option on offer. wants All the big parties have their virtues— and serious flaws. The Conservatives obsess over foreign phantoms such as immigrants and eu bureaucrats; Labour appears only occasionally to remember that the country has a large debt to pay off; the Liberal Democrats still do not know what they want, besides power; the uk Independence Party knows precisely what it wants, but it wants precisely the wrong things. It is not hard to do better. This perfect government would pursue an economic policy similar to that of the ConservativeLiberal Democrat coalition that took power in 2010, but it would borrow a trick from Labour. It would continue to reduce the deficit on current spending, closing it altogether by 2020. It would, however, throw this plan out if the economy greatly deteriorates, just as George Osborne, the Conservative chancellor of the exchequer, quietly junked his deficit-reduction “Plan a” when the euro zone caught fire. Like the last Labour government, ours would tolerate higher capital spending, on schools, roads and the like, to improve the economy in the long run. The government would speed up the best reforms launched by the coalition. That means, above all, greater independence for schools. Many have already been cut free of local- In our dreams Joel Budd: Britain editor, The Economist
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authority control; the rest should be freed, too. In a similar spirit, the national Department of Education would be barred from meddling so frequently with curricula and exams. Another reform trumpeted by the coalition, the crunching of welfare benefits into a single “universal credit”, is a good idea that has been mishandled by the minister in charge, Iain Duncan Smith. We propose to sack him and get on with it. Our ideal government would also reform the police, but not in the way the coalition has tried to do. We would get rid of elected police overseers, for whom nobody votes, and merge police forces, turning 43 into ten or so.
A red card for green belts By the end of 2015 this government would come up with a firm plan to build another airport runway near London, preferably west of Heathrow. It would spend money on new roads and railways, and would scrap hs2, a fast passenger railway from London to Leeds and Manchester, pouring funds instead into railway capacity on the fringes of big cities, where the jams are worst. Even more boldly, it would face down the nimbys and abolish the huge green belts around London and other big cities. The nice bits should become parks; the gravel pits and pony paddocks can be turned into suburbs. This would help to bring down property prices from their present mad heights. This government would run a more liberal immigration policy than any existing party wants to: it would make it easier for companies to import workers and would staple a long-term work visa to the back of every letter of admission to a decent university. It would hold a referendum on eu membership—but argue flatly for staying in. It would decentralise power, particularly to cities like London and Manchester. Recognising Whitehall’s limitless desire to meddle, it would cut half of the remaining civil servants. Ours would be a government of all the talents. We would keep socially liberal, reforming Conservatives like Mr Osborne and Michael Gove, and add tough-minded Labour and Liberal Democrat folk like Ed Balls, Tristram Hunt and David Laws. We would invite gifted but neglected politicians like Margot James, David Willetts and Liam Byrne to take on big jobs. We would also find a decent job for David Cameron, the current prime minister—but with a caveat. Mr Cameron, an otherwise good politician, has been a poor advocate for British interests in Europe. To stop him causing more damage, we would confiscate his passport. n
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Calendar
2015
THE WORLD IN 2015
Our selection of events around the world
JANUARY
JULY
Lithuania joins the euro; Germany takes on the presidency of the G7; Latvia starts its first sixmonth stint as the EU’s president.
Luxembourg takes over the EU’s presidency.
Britons never, never, never give up thinking about Winston Churchill, on the 50th anniversary of his death. The world embraces National Hugging Day.
FEBRUARY
New Horizons, a NASA space probe that has travelled more than 3 billion miles since its launch in 2006, becomes the first to visit Pluto. Another intrepid voyager, Queen Mary 2, sails from Liverpool for Halifax and Boston, to recreate the first transatlantic crossing by a Cunard liner, Britannia, 175 years earlier.
The Chinese Year of the Goat begins. Those born in goat years are said to be calm, mildmannered, creative and pessimistic.
AUGUST
The best teams in American football face off in Phoenix, Arizona, in Super Bowl XLIX.
Sailors and music-lovers head for the port of Paimpol in Brittany for the Festival du Chant de Marin, a biennial sea-shanty jamboree.
Nigeria, Africa’s most populous country, holds elections for its president and parliament. Take your pick for the hottest tickets: for the Sambadrome, where samba schools compete at the Rio Carnival; for the film premiere of “Fifty Shades of Grey”; or for the Cricket World Cup, which starts in Australia and New Zealand.
MARCH The total solar eclipse on March 20th is the last one visible in Europe until August 2026. The slain King Richard III of England, whose remains were uncovered in a council car park in 2012 and identified through DNA testing, is reburied in Leicester Cathedral. The UN tries to lift spirits on World Poetry Day.
APRIL Happy ironversary: Otto von Bismarck, first chancellor of the German Empire and creator of the first modern welfare state, was born 200 years ago in Prussia. Americans remember the end of their civil war, with Robert E. Lee’s surrender 150 years ago, as well as the assassination six days later of Abraham Lincoln. All the world’s a big top on World Circus Day. The seventh Summit of the Americas, a gathering of leaders from across the region, is held in Panama.
MAY The Chelsea Flower Show blooms, come rain or shine. Expo 2015 opens in Milan. Contemporary-artlovers flock to Venice for its Biennale. Britons vote in a general election.
JUNE Leaders of the world’s rich countries gather at Schloss Elmau in the Bavarian Alps, where Angela Merkel hosts the annual G8 summit—or the G7 summit, if Russia’s president, Vladimir Putin, is not invited. The first European games, involving the 49 Olympic nations of Europe across 20 sports, open in Baku, Azerbaijan; and the seventh FIFA Women’s World Cup kicks off in Canada. King John of England put his seal to the Magna Carta 800 years ago, at Runnymede Meadow. Turkey holds a general election.
Ten years after being struck by Hurricane Katrina, New Orleans takes stock of its recovery.
The World Championships in Athletics, held every two years, are the largest sporting event in Beijing’s “bird’s nest” since the 2008 0lympics. In Mar del Plata, Argentina, athletes who have undergone a successful organ transplant compete in the 20th World Transplant games.
SEPTEMBER Longest to reign over us: Queen Elizabeth II overtakes Queen Victoria (who was on the throne for 63 years, seven months and three days) as the longest-reigning British monarch. The Rugby World Cup, held every four years, scrums down in England and Wales. World leaders gather in New York to measure progress in fighting extreme poverty as the end-of-2015 deadline nears for achieving eight Millennium Development Goals (MDGs) set in 2000—and to lay out post-MDG targets.
OCTOBER Canadians vote in a general election. The latest James Bond film, the 24th in the series and starring Daniel Craig, opens, as does a movie of the musical “Wicked”. The future arrives: October 21st is the day Marty travelled forward to in “Back to the Future Part II”. The IMF and the World Bank head south to Lima, Peru, for their annual meetings.
NOVEMBER Twin peaks: Turkey hosts the tenth G20 summit, and leaders of the 21-member AsiaPacific Economic Co-operation assemble in Manila, in the Philippines. The battle against global warming moves to Paris, where governments gather for the latest international conference on climate change. Aviation types do deals in the desert at the Dubai airshow, the world’s fastest-growing.
DECEMBER The World Peace Caravan retraces the steps of the Queen of Sheba from Jordan to Jerusalem. Spain has to hold a general election by now. Americans commemorate the 150th anniversary of the outlawing of slavery: the 13th amendment entered into force when Georgia became the 27th state to ratify it.
The illustration for the 2015 Calendar is by Kevin (“KAL”) Kallaugher, The Economist’s editorial cartoonist With the help of contributions from www.foresightnews.co.uk
THE WORLD IN 2015
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THE WORLD IN 2015
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United States Also in this section: The 2016 race 44 Obamacare’s tipping-point 46 Just possibly… 46
What the Fed will do 48 Kids leave home, at last 50 Silicon Valley gets physical 50 Drones take off 51
Ian Bremmer: The foreign-policy president 54
All the president’s pens David Rennie WASHINGTON, DC
Government by decree and veto is in prospect
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2015 IN BRIEF California becomes the first state to ban the provision of single-use plastic carrier bags in grocery stores
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resident Barack Obama heads into 2015 at the mercy of a Congress controlled by the Republican Party, his opponents. After mid-term elections in November handed control of the Senate to the Republicans, and solidified the right’s majority in the House of Representatives, Mr Obama has been left with the (formidable) tools available to even lame-duck American presidents: his ability to convene debates and his power to sign executive or- Mr Obama will ders and take administrative acwant to leave tions. “I’ve got a pen, and I’ve got office with a a phone,” Mr Obama likes to say. legacy Democrats have high hopes for that pen. With just two years left in the White House, Mr Obama—they hope—will sign a barrage of orders in fields as varied as immigration, the environment and criminal-justice policy. Though executive actions are easily reversed, compared with legislation passed by Congress, Mr Obama’s allies think that presidential orders can still nudge the country in a more progressive direction. They hope that some of the changes will stick. For instance, they believe that executive orders shielding illegal immigrants with deep roots in America from deportation will make it inevitable that some future government will have to
address the thorny question of legalising many of the 11m migrants now in the country without the right papers—even if comprehensive immigration reform is impossible for now. If other orders and actions are likely to prove short-lived, well, Democrats can live with that. They want Mr Obama’s busy pen to craft policies designed to make the Republicans look extreme or out-oftouch ahead of the 2016 elections, helping Democrats to keep the White House and perhaps take back the Senate. Republicans have ambitions for Mr Obama’s pen, too. Though the president has faced divided government since 2010, when Republicans took the House of Representatives, Democrats in the Senate used to provide him with an important firewall, blocking any number of laws drafted by conservatives. Now that Republicans control both halves of Congress, he will have to sign or veto every bill and budget they send him. Optimists assert that this could be a surprisingly constructive moment. Mr Obama will want to leave office with a legacy, they argue, and Republicans cannot afford to head into the 2016 elections looking like a party that knows only how to say no. What is more, Republicans on their own do not have the super-majority of 60 votes needed to pass most business in the Senate, so the party will be forced to seek pragmatic, problem-solving measures that appeal to a few centrist Democrats. Optimists—notably among the pro-busi-
David Rennie: Washington bureau chief and Lexington columnist, The Economist
United States
2015 IN BRIEF
ness “governing” wing of the Republican Party—can reel off a list of measures, which they believe Mr Obama would find it hard not to sign into law. These include a bipartisan push to simplify the corporate-tax laws that currently entangle American businesses, tempting many bosses to hoard profits overseas or move their headquarters abroad. Other Republican priorities for 2015 include measures to promote oil- and gas-drilling and to build the Keystone xl pipeline to ship oil from Canada to America. Pro-business Republicans would like to see their party help Team Obama complete a pair of big free-trade pacts with Asia and Europe. Gloomier souls think that two years of partisan stalemate are a likelier outcome, for two reasons. First, they reckon the Republican Party is not united enough to send Mr Obama constructive conservative policies, with Establishment Republicans thwarted by hardline Tea Party populists, notably in the House, who despise compromise and who are not that fussed about what big business wants. Second, pessimists fear that calls to
After more than 20 years David Letterman steps away from his desk and retires from “The Late Show”, to be replaced by Stephen Colbert
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THE WORLD IN 2015
make the Republican Party look good (by passing some laws with Mr Obama) will be drowned out by demands to make the president look bad (by denying him any successes, and thereby ramming home the idea that Democrats can never be trusted in government). Republican leaders in Congress will attempt to bridge the gap between these constructive and nihilistic scenarios. They will send some modest conservative bills to Mr Obama’s desk, offering a glimpse of the policies that Republicans are sure would create jobs and spur growth, if only they controlled the White House as well as Congress. At the same time, Republicans will be tempted to use their powers over the budget and spending bills to starve some bits of Mr Obama’s agenda of funding (for instance in the field of environmental regulation). The window for bipartisan co-operation will start to close towards the end of 2015, as prominent Republicans prepare for the presidential-primary season. Mr Obama’s penultimate year in office will be a bumpy one. But it may be his last chance to get much done. n
Waiting for the big one John Prideaux WASHINGTON, DC
Elections taking place in 2015 will hold clues for the race in 2016
I
f a week is a long time in politics, then 22 months, a period sufficient for three trips to Mars, might best be called an era. Throughout 2015 the collective attention of America’s political class will be on the presidential election in November 2016. Much of what will happen in 2015 will turn out to be irrelevant to that race, but not all. One way of screening out the noise will be to pay attention to the elections actually taking place in 2015. The year will see three governors’ races, in Kentucky, Louisiana and Mississippi. The two states in the deep South are reliably Republican, with little predictive value for 2016. Kentucky is different. Though Virginia will it too is Republican provide some in presidential races, excitement it has a Democratic outgoing governor. Up until the 1990s the state’s politics followed a pattern set in the civil war. The eastern, Union-supporting part voted Republican; the western part, once worked by slaves, backed the Democrats. Over the past few decades, though, Kentucky has veered towards the Republicans, a process accelerated recently by statewide resentment of federal regulations for coal-fired power stations: the east, where, wrote Leonard Pitts, the roads “twist like a snake having a nightmare”, is coal country. Kentucky is likely to choose a Republican governor, then. But what sort? The
year’s biggest political story will be the saga that pits the governing wing of the Republicans against the party’s would-be revolutionaries. Voters choosing a governor tend to go for pragmatists over ideologues, so the governing wing will start with an advantage. But the Kentucky party’s internal strife will be closely watched for what it says about the party’s national mood. There will be statehouse elections in Louisiana, Mississippi, New Jersey and Virginia. The two east-coast contests will have some bearing on 2016. New Jersey will be interesting because its Republican governor, Chris Christie, is one of the party’s many possible presidential candidates. Mr Christie’s appeal lies in his ability to charm voters who would ordinarily vote for the other party, and in his willingness to pick battles with public-sector unions in the name of budgetary discipline. The second part of this pitch has not gone well lately. Mr Christie’s administration has overestimated revenues from gambling in Atlantic City, with the result that the state’s rainy-day fund is dry and
ratings agencies have downgraded New Jersey’s debt. This will be an issue in the elections to the state legislature, and the attention it will bring to New Jersey’s finances will not flatter the governor. In Virginia, a state whose proximity to the world’s largest agglomeration of political journalists guarantees it gets attention, the statehouse election will provide some excitement for those who just cannot wait until 2016. Virginia has backed the winner in all four presidential elections since 2000. Republicans have an unloseable majority in the lower house, but the state Senate is more finely poised. With turnout likely to be low, because there is neither a congressional nor a presidential vote to draw voters in, the Republicans ought to keep control of Virginia’s senate. Failure to do so would spell trouble for the party’s chances nationally in 2016. While these contests play out, an unusually large number of prominent Republicans will be dropping hints about running for the party’s presidential nomination and examining the resulting ripples. The group includes seven governors or ex-governors (Mr Christie, Rick Perry, Jeb Bush, John Kasich, Scott Walker, Mike Pence and Bobby Jindal) and at least four senators (Ted Cruz, Rand Paul, Marco Rubio and Rob Portman). Since none of these will build up a decisive advantage in 2015, some will start to wonder about giving Mitt Romney a second chance. This Republican frenzy will seem even more animated when contrasted with the stasis among Democrats. Barring some unforeseen health scare, Hillary Clinton’s progress towards her party’s nomination will continue unimpeded. n John Prideaux: Washington correspondent, The Economist
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United States
2015 IN BRIEF
Point of no return
Fifty years have passed since Lyndon Johnson signed Medicare into law at a time when half of all Americans over 65 had no medical insurance
Roger McShane WASHINGTON, DC
The more people encounter Obamacare, the harder it becomes to repeal
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t has been nearly five years since Barack Obama signed the Affordable Care Act, better known as Obamacare, into law. The huge overhaul of the American health system was designed to widen access to care and reduce its cost. Since then Republicans have voted over 50 times to undo it, portions of it have been delayed and a disastrous roll-out of its website nearly sank it. It will face more challenges in 2015, but as in the past Obamacare will prove resilient. First, though, will come a new round of complaints. In the year to October 2014 over 7m people signed up for insurance through Obamacare, beating expectations. Now they must re-enroll. Most will face higher premiums. Worse, many will not realise that the government’s
A helping hand
Roger McShane: public-policy correspondent, The Economist
share of paying these bills will have gone down. Those seeking a clearer picture of their new financial burden will have to brave Obamacare’s buggy websites again. But premiums will not spike, despite the predictions of the law’s opponents, so most of those in the system will stay there. Luring the remaining hold-outs will prove a tougher task for the government, as this batch of uninsured Americans is more sceptical of Obamacare. Some still complain about the “unconstitutional” mandate to buy insurance. Their principles will be put to
Just possibly… New York joins the likes of Colorado and Washington state in legalising the use of marijuana for recreational purposes. American ground troops see action in Iraq. Barack Obama at last manages to clear Guantánamo Bay of its prisoners.
THE WORLD IN 2015
the test when the penalty for lacking coverage jumps in 2015. Still, the administration will find it hard to reach the Congressional Budget Office’s lofty projection of 13m people enrolled by mid-February. Even as the pace of enrolment slows, the constituency tied to Obamacare will continue to grow. On top of the many millions of people covered under the law, doctors, hospitals and insurers are investing in the system. Providers have set up Accountable Care Organisations (acos), which get bonuses for delivering care more efficiently. The number of acos will grow in 2015. So will the number of insurers selling plans on Obamacare’s exchanges. With more customers and stable risk pools, they will find that the law isn’t so bad for business. Too big to undo The bigger Obamacare gets, the tougher it becomes to dismantle. That will not discourage congressional Republicans, whose goal is still repeal. The country has always been split on the law, with the divide falling along partisan lines. The opposition is more fervent. During the mid-term elections Republican candidates successfully used the law to attack their Democratic opponents. But the politics of Obamacare is changing, and 2015 will mark a turning-point. Republicans have been able to demonise the law because, unlike Medicare, it is not a coherent programme with a clear identity. Rather, it is a confusing collection of policies The burden and regulations. Many people do of fixing not realise that they are benefiting Obamacare’s from Obamacare, which is why it polls poorly, even though its flaws falls on component parts are quite popular. There is a huge disconnect the president between the reality of Obamacare and the public’s perception of it, says Jonathan Oberlander, a professor of health policy at the University of North Carolina. The law has also become a proxy for bigger things, including Mr Obama’s presidency, the dysfunctional Congress and America’s welfare state. So even as more people come into contact with Obamacare, it will be a catalyst for criticism. Yet the law benefits so many people, in so many ways, that politicians will be afraid to dismantle it. Voters may never say “Hands off my Obamacare”, but they will fight for the parts of it they like. Obamacare will therefore fade as an issue just as the 2016 presidential campaign begins. Still, the Republican candidates will pay lip service to the conservative dream of repeal, even if they dare not specify which parts of Obamacare (beyond the mandate to buy insurance) would go away. The Democratic candidates, on the other hand, will at last find it advantageous to promote and defend Mr Obama’s chief achievement—at least the parts of it that are popular. Meanwhile, a gridlocked Congress will fail to improve the law, even though some changes—such as broader malpractice reform—would win support from both Democrats and Republicans. But by the end of 2015 too many patients, doctors, hospitals and insurers will have a stake in Obamacare for it to be revamped. It is a year that will mark the beginning of the end of the fight over the law. For better or worse, Obamacare is here to stay. n
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THE WORLD IN 2015
Togetherness 12
Nominal GDP, % growth*
12
9
9
6
6
3
Ten-year Treasury-bond yield, %
3
0
*Seasonally adjusted
Congressional Budget Office forecast for 2014 Sources: Bureau of Economic Analysis; Federal Reserve Board
Greg Ip WASHINGTON, DC
Prepare for a modest rise in interest rates The Who pinball their way around America on their 50th-anniversary tour, starting in Tampa, Florida
Greg Ip: United States economics editor, The Economist
-3
†
Gently does it 2015 IN BRIEF
2011 2012 2013 2014†
1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
-3
0
A
fter seven years at zero, interest rates will begin the return to normal in 2015. The surprise will be how low normal turns out to be in this economic cycle. The federal-funds rate will not go above 3%, the lowest peak of any Federal Reserve tightening spell since the early 1950s. Bond yields will not go much higher. To understand why rates will remain low, it helps to understand what drove them down in the first place. The immediate cause was the Fed’s determination to learn the lessons of the 1930s, and of Japan’s experience in the 1990s, and inject as much monetary stimulus into the economy as it could. It slashed the federal-funds rate to zero in 2008 and then bought trillions of dollars of government bonds with newly created money (“quantitative easing”) to pull down bond yields. Powerful headwinds still kept the recovery anaemic. By 2015, however, those headwinds will have largely dissipated. Households, after several years of “deleveraging” (paying down their pre-crisis debts), are borrowing again. Flush with capital, banks are happy to do their part: by late 2014 their loans were growing at their fastest rate since 2008 and there is talk of bubbles in student and car loans. Europe’s sovereign-debt crisis has subsided, for now. No new federal austerity is on the cards, and state and local governments are hiring again. Average monthly jobs growth gently accelerated from 186,000 in 2012 to 194,000 in 2013 to 225,000 in the first nine months of 2014. By late 2015 the unemployment rate will drop below 5.5%, the level widely considered consistent with full employment. The new normal Such an economy no longer needs abnormally low interest rates. But nor can it tolerate rates once considered normal. Some of the forces at work in America in the 1930s and Japan in the 1990s are present today, exercising an outsize influence on interest rates. Historically the Fed tightened, and bond yields rose, most often because inflation threatened to erupt. But in recent decades inflation has been much more stable and lately it has been too low more often than too high. For 95% of the past six years it has been below the Fed’s
2% target, when measured by its preferred benchmark, the price index of personal consumption excluding food and energy. In late 2014 it was still only 1.5%. This will restrain the tempo and magnitude of rate rises. Furthermore, the world has a glut of savings and a dearth of investment, and it is the job of interest rates to bring the two into balance. Before the crisis the oversupply of savings could be traced to emerging markets, in particular China. Domestic savings in emerging markets rose from 24% of gdp in the 1990s to above 33% by 2008—and stayed there. That is more than enough to meet the (steep) investment needs of those countries, so they ploughed the excess into rich-country bond markets, pushing down interest rates. China’s currentaccount surplus has since shrunk, but the euro zone, bludgeoned by austerity, tight credit and weak investment in Germany, has taken its place: its current-account surplus in 2015 will exceed China’s. The global savings glut will put a lid on interest rates. The dearth of investment is more of a puzzle. Profit margins are near all-time highs and borrowing costs near all-time lows, yet capital spending has been subdued. This may be because business become less capital-intensive. Headwinds has For example, startup companies can will have rent all the computing capacity they need in the cloud without having to largely buy big servers. dissipated More important, over time long-term interest rates are highly correlated to long-term growth (see chart), and growth looks likely to be much lower in the coming decade than in the recent past. Faster-growing economies generate higher returns on capital, which encourage companies to borrow. Higher productivity growth usually translates into higher wages and encourages consumers to borrow against their future income. A slower-growing economy needs fewer stores, factories and offices, depresses the return on capital and thus leads to lower investment. Slower-growing productivity holds back incomes and discourages consumer borrowing. Productivity growth has slowed since the recession, and the working-age population will expand by just 0.4% a year in coming decades, less than half the rate of the past two. Long-term growth, which averaged 3.2% between 1993 and 2007, may average 2% or less in the coming decade. For all these reasons, the end of the Fed’s monetary morphine will not spell the end of low interest rates. n
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United States
2015 IN BRIEF
Time to fly the nest
Apple joins Facebook in offering female employees up to $20,000 to help them freeze their eggs
THE WORLD IN 2015
Robert Guest
Young adults will finally leave home
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Going physical Adrian Wooldridge
Silicon Valley returns to its roots
“A
ll that is solid melts into air…” For the past decade this phrase from “The Communist Manifesto” has provided a perfect description of the evolution of Silicon Valley. The most fashionable companies have all focused on the airy world of search and social networks. The engineering companies that once defined the Valley have faded into the background. Over the next decade all this will go into reverse—the air will become solid. In 2015 the buzz (and the money that goes with it) will shift from social media to intelligent devices. The most successful companies will focus on connecting the virtual and physical worlds. Google has already anticipated the trend with driverless cars, Google Glass, robots and, with its $3.2 billion purchase of Nest, domestic thermostats. The rest of the Valley will follow. The year’s buzzword will be “wearables”: for example, medical gadgets that keep a constant watch on your blood pressure, glucose level and food intake, and tell you
if trouble is on the way. “Wearables” will be the praetorian guard of a huge army of objects. Household items attached to the internet will act like servants in “Downton Abbey”—unobtrusively turning the thermostat up or down or politely suggesting that it is time to call the plumber. Cars will fill up with electronic devices that will make it easier and safer to drive and work on the road. The rise of intelligent devices will allow the Valley to rediscover its roots as an engineering centre. This Valley was briefly sidelined by the social-networking Twitter and But Facebook will revolution. engineers are relook like old turning to reclaim their own. Tesla is dowagers making cars in Palo Alto. bmw, Mercedes, Samsung, Nissan and General Electric have all established research and design laboratories. Medicaldevice companies are flocking in. Worn in the USA
The rise of intelligent devices will force San Francisco to share more of the limelight, which it has been basking in since the social-media boom, with San Jose. But San Francisco is already home to
device companies such as Lemnos Labs, and it will have a chance to reinvent itself as a centre of wearable fashion rather than of social networking. The wearable revolution will not only see Silicon Valley tightening its links with old-fashioned engineering firms. It will also see it forming alliances with centres of fashion and design such as New York, Los Angeles and a particularly energetic pioneer of mixing technology and fashion, London. The balance of Valley power will shift. Social-media giants such as Twitter and Facebook will look like old dowagers. New giants will emerge at speed to displace them in the public imagination. The great survivors from the Obama era will be Apple, which has always focused on making devices (its Apple Watch hits the stores in 2015), and Google, which is moving swiftly into the new world. Intelligent devices will provide the Valley with a new-found seriousness. Socialmedia companies essentially dealt with virtual candy-floss: nice to have but, for the most part, hardly essential. The new generation of entrepreneurs will deal in devices that can save lives. Truly, all that is airy will become solid. n Adrian Wooldridge: management editor and Schumpeter columnist, The Economist
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Robert Guest: United States editor, The Economist
n the film “Tiny Furniture”, the heroine, played by Lena Dunham (slumped on the floor in the picture above), moves back in with her mother because, having earned “a useless film-theory degree”, she has no job and no choice. Mother and daughter argue constantly. Ms Dunham’s character drinks all the wine in her mother’s neatly organised cabinets and gets a prison-style tattoo “out of sheer boredom”. In real life, too, it is hard for young adults to live with their parents. It is humiliating, and repels potential romantic partners. For the parents, it is disappointing that
junior has failed to launch and annoying that he never empties the dishwasher. But cheer up: in 2015 the unshaven slacker in your basement will at last move out. To understand why, it helps to know why he got stuck there in the first place. First, the job market has been dire for several years, so many young people have not been able to rent or buy their own homes. Second, even graduates with useless degrees in film theory have often racked up vast student debts. Living rent-free with their parents has made it easier to service those debts and still have a bit left over for beer, iTunes and tattoos. In 2012 a whopping 36% of Americans aged 18-31 were living in their parents’ homes, up from 32% in 2007. Several things will prompt them to pack their bags in 2015. First, the job market will improve. Unemployment has tumbled from around 10% after the financial crisis to 6% in 2014, and it will fall further in 2015. Youngsters In 2015 the with jobs are far more likely unshaven to find a place of their own. slacker in your Second, the cost of housing will remain reasonable basement will at in America, except in crazy last move out places like New York and San Francisco. The ratio of house prices to average incomes has crept up recently, but is far below its peak in 2006. Whether you are buying or renting, space is far cheaper in America than in Europe. Third, many young Americans who live with their parents will no longer be able to stand it any more. They
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THE WORLD IN 2015
A bumpy take-off Benjamin Sutherland SANTA BARBARA
Drones may take to the skies— eventually
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lying lower and slower than manned aircraft, cropdusting drones create a swirling wake that applies pesticide even to the underside of leaves. The cost is “simply untouchable”, notes Ladd Sanger, an aeroplane and helicopter pilot who practises aviation law in Dallas. Drones also bring improvements and Model aircraft cost-cutting to are grounded film-making, news-gathering, search and rescue, forensic photography, firefighting, archaeological surveying, smokestack inspection and the monitoring of pipelines, volcanoes, pollution and wildlife. The benefits to an economy like America’s could be worth $27m a day, says the Association for Unmanned Vehicle Systems International (auvsi) in Arlington, Virginia. America will not reap such a reward before September 30th 2015, however. That is the deadline Congress gave the Federal Aviation Administration (faa) to produce rules for the safe integration of drones into airspace; at present, only recreational use is allowed. If the upcoming rules are not too restrictive, auvsi reckons that they will add 70,000 jobs and $13.6 billion to America’s economy within three years. The faa won’t say what is likely to be permitted. But some observers believe that potential benefits will be dampened by over-stringent rules. The faa already grants some exceptions to its ban, which allow for severely restricted use, but getting one is so hard that a senior Customs and Border Patrol official says the process led to “a lot of gnashing of teeth”. (The agency now
flies nine unarmed Predator b drones.) That bodes ill for firms such as Amazon, which hopes to deliver parcels by drone. Moreover, in June the faa issued a “tremendously rigid” policy interpretation that even expands the definition of aircraft it has the authority to regulate to include boomerangs, frisbees and hand-tossed balsa gliders, says Paul Voss, an engineering professor at Smith College in Massachusetts. Dozens of universities have duly begun to eliminate engineering lessons that involve flying objects over campus lawns. Mr Voss laments that his aerial-design class is pretty much worthless, now that the college’s model aircraft are grounded. In a petition, he and 28 professors and administrators at universities including Harvard and Stanford decry the faa’s “breathtaking” restrictions and note that the agency appears keen to protect special interests, including established aircraft manufacturers and pilot unions. The faa has received more than 33,000 comments on the policy. Reading those that claim the agency is manoeuvring to reserve the
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love them, of course. But Dad’s stories about Woodstock and Mom’s enquiries as to when they will meet someone nice and get married are driving them insane. Because of tough economic times, many members of the millennial generation have put their lives on hold. They have spent longer than they planned in college. They have delayed getting married and having children, hoping that if they wait they will be able to afford it. But they cannot wait for ever: for women, the biological clock is unforgiving. If they don’t do it now, they may never be able to. Property-developers expect an explosion of pentup demand for new houses, as the young adults who
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right to regulate even the flight of bullets and baseballs “sets me off”, says Les Dorr, an faa spokesman. Even so, his agency has fined a man $10,000 for flying a small styrofoam drone around a University of Virginia campus for a promotional video. In May a judge threw out the fine, saying that it rests on a “risible” premise. The faa immediately appealed. All this suggests that the faa’s future rules will not bring America economic benefits on the scale some countries are starting to see, says Brendan Schulman of Kramer Levin Naftalis & Frankel. In August the New York law firm filed three suits against the faa for regulatory over-reach. The way things are heading, he says, the faa might require a drone to be flown by two licensed operators with medical certificates who keep it within sight. This would be costly, and might outlaw flights around a leafy tree. Until the autumn of 2015 the issue will remain, unlike the drones themselves, up in the air. n Benjamin Sutherland: freelance correspondent, The Economist
have put off forming families for so long at last decide that the time is ripe. Several years’ worth of nest-fleeing could be crammed into a much shorter period. Some of the nest-fugitives will shack up with a lover; others will actually tie the knot. Either way, they will be off your sofa and out of your hair. Parents in Europe may not be so lucky, alas. Nearly half of European 18- to 30-year-olds still live with their parents, thanks to sky-high youth unemployment in some countries. In Italy four-fifths of young adults live at home. Many young Italian men like having mamma cooking and cleaning for them but cannot persuade a wife to sign up for the same arrangement. Funny, that. n
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Pivoting back
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ho would have thought Barack Obama would become a foreignpolicy president? It’s not what he was elected for, but crises abroad and gridlock at home have forced him to focus on foreign policy—with mixed results. This will endure in 2015. Russia will keep strangling Ukraine. Islamic State (is) will cement its foothold. While it may seem that these growing threats would reinvigorate nato with new purpose, they will actually expose and exacerbate its divisions. It may not be on the radar yet, but in 2015 the transatlantic relationship will erode. The shortcomings of American leadership and the growing tensions with European partners will be clearest in dealings with Russia. In the long run, Vladimir Putin’s Ukraine policy will undermine his country’s economy and prompt Europeans to wean themselves off Russian energy. Yet in 2015, as Mr Obama puts extra pressure on Russia, America will haemorrhage support from European allies with much more to lose. Some nato members worry that America’s attention will drift to the next hotspot while they remain stuck with a bellicose neighbour. Responding to is will be an increasingly uphill battle. The American-led coalition is large, which gives it staying power, but it makes the partnership unwieldy and progress piecemeal. The campaign against is has been largely Sunni from the air, with collaboration from the Gulf states for strikes. Yet any chance for lasting success on the ground will need Shia buy-in—which will only get harder to secure as sectarian tensions grow. In 2015, watch America edge back toward old authoritarian allies and the Arab-spring movement hit the scrapheap. The coalition will fragment as the best-funded terrorist group in history stays entrenched in Iraq and Syria. Thankfully, Asia should be more benign. Despite flare-ups in the South and East China Seas, geopolitics in Asia will be more bluster than searing conflict. Strong leaders in Asia’s three most powerful nations—Shinzo Abe in Japan, Xi Jinping in China and Narendra Modi in India—will be a stabilising force. All three have staked their careers on monumental domestic reforms that will impel them to keep their focus at home and conflict to a minimum. As long as progress on their reforms continues, none of them is looking for trouble; danger will rise only if reforms go badly wrong, or if America mismanages its relationship with China.
That relationship has been warmer of late—but there is a diplomatic minefield ahead. Ructions between America and Mr Putin will push China closer to Russia. The two countries finalised a 30-year, $400 billion gas deal after Russia dropped its asking price due to tensions with the West. It’s not just transactional: China views a deeper relationship with Russia as a hedge against its own potential falling-out with America. Xi Jinping has made sufficient progress with his anti-corruption crackdown and economic reforms for pushback from influential Chinese with vested interests to grow; more success will beget more backlash. If Mr Xi’s agenda runs into serious trouble, all bets are off with Chinese behaviour—China could lash out abroad to secure support at home. America and its allies make an easy scapegoat, should Beijing want to punish foreign businesses or blame foreign agents for unrest (as was seen in Hong Kong). Down the road, the Russia-China alignment could become a more formalised alliance, undermining America’s foreign-policy initiatives. Germany and China are tightening their economic partnership; ruptures between America and Europe could push Berlin closer to Beijing. In 2015 America must actively engage China to avoid steps in this direction. TPPing-point What’s more, engagement in Asia could lock in a rare foreign-policy win for Washington. The Trans-Pacific Partnership (tpp), which would bring 12 countries representing nearly 40% of global gdp into a free-trade pact, is the one big strategic achievement that American leadership could push over the finish line in 2015. It would create tighter Pacific-rim alliances at a time of rising concern about China’s ambitions. The deal would generate big trade gains, and offers Mr Abe an external justification for his economic reforms. So what’s the hold-up? Progress has stalled owing to snags between Japan and America: Japan won’t compromise on protections for its farmers, nor will America on the car industry. But with distracting American mid-term elections out of the way, a concerted effort could get tpp over the goal line. The irony is that Mr Obama has taken a lot of criticism for abandoning his “pivot” to Asia in the face of other concerns, yet it is still the region where he is having the most foreignpolicy success. With active attention, America should be able to expand on that in 2015. n
Despite troubles elsewhere, opportunity beckons for America in Asia, argues Ian Bremmer, president, Eurasia Group
It may not be on the radar yet, but in 2015 the transatlantic relationship will erode
THE WORLD IN 2015
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The Americas Also in this section: Pemex faces competition 58 A new Trudeau for Canada 59
Just possibly… 59 Michelle Bachelet: The politics of inclusion 60
The hangover Michael Reid LIMA
Latin America after the commodity boom
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unite, the regime may face a choice between losing control of parliament and resorting to electoral manipulation. In Mexico, the ruling Institutional Revolutionary Party (pri) of President Enrique Peña Nieto will hang on to its control of Congress in mid-term elections in July. It will be helped by an uptick in public investment and economic growth and the start of private investment in energy (see next story). But all this will not yet pro vide a big boost to the popularity of Mr Peña; victory will owe more to the weakness of the opposition parties of right and left. Central America has seen a mild shift to the left over the past year, and that may continue in Guatemala, due to hold elections in September, after four years of rule by Otto Pérez Molina, a former general. Latin America’s most important political devel opment of 2015 will be a peace agreement between Colombia’s government and the farc guerrillas—at last. This will end more than half a century of armed
2015 IN BRIEF South America’s largest aquarium, the Acquario Ceará, opens in Fortaleza, Brazil
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elcome to the new normal in Latin America, a region that is struggling to replace the easy pick ings of the great commodity boom with the hard work of raising productivity. The result: the re gion’s economy will grow at well under 3% in 2015, after a disappointing 1.5% or so in 2014. The brighter spot will be Mexico, where growth may tick up towards 4%. Brazil will face an overdue fiscal adjustment. But Dilma Rousseff, narrowly elected for a second term and leading a weakened government, will find it hard to revive growth and the confidence of investors. Ms Rouss eff’s near-death experience in the presidential election of October 2014, provided evidence that slower growth and the frustrations of an expanded middle class are causing the political tide to turn. After a dozen years of domi nance by the left, South America is starting to move back towards the centre. But not uniformly so: the left looked set to win again in Uruguay in November 2014. This trend will be at work in Argentina and per haps in Venezuela, the focus of political attention in the region in 2015. In a presidential election in October Argentina will elect a more moderate and pragmatic government, ending a dozen years of populist-nation alist rule, latterly under Cristina Fernández de Kirch ner. The election will be a three-way fight between two Peronists, Sergio Massa and Daniel Scioli, and Mauri cio Macri, the conservative mayor of Buenos Aires. Ms Fernández will float her own candidate (perhaps Flor encio Randazzo, the interior minister), but will probably end up striking a deal with one of the front-runners to preserve a quota of power. Whoever wins will move to settle the long-running dispute with a clutch of New York hedge funds over Argentina’s debt and start to withdraw subsidies and import controls. In Venezuela a legislative election in September will revive the confrontation between the government, now a Cuban-backed largely military regime, and the opposition, di South America vided between the moderate is moving back former presidential candidate, towards the Henrique Capriles, and the rad icals who instigated the street centre protests of early 2014. The un popular government of Nicolás Maduro may try to raise cash by selling citgo, its big oil-refiner and distributor in the United States, to soothe popular irritation over stagflation and shortages. If the opposition manages to
Michael Reid: Bello columnist, The Economist
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THE WORLD IN 2015
Seconds out, Round One Henry Tricks MEXICO CITY
For the first time, Pemex will face competition for Mexican oil
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being streamlined, put under regulatory authority and given a new board of direc tors, its union is still there and old habits die hard. The suspicion is that Pemex will have the advantage when it comes to the first tenders. Already, in the so-called Round Zero allocation in August 2014, it was as signed 83% of all proven and probable reserves in Mexico. In Round One, which is scheduled to start in February 2015 and
y any normal standards, Pemex would be a hard company to love. For 77 years it has had a monopoly over Mexican oil. It frequently has cata strophic accidents. A former refinery turned Mexico City into a smog trap. Its union leaders live like kings. And it does a relatively lousy job—even if it provides the government with a third of its tax revenues. Production has fallen by almost a third since its peak in 2004. Mexico used to have the fifth-highest proven oil reserves in the world. Now they are 18th. Yet love it many Mexicans do, much as Japanese love their rice and Americans love Hollywood. Since Pemex’s founding in 1938, when Mexico took control of its oil industry, it has been a symbol of national pride. Even when the current president, Enrique Peña Nieto, changed the constitution in 2013 to allow foreign investment in Mexican oil for the first time since the original expropriation, he bent over backwards to assure Mexicans that Pemex would not be privatised. As a result of that reform, in 2015 Pemex will, for the first time ever, face competition from inter national oil companies in Mexico. It will be a wrenching change. Unlike many state oil companies, Pemex has never taken part in ten ders to produce oil and gas in other countries. Though the company is There will be more to smile about s
2015 IN BRIEF The Amazon Tall Tower Observatory, the highest building in South America, begins gathering data on greenhouse gases and weather in the Amazon rainforest
conflict that has bedevilled the region’s third-mostpopulous country, and it will be followed by a similar accord with the eln, a smaller guerrilla outfit (though possibly not until 2016). To win a referendum on the peace process, which will probably be held in the second half of the year, the government will have to persuade the farc’s leaders to accept some form of punishment for their crimes; in return, it may grant a mini constitu ent assembly to debate political reforms. All eyes on Castro Cuba will dominate the seventh Summit of the Ameri cas, to be held in Panama in April. Latin America has insisted that Raúl Castro, the Cuban president, is in vited to a gathering from which Cuba was previously excluded because it is not a democracy. This confronts
finish by September 2015, the government will tender 169 blocks covering 28,500 square kilometres (11,000 square miles). In the Gulf of Mexico, adjacent to Ameri can waters where companies like Shell and Chevron have drilled for a long time, for eign and private companies are obliged to team up with Pemex. Many companies It has been will want to ally them a symbol selves with the Mexi can company, but it of national would be a shame if pride there were a “home team” advantage. The real test of Mexico’s energy reform will be seen when a global oil major heads a syndicate to drill in Mexico without Pemex. That would improve the govern ment’s chances of hitting its target of $50 billion in private energy in vestment by 2018. Price differences at the pump
Hopes by left-wing parties that they can halt the energy reform with a referendum at the time of mid-term congressional elections in July 2015 are likely to be dashed. Opinion polls suggest the public is growing used to the reforms, and Mr Peña’s Institutional Revolu tionary Party is tipped to do well. Provided oil prices don’t continue to sink, a stronger economy will provide additional reassurance that the reforms are on the right track. What’s more, in 2015 Pemex will allow its petrol stations to compete with each other on price for the first time. For most Mexi cans, that will be the clearest sign of change. n Henry Tricks: Mexico City bureau chief, The Economist
Barack Obama with a dilemma. With no more elections to face at home, he may opt to attend and talk to Mr Castro. More probably, he will send Vice-President Joe Biden. Further tension may arise from the election of Venezuela to one of Latin America’s two rotating seats on the United Nations Security Council for 2015-16. Similar arguments about how best to deal with Latin America’s awkward squad of autocratic leftist regimes will dominate the contest to succeed José Miguel Isulza, who steps down in May as secretary-general of the Org anisation of American States. This pits Luis Almagro, Uruguay’s foreign minister, against Eduardo Stein, a former Guatemalan vice-president. It will be harder to restore the oas to political relevance in a region whose internal divisions will be sharpened in the short run by the turning of the political tide. n
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new spending and the smaller-government, lower-tax pledges of the Progressive Conservatives, who share many of the convictions of the federal Conservatives, they gave a majority to the Liberals’ candidate, Kathleen Wynne, the first openly gay political leader in Canada. “If Ontario voters think government is the problem and greater acceptance of social diversity is a bad thing, they have a strange way of showing it,” concludes Michael Adams, a social commentator and head of Environics, a research company. One province does not a federal Liberal victory make, not even a province with more than a third of Canada’s 36m people. But national polls paint a broadly similar picture. The number of people who identified with the Conservatives rose in the first part of their mandate, but began falling when ethics and money scandals involving Conservative senators came to light, says André Turcotte, a professor and pollster. The Con servative universe, defined as the pool of voters who could potentially vote for the party, is about where it was in 2005, according to Tom Flanagan, a political scientist who worked on Mr Harper’s earlier campaigns. The economy, once thought to be the government’s strong suit, remains “lethargic”, according to the Confer ence Board of Canada, a business think-tank: growth of 2.3% or so is expected in the year ahead. The Liberals, led ineffectually in the 2008 and 2011 elections, have a new, popular leader in Mr Trudeau, son of the late Pierre Trudeau, who was Canada’s prime minister for 15 years. “I’m not a Justin Trudeau supporter,” says Mr Fla nagan. “But there’s no denying he excites Liberals. Their fundraising has gone up and he attracts big crowds.” Demography does not favour the Conservatives. “Canadian millennials are the most liberal, progressive and multicultural generation in our history,” says Mr Adams of the country’s younger cohort. The Liberals and the left-leaning New Democrats, led by Thomas Mulcair, are working hard to persuade this notoriously ballot-shy group to vote.
2015 IN BRIEF
THE WORLD IN 2015
Justin time Madelaine Drohan OTTAWA
Another Trudeau will probably lead Canada
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othing enrages Canada’s ruling Conservatives more than to hear the third-party Liberals de scribed as the natural governing party of Canada. The Liberals may have held office for much of the last century, but the Tories have held sway since early 2006. For much of that time Stephen Harper, the prime min ister, has been on a crusade to persuade Canadians that they are Conservatives, not Liberals, at heart. His tactics have ranged from the subtle (changing the background colour on government websites from Liberal red to Tory blue) to the blatant: trumpeting Ca Demography nadian military exploits while does not downplaying the Liberal peace favour the keeping tradition. Former prime ministers Conservatives Conservative and their accomplishments have been elevated; those of Liberal leaders ignored. The general election scheduled for October 2015 is a test of whether Mr Harper and his party have changed the country’s default mindset. The prime minister is likely to be disappointed. It looks as if the best the Con servatives can hope for is a governing minority (they won such minorities in 2006 and 2008 and a major ity in 2011). More probably, the Liberals, led by Justin Trudeau (pictured), will return to power. Surveys show that despite the Conservatives’ effort to stamp their brand on Canada, public opinion has been moving fur ther to the left of centre. Proof of this came in the surprising electoral vic tory of the Liberals in the province of Ontario last June. Weighed down by scandal after a decade in power, the party was ripe for defeat. Yet when Ontarians were asked to choose between a leftish Liberal agenda full of
The 2016 temptation The situation is not hopeless for the Conservatives. The economy could conceivably rebound. The anticipated elimination of the budget deficit in 2015 gives them room to further shrink the government or buy votes. Se curity and terrorism, issues on which the Conservatives are perceived to be strong, could rise up the list of public priorities following the October shooting in Ottawa. There remains the possibility that Mr Harper will play for time. In 2008 he ignored his own vaguely worded legislation fixing elections at four-year intervals, and he could do so again. The constitution still calls for elections every five years—May 2016, in this instance. The political landscape may look different by then. n
Just possibly… Máximo Kirchner, the son of the current and previous presidents of Argentina, wins his first public office. A law decriminalising pot for religious and medical reasons allows Jamaican Rastafarians to smoke marijuana. Barack Obama and Raúl Castro sit down and talk at the Summit of the Americas in Panama.
Lonesome George—Galápagos Islander, famous tortoise and dead since 2012—returns to Ecuador after getting some work done in New York
Madelaine Drohan: Canada correspondent, The Economist
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THE WORLD IN 2015
The politics of inclusion
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he world will reach a turning-point in 2015. We have known this would be so since 2000, when 189 countries pledged to make progress on eight Mil lennium Development Goals (mdgs) over 15 years. There have been important improve ments in most of these. Progress has been greatest in the area of poverty and hunger: the aim of reducing extreme-poverty rates by 50% was reached in 2010. Nonetheless, one out of every eight people in the world still suffers from hunger and 1.2 billion people continue to live in misery. Two big mdg shortfalls remain: the need to make progress in education worldwide and the need to ensure the sustainability of our environment. So 2015 will begin with mixed feelings: happiness for advances made in most of the mdgs and a sense of urgency to pick up the pace so that these objectives become reali ties as soon as possible. This is why the post-2015 development agenda will be so important—especially at a time when many economies are beginning to get back to normal after a long period of pain. In this new economic cycle we should draw on the lessons learned from our recent experi ence. The most important is that the market alone is not enough to guarantee progress or the stability of economic systems, much less the wellbeing of citizens worldwide. Development is not defined solely by a high gdp per person. True development in volves sustainable growth, inclusion, social cohesion, governability and the broadening of democracy. It goes hand in hand with diversity, transparency and accountability. It requires freedom, but also social justice. It is synonymous with caring for the environment and respecting human rights. It needs mar kets that prosper thanks to productive inno vation and are not based on speculation. The coming year will provide a test of countries’ willingness to commit themselves to these development demands. It will be a key year for confirming that in future we should strive for greater equality. This implies social policies that allow increased access to opportunities for everyone, and a renewed fight against inequality in all areas. Chile has made this its priority. Among the inequalities that exist, the one that most negatively affects the destiny of each person is the gap in education. In 2015 Chile will undertake reform aimed at achieving highquality, free and integrated education at all levels. To be sure, this is a goal associated with
social, human and political development; but it is also a prerequisite for economic develop ment, as it places the knowledge and abili ties that people possess at the centre of our growth strategy. Chile will also begin a broad debate on our constitution and establish the principles of greater participation and better democracy for all. All together, with a Chilean accent But the commitment to more inclusive and sustainable development cannot occur solely within each country. We Latin Americans know this well, as we fought for and consoli dated our independence collectively. Two centuries on, co-operation between nations remains fundamental, to create alliances in pursuit of our common needs. The sustainability of our planet is one of these. Climate change deepens inequalities, both between countries and within them. It is our obligation to act before the consequences are irreversible. I know that the un’s XXI Conference of the Parties (cop21) on climate change in Paris will contribute to this, as will the Our Oceans conference in Chile. Another common challenge is inequality between the sexes. Confronting inequality, discrimination and violence against women has been a personal commitment of mine; it is part of my government agenda and it was my mission when I was the director of un Women. I know that we have a long road ahead. In 2015 we can take steps forward on these issues at the fifth World Conference on Women, which will be held in Qatar, and at a un Women meeting in Chile. In 2015 the world will continue efforts to strengthen democracy in the face of new challenges. It will move towards a democracy where votes alone are not enough and spaces for greater participation and citizen decisionmaking are required; a democracy stemming from social movements, many of them world wide, that demand to be heard and that today help to create a citizenry that is informed, engaged and has opinions. In all this, I know that Latin America will establish a voice that is ever more its own, with distinct accents, but that knows how to contribute to human development using its richness and experience. In Chile our empha sis is clear for 2015: advance towards a society that is more equal and inclusive through bet ter education, more participation, improved infrastructure, greater investment and in creased innovation. n
A broader approach to development will be needed in 2015 and beyond, suggests Michelle Bachelet, president of Chile
The market alone is not enough to guarantee progress or the stability of economic systems, much less the wellbeing of citizens worldwide
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Asia Also in this section: Myanmar’s choice 64 Modi the action man 65 Just possibly… 65
India’s universities 66 ASEAN’s offspring 68 Abenomics on notice 70 Australia looks abroad 72
Protecting the reef 72 Joko Widodo: Getting on with reform 74
Indonesia’s fresh start Jon Fasman JAKARTA
The pragmatic president will find it harder to get things done nationally than he did locally
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Primary colour
Raw materials and primary commodities as % of all Indonesia’s goods exports
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70
60
50
2004
2005
2006
2007
2008
2009
2010
2011
2012
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Source: Thomson Reuters
tician. But in order to get legislation passed, President Jokowi will have to work with and appeal to precisely those typical Indonesian politicians. He cannot rely on partisanship: members of his coalition hold a minority of seats in Indonesia’s parliament, and the much larger bloc of Prabowo-backers have made clear that they will use procedural manoeuvres and the institutions of Indonesia’s fragile democracy to block him at every turn. And even within his own pdi-p party, his relative inexperience may put him at a disadvantage to both his party chair, Ms Megawati, and his vice-president, Jusuf Kalla, who has served as a legislator, a minister under Mr Wahid and vice-president during Mr Yudhoyono’s first term. Jokowi’s supporters point out that he had a minority in Jakarta’s city council, and still managed to compile an impressive record as governor. They must hope he shows the same mettle as president. Jokowi has ambitious plans for universal health care and education, but unless he trims the country’s immense fuel subsidies he may find himself unable to pay for them. Those subsidies account for around onefifth of total government spending; worse, Indonesians have grown so used to them that simply getting rid of
2015 IN BRIEF Indonesians look back 200 years to the devastation caused by Mount Tambora and the largest volcanic eruption in recorded history
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o appreciate just how unusual a figure Indonesia’s newly elected president, Joko Widodo (known as “Jokowi”), cuts in his country’s politics, compare his background with those of his four predecessors. When Suharto resigned after holding the office for 31 years, he was replaced by the vice-president, B.J. Habibie, who had spent two decades in government. Mr Habibie was followed by Abdurrahman Wahid, who under Suharto’s rule headed Indonesia’s biggest Muslim organisation, which his grandfather founded. Then came Megawati Sukarnoputri, daughter of the president preceding Suharto, and a former legislator and party chair; she was followed by Susilo Bambang Yudhoyono, also a legislator as well as a general in Suharto’s army. Jokowi, by contrast, served neither in the armed forces nor the legislature. He was one of four children born to a timber collector, and he was raised in a shack 40 on a flood-prone riverbank. He graduated from university with a forestry degree, then built up a successful furniture-export business before serving first as mayor of Solo, his hometown, and then as governor of Jakarta. In office he built a reputation for clean governance and frequent blusukan: impromptu neighbourhood visits with a minimal entourage, during which he spoke with—and, more unusually for Indonesian politicians, apparently actually listened to—his constituents. He improved the city’s tax receipts, put government services (including his budget, salary and public meetings) online and built markets for vendors to stop them blocking traffic. Like Barack Obama six years earlier and half a world away, Jokowi’s campaign attracted waves of energetic young volunteers, eager to donate their time and socialmedia savvy. His approachability and modest background His relative appealed to Indonesia’s elecinexperience torate, and propelled him to a six-point victory over Prabowo may put him at Subianto (Suharto’s son-in-law, a disadvantage and a former commander of Indonesia’s Special Forces). His inauguration on October 20th marked the first handover of power from one directly elected Indonesian president to another. But whether the traits that helped Candidate Jokowi will serve him equally well as president remains unclear. Candidate Jokowi won in large part because he convinced voters he was not a typical Indonesian poli-
Jon Fasman: South-East Asia bureau chief, The Economist
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A choice of sorts Jon Fasman YANGON
Myanmar gets ready for elections
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THE WORLD IN 2015
the result. In 2008 a new constitution was foisted on Myanmar in a “referendum” that claimed 93% support and 98% turnout in a vote held days after Cyclone Nargis had devastated the land. Two years later the nld boycotted the first post-constitutional multiparty elections under the new constitution, allowing the Union Solidarity and Development Party (usdp), which grew out of the junta, to claim 75% of the contested seats. In 2012 the nld reversed course, taking part in byelections and winning 43 of the 45 seats it contested. Ms Suu Kyi went from dis-
ate in 2015, at a date not yet set, Myanmar’s voters head to the polls. All 664 seats in the bicameral legislature, except for the quarter held by military appointees, are at stake, as well as the indirectly elected presidency, held since 2010 by Thein Sein. More than 60 parties have registered to take part, most of them small and regional or ethnic-based. A decade ago Myanmar was economically stagnant, isolated from the outside world and ruled by a military junta. But in 2004 Than Shwe, the “senior general”, released a “Roadmap to Democracy”, and the junta began loosening its grip. Today gdp is growing at 6-7% a year; investors are eyeing one of the last frontier markets; and Aung San Suu Kyi, the country’s most famous political prisoner, is a member of parliament. So will 2015 be the year Myanmar becomes a vibrant democracy? The country’s record gives scant reason for hope. In 1990 Miss Suu Kyi’s National League for Democracy (nld) won a multiparty election easily, but the junta ignored The flower power of Aung San Suu Kyi
Having entered Bolivia in 2014, Kentucky Fried Chicken opens a first outlet in Myanmar
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them immediately and altogether may prove politically impossible. A likelier scenario is a multi-year taper, which is better than doing nothing, but still prevents more productive uses of government capital. Indonesia is South-East Asia’s biggest country, both by population (256m) and size of its economy. But gdp growth has begun to slow—from an annual average of 6.3% between 2010 and 2012 to 5.8%, a four-year low, in 2013 and 5.2% in 2014—just as millions of young Indonesians are reaching working age. Slower growth in China and continued European sluggishness have dampened demand for the raw commodities that still comprise too large a share of Indonesia’s exports (see chart on previous page). Jokowi will have to find a way to shift the economy towards domestic consumption and value-added manufacturing. That will be difficult without doing something about Indonesia’s appalling infrastructure. A World Economic Forum survey ranked Indonesia’s infrastructure 82nd in the world—behind Thailand, Mexico and Egypt, among other places—and just barely ahead of India and Tajikistan. The number of days containers spend between unloading and leaving the gates of Jakarta’s port, which handles most of Indonesia’s international trade, rose from 4.8 in 2010 to about six in 2014. But improving infrastructure will take deft political
sident to parliamentarian, and then announced her wish to become president. But for that to happen, given that the army reserves control of a quarter of the parliament, the nld would have to win Thein nearly two-thirds of all Sein has the seats that are actually contested. That is been coy a tall order, even for an about his unfractured opposiplans tion, which Myanmar’s is not—small ethnicbased parties will rack up votes. And a mooted move from a first-past-the-post voting system to proportional representation could further reduce the effect of a landslide loss on the usdp. Then there is the difficulty posed by the constitution, which bars anyone with a foreign spouse or children from being president. Ms Suu Kyi’s two children are British subjects, as was her late husband. The nld is, in effect, her vehicle; without her, its broad appeal would wither quickly. Mr Thein Sein has been coy about his plans, and his health is said to be shaky, which could leave the top spot open for Shwe Mann, the current party boss and Speaker of parliament’s lower house. Min Aung Hlaing, the army chief, may also throw his hat into the ring. Myanmar’s voters will still have a choice—just not much of one. n Jon Fasman: South-East Asia bureau chief, The Economist
manoeuvring as well as huge capital outlays. Soon after Suharto’s resignation Indonesia began a programme of massive decentralisation, giving power not to the provinces (for fear of encouraging secessionism) but to districts and villages. This has made local government more autonomous and responsive—it is doubtful that Jokowi could have got quite as much accomplished in Solo and Jakarta as he did without the power granted to him under decentralisation. But it also means that ambitious national infrastructure projects require approvals from numerous politicians, not all of whom may share the president’s steadfast opposition to graft. Mr Yudhoyono’s presidency was marked by Indonesia’s emergence onto the world stage: the country joined the g20, began the Bali Democracy Forum and took a prominent role in climate-change negotiations. Jokowi begins his presidency with two high-profile international events—the East Asia summit and the g20 summit—in the same week, but foreign policy played little part in his campaign, and at least in the short term he will be a more inward-looking president than his predecessor. He was elected, after all, on his record as a problem-solver, and on the promise that he could do for all Indonesians what he accomplished for residents of Solo and Jakarta. In 2015 he needs to show that he really can. n
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subsidised cooking gas will now get cash payments, using Aadhaar and their bank accounts. To his credit, Mr Modi has decided to push on with Aadhaar, which has already enrolled nearly 700m people. By the end of 2015 that figure should reach 1 billion. He has also freed diesel prices from government regulation. Progress on expanding the far-too-narrow tax net and cutting the fiscal deficit would be welcome, too. A senior figure in the commerce ministry, Amitabh Kant, predicts that India’s dismal place on the World Bank’s ranking of countries according to the ease of doing business will rise dramatically. In the latest report, India slipped back to an ignominious 142nd position, but Mr Kant says technical and bureaucratic reforms, such as compiling into one online process the 64 different forms needed to open a business, will see India ranked in the top 50 within a few years. Mr Modi has made some strikingly bold promises. He vows, for example, that an extra 75m households will get bank accounts before the end of January. He says that by 2019 two enormous problems will be solved. The days of open defecation will end thanks to a massive campaign to build toilets. And a failed effort to clean up the filthy River Ganges will at last get going after 30 years. If either is to have any chance of succeeding, 2015 should bring ample evidence of improvements. Not so important, but more entertaining, should be the early
2015 IN BRIEF
THE WORLD IN 2015
Action man Adam Roberts DELHI
India will find out whether Narendra Modi can keep his promises
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ince he took the job in May 2014, Narendra Modi has emerged as India’s most dominant prime minister in living memory. Power is centralised in his office, his cabinet is deferential and the opposition looks crushed. He is popular and aims to modernise—and may further liberalise—the economy. Lacking funds to pay for a big new push on building infrastructure, he spent his first months in office in a whirl of diplomatic activity, drumming Progress on up foreign capital to give the economy a lift. Engaging expanding the Japan, China and America, far-too-narrow among others, he wants to see tax net would be foreigners building railways, ports, factories and “smart welcome cities”, starting in 2015. However, that is also the year when the flush of excitement about the new leader, and his highly personalised style of governing, could start to fade. Early on, it has been enough for Mr Modi to announce bold plans to keep enthusiasm ticking over. Next, he needs to start delivering some substantial changes. It is his good fortune that only one big state—Bihar—is holding an assembly election in 2015. That means India, for once, can forget party politics and focus more on what needs fixing. The biggest task is the economy. The moment to watch will be in February or March, when Arun Jaitley, the finance minister, delivers his first full budget. His first effort, an interim one in July, underwhelmed most observers. It lacked decisive reforms, only partially eased restrictions on foreigners investing in the insurance, defence and railways industries, and looked too cautious in the light of a huge election victory. Equally disappointing, in the same month India scuppered a World Trade Organisation deal to make global trading easier, for the sake of defending food subsidies at home. Mr Jaitley has since set a target of 2016 for implementing a nationwide goods-and-services tax—a long-delayed measure to free internal trade by creating a single market. In the coming year he needs to make headway in preparing the ground for that. He needs, too, to set out how India’s prehistoric system of food subsidies, rations in kind, can be replaced with a cashbased welfare scheme, making use of Aadhaar, a bio metric system to identify recipients. People who receive
Just possibly… Under covert pressure from China, Kim Jong Un is replaced as leader of North Korea, and the disintegration of the regime gathers pace. Narendra Modi, the leader of India, who is due to visit China, strikes a deal on the countries’ Himalayan border.
Turkmenistan marks 20 gloriously impartial years with the Year of Neutrality and Peace. On December 12th 1995 the UN recognised the country’s “permanent neutrality”
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The wreckage of Malaysian Airlines flight MH370 is found at the bottom of the Indian Ocean.
The wind in his sails
Adam Roberts: Delhi bureau chief, The Economist
Asia
2015 IN BRIEF
work on the world’s tallest statue, of Vallabhbhai Patel, a hero of independence whom Mr Modi venerates. It is to be twice the height of the Statue of Liberty, and is supposed to be finished by 2018, in Gujarat; $33m is budgeted for the first stages. Mr Modi has been careful to sound statesmanlike, using speeches to urge an end to Hindu-Muslim violence. But more religious tension has been evident, at least before elections late in 2014. That Mr Modi’s ruling Bharatiya Janata Party (bjp) named a Hindu fringe leader to lead a by-election campaign in Uttar Pradesh was troubling. It is also disturbing that Mr Modi’s close acolyte, Amit Shah, is now the national president of the bjp. He has murder charges against him from his time in Gujarat. A recent inflammatory campaign by Hindu-
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Pope Francis heads to Sri Lanka and the Philippines, respectively the third and fourth papal visits to the two countries
THE WORLD IN 2015
nationalist types claimed that Muslim men engage in “love jihad”, an effort to seduce and convert Hindu women. Thankfully Mr Shah avoided such efforts in more important state elections in October, an acknowledgment that voters care most about development. As for opposition to the prime minister, don’t expect much. The Congress party failed doubly in 2014, first in its disastrous election, then in not daring to ask why it lost so badly. One answer is that its nominal leader, Rahul Gandhi, is not up to the job. He subsequently refused to take over party leadership in parliament, so is unlikely to become any more effective as a politician in the year ahead. In 2015 Mr Modi should have few distractions from the task of putting his promises into practice. n
India’s university challenge Adam Roberts DELHI
Big on quantity, short on quality
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f your five-year-old starts school in India in 2015 she will be ready to enrol at university in 2028. That is also the year when India’s population should pass 1.45 billion and become the world’s largest. By then, will there be enough highquality graduates to ensure the country’s prosperity? No chance—unless a rotten education system is fixed first. With some 240m children in school, India will make some gains in basic literacy. But most education remains poor. College-level studies are especially weak, though the sector is booming. The share of school graduates going on to higher education leapt from 11% in 2004 to 23% in 2011. By 2015 India will have some 35,000 colleges, plus 700 universities, with more to come. Narendra Modi, the prime minister, has promised several new institutes of management and technology. His government plans to open 60 new universities, including medical and engineering colleges. But most expansion will be in the private sector, which already caters for 60% of students in higher education. The problem is a lack of quality. In 2015 don’t expect any Indian university, private or public, to make the top 200 of any global ranking of universities (though India will do better in mba league tables). Too few colleges care about teaching standards, let alone research. The worst private outfits serve, in effect, as moneylaunderers. Even honest ones emphasise marketing over teaching: glitzy ads lure students with swimming pools, marble foyers or guarantees of jobs. Colleges often devote over a fifth of revenue to acquiring new students, more than they pay faculty. Students care little for study, as
few are ever allowed to fail exams. So outcomes will disappoint. Around a third of Indian graduates will remain unemployed, despite employers bemoaning a lack of skilled recruits. Varun Aggarwal of Aspiring Minds, a company that surveys student capabiliToo few ties, estimates that if colleges university exams were run properly, 70% of care about students would fail. Of teaching 700,000 engineering standards graduates in India each year, he reckons only 3% are employable without many months of post-recruitment training. Only 15% of computer-engineering graduates could complete a basic task set in one assessment, he says. Language and other “soft”
No country for young minds
skills are often poor. Some signs of quality may emerge. Competition to attract students should eventually drive up standards. A few philanthropists are launching new institutions aspiring to excellence. Ashoka University, near Delhi, is one. It is intended as an Ivy League-standard liberalarts college. One founder, Ashish Dhawan, a former venture capitalist, says the first goal is quality, to “set the bar really high”. It eschews marketing, has foreign partners (including the University of Pennsylvania), offers visiting faculty decent salaries and limits entry to relatively few bright students. It is a couple of years old, and applicants vastly outnumber available places. Other new private universities have similar goals. But still there is no serious funding for research. Only when that is in place will an Indian university make it into a global top 200. Not in 2015, but with luck before 2028. n Adam Roberts: Delhi bureau chief, The Economist
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THE WORLD IN 2015
Safety in numbers Simon Long SINGAPORE
ASEAN invites comparison with the EU
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he ten-member Association of South-East Asian Nations (asean) is proud of its way of doing things, which to the outsider sometimes looks like doing very little at all, except for holding many meetings every year. The club has long billed 2015 as a transformational year, with the arrival of “the asean Community”. But it would be a mistake to expect dramatic change in an organisation whose hallmark is slow, consensual progress to a goal, regional integration, which often seems more attractive in theory than in practice. Rather, 2015 will be another year in which the political rhetoric is a long way from economic reality. Of the community’s three “pillars”—socio-cultural, political and economic—it is the asean Economic Community, the aec, that has generated most excitement. asean ministers like to boast that it will unite a regional economy of more than 600m people and a gdp of over $2.5 trillion into a single market and a single production base. That makes it sound as if an eu-style South-East Asian Union is in the offing. It is not. A study by the Asian Development Bank (adb) and the Institute of South-East Asian Studies (iseas), a think-tank in Singapore, concluded that asean “has no prospect of coming close to…[a] single market by the aec’s 2015 deadline—or even by 2020 or 2025.” Countries in the region have no interest either in building the sort of central bureaucracy that sustains the eu, or in surrendering more than an absolute minimum of national sovereignty. asean has a small, understaffed and underfunded secretariat, whose functionaries have for years been trying to dampen expectations about what 2015 might mean. It is a milestone, they say, not
MYANMAR
2015 IN BRIEF Japan completes the installation of the world’s largest battery, for storing excess solar and wind power, in the northern island of Hokkaido
Simon Long: Banyan columnist, The Economist
LAOS VIETNAM
THAILAND
CAMBODIA
PHILIPPINES
BRUNEI MAL AY SIA SINGAPORE
INDONESIA
The measure of ASEAN* GDP, $bn Population, m GDP per head, $
ASEAN total EU28 total 2,756 18,160 630 510 4,370 35,620
China 11,628 1,360 8,550
India Myanmar 2,515 52 1,270 54 1,980 970
Thailand 422 67 6,260
Indonesia 990 256 3,870
a finishing-line. Even so, it was in effect moved back 12 months in 2012, when asean agreed that “2015” meant not January 1st of the year but December 31st. Three big obstacles stand in the way of the aec. The first is the sheer diversity of asean’s members. When the organisation, founded in 1967, admitted Laos and Myanmar in 1997 and Cambodia the following year, it was condemning itself to slower integration for the sake of regional completeness. Cambodia in 2015 will have a gdp per head of about $1,260. Singapore is 47 times richer. And asean includes countries with Buddhist, Muslim and Christian majorities; communist dictatorships; democracies; an Islamic sultanate and a military junta. Second, private businesses in many asean countries compete fiercely with each other and often lobby against the market-opening measures the aec requires. And third, asean’s biggest country, Indonesia, is also among the most prone to economic nationalism. The election victory of the new president, Joko Widodo, in 2014 was cheered by Indonesia’s asean partners. At least he was not a tub-thumping protectionist like his rival, Prabowo Subianto. But he will struggle to cobble together winning votes in parliament. Another adb study found that the Indonesian workforce was among the worst placed in asean to benefit from the aec’s liberalisation of labour mobility: it lacks well-qualified workers. Surrounded by giants That asean has integrated as far as it has is thus surprising. Virtually all categories of goods traded within the block are now tariff-free. The few exceptions are important, but still, by volume, some 70% of intra-regional trade incurs no tariffs and the average tariff rate is less than 5%. Yet the adb/iseas study concluded that “non-tariff barriers have replaced tariffs as protective measures for domestic industries.” asean’s tradition of “non-interference”, and the absence of penalties for non-compliance, make removing these difficult. Pressure for faster integration, though, will come in 2015 from two sources. One is the domestic private sector. Many businesses in asean see other member countries not as competitors but That as their market, and the region’s governments and asean itself as ASEAN has getting in the way. AirAsia, for exintegrated as ample, a low-cost airline launched in Malaysia, has tried to be a flag- far as it has is carrier for asean integration. Its surprising boss, Tony Fernandes, complained in 2014 that it had taken him three years to secure agreement to have a sean’s logo (a sheaf of ten rice stalks) emblazoned on one of his aeroplanes. “We must transcend nationalism and embrace regionalism,” he declared. The other pressure is external. asean competes for investment and markets with China to the north, and, increasingly, with India. Both are far more integrated markets with twice as many people. In economics as in geopolitics, many in asean feel the countries of the region have no option but to cling together. n Laos Vietnam Cambodia Malaysia Singapore 14 204 20 371 336 7 91 16 31 6 1,950 2,230 1,260 12,090 58,910
Brunei Philippines 16 332 0.4 102 37,340 3,260
*2015 forecast Source: Economist Intelligence Unit
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Asia
Coming to a crunch Tamzin Booth TOKYO
Time is running out for Abenomics
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uring two lost decades, pundits have prophesied a string of new dawns and turning-points for Japan’s economy, and most have come to naught. Yet there is little doubt that 2015 will go on record as a crucial year. Three key events will test the three-part plan of Shinzo Abe, the prime minister, to restore some vim to the economy.
Land of the rising tax
2015 IN BRIEF South Korea launches the world’s secondbiggest carbonemissions trading scheme
Tamzin Booth: Tokyo bureau chief, The Economist
First, the Bank of Japan (boj) will confront a rough deadline for its pledge to banish deflation. Most thought it would certainly miss its target, but its extra dose of quantitative easing announced in October 2014 gave more hope of reaching inflation of 2%. Second, a further rise in the consumption tax, Japan’s version of value-added tax (vat), is due in October, 18 months after one in 2014. Given Japan’s parlous public finances, general wisdom holds that Mr Abe will have little choice but to go ahead. Yet another punch to consumer spending could floor a slowly recovering economy. Third, Mr Abe, who remained politically unassailable in 2014, could face a trickier runup to the election for the presidency of the Liberal Democratic Party (ldp) in September. A less than stellar win in this contest, and for the ldp in a series of local elections in the spring, could erode his ability to get things done. There is potential, indeed, for 2015 to be the year in which Abenomics, as Mr Abe’s programme is known, starts to unravel. He spent much of 2013 and 2014 basking in international acclaim for his radicalism. Markets hailed the boj’s monetary easing as a triumph and welcomed an expansion of it in the autumn of 2014. The second part of Mr Abe’s plan, a fat dollop of fiscal spending, mostly reached its target. Yet the third, a set of ambitious structural reforms designed to boost the supply side of the economy, is still in the making. Mr Abe has to decide soon whether or not to proceed with the second tax increase. No other large coun-
THE WORLD IN 2015
try has doubled vat in just a year and a half, and for good reason. The Japanese public is opposing a second tax rise more vociferously than the first. Yet there is little scope to shirk the task of tackling the public debt, which now stands at over 240% of gdp. In 2015 Japan may only just meet a key target of reducing its primary deficit— the gap between government expenditure and receipts, excluding interest payments—to about 3.2% of gdp. If Abenomics eventually fails, Mr Abe’s supporters will point to the tax rises of 2014 and 2015 (if the second rise goes ahead) as the chief reason. The increase in April 2014 caused gdp to slump by a much-worsethan-expected 7.1% on an annualised 2015 may basis in the subsequent quarter. Another seem like rise will certainly require yet more fiscal a re-run stimulus in additon to the boj’s second of 2014 round of monetary easing. Thus far, the boj has achieved inflation of no more than 1.5%, excluding the effect of the consumption-tax rise, and as the impact of a weak yen abated in the middle of the year, price indices started to head downwards again. If the expanded easing does not soon show an effect—and some of the boj’s transmission mechanisms, such as bank lending, are clearly not working as well as hoped—the first arrow will again come into question. All the monetary largesse, if unaccompanied by structural reform, could eventually unnerve bond markets. The best sign of progress on the third arrow would be a robust deal on the Trans-Pacific Partnership, a freetrade agreement, yet a pact remains elusive. Another test will be whether or not the government is willing to tackle Japan’s inflexible, two-tier labour market. Yet many fear that 2015 may instead witness a return to oldfashioned pork-barrel spending in the countryside as part of a new scheme to boost regional economies—the opposite of future-minded reform. Mounting inflation and the consumption-tax rise of 2014 have squeezed household spending power, as wages have failed to keep pace. In the spring voters will have ample opportunity to punish the ldp in nationwide local elections. Even so, Mr Abe may take advantage of the weakness of Japan’s opposition to call a snap election for the lower house of parliament in the summer, in preparation for the party-leadership poll later on. Déjà vu with a difference Mr Abe’s national-security agenda will also make heavy claims on his political capital. In 2015 he wants to start passing a series of unpopular bills to allow Japan to come to the defence of allies if they are attacked. This will add to rumbling tensions with China and South Korea. In the year of the 50th anniversary of the normalisation of relations between Japan and South Korea, and the 70th of the end of the second world war, eyes will be on Mr Abe to see if he will, as previously hinted, issue a new “forward-looking statement” on Japan’s wartime record. It could further inflame regional tensions. In many ways, 2015 may seem like a re-run of 2014. In addition to the latest round of monetary easing, there will be more fiscal stimulus to offset a consumptiontax increase and further moves on structural reform— in short, more Abenomics. But this time, unless results are rapidly forthcoming, voters are unlikely to remain so tolerant. n
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2015 IN BRIEF
On Australia’s radar
Papua New Guinea hosts the four-yearly Pacific Games, with athletes from 24 countries competing in 28 sports
Robert Milliken: Australia correspondent, The Economist
Robert Milliken SYDNEY
Looking back to Gallipoli, and ahead to China
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ustralia will look backwards for one of its biggest events in 2015. On April 25th it will mark the centenary of the first landings of its troops on the Gallipoli peninsula in Turkey. This disastrous firstworld-war campaign cost the lives of 8,700 Australians and 2,700 New Zealanders, and the commemoration will show how strongly Gallipoli has marked Australia’s sense of nationhood. Only 13 years after its founding the young country went to war as a British dominion, but it came back more confident about its place in the world. The centenary will resonate with Tony Abbott, the prime minister who led the conservative Liberal-National coalition to power in 2013. He is an ardent Anglophile: he restored British-style knights and dames to Australia’s honours system, 40 years after they were abolished. To many voters, this merely confirmed the idea that he was out of touch with modern Australia. His government’s failure to convince Australians of the merits of big spending cuts in its first budget in 2014 only worsened its fortunes. For much of its first year in power
Great Barrier Grief Robert Milliken SYDNEY
Judgment day for a natural icon
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THE WORLD IN 2015
ature-lovers, divers and adventurers will flock to the Great Barrier Reef in 2015. What unesco calls “the world’s most complex expanse of coral reefs” is home to 400 types of coral, 1,500 fish species, whales, dolphins, seabirds and turtles. But the reef, which extends about 2,300km (1,500 miles) along Australia’s eastern state of Queensland, has never
it trailed the opposition Labor Party in opinion polls. In 2015 a critical task will be to steer the economy through its transition from a dream run, after a resources boom linked to China. Growth will fall to 2.5% and unemployment will rise above 6%. If iron ore, Australia’s biggest export, does not recover from its 2014 price falls, the effects will be felt across the economy. Mr Abbott has surprised his critics with more sure-footedness in his conduct of foreign policy than he has managed on the home front. His talks with the leaders of Japan and India strengthened relations with both countries. Australia will start naval exercises with India in 2015, and share defence know-how with Japan. Broadening both relationships to include security will be a hedge against China’s rising military power. Australia’s jostling between China, its biggest trading partner, and America, its main strategic partner, will come into play in the remote outback of Western Australia. America moved a radar system there from the Caribbean in 2014 because Australia’s biggest, emptiest state allows quicker detection of satellites launched from China. A second ground station may start operating in Western Australia in 2015. Australia’s space-monitoring task would draw it into any conflict between America and China. This will be a far cry from Western Australia’s role as the embarkation point for the first troops who sailed to war in Gallipoli a century ago. n
been more threatened. Australia will face a moment of truth over its management of this national icon. Thirty-four years after the un listed the reef as a World Heritage Site, it will decide in June whether to add it to the World Heritage in Danger list. Over the past 29 years, the reef ’s coral has been disappearing. This has been “most severe” along the southern twothirds of the reef, says the Great Barrier Reef Marine Park Authority, the Australian body charged with protecting it. Marine scientists largely blame rising sea temperatures and acidification, linked to climate change, and nutrients and pesti-
cides washing from farms into the Coral Sea and the Pacific Ocean. A bigger threat now looms from coal. In 2014 the government approved the dumping of about 3m cubic metres of dredging spoil inside the reef ’s waters from a planned expansion of the port Australia at Abbot Point. This will face a would allow Adani and gvk, two Indian moment of companies, to ship coal truth from big new projects in Queensland’s Galilee Basin. Earlier, dredge spoil from Gladstone, a southern reef port, was dumped offshore to allow liquefied-natural-gas exports from 2015. Some of the Abbot Point sludge could be dumped inland instead. Greens say the reef could still suffer from increased shipping, and the impact on oceans of carbon emissions from the exported coal. The federal and Queensland governments produced a draft plan in late 2014 for “protecting and managing” the reef up to 2050. unesco wants an updated conservation report from Australia by February, before the decision in June. Two things could save the reef from more trauma. Its tourism industry, worth about A$5 billion ($4.6 billion) a year to Queensland alone, is outraged by the dumping plans. And if coal prices continue to fall in 2015, the Galilee Basin’s black stuff will probably stay in the ground. n
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THE WORLD IN 2015
Getting down to business in Indonesia
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or Indonesia 2015 will be a busy year. Expectations are high. We are the world’s third-largest democracy. We are also the planet’s most-populous Muslim-majority nation, proving that Islam and democracy are not incompatible. Our adherence to our national motto, Bhinneka Tunggal Ika (Unity in Diversity), remains constant. Still, there is a great deal to accomplish. Some 16 years after the reformasi that ended the Suharto era, a better life remains elusive for many Indonesians. Although Indonesia has grown to be the world’s tenth-largest economy by purchasing-power parity, inequality has worsened. Some would argue that democracy has widened the gap between rich and poor. I was elected to resolve these disparities. Democracy must deliver greater prosperity to all. Managing a country of Indonesia’s size is not easy. We need a substantial break with tradition. We must also tackle a number of critical weaknesses. The recent “resource boom” is over. Indonesia has to stop relying on natural resources and diversify its exports. We must invest more in infrastructure and manufacturing, as well as research and development. I will do all I can to speed up the completion of projects like the 615km (380-mile) Trans-Java toll road. Indonesia must also improve its ports. We are an archipelagic nation. A renewed focus on our maritime potential will unlock the enormous wealth of our seas. Better ports will also improve efficiency in transport and logistics domestically. Thanks to new capacity, Indonesia’s container traffic is expected to grow significantly in 2015. But waiting times for document-processing have increased. This must change. If my intervention can help move things along—for example by speeding up land acquisition or cutting red tape—I will not hesitate to act. More importantly, Indonesia must improve its human capital. The quality of our education and health care has to be upgraded. According to the World Bank, Indonesia in 2012 spent just 3.6% of its gdp on public education, far less than our neighbours. We risk squandering our demographic boom. About 50% of our 250m-strong population is under the age of 30. The choice ahead is clear: we must turn the young into the drivers of our future economic growth. If we fail, they will become a massive, disaffected burden. Indonesia’s fuel-subsidy regime is in desperate need of reform. The previous government’s final budget set aside 276 tril-
lion rupiah ($22.5 billion) for fuel subsidies alone. This is unsustainable. I will work to shift subsidies gradually from consumption to productive purposes. The savings will be channelled to where they are truly needed: public transport, social security and improving agricultural yields. These reforms will not come easily or quickly. But we must get on with things. Many are wary of the perceived corruption and inefficiency in Indonesia. Every country in the world faces these problems, but that is no excuse. I will defend and strengthen the independence of our Corruption Eradication Commission in stamping out such practices. E-government initiatives will be implemented to foster transparency and efficiency. Yes I blusukan I will also continue my practice—which I began as mayor of Solo and then as governor of Jakarta—of blusukan or impromptu visits. When I go on such visits, I hit the ground, meet people, listen to their concerns and eventually figure out solutions for their problems. I am sure this will help win the public’s support for reform. But ordinary Indonesians, too, must contribute to pushing the country forward. We need a “mental revolution”, a belief that we can improve our lives. The beginnings of this are visible. During the last election, people from all walks of life volunteered to support my campaign and take back politics for the masses. I want ordinary Indonesians to continue scrutinising government delivery and services at all levels—and that includes my own performance. The passion and commitment of my volunteers is a reminder that much is expected of my administration. Some observers say Indonesia should assume a regional, even global leadership role. We are willing to act as an honest broker in the South China Sea and on other global issues. But we can make a difference abroad only if we have credibility, growth and renewal at home. Fundamentally, the challenge for my government is to restore trust. Whether it is the private sector, foreign investors or even the Indonesian public, we must convince them that Indonesia’s potential is more than just hype. There is a lot to be done in 2015. Leaders like me must work night and day to retain the trust of the people as we seek to rebuild global faith in Indonesia’s future prospects. It is time for Indonesians to roll up our sleeves and get down to business. n
Joko Widodo, president of Indonesia, says his country must roll up its sleeves for reform
We can make a difference abroad only if we have credibility, growth and renewal at home
THE WORLD IN 2015
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China Also in this section: A services boom 76 A lower growth target 78 Just possibly… 78
Ever more muscle James Miles
Slower growth, but rising power
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for deal with South Korea and Japan and another (known as the Regional Comprehensive Economic Partnership) with the ten members of the Association of South-East Asian Nations plus Australia, India, Japan, New Zealand and South Korea. Even though China’s economic growth will slow further in 2015, the country will remain hugely attractive to others in the region and beyond as a source of demand and investment. For example, China in the coming year could well become the world’s largest spender on business travel (though most of the money will still go on domestic trips). In 2015 outbound investment from China could well exceed, for the first time, the amount that foreign firms invest in China. A slowing economy will not affect China’s extra-terrestrial ambitions, including plans to build a space station and, possibly in a decade or so, land an astronaut on the Moon. Expect a Preparations are under tightening of way. In 2016 China will restrictions launch Tiangong-2, a space lab that will test on WeChat technologies for a space station. The following year a Chinese spacecraft will return to Earth after collecting lunar samples. China has just finished building a new spacelaunch facility on the island of Hainan. Officials hope the base will become a huge tourist attraction in the year ahead, with thousands of visitors flocking to see launches.
James Miles: China editor, The Economist
The mighty Xi Such displays of China’s rising power will help to boost Mr Xi’s status at home. In the year ahead it will become ever more evident that Mr Xi has abandoned the Communist Party’s once hallowed notion of “collective leadership” in favour of strongman rule by himself. But his power will not make him feel entirely secure. In 2015 the
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resident Xi Jinping, having acquired more power than any other leader possibly since Mao Zedong, has just added another feather to his cap. China will enter 2015 as the world’s largest economy, in purchasing-power terms. Mr Xi will not trumpet this achievement. China’s leaders are acutely aware of how their country’s rise unsettles some in the West. But anxiety about China will nonetheless grow in the year ahead. Under Mr Xi’s leadership the country has been trying to reinforce maritime claims in the Western Pacific, thus fuelling tensions with neighbours as well as with America. In 2015 frictions will not subside. China has said 2015 should be a year of “maritime co-operation” with South-East Asian nations. Yet it shows little sign of willingness to scale down its efforts to stake out what it regards as its territory in the East and South China Seas. These include building structures on disputed islands and reefs, sending coast-guard vessels to patrol near them, and exploring for oil and gas in contested waters. Some countries worry that China may declare an “air-defence identification zone” over the South China Sea, just as it did over the East China Sea in 2013 to the consternation of Japan and America. Such a zone would require planes travelling through it, even in international airspace, to report to the Chinese authorities. It would probably have little if any impact on air traffic, but other countries in the region would see it as a provocative gesture. By early 2016 it is possible that a un court will rule on a case lodged by the Philippines challenging China’s claims. China has said it will not accept the verdict. Mr Xi hopes that China’s economic muscle will help deter other countries from responding to its assertiveness with anything more than verbal expressions of outrage. In 2015 China will push for progress on several free-trade negotiations. These include one hoped-
China
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THE WORLD IN 2015
A hunger for better services Vijay Vaitheeswaran SHANGHAI
The Middle Kingdom meets the Magic Kingdom
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is composed of services; in America, the figure is closer to four-fifths. Services still lag in China compared with advanced economies, but the sector has more than doubled in size since 1980. Its growth now outpaces that of manufacturing, and the day is coming soon when services will In Shanghai, account for more services than half of China’s already make total output. In up 60% of increasingly postindustrial Shangoutput hai, services already make up 60% of output. Over the past three years, calculates Andy Rothman of Matthews Asia, an investment firm, average annual consumption growth in China has been around 9%. By contrast, it was 1% or less in Japan, America, Germany and Britain. Nominal
he most ambitious Disney theme park to be built outside Florida is due to open in China by the end of 2015. The park, which is likely to cost over $5 billion to construct and which will sprawl over a million square metres, will boast the biggest and most princess-filled Storybook Castle in the world. However, when Shanghai Disneyland throws open its gates, it will mark more than the mere arrival of the world’s best-marketed rodent to the Middle Kingdom. It will also herald the dramatic rise of the country’s long-suffering middle class. China’s state-led model of economic development has favoured investment over consumption. Officials have practised “financial repression”, with banks offering working folk meagre or even negative real rates of interest on their deposits. The gains are then used to direct subsidised capital to favoured state-run firms and national champions in industry. In this and other ways, the system has repressed consumption. Happily for punters, the country’s leaders have changed tack of late. They are now keen to boost consumption in their effort to shift the economy to a more sustainable path. That promises to lead to a surge in services catering to the needs of consumers. These range from retail and tourism to finance and health care, areas that have historically been dwarfed by China’s formidable manufacturing industry. In developed nations, perhaps two-thirds of gdp Gourmet enough?
Work finishes on the 42km Hong Kong-ZhuhaiMacau bridge
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2015 IN BRIEF
number of internet users in China will grow to 750m, double the combined number of those in America and Japan. Many of them will use social media to engage in irreverent discussion of current affairs; a few braver ones will be highly critical of the party and its leaders. A vast army of censors will step up efforts to keep them under control. Expect a tightening of restrictions on WeChat, a hugely popular social-networking service that has been operating more freely than the closely watched microblogs, known as weibo.
incomes have been rising at some 14% a year even in the bottom tenth of urban households. Now the next wave of consumption is on the horizon. The coming services surge could be a bonanza for private firms—and, just possibly, for foreign ones too. Stephen Roach of Yale University forecasts that growth in services by 2025 could amount to $12 trillion. Depending on assumptions of how the country opens up and how many of those services are tradable, he reckons foreign firms could expect a new market worth $4 trillion-$6 trillion in China. Recent liberalisation in the health sector, for example, means that 2015 could bring a flood of private capital into posh hospitals for the well-off. At the moment, such people often travel to Hong Kong or Singapore for medical care. Even faraway Cleveland Clinic in America has seen Chinese medical tourism double in recent years. But, in a sign of the times, the clinic is now collaborating on improving brain health with a hospital in Beijing. Foreign investment in health care will accelerate in 2015, especially in higher-end services such as retirement homes for the agile elderly. According to the McKinsey Global Institute, Shanghai and Beijing will head the list of global cities with the highest number of wealthy oldies in future: five of the top ten cities will be in China. China’s middle classes are becoming increasingly fed up with shoddy services. Their pent-up demand for better ones points to a coming innovation boom in everything, from dry-cleaning to gourmet-food delivery to entertainment. Mickey would surely approve. n Vijay Vaitheeswaran: China business editor, The Economist
China’s internet users will have much to discuss in 2015. They will surely feast on details that are likely to emerge of investigations into Zhou Yongkang, a retired security chief who is the highest-ranking politician to be targeted for corruption since the party came to power in 1949. A key test of Mr Xi’s strength will be whether he decides to put the well-connected Mr Zhou on trial. It is probable that he will. If so, the case will offer an extraordinary glimpse into wrongdoing at the very top of the party. n
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China
The number to watch
THE WORLD IN 2015
get will indicate that Mr Xi is ready (and confident he has enough political capital) to pay that cost. Reforms will come on several fronts. A new budget law Simon Rabinovitch SHANGHAI And breathe... will allow provinces to issue bonds directly, a step towards China’s air putting their finances in order by making debts transparquality may Prepare for a lower growth target ent. Tentative moves so far to get state-owned enterprises improve as to sell assets to private investors will gather steam. Regulacertain types he more China tries to move away from focusing tors will order banks to bring more shadow loans back of poor-quality on economic growth, the more it is pulled back onto their balance-sheets, while still coal are banned that way. Environmental protection, scientific intolerating a roaring business in wealth- It will be a novation, health indicators—these are just a few of the management products—substitutes for turbulent criteria that the Communist Party has said ought to disnormal deposits that are ushering in de year for place gdp in assessing the performance of officials. But facto interest-rate liberalisation. Chinese in March the eyes of officials, investors and corporate Two long-delayed reforms will see bosses will fix on the very thing that the government daylight. First, the government will infinance troduce a nationwide property tax, a wants to de-emphasise: the official growth target. new revenue source that will also impose costs on homeAt the start of China’s Target practice owners sitting on empty apartments. The tax will be low ersatz national parliament, China’s GDP, % change on previous year* at first—to avoid crashing the housing market. Second, Li Keqiang, the prime minister, will present a report 14.2 banks will at last agree to a deposit-insurance scheme, a 14.2 laying out priorities for the backstop for savers if a bank ever goes bust. That will coming months. Some bits open the door to the collapse of badly managed of this will be well-worn institutions, forcing investors to do a better slogans, repeated so often 11.6 job of pricing risk. Actual growth as to be drained of meanAnd not a moment too soon. It 10.4 10.1 10 ing. Others will be worthy will be a turbulent year for Chinese 9.6 9.2 and admirably precise, such 8.9 finance. A property downturn will 8.3 as pledges to spend more deepen as a multitude of new 7.7 7.6 7.3 money on affordable houshomes are completed, add7.0 ing to a backlog that is already ing and on rural education. putting pressure on developYet it is the target for gdp, a 9.0 ers’ prices. Bills from China’s single number planted half8.5 way through the speech as if explosive credit growth will 8.0 8.0 8.0 7.5 7.5 3.8 it is an afterthought, that will also come due in greater vol7.0 7.0 umes: 200 billion yuan ($33 command by far the most Government target 6.0 attention. billion) of high-interest trust It was not always thus. The loans to property companies 4.5 tradition of shooting for an anwill mature, almost double nual growth rate dates back to the 2014 total. Nearly 40% the 1980s. For much of that time, of China’s $3 trillion in local-government debts were though, the target was set well meant to have been paid off below the economy’s real trajectory, making it irrelevant. Yet as 1986 88 90 92 94 96 98 2000 02 04 06 08 10 12 14*15 by now, but many were rolled *Forecast for actual growth Forecast China’s economy has slowed, the Sources: Economist Intelligence Unit; China’s government over—they will cast a shadow target has morphed into a hard over credit markets. In 2014 commitment that guides and, the first-ever corporate bond critics argue, distorts policy decisions (see chart). In both default in China’s domestic market caused a stir but its 2013 and 2014, at risk of falling far short of the 7.5% tarinvestors were eventually rescued; in 2015 defaults will get, the government deployed rounds of “mini” stimulus become more familiar, with bailouts less forthcoming. spending to push growth back towards it. These problems stem from China’s economic distortions of the past five years. gdp was turbo-charged by Seven, seriously unsustainable lending pumped out by a financial system In 2015 the government will give itself more breathing lacking in transparency. It is high time for slower growth space: it will lower the growth target for the year to 7%. and faster reforms to stop the rot from spreading. n Many officials worry that even a slight reduction will spook Chinese companies and investors. But it will be Just possibly… the surest way for President Xi Jinping to signal that A state of emergency is declared in Hong Kong and the he is serious about reform. Wide-ranging changes— Chinese army is deployed on the streets. freeing interest rates, loosening the hold of state-run For the first time since the People’s Republic of China was monopolies, relaxing controls on the flow of money founded in 1949, the presidents of China and Taiwan meet. across borders—are needed to realise the economy’s long-term potential. In the short term, these will cause The Dalai Lama, Tibet’s spiritual leader, makes his first visit Rabinovitch: pain, wrenching China away from the government-led Simon to China since 1959 on a pilgrimage to Shanxi province. Asia economics editor, investment that has fuelled its growth. A lower gdp tar- The Economist
2015 IN BRIEF
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Middle East and Africa Also in this section: Kurdish calculations 80 The bright spots 81 Getting ready for business with Iran 82 Ebola’s economic impact 82
Africa’s debt problems 83 Just possibly… 83 Tony Elumelu: Africapitalism 84
The march of jihadism Anton La Guardia
As instability spreads, calls for intervention will grow
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n their fantasies, the jihadists of Islamic State (is) do not quite know whether they are reliving the early glories of Islam, or are engaged in the final battles before the Day of Resurrection. Those who leave home to fight in Syria and Iraq think of themselves as muhajirun, or “emigrants”, like the followers of the Prophet Muhammad who forsook Mecca to set up in Medina. Their many setbacks are akin to the early tribulations of the Prophet. But now the true believers have burst forth, just as their seventh-century forebears surged out of Arabia and conquered all before them. As it happens, the leader of is’s “caliphate”, Abu Bakr al-Baghdadi, goes by a nom-de-guerre inspired by Abu Bakr, the first caliph or “successor” of the Prophet. What of the American-led air campaign against is? Rejoice! It is the great battle of the End of Time that will take place in Dabiq (in Syria), according to a prophecy recorded in a hadith, or saying of the Prophet: one-third of the Muslim warriors will flee; one- Into battle against the unbelievers third will die; and the remaining third shall conquer “Constantinopole” (ie, America). Such is the nonsense peddled in is’s glossy online magazine, entitled Dabiq. In one respect, though, the jihadists’ fantasy has a telling parallel: the early Muslims defeated two empires, Persia and Byzantium, that were rotten and exhausted. The spectacular success of is, which secured a base in eastern Syria and then swept across the border to conquer much of northern and western Iraq in 2014, owes as much to the awfulness of rulers in Damascus and Baghdad as to the prowess of is’s fighters. Both multi-ethnic states have been ruled by minorities espousing ultra-nationalist Baathist ideology— totalitarian, brutal and, as a result, brittle. In Iraq, Saddam Hussein was overthrown by America, which Anton La Guardia: East and never found a way of putting the country back together Middle Africa editor, again. In Syria, Bashar Assad clings to power in a rump The Economist
of territory, partly because America shrank from taking military action against him, despite his use of chemical weapons, and partly because he is supported by both Russia and Iran. The jihadists have moved into these wrecked polities with a calculated savagery intended to stir sectarian hatred and establish themselves as protectors of the Sunnis. In 2015 America and its allies will be confronted time and again by the dilemma they faced in Mesopotamia in 2014. Stand back from internal conflicts and let jihadists take root? Or intervene and risk getting sucked into the hatreds of Muslim countries where foreigners can scarcely influence the politics while providing targets for jihadists? This is because the fragility of postcolonial states is apparent across the Arab world. Where there are chaotic regions in Muslim countries, virulent jihadism is always a danger. The rifts in the Arab world are widening. Lebanon is at one combustible end of the Sunni-Shia divide that runs all the way to Bahrain, stoked by rivalry between Saudi Arabia and Iran. Another breach is between supporters and opponents of political Islamism, as embodied by the Muslim Brotherhood: Turkey and Qatar confront Egypt, Saudi Arabia and the United Arab Emirates in various proxy conflicts. A separate gulf is opening between rulers and the The danger is that, having lost its ruled, with a succession of popular revolts toppling hubris, the West leaders from Tunisia to will fall prey to Egypt but ending in apexcessive caution palling civil war in Syria. Libya, like Iraq, has failed to create a stable government since the West helped to topple a tyrant; it may yet provoke external intervention, by neighbours if not by the West. Egypt flirted with democracy and the Muslim Brotherhood, but restored military rule is proving more brutal and
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Kurdish calculus Amberin Zaman ISTANBUL
A many-sided equation
M
any hailed 2014 as “the year of the Kurds”, as these long-persecuted and largely Sunni Muslim people pursued their dreams of self-rule in Iraq, Iran, Syria and Turkey. In Iraq some 5m Kurds, led by the tribal scion, Massoud Barzani, seemed closer than any of their cousins to achieving this goal. With the big oil companies developing the region’s vast oil reserves, the semi-independent Kurdistan Regional Government seemed ready to stand on its own feet. Next door in Syria the Kurds set up governments in three enclaves along the Turkish border, establishing separate governments in all three. Turkey’s Kurds continued to win greater political and cultural rights. But the Kurds’ fortunes were devas-
THE WORLD IN 2015
tatingly reversed when jihadists calling themselves Islamic State (is) burst on to the scene. In Iraq they overran the city of Mosul and in nearby Sinjar they dealt the Iraqi Kurds a humiliating defeat. In Syria the jihadists kept up their onslaught against the most powerful Kurdish militia, the People’s Defence Units (ypg), despite American air strikes. Iran’s Kurds remain firmly under the clerical regime’s grip. Dozens have been executed for alleged separatism—though they have been spared jihadist atrocities. In 2015 the threat posed by is will deepen the Iraqi Kurds’ dependence on America for their security. The Americans will, in turn, nag them to end their squabbles with the Shia-led government in Baghdad and to agree on a formula for sharing oil revenues. The Iraqi Kurds will also reassess their relations with Turkey, their biggest trading partner and ally. Turkey’s failure to help when is attacked Sinjar came as a shock to Mr Bar-
One nation, many countries T
14.7
Adana
U
R
Kurdish-populated areas
K
E
Y
Population, m
Orumieh
Diyarbakir Kobane
66.9
Qamislo Sinjar
Sources: CIA; author’s estimates
Mosul Erbil
I R A Q
ra t
2.0
ph
Mediterranean Sea
Eu
S Y R I A
I R A N
e
s
Other 0.0 0.0 Kurdish
8.1
T i gr i
LEBANON
19.9
s
Beirut
Damascus
72.8 5.7
ISRAEL
Baghdad
26.9
J O R D A N
s
2015 IN BRIEF Saudi Arabian women are allowed to stand and vote in local elections
suffocating than it ever was under Hosni Mubarak. Even so, Sinai has become another jihadist haven. Yemen is in chronic turmoil. Another band of interconnected conflicts runs south of the Sahara. At one end, in Mali, French intervention in 2013 prevented the capital, Bamako, from falling into the hands of jihadists. At the other, African troops and the un, with support from the West, are helping to wrest Somalia from the Shabab, another radical militia. But these gains are fragile and reversible. In between there are lots of worrying hot-spots—foremost among them Nigeria, where Boko Haram has established its own caliphate in swathes of Borno state. For the first time since the Biafran war of the 1960s, Western officials worry that Nigeria, Africa’s most populous nation, may break up. America and Europe will thus face manifold appeals for military help. In Afghanistan and Iraq Western forces have shown they are supremely good at destroying targets, but bad at building or rebuilding states. Indirect help through local allies is usually better than direct intervention. But the danger is that, having lost its hubris,
200 km
zani. His nephew and would-be successor, Nechirvan Barzani, who is the enclave’s prime minister, will, however, lobby for close ties with Turkey’s pro-Islamic president, Recep Tayyip Erdogan. This will ignite tensions between the Barzanis in ways that will be exploited by Iran, whose intervention helped to stem the jihadist tide. Turkey will get more involved in IraqiKurdish affairs, not least to avoid being overshadowed by the Americans. This will entail military co-operation, including security for a newish pipeline that bypasses an existing Iraqi grid to carry oil from Kurdish fields directly to Turkey. In Syria the Kurds’ resilience against is fighters will lead to closer, if tacit, ties between the ypg and America, which will turn a deaf ear to Turkish objections. Turkey feels deeply threatened by the fledgling Syrian Kurdish entity and has sought to isolate it. This is because the ypg and its political arm, the Democratic Unity Party, are linked to another Kurdish group, the Kurdistan Workers’ Party (pkk), which has been waging a 30-year armed campaign for self-rule inside Turkey. The pkk keeps threatening to end a ceasefire that underpins peace talks between its imprisoned leader, Abdullah Ocalan, and the Ankara government because of Turkey’s perceived hostility to their Syrian brethren. Peace with the Kurds is crucial to Mr Erdogan’s plans to win their backing for constitutional changes that would boost the presidency’s powers. In 2015 the Kurds will seek to unite against is, but a strongly ingrained tribalism will continue to be exploited by the regional powers. n Amberin Zaman: Turkey correspondent, The Economist
the West will fall prey to excessive caution. Earlier intervention in Syria to support mainstream rebels might have halted the rise of is’s unsavoury brand of jihadism. America’s war to “degrade and ultimately destroy is” did not start well. The jihadists continued to advance despite aerial bombardment. Over time, American military action will probably halt is’s advance. But to do so, America will have to abandon its policy of no “boots on the ground” by deploying special forces to stiffen Iraqi combat units and call in more accurate air strikes (especially in close-quarters urban fighting). The alternative is to allow jihadists to win more battles that would enhance their appeal as invincible, divinely guided warriors. If it is possible to degrade is, destroying it will be harder, requiring a transformation of the region’s politics and patient American leadership to manage its rivalries. A nuclear deal with Iran might ease tensions. But if America came to be seen as an ally of the Shia, it would do little to assuage the Sunni embitterment that feeds is’s appeal. And in 2015 the big question will remain: what to do about Syria’s president, Mr Assad? n
THE WORLD IN 2015
It’s not all bad Max Rodenbeck CAIRO
Some parts of the Middle East are actually doing all right
T
he Middle East had a grim time of it in 2014. Not only did violence intensify from Libya to Gaza, Yemen, Iraq, Syria and beyond. The flaunting of ever more shocking cruelties suggested a spreading sickness, a slide towards barbarism that bodes ill for the region’s future. Yet even in the Middle East things are rarely bad everywhere, all at once. Plenty of places are doing just fine, and look likely to keep on doing so. In fact, the misery of others helps some to thrive. So it is with Dubai. Although the Gulf emirate’s rulers have worked long and hard to make the city-state a better place to live and work, the failure of other regional governments has also driven Dubai’s phenomenal success. Whenever Saudi Arabia or Iran hurl more dissidents in jail, whenever India or Pakistan overtax business, whenever wars and revolutions erupt nearby, entrepreneurial talent and capital gush into Dubai. Not surprisingly, the emirate is booming. House prices, which tanked when Dubai nearly went bankrupt during the global financial crisis, have practically doubled since mid-2011. Ultra-expensive infrastructure projects such as a spiffy metro The misery and gigantic new airport now look like wise investments, not of others Dubai’s resident populahelps some to hubris. tion, which stood at 2.2m in 2014 thrive. So it is (not including another 1m daily commuters, tourists and other with Dubai temporary visitors), is expected to grow by 50% by 2020. The imf thinks the emirate’s gdp growth could average 5.5% in the same period. That seems sound. A tipping-point may have been reached, with so much regional business already relying on Dubai as a corporate base and service centre that future growth will come from internal energy rather than external push. Even so, 2015 could still bring another of those pushes. Dubai has long served as the back-office-cum-hypermarket to sanctions-strapped Iran. It stands to profit hugely if a long-sought nuclear deal frees the Islamic Republic to realise even a part of its immense potential. The great wall of Israel Israel is another place that bucks the regional trend. But whereas Dubai sucks in the region’s money and skills, Israel prospers by walling itself in. Aside from nasty and brutish, but typically short, wars over the past decade (Lebanon 2006, Gaza 2009 and 2014), the Jewish state essentially ignores its surroundings: weather maps in Hebrew newspapers show London, Miami, Moscow and New York but not Cairo or Baghdad. Since it joined the oecd in 2010, Israel has outperformed the rest of the rich-country club on many measures. gdp per person matched Italy’s in 2013. After decades of reliance on foreign aid, Israel now has a healthy trade balance as well as a stock of some $80 bil-
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lion in investment overseas. Energy dependence is also a thing of the past: Israel has been quick to exploit abundant offshore gas reserves, which already fuel most electricity generation. Meanwhile a virtuous circle involving high-quality universities, strong government backing and dynamic entrepreneurs generates continued innovation and success in the high-tech sector, exemplified in 2014 by Intel’s decision to expand its already large manufacturing presence with an additional $6 billion microchip factory. There are less dramatic examples of success, too. The sustained high oil prices of the past decade fuelled a long boom for infrastructure projects in countries such as Saudi Arabia, Qatar and Algeria. Morocco, far from the chaos, has hummed with steady growth. Even Egypt, where recent turbulence shrivelled investment, is
2015 IN BRIEF
likely to surge as stability returns: its stockmarket gave an indication of what lies ahead when it hit an all-time high in September 2014 after a steady 15-month climb. But, this being the Middle East, caveats are in order. Oil-dependent economies may face rougher times soon; the biggest of these, Saudi Arabia, might have to slash its budget if the price per barrel stays below $84. Dubai’s current balloon might pop, just as past ones did, if greed again blinds better judgment and the government fails to address concerns such as a harsh and arbitrary justice system. And Israel must beware of its own smugness. The surrounding mess has brought several years’ reprieve from pressure to address the elephant in its own room: its 6m happy Jews cannot indefinitely rule over an equal—or probably now greater—number of unhappy Palestinians. n
The 350km (220mile) TangierCasablanca highspeed rail line, the first of its sort in Africa, is due for completion
Max Rodenbeck: Middle East correspondent, The Economist
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High stakes in Iran Oliver August TEHRAN
Deal or no deal?
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estern investors have been itching to return to Iran. In the second half of 2014 many visited Tehran, the capital, in anticipation of a breakthrough in the country’s talks with foreign powers about the future of its ostensibly civilian nuclear programme. Severe Western sanctions designed to discourage Iran from developing a nuclear bomb have hurt the economy and left it hungry for capital. Unemployment and inflation have spun out of control. Wages and exchange rates have fallen by more than half since 2011. The American government estimates that gdp is a quarter lower than it would have been without sanctions. Iran is cut off not only from foreign markets but also from the international financial system. No Visa card has been swiped there in three years. Oil exports are down by about half. If sanctions are lifted, the economy should improve markedly. Officials predict that oil exports could quickly double. Oil exports The automotive incould dustry should recover quickly fairly fast, too. It used to generate 10% of gdp, double but has shrunk by 70% in the past three years because it can no longer source foreign components. “I have to tell you,” Wendy Sherman, America’s
2015 IN BRIEF The United Arab Emirates’ space programme completes its first satellite-making facility
Jonathan Rosenthal: Africa editor, The Economist
chief negotiator, said in September, “as soon as we suspend our major sanctions, which will happen very early in the agreement, the world will flood into Iran.” The countries involved in the talks—Iran, Germany and the five permanent members of the un Security Council—set themselves a deadline of November 24th 2014 to reach a deal that would lift the sanctions in return for tight limits on the suspect nuclear programme. If the Waiting for the stampede of customers talks collapse, the hopes of would-be investors will be dashed even years has waged a silent war on the country it calls the “Great Satan”. But if the nebefore 2015 begins. Even if a deal is done, two things gotiations collapse, hardliners on all sides should give investors pause. First, not all would feel vindicated. Sanctions would sanctions can be lifted straight away, for be ramped up and a military attack on technical reasons, and they can be reim- Iran’s nuclear facilities—on hold for the posed if the Iranian government reneges duration of the talks—would once again on its commitments. Second, not all of be an option for policymakers. For its Iran’s economic problems stem from sanc- part, Iran would become more belligerent tions. Reforms are needed too, especially and unco-operative in regional affairs, at in finance and the labour market. Yet a lift- a time when Islamist militants in neighing of sanctions would relieve pressure on bouring Iraq and Syria threaten the inthe government to take such painful steps. terests of all the nations involved. A great Beyond the economy, a deal with opportunity would have been missed. n America and its allies would mark a seis- Oliver August: Middle East and Africa correspondent, mic shift for Iran, which for the past 35 The Economist
Ebola’s long legacy Jonathan Rosenthal
Lasting harm in three west African countries
I
t is no coincidence that the three countries where Ebola spiralled out of control in 2014 are among the world’s poorest. Liberia and Sierra Leone were still struggling to recover from civil wars that devastated their economies, destabilised Guinea and destroyed health systems. Before the Ebola outbreak Liberia had fewer than 200 doctors serving a population of more than 4m. Models trying to forecast the spread of the disease vary widely depending on the assumptions plugged into them. Key variables, such as how many people are infected by each ill person, remain little more than guesses. Even the number of people infected is unknown. Doctors reckon it may be two-and-a-half times the official counts. This uncertainty is also reflected in forecasts for the range of possible economic damages. The World Bank bases its reckoning on two scenarios: a “low impact” one
in which the disease is rapidly contained, and a “high impact” one in which it is contained only slowly and spreads within the region. The cost to west Africa under these two scenarios ranges from $1.6 billion to $25 billion over time. By way of comparison, the economy of Liberia produces a little less than $2 billion a year and that of Sierra Leone under $5 billion a year. These estimates assume that the disease does not spread much within west Africa. If it does, the cost could exceed $32 billion by the end of 2015, according to the World Bank. Over the longer term the costs are likely to be far higher, and the impacts more insidious. Among the first casualties of Ebola are health-care workers. Many of those who do not fall ill flee. Within weeks of the disease breaking out in Liberia, it was estimated that fewer than 50 local doctors were still at their posts. By weakening already fragile health systems, Ebola will also kill tens of thousands indirectly through malaria, diarrhoea and hiv. Investors and skilled foreigners will shun affected countries, depriving them of skills and capital. Three of Africa’s poorest countries will be yet poorer. n
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issuer, South Africa. Corporate debt is usually dollar-denominated, making it hostage to currency fluctuations, though several governments, including those of Mozambique and Ghana, have recently had to issue bonds denominated in dollars instead of in local currencies. But the bigger worry for Africa is the nature of private lending. If governments get into trouble and need to reschedule their debts or borrow more even while they pay less, official lenders typically oblige. Private lenders are less forgiving. When interest rates and long-term bond yields in developed economies rise—as they surely will, starting in 2015 in some places—private lenders will look on Africa less benignly. They will probably demand yields much higher than those that new African government and private bonds are currently paying, if they don’t refuse to buy altogether. Much will depend on how healthy African government finances are looking. The signs are not good: whereas sub-Saharan Africa actually ran a regional budget surplus during much of the past decade, that has
2015 IN BRIEF
THE WORLD IN 2015
The coming African debt crisis Richard Walker
A worrying build-up of borrowing
A
frica has the fastest-growing continental economy on the planet. And the thing that has been growing fastest of all is debt—personal, corporate and government. In 2015 Africa and its boosters will start to worry that the debt boom is getting out of hand. Sovereign bonds issued by some of the world’s most far-out “frontier” economies, often denominated in local currencies, are snapped up by hungry investors from Omaha to Zurich. In 2014 countries like Senegal, Côte d’Ivoire (less than five years after a governmentdebt default) and Zambia placed bonds worth as much as $1 billion, with all the issues oversubscribed. Kenya’s record-breaking sale of $2 billion in debt was oversubscribed four times over. These government borrowings are in essence massive bets that the African growth story will continue. More betting will follow before the party finally ends—even Ghana, already deep in debt and with the continent’s worst-performing Today most currency, had no difficulty raising another $1 billion in euro-deof Africa’s debt in late 2014. The borrowing is nominated African borrowing binge, which from private began in 2007 and has been driven by investors’ hunger for sources yield in the post-crisis economy, looks likely to carry on until interest rates and investment returns in the rest of the world start to normalise. When that happens, Africa’s lenders may reflect on how history repeats itself—especially in a place with cyclical, resource-dependent economies—even if it is with a twist. The continent has been deep in debt before, and is in danger of a rerun. According to the imf, in 2009 the whole of sub-Saharan Africa raised less than $5 billion through bond issues, including both private and sovereign bonds. By 2013 that had grown to $14 billion, and the 2014 total will be around $20 billion. Africa’s total debt-to-gdp ratio, which had fallen to less than 30% by 2008 (thanks to debt forgiveness as well as booming commodity prices), remains low, because gdp has been growing fast. But in some countries debt is now heading back up towards 70% of gdp or beyond. This time is different—and could be worse Africa used to borrow from official lenders: governments, the World Bank, the African Development Bank and the imf. Today most of its borrowing is from private sources (see chart). Government loans and “assistance” are out of fashion. Instead it is private investors that are betting on Africa’s future ability to pay, with bond funds, private-equity and individual investors (including African ones) buying government debt. Private debt issued by larger African companies is adding to the pile; there have been large corporate-bond issues from Ethiopia, Mozambique and Nigeria, as well as from the traditional
Ivory Coast braces itself for a first presidential election since the poll of 2010 that saw the country descend into chaos
Burdensome
Sub-Saharan Africa’s mediumand long-term debt, $bn 200
Owed to official creditors
150
100
50
Owed to private creditors
0 2000
01
02
03
04
05
06
07
08
09 10 11 12 13 14* 15* *Forecast Source: Economist Intelligence Unit
now turned to a regional deficit, as governments have spent heavily on salaries, subsidies and infrastructure even as commodity prices and tax revenues have fallen. Some countries, such as Ghana and Tanzania, are now running deficits of over 10% of gdp. The world’s debt investors are willing to tolerate such figures as long as investment opportunities elsewhere pay next to nothing. Perhaps that will not change in 2015. It is also possible that African government spending will suddenly shrink. And maybe the commodity prices that Africa depends upon will soon boom again. But don’t bank on any of those events. n
Just possibly… Facilities for making chemical weapons in Syria are closed down, if a willing contractor can be found. Some South African trade unions break a long-standing alliance with the ANC and form a rival “workers’ party”. Work begins in Congo on the Grand Inga Dam, the biggest hydroelectric project in the world.
Richard Walker: freelance correspondent
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The rise of Africapitalism
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n 2015 the African entrepreneur will emerge on to the global stage, as a new generation shows the world what those of us doing business in Africa have long known: that our continent is home to some of the most exciting and innovative entrepreneurial talent. From advanced mobile-payment systems to new agricultural-insurance models, we are already seeing how entrepreneurship is transforming Africa. But in Africa, business growth alone is not the full story. It is perhaps not even the most important part. Entrepreneurship matters especially for its potential to transform society. For centuries, the continent was impoverished by the extraction of raw materials by colonial powers. Africa was unable to generate or sustain its own wealth, as it was forced to buy finished goods created with African resources at premium prices. And it lacked basic infrastructure except for the roads and ports built to move exports. If Africa is to transcend that chapter of its history and realise its economic potential, it must first become self-sufficient—and the private sector is vital to this process. Imagine the same continent filled with businesses that can process crude oil into petroleum, cocoa pods into chocolate and cotton lint into fabric, all while retaining the finished-goods premium instead of sending wealth overseas. The term “Africapitalism” describes the process of transforming private investment into social wealth. As homegrown businesses meet social and economic needs by creating goods and services with an innate understanding of the local environment, they can bring private capital to vital infrastructure like road transport and power generation. And they can create jobs for Africans, which will in turn create an African middle class—a new generation of African consumers. Entrepreneurial energy and inventiveness also have the potential to tackle pressing social problems in new ways. In recognition of the far-reaching impact such new methods can have, we will be providing $100m to 10,000 entrepreneurs across Africa through the soon-to-be-launched Tony Elumelu Entrepreneurship Programme. By democratising access to opportunity, with an emphasis on tapping into the talent of Africa’s young people, this programme strives to “institutionalise luck”, which is a key factor in the success of any entrepreneur. Young entrepreneurs and those they in-
spire are the lifeblood of Africa’s rise. Simdul Shagaya, a serial entrepreneur from Nigeria, built his first business monetising advertising space on toll roads in Lagos before selling that company to set up Konga, a leading Nigerian online retailer. Mr Shagaya has introduced innovations that surmount Nigeria’s limited capacity for online payments and door-to-door postal delivery service. Mike Macharia, a Kenyan tech entrepreneur, has built Seven Seas Technology into a pan-African company with operations in east, west and southern Africa. He outcompetes vendors from more traditional global it markets, and last year bought a Portuguese technology company to gain access to their software and services. And then there’s Funke Okpeke, who left a lucrative telecoms career in New York to assist the construction of 7,000km (4,350 miles) of fibre-optic submarine cables from Portugal to the coast of west Africa through her company, MainOne. The resulting increase in bandwidth has had a multiplying economic impact across the region. Way beyond business The promise of entrepreneurs like these reaches much wider than the business arena. They have the potential to transform leadership at home. Already, they are engaged in discussions with Africa’s political leaders on policy issues, pushing in particular for the streamlining of processes that will allow quicker business startups. And their influence can reach beyond Africa. At the us-Africa Summit held in Washington, dc, in August, Takunda Chingonzo, a 21-year-old tech entrepreneur from Zimbabwe, elicited the promise of a review from President Barack Obama by challenging him about the negative impact of American sanctions on Zimbabwean entrepreneurs. Mr Chingonzo proved the game-changing potential in the young African entrepreneur that day. African entrepreneurs will play a central role in bringing together private wealth and public need. They will prove a key tenet of Africapitalism: that it is both necessary and possible for entrepreneurs and society to prosper simultaneously. The transformative impact of economic growth unleashed by a fully empowered, socially conscious entrepreneurial class will dwarf the results achieved by the previous aid-driven approach to Africa’s development. n
Entrepreneurs will transform Africa, says Tony Elumelu, chairman, Heirs Holdings, and founder, the Tony Elumelu Foundation
Young entrepreneurs and those they inspire are the lifeblood of Africa’s rise
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International Also in this section: Our 2014 scorecard 86 Setting new development goals 87 Hillary Rodham Clinton: Closing the gender gap 88
The growth of yoga 89 A trio of World Cups 89 The spectre of nuclear war 90 Nationalism is back 92 Just possibly… 92
Bill Gates: Simple solutions to save lives 93 Charting a year of change 94 The population pyramid reshaped 96
Opinion of climate John Parker
Countries will approve a climate treaty in 2015. Sort of
A
2015 IN BRIEF The Parliament of the World’s Religions, the biggest global interfaith meeting, convenes in Salt Lake City
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t the end of 2009 efforts to negotiate a global climate treaty crashed and burned in Copenhagen. At the time, the head of one charity described the city as “a climate crime scene” with “the guilty men and women fleeing to the airport”. Six years later governments will revisit the scene of the crime—metaphorically at least—when they gather in Paris to have another go at negotiating a climate treaty. This time they will bicker and squabble their way to a deal. Whether it will do much to rein in the growth of carbon emissions or satisfy any of the other hopes that were raised and dashed at Copenhagen is doubtful. Much has changed since 2009. Most of it makes a deal somewhat more likely. A new generation of leaders has come to power. Indeed, only Barack Obama of the United States and Germany’s Angela Merkel remain as heads of the largest polluters. The new generation leads a world in which greenhouse-gas emissions have risen remorselessly since 2009. In 2015 annual average concentrations of carbon dioxide in the atmosphere will rise above 400 parts per million for the first time in over a million years. And even though global surface temperatures have not risen much
for a decade, the risks of severe and irreversible damage from rising greenhouse-gas emissions are, according to most climate scientists, growing. In most countries (though not in America) climate change is seen as a significant threat. Outdoor air pollution has become the largest source of premature death in the world. Politicians are also coming under increasing pressure from business, finance and markets. Two big reports published in 2014 (one from an international group of ex-presidents, heads of international financial institutions and economists; the other from The new climate American chief executives and former treasury secretardeal will allow ies) demonstrated a substancountries to set tial change of mind among their own goals decision-makers that climate change needs to be tackled. Some markets reflect these concerns. The corporate green-bond market, for example, which raises money from capital markets for companies to make environmentally friendly investments, is likely to hit $100 billion in 2015; in 2009 it barely existed. As a result, the politics of a climate treaty have changed. In 2009, none of the three biggest national polluters—the United States, China and India—was ready for such a step. Now, they may be.
John Parker: environment editor, The Economist
International
2015 IN BRIEF
America’s Senate will not ratify a treaty—these days, it never does—but executive actions by the Obama administration (such as limiting emissions from power stations) have ensured that the United States could abide by the terms of any likely climate treaty, rather as it conforms to the un Law of the Sea, which it has not ratified. In China the president, Xi Jinping, has given fighting pollution a higher profile. He has done so for domestic reasons, but may be prepared to approve a treaty based on steps he was planning anyway. India has long been cautious on global climate matters and is likely to remain so. The main reason for thinking it too might move is that its prime minister, Narendra Modi, was something of a green pioneer when chief minister of Gujarat. It is true that some things have not changed. The Copenhagen talks foundered mainly on disagreements between rich and poor countries. The poor argued that the rich caused more of the carbon accumulation in the first place, and should do more to reduce it by paying poor countries extra to cut back on greenhouse gases. Their demands will grow. The rich replied that they were doing a lot but that developing countries, as
To the sound of cracking ice, America takes over the chairmanship of the Arctic Council from Canada
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the sources of most new emissions, needed to do more themselves. There is little sign that this disagreement has narrowed. Moreover, the European Union, which likes to see itself as a leader of climate talks, has been backing away from some of its recent green ambitions. Better than nothing A new climate treaty will reflect such difficulties. Instead of looking like a traditional treaty, in which countries sign up to common obligations and promise to meet common targets, the new deal will allow countries to set their own goals, agreeing merely to revisit them regularly (which would help to give global investors confidence that the market for green goods will expand) and perhaps to promise to make goals more, rather than less, stringent in future. Such a deal would be extremely modest. In practice it might merely codify what America, China and a few others were doing anyway. It would not be able to push countries into promising anything they do not want to do. But at least it would be something, which is more than Copenhagen managed. n
Twenty-fourteen hindsight Daniel Franklin
Our best and worst predictions from last year
“T
he main battle in 2014 will unfold over Ukraine, which has been heading towards an association and free-trade agreement with the European Union,” said our article in The World in 2014. “Russia will do everything it can to stop it. Countering Russian pressure will require a vision and resolve from the West last displayed in the early 1980s.” A triumph of prediction? Not exactly. The passage above was tucked away at the end of our piece on Russia and, despite one or two broad hints elsewhere of potential trouble, readers of last year’s edition would hardly have been prepared for the prospect of Russia grabbing Crimea or stoking a small war in eastern Ukraine. Our readers would have been even less prepared for the gruesome rise of Islamic State in Iraq and Syria, and the Americanled military response. Nor were they told to expect a bloody war in Gaza. In the Arab world, a misguided belief that things could hardly get worse persuaded us that there was “a modest chance that 2014 will bring a general improvement”. As for Africa, previous editions of this publication had warned of the spread of infectious diseases, but last year’s contained no mention of Ebola. In short, we did a poor job at foreseeing things that flared up suddenly. Fortunately, we did better in other areas, such as
the economy, the ups and downs of politics, and the broad pattern of geopolitics if not specific crises. We expected America’s economy to pick up and China’s to slow down. We thought Britain’s would grow to be bigger than ever, yet rightly reckoned low wages would keep Britons feeling dissatisfied. We pointed to the revision of Nigeria’s gdp that would show the country to be the biggest economic power in Africa. The global political scene would be more risky, Gideon Rachman presciently
warned, because of doubts about Ameri ca’s willingness to play the role of global policeman. In a big year for voting, we correctly predicted the outcome in many cases: the rise of populist parties in the elections for the European Parliament, No to Scottish independence in a referendum, wins at the polls for Dilma Rousseff in We did a Joko Widodo poor job at Brazil, in Indonesia, John foreseeing Key in New Zealand things that and Narendra Modi in India (though Mr flared up Modi’s victory was a good deal bigger than suddenly we expected). What was our best prediction? Laza Kekic merits an honourable mention for flagging a rise in social unrest around the world. Sophie Pedder surely deserves a légion d’honneur for being right about France down to the last detail (well, almost: those details did not extend to President François Hollande’s love life). But the prize goes to Adrian Wooldridge for foretelling a “tech-lash”, a peasants’ revolt against the sovereigns of cyberspace. Sure enough, in 2014 Silicon titans have found themselves under growing attack for everything from dodging corporate taxes to scooping up vast amounts of people’s personal data. The booby prize, on the other hand, goes to our prediction for the fastest-growing economy of 2014. We expected that country to be South Sudan, where gdp would rise by an eye-popping 35%, streets ahead of its nearest rival. Sadly, what grew instead was growth-destroying civil conflict. n Daniel Franklin: editor, The World in 2015
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stick to some sort of income measure of dollars per day, or adopt a more sophisticated yardstick that also takes into account factors such as health and education? The targets will need to be designed to make it hard for governments to pick and choose between them in claiming progress, so that countries can be meaningfully compared. Proposals will be made for new ways to hold to account the rich countries that will have to pay a significant part of the price of achieving the new goals. The debate about how effective the mdgs have been will intensify as the announcement of the new goals gets nearer. Naysayers will point out that, though progress has been made on, say, bringing down the number of people living in extreme poverty, this has been due largely to the flourishing of capitalism in China rather than anything done by the un and its agencies or international aid. But where the mdgs can claim some credit, such as on reducing by millions the number of children under five dying each year, it is clear that mobilising large amounts of money in support of them was crucial.
2015 IN BRIEF
THE WORLD IN 2015
Goals, goals, goals Matthew Bishop NEW YORK
The world comes together to set itself some more development targets
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nless you are a world leader, avoid New York in the last week of September. Manhattan traffic will be gridlocked as the United Nations holds its annual General Assembly, which in 2015 will be the most significant in at least a generation. It will include a big celebration of the progress that has been made towards achieving the Millennium Development Goals (mdgs) adopted in 2000—almost certainly a bigger celebration than the uneven results merit. And, with the mdgs expiring at the end of 2015, a new There is a real set of goals will be adopted to guide the world until 2030. danger that They will be called the Susall the effort tainable Development Goals will produce but, apart from their name, almost everything about them nothing of will be decided through a massive diplomatic free-for-all in substance the months, days and probably even hours before their unveiling at the General Assembly. The adoption of the mdgs was relatively straightforward in comparison, shepherded through by some un officials who focused on things that could make a big difference and had a reasonable chance of being implemented. The fight over the Sustainable Development Goals will pit not only rich-country politicians against developing-country ones, but also bring to the battleground multinational companies, philanthropic foundations, ngos and campaigns by the public. With so much noise, there is a real danger that all the effort will produce nothing of substance. Eight mdgs were adopted in 2000, ranging from ending extreme hunger and poverty, and reducing child mortality, to forging a partnership between governments and the private sector to promote economic development. The starting-point for the next battle will be a much longer list of proposed goals that has already been trimmed to 17 (including ones on oceans, income inequality and renewable energy), accompanied by some 169 sub-targets. Some attempts will be made to increase the number of goals (and targets). But the real battle in 2015 will be over whether to have fewer. A group of rich governments, including America and Britain, plus some business leaders and philanthropists such as Bill Gates, would prefer a smaller set of crunchier goals, with an emphasis on building on and completing the work of the mdgs. For them, trying to agree on a goal for, say, income inequality has the potential to be a massive distraction from the practical issues of helping the people now worst off. Developing countries, on the other hand, and in all likelihood the leaders of the un, will push for a broad package of goals and targets that has the potential to transform the workings of the international economic and political system. One key question will be how to define poverty:
Another big UN global gathering, in the Japanese city of Sendai in March, sets a framework for disaster-risk reduction
Money, money, money The Sustainable Development Goals are more likely to be taken seriously if they come with some big pots of money to help countries pursue them. That will be the focus of an inter-governmental meeting in Addis Ababa in July, where there will be a push to get donor countries to move beyond vague promises to spend 0.7% of gdp
Education, education, education
on international aid to something focused on specific tasks. New approaches to financing the building of infrastructure in developing countries will be on the table, as will a new Global Fund for Education. Events in Addis Ababa will play a large part in shaping the mood in New York in September. Similarly, the details of a climate-change deal due to be announced in Paris in December will determine the credibility of any claims that the new goals make about sustainability. All this will be a test of whether fresh life can be injected into the un system and the notion that countries can work together to tackle the world’s biggest problems, or whether the initial promise of the mdgs will be followed by a return to hot air and inaction. n
Matthew Bishop: globalisation editor, The Economist
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Unfinished business for the world’s women
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ere are two numbers that could shape the future of a great nation: six and 1.7 trillion. The first is the average number of hours each day that women in India spend performing unpaid labour. The second, in dollars, is the amount India’s gross domestic product (gdp) would increase if women participated in the formal labour force at the same level as men. Today, using new data and analytical tools, we know more than ever about the contributions of women and girls to security and prosperity around the world, as well as the obstacles that block them. In 2015 the Clinton Foundation’s No Ceilings initiative, working with the Gates Foundation, will release a global report that maps out both the gains that women have made over the past two decades and the notable gaps that remain. Why 2015?
September marks the 20th anniversary of the United Nations Fourth World Conference on Women, which took place in Beijing in 1995. The message of that gathering still rings true today: “Human rights are women’s rights and women’s rights are human rights, once and for all.” I was proud to join representatives of 189 nations in agreeing to an ambitious platform for action that called for the “full and equal participation of women in political, civil, economic, social and cultural life”. The good news is that in the 20 years since the Beijing conference we have made real progress. Access to health and education for women has improved markedly. The rate of maternal mortality has been cut in half. The global gender gap in primary-school enrolment has virtually closed. But other news is not so encouraging. Progress has been slow in terms of economic opportunity for women. Globally, the gap between men’s and women’s labour-force parti cipation has not narrowed that much. Over 100 countries still have laws that limit women’s participation in the economy. Even where more women are entering the workforce, challenges persist. In the United States, four in ten primary breadwinners are now women. Yet American women still earn less than men doing the same job. A lack of flexible and predictable scheduling, affordable child care, paid sick days and paid maternity leave—the United States being one of very few countries that lack it—keeps too many women on the sidelines. A 20th-century economy just doesn’t work for 21st-century families.
What we believed to be true in 1995, we know for certain now: we cannot get ahead by leaving half the population behind. The evidence is clear that when women and girls have opportunities to participate, economies grow and nations prosper. When you present these data in a way that is accessible and compelling, heads start nodding. I’ve seen it first-hand all over the world, including from sceptical heads of state. The more people are informed by good data, the more they can make good decisions and ultimately, the more results we will see. The Organisation for Economic Co-operation and Development has found that if we close the global gap in workforce participation between men and women, gdp worldwide would grow by nearly 12% by 2030. As the world looks back on the lessons of Beijing and forward to agreement on new global development goals, we have the opportunity to make 2015 a year of action in a number of key areas. Although more laws prohibit discrimination against women, implementation and enforcement lag and cultural norms remain hard to change. Nations need to commit the resources and political will to enforce the laws they have adopted to promote gender equity and act against the obstacles that still persist. Advances in technology open up unprecedented opportunities for progress. Tools like mobile banking, online training and even Twitter can help more women access the services they need to get ahead and share their stories. But we must first close the large gap in mobile and internet connectivity between men and women in the developing world. This isn’t just a fight for women. In 2015, if we leverage partnerships with a range of allies, particularly religious and private-sector leaders, we will drive broader and faster change. Leaders in many spheres are starting to recognise that holding back women is not right and is not good for the bottom line either. Twenty years ago, talking about the equality of women and girls was taboo in many places, including China, so pushing boundaries meant making a strong moral case. In 2015, a growing body of data allow us to do this using evidence as well. Progress is possible. Just like our words in 1995, our actions in 2015 will echo into the future. Let’s ensure that when we turn the pages of this publication in 2035, the fight for the equality of women and girls will have been won. Once and for all. n
The anniversary of a landmark UN conference on women is an opportunity to renew its vision, says Hillary Rodham Clinton, former American secretary of state
What we believed to be true in 1995, we know for certain now: we cannot get ahead by leaving half the population behind
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THE WORLD IN 2015
Yoga stretches up Anne McElvoy
Plentiful pranayama
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ver since Adinatha, a 15th-century Indian mystic, promised in the Khecarividya that yoga practitioners would become “ageless and undying in this world”, followers have been drawn to its bendy charms. According to Spafinder, a New York health-industry consultancy, some 22m Americans practised yoga in 2012—up 2m on 2010. American spending on yoga products, from trendy attire and mats to studio classes, rose from $4.7 billion in 2007 to $7 billion in 2012 and is predicted to exceed $8 billion by 2017. Worldwide the number of people engaging in asanas (movements) and pranayamas
(breathing exercises) is expected to reach a new peak in 2015. The Wharton School at Pennsylvania University has tracked yoga in China and predicts a boom. Even theocracies, which often frown on yoga as a challenge to the state religion, seem to be relaxing. Iran now has an estimated 200 yoga centres, despite an edict from security chiefs that called the pursuit a threat to Islam. Several factors are combining to promote the practice. It has shaken off a hippy-dippy reputation (even bankers chant their “Oms” and studios open early to catch industrious office workers). Insurance companies include regular yoga exercise among factors that can reduce premiums. Health benefits for the elderly have made “Grey yoga” popular. And yoga is nothing if not adaptable: the International Sports Yoga Federation, which, to the horror of purists, runs yogic tourna-
A trio of World Cups Adam Barnes
Just when you thought it was safe to move away from the television...
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n between two invigorating displays of Brazilianbased sport—the football World Cup in 2014 and the 2016 Rio Olympics—2015 promises something of a lull. But what it lacks in samba-infused spectacle, it should make up in variety, thanks to three World Cups. Cricket-mad Indians, in particular, will lap up the cricket World Cup, which takes place in Australia and New Zealand in February and March. Matches are of the “one-day” variety—less traditional than fiveday Test matches, more staid than hit-and-giggle Twenty20 cricket, which lasts about as long as a baseball game. Some have questioned a bloated format that means all 14 competing teams play at least six matches before the knockout stages: the eight best sides are practically certain of quarter-final berths. But one advantage for the broadcasters—and by implication the International Cricket Council, which sells the television rights—is that India should play at least seven games. In 2007 they went home after three matches and advertising revenues plummeted. They are in the running to win the 2015 competition, but familiarity with local conditions means Australia should ride a wave of home support to victory. Television audiences for these matches can be massive. Folklore holds that the semi-final in 2011 between Pakistan and India attracted more than 1 billion viewers. But, based on total attendance figures, it is the rugby World Cup that has a stronger claim to be the thirdbiggest international sports event, behind the Olympics and the football World Cup. Much as one-day cricket has been put on its guard by shorter, sexier Twenty20, the 15-a-side version of
Adam Barnes: deputy editor, The World in 2015
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ments, estimates that more than 5,000 people take part in such contests. Social media and internet apps have also helped forms of yoga that were once deemed slightly bonkers to attract new followers. At the Third Space gym in central London one of the most heavily booked classes is antigravity yoga, in which participants are suspended from the ceiling by silk fabrics, enabling deeper stretching. Elsewhere, there are yoga raves for the hedonistic and placid yin yoga for those who like to stay in one position until tedium numbs the soul. Six centuries ago, Adinatha promised that his (relatively straightforward) hatha yoga would be useful for “finding buried treasure, entering subterranean realms (and) controlling the Earth”. Not a bad offer for off-duty corporate types. n Anne McElvoy: public-policy editor, The Economist
rugby (15s) that is played at the World Cup is starting to notice the impact of the seven-a-side version (sevens). From 2016 sevens becomes an Olympic sport, and countries with a small player base, not to mention governments bewitched by the prospect of Olympic medals, will start to concentrate on the shorter, less complicated version of the game. Kenya, for example, has a world ranking of 32nd for 15s, but came seventh in the most recent World Sevens Series. This World Cup starts in England in September, and a decent, competitive tournament would remind new fans wowed by the speed and simplicity of sevens that 15s provides a different set of thrills. New Zealand, the cup-holders and the world’s best team, should win a first World Cup outside their homeland; South Africa and England will provide the strongest challenges. Americans searching for a team to get behind should look to the women’s football World Cup in Canada in mid-summer. This is the seventh such tournament and, thanks in part to many years of investment, the Americans have won twice and have yet to finish outside the top three. They should win again in 2015. The Canadian hosts have much to live up to after the success of the previous competition in Germany. Their plan to use artificial grass in the six stadiums has attracted criticism, and a group of players threatened fifa, the game’s governing body, and the Canadian Soccer Association with legal action for gender discrimination. The men’s competition, they said, would never be played on such surfaces. Canada wants to host the 2026 men’s World Cup—it is the only one of the g7 group of rich nations not to have done so—and will hope for a smoothing over of all ruffled feathers. So armchair fans in 2015 will have to make do without television backdrops of Copacabana Beach and colourful favelas. But with football’s Africa Cup of Nations in Morocco and the World Athletics Championships in Beijing in the mix as well, they still have plenty of reasons to invest in a bigger television. n
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Still on the eve of destruction Matthew Symonds
Barack Obama’s bid to rid the world of nuclear weapons looks more forlorn than ever
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THE WORLD IN 2015
2015 IN BRIEF The UN celebrates both earth and sky with the International Year of Soil and the International Year of Light
ugust 2015 will mark the 70th anniversary of the dropping of two atomic bombs, on Hiroshima and Nagasaki. Although the world came close to disaster in 1962 during the Cuban missile crisis, and numerous accidents and false alarms could also have triggered catastrophe, the Japanese attacks marked both the first and so far the last time that a nuclear bomb has been used in war. The balance of terror between America and the Soviet Union evolved into a choreography of deterrence involving successive arms-control deals in which both sides understood that their own security depended upon respecting the security needs of the other. The world today is both safer and more dangerous. Despite Vladimir Putin’s best efforts to restore the adversarial relationship between Russia and the West, a nuclear exchange with America and Russia of a size that could end all life on the planet is hard to imagine. But it is also more dangerous because of new tensions, the increased number of nuclear decision-making centres and the growing risk of proliferation in volatile regions. Those concerns will supposedly be addressed in May when the 189 state signatories of the nuclear Non-Proliferation Treaty (npt) meet in New York for the review conference, known as RevCon, which is held every five years. The npt, established in 1968 to restrict nuclear-weapons states to the five permanent members of the un Security Council (p5), America, Britain, France, Russia and China, while promoting nuclear energy, was a grand bargain that rested on three pillars: non-proliferation, the peaceful use of nuclear energy and eventual nuclear disarmament by the p5. But although Russia and America have negotiated large cuts in their nuclear arsenals, arms control has stalled since the last (modest) agreement, New start, was signed on the eve of the 2010 RevCon. The p5 still have some 10,000 warheads between them. India, Pakistan and Israel, all nuclear-weapons states, The nightmare of Nagasaki are non-signatories; North Korea left the npt without much effective sanction after gaining nuclearweapons technology. Others, notably Iran, and in the past Libya, Iraq and Syria, have stayed within the npt while clearly cheating and undermining its purpose. It was against this backdrop that Barack Obama made his famous Prague speech in 2009 (which won him his premature Nobel peace prize), arguing that the world must be shaken out of its complacency about weapons that could still destroy mankind. His ambition, he declared, was to set in train multilateral processes that within a generation could lead to the worldwide Symonds: renunciation of nuclear weapons—“global zero”, as it Matthew defence editor, The Economist became known.
After an unproductive affair in 2005, the 2010 RevCon was deemed a success, partly because of the hopes placed in Mr Obama and partly because of an agreement reached on an action plan aimed at reinforcing each of the npt’s three pillars. But Mr Obama promised far more than he could deliver and much of the plan remains incomplete, which does not bode well for the 2015 gathering. With Mr Putin’s belligerent Russia unwilling to enter into any new talks with America, and with China resistant to calls for more transparency about its arsenal, the p5 have made none of the progress towards the further disarmament they committed themselves to. Indeed, all the authorised weapons states are modernising their nuclear forces. Signatories from the non-aligned movement (nam) are also grumpy, as they believe their agenda has been ignored. A pledge to hold a conference by 2012 on estabIf Ukraine had lishing the Middle East as a nuclear-weapons-free zone kept its nuclear has not been met. Given the arsenal, would turmoil of the Arab spring and Russia have Israel’s willingness only to take invaded its part in a process that deals with all aspects of security in the reterritory? gion, the prospects for such a meeting happening before the RevCon are poor. Failure will have a corrosive effect on the atmosphere with some countries, such as Egypt, threatening to walk out. A new initiative on the “humanitarian consequences” of nuclear weapons, which challenges the incremental approach to disarmament by attempting to make them illegal under international humanitarian law, has grown in popularity and is backed by the likes of Norway, Austria and Ireland, as well as the nam. However, the p5 have refused to engage with it; and, since Russia’s annexation of Crimea, the attitudes of many nato countries protected by America’s nuclear umbrella have hardened against it further. Chilly at the top The Ukraine crisis will affect the conference in other ways. Co-operation between America and Russia on nuclear issues is now in the deep freeze. Mr Putin sees Russia’s nuclear weapons as an essential symbol of its national virility. But the gravest danger to the npt is the devaluing of security assurances of the kind provided to Ukraine by Russia, France and Britain under the 1994 Budapest Memorandum when it gave up nuclear weapons it had inherited after the dissolution of the Soviet Union. If Ukraine had kept its nuclear arsenal, would Russia have invaded its territory? Oddly, the one bit of positive news could come from the negotiations between the p5 (plus Germany) and Iran over its nuclear programme. Large gaps remain, especially over the number of uranium-enrichment centrifuges Iran can keep. But enough progress was made in 2014 to warrant an extension of the talks. Russia has not broken ranks. The npt is under great strain, but it has not yet fractured. A deal with Iran that honoured its principles could give it the boost it desperately needs. n
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2015 IN BRIEF
Nationalism is back
The host city of the 2022 Winter Olympics is chosen. Almaty and Beijing are in the running
Gideon Rachman: chief foreign-affairs columnist, Financial Times
Gideon Rachman
Bad news for international co-operation
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n recent years, any writer who predicted that nationalism was the wave of the future would have been regarded as eccentric—at best. All the most powerful forces in business, technology and finance seemed to be pushing towards deeper international integration. New supranational organisations such as the World Trade Organisation, the g20 and the International Criminal Court were set up to handle the cross-border issues that proliferated in a globalised world. Meanwhile the European Union, an organisation in which countries pool sovereignty and forswear nationalism, set itself up as the political model for the 21st century. In 2015, however, it will become increasingly clear that nationalism is back. From Europe to Asia to America, politicians who base their appeal on the idea that they are standing up for their own countries will grow in power and influence. The result will be an increase in international tensions and an unpromising background for efforts at multilateral co-operation, whether on climate, trade, taxation or development. The resurgence of the nationalist style in politics became evident in 2014. In India Narendra Modi, who is often referred to as a Hindu nationalist, won a sweeping general-election victory. Nationalist parties made big gains in the elections to the European Parliament, with France’s National Front and Britain’s United Kingdom Independence Party (ukip) topping the polls. Scottish nationalists came unnervingly close to winning a referendum on independence from the United Kingdom. Nationalist rhetoric also surged in Vladimir Putin’s Russia, as the Kremlin rallied domestic support for the annexation of Crimea by using the Russian media to portray the outside world as hostile, even fascist. Fuel for the fire A widespread disillusion with political and business elites, after years of disappointing economic growth, is a common factor that underpins resurgent nationalism across the globe. In western Europe the added ingredient is anger at high levels of immigration. In Russia it is lingering humiliation about the collapse of the Soviet Union and nostalgia for great-power status. In Asia the extra spice is a shifting balance of power that has encouraged nations such as China and South Korea to focus on historical grievances, particularly against Japan. In America outrage at the growth of Islamic State has begun to stoke an appetite for a return to a more assertive and militarised foreign policy.
THE WORLD IN 2015
Many of these forces will strengthen in 2015. So the nationalist tone to global politics will be more marked. In Europe key gauges of the strength of nationalism will be the general election in Britain and some local elections in Germany. A strong showing by ukip in Britain will stoke fears that the country may soon leave the European Union. Meanwhile, the Alternative for Germany party, which argues that In Asia the German interests have been subordinated to the eu’s, will push to extra spice establish itself as the country’s third is a shifting political force. The French political balance of class will nervously watch opinion polls for more evidence of the rise power of the National Front’s leader, Marine Le Pen, as a viable candidate for the presidency. The most serious threat to the stability of Europe, however, remains Russian nationalism. The biggest security question facing Europe—and perhaps the world—will be whether President Putin rides the nationalist wave he has helped to create, and continues to threaten Ukraine and even the Baltic states. The relationship between nationalist rhetoric and territorial disputes will also be critical to the future of Asia. Mr Modi of India, Shinzo Abe of Japan and Xi Jinping of China are all energetic nation-builders who have used nationalism as a spur to domestic reforms. But their nationalism also has an outward-looking face. Asia’s big question in 2015 is whether the urge to get on with domestic reforms in China, India and Japan will trump international rivalries. There are grounds for optimism. Though tensions remain high over issues such as the dispute between China and Japan over islands, political leaders are likely to try to manage their differences without conceding on basic issues of principle. Overall, however, the resurgence of nationalist politics will make 2015 a bad year for international co-operation. The eu will struggle to agree on the measures needed to revive Europe’s economy and to deal with Russia. Russia itself will be increasingly marginalised. That will make it hard to achieve agreement at the un on everything from the Middle East to climate-change negotiations. The globalised economic system will survive the revival of nationalism in 2015, but co-operation between nations will nosedive. n
Just possibly… The world laments the passing of the last two male northern white rhinos. FIFA finds that all parties acted with unimpeachable decorum in the bidding for the 2018 and 2022 World Cups. More countries adopt the Swedish model of criminalising the purchase of sex
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Great expectations
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n the history of successful social movements, there is always a flashpoint when the concerted strategy of a small group of people committed to a particular goal ignites a mass of people demanding change. It happened with the American civil-rights movement in the mid-1950s, leading to historic legislation just a decade later. It happened with the response to apartheid in the 1980s, when global boycotts combined with a surging movement among black South Africans to end the oppressive system. And it happened in that same decade when the world began to turn on Soviet communism. Successful movements share certain key features: the remarkable leadership of a few visionary individuals and organisations; a moment that jars the consciousness of the masses; and political evolutions that create the environment where change seems possible. But perhaps the most important prerequisite for a mass movement is a record of progress that convinces the majority that change can happen if they commit themselves to achieving it. I believe 2015 can be the moment when the fight to save the lives of children around the world turns into a popular movement, because the world has built a record of progress that proves dramatic change is possible in our lifetimes. When children have the basic health care needed to live past their fifth birthdays, when they have access to food that keeps them well nourished and when they can go to school, whole societies are empowered. Successes in the field of global development have been building for decades, but we still have a long way to go. One day it will become blindingly obvious to people in rich countries that children in poor countries are 10-25 times more likely to die just because of where they happen to be born; it will become clear that these deaths are preventable; and it will become morally unacceptable not to address the situation immediately. In the arc of global development, I think we’re at a point where the world will pay attention because the progress we’ve made proves that disease and extreme poverty are not inevitable. In the past 25 years, the number of children who die has dropped by a half. In 1990, 12.7m children died. If the rate of death had stayed the same, then the number of children who died last year would have been more than 17m, if you take population growth into account. Instead, it was just over 6m. The number of extremely poor people
has been going down at roughly the same rate, with the percentage of very poor people in the world cut by more than half since 1990. The reasons for this progress are neither miraculous nor mysterious. We know precisely why children are surviving. More vaccines for more diseases are being delivered to more places. Bed nets treated with insecticide have saved millions from malaria. Simple oral rehydration salts keep children suffering from diarrhoea alive. We also know why people are escaping poverty: it is thanks to more productive agriculture, better access to financial services, and the spread of functioning health systems that prevent expensive medical emergencies. Another reason for all this progress is that we’ve become much better at understanding what works, how to measure it and how to know if we’re on track or not. In 2000 the countries of the world came together to agree a set of clear goals for development for the first time. They envisioned a world in 2015 with far fewer people in poverty, and they’ve succeeded in part because of that common set of expectations. Everyone, grab the chance In 2015 leaders from every country in the world will come together to talk about how to build on that progress. In September they will meet at the United Nations to agree to the next set of goals in key areas of development, like saving children’s lives, reducing extreme poverty and providing access to clean water. These goals can be the foundations of a world in which all individuals and nations have a real chance to be self-sufficient. In the past, these sorts of conversations took place in meeting rooms where development professionals talked in a language that didn’t make sense to most people. In the year ahead we can broaden the conversation so that billions of people can take part in the discussion of what the world should look like and how to get there. And then they can hold their leaders accountable for meeting the goals that have been set. I am an optimist. I believe that when people realise they can increase the chances that a child will stay alive by 10 or 20 times by focusing on easy-to-understand solutions, they will no longer tolerate any failure to deliver those solutions to the people who need them. People want a more equitable world. And, in a very practical way, that world is within our grasp. n
Dramatic advances in children’s health and in povertyreduction are within the world’s grasp, argues Bill Gates, co-chair, the Bill & Melinda Gates Foundation
The progress we’ve made over the past two-and-a-half decades proves that disease and extreme poverty are not inevitable
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The world in transition Kenneth Cukier
A whistlestop tour of a year of eye-catching statistical landmarks
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American takeover
according to Capgemini and rbc Wealth Management. Danny Quah of the London School of Economics has calculated the world’s economic centre of gravity and reckons that, thanks to Asia’s rise, over the 70 years from 1980 to 2050 it will move eastwards from the mid-Atlantic all the way to somewhere between India and China. By 2015, the halfway point on this great journey, it will have reached the city of Bandar-e Mahshahr, in Iran, on the north-eastern tip of the Persian Gulf (chart 2). China will pass two milestones. First, the country’s outward foreign direct investment is likely to exceed its inward flows (chart 3). This powerfully symbolises the degree to which China has matured as a global economic power. Second, China will for the first time in modern history begin the year as the world’s largest economy, surpassing America, at least in terms of
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Going east
The world’s economic centre of gravity, 1980–2050
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2050 2015: Bandar-e Mahshahr Iran
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China’s foreign direct investment, $bn
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Outflows Source: UNCTAD
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Kenneth Cukier: data editor, The Economist
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Chinese takeover
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*Crude/condensate/NGLs † Projected, based on 2014 year-on-year growth Source: IEA 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 14
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Source: IMF 13 14 15
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he way people think about the world will undergo a radical change in 2015, as assumptions that have held steady for years are overturned. In the economy and technology, especially, the year will bring a series of statistical landmarks. The most remarkable shifts are geo-economic. America will overtake Saudi Arabia to become the world’s largest producer of oil, thanks to the shale-gas revolution (chart 1). Many aspects of international relations are built around American access to oil, and these will be viewed in a new light. The International Energy Agency forecasts that America’s oil preeminence will last until 2050 and beyond. Yet Asia is still rising, and some striking numbers will reflect this. The combined wealth of Asian high-net-worth individuals (those holding at least $1m) will exceed those from North America in 2015,
International Charting change
THE WORLD IN 2015
Global mobile-phone subscriptions and people, bn
7.5
World population 7.0
6.5
6.0
Mobile subscriptions
5.5
Sources: Ericsson; UN 2011
5
Balance of power
8
Outnumbered
2012
2013
2014
9
Facebookland
Defence spending, $bn
Population of China v Facebook users, bn 1.4
275
EU
China
1.2
250
1.0 0.8
225
Asia-Pacific (excluding China)
200 2013
2014
2015
2016
2017
Facebook*
0.6 Source: IHS Jane’s
2010 2011 2012
2018 2019 2020
Sources: UN; Facebook 2010
2011
2012
2013
2014
2015
10
Game of thrones
Longest-reigning English monarchs, years on throne
Global sales of tablets v PCs, m 350
*Projected from Q2 2014 based on previous year’s growth of active monthly users
0.4
6
Tech transition
Desktop and laptop PCs*
300 250
63.6
63.9*
Victoria
Elizabeth II
59.4
200
56.1
150
Tablets/hybrids
100 50 0
2015
*End-2015, assuming still on throne
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purchasing-power parity (chart 4). Though quibblers will say it is an imperfect measure, it nevertheless suggests that, as Dryden put it, “An old age is out/And time to begin a new.” After wealth follows power. Defence spending in the Asia-Pacific region, excluding China, will match the European Union’s spending in 2015, according to ihs Jane’s, a research firm (chart 5). Technology is forever in flux. In 2015, sales of tablets will overtake those of personal computers (chart 6). Revenue from internet advertisements in America will surpass the combined value of ads from newspapers, magazines and billboards (chart 7). And, oddly, mobilephone subscriptions will exceed the world population (chart 8): some people hold many accounts, especially in countries with spotty connections. In 2015 there will be more people active on Facebook than living in China (chart 9). If the social network were a country, it would be the world’s mostpopulous. One 2015 milestone reflects continuity rather than change. Health and inclination permitting, Queen Elizabeth II will become England’s longest-serving monarch on September 11th (chart 10), when she passes her great-great grandmother, Queen Victoria. n
2011
2012
50.4 * Excludes ultra-lightweight laptops Source: Gartner 2016 2014 2015
2013
44.4
7
The age of the new media US advertising revenue, $bn 90 80 70 60 50 40 30 20 10 0 1990 92
Newspapers, magazines and outdoor
Internet Source: ZenithOptimedia 94
96
98 2000 02
04
06
08
10
12
14
16
Elizabeth I
Edward III
Henry III
George III
95
96
International Charting change
THE WORLD IN 2015
Dome truths and pillar talk Global population, % of total
8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8
8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8
8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8
Age 65 years
Age 15 years
Male Female
1970
Male Female
2015
The world reshaped John Parker
The end of the population pyramid
I
John Parker: environment editor, The Economist
n 2015 demographers, teachers and politicians will stop talking about the population pyramid and start referring to the population dome. The change in terminology will reflect a profound shift in the shape and structure of societies—a shift that has been going on for 50 years and is only half complete. The pyramid is a traditional way of visualising and explaining the age structure of a society. If you draw a chart with each age group represented by a bar, and each bar ranged one above the other—youngest at the bottom, oldest at the top, and with the sexes separated—you get a simple shape. In 1970 that shape was a pyramid because the largest segment of the global population was the youngest (0-5 years old, comprising 14% of the total), followed by the next-youngest (6-10, with 13%), and so on in regular increments until, above 85 years, there were so few people that the shape vanished into a point (see left-hand chart). The pyramid was characteristic of human populations since the day organised societies emerged. With lifespans short and mortality rates high, children were always the most numerous group, and old people the least. A population chart of England in 1700 looks like a pyramid, as well. But now look at the chart of the global population in 2015. It looks more like the dome of the Capitol building in Washington, dc (middle chart). Young children are still the largest group, but now make up only 10% of the population, and those above them are almost as big a cohort, with 9.5%. The age groups start to become markedly smaller only about the age of 40, so the incline starts much further up the chart than with the pyramid. In 1970 the youngest had not only been the largest but also the fastest-growing section of the population. But between 1970 and 2015, the population aged 0-19 grew by only 42%, whereas the population aged 20-39 rose by 128%. This group added almost twice as many people to the overall numbers as the group aged below 20 did.
Male Female
Source: UN
2060 There are now also 50m people above 85, so the dome of 2015 has a spike. In 1970-2015 the dominating influence on the global population was the fertility rate, the number of children a women would typically bear during her lifetime. It fell dramatically over the period, meaning that the world shifted from having larger to smaller families. But in 2015-60 the biggest influence upon the population will be ageing. Small families are already becoming the norm, the fall in fertility is slowing down and now almost everyone is living longer than their parents— dramatically so in developing countries. So, by 2060, the dome will have come and gone and now the shape of the population looks more like a column (or perhaps an old-fashioned beehive). It is a little fatter near the bottom and curves in at the top. But up to the age of about 50, the generations are of almost equal size and the shape Children has near-vertical sides. will be The size of the Earth’s population no more is still rising, from 7.2 billion in 2015 numerous to 9.5 billion in 2060. But, according calculations by Emi Suzuki and than any to Wolfgang Fengler of the World Bank, other age two-thirds of the extra 2.2 billion people in 2060 will be in the age group group between 40 and 79, not from younger people. The increase in the last, oldest segment is especially marked. Between 2015 and 2060, the number of 60- to 79-year-olds will increase by 1.1 billion, or 131%. That is five times the increase in the number of children and teenagers, which will rise by only 220m, or 9%. The numbers of the oldest people of all (those above 85, here lumped together in one bar) will rise at the fastest rate of all (by 281% in 2015-60), but from a much lower base, so they do not add as many people to the total. For all of history, humans have lived in societies dominated (in numbers at least) by children. By 2060 children will be barely more numerous than any other age group up to 65. And looking after parents and grandparents will be as big a, or a bigger, social requirement a s bringing up children and grandchildren. The year 2015 is, roughly, the halfway point in this astounding transformation. n
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Europe Also in this section: Brussels in-tray 98 France’s political marathon 99 Italy exposed 100
Rethinking Germany’s pacifism 100 Germany’s property bubble 101 Spain votes 102
Just possibly… 102 Matteo Renzi: The plan for Italy 104
Living with a bear John Peet
West Europeans will stiffen their collective spine in response to a common threat
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an autocratic and kleptocratic state so as to keep doing business with Russia. The events of 2014 have undone this understanding, even among the German centreleft (see the story “Power v piffle” in this section). The country’s chancellor, Angela Merkel, has emerged as one of Mr Putin’s fiercest critics in the West. The transformation of Mr Putin from an uneasy business partner into today’s hostile neighbour has been
s
ince the financial crisis, Europe’s leaders have looked inwards more than outwards, struggling to improve their economies and keep their single currency together. Yet external issues are now barging their way to the top of the European Union’s agenda. The reason is Russia’s president, Vladimir Putin, and his land grab in Ukraine. Three things will happen in 2015. First, the emergence of the new Russian threat will make most European countries raise their defence spending, after years of complacent cuts. Second, there will be a new push to diversify the European Union’s sources of energy away from Russian gas, and to reduce the eu’s economic dependence on Russia in general. Third, sanctions against Russia will be maintained and perhaps increased, although they are taking a toll not just on Russia but on shaky western European economies. Given recent history, all three are surprising. Mr Putin has long played a game of divide and rule in Europe. Against the enmity of the likes of Poland and the Baltics, he has played Putin’s balaclava brigade the trump card of friendliness with Italy and Germany. Hungary, Cyprus and Bulgaria have slow but steady. But since he returned to the Kremlin usually been pro-Russian. Many European businesses to replace the more pliant Dmitry Medvedev as Russia’s have traded and invested in Russia, and France has built president in March 2012, his anti-Western rhetoric has its military-transport Mistral ships. eu leaders such as become far stronger. Italy’s Silvio Berlusconi and GerIt has been clear for some time that Mr Putin sees Mutual many’s Gerhard Schröder were nato as a threat. He regrets its expansion to take in to be considered close per- several central European countries and the three Baltic suspicion is happy sonal friends of Mr Putin’s. states which joined in 2004; his war on Georgia in 2008 now deeply Yet those days are now gone. was partly intended to stop the Georgians following suit. entrenched Mr Putin’s aggression in Ukraine But it was less clear that Mr Putin would be hostile to has not only led to sanctions but the eastward expansion of the eu too. The catalyst for also cost him most of his friends in Europe. France has this was Ukraine. Mr Putin, who once called the collapse of the Sopostponed delivery of the Mistral ships. But the best example of the changing mood is Germany, Russia’s viet Union “a geopolitical disaster”, has long been loth biggest trading partner and source of investment. Ger- to accept the notion of Ukraine, the medieval cradle of many’s elites have long practised an “understanding”, Kievan Rus, as a truly independent country. The 2004 whereby they overlook Mr Putin’s entrenchment of Orange revolution was one of the biggest setbacks of his
John Peet: Europe editor, The Economist
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Brussels in-tray Tom Nuttall BRUSSELS
Tests for the new team
E
very few years, in a mêlée of backroom deals, the European Union’s heads of government work out who is to run the place; 2014 was one such year, and as it drew to a close the new team were getting their collective feet under the desk. In 2015 Brussels-watchers will pay close attention to Jean-Claude Juncker, the new president of the European Commission (the eu’s executive arm), who has tried to counter those who doubt his reformist credentials by revamping the commission’s structure. Donald Tusk, the new head of the European Council (where heads of government gather), and Federica Mogherini, the foreign-policy chief, will also be in the spotlight. Brussels will see a number of contentious policy debates in the coming year— notably over the Transatlantic Trade and Investment Partnership, an ambitious free-trade deal between the eu and America distrusted by the left on both sides. But three big-picture issues are likely to dominate. First, the threat from a revanchist Russia. Second, the feeble European economy. Third, looming concern over a British departure from the eu. The eu’s unity in response to Russia’s behaviour in Ukraine is fragile. If, as seems likely, the war in Ukraine’s east turns into a new “frozen conflict”, it is
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2015 IN BRIEF Russia opens the biggest prison in Europe, a 4,000-inmate facility in St Petersburg
THE WORLD IN 2015
hard to see the eu summoning the appetite for fresh confrontation. With some exceptions, its members simply care less than Vladimir Putin does. To the south, meanwhile, troubles in north Africa and the Middle East will mean no end to the stream of migrants seeking to cross the Mediterranean into Europe, often with tragic consequences. On the economic front, the existential fears ignited by the euro crisis of 2010-12 have waned. But in 2015 the euro zone may muster growth of a mere 1% or so. Mr Juncker wants a three-year e300 billion ($380 billion) investment splurge, covering transport, internet infrastructure and energy, but no one knows quite where the money will come from.
Enter Mogherini and Tusk
first presidential term, and he was pleased when the proRussian Viktor Yanukovych became Ukraine’s president in 2010. This was the background against which the eu drew up a free-trade deal with Mr Yanukovych. Mr Putin is strongly against such a deal because it seems to offer a path towards eventual eu membership for Ukraine. He also badly needs Ukraine, with 45m people, to join his planned Eurasian Union. So in late 2013 he used immense pressure to get Mr Yanukovych to reject the eu deal. But that prompted a new uprising by Ukrainians furious to see their country’s European aspirations dashed, leading ultimately to Mr Yanukovych’s flight and his replacement by Petro Poroshenko. Mr Putin took advantage of the chaos after Mr Yanukovych’s departure to invade and annex Crimea, a mostly Russian-speaking peninsula given to the Ukrainians by Khrushchev in 1954. Then the Russians fomented a revolt against Kiev in Ukraine’s Donbas region, sending undercover troops over the border. Mr Putin produced a new doctrine that he had the right to protect Russian-speakers wherever they were. For countries like Latvia or Estonia, with large Russian-speaking minorities and memories of Soviet occupation, this
The European Central Bank, under the wily Mario Draghi, urges a more expansionary fiscal stance across Europe—code for Germany to relax its domestic austerity. The bank may also belatedly embark upon a full-blown programme of “quantitative easing”. That would suit France Three bigand Italy, which are picture issues struggling to meet are likely to eu-agreed fiscal targets. But their dominate ostensibly reformist governments will need to start getting serious about tackling inefficiency. All the while, the red-robed judges of Germany’s Constitutional Court stand ready to step in if they think the ecb has exceeded its mandate. If the British general election in May leads to a Conservative-led government, David Cameron, the prime minister, will have to make good on his pledge to seek a renegotiation of the terms of Britain’s eu membership ahead of an in-or-out referendum in 2017. He will push for a deepening of the single market and an end to the eu treaty’s symbolic aspiration to “ever-closer union”. But the most contentious issue will be the right of eu citizens to move to Britain, which some Tories want to weaken. Most of Britain’s fellow club members are keen to see Britain stay. Mr Juncker, whose appointment was loudly opposed by Mr Cameron, has extended an olive branch. But don’t count on peace breaking out. n Tom Nuttall: Charlemagne columnist, The Economist
doctrine is deeply threatening. Although the fighting in eastern Ukraine has abated, all this has left Mr Putin and the eu in a stand-off that will endure throughout 2015. Mr Putin will not give up Crimea or abandon pro-Russian rebels in the Donbas, who will get a large degree of autonomy. The eu and Ukraine have signed a new version of the trade deal, but to avoid provoking Russia have postponed its implementation beyond 2015. Because the Europeans are not ready to fight over Ukraine, they only have the option of sanctions against individual Russians and Russian companies close to Mr Putin (even so, the West’s sanctions are hurting Russia’s economy, which stalled in 2014 and will barely recover in 2015). The Russians have retaliated with import bans of their own and threats of gas cutoffs. Mutual suspicion is now deeply entrenched. For several years, many within and beyond the European Union have bemoaned its inability to co-ordinate and present a common foreign policy, citing divisions over Russia as the clearest example. Paradoxically, in 2015 the eu will come closer than ever before to achieving this goal. And for that thanks are due to one man: Mr Putin himself. n
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tential Waterloo) will not be other contenders so much as pending judicial investigations into his past. French voters will twice have their say at the ballot box: at departmental elections in March, then at elections in December to 13 newly drawn regions, down from 22. Each result will be crushing for the left, comforting for the centre-right—and a chance for Ms Le Pen to demonstrate her rising electoral power. She could win the northern region, and possibly another, leaving France in shock. She will mock the renewed rivalry between Mr Hollande and Mr Sarkozy, arguing that the line-up of the cosy political elite never changes. With her canny ability to portray herself as the voice of ordinary voters, Ms Le Pen will thrive on political disillusion over unkept promises and joblessness. Mr Hollande will try to use foreign policy to disguise his domestic weakness, lending French military air support to America’s campaign against Islamic State, and keeping French troops on the ground in Mali and the Central African Republic. He will welcome world leaders to a grand un world-climate conference in December 2015, hoping to secure a binding commitment to reducing greenhouse gases. But worries will persist about French jihadists leaving for Syria and Iraq, and the terrorist threat posed by those who return. And Franco-German ties will be strained by differences over economic stimulus and budgetary discipline. In short, France will remain distrustful, despondent and doubtful. Some form of social revolt cannot be ruled out, whether in the heavily immigrant banlieues or in troubled rural parts. Tension may even provoke a political crisis, such as the resignation of Mr Valls if faced with an unmanageable Socialist rebellion, or, just possibly, the dissolution of parliament. There is a paradox behind all this. The year when Mr Hollande at last junks most of the socialist economic policies he was elected to put in place will be marked by one of the most reformist-sounding governments France has seen for years. Yet the political headache of implementing reform against the instincts of a large swathe of the left, and the time it takes to secure economic results, mean that this policy u-turn will come too late to rescue the Hollande presidency. n
2015 IN BRIEF
THE WORLD IN 2015
France’s political marathon Sophie Pedder PARIS
And its belated dash for economic reform
T
he long race for the French presidency in 2017 will begin in earnest in the year ahead. François Hollande, the Socialist incumbent, will fail to lift his record-breaking low poll ratings, so eyes will increasingly turn to the battle to succeed him. Three figures will dominate: Manuel Valls, his prime minister, on the left; Nicolas Sarkozy, a former president, on the centre-right; and Marine Le Pen of the populist National Front. Mr Hollande appointed Mr Some form Valls in the hope that the younger, pugnacious politician’s popularity of social would help revive the president’s too. But the longer Mr Valls re- revolt cannot be ruled out mains in the job, the more he will become tied to Mr Hollande, and the further his own poll ratings will tumble. This will make it all the harder for Mr Valls to put in place the economic reforms he has promised. On the government’s to-do list are pledges to liberalise protected professions, such as notaries, bailiffs and pharmacies; ease works-council rules in companies; simplify labour law; loosen Sunday and evening trading hours; cut bureaucratic red tape; and liberalise planning regulations. Each will meet angry resistance from lobbies or unions, and some concessions will follow. Mr Valls, a centre-left moderate, will tread a perilous line between a desire to establish his tough-guy, reformist credentials and a need to keep the restless left wing of his party from outright rebellion. Left-wingers are suspicious of what they consider a betrayal of taxand-spend socialism. They will denounce, for instance, a business payroll-tax cut that will come into full effect in January, part of a e40 billion ($51 billion) package to help revive private-sector investment. Socialist dissidents, including Arnaud Montebourg, a former industry minister, and Martine Aubry, the mayor of Lille, will also use the charge of “excessive austerity” to criticise e21 billion of planned public-sector budget savings in 2015—even as France, faced with weak growth, loosens its deficit target to 4.3% of gdp. Nicolas Bonaparte In the year that marks the 200th anniversary of Napoleon’s escape from Elba and his return to Paris, one force that may help unify the left is the redoubtable Mr Sarkozy, who remains as loathed on the left as he is wildly popular among his party’s supporters. After securing the party leadership, he will try to build a new political movement, lending it a fresh name and recruiting younger faces, in preparation for 2017. He will not hesitate to steal the limelight from rivals for the presidential nomination, notably Alain Juppé and François Fillon, two former prime ministers. With polls suggesting that Mr Sarkozy is the preferred candidate of centre-right voters, however, his main obstacle (and po-
He’s back
Armenia mourns the 100th anniversary of the start of the still-controversial genocide conducted by Ottoman forces during and after the first world war
Sophie Pedder: Paris bureau chief, The Economist
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Europe
Italy exposed Alexandra Fattal MILAN
The country’s delights, and its difficulties, will be on display
T
he World Expo—which takes place every five years and traces its history back to London’s Great Exhibition of 1851—comes to Milan in 2015. Despite corruption scandals and fears that the city will not be ready, and that some of the pavilions erected by the 144 countries taking part will not be finished by the opening in May, Italy should put on a good show. But if Milan Expo will not be the catastrophe naysayers predict, neither will Italy has had it provide much of three prime a boost to Italy’s ministers in stagnant economy. Shanghai 2010 as many years was, for the most part, an opportunity for Chinese people to see the world. Italy hopes, in contrast, to use Expo as a chance to put itself on display and increase tourism and exports in the future. Its short-term effects will be limited. An uptick in world demand and the depreciation of the euro should see
THE WORLD IN 2015
Italian exports grow by 5% in 2015, according to Italy’s export-credit agency. But the economy, which stagnated in 2014 and is barely bigger than it was when the euro was launched in 1999, will grow by less than 1%. The government will nevertheless muddle through. Italy has had three prime ministers in as many years. Matteo Renzi, the centre-left former mayor of Florence who took the job in a party coup in February by pledging change, will cling on, even if fresh elections are held. His position was strengthened by an impressive showing for his party in the European elections in May. But Italy will get a new president if Giorgio Napolitano, who is 90 in June, steps down (he stayed on into a second term only to help his country through a political crisis). It could get its first female president, perhaps Emma Bonino, a former foreign minister, Roberta Pinotti, the defence minister, or Anna Finocchiaro, a senator, though front-runners often come unstuck.
Power v piffle Andreas Kluth BERLIN
Germans face a wrenching debate about what their diplomats and soldiers may do abroad
2015 IN BRIEF The Shroud of Turin, which supposedly covered the body of Jesus, goes on display in the city’s cathedral for the first time in five years
Alexandra Fattal: Milan correspondent, The Economist
Islamic State, the spread of Ebola in Africa: are such problems Germany’s to deal with? During the cold war the answer was no. Neither West nor East Germany had a genuinely independent foreign policy. In geopolitical matters, Bonn farmed out its defence and diplomacy to Washington. In European affairs, it rode shotgun next to Paris. East Berlin took its cues from Moscow. Being divided, the Germans were not even sure whether they properly belonged to “the West”. On October 3rd 2015 Germans will celebrate the 25th anniversary of reunification, which ended that division and officially restored German sovereignty. In that quarter-century Germany has changed from an introverted country to a middle Germany’s diplomatic (and Preserving power. Anglophone) elite took on board world order the nagging by Western peers to be more assertive abroad. But its peois their ple would have none of it. Every burden too small step forward caused bitter controversy at home, starting with the decision in the late 1990s to send troops to Kosovo— for humanitarian reasons, but in a break with Germany’s categorical pacifism. Often Germany slid backwards, as in 2011 when Angela Merkel, the chancellor, abstained (with Russia and China) from voting in the United Nations Security Council on whether to intervene in Libya. Now the world’s conflicts are becoming too pressing for Germany to stay passive. It may defer to France in Africa and to America in Asia. But the stand-off between
s
Andreas Kluth: Berlin bureau chief, The Economist
F
uture historians will see the years between 2014 and 2017 as the period when Germany belatedly emerged from its post-war shell to become one of the leaders of the West. But a shift announced in 2014 will not be complete in 2015. Germans themselves must change their attitudes by means of what will be an acrimonious debate. They need to rethink their radical pacifism and their habit of letting America, France or Britain take the lead in international crises in order to harangue them later when something goes wrong. Eventually—but probably after 2015—they will realise that preserving world order is their burden too. Germany’s president, Joachim Gauck, called for such a shift in a speech at the Munich Security Conference in January 2014. In co-ordination with the foreign and defence ministers, who were both in the audience, Mr Gauck said that Germany could no longer be “the shirker in the international community”. After nearly seven decades of good behaviour, Mr Gauck suggested, Germans should trust themselves as others already did to do good in the wider world. Russia’s aggression in Ukraine, the new threat of
Business folk and foreign investors cautiously welcomed Mr Renzi, and his party secured 40% of the vote at the European Parliament elections. But the honeymoon is over. Though Mr Renzi stipulated 1,000 days for his reform agenda— which includes an overhaul of the Senate, a new electoral law, increased labour flexibility, a leaner bureaucracy and a speedier system of civil justice—he needs to show more tangible progress in 2015. A plan of part-privatisations could get going in earnest, including the listing of 40% of Poste Italiane, which runs both the postal service and a retail bank; and Italy’s disparate banking sector could see some consolidation. But with a jobless rate of over 12%, Italy will struggle to boost employment. A trip to sample the delights at Milan Expo might be needed to lift the spirits. n
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keeping the dialogue going, America by showing that there is firepower if needed. Meanwhile her foreign minister, Frank-Walter Steinmeier, will work Germany’s streets and talk-shows to educate the German public and win its support. This will be hard. The most telling moment of 2014, captured in a YouTube video that went viral, occurred when he spoke in a Berlin square about the Ukraine crisis. In the crowd were the habitual faux-pacifist protesters calling him (not Mr Putin) a “warmonger”. Usually controlled, Mr Steinmeier burst into a livid tirade about the demonstrators’ disingenuousness. Many more such episodes will follow in 2015. But before the next national election in 2017, Germany will have matured enough to help its allies keep the peace—by shooting if necessary. n
2015 IN BRIEF
THE WORLD IN 2015
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the West and Vladimir Putin in Ukraine falls squarely in a region where German leadership is needed. Those pleading with Germany the loudest are eastern neighbours such as Poland, today among Germany’s closest friends but repeatedly crushed between Germany and Russia in the past.
Sympathy for the bully And yet, to the consternation of Poles and Balts, many Germans show a surprising sympathy for Russian bullying. Supporters of The Left, a party that descends from East Germany’s communists, blame America and an allegedly expansionist nato for the crisis more than Mr Putin. Many centre-left Social Democrats, and even some on the political right, also mix anti-American reflexes with romantic piffle about a kinship between the Russian and German souls. And across the spectrum most Germans insist on never using their army, except perhaps to hand out nappies and water bottles. Mrs Merkel, as is her wont, has not taken a public stand on the debate about German diplomacy that Mr Gauck (in his largely ceremonial office) started. Instead, she navigates the domestic and international eddies as best she can. She is on the phone to Mr Putin more often than any other Western leader. She has also co-ordinated the European Union’s sanctions against him alongside America’s. In 2015 she will step up sanctions if necessary, but also keep playing good cop to America’s bad cop: she by Not in the mood for blinking
Et tu, Berlin Frederick Studemann BERLIN
Even Germany succumbs to a property boom
G
ermany’s property market used to be reassuringly boring. Just under half of the population lives in rented accommodation. When Germans do buy, they tend to save up for years to put down a hefty deposit. And once in, they tend to stay put. Not any more. Since the financial crisis money has flowed into German property, driving up prices by 40-50% in six years. Forecasters expect a further rise of more than 4% in 2015. All this may not be a patch on the likes of central London, but it does prompt questions about whether Germany is succumbing to the property affliction that has caused so much trouble elsewhere in Europe and in America.
The finance ministry has talked of “dangerous” price developments; eyebrows have been raised at the Bundesbank, with the custodians of Teutonic hard-money orthodoxy warning of a 25% over-valuation. The media have done their bit, too, serving up horror stories of rocketing prices and long-time tenants driven out onto the streets as new landEyebrows lords—some of them have been foreigners!—use the raised at the cover of a few “improvements” to jack Bundesbank up rents. Why the shift? German savers have turned to bricks and mortar—or Betongold, concrete gold—as a sanctuary from the horror of ultra-low euro-zone interest rates. Der Euro ist nichts wert (the euro is worthless) is a common refrain around dinner-party tables from Berlin to Munich. Low interest rates also mean cheaper credit, and prices in desirable
Germany introduces a universal minimum wage of €8.50 ($11) an hour
places like Berlin still compare favourably with hot property markets abroad. Unsurprisingly, international investors, some from euro-zone periphery countries hit badly by the financial crash, have joined the fray. A cultural change is also at work, with a younger generation that is prepared to climb the property ladder rather than stay in the same place for good. In some circles Germans are starting to suffer the smug talk of bargains acquired and gains made that has long been the death knell of many an Anglo-Saxon social gathering. Germans have not thrown financial caution to the winds, however. Borrowing money for property remains a fairly daunting business. Investors seeking a quick buck face robust tenant-protection laws and rent controls. Something is changing in German property, but in a very German way: slowly and cautiously. n Frederick Studemann: comment and analysis editor, Financial Times
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2015 IN BRIEF
Unfinished business
Ireland launches Eircode, at last addressing its status as the only EU country without postcodes
Merril Stevenson MADRID
Spain will find it hard to maintain the momentum of reforms in an election year
W
hen Europe badly needed a success story after the euro-area crisis of 2012, Spain provided it. Its government got a grip on the bust economy. It made labour markets more flexible, restructured and recapitalised the banks and cut the budget deficit. Exports surged as competitiveness improved. The economy began expanding again. Private-sector investors tiptoed back in and the government’s cost of borrowing plummeted. Unemployment at last began to fall. Spain started to be held up as a model to reform laggards such as Italy and France.
Catalan seeks place in the sun
Merril Stevenson: European business editor, The Economist
Success in 2015 will be more nuanced. The economy will grow again, a bit faster than in 2014. A cheaper euro will help both growth and the trade balance, by dampening domestic demand for imported goods. Spain is unlikely to meet its target of reducing the budget deficit to 4.2% of gdp, and the debt burden will increase to more than 100% of One in gdp. The real danger, though, is that two young 2014 will prove the high-water mark of reforms. Yet Spain needs more of people is them, especially to the tax system, unemployed the labour market, insolvency procedures and business regulation, to thrive in the longer term. Complacency and election-year politics will get in t he way. With more than 5m people still out of work, few ordinary folk believe the economy is improving. One in two young people is unemployed. All but the biggest firms complain that credit, though easier to get, is still
THE WORLD IN 2015
dear. More people are emigrating than immigrating. A series of corruption scandals have contributed to widespread disenchantment with the political system. Local elections are due in May, and a general election by the end of the year. Support is draining from the two parties that have governed Spain almost since Franco’s death: the Socialists and the centre-right People’s Party (pp) that is now in power. A new populist movement of the left called, with Obama-like overtones, Podemos (“We can”) picked up five of 54 seats in the European Parliament elections in May 2014, just four months after its founding, and could do better in 2015. But apathy is also gaining ground. No tough reform policies will be put in place before the elections; tax cuts are already planned, and the focus will be on active employment policies to get more people into work or training. The pp will probably emerge from the general election with the most votes, but not enough to govern effectively on its own. An alliance would need to emerge, on the left or on the right. This is territory uncharted in recent times. Mas movement The other political date with destiny in 2015 concerns Catalan independence. During the crisis enthusiasm for secession has grown in the northeast in rich, industrial Catalonia. Polls show that Catalans are determined to have their say, though a plebiscite might well produce more votes for devolving greater powers from Madrid than for outright independence. Less accommodating than the British towards the Scots, Mariano Rajoy, Spain’s prime minister, is denying Catalans the referendum on independence that their premier, Artur Mas, has promised. Mr Mas is expected to call snap regional elections and turn them into a de facto plebiscite if he can get the independence movement to unite behind him. All the while, Catalan frustration is mounting. The issue will dominate politics at least through the first half of 2015. With luck, a national government that has beenclever enough to nudge the economy towards the right path will be astute enough to open negotiations on a devolution deal for Catalonia. That will take money, no doubt, which it does not have. But then talks could take years. In the meantime, 2015 will be a bumpier ride politically than economically. n
Just possibly… A surge in migrants arriving from north Africa prompts Italy to demand a bolder EU response. A major computer hack reveals some surprising details about Vladimir Putin. A total solar eclipse in March destabilises Germany’s power grid.
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The plan for Italy
E
urope in 2015 is a continent that has yet to emerge from the economic crisis, in a world suffering from ongoing conflicts and new terrorism. But rather than let pessimism triumph, what is required is conviction and determination, the confidence that change is possible. This cannot be taken for granted. It is the role of politicians to lead the way. After years of an overwhelmingly technocratic approach, which did not yield positive results, a change of perspective is now needed. From the start, in February 2014, the new Italian government—half women and half men—has set itself this objective. We have a clear strategy and we know how to achieve results. We will speed up the completion of the structural reforms that are already under way, beginning with the constitutional and institutional reforms that are essential to make Italy simpler, nimbler and more competitive, able to respond in a timely way to social change. This includes an electoral law that produces a clear winner, a stable government and an undisputed majority; and a new constitutional architecture with a single legislative house together with a rebalancing of power between central and local authorities. In meetings with our international partners this is a priority which is often mentioned as helpful to economic growth. At the same time we will press ahead with social and economic reforms. We know the structural difficulties that are holding Italy back: above all, a high public debt accumulated over decades and an administrative system that is both invasive and inefficient. We have had years of recession. In 2014 we stopped the decline. But that is not enough; our goal is to grow again. To achieve this, our strategy stretches across several fronts. We have started to design a new public administration which, thanks to digitisation, should help families and business save time and resources. We have taken urgent measures to speed up the civil-justice system and are focused on cutting trial times by half, which will also have an economic impact. We know this is of great interest to foreign investors. In 2014 we started to attract their capital again; in 2015, thanks in part to these reforms, Italy will be even more attractive. As for the fiscal system, 30m citizens will receive their income-tax returns already filled in. Simpler taxes help those who create wealth and make it more likely that everyone will pay what they owe. We will continue to cut taxes
on workers and businesses. We are committed to providing a tax bonus of e80 ($102) a month to 11m workers and we will cut taxes more for businesses, having already lowered some by 10% in 2014. We are financing these measures with decisive and selective cuts in waste and unproductive public spending, without touching services, but redefining expenditure to make it an economic motor. Creating jobs, especially for the young, is an urgent challenge for Italy and all of Europe. In Italy we have launched a thorough labour-market reform. It is based on a single permanent contract with increasing rights, on expanding safeguards for those who lose their jobs (especially women), and on incentives for companies to hire. For Italy this is a bold, fundamental change. Last but not least, 2015 will bring an education revolution. At the start of the new academic year Italian schools will be profoundly different, following a public consultation that involved teachers, parents and students. This is an investment in the future: tomorrow’s Italy depends on today’s schools. To show the world that Italy is really changing, that it is healthy and can be an example, we have Expo 2015 in Milan. It is an extraordinary opportunity to bring Italy’s prowess to the world’s attention and to millions of visitors, but it will also be a chance to mobilise billions of euros in resources and to create tens of thousands of jobs. Back to the European dream We want to return to growth and we will succeed. Europe, too, needs to focus on growth and jobs with conviction. Today it is stagnating. The new commission has declared that it will allocate e300 billion to change course. We will make sure this happens, and we will ask the banking system to help foster economic growth by channelling to businesses and families the e200 billion made available by the European Central Bank. But Europe is much more than economics. It can and must go back to being what its founders dreamt of. The world needs a Europe that believes in its own values, in the principles on which it was established, starting with its vocation for peace; a Europe that, over and above its economic power, is a decisive player in the world order, during an extremely delicate period that requires everyone to assume greater responsibility. In Europe, in 2015, we will do this. We have 365 days. Let’s not waste a single one. n
Matteo Renzi, prime minister of Italy, explains how he aims to get his country growing again
Simpler taxes help those who create wealth and make it more likely that everyone pays what they owe
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Britain Also in this section: Post-referendum Scotland 106 Friendly advice from Italy 107
Bye-bye, Land Rover Defender 107 The runway decision 108 Flirting with power cuts 108
Just possibly… 108 François Heisbourg: Entente frugale 109
Coalition, the sequel James Astill
No political party will attain a majority
I
a choice between Mr Cameron, whom Britons like more than his party, and Mr Miliband, whom they like less, most will plump for the Tory incumbent. A surge by the snp, which could cost Labour up to half its 41 seats in Scotland, and by the Greens, which could reduce its ex-Lib Dem windfall, would make that electoral verdict still more emphatic. With its splintering vote and likelihood of coalitions, British politics is starting to feel rather north European. Yet its culture remains viperous and confrontational. The disdain Tory backbenchers show Nick Clegg’s Lib Dems, who have for the most part been a constructive partner, illustrates this. It is utterly self-defeating. Having no tribal affiliation, most voters view these feuds as ineffectual squabbling between politicians more similar, especially in their social and educational background, than they are different. The experience of coalition rule—to which most feel neutral or positive—has exacerbated that impression, and in turn fed the nat ional disenchantment with politics. So have the linger-
2015 IN BRIEF Britain stops all financial aid to India and South Africa by the end of the year
s
n May 2015 Britain will hold a general election in which nothing is predictable so much as the strain it will put on the already creaking Westminster system. First-past-the-post, majoritarian and adversarial, it emerged to produce stable governments from a twoparty contest. Yet the coming fight will be crowded, with five national parties expecting at least 5% of the vote and the Scottish National Party (snp) enjoying a post-referendum bloom. The result will be Britain’s third hung parliaBritish politics ment since the war (the curis starting to rent one is the second). The feel rather north government that emerges will probably be the same as the European present one, a coalition of Conservatives and Liberal Democrats. Yet even if that transpires—something most bookmakers do not expect—its formation will be attended by great uncertainty, testing the basic logic of electoral reward, and in turn increasing the disaffection most Britons feel with politics. Every general election in modern times has been won by the party most trusted with the economy or on the matter of leadership. Under David Cameron, the Tories are far ahead of the Labour Party on both counts. Yet mitigating these advantages are two consequences of Britain’s fracturing vote. First, the right is split. Under the chirpy leadership of Nigel Farage, the uk Independence Party secured 3% of the vote in 2010; this time, it will get around 10%, mainly at the expense of the Tories. Second, the left is more united, the Lib Dems’ decision to ally with the Tories having lost them around twothirds of their support, mostly to Labour. Given also the unfairness of Britain’s constituency boundaries, which means Labour needs fewer votes than the Tories to win seats, it has a great opportunity to bounce back to power after one term in opposition. Most bookies expect that—reasoning that Labour has only to turn out its core vote and retain most of its Lib Dem apostates to deliver Ed Miliband to 10 Downing Street. In a series of left-wing promises, he appears to have embraced this hypothesis as a “core strategy”. Yet this plan is fraying at the edges, so thoroughly is the Labour leader reviled, even by his own voters, less than half of whom trust him to run the economy. Given
James Astill: political editor and Bagehot columnist, The Economist
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THE WORLD IN 2015
Snatching victories from defeat Jeremy Cliffe GLASGOW
to independence during the referendum Talk of Scottish secession will be hushed. The secessionists will not campaign, then joined the snp afterwards
I
n 2014 the Scots rejected independence. In 2015 separatists will dust themselves down and forge ahead regardless. Spring will bring three big events. In April a batch of new powers, including control of taxes on property transactions and waste disposal, will be devolved from London to Edinburgh in keeping with the Scotland Act of 2012. Around the same time the main Westminster-based unionist parties will go into the general-election campaign offering yet more devolution, including housing benefit and further control over income tax, fulfilling panicky promises they made to persuade Scots to vote No to independence. Scotland’s drift from the rest of the United Kingdom, then, will continue. Most important, the secessionist Scottish National Party (snp) will meet for its final conference before the general election in May. It will do so under its new Scotland’s leader, Nicola Sturdrift from geon, the former the rest of deputy first minister to Alex Salmond the United (who resigned after Kingdom will the referendum). It continue will do so as Britain’s third-largest party in terms of membership, with roughly 100,000 members—up from 25,000 before September’s vote and equivalent to 2% of Scotland’s population. The membership surge comes from left-wing voters who became committed
Philately will get you anywhere on the 175th anniversary of the Penny Black, the world’s first adhesive postage stamp
s
2015 IN BRIEF
to continue the struggle. They are radical and mostly young, and will thus unsettle the snp’s traditionally conservative members (known as “Tartan Tories”). That difference will bubble to the surface at the party’s spring conference. New members will use their muscle to yank the snp’s policies, particularly those on public spending, to the left. They will agitate for the party to promise a wealth tax. Wither Labour? The snp will go into the general election with a starkly social-democratic prospectus. Combined with the ongoing collapse of the Labour Party in Scotland, this will enable it to win seats in working-class bastions like Glasgow and Dundee. Labour’s bout of soul-searching, triggered by the resignation of its leader in October 2014, will become yet more intense. Mr Salmond will lead the snp’s newly enlarged troupe of mps in Westminster, where he will secure as much power for Scotland as he can and will often outshine the main party leaders. Two other parties will do well. The Scottish Greens, who also supported independence, will see their share of the vote rise (at the expense of Labour and the Liberal Democrats). So will the Conservatives, who in the 2010 election won just one of Scotland’s 59 seats at Westminster. Thanks to the party’s talented Scottish leader, Ruth Davidson, together with the growing constituency for fiscal conservatism as further tax-raising powers are devolved, it will win another couple of seats in former Tory strongholds such as Perthshire. With a Scottish parliamentary elec-
ing effects of the downturn, including cuts and glacial wage growth, and a new record level of distrust of newspapers on the back of the phone-hacking scandal. Both are rare boons for Mr Miliband, who has campaigned against the high “cost of living”. Yet the cost to British democracy is similarly high; voter turnout will decline further in 2015. Caveat victor The next government will have other things to worry about. If the Tories return, Mr Cameron has promised an “in-out” referendum on Britain’s eu membership in 2017, and the Lib Dems would not block this. It would be a sapping drain on government time and, though Mr Cameron does not want it, might easily lead to Britain quitting the eu. The Tory prime minister has also
Sturgeon marches on to the next battle
tion looming in 2016, the second half of the year will see tensions pull at the snp’s fabric. Some Tartan Tories will leave the party. Some of the new joiners will become disillusioned; they too will walk. The leftist Ms Sturgeon’s leadership style—cagey and reliant on a close circle of confidants—will rile. The growing possibility of Britain’s departure from the European Union will prompt some to call for the snp to push afresh for secession in the next parliamentary term. Ms Sturgeon will resist these calls while upholding her party’s long-term commitment to the cause. Scotland will head into 2016 with no immediate prospect of a new independence referendum. Yet the nationalists will be on the march—carrying the ideal of a separate Scotland with them. n Jeremy Cliffe: political correspondent, The Economist
pledged to deliver more powers to English voters, to address a longstanding constitutional anomaly occasioned by Scottish devolution. This is an overdue change, but only critics of the prime minister tend to care about it, which makes it, in political terms, a hiding to nothing. Whoever forms the government, it will have to embark on a savage new round of austerity. If the Tories win, this will mean additional cuts worth £37 billion ($60 billion) over the first three years of the next parliament. If Labour sneaks in, there will be lesser, but still painful, belt-tightening. A bigger difference is that Mr Miliband, much like his erstwhile hero President François Hollande of France, has not prepared his supporters for this tough reality. That makes this an election Labour will be secretly glad to lose. The same might be true for the Tories. n
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running a city, instead of just whingeing), protest movements and populism tend to dampen voters’ enthusiasm. Nigel Farage’s trajectory may well take a downward turn in 2015—provided the three major parties stop obsessing about him and don’t hit the panic button. Second, Britain is fretting about immigration, which will be a big issue in the election campaign. But keeping the door open has its advantages. Many Europeans from many different countries bring their contribution to Britain. Take Italians. There are about half a million of us in Britain, two-thirds in London, which is now Italy’s eighth-largest city. Most Italians work: in the City and in industry, in universities and restaurants. Italians don’t exploit the nhs. If they’re in hospital, they’re more likely to be wearing white coats than taking up beds. And third, Europe. The next government should concentrate on proposing new rules that benefit everyone in the club, not just Britain. Italy’s prime minister, Matteo Renzi, in his own boisterous way, is doing just that. And his negotiating position, considering the state of Italy’s public finances, is weaker than David Cameron’s. In Eur ope, getting involved is better than standing aloof. n
2015 IN BRIEF
THE WORLD IN 2015
Italian lessons Beppe Severgnini MILAN
A bit of friendly advice for 2015
F
or Britain, 2015 will be a 12-month-long session on the psychoanalyst’s couch. Coming from one referendum in Scotland and probably heading to another on Europe, by way of the May general election, the country will spend the year trying to work out what it wants. Italy may not seem the most obvious inspiration, but in three areas a consigliere can come in handy. First, ukip’s rise came as a shock to many in Britain. Populism and protest movements, mostly on the right, have had their moments in Italy, too. They didn’t last long. The Northern League didn’t get anywhere near the secession it was calling for. Beppe Grillo’s Five Star Movement has already lost a quarter of the support it won in the 2013 general election. When they are put to the test (when they actually have to do stuff, such as
Land Rover Defender, RIP John Grimond
End of the line for a lovable boneshaker
C
after the war, who used an American Jeep on his farm in Anglesey and saw the need for a similar vehicle for other British farmers. His creation—noisy, draughty, underpowered, unresponsive and uncomfortable—went on to establish itself as a cherished and peculiarly British product. Unusually for a car, it has even found a
onceived on a beach in Wales in 1947, born in the West Midlands of England the following year, adopted later by Germans (bmw) and then Indians (Tata), the Land Rover Defender will die a much-mourned death in December 2015. Other Land Rovers—Discoveries and Range Rovers—will go on, but in the eyes of aficionados they are effete upstarts. And although a new Defender is promised, the diehards are sceptical. They never cared for the name, bestowed only in 1991, and consider their car to be the one true Land Rover. They fear it will die after less than three score years and ten. Only production will end, not the vehicles themselves, and, far from disintegrating, most can be expected to live on for years. True, some are already losing detachable parts to thieves who foresee a dearth of spares, but the boast is made One lady owner that most of the 2m or more Defenders ever made are still going. Their place in the canon of English children’s simple design, sturdy chassis and alumin- literature (“Landy” and “Fender”), never ium body make for longevity. mind Tomb Raider and James Bond films. The Land Rover was the idea of MauIn appearance it has changed little over rice Wilks, the chief engineer of Rover the years, though it developed a slight
A fleet of driverless cars will start running on special lanes in Milton Keynes
Beppe Severgnini: columnist, Corriere della Sera
bulge below the waistline in early middle age and was then elongated and adapted for countless different purposes. Some of its faults have been put right. A cherished Bigger engines, and peculiarly better transmissions, wind-up British product w indows and other upgrades were introduced over the years, usually belatedly and in response to Japanese competition. But part of the Land Rover’s charm has always been its stubborn defiance of user-friendliness and customer comfort. It appeals to the sort of doughty people who revel in dust and cold, fuggedup windows, the jarring pain of every bump, and the need for the dexterity of a cardsharp combined with the strength of a poker-bender to engage the low ratio of the fourwheel-drive system. That system, however, has been the other crucial part of the Land Rover’s success. It may be rubbish on the road, but off it has had few rivals. When confronted with a desert, a jungle or a perpendicular ascent, it just grinds on. And if it breaks down, its design is so basic that the fault isn’t usually too difficult to fix. The one obstacle that has proved insurmountable is modern legislation. Airbags, low emissions, all seats facing forward and pedestrians’ rights do not fit easily into the Land Rover ethos. They are blamed for delivering the coup de grâce. n John Grimond: contributing editor, The Economist
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Britain
Plane thinking Emma Hogan
A decision over airport capacity will at last be reached
S
ince 2012 Sir Howard Davies, a former consultant and financial regulator, has been pondering where to put extra airport capacity in Britain. After narrowing the options to Gatwick and Heathrow, Britain’s two busiest airports, Sir Howard and his Airports Commission will deliver their final recommendation to the newly elected government in 2015. They will plump for a third runway at Heathrow. In doing so they will put politicians from all parties in a pickle. The case for adding airport capacity in south-east England is a strong one. Heathrow, the world’s third-busiest airport by passenger numbers, is full, as is Gatwick at peak times. Sir Howard estimates that Gatwick will be full by 2020, with other southern airports following behind. In making his recommendation, Sir Howard will place a bet on the future of travel. The argument for expanding
THE WORLD IN 2015
Heathrow rests on the idea that hub airports are still important to the British economy, and that offering flights to far-flung places in emerging markets is vital to creating trade links. In contrast, Gatwick’s boosters point to the rise of lowcost airlines and how it has changed aspects of the industry. More people are “self-connecting” between London’s wake-up call flights, reducing the need for a large transfer hub, they argue. And “barbarically contemptuous” of the city’s the expansion of Gatwick could create residents. Ed Miliband, the Labour leader, has previously opposed expansion there, genuine competition with Heathrow. It would be easier for politicians if Sir though he seems to be wavering. And the Howard and his team were to suggest Gat- Liberal Democrats dislike it intensely. wick. Although some locals oppose it, far But Sir Howard will be swayed by fewer will be affected than at Heathrow, economics. Most airlines want to be at where several rich west-London constitu- Heathrow, as shown by the price of the encies are threatening to put up a fight. landing slots. Partly because of the airGatwick would also be far less likely to port, London is a financial powerhouse. split opinion within parties. Boris John- Once Sir Howard delivers his verdict, son, the Conservative mayor of London the new government should start getting who had his own vision of a new hub ready. Then discussions on where a fourth airport quashed by Sir Howard, has said runway might go can start. n another runway at Heathrow would be Emma Hogan: Britain correspondent, The Economist
Keeping the lights on Mark Johnson
Britain will avoid blackouts, at a cost
2015 IN BRIEF Drunk tanks: some London Underground lines start running a 24-hour service at weekends
Mark Johnson: UK energy correspondent, The Economist
P
ray for warm weather in 2015. For years Ofgem, Britain’s energy regulator, has warned that Britain is running out of power. Towards the end of 2015 the margin between average peak electricity demand and available supply will fall as low as 2%—down from 14% in 2012, and less than half the 5% buffer that many eggheads think is an acceptable minimum. A shortage of spare capacity multiplies the risk that lights will go out during a cold snap or if a big power station breaks down. If nothing is done about it, the chance of blackouts could reach one in four. The problem has been a long time coming. Copious supplies of cheap coal have encouraged Britain’s coalfired power stations to burn through most of the operating hours left to them under a European regulation that limits the life of the dirtiest kinds of plant. Many will soon shut down. Yet many costlier gas-fired power stations have been closed or mothballed—and uncertainty caused by a long-winded overhaul of Britain’s environmental subsidies has discouraged firms from reinvesting in them. Though renewables now provide nearly 20% of Britain’s electricity, these cannot yet make up the difference; planned new nuclear reactors at Hinkley Point in Somerset will not light up until at least 2022. Recently two things have made the situation worse. First, Britain’s economy is growing at its fastest rate for
six years. That has pushed up consumption and hastened the crunch (as a general rule an increase in peak electricity demand of 0.5% accompanies each additional percentage point of economic growth). Second, Britain’s ageing power stations have started to look increasingly unreliable. In August a crack detected during routine maintenance disabled four of Britain’s 16 nuclear reactors. In July a fire toppled a tower at Ferrybridge c, a big power station in Yorkshire, hobbling it until the spring. The National Grid, which manages the high-voltage power network on the government’s behalf, says two plans will help it fend off electricity shortages until new wind turbines and wood-burning generators start coming onstream in 2016. First, it will pay electricity firms to reopen mothballed gas stations, ready to fire up should chilly days require it. Second, it will vastly ramp up a programme that pays big factories to switch off when usage risks outstripping supply, probably between 4pm and 8pm on the coldest weekday evenings. These prescriptions will probably keep all the lights on, but at a price. Consumers will have to contribute to the costs of both programmes, and regulators will learn to wield a meatier range of powers. Britain’s liberalised energy market appears to be powering down. n
Just possibly… Nigel Farage, leader of the UK Independence Party, becomes deputy prime minister. Conservative MPs in Scotland outnumber pandas once more. ”Downton Abbey” bows out after a farewell sixth series.
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Entente frugale
A
s we approach the 600th anniversary in 2015 of the battle of Azincourt (which the English insist on calling “Agincourt”) and the 200th of Waterloo, not to mention the multi-commemorations of the two world wars, we are reminded that wars are the shared furniture of the French-British relationship. This helps explain why defence is the area in which France and Britain have established their most intimate ties. Even as Britain has drifted towards Europhobia and France has pressed for deeper integration within the euro zone, our countries have moved to ever-closer union in defence. The signing of the Lancaster House treaties in November 2010, with their military, defence-industrial and nuclear dimensions, was the crowning point of this process. Until the end of the cold war, the British had no appetite for defence co-operation outside nato and the special relationship with America, while France emphasised national independence. The implosion of the Soviet empire, and the war in Bosnia (1992-96) in which France and Britain were prime movers, forced the recognition that military involvement in European conflicts was no longer going to be the default mode of American strategy. Having decided not to join the euro, a freshly elected Tony Blair found defence a way of putting Britain at the centre of Europe. This was done through a Franco-British summit in St Malo (December 1998), with the two countries taking the lead in what eventually became the European Union’s common security and defence policy (csdp). csdp has been better at generating buzzwords (“headline goal”, “battle-groups”) than history-changing deployments. The prevention of genocide in Congo in 2003 and the ongoing anti-piracy patrols off the Horn of Africa have been its strongest contributions. Some of the blame for this modest record goes to the Iraq crisis, which split the eu and nato down the middle while making British forces unavailable for csdp operations. Beyond that event, the stalling of the eu integration process and the general rise of Euro-scepticism in the wake of the recession have ensured that csdp remains a limited enterprise in which eu members will sink little political and strategic capital. By default, this semi-failure of csdp created an opportunity for Britain and France as the two most important European military powers to set up a permanent alliance of their own, based on shared aims and motives.
The continued ambition to deserve their seats as permanent members of the un Security Council is essential. In a world in which the United States has its own priorities, there is also more cause for London and Paris to work together. That a strong French-American security relationship has been built up, including in nuclear and intelligence affairs, has helped to reassure the British. Mutual benchmarking is also of great importance. This is particularly true in the nuclear arena, in which each country’s capabilities are to some extent a product of mutual emulation, on top of the need to deter unfriendly powers. Herein lies a paradox. The nuclear part of the Lancaster House treaties contains a 50-year commitment to work together on nuclear-weapons stewardship, a highly sensitive area entailing exceptional levels of mutual trust. Yet this part is being implemented with no greater—and arguably with less—difficulty than the more mundane portions. This rests on a joint understanding that the vital interests of one country cannot be put at risk without also threatening those of the other. In other words, disagreements on contingent interests (such as the war in Iraq) can impede conventional military co-operation, but nuclear co-operation is based on shared vital interests. This is an alliance in the full sense of the word. It may be frugale but it is more than an entente. Another Waterloo? What could go wrong? Politically, a “Brexit” (British exit from the eu) in combination with a step-change towards full-blown eu federalism, including foreign and security policy, would make it impossible to sustain a bilateral alliance between a non-eu Britain and a province of a federalising eu. Economically, a sustained divergence between a rapidly growing Britain and a stagnating France could make it impossible to sustain the mutual-benchmarking component of an alliance between equals; but this could take a very long time indeed, since defence capabilities evolve in a multi-decade framework. The most immediate challenge may come from a reopening of the nuclear debate in Britain after the 2015 election. In the absence of big increases in defence spending, Britain will have to cut non-nuclear capital expenditure sharply in order to pay for the renewal of the Trident submarine force. The bonds of a 50-year treaty designed to guarantee a mutual nuclear future will be put to the test. n
François Heisbourg, special adviser, Fondation pour la Recherche Stratégique, asks what might upset the surprisingly close defence ties between Britain and France
Even as Britain has drifted towards Europhobia and France has pressed for deeper integration within the euro zone, our countries have moved to ever-closer union in defence
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The world in numbers Countries Europe Austria 112 Belgium 112 Bulgaria 112 Croatia 112 Czech Republic 112 Denmark 112 Estonia 112 Finland 112 France 112 Germany 112 Greece 113 Hungary 113
Ireland 113 Italy 113 Latvia 113 Lithuania 113 Netherlands 113 Norway 113 Poland 113 Portugal 114 Romania 114 Russia 114 Slovakia 114 Slovenia 114 Spain 114
TOP GROWERS Rank Country 1
9.0
3
8.6
4 Turkmenistan
8.5
5 Eritrea
8.3
6 Mongolia
8.0
7 Laos
7.7
8 Mozambique
7.6
9
7.4
Congo (Brazzaville)
10= Bhutan
7.3
10= Cambodia
7.3
10= Tanzania 7.3 In a sign of tougher times for the world’s biggest emerging markets, none makes it into the list of top growers for 2015. BRICs, CIVETS, MINTs—all are absent from a ranking dominated by small markets banking on investment in a booming industry. Papua New Guinea leads the list, with a one-off boost from a large Exxon Mobil LNG project that started producing in 2014. Macau will thrive on the flood of gamblers attracted by its licensed casinos. Resource extraction underpins growth for most of the rest, including copper and gold mining in Eritrea, naturalgas development in Turkmenistan and Tanzania, and oil production in Congo (Brazzaville). Bhutan’s mountainous terrain gives it a natural advantage for producing and exporting hydro power, mainly to India. The non-resource producers are Laos, where tourism and a rebound in Thailand’s economy will help growth, and Cambodia, for which garment-making is a key industry. 2015 forecasts unless otherwise indicated. Inflation: year-on-year annual average. Dollar GDPs calculated using 2015 forecasts for dollar exchange rates (GDP at PPP, or purchasing-power parity, shown in brackets). All figures simplified by rounding.
[email protected] Source:
North America Canada 117 Mexico 117 United States 117
Paraguay 118 Peru 118 Uruguay 118 Venezuela 118
Latin America Argentina 117 Bolivia 117 Brazil 117 Chile 117 Colombia 117 Cuba 118 Ecuador 118
Middle East and Africa Algeria 118 Angola 118 Cameroon 118 Egypt 118 Ethiopia 118 Iran 119
Iraq 119 Israel 119 Jordan 119 Kenya 119 Lebanon 119 Libya 119 Morocco 119 Nigeria 119 Saudi Arabia 119 South Africa 119 Syria 119 Zimbabwe 119
%
Western Europe
Eastern Europe
1.4
14.8
2 Macau Congo (Dem. Rep.)
Asia Australia 115 Bangladesh 115 China 115 Hong Kong 115 India 115 Indonesia 115
Japan 115 Kazakhstan 115 Malaysia 116 New Zealand 116 Pakistan 116 Philippines 116 Singapore 116 South Korea 116 Sri Lanka 116 Taiwan 116 Thailand 116 Uzbekistan 116 Vietnam 116
World GDP* growth, 2015
GDP growth, %
Papua New Guinea
Sweden 114 Switzerland 114 Turkey 114 Ukraine 114 United Kingdom 114
North America
3.2
2.1
Japan
Middle East/ north Africa
1.6
4.1
Asia
>4% 2–4%
